Establishing Objectives and Budgeting for the Promotional Program

1. 7 Establishing Objectivesand Budgeting for thePromotional Program

2. Setting Objectives • Obstacles to setting objectives • Complex marketing situations • Conflicting perspectives • Uncertainty over resources

3. Value of Objectives Measurement/Evaluation Planning & Decision Making Communications Specific Objectives

4. Characteristics of Objectives Specific Attainable Measurable Realistic Quantifiable

5. Sales vs. Communications Objectives SalesObjectives Communications Objectives • Primary goal is increased sales • Requires economic justification • Should produce quantifiable results • Increased brand knowledge, interest, favorable attitudes and image • Immediate response not expected • Goal is creating favorable predispositions

6. Problems with Sales Objectives Won’t work in isolation Ad effects take time Hard to determine precise relationship between advertising and sales Offers little guidance to those planning and developing the promotional program

7. Factors Influencing Sales Technology Competition The economy Advertising & promotion Product quality Distribution Price

8. Where Sales Objectives are Appropriate

9. Where Sales Objectives are Appropriate

10. 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.

11. Communications Objectives Conative (behavioral) Ads stimulate ordirect desires Affective (feeling) Ads change attitudes and feelings Cognitive (thinking) Ads provide information and facts Purchase Purchase intentions Favorable attitudes and image Brand knowledgeand interest Brand awareness

12. Creating an Image

13. Communications Effects Pyramid 5% Use Conative 20% Trial 25% Preference Affective 40% Liking 70% Knowledge/comprehension Cognitive 90% Awareness

14. GfK Purchase Funnel

15. Problems With Communications Objectives • Translating sales goals into communications objectives • What is adequate level of awareness, knowledge, liking, preference, or conviction? • No formulas or guidelines

16. The DAGMAR Approach Awareness Comprehension Conviction Action Define Advertising Goals for Measuring Advertising Results

17. Characteristics of Objectives Concrete, measurable tasks Well-definedaudience Benchmarkmeasures Specifiedtime period

18. Criticisms of DAGMAR Problems with response hierarchy Only relevant measure is sales Costly and time consuming Inhibits creativity

19. Advertising-Based View of Marketing Ads Acting on Consumers

20. Utilizing a Variety of Media

21. Balancing Objectives and Budgets What we’re willing and able to spend What we need to achieve our objectives

22. Establishing the Budget To whom should we allocate the monies? How much should we spend on advertising and promotion?

23. Budget Decisions in a Down Economy When times get tough, advertising and promotional budgets are the first to be cut

24. Marginal Analysis

25. Weaknesses of Marginal Analysis Sales are a direct measure of advertising and promotions efforts. Sales are determined solely by advertising and promotion.

26. 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

27. Budget Adjustments Increase Spending If cost is less than the marginal revenue generated Hold Spending If the cost is equal to the marginal revenue generated Decrease Spending If the cost is more than the marginal revenue generated

28. Sales Response Models 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

29. Factors Influencing Advertising Budgets Hidden productqualities Product life cycle Productprice Productdurability Purchasefrequency Differentiation

30. Top-Down vs. Bottom-Up Budgeting

31. Top-Down Budgeting Methods AffordableMethod Return onInvestment ArbitraryAllocation CompetitiveParity Percentage of Sales Top Management

32. Build-Up Approaches • Objective and Task Method • Define communications objectives to be accomplished • Determine specific strategies and tasks needed to attain them • Estimate costs associated with performance of these strategies and tasks

33. Implementing the Objective and Task Approach Isolate objectives Determine tasks required Estimate required expenditures Monitor Reevaluate objectives

34. Payout Planning

35. Quantitative Models Computer Simulation

36. Allocating to IMC Elements

37. Other Budget Allocation Factors • Budgeting Factors • Client/agency policies • Market size • Market potential • Market share goals

38. Share of Voice Effect 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

39. 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!

40. Organizational Characteristics • Factors that influence advertising and promotion budgets • The organization’s 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