Communication by marketers that informs, persuades and reminds potential buyers of a product in order to influence an opinion or elicit a response.

Advertising = long term

Promotion= short term incentives 

Promotional Mix

(advertising, public relations, personal selling, sales promotion) 

Elements:

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

Public Relations- effors to influence various publics- result is hopefully publicity. Try to get others to report on us. Trying to execute promotional plan that creates goodwill for company/brand image.

Personal Selling- most expensive per contact

Sales Promotion- Marketing activities (other than personal selling, adv and public relations) that stimulate consumer buying and dealer effectiveness. Meant to encourage short term change in behavior. Examples- coupons, p.o.p., rebates, sweestakes, incentives

Communication

Categories of Communication 

the process by which we exchange or share meanings through a common set of symbols.

Interpersonal Communication- personal selling

 Mass Communication- sales promotion, advertising, public relations.

Characteristics of Advertising

Advantages and Disadvantages of Advertising 

Communication mode: Indirect and non-personal

Message Flow Direction: One-way (except personal selling)

Message Content Control: Yes

Sponsor Identification: Yes

Reaching Large Audiences: Yes

Message Flexibility: Same Message to all Audiences

Advantages- reach large number of people, low cost per contact, can be micro targeted

 Disadvantages- total cost is high, national reach is expensive for small companies.

Public information about a company, good, or service appearing in the mass media as a news item.

End goal is publicity comes from an independent 3rd party. 

The marketing function that evaluates public attitudes, identifies areas within the organization that the public may be interested in, and executes a program of action to earn public understanding and acceptance.  Key word=control; publicity is the end result of PR

Communication Mode: Usually indirect, non-personal

Message Flow Direction: One-way

Message Content Control: No

Sponsor Identification: No

Reaching Large Audience: Usually Fast

Message Flexibility: Usually no direct control 

(Free samples, contests, premiums, trade shows, vacation giveaways, coupons)

Communication Mode: Usually indirect and non-personal

Message Flow Direction: Mostly one-way

Message Content Control: Yes

Sponsor Identification: Yes

Reaching Large Audience: Fast

Message Flexibility: Same message to varied target 

Planned Presentation to one or more prospective buyers for the purpose of making a sell. Small setting, small group of people.

Communication Mode: Direct and face to face

Message Flow Direction: Two-way

Message Content Control: Yes

Sponsor Identification: Yes

Reaching Large Audience: Slow

Message Flexibility: Tailored to prospect 

Goals and Tasks of Promotion

Informing, Persuading, Reminding

Informative Promotion- (Introduction and Early stage of PLC) increase awareness, explain how product works, suggest new uses, build company image

Persuasive Promotion- (Growth, Maturity) Encourage brand switching, change customers' perceptions of product attributes, influence immediate buying decision, persuade customers to call.

Reminding Promotion- (Maturity)- remind customers that product may be needed, remind customers where to buy product, maintain customer awareness

Routine- Advertising, Sales Promotion

Not Routine or Complex- Advertising, Public Relations

Complex- Personal Selling 

(Coordination) A method of carefully coordinating all promotional messages to assure the consistency of messages at every contact point where a company meets the consumer. (Coordianted effort of blending)

Reach a lot of people with a blending/combinations of the elements of the promotional mix 

Which company ad goes with. 

Crisis Management- a coordinated effor to handle the effects of unfavorable publicity or of an unfavorable event.

When product gets very bad light/portrayed negatively 

Public Relations- originates with the company (new product publicity, product placement, consumer education, sponsorship, websites)

Publicity- may or may not originate with the company. (crisis management, unfounded publicity) 

It should be done in both goods times and bad times.

Top 200 brands account for 37% of media spending.

Supply greatly exceeds demand.

Ads: can be so annoying- make you act adversely. 

Cost per contact- the cost of reaching one member of the target market.

Reach- The number of target consumers exposed to a commercial at least once during a time period.

Frequency- the number of times an individual is exposed to a message during a time period.

Audience selectivity- the ability of an advertising medium to reach a precisely defined market. How finite of a target market am I reaching with this? Magazines more selective than newspapers

Cost Per Thousand (CPM)

CPM= (Cost of ad space (absolute cost) / Circulation) * 1000

How many people do I reach? Apples to apples comparison 

New brands with a small market share spend more for advertising and sales than those with a large market share. New brands require higher spending to reach a minimum level of exposure needed to affect purchase habits. Need to inform. 

Define

Advertising

Goals for

Measuring

Advertising

Results 

Basic Principle of Marginal Analysis

Problems with Marginal Analysis 

Increase Spending If: The increased cost is less than the incremental (marginal) return

Decrease Spending If: the increased cost is more than the incremental (marginal) return

Hold Spending Level If: The increased cost is equal to the incremental (marginal) return

Problem:
Assumption- sales are the principal objective of advertising and/or promotion

Assumption: Sales are the result of advertising and promotion and nothing else 

Budget Approaches

The Affordable Method, Arbitrary Allocation Method, Percentage of Sales Method, Competitive Parity Method, Return on investment method, objective and task method 

The Affordable Method- what we have to spare; what's left to spend

Arbitrary Allocation Method- no system, seemed like a good idea at the time

Percentage of Sales Method- set percentage of sales or amount per unit

Competitive Parity Method- match competitor or industry average spending

Return on investment method- spending is treated as a capital investment 

Objective and Task Method- establish objectives, determine specific tasks, estimate costs associated with tasks. Advertising great at creating awareness 

Attribute- what the product has

Benefit- how that attribute can benefit customer 

A desirable, exclusive, and believable advertising appeal selected as the theme for a campaign.

How do I differentiate myself?

Key to advertisement- how to tell a good/memorable story 

Continuous-  advertising is run steadily throughout the period. (Never 0)

Flighted- advertising is run heavily every other month or ever two weeks. (Yes or No)

Pulsing- Advertising combines continuous scheduling with flighting (Never 0, combo of 1 or 2)

Seasonal- Advertising is run only when the product is likely to be used.

Rating- to get a rating, taking number that watch the show out of how many have tv

 Rating = (HH tuned to show)/ (Total US HH)

Share- Percentage of HUT tuned to a show. Share number always has to be equal or higher than rating; compare more apples to apples; more fair. 

Share = (HH tuned to show/ US HH using TV)

Major Types of Advertising: Institutional vs Product

Institutional- Enhances a company's image rather than promotes a particular product

Product- Touts the benefits of a specific good or service (Pioneering, Competitive, Comparitive) 

Product Advertising

pioneering, competitive, comparitive 

Pioneering- stimulates primary demand for new product or category; used in the PLC introductory stage

Competitive- influences demand for brand in the growth phase of the PLC; Often uses emotional appeal

Comparitive- compares two or more competing brands' product attributes; used if growth is sluggish, or if competition is strong 

Event creation- designing an event that features sponsorship

Guerilla Marketing- unconventional promotions on a very low budget; generally thought of as for small businesses/entreprenuers

Stealth Marketing- undercover marketing or roach baiting

Viral marketing- creating content that encourages users/customers to do your marketing for you (Burger King Chicken) 

Advertising- reason to buy --> attitude

Sales Promotion- incentive to buy --> behavior

Sales promotions- extra incentive to buy, an inducement to intermediaries (push strategy), targeted to different parties; want to change behavior 

what you pay for something

OR

the value that you exchange for the benefits of having or using the product/service (i.e.-time, psychological costs, other resources)

Internal Factors of Price

(i influence these) 

1) Marketing Objectives- to maximize profit, gain market share, infer a level of quality, to survive.

2)Marketing Mix Strategy- price needs to be consistent with other 3 P's

3) Costs- your costs affect your profit so set the optimal price

1. Demand for your product

2) Competition- competitors price's, strength of competition

3) Economy- cost of components (natural resources) and economic conditions 

Profit-oriented (high)- profit maximization, satisfactory profits, return on investment

 Status (medium)- maintaining price and meeting competitions price (customer perception)

Sales- oriented (low)- market share and sales maximization 

Tells us how much the demand for a product will change with a change in price.

E= (% change in quantity demanded of good "A")/(% change in price of Good A)

Factors that affect elasticity- availability of substitutes, price relative to purchasing power, product durability, a product's other uses 

Elastic demand- Consumers buy more or less of a product when the price changes. Products that are price sensitive and have many substitutes. (Price goes down, revenue goes up OR price goes up and revenue goes down)

Inelastic Demand- an increase or decrease in price will not significantly affect demand. Products less price-sensitive and have very few substitutes. (price goes down, revenue goes down OR price goes up and revenue goes up)

Unitary Elasticity- an increase in sales exactly offsets a decrease in prices and revenue is unchanged (price goes up or down and revenue stays the same)

Methods of Cost-based pricing

(Markup pricing, Break-Even Pricing, Profit maximization pricing) 

Markup Pricing: setting the price where price = markup + cost

Markup on Selling Price = (selling price-cost)/selling price

 Break-Even Pricing- Setting price to cover fixed costs

Break-Even Quantity= Total Fixed Costs/ Fixed cost Contribution

Fixed Cost Contribution= Price- Avg. Variable Cost

Profit Maximization:  Marketers will operate where Marginal Cost = Marginal Revenue 

stages of the product life cycle

competition- high prices may induce firms to enter the market, competition can lead to price wars, global competition may force firms to lower prices

distribution strategy- Manufacturers offer a larger profit margine or trade allowance, use exclusive distribution, franchising, avoid business with price-cutting discounters, develop brand loyalty. Wholesalers/Retailers- sell against the brand (stocking well-known branded items at high prices in order to sell store brandsat discounted prices), buy gray-market goods.

promotion strategy

perceived quality

Establish a pricing goal

Estimate demand, costs & profits

Choose a price strategy

Fine tune with pricing tactics

(Results lead to the right price) 

A basic, long-term pricing framework, which establishes the initial price for a product and the intended direction for price movements over the product life cycle.

(Hard to change price without changing perception of product) 

Choosing a Pricing Strategy

Price skimming, market-penetration pricing, status quo pricing 

should be based on pricing objectives, set a price that provides a perceived value for the defined target market.

Price skimming- (new product pricing) high initial price, innovators and early adopters will stand in line to buy. Successful when inelastic demand, unique advantages/superior, legal protection of product, technological breakthrough, blocked entry to competitors.

Market-Penetration Pricing- Low initial price- hook them in. Attract large number of buyers quickly. Advantages- discourages/blocks competition from market entry, boosts sales and provides large profit increases, can justify production expansion. Disadvantages- requires gear up for mass production, selling large volumes at low prices, strategy to gain market share may fail

Status Quo Pricing- safe like everyone else. Advantages- simplicity, safest route to longterm survival for small firms. Disadvantages- strategy may ignore demand and/or cost 

Premium Strategy- higher price, higher quality  (skimming)

Overcharging Strategy- higher price, lower quality (skimming)

Good-Value Strategy- Lower price, higher quality (penetration)

Economic Strategy- Lower price, lower quality (penetration) 

Product Mix Pricing Strategies

(Price Lining, Captive-product pricing, price bundling) 

1. Price lining- levels of pricing- price points. Different levels of what willing to deal with and pay for.

2. Captive-product pricing- you may have to buy main component and later particular items that go with that unit (razor and blades)

3. Price bundling- combine related goods, sell for one price, "package deals", could be example of co-branding 

1. Discounts, Allowances and Rebates (cash, quantity, seasonal- during non peak), promotion allowance

2. Flexible (variable) pricing- different segments pay different rates, off-peak daily rate changes

3. Psychological (odd-even) pricing- the 99 principle, reference pricing, unit pricing

4. Other pricing tactics- single price tactic, bait pricing, two part pricing, loss leaders (leader pricing) 

A company-wide business strategy designed to optimize profitability, revenue and customer satisfaction by focusing on highly defined and precise customer groups.

To understand customers find who is best fit for us. Looks at customers as data.

Strategy- organize the company around customer segments, encourage and track customer interaction with the company, foster customer-satisfying behaviors, predict future purchases. 

The company customizes its product and service offering based on data generated through interactions between the

Here's what we should be doing; focus on our best customers. Not all customers being the same level of participation to the relationship. 

Touch Points in a CRM System

Channels for Acquiring Data 

Touch points- (one experience can affect the way you think of something) customer registration for a service, completion of warranty card, communication with customer service, customer discussions with sales, delivery and installers

Channels for Acquiring Data- store visits, conversations with salespeople, interactions via the Web, traditional phone conversations, wireless communications 

A data analysis procedure that identifies significant patterns of variables and characteristics that pertain to particular customers or customer groups.

20% of customers are responsible for 80% of revenue (need to make these people happy)

Identify and profile the best customers, calculate their lifetime value, predict purchasing behavior, individual share 

1. Identifies customers most likely to purchase again

2. Identifies and ranks "best customers"

3. Identifies most profitable customers

Best does not always = most $ spent 

Segmenting- divide market based on needs/benefits, demographics, lifestyles, behavioral measures

Targeting- Select most appropriate market(s)

Positioning- Target marketing messages through 4P's (exp. based on GPA) 

To promote culture of customer orientation

To be an advocate for the customer

To assess market attractiveness

To develop firm's overall value proposition, the vision, and articulation of how its proposes to deliver superior value to customers. 

Creating Exchanges

Identity

Relationships

Solving Customer Problems 

How can we make something an experience? Connect with the customer

Provide the consumer with a total product experience that considers all the elements in an offering that encourage or inhibit consumers' interaction with the product 

Marketing Penetration- existing markets and existing products

Product Development- new products, existing markets

Market Development- new markets, existing products

Diversification- new products, new markets 

Tools for Consumer Sales Promotion

Consumer Promotion Objectives 

Coupons and rebates, Premiums (bonus gifts), loyalty marketing programs, contests and sweepstakes, sampling, point-of-purchase promotion

Promotion Objectives- Stimulate inquiries, generating product trial (learn more), encourages repurchase (2 for 1), traffic building (black Friday), increasing rate of purchase (get more while you're there)

Direct Mail

Door-to-Door

Packaging with another product

Retail store demonstration 

Small Redemtion Rates "effort"

Displace Sales- going to buy anyway

Stocking effect- now on sale will buy 

Market Response

Displacement rate, acquisition rate, conversion rate, product line effects 

Redemption Rate: % responding to incentive

Displacement Rate: % of those who would buy anyway

Acquisition Rate- % non-regular buyers who purchase the product during promotion

Converstion Rate: Number of future purchases by new customers

Product line effects: the impact the promotions have on related products 

We loose market share- all others maintain promotions, our firm cut back promotions

HIgher profits for everyone- all others cut back promotions and our firm cuts back promotions

Same market share, profits stay low- all others maintain promotions and our firm maintains promotions

We gain in market share- all others cut back promotions and our firm maintains promotions 

Personal presentations by salesforce for the purpose of making sales/building customer relationships.

Advantages of Personal selling- detailed explanation/demo, variable sales message, directed to quality product, controllable adjustable selling costs, more effective than other promotion in obtaining sale and gaining customer satisfaction

Good if high value product, custom made, technically complex, there are few customers, customers are concentrated 

Generate Leads- advertising, publicity, direct mail/marketing, cold calling, internet web site, referrals, networking, trade shows/conventions, company records

Qualify Leads- recognized need, buying power, receptivity and accessibility

Probe Customer Needs

Develop Solutions

Handle Objections

Close the Sale

Follow up 

Traditional Personal Selling- sell product, focus on closing sales, limited sales planning, discuss product, assess "product-specific needs, "Lone wolf" approach, pricing/product focus, short term sales follow up (sale beneficial)

Relationship selling- sell advice, assistance, counsel, focus on customer's bottom line, sales planning is top priority, build problem-solving environment, conduct discovery in scope of operations, team approach, profit impact and strategic benefit focus, long term sales follow up (market approach) 

The Consultative Salesperson

must know everything about... 

Product or service

Customers

Competition

Industry