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

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

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

7-4 Characteristics of Objectives SpecificMeasurable Quantifiable Attainable Realistic

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

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

7-8 Where Sales Objectives are Appropriate

7-9 Where Sales Objectives are Appropriate

7-10 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.

7-11 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

7-12 Creating an Image

7-13 Communications Effects Pyramid 20% Trial Conative 5% Use 90% Awareness Cognitive 70% Knowledge/comprehension 40% Liking Affective 25% Preference

7-14 GfK Purchase Funnel

7-15 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

7-16 The DAGMAR Approach D efine A dvertising G oals for M easuring A dvertising R esults Action Awareness Conviction Comprehension

7-17 Characteristics of Objectives Concrete, measurable tasks Benchmark measures Well-defined audience Specified time period

7-18 Criticisms of DAGMAR Inhibits creativity Problems with response hierarchy Only relevant measure is sales Costly and time consuming

7-19 Advertising-Based View of Marketing Acting on Consumers Ads

7-20 Utilizing a Variety of Media

7-21 Balancing Objectives and Budgets What we’re willing and able to spend What we need to achieve our objectives

7-22 Establishing the Budget To whom should we allocate the monies? How much should we spend on advertising and promotion?

7-23 Budget Decisions in a Down Economy When times get tough, advertising and promotional budgets are the first to be cut

7-24 Marginal Analysis

7-25 Weaknesses of Marginal Analysis Sales are determined solely by advertising and promotion. Sales are a direct measure of advertising and promotions efforts.

7-26 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

7-27 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

7-28 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

7-29 Factors Influencing Advertising Budgets Purchase frequency Product life cycle Product durability Differentiation Product price Hidden product qualities

7-30 Top-Down vs. Bottom-Up Budgeting

7-31 Top-Down Budgeting Methods Top Management Top Management Affordable Method Competitive Parity Percentage of Sales Return on Investment Arbitrary Allocation

7-32 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

7-33 Implementing the Objective and Task Approach Isolate objectives Reevaluate objectives Determine tasks required Estimate required expenditures Monitor

7-34 Payout Planning

7-35 Quantitative Models Computer Simulation

7-36 Allocating to IMC Elements

7-37 Other Budget Allocation Factors Budgeting Factors Client/agency policies Market size Market potential Market share goals

7-38 Share of Voice Effect Decrease–find a defensible niche Increase to defend Attack with large SOV premium Maintain modest spending premium Competitor’s Share of Voice High Low HighLow Your Share of Market

7-39 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.

7-40 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