Question

Toward the end of the fiscal year, the owner of a small company came back from lunch concerned because he had learned that a business targeting his same customer base was planning on spending $150,000 on promotion. As soon as he arrived at the office, he called his financial manager and said, "I want to budget $150,000 for next year's promotion." Which method of promotional budgeting did the owner want to use?
A) the objective-and-task methodB) the percentage-of-sales methodC) the competitive-parity methodD) the bottom-up methodE) the pull-push method

Answer 1

Answer:

C) the competitive-parity method

Explanation:

In marketing, when a company determines it marketing budget based on the competition's budget, they are engaging in a competitive parity approach. They are basically trying to copy what the competitors do in an attempt to defend their market share. This is a defensive strategy because the company is not interested in expanding their sales or pursuing an aggressive campaign, instead they just settle for not losing business.

Answer 2

Answer:

C) the competitive-parity method

Explanation:

Based on the scenario, it can be said that the method of promotional budgeting that the owner wants to use is known as the competitive-parity method. This method basically describes taking the total budget amount that a competitor is allocating towards marketing and spending that exact same amount for your own company's marketing.