Advertising budget decision depends to a great extent on the objective of the campaign whether it simply wants to inform, create brand image, cultivate brand preference or brand loyalty, whether it is to reinforce or change an existing image, whether it is to clarify some confusion, or campaign tries to create and sustain a real estate corporate image.

Now here is some startling information. We all know that the amount of money spent on advertising varies widely among real estate companies in different product categories. But the ad-spend of companies in some industry also varies widely. Another company in the same Moorpark Real Estate spends almost 14 percent of its total sales amount on advertising. Also companies often change their ad spends radically from year to year.

From the discussion many question arise. Why there is wide variation in ad spends among companies with the same industry and over time for the same company? Hoe do companies set their advertising budgets? What methods are employed in setting advertising budgets?

The total amounts of money spend on an advertising campaign is known as the ad spend or appropriate. Finding out this total ad-spend is not budgeting. It is just one part of budgeting. A budget is a financial plan, which includes details of how much money will be spent and how the money will be spent.

We know that advertising is a part of the total marketing communication or promotional activities for a product, which in turn is part of the marketing process. This way the advertising budget is part of the marketing budget. As different promotion mixes (combination of promotional activities like sale promotion, personal selling, public relations and advertising) are used for different brands, the advertising budgets also vary accordingly.

Advertising budget consists of media budget, creative and production budget and research budget. Now let us find out answers to the big question. How much to spend? So let us start by discussing the various methods of determining the ad-spend or ad appropriation.

The advertising to sales ratio is one of the widely used methods of determining the appropriation. Here the total sales revenue for the brand for the next year is estimated and fixed portion of this is allocated for the next year is estimated and fixed portion of this allocated for advertising. Sometimes the total sales revenue for the past or the current year is also used. Often advertisers combine the past sales and estimated sales revenues to work out the proportion to be allocated for advertising.

Deciding this proportion often involves guesswork, institution and past experience. However, this method is easy to practice once the proportion is decided. Brands with high sales get more ad budget. Also this method tried to establish a relationship between the sales and the ad-spend.