1. McGraw-Hill/Irwin Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed 7 Establishing Objectives and Budgeting for the Promotional Program

2. 7-2 Setting Objectives Obstacles to setting objectives Complex marketing situations Conflicting perspectives Uncertainty over resources

3. 7-3 Value of Objectives Measurement/Evaluation Planning & Decision Making Communications Specific Objectives

4. 7-4 Characteristics of Objectives SpecificMeasurable Quantifiable Attainable Realistic

5. 7-5 Sales vs. Communications Objectives Sales Objectives Primary goal is increased sales Requires economic justification Should produce quantifiable results Communications Objectives Increased brand knowledge, interest, favorable attitudes and image Immediate response not expected Goal is creating favorable predispositions

6. 7-6 Problems with Sales Objectives Won’t work in isolation Ad effects take time Hard to determine precise relationship between advertising and sales Offers little guidance to those planning and developing the promotional program

7. 7-7 Factors Influencing Sales CompetitionTechnology The economy Product quality Price Distribution Advertising & promotion

8. 7-8 Where Sales Objectives are Appropriate

9. 7-9 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.

10. 7-10 Communications Objectives Purchase Purchase intentions Favorable attitudes and image Brand knowledge and interest Brand awareness Conative (behavioral) Ads stimulate or direct desires Affective (feeling) Ads change attitudes and feelings Cognitive (thinking) Ads provide information and facts

11. 7-11 Creating an Image

12. 7-12 Communications Effects Pyramid 20% Trial Conative 5% Use 90% Awareness Cognitive 70% Knowledge/comprehension 40% Liking Affective 25% Preference

13. 7-13 GfK Purchase Funnel

14. 7-14 Problems With Communications Objectives Translating sales goals into communications objectives What is adequate level of awareness, knowledge, liking, preference, or conviction? No formulas or guidelines

15. 7-15 The DAGMAR Approach D efine A dvertising G oals for M easuring A dvertising R esults Action Awareness Conviction Comprehension

16. 7-16 Characteristics of Objectives Concrete, measurable tasks Benchmark measures Well-defined audience Specified time period

17. 7-17 Criticisms of DAGMAR Inhibits creativity Problems with response hierarchy Only relevant measure is sales Costly and time consuming

18. 7-18 Advertising-Based View of Marketing Acting on Consumers Ads

19. 7-19 Utilizing a Variety of Media

20. 7-20 Balancing Objectives and Budgets What we’re willing and able to spend What we need to achieve our objectives

21. 7-21 Establishing the Budget To whom should we allocate the monies? How much should we spend on advertising and promotion?

22. 7-22 Budget Decisions in a Down Economy When times get tough, advertising and promotional budgets are the first to be cut

23. 7-23 Marginal Analysis

24. 7-24 Weaknesses of Marginal Analysis Sales are determined solely by advertising and promotion. Sales are a direct measure of advertising and promotions efforts.

25. 7-25 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

26. 7-26 Budget Adjustments Increase Spending If cost is less than the marginal revenue generated Hold Spending Hold Spending If the cost is equal to the marginal revenue generated Decrease Spending If the cost is more than the marginal revenue generated

27. 7-27 Sales Response Models Incremental Sales Advertising Expenditures A.Concave-Downward Response Curve Incremental Sales Advertising Expenditures Range ARange BRange C B.S-Shaped Response Function High Spending Little Effect Initial Spending Little Effect Middle Level High Effect

28. 7-28 Factors Influencing Advertising Budgets Purchase frequency Product life cycle Product durability Differentiation Product price Hidden product qualities

29. 7-29 Top-Down vs. Bottom-Up Budgeting

30. 7-30 Top-Down Budgeting Methods Top Management Top Management Affordable Method Competitive Parity Percentage of Sales Return on Investment Arbitrary Allocation

31. 7-31 Build-Up Approaches Objective and Task Method Define communications objectives to be accomplished Determine specific strategies and tasks needed to attain them Estimate costs associated with performance of these strategies and tasks

32. 7-32 Implementing the Objective and Task Approach Isolate objectives Reevaluate objectives Determine tasks required Estimate required expenditures Monitor

33. 7-33 Payout Planning

34. 7-34 Allocating to IMC Elements

35. 7-35 Other Budget Allocation Factors Budgeting Factors Client/agency policies Market size Market potential Market share goals

36. 7-36 Economies of Scale There is no evidence to support any of these! 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.

37. 7-37 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