McGraw-Hill/Irwin Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed 7 Establishing Objectives and Budgeting for the Promotional Program

7-2 Chapter Focus Types of objectives Purpose of objectives Role of objectives in: development implementation and evaluation of IMC program

7-3 Objectives Written in the marketing plan What is to be accomplished by the marketing program

7-4 Value of Objectives Measurement/Evaluation Planning & Decision Making Communications Specific Objectives Among agencies Budgeting; creative / media Benchmark for success / failure

7-5 Characteristics of Objectives Specific measurable outcomes Well-defined target audience Realistic & attainable Quantifiable Timeframe EXAMPLE: Increase sales of Prada handbags by 5% in NYC among current Prada customers by December 2012

7-6 IMC Objectives Statements of what various aspects of IMC program will accomplish Consumer promotion will increase trial for new product X Advertising will increase awareness for new product X Trade promotion will get distribution for new product X

7-7 Sales vs. Communications Objectives Sales-Oriented Objectives Primary goal is increased sales or market share Spending should produce quantifiable results Investment of firm’s resources requires economic justification (ROI) Communications Objectives Goal is creating favorable predispositions Increased brand knowledge, interest, favorable attitudes and image Immediate response not expected

7-8 Problems with Sales Objectives Won’t work in isolation Ad effects take time (carryover effect) Hard to determine precise relationship between advertising and sales Offers little guidance to those planning and developing the promotional program Need both types 9 months Not only factor Need both types

7-9 Factors Influencing Sales CompetitionTechnology The economy Product quality Price Distribution Advertising & promotion It’s not just advertising that affects sales!

7-10 Sales Objectives Most Appropriate Sales promotion tools generate short term increase in sales

7-11 Sales Objectives Most Appropriate Direct response advertising evaluates effectiveness on the basis of sales

7-12 Communications Objectives Primary role of IMC programs is to communicate Planning should be based on communications objectives

7-13 Communications Tasks Purchase Purchase intentions Favorable attitudes and image Brand knowledge and interest Brand awareness Conative (behavioral) Ads stimulate or direct desires Affective (feeling) Ads change attitudes and feelings Cognitive (thinking) Ads provide information and facts

7-14 Communications Objectives Example Ad creates favorable impressions about the company

7-15 Communications Effects Pyramid 20% Trial Conative 5% Use 90% Awareness Cognitive 70% Knowledge/comprehension 40% Liking Affective 25% Preference Behavioral Feeling Thinking Can have different objectives for different target audiences (e.g. Caribou Coffee) % of prospective customers decline

7-16 Problems With Communications Objectives Translating sales goals into communications objectives is difficult What is adequate level of awareness, knowledge, liking, preference, or conviction? No formulas or guidelines SO … you may want a 20% increase in sales but do you need a 60% or 90% increase in awareness?

7-17 Benchmark Measures To set objectives, need to know consumers’ benchmark measures Where they are now Done thru research Provides basis for determining communications task e.g. high awareness but negative perceptions

7-18 Zero-based Communication Planning Determine what tasks need to be done Which marketing communications functions should be used? advertising? publicity?

7-19 Utilizing a Variety of Media Two tasks: provide funding and draw visitors to site

7-20 Balancing Objectives and Budgets What we’re willing and able to spend What we need to achieve with our objectives Objectives must be set with budget in mind

7-21 Establishing the Budget To whom should we allocate the monies? How much should we spend on advertising and promotion? New budget formulated every year

7-22 Budget Decisions in a Down Economy In a recession, advertising budgets are the first to be cut. But, firms that increased advertising during recession, experienced higher sales both during and after the recession.

7-23 Top-Down vs. Build-Up Budgeting Budgeting approaches vary according to size and sophistication of the company

7-24 Top-Down Budgeting Methods Top Management Top Management Affordable Method Competitive Parity Percentage of Sales Return on Investment Arbitrary Allocation “ all you can afford ” “ way it’s always been done ” Most common in large firms Same percentage competitor allocates Media rated on measurability

7-25 Build Up Approach Define objectives Reevaluate objectives Determine tasks required Estimate required expenditures Monitor performance Objective and Task Method:

7-26 Allocating the Budget IMC Elements Away from traditional media to Internet and Sales Promotion Client /Agency Policies Preferences for certain media Market Size New York City vs. Birmingham Market Potential Higher potential – more funding

7-27 Share of Market / Voice Brand A 75% Brand B 25% Share of Market ($ Sales) Brand A 50% Brand B 50% Share of Voice ($ Advertising)

7-28 Market Share Goals Decrease–find a defensible niche Increase to defend Attack with large SOV premium Maintain modest spending premium Competitor’s Share of Voice High Low HighLow Your Share of Market ($ Sales) ($ Advertising)

7-29 Economies of Scale Advertising works harder for well-established brands, so lower expenditure is required Larger companies: Get better advertising rates Advertise several products jointly Get better space positions in publication Most recent studies dispute these findings