marketing chapter 14

Sales promotion

A fourth promotional element is sales promotion, a short-term inducement of value offered to arouse interest in buying a product or service. Used in conjunction with advertising or personal selling, sales promotions are offered to intermediaries as well as to ultimate consumers. Coupons, rebates, samples, contests, and sweepstakes such as the M&M's promotion are just a few examples of sales promotions discussed later in this chapter.

personal selling

The second major promotional alternative is personal selling, which is the two-way flow of communication between a buyer and seller designed to influence a person's or group's purchase decision. Unlike advertising, personal selling is usually face-to-face communication between the sender and receiver.

direct orders

are the result of offers that contain all the information necessary for a prospective buyer to make a decision to purchase and complete the transaction. Priceline.com, for example, will send PriceBreaker alerts to people in its database. The messages offer discounted fares and rates to customers who can travel on very short notice.

push strategy

directing the promotional mix to channel members to gain their cooperation in ordering and stocking the product. In this approach, personal selling and sales promotions play major roles. Salespeople call on wholesalers to encourage orders and provide sales assistance. Sales promotions, such as case discount allowances (20 percent off the regular case price), are offered to stimulate demand. By pushing the product through the channel, the goal is to get channel members to push it to their customers.

traffic generation

is the outcome of an offer designed to motivate people to visit a business. Home Depot, for example, uses an opt-in e-mail alert to announce special sales that attract consumers to the store. Similarly, Mazda uses direct mail to generate traffic in its dealerships.37

Encoding

is the process of having the sender transform an idea into a set of symbols. Decoding is the reverse, or the process of having the receiver take a set of symbols, the message, and transform the symbols into an idea.

The Product Life Cycle

-All products have a product life cycle and the composition of the promotional mix changes over the four life-cycle stages, as shown in Figure 14-3. -Introduction stage. Providing information to consumers in an effort to increase their level of awareness is the primary promotional objective in the introduction stage of the product life cycle. In general, all the promotional mix elements are used at this time. -Growth stage. The primary promotional objective of the growth stage is to persuade the consumer to buy the product. Advertising is used to communicate brand differences, and personal selling is used to solidify the channel of distribution. -Maturity stage. In the maturity stage the need is to maintain existing buyers. Advertising's role is to remind buyers of the product's existence. Sales promotion, in the form of discounts, coupons, and events, is important in maintaining loyal buyers. -Decline stage. The decline stage of the product life cycle is usually a period of phase-out for the product, and little money is spent in the promotional mix.

methods can be used to set the promotion budget.

-Determining the ideal amount for the budget is difficult because there is no precise way to measure the exact results of spending promotion dollars. -Percentage of sales. In the percentage of sales budgeting approach, the amount of money spent on promotion is a percentage of past or anticipated sales. A common budgeting method,22 this approach is often staged in terms such as "our promotion budget for this year is 3 percent of last year's gross sales." See the Applying Marketing Metrics box for an application of the promotion-to-sales ratio to the soft-drink industry.23 -Competitive parity. Competitive parity budgeting matches the competitor's absolute level of spending or the proportion per point of market share.24 -All you can afford. Common to many businesses, the all-you-can-afford budgeting method allows money to be spent on promotion only after all other budget items—such as manufacturing costs—are covered.25 -Objective and task. The best approach to budgeting is objective and task budgeting, whereby the company (1) determines the promotion objectives, (2) outlines the tasks to accomplish those objectives, and (3) determines the promotion cost of performing those tasks.26

promotional mix

-The promotional element consists of five communication tools, including advertising, personal selling, sales promotion, public relations, and direct marketing. -The combination of one or more of these communication tools is called the promotional mix. -All of these tools can be used to (1) inform prospective buyers about the benefits of the product, (2) persuade them to try it, and (3) remind them later about the benefits they enjoyed by using the product. -In the past, marketers often viewed these communication tools as separate and independent.

public relations

-is a form of communication management that seeks to influence the feelings, opinions, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and other publics about a company and its products or services. - Many tools such as special events, lobbying efforts, annual reports, press conferences, social media (including Facebook and Twitter), and image management may be used by a public relations department, although publicity often plays the most important role

publicity

-is a nonpersonal, indirectly paid presentation of an organization, product, or service. It can take the form of a news story, editorial, or product announcement. A difference between publicity and both advertising and personal selling is the "indirectly paid" dimension. -With publicity a company does not pay for space in a mass medium (such as television or radio) but attempts to get the medium to run a favorable story on the company. In this sense, there is an indirect payment for publicity in that a company must support a public relations staff.

Advertising

-is any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor. -The paid aspect of this definition is important because the space for the advertising message normally must be bought. An occasional exception is the public service announcement, where the advertising time or space is donated. -A full-page, four-color ad in Time magazine, for example, costs $352,500. The nonpersonal component of advertising is also important. Advertising involves mass media (such as TV, radio, and magazines), which are nonpersonal and do not have an immediate feedback loop as does personal selling. -So before the message is sent, marketing research plays a valuable role; for example, it determines that the target market will actually see the medium chosen and that the message will be understood.

decoding

-is performed by the receivers according to their own frame of reference: their attitudes, values, and beliefs. -The North Face is the source and the advertisement is the message, which appeared in Wired magazine (the channel). How would you interpret (decode) this advertisement?

communication

-is the process of conveying a message to others, and it requires six elements: a source, a message, a channel of communication, a receiver, and the processes of encoding and decoding3 (see Figure 14-1). -The source may be a company or person who has information to convey. The information sent by a source, such as a description of a new smartphone, forms the message. -The message is conveyed by means of a channel of communication such as a salesperson, advertising media, or public relations tools. Consumers who read, hear, or see the message are the receivers.

Integrated marketing communications

.-Today, the concept of designing marketing communications programs that coordinate all promotional activities—advertising, personal selling, sales promotion, public relations, and direct marketing—to provide a consistent message across all audiences is referred to as integrated marketing communications (IMC). - By taking consumer expectations into consideration, IMC is a key element in a company's customer experience management strategy.

direct marketing

Another promotional alternative, direct marketing, uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet. The communication can take many forms, including face-to-face selling, direct mail, catalogs, telephone solicitations, direct response advertising (on television and radio and in print), and online marketing

hierarchy of effects

Consumers can be said to respond in terms of a hierarchy of effects, which is the sequence of stages a prospective buyer goes through from initial awareness of a product to eventual action.19 The five stages are: Awareness—the consumer's ability to recognize and remember the product or brand name. Interest—an increase in the consumer's desire to learn about some of the features of the product or brand. Evaluation—the consumer's appraisal of the product or brand on important attributes. Trial—the consumer's actual first purchase and use of the product or brand. Adoption—through a favorable experience on the first trial, the consumer's repeated purchase and use of the product or brand.

pull strategy

by directing its promotional mix at ultimate consumers to encourage them to ask the retailer for a product. Seeing demand from ultimate consumers, retailers order the product from wholesalers and thus the item is pulled through the intermediaries. Pharmaceutical companies, for example, now spend more than $3.8 billion annually on direct-to-consumer prescription drug advertising, to complement traditional personal selling and free samples directed only at doctors.17

lead generation

is the result of an offer designed to generate interest in a product or service and a request for additional information. Four Seasons Hotels now sell private residences in several of their properties and send direct mail to prospective residents asking them to request additional information on the telephone or through a website.