Promotional Strategy It is a luxury to be understood. -- Ralph Waldo Emerson "Let advertisers spend the same amount of money improving their product as they do advertising, and they wouldn't have to advertise it. " --Will Rogers “Half the money I spend on advertising is wasted, and the trouble is, I don’t know which half. ” -- John Wanamaker 1
Why do companies promote? Price D 2 O D 1 Quantity 2
The Marketing Communications Mix Advertising Sales Promotion Public Relations Personal Selling Direct Marketing Any Paid Form of Nonpersonal Presentation by an Identified Sponsor. Short-term Incentives to Encourage Trial or Purchase. Protect and/or Promote Company’s Image/products. Personal Presentations. Direct Communications With Individuals to Obtain an Immediate Response. 3
Relative Importance of Promotion Tools in Consumer vs. Industrial Markets Industrial goods Consumer goods Advertising Sales Promotion Personal Selling Public Relations Relative importance Personal Selling Sales Promotion Advertising Public Relations Relative importance 4
Push Versus Pull Strategy Producer Marketing activities Intermediaries Demand Marketing activities End users Push Strategy Marketing activities Producer Demand Intermediaries Demand End users Pull Strategy 5
Factors in Developing Promotion Mix Strategies Type of Product/ Market Buyer/ Readiness Stage Push vs. Pull Strategy Product Life-Cycle Stage 6
A Framework for Developing Communication Strategy • Target • Person, situation Copy Strategy • Objective • Primary, Secondary • (Cognitive, Affective, Behavioral) • Benefit • Consumer Benefit • Reason To Believe • Message Elements • Tone • Heart Emotional Responses by… • Leverage Point/Driving Point Evaluation Execution • Communication effect • Awareness • Knowledge • Preference • Sales effect • Behavior • Message • AIDA • Promotion mix 7
Three Objectives of Marketing Communication • Build Awareness (cognitive) • Reinforce the message (affective) – Establish and maintain a desired level of retention with respect to image, key benefits, and name recognition • Stimulate Action (Behavior) – Motivate target customers to take a specific action in a relatively short time 8
WHAT ARE THE KEY QUESTIONS IN DEVELOPING AND EVALUATING PROMOTIONS? WHO SAYS WHAT SPOKESPERSON MESSAGE TO WHOM TARGET AUDIENCE HOW Strategy WITH WHAT EFFECT INFORMATION CHANNEL & TIMING ACTION DESIRED 9
Strategy Print Ads that Win vs. Print Ads that Work 1. 2. 3. 4. 5. 6. 7. Keep it simple, stupid. You’re not selling the product; you’re selling the benefits. Use celebrities. Exploit the potential of color. Heighten the contrast. Use children and animals. When the ad has a good deal of copy, make it as inviting as possible. Source: Marketing Tools (!995) 10
Objective: Buyer Readiness States Cognitive Stage Awareness Knowledge Affective Stage Preference Strategy Affective Stage Liking Behavior Stage Conviction Purchase 11
Response Hierarchy Models Stages AIDA Model a Hierarchy-of. Effects Model b Innovation. Adoption Model c Attention Awareness Affective stage Interest Attitude Evaluation Intention Preference Desire Behavior stage Liking Reception Cognitive response Knowlege Interest Communications Model d Exposure Awareness Cognitive stage Strategy Action Conviction Purchase Trial Adoption Behavior 12
External Search Versus Internal Search n Ao = S biei i =1 Evaluations (ei) Salient Choice Outcomes Beliefs (bi) +5 +5 +3 +2 +2 BYU 1 1 2 3 1 3 3 2 1 1 29 High Quality of education Favorable job opportunities Low cost Close to home Ample recreational/cultural opportunities U of U 40 Evaluations: Importance of attribute i in the purchase decision. Beliefs: How well does product/service deliver on attribute i. 1. 2. An understanding of what consumers believe is the starting point for effective advertising. Advertising that is based on accepted consumer beliefs is generally more effective. 13
Decide on Communications Mix Execution Advertising Sales Promotion Public Relations & Publicity Personal Selling Direct Marketing 14
Designing the Message Execution Message Content Rational Appeals Emotional Appeals Moral Appeals Message Structure Draw Conclusions Argument Type Argument Order Message Format Layout, Words, & Sounds, Body Language Message Source Expertise, Trustworthiness, Congruity 15
The language of the media buyer Term What It Means Reach The number of different people or households advertisement. Rating exposed to an The percentage of households in a market that are tuned to a particular TV show or radio station. Frequency The average number of times an individual is exposed to an advertisement. Gross rating points (GRPs) Reach (expressed as a percentage of the total market) multiplied by frequency. Cost per thousands (CPM) The cost of advertising divided by the number of thousands of individuals or households who are exposed. 16
Message Frequency and Message Awareness 17
Krugman’s Three Exposures Theory 1. Familiarization Exposure 2. Evaluation Exposure 3. Confirmation/Reinforcement Exposure 18
Linking Advertising and Brand Value The relationship of the firm’s advertising expenditures to its brand value is captured in the advertising turnover calculation. Interbrand’s valuation Advertising turnover = Brand Value Advertising Expenditures Advertising Age Annual report SEC documentation (Herremans, Ryans, and Aggarwal, Business Horizons, 2000) 19
Linking Advertising and Brand Value: The Study Sample Firms Intel HP Compaq Kodak Polaroid Nike Reebok Kellogg Wrigley Coke Coors Avon Results: Four Categories A. B. C. D. High-Efficiency Brand Enhancers (brand value is rising faster than expenditures) Low-Efficiency Brand Enhancers (expenditures are rising faster than brand value) Brand Future Unknown (brand values are rising and expenditures decreasing) Brand Deterioration (brand values are decreasing and expenditures increasing) (Herremans, Ryans, and Aggarwal, Business Horizons, 2000) 20
90 75 60 45 30 15 0 A. High Efficiency Brand Enhancers Advertising Turnover 90 75 60 45 30 15 0 Coke Wrigley Kellogg 1991 1992 1993 1994 1995 1996 C. Brand Future Unknown Kodak 1991 1992 1993 1994 1995 1996 Advertising Turnover Linking Advertising and Brand Value: The Results 90 75 60 45 30 15 0 B. Low Efficiency Brand Enhancers Avon Nike Compaq HP 1991 1992 1993 1994 1995 1996 D. Brand Deterioration Coors Polaroid Reebok Intel 1991 1992 1993 1994 (Herremans, Ryans, and Aggarwal, Business Horizons, 2000) 21
Linking Advertising and Brand Value: Multiple Measures 1. Advertising turnover represents how well advertising expenditures are turned into brand value. Brand Value Advertising turnover = Advertising Expenditures 2. Brand turnover indicates how effectively the brand value converts to sales. Brand turnover = 3. 4. Brand Sales Brand Value Return on sales indicates how efficiently those brand-generated sales are converted to operating income. Net Income Return on Sales = Brand Sales 4. Brand ROI = Brand Sales Brand Value X Net Income Brand Sales 22
Linking Advertising and Brand Value: Multiple Measures Coke Wrigley Kellogg Percentage of increase in advertising 45 39 10 Percentage of increase in brand value 97 103 27 Average return on sales 15. 6 12. 4 6. 3 7. 9 Average brand ROI 9 5. 8 23 (Herremans, Ryans, and Aggarwal, Business Horizons, 2000)
Advertising Evaluation Advertising Program Evaluation Communication Effects Is the Ad • Communicating Well? Awareness Sales Effects Is the Ad • Behavior Sales? Increasing • Knowledge • Preference 24
Measuring Promotion Results: Is our strategy working? Evaluation 20% not aware 100% Market 80% aware 40% did not try 60% tried Evaluation 1. Share of expenditures 2. Share of voice 3. Share of mind and heart 4. Share or market 80% disappointed 20% satisfied Total Communication Expenditures Awareness Share of Voice Brand Trial Share of Mind and Heart Satisfaction Share of Market 25
Simplified Rating Sheet for Ads Evaluation (Attention) How well does the ad catch the reader’s attention? __20 (Read-through) How well does the ad lead the reader to read further? __20 (Cognitive) How clear is the central message or benefit? __20 (Affective) How effective is the particular appeal? __20 (Behavior) How well does the ad suggest follow-through action? __20 0 20 Poor ad 40 Mediocre ad 60 Average ad 80 Good ad 100 Great ad __Total 26
Marketing Communications and Customer Response Index 27
Media Advertising and Sales Carryover 28
Profiles of Major Media Types Execution Newspapers Advantages: Flexibility, timeliness; good local market coverage; broad acceptance, high believability Limitations: Television Short life; poor reproduction quality; small pass-along audience Advantages: Combines sight, sound, motion; high attention; high reach; appealing to senses Limitations: High absolute costs; high clutter; fleeting exposure; less audience selectivity Direct Mail Advantages: Audience selectivity; flexibility, no ad competition within same medium; allows personalization Limitations: Relative high cost; “junk mail” image 29
Profiles of Major Media Types Execution Radio Advantages: Mass use; high geographic and demographic selectivity; low cost Limitations: Audio only; fleeting exposure; lower attention; nonstandardized rates; fragmented audiences Magazines Advantages: High geographic and demographic selectivity; credibility and prestige; high-quality reproduction; long life; good pass-along readership Limitations: Long ad purchase lead time; waste circulation; no guarantee of position Outdoor Advantages: Flexibility; high repeat exposure; low cost; low message competition Limitations: Little audience selectivity; creative limitations 30
Why the increase in Sales Promotion? • • • Execution Growing retailer power Declining brand loyalty Increased promotional sensitivity Brand proliferation Fragmentation of consumer market Short-term focus Increased managerial accountability Competition Clutter 31
Channels of Sales Promotions Execution MANUFACTURER Push Trade Promotions RETAILER Push Retail Promotions Consumer Promotions Pull CONSUMER 32
Consumer Promotion Execution Consumer-Promotion Objectives Entice Consumers to Try a New Product Lure Customers Away From Competitors’ Products Get Consumers to “Load Up’ on a Mature Product Hold & Reward Loyal Customers Consumer Relationship Building Consumer-Promotion Tools Samples Coupons Cash Refunds Advertising Specialties Patronage Rewards Contests Price Packs Premiums Sweepstakes Games Point-of-Purchase Displays 33
Trade Promotions Trade-Promotion Objectives Execution Trade-Promotion Tools Persuade Retailers or Wholesalers to Carry a Brand Price-Offs Premiums Give a Brand Shelf Space Allowances Promote a Brand in Advertising Buy-Back Guarantees Patronage Displays Rewards Push a Brand to Consumers Free Goods Contests Discounts Push Money Specialty Advertising Items 34
Business-to-Business Promotion Business-Promotion Objectives Execution Business-Promotion Tools Generate Business Leads Stimulate Purchases Reward Customers Motivate Salespeople Conventions Trade Shows Sales Contests 35
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