ESTABLISHING OBJECTIVES AND BUDGETING FOR THE PROMOTIONAL PROGRAM

ESTABLISHING OBJECTIVES AND BUDGETING FOR THE PROMOTIONAL PROGRAM Chapter 7

LEARNING OBJECTIVES � To recognize the importance and value of setting objectives for advertising and promotion. � To know the differences between sales and communication objectives. � To understand the process of budgeting for IMC. � To know various methods of budget setting.

THE VALUE OF OBJECTIVES Important reasons for setting advertising and promotional objectives: � Communication � Planning and decision making � Measurement and evaluation of results

CHARACTERISTICS OF OBJECTIVES � Specific � Measurable � Quantifiable frame) � Realistic � attainable (delineates target market, time

MEASURABLE RESULTS

COMMUNICATION � Specific objectives serves as communication devices and facilitate the coordination of the various groups working on the campaign both on the agency and the client side. � Problems can be avoided when they have a set of written and approved objectives to guide their decisions.

PLANNING AND DECISION MAKING � Serve as guide for decision making. Advertising and promotion planners/managers are often faced by number of options in the decision making process. � Choices on these options should be made on the basis of how well a strategy or tactic matches the promotional objectives.

MEASUREMENT AND EVALUATION OF RESULTS � Objectives provide a benchmark or standard against which success or failure of the campaign can be measured. � Objectives make it easier for management to measure what have been accomplish by the campaign.

DETERMINING PROMOTIONAL OBJECTIVES The determination of objectives should occurs after: � a thorough situation analysis has been conducted. � marketing and promotional problems have been identified. Review all the information, see how IMC fits into the marketing program and what is hoped to be achieved through promotional elements. Ø SET OBJECTIVES!!!

SITUATION ANALYSIS Provides information on: � The market segments the firms wants to target and the target audiences (e. g. , demographics, psychographics) � The product and its main features, advantages, benefits, uses, and applications. � The company’s and competitors’ brands (sales and market share in various segments, competitive strategies) � Ideas on how the brand should be positioned and specific behavioral responses sought (trial, repurchase, brand switching, and increased usage)

MARKETING VS. COMMUNICATION OBJECTIVES � Marketing objectives – are statements of what is to be accomplished by the overall marketing program within a given period. � generally stated in the firms marketing plan.

MARKETING VS. COMMUNICATION OBJECTIVES � IMC objectives – are statements of what various aspects of the IMC program will accomplish. � They should be based on the particular communications tasks that are required to deliver the appropriate messages to the target audiences.

MARKETING VS. COMMUNICATION OBJECTIVES Communications Objectives Marketing 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 Vs. • 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

COMMUNICATION OBJECTIVES � The primary role of IMC program is to communicate and hence its planning must be based on communication objectives. � Advertising and promotional efforts are designed to achieve such communications as brand knowledge and interest, favorable attitudes and image, and purchase intentions.

FROM AWARENESS TO ACTION Conative Realm of motives. Ads stimulate or direct desires Purchase Conviction Affective Realm of emotions. Ads change attitudes and feelings Preference Liking Cognitive Realm of thoughts. Ads provide information and facts Knowledge Awareness

CREATING AN IMAGE • This ad for Philips is designed to inform consumers of the company’s focus on technology that makes sense and is simple. • While there is no call for immediate action, the ad creates favorable impressions about the company by creating a distinct image. • Consumers will consider this image when they enter the market for products in this category.

COMMUNICATION EFFECTS PYRAMID 20% Trial 25% Preference 40% Liking 70% Knowledge/Comprehension Co gn iti v e Af fe ct ive Co na tiv e 5% Use 90% Awareness

THE DAGMAR APPROACH Define Advertising Goals for Measuring Advertising Results Awareness Comprehension Conviction Action

THE DAGMAR APPROACH Colley proposed that the communications task be based on a hierarchical model of the communications process, with four stages: • Awareness… making the consumer aware of the existence of the brand or company. • Comprehension… developing an understanding of what the product is and what it will do for the consumer • Conviction… developing a mental disposition in the consumer to buy the product. • Action… getting the consumer to purchase the product. � Many promotional planners use this model as a basis for setting objectives and assessing the effectiveness of promotional campaigns.

DAGMAR Defining advertising goals for measured advertising results Good objectives: � Concrete and measureable � Target audience � Benchmark and degree of change sought � Specified time period

ESTABLISHING THE BUDGET � Budget may vary from few thousands to more than a billion. Increase Spending If the cost is less than the marginal return Hold Spending If the cost is equal to the incremental return Decrease Spending If the cost is more than the incremental return

BUDGET ADJUSTMENT If advertising expenditures are greater than the revenues generated by the ads, the budget should be scaled down. If revenues are higher, a larger budget may be in order. � Although this budgeting method seems logical, certain weaknesses limit its usefulness. These weaknesses include the assumptions that: � Sales are a direct result of advertising and promotional expenditures and can be measured � Advertising and promotion are solely responsible for sales � � The difficulty of determining the effects of the promotional effort on sales and revenues also limits applicability.

MARGINAL ANALYSIS Sales are a direct measure of advertising and promotions efforts Sales are determined solely by advertising and promotion

MARGINAL ANALYSIS Sales are a direct result of advertising and promotional expenditures and nothing else. Many marketers feel that it is very difficult to measure the influence of advertising on sales which limits the value of marginal analysis. Advertising and promotion are rarely the only factors that are responsible for sales as other elements of the marketing mix including product/service factors, price, and distribution all contribute to the success of the company. � Sales are the principal objective of advertising and promotion. Marginal analysis assumes that sales are the principal objective of advertising and promotion. As discussed in this chapter, marketers can have a variety of other objectives for their advertising and promotion programs. �

SALES RESPONSE MODELS Advertising Expenditures Initial Spending Little Effect Middle Level High Effect High Spending Little Effect B. S-Shaped Response Function Incremental Sales A. Concave. Downward Response Function Range A Range B Range C Advertising Expenditures

SALES RESPONSE MODELS � A lot of research and discussion has gone into trying to determine the true relationship between advertising and sales and the shape of the response curve. Most advertisers subscribe to one of two models of the advertising/sales response function: � The concave-downward function, which assumes that the effects of advertising spending follow the microeconomic law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. The logic is that those with the greatest potential to buy will likely act on the first (or earliest) exposures, while those less likely to buy are not likely to change as a result of the advertising. � The S-shaped response function, which assumes that initial outlays of the advertising budget have little impact (range A). However, after a certain budget level has been reached (range B) advertising and promotional efforts begin to have an effect, and additional increments of expenditures result in increased sales. When advertising expenditures enter range C, however, incremental spending will have little additional impact on sales.

FACTORS INFLUENCING ADVERTISING BUDGET Hidden product qualities Product life cycle Product durability Differentiation Factors influencing Product price Purchase frequency

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