DC Chapter Nine : Advertising And Promotion


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DC Chapter Nine : Advertising And Promotion

  2. 2. Distribution Channels MKTG 1058 LECTURE NINE Advertising and Promotion (Dunne Chapter Eleven) 9-2 2
  3. 3. Learning Objectives for Chapter 11 (Dunne): 1. Name the four basic components of the retailer’s promotion mix and discuss their relationship with other decisions. 2. Describe the differences between a retailer’s long- term and short-term promotional objectives. 3. List the six steps involved in developing a retailer’s advertising campaign. 4. Explain how retailers manage their sales promotion and publicity. 9 -3
  4. 4. The Retail Promotion Mix • Promotion is a means that retailers use to bring traffic into their stores, and it includes advertising, sales promotion, publicity, and personal selling. The term “promotions” implies one of moving forward. Moving forward from the customer’s perspective is to move the customer closer to the sale 9 -4
  5. 5. Promotions in Retailing This is usually the more popular and interesting topic Promotions is about communications and connecting with customers From the retailing perspective, you must understand the special roles that promotions play in the context of the entire distribution channel Remember the promotions strategy used by retailers will be different from that of the manufacturer 9 -5
  6. 6. Challenges of promotions in retailing Retailers are sometimes resource constrained (small) and therefore may not be able to use all the tools of promotions (such as advertising) Retailers promotions need to coordinate with (and in some cases controlled by) the manufacturers promotions Retailers often use short term sales promotions to build sales and create excitement You need to understand the concepts of “PUSH” and “PULL” strategies 9 -6
  7. 7. Types of Promotion • The four basic components of the retailer’s promotional mix: • Advertising is paid, non-personal communication through various media by business firms, nonprofit organizations, and individuals who are in some way identified in the advertising message and who hope to inform or persuade members of a particular audience; includes communication of products, services, institutions, and ideas. 9 -7
  8. 8. Types of Promotion • Sales Promotion involves the use of media and non-media marketing pressure applied for a predetermined, limited period of time as the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability. • Publicity is non-paid-for communications of information about the company or product, generally in some media form. 9 -8
  9. 9. Types of Promotion • Personal Selling involves a face-to-face interaction with the consumer with the goal of selling the consumer merchandise or service. At the retail level, personal selling is a key promotions tool since there is direct customer contact and communications 9 -9
  10. 10. Promotions in a ‘wider context” Promotions must be considered in the context of the total retailing mix (marketing mix) How does promotions integrate with other elements of the retail marketing mix? How does it complement and add value? 9 -10
  11. 11. Types of Promotion • Promotional decisions relate to and most be integrated with other management decisions, such as location, merchandise, credit, cash flow, building and fixtures, price, and customer service. • Think of the promotional implications of the other elements of the mix such as store image, retail staff, visual merchandising and so forth 9 -11
  12. 12. Where is promotions impacted? • Primary Trading Area is the geographical area where the retailer can serve customers, in terms of convenience and accessibility, better than the competition. • Secondary Trading Area is the geographic area where the retailer can still be competitive despite a competitor having some locational advantage. 9 -12
  13. 13. Promotions coverage Promotions by retailers tend to cover short term periods – weekends or sales in order to catch the traffic at the right time Promotions tend to be local rather than national But bear in mind that Singapore is a small market; therefore no difference between local and national But in some forms of direct marketing or broadsheets, you can target at specific locations 9 -13
  14. 14. Total Systems Approach Key Point: retailers often do not undertake promotional campaigns on their own These must be integrated with those of the other members of the supply chain such as the manufacturers and distributors/wholesalers This means that the promotional campaigns of the retailer should be integrated with those of the suppliers and the manufacturer 9 -14
  15. 15. What is involved in integration and coordination of promotions What is involved in integration and coordination of promotions within the channel? within the channel? Coordination of campaigns - planning Scheduling and timing (example new product launches) Using the right mix of tools Pull versus push strategies Consistency of message and image Building brand equity Question: whose brand takes priority- manufacturer or retailers brands? 9 -15
  16. 16. Push vs. Pull Promotion Strategy 9 -16
  17. 17. Integrated Effort - A retailer's promotion efforts must be Integrated Effort - A retailer's promotion efforts must be planned and implemented in the context of the retailer's planned and implemented in the context of the retailer's total strategy. total strategy. Promotion decisions relate to and must be integrated with other management decisions, such as: There is a maximum distance consumers will travel to visit a retail store. Thus a retailer's location will help determine to whom to promote. Retailers should direct their promotion dollars first toward households in their primary trading area (the area where the retailer can serve customers in terms of convenience and accessibility better than the competition) and then to secondary trading areas (areas where a retailer is still competitive despite a competitor having some location- related advantage 9 -17
  18. 18. Retail Promotions Retailers need high levels of store traffic to keep their merchandise rapidly turning over. Promotion helps build traffic. A retailer's credit customers are more store loyal and purchase in larger quantities. Thus, customers are excellent targets for increased promotional efforts. A retailer confronted with a temporary cash flow problem can use promotion to increase short-term cash flow. 9 -18
  19. 19. Retail Promotions A retailer's promotion strategy must be reinforced by its building and fixture decisions. Promotional creativity and style should coincide with building and fixture creativity and style. If the ads are exciting and appealing to a particular target market, so should the building and fixtures. Promotion provides customers with more information. That information will help them make better purchase decisions, because risk is reduced. Therefore, promotion can actually be viewed as a major component of customer service. 9 -19
  20. 20. Retail Promotions The retailer that systematically integrates its promotional programs with other retail decision areas will be better able to achieve high performance results. Some guidelines are: Try to utilize only promotions that are consistent with and will enhance your store image. Review the success or failure of each promotion to help in developing better future promotions. Wherever possible, test new promotions before making a major investment in using them on a broader scale. Use appeals that are of interest to your target market and that are realistic to obtain. 9 -20
  21. 21. Make sure your objectives are obtainable. Develop total promotional campaigns, not just ads. The lower the rent, the higher the promotional expenses generally needed. New stores need higher promotional budgets than established stores. Stores in out-of-the way locations require higher promotional budgets than stores with heavy traffic 9 -21
  22. 22. Promotion in the Supply Chain Major differences in the way retailers and manufacturers use promotion: •Product image versus availability. •Specific product benefits versus price. •Focused image versus cluttered ads. 9 -22
  23. 23. Product Image versus availability The manufacturer's primary goal is to create a positive image for the product itself and differentiate it from competing products. Retailers are primarily interested in announcing to their customers that they have the product available for purchase at a convenient location(s). 9 -23
  24. 24. Specific product benefits versus price Manufacturer generally don't care where customers make their purchases, just so they buy their product. Retailers don't care which brand the customer purchases; they just want the customer to make the purchase in their store. Thus, in addition to availability, retailers feature the product's price in their ads. 9 -24
  25. 25. Focused image versus cluttered ads In comparison to manufacturers, most retailers carry a larger variety and breath of products, while manufacturers produce a greater depth than most retailers carry. Thus, retail ads, which are usually geared towards short-term results, tend to be more cluttered with many different products as opposed to the manufacturer's ad, which focuses on a single product theme. 9 -25
  26. 26. However, the promotional activities of the retailer's However, the promotional activities of the retailer's supply chain partners may sometimes conflict with the supply chain partners may sometimes conflict with the retailer's causing a lack of promotional harmony: retailer's causing a lack of promotional harmony: Differing perceptions as to the future of the economy, projected market activities and other pertinent concerns may lead to supplier-retailer conflict and contradictory promotional activities. Supply chain members feel that the chain's promotional campaign is a mistake. Suppliers and retailers may experience conflict over the desire to project differing images (i.e. high-quality, high-price status symbol image vs. price leader). 9 -26
  27. 27. Possible Objectives for Promotions Exhibit 11.1 9 -27
  28. 28. Promotional Objectives •Long-Term Objectives •Short-Term Objectives •Interdependence 9 -28
  29. 29. Long term objectives Institutional advertising is an attempt by the retailer to gain long-term benefits by selling the store itself rather than the merchandise in it. Retailers using institutional ads generally seek to establish two long- term promotion objectives: 1. Create a Positive Store Image - Establish or reinforce the store’s image the retailer wants to convey. 2. Public Service Promotion - Persuade the consumer to perceive the retailer as a good citizen in the community 9 -29
  30. 30. Corporate Citizenship Wal-Mart sponsors a variety of community and public service programs, which help to promote its role as a good corporate citizen. Many local Singapore retailers sometimes do promotions that could be tied up to supporting local charities or community projects 9 -30
  31. 31. Short term objectives: Promotional advertising attempts to bolster short-term performance by using product availability or price as a selling point. The two most common promotional objectives are: 1. Increased Patronage from Existing Customers - promotional efforts directed at current customers as a means of encouraging them to make more purchases at the given retailer. 2. Attraction of New Customers - increase the number of customers that are attracted to the store. (1) Attract new customers from existing trading area. (2) Attract customers from outside the existing trading area. (3) Attract customers just moving into the retailer's market 9 -31
  32. 32. Interdependence •Although promotion objectives can be established to improve either long- or short-term financial performance, programs designed to achieve either objective will benefit as well. What is the link between long and short term objectives? Do retailers focus more on the long or short term objectives? Why? 9 -32
  33. 33. Interdependence- some questions Linkage: short term objectives sometimes conflict with or damage longer term objectives Too many sales promotional activities tend to damage the retailer’s brand equity Many small retailers tend to be reactive when planning promotions- mainly to counter local competitive retail promotions. Not able to build their brand equity over the longer term Lack of promotions planning- failure to link short term promotions to long term objectives 9 -33
  34. 34. Advertising Characteristics Advantages Disadvantages Attracts a large audience Standardized messages lack flexibility Gains pass along readership (for print) Some media require large investments Low cost per contact Geographic flexibility limited Many alternatives available Some media require long lead time Control over message content; message can be standardized Some media have high throwaway rate Message study possible Some media limit the ability to Editorial content surrounds ad provide detailed information Self-service operations possible 9 -34
  35. 35. Steps in Planning a Retail Advertising Campaign •Selecting Advertising Objectives •Budgeting for the Campaign •Designing the Message •Selecting the Media to Use •Scheduling the Ads •Evaluating the Results 9 -35
  36. 36. Advertising Objectives The specific objectives that advertising can accomplish are many and varied, and the objective(s) employed depend on the target market the retailer is seeking to reach. Examples of common objectives used by retailers include: •Make consumers aware that you offer low prices •Make newcomers aware of your existence •Make customers aware of your large stock selection •Inform a specific target market of your product offering •Increase traffic during slow sales periods 9 -36
  37. 37. Advertising Objectives (cont’d) Move old merchandise at the end of a selling season Strengthen your store's image or reputation Make consumers think of you first when a need for your products arise, especially if they are not commonly purchased Retain your present customers Regardless of the objective chosen, advertising must be aimed at a specific market segment and outcomes must be measurable over a given time period. 9 -37
  38. 38. Advertising Objectives for Retailers Lifting short-term sales Increasing customer traffic Developing and/or reinforcing a retail image Informing customers about goods and services and/or company attributes Easing the job for sales personnel Developing demand for private brands 9 -38
  39. 39. Selecting Advertising Objectives Factors unique to retailing that should be considered when determining objectives: • Age of the store • Store location • Type of merchandise sold • The competition • The size of trading area • Supplier support 9 -39
  40. 40. Selecting Advertising Objectives Make consumers in your trading area aware that you offer the lowest prices... Wal-Mart’s “ Always Low Prices” 9 -40
  41. 41. Selecting Advertising Objectives Make newcomers in your trading area aware of your existence... Sending promotions flyers to new residents of the area to welcome them to the store 9 -41
  42. 42. Selecting Advertising Objectives Make customers aware of your large stock selection... A retailer could promise the shopper a free shirt if it is “out of stock” on the basic sizes. 9 -42
  43. 43. Selecting Advertising Objectives Making a specific target market aware of your product offering... A ladies apparel retailer promotes a specific line of larger sized clothes for the “fuller woman” 9 -43
  44. 44. Selecting Advertising Objectives Increase traffic during slow sales periods... Subway Sandwiches Shop’s “Two-for-One Tuesdays” 9 -44
  45. 45. Selecting Advertising Objectives Move old merchandise at the end of of a selling season... The “after-Christmas clearance sales” that many retailers use. 9 -45
  46. 46. Selecting Advertising Objectives Strengthen your store’s image or reputation... 9 -46
  47. 47. Selecting Advertising Objectives Identify your store with the nationally advertised brands that it sells... Best Denki featuring the latest range of Hitachi’s Hi-Definition Plasma TVs 9 -47
  48. 48. Selecting Advertising Objectives Reposition the image of your store in the minds of consumers... 9 -48
  49. 49. Selecting Advertising Objectives Cultivate new customers... Getting new customers to apply for a bank card that has a tie up with the retailer. 9 -49
  50. 50. Selecting Advertising Objectives Make consumers think of you first when a need for your products occurs, especially if they are not commonly purchased... Example??? 9 -50
  51. 51. Selecting Advertising Objectives Retain your present customers... Any of the airline’s frequent-flyer programs, or supermarkets’ use of a loyalty card 9 -51
  52. 52. Selecting Advertising Objectives Get customers who previously shopped at your store, but no longer do, to return to your store... Example?? 9 -52
  53. 53. Budgeting for the Campaign: Retailer-Only Campaigns • Affordable method is a technique for budgeting advertising in which all the money a retailer can afford to spend on advertising in a given time period becomes the advertising budget. • Percentage-of-sales method is a technique for budgeting advertising in which the retailer targets a specific percentage of forecasted sales as the advertising budget. 9 -53
  54. 54. Affordable Method Affordable Method - Allocating all the money that the retailer can afford (1) This may lead to an inadequate appropriation or to a budget that is not related to actual needs. (2) The logic of this approach suggests that advertising does not stimulate sales or profits, but rather is supported by sales and profits. (3) Most small retailers have little choice but to use this approach. 9 -54
  55. 55. Percentage of Sales Method: Percentage-of-Sales - Targeting a specific percentage of forecasted sales to be used for advertising. (1) The percentage of sales is frequently determined by industry data or the retailer's past experience, and it provides a controlled, generally affordable amount to be spent on advertising. (2) Some limitations of the percentage-of-sales method are: (a) It bases advertising on sales, ignoring the fact that sales are derived from advertising (b) It doesn't reflect the retailer's advertising goals (c) It gives money to successful departments and not to areas where a little extra money could do some good 9 -55
  56. 56. Advertising as Percentage of Sales by Line of Trade Advertising as Percentage of Sales by Line of Trade Exhibit 11.2 9 -56
  57. 57. Budgeting for the Campaign: Retailer-Only Campaigns • Task-and-objective method is a technique for budgeting in which the retailer establishes its advertising objectives and then determines the advertising tasks that need to be performed to achieve those objectives. 9 -57
  58. 58. Task and Objective Methods: •Here the retailer establishes its advertising objectives and then determines the advertising tasks that need to be performed to achieve those objectives. •Associated with each task is an estimate of the cost of performing the task. •When all of these costs are totaled, the retailer has its advertising budget. • While the task and objective method for developing an advertising budget is the best of the three methods from a theoretical and managerial control perspective, many retailers choose not to adopt this method 9 -58
  59. 59. Task and Objective Method of Advertising Budget Development Exhibit 11.3 Objective and Task Estimated Cost Objective 1: Increase traffic during dull periods. Task A: 15 full-page newspaper advertisements to be spread over these dates: February 2 - 16; June 8 - 23; October 4 - 18 $22,500 Task B: 240, 30-second radio spots split on two stations and spread over these dates: February 2 - 16; June 8 - 23; October 4 - 18 4,320 9 -59
  60. 60. Task and Objective Method of Advertising Budget Development Exhibit 11.3 Objective and Task Estimated Cost Objective 2: Attract new customers from newcomers to the community Task A: 2,000 direct-mail letters greeting new residents to the community $1,000 Task B: 2,000 direct-mail letters inviting new arrivals in the community to stop in to visit the store and fill out a credit application 1,000 Task C: Yellow-Page advertising 1,900 9 -60
  61. 61. Task and Objective Method of Advertising Budget Development Exhibit 11.3 Objective and Task Estimated Cost Objective 3: Build store’s reputation. Task A: weekly 15-second institutional ads on the 10PM television news every Saturday and Sunday $20,800 Task B: one half-page newspaper ad per month in the home living section of the local newspaper 9,500 9 -61
  62. 62. Task and Objective Method of Advertising Budget Development Exhibit 11.3 Objective and Task Estimated Cost Objective 4: Increase shopper traffic in shopping center. Task A: cooperate with other retailers in the shopping center in sponsoring transit advertising on buses and cabs $3,000 Task B: participate in “Midnight Madness Sale” with other retailers in the shopping center by taking out 2 full-page newspaper ads--one in mid-March and the other in mid-July 3,000 9 -62
  63. 63. Task and Objective Method of Advertising Budget Development Exhibit 11.3 Objective and Task Estimated Cost Objective 5: Clear out end-of-month, slow-moving merchandise. Task A: run a full-page newspaper ad on the last Thursday of every month $18,000 Task B: run 3, 30-second television spots on the last Thursday of every month 14,000 Total advertising budget $99,020 9 -63
  64. 64. Task and Objective Method: Task and Objective Method: Advertising Budget Development Advertising Budget Development Exhibit 11.3 (consolidated table) 9 -64
  65. 65. Advertising Expenditures as Percentage of Sales: Advertising Expenditures as Percentage of Sales: Some Leading Retailers Some Leading Retailers Exhibit 11.4 – 1st 3 Categories 9 -65
  66. 66. Advertising Expenditures as Percentage of Sales: Advertising Expenditures as Percentage of Sales: Some Leading Retailers Some Leading Retailers Exhibit 11.4 – 2nd 3 Categories 9 -66
  67. 67. Factors in Allocating Advertising Dollars HIGH ADVERTISING LOW ADVERTISING ALLOCATION ALLOCATIONS •High Gross Margin Percentage •Low Gross Margin Percentage •High Advertising Elasticity of •Low Advertising Elasticity of Demand Demand •Dominant or Potentially •Low Market Share and Limited Dominant Market Share in Potential for Being Dominant Department or Merchandise Line Market Share Department or •Good Backup Resources Line (Space, Inventory, Accounts •Poor Backup Resource (Space, Receivable, People) Inventory, Accounts Receivable, •Willingness to Allocate Enough People) to Achieve “Critical Mass” •Unwillingness to Allocate Enough to Achieve “Critical Mass” 9 -67
  68. 68. Co-Op Campaigns Vertical Cooperative Advertising occurs when the retailer and other channel members (usually manufacturers) share the advertising budget. Usually the manufacturer subsidizes some of the retailer’s advertising that features the manufacturer’s brands. Horizontal Cooperative Advertising occurs when two or more retailers band together to share the cost of advertising usually in the form of a joint promotion of an event or sale that would benefit both parties. 9 -68
  69. 69. Planning a Cooperative Strategy What ads qualify, in terms of merchandise and special requirements? What percentage of advertising is paid by each party? When can ads be run? In what media? Are there special provisions regarding message content? What documentation is required for reimbursement? How does each party benefit? Do cooperative ads obscure the image of individual retailers? 9 -69
  70. 70. Designing the Message Creative messages cannot be developed without knowing which media will be used to carry out the message to the target market. Creative decisions are especially important for retailers since their advertising messages usually are seeking an immediate reaction by the consumer and have a short life span. Creative retail ads should seek to accomplish three goals: Attract attention and retain attention Achieve the objective of the advertising strategy Avoid having any errors, especially legal ones 9 -70
  71. 71. Common Approaches Lifestyle - Shows how the retailer's products fit in with the consumer's lifestyle. Fantasy - Creates a fantasy for the consumer that is built around the retailer's products. Humorous - Here the ad campaign is built around humor that relates to using the retailer's products. Slice-of-life - Here the retailer depicts the consumer in everyday settings using the retailer's products. Mood/Image - Builds a mood around using the retailer's products 9 -71
  72. 72. Media Alternatives • Mass Media aimed at total markets: Newspapers Television • Specific market media forms: Radio Magazines Direct mail Internet 9 -72
  73. 73. Newspapers Most frequently used medium in retailing. Many of the large retailers such as Courts or IKEA use newspapers to deliver their own centrally produced inserts. Advantages (a) Most newspapers are local; most retailers appeal to a local trading area. (b) Low technical skill is needed to create newspaper advertisements. (c) Lead time needed for placing newspaper ads is short. 9 -73
  74. 74. Newspapers Disadvantages (a) Consumer does not necessarily see or read a retailer's ad in the newspaper. (b) Life of any single issue of a newspaper is short. (c) Consumer spends relatively little time with each issue and each item within an issue of the newspaper. (d) Newspapers have poor reproduction quality. (e) Newspapers have broad appeal; retailers with small target markets may be wasting advertising dollars by placing newspaper ads. 9 -74
  75. 75. Television Television Advertising - With the widespread development of cable television, which has made television attractive to small, local retailers, television advertising can be a powerful tool for generating higher sales. Advantages (a) Very effective in creating an image (b) Pictures retain their effects on consumer memory and evaluations to a greater extent than verbal messages. 9 -75
  76. 76. Television Disadvantages (a) The television ads are very expensive. (b) Television stations often reach well beyond the trading area of small or medium size retailers, leading to wasted advertising dollars. (c) Competition is high for the television viewer's attention. 9 -76
  77. 77. Radio Advertising Advantages (a) Can target messages to select groups. (b) Can develop distinctive and appealing messages through the use of volume sound variations. (c) Endorsement of a retailer by a radio announcer who has developed a loyal audience can strengthen the impact. 9 -77
  78. 78. Radio Advertising Disadvantages (a) Radio commercials are very fleeting. (b) It is frequently listened to during work hours or while driving to and from work (a period called drive time) and tends, over time, to become part of the background environment. (c) Impossible to demonstrate or show the advertised merchandise. (d) Radio signals usually cover an area much larger than the retailer's target market and may lead to the ineffective use of some of the retailer's advertising dollars. 9 -78
  79. 79. Magazines While not used by local retailers, many national chains are now allocating part of their budgets to magazines. Advantages (a) Better reproduction quality. (b) Longer life span per issue. (c) Consumers spend more time, per issue, with a magazine than with a newspaper. (d) Featured articles can put consumers in the mood for a particular product class The major disadvantage is that long lead-time requirements prevent price appeal advertising. 9 -79
  80. 80. Direct Mail With direct mail, the retailer can precisely target its message as long as a good mailing list of the target population is available. Advantages (a) Retailers can specifically target their messages at a particular group. (b) It provides a means of personal contact. (c) Results are easily measured. 9 -80
  81. 81. Direct Mail Disadvantages (a) Cost is relatively expensive per contact or message delivered. (b) Contact with the target market is completely dependent upon the quality of the mailing list. (c) Targeted consumer may receive direct mail piece but leave it unopened or unexamined. 9 -81
  82. 82. Internet Projections indicate that there will be huge users over the next few years. Advantages - In essence, the Internet provides a platform for a retailer to employ a relatively low cost integrated marketing communications mix thus increasing shareholder value by enhancing the retailer's image through providing customers with a variety of highly specialized information. Disadvantages – Internet penetration may not be high in certain markets and in some Asian countries. Even with PC ownership, not a large proportion of customers have high propensity to shop on the Web 9 -82
  83. 83. Media Alternatives • Miscellaneous Media Yellow Pages Outdoor advertising Transit advertising Electronic information terminals Specialty firms Shopping guides 9 -83
  84. 84. Advertising Media Comparison Chart Advertising Media Comparison Chart Medium Market Coverage Particular Suitability Daily Papers Single community or entire All larger retailers metro area; local editions may be available Weekly Papers Single community usually; may Retailers with a strictly local be a metro area market Shopper Papers Most households in one Neighborhood retailers and community; chain shoppers service businesses can cover a metro area Phone Directories Geographic area or All types of goods and service- occupational field served by the oriented retailers directory Direct Mail Controlled by the retailer New and expanding firms, those using coupons or special offers, mail order 9 -84
  85. 85. Advertising Media Comparison Chart Advertising Media Comparison Chart Medium Market Coverage Particular Suitability Radio Definable market area Retailers focusing on surrounding the station identifiable segments TV Definable market area Retailers of goods and services surrounding the station with wide appeal World Wide Web Global All types of goods and service- oriented retailers Transit Urban or metro community Retailers near transit routes, served by transit system especially those appealing to commuters Outdoor Entire metro area or single Amusement and tourist- neighborhood oriented retailers, well-known firms 9 -85
  86. 86. Advertising Media Comparison Chart Advertising Media Comparison Chart Medium Market Coverage Particular Suitability Local Magazines Entire metro area or region, Restaurants, entertainment- zoned editions sometimes oriented firms, specialty shops, available mail-order firms Flyers/Circulars Single neighborhood Restaurants, dry cleaners, service stations, and other neighborhood firms 9 -86
  87. 87. Media Selection • Coverage is the theoretical maximum number of consumers in the retailer’s target market that can be reached by a medium and not the number actually reached. • Reach is the actual total number of target customers who come in contact with an advertising message. • Cumulative Reach is the reach that is achieved over a period of time. 9 -87
  88. 88. Media Selection • Frequency is the average number of times each person who is reached is exposed to an advertisement during a given time period. • Cost Per Thousand Method (CPM) is a technique used to evaluate advertisements in different media based on cost. The cost per thousand is the cost of the advertisement divided by the number of people viewing it, which is then multiplied by 1,000. 9 -88
  89. 89. Media Selection • Cost Per Thousand – Target Market (CPM-TM) is a technique used to evaluate advertisements in different media based on cost. The cost per thousand per target market is the cost of the advertisement divided by the number of people in the target market viewing it, which is then multiplied by 1,000. • Impact refers to how strong an impression an advertisement makes and how well it ultimately leads to a purchase. 9 -89
  90. 90. Scheduling of Advertising • Ads should appear on, or slightly precede, the days when customers are most likely to purchase. • Advertising should be concentrated around times when people receive their payroll checks. • If the retailer has limited funds, it should concentrate its advertising during periods of highest demand. 9 -90
  91. 91. Scheduling of Advertising • The retailer should time its ads to appear during the time of day or day of week when the best CPM-TM will be obtained. • The higher the degree of habitual purchasing of a product class, the more the advertising should precede the purchase time. 9 -91
  92. 92. Evaluating the Results •Advertising Effectiveness is the extent to which the advertising has produced the result desired. •Advertising Efficiency is concerned with whether the advertising result was achieved with minimum financial expenditure. 9 -92
  93. 93. Evaluating the Results • Most, but not all, ineffective advertising is due to one of ten errors: • Bombarding the customer with so many messages and sales that any single message or sale tends to be discounted. • The advertising was not creative or appealing. • The advertising didn’t give all the needed information. • Advertising dollars were spread too thinly over too many departments or merchandise lines. 9 -93
  94. 94. Evaluating the Results • Poor internal communication among salesclerks, cashiers, stock clerks, and management. • Advertisement not directed at the proper target market. • Retailer did not consider all media options. • Too many last-minute changes in the advertising copy. • Retailer took co-op dollars just because they were “free” and therefore presumably a good deal. • Used a medium that reached too many people not in the target market. 9 -94
  95. 95. Sales Promotion Encompasses the paid communication activities other than advertising, public relations, and personal selling that stimulate consumer purchases and dealer effectiveness 9 -95
  96. 96. Management of Sales Promotions and Publicity •Role of Sales Promotion •Types of Sales Promotion •Evaluating Sales Promotions •Publicity Management 9 -96
  97. 97. Sales Promotion - Consumers will change their shopping habits and brand preferences to take advantage of sales promotions, especially those that offer something special, different, or exciting. 9 -97
  98. 98. Sales Promotions Objectives for Retailers Increasing short-term sales volume Maintaining customer loyalty Emphasizing novelty Complementing other promotion tools 9 -98
  99. 99. Sales Promotion Characteristics Advantages Disadvantages Eye-catching appeal Difficult to terminate Distinctive themes and tools Possible damage to retailer’s image Additional value for customer More stress on frivolous selling points Draws customer traffic Short-term effects only Maintains customer loyalty Used as a supplement Increases impulse purchases Fun for customers 9 -99
  100. 100. Role of Sales Promotions Sales promotions can benefit the retailer by being used on short notice to differentiate itself from the competition. Sales promotion expenditures are often quite substantial, but not well tracked by retailers. Sales promotion activities should be consistent and reinforce the retailer's overall promotion objectives; sales promotions are often employed as a means of improving the retailer's short-term performance. 9 -100
  101. 101. Types of Sales Promotion Exhibit 11.5 9 -101
  102. 102. Types of Sales Promotions • Sole-Sponsored Sales Promotions are sales promotions that the expense to the retailer may or may not be shared with others. • Premiums are extra items offered to the customer when purchasing promoted products. 9 -102
  103. 103. Types of Sales Promotions • Contests and Sweepstakes are sales promotion techniques in which customers have a chance of winning a special prize based on entering a contest in which the entrant competes with others, or a sweepstakes in which all entrants have an equal chance of winning a prize. • Loyalty Programs are a from of sales promotion program in which buyers are rewarded with special rewards, which other shoppers are not offered, for purchasing often from the retailer. 9 -103
  104. 104. Types of Sales Promotions Jointly Sponsored Sales Promotions offers retailer the advantage of using “other people’s money” (OPM). • Coupons are a sales promotion toll in which the shopper is offered a price discount on a specific item if the retailer is presented with the appropriate coupon at time of purchase. • In-Store Displays are promotional fixtures of displays that seek to generate traffic, highlight individual items, and encourage impulse buying. • Demonstrations and Sampling are in-store presentations with the intent of reducing the consumer’s perceived risk of purchasing a product. 9 -104
  105. 105. Types of Sales Promotions • Jointly Sponsored Sales Promotions: • Best Denki coordinates promotional efforts with manufacturers to provide consumers price savings through rebates. Other examples? 9 -105
  106. 106. Evaluating Sales Promotions: What Sales Promotions Can and Cannot Achieve Exhibit 11.6 Tasks That Sales Promotion Can Accomplish: Get consumers to try a new product Stimulate the sales of products Neutralize competitive advertising and sales promotions Encourage repeat usage by current users Reinforce advertising 9 -106
  107. 107. Evaluating Sales Promotions: What Sales Promotions Can and Cannot Achieve Exhibit 11.6 Tasks That Sales Promotion Cannot Achieve: Change the basic non-acceptance of an undesired product Compensate for a poorly trained sales force Give consumers a compelling reason to continue purchasing a product over the long run Permanently stop an established product’s declining sales trend 9 -107
  108. 108. Public Relations Public Relations – Any communication that fosters a favorable image for the retailer Nonpersonal or personal Paid or nonpaid Sponsor-controlled or not Publicity – Any nonpersonal form of public relations whereby messages are transmitted through mass media, the time or space provided by the media is not paid for, and there is no identified commercial sponsor 9 -108
  109. 109. Publicity Management When publicity is formally managed, it should be integrated with other elements of the promotion mix. Advantages of publicity: Note: do not Objective confuse Publicity with Public Credible Relations Appeals to a mass audience Disadvantages of publicity: Difficult to control and time 9 -109
  110. 110. Public Relations Characteristics Advantages Disadvantages Image can be presented Some retailers do not or enhanced believe in spending on image-related More credible source communication No costs for message’s Little control over publicity time or space message Mass audience addressed More suitable for short run Carryover effects possible Costs for PR staff, planning activities, and People pay more attention events than to clearly identified ads 9 -110
  111. 111. Public Relations Objectives for Retailers Increase awareness of the retailer and its strategy mix Maintain or improve the company image Show the retailer as a contributor to the public’s quality of life Demonstrate innovativeness Present a favorable message in a highly believable manner Minimize total promotion costs 9 -111
  112. 112. Publicity and Retailing “Publicity is prayed for; advertising is paid for” Many small retailers could leverage the power of publicity- but many don’t know how If retailers could get a newsworthy story or publicity, they could get lots of mileage from the local press Example- restaurants promoting their special menus and dishes for a write up in the weekend press 9 -112
  113. 113. Past Year Examination Questions Chapter Eleven: Advertising and Promotion 9-113
  114. 114. October 2006 9-114
  115. 115. May 2006 9-115
  116. 116. May 2006 9-116