Chapter Six
Marcom Objective
Setting and Budgeting
 2007 Thomson South-Western
Chapter Six Objectives
• Understand the process of marcom objective
setting and the requirements for good
objectives.
• Describe the hierarchy-of-effects model and its
relevance for setting marcom objectives.
• Understand the role of sales as a marcom
objective and the logic of vaguely right versus
precisely wrong thinking.
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Chapter Six Objectives
• Understand the nature and importance of
marcom budgeting.
• Explain the relation between a brand’s
share of market (SOM) and its share of
voice (SOV).
• Explain the various rules of thumb, or
heuristics, that guide practical budgeting.
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Setting Marcom Objectives
Goals that the various marcom elements
aspire to individually or collectively
achieve during a scope of time such as
a business quarter or fiscal year.
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Marcom Objectives
• Facilitate the successful introduction of
new brands.
• Build sales of existing brands by
increasing the frequency of use, the
variety of use, or the quantity purchased.
• Inform the trade and consumers about
brand improvements.
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Marcom Objectives
•
•
•
•
Create brand awareness
Enhance a brand’s image
Generate sales leads
Persuade the trade to handle the
manufacturer’s brands
• Stimulate point-of-purchase sales
• Increase customer loyalty
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Marcom Objectives
• Improve corporate relations with special
interest groups
• Offset bad publicity about a brand or
generate good publicity
• Counter competitors’ communication
efforts
• Provide customers with reasons for buying
immediately instead of delaying a
purchase
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Setting Marcom Objectives
• Expression of management consensus
• Guides the budgeting, message, and
media aspects of advertising strategy
• Provide standards against which results
can be measured
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Advancing Consumers From
Unawareness to Awareness
• Advertising (mass media or otherwise) is
generally the most effective and efficient
method for quickly creating brand
awareness.
• Creating an Expectation
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Hierarchy of Effects
•
•
•
Forming Beliefs and Attitudes
Reinforcing Beliefs and Attitudes
Accomplishing Brand Loyalty
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Requirements for Setting Suitable
Marcom Objectives
• Include a precise statement of who, what,
and when
• Be quantitative and measurable
• Specify the amount of change
• Be realistic
• Be internally consistent
• Be clear and put it in writing
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Should Marcom Objectives Be Stated
in Terms of Sales?
Presales Objectives:
communication
objectives that attempt
to increase the target
audience’s brand
awareness, enhance
their attitudes toward
the brand, shift their
preferences from the
competitors’ brand and
so on.
Sales Objectives:
means the marcom
objective literally is to
increase sales by a
particular amount.
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Should Marcom Objectives Be Stated
in Terms of Sales?
Traditional View (Thesis)
• Sales volume is the consequence of
a host of factors in addition to
marcom
• Effect of marcom efforts is delayed
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Sales Volume as
a Marcom Objective
Heretical View (Antithesis)
• Marcom’s purpose is to generate
sales
• Sales measures are “vaguely right”
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The Logic of Vaguely Right Vs.
Precisely Wrong Thinking
Vaguely
Measurement
Accuracy
Issue
Right
Versus
Precisely
Choice of
Objective
Issue
Wrong
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An Accountability Perspective
(Synthesis)
• Chief executives and financial officers are
demanding greater accountability from
marcom programs.
• The measurement of effects of a program
should not stop short of measuring the
effect on sales.
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Marcom Budgeting in Theory
• The best(optimal) level of any investment is the
level that maximizes profits(MR=MC)
• Advertisers should continue to increase their
advertising investment as long as it is profitable
to do so
MC
MR
= (Change in total cost) = (Change in total Revenue)
(Change in quantity)
(Change in quantity)
= TC/Q
= TR/Q
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Sales-to-Advertising Response
Function
The relationship between money invested in
advertising and the response, or output, of
that investment in terms of revenue
generated.
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Practical Budgeting Methods
• Percent-of-Sales Budgeting
• Objective-and-Task Method
• Competitive Parity Method
(match competitors’ method)
• Affordability Method
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Percentage-of-Sales Budgeting
• A company sets a brand’s advertising
budget by simply establishing the
budget as a fixed percentage of past or
anticipated sales volume
• Criticized as being illogical
Sales=f(Advertising) (o)
Advertising=f(Sales) (x)
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Objective-and-Task Method
• The most sensible and defendable
advertising budgeting method
• Specify what role they expect advertising
to play for a brand and then set the
budget accordingly
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The Competitive Parity Method
• Sets the ad budget by basically following
what competitors are doing
• SOM- the ratio of one brand’s revenue to
total category revenue
• SOV-the ratio of a brand’s advertising
expenditures to total category advertising
expenditures
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Encoding Variability Hypothesis
• Contends that people’s memory for
information is enhanced when multiple
pathways, or connections are created
between the object to be remembered and
the information about the object that is to
be remembered.
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Affordability Method
• Only the funds that remain after
budgeting for everything else are spent
on advertising
• Only the most unsophisticated and
impoverished firms
• However, affordability and competitive
considerations influence the budgeting
decisions of all companies
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