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Chapter 8 Media Strategy and Tactics Decisions Chapter Objectives • To understand the key terminology used in media planning. • To know how a media plan is developed. Chapter 8 : Media Strategy and Tactics Decisions Chapter Objectives • To know the process of deciding and implementing media strategies and tactics. • To understand the theoretical and managerial approaches for media budget setting. Chapter 8 : Media Strategy and Tactics Decisions Media Terminology • Media planning - a series of decisions involving the delivery of messages to audiences. • Media objectives - goals to be attained by the media strategy and program. • Media strategy - decisions on how the media objectives can be attained. Chapter 8 : Media Strategy and Tactics Decisions Media Terminology • Medium - the various categories of delivery systems, including broadcast and print media. • Broadcast media - either radio or television network or local station broadcasts. • Print media - publications such as newspapers, magazines, direct mail, outdoor, and the like. Chapter 8 : Media Strategy and Tactics Decisions Media Terminology • Media vehicle - the specific message carrier, such as the Washington post or tonight show. • Coverage - the potential audience that might receive the message through the the vehicle. Chapter 8 : Media Strategy and Tactics Decisions Media Terminology • Reach - the actual number of individual audience members reached at least once by the vehicle. • Frequency - the number of times the receiver is exposed to vehicle in a specific time period. Chapter 8 : Media Strategy and Tactics Decisions Developing the Media Plan Marketing Strategy Plan Situation Analysis Creative Strategy Plan Setting Media Objectives Determining Media Strategy Selecting Broad Media Classes Selecting Media Within Class Media Use Decision — Broadcast Media Use Decision — Print Media Use Decision — Other Media Chapter 8 : Media Strategy and Tactics Decisions Developing the Media Plan Analyze the Market Establish Media Objectives - give direction Develop Media Strategy Implement Media Strategy Evaluate Performance Chapter 8 : Media Strategy and Tactics Decisions Media Strategy Challenges • Insufficient information – Some mediums cannot be measured – Too expensive • Inconsistent terminologies – Print vs. Radio • Difficulty measuring effectiveness Chapter 8 : Media Strategy and Tactics Decisions Marginal Analysis • One of the most used theoretical approaches to establish advertising budgets. • As advertising/ promotional expenditures increase, sales and gross margins also increase to a point, then they level off. Chapter 8 : Media Strategy and Tactics Decisions Marginal Analysis Sales in $ Sales Gross Margin Ad. Expenditure Profit Point A Advertising / Promotion in $ Chapter 8 : Media Strategy and Tactics Decisions BASIC Principle of Marginal Analysis Increase spending . . . IF: The increased cost is less than the incremental (marginal) return. Decrease spending . . . IF: The increased cost is more than the incremental (marginal) return. Hold spending level. . . IF: The increased cost is equal to the incremental (marginal) return. Chapter 8 : Media Strategy and Tactics Decisions Problems With Marginal Analysis • Assumption: – Sales are the principal objective of advertising and/or promotion. • Assumption: – Sales are determined solely by advertising and promotion and nothing else. Chapter 8 : Media Strategy and Tactics Decisions Sales Response Models • Concave-downward function – The effects of advertising budgets follow the microeconomic law of diminishing return. • S-shaped response function – After a certain budget level has been reached, advertising and promotional efforts begin to have an effect on sales. – The incremental gain continues only to a point. Chapter 8 : Media Strategy and Tactics Decisions Advertising Sales/Response Functions Range A High Spending Little Effect Advertising Expenditures Middle Level High Effect Incremental Sales B. S-Shaped Response Function Initial Spending Little Effect Incremental Sales A. Concave-Downward Response Curve Range B Range C Advertising Expenditures Chapter 8 : Media Strategy and Tactics Decisions Managerial Approaches in Budget Setting You must understand… • Many firms apply more than one method • Budgeting approaches vary according to the size and sophistication of the firm Chapter 8 : Media Strategy and Tactics Decisions Factors Influencing Budgets Decision • • • • • Market size Market potential Market share goals Economies of scale in advertising IMC tools Chapter 8 : Media Strategy and Tactics Decisions Top-Down Budgeting Top Management Sets the Spending Limit The Promotion Budget Is Set to Stay Within the Spending Limit Chapter 8 : Media Strategy and Tactics Decisions Top-Down Approaches • The affordable method – What we have to spare. What's left to spend. • Arbitrary allocation method – No system. Seemed like a good idea at the time. Chapter 8 : Media Strategy and Tactics Decisions Top-Down Approaches • Percentage of sales method – Taking a percentage of sales dollars. – A fixed amount of the unit product cost to promotion multiplied by the number of units sold – Disadvantages – Sales – Difficult for new products – Decrease in sales, decrease in ad Chapter 8 : Media Strategy and Tactics Decisions Top-Down Approaches • Competitive parity method – Match competitor or industry average spending. • Return on investment method – Spending is treated as a capital investment. Chapter 8 : Media Strategy and Tactics Decisions Bottom-Up Approaches Total Budget Is Approved by Top Management Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Promotional Objectives Are Set Chapter 8 : Media Strategy and Tactics Decisions Bottom-Up Approaches • Objective and task method 1. 2. 3. 4. 5. • Isolate objectives Determine task required Estimate required expenditure Monitor Reevaluate objectives Payout planning – Determines the investment value of the advertising and promotion appropriation. Chapter 8 : Media Strategy and Tactics Decisions Objective and Task Method 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) Estimate Costs Associated with Tasks (create awareness of new product among 20 percent of target market) Chapter 8 : Media Strategy and Tactics Decisions Media Planning Criteria Considerations • Target audience coverage • The media mix • Geographic coverage • Scheduling • Reach versus frequency Chapter 8 : Media Strategy and Tactics Decisions Target Audience Coverage Population excluding target market Target market Media coverage Media overexposure Target Market Proportion Full Market Coverage Partial Market Coverage Chapter 8 : Media Strategy and Tactics Decisions Coverage Exceeding Market Media Mix • A wide variety of media are available for advertisers. • By combining media, marketers can increase coverage, reach, and frequency. Chapter 8 : Media Strategy and Tactics Decisions Media Characteristics • Figure 8-15 Chapter 8 : Media Strategy and Tactics Decisions Geographic Coverage • The brand development index (BDI) – Helps marketers factor the rate of product usage by geographic area into the decision process. • The category development index (CDI) – Same manner as BDI, except it uses information regarding the product category. Chapter 8 : Media Strategy and Tactics Decisions Brand and Category Analysis Brand Development Index Percentage of brand to total U.S. sales in market BDI = Percentage of total U.S. population in market Chapter 8 : Media Strategy and Tactics Decisions X 100 Brand and Category Analysis Category Development Index Percentage of product category total sales in market CDI = Percentage of total U.S. population in market Chapter 8 : Media Strategy and Tactics Decisions X 100 High BDI Low BDI High CDI High market share Good market potential Low market share Good market potential Low CDI Brand and Category Analysis High market share Monitor for sales decline Low market share Poor market potential Chapter 8 : Media Strategy and Tactics Decisions Brand and Category Analysis Low CDI High CDI High BDI Low BDI The market usually represents The product category shows good sales potential for both high potential but the brand the product and the brand. isn’t doing well; the reason should be determined. The category isn’t selling well Both the product category but the brand is; may be a and the brand are doing good market in which to poorly; not likely to be a good advertise but should be place to advertise. monitored for sales decline. Chapter 8 : Media Strategy and Tactics Decisions Scheduling • Continuity-a continuous pattern of advertising, which may mean every day, every week, and/or every months. • Flighting-a less regular schedule, with intermittent periods of advertising and non-advertising. • Pulsing-combination of the first two methods. Chapter 8 : Media Strategy and Tactics Decisions Three Scheduling Methods Continuity Flighting Pulsing Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chapter 8 : Media Strategy and Tactics Decisions Reach Versus Frequency • Reach – exposing potential buyers to the message. • Frequency - the number of times the receiver is exposed to vehicle, not necessarily to the ad itself. • Gross ratings points (GRP) – GRP= reach x frequency Chapter 8 : Media Strategy and Tactics Decisions Reach and Frequency Reach of One Program Total market audience reached Reach of Two Program Total market audience reached Duplicated Reach of Both Unduplicated Reach of Both Total reached with both shows Total reach less duplicate Chapter 8 : Media Strategy and Tactics Decisions Effects of Reach and Frequency 1. One exposure of an ad to a target group within a purchase cycle has little or no effect in I most circumstances. 2. Since one exposure is usually ineffective, the central goal of productive media planning I should be to enhance frequency rather than reach. Chapter 8 : Media Strategy and Tactics Decisions Effects of Reach and Frequency 3. The evidence suggests strongly that an exposure frequency of two within a purchase cycle is an effective level. 4. Beyond three exposures within a brand purchase cycle or over a period of four or even eight weeks, increasing frequency continues to build advertising effectiveness at a decreasing rate but with no evidence of decline. Chapter 8 : Media Strategy and Tactics Decisions Effects of Reach and Frequency 5. Although there are general principles with respect to frequency of exposure and its relationship to advertising effectiveness, differential effects by brand are equally important 6. Nothing we have seen suggests that frequency response principles or generalizations vary by medium. Chapter 8 : Media Strategy and Tactics Decisions Effects of Reach and Frequency 7. The data strongly suggest that wearout is not a function of too much frequency; It is more of a creative or copy problem. Chapter 8 : Media Strategy and Tactics Decisions Graph of Effective Reach Percentage Reach 25% Ineffective Reach 20% Effective Reach 15% Ineffective Reach 10% 5% 0% 0 5 10 Exposures Chapter 8 : Media Strategy and Tactics Decisions 15 Marketing Factors Important to Determining Frequency • Brand history • Brand share • Brand loyalty • Purchase cycles • Usage cycle • Competitive share of voice • Target group Chapter 8 : Media Strategy and Tactics Decisions Creative Factors Important to Determining Frequency • • • • • • • Message complexity Message uniqueness New vs. Continuing campaigns Image versus product sell Message variation Wearout Advertising units Chapter 8 : Media Strategy and Tactics Decisions Media Factors Important to Determining Frequency • Clutter • Editorial environment • Attentiveness • Scheduling • Number of media used • Repeat exposures Chapter 8 : Media Strategy and Tactics Decisions Budget Adjustments • Absolute cost: actual cost of ad • Relative cost: relationship between the price paid for the time or space and the size of audience. – Cost per thousand: magazine industry – Cost per ratings point : broadcast – Daily inch rate: target CPM- based on target audience not overall audience Chapter 8 : Media Strategy and Tactics Decisions Determining Relative Cost of Media Cost per thousand (CPM) CPM = Cost of ad space (absolute cost) Circulation Chapter 8 : Media Strategy and Tactics Decisions X 1,000 Determining Relative Cost of Media Cost per rating point (CPRP) CPRP = Cost of commercial time Program rating Chapter 8 : Media Strategy and Tactics Decisions Determining Relative Cost of Media Daily inch rate (I.E. Magazine and newspapers) – Target CPM (TCPM) CPMs based on the target audience – Readers per copy The true circulation – Pass-along rate Estimating the number of people who read magazine without buying. Chapter 8 : Media Strategy and Tactics Decisions