Advertising objectives &

budget allocation

Advertising objectives

1.
2.
3.
4.

Depends on overall marketing plan

Specifies what is to be accomplished & where the
advertising fits in.
Influenced by situation analysis like
The target market segment & the target audience
The brands main attributes & benefits
The market share of the company's & competing
brands. Their positioning, strategies & other relevant
information
Some ideas on how the companys brand should be
positioned & what specific behavioral response is
desired, such as brand trail, repeat purchase,
increased usage rate, etc.
Sales & communication are two objectives

Sales as an advertising objective

1.
2.
3.
4.
5.
6.

Sales are a convenient, simple, & attractive advertising

objective
It may not be operational in many cases because
Advertising is just one factor
Measuring the contribution of advertising is difficult
Time lag between audience exposure to an ad & when
that ad may lead to an actual sale
Other factors may have significant influence on sales
Ads may be successful in building interest & favorable
brand attitudes
It offers little guidance to creative & media people

Factors influencing sales

distribution
Packaging

Price

Ad &
promotion

Product
quality

SALES

Personal
selling

Economy

Technology

Competition
Consumer
Tastes

Communication objectives
5%
Repurchase

10% trail

20% preference

40% liking

60% knowledge

80% awareness

1.
2.
3.
4.

If the brand objective is to raise sales by 12%,

the promotion manager will have decide in
terms of some message that will be used to
address the target audience to achieve this
Some possible objectives may be
Increase the percentage of target consumers
who associate specific features or benefits with
companys brand
Increase number of target consumers who
prefer companys brand rather than competing
brands.
Increasing companys brand usage rate among
existing consumers
Encouraging companys brand trail among
non-users

Behavioral objectives for five target groups

Trial objectives

New
category
users

Brand trail

yes

Category trail

yes

Brand retrial

Other
brand
users

Other
brand
switchers

yes

yes

yes

yes

Favorable
brand
switchers

Brand
loyals

Repeat purchase
objectives
Maintain repeat
purchase rate
Increase repeat
purchase rate

yes
yes

yes

yes

Buy more per

occasion

yes

yes

Accelerate
purchase

yes

yes

DAGMAR approach
Russell H Colley prepared a report for the
association of national advertisers titled
Defining Advertising Goals for Measured
Advertising Results.
According to this model, communication
objectives are the logical basis for setting
advertising objectives & goals against
which results should be measured.

 In Colleys words Advertisings job,

purely & simply, is to communicate to a
defined audience information & a frame of
mind that stimulates action. Advertising
succeeds or fails depending on how well it
communicates the desired information &
attitudes to the right people at the right
time & at the right cost.
It could clarify what constitutes a good
advertisement.

 Colley proposed that communications

1.
2.
3.
4.

objectives be based on a hierarchical

model with the following stages
Awareness
Comprehension
Conviction
Action

 Objectives should have the following

1.
2.
3.
4.

features
Stated in terms of concrete &
measurable communication tasks
Specify a target audience
Indicate a benchmark or standard
starting point & the degree of change
sought, &
Specify a time period for accomplishing
the objective or objectives

Criticism of DAGMAR
Problem with response hierarchy
Sales as the advertising goal
Practicality & costs
Inhibits creativity

Budget allocation
Kelloggs north American president,
Thomas Knowlton, cuts in advertising &
promotion spending will be a short time
strategy
We cant afford advertising that isnt
working. We are going to be more
demanding with our brands & only proven
ad campaigns will get full funding.

 Research has shown that

1. Increase in market share are more closely
2.
3.
4.
5.
6.

related to increase in marketing budget than to

reduction in prices
Additional advertising normally increases sales
but, at some point, the rate of return declines.
Sales response to advertising may build
overtime, but it is not durable, & a consistent
investment is important.
There are minimum levels of ad expenditure
below which advertising expenditures have no
effect on sales.
There will be some sales even if the marketer
does not advertise
Culture & competition impose saturation limits
& beyond this no amount of advertising can
increase sales.

Two approaches to budgeting

Top-down approach
1. Top mgt. sets the
spending limit
2. Advertising budget set
to stay within allocation
limits

Build-up approach
1. .Ad objectives are set
2. Activities necessary to
achieve objectives are
planned
3. Costs are ascertained
4. Total budget is approved

Top down approach

The budgetary amount is decided by the top
management & passed on to the lower levels
No real theoretical base
Not linked to the objectives & the strategies
Includes Affordable method, Arbitrary allocation,
percentage of sales, competitive parity & return
on investment method

Build-up approach
Takes into account objectives of
advertising
Budget is allocated on the basis of what is
essential for achieving the goals
It includes objective & task method,
payout planning, & quantitative models

The affordable method

Also called all-you-can-afford

Advertising gets the last place in the list of
expenditures
No consideration to what is expected
Common among small & high-tech firms
Merits
1. Simple
2. Budget does not go beyond the ability of the
firm
3. Realistic


1.
2.

Limitations
Chances of under spending is more
If the product is good it will sell on its
own has little relevance
3. Not based on sound decision making
principles
4. There may be budget cuts at a wrong
time

Arbitrary allocation method

No theoretical base
Management spends what is felt to be
necessary

Percentage of sales method

Most commonly used by large & medium

sized firms
A fixed percentage of last years or next
years projected sales or average sales for
the last few years is taken as the budget
A fixed amount of the unit product cost is
taken as the advertising expense
Percentage figure is often the industry
standard

 Merits
1. Safe method as ad spending remains within
2.

1.
2.
3.
4.
5.

limits
Easy to arrive at budget
Limitations
It considers sales as the cause rather than an
end
It ignores the possibility that sales decline
because of little advertising
Advertising cannot be used as a tool of
competition
Possibility of overspending & under spending
Cannot be applied in the introductory stage

Competitive parity method

1.
2.

1.

Basing budget allocation on competitors expenditure

Merits
Collective wisdom
Minimizes the possibility of promotional wars
Limitations
Ignores the fact that ad budget is assigned to achieve
specific objectives
2. Ignores the contribution of media & creative executions
3. Promotional wars do arise
4. Information on competitive advertising will be available
only after the money is spent

Objective & task method

It involves three steps
1. Defining the advertising communications

objectives to be accomplished
2. Deciding specific strategies & tasks necessary
to achieve them
3. Estimating the costs involved in putting these
strategies & tasks in operation
Difficult to determine the tasks & costs
associated with each
More realistic & best suited in introductory
stage

Payout planning
Advertising is considered as an
investment & not an expenditure
It can be used in conjunction with other
budgeting methods
Limitation is that it cannot account for all
uncontrollable factors

Quantitative models
Mathematical & statistical models
It requires experimentation & formal
analysis
It requires the use of computers

Experimental approach
Experiments are used to decide the
budget
Limitation is the expense & time involved
Advertiser cannot control the
environmental variables

Factors affecting advertising budget

Market size & potential

Market share goals
Product life cycle stage
Intensity of competition
Advertising frequency
Product differentiation
Campaign objectives
Availability of funds
Type of product
Media plan