lecture 4-obectives-budgeting
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Setting Objectives, Planning and Budgeting for the IMC
Program
Setting Objectives, Planning and Budgeting for the IMC
Program
.
Focus &Coordination
Focus &Coordination
Plans &DecisionsPlans &
Decisions
Measurement& Control
Measurement& Control
Plans &DecisionsPlans &
Decisions
Focus &Coordination
Focus &Coordination
Value of Objectives
©
ObjectivesObjectives
Marketing ObjectivesMarketing 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 ObjectivesMarketing Objectives
Marketing Versus Communications Objectives
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.Vs.
Theeconomy
TheeconomyDistributionDistribution TechnologyTechnology PricePrice
Advertising and
promotion
Advertising and
promotionCompetitionCompetition Product
qualityProductquality
PricePriceTechnologyTechnologyDistributionDistribution
Productquality
ProductqualityCompetitionCompetition
Advertising and
promotion
Advertising and
promotion
Many Different Factors Affect Sales
$ALE$$ALE$
Direct Response Ads Seek Sales
AttainableAttainable
MeasurableMeasurable
SpecificSpecific
RealisticRealistic
Based on benchmarkmeasures
Based on benchmarkmeasures
Based on concrete,
measurable tasks
Based on concrete,
measurable tasks
Realistic/AttainableRealistic/Attainable
SpecifiedTime PeriodSpecified
Time Period
Target audience is well-defined
Target audience is well-defined
Characteristics of Good Objectives
ObjectivesObjectives
20% TrialCon
ativ
e
40% LikingAffec
tive
90% AwarenessCog
nitive
5% Use
70% Knowledge
25% Preference
90% Awareness
70% Knowledge
40% Liking
25% Preference
20% Trial
Pyramid of Communications Effects
AwarenessAwareness
Interest/ConsiderationInterest/Consideration
PreferencePreference
LoyaltyLoyalty
TrialTrial
ConversionConversion
PerceptionChange
DemandGeneration
RelationshipManagement
MarketingObjective
Integrated Marcom Funnel
Purchase Funnel as a Basis for Communication Objectives
• Based on premise that consumers rarely go directly from awareness to purchase but rather pass through a series of stages
• Intermediate stages are important and can be measured
• Need to understand where customers are in the purchase funnel and what needs to be done to impact their perceptions and decision making
• Objectives and strategies can be defined for each stage of the funnel
• Need to consider what IMC tools work best for impacting various stages including customer retention
Using Brand Contacts To Influence The Funnel
• Prioritize contact opportunities by understanding which contacts are most likely to influence various stages of the purchase funnel and to what degree
• What are the intrinsic values of each brand contact– TV ad may impact image or create an emotional bond
more effectively than an brochure– Time spent on web site will impact knowledge/interest
more than print ad
• How do brand contacts perform across different products– What contacts are most influential for different product
or service categories
Purchase Funnel
Budgeting for Marketing Communications
How do we determine the impact of our
marketing communications
?
How much money should we spend
on advertising and
promotion?
Balancing Objectives and Budgets
©
Dollars Goals
What we’re willing and
able to spend
What we need to achieve our
objectives
Marginal Analysis
Advertising / Promotion in $
Sale
s in
$
Point A
Profit
Sales Gross Margin
Ad. Expenditure
BASIC Principle of Marginal Analysis
Increase SpendingIncrease Spending
Decrease SpendingDecrease Spending
HoldSpending
HoldSpending
If the increased cost is less than the incremental (marginal) return
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 equal to the incremental (marginal) return.
If the increased cost is more than the incremental (marginal) return
If the increased cost is more than the incremental (marginal) return
Advertising Sales/Response FunctionsIn
crem
en
tal S
ale
s
Advertising Expenditures
A. Concave-Downward Response Curve
Incr
em
en
tal S
ale
s
Advertising Expenditures
Range A Range B Range C
B. S-Shaped Response Function
The Relationship Between Marketing Communication Expenditures and Sales
Incr
em
en
tal S
ale
s
Marketing Communication Expenditures
Range A Range B Range C
Hig
h S
pendin
gLi
ttle
Eff
ect
Init
ial Sp
endin
gLi
ttle
Eff
ect
Mid
dle
Level
Hig
h E
ffect
Range AAre you spending
enough money to have an impact?
Range B - spending is generating incremental
sales so continue to spend $
Range C – Point of diminishing return
should cut back on spending
The Promotion Budget Is Set to Stay Within the Spending Limit
The Promotion Budget Is Set to Stay Within the Spending Limit
Top Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending LimitTop Management Sets the Spending Limit
Top-Down Budgeting
Affordable Method
Affordable Method
Affordable Method
Affordable Method
Competitive Parity
Competitive Parity
Percentageof Sales
Percentageof Sales
Return onInvestmentReturn on
Investment
Arbitrary AllocationArbitrary Allocation
Percentageof Sales
Percentageof Sales
Competitive Parity
Competitive Parity
Arbitrary AllocationArbitrary Allocation
Top-Down Budgeting Methods
TopManagement
TopManagement
Total Budget Is Approved byTop Management
Total Budget Is Approved byTop Management
Cost of Activities are BudgetedCost of Activities are Budgeted
Activities to Achieve ObjectivesAre Planned
Activities to Achieve ObjectivesAre Planned
Promotional Objectives Are SetPromotional Objectives Are Set
Cost of Activities are BudgetedCost of Activities are Budgeted
Activities to Achieve ObjectivesAre Planned
Activities to Achieve ObjectivesAre Planned
Promotional Objectives Are SetPromotional Objectives Are Set
Bottom-Up Budgeting
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
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.)
Ways Companies Asses ROI for Marketing and Advertising Expenditures
66% - Incremental sales generated by marketing activities
57% - Changes in brand awareness
55% - Total sales revenue generated by marketing activities
55% - Changes in purchase intentions
51% - Changes in attitude toward the brand/company
49% - Changes in market share
34% - Cost per lead generated 34% - Ratio of advertising
costs to sales revenue 30% - Reach/frequency
achieved 25% - Gross ratings points
delivered 21% - Comparison of media
plan to media delivery 19% - Changes in financial
value of brand equity 17% - Increase in customer
lifetime value
Source: Survey by Association of National Advertisers