Advertising impacts a companys annual sales, so what happens when advertising budgets are set based on sales

❺ Advertising impacts a company’s annual sales, so what happens when advertising budgets are set based on sales forecasts? It is marketing heresy to suggest anything other than that marketing effort (e.g. advertising expenditure) is a part determinant of sales levels. We do know that word of mouth is another such determinant. After the worldwide slowdown in advertising expenditure during the Global Financial Crisis, Australian and New Zealand advertisers increased their ad spend. Today, ad spending has stabilised and this has coincided with a general period of low economic growth (see Table 11.1). With a great many advertisers using the percentageof-

sales method to determine promotion budgets, discuss whether, in your view, advertising led the improvement in sales or if an improving financial climate and increased sales meant that advertisers could spend more on advertising? (Learning Objective 3) (AACSB: Reflective Thinking)