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- The plan may become out of date with changes to the market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
