A Study on Advertising Cost Desision

Yong-Chul Lee

Advertising is important sales-promotion means in business firms, then, the success of failure in advertising has an important influence upon the achievement of marketing goal. Advertising cost which increases year by year is considered as critical factor for top management and marketing manager.

The expenditure scale of advertising cost becomes relative important expenditure items in selling and general administrative expense of budget decisions. And so, the effective decision method and expenditure scale of advertising cost can be considered as more important decisions of marketing managers.

The purpose of this paper is to identify the appropriate decision method and expenditure scale of advertising cost, to maximize the promotion effects of business marketing, to help achieve successfully the marketing goal, and finally to adapt creatively to competitive marketing environments.

Therefore, this paper, first of all, examines the general theoretical models of advertising cost decisions and analyses the theoretical models of advertising cost decisions mathematically for the practice of marketing field according to the market character. And finally this paper suggests the limits of these theoretical models in applying to the practice of advertising cost decisions.

In monopoly market, the optimum advertising cost is determined on approzimately 75% of the real advertising cost. This results means that advertising cost can be reduced approximately 25%. In competive market, the optimum advertising cost of business which pays the most expensive advertising cost in the same types of business. This results means that in this situation advertising cost can be reduced approzimately 12%.

Media effect index means media efficiency degree. Media effect index and frequency get to be critical factor for advertising decisions. For the realistic advertising expenditure, it is desirables that advertising cost decision relation studies apply media effect index to advertising frequency.