Question
QUESTION 4 of 10: How are promotional budgets normally determined? a) By using a percentage of a business's net sales b) By using an estimate of expected future sales c) By budgeting just a little bit more than the competition
Answer
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Finley
Expert · Tutor for 3 years
Answer
a) By using a percentage of a business's net sales
Explanation
Promotional budgets are a critical aspect of a business's marketing strategy, and there are various methods to determine them. The options given in the question represent three common approaches:a) Using a percentage of a business's net sales: This method involves allocating a fixed percentage of the net sales of the business to the promotional budget. It is a straightforward approach and ties the budget directly to the sales performance of the business.b) Using an estimate of expected future sales: This approach involves forecasting future sales and setting the promotional budget based on these projections. It requires a more dynamic and anticipatory planning process, as it relies on predictions about future market conditions and sales performance.c) Budgeting just a little bit more than the competition: This competitive approach involves setting the promotional budget based on the spending of competitors. The idea is to outspend competitors in promotional activities to gain a market advantage. However, this method requires comprehensive knowledge of competitors' spending and may not always be feasible or effective, depending on the market dynamics and the financial capabilities of the business.Each of these methods has its advantages and limitations, and businesses often choose a method based on their specific circumstances, market conditions, and strategic goals.