Establishing Objectives
and
Budgeting for the Promotional
Program
Value of Objectives
Focus and Coordination
They help to orient everyone involved toward
one, common goal.
Plans and Decisions
They serve as criteria for developing plans and
making decisions.
Measurement and Control
They provide the standards and benchmarks for
evaluating results.
Types of Objectives
Marketing Objectives
Statements of what is to be accomplished by the overall
marketing program within a given time period.
Need to be quantifiable such as sales volume, market
share, profits, or ROI.
Need to be realistic, measurable and attainable
IMC Objectives
Statements of what various aspects of the IMC program
will accomplish based on communication tasks required to
deliver appropriate messages to the target audience.
Problems With Sales Objectives
Sales are a function of many factors, not just
advertising and promotion.
Effects of IMC tools such as advertising often occur
over an extended time period.
Sales objectives provide little guidance to those
responsible for planning and developing the IMC
program
Many Factors Influence Sales
Promotion
Product Quality Competition
Technology SALES Distribution
The Economy Price Policy
When Sales Objectives Are Appropriate
For promotional efforts that are direct action in nature and
can induce an immediate behavioral response.
Sales promotion
Direct response advertising
Retail advertising for sales or special events
When advertising plays a dominant role in a firm’s
marketing program and other factors are relatively stable
When sales effects of an IMC variable can be isolated.
Communication Objectives
The primary goal of an IMC program is to
communicate and planning should be based
on communications objectives such as brand
awareness, knowledge, interest, attitudes,
image and purchase intention
Advertising and Movement Toward Action
Related behavioral Movement Types of promotions and
dimensions toward purchase advertising at each step
Point of purchase
Purchase
Conative Retail store ads, Deals
“Last-chance” offers
Realm of motives. Price appeals, Testimonials
Ads stimulate or direct
Conviction
desires.
Affective Preference Competitive ads
Argumentative copy
Realm of emotions.
Liking “Image” copy
Ads change attitudes Status, glamour appeals
and feelings
Knowledge Announcements
Cognitive Descriptive copy
Realm of thoughts. Classified ads
Slogans, jingles, skywriting
Ads provide
information and facts. Awareness Teaser campaigns
Inverted Pyramid of Communications
Effects
90% Awareness
70% Knowledge
40% Liking
25% Preference
20% Trial
5% Use
The DAGMAR Approach
Define
Advertising
Goals for
Measuring
Advertising
Results
Characteristics of Objectives
Good Objectives Should Include:
Concrete, Measurable Communication Tasks
Well-Defined Target Audience
Have an Existing Benchmark Measure
Specify Degree of Change Sought
Specific Time Period
DAGMAR Difficulties
Legitimate Problems Questionable Objections
Sales Objectives Are
Response Hierarchy Needed
Problems
Sales are all that really
Doesn't always define the
counts, not communications
process people use to reach
purchase/use. objectives.
Costly and Impractical
Attitude - Behavior The research and efforts
Relationship cost more then the results
Attitude change doesn't are worth.
always lead to change in Inhibition of Creativity
actions or behavior.
Too many rules and
structure curb genius.
Advertising-Based View of Communications
Advertising Through Media
One-Way
Purchase
Attitudes Knowledge Preference Conviction
Behavior
Linear
Acting on Consumers
Budgeting Decisions
Budgeting decisions involve determining how much
money will be spent on advertising and promotion
each year and how the monies will be allocated
Two major decisions
Establishing the size of the budget
Allocating the budget
Marginal Analysis
Sales Gross Margin
$
in
s Ad. Expenditure
le
a
S
Profit
Point A
Advertising / Promotion in $
BASIC Principles of Marginal Analysis
Increase Spending . . . IF:
The increased cost is less than the incremental
(marginal) return.
Decrease Spending . . . IF:
The increased cost is more than the incremental
(marginal) return.
Hold Spending Level. . . IF:
The increased cost is equal to the incremental
(marginal) return.
Problems with Marginal Analysis
Assumption:
Sales are the principal objective of advertising
and/or promotion.
Assumption:
Sales are the result of advertising and
promotion and nothing else.
Advertising Sales/Response
Functions
A. Concave-Downward B. S-Shaped Response
Response Curve Function
s s
le le
a a L In H M L H
S S it ig id it ig
tii
l l lte a h d lte h
ta ta E l E le E S
n n S ff p
ff L ff
e e e
p
e e e e e
m c c c n
m t
n t v
t d
e
r e d e
in
r in l
c c g
n g
I In
Range A Range B Range C
Advertising Expenditures
Advertising Expenditures
Top-Down Budgeting
Top Management Sets the
Spending Limit
The Promotion Budget Is Set to Stay
Within the Spending Limit
Top-Down Approaches
The Affordable Method
What we have to spare. What's left to spend.
Arbitrary Allocation Method
No system. Seemed like a good idea at the time.
Percentage of Sales Method
Set percentage of sales or amount per unit.
Competitive Parity Method
Match competitor or industry average spending.
Return on Investment Method
Spending is treated as a capital investment.
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
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
(cost of advertising on TV + radio +
newspapers)
Payout Planning
To determine how much to spend,
marketers develop a payout plan that
determines the investment value of the
advertising and promotion appropriation
Example of a three-year payout plan ($ millions)
Year 1 Year 2 Year 3
Product sales 15.0 35.50 60.75
Profit contribution
(@$.50 per case) 7.5 17.75 30.38
Advertising/promotions 15.0 10.50 8.50
Profit (loss) (7.5) 7.25 21.88
Cumulative profit (loss) (7.5) (0.25) 21.63
Allocating the IMC Budget
Factors Affecting Allocation to various
markets, products, IMC Elements
Client/Agency Policies
Size of Market
Market Potential
Market Share Goals
Market Share and Economies of Scale
Organizational Characteristics
Share of Voice and Ad Spending