Marketing Management, 16th Edition

Determining the Communication Budget

One of the most difficult marketing decisions is choosing how much to spend on marketing communications. How does a company know it’s spending the right amount? John Wanamaker, the department store magnate, once said, “I know that half of my advertising is wasted, but I don’t know which half.” Industries and companies vary considerably in how much they spend on marketing communications. Expenditures might be 50 percent of sales in the cosmetics industry, but only 5 percent in the industrial equipment industry. Even within a given industry, there are low- and high-spending companies.

A practical approach for defining the communication budget is objective-and-task budgeting. This approach calls for marketers ...