Copyright © 2012 McGraw-Hill Companies, Inc., All right reversedMcGraw-Hill/Irwin

07

Establishing Objectivesand Budgeting for thePromotional Program

Characteristics of Objectives

Specific

Measurable

Quantifiable

Attainable

Realistic

7-2

Sales vs. Communications Objectives

SalesObjectives

•Primary goal is increased sales

•Requires economic justification

•Should produce quantifiable results

Communications Objectives

• Increased brand knowledge, interest, favorable attitudes and image

• Immediate response not expected

•Goal is creating favorable predispositions

7-3

Factors Influencing Sales

Competition Technology

The economy

Product quality

PriceDistribution

Advertising & promotion

7-4

Communications Effects Pyramid

20% TrialCon

ativ

e 5% Use

90% AwarenessCog

nitive

70% Knowledge/comprehension

40% LikingAffec

tive 25% Preference

7-5

GfK Purchase Funnel

7-6

The DAGMAR Approach

Define

Advertising

Goals for

Measuring

Advertising

Results ActionAction

AwarenessAwareness

ConvictionConviction

ComprehensionComprehension

7-7

Advertising-Based View of Marketing

Acting on Consumers

Ads

7-8

Marginal Analysis

7-9

Budget Adjustments

Increase SpendingIncrease Spending If cost is less than the

marginal revenue generatedIf cost is less than the

marginal revenue generated

HoldSpending

HoldSpending

If the cost is equal to the marginal revenue generated

If the cost is equal to the marginal revenue generated

Decrease SpendingDecrease Spending

If the cost is more than the marginal revenue generatedIf the cost is more than the

marginal revenue generated

7-10

Sales Response ModelsIn

crem

en

tal S

ale

s

Advertising Expenditures

A. Concave-Downward Response Curve

Incr

em

en

tal S

ale

s

Advertising ExpendituresRange A Range B Range C

B. S-Shaped Response Function

Hig

h S

pendin

gLi

ttle

Eff

ect

Init

ial Sp

endin

gLi

ttle

Eff

ect

Mid

dle

Level

Hig

h E

ffect

7-11

Factors Influencing Advertising Budgets

Purchasefrequency

Product life cycle

Productdurability

Differentiation

Productprice

Hidden productqualities

7-12

Top-Down vs. Bottom-Up Budgeting

7-13

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

7-14

Implementing the Objective and Task Approach

Isolate objectivesIsolate objectives

Reevaluate objectivesReevaluate objectives

Determine tasks requiredDetermine tasks required

Estimate required expendituresEstimate required expenditures

MonitorMonitor

7-15