Marketing Communications

COMMUNICATIONS BUDGETING METHODS 191

Objective and task method

Th is method is one of the least arbitrary methods, which makes it a diffi cult technique to use.

It diff ers from the other methods in that it starts from communications objectives and the

resources that are needed to reach these planned goals. All needed investments are then

added and this will lead to the overall communications budget. It requires more strategic

planning and investment analysis and is therefore clearly superior to all the other methods.

Moreover, budgets can be evaluated each year, and this feedback will lead to improved

decision-making and more effi cient budgeting in the future. Th e diffi culty in this method lies

in the estimation of profi t impacts of diff erent communications actions and tactics. Th erefore

it is of the utmost importance that historical data on, for instance, sales promotion responses

in each market are stored. But estimating all costs of every action needs some eff ort and oft en

the fi nal costs of an action are diffi cult to foresee.^16

Table 6.3 shows the three most frequently used budgeting methods in the USA.^17 Percentage

of sales is the most commonly used communications budgeting technique. It is likely that

variants such as percentage on last year’s returns and percentage on profi ts are also commonly

Besides sales effects, the result of the marketing communications effort can also be measured in other terms, such

as brand awareness. In the following graph the efficiency of the advertising campaigns of different banks is ana-

lysed. On the horizontal axis budgets are measured. The vertical axis shows top-of-mind awareness of bank names.

For two consecutive years, the relationship between the two factors is shown. The more a bank moves to the upper

left corner of the graph, the more efficiently it is spending its resources. The analysis also permits a comparison of

the own company with competitors.

BUSINESS INSIGHT

Relating budgets to top-of-mind brand awareness

Top-of-mind awareness and advertising budgets

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