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Unit 11: Marketing Communication Tools (Promotion Mix)

Notes
Figure 11.3: Response Hierarchy Models

5. Conviction: a target audience might prefer a particular product/brand but not develop a
conviction – a firm decision – to buy it. Here the advertiser’s task is to build conviction
among the interested consumers so that the particular product/brand is their best choice.
6. Purchase: finally members of the target audience should be induced to make the final
purchase. This can be done again by the help of other tools such as sales promotion.

11.1.2 Setting the Advertising Budget

After determining its advertising objectives, the marketer must set the advertising budget for
each product and market.
There are four common methods used to set the total budget for advertising:
1. The affordable method involves setting the promotion budget at the level management
thinks the company can afford. This method is often used by small businesses. They start
with total revenues, deduct operating expenses and capital outlays, and then devote some
portion of the remaining funds to advertising. However, it completely ignores the effect
of promotion on sales. It places promotional spending last and can lead to over- or under-
spending.
2. The percentage-of-sales method is setting the promotion budget at a certain percentage of
current or forecasted sales or as a percentage of the sales price. This method is simple and
it helps management to think about the relationships between promotion spending, selling
price, and profit per unit. However, it wrongly views sales as the cause of promotion
rather than the result. Yearly budget variations cause problems with this method and the
method does not provide any basis for selecting the percentage to use.
3. The competitive-parity method is setting the promotion budget to match competitor’s
outlay. Supporting this method are the arguments that competition knows the industry
and parity helps to prevent promotion wars. Here, each organisation tries to have equal
share of their voice in the market place. However, neither of these arguments has proved
to be reliable. Often, competitors do not have a justification for what they spend.

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