media strategies
DESCRIPTION
TRANSCRIPT
Media Strategyis about setting
Media Budgets
Budgeting Decisions
Two major decisions
• Establishing the size of the budget
• Allocating the budget
Budgeting decisions involve determining how much money will be spent on advertising and promotion each year and how the monies will be allocated
Marginal Analysis
A firm should continue to add to its budget as long as incremental expenditures are exceeded by the marginal revenue they generate
This theoretical underpinning assumes a functional relationship between advertising and sales
Marginal Analysis
Advertising / Promotion in $
Sa
les
in
$
Point A
Profit
Sales Gross Margin
Ad. Expenditure
BASIC Principles of Marginal Analysis
IncreaseIncrease Spending . . . IF:The increased cost is less than the incremental (marginal) return.
DecreaseDecrease Spending . . . IF:The increased cost is more than the incremental (marginal) return.
HoldHold Spending Level. . . IF:The increased cost is equal to the incremental (marginal) return.
Problems with Marginal Analysis
Assumption: Sales are the principal objective of advertising
and/or promotion.
Assumption: Sales are the result of advertising and
promotion and nothing else.
Other Problems with Marginal Analysis
– The determination of the shape, and the parameters of their relationship is difficult - linier / curved / S shaped
– The market is a dynamic environment and this relationship changes through time
– Apart from the other 3Ps Sales is also affected by
• The type of creative• The selection of media• The selection of markets
Advertising Sales/Response Functions
Incr
em
enta
l Sa
les
Advertising Expenditures
A. Concave-Downward Response Curve
Incr
em
enta
l Sa
les
Advertising ExpendituresRange A Range B Range C
B. S-Shaped Response Function
Hig
h S
pen
din
gL
ittle Effect
Initial S
pen
din
gL
ittle Effect
Mid
dle L
evelH
igh
Effect
Top Management Sets the
Spending Limit
The Promotion Budget Is Set to Stay Within the Spending Limit
Top-Down Budgeting
Top-Down Approaches Percentage of Sales Method
Set percentage of sales or amount per unit.• Does not consider the dynamic brand situations and leads to -
– established brands – over spending– young new entrants – under spending– repositioned brands – under spending
Competitive Parity Method Match competitor or industry average spending.
– Industry is spending at the optimum level – Each Company’s needs are not unique
The Affordable Method What we have to spare. What's left to spend. Sales are independent of / the cause of advertising expense
Return on Investment Method Spending is treated as a capital investment.
Arbitrary Allocation Method No system. ‘Seemed like a good idea at the time.’
Share of Voice and Ad Spending
Data Based Response Function Approaches of Budgeting
• Field experimentation
• Split-cable testing
• Regression analysis
• Optimal repetition frequency
Market Experimentation
Advertising spends are deliberately and systematically varied across areas. Sales are monitored over years and related to the spends
• Problems with market experimentation –– Expensive
» High cost of the experiment» Management decisions are delayed» Security costs» Excessive advertising and under advertising in some
areas– The experiment can not be controlled as desired – may be
an increase in trade / sales team efforts, etc
Split-cable TestingAn improvement over Field Experiments
– The ability to control exposure levels and monitor purchase is better
– Impact of other in-shop activities are monitored– Hidden from competitors– Sales are closely monitored
The problems– Very very expensive– Lengthy – conditions may change making results
obsolete – Experiment can be over controlled– The shape of the relationship between advertising and
sales must be determined– Masses of data to be analyzed– May not be representative of all markets– Does not give the effect of advtg. on trade
Regression Analysis
Based on historical patterns of sales and advertising – It is important to isolate the carry over impact of previous
advertising– Impact of creative and media mix should be considered– Impact of other marketing variables must be factored– The competitor’s advertising and other environmental factors must
be considered
The Problems– Calls for statisticians– Measuring the carry over effect of advertising is difficult– Lack of variability of advertising data – other than the seasonality
effect– Lack of data on confounding factors – competitor’s actions– Data may be faulty, inadequate, expensive to procure– Percentage of Sale method of budgeting may have been adopted
Total Budget Is Approved byTop Management
Bottom-Up Budgeting
Cost of Activities are Budgeted
Activities to Achieve ObjectivesAre Planned
Promotional Objectives Are Set
Objective and Task Method
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)
Estimate Costs Associated with Tasks(create awareness of new product among 20 percent of target market)
Estimate Costs Associated with Tasks(create awareness of new product among 20 percent of target market)
Optimal Repetition Frequency Number of consumers to be Reached to achieve the sales objective
X
Number of ad exposures - Frequency needed for each consumer in a purchase cycle for the advertising objective to be met.
xCost per exposure ( unit cost
divided by readership)
= Media Budget
Deriving Target Reach• Derived from the sales (incremental) objective
Determining Effective Frequency level – minimum number of exposures in a purchase cycle
• 1st exposure experience- ‘What is it?’ response• 2nd exposure experience ’What of it?’ response• 3rd exposure experience ‘Ah I have seen it before’ response
Optimal Frequency and Wear-out
Wear- Out : sets in with too much repetition. Recall, Attitude and Purchase Intention levels off / declines
‘Wear-out’ is the maximum number of insertions for any particular ad execution
– Because people get irritated and less attentive to repetitive advertising
– Wear-out is greater when the message is old, simple and humorous
Wear-out is combated by – spacing commercials– using multiple media– with varied creative executions (pool-outs)
More Frequency is Required….• More frequency is needed in certain
situations– A new brand / campaign (more interesting) – Message is more complex – The message is more reliant on mood and
imagery– Brand associations are to be developed – people,
feelings –Transformational Advertising
• Wear in and wear out is higher » when people are more involved with the
product category / experts » When it is a largely rational ad
Payout PlanningTo determine how much to spend,
marketers develop a payoutpayout planplan that determines the investment value of the advertising and promotion appropriation
Example of a three-year payout plan ($ millions)
Year 1 Year 2 Year 3Product sales 15.0 35.50 60.75Profit contribution(@$.50 per case) 7.5 17.75 30.38Advertising/promotions 15.0 10.50 8.50Profit (loss) (7.5) 7.25 21.88Cumulative profit (loss) (7.5) (0.25) 21.63
Allocating the IMC Budget
Client/Agency Policies Size of Market Market Potential Market Share Goals Market Share and Economies of Scale Organizational Characteristics
Factors Affecting Allocation to Various IMC Elements