*A marketing plan is a document that serves as a guide for the present and future marketing activities of an organization.
7 things marketing plans do
(1) state or restate the organization’s mission
(2) assess a brand’s current marketing situation and identify factors, both within the company and in the environment, that may help or hinder achieving marketing objectives;
(3) present clear, measurable, time-delineated marketing objectives
(4) describe strategies that will be used to achieve marketing objectives with specific target markets
(5) describe tactics or action programs for implementing the marketing strategy
(6) explain how the effectiveness of the marketing efforts will be evaluated
(7) propose a budget for marketing activities
What effect does the marketing plan have on an organization’s IMC?
It dictates the role of promotional messages in the marketing mix. It enables better implementation, control, and continuity of campaigns, and it guides the allocation of promotional dollars.
Successful organizations do not separate IMC plans from marketing. They view each as a vital building block for success.
A good marketing plan generally begins with the organization’s ______ ______.
mission statement :
-is a short description of the organization’s purpose and philosophy.
– Starting the plan with a mission statement helps remind planners and marketing partners about what the organization is and what it stands for.
– detailed description of the brand’s current marketing situation
-the situation analysis presents all the facts that are relevant for planning a marketing strategy. Most situation analyses will, therefore, include a description of the brand’s history, market share, growth, profitability, promotional expenditures, key competitors, and so on. A situation analysis is more than a presentation of facts, however. Good marketing plans provide the context for factual information. For example, Diet Mountain Dew’s sales growth of 8 percent during the most recent year is put into a context when the marketing plan notes that overall sales of carbonated beverages declined. In that context, 8 percent growth is outstanding.
Planners draw attention to the most important aspects of a brand’s situation through a ______ analysis.
-the SWOT analysis uses the facts contained in the situation analysis to point out strengths, weaknesses, opportunities, and threats for the brand. Strengths and weaknesses represent company capabilities, while opportunities and threats represent environmental factors.
-briefly restates the company’s current situation, reviews the target market segments, itemizes the long- and short-term marketing objectives, and cites decisions regarding market positioning and the marketing mix.
the third part of the marketing plan, are clear, quantifiable, realistic marketing goals that are to be accomplished within a defined time period
– Goals of the marketing effort that may be expressed in terms of the needs of specific target markets and specific sales objectives.
Marketing objectives generally fall into one of two broad categories:
sales-target objectives and communication objectives.
-Marketing objectives that relate to a company’s sales. They should be specific as to product and market, quantified as to time and amount, and realistic. They may be expressed in terms of total sales volume; sales by product, market segment, or customer type; market share; growth rate of sales volume; or gross profit.
-include goals related to increasing or maintaining sales volume and market share. Such objectives, of course, must be realistic in light of the issues described in the situation analysis. In good economic times and in a new product category, a company might set very ambitious sales-target objectives.
EX: Since Mountain Dew is an established brand in a mature product category, it might propose a sales-target objective of 5 percent growth in overall sales over a period of one year. This overall sales objective might be a result of even more specific objectives by distribution point. For example, Mountain Dew might propose modest sales-target objectives at one distribution point (grocery stores) and higher objectives at another (restaurants).
Many experts believe that good marketing plans should place greater emphasis on communication objectives and less on sales-target objectives. why?
-viewing IMC effectiveness only in terms of sales only overlooks some key issues. For example, a campaign’s impact on sales usually works through intermediate steps (see Exhibit 8-5 on page 253). In many instances consumers must travel through a sequence of awareness, comprehension, conviction, and desire before they are ready to take action and buy a product. These intermediate steps are best achieved by specifying communications objectives. In addition, the relationship between sales and IMC is a complex one. An effective campaign can make a consumer want to try a product, but a repeat sale is typically influenced by the consumer’s product experiences. So even great campaigns can fail if consumers are dissatisfied with the product when they try it.
-are outcomes that can reasonably be associated with promotional activities, such as increases in brand recognition or awareness, increased comprehension of a brand’s attributes or benefits, more positive attitudes about a brand or a more favorable image of the brand or its typical user, and stronger intentions to try or buy a brand.
EX:Mountain Dew’s IMC is meant to help consumers view the brand as a flavorful, high-energy drink for youthful-thinking people looking for an alternative to colas.
name the 4 steps of the traditional top-down marketing plan:
3. marketing strategy
4. marketing tactics
Who introduced DAGMAR?
Who does the acronym stands for ?
Defining Advertising Goals for Measured Advertising Results.
What is DAGMAR?
– a system for defining advertising goals for measured advertising results
-DAGMAR is a planning tool for setting communications objectives for a campaign.
-system emphasizes communication objectives because Colley believed that the proper way to evaluate a campaign is to determine how well it communicates information, within a given budget, to the target audience.
planners who follow DAGMAR formulate objectives related to one of four outcomes:
1. awareness (knowing the brand exists)
2. comprehension (knowing about the brand’s benefits or attributes)
3. conviction (a favorable attitude toward the brand)
4. action (purchasing and using the brand).
*DAGMAR also specifies the qualities of a good objective. Good objectives specify an audience and define outcomes that are concrete and measurable. They are also clear about the current situation, the desired situation, and the time frame for moving from the former to the latter.
*the marketing strategy:
describes how the company plans to meet or accomplish its marketing objectives
-A company’s marketing strategy has a dramatic impact on its advertising. It determines the role and amount of advertising in the marketing mix, its creative thrust, and the media to be employed.
Marketing strategy typically involves 3 steps:
(1) defining the particular target markets (2) determining the strategic position
(3) developing an appropriate marketing mix for each target market.
*Selecting the Target Market:
The first step in strategy development is to define and select the target market, using the processes of market segmentation and research discussed in Chapters 6 and 7.
EX: When General Motors introduced its Saturn SC1 model, for instance, it defined its target market as “college-educated import owners and intenders”—highly educated young adults (18 to 34) considering their first or second car purchase.
Positioning the Product The famous ad executive David Ogilvy said one of the first decisions in marketing is also the most important:
how to position the product.
refers to the place a brand occupies competitively in the minds of consumers. Every product has some position—whether intended or not—even if the position is “nowhere.” Positions are based on consumer beliefs, which may or may not reflect reality. Strong brands have a clear, often unique position in the target market.
EX:Ogilvy’s agency (Ogilvy & Mather), for example, differentiated Dove soap in 1957 by positioning it as a complexion bar for women with dry skin. Now, over a half-century later, the company still uses the same cleansing cream demonstration, and Dove is consistently the number one brand, spending some $153.6 million in advertising annually to maintain its 24 percent share of the multibillion-dollar bar soap market.10
Positioning is important for both the advertiser and the consumer because it helps ______ products from the competition.
ex:Volkswagen focuses on its hands-free parking system to position itself against competing brands.
______ positions are available in a market.
The big mistake many companies make is what?
not staking out any position
Companies can’t be everything; but they don’t want to be nothing. A company might pick a position similar to a competitor’s and fight for the same customers. Or it might find a position not held by a competitor—a hole in the market—and fill it quickly, perhaps through product differentiation or market segmentation.
Professor Ernest Martin proposes seven distinct approaches to developing a positioning strategy:
1. Product attribute—setting the brand apart by stressing a particular product feature important to consumers.
2. Price/quality—positioning on the basis of price or quality.
3. Use/application—positioning on the basis of how a product is used (e.g., Arm & Hammer).
4. Product class—positioning the brand against other products that, while not the same, offer the same class of benefits.
5. Product user—positioning against the particular group that uses the product.
6. Product competitor—positioning against competitors (e.g., Avis/Hertz), using the strength of the competitor’s position to help define the subject brand.
7.Cultural symbol—positioning apart from competitors through the creation or use of some recognized symbol or icon.
We add an eighth approach:
by category—positioning by defining or redefining the business category. A simple way for a company to get the number one position is to invent a new product category.
EX: APPLE was founded as a computer company. But its greatest successes came with innovations that defined new categories: tablets, an online music store, and smart phones. In turn, these successes bolstered sales of its laptops and desktops.13
Determining the marketing mix:
The next step in developing the marketing strategy is to determine a cost-effective marketing mix for each target market the company pursues.
-As we discussed in Chapter 6, the mix blends the various marketing elements the company controls: product, price, distribution, and communications.
Mountain dew and the marketing mix:
Mountain Dew was blessed with a broad marketing toolbox to draw upon. First, it offered consumers an energizing, thirst-quenching soft drink product with a unique citrus flavor and an image of youthful exuberance, exhilaration, and adventure.
-Then, to build distribution, it used a variety of promotions to the trade that would enable grocers and other resellers to increase both volume and profits. While its price was competitive with other soft drinks, Mountain Dew promoted itself aggressively with free samples, premiums, and prizes at various street and sporting events—which effectively lowered the price to consumers.
-Finally, Mountain Dew initiated an integrated communications program that included extensive advertising on TV, radio, outdoor and print media, and the Internet; sports and event sponsorships; appearances at grass-roots geographical events; plus a host of public relations activities—all designed to develop and promote the distinct Mountain Dew personality.
-Companies have a wide variety of marketing strategy options. They might increase distribution, initiate new uses for a product, change a product line, develop entirely new markets, or start discount pricing. Each option emphasizes one or more marketing mix elements. The choice depends on the product’s target market, its position in the market, and its stage in the product life cycle.
-The precise details of a company’s marketing strategy that determine the specific short-term actions that will be used to achieve its marketing objectives.
–A company’s objectives indicate where it wants to go; the strategy indicates the intended route; and the tactics determine the specific short-term actions to be taken, internally and externally, by whom, and when. Advertising campaigns live in the world of marketing tactics.
-The tactic is a specific action for helping to accomplish a strategy. By planning from the bottom up, entrepreneurs can find unique tactics to exploit. But caution is required. Companies should find just one tactic, not two or three. The marketer can then focus all elements of the marketing mix on the tactic. The tactic becomes the nail, and the strategy is the hammer that drives it home.
In a small company, everybody is both player and coach, and the day-to-day details seem to come first, leaving little or no time for formal planning. However, there is a solution to this dilemma:
steps of bottom-up marketing plan:
___ _____and ____ _____think one of the best ways for a company to develop a competitive advantage is to focus on an ingenious tactic first and then develop that tactic into a strategy. By reversing the normal process, marketers sometimes make important discoveries.15 Researchers at Vicks developed an effective liquid cold remedy but found it put people to sleep. Rather than throw out the research, Vicks positioned the formula as a nighttime cold remedy. NyQuil went on to become the number one cold remedy and the most successful new product in Vicks’s history.
—The tactic is a specific action for helping to accomplish a strategy.
Jack Trout and Al Ries
Advertisements with messages (often sexual) supposedly embedded in illustrations just below the threshold of perception.
– GB and Australia banned them
**Integrated marketing communications suggests a new approach to planning marketing and communications activities. It differs from the traditional processes by mixing marketing and communications planning together rather than separating them. Using the outside-in process, the IMC approach starts with the customer. Marketers learn about what media customers use, the relevance of their message to the customers, and when customers and prospects are most receptive to the message. As depicted in Exhibit 8-3 (starting at the bottom), IMC activities begin with the customer and work back to the brand.16 In turn, all corporate marketing functions are dedicated to building and maintaining brand equity through a united focus on stakeholder loyalty.
Thanks to _______, marketers have a wealth of information at their fingertips.
With supermarket scanner data, for instance, packaged-goods marketers can do what 4 things?
(1) identify specific users of products and services; (2) measure their actual purchase behavior and relate it to specific brand and product categories; (3) measure the impact of various advertising and marketing communications activities and determine their value in influencing the actual purchase; and (4) capture and evaluate this information over time.
Starting the planning process with a database focuses the company on the consumer, or prospect, not the company’s sales or profit goals. These marketing objectives are moved farther down in the planning process.
So how does planning proceed under an integrated approach? Wang and Schultz developed a seven-step IMC planning model:
The first step segments the customers and prospects in the database—either by brand loyalty, as illustrated, or by some other measurable purchase behavior (usage, for instance).
The second step analyzes information on customers to understand their attitudes, their history, and how they discover and interact with the brand or product. The goal is to find the best time, place, and situation to build and maintain relationships.
Next, the planner sets marketing objectives based on this analysis. In the illustrated example, these objectives relate to building and maintaining usage or nurturing brand loyalty.
The marketer then identifies what brand contacts and what changes in attitude are required to support the consumer’s continuance or change of purchase behavior.
The fifth step sets communications objectives and strategies for reaching the consumer and influencing his or her attitudes, beliefs, and purchase behavior. The marketer can then decide what other elements of the marketing mix (product, price, distribution) will further encourage the desired behavior.
Finally, the planner determines what communications tactics to use—advertising, direct marketing, publicity, sales promotion, special events—to make further contact and influence the consumer’s behavior.
**By following this model, the marketer sets objectives based on the needs of the customer or prospect. All forms of marketing are thus turned into communication, and all forms of communication into marketing.20
*The Importance of IMC to the Study of Advertising
Because many customers see all sponsored communications as advertising, advertising people (account managers, creatives, media planners) must grow beyond their traditional specialty to become enlightened generalists, familiar with and able to integrate all types of marketing communications. Conversely, marketers traditionally viewed advertising as IMC. In other words, marketers failed to look beyond traditional advertising approaches when creating campaigns, and failed to acknowledge that effective communications can (and should) come from a variety of media, platforms, and sources. The IMC approach helps broaden the company’s perspective, so that message tactics come from a consideration of broader marketing strategies, rather than the other way around.
*What is a natural outgrowth of the marketing plan and is prepared in much the same way?
the IMC plan
The written document that directs the company’s advertising effort.
-A natural outgrowth of the marketing plan, it analyzes the situation, sets advertising objectives, and lays out a specific strategy from which ads and campaigns are created.
Reviewing the Marketing Plan
The brand manager first reviews the marketing plan to understand where the company is going, how it intends to get there, and the role of IMC in the marketing mix. The first section of the plan should summarize briefly the situation analysis and SWOT analysis, review the target market segments, itemize the long- and short-term marketing objectives, and restate decisions regarding market positioning and the marketing mix.
The brand manager then determines what tasks IMC must accomplish. What strengths and opportunities can be leveraged? What weaknesses and threats need to be addressed? Unfortunately, some corporate executives (and advertising managers) state vague goals, like “increasing sales and maximizing profits by creating a favorable impression of the product in the marketplace.” When this happens, no one understands what the messages are intended to do, how much they will cost, or how to measure the results. Objectives should be specific, realistic, and measurable.
Most IMC programs encourage prospects to take some _____.
however, it is usually unrealistic to assign IMC the whole responsibility for achieving _______.
Sales goals are marketing objectives, not advertising objectives.
–Obviously, before your product is introduced, prospective customers are completely unaware of it. Your first communication objective therefore is to create ________(—to acquaint people with the company, product, service, and brand.)
Suppose you’re advertising a new brand in a new product category, but you’re not sure what kind of results to expect. What shows some of the tasks it can perform?
The IMC pyramid
*Before a company can persuade customers to buy, it must inform, persuade, or remind its intended audience about the company, product, service, or issue. A simple adage to remember when setting objectives is “Marketing sells, IMC tells.” In other words, IMC objectives should always be related to communication effects.
steps of the IMC pyramid
The next task might be to develop comprehension:
—to communicate enough information about the product so that some percentage of the aware group recognizes the product’s purpose, image, or position, and perhaps some of its features.
Next, you need to communicate enough information to develop conviction:
—to persuade a certain number of people to actually believe in the product’s value.
Once convinced, some people may be moved to ________ the product
Finally, some percentage of those who desire the product will take _____. They may request additional information, send in a coupon, visit a store, or actually buy the product.
Campaign results may take time, especially if the product is expensive or not purchased regularly. Over time, as a company continues communicating with prospects and customers, the number of people who become aware of the product increases. As more people comprehend the product, believe in it, and desire it, more take the final action of buying it.
The pyramid works in 3 dimensions:
time, dollars, and people.
The IMC objective declares:
what the marketer wants to achieve with respect to consumer awareness, attitude, and preference; the advertising (or creative) strategy describes how to get there.
let’s apply these principles to a hypothetical case. Suppose you are in charge of the new “Lightning Bug,” a hybrid car built by Volkswagen:
Your initial objectives for this fictional car might read as follows:
Within two years, communicate the existence of the Lightning Bug to half of the more than 500,000 people who annually buy foreign economy cars.
Inform two-thirds of this “aware” group that the Lightning Bug is a superior economy car with many design, safety, and environmentally friendly features; that it is a brand new nameplate backed with unmatched service, quality, and value; and that it is sold only through dedicated Volkswagen dealers.
Convince two-thirds of the “informed” group that the Lightning Bug is a high-quality car, reliable, economical, and fun to drive.
Stimulate desire within two-thirds of the “convinced” group for a test drive.
Motivate two-thirds of the “desire” group to visit a retailer for a test drive.
These IMC objectives are specific as to time and degree and are quantified. Theoretically, at the end of the first year, research could determine how many people are aware of the Lightning Bug, how many people understand the car’s primary features, and so on, thus measuring the program’s effectiveness. See how IMC objectives can help a marketer succeed in Ad Lab 8-B.
Volkswagen’s campaign may accomplish the objectives of creating awareness, comprehension, conviction, desire, and action. But once the customer is in the store, it’s the retailer’s responsibility to close the sale with effective selling and service.
The IMC pyramid represents the learn-feel-do model of effects. That is, it assumes that people rationally consider a prospective purchase, and once they feel good about it, they act. The theory is that IMC affects attitude, and attitude leads to behavior. That may be true for certain expensive, high-involvement products that require a lot of consideration (buying a home or car, or choosing a college). But other purchases may follow a different pattern. For example:
impulse purchases at the checkout counter may involve a do-feel-learn model, in which behavior leads to attitude (picking up a pack of gum or a magazine after every visit to the supermarket). Other purchases may follow some other pattern. Thus, there are many marketing considerations when objectives are being set, and they must be thought out carefully.
**The pyramid also reflects the traditional mass marketing monologue. The marketer talks and the customer listens.23 That was appropriate before the advent of computers and databases, and it may still be appropriate in those categories where the marketer has little choice or does not expect a repeat purchase (as when a family has a garage sale or a shop at a vacation destination sells t-shirts).
But today, as the IMC model shows, many marketers have databases about where their customers live, what they buy, and what they like and dislike. When marketers can have a dialogue and establish a relationship, the model is no longer a pyramid but a circle (see Exhibit 8-6). Consumers and business customers can send messages back to the marketer in the form of coupons, phone calls, e-mail, social media posts, surveys, and database information on purchases. With interactive media, responses are in real time. This feedback can help the marketer’s product, service, and messages evolve.
And reinforcement IMC, designed to build brand loyalty, will remind people of their successful experience with the product and suggest reuse.
By starting with the customer and then integrating all aspects of their marketing communications—package and store design, personal selling, advertising, public relations activities, special events, and sales promotions—companies hope to accelerate the communications process, make it more efficient, and achieve lasting loyalty from good prospects, not just prospects
*define IMC strategy:
The methodology advertisers use to achieve their advertising objectives. The strategy is determined by the particular creative mix of advertising elements the advertiser selects, namely: target audience; product concept; communications media; and advertising message. Also called the creative mix.
*____ _____ blends the elements of the creative mix: target audience, product concept, communications media, and advertising message.
Those advertising elements the company controls to achieve its advertising objectives, including the target audience, the product concept, the communications media, and the advertising message. See also advertising strategy.
-The specific group of individuals to whom the advertising message is directed
-Marketers need to know who the end user is, who makes the purchase, and who influences the purchasing decision. Children, for example, often exert a strong influence on where the family eats. So while McDonald’s target market is adults, its target audience also includes children, and it spends much of its promotional budget on campaigns directed at kids.
Similarly, while companies may target heavy users of a product, many light users and nonusers are exposed to the campaign as well. That’s good, because research shows that brand popularity (which IMC is uniquely good at creating) cuts across all levels of purchasing frequency.
example of product concept:
General Motors markets essentially the same truck to two different audiences but presents two different product concepts. The Silverado is marketed to the vast middle class with campaigns that stress its rugged, macho durability. Promotions for the Sierra, on the other hand, are aimed at white-collar professionals and emphasize the vehicle’s snob appeal.27
The “bundle of values” the marketer presents to the consumer is the _____ _____.
*define product concept:
-The consumer’s perception of a product as a “bundle” of utilitarian and symbolic values that satisfy functional, social, psychological, and other wants and needs. -Also, as an element of the creative mix used by advertisers to develop advertising strategy, it is the bundle of product values the advertiser presents to the consumer.
An element of the creative mix comprising what the company plans to say in its advertisements and how it plans to say it—verbally or nonverbally.
–the combination of copy, art, and production elements forms the message, and there are infinite ways to combine these elements
EX:Dew personifies its product concept not only through events, but via a team of 10 extreme athletes, each representing a sport more daring than the next. That same attitude is passed on to Dew campaigns. With longtime agency BBDO helping the brand stay true to its youthful feel, its campaigns have an edginess and audacity that stand in stark contrast to the big cola brands. In one Super Bowl commercial, a Dew Dude on a bicycle chases down a cheetah and wrestles it to the ground. Reaching into the cat’s mouth, he retrieves a stolen can of Dew.
Some years ago, Richard Vaughn at Foote, Cone & Belding noted that different kinds of products typically evoke different levels of consumer involvement (either high or low) and different types of involvement, either cognitive (think) or affective (feel). This means different products call for different kinds of advertising. He created a two-dimensional model known as the FCB grid, which categorized consumer products into four quadrants based on “high involvement” or “low involvement” and “think” or “feel.” By positioning brands in the grid based on the degree and type of involvement consumers brought to the purchase decision, the agency could determine which type of advertising would be most appropriate. Rossiter and Percy extended this research with the grid you saw in Exhibit 5-3, which also suggested different creative executions.
More recently, academics Kim and Lord recognized that people can be both cognitively and affectively involved at the same time. So they developed the Kim-Lord grid, shown in Exhibit 8-8. It too depicts the degree and the kind of involvement a consumer brings to the purchase decision for different products. Some purchases, like cars, require a high degree of personal involvement on both the cognitive and affective levels.28 For others, like detergent, involvement is low on both axes. Sometimes a marketer uses an advertising strategy aimed at shifting the product to higher involvement on either axis. A product’s location on the grid also indicates how the product is purchased (learn-feel-do or feel-learn-do) and how campaign copy should be written (more emotional or more rational).29
EX: Pepsi marketers view Mountain Dew as a high-involvement purchase on the affective scale. “We continually need to give people a reason to pick us up,” says one executive, “because we’re not an obvious substitute [for cola]. People make a conscious choice to consume Mountain Dew, so we push to keep the positioning pure.”
An element of the creative mix/creative strategy, comprising the various methods or vehicles that will be used to transmit the advertiser’s message.
–They include traditional media such as radio, TV, newspapers, magazines, and billboards, plus the Internet, direct marketing, public relations, special events, sales promotion, and personal selling.
*Marketers at Mountain Dew use a variety of media to create a special environment for the product.
EX:or example, Mountain Dew has used cars, radio stations, computer game demos, and extreme athletes as part of the experience. One summer, marketers decked out a subway car with “Do the Dew” memorabilia and hauled it around the country to major youth-oriented events where they passed out branded premiums such as snowboards, gear, and T-shirts—all relevant to the target market.
Whether the marketer is a large corporation or a small company, the key to successful planning is _______. But the genius of business is in interpreting what the information means. This leads to direction, which makes planning easier and more rewarding.
*The cost of a new plant or distribution warehouse is an investment in the company’s future ability to produce and distribute products. Similarly, IMC—as one element of the marketing mix—is an investment in a product or brand. While IMC is often used to stimulate immediate sales, its greatest power is in its cumulative, long-range, reinforcement effect.35
Campaigns build consumer preference and promote goodwill. This, in turn, enhances the reputation and value of the company name and brand. And it encourages customers to make repeat purchases.
So while IMC is a current expense for accounting purposes, it is also a long-term capital investment. For management to see IMC as an investment, however, it must understand how message campaigns relate to sales and profits.
substantial research does support the following principles:
-In consumer goods marketing, increases in market share are closely related to increases in the marketing budget. And market share is a prime indicator of profitability.
-Sales normally increase with additional advertising. At some point, however, the rate of return plateaus and then declines.
-Sales response to advertising may build over time, but the durability of advertising is brief, so a consistent investment is important.
-Advertising expenditures below certain minimum levels have no effect on sales.
-Some sales will occur even if there is no advertising.
-Culture and competition impose saturation limits above which no amount of advertising can increase sales.
change in market share may occur because of:
quality perceptions, word of mouth, the introduction of new products, competitive trade promotion, the opening of more attractive outlets, better personal selling, seasonal changes in the business cycle, or shifts in consumer preferences.
One thing remains clear. Because the response to promotional messages is spread out over time, IMC should be viewed as a _____ investment in future profits. Like all expenditures, campaigns should be evaluated for wastefulness. But historically, companies that make IMC the scapegoat during tough times end up losing substantial market share before the economy starts growing again
Companies use a number of methods to determine how much to spend on IMC including:
-the percentage of sales, percentage of profit, unit of sale, competitive parity, share of market, and objective/task methods
(mostly used for national advertising budgets)
The ___________________ is one of the most popular techniques for setting promotional budgets.
percentage of sales method
*percentage of sales method:
A method of advertising budget allocation based on a percentage of last year’s sales, anticipated sales for next year, or a combination of the two. Businesspeople like this method because it is simple, it doesn’t cost them anything, it is related to revenue, and it is considered safe.
– The problem is knowing what percentage to use.
-even leaders in the same industry use different percentages. Across industries, promotional expenditures range from just 1.5 percent of sales to more than 22 percent.
-Usually the percentage is based on an industry average or on company experience. Unfortunately, it is too often determined arbitrarily. An industry average assumes that every company in the industry has similar objectives and faces the same marketing problems. Company experience assumes that the market is highly static, which is rarely the case.
-However, when applied against anticipated future sales, this method often works well. It assumes that a certain number of dollars will be needed to sell a certain number of units. If the company knows what the percentage is, the correlation between IMC spending and sales should remain constant, assuming the market is stable and competitors’ spending remains unchanged. And because this method is common in the industry, it diminishes the likelihood of competitive warfare.
*A big shortcoming of the percentage of sales method is that it violates a basic marketing principle. Marketing activities are supposed to ____ demand and thus sales, not occur as a result of sales. If IMC automatically increases when sales increase and declines when sales decline, it ignores all other factors that might encourage an opposite move.
*The percentage of sales method also ignores the strategic nature of marketing. Rather than encouraging planners to think carefully about the proper budget for accomplishing objectives, it forces them to develop objectives that fit the budget. This means planners:
often miss opportunities for building brand equity or long-term relationships with consumers.
In markets with similar products, a strong relationship usually exists between a company’s share of the market and its share of _________.
What is an attempt to link promotional dollars with sales objectives?
The share of market / share of voice method
*The share of market / share of voice method:
– It holds that a company’s best chance of maintaining its share of a market is to keep a share of IMC (voice) somewhat ahead of its market share.
– A method of allocating advertising funds based on determining the firm’s goals for a certain share of the market and then applying a slightly higher percentage of industry advertising dollars to the firm’s budget.
— For example, a company with a 30 percent share of the market should spend 35 percent of the industry’s promotional dollars.
The share of market/share of voice method is commonly used for new product introductions.40 According to this formula, when a new brand is introduced, the budget for the first two years should be about one and a half times the brand’s targeted share of the market in two years. This means that if the company’s two-year sales goal is 10 percent of the market, it should spend about 15 percent of promotional spending during the first two years. The company’s share of all promotional spending is what is meant by “share of voice.”
To see how this method works, look at the three leading U.S. auto manufacturers in Exhibit 8-9, GM, Ford, and DaimlerChrysler. The domestic market, based on sales of the big three, was about $290 billion. DaimlerChrysler, with almost $80 billion in sales, had roughly 27.6 percent of U.S. auto company sales. What was advertising share of voice? We can see that DaimlerChrysler spent nearly $1.9 billion on advertising, which was only about 24 percent of U.S. automaker expenditures. To grow its market share, a larger share of voice may have been required.
An IMC focus helps to remind us that advertising is just one component of IMC, and for some marketers, not the most important one. The top national packaged-goods marketers spend 25 to 30 percent of their marketing budgets on consumer and trade promotion rather than consumer advertising.41 That’s how they get more shelf space in the store. And in certain packaged-goods categories, in-store trade promotions may generate 25 percent of a brand’s short-term volume, while advertising may be responsible for only 5 percent.42
*What is used by many large national marketers in the United States and treats IMC as a marketing tool for generating sales?
objective/task method, also known as the budget buildup method
*define objective/task method (also known as budget-buildup method)
A method of determining advertising allocations, that defines objectives and how advertising is to be used to accomplish them.
*What are the three steps of the objective/task method?
1. defining the objectives
2. determining strategy
3. estimating the cost.
-After setting specific, quantitative communication objectives, the company develops programs to attain them. If the objective is to increase awareness of Mountain Dew Code Red by 40 percent, PepsiCo determines which campaign approach will work best, how often messages must run, and which media to use. The estimated cost of the program becomes the basis for the budget. Of course, the company’s financial position is always a consideration. If the cost is too high, objectives may have to be scaled back. If results are better or worse than anticipated after the campaign runs, the next budget may need revision.
The task method forces companies to think in terms of accomplishing goals. Its effectiveness is most apparent when campaign results can be readily measured. The task method is adaptable to changing market conditions and can be easily revised.
However, it is often difficult to determine in advance the amount of money needed to reach a specific goal. Techniques for measuring campaign effectiveness still have many weaknesses.
*empirical research method:
A method of allocating funds for advertising that uses experimentation to determine the best level of advertising expenditure. By running a series of tests in different markets with different budgets, companies determine the most efficient level of expenditure.
–computers can generate quantitative mathematical models for budgeting and allocating promotional dollars. Many sophisticated techniques facilitate marketing planning, budget allocation, new product introductions, and media and promotion analysis. However, most are not easily understood by line executives, and all rely on data that may be unavailable or estimated. These methods require very sophisticated users and, for the most part, are still too expensive for the average small business.
Unfortunately, all these methods rely on one of two fallacies:
The first is that IMC is a result of sales. Marketers know this is not true, yet they continue to use the percentage of sales method.
The second fallacy is that IMC creates sales. In certain circumstances (where direct-response messages are used), advertising closes the sale.
But a campaign’s real role is to:
reinforce current customers, locate new prospects, position the product competitively, build brand equity, and stimulate demand. It may even stimulate inquiries and product trial and, on the local level, build retail traffic.
But the principal job of IMC is to influence consumers by informing, persuading, and reminding. IMC affects sales, but it is just one of many influences on consumers. Brand managers must keep this in mind when preparing their ___ and ____
plans and budgets.