Advertising and Promotion An Integrated Marketing Communications Perspective 11th Edition Belch Solutions Manual

Advertising and Promotion An
Integrated Marketing Communications

Perspective 11th Edition Belch
Solutions Manual
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Chapter 07—Establishing Objectives and Budgeting for the Promotional Program
CHAPTER 7
ESTABLISHING OBJECTIVES AND BUDGETING FOR THE
PROMOTIONAL PROGRAM
Chapter Overview
This chapter focuses on the process of setting objectives and budgeting for the IMC program. The major
emphasis is on determining advertising objectives, as they are often the lead element in the promotional
mix, particularly in consumer products marketing. This chapter stresses the value and importance of
setting specific advertising objectives and the role they play in guiding decisions and evaluating
performance. The chapter also focuses on the importance of knowing what to expect from advertising and
the differences between sales versus communication objectives. The DAGMAR model is discussed as a
viable approach to setting objectives with attention being given to the characteristics of good advertising
goals and objectives. Limitations of DAGMAR are also discussed along with other problems firms
encounter in setting objectives. The chapter then presents students with an understanding of the advertising
and promotions budgeting process. The chapter discusses the theories underlying budgeting decisions and
examines the various approaches to budgeting. The chapter concludes with an examination of budget
allocation decisions.
Learning Objectives
1. Discuss the value of setting objectives for advertising and promotion.
2. Describe the relationship between promotional objectives and marketing objectives.
3. Discuss sales-oriented objectives.
4. Compare the value of sales objectives and communications objectives as goals for promotional
programs.
5. Describe the process of budgeting for IMC.
6. Compare the economic and sales response perspectives on budgeting.
7. Compare different methods of setting budgets.
Chapter and Lecture Outline
I. INTRODUCTION
The lead-in to this chapter discusses how the changing media environment is forcing marketers to
reallocate their advertising expenditures. The chapter then moves into a discussion of the value of setting
objectives. It is important to communicate to the student that while setting good objectives can be
complex and difficult, it is important for this to be done properly as specific goals and objectives are the
foundation upon which all promotional decisions are made. Despite the importance of setting specific
advertising and promotional objectives, many companies fail to do so or set them in a manner that is
inappropriate or inadequate for guiding the development of the promotional program and measuring its
effectiveness. Part of the problem stems from the fact that many marketers are uncertain as to what
advertising and promotion can or should do and/or prefer to use sales as an objective.
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II. THE VALUE OF OBJECTIVES

One of the reasons many companies fail to set specific objectives for their advertising and promotional
programs is that they fail to recognize the value of doing so. There are several important reasons for
setting advertising and promotional objectives:
A. Communications—Specific objectives serve as communication devices and facilitate the

coordination of the various groups working on the campaign on both the agency and the client
side. Problems can be avoided if all parties involved have a set of written and approved objectives
to guide their decisions and actions.
B. Planning and Decision Making—Specific objectives can be useful as a guide or criterion for
decision making. Advertising and promotion planners are often faced with a number of strategic
and tactical options in areas such as creative, media, budgeting and sales promotion. Choices
among these options should be made on the basis of how well a strategy or tactic matches the
promotional objective.
C. Measurement and Evaluation of Results—A very important reason for setting specific objectives
is that they provide a benchmark or standard against which success or failure of the campaign can
be measured. When specific objectives are set it becomes easier for management to measure what
has been accomplished by the campaign.
Professor Notes
III. DETERMINING INTEGRATED MARKETING COMMUNICATION OBJECTIVES

The determination of objectives for integrated marketing communication occurs after a thorough situation
analysis has been conducted and the marketing and promotional problems and opportunities have been
identified. A thorough situation analysis is critical as this becomes the foundation upon which marketing
objectives are determined and the marketing plan is developed. Promotional objectives in turn evolve
from the overall marketing plan and are rooted in the firm’s marketing objectives.
A. Marketing versus Communications Objectives—It is very important to emphasize to the student

the differences between marketing versus communications objectives. Marketing objectives are
generally stated in the firms marketing plan and are statements of what is to be accomplished by
the overall marketing program within a given time period. Marketing objectives are usually
defined in terms of specific, measurable outcomes such as sales volume, market share, profits, or
return on investment. The achievement of marketing objectives will depend upon the proper
coordination and execution of all the marketing mix elements, not just promotion.
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Integrated marketing communications objectives are statements of what various aspects of the
IMC program will accomplish. They should be based on the particular communication tasks that
are required to deliver the appropriate message to the target audience. This requires the
translation of general marketing goals into communication goals and specific objectives. Many
promotional planners approach promotion from a communication perspective and view the
objective of advertising in particular as that of communicating information or a sales message
about a product or service. However, this is not always the case and leads to the debate over sales
versus communication objectives.
Professor Notes
IV. SALES VERSUS COMMUNICATION OBJECTIVES

A. Sales-Oriented Objectives—Many marketing managers view their advertising and promotional
programs from a sales perspective and argue that sales or some related measure such as market
share is the only meaningful goal for advertising and thus should be the basis for setting
objectives. They take the position that the basic reason a firm spends money on advertising and
promotion is to sell its products or services. Thus they argue that any monies spent on advertising
should produce measurable sales results.
1. Problems with sales objectives—Problems with this approach include:

• problems in achieving sales could be a function of other marketing mix variables such as
product design or quality, packaging, distribution, or price.
• problems in achieving sales could be due to other macro factors such as the economy,
competition, or consumer trends.
• the carryover effect, which suggests that the effects of advertising on sales are not
always immediate and occur over an extended time period.
• sales objectives offer little guidance or direction to those responsible for planning,
developing and executing the promotional program.
2. Where sales objectives are appropriate—While there are problems in attempting to use sales
as objectives for an advertising and promotional campaign, there are situations where they
may be appropriate, such as:
• when the promotional efforts are direct action in nature and are designed to induce a
more immediate response. For example, many sales promotion programs have sales
objectives since their goal is often to generate trial or short-term sales increases.
• direct response advertising which measures success of a campaign in terms of the sales
response generated by an ad.
• retail advertising where short-term or direct action is sought such as during sales or
special promotions.
• in situations where advertising plays a dominant role in the marketing program and other
factors are relatively stable.
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B. Communications Objectives—Many marketers take the perspective that the primary role of
promotional mix elements such as advertising is to communicate and effects should be based on
communication objectives. Advocates of communication objectives generally use some form of
the hierarchical models discussed in Chapter 5 as a basis for setting advertising objectives. The
underlying logic of these models is that as consumers pass through successive stages of the
response hierarchy they move closer to purchase, and advertising’s purpose is to help move them
through.
• Communications effects pyramid—The text uses the communication effects pyramid (Figure
7-2) as a way of understanding the communication tasks to be performed by advertising and
promotion. The marketer must accomplish lower level objectives such as awareness and
knowledge which builds a strong foundation or base. Subsequent tasks involve moving
consumers to higher levels in the pyramid so as to get them to the top where trial and regular
use/repurchase occur. It is important, however, to point out that the percentage of prospective
customers moved to each level will decline in most instances.
• Problems with communications objectives—It should be noted that not all marketing and
advertising managers accept the idea of using communication objectives. Accomplishing
communication objectives is seen as being of value only if this results in sales. Moreover,
translating a sales goal into communication objectives can be difficult. For example, you
might discuss what constitutes an adequate level of awareness, knowledge, liking or
conviction. While there are problems with communication-oriented objectives, it should be
pointed out that at some point a company must determine what it hopes to communicate and
to whom. Communication objectives are the criterion used in the DAGMAR model which
has become one of the best known and most influential approaches to the advertising
planning.
Professor Notes
V. DAGMAR: AN APPROACH TO SETTING OBJECTIVES

DAGMAR (Defining Advertising Goals for Measured Advertising Results) is a model developed by
Russell Colley for setting advertising objectives and measuring the results of a campaign against these
objectives. Under DAGMAR an advertising goal involves a communications task that is specific and
measurable. A communications task involves something that can be performed by and attributed to
advertising. Communication tasks in DAGMAR are based on a hierarchical model similar to those
discussed in Chapter 5. While hierarchical communication effects form the basis of DAGMAR, there are
other specific communications tasks that advertising might be expected to perform or help accomplish.
A. Characteristics of Objectives—A major contribution of DAGMAR was Colley’s specification of

what constitutes a good objective. Four requirements or characteristics of good objectives were
noted:
1. Concrete, measurable tasks—The communications task or objective should be a precise
statement of what appeal or message the advertiser wants to communicate to the target
audience. The objective should be measurable in that the method and criteria used for
determining if it has been properly communicated should be specified.
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2. Target audience—A good objective should specify a well-defined target audience. The
target audience is usually identified in the situation analysis and may be based on the
variables discussed in Chapter 2.
3. Benchmark and degree of change sought—Another important part of setting objectives is

having benchmark measures to determine where the target audience stands at the beginning
of the campaign with respect to various communication response variables such as awareness,
knowledge, attitudes, image, etc. The objectives should also specify how much change or
movement is being sought such as increase in awareness levels, creation of favorable
attitudes or number of consumers intending to purchase the brand, etc.
4. Specified time period—A final characteristic of good objectives is the specification of the
time period during which the objective is to be accomplished. The time period should be
appropriate for the communication objective as simple tasks such as increasing awareness
levels can be accomplished much faster than a complex goal such as repositioning a brand.
B. Assessment of DAGMAR—There are certain problems and limitations to DAGMAR which

should be discussed. These include:
• Problems with the response hierarchy—Reliance on traditional hierarchical type response
models is a problem in the original version of DAGMAR. However, the updated version of
the model, DAGMAR MOD II, recognizes the need for a modified response hierarchy that is
appropriate to the buying situation such as in high- versus low-involvement purchases.
• Sales objectives—Proponents of sales objectives argue that communication objectives
advocated by DAGMAR are a “cop-out” and a way of ignoring the basic goal of advertising
which is to generate sales. They argue that since a communication objective is of interest only
if it can be shown to be related to sales, why not simply use sales as the objective?
• Practicality and costs—DAGMAR is criticized for being difficult to implement and practical
only for big companies with large marketing and advertising research budgets who can afford
to establish quantitative benchmarks and measure communication results.
• Inhibition of creativity—DAGMAR is also criticized on the grounds that it can inhibit
creativity by imposing too much influence or structure on creatives. The creative department
may become too concerned with “passing the numbers test” rather than developing great
ideas that result in unique and effective advertising. Many advertising people have blamed
the lack of great creative ideas and campaigns in the U.S. in recent years on an over
quantification of advertising objectives.
Professor Notes
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McGraw-Hill Connect ®: Communication Effects Pyramid

Type of Activity: Click and Drag
Activity Summary:
In this activity, students will identify the correct sequence of the various stages in the consumer decision-
making process. They will then read about the Sunday Motor Corporation, an Asian automaker launching
a new SUV. To track the effectiveness of the IMC campaign, Sunday Motor Corporation hired
AutoSmart, a research and consulting firm that specialized in the automotive industry. Students will
match the research findings from AutoSmart’s reports to the corresponding stages in the Communications
Effects Pyramid and the GfK Purchase Funnel.
Activity Learning Objectives:

07-03 Discuss sales-oriented objectives.
07-04 Compare the value of sales objectives and communications objectives as goals for promotional
programs.
CONCEPT REVIEW:
Advertising and promotion perform communications tasks in the same way that a pyramid is built, by first
accomplishing lower level objectives and subsequently moving to higher level objectives. The initial
stages are easier to accomplish than those towards the top, and hence the percentage of prospective
consumers will decline as one moves up the pyramid. The communications effects pyramid can also be
used to determine promotional objectives for an established brand.
Difficulty: Medium
Bloom’s: Understand
AASCD: Analytical Thinking
VI. PROBLEMS IN SETTING OBJECTIVES

Most advertisers and their agencies fail to follow the basic principles and guidelines set forth in
DAGMAR. They often fail to set specific objectives for their campaigns and/or do not have the proper
evidence to determine the success of their promotional programs.
A. Improving Promotional Planners’ Use of Objectives—Advertisers and their agencies should

strive to set specific and measurable objectives that serve as a guide to promotional planning and
decision making. Part of this problem stems from a lack of understanding of the role and function
of advertising. It is unlikely that most firms are going to set objectives following all of the criteria
set forth in DAGMAR. However, promotional planners should set objectives that are specific and
measurable and go beyond simple sales goals.
B. Setting Objectives for the IMC Program—Most of the attention in the promotional area has
focused on advertising since it is often the lead element in the promotional mix and other
promotional mix elements such as sales promotion, direct marketing, and publicity are used to
support and complement the advertising program. Advertising-based views of marketing
communications planning, such as DAGMAR, have dominated the field for many years.
However, as more companies adopt IMC they are considering how the various promotional mix
tools can be used to communicate with their customers.
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Advocates of IMC have called for new approaches to promotional planning and IMC. For
example, Professor Don Schultz of Northwestern University advocates the use of an outside in
planning process to IMC that starts with the customer and builds backwards to the brand rather
than inside-out planning. Professor Tom Duncan argues that IMC should use zero-based
communications planning which involves determining what tasks need to be done and which
marketing communications functions should be used and to what extent. This approach focuses
on the task to be accomplished and searches for the best ideas and ways of accomplishing it.
Duncan suggests that an effective IMC program leads with the marketing communication
function that most effectively addresses the company’s problem or opportunity.
It should be noted that the criteria discussed in determining advertising objectives are relevant to
other promotional mix elements as well. A more thorough discussion of objectives for
promotional mix elements such as sales promotion, publicity/public relations and personal selling
is provided in the chapters where these topics are covered.
Professor Notes
VII. ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET

As noted in the text, the budgeting decision is not a trivial matter. Whether the firm is spending millions
of dollars or thousands, this decision will have a direct impact on the success of the communications
program. As can be seen by examining the decision sequence model presented in Chapter 1, budgeting
decisions are not made in isolation. These decisions require an interactive process in which the
communications objectives must be taken into consideration. Likewise, the budget directly impacts the
promotional mix strategies that are to be developed. Thus, both the size of the budget, and the way that it
will be allocated must be given much attention
A. Establishing the Budget

1. Theoretical issues in budget setting—Most of the models used to establish advertising
budgets can be categorized as taking an advertising or sales response perspective. In this
section we discuss some of them.
a. Marginal analysis—Figure 7-8 in the text illustrates the concept of marginal analysis.
As the figure indicates, as advertising/promotional efforts increase, sales and gross
margins will also increase to a point and then level off. In using marginal analysis, the
firm would continue to spend promotional dollars so long as the marginal revenues
created by these expenditures exceeded the incremental costs. When the dollar
expenditures exceed the returns, the budget should be scaled back. In other words, the
optimal budget would be at that point where marginal revenues are equal to marginal
costs, or where mr = mc. While this economic model seems logical intuitively, in fact,
there are two major weaknesses that limit its applicability: (1) The assumption that sales
are a direct measure of advertising and promotions efforts, and (2) the assumption that
sales are determined solely by advertising and promotions.
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b. Sales response models—Two budgeting models based on sales response are discussed in
the text. The first of these—the concave-downward function—is based on the
microeconomic theory of the law of diminishing returns. Essentially, the model states that
as the amount of advertising expenditures increases, its incremental value decreases. The
basic argument is that those most likely to buy the product are likely to do so as a result
of the earliest exposures. Additional exposures are not likely to increase the probability of
their purchasing, nor is it likely to have an effect on those who are undecided or unlikely
to buy. Thus, the effects of advertising would rapidly diminish.
The second model—the S-shaped response function—takes a very different approach.

In this model, it is argued that initial outlays of promotional dollars will have very little
impact on sales. As indicated in Figure 7-9, in Range B an impact will begin to be
noticed, carrying through to Range C, where additional expenditures have again very
little impact. This S-shaped curve suggests that there are incremental values to be accrued
from additional dollar outlays, but only to a point. For example, it would be argued that a
certain level of expenditures is necessary to make an impact. However, after a certain
point (beginning of Range C) these dollars are unlikely to be of value. In other words, no
matter how much I spend, if you don’t want the product, advertising isn’t going to make
you buy. As with marginal analysis, the marketer would want to establish the budget at
the point where s/he gets the optimal value for the outlay.
c. Additional factors considered in budget setting—In addition to considering the theoretical
aspects of budget setting, a number of other factors must be taken into consideration
including: situational factors; customer factors; the competitive environment; etc. Figures
7-10 and 7-11 can be used to demonstrate this point quite effectively and are useful to
provide a perspective of what advertisers and their agencies consider the most important
factors to consider in setting the budget.
Professor Notes
B. Budgeting Approaches—This section discusses the variety of approaches that marketers use in
establishing their budgets. These approaches can be classified as either top-down or build-up
approaches. (Figure 7-12)
1. Top-down approaches—In these methods of budgeting, the budget is established at the

“top” by management, and is passed down to the managers. Top down approaches generally
include the following:
a. the affordable method—In this approach, the firm determines what level of advertising
and promotions expenditures they feel that they can afford, and set this amount as the ad
budget.
b. arbitrary allocation—When budgets are set through arbitrary allocation, there is no real
rhyme or reason for the amount established. Sad as this may seem, the truth is that for
many firms this is the method employed.
c. percentage of sales—Perhaps the most commonly employed method of setting budgets
in large firms is the percentage of sales method. As noted in the text, there are a number
of variations on this method, as some firms use a flat percentage of sales figure, while
others may assign a percentage of the product cost to advertising with the budget based
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on the number of units sold (see Figure 7-13). In addition, another variation stems from
which year is considered the base year for sales. One approach uses past sales histories,
while the second—a percentage of projected future sales—uses projected sales figures.
Many firms employ both methods, with a projection used for planning, and the final
budget adjusted according to actual sales. Figure 7-14 provides advertising-to-sales ratios
by industry sector.
d. competitive parity—In this method, budgets are set by matching the percentage
advertising/sales ratios of competitors. Schonfeld and Associates publishes the
percentage of sales figures by product type, and this method would be easily
demonstrated in the classroom. Figure 7-14 can be used to show some percentage of sales
figures, and the instructor can explain that in using a competitive parity method,
companies competing in the same industries would have equal or nearly equal ratios.
e. Return on Investment (ROI)—One of the most discussed topics in recent years is that
of how to determine ROI. The basis of this approach is that advertising expenditures
should be considered as an investment, returning sales as a result. Unfortunately, for
many of the reasons cited in the text, the ability to demonstrate this relationship is very
difficult.
2. Build-up approaches—A more effective method of budgeting is that offered by build-up
approaches. In build-up approaches, specific objectives are established, and budgets are
determined based on the costs required to attain these goals. Three such approaches are
discussed in the text.
a. objective and task method—Figure 7-18 demonstrates the steps required in using the
objective and task approach. As can be seen, the process involves establishing objectives,
determining the specific tasks associated with attaining these objectives, and determining
the costs associated with these tasks. Monitoring and re-evaluation of these steps is
critical to the success of this method.
b. payout planning—By projecting the revenues that a product is expected to return over a
period of two to three years, the marketer can develop a payout plan. Based on this
expected rate of return, the marketer can assist in the determination of the advertising
expenditures necessary. An example of a payout plan is presented in Figure 7-20.
c. quantitative models—As noted in the text, quantitative models have not met with the
success that might have been expected of them. Most of these models have employed the
use of multiple regression analysis using sales as the dependent variable, which may
account for much of the problem.
Figure 7-21 provides the results of a study by Low and Mohr regarding the advertising budget
setting process. As can be seen, the nature of the decision process and a variety of factors have
been shown to come into play in this decision.
C. Allocating the Budget—A number of factors influence marketers in their determinations as to
how the budgets will be allocated. Recent years have seen a shifting of advertising dollars to
other media including the Internet and nontraditional media. Figures 7-22 provides an example of
media expenditures. A variety of factors must be considered in determining how advertising and
promotional dollars will be allocated.
1. Client/agency policies—Corporate politics, policies, etc. may all impact the allocation of
advertising and promotions dollars. As noted, agencies and advertisers may both have their
preferences as to how monies will be spent.
2. Market size—The size of the market will often determine how much monies need to be
allocated therein. For example, smaller markets may charge less for media time, may be more
easily covered, etc. than larger ones.
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3. Market potential—Certainly the potential of the market must be considered. The previously
discussed concept of target marketing would dictate that market potential should be
considered in the budget allocation decision.
4. Market share goals—The market share goals established by the firm—that is, increasing or
maintaining share—will impact the allocation decision. A study by John Jones concluded that
(1) new brands generally receive higher than average advertising support; (2) older, more
mature brands are often “milked”—that is, advertising expenditures are reduced; and (3) there
is an advertising economy of scale operating.
In another study, James Schroer suggests that to have a growing market share marketers
should:
• segment markets
• determine competitors’ cost positions
• resist the lure of short term profits
• consider niching strategies
5. Economies of scale in advertising—Some practitioners believe that there are economies of
scale that accrue to marketers holding large market shares, which allows them to spend less
money due to their past successes. As noted in the text, there is little or no evidence to
support this theory, and some studies show that an opposite effect may occur.
6. Organizational characteristics—After reviewing the literature, Low and Mohr conclude that a
number of organizational factors influence the budget allocation decision. These factors
include:
• the organization’s structure,
• power and politics in the organizational hierarchy,
• the use of expert opinions,
• characteristics of the decision maker,
• approval and negotiation channels, and
• pressure on senior managers to arrive at an optimal budget.
Professor Notes
McGraw-Hill Connect ®: Budgeting Approaches

Type of Activity: Click and Drag
Activity Summary:
In this activity, students will match the budgeting approaches with the disadvantages associated with each
of the methods.
Activity Learning Objective:

07-07 Compare different methods of setting budgets.
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CONCEPT REVIEW:
There are two broad budgeting approaches for setting advertising and promotions budgets – top-down and
build-up. In top-down budgeting methods, a budgetary amount is established, usually at an executive
level, and then monies are passed down to form the promotional budget. These budgets are predetermined
and have no true theoretical bases. In contrast, build-up budgeting methods are those in which the firm's
communications objectives are considered, the strategies and tasks needed to achieve them are identified,
and the estimated total cost for those strategies and tasks forms the promotional budget.
Difficulty: Medium
Bloom’s: Understand
McGraw-Hill Connect ®: Allocating the Promotional Budget Among Brand

Managers
Type of Activity: Case Analysis
Activity Summary:
Bee & Gee is a multi-product, multi-brand, packaged goods company with a significant presence in the
personal care and grooming category. Within each product category, it has numerous brands that
sometimes compete with each other in the same geographical markets. Bee & Gee allocates its annual
promotional budget for each product category using a top-down budgeting approach, after which brand
managers of brands in each product category compete for promotional dollars for their own brand by
submitting budget proposals. This activity will have the students select the best answer for each question
related to their promotional budget.
Activity Learning Objective:
07-07 Compare different methods of setting budgets.
CONCEPT REVIEW:
Once the promotional budget has been set, the next step is to allocate it. The allocation decision involves
determining which markets, products, and/or promotional elements will receive which amounts of the
funds appropriated. Some factors that influence budget allocation are—IMC element mix, client/agency
policies, market size, market potential, market share goals, economies of scale in advertising, and
organizational characteristics of the marketer's firm.
Difficulty: Medium
Bloom’s: Analyze
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Teaching Suggestions
We feel that from an integrated marketing communications planning perspective, this is one of the most
important chapters in the text. It is very important for students to understand the importance of setting
good objectives to guide the planning and development of an advertising campaign as well as for
providing a benchmark or standard against which performance can be measured and evaluated. This
chapter builds on material in previous chapters, particularly Chapters 2 and 5, as it stresses the difference
between marketing and sales versus communication objectives and the role of advertising in influencing
sales. The DAGMAR model relies heavily on the response hierarchy models discussed in Chapter 5.
Students should recognize that the specific communication objectives that are appropriate will vary
depending on the buying situation.
The DAGMAR model is discussed in detail as a viable approach to setting advertising objectives. A very
valuable aspect of Colley’s work on DAGMAR is the specification of characteristics of good objectives
which are discussed in the text. While most companies are not going to meet all of the criteria set forth in
DAGMAR, it is important that students recognize the characteristics of good objectives. Another
important issue to address in discussing this material is the difference between sales versus
communication objectives. We discuss the basic characteristics of each, when they are appropriate and
problems with using sales and communication objectives. The instructor may want to find some examples
of campaigns which have won awards and/or have been very effective from a communications
perspective but not in terms of sales. The discussion can focus on the role of advertising and whether
there are other problems or factors which may be inhibiting sales. A very good and interesting example
which might be used here is to demonstrate that an advertising campaign can impact sales is presented in
the discussion on GEICO.
Some instructors may wish to divide the lecture into two sessions. The first can be devoted to discussing
the objective setting process and the second on budgeting. In the budgeting session we usually start the
lecture with the theoretical perspective, explaining the two advertising/sales response models discussed in
the text. A discussion and evaluation of each of the budgeting methods usually follows. (For example,
Figure 7-13 can be very useful in demonstrating the percentage-of-sales method. It could also be noted
that many companies use this as a guide in setting their budgets to remain at competitive parity). The
budget allocation decision is illustrated very well by showing Competitive Media Reporting examples of
monies and percentages of budgets assigned to the media this service tracks.
It is important for the instructor to demonstrate some of the strengths and weaknesses associated with
both the theoretical models and the budgeting methods themselves. The major problem with the former is
the fact that sales are used as the dependent variable. Students need to know that while it is sales (or some
other behavior) that is ultimately sought, it is often very difficult to demonstrate directly the
advertising/sales relationship—which to a large degree explains why regression-based models have also
had limited success. The chapter’s discussion of ROI demonstrates both the importance and frustration
involved in attempting to make this determination. Likewise, the budgeting methods discussed are also
fraught with weaknesses the student must be aware of. An effective way of demonstrating this for the
bottom-up methods is to ask students to prepare a fictional budget for a product. They will very quickly
realize the problems associated with trying to determine payouts and assigning costs to the tasks required
to attain specific objectives.
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Answers to Discussion Questions
1. Explain some of the factors that might lead to success in increasing sales and achieving
communications objectives when competitors decrease their budgets. (LO 7-7)
As the text notes, some companies are keen to take advantage of competitors’ decreases in
budgets. Their experiences have shown that by increasing their own budgets at the same time they
can make sometimes significant gains. The fact that the competitors sometimes leave the
advertising arena, results in these companies no longer even being seen, known, or reminded to
the consumer. Even if the competitor just cuts the budget, the non-cutter will achieve a greater
share of voice, as the competitors’ ads will be shown less often. If one believes that advertising is
an effective mechanism for communicating to the market, then those companies reducing budgets
will lower the possibility of using this to their advantage.
2. Discuss why the allocation of media dollars to digital and social media at the expense of
traditional media is considered by some marketers to be a “knee-jerk reaction.” (LO 7-5)
The monies previously allocated to traditional media are increasingly being moved to digital
media. At the same time, not everyone is on board with what they consider to be more of a knee-
jerk reaction than a sound strategy, as many managers admit they don't yet know if their digital
expenditures are paying off. Those managers who have been hesitant to move strongly into digital
argue that it is necessary to establish concrete communications objectives to guide their media
strategies. These objectives should be based on purchase decision models that guide the budget
allocation to various media, and not just the fact that a particular media category is trending.
Many large companies have been using these purchase decision models for a number of years,
and continue to do so. At the same time, not everyone agrees with their use or their validity,
arguing that the models are either outdated or should never have been used in the first place. As
the media environment continues to change, marketers continue to examine these models and
their value in guiding the IMC program. The success of a program can and should be measured
by both marketing and communications objectives.
3. Why are the affordable and arbitrary allocation budgeting methods considered to be very
poor budgeting methods? (LO 7-5)
Top-down approaches—in these methods of budgeting, the budget is established at the “top” by
management, and is passed down to the managers. Top down approaches generally include the
following:
a. the affordable method—In this approach, the firm determines what level of advertising and
promotions expenditures they feel that they can afford, and set this amount as the ad budget.
b. arbitrary allocation—when budgets are set through arbitrary allocation, there is no real
rhyme or reason for the amount established. Sad as this may seem, the truth is that for many firms
this is the method employed.
4. Explain why communications measures may be better to use than sales or market share
objectives when developing the IMC plan. (LO 7-1)
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Specific objectives for the IMC program facilitate coordination of the various groups working on
the campaign. Many people are involved in the planning and development of an integrated
marketing communications program on the client side as well as in the various promotional
agencies. The advertising and promotional program must be coordinated within the company,
inside the ad agency, and between the two. Any other parties involved in the promotional
campaign, such as public relations and/or sales promotion firms, research specialists, and media
buying services, must also know what the company hopes to accomplish through its marketing
communications program. Many problems can be avoided if all parties have written, approved
objectives to guide their actions and serve as a common base for discussing issues related to the
promotional program.
In regard to marketing versus communications objectives, it is well known that sales and
marketing objectives have too many other variables influencing their outcome. What if the
communications strategy attained the sought purchase intention, but the product was not found in
the distribution channel? Did the communications strategy work? Yes. Distribution failed to
achieve the marketing and sales goals. Achieving communications objectives can be more
precisely measured and their attainment will contribute to the achievement of marketing and sales
objectives.
5. Explain the S-shaped response curve and the concave-downward curve as they relate to
budget setting. What are the differences in these two curves? Give examples of how each
might be more appropriate for different products. (LO 7-6)
The s-shaped response curve makes the assumption that certain levels of advertising expenditures
must be reached before any noticeable impact on sales will occur. According to this model, initial
outlays will have little or no noticeable impact on sales, then additional outlays will have a very
noticeable effect to a point at which sales will level off and additional expenditures will again have
little or no impact.
The concave-downward model follows the economic model of the law of diminishing returns.
That is, as the amount of advertising increases, its incremental value decreases. thus, the effects of
advertising would almost immediately begin to decrease.
As can be seen, the models differ substantially in respect to the impact of advertising expenditures.
In the former model, the impact of advertising will not even begin to be felt until a certain level of
expenditures has been reached. Those who believe that advertising spending has a cumulative
effect would adhere to this mode. In the concave downward model, the impact takes place almost
immediately, with incremental expenditures having less and less value.
The models would also differ in respect to their appropriate us based on the types of products being
advertised. For example, the S-shaped response curve would seem to indicate an ability of the
advertising to stimulate sales, both through the provision of information and throughout persuasive
capabilities. As noted, it would support the fact that ads have a cumulative effect, and the additional
ad spending may lead to additional sales. The concave-downward model, on the other hand, would
argue that consumers are already in a mindset to buy or not buy, and the value of the advertising is
primarily to inform not to persuade. Additional levels of ad spending will not be effective in
changing one’s mind, or motivating them to purchase. If these assumptions are true, it would seem
that for high-involvement products, the concave downward model would be more likely to be
operating, while the S-shaped response might better explain products for which the consumers’
mind has not already been made up. In other words, the concave model assumes there will be little
or no search, or that this search has been concluded. the ads primary impact is on the decision to
buy. (Otherwise, additional expenditures would be likely to be effective at the search stage.) The S-
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shaped model would seem to be more effective when the decision hasn’t yet been made, and the
consumer can still be impacted by the ads.
6. Companies like P&G and Kraft Foods have found success by increasing their IMC budgets
while other companies reduce theirs during a recession. Explain why they have likely
achieved this success. (LO 7-7)
Companies like P&G and Kraft are successful for a reason. That reason is making sound
marketing decisions.
Many companies treat advertising and promotions as an expense rather than an investment, with
the first budgets to get cut when sales begin to decline are those of marketing. While common,
this is not likely to be an effective strategy. Companies like P&G and Kraft have determined this,
and typically do not make cuts.
If one recognizes that advertising as an investment rather than in expense, it would make more
sense to increase expenditures during a downturn. In fact, that is what advertising is supposed to
do—help sell the product. Reducing the budget is likely to lead to even further sales declines,
given the reduction in support. It seems illogical to think, “sales are going down, so let’s cut our
marketing efforts,” but that is what most companies do.
In addition, if competitors reduce their budgets, those who continue to allocate, or increase
allocations, will experience a greater share of voice, as there will now be less advertising clutter
in the marketplace. Kraft and P&G’s ads will be even more likely to be seen.
Many successful companies actually increase their advertising expenditures in hard times for
these very reasons.
7. Some marketers feel that the hierarchy of effects models may no longer reflect the
characteristics of the consumer decision-making process. Discuss the pros and cons of these
arguments. (LO 7-4)
A study published in McKinsey Quarterly claimed the purchase funnel dead,

arguing that consumers no longer make decisions in a linear fashion and have changed the way
they go about making purchase decisions. The report states that decision making has become
more complex and dynamic, and the stages have become interdependent and consumers are
influenced at any time during the process. Likewise, Sue Unerman, chief strategy officer at
MediaCom, claims that the purchasing funnel is not dead but pregnant. She contends that the
traditional model must be adapted to account for new media. Unerman notes that the traditional
funnel shape is being replaced by one that shows the traditional narrowing at the consideration
stage but then bulges when the known and trusted brands are joined by new ones found on
Internet searches, blogs, Facebook, and other new media. Yet another nonbeliever in consumer
funnels is Joseph Jaffe, president of Crayon, who thinks funnels need to be flipped. According
to Jaffe, the traditional funnel is outmoded, as marketers spend too much money trying to funnel
the consumer universe (many of whom don’t care about the product or service) down to a
handful. He says monies should be spent on this handful to get more out of them, resulting in a
more efficient, effective, and profitable strategy. By focusing on establishing a strong relationship
with customers after the sale, companies can take advantage of the new viral world as consumers
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interact with and influence many other consumers, each of whom may make multiple
transactions.
Not everyone is convinced that employing a funnel is no longer a viable strategy. In a study
designed to determine if the purchase funnel still works, the Television Bureau of Advertising
(TVB) was more interested in how media impacts consumers in the decision-making process.
Yankelovich (a research company) and TVB examined how 3,002 consumers employed
traditional and new media at each step in the process. The results indicated that media had an
influence on 80 percent of the consumers at the awareness phase, declining to 53 percent at the
transaction stage, and that the impact varied depending upon the product category, but the funnel
approach still made sense. The Advertising Research Foundation (ARF) found data to support
both sides of the argument, again concluding it varies by product category.
8. Explain why it is so difficult to directly measure the impact of advertising on sales. What
factors may inhibit this determination? (LO 7-3)
Perhaps one of the most common questions to which marketers seek an answer (and are asked by
stockholders, accountants, and others) is whether the money being spent on advertising are
leading to sales, and is being spent wisely. Thus, there has always been an attempt to relate
advertising to sale, primarily be economists, without any concrete conclusions forthcoming.
The problem with establishing this relationship is that a number of other factors affect sales,
including environmental effects, other marketing variables, etc.
For example, if one has good advertising and draws customers to the stores, but the store is out of
inventory, it is possible to get a good assessment of the advertising? Or, what if the product is of
poor quality? The advertising may have drawn people to the product, but once they tried it they
refused to buy it again? What if the advertisement leads to my wanting a Rolls Royce? If the price
is too high, was it the fault of the advertising that I did not buy?
Sometimes advertising can be effective at creating sales but at a later date. In advertising, this is
referred to as the “lag” effect. What if I see the ad now, but don’t buy until later? Is it possible to
measure the impact of the advertising directly on the sales?
Many factors impact the advertising-sales relationship, making it difficult to isolate the impact of
only the advertising. While marketers have made great strides in this regard, unless there is
testing in a controlled environment, the exact relationship will not be known.
9. Explain some of the reasons marketers are shifting their budget allocations from traditional
to digital and social media. What are some of the advantages and disadvantages with this
reallocation? (LO 7-5)
The world is becoming—or already has become—a digital world. Almost everyone is on the
Internet, and the majority of the population in the U.S. and first world countries are involved with
social media. Children are learning in school on iPads. High schoolers can only get assignments
and grades online ins some schools and digital toys have become the new babysitters replacing
television.
With the coming of the digital age is the demise of many traditional media. Younger people
rarely read a newspaper, and if they do, it is probably online. Programming is watched on mobile
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devices almost as much as TV. General news magazines are struggling to survive—Newsweek
hasn’t. Mobile is the fastest growing medium, and is not only enjoyed, but relied upon, by the
younger generation. The result of all of this is that many marketers have shifted their advertising
allocations to digital media, at the expense of traditional media.
But traditional media are not dead yet. Numerous studies have indicated that at the top of the
funnel (awareness and interest), television is still the main source of information for consumers.
Magazine ads have also been shown to drive search, as have newspapers (to a lesser degree).
While digital media have taken over at the later stages of the response hierarchies, they are not as
effective as some traditional media at earlier stages.
More than one company, for example P&G and GM, have moved advertising dollars from
traditional media to digital only to move them back again. While both had discontinued ads on
the Super Bowl, they have both come back, recognizing the reach from this event as well as the
ability for these media to generate interest.
In a successful IMC program there is a need for a mix of traditional and new media. In a sense,
that is what IMC is all about.
10. Why is it important for marketers to set specific objectives for advertising and promotion?
What criteria must these objectives meet to be valid? (LO 7-1).
Objectives are necessary to effectively plan and evaluate the communications program. Think
about it as taking a trip. The roadmap serves as the plan, and specific objectives are set in regard
to where you want to be and when. Your progress is measured by the attainment of these
objectives.
It is important for marketers to set objectives for proper coordination of the promotional program
elements. What is the message going to achieve? How will various media like advertising, public
relations, and the Internet be used? How much money is to be spent in each medium? Secondly,
as noted, the communications are part of the strategic map as to what is to be accomplished, and
when. Without these communications, there is no plan. Finally, communications objectives serve
as a basis for evaluation of the success or failure of the program. Too many marketers fail to
measure the effectiveness of their programs because they do not know what to measure. Once
they understand the value of communications programs, they will be more effective in
determining the proper metrics for this purpose.
To serve as valid objectives, specific criteria must be met. These include (1) they must be
concrete and measurable, (2) they must include and define a specific target audience, (3) they
must establish a benchmark and specify the degree of change sought, and (4) they must be time
specific. In addition, objectives must be realistic and attainable. By adhering to these criteria, the
objectives will be useful in developing the overall IMC plan.
Additional Discussions Questions (not in text)
11. As noted in the chapter, there is an increased emphasis on the determination of ROI. Discuss
some of the reasons leading to this increase in attention. Why is it so difficult to measure ROI?
(LO 7-7)
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For years marketers have wondered about the impact of their promotional expenditures. While some
media, like direct marketing and sales promotion, could demonstrate some of the impact of their
investments, others –particularly advertising—had a much more difficult time doing so. Many
advertisers recognized the difficulties associated with measuring effectiveness, and as a result, made
little or no attempts to do so.
However, as the media landscape changed, particularly with the growth of direct marketing and the
Internet, the importance of being able to determine which media would provide the greatest ROI
increased significantly. As direct marketers were able to show the returns through measures such as
cost per order, etc. the pressure on demonstrating the returns of other media naturally increased.
When companies invest millions of dollars in their IMC programs, the need for accountability seems
obvious.
Unfortunately, the measure that most marketers want to see is the impact on sales. Thus, for the most
part, when companies attempt to measure ROI, they attempt to look at the impact of various media
expenditures on sales (or other marketing objectives). Because there are other factors beyond
advertising and promotions that impact sales, it is often difficult to isolate the ROI of the
communications programs specifically. For example, what if the IMC program is very effective, but
the consumer doesn’t like the product? What if the price is too high? What if the product is not
available when the consumer goes to make a purchase? Using sales as the criterion for determining
ROI, could lead to the conclusion that the communications program didn’t work, when in fact it did.
Certainly sales is the critical element that marketers want to see. However, achieving one’s
communications objectives will likely lead to increases in sales (all other factors such as price,
product and distribution being in place). Thus, marketers need to understand that they must measure
communications objectives and not just drop to the bottom line (sales, marketing objectives) to
determine IMC effectiveness. By measuring communications objectives, the marketer may be able to
isolate the contributions of the IMC program, as well as determine what other factors might be
impacting.
12. Chapter 7 differentiates between communications objectives and sales objectives. Explain the
difference. What are examples of communications objectives? From where are these objectives
derived? (LO 7-3)
As noted in the text, marketing objectives are stated in the marketing plan and refer to what is to be
accomplished by the overall marketing program. These objectives are derived from the marketing
situation analysis, and typically relate to sales, market share, and similar goals. Communications
objectives are specifically related to what the organization will attempt to achieve with the
promotional program. While these objectives are designed to assist in the achievement of the overall
marketing objectives, they are not the same (though some companies may treat them as such).
Communications objectives, while designed to help achieve overall marketing objectives, are those
sought in the development of the communications program. Awareness, knowledge, interest, and
attitude change are just a few examples of communications objectives. As with marketing objectives,
communications objectives must meet the same criteria of effective objectives, e.g., measurability,
attainability, and the like.
Communications objectives are often derived from response hierarchy models (see Chapters 5 and 6).
As noted in the text these models may vary somewhat depending upon their original intent (to
determine advertising effects, adoption, etc.), but they still meet the criteria for sound objectives, and
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focus on the necessity for the communications program to move potential consumers through a series
of steps toward the ultimate goal. These hierarchies are supported by years of studies demonstrating
their validity. As such, they serve as excellent measures of communications impact.
13. The AAAA contends that advertisers should not cut their budgets during a time of recession.
Explain why advertisers usually do make cuts in marketing communications budgets during a
recession. Is this likely to be an effective or ineffective strategy? Explain why. (LO 7-5)
It seems logical to some that when sales start to decline, such as in a period of recession, that
advertising expenditures should be cut. To others, like the AAAA, this is exactly the wrong thing to
do. The primary reason for cutting advertising expenditures during a recession is because many
advertisers consider advertising an expense rather than an investment. When there are less revenues
coming in, they feel that they have less to spend on advertising. In fact, one of the criticisms of the
percentage of sales method is exactly this point. As sales drop, the % stays the same, but the total
amount serving as the base for that expenditure is lower. Thus, advertising expenditures drop.
In fact, many companies have been successful by increasing or maintaining advertising expenditures
during downturns in the business cycle. Minute Maid, and Toyota are two such examples. The logic
behind their thinking is that if other advertisers cut their budgets, or pull out of the market completely
with their advertising, there is an opportunity to gain a competitive advantage. With less advertisers,
there is less clutter, and a greater share of voice. For those with the same mindset as Minute Maid and
Toyota, advertising is an investment in the brand. Opportunities arise when competitors think of it as
an expense. These companies recognize that when there is a recession, and when sales are off, that is
the time to increase expenditures in advertising to assist the brand.
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14. The chapter discusses the results of a study conducted by Yoo and Mandhachitara that shows
that advertising spending and effects may differ in different competitive environments. Explain
each of the four scenarios presented in Figure 7-16 and give examples of brands in each of these
cells. (LO 7-5)
The study focuses on the fact that advertising by competitors may not always be to the detriment of
one’s brand. In fact, there may be cumulative gains to both competitors when both advertise. Figure
7-1 provides some examples.
Advertiser’s Advantage—In this case, one’s brand is stronger than that of the competition. Given the
competitive advantage, the brand should focus on advertising versus other promotional tools. The
reason for this is that advertising serves as a reminder as well as an introduction to the brand. Given
the brand’s strength, incentives—some of which may be costly—are not required. Rather, keeping the
brand in front of the consumer, and maintaining a brand image may be most important. An example
may be the Apple iPod versus other MP3 players. Apple is clearly the dominant brand, and should
focus on communicating its brand image and benefits. There is no need to offer discounts.
Symbiotic competition—Brands competing in a growing market that complement each other should
still focus on advertising, according to Figure 7-16. The adoption of satellite radio by auto
manufacturers offers consumers an attractive option to enhance their driving experience, and a
competitive advantage to competitors not offering such an option. For both the automobile and the
satellite radio company (i.e., BMW and Sirius), continued advertising of the brand is likely to benefit
both.
Zero-Sum Competition—In a mature market, one of the ways to gain market share is by taking it from
the competition. Thus, increases in advertising may lead to gaining share, and may have to be
matched to ward off the competition by others. Consider the competition between Energizer and
Duracell, while the market for batteries is growing very slowly or may even be flat, both companies
will continue to advertise in attempts to gain share and defend against the other as well.
Competitor’s Advantage—In a market situation in which a company’s brand is inferior to the

competition, head to head advertising may not be the best strategy. By gaining a niche position, and
focusing on promotional tools as opposed to advertising, some share may be gained. Using batteries
as an example, again, consider the smaller share brands such as Panasonic, EverReady, etc. Head to
head advertising battles are not likely to be effective. On the other hand, offering coupons,
sweepstakes, etc. may entice the consumer to try the brand, and sales may increase.
15. Different companies believe that various media are more important than others for their
marketing purposes. Discuss the various perspectives taken by these companies, and explain
why everyone may not agree on the same level of importance for media. (LO 7-6)
As Chapter 7 demonstrates, there are a number of factors that influence the media strategy.
Communications objectives, corporate policies, politics, and the size of the budget are just a few of
these. Because of the difficulty in determining a precise ROI for media, the decision is often
subjective, and may not always achieve consensus. Jaguar prefers a method of tracking prospects that
respond to their advertising, then providing the contact information to dealers for follow up through
direct marketing, etc. Jaguar believes that this method leads to a better determination of media
efficiencies.
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Other companies focus on other media. For example, more and more companies are spending more
monies on public relations. Many marketers believe that PR may be the best medium to employ. Ries
& Ries, previously published a book specifically to this point, noting that numerous companies now
employ PR strategies prior to advertising, and that this medium may be more effective.
As will be clearly demonstrated in Chapters 13 and 15, other media—many not traditional—are
favored by some companies. The rapid growth of the Internet and Interactive media appeals to many
companies, while others like the new media such as product placements, branded entertainment, etc.,
and are spending more and more monies in these areas.
One of the basics of an IMC orientation is the effective and efficient uses of media. As will be
evidenced throughout the remainder of this text, each medium has its advantages and disadvantages.
The astute marketer will learn and understand the uses of these media for various marketing
situations, adopting an integrated marketing communications strategy for the specific market
situation.
IMC Exercise
Students should find examples of advertisements for several products or services and discuss the specific
types of objectives the marketer may have for these ads. They should explain why sales objectives may be
appropriate for some ads while communications objectives are most relevant for others. Have the students
attempt to determine the percentage of sales ratios for the product categories they have ads for and
explain why these ratios may be as they are.
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Advertising and Promotion An

Integrated Marketing Communications

Chapter and Lecture Outline

II. THE VALUE OF OBJECTIVES

A. Communications—Specific objectives serve as communication devices and facilitate the

III. DETERMINING INTEGRATED MARKETING COMMUNICATION OBJECTIVES

A. Marketing versus Communications Objectives—It is very important to emphasize to the student

IV. SALES VERSUS COMMUNICATION OBJECTIVES

1. Problems with sales objectives—Problems with this approach include:

V. DAGMAR: AN APPROACH TO SETTING OBJECTIVES

A. Characteristics of Objectives—A major contribution of DAGMAR was Colley’s specification of

3. Benchmark and degree of change sought—Another important part of setting objectives is

B. Assessment of DAGMAR—There are certain problems and limitations to DAGMAR which

McGraw-Hill Connect ®: Communication Effects Pyramid

Activity Learning Objectives:

VI. PROBLEMS IN SETTING OBJECTIVES

A. Improving Promotional Planners’ Use of Objectives—Advertisers and their agencies should

VII. ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET

A. Establishing the Budget

The second model—the S-shaped response function—takes a very different approach.

1. Top-down approaches—In these methods of budgeting, the budget is established at the

McGraw-Hill Connect ®: Budgeting Approaches

Activity Learning Objective:

McGraw-Hill Connect ®: Allocating the Promotional Budget Among Brand

Answers to Discussion Questions

A study published in McKinsey Quarterly claimed the purchase funnel dead,

Additional Discussions Questions (not in text)

Competitor’s Advantage—In a market situation in which a company’s brand is inferior to the

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