The marketing budget of an FMCG brand typically comprises of the following elements:
1. Above The Line (ATL) budget
2. Below The Line (BTL) budget
The ATL budget broadly comprises of two components: the media budget and the production budget. Media budget is the actual money that is spent on advertising the brand in conventional media such as print, TV, radio, cinema, outdoor, social, and mobile. Production budget is the cost that is incurred to produce the creative units that are used in the communication process. Usually the costs for production are not very high (relative to the budget), except for TV advertising, which has high production costs depending on the kind of brand ambassador or model, location, post-production work, creative and production team, etc.
The BTL budget comprises of two components: the trade budget and the promotions budget. Trade budget is the budget kept aside for offers and promotions for the trade schemes. This is more important for certain categories and brands that are in a more mature stage of the product life cycle (PLC) or that are more dependent on trade ‘push’ than on consumer ‘pull’. On the other hand, the promotions budget is the budget set aside for consumer promotions, for e.g. volume or value offers, and any on ground activations and in-shop advertising.
So, the budget is partitioned mainly across advertising, trade schemes, and consumer promotions. Marketers try to craft the right mix of these tools and its sub-components in order to achieve sales and market share goals, but they are always torn between the long term brand plans and the pressure to deliver results in the short term. For example, consumer promotions generally result in an immediate peak in the sales offtakes, and hence promotions may seem more attractive compared to advertising. But, excess promotions can bring down the profitability of the brand, make the brand more promotions dependent, and cause loss of market share in the long term. Similarly, sometimes internal pressure from trade and sales teams may force more investment into trade schemes.
In summary, marketers and planners make budget and media-mix decisions based on many qualitative and quantitative factors (e.g. marketing and financial goals, past spends, clutter, competition spends, market priority, cost per rating point, media isolatability, etc.) and use tools like optimizers and market modelling to optimize their investments for maximum return.
As an after thought, here is a Forbes article on the emerging trend of how brands are shifting their budgets from TV to online video?