7
Establishing Objectives
and Budgeting for the
Promotional Program
McGraw-Hill/Irwin
Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed
Chapter Focus
• Types of objectives
• Purpose of objectives
• Role of objectives in:
• development
• implementation and
• evaluation of IMC program
7-2
Objectives
• Written in the marketing plan
• What is to be accomplished by the
marketing program
7-3
Value of Objectives
Measurement/Evaluation
Planning & Decision Making
Communications
Benchmark for
success / failure
Budgeting;
creative / media
Among
agencies
Specific Objectives
7-4
Characteristics of Objectives
Specific
measurable
outcomes
Quantifiable
Timeframe
Well-defined
target audience
Realistic &
attainable
EXAMPLE: Increase sales of Prada handbags by 5% in NYC among current
Prada customers by December 2012
7-5
IMC Objectives
• Statements of what various aspects of
IMC program will accomplish
• Consumer promotion will increase trial for
new product X
• Advertising will increase awareness for
new product X
• Trade promotion will get distribution for
new product X
7-6
Sales vs. Communications Objectives
Sales-Oriented
Objectives
Communications
Objectives
• Primary goal is
increased sales or
market share
• Spending should
produce quantifiable
results
• Investment of firm’s
resources requires
economic justification
(ROI)
• Goal is creating
favorable
predispositions
• Increased brand
knowledge, interest,
favorable attitudes
and image
• Immediate response
not expected
7-7
Problems with Sales Objectives
Won’t work in isolation
Ad effects take time
Need both types
(carryover effect)
9
months
Hard to determine precise
relationship between advertising
and sales
Not only
factor
Offers little guidance to those
planning and developing the
promotional program
Need both
types
7-8
Factors Influencing Sales
Competition
Technology
The
economy
Advertising
& promotion
Product
quality
Distribution
Price
It’s not just advertising that affects sales!
7-9
Sales Objectives Most Appropriate
Sales promotion tools
generate
short term increase
in sales
7-10
Sales Objectives Most Appropriate
Direct response advertising evaluates effectiveness
on the basis of sales
7-11
Communications Objectives
• Primary role of IMC programs is to
communicate
• Planning should be based on
communications objectives
7-12
Communications Tasks
Conative
(behavioral)
Ads stimulate or
direct desires
Purchase
Purchase intentions
Affective (feeling)
Ads change attitudes
and feelings
Favorable attitudes
and image
Cognitive (thinking)
Ads provide
information and facts
Brand knowledge
and interest
Brand awareness
7-13
Communications Objectives Example
Ad creates
favorable impressions
about the company
7-14
Communications Effects Pyramid
Behavioral
5% Use
% of prospective
customers decline
20% Trial
Feeling
25% Preference
40% Liking
Thinking
70% Knowledge/comprehension
90% Awareness
Can have different objectives for different target audiences (e.g. Caribou Coffee)
7-15
Problems With Communications Objectives
• Translating sales goals into
communications objectives is difficult
• What is adequate level of awareness,
knowledge, liking, preference, or
conviction?
• No formulas or guidelines
SO … you may want a 20% increase in
sales but do you need a 60% or 90%
increase in awareness?
7-16
Benchmark Measures
• To set objectives, need to know
consumers’ benchmark measures
• Where they are now
• Done thru research
• Provides basis for determining
communications task
• e.g. high awareness but negative perceptions
7-17
Zero-based Communication Planning
• Determine what tasks need to be done
• Which marketing communications
functions should be used?
• advertising? publicity?
7-18
Utilizing a Variety of Media
Two tasks: provide funding and draw visitors to site
7-19
Balancing Objectives and Budgets
What we’re
willing and
able to spend
What we need
to achieve
with our
objectives
Objectives must be set with budget in mind
7-20
Establishing the Budget
How much
should we spend
on advertising
and promotion?
To whom should
we allocate the
monies?
New budget
formulated
every year
7-21
Budget Decisions in a Down Economy
• In a recession, advertising budgets are the first to
be cut.
• But, firms that increased advertising during
recession, experienced higher sales both during
7-22
and after the recession.
Top-Down vs. Build-Up Budgeting
Budgeting approaches
vary
according to
size and sophistication
of the company
7-23
Top-Down Budgeting Methods
“all you can afford”
Affordable
Method
Return on
Investment
Top
Management
Media rated on measurability
Competitive
Parity
Same percentage competitor allocates
Arbitrary
Allocation
“way it’s always been done”
Percentage
of Sales
Most common in large firms
7-24
Build Up Approach
Objective and Task Method:
Define objectives
Determine tasks required
Estimate required expenditures
Monitor performance
Reevaluate objectives
7-25
Allocating the Budget
• IMC Elements
• Away from traditional media to Internet and
Sales Promotion
• Client /Agency Policies
• Preferences for certain media
• Market Size
• New York City vs. Birmingham
• Market Potential
• Higher potential – more funding
7-26
Share of Market / Voice
Brand
A
75%
Brand
B
25%
Share of Market
($ Sales)
Brand Brand
A
B
50% 50%
Share of Voice
($ Advertising)
7-27
High
Low
Competitor’s
Share of Voice
($ Advertising)
Market Share Goals
Decrease–find a
defensible niche
Increase to defend
Attack with large
SOV premium
Maintain modest
spending premium
Low
Your Share of Market
($ Sales)
High
7-28
Economies of Scale
• Advertising works harder for well-established
brands, so lower expenditure is required
• Larger companies:
• Get better advertising rates
• Advertise several products jointly
• Get better space positions in publication
• Most recent studies dispute these findings
7-29