Final answer:
Determining the advertising spend requires considering the advertising budget, which is often set as a percentage of sales. In monopolistic competition, effective advertising is crucial for product differentiation and reaching the target audience. Choice of media channels and technology advancements are also key factors influencing the decision.
Step-by-step explanation:
To determine how much to spend on advertising, several factors need to be considered. A key consideration is the advertising budget, which is often a percentage of the projected or actual sales revenue, a strategy known as percentage-of-sales. However, this budget allocation can vary depending on the industry, the life-cycle stage of the product, and market competition.
In the context of monopolistic competition, advertising plays a significant role in differentiating products and services from competitors. As seen in historical data such as the U.S. economy spending approximately $180.12 billion on advertising in 2014, a substantial portion goes to media channels like television, internet, and newspapers. The choice among these platforms depends on the target audience and the type of product being advertised. For instance, advertising footwear might require a detailed analysis to decide whether all 20 pages of a magazine should feature the product or if a more digital approach is appropriate.
It’s not always probable that all available advertising space will be utilized for a single type of product such as footwear, as this decision is driven by marketing strategies and budget considerations. Diversifying advertisement placements across different channels can be more effective in reaching a wider audience and creating brand awareness. Additionally, advancements in technology, especially in mobile devices, are creating more avenues and consequently, decisions about how and where to advertise.