Advertising Promotion and Other Aspects of Integrated Marketing Communications 9th Edition
Shimp Andrews 1111580219 9781111580216
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Chapter 8 Objective Setting and Budgeting
TRUE/FALSE
1. Objective setting and budgeting decisions are implementation marcom decisions.
ANS: F PTS: 1
2. Objective setting and budgeting decisions must be formal and systematic.
ANS: T PTS: 1
3. Marcom implementation decisions include the choice of messages, media, mixture of marcom elements, and the achievement of a continuous message presence, or momentum.
ANS: T PTS: 1
4. Marcom objectives are goals that the various marcom elements aspire to individually or collectively achieve during a specific period of time.
ANS: T PTS: 1
5. Marcom objectives should be established after making decisions regarding message selection and media determination.
ANS: F PTS: 1
6. It is optional that marcom objectives be established prior to making decisions regarding message selection and media determination.
ANS: F PTS: 1
7. One reason why it is essential that objectives be established prior to making implementation decisions is that objectives provide a formalized expression of management consensus.
ANS: T PTS: 1
8. Objectives provide standards against which results can be measured.
ANS: T PTS: 1
9. According to the hierarchy-of-effects model, brand-loyal consumers are the ultimate goal.
ANS: T PTS: 1
10. The hierarchy-of-effects model implies that for marketing communications to be successful, the various marcom elements must advance consumers through a series of behavioral stages.
ANS: F PTS: 1
11. The initial marcom imperative for new or unestablished brands is to create awareness.
ANS: T PTS: 1
12. The top step on the hierarchy of effects ladder is brand awareness.
ANS: F PTS: 1
13. Of all the marcom tools, sales promotion generally is the most effective and efficient method for quickly creating brand awareness.
ANS: F PTS: 1
14. An expectation from the consumer’s perspective is based on how the brand has been positioned.
ANS: T PTS: 1
15. Sales promotion is effective for encouraging trial purchases.
ANS: T PTS: 1
16. Because individual consumers inevitably will be at different levels of the hierarchy of effects, marcom objectives should be based on the lowest level where any consumers are located.
ANS: F PTS: 1
17. Marcom objectives should specify the target audience, indicate the specific goal to be accomplished and indicate the relevant time frame.
ANS: T PTS: 1
18. Marcom objectives should be qualitative and measurable.
ANS: F PTS: 1
19. Marcom objectives must specify the amount of change.
ANS: T PTS: 1
20. Objectives for a particular element of a marcom program should be determined independently from objectives set for other marcom components.
ANS: F PTS: 1
21. The two broad type of marcom objectives are short-term and long-term.
ANS: F PTS: 1
22. The traditional view states that marcom objectives should be stated in terms of sales and market share.
ANS: F PTS: 1
23. According to the traditional view, a brand’s sales volume during any given period is the consequence of a host of factors in addition to marcom efforts.
ANS: T PTS: 1
24. The antithesis of the traditional view toward advertising objectives (i.e., the heretical view) is that advertising objectives should be stated in terms of sales or market share.
ANS: T PTS: 1
25. Presales, or communication, objectives such as increases in brand awareness are claimed to be “vaguely wrong,” in contrast to sales measures that are asserted to be “precisely right.”
ANS: F PTS: 1
26. In terms of profitability, investing in advertising can be justified only if the incremental revenue generated from the advertising effort exceeds the increase in advertising expense.
ANS: T PTS: 1
27. The advertising-to-sales response function is the amount of sales revenue generated at each level of advertising expenditure.
ANS: T PTS: 1
28. The highest percentage of sales devoted to advertising is found in the food products industry.
ANS: F PTS: 1
29. The percentage of sales method is the advertising budgeting procedure used most frequently by both consumer and industrial companies.
ANS: F PTS: 1
30. The first step of the objective-and-task method is to establish specific marketing objectives that need to be accomplished, such as sales volume, market share, and profit contribution.
ANS: T PTS: 1
31. The competitive parity method sets the budget by examining what competitors are doing.
ANS: T PTS: 1
32. The ratio of a brand’s advertising expenditures to total category advertising expenditures is that brand’s share of voice (SOV).
ANS: T PTS: 1
33. When a company that has a relatively low market share has a major competitor with a relatively high share of voice, the recommendation would be to increase advertising expenditures and find a niche that can be defended against other small-share brands.
ANS: F PTS: 1
34. Increasing advertising expenditures is guaranteed to have a substantial impact on augmenting a brand’s sales volume.
ANS: F PTS: 1
35. The encoding variability hypothesis states that people will be more likely to remember information that is relevant to their daily lives.
ANS: F PTS: 1
MULTIPLE CHOICE
1. Objective setting and budgeting are _____ marcom decisions.
a. fundamental
b. implementation
c. short-term
d. long-term
e. primary
ANS: A PTS: 1
2. Objective setting and budgeting decisions must be _____.
a. short-term
b. long-term
c. short-term and long-term
d. formal and systematic
e. unplanned
ANS: D PTS: 1
3. Which of the following is NOT a marcom implementation decision?
a. budgeting
b. choice of messages
c. media
d. mixture of marcom elements
e. achievement of momentum
ANS: A PTS: 1
4. _____ are goals that the various marcom elements aspire to individually or collectively achieve during a scope of time such as a business quarter or fiscal year.
a. Marketing objectives
b. Communication objectives
c. Sales objectives
d. Marcom objectives
e. Market share objectives
ANS: D PTS: 1
5. Which of the following is an example of a marcom goal from which marcom objectives can be derived?
a. Facilitate the successful introduction of new brands.
b. Create brand awareness.
c. Increase customer loyalty.
d. Generate sales leads.
e. All of these are correct.
ANS: E PTS: 1
6. The marcom tools most suitable for accomplishing the objective of informing the trade and consumers about brand improvements are _____.
a. advertising and packaging
b. p-o-p displays and brand naming
c. personal selling and trade-oriented advertising
d. word-of-mouth and event sponsorship
e. cause-oriented marketing and public relations
ANS: C PTS: 1
7. Which of the following is a reason why it is essential that objectives be established prior to making implementation decisions regarding message selection, media determination, and how the various marcom elements should be mixed and maintained?
a. Objectives provide standards against which results can be measured.
b. Objective setting guides the budgeting, message, and media aspects of a brand’s marcom strategy.
c. Objectives provide a formalized expression of management consensus.
d. a and b only
e. a, b, and c
ANS: E PTS: 1
8. The process of setting objectives literally forces top marketing executives and marcom personnel to agree on the course that a brand’s marcom strategy will take for the following planning period as well as the tasks it is to accomplish for a specific brand, thus providing a formalized expression of _____.
a. guidelines
b. standards
c. hierarchy of effects
d. competitive advantage
e. management consensus
ANS: E PTS: 1
9. Good objectives set precise, quantitative yardsticks of what a marcom program hopes to accomplish, or _____.
a. achieve management consensus
b. guide subsequent marcom decisions
c. provide standards
d. outline specific strategies
e. set budgeting method
ANS: C PTS: 1
10. One reason why it is essential that objectives be established prior to making marcom implementation decisions is that objectives provide _____ against which results can be measured.
a. management consensus
b. guidelines
c. standards
d. effects
e. a hierarchy
ANS: C PTS: 1
11. The hierarchy-of-effects metaphor implies that for marketing communications to be successful, the various marcom elements must _____.
a. encourage consumers to discuss the advertisement
b. create brand loyalty for the product
c. advance consumers through a series of psychological stages
d. have the objective of creating brand awareness
e. encourage consumers to purchase the product
ANS: C PTS: 1
12. Which of the following is a step in the hierarchy-of-effects model?
a. unawareness
b. expectations
c. trial
d. beliefs
e. All of these are correct.
ANS: E PTS: 1
13. Which of the following is NOT a step in the hierarchy-of-effects model?
a. brand loyalty
b. satisfaction
c. trial
d. unawareness
e. attitude
ANS: B PTS: 1
14. According to the hierarchy-of-effects model, the advertiser's initial imperative is to _____.
a. make people aware of the brand
b. make people like the advertisement
c. make people discuss the advertisement with others
d. encourage trial of the product
e. change beliefs of the brand
ANS: A PTS: 1
15. Linda saw a print ad in a magazine for Clairol’s Natural Essence semi-permanent hair color that she knew existed but did not know anything about it. The ad informed her that users of this hair dye will not see gray roots. In terms of the hierarchy-of-effects model, which step does this marketing communication represent?
a. creating awareness
b. creating an expectation
c. encouraging trial purchase
d. reinforcing attitudes
e. accomplishing brand loyalty
ANS: B PTS: 1
16. Which is the top rung on the hierarchy of marcom effects?
a. awareness
b. beliefs
c. attitudes
d. expectations
e. brand loyalty
ANS: E PTS: 1
17. Owners of Sun Buns, Incorporated, a new beach-side California baker, want to make sure that consumers are aware of their baked goods, but they also want to persuade consumers that their products are more nutritious than competitive brands. Their ads will be designed to move consumers from the awareness state of the hierarchy-of-effects model to what stage?
a. brand loyalty
b. trial
c. expectation
d. unawareness
e. preference
ANS: C PTS: 1
18. Which marcom tool is best at encouraging trial purchases?
a. advertising
b. personal selling
c. public relations
d. sales promotion
e. point-of-purchase displays
ANS: D PTS: 1
19. A marketer distributes samples of a new product to consumers in the hope that they will form positive
_____ about the product’s performance, which will then lead to further purchases.
a. feedback
b. interpretations
c. awareness
d. beliefs
e. price perceptions
ANS: D PTS: 1
20. Attitudes would most likely precede behavior when purchasing _____.
a. pens
b. cleaning products
c. new automobiles
d. soft drinks
e. aspirin
ANS: C PTS: 1
21. Once brand-specific beliefs and attitudes are formed as the outcome from firsthand product usage experience, subsequent marketing communications _____.
a. are not necessary
b. should increase in intensity
c. should decrease in intensity
d. serve to guarantee brand loyalty
e. serve to reinforce the consumers’ beliefs and attitudes
ANS: E PTS: 1
22. Why is the ultimate objective to achieve brand loyal consumers?
a. It is much cheaper to retain present customers than it is to continuously prospect for new ones.
b. Competitors will go out of business once consumers are loyal to your brand.
c. Switching costs are too high for consumers once they become brand loyal.
d. Brand loyal consumers are a “captive audience,” which reduces marcom expenditures in the future.
e. Brand loyal consumers are more satisfied consumers.
ANS: A PTS: 1
23. Advertisers obtain consumer loyalty by providing a brand that meets the needs of the consumers and _____.
a. by continually advertising the brand's merits
b. by stressing the price
c. by stating the unfavorable attributes of the major competitor
d. by using sales promotion
e. All of these are correct.
ANS: A PTS: 1
24. The objective for a brand’s marcom program at any point in time depends on _____.
a. how many consumers are in the market
b. how long the marketer has been offering the brand
c. where on the hierarchy most consumers are located
d. the lowest level on the hierarchy where consumers are located
e. the highest level on the hierarchy where consumers are located
ANS: C PTS: 1
25. Which of the following is a requirement for setting marcom objectives?
a. Objectives must include a precise statement of who, what, and when.
b. Objectives must be qualitative.
c. Objectives must be broad in scope.
d. Objectives must be long-term.
e. Objectives must be short-term.
ANS: A PTS: 1
26. Which of the following is NOT a requirement for setting marcom objectives?
a. Objectives must specify the amount of change.
b. Objectives must be stated in terms of profits.
c. Objectives must be realistic.
d. Objectives must be internally consistent.
e. Objectives must be clear and in writing.
ANS: B PTS: 1
27. The owners of Sun Buns, a new beach-side baker in California, set the following advertising objective: “Increase awareness of the Sun Buns brand from 45 to 55 percent.” Which of the following best characterizes this objective?
a. not quantitative
b. unrealistic
c. imprecise
d. specific in terms of the amount of change
e. qualitative
ANS: D PTS: 1
28. The owner of a new pizzeria set the following marcom objective: “Make consumers aware of this new restaurant.” This objective suffers from _____.
a. being unrealistic
b. not being quantitative and measurable
c. not being internally focused
d. being externally focused
e. being too specific
ANS: B PTS: 1
29. A certain brand of hand lotion commands 7 percent of the market for this product category. To increase the brand’s market share, a new advertising campaign is formulated with the following objective: “Within the next six months, our objective is to increase the brand’s market share from 7 percent to 40 percent.” This objective suffers from being ____.
a. imprecise
b. nonmeasurable
c. general
d. unrealistic
e. qualitative
ANS: D PTS: 1
30. A manufacturer of consumer goods has stated the advertising and sales promotion objective is to increase retail distribution by 25 percent while at the same time has reduced the sales force size by 20 percent. This objective suffers from _____.
a. not being quantitative and measurable
b. not being internally consistent
c. being too specific
d. expecting too small of a change
e. not being clear
ANS: B PTS: 1
31. Presales objectives are commonly referred to as _____.
a. marcom standards
b. communication objectives
c. benchmarks
d. short-term goals
e. focused strategies
ANS: B PTS: 1
32. Which point of view asserts that it is unsuitable to use sales as the objective for a branded product’s marcom effort?
a. traditional view
b. common view
c. communications view
d. heretical view
e. revolutionary view
ANS: A PTS: 1
33. The traditional view states that advertising objectives should not be stated in terms of _____.
a. sales or market share gains
b. brand awareness
c. attitude change
d. purchase intentions
e. creating brand loyalty
ANS: A PTS: 1
34. Which of the following is an argument against using sales as the objective for a branded product’s marcom effort?
a. A brand’s sales volume during any given period is the consequence of a host of factors in addition to marcom efforts.
b. Marcom’s effect on sales is typically delayed.
c. Marcom agency compensation formulas are based on media commissions, not a brand’s sales.
d. a and b only
e. a, b, and c
ANS: D PTS: 1
35. Harriet is a marcom manager who asserts that using sales as the objective for a branded product’s marcom effort is unsuitable because she feels that sales are a function of other factors in addition to marcom efforts. Harriet is espousing which view?
a. traditional view
b. common view
c. heretical view
d. revolutionary view
e. middle-of-the-road view
ANS: A PTS: 1
36. One reason that sales response is claimed to represent an unsuitable marcom objective is that advertising during any given period does not necessarily influence sales in the current period but may influence sales during later periods. This is referred to as the _____ effect.
a. economic
b. consumer response
c. heretical
d. advertising response
e. lagged
ANS: E PTS: 1
37. The heretical view states that advertising objectives should always be stated in terms of _____.
a. awareness levels
b. attitude change
c. purchase intention
d. sales or market share gains
e. creating brand loyalty
ANS: D PTS: 1
38. John is the marcom manager at a major consumer packaged goods manufacturer. He feels that marcom objectives should be stated in terms of sales or market share gains and that failure to do so is a cop-out. Which view is John espousing?
a. traditional view
b. common view
c. heretical view
d. revolutionary view
e. controversial view
ANS: C PTS: 1
39. According to the heretical view, presales, or communication, objectives such as increase in brand awareness are claimed to be _____.
a. precisely right
b. precisely wrong
c. vaguely right
d. vaguely wrong
e. just plain wrong
ANS: B PTS: 1
40. Although there is no simple resolution to whether the traditional or heretical view is more correct, one thing is certain: companies and their chief executives and financial officers are increasingly demanding greater _____ from marcom programs.
a. creativity
b. product placement
c. consumer response
d. brand awareness
e. accountability
ANS: E PTS: 1
41. The assessment of marcom effectiveness should include, but not be restricted to, _____.
a. presales goals
b. percentage-of-sales
c. qualitative measurement
d. survey data
e. economic analysis
ANS: A PTS: 1
42. In terms of profitability, investing in advertising can be justified only if the incremental revenue generated from the advertising effort exceeds the increase in the _____.
a. production expense
b. operational expense
c. discretionary expense
d. advertising expense
e. committed expense
ANS: D PTS: 1
43. When MC > MR there is a _____.
a. marginal gain
b. sub-optimization of profits
c. need for increased advertising
d. marginal loss
e. maximization of profits
ANS: D PTS: 1
44. The _____ function refers to the relationship between money invested in advertising and the response, or output, of that investment in terms of revenue generated.
a. sales response
b. advertising response
c. sales-to-advertising response
d. advertising-to-sales response
e. marcom response
ANS: C PTS: 1
45. Which of the following can impact the sale-to-advertising response function?
a. creativity of advertising execution
b. state of the economy
c. intensity of competitive advertising efforts
d. overall quality of the brand’s mix
e. All of these are correct.
ANS: E PTS: 1
46. Which of the following is NOT a marcom budgeting method?
a. percentage-of sales method
b. objective-and-task method
c. competitive parity method
d. affordability method
e. communication-based method
ANS: E PTS: 1
47. In which method does a company set a brand’s advertising budget by simply establishing the budget as a fixed percentage of past or anticipated sales volume?
a. revenue-based method
b. percentage-of-sales method
c. affordability method
d. competitive parity method
e. objective-and-task method
ANS: B PTS: 1
48. The highest percentage of sales devoted to advertising is for the _____ industry.
a. watches and clocks
b. food products
c. miscellaneous publishing
d. agricultural chemicals
e. cleaners and polish preparations
ANS: C PTS: 1
49. Most product categories average _____ advertising-to-sales ratios.
a. less than 5 percent
b. 10 percent
c. 20 percent
d. 30 percent
e. more than 50 percent
ANS: A PTS: 1
50. The criticism that the percentage-of-sales budgeting technique is not logical is based on the idea that _____.
a. sales volume cannot be estimated accurately
b. it results in excessive amounts of funding being invested in advertising
c. it confuses objectives with goals
d. it reverses the true functional relationship between advertising and sales
e. advertising effectiveness cannot be measured
ANS: D PTS: 1
51. Which is generally regarded as the most sensible and defendable advertising budgeting method?
a. percentage-of-sales method
b. objective-and-task method
c. competitive parity method
d. affordability method
e. comparative method
ANS: B PTS: 1
52. The first step of the objective-and-task method is _____.
a. assessing the communications functions
b. establishing specific marketing objectives that need to be accomplished
c. determining advertising's role in the total communication mix
d. establishing specific advertising goals in terms of the levels of measurable communication response required to achieve marketing objectives
e. establish the budget based on estimates of expenditures required to accomplish the advertising goals
ANS: B PTS: 1
53. Nathan is determining next year’s advertising budget by establishing specific marketing objectives, assessing the communication functions that must be performed to accomplish those objectives, determining advertising’s role in the total communication mix, establishing specific advertising goals in terms of the levels of measurable communication response required to achieve the marketing objectives, and establishing the budget based on estimates of expenditures required to accomplish the advertising goals. Which advertising budgeting method is Nathan using?
a. percentage-of-sales method
b. objective-and-task method
c. competitive parity method
d. affordability method
e. comparative method
ANS: B PTS: 1
54. In using the objective-and-task method of budgeting, Volkswagen determined that it had to substantially increase consumer awareness of the Golf and Jetta brand names. This would be included in which step of the budgeting process?
a. Establish specific marketing objectives
b. assess the communication functions that must be performed
c. determine advertising’s role in the total communication mix
d. establish specific advertising goals in terms of measurable communication response
e. establish the budget
ANS: D PTS: 1
55. The advertising budget procedure used most frequently is the _____ method.
a. percentage-of-sales
b. arbitrary allocation
c. marginal cost
d. competitive parity
e. objective-and-task
ANS: E PTS: 1
56. Which budgeting method sets the budget by examining what competitors are doing?
a. percentage-of-sales method
b. objective-and-task method
c. competitive parity method
d. affordability method
e. comparative method
ANS: C PTS: 1
57. A clothing store that sets their advertising budget by following the major competitor and adding an additional 15 percent is using the _____ method.
a. percentage-of-sales
b. arbitrary allocation
c. objective-and-task
d. competitive parity
e. affordability
ANS: D PTS: 1
58. The ratio of a specific brand’s revenues to the total revenues in the product category is known as that brand’s _____.
a. share of market (SOM)
b. share of sales (SOS)
c. share of voice (SOV)
d. share of state (SOS)
e. share of money (SOM)
ANS: A PTS: 1
59. The ratio of a specific brand’s ad expenditures to the total product category ad expenditures is known as _____.
a. share of market (SOM)
b. share of communication (SOC)
c. share of voice (SOV)
d. share of advertising (SOA)
e. share of state (SOS)
ANS: C PTS: 1
60. Assume that the total advertising expenditures for shoe manufacturers is $828 million and Nike spends $207 million. Nike's _____ would be 25 percent.
a. share of market
b. share of objectives
c. share of voice
d. share of goals
e. share of stage
ANS: C PTS: 1
61. When a product has a relatively high share of market and the competitor has a high share of voice, it is best to _____.
a. increase advertising expenditures
b. decrease advertising expenditures
c. cut prices
d. aggressively attack the competitor
e. increase prices
ANS: A PTS: 1
62. What is the best recommendation for a brand that has a relatively low share of market and competitors have a relatively high share of voice?
a. Increase advertising expenditures to defend position.
b. Find a defensible niche and decrease advertising expenditures.
c. Attack with a large share of voice premium over all competitors.
d. Maintain a modest advertising spending premium over competitors.
e. Cut all advertising expenditures.
ANS: B PTS: 1
63. Nextel and Alltel are two mobile phone service providers with relatively low market shares. However, Nextel’s share of voice is more than double Alltel’s. What is the general recommendation for Nextel in this situation?
a. Increase advertising expenditures only slightly to defend position.
b. Find a defensible niche and decrease advertising expenditures.
c. Attack with a large share of voice premium over Alltel.
d. Maintain current advertising spending.
e. Cut all advertising expenditures.
ANS: C PTS: 1
64. Albright Carpet Cleaners has the attractive position of holding a high market share, and its competitor is nonaggressive and has a relatively low share of voice. What should Albright do to retain its present large market share?
a. Increase advertising considerably to defend position.
b. Find a defensible niche and decrease advertising expenditures.
c. Attack with a large share of voice premium over its competitor.
d. Maintain a modest advertising spending premium over its competitor.
e. Cut all advertising expenditures.
ANS: D PTS: 1
65. The fact that a brand’s advertising must compete for the consumer’s recall with the advertising from competitive brands is a situation known as _____.
a. share of voice
b. competitive interference
c. competitive voice
d. noise
e. clutter
ANS: B PTS: 1
66. The encoding variability hypothesis contends that people's memories for information are enhanced when _____.
a. humor is used in the advertisements
b. the brand is advertised with varied messages or in multiple media
c. there is comparative advertising
d. price is stressed in the advertisements
e. fear appeals are used
ANS: B PTS: 1
67. In the _____ method, only the funds that remain after budgeting for everything else are spent on advertising.
a. competitive parity
b. affordability
c. objective-and-task
d. arbitrary allocation
e. percentage-of-sales
ANS: B PTS: 1
68. Which budgeting method considers advertising along with other marcom elements as relatively unimportant to a brand’s present success and future growth?
a. percentage-of-sales method
b. objective-and-task method
c. competitive parity method
d. affordability method
e. comparative method
ANS: D PTS: 1
69. The world's leading advertiser is _____.
a. Coca Cola
b. Procter & Gamble
c. General Motors
d. Philip Morris
e. McDonald's
ANS: B PTS: 1
70. To employ the profit-maximization rule for budget setting, the advertising decision maker must know the _____ for every brand for which a budgeting decision will be made.
a. consumer-response factors
b. sales-to-advertising response function
c. availability ratio
d. return on investment calculation
e. hierarchy-of-effects model
ANS: B PTS: 1
ESSAY
1. Explain the hierarchy-of-effects metaphor, and discuss why it is important for marketing communicators to understand it.
ANS:
The hierarchy-of-effects metaphor implies that for marketing communications to be successful, the various marcom elements must advance consumers through a series of psychological stages. These types of models are all predicted on the idea that the marcom elements, if successful, move people form an initial state of unawareness about a brand to eventually purchasing that brand. Intermediate stages represent progressively closer steps to brand purchase, with the model given in the textbook establishing brand loyalty as the top step on the ladder. The initial imperative is to make consumers aware of the brand. However, that is not sufficient, so the next step is to instill in consumers an expectation of what benefits they will obtain from buying a brand. Consumers’ expectations are based on how the brand has been positioned. To the extent that consumers develop expectations, they may undertake trial purchases. Sales promotions and advertisements sometimes work together to encourage trial purchases, often by influencing consumers to switch from brands they currently are purchasing. Upon trying a brand for the first time, the consumer will form beliefs about its performance, which then form the basis for developing an overall attitude toward the brand. Beliefs and attitudes are mutually reinforcing. Once brand-specific beliefs and attitudes are formed, subsequent marketing communications serve merely to reinforce these beliefs and attitudes. As longs as the brand continues to satisfy expectations and a superior brand is not introduced, the consumer may become a brand loyal purchaser, which is the ultimate objective.
It is important for marketing communicators to understand the hierarchy-of-effects because the objective for a brand’s marcom program at any point in time depends on where on the hierarchy most consumers are located.
PTS: 1
2. Explain the criteria that good marcom objectives must satisfy.
ANS: The criteria for good marcom objectives are:
1. Include a precise statement of who, what, and when. At a minimum, objectives should specify the target audience (who), indicate the specific goal, such as awareness level, to
be accomplished (what), and indicate the relevant time frame (when) over which the objective is to be achieved.
2. Be quantitative and measurable. Objectives must be stated in quantitative terms so as to be measurable.
3. Specify the amount of change. In addition to being quantitative and measurable, objectives must specify the amount of change they are intended to accomplish.
4. Be realistic. Unrealistic objectives cannot be accomplished in the time allotted to the proposed marcom campaign.
5. Be internally consistent. Objectives set for a particular element of a marcom program must be compatible with objectives set for other marcom components.
6. Be clear and in writing. For objectives to accomplish their purposes of fostering communication and permitting evaluation, they must be stated clearly and in writing so that they can be disseminated to marcom personnel who will be held responsible for seeing that the objectives are accomplished.
PTS: 1
3. Explain the differences between the traditional view and the heretical view for having sales represent the advertising objective. Explain which view you support.
ANS:
The traditional view asserts that using sales as the objective for a branded product’s marcom effort is unsuitable for two major reasons. First, a brand’s sales volume during any given period is the consequence of a host of factors in addition to advertising, sales promotions, and other elements of the program. These include the economic situation, competitive activity, and all the other marketing mix variables (i.e., price, quality, distribution, etc.). The second reason is that marcom’s effect on sales is typically delayed, or lagged. Advertising during any given period does not necessarily influence sales in the current period but may influence sales during later periods.
The heretical view contends that marketing communicators should always state objectives in terms of sales or market share gains and that failure to do so is a cop-out. The logic of this view is that marcom’s purpose is not just to result in communication effects but rather to generate sales. This view contends that it is always possible to measure, if only vaguely and imprecisely, marcom’s effect on sales. Presales, or communication, objectives are claimed to be “precisely wrong,” in contrast to sales measures that are asserted to be “vaguely right.”
Students’ opinions will support either view, and don’t be surprised if many espouse the “accountability perspective,” which is a synthesis of the two viewpoints.
PTS: 1
4. Explain the sales-to-advertising response function and why it is rarely used to determine marcom budgets.
ANS:
The sales-to advertising response function refers to the relationship between money invested in advertising and the response, or output, of that investment in terms of revenue generated. It is a mathematical function that maps the relationship between an “output” (i.e., sales revenue) to each meaningful level of an “input” (i.e., advertising expenditures). If marcom personnel could accurately estimate the sales-to-advertising response function, then setting the budget to maximize profits would be simple. However, because the S-to-A response function is influenced by many factors (i.e., creativity of advertising execution, the state of the economy, the intensity of competitive advertising efforts, the overall quality of the brand’s marketing mix, etc.) and not solely by the amount of advertising investment, it is difficult to know with any certainty what amount of sales a particular level of advertising expenditures will generate. So it is extremely difficult, if not impossible, to derive anything approximating an accurate S-to-A response function.
PTS: 1
5. Name and describe the four practical budgeting methods.
ANS:
The four budgeting methods are:
1. Percentage-of sales budgeting. A company sets a brand’s advertising budget by simply establishing the budget as a fixed percent of past or anticipated sales volume. What percentage to use is highly variable, however, and varies by industry. This method has been criticized as being illogical because it reverses the logical relationship between sales and advertising. Instead of Sales = f(Advertising), this method says Advertising = f(Sales). Thus if sales are expected to increase, the budget also increases; when sales are expected to decline, the budget is reduced. However, in an economic downswing, increasing advertising expenditures might be more appropriate to prevent further sales erosion.
2. Objective-and-task budgeting. This is generally regarded as the most sensible and defendable advertising budgeting method. In using this method, decision makers must specify what role they expect a marcom element to play for a brand and then set the budget accordingly. The steps involved are: (1) specify the marketing objectives (i.e., sales volume, market share, profit contribution), (2) assess the communication functions that must be performed to accomplish the marketing objectives, (3) determine advertising’s role in the total communication mix, (4) establish specific advertising goals in terms of measurable communication responses, and (5) establish the budget based on estimates of expenditures required to accomplish the advertising goals.
3. Competitive parity method. This method sets the budget by examining what competitors are doing. A company may decide not merely to match but to exceed its expenditures. Deciding what to do depends on your market share and your competitor’s share of voice.
4. Affordability method. A firm spends on advertising only those funds that remain after budgeting for everything else. This method relegates marcom elements to a position of comparative insignificance (vis-s-vis other investment options) and implicitly considers them unimportant to a brand’s present success and future growth.
PTS: 1
6. Compare and contrast the concepts of “share of market (SOM)” and “share of voice (SOV),” and discuss the implications for advertising budgeting.
ANS:
The ratio of the brand’s revenue to total category revenue is that brand’s share of market (SOM). Similarly, the ratio of a brand’s advertising expenditures to total category advertising expenditures is that brand’s share of voice (SOV). SOV and SOM generally are correlated: Brands having larger SOVs also generally realize larger SOMs. This does not mean, however, the SOV causes SOM; in fact, the relationship between the two is bidirectional. A brand’s SOV is partially responsible for its SOM; at the same time, brands with larger SOMs can afford to achieve higher SOVs, and smaller-share brands often are limited to relatively small SOVs.
By considering a brand’s SOM and the competitor’s SOV, a framework can be developed for evaluating whether a brand should increase or decrease its advertising expenditures (some students might reproduce Figure 8.6). If a brand has a relatively low SOM and its competitor’s SOV is relatively high, managers for that brand should consider decreasing ad expenditures and finding a niche that can be defended against other small-share brands. If a brand’s SOM is relatively high and its competitor has a high SOV, advertising expenditures should probably be increased to defend its position. If a brand’s SOM is low and its competitor’s SOV is also low, the general recommendation is to aggressively attack with a large SOV premium vis-a-vis that competitor. Finally, if a brand holds a high SOM but its competitor is nonaggressive and has a relatively low SOV, a brand can retain its present position by maintaining only a modest advertising spending premium over its competitor.
PTS: 1
