Marketing Communications and Budgets B2B Communications

Types of Objectives
Marketing Objectives
Statements of what is to be accomplished by the overall marketing program within a given time period.
Need to be quantifiable such as sales volume, market share, profits, or ROI. Need to be realistic, measurable and attainable

IMC Objectives
Statements of what various aspects of the IMC program will accomplish based on communication tasks required to deliver appropriate messages to the target audience.

Allocating the IMC Budget

Factors Affecting Allocation to Various IMC Elements
A. B. C. D. E. F. Client/Agency Policies Size of Market Market Potential Market Share Goals Market Share and Economies of Scale Organizational Characteristics

Problems With Sales Objectives

A. Sales are a function of many factors, not just advertising and promotion. B. Effects of IMC tools such as advertising often occur over an extended time period. C. Sales objectives provide little guidance to those responsible for planning and developing the IMC program

When Sales Objectives Are Appropriate

A. For promotional efforts that are direct action in nature and can induce an immediate behavioral response.
A. Sales promotion B. Direct response advertising C. Retail advertising for sales or special events

B. When advertising plays a dominant role in a firms marketing program and other factors are relatively stable
C. When sales effects of an IMC variable can be isolated.

Communication Objectives

The primary goal of an IMC program is to communicate and planning should be based on communications objectives such as brand awareness, knowledge, interest, attitudes, image and purchase intention

Advertising and Movement Toward Action

Related behavioral dimensions Movement toward purchase Types of promotions and advertising at each step

Conative
Realm of motives. Ads stimulate or direct desires.

Purchase

Point of purchase Retail store ads, Deals Last-chance offers Price appeals, Testimonials

Conviction Preference Liking

Competitive ads Argumentative copy Image copy Status, glamour appeals Announcements Descriptive copy Classified ads Slogans, jingles, skywriting Teaser campaigns

Affective
Realm of emotions. Ads change attitudes and feelings

Cognitive
Realm of thoughts. Ads provide information and facts.

Knowledge

Awareness

Inverted Pyramid of Communications Effects

90% Awareness

70% Knowledge
40% Liking

25% Preference
20% Trial 5% Use

The DAGMAR Approach

Define Advertising Goals for Measuring Advertising Results

Characteristics of Objectives
Good Objectives Should Include:
Concrete, Measurable Communication Tasks Well-Defined Target Audience Have an Existing Benchmark Measure Specify Degree of Change Sought Specific Time Period

DAGMAR Difficulties
Legitimate Problems Questionable Objections Sales Objectives Are Needed
Sales are all that really counts, not communications objectives.

Response Hierarchy Problems

Doesn't always define the process people use to reach purchase/use.

Attitude - Behavior Relationship

Attitude change doesn't always lead to change in actions or behavior.

Costly and Impractical

The research and efforts cost more then the results are worth.

Inhibition of Creativity
Too many rules and structure curb genius.

Advertising-Based View of Communications

Advertising Through Media One-Way

Attitudes

Knowledge

Preference

Conviction

Purchase Behavior

Linear
Acting on Consumers

Ad Budget Defined
1. The advertising budget of a business is typically a subset of the larger sales budget and, within that, the marketing budget. Advertising is a part of the sales and marketing effort. Money spent on advertising can also be seen as an investment in building up the business. 2. An estimation of a company's promotional expenditures over a period of time. An advertising budget is the money a company is willing to set aside to accomplish its marketing objectives. When creating the advertising budget, a company must weigh the trade-offs between spending one additional advertising dollar with the amount of revenue that dollar will bring in revenue.

Questions to ask for Ad Budgeting

1. Who is the target consumer? 2. Who is interested in purchasing the product or service, and what are the specific demographics of this consumer (age, employment, sex, attitudes, etc.)? 3. Often it is useful to compose a consumer profile to give the abstract idea of a "target consumer" a face and a personality that can then be used to shape the advertising message. 4. What media type will be most useful in reaching the target consumer? 5. What is required to get the target consumer to purchase the product? Does the product lend itself to rational or emotional appeals? Which appeals are most likely to persuade the target consumer? 6. What is the relationship between advertising expenditures and the impact of advertising campaigns on product or service purchases? In other words, how much profit is likely to be earned for each dollar spent on advertising?

Budgeting Decisions
Budgeting decisions involve determining how much money will be spent on advertising and promotion each year and how the monies will be allocated

Two major decisions Establishing the size of the budget Allocating the budget

Marginal Analysis

Sales

Gross Margin

Sales in

Ad. Expenditure

Profit

Point A Advertising / Promotion in Rs

BASIC Principles of Marginal Analysis

Increase Spending . . . IF:

The increased cost is less than the incremental (marginal) return.

Decrease Spending . . . IF:

The increased cost is more than the incremental (marginal) return.

Hold Spending Level. . . IF:

The increased cost is equal to the incremental (marginal) return.

Advertising Sales/Response Functions

A. Concave-Downward Response Curve B. S-Shaped Response Function

Incremental Sales

Incremental Sales

Advertising Expenditures

Range A

Advertising Expenditures

Initial Spending Little Effect

Range B

Middle Level High Effect

Range C

High Spending Little Effect

Bottom-Up Budgeting
Total Budget Is Approved by Top Management
Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned

Promotional Objectives Are Set

Objective and Task Method

Establish Objectives (create awareness of new product among 20 percent of target market) Determine Specific Tasks (advertise on market area television and radio and local newspapers) Estimate Costs Associated with Tasks (create awareness of new product among 20 percent of target market)

Payout Planning
To determine how much to spend, marketers develop a payout plan that determines the investment value of the advertising and promotion appropriation
Example of a three-year payout plan ( Rs / millions)
Year 1 15.0 7.5 15.0 (7.5) (7.5) Year 2 35.50 17.75 10.50 7.25 (0.25) Year 3 60.75 30.38 8.50 21.88 21.63

Product sales Profit contribution (@ Rs.50 per case) Advertising/promotions Profit (loss) Cumulative profit (loss)

Share of Voice and Ad Spending

TOP 10 U.S. ADVERTISERS OF 2012 PARENT COMPANY

Rank 1 2 Parent Company Procter & Gamble Co AT&T Inc

3
4 5 6 7 8 9

General Motors Co
Toyota Motor Corp Ford Motor Co Comcast Corp Verizon Communications Inc Fiat SPA LOREAL SA

10

Berkshire Hathaway Inc

Top Ad Spenders in India

Ad spend in Rs cr 2011-12 Uni Lever ITC Ranbaxy Lab Tata Motors Dabur India Hero Honda Bajaj Auto Colgate Palmolive Reckitt Benck Nestle India ICICI Bank Reliance Ind GlaxoSmith Consumer Britannia Ind 759.09 265.72 182.26 123.60 154.95 124.46 129.32 147.65 102.17 136.12 68.68 220.64 97.92 114.66 835.98 220.53 201.72 172.37 171.79 147.48 143.87 136.84 124.41 121.26 116.26 114.56 101.45 101.09 2012-13 7.51 4.15 5.01 0.96 14.31 2.13 2.71 15.74 16.21 6.36 0.76 0.43 12.30 7.96 2011-12 8.42 2.90 5.44 1.01 14.01 1.99 2.50 14.23 16.43 5.44 1.24 0.17 11.78 6.37 Ad spend of % of sales 2012-13

Advertising Budgeting Process

Setting objectives Determination of Tasks Preparation of Budgets Approval of Top Management Allocation of Budgets

Methods of setting Advertising Budgets

A. The Affordable Method
What we have to spare. What's left to spend.

B. Arbitrary Allocation Method

No system. Seemed like a good idea at the time.

C. Percentage of Sales Method

Set percentage of sales or amount per unit.

D. Competitive Parity Method

Match competitor or industry average spending.

E. Return on Investment Method

Spending is treated as a capital investment

Affordable Methods
What the company can afford
A. Advantages
Simple to apply afford understand Uncertainty in budgeting Not logical

B. Disadvantages

Top-Down Budgeting
Top Management Sets the Spending Limit

The Promotion Budget Is Set to Stay Within the Spending Limit

Percentage of Sales Method

Here a fixed percentage of the sales is allocated for the ad
A. Advantages
Simple and easy Expenditure related to funds Expenses in Ads directly related to cost Views sales in the ad decider Makes long range product planning difficult Discourages experiments Not applicable for new products requiring heavy ads

B. Disadvantages

Competitive Parity Method

The ad expenditures of competitors are taken as the basis of the budget
A. Advantages
Recognizes competition as the important factor. Monitors marketing activity of competitors Reduces chances of promotional wars The reputation, resources varies across the companies No guarantee that the firms shall spend at the optimal levels Ignores levels of production and other factors

B. Disadvantages

Objective and task Method

Budget is based on the task to be done at hand. Steps Task definition Determination of strategy Estimating cost of various elements Deciding on the firms financial strengths A. Advantages

B.

Logical Accounts business conditions Does not rely on past sales Objectives need to be well defined

Disadvantages

Fails a basis of prioritizing Objectives need s to be well defined Difficult to ascertain tasks

Factors influencing the advertising budgets

Tasks achieved Stage in the PLC Market Share Competition Frequency of Advertising Product Differentiation Support from retailers Financial Resources

B2B Communications
Business-to-business (B2B) describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. Contrasting terms are business-to-consumer (B2C) and business-togovernment (B2G). B2B branding is a term used in marketing. The overall volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C transactions. The primary reason for this is that in a typical supply chain there will be many B2B transactions involving sub components or raw materials, and only one B2C transaction, specifically sale of the finished product to the end customer. For example, an automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a single (B2C) transaction. B2B is also used in the context of communication and collaboration. Many businesses are now using social media to connect with their consumers (B2C); however, they are now using similar tools within the business so employees can connect with one another. When communication is taking place amongst employees, this can be referred to as "B2B" communication.

5 Keys to B2B Communications

I. II. III. IV. V. Be consistent Keep it personal Stay relevant and offer value Use a variety of formats Write well

End