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Objectives of budgeting
The document discusses establishing objectives and budgeting for promotional programs. It emphasizes that objectives should be specific, measurable, attainable, realistic and time-bound. Marketing objectives aim to achieve goals like sales and market share, while communication objectives are more narrow and focus on delivering messages to target audiences. Budgeting can be done through top-down or bottom-up approaches. Top-down uses a percentage of sales or competitive parity to set budgets, while bottom-up budgets activities to achieve predefined objectives. Marginal analysis is used to determine optimal spending by increasing, holding, or decreasing expenditures based on incremental returns.
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Objectives of budgeting
- 1. Establishing Objectives and Budgetingfor 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 ShapeCorporate Images © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 5. Marketing Versus CommunicationsObjectives 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 FactorsAffect 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 AdsSeek Sales © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 8. Some Communications UseNontraditional Methods © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 9. Sales As AdvertisingObjectives © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 10. Test Your Knowledge Whichof 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 MovementToward 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 CanHave a Strong Effect on Preference © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 13. Pyramid of CommunicationsEffects 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 Consof 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 ofCommunications Advertising Through Media Acting on Consumers © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 17. Balancing Objectives andBudgets 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 Inmarginal 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 ofMarginal 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 MarginalAnalysis 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 TopManagement 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 Wellknown 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 TaskMethod 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 Economiesof 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 andShare 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