establishing objectives n budgeting

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Establishing Objectivesand Budgeting for thePromotional Program

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin



Focus & Coordination


Plans & Decisions

Plans & Decisions

Measurement& Control

Measurement& Control

Plans & Decisions

Plans & Decisions



Value of Objectives


Objectives

Objectives



Attainable

Attainable

Measurable

Measurable

Specific

Specific

Realistic

Realistic

Specific

Specific

Measurable

Measurable

Attainable

Attainable

Realistic

Realistic

Not MutuallyExclusive

Not MutuallyExclusive

Characteristics of Objectives


Objectives

Objectives



Advertising Can Shape Corporate Images




MarketingObjectives

MarketingObjectives

• Generally stated in the

firm’s marketing plan• Achieved through the

overall marketing plan

• Quantifiable, such assales, market share, ROI

• To be accomplished in agiven period of time

• Must be realistic andattainable to be effective

• Generally stated in thefirm’s marketing plan

• Achieved through theoverall marketing plan

• Quantifiable, such assales, market share, ROI

• To be accomplished in agiven period of time

• Must be realistic andattainable to be effective

MarketingObjectives

MarketingObjectives

Marketing Versus Communications Objectives


CommunicationsObjectives

CommunicationsObjectives

• Derived from the overall

marketing plan• More narrow than

marketing objectives

• Based on particular communications tasks

• Designed to deliver appropriate messages

• Focused on a specifictarget audience

• Derived from the overallmarketing plan

• More narrow thanmarketing objectives

• Based on particular communications tasks

• Designed to deliver appropriate messages

• Focused on a specifictarget audience

Vs.Vs.



Theeconomy

TheeconomyDistribution

Distribution Technology

Technology Price

Price

Advertisingand

promotion

Advertisingand

promotionCompetition

Competition Productquality

Productquality

Price

PriceTechnology

TechnologyDistribution

Distribution

Productquality

ProductqualityCompetition

CompetitionAdvertising

andpromotion

Advertisingand

promotion

Many Different Factors Affect Sales


$ALE$

$ALE$



Direct Response Ads Seek Sales




Some Communications Use Nontraditional Methods




Sales As Advertising Objectives




Test Your Knowledge


Which of the following statements about

communications objectives is true?A) It is easy to translate sales goals 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 to the planning,execution, and evaluation of thepromotional program.

D) Marketing managers do not recognize thevalue of setting communicationsobjectives.



Advertising and Movement Toward Action


Teaser campaigns

AffectiveRealm of emotions.Ads change attitudesand feelings

CognitiveRealm of thoughts.Ads provideinformation and facts.

ConativeRealm of motives.Ads stimulate ordirect desires.

“Image” copyStatus, glamour appeals

AnnouncementsDescriptive copyClassified adsSlogans, jingles, skywriting

Competitive adsArgumentative copy

Point of purchaseRetail store ads, Deals “Last-chance” offersPrice appeals, Testimonials

Purchase

Conviction

Preference

Liking

Knowledge

Awareness

d



Image Ads Can Have a StrongEffect on Preference




20% Trial C o n a t i v e

40% Liking A f f

e c t i v

e

90% Awareness C o g n i t i

v e

5% Use

70% Knowledge

25% Preference

90% Awareness

70% Knowledge

40% Liking

25% Preference

20% Trial

Pyramid of Communications Effects




The DAGMAR Approach


Define

Advertising

Goals for M easuring

AdvertisingResults ActionAction

AwarenessAwarenessAwarenessAwareness

ConvictionConviction

ComprehensionComprehensionComprehensionComprehension

ConvictionConviction



• Concrete and measurable

• Target audience

• Benchmark and degree of change sought

• Specified time period

Characteristics of Objectives



Pros and Cons of DAGMAR


Problems with theresponse hierarchy


Assessment of campaigneffectiveness


ProsPros ConsCons

Sales objectivesSales objectives

Practicality and costPracticality and cost

Inhibition of creativityInhibition of creativity

Value of communication-based objectives


Measurement of stagesMeasurement of stages

Less subjectiveLess subjective





Sales objectivesSales objectives

Practicality and costPracticality and cost



Measurement of stagesMeasurement of stages

Less subjectiveLess subjective



Advertising Through Media

Acting on Consumers

Advertising-Based View of Communications




Balancing Objectives and Budgets


Dollars Goals

What we’rewilling and

able to spend

What we needto achieve our

objectives



Test Your Knowledge


In marginal analysis all of the following should be

considered EXCEPT:A) salesB) fixed costs of advertisingC) advertising expenditures and other

variable costs

D) gross marginE) net worth



Marginal Analysis


Advertising / Promotion in $

Sales

in$

Point A

Profit

Sales Gross Margin

Ad. Expenditure



BASIC Principle of Marginal Analysis


IncreaseSpending

IncreaseSpending

DecreaseSpending

DecreaseSpending

HoldSpending

HoldSpending

If the increased cost is lessthan the incremental(marginal) return

If the increased cost is lessthan the incremental(marginal) return

If the increased cost is equalto the incremental (marginal)return.

If the increased cost is equalto the incremental (marginal)return.

If the increased cost is morethan the incremental(marginal) return

If the increased cost is morethan the incremental(marginal) return



Assumptions for Marginal Analysis


Sales are theprincipal

objective of advertising

and promotion

Sales are theresult of

advertising andpromotion, and

nothing else



Advertising Sales/Response Functions


Increm

entalSale

s

Advertising Expenditures

A. Concave-DownwardResponse Curve

Increm

enta

lSale

s

Advertising Expenditures

Range A Range B Range C

B. S-ShapedResponseFunction

HighS

pendin

g

LittleEffect

Initial

Spending

LittleE

ffect

Middle

Level

HighE

ffect



The Promotion Budget Is Set to Stay Within

the Spending Limit

The Promotion Budget Is Set to Stay Withinthe Spending Limit

Top Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending Limit

Top-Down Budgeting




AffordableMethod

AffordableMethod

AffordableMethod

AffordableMethod

CompetitiveParity

CompetitiveParity

Percentageof Sales

Percentageof Sales

Return onInvestment

Return onInvestment

ArbitraryAllocationArbitraryAllocation Percentage

of SalesPercentageof Sales

CompetitiveParity

CompetitiveParity

ArbitraryAllocationArbitraryAllocation

Top-Down Budgeting Methods


TopManagement

TopManagement



Total Budget Is Approved byTop ManagementTotal Budget Is Approved byTop Management

Cost of Activities are BudgetedCost of Activities are Budgeted

Activities to Achieve ObjectivesAre Planned


Promotional Objectives Are SetPromotional Objectives Are Set

Cost of Activities are BudgetedCost of Activities are Budgeted



Promotional Objectives Are SetPromotional Objectives Are Set

Bottom-Up Budgeting




Test Your Knowledge


Well known brand name products do not receive

incremental advantages from increased dollarexpenditures on advertising. Once the ad hits themarket, subsequent budget increases result in little orno incremental gains. This might best be explainedby:

A) arbitrary allocationB) the objective and task methodC) competitive parityD) an S-shaped responseE) rapidly diminishing returns



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 andradio and local newspapers)

Establish Objectives(create awareness of new productamong 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)

Determine Specific Tasks(advertise on market area television andradio and local newspapers)

Establish Objectives(create awareness of new productamong 20 percent of target market)

Establish Objectives(create awareness of new product

among 20 percent of target market)

Objective and Task Method


Monitor and Adjust(monitor performance and adjust)

Monitor and Adjust(monitor performance and adjust)



M di E di



Media Expenditures




f



Ad Spending and Share of Voice

Decrease–find aDefensible Niche

Decrease–find aDefensible Niche Increase to DefendIncrease to Defend

Attack With LargeSOV Premium

Attack With LargeSOV Premium

Maintain ModestSpending Premium

Maintain ModestSpending PremiumC

omp e

titor’s

Shareo

fV

oice

High

Low

HighLowYour Share of Market

establishing objectives n budgeting

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