Establishing Objectives and Budgeting for the Promotional Program

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Value of Objectives

Objectives

Focus & Coordination

Plans & Decisions Measurement & Control

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Characteristics of Objectives
Attainable

Realistic Objectives

Measurable

Not Mutually Exclusive

Specific

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising Can Shape Corporate Images

+
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing Versus Communications Objectives

Marketing Objectives
Generally stated in the firms marketing plan Achieved through the overall marketing plan Quantifiable, such as sales, market share, ROI To be accomplished in a given period of time Must be realistic and attainable to be effective

Communications Objectives
Derived from the overall marketing plan More narrow than marketing objectives Based on particular communications tasks Designed to deliver appropriate messages Focused on a specific target audience

Vs.

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Many Different Factors Affect Sales

$ALE$

Promotion

Competition

Product Quality

Distribution

Technology

Price Policy

The Economy

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Sales As Advertising Objectives

+
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Direct Response Ads Seek Sales

+
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Many Ads Seek Communications Objectives

+
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising and Movement Toward Action

Conative Purchase Conviction Preference Liking Knowledge
Point of purchase Retail store ads, Deals Last-chance offers Price appeals, Testimonials

Realm of motives. Ads stimulate or direct desires.

Affective

Competitive ads Argumentative copy Image copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Teaser campaigns

Realm of emotions. Ads change attitudes and feelings

Cognitive

Realm of thoughts. Ads provide information and facts.

Awareness

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Image Ads Can Have a Strong Effect on Preference

+
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Pyramid of Communications Effects

5% Use 20% Trial 25% Preference 40% Liking

70% Knowledge
90% Awareness

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The DAGMAR Approach

Define Advertising Goals for Measuring Advertising Results

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Specific Objective: Membership Specific Target: Avid Golfers

*Click outside of the video screen to advance to the next slide

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

DAGMAR Difficulties
Legitimate Problems
Attitude - Behavior Relationship Response Hierarchy Problems

Questionable Objections

Sales Objectives Needed

Costly and Impractical

Inhibits Creativity

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising-Based View of Communications

Advertising Through Media

Acting on Consumers
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The San Diego Zoo's Objective is to Attract Visitors

*Click outside of the video screen to advance to the next slide

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Balancing Objectives and Budgets

What were willing and able to spend

Dollars

What we need to achieve our objectives

Goals

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marginal Analysis

Sales Sales in $

Gross Margin

Ad. Expenditure

Profit Point A Advertising / Promotion in $

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

BASIC Principle of Marginal Analysis

Increase Spending

If the increased cost is less than the incremental (marginal) return

Hold Spending

If the increased cost is equal to the incremental (marginal) return. If the increased cost is more than the incremental (marginal) return

Decrease Spending

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Assumptions for Marginal Analysis

Sales are the result of advertising and promotion, and nothing else Sales are the principal objective of advertising and promotion

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising Sales/Response Functions

A. ConcaveDownward Response Curve
Incremental Sales

B. S-Shaped Response Function

Incremental Sales

Initial Spending Little Effect

Range A

Range B

Middle Level High Effect

Range C

Advertising Expenditures

Advertising Expenditures

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

High Spending Little Effect

Top-Down Budgeting

Top Management Sets the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending Limit

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Top-Down Budgeting Methods

Competitive Parity

Arbitrary Allocation

Top Management

Percentage of Sales

Return on Investment

Affordable Method

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Bottom-Up Budgeting
Total Budget Is Approved by Top Management

Cost of Activities are Budgeted

Activities to Achieve Objectives Are Planned

Promotional Objectives Are Set

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Objective and Task Method

Establish Objectives (create awareness of new product among 20 percent of target market)

Determine Specific Tasks (advertise on market area television and radio and local newspapers)

Estimate Costs Associated with Tasks (determine costs of advertising, promotions, etc)

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Are There Economies of Scale?

Proposition I Larger firms can support their brands with lower relative advertising costs than smaller firms.

No evidence to support this!

Proposition II The leading brand in a product group enjoys lower advertising costs per sales dollar than do other brands.

No evidence to support this!

Proposition III There is a static relationship between advertising costs per dollar of sales and the size of the advertiser.

No evidence to support this!

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Ad Spending and Share of Voice

Competitors Share of Voice

Decreasefind a Defensible Niche Attack With Large SOV Premium

Low

High

Increase to Defend

Low

Maintain Modest Spending Premium

High

Your Share of Market

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin