Advertising expenditures are a crucial part of most business budgets. Without advertising, companies are unable to get the word out about their services or establish a reputation in the community. There are many different types of advertising expenditures, including traditional media advertising, promotional advertising, and sponsorships. Many companies use a blend of different advertising techniques, which in turn can lead to varied and sometimes unpredictable advertising expenditures.
Traditional media advertising, such as radio, television, magazine, and newspaper ads, is often the most straightforward in terms of advertising expenditures. The cost of a newspaper ad, for instance, usually depends on the size and format of the ad, the length of time it will run, and the addition of special features, such as color graphics. To make a commercial for television, expenditures will also include the filming costs of the commercial as well as the television ad buy. Most businesses use traditional media ads of some sort, though the scope, prevalence, and complexity of this type of advertising expenditure may vary greatly depending on the size of the company.
Promotional advertising expenditures are often difficult to manage or forecast correctly. Promotions include campaigns such as buy-one-get-one-free sales, raffles or prize giveaways, or discounts. Expenditures on this type of advertising may include printing and distribution costs, advertising the promotion in traditional media, and the price of giveaway items. Generally, companies use promotional advertising to help draw in new customers or increase clientele by means of a gimmick.
Sponsorships allow a company to make a strong stance in the community and can boost name recognition. A sponsorship may include gestures such as purchasing or printing uniforms for a local baseball team, donating goods, services, or money to a community orchestra or recreation center, or offering a scholarship to a local student. This type of advertising expenditure depends entirely on the specifics of the sponsorship; generally, companies form partnerships with a few select organizations and continue to provide the same level of sponsorship each year.
Other advertising expenditures may include the salaries of any sales or marketing professionals, services such as logo or letterhead design, and printing and distribution costs for fliers, mailers, or other basic forms of advertising. Companies tend to keep close watch on advertising expenditures, in order to ensure that the amount spent on advertising leads to increased business and higher sales. If advertising expenditures cost more than they are worth, it is a clear sign to reduce the budget or change advertising strategies for more effective returns.