Budget approaches are used in estimating the advertising and sales promotion budget.It is mainly consisit of two methods
1. Top down approaches method
2. Build up approaches method
Top down budget are consist of another five types.These are
1. Affordable method
2. Arbitrary allocation method
3. Percentage of sales method
4. Competitive parity method
5. Return on investment method
In percentage of sales method the advertising and promotion budget is based upon the sales of the product.It is again consist of two methods
1.Straight percentage of sale
2. Percentage of unit cost
Advantage of percentage of sales method
1. Simple, straightforward and easy to implement
2. Based on future sales
Disadvantage of percentage of sales method
1. Sales
2. Stability
In competitive parity method the estimation of budget depends upon the competitor's expenditure on advertisement
In ROI method the advertisement and sales promotion are treated as plant and equipment.Thus budget appropriations looking for return on investements done by the company
Summary of top down budgeting methods
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