Marketing management must make four important decisions when developing an advertising program:
Setting advertising objectives
Setting advertising budgets
Developing advertising strategy
Evaluating advertising campaigns
Setting Advertising Objectives
Setting objectives is the first step in developing an advertising program. These objectives should be based on past decisions about the target market, positioning, and marketing mix, which define the job that advertising must do in the total marketing program. An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time.
Advertising objectives can be classified by primary purpose as:
Informative advertising, which is used to inform consumers about a new product or feature and to build primary demand.
Persuasive advertising, which is used to build selective demand for a brand by persuading consumers that it offers the best quality for their money.
Comparative advertising, which is that compares one brand directly or indirectly to one or more other brands.
Reminder advertising, which is used to keep consumers thinking about a product.
Setting the Advertising Budget
After determining its objectives, the marketer must set the budget for each product and market.
There are four common methods used to set the total budget for this:
The affordable method involves setting the promotion budget at the level management thinks the company can afford. This method is often used by small businesses. They start with total revenues, deduct operating expenses and capital outlays, and then devote some portion of the remaining funds to an advertisement. However, it completely ignores the effect of promotion on sales. It places promotional spending last and can lead to over- or under-spending.
The percentage-of-sales method is setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the sales price. This method is simple and it helps management to think about the relationships between promotion spending, selling price, and profit per unit. However, it wrongly views sales as the cause of promotion rather than the result. Yearly budget variations cause problems with this method and the method do not provide any basis for selecting the percentage to use.
The competitive-parity method is setting the promotion budget to match competitor’s outlay. Supporting this method are the arguments that competition knows the industry and party help to prevent promotion wars. Here, each organization tries to have an equal share of their voice in the marketplace. However, neither of these arguments has proved to be reliable. Often, competitors do not have a justification for what they spend.
The objective-and-task method involves developing the promotion budget by:
Defining specific promotion objectives.
Determining the tasks that must be performed to achieve these objectives.
Estimating the costs of performing these tasks.
The sum of the above costs is the proposed promotion budget.
The objective and task method force management to spell out its assumptions about the relationships between money spent and promotion results. It is a difficult method but does produce good results if done correctly.
The advertising program should regularly evaluate both the communication effects and the sales effects of advertisement regularly. This reveals whether or not an ad is communicating well. This involves copy testing (measuring the communication effect of an advertisement before or after it is printed or broadcast).
The sales effect is often harder to measure than the communication effect since sales are affected by many factors besides advertisement. Methods that can be used are:
Comparing past sales with past advertisement expenditures.
Design experiments to examine different expenditure levels.