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Answer to #1
The ratio of the brand's revenue to total category revenue is that brand's share of market (SOM). Similarly, the ratio of a brand's advertising expenditures to total category advertising expenditures is that brand's share of voice (SOV). SOV and SOM generally are correlated: Brands having larger SOVs also generally realize larger SOMs. This does not mean, however, the SOV causes SOM; in fact, the relationship between the two is bidirectional. A brand's SOV is partially responsible for its SOM; at the same time, brands with larger SOMs can afford to achieve higher SOVs, and smaller-share brands often are limited to relatively small SOVs.
By considering a brand's SOM and the competitor's SOV, a framework can be developed for evaluating whether a brand should increase or decrease its advertising expenditures (some students might reproduce Figure 8.6). If a brand has a relatively low SOM and its competitor's SOV is relatively high, managers for that brand should consider decreasing ad expenditures and finding a niche that can be defended against other small-share brands. If a brand's SOM is relatively high and its competitor has a high SOV, advertising expenditures should probably be increased to defend its position. If a brand's SOM is low and its competitor's SOV is also low, the general recommendation is to aggressively attack with a large SOV premium vis-a-vis that competitor. Finally, if a brand holds a high SOM but its competitor is nonaggressive and has a relatively low SOV, a brand can retain its present position by maintaining only a modest advertising spending premium over its competitor.
Answer to #2
d
Answer to #3
The four budgeting methods are:
1 . Percentage-of sales budgeting. A company sets a brand's advertising budget by simply establishing the budget as a fixed percent of past or anticipated sales volume. What percentage to use is highly variable, however, and varies by industry. This method has been criticized as being illogical because it reverses the logical relationship between sales and advertising. Instead of Sales = f(Advertising), this method says Advertising = f(Sales). Thus if sales are expected to increase, the budget also increases; when sales are expected to decline, the budget is reduced. However, in an economic downswing, increasing advertising expenditures might be more appropriate to prevent further sales erosion.
2 . Objective-and-task budgeting. This is generally regarded as the most sensible and defendable advertising budgeting method. In using this method, decision makers must specify what role they expect a marcom element to play for a brand and then set the budget accordingly. The steps involved are: (1) specify the marketing objectives (i.e., sales volume, market share, profit contribution), (2) assess the communication functions that must be performed to accomplish the marketing objectives, (3) determine advertising's role in the total communication mix, (4) establish specific advertising goals in terms of measurable communication responses, and (5) establish the budget based on estimates of expenditures required to accomplish the advertising goals.
3 . Competitive parity method. This method sets the budget by examining what competitors are doing. A company may decide not merely to match but to exceed its expenditures. Deciding what to do depends on your market share and your competitor's share of voice.
4 . Affordability method. A firm spends on advertising only those funds that remain after budgeting for everything else. This method relegates marcom elements to a position of comparative insignificance (vis-s-vis other investment options) and implicitly considers them unimportant to a brand's present success and future growth.
Answer to #4
c
Answer to #5
The sales-to advertising response function refers to the relationship between money invested in advertising and the response, or output, of that investment in terms of revenue generated. It is a mathematical function that maps the relationship between an output (i.e., sales revenue) to each meaningful level of an input (i.e., advertising expenditures). If marcom personnel could accurately estimate the sales-to-advertising response function, then setting the budget to maximize profits would be simple. However, because the S-to-A response function is influenced by many factors (i.e., creativity of advertising execution, the state of the economy, the intensity of competitive advertising efforts, the overall quality of the brand's marketing mix, etc.) and not solely by the amount of advertising investment, it is difficult to know with any certainty what amount of sales a particular level of advertising expenditures will generate. So it is extremely difficult, if not impossible, to derive anything approximating an accurate S-to-A response function.
Answer to #6
b
Answer to #7
The traditional view asserts that using sales as the objective for a branded product's marcom effort is unsuitable for two major reasons. First, a brand's sales volume during any given period is the consequence of a host of factors in addition to advertising, sales promotions, and other elements of the program. These include the economic situation, competitive activity, and all the other marketing mix variables (i.e., price, quality, distribution, etc.). The second reason is that marcom's effect on sales is typically delayed, or lagged. Advertising during any given period does not necessarily influence sales in the current period but may influence sales during later periods.
The heretical view contends that marketing communicators should always state objectives in terms of sales or market share gains and that failure to do so is a cop-out. The logic of this view is that marcom's purpose is not just to result in communication effects but rather to generate sales. This view contends that it is always possible to measure, if only vaguely and imprecisely, marcom's effect on sales. Presales, or communication, objectives are claimed to be precisely wrong, in contrast to sales measures that are asserted to be vaguely right..
Students' opinions will support either view, and don't be surprised if many espouse the accountability perspective, which is a synthesis of the two viewpoints.
Answer to #8
d
Answer to #9
The criteria for good marcom objectives are:
1 . Include a precise statement of who, what, and when. At a minimum, objectives should specify the target audience (who), indicate the specific goal, such as awareness level, to be accomplished (what), and indicate the relevant time frame (when) over which the objective is to be achieved.
2 . Be quantitative and measurable. Objectives must be stated in quantitative terms so as to be measurable.
3 . Specify the amount of change. In addition to being quantitative and measurable, objectives must specify the amount of change they are intended to accomplish.
4 . Be realistic. Unrealistic objectives cannot be accomplished in the time allotted to the proposed marcom campaign.
5 . Be internally consistent. Objectives set for a particular element of a marcom program must be compatible with objectives set for other marcom components.
6 . Be clear and in writing. For objectives to accomplish their purposes of fostering communication and permitting evaluation, they must be stated clearly and in writing so that they can be disseminated to marcom personnel who will be held responsible for seeing that the objectives are accomplished.
Answer to #10
e
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