Objectives%20and%20Budgeting

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• Objectives and Budgeting

We cant afford advertising that isnt
working. Thomas Knowlton President, Kelloggs
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Value of Objectives

• Focus and Coordination
• They help to orient everyone involved toward one,
  common goal.
• Plans and Decisions
• They serve as criteria for developing plans and
  making decisions.
• Measurement and Control
• They provide the standards and benchmarks for
  evaluating results.

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Measuring Advertising Effectiveness
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Problems With Sales Objectives

• Many other variables may influence sales.
• Advertising has a lagged effect.
• Sales objectives offer little guidance to
  creative and media people.

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Where Sales Objectives May Work

• In order of appropriateness
• Direct response

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Where Sales Objectives May Work

• In order of appropriateness
• Direct response
• Retail special event promotions

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Where Sales Objectives May Work

• In order of appropriateness
• Direct response
• Retail special event promotions
• Mature very stable markets

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Communications Objectives
Hierarchy of Effects Pyramid
5 Regular Use
Conative
20 Trial
25 Preference
Affective
40 Liking
70 Comprehension
Cognitive
90 Awareness
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Communications Objectives

• Objective 1 Create brand awareness among 90 of
  the target audience.
• Objective 2 Create understanding of key brand
  benefits among 70 of the target audience.
• Objective 3 Create positive feelings about the
  brand among 40 and preference among 25 of the
  target audience.
• Objective 4 Obtain trial among 20 of the target
  audience.
• Objective 5 Develop and maintain regular use
  among 5 of the target audience.

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The DAGMAR Approach

• Define
• Advertising
• Goals for
• Measuring
• Advertising
• Results

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Characteristics of Objectives

• Specific Communications Objectives
• Concrete Measurable Tasks
• Well-Defined Target Audience
• Existing Benchmark Measure
• Degree of Change Sought
• Specific Time Period

Critique of Objectives
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DAGMAR Difficulties

• Questionable Objections
• Sales Objectives Are Needed
• Sales are all that really counts, not
  communications objectives.
• Costly and Impractical
• The research and efforts cost more then the
  results are worth.
• Inhibition of Creativity
• Too many rules and too much structure curb genius.

• Legitimate Problems
• Response Hierarchy Problems
• Doesn't always define the process people use to
  reach purchase/use.
• Attitude - Behavior Relationship
• Attitude change doesn't always lead to change in
  actions or behavior.

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Theoretical Issues in Budgeting

• Concave-Downward Response Curve

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Theoretical Issues in Budgeting

• S-Shaped Response Curve

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Theoretical Issues in Budgeting Marginal Analysis
Sales
Gross Margin
Sales in
Ad. Expenditure
Profit
Point A
Advertising / Promotion in
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Problems with Marginal Analysis

• Assumption
• Sales are the principal objective of advertising
  and/or promotion.
• Assumption
• Sales are the result of advertising and promotion
  and nothing else.

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Budgeting - Top Down
Historical Method
Affordable Method

• May be based on last years with a percentage
  increase.

• Allocates whatever is left over to advertising.

Percentage-of-Sales

• Compares total sales with the total promotion
  budget during a previous or projected time
  period.

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Budgeting-Top Down
Arbitrary Allocation
Competitive Parity

• Budgeting by fiat.

• Matching the competitions percentage-of-sales
  expenditures.

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Examples of ad-to-sales ratios

• Airlines 1.2 of sales
• Soft drinks 5.3
• Cable TV 1.3
• Dolls 15.2
• Food kindred products 10.2
• Steel works and blast furnaces 1.9
• Watches, clocks and parts 13.7
• Wine and brandy 11.3
• Records, audiotape, disk 13.4
• Plastic, resins 0.5

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Budgeting-Bottom Up
Objective Task Method

• Looks at objectives set for each activity, and
  determines the cost of accomplishing each
  objective.

• 1. Isolate Objectives
• 2. Determine Tasks Required
• 3. Estimate Required Capital Expenditures
• 4. Monitor
• 5. Reevaluate Objectives