How to the Methods of Calculating Banks Marketing Budget Essay Example for Free

How to the Methods of Calculating Banks Marketing Budget EssayHow to make up ones mind Banks Marketing Budget? Introduction Now a day under taking market activities is imperious and a key to exist in the business environment especially in the financial celestial sphere where competition is strong. In Ethiopia there are 16 nonpublic commercial-grade cashboxs and three public drive home banks. There is strong competition among these banks to take market cover and earn profit especially for those banks that code the market recently. In addition according to the National Bank of Ethiopia Directive, all commercial bank have to reach 500 million paid up capital in the coming four years. In order to achieve this amount of capital these banks mustiness sell new share, persuade their existing share holders to fully pay the subscribed amount and retain the earning instead of paying the dividend. These are achieved by set or so strong marketing campaign.All the banks have mar keting budget and the budget differs based on the size and depth of their capital. However, determining the size of marketing budget is non an easy task. It is big question often asked by marketers and bank executives. In Ethiopia it is common to see Television program and football events sponsored by commercial banks, advertisement of banks returns and services in any time on electronics and print media especially money steer adverts during the holiday season, distributing givea manner materials and entertaining their customers.The marketing budget for a bank frequently includes expenditures for five several(predicate) activities Advertising Debub Global Bank, MPPE DepartmentCompiled by Behaylu WondafrashPromotional activities gross revenue procession Marketing research Sales/customer service training and Public relations How a bank allocates its chalk up marketing budget among various marketing activities depends largely on bank size in terms of capital and subsection di stribution and advert approach (production and air time cost). Most the Banks in Ethiopia spends about 80% of their total marketing budgets on advertising. The rest activities took 20 percent of the budget. Most banks are currently using sales promotion activity corresponding commercial bank of Ethiopia which provide awards for who save 1000 birr and to a higher place in any branch of it and promotional activities like sponsoring Ethiopian Great Run and donating to children aid.Advertising took about 80 percent of the budget. This due to the fact that time to time increasing cost of advertising ordinate and production cost. The lion share of the budget is goes to the Ethiopian radio and Television Agency and then to the private FM radio stations especially Fana FM and Sheger FM. Most banks also usage print media like reporter and fortune news paper. But how does a bank determine how much it should spend for marketing in general and advertising in particular? There are orders of calculation. Methods of calculation According to root of Marketing Financial Services, there are different ways to calculate a banks marketing budget. Banks use at least four methods to determine what they will spend on marketing in general and on advertising in particularDebub Global Bank, MPPE DepartmentCompiled by Behaylu WondafrashThe percentage method, The competitive paratrooper method, The incremental method and The objective-and-task method.1. Percentage method the percentage method states banks advertising budget is 1/tenth of 1 percent of a banks total assets. This percentage method has several drawbacks or flaws. First, it is based on the banks past performance rather than on objectives for the future. Second, it views assets or deposits as the cause of advertising rather than recognizing that increases in these variables might be, to some extent, the effect of advertising. Third, it discourages aggressive advertising and reduces advertising expenditures in periods of economic slowdown. Research indicates that firms that keep abreast or increase their advertising during periods of recession do better after the recession.2. Competitive parity method this method is also known as follows the leader.A bank determines what its competitors are spending on advertising and simply follows their lead. This method is based on the erroneous assumption that the market responds in the same way to the same strength of birr spent by different banks. It fails to take into account the effects of variations in creativity, different uses of media, the timing of campaigns, and a banks image and recognition level in its market area. Furthermore, a banks competitors plausibly use no more rational a system for determining their advertising expenditures than does the bank that is side by side(p) their lead.3. Incremental Method under this method a bank simply increases its advertising budget by a certain percentage each year. The percentage whitethorn take Debub G lobal Bank, MPPE DepartmentCompiled by Behaylu Wondafrashinto account the rate of inflation or the growth rate of the bank or it may be dictated by a planner or budgeter whose primary objective is to make the bottom bourn show a targeted return on assets. Whatever the percentage increase, this method does not take in to account the desired objectives of advertising and the most cost effective ways to attain them.4. Objective-and-task method. Using this method, the bank bases its advertising budget on what it will cost to meet the marketing objectives it had defined. The bank then weighs this cost against the expected net benefit of the new business to ensure that the cost of advertising will not reduce the profit margin on the newly acquired deposits or bestows beyond acceptable limits. For example, Let us take Debub Global bank (DGB) and assume that a banks goal is to increase its one-year deposit volume by 100 million birr over its expected normal growth during a promotion perio d. It calculates that the profit margin on those funds (deposits) will be 6 percent (or 6,000,000 birr). The bank must then decide how much it is willing to invest in advertising in order to feed an extra 6,000,000 birr of income. The selected amount will vary from bank to bank.This method also has its drawbacks. While it works for specific promotions that have immediately measurable results, such as increased deposit or loan volume, it cannot be used to determine the level of advertising necessary to build awareness of the bank and to farm and maintain an image for it. A bank that advertises only when it has a specific promotion to communicate may be out of the media for considerable periods of time. Most marketers agree that some maintenance level of advertising, either product or institutional, is a necessary investment, simply to keep the banks name in front of its publics.