Setting Objectives, Planning and Budgeting for the IMC

Program

Setting Objectives, Planning and Budgeting for the IMC

Program

.

Focus &Coordination

Focus &Coordination

Plans &DecisionsPlans &

Decisions

Measurement& Control

Measurement& Control

Plans &DecisionsPlans &

Decisions

Focus &Coordination

Focus &Coordination

Value of Objectives

©

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

Communications Objectives

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

• 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.

Theeconomy

TheeconomyDistributionDistribution TechnologyTechnology PricePrice

Advertising and

promotion

Advertising and

promotionCompetitionCompetition Product

qualityProductquality

PricePriceTechnologyTechnologyDistributionDistribution

Productquality

ProductqualityCompetitionCompetition

Advertising and

promotion

Advertising and

promotion

Many Different Factors Affect Sales

$ALE$$ALE$

Direct Response Ads Seek Sales

AttainableAttainable

MeasurableMeasurable

SpecificSpecific

RealisticRealistic

Based on benchmarkmeasures

Based on benchmarkmeasures

Based on concrete,

measurable tasks

Based on concrete,

measurable tasks

Realistic/AttainableRealistic/Attainable

SpecifiedTime PeriodSpecified

Time Period

Target audience is well-defined

Target audience is well-defined

Characteristics of Good Objectives

ObjectivesObjectives

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

AwarenessAwareness

Interest/ConsiderationInterest/Consideration

PreferencePreference

LoyaltyLoyalty

TrialTrial

ConversionConversion

PerceptionChange

DemandGeneration

RelationshipManagement

MarketingObjective

Integrated Marcom Funnel

Purchase Funnel as a Basis for Communication Objectives

• Based on premise that consumers rarely go directly from awareness to purchase but rather pass through a series of stages

• Intermediate stages are important and can be measured

• Need to understand where customers are in the purchase funnel and what needs to be done to impact their perceptions and decision making

• Objectives and strategies can be defined for each stage of the funnel

• Need to consider what IMC tools work best for impacting various stages including customer retention

Using Brand Contacts To Influence The Funnel

• Prioritize contact opportunities by understanding which contacts are most likely to influence various stages of the purchase funnel and to what degree

• What are the intrinsic values of each brand contact– TV ad may impact image or create an emotional bond

more effectively than an brochure– Time spent on web site will impact knowledge/interest

more than print ad

• How do brand contacts perform across different products– What contacts are most influential for different product

or service categories

Purchase Funnel

Budgeting for Marketing Communications

How do we determine the impact of our

marketing communications

?

How much money should we spend

on advertising and

promotion?

Balancing Objectives and Budgets

©

Dollars Goals

What we’re willing and

able to spend

What we need to achieve our

objectives

Marginal Analysis

Advertising / Promotion in $

Sale

s in

$

Point A

Profit

Sales Gross Margin

Ad. Expenditure

BASIC Principle of Marginal Analysis

Increase SpendingIncrease Spending

Decrease SpendingDecrease Spending

HoldSpending

HoldSpending

If the increased cost is less than the incremental (marginal) return

If the increased cost is less than the incremental (marginal) return

If the increased cost is equal to the incremental (marginal) return.

If the increased cost is equal to the incremental (marginal) return.

If the increased cost is more than the incremental (marginal) return

If the increased cost is more than the incremental (marginal) return

Advertising Sales/Response FunctionsIn

crem

en

tal S

ale

s

Advertising Expenditures

A. Concave-Downward Response Curve

Incr

em

en

tal S

ale

s

Advertising Expenditures

Range A Range B Range C

B. S-Shaped Response Function

The Relationship Between Marketing Communication Expenditures and Sales

Incr

em

en

tal S

ale

s

Marketing Communication Expenditures

Range A Range B Range C

Hig

h S

pendin

gLi

ttle

Eff

ect

Init

ial Sp

endin

gLi

ttle

Eff

ect

Mid

dle

Level

Hig

h E

ffect

Range AAre you spending

enough money to have an impact?

Range B - spending is generating incremental

sales so continue to spend $

Range C – Point of diminishing return

should cut back on spending

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

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

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

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

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

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.)

Ways Companies Asses ROI for Marketing and Advertising Expenditures

66% - Incremental sales generated by marketing activities

57% - Changes in brand awareness

55% - Total sales revenue generated by marketing activities

55% - Changes in purchase intentions

51% - Changes in attitude toward the brand/company

49% - Changes in market share

34% - Cost per lead generated 34% - Ratio of advertising

costs to sales revenue 30% - Reach/frequency

achieved 25% - Gross ratings points

delivered 21% - Comparison of media

plan to media delivery 19% - Changes in financial

value of brand equity 17% - Increase in customer

lifetime value

Source: Survey by Association of National Advertisers