Establishing Objectives and Budgeting for the Promotional Program © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Focus & Coordination Focus & Coordination Plans & Decisions Plans & Decisions Measurement & Control Measurement & Control Plans & Decisions Plans & Decisions Focus & Coordination Focus & Coordination Value of Objectives © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Objectives

Attainable Measurable Specific Realistic Specific Measurable Attainable Realistic Not Mutually Exclusive Characteristics of Objectives © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Objectives

Advertising Can Shape Corporate Images © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

Vs. Marketing 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 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 Marketing Objectives Marketing Versus Communications Objectives © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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 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

The Economy The Economy Distribution Technology Price Policy Promotion Competition Product Quality Product Quality Price Policy Technology Distribution Product Quality Product Quality Competition Promotion Many Different Factors Affect Sales © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin $ ALE $

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 © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Teaser campaigns Affective Realm of emotions. Ads change attitudes and feelings Cognitive Realm of thoughts. Ads provide information and facts. Conative Realm of motives. Ads stimulate or direct desires. “Image” copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Competitive ads Argumentative copy Point of purchase Retail store ads, Deals “Last-chance” offers Price appeals, Testimonials Purchase Conviction Preference Liking Knowledge Awareness

Image Ads Can Have a Strong Effect on Preference © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

20% Trial Conative 40% Liking Affective 90% Awareness Cognitive 5% Use 70% Knowledge 25% Preference 90% Awareness 70% Knowledge 40% Liking 25% Preference 20% Trial Pyramid of Communications Effects © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The DAGMAR Approach © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin D efine A dvertising G oals for M easuring A dvertising R esults

Specific Objective: Membership Specific Target: Avid Golfers © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide

Attitude - Behavior Relationship Response Hierarchy Problems Attitude - Behavior Relationship Sales Objectives Needed Inhibits Creativity Costly and Impractical Sales Objectives Needed Costly and Impractical DAGMAR Difficulties © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Legitimate Problems Questionable Objections

Advertising Through Media Acting on Consumers Advertising-Based View of Communications © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The San Diego Zoo's Objective is to Attract Visitors © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide

Balancing Objectives and Budgets © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Dollars Goals What we’re willing and able to spend What we need to achieve our objectives

Marginal Analysis © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Advertising / Promotion in $ Sales in $ Point A Profit Sales Gross Margin Ad. Expenditure

BASIC Principle of Marginal Analysis © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Increase Spending Decrease Spending Hold Spending Hold Spending If the increased cost is less than the incremental (marginal) return If the increased cost is equal to the incremental (marginal) return. If the increased cost is more than the incremental (marginal) return

Assumptions for Marginal Analysis © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Sales are the principal objective of advertising and promotion Sales are the result of advertising and promotion, and nothing else

Advertising Sales/Response Functions © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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

The Promotion Budget Is Set to Stay Within the Spending Limit Top Management Sets the Spending Limit Top-Down Budgeting © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Affordable Method Competitive Parity Percentage of Sales Percentage of Sales Return on Investment Return on Investment Arbitrary Allocation Percentage of Sales Percentage of Sales Competitive Parity Arbitrary Allocation Top-Down Budgeting Methods © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Top Management Top Management

Total Budget Is Approved by Top Management Total Budget Is Approved by Top Management Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Activities to Achieve Objectives Are Planned Promotional Objectives Are Set Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Activities to Achieve Objectives Are Planned Promotional Objectives Are Set Bottom-Up Budgeting © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Estimate Costs Associated with Tasks (determine costs of advertising, promotions, etc…) Estimate Costs Associated with Tasks (determine costs of advertising, promotions, etc…) Determine Specific Tasks (advertise on market area television and radio and local newspapers) Determine Specific Tasks (advertise on market area television and radio and local newspapers) Establish Objectives (create awareness of new product among 20 percent of target market) 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) Determine Specific Tasks (advertise on market area television and radio and local newspapers) Establish Objectives (create awareness of new product among 20 percent of target market) Establish Objectives (create awareness of new product among 20 percent of target market) Objective and Task Method © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Are There Economies of Scale? © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin No evidence to support this! 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.

Ad Spending and Share of Voice © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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

Discussion 1. Some marketers feel that the cereal companies have focused too much on sales objectives, creating a situation in which price cutting and couponing have become essential to selling the product. Do you think that these companies may be able to reverse this situation? Describe some of the options available to the cereal manufacturers.

Assignment 1.What is DAGMAR? Explain how marketers might use DAGMAR in establishing objectives.What are some of the problems associated with the use of DAGMAR? 2. Figure 7-1 notes the numerous factors that influence sales. Provide examples of products and/or services that have been directly influenced by each of these factors. 3. In meeting with your new boss, he informs you that the only goal of advertising and promotion is to generate sales.Present your argument as to why communications objectives must also be considered.