1.4 International advertising budget planning

In international advertising budget planning the automotive manufacturer faces the question, whether decision making about the amount and allocation of advertising budgets can be standardised (Landwehr 1988, p49).

In principle, we distinguish between heuristic advertising budgeting methods and socalled optimisation methods depending on whether the respective allocation criteria are geared to the advertising impact. (Schweiger, Schrattenecker 2001, p159 ff.).

Ideally, the budgets of all national sales companies should be optimised and allocated topdown according to the marginal utility in terms of an efficient allocation of resources. Since national sales companies are, however, in general managed as independent profit centres, the budget planning is effected bottomup, i.e. each importer independently fixes his budget on the basis of his market knowledge and market objectives. In this case, budget planning is often executed according to the rules of thumb or according to the power of influence, which abets a counterproductive variety of rules.

Heuristic budgeting methods, such as budgeting based on percentage of sales enjoy high acceptance. However, these methods have to be assessed critically, as far as a logically wrong coherence is created, if the advertising budget depends on the target value actually to be influenced. The only acceptable heuristic seems to be budgeting according to advertising objectives and relevant measures required (objectivetaskmethod), because it is geared to advertising objectives (Sander 1993, p274 f.).

It is tried to picture the coherence between advertising campaigns that are financed with the advertising budget and their impact with help of a response function in order to finally optimally allocate the budget (Streich 1996, p109 ff.). This method being theoretically founded is of little value for the practical application, because the advertising impact is operationalised with economic variables. This does not make sense because of the accountability problem (see chapter 2.2). Besides, the mathematical complexity of such optimisation models is high, which leads to a lack of acceptance in practice.
This criticism allows for a synthetic approach (Landwehr 1988, p177 ff.), being an advertising budgeting method for the automotive industry. This method is target-oriented, because it is geared to planned sales volumes, divided between regular and new customer objectives, but also takes into account the specific situation, because it considers market and communi-cation conditions by including the advertising impact of competitors and marketability.

Within the annual financial accounting advertising budget planning is a repetitive task. Unlike for optimization models data of a synthetic ap-proach is ascertainable because it is based on the usual planned magni-tudes of the automotive industry: conquest and loyalty rate. As both val-ues are derived from previous year values, a response function becomes part of this method. The budgets are calculated on model and brand level and consolidated bottom-up. The procedures are thus observable. The method can therefore be classified as potential to be standardised and should be applied by the national sales companies.