How Corporate Culture Drive Advertising and Promotion Budgets: Best Practices Combine Heuristics and Algorithmic Tools

This study provides a survey of the methods used by U.S. advertisers to set advertising and promotions budgets and the effects of culture, risk, and organizational experience on these choices.

How Corporate Cultures Drive Advertising and Promotion Budgets: Best Practices Combine Heuristics and Algorithmic Tools

Douglas West

King's College London

John B. Ford

Old Dominion University

Paul W. Farris

University of Virginia Darden School of business

Management slant

  • Budgeting processes used by companies are more complicated than the oft-referenced 'rules of thumb' suggest.
  • Nevertheless, the process is not as rational as economists and management scientists would prefer and rarely can be demonstrated to produce profit-optimizing budgets (however profit might be defined).
  • Instead, whatever the sophistication of the organization, the budget-setting process often combines heuristics (such as maximum advertising/sales ratios)...

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