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Establishing Objectivesand Budgeting for the Promotional Program by belch & belch
Citation preview
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Establishing Objectivesand Budgeting for the Promotional Program
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McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Starbucks
• Core competencies– Third Place
– Neighborhood coffee shop
• Failed Ventures– Joe magazine
– Café Starbucks
– Circadia
• Losing focus– Hear Music
– Akeelah and the Bee
• Closing down stores
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Value of Objectives
Communications
Planning & Decision Making
Measurement& Evaluation
Specific Objectives
Characteristics of Objectives
Specific
Measurable
Quantifiable
Attainable
Realistic
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Measurable Results
Marketing vs. 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
Communications Objectives
• 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
Vs.
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Sales Objectives
Increased Sales
Increased Market Share
Brand Extensions
Factors Influencing Sales
CompetitionTechnology
The economy
Product quality
Price
Distribution
Advertising & promotion
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Where Sales Objectives are Appropriate
Where Sales Objectives are Appropriate
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Test Your Knowledge
Which of the following statements about communications objectives is true?
A) Sales goals are easily translated into communications objectives.
B) It can be difficult to determine the relationshipbetween communications objectives and sales performance.
C) Communications objectives cannot serveas operational guidelines for planning,executing, and evaluating promotionalprograms.
D) Marketing managers often do not recognize the value of setting communications objectives.
IMC perspective Geico
• Increases in Advertising– Sell via internet & direct sales– In 2005, increased advertising expenditures 75%
to $403 million– In 2006, spent twice as much as nearest
competitor– Also spent in more places
• Increases in Sales– 5.8% new customer acquisition (2.1% is
industry average)– 91% ad message recognition– Only brand to have double digit market share
growth 13.1%
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From Awareness to Action
AffectiveRealm of emotions.Ads change attitudes and feelings
CognitiveRealm of thoughts.Ads provide information and facts
ConativeRealm of motives.Ads stimulate or direct desires
Teaser campaigns
“Image” copyStatus, glamour appeals
AnnouncementsDescriptive copyClassified ads, slogans, Jingles, skywriting
Competitive adsArgumentative copy
Point of purchaseRetail store ads, deals“Last-chance” offersPrice appeals
Testimonials
Purchase
Conviction
Preference
Liking
Knowledge
Awareness
Creating an Image
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Communications Effects Pyramid
20% Trial
40% Liking
90% Awareness
5% Use
70% Knowledge/Comprehension
25% Preference
The DAGMAR Approach
Define
Advertising
Goals for
Measuring
Advertising
Results Action
Awareness
Conviction
Comprehension
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Characteristics of Objectives
Concrete, measurable tasks
Benchmarkmeasures
Well-definedaudience
Specifiedtime period
Pros and Cons of DAGMAR
Cons
Inhibition of creativity
Relies heavily on the response hierarchy
May not increase sales
Practicality and cost
Pros
Focus on communications objectives
Measurement of stages
Better understanding of goals and objectives
Less subjective
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Advertising-Based View of Communications
Acting on Consumers
Ads
Utilizing a Variety of Media
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San Diego Zoo Protect Endangered Species
*Click outside of the video screen to advance to the next slide
Establishing & Allocating the Promotional Budget
SponsorshipUnderwriting
PublicRelations
SalesPromotions
Internet
Group Sales
DirectMarketing
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Test Your Knowledge
In marginal analysis, all of the following should be considered except:
A) Sales
B) Fixed costs of advertising
C) Advertising expenditures and other variable costs
D) Gross margin
E) Net worth
Establishing a Budget
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Budget Adjustments
IncreaseSpending
If the cost is less than the marginal return
HoldSpending
If the cost is equal to the incremental return
DecreaseSpending
If the cost is more than the incremental return
Assumptions for Marginal Analysis
Sales are determined
solely by advertising
and promotion
Sales are a direct measure of advertising
and promotions efforts
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Sales Response Models
Incre
menta
l Sale
s
Advertising Expenditures
A. Concave-Downward Response Curve
Incre
menta
l Sale
s
Advertising Expenditures
Range A Range B Range C
B. S-Shaped Response Function
Hig
h S
pendin
gLittle E
ffect
Initia
l Spendin
gLittle E
ffect
Mid
dle
Level
Hig
h E
ffect
Purchasefrequency
Factors Influencing Advertising Budgets
Product life cycle
Productdurability
Differentiation
Productprice
Hidden productqualities
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Top-Down vs. Bottom-Up Budgeting
Top-Down Budgeting Methods
TopManagement
AffordableMethod
CompetitiveParity
Percentage of Sales
Return onInvestment
ArbitraryAllocation
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Test Your Knowledge
Well known brand name products do not receive incremental advantages from increased dollar expenditures on advertising. Once the ad hits the market, subsequent budget increases result in little or no incremental gains. This is best explained by:
A) Arbitrary allocation
B) The objective and task method
C) Competitive parity
D) An S-shaped response
E) Rapidly diminishing returns
Object and Task Method
Isolate objectives
Reevaluate objectives
Determine tasks required
Estimate required expenditures
Monitor
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Payout Planning
Quantitative Models
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Allocating to IMC Elements
Share of Voice Effect
Decrease–find a defensible niche
Increase to defend
Attack with large SOV premium
Maintain modest spending premium
Competitor’s
Sh
are o
f V
oic
e
Hig
hLow
HighLow
Your Share of Market
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Economies of Scale
There is no evidence to support any of these!
Proposition ILarger firms can support their brands with lower relativeadvertising costs than smaller firms.
Proposition IIThe leading brand in a product group enjoys lower advertising costs per sales dollar than do other brands.
Proposition IIIThere is a static relationship between advertising costs per dollar of sales and the size of the advertiser.
Organizational Characteristics
• Factors that influence advertising and promotion budgets
–The organization’s structure
–Power and politics
–The use of expert opinions
–Characteristics of the decision maker
–Approval and negotiation channels
–Pressure on senior managers to arrive at the optimal budget