Establishing and Allocating the Marketing Communications Budget in Indian Organizations

Abstract

Two of the most critical decisions facing marketing managers are how much to spend on communications or promotion (i.e. to determine the marketing communications budget), and how to allocate it over the major tools or elements of the communications mix (viz. advertising, sales promotion, direct marketing, personal selling, public relations, and publicity). There are four common methods used by companies to decide on the communications budget. These are the affordable method, the percentage-of-sales method, the competitive parity method, and the objective-and-task method. Many companies employ more than one method to arrive at relatively accurate budget figure. Companies consider several factors when they allocate the communications budget, including the market size and potential, market share objectives, product market type, product life-cycle stage, and buyer-readiness stage. The present study is undertaken to understand the usage of different communications budgeting methods and the allocation of the communications budget to the different promotional elements in Indian companies. These are further compared between consumer durables and non-durables, industrial products, and services.