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07 Establishing Objectives and Budgeting for the Promotional Program McGraw-Hill/Irwin Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed Characteristics of Objectives Specific Attainable Realistic Measurable Quantifiable 7-2 Sales vs. Communications Objectives 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 7-3 Factors Influencing Sales Competition Technology The economy Advertising & promotion Product quality Distribution Price 7-4 Communications Effects Pyramid 5% Use 20% Trial 25% Preference 40% Liking 70% Knowledge/comprehension 90% Awareness 7-5 GfK Purchase Funnel 7-6 The DAGMAR Approach Define Advertising Goals for Measuring Advertising Results Awareness Comprehension Conviction Action 7-7 Advertising-Based View of Marketing Ads Acting on Consumers 7-8 Marginal Analysis 7-9 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 7-10 Sales Response Models Advertising Expenditures Initial Spending Little Effect Middle Level High Effect High Spending Little Effect B. S-Shaped Response Function Incremental Sales Incremental Sales A. Concave-Downward Response Curve Range A Range B Range C Advertising Expenditures 7-11 Factors Influencing Advertising Budgets Product life cycle Product durability Differentiation Hidden product qualities Product price Purchase frequency 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 objectives Determine tasks required Estimate required expenditures Monitor Reevaluate objectives 7-15