Approaches to Setting of Advertising Advertising Objectives The approaches to setting objectives can be divided into the following broad categories: 1) Primary 2) ) #) Linear $ierarchical %odels&
and
selective
demand
PLC !dvertising
theory, approach, "piral,
6.1 Primary and Selective Demand Theory 'nder this approach the advertising objectives are set on the basis of the broader objective of creating demand for the prod(ct or service in the maret& The demand may be primary or selective& Primary demand theory: theory : The primary demand is first level demand, where the c(stomer hersel herselff is not awar aware e of the need of the prod(c prod(ctt or servic service e consci conscio(s o(sly ly&& The marete mareterr observes and st(dies the hidden desire*s) of the prospective c(stomer and develops the prod(ct or service for the c(stomer satisfaction& The c(stomer needs to be ed(cated and made aware of his hidden needs and comforts i&e& the concept selling is re+(ired& or s(ch a p(rpose the advertising objectives are: •
to create an awareness of the e-istence of prod(ct,
•
to inform the c(stomers abo(t the vario(s (ses and benefits,
•
to stim(late the c(stomers for (sing the prod(ct by giving trial offers,
•
to demonstrate the (sage of prod(ct or service&
The advertiser may not be very specific towards its own company or brand& This wo(ld be an !d for the generic demand& There may not be any competitor at this stage. this wo(ld a(tomatically be the !d plan for the ind(stry as s(ch& Selective demand theory: theory : /f the advertiser has an objective of creating selective demand, the advertisement sho(ld be of pers(asive nat(re& This ind of objective is set for the prod(cts that already have the primary demand& !nd the advertiser is interested in getting a response in terms of act(al sales and not merely a +(ery& or s(ch s(ch an action one needs to create strong desire for the brand in which the advertiser is dealing& or this p(rpose the distinctiveness of the specific brand or the prod(ct or service in terms of feat(res, +(ality, benefits etc& sho(ld be made visible& $ence the advertising objectives sho(ld be set in the manner that these needs are f(lfilled& 0-amples: The prod(cts lie /%, eady to 0at st(ff, Tata "y etc& capt(red their maret share thro(gh creating primary demand initially& They simply informed the c(stomer abo(t the e-istence of the prod(ct and aro(se interest in the minds of the people& Later, they thro(gh thro(gh pers(asio pers(asion n and infl(encin infl(encing g the mindset mindset and behavio(r behavio(ral al response, response, a secondar secondary y demand demand was created& The prospectiv prospective e cons(mer cons(mers s were sold the additional additional advantages, advantages,
feat(res, price tags associated with the val(e system etc& /nterest was transformed into strong desire and (ltimately a favo(rable favo(rable action&
6.2 PLC Approach: Approach : This approach disc(sses how the setting of advertising objectives becomes different with each stage of a prod(ct or service in its life cycle& /t is a well3nown fact that whatever is created or is bro(ght into e-istence passes thro(gh its life and (ltimately fades away& The same r(le applies to any prod(ct or service introd(ced in the maret& $owever, $owever, the passage of the different different phases is not the res(lt of time b(t the effect effect of cons(mer cons(mer4s 4s attit(des attit(des and perceptions& 0very 0very prod(c prod(ctt or servic service e passes passes thro(g thro(gh h a se+(en se+(ence: ce: /ntrod /ntrod(ct (ction ion *also *also termed termed as Pioneerin Pioneering g stage), stage), 5rowth 5rowth *Competitiv *Competitive e stage), stage), %at(rity %at(rity *"at(ra *"at(ration tion stage) stage) and 6ecline 6ecline *6ie)& !fter research and development, the prod(ct is la(nched in the maret& The prod(ct or service is said to be in the introd(ctory or pioneering stage& /t then grows, becomes pop(lar, adopted by a n(mber of c(stomers, becomes well nown, is appreciated in the maret for its feat(res, +(ality etc& /t is said to be in growth or competitive stage& The competition f(rther increases in mat(rity or sat(ration stage& The increase in profit starts declining b(t it is still getting slice in profit& The research and development of new and better prod(cts ca(ses the loss of interest in the prod(ct and profits to decline more& The prod(ct is said to be in decline or dying stage& This (ltimate fate of the prod(ct can be changed to a new pioneering stage by adding new prod(c prod(ctt feat(r feat(res, es, f(ncti f(nctiona onall (tilit (tility y and so on& This This leads leads to maret maret e-pans e-pansion ion&& "(ch "(ch improvements in the prod(cts or services, from time to time helps a company to s(stain its growth and the prod(ct life cycle contin(es& This concept is e-plained with the help of the diagram given below&
ig(re 7: Prod(ct Life Cycle
The same comm(nication objective does not wor, it changes, and it needs to be redefined with the changing needs, re+(irements, and changing maret scene& $ence the advertiser needs to redefine his comm(nication objective with the passage of each stage of prod(ct life cycle& /n the /ntrod(ction stage the advertiser needs to adopt the strategy of introd(cing ideas, creating awareness, providing nowledge and ed(cating cons(mers abo(t the prod(ct& The advertiser taes advantage advantage of the fact that there may be little or no competition at all in the maret d(ring this stage of prod(ct life cycle& $ere, informative advertising is (sed& /n the growth stage, the advertiser needs to b(ild the brand image& $e sho(ld be displaying the strengths of the brand& $e can develop liing and preferences and b(ild brand image by (sing company8s company8s name and goodwill goodwill also& also& The advertiser advertiser also needs to differentia differentiate te his prod(ct and brand from others, highlighting the distinctive feat(res and +(ality etc& over competitors8 prod(cts& Competitive and pers(asive advertising is (sed& /n the mat(rity stage, the advertiser needs to differentiate his prod(ct and brand. mae (se of larger variety of media to get a wider maret& $e attempts to retain patronage and co(nt (pon brand loyalty& loyalty& $e can get advantage advantage of his rep(tation& rep(tation& The advertise advertiserr may either choose to have little advertising or (se repeated retentive advertising& /n the decline stage of the prod(ct life cycle the mareter may decide to eep low at advertising and stop (sing other types of s(pportive promotional activities or he may j(st +(it +(it from from advert advertisi ising ng the prod(c prod(ct& t& The prod(c prod(ctt los loses es its mare marett share share to compet competiti itive ve prod(cts& The prod(ct may phase o(t completely (nless rej(venated prod(ct adds (p to its life& The advertiser needs to adopt repositioning strategies or innovative advertising and mae efforts to reach o(t to all prospective cons(mer gro(p*s)& This needs to be done to reinforce the new life of the prod(ct innovation or modification with a new form(la or a new name& or or e-ampl e-ample, e, "( "(rf3 rf396a 96aag ag !chhe !chhe $ain8 $ain8,, gave gave new life life to the s(rf s(rf deterg detergent ent powder powder&& !n ointment, 9oroline8 was given a new name 9oro pl(s8 with a new additional cosmetic val(e in place of the medicinal val(e and entered into a new life cycle&
6.3 Advertising Spiral Approach: !dvertising "piral is considered as an e-tended version of advertising stages of a prod(ct& ;(st as a prod(ct has a life cycle and there are vario(s stages, there are advertising stages of prod(cts too& These are pioneering stage, competitive stage and retentive stage& /n the pioneering stage of advertising, the advertising is termed as pioneering advertising and it is aimed at promoting new prod(cts in the maret& /t is devoted to the stim(lation of primary or generic demand& This e+(als the introd(ctory stage of PLC& /n the competitive stage of advertising, the advertising is termed as competitive advertising and and the aim of advert advertisi ising ng is to differ different entiat iate e the prod(c prod(ctt from from the other other compet competitiv itive e prod(cts in the maret& !t this stage, the selective demand is emphasi
/n the retentive stage of advertising, the advertising is termed as retentive advertising& The objective is to retain the maret share& The prod(ct reaches the most profitable stage at this point and retentive advertising aims at miling the brand& This parallels mat(rity and decline stage of PLC& There are two alternatives available to the advertiser at this stage:
1. To red(ce=c(rtail the advertising effort, withdraw and call off advertising grad(ally after reaping the ma-im(m profits from the prod(ct and allow the prod(ct to die& This happens when competition is intense and company is not willing to tae the prod(ct innovation any f(rther&
2. To (se pioneering advertising for new feat(res of the e-isting prod(ct or for line e-tensions of the prod(ct& This happens when the company modifies the e-isting prod(ct and adds a new f(nctional dimension to it or completely overha(ls the e-isting prod(ct to form a new (tility of the prod(ct& /n both cases a new=e-panded cycle begins with the following stages: newer pioneering, newer competitive and newer retentive& These are f(rther followed by: newest pioneering, newest competitive and newest retentive& !nd that is how the spiral goes on and on& ig(re >: Clic on the lins below to view the changes in depicting advertising spiral over the years& "o(rce: http:==www&reanimationlibrary&org=images=theadvertisingspiral&jpg
/t m(st be noted that in newer pioneering stage and beyond, the stages do not go along a circle, b(t e-pands in the form of a spiral, with long3term c(stomers perceiving the prod(ct in competitive or retentive stage and the new c(stomers perceiving it as in the pioneering stage&
ig(re ?: !dvertising "piral signifying 0-pansion The st(dy of advertising spiral helps the advertisers in setting the advertising objectives as he is able to now the advertising stage in which the prod(ct is and thereby decide on the type of advertising *pioneering, competitive or retentive) to be (sed& "ometimes he may decide to (se a j(dicio(s mi- of two types of advertising, for e-ample, pioneering and competitive, when the prod(ct is in competitive stage and he aims at targeting a new a(dience with pioneering advertising and c(rrent a(dience with competitive advertising&
6. Linear !ierarchical "odels: The models of linear hierarchy help in str(ct(ring the organi
c(stomer on the hierarchy mae it easier for the mareter or advertiser to design their program and set the objectives of the program effectively& /t is not necessary at all that the prospective b(yers follow a partic(lar se+(ential pattern only& They do change their mental state in a dynamic manner, j(mping right away to the final stage or j(st sipping one or two steps& The advertisers perceive the prospective c(stomer them to be on different stair3steps stages& !nd there are vario(s models g(iding the advertiser to lay down their own program of advertising on the basis of different inds of hierarchical presentations&
#al$e Addition %: Timeline
&vol$tion o' !ierarchy o' &''ects
!ierarchy o' &''ects "odel has (een relevant in advertising and mar)eting 'or over 1** years.
1+,+ @ or the first time hierarchy3of3personal selling effects fo(nd its place in literat(re& The hierarchy s(ggested by &lmo Le-is was: 9!ttention, /nterest, 6esire8 3 9!/68& 1,**@/n hierarchy3of3personal selling effects &lmo Le-is added another stage 9!ction8 at the end to incl(de closing of a sale by a salesman& The new hierarchy was: 9!ttention, /nterest, 6esire, !ction8 3 9!/6!8 b(t did not become very pop(lar& 1,11@ Arth$r . Sheldon added another dimension 9"atisfaction8 to the hierarchy& The hierarchy of selling process given by him was: 9!ttention, /nterest, 6esire, !ction, "atisfaction8 3 9!/6!"8& 1,2% @ &d-ard Strong adapted the concept of hierarchy3of3effects to advertising& The hierarchy propo(nded by him was: !wareness, /nterest, 6esire, !ction. which pop(larly became the acronym, 9!/6!8& 1,/ @ Al(ert rey was of the opinion that advertisers m(st (nderstand the mental steps that the cons(mers pass thro(gh before they act(ally p(rchase their prod(ct& $e s(ggested that the advertisers, while creating the advertisement, m(st eep in mind to tae the prospective c(stomers thro(gh the following stages: •
attract attention of prospective c(stomers to their advertisement,
•
hold the interest of the prospective c(stomers by highlighting the positive
aspects of the prod(cts in the advertisements, •
create acceptance, preference and demand for their products among the prospective customers.
1,%* @ Darrell L$c$s and Ste$art 0ritt gave a form(la for hierarchy3of3 advertising effects as: !ttention /nterest, 6esire, Conviction, and !ction in their introd(ctory te-t, 9!dvertising Psychology8& 1,61 @ This year is mared in history for widespread dissemination of information on how advertising wors& There came abo(t two important and independent p(blications&
1. 96efining !dvertising 5oals for %eas(red !dvertising es(lts *6!5%!)8, a boo by , which was, p(blishes by !ssociation of Aational !dvertisers& $ssell Colley
2. 9! %odel for Predictive %eas(rements of !dvertising 0ffectiveness8, a paper by o(ert. . Lavidge and ary A. Steiner, which was p(blished in a ;o(rnal of %areting& /n both the p(blications there was a shift of foc(s from 9(nderstanding the stages the cons(mers go thro(gh on being e-posed to an advertisement, namely, the hierarchy3 of3advertising effects8 to 9advertising research meas(rements of aspects lie brand awareness, brand feat(re awareness, brand preference, and intention to b(y specific brands8& Bhile earlier the emphasis was on describing the hierarchy, the emphasis in 1>1 shifted on measurement of how effective or otherwise has advertising been along this hierarchy& 1,,% @ Solomon D$)ta released a second edition of 96efining !dvertising 5oals for %eas(red !dvertising es(lts *6!5%!)8& This edition of 6!5%! however retained the concept of hierarchy3of3advertising effects on cons(mers and their meas(rement& 1,,, @ #atratsas and Am(ler reviewed the hierarchy3of3advertising effects model and came (p with the view that the hierarchy or the temporal se+(ence of advertising effects cannot be empirically s(pported& "o it can be said that altho(gh hierarchy3of3advertising effects model dates bac to over 1DD years in the advertising or mareting environment, b(t it still remains an int(itive and non3validated concept of how advertising wors&
"o(rce: Point of view: 6oes advertising ca(se a E$ierarchy of 0ffectsFG @ ;o(rnal of
!dvertising esearch, 1 Aovember 2DD1, Beilbacher, Billiam %&
i4 A5DA: !/6! is the acronym of !ttention, /nterest, 6esire, !ction& This is the simplest model and perhaps the first one of its ind, where an effort is made to describe the way advertising affects or infl(ences the prospective c(stomer& This is based on the principle of se+(ential process or stages of cons(mers8 action for p(rchase& This has been an adaptation of the form(lation: 4! hierarchy3of3personal3selling3effects4, *in 1HH) by 0lmo Lewis& The emphasis has been on (nderstanding the cons(mer4s response to the advertisement endeavor& /t is important for the advertisers to comprehend and predict the pattern of cons(mer4s reactions in order to set the objectives specifically and mae effective advertisements& !ttention: /t states that the advertisement sho(ld be so catchy and effective that it is able to grab the attention of the potential c(stomer& /f the advertiser or a mareter is able to sei
meaningf(l& This model primarily tals abo(t being p(shy and pers(asive, and does not emphasi
ii4 A5DAS: /n 111 yet another dimension of 4Permanent "atisfaction4 was added to the !/6! model by !rth(r & "heldon as 7th stage& 4"4 here stands for 4satisfaction4& $e stressed on the importance on repeat sales& $e opines that the b(yer, if satisfied, will definitely go for a repeat p(rchase& !nd the loyalty of e-isting c(stomers is important for maintaining or enhancing maret share& !lso, it is a necessary part of pers(asive and long3r(n3selling process&
iii4 5nnovation Adoption "odel: !nother model, /nnovation !doption %odel, was developed within the linear hierarchy in 1D& This came as another modification to !/6!& /t introd(ced the steps of !wareness in place of !ttention, retained /nterest at the same stage, and replaced 0val(ationin the se+(ence for 6esire& /n place of !ction, the additions are 4Trial of the prod(ct or service4, and 4!doption4& /n this model the emphasis is on the stages of eval(ation, trial and adoption& The advertisement m(st not only be able to generate awareness abo(t the prod(ct and brand, b(t m(st enable the c(stomer to relate his need to the prod(ct& !dvertising will be s(ccessf(l only when the c(stomer is able to eval(ate the prod(ct favorably& /f the potential c(stomer gets interested in the prod(ct, he is ind(ced to try the prod(ct& /n case the prod(ct satisfies him, he adopts it& "(ch trial and adoption sometimes b(ilds long3term relationships between company and cons(mers&
ig(re H: /nnovation3!doption %odel
iv4 !ierarchyo'&''ects "odel: This model s(ggests that the advertising objectives are based on the hierarchical effect of advertising on e-isting and potential c(stomers& !dvertising cannot bring in the immediate response of sales& /t is believed that the advertising wor follows a se+(ence from (nawareness to p(rchase& ! series of mental effects m(st occ(r along with the satisfaction at each step before one can proceed on to the ne-t step within the hierarchy& That is why this model is called 9$ierarchy of 0ffects %odel8& irstly, the lower level objectives are so(ght to be achieved& Ince the objectives of awareness nowledge and comprehension are f(lfilled one can foc(s on moving to higher3 level objectives& The lower level objectives relate to the dissemination of information to empower the c(stomer to enable her to decide abo(t her p(rchase by creating awareness and broaden the nowledge base& Bhereas the higher3level objectives offer to see desired
behavio(ral response s(ch as developing preference of the prod(ct over others, creating association with brand or prod(ct and finally a p(rchase is made& In 1961, a new model of hierarchy-of-effects was proposed by Robert J.Lavidge and Gary A. Steiner with emphasis on persuasion as an important aspect of all marketing communications. Besides considering the short-term recall value of advertising as a means of marketing communications, it recognied its long-term value too. !he model describes si" stages that a customer goes through before making a final purchase action for a product. !hese stages are# •
$wareness
•
%nowledge
•
&iking
•
'reference
•
(onviction, and
•
'urchase. )igure 9# *ierarchy-of-$dvertising +ffects
!he advertisers attempt in the above stages in a seuential order is therefore to make the prospective consumers aware about the very e"istence of the product in the market, make them know about the product features and benefits, make them develop a favourable attitude for the advertised brand, make them prefer their brand over others in the market by highlighting product differentiation, create a strong desire and conviction to buy the same product, and finally lead them in actually purchasing the product.
#al$e Addition 6: Activity
!ierarchyo'&''ects "odel (y Lavidge and Steiner7 1,61
%atch the statements given below with the si- steps in the hierarchy3of3effects model as
described by Lavidge and "teiner and arrange the job of the advertiser in enco(raging the c(stomers to go thro(gh these si- steps:
1& Jnowledge
a& To assist the c(stomer in ac+(iring the prod(ct&
2& P(rchase
b& To p rovide easy and +(ic means of information to the c(stomers thro(gh internet, channel members, prod(ct labeling, handling telephonic c(stomer +(eries, etc& so that they do not switch over to competitors prod(ct&
& !wareness
c& To convey the locations where there is live demonstration or display of the prod(ct s(ch as, at trade fairs, retail showrooms. where the c(stomers can see, feel, have a trial of the prod(ct that can infl(ence them in b(ying&
#& Conviction
d& To highlight prod(ct differentiation in terms of feat(res, (tility, ease of after sale service, g(arantee=warrantee, p(rchase=payment=repair=e-change=disposal, etc&
7& Liing
e& The challenging tas of maing the c(stomers remember the prod(ct after viewing the advertisement&
>& Preference
f& To mae the c(stomers fond of the prod(ct appeal and prod(ct form3colo(r=shape=si
*int# 1-b, -a, /-e, 0-c, -f, 6-d. (orrect seuence# /,1,,6,0,.
#al$e Addition /: Did 8o$ 9no-
Three Stages o' Cons$mer 0ehavio$r (y Lavidge ; Steiner7 1,61
The si- steps of awareness, nowledge, liing, preference, conviction and p(rchase have been gro(ped into three stages of cons(mer behavio(r, namely, cognitive, affective and conative according to Lavidge and "teiner& Cognitive relates to thining and therefore incl(des awareness and nowledge. affective relates to feeling and covers liing, preference and conviction. and conative relates to behavio(r and refers to the act of b(ying the prod(ct&
!ccording to these three stages, the advertisers tass are to mae t he prospective cons(mers thin, feel and act *p(rchase)&
The st(dy of hierarchy3of3effects model is not only (sef(l in advertising as it helps in setting of advertising objectives and their eval(ation later on. b(t is also (sef(l in choosing an advertising media, in p(blicity, sales promotion and personal selling& /t has far more implications than j(st on advertising& This maes its st(dy (sef(l to the advertiser and mareter& ig(re 1D: Clic on the lin below to view an image on $ierarchy of 0ffects %odel and its /mplications for Promotion mi-& "o(rce: http:==www&sba&pd-&ed(=fac(lty=tomg=%/%717=6ay?3%/%7173f2DD1v=imgDD7&gif
#al$e Addition +: Did 8o$ 9no-
Ae(roscience has opened a new chapter on how advertising wors by considering not only the rational component of the brain8s activity, b(t also the emotional component& Bhile the rational component has been considered active and has been researched e-tensively in giving reasons to believe how cons(mers decide to b(y, the emotional component has been significantly ignored& /t was fo(nd that emotional ads have greater lielihood of being remembered& 0-periments were cond(cted to find o(t the part of brain that responded to emotionally engaging *9affective8) and reason3engaging *9cognitive8) advertising stim(li& This led to a revol(tionary change in the advertising environment that s(ggested that there are two effects on viewing an advertisement @ cognitive and affective& The affective part is associated with decision3maing and social sensitivity and is therefore relevant to advertisers&
"o(rce: !rticle in (siness "trategy eview, 2DDD, ol(me 11 @ /ss(e , pp 1?3D, Titled: Erands on the rain: Ae(ro3/ss(es of !dvertisingF, by Tim !mbler, !ndreas /oannides and "teven ose& !bstacton :http:==onlinelibrary&wiley&com=doi=1D&1111=1#>?3H>1>&DD1##=abstract
#al$e Addition ,: Pa$se and Thin)
The
The fact that cons(mers process all information that they come across has been ignored by advertising& !ccording to the Cognitive Psychologists, advertising is not merely a stand3alone stim(l(s leading to a response, b(t is the aggregate of what the prospective cons(mers have learned abo(t the brand (ntil being e-posed to the c(rrent advertisement&
Th(s, the challenge for the advertisers is not j(st to come (p with a stim(lating advertisement, b(t to create an environment wherein the cons(mer8s brain (nlearn the past information and b(ild a new end(ring message that can be accepted by the prospective c(stomers and creates a positive image of the brand& Thin abo(t it and disc(ss it with yo(r peers&
"o(rce: B/LL/!% %& B0/L!C$0 *2DD)& $ow !dvertising !ffects Cons(mers& ;o(rnal of !dvertising esearch, #, pp 2D32#& Lin: http:==jo(rnals&cambridge&org=abstractK"DD21H#DDD2#1
#4. DA"A Approach Be have by now read many approaches to setting of advertising objectives& 6!5%! approach to setting advertising objectives was based on the premise that advertising effectiveness m(st be meas(red& /t clearly specified that to be effective, advertising m(st be based on well defined, clear, (nambig(o(s, and realistic objectives attainable in a given time frame& $ence, the emphasis on was objectives& 6!5%! !pproach is the pioneer wor of (ssell $& Colley, who in 1>1 came (p with a boo named as 6efining !dvertising 5oals for %eas(red !dvertising es(lts *6!5%!) (nder the sponsorship of !ssociation of Aational !dvertisers .The boo was introd(ced in maret as 6!5%! approach to advertising& /t encompasses a framewor for setting advertising goals and meas(ring the effectiveness of an ad campaign& !ccording to 6!5%! approach, while defining advertising goals, it m(st be remembered that an advertising objective is basically a specific comm(nication tas, directed towards a defined gro(p of a(dience, in a specified time period& /t is important to be noted that it basically involves a comm(nication tas instead of a mareting tas& %ajor emphasis of the 6!5%! approach is the proposition that comm(nication effects are the most important basis for advertising goals and objectives that can meas(re the s(ccess or fail(re of an advertising campaign& The rationale for setting 9Comm(nication based objectives8 is that the aim of advertising is to comm(nicate information that helps create a frame of mind that stim(lates action& The s(ccess or fail(re of an ad campaign depends on the manner in which the desired information is comm(nicated to the target a(dience at right time and at the right cost& !ccording to (ssell Colley, EThe main objective of advertising is to comm(nicate with the defined a(dience the necessary information to the right people, at the right time, and at the right cost&F
#al$e Addition 1*: #ideo
Characteristics o' Advertising
Play the video on advertising objectives and list the feat(res of good objectives& $ow far is setting the objectives in a planned manner important for a mareter=advertiserG 6isc(ss
"o(rce: http:==www&yo(t(be&com=watchGv<o#MMrBo5o
Stages=!ierarchy as per DA"A approach
!s stated above, an advertising goal involves a 9Comm(nication Tas8& /t is meas(rable and specific& Colley proposed that comm(nication tas is based on a specific model of comm(nication, which is hierarchical in nat(re and consists of following fo(r stages:
1. !wareness 2. Comprehension 3. Conviction 4. !ction The initial comm(nication tas is to mae cons(mers aware of the e-istence of brand& The objective at this stage is to increase brand awareness among the cons(mers in order to facilitate (pward movement in the hierarchy&
ig(re 11: $ierarchy as per 6!5%! approach
#al$e Addition 11: &>ample
Advertising ?(@ective o' Creating A-areness
The e-isting awareness among the prospective c(stomers may be high or low& !lso, the involvement of the prospective c(stomers in the prod(ct may be high or low& The involvement is said to be high when the amo(nt involved in ac+(iring the prod(ct=service is h(ge, the p(rchase decision is less often and irreversible, and the cost of maing an incorrect decision is h(ge. e-ample a(tomobiles, real estate& The involvement is low when the amo(nt involved in ac+(iring the prod(ct=service is less, the p(rchase decision is fre+(ent, and decision maing does not involve m(ch ris in terms of a wrong decision. e-ample mil, bread& Creating awareness is a challenging tas for the advertiser and he will have to set the objectives eeping in mind the level of awareness and the level of involvement& There may be # possibilities:
1. $igh !wareness3$igh /nvolvement: The aim of advertising m(st be to the present level of awareness&sustain
2. $igh !wareness3Low /nvolvement: The aim of advertising m(st be to refine the present level of awareness&
3. Low !wareness3$igh /nvolvement: The aim of advertising m(st be to build awareness rapidly&
4. Low !wareness3Low /nvolvement: The aim of advertising m(st be to create association between awareness abo(t the prod(ct and the need for the prod(ct& Clic on the lin below to view an image of an awareness grid&
"o(rce:http: ==www&fillassociates&co&(=site=assets=images=briefingKsheetKimages=m aretingKcomm(nicationsK=informationKprocessing=!warenessK5rid&jpg
!fter the prospective c(stomers are s(fficiently aware, the ne-t stage is to mae them comprehend or (nderstand the prod(ct& The objective of advertising at this stage is to mae them (nderstand the benefits, f(nctions and (tility of the prod(ct advertised& The advertisers can later decide on the type of appeal for advertising the prod(ct, lie, rational, emotional, price appeal or any other type of appeal& or e-ample, The ad of 5anga mineral water has been created (sing rational appeal that foc(ses on the feat(re *p(rity) of the prod(ct *mineral water) of a specific brand *5anga). maing the c(stomers (nderstand that the mineral water&
Ince the c(stomers (nderstand the prod(ct and are able to comprehend what the brand has to offer, the ne-t step for the advertiser is to pers(ade them to p(rchase the prod(ct& The objective of advertising at this stage is to create a strong conviction among the prospective c(stomers to e-ec(te a b(ying behavio(r& This may be achieved by maing them develop a strong preference for the brand and a favo(rable mental disposition or attit(de for the prod(ct&
#al$e Addition 12: #ideo
Advertising ?(@ective o' Creating Conviction
The ad of $ero $onda @ Pleas(re created awareness abo(t the e-istence of a new prod(ct, highlighted specific feat(res for creating comprehension and incl(ded the jingle 9Bhy sho(ld boys have all the f(n8 to create strong conviction among the females to b(y the prod(ct&
"o(rce: http:==www&yo(t(be&com=watchGv$K76#cPmCD http:==www&yo(t(be&com=watchGvK$>j!>1M%
The last stage is to get the c(stomer b(y the prod(ct& The objective of advertising at this stage is to p(sh the prospective c(stomer to act: the act of act(ally b(ying or taing a trial of the prod(ct that finally closes on prod(ct p(rchase& This step is very important, as the (ltimate objective of advertising is to create sale even if the emphasis is merely on comm(nicating the message effectively&
#al$e Addition 13: &>ample
Advertising ?(@ective o' Ca$sing an Action
1& 'se of toll free n(mbers by mobile service providers to b(y additional "/% card with a n(mber similar to the one being (sed, or for availing some additional facility for their c(rrent n(mber,
2& 6irect mail sent by the company for some special offer or a clearance sale, & edemption co(pons with the newspaper advertisement that maes the c(stomer to p(rchase the prod(ct in order to get some benefit&
"etting of objectives according to 6!5%! approach not only maes the objectives serve as benchmars for meas(ring the effectiveness of advertising, b(t also helps the mareter and advertiser decide on the following: •
!dvertising b(dget,
•
!dvertising message and appeal,
•
6esign of ad copy,
•
Choice of advertising media, and
•
re+(ency of advertisement e-pos(re&
!ppropriate decisions with respect to the above dimensions lead to better client3agency relationships on one hand and create brand loyalty among c(stomers on the other hand&
Characteristics o' ?(@ectives as per DA"A approach Colley provided a checlist of 72 comm(nication tass which advertising might be e-pected to perform in leading to (ltimate objective of sale& !n important element covered in 6!5%! approach is a Concrete, %eas(rable Tas& (ssell Colley arg(ed that the comm(nication tas specified in the objective m(st be specific and concrete to g(ide the media and creative specialists in the right direction&
The characteristics of advertising objectives according to 6!5%! approach are that: •
They m(st be defined specifically and doc(mented,
•
They m(st be formed eeping in mind specific target a(dience,
•
They m(st be attained in a time bo(nd frame,
•
They m(st be +(antified,
•
They m(st be meas(rable for eval(ating the effectiveness of advertising&
6!5%! approach led to an improvement over the earlier approaches of setting of advertising objectives by not only foc(sing on comm(nication tass at different stages, b(t also on meas(rement of s(ch tass& Challenges to DA"A APP?AC! Tho(gh 6!5%! approach has made significant contrib(tions towards the setting of advertising objectives, yet there are certain areas which have been critici
1. esponse $ierarchy: Ine of the arg(ments against 6!5%! approach is its association with basic response hierarchy model& Cons(mers may not always follow the se+(ence of comm(nication effects as s(ggested (nder 6!5%!& or e-ample, in case of low involvement prod(cts, action may precede attit(de formation& $ence there can be other alternative response models that have been completely ignored by this approach&
2. "ales as objective: !n important arg(ment against 6!5%! approach is the neglect sales as objective completely& 6!5%! approach emphasi
3. 6iffic(lt to meas(re comm(nication effect: 6!5%! approach s(ggests setting of well3defined and meas(rable advertising objectives and considers comm(nication tas as the basic aim of advertising& "etting the comm(nication objective in a meas(rable form is diffic(lt& Comm(nication effect is diffic(lt to meas(re and is therefore diffic(lt to be spelt o(t clearly while it is set& %oreover, comm(nication as an objective may be effective in the short r(n d(e to its high recall val(e, in the long r(n it becomes all the more diffic(lt to meas(re as the cons(mers might forget it&
4. Practicality and Cost aspect: !nother objection raised is abo(t the set of diffic(lties involved in the implementation of 6!5%! approach& Colley s(ggested determining the n(mber of prospective cons(mers in the hierarchy of comm(nication effects and thereby recommended setting objectives s(ited to s(ch proportion of target a(dience at each level of hierarchy& This is not an easy tas and calls for e-tensive maret research that may not be feasible and affordable by small firms&
5. !dvertising is not the sole ca(se for sale: %any factors besides the advertising affect the level of sales, for e-ample, prod(ct, price, distrib(tion and other promotion related factors&
#al$e Addition 1: Did 8o$ 9no-
DA"A55 Approach
6agmar // was also developed by (ssell Colley& Bhile all the characteristics of the earlier 6!5%! approach for setting advertising objectives were retained in this approach, the difference lies in the hierarchy s(ggested by Colley in both the approaches& The first approach s(ggested a fo(r step comm(nication hierarchy model that was critici
5ntegrated "ar)eting Comm$nications 5"C4 /ntegrated %areting Comm(nications is an e-tension of the hierarchy3of3effects model& /t is based on the premise that all forms of mareting comm(nication m(st carry the same message to the cons(mer& The comm(nication activity sho(ld have one (nified message and selling appeal !ll the mareting mi- variables s(ch as prod(ct, price, physical distrib(tion and promotion involving tools s(ch as p(blicity or p(blic relations, personal selling, interactive or internet mareting, sales promotion and direct mareting m(st aim at conveying the same selling idea as that of advertising to the target a(dience&
ig(re 12: Tools of /ntegrated %areting Comm(nications
#al$e Addition 1%: Activity
Comparing A5DA7 !ierarchy o' &''ects and DA"A "odels
Clic on the lin below to view an image of comparison of !/6!, $ierarchy of 0ffects and 6!5%! approaches to setting of advertising objectives&
!naly
6o yo( find them any different with respect to their approaches in the pre3 cognitive, cognitive, affective and conative stagesG /f yes, disc(ss yo(r opinion with yo(r peers&
"o(rce: http:==ars&els3cdn&com=content=image=13s2&D3"D1#H2>D#DD1DHD3 gr1&jpg
#al$e Addition 16: Activity
Comparing A5DA7 Colley and Lavidge ; Steiner "odels
Clic on the lin below and st(dy the fig(re caref(lly& /f yo( were the mareting head of a company who has been ased to list a few advertising objectives for some forthcoming period on the basis of any of the hierarchical approach described in the fig(re, what problems will yo( face in setting of advertising objectives& %ae a list of s(ch obstacles& "o(rce for viewing the fig(re: http:==open&jor(m&ac&(=-ml(i=bitstream=handle=12#7>?H=>7D=/tems=2#K1KDD?i&jpg
Clic on the lin: http:==open&jor(m&ac&(=-ml(i=bitstream=handle=12#7>?H=>7D=/tems=2#K1Ksection1>& html to read abo(t the criticism of hierarchical orders and compare yo(r answer with it to say whether the criticism is j(stified or not&
How it works (Example): For eamp!e, !et"s assume that #ompan$ %&' (ants to measure the effectiveness of the mar)eting campaign for its !atest *idget. +he compan$ starts testing a commercia! that is designed to move potentia! customers through the four stages of the purchase process 1- n the a(areness stage, #ompan$ %&' ma)es the consumer a(are that there is a ne( *idget on the mar)et. 2- n the comprehension stage, #ompan$ %&' sho(s consumers the ne( *idget"s features and reminds the consumer of #ompan$ %&'"s !ogo and brand name. 3- n the conviction stage, #ompan$ %&' he!ps the consumer emotiona!!$ attach to the ne( *idget so that the consumer estab!ishes an emotiona! preference for the #ompan$ %&' brand. 4- n the action stage, #ompan$ %&' gets the sa!e. #ompan$ %&' then measures the success of the mar)eting effort using /A0A. +he compan$ gauges ho( far the customer proceeded through the four stages of the purchase process, and ho( man$ sa!es (ere generated. f the customers get stuc) in one of the first three stages and the compan$ doesn"t meet sa!es goa!s, the compan$ )no(s it needs to change its ad campaign.
Why it Matters: +he DAGMAR method is a !ongestab!ished method of creating effective advertising. +he idea behind the method is to communicate rather than se!!. easons for Setting Advertising Objectives The advertising objectives define a clear path on which the mareter or advertiser has to move& Ince they now their c(rrent position and the targeted f(t(re position, they can plan accordingly and set the advertising objectives to reach their desired destination& The advertising objectives are set for a n(mber of p(rposes these serve& 1& /nitial step in planning an !d3campaign: "etting advertising objectives is the first step in the process of designing and creating an !dvertisement Program& These lay the framewor for the s(bse+(ent tass in the advertising plan& They help to identify the goals of the
advertisers e&g& increase in cons(mer awareness, change cons(mer8s beliefs or attit(des abo(t the prod(ct, infl(ences p(rchase intent, stim(late trial (se, switch cons(mers from other brands, increase in sales etc& These wor as: i) 5(idelines to advertisement b(dget: the b(dget allocation is decided on the basis of the objectives& The allocation of b(dget is more if the objective is to pers(ade for sales, give trial offer*s), or inform the target a(dience abo(t a new promising prod(ct and the b(dget is less if the objective is to retain the maret& ii) ase of selection of media: The decision of medi(m is also based on the advertising objective& iii) Criteria of designing of message: The objective only can be a g(ide light for the decision of the message& Pers(asive messages, informative messages, reminders or retentive messages all serve different p(rposes only& The slogan writing, the fre+(ency of appearance of the advertisement, and the time slot of the advertisement all are decided on the basis of the pre defined advertising objectives& 2. +he$ provide a standard or benchmar) for eva!uation n the modern thin)ing ever$one be!ieves that action must re!ate to fina! resu!t. And the same is true for advertising. +he advertisements in an$ form or through an$ mediums must bear fruits i.e. give positive resu!ts. One needs to eva!uate the resu!ts in comparison to costs as (e!! as in terms achieving ua!itative and uantitative t argets. +he pre determined objectives provide that frame(or) for eva!uation.
& Comm(nication lin: The defined advertising objectives help the advertiser i&e& the comm(nicator to identify the ind of interest that needs to be created among b(yers to get the desired res(lts& The information of interest sho(ld be capable of attracting attention and interpreted favorably in the perspective of the need, desire, stat(s val(e, motives etc& The setting of advertising objectives establishes a meaningf(l lin between the advertiser and cons(mer& #& Coordinating tool: The predefined advertising objectives wor as the coordinator among vario(s other f(nctions of the organi
past e-perience, the needs and desires of individ(als, the stat(s of a person, val(e system and other social and c(lt(ral factors& The perception of the target a(dience is very important to an advertiser as it leads to a response or action of b(ying or not b(ying a prod(ct& /t therefore becomes important for the advertisers and mareters to st(dy the vario(s factors that are liely to have a bearing on the perception formation& !nd the advertisements are designed s(itably to help people form desirable perceptions& They m(st convince the a(dience *cons(mers), infl(ence them and bring attit(dinal changes&
Factors inf!uencing Setting of Advertising Objectives ! n(mber of factors infl(ence the decision of setting the advertising objectives& They range from the overall company objectives to the (ltimate cons(mers8 psychological perceptions and between these encompasses the prod(ct characteristics, maret characteristics, financial characteristics and implications, e-tent of competitors8 advertising, distrib(tion strategy and so on& "ome of them are described below:
1. Consistency with overall company objectives @ The advertising objectives are the means to achieve the overall b(siness objectives that may be s(rvival, growth, attaining maret leadership thro(gh greater penetration, being a cost leader, driving competitors away, or meeting competition& They m(st be decided (pon after considering the broad company objectives&
2. Consistency with mareting objectives @ The advertising objective is derived from the overall mareting objective that in t(rn is derived from the company objective& Care m(st be taen while form(lating the advertising objectives that they do not conflict with the mareting objectives&
3. !ppropriate allocation of advertising b(dget @ 6ifferent types of advertising objectives wo(ld re+(ire committing different amo(nts of f(nds for its attainment& or e-ample, aiming to achieve h(ge awareness and ind(cing trial for a newly la(nched prod(ct might call for aggressive advertising that shall re+(ire lot of f(nds to be set3aside for the p(rpose& The mareters m(st ens(re the availability of f(nds before setting advertising objectives to mae them attainable&
4. !naly
#al$e Addition 2: &>ample
"ar)eting and Advertising ?(@ectives along PLC
"tage
%areting Ibjective
!dvertising Ibjective
/ntrod(ctory
Create prod(ct awareness& (ild prod(ct awareness among early adopters and dealers&
5rowth
%a-imi
(ild awareness and interest in mass maret&
%at(rity
%a-imi
"tress brand differences and benefits&
6ecline
ed(ce e-pendit(re and mil the brand&
ed(ce to level needed to retain hard3core loyal c(stomers&
"o(rce: http:==www&google&co&in=(rlG satNrctjN+NesrcsNso(rcewebNcd1NvedDCC#Oj!!N(rlhttp!2 2directory&(mm&ac&id2"lideKJ(liah2PPT 2%PKJotlerKH2JITC$!D&pptNei
1. Jeeping (p with the level of competition @ The e-isting level of competition has an impact on the setting of advertising objectives& The mareters m(st consider the level of competition, the intensity of competition, and the top players, mareting and advertising objectives& /f a potential competitor is a threat to the firm, then the firm8s advertising effort m(st at least match (p with the competitors advertising effort or else the firm will lose its potential c(stomers to the competing firm& $owever, if the mareting objective of the firm is to be a +(ality or cost leader in the maret or to attain near monopolistic position, then advertising objectives are set accordingly&
2. Cons(mer vs& /nd(strial prod(ct @ ! cons(mer prod(ct is p(rchased (ltimately to be cons(med by a final cons(mer& !n ind(strial prod(ct is p(rchased to facilitate f(rther prod(ction of goods and services& The marets and n(mber of b(yers for both cons(mer and ind(strial prod(cts vary& Bhile for cons(mer goods the maret is large
and geographically spread generally, the maret for ind(strial prod(ct is limited& This calls for different advertising objectives for both& To match the nat(re of maret for the cons(mer goods, the advertising objectives are ept broad and comprehensive& !dvertising becomes an important component of the overall promotion mi-& "imilarly, for ind(strial goods the advertising objectives are narrower and tend to s(pport the personal selling by salesmen&
3. $omogeneity or heterogeneity of maret @ /f the maret is large b(t homogeneo(s, advertising objectives to inform, pers(ade, remind and reinforce the target maret remain identical for the entire maret& $owever, if the maret is divided on the basis of demographic, behavio(ral or socio3c(lt(ral factors, then different advertising objectives have to be set for each maret segment&
4. $ierarchy3of3effects of advertising @ The advertising objectives follow a hierarchy in the form of a pyramid of awareness, nowledge, liing, preference, conviction and p(rchase& !s the firm advances (p along this pyramid, the n(mber of prospective c(stomers decreases& !dvertising objectives are set eeping in mind the c(rrent stage of the firm in the hierarchy of advertising objectives& /f the firm has already been s(ccessf(l in creating h(ge awareness for its prod(ct and the prospective c(stomers already now and lie the prod(ct, it m(st then aim at b(ilding preference and creating conviction to p(rchase& This can be done by stressing on prod(ct differences and benefits over the competitors8 prod(cts&
5. Ivercoming dissatisfaction or lac of tr(st @ Bhile generally advertising is aimed at b(ilding tr(st and goodwill for the firm, in times of adversity it may even aim at maintaining tr(st or overcoming lac of tr(st& or e-ample, in times of economic adversity when the investments of prospective c(stomers do not rise as per their e-pectation, financial companies lie /C/C/, L/C etc& may advertise to overcome dissatisfaction amongst the c(rrent clients and overcome lac of tr(st among the prospective clients by ass(ring them good ret(rns over long period of time&
#al$e Addition 3: &>ample
Advertisement ?vercoming Lac) o' Tr$st
Paly the video by clicing on the lin below to view an ad of Life /ns(rance Corporation *L/C) of /ndia& Bhat co(ld be the advertising objective of s(ch an adG The advertisers are trying to b(ild ass(rance of a peacef(l life& The L/C advertisement sends across an idea of leading a life witho(t stress despite the inherent (ncertainties of life when yo( are /ns(red with the company&
"o(rce: http:==www&yo(t(be&com=watchGvT/(ft#onRj!
1. P(ll vs& P(sh strategy of distrib(tion @ !dvertising objectives will also depend (pon the strategy of distrib(tion followed by the mareter& Bhile p(ll strategy is directed towards the final cons(mers and aims to create demand at the final end, p(sh strategy is directed towards middlemen or channel members and aims to capt(re maret share by spread of word3of3mo(th by s(ch middlemen& The p(ll strategy p(lls the c(stomer towards the prod(ct s(ch that the c(stomer reaches o(t to ac+(ire the prod(ct. the p(sh strategy p(shes the prod(ct down thro(gh the wholesaler to the retailer to the final c(stomer& Aat(rally, if p(ll strategy is followed, the company will have to (se aggressive advertising to mae the cons(mers aware of the prod(ct, to inform them of e-isting and new feat(res of the prod(ct, pers(ade them by reminding them and reinforcing their belief in the prod(ct and the company& $owever, if p(sh strategy is adopted, the company will have different advertising objective to convince the retailers to provide them with larger shelf space, stoc more of their prod(cts and pers(ade the prospective c(stomers at the PIP *Point3of3 P(rchase) to b(y the prod(ct thro(gh additional sales offers&
2. Comm(nication vs& "ales objective @ The objective of any promotional activity is to increase the level of profit and sales in the long r(n& Aevertheless, the objective of advertising as an element of promotion mi- may be either to have a comm(nication effect or to have a sales effect or both& "ometimes the company may advertise d(ring some concert=event=program only to enhance goodwill and strengthen brand loyalty among the e-isting and prospective cons(mers& "(ch an advertisement has only the comm(nication objective that e-pects the viewers or readers to be reminded of the company prod(cts& !t other times advertisements may be to s(pport the other promotional activities lie direct mareting, personal selling and sales promotion& The objective of s(ch an advertisement is to generate more sales in the forthcoming period& "(ch advertisements have sales objective& ! stand3alone advertisement may have both comm(nication and sales objective& /t is of paramo(nt importance to be clear abo(t the objective of advertising before creating and designing one, as it affects the s(ccess or fail(re of the entire advertising effort& The clarity with respect to the objective of advertising helps in assessing the effectiveness of advertising&
rocess of Setting Advertising Objectives The setting of advertising objectives is an important and a reg(lar e-ercise for an organi
the e-pected n(mber of the e-isting and potential c(stomers,
•
the behavio(ral pattern of the e-isting and potential cons(mer,
•
the socio economic class,
•
the stage at which the c(stomer is positioned in the response hierarchy of advertising,
•
how can advertising help in achieving the desired behavior or response of the c(stomer&
ii) Target maret or segment3 the target maret is identified incompatibility to the prod(ct, and the information is gathered in respect of: •
si
•
pec(liar characteristics of the segment
•
competitive maret and environment
The ne-t step is that of analysis of information or data& The advertiser sho(ld analy
#al$e Addition : Did 8o$ 9no-
Process o' Setting Advertising ?(@ectives
There is yet another approach to process of setting the advertising objectives& This calls for: 1& "it(ation !nalysis3! priori analysis, road map approach and introspection 2& /dentifying Company4s needs thro(gh "BIT in compatibility to the sit(ation analysis, & 6etermining mareting objectives in the light of company4s objectives and e-pected ret(rns, #& 6efining !dvertising objectives in alignment to #P4s of mareting and company4s overall objectives&
Process of "etting !dvertising Ibjectives
"it(ation analysis identifies the c(rrent position of the company with regard to the prod(ct, maret, competition, and ret(rns etc& This also facilitates identification of the road ahead& 'nderstanding the maret and the competition maes the difference in selling a commodity, a high tech prod(ct, or e-pensive e+(ipment s(ccessf(lly& The information with regard to strengths, weanesses, opport(nities and threats of the company compared to the competitors will facilitate appropriate decision3 maing& Ine can vis(ali
Summar$ •
"etting of advertising objectives is a very important tas for the advertiser or the mareter&
•
The comm(nication model and the sales model, the +(alitative and the +(antitative respectively, are the two schools of tho(ghts that govern the setting of advertising objectives&
•
The advertising objectives are derived from the mareting objectives, which are a part of overall company objectives and hence have to be consistent with them&
•
"etting of advertising objectives is important for a n(mber of reasons for e-ample, in setting of advertising b(dget, for selection of media, in designing message and for eval(ating the effectiveness of advertising&
•
Bhile setting the advertising objectives, besides the mareting and company objectives, a host of other factors m(st be considered, namely, prod(ct8s stage in the PLC, level of competition, nat(re of prod(ct and maret, the hierarchy of effects of advertising and distrib(tion strategy&
•
The process of setting advertising objectives incl(des the following stages: sit(ation analysis of the company, identifying the company needs, determining the mareting objectives and on the basis of them identifying advertising objectives&
•
There are vario(s approaches to setting of advertising objectives that can be adopted by the advertisers&
•
'nder primary and selective demand theory approach, the advertising objectives are set on the basis of the broader objective of creating demand for the prod(ct or service in the maret& The demand may be primary or selective&
•
The PLC approach describes how the setting of advertising objectives becomes different with each stage of a prod(ct or service in its life cycle&
•
!dvertising "piral approach is similar to PLC approach with the difference that while PLC approach foc(ses on the stages of the prod(ct in its life cycle, advertising spiral approach emphasi
•
The hierarchical models of advertising s(ggest a se+(ence of mental stages that the cons(mers go thro(gh on being e-posed to an advertisement& These emphasi
•
There are different hierarchical model s(ggested in different years, namely, !/6!, !/6!", /nnovation !doption model, $ierarchy3of30ffects model and 6!5%! approach&
•
6!5%! approach is the most pop(lar approach in setting of advertising objectives&
•
/t helps in setting well3defined advertising objective as comm(nication tas that is to be achieved within a definite period of time, amongst a pre3defined target maret&
•
This approach emphasi
•
$owever, 6!5%! approach has been critici
Sma!! 6usiness Advertising 6udget /eciding ho( much $our advertising budget just ho( much shou!d be invested in ma)ing sa!es gro( and ho( that amount shou!d be a!!ocated is comp!ete!$ up to $ou, the business o(nermanager. Advertising costs are a comp!ete!$ contro!!ab!e epense. Advertising budgets are the means of determining and contro!!ing this epense and dividing it (ise!$ among departments, !ines, or services. +his 0uide describes various methods 7percentage of sa!es or profits, unit of sa!es, objective and tas)- for inte!!igent!$ estab!ishing an advertising budgetand suggests (a$s of app!$ing budg et amounts to get the effects $ou (ant f $ou (ant to bui!d sa!es, it"s a!most certain $ou"!! need to advertise. 8o( shou!d $ou a!!ocate $our advertising do!!ar9 8o( can $ou be sure $our advertising out!a$s aren"t out of !ine9 +he advertising budget he!ps $ou determine ho( much $ou have to spend and he!ps estab!ish the guide!ines for ho( $ou"re going to spend it. *hat $ou"d !i)e to invest in advertising and (hat $ou can afford are se!dom the same. Spending too much is obvious!$ an etravagance, but spending too !itt!e can be just as bad in terms of !ost sa!es and diminished visibi!it$. #osts must be tied to resu!ts. &ou must be prepared to eva!uate $our goa!s and assess $our capabi!ities a budget (i!! he!p $ou do precise!$ this. &our budget (i!! he!p $ou choose and assess the amount of advertising and its timing. t (i!! a!so serve as the bac)ground for net $ear"s p!an. Methods of Establishing an Advertising Budget
:ach of the various (a$s in (hich to estab!ish an advertising budget has its prob!ems as (e!! as its benefits. ;o method is perfect for a!! t$pes of businesses, nor for that matter is an$ combination of methods. 8ere concepts from severa! traditiona! methods of budgeting have been combined into three basic methods
71- ercentage of sa!es or profits 72-
+he most (ide!$ used method of estab!ishing an advertising budget is to base it on a percentage of sa!es. Advertising is as much a business epense as, sa$, the cost of !abor and, thus, shou!d be re!ated to the uantit$ of goods so!d. +he percentageofsa!es method avoids some of the prob!ems that resu!t from using profits as a base. For instance, if profits in a period are !o(, it might not be the fau!t of sa!es or advertising. 6ut if $ou stic) (ith the same percentage figure, $ou"!! automatica!!$ reduce $our advertising a!!otment. +here"s no (a$ around it 2= of >1?,??? is !ess than 2= of >15,???. Such a cut in the advertising budget, if profits are do(n for other reason, ma$ ver$ (e!! !ead to further !osses in sa!es and profits. +his in turn (i!! !ead to further reductions in advertising investment, and so on. n the short run a business o(ner might ma)e sma!! additions to profit b$ cutting advertising epenses, but such a po!ic$ cou!d !ead to a !ong term deterioration of the bottom !ine. 6$ using the percentageofsa!es method, $ou )eep $our advertising in a consistent re!ation to $our sa!es vo!ume (hich is (hat $our advertising shou!d be primari!$ affecting. 0ross margin, especia!!$ over the !ong run, shou!d a!so sho( an increase, of course, if $our advertising out!a$s are being proper!$ app!ied. What percentage?
&ou can guide $our choice of a percentageofsa!es figure b$ finding out (hat other businesses in $our !ine are doing. +hese percentages are fair!$ consistent (ithin a given categor$ of business. t"s fair!$ eas$ to find out this ratio of advertising epense to sa!es in $our !ine. #hec) trade maga@ines and association. &ou can a!so find these percentages in #ensus and nterna! evenue Service reports and in reports pub!ished b$ financia! institution such as /un 6radstreet, the obert orris Associates, and the Accounting #orporation of America. Bno(ing (hat the ratio for $our industr$ is (i!! he!p to assure $ou that $ou (i!! be spending proportionate!$ as much or more than $our competitorsC but remember, these industr$ averages are not gospe!. &our particu!ar situation ma$ dictate that $ou (ant to advertise more than or !ess
than $our competition. Average ma$ not be good enough for $ou. &ou ma$ (ant to outadvertise $our competitors and be (i!!ing to cut into short term profits to do so. 0ro(th ta)es investment. ;o business o(ner shou!d !et an$ method bind him or her. t"s he!pfu! to use the percentageof sa!es method because it"s uic) and eas$. t ensures that $our advertising budget isn"t (a$ out of proportion for $our business. t"s a sound method for stab!e mar)ets. 6ut if $ou (ant to epand $our mar)et share, $ou"!! probab!$ need to use a !arger percentage of sa!es than the industr$ average. Which Sales? (Bsiness !"#ertising B"get)
&our advertising budget can be determined as a percentage of past sa!es, of estimated future sa!es, or as a combination of the t(o $% Past Sales% &our base can be !ast $ear"s sa!es or an average of a number of $ears in the immediate past. #onsider, though, that changes in economic conditions can ma)e $our figure too high or too !o(. &% Estimate" ftre sales% &ou can ca!cu!ate $our advertising budget as a percentage of $our anticipated sa!es for net $ear. +he most common pitfa!! of this method is an optimistic assumption that $our business (i!! continue to gro(. &ou must )eep genera! business trends a!(a$s in mind, especia!!$ if there"s the chance of a s!ump, and hardheaded!$ assess the directions in $our industr$ and $our o(n operation. '% Past sales an" estimate" ftre sales% +he midd!e ground bet(een an often conservative appraisa! based on !ast $ear"s sa!es and a usua!!$ too optimistic assessment of net $ear"s is to combine both. t"s a more rea!istic method during periods of changed economic conditions. t a!!o(s $ou to ana!$@e trends and resu!ts thoughtfu!!$ and to predict (ith a !itt!e more assurance of accurac$. nit of Sales
n the unitofsa!e method $ou set aside a fied sum for each unit of product to be so!d, based on $our eperience and trade )no(!edge of ho( much advertising it ta)es to se!! each unit. +hat is, if it ta)es t(o cents" (orth of advertising to se!! a case of canned vegetab!es and $ou (ant to move 1??,??? cases, $ou"!! probab!$ p!an to spend >2,??? on advertising them. /oes it cost % do!!ars to se!! a refrigerator9 +hen $ou"!! probab!$ have to budget 1,??? time % if $ou p!an to se!! a thousand refrigerators. &ou"re simp!$ basing $our budget on unit of sa!e rather than do!!ar amounts of sa!es. Some peop!e consider this method just a variation of percentageofsa!es.
maimum effect, since it"s based on (hat eperience te!!s $ou it ta)es to se!! an actua! unit, rather than an overa!! percentage of $our gross sa!es estimate. +he unitofsa!es method is particu!ar!$ usefu! in fie!ds (here the amount of product avai!ab!e is !imited b$ outside factors, such as the (eather"s effect on crops. f that"s the situation for $our business, $ou first estimate ho( man$ units or cases (i!! be avai!ab!e to $ou. +hen, $ou advertise on!$ as much as eperience te!!s $ou it ta)es to se!! them. +hus, if $ou have a prett$ good idea ahead of time ho( man$ units (i!! be avai!ab!e, $ou shou!d have minima! (aste in $our advertising costs. +his method is a!so suited for specia!t$ goods, such as (ashing machines and automobi!esC ho(ever, it"s difficu!t to app!$ (hen $ou have man$ different )inds of products to advertise and must divide $our advertising among these products. +he unitofsa!es method is not ver$ usefu! in sporadic or irregu!ar mar)ets or for st$!e merchandise. *+ecti#e an" ,ask
+he most difficu!t 7and !east used- method for determining an advertising budget is the objective andtas) approach. &et, it"s the most accurate and best accomp!ishes (hat a!! budgets shou!d •
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t re!ates the appropriation to the mar)eting tas) to be accomp!ished. t re!ates the advertising appropriation under usua! conditions and in the !ong run to the vo!ume of sa!es, so that profits and reserves (i!! not be drained.
+o estab!ish $our budget b$ this method, $ou need a coordinated mar)eting program (ith specific objectives based on a thorough surve$ of $our mar)ets and their potentia!. *hi!e the percentageofsa!es or profits method first determines ho( much $ou"!! spend (ithout much consideration of (hat $ou (ant to accomp!ish, the tas) method estab!ishes (hat $ou must do in order to meet $our objectives. On!$ then do $ou ca!cu!ate its cost. &ou shou!d set specific objectives not just Dncrease sa!es,D but, for eamp!e, DSe!! 25= more of product % or service & b$ attracting the business of teenagers.D +hen determine (hat media best reaches $our target mar)et and estimate ho( much it (i!! cost to run the number and t$pes of advertisement $ou thin) it"!! ta)e to get that sa!es increase. &ou repeat this process for each of $our objectives. *hen $ou tota! these costs, $ou have $our projected budget. Of course, $ou ma$ find that $ou can"t afford to advertise as $ou"d !i)e to. t"s a good idea, therefore, to ran) $our objectives. As (ith the other methods, be prepared to change $our p!an to ref!ect rea!it$ and to fit the resources $ou have avai!ab!e.
How to !llocate -or !"#ertising B"get
Once $ou have determined $our advertising budget, $ou must decide ho( $ou"!! a!!ocate $our advertising do!!ars. First, $ou"!! have to decide if $ou"!! do an$ institutiona! advertising or on!$ promotiona! advertising. After $ou set aside an amount to bui!d $our image 7if that"s $our p!ans for the $ear-, $ou can then a!!ocate $our promotiona! advertising in a number of (a$s. Among the most common brea)do(ns are b$ 1- departmenta! budgets 2- tota! budget 3- ca!endar periods 4- media 5- sa!es areas .epartmental B"gets
+he most common method of a!!ocating advertising do!!ars is percent of sa!es. +hose departments or product categories (ith the greatest sa!es vo!ume receive the biggest share of the budget. n a sma!! business or (hen the merchandise range is !imited, the same percentage can be used throughout. Other(ise, a good ru!e is to use the average industr$ figure for each product. 6$ brea)ing do(n the budget b$ departments or products those goods that reuire more promotion to stimu!ate sa!es can get the reuired advertising do!!ars. &our budget can be further divided into individua! merchandise !ines. ,otal B"get
&our tota! budget ma$ be the resu!t of integrated departmenta! or product budgets. f $our business has set an upper !imit for advertising epense percentage, then $our departmenta! budgets, (hich are based on different percentages of sa!es in each area, might be pared do(n. n sma!!er business the tota! budget ma$ be the on!$ one estab!ished. it too, shou!d be divided into merchandise c!assification for schedu!ing.
/alen"ar Perio"s
ost eecutives of sma!! businesses usua!!$ p!an their advertising on a month!$, even a (ee)!$, basis. &our budget, even if it"s for a !onger p!anning period, ought to be ca!cu!ated for these shorter periods. t (i!! give $ou better contro!. +he percentageofsa!es methods is a!so usefu! here to determine ho( much mone$ to a!!ocate b$ time periods. +he standard practice is to match sa!es (ith advertising do!!ars. +hus, if Februar$ accounts for 5= of $our sa!es, $ou might give it 5= of $our budget. Sometimes $ou might (ant to adjust advertising a!!ocations do(n(ard in some of $our heavier sa!es months, so $ou can boost the budget of some of $our poorer periods. 6ut this shou!d be done on!$ if $ou have reason 7as (hen $our competition"s sa!es trends differ mar)ed!$ from $ours- to be!ieve that a change in $our advertising timing cou!d improve s!o( sa!es. Me"ia
+he amount of advertising that $ou p!ace in each advertising medium such as direct mai!, ne(spapers, or radio shou!d be determined b$ past eperience, industr$ practice, and ideas from media specia!ists. ;orma!!$ it"s (ise to use the same sort of media $our competitors use. +hat"s (here, most !i)e!$, $our potentia! customers !oo) and !isten. Sales areas
&ou can spend $our advertising do!!ars (here $our customers a!read$ come from, or $ou can use them to tr$ to stimu!ate ne( sa!es areas. Eust as in dividing $ou r appropriation b$ time periods, it"s (ise to continue to do the bu!) of $our advertising in fami!iar areas.
An$ combination of these methods ma$ be emp!o$ed in the formation and a!!ocation of $our advertising budget. A!! of them or simp!$ one ma$ be needed to meet $our advertising objectives. 8o(ever $ou decide to p!an $our budget, $ou must ma)e it f!eib!e, capab!e of being adjusted to changes in the mar)etp!ace. +he duration of $our p!anning and budgeting period depends upon the nature of $our business. f $ou can use short budgeting periods, $ou"!! find that $our advertising can be more f!eib!e and that $ou can change tactics to meet immediate trends.
