Sam, the owner of a small company, learned that a competitor was planning to spend $150,000 on promotion in the next financial year. As soon as he learned this, Sam called his finance manager and said, "I want to spend $150,000 on promotion next year."

In this case, which method of promotional budgeting does Sam use?

A) the objective-and-task method

B) the competitive-parity method

C) the percentage-of-sales method

D) the affordable method

E) the pull-push method

The answer is, The competitive-parity method.

Explanation:

Promotional Budgeting is the process of estimating the expenses for a particular promotional project that is yet to be launched.

The competitive-parity method, primarily assumes that the other firms have the same marketing objectives and know what they are doing. Based on this, the Advertising-expense budgeting method is decided under the basis of what a brand's or firm's competitors are estimated to be spending.

The other several popular ways to do this are,

Percentage Method: a percentage of sales are taken to budget the costs Goal-and-Task Method: First you define a task, then you estimate the costs related Zero Method: This method emphasizes on keeping the promotional costs near to 0! the affordable method/What's-in-my-Wallet Method: A method where company only spends what they can afford, often this is utilized by small businesses