Establishing the Marketing Communications Budget

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Do curso por IE Business School

Marketing Mix Fundamentals

184 classificações

IE Business School

Marketing Mix Fundamentals

184 classificações

Curso 3 de 5 em Specialization Marketing Strategy

Marketing Mix Fundamentals prepares you for arguably the most important stage of bring your product to market - how and where are you going to market it? It sets out a detailed introduction to the four P’s of Marketing (Product, Pricing, Place and Promotion), this course forces you to strategically analyze your product and/or service. The Product session is designed to provide you with the knowledge to understand and manage the strategic role of brands and products in generating business results, whilst the focus on Pricing will cover the main concepts and techniques to formulate prices. Compliment this with skills from the “P” session Place, where you consider channels and retail strategies with the overriding objective of defining a distribution strategy for your product or service. Finally, through the Promotional activities (Communication) session, explore the different communication channels available and understand the importance of the media plan, dealing specifically with social media and omni-channel strategy. IE Professors Maria Teresa Aranzabal and Fernando Cortiñas will guide you through this incredibly important stage of marketing strategy using expert interviews with industry professionals. After this course you will be ready to decide where and how you want to market your product.

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Marketing Communications

At the end of this module you will be able to construct and manage your own Marketing Communication Mix, after having understood its role and importance in the Marketing Mix as a whole. You will also know how to construct, manage and evaluate advertising and media promotion.

The Role of Marketing Communications7:16

Developing Effective Communications9:15

Establishing the Marketing Communications Budget8:00

Deciding on the Marketing Communication Mix8:08

Managing the Integrated Marketing Communications Process4:59

Expert Interview: José María Rull, President and CEO of DDB Spain13:01

Managing Media and Evaluating Effectiveness7:26

Conheça os instrutores

Maria Teresa Aranzabal
Professor
Marketing
Fernando Cortiñas
Professor
Marketing

[MUSIC]

Nice to see you again.

One of the most difficult marketing decisions is determining

how much to spend on promotion.

Industries and companies vary considerably in how much they spend on promotion.

Expenditure may be up to 40-45% of sales in the cosmetic industry and

5 to 10% in the industrial equipment industry.

The most common method used to decide the promotion budget

are the affordable method, the percentage of sales method,

the comparative parity method, and real objective and task method.

However, there are other methods focused on financial considerations.

I will start by explaining to you the main methods.

The affordable method sets the promotion budget based

on what they think the company can afford.

It completely ignores the role of the promotion as an investment.

And the immediate impact of the promotions on sales volume.

It leads to an uncertain annual budget

which makes long range planning very difficult.

The second method is the percentage of sales method.

Promotion expenditure is set at a specific percentage of sales or of the sales price,

for example, the car manufacturers use the percentage of sales whereas the old

companies used the fraction of the currency per liter of gallon of petrol.

Supporters of this method see a number of advantages.

That expenditure will rise with what the company can afford.

That it encourages management to think of the relationship between

the promotion cost, selling price and the profit per unit.

And finally,

it encourages stability when competing firms expend similar percentages.

However, there are also several drawbacks.

It views sales as the determiner of a promotion rather than as the result.

A second drawback is that it leads to a budget set

by the availability of funds rather than by the market opportunity.

It discourages experimentation with counter cyclical promotion or

aggressive spending.

There is a huge dependence on year to year sales fluctuations interfering

with the long term planning.

And there is no logical basis for choosing the specific percentage.

Except that it has been done in the past or what the competition is doing.

And finally, it does not encourage building the promotion budget by

determining what each product deserves.

There is a third method, that is the competitive parity method.

The budget is set to achieve share of parity with competitor.

There are two arguments to support this method.

One is that the competitor's expenditure represents the collective wisdom

in the industry and the second one that prevents promotional worth.

But neither argument is realy valid.

And finally, the fourth method is the objective and task method.

It causes marketers to develop

promotion budgets by defining specific objectives,

determining the task that must be performed to achieve these objectives,

and estimating the cost of performing this task.

The sum of this cost is the proposed promotional budget.

The advantage of this method is that it requires management to declare

its assumptions about the relationship between the amount to spend,

exposure levels, trial rates and regular usage.

A major question is, how much weight

marketing communication should receive in relation to alternatives such

as marketing offering improvement, lower prices, or better service.

It usually depends on where the company's market offering products are in their

life cycles, whether they are commodities or highly differentiated products,

whether they are routinely needed or must be sold

and budgets tend to be higher when there is low channel support,

much change in the marketing program over time, many hard to reach consumers,

more complex consumer decision making, differentiate in products, and non

homogeneous customer needs and frequent product purchases in small quantities.

As I mentioned before there are other methods that focus on financial

considerations, for example, modeling.

It uses a variety economic and simulation techniques to model how diverse a spend level

will affect performance in terms of awareness rating, revenue flow, and profitability.

Unilever uses one of these methods.

Another one would be the pay back period, it calculates the amount of exposure

time needing to redeem the budget cost of the marketing communication.

And a third system is the profit optimization, seeks to track the point at

which the marginal revenue from the expense exceeds the marginal cost.

Ideally, marketing managers should establish the total communication budget

so that the marginal profit from the last communication Euro just

equals the marginal profit from the last Euro in the best communication cases.

However, implementing this principle is impossible, as consumer responses

are influenced by dynamic variables,

many of which are beyond the control of marketing management.

Senior managers, in addition, they want to know the outcomes and

revenues resulting from the communications investment.

They need to measure the marketing communication impact

on the target audience.

Based at least on the brand awareness, the brand trial and the satisfaction.

Consumers should be asked about their brand awareness.

Whether they recognize or recall the message,

how many times they saw it,

what points they recall, how they feel about the message.

When we talk about brand trial, we need to find out previous and

current attitudes towoard the product and the company.

And how many people bought the product.

And finally, from the satisfaction point of view,

we concentrate more in the behavioral measures of all this response.

Such as how many people like the product and talk to others about it.

In the following example we can see that the communication campaign for

brand A was effecting in creating brand awareness, but

the market offering failed to meet consumer expectations.

On the other side, with brand B awareness was low,

few tried it, but satisfaction was very high.

So it means that they needed to strengthen the communications

to take advantage of the brand's power.

Once we know how to establish a communication budget, in the next class,

we will decide on the media mix.

We will learn about the characteristics of the different media and

what factors to consider in developing the mix.

[MUSIC]

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