Marketing Expense Budget Total Expense Budget – 28 Million Dollars The snack food industry is highly competitive. Increased competition and new products entering the market are a factor when deciding how fast to implement Tostitos marketing strategy. To compete with Tostitos competitors, Tostitos must implement their marketing strategy immediately.
Tostitos wants to increase sales for the financial year 2014. Focusing their marketing and advertising budget by utilizing a percentage of sales or profits tactics should be related to the quantity of goods sold. Tostitos plans on implementing their marketing strategy immediately by using the percentage of sales method to avoid problems that could result from using profits as a base. For example, if the profits during a certain marketing strategies implantation are low, likely it will not be the fault of the sales and advertising programs. Tostitos bottom line in implementing their marketing strategy is to ensure funding is not cut from next years budget. Tostitos, using the percentage of sales method, allows their advertising to be in direct relation with sales volume.
Tostitos is a large, industry-leading brand. To stay relevant in the highly competitive market in which they operate, Tostitos must allocate a larger portion of their marketing expenses to paid media advertising. Choosing to spend more on paid media advertising will ensure higher visibility of the brand. In turn, paid media advertising is also the most expensive marketing tool.
To effectively advertise to Tostitos target consumer, their marketing and advertising strategy should carry messages that appeal to consumers when they want to buy and reach them through their preferred media outlets. Choosing to spend marketing resources must be inline and campaigns timed for when the customer wants to buy, not based only on when Tostitos wants to sell. Effective advertising entails selling items that are popular with customers, allocating money to promote products must tout customer benefits.
Marketing Expense Budget Tostitos has chosen various advertising mediums based on the ability to reach prospective customers. Choosing to spend resources begins with Tostitos sales revenue. The cost associated with advertising will be paid for by sales and increasing sales is a priority. Revenue Objective – To increase sales by 10 % based on 2012 financials. Tostitos 2012 Annual Revenue - $1.6 billion Projected Sales – 1.6 billion x .10 = 160 Million Dollars increased projected sales 28 Million Dollar Marketing Budget
Tostitos must take into consideration what percentage of sales expenses need to be allocated for marketing support and advertising promotions. How much of Tostitos sales expense budget goes to pay for these marketing activities depends on many factors such as industry, location, and place in the product lifecycle.
Industry spending on marketing support in the consumer packaged snack food industry is between 10 and 12 percent of annual projected gross sales. Competitors in the industry are spending around 10 percent of their annual projected gross sales. Tostitos must remain an industry leader by increasing their budget in relation to competitors. Percent of sales to spend on expenses = 15 % Spending 15 % of sales on expenses is logical for my marketing plan because Tostitos is in the maturity phase of the product lifecycle. If I were launching a new product, I would allocate a higher percentage of sales to spend on marketing expenses. For my strategy, I am creating brand awareness, increasing sales, and positioning Tostitos as a healthy, fun party chip. The main advantage of using a percentage of sales strategy is that the marketing budget will increase, or decrease, with the sales revenue of the company. This ensures the marketing budget will not spin out of control and decrease sales revenue.
Marketing Expense Budget Marketing Plan Spending versus Sales High levels compared to sales – Evaluating Tostitos marketing plan, print advertising has the highest levels of costs compared to sales. The circulation of each magazine outweighs the extra costs associated with using print advertising. In addition, print advertising is one of the most expensive marketing tools but it reaches our target very precisely. The efforts of print advertising are not immediately associated to sales because of timing. Print advertising has a stronger longtime value instead of immediate increase sales. Low levels compared to sales – Television advertising reaches our target audience effectively. Advertising on cable television networks, at certain periods reduces the overall cost of ad. The production fees associated with creating a commercial are considerably lower than print advertisement. This is due to circulation based on press kits evaluated from each magazine in comparison to cable network viewer penetration. Television advertisements have a faster impact on sales because of Tostitos has more control of when to release certain commercial television strategies.
Marketing Expense Budget
Tostitos Budget
Plan $
Objective 1: Increase Tostitos perception as a healthy snack versus their competitors within 12 months. Strategy 1: Raise Brand Awareness
Program 1Print Advertising
Tactic 1- Cosmopolitan
$ 289,000 x 7 months = $2,023,000 total
Tactic 2- Better Homes & Gardens
$28,347 x 7 months = $198,429.00 total
Tactic 3- Sports Illustrated
$396,600 x 7 months = $2,776,200.00 total Total = $4,997,629.00
Program 2 – Drive Local Sales / Promote Mobile Apps
Tactic 1 - Facebook
Sidebar Ads $1 per-click Bid $500,000 Estimated Reach – 714,000 people
Tactic 2 – Twitter
Followers 15,000 15,000 x $3 = $45,000
Tactic 3 – YouTube
Approx. Ad Views – 70,000 70,000 x .20 = $14,000 Total = $5,556,629.00
Strategy 2: POP Promotion
Program 3 – ISM (In-Store Media)
Tactic 1 – NFL Super bowl Campaign / Fiesta bowl
Retailer’s – Target: Chicago, IL 60604 Fair Oaks, IN 47943 Fullton, OH 43321 Detroit, MI 48242 Columbus, OH 43240 Lake Villa, IL 60046
$150,000 per four week run
Wal-Mart: Aurora, IL 60503 Lewis Center, OH 43035 Bristol, IL 60532 Rockford, IL 61112 Abrams, WI 54101 Detroit, MI 48242
$100,000 per four week run
$150,000 x 7 Months = $1,050,000.00
$100,000 x 7 Months = $700,000.00
$1,750,000.00 Total Strategy Cost = $12,304,258.00
Tostitos Budget
$
Objective 2: Increase cumulative sales of Millennial families by 15 % during months March, April, October, November, and December 2014. Strategy 1: Gain Market Share.
Program 1 – Print Advertising
Tactic 1 – US Weekly
$222,058 x 5 = $1,110,290.00
Tactic 2 – People
$324,400 x 5 = $1,622,000.00
Tactic 3 – Sports Illustrated
$396,600 x 5 = $1,983,000.00 Total = $4,715,290
Strategy 2: Enhance Web Presence
Program 2 – Social Media Enhancement / Online Enhancement
Tactic 1 – Google Hangouts
Platform = Free Content, Production, and Advertising costs of hangouts via Facebook and YouTube Costs = $900,000.00
Tactic 2 – Facebook
Optimized Cost Per Mile (oCPM) Bid - $3.00 per click Estimated reach 714,000 people 714,000 x $3 = $2,142,000.00
Tactic 3 – Tostitos Snack Chats
Design production – $6,000.00 Server/ Developer$12,000.00 Content Written – $12,000.00 Project Management / Hosting Fees 2014$5,000.00 Total = $35,000.00
Strategy 3: NFL Super bowl
Program 3- Television Commercials
Tactic 1 – History Channel
Production cost$15,000.00 Airtime cost4 month period -Ad runs 5 times between 7 pm and 11 pm daily -30-second slot Total = $ 55,000.00
Tactic 2 – ESPN
Production – $15,000.00 Airtime Cost4 month period Ad runs 5 times between 7 pm and 11 pm daily 30-second slot Total = $65,000.00 Total Strategy Cost = $7,912,290.00
Tostitos Budget
$
Objective 3: Increase sales of core customers by 20% during the months of January, February, May, June, and September 2014. Strategy 1: Market Awareness
Program 1- Print Advertising
Tactic 1 – Sports Illustrated
$396,000 x 5 = $1,980,000.00
Tactic 2- People
$324,400 x 5 = $1,622,000.00
Tactic 3 – Cosmopolitan
$289,000 x 5 = $1,445,000.00 Total - $5,047,000.00
Strategy 2: Brand Persona
Program 2 – Web Advertising
Tactic 1 – Tostitos Snack Chats / Blogs
Design Production – $10,000.00 Server / Developer – $15,000.00 Content Written – $8,000.00 Project Management / Hosting Fees 2014 – $8,000.00 Total – $41,000.00
Tactic 2 – Facebook
Optimized Cost Per Mile (oCPM) Bid - $3.00 per click Estimated reach 714,000 people 714,000 x $3 = $2,142,000.00
Tactic 3 – YouTube
Approx. Ad Views – 70,000 70,000 x .20 = $14,000
Total Strategy Cost = $7,244,000.00
Total of three strategies - $27,460,548.00