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How to manage budgets from day one

News, 13 January 2015

NEW YORK: Marketers now have access to benchmarks which may be used to conduct a preliminary assessment of whether products have a reasonable chance of meeting their year-end sales goals, according to a study in the Journal of Advertising Research (JAR).

"Will I Hit My Year-End Numbers? A Brand-Performance Forecasting Model: The Case for Benchmarking Sales and Advertising Spending" was published in the winter issue (Volume 54, Number 4) of JAR.

In it, the University of Louisville's Robert E. Carter investigated the sales and advertising "build" curves – reflecting cumulative sales at any given time period divided by the 52-week sales – for various established brands and new products in 15 consumer packaged goods categories.

Identifying commonalities across categories in the sales and advertising build curves, he reported, means benchmarks can be developed to provisionally investigate if a product might hit its annual sales target.

"Successfully managing established brands and/or new products requires marketers to navigate innumerable risks," Dr. Carter wrote.

"Among these challenges is determining whether a brand is on track to hit its full-year sales objective."

More specifically, he reported that "regardless of the category, brand, and advertising spending, there were very reliable patterns or benchmarks for the growth in the sales index over 52 weeks for established brands."

For new products, "these builds demonstrated a wider range of values, at any given time frame, than those for established brands," he added.

"The wider ranges should not be surprising, given the small (but growing) buyer base for a new product as compared to an established brand."

Benchmarking sales and adspend figures, however, are not meant to replace comprehensive marketing-mix modelling.

"Rather, their use is recommended to provide managers with a preliminary assessment of whether a product has a reasonable chance of meeting its year-end sales objective, based on the actual sales recorded at some interim time period (such as 13 weeks or 26 weeks), and to do so employing a much simpler, faster, and less expensive process."

Data sourced from Warc