establishing objectives and budgeting for the promotional program
TRANSCRIPT
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Establishing Objectivesand Budgeting for the Promotional
Program
Prepared by:Mr. Nishant Agrawal
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Value of Objectives
Communications
Planning & Decision Making
Measurement& Evaluation
Specific Objectives
( Return on their promotional investment )
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Characteristics of Objectives
Specific
Measurable
Quantifiable
Attainable
Realistic
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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.
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Sales Objectives
Increased Sales
Increased Market Share
Brand Extensions
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Factors Influencing Sales
Competition Technology
The economy
Product quality
PriceDistribution
Advertising & promotion
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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.
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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
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Creating an Image
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Communications Effects Pyramid
20% TrialCona
tive
40% LikingAffec
tive
90% AwarenessCogn
itive
5% Use
70% Knowledge/Comprehension
25% Preference
first accomplishing lower-level objectives
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The DAGMAR Approach
DefineAdvertisingGoals forMeasuringAdvertisingResults
Action
Awareness
Conviction
Comprehension
Each purchase prospect goes through 4 steps:
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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.
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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
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Characteristics of Objectives
Concrete, measurable tasks
Benchmarkmeasures
Well-definedaudience
Specifiedtime period
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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.
.
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Continue…
4. Specified time period —
– Objectives is the specification of the time period
during which the objective is to be accomplished,
e.g. 6months.
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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.
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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.
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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
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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.
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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”
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Utilizing a Variety of Media
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Establishing & Allocating the Promotional Budget
Sponsorship
PublicRelations
SalesPromotions
Internet
Group Sales
DirectMarketing
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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
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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.
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Establishing a Budget
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• 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.
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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
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Assumptions for Marginal Analysis
Sales are determined
only by advertising
and promotion
Sales are a direct measure of advertising
and promotions efforts
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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
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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
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Purchasefrequency
Factors Influencing Advertising Budgets
Product life cycle
Productstability
Differentiation
Productprice
Hidden productqualities
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Top-Down vs. Bottom-Up Budgeting
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Top-Down Budgeting Methods
TopManagement
AffordableMethod
CompetitiveParity
Percentage of Sales
Return onInvestment
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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.
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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
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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
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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
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Object and Task Method
Isolate objectives
Reevaluate objectives
Determine tasks required
Estimate required expenditures
Monitor
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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.
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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.
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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
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End of Session
“Learn from yesterday,
live for today, hope for tomorrow”