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3

Establishing Objectives
and Budgeting for the
Promotional Program

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Starbucks

• Core competencies
– Third Place
– Neighborhood coffee shop
• Failed Ventures
– Joe magazine
– Café Starbucks
– Circadia
Value of Objectives

Specific
Objectives Communications

Planning &
Decision Making

Measurement
& Evaluation
Characteristics of Objectives

Specific

Attainable Measurable

Realistic Quantifiable
Measurable Results
Marketing vs. Communications Objectives

Marketing Communications
Objectives Objectives

• Generally stated in the • Derived from the overall


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

Increased Market Share

Increased Sales Brand Extensions


Factors Influencing Sales

Technology
Competition

The
Advertising economy
& promotion

Product
quality
Distribution
Price
Where Sales Objectives are Appropriate
IMC perspective Geico

• Increases in Advertising
– Sell via internet & direct sales
– In 2005, increased advertising expenditures 75%
to $403 million
– In 2006, spent twice as much as nearest
competitor
– Also spent in more places
• Increases in Sales
– 5.8% new customer acquisition (2.1% is
industry average)
– 91% ad message recognition
– Only brand to have double digit market share
growth 13.1%
From Awareness to Action

Point of purchase
Conative Purchase Retail store ads, deals
Realm of motives. “Last-chance” offers
Ads stimulate or Price appeals
direct desires Conviction Testimonials

Preference Competitive ads


Affective Argumentative copy
Realm of emotions.
Ads change attitudes Liking “Image” copy
and feelings Status, glamour appeals

Knowledge Announcements
Descriptive copy
Cognitive Classified ads, slogans,
Realm of thoughts. Jingles, skywriting
Ads provide
Awareness Teaser campaigns
information and facts
Creating an Image
Communications Effects Pyramid

5% Use

20% Trial

25% Preference

40% Liking

70% Knowledge/Comprehension

90% Awareness
The DAGMAR Approach

Define Awareness

Advertising
Goals for Comprehension

Measuring Conviction
Advertising
Results Action
Characteristics of Objectives

Concrete, Well-defined
measurable tasks audience

Benchmark Specified
measures time period
Pros and Cons of DAGMAR

Pros Cons
Focus on communications Relies heavily on the
objectives response hierarchy

Measurement of stages May not increase sales

Better understanding of
Practicality and cost
goals and objectives

Less subjective Inhibition of creativity


Advertising-Based View of Communications

Ads

Acting on Consumers
Utilizing a Variety of Media
Establishing & Allocating the Promotional Budget

Sponsorship Direct
Underwriting Marketing

Public Group Sales


Relations

Sales Internet
Promotions
Establishing a Budget
Budget Adjustments

Increase If the cost is less than the


Spending marginal return

Hold If the cost is equal to the


Spending incremental return

Decrease If the cost is more than the


Spending incremental return
Assumptions for Marginal Analysis

Sales are a Sales are


direct measure determined
of advertising solely by
and promotions advertising
and promotion
efforts
Sales Response Models

A. Concave-Downward B. S-Shaped Response


Response Curve Function
Incremental Sales

Incremental Sales

Initial Spending

High Spending
Middle Level

Little Effect
Little Effect

High Effect
Range A Range B Range C
Advertising Expenditures Advertising Expenditures
Factors Influencing Advertising Budgets

Product Hidden product


life cycle qualities

Product Product
durability price

Purchase
Differentiation frequency
Top-Down vs. Bottom-Up Budgeting
Top-Down Budgeting Methods

Affordable
Method

Return on Arbitrary
Top
Investment Allocation
Management

Competitive Percentage
Parity of Sales
Object and Task Method

Isolate objectives

Determine tasks required

Estimate required expenditures

Monitor

Reevaluate objectives
Payout Planning
Quantitative Models
Allocating to IMC Elements
Share of Voice Effect

Share of Voice

Decrease–find a
High
Competitor’s

Increase to defend
defensible niche

Attack with large Maintain modest


SOV premium spending premium
Low

Low High
Your Share of Market
Economies of Scale

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

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

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

There is no evidence to support any of these!


Organizational Characteristics

• Factors that influence advertising and


promotion budgets
– The organization’s structure
– Power and politics
– The use of expert opinions
– Characteristics of the decision maker
– Approval and negotiation channels
– Pressure on senior managers to arrive
at the optimal budget

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