Calculating Marketing Budget

1261 WordsApr 29, 20136 Pages
Compiled by: Behaylu Wondafrash How to Decide Banks Marketing Budget? Introduction Now a day under taking marketing activities is compulsory and a key to exist in the business environment especially in the financial sector where competition is strong. In Ethiopia there are 16 private commercial banks and three public owned banks. There is strong competition among these banks to take market share and earn profit especially for those banks that enter the market recently. In addition according to the National Bank of Ethiopia Directive, all commercial bank have to reach 500 million paid up capital in the coming four years. In order to achieve this amount of capital these banks must sell new share, persuade their existing share holders to…show more content…
A bank determines what its competitors are spending on advertising and simply follows their lead. This method is based on the erroneous assumption that the market responds in the same way to the same volume of birr spent by different banks. It fails to take into account the effects of variations in creativity, different uses of media, the timing of campaigns, and a bank 's image and recognition level in its market area. Furthermore, a bank 's competitors probably use no more rational a system for determining their advertising expenditures than does the bank that is following their lead. 3. Incremental Method: under this method a bank simply increases its advertising budget by a certain percentage each year. The percentage may take Debub Global Bank, MPPE Department Compiled by: Behaylu Wondafrash into account the rate of inflation or the growth rate of the bank or it may be dictated by a planner or budgeter whose primary objective is to make the bottom line show a targeted return on assets. Whatever the percentage increase, this method does not take in to account the desired objectives of advertising and the most cost effective ways to attain them. 4. Objective-and-task method. Using this method, the bank bases its advertising budget on what it will cost to meet the marketing objectives it had defined. The bank then weighs this cost against the expected net benefit of the new business to ensure that the cost of advertising will not reduce the profit

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