The competitive parity method is an approach to determining the advertising budget in which a company allocates an amount for advertising that is in line with or equal to the spending of its main competitors. This method is based on the premise that competitors have successfully determined the optimal level of spending and that balancing the advertising “voice” will prevent marketing wars.
The main argument in favor of this method is that it maintains the collective wisdom of the industry and prevents cost escalation. Its disadvantage is that it ignores the individual needs of the company, its unique goals and market position. It can lead to under- or over-spending, since the budget is determined by external rather than internal strategic factors.
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