Promotions

1. Promotions • Advertising • Television, radio, print, internet, outdoors • Sales Force • Sales promotions • coupons, rebates, trade shows, free samples etc. • Public relations

2. Top Ad Spenders (1992) • P & G 1174 million • Phillip Morris 1090 • GM 948 • Ford 602 • Chrysler 567 • Pepsi 556

3. Top Categories • Automotive 3597 • Retail 2879 • Food 1780 • Restaurants 1334 • Entertainment 1065 • Telephone 732

4. Media • Newspapers 10862 • Network TV 10733 • Spot TV 9399 • Magazines 7105 • Cable TV 1590 • Spot Radio 1092 • Outdoor 655

5. Top Brands • McDonalds • Sears • Ford • Kelloggs • AT&T • Toyota • General Mills

6. Product life cycle and promotion Stage of PLCPurpose of Promotion Introduction Inform, create awareness Growth Persuade, differentiate Mature Remind, differentiate Decline Target niche markets

7. Product characteristics & promotions: Complex Product: Personal selling > Print Ad > TV Ad Risky Product: Personal sales

8. Purchase stage and Promotions Before buying Ad; free samples At time of buying Personal selling After buying Ad; personal services

9. Push versus pull strategy Push Strategy: Promote to retailers and create demand e.g., Trade promotions, quantity discounts, stock-up Pull Strategy: Promote to customers and create demand e.g., Advertising, coupons When to use more push versus pull Mature markets, Demand less than supply, Brand not strong

10. Advertising

11. STEPS IN DEVELOPING EFFECTIVE COMMUNICATIONS • Identify the target audience • Image Analysis: what the consumer thinks about the product. - desired image vs. current image • Determine the communication objectives: • Awareness - simple message, repeat name • Knowledge • Liking • Preference • Purchase 4. Designing the message:

12. AIDA Model • Attention • Interest • Desire • Action

13. Message content • Rational appeal • Emotion appeal: Fear appeal • Moral appeal • Humor

14. Types of Ads • Informative Ad - new products • Persuasive Ad - mature products • Comparative Ad - Nissan and Honda • Reminder Ad - Coke, Nike • Corrective Ad - Listerine • Advocacy Ad - MADD, AIDS, Drugs

15. Message Structure • Conclusion drawing: Explicitly stated or inferred • Educated audience: Better let them infer • Complex product: Explicitly state conclusion • One sided message: Only positive info. • good for favorably disposed audience • Two sided message: Both sides • good when audience is opposed, better educated

16. Message Format • Headline • Copy • Illustration • Color

17. Message Source Characteristics of a good source: • Experience • Likeability • Trustworthiness

18. Setting Ad Budget (1) Affordable method: - Ignores the impact of advertising on sales - Long range planning difficult (2) Percentage of sales: easy method - Is not clear whether ad causes sales or vice versa - Ignores the specific needs of a region (3) Competitive parity: Assumes that what the market does is rational - Does not account for the company’s objectives

19. (4) Objective and task method: Example: Dog Biscuit “Puppy Luv” 1. Set market share goal: 6% share If the population is 17m households, we plan to capture 6%*17 = 1m HH 2. REACH=Percentage of market to be reached to achieve goal = 80 3. FREQUENCY= Number of ad impressions needed for trial = 4 4. Number of Gross Rating Points (GRP) needed = Reach * Frequency = 80 * 4 = 320 GRPs Gross Rating Point = 1 exposure to 1% of population 5. If cost/GRP = $2500, then budget = 320 x 2500 = $ 800,000

20. Reach - Measure of the percentage of people in the target market who are exposed to the ad campaign during a given period; e.g. 70% of the target market. Frequency - Refers to how many times the average person in the target market is exposed in a given period; e.g. one may desire 3 exposures to serve their objective. GRP= Gross rating points Terms to remember

21. Types of Media • Television • National, Spot • Radio • Print – magazines, newspapers • Outdoor – billboard • Internet • Direct mail

22. Alternative media: • Billboards • Stalls in restrooms • Shopping carts • Heads and bodies • Parking meters • Back seat of taxi

23. How to select media Based on: Nature of the product Type of message Cost of production Cost - CPM (cost per thousand) Example: Newsweek $84,000 3million CPM = $28 Business Week $30,000 775,000 CPM = $39

24. Scheduling: Pulsing Budweiser experiment: Pulsing: The idea of concentrating heavy advertising in some periods and then having some periods of low level of advertising follow. • Dupont also conducts such experiments: In one experiment to advertise for Teflon coated cookware, they found that 5 exposures per week did not have any effect while 10 exposures per week doubled their market share.

25. Evaluation of the effectiveness of campaign Pre-testing Direct rating Laboratory tests Split cable testing Post testing Unaided/aided recall Recognition Intention to buy

26. Advertising agency Four departments: Creative, media, research, and business Average fees: 15% of the media cost Problems with fee structure: - Large advertisers pay more for the same services simply because they advertise more. - No incentive to use cheaper media or shorter campaigns. - Agencies feel that they perform extra services for an account without getting more money.

27. Other terms Storyboard : Outline of advertising Time compression: running an ad at a higher speed than the normal; e.g. levi jeans 30 second commercial / 15 seconds Zipping - when one changes the channel frequently and views many programs simultaneously. Zapping - when one does fast forward on taped program when the commercials arrive.

28. Sales Promotions

29. Types of sales promotions • Trade promotions • Advertising allowances, joint promotions, training, slotting allowances • Consumer promotions • Coupons, rebates 330b cpns, face value $194b • Deals / discounts

30. Trade promotions growing. Why? • Growing retailer power • Lower brand loyalty • Competition • Retailers have demand data and are in a better bargaining position

31. Types of consumer promotions • Coupons – in pack / on pack / FSI coupons • Rebates – cash refund • Premiums - buy two, get a free toy / t-shirt for $5 • Deals / discounts/ price bundles • Samples • Sweepstakes • Contests • Continuity programs – frequent flier miles • POP: Point of purchase displays

32. Types of Trade promotions • Price-offs • Allowances • Buy-back guarantees • Free goods • Displays • Premiums • Sales contests • Trade shows • conventions

33. Who is a coupon prone household ? • Income Low medium high • Education Low Medium high • Family size Large/small • Small children Y/N • Home owners / renters • Car owners • Are coupons profitable? • Redemption / Misredemption

34. How Sales Promotions Work ? Blattberg, Briesch, Fox - Marketing Science 1997 • Temporary price reductions substantially increase sales • Higher market share brands are less deal elastic • The frequency of deals changes the consumer’s reference price • Greater the frequency of deals, the lower the height of the deal spike

35. How Sales Promotions Work? • Cross promotional effects are asymmetric - promoting higher quality brands impacts weaker brands more than vice-versa • Retailers pass through less than 100% of the trade deals • Display and feature advertising have strong effects on item sales • Advertised promotions can result in increased store traffic • Promotions affect sales in complementary and competitive categories

36. Sales Promotions • Majority of promotional volume comes • from switchers • category expansion • Store switching • purchase acceleration • Stockpiling • Promotional elasticities are greater than price elasticities

37. Public relations • News releases • News conferences • Public service announcements • Talk shows, football games, book signings, autograph sessions

38. Joint promotions • Advantages? • Disadvantages?