1. Marketing Management
20th of June 2011

2. Communicating Customer Value
Integrated Marketing Communications Strategy

3. Total Promotion Budget and Mix

4. Setting Total Promotion Budget
How much to spend on promotion??!
How does a company decide on its promotion budget?
Four common methods to set total budget for advertising
Affordable Method
Percentage of Sales Method
Competitive-Parity Method
Objective and Task Method

5. Setting Total Promotion Budget
Affordable Method
This involves setting the promotion budget at levels management thinks the company can afford
Usually used by small businesses with limited resources
This method ignores the effects of promotion on sales
Places promotion last among spending priorities even when it’s critical
It leads to an uncertain annual promotion budget
Long range market planning is thus difficult
It often results in under spending; however, it can lead to over spending

6. Setting Total Promotion Budget
Percentage of Sales Method
Involves the setting of promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price
Based on availability of funds and not opportunities
Advantages of this method:
Simple and easy to use
Enables the construction of relationship behaviour – between promotion spending, selling price, and profit per unit
Disadvantages of this method:
Wrongfully views sales as the cause of promotion rather than result of promotion
Strong brands with higher sales have biggest ad budgets
Prevents increased spend to advance a turnaround in low sales
Long range planning is difficult
Relies on past and what competitors are doing

7. Setting Total Promotion Budget
Competitive-Parity Method
This is the setting of your promotion budget to match competitors’ budgets
Get industry promotion spending estimates from publications and set based on industry average
Advantages:
Prevents promotional wars with competitors
This involves the collective wisdom of the industry
Disadvantages:
Competition doesn’t have all the answers. What if wrong?
No two companies are the same. Own promotional needs.
No evidence that competitive parity prevents promotional wars.

8. Setting Total Promotion Budget
Objective and Task Method
Involves setting the budget based on what it wants to achieve with its promotions
It’s the most logical budget setting method
This method entails:
Defining specific promotion objectives
Determining the tasks needed to achieve objectives
Estimating the costs of performing the tasks
The total sum of costs is the proposed budget
Advantages:
Accountability for spend through assumptions measured via results achieved
Disadvantages:
It’s difficult to use – difficult to know which objectives will deliver

9. Shaping the Promotion Mix
Nature of Each Promotion Tool
Please refer to textbook Pages 440 – 442
Promotion Mix Strategies
Push or Pull Promotion Mix Strategies
Push Strategy: A promotion strategy which utilises the sales force and trade promotion to push products through the channels. Producers promote the products to channel members who promote it to consumers.
Pull Strategy: A promotion strategy which relies on spending plenty on advertising and consumer promotion to induce final consumers to purchase products. This creates a demand vacuum which pulls the product through the channels

10. Promotion Mix Strategies

11. Promotion Mix Strategies

12. Promotion Mix Strategies
A Push Strategy uses personal selling and trade promotions
A Pull Strategy uses advertising and consumer promotion
Industrial goods companies mainly use push strategies
Direct-marketing companies mainly use pull strategies
Most large companies will use a combination of both pull and push strategies
Considerations when designing promotion mix strategies (see pages 443 and 444):
Type of product and market
Product life cycle stage

13. Integrating the Promotional Mix
Checklist for integrating marketing communications, (see pages 444 and 445)
Start with customer touch points
Analyze trends – internal and external
Audit pockets of communication spending
Gather together to plan communications
Create compatible themes, tones, quality across communication media
Create performance measures shared by all communication elements
Appoint a person responsible for persuasive communication efforts

14. See you next time.
Cheers Guys!