Some consultants or authors recommend that in certain industries, you dedicate a particular percent of sales for your marketing communications budget. I believe this is bad advice; you should not be spending the same amount as your competitors. In those markets that you are pushing, you should be spending more and in those markets where you are harvesting, you should be spending less. For example, your budget should be tied to your plans relative to market share objective, number of new products or services, market growth, plant or facility utilization, amount of sales transaction, importance to customer, premium or discounted pricing, relative quality, depth of line, and a standard versus custom brand.
Following are some formulas that you can use to factor in these components to calculate your budget. First, in Worksheet 7–1, you calculate your participant market factor, which is based on your total sales. Then you adjust this factor, based on the market objectives mentioned above, in Worksheets 7–2 through 7–11 to calculate your budget, as shown on Worksheet 7–12.