Objective and Task Method For Calculating Advertising budget

Marketing people follow this method more often as this is a scientific method where the advertising goals are explicitly stated and the cost to achieve the target is also spelt out. Taking each activity like increasing geographic sales area, increasing market awareness by a certain percentage over the figure obtained from the brand tracking study, they add up the amounts needed for each activity. We can illustrate the process as below:

  1. Establish the Market Share goal: lets say the company estimates 50 million potential users and sets a target of attracting 8 percent of the market i.e. four million users.
  2. Determine the percentage of the market that should be reached by advertising: The advertiser hopes to reach 80% (40 million prospects) with the advertising budget.
  3. Determine the percentage of aware prospects that should be persuaded to try the brand: The advertiser would be pleased if 25 per cent of aware prospects (10 million) tried the brand. This is because it estimates that 40% of all triers or 4 million people would become loyal users. This is called the Market Goal.
  4. Determine the number of advertising impressions per 1 per cent of trial rate:
    the advertiser estimates that 40 advertising impressions (exposures) for every 1 per cent population would bring about a 25% trail rate.
  5. Determine the number of Gross Rating Points that would have to be purchased: A Gross rating Point is one exposure to 1 per cent of the target population. Because the company wants to achieve 40 exposures to 80% of the population, it will want to buy 3,200 gross rating points
  6. Determine the necessary advertising budget on the basis of average cost of buying a gross rating point. To expose 1 per cent of the target population to one impressions costs an average of Rs. 3277/. Therefore, 3,200 gross rating point s would cost Rs. 10,486,400 in the introductory year.