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7. Establishing Objectives and Budgeting for the Promotional Program. Setting Objectives. Obstacles to setting objectives Complex marketing situations Conflicting perspectives Uncertainty over resources. Value of Objectives. Measurement/Evaluation. Planning & Decision Making.

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7

Establishing Objectivesand Budgeting for thePromotional Program


Setting objectives
Setting Objectives

  • Obstacles to setting objectives

    • Complex marketing situations

    • Conflicting perspectives

    • Uncertainty over resources


Value of objectives
Value of Objectives

Measurement/Evaluation

Planning & Decision Making

Communications

Specific Objectives


Characteristics of objectives
Characteristics of Objectives

Specific

Attainable

Measurable

Realistic

Quantifiable


Sales vs communications objectives
Sales vs. Communications Objectives

SalesObjectives

Communications Objectives

  • Primary goal is increased sales

  • Requires economic justification

  • Should produce quantifiable results

  • Increased brand knowledge, interest, favorable attitudes and image

  • Immediate response not expected

  • Goal is creating favorable predispositions


Problems with sales objectives
Problems with Sales Objectives

Won’t work in isolation

Ad effects take time

Hard to determine precise relationship between advertising and sales

Offers little guidance to those planning and developing the promotional program


Factors influencing sales
Factors Influencing Sales

Technology

Competition

The economy

Advertising & promotion

Product quality

Distribution

Price




Test your knowledge
Test Your Knowledge

Which of the following statements about communications objectives is true?

A) Sales goals are easily translated 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 for planning, executing, and evaluating promotional programs.

D) Marketing managers often do not recognize the value of setting communications objectives.


Communications objectives
Communications Objectives

Conative (behavioral)

Ads stimulate ordirect desires

Affective (feeling)

Ads change attitudes and feelings

Cognitive (thinking)

Ads provide

information and facts

Purchase

Purchase intentions

Favorable attitudes and image

Brand knowledgeand interest

Brand awareness



Communications effects pyramid
Communications Effects Pyramid

5% Use

Conative

20% Trial

25% Preference

Affective

40% Liking

70% Knowledge/comprehension

Cognitive

90% Awareness



Problems with communications objectives
Problems With Communications Objectives

  • Translating sales goals into communications objectives

    • What is adequate level of awareness, knowledge, liking, preference, or conviction?

    • No formulas or guidelines


The dagmar approach
The DAGMAR Approach

Awareness

Comprehension

Conviction

Action

Define

Advertising

Goals for

Measuring

Advertising

Results


Characteristics of objectives1
Characteristics of Objectives

Concrete, measurable tasks

Well-definedaudience

Benchmarkmeasures

Specifiedtime period


Criticisms of dagmar
Criticisms of DAGMAR

Problems with response hierarchy

Only relevant measure is sales

Costly and time consuming

Inhibits creativity


Advertising based view of marketing
Advertising-Based View of Marketing

Ads

Acting on Consumers



Balancing objectives and budgets
Balancing Objectives and Budgets

What we’re willing and able to spend

What we need to achieve our objectives


Establishing the budget
Establishing the Budget

To whom should we allocate the monies?

How much should we spend on advertising and promotion?


Budget decisions in a down economy
Budget Decisions in a Down Economy

When times get tough, advertising and promotional budgets are the first to be cut



Weaknesses of marginal analysis
Weaknesses of Marginal Analysis

Sales are a direct measure of advertising and promotions efforts.

Sales are determined solely by advertising and promotion.


Test your knowledge1
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


Budget adjustments
Budget Adjustments

Increase Spending

If cost is less than the marginal revenue generated

Hold

Spending

If the cost is equal to the marginal revenue generated

Decrease Spending

If the cost is more than the marginal revenue generated


Sales response models
Sales Response Models

A. Concave-Downward Response Curve

B. S-Shaped Response Function

Incremental Sales

Incremental Sales

Initial Spending

Little Effect

High Spending

Little Effect

Middle Level

High Effect

Range A

Range B

Range C

Advertising Expenditures

Advertising Expenditures


Factors influencing advertising budgets
Factors Influencing Advertising Budgets

Hidden productqualities

Product life cycle

Productprice

Productdurability

Purchasefrequency

Differentiation



Top down budgeting methods
Top-Down Budgeting Methods

AffordableMethod

Return onInvestment

ArbitraryAllocation

CompetitiveParity

Percentage of Sales

Top

Management


Build up approaches
Build-Up Approaches

  • Objective and Task Method

    • Define communications objectives to be accomplished

    • Determine specific strategies and tasks needed to attain them

    • Estimate costs associated with performance of these strategies and tasks


Implementing the objective and task approach
Implementing the Objective and Task Approach

Isolate objectives

Determine tasks required

Estimate required expenditures

Monitor

Reevaluate objectives



Quantitative models
Quantitative Models

Computer Simulation



Other budget allocation factors
Other Budget Allocation Factors

  • Budgeting Factors

    • Client/agency policies

    • Market size

    • Market potential

    • Market share goals


Share of voice effect
Share of Voice Effect

Decrease–find a defensible niche

Increase to defend

High

Competitor’s

Share of Voice

Attack with large SOV premium

Maintain modest spending premium

Low

Low

High

Your Share of Market


Economies of scale
Economies of Scale

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.

There is no evidence to support any of these!


Organizational characteristics
Organizational Characteristics

  • Factors that influence advertising and promotion budgets

    • The organization’s structure

    • Power and politics

    • The use of expert opinions

    • Characteristics of the decision maker

    • Approval and negotiation channels

    • Pressure on senior managers to arrive at the optimal budget


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