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How to determine Advertisement budget for your business
To determine the ad budget we must first of all find out the frequency of buying for the product, this means we should estimate after how many days the product is re purchased by the buyer. After this find out the market size of the product in terms of number of consumers. Then find out the reach of advertisement media and the profit margin on the product.
Suppose, reach of advertising media=200000 people.
Frequency of product purchase= 150 days/ year/user
Market size of product>1000000 people
This means we may expect 100000 potential viewers of ad on any day as people buy product every 2 nd day approximately, we are simply saying people will buy if they need and see it.
If the profit margin is 10 rs, then ad budget should be less than 1000000 Rs/ day for a media with reach of 200000 people.
This should also be multiplied with market share of brand, suppose market share of brand is 40% then this will become 400000 Rs/ day.