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CHAPTER 7
ESTABLISHING OBJECTIVES AND BUDGETING FOR THE
PROMOTIONAL PROGRAM
Chapter Overview
This chapter focuses on the process of setting objectives and budgeting for the IMC program. The major
emphasis is on determining advertising objectives as it is often the lead element in the promotional mix,
particularly in consumer products marketing. This chapter stresses the value and importance of setting
specific advertising objectives and the role they play in guiding decisions and evaluating performance.
The chapter also focuses on the importance of knowing what to expect from advertising and the
Learning Objectives
2. To understand the role of objectives in the IMC planning process and the relationship of
promotional objectives to marketing objectives.
4. To recognize some problems marketers encounter in setting objectives for their IMC programs.
6. To know various methods of budget setting.
Chapter and Lecture Outline
I. INTRODUCTION
This chapter begins by presenting a very interesting discussion of advertisers’ use of consumer purchase
funnels. The use of these funnels serves as an interesting topic for discussion, as marketers have
increasingly used them to guide their strategies. The chapter then moves into a discussion of the value of
setting objectives. It is important to communicate to the student that while setting good objectives can be
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II. THE VALUE OF OBJECTIVES
One of the reasons many companies fail to set specific objectives for their advertising and promotional
programs is that they fail to recognize the value of doing so. There are several important reasons for
setting advertising and promotional objectives:
A. Communication—Specific objectives serve as communication devices and facilitate the
coordination of the various groups working on the campaign on both the agency and the client
side. Problems can be avoided if all parties involved have a set of written and approved objectives
to guide their decisions and actions.
Professor Notes
III. DETERMINING PROMOTIONAL OBJECTIVES
The determination of objectives for integrated marketing communication occurs after a thorough situation
analysis has been conducted and the marketing and promotional problems and opportunities have been
identified. A thorough situation analysis is critical as this becomes the foundation upon which marketing
objectives are determined and the marketing plan is developed. Promotional objectives in turn evolve
from the overall marketing plan and are rooted in the firm’s marketing objectives.
A. Marketing versus Communications Objectives—it is very important to emphasize to the student
the differences between marketing versus communications objectives. Marketing objectives are
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Integrated marketing communications objectives are statements of what various aspects of the
IMC program will accomplish. They should be based on the particular communication tasks that
Professor Notes
IV. SALES VERSUS COMMUNICATION OBJECTIVES
A. Sales-Oriented Objectives—many marketing managers view their advertising and promotional
programs from a sales perspective and argue that sales or some related measure such as market
share is the only meaningful goal for advertising and thus should be the basis for setting
objectives. They take the position that the basic reason a firm spends money on advertising and
promotion is to sell its products or services. Thus they argue that any monies spent on advertising
should produce measurable sales results.
1. Problems with sales objectives—Problems with this approach include:
• problems in achieving sales could be a function of other marketing mix variables such as
product design or quality, packaging, distribution, or price.
2. Where sales objectives are appropriate—while there are problems in attempting to use sales
as objectives for an advertising and promotional campaign, there are situations where they
may be appropriate, such as:
• when the promotional efforts are direct action in nature and are designed to induce a
more immediate response. For example many sales promotion programs have sales
objectives since their goal is often to generate trial or short-term sales increases.
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B. Communication Objectives—many marketers take the perspective that the primary role of
promotional mix elements such as advertising is to communicate and effects should be based on
• Communication effects pyramid—The text uses the communication effects pyramid (Figure
7-2) as a way of understanding the communication tasks to be performed by advertising and
promotion. The marketer must accomplish lower level objectives such as awareness and
knowledge which builds a strong foundation or base. Subsequent tasks involve moving
consumers to higher levels in the pyramid so as to get them to the top where trial and regular
use/repurchase occur. It is important, however, to point out that the percentage of prospective
customers moved to each level will decline in most instances.
Professor Notes
V. DAGMAR—AN APPROACH TO SETTING OBJECTIVES
DAGMAR (Defining Advertising Goals for Measured Advertising Results) is a model developed by
Russell Colley for setting advertising objectives and measuring the results of a campaign against these
objectives. Under DAGMAR an advertising goal involves a communications task that is specific and
measurable. A communications task involves something that can be performed by and attributed to
advertising. Communication tasks in DAGMAR are based on a hierarchical model similar to those
discussed in Chapter 5. While hierarchical communication effects form the basis of DAGMAR, there are
other specific communications tasks that advertising might be expected to perform or help accomplish.
A. Characteristics of Objectives—a major contribution of DAGMAR was Colley’s specification of
what constitutes a good objective. Four requirements or characteristics of good objectives were
noted:
1. Concrete and measurable—the communications task or objective should be a precise
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2. Target audience—a good objective should specify a well-defined target audience. The target
3. Benchmark and degree of change sought—another important part of setting objectives is
having benchmark measures to determine where the target audience stands at the beginning
4. Specified time period—a final characteristic of good objectives is the specification of the
time period during which the objective is to be accomplished. The time period should be
B. Assessment of DAGMAR—There are certain problems and limitations to DAGMAR which
should be discussed. These include:
• Problems with the response hierarchy—reliance on traditional hierarchical type response
models is a problem in the original version of DAGMAR. However, the updated version of
the model, DAGMAR MOD II, recognizes the need for a modified response hierarchy that is
appropriate to the buying situation such as in high- versus low-involvement purchases.
• Sales objectives—proponents of sales objectives argue that communication objectives
advocated by DAGMAR are a “cop–out” and a way of ignoring the basic goal of advertising
which is to generate sales. They argue that since a communication objective is of interest only
Professor Notes
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VI. PROBLEMS IN SETTING OBJECTIVES
Most advertisers and their agencies fail to follow the basic principles and guidelines set forth in
DAGMAR. They often fail to set specific objectives for their campaigns and/or do not have the proper
evidence to determine the success of their promotional programs. Several interesting studies dealing with
this problem are discussed in the text including the classic study by Stewart H. Britt and a more recent
investigation by Steven Hartley and Charles Patti which looked at the problems of business–to-business
advertisers in setting objectives.
A. Improving Promotional Planners’ Use of Objectives—Advertisers and their agencies should
strive to set specific and measurable objectives that serve as a guide to promotional planning and
B. Setting Objectives for the IMC Program—Most of the attention in the promotional area has
focused on advertising since it is often the lead element in the promotional mix and other
promotional mix elements such as sales promotion, direct marketing, and publicity are used to
support and complement the advertising program. Advertising-based views of marketing
communications planning, such as DAGMAR, have dominated the field for many years.
function that most effectively addresses the company’s problem or opportunity.
It should be noted that the criteria discussed in determining advertising objectives are relevant to
other promotional mix elements as well. A more thorough discussion of objectives for
promotional mix elements such as sales promotion, publicity/public relations and personal selling
is provided in the chapters where these topics are covered.
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VII. ESTABLISHING AND ALLOCATING THE PROMOTIONAL BUDGET
As noted in the text, the budgeting decision is not a trivial matter. Whether the firm is spending millions
of dollars or thousands, this decision will have a direct impact on the success of the communications
A. Establishing the Budget
1. Theoretical issues in budget setting—most of the models used to establish advertising
budgets can be categorized as taking an advertising or sales response perspective. In this
section we discuss some of these.
a. Marginal analysis—Figure 7-7 in the text illustrates the concept of marginal analysis.
As the figure indicates, as advertising/promotional efforts increase, sales and gross
margins will also increase to a point and then level off. In using marginal analysis, the
firm would continue to spend promotional dollars so long as the marginal revenues
b. Sales response models—two budgeting models based on sales response are discussed in
the text. The first of these—the concave-downward function—is based on the
microeconomic theory of the law of diminishing returns. Essentially, the model states that
as the amount of advertising expenditures increases, its incremental value decreases. The
basic argument is that those most likely to buy the product are likely to do so as a result
of the earliest exposures. Additional exposures are not likely to increase the probability of
Chapter 07 – Establishing Objectives and Budgeting for the Promotional Program
c. Additional factors considered in budget setting—In addition to considering the theoretical
aspects of budget setting, a number of other factors must be taken into consideration
Professor Notes
B. Budgeting Approaches—This section discusses the variety of approaches that marketers use in
establishing their budgets. These approaches can be classified as either top-down or build-up
approaches.
1. Top-down approaches—in these methods of budgeting, the budget is established at the
“top” by management, and is passed down to the managers. Top down approaches generally
b. arbitrary allocation—when budgets are set through arbitrary allocation, there is no real
rhyme or reason for the amount established. Sad as this may seem, the truth is that for
many firms this is the method employed.
c. percentage of sales—perhaps the most commonly employed method of setting budgets
in large firms is the percentage of sales method. As noted in the text, there are a number
d. competitive parity—in this method, budgets are set by matching the percentage
advertising/sales ratios of competitors. Schonfeld and Associates publishes the
percentage of sales figures by product type, and this method would be easily
demonstrated in the classroom. Figure 7-13 can be used to show some percentage of sales
figures, and the instructor can explain that in using a competitive parity method,
companies competing in the same industries would have equal or nearly equal ratios.
Chapter 07 – Establishing Objectives and Budgeting for the Promotional Program
2. Build-up approaches—a more effective method of budgeting is that offered by build-up
approaches. In build-up approaches, specific objectives are established, and budgets are
determined based on the costs required to attain these goals. Three such approaches are
discussed in the text.
a. objective and task method—Figure 7-17 demonstrates the steps required in using the
objective and task approach. As can be seen, the process involves establishing objectives,
determining the specific tasks associated with attaining these objectives, and determining
the costs associated with these tasks. Monitoring and re-evaluation of these steps is
critical to the success of this method.
Figure 7-20 provides the results of a study by Low and Mohr regarding the advertising budget
setting process. As can be seen, the nature of the decision process and a variety of factors have
been shown to come into play in this decision.
C. Allocating the Budget—a number of factors influence marketers in their determinations as to
how the budgets will be allocated. Recent years have seen a shifting of advertising dollars to
other media including the Internet and nontraditional media. Figures 7-21 provides an example
of media expenditures. A variety of factors must be considered in determining how advertising
and promotional dollars will be allocated.
1. Client/agency policies—corporate politics, policies, etc. may all impact the allocation of
2. Market size—the size of the market will often determine how much monies need to be
3. Market potential—certainly the potential of the market must be considered. The previously
4. Market share goals—the market share goals established by the firm—that is, increasing or
maintaining share—will impact the allocation decision. A study by John Jones concluded that
(1) new brands generally receive higher than average advertising support; (2) older, more
mature brands are often “milked”—that is, advertising expenditures are reduced; and (3) there
is an advertising economy of scale operating.
In another study, James Schroer suggests that to have a growing market share marketers
should:
• segment markets
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5. Economies of scale—some practitioners believe that there are economies of scale that accrue
6. Organizational characteristics—After reviewing the literature, Low and Mohr conclude that a
Professor’s Notes
Teaching Suggestions
We feel that from an integrated marketing communications planning perspective, this is one of the most
important chapters in the text. It is very important for students to understand the importance of setting
good objectives to guide the planning and development of an advertising campaign as well as for
The DAGMAR model is discussed in detail as a viable approach to setting advertising objectives. A very
valuable aspect of Colley’s work on DAGMAR is the specification of characteristics of good objectives
which are discussed in the text. While most companies are not going to meet all of the criteria set forth in
DAGMAR, it is important that students recognize the characteristics of good objectives. Another
important issue to address in discussing this material is the difference between sales versus
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Some instructors may wish to divide the lecture into two sessions. The first can be devoted to discussing
the objective setting process and the second on budgeting. In the budgeting session we usually start the
lecture with the theoretical perspective, explaining the two advertising/sales response models discussed in
the text. A discussion and evaluation of each of the budgeting methods usually follows. (For example
Figure 7-12 can be very useful in demonstrating the percentage of sales method. It could also be noted
that many companies use this as a guide in setting their budgets to remain at competitive parity). The
budget allocation decision is illustrated very well by showing Competitive Media Reporting examples of
monies and percentages of budgets assigned to the media this service tracks.
Answers To Discussion Questions
1. Why is it important for marketers to set specific objectives for advertising and promotion? What
criteria must these objectives meet to be valid? (LO1).
Objectives are necessary to effectively plan and evaluate the communications program. Think about it
as taking a trip. The roadmap serves as the plan, and specific objectives are set in regard to where you
want to be and when. Your progress is measured by the attainment of these objectives.
It is important for marketers to set objectives for proper coordination of the promotional program
elements. What is the message going to achieve? How will various media like advertising, public
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2. What are some of the problems associated with setting communications objectives? How can
marketers overcome these problems? Cite examples. (LO4)
Objectives are also not matched to outcomes through evaluation. Specifically, companies need to
specify the objectives, and the metrics that will be used to determine if these objectives have been
obtained. For example, how will we determine if we have improved our image and our customer
relationships? What are the specific tasks that will be necessary to achieve these goals, and how will
we measure if they were successful?
By setting specific, concrete and measurable objectives based on a consumer funnel, many of these
problems can be avoided.
3. What are the values associated with setting objectives for IMC? How can marketers improve their
communications programs by establishing specific objectives? (LO1)
The values provided by objectives include improved communications, as well as planning and
decision making, and the ability to measure and evaluate results. The first step in the planning