Download ETHICAL ISSUE: “A War of Comparisons” (p. 242)

CHAPTER EIGHT
MARKETING AND ADVERTISING PLANNING: TOPDOWN, BOTTOM-UP AND IMC
OBJECTIVES
To describe the process of marketing and advertising planning. Marketers and advertisers need to
understand the various ways plans are created. They must know how to analyze situations; set
realistic, attainable objectives; develop strategies to achieve them, and establish budgets for
marketing communications. (p. 232)
After studying this chapter, your students will be able to:
1. Explain the role and importance of a marketing plan.
2. Describe how marketing and advertising plans are related.
3. Explain the difference between objectives and strategies in marketing and advertising
plans.
4. Give examples of need-satisfying and sales-target objectives.
5. Discuss the suitability of top-down, bottom-up, and integrated marketing communications
planning.
6. Explain how advertising budgets are determined.
7. Describe how share-of-market/share-of-voice budgeting can be used for new product
introductions.
TEACHING TIPS AND STRATEGIES
Students will learn the three different types of marketing planning models: (1) top-down,
(2) bottoms up and (3) IMC-integrated marketing communications. IMC is the subject of
many textbooks and research articles. It is often touted as the marketing mantra of the
new century. Although recently I have read several articles claiming, that IMC does not
work. The majority of experts including Arens suggest that IMC is still a very valuable
tool.
When discussing the top-down approach to the marketing plan. This is the standard way
of creating a marketing plan (please see page 235 Exhibit 8-1). I like to take the students
through the top down approach. As you know this is still the most commonly used
method of creating a marketing plan.
When I was in television advertising, the first thing I would execute with clients is to
complete a situation analysis. I would find out who their competitors were, and what
type of advertising medium they would use, along with the current advertising mediums
the competitor was using. It amazed me in television advertising sales, on how many
small business owners didn’t really know who their customers were.
For example: I had a customer that sold lawn mowers etc. He used to use his coop
money to advertise on television among other things. The owner originally told me that
his target market was men 50+. I found out later through the situational analysis this
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could not be possibly true. In fact, his average customer was about 30+. Why is this
important? When creating a marketing plan, it doesn’t matter how much money we have
for advertising it won’t’ be effective unless we know whom we are selling too.
The reason the owner was mistaken, is he was not a hands on owner (he let others run the
shop), and he use to sell a lot more farm equipment about twenty years ago. What he did
not realize or at least convey to me, that most of his business had moved from farm
equipment to the residential market.
The next step in creating his advertising plan was to figure out his objectives, which was
to increase sales. I find that many times when creating a advertising campaign for
customers that it is very important to set the expectations. For some of the small
businesses I dealt with, they had not advertised in years. When they went on TV, I
learned to make sure that I went over with them the sales increase expected and what
would really happen at first. As you know, advertising takes a little while to get the full
effect. I found this helped to get our expectations on the same page. This helped me to
build win win relationship, between clients and myself.
This chapter has good pictorials, as well as a great story about Mountain Dew and how it
was started and later purchased by powerhouse Pepsi-Cola. Students will be interested in
how Mountain Dew was started, after all the target market for Mountain is part of their
age group. Code-Red Anyone?
LECTURE OUTLINE
Introduction (pp. 233-235) — Invented by two brothers in Knoxville, Tennessee,
Mountain Dew was originally designed as a mixer for hard liquor. Nevertheless,
people liked drinking it so much it became an alternative soft drink, promoted with
the slogan “Yahoo, Mountain Dew.” PepsiCo bought the company in 1964 and,
some time later, repositioned and relaunched the brand as a high-energy, youthoriented, flavored soft drink. Since that time, the brand has done nothing but grow.
Supported by advertising that promotes the “Dew-x-perience,” it is today the number
three soft drink behind Coke and Pepsi. Its success also demonstrates the importance
of good, strategic marketing and advertising planning.
A8-1 Mountain Dew Advertisement (p. 233)
II. The Marketing Plan (p. 235)
A. The Importance of Marketing Planning (p. 235)
Since marketing is typically a company's only source of income, the marketing plan
may be a company's most important document.
1. The marketing plan assembles all the pertinent facts about the organization, the
markets it serves, and its products, services, customers, competition, and so on.
2. It forces all of the departments (product development, production, selling,
advertising, credit, transportation) to focus on the customer.
3. Finally, it sets goals and objectives for specified periods of time and lays out
strategies and tactics to achieve them in a written form.
B. The Effect of the Marketing Plan on Advertising (p. 233) The marketing plan has a
profound effect on a company's advertising plan.
I.
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1. It helps managers analyze and improve all company operations, including
marketing and advertising programs.
2. It dictates the role of advertising in the marketing mix.
3. It enables better implementation, control, and continuity of advertising programs,
and it ensures the most efficient allocation of advertising dollars.
4. Successful organizations do not separate advertising plans from marketing. In
addition, they have several choices in how they plan.
C. Top-Down Marketing (p. 235)
The top-down marketing plan, the most common planning format, has four main
elements:
Exhibit 8-1 Traditional top-down marketing plan (p. 235)
A8-2 (p.235)
1. Situation Analysis (p. 236) — The section that is a “factual” statement of the
organization's current situation and how it got there. It also:
a. Presents all relevant facts about the company's history, growth, products,
sales volume, share of market, competitive status, markets served,
distribution system, past advertising programs, results of marketing research
studies, company capabilities, strengths and weaknesses, and any other
pertinent information.
b. After gathering historical information, the focus changes to potential threats
and opportunities based on key factors outside the company's: economic,
political, social, technological, or commercial environments the company
operates in.
Example: Mountain Dew advertisements are a result of careful marketing and
advertising planning (p. 236).
2. Marketing Objectives (p. 236) — the next step is determining the company's
specific marketing objectives and stating them in a hierarchy as follows:
a. Corporate objectives are usually stated in terms of profit or return on
investment-or net worth, earnings ratio, growth, or corporate reputation.
b. Marketing objectives, which derive from corporate objectives, relate to the
needs of target markets and to specific sales goals referred to as:
1) Need-satisfying objectives are set to shift management’s view of the
organization from a producer of products or services to a satisfier of
target market needs.
Example: example of need-satisfying objectives for a marketing strategy
(p. 237)
2) Sales-target objectives — are specific, quantitative, realistic marketing
goals to be achieved within a specified time period. May be expressed as
total sales volume, sales volume by product, market segment, or
customer type; and market share, growth rate of sales volume, or gross
profit in total or by product line.
3. Marketing Strategy (p. 237) — the total directional thrust of the company's
marketing efforts; a statement of how the company is going to achieve its
objectives. A company's marketing strategy has a dramatic impact on its
advertising and it determines the following:
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a. Selecting the target market — In top-down marketing, the first step begins by
defining and selecting the target market using the processes of market
segmentation and research.
Ad Lab 8-A “The Strategies of Marketing Warfare.” (p. 238)
b. Positioning the product — after examining market needs and competitive
positions, developing the position the company wants to occupy. Companies
usually have a number of positioning options. Positioning refers to the place
a brand occupies competitively in the minds of customers.
A8-4 Advertising demonstrating positioning strategy (p. 239)
c. Determining the marketing mix (p. 240) — developing a cost-effective mix
(product, price, distribution and communication) for each target market the
company pursues
4. Marketing Tactics (Action Programs) (p. 241) — The determination of the
specific short-term actions to be taken, internally and externally, by whom and
when.
D. Bottom-up Marketing: How Small Companies Plan (p. 241) In a small company,
everybody is both player and coach, and the day-to-day details seem to come first.
Small companies can use bottom-up marketing.
The tactic: A singular, competitive mental angle that is unique enough to produce
results. Advertisers need to find just one tactic and build a strategy around it,
focusing all the elements of the marketing mix on the tactic. Managers of small
companies actually have an advantage. Surrounded by the details of the business,
they are more likely to discover a good tactic that can be developed into a powerful
strategy.
III.
Exhibit 8-2 Bottom-up marketing plan (p. 241)
A8-3 (p.241)
RL-2 (p.
Website)
The New Marketing Mantra: Relationship Marketing (p. 241)
A. Today, advertisers are discovering the key to building brand equity is to develop
interdependent, mutually satisfying relationships with customers. Greater acceptance
of this concept is creating the following changes:
1. A belief that customers, not products, are the lifeblood of business.
2. A new trend away from simple "transactional marketing" to relationship
marketing — creating, maintaining, and enhancing long-term relationships with
customers and other stakeholders that result in exchanges of information and
other things of mutual value.
3. The understanding that the sophisticated consumer can choose from a wide
variety of products and services offered by producers worldwide, and, therefore,
customer relationships — in which the sale is only the beginning — will be the
key strategic resource for success in the 21st-century. Managing strategic
partnerships will be the focus in the new market-driven concept of marketing.
B. The Importance of Relationships (p. 242)
To succeed today, companies must focus on managing loyalty among carefully
chosen customers and other stakeholders (among them employees, centers of
influence, stockholders, the financial community, and the press). There are a number
of reasons for this:
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1. The cost of lost customers — no amount of advertising is likely to win back a
customer due to shoddy products or poor service. Moreover, the profit lost is the
lifetime customer value (LTCV) to a firm.
2. The cost of acquiring new customers (p. 242) — Defensive marketing typically
costs less than offensive marketing because it takes a great deal of effort to lure
satisfied customers away from competition.
a) Fragmentation of media and resistance of sophisticated consumers to
advertising messages increases the difficulty of winning new customers.
b) It now costs five to eight times as much in marketing, advertising, and
promotion costs to acquire a new customer as it does to keep an existing one.
3. The value of loyal customers (p. 243) — the founder of Wunderman Cato
Johnson, the second largest direct-response agency in the world, says:
a) 90 percent of a manufacturer's profit comes from repeat purchasers.
b) Only 10 percent comes from trial or sporadic purchasers.
c) Reducing customer defections by even five percent can improve profits 25 to
85 percent.
Thus, a company's first market should be its current customers, and
advertising effort focused on "postsale" activities (unlike "presale" activities
in the past), making customer retention their first line of defense — making
relationship primary and increasing retention to optimize lifetime customer
value (LTCV).
Example: Advertisement demonstrating customer value (p. 243)
C. Levels of Relationships (pp. 243, 244)
Example: Advertisement demonstrating relationship marketing (p. 244)
1. Kotler and Armstrong distinguish five levels of relationship that can be formed
between a company and its various stakeholders:
a. Basic transactional relationship — the company sells the product, but does
not follow up (Kmart).
b. Reactive relationship — the company (or salesperson) sells the product and
encourages customers to call with problems (Men's Wearhouse).
c. Accountable relationship — salesperson phones customers shortly after the
sale to check if the product meets expectations and asks about product
improvements and any specific disappointments (Acura dealers).
d. Proactive relationship — company representatives contact the customer from
time to time with suggestions about improving product use or helpful new
products (CompuServe).
e. Partnership — the company works continuously with customers (and other
stakeholders) to discover ways to deliver better value (Apple Computer).
2. Different stakeholders require different types of relationships (a company will
have different relationship with a customer than with the press).
3. The more stakeholders involved, the more difficult it is to develop a relationship
(and some customers may only want a transactional relationship).
High-profit product or service categories make deeper, personal relationship more
desirable.
Ethical Issue: “A War of Comparisons.” (pp. 242, 243)
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IV.
Exhibit 8-3 Relationship levels (p. 245)
A8-4 planned messages of elegance
and romance in the DeBeers Ad “Diamonds are Forever) (p. 245)
RL-3
(Website)
Using IMC to Make Relationships Work (p. 244)
Interest in relationship marketing has coincided with the interest in integrated marketing
communications (IMC). The link is "interdependence," the fundamental characteristic of
all relationships. "IMC is the management of interdependence in the marketplace,"
according to Lou Woulter, Drake University professor.
A. IMC: The Concept and the Process (p. 245)
Technology has enabled marketers to adopt flexible manufacturing, customizing
products for customized markets — indicating that "market-driven" means:
a. Bundling more services with products to create a "unique product
experience"
b. Companies and customers working together. Endcap promotion-a display
at the end of an isle in a store
IMC is both a concept and a process.
a. The concept of integration is "wholeness" and wholeness in communications
creates synergy — the principle benefit of IMC — because each element of
the communications mix reinforces the others for greater effect.
b. IMC is also a process in which communication becomes the driving,
integrating force in the marketing mix and throughout the organization.
1. The Evolution of the IMC Concept (p. 245)
a. Technological changes led to specialized media and a subsequent
fragmentation in the ways humans reach one another and work together.
Business practices changed with the times (flood of mergers, rise in the
global marketplace, escalation of competition) companies are faced with
redundancies and inefficiencies as company departments were at odds with
each other, with the company's needs, and out of step with customers needs.
b. Companies had to change their perspectives
1) Inside-out view of IMC — The company adapts by working from within,
changing the way it coordinates and manages its marketing
communications in order to deliver a consistent overall message to its
customers.
2) Outside-in view of IMC — The company views customers as partners in
an ongoing relationship, recognizes the references they use,
acknowledges the importance of communication, and accepts the many
ways they come in contact with the company and the brand.
3) Companies committed to IMC realize that their customers are more
important than their product or plants.
4) IMC defined broadly: integrated marketing communications is the
process of building and reinforcing mutually profitable relationships with
employees, customers, other stakeholders, and the general public by
developing and coordinating a strategic communications pro-gram that
enables them to have a constructive encounter with the company/brand
through a variety of media or other contacts.
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5) Tom Duncan, former director of the IMC graduate program at the
University of Colorado at Boulder, has identified four distinct levels of
integration that companies use: unified image, consistent voice, good
listener, and at the most integrated, world-class citizen. These levels
demonstrate how IMC programs range from narrowly focused corporate
monologs to broad, interactive dialogs.
Exhibit 8-4 Levels of
integration (p. 246)
A8-5 (p.246)
2. How the Customer Sees Marketing Communications (p. 246)
a. In one study, customers identified 102 different media as "advertising". All
of the communications created an "integrated product" in the consumer's
mind.
b. All these communications or brand contacts, sponsored or not, create an
“integrated product” in the consumer's mind — customers automatically
integrate all the brand-related messages that emanate from the company or
some other source.
3. The Four Sources of Brand Messages (p. 247)
As everything we do (and do not do) sends a message, Duncan has categorized
four types of company/brand-related messages stakeholders receive:
a. Planned messages — these are the traditional marketing communications
messages:
1) Advertising, sales promotion, personal selling, merchandising material,
publicity releases, event sponsorships. May also include help-wanted or
financial offering ads, engineering articles in professional journals, and
new contract articles.
2) Appearing self-serving, these messages usually have the least impact.
b. Product messages — messages reflecting the marketing mix:
1) Primarily the product, price, and distribution elements. Also referred to
as inferred messages.
2) Product messages have great impact — when a product performs well,
the customer infers a positive message that reinforces the purchase
decision.
c. Service messages — messages sent by service personnel, employees who
interact with customers.
1) People managed not by skilled communications supervisors, but by
operations managers — marketing people should be involved to
minimize negative and maximize positive messages.
2) Service messages, like product messages, have greater impact than
planned messages.
d. Unplanned messages — messages companies have little or no control over,
for example:
1) Employee gossip, unsought news stories, comments, comments by trade
or competitors, word-of-mouth rumors, or major disasters.
2) Unplanned messages may affect customer's attitude dramatically.
3) Some unplanned messages can be anticipated and planned responses can
be prepared, especially by managers experienced in public relations.
4. The Integration Triangle (p. 247)
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a. Developed by Duncan and Moriarity, the integration triangle is a simple way
of illustrating how perceptions are created from various brand message
sources.
Exhibit 8-5 The integration triangle (p. 247)
A8-6 (p.247)
b. There are three types of integration triangle messages:
1) Say messages — planned messages, what companies say about
themselves.
2) Do messages — product and service messages that represent what a
company does.
3) Confirm messages — unplanned messages that reinforce the say and do
messages generated by a company.
c. Constructive integration occurs when a brand does what it maker says it will
do and then others confirm that, in fact, it delivers on its promises.
B. The Dimensions of IMC (p. 248)
1. To maximize the synergistic benefits of IMC, Duncan suggests the use of three
dimensions to an organization's integration process.
a. Ensure consistent positioning
b. Then, facilitate purposeful interactivity between the company and its
customers or other stakeholders.
c. Finally, actively incorporate a socially responsible mission into the
organization's relationships with its stakeholders.
Exhibit 8-6 IMC macro
model (p. 248)
A8-7 (p.248)
2. Interest in IMC has gone global, moving form North America into Europe, Asia,
and Latin America.
3. IMC offers accountability by maximizing resources and linking communications
activities directly to organizational goals and the resulting bottom line.
C. The IMC Approach to Marketing and Advertising Planning (p. 248)
1. IMC is a new approach
a. Mixes marketing and communications planning together, rather than
separating them.
b. Begins with the customer and works back to the brand.
2. Computer technology can determine customer behavior for use in IMC programs
by helping to:
a. Identify specific users of products and services.
b. Measure users' actual purchase behaviors and relating that to specific brand
and product categories.
c. Measure the impact of various advertising and marketing communications
activities and determining their value in influencing the actual purchase.
d. Capture and evaluate this information over time.
3. The ever-expanding database of customer behavior becomes the basis for
planning all future marketing and communications activities.
Exhibit 8-7
Wang-Schultz IMC planning model (p. 249)
A8-2 (p.249)
4. Wang and Schultz have developed a seven-step IMC planning model.
a. Segment customers and prospect in a database.
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b. Analyze customer data (attitudes, history, contact with the brand) and
determine the best time, place, and situation to communicate with customers.
c. Have planner set the marketing objectives.
d. Identify brand contacts and what changes in attitude will be needed to
support the customer's continuance or change of purchase behavior.
e. Set communications objectives and strategies for making contact with
consumers and influencing their attitudes, beliefs, and purchase behavior.
f. Decide what other elements of the marketing mix (product, place, and
distribution) can be used to encourage the desired behavior.
g. Finally, have the planner determine what communications tactics to use.
D. The Importance of IMC to the Study of Advertising (p. 250) Since customers see all
sponsored communications as advertising, advertising people must grow beyond
traditional specialties to become enlightened generalists, familiar with and able to
integrate all types of marketing communications.
V. The Advertising Plan (p. 250) — The advertising plan is a natural outgrowth of the
marketing plan and is prepared in much the same way (see appendix B). In IMC
planning, the advertising plan is an integral part of the overall procedure.
A. Reviewing the Marketing Plan (p. 250) —
The first section of advertising plan is a situation analysis that is organized in four
categories: internal strengths and weaknesses, and external opportunities, and threats
(SWOT). This SWOT analysis briefly restates the company's current situation,
reviews the target market segments, itemizes the long- and short-term marketing
objectives, and cites decisions regarding market positioning and the marketing mix.
B. Setting Advertising Objectives (p. 250)
The second section lists realistic, specific and measurable advertising objectives.
1. Understanding What Advertising Can Do (p. 251) — most advertising programs
encourage prospects to take some action. Advertising does not sell — it tells:
informs, persuades, or reminds the intended audience over time of the company.
2. The Advertising Pyramid: A Guide to Setting Objectives (p. 246) — a model of
the progression of effects advertising has on mass audiences, especially for new
products.
Exhibition 8-8 the advertising pyramid (p. 251)
A8-9 (p.251)
a. First objective is to create “awareness” — to acquaint people with the
company, product, service, or brand.
b. Next task is to develop “comprehension” — to communicate enough
information so some percentage of the aware group recognizes the product's
purpose, image or position, and perhaps some of its features.
c. Next, advertising needs to communicate enough information to develop
“conviction” — to persuade a certain number of people to believe in the
product's value, such that ...
d. Of those who become convinced, some can be moved to “desire” the
product.
e. Finally, some percentage of those who desire the product will take “action”
— request additional in-formation, send in a coupon, visit a store, or buy it.
4. The Old Model versus the New (p. 252)
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a. The advertising pyramid represents the learn-feel-do model of advertising
effects. The theory is that advertising affects attitude, and attitude leads to
behavior. The advertising pyramid also reflects the traditional mass
marketing monolog. The advertiser talks, the customer listens.
RL 8-3
(Website)
b. The IMC model is because many marketers have databases of information on
which their customers are, where they live, what they buy, and what they like
and dislike. When marketers can have a dialog and establish a relationship,
the model is no longer a pyramid but a circle.
Exhibit 8-9 when
marketers can have a dialog and establish a relationship, the model is no
longer a pyramid by a circle (p. 253)
A8-10 (p.253)
c. By starting with the customer and then integrating all aspects of their
marketing communications, companies hope to accelerate the
communications process, make it more efficient, and achieve lasting loyalty
from good prospects, not just prospects.
C. Advertising Strategy and the Creative Mix (p. 253) — the advertising (or
communications) objective declares where the advertiser wants to be with respect to
consumer awareness, attitude, and preference; the advertising strategy describes
how to get there. Advertising strategy blends the elements of the creative mix
(target audience, product concept, communications media, and advertising message):
1. The Target Audience: Everyone Who Should Know (p. 253)
a. The target audience — the specific people the advertising will address, is
typically larger than the target market. Advertisers need to know who the
end user is, who makes the purchase, and who influences the purchasing
decision.
Exhibit 8-10 The dominant brands are purchased the most by both heave and
light users (p. 254)
b. Brand popularity (which advertising is good at creating) cuts across all levels
of purchasing frequency. Dominant brands are purchased by both heavy and
light users.
2. The Product Concept: Presenting the Product (p. 253) Product concept refers to
the "bundle of values" the product might represent to the consumer.
a. When writing the advertising plan, the advertising manager must develop:
1) A simple statement to describe the product concept — that is, how the
advertising will present the product.
2) How the consumer perceives the product.
b. Ad manager must weigh the perception of the product against the company's
marketing strategy using the Elaboration Likelihood Model and the FCB
Grid (Kim-Lord Grid is a newer interpretation) (refer back to Exhibit 4-4 and
see Exhibit 7-11).
c. Kim and Lord recognized that customers can be both cognitively and
effectively involved simultaneously. So, they developed the Kim-Lord Grid
that depicts the degree and kind of involvement a consumer brings to the
purchase decision
Exhibit 8-11 Enhanced Kim-lord grid (p. 254)
A8-11 (p.254)
3. The Communications Media: The Message Delivery System (p. 254) — are all
the vehicles that might transmit the advertiser's message.
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4. The Advertising Message: What the Advertising Communicates (p. 251)
Portfolio: “Strategic Use of the Creative Mix” (pp. 256-258)
a. What the company wants to say, and how it plans to say it, verbally and
nonverbally makes up the advertising message.
b. The combination of copy, art, and production elements in the ads forms the
message, and there are infinite ways to combine these elements. (Chapter 11
will discuss this further)
Example: Messages that the airline, TRIM is unlike others in customer
service (p. 255)
Example: Mountain Dew Advertises through memorabilia given away at key
events (p. 255)
D. The Secret To Successful Planning (p. 259)
The key to successful planning is information, but the genius of business is
integrating what the information means.
VI. Allocating Funds for Advertising (p. 259)
Money is the motor that drives every marketing and advertising plan. If you suddenly
shut the motor off, the car may coast for a while, but before long it will stop running.
The marketing department has to convince management that advertising spending makes
good business sense, even in an adverse economic climate.
A. Advertising: An Investment in Future Sales (p. 259) Advertising is a current expense
for accounting purposes, it is best to view it as a long-term capital investment.
Advertising builds consumer preference and promotes goodwill, which enhances the
reputation and value of the company name. To see advertising as an investment
however we must understand:
1. The Relationship of Advertising to Sales and Profits (p. 260) — many variables
(both internal and external) influence the effectiveness of a company's marketing
and advertising efforts.
a. Increases in market share are related closely to increases in the marketing
budget. In addition, market share is a prime indicator of profitability.
1) While additional advertising will increase sales, the rate of return will
decline at some point.
2) Sales response to advertising is spread out over time, but the durability of
advertising is brief, so a consistent investment is important.
3) There are minimum levels below which advertising expenditures will have
no effect on sales.
4) There will be some sales even if there is no advertising.
5) There are saturation limits imposed by culture and competition above
which no amount of advertising can increase sales.
Ad Lab 8-B “The Economic Effect of Advertising on Sales” (p. 261)
b. Advertising is not the only marketing activity that affects sales. A change in
market share may be due to:
1) Quality perceptions
2) Word-of-mouth
3) New products on market
4) New outlets opened
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5) Better personal selling
6) Seasonal changes in the business cycle.
c. Some companies have no way of determining the relationship between sales
and profit.
d. The response to advertising extends over a longer period than the ads run;
advertising should be seen as a long-term investment.
d. Sustained ad spending in hard times protects, and can increase, market share.
During the last global recession, the leading European marketers maintained
their budgets and built brand equity.
A8-15 local businesses can gain profits through word-of-mouth but outdoor
advertising is likely to provide significant success-example a local company’s
billboard ad (p. 260)
2. The Variable Environments of Business (p. 261) — the advertising manager must
consider the company's external situation (economic, political, social, and legal),
and the internal situation (institutional and competitive environments). Plus, the
company's policies and procedures
B. Methods of Allocating Funds (p. 261) — companies use a number of methods to
determine how much to spend on advertising.
Checklist: “Ways to Set Advertising Budgets” (p. 262)
1. Percentage-of-sales method (p. 262)
a. Simplest and most popular method because it is related to revenue and
considered safe.
Exhibit 8-12 Advertising expenditures by the top 15
leading advertisers in 2001 (p. 262)
b. It may be based on a percentage of last year’s sales, next year’s anticipated
rules, or a combination of both. Usually based on an industry average or
company experience.
c. The problem is knowing what percentage to use Unfortunately, it is too often
determined arbitrarily
d. The greatest shortcoming is that it violates a basic marketing principle.
Marketing activities are supposed to “stimulate” demand and thus sales —
marketing activities are not supposed to occur as a “result” of sales.
2. Share-of-Market/Share-of-Voice Method (p. 263) — a high correlation usually
exists between share of market and share of industry advertising, in markets with
similar products. Best to keep the share of voice ahead of market share.
a. Commonly used for new products
b. For new products, the budget should be one and one half times the brand's
expected share of market in two years, e.g. if the 2-year objective is a 10
percent share of market, it should spend 15 percent of industry's advertising
during the two year period.
c. One hazard of this method is the tendency to become complacent.
Companies must be aware of all their competitor's marketing activities, not
just advertising.
3. The Objective/Task Method (p. 263) Also known as the budget build-up method,
the objective/task method is used by the majority of U.S. major national
advertisers. The task method has three steps:
a. Defining objectives
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b. Determining strategy
c. Estimating cost
The task method forces companies to think in terms of accomplishing goals.
Its effectiveness is most apparent when the results of particular ads or
campaigns can be readily measured. This method is adaptable to changing
market conditions and can be easily revised.
d. The major drawback is that it is usually very difficult to determine in
advance how much money is needed to reach a specific goal.
4. Additional methods — advertisers also use several other methods.
a. In the empirical research method, a company runs a series of tests in
different markets with different budgets to determine the best level of
advertising expenditure.
b. Computers can generate quantitative mathematical models for budgeting and
allocating ad dollars.
C. The Bottom Line (p. 264)
Unfortunately, all these methods rely on one of two fallacies.
1. The first is that advertising is a “result” of sales.
2. The second is that advertising “creates” sales.
3. The principal job of advertising is to influence perception by informing,
persuading, and reminding. Advertising affects sales, but it is just one of many
influences.
AD LAB 8-A “The Strategies of Marketing Warfare.” (p. 238)
1. Think of a successful product and explain its success in terms of marketing warfare.
Discussion guidelines:
Market Position
(per 100
companies)
1
Strategy
Defensive strategy (adopts competitors’ features)
2-3
Offensive strategy (attacks to capture market share)
4-7
Flanking strategy (controls uncontested niche areas)
7-99
Guerrilla strategy (controls small areas until contested)
Students may want to localize their example. Local radio stations, banks, auto dealers,
grocery stores, and department stores might provide interesting opportunities for discussion.
Example: On the national level, Compaq computer is an example of a company that
successfully waged guerrilla warfare and flanking warfare throughout the 1980s by
specializing in the small, portable, IBM-compatible computer niche market. Today, it has
reached a size where it competes for market share against the leaders using the offensive
strategy of marketing warfare.
2. Select a product and explain how marketing warfare strategy might be used to gain greater
success.
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Use the guidelines above.
Example: A small used car lot could run testimonials featuring only 18 year-olds (praising the
good service they received) along with a special discount on car insurance from a certain
insurance company. This would probably be considered a flanking tactic if the niche market
of young, first-time car buyers came in droves and continued to do so as long as promotions
were run. It would be seen as a guerrilla strategy if another dealer — particularly a major
dealer — advertised to the same market segment, and the used-car lot re-targeted its ads to
reach single parents.
AD LAB 8-B “The Economic Effect of Advertising on Sales.” (p. 261)
1. When would an advertising expenditure curve have a negative slope?
The advertising expenditure curve will grow until the market response slows to the point
where advertising costs match the return on sales.
Rationale: Initially, the ratio between “advertising expenditures” and “units sold” is a
positive, upward line with sales returns outstripping the cost of advertising. However, once
the audience is saturated (exposed to the ads too frequently), sales figures begin to slow and
the line begins to slope at a shallower angle. However, sales will still be better than
advertising costs — to some degree — until the line reaches a point where it no longer rises
(horizontal axis). Thus, the advertising expenditure curve will grow until the market response
slows to the point where advertising costs match the return on sales. As sales returns
diminish further, the curve will drop into a negative slope.
2. Economists suggest that the quantity sold depends on the number of dollars the company
spends on advertising. Is that a safe assumption? Discuss.
No.
Rationale: There are internal and external factors that affect sales. (p. 257)
a. There is a point where markets become unwilling to respond to advertising.
b. Ad budgets cannot last indefinitely.
c. There are minimal levels below which advertising expenditures have no effect on
sales.
d. Culture and competitors can impose limits on advertising.
However, it is true that there is normally a positive relationship between the quantity sold and
the advertising dollars spent (there are too few advertising dollars available to maintain broad
or complete coverage for any length of time). The relationship depends on a perceived need
in the marketplace for the product. If people do not perceive the need-satisfying qualities of
the product, all the advertising in the world will not generate sales. (The Edsel case was a
classic example of vast advertising with little to show for it.)
ETHICAL ISSUE: “A War of Comparisons” (p. 242)
1. How do you feel about ads that compare the features and benefits of competitive products and
services? Do you believe they are unethical even if the comparisons are honest? Why or
why not?
Discussion guidelines:
The primary challenge is to determine if an ad’s comparisons are fair and legal:
a. Misleading, deceptive (includes omissions) or false comparisons are illegal.
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b. “Unjust injury” is illegal (damage caused by innuendo, indirect intimations, and
ambiguous suggestions). Most will agree that negative political advertising can
sometimes fit the description of unjust injury, but it is protected by the First
Amendment and therefore avoids legal and self-regulatory protections. (See the
Ethical Issue, “Political Advertising: Positively Negative?” in Chapter 9, p. 312-313)
c. A distinction must be made between illegal comparisons and puffery, a legal form of
hyperbole that distorts concepts, not necessarily facts. (Review the Ethical Issue in
Chapter 2, “Truth in Advertising: Puffing and Fluffing,” and the related discussion in
this instructor’s manual)
2. Select a comparative ad and study the copy. What points of comparison does the ad make?
Are the points made honestly and directly, or are they masked by innuendo and implication?
Is the ad literally true but still potentially misleading? Do you feel the ad is ethical or not?
See guidelines for question 1.
REVIEW QUESTIONS
1. What is a marketing plan and why is it a company’s most important document? (p. 235)
The marketing plan assembles all the pertinent facts about the organization, the markets it
serves and its products, services, customers, competition, and so on. It forces all
departments- product development, production, selling, advertising, credit, transportation- to
focus on the customer. Finally, it sets goals and objectives for specified periods of time and
lays out the precise strategies and tactics to achieve them.
2. What examples illustrate the difference between need-satisfying objectives and sales-target
objectives? (p. 236-237)
Answer guidelines:
Need-Satisfying objectives — shifts management’s view from a producer of products to a
satisfier of target market needs.
Sales-target objectives — specific, quantitative, realistic marketing goals to be achieved
within a specified time period.
Example: An oil company's need-satisfying objective might be to satisfy its customers' needs
for a variety of sources of energy. Its sales-target objective might be to increase the sale of its
subsidiary company's solar heating devices by 50% over the next two years.
3. What are the three types of marketing plans? How do they differ? (pp. 235-, 241, 244, 245)
Companies employ three types of marketing planning models today:
a. Top-down — The traditional top-down marketing plan is the most common planning
format. The top-down plan has four main elements: situation analysis, marketing
objectives, marketing strategy, and marketing tactics (or action programs).
b. Bottom-up — Small companies use bottom-up marketing, which enables entrepreneurs to
find unique tactics to exploit. Once a tactic is discovered, the advertiser can build a
strategy around it, focusing all elements of the marketing mix on it. The tactic becomes
the nail, and the strategy is the hammer that drives it home. (Exhibit 7-2, p. 235)
c. Integrated Marketing Communications (IMC) — is the process of building and
reinforcing mutually profitable relationships with employees, customers, other
stakeholders, and the general public through a communication program using a variety of
media. IMC planning perceives all the actions of a company as communications (e.g.,
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sales people’s attitudes, management’s human resource policies, advertising, the look of
the letterhead, etc.). The focus on the customer's role is dominant and makes companies
go beyond marketing-oriented to being market-driven.
4. What basic elements should be included in a top-down marketing plan? (pp. 235-239)
The basic elements of a top-down marketing plan are:
1. Situation Analysis
2. Marketing Objectives
a. Need-satisfying objectives
b. Sales-target objectives
3. Marketing Strategy
a. Selecting target markets
b. Determining the marketing mix (the 4 P's)
4. Tactics (Action Programs)
5. How can small companies use bottom-up marketing to become big companies? (p. 235)
Trout and Ries think the best way for a company to develop a competitive advantage is to
focus on an ingenious tactic first and then develop that tactic into a strategy. Bottom-up
marketing is reversing the normal planning process (i.e., top-down planning), and it can be
used in a small company that wants to become a big company. By planning from the bottom
up, entrepreneurs can find unique tactics to exploit. The tactic is a competitive mental angle
that is unique enough to produce results (i.e., growth, financial success). Once a tactic is
discovered, the advertiser can build a strategy around it, focusing all elements of the
marketing mix on it. Managers of small companies actually have an advantage. Surrounded
by the details of the business, they are more likely to discover a good tactic that can be
developed into a powerful strategy.
6. How does one person's strategy become another person's objective? Give examples. (pp.
251-252)
The company president's objective might be to increase profits. His strategy might be to
lower the cost of sales. To the marketing director, lowering sales costs then becomes the
objective, and the strategy might be to develop more distributors who will carry part of the
cost of promotion. Increasing the number of distributors then becomes an objective for the
agency, which might decide on a strategy of running ads in trade magazines to solicit dealer
inquiries.
7. What types of involvement do consumers bring to the purchase decision? (pp. 251-253)
Consumers bring different levels of involvement (high or low) and different types of
involvement, either cognitive (think), or affective (feel), to the purchase decision.
8. What is the best method of allocating advertising funds for a real estate development? Why?
(p. 251)
Most real estate developers use the unit of sale method — allocating a certain amount per
house to advertising — which is simply a variation on the percentage-of-sales method. This
enables the developer and the banker to anticipate what will be spent to promote the project
before it is built. However, this method is only as good as the developer's ability to know
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how much per unit needs to be spent to sell the project. To determine that, a variation of the
task method might be most useful. (see Checklist “Ways to Set Advertising Budgets,” p. 259)
9. What types of companies tend to use the percentage-of-sales methods? Why? (pp. 262-263)
Retailers, who need to control the level of expenditure to maintain profitability. In addition,
new business people and companies that don't have a lot of experience in advertising or for
whom advertising may not be a major marketing activity. Often these firms miss out on
opportunities because of their narrow view.
10. How could a packaged foods manufacturer use the share-of-market/share-of-voice method to
determine its advertising budget? (p. 263)
A packaged foods manufacturer could measure the dollars spent on advertising by
competitors, determine a reasonable market share to achieve over some period of time, and
then set a budget of a percentage of industry advertising that is somewhat ahead of share-ofmarket objective
EXPLORING THE INTERNET
The Internet exercises for Chapter 8 address the following areas covered throughout the chapter:
strategic advertising planning (Exercise 1) and integrated marketing communications (Exercise
2).
1. Strategic Advertising Planning
You have studied in this chapter the various means of planning advertising strategy – topdown, bottom-up, and IMC. Browse through the websites of the following marketers, and
answer the questions regarding the various means of planning advertising strategy.
 American Automobile Association (AAA) (www.aaa.com)
 Bristol Myers Squibb (www.bms.com)
 Proflowers.com (www.proflowers.com)
 Hudson Moving & Storage (www.moving-storage.com)
 Metro Goldwyn Mayer/UA (www.mgm.com)
 General Electric (www.ge.com)
 Hewlett-Packard (www.hp.com)
 Intel (www.intel.com)
 Kellogg’s (www.kelloggs.com)
 Walt Disney (www.disney.com)
a. What is the size/scope of the company and its business? What is the company’s purpose?
b. Identify the target audience, product concept, communications media, and advertising
message for each.
c. What is the company’s position within the industry? Type of communication used?
Target market?
d. Where does the company’s product(s) fall within the Kim-Lord Grid?
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Sample Answer:
Hewlett-Packard
a. Hewlett-Packard is a large, international company, which designs, manufactures and
services electronic products and systems for measurement, computing and
communication used by people in industry, business, engineering, science, medicine and
education.
b. Target audience – the HP website is vast and varied. The site includes information for
employees, current and potential customers, and potential investors on three continents
and in 50 countries by providing:
 in-depth information for the company’s printing digital imaging, computers,
storage, networking, and software products
 customer service and technical support
 online shopping
 seven online publications/journals
 press releases and philanthropic information
 current company financials
 corporate mission, goals, policies, and information
Product concept – the company’s more than 25,000 products include: computers and
peripheral products, electronic test and measurement instruments and systems,
networking products, medical electronic equipment, instruments and systems for
chemical analysis, handheld calculators and electronic components. The basic purpose
behind these products is to accelerate the advancement of knowledge and improve the
effectiveness of people and organizations.
Communications media/messages – website that details all the necessary company and
product information. It also has advertising banners, which provide an image message
while pointing to the site.
c. Position – the company is positioned as the age-old technology leader within its
industries providing high quality, state-of-the-art, reliable products.
Communications used:
 The HP website and its advertising banners are the company’s primary online
media. These interactive media, coupled with other collateral items – including
brochures, P.O.P. displays/kiosks, and a myriad of in-store merchandising
vehicles – work to provide all the essential information abut the company and its
products.
 HP also makes use of national television spots and magazine advertisements to
enhance the awareness and image for the company and its products.
 Local/regional newspaper advertising and extensive sales promotion (both
consumer and trade premiums) for the company’s products provide price
incentives and push sales.
 Finally, the company’s direct marketing presence works to establish its consumer
database, identify qualified leads (“hand-raisers”), build owner loyalty, and
communicate new product information.
Target markets:
 current and potential consumers of the company’s products
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 industry technicians, practitioners, and executives
 retail and wholesale channel partners
 current and future investors
 HP employees
d. Most, if not all of the company’s products, fall in Quadrant I of the Kim-Lord Grid, as
they are very high in cognitive involvement, but low in affective involvement.
2. Integrated Marketing Communications (IMC)
Integrated marketing communications (IMC) is an important part of modern advertising
strategy. Browse the following five websites, and provide a summary of the organization’s
IMC role and its implications to the advertising industry. Also, answer the questions listed
below.
 IMC Strategic Development (www.imcstrategic.com)
 Integrated Marketing Communications, Inc. (www.intmark.com)
 The Phelps Group (www.phelpsgroup.com)
 Medill’s IMC Graduate Program at Northwestern University (www.medill.nwu.edu/imc/)
 CU Boulder’s IMC Graduate Program (http://128.138.144.96/ej/projects/imc_home.html)
a. Who is the intended audience of the site?
b. What type of organization sponsors the site?
c. What specific IMC vehicles or services (if any) are mentioned/offered?
d. What benefit does the organization provide individual clients/students? The advertising
community, at large?
Sample Answer:
Medill School Program
Northwestern University Medill School of Journalism’s IMC program has many implications to
the contemporary advertising business. However, foremost in its impact is its effective ability to
train a new generation of advertising executives and practitioners on the merits of implementing
and utilizing IMC functions in their everyday communications activities.
a. The intended audience of the site is composed of interested practitioners and students
currently or researching the possibility of attending the school.
b. The site’s sponsor is an academic organization (Northwestern university’s Medill
Graduate School of Journalism).
c. The degree offered by the school is in IMC, and focuses on one of the following three
areas: advertising/sales promotion, public relations, or direct marketing.
d. The benefits this program and the school offers the students is a wealth of integrated
communications knowledge packaged in a means for practical implementation. The
advertising community benefits (and will benefit) from a fresh new wave of advertising
executives who understand and know how to utilize the full impact of integrated
communications.
IMPORTANT TERMS
advertising message, 255
advertising plan, 250
need-satisfying objectives, 236
objective/task method, 263
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advertising strategy, 253
bottom-up marketing, 241
communications media, 254
corporate objectives, 236
creative mix, 253
empirical research method, 263
end cap promotion, 247
integrated marketing communications
(IMC), 246
lifetime customer value (LTCV), 242
marketing objectives, 236
marketing plan, 235
marketing strategy, 237
percentage-of-sales method, 262
positioning, 238
product concept, 253
relationship marketing, 241
sales-target objectives, 237
share-of-market/share-of-voice method, 263
situation analysis, 236
stakeholders, 242
SWOT analysis, 250
tactics (action programs), 241
target audience, 253
top-down marketing, 235
value, 242
ANCILLARY
ACTIVITIES & EXERCISES
1. Have students do research on the reasons that Coca-Cola launched the new Coke
product in the eighties. Have them present the rationale/conclusions.
2. Have students work in teams to prepare a situation analysis for a local business.
3. Have students use the situation from exercise one to develop alternative marketing and
advertising strategies for the local business.
DEBATABLE ISSUE
Should Advertising of Unhealthful or Unsafe Products Be Banned?
A number of laws prohibit the advertising of certain harmful products. Cigarette advertising on
radio and television, for example, was banned in the United States on January 1, 1971. Since
then, some consumer groups and legislators have urged that other harmful products be prohibited
from media advertising. These include hard liquor, patent medicines, and products that cause
atmospheric pollution. However, numerous arguments have arisen about which products should
and should not be advertised. Some feel the government should protect consumers from all
products that may be unhealthful or unsafe. Others are opposed to such regulation.
PRO
Advertising of unhealthful or unsafe products should be banned because...
Such advertising motivates people to buy and use harmful products, like processed foods with
high salt, fat, or sugar content, nonprescription drugs, or hazardous children's toys. In the interest
of public safety, advertising should include warnings.
The consumption of certain products, such as hard liquor or cigarettes, can endanger not only the
users but also their families and others around them. In the interest of public health, such
products should not be advertised.
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Promotion of unsafe or unhealthful products is detrimental since the use of such products may
cause illness, injury, or even death. People must be protected, for they are society's most precious
asset.
Products that are harmful should not be marketed. Since advertising promotes sales, halting the
advertising of such products will reduce sales. This will serve to reduce their consumption.
CON
Advertising of unhealthful or unsafe products should not be banned because...
Most people know that using certain products can be harmful. However, if the purchase and use
of such products is legal, then media advertising of these products must also be legal.
It is doubtful that cigarette smokers would stop smoking because cigarette advertising was
banned. In fact, despite prohibition of the sale of alcoholic beverages in the United States from
1920 to 1933, the consumption of such beverages actually increased.
The First Amendment of the U.S. Constitution guarantees freedom of speech. Commercial
speech, including advertising, is within the protection of this amendment even though it may be
regulated to some extent by law.
The automobile may be responsible for more deaths and injuries than any other product sold
today, but would curtailing its sale benefit society? To buy or not buy should be a matter of free
choice for the consumer.
Questions
1. Do you agree that the advertising of certain unsafe or unhealthful products should be banned?
If so, what products?
2. Which side of this issue do you feel has the strongest arguments?
IMAGES FROM THE TEXT
Images are available as color acetates through your local McGraw-Hill/Irwin sales
representative.
A8-1
A8-2
A8-3
A8-4
A8-5
A8-6
A8-7
A8-8
A8-9
A8-10
A8-11
Exhibit 8-1
Exhibit 8-2
Exhibit 8-4
Exhibit 8-5
Exhibit 8-6
Exhibit 8-7
Exhibit 8-8
Exhibit 8-9
Exhibit 8-11
Mountain Dew ad (p. 233)
The top-down marketing planning model (p. 235)
The bottom-up planning model (p. 241)
DeBeers ad (p.245)
Levels of integration (p. 246)
Integration triangle (p. 247)
Duncan IMC macro model (p. 248)
Wang-Schultz IMC planning model (p. 249)
Advertising pyramid (p. 251)
The relationship circle (p.253)
Kim-Lord Grid (p. 254)
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REFERENCE LIBRARY
Located on the McGraw-Hill
Contemporary Advertising website:
www.mhhe.com/arens04
RL 8-1
RL 8-2
RL 8-3
Checklist: Situation analysis
How IMC builds Relationships
Checklist: Developing advertising objectives
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