INTRODUCTION TO BUSINESS

CHAPTER FIFTEEN

Of the 4 ingredients in the marketing mix (product, price, place, and promotion), promotion is perhaps the one most often associated with marketing. Although there are no guarantees of success, promotion has a profound impact on a product’s performance in the marketplace.

Promotion is a persuasive communication that motivates people to buy whatever an organization is selling (goods, services, or ideas.) Promotion may take the form of advertising, personal selling, direct marketing, publicity, or sales promotion.

A company’s promotional strategy defines the direction and scope of the promotional activities that will be implemented to meet marketing objectives.

Promotional activities have 3 basic goals

1. To inform – this is the first priority. Potential customers need to know where the item can be found, how much it will cost, and how to use it.

2. To persuade – this motivates people to satisfy their wants in a particular way. Persuasive advertising lets them know how your product will benefit them.

3. To remind – reminding the customer of the product’s availability and benefits; stimulates additional purchases often by using reminder advertising.

Promotional strategy should accomplish specific objectives:

1. Attract new customers

2. Increase usage among existing customers

3. Aid distributors

4. Stabilize sales

5. Boost brand-name recognition

6. Create sales leads

7. Differentiate the product

8. Influence decision makers

The promotional mix has 5 elements:

1. personal selling

2. advertising

3. direct marketing

4. sales promotion

5. public relations

Personal selling involves direct, person-to-person communication, either in person or by phone.

1. Advantages are that it is flexible, allowing for immediate response and adjustment to the individual buyer.

2. A disadvantage is its high cost.

Advertising consists of messages paid for by an identified sponsor and transmitted through a mass-communication medium. It creates product awareness and stimulates demand by bringing a consistent message to a large targeted consumer group economically.

Direct marketing is distributing promotion materials directly to a consumer or business recipient for the purpose of generating:

1. Response in the form of an order

2. Request for further information

3. Visit to a store or other place of business for purchase of a specific product or service

Direct marketing vehicles:

1. Direct mail – include catalogs, brochures, videotapes, disks, and other promotional materials delivered through the U.S. Postal Service and private carriers.

2. Target e-mail – companies are sending e-mails to highly targeted lists of prospects.

3. Telemarketing – selling over the telephone. Several states enacted legislation because this can be intrusive.

4. Internet – marketers can use the Internet’s interactive options to tailor a unique pitch to the individual.

Sales promotion includes a wide range of events and activities designed to stimulate immediate interest in and encourage the purchase of a product or service. The impact of sales promotion activities is often short term.

Public relations encompasses all the nonsales communications that businesses have with their various audiences (communities, investors, industry analysts, government agencies and officials, and the news media.) Companies rely on public relations to build a favorable corporate image and foster positive relations with these groups.

In marketing a product, the seller mixes the various elements of the promotional mix in different proportions, depending on the characteristics of the product and the market.

Product-related factors

1. Nature and appeal of a product – Familiar items can be explained adequately through advertising, but personal selling is required for unfamiliar and sophisticated goods. Direct selling is important in promoting customized services.

2. Position in the life cycle – In the introductory stage they use selective advertising, sales promotion, public relations, and personal selling. In the growth stage they use advertising, sales promotion and personal selling. In the maturity stage they use advertising and sales promotion. In the decline stage promotion starts to taper off.

3. Size and interest of targeted market - In markets with widely disbursed buyers, advertising is the most economical way of communication. In markets with few customers, especially when they are clustered in a small area, personal selling is practical.

4. Competitive situation

5. Cultural differences (if any)

6. Desired market position

7. Need for personal contact in promotion

8. Price of products – Inexpensive items sold to mass markets use advertising and sales promotion. Products with a high unit price need personal selling.

Market-related factors are what the size and concentration of the market are and whether efforts are focused on the market intermediaries or final consumers.

1. A push strategy is used if the focus is on the market intermediaries to persuade wholesale and retail vendors to carry the item.

2. A pull strategy is used if the focus is on the end user to appeal directly to the ultimate customer using advertising, direct mail, contests, and discount coupons.

Combining methods – Most companies use a combination of methods, often relying on advertising and public relations to build awareness and interest, following up with personal selling to complete the sale.

Personal selling is the dominant form of promotional activity and the most costly. Most companies spend twice as much on personal selling as on all other marketing activities combined. Sales force automation and new technologies are relieving salespeople of nonproductive tasks, making the time they spend with customers more efficient and profitable.

Types of sales personnel

1. Order getters are responsible for generating new sales and for increasing sales to existing customers. This is sometimes called creative selling because is requires determining what the customer needs, and persuading the customer to buy.

2. Order takers do little creative selling, but are available to take orders. Recently, some companies are encouraging order takers to act more like order getters.

3. Sales support personnel facilitate the selling effort by providing a variety of services such as prospecting, educating prospects, and providing service after the sale.

a. Missionary salespeople are employed by manufacturers to disseminate information about new products to existing customers (usually wholesalers and retailers.)

b. Technical salespeople are usually engineers and scientists or those who have specialized technical training to provide help to salespeople. They are often needed by companies that sell sophisticated medical equipment or computers.

c. Trade salespeople sell to and support marketing intermediaries and give in-store demonstrations, set up displays, offer samples to customers, and obtain more shelf space.

Creative selling is not a simple task. Some sales are completed in a short time, others may take years. Salespeople should follow a carefully planned process.

1. Prospecting is the process of finding and qualifying potential customers. It involves

A. Generating sales leads – names of individuals and organizations that might be likely prospects for the company’s products.

B. Identifying prospects – potential customers who indicate a need or a desire for the seller’s product.

C. Qualifying prospects – the process of figuring out which prospects have both the authority and the available money to buy.

2. Preparing is the creation of a prospect file including the names of key people, their role in decision making, and various other information on needs, current sources, and income level. Establishing specific objectives for the sales call is an important part of preparation.

3. Approaching is contacting the prospect by telephone, by letter, or in person.

4. Making the presentation is the most crucial step in the process whose purpose is to personally communicate a product message in a way that meets the objectives.

A. A canned approach is based on a memorized presentation.

B. The need satisfaction approach focuses on identifying the customer’s needs and creating a presentation that meets those needs.

5. Handling objections is the step in the process that addresses the problems the prospect has with the product.

6. Closing is the stage of the selling process during which you persuade the prospect to place an order. Asking for the order may use one of the following techniques

A. Alternative-proposal close asks the prospect to choose between two minor details.

B. Assumptive close simply proceeds with processing the order.

C. Silent close in which you finish the presentation and wait quietly for a decision.

D. Direct close is when you just come right out and ask for the order.

7. Following up is making sure that the order has been filled properly and that the customer is satisfied.

Advertising creates product awareness and stimulates consumer demand. It not only determines what we buy, but it shapes our views of the world.

1. It is the best form of promotion for reaching mass audiences quickly at a low per-person cost.

2. It gives the organization the greatest control over the message.

Advertising promotes goods, services, or ideas, using a full range of creative approaches and media to convey your message. Ads must conform to the law, as well as the ethical and moral standards of the medium and trade associations.

The Federal Trade Commission and other government agencies have passed strict rules and regulations to limit promotional abuse.

1. All statements of fact must be supported by evidence.

2. Sellers must not create an overall impression that is incorrect.

3. Most states regulate promotional practices of certain businesses, such as liquor stores, stock brokerages, employment agencies, and loan companies.

4. The National Advertising Review Board investigates complaints of deceptive advertising.

Advertising may be classified in various ways depending on its purpose, sponsor, or audience.

1. Product advertising tries to sell specific goods or services; generally describes the product’s features and may mention its price.

A. Competitive advertising is that which specifically highlights how a product is better than its competitor’s product.

B. Comparative advertising is a form of competitive ad that directly contrasts two or more specific products.

2. Institutional advertising, also known as corporate advertising, is designed to create goodwill and build a desired image for a company rather that to sell specific products.

A. Green marketing – image of companies as corporate conservationists.

B. Corporate advertising – promotes an entire line of a company’s products.

C. Advocacy advertising – institutional ads that address public issues.

3. National advertising is sponsored by companies that sell products nationwide; it creates general demand.

4. Local advertising is sponsored by a local merchant to provide details such as availability and price.

5. Cooperative advertising is a financial arrangement in which companies with products sold nationally share the costs of local advertising with local merchants and wholesalers.

6. Word-of-mouth advertising

7. Buzz marketing – companies seek out trendsetters in communities and subtly push them into talking up a brand or product to friends and admirers.

8. Stealth advertising – A commercial message that sneaks up on consumers where they least expect it (movie characters driving particular makes of cars or drinking specific drinks.)

Advertising uses 4 appeals

1. Logical appeal

A. Discussing price or product value

B. Promising to give buyers more for their money

C. Highlighting product benefits

2. Emotional appeal

A. Range from the most syrupy and sentimental to the downright terrifying

B. Companies try to convince you of how good it will feel to use their product

3. Celebrity appeal

A. People will be more inclined to use products endorsed by a celebrity because they will identify with and want to be like the celebrity

B. Celebrity ads are not always successful

4. Sex appeal

A. Goal is to have the audience associate the product with pleasure

B. Has to be used with caution

C. Attempts to present a sexy image may cross the line, offending some readers and viewers

Direct marketing has become the promotion tool of choice for many companies because it enables them to more precisely target and personalize messages to specific consumer and business segments and build long-term customer relationships. The most popular direct marketing vehicles are:

1. Direct mail is advertisements sent directly to potential customers, usually through the U.S. Postal Service. Mailing out samples and promotional information is effective, but printing and mailing can be costly.

2. Targeted e-mail sent to highly targeted lists of prospects. It is a cost-efficient way to reach potential and existing customers.

A. Impressive response rates

B. Ability to gauge how many people open and forward the e-mail

C. Whether or not they click through to the Web site

D. Some consumers look at it as a form of spam

3. Telemarketing uses the telephone to make sales calls. It is a low-cost efficient way to reach many people. Federal “Do not call list” bans companies from calling numbers on the list for five years, and violators could be fined up to $11,000 per call. Companies are required to reveal their phone numbers on Caller ID systems.

4. Television infomercials are long, informative commercials that have the appearance of regular programs.

5. Web advertising

A. Track the exact information accessed by any particular visitor to their website.

B. Develop a profile for each of their regular visitors.

C. Present information that may be of special interest to a particular visitor by customizing the webpage based on the user’s profile.

D. Alert customers to special savings or remind them of past purchases.

E. Banner ads

F. Advantages

1) Timeliness

2) Reach

3) Cost

4) Interactive options

G. Disadvantages

1) Many web surfers ignore banner ads or click away to another website.

2) Web surfers may spend 5 to 10 seconds before clicking to another web page.

Media are channels of communication used to convey the message to the audience. The media plan specifies the advertising budget, establishes how the money will be split among alternative media, and indicates exactly when the advertisements will appear.

The media mix is the combination of print, broadcast, and other media for the advertising campaign.

1. First, the characteristics of the target audience and the types of media that will reach it are determined.

2. The choice of media is also determined by what it is expected to do.

3. Second step is to choose specific vehicles in each of the media categories.

Sales promotion covers a wide variety of activities and events designed to stimulate immediate interest in and encourage the purchase of the product or service. Sales promotion may be divided into two basic categories

1. Consumer promotion – aimed at the final consumer

2. Trade promotion – aimed at wholesalers and retailers

Consumer promotion is aimed at the final user.

1. Coupons aim to spur sales by offering a discount through redeemable coupons. It is the biggest category of consumer promotion.

2. Samples are one of the best ways to get consumers to try a new product, encourage nonusers to try an existing product, encourage current buyers to use the product in a new way, or expand distribution into new areas.

3. Specialty advertising is advertising on coffee mugs, pens, calendars, etc.

4. Premiums are items offered free or at a bargain price to encourage the consumer to try a product.

5. Point-of-purchase displays are devices used to show a product in a way that stimulates immediate sales. It may be an end-of-aisle display in a supermarket or the computerized kitchen design systems for cabinets in building-supply stores.

6. Special event sponsorship has become one of the most popular types of sales promotion.

7. Cross-promotion uses one brand to promote another non-competing brand as in McDonald’s bundling with beanie babies.

8. Rebates – buyers generally get reimbursement checks from the manufacturer by submitting proofs of purchase along with a prepared manufacturer’s rebate form.

Trade promotions are efforts to induce distributors and retailers to push a product.

1. Trade allowances are discounts on the usual price of merchandise that enables the distributor or retailer to pass on a price cut to the ultimate consumer and, at the same time, earn a higher profit margin. It leads to the controversial practice of forward buying, or stocking up while the price is low.

2. Other trade promotions include dealer contests or sweepstakes, and travel bonus programs.

Smart companies know they need to maintain positive relations with their communities, investors, industry analysts, government agencies, and the news media.

1. Companies seek favorable publicity to create interest in their products.

2. Companies with a good public image are more attractive to investors.

3. Press relations refers to the process of communicating with reporters and editors from newspapers, magazines, and broadcast media.

4. News or press releases are brief statements released to the media announcing new products, management changes, sales performance, and other potential news items.

5. Video news release is a brief video clip sent to television stations.

6. News conferences are meetings arranged to announce new information; they allow for questions by the media.