Transcript Chapter 1

Establishing Objectives
and Budgeting for the
Promotional Program
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Value of Objectives
Objectives
Focus &
Coordination
Plans &
Decisions
Measurement
& Control
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Characteristics of Objectives
Attainable
Realistic
Measurable
Objectives
Not Mutually
Exclusive
Specific
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Advertising Can Shape Corporate Images
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Marketing Versus Communications Objectives
Marketing
Objectives
Communications
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
• 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.
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Many Different Factors Affect Sales
$ALE$
Promotion
Distribution
Competition
Technology
Product
Quality
Price Policy
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The
Economy
Sales As Advertising Objectives
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Direct Response Ads Seek Sales
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Many Ads Seek Communications Objectives
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Advertising and Movement Toward Action
Purchase
Conative
Realm of motives.
Ads stimulate or
direct desires.
Conviction
Preference
Affective
Realm of emotions.
Ads change attitudes
and feelings
Liking
Competitive ads
Argumentative copy
“Image” copy
Status, glamour appeals
Knowledge
Announcements
Descriptive copy
Classified ads
Slogans, jingles, skywriting
Awareness
Teaser campaigns
Cognitive
Realm of thoughts.
Ads provide
information and facts.
Point of purchase
Retail store ads, Deals
“Last-chance” offers
Price appeals, Testimonials
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Image Ads Can Have a Strong
Effect on Preference
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Pyramid of Communications Effects
5% Use
20% Trial
25% Preference
40% Liking
70% Knowledge
90% Awareness
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The DAGMAR Approach
Define
Advertising
Goals for
Measuring
Advertising
Results
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Specific Objective: Membership
Specific Target: Avid Golfers
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DAGMAR Difficulties
Legitimate Problems
Attitude - Behavior
Relationship
Response Hierarchy
Problems
Questionable Objections
Sales Objectives
Needed
Costly and
Impractical
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Inhibits Creativity
Advertising-Based View of Communications
Advertising Through Media
Acting on Consumers
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The San Diego Zoo's Objective is to
Attract Visitors
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Balancing Objectives and Budgets
What we’re
willing and
able to spend
Dollars
What we need
to achieve our
objectives
Goals
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Marginal Analysis
Gross Margin
Sales in $
Sales
Ad. Expenditure
Profit
Point A
Advertising / Promotion in $
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BASIC Principle of Marginal Analysis
Increase
Spending
If the increased cost is less
than the incremental
(marginal) return
Hold
Spending
If the increased cost is equal
to the incremental
(marginal) return.
Decrease
Spending
If the increased cost is more
than the incremental
(marginal) return
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Assumptions for Marginal Analysis
Sales are the
result of
advertising and
promotion, and
nothing else
Sales are the
principal
objective of
advertising
and promotion
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Advertising Sales/Response Functions
Advertising Expenditures
Initial Spending
Little Effect
Middle Level
High Effect
High Spending
Little Effect
B. S-Shaped
Response
Function
Incremental Sales
Incremental Sales
A. ConcaveDownward
Response Curve
Range A
Range B
Range C
Advertising Expenditures
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Top-Down Budgeting
Top Management Sets the Spending Limit
The Promotion Budget Is Set to Stay Within
the Spending Limit
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Top-Down Budgeting Methods
Competitive
Parity
Arbitrary
Allocation
Top
Management
Return on
Investment
Percentage
of Sales
Affordable
Method
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Bottom-Up Budgeting
Total Budget Is Approved by
Top Management
Cost of Activities are Budgeted
Activities to Achieve Objectives
Are Planned
Promotional Objectives Are Set
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Objective and Task Method
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)
Estimate Costs Associated with Tasks
(determine costs of advertising,
promotions, etc…)
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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!
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High
Low
Competitor’s
Share of Voice
Ad Spending and Share of Voice
Decrease–find a
Defensible Niche
Increase to Defend
Attack With Large
SOV Premium
Maintain Modest
Spending Premium
Low
High
Your Share of Market
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