Prof. Samir V.
Charania 2_Advertising Budget & Creative Strategy
2. Advertising Budget & Creative Strategy
2.1 OVERVIEW OF ADVERTISING BUDGET:
Budget is the financial statement of income and expenditure for a given period of time.
Therefore, advertising budget is also a statement of expenditure on various advertising
activities and of the income generated from advertising in the same period. Traditionally the
expenses on advertising was regarded as a waste, but now considered as an investment.
The Institute of Costs and Works Accountant, London has defined the term budget as “A
financial or quantitative statement prepared prior to a definite period of time, of the policy
to be pursued during that period for the purpose of achieving a given objective” Thus a
budget.
1. Is a formal statement of estimated income and expenditure for a fixed period, generally a
year;
2. Is a statement of policies to be followed by the department during the budget period;
3. Is prepared in advance.
Advertising budget is the amount of money allocated by marketer for advertising campaign
for a specific period of time. The advertising budget states the proposed advertising
expenditure and informs and suggests the management of the anticipated cost of executing
the advertising plan. It thus, serves as a decision making tool in the hands of top
management while allocating available funds to the various functions and activities of the
company.
While preparing a budget (including advertising budget) two things must be observed.
1. Budget must be constructed with the financial capabilities of the company otherwise the
plans set will remain, unexecuted due to shortage of funds.
2. It must contain the details on the allocation of funds to specific operations.
2.2 METHODS OF PREPARING ADVERTISING BUDGET
Advertising budgeting approaches are of 2 types: (A) judgmental and (B) data oriented
methods. Judgment oriented methods are easy to implement, but are not as effective as the
data oriented methods. Data oriented methods provide better results, but the budgeting
decisions using these methods require greater time and effort. Companies can select their
budgeting method on the basis of management capabilities, financial position, and the
outlook towards marketing communications.
(A) Judgment Oriented Methods
Judgment oriented techniques are those techniques through which advertising budgets are
fixed arbitrarily on the basis of management intuitions or experiences. Such methods
include percentage of sales method, arbitrary method and affordability method.
1. Percentage of sales method:
The percentage of sales method is one of the most popular methods used for fixing
advertising budgets. Under this method, a communication budget is fixed on the basis of
sales. Two aspects should be considered in this method, “what percentage” and “what
sales”. To arrive at the budget figure, the application may be as follows:
(a) Fixed percentage of last year’s sales. Example: Total Sales of a product in the year 2014 is
₹ 10,00,000. The advertising budget may be decided as 10% of 10,00,000.
(b) Percentage of projected sales of next year as base. Example: Suppose the projected
Sales for the coming year is ₹ 15,00,000. The advertising budget may be decided as 10% of ₹
15,00,000
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
(c) Percentage of Average Sales of last several years. Example: Suppose the average of last 3
months sales comes to ₹ 20,00,000. The advertising budget will be 10% of ₹ 20,00,000
(d) Fixed amount of unit product cost as advertising expense multiplied by the number of
projected Sales. Example:
Suppose the manufacturing cost per pair of Jeans = ₹ 200
Advertising money allocated per unit = ₹ 20
Projected Sales = 50,000 units
Therefore, projected Sales figure = ₹ 10,00,000
The % figure is often the industry standard. This method is easy to implement. There are
some serious disadvantages:
(a) Sales are the cause of advertising, rather than advertising being the cause of sales.
(b) Companies increase the promotional budget when sales increase and decrease the
budget when the sales start declining. In fact, companies need to increase their promotional
spending on products recording low sales because advertising and promotional activities
may help in reviving the sales of the product. Similarly, products which are well established
and have high sales require less promotional support.
(c) This approach is not suitable for fixing communication budgets for new products because
these products have no sales history.
(d) This method does not address special situations such as sudden change in competitor
moves and market conditions. Therefore, this method is not flexible enough to help
companies adjust their advertising budget to the market conditions.
2. Arbitrary method
In this approach, managers allocate the resources based on their experience and judgment
of market conditions and competitor moves. There are no pre-defined guidelines & systems
for fixing the advertising budget. This practice is prevalent in small and medium enterprises,
which do not have proper systems and procedures in place to take care of marketing
communication activities. Therefore, they decide upon the allocation of funds for
advertising and promotion in an adhoc manner.
3. Affordable method
In this method, managers allocate funds for promotion on the basis of their firm's financial
ability. The amount of funds to be allocated for advertising is decided after taking all other
expenses into consideration. This method of budget fixing is followed by small-scale
enterprises which have limited funds. This method is also used by companies, whose
managements give least preference to marketing activities. The managers in these
organizations feel that advertising may not increase the sales of their products. This strategy
leads to unpredictable results and is not sustainable.
(B) Data Oriented Methods:
Data oriented methods follow a quantitative approach. These methods use certain criteria
or framework for fixing the budget. Prominent methods, which follow this approach, are
competitive parity method, objective-to-task method and payout planning method.
1. Competitive parity method:
This method works on the premise that competitor’s spending reflects the collective
wisdom of the industry. This method provides the company a better benchmark to base its
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
communications budget. In this method, a company matches its communication budget
with that of its competitors. This method has certain advantages. It helps the company in
reducing the risk of overspending. As the company keeps track of competitor’s moves &
allocates the budget accordingly, it restricts the company from taking major risks, or making
unnecessary expenditure. By spending on par with its competitors, a company can defend
its market share. This method is based on certain assumptions. First, it assumes that the
competitor advertising spending is optimal, & can be considered as a benchmark. The
second assumption is that the characteristics of the competitor, such as strengths,
resources, processes and objectives are similar to that of the company. The third
assumption is that promotional spending is the key influencing factor for sales. The
assumption that competitor spending is based on sound parameters may not be true. In
addition, the spending of the competitor may depend on various factors unique to his
company. The conditions & relative position of the company will differ from that of the
competitor. The objectives and operations of the competitor differ.
Therefore, comparing the company's budget with that of the competitor may not be the
right approach. The budget is based on past figures, but there is no guarantee that the
competitor will continue to follow a similar spending pattern in the future.
The competitive parity method focuses on the amount to be spent rather than on the
effectiveness of the spending. This budgeting approach fails to take into account the fact
that the sales of the brand will not just depend on the amount of spending, but also on
various other factors. These include the image of the competitor's brand, market share of
the competitor, creativity in the promotional campaigns and company's product attributes.
2. Objective and Task method:
Objective and task method is one of the effective communication budgeting methods. This
method involves application of analytical procedure to fix the advertising budget. It starts
with the identification of communication objectives that a company wants to achieve,
followed by the determination of specific communication tasks for achieving those
objectives and finally, assigning cost to each of the tasks to arrive at a budget figure.
This method consists of various steps that form a continuous loop.
a) Identifying the communication objectives: A company first needs to identify the
communication objectives that it wants to achieve. The communications objectives are
derived from marketing objectives. Therefore, before defining the communication
objectives the company has to develop clear and precise marketing goals.
b) Designing the communication program: After determining its communication objectives,
a company has to design a communication program that translates the objectives into
specific tasks. The tasks can include all or some of the promotional elements i.e.,
advertising, sales promotion, personal selling, public relations, and direct marketing.
c) Ascertaining the costs incurred for each tasks: Next, the company needs to evaluate the
costs of each task. The sum of costs of all these tasks forms the advertising budget. There
are four key cost components that the company needs to consider at this stage - production
costs, media expenditure, ancillary costs, and integration costs. Production costs include all
the expenses incurred in developing the communication campaigns. The media expenditure
refers to the costs incurred in buying the media space to run the promotions. Ancillary costs
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
refer to the other costs that are incurred while running these campaigns. These may include
travel costs, and costs incurred for conducting research activities related to the campaigns.
d) Monitoring the program and control: The next step is to monitor the communication
program to evaluate whether the program is moving in the right direction and is achieving
the goals set. The evaluation should be done from the budgeting perspective. If the
communication program does not provide the required results, the company needs to take
corrective measures that may result in changes to the communications budget. The positive
aspect of this method is that it provides a systematic procedure for fixing the
communications budget. Through this goal- based method, budget allocation can be done
more effectively. The negative aspect of this method is that it is difficult to ascertain costs
for tasks that have no measurable parameters. For example, if a company sets its objective
as building brand awareness about its products, ascertaining costs for sales promotion
activities aimed at building brand awareness for the products will be difficult.
3. Payout planning
Another data oriented method that is used in determining the communications budget is
the pay-out planning method. Payout planning involves fixing of the communications
budget on the basis of the expected revenues that it will obtain in future. This approach
considers communications spending all investment rather than an expense. Under this
method, a company allocates a higher budget during the introductory stage of the product
and reduces the spending as the product moves into its maturity and decline stages. High
spending in the initial stages enables the company to create brand awareness and build the
brand image. At the later stages, the spending can be reduced as the brand is well
established in the market place. Apart from these methods, other data oriented methods,
such as experimentation method and quantitative models are also in use. However, these
methods are not accepted on a large scale because of the complexity involved. Their results
are also not encouraging.
CREATIVE STRATEGY
2.3 OVERVIEW OF CREATIVE STRATEGY
Creativity can be expressed in many ways. The creative imagination knows no boundaries. A
company's creative strategy is as much responsible for its success as mundane matters like
product prices, operational efficiency, customer service and so on.
Examples of creative strategy: Hutch (now Vodafone), the cellular service provider, wanted
to communicate that their network was robust and offered good connectivity. The well-
known advertising agency Ogilvy & Mather, Mumbai, was given the brief. The creative team
of Piyush Pandey, Mahesh V. and Rajeev Roy first came up with an idea of depicting a little
sister following her brother, where the sister represents the network. Then the team
thought, why not use a dog instead, giving the advertisement more emotional appeal? Thus
was born an idea, to advertise a technology product without using any technical jargon. In
the advertisement, the dog followed the boy wherever he went, whether to school, a
saloon, to play, or to sleep. The advertisement was such a hit that many other
advertisements started featuring a boy dog combo.
Another example of creative advertisement was for Fevicol. The product was ordinary, just a
brand of adhesive, so the challenge was to do something imaginative. The advertisement for
Pidilite Industries Ltd., which makes Fevicol, showed villagers dressed in bright clothes and
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
headgear, riding on a bus. The bus was overcrowded, with people sitting on the roof, the
bonnet and even clinging on to the bus. The bus was seen moving on a rough village road,
the passengers holding on for dear life. Just as you began to wonder whether any of them
were going to fall off, the advertisement displayed on the back of the bus came into view.
“Fevicol, the ultimate adhesive.” The ad got you laughing while highlighting the adhesive
property of the product. This advertisement won the Silver Lions award in 2002. Hutch &
Pidilite are examples of how the advertising agencies commissioned effective
advertisements. The sponsor gives the creative brief or the points to be highlighted in the
advertisement and the responsibility of communicating the message in an effective way to
the target audience is left to the creative team of the advertising agency.
2.4 ADVERTISING APPEALS
An appeal can be defined as the manner in which an advertising message is developed and
expressed, to derive a particular consumer response or influence decision making.
The appeal for an advertisement is decided by a number of factors like the objective of the
advertisement, the product, the creative brief and the time frame. The kind of appeal to be
used is also influenced by the personal preferences of the client or the people involved in
the creative process. Advertisers work to get good knowledge about which appeal works
with what products. Advertising appeals can be broadly divided into three categories:
• Rational / Logical Appeal
• Emotional Appeal
• Other Appeals
I. Rational Appeal:
The rational appeal is also called the logical or informational appeal. It concentrates on
product features, benefits derived from the product and so on. These advertisements focus
on the known utility needs of the customer. Advertisements using a rational appeal are
informative and stress how the product will satisfy consumer needs. They provoke viewers
to think further and then make a buying decision. Rational or logical appeals include details
of price, quality, features, competitive advantage and favourable costs. Following are the
rational appeals:
1. Price appeal: Advertisements of this type communicate the price of the product. This
appeal is mainly used by manufacturer to communicate special offer prices, price cuts, sales
or new price points. The appeal is very effective in times of recession, when customers
become price sensitive. When Coca-Cola introduced its soft drink in a 200ml bottle, it
advertised heavily to communicate the new price point ( 5).
2. Quality appeal: Here, the ad copy emphasizes the quality of the product. Products using
this appeal should ideally be known for their good quality. The print advertisement for
Hidesign (a leading premium leather goods brand) products describes the superior quality of
leather used and the quality of brass material used. A print advertisement for Hidesign goes
like this, “As you can guess, when it comes to our leather, we don’t believe in short-cuts.
That's why we went back 1500 years for a technique needing 40 pairs of hands. To hand
polish each piece in fine river sand before arriving at the final brass accessory. If you still
have any doubts, you know what to do. Ask for a guarantee card.” The process used for
making bags is described and it is explained how a high level of quality is maintained.
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3. Feature appeal: This form of appeal is commonly used by services, or by technical and
high-involvement products. Advertisements, which highlight features, describe the product
features in detail and are informative. The ad is structured in such a way that it creates a
favourable attitude towards the product.
4. Competitive advantage appeal: In advertisements, which use competitive advantage, as
a method to attract viewers, the advertisers' product is compared to that' of the
competitors'. The comparison is made based on product feature or attribute. Usually, the
comparison is with the leader in the industry. The shampoo Head & Shoulders, which claims
to get rid of dandruff from the hair, uses competitive appeal in the television commercial
promoting its products. The advertisement depicts a person using ordinary shampoo as still
having dandruff in his hair, while a person using Head & Shoulders has no dandruff. The
comparison can be done with one or more brands.
5. News appeal: When an advertisement talks about a company’s achievements, or refers to
news released in the media, it is then said to have news appeal. This is very effective to
communicate usage of new technology, introduction of new products or services or awards
received.
6. Product/service popularity appeal: Advertisements using popularity appeal communicate
the number one position of the product in the market. The ad focuses on conveying the
dominance of the product. Example: Malayala Manorama, the leading newspaper in Kerala,
stresses its top position in advertisements in the print media.
II. Emotional Appeal:
This type of appeal uses human feelings like warmth, affection, humour or fear to evoke a
favourable response in the viewer. Advertisements with emotional appeal emphasize the
social or psychological needs that a product can satisfy. This type of appeal can be used to
advertise any product category, whether high-involvement or low-involvement. It is
generally recommended that emotional appeal should be reserved for products that
consumers buy for small pleasures, like biscuits, chocolates and soft drinks. It can also be
used to promote lifestyle products like fragrances, sports cars, designer clothes and designer
jewellery. Advertisers opt for emotional appeal for products where they feel rational appeal
may not be very effective. There is no hard and fast rule that a product should use only
rational appeal or only emotional appeal for promotions.
Emotional appeals are aimed at creating a positive image for the product or service by
activating the customer’s social or psychological needs. The various types of emotional
appeals are humor, fear, music, etc.
1. Humour appeal: Humour in an advertisement is indicated by the presence of jokes,
understatement, goof-ups, etc. An advertisement is humorous if it prompts smiles and
laughter among the audience. It has been proved that a humorous advertisement is more
likely to gain the attention of the audience compared to one without any humour. Humour
targeted at the product rather than the user is better accepted. It has been argued that
humour in an advertisement makes the viewer more receptive to the message and
therefore improves the chances of persuasion. This is because humour brings on a positive
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
mood in the viewer. When deciding to use humour, audience characteristics like age, gender
and education should first be studied. A commercial, which is perceived as funny by a
teenager, might not be considered the same by elderly people. If the advertisement is not
liked, then it will fail to create the desired effect.
Humor creates positive mood and people are more receptive in positive mood, thus the
persuasive power of advertisement involving humor is more. It has been proved that the
humorous advertisements are persuasive. But the persuasive power of serious ads is more
as compared to the ads with humor appeal.
2. Fear appeal: Fear appeal advertising is a type of “psychoactive” ad, which is capable of
arousing fear in the viewer about the effect of the viewer’s lifestyle. Fear appeal is very
effective in depicting products designed for safety and products for health.
Advertisements with fear appeal associate a common practice with something bad and then
attempt an attitude change. Example; Not brushing your teeth regularly causes cavities.
Brushing your teeth twice a day with the featured toothbrush, avoids cavities.
3. Music appeal: Music is an inseparable part of television and radio advertisements. Music
manages to break through the clutter and attracts the attention of the listener. Music can
be used as a background score or as the main theme of the advertisement. Some
advertisements use musical tag lines for more impact. Advertisement can use popular music
or can compose special music for the purpose. Music should be selected in such a way that
it goes well with the overall theme of the advertisement. Sad music is not the right choice
for an advertisement depicting a happy moment. It has been observed that music has high
recall compared to any other element in an advertisement. Example: The advertisement for
the cellular service provider ‘Airtel’ uses music appeal very effectively. Example: Britannia
Biscuits uses the jingle “tin tin tiding” in its advertisements. In fact, the music is so
synonymous with the advertisement that sometimes only the music is aired on television.
III. Other Appeals:
Apart from rational and emotional appeals, advertisers use other types of appeal to attract
the attention of the customers. The other appeals are star appeal, reminder advertisement
and teaser advertisement.
1. Star appeal: Advertisements with star appeal feature famous personalities endorsing a
product. The advantage of using such figures is that it will attract the attention of viewers,
irrespective of the product. Care should be taken that the image of the endorser and the
product goes well together. A sportsperson can be used to promote health drinks or sports
equipment, but not medical products. The cost of producing an advertisement with a
famous personality is high as they charge a lot for featuring in advertisement.
2. Reminder advertisements: The purpose of reminder advertisements is to remind that the
certain product still exists in the market. This type of advertisement is generally used by the
mature products. Soft drinks giants Pepsi and Cola place ads in print and television, to
remind the customers of their products.
3. Teaser advertisements: These give a short preview about a new product. They are used
to create curiosity and interest among the people. A lot of curiosity at the initial stages
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
means that the advertisement will attract the attention of viewers. Teaser advertisements
are generally used to introduce a new product, a new movie or a new TV show. Such an
advertisement generally does not convey any message. A movie trailer showing a few
scenes and songs is a good example of a teaser. Frooti used a teaser campaign ‘Digen
Verma’ for repositioning its drink as a youth drink.
2.5 CREATIVE FORMAT
After deciding on the type of appeal, an advertiser should develop a creative format to
present/execute it. The commonly used execution frameworks are animation, slice-of- life,
dramatization and testimonial. The creative team first selects an appropriate appeal and
then decides an execution framework to suit that. An appeal can be presented using any of
the execution frameworks. For example, the humour appeals in an advertisement can be
presented with the help of animation or dramatization. It is important to choose the
creative format carefully, as it will impact the effectiveness of the advertisement.
1. Animation:
Animation is the process by which a number of images, or graphics, are exposed rapidly to
the human eye to give the illusion of a continuous picture. Previously, animation was used
only in advertisements targeting children. Example: The ‘Top Ramen Noodles’ ad used
animation and the same characters were used on the packaging. As animation became
popular, the technique was introduced for other products. Animation is special because it
can be used to create new human characters, talking animals or to personify the product.
Example: The Close Up toothpaste advertisement, with ‘vitamin fluoride’, shows the
toothpaste tube singing and dancing. Example: Vodafone’s zoo-zoo campaign.
The advertisement can be animated in full, or an animated character can be used along with
human beings. A technique called rotoscoping makes it possible to capture real images and
animated characters in one frame. Example: ICICI Bank created a fictional animated
character called ‘Chintamani’ to promote its products. New developments in the field
facilitated creation of animation in a short time, with more realistic images and more
details. A variation of animation is clay modelling. Here, clay models are animated to depict
a story. Example: The advertisement for Amaron battery features clay models. This
advertisement has shown that animation can be used to advertise industrial products too.
Example: Allout brand of mosquito repellent has used animation effectively in its
advertisements to explain how its product functions. The ad featured a sleeping man
troubled by mosquitoes. He then plugs in an All out mosquito repellent appliance, which is
shaped like a halved capsule. The machine jumps like a frog and eats every mosquito in the
room. The jumping of the machine on screen was accomplished with the help of animation.
Next, the character too starts jumping and catches mosquitoes. The impact of the ad was
very high on viewers. Some people even thought that the All out machine would actually
jump and eat mosquitoes.
2. Slice-of-Life: The slice-of-life execution framework refers to the realistic portrayal of life
in an advertisement. It depicts problem situations faced by people in day-to-day life, and
shows how the advertised product provides a solution. The execution framework consists of
four parts: encounter, problem, interaction and solution. Example: The advertisement for
Clinic Plus coconut hair oil shows a mother oiling her daughter's hair with a different brand
of coconut oil. She finds oil stains on her clothes as well as on the pillow. A voice over
explains the benefits of Clinic Plus hair oil, that it penetrates hair and nourishes it. That is, it
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
does not leave any stains. The interaction in this case is done with the help of a voice over.
Interaction can also be depicted by characters introducing the product. Advertisers believe
that the slice-of-life format is effective as consumers can relate to the situations shown in
the advertisement, and can understand the benefits readily. This makes them willing to buy.
This format can be used in almost all media like print, billboard, television, etc. In print, a
single picture can depict an everyday situation and carry the message forward.
3. Testimonial: In the testimonial format, advertisements show satisfied customers who
share their experiences with the viewers. They talk about the product and the benefits
derived from them. As the spokesperson belongs to the target group, viewers in the target
group can relate to that person and find him or her credible. Also viewers tend to believe
messages delivered by customers, rather than messages issued by the company. So,
advertisers are convinced that testimonials are an effective way to communicate with the
target group. The testimonial format is also very effective in promoting services. Owing to
the intangible nature of services, customers cannot touch and feel the service; testimonials
can serve as word-of-mouth recommendation.
Another form of testimonial is celebrity endorsement, where a well known person features
in the advertisement. The viewers know the celebrity is being paid to appear in the
advertisement, so the credibility of the message might be doubted. Some companies solve
this problem by using not so famous artistes to act as consumers in the ad. They feel this will
increase credibility.
4. Authoritative: The aim of the authoritative framework is to convince viewers that the
advertised brand is superior to other brands. This is achieved by using an expert /
spokesperson, respected by society, like a teacher or a doctor. The expert talks about the
brand attributes that make the product superior. Example: Colgate Dental cream has
effectively used the authoritative format for years. Their advertisement featured a doctor
recommending the usage of Colgate dental cream.
Advertisements with the authoritative framework are more effective in the print medium,
especially specialty magazines. Example: An advertisement featuring a beautician
recommending beauty products in a woman's magazine will be more effective than the
same advertisement appearing in a daily newspaper. The newspaper is read by all the
people (men, women, kids, etc.) whereas the women's magazine is read by women, who
might be interested in buying beauty products,
5. Demonstration: In the demonstration format, the advertisement features the functioning
of the product. During the demonstration, the attributes of the product are also explained.
This execution format can be effectively used for promoting consumer products and
business-to-business products. The Television Shopping Network features advertisements in
the demonstration format. An advertisement for a hand-held vacuum cleaner shows how
one can clean carpets, sofa-sets, corners in the house, which cannot be accessed otherwise,
televisions, music systems, etc. with the help of the vacuum cleaner. A new use of a product
can also be effectively communicated using the demonstration format. The format is well
suited for the television media, as a step-by-step demonstration can be shown. The
advertisement for Maggi two-step mix demonstrates how to use the product. The MTR
ready-to-eat also uses the same format.
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Prof. Samir V. Charania 2_Advertising Budget & Creative Strategy
6. Fantasy: In the fantasy approach, the viewer is taken into a world that is not real.
Alternatively, it might portray a situation which viewers can dream of. The fantasies shown
in the advertisement can be realistic or unrealistic. Entertainment parks and vacation places
use the fantasy approach, where the advertisement features a family or couple on vacation.
An advertisement with a fantasy approach scores well on recall, as well as on action. If the
fantasy is absurd, then the recall is high as viewers remember the absurdity. It has to be
remembered that this approach may not go down well with senior citizens or conservative
customers, who prefer more subtle messages. Example: Fairness cream products
7. Informative: As the name suggests, in the informative execution framework, detailed
information about the product is given. The format is best suited for advertisements using
rational appeal. It has been observed that the informative format is more effective if the
consumer is seeking information. If a person is planning to buy a car and he comes across an
informative ad on a car, he will pay more attention to the ad compared to someone not
planning to buy a car. The informative execution format is used extensively in business-to-
business (B2B) advertisements. B2B customers are more interested in more and more
information. This execution framework is also called straight sell or factual message.
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