Promotional Strategy

1. Promotional Strategy It is a luxury to be understood. -- Ralph Waldo Emerson "Let advertisers spend the same amount of money improving their product as they do advertising, and they wouldn't have to advertise it." --Will Rogers “Half the money I spend on advertising is wasted, and the trouble is, I don’t know which half.” -- John Wanamaker

2. Price Price D1 D2 D2 D1 O O Quantity Quantity Why do companies promote?

3. Any Paid Form of Nonpersonal Presentation by an Identified Sponsor. Short-term Incentives to Encourage Trial or Purchase. Sales Promotion Protect and/or Promote Company’s Image/products. Public Relations Personal Presentations. Direct Communications With Individuals to Obtain an Immediate Response. Direct Marketing Advertising The Marketing Communications Mix Personal Selling

4. Relative Importance of Promotion Tools in Consumer vs. Industrial Markets Industrial goods Consumer goods Personal Selling Advertising Sales Promotion Sales Promotion Advertising Personal Selling Public Relations Public Relations Relative importance Relative importance

5. Push Versus Pull Strategy Interme- diaries End users Marketing activities Marketing activities Demand Marketing activities Interme- diaries End users Demand Demand Producer Push Strategy Producer Pull Strategy

6. Product Life-Cycle Stage Push vs. Pull Strategy Buyer/ Readiness Stage Type of Product/ Market Factors in Developing Promotion Mix Strategies

7. A Framework for Developing Communication Strategy Copy Strategy • Target • Person, situation • Objective • Primary, Secondary • (Cognitive, Affective, Behavioral) • Benefit • Consumer Benefit • Reason To Believe • Message Elements • Tone • Heart Emotional Responses by… • Leverage Point/Driving Point • Evaluation • Communication effect • Awareness • Knowledge • Preference • Sales effect • Behavior • Execution • Message • AIDA • Promotion mix

8. Three Objectives of Marketing Communication • Build Awareness (cognitive) • Reinforce the message (affective) • Establish and maintain a desired level of retention with respect to image, key benefits, and name recognition • Stimulate Action (Behavior) • Motivate target customers to take a specific action in a relatively short time

9. INFORMATION CHANNEL & TIMING ACTION DESIRED SPOKESPERSON MESSAGE TARGET AUDIENCE Strategy WHAT ARE THEKEYQUESTIONS INDEVELOPING AND EVALUATING PROMOTIONS? SAYS WHAT TO WHOM WITH WHAT EFFECT WHO HOW

10. Strategy Print Ads that Win vs. Print Ads that Work • Keep it simple, stupid. • You’re not selling the product; you’re selling the benefits. • Use celebrities. • Exploit the potential of color. • Heighten the contrast. • Use children and animals. • When the ad has a good deal of copy, make it as inviting as possible. Source: Marketing Tools (!995)

11. Cognitive Stage Affective Stage Awareness Knowledge Liking Purchase Preference Conviction Affective Stage Behavior Stage Objective: Buyer Readiness States Strategy

12. Stages Cognitive stage Attention Awareness Knowlege Awareness Exposure Reception Cognitive response Affective stage Interest Desire Liking Preference Conviction Interest Evaluation Attitude Intention Behavior stage Action Purchase Trial Adoption Behavior Response Hierarchy Models Strategy AIDA Modela Hierarchy-of- Effects Modelb Innovation- Adoption Modelc Communi- cations Modeld

13. n Ao = Sbiei i =1 External Search Versus Internal Search Evaluations (ei) Beliefs (bi) Salient Choice Outcomes High Quality of education Favorable job opportunities Low cost Close to home Ample recreational/cultural opportunities U of U BYU +5 1 1 2 3 1 3 3 2 1 1 +5 +3 +2 +2 29 40 Evaluations: Importance of attribute i in the purchase decision. Beliefs: How well does product/service deliver on attribute i. • An understanding of what consumers believe is the starting point for effective advertising. • Advertising that is based on accepted consumer beliefs is generally more effective.

14. Decide on Communications Mix Advertising Sales Promotion Public Relations & Publicity Execution Personal Selling Direct Marketing

15. Designing the Message Execution Message Content Rational Appeals Emotional Appeals Moral Appeals Message Structure Draw Conclusions Argument Type Argument Order Message Format Layout, Words, & Sounds, Body Language Message Source Expertise, Trustworthiness, Congruity

16. The language of the media buyer Term What It Means Reach The number of different people or households exposed to an advertisement. Rating The percentage of households in a market that are tuned to a particular TV show or radio station. Frequency The average number of times an individual is exposed to an advertisement. Gross rating points (GRPs) Reach (expressed as a percentage of the total market) multiplied by frequency. Cost per thousands (CPM) The cost of advertising divided by the number of thousands of individuals or households who are exposed.

17. Message Frequency and Message Awareness

18. Krugman’s Three Exposures Theory • Familiarization Exposure • Evaluation Exposure • Confirmation/Reinforcement Exposure

19. Interbrand’s valuation Brand Value Advertising turnover = Advertising Expenditures Advertising Age Annual report SEC documentation Linking Advertising and Brand Value The relationship of the firm’s advertising expenditures to its brand value is captured in the advertising turnover calculation. (Herremans, Ryans, and Aggarwal, Business Horizons, 2000)

20. Sample Firms Intel Kodak Nike Kellogg Avon HP Polaroid Reebok Wrigley Compaq Coke Coors Results: Four Categories Linking Advertising and Brand Value: The Study • High-Efficiency Brand Enhancers (brand value is rising faster than expenditures) • Low-Efficiency Brand Enhancers (expenditures are rising faster than brand value) • Brand Future Unknown (brand values are rising and expenditures decreasing) • Brand Deterioration (brand values are decreasing and expenditures increasing) (Herremans, Ryans, and Aggarwal, Business Horizons, 2000)

21. A. High Efficiency Brand Enhancers B. Low Efficiency Brand Enhancers Avon Nike Compaq HP Coke Wrigley Kellogg 90 75 60 45 30 15 0 90 75 60 45 30 15 0 90 75 60 45 30 15 0 90 75 60 45 30 15 0 Advertising Turnover Advertising Turnover 1991 1992 1993 1994 1995 1996 1991 1992 1993 1994 1995 1996 1991 1992 1993 1994 1995 1996 1991 1992 1993 1994 1995 1996 C. Brand Future Unknown D. Brand Deterioration Coors Polaroid Reebok Intel Kodak Advertising Turnover Advertising Turnover Linking Advertising and Brand Value: The Results (Herremans, Ryans, and Aggarwal, Business Horizons, 2000)

22. Linking Advertising and Brand Value: Multiple Measures 1. Advertising turnover represents how well advertising expenditures are turned into brand value. Brand Value Advertising turnover = Advertising Expenditures 2. Brand turnover indicates how effectively the brand value converts to sales. Brand Sales Brand turnover = Brand Value • Return on sales indicates how efficiently those brand-generated sales • are converted to operating income. Net Income Return on Sales = Brand Sales 4. Brand ROI Brand Sales Net Income Brand ROI = X Brand Value Brand Sales

23. Linking Advertising and Brand Value: Multiple Measures Coke Wrigley Kellogg Percentage of increase in advertising 45 39 10 Percentage of increase in brand value 97 103 27 Average return on sales 15.6 12.4 9 Average brand ROI 6.3 7.9 5.8 (Herremans, Ryans, and Aggarwal, Business Horizons, 2000)

24. Advertising Program Evaluation Communication Effects Is the Ad Communicating Well? Sales Effects Is the Ad Increasing Sales? Advertising Evaluation Evaluation • Awareness • Knowledge • Preference • Behavior

25. Measuring Promotion Results: Is our strategy working? Evaluation Evaluation 1. Share of expenditures 2. Share of voice 3. Share of mind and heart 4. Share or market 20% not aware 40% did not try 100% Market 80% aware 80% disappointed 60% tried 20% satisfied Total Awareness Brand Trial Satisfaction Communication Expenditures Share of Mind and Heart Share of Voice Share of Market

26. 100 80 60 40 20 0 Poor ad Mediocre ad Average ad Good ad Great ad Simplified Rating Sheet for Ads Evaluation (Attention) How well does the ad catch the reader’s attention? __20 (Read-through) How well does the ad lead the reader to read further? __20 (Cognitive) How clear is the central message or benefit? __20 (Affective) How effective is the particular appeal? __20 (Behavior) How well does the ad suggest follow-through action? __20 __Total

27. Marketing Communications and Customer Response Index

28. Media Advertising and Sales Carryover

29. Profiles of Major Media Types Execution Newspapers Advantages: Flexibility, timeliness; good local market coverage; broad acceptance, high believability Limitations: Short life; poor reproduction quality; small pass-along audience Television Advantages:Combines sight, sound, motion; high attention; high reach; appealing to senses Limitations:High absolute costs; high clutter; fleeting exposure; less audience selectivity Direct Mail Advantages: Audience selectivity; flexibility, no ad compe- tition within same medium; allows personalization Limitations: Relative high cost; “junk mail” image

30. Profiles of Major Media Types Execution Radio Advantages:Mass use; high geographic and demographic selectivity; low cost Limitations:Audio only; fleeting exposure; lower attention; nonstandardized rates; fragmented audiences Magazines Advantages:High geographic and demographic selectivity; credibility and prestige; high-quality reproduction; long life; good pass-along readership Limitations:Long ad purchase lead time; waste circulation; no guarantee of position Outdoor Advantages: Flexibility; high repeat exposure; low cost; low message competition Limitations: Little audience selectivity; creative limitations

31. Why the increase in Sales Promotion? Execution • Growing retailer power • Declining brand loyalty • Increased promotional sensitivity • Brand proliferation • Fragmentation of consumer market • Short-term focus • Increased managerial accountability • Competition • Clutter

32. Trade Promotions Push RETAILER Consumer Promotions Pull Retail Promotions Push CONSUMER Channels of Sales Promotions Execution MANUFACTURER

33. Samples Advertising Specialties Coupons Patronage Rewards Patronage Rewards Cash Refunds Contests Price Packs Sweepstakes Premiums Games Point-of-Purchase Displays Consumer Promotion Execution Consumer-Promotion Objectives Consumer-Promotion Tools Entice Consumers to Try a New Product Lure Customers Away From Competitors’ Products Get Consumers to “Load Up’ on a Mature Product Hold & Reward Loyal Customers Consumer Relationship Building

34. Price-Offs Premiums Allowances Patronage Rewards Displays Buy-Back Guarantees Discounts Push Money Free Goods Specialty Advertising Items Contests Trade Promotions Execution Trade-Promotion Tools Trade-Promotion Objectives Persuade Retailers or Wholesalers to Carry a Brand Give a Brand Shelf Space Promote a Brand in Advertising Push a Brand to Consumers

35. Conventions Trade Shows Sales Contests Business-to-Business Promotion Execution Business-Promotion Objectives Business-Promotion Tools Generate Business Leads Stimulate Purchases Reward Customers Motivate Salespeople