CHAPTER FIFTEEN INTEGRATED MARKETING COMMUNICATIONS Text by Profs.

CHAPTER FIFTEEN INTEGRATED MARKETING COMMUNICATIONS Text by Profs.

CHAPTER FIFTEEN INTEGRATED MARKETING COMMUNICATIONS Text by Profs. Gene Boone & David Kurtz Multimedia Presentation by Prof. Milton Pressley The University of New Orleans 15-1 Copyright 2001 by Harcourt, Inc. All rights reserved. CHAPTER CHAPTER OBJECTIVES OBJECTIVES Relate the concept of integrated marketing communications to the development of the optimal promotional mix Explain the relationship of promotional strategy to the process of communication List the objectives of promotion Explain the concept of the promotional mix

and its relationship to the marketing mix 15-2 Copyright 2001 by Harcourt, Inc. All rights reserved. CHAPTER CHAPTER OBJECTIVES OBJECTIVES Discuss the role of sponsorships and direct marketing in integrated marketing communications planning Identify the primary determinants of a promotional mix Contrast the two major alternative promotional strategies Compare to the primary methods of developing a promotional budget Defend promotion against common public criticisms

15-3 Copyright 2001 by Harcourt, Inc. All rights reserved. Chapter Chapter Overview Overview Promotion: function of informing, persuading, and influencing the consumers purchase decision Marketing Communications: transmission from a sender to a receiver of a message dealing with the buyer-seller relationship 15-4 Copyright 2001 by Harcourt, Inc. All rights reserved. Integrated Integrated Marketing Marketing Communications Communications

Integrated marketing communications (IMC): 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 PhotoDisc 15-5 Copyright 2001 by Harcourt, Inc. All rights reserved. Recognizing Recognizing That That Many Many Consumers Consumers Dislike Dislike the the Face-to-Face Face-to-Face Sales Sales Tactics

Tactics That That Often Often Characterize Characterize Showroom Showroom Floors, Floors, GM GM Has, Has, as as Part Part of of Its Its IMC IMC Program, Program, Streamlined Streamlined the the Car-buying Car-buying Experience Experience Here Here On On Its Its WebSite WebSite 15-6

Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Wheres Wheres The The Tracker? Tracker? Trackers Trackers IMC IMC Program Program Included Included aa Game Game for for Chevrolet Chevrolet Tracker Tracker That That Drew Drew 1.3 1.3 Million Million Entries Entries Online

Online and and Another Another 100,000 100,000 Offline Offline 15-7 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Cheerios Cheerios One One of of Many Many Different Different Ads Ads in in an an IMC IMC Campaign Campaign for for

Cheerios Cheerios That That Produced Produced aa Unified Unified Customer-Focused Customer-Focused Message Message Aimed Aimed at at Cheerios Cheerios Many Many Different Different Target Target Markets Markets 15-8 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Figure

Figure 15.1: 15.1: Joint Joint Integrated Integrated Marketing Marketing Promotion Promotion by by General General Mills Mills and and Nintendo Nintendo PlayStations PlayStations 15-9 Copyright 2001 by Harcourt, Inc. All rights reserved. Importance Importance of of Teamwork 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 PhotoDisc 15-10 Copyright 2001 by Harcourt, Inc. All rights reserved. Role Role of of Databases Databases in in Effective Effective IMC IMC Programs

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 PhotoDisc 15-11 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.2: 15.2: Radio

Radio Shack Shack Using Using Database Database Information Information to to Stock Stock Retail Retail Stores Stores 15-12 Copyright 2001 by Harcourt, Inc. All rights reserved. Snyder Snyder Communications, Communications, an an Illinois-Based Illinois-Based Direct Direct Sampler Sampler for for Consumer-Products

Consumer-Products Companies, Companies, Uses Uses aa Database Database to to Target Target Its Its Programs Programs to to Hispanic Hispanic Households Households With With Children Children Aged Aged 66 12. 12. 15-13 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE COMMUNICATIONS COMMUNICATIONS PROCESS PROCESS Table 15.1: Relating Promotion to the Communications Process

15-14 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.3: 15.3: Calvin Calvin Klein: Klein: Kiosks Kiosks Provide Provide Instant Instant Feedback Feedback for for Fragrance Fragrance Marketers Marketers 15-15 Copyright 2001 by Harcourt, Inc. All rights reserved. THE

THE COMMUNICATIONS COMMUNICATIONS PROCESS PROCESS An effective promotional message accomplishes three tasks: It gains the receivers attention It achieves understanding by both receiver and sender It stimulates the receivers needs and suggests an appropriate method of satisfying them The above tasks are related to the AIDA concept (Attention-Interest-Desire-Action) an explanation of the steps through which an individual reaches a purchase decision 15-16 Copyright 2001 by Harcourt, Inc. All rights reserved. TUMS TUMS A A Print Print Message

Message Following Following the the AIDA AIDA Concept Concept 15-17 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Global Global Difficulties Difficulties With With the the Communication Communication Process Process In China: KFCs 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: Pepsis slogan, Come alive with the Pepsi generation came out as Pepsi will bring your ancestors back from the dead 15-18 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Objectives Objectives of of Provide Promotion Promotion Information Traditional function of promotion was to inform the market about the availability of a particular good or

service Marketers still direct large portions of current promotional efforts at providing information PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.4: 15.4: Haagen-Dazs Haagen-Dazs Providing Providing Information Information to to Consumers Consumers 15-20 Copyright 2001 by Harcourt, Inc. All rights reserved. Haagen-Dazs Haagen-Dazs Also

Also Provides Provides Information Information to to Consumers Consumers via via Its Its WWW WWW Site Site 15-21 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Walt Walt Disney Disney World World Ad Ad Promoting Promoting aa Free Free Video Video to to Provide

Provide Information Information for for Vacation Vacation Planning Planning 15-22 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Objectives Objectives of of Provide Promotion Promotion Information 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 PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. MindSpring MindSpring Internet Internet Services Services Increasing Increasing Selective Selective Demand Demand 15-24 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Nokia Nokia Cellular Cellular Phone

Phone Company Company Attempts Attempts to to Convince Convince Potential Potential Buyers Buyers of of Nokias Nokias Advantages Advantages Over Over Other Other Cellular Cellular Phones Phones (Build (Build Selective Selective Demand) Demand) Via Via Its Its WWW WWW Site Site 15-25 Copyright 2001 by Harcourt, Inc. All rights reserved.

Copyright 2001 by Harcourt, Inc. All rights reserved. Objectives Objectives of of Provide Promotion Promotion Information Increase Demand Product differentiation is a frequent objective Homogenous demand for many products results when consumers regard the firms output as virtually identical to its competitors then, the firm has virtually no control over marketing variables Product differentiation permits more flexibility in marketing strategy

PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Differentiate the Product Hefty Hefty OneZip OneZip Differentiating Differentiating Its Its Product Product 15-27 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Achie Achie McPhee, McPhee, Having Having Differentiated Differentiated Its Its Party Party Supplies,

Supplies, Maintains Maintains aa WWW WWW Site Site as as Part Part of of Its Its IMC IMC Efforts Efforts 15-28 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Objectives Objectives of of Provide Promotion Promotion Information Increase Demand

Promotion can explain the greater ownership utility of a product to buyers, thereby accentuating its value and justifying a higher price PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Differentiate the Product Accentuate Products Value Johnson Johnson & & Johnson Johnson First First Aid Aid To To Go! Go! Accentuating Accentuating aa

Products Products Value Value 15-30 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Objectives Objectives of of Provide Promotion Promotion Information Increase Demand For the typical firm, sales fluctuations may result from cyclical, seasonal, or irregular demand Stabilizing these variations is often an objective of promotional strategy

PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Differentiate the Product Accentuate Products Value Stabilize Sales The The Promotional Promotional Mix Mix Personal Selling Nonpersonal Selling Promotional mix: blend of personal selling and

nonpersonal selling (including advertising, sales promotion, direct marketing, and public relations) designed to achieve promotional objectives 15-32 Copyright 2001 by Harcourt, Inc. All rights reserved. The The Promotional Promotional Mix Mix Personal Selling Personal selling: interpersonal promotional process involving a sellers person-to-person presentation to a

prospective buyer Nonpersonal Selling 15-33 Copyright 2001 by Harcourt, Inc. All rights reserved. The The Promotional Promotional Mix Mix Personal Selling Nonpersonal Selling Nonpersonal selling includes: Advertising Sales promotion Direct marketing Public relations

15-34 Copyright 2001 by Harcourt, Inc. All rights reserved. Nonpersonal Nonpersonal Selling Selling Advertising Advertising Advertising: paid, nonpersonal communication through various media by a business firm, not-forprofit organization, or individual identified in the message with the hope of informing or persuading members of a particular audience 15-35 Copyright 2001 by Harcourt, Inc. All rights reserved. Nonpersonal

Nonpersonal Selling Selling Advertising Sales Sales promotion promotion Sales promotion: marketing activities other than personal selling, advertising, and publicity that stimulates consumer purchasing and dealer effectiveness (includes displays, trade shows, coupons, premiums, contests, product demonstrations, and various nonrecurrent selling efforts) 15-36 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure

Figure 15.5: 15.5: A A Joint Joint Promotion Promotion Using Using Licensing Licensing 15-37 Copyright 2001 by Harcourt, Inc. All rights reserved. Van Van de de Kamps Kamps Breaded Breaded Fish Fish Sticks Sticks Sales Sales Promotion Promotion Designed

Designed to to Stimulate Stimulate Consumer Consumer Purchasing Purchasing 15-38 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Nonpersonal Nonpersonal Selling Selling Advertising Sales Sales promotion promotion Trade promotion: sales promotions aimed at marketing

intermediaries rather than ultimate consumers 15-39 Copyright 2001 by Harcourt, Inc. All rights reserved. Nonpersonal Nonpersonal Selling Selling Advertising Sales promotion Direct Direct marketing marketing Direct marketing: direct communications other than personal sales contact between buyer and seller, designed to generate sales, information requests, or store visits

15-40 Copyright 2001 by Harcourt, Inc. All rights reserved. Nonpersonal Nonpersonal Selling Selling Advertising Sales promotion Direct marketing Public Public relations relations Public relations: firms 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 15-41 Copyright 2001 by Harcourt, Inc. All rights reserved. Advantages Table 15.2: Relating Promotion to the Communications Process Personal Sales Direct Public Selling Promotion Marketing Relations Advertising Permits measurement of effectiveness. Elicits an immediate response. Tailors the

message to fit the customer. Reaches a large group of potential consumers for a relatively low price per exposure. Allows strict control over the final message. Can be adapted to either mass audiences or specific audience segments. Produces an immediate consumer response.

Attracts attention and creates product awareness. Allows easy measurement of results. Provides shortterm sales increases. Generates an immediate response. Covers a wide audience with targeted advertising. Allows complete, customized, personal message. Produces

measurable results. Creates a positive attitude toward a product or company. Enhances credibility of a product or company. Continued on next slide . . . 15-42 Copyright 2001 by Harcourt, Inc. All rights reserved. Table 15.2: Relating Promotion to the Communications Process (Continued) Disadvantages

Personal Selling Relies almost exclusively upon the ability of the salesperson. Involves high cost per contact. Sales Direct Advertising Promotion Marketing Does not permit totally accurate measuremen t of results. Usually cannot close sales. Is

nonpersona l in nature. Is difficult to differentiat e from competitor s efforts. Suffers from image problem. Involves a high cost per reader. Depends on quality and accuracy of mailing lists. May annoy consumers. Public Relations May not

permit accurate measureme nt of effect on sales. Involves much effort directed toward nonmarketi ng-oriented goals. 15-43 Copyright 2001 by Harcourt, Inc. All rights reserved. SPONSORSHIPS SPONSORSHIPS Sponsorship: provision of funds for a sporting or cultural event in exchange for a direct association with the events; in ecommerce, a long-term linkage between a Web site and a marketer

Sponsor IBM is prominently featured on the Sydney 2000 Olympic WebSite 15-44 Copyright 2001 by Harcourt, Inc. All rights reserved. AT&T AT&T Digital Digital One One Rate Rate AT&T: AT&T: A A Sponsor Sponsor of of the the PGA PGA Tour Tour

15-45 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Sponsorship Sponsorship Spending Spending Figure Figure 15.6: 15.6: Sponsorship Sponsorship Spending Spending (in (in Millions Millions of of Dollars) Dollars) by by North North American American Corporations Corporations

15-46 Copyright 2001 by Harcourt, Inc. All rights reserved. Growth Growth of of Sponsorships Sponsorships Sponsorship has grown rapidly for the past 30 years During this period corporate sponsorship spending has increased faster than promotional outlays for advertising and sales promotion PhotoDisc 15-47 Copyright 2001 by Harcourt, Inc. All rights reserved. How

How Sponsorship Sponsorship Differs Differs From From Advertising Advertising Differences include the: Sponsors degree of control vs. that of the advertisers Nature of the message Audience reaction Measurements of effectiveness PhotoDisc 15-48 Copyright 2001 by Harcourt, Inc. All rights reserved. Assessing Assessing Sponsorship Sponsorship Results Results

Marketers utilize some of the same techniques to measure both advertising and sponsorship However, the differences between the two promotional alternatives often necessitate some unique research techniques, as well Despite the impressive visibility of special events like soccers World Cup and footballs Super Bowl, the demands do not necessarily lead directly to increased sales PhotoDisc 15-49 Copyright 2001 by Harcourt, Inc. All rights reserved. Using Using Sponsorship Sponsorship in in aa Promotional Promotional

Strategy Strategy Figure Figure 15.7: 15.7: Steps Steps in in the the Sponsorship Sponsorship Process Process 15-50 Copyright 2001 by Harcourt, Inc. All rights reserved. DIRECT DIRECT MARKETING MARKETING Few promotional mix elements are growing as rapidly as direct marketing

Related overall spending total more than $162 billion Direct marketing accounts for 57 percent of total U.S. advertising expenditures PhotoDisc 15-51 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.8: 15.8: Direct Direct Marketing Marketing Sales Sales by by Media Media Category Category 15-52 Copyright 2001 by Harcourt, Inc. All rights reserved. Direct Direct Marketing

Marketing Communications Communications Channels Channels Direct marketing uses many different media forms including: Telephone Direct mail Television Newspapers Magazines Radio Marketers often combine two or more

media in one direct marketing program 15-53 Copyright 2001 by Harcourt, Inc. All rights reserved. Direct Direct Mail Mail Marketers combine information from internal and external databases, surveys, personalize coupons, and rebates that require responses to provide information about consumer lifestyles, buying habits, and wants As the information improves, direct-mail has become a viable channel for identifying a firms best prospects Direct mail is a critical tool in creating effective direct marketing campaigns Milton Pressley 15-54

Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.9: 15.9: Targeted Targeted Direct Direct Mail Mail Van Van Gogh Gogh Exhibition Exhibition 15-55 Copyright 2001 by Harcourt, Inc. All rights reserved. Catalogs Catalogs A highly popular form of direct mail

Over 10,000 different consumer mail-order catalogs and thousands more for business-tobusiness sales are mailed each year They typically generate over $57 million in consumer sales and $36 million in business-tobusiness sales Almost 45 percent of Americans still refuse to purchase from a catalog Milton Pressley 15-56 Copyright 2001 by Harcourt, Inc. All rights reserved. Telemarketing Telemarketing 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 PhotoDisc

15-57 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.10: 15.10: Offering Offering Toll-Free Toll-Free Telephone Telephone Numbers Numbers to to Catalog Catalog Shoppers Shoppers 15-58 Copyright 2001 by Harcourt, Inc. All rights reserved. Direct Direct Marketing Marketing Via Via aa Broadcast Broadcast Channels Channels

Broadcast 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 15-59 Copyright 2001 by Harcourt, Inc. All rights reserved. Time-Life Time-Life Supports Supports Its Its Broadcast Broadcast Direct Direct Marketing Marketing Efforts Efforts With With This This Direct Direct Marketing

Marketing Website Website 15-60 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Electronic Electronic Direct Direct Marketing Marketing Channels 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 PhotoDisc 15-61

Copyright 2001 by Harcourt, Inc. All rights reserved. Other Other Direct Direct Marketing Marketing Channels Channels Print media is generally not as effective as Web marketing or telemarketing for direct marketers Magazine and newspaper ads with tollfree telephone numbers, kiosks, and other media are still useful in many situations 15-62 Copyright 2001 by Harcourt, Inc. All rights reserved. peoplepc peoplepc This This Print Print Ad

Ad Supplements Supplements aa Promotional Promotional Campaign Campaign That That Is Is Primarily Primarily Based Based on on Broadcast Broadcast Advertising Advertising 15-63 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. Starbucks Starbucks Encore Encore Starbucks Starbucks DirectDirectResponse

Response Print Print Ad Ad 15-64 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market Nature of Product Stage in PLC Price Funds Available 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 Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature Nature of of Market Market Nature of Product Stage in PLC

Price Funds Available 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 Copyright 2001 by Harcourt, Inc. All rights reserved. Nescafe Nescafe Is Is Targeting

Targeting the the Younger Younger Coffeehouse Coffeehouse Crowd Crowd With With IMC IMC Efforts Efforts Like Like Its Its Innovative Innovative Website Website 15-67 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market

Nature Nature of of Product Product Stage in PLC Price Funds Available 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

Copyright 2001 by Harcourt, Inc. All rights reserved. Curad Curad Aqua-Protect Aqua-Protect Advertisement Advertisement for for aa New New Consumer Consumer Product Product to to Create Create Awareness Awareness 15-69 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN

AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market Nature of Product Stage Stage in in PLC PLC Price Funds Available Promotional mix must be tailored to the products stage in the product lifecycle 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 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.11: 15.11: DVD DVD Players Players Promotion Promotion for for aa New New Product Product to to Stimulate Stimulate Demand Demand 15-71 Copyright 2001 by Harcourt, Inc. All rights reserved.

DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market Nature of Product Stage Stage in in PLC PLC Price Funds Available 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 Copyright 2001 by Harcourt, Inc. All rights reserved. Blockbuster, Blockbuster, in in the the Maturity Maturity Stage Stage of of the the PLC, PLC, Continually Continually Revamps Revamps Its

Its Promotions. Promotions. This This Web Web Page Page Advertises Advertises Up Up to to 40% 40% Off Off on on DVDs DVDs for for Fathers Fathers Day, Day, One-Cent One-Cent Shipping Shipping on on Selected Selected Items, Items, and and Other Other Special Special Offers Offers

15-73 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market Nature of Product Stage in PLC Price Price Funds Available Advertising dominates the promotional mix for lowunit-value products due to

the high personal contact costs of personal selling Consumers a high-priced items like luxury cars expect lots of wellpresented information via videocassettes, CDs, fancy brochures, and personal selling Copyright 2001 by Harcourt, Inc. All rights reserved. DEVELOPING DEVELOPING AN AN OPTIMAL OPTIMAL PROMOTIONAL PROMOTIONAL MIX MIX Nature of Market Nature of Product Stage in PLC Price Funds

Funds Available Available 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 Copyright 2001 by Harcourt, Inc. All rights reserved. Table 15.3: Factors Influencing Choice of Promotional Mix 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 Copyright 2001 by Harcourt, Inc. All rights reserved. 15-76 PULLING PULLING AND AND PUSHING PUSHING PROMOTIONAL PROMOTIONAL STRATEGIES 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 PhotoDisc 15-77 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.12: 15.12: Use Use of of aa Pulling Pulling Strategy Strategy by by Home Home Depot Depot 15-78 Copyright 2001 by Harcourt, Inc. All rights reserved.

Colgate Colgate Total Total Using Using aa Pulling Pulling Strategy Strategy With With Ads Ads Like Like This This Combined Combined With With aa Pushing Pushing Strategy Strategy (30 (30 Million Million Samples Samples to to Dental Dental Practitioners)

Practitioners) Created Created Strong Strong Demand Demand for for This This Improved Improved Product Product 15-79 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. BUDGETING BUDGETING FOR FOR PROMOTIONAL PROMOTIONAL STRATEGY STRATEGY

Percentage-of-sales method: allocating funds for promotion during a given time period based on a specified percentage of either past or forecasted sales Fixed-sum-per-unit method: allocating promotional expenditures as a predetermined dollar amount for each sales or production unit PhotoDisc 15-80 Copyright 2001 by Harcourt, Inc. All rights reserved. BUDGETING BUDGETING FOR FOR PROMOTIONAL PROMOTIONAL STRATEGY STRATEGY Percentage-of-sales method: allocating promotional spending to match that of a

competitor, either as an absolute amount or relative to the firms market shares Fixed-sum-per-unit method: allocating promotional spending by defining goals and then determining the amount of promotional spending needed to achieve them PhotoDisc 15-81 Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.13: 15.13: Allocation Allocation of of Promotional Promotional Budgets Budgets 15-82 Copyright 2001 by Harcourt, Inc. All rights reserved. Table 15.4: Promotional Budget Determination Method

Percentage-ofsales method Description Example 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-perunit 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 competitors 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? 15-83 Copyright 2001 by Harcourt, Inc. All rights reserved. MEASURING MEASURING THE THE EFFECTIVENESS EFFECTIVENESS OF OF PROMOTION 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 messages audience

15-84 PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Measuring Measuring Online Online Promotions Promotions Early attempts at measuring online promotional efforts involved: Counting hits, user requests for a file Counting visits, pages downloaded or read in one session 15-85 PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. Measuring Measuring Online Online

Promotions Promotions 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 15-86 PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE VALUE VALUE OF OF MARKETING MARKETING COMMUNICATIONS COMMUNICATIONS Social Social

Importance 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 15-87 Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE VALUE VALUE OF

OF MARKETING MARKETING COMMUNICATIONS COMMUNICATIONS Social Social Importance Importance Promotion has become an important factor in campaigns aimed at achieving socially oriented objectives like the elimination of drug abuse What is important is how promotion is used rather than whether it is used 15-88

Copyright 2001 by Harcourt, Inc. All rights reserved. Figure Figure 15.14: 15.14: Promotional Promotional Message Message Addressing Addressing aa Universal Universal Social Social Concern Concern 15-89 Copyright 2001 by Harcourt, Inc. All rights reserved. Merck Merck Vaccine Vaccine Division Division The

The Social Social Importance Importance of of Marketing Marketing Communications Communications 15-90 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE VALUE VALUE OF OF MARKETING MARKETING COMMUNICATIONS COMMUNICATIONS Social Importance Business Business Importance

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 15-91 Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE VALUE VALUE OF OF MARKETING MARKETING COMMUNICATIONS COMMUNICATIONS

Social Importance Business Business Importance Importance Both business and nonbusiness enterprises recognize the importance of promotional efforts Nonbusiness organizations using promotion include governments and religions 15-92 Copyright 2001 by Harcourt, Inc. All rights reserved. Doritos

Doritos IMC IMC Strategy Strategy Also Also Includes Includes Maintaining Maintaining Its Its WebSite WebSite 15-93 Copyright 2001 by Harcourt, Inc. All rights reserved. Copyright 2001 by Harcourt, Inc. All rights reserved. THE THE VALUE VALUE OF OF MARKETING MARKETING COMMUNICATIONS COMMUNICATIONS Social Importance Business Importance Economic

Economic Importance 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 15-94 Copyright 2001 by Harcourt, Inc. All rights reserved. STRATEGIC STRATEGIC IMPLICATIONS IMPLICATIONS

Its difficult to overstate the impact of the Internet on the promotional mix for 21st Century firms Both small and large firms are on the Web Entrepreneurs have found a lucrative new launch pad for their enterprises Online companies must buy advertising electronic and traditional Online and offline firms both spend about $50 to get each new customer IMC will continue to play an important role as the Internet brings the global community closer together 15-95 PhotoDisc Copyright 2001 by Harcourt, Inc. All rights reserved.

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