Establishing Objectives and Budgeting for the Promotional Program Chapter 7 Establishing Objectives and Budgeting for the Promotional Program Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 1 1

The Value of Objectives Communications: Specific objective for IMC program coordination of the various group working on the campaign all parties should know what company hope to accomplish. Planning and Decision Making: All phases of a firms promotional strategy should be based on the established objectives including budgeting, creative and media decisions Measurement and Evaluation: An important reason for setting specific objectives is that they provide a benchmark against which the success or frailer of the promotional campaign can be measured Communication - Specific objectives serve as communication devices and facilitate the coordination of the various groups working on the campaign on both the agency and the client side. Problems can be avoided if all parties involved have a set of written and approved objectives to guide their decisions and actions. Planning and Decision Making - Specific objectives can be useful as a guide or criterion for decision making. Advertising and promotion planners are often faced with a number of strategic and tactical options in areas such as creative, media, budgeting and sales promotion. Choices among these options should be made on the basis of how well a strategy or tactic matches the promotional objective. Measurement and Evaluation of Results - A very important reason for setting specific objectives is that they provide a benchmark or standard against which success or failure of the campaign can be measured. When specific objectives are set it becomes easier for management to measure what has been accomplished by the campaign. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 7-1 2 2

Problems with Sales Objectives Problems in achieving sales could be a function of other marketing mix variables.( bad product design, packaging ,quality. Problems in achieving sales could be due to other macro factors. (PEST) The effects of advertising on sales are not always immediate and occur over an extended time period. Sales objectives offer little direction to those responsible for planning, developing and executing the promotional program.( nature of ad. Massage company hope.) Problems with Sales Objectives - Other marketing mix variables: product design or quality, packaging, distribution, or price. Other macro factors: the economy, competition, or consumer trends. This is known as the carryover effect . Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 7-2 3 3

Factors Influencing Sales Technology Competition The economy Sales Advertising and promotion Product quality Distribution Price Slide 7-3 Figure 7-1 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 4 4

Setting Objectives Using the Communications Effects Pyramid 90% Create Awareness 70% Knowledge ( interest in brand) 40% create a positive Feeling (Liking) 25% Preference of target audiences 20% Trial of target audiences 5% Repurchase repetitive advertising in newspapers, magazines, TV etc. communicate features of brand Create favorable attitudes by conveying information, promotions, sampling, etc. Use sampling and cents-off coupons Use continued reinforcement advertising, fewer coupons and promotions The McGraw-Hill Companies, Inc., 1998 Slide 7-4 Figure 7-3 5 5

The McGraw-Hill Companies, Inc., 1998 Good Objectives Are: DAGMAR Defining Advertising Goals for Measured Advertising Results Concrete and measurable Specify a well-defined audience Establish benchmark measures Specify a time period Attainable Realistic Characteristics of Objectives - a major contribution of DAGMAR was Colley's specification of what constitutes a good objective. Four requirements or characteristics of good objectives were noted: Concrete and measurable - the communications task or objective should be a precise statement of what appeal or message the advertiser wants to communicate to the target audience. The objective should be measurable in that the method and criteria used for determining if it has been properly communicated should be specified. Target audience - a good objective should specify a well-defined target audience. The target audience is usually identified in the situation analysis and may be based on the variables discussed in Chapter 2. Benchmark and degree of change sought - another important part of setting objectives is having benchmark measures to determine where the target audience stands at the beginning of the campaign with respect to various communication response variables such as awareness, knowledge, attitudes, image, etc. The objectives should also specify how much change or movement is being sought such as increase in awareness levels, creation of favorable attitudes or number of consumers intending to purchase the brand, etc. IMC Perspective 7-2 is a good example to discuss here. 4. Specified Time Period - a final characteristic of good objectives is the specification of the time period during which the objective is to be accomplished. The time period should be appropriate for the communication objective as simple tasks such as increasing awareness levels can be accomplished much faster than a complex goal such as repositioning a brand. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 7-5 6 6

Top-Down versus Bottom-Up Budgeting Slide 7-6 Figure 7-12 Top-Down Promotion objectives are set Top Management sets the spending limits Activities needed to achieve objectives are planned Promotion budget set to stay within spending limit Referrals - many good agencies obtain new clients as a result of referrals from existing clients, media reps, and other agencies. Solicitations - This is one of the most common ways of gaining new business. Presentations - This gives an opportunity for the agency to sell itself. The agency may be asked to make a speculative presentation, in which it examines the client’s marketing situation and proposes a tentative communications campaign. What is the disadvantage of this method? (see p. 89) Costs of promotion activities are budgeted Total promotion budget is approved by top management The McGraw-Hill Companies, Inc., 1998 7 7

Alternative Methods for Computing % of Sales for Entree Cologne Method 1: Straight Percentage of Sales Method 2: Percentage of Unit Cost While the agency executives consider themselves the architects of integrated marketing programs, the marketers see themselves as team players or partners Irwin/McGraw-Hill Slide 7-7 Figure 7-13 The McGraw-Hill Companies, Inc., 1998 8 8