Marketing Mix: Promotion and Place Study Notes

Learning Objectives for Marketing Mix: Promotion and Place

  • Identify Differences: Distinguish between sales promotion and advertising, as well as above-the-line and below-the-line promotion.

  • Understand Objectives: Comprehend the various goals established for promotional campaigns.

  • Analyze Promotion-Mix Decisions: Evaluate factors businesses consider when selecting promotional methods for products.

  • Evaluate Effectiveness: Assess methods used to measure the return on promotional spending.

  • Packaging Importance: Recognize how packaging contributes to product marketing.

  • Importance of Place: Understand why distribution strategy is vital in the marketing mix.

  • Distribution Channels: Discuss various channels and their appropriateness in different business circumstances.

Case Study: Nikon Coolpix Promotion

  • Market Context: The global digital-camera market is saturated with six major manufacturers offering products with similar quality and features.

  • Promotional Objectives:     * Encourage consumers to visit retailers to try the Coolpix range.     * Provide incentives for shop staff to actively demonstrate the camera.     * Meet or exceed sales targets based on a 10%10\% increase over the previous year.

  • Target Audience Profile:     * Existing digital-camera users.     * Demographics: 58%58\% male, age group 35−4435-44.     * Family Status: 81%81\% married with children.     * Income: Household income greater than $70,000\$70,000 per year.

  • Campaign Features:     * 500,000500,000 leaflets dropped to target consumers containing a photo memory card.     * Invitation to test the card in-store; if a prize image appeared on the LCD, the consumer won (e.g., a holiday to Australia).     * Retail staff could win the same prizes as consumers for demonstrating the product.

  • Results:     * Sales increased by 30%30\% during the promotion.     * Brand recognition increased even after the campaign ended.     * The budget of $2 million\$2 \text{ million} for prizes was not exceeded.

Understanding Promotion

  • Definition of Promotion: The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship, and public relations to inform consumers and persuade them to purchase.

  • The Role of Promotion: Communicating with actual/potential customers to increase awareness and create product "personalities" or images that consumers identify with.

  • Promotion Mix: The specific combination of techniques a firm uses to sell a product.

  • Promotion Budget: The financial amount allocated for marketing/promotion over a specific period. Success depends not just on the total amount, but on the allocation within the promotion mix.

  • Promotional Objectives:     * Increase Sales/Awareness: Especially critical for new product launches.     * Remind Consumers: Reinforce the qualities of existing products.     * Attract New/Existing Consumers: Increase purchase frequency or brand switching.     * Demonstrate Superiority: Highlight updated features compared to competitors.     * Develop Brand Image: Create a distinct "personality" in a market where products may seem identical.     * Correct Misleading Reports: Reassure the public after a "scare" or accident.     * Corporate Advertising: Improve the public image of the business rather than a specific product.     * Retailer Encouragement: Motivate retailers to stock and promote products.

Above-the-Line Promotion: Advertising

  • Definition: Paid-for communication with consumers through media to inform and persuade.

  • Informative Advertising: Adverts providing facts like price, technical specifications, or locations to buy. Most effective for new products or major pricing/design changes.

  • Persuasive Advertising: Adverts aimed at creating a distinct brand identity or perceived difference in the consumer's mind, common in undifferentiated markets.

  • Trade Advertising: Aimed at retailers via trade journals/magazines to encourage stocking and preferential promotion.

  • Advertising Agencies: Specialist firms that assist by:     * Researching markets and consumer profiles.     * Advising on cost-effective media.     * Designing and producing (filming/printing) adverts.     * Monitoring public reaction and feedback.

  • Factors Influencing Media Choice:     * Cost: TV and cinema are expensive; radio and local press are cheaper. Viral marketing via social media is nearly cost-free.     * Audience Size: Calculation of cost per person reached.     * Target Profile: Matching media to the age, income, and interests of the target market.     * Message Type: Written media is better for detailed info; TV/YouTube is better for dynamic images.     * Integration: Ensuring the media choice aligns with the rest of the marketing mix.     * Legal Constraints: Bans on tobacco advertising or restrictions on adverts aimed at children. The UK Advertising Standards Authority (ASA) ensures ads are 'legal, decent, and honest.'

Case Study Insights: Cadbury vs. Evian

  • Cadbury 'Gorilla' Advert:     * Strategy: 9090-second TV spot with a gorilla drummer, costing $12 million\$12 \text{ million} total.     * Goal: Improve brand image of Dairy Milk during its maturity stage.     * Outcome: 500,000500,000 YouTube views in the first week; sales rose by 9%9\% in one year.

  • Evian 'Roller Babies':     * Strategy: Viral video with over 50 million50 \text{ million} YouTube views (Guinness World Record).     * Outcome: Brand lost market share; sales dropped 25%25\% in the year it went viral. Proof that viral success does not always equal sales success.

Below-the-Line Promotion: Sales Promotion

  • Definition: Short-term incentives directed at consumers or retailers to achieve immediate sales increases.

  • Push vs. Pull Strategy:     * Pull: Directed at the final consumer to encourage them to buy.     * Push: Directed at the distribution channel (retailers) to encourage stocking.

  • Common Methods & Limitations:     * Price Promotions: Temporary price discounting. Limitations: Reduces gross profit margin; may damage brand reputation.     * Money-off Coupons: Versatile and focused. Limitations: Low usage if the discount is too small.     * Customer Loyalty Schemes: (e.g., airline miles). Limitations: High administration costs; reduced impact if consumers have many cards.     * Money Refunds: Requires returning receipts. Limitations: Delay in refund acts as a disincentive.     * BOGOF (Buy One Get One Free): Encourages multiple purchases. Limitations: May lead to future sales falling as consumers stock up.     * Point-of-Sale Displays: (e.g., aisle interrupters, dump bins). Limitations: Best spots often reserved for market leaders.     * Games/Competitions: Common on cereal packets. Limitations: Often ineffective in generating consumer response compared to price deals.

Other Forms of Promotion

  • Personal Selling: Sales staff communicate one-on-one with consumers. Used for expensive items (cars, furniture, industrial goods). Expensive but high success rate with skilled staff.

  • Direct Mail: Targeted mailshots based on databases. Can be seen as "junk mail," increasingly replaced by text/social media messages.

  • Trade Fairs and Exhibitions: Used specifically for B2B (business-to-business) marketing to find retailers and wholesalers.

  • Sponsorship: Payment to associate a brand with an event, team, or individual. Example: $1\$1 spent on Tour de France sponsorship can yield $5.40\$5.40 in free publicity.

  • Public Relations (PR): Gaining free publicity through media coverage. Includes press conferences, product testing for journalists, and crisis management responses.

Branding and Brand Extension

  • Branding Definition: The strategy of differentiating products from competitors by creating an identifiable image.

  • Benefits of Effective Branding:     * Higher brand recall during shopping.     * Differentiates the product clearly.     * Allows for a "family" of associated products.     * Reduces price elasticity of demand (consumers are less sensitive to price changes).     * Increases consumer loyalty.

  • Own-Label Brands: Retailers launch products under their own name, often bought from manufacturers with spare capacity. Offers retailers full marketing control and bulk discounts.

  • Brand Extension: Using a strong brand name for new/modified products. Examples: Mars (ice cream), Caterpillar (shoes), Dunlop (sports equipment).

Marketing Expenditure Budgets

  • Percentage of Sales: Budget varies based on sales levels. Flaw: If sales decline, the budget declines, which may worsen the sales drop.

  • Objective-Based Budgeting: Budgets are set based on the cost required to reach specific sales targets.

  • Competitor-Based Budgeting: Matching competitor spending. Can lead to spiraling costs.

  • What the Business Can Afford: Common in small firms; marketing is treated as a luxury after other expenses.

  • Incremental Budgeting: Taking last year's figure and adding a percentage for inflation or new targets.

Evaluating Promotional Effectiveness

  • Societal Viewpoint:     * Arguments Against: Waste of resources; encourages consumerism and environmental destruction.     * Arguments For: Informs consumers; increases competition; creates mass markets (economies of scale); subsidizes media like TV and newspapers.

  • Methods of Evaluation:     * Sales Performance: Comparing sales before, during, and after a campaign.     * Consumer Awareness Data: Market research on advert recall.     * Consumer Panels: Qualitative feedback on product impact.     * Response Rates: Tracking tear-off slips, website hits, or video views.

Promotion and the Product Life Cycle

  • Introduction: Informative advertising and free samples/trials.

  • Growth: Focus shifts to brand building and persuasive advertising; encourage repeat purchases.

  • Maturity: Advertising to emphasize differences from competitors; use sales incentives for brand switching.

  • Decline: Minimal advertising; sales promotion for clearance if the intention is withdrawal.

Packaging

  • Functions: Protect contents, provide info (ingredients, instructions), support product image, aid recognition.

  • Strategic Impact: Distinctive packaging (e.g., the red of Coca-Cola cans) becomes central to promotional themes. Advances like Tetra Brik allow for new selling opportunities.

  • Environmental Concerns: Move toward recycled and recyclable materials to avoid negative consumer reactions to waste.

Place and Distribution Channels

  • Place Definition: Concerned with how products pass from manufacturer to final customer.

  • Channel of Distribution: The chain of intermediaries a product passes through.

  • Key Objectives: Customer service is primary; products must be available when and where customers want them.

  • Common Channels:     * Direct Selling (Zero-intermediary): Manufacturer →\rightarrow Consumer. (e.g., mail order, airline sites, farmers' markets). Benefit: No mark-ups; full control. Drawback: Producer bears all storage/delivery costs.     * Single-intermediary: Manufacturer →\rightarrow Retailer →\rightarrow Consumer. (e.g., supermarkets buying direct, holiday travel agents). Benefit: Retailer holds stocks and provides locations. Drawback: Retailer takes a profit mark-up.     * Two-intermediary: Manufacturer →\rightarrow Wholesaler →\rightarrow Retailer →\rightarrow Consumer. (Traditional channel). Benefit: Wholesaler "breaks bulk" and reduces producer's transport costs. Drawback: Slows down the chain; adds another mark-up.

  • Factors Influencing Channel Choice:     * Industrial vs. Consumer: Industrial products use shorter channels.     * Geographic Dispersion: Widely dispersed markets may require more intermediaries.     * Service Level: Products requiring after-sales service need physical outlets.     * Product Value: High-value items (yachts) justify direct selling.     * Number of Customers: Mass markets (Nike shoes) require intermediaries.

Internet Marketing and E-commerce

  • Internet Marketing: Advertising and marketing using internet, email, and mobile communications.

  • E-commerce: Buying and selling goods/services through electronic mediums.

  • Impact on the 4Cs:     * Convenience: Selling direct (B2C and B2B).     * Communication: Online advertising and viral marketing.     * Customer Solution: Collecting data to aid development.     * Cost to Customer: Dynamic pricing (charging different prices based on online data).

  • Viral Marketing: Encouraging people to pass on marketing messages (e.g., videos, games). Often targets "influencers."

  • Benefits: Low cost-to-reach ratio; worldwide audience; accurate records/tracking; lower fixed costs than physical stores.

  • Limitations: Poor internet speeds in some countries; inability to touch/try products; insecurity regarding online payments; website maintenance costs.

The Integrated Marketing Mix

  • Definition: Marketing decisions that complement each other and provide a consistent message.

  • Examples of Poor Integration: Selling expensive perfume on a market stall or wrapping high-end gifts in newspaper.

  • Requirements for Effective Mix:     * Based on marketing objectives.     * Affordable within the budget.     * Targeted at appropriate consumers.     * Internally consistent (Product, Price, Place, Promotion all convey the same image).

Questions & Discussion: Activities Insights

  • Activity 19.3 (Sales Promotion Effectiveness): Supermarket shoppers in Hong Kong found BOGOF and price discounts most effective for bringing purchases forward. Loyalty cards encouraged single-store shopping. Competitions and games were felt to be ineffective in terms of consumer response.

  • Activity 19.4 (Gap Inc.): Gap lost its lead to Zara in 20082008. Sales dropped 9%9\% in July 20092009 but rose 8%8\% by Jan 20132013 after refreshing designs and focusing on "international sales."

  • Activity 19.7 (Nescafé Hot When You Want): Utilized a $10 million\$10 \text{ million} launch budget, with $7 million\$7 \text{ million} for advertising. Packaging was critical to show how the self-heating button and shaking mechanism functioned.

  • Activity 19.8 (Coca-Cola): Considered direct selling via syrup concentrate taps in homes to bypass retailers, though the former CEO noted that customers still currently prefer physical shopping.

  • Activity 19.10 (E-commerce Trends): Online retailing in the UK grew 22%22\% in 20132013, while high-street growth was only 1.8%1.8\%. Verdict Research predicts internet retailing will reach 14%14\% share by 20162016.