Investor's wiki

Advertising Budget

Advertising Budget

What Is Advertising Budget?

An advertising budget is an estimate of a company's promotional expenditures throughout a certain time span. All the more importantly, it is the money a company will set to the side to achieve its marketing objectives.

Figuring out Advertising Budget

An advertising budget is part of a company's overall sales or marketing budget that can be seen as an investment in a company's growth. The best advertising budgets โ€” and crusades โ€” center around customers' necessities and issues and on giving answers for these issues, not company issues, for example, an overload reduction.

While making an advertising budget, a company must gauge the value of spending an advertising dollar against the value of that dollar as recognized revenue. Before settling on a specific amount, companies ought to make certain conclusions to guarantee that the advertising budget is in accordance with their promotional and marketing objectives:

  • The target consumer โ€” Knowing the consumer and having their demographic profile can assist with directing advertising spend.
  • Best media type for the target consumer โ€” Mobile or internet advertising, through social media, might be the response, albeit traditional media, like print, TV, and radio might be best for a given product, market, or target consumer.
  • Right approach for the target consumer โ€” Depending on the product or service, consider if interesting to the consumer's feelings or intelligence is a suitable strategy.
  • Expected profit from every dollar of advertising spending โ€” This might be the main inquiry to address, as well as the most troublesome.

The best advertising budgets โ€” and crusades โ€” center around customers' requirements and taking care of their concerns, not company issues, for example, an overload reduction.

Advertising Budget Levels

Companies can decide their advertising budget levels in more than one way, every one of which has its positives and negatives:

  1. Spend however much as could reasonably be expected โ€” This strategy, which sets to the side just sufficient money to fund operations, is famous with startups that see a positive return on investment on their advertising spend. The key is guessing when the strategy will begin showing diminishing returns and knowing when to switch strategies.
  2. Distribute a percentage of sales โ€” This is basically as simple as dispensing a specific percentage in view of the previous year's total gross sales or average sales. It is common for a business to spend 2% to 5% of annual revenues on advertising. This strategy is simple and safe yet depends on past performance and may not be the most flexible decision for an evolving marketplace. It likewise expects that sales are straightforwardly linked to advertising.
  3. Spend what the competition spends โ€” This is essentially as simple as sticking to the industry average for advertising costs. Of course, no market is the very same and such a strategy may not be adequately flexible.
  4. Budget in light of objectives and tasks โ€” This strategy, wherein you decide the objectives and the resources expected to accomplish them, has advantages and disadvantages. On the upside, this can be the most targeted method of budgeting and the best. On the downside, it very well may be costly and unsafe.


  • An advertising budget is the amount of money set to the side for reasons for marketing and ads.
  • The cost of advertising dollars must be weighed against the potential recognized revenues that those dollars will produce.
  • Demographic research and customer segmentation can make profiles to assist with improving the returns to advertising spending.