Establishing Objectives

and Budgeting for the

Promotional Program

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Value of Objectives

Focus
Focus &
&
Objectives
Objectives Coordination
Coordination

Plans
Plans &
&
Decisions
Decisions

Measurement
Measurement
&& Control
Control

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Characteristics of Objectives

Attainable
Attainable

Realistic
Realistic Measurable
Measurable
Objectives
Objectives

Not
Not Mutually
Mutually Specific
Specific
Exclusive
Exclusive
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Advertising Can Shape Corporate Images

+
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
 Marketing Versus Communications Objectives

Marketing
Marketing Communications
Communications
Objectives
Objectives Objectives
Objectives

•• Generally
Generally stated
stated in in the
the •• Derived
Derived from
from the
the overall
overall
firm’s
firm’s marketing
marketing plan plan marketing
marketing plan
plan
•• Achieved
Achieved through
through the the •• More
More narrow
narrow than
than
overall
overall marketing
marketing plan plan marketing
marketing objectives
objectives
•• Quantifiable,
Quantifiable, such
such as as Vs. •• Based
Based onon particular
particular
sales,
sales, market
market share,
share, ROI ROI communications
communications taskstasks
•• To
To be
be accomplished
accomplished in in aa •• Designed
Designed to to deliver
deliver
given
given period
period ofof time
time appropriate
appropriate messages
messages
•• Must
Must bebe realistic
realistic andand •• Focused
Focused onon aa specific
specific
attainable
attainable to
to be
be effective
effective target
target audience
audience
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
 Many Different Factors Affect Sales

$ ALE$
$ALE $

Product
Product
Promotion
Promotion Competition
Competition Quality
Quality

The
The
Distribution
Distribution Technology
Technology Price
Price Policy
Policy Economy
Economy

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Sales As Advertising Objectives

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

+
Direct Response Ads Seek Sales

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

+
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
 Advertising and Movement Toward Action

Conative Purchase Point of purchase

Realm of motives.
Ads stimulate or
direct desires.
Retail store ads, Deals
“Last-chance” offers
Price appeals, Testimonials
Conviction

Preference Competitive ads

Affective Argumentative copy
Realm of emotions.
Ads change attitudes Liking “Image” copy
Status, glamour appeals
and feelings

Knowledge Announcements
Descriptive copy
Classified ads
Cognitive Slogans, jingles, skywriting
Realm of thoughts.
Ads provide Awareness Teaser campaigns
information and facts.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Image Ads Can Have a Strong
Effect on Preference

+
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
 Pyramid of Communications Effects

5% Use

e
iv
at
n
Co
20% Trial
e

25% Preference
iv
ct
fe
Af

40% Liking
e

70% Knowledge
ti v
i
gn
Co

90% Awareness

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The DAGMAR Approach

Define
Advertising
Goals for
Measuring
Advertising
Results
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Specific Objective: Membership
Specific Target: Avid Golfers

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

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 DAGMAR Difficulties

Legitimate
Legitimate Problems
Problems

Attitude
Attitude -- Behavior
Behavior Response
Response Hierarchy
Hierarchy
Relationship
Relationship Problems
Problems

Questionable
Questionable Objections
Objections

Sales
Sales Objectives
Objectives Costly
Costly and
and Inhibits
Inhibits Creativity
Creativity
Needed
Needed Impractical
Impractical

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising-Based View of Communications

Advertising Through Media

Acting on Consumers
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
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

Balancing Objectives and Budgets

What we’re What we need

willing and to achieve our
able to spend objectives
Dollars Goals

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Marginal Analysis

Sales Gross Margin

Sales in $

Ad. Expenditure

Profit
Point A

Advertising / Promotion in $

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

BASIC Principle of Marginal Analysis

Increase
Increase If
If the
the increased
increased cost
cost is
is less
less
Spending
Spending than
than the
the incremental
incremental
(marginal)
(marginal) return
return

If
If the
the increased
increased cost
cost is
is equal
equal
Hold
Hold to
to the
the incremental
incremental (marginal)
(marginal)
Spending
Spending return.
return.

If
If the
the increased
increased cost
cost is
is more
more
Decrease
Decrease than
than the
the incremental
incremental
Spending
Spending (marginal)
(marginal) return
return

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Assumptions for Marginal Analysis

Sales are the

principal
Sales are the result of advertising
and promotion, and nothing else
objective of
advertising
and promotion

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Advertising Sales/Response Functions

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

Incremental Sales

Initial Spending

High Spending
Middle Level

Little Effect
Little Effect

High Effect
Range A Range B Range C

Advertising Expenditures Advertising Expenditures

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Top-Down Budgeting

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

The
The Promotion
Promotion Budget
Budget Is
Is Set
Set to
to Stay
Stay Within
Within
the
the Spending
Spending Limit
Limit

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Top-Down Budgeting Methods

Competitive
Competitive
Parity
Parity

Arbitrary
Arbitrary Percentage
Percentage
Allocation
Allocation Top of
of Sales
Sales
Top
Management
Management

Return
Return on
on Affordable
Affordable
Investment
Investment Method
Method
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Bottom-Up Budgeting

Total
Total Budget
Budget Is
Is Approved
Approved by
by
Top
Top Management
Management

Cost
Cost of
of Activities
Activities are
are Budgeted
Budgeted

Activities
Activities to
to Achieve
Achieve Objectives
Objectives
Are
Are Planned
Planned

Promotional
Promotional Objectives
Objectives Are
Are Set
Set

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Objective and Task Method

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

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

Estimate
Estimate Costs
Costs Associated
Associated with
with Tasks
Tasks
(determine
(determine costs
costs of
of advertising,
advertising,
promotions,
promotions, etc…)
etc…)

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Are There Economies of Scale?

Proposition I
Larger firms can support their brands with lower relative
advertising costs than smaller firms.
No evidence to support this!

Proposition II
The leading brand in a product group enjoys lower advertising
costs per sales dollar than do other brands.
No evidence to support this!

Proposition III
There is a static relationship between advertising costs per
dollar of sales and the size of the advertiser.
No evidence to support this!

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Ad Spending and Share of Voice
Share of Voice

Decrease–find
Decrease–find aa
Competitor’s

High

Increase
Increase to
to Defend
Defend
Defensible
Defensible Niche
Niche

Attack
Attack With
With Large
Large Maintain
Maintain Modest
Modest
SOV
SOV Premium Spending
Spending Premium
Low

Premium Premium

Low High
Your Share of Market

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin