The Ten-Day MBA 4th Ed.

by Steven A. Silbiger

  Need for Control. The ability to motivate the channels to carry your product effectively and appropriately enters into the placement decision. The further the manufacturer is removed from the consumer with distributors, wholesalers, and jobbers, the less control the manufacturer has over how a product is sold. Pharmaceutical companies usually have their own sales forces, also called captive sales forces, that are thoroughly trained to provide credible information to doctors. If Merck or Pfizer had to rely on an independent sales force, they would not have absolute control over their training or conduct in the field.

  Margins Desired. The analysis of the channels of distribution helps to determine the potential profits available. Where are the margins taken at each level? Can your company deliver the product through the channels at a competitive price and still reserve enough margin for itself? Based on the available margins, channel decisions can be made. In the case of Bose premium priced headphones and stereos, more selective marketing in corporate stores, print, and other forms of direct marketing allow for Bose to maintain their margins and control their brand’s premium image.

  Product Place Promotion Price

  PROMOTIONAL DECISIONS

  Promotion includes all the advertising and selling efforts of the marketing plan. Goal setting is paramount in developing a promotional campaign. You need to know the mission you want to accomplish before you can begin to draft or spend the promotion budget. The ultimate goal of promotion is to affect buyer behavior; therefore, the desired behavior must be defined. Different products, at different stages of the PLC, with different levels of involvement and complexity, require different promotional efforts to perform different missions. The promotional mission chosen for your product must be consistent with the buying process outlined in your consumer analysis.

  BUYING PROCESS: Awareness

  PROMOTIONAL MISSION: Inform about product, prompt a need message

  BUYING PROCESS: Interest

  PROMOTIONAL MISSION: Provide compelling message, solve a need message

  BUYING PROCESS: Trial

  PROMOTIONAL MISSION: Motivate action

  BUYING PROCESS: Repurchase

  PROMOTIONAL MISSION: Cue to buy, increase usage

  BUYING PROCESS: Loyalty

  PROMOTIONAL MISSION: Reinforce brand or image, special promotions

  Push or Pull Strategy? As with distribution, promotional efforts should be guided by a strategy. Pull strategies are those efforts that pull buyers to the outlets that carry your product. TV pitches that instruct viewers “to ask for Perdue chicken by name at your local grocer” pull consumers to the stores that carry it. Another important mission of promotion is to encourage the distribution channels to stock and sell a product to consumers. Such efforts are a push strategy. Beer distributors, for instance, spend a great deal of their time trying to court bar owners to stock and promote their brew on tap. Most plans have an element of both push and pull strategies. In the beer industry they spend heavily to advertise the brand as well as to gain greater bar distribution.

  To pull buyers to a store or to push the distribution channel to stock and sell, there are five general categories of promotional efforts:

  Advertising

  Personal Selling

  Sales Promotion

  Public Relations and Publicity

  Direct Selling

  Advertising Advertising takes many forms: television, radio, outdoor (billboard), magazines, keyword Internet search, banner ads, pop-ups, e-mail, and newspaper. Two important things to keep in mind are your intended mission and the quantitative measurement of exposure required to accomplish it.

  Please pay attention to the following measurement vocabulary. This is what you pay for when you buy advertising. The tendency for the uninitiated is to listen to the ad world’s babble, not understand it, and buy their wares anyway. Buying advertising is just like buying marketing research—know what and why you are buying—buyer beware.

  Reach and frequency are key quantitative measurements of media goals. Reach is the percentage of the target market who see and hear your promotion or advertisement. Frequency is the number of times they saw or heard it. Marketers refer to the number of times a person is exposed to a message as the total impressions made on that audience. Because of the buying behavior associated with different products, different mixes of reach and frequency are required to induce purchase. When multiplied, Reach × Frequency equals a measure called gross rating points (GRPs). Add the GRPs together and you get total rating points (TRPs). GRP and TRP are the measures by which radio, TV, and outdoor advertising is sold and purchased.

  The desired demographics and segmentation variables of the audiences delivered also enter prominently into the equation. A TV station’s regional golf program that delivers active, middle-aged golfing males with incomes over $100,000 in the Southwest could efficiently be used to advertise a variety of products. A TV program that attracts a muddled mix of demographic audiences is less valuable per audience member. Even if you have the right media vehicle, scheduling is key in reaching your target.

  High GRPs do not guarantee sales. The message delivered is also a key determinant. When advertising people refer to the message, copy (wording), or layout of advertising, they call it the creative, a noun. Ad agency people who develop the ideas are called creatives.

  Magazine and newspaper advertising is purchased based on the size and segmentation variables of their circulations. Magazines have a longer shelf life, but newspapers deliver a much more immediate and focused geographic readership, which is best for sale promotions. Both of these print audiences are bought on a cost per thousand (CPM) readers basis. A comprehensive listing of media and mailing list prices is provided by SRDS (Standard Rate & Data Service) online or in a series of telephone-book-sized volumes.

  A competitive measure of media is share of voice. Using this measure, an advertiser can target a certain percentage of media spending by all competitors within a product category. Advertisers believe that to have an impact through the competitive media clutter and noise, the relative spending level is just as important as the absolute dollars spent.

  Through the clutter, it would have been futile to run a TV ad to promote the tiny coffee brand that I managed during my summer internship. A small competitor had no chance against the likes of Procter & Gamble, Kraft Foods, and Nestlé, who together spend millions. Any affordable ad would have been drowned out by the giants.

  Remember, each medium has its strengths in reaching people. Some are more selective than others. Marketers want to reach their intended targets as efficiently as possible to induce the desired buying behavior.

  Personal Selling. Marketers choose personal selling when they need to make direct contact with the buyer. A salesperson can personalize your message to fit the buyer’s needs and situation and can field objections and questions in this interactive process. This avenue is generally the most expensive element in any marketing mix because of the high cost of labor and commissions paid.

  Managers of products that are new, complex, or expensive find that the benefits of personal selling often outweigh their high cost. Because some target markets are inaccessible by other media vehicles, personal selling is sometimes the only means to reach consumers. Water purification systems, pharmaceuticals, copiers, and industrial products widely utilize personal selling in their marketing mixes. The use of telemarketers has greatly been reduced by the adoption of many do-not-call lists.

  Current theory holds that personal selling is a problem-solving and consultation process. Professor Derek A. Newton of the Darden School at the University of Virginia saw personal selling as having evolved over the years in four stages: Music Man, Animated Catalog, Magic Formula, and Problem Solver. Before World War I it was believed that the “Music Man” approach to selling was the key to success. It was the salesperson’s personality that enabled him to charm his customer into buying. After World War I, the “Animated Catalog” was considered the right way to sell. Vacu
um cleaner salespeople knew all the facts about their products, and their sales presentations were rehearsed catalog readings. During the 1930s the slick pitch or “Magic Formula” was thought to be the best sales approach. Encyclopedia sales reps would control the presentation and lead the customer down a “mapped-out road” to a “sure sale.” Many books currently on the bookstore shelves claim they hold the “secret” of how to close a sale. Today, academics agree that personal selling still requires some element of pizzazz and catalog-like product knowledge, but sales forces must also have extensive knowledge of the prospect’s needs and buying processes to be successful. Salespeople should sell benefits that solve customers’ problems, rather than simply peddling products.

  Sales Promotion. Sales promotion is designed to elicit the desired behavior from the consumer, the sales force, and other channel participants. Sales promotions are designed to complement and reinforce other promotional efforts, especially advertising. Each type of promotion has its own associated vocabulary that you should be aware of. If you are not a marketer, knowing the vocabulary does not make you an expert, but it can sure help you to engage in intelligent marketing conversation, if need be. There are two types of promotions: those directed toward the consumer, and those directed at the distribution channels.

  Consumer sales promotions techniques available are coupons, refund offers, samples, premiums, and contests.

  Coupons are a direct way to pass a price reduction on to consumers. As a manufacturer, if you give retailers a discount in hopes that they will pass it along to consumers, you may be sadly disappointed. Marketers use coupons to encourage trial, brand switching, and brand loyalty. Grocery coupons are most often placed in a special coupon section of the Sunday paper called freestanding inserts (FSIs). The leader in FSIs is Valassis Inserts, which prints almost half of the 332 billion coupons distributed annually in Sunday FSIs. Coupons can also be distributed on a corporate Web site at little cost. Groupon, the social media couponing site, provides daily deals for a variety of services and products.

  Rebates are also used for more expensive items, especially electronics, to reduce their perceived cost to the consumer. Rebates require buyers to complete paperwork, retain receipts, and mail them in. Because of the work involved, even rebates of $50 or more have low redemption rates. Marketers need to estimate the redemption rate and net cost and include the net cost in their marketing budgets.

  Refunds are generally used to accelerate the normal consumer purchase cycles. Refunds are usually used to increase the quantity or frequency of purchase by encouraging buyers to stock up. Battery manufacturers frequently use refund offers. Such offers have been cleverly used to stock up consumers just before a competitor’s promotion or product introduction.

  Samples are a high-cost way of introducing a new product. Sampling requires a cash investment to produce and stock the smaller-sized packages. Samples are properly used for products whose benefits are “sensory in nature” and cannot be communicated effectively by advertising. Sampling may also be effective for products that consumers would view as risky in switching to a new brand, or that may have a high probability of generating word of mouth (WOM) activity after use. Many new shampoos use free or low-cost samples since their benefits are sensory. Consumers are reluctant to risk four dollars to try a whole bottle. Sampling reduces the buyer’s risk of trial.

  Premiums are items offered at low or no cost to purchasers of a product. Self-liquidating premiums are those for which the price charged covers just costs. Hershey’s has periodically offered watches and Christmas ornaments as premiums. To get the goodies, chocolate lovers have to send in wrappers as proof of purchase. Mr. Bubble, the happy pink bubble-bath man, is pictured on inexpensive T-shirts, beach towels, and sweatshirts that are printed on every box.

  Contests and sweepstakes are a popular promotion and the most restricted legally, because they border on gambling. Many contests are conducted by inviting customers to corporate Web sites to play a game and enter contests. A thorough analysis of the game rules and the laws must be conducted to avoid a disaster. State gambling laws must be investigated to ensure compliance. The game rules and odds of winning must also be scrutinized to ensure that the promotional budget will cover the forecasted costs. In 1984 McDonald’s ran a summer Olympics medal game. Every time the United States won, game pieces could be redeemed for free food and other prizes. When the Communist bloc boycotted the games, the United States won most of the medals, and most of the game pieces became winners.

  Trade-directed sales promotions tools include sales contests, point-of-purchase displays, dealer incentives, trade shows, and in-store demonstrations.

  There are many variations on the point-of-purchase display (POP). To get them in the stores requires the cooperation of the trade. On the retail shelf a POP can be a shelf talker, a minibillboard attached to the end of the shelf with a little ad used to attract attention. Freestanding aisle displays and built-in shelf displays are other forms of POP. When a display is at the end of an aisle it is referred to as an end cap. To get those prime sports, the manufacturer must entice the retailer. A marketer can do it by providing a high markup per item or a high turnover on lower-margin items.

  Dealer and employee incentives. Payments made to dealers for marketing support are called spiffs. They can take the form of slotting fees, case discounts, cash payments, free merchandise, or prizes. Spiffs enable the dealer to discount, promote, or justify carrying a product. A manufacturer can also give incentives to the dealer’s employees to place store displays or award prizes for meeting sales targets.

  Trade shows are a way to promote a new or existing product to the wholesalers, dealers, retailers, and distributors. This promotion tries to encourage the channel participants to carry your product. A fledgling start-up company making housewares, for example, would need to attend trade shows to develop the distribution contacts that might carry their products to retail. If you have no trade contacts, you have to develop them.

  In-store demonstrations. Trained experts from the manufacturer are extensively used to promote products that would not otherwise generate consumer interest or be accepted by the trade. Small kitchen gadget hucksters set up demonstration platforms to bring inconspicuous blades to life by creating “beautiful” plate garnishes with ordinary vegetables. The Clinique ladies in their white smocks perform a similar mission for their boxes of “natural” beauty at the cosmetics counter. Many retailers use a DVD player to play a recorded demonstration when a live one is not practical.

  Whatever the sales promotion you choose in a marketing mix, each element must have an explicit marketing mission to justify its cost in the marketing mix.

  Public Relations and Publicity. Public relations (PR) is typically a promotional tool used to communicate to a broader audience. PR is intended to create a favorable climate for your product, not to directly sell it. The list of possible PR targets can include politicians as well as the communities in which a company operates. The PR message can be intended to create goodwill, correct a mistaken impression or factual situation, or to explain a firm’s actions. Sponsorship of prestigious or charitable events or causes is often used to create a halo effect of positive feeling toward a corporation and its products. Hallmark Cards’ sponsorship of television’s Hallmark Hall of Fame aligned itself and its products with the attributes of quality, culture, and good citizenship.

  Because the goals of PR are less defined than a sales target, the results are more difficult to measure. Opinion polls and legislative victories are often used to measure PR success.

  Public relations also include viral marketing. By trying to reach opinion leaders, a marketer can create a buzz about its product without an ad on TV. Generating a positive discussion about your product on blogs, vlogs, podcasts, YouTube, Facebook “likes,” and Twitter “tweets”; in organization newsletters; and on college campuses can launch a product and propel sales. With the advent of the Internet, viral marketing can quickly translate i
nto direct measurable sales via links to commercial Web site stores.

  Publicity, a form of public relations, is any unpaid form of mass media communication about a company or product. It can take the form of a news story or even the appearance of a product in the media. Publicity is a two-edged sword. It is judged as more credible by the public because it is not purchased; however, there is less control over the message. Press conferences, press releases, use by celebrities, and staged events are used to capture the media’s attention. Using a PR agency allows you to tap into their media contacts to capture an audience and hopefully control the impression made about your company or products.

  When tennis star Roger Federer or Rafael Nadal wears Nike shoes and sportswear at the U.S. Open, the TV can’t help but flash Nike on the screen each time he serves and volleys. This network time has great value. If the athlete makes the national evening news or Sports Illustrated, which cost $50,000 per thirty seconds and $320,000 per page, respectively, the value of free media exposure can be great.

  “I HAVE CREDIBILITY, AND FOR THE RIGHT PRICE I COULD BRING IT TO THIS COMPANY.”

  Accordingly, PR executives track their effectiveness by measuring the value of the media time or space captured. Tracking services, such as Burrelles Luce’s press-clipping service for print, report on their clients’ PR and advertising media exposure across the country. Burrelle’s can also track competitors in the same way. Although it is often overlooked in the marketing mix, publicity can often create a tremendous impact if skillfully and creatively orchestrated.