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Establishing Objectives and Budgetingfor the Promotional Program
McGraw-Hill/Irwin © 2004 The McGraw-Hill Com anies Inc. All Ri hs Reser!e".
7
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Value of Objectives
¾ Focus and Coordination
They help to orienteveryone toward one,
common goal¾ Plans and Decisions
involved
They serve as criteria fordeveloping
plans and ma!ing decisions
¾ Measurement and Control
They provide the standards andbenchmar!s for evaluating results
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Types of Objectives
"tatements of whatis
to be accomplished by theoverall mar!eting program within a given timeperiod
#eed to be quantifiable such as salesvolume, mar!et share, profits, or $O%
#eed to be realistic, measurable and attainable
"tatements of what various aspects of the%&'
program will accomplish based oncommunication tas!s re(uired to deliver
appropriate messages to the target audience
%&' Objectives
&ar!eting Objectives
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#ot all )ds are *esigned to )chieve "ales
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Problems +ith "ales Objectives
¾ "ales are a function of many factors,
just advertising and promotion
not
¾ Effects of %&' tools such as advertising
often occur over an etended timeperiod
¾ "ales objectives provide little guidance
to those responsible for planning anddeveloping the %&' program
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&any -actors %nfluence "ales
SALES
Price PolicyThe Economy
Technology Distribution
CompetitionProduct QualityPromotion
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+hen "ales Objectives )re )ppropriate
¾-or promotional efforts that are direct action
in nature and can induce an immediatebehavioral response
"ales promotion
*irect response advertising
$etail advertising for sales or special events
¾+hen advertising plays a dominant role in afirm.s mar!eting program and other factors
are relatively stable
¾+hen sales effects of an %&' variable can beisolated
" l Obj ti ) i t f *i t
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"ales Objectives are )ppropriate for *irect
$esponse )dvertising
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'ommunication Objectives
The primary goal of an %&' program is tocommunicate and planning should be basedon communications objectives such as brandawareness, !nowledge, interest, attitudes,
image and purchase intention
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)dvertising and &ovement Toward )ction
Related behavioral
dimensions
Movement Types of promotions and
advertising at each steptoward purchase
Retail store ads, Deals
Price appeals, Testimonials
Argumentative copy
Status, glamour appeals
Descriptive copy
Slogans, jingles, skywriting
ConativeRealm of motives.
Ads stimulate or direct
desires.
AffectiveRealm of emotions.
Ads change attitudes
and feelings
CognitiveRealm of thoughts.
Ads provide
information and facts.
Purchase
Conviction
Preference
Liking
no!ledge
A!areness
Point of purchase
!ast"chance# offers
$ompetitive ads
%mage# copy
Announcements
$lassified ads
Teaser campaigns
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%nverted Pyramid of 'ommunications Effects
"#$ A!areness
%#$ no!ledge
$ Liking
'($ Preference
'#$ Trial
($ )se
A f f e c t i v
e
C o n a t i v e
C o g n i t i v
e
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The *)/&)$ )pproach
Define
AdvertisingGoals for M easuring
Advertising
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'haracteristics of Objectives
¾ 'oncrete, &easurable 'ommunication
¾ +ell0*efined Target )udience
¾ 1ave an Eisting Benchmar! &easure
¾ "pecify *egree of 'hange "ought
¾ "pecific Time Period
Tas!s
Good Objectives Should Include:
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*)/&)$ *ifficulties
Legitimate roblems !uestionable Objections
Problems
process people use to
)ttitude changedoesn2t
"ales Objectives )re
#eeded
"ales are all thatreally counts, notcommunicationsobjectives
'ostly and
%mpractical The research andefforts cost more thenthe results are worth
%nhibition of
'reativity
$esponse 1ierarchy
*oesn2t always define
the
reach purchase3use
)ttitude 0 Behavior$elationship
always lead to change inactions or behavior
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)dvertising0Based View of 'ommunications
Advertising Through Media
Purchase*ehavior
no!ledge Preference Conviction
Acting on Consumers
Linear
Attitudes
+ne,-ay
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Budgeting *ecisions
Two major decisions
4 Establishing the si5eof the budget
4 )llocating the budget
Budgeting decisions involve determining how muchmoney will be spent on advertising and promotion
each year and how the monies will be allocated
&arginal )nalysis
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&arginal )nalysis
Advertising . Promotion in /
S a l e s
i n /
Sales 0ross 1argin
Ad2 E3penditure
Profit
Point A
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B)"%' Principles of &arginal )nalysis
Increase "pending %-6The increased cost is less than theincremental marginal8 return
Decrease "pending %-6The increased cost is more than
incremental marginal8 return
Hold "pending 9evel %-6
the
The increased cost is e(ual to the
incremental marginal8 return
P bl ith & i l ) l i
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Problems with &arginal )nalysis
¾ )ssumption6
"ales are the principalobjective advertising and3or
promotion
of
¾ )ssumption6
"ales are the result of
advertising and promotion andnothing else
)d ti i " l 3$ - ti
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)dvertising "ales3$esponse -unctions
A2 Concave,Do!n!ard *2 S,Shaped4unction
5esponse5esponse Curve
Range A Range B Range C Advertising E3pendituresAdvertising E3penditures
6ighSp
endin
g
LittleEffect
1iddle
Level
6ighEf fe
ct
7nitialSpend
i ng
LittleEffect
7 n c r e m e n t a l S a l e s
7 n c
r e m e n t a l S a l e s
Top *own Budgeting
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Top0*own Budgeting
The Promotion *udget 7s Set to
Stay -ithin the Spending Limit
Top 1anagement Sets the
Spending Limit
Top *o n )pp oaches
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Top0*own )pproaches
¾ The )ffordable ðod
+hat we have to spare+hat2s left to spend
¾ )rbitrary )llocation ðod
#o system "eemed li!e a good
¾ Percentage of "ales ðod
idea at the time
"et percentage of sales or amount per unit
¾ 'ompetitive Parity ðod
&atch competitor or industry average spending
¾ $eturn on %nvestment ðod
"pending is treated as a capital investment
Bottom :p Budgeting
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Bottom0:p Budgeting
Promotional +b8ectives Are Set
Activities to Achieve +b8ectives
Are Planned
Cost of Activities are *udgeted
Total *udget 7s Approved byTop 1anagement
Objective and Tas! ðod
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Objective and Tas! ðod
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Payout Planning
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Payout Planning
Eample of a three0year payout plan ; millions8
=DD
'umulative profit loss8 7@8 A>@8 >=?
To determine how much to spend,mar!eters develop a payout plan thatdetermines the investment value of theadvertising and promotion appropriation
)llocating the %&' Budget
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)llocating the %&' Budget
¾ 'lient3)gency Policies
¾ "i5e of ¾ &ar!et
¾ &ar!et
¾ &ar!et
&ar!etPotential
"hare /oals
"hare and Economies of "cale
¾ Organi5ational 'haracteristics
-actors )ffecting )llocation to
Various %&' Elements
"hare of Voice and )d "pending
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"hare of Voice and )d "pending