Chapter 7

Report
7
Establishing Objectives
and Budgeting for the
Promotional Program
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Starbucks
• Core competencies
– Third Place
– Neighborhood coffee shop
• Failed Ventures
– Joe magazine
– Café Starbucks
– Circadia
• Losing focus
– Hear Music
– Akeelah and the Bee
• Closing down stores
Value of Objectives
Specific
Objectives
Communications
Planning &
Decision Making
Measurement
& Evaluation
Characteristics of Objectives
Specific
Attainable
Realistic
Measurable
Quantifiable
Measurable Results
Marketing vs. Communications Objectives
Marketing
Objectives
Communications
Objectives
• Generally stated in the
firm’s 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
• 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.
Sales Objectives
Increased Market Share
Increased Sales
Brand Extensions
Factors Influencing Sales
Competition
Technology
The
economy
Advertising
& promotion
Product
quality
Distribution
Price
Where Sales Objectives are Appropriate
Where Sales Objectives are Appropriate
Test Your Knowledge
Which of the following statements about
communications objectives is true?
A) Sales goals are easily translated into
communications objectives.
B) It can be difficult to determine the relationship
between communications objectives and
sales performance.
C) Communications objectives cannot serve
as operational guidelines for planning,
executing, and evaluating promotional
programs.
D) Marketing managers often do not recognize
the value of setting communications objectives.
IMC perspective Geico
• Increases in Advertising
– Sell via internet & direct sales
– In 2005, increased advertising expenditures 75%
to $403 million
– In 2006, spent twice as much as nearest
competitor
– Also spent in more places
• Increases in Sales
– 5.8% new customer acquisition (2.1% is
industry average)
– 91% ad message recognition
– Only brand to have double digit market share
growth 13.1%
From Awareness to Action
Conative
Purchase
Point of purchase
Retail store ads, deals
“Last-chance” offers
Price appeals
Realm of motives.
Ads stimulate or
direct desires
Conviction
Testimonials
Affective
Preference
Competitive ads
Argumentative copy
Realm of emotions.
Ads change attitudes
and feelings
Liking
“Image” copy
Status, glamour appeals
Knowledge
Announcements
Descriptive copy
Classified ads, slogans,
Jingles, skywriting
Awareness
Teaser campaigns
Cognitive
Realm of thoughts.
Ads provide
information and facts
Creating an Image
Communications Effects Pyramid
5% Use
20% Trial
25% Preference
40% Liking
70% Knowledge/Comprehension
90% Awareness
The DAGMAR Approach
Define
Advertising
Goals for
Measuring
Advertising
Results
Awareness
Comprehension
Conviction
Action
Characteristics of Objectives
Concrete,
measurable tasks
Well-defined
audience
Benchmark
measures
Specified
time period
Pros and Cons of DAGMAR
Pros
Cons
Focus on communications
objectives
Relies heavily on the
response hierarchy
Measurement of stages
May not increase sales
Better understanding of
goals and objectives
Practicality and cost
Less subjective
Inhibition of creativity
Advertising-Based View of Communications
Ads
Acting on Consumers
Utilizing a Variety of Media
San Diego Zoo Protect Endangered Species
*Click outside of the video screen to advance to the next slide
Establishing & Allocating the Promotional Budget
Sponsorship
Underwriting
Direct
Marketing
Public
Relations
Group Sales
Sales
Promotions
Internet
Test Your Knowledge
In marginal analysis, all of the following should be
considered except:
A) Sales
B) Fixed costs of advertising
C) Advertising expenditures and other
variable costs
D) Gross margin
E) Net worth
Establishing a Budget
Budget Adjustments
Increase
Spending
If the cost is less than the
marginal return
Hold
Spending
If the cost is equal to the
incremental return
Decrease
Spending
If the cost is more than the
incremental return
Assumptions for Marginal Analysis
Sales are a
direct measure
of advertising
and promotions
efforts
Sales are
determined
solely by
advertising
and promotion
Sales Response Models
Advertising Expenditures
Initial Spending
Little Effect
Middle Level
High Effect
High Spending
Little Effect
B. S-Shaped Response
Function
Incremental Sales
Incremental Sales
A. Concave-Downward
Response Curve
Range A
Range B
Range C
Advertising Expenditures
Factors Influencing Advertising Budgets
Product
life cycle
Product
durability
Differentiation
Hidden product
qualities
Product
price
Purchase
frequency
Top-Down vs. Bottom-Up Budgeting
Top-Down Budgeting Methods
Affordable
Method
Return on
Investment
Competitive
Parity
Top
Management
Arbitrary
Allocation
Percentage
of Sales
Test Your Knowledge
Well known brand name products do not receive
incremental advantages from increased dollar
expenditures on advertising. Once the ad hits the
market, subsequent budget increases result in little or
no incremental gains. This is best explained by:
A) Arbitrary allocation
B) The objective and task method
C) Competitive parity
D) An S-shaped response
E) Rapidly diminishing returns
Object and Task Method
Isolate objectives
Determine tasks required
Estimate required expenditures
Monitor
Reevaluate objectives
Payout Planning
Quantitative Models
Allocating to IMC Elements
High
Low
Competitor’s
Share of Voice
Share of Voice Effect
Decrease–find a
defensible niche
Increase to defend
Attack with large
SOV premium
Maintain modest
spending premium
Low
High
Your Share of Market
Economies of Scale
Proposition I
Larger firms can support their brands with lower relative
advertising costs than smaller firms.
Proposition II
The leading brand in a product group enjoys lower
advertising costs per sales dollar than do other brands.
Proposition III
There is a static relationship between advertising costs
per dollar of sales and the size of the advertiser.
There is no evidence to support any of these!
Organizational Characteristics
• Factors that influence advertising and
promotion budgets
– The organization’s structure
– Power and politics
– The use of expert opinions
– Characteristics of the decision maker
– Approval and negotiation channels
– Pressure on senior managers to arrive
at the optimal budget

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