Advertising Budget, Effectiveness and Ethics
What this domain tests
Budget-setting methods, how advertising effectiveness is measured, and the ethical and legal standards that apply in India.
Budget methods
- Percentage of sales - simple and common, but it reverses cause and effect (sales drive the budget, whereas advertising is meant to drive sales).
- Affordable method - whatever the firm thinks it can spare; arbitrary.
- Competitive parity - match competitors' spending, though objectives differ.
- Objective-and-task - define the objective, the tasks needed, and cost them out; the most logical method because it links money to results. Factors affecting the budget: product life-cycle stage, market share, competition, media costs, funds available.
Measuring effectiveness
Pre-testing (consumer jury, portfolio test, dummy magazine, theatre test) checks whether the advertisement will work. Post-testing checks what it did: recall and recognition tests (aided and unaided), coupon returns, dealer enquiries, split-market sales tests, brand-awareness tracking.
Ethics and regulation in India
Issues: misleading or false claims, puffery (harmless exaggeration such as "the best tea in the world"), bait-and-switch, surrogate advertising of prohibited products, indecent or offensive content, advertising to children, gender stereotyping. Regulation: the Advertising Standards Council of India (ASCI) code (truthful and honest, decent, safe, fair to competitors), the Cable Television Networks Rules, and the Consumer Protection Act 2019, under which the Central Consumer Protection Authority can act against misleading advertisements and endorsers.
Worked example (objective-and-task)
Objective: reach 50,000 households in a town with a launch leaflet, at ₹2 per household. Budget = 50,000 × ₹2 = ₹1,00,000. Reasoning: the budget is built from the task, not from a percentage of last year's sales; if the objective changes, the budget changes with it.
Traps that cost marks
- Recommending the percentage-of-sales method as the best method - objective-and-task is.
- Confusing pre-testing with post-testing.
- Treating puffery as illegal deception; puffery is vague exaggeration, deception is a false factual claim.
- Forgetting ASCI is self-regulatory, while the CCPA under the 2019 Act has statutory powers.