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University of Washington EMBA Program
Marketing Management
“Badvertising & Budgeting”(Promotions!)
Instructor: Elizabeth Stearns
United States of America 9,196,277
J apan 4,352,182
United Kingdom 1,453,980
France 1,450,341
China 1,024,874
Mexico 520,723
India 473,768
Korea, Republic of 428,682
Australia 416,718
Russian Federation 182,238
Indonesia 156,417
Norway 155,560
Poland 154,154
Venezuela 104,728
US $ Ad Spending 2002 = $96.1 billion Country GDP ($ millions)
“Perspective”
US $Ad Spending is ~ 1% of US GDP
US $ Ad Spending 2002 = $96.1 billion Country GDP ($ millions)
“Perspective”
Malaysia 81,879
Iraq 75,462
Congo 42,303
Kuwait 34,300
Guatemala 21,795
Uzbekistan 17,434
Sri Lanka 16,366
Kenya 11,054
Korea, Dem. People's Rep. 10,423
Trinidad and Tobago 5,957
Zimbabwe 4,960
Afghanistan 4,941
J amaica 3,985
Papua New Guinea 3,926
Haiti 3,504
Mozambique 2,627
Nicaragua 2,306
Saint Lucia 721
Grenada 294
Dominica 265
US $Ad Spending exceeds GDP of many countries.On this limited list, US $Ad Spending is greater than the total GDP of 15 countries!
Marketing Considerations
• Marketing Objectives (share, profit, growth…)• Product or Service
Availability(Intro/Mature/Market Leader)• BDI/CDI Index Review• Marketing Strategy(targeting and positioning)• Company advertising objectives and spending
trends
Brand Development Index (BDI)(Media Usage)
Market (1) % U.S. Population
(2) % Brand Sales
BDI (2 ÷ 1) * 100
A 10 11 110
B 15 15 100
C 20 18 90
D 25 30 120
E 30 26 87
Total 100 100 100 (Average)
Markets “C” & “E need support, “A”, “B”, and “D” seem OK
BDI Compared to CDI% Sales Index
(% Sales / % Population)
Index (BDI/CDI)
Market % Population
Category Brand Category Brand
A 10 12 11 120 110 92
B 15 15 15 100 100 100
C 20 16 18 80 90 113
D 25 30 30 120 120 100
E 30 27 26 90 87 96
Total 100 100 100
Consider possible different conclusions: Market “D” is only average,“C” & “E” probably don’t need support, “A” probably does.
Marketing Considerations
• Customer/target awareness/attitudes/usage
• Customer media habits
• Advertising Quality (Creative)
• Category size/competitive spending trends
• Seasonality/Regionality
• Other communications programs
Advertising Functions
• Informing
• Persuading
• Reminding
• Adding Value
• Assisting Other Company Efforts
Dryden Press, Inc
“Language”
• Introduce
• Create awareness (inform)
• Maintain/change/enhance attitudes
• Reinforce behavior
• Convince
Awareness
An Effort to Establish New Linkages in Consumer’s Minds
Attitude Change Strategies
1. To influence consumers’ brand-related beliefs
2. To influence existing evaluations
- getting consumers to reassess
3. To get consumers to add an entirely new outcome into existing beliefs
Overview of the Advertising Process
AdvertisingObjectives
AdvertisingBudget
Message(Creative)Strategy
MediaStrategy
MarketingStrategy
Harcourt, Inc
Situation Analysis
Marketing Objectives
Marketing Strategy
Action Plan
Situation AnalysisMarketing StrategyPromotional Strategy
Advertising objectives•Sales•Communications
Advertising Strategy•Creative Strategy•Media plan•Budget
MARKETING PLAN ADVERTISING PLAN
Elements of Advertising Plan
McGraw-Hill, Inc
Absolut’s Classic Advertising
What Makes Effective Advertising?
Sound
Strategy
Consumer’s
View Persuasive
Doesn’t
Overwhelm
Deliver on
Promises
Break
Clutter
Effective
Advertising
Energizer Batteries
Bud Light
• Spuds MacKenzie campaign
• Budfrogs
• Louie and Frank
• Consumers go to great lengths to get a Bud Light
Little Caesar’s (Example of Bad Advertising)
Advertising Strategy
An advertising message that
communicates the brand’s primary
benefits or how it can solve a
consumer’s problem
Advertising Plan
Provides the framework for systematic
execution of advertising strategies
Creating an Advertising Strategy/Plan
1. Specify the key fact.
2. State the marketing problem.
3. State the communications objective.
4. Implement the creative message strategy.
5. Establish mandatory corporate / divisional
requirements.
Step 1…
Key Fact:
A single-minded statement from the
customer’s points of view that identifies
why consumers are or are not
purchasing the brand
Step 2…
State the problem from
the marketer’s point of view
Step 3…
Communications Objective:
What effect the advertising is intended
to have on the target market and how it
should persuade consumers
Step 4…
Implement the creative message strategy:• Define the target market• Identify the primary competition• Choose the promise• Offer reasons why
Step 5…
Establish mandatory corporate/divisional requirements
• Relatively technical and uncreative• It reminds the advertiser to include the corporate
slogan or logo, any regulatory requirements and so on
Alternative Creative Strategies
• Generic
• Preemptive
• Unique Selling Proposition
• Brand Image
• Positioning
• Resonance
• Emotional
Unique Selling Proposition Example
• M & M candies– Melts in your mouth, not in your hands
Brand Image Example
Marlboro Man
Creating a Brand Image for Diet Coke
Brand Image
Alternative Creative Strategies: Positioning
• Product characteristics - Miller’s cold filtering• Price-quality relationship - Sears as family oriented• Use or application - IBM PCs for desktop
publishing• Product user - Busch as the working man’s beer • Product category - Domestic versus Foreign wines• Cultural symbols - Red, white, and blue• Competitor - Avis positioning as # 2
Positioning
Pork positions itself
as the healthy
choice
Bernbach’s Executional Emphasis
Lemon
Small
Ugly
Rear-engine powered
Foreign produced
Situation Analysis
Marketing Objectives
Marketing Strategy
Action Plan
Situation AnalysisMarketing StrategyPromotional Strategy
Media Objectives
Media Strategy
Media Vehicles
Media Schedule
Advertising objectives•Sales•Communications
Advertising Strategy•Creative Strategy•Media plan•Budget
MARKETING PLAN ADVERTISING PLAN MEDIA PLAN
Elements of Advertising Plan/Media
McGraw-Hill, Inc
Media is the throttle
• Media Objectives
• Media Strategies(Positioning/Targeting)
• Media Vehicles
• Planning (pulsing/continuity/flighting)
• Budgeting
Basic Concepts
• Reach and Frequency
• GRP’s/Impressions
• Planning & Buying
• Media Mix
• Efficiency and Effectiveness
• Measurement
• Testing
How do I craft my Media Objectives?
• Consider where you are going with your business objectives/Hierarchy of Effects/Communications Objectives, e.g.’s:
• Awareness = Reach• Reinforce = Frequency• Get people to buy more = Frequency• Attitude adjustments = Reach and Frequency• There are always elements of both, and minimums
(threshold levels) to attain effective levels.
Media VehiclesReach or Frequency?
• Reach:– Network Television– Cable Television – only a few CNN, TBS,
ESPN– National Radio– Horizontal Magazines – large circulation,
varied audiences (TV Guide, Readers Digest, Newsweek, Time, People)
– National Newspapers (USA Today, WSJ)
Media VehiclesReach or Frequency?
• Frequency– Spot Television
– Cable Television (used to fill in a Network Buy – usually more upscale)
– Spot Radio
– Vertical Magazines – select audiences, smaller circulation, run more frequently in them (Scientific American, Runners World, Tennis, Skiing, Inc)
– Local Newspapers
– Outdoor (passing by constantly – same road, same people)
Media VehiclesReach or Frequency?
• All vehicles are both!! An advertiser can build reach with a frequency vehicle and can increase frequency with a reach vehicle. However….
• Reach vehicles are typically more expensive in terms of out of pocket. (they reach more people).
• Frequency vehicles, while less expensive (even if you run a lot!) will never deliver all the target required! (inappropriate target/region)
• Therefore it is better to use media appropriate to the task - efficiency. And to fill in with other.
Media VehiclesReach or Frequency?
• Internet: that depends with whom you speak!• It is the ultimate Direct Marketing medium,
and as such evaluated differently.• Banner advertising on the internet is more a reach
vehicle. But its cost is still relatively low, and frequency is possible
• Email on the internet is more DM, and as sites are charging more for better targeting, creates more value for one-to-one capability
Media Planning
Involves the process of designing a
scheduling plan that shows how
advertising time and space will
contribute to the achievement of
marketing objectives
4. Buying media
The Media-Planning Process
1. Selecting the target audience
2. Specifying media objectives
3. Selecting media categories and
vehicles
Overview for the Media Planning Process
Advertising Strategy
Advertising
ObjectivesAdvertising
BudgetMessageStrategy
MediaStrategy
Media Strategy
• Audience Selection• Objective Specification• Media and Vehicle• Media Buying
Marketing Strategy
Alternative Media Plans*
Plan A: Plan B: Plan C: Plan D: TV (100%) Radio (33%) Magazines (50%) Outdoor
(33%)
Reach 69% 79% 91% 87%
(1+exposures)Effective Reach 29% 48% 53%
61%(3+exposures)
Frequency 2.8 5.5 3.2 6.7
GRP’s 193 435 291 583
ERP’s 81 264 170 409
Cost per GRP $62,176 $27,586 $41,237 $20,583Cost per ERP $148,148 $45,455 $70,588
$29,340
*Based on $12 Million annual budget and a 4-week media analysis
Continuity
How advertising is allocated during
the course of an advertising
campaign : how should the media
budget be distributed?
Continuity
• Continuous schedule
• Pulsing
• Flighting
• Shelf-Space model of advertising
Continuous, Pulsing, and Flighting Schedules
0
200
400
600
J F M A M J J A S O N D
Continuous Pulsing Flighting
Advertising Schedules
Ad
$ (
in t
ho
usa
nd
s)
(months)
Cost Considerations
The cost of reaching 1,000 members of
the target audience, excluding those
people who fall outside the target market
Cost considerations
Cost per Thousand (CPM)
Target Market (TM)
CPM= Cost of ad # of contacts (expressed in thousands)
CPM-TM= Cost of ad # of TM contacts
(expressed in thousands)
Cost Considerations
• Measures of cost efficiency, not of effectiveness
• Lack of comparability across media
• Misused unless vehicles within a particular medium are compared on the same basis
Budgeting
Advertising Budgeting in Theory• The best(optimal) level of any investment is the level that
maximizes profits(MR=MC)• Above a minimum threshold, the cost of advertising is less
than the additional revenues generated by it (MR>MC)• As you spend more on advertising, however, at some point
you reach saturation. If you spend any more, the revenues generated will be insufficient to justify the costs (MR<MC)
MC
= (Change in total cost) (Change in quantity)
= TC/Q
MR
= (Change in total Revenue) (Change in quantity)
= TR/Q
Budget Approaches
• Share of Voice(a.k.a Share of Advertising)
• Advertising to Sales Ratio (A/S)
• Share of Advertising to Share of Voice (SOA/SOM Index)
• Task and Objective
• Reality
Advertising to Sales Ratio (A/S)
• Criticized as illogical
– Assumes sales determine advertising expenditures; in reality, advertising expenditures determine sales
– Results in lower advertising spending during hard times, when increased advertising may prevent sales erosion
• A/S ratios less than 5% for most industries; vary considerably across firms within an industry
Advertising to Sales Ratio (A/S)• Examples of industries with high A/S ratios:
– Dolls & stuffed toys 14.9%– Watches & clocks 14.4%– Sugar & confectionery products 14.2%– Cleaners & polish preparations 13.1%– Games, toys, & children vehicles 12.8%– Distilled & blended liquor 11.9%– Books & publishing 11.7%– Wine & brandy 11.2%– Cutlery, hand tools, & general hardware 11.2%– Food products 10.5%– Agricultural chemicals 10.3%
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 20 $6 21 $5 18
Saucony $6 15 $5 12 $8 14
Nike $10 22 $13 24 $14 25
New Balance $6 20 $7 21 $9 23
Reebok $7 8 $9 10 $10 12
All Other $6 15 $6 12 $4 8
Totals $40 100 $46 100 $50 100
2000 2001 2002
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 12.5 20 $6 13 21 $5 10 18
Saucony $6 15 15 $5 11 12 $8 16 14
Nike $10 25 22 $13 28 24 $14 28 25
New Balance $6 15 20 $7 15 21 $9 18 23
Reebok $7 17.5 8 $9 20 10 $10 20 12
All Other $6 15 15 $6 13 12 $4 8 8
Totals $40 100 100 $46 100 100 $50 100 100
2000 2001 2002
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 12.5 20 63 $6 13 21 62 $5 10 18 56
Saucony $6 15 15 100 $5 11 12 92 $8 16 14 114
Nike $10 25 22 114 $13 28 24 117 $14 28 25 112
New Balance $6 15 20 75 $7 15 21 71 $9 18 23 78
Reebok $7 17.5 8 219 $9 20 10 200 $10 20 12 167
All Other $6 15 15 100 $6 13 12 108 $4 8 8 100
Totals $40 100 100 $46 100 100 $50 100 100
2000 2001 2002
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 20 $6 21 $5 18
Saucony $6 15 $5 12 $8 14
Nike $10 22 $13 24 $14 25
New Balance $6 20 $7 21 $9 23
Reebok $7 8 $9 10 $10 12
All Other $6 15 $6 12 $4 8
Totals $40 100 $46 100 $50 100
2000 2001 2002
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 12.5 20 $6 13 21 $5 10 18
Saucony $6 15 15 $5 11 12 $8 16 14
Nike $10 25 22 $13 28 24 $14 28 25
New Balance $6 15 20 $7 15 21 $9 18 23
Reebok $7 17.5 8 $9 20 10 $10 20 12
All Other $6 15 15 $6 13 12 $4 8 8
Totals $40 100 100 $46 100 100 $50 100 100
2000 2001 2002
Advertising Spending and Market ShareSOA/SOM
Adv $ SOA SOM Index Adv $ SOA SOM Index Adv $ SOA SOM Index
(Millions) % % SOA/SOM (Millions) % % SOA/SOM (Millions) % % SOA/SOM
Adidas $5 12.5 20 63 $6 13 21 62 $5 10 18 56
Saucony $6 15 15 100 $5 11 12 92 $8 16 14 114
Nike $10 25 22 114 $13 28 24 117 $14 28 25 112
New Balance $6 15 20 75 $7 15 21 71 $9 18 23 78
Reebok $7 17.5 8 219 $9 20 10 200 $10 20 12 167
All Other $6 15 15 100 $6 13 12 108 $4 8 8 100
Totals $40 100 100 $46 100 100 $50 100 100
2000 2001 2002
1980 1981 1982Adv $ (mill.)
SOA (%)
SOM (%)
Index (SOA/SOM)
Adv$ (mill.)
SOA (%) SOM (%) Index (SOA/SOM)
Adv$ (mill.)
SOA (%) SOM (%)
Index (SOA/SOM)
Suave 3 3 5.8 52 4 3.5 6 58 6 5.5 9.4 59
Agree 5 4.1 7.1 58 6 5.3 3.4 156 4 3.5 2.7 130
Flex 5 4.2 7.1 59 4 3.3 6.8 49 3 2.6 6.6 39
Head & Shoulders
20 17.5 18.3 96 21 18.3 11.6 158 17 17.1 9.5 180
Jhirmack 3 2.4 6 4.8 4 4.2
Pert 21 18.3 3.4 538 17 14.6 5.6 261 10 9.5 4.5 211
Prell 14 11.8 7.3 162 12 10.3 5.7 181 10 10.3 5.8 178
Silkience 9 7.7 2.1 367 11 9.2 4.3 214 6 5.7 3.3 173
Vidal Sassoon
10 8.4 3.3 255 10 8.8 4.6 191 11 11.1 4.2 264
All Other 26 22.6 45.6 50 26 22 52 42 31 30.5 54 56
Total 115 100 100 100 117 100 100 100 100 100 100 100
SOA/SOM Analysis for Suave
1982 1983 1984Adv $ (mill.)
SOA (%)
SOM (%)
Index (SOA/SOM)
Adv$ (mill.)
SOA (%) SOM (%) Index (SOA/SOM)
Adv$ (mill.)
SOA (%) SOM (%)
Index (SOA/SOM)
Suave 6 5.5 9.4 59 6 5.1 9 57
Agree 4 3.5 2.7 130 6 4.7 2.2 214
Flex 3 2.6 6.6 39 4 3 6.4 47
Head & Shoulders
17 17.1 9.5 180 17 14.3 9.1 157
Jhirmack 4 4.2 9 8 3.4 235
Pert 10 9.5 4.5 211 9 8 3.6 222
Prell 10 10.3 5.8 178 16 13.6 5.6 243
Silkience 6 5.7 3.3 173 5 4.4 2.6 169
Vidal Sassoon
11 11.1 4.2 264 14 11.5 4.4 261
White Rain
5 New Brands
44.5
All Other 31 30.5 54 56 32 27.4 53.7 51
Total 100 100 100 100 118 100 100 100 145
SOA/SOM Analysis for Suave
Task and Objective Method1. Establish specific marketing objectives that need to be
accomplished2. Assess the communication functions that must be
performed to accomplish the overall marketing objectives3. Determine advertising’s role in the total communication
mix in performing the functions established in step 2.4. Establish specific advertising goals in terms of the levels
of measurable communication response required to achieve marketing objectives.
5. Establish the budget based on estimates of expenditures required to accomplish the advertising goals.
Task and Objective Method: Volkswagen Example
1. Marketing objectives: Increase sales of Golfs and Jettas from 21,000 to 250,000
2. Communication functions: Increase awareness of Golf and Jetta brand names, establish an image as a company that offers “honest, reliable, affordable” cars.
3. Advertising will be a crucial component in Volkswagen’s communication mix.
4. Advertising goals: 1. Increase awareness of Jetta from 45% to 75% of target market. 2. Expand percentage of respondents who rate VW’s products as high quality from 15% to 40%.
5. Budget: ~$100 million
Thank You!