IMC Objective Setting and Budgeting

Marcom Objective

Setting and Budgeting

Setting Marcom Objectives

Goals that the various marcom elements

aspire to individually or collectively

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aspire to individually or collectively

achieve during a scope of time such as

a business quarter or fiscal year.

Some Marcom Goals

• Facilitate the successful introduction of

new brands.

• Build sales of existing brands by

increasing the frequency of use, the

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increasing the frequency of use, the

variety of use, or the quantity purchased.

• Inform the trade and consumers about

brand improvements.

Marcom Goals

• Create brand awareness

• Enhance a brand’s image

• Generate sales leads

• Persuade the trade to handle the

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• Persuade the trade to handle the

manufacturer’s brands

• Stimulate point-of-purchase sales

• Increase customer loyalty

Marcom Goals

• Improve corporate relations with special interest groups

• Offset bad publicity about a brand or generate good publicity

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generate good publicity

• Counter competitors’ communication efforts

• Provide customers with reasons for buying immediately instead of delaying a purchase

Why Set Marcom Objectives

• Expression of management consensus

• Guides the budgeting, message, and

media aspects of advertising strategy

• Provide standards against which results

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• Provide standards against which results

can be measured

The Hierarchy of Marcom Effects

♦ The hierarchy of

effects metaphor

implies that for

marketing

communications

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communications

to be successful

it must move

consumers from

one goal to the

next goal.

Should Marcom Objectives Be Stated

in Terms of Sales?

Presales Objectives:

communication

objectives that attempt

to increase the target

audience’s brand

Sales Objectives:

means the marcom

objective literally is to

increase sales by a

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audience’s brand

awareness, enhance

their attitudes toward

the brand, shift their

preferences from the

competitors’ brand and

so on.

particular amount.

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

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a host of factors in addition to

marcom

• Effect of marcom efforts is delayed

Sales Volume as

a Marcom Objective

Heretical View (Antithesis)

• Marcom’s purpose is to generate

sales

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sales

• Sales measures are “vaguely right”

An Accountability Perspective

(Synthesis)

• Chief executives and financial officers are

demanding greater accountability from

marcom programs.

• The measurement of effects of a program

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• The measurement of effects of a program

should not stop short of measuring the

effect on sales.

Marcom Budgeting in Theory

• The best(optimal) level of any investment is the

level that maximizes profits(MR=MC)

• Advertisers should continue to increase their

advertising investment as long as it is profitable

to do so

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to do so

– Every additional dollar spent on MARCOM brings in

more than a dollar in revenue (MR>MC), it is profitable

to continue MARCOM spending.

– If the additional dollar spent on MARCOM brings in

less than a dollar in revenue (MR<MC), MARCOM

spending needs to be cut.

– Thus profits are maximized when MR = MC

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.

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generated.

Practical Budgeting Methods

• Percent-of-Sales Budgeting

• Objective-and-Task Method

• Competitive Parity Method

(match competitors’ method)

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(match competitors’ method)

• Affordability Method

Percentage-of-Sales Budgeting

• A company sets a brand’s advertising

budget by simply establishing the

budget as a fixed percentage of past or

anticipated sales volume

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anticipated sales volume

• Criticized as being illogical

Sales=f(Advertising) (o)

Advertising=f(Sales) (x)

• During recession?

Objective-and-Task Method

• The most sensible and defendable

advertising budgeting method

• Specify what role they expect advertising

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• Specify what role they expect advertising

to play for a brand and then set the

budget accordingly

• Build upwards by costing activities

The Competitive Parity Method

• Sets the ad budget by basically following what

competitors are doing

• SOM- (share of market) the ratio of one

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• SOM- (share of market) the ratio of one

brand’s revenue to total category revenue

• SOV- (share of voice) the ratio of a brand’s

advertising expenditures to total category

advertising expenditures

The SOV/SOM Effect and Ad

Spending Implications

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Affordability Method

• Only the funds that remain after

budgeting for everything else are spent

on advertising

• Only the most unsophisticated and

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• Only the most unsophisticated and

impoverished firms

• However, affordability and competitive

considerations influence the budgeting

decisions of all companies