1. The Role of Building a Budget for an IMC Program
By Karla M. Kassey
NORTHCENTRAL UNIVERSITY
ASSIGNMENT COVER SHEET
Student: Karla M. Kassey
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MKT
Dr. Chad McAllister
Advertising and Promotion Strategy
Role of Building a Budget for an IMC Program
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2. International Burgers Limited
“Gourmet Tater Puffs” are this organization’s newest product
Budgeting is an important consideration for International Burgers Limited as we move forward with the introduction of our new product, Low-fat, Gourmet Tater Puffs. This product was developed through a patented process that allows for lower fat consumption than is the case with traditional Tater Tots that are sold in the fast food industry. This product is actually a cross between Tater Tots and Potato Puffs and contains less than 30% fat, which is the guideline established by the Food & Drug Administration to be allowed to label a product as low-fat.
Today, we will discuss the importance of this organization’s message to the consumer regarding a statement that outlines our product’s attributes and provides an idea of who would be included as part of our target market. This information was provided to you during our meeting a couple of weeks ago, but I will cover the information again. The target market is anyone trying to eat healthier by adding low-fat products to their diet, individuals that must restrict the amount of fat in their diet, and consumers that simply prefer a Tater Puff product over traditional French-fried potatoes.
The message to the consumer will be revealed as part of this presentation. Also revealed will be the method through which the advertising budget will be distributed and the impact of consumer behavior on the consumption of food away from home. In addition, how the consumer decision making process will affect the purchase of this organization’s new product will also be discussed.
Since this is a meeting about establishing a budget, we will determine how each of the above elements, with regard to the organization’s message, advertising expenditures, and the behaviors of our consumer market will affect the creation of a budget that allows our organization to meet its goals.
I will also address the impact that an underfinanced budget would have on the effectiveness of our advertising campaign. Finally, I will discuss ways to evaluate the Return on Investment (ROI) in order to formulate recommendations for future marketing efforts.

3. Factors that must be considered in establishing a budget for an IMC program
Factors that must be considered in establishing a complete and accurate budget:
An accurate budget should be benchmarked against other organizations in the same industry (Kim & Cheong, 2009).
Empirical optimization is another method that must be considered to determine an advertising budget or a budget for a total IMC program. It is calculated by determining the elasticity of advertising, for example, which if it is 0.10, would indicate that the advertising budget or the budget for any other IMC component would be 10 percent of gross profit (Wright, 2009).
Basis for differentiation, hidden product qualities, emotional buying motives, durability of the product, purchase frequency, and the dollar amount of the purchase should also be considered in establishing a budget (Belch & Belch, 2012).
Where the product is in the product life cycle should also be a factor that is considered in establishing a budget (Belch & Belch, 2012).
The method of establishing the budget must be considered including choosing one of the following (Belch & Belch, 2012):
Top-down approach: A budget is established and then funds are allocated to each department
The affordable method approach: The firm allocated any funds left over for advertising and promotion after other expenses such as production and operations are paid
Arbitrary allocation: The budget is determined based on what is felt to be necessary
Percentage of Sales: Is an amount that is based on a percentage of sales or based on the cost to produce the product on a per-unit basis multiplied by the number of units sold or based on projected sales
Build-up Approaches (Belch & Belch, 2012)
Objective task method, which is based on several steps, including isolating the objective, determining tasks, estimating expenditures, monitoring, and reevaluating objectives
Payout planning method, which is based on project revenues a product will generate and budget accordingly
Combining heuristics and algorithmic tools is another method that must be considered in establishing an advertising budget. This method combines heuristics such as the maximum advertising-to-sales ratio with analytics such as the marketing mix model in order to help managers get the most from their advertising budget (West, Ford & Farris, 2014).
Also, managers can consult the Advertising to Sales Ratio by industry sector to determine this ratio for a given sector such as Food and Kindred Products, which would include our organization (Belch & Belch, 2012).

4. The message is that “Low-fat, Gourmet Tater Puffs are a healthier alternative to traditional French-fried potatoes”
The message is that “Low-fat, Gourmet Tater Puffs are a healthier alternative to traditional French-fried potatoes”
A positioning statement is important as it is the key to describing what the product is intended to convey to its target market. This message is the same throughout all channels anytime that media is used to come in contact with the consumer. This same message will be communicated to all stakeholders that come in contact with the product on its way to the final consumer in all channels (Shimp, 2007).
The purpose of this message is to convey to our franchisees as well as to the consumer that this new product is a high quality alternative to this organization’s French-fried potato product that just happens to also be low fat. It appears that the mistake that our competitor made is that they did not properly position the product, and people determined that the Satisfries product was a “diet” item rather than simply a healthy alternative to its Classic French-fried potato product. In fact, in one study that involved college students who ate at fast food restaurants as much as four times per week, healthy menu options were considered as an important factor in choosing a fast food restaurant (Kim, Hertzman & Hwang, 2010). Based on this research, we feel confident that we are conveying the right message to the consumer.

5. Fast food study that supports our product message
Studies such as the one described in the previous slide are also likely the reason that our competitor, Burger King, attempted to enter the healthy fast food product market with Satisfries. Burger King’s primary market is males 18-35, and this study contained 61.4% females and only 36.6% males (Kim et al., 2010). Because we serve gourmet burgers and chicken sandwiches as well as gourmet fries, we tend to attract a higher number of female customers than Burger King. For this reason, we feel that our product will be more successful and that we are conveying the right message to our target audience.
As we discussed a couple of weeks ago, females are more health-conscious than males and tend to favor gourmet fast food products such as those that our organization serves. In the study, the participants favored Wendy’s due to “healthy menu items,” which has created some quasi-gourmet sandwiches and salads to attract females.
Men seem to favor Burger King and McDonald’s, however, which is most likely due to the value they receive based on price, and the more traditional fast-food menu items. Again, Satisfries failed at the vast majority of Burger King’s locations, and they are no longer available at most locations throughout North America. Men are the primary fast food customers, but because we are a cross between quick-service and fast- casual restaurants, we are attracting more females than most fast food organizations.
Women make up 51.6% of the customer base at fast-casual restaurants and 52.7% of these customers are married females versus 29.3% who are single (Valassis.com, 2013). Our organization tends to attract more single males and females, since we are a fast food organization, and we also serve beer, as we, of course, are supplied by a micro-brewery that provides us with specialty beer products. Again, our product mix attracts an equal number of males and females, which is more characteristic of fast-casual restaurants.
The impact of our message, based on this study, is such that we will be making a strong impression on female and male customers that are health-conscious and want to make healthy food choices.

6. Factors influencing consumer behavior in the fast food industry
Cultural Factors
Social Factors
Personal
Factors
Psychological Factors
Factors influencing consumer behavior in the fast food industry:
Cultural Factors
Culture is an important consideration for our organization, especially at our international locations. Culture teaches us our values and preferences. Because not everyone feels comfortable dining in a fast food restaurant, we have developed a brisk carry-out business, and this has helped to build our organization. We pride ourselves, as an organization, on being sensitive to cultural differences. We also realize that culture impacts our business, since this is what motivates consumers to choose one brand over another.
Culture is also tied in with social class. Different social classes have different consumption patterns. Because our products are somewhat more expensive than the typical fast food organization, International Burgers Limited tends to serve the middle and upper middle class. We do offer lunch specials, however, that are designed to attract all social classes.
Also, it is difficult to say whether eating healthier is a trend or simply a fad as the trend seems to change from one generation to the next. Eating healthy is somewhat affected by culture as well.
Social Factors
Social factors have a significant impact on consumer behavior (theconsumerfactor.com, 2013). Social factors include reference groups, family, and social role (theconsumerfactor.com, 2013). If an individual is part of a reference group that thinks consuming healthy foods is important, that individual will be likely to subscribe to the same attitude.
In other words, reference groups are important because they help to direct an individual’s behaviors. This organization tends to attract young, innovator personality types as customers that can help to initiate the sale of our new product, if we can convince these individuals to at least try our new Gourmet Tater Puffs product. We also attract the influencer personality type or early adopters, whose point of view will encourage others in making a buying decision as well (theconsumerfactor.com, 2013).
Personal Factors
Personal factors will have a strong impact on this organization. This organization’s image is one of being health-conscious and trendy, and attempts to attract like-minded individuals. The goal is to overcome the idea that being health-conscious is only for individuals that are not in good health. The mindset of our organization is to offer choice to the consumer and to attract consumers that eat fast food often and consume many of their meals away from home, but want healthy choices.
Psychological Factors
Psychological factors will impact this organization. In fact, it is also this organization’s goal to encourage the purchase of our new product through motivation, perception, learning, beliefs, and attitudes regarding the consumption of healthy foods (theconsumerfactor.com, 2013).

7. Advertising expenditures by media for International Burgers Limited
Advertising expenditures by media have been determined based on covering all of the media that our target market is likely to encounter. Our target market is Baby Boomers-people born between 1946 and 1964 as well as Generation X-those born between 1965 and 1977 and Generation Y-those born between 1980 and 2000.
Internet advertising will include social media and the title of “Other” will be designated to cover some advertising expenses, such as those associated with digital media, which is a growing form of advertising.
This organization’s customer base is more representative of the consumer base of a fast-casual restaurant, and this is due to our menu items.
The age ranges for fast casual restaurants and QSRs are as follows (Valassis.com, 2013; The NPD Group, 2014):
Fast Casual Restaurants QSR Restaurants
Age All Consumers Age All Consumers
% %
% %
% %
% %
% % %
Again, International Burgers Limited is a cross between a fast-casual restaurant and a QSR, and this is due to our organization’s style of products, which is gourmet fast food at a premium price compared with other organizations in the fast food industry. For this reason, our advertising structure includes some traditional forms of advertising. These forms of advertising include newspapers, local TV, and magazines.
People in the 50 and over age group still view these media, and they represent 33% of the customers for QSRs and more than 42.3% of the customers for fast-casual restaurants, and the advertising to this group will be comprised of 35.5% of the budget. To capture the rest of the market, we will advertise on cable TV, Network TV, the Internet, including social media, Hispanic TV, and through other forms of media including digital media, which will be comprised of 64.5% of the budget.

8. Advertising expenditures versus consumer behavior/expenditures (likenesses and differences) Source:
Advertising expenditures and consumer behavior are alike from the standpoint that both are based on measurements. While advertising expenditures are measured in dollars, consumer behavior is measured by the number of people that fall into each category of the product adoption cycle. The adoption cycle is based on Rogers’ Diffusion of Innovations Theory and is dependent upon innovators and early adopters to adopt a new product and move it forward. Advertising expenditures need to be geared toward this group initially in order to have these individuals provide word-of-mouth advertising that will also work to increase sales of our product.
Consumer behavior is also measured, like advertising expenditures, by the types of purchases that consumers make on a yearly basis. For example, according to the Bureau of Labor Statistics, American households spent an average of $2,625 on food away from home with an average income of $51,100 or 5.1% of their total income on this expenditure (bls.gov, 2013).
The way that advertising expenditures and consumer behavior differ, with respect to the role they play in determining a budget, is that while an ad budget can be quantified, consumer behavior is much less of an exact science. Consumer behavior is also dependent upon a myriad of factors, many of which are outside of the control of businesses, unlike ad expenditures.
Another way that consumer behavior and ad budgets differ is that while an ad budget is divided up among media, consumers are more difficult to divide to determine who sees a given ad. While we might say that we are using digital media specifically to reach younger consumers, we must be cognizant of the fact that there are also many older consumers with smart phones that will see the ad as well. In other words, consumer behavior, again, is not an exact science, so the budget will, again, overlap to some extent.

9. Consumer message versus consumer behavior (likenesses and differences between these elements)
Consumer messages and consumer behavior are aligned from the standpoint that they both describe behaviors and preferences. In other words, consumers make decisions based on personal preferences and the messages that advertisers develop are also based on consumer preferences.
Also, consumer behavior and the development of an advertising message both have a scientific element that guides the practitioner in using these processes. For example, consumer behavior is based on the four factors described in slide 6, and in some cases, is actually predictable based on this information. Also, advertising messages, in some respects, are also somewhat predictable, as they are based on product attributes that must be communicated to the consumer in order to induce a purchase.
The way that consumer behavior and consumer messages differ is that development of a consumer message is also an art that is based on the creativity of the author. In other words, the author of an advertising message must use words that grab the attention of the consumer in order for the consumer to actually pay attention to the message. In contrast, consumer behavior is a science.
Another way that these two entities are different is that consumer behavior is an evolutionary process in that when a new product is introduced, not everyone gets onboard to buy the product at once. Consumer behavior dictates that some consumers will be more cautious than others about a new product. In contrast, once a consumer message is developed, it stays the same for a long period of time.
In other words, the product message can resonate with all consumers right from the start, even if the recognition and positive impact of the message does not initially result in a purchase. That is the reason that spending during the initial phase of our product introduction and having an adequate budget is so important during the first few months that the product is on the market.

10. Message content versus advertising expenditures (likenesses and differences between these elements)
Message content and advertising expenditures are alike in that both are very important at the beginning of a new ad campaign after a new product or service is introduced. In other words, the wrong message or an underfinanced ad campaign can have serious consequences with regard to the success rate for a new product, especially if the budget is not large enough at the beginning of the campaign.
In fact, 75% of new retail products fail to earn even $7.5 million during their first year, so there is definitely a risk in introducing our new Tater Puffs product (Schneider & Hall, 2011). Also, consumers repeatedly buy the same goods, and it is difficult to get them to buy something new (Schneider & Hall, 2011).
The difference between an advertising message and an advertising expenditure is that the advertising message is difficult to change once it is in the mind of the consumer. An advertising budget, however, can be adjusted over time to reflect demand for the product in the marketplace. Also, the benchmark of a highly successful consumer product is $50 million, but since we don’t know how well our message will resonate in the market, it is difficult to gauge the level of success this product will achieve. It is also difficult to determine whether this is an accurate figure for our organization for our long-term program, as it is a figure that would be over-budget for a fast food organization with low margins (Schneider & Hall, 2011).
The cost of our product will be $1.99 per unit, for the regular sized product, and we expect 75,000,000 trials of our new product during the first year, with 70 percent of our business coming during the April-August period when we will introduce the product.
McDonald’s will be the benchmark for our advertising program, which spends 2.9% of sales on advertising (Hume, 2014). Projected sales during the initial advertising period for the introduction of the product are, therefore, $149,250,000 x .029 = $4,328,250 to introduce the product between April-August of The budget for advertising will be equal to this figure and will be divided, according to the percentages outlined in this slide, among the media that were chosen. The entire budget will be spent from April-August, which is the busiest period of the year when the product will be initially introduced. We will develop a new budget for advertising beyond that point, depending on how well initial sales perform.
This plan makes certain that there are also funds available for other types of promotions, including couponing, incentives for counter people to sell the product to the final consumer, and free samples for consumers, etc.

11. Impact an underfinanced budget can have on an ad campaign’s effectiveness
Our business is entirely dependent upon prosperity in other areas of the economy, as fewer people dine away from home in a down economy. With the economy improving, however, business has increased for our organization. Having stated that information, the time of year for the introduction will be a factor with regard to the amount of financing that should be utilized to fund the product introduction. It is our hope to introduce our product during the busiest season of the year, which is during the late spring and summer months.
An underfinanced campaign means a loss of business and excess product that may need to be destroyed if it is not sold by the expiration date. An underfinanced campaign also means that the message will not reach an adequate number of consumers to ensure sales beyond the beginning of the campaign when people trial the product.
Burger King received over 100 million trials of its product after giving away 10 million free orders, but this did not result in long-term sales of Satisfries for the company. What this likely means is that the advertising budget fell short of what was needed to sustain sales of the product long-term.
Also, Satisfries were launched in September, which is the end of the busy season for Burger King, and for the fast food industry in general. What this means is that the ad budget may have been smaller due to the time of the year that the product was introduced. We would like to introduce the product during the busiest time of the year and also ensure that we have an adequate budget of at least 2.9%, using McDonald’s ad budget as our benchmark for the amount to spend on advertising, as outlined in the previous slide.
Using the heuristics method is also an option, which takes the marketing mix model into consideration in establishing a budget. The marketing mix factors that should be considered include product, place, price, and promotion combined with our ability to create an effective marketing program to guarantee sales in the marketplace (Belch & Belch, 2012). We will also want to advertise aggressively beyond the initial trial period, so we will probably want to introduce the product by late spring at the latest, and extend our initial advertising program through the summer months.

12. Evaluation of the return on investment by measuring sales
Using sales to measure Return on Investment (ROI) to determine how effective an advertising or IMC program is, represents one of the most common uses of this ratio.
ROI = Gain from investment – Cost of investment / Cost of investment (Botchkarev & Andru, 2011).
Sales are the most salient method to measure ROI. This ratio, however, is dependent upon how much effect the amount of sales has on the budget. In other words, this ratio is helpful to the extent that sales are determined by the ad budget or the budget for the IMC program.
Future marketing efforts can be determined, based on this ratio, to the extent that the ROI number can be used to justify future investments (Botchkarev & Andru, 2011). In fact, each media format that is used can be judged based on the amount of sales versus the amount that was invested in that particular format.
It is possible to isolate certain media formats such as newspapers and many magazines and say that sales created by individuals 50 and over should be measured against spending on newspaper or magazine advertising to determine the ROI. Other media formats that tend to be heavily skewed toward a given age group can also be analyzed in this way. Hispanic TV is another media format that can be effectively analyzed using ROI based on sales. The more accurate these ROI figures are, the more likely that they can be used to make recommendations for future marketing efforts.
Also, accounting records are used to obtain the data used to determine ROI, so the correctness of the numbers is dependent upon the accountability of those individuals that are responsible for creating accounting records that are accurate (Botchkarev & Andru, 2011). The extent to which these records are correct has an effect on the usefulness of the data. This data is also formulated through the ROI approach and is accurate to the extent to which it can be effectively used to create recommendations for future marketing efforts.

13. Evaluation of ROI based on market share increases
Return on investment can be determined by increases in market share. There is a positive relationship between market share and ROI. Therefore, increases in market share lead to increases in ROI (Buzzell, Gail & Sultan, 1975). What this means is that, if market share increases based on an investment in advertising, for example, the investor should expect to see a positive ROI.
The reason that a higher market share results in higher rates of return is also due to the achievement of economies of scale (Buzzell et al., 1975). We feel that this is the case to the extent that our customers have similar preferences and to the extent that we can achieve economies of scale through the production and sales of our product (Anderson, Fornell & Lehmann, 1994). In other words, the more product we sell, the greater economies of scale we can achieve. We plan to accomplish this by using our advertising budget in a strategic manner and launching our product during the busiest time of the year.
In the past, companies such as IBM, Dr. Scholl’s and Hartz Mountain increased their ROI simply by increasing market share, and we are confident that we can achieve the same strong results by taking market share from the competitor.
Thus, increases in market share will allow us to increase our return on investment, therefore allowing for the creation of recommendations for future marketing efforts based on having achieved this accomplishment.
The reason for this conclusion is that companies with a higher share of the market also have higher sales that result in lower costs and higher profits (Buzzell et al., 1975).

14. Evaluation of ROI based on awareness
One area in which we plan to initiate future marketing efforts is that of corporate sponsorship. To determine ROI, we will measure awareness, and Facebook is one of the media choices that we will use to measure the return on investment of our efforts. There is also an increasing requirement for accountability by our stakeholders, and we feel that measuring awareness will provide the necessary level of accountability (Meenaghan & O’Sullivan, 2013).
Corporate sponsorship is an area that will create goodwill for our organization as well as product recognition, as we plan to mention that we are the makers of Low-fat, Gourmet Tater Puffs as part of our sponsorship of events such as the USA Summer Olympic Trials and Olympics, etc. We want to sponsor swimming and gymnastics, which are two sports that McDonald’s also sponsors as well. Also, the Olympics promote good health, and we are promoting healthier choices at our restaurants, so we feel that this is a good fit.
We also plan to use couponing on our website as well as a program by which the consumers of our restaurants can sign up for s through which they will receive promotional coupons for discounts and free items. These free items will include a free trial of our new Tater Puffs product over time to capture those individuals that fall in later in the adoption process. We will also use search engine optimization to be sure that our organization comes to the top when a search of fast food restaurants is conducted on the Internet.

15. Conclusion Thank you for your attention Questions? Or comments
This presentation was focused on a discussion of the factors that must be considered in establishing a complete and accurate budget. It was determined, based on this discussion, that benchmarking against McDonald’s was the most appropriate approach to use for this process. Also discussed was the importance and impact of message content as well as advertising expenditures and consumer behavior. This presentation compared and contrasted these elements with respect to how they impact setting an appropriate ad budget as well. In addition, the impact of an underfinanced budget was addressed and it was determined that seasonality plays a part in ensuring an adequate budget. Finally, this presentation discussed how ROI should be evaluated in order to formulate recommendations for future marketing efforts.

16. References
Anderson, E. W., Fornell, C., & Lehman, D. R. (1994, July). Customer satisfaction, market share, and profitability: Findings from Sweden. Journal of Marketing, 58(3), Retrieved from
Belch, G. E., & Belch, M. A. (2012). Advertising and promotion-An integrated marketing communications perspective. New York: McGraw-Hill Irwin.
bls.gov. (2014, September 9). Consumer Expenditures Retrieved from Economic News Release:
Botchkarev, A., & Andru, P. (2011). A return on investment as a metric for evaluating information systems: Taxonomy and application. Interdisciplinary Journal of Information, Knowledge, and Management, Retrieved from
Buzzell, R. D., Gale, B. T., & Sultan, R. G. (1975, January). Market share-A key to profitability. Harvard Business Review, 1-2. Retrieved from
Hume, S. (2014, March 30). McDonald's spent more than $988 million on advertising in Retrieved from csmonitor.com:

17. References
Kim, K., & Cheong, Y. (2009). A frontier analysis for advertising budget: Benchmarking efficient advertisers. Journal of Current Issues and Research in Advertising, 31(2), Retrieved from
Kim, Y.-S., Hertzman, J., & Hwang, J.-J. (2014, September 29). College students and quick-service restaurants: How students perceive restaurant food and services. Journal of Foodservice Business Research, doi: /
Meenaghan, T., & O'Sullivan, P. (2013, May). Metrics in sponsorship research-Is credibility an issue. Psychology and Marketing, 30(5), doi: /mar.20615
Schneider, J., & Hall, J. (2011, April). Why most product launches fail. Harvard Business Review, pp Retrieved from
Shimp, T. A. (2007). Advertising, promotion, and other aspects of integrated marketing communications. Mason: Thomson Learning, Inc.
The NPD Group. (2014, May 8). Wendy's seeking traction with millennials. Retrieved from burgerbusiness.com:

18. References
theconsumerfactor.com. (2013, November 28). The 4 factors influencing consumer behavior. Retrieved from The Consumer Factor:
Valassis.com. (2013). Scarborough Industry Report. Valassis.com. Retrieved from