Advertising and Movement Toward Action
Related behavioral dimensions Movement toward purchase Types of promotions and advertising at each step
Conative
Realm of motives. Ads stimulate or direct desires.
Purchase Conviction Preference Liking Knowledge
Point of purchase Retail store ads, Deals Last-chance offers Price appeals, Testimonials
Affective
Realm of emotions. Ads change attitudes and feelings
Competitive ads Argumentative copy Image copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Teaser campaigns
Cognitive
Realm of thoughts. Ads provide information and facts.
Awareness
Inverted Pyramid of Communications Effects
90% Awareness
ve iti gn Co e iv ct fe Af
70% Knowledge 40% Liking 25% Preference 20% Trial
e tiv na Co
5% Use
Setting Objectives Using the Communications Effects Pyramid
Product: Backstage Shampoo Time period: Six months Objective 1: 90% awareness Objective 2: 70% interest Objective 3: 40% positive feelings and 25% preference Objective 4: 20% trial Objective 5: 5% main regular use
The DAGMAR Approach
Define Advertising Goals for Measuring Advertising Results
Communication Tasks
Four stages
Awareness Comprehension Conviction Action
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 Response Hierarchy Problems
Doesn't always define the process people use to reach purchase/use.
Questionable Objections Sales Objectives Are Needed
Sales are all that really counts, not communications objectives.
Costly and Impractical
The research and efforts cost more then the results are worth.
Attitude - Behavior Relationship
Attitude change doesn't always lead to change in actions or behavior.
Inhibition of Creativity
Too many rules and structure curb genius.
The Promotional Budget
Establishing the budget Allocating the budget (budgeting approaches)
Establishing the budget
Marginal Analysis Sales response models Additional factors in budget setting
Marginal Analysis
Sales Sales in $ Gross Margin
Ad. Expenditure
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 that sales are a direct measure of advertising and promotional efforts. Assumption that sales are determined solely by advertising and promotion.
Advertising Sales/Response Functions
A. Concave-Downward B. S-Shaped Response Curve Response Function
Initial Spending Little Effect High Spending Little Effect Middle Level High Effect
Sales
Sales Advertising Expenditures
Range A Range B Range C
Advertising Expenditures
Additional Factors in Budget Setting
Figure 7-11 Figure 7-12
Allocating the Budget
Top-down budgeting Bottom-up budgeting
Top-Down Budgeting
Top Management Sets the Spending Limit
The Promotion Budget Is Set to Stay Within the Spending Limit
Top-Down Budgeting
Arbitrary allocation The affordable method Percentage of Sales Competitive parity Return on investment (ROI)
The Affordable Method
It is common among small firms and certain non-marketing-driven large firms. Logic: We cant be hurt with this method. Weakness: often does not allocate enough money.
Percentage of Sales
Sales dollar or unit product cost Future or past Pros
Financially safe Reasonable limits Stable
Percentage of Sales
Cons
Reverse the cause-and-effect relationship between advertising and sales. Stability Misallocation Difficult to employ for new product introductions. Sales Advertising budget
Competitive Parity Method
Pros
Take advantage of the collective wisdom of the industry Prisoners dilemma
Cons
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
Bottom-Up Budgeting
Objective and Task Method Payout Planning Quantitative Models
Objective and Task Method
Three steps:
Defining the communications objectives to be accomplished Determining the specific strategies and tasks need to attain them Estimating the cost associated with performance of these strategies and tasks
Objective and Task Method
Establish Objectives Establish Objectives (create awareness of new product among (create awareness of new product among 20 percent of target market) 20 percent of target market) Determine Specific Tasks Determine Specific Tasks (advertise on market area television and (advertise on market area television and radio and local newspapers) radio and local newspapers) Estimate Costs Associated with Tasks Estimate Costs Associated with Tasks (television, $575,000; radio, $225,000; (television, $575,000; radio, $225,000; newspaper, $175,000) newspaper, $175,000)
Payout Planning
To determine how much to spend, marketers develop a payout plan that determines the investment value of the advertising and promotion appropriation
Example of a three-year payout plan ($ millions)
Year 1 15.0 7.5 15.0 (7.5) (7.5) Year 2 35.50 17.75 10.50 7.25 (0.25) Year 3 60.75 30.38 8.50 21.88 21.63
Product sales Profit contribution (@$.50 per case) Advertising/promotions Profit (loss) Cumulative profit (loss)