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Belch: Advertising and
Promotion, Sixth Edition
IMC PERSPECTIVE 7-2
IV. Objectives and
Budgeting for Integrated
Marketing
Communications Programs
7. Establishing Objectives
and Budgeting for the
Promotional Program
returns. Like other aspects of the firm’s efforts, advertising and promotion are
expected to earn a certain return.
While the ROI method looks good on paper, the reality is that it is rarely possible to
assess the returns provided by the promotional effort—at least as long as sales continue
to be the basis for evaluation. Thus, while managers are certain to ask how much
return they are getting for such expenditures, the question remains unanswered and as
shown in the chapter introduction, depends on the criteria used to determine effectiveness.
ROI remains a difficult method to employ.
© The McGraw−Hill
Companies, 2003
Cutting Budgets When Times Get Tough—Wise Strategy
or Potential Pitfall?
A downturn in the U.S. economy led a number of companies
to slash their advertising budgets significantly
in 2001 and 2002. Even the top spenders cut deeply,
with GM cutting the budget by 24 percent and the top
10 overall spending 7 percent less on the average. The
companies seemed to be saying that since sales are
down, advertising expenditures should go down. But is
this the right thing to do? A lot of companies don’t
think so.
For example, not all of the top 10 advertisers slashed
budgets (though 7 of them did). Some like AOL and
AT&T actually increased expenditures. For these companies,
the downturn is viewed as an opportunity
rather than a threat. They take a “spend now, win later”
approach, viewing such expenditures as an investment
rather than a cost. Take Monster.com as an example.
While many dot-coms announced advertising cuts for
2002, Monster indicated that it would maintain its
advertising expenditures and number of ads constant.
Not only that, but it announced that it would spend
additional promotional dollars in other areas. In the
first quarter of 2001 Monster invested $37.4 million in
measured media, as opposed to $28.7 in the same
period for 2000. The same amount was budgeted for
2002. In addition, Monster paid more than $10 million
to be part of the Winter Olympics in Salt Lake City. The
company is also negotiating for advertising on the
2003 Super Bowl. Monster has also kept its print budget
the same, though it is increasing expenditures
online.
What does Monster know that others do not? The
goal of the new Monster campaign is to raise brand
awareness. The company believes that in a time when
the economy is down and layoffs may occur, a job
placement firm has a golden opportunity to gain by
increased investing. Jim Dietz, president of Andover
Franchising, Inc., agrees with this philosophy. As Dietz
notes, “Pink slips can help us. When downsizing is in
the headlines, more folks are willing to look at making
an investment in themselves.” Andover has increased
its expenditures, as well as its media options. Primarily
an online advertiser, its 2002 plan included print ads in
Entrepreneur and Franchise Times magazines.
To encourage advertisers to consider ad dollars as
an investment rather than an expense, the American
Advertising Federation (AAF) has initiated a “Great
Brands” campaign, debuting with two 15-second TV
spots and a number of print ads encouraging marketers
not to neglect market spending during the
slump. Wally Snyder, CEO of the AAF, notes: “The companies
behind leading global brands . . . recognize that
advertising dollars translate into increased market
share.” The first two companies featured in the campaign
are Intel and Coca-Cola.
Thus, while some companies cut, others increase
expenditures in a down economy. Much of the reason
for this is rooted in the underlying philosophy as to
what advertising is all about—an investment or a cost
of doing business.
Sources: Erin Strout, “Spend Now, Win Later,” Sales & Marketing
Management, April 2002, pp. 65–66; Hillary Chura, “Monster.com
Beefs Up Ad Plans,” www.Adage.com, Dec. 3, 2001, pp. 1–2; Vanessa
O’Connell, “Ad Spending in All Media Is Slashed 5.2%,” The Wall
Street Journal, June 8, 2001, p. B6.
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