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Advertising

&
Sales Promotion Management

Chapter 6
Advertising Objectives & Budgeting
Learning Objectives
• Recognize the importance of setting objectives
for advertising and promotion.
• Understand the role of objectives in the
promotional planning process.
• Know the difference between sales and
communication objectives.
• Understand the process of budgeting for IMC.
• Understand theoretical issues involved in budget
setting.
• Know various methods of budgeting setting.
6.1 Introduction
• Advertisements are done with business objectives in
mind.
• Marketing objectives are listed as – SMART obj.
‒ S = Specific
‒ M = Measurable
‒ A = Achievable
‒ R = Realistic
‒ T = Time-sensitive
“Increase sales by 10% in six months through 20-week
long product awareness campaign held in six target
cities”.
6.1 Introduction
• Advertising goals and tactics follow from
marketing strategies and objectives.
• However, there are two debatable school of
thoughts regarding advertising objective;
‒ Is it marketing?
‒ Is it communication?
‒ Is it to generate sale or prepare customers to
buy?
• It is therefore tuff to set marketing objectives.
6.1 Introduction
• Objectives provide performance standards.
• Budget is derived from your objectives.
• Also, it is not always possible to measure the
effects of advertising in terms of sales.
‒ Advertisement for girl child education
‒ Advertisement for environment concerns
‒ Advertisement for rural education
• Results of such advertisement with broader goals
can't be measured.
6.2 Importance of Promotional Objectives
• Important to have the promotional mix objectives
for effective advertising.
• Objectives are standards against which
performance can be measured.
• Advertisement may play different role but
ultimately it’s a link between producer and
consumer.
• Advertising & Promotional objectives are needed
considering the functions they serve in
communications, planning & decision making,
measurement and evaluation etc.
6.2 Importance of Promotional Objectives
a) Objectives serve as a communications and
coordination devise
‒ Objectives facilitates co-ordination of various
groups working on campaign
‒ Organizational teams as well as support
agencies should know what the company hopes
to accomplish through its marketing
communications program.
‒ Written and approved objectives guide action
and discuss issues if any.
6.2 Importance of Promotional Objectives
b) Objective provide a criterion for decision making
‒ All phases of promotional strategy are based on
the established objectives
‒ Meaningful objectives can also be useful guide
for decision making
‒ Promotional planner face challenges like;
‒ Creative ideas short-listing
‒ Selecting media
‒ Choosing the promotional mix
‒ Allocating the budget
‒ Promotional objective helps in short-listing
6.2 Importance of Promotional Objectives
c) Evaluation of advertising effectiveness
‒ Objectives provide a benchmark against which
the success of the campaign can be measured
‒ Without objectives either subjectivity comes or
accountability suffers
‒ Good objectives are measurable
‒ Can justify return on investments
6.3 Classification of advertising objectives
• Advertising objectives can be classified as per the
various stages in the Product Life Cycle (PLC).
i. Informative
‒ Informative advertising seeks initial demand
‒ Inform about new products, new offers, price
‒ Promotions across new market entry pursues
this objective as success relies on announcing
new product availability
‒ Informative advertising is common in the
‘Introduction’ stage of PLC
6.3 Classification of advertising objectives
ii. Persuasive
‒ Objective is to persuade new customers for first
time purchase to increase demand
‒ Persuade existing customers for repurchases
‒ Persuasive advertising increases the demand;
o Encourage to switch brand
o Create a preference in the market
‒ Competitive type of communication suited during
the ‘Growth’ state or early part of the ‘Maturity’
or complete decline stage
6.3 Classification of advertising objectives
iii. Reminder
‒ Objective is to maintain interest and awareness
of a well established product in the market
‒ Often used at the point-of-purchase to remind
consumers of the brand
‒ Reminder advertising reinforces previous
promotional activity by keeping the name of a
product before the public
‒ Reminder advertising is suitable during the later
part of the ‘Maturity’ or complete decline stage
6.4 Types of Advertising Objectives
• Promotional objectives evolve from the
company’s marketing plan and are rooted in the
firm’s marketing objectives.
• Marketing objectives derived from the marketing
plan are statements of what is to be
accomplished by the overall marketing program.
• Marketing objectives are in specific terms like
sales, market share, profit or ROI.
• Situational analysis helps in identification of the
promotional problems and opportunities post
which objectives are set.
6.4 Types of Advertising Objectives
• The Achievement of marketing objectives
depends upon the coordination of all the
marketing mix elements, not just promotion.
• Advertising objectives are various communication
tasks required to deliver the message.
• However, two schools of thoughts operate here;
o Usually to communicate
o Usually sales or market share
• Clarity on which side of thought you wish to
pursue must come.
6.4.1 Sales Objectives
• Many believe that the only objective of
advertising is sale.
• Lack of sale can be due to any of the other
marketing mix elements.
• Promotional mix is only one of the elements.
• Advertising can make consumers aware and
interested.
• Sale happens / doesn’t happen due to factors like
competition, technology, packaging, price,
quality, distribution, changing taste etc.
6.4.1 Sales Objectives
• All the marketing elements must synchronized
together to make brand successful.
• Effect of advertising happens over a period of
time post multiple exposures.
• Sales objective approach can be used when
advertising plays a dominant role and other
factors are relatively stable.
• Sales objective approach is appropriate where we
look for immediate results such as sales
promotions, DM, retail promotions, festival sale.
6.4.2 Communications Objectives
• One school of thoughts believes that objective of
a promotional program is to communicate.
• Advtg & Sales Promotions are done to achieve
goals like building awareness, brand image and
purchase intentions.
• For achieving such objectives, consumers must be
given information and create favorable bias
towards the brand even before purchase
behavior to occur.
• Logic? Consumers pass through successive stages
of Response Hierarchy theory.
6.4.2 Communications Objectives
• Before they move closer to purchase, purpose of
advertising is to help move them through the
different stages
6.4.2 Communications Objectives
• A & P perform communications task by;
o First generating awareness and knowledge
o Moving the consumers towards trial and
repurchase
• Brand Low on awareness – Communication obj is
to increase the awareness.
• Brand low on liking / preference –
Communications objective should be to change
the image of the brand and move consumer
through to purchase.
6.4 Types of Advertising Objectives

Marketing Objectives Advertising Objectives


• Make existing brand a • Make attitude favorable to a
leader in category to add particular product
additional products in • To build an image for the
future product
• To increase market share by • To reduce existing negative
expanding the market attitude
• To increase sales among • To ensure call to action
existing users
• To launch product in new
markets
6.5 DAGMAR Approach to Objective Setting
• DAGMAR = Defining Advertising Goals for
Measured Advertising Result.
• Pioneered by Russel H. Colley (1961).
• It helps in establishing a measurable link between
advertising goals and advertising results.
• It monitors and evaluates promotion campaigns
thus it is a planning and control tool.
• 52 distinguished advertising goals were listed
which can be used for single advertisement or
year long campaign for a product.
• Goals may pertain to sales, image, attitude etc.
6.5 DAGMAR Approach to Objective Setting
• According to DAGMAR approach, the
communication task of the brand is to gain;
a) Awareness
b) Comprehension
c) Conviction
d) Image
e) Action
• Advertising goals should be consistent with
these communication tasks.
6.5 DAGMAR Approach to Objective Setting
• Performance on these counts and projected
goals is compared to evaluate the effectiveness
of the campaign.
• DAGMAR model has three parts;
1. Define advertising goals for effectiveness
measurement
2. Understand four sequential path through which
customers pass through – awareness,
comprehension, conviction and action
3. Measure advertising result
6.5 DAGMAR Approach to Objective Setting
1. Define Advertising Goals:
‒ Characteristics of good advertising goals include;
‒ Written
‒ Measurable involving a starting point
‒ A defined audience
‒ Time limit
• You must know current state before the start of
the advertising
• Through survey, you measure current
awareness, comprehension and conviction.
6.5 DAGMAR Approach to Objective Setting
1. Define Advertising Goals:
• You now set advertising goal which improves the
identified attributes status – Increase product
awareness from 10% to 30%.

2. Awareness, Comprehension, Conviction and


Action
‒ Awareness: Make customers aware about your
product, new product
‒ Not everyone will buy it. Thus vital to identify
your target audience
6.5 DAGMAR Approach to Objective Setting
2. Awareness, Comprehension, Conviction and
Action
‒ Comprehension: Make customers understand
what product will do for them
‒ Make them aware about product feature,
advantages and benefits
‒ Comprehension will generate its
appropriateness in the minds of customers
‒ Conviction: Post comprehension, it is essential
to build a positive attitude to the product
‒ Conviction needs persuasion
6.5 DAGMAR Approach to Objective Setting
2. Awareness, Comprehension, Conviction and
Action
‒ Action: Inducing customers to take expected
action which is a step towards buying
‒ Expected action at the customers end only
generates revenue for you

3. Measure Advertising Effectiveness:


‒ Effectiveness can be measured post evaluating
result vis-à-vis expectations
6.5 DAGMAR Approach to Objective Setting
3. Measure Advertising Effectiveness:
‒ Actual results are compared with goals set
‒ This may requires another survey if criteria are
subjective – awareness, comprehension etc.
• Utility of DAGMAR;
‒ Improvements in advertising and promotional
planning process by providing a better
understanding of the goals and objectives
‒ Planners’ efforts were directed towards that
6.5 DAGMAR Approach to Objective Setting
3. Measure Advertising Effectiveness:
‒ Focuses advertisers’ attention on the value of
using communication based rather than sales-
based objective to measure advtg effectiveness.
‒ Many promotional planner use this model as a
basis for setting objectives and assessing the
effectiveness of their promotional campaign
‒ It helps in less subjectivity and leads to better
communication and relationships between client
and agency
6.5.2 Criticism of DAGMAR
• Too much reliance on the hierarchy of effects
theory.
• Customers do not necessarily pass through the
stages in a linear way.
• It inhibits creativity buy focusing on strategic
aspects.
• Creative focus will shift from developing unique &
effective advertising to quantitative advtg.
• It believes in communication approach and
sidelines sales objective approach, which is basic.
6.5.2 Criticism of DAGMAR
• It is practical only for big corporations with large
marketing & advertising research budgets who
can afford to establish quantitative benchmarks
and measure communication.
6.6 Advertising Budget
• One of the difficult marketing decision is to
decide how much to spend on promotion mix.
• John Wanamaker, a department-store magnet
said in 2003, “I know that half of my advertising is
wasted, but I don’t know which half!”
• Advertising budget is the amount which has to be
spent on advertising to promote product, reach
target audience, generate sale and give
reasonable profits to the company.
• One must consider marketing conditions which
will have impact on advertising budget.
6.6.1 Factors to be Taken into Consideration
While Determining the Advertising Budget
• The advertising task to be achieved
• Frequency of the advertisement
• Competition and clutter
• Market share
• Product life cycle stage
• Product differentiation
• Support from retailers
• Financial resources
6.6.1 Factors to be Taken into Consideration
While Determining the Advertising Budget
• The advertising task to be achieved
‒ Is it awareness, trial, persuasion, sale, resale,
festival sale
‒ Is it brand building, image building, equity
development
• Frequency of the advertisement
‒ Minimum exposure needed to pursue customers
to get in to purchase action
‒ Regular, burst, seasonal, continuous frequency
6.6.1 Factors to be Taken into Consideration
While Determining the Advertising Budget
• Competition and clutter
‒ Nature, level and intensity of competition faced
‒ Clutter (Noise)
• Market share
‒ To maintain, increase, develop market
‒ Product uniqueness / standardization
‒ PLC stage and market share
6.6.1 Factors to be Taken into Consideration
While Determining the Advertising Budget
• Product life cycle stage
‒ PLC stages are Intro, growth, maturity, decline
‒ Higher budget on intro and initial growth stage
‒ Budget tapers post momentum, or on maturity
and decline
• Product differentiation
‒ Poor differentiation needs higher budget
‒ Differentiation vis-à-vis equity if low, higher
budget required
6.6.1 Factors to be Taken into Consideration
While Determining the Advertising Budget
• Support from retailers
‒ Retailers PUSH the brands
‒ Lesser the support, you need to create PULL, thus
higher budget
• Financial resources
‒ Funds availability, financial health allows more
advertisement budget
‒ Impact on margin affects budget
6.6.2 Establishing and Allocating Promotional
Budget
• Objectives set w/o budget are unrealistic.
• Budget is always limited
• Budget has relevance to critical marketing
objective

i. Establishing the budget


‒ Advertising without the promotion is w/o the
edge to your knife
‒ Promotion w/o advertising is like a broken knife
6.6.2 Establishing and Allocating Promotional Budget

i. Budgeting Approaches
‒ Two basic approaches;
A. Top-down approach
B. Built-up approach

A. Top-down approaches
‒ Budget is fixed and passed on to various
departments
‒ Pre-determined w/o any theoretical basis
6.6.2 Establishing and Allocating Promotional Budget

A. Top-down approaches
a) The affordable method
‒ Firm needs to compulsorily spend on certain
cost heads – production, operations etc.
‒ Margin prediction determines impact on
profitability
‒ Organization accordingly decides how much
spare money is available for allocating it to
advertising & promotions etc.
‒ Tasks by advertising is not considered
6.6.2 Establishing and Allocating Promotional Budget

A. Top-down approaches
b) The arbitrary allocation
‒ Budget is determined based on what is
considered as necessary
‒ There are no advertising objectives or purpose
for advertising & promotions
‒ It is based on managements ad-hoc
understanding about what can bring revenue
‒ It is illogically derived
6.6.2 Establishing and Allocating Promotional Budget

A.Top-down approaches
c)The percentage (%) of sales
‒ Most common and relevant method
‒ Use either past actual data of sale / advertising
budget
‒ Project future sale and determine impact
desired and accordingly determine %
‒ Both can be used where sales projection is
derived differently and % are derived using past
data
6.6.2 Establishing and Allocating Promotional Budget

A. Top-down approaches
d) The competitive parity
‒ Budgets are set by matching the % advertising
to sales ratio of competition
‒ Two variants to this;
i. Share of Expenses – Here past data of entire
industry and each enterprise is compiled – sales
& advertising expenses
ii. To maintain past share of industry advertising
expenditure, your budget is derived
6.6.2 Establishing and Allocating Promotional Budget

A. Top-down approaches
d) The competitive parity
‒ Two variants to this;
i. Share of Voice – Here past data of entire
industry and each enterprise is compiled –
sales, market share & advertising expenses
ii. To maintain past market share of industry
advertising expenditure, your budget is derived.
It can be tweaked to adjust to your planned
market share
6.6.2 Establishing and Allocating Promotional Budget

A. Top-down approaches
e) The return on investment
‒ Here advertising approach is considered as an
investment
‒ Also, it is accepted impact of advertising is
spread over a period
‒ Sales is a result of advertisement seen over the
period
‒ Thus return over pre-agreed period over
investments made in advertising is calculated
6.6.2 Establishing and Allocating Promotional Budget

i. Budgeting Approaches
‒ Two basic approaches;
A. Top-down approach
B. Built-up approach

B. Built-up approaches
‒ In this objectives and goals are determined
‒ Cost is calculated to achieve these goals
6.6.2 Establishing and Allocating Promotional Budget

B. Built-up approaches
a) The objective & task method
‒ Process involves establishing the
communication objectives
‒ Determining the strategy associated
‒ Determining the tasks needed to be done
‒ Determining the costs associated with such
tasks
‒ Focuses on marketing need and results
expected
6.6.2 Establishing and Allocating Promotional Budget

B. Built-up approaches
b) The payout planning
‒ Marketer projects the revenues that a product is
expected to return over a period of two to three
years
‒ Cost is associated to generate this revenue
including advertising
‒ Armed with this data, marketers presents
period in which project will pay-off
‒ If need to re-adjust, budgets are adjusted
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