Marketing Communications

REVIEW QUESTIONS 195

studied.^26 In almost all markets, a brand’s competitive advantage is determined by the order

of entry on a market. Pioneer brands oft en enjoy market share leadership, the second brand

gets the second-largest market share, etc.^27 Th e market share of a brand entering a category is

on average 0.71 times the share of the previous entrant, although for frequently purchased

(fast-moving) consumer products it is 0.92.^28 Overcoming this order-of-entry eff ect by later

entrants is diffi cult and can only be achieved when introducing a product of superior quality,

by spending a lot more on advertising or by making advertising of better quality. Quality of

advertising – that is, advertising that gets better results in getting the message across and

creating better awareness, being more persuasive or getting higher purchase intentions or

sales results – depends on the creative work of advertising agencies and the media planning

job of media agencies. Th ese factors have not been considered here but are, of course, of

huge importance and infl uence the eff ectiveness of and consequently the required budget.

However, according to some studies,^29 in about 76% of all product categories order-of-entry

advantages in market share are never overcome.

Summary

Sales response models have been developed to describe the relationship between commu-

nications budgets and communications eff ects. However, the extent to which sales respond

to advertising depends on a number of other factors, such as the product range, price and

distribution strategies, the marketing environment and the competition. As a result, it is very

diffi cult to decide on communications budgets on the basis of these models because the

eff ects of communications eff orts on sales cannot be isolated. Furthermore, traditionally,

advertising is assumed to aff ect sales only in the long run (although this point of view

is radically contradicted by the works of Jones), which makes it even harder to decide on

budgets in terms of eff ectiveness. Th erefore, companies oft en resort to more practical and

easier, but not very relevant, budgeting methods such as inertia, arbitrary allocation, aff ord-

ability and percentage of sales. In the objectives and task method, the communications needs

are assessed, aft er which a task-related budget is defi ned. In the competitive parity method,

companies analyse their market position and decide on their share of voice accordingly.

Communications budgets are infl uenced by multiple factors, such as a crisis situation, con-

tingencies, unexpected opportunities, economic recessions and other market and company

factors, and companies should always be alert and prepared to adapt budgets to changing

situations.

REVIEW QUESTIONS

1. What is a sales response model and why is it not easy to estimate?


2. Discuss Jones’s theory on the short-term and long-term relationship between advertising
   budgets and sales.


3. Discuss the various communications budgeting methods that are frequently used by
   practitioners.


4. What is the relationship between share of voice and share of market, and how does it affect
   budgeting?


5. What are the factors that influence the budgeting decision?


6. How should the communications budget for a new product launch be determined?

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