Sales Promotion Schemes Project Report MBA One of the most difficult marketing decisions facing companies is how much to spend on promotional John Wanamaker, the departmental - store magazine, said, "I know that half of my advertising is wasted but I don't know which half."
Thus it is not surprising that industries and companies vary considerably in how much they spend on promotion. Promotional expenditures might amount to 30-50% of sales in case in cosmetics industry and only 10-20% in the industrial equipment industry. Within a industry, a low and high spending companies can be found. How do companies decide on their promotion budget? There are mainly four methods of sales promotion :• Affordable Method :Many companies set the promotion budget at what they think the company can afford. One executive explained this method as follows : "Why, it’s simple. First I go upstairs to the controller and how much they can afford to give us this year. He says a million and half. Later, the boss comes to me and asks how much we should spend and I say ‘Oh about a million and half."It is a method which is uncertain one and makes long term planning difficult.• Percentage of Sales Method :Many companies set their promotion expenditures at a specified percentage of sales. Accordingly the sales is set on the basis of sales. | Advertising Effectiveness Project ReportInternal Customer Satisfaction Project Report |
In this a specified sales percentage is decided for the promotional budget Advantages of this method :
First, its use means that promotional budget vary with what a company can afford.
Second, it encourages the management to think in terms of the relationship among promotion costs, selling price, and profit per unit,
Third, it encourages the competitive stability to the extent that competing firms spend approximately the same % of their sales on promotion.
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