HO CHI MINH CITY UNIVERSITY OF FOREIGN LANGUAGES
AND INFORMATION TECHNOLOGY (HUFLIT)
SCHOOL OF FOREIGN LANGUAGES

ro-ollJ~
,

.

.

.

GRADUATION PAPER
THEME:

PROMOTIONAL STRATEGYITS .EFFECTIVENESS ON THE VISSAN
COMI~ANY'SBUSINESS ACTIVITIES .
.

.

Advisor
Student
Class
I

'

: NGUYEN THI QUYNH, MSBA
: NGUYEN THANH NHA

: KA9602
i

TV Dqi Hqc Huflit

1[111[1[111111111111111111[1

101000423

HO CHI MINH CITY
JULY, 2000

•

•



:

Table
of
.

",'".

COllt~llts .....
.;;.

':,


';.

Page

Acknowledgement
List of figure and t~bles
Introduction

1

Chapter 1: An overview of promotion

3

1.1. Definition

3

1.2. HistolY of promotion

;

3

1.2.1. History of promotion in the world

3

1.2.2. HistOlY of promotion in Vietnam


~

5

1.3. Important of promotion

6

104. Promotion mix

8

104.1. Advertising

:

9

104.2. Personal selling

10

104.3. Publicity

: ~

10404. Sales pr6.motions

:


10

;;

c•••••••••••

11

1.5. Promotion environinent

12

Chapter 2: Promotional Strategy

16

2.1. Total promotion budget

,

2.2. Promotional strategy

16
19

2.2.1. Advertising

:


c••••••••••••••••••••••••••••••••••••••••

2.2.2. Sales promotion

,

19
24

2.2.3. Personal selling

31

2.204. Publicity

38

/

Chapter 3: Promotional Strategy at the Vissan company

42


3.1.2. Targets, responsibilities and autlioritieso'i

the Vissan company

3.1.3. Functions and responsibilities of departments


;

3.2. Technology and material bases

:

.44
.45
48

3.2.1. MachineIY and equipment situation

48

3.2.2. Material supply situation

; ~

49

3.3.3. Technology organizing process

50

3.3. Business activities at the Vissan company

52

( 3.3.1. Ran~ing o~bu~~ne~s products


52

.

, 3.3.2. Busmess. SItuatIon m 1993-1999

54

3.3.3. Foreign and domestic market

55

\ 3.3.4 ..Marketing activities at Vissan

59

3.4. Promotional strategy

60

3.4.1. Advertising

61

3.4.2. Sales promotion
3.4.3. Personal selling

:
,


:

3.4.4. Publicity

65
70
72

3.4.5. Analyzing effects of promotion strategy on the company's
business activities

73

3.4.6. Some measurement to motivate promotional activities

78

Chapter 4: Recommendation and conclusion

85

4.1. Recommendation

85

4.2. Conclusion

89

References


••••


L{st offigures ll1ldtables
Page
Figure 2.1

,

Figure 2.2

32

~

33

Figure 2.3

33

Figure 3.1. .

:

44a

Figure 3.2


50

Figure 3.3

:

Figure 3.4

52

::

57

Figure 3.5

57

Figure 3.6. .

61

Figure 3.7

:

Figure 3.8

63
:


Figure 3.9

:

67
69

Figure 3.10

71

Figure 3.11

74

Figure 3.12

75

Table 3.1

53

Table 3.2

53

Table 3.3.......................................................................................................


54

Table 3.4

73

Table 3.5

;

77

Table 3.6

80

Table 3.7

82

Table 3.8

86

********


Acknowledgements
In completing this graduation paper, I have received invaluable help, advice
and encouragement from my teacher, the company and fi'iends.

First of all, I would like to thank my supervisor, Ms Nguyen Thi Quynh, for
recommendations

and providing materials and for giving me ideas and advises

in widening my acknowledge and completing the graduation,paper.
My special thanks should go to President Huynh The euoc and Ms. Luong
Thi Ly for their helpful suggestion and encouragement. '
I also thank to the help and advise of the Vissan company, especially for Mr.
Phan Van Dung providing his materials and experiences in marketing activities,
particularly in promotional activities.
I own my thanks to, my family and my friends for their constant supports and
encouragement. To them, I delicate this graduation paper.


Page 1

Graduation paper

. Nowadays, in modem marketing, the promotional strategy not only becomes a most
popular strategy but also can not be lacking in all organizations to inform, persuade or remind
its target market, its products and its activities. Although the objective of promotion is to
facilitate satisfying exchanges by communicating positive, persuasive information to a target
market, promotion is one of the most highly criticized activities in marketing. Most of us would
agree that it would be difficult to make infonned

purchase deci"sions without promotion

activities.
To develop

activities

including

a right promotional
advertising,

strategy for each company, requiring a variety of

sales promotions,

personal

selling,

publicity

and direct

marketing. These activities are all part of promotional strategy. It is a special combination of
communication helping launch products to the market quickly; but its application for specific
product is very difficult. Advertising takes a variety of forms such as print, broadcast, outdoor,
media and other forms. Personal selling includes sale presentation, trade shows, and incentive
programs.

Sales promotion

encompasses

point-of-purchase


coupons, speciality advertising, and demonstration.

displays, premiums,

Publicity professional

discounts,

uses several tools

such as news story, speeches and special events to strengthen the position of organization in
the market. Moreover, depending on technological breakthroughs,
with newer media. The new technologies have encouraged
mass communication

to more targeted communication

people can communicate

more companies to move from

and one-to-one

dialogue. Therefore,


Graduation paper

Page 2


direct marketing is applied with different forms as catalogs, telemarketing,

fax, Internet and so

on which create promotional strategy to be more effective.
According to the Doi moi policy, all companies in Vietnam are also willing to analyze
and submit a strong promotional strategy making the product consumed easily, creating the
high prestige

as well as getting more profit for them. IdentifyiJ,1g objectives

and setting

promotional budget play an important role in the overall the promotional strategy. Therefore,
our research
Business

is carried out under the topic "The Promotional Strategy - Its Influences on

Activities

promotional

strategy

of Vissan Import.Export

Corporation".


is and how it influences

promotional strategy and demonstrate

To identify

on busine'ss activities,

clearly

how the

We analyze

the

some of its influences on Vissan's business activities,

and then give some suggestions to improve the promotional strategy at this company.
Apart from the tendency above, the report begins with an overview of promotion in
Chapter I about definition, history, its important role, communication process, and promotion
as well as promotion environment.

Chapter 2 is continued to bui~d a promotional strategy on

advertising, sale promotion, personal selling and publicity. The analyzing promotional strategy
and its influences on Vissan's business activities are stated in Chapter 3. Recommendation

for


measures to improve a right promotional strategy and motivate to greater productivity are put
forward as Chapter 4 to the study.


CHAPTER I
AN OVERVIEW OF PROMOTION


Graduation paper

Page 3

1.1. Definition
Modern marketing
development,

assessment

requires

much more thing. It is not only to create

of price but also to make an attractive

potential and existing customers. Therefore,

each company must be

a product


image approaching
a, communicator

to
and

promotion person.
What is promotion?

There are several definitions concerning to promotion. Steven 1.

Skinner (1994) states that "Promotion refers to any communication

activities used to inform,

persuade and remind the target market about an organization's good, services, and ideas to its
target and its activities".

According

combination of communication

to Hemry

Assael

(1998). "A promotion

mix is a


strategies that a company uses to convey brand benefits to

customers and to influence them to buy". In addition, "promotion "exists to assist people in an
organization in making contact with the people who are going to buy and use services they are
offering (Elizabeth Barnes, 1997).
From different ideas states above, promotion itself is a term that becomes

popular to

everybody in marketing mix.
1.2. History of Promotion
1.2.1. History of promotion in the world
th

From the 19

century (1809-1884), Lynas H. and Mc L~nmich, the first peoples in

Western studied systematically

about the special work for the manager to find out a good

sollition to appeal customers with the most selling productivity and get an absolute revenue.


Graduation paper

Page 4.

They discovered effectively about research methods and distinguished the market, content and

market mechanism, distribution policy and promotion, etc.
Apart from that has made foundation for the "production .oriented" in the late 19th
century to the 1930s. It was preoccupied

with the manufacturing

process with new products

being launched to dispose of manufacturing by product rather than. to serve the market. A new
phrase in the development of marketing took place in the last haft century (1930s - 1950s) led
to the "sale orientations" where a sophisticated sales organization backed up with advertising
and market analysis was assembled to dispose of the company's product lines.
After World War II, the sub-sequence
diversified

production

way by promotion

era was "marketing oriented" economist has

strategy,

selling, advertising,

pricing, building

product consumption strategy in a few countries such as England, Austria, Germany. Almost
companies manufactured


and sold a wide range of products to sati.sfy the needs and desires of

its customers. In 1950s, the advertisement

campaign for Roll Royce was celebrated to open a

new decade for other campaigns in the next decades.
And then in Japan, China, England, America, the fierce competition happened among
many suppliers

when the product consumption

become

too difficult in the market.

All

businessmen had carried out promotional strategies on their customers. They sell something
that the customers

need, make the customers

to satisfy when buying product by sales

promotion such as money-off coupon, free offers, trial purchas.e, vouchers and loyalty or
"reminder" incentives can be targeted to individual customers. Besides that, they used other
activities

on selling to appeal


new customers

and provided

complex. technical

product


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Page 5

information to potential customers. Furthermore, these activities boosted the consumption of
product increase considerably.
Until now, when products are launched to the more competition market, requiring more
and more promotional activities are widely propagated and effectively applied in business and
production in over the world.
1.2.2. History of promotion in Vietnam
In the late 1980s, promotion activities are seemed to be still strange with everybody.
Advertising

was only used as a main tool to spread on communication

channel such as

television, radio but very little.
When having Doimoi policy, it has created favourable conditions for Vietnam economy
to develop and integrate into regional and global market. Together with maturation of local

and foreign invested companies has established
and development

and created an opportunity for the formation

of promotion activities i~ Vietnam through advertising,

exhibition, sales

promotion, trade promotion, trade fair, and so on. Recently, these activities have developed
continuously and more and more increased strongly.
On the way for development of Vietnam Promotion Industry, the government recently
promulgated Decree 32/CP dated May 5, 1999 regarding trade promotion, advertising, trade
fair, exhibition activities with implementation
Information.

guidance of the Ministries of Trade and Culture-

The decree has set up a liberal operation and healthy competition

domestic and foreign companies. This also abolished the request-granting
acknowledged the enterprises' advertising rights.

between

mechanism

and



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Page 6

Besides that, a newly-appointed

Minister of Trade, Vu Khoan, at an interview of

March 9, 2000 with "Tuoi Tre" newspaper.

He stated: "I want to form a trade promotion

department right now in Vietnam". The ministry has provisionally established a division of this
kind that is now operation. Its top mission is to formulate a legal basis for the operation of the
future trade promotion department and also to assist businesses, particularly those small and
medium ones, in marketing. One more task the division is a bridge with foreign promotion
organization to boost international trade co-operation.
1.3. Important of Promotion
Marketing strategies are to be successful when having an effective communication.
Communication

is a very complex activity. The failure to understand this complexity often

leads to problem. Therefore, the communication plays an important role through all parts of
promotion

mix: advertising,

sales promotion,


personal

selling, and publicity, even direct

marketing.
Promotion can directly facilitate exchanges by communicating
organization's

goods, services

and ideas to its target market

information about an

(Skinner,

1994). To target

customers, FPT (Food Processing Technology) in Vietnam using promotion program for their
services: in expired date to encourage people register Internet Network with some benefits
such as no connection fee, no monthly fee, no bill to pay as well as installation cost. These
services made their customers once again feel comfortable and excited when their account is
registered at FPT (Advertising on "Tuoi Tre" newspaper).

Moreover, some companies use a

flashier method, such as hot air balloons shaped like their products or services, to facilitate


Page 7


Graduation paper

exchanges directly. To illustrate, car co-operations have a message to customers that the car
can use energy from the earth instead of using petrol and car dealer have used video tapes
about their brands of cars to deliver personalized messages to prospects.
Besides, promotion can indirectly facilitate exchanges by.communicating

information

about company activities and products to interest groups (include environmental and consumer
groups),

current

and potential

investors,

regulatory

agencies,

and society

in generaL

Promotional activities can help a company justify its existence and maintain positive, healthy
relationships with various groups in the marketing environment.
company


is an example

which has joined

in society

Dong

activities

Tam

ceramic

such as offering

tile
some

scholarships for students having good results in all universities and solving the job for 1,000 of
youth in Ho Chi Minh City. They has created a good image their product and had a good
relationship with various groups. (Duc Binh, 2000).
Marketing
audience

managers

or communicate


may design a single promotion message
several

different

messages

simultaneously,

different group. For instance, Rohto Metho1atum targets advertisement
product at customers

for a specific target
each targets

at a

for its new Sunplay

who use it to protect their faces and bodies from the sun beams.

Furthermore, Rohto also has mainly sponsored for Japan films showed in Vietnam and even
music program as "Nhip cau am nhac", "Lan Song Xanh" and others.
Few goods and services, no matter how well developed,

priced and distributed, can

survive in the market place without effective promotion. Promotion is the means by which
businesses


communicate

with customers and public about the merits and characteristics

of


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Page 8

their offerings. To make promotional efforts effective in communicating with consumers

and

the public, a firm must properly plan, implement, co-ordinate and control ail communications.
First, the firm must obtain and use information from the marketing environment. The extent to
which an organization can use promotion to maintain positive relationships with environmental
forces depends largely on the quantity and quality of the information it gains. For example, to
effectively communicate information to consumers that will persuade them to buy a particular
product, marketers need data about these consumers and about the types of information they
use when making purchase decisions for that type of product. Thus, the collection and using of
data are critical in successfully communicating with selected market.
1.4. Promotion Mix
To communicate
alternatives:

to consumers, a company can use one or more of four promotional

advertising, personal selling, sales promotion and publicity. A firm's promotional


mix is the combination of one or more of the elements it chooses to use.
Recently, marketing firms have emphasized the need to co-ordinate various forms of
persuasive communications.
communication
marketing,

methods

and personal

activity reinforces

Integrated marketing communication is the application of various
including

advertising,

sales

promotion,

selling, to accomplish marketing objectives.

the other. Integrated

marketing

communications


public relation,

direct

Each communication
is rated as the most

important factor that will influence marketing strategies. Each promotional

tool has unique

characteristic and cost. Marketers must understand these characteristics in selecting their tools.


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Page 9

1.5.1. Advertising
Advertising can be defined as a paid form of non-personal

communication

about an

organization, its product or its activities that is transmitted througn a mass medium to a target
audience. The mass medium are television, radio, newspapers, magazines, direct mail, signs
on mass transit vehicle, outdoor display, handbill, catalogues or directories.
Advertising is an extremely efficient promotional method because it can reach a large
number of people at a low cost per person. It also enables the seller to repeat a message many

times and it lets the buyer receive

and compare

the messages

of various competitors.

Advertising is also very expressive. It allows the company to dramatize its products through
the artful use of visuals, print, sound and colour. Furthermore, 'advertising
enhance its public image for a long term and can trigger quick sales.
Vietnam expensed

can be used to

In 1999, Unilever

14 million USD for advertising its products, such as Omo, Viso, Lux,

Lifebuoy, Sunsilk or PIS, Although decreasing

in consumer spending, it earned 1.9 trillion

VND on sales (Ngoc Trang, 2000)
Besides

that, advertising

has several drawbacks. Even though the cost per person


reached may be low, the absolute dollar outlay is extremely high. Organizations like Procter
and Gamble, Coca-Cola, 3M and IBM may spend millions of dollars to advertise a single
product. For the most part, advertising can carryon

only a one-way communication with the

audience, and the audience does not feel that it has to pay attention or respond. Therefore,
feedback from advertising is generally slow, if it occurs at all, and measurement

of the effect


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Page 10

of advertising on sales is difficult. Finally, advertising normally has less persuasive

power

over customer than other forms of promotion, such as personal selling.
1.5.2. Personal
Personal
particularly

seIling
selling is the most effective

in building up buyer's preference


tool at certain

stages of buying process,

convictions and actions. There are important

advantages to personal selling. Comparing to advertising, personal selling can be much more
persuasive

than advertising and easily contact with selected audience. In addition, personal

selling efforts generate immediate feedback, enabling the sales person to adjust the message
in response to customers' needs for information.
Personal selling also allows all kinds of relationships

to' spring up, ranging from a

matter of fact selling relationship to personal friendship. A sales force requires a longer term
commitment than does advertising. Advertising can be turned on and of but sales force size is
harder to change.
The flexibility of personal selling can also be a disadvantage.
can change the message so that no consistent communication
high cost of personal

selling is probably

Different salespeople

is given to all customers. The


its major disadvantage.

It involves

personal

interaction between two or more people and it costs considerably more than advertising which
reaches a much larger audience.
1.5.3. Publicity
A non-personal, indirectly paid presentation

of an organization, service, or product is

termed publicity. It can take the form of a news story, editorial, or product announcement. The


Graduation paper

Page II

advantage of publicity is credibility, publicity is more real and believable to readers than ads
do. Public relations can also reach many prospects who avoid salespeople and advertisements.
The message gets to the buyers as " news" rather than as a sales - directed communication.
With publicity, a company does not pay for space in a mass media (such as TV and radio) but
attempts to get the medium to run a favourable story on the company.
Although an organization

does not pay for the transmission

publicity should not be viewed as free communication.

each year preparing news releases

and encouraging

of publicity messages,

Companies' spend millions of dollars
media personnel to broadcast or print

them. To perform these activities on a regular basis, an organization must hire employees, a
public relations firms, or an advertising agency. In any case, the organzition pays for the costs
of these activities. Publicity must be planned and implemented

so that it is compatible with,

and supportive of, other element in the promotion mix.
1.5.4. Sales promotion
Sales promotion is a short-term inducement

of value offered to arouse interest in

buying a good or a service. They attract consumer attention and provide information that may
lead to a purchase.

It includes a wide assortment of tools such as coupons, contest, cents-off

deals, premiums, and others that have special features and uses in conjunction with advertising
or personal selling, sales promotion. They are offered to intermediaries

as well as to ultimate


consumers. Sales promotions invite and reward quick response. Whereas
"Buy our product", sales promotion says "Buy it now".

advertising says,


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Page 12

The advantage of sales promotions is that the short term nature of these programs (such
as the expired date of a coupon or sweepstakes)

often stimulates sales for their duration.

Offering value to the customer in terms of a cent-off coupon or rebate provides an incentive to
buy.
It cannot be the sole basis for a campaign because gains are often temporary and sales
drop off when the deal ends. If sales promotion is conducted continuously, they will lose their
effectiveness.

Customer begins to delay purchase until a coupon "is offered, or they question

the product's value. Thus, some aspects of sales promotions also are regulated by the federal
government.

1.5. Promotion Environment
Although
communicating


the

objective

of promotion

is to facilitate

satisfying

positive, persuasive information to a target market, promotion

exchanges

by

is one of the

most highly criticized activities in Marketing.
Promotional
organization

activities often reflect the value of society. 'People at all levels of the

must be aware of the growing body of legal and ethical issues surrounding

marketing communications.

Thus, sound ethical judgements


of key marketing executives are

needed in most of areas. Critics of promotion think that the result has a negative impact on
society.
First, some suggest that promotion is dishonest or unethical. Unfortunately,

over the

years many customers have been misled or even deceived by some sales promotions and
advertisements.

Examples include sweepstakes

in which the gifts were not awarded, rebate


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Page 13

offers that were a terrible hassle, and advertisement

whose pr~mises were great, until the

buyer read the small print. The truth is that the Federal Trade Commission (FTC _ USA) use
i

several measures to protect consumers against false and deceptive promotion practices such as
steps into set precise guidelines on sweepstakes


to protect consumers, an example of formal

government regulation by an agency of the federal government. Concerning rebates, the buyer
usually needs to send proof-of - purchase evidence to the manufacturer to receive a check for
the offered price reduction. Suppose that the hassle to finding the proof-of purchase rebate
discourages

you from sending

it in. This slippage

raises

e,thical questions

about the

manufacturer perhaps deliberately making it difficult for you to take advantage of the rebate.
The FTC can issue a cease-and-desist

order requiting a firm to stop using deceptive

practices.

Fitms can also be required

to run corrective

deceptive


promotion.

also work to combat

Local agencies

adveltisements
deceptive

or pay fines for
promotion.

Most

companies tIy to adhere to the laws and regulations governing promotion activities.
Another criticism of promotion is to lead to a materialistic

society. Advertising to

children is a subject of great debate because promotion, by its Vt;ry nature, is persuasive. On
the survey, estimated that children who watch a great amount of TV want more advertised
product and ask for them more often than do children who watch less TV. For example, after
seeing Mickey Cartoon Video in an advertisement on TV, the children want that one and force
their parents to buy it immediately.
Some marketing professionals argue that they cannot be responsible for family values.
It is up to parents to make purchase decisions and communicate their beliefs to their children.

-,



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Page 14

Therefore, clear policies by the government and companies remain to be developed to ensure
advertising

to children is responsible

and ethical. Advertisers

and consumers have clear

differences of opinion on what TV ads and programs are appropriate for children.
A third criticism of promotion is that it leads to higher price, the cost of promotion is
passed on to customers and reflected in the product's price. But promotion allows fIrms to
achieve economies of scales by increasing demand for their pwducts. With higher demand,
fIrm can mass-produce
case the professional

products and lower the per-unit cost, resulting in lower prices. In the
pricing, promotion has actually stimulated price competition

among

dentist and lawyers.
Some critics have argued that promotion is in poor taste and encourages
stereotypes.


For example,

erotic advertisements

are used to sell products ranging from

cosmetics to industrial tools. Some of these advertisements
women

that are neither

realistic

favourably to an erotic advertisement,

negative

nor complimentary.

portray stereotypical

Whereas,

images of

many customers

react

other are outraged. In fact, showing a realistic role of


today's women - more than half of whom work outside the home-not only is ethically sound
but also makes good marketing sense. One study showed that realistic role portrayal of women
strongly influence advettising effectiveness,

such as the recall of major selling points in an ad

and a willingness to consider buying a product.
A final criticism is that promotion can move people to buy products they do not need.
This problem is difficult to resolve. It could be argued that rational consumers do not buy
products they do not want. On the other hand, many consumers find themselves questioning


Graduation paper

Page 15

whether they really need a product once they get it home. Besides that, the sales person can
persuade their customers to buy product. Thus, promotion can not force customer to buy a
product but it is persuasive and certainly can be a strong factor in any purchase decision.
With some criticisms above, promotion will always be controversial. On the one hand,
it seems to be the way to persuade customers to buy product with creating good image the
company. On the other hand, it has a negative

impact on society. Although some of the

criticisms may be justified and others defended, it belongs to each us as customer to decide its
a negative influence on society. Moreover, company must establish promotional activities that
meet the needs of target market without having a negative impact 'on society.


IL------------------'---~_

--


Graduation paper

Page 16

2.1 Total Promotion Budget
One of the hardest marketing decisions facing a company is how much to spend on
promotion. A company with a very small promotional budget will probably rely on personal
selling because it is easier to measure a salesperson's contribution to sales than to measure the
contribution of advertising or publicity. To implement regional or national advertising and
sales promotion activities, a business must have a considerable promotion budget.
How does a company decide on its promotion budget? There are 4 common methods
used to set total promotion budget
2.1.1. Affordable method
Some companies use the affordable method: they set the promotion budget at the level
they think the company can afford. Small businesses often use this method, reasoning that the
company cannot spend more on advertising than its budget. They start with total revenues,
deducting

operating

expenses

and capital outlays, and then devote some portion of the

remaining funds to advertising (Skinner, 1994).

Unfortunately,

this method of setting budgets

completely

rgnores the effects

of

even when advertising

is

promotion on sales volume.
It tends to place advertising

last among'.other

expenses

critical to the firm's success. It leads to an uncertain annual promotion budget, which makes
long-range

market planning difficult. Although the affordable

spending on advertising, it more often results in' under-spending.

method can result


III

over-


Graduation paper

Page 17

2.1.2. Percentage of sales method
Many firms use the percentage of sales method, the promotional budget is based on ,a
percentage

of the previous year's sales or the next year's forecasted

sales.

For instance,

automobile companies usually budget a fixed percentage for promotion based on the planned
car pnce.
A number of advantages

are claimed for this method: First, the percentage-of-sales

method means that the promotion spending is likely to vary with what company can "afford".
Second, this method helps management

to think about relationship


between

promotion

spending, selling price, and nonprofit per unit. Third, this method creates competitive stability
because competing films tend to spend about the same percent of their sales on promotion.
Besides that, this method uses poor logic in viewing sales as the cause of promotion
rather than as the result. It prevents the increased spending sometimes needed to turn around
falling sales, because the budget varies with year-to-year
range planning. Therefore,

sales, creating difficulty for long-

the method does not provide any basis for choosing the specific

percentage other than what has been done in the past or what competitors are doing.

2.1.3. Competitive parity method
Competitive parity budgeting, is matching'the

competitor's absolute level of spending

or the proportions per point of market share a competitor has (Berkowitz, Kerins & Rudelious,
1989).
This approach has also been referred to as matching competitors or share of market. It
is impOltant to consider the competition in budgeting. There are no grounds for believing that


Graduation paper


Page 18

the competition has a better idea of what a company should b~ spending on promotion than t~e
company itself does. Companies
needs. Finally,

differ greatly ,and

there is no evidence

each has their own special promotion

that budgets based on competitive

parity prevent

promotion wars.
2.1.4 Objective and task method
The best approach to budgeting is objective and task budgeting, whereby the company
(1) determines its advertising objectives, (2) outlines the task to accomplish there objectives,
and (3) determines the cost of performing these tasks (Berkowitz, Kerins & Rudelious, 1989).,
This method takes into account what thecompariy

wants to accomplish and requires

that the objectives be specified. Strengths of the other budgeting method are integrated into
this approach because each previous method's strength is tied to the objectives.
The difficulty in this method is the evaluation required to determine the tasks needed
to accomplish objectives. With the objective-and-task


method, the company sets its promotion

budget on the basis of what it wants to accomplish with promotion.
Apart from four methods, we can see that companies must choose one method for thepcompany's budget to plan strategy. The overall answer to how large the promotion budget
should be depends on where the company's product are in their life cycles, how much they
differ from competing products, whether they are routinely needed or have to be "sold", and
other factors.