ADVERTISING:
Budgeting to Achieve
Specific Objectives
General Budget Strategies
1. Top Down
2. Sales Goals
3. Return on Investment
4. Bottom up (Goal Based)
1. Top-Down Budgeting
Top Management Sets the Spending Limit
The Promotion Budget Is Set to Stay Within
the Spending Limit
2. Sales Objectives Budget
Product Quality
Promotion
The Economy
Competition
SALES
Price Policy
Distribution
3. Return on Investment Budget
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.
Marginal Analysis: An Example
Gross Margin
Sales
Ad. Expenditure
$
Profit
Point A
Advertising / Promotion in $
The Complication:
Two Advertising Response Functions
A. Concave-Downward
B. S-Shaped Response
Response Curve
High Spending
Range B
Little Effect
Middle Level
Range A
High Effect
Advertising Expenditures
Initial Spending
Sales
Little Effect
Sales
Curve
Range C
Advertising Expenditures
Concave or S-shaped?
Concave or S-shaped?
4. Bottom-Up Budget
Total Budget Is Approved by
Top Management
Cost of Activities are Budgeted
Activities to Achieve Objectives
Are Planned
Promotional Objectives Are Set
Goal Based Budgeting:
The DAGMAR Approach
Define
Advertising
Goals for
Measuring
Advertising
Results
Communications Effects Pyramid
5% Use
20% Trial
25% Preference
40% Liking
70% Knowledge
90% Awareness
Alternative response strategies
What would you budget for?
Do
Learn
Feel
Do
Learn
Feel
Setting Objectives
• Specific Communications Objectives
• Concrete Measurable Tasks
• Well-Defined Target Audience
• Existing Benchmark Measure
• Degree of Change Sought
• Specific Time Period
Video
http://www.youtube.com/watch?v=XVNV5SpLjKk
Activity
• Evaluate the proposed
campaign
Suggested approach
• 1. Determine involvement level
• Which involvement hierarchy?
• 2. Choose communication objectives
(DAGMAR)
• What should marketing communication DO?
LATER STEPS:
• 3. Select IMC channels
• Which elements will allow you to achieve those?
• 4. Estimate prices
• How much will it cost to achieve those goals?
Quote of the Day
American advertisers rely on essentially
illogical approaches to determine their
advertising budgets.
• Michael Schudson (professor)