part 6: promotional decisions
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Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Part 6: Promotional DecisionsPart 6: Promotional Decisions
15. Integrated Marketing Communications
16.Advertising and Public Relations
17.Personal Selling and Sales Promotion
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Chapter 15Chapter 15
Integrated Integrated Marketing Marketing
CommunicationsCommunications
15-3Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter ObjectivesChapter Objectives1. Explain how integrated marketing communications relates
to the development of an optimal promotional mix.2. Describe the communication process and how it relates to
the AIDA concept.3. Explain how the promotional mix relates to the objectives
of promotion.4. Identify the different elements of the promotional mix and
explain how marketers develop an optimal promotional mix.
5. Describe the role of sponsorships and direct marketing in integrated marketing communications.
6. Contrast the two major alternative promotional strategies.7. Explain how marketers budget for and measure the
effectiveness of promotion.8. Discuss the value of marketing communications.
15-4Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter OverviewChapter Overview
PromotionPromotion: function of informing, persuading, and influencing the consumer’s purchase decision
Marketing CommunicationsMarketing Communications: transmission from a sender to a receiver of a message dealing with the buyer-seller relationship
15-5Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Integrated Marketing CommunicationsIntegrated 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 messageSuccess of any IMC program depends
critically on identifying the members of an audience and understanding what they want
15-6Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Importance of TeamworkImportance of TeamworkIMC 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
15-7Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Role of Databases in Effective IMC Role of Databases in Effective IMC ProgramsProgramsWith 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
15-8Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
The Communications ProcessThe Communications Process
An effective promotional message accomplishes three tasks:It gains the receiver’s attentionIt achieves understanding by both receiver
and senderIt stimulates the receiver’s needs and
suggests an appropriate method of satisfying them
15-9Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
AIDA conceptAIDA concept (Attention-Interest-Desire-Action) – an explanation of the steps through which an individual reaches a purchase decisionSenderEncodingChannelDecodingResponseFeedbackNoise
15-10
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Global Difficulties with the Communication ProcessIn 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”
15-11
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Objectives of PromotionObjectives of Promotion
Provide InformationProvide InformationInform the market about the availability of a
particular good or service Increase DemandIncrease 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
15-12
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Differentiate the ProductDifferentiate the ProductHomogenous 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 ValueAccentuate the Product’s ValuePromotion can explain the greater ownership
utility of a product to buyers, thereby accentuating its value and justifying a higher price
15-13
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Stabilize SalesStabilize SalesFor the typical firm, sales
fluctuations may result from cyclical, seasonal, or irregular demand
Stabilizing these variations is often an objective of promotional strategy
15-14
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Elements of the Promotional MixElements of the Promotional Mix
Promotional mixPromotional mix: blend of personal selling and nonpersonal selling designed to achieve promotional objectivesPersonal sellingPersonal selling: interpersonal
promotional process involving a seller’s person-to-person presentation to a prospective buyer
Nonpersonal sellingNonpersonal selling includes: Advertising, Product placement, Sales promotion, Direct marketing, Public relations
15-15
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AdvertisingAdvertisingPaid, 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 PlacementProduct PlacementMarketer pays a motion picture or television
program owner a fee to display his or her product prominently in the film or show
15-16
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Sales PromotionSales PromotionMarketing activities that stimulates
consumer purchasing (includes: displays, trade shows, coupons, premiums, contests, product demonstrations, and various nonrecurrent selling efforts)
Trade promotion
15-17
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Direct MarketingDirect MarketingDirect communications other than
personal sales contact between buyer and seller, designed to generate sales, information requests, or store visits
15-18
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Public relationsPublic relations: firm’s communications and relationships with its various publics
PublicityPublicity: stimulation of demand for good, service, place, idea, person, or organization by unpaid placement of commercially significant news or favorable media presentations
15-19
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Guerilla MarketingGuerilla Marketing: Unconventional, innovative, and low-cost marketing techniques designed to get consumers’ attention in unusual ways.
15-20
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SponsorshipsSponsorships
Provision of funds for a sporting or cultural event in exchange for a direct association with the events or activity
SpendingSpending now $11 Billion year
15-21
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Growth of SponsorshipsGrowth of SponsorshipsSponsorship has grown rapidly during the
past 30 yearsCorporate sponsorship spending has
increased faster than promotional outlays for advertising and sales promotion
How Sponsorship Differs from AdvertisingHow Sponsorship Differs from AdvertisingSponsor’s degree of controlNature of the messageAudience reactionAmbush marketing
15-22
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Assessing Sponsorship ResultsAssessing Sponsorship ResultsMarketers 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
15-23
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Direct MarketingDirect Marketing Few promotional mix elements are growing as
rapidly as direct marketingRelated overall spending total $1.7 trillion
Direct Marketing Communication ChannelsDirect Marketing Communication Channels
15-24
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Direct Mail 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
CatalogsCatalogsOver 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
15-25
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TelemarketingTelemarketing: 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
15-26
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Direct Marketing via Broadcast ChannelsDirect Marketing via Broadcast ChannelsBroadcast direct marketing includes:Brief (30 to 90 and second) direct response
ads on television or radioHome 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
15-27
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Electronic Direct Marketing ChannelsElectronic Direct Marketing ChannelsWeb advertising is an important
component of electronic direct marketingE-mail direct marketing is a natural and
easy extension of traditional direct mail marketing
Other Direct Marketing ChannelsOther Direct Marketing ChannelsPrint 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
15-28
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Developing an Optimal Promotional MixDeveloping an Optimal Promotional Mix
Factors that influence the effectiveness of a promotional to mix:Nature of the marketNature of the productStage in the product life-cyclePriceFunds available for promotion
15-29
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Nature of the marketNature of the marketPersonal selling may prove effective with a market
composed of a limited number of buyersAdvertising 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 productNature of the productHighly 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
15-30
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Stage in the product life-cycleStage in the product life-cyclePromotional 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 intermediariesHowever, advertising and sales promotion help to
create awareness and stimulate initial purchases In the growth and maturity stages, advertising gains
relative importancePersonal 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
15-31
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PricePriceAdvertising 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 promotionFunds available for promotionA critical element in the promotional strategy is the
size of the promotional budgetWhile 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
15-32
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Influencing Factors Personal Selling Advertising
Nature of the market Number of buyers Geographic concentration Type of customer
Limited number
Concentrated
Business purchaser
Large number
Dispersed
Ultimate consumer
Nature of the product Complexity Service requirements Type of good or service Use of trade-ins
Custom-made, complex
Considerable
Business
Trade-ins common
Standardized
Minimal
Consumer
Trade-ins uncommon
Stage in the product life cycle
Often emphasized at every stage; heavy emphasis in the introductory and early growth stages in acquainting marketing intermediaries and potential consumers with the new good or service
Often emphasized at every stage; heavy emphasis in the latter part of the growth stage, as well as the maturity and early decline stages, to persuade consumers to select specific brands
Price High unit value Low unit value
15-33
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Pulling and PushingPulling and PushingPromotional StrategiesPromotional Strategies
Pulling strategyPulling 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 strategyPushing 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
15-34
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Budgeting for Promotional StrategyBudgeting for Promotional Strategy
Percentage-of-sales method
Fixed-sum-per-unit method
Meeting competition method
Task-objective method
15-35
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Method Description Example
Percentage-of-sales method
Promotional budget is set as a specified percentage of either past or forecasted sales.
“Last year we spent $10,500 on promotion and had sales of $420,000. Next year we expect sales to grow to $480,000, and we are allocating $12,000 for promotion.”
Fixed-sum-per-unit method
Promotional budget is set as a predetermined dollar amount for each unit sold or produced.
“Our forecast calls for sales of 14,000 units, and we allocate promotion at the rate of $65 per unit.”
Meeting competition method
Promotional budget is set to match competitor’s promotional outlays on either an absolute or relative basis.
“Promotional outlays average 4 percent of sales in our industry.”
Task-objective method
Once marketers determine their specific, promotional objectives, the amount (and type) of promotional spending needed to achieve them is determined.
“By the end of next year, we want 75 percent of the area high-school students to be aware of our new, highly automated fast-food prototype outlet. How many promotional dollars will it take, and how should they be spent?”
15-36
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Figure 15.9Figure 15.9Allocation of Promotional Budgets for consumer
Packaged Goods
15-37
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Measuring the Effectiveness of PromotionMeasuring 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
15-38
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Measuring Online PromotionsMeasuring Online PromotionsEarly attempts at measuring online promotional
efforts involved counting hits and visitsIncorporating direct response and comparing
different promotions for effectivenessTwo 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
15-39
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The Value of Marketing CommunicationsThe Value of Marketing Communications
Social ImportanceSocial ImportanceCriticisms 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
15-40
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Business ImportanceBusiness ImportancePromotional 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
15-41
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Economic ImportanceEconomic ImportanceEffective promotion has allowed society to
derive benefits not otherwise availablePromotion 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
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