Marcom Objective Setting and Budgeting

1
Chapter Six
Marcom Objective Setting and Budgeting
? 2007 Thomson South-Western
2
Setting Marcom Objectives

• Goals that the various marcom elements aspire to
  individually or collectively achieve during a
  scope of time such as a business quarter or
  fiscal year.

3
Some Marcom Objectives

• Facilitate the successful introduction of new
  brands.
• Build sales of existing brands by increasing the
  frequency of use, the variety of use, or the
  quantity purchased.
• Inform the trade and consumers about brand
  improvements.

4
Marcom Objectives

• Create brand awareness
• Enhance a brands image
• Generate sales leads
• Persuade the trade to handle the manufacturers
  brands
• Stimulate point-of-purchase sales
• Increase customer loyalty

5
Marcom Objectives

• Improve corporate relations with special interest
  groups
• Offset bad publicity about a brand or generate
  good publicity
• Counter competitors communication efforts
• Provide customers with reasons for buying
  immediately instead of delaying a purchase

6
Why Set Marcom Objectives

• Expression of management consensus
• Guides the budgeting, message, and media aspects
  of advertising strategy
• Provide standards against which results can be
  measured

7
The 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.

8

• The
• Hierarchy
• Of Effects

9
Advancing Consumers From Unawareness to Awareness

• Advertising (mass media or otherwise) is
  generally the most effective and efficient method
  for quickly creating brand awareness.
• Building knowledge understanding Creating an
  Expectation

10
Hierarchy of Effects
Encouraging Trial Purchases
11
Hierarchy of Effects

• Forming Beliefs and Attitudes
• Reinforcing Beliefs and Attitudes
• Accomplishing Brand Loyalty

12
Requirements for Setting Suitable Marcom
Objectives

• Include a precise statement of who, what, and
  when
• Be quantitative and measurable
• Specify the amount of change whenever possible
• Be realistic
• Be internally consistent
• Be clear and put it in writing

13
Should Marcom Objectives Be Stated in Terms of
Sales?

• Presales Objectives communication objectives
  that attempt to increase the target audiences
  brand awareness, enhance their attitudes toward
  the brand, shift their preferences from the
  competitors brand and so on.

• Sales Objectives means the marcom objective
  literally is to increase sales by a particular
  amount.

14
Should Marcom Objectives Be Stated in Terms of
Sales?

• Traditional View (Thesis)
• Sales volume is the consequence of a host of
  factors in addition to marcom
• Effect of marcom efforts is delayed
• Problem Communication objectives dont
  necessarily translate into sales

15
Sales Volume as a Marcom Objective

• Heretical View (Antithesis)
• Marcoms purpose is to generate sales
• Sales measures are vaguely right
• Problem Too many other factors influence sales

16
An Accountability Perspective (Synthesis)

• Chief executives and financial officers are
  demanding greater accountability from marcom
  programs.
• The measurement of effects of a program should
  not stop short of measuring the effect on sales.

17
Marcom Budgeting in Theory

• The best(optimal) level of any investment is the
  level that maximizes profits(MRMC)
• Advertisers should continue to increase their
  advertising investment as long as it is
  profitable to do so
• Every additional dollar spent on MARCOM brings in
  more than a dollar in revenue (MRgtMC), it is
  profitable to continue MARCOM spending.
• If the additional dollar spent on MARCOM brings
  in less than a dollar in revenue (MRltMC), MARCOM
  spending needs to be cut.
• Thus profits are maximized when MR MC

18
Sales-to-Advertising Response Function

• The relationship between money invested in
  advertising and the response, or output, of that
  investment in terms of revenue generated.

19
An Example of a Sales-to-Advertising Response
Function
20
Practical Budgeting Methods

• Percent-of-Sales Budgeting
• Objective-and-Task Method
• Competitive Parity Method
• (match competitors method)
• Affordability Method

21
Percentage-of-Sales Budgeting

• A company sets a brands advertising budget by
  simply establishing the budget as a fixed
  percentage of past or anticipated sales volume
• Criticized as being illogical
• Salesf(Advertising) (o)
• Advertisingf(Sales) (x)
• During recession?

22
Objective-and-Task Method

• The most sensible and defendable advertising
  budgeting method
• Specify what role they expect advertising to play
  for a brand and then set the budget accordingly
• Build upwards by costing activities

23
The Competitive Parity Method

• Sets the ad budget by basically following what
  competitors are doing
• SOM- (share of market) the ratio of one brands
  revenue to total category revenue
• SOV- (share of voice) the ratio of a brands
  advertising expenditures to total category
  advertising expenditures

24
Advertising Spend, SOV, and SOM for Top-10
Wireless Phone Brands
25
Advertising Spend, SOV, and SOM for Top-10 Beer
Brands
26
The SOV/SOM Effect and Ad Spending Implications
27
Affordability Method

• Only the funds that remain after budgeting for
  everything else are spent on advertising
• Only the most unsophisticated and impoverished
  firms
• However, affordability and competitive
  considerations influence the budgeting decisions
  of all companies