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Describe the promotional mix and the uniqueness of each component. (LO2)
- There are five promotional alternatives
- mass selling approaches: advertising, sales promotion, public relations
- customized messages: personal selling, direct marketing
- Advertising: high absolute costs, but reaches large numbers of people
- Personal selling: high cost per contact but provides immediate feedback
- Public relations: often difficult to obtain but is very credible
- Sales promotion: influences short-term consumer behavior
- Direct marketing: help develop customer relationships although maintaining a database can be very expensive
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Advertising
- Any paid form of nonpersonal communication about an organization, good, service, or idea by an identified sponsor
- Space for advertising message must be bought
- Mass media is nonpersonal, doesn't have immediate feedback loop
- Strengths: efficient means for reaching large numbers of people; attention-getting; company can control what it wants to say, to whom the message is sent, and when/how often to send message; send to all receivers in a market segment
- Weaknesses: high absolute costs, difficult to receive good feedback
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Personal selling
- Two-way flow of communication between a buyer and seller designed to influence a person's or group's purchase decision
- Face-to-face communication between sender and receiver (customized)
- Fees paid to salespeople as either salaries or commissions
- Cost-per-contact basis most expensive
- Strengths: immediate feedback; very persuasive; can select audience; can give complex information
- Weaknesses: extremely expensive per exposure; messages may differ between salespeople
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Public relations
- Form of communication management that seeks to influence the feelings, opinions, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and other publics about a company and its products or services
- Publicity: a nonpersonal, indirectly paid presentation of an organization, good, or service
- No direct payment to media
- Strengths: often most credible source in the consumer's mind
- Weaknesses: difficult to get media cooperation; user's lack of control
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Sales promotion
- Short-term inducement of value offered to arouse interest in buying a good or service
- Offered to intermediaries as well as to ultimate consumers
- Wide range of fees paid, depending on promotion selected
- Strengths: effective at changing behavior in short run; very flexible
- Weaknesses: easily abused, can lead to promotion wars, easily duplicated
- Advertising support needed to convert trial customer into long-term buyer
- Sales promotions conducted continuously lose their effectiveness
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Direct Marketing
- Uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet
- Communication can be in any form: face-to-face selling, direct mail, telephone, direct response advertising, online marketing
- Cost of communication through mail, telephone, or computer
- Strengths: messages can be prepared and adapted quickly, facilitates relationship with customer; interactive communication
- Weaknesses: declining customer response; database management is expensive
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Factors affecting promotional mix
target audience for the promotion, the stage of the product's life cycle, characteristics of the product, decision stage of the buyer, channel of distribution
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Select the promotional approach appropriate to a product's target audience, life-cycle stage, and characteristics, as well as stages of the buying decision and channel strategies. (LO3)
- Target audience: programs for consumers, business buyers, and intermediaries might emphasize advertising, personal selling, and sales promotion, respectively
- Product life-cycle stages: Introduction stage (all promotional mix elements are used). Growth stage (advertising is emphasized). Maturity stage (utilizes sales promotion and direct marketing). Decline stage (little promotion used)
- Product characteristics: level of complexity, risk, and ancillary services required will determine which element is needed
- Customer's stage in buying process: Prepurchase phase (advertising and PR can create awareness). Facilitate purchase (personal selling and sales promotion). Postpurchase stage (advertising can help reduce anxiety)
- Channel strategy: Push strategy (personal selling and sales promotions directed at channel members). Pull strategy (advertising and sales promotion directed at customers).
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Product characteristics
- Complexity: refers to technical sophistication of the product and hence the amount of understanding required to use it
- - More complex the product, the greater the emphasis on personal selling
- Risk: in terms of financial risk, social risk, and physical risk
- - Advertising helps, but greater risks require more personal selling
- Ancillary services: degree of service or support required after the sale
- - Advertising establishes seller's reputation; direct marketing describes how product or service can be customized to individual needs; personal selling essential to build buyer confidence and provide evidence of customer service
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Channel strategy
- Push Strategy- directing promotional mix to channel members to gain their cooperation in ordering and stocking the product
- - Flow of demand simulation: wholesaler -> retailer -> consumer
- - Flow of promotion (mainly personal selling directed to intermediaries)
- Pull Strategy- directs promotional mix at ultimate consumers to encourage them to ask the retailer for a product
- - Flow of demand stimulation: derived demand
- - Flow of promotion (mainly advertising directed to consumer)
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Describe the elements of the promotion decision process. (LO4)
- The promotional decision process consists of three steps: planning, implementation, and evaluation
- Planning consists of six elements: identify the target audience, specify the objectives, set the budget, select the right promotional elements, design the promotion, and schedule the promotion
- Implementation includes pretesting the promotion and carrying out the promotion
- Evaluation includes posttesting the promotion and making needed changes
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Planning the promotion program
- Identifying the target audience- group of prospective buyers toward which a promotion program is directed
- - the more the firm knows about its target audiences (lifestyle, attitudes, values) the easier it is to develop a promotion program
- Specifying promotion objectives
- - Awareness: consumer's ability to recognize and remember the product or brand name
- - Interest: an increase in the consumer's desire to learn about some of the features of the product or brand
- - Evaluation: consumer's appraisal of the product or brand on important attributes
- - Trial: consumer's actual first purchase and use of the product or brand
- - Adoption: favorable first trial experience -> consumer's repeat purchase and use of product or brand
- - Objectives should possess three important qualities: be designed for a well-defined target audience, be measurable, cover a specified time period
- Setting the promotion budget
- - - Advantages: simple, provides financial safeguard
- - - weaknesses: may reduce promotion budget because of past down turns or anticipated downturn in sales, situations in which may need promotion the most
- - Competitive parity budgeting: matching the competitor's absolute level of spending or the proportion per point of market share; matching competitors or share of market
- - All-you-can-afford budgeting: money is allocated to promotion only after all other budget items are covered; fiscally conservative but shows inexperience in promotion objectives
- - Objective and task budgeting: company (1) determines its promotion objectives, (2) outlines the tasks to accomplish these objectives, and (3) determines the promotion cost of performing these tasks
- Selecting the right promotional tools
- Designing the Promotion
- Scheduling the Promotion
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Explain the value of direct marketing for consumers and sellers. (LO5)
- The value of direct marketing for consumers is indicated by its level of use. (ie: 68% of them have made a purchase by phone or mail, 12 million people have purchased items from a tv offer)
- The value of direct marketing for sellers can be measured in terms of three types of responses: direct orders, lead generation, and traffic generation
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