Promotion Mix

The Promotion Mix
The promotion mix is the specific blend of advertising, public relations, personal selling, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships.

• Advertising
• Sales promotion
• Public relations
• Personal selling
• Direct marketing

Advertising

Developing Advertising Programs

Setting Advertising Objectives

• An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific time.
• Informative advertising is used when introducing a new product category; the objective is to build primary demand.
• Comparative advertising directly or indirectly compares the brand with one or more other brands.
• Persuasive advertising is important with increased competition to build selective demand.
• Reminder advertising is important with mature products to help maintain customer relationships and keep customers thinking about the product.

Advertising strategy is the strategy by which the company accomplishes its advertising objectives. It consists of two major elements:

• Creating the advertising message
• Selecting the advertising media

Creating Advertising Message
Creative concept is the idea that will bring the message strategy to life and guide specific appeals to be used in an advertising campaign.
Characteristics of the appeals include

• Meaningful
• Believable
• Distinctive

Message execution captures the target market’s attention and interest, and can include the following execution styles.

• Slice of life
• Lifestyle
• Fantasy
• Mood or image
• Musical
• Personality symbol
• Technical expertise
• Scientific evidence
• Testimonial evidence or endorsement

Selecting Advertising Media
Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time.
Frequency is a measure of how many times the average person in the target market is exposed to the message.
Impact is the qualitative value of a message exposure through a given medium.
Selecting media vehicles involves decisions that present the media effectively and efficiently to the target customer and must consider the message’s

• Impact
• Effectiveness
• Cost 

Evaluating Advertising Effectiveness

• Communication effects indicate whether the ad and media are communicating the ad message well and can be tested before or after the ad runs.
• Sales and profit effects compare past sales and profits with past expenditures or through experiments.

Personal Selling

Salespeople can include an order taker such as someone standing behind the counter or an order getter whose position demands more creative selling and relationship building.

Salespeople can be more effective than advertising

• Learn about customer problems and adjust the marketing offer and presentation accordingly to meet the special needs of each customer.

Salespeople are an effective link between the company and its customers to produce customer value and company profit by

• Representing the company to customers
• Representing customers to the company

Sales Force Structure

Territorial sales force structure

• Each salesperson is assigned an exclusive geographic area and sells the company’s full line of products and services to all customers in that territory.
• Defines salesperson’s job
• Fixes accountability
• Lowers sales expenses
• Improves relationship building and selling effectiveness

Product sales force structure

• Each salesperson sells along product lines.
• Improves product knowledge
• Can lead to territorial conflicts

Customer sales force structure

• Each salesperson sells along customer or industry lines.
• Improves customer relationships

Complex sales force structure

• A wide variety of products is sold to many types of customers over a broad geographic area and combines several types of sales force structures.

Sales Promotion

• Sales promotion is the use of short-term incentives to encourage purchases or sales of a product or service.
• Product managers are under pressure to increase current sales.
• Companies face more competition.
• Competing brands offer less differentiation.
• Advertising efficiency has declined due to rising costs, clutter, and legal constraints.
• Consumers have become more deal-oriented.

Consumer Promotion Tools

• Price packs offer consumers savings off the regular price of a product.
• Premiums are goods offered either free or at low cost to buy a product.
• Advertising specialties are useful articles imprinted with the advertiser’s name, logo, or message that are given as gifts to consumers.
• Samples offer a trial amount of a product.
• Coupons are certificates that give buyers a saving when they purchase specified products.
• Cash refunds are similar to coupons except that the price reduction occurs after the purchase.
• Contests, sweepstakes, and games give consumers the chance to win something, such as cash, trips, or goods, by luck or through extra effort.
• Contests require an entry by a consumer.
• Sweepstakes require consumers to submit their names for a drawing.
• Games present consumers with something that may or may not help them win a prize.

Direct Marketing

Direct marketing consists of direct connection with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships.

• No intermediaries
• An element of the promotion mix
• Fastest-growing form of marketing

Benefits to Sellers

• Tool to build customer relationships
• Low-cost, efficient, fast alternative to reach markets
• Flexible
• Access to buyers not reachable through other channels

Benefits to Buyers

• Convenience
• Ready access to many products
• Access to comparative information about companies, products, and competitors
• Interactive and immediate

Forms of Direct Marketing

Direct Marketing Tools
Direct-mail marketing involves an offer, announcement, reminder, or other item to a person at a particular address.

• Personalized
• Easy-to measure results
• Costs more than mass media
• Provides better results than mass media

Catalog direct marketing involves printed and Web-based catalogs.

• Benefits of Web-based catalogs
• Lower cost than printed catalogs
• Unlimited amount of merchandise
• Real-time merchandising
• Interactive content
• Promotional features

Telephone direct marketing involves using the telephone to sell directly to consumers and business customers.

• Outbound telephone marketing sells directly to consumers and businesses.
• Inbound telephone marketing uses toll-free numbers to received orders from television and print ads, direct mail, and catalogs.

Direct-response television (DRTV) marketing involves 60- to 120-second advertisements that describe products or give customers a toll-free number or Web site to purchase products, and 30-minute infomercials such as home shopping channels.

• Less expensive than other forms of promotion
• Easier to track results

Kiosk marketing involves placing information and ordering machines in stores, airports, trade shows, and other locations.

Digital Direct Marketing Technologies

• Mobile phone marketing
• Podcasts
• Vodcasts
• Interactive TV

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Pricing Strategies

General pricing approaches

• Cost-based pricing
• Value-based pricing
• Competition-based pricing

 

Cost-based pricing

• Adding a standard markup to cost
• Ignores demand and competition
• Popular pricing technique because:
• Sellers more certain about cost than demand
• Simplifies pricing
• When all sellers use, prices are similar and competition is minimized
• Some feel it is more fair to both buyers and sellers

 

Value-based pricing

• Uses buyers’ perceptions of value rather than seller’s costs to set price.
• Measuring perceived value can be difficult.
• Consumer attitudes toward price and quality have shifted during the last decade.
• Introduction of less expensive versions of established brands has become common.

 

Competition-based pricing

• Going-Rate Pricing:
• Firm bases its price largely on competitors’ prices, with less attention paid to its own costs or to demand.
• Sealed-Bid Pricing:
• Firm bases its price on how it thinks competitors will price rather than on its own costs or on demand.
• May price at the same level, above, or below the competition

Factors to Consider When Setting Prices

Customer Perception of Value

• Value-based pricing uses the buyers’ perception of value, not the seller’s cost, as the key to pricing. Price is considered before the marketing program is set.
• Value-based pricing
• is customer-driven.
• Represents the price ceiling
• Cost-based pricing
• is product-driven.
• Represents the price floor

Customer Perception of Value

• Good-value pricing offers the right combination of quality and good service to fair price.
• Existing brands are being redesigned to offer more quality for a given price or the same quality for less price.

Customer Perception of Value

• Everyday low pricing (EDLP)
• a constant everyday low price with few discounts.
• High-low pricing
• higher prices everyday but frequent promotions to lower prices temporarily on selected items.

Other Internal and External Considerations Affecting Price Decisions

• External factors
• The market and demand
• Types of markets
• Analyzing the price-demand relationship
• Competitors’ strategies and prices
• Other environmental factors

The Market and Demand
Types of markets

• Pure competition
• Monopolistic competition
• Oligopolistic competition
• Pure monopoly

Pure competition is a market with many buyers and sellers trading uniform commodities where no single buyer or seller has much effect on market price.

 

Monopolistic competition is a market with many buyers and sellers who trade over a range of prices rather than a single market price with differentiated offers.

 

Oligopolistic competition is a market with few sellers because it is difficult for sellers to enter who are highly sensitive to each other’s pricing and marketing strategies.

 

Pure monopoly is a market with only one seller. In a regulated monopoly, the government permits a price that will yield a fair return. In a non-regulated monopoly, companies are free to set a market price.

 

Analyzing the Price-Demand Relationship

• Before setting prices, the marketer must understand the relationship between price and demand for its products.
• The demand curve shows the number of units the market will buy in a given period at different prices.
• Normally, demand and price are inversely related.
• Higher price = lower demand
• For prestige (luxury) goods, higher price can equal higher demand when consumers perceive higher prices as higher quality.

Price Elasticity of Demand

• Price elasticity of demand illustrates the response of demand to a change in price.
• Inelastic demand occurs when demand hardly changes when there is a small change in price.
• Elastic demand occurs when demand changes greatly for a small change in price.

 

Factors affecting price elasticity of demand

• Unique product
• Quality
• Prestige
• Substitute products
• Cost relative to income

Factors to consider:

• Comparison of offering in terms of customer value
• Strength of competitors
• Competition pricing strategies
• Customer price sensitivity

Market-skimming pricing
Set a high price for a new product to “skim” revenues layer by layer from the market.
Company makes fewer, but more profitable sales.
When to use:
Product’s quality and image must support its higher price.
Costs of smaller volume cannot be so high they cancel the advantage of charging more.
Competitors should not be able to enter market easily and undercut the high price.

Market-penetration pricing
Set a low initial price in order to “penetrate” the market quickly and deeply.
Can attract a large number of buyers quickly and win a large market share.
When to use:
Market must be highly price sensitive so a low price produces more market growth.
Production and distribution costs must fall as sales volume increases.
Must keep out competition and maintain low price or effects are only temporary.

Market-skimming VS Market-penetration

Product-line pricing
Involves setting price steps between various products in a product line based on:
Cost differences between products
Customer evaluations of different features
Competitors’ prices

 

Optional-product pricing
Pricing optional or accessory products sold with the main product (e.g., ice maker with the refrigerator).

 

Captive-product pricing
Pricing products that must be used with the main product (e.g., replacement cartridges for Gillette razors).

 

By-product pricing
Pricing low-value by-products to get rid of them and make the main product’s price more competitive.

 

Product bundle pricing
Combining several products and offering the bundle at a reduced price.

 

Product-adjustment pricing strategies

• Discount and Allowance pricing
• Segmented pricing
• Psychological pricing
• Promotional pricing
• Geographic pricing
• International pricing

 

 

 

 

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Distribution Strategies

Conventional Distribution Systems

• Consist of one or more independent producers, wholesalers, and retailers.
• Each seeks to maximize its own profits and there is little control over the other members.
• No formal means for assigning roles and resolving conflict.

 

Vertical Marketing Systems

 

Vertical marketing systems (VMS) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of:

• Corporate marketing systems
• Contractual marketing systems
• Administered marketing systems

Corporate vertical marketing system integrates successive stages of production and distribution under single ownership.

Contractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone.
Most common form is the franchise organization

Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power.
Franchise organizations link several stages in the production distribution process.

 

Conventional VS Vertical system

 

Horizontal Marketing Systems

• Horizontal marketing systems include two or more companies at one level that join together to follow a new marketing opportunity
• Companies combine financial, production, or marketing resources to accomplish more than any one company could alone.

 

Multichannel Distribution Systems

• Hybrid marketing channels exist when a single firm sets up two or more marketing channels to reach one or more customer segments.

Disintermediation

• Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones.

 

Number of marketing intermediaries

 

 

Intensive distribution is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible.

 

Exclusive distribution is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute products in territories

 

Selective distribution is a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products.

 

 

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Product Life-Cycle Strategies

Product life-cycle (PLC) is the course that a product’s sales and profits take over its lifetime.

• Product development
• Introduction
• Growth
• Maturity
• Decline

 

 

Introduction stage is when the new product is first launched.

Takes time

Slow sales growth

Little or no profit
High distribution and promotion expense

 

 

Growth stage is when the new product satisfies the market. Sales increase

New competitors enter the market
Price stability or decline to increase volume
Consumer education
Profits increase
Promotion and manufacturing costs gain economies of scale
Product quality increases
New features
New market segments and distribution channels are entered

 

 

Maturity stage is a long-lasting stage of a product that has gained consumer acceptance.
Slowdown in sales
Many suppliers
Substitute products
Overcapacity leads to competition
Increased promotion and R&D to support sales and profits.

 

 

Decline stage is when sales decline or level off for an extended time, creating a weak product.
Maintain the product
Harvest the product
Drop the product

 

 

Modifying Strategies

Market modifying strategy is when a company tries to increase consumption of the current product.

• New users
• Increase usage of existing users
• New market segments

Marketing mix modifying strategy is when a company changes one or more of the marketing mix elements.

• Price
• Promotion
• Distribution channels

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Product, Services and Branding Strategy

Products, Services and Experiences

 

A product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want.

 

Service is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership.

 

Experiences represent what buying the product or service will do for the customer.

 

 

Level of Products and Services

 

• Core benefit: show the accurate time
• Actual product: Swatch, high quality that meet the Swiss watch standard, young and stylish design, packed in high-quality clear plastic box.
• Augmented product: 1 year international warranty, worldwide service center.

 

Product and Service Classification

 

Consumer products:

• Convenience products
• Shopping products
• Specialty products
• Unsought products

Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort.
Newspapers
Candy
Fast food

 

Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style.
Furniture
Cars
Appliances

 

Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
Designer watches
Branded fashion wear
High-end electronics

 

Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying.
Life insurance
Funeral services
Blood donations

 

Industrial products are products purchased for further processing or for use in conducting a business.
Classified by the purpose for which the product is purchased
Materials and parts
Capital
Raw materials

 

 

Branding Strategy: Building Strong Brand

 

Brand represents the consumer’s perceptions and feelings about a product and its performance. It is the company’s promise to deliver a specific set of features, benefits, services, and experiences consistently to the buyers.

 

 

Brand strategy decisions include:

• Brand positioning
• Brand name selection
• Brand sponsorship
• Brand development

 

 

Brand Positioning:
Product attributes
Product benefits
Product beliefs and values

 

Brand name selection
Suggests benefits and qualities
Easy to pronounce, recognize, and remember
Distinctive
Extendable
Translatable for the global economy

 

Brand sponsorship:
Manufacturer’s brand
Private brand
Licensed brand
Co-brand

 

Private brands provide retailers with advantages.
Product mix control
Slotting fees for manufacturers’ brands
Higher margins
Exclusivity

 

 

Branding Strategy: Brand Development

 

Line extensions: occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category.

 

Brand extensions: is using a successful brand name to launch a new or modified product in a new category.

 

Multibrands: New brand names introduced in the same product category. This offers a way to establish different features and appeal to different buying motives.

 

New brand: New brand names in new product categories. This is developed based on the belief that the power of its existing brand is waning and a new brand name is needed.

 

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Target Marketing Positioning for Competitive Advantage

STEPS IN SEGMENTING, TARGETING, POSITIONING

Target Marketing 

• Evaluating Market Segments
• Segment size and growth
• Segment structural attractiveness
• Level of competition
• Substitute products
• Power of buyers
• Powerful suppliers
• Company objectives and resources

Target Marketing: Selecting Target Market Segments

TARGET MARKETING

Target Marketing: Selecting Target Market Segments

Undifferentiated marketing - targets the whole market with one offer.

• Mass marketing
• Focuses on common needs rather than what’s different

Differentiated marketing - targets several different market segments and designs separate offers for each.

• Goal is to achieve higher sales and stronger position
• More expensive than undifferentiated marketing

Concentrated marketing - targets a large share of a small market

• Limited company resources
• Knowledge of the market
• More effective and efficient

Micromarketing - the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.

• Local marketing
• Individual marketing

Differentiation and Positioning

Identifying a set of possible competitive advantages to build a position
Choosing the right competitive advantages
Selecting an overall positioning strategy

Competitive advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices.

Possible Differentiation and Competitive Advantages

Overall positioning strategy (Value proposition)

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Marketing Segmentation

Creating Value for Targeted Customers 4 major steps

Market Segmentation
Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs.

Market Segmentation 4 Major Bases
Geographical segmentation
Marketing mixes are customized geographically

Demographic segmentation
Most popular segmentation
Demographics are closely related to needs, wants and usage rates

Psychographic segmentation
Lifestyle, social class, and personality-based segmentation

Behavioral segmentation
Typically done first


Consumer Market: Geographic Segmentation
Geographic segmentation divides the market into different geographical units such as nations, regions, states, provinces, or cities.

Consumer Market: Demographic Segmentation
Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables.

Demographic segmentation variables
> Age
> Occupation
> Income
> Gender
> Education
> Nationality
> Family size
> Religion
> Generation
> Family life cycle
> Race


Consumer Market: Psychographic Segmentation
Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits.
> Social class
> Lifestyle
> Personality

Consumer Market: Behavioural Segmentation
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.
Occasion
Benefits sought
User status
Usage rate
Loyalty status

Business Market
In addition to the same segmentation variables as consumers, business can also be segmented by:
Customer-operating characteristics
Purchasing approaches
Situational factors
Personal characteristics

BUSINESS SEGMENT – INDUSTRY CATEGORIES

• Aerospace and Defense
• Automotive
• Banking
• Chemicals
• Computer Hardware
• Computer Software
• Conglomerates Consumer Durables
• Consumer Non-Durables
• Diversified Services
• Drugs
• Electronics
• Energy
• Financial Services
• Food and Beverage
• Health Services
• Insurance
• Internet
• Leisure
• Manufacturing
• Materials and Construction
• Media
• Metals and Mining
• Real Estate
• Retail
• Specialty Retail
• Telecommunications
• Tobacco
• Transportation
• Utilities
• Wholesale

International Market
Segmenting international markets
Geographic location
Economic factors
Political and legal factors
Cultural factors

Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries.

Requirement for effective segmentation

Measurable
Size, purchasing power, and profile of segment

Accessible
Can be reached and served

Substantial
Large and profitable enough to serve

Differentiable
Respond differently

Actionable
Effective programs can be developed

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