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Objectives of budgeting

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  • 1. Establishing Objectivesand Budgeting for thePromotional Program © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 2. Value of Objectives Focus & Focus &ObjectivesObjectives Coordination Coordination Plans & Plans & Decisions Decisions Measurement Measurement & Control & Control © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 3. Characteristics of Objectives Attainable AttainableRealisticRealistic 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 TheDistributionDistribution 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 KnowledgeWhich of the following statements aboutcommunications 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 ActionConative Purchase Point of purchase Retail store ads, DealsRealm of motives. “Last-chance” offers Price appeals, TestimonialsAds stimulate ordirect desires. Conviction Preference Competitive adsAffective Argumentative copyRealm of emotions.Ads change attitudes Liking “Image” copy Status, glamour appealsand feelings Knowledge Announcements Descriptive copy Classified adsCognitive Slogans, jingles, skywritingRealm of thoughts.Ads provide Awareness Teaser campaignsinformation and facts. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 12. Image Ads Can Have a StrongEffect 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 gnCo 90% Awareness © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 14. The DAGMAR ApproachDefine Awareness AwarenessAdvertisingGoals for Comprehension Comprehension Comprehension ComprehensionMeasuring ConvictionAdvertising ConvictionResults Action Action © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 15. Pros and Cons of DAGMAR Pros ConsAssessment of campaignAssessment of campaign Problems with the Problems with the effectiveness effectiveness response hierarchy response hierarchyValue of communication-Value of communication- Sales objectives Sales objectives based objectives based objectivesMeasurement of stagesMeasurement 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 ourable to spend objectives Dollars Goals © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • 18. Test Your KnowledgeIn marginal analysis all of the following should beconsidered 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 MarginSales 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 FunctionIncremental 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 LimitThe Promotion Budget Is Set to Stay WithinThe 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 ParityArbitrary Arbitrary Percentage PercentageAllocationAllocation 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 KnowledgeWell known brand name products do not receiveincremental advantages from increased dollarexpenditures on advertising. Once the ad hits themarket, subsequent budget increases result in little orno incremental gains. This might best be explainedby: 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 MethodEstablish ObjectivesEstablish Objectives(create awareness of new product(create awareness of new productamong 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 ILarger firms can support their brands with lower relativeadvertising costs than smaller firms. No evidence to support this!Proposition IIThe leading brand in a product group enjoys lower advertisingcosts per sales dollar than do other brands. No evidence to support this!Proposition IIIThere is a static relationship between advertising costs perdollar 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 VoiceShare 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

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