What are the different factors that influence advertising budgets?

What will be an ideal response?

The required size of the organization's advertising budget is often influenced by several factors. When deciding
upon a budget to cover advertising expenses, those factors can impact the level of spending required to successfully
introduce a new product or service and keep it successful throughout its life cycle.
• Life Cycle Stage: Generally, new products and services require higher budgets, because they require expensive
efforts to boost awareness and encourage customer trial. Mature products and services generally require lower
amounts of funding as a percentage of sales. Declining products can have high amounts of funding as a percentage
of sales (despite lower total expenditures), due to the declining period's lower sales volume.
• Market Share: Brands with lower market share generally require higher advertising budgets, as a percentage of
sales, than those with high market share, because the sales rate is lower.
• Competition: Brands in highly competitive markets must advertise more heavily to remain on customers'
consideration lists.
• Advertising Frequency: Brands in markets subjected to significant amounts of advertising, such as those of
consumer packaged goods, generally must advertise more frequently to reach its audience with a designated
number of repetitions. Higher frequency results in higher budgets.
• Product Substitutability: Brands in markets where offerings are perceived as nearly identical (such as the market
for airline services) require higher budgets to emphasize their differentiation.