MAR 3023 Exam 4 - Brady

What is Promotion?

The link between manufacturer and the buyer, they are trying to influence the consumer and inform them about the benefits of the product and persuade them to buy the product

Promotion Mix

The levers and strategic tools that companies can use to turn the dial in terms of how you become aware and persuaded of a particular product

Advertising

a paid, non-personal communication about an organization and its products transmitted to a target audience through mass media

Personal Selling

a paid, personal communication that aims to inform customers and persuade them to purchase products in an exchange situation

Public Relations

a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders

Sales Promotion

is an activity or material that acts as a direct inducement offering added value or incentive for the product to resellers, salespeople, or customers; free samples, games, rebates, sweepstakes, contests, premiums, and coupons

Integrated Marketing Communications

Coordination of promotion and marketing efforts for maximum impact

Goals of IMC

Consistent:

-Consistent message to customers

Coordinated:

-Coordinate/manage promotional efforts to be logically connected

Complementary:

-Synchronization to create a greater overall campaign

Continuity:

-Use more precisely targeted promotional tools over time

Two General Promo Strategies

-Push Policy

-Pull Policy

Push Policy

-The firm is targeting someone within the distribution network

-Promoting a product only to the next institution down the marketing channel

-The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers

-Trade shows and personal selling

-Push money: also known as "spiffs". An extra commission paid to retail employees to push products

Pull Policy

-Promoting a product directly to consumers to develop strong demand that pulls products through the marketing channel

-Children's toys

-Ford Australia only produces a car when one is ordered by a customer; Dell did the same thing

Communication Process

-The process that describes the exchange of information between two or more people

-Messages are sent through channels:

letters, email, in person

The Source

-the person or organization that has information to share

-Company

-Salesperson

-Celebrities Q-scores

Q-scores (Celebrities)

-The way celebs get paid for promotions

-Measure of familiarity and liking

-Consumers level of familiarity with a name - % who have heard of her/him

-The number of respondents who indicate that a person, program or character is a favorite

-The score is calculated by dividing the two numbers

-Some argue that Q is better than Nielsen

Encoding

-the process of putting words, thoughts, messages into symbolic form in such a way that they will be understood by the receiver/consumer

- symbols are particularly good for this

The Channel

how the communication travels from the source to the receiver

The Channel Two Types

Nonpersonal channels:

-no personal contact with consumer

-Print, broadcast

Personal channels:

-involves direct contact

-Direct selling

-Salespeople

-WOM

-"Buzz marketing"

Buzz Marketing

-a subset of "viral marketing" wherein companies hire socially active consumers to promote products to their friends, relatives, and acquaintances.

-consumers are typically unaware that the person is on the "payroll"

Decoding

-The process of transforming the message back into thought.

-The key is for the decoded message to resemble the encoded message.

-Problems can occur if there is too much

Noise

-Anything that interferes with or distorts the message

Feedback

-The final piece of the communications process

-The receiver's response to the message.

-Can be difficult to assess

-One way to get feedback from objective sources

Response Methods

Describe the process that receivers must go through before a desired behavior occurs

Each Model has three successive stages:

Cognitive stage:

-the "thinking" stage

-Where the receiver becomes aware of the message

Affective stage:

-the "feeling" stage

-Where the receiver forms a liking or preference for the ad object

Behavioral stage:

-the "doing" stage

-Where the receiver acts on the preference

AIDA Model (attention - interest - desire - action)

-developed for personal selling

-represents the stages a salesperson must take a customer through to induce purchase

What is Advertising?

-A paid form of nonpersonal communication that is transmitted to a target audience through mass media

-Effective advertising can influence customers' purchasing behavior throughout their lifetimes

-Most organizations, even nonprofits, engage in advertising

The First Ads

-Newspaper (1704)

-P&G Ivory Soap (1882 - $11,000)

-Coca-Cola (1886)

-Automobile (1898)

-Radio - Hawthorne Court Apts, Queens, NY (1922)

-Television (1941)

-Banner Ad (1994) - Wired.com

Advertising Mediums

Movies, TV, and Video Games:

-Product placement

-Mentions

-Interactivity

Newspaper, direct mail, magazines:

-Coupons

-Flyers

-Classified ads

Sports:

-Soccer

-Nascar

-Volleyball

Internet

-How many ads does the average American see each day?

3000

Product Advertising

-Promotes the uses, features, and benefits of specific products

Pioneer Advertising

-Focuses on a product category

-Got Milk?, Beef?

Competitive Advertising

-Points out a brand's advantages relative to competing brands

-Three types of competitive ads

1.Comparative

-Compares two or more brands on one or more characteristics

2. Reminder advertising

-Reminds customers of an established brand's characteristics and benefits

3. Reinforcement

-Assures current users they have made the right choice

Advocacy Advertising

-Conveys a firm's position on a public issue

The Next Wave of Advertising

Mobile ads:

-advertisements sent to mobile phones or other wireless devices.

-First mobile ad was sent in 2000

-Now accounts for 2% of the advertising market

Scheduling Advertising

Continuous:

-runs steadily throughout the year

-Good for continuously used products

Flighting:

-runs in spurts

-Heavy/none

-Good for seasonal products

Pulsing:

-a combination

-Runs steadily but with bursts at certain times

Measuring Advertising

Reach:

-The percentage of consumers in the target audience exposed to a particular advertisement in a stated period

Frequency:

-The number of times these targeted consumers are exposed to the advertisement

Measuring Advertising Effectiveness

Pretest/Posttest

Pretest

-Evaluation performed before a campaign begins

-Consumer jury test (on your own)

Posttest

-Evaluation of advertising effectiveness after the campaign

-Recognition

-Aided Recall

-Unaided Recall

Recognition/Recall

Respondents shown a portion of an ad - or sometimes a memorable image and asked:

1. Do you recognize this ad? (recognition measure)

2. Please choose the sponsor of this ad from the following list (aided recall)

3. Please type in the sponsor of this ad (unaided recall measure)

Nielsen Ratings

-An audience measurement system designed to assess the size and composition of TV audiences

-Since there are an estimated 116,000,000 television households in the U.S.

-One ratings point represents 1% of that number - 1.16 million households

-Nielsen traditionally relied on a combination of data from the "audimeter" and consumer diaries.

-there were concerns over the accuracy of the diaries

-Nielsen now uses a "people meter" that has the capability to measure each household member's viewing habits.

-each family member has a separate button that is pushed.

-data are based on a nationwide sample of 10,000 "Nielsen families"

-Nielsen uses a sample of families in 55 markets to produce the overnight ratings

-Nielsen now also produces commercial ratings that measure commercial viewership, adjusted for DVR recordings.

-They measure zipping and zapping

Print Media

-Almost 80% of U.S. households subscribe to or purchase magazines

-The average household purchases 6 magazines per year

-54% of magazine revenues come from ads

-73% of business magazine revenue

Public Relations

-communication efforts used to create and maintain favorable relations between an organization and its stakeholders.

-Starbucks, Palm, Botox, and Segway were successfully launched this way

Publicity

-communication about the organization and/or its products transmitted through mass media at no charge.

-News release

-Feature article

-Captioned photograph

-Press conference

PR vs. Publicity

1. Publicity is more short term whereas PR extends over a period of time.

2. Publicity is largely out of the control of the firm.

Control: Ads.......PR.....Publicity

3. PR is designed to be positive whereas publicity may not be positive.

Tylenol - 1982, cleared the shelves after potassium cyanide poisonings

Perrier - Benzene cover-up in the 1990s

4. Publicity is considered to be more powerful than PR

Personal Selling

-Paid personal communication that informs customers and persuades them to buy products in an exchange situation

Nature of Personal Selling

-Gives marketers greatest freedom to adjust message

-Millions of people earn their living through personal selling

-Varies from firm to firm

GENERAL STEPS IN THE PERSONAL SELLING PROCESS

-Prospecting

-Preapproach

-Approach

-Making the Presentation

-Overcoming Objections

-Closing the Sale

Prospecting

-Developing a list of potential customers

-Names can be found in a variety of sources internal and external to the firm.

-Advertising can generate leads

-Customer referrals are a key source

Five Things for a Prospect to be Qualified:

-Do they need the product?

-Can they afford the product?

-Are they the real decision maker?

-Are they open to talking about the product?

-Are the qualified to buy the product?

Preapproach

Before contacting prospects:

-Identify key decision makers

-Review account histories and problems

-Contact other clients for information

-Assess credit histories and problems

-Prepare sales presentations

-Identify product needs

-Obtain relevant literature

Approach

-The manner in which a salesperson contacts a potential customer

-Important to create a favorable first impression and build rapport with prospective customer

Typical approaches:

-Referral

-Cold Canvassing

-Repeat Contact

Making the Presentation

-Must attract and hold the prospect's attention

-Stimulate interest in and spark a desire for the product.

-Use influencing tactics matched to prospects:

-Information exchange

-Recommendations

-Threats

-Promises, ingratiation and inspirational appeals

Overcoming Objections

-Anticipate and counter them before the prospect raises them

-Handle objections as they arise

-CRC Technique for Handling Objections:

-Clarify

-Respond

-Confirm

Closing the Sale

Closing:

-The stage in the personal selling process when the salesperson asks the prospect to buy the product

-Should be a very natural part of the conversation

Closing Tactics:

-Trial close by asking questions that assume the prospect will buy.

-Attempt to close at several points during the presentation

Types of Salespeople

-Order Getter

-Order Taker

-Support Personnel

Order Getter

-Sells to new customers and increases sales to current customers

• Current-customer

• New-business

Order Taker

-Primarily seeks repeat sales

• Inside sales

• Field sales

Support Personnel

-Staff members who facilitate selling but usually are not involved solely with making sales

• Missionary

• Trade

• Technical

Selected Types of Selling

-Team Selling

-Relationship Selling

Team Selling

-The use of a team of experts from all functional areas of a firm, led by a salesperson, to conduct the personal selling process

Relationship Selling

-The building of mutually beneficial long-term associations with a customer through regular communications over prolonged periods of time

Managing the Sales Force

-Create

-Route/Schedule

-Control/Evaluate

-Establish Objectives

-Determine Size

-Recruit/Select

-Train

-Compensate

-Salary

-Commission

-Combination

Managing Sales Territories

Creating sales territories:

-Measurable sales potential

-Geographic size

Routing and scheduling salespeople:

-Geographic size/shape

-Number of customers

Controlling and Evaluating Sales Force Performance

Information for Managers:

-Call reports

-Customer feedback

-Invoices

Set Sales Objectives/Performance Indicators:

-Calls per day and cost per call

-Average sales per customer and gross profit per customer

-Actual sales vs. sales potential

-Number of new customer orders

Price

-The value paid for a product in a marketing exchange

Not always money:

-Rent

-Tips

-Deposit

-Dues

-Interest

-Taxes

-Tuition

-Premium

-Fine

-Fee

-Fare

-Toll

Barter

the trading of products

Price competition

emphasizing price as an issue and matching or beating competitor's prices

Nonprice competition

-emphasizing factors other than price to distinguish a product from competing brands

-Price is related to total revenue and profit:

Profit = Total Revenue - Total Costs

Profits = (Price x Quantity Sold) - Total Costs

-Price is a good control for demand

-Markup is the difference between the cost of a good and its selling price:

Grocery store markup average: 12%

Gas tends to be 5-15 cents

Pre-Cut Vegetables 40%

Coffee Shop Coffee 2900%

Movie Popcorn 900%

Price Elasticity of Demand

A measure of the sensitivity of demand to changes in price

Elastic Demand

A change in price causes an opposite change in quantity demanded

Elasticity Determinants

-Availability of substitutes:

Electricity versus Coca-Cola

-Percentage of income:

Gum versus a Car

-Necessity

-Time:

Eventually find a substitute/quit smoking/die

-Brand loyalty

Costs

-Crucial component of price.

-Ideally goods are sold above cost, exceptions:

Match competition

Generate cash flow

Increase market share

Break-Even Point

where the costs of producing a product equal the revenue made from selling the product.

Marginal Analysis

Examines what happens to a firm's costs and revenues when production or sales volume changes by one unit.

Marginal cost

an extra cost incurred for producing one more unit of product

Marginal revenue

-change in total revenue when a firm sells one additional unit of product

-To determine cost of production, a firm must distinguish between several types of costs

Fixed Costs

do not vary with change in number of units sold or produced

Average Fixed Costs

is fixed cost per unit produced (Fixed Costs/Units Produced)

Variable Costs

vary directly with changes in the number of units produced or sold

Average Variable Costs

variable cost per unit produced (Variable Costs/Units Produced)

Total Costs

sum of average fixed costs and average variable costs times the quantity produced.

Reference Price

-The price stored in memory that helps to evaluate the actual price:

Serves as an anchor

Frames the purchase price

-Internal Reference Price:

Develops in buyer's mind through experience with product

-External Reference Price:

A comparison price provided by others

Price Strategies: Framing

-Anchoring price for consumers

-"MSRP", Competitor's Price, "You save

Price Strategies: Bundling

-Offering several products for sale in one

"package":

Cable, Phone, High Speed Internet

Microsoft Office

Unbundling

charging separately for previously bundled products/services

General Pricing Strategies

-Skimming

-Penetration

-Neutral

Skimming

-Useful with inelastic demand, early lifecycle stage

-Consulting, Health Care

Penetration

-Useful with elastic demand, long-term focus

-Fast Food, Dry Cleaning

Neutral

-Market-driven, "status quo" strategies

-Airlines, Retail Gas

Pricing Methods: New Products

Pricing Skimming:

-set a relatively high price at first and then lower it over time.

-Popular in electronics category (play station was originally $600)

-Encourages competition

Penetration Pricing:

-set a relatively low price to drive market share/value perceptions.

-Discourages competition

Pricing Methods: Promotional Pricing

Price/Loss Leader:

-selling products at or below cost.

-Low priced, every day products

Special Event Pricing:

-special prices linked to a holiday, season, or event.

-Black Friday

Pricing Methods: Product Line Pricing

Captive Pricing:

-the basic product is sold low; ancillaries (supporting products) are expensive.

-Cell phones / service contract

Price Lining:

-pricing products at several levels; prices are relatively inelastic within the different ranges.

Bait Pricing (a.k.a. "bait and switch"):

-a product is promised at a low price but is either not in stock or a less attractive product is sold.

-Unethical and Illegal

Pricing Methods: Psychological Pricing

Odd-Even Pricing:

-ending prices in odd or non-round numbers.

Best reason: Prices seem lower

-Limited processing capacity: $4.99 is stored in memory as $4.00 or maybe $4.90

-The more specific the price, the more consumers believe it's the lowest price possible

Reference Pricing:

-displaying a moderately priced product next to an expensive one.

EDLP:

-no sales, setting low prices on a consistent basis.

Customary Pricing:

-setting prices at a customary level.

Prestige Pricing

-Prices set at artificially high level to convey prestige or a quality image.

-Black Pearls: nobody would buy when they were first introduced

Online: Variable Pricing

-Retail website often offer different prices to different customers

Differs based on things like:

-Average income in your zip code

-Whether the consumer visited a price comparison site prior to landing on the page

-Whether you're shopping from a Mac (Mac users earn higher incomes)

-Staples, Discover Financial Services, Orbitz, Rosetta Stone, and Home Depot all do this

What is E-Marketing?

-The strategic process of distributing, promoting, pricing products, and discovering the desires of customers using digital media and digital marketing

-Also provides customers with the ability to ask questions, voice complaints, provide preferences

Addressability

-Digital technology makes it possible for visitors to identify themselves before making a purchase

-This "addressable channel" helps marketers address the specific customer needs, as opposed to a generic appeal

Interactivity

-E-marketing is about the conversation

-Interactivity helps marketers focus on high quality relationships