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Advertising and Promotion An Integrated Marketing Communications Perspective Value of Objectives Chapter 7 • Keep everyone focused on common goals Establishing Objectives and Budgeting for the Promotional Program • Used to develop plans and make decisions • Provide measurement and control • Benchmarks for evaluating results McGraw-Hill/Irwin Advertising and Movement Toward Action Sales vs Communication Objectives Conative • Marketing objectives focus on sales, market share, and distribution measured only by sales generated? • What else affects sales? McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Purchase Realm of motives. Ads stimulate or direct desires. Conviction Affective Preference Realm of emotions. Ads change attitudes and feelings • Should advertising effectiveness be 7-3 Competitive ads Argumentative copy “Image” copy Status, glamour appeals Knowledge Realm of thoughts. Ads provide information and facts. Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Awareness Teaser campaigns McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-4 The DAGMAR Approach Define Advertising Goals for Measuring Advertising Results 90% Awareness i gn Co 70% Knowledge e ti v 40% Liking fe Af cti 25% Preference ve 20% Trial Co t na 5% Use ive Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Liking Point of purchase Retail store ads, Deals “Last-chance” offers Price appeals, Testimonials Cognitive Inverted Pyramid of Communications Effects McGraw-Hill/Irwin 7-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-5 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Establishing Objectives and Budgeting for the Promotional Program Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-6 7-1 Advertising and Promotion An Integrated Marketing Communications Perspective Characteristics of Objectives Dagmar Criticisms • Specific Communications Objectives • Concrete Measurable Tasks • Well-Defined Target Audience • Existing Benchmark Measure • Degree of Change Sought • Specific Time Period McGraw-Hill/Irwin • Behavior doesn’t always follow the response hierarchy • Changes in attitudes don’t always lead to changes in behavior 7-7 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin BASIC Principle of Marginal Analysis Marginal Analysis Increase Spending . . . IF: Gross Margin Sales in $ Sales 7-8 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. The increased cost is less than the incremental (marginal) return. Decrease Spending . . . IF: Ad. Expenditure The increased cost is more than the incremental (marginal) return. Profit Hold Spending Level. . . IF: The increased cost is equal to the incremental (marginal) return. Point A Advertising / Promotion in $ McGraw-Hill/Irwin 7-9 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Advertising Sales/Response Functions Problems with Marginal Analysis A. Concave-Downward Response Curve • Assumption: • Sales are the principal objective of Incremental Sales promotion and nothing else. Advertising Expenditures McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-11 McGraw-Hill/Irwin Range A High Spending Little Effect • Sales are the result of advertising and Middle Level High Effect • Assumption: B. S-Shaped Response Function Initial Spending Little Effect Incremental Sales advertising and/or promotion. 7-10 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Range B Range C Advertising Expenditures Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Establishing Objectives and Budgeting for the Promotional Program Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-12 7-2 Advertising and Promotion An Integrated Marketing Communications Perspective Top-Down Budgeting Bottom-Up Budgeting Total Budget Is Approved by Top Management Top Management Sets the Spending Limit Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned The Promotion Budget Is Set to Stay Within the Spending Limit Promotional Objectives Are Set McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-13 McGraw-Hill/Irwin Objective and Task Method Top-Down Approaches • The Affordable Method • What we have to spare. 7-14 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Establish Objectives (create awareness of new product among 20 percent of target market) What's left to spend. • Arbitrary Allocation Method • No system. Seemed like a good idea at the time. • Percentage of Sales Method Determine Specific Tasks (advertise on market area television and radio and local newspapers) • Set percentage of sales or amount per unit. • Competitive Parity Method • Match competitor or industry average spending. Estimate Costs Associated with Tasks (create awareness of new product among 20 percent of target market) • Return on Investment Method • Spending is treated as a capital investment. McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-15 McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Establishing Objectives and Budgeting for the Promotional Program Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7-16 7-3