192 CHAPTER 6 BUDGETSused. Spending what is left aft er all other costs are covered is also popular, and the arbitrary
budgeting method is frequently used in smaller companies and business-to-business contexts.
A survey by Belgian Business & Industry revealed that 40% of all business-to-business com-
panies had no preset communications budget: funds were allocated according to needs.
Eighteen per cent said they had a budget, but admitted that the funds were not allocated to
specifi c tasks and objectives.Experimental budgeting implies using different budgets on different locations or in separate markets. Comparing
results of split-run test groups will allow a company to gain insights that will enable it to identify optimal commu-
nications budgets. Of course, as in every split-run experiment, test groups should be fully comparable and other
possible influential variables should be kept constant. A well-known example of experimental budgeting is the case
of Budweiser beer.^18 Anheuser-Busch, manufacturers of Budweiser, split the USA into 200 geographic areas. In the
experiment test areas were randomly assigned to experimental groups. One of the areas, the control group,
received a communications budget level which was believed to be the optimal level. All other groups received
budgets ranging from −100% to +300% of that of the control group. Tests lasted from 12 to 24 months and were
evaluated by sales responses compared with the five-year, seasonally adjusted sales trend line. The results of these
experiments indicated that the advertising expenditures of Anheuser-Busch were too high. Reducing the commu-
nications budgets would have only a minor effect on sales. By lowering the advertising costs, the total cost per draft
Budweiser beer also decreased. This allowed Anheuser-Busch to drop the price, which led to increased sales and
market share. The Budweiser case demonstrates that experimental budgeting can be very effective and, when
overspends are found, budget cuts might lead to increased market share.
However, there are some fundamental disadvantages with this method. Firstly, experiments tend to be expensive.
To test different budget levels it would be necessary to assign an amount of non-optimal budgets. High budgets
will lead to a spill of resources and low budgets could affect market positions. Moreover, experiments and the data-
gathering process require additional investments. When cutting costs through reducing the number of test groups
and/or the test period, less accurate and thus less reliable results will be achieved. A second disadvantage is that
experiments are hard to control and that uncontrollable factors such as competitive actions, distribution influences,
etc., are likely to skew the experimental settings. It is also very difficult to reach each of the test groups with differ-
ent isolated communications channels and, when regional media are used, communications impacts might not be
comparable with the traditional national media coverage.BUSINESS INSIGHT
Experimental budgetingTable 6.3 Budgeting methods most often used in the USABudgeting method Consumer goods Business-to-business- Percentage of expected sales 50% 28%
- Affordability method 30% 26%
- Arbitrary method 12% 34%
Source : after Advertising Media Planning , Lincolnwood, IL: NTC Business Books (Sissors, J.Z. and Surmanek, J. 1986)
© The McGraw-Hill Companies, Inc.
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