Marketing Communications

FACTORS INFLUENCING BUDGETS 193

Factors influencing budgets

A number of factors may infl uence the budgeting decision or may call for budget adjust-

ments.^19 Th ey are summarised in Figure 6.6.

Th e smaller the targeted markets, the easier it is to reach the targets in a cost-effi cient

way. Spending too much in small markets leads to saturation, and overspends are likely to

be ineff ective. Larger markets imply more dispersed target groups which are more diffi cult to

reach and thus more expensive. When particular markets have higher potential, it may be a

good idea to allocate more money to these specifi c markets. Brands with smaller market shares

and new brands require a high communications budget; larger well-established brands and

‘harvested’ brands in the mature stage of their life cycle could do with a lower allocation of

communications funds.

Some studies^20 show that companies and brands with larger market shares have an advan-

tage in communications costs (such as better media space buying, synergy between diff erent

communications mix elements on diff erent company brands, better media rental rates and

lower production costs) and can thus spend less money on promotional activities while hav-

ing the same or even better sales. However, other research^21 claims that there is no evidence

that larger companies are able to support their brands with lower advertising costs than

smaller ones. A number of organisational factors that have a potential infl uence on the budg-

eting decision can be identifi ed:^22 the organisational structure (centralised vs decentralised,

formalisation and complexity), the use of experts such as consultants, the organisational

hierarchy, preferences and experiences of decision-makers and decision-infl uencers, and

pressure on management to reach certain budgets.

Sometimes it is necessary to make adjustments to the planned budgets during the year or

during the communications campaign. If sales and profi ts lag behind projected and budgeted

fi gures (planning gap), cutting communications eff orts is oft en the easiest and fastest way to

increase profi ts. Of course, this will only have an immediate eff ect in the short term. In the

Figure 6.6 Factors influencing communications budgets

Source : Based on Belch, G.E. and Belch, M.A. (1998), Advertising and Promotion. An Integrated Marketing Communication

Perspective. New York: Irwin/McGraw-Hill.

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