ESTABLISHING OBJECTIVES AND BUDGETING FOR THE PROMOTIONAL PROGRAM

Chapter 7

LEARNING OBJECTIVES

To recognize the importance and value of setting objectives for advertising and promotion.

To know the differences between sales and communication objectives.

To understand the process of budgeting for IMC.

To know various methods of budget setting.

THE VALUE OF OBJECTIVES

Important reasons for setting advertising and promotional objectives:

Communication Planning and decision making Measurement and evaluation of results

CHARACTERISTICS OF OBJECTIVES

Specific Measurable Quantifiable (delineates target market,

time frame) Realistic attainable

MEASURABLE RESULTS

COMMUNICATION

Specific objectives serves as communication devices and facilitate the coordination of the various groups working on the campaign both on the agency and the client side.

Problems can be avoided when they have a set of written and approved objectives to guide their decisions.

PLANNING AND DECISION MAKING

Serve as guide for decision making. Advertising and promotion planners/managers are often faced by number of options in the decision making process.

Choices on these options should be made on the basis of how well a strategy or tactic matches the promotional objectives.

MEASUREMENT AND EVALUATION OF RESULTS

Objectives provide a benchmark or standard against which success or failure of the campaign can be measured.

Objectives make it easier for management to measure what have been accomplish by the campaign.

DETERMINING PROMOTIONAL OBJECTIVESThe determination of objectives should occurs

after: a thorough situation analysis has been

conducted. marketing and promotional problems have been

identified.Review all the information, see how IMC fits into

the marketing program and what is hoped to be achieved through promotional elements.

SET OBJECTIVES!!!

SITUATION ANALYSISProvides information on: The market segments the firms wants to target

and the target audiences (e.g., demographics, psychographics)

The product and its main features, advantages, benefits, uses, and applications.

The company’s and competitors’ brands (sales and market share in various segments, competitive strategies)

Ideas on how the brand should be positioned and specific behavioral responses sought (trial, repurchase, brand switching, and increased usage)

MARKETING VS. COMMUNICATION OBJECTIVES

Marketing objectives – are statements of what is to be accomplished by the overall marketing program within a given period.

generally stated in the firms marketing plan.

MARKETING VS. COMMUNICATION OBJECTIVES

IMC objectives – are statements of what various aspects of the IMC program will accomplish.

They should be based on the particular communications tasks that are required to deliver the appropriate messages to the target audiences.

MARKETING VS. COMMUNICATION OBJECTIVES

Marketing Objectives

Marketing Objectives

•Generally stated in the firm’s marketing plan

•Achieved through the overall marketing plan

•Quantifiable, such as sales, market share, ROI

•To be accomplished in a given period of time

•Must be realistic and attainable to be effective

•Generally stated in the firm’s marketing plan

•Achieved through the overall marketing plan

•Quantifiable, such as sales, market share, ROI

•To be accomplished in a given period of time

•Must be realistic and attainable to be effective

Communications ObjectivesCommunications Objectives

• Derived from the overall marketing plan

• More narrow than marketing objectives

• Based on particular communications tasks

• Designed to deliver appropriate messages

• Focused on a specific target audience

• Derived from the overall marketing plan

• More narrow than marketing objectives

• Based on particular communications tasks

• Designed to deliver appropriate messages

• Focused on a specific target audience

Vs.

COMMUNICATION OBJECTIVES

The primary role of IMC program is to communicate and hence its planning must be based on communication objectives.

Advertising and promotional efforts are designed to achieve such communications as brand knowledge and interest, favorable attitudes and image, and purchase intentions.

FROM AWARENESS TO ACTION

AffectiveRealm of emotions.Ads change attitudes and

feelings

CognitiveRealm of thoughts.Ads provide information and

facts

ConativeRealm of motives.Ads stimulate or direct

desires

Purchase

Conviction

Preference

Liking

Knowledge

Awareness

CREATING AN IMAGE

•This ad for Philips is designed to inform consumers of the company’s focus on technology that makes sense and is simple. •While there is no call for immediate action, the ad creates favorable impressions about the company by creating a distinct image. •Consumers will consider this image when they enter the market for products in this category.

COMMUNICATION EFFECTS PYRAMID

20% TrialCon

ativ

e

40% LikingAffec

tive

90% AwarenessCog

nitive

5% Use

70% Knowledge/Comprehension

25% Preference

THE DAGMAR APPROACH

Define

Advertising

Goals for

Measuring

Advertising

ResultsActionAction

AwarenessAwareness

ConvictionConviction

ComprehensionComprehension

THE DAGMAR APPROACH

Colley proposed that the communications task be based on a hierarchical model of the communications process, with four stages:

• Awareness… making the consumer aware of the existence of the brand or company.

• Comprehension… developing an understanding of what the product is and what it will do for the consumer

• Conviction… developing a mental disposition in the consumer to buy the product.

• Action… getting the consumer to purchase the product. Many promotional planners use this model as a basis

for setting objectives and assessing the effectiveness of promotional campaigns.

DAGMAR

Defining advertising goals for measured advertising results

Good objectives: Concrete and measureable Target audience Benchmark and degree of change

sought Specified time period

ESTABLISHING THE BUDGET

Budget may vary from few thousands to more than a billion.

Increase SpendingIncrease Spending

If the cost is less than the marginal returnIf the cost is less than the marginal return

HoldSpendingHoldSpending

If the cost is equal to the incremental returnIf the cost is equal to the incremental return

Decrease SpendingDecrease Spending

If the cost is more than the incremental returnIf the cost is more than the incremental return

BUDGET ADJUSTMENT

If advertising expenditures are greater than the revenues generated by the ads, the budget should be scaled down. If revenues are higher, a larger budget may be in order.

Although this budgeting method seems logical, certain weaknesses limit its usefulness. These weaknesses include the assumptions that: Sales are a direct result of advertising and promotional

expenditures and can be measured Advertising and promotion are solely responsible for sales

The difficulty of determining the effects of the promotional effort on sales and revenues also limits its applicability.

MARGINAL ANALYSISSales are a direct measure of advertising and promotions efforts

Sales are determined solely by advertising and promotion

MARGINAL ANALYSIS Sales are a direct result of advertising and promotional

expenditures and nothing else. Many marketers feel that it is very difficult to measure the influence of advertising on sales which limits the value of marginal analysis. Advertising and promotion are rarely the only factors that are responsible for sales as other elements of the marketing mix including product/service factors, price, and distribution all contribute to the success of the company.

Sales are the principal objective of advertising and promotion. Marginal analysis assumes that sales are the principal objective of advertising and promotion. As discussed in this chapter, marketers can have a variety of other objectives for their advertising and promotion programs.

SALES RESPONSE MODELSIn

crem

en

tal S

ale

s

Advertising Expenditures

A. Concave-Downward Response Function

Incr

em

en

tal S

ale

s

Advertising ExpendituresRange A Range B Range C

B. S-Shaped Response Function

Hig

h S

pendin

gLi

ttle

Eff

ect

Init

ial Sp

endin

gLi

ttle

Eff

ect

Mid

dle

Level

Hig

h E

ffect

SALES RESPONSE MODELS A lot of research and discussion has gone into trying to determine the true

relationship between advertising and sales and the shape of the response curve. Most advertisers subscribe to one of two models of the advertising/sales response function:

The concave-downward function, which assumes that the effects of advertising spending follow the microeconomic law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. The logic is that those with the greatest potential to buy will likely act on the first (or earliest) exposures, while those less likely to buy are not likely to change as a result of the advertising.

The S-shaped response function, which assumes that initial outlays of the advertising budget have little impact (range A). However, after a certain budget level has been reached (range B) advertising and promotional efforts begin to have an effect, and additional increments of expenditures result in increased sales. When advertising expenditures enter range C, however, incremental spending will have little additional impact on sales.

FACTORS INFLUENCING ADVERTISING BUDGET

Product life cycle

Factors influencing

Productdurability

Differentiation

Hidden productqualities

Productprice

Purchasefrequency

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