Determining the appropriate promotional budget is an important decision within any marketing strategy. Firms that set the budget too low risk blending into the competition and are often ineffective in communicating value to potential customers. Firms that set the budget too high open themselves up to waste and lower profits. Promotional budget decisions should consider a variety of factors, such as the types of products sold by the firm, the geographic location of the firm's customers, and the level of competition in the industry. Firms typically determine their promotional budget using one of three methods: (1) the affordable method, (2) the percentage-of-sales method, or (3) the objective-and-task method.

Asmall town wants to build some new recreational facilities. the proposed facilities include a swimming pool, recreation center, basketball court and baseball field. the town council wants to provide the facilities which will be used by the most people, but they face budget and land limitations. the town has $400,000 and 14 acres of land. the pool requires locker facilities which would be in the recreation center, so if the swimming pool is built the recreation center must also be built. also, the council has only enough flat land to build the basketball court or the baseball field. the daily usage and cost of the facilities (in $1,000) are shown below. which facilities should they build? facilityusagecost ($1,000)landswimming pool4001002recreation center5002003basketball court3001504baseball field2001005