1. Establishing Objectives
and Budgeting for the
Promotional Program
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

2. Value of Objectives
Focus &
Focus &
Objectives
Objectives Coordination
Coordination
Plans &
Plans &
Decisions
Decisions
Measurement
Measurement
& Control
& Control
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

3. Characteristics of Objectives
Attainable
Attainable
Realistic
Realistic Measurable
Measurable
Objectives
Objectives
Not Mutually
Not Mutually Specific
Specific
Exclusive
Exclusive
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

4. Advertising Can Shape Corporate Images
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

5. Marketing Versus Communications Objectives
Marketing
Marketing Communications
Communications
Objectives
Objectives Objectives
Objectives
•• Generally stated in the
Generally stated in the •• Derived from the overall
Derived from the overall
firm’s marketing plan
firm’s marketing plan marketing plan
marketing plan
•• Achieved through the
Achieved through the •• More narrow than
More narrow than
overall marketing plan
overall marketing plan marketing objectives
marketing objectives
•• Quantifiable, such as
Quantifiable, such as Vs. •• Based on particular
Based on particular
sales, market share, ROI
sales, market share, ROI communications tasks
communications tasks
•• To be accomplished in a
To be accomplished in a •• Designed to deliver
Designed to deliver
given period of time
given period of time appropriate messages
appropriate messages
•• Must be realistic and
Must be realistic and •• Focused on a specific
Focused on a specific
attainable to be effective
attainable to be effective target audience
target audience
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

6. Many Different Factors Affect Sales
$ALE$
$ALE$
Advertising
Advertising Product
Product
and
and Competition
Competition quality
quality
promotion
promotion
The
The
Distribution
Distribution Technology
Technology Price
Price economy
economy
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

7. Direct Response Ads Seek Sales
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

8. Some Communications Use Nontraditional Methods
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

9. Sales As Advertising Objectives
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

10. Test Your Knowledge
Which of the following statements about
communications objectives is true?
A) It is easy to translate sales goals into
communications objectives.
B) It can be difficult to determine the
relationship between communications
objectives and sales performance.
C) Communications objectives cannot serve
as operational guidelines to the planning,
execution, and evaluation of the
promotional program.
D) Marketing managers do not recognize the
value of setting communications
objectives.
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

11. Advertising and Movement Toward Action
Conative Purchase Point of purchase
Retail store ads, Deals
Realm of motives. “Last-chance” offers
Price appeals, Testimonials
Ads stimulate or
direct desires. Conviction
Preference Competitive ads
Affective Argumentative copy
Realm of emotions.
Ads change attitudes Liking “Image” copy
Status, glamour appeals
and feelings
Knowledge Announcements
Descriptive copy
Classified ads
Cognitive Slogans, jingles, skywriting
Realm of thoughts.
Ads provide Awareness Teaser campaigns
information and facts.
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

12. Image Ads Can Have a Strong
Effect on Preference
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

13. Pyramid of Communications Effects
5% Use
e
iv
at
n
Co
20% Trial
e
25% Preference
iv
ct
fe
Af
40% Liking
ve
70% Knowledge
i ti
gn
Co
90% Awareness
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

14. The DAGMAR Approach
Define Awareness
Awareness
Advertising
Goals for Comprehension
Comprehension
Comprehension
Comprehension
Measuring Conviction
Advertising
Conviction
Results Action
Action
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15. Pros and Cons of DAGMAR
Pros Cons
Assessment of campaign
Assessment of campaign Problems with the
Problems with the
effectiveness
effectiveness response hierarchy
response hierarchy
Value of communication-
Value of communication- Sales objectives
Sales objectives
based objectives
based objectives
Measurement of stages
Measurement of stages Practicality and cost
Practicality and cost
Less subjective
Less subjective Inhibition of creativity
Inhibition of creativity
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

16. Advertising-Based View of Communications
Advertising Through Media
Acting on Consumers
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

17. Balancing Objectives and Budgets
What we’re What we need
willing and to achieve our
able to spend objectives
Dollars Goals
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

18. 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
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

19. Marginal Analysis
Sales Gross Margin
Sales in $
Ad. Expenditure
Profit
Point A
Advertising / Promotion in $
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

20. BASIC Principle of Marginal Analysis
Increase
Increase If the increased cost is less
If the increased cost is less
Spending
Spending than the incremental
than the incremental
(marginal) return
(marginal) return
If the increased cost is equal
If the increased cost is equal
Hold
Hold to the incremental (marginal)
to the incremental (marginal)
Spending
Spending return.
return.
If the increased cost is more
If the increased cost is more
Decrease
Decrease than the incremental
than the incremental
Spending
Spending (marginal) return
(marginal) return
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

21. Assumptions for Marginal Analysis
Sales are the Sales are the
result of principal
advertising and objective of
promotion, and advertising
and promotion
nothing else
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

22. Advertising Sales/Response Functions
A. Concave- B. S-Shaped
Downward Response
Response Curve Function
Incremental Sales
Incremental Sales
Initial Spending
High Spending
Middle Level
Little Effect
Little Effect
High Effect
Range A Range B Range C
Advertising Expenditures Advertising Expenditures
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

23. Top-Down Budgeting
Top Management Sets the Spending Limit
Top Management Sets the Spending Limit
The Promotion Budget Is Set to Stay Within
The Promotion Budget Is Set to Stay Within
the Spending Limit
the Spending Limit
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

24. Top-Down Budgeting Methods
Competitive
Competitive
Parity
Parity
Arbitrary
Arbitrary Percentage
Percentage
Allocation
Allocation Top of Sales
of Sales
Top
Management
Management
Return on
Return on Affordable
Affordable
Investment
Investment Method
Method
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

25. Bottom-Up Budgeting
Total Budget Is Approved by
Total Budget Is Approved by
Top Management
Top Management
Cost of Activities are Budgeted
Cost of Activities are Budgeted
Activities to Achieve Objectives
Activities to Achieve Objectives
Are Planned
Are Planned
Promotional Objectives Are Set
Promotional Objectives Are Set
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

26. 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 might best be explained
by:
A) arbitrary allocation
B) the objective and task method
C) competitive parity
D) an S-shaped response
E) rapidly diminishing returns
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

27. Objective and Task Method
Establish Objectives
Establish Objectives
(create awareness of new product
(create awareness of new product
among 20 percent of target market)
among 20 percent of target market)
Determine Specific Tasks
Determine Specific Tasks
(advertise on market area television and
(advertise on market area television and
radio and local newspapers)
radio and local newspapers)
Estimate Costs Associated with Tasks
Estimate Costs Associated with Tasks
(determine costs of advertising,
(determine costs of advertising,
promotions, etc.)
promotions, etc.)
Monitor and Adjust
Monitor and Adjust
(monitor performance and adjust)
(monitor performance and adjust)
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

28. Media Expenditures
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

29. Are There Economies of Scale?
Proposition I
Larger firms can support their brands with lower relative
advertising costs than smaller firms.
No evidence to support this!
Proposition II
The leading brand in a product group enjoys lower advertising
costs per sales dollar than do other brands.
No evidence to support this!
Proposition III
There is a static relationship between advertising costs per
dollar of sales and the size of the advertiser.
No evidence to support this!
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

30. Ad Spending and Share of Voice
Share of Voice
Decrease–find a
Decrease–find a
Competitor’s
High
Increase to Defend
Increase to Defend
Defensible Niche
Defensible Niche
Attack With Large
Attack With Large Maintain Modest
Maintain Modest
SOV Premium Spending Premium
Low
SOV Premium Spending Premium
Low High
Your Share of Market
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin