MKTG 477 1st Edition Lecture 20Outline of Last Lecture I. Percentage of salesII. All you can affordIII. Arbitrary allocationIV. Competitive parityV. Objective and taskOutline of Current Lecture I. Considerations when setting a promotional budgetII. Budget “effects”Current LectureMarch 9, 2015 – Considerations when setting a promotional budget1. Company policies and procedures often dictate the amount spent and method employed 2. Your advertising budget (ad dollars spent) is not the only factor influencing sales (product, distribution strategies) 3. “Sales” is not the only factor that is affected by the amount of money you spend on advertising (awareness, attitude change, communication)4. It is difficult to estimate a sales response function curve (to establish a relationship between an “ad expenditure/sales” relationship)a. We can control the ad budget but not dollar salesb. The relationship between the spending and sales c. Snapshot of one day, not over time5. The “advertising expenditure to sales relationship is dynamic” (ever changing)What if our nearest competitor goes out of business? - The entire sales curve shifts up – you achieve more sales with the same advertising budget Or, a major competitor doubles its advertising budget?- The entire sales curve shifts down – you lose sales with the same advertising budget Budget “effects” – understand it and how are you going to budget accordingly?These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.1. Nonlinear effect – higher promotional expenditures do not necessarily lead to proportionally higher sales figures a. Straight line from zero (with no curve)b. There comes a point where spending more does not create more sales2. Threshold effect – promotional dollars may not have any noticeable effect until a certain expenditure level is reached a. Threshold point – point on the graph where the curve turns upb. Sales before spending more on advertising (spend more than point B)3. Carry over effect – the impact of promotional expenditures tends to take place over time a. Spending money today will create benefits in the future (2 for 1 margaritas at La Casa)b. Good thing!!!c. Demonstrated over time, which we cannot see on the
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