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As with all business activities, marketing budgets help the planning of actual operations by forcing managers to prioritize activities and consider how conditions might change.
Marketing also encourages managers to take steps now, so they can deal with problems before they arise.
It also helps coordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments, which is a key component of integrated marketing.
The essential purposes of budgeting include:
To control resources
To communicate plans to various responsibility center managers
To motivate managers to strive to achieve budget goals
To evaluate the performance of managers
To provide visibility into the company's performance
Marketing plans are resource driven and they affect the budget.
Therefore, two big budgeting decisions should be resolved up front:
How shall these efforts be funded?
For example, 70% will be reallocated through cost reductions by consolidating programs and 30% will come from new funding.
Who will benefit from the new program?
For example, 70% will advance the reputation of the company and 30% will build "steeples" - the critical core themes that make a difference, which are usually only built one at a time.
When determining a budget for an integrated marketing plan, it is important for managers to understand the components of IMC in order to allocate funds properly .
The foundation - This component is based on a strategic understanding of the product and market.
This includes changes in technology, buyer attitudes, and behavior, as well as anticipated moves by competitors.
To motivate managers to strive to achieve budget goals., To evaluate the performance of managers., To provide visibility into the company's performance., and To evaluate company risks and opportunities.