Chapter Six

Marcom Objective
Setting and Budgeting
 2007 Thomson South-Western
 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 Objectives
• 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 Objectives
• 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 Objectives
• 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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 The
Hierarchy
Of Effects

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 Advancing Consumers From
Unawareness to Awareness
• Advertising (mass media or otherwise) is
generally the most effective and efficient
method for quickly creating brand
awareness.
• Building knowledge & understanding:
Creating an Expectation

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Hierarchy of Effects

Encouraging
Trial
Purchases

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 Hierarchy of Effects
• Forming Beliefs and Attitudes
• Reinforcing Beliefs and Attitudes
• Accomplishing Brand Loyalty

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 Requirements for Setting Suitable
Marcom Objectives
• Include a precise statement of who, what, and
when
• Be quantitative and measurable
• Specify the amount of change whenever
possible
• Be realistic
• Be internally consistent
• Be clear and put it in writing

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 Should Marcom Objectives Be Stated
in Terms of Sales?
Presales Objectives: Sales Objectives:
communication means the marcom
objectives that attempt objective literally is to
to increase the target increase sales by a
audience’s brand particular amount.
awareness, enhance
their attitudes toward
the brand, shift their
preferences from the
competitors’ brand and
so on.
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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
• Problem: Communication objectives
don’t necessarily translate into sales
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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”
• Problem: Too many other factors
influence sales

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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 17
 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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 An Example of a Sales-to-
Advertising Response Function

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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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Advertising Spend, SOV, and SOM
for Top-10 Wireless Phone Brands

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Advertising Spend, SOV, and SOM
for Top-10 Beer Brands

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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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