Today’s economic conditions call for careful consideration of the elements that are essential in developing an effective communication program – whether it is industrial or consumer oriented. Promotional variables must be artfully integrated if communication objectives are to be achieved most effectively.
Many of the principles that are followed in developing consumer advertising programs are not only applicable but are necessary in developing an effective industrial promotional program. The objective of industrial advertising, for instance, is to communicate something about the company and its products. It should be designed, then, to enable the company and its sales people to become favourably known to current and potential customers, to convey specific and technical information regarding the characteristics of a particular product(s), to help sales people in their selling effort, to motivate distributors of industrial goods, and to reach those who either directly or indirectly influence the buying of industrial goods.
An effective industrial advertising program is built around careful consideration of advertising objectives, the advertising budget and the message strategy.
The first step in developing an effective advertising plan begins with the formulation of advertising objectives. Advertising objectives, however, cannot be formulated in isolation. They must be formulated on the basis of the firm’s overall corporate and marketing objectives. In the development of corporate objectives, a company sets the direction for its desired business performance. Once established, management chooses the strategies and actions necessary to achieve those objectives. Marketing objectives indicate what is to be accomplished through advertising to achieve corporate objectives. For instance, if the corporate objective is to increase return on stockholders’ equity by five percent, the marketing objective may be to increase sales by thirty percent. The advertising objective, then, should be stated in terms of increasing product knowledge, or in terms of generating sales leads.
Advertising objectives should never be stated in terms of increasing sales. While increased sales are usually the ultimate objective desired, it is difficult, if not impossible, to link advertising directly to sales. Personal selling, price, product performance, competitive actions, and other factors, such as increased consumer demand for end products, also affect sales levels. Thus, pinpointing the impact of advertising on sales is a difficult job indeed.
Whatever the marketing objective, to set the direction for creating, coordinating, and evaluating the entire promotional program, advertising objectives must specify exactly what is to be accomplished in terms of the marketing objective, and they must be stated in specific, measurable, realistic and obtainable terms that delineate what is to be accomplished within a specific period of time.
Research suggests that industrial marketers have tended to rely on arbitrary methods for developing promotional budgets. The appropriation of funds for advertising involves considerations of the cost of purchased space or time in advertising media (including the cost of direct mail) and the cost of producing the advertisements that appear in the purchased media over a specific time period, generally one year. An advertising budget, on the other hand, details how advertising dollars are to be expended from monies appropriated for advertising for individual campaigns by media, by time frames, by market segments and audiences, and by geographic areas.
To ensure that expenditures budgeted for advertising can be effectively monitored, advertising appropriations should not include trade shows, catalogs, or other promotional outlays. These outlays should be monitored separately to evaluate their individual effectiveness. To monitor the effectiveness of these promotional expenditures, promotion funds should be appropriated and budgeted separately. An advertising appropriation should not be a “catchall’ for other promotional expenses.
Advertising appropriations are approached in a variety of ways depending on the philosophy of the particular company. While some firms use such computer simulations for experimenting as “Advisor”, others use a variety of other methods. Computer models are built on a series of situations such as the life-cycle state of the product, frequency of purchase, market share, and concentration of sales, profit patterns, and controlled advertising experiments. In addition to the “what can we afford method,” two other conventional appropriation techniques used by industrial advertisers are the rule-of-thumb and the objective-task techniques.
Rule of Thumb
A rule of thumb relates advertising expenditures to some other measure of company activity in a consistent way. For instance, funds can be allocated on the basis of past sales (two percent of sales, say, to advertising) or on the basis of industry averages. Such rule of thumb methods for appropriating advertising dollars are quite common in industrial marketing, particularly where advertising is a relatively small percentage of the total communication budget. The problem with this method of allocation is that it violates the basic marketing principle that marketing activities stimulate demand and thus sales. When advertising dollars are fixed as a percentage of sales, for instance, advertising increased when sales increase and decreases when sales decrease. Thus, this method ignores all other business conditions that might be suggesting to totally opposite strategy.
The objective task technique is a relatively logical method for establishing the advertising allocation in that the steps involved in developing the advertising program formulate the bases for appropriating advertising funds. The costs involved in implementing the bases for appropriating advertising funds. The costs involved in implementing the advertising program become the basis for determining the advertising appropriation. In developing the appropriation, the company’s financial position is also considered. If the appropriation appears to be too high, the objectives may be scaled down and strategies adjusted accordingly. Program results are also monitored in light of appropriate revisions for the next planning period. Steps in the objective task method of appropriating advertising are:
- Determine marketing objectives
- Determine advertising objectives
- Determine audiences to be reached
- Determine reach, frequency, and continuity needs (communication objectives)
- Determine appropriating media to reach audiences
- Establish other promotional support needs
- Determine control measures
- Estimate necessary promotional funds to achieve media and communication objectives.
The important aspect of the objective-task method is that is forces the firm to think in terms of objectives and whether they are being accomplished. The major drawback of the task method, however, lies in the difficulty of determining in advance the amount of funds that will be needed to reach specific objectives. Further, while techniques for measuring advertising effectiveness are improving, they are still not sufficient in many areas. As these techniques become more exact, though, advertisers are using this method more and more.