Part 6: Promotional Decisions

1. Part 6: Promotional Decisions • Integrated Marketing Communications • Advertising and Public Relations • Personal Selling and Sales Promotion

2. Chapter 15 Integrated Marketing Communications

3. Chapter Objectives • Explain how integrated marketing communications relates to the development of an optimal promotional mix. • Describe the communication process and how it relates to the AIDA concept. • Explain how the promotional mix relates to the objectives of promotion. • Identify the different elements of the promotional mix and explain how marketers develop an optimal promotional mix. • Describe the role of sponsorships and direct marketing in integrated marketing communications. • Contrast the two major alternative promotional strategies. • Explain how marketers budget for and measure the effectiveness of promotion. • Discuss the value of marketing communications.

4. Chapter Overview • Promotion: function of informing, persuading, and influencing the consumer’s purchase decision • Marketing Communications: transmission from a sender to a receiver of a message dealing with the buyer-seller relationship

5. Integrated Marketing Communications • Coordination of all promotional activities – media advertising, direct mail, personal selling, sales promotion, and public relations – to produce a unified customer-focused promotional message • Success of any IMC program depends critically on identifying the members of an audience and understanding what they want

6. Importance of Teamwork • IMC requires a total strategy including all marketing activities, not just promotion • Successful implementation of IMC requires that everyone involved in every aspect of promotion – public relations, advertising, personal selling, and sales promotion – function as a team

7. Role of Databases in Effective IMC Programs • With the growth of the Internet, marketers have been given the power to gather information faster and to organize it easier than ever before • By sharing this knowledge appropriately among all relative parties, a firm can lay the foundation for a successful IMC program

8. The Communications Process • An effective promotional message accomplishes three tasks: • It gains the receiver’s attention • It achieves understanding by both receiver and sender • It stimulates the receiver’s needs and suggests an appropriate method of satisfying them

9. AIDA concept (Attention-Interest-Desire-Action) – an explanation of the steps through which an individual reaches a purchase decision • Sender • Encoding • Channel • Decoding • Response • Feedback • Noise

10. Global Difficulties with the Communication Process • In China: KFC’s slogan: “Finger lickin’ good” came out as “Eat your fingers off” • Also in China: Coca-Cola had thousands of signs made using the translation: “Ke-kou-ke-la” • Depending on the dialect this means . . . • “Bite the wax tadpole,” or • “Female horse stuffed with wax” • In Taiwan: Pepsi’s slogan, “Come alive with the Pepsi generation” came out as “Pepsi will bring your ancestors back from the dead”

11. Objectives of Promotion • Provide Information • Inform the market about the availability of a particular good or service • Increase Demand • Some promotions are aimed at increasing primary demand, the desire for a general product category • More promotions are aimed at increasing selective demand, the desire for a specific brand

12. Differentiate the Product • Homogenous demand for many products results when consumers regard the firm’s output as virtually identical to its competitors’– then, the firm has virtually no control over marketing variables • Accentuate the Product’s Value • Promotion can explain the greater ownership utility of a product to buyers, thereby accentuating its value and justifying a higher price

13. Stabilize Sales • For the typical firm, sales fluctuations may result from cyclical, seasonal, or irregular demand • Stabilizing these variations is often an objective of promotional strategy

14. Elements of the Promotional Mix • Promotional mix: blend of personal selling and nonpersonal selling designed to achieve promotional objectives • Personal selling: interpersonal promotional process involving a seller’s person-to-person presentation to a prospective buyer • Nonpersonal selling includes: Advertising, Product placement, Sales promotion, Direct marketing, Public relations

15. Advertising • Paid, nonpersonal communication through various media by a business firm, not-for-profit organization, or individual identified in the message with the hope of informing or persuading members of a particular audience • Product Placement • Marketer pays a motion picture or television program owner a fee to display his or her product prominently in the film or show

16. Sales Promotion • Marketing activities that stimulates consumer purchasing (includes: displays, trade shows, coupons, premiums, contests, product demonstrations, and various nonrecurrent selling efforts) • Trade promotion

17. Direct Marketing • Direct communications other than personal sales contact between buyer and seller, designed to generate sales, information requests, or store visits

18. Public relations: firm’s communications and relationships with its various publics • Publicity: stimulation of demand for good, service, place, idea, person, or organization by unpaid placement of commercially significant news or favorable media presentations

19. Guerilla Marketing: Unconventional, innovative, and low-cost marketing techniques designed to get consumers’ attention in unusual ways.

20. Sponsorships • Provision of funds for a sporting or cultural event in exchange for a direct association with the events or activity • Spending now $11 Billion year

21. Growth of Sponsorships • Sponsorship has grown rapidly during the past 30 years • Corporate sponsorship spending has increased faster than promotional outlays for advertising and sales promotion • How Sponsorship Differs from Advertising • Sponsor’s degree of control • Nature of the message • Audience reaction • Ambush marketing

22. Assessing Sponsorship Results • Marketers utilize some of the same techniques to measure both advertising and sponsorship • The differences between the two promotional alternatives often necessitate some unique research techniques • Despite the impressive visibility of special events like soccer’s World Cup and football’s Super Bowl, the demands do not necessarily lead directly to increased sales or improved brand awareness

23. Direct Marketing • Few promotional mix elements are growing as rapidly as direct marketing • Related overall spending total $1.7 trillion • Direct Marketing Communication Channels

24. Direct Mail • Marketers combine information from internal and external databases, surveys, coupons, and rebates that require responses to provide information about consumer lifestyles, buying habits, and wants • Catalogs • Over 10,000 different consumer mail-order catalogs and thousands more for business-to- business sales are mailed each year generating over $57 million in consumer sales and $36 million in B2B sales

25. Telemarketing: promotional presentation involving the use of the telephone for outbound contacts by salespeople or inbound contacts initiated by customers who want to obtain information and place orders

26. Direct Marketing via Broadcast ChannelsBroadcast direct marketing includes: • Brief (30 to 90 and second) direct response ads on television or radio • Home shopping channels like: • Quality Value Channel (QVC) • Home Shopping Network (HSN) • Infomercial: promotional presentation for a single product running 30 minutes or longer in a format that resembles a regular television program

27. Electronic Direct Marketing Channels • Web advertising is an important component of electronic direct marketing • E-mail direct marketing is a natural and easy extension of traditional direct mail marketing • Other Direct Marketing Channels • Print media is generally not as effective as Web marketing or telemarketing for direct marketers • Magazine and newspaper ads with toll-free telephone numbers, kiosks, and other media are still useful in many situations

28. Developing an Optimal Promotional Mix • Factors that influence the effectiveness of a promotional to mix: • Nature of the market • Nature of the product • Stage in the product life-cycle • Price • Funds available for promotion

29. Nature of the market • Personal selling may prove effective with a market composed of a limited number of buyers • Advertising is more effective when a market has large numbers of potential customers scattered over sizable geographic areas • Personal selling often works better for intermediary target markets • Nature of the product • Highly standardized products with minimal servicing requirements usually need less personal selling than custom products with complex features and/or frequent maintenance needs • Consumer products are more likely to rely heavily on advertising than are business products

30. Stage in the product life-cycle • Promotional mix must be tailored to the products stage in the product life-cycle • In the introductory stage, there is a heavy emphasis on personal selling to the to the intermediaries • However, advertising and sales promotion help to create awareness and stimulate initial purchases • In the growth and maturity stages, advertising gains relative importance • Personal selling efforts at marketing intermediaries to expand distribution is continued • In the maturity and early decline stages, firms frequently reduce advertising and sales promotion expenditures

31. Price • Advertising dominates the promotional mix for low-unit-value products due to the high personal contact costs of personal selling • Consumers a high-priced items like luxury cars expect lots of well-presented information via videocassettes, CDs, fancy brochures, and personal selling • Funds available for promotion • A critical element in the promotional strategy is the size of the promotional budget • While the cost-per-contact of a $2 million, 30-second TV commercial during the Super Bowl is relatively low, such an expenditure exceeds the entire promotional budgets of many, if not most firms

33. Pulling and PushingPromotional Strategies • Pulling strategy: promotional effort by a seller to stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service, pulling it though the marketing channel • Pushing strategy: promotional effort by a seller to members of the marketing channel intended to stimulate personal selling of the good or service, thereby pushing it through the marketing channel

34. Budgeting for Promotional Strategy • Percentage-of-sales method • Fixed-sum-per-unit method • Meeting competition method • Task-objective method

36. Figure 15.9 • Allocation of Promotional Budgets for consumer Packaged Goods

37. Measuring the Effectiveness of Promotion • Two basic measurement tools: • Direct sales results measures the effectiveness of promotion by revealing the specific impact on sales revenues for each dollar of promotional spending • Indirect evaluation concentrates on quantifiable indicators of effectiveness like: • Recall - how much members of the target market remember about specific products or advertisements • Readership – size and composition of a message’s audience

38. Measuring Online Promotions • Early attempts at measuring online promotional efforts involved counting hits and visits • Incorporating direct response and comparing different promotions for effectiveness • Two major techniques for setting online advertising rates: • Cost per impression (CPM), technique that related the cost of an ad to every thousand people who read it • Cost per response (click-throughs), which assumes that those who actually click on an ad want more information

39. The Value of Marketing Communications • Social Importance • Criticisms of promotional messages as tasteless and lacking any contribution to society sometimes ignore the fact that society provides no commonly accepted set of standards • The one generally accepted standard in a market society is freedom of choice for the consumer • Promotion has become an important factor in campaigns aimed at achieving socially oriented objectives like the elimination of drug abuse

40. Business Importance • Promotional strategy has become increasingly important to both small and large firms • Its effectiveness to encourage attitude changes, brand loyalty and increase sales is well-documented • Both business and nonbusiness enterprises recognize the importance of promotional efforts • Nonbusiness organizations using promotion include governments and religions

41. Economic Importance • Effective promotion has allowed society to derive benefits not otherwise available • Promotion increases the number of units sold; the resulting economies of scale lower production costs and allows lower sales prices • Subsidizes the information contents of newspapers and the broadcast media