Objectives of budgeting
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Transcript of Objectives of budgeting
Establishing Objectives and Budgeting for the Promotional Program
Establishing Objectives and Budgeting for the Promotional Program
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Focus &Coordination
Focus &Coordination
Plans &DecisionsPlans &Decisions
Measurement& Control
Measurement& Control
Plans &DecisionsPlans &Decisions
Focus &Coordination
Focus &Coordination
Value of Objectives
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ObjectivesObjectives
AttainableAttainable
MeasurableMeasurable
SpecificSpecific
RealisticRealistic
SpecificSpecific
MeasurableMeasurable
AttainableAttainable
RealisticRealistic
Not Mutually Exclusive
Not Mutually Exclusive
Characteristics of Objectives
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ObjectivesObjectives
Advertising Can Shape Corporate Images
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Marketing ObjectivesMarketing 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
Marketing ObjectivesMarketing Objectives
Marketing Versus Communications Objectives
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Communications Objectives
Communications 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.Vs.
TheeconomyThe
economyDistributi
onDistributi
on TechnologyTechnology PricePrice
Advertising and
promotion
Advertising and
promotion
Competition
Competition
ProductqualityProductquality
PricePriceTechnologyTechnologyDistribution
Distribution
ProductqualityProductquality
Competition
Competition
Advertising and
promotion
Advertising and
promotion
Many Different Factors Affect Sales
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$ALE$$ALE$
Direct Response Ads Seek Sales
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Some Communications Use Nontraditional Methods
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Sales As Advertising Objectives
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Test Your Knowledge
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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.
Advertising and Movement Toward Action
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Teaser campaigns
AffectiveRealm of emotions.Ads change attitudes and feelings
CognitiveRealm of thoughts.Ads provide information and facts.
ConativeRealm of motives.Ads stimulate or direct 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
Image Ads Can Have a Strong Effect on Preference
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20% TrialConative
40% LikingAffective
90% AwarenessCognitive
5% Use
70% Knowledge
25% Preference
90% Awareness
70% Knowledge
40% Liking
25% Preference
20% Trial
Pyramid of Communications Effects
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The DAGMAR Approach
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DefineAdvertisingGoals forMeasuringAdvertisingResults ActionAction
AwarenessAwarenessAwarenessAwareness
ConvictionConviction
ComprehensionComprehensionComprehensionComprehension
ConvictionConviction
Pros and Cons of DAGMAR
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Problems with the response hierarchyProblems with the response hierarchy
Assessment of campaign effectiveness
Assessment of campaign effectiveness
ProsPros ConsCons
Sales objectivesSales objectives
Practicality and costPracticality and cost
Inhibition of creativity
Inhibition of creativity
Value of communication-based
objectives
Value of communication-based
objectives
Measurement of stagesMeasurement of stages
Less subjectiveLess subjective
Problems with the response hierarchyProblems with the response hierarchy
Assessment of campaign effectiveness
Assessment of campaign effectiveness
Sales objectivesSales objectives
Practicality and costPracticality and cost
Value of communication-based
objectives
Value of communication-based
objectives
Measurement of stagesMeasurement of stages
Less subjectiveLess subjective
Advertising Through Media
Acting on Consumers
Advertising-Based View of Communications
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Balancing Objectives and Budgets
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Dollars Goals
What we’re willing and
able to spend
What we need to achieve
our objectives
Test Your Knowledge
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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
Marginal Analysis
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Advertising / Promotion in $
Sales in $
Point A
Profit
Sales Gross Margin
Ad. Expenditure
BASIC Principle of Marginal Analysis
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Increase SpendingIncrease Spending
Decrease SpendingDecrease Spending
HoldSpendingHold
Spending
If the increased cost is less than the incremental (marginal) return
If the increased cost is less than the incremental (marginal) return
If the increased cost is equal to the incremental (marginal) return.
If the increased cost is equal to the incremental (marginal) return.
If the increased cost is more than the incremental (marginal) return
If the increased cost is more than the incremental (marginal) return
Assumptions for Marginal Analysis
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Sales are the principal
objective of advertising
and promotion
Sales are the result of
advertising and promotion, and nothing else
Advertising Sales/Response Functions
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Incremental Sales
Advertising Expenditures
A. Concave-Downward Response Curve
Incremental Sales
Advertising Expenditures
Range A Range B Range C
B. S-Shaped Response Function
High Spending
Little Effect
Initial Spending
Little Effect
Middle Level
High Effect
The Promotion Budget Is Set to Stay Within the Spending Limit
The Promotion Budget Is Set to Stay Within the 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
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Affordable Method
Affordable Method
Affordable Method
Affordable Method
Competitive Parity
Competitive Parity
Percentageof Sales
Percentageof Sales
Return onInvestmentReturn onInvestment
Arbitrary AllocationArbitrary Allocation
Percentageof Sales
Percentageof Sales
Competitive Parity
Competitive Parity
Arbitrary AllocationArbitrary Allocation
Top-Down Budgeting Methods
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TopManagement
TopManagement
Total Budget Is Approved byTop Management
Total Budget Is Approved byTop Management
Cost of Activities are BudgetedCost of Activities are Budgeted
Activities to Achieve ObjectivesAre Planned
Activities to Achieve ObjectivesAre Planned
Promotional Objectives Are SetPromotional Objectives Are Set
Cost of Activities are BudgetedCost of Activities are Budgeted
Activities to Achieve ObjectivesAre Planned
Activities to Achieve ObjectivesAre Planned
Promotional Objectives Are SetPromotional Objectives Are Set
Bottom-Up Budgeting
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Test Your Knowledge
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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
Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)
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 and radio and local newspapers)
Establish Objectives(create awareness of new product among 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 and radio and local newspapers)
Establish Objectives(create awareness of new product among 20 percent of target market)
Establish Objectives(create awareness of new product among 20 percent of target market)
Objective and Task Method
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Monitor and Adjust(monitor performance and adjust)
Monitor and Adjust(monitor performance and adjust)
Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)
Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)
Media Expenditures
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Are There Economies of Scale?
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No evidence to support this!No evidence to support this!
No evidence to support this!No evidence to support this!
No evidence to support this!No evidence to support this!
Proposition ILarger firms can support their brands with lower relativeadvertising costs than smaller firms.
Proposition IIThe leading brand in a product group enjoys lower advertising costs per sales dollar than do other brands.
Proposition IIIThere is a static relationship between advertising costs per dollar of sales and the size of the advertiser.
Ad Spending and Share of Voice
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Decrease–find a Defensible NicheDecrease–find a Defensible Niche
Increase to Defend
Increase to Defend
Attack With Large SOV Premium
Attack With Large SOV Premium
Maintain Modest Spending Premium
Maintain Modest Spending PremiumC
ompetitor’s
Share of Voice
High
Low
HighLowYour Share of Market