Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-1 Chapter 8 Establishing objectives and budgeting for the IMC program
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell To recognise the importance and value of setting specific objectives for advertising and IMC. 2.To understand the role objectives play in the IMC planning process and the relationship of marketing communication objectives to marketing objectives. 3.To know the differences between behavioural and communication objectives, and the issues regarding the use of each. 4.To recognise some problems marketers encounter in setting objectives for their IMC programs. 5.To understand the process of budgeting for IMC. 6.To understand the theoretical issues involved in budget setting. 7.To know the various methods of budget setting. Learning objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-3 Determining objectives Budgeting approaches ProblemsCharacteristics Objectives & Budgets Top down DAGMARRTTTAOS Setting objectives for IMC Build up SMARRT Hierarchy ObjectivesBudgets Communication vs behavioural Approaches to setting objectives Value of objectives Establishing the budget Allocating the budget
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-4 The value of objectives Consensus Planning & decision making Planning & decision making Measurement & evaluation Measurement & evaluation Objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-5 Hierarchy of objectives Advertising objectives IMC objectives Objectives for other elements of IMC Marketing objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-6 Marketing versus communication objectives 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 IMC 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 vsvs
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-7 Characteristics of objectives Specify target audience Measurable communications tasks Benchmark starting point for degree of change sought Time period Elements of objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-8 Google Labs’ objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-9 Characteristics of objectives Pure Blonde’s Live well with as little compromise as possible campaign
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-10 Determining objectives Budgeting approaches ProblemsCharacteristics Objectives & Budgets Top down DAGMARRTTTAOS Setting objectives for IMC Build up SMARRT Hierarchy ObjectivesBudgets Communication vs behavioural Approaches to setting objectives Value of objectives Establishing the budget Allocating the budget
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-11 Sales vs communication objectives Sales objectives Sales ROI Relative market share Sales ROI Relative market share Communication objectives Communication objectives Communications effects Awareness action Communications effects Awareness action vsvs
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-12 Factors affecting sales The economy The economy Distribution Technology Price Advertising and promotion Competition Product quality Product quality SALES
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-13 Use sales objectives when… Sales objectives are appropriate when using: IMC tools designed to elicit direct action (sales promotion, direct marketing) direct response advertising retail advertising. Also useful when advertising plays a dominant role in the marketing program, such as in FMCG.
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-14 Communications objectives Possible communication objectives include: increasing the percentage of consumers in the target market who associate specific features, benefits or advantages with our brand increasing the number of consumers in the target audience who prefer our product over the competition encouraging current users of the product to use it more frequently or in more situations encouraging consumers who have never used our brand to try it.
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-15 Communications objectives (cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-16 Westpac is a good corporate citizen
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-17 Advertising effects 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. Point of purchase Retail store ads, deals ‘Last-chance’ offers Price appeals, testimonials Competitive ads Argumentative copy ‘Image’ copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Teaser campaigns Purchase Conviction Preference Liking Knowledge Awareness BehaviouralMovement Relevant promotions
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-18 Pyramid of communications effects 5% Use 90% Awareness 70% Knowledge 40% Liking 25% Preference 20% Trial
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-19 Backstage Shampoo
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-20 Clear and consistent communications objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-21 Determining objectives Budgeting approaches ProblemsCharacteristics Objectives & Budgets Top down DAGMARRTTTAOS Setting objectives for IMC Build up SMARRT Hierarchy ObjectivesBudgets Communication vs behavioural Approaches to setting objectives Value of objectives Establishing the budget Allocating the budget
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-22 Advertising opportunity score (AOS)
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-23 Advertising opportunity score (AOS) (cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-24 Approaches to setting objectives: DAGMAR D efine A dvertising G oals for M easuring A dvertising R esults Action Awareness Conviction Comprehension
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-25 DAGMAR’s advantages and limitations Problems with the response hierarchy Assessment of campaign effectiveness AdvantagesLimitations Sales objectives Practicality and cost Inhibition of creativity Value of communication-based objectives Measurement of stages Less subjective
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-26 Other approaches: RTTT R ealistic T arget market is clearly defined T ask—state exactly what degree of change is sought T is for the timeframe of the objective
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-27 Other approaches: SMARTT S for specific—clear, precise and directional M for measurable—quantified measurement statement A for achievable—capable of being achieved R for realistic—appropriate in light of situation analysis T for targeted—defines the target market T for timed—timeframe for achievement
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-28 Advertising-based view of communications Acting on consumers
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-29 Determining objectives Budgeting approaches ProblemsCharacteristics Objectives & Budgets Top down DAGMARRTTTAOS Setting objectives for IMC Build up SMARRT Hierarchy ObjectivesBudgets Communication vs behavioural Approaches to setting objectives Value of objectives Establishing the budget Allocating the budget
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-30 Advertising and cost cutting
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-31 Balancing objectives and budgets What we’re willing and able to spend What we need to achieve our objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-32 Theoretical perspectives on budgeting Advertising / promotion in $ Sales in $ Point A Profit Sales Advertising expenditure Gross margin Marginal analysis
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-33 Basic principles of marginal analysis 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
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-34 Advertising sales/response functions 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
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-35 Other factors in budget setting
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-36 Differentiation
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-37 Top-down and build-up budgeting
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-38 Top-down budgeting methods Affordable method Competitive parity Percentage of sales Percentage of sales Return on investment Return on investment Arbitrary allocation Top management Top management
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-39 Percentage of sales
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-40 Impact of competitors’ advertising outlays
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-41 Build-up budgeting methods Payout planning Objective & task Objectives
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-42 Objective and task method 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% of target market) Establish objectives (create awareness of new product among 20% of target market) Monitor and adjust (monitor performance and adjust) Monitor and adjust (monitor performance and adjust)
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-43 Payout planning 8-43
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-44 Payout planning (cont.)
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-45 How communications budgets are set
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-46 Ad spending and share of voice 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
Copyright 2012 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Advertising and Promotion 2e by Belch, Belch, Kerr & Powell 8-47 Summary and conclusions Setting objectives is an essential part of the planning process. Objectives may be sales- or communication- oriented. Setting budgets is also an important consideration. Many methods for setting budgets are used by practitioners—from economic modelling through to objective and task methods.