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Setting Objectives
There are obstacles that get in the way of setting IMC program objectives:
• Complex marketing situations
• Conflicting perspectives
• Uncertainty over resources
Textbook
Pages 216
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Value of Objectives
Specific objectives are the foundation upon which other important decisions rest. Setting
specific IMC program objectives is so important to do:
• Communications: Setting objectives facilitates coordination of the various groups
working on the campaign. Many problems can be avoided if all parties have written,
approved objectives to guide their actions and serve as a common base for discussing
issues related to the promotional program.
• Planning and Decision Making: Specific promotional objectives guide development of
an integrated marketing communications plan, as well as decisions related to creative
options, media selection, and budget allocation.
• Measurement and Evaluation: Objectives provide a benchmark against which the
success or failure of the promotional campaign can be measured. Most organizations
are concerned about the return on their promotional investment; comparing actual
performance against measurable objectives is the best way to determine if the return
justifies the expense.
Textbook
Pages 217 - 218
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Characteristics of Objectives
These are characteristics of good communication and promotional objectives:
• Specific: A clear definition of what is to be achieved by the program.
• Measurable: Outcomes such as sales volume, market share, profits, or return on
investment.
• Quantifiable: Delineates the target market and notes the time frame for accomplishing
the goal (often one year).
• Realistic and Attainable… as in “increase sales by 10% during the next 12 months.”
Textbook
Pages 218 - 219
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Sales vs. Communications Objectives
This chart presents the differences between marketing and communications objectives:
Textbook
Pages 219 - 223
Sales Objectives
• 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
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Problems with Sales Objectives
These are some of the problems related to sales objectives:
Textbook
Pages 220 - 221
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
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Factors Influencing Sales
These are the various factors that can affect sales:
Textbook
Pages 220 - 221 / Figure 7 - 1
Competition
Technology
Economy
Product Quality
Price
Distribution
Advertising &
Promotion
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Where Sales Objectives are Appropriate
This visual presents a packaging design that resulted in a 15.7 percent increase in sales. Some
promotion efforts are designed to induce an immediate behavioral response.
Textbook
Pages 221 - 222 / Exhibit 7 - 3
To celebrate its 100th anniversary, Kayem Foods
changed the design of their frankfurter
package.
Within 12 weeks of the introduction of the
new copy and label, regional sales rose by 15.7
percent, which prompted a national rollout.
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Where Sales Objectives are Appropriate
This visual shows a direct-response ad that Mercury Insurance Group uses to sell products
and services. Direct-response advertising often evaluates its effectiveness on the basis of
sales. Merchandise or services are advertised to customers, who then make purchases by
mail, on the Internet, or by calling a toll-free number.
Textbook
Pages 221 - 222 / Exhibit 7 - 5
Sales objectives may also be
appropriate for TV ads if the ad is
the only form of communication
and promotion being used, and
the response is immediate.
Discount coupons are used to
increase sales during a particular
time period, so sales objectives
are appropriate here as well.
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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.
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Communications Objectives
This visual shows a hierarchy of effects model and the steps consumers move through before
making a purchase:
Textbook
Page 223
Purchase
Purchase intentions
Favorable attitudes and
image
Brand knowledge
and interest
Brand awareness
Conative (behavioral)
Ads stimulate or
direct desires
Affective (feeling)
Ads change attitudes and
feelings
Cognitive (thinking)
Ads provide
information and facts
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Creating an Image
This is an ad that Consolidated Edison uses to create an image of its company.
Textbook
Pages 223 / Exhibit 7 - 6
Some advertisements do not require immediate
action on the part of the consumer, but encourage
consumers to consider the brand when they enter
the market for products in this category.
In this case, Consolidated Edison creates favorable
images of the company by linking pictures of children
to Con Ed workers in action.
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Communications Effects Pyramid
These are the effects of communications on consumer behavior:
Textbook
Pages 223 - 224 / Figure 7 - 2
20% Trial
5% Use
90% Awareness
70% Knowledge/Comprehension
40% Liking
25% Preference
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GfK Purchase Funnel
GfK Purchase Funnel is used by many in the automobile industry as a diagnostic model of
consumer decision making.
Textbook
Pages 224 - 227 / Figure 7 - 3
In essence, it is an inverse of
the communications effects
pyramid, and shows that 90%
awareness funnels down to 5%
purchase/use.
15. There are two major problems with translating sales goals into communications objectives:
• Determining what an adequate level is for customer awareness, knowledge, liking,
preference, and conviction.
• Having no formulas or guidelines that provide this information. A promotional
manager must base decisions on personal experience, as well as the marketing
history of this and similar brands.
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Problems with Communications Objectives
Textbook
Pages 224 - 227
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The DAGMAR Approach
This is the DAGMAR model and the four stages of the communication process:
Textbook
Pages 226 - 227
Define
Advertising
Goals for
Measuring
Advertising
Results Action
Awareness
Conviction
Comprehension
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Characteristics of Objectives
The basic characteristics of a good objective:
Textbook
Pages 227 - 228
Concrete and Measurable Tasks
Benchmark Measures
Well-Defined Audience
Specified Time Period
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Criticisms of DAGMAR
This visual summarizes the criticisms of the DAGMAR approach:
Textbook
Pages 228 - 229
Costly and Time Consuming
Problems with Response Hierarchy
Only Relevant Measure is Sales
Inhibits Creativity
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Utilizing a Variety of Media
This visual shows how the San Diego Zoo attempts to attract visitors through a variety of
media:
Textbook
Pages 230 - 231 / Exhibit 7 - 10
• Provide funding for the society’s programs
• Maintain a large and powerful base of
supporters for financial and political
strength
• Educate the public about the society’s
programs
• Maintain a favorable image on a local,
regional, national, and international level
• Draw visitors
To achieve these objectives, the society’s IMC program employs a variety of integrated
marketing communication tools, including the website shown on this slide.
Note: This is a good time to show some of the San Diego Zoo and Wild Animal Park videos on
the accompanying CD.
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Balancing Objectives and Budgets
This visual shows the delicate balancing act between how much money a company is willing
to spend on advertising, and how much money should be spent to achieve advertising goals.
While establishing marketing objectives is an important part of the planning process, the
limitations of the budget are important too. No organization has an unlimited budget, so
objectives must be set with the budget in mind.
Textbook
Page 231
What we’re willing
and able to spend
What we need to
achieve our objectives
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Establishing the Budget
These are the two promotional budgeting decisions that every organization must make:
Textbook
Page 231
To whom should we
allocate the monies?
How much should we
spend on advertising
and promotion?
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Budget Decisions in a Down Economy
During a recession, advertising and promotional budgets are the first to be cut. The best
defense is a good offense. This is the opposite of what often occurs, because many managers
fail to realize the value of advertising and promotion. They see it merely as an expense,
rather than an investment.
Textbook
Page 233 / Exhibit 7 - 11
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Marginal Analysis
This visual shows a graphical representation of the concept of marginal analysis. As
advertising/promotional expenditures increase, sales and gross margins also increase, but
then level off. Profits are a result of the gross margin minus advertising expenditures.
Textbook
Pages 235 - 236 / Figure 7 - 7
Using this theory to establish a budget, a firm would continue to spend advertising dollars as
long as the revenues created by the expenditures exceeded the advertising costs. As shown
on the graph, the optimal expenditure level is the point at which costs equal the revenues
they generate (point A).
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Weakness of Marginal Analysis
The two basic assumptions about marginal analysis that limit its usefulness:
Textbook
Pages 235 - 236
Sales are determined
solely by advertising
and promotion.
Sales are a direct
measure of advertising
and promotions efforts.
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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
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Budget Adjustments
This chart presents situations in which advertising budgets should be maintained as-is,
increased, or decreased.
Textbook
Pages 235 - 236 / Figure 7 - 7
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
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Sales Response Models
The two models of the advertising/sales response function.
Textbook
Pages 236 - 237 / Figure 7 - 8
IncrementalSales
Advertising Expenditures
A. Concave-Downward Response
Curve
IncrementalSales
Advertising Expenditures
Range A Range B Range C
B. S-Shaped Response Function
HighSpending
LittleEffect
InitialSpending
LittleEffect
MiddleLevel
HighEffect
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Factors Influencing Advertising Budgets
These are some of the additional factors that should be considered when establishing an
advertising budget.
Textbook
Pages 237 - 238 / Figure 7 - 9
Purchase
frequency
Product
life cycle
Product
durability
Differentiation
Product
price
Hidden product
qualities
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Top-Down vs. Bottom-Up Budgeting
This chart outlines the top-down and bottom-up approaches to budgeting.
Promotion objectives are set
Bottom-Up Budgeting
Activities needed to achieve objectives
are planned
Costs of promotion activities are
budgeted
Total promotion budget is approved by
top management
Top management sets the spending limit
Top-Down Budgeting
Promotion budget set to stay within
spending limit
Textbook
Pages 238 - 239 / Figure 7 - 11
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Top-Down Budgeting Methods
These are examples of various top-down budgeting methods.
Textbook
Pages 238 - 245
Affordable
Method
Competitive
Parity
Percentage
of Sales
Return on
Investment
Arbitrary
Allocation
Top
Management
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Build-Up Approaches
Objective and Task Method is one build-up approach to budgeting and consists of three
steps:
• 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
The total budget is based on the accumulation of these costs.
Textbook
Page 246
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Implementing the Objective and Task Approach
These are the steps of objective and task budgeting, which reflects a bottom-up approach.
Textbook
Pages 246 - 247
Isolate objectives
Determine tasks required
Estimate required expenditures
Monitor
Reevaluate objectives
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Payout Planning
This chart illustrates that the first months of a new product’s introduction typically require
heavier-than-normal advertising and promotion to stimulate product awareness and
subsequent trial. To determine how much to spend, marketers often develop a payout plan
that projects revenues the product will generate, as well as the costs it will incur, over two to
three years.
Textbook
Pages 247 - 248 / Figure 7 - 19
A three-year payout plan is shown on this slide. The product will lose money in year 1,
almost break even in year 2, and show a profit by the end of year 3.
Note that the cost of advertising and promotion is highest in year 1, and declines in years 2
and 3.
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Quantitative Models
Quantitative budgeting models are available, but have met with limited success. Generally,
these methods employ computer simulation models involving statistical techniques, such as
multiple regression analysis, to determine the relative contribution of the advertising budget
to sales.
Textbook
Page 249
Because of problems associated with these
methods, their acceptance has been limited.
As these methods are improved and refined,
they may achieve more widespread success.
Computer Simulation
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Allocating to IMC Elements
This is how advertising expenditures were allocated in between 2008 and 2009. Advertisers
distributed their funds among the various advertising venues and those allocations shifted
over time.
Textbook
Pages 250 - 253 / Figure 7 - 23
Note that many advertisers are shifting
from traditional advertising media to sales
promotions targeted to both consumers
and the trade.
As this figure shows, radio and magazines
took the hardest hits.
The only media showing increases during
this time frame were for the Internet
(display advertising) and free-standing
inserts (FSIs).
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Other Budget Allocation Factors
These are other factors that may influence a company’s budget allocation decisions:
• Client/Agency Policies: There may be disagreement over whether monies should go
to sales promotions or advertising, creative talent or specific media. Decisions will
also be impacted by past successes.
• Market Size: Smaller markets are often easier and less expensive to reach.
• Market Potential: A market with low sales but high potential may be a candidate for
additional appropriations.
• Market Share Goals: Does the company want to maintain or increase market share?
As a rule, new brands receive higher-than-average advertising support. Older, mature
brands have reduced advertising support. Well-established brands require a lower
expenditure.
Textbook
Page 251 - 252
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Other Budget Allocation Factors
This chart outlines strategies for advertising spending based on company or brand market
share and a competitor’s share-of-voice (SOV).
Textbook
Pages 252 / Figure 7 - 22
Decrease–find a
defensible niche
Increase to defend
Attack with large
SOV premium
Maintain modest
spending premium
Competitor’s
ShareofVoice
HighLow
HighLow
Your Share of Market
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Economies of Scale
These are three propositions related to the economies of scale in advertising:
Textbook
Page 252
There is no evidence to support any of these!
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.
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Organizational Characteristics
The following factors influence budget allocation decisions, although they may vary from one
organization to another, and each influences the amount assigned to advertising and
promotion.
• Organization’s Structure: Centralized versus decentralized, formalization, and
complexity.
• Power and Politics: Including the level of interaction between functional
departments.
• Use of Expert Opinions: For example, advise from consultants, or trade and
academic journals.
• Characteristics of Decision Maker: Preferences and experience.
• Approval and Negotiation Channels: How many approval levels, approval
limitations, and so forth.
• Pressure on senior managers to arrive at the optimal budget… more important than
ever in an economic downturn.
Textbook
Pages 252 - 253