Establishing Objectivesand Budgeting for the Promotional

Program

Prepared by:Mr. Nishant Agrawal

Value of Objectives

Communications

Planning & Decision Making

Measurement& Evaluation

Specific Objectives

( Return on their promotional investment )

Characteristics of Objectives

Specific

Measurable

Quantifiable

Attainable

Realistic

Marketing vs. Communications Objectives

Marketing Objectives

• Generally declared in the firm’s marketing plan

• Achieved through the overall marketing plan

• Quantifiable, such as sales, market share, ROI

• To be accomplished in a given period of time

• Must be realistic and attainable to be effective

Communications Objectives

• Derived from the overall marketing plan

• More narrow than marketing objectives

• Based on particular communications tasks

• Designed to deliver appropriate messages

• Focused on a specific target audience

Vs.

Sales Objectives

Increased Sales

Increased Market Share

Brand Extensions

Factors Influencing Sales

Competition Technology

The economy

Product quality

PriceDistribution

Advertising & promotion

Where Sales Objectives are Appropriate

Test Your Knowledge

Which of the following statements about communications objectives is true?

A) Sales goals are easily translated 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 for planning,

executing, and evaluating promotional programs.

D) Marketing managers often do not recognize the value of setting communications objectives.

Effect of advertising on Consumer: From Awareness to Action

AffectiveOrigin of emotions.Ads change attitudes and feelings

CognitiveOrigin of thoughts.Ads provide information and facts

ConativeOrigin of motives.direct desires

Teaser campaigns

“Image” copyStatus, glamour appeals

Descriptive Classified ads, slogans, Jingles

Competitive adsArgumentative copy

Point of purchaseRetail store ads, deals“Last-chance” offersPrice appeals Testimonials

Purchase

Conviction / Confidence

Preference

Liking

Knowledge

Awareness

Creating an Image

Communications Effects Pyramid

20% TrialCona

tive

40% LikingAffec

tive

90% AwarenessCogn

itive

5% Use

70% Knowledge/Comprehension

25% Preference

first accomplishing lower-level objectives

The DAGMAR Approach

DefineAdvertisingGoals forMeasuringAdvertisingResults

Action

Awareness

Conviction

Comprehension

Each purchase prospect goes through 4 steps:

The DAGMAR Approach

• DAGMAR was an advertising model proposed

by Russel Colley in 1961.

• A marketing approach used to setting

advertising objectives and measure the results

of an advertising campaign.

Four Stages

• ACCA advertising formula1. Awareness: making the consumer aware that the

product2. Comprehension: letting the consumer know what the

product is used 3. Conviction : convincing the consumer to purchase the

product4. Action :Getting the consumer to actually make the

purchase

Characteristics of Objectives

Concrete, measurable tasks

Benchmarkmeasures

Well-definedaudience

Specifiedtime period

Characteristics of Objectives:1. Concrete and measurable:

– Objective should be a precise statement of what message the advertiser wants to communicate to the target audience.

2. Target audience

3. Benchmark and degree of change required: – Determine where the target audience stands with respect to various

communication response variables such as awareness, knowledge, attitudes.

– The objectives should also specify how much change or movement is being required such as increase in awareness levels, creation of favourable attitudes or number of consumers intending to purchase the brand, etc.

. 

Continue…

4. Specified time period —

– Objectives is the specification of the time period

during which the objective is to be accomplished,

e.g. 6months.

Criticisms of DAGMAR

• DAGMAR has contributed to the advertising planning process, it has not been totally accepted by everyone in the advertising field.

• A number of problems have led to questions regarding its value as a planning tool.

1.Problems with the response hierarchy

– Its reliance on the hierarchy of effects model. The fact that consumers do not always go through this sequence of communications effects before making a purchase has been recognized.

Continue…

2. Practicality and costs• Money must be spent on research to establish

quantitative benchmarks and measure changes in the response hierarchy.

3. Inhibition / Lack of creativity• Many person think the DAGMAR approach is too

concerned with quantitative assessment of campaign’s impact on awareness, brand name recall.

Pros and Cons of DAGMAR

ConsCons

Inhibition of creativity

Relies heavily on the response hierarchy

May not increase sales

Practicality and cost

ProsProsFocus on communications

objectives

Measurement of stages

Better understanding of goals and objectives

Less subjective

Traditional Advertising-Based View of Communications inside-out planning

Acting on Consumers

Ads

An alternative to this approach is called zero-based communications planning, which involves determining what tasks need to be done, which marketing communications functions should be used, and to what extent.

inside-out planning

• It has dominated the field for so long. • These approaches are based on hierarchical response

model • Consider how marketers can develop and distribute

advertising message to move consumer along with path.

• “It focuses on what the marketer want to say, when the

marketer want to say it, about things the marketer

believes are important about his brand and in media

forms the marketer want to use”

Utilizing a Variety of Media

Establishing & Allocating the Promotional Budget

Sponsorship

PublicRelations

SalesPromotions

Internet

Group Sales

DirectMarketing

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

Establishing a Budget

• Size of a firm's advertising and promotions budget can vary from a few thousand dollars to more than a billion.

• One of the most critical decisions facing the marketing manager is how much to spend on the promotional effort.

• Many managers fail to realize the value of advertising and promotion. 

Establishing a Budget

Continue..

• Advertising/promotional expenditures increase, sales and gross margins also increase to a point, but then they level off.

• Profits are shown to be a result of the gross margin minus advertising expenditures.

Budget Adjustments

Increase Spending If the cost is less than the

marginal return

HoldSpending

If the cost is equal to the incremental return

Decrease Spending

If the cost is more than the incremental return

Assumptions for Marginal Analysis

Sales are determined

only by advertising

and promotion

Sales are a direct measure of advertising

and promotions efforts

Sales Response ModelsIn

crem

enta

l Sal

es

Advertising Expenditures

A. Concave-Downward Response Curve

Incr

emen

tal S

ales

Advertising ExpendituresRange A Range B Range C

B. S-Shaped Response Function

High

Spe

ndin

gLit

tle E

ffect

Initi

al S

pend

ing

Little

Effe

ct

Mid

dle

Leve

lHi

gh E

ffect

all advertisers subscribe to one of two models of the advertising/sales response function

Continue..1. The concave-downward function

– Budgeting under this model suggests that fewer advertising dollars may be needed to create the optimal influence on sales.

2. The S-shaped response function

– 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 increments of expenditures result in increased sales. 

• This model suggests a small advertising budget is likely to have no impact beyond the sales that may have been generated through other means

Purchasefrequency

Factors Influencing Advertising Budgets

Product life cycle

Productstability

Differentiation

Productprice

Hidden productqualities

Top-Down vs. Bottom-Up Budgeting

Top-Down Budgeting Methods

TopManagement

AffordableMethod

CompetitiveParity

Percentage of Sales

Return onInvestment

Top-Down Budgeting Methods1. Affordable Method

• Firm determine amount to be spent in various areas such as production and operations. Then it allocates what’s left to advertising and promotion.

2. Competitive Parity• Managers establish budget amounts by matching the

competition’s percentage of sales expenditures.3. Return on Investment

• Advertising and promotions are considered investment like plant and equipment. ROI looks good on paper, reality is that it is rarely possible to assess the returns provided by promotional effort.

4. Percentage of Sales– Most commonly used method for budget setting

Method 1: Straight Percentage of Sale2002 Total Dollar Sales Straight % of sales at 10%2003 Advertising Budget

$10,00,000$1,00,000$1,00,000

Method 2: Percentage of unit Cost

2002 Cost per bottle to manufacturer

Unit cost allocated to advertising

2003 Forecasted Sales 1,00,000 units

Advertising Budget (1,00,000 x $1)

$ 4.00

$ 1.00

$1,00,000

Build Up Approach Defining the communication objectives to be

accomplished Determining the specific strategies and tasks needed to

attain Estimating the costs associated with performance of

these strategies and tasks1. Isolate Objective2. Detrmine tasks required3. Estimnate rquired expenditure4. Monitor5. Reevalute Objective

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 is best explained by:

A) Arbitrary allocation B) The objective and task method C) Competitive parity D) An S-shaped response E) Rapidly diminishing returns

Object and Task Method

Isolate objectives

Reevaluate objectives

Determine tasks required

Estimate required expenditures

Monitor

Share of Voice Effect (SOV)

Decrease–find a defensible /

justifiable nicheIncrease to defend

Attack with large SOV premium

Maintain modest spending premiumCo

mpe

tito

r’s

Shar

e of

Voi

ceHi

ghLo

w

HighLowYour Share of Market

James Schroer’s suggestions for spending priorities

Online Advertising is an ad revenue model that focuses on percentage among other advertisers. 

Economies of Scale

There is no evidence to support any of these!

Proposition ILarger firms can support their brands with lower relativeadvertising costs than smaller firms.

Proposition IIThe leading brand in a product group enjoys lower advertising costs per sales dollar than do other brands.

Proposition IIIThere is a static relationship between advertising costs per dollar of sales and the size of the advertiser.

Organizational Characteristics

• Factors that influence advertising and promotion budgets– The organization’s structure– Power and politics– The use of expert opinions– Characteristics of the decision maker– Approval and negotiation channels– Pressure on senior managers to arrive

at the optimal budget

End of Session

“Learn from yesterday,

live for today, hope for tomorrow”