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Establishing Objectives and Budgeting for the Promotional Program
Establishing Objectives and Budgeting for the Promotional Program
Establishing Objectives and Budgeting for the Promotional Program
Establishing Objectives
and Budgeting for the
Promotional Program

Value of Objectives

Objectives

Objectives

Focus &

Focus &

Focus &

Focus &

Coordination

Coordination

Coordination

Coordination

Plans &

Plans &

Plans &

Plans &

   

Decisions

Decisions

Decisions

Decisions

 
 

Measurement

Measurement

 

& Control

& Control

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

Characteristics of Objectives

Attainable

Attainable

Attainable

Attainable

Characteristics of Objectives Attainable Attainable Attainable Attainable Realistic Realistic Realistic Realistic Objectives Objectives Measurable Measurable Measurable

Realistic

Realistic

Realistic

Realistic

Objectives

Objectives

Characteristics of Objectives Attainable Attainable Attainable Attainable Realistic Realistic Realistic Realistic Objectives Objectives Measurable Measurable Measurable
Characteristics of Objectives Attainable Attainable Attainable Attainable Realistic Realistic Realistic Realistic Objectives Objectives Measurable Measurable Measurable
Characteristics of Objectives Attainable Attainable Attainable Attainable Realistic Realistic Realistic Realistic Objectives Objectives Measurable Measurable Measurable
Characteristics of Objectives Attainable Attainable Attainable Attainable Realistic Realistic Realistic Realistic Objectives Objectives Measurable Measurable Measurable

Measurable

Measurable

Measurable

Measurable

Not Mutually

Not Mutually

Exclusive

Exclusive

Specific

Specific

Specific

Specific

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

Advertising Can Shape Corporate Images

Advertising Can Shape Corporate Images © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Marketing Versus Communications Objectives Marketing Marketing Marketing Marketing Communications Communications Objectives Objectives Objectives Objectives Objectives Objectives
Marketing Versus Communications Objectives
Marketing
Marketing
Marketing
Marketing
Communications
Communications
Objectives
Objectives
Objectives
Objectives
Objectives
Objectives
• Generally stated in the
• Generally stated in the
• Derived from the overall
• Derived from the overall
firm’s marketing plan
firm’s marketing plan
marketing plan
marketing plan
• Achieved through the
• Achieved through the
• More narrow than
• More narrow than
overall marketing plan
overall marketing plan
marketing objectives
marketing objectives
• Quantifiable, such as
• Quantifiable, such as
Vs.
Vs.
• Based on particular
• Based on particular
sales, market share, ROI
sales, market share, ROI
communications tasks
communications tasks
• To be accomplished in a
• To be accomplished in a
• Designed to deliver
• Designed to deliver
given period of time
given period of time
appropriate messages
appropriate messages
• Must be realistic and
• Must be realistic and
• Focused on a specific
• Focused on a specific
attainable to be effective
attainable to be effective
target audience
target audience

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

Many Different Factors Affect Sales

$ALE$ $ALE$

Advertising Advertising Advertising Advertising Product Product Product Product and and and and Competition Competition Competition Competition
Advertising
Advertising
Advertising
Advertising
Product
Product
Product
Product
and
and
and
and
Competition
Competition
Competition
Competition
quality
quality
quality
quality
promotion
promotion
promotion
promotion

Distribution

Distribution

Distribution

Distribution

Technology

Technology

Technology

Technology

Price Price Price Price
Price
Price
Price
Price
The The
The
The

economy

economy

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

Direct Response Ads Seek Sales

Direct Response Ads Seek Sales © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Some Communications Use Nontraditional Methods

Some Communications Use Nontraditional Methods © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Sales As Advertising Objectives

Sales As Advertising Objectives © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

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 the promotional program.

  • D) Marketing managers do not recognize the value of setting communications objectives.

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

Advertising and Movement Toward Action

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

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

Image Ads Can Have a Strong

Effect on Preference

Image Ads Can Have a Strong Effect on Preference © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Affective

Cognitive

Pyramid of Communications Effects

5% Use 20% Trial 20% Trial 25% Preference 25% Preference Conative
5% Use
20% Trial
20% Trial
25% Preference
25% Preference
Conative

40% Liking

40% Liking

70% Knowledge

70% Knowledge

90% Awareness

90% Awareness

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

The DAGMAR Approach

Define Advertising Goals for Measuring Advertising Results

Awareness

Awareness

Awareness

Awareness

Comprehension Comprehension Comprehension Conviction Conviction Conviction Conviction

Comprehension

Comprehension

Comprehension

Comprehension

 
Comprehension Comprehension Comprehension Conviction Conviction Conviction Conviction

Conviction

Conviction

Conviction

Conviction

Comprehension Comprehension Comprehension Conviction Conviction Conviction Conviction
Action Action
Action
Action

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

Characteristics of Objectives

Characteristics of Objectives • Concrete and measurable • Target audience • Benchmark and degree of change

Concrete and measurable

Target audience

Benchmark and degree of

change sought

Specified time period

Pros and Cons of DAGMAR

Pros

Pros

Assessment of campaign

Assessment of campaign

Assessment of campaign

Assessment of campaign

effectiveness

effectiveness

effectiveness

effectiveness

Value of communication-

Value of communication-

Value of communication-

Value of communication-

based objectives

based objectives

based objectives

based objectives

Measurement of stages

Measurement of stages

Measurement of stages

Measurement of stages

Less subjective

Less subjective

Less subjective

Less subjective

Cons

Cons

Problems with the

Problems with the

Problems with the

Problems with the

response hierarchy

response hierarchy

response hierarchy

response hierarchy

Sales objectives

Sales objectives

Sales objectives

Sales objectives

Practicality and cost

Practicality and cost

Practicality and cost

Practicality and cost

Inhibition of creativity

Inhibition of creativity

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

Advertising-Based View of Communications

Advertising Through Media

Advertising-Based View of Communications Advertising Through Media Acting on Consumers © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Acting on Consumers

© 2007 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
What we’re
What we need
willing and
to achieve our
able to spend
objectives
Dollars
Goals

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

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

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

Marginal Analysis

Sales Gross Margin Ad. Expenditure Profit Point A Advertising / Promotion in $ Sales in $
Sales
Gross Margin
Ad. Expenditure
Profit
Point A
Advertising / Promotion in $
Sales in $

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

BASIC Principle of Marginal Analysis

Increase Increase Spending Spending
Increase Increase
Spending Spending
If If the the increased increased cost cost is is less less than than the the
If If the the increased increased cost cost is is less less
than than the the incremental incremental
(marginal) (marginal) return return
Hold Hold Spending Spending
Hold Hold
Spending Spending
If If the the increased increased cost cost is is equal equal to to the the
If If the the increased increased cost cost is is equal equal
to to the the incremental incremental (marginal) (marginal)
return. return.
Decrease Decrease Spending Spending
Decrease Decrease
Spending Spending
If If the the increased increased cost cost is is more more than than the the
If If the the increased increased cost cost is is more more
than than the the incremental incremental
(marginal) (marginal) return return

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

Assumptions for Marginal Analysis

Sales are the principal objective of advertising and promotion
Sales are the
principal
objective of
advertising
and promotion
Sales are the result of advertising and promotion, and nothing else
Sales are the
result of
advertising and
promotion, and
nothing else
Assumptions for Marginal Analysis Sales are the principal objective of advertising and promotion Sales are the

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

Advertising Sales/Response Functions

A. Concave-

Downward

Response Curve

Incremental Sales
Incremental Sales

Advertising Expenditures

B. S-Shaped

Response

Function

Range A Range B Range C Incremental Sales Initial Spending Little Effect Middle Level High Effect
Range A
Range B
Range C
Incremental Sales
Initial Spending
Little Effect
Middle Level
High Effect
High Spending
Little Effect

Advertising Expenditures

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

Top-Down Budgeting

Top Management Sets the Spending Limit

Top Management Sets the Spending Limit

Top Management Sets the Spending Limit

Top Management Sets the Spending Limit

Top-Down Budgeting Top Management Sets the Spending Limit Top Management Sets the Spending Limit Top Management

The Promotion Budget Is Set to Stay Within

The Promotion Budget Is Set to Stay Within

the Spending Limit

the Spending Limit

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

Top-Down Budgeting Methods

Competitive

Competitive

Competitive

Competitive

Parity

Parity

Parity

Parity

Parity Parity Parity Parity

Top

Top

Management

Management

Arbitrary

Arbitrary

Arbitrary

Arbitrary

Allocation

Allocation

Allocation

Allocation

Top-Down Budgeting Methods Competitive Competitive Competitive Competitive Parity Parity Parity Parity Top Top Management Management Arbitrary
Top-Down Budgeting Methods Competitive Competitive Competitive Competitive Parity Parity Parity Parity Top Top Management Management Arbitrary
Top-Down Budgeting Methods Competitive Competitive Competitive Competitive Parity Parity Parity Parity Top Top Management Management Arbitrary
Top-Down Budgeting Methods Competitive Competitive Competitive Competitive Parity Parity Parity Parity Top Top Management Management Arbitrary

Percentage

Percentage

Percentage

Percentage

of Sales

of Sales

of Sales

of Sales

Return on

Return on

Investment

Investment

Affordable

Affordable

Affordable

Affordable

Method

Method

Method

Method

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

Bottom-Up Budgeting

Total Budget Is Approved by

Total Budget Is Approved by

Top Management

Top Management

Bottom-Up Budgeting Total Budget Is Approved by Total Budget Is Approved by Top Management Top Management

Cost of Activities are Budgeted

Cost of Activities are Budgeted

Cost of Activities are Budgeted

Cost of Activities are Budgeted

Bottom-Up Budgeting Total Budget Is Approved by Total Budget Is Approved by Top Management Top Management

Activities to Achieve Objectives

Activities to Achieve Objectives

Activities to Achieve Objectives

Activities to Achieve Objectives

Are Planned

Are Planned

Are Planned

Are Planned

Bottom-Up Budgeting Total Budget Is Approved by Total Budget Is Approved by Top Management Top Management

Promotional Objectives Are Set

Promotional Objectives Are Set

Promotional Objectives Are Set

Promotional Objectives Are Set

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

Test Your Knowledge

Well known brand name products do not receive

incremental advantages from increased dollar

expenditures on advertising. Once the ad hits the

market, subsequent budget increases result in little or

no incremental gains. This might best be explained

by:

  • A) arbitrary allocation

    • B) the objective and task method

    • C) competitive parity

    • D) an S-shaped response

    • E) rapidly diminishing returns

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

Objective and Task Method

Establish Objectives

Establish Objectives

Establish Objectives

Establish Objectives

(create awareness of new product

(create awareness of new product

(create awareness of new product

(create awareness of new product

among 20 percent of target market)

among 20 percent of target market)

among 20 percent of target market)

among 20 percent of target market)

Objective and Task Method Establish Objectives Establish Objectives Establish Objectives Establish Objectives (create awareness of new

Determine Specific Tasks

Determine Specific Tasks

Determine Specific Tasks

Determine Specific Tasks

(advertise on market area television and

(advertise on market area television and

(advertise on market area television and

(advertise on market area television and

radio and local newspapers)

radio and local newspapers)

radio and local newspapers)

radio and local newspapers)

Objective and Task Method Establish Objectives Establish Objectives Establish Objectives Establish Objectives (create awareness of new

Estimate Costs Associated with Tasks

Estimate Costs Associated with Tasks

Estimate Costs Associated with Tasks

Estimate Costs Associated with Tasks

(determine costs of advertising,

(determine costs of advertising,

(determine costs of advertising,

(determine costs of advertising,

promotions, etc.)

promotions, etc.)

promotions, etc.)

promotions, etc.)

Objective and Task Method Establish Objectives Establish Objectives Establish Objectives Establish Objectives (create awareness of new
Objective and Task Method Establish Objectives Establish Objectives Establish Objectives Establish Objectives (create awareness of new

Monitor and Adjust

Monitor and Adjust

(monitor performance and adjust)

(monitor performance and adjust)

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

Media Expenditures

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

© 2007 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.
Proposition I
Larger firms can support their brands with lower relative
advertising costs than smaller firms.

NoNo evidence

evidence toto support

support this!

this!

Proposition II The leading brand in a product group enjoys lower advertising costs per sales dollar
Proposition II
The leading brand in a product group enjoys lower advertising
costs per sales dollar than do other brands.

NoNo evidence

evidence toto support

support this!

this!

Proposition III There is a static relationship between advertising costs per dollar of sales and the
Proposition III
There is a static relationship between advertising costs per
dollar of sales and the size of the advertiser.

NoNo evidence

evidence toto support

support this!

this!

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

Share of Voice

Competitor’s

High

Low

Ad Spending and Share of Voice

 
 

Decrease–find a

Decrease–find a

Defensible Niche

Defensible Niche

Increase to Defend

Increase to Defend

Attack With Large

Attack With Large

SOV Premium

SOV Premium

Maintain Modest

Maintain Modest

Spending Premium

Spending Premium

 
 

Low

High

Your Share of Market

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