Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

14. Promotion −
    Introduction to Integrated
    Marketing
    Communications

Text © The McGraw−Hill

Companies, 2002

416 Chapter 14

contact. But the total costfor some mass media may force small firms, or those with

small promotion budgets, to use promotion alternatives that are more expensive per

contact. For example, a small retailer might want to use local television but find

that there is only enough money for a web page, an ad in the Yellow Pages, and an

occasional newspaper ad.

Smaller producers and firms that offer relatively undifferentiated consumer prod-

ucts emphasize personal selling first and rely mainly on sales promotion for the

balance. The objective is to build good channel relations and encourage channel

members to recommend and push the product. Note that here we are referring to

percentages in the promotion blend, not the level of expenditures. Setting the over-

all level of promotion spending and how much to spend on each type of promotion

is an important but difficult decision.

The most common method of budgeting for promotion expenditures is to com-

pute a percentage of either past sales or sales expected in the future. The virtue of

this method is its simplicity. A similar percentage can be used automatically each

year—eliminating the need to keep evaluating the kind and amount of promotion

effort needed and its probable cost. However, when a company’s top managers have

this attitude, they often get what they deserve—something less than the best results.

Just because budgeting a certain percentage of past or forecast sales is common

doesn’t mean that it’s smart. This mechanical approach leads to expanding mar-

keting expenditures when business is good and cutting back when business is poor.

It may be desirable to increase marketing expenditures when business is good. But

when business is poor, this approach may just make the problem worse—if weak

promotion is the reason for declining sales. The most sensible approach may be to

be more,not less, aggressive!

Other methods of budgeting for marketing expenditures are:

1. Match expenditures with competitors.


2. Set the budget as a certain number of cents or dollars per sales unit (by case,
   by thousand, or by ton) using the past year or estimated year ahead as a base.


3. Base the budget on any uncommitted revenue, perhaps including budgeted
   profits. Companies with limited resources may use this approach. Or a firm
   may be willing to sacrifice some or all of its current profits for future sales—
   that is, it looks at promotion spending as an investmentin future growth.

Many marketing managers now
view promotion on the Internet as
a “must buy” in a promotion
budget.

Budgeting for
promotion— 50
percent, 30 percent, or
10 percent is better
than nothing

Find the task, budget
for it