Advertising objectives & budget allocation

Advertising objectivesDepends on overall marketing planSpecifies what is to be accomplished & where the advertising fits in.Influenced by situation analysis likeThe target market segment & the target audienceThe brands main attributes & benefitsThe market share of the company's & competing brands. Their positioning, strategies & other relevant informationSome ideas on how the companys brand should be positioned & what specific behavioral response is desired, such as brand trail, repeat purchase, increased usage rate, etc.Sales & communication are two objectives

Sales as an advertising objectiveSales are a convenient, simple, & attractive advertising objectiveIt may not be operational in many cases becauseAdvertising is just one factorMeasuring the contribution of advertising is difficultTime lag between audience exposure to an ad & when that ad may lead to an actual saleOther factors may have significant influence on salesAds may be successful in building interest & favorable brand attitudesIt offers little guidance to creative & media people

Factors influencing sales

Communication objectives

If the brand objective is to raise sales by 12%, the promotion manager will have decide in terms of some message that will be used to address the target audience to achieve thisSome possible objectives may beIncrease the percentage of target consumers who associate specific features or benefits with companys brandIncrease number of target consumers who prefer companys brand rather than competing brands.Increasing companys brand usage rate among existing consumersEncouraging companys brand trail among non-users

Behavioral objectives for five target groups

DAGMAR approachRussell H Colley prepared a report for the association of national advertisers titled Defining Advertising Goals for Measured Advertising Results.According to this model, communication objectives are the logical basis for setting advertising objectives & goals against which results should be measured.

In Colleys words Advertisings job, purely & simply, is to communicate to a defined audience information & a frame of mind that stimulates action. Advertising succeeds or fails depending on how well it communicates the desired information & attitudes to the right people at the right time & at the right cost.It could clarify what constitutes a good advertisement.

Colley proposed that communications objectives be based on a hierarchical model with the following stagesAwarenessComprehensionConvictionAction

Objectives should have the following featuresStated in terms of concrete & measurable communication tasksSpecify a target audienceIndicate a benchmark or standard starting point & the degree of change sought, & Specify a time period for accomplishing the objective or objectives

Criticism of DAGMARProblem with response hierarchySales as the advertising goalPracticality & costsInhibits creativity

Budget allocationKelloggs north American president, Thomas Knowlton, cuts in advertising & promotion spending will be a short time strategyWe cant afford advertising that isnt working. We are going to be more demanding with our brands & only proven ad campaigns will get full funding.

Research has shown thatIncrease in market share are more closely related to increase in marketing budget than to reduction in pricesAdditional advertising normally increases sales but, at some point, the rate of return declines.Sales response to advertising may build overtime, but it is not durable, & a consistent investment is important.There are minimum levels of ad expenditure below which advertising expenditures have no effect on sales.There will be some sales even if the marketer does not advertiseCulture & competition impose saturation limits & beyond this no amount of advertising can increase sales.

Two approaches to budgeting Top-down approachTop mgt. sets the spending limitAdvertising budget set to stay within allocation limitsBuild-up approach.Ad objectives are setActivities necessary to achieve objectives are plannedCosts are ascertainedTotal budget is approved

Top down approachThe budgetary amount is decided by the top management & passed on to the lower levelsNo real theoretical baseNot linked to the objectives & the strategiesIncludes Affordable method, Arbitrary allocation, percentage of sales, competitive parity & return on investment method

Build-up approachTakes into account objectives of advertisingBudget is allocated on the basis of what is essential for achieving the goalsIt includes objective & task method, payout planning, & quantitative models

The affordable methodAlso called all-you-can-affordAdvertising gets the last place in the list of expendituresNo consideration to what is expectedCommon among small & high-tech firmsMeritsSimpleBudget does not go beyond the ability of the firmRealistic

LimitationsChances of under spending is moreIf the product is good it will sell on its own has little relevanceNot based on sound decision making principlesThere may be budget cuts at a wrong time

Arbitrary allocation methodNo theoretical baseManagement spends what is felt to be necessary

Percentage of sales methodMost commonly used by large & medium sized firmsA fixed percentage of last years or next years projected sales or average sales for the last few years is taken as the budgetA fixed amount of the unit product cost is taken as the advertising expensePercentage figure is often the industry standard

Merits Safe method as ad spending remains within limitsEasy to arrive at budgetLimitationsIt considers sales as the cause rather than an endIt ignores the possibility that sales decline because of little advertisingAdvertising cannot be used as a tool of competitionPossibility of overspending & under spendingCannot be applied in the introductory stage

Competitive parity methodBasing budget allocation on competitors expenditureMeritsCollective wisdomMinimizes the possibility of promotional warsLimitationsIgnores the fact that ad budget is assigned to achieve specific objectivesIgnores the contribution of media & creative executionsPromotional wars do ariseInformation on competitive advertising will be available only after the money is spent

Objective & task methodIt involves three stepsDefining the advertising communications objectives to be accomplishedDeciding specific strategies & tasks necessary to achieve themEstimating the costs involved in putting these strategies & tasks in operationDifficult to determine the tasks & costs associated with eachMore realistic & best suited in introductory stage

Payout planningAdvertising is considered as an investment & not an expenditureIt can be used in conjunction with other budgeting methodsLimitation is that it cannot account for all uncontrollable factors

Quantitative modelsMathematical & statistical modelsIt requires experimentation & formal analysis It requires the use of computers

Experimental approachExperiments are used to decide the budgetLimitation is the expense & time involvedAdvertiser cannot control the environmental variables

Factors affecting advertising budgetMarket size & potentialMarket share goalsProduct life cycle stageIntensity of competitionAdvertising frequencyProduct differentiationCampaign objectivesAvailability of fundsType of productMedia plan