The document outlines the framework and process for developing an advertising plan and budget. It begins with a situation analysis to understand the brand, market, and competitors. This informs the marketing programme which determines the role of various marketing mix elements including advertising. The advertising plan includes setting objectives, messages, media strategy and tactics, and implementation. Budgeting approaches can be top-down like percentage-of-sales or bottom-up based on specific communication tasks. Models like DAGMAR provide frameworks for setting measurable objectives at different stages from awareness to action.

1. Communication and Advertising
Budget

2. Framework of Advertising Planning & Decision
Making
Situation Analysis
Marketing Programme
Integrated Mar. Com. Plan
Advertising Plan
Implementation

3. Process starts with an analysis of the
Brand’s external & internal environment
Market analysis
Situation Analysis Competitor analysis
(external and internal) Brand Analysis- SWOT
Marketing Programme
Advertising Plan
Implementation

4. The Role of Advertising emerges from the
Marketing Programme
Situation Analysis Determines the role of each
elements of the marketing mix
including Marketing Communications
Indicates how all elements will be
coordinated to support and synergise
Marketing Programme with each other
IMC & Advertising plan
Implementation

5. The Advertising Plan Includes…
Situation Analysis
Marketing Programme
Setting Objectives -
(Segmentation-positioning)
Message – strategy & tactics
IMC & Advertising Plan
Media – strategy & tactics
Implementation and Coordination
(synergy with other IMC tools)
Implementation

6. Framework of Advertising & Decision Making
Situation Analysis
Marketing Programme
IMC /Advertising Plan
Facilitating Agencies
Implementation
Social, legal & other
constraints

7. The Role of Advertising….
The role the Advertising plan can only be in the context
of the Marketing Plan
– The Advertising Plan must support and synergise with:
• the elements of the Marketing Mix
• and other elements of the Communication Mix
Need to understand ‘How Advertising Works’
to appreciate the role it plays

8. How does Advertising work ?
Advertising is
‘persuasive communication’

9. The Persuasion Process of Advertising
Awareness
/familiarity
The Brand Benefit
/ Information
Persuasion
Creating image /
Process of personality
Brand Purchase
Attitude Behavior
Advertising
Associating feelings
is through with Brand
a variety Linkage of Brand with
of peers/experts/group
norms /culture
advertising
Reminder / Brand trial
effects inducement

10. Setting Advertising Objectives

11. These must be
Operational Objectives
Meaningful Advertising Objectives
• Provide criteria for decision making
• Serve as a communication and coordination tool
• Provide criteria for evaluate performance
Can ‘Sales’ be meaningful Objectives?

12. ‘Sales’- A Meaningful Advertising
Objective??
Difficult to identify the impact of Advtg.on ‘Sales’
– ‘Advtg. impact is felt over time
– Isolating ad impact from other elements of the marketing
mix is difficult
New customers
Advertising Immediate Sales Future sales
Change attitude / improve image

13. Developing Advertising Objectives
Involves 3 considerations -
– Behavioral decisions (behavioral objectives)
that Advertising must influence
– The Target Segment
– The decision making process that
communication must precede to influence
behavior

14. ‘Sales Strategy’ the basis for
Advertising Objectives
Sales growth comes from -
• New customers buying
• Old customers staying loyal
• Old customers consuming more

15. Demand Generation - Offensive Strategy
Market dynamics:
- Sales grow because of new customers buying
Those not the Those buying
buying product Other brands
Existing
customers
‘Offensive Marketing Strategies’
• Primary demand generation
• Secondary demand generation

16. Demand Generation - Defensive Strategy
Market dynamics:
– Sale grow with old customers staying loyal
‘Defensive Marketing Strategy’
• Recall the important brand features
• Reinforce use experience
• Consumer promotions

17. Demand Generation through Increased
Consumption
Market dynamics:
Sales grow with ‘Product form expansion’
• More frequent usage / share of requirement (SOR)
• New use applications

18. Primary Demand -
Customers trying Trial
the category for the Purchase
first time
Secondary Demand-
New customers using Trial
other brands Purchase Behavioral
Responses
that drive
Existing customers Purchase
Loyalty Loyalty
More consumption news Increased
uses and more usage usage / SOR
Marketing / Sales Strategies & Behavioral Objectives

19. The Influence of Advertising
on Desired Behavior
Advertising is not as effective in directly evoking desired
action -‘Purchase’
Advertising causal intervening response
desired behavioral response Sales
Sales Promotions, DM & Retail Advertising should be
used in conjunction with Advertising to drive sales

20. Advertising Objectives (the Intervening
Response Variables that are persuasive
in its context) are determined by the
type of Sales Strategy and Behavioral
Objectives

21. Advertising Objectives
Reflect the Target Segment
The segment and sub-segment can be defined by –
• Behavioral measures – non-users, other brand users, heavy /
light / loyal users etc.
• Advertising response measures – unaware, not convinced of
key benefit, diffused / sharp image, etc
• Lifestyle - attitude & opinions, interests
• Benefits sought
• Demographic, psychographics, geographic basis - more
relevant for media decisions

22. Communication Objective

23. Communication effect Pyramid
5% Repurchase
/regular use
10% trail
20% Preference
40% Liking
60% knowledge/Comprehension
80% Awareness

24. Behavioral Objectives for five target
groups
New Favorable
Other brand Other brand
Trail Objectives category brand Brand loyal
loyal switchers
users switchers
Category trail Yes
Brand trail Yes Yes Yes
Brand re trail Yes Yes
Repeat purchase objectives
Maintain repeat
Yes
purchase rate
Increase repeat
Yes Yes Yes
purchase rate
Buy more per
Yes Yes
occasion
Accelerate
timing
Decrease the

25. DAGMAR Approach
• Russell H. Colley (1961) prepared a
report for the Association of National
Advertisers titled Defining Advertising
goals for measured advertising Results
(DAGMAR). He developed this model for
setting advertising objectives and
measuring the results of an ad campaign

26. • According to colley advertising means
– Advertising job, purely and simply, is to
communicate to a defined audience
information and a frame of mind that
stimulates action. Advertising succeeds or
fails depending on how well it
communicates the desired information and
attitudes to the right people at the right
time and at the right cost.

27. ‘Hierarchy of Effects’ Model - DAGMAR
Unaware
Aware
Cognitive Comprehension & image
Attitude
Affective
Action
Behavioral
DAGMAR Approach – A communication task to be accomplished amongst a defined
audience, in a specified period of time. Advertising objective involve a comm. Task that is
specified and measurable

28. • Awareness: involves making target audience aware of
the existence of brand or company.
• Comprehension: the purpose is to develop an
understanding among audience of what the product is
and what it would do for them
• Conviction: the objective is to create a mental
disposition among target audience members to buy the
product
• Action: to motivate the target audience to purchase the
product or service.

29. DAGMAR in Practice
Objectives to ensure the sated goals contain the
crucial aspects of DAGMAR
– A specific task indicated clearly – to be measurable
– A starting point set –Benchmark against which goal
achievement can be measured
– A Target Segment specified precisely
– The Time Period for achieving the desired response
indicated

30. DAGMAR in Practice
Challenges to DAGMAR
• Does not measure Sales
• Broad outline does not give enough details (which
hierarchical level)
• Measurement is a problem
• System noise – other factors affecting goal
• Model may not hold good in every situation

31. Advertising affects on consumer
Behavioral dimensions Steps towards purchase Advertising for various stages
Conative Purchase POP advertising, testimonials,
The realm of motives ads price/quality appeals
stimulates or directs desires
Conviction
Affective Preference Comparative ads
The realm of emotions, Argumentative copy
attitudes and feelings
Image, status, glamour
Liking appeals
Cognitive Knowledge Descriptive copy, slogans,
The realm of thoughts jingles etc.
awareness Ad. Repetition, teaser ads.

32. Other Persuasion Models
AIDA Hierarchy Innovation
of Effects Adoption
Cognitive Awareness
Attention Awareness
Stage Knowledge
Liking
Interest Interest
Affective Preference
Stage Desire Evaluation
Conviction
Trial
Action
Action Purchase Adoption
Stage

33. Advertising Budget
• The term 'advertising budget' in essence is
nothing but planning the advertising expenditure.
• Advertising money before spending, it is
necessary to ensure its proper investment.
• Every ad is a long term investment in the
personality of a brand. Therefore, when
advertising is recognized as a type of future
investment, care must be taken today to make it
more effective with proper planning of
advertising budget.

34. IMPORTANCE OF ADVERTISING BUDGET
• Check on advertising expenditure
• Approval from top management
• Balanced focus
• Facilitates planned execution
• Provides direction for drafting of Ads
• Selection of media

35. Establishing the budget
• The size of the firm’s advertising and promotions budget can
vary from a few thousand dollar to more than a billion. When
companies like Procter & Gamble and General Motors spend
over a billion dollar per year to promote their products.
• Unfortunately, many managers fail to realize the value of
advertising and promotion. They treat the communications
budget as an expense rather than an investment. When times
get tough, the advertising and promotional budget is the first
to be cut.
• Moreover, the decision is not a one-time responsibility. A new
budget is formulated every year, each time a new product is
introduced or when either internal or external factors
necessitate a change to maintain competitiveness.

36. Models used to establish advertising
budgets
Marginal Analysis
• The concept of marginal analysis explained that as advertising/
promotional expenditures increase, sales and gross margins also
increases to a point, but then they level off.
• Profits are shown to be a result of the gross margin minus
advertising expenditures. Using this theory to establish its budget, a
firm would continue to spend advertising/promotional money as
long as the marginal revenue created by these expenditure
exceeded the incremental advertising/promotional cost.
• While marginal analysis seems logical intuitively, certain
weaknesses limit its usefulness. These weaknesses include the
assumptions :-
• Sales are a direct measures of advertising and promotions efforts.
• Sales are determined solely by advertising and promotion.

37. SALES RESPONSE MODELS
• Almost all advertiser subscribe to one of two
models of the advertising /sales response
function:
• the concave-downward function or
• the S-shaped response curve.

38. The concave-downward function
• In this advertising budget follow the law of
diminishing returns. That is as the amount of
advertisement increases, its incremental value
decreases. This means that those with the
great potential to buy will buy in the first
exposure, while those who are less likely to
buy are not likely to change as a result of
advertising even each additional adv. will
supply little or no new information that will
affect their decision

39. The S-shaped response function
• S-shaped response function to the budget outlay. Initial
outlays of the advertising budget have little impact( as
indicated by the essentially flat sales curve in range A).
After a certain budget level has been reached ( the
beginning of range B), advertising and promotional efforts
begin to have an effect, as additional increment of
expenditures result in increased sales. This incremental
gain continues only to the point, however, because at the
beginning of the range C additional expenditure begin to
return little or nothing in the way of sales. This model
suggest a small advertising budget is likely to have no
impact beyond the sales that may have been generated
through other means( for example, word of mouth).

40. ADVERTISING BUDGET PROCESS
• Since advertising is an investment, it should be budgeted
like any other investment. The preparation of an advertising
budget generally determines the size of advertising
expenditure. How much should be spent on advertising? To
determine this is the purpose of the advertising budget.
• A “budget” is a forward plan of any activity expressed in
terms of rupees, and budgeting is the process of this
planning. Therefore, the advertising budget is the amount
of the proposed advertising expenditure and its
apportionment on the various advertising activities of the
company. The advertising budget thus serves as a decision-
making tool for the top management, in addition to its
control function of such expenses.

41. • The advertising budget is prepared by the advertising
manager of the company. However, ad agencies do
help him in this planning work. Logically, the starting
point of any advertising budget process is the
determination of the size of advertising appropriation.
Once the total expenditure is arrived at, the next step
is the apportionment of this fund among various
advertising units over a period.
• During the execution of the budget, the advertising
manager has to exercise monitoring control so that the
funds that have been allocated may be spent in most
economical manner.

42. Budgeting Approaches
• After having a clear understanding of what an
advertising budget is, let us discuss the
various methods of framing the advertising
budget. There are no scientific methods
which can be employed in determining the
amount of the advertising fund to be spent
during the year. However, here are a few
approaches, which may serve as guides to
advertising appropriation decision.

43. There are two types of approaches
• Top down approaches
• Bottom up approaches
• TOP DOWN APPROACHES- Budgeting approaches in
which the budgetary amount is established at the
executive level and monies are passed down to the
various department. These budgets are essentially
predetermine and have no true theoretical basis top
down basis .
• These budgets are essential y predetermined and have
no true theoretical basis. Top-down methods include
the affordable method, arbitrary allocation, percentage
of sales, competitive parity, and return on investment.

45. • Bottom up approach- A method of
determining the budget for advertising and
promotion by determining the specific task
that have to be performed and estimating the
cost of performing them. A more effective
budgeting strategy would be to consider the
firm's communications objectives and budget
what is deemed necessary to attain these
goal.

47. METHODS OF TOP DOWN APPROACH
• Percentage-of-sales method
• All you can afford
• Arbitrary method
• Competitive parity method
• Return of investment

48. Percentage-of-sales method
• In the percentage-of-sales method, advertisers use one of
the two things in arriving at how much to be spent on
advertising. The first one is to select a factor or multiplier,
such as 3, 5 or 7 per cent, then multiply this by the sales
figures in rupees, and the sum so arrived at is the answer to
the question of how much to spend. For example, if the
sales are worth Rs. 300 lakhs, taking 3 per cent of this, the
advertiser should spend about Rs. 9 lakhs on advertising. By
this method, the advertisers determine how much of their
sales rupees should be spent on advertising. The sales figure
in the above calculation may be based on past sales or
expected future sales for the time period for which the
advertising appropriation is determined. Either gross or net
sales figures can be used.

49. • The other method of determining the
advertising funds to be spent, depends upon
the number of machines sold or units of
product sold. For example, an automobile firm
selling 500 cars a year will decide to spend Rs.
200 for each car sold as advertising expenses.
Thus, a total of Rs. One lakh will be the
advertising budget. The number of cars sold
may be determined on the basis of immediate
past sales or the expected future sales.

50. • The best way is to start with the most
appropriate percentage figure bases on an
individual's estimate, the industry's average
and the competitors' figure, and then improve
it in the light of experience gained over a
period of time. The percentage figure varies
widely from as low as one per cent in mining
companies to as high as 40 per cent in the
pharmaceutical and cosmetic companies.

51. • Advantage of Percentage of sales-
• It is financially safe
• keeps ad spending within reasonable limits
• This method is simple, straightforward
• Easy to implement
• Disadvantage of Percentage of sales-
• Percentage of sales method is also difficult to employ for
new product introduction.
• If the budget is contingent on sales, decreases in sales
will leave to decrease in budget when they most need to
be increased. Continuing to cut the advertising and
promotion budget may just add impetus to the downward
sales trend.

52. All You Can Afford
• The what-can-be-afforded method is yet another decision rule
on which many firms base their advertising budgets,
particularly firms with limited resources. When fund
availability is a constraint, a limited fund is only allocated after
other unavoidable expenditures have been met. The rule is
also based on the premise that sales are independent of
advertising expenditure _ an assumption which is not well
founded. The method, moreover, suffers from an inherent
shortcoming _ that budget decisions are left to the whim of
the management and are not based on rational business
needs. Whims are mostly irrational and subjective rather than
based on an objective approach.

53. ARBITRARY METHOD
• A variation of the what-can-be-afforded method
is yet another subjective method, by which the
budget is arbitrarily set without any rationality
and analysis of the task of advertising. This is
referred to as the arbitrary method Some
advertisers decide that they will spend 'X' rupees
on advertising next year. They claim that,
because of their first hand knowledge of
business, they have acquired a sort of "gut
feeling" about how much advertising expenses
would be appropriate. This is a "human" method.

54. COMPETITIVE PARITY METHOD
• A method of setting the advertising and promotion budget based on matching
the absolute level of percentage of sales expenditure of the competition.
• The competitive parity method has a number of disadvantages,
• It ignores the fact that advertising and promotional are designed to accomplish
specific objectives by addressing certain problems and opportunities.
• It assumes that because firms have similar expenditures, their programs will be
equally effective.
• There is no guarantee that competitors will continue to pursue their existing
strategies.
• Finally, competitive parity may not avoid promotional wars Coke versus Pepsi and
Anheuser-Busch versus Miller have been notorious for their spending wars, each
responding to the other's increased outlays.

55. RETURN OF INVESTMENT
• A budgeting method in which advertising and
promotion are considered investments and thus
measurement are made in an attempt to determine
the returns achieved by these investment.ROI
budgeting method, advertising and promotions are
considered investments, like plant and equipment.
• While the ROI method looks good on paper, the reality
is that it is rarely possible to assess the returns
provided by the promotional effort-at least as long as
sales continue to be basis for evaluation. ROI remains a
virtually unused method of budgeting.

56. METHODS OF BOTTOM UP APPROACH
• OBJECTIVE TASK METHOD-
• The objective-and-task approach to advertising budget
is based on establishing advertising objectives and the
tasks to be accomplished, and then determining the
required size of the budget. For example, a company
decides to increase the awareness of its brand in a
certain market segment to 50 per cent. The required
tasks to achieve this awareness are detailed, and a
suitable campaign programme is chalked out. The cost
of doing so, or, in other words, the cost of achieving
the requisite exposure, will be the advertising budget.

57. • The “objectives" are the advertiser's long-term
marketing aims, whereas "task" is a short-term
undertaking, usually the next year's sales goals.
• The definition of the term task and the determining of
the advertising programme should be further
elaborated, for they form the most critical steps in the
method. No doubt, the primary purpose of advertising
is to improve the sales of the company; but besides
this, advertising is required to perform some non-
selling tasks. Immediate sales may not always be the
goals.

58. Few typical examples of the tasks to be performed by
advertising campaigns:
1. To increase an awareness of a product and its promotion;
2. To develop the long-term selling theme - quality product,
newness, customer service;
3. To acquaint the market with the brand name;
4. To overcome expected consumer objection to the use of
the product;
5. To introduce a new product;
6. To secure the required distribution through wholesalers
and retailers.

59. • The major advantage of the objective and task
method is that the budget is driven by the
objectives to be attained. The managers closest
to the marketing effort will have specific
strategies and input into the budget-setting
process.
• The major disadvantage of this method is the
difficulty of determining which till be required
and the costs associated with each. For example,
specifically what tasks are needed to attain
awareness among percent of the target market?

60. Pay out planning
• It is use full when new products are introduced.
• It is used in conjunction with other budgeting
methods to estimate the investment value of
advertising.
• The commitment is to invest heavily in
advertising to achieve increased awareness and
product acceptance.
• The basic idea is to develop a projection of
revenues the product will generate, and the costs
it will incur over a period of two or three years.

61. Quantitative models
• Regression models etc.

62. Experimental approach
• It is an alternative to using statistical
approaches and mathematical models.
• Test and experiments are done in one or more
selected market areas.
• The purpose is to determine the impact of
input variations that might be used.
• The feedback data of this experiment is used
to determine the ad. Budget.