Marketing & Planning

Marketing Budget

A marketing budget sets out the costs and revenues that are allocated to the marketing department. The marketing budget will influence the promotional tools that a business is able to utilise.

Sales forecasting

Sales forecasting sets out targets for overall sales for products and is a goal for the firm to achieve

It influences other decisions:

  • Production schedule
  • Cash flow forecast
  • Human resources decisions

Producing a Sales Forecast

  • It may be based on historical / back data
  • The firm can use market research to try and identify likely future trends
  • It may be based on the firms best guess
  • Nature of the forecast depends on nature of the firms product and the market situation 

Problems with forecasts

  • Customer-buying behaviour suddenly changes
  • Original market research was poor
  • The experts got it wrong 

Reliability of forecasts

Forecasts are most likely to be correct when:

  • Trend has been extrapolated and market conditions continued as before
  • Test market is used and represents entire population
  • Forecast is made by experts
  • Firm is forecasting in the near future  

Marketing Planning

  • Develop tactics to support the marketing strategy
  • Sets targets Develops different elements of the mix
  • Allocates funds to different activities
  • Decides on a time schedule

Key Terms

  • Product Life Cycle
  • Marketing Budget
  • Test marketing
  • Sales forecasting

Advantages of marketing planning

  • Sets out in detail what it wants to achieve
  • Managers can review firms progress by comparing actual outcomes with planned outcomes
  • It forces managers to think ahead and consider what might happen
  • Provides direction

Disadvantages of marketing planning

  • The plan may become out of date with changes to the market
  • Can take up a lot of time and delay vital decision making 

Evaluation of the plan

  • Is it realistic?
  • Does it help achieve the strategy?
  • Is it affordable?
  • Does it fit with the firms strengths?

Sales Budget

A target level of sales for a product (actual or market share) – SALES BUDGET

Size is dependent on:

  • Past sales of the product
  • Expenditure budget
  • Market conditions
  • Objectives and strategy

Expenditure Budget

This is a target level of expenditure a firm sets to achieve its marketing objectives

Size depends on:

  • The firms overall financial position
  • The firms marketing objectives and strategy
  • The amount the firm expects to receive back
  • Competition

Elasticity

Elasticity measures how responsive demand is to a change in price / income

  • PED = % change in quantity demanded / % change in price
  • YED = % change in quantity demanded / % change in income
  • Inelastic: less responsive to a change in price / income
  • Elastic:  more responsive to a change in price / income
  • If YED / PED is greater than 1 it is elastic
  • If YED / PED is less than 1 it is inelastic
  • If YED / PED is 1 it is neither elastic or inelastic
  • To increase revenue for elastic goods you decrease price
  • To increase revenue for inelastic goods you increase price

Elastic goods tend to be:

  • Luxuries
  • Many substitutes
  • Take up a large % of income

 Inelastic goods tend to be:

  • Necessities
  • Few substitutes
  • Take up a small % of income
  • Goods with strong brands
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