E-Marketing Professionals

The affordable method of budgeting is based on the premise that all necessary expenditures, such as production costs, personnel costs, and so forth, come first, and promotion receives what is left over. Thus, in good years, the firm would commit large amounts to promotion, while in bad years spend little or nothing. Of all methods considered here, the affordable method holds the least potential for mak¬ing sound promotional decisions.

The competitive parity method sets the level of promotional spending equal to the firm's market share or larger if an attempt is being made to increase share. Thus, if the firm's market share is 20 percent, then its budget would be 20 percent of the total amount spent by the industry on promoting a given product-market entry. This method of budgeting tends to create stability in market shares among competitors and has the advantage of considering competition. Share-of-market budgeting is often used in connection with new products where the rule of thumb is to spend one and a half times the share objective at the end of the first or second year.