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MGT301 - Principles of Marketing - Lecture Handout 32

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Lesson overview and learning objectives:

This Lesson is about integrating the firm’s marketing communication in order to generate synergies between the various elements of communications package. It gives an overview of integrated marketing communication, communication process, different methods to set promotional budget and various promotional tools.

PROMOTION THE 4TH P OF MARKETING MIX

A. The Marketing Communications

The Marketing Communications

Modern marketing calls for more than just developing a good product, pricing it attractively, and making it available to target customers. Companies must also communicate with current and prospective customers, and what they communicate should not be left to chance. For most companies, the question is not whether to communicate, but how much to spend and in what ways. All of their communications efforts must be blended into a consistent and coordinated communications program. As shown in the fig, completion of marketing process requires something of value with both producer and customer that should be communicated with each other for performing the exchange process.

B. The Marketing Communications Mix.

A company's total marketing communications mix—also called its promotion mix consists of the specific blend of advertising, personal selling, sales promotion, public relations, and directmarketing tools that the company uses to pursue its advertising and marketing objectives.
Definitions of the five major promotion tools follow:
Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

Personal selling: Personal presentation by the firm's sales force for the purpose of making sales and building customer relationships.

Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service.

Public relations: Building good relations with the company's various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.

Direct marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships—the use of telephone, mail, fax, e-mail, the Internet, and other tools to communicate directly with specific consumers. Each category involves specific tools. For example, advertising includes print, broadcast, outdoor, and other forms. Personal selling includes sales presentations, trade shows, and incentive programs. Sales promotion includes point-of-purchase displays, premiums, discounts, coupons, specialty advertising, and demonstrations. Direct marketing includes catalogs, telemarketing, fax, kiosks, the Internet, and more. Thanks to technological breakthroughs, people can now communicate through traditional media (newspapers, radio, telephone, television), as well as through newer media forms (fax machines, cellular phones, pagers, and computers). The new
technologies have encouraged more companies to move from mass communication to more targeted communication and one-to-one dialogue.

C. Integrated Marketing Communications

During the past several decades, companies around the world have perfected the art of mass marketing—selling highly standardized products to masses of customers. In the process, they have developed effective mass-media advertising techniques to support their mass-marketing strategies.
These companies routinely invest immense amount of money in the mass media, reaching tens of millions of customers with a single ad. However, as we move into the twenty-first century, marketing managers face some new marketing communications realities.

D. The Changing Communications Environment

Two major factors are changing the face of today's marketing communications. First, as mass markets have fragmented, marketers are shifting away from mass marketing. More and more, they are developing focused marketing programs designed to build closer relationships with customers in more narrowly defined micro markets. Second, vast improvements in information technology are speeding the movement toward segmented marketing. Today's information technology helps marketers to keep closer track of customer needs—more information about consumers at the individual and household levels is available than ever before. New technologies also provide new communications avenues for reaching smaller customer segments with more tailored messages. The shift from mass marketing to segmented marketing has had a dramatic impact on marketing communications. Just as mass marketing gave rise to a new generation of mass-media communications, the shift toward one-to-one marketing is spawning a new generation of more specialized and highly targeted communications efforts.
Given this new communications environment, marketers must rethink the roles of various media and promotion mix tools. Mass-media advertising has long dominated the promotion mixes of consumer product companies. However, although television, magazines, and other mass media remain very important, their dominance is now declining. Market fragmentation has resulted in media fragmentation—in an explosion of more focused media that better match today's targeting strategies. More generally, advertising appears to be giving way to other elements of the promotion mix. In the glory days of mass marketing, consumer product companies spent the lion's share of their promotion budgets on mass-media advertising. Today, media advertising captures only about 26 percent of total promotion spending. The rest goes to various sales promotion activities, which can be focused more effectively on individual consumer and trade segments. They are using a richer variety of focused communication tools in an effort to reach their diverse target markets. In all, companies are doing less broadcasting and more narrowcasting.

E. The Need for Integrated Marketing Communications

The shift from mass marketing to targeted marketing, and the corresponding use of a richer mixture of communication channels and promotion tools, poses a problem for marketers. Consumers are being exposed to a greater variety of marketing communications from and about the company from a broader array of sources. However, customers don't distinguish between message sources the way marketers do. In the consumer's mind, advertising messages from different media such as television, magazines, or online sources blur into one. Messages delivered via different promotional approaches—such as advertising, personal selling, sales promotion, public relations, or direct marketing—all become part of a single message about the company. Conflicting messages from these different sources can result in confused company images and brand positions.

All too often, companies fail to integrate their various communications channels. The result is a hodgepodge of communications to consumers. Mass advertisements say one thing, a price promotion sends a different signal, a product label creates still another message, company sales literature says something altogether different, and the company's Web site seems out of sync with everything else.
The problem is that these communications often come from different company sources. Advertising messages are planned and implemented by the advertising department or advertising agency. Sales management develops personal selling communications. Other functional specialists are responsible for public relations, sales promotion, direct marketing, online sites, and other forms of marketing communications. Recently, such functional separation has been a major problem for many companies and their Internet communications activities, which are often split off into separate organizational units. In the past, no one person was responsible for thinking through the communication roles of the various promotion tools and coordinating the promotion mix. Today, however, more companies are adopting the concept of integrated marketing communications (IMC).
The IMC solution calls for recognizing all contact points where the customer may encounter the company, its products, and its brands. Each brand contact will deliver a message, whether good, bad, or indifferent. The company must strive to deliver a consistent and positive message at all contact points.
Integrated marketing communications produces better communications consistency and greater sales impact. It places the responsibility in someone's hands—where none existed before—to unify the company's image as it is shaped by thousands of company activities. It leads to a total marketing communication strategy aimed at showing how the company and its products can help customers solve their problems.

F. A View of the Communication Process

Integrated marketing communications involves identifying the target audience and shaping a wellcoordinated promotional program to elicit the desired audience response. Too often, marketing communications focus on overcoming immediate awareness, image, or preference problems in the target market. But this approach to communication has limitations: It is too short term and too costly, and most messages of this type fall on deaf ears. Today, marketers are moving toward
viewing communications as managing the customer relationship over time, during pre-selling, selling, consuming, and post consumption stages. Because customers differ, communications programs need to be developed for specific segments, niches, and even individuals. Given the new interactive communications technologies, companies must ask not only "How can we reach our customers?" but also "How can we find ways to let our customers reach us?"
Thus, the communications process should start with an audit of all the potential contacts target customers may have with the company and its brands. For example, someone purchasing a new computer may talk to others, see television ads, read articles and ads in newspapers and magazines, visit various Web sites, and try out computers in one or more stores. The marketer needs to assess the influence that each of these communications experiences will have at different stages of the buying process.

A View of the Communication Process

To communicate effectively, marketers need to understand how communication works. Communication involves the nine elements shown in Figure. Two of these elements are the major parties in a communication—the sender and the receiver. Another two are the major communication tools— the message and the media. Four more are major communication functions—encoding, decoding, response, and feedback. The last element is noise in the system.

  • Sender: The party sending the message to another party.
  • Encoding: The process of putting thought into symbolic form.
  • Message: The set of symbols that the sender transmits
  • Media: The communication channels through which the message moves from sender to receiver
  • Decoding: The process by which the receiver assigns meaning to the symbols encoded by the sender.
  • Receiver: The party receiving the message sent by another party
  • Response: The reactions of the receiver after being exposed to the message—any of hundreds of possible responses
  • Feedback: The part of the receiver's response communicated back to the sender
  • Noise: The unplanned static or distortion during the communication process, which results in the receiver's getting a different message than the one the sender sent.

For a message to be effective, the sender's encoding process must mesh with the receiver's decoding process. Thus, the best messages consist of words and other symbols that are familiar to the receiver. The more the sender's field of experience overlaps with that of the receiver, the more effective the message is likely to be. Marketing communicators may not always share their consumer's field of experience. For example, an advertising copywriter from one social stratum might create ads for consumers from another stratum—say, blue-collar workers or wealthy business owners. However, to communicate effectively, the marketing communicator must understand the consumer's field of experience.
This model points out several key factors in good communication. Senders need to know what audiences they wish to reach and what responses they want. They must be good at encoding messages that take into account how the target audience decodes them. They must send messages through media that reach target audiences, and they must develop feedback channels so that they can assess the audience's response to the message.

G. Steps in Developing Effective Communication

We now examine the steps in developing an effective integrated communications and promotion program. The marketing communicator must do the following: Identify the target audience; determine the communication objectives; design a message; choose the media through which to send the message; select the message source; and collect feedback.

e. Identifying the Target Audience

A marketing communicator starts with a clear target audience in mind. The audience may be potential buyers or current users, those who make the buying decision or those who influence it. The audience may be individuals, groups, special publics, or the general public. The target audience will heavily affect the communicator's decisions on what will be said, how it will be said, when it will be said, where it will be said, and who will say it.

f. Determining the Communication Objectives

Once the target audience has been defined, the marketing communicator must decide what response is sought. Of course, in many cases, the final response is purchase. But purchase is the result of a long process of consumer decision making. The marketing communicator needs to know where the target audience now stands and to what stage it needs to be moved. The target audience may be in any of six buyer-readiness stages, the stages consumers normally pass through
on their way to making a purchase. These stages include awareness, knowledge, liking, preference, conviction, and purchase (see Figure ).
The marketing communicator's target market may be totally unaware of the product, know only its name, or know one or a few things about it. The communicator must first build awareness and knowledge. Of course, marketing communications alone cannot create positive feelings and purchases for productar itself must provide superior value for the customer. In fact, outstanding marketing communications can actually speed the demise of a poor product. The more quickly potential buyers learn about the poor product, the more quickly they become aware of its faults.
Thus, good marketing communication calls for "good deeds followed by good words."

g. Designing a Message

Having defined the desired audience response, the communicator turns to developing an effective message. Ideally, the message should get Attention, hold Interest, arouse Desire, and obtain Action (a framework known as the AIDA model). In practice, few messages take the consumer all the way from awareness to purchase, but the AIDA framework suggests the desirable qualities of a good message. In putting the message together, the marketing communicator must decide what to say (message content) and how to say it (message structure and format).

h. Message Content

The communicator has to figure out an appeal or theme that will produce the desired response. There are three types of appeals: rational, emotional, and moral. Rational appeals relate to the audience's self-interest. They show that the product will produce the desired benefits. Examples are messages showing a product's quality, economy, value, or performance. Emotional appeals attempt to stir up either negative or positive emotions that can motivate purchase. Communicators may use positive emotional appeals such as love, pride, joy, and humor.

i. Message Structure

The communicator must also decide how to handle three message structure issues. The first is whether to draw a conclusion or leave it to the audience. Early research showed that drawing a conclusion was usually more effective. More recent research, however, suggests that in many cases the advertiser is better off asking questions and letting buyers come to their own conclusions. The second message structure issue is whether to present a one-sided argument (mentioning only the product's strengths) or a two-sided argument (touting the product's strengths while also admitting
its shortcomings). Usually, a one-sided argument is more effective in sales presentations—except when audiences are highly educated or likely to hear opposing claims, or when the communicator has a negative association to overcome.

j. Message Format

The marketing communicator also needs a strong format for the message. In a print ad, the communicator has to decide on the headline, copy, illustration, and color. To attract attention, advertisers can use novelty and contrast; eye-catching pictures and headlines; distinctive formats; message size and position; and color, shape, and movement. If the message is to be carried over the radio, the communicator has to choose words, sounds, and voices. The "sound" of an announcer promoting banking services should be different from one promoting quality furniture.

If the message is to be carried on television or in person, then all these elements plus body language have to be planned. Presenters plan their facial expressions, gestures, dress, posture, and hairstyle. If the message is carried on the product or its package, the communicator has to watch texture, scent, color, size, and shape.

k. Choosing Media

The communicator now must select channels of communication. There are two broad types of communication channels—personal and nonpersonal.

Personal Communication Channels

In personal communication channels, two or more people communicate directly with each other. They might communicate face to face, over the telephone, through the mail, or even through an Internet "chat." Personal communication channels are effective because they allow for personal addressing and feedback.
Some personal communication channels are controlled directly by the company. For example, company salespeople contact buyers in the target market. But other personal communications about the product may reach buyers through channels not directly controlled by the company. These might include independent experts—consumer advocates, consumer buying guides, and others—making statements to target buyers. Or they might be neighbors, friends, family members, and associates talking to target buyers. This last channel, known as word-of-mouth influence, has considerable effect in many product areas.
Personal influence carries great weight for products that are expensive, risky, or highly visible. For example, buyers of automobiles and major appliances often go beyond mass-media sources to seek the opinions of knowledgeable people.
Companies can take steps to put personal communication channels to work for them. For example, they can create opinion leaders—people whose opinions are sought by others—by supplying certain people with the product on attractive terms. For instance, they can work through community members such as local radio personalities, class presidents, and heads of local organizations. They can use influential people in their advertisements or develop advertising that has high "conversation value."

Nonpersonal Communication Channels

Nonpersonal communication channels are media that carry messages without personal contact or feedback. They include major media, atmospheres, and events. Major media include print media (newspapers, magazines, direct mail), broadcast media (radio, television), display media (billboards, signs, posters), and online media (online services, Web sites). Atmospheres are designed environments that create or reinforce the buyer's leanings toward buying a product. Thus, lawyers' offices and banks are designed to communicate confidence and other qualities that might be valued by their clients. Events are staged occurrences that communicate messages to target audiences. For example, public relations departments arrange press conferences, grand openings, shows and exhibits, public tours, and other events.
Nonpersonal communication affects buyers directly. In addition, using mass media often affects buyers indirectly by causing more personal communication. Communications first flow from television, magazines, and other mass media to opinion leaders and then from these opinion leaders to others. Thus, opinion leaders step between the mass media and their audiences and carry messages to people who are less exposed to media. This suggests that mass communicators should aim their messages directly at opinion leaders, letting them carry the message to others.

l. Selecting the Message Source

In either personal or nonpersonal communication, the message's impact on the target audience is also affected by how the audience views the communicator. Messages delivered by highly credible sources are more persuasive. Thus, marketers hire celebrity endorsers—well-known athletes, actors, and even cartoon characters—to deliver their messages. Many food companies promote to doctors, dentists, and other health care providers to motivate these professionals to recommend their products to patients.

m. Collecting Feedback

After sending the message, the communicator must research its effect on the target audience. This involves asking the target audience members whether they remember the message, how many times they saw it, what points they recall, how they felt about the message, and their past and present attitudes toward the product and company. The communicator would also like to measure behavior resulting from the message—how many people bought a product, talked to others about it, or visited the store.
Feedback on marketing communications may suggest changes in the promotion program or in the product offer itself.

H. Setting the Total Promotion Budget

One of the hardest marketing decisions facing a company is how much to spend on promotion. How does a company decide on its promotion budget? We look at four common methods used to set the total budget for advertising: the affordable method, the percentage-of-sales method, the competitiveparity method, and the objective-and-task method.

a. Affordable Method

Some companies use the affordable method: They set the promotion budget at the level they think the company can afford. Small businesses often use this method, reasoning that the company cannot spend more on advertising than it has. They start with total revenues, deduct operating expenses and capital outlays, and then devote some portion of the remaining funds to advertising. Unfortunately, this method of setting budgets completely ignores the effects of promotion on sales. It tends to place advertising last among spending priorities, even in situations in which advertising is critical to the firm's success. It leads to an uncertain annual promotion budget, which makes long-range market planning difficult. Although the affordable method can result in overspending on advertising, it more often results in under spending.

b. Percentage-of-Sales Method

Other companies use the percentage-of-sales method, setting their promotion budget at a certain percentage of current or forecasted sales. Or they budget a percentage of the unit sales price. The percentage-of-sales method has advantages. It is simple to use and helps management think about the relationships between promotion spending, selling price, and profit per unit.
Despite these claimed advantages, however, the percentage-of-sales method has little to justify it. It wrongly views sales as the cause of promotion rather than as the result. "A study in this area found good correlation between investments in advertising and the strength of the brands concerned— but it turned out to be effect and cause, not cause and effect. . . . The strongest brands had the highest sales and could afford the biggest investments in advertising!" Thus, the percentage-ofsales budget is based on availability of funds rather than on opportunities. It may prevent the increased spending sometimes needed to turn around falling sales. Because the budget varies with year-to-year sales, long-range planning is difficult. Finally, the method does not provide any basis for choosing a specific percentage, except what has been done in the past or what competitors are doing.

c. Competitive-Parity Method

Still other companies use the competitive-parity method, setting their promotion budgets to match competitors' outlays. They monitor competitors' advertising or get industry promotion spending estimates from publications or trade associations, and then set their budgets based on the industry average.
Two arguments support this method. First, competitors' budgets represent the collective wisdom of the industry. Second, spending what competitors spend helps prevent promotion wars. Unfortunately, neither argument is valid. There are no grounds for believing that the competition has a better idea of what a company should be spending on promotion than does the company itself. Companies differ greatly, and each has its own special promotion needs. Finally, there is no
evidence that budgets based on competitive parity prevent promotion wars.

d. Objective-and-Task Method

The most logical budget-setting method is the objective-and-task method, whereby the company sets its promotion budget based on what it wants to accomplish with promotion. This budgeting method entails (1) defining specific promotion objectives, (2) determining the tasks needed to achieve these objectives, and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget.
The objective-and-task method forces management to spell out its assumptions about the relationship between amount spent and promotion results. But it is also the most difficult method to use. Often, it is hard to figure out which specific tasks will achieve specific objectives. What specific advertising messages and media schedules should be used to attain this objective? How much would these messages and media schedules cost?

I. Setting the Overall Promotion Mix

The company now must divide the total promotion budget among the major promotion tools— advertising, personal selling, sales promotion, public relations, and direct marketing. The concept of integrated marketing communications suggests that it must blend the promotion tools carefully into a coordinated promotion mix. But how does the company determine what mix of promotion tools it will use? Companies within the same industry differ greatly in the design of their promotion mixes. We now look at factors that influence the marketer's choice of promotion tools.

a. The Nature of Each Promotion Tool

Each promotion tool has unique characteristics and costs. Marketers must understand these characteristics in selecting their tools.

Advertising

Advertising can reach masses of geographically dispersed buyers at a low cost per exposure, and it enables the seller to repeat a message many times. For example, television advertising can reach huge audiences. Beyond its reach, large-scale advertising says something positive about the seller's size, popularity, and success. Because of advertising's public nature, consumers tend to view advertised products as more legitimate. Advertising is also very expressive—it allows the company to dramatize its products through the artful use of visuals, print, sound, and color. Advertising also has some shortcomings. Although it reaches many people quickly, advertising is impersonal and cannot be as directly persuasive as company salespeople. For the most part, advertising can carry on only a one-way communication with the audience, and the audience does not feel that it has to pay attention or respond. In addition, advertising can be very costly. Although some advertising forms, such as newspaper and radio advertising, can be done on smaller budgets, other forms, such
as network TV advertising, require very large budgets.

Personal Selling

Personal selling is the most effective tool at certain stages of the buying process, particularly in building up buyers' preferences, convictions, and actions. It involves personal interaction between two or more people, so each person can observe the other's needs and characteristics and make quick adjustments. Personal selling also allows all kinds of relationships to spring up, ranging from a matter-of-fact selling relationship to personal friendship. The effective salesperson keeps the customer's interests at heart in order to build a long-term relationship. Finally, with personal selling
the buyer usually feels a greater need to listen and respond, even if the response is a polite "no thank you."
These unique qualities come at a cost, however. A sales force requires a longer-term commitment than does advertising—advertising can be turned on and off, but sales force size is harder to change

Sales Promotion

Sales promotion includes a wide assortment of tools—coupons, contests, cents-off deals, premiums, and others—all of which have many unique qualities. They attract consumer attention, offer strong incentives to purchase, and can be used to dramatize product offers and to boost sagging sales. Sales promotions invite and reward quick response—whereas advertising says, "Buy our product," sales promotion says, "Buy it now." Sales promotion effects are often short lived,
however, and often are not as effective as advertising or personal selling in building long-run brand preference.

Public Relations

Public relations are very believable—news stories, features, and events seem more real and believable to readers than ads do. Public relations can also reach many prospects who avoid salespeople and advertisements—the message gets to the buyers as "news" rather than as a salesdirected communication. As with advertising, public relations can dramatize a company or product.
Marketers tend to under use public relations or to use it as an afterthought. Yet a well-thought-out public relations campaign used with other promotion mix elements can be very effective and economical.

Direct Marketing

Although there are many forms of direct marketing— telemarketing, direct mail, electronic marketing, online marketing, and others—they all share four distinctive characteristics. Direct marketing is nonpublic: The message is normally addressed to a specific person. Direct marketing also is immediate and customized: Messages can be prepared very quickly, and they can be tailored to appeal to specific consumers. Finally, direct marketing is interactive: It allows a dialogue between the marketing and the consumer, and messages can be altered depending on the consumer's response.
Thus, direct marketing is well suited to highly targeted marketing efforts and to building one-toone customer relationships.

b. Promotion Mix Strategies

Marketers can choose from two basic promotion mix strategies—push promotion or pull promotion. Figure 14.4 contrasts the two strategies. The relative emphasis on the specific promotion tools differs for push and pulls strategies. A push strategy involves "pushing" the product through distribution channels to final consumers. The producer directs its marketing activities (primarily personal selling and trade promotion) toward channel members to induce them to carry the product and to promote it to final consumers. Using a pull strategy, the producer directs its marketing activities (primarily advertising and consumer promotion) toward final consumers to induce them to buy the product. If the pull strategy is effective, consumers will then demand the product from channel members, who will in turn demand it from producers. Thus, under a pull strategy, consumer demand "pulls" the product through the channels.

Promotion Mix Strategies

Some small industrial goods companies use only push strategies; some direct-marketing companies use only pull. However, most large companies use some combination of both. Companies consider many factors when developing their promotion mix strategies, including type of product–market and the product life-cycle stage. For example, the importance of different promotion tools varies between consumer and business markets. Consumer goods companies usually "pull" more, putting more of their funds into advertising, followed by sales promotion, personal selling, and then public relations. In contrast, business-to-business marketers tend to "push" more, putting more of their funds into personal selling, followed by sales promotion, advertising, and public relations. In general, personal selling is used more heavily with expensive and risky goods and in markets with fewer and larger sellers.
The effects of different promotion tools also vary with stages of the product life cycle. In the introduction stage, advertising and public relations are good for producing high awareness, and sales promotion is useful in promoting early trial. Personal selling must be used to get the trade to carry the product. In the growth stage, advertising and public relations continue to be powerful influences, whereas sales promotion can be reduced because fewer incentives are needed. In the mature stage, sales promotion again becomes important relative to advertising. Buyers know the brands, and advertising is needed only to remind them of the product. In the decline stage, advertising is kept at a reminder level, public relations is dropped, and salespeople give the product only a little attention. Sales promotion, however, might continue strong.

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