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- Objective Setting
CHAPTER 6
and Budgeting
© 2010 South-Western, a part of Cengage Learning PowerPoint Presentation by Charlie Cook
All rights reserved. The University of West Alabama
Eighth Edition
- Chapter Objectives
After reading this chapter you should be able to:
1. Understand the process of marcom objective setting and the
requirements for good objectives.
2. Appreciate the hierarchy-of-effects model and its relevance
for setting marcom objectives.
3. Comprehend the role of sales as a marcom objective and
the logic of vaguely right versus precisely wrong thinking.
4. Know the relation between a brand’s share of market (SOM)
and its share of voice (SOV) and the implications for setting
an advertising budget.
5. Understand the various rules of thumb, or heuristics, that
guide practical budgeting.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–2
- Setting Marcom Objectives
• Marcom Objectives
Goals that the various marcom elements aspire to
Goals
achieve individually or collectively during a scope of
time such as a business quarter or fiscal year
time
• Setting Marcom Objectives
Is an expression of management consensus
Guides the budgeting, message, and media aspects
Guides
of advertising strategy
of
Provides standards against which results can be
Provides
measured
measured
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–3
- Marcom Objectives and Tools
Marcom Objective Marcom Tool
Facilitate the successful introduction of new Brand naming and packaging, advertising, sales
Facilitate Brand
brands promotions, word-of-mouth buzz generation, and
brands
point-of-purchase (P-O-P) displays
point-of-purchase
Build sales of existing brands by increasing Advertising and sales promotions
Build
the frequency of use, the variety of uses, or
the quantity purchased
the
Inform the trade (wholesalers, agents or Personal selling and trade-oriented advertising
Inform
brokers, and retailers) and consumers about
brand improvements
brand
Create brand awareness Advertising, packaging, and P-O-P messages).
Enhance a brand’s image Brand naming and packaging, advertising, event
Brand
sponsorship, cause-oriented marketing, and
marketing-oriented public relations
marketing-oriented
©Generate South-Western, a part of
2010 sales leads Advertising
Cengage Learning. All rights
reserved. 6–4
- Marcom Objectives and Tools (cont’d)
Marcom Objective Marcom Tool
Persuade the trade to handle the Trade-oriented advertising and personal
Persuade Trade-oriented
manufacturer’s brands selling
manufacturer’s selling
Stimulate point-of-purchase sales Brand naming and packaging, P-O-P
Brand
messages, and external store signage
messages,
Increase customer loyalty Advertising and sales promotions
Improve corporate relations with special Marketing-oriented PR
Improve
interest groups
interest
Offset bad publicity about a brand or generate Marketing-oriented PR
Offset
good publicity
good
Counter competitors’ communications efforts Advertising and sales promotions
Provide customers with reasons for buying Advertising and sales promotions
Provide
immediately instead of delaying a purchase
immediately
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–5
- Figure 6.1
Hierarchy of
Marcom Effects
The hierarchy of effects
metaphor implies that for
marketing communications to
be successful it must move
consumers from one goal to
the next goal.
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–6
- The Hierarchy of Marcom Effects
• Advancing Consumers from Unawareness to
Advancing
Awareness
Awareness
Advertising is the most effective and efficient method
Advertising
for quickly creating brand awareness.
• Creating an Expectation
Product benefits from buying and experiencing a
Product
brand
brand
• Encouraging Trial Purchases
Free samples, coupons, major price discounts and
Free
rebate offers encourage trial behaviors
rebate
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–7
- The Hierarchy of Marcom Effects (cont’d)
• Forming Beliefs and Attitudes
Beliefs form the basis for developing an overall
Beliefs
attitude toward the brand.
attitude
Beliefs and attitudes are mutually reinforcing
• Reinforcing Beliefs and Attitudes
Marcom serves to reinforce consumer beliefs and
Marcom
attitudes based on product usage experience
attitudes
• Accomplishing Brand Loyalty
Brands that continue to satisfy expectations foster
Brands
© 2010rand-loyalty which reduces price sensitivity
brand-loyalty
b South-Western, a part of
Cengage Learning. All rights
reserved. 6–8
- Figure 6.2
Advertisement
Illustrating
Hierarchy of
Marcom Effects
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–9
- Criteria That Good Marcom Objectives Must Satisfy
Figure 6.3
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–10
- Should Marcom Objectives Be Stated in
Should
Terms of Sales?
• Objectives of Presales Communication
To increase the target audience’s brand awareness
To enhance the target ir attitudes toward the brand
To shift their preferences from the competitors’ brand
• Sales Objectives
The marcom objective literally is to increase sales by
The
a particular amount.
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–11
- The Logic of Vaguely Right versus Precisely Wrong Thinking
Figure 6.4
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–12
- Should Marcom Objectives Be Stated
in Terms of Sales?
Using sales response as the objective for a branded product’s
The Traditional
The marcom effort is unsuitable for two reasons:
View • A host of factors (e.g., advertising, sales promotions, and other
(Thesis)
(Thesis) elements of the marcom program) can affect sales.
• Marcom’s effect on sales is typically delayed, or lagged.
• Marcom objectives should always be stated in terms of sales or
The Heretical
The market share gains and that failure to do so is a cop-out
View • Marcom’s purpose is to generate sales.
(Antithesis)
(Antithesis)
Accountability • Companies and their chief executives and financial officers are
Accountability demanding greater accountability from marcom programs
Perspective • Efforts should not also
© 2010 South-Western, a part of goals. be made to assess whether marcom
(Synthesis)
(Synthesis) affects pre-sales
Cengage Learning. All rights
reserved. 6–13
- Marcom Budgeting
• Budgeting in Theory
The best (optimal) level of any investment is the level
The
that maximizes profits
that
Marginal revenue = Marginal cost, MR=MC
Marginal Cost = Change in total cost = ∆ TC
Change
Change in quantity Q
Marginal Revenue = Change in total revenue = ∆ TR
Change in quantity Q
Change
Advertisers should increase their advertising
Advertisers
investment as long as it is profitable to do so
investment
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–14
- Marcom Budgeting
• Sales-to-Advertising Response Function
The relationship between money invested in
The
advertising and the response, or output, of that
investment in terms of revenue generated
investment
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–15
- Hypothetical Sales-to-Advertising Response Function
Table 6.1
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–16
- Budgeting in Practice
• Percentage-of-Sales Budgeting
Brand advertising budget is a fixed percentage of past
Brand
(e.g., last year’s) or anticipated (e.g., next year’s)
sales volume.
sales
Criticism: budget becomes a function of sales
Sales = ƒ(Advertising) versus Advertising = ƒ(Sales)
Sales ƒ(
• Objective-and-Task Budgeting
Advertising decision makers specify what role they
Advertising
expect advertising (or some other marcom element)
to play for a brand and then set the budget
accordingly.
accordingly.
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–17
- Budgeting in Practice (cont’d)
• Percentage-of-Sales Budgeting
Brand advertising budget is a fixed percentage of past
Brand
(e.g., last year’s) or anticipated (e.g., next year’s)
sales volume.
sales
Criticism: budget becomes a function of sales
Sales = ƒ(Advertising) versus Advertising = ƒ(Sales)
Sales ƒ(
• Objective-and-Task Budgeting
Advertising decision makers specify what role they
Advertising
expect advertising (or some other marcom element)
to play for a brand and then set the budget
© 2010ccordingly.
a South-Western, a part of
accordingly.
Cengage Learning. All rights
reserved. 6–18
- Steps in Objective-and-Task Budgeting
1. Establish specific marketing objectives to be
Establish
accomplished
2. Assess communication functions required to
2. Assess
accomplish overall marketing objectives
accomplish
3. Determine advertising’s role in the total
Determine
communication mix
communication
4. Establish specific measurable communication
Establish
response level goals required to achieve marketing
objectives.
objectives.
5. Establish the budget based on estimates of
Establish
expenditures required to accomplish the advertising
goals.
goals.
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–19
- Budgeting in Practice (cont’d)
• Competitive Parity Method Budgeting
Setting the marcom budget to match or exceed what
Setting
competitors are doing
competitors
Share of Market (SOM)
The ratio of one brand’s revenue to total category revenue
Share of Voice (SOV)
The ratio of a brand’s advertising expenditures to total
The
category advertising expenditures
category
© 2010 South-Western, a part of
Cengage Learning. All rights
reserved. 6–20
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