McGraw-Hill/Irwin 7-2Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

McGraw-Hill/Irwin 7-3Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

SALES? A Questionable Objective!

Product QualityProduct QualityPromotionPromotion

DistributionDistribution

CompetitionCompetition

TechnologyTechnology

The EconomyThe Economy Price PolicyPrice Policy

SALES

McGraw-Hill/Irwin 7-4Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising and MovementToward Action

ConativeRealm of motives.Ads stimulate or direct desires.

AffectiveRealm of emotions.Ads change attitudes and feelings

CognitiveRealm of thoughts.Ads provide information and facts.

Purchase

Conviction

Preference

Liking

Knowledge

Awareness

Point of purchaseRetail store ads, Deals“Last-chance” offersPrice appeals, Testimonials

Competitive adsArgumentative copy

“Image” copyStatus, glamour appeals

AnnouncementsDescriptive copyClassified adsSlogans, jingles, skywriting

Teaser campaigns

McGraw-Hill/Irwin 7-5Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Inverted Pyramid ofCommunications Effects

90% Awareness

70% Knowledge

40% Liking

25% Preference

20% Trial

5% UseC

onative

Cognitive

Affective

McGraw-Hill/Irwin 7-6Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

The DAGMAR Approach

Define

Advertising

Goals for

Measuring

Advertising

Results

McGraw-Hill/Irwin 7-7Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Characteristics of Objectives

•Specific Communications Objectives

•Concrete Measurable Tasks

•Well-Defined Target Audience

•Existing Benchmark Measure

•Degree of Change Sought

•Specific Time Period

McGraw-Hill/Irwin 7-8Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

DAGMAR Difficulties

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.

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.

McGraw-Hill/Irwin 7-9Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising-Based View of Communications

PurchaseBehaviorPurchaseBehavior

Attitudes Knowledge Preference Conviction

One-Way

Linear

Advertising Through Media

Acting on Consumers

McGraw-Hill/Irwin 7-10Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Marginal Analysis

Advertising / Promotion in $

Sa

les

in $

Point A

Profit

Sales Gross Margin

Ad. Expenditure

McGraw-Hill/Irwin 7-11Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

BASIC Principle ofMarginal Analysis

Increase Spending . . . IF:The increased cost is less than the incremental (marginal) return.

Decrease Spending . . . IF:The increased cost is more than the incremental (marginal) return.

Hold Spending Level. . . IF:The increased cost is equal to the incremental (marginal) return.

McGraw-Hill/Irwin 7-12Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

McGraw-Hill/Irwin 7-13Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Sales/Response Functions

Incr

em

enta

l Sa

les

Advertising Expenditures

A. Concave-Downward Response Curve

Incr

em

enta

l Sa

les

Advertising ExpendituresRange A Range B Range C

B. S-Shaped Response Function

Hig

h S

pen

din

gL

ittle Effect

Initial S

pen

din

gL

ittle Effect

Mid

dle L

evelH

igh

Effect

McGraw-Hill/Irwin 7-14Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Top Management Sets the Spending Limit

Top Management Sets the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending LimitThe Promotion Budget Is Set to Stay Within the Spending Limit

Top-Down Budgeting

McGraw-Hill/Irwin 7-15Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Total Budget Is Approved byTop Management

Bottom-Up Budgeting

Cost of Activities are Budgeted

Activities to Achieve ObjectivesAre Planned

Promotional Objectives Are Set

McGraw-Hill/Irwin 7-16Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Top-Down Approaches

• The Affordable Method• What we have to spare. What's left to spend.

• Arbitrary Allocation Method• No system. Seemed like a good idea at the time.

• Percentage of Sales Method• Set percentage of sales or amount per unit.

• Competitive Parity Method• Match competitor or industry average spending.

• Return on Investment Method• Spending is treated as a capital investment.

McGraw-Hill/Irwin 7-17Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Objective and Task Method

Establish Objectives(create awareness of new product among 20 percent of target market)

Determine Specific Tasks(advertise on market area television and radio and local newspapers)

Estimate Costs Associated with Tasks(create awareness of new product among 20 percent of target market)