Advertising Budgeting — How Industrial Goods Companies Decide

Abstract

A number of studies have attempted to determine the methods used in setting advertising budgets of industrial goods firms. In 1965, a survey the British engineering industry revealed that 29 per cent of firms had no known basis for the calculation, 39 per cent used a fixed sum unrelated to sales, 28 per cent related their expenditure to the previous year's sales or the following year's anticipated sales, while 4 per cent used other methods. Three years later, research based upon 250 subscribers to the Industrial Advertising and Marketing Journal discovered that 71 per cent of respondents based their decision upon the percentage of sales techniques and a further 15 per cent used the affordable method. In 1975, a survey which covered essentially medium sized consumer and non‐consumer companies confirmed that the percentage of sales techniques were the main methods used, accounting for 46 per cent of these non‐consumer firms replying. Subsequently, however, a survey conducted into promotional activity in Britain revealed that the objective‐task method had gained ground and was the main method used in 38 per cent of firms selling industrial products in their sample.