The DAGMAR (Defining Advertising Goals for Measured Advertising Results) process, which was developed by Colley in 1961. This process has been very valuable towards advertising planning and setting objectives by placing an increased emphasis on different stages of the consumer decision-making process regarding final purchases. It uses the traditional hierarchy of effects model and suggests that the communication task must be specific and measurable. Therefore, it introduces a structure to measure the advertising results.
Characteristics of Effective Objectives
You already know that the success of any business strategy and plan depends on the objectives that they are designed around. Well-defined objectives serve as the main standard to measure the effectiveness of advertising. However, setting objectives is much harder than said. Several factors complicate the objective-setting process, especially in marketing communications. Some of the factors are as follows:
·Conflicting perspectives among decisions makers—usually there is no clear consensus among the participants in terms what marketing communication should accomplish. ·The marketing environment is complex and there are a number of factors that influence communication objectives (i.e., media, cost, dynamic nature of the market, etc.). ·Uncertainty about future events, customer behavior, and competitor actions.
So, what are the criteria for effective objectives in marketing communications? In general, the SMART acronym (introduced by Peter Drucker in The Practice of Management) is good for remembering important criteria of effective objectives. See Figure 5.1.
It is possible that you might identify some other important criterion for effective objectives (i.e., quantifiable), but these five criteria are the most commonly used characteristics of effective objectives.
For instance, “Our advertising should increase consumers’ knowledge of our product features,” is not a measurable advertising objective. On the other hand, “…to increase consumer awareness from 15 to 70%” is specific and measurable. However, is it realistic to expect a jump in awareness from 15 to 70%?
Below are good examples of solid SMART advertising objectives:
·We want to increase the firm’s market share by 10% this year. ·We want 35% of our target customers to be aware of our new product within the next 2 months.
Advertising Objectives: Sales Versus Communication
In general, advertising objectives may be broadly classified into two groups—sales and communication objectives.
Most people argue that the ultimate objective of advertising is to improve sales. Sales may be quantified and effectiveness of advertising can be measured using sales as the outcome. Direct response ads and retail advertising usually are good examples for this form of advertising objective. However, we know that there may be a number of other factors influencing sales. Factors related to the marketing mix and other uncontrollable variables may influence sales. Furthermore, the impact of the advertising may not happen in the short run, but rather may be stretched over a long time period (carryover effect). Therefore, the desired sales increase may not happen immediately in some situations, but this does not necessarily mean that the advertising failed.
Sales-oriented advertising objectives are frequently used by retailers. In this Macy’s example below, the objective of the advertising is to increase sales for a specified time period and encourages customers to purchase by offering a discount for a limited time.
Philip Kotler argues that the objective of advertising is “to inform, persuade, reinforce a purchase decision.”
In this view, the major objective of advertising is to change a customer’s attitude by creating awareness, knowledge, liking, and preference. It is argued that advertising should be seen as a force to move people up a series of steps closer to action or purchase. Apple’s 1984 and Nissan’s Leaf commercials (Video 5.3 below) illustrate this objective.
The six steps outlined in the Lavidge and Steiner model illustrated below begin with awareness related to three functions of advertising: (1) awareness and knowledge are related to information or ideas, (2) liking and preference are related to feelings toward the product, and (3) preference and conviction are related to purchase of the product. You can see that these steps have close relationships with the classical hierarchy of effects model which divides behavior into three dimensions: cognitive, affective, and behavioral.
This process that depicts how advertising should move consumers from awareness to purchase has ultimately become to known as the hierarchy of effects model that we have learned about in the previous lesson. This model shows that communication objectives center on the customer and the different levels in the buying process rather than sales alone. However, the main concern with communication-based advertising objectives is that it is hard to measure the outcomes.
Specific Objectives of Advertising
Using the two broad categories of advertising objectives, sales and communications, marketers define specific advertising objectives according to their needs. These specific advertising objectives should be related to the overall marketing strategy and to the promotion tasks assigned to advertising.
Accordingly, advertisers may incorporate one or more of specific objectives such as
·introducing new products,
·providing ongoing contact,
·preparing the way for salespeople, and
·advertising to get immediate customer action.
Please also note that there a number of factors which influence an advertiser’s decision to set these advertising objectives. Some of the commonly mentioned factors are product life cycle, availability of funds, competition, and distribution strategy.
DAGMAR is a process developed during the early 60s by Russell Colley and has been a frequently used approach when setting advertising objectives. DAGMAR is an acronym for Defining Advertising Goals for Measured Advertising Results and suggests that the main job of advertising is to communicate the information set by the marketer to a target audience to stimulate action. Undoubtedly, you already see the relationship between this approach and the previously mentioned communication effectiveness model (hierarchy of effects model). DAGMAR argues that advertising succeeds or fails in terms of how well it communicated the desired information to change consumer behavior.
DAGMAR uses a four-step process rather than the six-step approach provided by Lavidge and Steiner earlier.
DAGMAR argues that an advertisement can only be successful if it relates to
·creating awareness–making consumers aware of a brand;
·helping comprehension–what the products is and what it can do for the consumer;
·leading to conviction–mental or attitude change; and
·encouraging action–getting the consumer to buy.
To do that, DAGMAR suggests that specific advertising objectives related to sales, image, attitudes, and awareness need to be developed. Some of the examples suggested by Colley are:
·“persuading a prospect to visit a showroom,”
·“correcting an existing false impression,”
·“providing information about product’s benefits,”
·“growth in market share,”
·“sales turnover,” etc.
This means DAGMAR imposes a structure on advertisers in specifying advertising objectives and measuring outcomes. Target markets need to be considered in terms of demographics using descriptors such as age, income, education, etc. Advertising should have a specific objective, measurable outcomes need to be set, and benchmarks need to be established to compare the results. Finally, a specified time period needs to be decided on and written advertising objectives should be developed according to the DAGMAR’s suggested structure, which will foster communication and evaluation among the decision makers.
GfK Purchase Funnel
Funnel DiagramGfK is an acronym for the German marketing research group and stands for the German words meaning Gesellschaft für Konsumforschung which translates to “Society for Consumer Research.” Originating from the field of sales, the GfK funnel is a useful diagnostic tool to understand the consumer decision-making process. The seven layers of the GfK from top to bottom are awareness, familiarity, opinion, consideration, model intention, shopping, and purchase.
The GfK purchase funnel has been used in the automotive industry and depicts the different levels of communication objectives to be achieved. The widest portion of this funnel is easier to accomplish, but it gets much harder to move consumers through the funnel towards the end (purchase) without the integration of a number of marketing functions such as communications, brand equity, and demand tracking. This model assumes that only a small percentage of (e.g., 1%) customers who become aware of the product/brand will ultimately be converted to users (for instance, 90% awareness funnels down to 1% purchase or use). Therefore, as it is suggested in sales, quantifiable levels in each stage may need to be achieved in order to funnel them down to the targeted final use.
The traditional buying funnel in sales illustrates that marketing and sales help move consumers from awareness to purchase using a funnel metaphor.
How Much to Spend
Budgeting decisions will have significant impact on accomplishing defined advertising objectives. We all agree that the amount of advertising needed to accomplish the set goals is constrained by the financial resources available to the marketers. The budget-setting process is not necessarily theoretical but rather gets influenced by practice and experience. Some of the commonly used methods for setting an advertising budget are listed below.
·All I can afford method: The amount of funds availability determines how much to spend. ·Percentage of sales method: Using the previous year’s sales or historical figures, a percentage of sales are allocated to an advertising budget—higher sales lead to more funds allocated. ·Follow the competition method: The competitive environment influences the decisions; matching competitors’ actions determines the amount of money to be spent on advertising. ·Task method: This method links the promotion budget to a carefully considered “what must be done” factors to reach the promotion and sales objectives.
Although a number of methods are available for advertising budgeting decisions, practical and competitive factors usually play important roles in the decisions to allocate money to advertising. However, each of these budgeting decisions has potential weaknesses. For instance, percentage of sales budgeting may be problematic because it is difficult to identify the causal link between advertising and sales.
Most scholars and marketers argue that there is no clear basis for determining an advertising budget, but rather it is mostly based on experiential and practical decisions. Take a look at the table below that displays the top ten advertising budgets by corporation in the United States as of September 2010 as reported by Kantar Media Reports.
Consider the following:
·How did they decide how much to spend?
·Why did some increase while others decrease their ad spending in comparison to the previous year?
Perhaps the answers to these questions may not be provided by a theoretical or scientific process but rather explained by the previous experiences and market conditions faced by these corporations.
Chapter 7, “Establishing Objectives for the Promotional Program
The Value of Objectives
·Communcation: facilitate coordination of various groups working on the campaign
·Planning and Decision Making
·Measurement and Evaluation of Results
Marketing VS Communication Objectives
Marketing Objectifes: are generally stated in the firm’s marketing plan and are statements of what is to be accomplished by the overall marketing program wihtin a given time period.
Integrated Marketing Communications Objectives: are statements of what various aspects of the IMC program will accomplish. They should be based on the particular communications takst required to deliver the appropriate essages to the target audience.
Sales Vs Communication Objectives
Carryover Effect: monies spent of advertising do not necessarily have an immediate impact on sales.
Communication Effect Pyramid:
1. 5% Repurchase / Regular use
2. 20% Trail
3. 25% prefernce
4. 40% Likin
5. 70% knowledge / Comprehension
6. 90% Awareness
Characteristics of Objectives
·Concrete, Measurable Tasks
·Benchmark and Degree of Change Sought
·Specified Time Period
Criticisms of DAGMAR:
·Problems with the response hierarchy
·Practicality and costs
·Inhibition of creativity
Zero-Based Communications Planning: whihc invovles determining what tasks need to be done and which marketing communicaiton functions should be used and to what extent
Conclusions on Reserach of Advertising in a Recession:
·Advertising is strongly related to economic cycles across major world economies ·The single most compelling reason for cutting back advetising during a recession is that sales during a recession are likely to be lower than they would be during an expansion. ·There is strong, consistent evidence that cutting back on advertising cna hurt sales during and after the recession. ·Not cutting back on advertising during a recession experiencd higher sales, market share, or earnings during or after the recession. ·Most firms tend to cut back on advertising during a recession, reducing noise and increasing the effectiveness of advertsing of the firm that advertises.
Contribution Margin: the difference bwtween the total revenue generated by a brand and its total variable costs.
Marginal Analysis: as advertising/promotional expenditures increase, sales and gross margin also increase to a point, but then they level off. Price = Gross margin — advertising expenditures
Margina analysis seems logical intuitively, certain wekaness limit its usefulness. These include assumptions that ·Sales are direct result of advertising and promotional expenditures and this effect can be measred ·Advertising and promotion are solely responsible for sales.
Sales Response Models
The Concave-Downward Function Model: the effect of advertising quickly begin to diminsh. Budgeting under this model suggests that fewer advertising dollars may be needed to create the optimal influence on sales. (law of diminishin returns)
S-Shaped Response Curve: initial outlays of the advertising budget have little impact. After a certain budget level has been reached, advertising and promotional efforts begin to have an effect, as additional incremetns of expenditures result in increased sales.
Top-Down Approaches: a budgetary amount is established and then mones are passed down to the various deparments. These budgets are essnetially predetermined and have no true theoritical basis. Inlcude affordable method, arbitrary allocaiton, percentage of sales, competitive parity, and return on investment (ROI)
·The Affordable Method: the firm determines the amount to be spent in various areas such as prodution and operations. ·Arbitrary Allocation: virtually no theoritical basis is condiered and the budgetary amojnt is often set by fiat. That is, the budget is determined by management soley on the basis of what is felt to be necessary. Least effective ·Percentage of Sales: most common.
The advertising and promotions budget is based on sales ofthe product. Manager determine the amount by either takin a percentage of the sales dollars or assigning a fixed amount of unit proeuct cost to promotion and multiplying this amount by the number of units sold. ·Competitive Parity: using a similar budget as competitors or the industry average. ·Clippiong Service: clips competitor’s ads from local print media, allowing the companyto work backward to determine the cumulative cost of the ads placed. ·Returned on Investment (ROI): advertising and promotions are considred investments, like plan and equipment.
Objective and Task Method: the amount needed to accomplish a specific objective is given to be accomplished
1. Isolate objectives
2. Determine tasks required
3. Estimate required expenditures
5. Reevaluate Objectives
·Defining the coomunications objectives to be accomplished ·Determiing the specific strategies and tasks needed to attain them ·Estimating the costs associted with performance of these strategies and taks.
Payout Planning: determins the investment value of the advertising and promotion appropriation. The first months of new product’s introduction typicaly requier heavier-than-normal advertising and promotion appropriations to stimulate higher level of awareness and subsequent trial.
Quantitative Models: attempt to appy quantitative models to budgeting have met with limited uscess.
Computer Simulations Models: involving statistical techniques such as mutlple regression analysis to determine the rlative contribution of the advertising budget to sales.
Allocating the Budget Factors:
·Allocating the IMC Elements
·Client / Agency Policies
·Market Share Goals
·Economies of Scale in Advertising