Advertising and Movement Toward Action

Related behavioral dimensions Movement toward purchase Types of promotions and advertising at each step

Conative
Realm of motives. Ads stimulate or direct desires.

Purchase Conviction Preference Liking Knowledge

Point of purchase Retail store ads, Deals Last-chance offers Price appeals, Testimonials

Affective
Realm of emotions. Ads change attitudes and feelings

Competitive ads Argumentative copy Image copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Teaser campaigns

Cognitive
Realm of thoughts. Ads provide information and facts.

Awareness

Inverted Pyramid of Communications Effects

90% Awareness
ve iti gn Co e iv ct fe Af

70% Knowledge 40% Liking 25% Preference 20% Trial

e tiv na Co

5% Use

Setting Objectives Using the Communications Effects Pyramid

Product: Backstage Shampoo Time period: Six months Objective 1: 90% awareness Objective 2: 70% interest Objective 3: 40% positive feelings and 25% preference Objective 4: 20% trial Objective 5: 5% main regular use

The DAGMAR Approach

Define Advertising Goals for Measuring Advertising Results

Communication Tasks

Four stages

Awareness Comprehension Conviction Action

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

DAGMAR Difficulties
Legitimate Problems Response Hierarchy Problems
Doesn't always define the process people use to reach purchase/use.

Questionable Objections 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.

Attitude - Behavior Relationship

Attitude change doesn't always lead to change in actions or behavior.

Inhibition of Creativity
Too many rules and structure curb genius.

The Promotional Budget

Establishing the budget Allocating the budget (budgeting approaches)

Establishing the budget

Marginal Analysis Sales response models Additional factors in budget setting

Marginal Analysis
Sales Sales in $ Gross Margin

Ad. Expenditure

Profit

Point A Advertising / Promotion in $

BASIC Principles of Marginal Analysis

Increase Spending . . . IF:
The increased cost is less than the incremental (marginal) return.

Decrease Spending . . . IF:

The increased cost is more than the incremental (marginal) return.

Hold Spending Level. . . IF:

The increased cost is equal to the incremental (marginal) return.

Problems with Marginal Analysis

Assumption that sales are a direct measure of advertising and promotional efforts. Assumption that sales are determined solely by advertising and promotion.

Advertising Sales/Response Functions

A. Concave-Downward B. S-Shaped Response Curve Response Function
Initial Spending Little Effect High Spending Little Effect Middle Level High Effect

Sales

Sales Advertising Expenditures

Range A Range B Range C

Advertising Expenditures

Additional Factors in Budget Setting

Figure 7-11 Figure 7-12

Allocating the Budget

Top-down budgeting Bottom-up budgeting

Top-Down Budgeting
Top Management Sets the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending Limit

Top-Down Budgeting

Arbitrary allocation The affordable method Percentage of Sales Competitive parity Return on investment (ROI)

The Affordable Method

It is common among small firms and certain non-marketing-driven large firms. Logic: We cant be hurt with this method. Weakness: often does not allocate enough money.

Percentage of Sales

Sales dollar or unit product cost Future or past Pros

Financially safe Reasonable limits Stable

Percentage of Sales

Cons

Reverse the cause-and-effect relationship between advertising and sales. Stability Misallocation Difficult to employ for new product introductions. Sales Advertising budget

Competitive Parity Method

Pros

Take advantage of the collective wisdom of the industry Prisoners dilemma

Cons

Bottom-Up Budgeting
Total Budget Is Approved by Top Management Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Promotional Objectives Are Set

Bottom-Up Budgeting

Objective and Task Method Payout Planning Quantitative Models

Objective and Task Method

Three steps:

Defining the communications objectives to be accomplished Determining the specific strategies and tasks need to attain them Estimating the cost associated with performance of these strategies and tasks

Objective and Task Method

Establish Objectives Establish Objectives (create awareness of new product among (create awareness of new product among 20 percent of target market) 20 percent of target market) Determine Specific Tasks Determine Specific Tasks (advertise on market area television and (advertise on market area television and radio and local newspapers) radio and local newspapers) Estimate Costs Associated with Tasks Estimate Costs Associated with Tasks (television, $575,000; radio, $225,000; (television, $575,000; radio, $225,000; newspaper, $175,000) newspaper, $175,000)

Payout Planning
To determine how much to spend, marketers develop a payout plan that determines the investment value of the advertising and promotion appropriation
Example of a three-year payout plan ($ millions)
Year 1 15.0 7.5 15.0 (7.5) (7.5) Year 2 35.50 17.75 10.50 7.25 (0.25) Year 3 60.75 30.38 8.50 21.88 21.63

Product sales Profit contribution (@$.50 per case) Advertising/promotions Profit (loss) Cumulative profit (loss)