© 2010 South-Western, a part of Cengage Learning All rights reserved. PowerPoint Presentation by Charlie Cook The University of West Alabama Eighth Edition Objective Setting and Budgeting CHAPTER 6 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. Chapter Objectives After reading this chapter you should be able to: © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–2 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–3 Setting Marcom Objectives Setting Marcom Objectives • Marcom Objectives Marcom Objectives Goals that the various marcom elements aspire to Goals that the various marcom elements aspire to achieve individually or collectively during a scope of achieve individually or collectively during a scope of time such as a business quarter or fiscal year time such as a business quarter or fiscal year • Setting Marcom Objectives Setting Marcom Objectives Is an expression of management consensus Is an expression of management consensus Guides the budgeting, message, and media aspects Guides the budgeting, message, and media aspects of advertising strategy of advertising strategy Provides standards against which results can be Provides standards against which results can be measured measured © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–4 Marcom Objectives and Tools Marcom Objectives and Tools Marcom Objective Marcom Objective Marcom Tool Marcom Tool Facilitate the successful introduction of new Facilitate the successful introduction of new brands brands Brand naming and packaging, advertising, sales Brand naming and packaging, advertising, sales promotions, word-of-mouth buzz generation, and promotions, word-of-mouth buzz generation, and point-of-purchase (P-O-P) displays point-of-purchase (P-O-P) displays Build sales of existing brands by increasing Build sales of existing brands by increasing the frequency of use, the variety of uses, or the frequency of use, the variety of uses, or the quantity purchased the quantity purchased Advertising and sales promotions Advertising and sales promotions Inform the trade (wholesalers, agents or Inform the trade (wholesalers, agents or brokers, and retailers) and consumers about brokers, and retailers) and consumers about brand improvements brand improvements Personal selling and trade-oriented advertising Personal selling and trade-oriented advertising Create brand awareness Create brand awareness Advertising, packaging, and P-O-P messages). Advertising, packaging, and P-O-P messages). Enhance a brand’s image Enhance a brand’s image Brand naming and packaging, advertising, event Brand naming and packaging, advertising, event sponsorship, cause-oriented marketing, and sponsorship, cause-oriented marketing, and marketing-oriented public relations marketing-oriented public relations Generate sales leads Generate sales leads Advertising Advertising © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–5 Marcom Objectives and Tools (cont’d) Marcom Objectives and Tools (cont’d) Marcom Objective Marcom Objective Marcom Tool Marcom Tool Persuade the trade to handle the Persuade the trade to handle the manufacturer’s brands manufacturer’s brands Trade-oriented advertising and personal Trade-oriented advertising and personal selling selling Stimulate point-of-purchase sales Stimulate point-of-purchase sales Brand naming and packaging, P-O-P Brand naming and packaging, P-O-P messages, and external store signage messages, and external store signage Increase customer loyalty Increase customer loyalty Advertising and sales promotions Advertising and sales promotions Improve corporate relations with special Improve corporate relations with special interest groups interest groups Marketing-oriented PR Marketing-oriented PR Offset bad publicity about a brand or generate Offset bad publicity about a brand or generate good publicity good publicity Marketing-oriented PR Marketing-oriented PR Counter competitors’ communications efforts Counter competitors’ communications efforts Advertising and sales promotions Advertising and sales promotions Provide customers with reasons for buying Provide customers with reasons for buying immediately instead of delaying a purchase immediately instead of delaying a purchase Advertising and sales promotions Advertising and sales promotions © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–6 Hierarchy of Marcom Effects Figure 6.1 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. 6–7 The Hierarchy of Marcom Effects The Hierarchy of Marcom Effects • Advancing Consumers from Unawareness to Advancing Consumers from Unawareness to Awareness Awareness Advertising is the most effective and efficient method Advertising is the most effective and efficient method for quickly creating brand awareness. for quickly creating brand awareness. • Creating an Expectation Creating an Expectation Product benefits from buying and experiencing a Product benefits from buying and experiencing a brand brand • Encouraging Trial Purchases Encouraging Trial Purchases Free samples, coupons, major price discounts and Free samples, coupons, major price discounts and rebate offers encourage trial behaviors rebate offers encourage trial behaviors © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–8 The Hierarchy of Marcom Effects (cont’d) The Hierarchy of Marcom Effects (cont’d) • Forming Beliefs and Attitudes Forming Beliefs and Attitudes Beliefs form the basis for developing an overall Beliefs form the basis for developing an overall attitude toward the brand. attitude toward the brand. Beliefs and attitudes are mutually reinforcing Beliefs and attitudes are mutually reinforcing • Reinforcing Beliefs and Attitudes Reinforcing Beliefs and Attitudes Marcom serves to reinforce consumer beliefs and Marcom serves to reinforce consumer beliefs and attitudes based on product usage experience attitudes based on product usage experience • Accomplishing Brand Loyalty Accomplishing Brand Loyalty Brands that continue to satisfy expectations foster Brands that continue to satisfy expectations foster brand-loyalty which reduces price sensitivity brand-loyalty which reduces price sensitivity © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–9 Advertisement Illustrating Hierarchy of Marcom Effects Figure 6.2 © 2010 South-Western, a part of Cengage Learning. All rights reserved. 6–10 Criteria That Good Marcom Objectives Must Satisfy Figure 6.3 [...]... is placed © 2010 South-Western, a part of Cengage Learning All rights reserved 6 21 Table 6. 2 Advertising Spend, SOV, and SOM for Top-10 Wireless Phone Brands © 2010 South-Western, a part of Cengage Learning All rights reserved 6 22 Table 6. 3 Advertising Spend, SOV, and SOM for Top-10 Beer Brands © 2010 South-Western, a part of Cengage Learning All rights reserved 6 23 Figure 6. 5 The SOV Effect and... to do so © 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 advertising and the response, or output, of that investment in terms of revenue generated © 2010 South-Western, a part of Cengage Learning All rights reserved 6 15 Table 6. 1 Hypothetical Sales-to-Advertising Response... Function © 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 (e.g., last year’s) or anticipated (e.g., next year’s) sales volume Criticism: budget becomes a function of sales Sales = ƒ(Advertising) versus Advertising = ƒ(Sales) • Objective-and-Task Budgeting Advertising... some other marcom element) to play for a brand and then set the budget © 2010 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 accomplished 2 Assess communication functions required to accomplish overall marketing objectives 3 Determine advertising’s role in the total communication mix... 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 (e.g., last year’s) or anticipated (e.g., next year’s) sales volume Criticism: budget becomes a function of sales Sales = ƒ(Advertising) versus Advertising = ƒ(Sales) • Objective-and-Task Budgeting ... Objectives The marcom objective literally is to increase sales by a particular amount © 2010 South-Western, a part of Cengage Learning All rights reserved 6 11 Figure 6. 4 The Logic of Vaguely Right versus Precisely Wrong Thinking © 2010 South-Western, a part of Cengage Learning All rights reserved 6 12 Should Marcom Objectives Be Stated in Terms of Sales? The Traditional View (Thesis) Using sales... failure to do so is a cop-out • Marcom’s purpose is to generate sales Accountability • Companies and their chief executives and financial officers are demanding greater accountability from marcom programs Perspective • Efforts © 2010 South-Western, a should ofgoals be made to assess whether marcom part not also affects pre-sales (Synthesis) Cengage Learning All rights reserved 6 13 Marcom Budgeting •... 6. 5 The SOV Effect and Ad Spending Implications © 2010 South-Western, a part of Cengage Learning All rights reserved 6 24 Budgeting in Practice (cont’d) • The Affordability Method Spending on advertising only those funds that remain after budgeting for everything else Relegating marcom to a position of comparative insignificance (vis-à-vis other investment options) Marcom are implicitly considered... communication mix 4 Establish specific measurable communication response level goals required to achieve marketing objectives 5 Establish the budget based on estimates of expenditures required to accomplish the advertising 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... one brand’s revenue to total category revenue Share of Voice (SOV) The ratio of a brand’s advertising expenditures to total category advertising expenditures © 2010 South-Western, a part of Cengage Learning All rights reserved 6 20 Choosing Marcom Pathways • Encoding Variability Hypothesis Contends that people’s memory for information is enhanced when multiple pathways, or connections are created . advertising, sales promotions, word-of-mouth buzz generation, and promotions, word-of-mouth buzz generation, and point-of-purchase (P-O-P) displays point-of-purchase (P-O-P) displays Build sales of. sponsorship, cause-oriented marketing, and marketing- oriented public relations marketing- oriented public relations Generate sales leads Generate sales leads Advertising Advertising © 2010 South-Western,. brands Trade-oriented advertising and personal Trade-oriented advertising and personal selling selling Stimulate point-of-purchase sales Stimulate point-of-purchase sales Brand naming and packaging, P-O-P