The percentage-of-sales method of setting a communication budget wrongly treats sales as a cause of promotion rather than a result.

Question

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The percentage-of-sales method assumes that the amount spent on promotion is directly proportional to the sales revenue generated. However, this is not always the case, as promotion can also drive sales, and therefore treating sales as a cause of promotion is incorrect. This method can lead to underinvestment in promotion during times of slow sales and overinvestment during times of high sales.

The Percentage-Of-Sales Method of Setting a Communication Budget Wrongly Treats