Definition
An advertising budget is the money set aside by the advertiser to pay for advertising. There are a variety of methods for determining the most desirable size of an advertising budget. [1]
In adaptive control budgeting, the advertiser uses test markets to examine the sales level and profitability of advertising spending levels that are higher and lower than the spending level currently being used by the advertiser. The advertiser may decide to adapt to either a higher or lower spending level depending on test market results. [2]
All-you-can-afford budgeting establishes the amount to be spent on advertising as the funds remaining after all other necessary expenditures and investments have been covered in the comprehensive budget for the business or organization. [2]
With competitive parity budgeting, an advertiser chooses to use a level of spending on advertising that is similar to the advertising spending level being used by major competitors. [2]
In objective-and-task budgeting, advertising expenditures are determined on the basis of a specific audit of the resources needed to achieve the specific objectives and tasks outlined in the advertiser‘s media plan. [2]
In payout budgeting, advertising expenses are treated as part of the investment required to establish a new product. [2]
In percent-of-sales budgeting, expenses are established as a fixed percentage of past, current or future sales levels. [2]
An advertising allowance is a payment made to a reseller or channel partner in payment for advertising purchased or undertaken by the affiliate. [2]
An advertising contract is a contractual agreement between an advertiser and the operator of any form of advertising media for the purchase of specified types of advertising time or space. [2]
References
- Doyle, Charles, A Dictionary of Marketing (Oxford Quick Reference).
- American Marketing Association, AMA Dictionary.