Give a brief description of the various factors that affect advertising budget decisions

What will be an ideal response?

1. Stage in the product life cycle — New products typically merit large advertising budgets to build awareness and to gain consumer trial. Established brands usually are supported with lower advertising budgets, measured as a ratio to sales.
2. Market share and consumer base — High-market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. To build share by increasing market size requires larger expenditures.
3. Competition and clutter — In a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard. Even simple clutter from advertisements not directly competitive to the brand creates a
need for heavier advertising.
4. Advertising frequency — The number of repetitions needed to put the brand's message across to consumers has an obvious impact on the advertising budget.
5. Product substitutability — Brands in less-differentiated or commodity-like product classes (beer, soft drinks, banks, and airlines) require heavy advertising to establish a unique image.