Marcom Objective Setting and Budgeting

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.

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Some Marcom Goals
• 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.

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

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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.
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Should Marcom Objectives Be Stated in Terms of Sales?
Presales Objectives: communication objectives that attempt to increase the target audience’s 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.

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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

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Sales Volume as a Marcom Objective Heretical View (Antithesis)
• Marcom’s purpose is to generate sales • Sales measures are “vaguely right”

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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.

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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
– 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 12

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

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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 • Criticized as being illogical Sales=f(Advertising) (o) Advertising=f(Sales) (x) • During recession?
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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

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The Competitive Parity Method
• Sets the ad budget by basically following what competitors are doing • 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
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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 impoverished firms • However, affordability and competitive considerations influence the budgeting decisions of all companies
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