Question

Sam, the owner of a small company, learned that a competitor was planning to spend $150,000 on promotion in the next financial year.

As soon as he learned this, Sam called his finance manager and said, "I want to spend $150,000 on promotion next year."

In this case, which method of promotional budgeting does Sam use?


A) the objective-and-task method
B) the competitive-parity method
C) the percentage-of-sales method
D) the affordable method
E) the pull-push method

Answer 1

Answer:

The answer is, The competitive-parity method.

Explanation:

Promotional Budgeting is the process of estimating the expenses for a particular promotional project that is yet to be launched.

The competitive-parity method, primarily assumes that  the other firms have the same marketing objectives and know what they are doing. Based on this, the Advertising-expense budgeting method is decided under the basis of what a brand's or firm's competitors are estimated to be spending.

The other several popular ways to do this are,

1. Percentage Method: a percentage of sales are taken to budget the costs
2. Goal-and-Task Method: First you define a task, then you estimate the costs related
3. Zero Method: This method emphasizes on keeping the promotional costs near to 0!
4. the affordable method/What’s-in-my-Wallet Method: A method where company only spends what they can afford, often this is utilized by small businesses