Chapter - 7

Why do we need a good objective???

Although experts all around the world agree that advertising is too weak to establish brand equity, it is quite effective when it comes to creating awareness about a product and reinforcing the message an organization wants to convey. However, during the process it is extremely difficult to measure the return one can get on the money spent on advertising. Although a number of metrics can be used as a proxy to measure the performance of advertising, there is no particular metric that generates a consensus as an accurate measure of advertising effectiveness. This is so because the objectives of a particular advertising campaign might be different from the other one and thus the impact expected would be starkly varied across different campaigns. Thus, so far we can conclude that :

1. It is hard to measure the direct impact of advertising
2. A variety of objectives might be used in the evaluation process
3. So far as determining the ability of advertising to demonstrate positive ROI, we aren’t exactly there yet

There are various purposes than an objective serves while designing an IMC plan

1. Communication – A specific objective facilitates better communication between various workgroups working on the same campaign.
2. Planning and decision making – The promotion planners use the underlying objectives to come to a decision whenever confronted with an unforeseen dilemma
3. Measurement and evaluation – They provide a standard benchmark against which a promotional campaign’s success can be measured 

Thus, in the process to measure the effectiveness of advertising, the first and the foremost thins one needs to do is to define the objectives of the advertising campaign. However, the task of setting objectives can be complex and difficult and it must be done properly, because specific goals and objectives are the foundation on which all other promotional decisions are made. Advertising and promotional objectives are needed for several reasons; including the functions they serve in communications, planning and decision making, and measurement and evaluation.

How to draw a good Objective???

Now that we know why a clear objective is necessary before a promotional campaign is launched, let us look deeper into what an objective is and how to draw a good objective for any promotional campaign.Integrated marketing communications objectives are statements of what various aspects of the IMC program will accomplish. It must be translated into communication goals and specific promotional objectives. In general an objective should be SMART, i.e. Specific, Measurable, Attainable, Realistic and Time-bound.

There are two perspectives of developing a promotion objective:

1. Sales objective – the objective is developed solely keeping in mind that the company spends money to gain sales. Thus, the objective is translated into quantitative representative of increased sales. However, the basic issue with this approach is that it assumes that advertising and promotion are the major contributors in any purchase decision and neglects the effect of any other factors like quality, competition, economic condition etc. It also neglects the carryover effect of advertising. Thus, sales objectives seem suitable only in certain types of  promotion where the promotional efforts are direct action in nature and they attempt to induce an immediate behavioral response from the prospective customer.
2. Communication objective – The objective is to communicate a message to a particular set of target customers with certain effectiveness rather than generating sales. It follows the schematic of a communication effects pyramid wherein the lower stages have to be completed (which take more effort) and then the purchase behavior occurs.

What is DAGMAR approach???

After much exercise on how to develop a suitable objective, a new approach has approached which is called DAGMAR (Defining Advertising Goals for Measured Advertising Results) approach. Under the DAGMAR approach, an advertising goal involves a communications task that is specific and measurable. Apart from this, the goal should also have a well-defined target audience. The foundation for setting up of objective is through a market survey done to establish a benchmark of the current status of the target audience. Then this benchmark is analyzed to set up objectives suitable to the needs of the organization according to the current scenario. One more important element of DAGMAR approach is the time bound nature of objectives.

Objections to DAGMAR approach:

1. People say that a consumer does not always go through all the steps of the hierarchy of steps model and thus in such a scenario, the DAGMAR approach is not effective
2. Some marketers argue that the end result expected of marketing is increased sales and thus this is the only metric that can be used to measure the effectiveness of a promotional campaign
3. The costs associated with benchmarking the current situation also draw criticisms for this approach
4. The structured approach of DAGMAR is said to have reduced the creativity of advertisers

How to establish and allocating promotional budgets???

Once the promotional objectives have been zeroes in upon, it’s time to allocate the promotional budgets to achieve the desired objectives. The first thing that should be kept in mind while allocating budgets is that advertising budget should be viewed as an investment and not as an expense. Some of the concepts that come in handy while deciding the promotional budget are explained below – 

1. Marginal analysis – a firm would continue to spend advertising /promotional dollars as long as the marginal revenues created by these expenditures exceeded the incremental advertising/promotional costs.
2. Sales Response model – This explains the response pattern of the sales of a firm as a function of the advertising expenses. A number of sales response models have been proposed but there are basically two models that are widely accepted by the marketers

Apart from these there are a number of other factors that have to be considered while setting up the budget for a particular product, some of which may include stage in product life cycle, competition, differentiation, current market share etc.
Budget setting can either be done by following top down approach or by following a bottom up approach which are both pretty self-explanatory by the following figure.

Top down approach

1. Affordable method:  the management first allocated the required funds to the production and research departments and then the rest of the fund is allocated to promotion with the argument that this is all they can afford.
2. Arbitrary allocation: the budget is determined by management solely on the basis of what is felt to be necessary and is dependent on the psychological profile of the manager as much as it is based on economic reasoning.
3. Percentage of sales method: the budget is allocated as a percentage of the sales dollars or as a product of the number of units sold and fixed amount of unit production cost.
4. Competitive parity: managers establish budget amounts by matching the competition’s percentage-of-sales expenditures. The argument is that setting budgets in this fashion takes advantage of the collective wisdom of the industry.
5. RoI – Advertising budgets are seen as an invested and allocated with a view of getting something back in return.

Build up approach

1. Objective and tasks method: It is a step by step approach with the following elements occurring in     hierarchy – identifying objectives -> Determining tasks required -> Estimating expenditures -> Monitoring -> Revaluating objectives
2. Payout planning: The basic idea is to project the revenues the product will generate, as well as the costs it will incur, over two to three years. Based on an expected rate of return, the payout plan will assist in determining how much advertising and promotions expenditure will be necessary when the return might be expected.
3. Quantitative models: these methods employ computer simulation models involving statistical techniques such as multiple regression analysis to determine the relative contribution of the advertising budget to sales.

Allocating the budget

After the organization has decided on the budget it has set up for promotional activities, the next thing to do is to allocate it among the different channels of promotion to get an effective result. Different factors that need to be taken into consideration while allocating budgets are listed below.

1. Allocating to IMC elements: With an increase in the number of ways a company can use to reach its prospective customers, the organizations have started leveraging on the various combinations of different promotion channels wherein the emphasis on direct marketing has seen an increase at the cost of other channels.\
2. Client/agency policy: some predefined notions of the client/advertising agency also effect the distribution of the promotional budget between different channels.
3. Market size: as a thumb rule, a larger market would require more effort to reach the prospective buyers and thus would require higher allocation to ATL promotion
4. Market potential
5. Market share goals
6. Economies of scale in advertising: Larger advertisers get better positioning in the newspapers, better rates, co-operation of middlemen and favorable publicity and these benefits are known as economies of scale.
7. Organizational characteristics