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The Marketing Concept


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The Marketing Concept

  1. 1. Department of Business Administration. Assignment no.02 Marketing Theory and Practice. Project Advisor Athar Ummad Khan Submitted By Waseem Saeed Roll AD-512530 Semester 1’st ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD, PAKISTAN. Spring 2009 1
  2. 2. DEDICATION I dedicate it to my beloved parents and respected teachers. 2
  3. 3. ACKNOWLEDGMENT All praise and thanks is due to Allah, the Lord of mankind and all that exists, for His blessings, benevolence, and guidance at every stage of our life. I am deeply grateful to my supervisor, Prof. Athar Ummad Khan, for his guidance, support, and patience. He has been an invaluable source of knowledge and has certainly helped inspire many of the ideas expressed in this assignment. My words will fail to express my deepest heartfelt thanks to my family, especially my parents, for all what they did, and still doing, to help me be at this position and for their continuous support and encouragement. Any mistakes that remain are mine! I thank you all. 3
  4. 4. TABLE OF CONTENTS Thesis I Dedication ii Acknowledgement iii Table of Contents iv List of Tables viii List of Figures ix CHAPTER 1: The Marketing Concepts 1 1.1 The Production Concept 2 1.2 The Sales Concept 2 1.3 The Marketing Concept 3 CHAPTER 2: The Marketing Mix 5 2.1 Product Decision 7 2.2 Price Decision 7 2.3 Place Decision 8 2.4 Promotion Decision 8 4
  5. 5. CHAPTER 4: The Promotional Mix 12 4.1 Advertising 12 4.2 Personal Selling 13 4.3 Sales Promotion 13 4.4 Publicity 13 4.5 Factors That Determine Type Of Promotional Tools 15 4.5.1 Resource Availability and The Cost Of Promotional Tools 15 4.5.2 Market Size and Concentration 15 4.5.3 Customer Information Needs 15 CHAPTER 5: How To Establish a Promotional Mix 18 5.1 What To Expect. 19 5.2 What You Should Know Before Getting Started 19 5.2.1 You Deliver A Clear Message 20 5.2.2 Huffman encode data and add header info 20 5.3 Understanding The Main Communication Channels 21 5.4 Why You Need a Promotional Mix 22 Establishing Promotion? CHAPTER 3: What IsYour Promotional Mix 5.5 10 23 3.1 The Tools Of Promotion 11 CHAPTER 6: Advertising 26 6.1 Stage 1. Set Advertising Objectives 26 6.2 Stage 2. Set The Advertising Budget 27 6.3 Stage 3. Determine The Key Advertising Messages 27 6.4 Stage 4. Decide Which Advertising Media To Use 28 6.5 Stage 5. Evaluate The Result Of Advertising Campaign 29 CHAPTER 7: Setting The Advertising Budget 30 7.1 Effectiveness Of Advertising 30 7.2 Approaches To Setting The Advertising Budget 31 CHAPTER 8: Advertising Media 33 8.1 Published Media 34 8.2 Visual and Oral Media 34 8.3 Why and What 34 8.4 Why Advertise 34 8.5 What To Advertise 35 8.6 Advantages Of Advertising 37 8.7 Disadvantages Of Advertising 37 CHAPTER 9: Public Relations 40 9.1 The Roll Of Public Relations 41 9.2 Public Relations Techniques 41 9.3 Consumer Communication 41 9.4 Business Communication 42 9.5 Internal Communication 42 9.6 External Communication 42 9.7 Financial Communication 42 9.8 Advantages Of Public Relations 45 9.9 Disadvantages Of Public Relations 46 CHAPTER 10: Sales Promotions 5 47 10.1 Concept Of Sales Promotion 47 10.2 Definitions Of Sales Promotion 48
  6. 6. LIST OF TABLES Table 3.1 Advantages and Disadvantages Of Promotional Mix 15 6
  7. 7. Table 10.1 Major Sales Promotion Devices 53 LIST OF FIGURES Fig 2.1 Market Mix 6 7
  8. 8. Fig 6.1 Advertising 2009 29 Fig 14.1 Community 87 Fig 14.2 Sponsorship 88 Fig 14.3 Event / Road Show 89 Fig 14.4 Advertising VAIO AW on Catalog 90 Fig 14.5 Advertising VAIO CS on Magazine 91 8
  9. 9. 9
  10. 10. CHAPTER 1 The Marketing Concept The "marketing concept" is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. Today most firms have adopted the marketing concept, but this has not always been the case. In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. While this philosophy is consistent with the marketing concept, it would not be adopted widely until nearly 200 years later. To better understand the marketing concept, it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant. While these alternative concepts prevailed during different historical time frames, they are not restricted to those periods and are still practiced by some firms today. 10
  11. 11. 1.1 The Production Concept: The "production concept" prevailed from the time of the industrial revolution until the early 1920's. The production concepts was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products would in and of itself create the demand for the products. The key questions that a firm would ask before producing a product were: • Can we produce the product? • Can we produce enough of it? At the time, the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. The production concept prevailed into the late 1920's. 1.2 The Sales Concept: By the early 1930's however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand. Around this time, firms began to practice the "Sales concept" (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling. Before producing a product, the key questions were: 11
  12. 12. • Can we sell the product? • Can we charge enough for it? The sales concept paid little attention to whether the product actually was needed; the goal simply was to beat the competition to the sale with little regard to customer satisfaction. Marketing was a function that was performed after the product was developed and produced, and many people came to associate marketing with hard selling. Even today, many people use the word "marketing" when they really mean sales. 1.3 The Marketing Concept: After World War II, the variety of products increased and hard selling no longer could be relied upon to generate sales. With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions became: 1. What do customers want? 2. Can we develop it while they still want it? 3. How can we keep our customers satisfied? In response to these discerning customers, firms began to adopt the "marketing concept", which involves: • Focusing on customer needs before developing the product 12
  13. 13. • Aligning all functions of the company to focus on those needs • Realizing a profit by successfully satisfying customer needs over the long-term When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. Since the entire organization exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a "marketing problem" - everybody must be concerned with customer satisfaction. The marketing concept relies upon marketing research to define market segments, their size, and their needs. To satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix. 13
  14. 14. CHAPTER 2 The Marketing Mix (The 4 P's of Marketing) Introduction Marketing decisions generally fall into the following four controllable categories: 1. Product 2. Price 3. Place (distribution) 4. Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article; The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "Mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: 14
  15. 15. Fig.2.1: MARKET MIX These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. 15
  16. 16. 2.1 Product Decisions: The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made: • Brand name • Functionality • Styling • Quality • Safety • Packaging • Repairs and Support • Warranty • Accessories and services 2.2 Price Decisions: Some examples of pricing decisions to be made include: • Pricing strategy (skim, penetration, etc.) • Suggested retail price • Volume discounts and wholesale pricing • Cash and early payment discounts • Seasonal pricing • Bundling 16
  17. 17. • Price flexibility • Price discrimination 2.3 Distribution (Place) Decisions: Distribution is about getting the products to the customer. Some examples of distribution decisions include: • Distribution channels • Market coverage (inclusive, selective, or exclusive distribution) • Specific channel members • Inventory management • Warehousing • Distribution centers • Order processing • Transportation • Reverse logistics 2.4 Promotion Decisions: In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include: 17
  18. 18. • Promotional strategy (push, pull, etc.) • Advertising • Personal selling & sales force • Sales promotions • Public relations & publicity • Marketing communications budget 2.5 Limitations of the Marketing Mix Framework: The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it. 18
  19. 19. MARKETING-MIX AND PROMOTION-MIX: Marketing Mix Product Price Place Promotion Personal Sales Direct Advertising Publicity Selling Promotion Marketin g Fig.2.2 MARKETING-MIX AND PROMOTION-MIX 19
  20. 20. CHAPTER 3 What Is Promotion? Introduction It would be safe to say that most companies engage in some form of promotional activity every day of the year. Promotion is one of the four Ps of marketing—price, product, place, and promotion. Promotion is generally thought of as a sequence of activities designed to inform and convince individuals to purchase a product, subscribe to a belief, or support a cause. All of the various tools available to marketing managers for promotional activities constitute what is known as the promotional mix. Promotion is the activities people use to communicate with others about their product or service and to convince them to use it. Everything you do communicates something about your business. Promotion involves careful planning. When you see or hear effective promotion it is merely the "tip of the iceberg." A great deal of work went into planning the final product. It is not enough to have good products sold at attractive prices. To generate sales and profits, the benefits of products have to be communicated to customers. 20
  21. 21. Definition 1 Generally, promotion is communicating with the public in an attempt to influence them toward buying your products and/or services. Promotion is, therefore, about companies communicating with customers. Definition 2 An activity, such as a sale or advertising campaign, designed to increase visibility or sales of a product. But before talking about the planning process, we need to review the tools of promotion. 3.1 The Tools Of Promotion Day in and day out, people are bombarded with messages. There is no way to evaluate and act on all these messages so we pick and choose between them. This makes the choice of promotional tools extremely important. There are four main promotional tools: 1. Advertising 2. Personal selling 3. Sales promotion 4. Publicity 5. Sponsorships 21
  22. 22. CHAPTER 4 The promotional mix Introduction It is not enough for a business to have good products sold at attractive prices. To generate sales and profits, the benefits of products have to be communicated to customers. In marketing, this is commonly known as "promotion". Promotion is all about companies communicating with customers. A business' total marketing communications program is called the "promotional mix" and consists of a blend of advertising, personal selling, sales promotion and public relations tools. In this revision note, we describe the four key elements of the promotional mix in more detail. It is helpful to define the four main elements of the promotional mix before considering their strengths and limitations. 4.1 Advertising Any paid form of non-personal communication of ideas or products in the "prime media": i.e. television, newspapers, magazines, billboard posters, radio, cinema etc. Advertising is intended to persuade and to inform. The two basic aspects of advertising are the message (what you want your communication to say) and the medium (how you get your message across) 22
  23. 23. 4.2 Personal Selling Oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale". 4.3 Sales Promotion Providing incentives to customers or to the distribution channel to stimulate demand for a product. 4.4 Publicity The communication of a product, brand or business by placing information about it in the media without paying for the time or media space directly. Otherwise known as "public relations" or PR. The following table gives examples of each tool along with advantages and disadvantages of each. 23
  24. 24. Advantages and Disadvantages of Each Element of the Promotional Mix Mix Element Advantages Disadvantages Advertising Good for building awareness Impersonal - cannot answer all a customer's questions Effective at reaching a wide audience Not good at getting customers to Repetition of main brand and product make a final purchasing decision positioning helps build customer trust Personal Selling Highly interactive - lots of Costly - employing a sales force communication between the buyer has many hidden costs in addition and seller to wages Excellent for communicating Not suitable if there are thousands complex / detailed product of important buyers information and features Relationships can be built up - important if closing the sale make take a long time Sales Can stimulate quick increases in sales If used over the long-term, Promotion by targeting promotional incentives customers may get used to the on particular products effect Good short term tactical tool Too much promotion may damage the brand image Public Often seen as more "credible" - since Risk of losing control - cannot Relations the message seems to be coming from always control what other people a third party (e.g. magazine, write or say about your product newspaper) Cheap way of reaching many customers - if the publicity is achieved through the right media Table 3.1 24
  25. 25. 4.5 Factors that determine the type of promotional tools used Each of the above components of the promotional mix has strengths and weaknesses. There are several factors that should be taken into account in deciding which, and how much of each tool to use in a promotional marketing campaign: 4.5.1 Resource availability and the cost of each promotional tool Advertising (particularly on television and in the national newspapers can be very expensive). The overall resource budget for the promotional campaign will often determine which tools the business can afford to use. 4.5.2 Market size and concentration If a market size is small and the number of potential buyers is small, then personal selling may be the most cost-effective promotional tool. A good example of this would be businesses selling software systems designed for supermarket retailers. On the other hand, where markets are geographically disperse or, where there are substantial numbers of potential customers, advertising is usually the most effective. 25
  26. 26. 4.5.3 Customer information needs Some potential customers need to be provided with detailed, complex information to help them evaluate a purchase (e.g. buyers of equipment for nuclear power stations, or health service managers investing in the latest medical technology). In this situation, personal selling is almost always required - often using selling teams rather than just one individual. By contrast, few consumers need much information about products such as baked beans or bread. Promotional tools such as brand advertising and sales promotion are much more effective in this case. 26
  27. 27. CHAPTER 5 How to Establish a Promotional Mix? Introduction You drive sales by promoting the benefits of your company's goods or services to pools of potential buyers. The ways you promote your organization will largely determine whether you successfully plant the right messages in the minds of your target audience. This module explains how you can establish a promotional mix best suited to your company's needs and resources.  What You Should Know Before Getting Started?  Understanding the Main Communication Channels  Why You Need a Promotional Mix ?  Establishing Your Promotional Mix • Determine Your Target Market • Determine Your Objectives • Design Your Message • Select Your Promotional Channels • Determine Your Budget • Determine Your Promotional Mix • Measure the Results and Adjust 27
  28. 28. 5.1 What to Expect? Even a superior product doesn't sell itself. Your customers need information about your product or service before they buy it. The ways you communicate features and benefits to your potential customers is called a promotional mix. This Business Builder will explain how you can maximize your company's promotional mix for best results. 5.2 What You Should Know Before Getting Started? When you promote your business, you're engaging in persuasive communication: You want to convince others to buy from you. You must select the right promotional strategy to: Capture the attention of the right group of potential customers in a credible yet catchy way. Educate them about your products or services. Influence them to buy from you. A promotional mix is an allocation of resources among five primary elements: 1. Advertising 2. Public relations or publicity 3. Sales promotion 4. Direct marketing 5. Personal selling 28
  29. 29. How you integrate these elements depends on what you're promoting, the biases and preferences of the potential customers you're courting, general market conditions and your promotional budget. The communications process will succeed if: 5.2.1 You Deliver A Clear, Compelling Message. You may have several important or beneficial product features, but if you don't emphasize what's most important to your target market or you overwhelm prospects with too much data, they might reject your message. Example: If the target-market customer cares most about saving money, your message should emphasize how this will happen. 5.2.2 You Choose The Most Appropriate Promotion Method. To convey your message effectively, you must understand the best way to reach your target market. If your key customers are manufacturers and you supply specialized equipment, communicating through an advertisement in a general interest consumer magazine will waste time and money. 29
  30. 30. 5.3 Understanding The Main Communication Channels 5.3.a. Advertising. Advertising is any paid form of media communication. This includes print ads in magazines, trade journals and newspapers, radio and TV announcements, Web-based visibility-building, and billboards. Advertising is a no personal promotional activity because the seller has no direct contact with the potential customer during the communication process. 5.3.b. Sales Promotions. In-store demonstrations, displays, contests and price incentives (50% off, buy-one-get-one-free) are sales promotion techniques 5.3.c. Public Relations. These activities promote a positive image, generate publicity and foster goodwill with the intent of increasing sales. Generating favorable media coverage, hosting special events and sponsoring charitable campaigns are examples of public relations. 5.3.d. Direct Marketing. A form of advertising aimed directly at target customers (usually in their homes or offices) that ask the receiver to take action, such as ordering a product, clipping a coupon, phoning a toll-free number or visiting a store. Catalogs, coupon mailers and letters are common forms of direct marketing. 30
  31. 31. 5.3.e. Personal Selling. Face-to-face communication between buyer and seller. 5.4 Why You Need A Promotional Mix? If you deliver your message in many different ways, you increase your odds of reaching your target market. Hundreds of messages a day bombard your target market, but only a select few penetrate their consciousnesses. Of those, an even smaller percentage eventually leads them to act. You may want to communicate a range of messages to different markets. If you have a product, such as spot remover, that's used by general consumers but that auto mechanics apply in a more specialized way, you should communicate different messages to each market via different media and methods. You might air a TV commercial to reach consumers and place an ad in an auto magazine to reach mechanics. Without the proper promotional mix, you may squander your limited resources by taking a scattershot approach. Promotion must advance your overall marketing plan and reinforce the dialogue you want to establish with the segments of the marketplace you covet most.  Beware: In their rush to expand, some fast-growth entrepreneurs fail to coordinate their marketing strategies with their specific promotional efforts. A common trap: You invest heavily on advertising or sales 31
  32. 32. promotion, but you overlook quality control for your product or price it improperly. 5.5 Establishing Your Promotional Mix Establishing the promotional mix that's right for your company involves seven steps: 5.5.a. Determine Your Target Market The segment of people that needs, or would benefit from, your product or service is your target market. Understanding these individuals' attitudes and behaviors will help you design the best message and select the right means to reach them. Example: If you own an upscale jewelry store, you know from your sales history or marketing research that your target market is consumers earning more than $75,000 per year. Any print advertising should thus appear in publications in which readership income exceeds $75,000. 5.5.b. Determine Your Objectives You must determine the response you want to elicit from your target market, such as motivating them to click on your Web ad or sign up for a free trial of your product. Some entrepreneurs fail to define their objectives precisely. While you obviously want to increase sales, you need to decide the best way to build a relationship with shoppers. If you engage them effectively, then sales should inevitably follow. 32
  33. 33. Example: To introduce new customers to your product, a direct- marketing technique, such as a direct-mail letter with a money-saving offer to first-time customers, might work. Or you can try a sales promotion, such as two-for-the-price-of-one. If your target market has a misconception about your product (say, that it's more expensive or less effective than rival products), you can correct the perception by providing comparisons or testimonials. 5.5.c. Design Your Message The design of your communication incorporates two main factors: content and format. Content. The content is the words and images you use to appeal to your target market. You must give your potential customers reasons they should respond to your message. Think of the most important benefit a user of your product receives. That should lead you to the central theme of your message's content. Benefits fulfill a human want or need. Examples: The desire to enhance status, save money and time, or increase safety or security. In choosing your promotional mix, you must communicate how your product produces a positive emotion or satisfies a particular need. In the case of the jewelry store mentioned earlier, the message can appeal to the target market's desire to gain status, a likely motivator that drives jewelry shoppers. Or your message can communicate the 33
  34. 34. desire to be loved: "If you love her, then you will buy her this elegant ring to prove it."  Format. Each element of the promotional mix has its own format requirements. Web advertising relies on graphics, clarity and color, while personal selling may involve structured presentations, handouts and diagnostic tests to engage potential customers. To determine the best format to deliver your content, consider the technical aspects of presenting your message. If you prefer to demonstrate a product to sell it, you should probably include a broadcast medium in your advertising. That in turn will lead to decisions about sound effects, camera angles, lighting, and so on. Format for print advertising depends on how long or big a headline should look, how to integrate graphics and what types of photos reinforce your message. 5.5.d. Select Your Promotional Channels Entrepreneurs who miss revenue goals often explain the disappointing results by saying, "We were out-marketed." That usually indicates a failure to plan and implement the right promotional mix. By choosing the best methods to convey your message and extracting the most value from your financial and creative resources you can devise an integrated marketing communications program that reinforces your company's distinct character in your customers' minds. 34
  35. 35. CHAPTER 6 Introduction: The Institute of Practitioners in Advertising (IPA), the body which represents advertising agencies, defines advertising as: "The means of providing the most persuasive possible selling message to the right prospects at the lowest possible cost". Kotler and Armstrong provide an alternative definition: "Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor". There are five main stages in a well-managed advertising campaign: 6.1 Stage 1: Set Advertising Objectives An advertising objective is a specific communication task to be achieved with a specific target audience during a specified period of time. Advertising objectives fall into three main categories: 35
  36. 36. (a) To inform - e.g. tell customers about a new product (b) To persuade - e.g. encourage customers to switch to a different brand (c) To remind - e.g. remind buyers where to find a product 6.2 stage 2: Set the Advertising Budget Marketers should remember that the role of advertising is to create demand for a product. The amount spent on advertising should be relevant to the potential sales impact of the campaign. This, in turn will reflect the characteristics of the product being advertised. For example, new products tend to need a larger advertising budget to help build awareness and to encourage consumers to trial the product. A product that is highly differentiated may also need more advertising to help set it apart from the competition - emphasizing the points of difference. Setting the advertising budget is not easy - how can a business predict the right amount to spend. Which parts of the advertising campaign will work best and which will have relatively little effect? Often businesses use "rules-of-thumb" (e.g. advertising/sales ratio) as a guide to set the budget. 6.3 Stage 3: Determine the key Advertising Messages Spending a lot on advertising does not guarantee success (witness the infamous John Cleese campaign for Sainsbury). Research suggests that the clarity of the advertising message is often more important than the amount spent. The advertising message must 36
  37. 37. be carefully targeted to impact the target customer audience. A successful advertising message should have the following characteristics: (a) Meaningful - customers should find the message relevant (b) Distinctive - capture the customer's attention (c) Believable - a difficult task, since research suggests most consumers doubt the truth of advertising in general. 6.4 Stage 4: Decide which Advertising Media to Use There are a variety of advertising media from which to choose. A campaign may use one or more of the media alternatives. The key factors in choosing the right media include: (a) Reach - what proportion of the target customers will be exposed to the advertising? (b) Frequency - how many times will the target customer be exposed to the advertising message? (c) Media Impact - where, if the target customer sees the message - will it have most impact? For example does an advert promoting holidays for elderly people have more impact on Television (if so, when and which channels) or in a national newspaper or perhaps a magazine focused on this segment of the population? Another key decision in relation to advertising media relates to the timing of the campaign. Some products are particularly suited to seasonal campaigns on television (e.g. Christmas hampers) whereas for other products, a regular advertising campaign throughout the year 37
  38. 38. in media such as newspapers and specialist magazines (e.g. cottage holidays in the Lake District) is more appropriate. 6.5 Stage 5: Evaluate the results of the Advertising Campaign The evaluation of an advertising campaign should focus on two key areas: (1) The Communication Effects - is the intended message being communicated effectively and to the intended audience? (2) The Sales Effects - has the campaign generated the intended sales growth. This second area is much more difficult to measure. fig1.Advertising 2009 38
  39. 39. CHAPTER 7 Setting the advertising budget Introduction: A famous comment usually attributed to Lord Leverhulme goes: “I know that half of my advertising budget is wasted, but I’m not sure which half” It is notoriously difficult to measure the effect of advertising on a business’ sales. Advertising is just one of the variables that might affect sales in a particular period. These include: ∗ Consumer and business confidence ∗ Levels of disposable income ∗ Availability of product (e.g. does the retailer actually have stock to sell?) Availability of competing products ∗ The weather (often blamed by retailers for poor sales!) 7.1 How can a business know whether a specific advertising campaign was effective? As a percentage of sales, advertising expenditure varies enormously from business to business, from market to market. For 39
  40. 40. example, the leading pharmaceutical companies spend around 20% of sales on advertising, whilst business such as Ford and Toyota spend less than 1%. An average for fast-moving consumer goods markets (“FMCG”) is around 8-10% of sales. In practice, the following approaches are used for setting the advertising budget: 7.2 Approaches to setting the advertising budget 7.2.1 Method (1) Fixed percentage of sales: In markets with a stable, predictable sales pattern, some companies set their advertising spend consistently at a fixed percentage of sales. This policy has the advantage of avoiding an “advertising war” which could be bad news for profits. However, there are some disadvantages with this approach. This approach assumes that sales are directly related to advertising. Clearly this will not entirely be the case, since other elements of the promotional mix will also affect sales. If the rule is applied when sales are declining, the result will be a reduction in advertising just when greater sales promotion is required! 7.2.2 Method (2) Same level as competitors: This approach has widespread use when products are well- established with predictable sales patterns. It is based on the assumption that there is an “industry average” spend that works well for all major players in a market. 40
  41. 41. A major problem with this approach (in addition to the disadvantages set out for the example above) is that it encourages businesses to ignore the effectiveness of their advertising spend – it makes them “lazy”. It could also prevent a business with competitive advantages from increasing market share by spending more than average. 7.2.3 Method (3) Task The task approach involves setting marketing objectives based on the “tasks” that the advertising has to complete. These tasks could be financial in nature (e.g. achieve a certain increase in sales, profits) or related to the marketing activity that is generated by the campaigns. For example: ∗ Numbers of enquiries received quoting the source code on the advertisement ∗ Increase in customer recognition / awareness of the product or brand (which can be measured) ∗ Number of viewers, listeners or readers reached by the campaign 7.2.4 Method (4) Residual The residual approach, which is perhaps the worst of all, is to base the advertising budget on what the business can afford – after all other expenditure. There is no attempt to associate marketing 41
  42. 42. objectives with levels of advertising. In a good year large amounts of money could be wasted; in a bad year, the low advertising budget could guarantee a further low year for sales. CHAPTER 8 Advertising Media Introduction: There is a huge variety of media available through which a business can conduct an advertising campaign. What are the main types of media and what considerations should a business make in choosing between them? The starting point in the selection of appropriate advertising media is a “media analysis”. This can be defined as: "An investigation into the relative effectiveness and the relative costs of using the various advertising media in an advertising campaign" Before committing an advertising budget it is necessary to carry out marketing research on: • Potential customers • Their reading habits, television-watching habits • How many times the advertisers wish the potential customers to see an advertisement 42
  43. 43. • How great a percentage of the market they wish to reach, etc. These elements all need to be considered and balanced to plan a campaign that will effectively reach its target audience at a reasonable cost. A useful distinction can be made between “published media” and “visual/aural media”. 8.1 Published media include: • National daily newspapers • Sunday newspapers • Local and regional newspapers • Consumer magazines • Specialist magazines • Trade and professional press • Internet 8.2 Visual and aural media include: • Television (terrestrial and digital) • Radio • Cinema • Billboards • Transport • Direct mailing 43
  44. 44. 8.3 Why and What? Why and what should a business advertise? Before undertaking an advertising campaign, marketers should be able to answer two key questions: (1) Why are we advertising? (2) What are we advertising? On the face of it these seem like two fairly obvious questions. But they are significant. Advertising can be a very expensive promotional tool. It is widely believed that much advertising spend is wasted. So careful consideration about “Why” and “What” can pay dividends. 8.4 Why advertise? The following may be good reasons why a business is advertising: • To create awareness, customer interest or desire • To boost sales (moving the demand curve to the right) • To build brand loyalty (or to maintain it at the existing level) • To launch a new product • To change customer attitudes – perhaps trying to move a product more “up market” or to dispel some widely held perceptions about the product 44
  45. 45. • To support the activities of the distribution channel (e.g. supporting a “pull” strategy) • To build the company or brand image • To reminds and reassure customers • To offset competitor advertising – businesses may defend market share by responding to competitors’ campaigns with their own advertising • To boost public standing: companies can boost their public standing with advertisements that link them with generally approved campaigns such as care for the environment • To support the sales force – advertising can make the job of the sales force easier and more effective by attracting leads from potential customers and perhaps motivate them by boosting the profile of the business Take a look through any magazine and select a sample of adverts. Which of the above reasons do you think are behind the adverts you choose? Don’t forget that some adverts aim to achieve multiple objectives. 8.5 What to advertise? Factors that help answer the “what are we advertising”? focus on what the advertising message should be. In general, there are really only two kinds of effective advertising message: Firstly, does the business/product have a Unique Selling Proposition (“USP”) 45
  46. 46. A unique selling proposition is a customer benefit that no other product can claim In reality these are rare, although that does not stop marketers from claiming them for their products. Secondly, does the thing that is being advertised “add value” and if so, how? For example, advertising for washing powders will focus on the “added value” created by whitening agents or the fact that a particular formulation will last longer than the competition (take a look at the Fairy web site to see if you can spot the other “added value” features claimed for its products) Whatever is advertised, it is important that the message is: • Seen • Read • Believed • Remembered • Action upon by target customers 8.6 Advantages Of Advertising  Credibility. By investing in a public presentation of your company and its products, you can enhance customers' perceptions of 46
  47. 47. legitimacy, permanence and quality that they associate with your enterprise.  Timing. You can repeat a message at strategic intervals. Repeating your message increases the likelihood that your target customer will see the message at a time where he is open to hearing it. The right timing can maximize your awareness-building efforts.  Drama. The best advertising puts a human face on a company and its products. It can convey a sense of adventure, challenge people to test their assumptions about your business or entertain or enlighten your audience. It can introduce consumers to images and symbols that differentiate your company from others.  Branding. Effective advertising enables you to create and nurture brand equity, a vital but intangible source of goodwill that flows from a favorable image associated with a brand name. Once your company establishes a distinctive trademark in the public eye, you have a competitive advantage. 8.7 Disadvantages Of Advertising  Cost. 47
  48. 48. Marketers often argue that advertising offers a cost- effective way to reach large groups, and it's true that the cost per contact can prove lower than with other promotional methods. Nevertheless, many entrepreneurs lack the finances to invest heavily in advertising. Producing and placing professional advertisements is prohibitively expensive for many emerging-growth companies.  Follow Through. While attention-grabbing advertising can attract interest, even the most innovative campaigns can become stale over time. And entrepreneurs may grow to rely too much on advertising at the expense of more personal, direct appeals to niche audiences.  Lack Of Feedback. Measuring the success of advertising can prove impossible. Some of the best TV commercials from a stylistic standpoint may not increase sales for the advertiser.  Consumer Indifference. As people get pelted with promotional messages throughout the day, they become better at screening out ads. Information overload and clutter can lead your target audience to turn away from your best efforts to engage them. 48
  49. 49. CHAPTER 9 Introduction: The Institute of Public Relations defines public relations as follows: “The planned and sustained effort to establish and maintain goodwill and mutual understanding between an organization and its publics” What is meant by the term “publics” in the above definition? A business may have many “publics” with which it needs to maintain good relations and build goodwill. For example, consider the relevant “publics” for a publicly-quoted business engaged in medical research: • Employees • Shareholders • Trade unions • Members of the “general public” • Customers (past and present) • Pressure groups • The medical profession 49
  50. 50. • Charities funding medical research • Professional research bodies and policy-forming organizations • The media • Government and politicians 9.1 The role of public relations is to: o Identify the relevant publics o Influence the opinions of those publics by: o Reinforcing favorable opinions o Transforming perhaps neutral opinions into positive ones o Changing or neutralizing hostile opinions 9.2 Public relations techniques There are many techniques available to influence public opinion, some of which are more appropriate in certain circumstances than others. 9.3 Consumer communication • Customer press releases • Trade press releases • Promotional videos • Consumer exhibitions • Competitions and prizes • Product launch events 50
  51. 51. • Celebrity endorsements • Web sites 9.4 Business communication o Corporate identity design o Company and product videos o Direct mailings o Web site o Trade exhibitions 9.5 Internal / employee communication  In-house newsletters and magazines  Intranet  Notice boards  Employee conferences  Email 9.6 External corporate communication o Company literature (brochures, videos etc.) o Community involvement programmed o Trade, local, national and international media relations 9.7 Financial communication ∗ Financial media relations 51
  52. 52. ∗ Annual report and accounts ∗ Meetings with stock market analysts, fund managers etc ∗ Shareholder meetings (including the annual general meeting Given the wide range of techniques used in public relations, how is it possible to measure the effectiveness of public relations? It is actually quite difficult to measure whether the key messages have been communicated to the target public. In any event, this could be quite costly since it would involve a large amount of regular research. Instead, the main measures of effectiveness concentrate on the process of public relations, and include: • Monitoring the amount of media coverage obtained (press cuttings agencies play a role in keeping businesses informed of this) • Measuring attendance at meetings, conferences • Measuring the number of enquiries or orders received in response to specific public relations efforts. With effective public relations, you can increase sales through favorable, non paid media coverage and enhance your company's image. Public relations build goodwill toward your business by raising your company's profile in the public eye. Publicity is free advertising. You can generate publicity through press releases, special events, sponsorships, newsletters and community activities. 52
  53. 53. The most common form of publicity is press coverage. It fits into the promotional mix only when there's newsworthy information about your company such as: • You've developed a breakthrough technology or service that no one else offers. • You've won a prestigious award or industry prize that's widely recognizable. • You've made a major investment in your community, whether in ramping up hiring (especially if you're aggressively courting people with disabilities, senior citizens or implementing welfare- to-work programs), purchasing land to build your new headquarters or donating goods to charities. • You've acquired another company. • You're hiring new executives or announcing the addition of new board members. When publicity is not appropriate and your specific objective is to improve your company's image with the public, then consider sponsoring a charitable event. If your specific goal is to increase sales through better customer service and relations, produce a newsletter on a regular basis that provides your customers with useful information. 53
  54. 54. 9.8 Advantages Of Public Relations  Believability. Most people perceive publicity as more credible and believable than a paid advertisement. When you run an ad, you can make any product claim you want. Consumers know this and often react with skepticism. But reporters don't have to feature you in their publications or on their programs and speak positively about your business. You don't control the message when you don't pay for it.  Employee Morale. Your staff may work together to promote your company's charitable activities or host special events and celebrations for the community. The resulting publicity can boost their pride and enthusiasm for their jobs.  Educating Visitors To Your Web Site Before the Internet, companies would issue press releases about news designed to interest newspaper reporters. Today, you can compose press releases and display them on your company's Web site. While this may not reach as many people as having a reporter integrate your press release into a news story, you can still reap competitive value. Web researchers may read your company's press pages to get updates on your product releases, expansion plans or personnel moves. 54
  55. 55. 9.10 Disadvantages Of Public Relations  Cost. While arranging publicity generally costs less than advertising, it can prove surprisingly expensive. You may need to hire a public relations firm to develop campaigns, write press releases and follow up with journalists. Even if you bring these tasks in-house, the cost of developing publicity items and staging events can stretch your budget and divert workers from their primary responsibilities.  Lack of Control. While you can invite the media to preview your new product or tour your new facility, there's no guarantee that a glowing article will result. Or information might be improperly reported or key details omitted. What's worse, publicity can backfire if it downplays the positives and harps on negatives.  Failure To Hit Target. You can do everything right in generating the kind of favorable publicity you seek. But the message may not reach your desired audience. A newscast can run your segment at a time when fewer viewers are watching, or a newspaper can mention your company in a short article buried in a back section that's often discarded. 55
  56. 56. CHAPTER 10 Introduction Sales promotion is one of the most loosely used terms in the marketing vocabulary. We define sales promotion as demand. Stimulating devices designed to supplement advertising and facilitate personal selling. In other words, sales promotion signifies all those activities that supplement, co-ordinate and make the efforts of personal selling and advertising more effective. It is non recurrent in nature which means it can’t be used continuously. 10.1 Concept of Sales Promotion Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to stimulate quicker and / or greater purchase of a particular product by consumers or the trade. Where as advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion (for example samples, coupons, prizes, cash refund, warranties, demonstrations, contest); trade promotion (for example buying allowances, free goods, merchandise allowances, co-operative advertising, advertising and display allowances, dealer sales contests); 56
  57. 57. and sales-force promotion (for example bonuses, contests, sales rallies). Sales promotion efforts are directed at final consumers and designed to motivate, persuade and remind them of the goods and receives that are offered. Sales persons adopt several techniques for sales promotion. Creative sales promotion can be very effective. It is the marketing manager’s responsibility to specify promotion objectives and policies. 10.2 Definitions of Sales Promotion According to American Marketing Association “ Those marketing activities other than personal selling advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine.” W.J. Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers. 10.3 Purpose of sales Promotion Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial, while a free management advisory service cements a long-term relationship with a retailer. 57
  58. 58. From the marketer’s perspective, sales promotion serves three essential roles it informs, persuades and reminds prospective and current customers and other selected audiences about a company and its products. The relative importance of those roles varies according to the circumstances faced by a firm. The most useful product or brand will be a failure if no one knows it is available! Because distribution channels are often long, a product may pass through many lands between a producer and consumers. Therefore, a producer must inform middlemen as well as the ultimate consumers or business users about the product. Wholesalers, in turn must inform retailers and retailers must inform consumers. As the number of potential customers grows and the geographic dimensions of a market expand, the problems and costs of informing the market increase. Another purpose of sales promotion is persuasion. The intense competition among different industries puts tremendous pressure on the promotional programmed of sellers. In Pakistan, even a product designed to satisfy a basic physiological need requires strong persuasive promotion, because consumers have many alternatives to choose from. In the case of luxury product, for which sales depend on the ability to convince consumers that the products benefits exceed those of other luxuries, persuasion is even more important. 58
  59. 59. Consumers also must be reminded about a product’s availability and its potential to satisfy. Sellers bombard the market place units hundreds of messages every day in the hope of attracting new consumers and establishing markets for new products. Given the intense competition for consumers’ attention, even an established firm must constantly remind people about its brand to retain a place in their minds. Much of a firm’s sales promotion may be intended simply to offset competitors marketing activity by keeping its brand in front of the market. 10.4 Objectives of Sales Promotion The basic objectives of sales promotion are: i) To introduce new products To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product. ii) To attract new customers New customers may be attracted through issue of free samples, premiums, contests and similar devices. iii) To induce present customers to buy more Present customers may be induced to buy more by knowing more about a product, its ingredients and uses. 59
  60. 60. iv) To help firm remain competitive Sales promotions may be undertaken to meet competition from a firm. v) To increase sales in off season Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product. vi) To increase the inventories of business buyers Retailers may be induced to keep in stock more units of a product so that more sales can be effected. 10.5 Rationale of sales promotion Rationale of sales promotion may be analyzed under the following points. Short-term results Sales promotion such as coupons and trade allowances produce quicker, more measurable sales results. However critics of this strategy argue that these immediate benefits come at the expense of building brand equity. They believe that an over emphasize on sales promotion may under mine a brand’s future. 60
  61. 61. Competitive Pressure If competitors offer buyers price reductions, contest or other incentives, a firm may feel forced to retaliate with its own sales promotions. Buyers’ expectations Once they are offered purchase incentives, consumers and channel members get used to them and soon begin expecting them. Low quality of retail selling Many retailers use inadequately trained sales clerks or have switched to self service. For these outlets, sales promotion devices such as product displays and samples often are the only effective promotional tools available at the point of purchase. 10.6 Types of Sales Promotion In using sales promotion, a company must fulfill the objectives of the organization. Sales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. The specific objectives set for sales promotion will vary with the type of target market. For consumers, objectives include encouraging purchase of larger-size units, building trial among non users and attracting switches away from competitors’ brands. For retailers objectives include inducing retailers to carry new items and higher levels of inventory, encouraging off-season buying, encouraging, stocking of related items, off setting competitive promotions, building brand loyalty of retailers and gaining entry into new retail outlets. For sales force, 61
  62. 62. objectives include encouraging support of a new product or model, encouraging more prospecting and stimulating off-season sales. Many sales promotion tools are available to accomplish these objectives at the consumer level, and at the middle men level. For the purpose of convenience, the types of sales promotion methods may be grouped under three categories: 1. Types of sales promotion directed at consumers. 2. Types of sales promotion directed at dealers and distributors. The following chart shows major sales promotion devices, grouped by Target Audience. Business users or Households Middlemen and their Sales Forces 1. Coupons 1. Free goods 2. Cash rebates 2. Advertising allowances 3. Premiums (Gifts) 3. Contests for sales people 4. Free samples 4. Product demonstrations 5. Contests 5. Trade shows 6. Point of purchase displays 6. Exhibitions 7. Product demonstrations 7. Advertising specialties 8. Trade shows and exhibitions 8. Point-of-purchase displays 9. Advertising specialties 9. Training sales forces Table 10.1Major sales promotion devices 62
  63. 63. 10.7 Consumer Promotion Tools The main consumer promotion tools include samples, coupons, cash refund offers, price packs, premiums, prizes, patronage rewards, free trials, product warranties, tie-ins, and point of purchase displays and demonstrations. Samples Samples are offers of a free amount or trial of a product to consumers. The sample might be delivered door to door sent in the mail, picked up in a store, found attached to another product or featured in an advertising offer. Sampling is the most effective and most expensive way to introduce a new product. Coupons Coupons are certificates entitling the bearer to a stated saving on the purchase of a specific product. Coupons can be mailed, enclosed in or on other products or inserted in magazine and newspaper advertisements. Coupons can be effective in stimulating sales of a mature brand and inducing early trial of a new brand. Cash Refund Offers or Rebates These are like coupons except that the price reduction occurs after the purchase rather than at the retail shop. The consumer sends a specified “proof of purchase” to the manufacturer, who in turn ‘refunds’ part of the purchase price by mail. Cash refunds have been used for major products such as automobiles as well as for packaged goods. 63
  64. 64. Price Packs These are offers to consumers of savings off the regular price of a product, flagged on the label or package. They may take the form or a reduced-price pack which is single packages sold at a reduced price (such as two for the price of one) or a banded pack, which is two related products banded together (such as a tooth brush and tooth paste). Price packs are very effective in stimulating short term sales, even more than coupons. Premiums or Gifts These are merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. Sometimes the package itself is a reusable container may serve as a premium. A self- liquidating premium is an item sold below its normal retail price to consumers who request it. Prizes These are offers of the chance to win cash, trips or merchandise as a result of purchasing something. Pepsi-cola offered the chance to win cash by matching numbers under the bottle cap with numbers announced on television. Sometimes the prize is a person, offering the winner either cash or dinner with actor. Patronage Awards These are values in cash or in other forms that are proportional to one’s patronage of a certain vendor or group of vendors. Most airlines offer “frequent flyer plans” providing points for 64
  65. 65. miles traveled that can be turned in for free airline trips. Cooperatives pay their members dividends according to their annual patronage. Le Meridian adopted an “honored guest” plan that awards points for users of their hotels. Free Trials Free trails consist of inviting prospective purchasers to try the product without cost in the hope that they will buy the product. Thus, often we see, auto dealers encourage free test drives to stimulate purchase interest. Product Warranties These are an important tool, especially as consumers become more quality sensitive. When My TVS offered a two year car warranty, substantially longer than other competitors’ customers took notice. They inferred that My TVS quality must be good or else the company would be in deep trouble. Companies must carefully estimate the sales-generating value against the potential costs of any proposed warranty programmed. Tie-in Promotions These are becoming increasingly popular. In a tie in promotion two or more brands or companies team up on coupons, refunds and contests to increase their pulling power. Companies pool funds with the hope of broader exposure, while several sales forces 65
  66. 66. push these promotions to retailers, giving them a better shot at extra display and ad space. Point-of-Purchase Displays These take place at the point of purchase or sale. Display of visible mark or product at the entrance of the store is an example. Unfortunately many retailers do not like to handle the hundreds of displays, signs and posters they receive from manufacturers. Hindustan Lever often uses this tool to promote its products in the retail market. Product Demonstrations Products are being shown in action. Consumers can visit the store and see the usage of product in live action so that doubts of the consumers can be clarified in the store itself. When a new product is introduced in the market, the sales promotional tool is often used. For example ultra modern grinder mixer being used by the company to demonstrate its specialty than the other product. 10.8 Trade Promotion Tools More sales promotion rupees are directed to the trade than to consumers. Manufacturers seek the following objectives in awarding money to the trade: 66
  67. 67. i. Trade promotion can persuade the retailer or wholesaler to carry the brand. ii. Trade promotion can persuade the retailer or wholesaler to carry more than it normally carries. iii. Trade promotion can induce the retailers to promote the brand through featuring, display, and price reduction. iv. Trade promotion can stimulate retailers and their sales clerks to push the product. Manufacturers use several promotion tools. Some of which are mentioned below: Price – Off Manufacturers may offer a price – off, which is straight discount off the list price on each case purchased during a stated period of time. The offer encourages dealers to buy a quantity or carry a new item that they might not ordinarily buy. The dealers can use the buying allowance for immediate profit or price reductions. Allowance Manufacturers may offer an allowance in return for the retailer’s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special display of the product. 67
  68. 68. Free Goods Manufacturers may offer free goods, which are extra cases of merchandise to middlemen who buy a certain quantity of items. Push Money Manufacturers may offer push money which is cash or gifts to dealers or their sales force to push the manufacturer’s goods. Specialty Advertising Items Manufacturers may offer free specialty advertising items to the retailers that carry the company’s name such as pens, pencil, calendars, paper weights, and memo pads. As the number of competitive sales promotions have increased, friction has been created between the company’s sales force and its brand managers. The sales force says that the retailers will not keep products on the shelf unless they receive more trade promotion money, while the brand managers want to spend their funds on consumer promotion and advertising. 68
  69. 69. 10.9 Advantages Of Sales Promotions  Build Relationships. Trade-oriented promotions give marketing intermediaries a financial incentive to support your company's products. By offering discounts to retailers in exchange for prominent shelf space or end-of- the-aisle displays, for instance, you can strengthen relationships with key players who can help stimulate sales.  Stir Excitement. Many consumers love contests and sweepstakes. You can turn a drab purchase into a more lively event by promising cash prizes to lucky winners. At its best, a sales promotion adds alluring incentives for buyer action.  Gauge Price Sensitivity. Using coupons or rebates can help you measure to what extent your shopper’s base their buying decisions on price. You can also collect their addresses and other consumer profile data that can prove valuable in subsequent marketing campaigns. 69
  70. 70. 10.10 Disadvantages Of Sales Promotions  Risk Of Misfire. Many fast-growth entrepreneurs rush to try some form of sales promotion, only to declare such efforts a waste. But problems often result from poor planning. You must first identify and develop specific strategies to boost sales before you target customers and choose sales promotion tools, rather than plunging into sales promotions without laying the groundwork first.  Risk Of Dependency. Business owners can grow to rely on sales promotion and dwell on short-term marketing ploys, at the expense of more coordinated long-range plans. Realize that sales gains from promotions often sputter after an initial spike and you can sacrifice long-term brand equity in the pursuit of short-term goals.  Risk Of Trivializing Your Brand. Giving out coupons or samples can undermine the image of exclusivity or prestige that you wish to associate with your product or company. Price-conscious consumers may also withhold purchases in the absence of sales promotions. 70
  71. 71. CHAPTER 11 Introduction Direct marketing is concerned with establishing an individual relationship between the business offering a product or service and the final customer. Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording, analysis and tracking of customer behaviors to develop a relational marketing strategies The process of direct marketing covers a wide range of promotional activities you may be familiar with. These include: ∗ Direct-response adverts on television and radio ∗ Mail order catalogues ∗ E-commerce ∗ Magazine inserts ∗ Direct mail (sometimes also referred to as “junk mail”) ∗ Telemarketing ∗ Door drops 71
  72. 72. Direct marketing enables you to communicate with your customers in a more personalized way than advertising, such as greeting them with a letter or telephoning them directly. Telemarketing, direct mail, catalogs and coupon mailers are all examples of direct- marketing techniques. Successful direct marketing depends on whether you can acquire and maintain a database of your target market. Some marketers find this alone justifies the cost of advertising in a national consumer publication instead. Consider using direct marketing in your promotional mix if: o Your Primary Means Of Distributing Your Product Is Through The Mail Or Directly To Customers. With the growth of the Internet, many companies don't use retail outlets at all. Others supplement their retail efforts by selling through the Web, the mail or telephone. Companies that distribute products through the mail must assemble and maintain databases and mailing lists. Direct mail is a particularly cost-effective communication vehicle for them. o You Are Selling Products With Many Benefits. Your product may have multiple benefits to the user, but space limitations in an advertisement may prevent you from mentioning all but the most prominent ones. A direct-mail letter lets you communicate all your benefits. It's also a good way to announce sales promotions or special discounts. 72
  73. 73. o Your Advertising Efforts Fail To Reach Your Target Market. As the upscale jewelry store owner, you may feel that the ad you placed in a high-end magazine isn't increasing your business. You can try buying a list by ZIP code in an exclusive residential area. This assures you that you're concentrating on your actual target market. o You Are Selling An Expensive Product Or Service. When you're engaging in high-ticket sales, you must expend more effort to convince potential customers to buy. A direct-mail letter gives you more opportunity to expand your appeal than an advertisement with limited space. o Your Business Depends On Reorders And/or Volume. Magazine publishers use telemarketing because subscribers often put off renewing their subscriptions. A sales rep's reminder call often spurs a renewal sale. 11.1 Advantages Of Direct Marketing  Predictability. By staging initial tests and measuring the results, you can roll out a direct-marketing campaign to a wider universe of potential customers with a strong likelihood that it will succeed. You can mitigate your risk by strategic sampling.  Effectiveness In Reaching The Right Target. 73
  74. 74. Through direct marketing, you can contact narrow market segments and customize your message to appeal to them.  Ease Of Measurement. Evaluating direct-marketing campaigns is straightforward because you can measure outcomes with quantifiable data, such as number and size of orders, leads generated or requests for more information. 11.2 Disadvantages Of Direct Marketing  Saturation. Many consumers are rebelling against the onslaught of direct marketing. They're more apt to discard direct mail, resent telemarketing calls, turn away door-to-door salespeople and laugh off TV infomercials.  Reliance On Obsolete Direct-mail Lists. In this transient society, increasing numbers of people relocate more frequently or use two addresses. Despite advances in technology that update mailing lists, it remains difficult to buy reliable lists that reach the market segment you want. Incorrect list selection can wipe out the appeal of a great product, a great package or a great offer.  Heightened Need For Customer Service. 74
  75. 75. If you rely on direct-response ads, telemarketing or direct mail to introduce your company to shoppers, you must deliver an even higher level of personalized service to win over prospective customers. This requires additional investment in staffing and customer service training and delivery that some entrepreneurs overlook. 11.3 Direct mail Of the above direct marketing techniques, the one in most widespread use is direct mail. Direct mail is widely thought of as the most effective medium to achieve a customer sales response. 11.4 Why? o The advertiser can target a promotional message down to an individual level, and where possible personalize the message. There are a large number of mailing databases available that allow businesses to send direct mailing to potential customers based on household income, interests, occupation and other variables o Businesses can first test the responsiveness of direct mailing (by sending out a test mailing to a small, representative sample) before committing to the more significant cost of a larger campaign o Direct mailing campaigns are less visible to competitors – it is therefore possible to be more creative, for longer However, direct mail has several weaknesses: 75
  76. 76. o A piece of direct mail is less “interactive” than a television or radio advert, although creative packaging can still stimulate customer response o Lead times to produce direct mailing campaigns can be quite long o There is increasing customer concern with “junk mail” – the receipt of unsolicited mail which often suggests that the right to individual privacy has been breached. 11.5 The Direct marketing database Direct mailing is based on the “mailing list” – a critical part in the direct marketing process. The mailing list is a database which collects together details of past, current and potential customers. A properly managed mailing database enables a business to:  Focus on the best prospective customers  Cross-sell related products  Launch new products to existing customers The Internet and New Media (e.g. mobile phones or PDA's) are perfect for direct marketing. Consumers have never had so many sources of supply, and suppliers have never had access to so many markets. There is even room for niche marketers - for example Scottish salmon could ordered online, packed and chilled, and sent to customers in any part of the world by courier. Many companies use direct marketing, and a current example of its use, as part of a business model, is the way in which it is used by low-cost airlines. There is no intermediary or agent; customers book 76
  77. 77. tickets directly with the airlines over The Internet. Airlines capture data that can be used for marketing research or a loyalty scheme. Information can be processed quickly, and then categorized into complex relational databases. CHAPTER 12 Introduction Personal selling occurs where an individual salesperson sells a product, service or solution to a client. Salespeople match the benefits of their offering to the specific needs of a client. Today, personal selling involves the development of longstanding client relationships. In comparison to other marketing communications tools such as advertising, personal selling tends to: Use fewer resources, pricing is often negotiated. Products tend to be fairly complex (e.g. financial services or new cars). There is some contact between buyer and seller after the sale so that an ongoing relationship is built. Client/prospects need specific information. The purchase tends to involve large sums of money. 77
  78. 78. There are exceptions of course, but most personal selling takes place in this way. Personal selling involves a selling process that is summarized in the following Five Stage Personal Selling Process. The five stages are: 1. Prospecting. 2. Making first contact. 3. The sales call. 4. Objection handling. 5. Closing the sale. 12.1 A Five Stage Personal Selling Process. 12.1.1 Stage One - Prospecting. Prospecting is all about finding prospects, or potential new customers. Prospects should be 'qualified,' which means that they need to be assessed to see if there is business potential, otherwise you could be wasting your time. In order to qualify your prospects, one needs to: • Plan a sales approach focused upon the needs of the customer. • Determine which products or services best meet their needs. • In order to save time, rank the prospects and leave out those that are least likely to buy. 78
  79. 79. 12.1.2 Stage Two - Making First Contact. This is the preparation that a salesperson goes through before they meet with the client, for example via e-mail, telephone or letter. Preparation will make a call more focused. • Make sure that you are on time. • Before meeting with the client, set some objectives for the sales call. What is the purpose of the call? What outcome is desirable before you leave? • Make sure that you've done some homework before meeting your prospect. This will show that you are committed in the eyes of your customer. • To save time, send some information before you visit. This will wet the prospect's appetite. • Keep a set of samples at hand, and make sure that they are in very good condition. • Within the first minute or two, state the purpose of your call so that time with the client is maximized, and also to demonstrate to the client that you are not wasting his or her time. • Humour is fine, but tries to be sincere and friendly. 12.1.3 Stage Three - The Sales Call (or Sales Presentation). It is best to be enthusiastic about your product or service. If you are not excited about it, don't expect your prospect to be excited. 79
  80. 80. Focus on the real benefits of the product or service to the specific needs of your client, rather than listing endless lists of features. Try to be relaxed during the call, and put your client at ease. Let the client do at least 80% of the talking. This will give you invaluable information on your client's needs. Remember to ask plenty of questions. Use open questions, e.g. TED's, and closed questions i.e. questions that will only give the answer 'yes' or the answer 'no.' This way you can dictate the direction of the conversation. Never be too afraid to ask for the business straight off. 12.1.4 Stage Four - Objection Handling. Objection handling is the way in which salespeople tackle obstacles put in their way by clients. Some objections may prove too difficult to handle, and sometimes the client may just take a dislike to you. Here are some approaches for overcoming objections: • Firstly, try to anticipate them before they arise. • 'Yes but' technique allows you to accept the objection and then to divert it. For example, a client may say that they do not like a particular colour, to which the salesperson counters 'Yes but X is also available in many other colours. • Ask 'why' the client feels the way that they do. • 'Restate' the objection, and put it back into the client's lap. For example, the client may say, 'I don't like the taste of X,' to which 80
  81. 81. the salesperson responds, 'You don't like the taste of X,' generating the response 'since I do not like garlic' from the client. The salesperson could suggest that X is no longer made with garlic to meet the client's needs. • The sales person could also tactfully and respectfully contradict the client. 12.1.5 Stage Five - Closing the Sale. This is a very important stage. Often salespeople will leave without ever successfully closing a deal. Therefore it is vital to learn the skills of closing. • Just ask for the business! - 'Please may I take an order?' This really works well. • Look for buying signals (i.e. body language or comments made by the client that they want to place an order). For example, asking about availability, asking for details such as discounts, or asking for you to go over something again to clarify. • Just stop talking, and let the client say 'yes.' Again, this really works. • The 'summary close' allows the salesperson to summaries everything that the client needs, based upon the discussions during the call. For example, 'You need product X in blue, by 81
  82. 82. Friday, packaged accordingly, and delivered to your wife's office.' Then ask for the order. • The 'alternative close' does not give the client the opportunity to say no, but forces them towards a yes. For example 'Do you want product X in blue or red?' Cheeky, but effective. CHAPTER 13 Introduction An increasingly common form of promotional activity is sponsorship. What is sponsorship? Sponsorship can be defined as follows: Supporting an event, activity or organization by providing money or other resources that is of value to the sponsored event. This is usually in return for advertising space at the event or as part of the publicity for the event. There are many kinds of sponsorship: 13.1 Television and radio programmed sponsorship: (E.g. Cadbury’s sponsor broadcasts of Coronation Street). The increasing fragmentation of television in the UK through new digital 82
  83. 83. channels is providing many more opportunities for sponsorship of this kind 13.2 Sports sponsorship: Major sporting events have the advantage of being attended and (more importantly) watched by large numbers of people. They also attract significant media coverage. 13.3 Arts sponsorship: Arts events or organizations are not as well attended as sports events but are often regarded as more “worthy” and more in keeping with the image of certain businesses and brands. 13.4 Educational sponsorship: This can take several forms from the sponsoring of individual students at college through to the provision of books and computers nationwide using the redemption of product or store-related vouchers. 13.5 What is involved in developing a sponsorship promotion? Smith suggests a six-stage process to decide what and how to sponsor: 1. Analyze the current situation: look at which other businesses are sponsoring in the target area. Are competitors already doing this and is it providing them with an advantage? 2. Define the sponsorship objectives: e.g. raise awareness of the brand; build an image; promote a new product 83
  84. 84. 3. Agree the strategy: how does the sponsorship fit in with any other promotional activity? 4. Develop the tactics: agree the details of what to sponsor, price, timing etc 5. Define the target audience 6. Consider what resources are needed to make the sponsorship a success. Sony Corporation is a multinational conglomerate corporation headquartered in Tokyo, Japan, and one of the world's largest media conglomerate with revenue of US$88.7 billion (as of 2008) based in Minato, Tokyo. Sony is one of the leading manufacturers of electronics, video, communications, video game consoles and information technology products for the consumer and professional markets. Its name is derived from Sonus, the Greek goddess of sound. Sony Corporation is the electronics business unit and the parent company of the Sony Group, which is engaged in business through its five operating segments—electronics, games, entertainment (motion pictures and music), financial services and other. These make Sony one of the most comprehensive entertainment companies in the world. Sony's principal business 84
  85. 85. operations include Sony Corporation (Sony Electronics in the U.S.), Sony Pictures Entertainment, Sony Computer Entertainment, Sony BMG Music Entertainment, Sony Ericsson and Sony Financial Holdings. As a semiconductor maker, Sony is among the Worldwide Top 20 Semiconductor Sales Leaders. The company's slogan is Sony like no other. SONY Products The first market mix element is Product. A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a need or want. Product decision normally base on brand name, Functionality, Styling, Quality, Safety, Packaging, Repairs and Support, Warranty, accessories and Services. These product attributes can be manipulated depending on what the target market wants. Also, customers always look for new and improved things, which are why marketers should improve existing products, develop new ones, and discontinue old ones that are no longer needed or wanted by the customer. Sony has a variety of products ranging from electronic devices, games and entertainment. So, briefly Sony products can be categorized in the following major product categories: i. Television and Projectors. ii. Home video. 85
  86. 86. iii. Home Audio. iv. Home Theatre system. v. Digital Photography. vi. Hand cam video camera. vii. Computer Peripheral. viii. Portable Audio. ix. Game. x. In-Car entertainment. xi. Mobile phones. xii. Storage and Recording media. xiii. Batteries and Charger. xiv. Other Accessories. SONY Promotion Brief Introduction: Promotion is a key element of marketing program and is concerned with effectively and efficiently communicating the decisions of marketing strategy, to favorably influence target customers’ perceptions to facilitate exchange between the marketer and the customer that may satisfy the objective of both customer and the company. A company’s promotional efforts are the only controllable means to create awareness among publics about itself, the products 86
  87. 87. and services it offers, their features and influence their attitudes favorably. Sony Marketing Communication Mix: Sony Pakistan will spend Rs 200 crore in this financial year on advertising and promotion (Promotional Budget) of the entire range of consumer electronics, out of which Rs 60 crore will be spent only on digital imaging products. The major elements of promotion mix include advertising, personal selling, sales promotion, direct marketing, and publicity. Sony Corporation has used all of these marketing communication mix elements. Advertising Advertising is any paid form of non-personal mass communication through various media to present and promote product, services and ideas etc. by an identified sponsor. So far, SONY has advertised its products through many different ways and media. Through TV we have seen different advertisements of its products such as Bravia televisions or Sony wega TV. Sony also advertise its products by targeting those favorable television programs, like sports, series and also it has its own channel called Sony TV channel. Also, Sony has advertised its games like Play station 3, Play station 2 and PSP using sports like football in England premiere league. 87
  88. 88. Through newspapers like DAWN, The NEWS, etc. Sony has advertised a wide range of products it offers to its customers. And also through Posters a message has been sent to a lot of people to be aware of the products which Sony offers. Sony also uses direct – response advertising. This is type of advertising that encourages the consumer to respond either by providing feedback to the advertiser or placing the order with the advertiser either by telephone, mail or the internet. Such advertising is done through direct mail or catalogues. Sony incorporates co-operative advertising in its advertising process. Sony Corporation provides the dealers (e.g. Sony World) with the materials and guidelines to develop ads for print, television or radio commercials. This ensures that message is in line with, what the manufacture wants to communicate. The company and the dealers usually share the media costs and hence, the name ‘co-operative advertising’. Sales Promotion Sales promotion is a marketing discipline that utilizes a variety of incentives techniques to structure sales – related programs targeted to customers, trade, and/or sales levels that generate a specific, measurable action or response for a product or service. Sales promotions for example includes free samples, discount, rebates, coupons, contents and sweepstakes, premiums, scratch cards, exchange offers, early bird prizes, etc. 88
  89. 89. Sony has promoted its products through different sales promotional strategies. For example after the release of the Sony BRAVIA television sets, Sony promoted them by earl bird prizes by saying that all BRAVIA full HD LCD TVs purchased during July 2008 and registered within two weeks of purchase qualify for a Bonus Play station 3 as long as the customer claims is one of the first 35,000 received and validated by Sony. Also Sony has promoted its Sony Ericsson P1i phones by including a scratch card which gives the customer the offer to download 10 free software applications for that mobile phone. Sony Ericsson has also promoted its Sony Ericsson K550i Mid-Range Cyber-shot Phone that if you buy it you get a free Bluetooth headset with one year manufacturer’s warranty. Public Relations and Publicity Public relations is a broad set of communication activities employed to create and maintain favorable relationship with employees, shareholders, suppliers, media, educators, potential investors, financial institutions, government agencies and officials and society in general. Through its website, Sony Corporation has its provided contacts for those customers who will be in need of any information from the company. In this way 89