Pelsmacker Chapter 6

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MKC- Pelsmacker – Chapter 6 : Budgets
Chapter objectives:
* Understand how communications budget may influence communications effectiveness. * Get an overview of theoretical and practical marketing communications budgeting methods. * Optimise share-of-voice decisions.

* Indentify factors that influence budgeting decisions.
* Decide upon a communications budget for a new product or brand. This chapter discusses the elemets a marketer should consider when making budget allocations, and offers some insights into the relation between communications intensity and communication effectiveness. There is no ideal formula for making the best budgeting decision. Budgeting decisions should always take into account the long- and short-term effects of communications efforts on sales and profits. Step 1: asses the size of the budget

By understanding How communication budget affects sales?
Sales response models depict the relationship between two factors Two models:
1) Concave Sales Response
Sales behave in microeconomic way: law of diminishing returns: incremental value of added communications expenditures decreases. i.e. Once potential buyer is reached with comm mix, he or she will or wont buy and beyond that point prolonged comms will not change the non-buyers mind. This models suggested that smaller budgets as effective as big. 2) S-shaped Sales Response

Assumes that when the level of effort is low, there is no communication effect at all.Even if comm effort is zero, there still will be some sales and minimum investment is necessary to enjoy any results of comm.programme and to increase sales. When that levelis reached, sales will start to increase with incremental comms expenditures. The higher the investments, the greaterthe additional sales will be.. At point A, increased investment will start to lead to smaller changes in sales. Note that marketing comm, price, product line decisions and changes in the distribution...
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