Advertising is often considered paying to deliver and control a marketing message, while promotion is paying to support your marketing efforts more generically. Depending on your accounting goals, you may lump all marketing expenses, such as advertising, promotions and public relations, under one expense category. You may also wish to track spending by marketing activity. To learn more accurately where your marketing dollars are going, record your advertising and promotional expenses separately.
Advertising: Delivery Expenses
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Delivering your marketing message may require newspaper, magazine, TV or radio advertising. Other means include direct mail, website banners and links and billboards. When you buy advertising, you control your message by creating the copy used in the ad. Part of the advertising expense is the media purchase, such as a 30-second radio commercial or a half-page magazine ad. The price often does not cover creation of the ad.
Advertising: Creation Expenses
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Media costs represent only part of the advertising expense. Someone must create the ads. Advertising creation costs include agency fees, in-house designers, copywriting and overhead related to the development of the ad. For example, if you have an advertising department, you must include the costs of your staff, office space, computers and software in your advertising budget. If you spend money on focus groups to test different versions of advertising copy, slogans, jingles, models or graphics, that expense is a part of ad creation.
See AlsoAdvertisem*nt journal entry
Promotion: Delivery Expenses
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Examples of promotions include event sponsorships, giveaways, on-site sampling, contests and discounts. Promotions often include items such as T-shirts, stickers, coupons and prizes. If you sponsor an event and require staff to work at the event, include your staff time as part of the promotion expense.
If you sign a one-year contract with a celebrity to endorse your product, you would record the celebrity's fee as an annual promotional expense for accounting purposes. If you require the celebrity to make six appearances each year, you can assign one-sixth of the celebrity's fee to each of the six appearances he makes for an internal analysis of the true cost of each of those six promotions.
Promotion: Creation Expenses
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Calculate the cost of pre-promotion expenses directly related to planning and creating a promotion. Site visits, consulting fees, travel, lodging and other pre-event planning expenses are examples of promotion creation expenses. Giving your retailers, the media or event organizers gifts or entertaining them would be expenses indirectly associated with a promotion and considered part of creating, rather than executing the promotion.
