What is Competitive Parity Budgeting?
Competitive parity budgeting is a type of marketing budgeting in which a company sets its budget based on the spending of its competitors. It is a strategy used to ensure that the company is not falling behind its competitors in terms of marketing activity and is a form of benchmarking.
Benefits of Using Competitive Parity Budgeting
Competitive parity budgeting has several benefits, including:
- Helps to motivate the team – Knowing that the budget is on par with competitors helps the marketing team to stay motivated and competitive.
- Ensures a competitive position – By matching or exceeding the competition’s budget, companies can make sure they remain competitive in their market.
- Reduces the risk of under-investing – If a company’s competitors are investing more heavily in marketing, the company can use competitive parity budgeting to avoid being left behind.
- Can be used to measure progress – By regularly tracking the competition’s budget, companies can measure their own progress and see how they are performing in comparison.
Examples of Competitive Parity Budgeting
One example of competitive parity budgeting is when companies in a competitive market set their advertising budgets in line with their competitors. This can be done by tracking the competitors’ spending on advertising and ensuring that the company’s own budget is in line with that of its competitors. Another example is when companies in the same market set their budgets for promotional activities in line with their competitors. This could include setting budgets for online and offline promotions, events, and other marketing activities.
Conclusion
Competitive parity budgeting is a strategy used by companies to ensure that their budget is in line with that of their competitors. It can help to reduce the risk of under-investing and ensure that the company remains competitive in its market. Examples of competitive parity budgeting include setting advertising and promotional budgets in line with competitors.
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