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MARKETING COMMUNICATION PROCESS (Unit9)

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  • 1. UNIT 9 MARKETING COMMUNICATION PROCESS Structure 9.0 Objectives 9.1 Introduction 9.2 Marketing Communication : Role 9.3 Marketing Communication : Concept 9.4 Marketing Communication : Occurrence 9.5 The Sources of Misunderstanding 9.6 Elements of the Promotion Mix 9.7 Let Us Sum Up 9.8 Key Words 9.9 Clues to Answers 9.0 OBJECTIVES After going through this Unit, you will be able to: • explain the concept and role of marketing communication, • describe the marketing communication process, • discuss some sources of misunderstanding in communication process, and • comment upon the role of the various promotional elements in a marketing communication programme. 9.1 INTRODUCTION It is only through integrated efforts that a Sales Manager can hope to succeed with respect to his or her marketing offering whether in the form of product or service. Marketing Communication is a subset of integrated marketing efforts that merits the attention of Sales Managers. However, marketing communication poses a special challenge to the marketing strategists for some unique reasons. Firstly, it is the most visible clue next to the product itself of marketers’ intentions and commitment to consumers. Secondly, it receives a relatively closer scrutiny from the policy- makers and other consumer-interest groups. Thirdly, there has been a significant change in viewing marketing communication. For a very long time, it had been seen as if promotions formed the only communication-bridge between a company and its buyers. This limited view of marketing communication is now being replaced with a more correct and wider proposition that marketing communication travels beyond promotion. In its linkage with buyers, it encompasses everything including product, packaging and distribution channels; and forms a vital part of overall marketing efforts towards buyers and also the other sections of society. In this Unit our endeavour is to familarise you with the emerging orientation of marketing communication and discuss the various issues related to it. 9.2 MARKETING COMMUNICATION : ROLE Marketing Communication can be better understood if we define marketing and communication i.e. the two elements of marketing communication. Communication is the exchange of thoughts, views or ideas between two individuals or organisations. It is a process by which commonality of thought is established and meaning is shared between individuals or between organisations and individuals. Whereas, marketing is a set of activities whereby businesses and other organisations create transfers of value (i.e. exchanges), between themselves and their customers. Thus, Marketing Communication represents the collection of all elements in an organisation, 162
  • 2. marketing mix that facilitate exchanges by establishing shared meaning with the organisation’s customers or clients. Central to the above definition of Marketing Communication is the notion that Marketing Communication consists of not just the promotional variable but of all the other marketing mix variables i.e. Product, Price, Place, Promotion and in case of tourism the People. (Adapted from Terence A Shimp, Promotion Management and Marketing Communication). Table-1 provides a description of the role of marketing communication. For a deeper understanding it can be classified in dyads of marketer - buyer, marketer-market and non- profit and social organisations. Table-1 : The Value of Marketing Communication Marketing Communication or Promotion • Establishes an image, such as prestige, discount or innovative, for the company and its goods and services; • Communicates features of goods and services; • Creates awareness for new goods and services; • Keeps existing goods and services popular; • Can reposition the image or uses of faltering goods and services; • Generates enthusiasm from channel members; • Explains where goods and services can be purchased; • Convinces consumers to trade up from one good or service to a more expensive one; • Alerts consumers to sales; • Justifies prices of goods and services; • Answers consumer questions; • Closes transactions; • Provides after sale services for consumers; and • Place the company and is goods and services in a favourable light relative to competitors. Source: J. R. Evans & B. Beman (1987) Marketing (3rd ed.) Macmillan. 1) Communication in Marketer - Buyer Dyad Marketing Communication has a variety of roles to play. To begin with, it brings the marketers and the consumers closer to each other in their desire to achieve their respective goals. Thus, a company has such marketing goals as profitability, corporate credibility and market leadership, etc. Similarly, consumers too have such goals as better consumption, staying informed on new buying alternatives and a desire for a better quality of life. Examining these goals together, one finds a degree of commonality i.e. the need satisfaction through mutual efforts. Thus, a product offers the first common vehicle for satisfying these goal expectations of both marketers and consumers. Consumers buy the product because it is a bundle of need satisfying attributes. Marketers bring out the product because it is the only way they can achieve the firm’s goals. The role of marketing communication then is to share the meaning of the firm’s total product offering with its consumers in such a way, as to help consumers attain their goals and at the same time move the firm closer to its own goals. Figure-1 illustrates this linkage. Marketing goals Buyers goals: Financial & Observable & Non-Financial Marketing Unobservable Communication Perceived Total Product Offering 163
  • 3. Figure-1 : The Role of Marketing Communication Besides goal compatibility, marketing communication seeks to : • Inform, • Remind, and • Persuade the actual and potential buyers for the marketer’s offerings. Thus, most buyers do not object to the informational content of promotion because it serves to spread the word quickly about innovations. Imagine how much longer would it have taken buyers to become aware of the functional utility of pressure cookers had it not been communicated by marketers. Similarly, most consumers would also welcome occasional reminders about the product they are already familiar with. Thus, even if most buyers of ‘Milkmaid’ are familiar with its compatibility with reactive food preparation, its buyers may still like to receive a reminder and even new recipe suggestions from it. Similarly, even though Kerala is known for its scenic beauty, people love to see the visuals and advertisements reminding them of GODS OWN LAND. The persuasive element of communication has, however, been a subject of much controversy and some justified criticism too. Many believe that marketers manipulate consumers through clever marketing communication in making them buy those products and service which they may not need. Usually emotional appeals in communication are singled out for their cynicism. 2) Communication in Marketer - Market Dyad Not all marketing communication is directed towards ultimate buyers alone. Many are addressed to other manufacturers and institutions, some to the intermediaries who engage in resale operations and some to opinion leaders who are in a position to recommend the product or service. Each of them requires a different message. Thus, while a consumer may be impressed by the look of a particular brand of non-breakable synthetic cooking wares, dealers may need to know the margins available, its quality and attraction over the competing brands. Examples will, also, include the regular publication newsletters to teachers from publishing houses for book purchase and recommendation. The advertisements inviting dealers/ distributors for various products and services like Eurorail, Tour to Disney land, AMADEUS information services, TV, Fridge etc. are other examples of business to business communication. 3) Communication in Non-Profit /Social Organisations Finally, communication is vital to non-profit organisations and social institutions too. For example, the Department of Tourism, Government of India and other state tourism departments look forward to marketing communication with the same expectation as would probably any private or profit making organisation. The anti-drugs campaign and the family planning and welfare messages at the TV prime time are also illustrations of the value of marketing communication in non-profit and social organisations. 9.3 MARKETING COMMUNICATION : CONCEPT Marketing communication can be conceptualized at both macro and micro levels and it is a continuing dialogue between buyers and sellers in a market place. Thus, to an average reader and observer of marketing, everything that marketers do to attract buyers and help them satisfy their needs, is marketing communication. It should be noted here that although this definition is the macro view of communication, it emphasizes a dialogue and not a ‘monologue’ between sellers and buyers. The emergence of various consumer groups has been helpful in this respect. 164
  • 4. The opening of certain telephone lines by the major nationalized banks for listening to customer grievances is a recognition of this facet of marketing communication. Also, the feedback form given to the members of a tour or flight are also ways of listening to the customer’s view point. Looking, however, from marketers perspective, the marketing communication is “the process of presenting an integrated set of stimuli to a target with the intent of evoking a desired set of responses within that target market and setting up channels to receive, interpret and act upon messages and identifying new communication opportunities.” The definition is quite relevant to an individual firm. It recognizes that the firm is both a sender and a receiver of market-related messages. As a sender it first approaches customers to buy its products/ brands in a competitive environment. As a receiver, it seeks to attune itself to its target market in order to realign its messages; to adapt messages to its changing marketing conditions, and to spot new communication opportunities. The firm must be a sensitive receiver of market’s needs if it is to survive and grow. Here, it must be noted that the sales force plays a vital role in the process of marketing communication though their may be many other players in it. 9.4 MARKETING COMMUNICATION : OCCURRENCE An examination of the available texts on marketing communication reveals that marketing communication, like all forms of communication, occurs in ‘an orderly way of transmitting a message’. It is similar to the functioning of a telephone circuit. Figure-2 contains a simplified model of the way communication occurs. Source Message Encoding Message Medium of transmission Feedback Message Decoding Message Receiver 165
  • 5. Figure-2 : Functioning of Communication The basic elements of the communication flow as shown in Figure-2, are the ‘source’ - the originator of the ‘message’, the ‘receiver’ - the ultimate destination of the message and the ‘medium of transmission’ - the means by which the message moves from sender to receiver. These elements are joined together by a process which includes ‘encoding’, the way the message is put in an understandable format by the source and ‘decoding’, the process of retranslating the message into understandable terms by the receiver. The feedback is an indication of understanding by the message receiver to the message-source. Figure-3 shows a more comprehensive picture of communication as it occurs. (1) Marketing feedback Identification of existing market opportunities Information Company about Product Resources opportunities Managerial (5) Skills Time Company (2) Image Company goals, policies etc. Transmission Module (4) Desired Consumer Responses, Awareness, (3) 4(a) Desire, Product 4 (b) Purchase Packing loyalty, Pricing Total Product Transmission to Favourable word Place offering Channels of mouth Promotion and other actions Channel Receptors (6) (8) Communication Attitude Knowledge Attention Decode Message Social cultural system Filter Perception Needs Other receiver traits 7 (a) 7 (b) 7 (c) Reception Module (7) Market feedback 166
  • 6. Adapted from M. W. DeLozier, The Marketing Communication Process. Figure-3 : Marketing Communication Process Explanation of Figure-3 The model of communication process, as represented by Figure-3, is : • a description of the process. It does not intend to predict communication occurrence. • based on both marketer dominated or environmental stimuli that trigger off the process of communication. In the model, the first category of stimuli is represented by the existing opportunities and/or information about the opportunities (box 1). These stimuli activate the firm’s response by way of designing appropriate goals, policies, strategies and tactics (box 2). The policies, etc., then act as stimuli to accomplish desired consumer response beginning with creating an awareness, through obtaining a positive word of mouth (box 3). Simultaneously, these policies (box 2) create a transmission module (box 4). The transmission module starts with such marketer dominated stimuli as product, pricing, distribution, packaging, promotion i.e., the total product offering (box 4a). The total offering is influenced by the resources that the firm has at its command (box 5). The total offering thus travels through varied and often complex channels. The channels could be an advertising agency, Radio, Television, Newspapers Magazines, Sales Force, etc. These transmission channels can transmit the message in different forms i.e. through visual, aural and oral channels to consumers. Box 7 represents the process in which the market receives messages. The filtering of message (box 7a) is dependent upon communication skills of message receivers (box 8). Box 7 (c) indicates how messages have been perceived by target-receivers. This indication is given in the form of feedback, which travels back right through to the company’s perception of existing and potential market opportunities and through to the transmission module (box 4) to turn the circle in full. It should be cautioned here that the model may suffer from an over-simplification of the process. Further, there may be many hidden snags in proceeding from one stage to another. However, the model should be useful in understanding the process at a general level. Check Your Progress - 1 1) Explain how marketing communication helps in Marketer - Buyer Dyad. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) What do you understand by marketing communication process? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 167
  • 7. 9.5 THE SOURCES OF MISUNDERSTANDING As cautioned before in elaborating the model of communication process, there are several real and potential sources of misunderstanding that may thwart the process of marketing communication. These sources are listed below: 1) Source Effect: The source effect refers to the effect caused by reputation of the source of communication itself. The source effect can both impede the speed and accuracy of message reception (if the source has unfavourable reputation) and accelerate it if is preceded by a good reputation. Thus, a company known for its poor quality of products or services in the past, will have to work harder for gaining consumer reception for its subsequent efforts in producing quality goods and better services. A manufacturer/marketer of good products or creative advertisements will receive quicker understanding of consumers for its subsequent products or services and advertisements. 2) Multiple Transmitters: In marketing communications, several channels are to be used for message transmission. Thus, an airline may use dealers (General Sales Agents) as well as advertising and point of purchase publicity to communicate about its brand. All these channels have their unique transmission characteristics. A dealer may use more body language; an advertisement may use a sleek and emotional word power; and POPs may use attractive colours. The interpretation of each is bound to be varied and may affect the communication. 3) Decoding Errors: Many misunderstandings arise because of the tendency in receivers for selective perception and interpretation. When the message is unusual, shocking and substantially different from the current ones this tendency increases. 4) Communication Noise: ‘Noise’ represents an interference in marketing communication that is either deliberately or accidentally introduced and which blocks or distorts transmission. The noise could originate from the message itself (internal noise) either in the form of unknown words or any other stimuli. The communication could suffer from ‘external noise’ (TV commercials in a busy restaurant). The competitors could also introduce ‘noise’ by having similar messages or providing counter-arguments. 5) Inadequate Feedback: The final misunderstanding in communication may arise due to poor feedback given to the sender. This may affect the quality of subsequent marketing communication. No wonder, therefore, many marketing communicators spend lakhs of rupees to establish and monitor their feedback system. 9.6 ELEMENTS OF THE PROMOTION MIX As you have read marketing communication, now a days, comprises of a wider range of propositions than just promotion. Though some people might consider promotion as the only way but there exist other ways of communicating with the public about a product or service. Price is one way of communicating about the quality of a service or a product. For example, customers will tend to be skeptical about a hotel which advertises itself as a three star hotel but has the rate of a one star hotel. Another communication factor is the retail store or the outlet, where the products and services are sold. Every store has its own identify and ambience which the clients can sense and attach to the products or services being sold from that outlet. For example, one does not expect to get a booking for luxury cruise with some small time ticket agency. A couple of other factors also communicate with the public such as the company or the organisation’s reputation. One expects Ashoka chain of hotels to provide good services as it has a good market reputation. The other factor is the service or product itself which sometimes catches and sometimes does not catch the public’s imagination. For example, two tours to Europe 168
  • 8. at the same time can show varying bookings. The reason might be that one tour is via Paris and other does not touch Paris. And the tour with Paris on its itinerary has a lot more bookings even though both the tours had equal advertising and are from the same organisation. As you have read above, there are other forms of marketing communication, but promotion is considered the main form of communicating with the public. Promotion is an element of marketing mix, which uses variety of techniques such as PR, advertisement, etc. to set up channels of information and persuasion to sell goods or services or to promote an idea or to enhance the reputation of an organisation. Promotion comprises of several elements. Figure-4 represents the configuration. Promotion Advertising Publicity Personal Selling Sales Promotion Packaging Figure-4 : Elements of the Promotion Mix Given below is the description of each of these elements: Advertising : The American Marketing Association defines advertising as: “any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.” The key words are ‘non-personal’ and ‘paid by an identified sponsor.’ Thus, in an advertisement, instead of communicating with customers face-to-face, companies that advertise ordinarily use a mass media such as – television, newspapers, radio, hoardings, etc. These messages, when they appear, identify clearly the sponsor who has paid for them. The cost of advertising in television may appear very high when judged in absolute terms. However, it is one of the cheapest when calculated in terms of cost per unit in ‘reach’ and ‘frequency’. Besides being cost effective, advertising often attracts customers for its creativity. Many children and housewives are reported to have enjoyed the television commercials preceding the programmes more than the programmes themselves. The ultimate benefit of advertising lies in the fact that it allows perfect reproduction of the desired message and thus, enjoys the maximum degree of control over the message. Publicity: Publicity is formally defined as ‘any form of non-paid commercially significant news or editorial comment about ideas, products, services and institutions’ (James F Engel, Hugh G. Wales : and Martin R. Warshaw: Promotional Strategy, Hlmewood R. D. Irwin, 1971). Table-2 summarises the differences between advertising and publicity. Table-2 : Advertising Vs Publicity Sl. No. Advertising Publicity 1. Paid form Non-Paid form 2. Product related message Public welfare related message 3. Less credible More credible 169
  • 9. 4. More subjective More objective 5. Maximum control over the message Little control over the message The objectives of publicity are much the same as that of advertising and communication. In general, it increases consumer awareness of a company, its product, particularly new and innovative products and marketing practices. A company can also plan publicity to derive its advantages. Personal Selling: Unlike advertising, personal selling involves a one-to-one relationship with a customer. It is ‘the oral presentation of a tangible and intangible product by a seller to a prospect for the purpose of completing an exchange.’ The apparent benefit of personal selling is that it allows the salespersons to judge the reaction of customers to their sales presentations and thus, give an opportunity to vary the message for better understanding. It is, however, expensive as compared to advertising and other means of marketing communication. It is generally believed that it is not particularly suited to the mass - distributed consumer products. You have already read about Personal Selling in Unit 2 of this course. Sales Promotion: Sales promotion includes a wide variety of tools and, thus, has been defined in several different ways. Perhaps, one of the better definitions of sales promotion is: “a direct inducement which offers an extra value and incentive for the product to the salesforce, distributors or the ultimate consumers” (J.F. Luich & W.L.Ziegler ‘Sales Promotion’ and Modern Merchandising). Packaging: Packaging has become increasingly important as a promotional tool. Especially in consumer products, marketers have discovered the value of packaging as a fascinating communication with the introduction of new packaging technology. The markets are almost revolutionalised. The poly-packing is one illustration of this trend. Marketers have gone to the extent of designing their communication messages around new and innovative packaging. The value of packaging lies not merely in projecting the product but in retaining and promoting the product. Service industry too has begun to use packaging as a promotion. The particular combination or blend of advertising, sales promotion, public relations and personal selling that an advertiser chooses to employ is known as promotional mix. Setting objectives, budgets and coordinating the various promotional mix elements is known as promotional management. To sum up, marketing communication is an integral part of a marketing strategy and often, forms a very significant linkage between the firm and the market. This also constitutes as the most visible commitment of the firm to its purpose i.e., satisfying the needs of actual and potential customers. Check Your Progress – 2 1) Name two sources of misunderstanding in communication process. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) What is promotion ? What are the various elements of promotional mix? 170
  • 10. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 9.7 LET US SUM UP This Unit focused on marketing communication as an integral part of marketing strategy. Marketing communication is a continuing dialogue between marketers and buyers with a view to inform, remind and persuade the latter to buy the product. Further, it has been suggested that marketing communications are not restricted to the product alone. They address to the market as a whole and equally to non-profit making organisations. An integrated model of marketing communication was presented, which is followed by the sources likely to cause misunderstanding. The Unit concluded with a brief description of advertising, publicity, sales promotions, personal selling and packaging as the major elements of marketing communication. 9.8 KEY WORDS Advertisement : A non-personal way of promoting a product which is paid for by an identified sponsor. Coding (or Decoding) : The process in which messages are formatted (or retranslated) in understandable terms. Marketer-Buyer Dyad : The exchange relationships between the firm and its buyers interact. Marketer-Market Dyad : The exchange relationship between the firm and its competing firms, other institutions, middlemen etc. Packaging : The form in which product is sold/bought in the market. Publicity : A way of informing about any marketing plan/practice of a company by mass media which is not sponsored. Sales Promotion : The incentives to encourage quick adoption of a product. 9.9 CLUES TO ANSWERS Check Your Progress - 1 1) Marketing communication seeks to inform, remind and persuade the actual and potential buyers for the marketer’s offerings. Read carefully Sec. 9.2 and answer. 2) Marketing communication process like all forms of communication, occurs as “an orderly way of transmitting a message.” Read Sec. 9.4 and answer with the help of a diagram. Check Your Progress – 2 1) Two sources of misunderstanding are : i) Source Effect ii) Multiple Transmitter. 171
  • 11. Read carefully Sec. 9.5 and explain the above. 2) Promotion is an element of marketing mix which uses variety of techniques such as PR, advertisement, etc. to set up channels of information and pursuance to sell goods and services or to promote an idea or to enhance the reputation of an organisation. Read carefully Sec. 9.6 and answer. 172
  • 12. UNIT 10 PROMOTIONAL MEDIA USE : CASE STUDY OF INDIA Structure 10.0 Objectives 10.1 Introduction 10.2 Media Selection 10.3 Media Status 10.4 The Press Medium 10.5 The Broadcast Medium 10.5.1 Radio 10.5.2 Television 10.5.3 Cinema, Video and CD Roms 10.5.4 Internet Websites 10.6 Aerial Advertising 10.7 Railways Advertising and Off-the-Wall Media 10.8 Promotion Expenditure and Sales Generation 10.9 Advertising Expenditure 10.10 Promotional Scene 10.10.1 Service Products 10.10.2 Financial Advertising 10.11 Let Us Sum Up 10.12 Clues to Answers 10.0 OBJECTIVES After reading this Unit, you should be able to : • give a complete overview of the media scene in India, • discuss the rationale and inputs for the media selection decisions and give a comparative evaluation of the media, • describe the media habits of Indian consumers and evaluate their marketing implications, • establish the relation between advertising expenditures and sales promotion of products, • develop a profile of advertising expenditures, • assess the promotional scene with respect to advertising outlays, • describe the role and importance of advertising agencies, and • explain the specifics of the promotional scenario. 10.1 INTRODUCTION So far, you have been exposed to the marketing communication process and promotion along with the availability, design and usage of promotional media in terms of conceptual strengths and weaknesses. This Unit will help you in identifying your media options and the strategic directions for your product(s) or services; company and the industry that you belong to. Nevertheless, you need to know something else too - i.e., an introduction to the world of realities of media scene in a country that you are working. The media manager of any company will have to be familiar with the major characteristics of promotion vehicles in the country you work in. This is because the company, even though multinational in character, cannot expect to implement all of its media plan in a particular country in view of the inherent limitations and peculiarities of the media scene. The same is true for a new company/product/service entering any market for the first time 173
  • 13. to know the media availability through facts and figure. Sales Managers/salespersons have to be familiar with the media use as it has a direct bearing on their sales efforts. For example, an unattractive advertisement in a magazine, a dull promotional effort on television or a poor website on the internet may wash away the efforts made by a salesperson or create selling problems for him or her. The aim of this Unit is to provide substance to media planners ‘dreams’ and ‘expectations’ as to what they can do and what they cannot possibly do. The focus of this Unit is, also, to reveal media use by advertisers and profile major media users in order to expose you to current practices of media use. It will also help you in your own decisions regarding media use. Consider for yourself a situation in which you are expected to design a media use plan. For it, what is required is not only the data on the availability of media but also data on how industry has used it and what are the trends for the future. Existing advertisers often have to compare their media use over a period of time. This Unit attempts to aid this decision-making of media planners. All these issues have been discussed keeping in view the Indian scene as a case study. 10.2 MEDIA SELECTION Medium is the general category of communication vehicle available for communicating with a target audience. Media is the plural of medium and the communication vehicles referred to are paid to present an advertisement. Examples of media are broadcast, print, direct mail, outdoor and others. Media selection is the first step of effective communication with the audience and the effectiveness of an advertisement depends upon the media type. From the user’s point of view, let us first try to assess the requirements that a media manager would have of a suitable medium. Table-1 provides a checklist of questions needed to be asked for media selection. A good media manager decides on how he/she expects the media to work, by measuring a given medium on some evaluative criteria (See Table-1 on next page). In Table-1: • Reach means the number of different people or households i.e. audience members exposed to an advertising schedule during a given time period. • Frequency means the number of times an advertising message reaches the same person or household i.e. audience in a specified time period. Across a total audience, frequency is calculated as the average number of times individuals or homes i.e. audience are exposed to the advertisement. • Continuity means the length of an advertising campaign and the manner in which it is scheduled and sustained over an extended period of time. • Pulsing means a media scheduling method that combines flighting and continuous scheduling. Flighting is a media scheduling pattern in which periods of advertising are alternated with periods of no advertising. (The above definitions have been taken from Contemporary Advertising by Bovee/Areries and Introduction to Advertising & Promotion by G. E. Belch & M. A. Belch). 174
  • 14. Table-1 : Checklist for Media Selection Considerations Objectives Reach Frequency Continuity Pulsing 1. Message needs • New or highly complex message, strive for • Dogmatic message, surge at beginning, then • Reason-why messages, high frequency at first, then • Emotionally oriented messages • When message is so creative or product so newsworthy, they force attention • When message is dull or product indistinguishable, strive for 2. Consumer purchase patterns • To influence brand choice of regularly purchased products • As purchase cycle lengthens, use • To influence erratic purchase cycle, strive for • To influence consumer attitudes towards impulse purchases • For products requiring great deliberation, alternate • To reinforce consumer loyalty, concentrate on • To influence seasonal purchases, anticipate peak periods with 3. Budget Levels • Low budgets, use • Higher budgets, strive for 4. Competitive activity • Heavy competitive advertising, concentrate on • When competitive budgets are larger, use 5. Marketing objectives • New product introductions to mass market • To expand share of market with new uses for product • To stimulate direct response from advertising • To create awareness and recognition of corporate status Source : “Media Planning & Selection”. Table-2 : Media Selection : From Creativity Perspective Creative disadvantages Creative advantages Newspapers Loss of identity, especially in reproduction of halftone Almost any ad size available. Impact of black : illustration. Too many ad-format variations among against white (still one of the most powerful colour newspapers. Variance in column widths. Difficulty in combinations). Sense of immediacy. Quick response; controlling ad position on page. easy accountability. Local emphasis. Changes possible at short notice. Magazines Size not as large as those of newspapers or posters. Long High-quality reproduction. Prestige factor. Accurate : closing dates, limiting flexibility. Lack of immediacy. demographic information available. Graphic Tendency to cluster ads. Possible difficulties in securing opportunities (use of white space, benday screen, favourable spot in an issue. reverse type). Color. Television No time to convey a lot of information. Air clutter (almost Combination of sight and sound. Movement. A : 25 % of broad casting is non-programing material). single message at a time. Viewer’s empathy. Intrusiveness (TV tops list of consumers’ complaints in this Opportunity to demonstrate the product. respect). Capricious station censorship. Believability : “What you see is what you get.” Radio Lack of visual excitement. Wavering attention span (many Opportunity to explore sound. Favourable to humor. : listeners tune out commercials). Inadequate data on listening Intimacy. Loyal following (the average person listens habits (when is the “listener” really listening?). Fleeting regularly to on about two stations)., Ability to nature of message. change message quickly. Direct mail Damper of state, federal, and postal regulations on creative Graphic and production flexibility, such as use of : experimentations. Censorship often unpredictable. Formula three- dimensional effect (folding, die-cuts, pop-ups) thinking encouraged by “proven” direct-mail tract records. Measurable. As scientific as any other form of advertising. Highly personal. Posters Essentially a one-line medium with only a limited Graphic opportunities. Color. Large size. High- : opportunity to expand on the advertising message. fidelity reproduction. Simple, direct approach. Inadequate audience research, especially in transit Possibility of an entirely visual message. advertising. Point of Sale Difficulty in pinpointing audience. Failure of retailers to Opportunities for three-dimensional effects, : make proper use of material submitted to them movement, sound, and new production techniques. Source : Advertising Media . Besides checklist, media selection is often a creative art in which imagination and uniqueness of approach is always viewed with respect and admiration. Table-2 provides creative advantages and disadvantages in selecting a certain medium. 175
  • 15. Table-3 : Comparative Evaluation of Advertising Media Network television Spot radio Network Radio Consumer Business Sunday Daily Weekly magazines publication supplements newspapers newspaper Audience Consideration Attentiveness of audience Interest of audience Avoids excess selections by audience Offers selectivity to advertiser Avoids waste Offers involvement Avoids distraction Avoids resistance Provides impact Offers prestige Good quality of audience data Timing Factors Offers repetition Avoids irritation Offers frequency Offers frequency of issuance Offers flexibility in scheduling Long life Low mortality rate Avoids perisihability Allows long message Provides product protection Geographic Conditions Offers geographic selectivity offers proximity to point of sale Provides for local dealer “tags” Creative Consideration Permits demonstration Provides impact Permits relation to editorial matter Competitive factors Light use of medium by competitors Low amount of total advertising Control consideration Advertiser control of media content Favourable environment Advertiser control of location Amount of government regulation Number of other restrictions Mechanical and Production Factors Ease of insertion High reproduction quality Flexibility of format Avoids vandalism Financial considerations Low total cost High efficiency Note : N = not a factor for this medium, V = varies from one vehicle to another within the medium, †= week, †† = medium, ††† = strong. Source : “Media Planning and selection” . 176
  • 16. To get a degree of understanding of the relative attractiveness of different media on these criteria, let us see how different media rate on important media consideration. Table-3 provides a comparative evaluation of media in India. 10.3 MEDIA STATUS Beyond facts and figures, there has been a substantial qualitative improvement in media status in practically most of the developing countries. Both the demand and the usage of media has been on the rise. Several factors have been accountable for this rise and as a case study we list them in relation to India : • Economic liberalization, both in the consumer and industrial markets, necessitated a different approach to markets. No longer do the industrial policies and rules impede the expansion and diversification. Competition is the ‘new name of the game’. Naturally, media is treated as an ‘ally’ in meeting competition. • The markets are flooded with innovative, new and improved products. The traditional placid markets came suddenly to life. Media provides a significant vehicle for the promotion of these products. • There is an urgency in the efforts to defend market shares by the traditional leaders of both consumer durables, non-durables and business products. Thus, Indian Airlines, feeling anxious about the new entrants, is compelled to defend its market leadership and use media in the process in a perceptibly bigger way. • There has been marked departure in announcing financial securities and shares as if they could also be marketed like soaps and tooth pastes. As in these products, every company entering the capital market with mini or mega issues, feels the need of media to encourage subscribers. Today most of the issues are over subscribed. • There is now a greater intimacy between media suppliers and media users in India. Media suppliers provide latest data about their reach and frequency to make advertisements more effective. ‘Value for money’ is the new slogan of media suppliers. • Marketing research is being increasingly used by both media suppliers and users. This marketing research is used for both positioning the advertisement and effective use of reach and frequency in getting messages across to the consuming public. • The public preferences, knowledge and attitudes towards media too, has substantially changed. The awareness and appreciation of people is on the increase as to what media can or cannot do. • Realizing fully the monetary gains and importance of media selling, media suppliers too have modernized the media services. There is now a marketing department/section/cell/ executive in every major TV channel, newspaper, magazine and journal to look after this business exclusively. More personal or indirect contact points have been set up for the purpose of selling media to the advertisers and the agencies. The media scene in India is illustrated by Table-4, which attempts to show considerations of exposure, habits, income and other media features in the context of demographic variables like age and income. Table-5 gives a very general view of Metro media habits, especially useful to those media planners targeting at metro markets. These figures are of the year 1987 and you can well imagine the situation now with almost 150 television channels, etc. 177
  • 17. Table-4 : All India Media Scene Particulars Press Cinema Radio Others Exposure by Sex % Men 67.8 67.0 41.5 85.8 Women 40.0 55.4 35.4 70.4 Habits by Sex Men 58.6 50.6 34.1 Women 32.6 34.6 31.2 Habits by Income Up to Rs. 750 45.3 (194)* 47.4 (30.5)* 28.5 (23.2)* Between Rs. 750-1500 75.2(491)* 55.2 (39.4)* 42.2 (42.9)* Rs./ 1500+ 88.5 (71.4)* 56.4 (46.0)* 44.7 (55.1)* Habits by Populations Strata / Sex Below 1 lakh 50.2 (23.)* 49.8 (32.7)* 65.8 (42.7)* 1-5 lakhs 59.9 (31.2)* 55.4 (37.5)* 48.8 (34.5)* 5 lakhs + 65.8 (42.7)* 27.3 (21.7)* 49.1 (49.9)* Habits by Education / Sex Below SSC 54.2 (41.5)* 86.8 (80.5)* 96.3 (91.4)* Between SSC & Graduate 48.9 (40.3)* 61.8(83.8)* 60.2 (55.7)* Graduation and Above 32.9 (36.9)* 48.1 (53.0)* 45.1 (57.1)* Habit by Occupation Clerks/ Salesmen Professionals/ 62.3 48.4 34.1 Business/Self 88.2 51.2 39.6 Skilled & Unskilled workers 37.3 46.1 28.9 Students 82.7 69.0 48.7 Non-working women 27.3 31.7 29.8 *Figures relating to women Source: Complied from The Press & Advertisers Year Book, 1987. Table-5 : Metro Media Habits Bombay Calcutta Delhi Madras Press 63.1 49.9 50.2 64.2 Television 44.7 18.7 51.4 42.2 Cinema 32.7 37.8 38.2 54.8 Radio 54.2 46.9 56.2 69.2 Source : The Press and Advertisers Year Book, 1987. Check Your Progress – 1 1) What do you understand by checklist for Media Selection? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) State a few factors causing the demand and usage of media to rise. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 178
  • 18. 10.4 THE PRESS MEDIUM The medium of print has always held the place in the world and India is no exception. The power of written word has been recognised since the era of shared information. In the recent years, when press and print medium in general, felt threatened by the onslaught of ‘visual’ medium, in particular the television, several leading exponents of print medium began a concerted exercise to woo back its audience and, by implication, advertisers and advertising revenue. Nonetheless, press still enjoys the top position as a promotional/media vehicle specially in the Tourism sector. Until very recently, press print was the only medium of travel and tourism advertisements. Once in a while, only airlines were using the visual medium. Nowadays, the visual medium is being used more often for reaching the public but, nevertheless print media specially, trade papers and journals are very important media of tourism advertisements. Today it is evident that no media planner can afford to ignore print medium in his or her media plans. Print media habits in India are surveyed and articulated at several regular intervals through the National Readership Surveys in India. Exhibit-1 provides major findings of 1989 survey. Exhibit-1 Media Habits of Hindi Belt in India: The National Readership Survey, 1989 Findings • 8% of rural population read newspapers as against 46% of the urban counterparts. • 2% of the rural women and 12% of the rural men read newspapers. • 40% of the readers of newspapers and magazines are in the 15-24 age group. • 10% of the urban adults read english newspapers as against less than one per cent of the rural. This percentage of Hindi daily is 42% and 5% respectively. • While approx. 10.7 lakh adults restricted to urban areas read urdu publications about 16 lakh people I both urban and rural areas read punjabi. • 22.7% of the adults are regular Doordarshan viewers (four times a week or more). Half of these viewers are in 15-35 age group. • 20% of the populace listen to All India Radio. About 17.6% of rural adults listen to Vividh Bharati against 29% of the urbanities. • 15.6% of the rural women and the regular Vividh Bharati listeners - the english for any media that has reached rural women. • Only 10% of the adults go to a commercial hall for a film. The survey covered Punjab, J & K, Delhi, UP, Bihar, Haryana, Madhya Pradesh, Rajasthan and Himachal Pradesh. Figures-1 and 2 provide the figures pertaining to exposure and reach of print media in 1990. THE REACH OF PRINT (ALL INDIA) Urban 6.82 Rural 3.16 TOTAL READERS : 9.98 crore Figure-1 179
  • 19. EXPOSURE TO PRINT MEDIA BY INCOME BY AGE (Figure in percent) 100 (Figure in percent) 50 77.6 80 63.2 40 29 45.9 24.3 60 30 21.7 19.9 40 20 12.4 20 7.4 10 0 0 4001+ 1501-2500 2501-4000 Rs. 750 751-1500 15-.24 yrs. 45+ Upto 35-44 25-.34 Source ORG : 1990 ADVERTISING AND MARKETING Charts by DINESH MAIDASANI/QPC JULY 1990 Figure-2 A study conducted by Operation Research Group (ORG), reported by the Press Trust of India (PTI) on February 5, 1989, highlighted the following about the Indian print media in 1988. • The Press advertising in India surpassed Rs. 700 crores in 1988, marking an annual growth rate of 16.5 %. • Consumer advertising in the Indian press accounted for 40% of total advertising expenditure in 1988, as against 30% in 1987. • Public Sector undertakings, both in the state and central sectors left the private sector behind in press advertising. • The most advertised consumer products and services in terms of expenditure, were television sets, textiles and garments, newspapers and magazines, educational opportunities, housing and real estates. Lotteries were the single largest provider of advertisement revenue after government releases. • There was a marked improvement in service sector advertising. The service advertising produced an outlay level of Rs. 2.5 crores. • English print media is highly dominant, while English dailies consumed about 44% of all press advertising, English publications on the whole accounted for 51.4% of all press advertising. We must remember here that newspapers remain the most important and largest print media. 10.5 THE BROADCAST MEDIUM The broadcast media mainly consists of radio, television, cinema and video. Although radio is different from the other three, yet it holds the audience interest like any of its counterparts in broadcast medium. 180
  • 20. 10.5.1 Radio Broadcasting in India started with privately owned transmitters in Bombay and Calcutta, which were later nationalized and renamed in 1957 as Akashwani. It has now 94 Radio Stations, 134 MW transmitters with 6,794 KW power, 356W transmitters with 21725 KW power and 4 Vnf (FM) transmitters with 60 KW (ERP) power. This covers 95% population and 86% of the area of the country. A national radio channel has been broadcasting programmes for long. The News Service division broadcast everyday 273 news bulletins for a duration of over 36 hours in its home, external and regional services. The Vividh Bharati services provide entertainments through its 29 commercial broadcasting centres, 10% of the total broadcasting time is allotted to advertisement. Radio advertising takes the form of spots sold in units of 7,10,15,20 and 30 seconds, which are interspread between programmes. A capsule of sports contain a maximum of four spots for a total of 75 seconds. Nowadays, numerous FM channels are coming up. The FM Band is most popular band along with other All India Radio programmes. FM channels popularity among the youth has it made a prime target for marketers. The advertising agencies are making catchy jingles to be broadcast on the radio and thus capture the audience imagination. The sponsoring of programmes is also very common. Radio was and is the most easily accessible mode of entertainment and people from all specter of life tune in to radio programmes. On a lighter note, one can always listen to the radio programmes while travelling in a bus or in the neighborhood panwala’s shop. Though ‘Television’ is very popular, ‘Radio’ has not yet lost its audience. 10.5.2 Television Doordarshan network had 266 transmitters as on Oct 8, 1988, but today the situation is different. Now there is no government monopoly on this medium and many private players are in the field – no doubt, Doordarshan’s reach still remains the largest. This medium is being extensively used by the marketers and off late the tourism products and services are also being advertised on the channels. There is no doubt that television is an expanding medium. Of the incremental sets bought in the years, a significant number have penetrated into the middle class and rural households. It has become the primary source for household information (substituting radio) and entertainment (substituting cinema ) and thus, the most attractive medium for advertisements. With many channels available via the satellite, the audience now has a variety of choice of programmes and the advertisers too have a wide range of satellite channels to choose from for advertising their products and services. The Sponsored Programmes / Channels : With the introduction of sponsored programmes and private channels, there is an attempt to produce improved quality programmes to counter competition. This has vastly improved the entertainment value and the consequent viewership. It has also increased the clutter of commercials as we also see subject related commercials. On television, whatever it is, the advertisers cannot afford not to invest in this medium. 10.5.3 Cinema, Video and CD Roms For a considerably long time, cinema reigned as the supreme medium of visual entertainment and information for the Indian masses. At least, till the advent of television in the country. There, thus, occurred a brief decline in the popularity of cinema. However, figures indicate that it is viewed as an attractive and captive vehicle for promotional measures. Many tourist destinations picked up because of cinema as the films were shot there. Today films are not confined to cinema halls as video cassettes and CD roms are also available. Companies get their own Videos or CD Roms made for promotional purposes. In many cases the sales force keeps distributing them to the 181
  • 21. customers who can view them as per their convenience. The expertise and the technology to make Videos and CD roms is now widely available. 10.5.4 Internet Websites The latest in the advertising world is Internet. Advertisements are regularly posted on the various internet sites and are also set to various e-mail addresses as POP mail. Promotion letters and invitation to subscription are some examples of mail sent via the e-mail. Also, the various search engines have specially allocated places, as in newspapers and magazines, for advertisements. This latest technology has helped the advertisers to remove the boundaries of cities, regions and nations to reach millions of people. Since Internet surfing has caught the imagination of the average Indian, it is being used in a big way to promote and advertise products. An interesting phenomenon used for ‘net advertising’ are the various schemes and prizes. Information is posted on various search engines, newspapers, magazines as well as on television and via e-mail for trying out a new site which has scope for the surfer to win prizes. The sites in questions are many a times a promotional sites. The travel industry, as you are aware, is using the Internet in a big way. Most of the search engines have travel and tour sites. Though many of these sites provide on-line booking, most of them are concerned with providing information about themselves i.e. promotional in nature. The popularity of the internet has made internet a valuable and promising scene for the advertisers. 10.6 AERIAL ADVERTISING The concept is popular in US and came to India in 1985 by Sky-ads, a Bombay based firm. The aerial banker services involves 200 ft X 5 ft fibre glass mesh banner held by aluminium alloy rods and towed by a single seater single engine aircraft flying at 700 ft. to 1000 ft above the ground, depending upon the population zone. The banner message length can be upto a maximum of 40 English alphabets including the emblem. The characters are scarlet as one can read it in the blue sky. The flight is of two hour duration. The monthly rentals for balloons of size 10 ft X 25 blimps are also available. It offers advantages like: • Targeting and reaching the audience is most effective, not possible to achieve in print or broadcast media. • Reaching a captive audience like in cricket matches, public rallies is more effective through aerial advertising. • Since there are so many festive occasions and events, this can be very effective. Advertising at Airports is mainly done through glowsigns and show window. While the former offers us the benefits of colour, light and motion, the later are used for demonstrating the products at prominent places at the airport. On an average, a passenger has to wait at the airport for more than an hour - a captive audience for the marketers. 10.7 RAILWAYS ADVERTISING AND OFF-THE-WALL MEDIA Railways occupy its place in the mind of media planners as the most important vehicle in transit advertising. The number of travellers per day in Indian trains and the hours (even days) that are spent in them enhances its importance. The media mix of Railway advertising is as follows : • Station Hoardings, • Railway Bridges Hoardings, • Posters, • Inside Carriages Advertising, 182
  • 22. • Reverse of Passenger Tickets, • Sign Below clocks, and • Closed circuit televisions. Exhibit-2 provides an illustrative scenario of off-the-wall media options. These options score over others in terms of noticeability and creativity. Although, the Indian promotion experts have been working on off-the-wall media for quite some time, it is, however, restricted to A and B class towns, besides the metros. Exhibit-2: Emerging Off-the-wall Media : The Shape of Things to Come • Advertising via telephone You can purchase 30 second messages in which the advertiser supplies the company with relevant sales points. They can be taped, introduced by a live - pitch person, or both. “Where to Buy” telephone services identify retailers of specific products from consumers’ inquiries. • Aerial banners and lights Banners, usually more than 30 feet long, are pulled by low - flying planes. After dark, travelling aerial lights can display messages of up to 90 characters. • Balloons The advertiser’s message is imprinted on the balloons. Airborne heights vary from 200 to 800 feet. • Coptermedia This method uses thousands of light bulbs mounted on a 40 - by - 8 foot billboard frame on a slow - flying helicopter. The effect is that of a brilliant flying electric sign floating about 500 feet above the ground. • Handbills Handbills are simple sheets of paper with brief advertising messages which may be slipped under windshield wipers or hung on door knobs. Distributed by agents, they are one of the least expensive methods of advertising a local service or retail business. • Direct Mailing Direct mailing is any form of advertisement such as leaflets, brochures, pamphlets etc. which are sent through the mail. The key to direct mailing is the mailing list, which is used to segment the target group to whom the mailers should be sent. • Litter receptacles Some major cities offer space on concrete litter receptacles at major commercial intersections. • Paper - book advertising Bound-in inserts are available. Approximately 35 lakhs pocket books are sold annually. The audience can be pinpointed by book title. • Sales Tele-conferencing. This method helps the advertisers to directly contact the target audience with their product or services over the phone. The technological development has enabled the advertisers to connect the audience to a sales conference over the phone. Opinion makers, advertisers and few members of audience discuss the pros and cons of a product or service which can be heard over the phone. • Shopping bags Bags are offered to grocery chains on a regionally exclusive basis. A shopper’s checklist is printed on both sides, and advertisers can have their names printed on the list next to or in place of the category designation. • Taxicab advertising The back panel of from seats, the outside rear, and displays built on the roof provide day and night exposure. Rear - screen slide projectors facing riders are also available in some major markets. • Theater-screen advertising Commercials ranging from 30 seconds to 2 1/2minutes are screened at performances in most indoor and drive in theaters. The average national movie audience consists of approximately 500 million people per week, with women and younger people dominant. • Trade Marts. Trade marts have now become a common occurrence where the representative of a given trade or business come together to interact with the general public as well as among themselves. A direct face to face interaction takes place enabling in the clearance of any doubts or queries on the spot. A few trade marts are Trade Fair, Travel and Tour Fair, Arabian Travel Mart, etc. 183
  • 23. Check Your Progress – 2 1) How much popularity, does Press as media enjoys in India? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) Differentiate between – a) Advertisement via telephone & sales teleconferencing b) Direct Mailing and Handbills ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 10.8 PROMOTION EXPENDITURE AND SALES GENERATION It is perceived that advertisement expenditure results in additional sales. Though opinions vary on this count, it is usually believed that a rupee spent on promotion does bring in a more than rupee worth of turnover. Exhibit-3 summarizes an Economic Times Study on this aspect. Exhibit-3 : The Correlation Between Ad Expenditure and Sales Generation A study published in The Economic Times of July 7, 1988 had shown that the sales income generated by companies, particularly those manufacturing consumer goods, has high correlation with the expenditure incurred on advertising and sales promotion of goods. A relatively high correlation was found to exist in the case of Brooke Bond, Colgate-Palmolive, Food Specialities, Hindustan Cocoa and Hindustan Lever. The expenditure on advertisement and related promotional activities is often construed as a selling cost by the companies. But advertisement is a production cost, forming a part of the cost, for manufacturing and distribution of a new or supposedly better product. The selling cost is the cost incurred generally in maintaining or enlarging the market for products which are already in the market stream. The Economic Times study of July 7, 1988 had also brought out the fact that certain companies have high advertisement-push effect on sales than others. Invariably, the consumer goods manufacturing companies have such a push-effect. It has been found that there is no linear relation between generation of sales and expenditure on sales promotion. This is because the companies have generally a diversified product range. Again, the modus operandi in the preparation of an advertisement budget by a company is an essential factor in deciding a linear relationship between advertisement expenses and the sales income of the company. The media platforms for advertisements and nature of products are also important factors in establishing linear relationship between sales promotion expenses and sales income of companies. All said and done, sales promotion expenses do have an impact on the sales income of companies. But it appears that there is no one to one linear relationship between the two factors though these are highly correlated to one another. 10.9 ADVERTISING EXPENDITURE As elsewhere in India too, there is a dearth of authentic published data on how much has been spent on advertising. Reasons for this reluctance are not far to seek. Firstly, it is indeed a 184
  • 24. sensitive question for any company to answer. Secondly and perhaps more important is the inability to arrive at precisely the amount to be attributed to advertising as accounting practices in these companies do not accurately keep figures on various forms of promotion in a company. Table-4 attempts to profile advertising expenditure in India during 1981 to 1988 on various media categories. Following are quick inferences on Table-4: a) The advertisement industry had crossed the magic figure of Rs. 1000 crores in 1988. b) In growth terms, television is scoring over other media in organized sector; while the distinction belongs to outdoor media in unorganized sector. c) The print media accounts for 60% of the total advertisement expenditure in 1988 with a similar formidable track record in the past. d) The expenditure on Radio has peaked off in the recent past, and it displays signs of sliding down in both absolute and proportionate ad expenditure. Table-4 : Advertising expenditure (Rs. crores) Category 1988 1987 1986 1985 1984 1983 1982 1981 Actual % Actual % Actual % Actual % Actual % Actual % Actual % Actual % I. . Organised 818 720 585 463 358 316 279 239 600 55.6 540 58.0 450 60.0 370 62.9 295 65.7 263 65.9 223 66.2 200 67.3 (11.1) (20.0) (21.6) (25.4) (12.2) (12.9) (16.5) T.V. 175 16.2 140 15.1 100 13.3 60 10.2 28 6.2 20 5.0 16 4.5 12 4.0 (25.0) (40.0) (66.7) (114.3) (40.0) (25.0) (33.3) Radio 30 2.8 28 3.0 23 3.1 20 3.4 19 4.2 17 4.3 15 4.3 14 4.7 (7.1) (21.7 (15.0) (5.3) (11.8) (13.3) (7.1) Cinema 13 1.2 12 1.3 12 1.6 13 2.2 16 3.6 16 4.0 15 4.3 13 4.4 (8.3) (-) (-7.7) (-18.7) (-) (6.7) (15.4) II. Unorganised 260 210 165 125 91 83 73 58 Outdoor 90 8.4 60 6.5 40 5.3 30 5.1 24 5.4 22 5.5 20 5.7 15 5.1 (50.0) (50.0) (33.3) (25.0) (9.1) (10.0) (33.3) Point of 80 7.4 65 7.0 50 6.7 45 7.7 27 6.0 26 6.5 23 6.5 18 6.1 purchase (23.1) (30.0) (11.1) (66.7) (3.0) (13.0) (27.8) Production 90 8.4 8.5) 9.1 75 10.0 50 8.5 40 8.9 35 8.8 30 8.5 25 8.4 (5.9) (13.3) (50.0) (25.0) (14.3) (16.7) (20.0) Total (I+II) 1078 100 930 100 750 100 588 100 449 100 399 100 352 100 297 100 (14.7) (24.3) (27.6) (31.0) (12.5) (13.4) (18.2) Figures in brackets indicate growth. Source: Advertising Industries : The Economic Times, Dec.5, 1988 A visual picture of the same advertisement expenditure is available in Figure-3. Additionally, a distribution of advertisement/sales ratios (percentages) of 103 select companies covered by a study of Economic Times is available in Figure-4. ADVERTISING EXPENDITURE 35 (Rs/crores) Percent Growth 30 1150 25 1000 20 15 850 10 1983 1984 1985 1986 1988 1982 1987 700 (P) 550 400 1981 1982 1983 1984 1986 1987 1985 1988 250 (P) Figure-3 185
  • 25. Distribution of 103 cos. by advertisement/sales ratios (Percentages) 48.5 12.0 34.0 4.9 3.01 to 4.50 1987-88 0.01 to 1.50 Above 4.50 1.51 to 3.00 Figure-4 Advertising agencies have specialised in the creation, generation and execution of promotional communications. Many organisations take the help of advertising agencies to promote their products and services and for reaching the audience in a better manner. Advertising agencies in India have kept pace with the expansion of media business and expenditure on advertising. While in 1939, there were only 14 agencies accredited to the Indian Newspaper Society (INS), by 1986, their strength has gone up to 383 and the number is much more today. Advertising agencies are playing a vital role, in India, in promoting a product or service. You will read more about advertising agencies and their work pattern in the next Unit. 10.10 PROMOTIONAL SCENE The promotional scene in India is so heavily tilted in favour of products in both consumer and industrial categories that other emerging areas appear totally out shadowed. The purpose of this Section is to pull two strongly emerging areas of marketing activities i.e. Services and Financial products out of their traditional neglect and make you aware of their current status. 10.10.1 Service Products As stated earlier, promotional scene of service products is both exciting and peculiar because the contours of the same are yet to settle firmly. There are in-built reservations in the minds of both marketers and media planners about the suitability of already-known promotional method in India and to find a perfect fit between them. Of immediate attention is the issue of selecting a consumer promotion for a service product. Exhibit-4 provides a checklist of questions in this regard. Exhibit-4 : Criteria for Selecting a Consumer Promotion for a Service 1. Objectives • Is the promotion consistent with overall brand marketing objectives in general and with the overall objectives of consumer promotions for the service? • Is the promotion versatile, capable of effectively reaching several groups (such both new and existing users) and fulfilling several objectives (such as stimulating switching and multiple purchases) simultaneously? • Does the promotion have appeal to consumers, to intermediaries, and to contact personnel? • Can the promotion function efficiently as a national promotion and / or as a local promotion in select market areas? For examples, coupon drops can be arranged in an individual market area, but sweepstakes or contests must generally be national. 186
  • 26. 2. The Service • Is the service a planned or an impulse purchase? If the latter, does the promotion make an impact at the point of service delivery? • Is the product frequently or infrequently purchased? If the promotion offer requires multiple purchases, slippage will be greater to the extent that the product is less frequently purchased. • Are the characteristics of the product appropriate for the promotional approach? For example indivisible services cannot be economically sampled. 3. The Consumer • Are target consumers accustomed to this promotional technique for this service? If not, might they perceive it as inappropriate? • Does the promotion reduce perceived purchase risk? • Are the term of the promotion simple and easy to understand? • Does the promotion offer an immediate or delayed reward to the consumer? • How much consumer effort is required to take advantage of the promotional offer? 4. The Intermediaries • How much incremental effort is required of intermediaries to successfully implement the promotion? • Does the promotion offer a direct sales benefit to intermediaries? Some refund offers, for example, either require proof of purchase for a second related item or offer a refund in the form of a certificate towards purchase of a second related item. • How much flexibility does the promotion offer intermediaries in terms of timing and execution? • Does the promotion permit intermediaries to appear to the source of the offer. • Does the promotion lend itself to creative and exciting point-of-sale displays? 5. Competition • Are competitive products currently using this promotion technique? • How rapidly can a competitor respond with a similar or superior promotion? 6. Cost Effectiveness • What is the maximum expected liability for the promotion? • Can the terms of the promotional offer be designed to minimize liability. For example, the number of purchase proofs required for a refund offer can be increased such that slippage increases and actual costs decrease. • How well can costs for the promotion be forecast? Is it vulnerable to the activities of ad hoc intermediaries (such as coupon brokers) such that forecast costs may be greatly exceeded? • Will the promotion tie up manufacturer capital, for example in an inventory of premium merchandise? • Are the expenses for the promotion incurred on a pay-as-young (couponing) or investment (sweepstakes) bases? • Is this promotion vulnerable to waste and abuse through such activities as pilferage and miserdemption? • Can the promotion be designed to minimize the number of consumers which can take advantage of the offer more than once? 7. Integration • Can promotion be integrated easily with other elements of the communication mix, including advertising, personal selling, and point-of-sale displays? • Can promotion, reinforce the service advertising theme and contribution to franchise building? • Can promotion integrated with other promotional activities, be used to create a dramatic event? For example, a sweepstakes is often used as an overlay to a refund and / or coupon offer. • Can promotion be used easily in line promotions involving several services as well as in single service promotion? • Is promotion part of a successful marketing tradition for this service category? 8. Implementation • How much incremental effort is required of management and the salesforce to successfully implement the promotion? • Does the salesforce expect the promotion to facilitate its selling task? • To what extent are the services of outside agencies required to implement the promotion? • Does management calculates the costs and timing of delivering the offer? • Does management have prior experience with this type of promotion? • How much lead time is required for implementation? 9. Measurement • What measures are available to gauge response to the promotion and how valuable are they ? For example, does the number of entries in a sweepstakes indicate the relative degree of positive impact on the sponsoring brand? 187
  • 27. • Can the impact be inexpensively measured and compared to the impact of other promotions both of the same and of different types? • Is response concentrated in a short time period after the promotion is launched, or are there significant lag effects which may reduce the accuracy and increase the expense of measurement? 10. Legal • Are there legal constraints on the design and use of this type of promotion? • Can this type of promotion be implemented nationally, or are there local laws which require adaptation of the offer in each state? Source :C.H. Lovelock and J.A. Quelch “Consumer Promotion in Service Marketing” , Business Horizons, May/June 1983. 10.10.2 Financial Advertising Since 1985-86 a new era of financial advertising has emerged in India, something that was seldom seen before. This is, however, inextricably linked to a new culture of saving and investment being witnessed these days. The culture was nurtured by a virtuous-circle of higher savings fuelled by newer avenues of investment and reinforced by better returns. The year 1985-86 was a watershed year where shares and debentures market experienced a boom. The progress slowed down with world recession and the stock market crash in 1987 worldwide. However, the recovery was swift and strong and the years 1988 and 1989 will go down in the history of corporate investment as the best years, in which several major issues of shares and debentures, were announced and subscribed to by the eager investors. Financial advertising refers to the advertisement of “financial instruments such as shares, debentures, bonds, bank deposits, saving schemes, units, mutual funds, etc.” In many ways, financial advertising is akin to consumer advertising. Financial instruments are similar to consumer products, though they engage higher customer involvement, commitment and risk. Thus, all marketing mix elements are of as much significance in financial products as they are in consumer products. Two differences, however, are notable in comparing financial advertising with consumer advertising : i) Firstly, financial advertising is ‘one time’ i.e., related to a particular event. Thereafter, it is forgotten. Consumer advertising on the other hand is continual in nature. ii) Secondly, the target audience in financial advertising is more ‘limited’ and ‘identifiable’ than in consumer advertising. Thus, media choice is more precise in financial advertising. Financial advertising is different from corporate advertising too. While the former is primarily to persuade the existing and potential investors to the financial products, the later deals with the task of building corporate-image of the advertiser. Usually, financial advertising is preceded by corporate advertising. So if an ITDC mega debentures issue is to be sold, the company would usually start with describing all that it had been doing, accomplishing and planning for the future. Then in the subsequent advertising, it will issue details of the debenture issue like the amount to be raised, the conversion terms, future profitability and investors benefits. Following are some major features of financial advertising in India. a) There are now several ad agencies in India which deal exclusively with financial advertising and marketing of financial products. b) The financial advertising accounts for less than 10% of the total advertising. Thus, if the advertising industry is worth Rs. 1,000 crores today, financial advertising’s share is less than Rs. 100 crores. c) The growth of financial advertising, naturally, is linked to the growth of capital markets. Thus, in 1985-86 the first capital market boom, Rs. 814.6 crores were raised. In 1987-88 the figure was almost Rs. 5,000 cores. Future indications too auger well for the capital markets. 188
  • 28. d) Financial advertising is not rated at par with consumer advertising on ‘creativity’. This criticism is nevertheless not very serious because financial advertising is about products marked by ‘seriousness’ and ‘facts’. So a no frills advertising in financial matters is as attractive as an emotional appeal in consumer products. e) Many companies have begun branding the financial products. Such branding, however has been limited to mega - capital issues only. f) Financial advertising uses a variety of media – with more emphasis on print media. Although television is used, it only arouses the initial interest and persuades the potential investors to look for facts in the print media. g) From the advertiser and user perspectives, trend towards cluttering of financial advertisers has been noticed. This becomes inescapable when several companies raise resources simultaneously, because the ‘going is good.’ This obstructs the full appreciation of facts by investors. h) Finally, since the financial advertising is ‘contextual’ rather than ‘perpetual’, agencies have to search unfailingly for new advertisers and companies. There is no ‘durable’ relationship between the client and the advertiser. This affects involvement of agencies in financial products, unlike the involvement seen in consumer products where agencies and advertiser both work together to build a product. Finally, the business of financial advertising is more ‘cyclical’ or ‘seasonal’ than ‘regular’ for agencies dealing in financial advertising. Beyond facts and figures, the question is: what is in store of future for Indian promotion? Although it may sound like a cliche, it is still true that growth, competition and creativity are likely to be the three leading starts on the horizon of Indian promotion and advertising. No sector will remain untouched by the all-engulfing arm of promotions, be it government, manufacturing units service sector and social activists. The cluttering of ad will call for creativity to cut through and get noticed. Keen and severe competition will force a rationalization and realignment in advertisement agencies. Advertisements will be far more slick and budget will rise for advertising. The question may be asked whether consumers too will get a better deal? Only time can tell. Check Your Progress – 3 1) State your opinion regarding the co-relation between promotion expenditure and sales generation? ….. ……………………………………………………………………………………………… …………………………………………………………………………………………….. ……………………………………………………………………………………………….. ……………………………………………………………………………………………….. ……………………………………………………………………………………………….. 2) What is the criteria for selecting a consumer promotion for a service? ………………………………………………………………………………………………. ………………………………………………………………………………………………. ………………………………………………………………………………………………. ………………………………………………………………………………………………. ………………………………………………………………………………………………. 10.11 LET US SUM UP 189
  • 29. This Unit covered the promotional media in use in India. Relevant data information on readership and other media habits was also provided. The ‘reach’ of the different media has been discussed and a comparative evaluation of media options has been provided. Promotional scene in India is undergoing a turbulent high growth period, with most advertisers waking upto the need for advertising and promotions, to create a niche in the increasingly competitive market. Services have also taken the promotional route and unconventional products like financial products are also being advertised. This growing outlay on promotional expenditure may bear testimony to gradual shift from the Seller’s market to a Buyer’s market. It has interesting implications for interested groups like media and advertising agencies. This Unit provided a scenario of the promotional expenditure, allocation of this expenditure media wise and the agency billing. Finally, promotional development in the field of services and financial advertising were discussed to give you an idea in those areas. Advertising and promotion are essential components in tourism and the various concepts mentioned in this Unit are applicable in this sector. 10.12 CLUES TO ANSWERS Check Your Progress – 1 1) A good media manager decides on how he or she expects a particular media to work by some evaluative criteria. A few questions form the evaluative criteria and can be considered as checklist for Media Selection. Read Sec. 1.2 to answer. 2) A few factors are : (a) The markets are flooded with new, innovative and improved products. (b) The public preferences, knowledge and attitudes towards media too has substantially changed. Read Sec. 1.3 to list more factors. Check Your Progress – 2 1) To answer this question study carefully Sec. 10.4. 2) (a) To advertise via Telephone, one can purchase 30 second messages, where the consumer is reached via phone. Sales teleconferencing takes place between advertisers, opinion makers and consumers. And one can participate in the conference by calling up or sending enquiries. (b) Direct mailing can be of brochure, pamphlets, leaflets etc. whereas handbills are simple sheet of paper with brief advertising messages. Read Sec. 10.7 to answer. Check Your Progress – 3 1) It is generally believed that a rupee spent on promotion does bring in a more than a rupee worth of turnover. Read Sec. 10.8 and form you own opinion. 2) Read Sub.-sec. 10.10.1 to answer this question. 190
  • 30. UNIT 11 PLANNING, MANAGING AND EVALUATING PROMOTIONAL STRATEGY Structure 11.0 Objectives 11.1 Introduction 11.2 Promotional Strategy and Tactics : Concept 11.3 Promotional Strategy : Planning Framework 11.4 Decision Sequence Analysis 11.5 Let Us Sum Up 11.7 Clues to Answers 11.0 OBJECTIVES After going through this Unit you should be able to : • define the concept of promotional strategy, • explain the planning process of promotional strategy, • help manage promotional strategy and allocate desired funds to the process, • evaluate the results of the promotional strategy, and • draw lessons for applying the same to your organisation. 11.1 INTRODUCTION This Unit picks up the thread of discussion from the framework of marketing communication process. It has been observed in practice that firms have to manage a more complex communication process than the literature might suggest. A wide range of communication tools and procedures are available to a firm to communicate with its target markets. It is, therefore, imperative that they are well coordinated. Else, the communication process may not work to the fullest advantage of the firm. In fact, the financial and non-financial resources sunk in any marketing communication programme are just too heavy to afford any misjudgment in promotional planning. The need of giving a strategic orientation to the promotional efforts can hardly be over-emphasised. A managerial perspective or a decision-making approach to promotion efforts is the central concern of this Unit. It seeks to cover the entire gamut of designing, managing and evaluating appropriate promotion strategies for a marketing firm. 11.2 PROMOTIONAL STRATEGY AND TACTICS : CONCEPT The strategic orientation to promotional activities is a sine-qua-non to a firm with a desire to survive and earn profit in a highly competitive marketing environment. This orientation provides an orderly plan for putting marketing resources and for exploiting market opportunities. It is a design that guides promotional activities for a long period. Though the term strategy has been treated to numerous definitions and conceptualisations, we would fall back on such definitions which are simple to understand and easy to operationalise in the context of promotional efforts. Given below are the two definitions of strategy: • “The art of distributing and applying business means to fulfil the end of policy” (Source : B. H. Liddele Hart, Strategy : 2nd ed. NY, F.A. Prager, Inc 1967). 191
  • 31. • “The art and science of adapting and coordinating resources to the attainment of an objective” ( Source : D.T. Kollat, R. D. Blackwell and James F. Robeson: “Strategic Marketing” NY, Holt Rineheart and Winston Inc. 1972). From examining these descriptions of strategy, it is clear that strategy is the way of achieving the ‘ends’ or ‘objectives’ of a firm often termed as the corporate mission. It is a long term vision of what the business is or is striving to be. It reflects on the firm’s ‘self’ and ‘self-ideal’ image. When translated in the context of promotion efforts it denotes a long range view of what promotion will be and what it should be. It may be appropriate here to recall the proposition that marketing communication and promotional objectives stem out of the corporate objectives and marketing objectives. Figure-1 examines this relationship quite elegantly: The Firm Corporate Mission Objectives and Strategy Corporate Strategic Planning Marketing Objectives and Strategy Functional Strategic Planning Marketing Communications Objectives and Strategy Promotional Activities Tactical Planning & Operations Consumer / Public Figure-1 : Linkages Between Promotion, Marketing and Corporate Strategy In many leading texts on promotional strategy, the term, ‘tactics’ is also used. Tactics are the ways for strategy application and involve a ‘deployment of resources with a view to implement strategy objective’. This will be amply clear by an illustration of two marketing firms - called A and B. We suppose that firm A has formulated a strategy of continuously offering new products in the market. Since new products take time in customer acceptance, marketing tactics for the firm would be to issue generous discount coupons to encourage first trail and repeat purchase rates. 192
  • 32. Similarly, if firm ‘B’ has wished to introduce up-market products, it will have to use, inter-alia, tactics of attractive packaging and promotion of high - grade dealers. Both strategy and tactics are used by firms and many entrepreneurs in small business use them unknowingly. As far as the tourism sector is concerned they are both vital not only for profit organisations but for non-profit organisations (like the Tourism Department) also. 11.3 PROMOTIONAL STRATEGY : PLANNING FRAMEWORK After a company has gained understanding of what a promotional strategy is and its differentiation with promotion tactics, it turns its attention for evolving a planning framework of promotional strategy. Figure-2 provides an approach for planning promotional strategy for a typical marketing firm. The approach's steps and a brief explanation of each is given below: 1) Situation Analysis A) Demand • Culture • Attitudes • Individual Differences 2) Establishment of Objectives • Decision Process A) Relationship to Market Target B) Communication Message Objectives B) Definition and Identification of Target C) Sales Objectives Markets • Segmentation 3) Determination of Funds Appropriation • Positioning C) Competition 4) Specification and Management of Programme Elements D) Legal Consideration A) Advertising E) Internal Organisational Considerations 5) Coordination and Integration of Efforts • Analysis of Media Resources • Personnel • Selection of Advertising Media of Proper Balance between A) Achievement • Monetary • Message Determination • Established policies and procedures 6) Measurement of Elements Programme Effectiveness • Operational distinctive B) Personal SellingB) Scheduling of Execution • C) Utilisation of Personnel and Outside Services Analysis of Resources D) Evaluation and Follow up • Selection of Motivation, deployment, 7) Evaluation and Follow up compensation and evaluation Source: Adapted from J.F. Engel, M.R. Warshaw and T. C. Kinner : “Promotional Strategy” 1987. C) Stimulation of Re-seller Support • Analysis of Re-seller Resources • Stimulation of Performance Figure-2: Stages in Promotional Planning and • Improvement and Augmentation of Strategy performance D) Sales Promotion E) Supplemental Communication (Public) Relations Let us now explain the Figure-2 given above: • An assessment of Relevant Publics • Determination of Media and Messages 1) Situation Analysis : The Promotion Planning begins, as it must, along with an analysis of the promotion environment. This analysis extends to both external and internal environment. Among the major external environment variables, attention is focused on market demand; market competition and legal constraints on promotional activities. 2) Establishment of Promotional Objectives : Objectives are expressions of where a firm would like to be in the future. As you have read earlier, the promotional objectives are derivative of corporate mission and situation analysis. Table-1 details what could be possible objectives of promotion. Although the promotion objectives are normally for the direct utility of marketing managers only, it is advisable to have a macro view of these objectives so as to have a larger picture. Table-1: Statement of Some Possible Promotional Objectives 193
  • 33. I) Desired Conditions to achieve in the Consumer’s Mind A) Clarify needs 1) Make the consumer conscious of the difference between the objectives and the present positions. 2) Clarify the nature of this difference in his or her mind. 3) Increase the magnitude of the difference in his or her mind. 4) Provide some urgency about eliminating the difference. 5) Make him or her feel more certain that a difference does exist now or in the future. B) Increase Brand Awareness 1) Increase the breadth of awareness. 2) Increase the intensity of awareness. 3) Improve the timing of initial awareness in relation to purchase. 4) Increase the duration of awareness 5) Improve the quality of the prospects made aware. 6) Improve the closeness of association between the need felt and this brand as a solution to it. C) Increase Product Knowledge 1) Increase the consumers total and true knowledge about the brand. 2) Increase the ratio of favourable knowledge to unfavourable knowledge about this brand 3) Improve the accessibility of this knowledge in the consumer mind. 4) Improve the accuracy of knowledge about the product in the consumers mind (eliminate unfavourable myths). 5) Improve the appropriateness of consumer knowledge especially on unique points of products differentiation and hidden quantities. 6) Improve the credibility of consumer knowledge. D) Improve the Company image 1) Progressiveness 2) Honesty 3) Reliability 4) Competence 5) Friendliness E) Improve the Brand Image 1) Improve consumer attitudes towards the product attributes (design capacity, expense quality etc.) of the brand. 2) Improve customer attitudes towards the personality attributes (age, status, race gender etc.) of the brand. F) Increase Brand Preference 1) Increase the breadth of preference (the number of consumers that prefer the brand). 2) Increase the volume of re-purchase (decrease cognitive dissonance) 3) Extend the period of time over which re-purchase continues to be made. II) Desired Conditions to achieve in the Consumer’s be Baviour A) Stimulate Search Behaviour 1) Increase store traffic 2) Increase enquires 3) Increase other forms of product enquires B) Increase Brand Trial Purchase 1) Increase the number of triers 2) Increase the quality of triers (i.e. triers with the greatest possibility of re-purchase by giving free coupons, coupons with some discounts etc.). C) Increase Re-purchases 1) Increase the frequency of purchase 2) Increase the volume of re-purchase (decrease cognitive dissonance) 3) Extend the period of time over which re-purchase continue to be made. 194
  • 34. D) Increase Voluntary Promotion by consumers of the brand 1) Increase the quality and the amount of word of mouth communications among consumers by providing better and better services. 2) Increase favourable consumer feedback to dealers. III) Desired Conditions to achieve for Corporate Position A) Improve the financial position 1) Increase the sales volume per year 2) Reduce the cost of sales per year 3) Increase the profits per year and/or Return on Investment 4) Extend the period of profit flow 5) Increase the certainty of profit flow B) Increase the flexibility of the corporate image to facilitate future growth and/or diversification C) Increase cooperation from the trade 1) Stimulate the enthusiasm of company sales representative 2) Increase the self space at retail outlets 3) Increase the completeness of inventory D) Enhance the company’s reputation in the financial community E) Enhance the company’s reputation among present and potential employees F) Increase the influence of public opinion concerning political issues related to corporate welfare G) Build up Management Ego. Source: M. W. Delozier : “The Marketing Communication Process”, McGraw Hill (1976). Promotional Objectives Selection of Techniques Modification in Allocation Geographic Consideration Unanticipated contingencies Product Life Cycle consideration Specification of Promotional Budget Figure-3 : A Framework of Funds Allocation to Promotion 3) A Budgeting Framework for Promotional Strategy : In approaching to initiate budgeting for promotional strategy, the decision makers are confronted with the question : How much should be spent? Unfortunately, answers are difficult to come by. Moreover, they vary substantially. This section intends specifically to deal with the issue and to present the techniques for determining promotional budgets or funds allocation. It should, however, be cautioned here that these methods aim to reduce the subjective bias in allocation decision. They can never eliminate it entirely. The framework for funds allocation in promotion begins with the objectives. Figure-3 provides a graphic illustration of the same. a) Techniques of Determining Promotional Budgets Traditionally, many of techniques are available to help decision makers in allocating funds to promotional activities. Table-2 summaries each of them. 195
  • 35. Table-2: A Description of Promotional Budgeting Techniques Techniques Illustration 1) Arbitrary If the current year’s promotion budget is Rs. 1,20,000 and the next year is expected to be a good year, the decision is taken to increase funds allocation from 10% to 15%. Thus, the allocation will stand between Rs. 1,40,000 - 1,50,000 for the next year. 2) Percentage of Sales If the present promotion funds percentage is 10% for every sale worth Rs. 100, Rs. 10 is spent on promotion. Thus, if next year’s sales are forecast to be Rs. 1 crore, the promotional budget will be fixed at Rs. 10 lakhs. 3) Competitive Party If the current year’s promotion budget is Rs. 1,20,000 and the closest competitor is expected to increase its promotion budget by 4% , the firm too follows the strategy and establishes the budget allocation at Rs. 1,24,800 next year. 4) All you can Afford If a firm has a total marketing budget of Rs. 10 lakhs, out of which Rs. 5,00,000 are allocated for distribution, Rs. 400,000 for product testing, and Rs. 30,000 for consumer surveys, then remaining Rs. 70,000 is left for advertising, personal selling, and sales promotions. 5) Objective and Task If the firm has three goals for next year: (i) increase sales of brand A by 5% (ii) introduce brand B and attain recognition by 15% of the target market, and (iii) improve positive rating of the company from 60% to 75%, the promotional tasks and tools needed to achieve these goals will be allocated separately. It is clear that all the techniques have their own merits and demerits and may not be recommended to every company universally. Similarly, even a company may change over from one technique to another in a given period for allocating promotional funds. On the whole, the ‘Objective and Task’ method of funds allocation seems to be the most rational and equitable. It is based on the built-up approach that aggregates that cost of performing those tasks that are needed to reach stated objectives. Then only, it determines the total promotional appropriation. Many research studies also have verified its greater popularity and use among all the techniques mentioned thus far. b) Modification in Promotional Budgets Even if a suitable technique has been identified, it may become necessary for a firm to further fine tune it for fund allocation. There could be three reasons for the modification. Different geographic conditions are the first to force a change in funds allocation. Thus, Bombay may account for the largest promotional budgets even though the allocation for Western region may not be high for promoting the products. The second reason for change emanates from the different stages of product life cycle (PLC). It is, thus, logical to spend more during the launch phase of product than the growth stage of product when it has stabilised. Finally, unanticipated contingencies may call for a modification in promotional budget. For examples, the tourism industry had to promote India a lot more harder after the plague scare in Surat which reduced the flow of inbound tourists. More funds and quick tactical changes in promotional policy helped the industry in retrieving the situation. 4) Role Assignment to Promotional Elements : In a promotional strategy, marketers endeavour to arrive at the best possible mix of promotional elements i.e. promotional mix. These elements are advertising, resellers support (wholesalers and retailers), personal selling, sales promotion, etc. Figure-4 explains the linkages between various promotion elements and the hierarchy of effects. 196
  • 36. HIERARCHY OF GENERAL SPECIFIC BEHAVIOUR SELECTED EFFECTS BEHAVIOURAL OBJECTIVE OF PROMOTIONAL MIX OBJECTIVES OF PROMOTION RELEVANT TO EACH PROMOTION Awareness Obtain consumer Advertising, publicity recognition, gain consumer pre, POPs and window Provide Information knowledge of product display. Knowledge attitudes. Liking Obtain favourable attitudes, Combination of Media Developing Positive gain preference for Advt. (Arguments, Image attitude and feelings company’s brand over those and status appeal) Sales Preference of competitors. force, demonstration publicity, word of mouth. Conviction Sustain strong consumer Point of purchase, Stimulate and retain preference; gain purchase displays, Advt., Deal desires of goods and service; special offers price, maintain continued appeal celebrity Purchase purchase. Endorsement, Direct Mail; Sales Force; Word of Mouth. Source: R. Havide & G. A. Steiner : A Model to Predictive Measurement Advertisement Effectiveness, Journal of Marketing. Vol. 25 October 1961. Figure-4 : Promotion and the Hierarchy of Effect Model 5) Co-ordination and Integration of Promotional Efforts : Past research has brought out what separates a successful strategy from a non-successful one. The major factor is effective coordination and integration of various efforts. The same is true for promotional strategy. A promotion coordinator thus, has to ensure that unless otherwise required, advertising should not over-shadow personal selling for a given product or vice - versa. Similarly, a careful decision has to be taken for involving outsiders like advertising agency, market research and media buying services in your promotional efforts. A proper balance needs to be arrived at between the management and the thinking of the outside experts. 6) Measurement of Effectiveness : The promotional strategy, being so costly and resource- consuming, has to show tangible results. In other words, effectiveness measurement is a must. Doing it, however, is a different proposition than recommending it because both ‘measurement’ and ‘effectiveness’ have been subjected to a variety of interpretations. It has become virtually impossible to satisfy an all effectiveness criteria. 7) Evaluation and Follow up : At this stage, marketers have to evaluate implementation and efforts of the promotional strategy; identify the gaps between its objectives and results; and plan action for its follow up. This way, chances of making the same mistakes again and yet all over again, are reduced considerably. It also ensures that lessons are learnt from deficiencies. Finally, notwithstanding the presence of subjective perceptions in evaluations, accountability needs to be fixed for doing both right and wrong things in the promotion strategy. For this reason alone, the evaluation and follow up of promotional strategy is inescapable. 11.4 DECISION SEQUENCE ANALYSIS 197
  • 37. Figure-5 (given on next page) illustrates a decision sequence analysis for promotional strategy. It provides an illustration of the stages in the promotional planning framework discussed in the previous Section. It should be noted that the decision sequence analysis is based on: • an ‘adaptive’ process. It, thus, includes systematic procedures for gathering information and bringing about modification when needed in the promotional planning. • the proposition that the promotional planning is a continual and on-going process. Evaluation, feedback and follow up are the integral parts of the process that provides it with vitality and relevance in the changing needs of promotion. Check Your Progress 1) How is Promotional Strategy different from Promotional Tactics? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… 2) Explain the budgetary constraints in Promotional Planning. ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… 3) Discuss the Decision Sequence Analysis of Promotional Strategy. ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… 198
  • 38. Step 1 Situation Analysis: Demand, Target Markets Segmentation and Positioning, Competition, Legal consideration, Internal Organizational Considerations Step 2 Establishment of Objectives Relationships to Market Targets; Communication message, objectives, sales objectives Step 3 Determination of Funds Appropriation Step 4 Management of Programme Element’s Specification and Advertising, Personal Selling, Re-selling support, Sales promotion. Public Relations Advertising Personnel Sales Re-seller Public Selling Promotion Programme Relations Analysis of Media Resources Decision Sequence Similar to Advertising Selection of Media Determination of Message Step 5 Co-ordination and Integration: Budgetary Balance scheduling, Utilization Revision of Personnel, Funds Allocation Revision Step 6 Measurement of Effectiveness Step 7 Evaluation and Follow - up Postmartem Assessment of Accountability Source : Engel, Warshaw and Kinnear. Figure-5 : Decision Sequence Analysis of Promotional Strategy 199
  • 39. 11.5 LET US SUM UP This Unit sheds light on the hidden aspects of promotional strategy. It first differentiated between strategy and tactics orientation. This was followed with a detailed framework of promotional strategy. The activity of setting up of objectives of promotion is evaluated with a closer eye, because they will later become the destination points for promotional activities. A procedure of setting a budget was also discussed and several different techniques for the same were explained. The Unit finally developed a managerial framework for evaluating and controlling the promotional efforts. 11.6 CLUES TO ANSWERS Check Your Progress 1) Strategy is the way of achieving the ‘ends’ or ‘objectives’ of a firm often termed as the corporate mission. Tactics are the ways for strategy application and involve a ‘deployment of resources with a view to implement strategy objective’. Read carefully Sec. 11.2 and answer. 2) Budgetary allocations involve: i) Techniques of Determining promotional Budgets, and ii) Modification in Promotional Budgets. Read Sec. 11.3 and prepare you answer. 3) Decision sequence Analysis of Promotional Strategy involves seven steps. Study carefully. Secs. 11.2 and 11.3 to prepare your answer. 200
  • 40. UNIT 12 MANAGING SALES PROMOTION Structure 12.0 Objectives 12.1 Introduction 12.2 Sales Promotion : Objectives 12.3 Methods 12.4 Planning 12.5 Promotional Strategy 12.6 Managing Consumer Promotions 12.6.1 Organising Consumer Schemes 12.6.2 Types of Consumer Promotion 12.6.3 Organising Consumer Contests 12.6.4 Other Methods 12.7 Managing Trade Promotions 12.8 Managing Salesforce Promotions 12.9 Managing Sales Promotion in Services Marketing 12.10 Measuring the Performance of Sales Promotion 12.11 Let Us Sum Up 12.12 Clues to Answers 12.0 OBJECTIVES After going through this Unit you should be able to : • define sales promotion and its objectives, • discuss the various sales promotion methods, • discuss the various step of sales promotion methods and promotional strategies, • explain the considerations in the organisation and management of consumer trade and salesforce promotions, • discuss the importance of measuring the performance of sales promotion, and • describe how to manage sales promotion schemes to efficiently accomplish the goals set. 12.1 INTRODUCTION This Unit is a build up on Unit-9 on “Marketing Communication Process”. In this Unit we will discuss “Promotion” aspects such as meaning, role, objectives and methods of sales promotion as well as highlight the need for systematic management of this function. The sales promotion schemes are aimed at three target audiences namely consumers, trade (distributors, retailers, etc.) and the salesforce. The issues relating to effective planning and control of sales promotion targeted at each of the three audiences are explained in this Unit. 12.2 SALES PROMOTION : OBJECTIVES Of all the methods of promotion that constitute the promotion mix, “Sales Promotion” is the only method that makes use of incentives to complete the ‘push-pull’ promotional strategy of motivating the salesforce, the dealer and the consumer in transacting a sale. There is no single universally accepted definition of sales promotion. One can, however, gather its essence by perusing a few definitions. Let us look at some of the popular definitions of sales promotion : 201
  • 41. i) According to American Marketing Association, sales promotion refers to : “those activities other than personal selling, advertising and publicity, that stimulate consumer purchasing and dealer effectiveness, such as display shows and exhibitions, demonstrations, and various other non-recurrent selling efforts not in ordinary routine.” This definition suggests that sales promotion is a catch – all for all those promotion activities which do not fall clearly into advertising, personal selling or publicity. ii) Roger A. Strang offers a simpler definition: “Sales promotion are short term incentives to encourage purchase or sale of product or service.” iii) Yet another definition that seems fairly exhaustive, and hence, will be used in this Unit is the one given by Stangley M. Ulanoff in his Handbook of Sales Promotion. Stanley defines sales promotion as : “all the marketing and promotion activities, other than advertising, personal selling and publicity, that motivate and encourage the consumer to purchase by means of such inducements as premiums, advertising specialities, samples, cents-off coupons, sweepstakes, contests, games, trading stamps, refunds, rebates, exhibits, displays, and demonstrations. It is employed as well, to motivate retailers’, wholesalers; the manufacturers’ salesforces sell through the use of such incentives as awards prizes (merchandise, cash and travel), direct payments and allowances, cooperative advertising, and trade shows. It offers direct inducement to act by providing extra worth over and above what is built into the product as its normal price. These temporary inducements are offered usually at a time and place where the buying decision is made” Summing up, Sales promotion deals with promotion of sales by the offer of incentives which are essentially non-recurring in nature. It is also known by the names of Extra - Purchase - Value (EPV) and Below - the - line selling. Like in other market economics, the use of sales promotion is catching on in India. In terms of volume, the number of sales promotion schemes offered to the consumers alone have grown up manifold. The schemes offered at the dealer level also have nearly doubled. In terms of the expenditure incurred, the large size companies are stated to be spending between 40 and 50 per cent of their advertising and sales promotion budget on this activity. Among the various types of sales promotion schemes used, contests at the consumer, dealer and salesforce levels have made a significant headway. Why rapid growth? A perusal of the list of the product and service groups which emerged as the major users of sales promotion, and from the market feel, it seems clear that a transformation from the seller’s to the buyers’ market is taking place and marketing has become more competitive in these product markets. In addition to increasing competition, other reasons for rapid growth of sales promotion in India, as pointed out by ninety five large sized cooperating companies in a survey are summarised below: • sales promotion makes an immediate effect on sales, • measurement of the effectiveness of sales promotion is easier as against the other promotional methods, 202
  • 42. • channels of distribution are emerging as powerful entities and demand greater use of incentives to get desired results, • products are becoming standardised and similar, and so need increased support of non-price factors of which sales promotion is an important one, and • impulse buying is on the increase, and so is the rise in the number of marginal customers. With virtually no brand loyalty, offer of attractive schemes help manufacturers to induce such customers to choose their products or services. Moreover, the retailers play an important part in stocking, displaying and selling products, and sales promotion helps in developing and maintaining trade relationships. Objectives of Sales Promotion As a powerful method with a capability to complement and supplement the advertisement function of marketing, sales promotion helps marketers realise a variety of objectives. These objectives could relate to the promotion of sales in general, or to a specific activity at a particular level i.e. consumer, dealer or salesforce. Some of the commonly attempted objectives are to: • increase sales (in general, and focusing on new uses, increased usage, upgrading unit of purchase, winning sales of fading brands, etc.), • make the sales of slow-moving products faster, • stabilise a fluctuating sales pattern, • identify and attract new customers, • convince old customers to stay with the brand or product, • launch a new product quickly, • educate customers regarding products improvements, • reduce the perception of risk associated with the purchase of a product, • motivate dealers to stock and sell more (including complete product line), • encourage customers to buy more products from the same product line, • attract dealers to participate in manufacturer’s dealer displays and sales contests, • obtain more and better shelf space and displays, • bring more customers to dealer stores, • make goods move faster through dealers, • improve manufacturer-dealer relationship, • motivate salesforce to take the achievement higher than targets, • attract salesforce to give desired emphasis on new accounts, latent accounts, new products, and difficult territories, • reward salesforce for active market surveillance and for rendering superior customer service, • put power into the sales-presentation, • counter competitors sales-promotion and, marketing efforts, • provide punch to the company’s advertising efforts, and • build goodwill. Companies may use any one or a combination of the above objectives in varying forms to suit the product-market needs of their product. What is of significance is that the sales promotion objectives set to be accomplished must be integrated with the promotion and marketing objectives pursued by the company. 12.3 METHODS Many methods of sales promotion are used by marketers. Depending upon the creativity level of their sponsors, their variety seems very large. We refer here to some of the most commonly used methods of sales promotion. 203
  • 43. As noted above, the accomplishments of the desired promotion and marketing objectives ultimately depend on the extent of the desired response received from consumers, dealers and members of the salesforce. Hence various sales promotion methods are build around these three target groups. Further, in terms of the impact desired, the variety of sales promotion schemes offered are grouped into two categories: One, aimed at producing immediate impact, and the other of delayed impact i.e. carrying on the impact over a period of time. Immediate impact schemes are those schemes where the consumer, dealer or salesperson gets the incentive on first contact, purchase or on performing a one-time act. On the other hand, under the delayed impact schemes, the consumer, dealer or salesforce is called upon to comply with the scheme over a period of time before receiving the full benefit of the scheme. Price discounts, free samples or large quantity packs are the popular examples of immediate impact schemes, whereas coupons, trading stamps, and contests are examples of delayed impact category of sales promotion schemes. Table-1 presents the variety of sales promotion schemes directed at the consumer, dealer and salesforce levels according to their grouping under immediate impact or delayed impact categories. The meaning and objectives of these schemes are given in Table-2. Table-1 : Sales Promotion Directed at Impact Users Non-users Trade/Suppliers Salesforce *Price-off *Price-off *Discounts *Perquisites & Allowances * Qty-off *Sampling *Shelf space allowance Immediate * Over-the-counter *Over-the-counter * Gifts * Gifts * Package Premium * Push Money * Banded Premium * Posting of * Container Premium Salesforce * In Prdt. * Media/Door * Merchandise * Sales Contests Coupons * Coupons Deals Delayed * Personality * Return/Refund * Coupons Premiums Offer * Display Contests * Honours and * Trading Stamps Recognition * Self-liquidators * Co-op Allowance * Customer Service * Contests / Lucky * Sales Contests Awards Draws Training Sales Force/Privileges * The format of this table is based on Donald W’Cowell’s article on Sales Promotion and the Marketing of Local Government Recreation and Leisure Services, European Journal of Marketing, 18.2. Though ideal for consumer goods, sales promotions are also used for promoting industrial goods. The difference in the use lies in the types of schemes offered, and in the frequency of their offer. Sales promotion schemes offered to industrial customers, besides the usual gifts, price-off coupons and contests, include product demonstration, training to customer staff, offer of interest - free instalment payment plan, ready and regular availability of repairs and spares, and posting of trained staff to assist/supervise in the working of the equipment in the client’s premises, at the manufacturer’s cost. The sales promotion schemes offered at the level of industrial distributors are : provision of extended credit, and provision of specialised sales/technical staff at the manufacturer’s cost, besides the usual cooperative advertising and sales promotion, gifts, and organisation of distributors contests. The sales promotion schemes popularly used to motivate industrial salesforce are: prizes and awards on special achievements, sales contests, new accounts contests and prompt service awards. 204
  • 44. Table-2 : Sales Promotions : Meaning and Objectives Sales Promotion Meaning Objectives 1. Price-off offers Offering product at lower than the normal price To encourage immediate sales, attract non-users, induce new product trial, counter competition, inventory clearance at the retail level, inventory build-up the trade level. 2. Quantity-off offers Offering more quantity of the same product at To encourage more/longer duration no extra cost or with a very nominal increase in consumption, higher or excess quantity the price of the larger quantity packs movement from the factory, trade up consumer for higher quantity pack size. 3. Premium Offer of an article of merchandise as an To encourage purchase, stimulate loyalty, off- incentive in order to sell product or service. Its season sales promotion, induce trial or new forms are: product, ensures reach of premium to the consumer a) Packaged When the incentive article is packed (inserted) Premium inside the package of the product. b) Banded Where the premium article is banded to the Sampling new products, adding speed to slow Premium package of the product say with cellotape etc. moving products. c) Over-the- When the premium article is neither inserted To counter competition, improve inventory counter (OTC) inside nor banded to the product package but is clearance at the trade level Premium given away to the consumer over the counter along with the product package d) Container When the product itself is placed in an attractive As a durable reminder at home Premium and reusable container which serves as a gift. e) Self-liquidating Where the consumer usually is asked to pay a To induce consumer to appropriate premium Premiums specified amount to liquidate or offset a part or article, reinforce brand image, encourage more full cost of the premium article or the scheme consumption, enables sponsor to offer better administration costs quality premium. f) Personality Where the consumer is required to redeem a To build loyalty and reward the consumer for Premium specified proof-of-purchase for the premium that to counter competitive offers. article. Proof-of-purchase may be labels, pack tops, bottle tops, corks, etc. 4. Coupons When the consumer is entitled to redeem a To encourage product trial, build loyalty, trade- specific standard certificate for product/article up regular users, stimulate re-purchase rate, free or in part payment. Coupons are used by solicit inquiries. both the manufacturer and the dealers for sales promotion. Coupons may be distributed by mail, by media advertisements, door-to-door, inside product package or by dealers on purchase. 5. Refund offers Offer of a refund of money to consumer for To induce trial from primary users, motivate mailing in a proof-of-purchase of a particular several product purchases, obtain displays at the product(s) retailers, help retailers tie-in with other products, switch competing brand users to sponsor’s brand, loading dealers with increased stock. 6. Trading stamps Organised by Trading Stamps companies or large retailers. Trading stamps are a kind of discount coupons offered to consumers linked with the quantum of their purchase. On enough accumulation these are redeemable for various kinds of merchandise. 7. Consumer contests Where individuals are invited to compete on the To create brand awareness and stimulate interest and Lucky draws basis of creative skills. The latter is based on the in the brand, acquaint consumers with brand chance or luck factor. usage and benefits, build traffic at the store precipitate brand purchase, obtain consumer feedback, promote advertising theme of the company. 8. Dealer stock It is a type of point-of-purchase advertising To provide product exposure at the point of Display contests which uses the show windows of the dealers for purchase, generate traffic at the store, infuse providing exposure to the sponsor’s products. enthusiasm among dealers. Dealers participating enthusiastically and creatively are awarded. 9. Dealer Sales Where participating dealers are invited to To increase sales, buy dealers’ loyalty, motivate contests compete in terms of the sales performance. dealers’ staff to sell more. 10. Discounts Other than normal trade and cash discounts To push more sales to trade, early cash recovery. 205
  • 45. Sales Promotion Meaning Objectives 11. Trade Allowances These are temporary price reductions/reimbursement of expenses incurred by dealers-in full or in part, its varied types are as under : a) Trade or Buying Offer of price reduction on purchase of To load the trade, allowance specified quantity of a product b) Buy-back allowance A secondary incentive which offers a certain To encourage trade co-operation and sum of money to trade for each additional stimulate repurchase unit bought over and above the deal. c) Count and recount When a specific amount of money is offered To move stocks faster, reward on sale only. allowance after ascertaining the number of units sold during a specified period. d) Merchandise (display) An allowance to trade for providing desired To create enthusiasm in trade, improve traffic allowance sales promotion and product displays and exposure at the point-of-purchase, gain larger space/effort of the trade in the promotion of sponsor’s product as against the competitors. e) Co-operative Where in a manufacture shares at an agreed To gain product and retail identity motivate advertising & rate the advertising and promotional cost dealers to promote manufacturer’s product, Promotion allowance incurred by the dealer in the promotion of obtain local advertising and promotion manufacturer’s product. 12. Dealer gifts Offer of useful articles and attractive gifts to To improve dealer relations, made impact on dealers for his personal, family or office use consumer scheme/contest offered 13. Premium or Push money When an additional compensation is offered To push a specific product or product line. to trade or salesforce for pushing additionally a specific product or product line. 14. Merchandise Deals (13 Wherein additional quantity of the same or To load dealers with inventory, expose other for 12) the same manufacturer’s another product is products of the sponsor, encouraging dealers offered to trade. May be offered jointly by to sell more and early to realise their non-competing manufacturers. incentive. 15. Point-of-Purchase (POP) Those special displays, racks, banners, To attract traffic at retail store, remind exhibits, that are placed in the retail store to customers, encourage impulse buying, ensure support the sale of a brand. additional visibility to the advertising campaign. * The format of this table is based on Donald W. Cowell’s article on Sales Promotion and the Marketing of Local Government Recreation and Leisure Services, European Journal of Marketing, 18.2. Need for Orderly Management In spite of the growth in the sales promotion activities, one survey of the company practice revealed that the managerial efforts put in to manage this function were unsatisfactory. Use of ad- hoc approaches, neglect of sales promotion research, and lack of formal systems and producers were found to be more prevalent in the case of 95 companies surveyed. Consequently larger number of companies experienced less than expected success of their schemes. When asked specifically, about forty per cent of the companies surveyed admitted that one or more of their sales promotion schemes misfired during the last three years due to causes which could be categorised as : • faulty administration, • failure to match the scheme to the objective, • lack of proper planning, • poor dealer relations, and • lack of creativity. 206
  • 46. Check Your Progress – 1 1) State a few objectives of Sales Promotion. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) What are the methods of Sales Promotion? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 12.4 PLANNING With growing competition at the marketplace and the need to realise full benefits of this unique method of promotion, it is required that the perfunctory approach used in its management is stopped forthwith and the sales promotion function is managed professionally. Systematic planning of this function should initiate the managerial process. The following eight steps are suggested for effective planning and management of the sales promotion function: i) The first step is to assess and analyse the present situation of the brand in terms of market share, major competitors and brand performance of brands users, non-users and lapsed users. This benchmark should then be related to the market size and the potential estimated. It will now pave the way for determining the role of sales promotion in effecting the desired change in the market share of the brand. The outcome of this exercise will be the availability of desired information to set measurable and attainable goals. ii) After the goals for sales promotion of the brand are set, the second step deals with the identification of the alternative schemes, and the selection of the most appropriate sales promotion scheme(s) capable of accomplishing the goals set, within the available budget. iii) The third step relates to incorporating creativity into the scheme to be offered. This is, making the scheme novel, attractive, and challenging from the viewpoint of its target group i.e. consumer, trade or salesforce. iv) The fourth step relates to legal validity of the sales promotion scheme to be offered. For example, in India before a consumer contest can be offered permission from the licensing authority of State, usually, the Collector of the District is required under the Prize Competition Act, 1955. Similarly, with the amendment of MRTP Act and the incorporation of Unfair Trade Practices therein, the sponsors must ensure that their schemes do not attract the provisions of the Act. The judgements of the MRTPC against the Sales Promotion Schemes offered (by a leading footwear company of India relating to children footwear; a dentifrice company relating to the toothbrush offer; and of a popular fan company relating to announcement of special off season reduction in price) point to the strong determination of the commission to protect consumers from unfair trade practices. v) The fifth step covers primary decisions relating to the timing and duration of the schemes to be offered, location-wise selection of dealers, and conviction of the trade and salesforce about the appropriateness of the scheme. It will be useful to quote here the findings of a recent study of Kenneth G. Hardy on Key success factors for manufacturer’s sales promotions. The major findings are given in a tabular form in Exhibit-1. 207
  • 47. Exhibit-1 Sales Promotion Key success factors Objectives Consumer Promotions Trade Promotions 1. Short- term volume objective • Dual promotions (offer of trade • Trade support promotions simultaneously with • Short promotion period consumer promotions) • Offer of high level of • Sales force (trade) support incentives 2. Long-term market share objectives • Sales force support • Dual promotions • Trade support 3. Building trade inventory objective • Avoid competitive promotion • Absence of competitive • Salesforce (trade) support promotions • Offer of high level of incentives to • Trade support the consumer (and to the trade in • Shorter-promotion period case of dual promotions). 4. Increase consumer Trial • Salesforce (trade)support • Dual promotions • Longer promotion period • Offer of higher level of incentives 5. Load the consumer objective • Salesforce (trade) support (Situational) • High promotion cost-special advertising, p.o.p., etc. Other important decisions relate to scheduling for procurement of scheme related premiums, production of the brand, advertising, P.O.P. (Point of Purchase) materials and other logistics related aspects. vi) The sixth step covers the development of the evaluation criteria in relation to the sales promotion goals set. The decision areas include what to measure? when to measure? how to measure? and for how long to measure? Effectiveness of Sales promotions is usually measured in references to sales achieved, cost effectiveness, redemption rate of coupons and trading stamps, turnover of special packs or special liquidators, number of entries received to the contest, etc. To do a good job, special focus must be laid on measuring the incremental sales arising out of sales promotions. Before proceeding to the last two steps involved in management of sales promotions, let us take note of the select findings from the literature survey relating to the effectiveness of sales promotion. These are : • Incremental sales are harder to get for high market share brands, • A coupon with a sample can be almost twice as effective as a coupon alone, • High redemption rates can be very costly, • The earliest redemption’s are the incremental sales, and • Short purchase cycles mean shorter term effects. vii) As the sales promotions offer commences, the seventh step relates to monitoring the offer and collecting the relevant data and experience for future use as well as mid-period corrections. viii) The eighth and last step relates to evaluating the effectiveness of sales promotions in the context of their goals. Efforts must also be put in to perfect the measurement methodologies, and in conducting researches on aspects like deal prone consumer, incentive scheme and gift selection factors or the attitudes of trade and consumers towards the use of sales promotion 208
  • 48. schemes. Documentation of corporate experiences on sales promotions, the pitfalls in the existing systems and procedures, and the mishaps that occurred, etc., ultimately help in improving the state of the art of managing the sales promotion function professionally. 12.5 PROMOTIONAL STRATEGY After gaining an understanding of the concepts, issues and decision areas relating to four methods of promotion-advertising, publicity, personal selling and sales promotion let us make a few observations concerning the formulation of promotional strategy. You would recall that promotion constitutes one of the important elements of the marketing mix of a firm. Each firm has a need to perform its promotion (marketing communication) function effectively. Further each of the promotion methods (discussed in Unit-9) has its own unique place in the marketing communications mix of a firm. The question facing marketers, therefore, is not which promotion method to use to meet today’s complex marketing tasks. Rather the real questions are which promotion method should be emphasised? how intensively it should be used? and how it can be integrated with the other promotional methods? Decisions on determination of promotion mix take us back to the promotion objectives which must emanate out of the marketing objectives of the firm. A promotional strategy aims at accomplishing the promotion objectives in the allocated funds and within a scheduled period of time. Promotional objectives, generally speaking, relate to sales and the marketing communication tasks required to be performed as per the needs of the product-market scenario. Expressed in specific measurable terms these can be put as : increasing sales, improving market share, creating product awareness and comprehension, developing positive attitude of the public towards the product, building favourable image of the product, or gaining competitive advantage, etc. In this contest Leonard M. Lodish suggests a ‘vaguely right’ criteria, the relevant part of which is given in Exhibit-2. Exhibit-2 Promotion Decision Vaguely Right Area Creteria for evaluation Advertising Budget Changes in buyer behaviour - long term or short term - and its resulting profitability. Media Planning Promotion Changes in buyer behaviour per dollar Management Changes in buyer behaviour and resulting long and short term profits Trade Promotion Changes in buyer behaviour of the ultimate consumer Management Consumer Coupons Sales and profit changes (both short and long term) caused by the coupons The extent of emphasis to be placed on the different promotion methods is determined by several variables. First, it is dependent on the promotional objectives. Next, on the characteristics of the target public, their psychology, and the allocated funds. For example, a marketer of consumer durables in a metropolitan city like Delhi may use means like advertising to create awareness and build comprehension. It would also require publicity which could be through press release on the contest technology backing his or her product. Sales promotion through demonstration, P.O.P. and an offer of introductory price to encourage intentions would also be used and, definitely, personal selling to overcome objections offer conviction and precipitate purchase action would complete the promotion picture. Further, as revealed by Kenouth G. Nardy, for achieving the objectives of, for example, loading the consumer with larger supplies, it is required that all the methods of promotion be approached simultaneously in terms of objectives to be achieved. Attaining synergistic advantage arising out of the use of different promotional methods is the hall-mark of 209
  • 49. an effective promotional strategy. This is what one finds largely, if not entirely, missing in tourism promotion in India. Hence, more so the reason for MTM learners to go in for it. 12.6 MANAGING CONSUMER PROMOTIONS Consumer promotions are those incentive schemes which aim at encouraging the product or service usage at the consumer level, the ultimate user of goods or services. As you know, some of such schemes are over-the-counter give aways, price-offs, quantity-offs, sampling, in-package premium, banded premiums, container premiums, self-liquidating premiums, coupons, personality premiums, refund offers, trading stamps, contests and lucky draws and also meeting and trade shows. Besides choosing an innovative and creative scheme which is compatible with the sales promotion goals set, it may be noted that the success of the scheme rests equally on how well these are organised and implemented. For effective management of consumer promotion, the following checkpoints merit consideration by the sales promotion managers. These checkpoints, separately for consumer schemes and consumer contests, are as under. 12.6.1 Organising Consumer Schemes The consumer promotion campaign is a step by step procedure, the first step being to set the goals and objectives. The organising of consumer schemes is discussed below: a) Objectives: Simply speaking, all consumer promotions must persuade consumers to consume more and many a times, consumer promotion is aimed for trying out a new product. Under this overall objective, consumer schemes can be organised to help attain the following specific objectives i.e. to : • stabilise the fluctuating sales pattern. • make the slow moving products move faster. • overcome seasonal slumps, • clear inventory of old product while making room for a new product, • effect sales of specific pack size in a specific market(s), • counter a competitive move, • build good will by sharing festivity spirit, • improve product visibility at point-of-sales, • motivate trade to take more interest in the product, • assist in the launch of a new product, • built brand loyalty, and/or • initiate consumer to use other products of the company. b) Scheme Selection: Innovative and not-easily imitable scheme which is suitable to accomplish the objective set should guide the scheme selection. For example, while price-off scheme works well for an objective of inventory clearance at the retail level, to promote sales of a specific pack, schemes such as in-pack or banded-premiums have shown encouraging results. It may also be noted that a consumer scheme which clicks well for one product or service need not succeed for the other. Also, what succeeds in one market or the one that succeeded in the past may not necessarily do so on its repetition elsewhere or later. Some more points that need emphasis are given as under: • Ensure that the consumer promotion reaches the consumer given the unscrupulous image of the traders and the pilferages in transportation. 210
  • 50. • Ensure the ready availability of the premiums at retail points during the entire duration of the scheme for which proper forecasting and reliable sourcing are critical consideration. Often sponsors run into problems of non-availability of premiums and also the varying quality of the premium item given makes a reflection on the quality of the brand under promotion. c) Scheme Execution : Given the varying tax structure across the different states in India, the selection of the target market area for the consumer scheme should include in it the neighbouring satellite markets in order to minimise leakage. In cases where sponsors make use of coupons, personality premium schemes, and refund/rebate offers, there is a need to fix responsibility on a specific personnel at the field/regional office to enable quick processing and minimising delays and doubts in the mind of the consumer. d) Promoting the Promotion : A well rehearsed and integrated promotional support is must for enabling the scheme to accomplish the set objectives. Apart from an action generating media campaign at the consumer level, it is necessary that the trade be convinced of the merits of the consumer scheme as well as what they are required to do. Similarly, the salesforce should be properly briefed to handle the scheme and be motivated to adopt the scheme as their own and thus be prepared to put in the extra effort required at the marketplace. e) Follow-up : For ensuring better performance of the consumer scheme, it is desirable to monitor the market place soon after the commencement of the scheme. This monitoring should cover : brand premium availability, brand visibility area and store-wise daily movement of the brand, and competitors reactions, etc. Reminder advertisements, release of extra P.O.P. (Point of Purchase) materials, and development of salesforce may sometimes be required to save the scheme from misfiring, hence a contingency plan for the above should be prepared. 12.6.2 Types of Consumer Promotion The manufacturers and service providers use various techniques for consumer sale promotion. Every other day we can see the different promotion schemes put forward such as buy two get one free, stay two nights, children under 12 free, etc. The most popularly used promotion tool is ‘contests’. The various types of promotional methods have been classified and their limitations have been discussed below: 1) Price-off offers: In the price promotion method, products are offered at a price lower than the normal price. The price is reduced on the product package through special printing of price. The percentage of price - off differs from product to product or service to service and it is decided by the manufacturer or supplier. The reduction of the price does not cuts into the retailers profit but is given from the manufacturer’s profit. This ensures the co-operation of retailers. For example, 50% discount banners or sale banners at various shops and shopping malls, airlines giving different rates of discount for flying the same sector, etc. Price-off scheme is initiated by manufacturers or producers since the: • price is controlled by manufacturer, it is believed that the control price will reach the consumers, • price-sensitive consumers would find it more suitable in comparison to other similar products, • consumers can be tempted to buy more than one and thus increase the sale and make retailers happy, and 211
  • 51. • consumers of competitor’s brand can try the products or services at lower rates and might like the product well enough to switch over. Although price-off deals are commonly used, the retailers are hassled as they have to maintain two inventories concerning the stock of both with and without offer products. 2) Quantity-off offers: Offering more quantity of product at no extra cost or nominal increase in the price of the larger quantity packs is known as quantity-off offer. This can be of two types: i) The Bonus Pack contains extra quantity of the same product at the regular price. ii) The Banded Pack in which two or more products are sold as a unit, at a price lower than what they would cost if bought separately. Some examples are – three for the price of two, 25% extra, hotels offering 3 night stay at the rate/ price of 2 night stay, etc. Quantity - off promotions give consumers a lot more value for money. Sometimes they are initiated to counter a competitor’s promotion scheme. The advantages and limitation of quantity - off promotions are similar to that of price-off promotions. One added disadvantage is for the retailers who sometimes have to make extra shelf space to accommodate the bonus packs. 3) Premium : Premium is an item that is offered free of cost or offered to the consumers at bargain price to initiate them to buy or try a product or service. Premium usually enhances an advertising compaign or brand image. Various premium keep the consumers interest in the products/services and keeps the retailers busy. Limitation is to keep on finding new premium ways to maintain the consumer interest and to keep the retailers happy. For example, some international airlines provide transfer facilities to their business class passenger free of cost from time to time, etc. 4) Coupons: Coupons are the oldest and the most commonly used form of sales promotion. Coupons are legal certificates of a stated value, offered by the manufacturers and sometimes retailers for some products or services. These can be redeemed at the store or point-of-purchase of the products or services. For example, Pizza Hut offering some coupons on their pizzas with different toppings, Coke coupons with eating outlets, etc. Coupons may be distributed by mail, by media advertisements in newspapers/journals, door to door, inside product package or by the dealers and retailers on purchase. Coupons are issued while launching a product in the market as well as to increase the market share as the price sensitive consumers will use the coupons. Electronic couponing, a computerised system is also gaining popularity. Coupons are not mass printed but are given to customers buying a specific brand of product. In this technique a scanner at the cash counter reads the Universal Product Code (UPC) on the machine readable bar codes printed on product packages. And a coupon for discount is given to consumers buying competitions product. All the coupons handling retailers are reimbursed and provided with some extra money as handling charge. This insures the retailers co-operation in future promotion schemes. 5) Refunds: Refund is an offer to return a portion of the purchase price back to the consumers, once they provide the proof of purchase, such as receipt, etc. The refund form usually has to be mailed to the organisation with receipt to get the refund. Many of the companies now provide coupons instead of refund. This ensures and enhances the chance of the consumer buying the product again. 212
  • 52. Refunds are often also known as rebates and help in generating cash for cash struck companies. The major problem with refunds is that the customer does not want to undergo the trouble of collecting and mailing proof of purchase. So the manufacturers and suppliers can never be sure about the number of refund forms they are going to receive. 6) Trading stamps: These are a kind of discount coupon offered to the consumers linked with the quantum of their purchase. On enough accumulation, these are redeemable for various kinds of merchandise. One commonly used term is frequency programme. For instance, the Frequent Flyers club etc. This ensures brand loyalty and less chance of consumers switching over to competitors brand. Unlike premium, the trading stamp promotions run for a long time. However, the redemption and administration cost of running such a scheme can be a costly offer. 12.6.3 Organising Consumer Contests Consumer contests are competitions wherein individuals are invited to compete on the basis of creative skills. These contests are generally open for a period of five weeks or more and among others aim at generating greater degree of awareness and enthusiasm in the sponsor and/or his or her brand. Although consumer contests are capable of accomplishing some of the sales promotion objectives mentioned earlier, yet there are certain specific objectives for which consumer contests are more suitable. These objectives are: • Stimulating interest in the stagnant/tapering brand, • Increasing product usage and its unit of purchase e.g., a larger size pack, • Introducing new products, • Acquainting consumer with unique or specific aspects of the brand and brand usage, • Measuring the effectiveness of ad copy and media through recall, completion of slogan, theme visualisation association, coupon response, etc., • Generating mailing list for database marketing, and • Influencing enthusiams in public and generating goodwill. In organising consumer contests, one of the most important aspects is to consider the law. Being skill based competitions, in India, the contests are covered under the Prize Competition Act of 1955 and require a written permission from Government (District Collector or other similar licensing authority in a State) before launching a consumer contest. Four things determine the success of a contest and hence need careful consideration. These are : i) Type of Contest : Being capable of meeting diverse objectives the popular types of contests include : reason why, sentence completion, brand name/slogan/essay writing contests, special skills – sewing, knitting, cookery contests, etc., each capable of delivering the purpose with which a contest is organised. Whatever be the type of contest selected, it should be easy and fun in order to attract greater participation. ii) Prize Schedule : A big first prize, a few second, more thirds, and many consolation and early bird prizes rule the consumer contests these days. In order to reduce uncertainty on the part of the contestants it is desirable to offer only well - known brands as articles of prize. The closing date of the contest must be adhered to and its extension even “on public request” is generally seen with suspicion and in bad taste. The intervening gap between the closing date of the contest and the announcement of results should be bare minimum, pre-fixed and in case of unavoidable delay, must be advertised. Likewise, the announcement of results should be given wide publicity. iii) Advertising and Promotion of the Contest : It is important that the contest be supported with an integrated advertising and promotion programme targeted at the consumer, the trade and the salesforce. Media advertising supported by displays and P.O.P. materials at retail level and intense market touring by the salesforce improve the public participation in the contest. Also periodic repetition of ads and the increase in the reminder ads towards the last leg of the contests 213
  • 53. prove useful. Announcement of early bird prize winners have been found to stimulate increased and early participation in the contest. iv) Consumer Contest Rules : Experience brings out the need for clearly spelling out the rules covering the contest for the smooth conduct of a scheme. While celebrities and public persons have their due place in the panel of judges, it must have reputed and technically qualified experts too. Specifically the rules should contain indications like: • Judges decision will be final and no correspondence will be acknowledged, • How and when the winners will be informed, • Whether entries will be returned or become property of the sponsor of the contest, • And, where applicable, all entries submitted must be the original work of the contestant. 12.6.4 Other Methods Certain other methods are also used in promotions : i) Point-of-Purchase Advertising : The retailers are provided with materials from the manufacturers to advertise in their store. These can be posters, or other related materials for display. This ensures that the customers are aware of the product and in the case of some self- servicing product retailers, POP advertising helps. But the POP advertisement does not ensure the sale of product and the cost of providing the materials of display can be very high. ii) Sampling : It is one of the most effective but costly methods of encouraging consumers to try a product. Usually this technique is used to introduce a new product or brand to market but many a times established companies also use sampling. It basically means, to provide free trial of a product or service to the consumers. In tourism sector, principle suppliers often provide free help and accommodation to retailers, so that can be recommended to the customers. For this they organise FAM trips (see TS-6). Sampling can be : • door to door, in which samples are directly delivered to the customers, • mailing, where samples are mailed to customers, • in - store sampling, where a demonstrator is available in store to demonstrate about a product. Commonly it is used for food sampling such as free juice or coffee, etc., • on-package, where a small sample is provided with a product packet, and • with magazines and newspapers, which is expensive as the samples are provided with ads in print media. They are either glued or taped but the perfume industry use perfumed stickers to show the consumers the smell of their product. The benefit of sampling is that it is believed that the consumers will at least buy the product once i.e. the sample and it might lead to their becoming permanent consumers of the product. The limitation is no one can for sure say that the consumer will buy the product after sampling it. Also many products need repeated use before a consumer can feel a difference and start liking the product. iii) Event Sponsorship: Event sponsorship always ensures that the consumer knows who the sponsors are and leads to consumer awareness. Large companies sponsor big events like cricket matches, football tournaments, conferences and other festivals, etc. But awareness does not necessarily translates to sales. 214
  • 54. Check Your Progress – 2 1) How can you plan an effective sales promotion? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) What are the various types of consumer promotion? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 12.7 MANAGING TRADE PROMOTIONS Trade promotions are the incentive schemes which are offered to the distributive trade (wholesalers, distributors, retailers, etc.) and aim at motivating them to back up the sponsored brand by giving them more than their usual push. You might recall that some of the trade promotion schemes are such as dealer “loaders” – merchandise deals, buying / selling allowance and discounts; coupons; shelf-space incentive, display contests, sales contests, gifts, trade/cooperative allowance, premium or push money and provision of P.O.P. material. Effectively managed trade promotions contribute towards building customer traffic at retail points, increasing sales, improving profitability and strengthening of manufacturer–trade relationships. While trade promotions are meant inter-alia to obtain greater trade cooperation and improve manufacturer – trade relations, the practice of trade promotion schemes has brought forth certain conflicts between the two. These conflicts mainly arise out of the unmet expectations of each other. For effective management of trade promotions therefore, one of the prerequisites is the clarity of understanding between the parties regarding the roles and goals of each. The manufactures should clearly understand that like them the traders have their own economic objectives which are of uppermost importance to them. Likewise, trade members should realise that with rising costs of managing promotions, no manufacturer can afford to accept the indifferent response and performance of his or her trade. A few of the basic considerations useful in systematic organisation of trade promotions are : 1) Trade promotion schemes should match with the capability of the different members of trade. For example, wholesalers are poor at primary demand creation of the product, and the retailers in administration of complete schemes. Sponsors of trade promotion schemes should perform these tasks for them instead of expecting them to carry them out. 2) Only those schemes and terms should be offered which minimise the temptation of resorting to unhealthy trade practices on part of the trade. 3) Trade should be effectively communicated and soundly convinced with the working as well as the results expected of the schemes. 4) Regular availability of product supplies and gifts must be ensured during the period of the promotion scheme. 5) Increasing competition and limited display-shelf-space now requires the signing up of the prominent dealers and booking of their shelf-space sufficiently in advance. 215
  • 55. 6) In case gifts are offered as incentives to trade members, these articles should be of a reputed brand and of household or personal use. 7) The organisation of dealer displays and sales contests follows more or less the same steps as discussed for consumer contests earlier. Some points of special importance include: • Selection of dealers having prominent location as well as good facilities such as show windows, counters, etc. • Provisions of assistance for arranging creative displays because not all dealers show enough initiative or possess adequate expertise in this area. • Communication of the team of judges, the judging criteria and offer of consolation prizes of meaningful value inspire greater participation of the trade in the contest. • Assignment of targets should be based on the trading area potential. It is useful, therefore, to divide the market into different potential zones, and likewise offer a set of prizes on zonal basis. 8) It is said that not more than 15% of the P.O.P. material supplied is displayed and that too for a period less than half its life. It is needless to state that the use of P.O.P. at the retail level requires constant supervision and follow up. 9) Leading retail dealers offer their own retail sales promotion schemes. Though difficult, attempt should be made to get a special support for the company product line during that period. 10) Rules and regulations laid by the government must be followed. For example, in India with the amendment of the MRTP Act, 1969 by Amending Act 30 of 1984 w.e.f. 1 st August 1984, Sections 36A to 36E relating to unfair trade practices have been inserted. Upon complaints relating to discount sales upto 50%, the commission laid down the following guidelines for future advertisements: • the period of discount sale shall not be less than 10 days, and • the original price, the bargain price, the quality of articles at which the maximum and minimum discount would be available shall be mentioned. 12.8 MANAGING SALESFORCE PROMOTIONS Sales promotion schemes offered to the salesforce mainly include incentive programme and sales-contests. The operational and managerial aspects of the two schemes are discussed below: 1) Organising Salesforce Incentives Sales incentive directly link the motivation and reward for the salesforce. There are four methods by which sales incentive awards may be computed for the salesforce. Awards are: • tied to unit sales on an actual basis. • given to those who achieve more than specific percentage of their sales quota performance. • given to those who perform best in relation to their individual quota. • given on account of special achievements as notified by the organisation from time to time. These awards or incentives should be budgeted from the beginning by the company and made known to the salesforce. The sales incentive programmes have been found to be both cost efficient as well as strong motivators for improved sales productivity. According an American study, some of the popular reasons for the use of sales incentive include: 216
  • 56. • increase sales per salesperson, • boost morale, • increase units sold per salesperson, • launch new products, • increase average sales per account, • promote dealer activity, • boost recession - period sales, • upgrade existing accounts to high ticket products, and • revive old products, etc. 2) Organising Salesforce Contests A sales contest is a competition among members of the salesforce of a firm. Sales contests aim to fulfil the needs of the salesperson for achievement, esteem and self-actualisation. Used effectively, sales contests prove to be a boon to the sales organisation. On the other hand, if improperly handled they can destroy the morale among salespersons as well as negatively effect sales. Over enthusiasm to win contests has also led some salesperson to inventory overloading, cheating and even neglect of customer service and relationship. In short, being prone to misfire sales contests need to be managed carefully. In addition to the managerial considerations for effective management of consumer and trade promotions, some other aspects relating to themes, rules, participation and promotion of sales contests are discussed below: a) Themes of Sales Contest: Sales contest have a direct and a novelty theme. In a direct theme the focus could be on obtaining new consumers, or selling a more profitable product mix or improving the market share etc. In a novelty theme the focus is on fun simultaneous with more specific current event or problem facing the company sales. Some examples of novelty themes are : let’s hunt for hidden treasure (find new customers), make your customer fat (sell more to existing customers), planting the gold (sell more profitable orders), healthy customer healthy salesperson (more sales, less outstanding, more profit per customer) etc. Themes which are novel, objectively measurable and relevant to the company sales curve find greater participation of the salesforce. b) Rules : Clear and comprehensively written rules should be laid down in advance. These should cover aspects such as what will constitute a sale (order, delivery or payment), whether institutional or original equipment manufacturer’s supplies will be counted in sales or not, what will distinguish between a new order and old order, and new customer and old customer, what about cancellations or returns after the contest period is over, and which achievement will carry how many success points? etc. This helps to minimise heart burns and ill-feelings among the sales persons. c) Participation : If the size of salesforce is large and the hierarchy levels different, it is preferable to organise different sales contests with restrictive participation on an eligibility criteria. In any case, sales contests should try not to pit one salesperson against another. An offer of a variety of prizes for various types of achievements helps in this direction. d) Promotion : Excitement, surprise and a feeling of enjoyment should govern the mood throughout the contest period. Write-ups in newsletters; flashing of special communications with photographs of ice breakers, special achievement and achievers; wiring of reminders, motivational letters, announcements of a few more prizes, etc. lend strength to the air of expectancy on the part of the salesperson during the contest. To save the sales curve from dropping down drastically after the contest is over and also not to lose the business which could not be accomplished during the contest period some activity must be planned. e) Prizes : The prizes to be given should be well thought out and declared in advance. They should be attractive enough to catch the interest of the salesforce. Some examples can be : 217
  • 57. Holiday with family; out of turn promotion; additional increments; attractive and high prized consumer items like car, etc.; cash prizes, etc. Heinz Goldmann has mentioned some very pertinent dont’s for sales contests. These are : 1) Don’ts reward just one person : One or only a few winners can serve to demotivate the losers. A contest which no one has a chance of winning can often cause salespeople to sell less than before the contest started. 2) Don’t set goals too high : Do not alienate the bulk of sales people with goals that are too high. Motivate everyone, because the bulk of sales does not come from a top performer. There should be as many winners as possible. 3) Don’t start the contests towards the end of the year : Many salespersons perceive a year end contest as a way to make up for poor planning and a bad sales year. 4) Don’t use sales volume as the only goal of every contest : There are many marketing goals other than sales. Other goals like territory cultivation, dealer relations and customer relations can also increase motivations of sales people who achieve less than others in terms of sales alone. 5) Don’t use the same prizes for every contest : The same prize repeated very often can lose impact very quickly. 6) Don’t include only sales people in the contest : A good opportunity to involve other people within the company is to make them part of the sales contest. The non-selling staff can do a great deal to help push their sales people to perform better. 7) Don’t let the sales contest become a guessing game : Everyone should clearly understand the purpose of the contest; otherwise lost sales are bound to occur. A sales contest is not an intelligence test. 8) Don’t look for a “fair” or a “just” contest : Sales contests have specific goals to accomplish and unfortunately some goals will be easier to accomplish for some than for others. 12.9 MANAGING SALES PROMOTION IN SERVICES MARKETING Our discussion so far remained by and large confined to firms marketing tangible goods. Although, the considerations and guidelines of sales promotion for goods are extendable to services, some special aspects of service sales promotion are further discussed in this Section. Of late, we notice a great deal of sales promotion activity on the part of hotels, travel agents, international airlines, banks and financial service institutions, etc. These firms make use of schemes similar to that of product promotions at the levels of consumer, trade and own salesforce. Some of the commonly offered sales promotion schemes offered by services firms are : price and quantity off by airlines, contests and coupons by tourism organisations, refunds and future discounts by international airlines, chance to fly free through flyers club, premiums by banks and financial institutions, incentives to trade and salesforce by financial services firms, etc. Even non-commercial organisations like the tourism departments go for destination promotion. They offer incentives or organise contests like every 10000th visitor to the country will be their guest or an award for the tour operator bringing in highest number of tourists, etc. 218
  • 58. Services carry the peculiarities of perishability, absence of inventory and intangibility. As such a service not utilised in time is an opportunity lost for ever, be it an airlines seat, a hotel room, etc. The demand by management of services, therefore, often requires the use of sales promotion schemes particularly in business affected greatly by seasonality or having intense competition. Lovelock and Duelch make following observations regarding organising of sales promotion for services marketing: • The broader the service product line, the more challenging the scope for offering sales promotion schemes. For example, an airline has limited options as against a hotel which offers a large variety of restaurants , rooms and services. • As the usage level of service varies with the customers unlike consumer goods, the service marketers offer schemes with multiple options for different levels of consumption, as in the case of airlines promotions. • Consumer response is likely to vary by type of promotion and is unlikely to be linear; in other words a 10% discount will not necessarily generate twice the incremental sales of a 5% discount. Service Industry, specially tourism sector, are seasonally affected and discounts are means to initiate tourists. • Services offer tremendous opportunities for joint promotions, where the actual costs are shared by major users. A typical example is of airlines joining hands with hotels and car rentals promoted through travel agents and tour operators. The primary suppliers and retailers promote together. • Services sales promotions are easily limited. Two forms of competition proofing are, first, to develop a promotion that will be too complex to imitate quickly, and second, to arrange with one or more well known firms an exclusive joint promotion programme that cannot be directly duplicated. • Although promotions can stimulate consumer excitement, they can also increase consumer price sensitivity and the consumer expectancy. Many consumers eventually become unwilling to buy the service unless it is available at a promoted price. • If a high percentage of sales is made on promotion, “normal” prices become artificially inflated and increasingly meaningless. For example, the rates of all the airlines in the international sector is same but the discounts offered by them vary a lot. 12.10 MEASURING THE PERFORMANCE OF SALES PROMOTION The measurement on how well the sales promotion has performed implies the existence of the following: • written sales promotion goals or objectives for which the schemes were run, • the evaluation criteria in relation to the sales promotion goals, • a data bank containing documentation on past sales promotion results and trade/salesforces reactions and assessments, and • an organisation for monitoring and evaluating the sales promotion. The task of organising effective sales promotion is usually divided into three phases before sales promotion is offered i.e., pre-testing; testing during the time it is in operation i.e., monitoring and follow up; and after the sales promotion event has ended i.e., post-testing. The pre-testing phase helps both in ascertaining the cost effectiveness of the alternate schemes as well as in finding out the most liked terms on which to offer the scheme for accomplishing the 219
  • 59. goals set. It includes checking whether the promotion is cost effective, the idea is unique, what is the competition upto and so on. Pre-testing could be carried out with a panel of the audience in person or by telephone or by mail and by field testing followed by a market research study. The monitoring phase of evaluation should focus on gathering product movement and sales data territory and outlet-wise; its review and comparison with the goals set and the past results; competitive intelligence and reactions; assessment on market mood and the problems faced, if any. The post-testing phase of sales promotion evaluation is analytical in nature. Sales promotion is usually measured in performance reference to sales achieved, cost effectiveness, redemption rate of coupons and trading stamps, turnover of special packs or self-liquidators, number of entries received to the contest, etc. Post-testing of sales promotion is carried out by desk analysis of the data gathered, in-store observations and market research studies carried out for this purpose. Where direct measurement is possible, results are compared against goals set as well as with a similar period or a base line. Emphasis should be put on measuring and comparing the incremental sales than the gross sales and other related parameters. A literature survey on effectiveness of sales promotion brings out that: • incremental sales are harder to get for high market share brands, • a coupon with a sample can be almost twice as effective as a coupon alone, • high redemption rates (say of coupons, personality premiums) can be very costly, • the earliest redemptions are the incremental sales, • short purchase cycles mean shorter-term effects, • higher levels of inventory with the trade and competitive escalation of sales promotion are the hidden costs of promotions; higher discounts offered to the trade once, become the minimum level for future schemes, • customising promotions for local markets makes more impact than the general all market sales promotions, and • markets with above-average unsupported price reductions might need greater product featuring and display support from the retailer. Those markets which are low in promotion response probably need higher quality promotions, better display locations or advertising and salesforce support. Value of Sales Promotion Evaluation Pre-testing, monitoring, and post-testing sales promotion are only the means to measuring its performance. In the ultimate analysis what matters is the value vs. cost of sales promotion in terms of changes in consumer, trade and sales force behaviour and their impact on the long and short-term sales, profitability and brand image. While systematic planning, monitoring and research help in making sales promotion effective, more efforts should also be made to control sales promotion expenditure. Inculcation of cost consciousness, selection of the appropriate form of sales promotion aids; updating of mailing lists; control over misuse of P.O.P. material; careful selection of the participants to the scheme; instituting rewards for expense control can enable sales promotion to be managed more efficiently. With growing need as well as cost of sales promotion, managers must, cut back on convenient but unproductive promotion schemes in favour of hard-to-imitate creative and preferred schemes. Role of Salesforce The changing market environment and the increasing need of sales promotion calls for a new role for the salesforce to make sales promotion cost effective. Salesforce are the footsoldiers, army of 220
  • 60. the marketer. They must involve themselves in the gathering of competitive intelligence and also give regular feedback on the local conditions of the market, the brand movement, the retailers reactions, and their assessment for the sales promotion schemes. Monitoring and follow up of the market when the sales promotion event is on, assisting the trade in improving the off-take of the brand and administration of sales promotion schemes are its other new tasks. Selling sales promotion scheme convincingly to the trade and discovering room for expenditure control are the emerging challenges for the salesforce to face. Check Your Progress – 3 1) What do you understand by salesforce incentive promotions? ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 2) State the points to consider while planning and organising the sales promotion for services marketing. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 12.11 LET US SUM UP Sales promotion, of late, has emerged as one of the more popular methods of promotion in the case of consumer goods and services. Stated simply, sales promotion deals with offering something extra as an incentive to motivate an early purchase. Sales promotions can be offered at the level of the consumer, trade and salesforce. Sales promotions aid in achieving both the push- pull elements of a promotion strategy. Sales promotion schemes used to attain consumer pull include free samples, price-offs, premium give aways, coupons and contests. Schemes offered for gaining the push cover promotional allowance, gifts, discounts, cooperative promotions, contests, awards and rewards. To save a sales promotion programme from getting misfired, it should be planned and managed in a systematic manner. In this Unit we have also discussed the various operational organisational aspects involved in managing sales promotion. Creative planning, sound implementation and an eye-for-the-detail emerge as the pre-requisites for effective management be it the consumer trade, salesforce or services marketing promotions. The task of measuring the sales promotion performance consists of three phases: pre-testing, monitoring, and post-testing. Clearly formulated goals and the existence of a data bank and the organisation for monitoring market response and carrying out the market research contributes towards making sales promotion more cost effective. The proper planning and execution of sales promotion will require the salesforce to cast itself for the new role. Promotion is an important marketing function of each firm. And, rare will be a firm which makes use of only one promotional method. The commonality in the ultimate goal of all the promotional methods apart, their limited suitability in influencing only a specific part of the consumer adoption process, calls for the need to use the promotional mix in an integrative manner. Given the complexities in the management of the promotion function and its vulnerability to failure, it is desired that the function be managed professionally. 221
  • 61. 12.12 CLUES TO ANSWERS Check Your Progress – 1 1) A few objectives attempted by sales promotion are : • increase in sales. • make the sale of slow-moving products faster. • identify and attract new customers. Read Sec. 12.2 and add to the above answer. 2) The various sales promotion methods are build around the three target groups of consumers, dealers and members of salesforce. Read Sec. 12.3 and answer. Check Your Progress – 2 1) An effective planning and management of the sales promotion function is possible by following the eight steps of planning a sales promotion. Read Sec. 12.4 to answer the question. 2) The various types of consumer promotion includes : a) Price-off offers b) Quantity-off offers c) Premium d) Coupons e) Refunds f) Trading Stamps. Read Sub.-sec. 12.6.2 to answer in details. Check Your Progress – 3 1) One of the salesforce promotion schemes offered to the salesforce includes incentive programme. Sales incentive directly link the motivation and reward for the salesforce. Read Sec. 12.8 to answer. 2) There are mainly seven observations regarding organising of sales promotion for services marking. Read Sec. 12.9 to answer. 222

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