Communication & Distribution Policy

Situation Analysis, Marketing Goals, Strategy, Instruments, Organization, Controlling, and Management

Communication Policy: Basics

• Communication policy involves the planned design and transmission of information to influence the addressees in terms of knowledge, attitudes, expectations, and behavior, aligned with company objectives.
• Subareas:
  • Market communication: between management and customer.
  • Customer communication: between employee and customer.
  • Employee communication: between management and employees.
  • Impersonal vs. personal communication.
• Central Terms:
  • Communication message: statement suggested to the advertiser (e.g., "Our products are of high quality.").
  • Means of communication: how a message is presented (e.g., commercial, advertisement, poster).
  • Communication carrier/medium: the medium conveying a message (e.g., TV, magazine, newspaper).

Basic Model of the Communication Process

• Involves a transmitter coding a message, sending it through a medium, and a receiver decoding it, leading to an effect and feedback, with potential interference.
• Problems:
  • Selective perception: different interpretations.
  • Selective bias: individual expectations/evaluations.
  • Selective memory: differing recall.
• Lasswell's Components of Communication:
  • WHO (sender).
  • SAYS WHAT (message).
  • THROUGH WHICH CHANNEL (media).
  • TO WHOM (recipient/target group).
  • WITH WHAT EFFECT (reaction).

Loss Effects of Communication

• TOLD/SHOWN ≠ HEARD/SEEN
• HEARD/SEEN ≠ UNDERSTOOD/RECOGNIZED
• UNDERSTOOD/RECOGNIZED ≠ UNDERSTOOD
• UNDERSTOOD ≠ APPLIED
• APPLIED ≠ RETAINED

Objectives of Communication Policy

• Economic Objectives:
  • Profit, sales, market share, test buying, repetitive buying.
• Ex-Economic Objectives:
  • Attention, perception, awareness, knowledge about product features and advantages, interest, attitude and image, product and brand positioning, emotional experience.

Stage Model of Communication Effect: AIDA

• AIDA Model:
  • Attention
  • Interest
  • Desire
  • Action

Multistep Flow of Communication Model

• Mass medium to opinion leaders (T1, T2, T3, T4) who then influence others (T5, T6).
• Perspective of classic marketing: Adoption of a "one-step flow of communication" model targeting amorphous groups with a one-to-many approach and indirect addressing, assuming a passive customer role.

Customer Journey Example (Kreutzer 2021)

• Illustrates various touchpoints across awareness, purchase, binding, and recommendation phases, utilizing online and offline channels.

Media Categories (Kreutzer 2021)

• Owned Media: Corporate website, blogs, communities.
• Paid Media: Display banners, keyword ads, promoted social media posts.
• Earned Media: Mentions in other blogs/forums, fan activity, online store presence.

Process of Advertising Planning (Haller 2017)

• Involves defining advertising objectives, target group, message, selecting media, budgeting, implementation, and success control with continuous review.

Budgeting and Budget Allocation (Haller 2017)

• Budgeting: Determining total expenditure for communication within a planning period.
  • Heuristic and analytical approaches (advertising response functions, elasticity).
  • Orientation on previous budget, sales/profit, available resources, competitor activities, and communication objectives.
• Budget Allocation: Distributing a given budget across media categories, individual media, time, and geographical areas.
  • Criteria: distribution, reach, and costs (CPM).

Calculation of Thousand Contact Price (CPM)

• $TKP<em>j = (frac{c</em>j}{K_j} \cdot 1000)$
  • $c_j$ = Costs per occupancy of the j-th medium.
  • $K_j$ = Users per issue of the jth medium.

CPM Calculation Example

• A budget of €0.47 million is available for newspaper advertising.
• Goal: maximize contacts.
• Solution: Calculate CPMs for each newspaper and then plan ad placements based on cost-effectiveness.
• See Page 142 for numerical example

Overview of the Communication Mix

• Classic media advertising (TV, print, radio, cinema, outdoor).
• Sales promotion.
• Public relations.
• Sponsoring.
• Trade fair marketing.
• Event marketing.
• Direct marketing.
• Online marketing (Web 1.0 and Web 2.0).
• Product placement.
• Personal sale.
• Internal communication.

Classic Media Advertising

• Traditional forms of advertising before digitalization.
• Goals: Address broad audience, convey messages.
• Subareas: TV, cinema, radio, print, outdoor.

Critical Appraisal of Television Advertising

• Pros: Good demonstration, wide reach, emotional approach.
• Cons: Lack of targeting, divergence losses, zapping, low attention, increasing reactance.

Critical Appraisal of Cinema Advertising

• Pros: Concentrated presentation, precise targeting, availability over time.
• Cons: Low reach, high production cost, viewer reluctance.

Critical Appraisal of Radio Advertising

• Pros: Frequent use, repeatability, low cost, local/regional targeting.
• Cons: Transient information absorption, limited placement, low reach, reactance.

Critical Appraisal of Advertisements in Consumer Magazines

• Pros: Positive editorial attitude, high print quality, variety, national reach.
• Cons: Many ads, short attention span, high cost for special groups.

Critical Appraisal of Advertisements in Daily Newspapers

• Pros: Current medium, high information content, local targeting, fast distribution.
• Cons: Print quality, short attention, neighboring ads impact attention.

Critical Appraisal of Outdoor Advertising

• Pros: Wide range, over-dimensional image, individual locations, high attention.
• Cons: Cannot escape ad, short perception span, risk of outrage, long-term planning.

Sales Promotion

• Analysis, planning, implementation and monitoring of temporary measures to achieve communication and sales targets.
• Goal: Short-term sales stimulation.
• Sales staff-oriented (push effect).
• Trade-oriented (push effect).
• Consumer-oriented (pull effect).

Forms of Appearance

• Direct: Vouchers, coupons, sampling, brochure enclosures.
• Indirect (B2C): POS games, display ads, personality promotions.
• Indirect (B2B): Wholesale ads, special sales personnel, advertising gifts.

Critical Appraisal

• Pros: Target specific, entry medium, push motivation, product sampling.
• Cons: Short-term focus, negligence of integration, frequent changes, low suitability for brand image.

Public Relations (PR)

• Analysis, planning, implementation and control of activities to promote understanding and trust among target groups.
• Goals: Build/maintain understanding, trust, and acceptance.
• Tasks: Information, maintaining contacts, documenting social responsibility.

Types and Target Groups

• PR Types: Product/service, corporate/organizational, crisis, location, media relations, employee PR, lobbying, investor relations.
• PR Target Groups: Organization, capital, sales, procurement markets, competitors, media, political society, labor markets.

Forms of Publication

• Press conferences, communiqués, brochures, website info, personal relations, knowledge material, sponsorships, ads for image promotion, internal measures.

Critical Appraisal

• Pros: Strategic communication, suitable for psychological objectives, corporate communication, preemptive narrative.
• Cons: Not for short-term, image awareness, product communication, risk of misuse for management.

Direct Marketing

• Communication measures establishing direct contact with the addressee and initiate an immediate dialog.
• Tasks and Goals: Individual dialog, targeted information, attracting attention, customer acquisition and loyalty.
• Technical Support: Database management, call centers.

Critical Appraisal

• Pros: Target group specific reach, avoid dissemination loss, dialogue communication, customer loyalty.
• Cons: Risk of intrusiveness, unsystematic activities, redundancy of content, low suitability for emotional approach, low range.

Sponsoring

• Provision of resources to promote individuals/organizations in sports, culture, social affairs, environment, and media for corporate communication goals.
• Goals: Update brand awareness, improve image, create contact opportunities, goodwill, employee motivation.
• Benefits: Mention, advertising rights, logo placement, participation, naming rights.

Types

• Sport, culture, social, ecological, and program sponsoring.

Critical Appraisal

• Pros: Low cost, creative application, circumventing reactance, corporate responsibility.
• Cons: Risk of loss of trust, barriers of sponsored persons, public critique.

Event Marketing

• Company-staged events for experience and dialog-oriented presentation.
• Goals: Increase awareness, improve image, create sympathy.
• Tasks: Experience-oriented presentation, dialog, information/emotion/action/motivation.

Critical Appraisal

• Pros: Strong attention, special target groups, special images, engage employees, independent profile, advertising environment.
• Cons: No long-term effect if scarce, event is occupied, negative transfer effects, visitors focused on event.

Product Placement

• Planned placement of marketing objects in appropriate environments in non-advertising media sections for payment.
• Options: Verbal/visual, intensity of placement, remuneration, replacement to avoid bad image.

Critical Appraisal

• Pros: Less influence to avoid reactance, activation during usage, trustworthiness, brand/movie image combination.
• Cons: Not for many products, short-term objectives, difficult to control/measure.

Online Marketing

• Affiliate, email, couponing, banner, video, social media, search engine (SEM), viral, guerrilla, search engine optimization (SEO), search engine advertising (SEA).

Social Media Marketing

• Uses social networks for marketing goals through relevant applications and technologies, focusing on many-to-many communication and interactive customer roles.
• Different social media instruments can be weblogs, microblogs, social networks, webforums, bookmarks, wikis, podcasts, videosharing, or evaluation sites

Cross-Platform Social Media Marketing: Influencer Marketing

• Strategy where companies use opinion leaders (influencers) to achieve communication goals.
• Important Success Factors: Suitable target group, fit between product and influencer.

Mobile Marketing

• Implementation of marketing activities via mobile devices like text messaging, mobile apps, mobile advertising QR codes and Near Field Communication and location-based marketing.

Integrated Communication

• Strategic and operational process aimed at creating unity from differentiated internal and external sources to convey a consistent image.
• Content and Objectives: Increase motivation, uniform appearance, differentiate, learning effects, building trust, reduce costs, improve sales, profits, market share.

Communication Planning at Different Levels

• Overall Strategy, tactical planning integrating advertising, sales promotion, sponsoring and trade fair strategy.

Repetition Exercises:

• Exercises provided for independent follow-up, group study, in-depth literature, but no solutions are included.

Distribution

Distribution Policy: Definition and Objectives

• Distribution policy encompasses decisions and actions affecting the transmission of goods/services from manufacturer to end buyer.
• Acquisition-based distribution: Economic, legal, informational, and relationship-oriented management of distribution channels.
• Physical distribution (marketing logistics): Physical transmission of services, bridging space and time.
• Goals: Profit/sales/market share increase, distribution cost reduction, desired distribution level, delivery readiness, right quantity/condition/place/time.

Overview of Sales Organs

• All internal/external persons/departments/institutions that directly carry out or support sales activities.

Types of Sales Organs:

• Company Internal: CEO, Key Account Manager, Sales Director, Sales Staff, etc.
• Company External Dependent: Sales Agents, Commission Agent, Representative, Retail, Broker, etc.
• Company External Independent: Freelancers, Individuals etc.

Design of the Distribution System

• The distribution system forms the institutional and structural basis of distribution policy, consisting of sales organs combined into distribution channels.

Vertical & Horizontal Structure

• Vertical Structure: Direct Sales (Manufacturer to End User) and Indirect Sales with Intermediaries (Wholesaler and Retailers).
• Horizontal Structure: sales channel width and depth.

Vertical Structure: Level Scope of Sales Channels

• Direct Sales (Zero-level channel): Manufacturer to Final Customer.
• Indirect Sales (1-stage channel): Manufacturer to Retailer to Final Customer.
• Indirect Sales (2-stage channel): Manufacturer to Wholesaler to Retailer to Final Customer.

Horizontal Structure: Sales Channel Width

• Area coverage strategies: Universal distribution, intensive distribution, selective distribution, exclusive distribution.
• Decreasing width = declining market coverage, increasing flexibility, increasing control.

Horizontal Structure: Distribution Ratio

• Distribution quota = Degree of distribution of the product
• Numerical Distribution: $\frac{\text{Number of sales outlets supplied that carry a specific brand or product}}{\text{Number of all eligible sales outlets that stock this product group}}*100$
• Weighted Distribution: $\frac{\text{Turnover of the product- and brand- leading sales outlets}}{\text{Total sales of all outlets selling this product group}}*100$

Horizontal Structure: Sales Channel Depth

• The depth of the sales channel increases with the increasing heterogeneity of the sales intermediaries involved.

Decision: Direct vs Indirect Distrubtion

• Decision Tree on wether to use direct/indirect channels based on various criteria.
• Starting with direct sales competence and retailers.

Different types of Direct Distribution

Factory Outlet, Travelling Salesmen, Sales Assistants, Own Stores / Branches, Management Market events, Sales Department, Media: e.g. Internet, TV, radio, print

Types of Sales Assistants

• Acquisition sale assistants
• Logistical sales assistants
• Supplementary services sales assistants

Overview of the Types of Sales Assistants

A Commercial Agent is a self-employed trader who is permanently entrusted with brokering transactions for another entrepreneur or concluding transactions on their behalf.

Commission Agents act in their own name but for the account of others by buying or selling goods or rights.

Commercial Brokers are only involved in brokering transactions on a case-by-case basis in the name and for the account of third parties, without being involved in the flow of goods themselves.

Mathematical Optimization of the Decision: Traveling Salersman vs Sales representative

Based on

• Fixed Salary
• Sales comission
• Product price
• Home office cost contribution

An equation can be setup which defines when to use what.

*Traveler: −Fixed Salary: € 48,000 p.a. −Sales Commission: 1 % with a minimum SalesVolume of 12 units p.a.
Sales Representative: −Home Office Cost Vontribution: € 6,000 p.a. −Sales Vommission: 4 %
Product Price: € 100,000 per unit
*Calculating the Threshold Value $48,000 + 0.01 (x - 1,200,000) = 6,000 + 0.04 x <=> 36,000 + 0.01 x = 6,000 + 0.04 x <=> 3.000.000 = 3 x <=> x = 1,000,000 = 10$
*The break-even point is 10 units, i.e. for sales of up to 10 units, the use of a sales representative is more cost- effective; from the 11th unit or more sold, the use oa traveler is more cost-effective.

Qualitative criteria for Traveling Salesman vs Sales representative

Examples of qualitative criteria? Use of Sales Representatives (=Freelancer) or Travelling Salesmen (=Employee): qualitative criteria

Definition of Authorized Dealer

Independent trading company that is bound to a manufacturer by a contract in a way that implies a high degree of economic dependence.

Definition of franchising

Franchising is a sales system based on partnership with the aim of promoting sales. The franchisor takes over the planning, implementation and control of a successful type of business. He creates an overall entrepreneurial concept that is implemented independently by his business partners, the franchisees, at their location."

Features

*Sale Market, Supplier Market
*Franchisor Franchisee Exclusivity, System advertisement, Goods procurement, Organizational concept, Regional advertisement
*Goods delivery Sales concept, Franchise contract, Direct payment, Direct services, Procurement, concept

Franchise system: advantages and disadvantages from a franchisor and franchisee perspective

Advantages: • Utilization of the entrepreneurial initiative of franchisees  Higher motivation than store employees
Disadvantages: • Waiver of part of the of the earnings • Lack of control over the quality of performance • Lack of strategic coordination • Close proximity to the market, customers and franchisees •

Indirect sales: forms of sales intermediaries

• Specialized Dealer, One-Line Shop, Depot Store, Warehouse, Mail Oder Company, Supermarket, Discounter etc
• Merchant Wholesalers, Full-Service Wholesalers Cash-and-Carry Wholesalers, Drop Shippers, Mail-Order Wholesalers, Rack Jobbers, etc

Indirect sales: reduced communication effort

Indirect sales reduces the path of contacts needed

Indirect sales: functions assumed by sales intermediaries

• Material goods re-grouping function, Market balancing, Material goods processing function

Indirect sales: advantages and disadvantages from the manufacturer's perspective

• Advantage: Relatively small sales organization required, High degree of distribution possible, Trade takes over numerous Sales functions
• Disadvantage: No direct contact with the end customer, Dependence on trade, Lower selling price in comparison for direct sales

Indirect sales: areas of cooperation between manufacturers and sales partners

• Areas include Information, Products, Prices and Processes

Characteristics of different sales (Direct, Indirect)

Direct sales uses a lower number of end customers than indirect sales

Direct and Indirect Distribution: multi-channel sales system

Objectives of multichannel sales are

• Increased market coverage,
• Higher visibility
• Synergy effects
• Distribution cost reduction
• Better customer customization