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Establishing Objectives and Budgeting for the Promotional Program

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Starbucks
Core competencies
Third Place Neighborhood coffee shop

Failed Ventures
Joe magazine Caf Starbucks Circadia

Losing focus
Hear Music Akeelah and the Bee

Closing down stores

Value of Objectives

Specific Objectives

Communications Planning & Decision Making Measurement & Evaluation

Characteristics of Objectives

Specific

Attainable

Measurable

Realistic

Quantifiable

Measurable Results

Marketing vs. Communications Objectives

Marketing Objectives
Generally stated in the firms 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

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

Vs.

Sales Objectives

Increased Market Share Increased Sales Brand Extensions

Factors Influencing Sales

Competition

Technology

Advertising & promotion

The economy Product quality

Distribution Price

Where Sales Objectives are Appropriate

Where Sales Objectives are Appropriate

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.

IMC perspective Geico

Increases in Advertising
Sell via internet & direct sales In 2005, increased advertising expenditures 75% to $403 million In 2006, spent twice as much as nearest competitor Also spent in more places 5.8% new customer acquisition (2.1% is industry average) 91% ad message recognition Only brand to have double digit market share growth 13.1%

Increases in Sales

From Awareness to Action

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

Conative

Purchase Conviction Preference Liking Knowledge

Realm of motives. Ads stimulate or direct desires

Affective

Realm of emotions. Ads change attitudes and feelings

Cognitive

Realm of thoughts. Ads provide information and facts

Awareness

Creating an Image

Communications Effects Pyramid

5% Use 20% Trial

25% Preference 40% Liking 70% Knowledge/Comprehension

90% Awareness

The DAGMAR Approach

Define Advertising Goals for Measuring Advertising Results

Awareness

Comprehension

Conviction

Action

Characteristics of Objectives

Concrete, measurable tasks

Well-defined audience

Benchmark measures

Specified time period

Pros and Cons of DAGMAR

Pros
Focus on communications objectives Measurement of stages Better understanding of goals and objectives Less subjective

Cons
Relies heavily on the response hierarchy May not increase sales Practicality and cost Inhibition of creativity

Advertising-Based View of Communications

Ads

Acting on Consumers

Utilizing a Variety of Media

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San Diego Zoo Protect Endangered Species

*Click outside of the video screen to advance to the next slide

Establishing & Allocating the Promotional Budget

Sponsorship Underwriting

Direct Marketing

Public Relations

Group Sales

Sales Promotions

Internet

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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

Establishing a Budget

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Budget Adjustments

Increase Spending

If the cost is less than the marginal return

Hold Spending

If the cost is equal to the incremental return

Decrease Spending

If the cost is more than the incremental return

Assumptions for Marginal Analysis

Sales are a direct measure of advertising and promotions efforts

Sales are determined solely by advertising and promotion

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Sales Response Models

A. Concave-Downward Response Curve B. S-Shaped Response Function

Incremental Sales

Incremental Sales

Initial Spending Little Effect

Range A

Range B

Middle Level High Effect

Range C

Advertising Expenditures

Advertising Expenditures

Factors Influencing Advertising Budgets

Product life cycle

Hidden product qualities

Product durability

Product price

Differentiation

Purchase frequency

High Spending Little Effect

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Top-Down vs. Bottom-Up Budgeting

Top-Down Budgeting Methods

Affordable Method

Return on Investment

Top Management

Arbitrary Allocation

Competitive Parity

Percentage of Sales

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Test Your Knowledge

Well known brand name products do not receive incremental advantages from increased dollar expenditures on advertising. Once the ad hits the market, subsequent budget increases result in little or no incremental gains. This is best explained by:

A) Arbitrary allocation
B) The objective and task method C) Competitive parity D) An S-shaped response E) Rapidly diminishing returns

Object and Task Method

Isolate objectives Determine tasks required Estimate required expenditures Monitor Reevaluate objectives

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Payout Planning

Quantitative Models

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Allocating to IMC Elements

Share of Voice Effect

Competitors Share of Voice

Decreasefind a defensible niche Attack with large SOV premium

Low

High

Increase to defend Maintain modest spending premium

High

Low

Your Share of Market

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Economies of Scale

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.

There is no evidence to support any of these!

Organizational Characteristics

Factors that influence advertising and promotion budgets

The organizations 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

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