Establishing Objectives and Budgeting for the Promotional Program

Establishing Objectives and Budgeting for the Promotional Program

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© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Promotional Objectives

Focus &Coordination

Focus &Coordination

Plans &DecisionsPlans &

Decisions

Measurement& Control

Measurement& Control

Plans &DecisionsPlans &

Decisions

Focus &Coordination

Focus &Coordination

Value of Objectives

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ObjectivesObjectives

AttainableAttainable

MeasurableMeasurable

SpecificSpecific

RealisticRealistic

SpecificSpecific

MeasurableMeasurable

AttainableAttainable

RealisticRealistic

Not Mutually Exclusive

Not Mutually Exclusive

Characteristics of Objectives

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ObjectivesObjectives

Marketing ObjectivesMarketing Objectives

• Generally stated 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

• Generally stated 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

Marketing ObjectivesMarketing Objectives

Marketing Versus Communications Objectives

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IMC ObjectivesIMC 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

• 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.Vs.

Marketing ObjectivesMarketing Objectives

IMC IMC

Sales ObjectivesSales Objectives

IMC Objectives

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Communications Objectives

Communications Objectives

More sales IMC Awareness

IMC Attitudes

IMC Recall

IMC Preferences

Sales ObjectivesSales Objectives

IMC Objectives

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Theeconomy

TheeconomyDistributionDistribution TechnologyTechnology PricePrice

Advertising and promotionAdvertising

and promotion CompetitionCompetition Productquality

Productquality

PricePriceTechnologyTechnologyDistributionDistribution

Productquality

ProductqualityCompetitionCompetitionAdvertising

and promotionAdvertising

and promotion

Sales Objectives: Problem 1

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$ALE$$ALE$

Many Different Factors Affect Sales

Sales Objectives: Problem 2

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Carryover effects of promotion

Sales Objectives: Problem 3

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No formula to relate between sales level and

promotion

Sales objectives are appropriate when:

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Promotion attempts to induce immediate response

Direct response advertising

Retail ads during sales period or special events

When other promotional factors can be controlled

Communication ObjectivesCommunication Objectives

IMC Objectives

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Advertising and Movement Toward Action

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Teaser campaigns

AffectiveRealm of emotions.Ads change attitudes and feelings

CognitiveRealm of thoughts.Ads provide information and facts.

ConativeRealm of motives.Ads stimulate or direct desires.

“Image” copyStatus, glamour appeals

AnnouncementsDescriptive copyClassified adsSlogans, jingles, skywriting

Competitive adsArgumentative copy

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

Purchase

Conviction

Preference

Liking

Knowledge

Awareness

Image Ads Can Have a Strong Effect on Liking and Preference

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20% TrialCon

ativ

e

40% LikingAffec

tive

90% AwarenessCog

nitive

5% Use

70% Knowledge

25% Preference

90% Awareness

70% Knowledge

40% Liking

25% Preference

20% Trial

Pyramid of Communications Effects

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Problems of communication objectives

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Measuring effectiveness of communication

Difficult to translate sales goals into specific communication objectives

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Promotional Budget

Balancing Objectives and Budgets

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Dollars Goals

What we’re willing and

able to spend

What we need to achieve (objectives)

The Promotion Budget Is Set to Stay Within the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending Limit

Top Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending Limit

Top-Down Budgeting

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Affordable Method

Affordable Method

Affordable Method

Affordable Method

Competitive Parity

Competitive Parity

Percentageof Sales

Percentageof Sales

Return onInvestmentReturn on

Investment

Arbitrary AllocationArbitrary Allocation

Percentageof Sales

Percentageof Sales

Competitive Parity

Competitive Parity

Arbitrary AllocationArbitrary Allocation

Top-Down Budgeting Methods

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TopManagement

TopManagement

Total Budget Is Approved byTop Management

Total Budget Is Approved byTop Management

Cost of Activities are BudgetedCost of Activities are Budgeted

Activities to Achieve ObjectivesAre Planned

Activities to Achieve ObjectivesAre Planned

Promotional Objectives Are SetPromotional Objectives Are Set

Cost of Activities are BudgetedCost of Activities are Budgeted

Activities to Achieve ObjectivesAre Planned

Activities to Achieve ObjectivesAre Planned

Promotional Objectives Are SetPromotional Objectives Are Set

Bottom-Up Budgeting

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Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)

Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)

Determine Specific Tasks(advertise on market area television and radio and local newspapers)

Determine Specific Tasks(advertise on market area television and radio and local newspapers)

Establish Objectives(create awareness of new product among 20 percent of target market)

Establish Objectives(create awareness of new product among 20 percent of target market)

Determine Specific Tasks(advertise on market area television and radio and local newspapers)

Determine Specific Tasks(advertise on market area television and radio and local newspapers)

Establish Objectives(create awareness of new product among 20 percent of target market)

Establish Objectives(create awareness of new product among 20 percent of target market)

Objective and Task Method

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Monitor and Adjust(monitor performance and adjust)Monitor and Adjust(monitor performance and adjust)

Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)

Estimate Costs Associated with Tasks(determine costs of advertising, promotions, etc.)