How to the Methods of Calculating Banks Marketing Budget Essay

How to Decide Banks selling Budget? Introduction Now a day under victorious market activities is compulsory and a key to exist in the line of products environment especially in the financial sector where competition is strong. In Ethiopia in that respect argon 16 private commercial relys and three state-supported owned avers. in that location is strong competition among these coin entrusts to bespeak market destiny and earn win especially for those banks that enter the market recently. In rise to power according to the National Bank of Ethiopia Directive, all commercial bank contain to reach 500 million paid up capital in the coming four years. In order to achieve this amount of capital these banks must sell new share, persuade their existing share holders to amply pay the subscribed amount and retain the earning instead of paying the dividend. These are achieved by undertaking strong marketing campaign.All the banks have marketing budget and the budget differs estab lish on the size and depth of their capital. However, find the size of marketing budget is not an easy task. It is big interrogation often asked by marketers and bank executives. In Ethiopia it is common to see picture program and football events sponsored by commercial banks, advertisement of banks products and services in any time on electronics and print media especially money absent adverts during the holiday season, distributing givea right smart materials and entertaining their customers.The marketing budget for a bank generally includes expenditures for five different activities Advertising Debub ball-shaped Bank, MPPE DepartmentCompiled by Behaylu WondafrashPromotional activities Sales promotion Marketing research Sales/customer service training and Public relations How a bank allocates its core marketing budget among various marketing activities depends largely on bank size in terms of capital and branch distribution and advertize cost ( end product and air time cos t). about the Banks in Ethiopia authorises about 80% of their total marketing budgets on publicizing. The rest activities took 20 per centum of the budget. to the highest degree banks are currently using sales promotion activity handle commercial bank of Ethiopia which provide awards for who save 1000 whiz and preceding(prenominal) in any branch of it and promotional activities like sponsoring Ethiopian bulky Run and donating to children aid.Advertising took about 80 percent of the budget. This due to the incident that time to time increasing cost of advertizing station and production cost. The lion share of the budget is goes to the Ethiopian radio and Television spot and then to the private FM radio stations especially Fana FM and Sheger FM. Most banks also use print media like reporter and event news paper. But how does a bank envision how much it should spend for marketing in general and publicize in particular? There are regularitys of calculation. Methods of ca lculation According to author of Marketing Financial Services, there are different shipway to calculate a banks marketing budget. Banks use at least four systems to determine what they go away spend on marketing in general and on ad in particularDebub Global Bank, MPPE DepartmentCompiled by Behaylu WondafrashThe component part method, The war-ridden similitude method, The incremental method and The objective-and-task method.1. Percentage method the percentage method states banks ad budget is 1/10th of 1 percent of a banks total assets. This percentage method has several drawbacks or flaws. First, it is based on the banks former(prenominal) 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 slow down. Research indicates that firms that maintain 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 volume of whirring 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 probably use no more shrewd a system for determining their advertising expenditures than does the bank that is following their lead.3. additive Method under this method a bank simply increases its advertising budget by a certain percentage each year. The percentage may take Debub Global Bank, MPPE DepartmentCompiled b y 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 election objective is to make the bottom line show a targeted result 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 get out cost to meet the marketing objectives it had defined. The bank then weighs this cost against the pass judgment net benefit of the new business to ensure that the cost of advertising will not reduce the profit margin on the fresh acquired deposits or loans 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 period. It calculates tha t 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 lay in advertising in order to generate an extra 6,000,000 birr of income. The selected amount will vary from bank to bank.This method also has its drawbacks. bandage it works for particularized 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 enlarge 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 call down in front of its publics.