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Integrated Marketing Communications

Lecture 4: Establishing objectives and budgeting for IMC campaigns
 INTEGRATED
MARKETING
COMMUNICATION
FRAMEWORK
 Chapter 4
Establishing objectives
and budgeting for IMC
campaigns

3
Learning objectives

Understand Know Relate

How advertising how to set importance of
influences achievable IMC budgeting
investment and marketing and the practical
brand equity objectives, and considerations
how this is that guide
influenced by the budgeting
Various functions hierarchy-of-
that advertising effects model
performs and the
advertising
management
process
Content

Advertising influences investment

and brand equity

IMC budgeting
 Advertising
• One of the most frequently used
marketing tools
• Characterised as impersonal and
one-way communication
• Paid for by the sponsor
• Predominantly used to build brand
awareness
• Advertising consumes a major
proportion of marketing budgets.
Ad investment
• Advertising is not just a current
expense, but an investment in long-
term success.
• Consistent investment spending is the
key factor underlying successful
advertising.
• Stopping or reducing advertising can
cause a brand to lose some of its
equity and market share.
Putting advertising in perspective

Profit = Revenue – Expenses

Revenue = Price x Volume

Volume = Trial + Repeat

Putting advertising in perspective (cont.)

Arguments for investing Arguments for reducing

in advertising advertising expenditure

• Investment in advertising • Decreasing advertising

requires that incremental expenses will increase
revenue exceeds profits, if all other
advertising expense. expenses are held
constant.
Which approach is more beneficial? Elasticity
Appropriate strategy considering elasticity

• Maintain status quo • Spend more on

• Most suitable when advertising
consumers have well- Neither • Most suitable for
established price- More cosmetics, designer
preferences elastic nor advertising- labels, home
furnishing
advertising elastic
-elastic

Both price-
More price- and
• Price discounting
elastic advertising-
• Increase advertising
and/or discount prices
• Suitable when elastic • Suitable for: breakfast
branding switching is
cereals, cars,
high, consumer goods
household appliances
An investment in brand equity
• Marketing’s objective is to enhance the equity in
a firm’s brand.
• ‘Strong advertising’ refers to advertising that is
different, unique, clever and memorable.
• Not all advertising builds equity.
3. Marketing communication functions and process

Informing

Persuading

Reminding

Adding value

Assisting other company efforts

 Details of the Functions
Informing Persuading
• Facilitates the introduction of new brands. • Convinces customers to try advertised
products and services.
• Educates consumers about the features and
benefits of existing brands. • Influences primary demand (i.e. demand
for an entire product category).
• Facilitates the creation of positive brand • Builds secondary demand (i.e. the demand
images. for a specific company’s brand).
• Increases the demand for existing brands.
• Teaches consumers new uses for existing
brands
(usage expansion advertising).
 Details of the Functions

Reminding Adding value

• Keeps a company’s brand fresh in • Companies can add value to their

the consumer’s memory. products through:
• Can encourage brand switching by • product innovation
reminding consumers that the brand • improving product quality
is available and that it possesses
favourable attributes and benefits. • altering consumers’ perceptions.
• Advertising adds value to brands by
influencing consumers’ perceptions.
 Details of the Functions

Assisting other company efforts

• Advertising is just one element of marketing

communication.
• Sometimes advertising facilitates other company
efforts in the marketing communications process
(e.g. lends credibility to salespeople’s claims).
Managing the marketing communication process
 3. Setting marketing communication
objectives

An expression of Guide the budgeting,

Provide standards
marketing message and media
against which results
management aspects of a brand’s
can be measured
consensus advertising strategy
Moving consumers from one goal to the next
 Setting objectives
Influence consumers’
Make consumers
expectations about a
aware of a new
brand’s attributes
brand
and benefits

Encourage
consumers to try the
brand
 Brand loyalty
• Highest tier of the hierarchy-of-effects model
• No guarantee that consumers will move to this level
• Create a preference for the brand; reduce a consumer‘s brand
switching tendency
• Generating consumer loyalty requires:
• providing a brand that satisfies consumers’ needs
• continuous advertising to reinforce consumers’ brand-related beliefs and
attitudes.
Setting achievable advertising objectives

Include a precise
Be quantitative Specify the
statement of who,
and measurable amount of change
what and when

Be internally Be clear and put it

Be realistic
consistent in writing
 Advertising objective
(the traditional view)
• The traditional view rejects the use
of sales as a suitable advertising
objective.
• Sales volume is the consequence of a
host of factors
in addition to advertising.
• The effect of advertising is delayed.
• Sales cannot be accurately assessed.
Advertising objective
(an alternative approach)
• An alternative view (antithesis)
asserts:
• advertising’s purpose is to generate
sales, or gain market share
• sales measures are ‘vaguely right’.
• The goal of advertising is not solely
to generate awareness, influence
expectations, or enhance
attributes, but rather to generate
sales.
 Advertising objective
(a more recent approach)

• A more recent view focuses Sales

on accountability. increase

Enhance Market
• Measurables include attitudes share
the traditional and
alternative approaches. Influence
ROI
expectations

Awareness
4. Budgeting for marketing communications

• The optimal level of any investment is the level that

maximises profits (MR = MC).
• Advertisers should continue to increase their advertising
investment as long as it is profitable to do so.

MC MR
= (Change in total cost) = (Change in total revenue)
(Change in quantity) (Change in quantity)

= DTC/Q = DTR/Q
Factors when establishing an advertising
budget

Competitor’s
advertising
e activity
c tiv av Fun
je ail ds
ob ab
le
Ad
 Practical budgeting methods

Percentage-of-sales budgeting
• A company sets a brand’s advertising budget by establishing the
budget as a fixed percentage of past or anticipated sales volume.
• This method has been criticised as illogical, as it reverses the
relationship.
• The true is relationship is that sales are a function of advertising.
Sales = f (Advertising) [true relationship]
Advertising = f (Sales) [percent of sales reverses logic]
 Practical budgeting methods
Competitive parity method
• This method sets the ad budget by basically following what
competitors are doing.
• Armed with knowledge of its competitors’ budget, it may choose to
match or exceed that budget.
 Practical budgeting methods
Objective-and-task method
• This is the most defendable budgeting method. Its sequential
procedures are:
• establish marketing objectives
• assess communication objectives
• determine advertising’s role
• establish specific advertising goals.
 Practical budgeting methods
Affordability method
• The affordability method is used by only the most unsophisticated
and marginal firms.
• Only the funds left after everything else is budgeted for are used for
advertising.
• Affordability and competitive considerations influence the budgeting
decisions of all companies, but not to the same extent.
5. Legal and regulatory issues in advertising management
• The regulatory environment is premised on protecting
consumers from unscrupulous practices.
• Competition and Consumer Act 2010. The Act deals
with:
Misleading
Misuse of
Resale price and
Price fixing market
maintenance deceptive
power
conduct

Primary and Anti-

Exclusive
secondary competitive
dealing
boycotts behaviour
 Homework
Thống kê các luật quảng cáo, truyền thông marketing tại Việt Nam
 IMC Planning Model
Review of marketing plan
Analysis of promotional program situation and the communication process
Budget determination
Develop integrated marketing communications programs
Direct Digital/Internet Sales
Advertising PR/publicity Personal selling
marketing marketing promotion

Advertising Direct- Internet Sales PR/publicity Personal-selling

marketing marketing promotion objectives objectives
objectives objectives objectives objectives

Advertising Direct- Internet Sales PR/publicity Personal-selling

marketing marketing promotion strategy strategy
strategy strategy strategy strategy

Direct-
Advertising Internet Sales promotion PR/publicity
marketing Sales message
message & message & message & message &
message & strategy and
media strategy media strategy media strategy media strategy
media strategy sales tactics
& tactics & tactics & tactics & tactics
& tactics

Integrate and implement marketing communications strategies

Monitor, evaluate, and control IMC Program