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Advertising Appropriation – Definition

Cite this article as:"Advertising Appropriation – Definition," in The Business Professor, updated June 9, 2019, last accessed September 25, 2020, https://thebusinessprofessor.com/lesson/advertising-appropriation-definition/.

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Advertising Appropriation Definition

Advertising Appropriation refers to the total amount of money that an organization keeps aside strictly for marketing or advertising at a particular period of time. Since appropriation in itself is a sum of money allocated officially or set apart for a particular use, advertising appropriation is marketing budget for a specific period.

Oftentimes, corporate organizations designated a sum of money for a wide range of official purposes. Advertisement is one of the core areas organizations budget for. Based on the advertising policy or marketing strategy that a company uses, a certain amount of money is earmarked for advertising at a certain period of time.

A Little More on What is Advertising Appropriation

It will be improper to discuss advertising appropriation in abstraction, this is because there is an interaction between the percentage of sales that an organization makes and the advertising costs that it budgets for.

Determining the extent of advertising appropriation is not often straightforward. Arbitrary calculations are often involved in the estimation or calculation of advertising budget. Also, how much a company means and profits it makes from sales are important determinants of how the advertising budget would look like.

Advertising Appropriation Method

Different organizations use different advertising approaches, the advertising approach used determines the advertising budget earmarked for a particular period. The advertising appropriation methods or approaches are outlined below;

  • Adaptive management approach: this type of appropriation is based on assumptions, revenue and profits that a company is likely to earn are estimated and used in the appropriation of funds.
  • Cost-effective approach:this is dependent on a company’s trust in marketing and not based on cogent marketing goals that the company wants to achieve. It is regarded as an unreliable approach.
  • RIO method: this approach seeks to balance advertising volume and profits realised from advertising.
  • Goal method: based on a specific goal that a company wants to accomplish.
  • Competitive parity method: marketing or advertising budgets are set based on the marking goals and strategy that other competitors have.
  • Interest of income approach: advertising budget is based on the percentage of the profit a company makes from sales.

Factors Influencing Ad Delivery

Budgets for the delivery of ads is influenced by a number of factors, the fact that a company has large market shares does not posit that the company will require a huge budget for advertisement. For instance, large companies may have lower advertising budgets even when compared to emerging competitors, that is, emerging company in that same industry can have a higher advertising budget. A renowned company with large customer base might not need much advertisement like an emerging company seeking to get more customers, therefore, the calculation of their advertising appropriation will also vary.

References for Advertising Appropriation Methods

Academic Research on Advertising Appropriation Methods

Advertising appropriation policy, Taplin, W. (1959). Economica, 26(103), 227-239.

Cyclical Policy on the Advertising Appropriation, Dean, J. (1951). Journal of Marketing, 15(3), 265-273.

Measuring the profitability of advertising: An empirical study, Lambin, J. J. (1969). The Journal of Industrial Economics, 86-103.

The Development of Advertising Appropriation Policy, Jastram, R. W. (1950). The Journal of Business of the University of Chicago, 23(3), 154-166.

Advertising budgeting methods in Canada, the UK and the USA, Hung, C. L., & West, D. C. (1991). International Journal of Advertising, 10(3), 239-250.

An examination of methods of setting advertising budgets: practice and the literature, Mitchell, L. A. (1993). European Journal of Marketing, 27(5), 5-21.

If you cannot block, you better run: Small firms, cooperative innovation, and appropriation strategies, Leiponen, A., & Byma, J. (2009). Research Policy, 38(9), 1478-1488..

Advertising expenditure and consumer demand, Doyle, P. (1968). Oxford Economic Papers, 20(3), 394-416.

Common approaches to budgeting for advertising, Mitchell, L. A. (1979). Management Decision, 17(5), 357-403.

Advertising budgeting: process and structure as explanatory variables, Piercy, N. (1987). Journal of Advertising, 16(2), 34-40.

The promotions mix practices of retail pharmacies: towards an appropriation model, Abratt, R., & Anley, J. M. (1994). International Journal of Advertising, 13(4), 367-377.

 

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