1. Establishing Objectives and Budgeting for the Promotional Program © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

2. Focus & Coordination Focus & Coordination Plans & Decisions Plans & Decisions Measurement & Control Measurement & Control Plans & Decisions Plans & Decisions Focus & Coordination Focus & Coordination Value of Objectives Objectives

3. Attainable Measurable Specific Realistic Specific Measurable Attainable Realistic Not Mutually Exclusive Characteristics of Objectives Objectives

4. Advertising Can Shape Corporate Images

5. Marketing 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 Objectives Marketing Versus 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.

6. The economy The economy Distribution Technology Price Advertising and promotion Competition Product quality Product quality Price Technology Distribution Product quality Product quality Competition Advertising and promotion Many Different Factors Affect Sales $ ALE $

7. Direct Response Ads Seek Sales

8. Some Communications Use Nontraditional Methods

9. Sales As Advertising Objectives

10. Test Your Knowledge Which of the following statements about communications objectives is true? A)It is easy to translate sales goals into communications objectives. B)It can be difficult to determine the relationship between communications objectives and sales performance. C)Communications objectives cannot serve as operational guidelines to the planning, execution, and evaluation of the promotional program. D)Marketing managers do not recognize the value of setting communications objectives.

11. Advertising and Movement Toward Action Teaser campaigns Affective Realm of emotions. Ads change attitudes and feelings Cognitive Realm of thoughts. Ads provide information and facts. Conative Realm of motives. Ads stimulate or direct desires. “Image” copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Competitive ads Argumentative copy Point of purchase Retail store ads, Deals “Last-chance” offers Price appeals, Testimonials Purchase Conviction Preference Liking Knowledge Awareness

12. Image Ads Can Have a Strong Effect on Preference

13. 20% Trial Conative 40% Liking Affective 90% Awareness Cognitive 5% Use 70% Knowledge 25% Preference 90% Awareness 70% Knowledge 40% Liking 25% Preference 20% Trial Pyramid of Communications Effects

14. The DAGMAR Approach D efine A dvertising G oals for M easuring A dvertising R esults Action Awareness Conviction Comprehension Conviction

15. Pros and Cons of DAGMAR Problems with the response hierarchy Assessment of campaign effectiveness ProsCons Sales objectives Practicality and cost Inhibition of creativity Value of communication- based objectives Measurement of stages Less subjective Problems with the response hierarchy Assessment of campaign effectiveness Sales objectives Practicality and cost Value of communication- based objectives Measurement of stages Less subjective

16. Advertising Through Media Acting on Consumers Advertising-Based View of Communications

17. Balancing Objectives and Budgets Dollars Goals What we’re willing and able to spend What we need to achieve our objectives

18. Test Your Knowledge In marginal analysis all of the following should be considered EXCEPT: A)sales B)fixed costs of advertising C)advertising expenditures and other variable costs D)gross margin E)net worth

19. Marginal Analysis Advertising / Promotion in $ Sales in $ Point A Profit Sales Gross Margin Ad. Expenditure

20. BASIC Principle of Marginal Analysis Increase Spending Decrease Spending Hold Spending Hold Spending 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 more than the incremental (marginal) return

21. Assumptions for Marginal Analysis Sales are the principal objective of advertising and promotion Sales are the result of advertising and promotion, and nothing else

22. Advertising Sales/Response Functions Incremental Sales Advertising Expenditures A.Concave- Downward Response Curve Incremental Sales Advertising Expenditures Range ARange BRange C B.S-Shaped Response Function High Spending Little Effect Initial Spending Little Effect Middle Level High Effect

23. The Promotion Budget Is Set to Stay Within the Spending Limit Top Management Sets the Spending Limit Top-Down Budgeting

24. Affordable Method Competitive Parity Percentage of Sales Percentage of Sales Return on Investment Return on Investment Arbitrary Allocation Percentage of Sales Percentage of Sales Competitive Parity Arbitrary Allocation Top-Down Budgeting Methods Top Management Top Management

25. Total Budget Is Approved by Top Management Total Budget Is Approved by Top Management Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Activities to Achieve Objectives Are Planned Promotional Objectives Are Set Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Activities to Achieve Objectives Are Planned Promotional Objectives Are Set Bottom-Up Budgeting

26. Test Your Knowledge Well known brand name products do not receive incremental advantages from increased dollar expenditures on advertising. Once the ad hits the market, subsequent budget increases result in little or no incremental gains. This might best be explained by: A)arbitrary allocation B)the objective and task method C)competitive parity D)an S-shaped response E)rapidly diminishing returns

27. 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.)

28. Media Expenditures

29. Are There Economies of Scale? No evidence to support this! Proposition I Larger firms can support their brands with lower relative advertising costs than smaller firms. Proposition II The leading brand in a product group enjoys lower advertising costs per sales dollar than do other brands. Proposition III There is a static relationship between advertising costs per dollar of sales and the size of the advertiser.

30. Ad Spending and Share of Voice 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