CHAPTER 15: MARKETING COMMUNICATIONS

Promotion – communication by marketers that informs, persuades, reminds, and

connects with potential buyers of a product. Data and data analytics help determin

how marketers distribute funding among their promotional mix tactics.

Promotional Mix - A combination of promotion tools used to

reach the target market and fulfill the organization’s overall

objectives. The promotional mix includes:

Advertising

Public Relations

Personal Selling

Sales Promotion

Direct Marketing (includes social media)

The Role of Promotion

• Seeks to modify behavior and thoughts in some way
• Promotion can perform one or more of four tasks, sometimes simultaneously:
  • Infom the target audience
  • Persuade the target audience
  • Remind the target audience
  • Connect with the audience

Informative Promotion

• create/increase awareness
• Explain how product works
• Suggest new uses (repositioning)
• Generally more prevalent during the early stages of the product life cycle
• Important for promoting complex and technical products such as automobiles, computers, and investment services

Persuasive Promotion - simulate a purchase or an action

• Typically used during the growth stage, when the target market is already aware of how the product can fulfill its wants
• Messaging emphasizes the product's real and perceived competitive advantages
• Messaging often appeals to emotional needs
• For highly competitive products, the promotional message often encourages bran switching and aims to convert some buyers into loyal users

Reminder Promotion - keep the product and brand name in the public’s mind

• Assumes that the target market has already been persuaded of the merits of the good or service, so used during the maturity stage
• The purpose is to trigger a memory that leads to a purchase
  

Connection Promotion

• Forms relationships through social media or sales personnel
• Brands are increasingly connecting with their customers in hopes that they become brand advocates who promote the brand
• Important in all phases of the PLC

Advertising

Advertising - impersonal, one-way mass communication about a product or organization that is paid for by a marketer

• Advertising budgets are shifting away from traditional communication media and more toward digital options
• One of the primary benefits of advertising is its ability to communicate to large numbers of potential customers
• Cost per contact is typically very low, but the total cost is usually very high

Major Public Relations Tools

• New-product publicity helps advertisers about their new product by prompting free news or positive words (via news releases or news conferences)
• Product placement: a public relations strategy that involves getting a product, service, or company name to appear in a movie, television show, radio program, magazine, newspaper, video games, video or audio clip, book or commercial for another product
• Consumer education events
• Sponsorship: a public relations strategy in which a company spends money to support an issue, cause, or even that is consistent with corporate objectives, such as improving brand awareness or enhancing corporate image

Sales Promotion

Short-term incentive to motivate consumers to do something (purchase a product, visit a store, etc.) immediately. Typically, it involves lowering the price or adding value.

Common Forms of Consumer Sales Promotions

Common Consumer Sales Promotion Objectives:

• Induce the customer to try the product
• Reward brand loyalty (frequent buyer/loyalty programs)
• Encourage the consumer to trade-up or purchase larger sizes
• Stimulate repeat purchases
• Reaction to Competitor Efforts

Direct Marketing

■ Allows the organization to communicate directly

with customers and offer targeted promotions

■ Direct mail, emails, text messaging, social media,

telemarketing

– Technology provides more ways to directly

communicate with consumers

The Internet and the Promotional Mix

• The internet has changed how businesses promote their brands
• Types of media:
  • Paid media: a category of promotional tactic based on the traditional advertising model whereby a brand pays for media space
  • Earned media: a category of promotional tactic based on a public relations or publicity model that gets customers talking about products or services (e.g. getting customers to share your stories)
  • Owned media: a new category of promotional tactic based on brands becoming publishers of their own content in order to maximize the brands’ value to customers

Integrated Marketing Communications

• Coordinates and integrates all elements of the promotion mix so that the organization presents a consistent message
• Seeks to manage all sources of brand or company contacts with existing and potential customers

The AIDA Model

• AIDA concept: a model that outlines the process for achieving promotional goals in terms of stages of consumer involvement with the message; the acronym stands for attention, interest, desire, and action
• The AIDA concept assumes that promotion propels consumers along the four steps in the purchase-decision process:
  • Attention: The advertiser must first gain the attention of the target market
  • Interest: Create interest in the message and the product
  • Desire: Show how product features will satisfy customer needs
  • Action: A special offer or strong closing sales pitch may drive the consumer to purchase the product

Factors Affecting the Choice of Promotional Tools
Nature of the product

Stage in Product’s Life Cycle

Target market characteristics

Type of buying decision

Promotion funds

Push or pull strategy

Type of Buying Decision & Nature of the Product

• For routine consumer decisions and for basic/easy-to-use/convenience products, the most effective promotion alls attention to the brand
  • Advertising and sales promotion are the most productive promotion tools
• Complex/Extensive consumer decisions and more complex/hard-to-use products rely on large amounts of information to help them reach a purchase decision
  • Personal selling is effective in helping these consumers decide
  • As a general rule, as the costs or risks of buying and using a product or service increase, personal selling becomes more important

Target Market Characteristics

In general, a target market characterized by widely scattered potential customers, highly informed buyers, and brand-loyal repeat purchasers requires a promotional mix with more advertising and sales promotion and less personnel selling.

Chapter 16 and 18: Advertising & Sales Promotions

• Advertising is utilized for creating/maintaining brand awareness and market share
• New brands with small market shares spend proportionally more on advertising because of the following two reasons:
  • Advertising response function: a phenomenon in which spending for advertising increases sales or market share to certain level but then produces diminishing returns
    • At some point the brand has captured the attention of the majority of hte target market and only needs to remind consumers of its products
  • Requirements of a minimum level of exposure to measurably affect purchase habits (i.e. consumers need to be exposed to your brand multiple times for it to impact their willingness to purchase)

The Effects of Advertising on Consumers

• Advertising may change a consumer’s negative attitude toward a product or reinforce a positive attitude, but is not good for really connecting with consumers/creating long-term relationships and cannot change deeply rooted values.
• Advertising can affect consumer ranking of a product’s attributes
  • Car ads used to emphasize attributes such as roominess, speed, and low maintenance, but todays car ads often show technology, safety, fuel efficiency

Institutional advertising: a form of advertising designed to enhance a company’s image rather than promote a particular product

Advocacy advertising: a form of advertising in which an organization expresses
its views on controversial issues

Product advertising: a form of advertising that touts the benefit of a specific good or service

Identity Product Benefits:

• An advertising campaign should sell a product’s benefits, not its attributes. A benefit is what consumers will receive or achieve by using the product.
• A benefit should answer “What’s in it for me?”
• Ask “So?” to determine if advertising offers attributes or benefits

Advertising Appeals:

• Advertising Appeal - identifies a reason for a consumer to buy a product
  • How are you going to make your product appeal to your consumers?

Normally requires market research to determine how your specific target market will respond to different types of appeals

Appeal must make a positive impression on the target market, while being unique, distinguishable from competitor's messages, and believable

Common Advertising Appeals:

Unique Selling Proposition:

• A desirable, exclusive, and believable advertising appeal selected as the theme for a campaign
  • Snickers USP - stopping hunger, slogan - “You’re not you when you are hungry.”
• Effective slogans become easily recognizable to the consumer.
  • Taste the rainbow
  • The ultimate driving machine
  • Just do it
  • Im lovin it

Executing the Mesage: The Way That An Ad Portrays Its Message

Media Decisions in Advertising

Medium: the channel used to convey a message to a target market

• Selection of the medium is determined by the promotional objectives and the appeal and the executional style of advertising

Media planning: the series of decisions advertisers make

regarding the selection and use of media, allowing the

marketer to optimally and cost-effectively communicate the

message to the target audience

Sales Promotion:

• Sales promotion: marketing communication activities other than advertising, personal selling, and public relations

Contests and sweepstakes:

Designed to create interest in a brand, not effective tools for generation long-term sales. Offering several smaller prizes instead of one huge prize with increase effectiveness

Contests - Promotions in which participants use some skill or availability to compete for prizes

Sweepstakes - Promotions that depend on chance, with free participation

Sampling - A promotional program that allows the consumer the opportunity to try a product or service for free
Sampling is often the most successful sales promotion tactic

Chapter 18: Social Media & Marketing

• Social Media - any tool or service that uses the Internet

to facilitate conversations.

• Whereas traditional marketing media offer a mass media method of interacting with consumers, SM offer more one-to-one ways to meet consumers.

The Listening System

• Developing an effective listening system is necessary in understanding and engaging an online audience
• Social media monitoring: the process of identifying and assessing what is being said about a company, individuals, product, or brand
  • Involves sentiment analysis and text mining for specific key words
  • Google Alerts, Mention, Pulsar, and Brand Watch are some of the companies that help with social media monitoring
• Failure to respond to criticism leads to larger crisis

Social Media Metrics

• Only valuable if they are tied to performance indicators that show how SM directly impact the business
  • Buzz - volume of consumer created content for a bran dba on posts and impressions (how much are people talking about you)
  • Interest - number of likes and followers
  • Participation and engagement - number of comments, ratings, bookmarks, subscriptions, retweets, shares, and time spend on social media platform
  • Search engine ranks and results - how high is your ranking on search engine results for certain keywords
  • Influence - media mentions, bloggers reached, influence on consumers
  • Sentiment analysis - positive, negative, or neutral sentiment of posts
  • Website metrics - clicks and click-throughs

Social Media Tools

• Blog: a publicly accessible web page that functions as an interactive journal, whereby readers can post comments on the author’s entries
• Microblog: blogs with post length limits
• Useful for disseminating news, promoting longer blog posts, sharing link, announcing events, and promotion sales.
• Facebook status updates are considered microblogging
• Social networking sites: websites that allow individuals to connect–or network–with friends, peers, and business associates (LinkedIn)
• Media sharing sites: websites that allow users to upload and distribute multimedia content like videos and photos (YouTube, Instagram, TikTok)
• Social news sites: websites that allow users to decide which content is promoted on a given website by voting that content up or down (Reddit)
• Location-based social networking sites: websites that combine the fun of social networking with the utility of location-based GPS technology (Facebook “check-ins”)
• Review sites: websites that allow consumers to post, read, rate, and comment on opinions regarding all kinds of products and services
  • More than 70% of consumers say they trust online consumer ratings

CHAPTER 19: Pricing Concepts

What is Price?

• Price is that which is given up in an exchange to acquire a good or service. This is typically money but can also be time or other products.

Pricing Goals

• Should be derived from overall marketing objectives, which in turn should be derived from corporate objectives

Common Pricing Goals:

• Profit-Oriented (Achieving a target profit/return on investment)
• Sales-Oriented (Achieving a target market share/sales volume)
• Status Quo (Maintain current pricing or matching competition)

Profit-Oriented Pricing Objectives:

• Profit Maximization: Setting prices so that profit is as high as possible. Increased customer satisfaction or decreased cost.
• Target Return on Investment: Profits relative to investment. Firms typically aim for ROI’s between 10% & 30% but varies by industry.

Sales-Oriented Pricing Objectives:

• Market Share
• Sales Maximization
  • Short-term objective to maximize sales to increase cash flow immediately. Should never be a long-run objective because it may mean little or no profit.
  • May be used to sell excess inventory (end of season sales)

Status Quo Pricing Objectives: requires little planning, passive policy. Suboptimal because it ignores value of product to customer

• Maintain existing prices
• Meet competition’s prices

Pricing Strategies:

• Skimming Policy: Seller charges a relatively high price and then may lower the price at a later date to makes sales to more price-sensitive buyers. Ex: New Apple Products
  • Fits well with profit/ROI based objectives
• Penetration Policy: Seller charges a relatively low price in order to grow a market, gain market share, and discourage competition from entering the market. Ex: Spirit Airlines
  • Fits well with market shares/sales-based objectives
• Status Quo Pricing: Charging a price identical or very similar to that of your competitors

Better to test at higher prices than lower them if sales are low

Penetration Pricing Low Price to Reach the Masses

Advantages:

• Discourages or blocks competition from market entry
• Boosts sales and provides large market share increases

Disadvantages:

• Requires gear up for mass production
• Strategy to gain market share may fail
• Lower profit/unit

Pricing:

• Demand/Consumer Influences
• Environmental Influences (including the competition)
• Product Influences (including PLC)
• Promotion Influences
• Place (Distribution) Influences

Demand Influences on Pricing Decisions

• Primarily concerned with the nature of the target market and expected reaction of consumers to a given price or change in price.
  How much of my product will consumers demand at a given price?
• Primary considerations:
  • Demographic factors (number of buyers, expected consumption rate, willingness/ability to pay)
    • Used to determine market potential
• Price elasticity

Demand Influences on Price: Elasticity
Price Elasticity - Consumers responsiveness or sensitivity to changes in price.

Inelastic Demand - An increase or decrease in price will not significantly affect demand. Consumers are NOT price sensitive.
Elastic Demand - Consumers buy more or less of a product when the price changes. Consumers are price-sensitive.

Factors that Affect Elasticity of Demand
Availability of substitutes - more subs (easy to switch) makes demand more elastic and vice versa.

Price relative to purchasing power - if a price/price change is so low that it is an inconsequential part of one’s budget, demand will be inelastic and consumers will not be sensitive to $ changes
Product durability - if the cost of a new product increases, people might elect to repair the product making people sensitive to $ (elastic)

Product Consideration in Pricing:
Perishability - Discounting the products as they approach being no longer fit for sale

Products are perishable if the demand for them is confined to a specific time period (seasonal products)
Stage in the Product Life Cycle
Distinctiveness - Marketers can charge higher prices if they can successfully distinguish their products from those of their competitors

Branding and brand equity are used to make products distinctive
Perceived Quality & Value

Prestige Pricing

• Consumers typically have strong price/quality associations (i.e. high price = high quality)
• Prestige pricing involves charging a high price to create a signal that the product is high quality or special/unique
• Particularly effective when customer uncertainty is high

Environmental influences on pricing: The Internet

• Internet auctions - eBay
• Second opinions from expert sites (KBB.com)
• Increased product selection/comparison
• Shopping bots – search the web for the best price

Promotional Influences: Tactics for fine-tuning the base price (base price - general price level at which the company expects to sell goods/services)

• Discounts
• Geographic Pricing
• Special pricing tactics

Discounts, Allowances, Rebates

Discounts are used to encourage customers to do what they would not ordinarily do.

Quantity Discounts: Discounts for buying in quantity

Cash Discounts: Discounts for payment of a bill in cash

Functional Discounts (Trade Discount): Discounts

for performing functions, such as in-store display

Seasonal Discounts: Discounts for buying out of season

Special Pricing Tactics:

Even/Odd Pricing - Prices are set at one or a few cents below a round number in

order to create the perception that the price is low (getting a good deal) or pricing

evenly at the dollar to give a perception of high quality.

Bundle Pricing - involves selling several products together at a single price in order to suggest a good deal