Objective & Budget Setting

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.
 Two types of objectives
• Sales Objective
• Communications Objective
 Problems With Sales Objectives
 Sales are a function of many factors, not just advertising and
promotion.

 Effects of IMC tools such as advertising often occur over an

extended time period.

 Sales objectives provide little guidance to those responsible

for planning and developing the IMC program
 Many Factors Influence Sales

Promotion
Product Quality Competition

Technology SALES Distribution

The Economy Price Policy

When Sales Objectives Are Appropriate
For promotional efforts that are direct action in
nature and can induce an immediate behavioral
response.
 Sales promotion
 Direct response advertising
 Retail advertising for sales or special events
When advertising plays a dominant role in a
firm’s marketing program and other factors are
relatively stable
When sales effects of an IMC variable can be
isolated.
 Communication Objectives
The primary goal of an IMC program is to
communicate and planning should be based on
communications objectives such as brand
awareness, knowledge, interest, attitudes, image
and purchase intention
 Advertising and Movement Toward Action
Related behavioral Movement Types of promotions and
dimensions toward purchase advertising at each step
Point of purchase
Purchase
Conative Retail store ads, Deals
“Last-chance” offers
Realm of motives. Price appeals, Testimonials
Ads stimulate or direct Conviction
desires.

Affective Preference Competitive ads

Argumentative copy
Realm of emotions.
Liking “Image” copy
Ads change attitudes Status, glamour appeals
and feelings

Knowledge Announcements
Cognitive Descriptive copy
Realm of thoughts. Classified ads
Slogans, jingles, skywriting
Ads provide
information and facts. Awareness Teaser campaigns
Inverted Pyramid of Communications Effects

90% Awareness

70% Knowledge

40% Liking

25% Preference

20% Trial

5% Use
 Characteristics of Objectives

Good Objectives Should Include:

 Concrete, Measurable Communication Tasks

 Well-Defined Target Audience
 Have an Existing Benchmark Measure
 Specify Degree of Change Sought
 Specific Time Period
 Problems in Communication Objectives
 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.
 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 structure
curb genius.
Factors affecting IMC budget allocation
• Importance attached to IMC elements
• Client policies and organizational characteristics
• Market size and potential
• Market share goals
• Extent of brand differentiation
• Brand loyalty and equity
• Strength of the creative message
• Retailer power
• Time focus
• Ad hoc changes
Practical budget setting methods:
1. Percentage of sales
Disadvantages: sales or its estimate determine
promotional budget. It can lead to huge
expenditures on established brands which are
mature & inadequate budget for healthy promising
brands. Ignores brand profitability.
Requires modification when:
 Brand is making a major repositioning move or
reacting to one
 When brand is established and dominant
 When brand is being introduced.
2. All you can afford:

Suitable for firms with limited resources who may decide

to spend all that they can reasonably allocate to
promotion after other unavoidable expenditures have
been allocated.
This ensures that they are not promoting too heavily,
and that Advertising expenses are not being wasted.
Assumption is advertising does not influence sales
but is done for staying visible and building
corporate identity.
3.Allowances
A fixed sum per unit may be allocated for
marcom. The units can be any thing – no. of
households, number of retail outlets, no. of
automobiles expected to be sold.
4. Inertia
The budget from last year is simply extended for
the coming year. Assumption is that something
is working for the brand or company, it might
well be marcom, so don’t change it.
 5. Media inflation multiplier
The media budget for the past year is used as a
base. As estimate is made of what increases in
the media budget are likely to be required as
compared with last year. This percentage
increase is used to increase the budget for the
coming year.
6. Competitive parity or share of voice:
Comparability to competitors. Logic is that, collective
wisdom leads to optimal decision making. Reduces
chances of spending war and maintains undeclared
ceasefire.
Another variant is coordinating between SOV & SOM
assuming that all other elements of the marketing mix
are at parity across brands.
Market leaders normally have SOV <SOM
Market challengers have SOV >SOM.
 Share of Voice (SOV) effect & budgeting
strategies for individual markets

High
Decrease Increase to defend
Follow a niche Follow defensive strategy,
strategy, retreat & increase ad spend to match
focus, reduce spend competitor
Competitor
SOV
Attack with large
Maintain a modest ad
SOV premium
spend premium
Approx. double
spend than Set your SOV at least at the
level of competitor.
competitor
Low

Low Your brand’s SOM High

7.Objective and task method
Steps in O/T method:
Establish advertising objectives Determine
specific
tasks.

Estimate
associated
costs of each
task.
O/T method requires higher degree of managerial
involvement in terms of how well the objectives have
been achieved and suitable changes in the strategies
made, if necessary.
It attempts to introduce intervening variables such as
awareness or knowledge, or attitude formation in the
budgeting process.
Although determination of tasks and associated costs
are difficult to ascertain.
Best suited for new products where past information is
not available.
Using BDI and CDI as indicators to Budget Allocation
 Brand and Category Analysis

Brand Development Index

Percentage of brand sales in specific
market

BDI = X 100
Percentage of total population in
specific market
 Brand and Category Analysis

Category Development Index

Percentage of total product category sales
in specific market

CDI = X 100
Percentage of total population in
specific market
 Brand and Category Analysis

High BDI Low BDI

High CDI

High market share Low market share Good

Good market potential market potential

High market share

Low CDI

Low market share

Monitor for sales decline Poor market potential
 Brand and Category Analysis
High BDI Low BDI

The market usually The product category

High CDI

represents good sales shows high potential but

potential for both the the brand isn’t doing well;
product and the brand. the reason should be
determined.

The category isn’t selling Both the product category

Low CDI

well but the brand is; and the brand are doing
may be a good market in poorly; not likely to be a
which to advertise but good place to advertise.
should be monitored for
sales decline.
From the data given below calculate BDI & CDI values for given
markets. Interpret the values and give your recommendations
about MARCOM spending in the different markets.

Market Population Category sales Brand Sales

(in crores) (in crores) (in crores)
UP & Bihar 22 35 14
MP & 18 28 08
Rajasthan
WB & 15 30 18
Odissa
Gujarat & 12 25 15
Rajasthan