Establishing Objectives and Budgeting for the Promotional Program

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

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

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

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

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

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

7. Sales As Advertising Objectives + © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

8. Direct Response Ads Seek Sales + © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

9. Many Ads Seek Communications Objectives + © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

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

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

13. The DAGMAR Approach Define Advertising Goals for Measuring Advertising Results © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

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

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

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

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

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

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

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

22. A. Concave-Downward Response Curve B. S-Shaped Response Function Incremental Sales Incremental Sales Initial Spending Little Effect High Spending Little Effect Middle Level High Effect Range A Range B Range C Advertising Expenditures Advertising Expenditures Advertising Sales/Response Functions © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

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

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

26. Determine Specific Tasks (advertise on market area television and radio and local newspapers) Estimate Costs Associated with Tasks (determine costs of advertising, promotions, etc…) Objective and Task Method 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) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

27. No evidence to support this! No evidence to support this! No evidence to support this! Are There 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. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

28. Ad Spending and Share of Voice Decrease–find a Defensible Niche Increase to Defend High Competitor’s Share of Voice Attack With Large SOV Premium Maintain Modest Spending Premium Low Low High Your Share of Market © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin