RM 1

NOTES
1 ANNA UNIVERSITY CHENNAI

RETAIL SALES PROMOTION
UNIT I
RETAIL PROMOTION MIX
1.1 INTRODUCTION
The retail sector in India is highly fragmented with organized retail contributing to only
2% of total retail sales. The retail sector in developed countries was also highly fragmented
at the beginning of the last century but the emergence of large chains like Wal-Mart, Sears
and McDonalds led to rapid growth of organized retail and growing consolidation of the
retail industry in the developed countries. The rapidly rising income levels and accompanying
changes in life style greatly contributed to the growth of organized retail in the west. Today,
in India we see a rise in the purchasing power and growth of a middle class which follow
the western life style. Hence, conditions are conductive for the rapid growth of organized
retail in India. In this context it is a known factor that promotion is a major generator of
demand in retailing. This unit focuses on various elements of retail promotion such as
Advertising, Sales Promotion, Publicity and Personal Selling.
The discussion in this unit is directed at describing how retailers should manage their
firms promotional resources. Retail promotion mix is an integral part of the retailers marketing
strategy. Primarily promotion mix is used to informthe customers about the retailer, the
merchandise and the services. It also serves as a tool for building the store image. Retail
promotion mix has moved on fromthe time when the retailer alone communicated with the
consumers. Today consumer can also communicate and reach the organizations.
Unlike most other business, retailers do not generally take their product to market
except in unorganized retailing. Instead, they rely on consumers to take the initiative of
visiting their stores or placing an order by phone or mail. Most consumers will not take the
initiatives unless they are in some way motivated to do so, before consumers will visit a
particular store. However, they must be aware of its existence, know its location, and have
some idea of what is available inside. They also may want information about price they
must pay, the terms of sale they can expect, services available and store houses. In addition,
consumers need to be promoted that a particular retailer offering is the most suited to their
need.
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So retailers usually employ a combination of advertising, sales promotion, personal
selling and publicity to achieve promotional and business objectives. The degree and nature
of usage of each of the promotion method depend on the objectives of the retail firm,
product, market profile and availability of services. With this idea in background, this unit
will discuss the various components of retail promotion mix, retail formats, promotional
strategy and the factors influencing the promotion strategy.
1.2 LEARNING OBJECTIVES
After reading this unit you should be able
To understand the basic component of retailers promotion mix and discuss the
relationships with other decisions.
To describe the various retail formats through which retailing business can be made
more success.
To explain the various promotional strategies involved in developing a retail
promotion programmed.
To analyze the various factors influencing the promotional strategies for various
promotional mix.
1.3 INTRODUCTORY CONCEPTS OF RETAIL PROMOTION MIX
The word retail is derived fromthe French word retailer, meaning to cut a piece-
off or to break bulk. In most simple terms, it implies a first hand transaction with the
customer. To effectively manage and integrate all of the many retailing functions, it is
necessary to develop an overall plan for the retail organization.
The termretail refers to the sale of goods or commodities in small quantities directly
to consumers. Thus, a retailer is a company or an organisation that purchases products
from individuals or companies with the intent to resell those goods and services to the
ultimate, or final, consumer.
Ultimate consumers, or end users, are families, individuals, and/or households that
plan to consume the products or services themselves. The toothpaste you used this morning,
the shampoo you used last night, and the gasoline that powers your vehicle are all products
that were purchased for personal consumption froma retailer. In addition to selling to end
users, some retailers sell products to other intermediaries, such as other businesses,
universities, hospitals, and so on. These transactions are considered non-retail transactions.
Non-retail transactions, or business sales (or business to business, also referred to as b-
to-b or B2B), are sales in which the purchasers plan to use the products or services in their
business operations or to resell them. The vast majority of retailing occurs in stores
throughout the world. Other venues for retail vending machines, door-to-door sales, cyber
sales (or e-tailing)), party sales (such as Tupperware parties) point of-consumption sales
(such as purchasing drinks on an aero plane sales, infomercial sales, and other creative
methods.
NOTES
Retailing involves a direct interface with the customer and the coordination of business
activities fromend to end right fromthe concept or design stage of a product or offering,
to its delivery and post-delivery service to the customer.
Retailing includes all the activities involved in selling goods or services directly to final
consumers for personal, non-business use. A retailer or retail store is any business enterprise
whose sales volume comes primarily fromretailing. It is also described that:
Any organization selling to final consumers-whether he is a manufacturer, wholesaler,
or retailer-is doing retailing. It does not matter how the goods or services are sold (by
person, mail, telephone, vending machine, or Internet) or where they are sold (in a store,
on the street, or in the consumers home).
Definition of Retailing
At its simplest, retailing is what retailers do. So, we can define retailing by identifying
those features that are common to different types of retailers and how they carry out their
business. However, a definition of retailing also indicates the way we study retailing to
make it more efficient and profitable, and clearly marks its contribution to our society.
Bearing these points in mind, we define retailing in the following way:
Retailing is the set of activities that markets products or services to final
consumers for their own personal or household use. It does this by organizing their
availability on a relatively large scale and supplying them to consumers on a relatively
small scale.
We can note the following points from this definition:
1. Retailers sell to the final (non-business) consumer. The final consumer buys final
products that do not undergo any further change outside the home or non-work
environment. A business or non-final consumer, on the other hand, buys
intermediate products for industrial use to produce other goods or services to
sell to other people. Timber is a final product when it is sold to a householder to
build a fence. On the other hand, timber is an intermediate product when it is sold
to a carpenter to build a fence for a customer.
2. Retailers buy in large quantities and sell in small quantities to consumers, who buy
for their own personal or household use. This differentiates retailers from
wholesalers or other industrial suppliers who also buy in very large quantities and
sell in smaller quantities. Wholesalers usually sell in quantities that are too large for
a buyers own personal, household or internal business use. Their customers are
retailers or other wholesalers, who resell most of what they buy: or else they are
industrial firms that produce their own products or services.
3. Retailers often buy products from a wide variety of distant, even global, sources.
They then resell them through a nearby store, mail order, television or the Internet
and organize the required delivery and collection services. Most product retailers
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no longer sell goods made on their premises. However, some retailers do so, for
instance many small computer shops build or remodel computers to customer
specifications using bought in components and florists build flower collections using
available stocks of flowers.
4. Retailers can sell services. Service retailers cover a very diverse range of activities,
such as garages, restaurants and banks. These usually require additional manual
and technical skills (as in the case of repair services and restaurant services) or
knowledge (as in financial services). However, just like product retailers, they
invest substantial amounts in their facilities and operating systems. These facilities
are only worthwhile if the retailer uses themto deliver large quantities of services
within a given period. They do so by selling relatively small amounts of the services
to large number of consumers.
5. Retailers sell to many different consumers. Retailers are prepared to sell to
whoever will buy their products. They are restricted only by legal restraint, such as
alcohol to minors and by any discriminatory practices they operate. Some
discriminatory practices are illegal, but any discrimination makes it more difficult to
be profitable, because it excludes sales to customers and reduces chances of finding
the best worker for the job.
1.4 COMPONENTS OF RETAIL PROMOTION MIX
By making their targeted customers aware of current offerings, retailers use promotion to
generate sales. This doesnt mean that sales cant occur without using promotion. Some sales
will always take place, even if the retailer doesnt spend any money on promotion. For example,
households close to the retailer may shop there strictly for convenience; passersby might
occasionally visit the store for an impulse purchase. Most retailers, however, use a combination
of location, price levels, displays, merchandise assortments, customer service, and promotion
as a means to generate store traffic and sales.
Retailers do make trade-offs between the elements of the retailing mix. Some retailers,
such as The Limited operate in high-rent prime mall locations and seldomadvertise. The
Limited prefers to use these prime mall locations to generate customer traffic. Most of The
Limiteds promotional expenses are made in combination with other mall merchants using the
malls co-op promotional campaigns. However, although this has been the policy of The
Limited in the past, it is starting to change as the retailer is finding even with its high-rent
locations that it needs to advertise more to help enhance the image of some of its private label
brands. Wal-Mart is another retailer that spends only a small percentage of its sales on
promotion. Wal-Mart believes that lower prices are more effective than location and heavy
promotional expenditures in generating traffic levels. Thus, although direct promotional
expenditures are not always a prerequisite to generating sales, they are a means of achieving
sales above those that could be obtained merely fromoffering a lower price range, having a
better location, or offering outstanding service. After all, without promotion how would the
consumers be aware of these retail offerings. Therefore, many of todays high-performance
NOTES
retailers use promotion to bring traffic into their stores, move the traffic to the various selling
areas of the store, and entice the traffic into purchasing merchandise.
TYPES OF PROMOTION
There are four basic components of promotion: advertising, sales promotion, publicity,
and personal selling. Collectively, these components comprise the retailers promotion mix.
Each component is defined as follows and is discussed froma managerial perspective.
1. Advertising is paid, nonpersonal communication through various media by business
firms, nonprofit organizations, and individuals who are in some way identified in the
advertising message and who hope to informand/or persuade members of a particular
audience; includes communication of products, services, institutions, and ideas. Retail
advertisings function is primarily to informpotential buyers of the problem-solving
utility of a retailers offering, with the objective of developing consumer preferences for
a particular retailer. Retailers most commonly use the following advertising media:
newspapers, radio, television, and printed circulars. Recently, some of the major retail
chains have started using the Internet to support these other media.
2. Sales promotions involve the use of media and non-media marketing press applied
for a pre-determined, limited period of time at the level of consumer, retailer or
wholesaler in order to stimulate trial, increase consumer demand, or improve
product availability. The most popular sales promotion tools in retailing are
premiums, frequent buyer programs, coupons, in-store displays, contests and
sweepstakes, product demonstrations, and sampling.
3. Publicity is non-paid-for communications of information about the company or
product, generally in some media form. Popular examples are Macys Thanksgiving
Day Parade and local retailers supporting various civic and educational groups.
4. Personal selling is selling that involves a face-to-face interaction with the con-sumer.
Personal selling and other services provided by retailers occur when the retailers
promotional efforts cause a shopper to reach a specific selling area.
All four components of the retailers promotion mix need to be managed froma total
systems perspective. That is, they need to be effectively blended together to achieve the
retailers promotion objectives and reinforce each other. If the advertising conveys quality
and status, so must the sales personnel, publicity, and sales promotion. Otherwise, the
consumer will receive conflicting or inconsistent messages about the retailer, which will
result in confusion and loss of patronage.
Promotion in the Channel
The retailer is not the only member of the marketing channel that uses promotion.
Manufacturers also invest in promotion for many of the same reasons retailers do to move
merchandise more quickly, to speed up cash flow, and to better retain customer loyalty.
However, the promotional activities of the retailers channel partners may sometimes conflict
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with the retailers. There are three major differences in the way retailers and manufacturers
use promotion:
1. Product image versus availability: The manufacturers primary goal is to create
a positive image for the product itself and differentiate it fromcompeting products.
For example, when introducing a new product, a manufacturer will attempt to
explain how the product works. Retailers, however, are primarily interested in
announcing to their customers that they have the product available for purchase
at a convenient location(s).
2. Specific product benefits versus price: Manufacturers generally dont care where
customers make their purchases, just so they buy their product. That is why they
promote the benefits of their products. Retailers, however, dont care which brand
the customer purchases. (Remember retailers carry many different manufacturers
brands.) Retailers just want the customer to make the purchase in their store Thus,
in addition to availability; retailers feature the products price in their ads.
3. Focused image versus cluttered ads: In comparison with manufacturers, most
retailers carry a larger variety and breadth of products, whereas manufacturers
produce a greater depth than most retailers carry. Thus, retail ads, which are usually
geared toward short-term results, tend to be more cluttered, with many different
products, as opposed to the manufacturers ad, which focuses on a single product
theme.
Retailers who realize that there are major differences in the way retailers and
manufacturers use promotion will be higher performers than those who dont
understand these differences.
Sometimes, a lack of promotional harmony by channel members results fromother
factors. Consider the case of the automobile channel. Assume that an increase in inflation
has slowed the countrys rate of real economic growth, and as a result the countrys auto
sales are off 10 percent fromlast year. The manufacturer believes that this recession will be
short-lived and therefore does not want to get into a price war by offering any price
rebates or other special promotions from the factory. However, the automobile dealers
believe that the recession will be fairly prolonged. They think that advertising by the
manufacturer should be increased and that special allowances should be given for increased
local advertising. They would also like to see the manufacturer tie in this increased advertising
program with a cash rebate from the factory. Because the manufacturer and dealer have
different beliefs about the economys future, this could lead to serious problems between
them.
A second possible source of problems is when the channel members think that the
chains promotional campaign is a mistake. For example, in 1997, McDonalds, the nations
largest fast-food chain, was forced by it franchisees to cancel its major promotional campaign
just one week into the program. Campaign 55 (McDonalds was founded in 1955)
featured 55-cent Big Macs and the promise that customers would get their orders within
NOTES
55 seconds of paying for them or get a coupon for free merchandise. The franchisees
thought that although such a programwould guarantee success for the franchisor, which
gets a royalty based on sales, it would only lead to hassles with the customers and lost
profits.
Another source of problems among channel members over promotional policies is
the case in which the manufacturer seeks, through the use of promotion, to attract a high-
quality, high-price, high status image to its brand; whereas the retailer wants to be known
as the price leader and advertises that I will not be undersold! Or it can be as simple as
recently occurred when Nissan introduced a new campaign that sought to develop a positive
brand image for its line of cars, but dealers said that the campaign didnt help themsell
cars. Here, the manufacturers and the retailers promotional efforts are not interwoven,
and again a serious conflict can develop between them. Such different perceptions show
why it is important for retailers to develop the cooperative relationship discussed with their
suppliers so that the conflict can be resolved.
Promotional Objectives
To efficiently manage the promotion mix, retail managers must first establish their
promotion objectives. These promotional objectives should flow from their overall
objectives. They should be the natural outgrowth of the retailers operations management
plans. As such, all promotion objectives should ultimately seek to improve the retailers
financial performance, because this is what strategic and administrative plans are intended
to accomplish.
The promotion objectives should relate to financial performance objectives, with a
view to help to improve both long and short - termfinancial performance.
Long Term Objectives
Institutional advertising is an attempt by the retailer to gain long-term benefits by
selling the store itself rather than the merchandise in it. By doing this, the retailers are
creating a positive image for themselves in the consumers mind. Retailers using institutional
ads generally seek to establish two long-termpromotion objectives: creating a positive
store image and public service objectives.
Creating a Positive Store Image
The first objective is to establish or reinforce in the consumers mind the positive
store image that the retailer wants to convey relative to its competitors. Here, the retailer is
seeking to gain that differential advantage by providing a clear positive image that is distinctive
fromother retailers. By providing such an image, the retailer hopes to develop a long-term
relationship with the customer. Two of the most successful retailers in this area have been
Neiman-Marcus and Nordstrom. Today, when consumers think of these retailers, they
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perceive elegantly designed store layouts featuring the top names in fashion backed by
excellent service and a helpful, knowledgeable sales staff. Promotion directed at fulfilling
this objective will have its major effect on improving the retailers long-term financial
performance. However, as you might expect, this type of promotion will also assist the
retailer in the short run, such as when a consumer is seeking to purchase a gift for a special
friend and the retailers ad suggests that perfect product idea. After all, promotional
efforts of a store have been found to be a key predictor of store choice when gift shopping.
Public Service Promotion
The second long-term objective directed at getting the consumer to perceive the
retailer as a good citizen in the community. Retailers may sponsor public service
advertisements to honor local athletes and scholars as well as provide cash and merchandise
to local charities. For example, some retailers offer meeting rooms for use by local civic
organizations; some supermarkets have began publishing consumer news with health,
cooking, safety, and beauty tips; and others provide public service announcements and
sponsor programs on public television stations.
Short-Term Objectives
Promotional advertising, however, attempts to bolster short-termperformance by
using product availability or price as a selling point. The two most common promotional
objectives are increasing patronage of existing customers and attracting new customers.
Possible Promotion Objectives in Retailing
Increased Patronage from Existing Customers
Increased patronage is probably one of the most common promotion objectives
found in retailing. Simply stated, promotion expenditures should be directed at current
customers to encourage themto make more of their purchases at the retailers store. In
other words, promotion attempts to make present customers more stores loyal.
NOTES
Attraction of New Customers
A second major short-termpromotion objective is to increase the number of customers
that can be attracted to the store. One approach is to try to attract new customers fromthe
retailers primary trading area. There are always some households within the primary trading
area that, for a variety of reasons, do not patronize the retailer. Perhaps they do their
shopping at a retailer close to their place of employment or perhaps they simply do not
think that the retailers store is attractive to their tastes. Maybe they once had a bad
experience while shopping there and vowed never to return. A second approach to gaining
new customers is to attempt to expand the trading area by attracting customers from the
secondary trading area. Here, the retailer might want to consider using different media to
expand the geographic coverage of its promotional efforts. A third type of new customer is
the customer just moving into the retailers market area. Mobile consumers, for instance,
are generally more prone to use national retailers, because they are familiar with the stores,
unless local retailers use promotions to informthemof their offerings.
Interdependence
Although promotion objectives can be established to improve either long-or short-
termfinancial performance, programs designed to achieve either objective will benefit the
other as well. Promotion efforts to build long-termfinancial performance will begin to have
an effect almost immediately but also will have a cumulative effect over time. Similarly,
efforts to promote short termfinancial performance will carry over to affect the long-term
future of the retailer.
There are four methods of promotion:
1. Advertising. Non-personal communication using any form of paid space or time
to directly influence customer spending.
2. Publicity. Any communication using an unpaid third party to positively influence
perceptions about the retailer.
3. Sales promotions. Specific, time-limited activity designed to increase theconsumer
demand for specific products or for store items in general.
4. Personal selling. Direct interaction by retail staff with a customer. This may be
face to face, by telephone or through personal correspondence.
The retailer needs to choose the appropriate mix of methods to promote the store in
the best possible way. Advertising, publicity and promotions can all generate external
appreciation of the retailers offering. The retailer can then back these external promotions
with various forms of inshort motion the most important of which is usually personal selling.
The retailer can also support its promotional efforts by various links with Producers and
wholesalers. There are four factors the retailer needs to take into account in planning the
mix of promotional activities:
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1. The retailers goals, which in turn affect promotional goals.
2. Other channel promotional activity, including in-channel promotion.
3. The relative cost-effectiveness of the different methods.
4. The budget available.
Sales Promotion
NOTES
Sales promotion involves any paid non-personal marketing communication activity,
other than advertising, which offers an incentive to induce a desired result frompotential
customers, trade intermediaries, or the sales force. This is sometimes referred to by the
termsales incentive. Sales promotion campaigns will add value to the product because
the incentives will generally not accompany the product but will typically be offered as mail
drops or as coupons to be cut from newspapers, etc. It is usual for a sales promotion
campaign to be used as a temporary offer to the customer in order to stimulate an immediate
response. For example, free samples or money-off vouchers and offers are frequently
used in sales promotion campaigns for brands or companies which need to improve demand
at certain periods. Included in these campaigns are: displays, contests, sweepstakes,
coupons, frequent user (loyalty) programmes, prizes, samples, demonstrations, referral
gifts and other limited duration selling efforts not included in the other techniques - see
summary of types of sales promotion below. Most incentives are planned to be offered on
a short-termbasis only.
The following is a model for Sales Promotion efforts with relevant descriptions.
To supplement the overall effort, it has to be remembered that it is sometimes difficult
to terminate or change special promotions without causing adverse effects on Loyalty
programmes. A sales promotion (or series of promotions) also has to take account of the
likely effect it may have on the image of the brand or outlet due to the negative perception
change which may occur due to association with banal and frivolous promotions.
To evaluate a sales promotion the retailer should consider:
the cost of the promotion in employee time, as well as the cost of any merchandise
giveaway items or promotional literature;
the increase in sales and profit, or improvement in awareness, based upon the
campaign;
whether the campaign had secondary effects of switching demand fromother retailer
products;
Whether there were any additional sales outside of the promotion, due to customers
being attracted to the store.
It is not always easy to isolate the above effects from other factors, but it is always
important to make some assessment of the benefit of different types of promotion.
1.5 RETAIL FORMATS AND PROMOTION STRATEGIES
Forms of Retailing
Many retailers provide services to their customers in traditional ways that require the
retail outlet or shop to be close to its customers and use the traditional methods of service,
with direct interaction between the customer and the sales assistant using the sales. However,
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the development of modern technology is increasing the use of other forms of retailing
either wholly or partly to replace the store and the sales assistant, leading to other, indirect
forms of interaction.
Table: 1.1 Forms of retailing
Near Far
Person to person Store Telephone/television

Not person to person Vending machine Mail order/email/Internet
Retail Formats
The category of specialist and non-specialist retailers is a relatively simple way of
dividing types of stores. However, from a customer point of view the sales appeal of a
particular store is related to the way the retailer presents the store. The retail format is the
store package that the retailer presents to the customer. The retailer uses the store to give
out messages to customers about the products and services that are available as the retailer
may offer to the customer.
Retail formats can be defined according to different attributes
Location. Store location significantly affects customers expectations. Stores in
out-of-town shopping centres will have to offer a superior selection to attract
customers. For the factory outlet, the attraction must be a suitable range of high-
class brand names at bargain price; for the store at an out-of-town retail centre
such as Meadow hall, the expectation is one of quality and range.
Size: The size of store affects customer expectations as to the range of products
stocked. Small boutiques will be expected to stock an interesting variety of a
limited assortment of products.
Merchandise. This has a number of aspects that the retailer needs to take note of:
Product mix: the combination of merchandise in a unit. Some stores will
keep to a major category such as groceries. Other stores will scramble
merchandise by mixing food and major non-food items such as electrical
products
merchandise assortment: choices of merchandise within a classification
breadth: measured by the number of different merchandise brands stocked
Depth of merchandise: measured by the average number of stock-
keeping units (SKUs) within each brand.
NOTES
Price. A supermarket is expected to charge low prices and offer a wide range and
deep assortment. Discount stores are expected to provide relatively limited ranges
at lower prices. Specialist shops are expected to provide a comprehensive range
of products. Specialist food shops are expected to charge relatively high prices.
On the other hand, specialist non-food shops may charge high or low prices
depending on the category of product that they are selling.
Atmosphere and service. Sense of quality or low price; full service or limited
services are all signals that customers pick up and use in deciding where to shop.
The limited space in the store means that the retailer has to trade off a greater offering
in one sense against a reduced offering elsewhere, unless it is willing to compromise on the
spaciousness of the store either through using narrow walkways or high shelving. There
are a number of different retail formats and they include the following types of store:
Neighborhood-based stores that relate mainly to customer convenience.
These can be:
General stores: old-fashioned, with low levels of self-services. Their
market is based on convenience. They are most often classified as CTN
variety store - confectionery, tobacco and news.
Variety stores: these will tend to have mixed or scrambled merchandise,
the range of which will vary with the size of the store.
One-stop shopping stores. These stores are designed to provide a complete
shopping service for a major part of consumer shopping. They include:
Supermarkets: mostly for groceries, but increasingly for certain types of clothing
and some home wares.
Department stores: now relatively old-fashioned and losing market share to
specialist stores, but originally able to provide a comprehensive service for quality
value shopping.
Hypermarkets and superstores: French and American-based formats
respectively, providing a range of shopping requirements under one umbrella.
Specialist stores. These may be located in suburban or inner city districts
to take advantage of low rents but their markets are at least the whole
town. These include small computer shops, fancy dress hire and hobby
shops.
Mass merchandisers. These provide a comprehensive range within
particular product areas; also known as category killers.
Discounters. These include:
Discount stores: these sell limited lines at low prices; stock may change according
to buying opportunities; these may be suburban, town centre or out of town,
according to size and merchandise.
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Off-price stores: such as factory outlets and retailers secondary stores that sell
overruns, seconds, discontinued lines. Again the retailer varies stock according to
buying opportunities. These may be situated out of town or at edge of town to
take advantage of lower rents and easier access.
Warehouse clubs: these are usually located off town centres to take advantage
of lower rents, often using non-retail buildings.
Promotion depends on communicating messages to customers (and other interested
parties). These messages are appropriate to the target; markets when they:
take account of what target customer segments believe about the store
convey what the retailer wants themto believe about the store.
A format is defined as a type of retail mix used by a set of retailers. It is a place,
physical or virtual, where the vendor interacts with its customer. The store format depends
on the mix of variables such as assortment, price, transactional convenience, and experience
that retailers use to develop their business strategies.
Each retailer needs to evaluate the enablers and deterrents for succeeding in the
marketplace. This primarily involves identifying the key drivers of growth, the shoppers
profile, and shopper expectations. It also requires the retailer to evaluate the nature of
competition and challenge in the marketplace. The retailer then decides the elements of the
retail mix to satisfy the target markets needs more effectively than its competitors. The
choice of retail mix elements enables it to decide the type of format or structure of business.
Classification of Formats
The term retail institution refers to the basic format or structure of a business.
Classification of retail institutions is necessary to enable firms to better understand and
enact their own strategies: selecting an organizational mission, choosing an ownership
alternative, defining the goods and service category, and setting objectives. Three categories
of retail institutions emerges. The classification is not mutually exclusive; that is, an institution
may be correctly placed in more than one category. For example, a department store unit
may be part of a chain, have a store-based strategy, accept mail order sales, and have a
website.
Ownership-based Classification
Retailing is one of the few sectors where entrepreneurial activity is extensive. More
than 80 per cent of all stores across the world operate with one outlet and over one-half of
all firms have less than two paid employees. Retail firms may be independently owned,
chain owned, franchisee operated, leased departments, owned by manufacturers or
wholesalers, or consumer owned. From a positioning and operating perspective, each
ownership format delivers unique value. In order to be successful, retailers need to keep in
mind the strengths and weaknesses inherent in each of these formats.
NOTES
Independents
An independent retailer owns a single retail unit. Independents account for more than
80 per cent of the total retail establishments. However, their share varies based on the
development of the economies. While in the US these firms account for just 3 per cent of
the total US store sales, in developing countries such as India, their share is almost 98 per
cent. A majority of themare run entirely by the owners and their families and have no paid
workers The high number of independent retailers is associated with the ease of entry into
the marketplace, owing to low capital requirement and simple licensing procedures. This
creates a very fragmented market in many product categories. For example, in the grocery
store category in the US, where large chains are quite strong, the five largest grocery
retailers account for only about 22 per cent of sales. A similar large format in India contributes
less than 3 per cent of the total retail sales. The Indian retail market has around 1.2 crore
outlets and has the largest retail outlet density in the world. Most of these outlets have very
basic offerings and offer over-the-counter service. These are highly competitive stores due
to cheap land prices and labour.
There is fierce competition among firms, resulting in a high rate of failure. It is estimated
that one-third of new retailers in the US fail to survive their first year, and two-thirds fail to
continue beyond their third year. Most of the failures involve independents.
Independents enjoy a great deal of flexibility in choosing retail formats and locations.
They look for smaller consumer segments and choose a location so that they can serve the
customers with a targeted merchandise mix, prices, and other services. A large number of
themtend to specialize in a particular product or service category. These stores are labour
intensive with a very low level of technology. These are owner-managed establishments
with the owner taking all the decisions. Most of the work related to buying, merchandising,
and fund management are carried out by the owner. Independents tend to allocate limited
time and resources to long-term planning. Other people in the store are used mainly for
fetching merchandise and managing the racks.
While they have several advantages, independents have limited bargaining power
with suppliers as they often buy in-small quantities. They are largely influenced by the other
channel members. Due to low economies in buying and maintaining inventory, the
transportation, ordering, and handling costs are higher. To overcome this problem, a number
of independents formbuying groups. To offset the disadvantage of economies, these retailers
offer complementary merchandise and services. Compared to other formats, independents
tend to use less of advertising and more of personal and point of purchase (Pop)
communication. The most common advertising media in India are the free standing inserts
in newspapers. Since most independents offer home delivery, the delivery person becomes
another source of information. The personal attention paid to the customers by the owner
is the most potent tool for customer retention.
DBA 1738
NOTES
Chains
A chain retailer operates multiple outlets (store units) under a common ownership and
name. Retail chains can range from comprising two stores to over 1,000 stores. Some
retail chains are divisions of larger corporations or holding companies. In developed
economies, they account for nearly a quarter of retail outlets and over 50 per cent of retail
sales.
Chain retailers have several advantages. They enjoy strong bargaining power with
suppliers due to the volumes of purchases. They generally bypass wholesalersmany of
thembuy directly fromthe manufacturers. Suppliers service the orders fromchains promptly
and extend a higher level of service and selling support. New brands reach these stores
faster. Most of these chains sell private brands. Wider geographic coverage of markets
allows chains to utilize all forms of media. Most chains invest considerable time and resources
in long-termplanning, and in monitoring opportunities and threats.
Chain retailers suffer fromlimited flexibility as they need to be consistent throughout
in terms of prices, promotions, and product assortments. They have high investments in
fixed assets and rent, product assortments, and employees. Due to their spread, these
retailers have reduced control, poor communication, and time delays. Thus, such retailers
focus on managing a specific retail format for a better strategic advantage and increased
profitability. They use innovative strategies to manage costs. In India, chains like Subhiksha
implement just-noticeable changes with respect to kiranas and manage to differentiate
themselves at a low cost.
Franchising
Franchising is one of the most common modes of expansion in retailing. More than
one-third of all retail sales are made by franchisees. It signifies a contractual agreement that
allows the franchisee to operate a retail outlet using the name and format of the franchiser.
The franchisee pays a fee and royalty on all proprietary for operating a store on behalf of
the franchiser. The franchiser provides assistance in locating and building the store, developing
the products and services sold, management training, and advertising. In return, the
franchisee operates the outlet based on the norms and practices laid down by the franchiser.
There are two types of franchising: product or trademark franchising and business
format franchising. In product or trademark franchising, the franchiser allows the use of the
identity but does not control the operations. The franchisee may draw up certain operating
rules in consultation with the franchiser. In a business format franchising arrangement, the
two parties enter into a symbiotic relationship. The franchiser draws out the strategic plans
and lays the procedures for operations. The aim is to deliver similar service across all
outlets. The franchisees are responsible for the operations and profitability of the stores
under the given guidelines. For instance, in the convenience stores located at the BP petrol
NOTES
stations, the merchandise mix, mark-ups, and Plano grams of the stores are decided by the
company. The franchisee can change the merchandise mix to the extent of 20 per cent only
to suit the local requirements.
Due to its several advantages to franchisees as well as franchisers, franchising is one
of the most popular formats. Franchisers gain a wide presence quickly and with less
investment. It improves cash flow as money is obtained fromfees, royalties, and merchandise
sales. Individual franchisees can become part of a chain and take advantage of the economies
as well as knowledge of the franchiser with relatively small capital investment. Since
franchisees are owners and not employees, they tend to bring their entrepreneurial skill in
growing the business. Franchisees may also have to face certain disadvantages. The
agreement does not allow any territorial exclusivity and hence franchisers can open new
stores in the same trading area, leading, many times, to over-saturation. On the other hand,
bad franchisees can harma retailers overall reputation. Ineffective franchisees impact the
profitability and may lead to a network with a long tail.
Leased Departments
A leased department is a department in a retail store rented by a manufacturer. The
manufacturer is responsible for running the department. It pays the store a rent for using
the premises. Leased departments are run on similar lines as an exclusive company store,
except that they are located in another store. The leased departments are generally given
to non-core product lines. Some common examples of leased departments are food courts,
studios, and banks. They require a different set of skills that the main store personnel may
not posses and hence complement each other despite being independent. Leased
departments help the stores in generating greater traffic and providing one-stop shopping.
This arrangement reduces expenses as many of them are shared. However, there may be
inflexibility due to the restrictions imposed by the operations of the main store. Also, the
main store may seek to replace the existing lessee with newer companies and hence always
demand a rise in rent even when lessees are successful.
Consumer Cooperatives
A consumer cooperative is a retail firmwhere consumers invest in the enterprise. The
profits are distributed among the members as dividends. Consequently, even when these
stores sell at the same prices, consumers tend to gain. The stores are managed by elected
officials. They are started mainly to guard against the malpractices that many retailers
indulge in terms of higher prices or inconsistent quality. Consumer cooperatives are limited
in number because consumers are usually not experts in buying, handling, and selling goods
and services, and the cost savings and low selling prices have not been as expected in
many cases. Many of them also become a hotbed of politics.
DBA 1738
NOTES
Store-based Classification
Retail institutions may be classified on the basis of store-based strategy mix and
divided into food-oriented and general merchandise retailers. Selected aspects of the strategy
of store-based retail institutions.
Food-oriented Retailers
The major strategic formats used by food-oriented retailers are convenience stores,
conventional supermarkets, food-based superstores, combination store box (limited line)
stores, and warehouse stores.
Convenience Stores: A convenience store is a neighborhood store. These stores are
also known as kirana stores in India. Ease of shopping personalized services are the
major reasons for the patronage of these stores even when they charges average to above
average prices and carry a moderate number of items. They stay open for long hours and
provide an average atmosphere. The service levels are moderate within the store, although,
in India, they provide home delivery and credit as well. Convenience stores are often
referred to as mom-and-pop stores. They are visited for fills merchandise, and emergency
purchases. Most customers shop at least two to three times a week at these stores. These
stores carry up to 1,000 stock-keeping units (SKU). In India, they are generally over-the-
counter (OTC) serviced outlets convenience stores face most competition from
supermarkets that have started providing longer hours and better stocks of non-food items.
Conventional Supermarkets: A conventional supermarket is a self-serve food store
offering wet and dry groceries and with a limited range of non-food items, such as health
and beauty aids and general merchandise. They carry 5,000 to 10,000 SKUs. They are
chosen due to variety, self-service, and promotions. Self-service allows supermarkets to
cut costs as well as increase volume. The conventional supermarket was once the most
common format.

However, competition fromother formats due to different value drivers,
such as better prices fromhypermarkets and better service from kirana stores, has led to
a reduction in the number of such stores in developing markets. India, however, is witnessing
growth of this format.
Hypermarkets: Hypermarkets are combination stores that unite supermarket and general
merchandise sales in one store, with the latter typically accounting for 25-40 per cent of
total sales. Consumers choose them for one-stop shopping and do not mind traveling to
visit these stores. Hypermarkets achieve operational efficiencies and cost savings through
their large-scale operations. Impulse sales are high in such stores, even when the visit is
planned.
Box (limited-line) Stores: The box (limited-line) store is a food-based discounter that
focuses on a small selection of items and few additional services. The merchandise consists
of few or no refrigerated items and few SKUs and brands per item. Items are displayed in
NOTES
cut cases. Customers carry the merchandise in their own bags. Box stores depend on low-
priced private label brands. They aim to price merchandise 20-30 per cent below that of
supermarkets. They are very similar to convenience stores, except in terms of merchandise,
price, and service.
Warehouse Stores: A warehouse store or club is a retailer that offers food and general
merchandise with limited services and at low prices, mainly to other retailers, although the
final consumers can also buy directly from these stores. These stores appeal to price-
conscious consumers who do not mind buying in large quantities and stocking them at
home. Warehouse stores are membership-based retail outlets. Such stores are large in
size and are generally located in low-rent areas. The store layout is simple and race-track
type. As in a warehouse, the aisles and racks are large, suitable for large trolleys to move
around. The proportion of private brands in such stores is higher. The assortment is planned
on the basis of prices and availability of merchandise. Customers may not get the same
brand or SKU of merchandise in every visit.
General Merchandise Retailers
The major formats used by general merchandise retailers are department stores, full-
line discount stores, specialty stores, off-price stores, variety stores, and flea markets.
These are discussed below.
Department Stores: A department store is known for its large assortment and service.
The goods and services are organized into separate departments, with each department
looking after its own operations. These stores cater to customers who are not price-
conscious and are ready to pay for the service. Ambience plays a very important role in
such stores. These stores offer a full range of products and services. They offer branded
products as well as store brands that are known for quality. They have well-planned
merchandise return policies and run loyalty programmes. These stores are the anchors in a
shopping centre or mall. They help in attracting very high traffic. Conversion rates are low
in such stores. A department store with 30 per cent conversion rate is considered very
successful. These stores have to face competition fromall formats as they deal in several
products and services.
Full-line Discount Stores: A full-line discount store is known for offering an assortment
at a price that is discounted up to 50 per cent of the prices charged by department stores.
It targets the mass market that looks forward to the best bargain. It is likely to carry the
range of merchandise similar to a departmental store. It reduces its costs through a very
low level of service, private brands, and Spartan fixtures and ambience. Competition is
forcing these stores to improve the experience and service to the customers without
compromising on the price.
DBA 1738
NOTES
Specialty Stores: A specialty store deals in a specific product or service. Specialty stores
also provide a high level of service to their customers. These stores are found in medicine,
books, photography, toys, jewellery, hardware, and home improvement products. Category
killers and do-it-yourself (DIY) stores belong to this category.
A category killer is a specialist discount store. It attracts customers by offering a
particular product at the lowest price and the largest assortment. Category killers are
known to kill brands by making price the most important buying consideration. In the
process, they commoditize the category. According to a report in the European Retail
Digest, the category killer format is burnt out due to increasing competitive intensity. These
retailers concentrate on reducing costs by increasing operational efficiency and expanding
into less competitive international markets. Although they are generally large in size, some
category killers are choosing to downsize their format to make it fit small towns, though to
a mixed result.
Do-it-yourself stores are a popular format, but are yet to find success in many parts
of the world. These stores are category specialists who offer equipment and material mainly
to contractors to make home improvements. They look like warehouse stores. Salespersons
are available to assist customers in selecting merchandise through demonstrations and
workshops. Individual customers also buy fromsuch stores. One such store that has made
DIY the core benefit and leveraged it to become one of the largest retailers is IKEA-
Unlike warehouse stores, it is a place where customers can be creative and choose what
they visualize with the help of design consultants.
Off-price Stores Off-price retailers sell branded merchandise and designer labels at
a low price. They generally offer a range of out-of-season designs, seconds, and order
rejects. The buying is totally opportunistic, though many of themhave evolved buying
strategies that establish long-termrelationships with suppliers. Three special types of off-
price retailers are factory outlets, closeouts, and single-price retail stores. Off-price
retailers are affected most by discount stores and better planning by the manufacturers.
However, the unpredictable nature of fashion products results in excess stock and rejects.
Factory outlets have become popular formats mainly due to the trend of out-of-town
shopping coinciding with the rise of discount formats, creating a climate suitable for the
growth of value retailing, and the relaxation of planning guidelines for the development of
new out-of-town retail formats.
Variety Stores A variety store handles a wide assortment of inexpensive and popularly
priced goods and services, such as stationery, gift items, womens accessories, health and
beauty products, toys, imitation jewellery, and greeting cards. They do not carry full product
lines. Transactions are often on a cash basis. They face competition mainly fromspecialty
stores, discount stores, hypermarkets, and closeout off-price retailers.
NOTES
Flea Markets A flea market is a formof traditional street selling. It is a place with
many retail vendors offering a range of products at lower prices. Shoppers pick and sample
the products. Bargaining for prices is common. These markets are located mainly in places
where there is high traffic or people come together for a function or an event at a flea
market, individual retailers rent space based on the duration of occupation, which could be
on a daily, weekly, or seasonal basis. However, there are many flea markets that are
permanent in nature and become landmarks of the town. They have found a place on the
web too, with offers fromeBay and Amazon.coms shop.
Non-store-based Retailers
Non-store retailing is a formof retailing in which sales are made to consumers without
using physical stores. Non-store retailers are known by the mediumthey use to communicate
with their customers, for example, direct marketing, catalogue stores, vending machines,
and e-tailing. Non-store retailing formats are patronized by time conscious consumers,
consumers who can not easily go to stores, and compulsive buyers. Most non-store retailers
offer consumers the convenience of making purchases anytime throughout the year and
delivery at a location and time of their choice.
Non-store sales are now growing at a higher rate than sales in retail stores. The high
growth rate is primarily due to the growth of electronic retailing. The growth of sales in
catalogue stores and other non-store retailing formats such as TV home shopping, direct
selling, and vending machines is slower.
Vending Machines
A vending machine is a retailing format involving coin or card operated dispensing of
goods (such as beverages) and services (such as life insurance sales at airports). It eliminates
the need for sales personnel and allows for round-the-clock sales. Machines can be placed
wherever they are most convenient for the consumersinside or outside a store, in a hotel
corridor at a station, airport, or a street corner.
Although many attempts have been made to vend other products beverages and
food items remain the largest category. Hotels, restaurants, and train stations are highly
visible spots for vending, but vending account for a small proportion of sales. High priced
items have not sold well through vending machines because too many coins are required
for each transaction and many vending machines are not equipped with currency note
changers. Many consumers are reluctant to purchase more expensive items fromvending
machines as they cannot see them displayed or have them explained, and there is the
difficulty of returning unsatisfactory merchandise. In evolved markets, vending machine
sales have experienced little growth over the past five years, largely due to the changes in
the workplace.
DBA 1738
NOTES
To improve productivity and customer relations, vending machine retailers use
microprocessors to track consumer preferences, trace malfunctions, and record receipts.
The devices transmit data back to the host computer. This data is analyzed and
communications are sent to route drivers, informing themof stock-outs and malfunctions.
Some machines even have voice synthesizers. Video kiosks enable consumers to assess
the merchandise and also use their credit cards to make a purchase. In India, vending
machines are at a very nascent stage. Almost all of themare operated by an attendant even
coffee machines are operated with assistance. Companies like Cadburys and Malayalam
Manorama (a newspaper publishing house) have installed themat places that attract a lot
of traffic, such as at the airport. However, sales fromthese are limited.
Electronic Retailing
Electronic retailing, also called e-tailing, online retailing, or Internet retailing, is a retail
format in which the retailer and customer communicate with each other through the Internet.
After an electronic dialogue between the retailer and customer, the customer can order the
merchandise. The merchandise is then delivered at an address of the customers choice.
Started on venture capitalist (VC) or initial public offering (IPO) money, e-tailing had
attracted a lot of hype by 1999. Consumers were thought to be ready to make a deliberate
choice of buying frome-tailors rather than retailers. Electronic retailing seemed to fulfill the
consumer dreamof no queues, no geographic barriers, low prices, and unlimited selection
what retailing had failed to deliver. However, e-tailing ended up disappointing consumers,
who found that traditional shopping was easier. Ernst & Young statistics for the 1999
Christmas season revealed that US online buyers spent only 26 per cent of their holiday
spending (averaging $1,080 per capita) online, while they devoted 67 per cent of their
total holiday expenditure to in-store purchases, and the remaining 7 per cent on catalogue
products. More than 90 percent of e-tailers closed down in the period fromthe end of the
2000 holiday season to January 2001. E-commerce witnessed the collapse of several
online grocers, drug stores, auto dealerships, pet supply stores, and other budding e-
commerce ventures, and hundreds of dotcominvestors abandoned their dreams of getting
rich quick with e-commerce.
However, retail e-commerce sales grew to $7.5 billion, up 24.7 per cent in the second
quarter of 2001, compared with just under $6 billion in the second quarter of 2000. It is
expected that online retail sales shall exceed $30 billion by 2007. European customers are
likely to spend more money on the Internet than American customers. More than 5 per
cent of grocery shopping would be carried out on the Internet. In the UK, this figure is
likely to be 7 per cent, whereas the Nordic countries may buy 6 per cent of their grocery
through the Internet. France and Germany would account for more than 3 percent of the
sales on the Internet in 2007. The present players in the market are trying to learn the
lessons from the failures and success of extinct and surviving e-commerce pioneers.
NOTES
The Internet can serve one or more of the following roles for a retailer:
project a retail presence
generate sales as the major source of revenue for an online retailer or as a
complementary source of revenue for a store-based retailer
enhance the retailers image
reach geographically dispersed consumers, including foreign ones
provide information to consumers about the products carried, store locations, usage
information, answers to common questions, customer loyalty programmes, and so
on
promote new products and fully explain and demonstrate their features
furnish customer service in the formof e-mail, hot links, and other communication
be more personal with consumers by letting thempoint and click on topics they
choose
conduct a retail business in a cost efficient manner
obtain customer feedback
give special offers and send coupons to web customers
describe employment opportunities
present information to potential investors, potential franchisees, and the media
The role assigned to the web by a given retailer depends on whether it is predominantly
a traditional retailer that wants to have a web presence or a newer firmthat wants to derive
most or all its revenues fromweb transactions.
Forrester Research forecasted that, in 2007, 13 cent of US retailing will be conducted
via the Internet. Non-US markets account for about 30 per cent of the e-commerce industry.
In India, non-store retailing represented by direct selling and e-tailing is estimated at Rs
1,100 crore. Although only 19 per cent of all retailers have an e-retailing initiative, the
number of retailers with plans to venture into e-tailing within one year and those with no
plans are almost equal. Significantly, 10 per cent of retailers have discontinued their e-retail
initiatives. The main reason for retailers to stay away from e-tailing is predominantly non-
viability of business and resource constraints. It is estimated that 5 per cent or more of
retail sales of goods and services such as apparel, banking, books, computer hardware
and software, consumer electronics, gifts, greeting cards, insurance, music, newspapers/
magazines, sporting goods, toys, travel, and videos will be made online.

It is believed that,
the case of products where it is difficult to provide touch and feel information electronically,
such as clothing, perfumes, flowers, and food, electronic retailers may not be successful.
Branding may help overcome many of the uncertainties in purchasing merchandise without
touching and feeling it.
DBA 1738
NOTES
In some products and services, such as travel or hotels, electronic retailers have been
able to provide superior information than store retailers. The critical issue related to selling
successfully for electronic retailers is whether they can provide enough information prior to
the purchase and make sure that the customers will be satisfied with the merchandise once
they get it. There are many buying situations in which electronic retailers can provide sufficient
information, even though the merchandise has important touch and feel attributes, as in
case of books and music.
According to the Ernst & Young Global-Online Retailing Report, the main reasons
that non-buyers avoid buying online are: discomfort in sending credit card information;
preference for seeing the product before purchasing; no existence of credit card; insufficient
information about products to make decisions; lack of confidence in online merchants; and
non-availability of the opportunity to talk to sale persons. In addition, the main concerns of
online buyers are overly high shipping costs; need to try for fit in the case of apparel; high
prices; inappropriateness of the format for large, perishable, and luxury items; need to feel
and see; and concern of privacy. The report also indicated that consumers restrict their
online shopping due to price, security, and ease of navigation.
E-tailers have high fulfillment costs. It could be as high as US$16 per order. Lack of
scale makes the business unprofitable. Poor inventory management also causes major
losses. E-tailing also involves higher marketing costs. According to Thomas Weitzel Partners,
where as a superstore spends an average of US$2.50 promoting a product, e-tailers
spend US$17.29 per product Also, experienced offline brands spend about 18 per cent
less than start-ups on establishing retail websites. Most consumers still need to be persuaded
to go online and, at the same time, almost all e-tailers lose money on every customer. Their
customers generate too few orders and too little profit per order to cover the costs of
winning them, which can be as high as 65 per cent per order. According to a study by
McKinsey in July 2000, e-tailers would need efficient order fulfillment processes, average
orders of at least US$100, and gross margins of at least 25 per cent to achieve a comfortable
contribution on each transaction E-tailing Myths The common myths earlier were that
online selling required low investment and low cost and hence had no entry barriers and it
was easy to succeed. There are some other myths that can mislead e-tailers while managing
e-commerce operations.
Stickiness is good: Many sites aspire to keep customers on the site as long as possible
by adding features and design navigation. On the contrary, it has been observed that
customers would rather complete their purpose than waste a lot of time on a site when
looking for a particular product. Their behavior has been found to be very goal oriented.
More is better: Some sites try to attract customers with flashy graphics, animation, and
sound effects. A recent survey fromJupiter Media Matrix found that visitors were twice
more likely to return to a site with faster loading pages than to sites that provided rich
NOTES
media. It also found that 59 per cent of those surveyed would be more likely to return to a
site that offered more product information.
Personalization drives profitability: Personalization was supposed to be the key to
business-to-consumer (B2C) e-commerce. However, personalization per se does not help
to complete sales. Customers buy a complete offer fromthe retailers. Also, in many cases,
customers purchases may not reflect their interests. Instead of investing in expensive
personalization technology sites, e-tailers would be better off devoting their energies to
proper merchandising by answering questions and arranging items logically.
E-commerce cannot make money: E-commerce is a high investment business requiring
substantial investment to set up the website, the software for data capture, records, and
interactive systems for customer dialogue. These are sometimes underestimated and often
cause downfalls. However, these are investments like in any bricks and mortar business;
only the heads under which they are made are different. E-commerce can be made profitable
by generating volumes to make money, giving it time to mature and by developing strategies
to change customer behavior. However, e-commerce cannot be a gold mine.
Factors Affecting the Growth of Electronic Retailing: The critical factors affecting
the adoption of shopping electronically are the experience that customers would get while
trying it for the first time, risks they perceive, and the benefit that the e-tailers deliver.
Trying out electronic shopping: In September 2002, about 605.60 million people around
the world had access to the Internet. Majority of these web surfers were living in Europe,
followed by Asia/Pacific, Canada and USA, Latin America, Africa, and the Middle East.
According to the United Nations Conference on Trade and Development report, Internet
usage is seeing an annual rise of about 30 per cent, which is equivalent to about 2.5 per
cent of the global population. A growing share of new Internet users is in developing countries,
which accounted for nearly a third of all new Internet users worldwide. In 2001, Asia,
excluding Japan and the Republic of Korea, added almost 21 million new users to the
Internet, which is more than that of North America. With more than 80 million people less
than 18 years of age expected to be online globally, teenagers and children constitute one
of the fastest growing Internet populations. Surfing the net is a highly regarded activity by
this age group. However, adults over 50 years are one of the fastest growing markets on-
line. A large number of people in this age group have home access to the Internet. Studies
have revealed that older people are receptive to new technology and have time, money,
and enthusiasmto surf the web regularly Apart from staying in touch with far-flung family
and friends, older people tend to purchase merchandise and services online because
shopping in stores can be difficult for them.
DBA 1738
NOTES
Perceived risks in electronic shopping: Technological developments are reducing the
risk of electronic shopping by enabling secure transactions and increasing the amount and
quality of information available to electronic shoppers. However, the security of credit
card transactions remains one of the major concerns, especially in developing economies.
The time lag between order and delivery is one of the important reasons for low
usage of e-tailing, especially when the goods are perishable or are bought for an occasion.
In the case of store-based retail formats, the delivery time of merchandise is immediate,
but in the case of non-store retail formats, consumers usually have to wait several days to
get the merchandise.
Benefits Delivered by E-Tailers: The biggest benefit of electronic retailing compared to
other retail formats is the vast number of alternatives that become available to consumers.
The success of Amazon.com is attributed to the fact that no physical book store can offer
millions of titles at one place. Accessibility is another benefit. For example, a person living
in India can shop electronically at Harrods in London in less time than it takes to visit the
local supermarket Since electronic retailers do not have to spend money building and
operating stores at convenient locations, they have much lower costsas much as 25 per
cent lower than in-store retailers. Another potential benefit of electronic retailing is the
ability to select a small set for the customer to look at in detail. Suggestive selling is very
easy on the net.
E-tailing, however, does have limitations. Shoppers may not visit all the sites selling
the product. This may be a time consuming exercise unless the consumer is focused and
finds a few items to study in detail. In spite of the above-mentioned advantages, electronic
retailers (or the customers) will have to incur higher costs to get the merchandise to homes,
deal with the high level of returns and attract customers to their website. Customers bear
these costs when they buy froma physical store. A comparison of various formats in terms
of their economies and the cost of operation for a format in food stores. Reveals that online
retailing scores over all newer formats in terms of benefits to retailers. It scores over even
hypermarkets with respect to benefits to the customers. It is also observed that its operation
costs are similar to that of other formats. Therefore, in order to succeed, an e-tailer should
try to achieve large volumes as soon as possible.
Other Retailing Formats
The practice of retailing is continuously evolving. New formats are born and old ones
fade. Incessant pressure to improve efficiency and effectiveness and a continual effort to
serve the customer better force the retailers to find new ways of doing business. Some of
the new formats that have developed recently are discussed in this section.
Supercentres: Supercentres, one-shop combinations of supermarkets and discount
department stores that carry at least 80,(MK) items and often more than 100,000 products
NOTES
ranging fromtelevisions to peanut butler to fax machines, are the new format for the mass
merchants. These stores offer the customer the convenience of one-stop shopping with
service and variety. They draw customers fromvery far. They are similar to hypermarkets
in then-operations, but are much larger in size.
Malls: Malls are formats that house a cluster of stores that are owned and managed by
independent retailers. Malls are generally designed to offer products and services that
would complete the basket. They also contain cinemas and eateries. Most customers
come to malls to spend almost thewhole day. These malls are very large. They are either
spread over a very large area located away fromthe city or have many floors when located
within the city. While most malls offer a wide variety of merchandise, there are malls that
specialize in a particular category, such as the Gold Souk in Dubai. Malls are designed to
accommodate department stores, hypermarkets, specialty stores, exclusive branded outlets,
variety stores, and several other formats. In Asian markets, these are the most preferred
format at present.
Recycled Merchandise Retailers: Recycled merchandise retailers sell cast-off clothes,
furniture, sporting goods, and computers. They include pawnshops, thrift shops, consignment
shops, and even flea markets. A fast growth of this format has been observed over the past
five years. Even as a large number of retailers were closing down in the mid-1990s, recycled
merchandise retailers were growing. While in the US, Europe, and Latin America they
grew at 10 per cent, in Japan they grew at 20 per cent per annum. One of the most
popular stores in Japan, Per Gram Market, sells items at eight cents a gram. Thus, a
second-hand T-shirt would cost around $ 8.50 in such a store, but a silk scarf would sell
for $2.80
Liquidators: Liquidators are retail formats which liquidate leftover merchandise when an
established retailer shuts down or downsizes. They are often called retailing undertakers
or vultures. They earn by buying the merchandise at a price that is 30 per cent less than the
wholesale price for the closeout retailers. Retailers utilize the services of liquidators because
running closeouts requires some special retailing skills. Liquidators also have to develop
special incentive plans to make it more profitable for store personnel to stay and work
rather than quit or walk off with merchandise.
Video Kiosks: The video kiosk is a freestanding, interactive, electronic computer terminal
that displays products and related information on a video screen. It often uses a touch
screen for consumers to make selections. Video kiosks can be situated in high traffic zones
such as store aisles or hotel lobbies. They enable consumers to place orders, complete
transactions, pay mostly with a credit/debit card, and arrange for products to be shipped.
Kiosks can be linked to retailers computer networks or tied in to the web.
At the beginning of 1999, there were about 250,000 video kiosks in use throughout
the US. At present there are about 2 million kiosks in the US. Video kiosk sales seem to
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have grown four times fromits figure of $830 million in 1999. Worldwide, nearly 80 per
cent of kiosks are involved with retail-related transactions. North America accounts for 59
per cent of kiosk sales, the Pacific Rim for 20 per cent, Europe for 16 per cent, and the
rest of the world for 5 per cent.
Car Boot Sales: Car boot sales are becoming increasingly popular, where often a vehicle
is modified for the sale of a variety of merchandise like books, magazines, clothes, music
cassettes, export surplus and/or rejects, and fast food items. The boot sale boom has
given vendors such as software pirates an ideal outlet and quick getaway. It also provides
opportunities for small traders who may lack the capital for permanent premises. They are
often situated near university campuses and commercial areas. Their target audience is
lower middle class and middle class customers looking for value for money products.
Mobile Vans: Mobile vans are modified vehicles that usually sell books, newspapers,
poultry, and meat products. They move fromlocation to location, for fixed periods of time,
thus providing convenience by coming closer to customers.
Types of Retailers
Consumers today can shop for goods and services in a wide variety of retail
organizations. There are store retailers, non-store retailers, and retail organizations. Perhaps
the best-known type of retailer is the department store. Japanese department stores such
as Takashimaya and Mitsukoshi attract millions of shoppers each year. These stores feature
art galleries, restaurants, cooking classes and childrens playgrounds.
Specially Store: Narrow product line. (Athletes foot, Tall Men, The Limited, The Body
Shop).
Department Store :( Several product lines. (Sears, J CPenney, Nordstrom,
Bloomingdales).
Supermarket: Large, low-cost, low-margin, high-volume, self-service store designed to
meet total needs for food and household products. (Kroger, Jewel, Food Emporium).
Convenience store: Small store in residential area, often open 24/7, limited line of high-
turnover convenience products plus takeout. (7-Eleven, Circle K).
Discount store: Standard or specialty merchandise; low-price, low-margin, high-volume
stores. (Wal-Mart, Kmart, Circuit City, Crown Bookstores).
Off-price retailer: Leftover goods, overruns, irregular merchandise sold at less than retail.
Factory outlets, independent off-price retailers. (Filenes Basement, T.J. Maxx, warehouse
clubs Sams Clubs, Price-Costoco, BJs Wholesale).
Superstore: Huge selling space, routinely purchased food and household items, plus
services (laundries, shoe repair, dry cleaning, check cashing). Category killer (deep
NOTES
assortment in one category) such as Pet smart, Staples, Home Depot ; combination store
such as Jewel, Osco ; hypermarket (huge stores that combine supermarket, discount and
warehouse retailing) such as Carrefour in France, Pyrca in Spain and Meijers in the
Netherlands.
Catalog showroom: Broad selection of high-markup, fast-moving, brand-name goods
sold by catalog at discount. Customers pick up merchandise at the store. (Inside Edge,
Ski and Bike). With the better understanding on the meaning of retailing and types of
retailers, now let us see how they operate.
Retailers can position themselves as offering one of four levels of service:
1. Self-service Self-service is the cornerstone of all discount operations. Many
customers are willing to carry out their own locate-compare-select process to
save money.
2. Self-selection Customers find their own of goods, although they can ask for
assistance.
3. Limited service These retailers carry more shopping goods, and customers
need more information and assistance. The stores also offer services (such as
credit and merchandise-return privileges).
4. Full service Salespeople are ready to assist in every phase of the locate-
compare-select process. Customers who like to be waited on prefer this type of
store. The high staffing cost, along with the higher proportion of specialty goods
and slower-moving items and the many services, results in high-cost retailing.
Although the overwhelming bulk (97 percent) of goods and services is sold through
stores, non-store retailing has been growing much faster than store retailing. Non-store
retailing falls into four major categories: direct selling, direct marketing (which includes
telemarketing and Internet selling), automatic vending, and buying services which are
explained below:
1. Direct Selling (also called multilevel selling, network marketing) is a $9 billion
industry, with over 600 companies selling door-to-door or at home sales parties.
Well known in one-to-one selling are Avon, Electrolux, and Southwestern Company
of Nashville (Bibles). Tupperware and Mary Kay cosmetics are sold one-to-may:
A Salesperson goes to the home of a host who has invited friends; the salesperson
demonstrates the products and takes orders. Pioneered by Amway, the multilevel
(network) marketing sales systemconsists of recruiting independent businesspeople
who act as distributors. The distributors compensation includes a percentage of
sales of those the distributor recruits as well as earnings on direct sales to customers.
These direct-selling firms, now finding fewer consumers at home, are developing
multi distribution strategies.
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2. Direct marketing has roots in direct-mail and catalog marketing (Lands end,
L.L. Bean); it includes telemarketing (1-800-FLOWERS), television direct-
response marketing (Home Shopping Network, QVC) and electronic shopping
(Amazon.com, Autobytel.com). Of these, electronic shopping experiences a major
take-off in the late 1990s as consumers flocked to dot-com sites to buy books,
music, toys, electronics and other products.
3. Automatic vending is used for a variety of merchandise, including impulse goods
like cigarettes, soft drinks, coffee, candy, newspapers, magazines and other
products like hosiery, cosmetics, hot food, condoms and paperbacks. Vending
machines are found in factories, offices, large retail stores, gasoline stations, hotels,
restaurants and many other places. They offer 24-hour selling, self-service and
merchandise that is always fresh. Japan has the most vending machines per person-
Coca-Cola has over 1 million there and annual vending sales of $50 billion-twice
that of the United States. These reliable, high-tech machines allow consumers to
buy products ranging from blue jeans to expensive lunches. Some U.S. retailers
are now trying to emulate Japans success with a new generation of vending machines
in high-traffic areas. All over South Florida, machines are popping up that dispense
banana Boat sunscreen to travelers and outdoor enthusiasts where they need it
most.
4. Buying service is a store less retailer serving a specific clientele-usually employees
of large organizations-who are entitled to buy from a list of retailers that have
agreed to give discounts in return for membership.
Corporate Retailing: Although many retail stores are independently owned, an increasing
number are apart of some formof corporate retailing. Corporate retail organizations achieve
economies of scale, greater purchasing power, wider brand recognition and better trained
employees. The major types of corporate retailing-corporate chain stores, voluntary chains,
retailer co-operatives, franchises and merchandising conglomerates.
Corporate Chain Store: Two or more outlets owned and controlled, employing central
buying and merchandising and selling similar lines of merchandise. GAP. Pottery Barn,
Hold Everything.
Voluntary Chain: A wholesaler-sponsored group of independent retailers engaged in
bulk buying and common merchandising. Independent Grocers Alliance (IGA).
Retailer Cooperative: Independent retailers using a central buying organization and joint
promotion efforts. Associated Grocers, ACE Hardware.
Consumer Cooperative: A retail firmowned by its customers. Members contribute money
to open their own store, vote on its policies, elect a group to manage it and receive dividends.
Franchise organization: Contractual association between a franchiser and franchisees,
popular in a number of product and service areas. McDonalds, Subway, Pizza Hut, jiffy
Lube, 7-Eleven.
NOTES
Merchandising conglomerate: A corporation that combines several diversified retailing
lines and forms under central ownership, with some integration of distribution and
management. Allied Domeq PLC with Dunkin donuts and Baskin-Robbins, plus a number
of British retailers and a wine and spirits group.
1.6 FACTORS INFLUENCING PROMOTIONAL STRATEGIES
Retailers meet the needs of their customers by providing the following essential services:
Accessibility of location. Products and services have no value for consumers
until they can acquire them. Successful retailers make a range of products and
services, often from distant locations, accessible to the consumer. However, the
trend in recent years to large out-of-town shopping centres has been seen as
disadvantaging inner-city residents, most of whomare already disadvantaged in
society. This has created political resistance to further developments. Retailers
that support neighborhood shopping centres create a positive image that can help
themin planning applications and in promoting their stores
Convenience of timing. Successful retailers ensure goods and services, are
available when people require them. The trend in recent years to longer opening
hours reflects the social and economic changes where over one in seven people
work outside normal hours. They demand greater flexibility in service provision.
This has also helped the small local store survive against the cheaper prices of the
supermarket chains and other large stores.
Convenience of size. Successful retailers adapt the quantities to suit their customers
needs. For instance, supermarkets can sell larger lacks and quantity packs because
they know shoppers may be locking up for the week, fortnight or month.
Information. In an increasingly complex society, the amount of information that
people require to function successfully increases. This applies also to their
consumption and choice of products. The government requires a range of
information to be provided to the consumer, but supermarkets, for instance, have
been regularly providing extra information through their codes of practice.
Lifestyle support. Most consumers identify with a particular lifestyle that integrates
their use of domestic equipment and appliances such as the washing machine and
car into their general way of living. These integrated purchases make it difficult and
relatively expensive for households and retailers to change direction. They need to
guarantee the continuance of an appropriate lifestyle as, for instance, in the choice
of a particular computer system. Successful retailers make their selection of
appropriate goods and services to support their consumers lifestyles. When they
performthese functions effectively, they create added value for their customers,
who will pay for value of the product or service provided. However, this value is
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subjective because what is valuable to one person may be of no value to another.
The successful retailer focuses its activities on meeting this subjective value through
effective marketing. Customers have to be won continually in the marketplace and
the successful retailer builds up a regular customer base and constantly renews the
relationship through a combination of service, price and accessibility.
The management of promotional efforts in retailing must also fit into the retailers
overall plan. Promotion decisions relate to and must be integrated with other management
decisions, such as location, merchandise, credit, cash flow, building and fixtures, price,
and customer service. For example,
1. There is a maximum distance consumers will travel to visit a retail store. Thus a
retailers location will help determine the target for promotions. Retailers should
direct their promotional dollars first toward households in their primary trading
area, the area where the retailer can serve customers in terms of convenience and
accessibility better than the competition, and then to secondary trading areas, areas
where a retailer is still competitive despite a competitor having some vocational
advantage.
2. Retailers need high levels of store traffic to keep their merchandise rapidly turning
over. Promotion helps build traffic.
3. A retailers credit customers, such as Neiman-Marcuss InCircle members who
charge more than $3,000 a year, are more store loyal and purchase in larger
quantities. Thus they are an excellent target for increased promotional efforts.
Although the increased use of MasterCard, Visa, and Discover cards has affected
this retail advantage in recent years, many retailers have overcome this problemby
developing their own co-branded cards.
4. A retailer confronted with a temporary cash flow problemcan use promotion to
increase short-run cash flow.
5. A retailers promotional strategy must be reinforced by its building and fixtures
decisions. Promotional creativity and style should coincide with building and fixture
creativity and style. If the ads are exciting and appealing to a particular target
market, so should the building and fixtures.
6. Promotion provides customers with more information. That information will help
them make better purchase decisions, because risk is reduced. Therefore,
promotion can actually be viewed as a major component of customer service.
7. The retailer that systematically integrates its promotional programs with other retail
decision areas will be better able to achieve high performance results. One retailer
even developed a set of basic promotional guidelines that all retailers should follow
when using promotion. These guidelines are
NOTES
Try to use only promotions that are consistent with and will enhance your store
image.
Review the success or failure of each promotion to help in developing better future
promotions.
Wherever possible, test new promotions before making a major investment in
them on a broader scale.
Use appeals that are of interest to your target market and that are realistic to
obtain. For example, double-opening offers everybody an award; a sweepstakes
has only one winner.
Make sure your objectives are measurable.
Make sure your objectives are obtainable.
Develop total promotional campaigns, not just ads.
The lower the rent, the higher the promotional expenses generally needed.
New stores need higher promotional budgets than established stores.
Stores in out-of-the way locations require higher promotional budgets than stores
with heavy traffic.
Retailer Goals
A retailers successes depend on how well it knows and target its customers.
Understanding its customers enables the retailer to answer such strategic questions as:
Where do we want to go as a firm?
What is our market and type of customer?
How do we get there?
Answering these questions enables the retailer to set out its vision for the company
and its customers and to set objectives for the business. Corporate objectives are then
translated into marketing objectives that the retailer can use to direct its communication
strategy. This in turn will lead to effective targeting of its customers and provides a
framework within which the retailer can decide on its promotional mix.
It is evident that each of the formats discussed in this unit offers some unique benefits
that help in attracting shoppers. What is also interesting is that, even with the proliferation
of formats, each one of them is surviving. Shoppers have split their purchases across
formats. In some cases, different merchandise is bought through specific channels. So,
while books and music are being bought in large volumes through the Internet, grocery and
high value purchases are being bought through store-based formats. Some shoppers are
also buying similar merchandise through separate formats. Due to the choices available to
shoppers, there is an effort to optimize the value derived and hence split purchases between
formats. However, it is also noticed that shoppers tend to make one of the formats their
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primary choice and make most of their purchases fromthat format. It is, therefore, imperative
that a retailer should select the value and then choose the format that delivers the value to
the fullest. A format can be conceptualized as a system for delivering the value promised
to the shoppers so as to create a sustainable competitive advantage.
Deciding the Format
The process of deciding a format involves several steps. At the core of the process is
the value proposition that the retailer chooses to offer to its customers, based on which it
develops a positioning for the store.
Define Value Proposition
The first step in deciding the format is to identify and select the value proposition that
the store would like to offer to shoppers. Shoppers have several reasons for choosing a
store. A study conducted in India indicated that proximity and merchandise were the primary
reasons. More than 70 per cent of respondents indicated these as their strongest reason
for choice. The third reason was ambience (8%) and patronized store (8%). Only 10 per
cent could provide as many as three reasons. Seventy per cent had at least two reasons.
This indicates that shoppers generally have just one good reason, and, at the most, two
reasons for visiting a particular store. A store would thus build a value proposition based
on its target customers, competition, and company objectives. Each retailer would need to
vary its offering by different combinations of the elements of value mix, referred to as the
retail value proposition.
Identify Enablers and Deterrents
Each of the formats would yield optimum results only when certain conditions are
fulfilled. A store needs to identify these conditions and the variables causing them. These
variables then need to be classified as enablers or deterrents. Enablers are factors that
could be utilized to manage the format successfully. Deterrents consist of variables that
would impede the successful working and growth of the format. The retailer needs to
conduct a thorough analysis of the macro and microenvironment that affect its business.
ToysRUs (TRS) found that, in entering Japan, its biggest challenge was finding space for
large stores. The largest stores in Japan were about one-third of the existing stores.
ToysRUs is a category killer. It drives the value from focusing on one category and
offering price and depth. It would require huge space to deliver value to its customers
Find Out what it takes to deliver the Values
Based on the value identified and the environmental factors, retailers develop a mix
by using the following five elements:
NOTES
Variety and Assortment of Merchandise: Variety is the number of different merchandise
categories a retailer offers. Assortment is the number of different items in a merchandise
category. Each different kind of merchandise is called a stock keeping unit (SKU). For
example, department stores, discount stores, and toy stores all sell toys. However,
department stores sell many other categories of merchandise in addition to toys. Thus,
they have greater variety. The toy stores stock more types of toys (more SKUs). For each
type of toy, such as dolls, the specialty toy retailer will offer more assortments (more
models, sizes, brands, and deeper assortments) than general merchants such as department
or discount stores. Elements like product quality, uniqueness, and reliability can also be
clubbed with this factor of the retail mix.
Customer Service and Facility: Services provided by retailers to facilitate the shopping
process for customers are called customer services. Customer service could include easy
access to product and price information, employing in-store sales people, parking, accepting
modes of payment suitable to customers, express checkouts, home delivery, gift wrapping,
rest and refreshment facility, and child care facility.
Store Design, Display, and Ambience: Ambience can be described as non-visual,
background conditions in the store environment, including elements like temperature, lighting,
music, noise levels, air quality, and scent. Display and design factors are the environmental
elements that are more visible in nature than ambient factors. These include factors such as
layout, width of aisles, equipment, furnishing, and cleanliness. Kotler has proposed
atmospherics as being an important part of retail marketing strategy. Shoppers also
determine the value of the merchandise based on monetary as well as non-monetary costs.
The shopping experience, as created by the store environment, plays an important role in
building store patronage. Along with the merchandise, it triggers affective reaction among
shoppers and contributes to creating store patronage intentions.
Pricing: It is one of the strategic decisions and plays a vital role in store selection. Pricing
decisions like premiumpricing, everyday low pricing (EDLP), high-low (HILO) pricing,
and discount pricing are some of the pricing considerations offered to the customer. The
shopper may also evaluate each of these situations in the light of the cost incurred and the
utilities derived fromshopping. These costs can be classified as fixed and variable costs of
shopping.
S
The variable cost is related to the basket size or the list and hence is likely to
change with every trip. The fixed costs, such as the location of the store or the price
format, would remain unchanged over list size. It is suggested that these costs can be
converted into utilities for each of the shoppers by the store. In a study of two price
formats, EDLP and HILO, it was found that the store could influence the choice of shoppers
by enhancing the perceived utilities. It is also argued that the shopper may evaluate a
shopping situation in the light of costs incurred and utilities derived out of shopping.
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Accessibility: It is the convenience component of the retail mix. Store location, traveling
time, parking facility, and service hours are considered as important elements. The first
decision is the store location choice problem. The second is the shopping trip incidence
problemrelating to the timing of shopping trips. The two decision processes are correlated.
It is found that, overall; shoppers give prominence to proximity of the store, merchandise,
and service provided by the store.
Decide on Brick or Click or Brick and Click
Offline retailers have realized that the online model can help in an unmatched expansion
in customer base at a very low cost. The click model also enables retailers to offer a lot of
value added services to their customers, which perhaps will be the only differentiating
factor in the emerging global marketplace. For the pure play online retailers, such alliances
offer a chance to leverage the extensive distribution infrastructure, credibility, and stability
of the established offline players. It also helps in customer acquisition as shoppers tend to
be more comfortable in making online purchases when the familiar offline retailers have an
online presence.
Offline retailers can include their web addresses in their communication. Moreover,
they can also tie their store loyalty cards and mailing lists to increase awareness and usage
of the online channel. They can find out new shoppers on their site and their conversion.
However, integrating offline and online store operations is a complex process. Initially,
pure plays were concerned about erosion in their valuations. On the other hand, offline
retailers were concerned about the potential cannibalization of the sales. The advantages,
however, have outweighed the disadvantages. And also it highlights some points that a
retailer needs to keep in mind while deciding on this issue. The primary concern in integration
is the cultural fit. The two types of retailers represent different business and retailing
environments. The shoppers behave differently, the technology is different, and so are the
processes.
Formats are systems through which retailers deliver their values to the chosen segments
of customers. Based on the value chosen for delivery and the success parameters of each
of the formats, a retailer tries to differentiate it fromcompetitors and create a customer
franchise. In many cases, the retailer chooses a combination of values as it aims to cater
to different segments and their expectations. There is a wide variety of formats fromwhich
the retailers can choose. These are classified broadly into store-based and non-store based
formats.
Store-based retailers operate in a given physical area defined by their value and
merchandise. This formof retailing has been in existence since a long time and has evolved
with changes in consumer preferences and compulsions of the retailers. They cover both
food and nonfood retailing. There are several choices that a retailer has in a physical store,
based on the merchandise and ownership. Each of them has unique characteristics and
NOTES
requires a particular skill to operate and compete efficiently. Chain stores are one of the
most common ownership formats as they provide the reach as well as volume for buying
better and providing the customer a similar experience all over. Retailers use franchising as
the route to expand fast without much capital investment fromthe franchisers. The biggest
challenge in the chain stores is to create ownership among the store managers to achieve a
high level of value delivery. The competition in the retail business has brought hypermarkets
and other large formats which serve as one-stop-shops for the customers, giving them
competitive prices and convenience.
Non-store based retailing is mainly in the non-food area. Their area of operation is
determined by the feasibility and cost of delivery to the customers at the desired location.
Non-store retailing has its own challenges. It requires the retailers to serve the customers
without the presence of either the shopper or the retailer in a physical setting. Shoppers
have been using this format since a long time through catalogue and teleshopping networks.
The advent of the Internet as anew retailing format brought new environments for customers
to shop. It started with a lot of insecurity but has been able to establish itself as a good
alternative format
Role of the Retail Promotion Program
The ultimate goal of the retail promotion programis to generate sales for customers in
the retailers target market. To accomplish retailers use a variety of methods to inform,
persuade, and remind customers about the retailer newsletters announcing programs, invite
the customers to special showings, assign personal shoppers to them, and offer special
discounts
Paid Impersonal Communications
Advertising, sales promotions, and store atmosphere are examples of paid impersonal
communications. Advertising is a formof paid communication to customers using impersonal
mass media such as newspapers, TV, radio, and direct mail.
Sales promotions are paid impersonal communication activities that other extra
value and incentives to customers to visit a store and/or purchase merchandise during a
specific period of time. The most common sales promotion is a sale. Other sales promotions
involve special events, in-store demonstrations, coupons, and contests.
Sales promotion activities typically are used to influence customer behavior during a
short period of time. For example, Kmarts blue-light specials are dramatic way to
increase sales of specific items. Theyre announced over the stores public address system
and a flashing blue light is placed near the item on sale. The sales last only 5 to 15 minutes.
Since the stock of sale items is limited, customers rush to the merchandise to make sure
they get it before it runs out or the sale ends. Besides increasing sales of specific items,
blue-light specials reinforce Kmarts image of providing good value to its customers.
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While sales promotions are effective at generating short-term interest among
customers, they arent very useful for building long-termloyalty. Customers attracted by
sales promotions are interested in the promoted merchandise, not the store. But customers
who participate in the promotion might learn more about a store and return to it.
Unfortunately, when a specific promotion is effective for retailer, competing retailers learn
about it quickly and offer the same promotion, which prevents the innovating retailer from
gaining any long-termadvantage.
Finally, the retail store itself provides paid impersonal communications to its customers.
Store atmosphere is the combination of the stores physical characteristics, such as
architecture, layout, signs and displays, colors, lighting, temperature, sounds, and smells,
which together create an image in the customers mind. The atmosphere communicates
information about the stores service, pricing, and fashionability of its merchandise.
Paid Personal Communications Retail salespeople are the primary vehicle for providing
paid personal communications to customers. Personal selling is a communication process
in which salespeople assist customers in satisfying their needs through face-to-face exchange
of information.
Unpaid Impersonal Communications The primary method for generating unpaid
impersonal communication is publicity. Publicity is communications through significant
unpaid presentations about the retailer (usually a news story) in impersonal media. Examples
of publicity are the newspaper and TV coverage of Macys Thanksgiving Day parade in
New York and the Sears trophy for the national collegiate football championship.
Unpaid Personal Communications Finally, retailers communicate with their customers
at no cost through word of mouth (communication between people about a retailer).
8
For
example, retailers attempt to encourage favorable word-of-mouth communication by
establishing teen boards composed of high school student leaders. Board members are
encouraged to tell their friends about the retailer and its merchandise. On the other hand,
unfavorable word-of-mouth communica-tion can seriously affect store performance
Control Retailers have more control when using paid versus unpaid methods. When using
advertising, sales promotions, and store atmosphere, retailers determine the messages
content and the time of its delivery. But because each salesperson can deliver different
messages, retailers have less control over personal selling than other paid communication
methods. Retailers have very little control over the content or timing of publicity and word-
of-mouth communications. Since unpaid communications are designed and delivered by
people not employed by the retailer, they can communicate unfavorable as well as favorable
information.
NOTES
Flexibility Personal selling is the most flexible communication method, because salespeople
can talk with each customer, discover their specific needs, and develop unique presentations.
Other communication methods are less flexible. For example, ads deliver the same message
to all customers.
Credibility Because publicity and word of mouth are communicated by independent
sources, their information is usually more credible than the information in paid communication
sources. For example, customers see their friends and family as highly) credible sources of
information. Customers tend to doubt claims made by salespeople and in ads since they
know retailers are trying to promote their merchandise.
Cost Publicity and word of mouth are classified as unpaid communication methods, but
retailers do incur costs to stimulate them. Creating an event that merits significant news
coverage can be costly for a retailer.
Retail Promotion
Retailers communicate to their customers on a continuous, basis through the store
atmosphere, the products and services, promotional literature, advertising and other
promotional means. Retail promotion is the descriptive termfor the mix of communication
activities which retail companies carry out in order to influence those publics on whom
their sales depend. Retailing promotion will have the main objective of influencing consumer
perceptions, attitudes and behaviour in order to increase store loyalty, store visits and
product purchase. However, the important groups which need to be influenced are not
simply the target market group of current and potential customers. There is a need to
influence trade contacts such as agents and suppliers as well as opinion formers such as
journalists and writers. Even local, national and international politicians and important
professional groups may need to be influenced.
Setting Objectives
As there is a range of promotional methods which can be employed by the marketer,
it is important to define what the promotion has to achieve. The marketing objectives need
to be clearly defined so that the most effective types of promotion can be utilized.
The promotional objectives should have some precise terms in order to carry out the
promotion and then monitor the results - so-called SMART objectives. SMART objectives
will provide Specific, Measurable, Actionable, Realistic and Timed results along the following
lines.
1. The target audience or market has to be identified (by segment, geographical spread,
and for what stores). For example, identifying parents of school age children living
in London.
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NOTES
2. The specific product (goods and service) to be promoted has to be identified. For
example, identifying childrens school-related products for a back to school
promotion.
3. Specific goals should be set, perhaps that sales will increase by x in specific,
departments or across the store, or that attitudes to the store or brand will become
more positive for the 40 plus age group. To continue the back to school example,
to target an increase in sales of 15 000 for each London store for childrens wear
and 12 000 for school-related equipment.
4. The time horizon of when the expected effect will have occurred should be stated.
For example, targets should be achieved by September of a specified year.
To ensure that the parents of children between the ages of four and sixteen, within
seven miles of each London store, are communicated with and receive information on the
back to school childrens offers. Subsequently, sales for these products will increase by
15 000 for childrens wear and 12 000 for school-related equipment by 1 September
Communication Effects
There is always the need to plan to achieve the most effective response from the
target market. An important part of the promotional effort is the building of brand and
product awareness. Sometimes it will take a long time for the consumer to learn about the
brand and the type of products which will be on offer. A promotion campaign should aim
to provide knowledge of the product, to ensure that the consumer will feel favorable
toward the product and build up a preference for it. Any campaign has to sell the benefits
that a customer would be seeking in a creditable way so that the potential customer feels
conviction and more likely than not to make a purchase.
Advertising and sales promotion are the most widely used forms of promotion. Because
of the intrusive characteristic of these forms of promotion most consumers relate ideas of
marketing to the use of advertising or sales promotion; the other main forms include public
relations and personal selling. Retail promotion can be defined as any communication that
informs, influences and prompts the target market about any aspect of the retail sponsor
1.7. INTEGRATED PROMOTION STRATEGIES
The elements in the retail communication programmust work together and reinforce
each other so the retailer can achieve its objectives. As described above, the communication
methods van in their effectiveness in performing tasks in the promotion program. Rather
than creating unique programs for sales associates, advertising, sales promotion, and direct
mail, retailers need to coordinate these activities into an integrated marketing communication
program. Without this coordination, the communication methods might work at cross-
purposes. For example, the retailers TV advertising campaign might attempt to build an
image of exceptional customer service, but the firms sales promotions might all emphasize
low prices. If communication methods arent used consistently, customers may become
confused about the retailers image and therefore may not patronize the store
NOTES
1. Merchandise category. The most common method for positioning is to make the
retailer distinctive in a category of merchandise offered. For example, Circuit City
is closely related in consumers minds with consumer electronics. Consumers view
Circuit City as having any electronic itemthey might want in stock at all times.
2. Price/quality. Some retailers (such as Neiman Marcus) position themselves as
offering high prices and high fashion. Other retailers (such as Wal-Mart) are
positioned as offering low prices, adequate merchandise and service, and good
value.
3. Specific attribute or benefit. A retailer can link its stores to attributes such as
convenience (7-Eleven) or service (Nordstrom).
4. Lifestyle or activity. Some retailers associate themselves with a specific lifestyle
or activity. For example, The Nature Company, a retailer offering books and
equipment to study nature, is linked to a lifestyle of interacting with the environment.
Electronic Boutique is associated with home use of computer software
Sales Goals: Short-Term Objectives a common short-termobjective for a promotion
program is to increase sales during a specified time period. For example, retailers often
have sales during which some or all merchandise is priced at a discount for a short time.
Grocery stores usually place weekly ads with coupons that can be used to save money on
purchases made during the week.
Communication Objectives While retailers overall objective is to generate long-and
short-termsales and profits, they often use objectives related to the communication tasks
discussed previously rather than sales objectives to plan and evaluate their promotion
programs. Communication objectives are specific goals related to the retail promotion
mixs effect on the customers decision-making process.
The hypothetical information about customers in the target market for a Safeway
supermarket. This information illustrates goals related to stages in the consumer decision-
making process. Note that 95 percent of the customers are aware of the store (the first
stage in the decision-making process) and 85 percent know the type of merchandise it
sells. But only 45 percent of the customers in the target market have a Favorable attitude
toward the store. Thirty-two percent two percent intend to visit the store during the next
few weeks; 25 percent actually visit the store during the next two weeks; and 18 percent
regularly shop at the store.
In this hypothetical example, most people know about the store and its offering. The
major problemconfronting the Safeway supermarket is the big drop between knowledge
and favorable attitude. The store should develop a communication program with the
objective of increasing the percentage of customers with a favorable attitude toward it.
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NOTES
To effectively implement and evaluate a communication program, objectives must be
clearly stated in quantitative terms. The target audience for the promotion mix needs to be
defined along with the degree of change expected and the time period over which the
change will be realized.
For example, the communication objective for the Safeway programmight be to
increase from45 percent to 55 percent within three months the percentage of customers
within a five-mile radius of the store who have a favorable attitude toward the store. This
objective is clear and measurable. It indicates the task the program should address. The
people who implement the program know what theyre supposed to accomplish.
The Concept of Integrated Promotion Strategies
In the early 90s, the concept of mass advertising started to give way to target market
advertising. Ways of making communication more effective to the target audience were
needed. There was a need for synergy between the messages being sent out to the target
audience. This need gave rise to the concept of Integrated Marketing Communications
(IMC).
IMC is a concept that is designed to make all aspects of marketing communication,
such as advertising, sales promotion, public relations and direct marketing, work together
as a unified force, rather than permitting each to work in isolation.
The American Association of Advertising Agencies defines integrated marketing
communications as the concept of marketing communication planning that recognizes the
added value of a comprehensive plan that evaluates the strategic roles of a variety of
communication disciplines (general advertising, direct response, sales promotion and public
NOTES
relations) and combines these disciplines to provide clarity, consistency and maximum
communication impact.
The power to influence the customer has now shifted to the retailer. In a highly
competitive world, the retailer faces a knowledgeable customer and increased advertising
clutter. The rise of the internet has created a new mediumfor advertising and communication
for the retailer. Technology is a key enabler in retail. Use of technology enables the retailer
to assess the audience through database technology. Faced with increasing costs and
pressure on margins, an integrated approach towards marketing and communication is
necessary for the retailer.
1.8. SUMMARY
Retailer is a business that sells products and services to consumers for their personal
or family use. A retailer is the final business in a distribution channel that links manufacturers
with consumers. Manufacturers make products and sell themto retailers or wholesalers.
Wholesalers buy products frommanufacturers and resell these products to retailers, while
retailers resell products to consumers. Wholesalers and retailers may performmany of the
same functions described in the next section. But wholesalers satisfy retailers needs, while
retailers direct their efforts to satisfying needs of ultimate consumers. Some retail chains
(like Home Depot and Sams) are both retailers and wholesalers. Theyre retailers when
they sell to consumers; theyre wholesalers when they sell to other businesses like building
contractors or restaurant owners. U.S. consumers are able to buy merchandise at low
prices fromconvenient locations because the U.S. distribution systemis very efficient
Retailers communicate with customers through five vehicles: advertising, and sales
promotion, publicity, store atmosphere and visual merchandising, and personal. This part
focuses on the first three of these vehiclesthe promotion mix. In large retail firms, the
promotion mix is managed by the firms marketing or advertising department and the buying
organization. Store atmosphere and personal are managed by store personnel
Informing the first task performed by the promotion programis informing customers
about the retailer and the merchandise and services it offers. For example, a carpet cleaning
company places ads in the Yellow Pages to make customers aware of its services and its
phone number. Supermarkets advertise special prices on groceries in the daily newspaper
and place signs on the shelves next to products on sale. Home-improvement centers make
announcements on radio for classes theyre holding to show customers how to install a
new kitchen sink.
Persuading the second task is motivating customers to visit the retailer and buy
merchandise and services. For example, the department store salesperson described
encouraged the college student to buy a suit for her upcoming interviews. Mi Amore Pizza
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NOTES
& Pasta, the restaurant, sends out coupons offering discounts to motivate customers to
order pizzas.
Simply making a sale isnt enough. Although a customer may like a retailer, the retailer
is vulnerable to appeals made by competitors. Retailers need to build repeat sales and
loyalty by reminding customers about their offering and its benefits.
More and more retailers are using frequent shopper programs to performthis reminding
task. Frequent shopper programs are reward and communication programs to encourage
continued sales from the retailers best customers. For example, many department chains
identify their best customers, send themperiodic new letter announcing programs invite the
customer to special showings, assign personal shopper to them, and offer special discounts.
Retailers use franchising as the route to expand fast without much capital investment
from the franchisers. The biggest challenge in the chain stores is to create ownership
among the store managers to achieve a high level of value delivery. The competition in the
retail business has brought hypermarkets and other large formats which serve as one-
stop-shops for the customers, giving them competitive prices and convenience.
Non-store-based retailing is mainly in the non-food area their area of operation is
determined by the feasibility and cost of delivery to the customers at the desired location.
Non-store retailing has its own challenges. It requires the retailers to serve the customers
without the presence of either the shopper or the retailer in a physical setting. Shoppers
have been using this format since a long time
Through catalogue and the shopping networks. The advent of the Internet as a new
retailing format brought new environments for customers to shop. It started with a lot of
insecurity but has been able to establish itself as a good alternative format.
1.9. HAVE YOU UNDERSTOOD QUESTIONS?
1. What is the different basic component, of retailer promotion mix and how are they
related to other retailer decisions?
2. What are the different retail formats through which the retailers reach the customers?
3. Explain the importance of promotion strategies adopted by the retailers in India.
4. Explain the role of various factors influencing the implementation of the promotion
strategies available to the retailer.
NOTES
UNIT II
FINANCIAL IMPLICATIONS
2.1. INTRODUCTION
Financial decisions are an integral component in every aspect of a retailers strategy.
A well designed retail promotion campaign requires money that can be spent on advertising,
sales promotion, personal selling. A retailer has to work out the optimal promotional mix
for his customer, on the basis of the resources available. There rarely would be enough
financial resources to incorporate all three dimensions of variety., breath and depth.
Retailers have a limited roomfor the promotion activities. These budgetary constraints are
universal to all kinds of retail format, where only the intensity varies. Therefore they estimate
the amount to be spent on retail promotional activities.
In this exercise Cost Benefit Analysis, has to be made which is a technique for deciding
whether to make a change or not. This cost benefit analysis is carries out using only
manufacturer financial cost and financial benefits. While framing the budget, market led
and promotional activities are to be planned where the objective and interest are varying.
2.2. LEARNING OBJECTIVES
After reading this unit you must able to understand
To estimate the budgetary proposal for retail promotion mix.
To understand the criteria involved for budget allotment.
To design market led and manufacturer, led promotion budget.
To assess the cost benefit analysis and the financial implication on the retail sales
promotion.
2.3. ESTIMATING RETAIL PROMOTION BUDGET
A well-designed retail promotion budget requires money that can be spent on various
retail promotion mixes. The retailer hopes the dollars spent on advertising will generate
sales that will in turn add profits, which can then be used to finance the other activities of
the retailer. When developing a budget, the retailer should first determine who is going to
pay for the campaign (i.e., will the retailer be the sole sponsor or will it get co-op support
fromother retailers and/or the manufacturer?.
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NOTES
As a rule, high-performance retailers break sales promotions into two categories:
those in which they are the sole sponsors and those involving a joint effort with other
parties.
Sole Sponsored Sales Promotions
Just like advertising, sales promotions are an expense to the retailer that may or
may not be shared with others. With sole-sponsored sales promotions, the retailer has
complete control over the promotion but is also completely responsible for the costs.
Although there may be some overlap in the sponsorship of these promotions, retailers
generally consider these sales promotions to be sole-sponsored:
Premiums are extra items offered to the customer when purchasing a promoted
product. Premiums are used to increase consumption among current consumers and
persuade nonusers to try their promoted product. Generally, the retailer is solely
responsible for such programs, although some exceptions may occur. An example of
a successful premium is when McDonalds gives away a free toy (e.g., a Teenie Beanie
Baby) with the purchase of a Happy Meal.
Contests and sweepstakes, which face legal restrictions in some states, are
designed to create an interest in the retailers product and encourage both repeat
purchases and brand switching. Although such programs produce only one grand prize
winner, the selection of a prize that will appeal to a large segment of the market and
the addition of smaller prizes make such promotions very popular with consumers.
Many local restaurants use weekly drawings to not only generate business but also to
track their customers. As the Behind the Scenes box shows, one retailer used a simple
little Halloween pumpkin decoration contest to generate both awareness and business.
Frequent Buyer Programs are still rapidly growing as retailers begin to
appreciate the importance of combining this promotion with their database system to
solidify their relationship with the customer. Neiman-Marcus, for example, offers a
free trip for two to London when the customer purchases $125,000 on their Neiman-
Marcus credit card. In addition, they offer smaller rewards, starting with membership
in their In Circle Club when the customer reaches $3,000.
Joint Sponsored Sales Promotions: Jointly sponsored sales promotions
offer retailers the advantage of using OPM other peoples money. Although in
some cases such promotions require the retailer to relinquish some control, the
co-sponsor monetary offering to the retailer more than makes up for it. Retailers
generally consider these promotions to be jointly sponsored:
NOTES
1. Coupons offer the retail customer a discount on the price of a specific item.
In 1997, American manufacturers offered consumers more than 269 billion
money- off coupons worth more than $180 billion. Although only 2 percent
of these coupons are redeemed, this represents a win-fall worth more than
$500 million to retailers because they receive, on average, a 10 cents coupon
handling fee from the manufacturers. Recently, Procter & Gamble has been
testing various programs to lower everyday prices and discontinue coupons.
However, this move has met strong consumer, retailer, newspaper (they make
big money on coupons, also),and political opposition.
Some manufacturers are testing the use of the Internet for coupon delivery. By
going to the Cool Savings web site (www.coolsavings.com), consumers can get
coupons for a number of major products. The manufacturer benefits by getting vital
demographic information on the consumer and is able to track redemptions rates on
all coupons issued.
2. In-store displays are promotional displays that seek to generate traffic,
highlight individual items, and encourage impulse buying. Such displays offer
manufacturers a captive audience for their products in the retailers store.
(Remember, the retailer doesnt care which brand the customer purchases,
just as long as the purchase is made in its store.) As a result, the manufacturer
is willing to pay for the right to rent the space necessary for the display
from the retailer.
3. Demonstrations and sampling are in-store presentations intent on reducing
the consumers perceived risk of purchasing a product. These presentations
on the case, convenience, and /or product superiority are paid for by the
manufacturer at a price that is usually higher than the retailers cost for providing
that service.
Evaluating Sales Promotions
Because sales promotions are intended to help generate short-term increases in
performance, they should be evaluated in terms of their sales and profit-generating
capability. As with advertising, sales promotions can also be evaluated with sophisticated
mathematical models. However, the development and use of such models is usually
not cost-effective. A simpler approach is to monitor weekly unit volume before the
sales promotion and compare it with weekly unit volume during and after the promotion.
Publicity Management
Publicity was defined at the outset as non-paid-for communications of information about
the company or products, generally in some media form. This definition is actually misleading.
Although the retailer does not directly pay for publicity, it can be very expensive to have a good
publicity department that plants the commercially significant news in the appropriate places. It
may be even more expensive to create the news that is worth reporting. For example, Macys
DBA 1738
NOTES
Fourth of July, fireworks display in New York, Dominos sponsoring a car in the Indianapolis
500 race, and McDonalds Ronald McDonald Houses all create favorable publicity, they are
expensive. Earlier, we discussed Taco Bells infamous Liberty Bell ad. Although Taco Bell did
spend more than $400,000 on the ad, the April Fools hoax did generate more than 400
newspaper and television stories across the country. Whether the money could be ; better spent
in other ways is debatable.
Recently, Dallas restaurateur Dee Lincoln, co-founder of Del Friscos Double Eagle
Steakhouse, made great use of publicity when she paid a record $80,000 for a 1,309-pound
Maine-Anjou crossbreed at Denvers National Western Stock Show. An opposing bidder said
at the time her winning bid was accepted, Lady, you must either be really crazy or have too
much money. Well, Dee Lincoln isnt crazy. What Dee wanted and got was hundreds of
thousands dollars worth of publicity for her high-quality steakhouses, the newest of which had
just opened in Denver. In addition to having her name/picture in all the Denver shows highest
bidder she got to perform other highly visible duties for the remainder of the cattle
show.
Retailers do not formally have a publicity department or even a person in charge
of publicity. Rather, let us mention that publicity (like other forms of promotion) has its
strengths and weaknesses. Perhaps the major advantages are that it is objective and
credible and appeals to a mass audience. The major disadvantages are that publicity
is difficult to control and time. Except for annual events, such as a charity fund-raiser,
publicity may be hard to plan, and if it is planned, the cost can become exorbitant. In
addition, sometimes retailers can experience bad publicity in the form of events that
are beyond its control.
Setting the Promotion Budget
Marginal Analysis Method Marginal analysis is based on the economic principle
that firms should increase promotion expenditures so long as each additional rupee spent
generates more than a rupee of additional contribution.
Objective-and-Task Method
The objective-and-task method determines the budget required to undertake specific
tasks for accomplishing communication objectives. To use this method, the retailer first
establishes a set of communication objectives. Then the necessary tasks and their costs
are determined. The sumtotal of all costs incurred to undertake the tasks is the promotion
budget.
NOTES
Rule-of-Thumb Methods
In the previous two methods, the promotion budget is set by estimating promotion
activities effects on the firms future sales or communication objectives. The rule-of-thumb
methods discussed in this section use the opposite logic. These methods use past sales
and promotional activity to determine the present promotion budget using the affordable
budgeting method, retailers first forecast their sales and expenses excluding promotion
expenses during the budgeting period. The difference between the forecast sales and
expenses plus desired profit is then budgeted for the promotion mix. In other words, the
affordable method sets the promotion budget by determining what money is available after
operating costs and profits are budgeted.
The major problemwith the affordable method is that it assumes that the promotion
expenses dont stimulate sales and profit. Promotion expenses are just a cost of business,
like the cost of merchandise. When retailers use the affordable method, they typically cut
unnecessary promotion expenses if sales fall below the forecast rather than increase
promotion expenses to increase sales.
Percentage-of-Sales Method
The Percentage-of-sales method sets the promotion budget as a fixed percentage
of forecast sales. Retailers use this method to determine the promotion budget by forecasting
sales during the budget period and using a predetermined percentage to set the budget.
The percentage may be the retailers historical percentage or the average percentage used
by similar retailers.
The problem with the percentage-of-sales method is that it assumes the same
percentage used in the past, or by competitors, is still appropriate for your firm. Consider
a retailer that hasnt opened new stores in the past but plans to open many new stores in
the current year. It must create customer awareness for these new stores so the promotion
budget should be much larger in the current year than in the past.
Using the same percentage as competitors also may be inappropriate. For example,
a retailer might have better locations than its competitors. Due to these locations, customers
may already have a much higher awareness of the retailers stores. Thus, the retailer may
not need to spend as much on promotions as competitors with poorer locations spend.
One advantage of both the percentage-of-sales method and the affordable method
for determining a promotion budget is that the retailer wont spend beyond its means.
Since the level of spending is determined by sales, the budget will only go up when sales go
up and the retailer generates more sales to pay for the additional promotion expenses.
When times are good, these methods work well because they allow the retailer to
communicate more aggressively with customers. But when sales fall, promotion expenses
are cut, which may accelerate the sales decline.
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NOTES
Competitive Parity Method
Under the competitive parity method, the promotion budget is set so that the retailers
share of promotion expenses equals-its share of market. For example, consider a sporting
goods store in a small town. To use the competitive parity method, the owner-manager
would first estimate the total amount spent on promotions by all of the sporting goods
retailers in town. Then the owner-manager would estimate the stores market share for
sporting goods and multiply the market share by sporting goods stores total advertising
expenses to set its budget.
Like the other rule-of-thumb methods, the competitive parity method doesnt allow
retailers to exploit the unique opportunities or problems they confront in a market. If all
competitors used this method to set promotion budgets, their market shares would stay
about the same over time (assuming that the retailers develop equally effective campaigns).
2.4. CRETERIA FOR BUDGET ALLOTMENT
While there is no definite formula for determining the advertising or the overall promotion
budget, the following are the main methods that may be employed to determine the
advertising budget :
a) The percentage of sales method; This is perhaps the most commonly used method
for determining the budget. Here, the budget is a fixed percentage of sales. The
biggest advantage of this method is that is simple to apply and allows the retailer
to set an affordable limit on promotional activity. This method however, lacks
little consideration of market conditions or special advertising needs.
b) The competitive parity method; Here, the budget is based on the stimulated amount
spent by the competition. There is a risk that it could be based on wrong information
and again, there is little consideration of market conditions or growth opportunities.
c) The research approach or the task and objective method; The budget is determined
on the basis of a study of the best forms of advertising media and the costs of
each. The retailer formulates advertising goals and then defines the tasks necessary
to accomplish these goals. Next, the management determines the cost for each
task and adds up the total to arrive at the required budget. Here, the advertising
expenses are linked to the retailers objectives and the effectiveness of some
forms of advertising can be measured and compared to the costs.
d) The incremental method; The budget is simply based on the previous expenditure.
e) What can be afforded; The budget allocated for advertising or for promotions is
based on the basis of the money that can be allocated by the retailer for this
purpose.
While determining which method is to be adopted, a retailer needs to take into
consideration the market that the firmis operating in, its current market position and how
important advertising is in that market.
NOTES
2.5. MARKET LED AND MANUFACTURER LED PROMOTION
BUDGETS
There are. differences between retailer and manufacturer advertising strategies. Retail
advertising is often based upon short-termobjectives with the emphasis on value or price
of the products on offer. This is unlike manufacturers approaches; they often attempt to
build favorable attitudes or improve the image of the brand or organization over an extended
period of time. Whereas a manufacturer will need to create awareness of brand across
major market areas, a retailer may have more geographically concentrated target markets.
Therefore, a retailer has to take into account local habits, conditions of the marketplace,
availability of local media and have a clear idea of the housing areas where potential
customers are living.
The expense of some forms of advertising is excessive - for example TV advertising
extremely expensive due to production as well as transmission costs - and therefore only
the larger companies or franchisers will use this medium. The alternative use of direct
marketing is often a more cost-effective formof promotion for smaller more geographically
dispersed retailers.
Push Versus Pull Strategy
The promotional decisions have to consider whether the company chooses a strategy
or a pull strategy or a balance of the two. A push strategy involves pushing the consumer
through the channel by directing the marketing activities to promote the store or benefits of
the channel. As retailing is a channel service this approach is unlike that of more traditional
forms of product marketing as it is the channel service which is promoted. The pull strategy
is where marketing promotion activities are targeted to the consumer to induce them to
buy the retailers merchandise or services. Retailers may enter third party agreements for
promotion whereby the cost of the promotion is shared between the retailer and the
manufacturer to encourage sales of the manufacturers product
With the growing use of relationship marketing and the compilation of customer
databases, retailers have been concentrating more on push rather than pull strategies.
Companies are increasing their efforts to select the most appropriate target groups to
direct offers at. This allows marketing programmes to be more finely targeted, with literature
for sale periods, special events or offers being tailored to suit the individual customer
group.
Retailer Only Campaigns
If a retailer decides to do the campaign alone, the retailer generally uses one of the
following methods to determine that amount of money to be spent on the advertising
campaign: the affordable method, the percentage-of-sales method, or the task and objective
method.
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NOTES
1.affordable method. Many small retailers use the affordable method by allocating the
money that they can afford for advertising in any given budget period. This mislead to an
inadequate appropriation or to a budget that is not related to actual needs. The logic of this
approach suggests that advertising does not stimulate sales or profits but rather is supported
by sales and profits. However, some retailers have little choice but to use this approach. A
small retailer cannot go to the bank and borrow $10 to spend on advertising. This is
unfortunate, because the small retailer might more fromadvertising than frommore inventory
or equipment. Thus, we can see although the affordable method may not be ideal in terms
of advertising theory certainly defensible given the financial constraints that confront the
small retailer.
2. percentage-of-sales method. In the percentage-of-sales method of budgeting for
advertising, the retailer targets a specific percentage of forecasted sales to be use advertising.
The percentage of sales that should be used is frequently determined by industry data or
the retailers past experience. Industry data, such as shown in are often published by trade
associations. These figures are average. however, and do not reflect the unique circumstances
and objectives of a particular retailer. A more suitable guide to the level of advertising
appropriations is the retailers past sales experience. The average percentage of advertising
expenditures to sales for the past several years can be applied to the current year.
One of the weaknesses of the percentage-of-sales method is that the amount of sales
becomes the factor that influences the advertising outlay. In a correct cause-and-effect
relationship, the level of advertising should influence the amount of sales. In addition, this
technique does not reflect the retailers advertising.
Percentage-of-sales does, however, provide a controlled, generally affordable amount
to spend, and if spent wisely, it may work out well in practice. Most retailers, especially
the smaller ones, do not use ad agencies and lack the sophistication required to adequately
implement the task and objective approach. A percentage-of-sales guideline allows the
retailer to follow objectives in an affordable, controlled manner. If the dollars are carefully
applied in appropriate amounts over the year in such a way that they relate to expected
sales percentages in each month, the percentage-of-sales method can work well.
3. Task and objective method. With the preceding budgeting methods, advertising seemed
to follow sales results. With the task and objective method, the logic is properly reversed;
advertising leads to sales or some other measure of financial performance. Basically, the
retailer establishes its advertising objectives and then determines the advertising tasks that
need to be performed to achieve those objectives. Associated with each task is an estimate
of the cost of performing the task. When all these costs are totaled, the retailer has its
advertising budget. In short, this method begins with the retailers advertising objectives
and then determine what it will cost to achieve those objectives.
NOTES
Sometimes accounting errors or errors in forecasting future sales may cause a retailer
to exceed its planned advertising spending for a period. McDonalds, for example, in
1996 spent almost $20 million more than planned when an error occurred in its ad agencys
media buying department. The agency forgot to account for several weeks of television
and radio costs when preparing the retailers ad budget. Compounding this error was the
fact that sales failed to meet the planned goal. This resulted in reduced franchise fees from
retailers at a time when the chain was weeks away from its major Summer Olympics
campaign.
Many of the major retailers use a combination of the percentage-of-sales method,
which they use to keep pace with competitors, and task and objectives, which reflects the
different tasks that they must accomplish to reach their objectives.
Co-op Campaigns
Although most retail advertising is paid for solely the retailer, sometimes manufacturers
and other retailers may pay part of it or all for the retailers advertising campaign.
Vertical cooperative advertising allows the retailer and other channel members to
share the advertising burden. For example, the manufacturer may pay up to 40 percent
cost of the retailers advertising of the manufacturers products up to a ceiling of percent of
annual purchases by the retailer fromthe manufacturer.
There is a strong temptation among retailers to view vertical co-op advertising money
as free. Retailers forget, however, that even if the supplier is putting up 50 percent of the
expense, they must still pay the other 50 percent. In addition, because the supplier often
exercises considerable control over the content of the advertising and its objectives he
different than the retailers, retailers may be actually paying 50 percent of the suppliers
cost of advertising rather than vice versa. Also, suppliers know that it is a common media
practice to offer local retailers a discount on rates relative to national advertisers, (Thus,
suppliers often use local retailers to get themthis discount on their ads.
Retailers must, therefore, decide whether they can get a better return on their money
with vertical co-op dollars or by total sponsorship of advertising seeking to achieve their
objectives.
Horizontal cooperative advertising is when two or more retailers band together
to share the cost of advertising. Significantly, this tends to give small retailers more bargaining
power in purchasing advertising than they would otherwise have. Also, if properly conducted,
it can create substantially more store traffic for all participants. By having a store-to-store
programthat provides safe place for trick-or-treating, a mall can pull significantly more
individuals into each retailers store than the retailers operating individually could expect to
do at the same cost. However, sometimes successful promotions can create too much
traffic.
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NOTES
2.6. COST BENEFIT ANALYSIS OF RETAIL SALES PROMOTION
It summarizes the financial reasons for taking on the project. It consists of an analysis
of the expected benefits in comparison to the costs with an attempt to quantify the return
on investment.
Tangible benefits
Tangible benefits are measurable and will correspond to the problem/opportunity.
For each benefit describe it and quantify it, including a translation of the benefit into financial
terns such as rupee saved or gained. Include any assumptions used in calculating this
benefit. Forecast benefits are usually not certain, so describe the probability of achieving
the result.
Intangible benefits
Intangible benefits are difficult to measure, but are still important. For example, reducing
complexity in a task may increase employee job satisfaction, a worthwhile benefit but a
difficult to measure. Again, describe the benefit , the assumptions used to predict the
magnitude of this benefit, and the probability the benefit will be realized.
Required resources(cost): What labor and other resources will be required? Include
a comment about the accuracy of these figures. Typical cost categories include internal
(employee ) labour hours, external labour, capital investment and the ongoing cost to support
the result of the project.
Financial return; There are many financial methods that compare the tangible up-
front cost of the project with expected tangible benefits achieved over time, The project
selection committee should describe which of the financial measure to use.
The essence for the theory of cost benefit analysis is that it does not accept that the
actual receipts of a project adequately measure social benefits and actual expenditures
measure social costs. The reason is that actual prices may be an inadequate indicator of
economic benefits and costs. For example, in developing countries like India, the prices of
necessities are set low, despite their economic importance, while the prices of less essential
goods are set high(through a systemof taxes and duties). As a result, some projects which
appear very profitable when their outputs and inputs are valued at actual prices are , in fact
,unattractive fromthe viewpoint of the national economy, while other apparently unprofitable
projects have high economic returns. But national economy while other apparently
unprofitable projects have high economic returns . But the theory accepts that actual receipts
and expenditures can be suitably adjusted so that the difference between them ,closely
analogue to ordinary profit, will properly reflect the social gain.
NOTES
The Objectives
The objective of cost benefit analysis is , in its widest sense, to secure and achieve the
value of money in economic life by simply evaluating the costs and benefits of alternative
economic choices and selecting an alternative which offers the largest net benefit, i.e. the
highest margin of benefit over cost.
Very broadly, cost benefit analysis involves the following steps:-
Estimates of costs and benefits which will accrue to the project-implementing body.
Estimates of costs and benefits which will accrue to individual members of society as
consumers or as suppliers of factor input.
Estimates of costs and benefits which will accrue to the Community.
Estimates of costs and benefits which will accrue to the National Exchequer.
Discounting the costs and benefits which accrue over a period of time to determine
the feasibility of the project.
Here again, the non-quantifiable benefits are stated only in descriptive terms. These
strategies will work towards the appropriate calculation of the profitability ratio(PR)
While this is the general approach to project formulation, implementation and evaluation,
the same may be modified to suit the circumstances.
Main Features of Cost-Benefit Analysis
Prest and Turvey defined cost benefit analysis as a process way of assessing the
desirability of projects, where it is important to take a long view( in the sense of looking at
repercussions in the future as well as the near future and wide view in the sense of allowing
side-effects of many decisions relating to industries, regions etc) i.e.. it implies the
enumeration and evaluation of all the relevant cost and benefits.. This definition focuses
attention on the main features of cost benefit analysis. It covers five distinct issues:
Assessing the desirability of projects in the public, as opposed to the private sector.
Identification of costs and benefits.
Measurement of cost and benefits.
The effect of (risk and uncertainty) time in investment appraisal.
Presentation of results-the investment criterion.
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NOTES
2.7. SUMMARY
Retail marketers commit their resources to a project on the basis of forecasts and
estimates. These are the bases of cost / benefit analysis which, for a growing proportion of
projects, means appraisal of profitability.
The appraisal of project profitability has always been important for marketers. It is
getting more important now, because:
The scale of retail sales promotion project financial commitments is increasing;
Large promotion projects affect the customer retailer relationship than was
previously the case;
International competition is more severe;
Retail promotion projects are more complex, with less opportunity to make changes
easily;
Mistakes are more dangerous.
2.8. HAVE YOU UNDERSTOOD QUESTIONS?
1. How do you estimate the promotion budget for retail business?
2. Explain the various factors involved in budget allotment for various promotional
mixes.
3. How do you plan the market led and manufacturer led promotion budgets?
4. Define cost and benefit analysis?. Explain the role of CBA in retail sales promotion.
NOTES
UNIT III
RETAIL ADVERTISING
3.1. INTRODUCTION
Retail Advertising is paid, non personnel communication through various media by
business firms, non profit organizations and individuals, who are in some way identified in
the advertising message and who hope to inform and persuade members of a particular
audience; includes communication of product, service, institutions and ideas.
In recent years, retailer of all types and from various geographical locations have
started utilizing a wider set of media vehicles for their promotion effort. Use of print media
by independent retailer in small townships was limited to some local newspapers and
magazines published by local authorities. However, the key advertising media was word of
mouth communication generated through personnel selling effort and the purchase
experience itself with changing time, small retention have begun to use local Cable TV
networks and have increased the use of regional newspapers. On the other hand, retailers
fromthe organized sector and those operating in metro, make greater use of all the available
communication media.
Great advertising will make you a lot of money, but you have to create a message
exciting and provocative enough to make people walk through your front door with a
desire to buy. You can communicate your message and build your business in many ways,
but this section is devoted to advertising. Advertising cost vary widely a business owner
can spend a lot or a little. Your task is to determine how much is too much and how much
is too little; and in this section you learn these are many way, to divide your advertising
budget. So it is important to remember that advertising is more than just spending money.
The best formof advertising is still word of mouth and in order to generate it, the business
must continuously give people something to talk about.
Another important concept in marketing is product positioning. Each marketer wants
to create a specific position for its product among many competitive products, and advertising
is effectively employed to achieve this end. To be successful, an advertiser must create a
niche in the prospects mind. The niche or position involves not only the strength or the
benefit to be derived from the product, but also the manner in which it differs from the
DBA 1738
NOTES
products of other competitors. In cigarette advertising of different brands, positioning may
be in regard to taste, or its strength; the third one may be positioned a personalized product,
and the fourth may be positioned as a perfect blend of taste and flavour. The fifth one may
be positioned as the largest among king-size cigarettes. These are all typical examples of
product positioning through advertising.
3.2. LEARNING OBJECTIVE
After reading this unit you must able to understand.
To know the available types of advertisement programmes suitable to the
requirements.
To design a proper advertisement media plan which helps to achieve short term
sales income, greater customer traffic, developing retailing image and the related
concepts.
To measure the impact and effectiveness of various retail advertising programmes.
To know the meaning of online advertising and also the recent trends in online
advertising.
3.3. TYPES OF ADVERTISEMENTS
The two most important features in any ad, regardless of what advertising medium
you use, are telling the audience who you are and what you are selling. Mentioning this
almost sounds elementary, but look at the number of ads that give readers no idea what the
store is selling or even what the store actually is. The most important parts of any ad are as
follows;
1. The name of your store
2. A brief slogan or a signature line
3. A positioning statement that explains what the store is all about.
The termadvertising includes any paid formof non-personal communication through
the media about a product that has an identified sponsor. The use of payment differentiates
advertising from public relations for which no payment is made for the time or space to
convey a message. The media may include telephone directories guides, newspapers,
magazines, radio, television, direct mail, Web pages and billboards. It is normally associated
with mass communication, where a broad target market is to be contacted.
Advertising is used to achieve a whole range of objectives which may include changing
attitudes or building image as well as achieving sales. Advertising is often described as
above-the-line promotion with all other forms of promotion being termed below-the-line.
The difference between above and below the line is simply academic now as the emphasis
is on both areas, for example sales promotion and advertising, working together to achieve
the greatest impact.
NOTES
Moreover, in decisions over communication plans, it is the cost-effectiveness that
matters most. The use of different combinations of what has traditionally been known as
above and below the line has blurred the meaning of the terms and there are many
promotional strategies which can be seen to erase the line or, as it is known, pass through
the line. With direct mail being used to build awareness and TV being used to sell products
direct to the consumer, there is a great deal more flexibility in the use of different promotional
mediums.
Communication theorists have proposed several models to explain the way advertising
works and each have some similarity. One model known as the DAGMAR model (Defining
Advertising Goals for Measured Advertising Results) describes the sequence of stages
through which the prospective customer has to move:
Unawareness;
Awareness;
Comprehension of the offer;
Conviction;
Action.
Through advertising, the retailer will make the potential customer aware of the store
and its range of offers. As part of the advertising-communication process, information has
to be clearly transmitted so it can be decoded and comprehended properly. The process
is then to make the offer credible so that the potential customer can be moved to a favourable
attitude to the store or product. The act of purchase may then follow.
Advertising has the potential to affect a large number of people simultaneously with a
Jingle message. The secondary effect of advertising is personal communications among
consumers. This is known as the two-step flow of communication. The first step in the
process is the communications flow frommedia to opinion leaders - the individuals whose
attitudes, opinions, preferences and actions affect others. The second step is word-of-
mouth communications from opinion leaders to others (followers). This communication
can occur through personal conversation between friends or with work colleagues based
upon communication about the store or its offers. It can also occur through non-verbal
communications when someone displays newly bought merchandise in their home or by
means of the labels on or in their clothes. One implication of the need to achieve as much
benefit as possible from the two-step model is the requirement to reach and influence
opinion leaders.
Product Advertising
Product advertising is aimed at enticing people to the store in order to consider specific
merchandise. Product advertising will feature the promotion of merchandise that is new,
exclusive, and superior in aspects of quality and design as well as creating awareness of
DBA 1738
NOTES
complete assortments or special merchandise events. It is aimed at creating awareness of
the product, its availability and benefits.
It has been said that advertising is an important component of the marketing mix.
Marketing executives decide about the marketing mix elements to be used, and the
proportion in which they are to be blended into their marketing programmes. The right
choices determine the executives success, and make for the marketers reputation. Almost
all consumer goods manufacturers and many industrial product marketers include advertising
in their marketing mix. The specific role of advertising is to pre-sell to present and potential
customers. Together with other elements of the promotion mix such as personal selling and
sales promotion activities, the point-of-purchase displays, coupons, premium offers,
demonstrations and trade shows - advertising ensures, that these important functions lead
to a successful marketing programme of selling. mass produced; mass marketed consumer
goods. In the marketing of industrial products, too, advertising plays a useful role; it informs
unknown prospects and enables the salesman in the field to obtain a hearing from the
buyers. Not only this, marketing concepts and techniques can be well applied to non-
commercial social ventures; and advertising promotes such non-commercial ventures such
as family planning, adult literacy, etc. Even political candidates use banners, outdoor signs
and other forms of advertising to get elected.
The dose of advertising and its nature and type are determined fromthe nature of the
other components in the marketing mix. To start with, the product, the first P in the mix, is
the very heart of any advertising programme. An old marketing axiomrightly states that
without a good product, you have nothing. No doubt, advertising does not add an intrinsic
value to the product; no amount of marketing and advertising effort can sell a bad product
to all the customers all the time. It may help in achieving initial sales; but, in the long run,
success depends on customer satisfaction with the product, which should be the very
foundation of sound advertising If the consumer knows the brand name and the benefits to
be derived fromusing a product, it is easier to sell that product. Product or brand knowledge,
together with a clear conception of product positioning, derived after a well-thought-out
marketing strategy, are essential to every successful advertising programme. The other
elements in planning for effective advertising are packaging, trade mark and such other
physical and psychic attributes of the product as its. taste, colour, texture, aroma, style and
design. The sale ability influence of these product attributes is to be analyzed before
incorporating themin the advertising messages delivered through various advertising media.
Product advertising can be classified into three types. Product advertising conveys
information about a product. It is of three types.
Pioneering Advertising
Here, an attempt is made to stimulate the primary demand of the product category
rather than a specific brand. The initial advertising of micro-wave ovens, electric mosquito
NOTES
repellents, tourist places and a host of other new, novel and unique products is of this type.
Here the product category is first introduced. It is educative in intent. It appeals to consumers
emotions as well as to his rational motives. In the introductory stage of Product Life Cycle,
such advertising is relevant.
Competitive Advertising
Here, selective demand of a specific product brand is stimulated. By now, the product
is established in the market and has grown in the market and has reached the growth or
maturity stage of Product Life Cycle.
Competitive advertising is again of two types.
i) Direct type: It seeks to stimulate immediate buying. action.
ii) Indirect type: Here the benefits of the product are emphasized in anticipation of
the consumers final action of buying.
Retentive Advertising
The product is now having a firm footing in the market. Its sales may start declining
later. The buyer must be reminded about the product to sustain his loyalty. It is a soft-sell
approach where the buyer is nudged to continue the usage of the product. .
Relation of Product Advertising to Product Life Cycle
Informative Product Advertising builds up an initial demand for the product at the
introductory stage. Mostly all new products are promoted this way. The basic objective is
to create awareness about the existence and availability of the product
Persuasive product Advertising aims at building up the demand for a specific
product/brand. It is used in the growth stage. It is a competitive type of promotion. It is
also used at the maturity stage of the product.
Reminder Oriented Product Advertising aims at strengthening the previous
promotional activity by keeping the brand name before the eye of the public. It is used at
the maturity stage as well as the declining phase of the product life cycle. It creates preparation
effect in the minds of consumers.
Institutional Advertising or Corporate Advertising
This type of advertising is used to sell the store or shopping mall as a pleasing place to
shop. With the use of institutional advertising, the store attempts to reinforce the image of
one or more of the following: a leader in fashion, fair prices, wide merchandise selection,
superior service or quality, a leisure experience or somewhere to enjoy visiting. There is
now a trend to advertise a shopping centre rather than individual outlets. The communication
DBA 1738
NOTES
emphasis is on the available range of shops, ease of parking or other consumer benefits.
The frequency of this type of advertising increases at peak demand times such as Christmas.
As the name itself suggests, in this formof advertising, the institute presents its own
story to build up an image of itself in the public mind. It is a public-relations-approach
advertising. The institute may present its viewpoint about a national cause, say, prevention
of blindness and the efforts it has taken to help this cause. Alternatively, it may list its social
contributions, or may emphasize its socially oriented policies. It may also lay stress on the
mission of the organization and its philosophy. One recent example of institutional advertising
was Mafatlal Groups campaign bearing on the great sons of India, its festivals, its seasons,
and how they as a group follow the same high traditions. Thus institutional advertising is
indirect, subtle, and affects our basic attitudes. The organization may reveal its history and
may try to build awareness about itself. The ad copy may be directed to a potential market
or to any of the interest groups like employees, shareholders, government etc. Institutional
advertising cultivates or tries to promote a spirit of friendliness towards it among the public.
Institutional Advertising aims at building a positive image for the firmin the eyes of
internal and external public. It does not attempt to sell anything directly. However, it does
a lot of good to the organization as a whole. It forcefully tells how the organization is a
socially responsible institution. It also tells about the nationalistic leanings of the organization.
It shows how its actions are consistent with overall national objectives like environmental
protection, employment generation, literacy, loss prevention, health for all etc. This
advertising is integrated to public relations function of the organization.
Institutional advertisements may be addressed either to consumers or other groups like
government, suppliers, financial institutions etc. Effective institutional advertising evokes a
positive response amongst the target group and creates goodwill. Institutional advertising
may introduce products indirectly or may introduce the sales people indirectly. Glaxos
advertising on child health may make doctors favourably inclined to meet its medical
representatives.
Institutional advertising like product advertising, can be informative, persuasive or
reminder-oriented.
The objectives of institutional/corporate advertising are:
i) To make the company known.
ii) To make its products/services known.
iii) To make its achievements known.
iv) To make its values known.
v) To make socio-political/economic/moral statements.
Many companies are faceless entities. Corporate or institutional advertising gives a
face to the company. It causes seismic changes in peoples reactions to one companys
products/services, sales force and job offers.
NOTES
Institutional advertising establishes a relationship and is not merely timing of our
achievements.
Receptivity to Corporate Advertising
Mostly, people by and large are not ready to receive this genre of advertising. The
sterile information is hardly relevant for many. The recall rates are low. Except boosting the
chairmans ego, they are not of much use. The aversion occurs because of self-praise - say
a company makes an often-made claimthat we have a vision for the future. But can they
substantiate it?
Commercials on TV show a computer-generated factory site. There are so many
such commercials. Can they be inspiring?
While designing corporate ads, we should pay heed to the type of response we want.
Corporate communication is single-track. It asks for no action on the part of the audience;
except passive approval. Corporate ads are difficult to evaluate. How the company behaves
as a citizen? This defines its image. But ads must be backed by deeds.
Even then, corporate campaign sustained on a low key basis does have a compound
effect. Corporate advertising is also called public relations or public services advertising.
Markdown Event Advertising
This is used to create some excitement about a special period of lower cost offers for
products. It is likely to be more successful if the reduction is believed to be part of a
genuine sale of products which in the past had been fairly priced.
Co-operative Advertising
This is used where manufacturers fund part of a promotion by supplying leaflets or
advertising material for use by the store. The store can add its own address to ready
prepared printed material and carry out mail drops or other methods of distribution.
Alternatively a manufacturer may agree to share equally the costs of an advertising campaign.
Manufacturers are keen to have their brands stocked and sold; therefore, they often enter
into joint advertising schemes with retailers. Co-operative advertising may involve a
combination of one or more retailers in an area as well as the manufacturer. In addition,
co-operative promotions may well extend to agreements to provide joint branded window
display material and point-of-sale material.
Advertising can be classified on the basis of different criteria. Generally, we use the
following four criteria target audience, geographical area, mediumand purpose.
DBA 1738
NOTES
Advertising Classified Target Audience
Advertising addresses itself to a particular group of population - its target audience.
Sometimes, we come across an advertisement that does not appeal to us. Perhaps, it is
meant for some other group. To illustrate, Stress Guard capsules are for people in the
middle ages to protect against stress and its harmful effects. This product and its ad may
not appeal to young students. Advertisements broadly cater to two types of target audiences
-consumers and business.
Consumer Advertising
Most of the advertisements we come across daily in the media belong to this type.
These are sponsored by either manufacturers who make the consumer products or by
dealers who sell them. They are directed to the consumers who buy these products for
their own or for somebody elses personal use.
Consumer goods are either fast-moving consumer goods (FMCGs) like tea, coffee,
soaps, soft drinks, pens, pencils, blades and so on; or consumer durables like refrigerators,
washing machines and ACs which are not bought so frequently. Consumer durables belong
to white goods which include products like refrigerators, washing machines, ovens, ACs
and dishwashers. There is another category of consumer durables called brown goods
such as TVs, tape decks, and radios. Computers and automotivesformseparate categories
of consumer durables. There is one more category of consumer durables called domestic
or small appliances which include mixers, shavers, toasters and hair-dryers.
Service Advertising
Services are activities, benefits or satisfactions offered for sale. They are intangible,
inseparable, variable and perishable. They, therefore, require strict quality control, supplier
credibility and adaptability.
Personalized services like laundry, hair-grooming, beauty salon, automotive repairs,
when advertised, place greater emphasis on the institution offering it and the advantages in
patronizing them. They may talk about congenial environment, quickness and promptness
of service, economy, exclusiveness, status significance, etc. Luxury hotels and airlines,
when advertising their services, attach greater importance to service with a smile, courtesy,
thoughtfulness, and claimthat they offer a home away fromhome. Banks also advertise the
services they offer to their clientele, like the teller system, personalized banking, computer
banking, etc.
Services like physical goods also use channels to make their output available and
accessible, e.g., location of a hospital to cater a particular catchments area. Promotion of
services also emphasizes the locational aspects. Banks are looking at new ways to distribute
their services, e.g., use of ATMs - automatic teller machines, telephone banking. Promotion
NOTES
is used to take care of service retailers who are growing at a faster rate than product
retailers.
Business Advertising
Most of the advertising we come across is consumer advertising which we see in the
mass media. As opposed to this, business advertising is much smaller and is concentrated
in trade and business publications and technical magazines. Even direct mail is used as a
media for business advertising. There are four types of business advertising:
i) industrial advertising
ii) trade advertising
iii) professional advertising
iv) agricultural advertising.
Industrial Product Advertising
This advertisement is meant for individuals in business who buy or influence the purchase
decisions of the industrial products used to manufacture other goods. Industrial products
include, plant and machinery, and equipment. Industrial products also include such items
which become part of other products like the raw materials, semi manufactured goods
and components. Some services like insurance and accountancy are also considered
industrial products as they assist the furtherance of business.
An industrial product is bought by a very elaborate process affected by a number of
variables. The advertising is thus very complicated. Most common objectives for industrial
product advertising are to inform, to bring in orders, to stimulate queries, to empanel the
marketers name on the buyers panel of sources. It also seeks to influence the buying
persons in the purchasing organization whom sales people cannot access.
Industrial advertising is prepared in the formof messages inserted in trade journals
and at time in lay press. It motivates the distributors. It also seeks to build up a corporate
image. It reminds the final consumers about the role the industrial marketer plays in their
lives by offering products which. a customer finally ends up using.
The basic appeals used are rational. The appeals to patronize are mostly emotional.
The copy gives facts and figures. It is specific and gives evidence.
Apart from trade journals, other media used for industrial product advertising are
catalogues, brochures, direct mail, exhibits.
Trade Advertising
Its purpose is to stimulate greater distribution by increasing the number of outlets who
stock the product or by promoting better stocking of the existing distributors.
DBA 1738
NOTES
Professional Advertising
These messages are meant for professionals like doctors, accountants, lawyers,
architects and engineers. These appear in the professional journals. Professional advertising
tries to persuade the professionals to use the product for them, or to recommend it to
others.
Advertising classified by Geographic Area
Most of you in metros must have seen advertisements of local neighborhoods stores
in Mid Day and Afternoon. Shoppers stop, Akbarallys, Benzer, Spencers, Foodworld,
Kemps Fort, Kid Kemp are mass retailers who regularly put advertisement messages.
Local Advertising is mostly fromretailers. They are restricted to the local media, generally
the tabloid and the local edition of the national newspaper. Some believe in relationship
marketing and advertise in magazines. They want to pull traffic both local and fromother
areas when they visit the city. Bigger firms use regional, national or international advertising,
depending upon the market they serve and the nature of their product.
Of late, the world has become a small place. Many foreign brands have entered
India, especially after liberalization since 1991-92. These global brands do international
advertising. Sometimes they keep the message same, but change the execution. In other
words, their thinking is global, but they act local.
Advertising classified by Medium
Advertising can be classified on the basis of the mediumin which it is carried e.g. print
advertising consisting of press and magazine advertising, broadcast advertising consisting
of radio, TV and Cinema advertising, outdoor advertising consisting of hoardings, bill-
boards and posters. A medium is paid to carry this advertisement message to the target
audience.
Advertising Classified by Purpose
Advertising can be also classified on the basis of objectives which it seeks to achieve.
Mostly advertisements try to improve sales or market share of products and services.
Sometimes; they try to create awareness about the products. They may also remind the
audience so that that buy repeatedly. At times, advertisements are used to promote ideas
and social causes. This is also important area which goes by the name of institutional or
corporate advertising.
Public Relations Advertising
It is a part of institutional advertising. The most widely accepted definition of public
relations is the deliberate, planned and sustained effort to establish and maintain mutual
understanding between an organization and its public. PR is an extended arm of the
NOTES
management and tends to flow over the whole of business and its management. Public
Relations Advertising represents the management and communicates the policies, problems
and performances to the public. PR Advertising should, therefore, be objective. Public
Relations Advertising is effective when the organization practices what it preaches because
PR means 90 p.c. doing and 10 p.c. talking about it.
PR Advertising generally precedes the share issues these days to create a favourable
climate for investing public.
Annual Reports of the companies and the chairmans speech have also the potential
of being good Public Relations Advertising provided they are excellently drafted.
Public Relations Advertising addressed to customers is about the price revisions for
whatever reasons, customer education advertisements, notice about change in address/
phone numbers, grievance redressal mechanisms etc.
Public Relations Advertising is a must at the times of crisis like a fire in a factory,
major accident or disaster. It then becomes an effective damage containing device.
It may be appreciated that many areas of institutional and PR Advertising overlap.
Institutional Advertising definitely has a PR content but is more indirect and philosophic.
PR Advertising on the other hand can be down-to-earth, and is a communication with any
of the public with which the organization interacts.
Public Service Advertising
Public Service Advertising is done as a part of social responsibility by the advertising
agencies or business organization or government or social service institutions. It seeks to
promote important social issues. It is created to promote greater awareness of public
causes. The examples of such social issues which have been promoted are:(a) handicapped
children and their help, (b) female foeticide, (c) national integration, (d) drug addiction, (e)
blood donation, (f) prevailing systemof education.
The importance being given to Public Service Advertising can be seen by the institution
of the Ashok Jain Awards and the Sunday Observer Awards where entries of ad copies
are judged against the following criteria :
Thematic brilliance
Design and layout
Inspired copywriting
A renewed vision provided for an otherwise well-known issue
Best entry fromyoung amateurs.
DBA 1738
NOTES
The drug addiction entry had the juxtaposition of grotesque images and sensitive
copywriting. The entry on blood donation had a pair of hands in various prayer modes.
It may be noted that Padamsree of Lintas is the first Indian to enter Clio Hall of
Fame an equivalent of Oscar in advertising field for his public service film. India on
Handicapped Children: The Story of Hope.
Public Service Advertising.
(a) A protein diet was promoted by imaginative ads.
(b) Cancer awareness was promoted by issuing positive appeals.
(c) (c) Family planning campaign by Lintas with a slogan one or two, thats enough
or in Hindi Ek ya do bus.
(d) Visuals on sugar cane vendors unhygienic conditions of sale or on hazards of
smoking.
(e) A film on the handicapped making us aware that the problem is not it? The
handicapped but it is in us who treat the handicapped as handicapped. In fact, this
handicaps them further. Lintas filmemphasize that the disabled dont need your
pity. They need your help.
(f) The ad films, (Spread the Fight of Freedom) and (One Tune) (Ek Sur) are
memorable.
The former film had 24 sports people running with lighted torches in different
locales.
(One Tune) commenced with Bhimsen Joshi, interspersed with Lata, and ending
with
Amit, Jeetu and Mithun and a host of Indians did set for national integration very
beautifully.
(g) The recent film with actors stressing desh mein ekaa rahein is also a lovely one
on communal harmony.
Though Public Service Advertising is identified with national causes, there is some
amount of public services even in product advertising like the promotion of soap, detergent,
banking habit and insurance habit. However, we consider such advertising as product
advertising with a public service slant. This slant is predominant when primary demand for
a product is being stimulated.
It is essential to focus our message to a target group. We should also know what
motivates this target groups. A family planning message in the usual format does not interest
the farmer because to him more children means more hands to help him at work.
In Public Service Advertising, there should be a thorough understanding of the target
group. We have to focus our communication on it. We have to motivate the target group.
The three rules of presentation are: keep messages single minded, keep themdramatic and
NOTES
keep them short. The effectiveness of any Public Service Advertising can be assessed
from two angles. Unless it has a sponsor and a disciplined plan for release it can prove
ineffective.
Public Service Advertising is also known by various other names: .
Public Awareness Advertising
Social Service Advertising
Social Awareness (SA) Advertising.
Leo Burnett, while making a presentation at the 15th Asian Advertising Congress in
1986 at Bangkok said:
1) By its very nature, marketing of causes, professionally called Public Service
Advertising, is emotional since it touches peoples deepest fears, anxieties, and
values.
2) Most PSA (Public Service Advertising) designed today lacks impact. Perhaps
the reason for this is human nature. People may be appalled by images of starving
children but very few are willing to do something about it. Another reason is that
principles of marketing are seldomapplied to promotion of causes. One difficulty
is to define the target audience sharply. Usually, the message requires people to
change the existing behavioural pattern drastically. Public Service Advertising
may promote awareness but action on social problems needs much more than
advertising. The state needs to tackle the problems with the resources at its
command, the social structure has to be radically charged, and laws put into
effect.
We cannot always be provocative in communication. We have to see what we want
to achieve. While trying to change personal habits like smoking, drugs, etc. the message
can be hard-hitting, but not while dealing with riots.
We can now appreciate that product advertising promotes products and corporate
advertising promotes ideas. Thus corporate advertising is non-product advertising.
Advertising is commercial if it is done by a business firmto sell products and earn profits.
Advertising can be non commercial if done by a government or NGO to seek some
donation, charity or to influence the consumer behaviour. Some advertisements seek an
order or direct action but mostly they try to create a favourable attitude and awareness.
Financial Advertising
There can be special features in industry-specific advertising. Thus we can think of
textile advertising, pharmaceutical advertising and financial advertising. As students of
commerce and management, you are aware that public limited companies invite the general
public to subscribe to the share capital of the company. There are as many as 50 million
shareholders who invested more than Rs. 26,000 crores in 1992. In 1993-94, over a
DBA 1738
NOTES
thousand public issues are vied for a capital pie of roughly Rs. 40,000 crore. Obviously,
the market is fiercely competitive. A small part of this investor community can always be
motivated and won with advertising campaign that understands. their aspirations and respects
their intelligence. Some private and public limited companies invite people to deposit money
in the company as a loan or sell bonds and debentures to the general public. In the later life
of the company for .expansion and diversification or for capital investment, the company
may approach the shareholders again in the formof a rights issue or may offer share to the
public again. Promoting capital issues has become a very specialized segment of advertising
called financial advertising. As more and more companies tap the capital market often and
with issue sizes becoming larger and larger, financial advertising is receiving increasing
attention. These days mega-issues of fertilizers, petrochemicals, are being floated seeking
to raise several hundred crores. Almost all advertising agencies are setting up special cells
for financial advertising. The copy of financial ad gives the highlights of the project, details
of the issue, Crisil rating, managements perception of risk factors, closing date of the
issue, lead managers names and addresses, promoters name and address, name of the
company and its address. Apart fromthese routine things, the investing public is motivated
to invest by suitable copy matter - a slogan, a promise of dividends/returns, profile of the
product etc.
Suddenly, issues are at a premium and it must be justified. Financial advertising has
therefore assumed greater importance.
The general public is prepared for a major issue by suitable institutional and public
relations advertising before the issue is floated.
The dividing line between corporate and issue advertising has been getting thinner. A
lot of corporate ads are designed to sell forth-coming issues. They are perception - altering
ads just weeks before their issues.
The media used for financial advertising is, mainly the print media, especially the press
and to some extent magazines. Mega-issues are promoted even on TV. Some companies
use Cable TV also. Issue advertisements are also put on hoardings.
Too much money in financial advertising is spent on selling people were big, friendly
and wonderful. It is not on any more. People want a specific proposition, so that they can
understand what is in it for them.
The visuals used are graphics of turnover and financial data. Some visuals pertain to
the promised returns. Products are also used as illustrations in the copy.
The real skill is in framing appropriate headlines. A creative advertising is one that
gets noticed and compels the investor to read the message.
NOTES
The success of small time agencies in this sector is due to their rapport with the stock-
brokers, merchant bankers, low costs of operating, quick reaction to market conditions,
ability to work round-the-clock and manpowers financial background.
There is bifocal advertising: One campaign to paint the larger picture of the company
and another to provide the nitty-gritty. The recent SBI issue was handled by Lintas as pre-
issue corporate campaign and then by Pressman as the issue advertising. In future, this
trend may continue. Corporate accounts will go to mainline agencies and issue accounts to
specialist financial agencies. Even, then specialist agencies may take up the integrated issue
marketing.
In spite of all this, financial advertising leaves much to be desired in terms of quality.
Most of the issues still remain unbranded. Just issue highlights cannot make a good copy.
Till the investment is buoyant, the ads may afford to remain unprofessional. Mudra attempted
to brand Reliance Petrochemicals issue - Khazana way back in 1987, which was the first
attempt to market an issue. In future, distinctive advertising will make the difference in this
specialized segment too. Most of the Agencies have started offering communication package
including direct marketing, press and broker conferences, brochure preparation, PR to
clients in this area.
Financial agencies who handle issue ads work within short-time frames. Market
research is a luxury. There is hardly anytime to collect and collate all financial data. There
is no test-marketing. An issue is a one-time sale. There is no roomfor corrective action. A
strategy cannot be reworked once the issue opens.
SEBI Proposal
Securities and Exchange Board of India (SEBI) has proposed that between the date
of announcement of the public issue and the closing of the subscription list, no corporate
advertisement of the issuer can be released.
There has to be some discipline in which companies promote their issues. Sky-high
promises made in issue/corporate ads must be avoided. Many agencies also advise the
clients to refrain fromimage building ads during the 10-day period leading to the opening
of the subscription. It is too late to start building corporate image on the eve of the public
issue. It is better to concentrate on the issue rather than the image.
SEBIs proposal puts a blanket ban. If some significant information is to be passed on
like ISO 9000 certification or a tie-up arrangement, the corporate ads should allow it even
during the launch period on merits. Low-key industrial companies have to build image
since investors do not know about them. Besides, professional code is to emerge fromthe
profession, rather than SEBI. Corporate ads are truthful by and large. In so far as the
information in corporate ads is consistent with the prospectus, there ought not to be any
restrictions. The ASCI is to discuss the SEBI proposal.
DBA 1738
NOTES
Sensational and Glamourous Financial Advertising
Financial advertising remained conservative till West Coast Breweries put Pooja
Bhatt-in-a-swim-suit in its issue advertisement. SEBIs new draft code wants to see the
end of any touch of glamour in public issue ads. No wacky visuals, no smart headlines, no
models, no fluff. No happy faces offering an opportunity of a life time. No unsubstantiated,
claims. Public issue ads should contain nothing more than the prospectus does offer. They
must be vetted by the Board before release. SEBI exercises control over issue ads indirectly,
through Merchant Banks who manage that issue. Advertisers are demanding media-specific
guide-lines since the present proposal is for print ads only. SEBIs directive will result in
tombstone advertising with no slogans, models, celebrities, cartoons, and unsubstantiated
claims. Maybe to bypass the directive, pre-issue corporate ads will be used in a much
bigger way. However, such ads can be inserted until the day before the issue is actually
announced. It heralds the coming issue. Personal selling and direct marketing will be used
much more in future.
Financial Advertising on Satellite Television (ST)
Financial advertising accompanies financial programmes since the viewers of such
programmes formthe target audience. Financial programmes are niche audience directed
programmes, and are not dependent on TRP ratings. The message becomes focused.
Satellite channels are viewed by middle class, upper-income bracket people, and these
are the people who invest. The satellite channels and financial advertising have to go well
wit each other since the viewer ship fits the target audience of financial advertising.
The influencers in securities buying are the financial consultants, brokers, sub-brokers
and merchant bankers. Business-based programmes are watched by these influencers.
Satellite channels offer special packages for financial advertisers. JAIN TV claims
that 30 percent of its advertising revenue comes from financial programmes. Besides,
certainly some financial advertising requires more than 30-seconds, and corporate films
lasting 10 minutes are the way out. They may prove expensive as per tariff card rate and so
special package is offered. JAIN also offers to make advertisements films for advertisers.
3.4. DESIGNING THE ADVERTISEMENTS
The next step in developing an advertising campaign is to design a creative message
and select the media that will enable the retailer to reach its objectives reality these decisions
are made simultaneously. Creative messages cant be developed without knowing which
media will be used to carry the message to the target market. This text, however, covers
media selection after discussing how retailers design the message.
Creative decisions are especially important for retailers because their advertising
messages usually are seeking an immediate reaction by the consumer and have a life span.
NOTES
The development of such messages is one of retailers major failings. This merely covering
up the retailers name in ads used in your local newspaper to bring out the retailers name
in a broadcast ad, you will realize that all too often retailer-originality in their ads, because
they will all be the same.
Creative retail ads should seek to accomplish three goals:
attract attention and retain attention
achieve the objective of the advertising strategy
avoid having any errors, especially legal ones.
Accomplishing these goals is an extremely difficult task in todays mark given the
limited time span of the consumer. With newspaper and magazine readership declining and
the increased use of the remote control to surf the tube during television commercial
breaks, it is becoming more and more difficult to first get the consumers attention and then
to hold it.
It Kmart, for example, recently started using celebrities such as Penny Marshall,
Rosie ODonnell, and Martha Stewart in its ads to attract attention. Small local retailers
often use big bold copy offering something exciting in their print ads to get attention.
Other retailers use a combination of one or more of the common advertising appeals
again attention. These appeals are profit, fear, pleasure, vanity, convenience, romance,
admiration, and health.
However, even after the retailer gets the consumers attention, the retailer must
hold on to that attention. After all, if consumers have already seen or read the ad, why
should they continue to view it again. Some of the common approaches that retailers
use to gain repeated viewing include Lifestyle shows how the retailers products fit in
with the consumers lifestyle.
Fantasy creates a fantasy for the consumer that is built around the retailers
products.
Humorous built around humor that relates to using the retailers products
Slice-of-life depicts the consumer in everyday settings using the retailers
products.
Mood/image builds a mood around using the retailers products
Finally, before using the ad, the retailer should pretest it with both consumer
groups and legal experts for errors. For example, Burger King recently ran a national
television ad featuring a bookish-looking boy playing a cello badly. After being zapped
by a cartoon character, the boy is taken to a Burger King for a Whopper and
transformed into a skilled electricguitar player. Music teachers began complaining
DBA 1738
NOTES
to Burger King at once, and some even picketed outside Burger King restaurants. By
fading to pretest the ad, Burger King never realized that this ad could offend these
teachers. Similarly, Taco Bell ran an April Fools Day ad claiming that it purchased
the Liberty Bell from the government and was going to rename it the Taco Liberty
Bel. Many consumers failed to realize the significance of the date and angrily
confronted the company. Likewise, in the Holiday Inn campaign mentioned earlier,
the chains first ad of this campaign was dropped after only one airing. In this ad, a
former male, Bob J ohnson, returns to his high school reunion as a transsexual and
nobody is able to recognize him/her. Holiday Inn hoped this would reinforce the
campaigns main me*: sage of the renovations at Holiday Inn. Unfortunately, many
viewers found the ad offensive, and it was dropped at once. All of these mistakes
could have been detected during a pretest. The Global Retailing box shows that
American retailers are not the only ones who sometimes fail to pretest or proof their
promotions.
Although these errors are serious enough in nature, they should not present the
retailer with legal problems. That does not mean the retailer isnt in danger of violating
some laws with its ads, even if it isnt trying to deceive the consumer. It discussed
some of the various federal laws governing retail advertising. All too often the retailer
runs into trouble with local laws. Some states, for example, limit promotions involving
games of chance, others regulate the use of ads with price comparison among retail
stores, and others regulate the use of certain words in the description of merchandise.
For example, the Pennsylvania Human Relations Commission has issued guidelines
against the use of the following words that may tend to discriminate among consumer
groups in real estate ads: bachelor pad, couple, mature, older seniors, adults, traditional,
newlyweds, exclusive, children, and established neighborhood.
Media Alternatives
The retailer has many media alternatives fromwhich to select. In the past, retailers
generally categorized media as either print, which included newspaper, magazines,
and direct mail, or broadcast, which lumped radio and television together. Now,
however, retailers are beginning to classify media from a managerial perspective by
recognizing that newspapers and television are mass media alternatives aimed at a
total market, whereas radio, magazines, direct mail, and the Internet can be more
easily targeted toward specific markets.
Newspaper Advertising
The most frequently used advertising medium in retailing is the newspaper for the
following reasons. (1) Most newspaper are local. This is advantageous because most
retailers appeal to a local trading area. (2) A low technical skill level is required to
create advertisements for newspapers. This u helpful for small retailers. (3) Newspaper
NOTES
ads take only a short time between the time copy is written and when the ad will
appear. Because some retailers do a poor job at planning and because they tend to
use advertising to respond to crises (poor cash slackening of sales, need to move old
merchandise), the short lead time for placing newspaper ads is a significant advantage.
Retail newspaper advertising also has its disadvantages, among them being (1)
the fact that a consumer was exposed to an issue of a newspaper does not mean the
consumer read or even saw the retailers ad; (2) the life of any single issue of a
newspaper is shortits read and subsequently discarded; (3) the typical person
spends relatively little time with each issue, and the time spent is spread over many
items in the newspaper; (4) newspapers have poor reproduction quality, which leads
to ads with little appeal; and (5) if the retailer has a specific target market, much of its
advertising money will be wasted, because newspapers lend to have a broad appeal.
In lad, seldom does the retailers target market match the circulation of any newspaper.
Still, despite these disadvantages, newspapers continue to be the number 1 form of
advertising for retailers. Many of the large retailers, such as Wal-Mart, Target, Sears,
Mervyns, and Knurl use newspapers to deliver their own centrally produced inserts.
Television Advertising
Today, retailers such as Sears and J CPenney, with their womens apparel, are
turning to television advertising as a means of creating an image or position in the
marketplace. Research suggests that, over time, pictures retain their effects on consumer
memory and evaluations to a greater extol than the verbal messages from media such
as radio. However, television advertisings expensive. A half-dozen well-designed
television ads may use up the total ad budget. Inaddition, for the small or even
intermediate-sized retailer, a television ad would read well beyond its trading area. A
final disadvantage of television advertising is that competition is high for the viewers
attention. During advertising periods, the viewer may take a break and leave the
room, may be exposed to several ads, or use the remote control to surf to other
channels. Surfing the tube, however, has become a significant problem recently, as
most viewers have remote controls and the number of channels available has increased
from three or four in the early 1980s to the more than 500 that are now available on
many cable systems. Such an increase in channel availability may cause retailers to
view television advertising not so much a mass audience approach but one that can be
targeted to specific markets.
Despite the preceding drawbacks, television advertising can be a powerful tool
for generating higher sales. The American public spends more time relaxing in front of
television than in any other recreational activity. Television has broad coverage; mat
than 98 percent of homes in the United States have at least one television set. Most of
DBA 1738
NOTES
these sets are color and offer the retailer a vehicle in which both sight and sound can
be used to create a significant perceptual and cognitive effect on the consumer.
The widespread development of cable television has made television attractive to
small local retailers. Local cable operators have been selling advertising on cable
channels, which is quite competitive with that of newspaper advertising. However,
retailers just starting to use TV advertising may be hard pressed to find a niche because
so many others have already been seeking to fill niches too. The point to remember,
has we Mentioned earlier, is to sell both the products and store image at the same
time. Cable television has also provided a new means of television advertisingthe
24-hour shop-ping channels.
Radio Advertising
Many retailers prefer to use radio because it can target messages to select groups.
In most communities, there are live to 10 or more radio stations, each of which tends
to appeal to a different demographic group. Retailers can use radio, through the use
of proper variations in volume and types of sounds, to develop distinctive and appealing
messages and to introduce a store and its image to current and potential customers. In
short, there is a lot of flexibility. Also, many radio audiences develop strong affection
and trust for their favorite radio announcers. When theseannouncers endorse the
retailer, the audience is impressed.
Radio advertising also has its drawbacks. Radio commercials, especially the
uncreative ones, are not easily saved or referred to again like print media ads. In fact,
some media experts claim that radios lack of creativity is a major shortcoming. All
too often, ad agencies and radio stations lack the creativity to help local retailers. The
CBS radio network, claiming the last truly great radio campaign was Motel 6s And
well leave the light on for you, recently hired top creative individuals to stimulate
better radio commercials, at both the national and local levels. In addition, radio is
frequently listened to during work hours or driving to and fromwork (drive time) and
tends, over time, to become part of the background environment. Also, because radio
is nonvisual, it is impossible to effectively demonstrate or show the merchandise that is
being advertised. And, finally, radio signals tend to cover an area much larger than a
retailers trading area. Therefore, a good portion of the retailers advertising dollars
may be wasted.
Magazine Advertising
Relatively few local retailers advertise in Magazines, unless the magazine has
only a local circulation. Nationally based retailers such as JCPenney will allocate some
of their advertising budget to magazines. Usually, the retail ads that these retailers
place in magazines are institutional.
NOTES
Magazine advertising can be quite effective. In relation to newspapers, magazines
perform well on several dimensions. They have a better reproduction quality, they
have a longer life span per issue, and consumers spend more time with each issue of
their magazine than their newspaper. An added benefit is that featured articles in a
magazine can put individuals in the mood for a particular product class. For example,
a feature article on home remodeling in Better Homes and Gardens can put people in
a frame of mind to consider purchasing wallpaper, carpeting, tiling, draperies, paint,
and other home improvement items.
The major disadvantage of using magazines is that the long lead time requirements
prevent price appeal advertising, as well as the lack of urgency in its messages.
Direct Mail
Direct marketing can be a powerful addition to the retailers promotional strategy.
With direct mail, the retailer can precisely target its message at a particular group as
long as a good mailing list of the target population is available. Bloomingdales, for
example, uses a customer database to select targeted recipients for each of its roughly
300 annual catalog and promotional mailings. In addition, direct mail provides retailers
a personal contact with individual consumers who share certain valued characteristics.
Thus, although all Bloomingdales customers receive the Christmas catalog, only those
recently purchasing a mens suit will receive a postcard promoting a sale on shirts and
ties. Such messages can reach the consumer without being noticed by the competition.
Finally, direct-mail results can generally be easily measured, thus providing the retailer
with important feedback information. On the negative side, direct-mail advertising is
relatively expensive per contactor message delivered. Also, the ability to reach the
target market depends totally on the quality of the mailing list. If the list is not kept
current, advertising dollars will hr wasted. A related problem is the incidence of
unopened or unexamined mail, especially when it is addressed to occupant or is
mailed using third-class postage.
Internet
Within the next few years, the number of web users is expected to exceed 200
million. Most of the 50 million users in 1997 made their purchases online strictly for
convenience. After all, the disconnect between seeing a picture of lamp and then finding
a store where that lamp is sold disappears when you can order on-line. The web site
for 1-800-1-l.OWERS (www.1800flowers.com) is a good example On the web, the
customer can get a better idea of the various arrangements available than by calling
the florist and asking for a description. In the future, however, the customer is expected
to be lured by price. This emphasis on price is already seen in the equipment necessary
to go on-line. In 1996, only one-third of American households had invested the $2,000
needed for a PC with the modem and software to shop the Internet. However, within
DBA 1738
NOTES
the next few years, the cost for such equipment will likely drop to the $500-to-$700
ranges. At this time, computers will be as cheap, as dependable, and as simple to use
as televisions, the high-performance retailers will be ready for these shoppers.
Successful retailers, even the small ones, already realize that the cost of setting
up and maintaining a commercial web site is minuscule compared with the cost of
building additional stores. Thus, as Internet shopping becomes more popular and the
technology that enables it becomes cheaper, prices on the Web will drop below prices
in traditional stores. In addition, the retailers web site will help it promote and
advertise its business.
Miscellaneous Media
The retailer can advertise by using media other than those previously identified:
yellow pages, outdoor advertising, transit advertising and transit advertising (on buses,
cabs, subways, electronic information terminals, specialty firms such as Welcome
Wagon and shopping guides, newspaper-like printed material but with no news). Each
of these is usually best used to reinforce other media and should not be relied on
exclusively unless the retailers advertising budget is minimal. Most retailers look on
these media vehicles as geared more toward particular product advertising by
manufacturers. However, that doesnt mean a retailer cant make use of them
3.5. MEDIA PLAN
Media planning consists of the series of decisions made to answer the question for
advertisers: What are the best means of delivering advertisements to prospective purchasers
of my brand or service? Advertisements are delivered by media such as newspapers, magazines,
or television. While this definition is rather general, it provides a broad picture of what media
planning is all about.
Some specific questions that a media planner attempts to answer are:
How many prospects (for purchasing a given brand of product) do I need to reach?
In which mediumshould I place ads?
How many times a month should prospects see each ad?
In which months should ads appear?
In which markets and regions should ads appear?
How much money should be spent in each medium? )
These are only a few of the questions that must be asked. Each one requires a specific
answer and decision.
NOTES
When all questions have been asked and decisions made, the recommendations and rationales
are organized into a written document called a media plan. The plan, when approved by the
advertiser, becomes a blueprint for the selection and use of media. Once the advertiser has
approved the plan, it also serves as a guide for actually purchasing the media.
It would be a mistake, however, to think of media planning as nothing more than finding
answers to a list of questions about media. Such a view is too narrow to provide the necessary
perspective. Rather, it is better to assume that each question represents certain kinds of problems
that need to be solved. Some problems are relatively simple, such as, On which day of the
week should television commercials be, shown? Other problems, however, are much more
difficult, such as, In which media will ads most affect the prospects buying behavior to result in
sales?.
Media planning should be thought of as a process or a series of decisions that provides the
best possible answers to a set of problems. A planner may find that a solution to a given problem
does not guarantee that it will work when other factors are considered. Finding the best solutions
to a set of problems represents the main task of planners, and this is what makes media planning
such an intellectually challenging activity.
Specialized Media
Special interest consumer magazines appeal to specific reader interests such asking, money
management, photography, or antiques. These magazines are read as much for their advertising
as they are for their editorial content. Therefore, these magazines often attract readers who
purchase the magazine not only for the editorial material, but also for information on the kinds
of products advertised.
A large category of media also exists to meet the specialized needs of industrial
manufacturers, service companies, wholesalers, retailers, and professional workers such as
physicians, attorneys, and teachers. These media may take the form of publications that contain
editorial matter, as well as advertising, pertaining to the specialized market, but they may also
include films, trade shows, convention exhibits, and phonograph records.
Other specialized media exist exclusively for the purpose of delivering advertising messages.
They carry no editorial matter and are not sought after by readers as are other forms of media.
Such advertising-oriented media include handbills, direct mail, outdoor billboards, car cards
that appear on buses or trucks, and free-standing inserts in newspapers (called FSI).
Another special mediumis the catalog. Although catalogs are often requested by consumers,
they may not be looked at with the same degree of frequency as are mass media. Therefore, the
advertising value of catalogs is somewhat limited. A special formof catalog is the telephone
book, which carries advertising but also carries editorial mattertelephone numbers. Plumbers,
for example, might justifiably use telephone book advertising exclusively because plumbers
arent needed until emergencies arise. On such occasions, the consumer will search ads in the
Yellow Pages to find a plumber, but probably will nor notice such ads at any other time
DBA 1738
NOTES
General Procedures in Planning Media
Marketing considerations must precede media planning. Media planning never starts
with answers to such questions as Which medium should I select? or Should I use
television or magazines? Planning grows out of a marketing problem that needs to be
solved. To start without knowing or understanding the underlying marketing problem is
illogical, because the use of media is primarily a tool for implementing the marketing strategy.
So the starting point for a media plan should be an analysis of a marketing situation. This
analysis is made so that both marketing and media planners can get a birds-eye view of
how a company has been operating against its competitors in the total market. The analysis
serves as a means of learning what the details of the problemare, where possibilities lie for
its solution, and where the company can gain an advantage over its competitors in the
marketplace.
After the marketing situation has been analyzed, a marketing strategy and plan is
devised that states marketing objectives and spells out the actions to accomplish those
objectives. When the marketing strategy calls for advertising, it is usually to communicate
some information to consumers that affects the attainment of a marketing objective. Media
are the means whereby advertisements are delivered to the market.
Once a marketing plan has been devised, an advertising creative strategy must
also be determined. This consists of decisions about what is to be communicated, how it
will be executed, and what it is supposed to accomplish. A statement of advertising copy
themes and how copy will be used to communicate the selling message is also part of that
strategy. Media planning decisions are affected by advertising creative strategy because
some creative strategies are better suited to one mediumthan to any other. For example, if
a product requires demonstration, Television may be the best medium. If an ad must be
shown in high-fidelity color, mag-azines or newspaper supplements may be preferable.
Creative strategy also determines the prospect profile in terms of such demographic
variables as age, sex, income, or occupation. These prospects now become the targets
that the planner will focus on in selecting media vehicles.
It should be noted that up to this point persons other than the media planner have
been making decisions that will ultimately affect the media plan. The marketing or marketing
research people were responsible for the situation analysis and marketing plan, though
media planners are, at times, involved at the inception of the marketing plan. Copywriters
and art directors are generally responsible for carrying out the creative strategy. Sometimes
a marketing plan may be as simple as a memorandumfroma marketing executive to the
media planner, or even an idea in an advertising executives mind. In such informal situations,
media planning may begin almost immediately with little or no marketing research preceding
it.
The media planner begins work once a marketing strategy plan is in hand. This plan
sets the tone and guides the direction of the media decisions to follow.
NOTES
The first thing to come out of such a plan is a statement of media objectives. These
are the goals that a media planner believes are most important in helping to attain marketing
objectives. Goals include General determination of which targets those persons most
likely to purchase a given product or serviceare most important; how many of those
targets need to be reached. and where advertising should be concentrated at what times.
Media strategies develop out of objectives. A media strategy is a series of actions
selected from several possible alternatives to best achieve the media objectives. Media
strategies will cover such decisions as which kinds of media should be used, whether
national or spot broadcast advertising should be used, how ads should be scheduled, and
many other decisions.
After the strategy is determined, the implementation of the media plan begins. Some
planners call all these subsequent decisions tactics. Whatever they are called, many decisions
still have to be made before tactics culminate in a media plan. These decisions might include
the selection of vehicles in which to place ads, the number of ads to be placed in each
vehicle, the size of each ad, and the specific position within each vehicle that an ad will
occupy.
Media decisions need to be creative. Yet many of the decisions involved in media
planning are based on quantitative analysis of research data, such as audience sizes, costs,
product usage habits, and broadcast ratings. But a media plan does not totally depend on
such numbers. It must also have a degree of creativity and good judgment. Although the
research analysis may lead to fairly clear alternatives, the planners judgment may modify
these alternatives in some way. For that reason many advertisers who sell the same kind of
product use widely differing media to advertise their brands. What is the correct decision
for one brand may be incorrect for a competing brand. A dramatic example of this occurred
some years ago when Shell Oil Company selected newspapers exclusively to deliver its
ads, while all other major oil companies used a combination of television, radio, magazines,
billboards, and newspapers.
The effectiveness of a plan depends to a great extent on the amount of creativity the
planner uses. An example of how such creativity might be applied to a media/ marketing
problemwas provided by Leonard Matthews, then vice president of marketing services of
Leo Burnett Company, Inc., in Chicago:
A couple of years ago, we introduced a new product on a regional basis, achieving
national distribution in about an 18-month period. Our problemwas to advertise in 10 or
12 key marker areas and to put extra advertising weight against a very selective local
audience in these areasfor exam- pie, the factory worker in Columbus, Ohio. All local
media are mass in their approach. There are no local magazines beamed at the blue collar
worker.
DBA 1738
NOTES
The media planner on this account came up with what I believe was a creative solution
to a fairly knotty problem. He isolated the major factory locations on a map of each
marker involved. He did some research on where these people lived in relation to where
they worked. He worked out an outdoor poster showing which was tailored to the traffic
pattern of the factory million homes. Such data are to be used for relative purposes only,
and the data merely show that ProgramA probably has a larger audience size than Program
B.
On the other hand, a planner cannot ignore the numbers and make decisions entirely
on the basis of experience. Clients are certain to challenge the basis upon which media
decisions are made.
Media Selection
To select the best media, the retailer needs to remember the strengths and weaknesses
of each mediumand needs to determine the coverage, reach, and frequency of each medium
that is being considered.
Coverage refers to the theoretical maximumnumber of consumers in the retailers
target market that can be reached by a medium not the number actually reached, For
example, it a newspaper is circulated to 70 percent of the 20,000 households in a retailers
trading area, then the theoretical coverage is 14,000 households reach, however, refers to
the actual total number of target customers who come into contact with the ad message.
Another useful termis cumulative reach, which is the reach achieved over a period of time.
Frequency is the average number of times each person who is reached is exposed to
an advertisement during a given time period.
Different media can be evaluated by combining knowledge on the cost of ads in a
mediumand the mediums reach and cumulative reach. The most commonly used method
for doing this is the cost per thousand methods (CPM). The most appropriate way to
compute the CPM is to divide the cost for an ad or series of ads in a medium by the reach
or cumulative reach. If a newspaper ad cost $500 and the cumulative reach was 13,860,
then the cost per thousand is $36.08 [($500/13,860) X 1,000)]. The newspaper may
have actually reached 38,200 households in the community, but if only 13,860 were reached
in the retailers trading area, then that is the relevant statistic.
The CPM is useful for comparing similar-sized advertisements in the same media
type (e.g., two local newspapers). But, when comparing different media (TV versus
newspapers), the CPM can be misleading. A medium such as television may cost more
based on CPM, but if it has a significantly greater impact, it may be the better buy. Impact
refers to how strong an impression an advertisement makes and how well it ultimately
leads to a purchase. As a result of the increase in media alternatives and consumers spending
NOTES
a stable amount of time on the various medias, CPM has had a fivefold increase in the past
decade
When should a retailer time its advertisements to be received by the consumer? What
time of day, day of week, week of month, and month of year should the ads appear? No
uniformanswer to these questions is available for all lines of retail trade. Rather, the following
conventional wisdomshould be considered.
1. Ads should appear on, or slightly precede, the days when customers are most
likely to purchase. If most customers shop for groceries on Thursday through
Saturday then grocery store ads might appear on Wednesday and Thursday.
2. Advertising should be concentrated around the times when individuals receive
their payroll checks. If they get paid at the end of each month, then advertising
should be concentrated at that point.
3. If the retailer has limited advertising funds, it should concentrate its advertising
during periods of highest demand. For example, a muffler repair shop would well
advised to advertise during drive time on Thursday and Friday when the consumer
is aware of his or her problem and has Saturday available for the repair work.
4. The retailer should time its ads to appear during the time of day or day of wed;
when the best CPM will be obtained. Many small retailers have found the
advantages of latenight television.
5. The higher the degree of habitual purchasing of a product class, the more the
advertising should proceed the purchase time.
Many retailers use advertising to react to crises (e.g., an unexpected buildup of inventory
due to slow sales). Of course, if this is the situation, the timing of ads t not planned in
advance. This, however, is an ineffective method of scheduling retail advertising
Will the advertising produce results? It depends on how well designed the ads are
and how well the advertising decisions were made. A consistent record of good retail
advertising decision making is achieved only if the retailer effectively plans its advertising
program.
Some retailers will try systematically to assess the effectiveness and efficient their
advertising. Advertising effectiveness refers to the extent to which the advertising has
produced the result desired (i.e., helped to achieve the advertising objective, advertising
efficiency is concerned with whether the advertising result was achieved in the minimum
effort (e.g., dollars).
The effectiveness or efficiency of a retailers advertising can be assessed on a
subjective basis. Simply ask yourself: Are you satisfied with the results produced?
Do not believe you achieved those results at the least cost? Most, but not all, ineffective
advertising is due to 10 errors:
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Advertising promotion can generate excitement. Many retailers fail to recognize that
the role of sales promotion is quite large and may represent a larger expenditure than
advertising. They do not recognize this because of their poor record-keeping systems.
They know the cost of advertising because most of that is paid to parties outside the firm.
However, the cost of sales promotions often includes many instore expenses that the
retailer does not trace to promotion activities. If these costs were properly traced, many
retailers would discover that sales promotions represent a sizable expenditure. Therefore,
promotions warrant more attention by retail decision makers than is typically given.
In large companies the media plan is a subpart of the marketing communication plan
(which, of course, is a subpart of the marketing plan). Media planning is a process for
determining the most cost-effective mix of media for achieving a set of media objectives.
The key is to balance message impact and costmaximizing impact while minimizing cost.
Media are often the largest single cost itemin a marketing communication budget, especially
for consumer goods and services. General Motors, for example, spends worldwide over
$3 billion a year on media. If the selected media do not deliver the brand messages and
help themhave maximumimpact, sales will likely suffer, and much of the media money will
have been wasted.
Although media planning is numbers driven, it has a significant creative dimension.
Media planners must be creative in analyzing the quantitative aspect while understanding
the qualitative dimensions and how people use media. At the Fallon agency, the science
and art of how media connect companies and customers is operational zed in the following
considerations: the moment in which brand messages are delivered, the mood of customers
or prospects at the time they receive or send brand messages, the mind-set of customers
and prospects, the media that carry the messages, and the milieu in which messages are
exchanged.
Unless the media budget is extremely small, most companies use more than one medium
for several reasons. First, different media have different message delivery features and
Second, media strategies, often call for a variety of media. Finally, a single communication
vehicle can seldomreach everyone in a target audience.
The challenge of media planning is becoming greater because the number of ways to
send brand messages is increasing. Recognition of this development, however, has been
slow in coming. Not until the late 1980s, for example, did the Advertising Research
Association recommend that its 30-year-old model for evaluating media effects be revised
to include all marketing communication functions, not just advertising.
The Role of Media Research
Media planners begin their work by doing media researchanalyzing both target
audiences and media options. The information that must be reviewed includes size and
NOTES
characteristics of the various medias audiences, as well as effectiveness data on how well
these media deliver the audiences they promise. Most of the information comes from
research companies that compile media statistics and profiles. Media mark Research Inc.
(MRI), for example, provides data on demographic, lifestyle, product usage, and media
usage from a sample of 25,000 consumers who are interviewed each year. Information
Resources Inc. (1R1) synthesizes the movement of billions of product purchases based on
data fromretail store scanners.
3.6. SPECIFIC FEATURES OF RETAIL ADVERTISEMENTS
Retail advertising is used to develop and reinforce a firms image, informcustomers
about merchandise and prices, and announce a sale. While some national retailers invest in
image advertising and most of the retail advertising focuses on short-term objectives.
Implementing an ad programinvolves developing the message, choosing the specific media
to convey the message, and determining the frequency and timing of the message..
Developing the Advertising Message
Most retail advertising messages have a short life and are designed to have an immediate
impact. This immediacy calls for a copy writing style that grabs the readers attention.
Assistance in Developing Advertising
Cooperative (co-op) advertising is a program undertaken by a vendor. The vendor
pays for part of the retailers advertising. But the vendor dictates some conditions for the
advertising. For example, Procter & Gamble may have a co-op programthat pays for half
of a retailers ads for Tide detergent.
Co-op advertising enables a retailer to increase its advertising budget. In the previous
paragraphs example, the retailer only pays for half of its expenses (for ads including Tide).
In addition to lowering costs, co-op advertising enables the retailer to associate its name
with well-known national brands using attractive art work.
Co-op advertising has some drawbacks. First, vendors want the ad to featuretheir
products, while retailers are more interested in featuring their stores name, location, and
assortment of merchandise and services offered. This conflict in goods can reduce co-op
advertisings effectiveness from the retailers perspective. In addition, ads developed by
the vendor often are used by several competing retailer may list the names and locations of
all retailers offering their brands. Thus, co-op ads tend to blur any distinctions between
retailers. Finally, restrictions the vendor places on the ad may further reduce its effectiveness
for the retailer. For example, the vendor may restrict advertising to a period of time when
the vendors sales are depresseda time when the retailer might not normally be advertising.
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Advertising Agencies
Most large retailers have a department that creates advertising for sales and special
events. Advertising agencies are often used by large retailers to develop ads for store
image campaigns. Many small retailers use local agencies to plan and create their advertising.
These local agencies are often more skilled in planning and executing advertising than the
retailers employees are. Agencies also work on other aspects of the promotion programs,
such as contests, direct mail, and special promotions.
Local Media
Besides selling newspaper space and broadcast time, the advertising media offer
services to local retailers ranging from planning an ad programto actually designing the
ads. Media companies also do market research on their audiences and can provide
information about shopping patterns in the local area.
Choosing the Most Effective advertising medium
After developing the message, the next step is deciding what Medium to use to
communicate the message to customers.
Types of Media
The media used for retail advertising are newspapers, magazines, direct mail, radio,
TV, outdoor, shopping guides, and the Yellow Pages.
Newspapers
Retailing and newspaper advertising grew up together over the past century. But the
growth in retail newspaper advertising has slowed recently as retailers have begun using
other media. Still, 16 of the nations 25 largest newspaper advertisers are retailers.
In addition to printing ads with their editorial content, newspapers distribute free-
standing inserts. A free-standing insert (FSI), also called a preprint, is an ad printed at
the retailers expense and distributed as an insert in the newspaper.
Since newspapers are distributed in a well-defined local market area, theyre effective
at targeting retail advertising. For large retailers with multiple stores, the local market covered
by a newspaper is similar to the market served by the retailer. Newspapers are beginning
to offer opportunities for small retailers to target their advertising by developing editions
for different areas of a city. For example, The Los Angeles Times has 11 special editions
for regions of southern California, including editions for Ventura County, the desert cities,
and San Diego County.
NOTES
Newspapers also offer quick response. Theres only a short time between the deadline
for receiving the ad and the time that the ad will appear. Thus, newspapers are very useful
for delivering messages on a short notice.
Newspapers, like all print media, effectively convey a lot of detailed information.
Readers can go through an ad at their own pace and refer back to part of the ad when they
want to. In addition, consumers can save the ad and take it to the store with them. This
makes newspaper ads very effective at conveying information about the prices of sale
items. But newspaper ads arent effective for showing merchandise (particularly when its
important to illustrate colors) because of the poor reproduction quality.
While newspapers are improving their printing facilities to provide better reproductions
and color in ads, retailers continue to rely on preprints to get good reproduction quality.
JCPenney uses FSIs extensively, distributing them to over 50 million newspaper readers
weekly. However, FSIs are so popular that the insert from one retailer is lost among the
large number of inserts in the newspaper. Walgreen has reduced its FSIs from two to one
a week because of the clutter and because it has found that younger people dont read
newspapers as much as their parents. However, Walgreen is trying to increase the
effectiveness of its FSIs by streamlining the message and using a better grade of paper.
The life of a newspaper ad is short because the newspaper is usually discarded after
it is read. In contrast, magazine advertising has a longer life since consumers tend to save
magazines and read themseveral times during a week or month.
Finally, the cost of developing newspaper ads is very low, but the cost of delivering
the message may be high if the newspapers circulation is broader than the retailers target
market, thus requiring the retailer to pay for exposures that wont generate sales. Newspaper
ads can be developed by less experienced people and dont require expensive color
photography or typesetting.
Magazines
Retail magazine advertising is mostly done by national retailers such as Lord & Taylor
and The Gap. But magazine advertising is increasing with the growth of local magazines
and regional editions of national magazines. Retailers tend to use this medium for image
advertising because the reproduction quality is high. Due to the lead time (time between
submitting the ad and publication), a major disadvantage is that the timing of a magazine ad
is difficult to coordinate with special events and sales.
Direct Mail
Retailers frequently use data collected at POS terminals to target their advertising and
sales promotions to specific customers using direct mail. For example, Neiman Marcus
keeps a database of all purchases made by its credit card customers. With information on
DBA 1738
NOTES
each customers purchases, Neiman Marcus can target direct mail on a new perfume to
customers with a history of purchasing such merchandise.
Many purchases are made with cash or use third-party credit cards like Visa and
MasterCard. Thus, retailers lack information about many purchases if they rely on store
credit card transactions to create a mailing list. Retailing also discusses how Service
Merchandise overcomes this problem and then uses the database of customer purchases
to build sales and customer loyalty.
Retailers without their own mailing list can purchase a wide variety of lists or targeting
consumers with specific demographics, interests, and lifestyles. For example, a store could
buy a list of subscribers to Architectural Digest magazine in its trading area and then mail
information about home furnishings to those upscale consumers. Finally, many retailers
encourage their salespeople to maintain a preferred customer list and use it to mail
personalized invitations and notes.
While direct mail can be very effective due to the ability to personalize themessage,
its also costly. Many consumers ignore direct-mail advertising and treat it as junk mail.
Radio
Many retailers use radio advertising because messages can be targeted to a specific
segment of the market. Some radio stations audiences are highly loyal to their announcers.
When these announcers promote a retailer, listeners are impressed. The cost of developing
and broadcasting radio commercials is quite low.
One disadvantage of radio advertising is that listeners generally treat the radio broadcast
as background, which limits the attention they give the message. As with all broadcast
media, consumers must get the information from a radio commercial when its broadcast
they cant refer back to the ad for information the) didnt hear or remember.
Television
TV commercials can be placed on a national network or a local station. A local
commercial is called a spot. Retailers typically use TV for image advertising. They take
advantage of the high reproduction quality and the opportunity to communicate through
both visual images and sound. TV ads can also demonstrate product usage.
Besides high production costs, broadcast time for national TV advertising is expensive.
Spots, ads on local and cable TV, have relatively small audiences and may be economical
for local retailers. To offset the high production costs, many suppliers provide modular
commercials, in which the retailer can insert its name or a tag after information about the
vendors merchandise.
NOTES
Outdoor
Billboards and other forms of outdoor advertising can effectively create awareness
for a limited amount of information to a narrow audience. Thus, outdoor advertising has
limited usefulness in providing information about sales. Outdoor advertising is typically
used to remind customers about the retailer or to inform people in cars of nearby retail
outlets.
Shopping Guides
Shopping guides are free papers delivered to all residents in a specific area. This
medium is particularly useful for retailers that want to saturate a specific trading area.
Shopping guides are very cost-effective and assure the local retailer of 100 percent coverage
in a specific area. In contrast, subscription newspapers typically offer only 30 to 50
percent coverage.
An extension of the shopping guide concept is the coupon book or magazine. These
media contain coupons offered by retailers for discounts. Shopping guides and coupon
books make no pretense about providing news to consumers. Theyre simply delivery
vehicles for ads and coupons.
Yellow Pages
The Yellow Pages are useful for retailers because they have a long-life. The Yellow
Pages are used as a reference by consumers who are definitely interested in making a
purchase and seeking information.
Factors in Selecting Media
To convey their message with the most impact to the most consumers in the target
market at the lowest cost, retailers need to evaluate media in terms of coverage, reach,
cost, and impact of the advertising messages delivered through the medium.
Coverage
Coverage refers to the number of potential customers in the retailers target market
that could be exposed to an ad in a given medium. For example, assume that the size of the
target market is 100,000 customers. The local newspaper is distributed to 60 percent of
the customers in the target market, 90 percent of the potential customers have a TV set
that picks up the local stations signal, and 5 percent of the potential customers drive past
a billboard. Thus, the coverage for newspaper advertising would be 60,000; for TV
advertising, 90,000; and for the specific billboard, 5,000.
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NOTES
Premiums
A premiumis merchandise offered at a reduced price, or free, to encourage customers
to make a purchase. Premiums are often used to promote cosmetics and fragrances.
Manufacturers such as Estee Lauder will offer gift box of bath powder with every purchase
of new cologne to stimulate trial the new fragrance
Games, Sweepstakes, and Contests
Promotional games of chance differ from premiums and price-off deals in that (1)
only a few customers receive rewards and (2) winners are determined by luck. For example,
fast-food restaurants frequently have contests associated with major films (such as The
Lion King) or sports events (such as the Super Bowl).
Coupons
Coupons offer a discount on the price of specific items when theyre purchased at a
store. Coupons are the most common promotional tool used by supermarkets. Retailers
distribute themin their newspaper ads and in direct-mail programs. For example, Publix, a
Florida-based supermarket chain, targeted a promotion at affluent customers using a direct-
mail piece that included recipes for a gourmet meal with coupons to purchase the products
needed to prepare it
Manufacturers also distribute coupons for their products that can be used at retailers
that stock the products. To attract customers, some supermarkets accept coupons
distributed by competing retailers. Another technique is for a retailer to offer double or
triple the value of coupons distributed by manufacturers. Coupons are often tied into frequent
shopper programs. Retailing describes a systemfor targeting coupons at the point of sale
to specific customers.
Frequent Shopper Programs
Fresh Farm, a Norfolk, Virginia-based supermar-ket chain, has a frequent shopper
program, called the Gold Card program, for its best customers. When Gold Card member
Tina Williams enters the store, she swipes her card at a kiosk, and a high-speed printer
provides a personalized shopping list with up to 25 deals. The deals offered are based on
Tinas purchase history
For example, Tinas history shows she frequently purchases corn chips but does not
buy dip. Shell get a deal on bean dip printed on her shopping list to-encourage her to try
a new product. If she passes up the deal this time in the market, the next time the value of
the bean dip coupon will be automatically increased.
NOTES
Frequent shopper programs are based on two principles: (l) all customers are not
equal and (2) behavior follows rewards. Most retailers have found that 20 percent of
their customers account for an overwhelming share of their sales and profits. Frequent
shopper programs reward those important customers to motivate themto develop loyalty.
Due to these programs success, many retailers are shifting their expenditure on newspaper
advertising and newspaper coupons to frequent shopper programs.
Determining the message and the communication platform
The advertising message is often a major factor affecting the success or failure of the
advertising campaign. To start with, the retailer needs to determine what to say. This is
largely dependent on the advertising objectives and the target consumer, but the appeal
has to be finalized. At this point, the retailer needs to consider who the potential customers
are their demographic, economic and psychological characteristics. How many of such
customers exist and who influences their purchasing decisions. What is the frequency of
their buying and the type of merchandise frequently purchased
Alter determining what to say, the retailer needs to determine how to communicate
the message. Some platforms which may be used are listed below:
Stressing the unique features of the product/s sold in the store.
Reflecting a lifestyle or desired lifestyle by showing people shopping in a particular
environment.
Testimonials from celebrities. A frequently used message tactic is to have a
spokesperson that champions the brand in an advertisement, rather than simply
providing information. When a position of advocacy is taken by a spokesperson in
an advertisement, this is known as a testimonial. In most cases, television, filmor
sports personalities, with whom the target customers can identify with, a reused
for testimonials.
Association formats-This formal usesanalogies to convey the message by creating
the mood and communicating the psychological benefits by way of exciting
associations.
A retailer may also use an advertorial. An advertorial is a special advertising section,
designed to look like the print section in which it appears. They are so named because they
have the look of the editorial content of a magazine or newspaper, but really represent a
long and involved advertisement for the brand.
The main media used for advertising are press, television, radio, cinema, posters,
hoardings and direct mail. Advertising may also be done on bus shelters, buses, road
dividers, dividers, kiosks, balloons, etc. The kind of media vehicle chosen by the retailer
largely depends on the reach of the particular mediumto the target audience. For example,
a Food Bazaar or Big Bazaar may advertise on a bus in a city, however.
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NOTES
The changes in technology have also made an impact in the area of communication.
The internet has emerged as a legitimate option for marketers. The web allows the marketers
to select precise markets and locus on specific interest areas, geographic regions, etc. It
also allows themto track how users interact with the various brands/advertisements. On-
line advertising allows the marketer to advertise twenty-four hours a day, seven days a
week, at the convenience of the consumer. As most retailers today have a web presence,
web advertising can be integrated with other forms of advertising.
Advertising on the internet may be in the form of banner adswhere the ads are
placed on sites that contain editorial material. It allows the browser to visit the website by
merely clicking on the ad. A pop up ad may also be used. This is an ad that appears when
a web page is being loaded or alters it has been loaded. Lastly, communication on the
internet may be by way of an e-mail message sent to the receiver. Certain websites ask
permission from the users to send e-mail updates on new items of interest. This is called
permission marketing. After the advertisement has been created, the toning and scheduling
has to be finalized and then the evaluation has to be done.
3.7. MEASURING RETAIL ADVERTISEMENT EFFECTIVENESS
Measuring Advertising Effectiveness
Every advertiser wants to assess the effectiveness of advertising. The problem of
assessment becomes more complicated when advertiser advertises through various
media. Selection of media is not an easy job. Which media responded to the satisfaction
of the advertiser? This is not an easy question to answer. In other words, there arises
the problem of choosing how to advertise? and through which media. Naturally,
one would select a media mix that would serve ones purpose the most. This can be
easily done by keying the advertising. Keying means to adopt such methods at the
time of advertising so that results may be very easily assured, and to do so, either of
the following may be adopted.
1. Different address may be given to different media, so that enquiries received
may be scrutinized to find out which media responds the best. The best medium
may be selected and continued for advertisements and the rest may be stopped
to avoid unnecessary waste of time and money
2. Different papers may be selected for the advertisement of different
departments, so as to know which paper suits the requirements and of which
department.
3. A coupon, blank order or space may be provided with the advertisement
paper with request that all requirements should be made along with the coupon
or blank order or space duly filled in.
NOTES
A request can be made to the enquirer or the prospective buyer, along with the
advertisement that he should mention the name of the particular medium, which is the
source of his information while making any enquiry. A scrutiny of all those inquiries
may give an idea which paper or media is the best suited.
All advertising efforts are directed mainly towards the achievement of business,
marketing and advertising objectives, i.e., to increase the sales turnover and thus to
make the maximum profit. The advertiser spends lakhs of rupees in this advertising
activity. In the background of all these efforts, is an attempt to attract the customer
towards the product through advertising. As soon as the advertising campaign is over,
a need is generally felt to measure the effectiveness of the campaign. Whether it has
achieved the desired results, i.e., desired sales profitability or results in terms the
change in customers behaviour in favour of the companys product which will naturally,
affect the future sale of the product.
In order to measure the effectiveness of an advertising copy, two types of tests
pre-tests and post-testscan be undertaken. Pre-tests are generally conducted in
the beginning of the creation process or at the end of creation process or production
stage. There are several pre- and post-test techniques to measure the effectiveness of
the advertising copy. The effectiveness of advertising in a particular media may also
be measured in any of the following ways: (a) by giving different addresses to different
media, (b) different newspapers may be selected for advertisements of different
departments, (c) coupon blank, etc., may be provided with the advertisement, or (d)
enquiry from consumers should mention the name of the source of information. The
technique is known as keying the advertising. Thus, in measuring the effectiveness of
advertising we include measuring of the effectiveness of advertising campaign,
advertising copy and the effectiveness of individual medium.
Because that is no valid way of measuring advertising effectiveness, it is often
difficult to prove that media decisions were effective. Consequently, decision making
has not been able to advance to the point where there is always substantive proof that
one medium is much better than another. Often a media planner has biased preferences
in favor of one media class over others and will favor that medium regardless of what
statistics or other objective evidence might indicate.
Notwithstanding these problems, decision making is improving and will
undoubtedly improve as long as the people in charge realize there are problems that
need solutions and make attempts at improving the situation. The Advertising Research
Foundation (ARF) and the Association of National Advertisers (ANA) have attacked
some of the more pressing problems of research data and methodology. Furthermore,
new and more highly qualified personnel within both agency and client organizations
have shown dissatisfaction with traditional methods of decision making and have
DBA 1738
NOTES
demanded new and better evidence for decisions. They are critical of the misuse of
statistics and have a broad enough background in research, marketing. Advertising
and media or set high standards of performance. The era of accountability in which
many large companies now operate also will act to improve the decision-making
function by demanding better research data and the removal of major obstacles that
stand in the way of such data.
We allocate a huge budget to our advertising activity. The main objective of this
allocation is to increase sales and profits of the firm. The multivariate forces influencing
sales make it almost impossible to measure with high precision the sales effect of
advertising. Most advertising research measures the characteristics of an advertisement
such as exposure, the ability of receiver to comprehend retain and believe in the
advertisement. If all of these characteristics are present in an advertisement, it can be
inferred that the advertisement is effective in generating sales. Measuring the
effectiveness, however, is not an easy task, it is still a complex problemand no scientific
methods can be applied precisely, particularly in Indian conditions in which the
advertising industry is growing because its problems are closely related to the economic
and cultural problems of the country.
Importance of Measuring the Effectiveness of Advertising
Why do we measure the worth of advertising?. There are a number of answers to
this question:
To Get the Cost Benefit of Advertising
The cost of advertising is mounting day by day and consequently profits are being
squeezed. So, the top management should be concerned about the cost benefit of
advertising in the various items of expenditure in the balance sheet of the company, the
contribution of which cannot be measured in terms of sales or profitability. Its
contribution in terms of sales or profitability can only be estimated to a reasonable
extent. Due to high costs of materials and wages, strangulated by higher overheads
and taxes, the management is reasonable in not approving any expenditure on
advertisement, which is not likely to bring in additional sale, resulting in additional
profits. The main concept is that additional cost of advertising must produce additional
profit and, therefore, the advertising should prove its contribution in total marketing
efforts like any other allocation of corporate resources or else. The advertising
expenditure will be set arbitrarily or be slashed drastically. So, if the management
measures the effectiveness of the advertising Campaign, it should compare the cost
with the contribution received. It must be linked with the benefits derived. If contribution
of any advertising campaign is higher, it means the cost benefit is higher and the
advertisement is effective.
NOTES
To Justify the Investment in Advertising
The expenditure on advertisements is considered to be an investment. In any
investment decision planning, there is always a statement of objectives which are spelt
out in detail, together with the nature and size of the returns expected on investment.
The case of investment in advertising is no more different. Advertising is a marketing
investment and its objectives should be spelt out in a similar manner, clearly indicating
the results expected fromthe campaign. The rate and size of return should be determined
in advance. If the expected rate of return is achieved in terms of additional profits, the
advertisement can be considered an effective one. In order to justify the investment
in advertising, the management makes an attempt to measure the effectiveness of the
advertisement.
To Compare the Results with the Objective and Goals
Advertising objectives and goals as two distinct terms must be distinguished. An
objective is a broad aim; a goal is specific and quantified objective. The objective is
not measurable whereas the goal is. Generally, the objectives of advertising are worded
vaguely in general terms such as to increase sales or profits or to expand our share
of market, or to maintain a favourable attitude of the company and its product.
Evaluation of these objectives is not possible. If these objectives are stated in terms of
the quantity or the amount of sales or percentage of total market snares these are
measurable in these terms and effectiveness can be measured. If the goal has been
achieved the advertising may be said to be effective. The results (actual sales) are
compared with the goals and if the actual performance is better, the advertising is
effective otherwise, it is ineffective.
To Know the Communication Effect
The effectiveness of the advertisements can be measured in terms of their
communication effects on the target consumers or audience. The main purpose of
advertising is communicating to the general public, and existing and prospective
consumers, various information about the product and the company. It is, therefore,
desirable to seek post measurements of advertising in order to determine whether
advertisements have been seen or heard, or in other words, whether they have
communicated the theme, message or appeal of the advertising. Clearly, if
advertisements are not seen or heard or are low in communication ability relative to
advertisements for comparable products, then the advertising probably is ineffective
and a change is called for. It is not enough that advertising is seen or heard, the advertiser
needs also to know the degree to which prospects retain messages and have been
induced to develop favourable attitudes towards the product advertised. Thus, if the
advertisements succeed in communicating the desired information and developing a
favourable attitude, the advertising is effective.
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NOTES
Compare Two Markets
Advertisers frequently seek to evaluate alternative types and amounts of
advertising by experimentation in so-called test markets. Under this procedure,
advertising is published in test markets and results are contrasted with other markets
so-called control marketswhich have had the regular advertis-ing programme. The
measurements made to determine results may be measurements of change in sales,
change in consumer attitudes, changes in dealer display, and so on depending upon
the objectives sought by the advertiser. Although experimentation in test markets
provides an excellent means for testing alternative advertising approaches to see if
they are effective in actual operations, the measurements made are actually
measurements of the effectiveness of the sales- promotional programme as a whole
rather the measurement of the effectiveness of the advertising itself.
Advertising Effectiveness Measurement
Advertising is aimed at improving the sales volume of a concern, so its effectiveness
can be evaluated by its impact on sales. Most of the managers believe that the
advertisement directly affects the sales volume and hence they evaluate the effectiveness
of the advertising campaign by the increase in the sales volume. However, it is not
correct to anticipate that the advertisement is the only factor to influence sales. There
are many other influences to sales in addition to that of advertising. Though sales
volume is not the valid measure of advertising effectiveness it is a good measure where
the management believes that advertising is the sole, or at least, the most important
influence on sales. However, where advertising objectives are defined in terms of
sales, it is desirable to measure the effective of advertising campaign on sales.
There may be two types of measure: (i) Direct measures; and (ii) Indirect measures.
Direct Measures of Advertising Effectiveness
Under direct measures, a relationship between advertising and sales is established.
A comparison of sales of two periods or two markets may be done and the
corresponding changes may be noted. The following are some of the methods that are
generally used in measuring advertising effectiveness.
Historical Sales Method
Some insights into the effectiveness of past advertising may be obtained by
measuring the relationship between the advertising expenditure and the total sales of
the product. A multiple regression analysis of advertising expenditure and sales over
several time periods may be calculated. It would show how the changes in advertising
expenditure have corresponding changes in sales volume. This technique estimates
the contribution that advertising has made to explaining in a correctional manner rather
NOTES
than in casual sales, the variation in sales over the time periods covered in the study.
The data required for this analysis are periodic advertising expenditure, which can be
obtained from the companys advertising budgeting records and the product or brand
sales figures from sources like audit records, where house shipments or other sales
records are maintained by the company. If it has a positive correlation the expenditure
on budgeting will show an effective relationship.
However, the historical sales analysis method is only a post-test measure of
advertising effectiveness and is not applicable to pre-testing. It means that in this
analysis, advertising effectiveness can be measured only when sales are effected and
not earlier.
Experimental Control
The other measure of advertising effectiveness is the method of experimental
control where a casual relationship between advertising and sales is established. This
method is quite expensive when related to other advertising effectiveness measures,
yet it is possible to isolate advertising contribution to sales. Moreover this can be
done as a pre-test to aid advertising in choosing between alternative creative designs,
media schedules, expenditure levels or some combination of these advertising decision
areas.
One experimental approach to measuring the sales effectiveness of advertising
is test marketing.
(i) Before-after with Control Group Design: This classic design uses several
test and control cities (Fig. 1). In this design two types of cities are selected.
Cities in which advertising campaigns are effected may be named as test
cities and other cities may be called central cities.
First of all, the normal sales level is calculated for both types of cities prior to
advertising campaign, and then the advertising campaign is presented to the test cities
and not the central cities. The effect of advertising campaign can be measured by
subtracting the amount of postcampaign figure of sales from the precampaign sale
figures in test cities.
A Before-After with Control Group Design for Measuring the Effectiveness of
Advertising Campaigns
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NOTES
The difference of post- and pre-campaign sales in cities is the result of advertising
and all other factors that affect the sales. In control cities, the difference of these two
sales shows the effect of other factors except advertising. By subtracting the sales
differences in control cities from those in test cities, a tolerably accurate estimate can
be gathered of the effect of advertising only on sales provided that the test and the
control cities are reasonably comparable
(ii) Multivariate Experimental Designs: While the experimental design
discussed above yields a reasonably accurate estimate of the effects of
the advertising on sales, it is not successful in explaining the success or
failure of the campaign itself. Multivariable designs produce these
explanations and are, therefore used by some very large firms because of
their diagnostic value. Fig. 2 shows the multivariable design:
(Figures in brackets show the area number)
A Multivariable Experimental Design for Measuring the Effectiveness of Advertising
Campaigns
The power of this multivariable factorial design is explained by G.H. Brown,
former Fords Director of Marketing Research. For any single medium eight possible
geographic areas have been exposed and eight have not been exposed. Thus, in this
experimental model it is possible to evaluate how each individual medium behaves
alone and in all possible combinations with other media.
This type of factorial design is capable of measuring the effectiveness of all
combinations of media used, as well as four different levels, of advertising expenditures.
For these reasons, it is a very efficient design. However, the complexities and the
costs involved make it impractical for all except a very big advertiser.
Indirect Measures
As it is very difficult to measure the direct effect of advertising on a companys
profits or sales, most firms rely heavily on indirect measures. These measures do not
evaluate the effects of advertisements directing on sales or profits but all other factors
such as customer awareness or attitude or customer recall of advertising message
affect the sales or profits or goals of the business indirectly. The assumption of these
measures is that favourable change in customer awareness, attitude, and recall will
lead in some way or the other to the attainment of greater sales and profits or whatever
is the primary object of the marketing and corporate strategy. This assumption, in
NOTES
turn, is based upon universal human behaviour that is by no means firmly established.
It is quite obvious if we make a housewife aware of the brand, she will not necessarily
go for the purchase of the brand immediately. If she buys the brand, it may not be due
to the advertisement. There may be certain other factors that instigate her to buy the
product.
Despite the uncertainties about the relationship between the intermediate effects
of advertising and the ultimate results, there is not other alternative but to use indirect
measures. The most commonly used measures are:
Exposure to Advertisement
In order to be effective, the advertisement must gain exposure. The management
is concerned about the number of target audience who see or hear the organization
message set in the advertisement. Without exposure, advertisement is bound to fail.
Marketers or advertisers may. obtain an idea of exposure generated by the medium
by examining its circulation or audience data, which reveal the number of copies of the
magazines, newspaper or journals sold, the number of persons passing the billboards
or riding in transit facilities, or the number of persons living in the televising or radio-
listening area, and the members of persons switching on their TV and radio sets at
various points of time. This number can be estimated by interviewing the members of
the audience for different media.
The audience and circulation data, as collected by the advertiser, may be further
classified by such variables as the age, income, occupation and areas of residence of
the audience or reader population and the advertiser can estimate the approximate
number of target consumers that are exposed to advertising messages. Another means
of gauging exposure is readership or listener surveys in which interviewers ask the
listeners or readers whether they have read or viewed the advertisements.
Attention or Recall of Advertising Message Content
This is one of the widely used measures of advertising results. Under this measure,
a recall of the message content among a specified group or groups of prospective
customers is measured within 24 hours of the exposure of the advertisement.
Attention value is the chief quality of the advertising copy the advertisements
cannot be said to be effective unless they attract the attention of the target consumers.
There are two methods for evaluating the attention getting value of the advertisements.
One is pre-test and the other is post-test.
In a pre-test evaluation, the consumers are asked to indicate the extent to which
they recognize or recall the advertisement, they have already seen. This test is conducted
in the laboratory setting. Here consumers read, hear or listen to the advertisement
DBA 1738
NOTES
and then researchers ask question regarding the advertisement just to test the recall
and then evaluate it.
In post-test method, the consumers are asked questions about the indication of
recognition or recall after the advertisement has been run.
These measures assume that customers can recall or recognize what they have
viewed or listened to.
Brand Awareness
The marketers who rely heavily on advertising often appraise its effectiveness by
measuring the customers awareness about the particular product or brand. The
assumption of this type of measure is that there is a direct relationship between the
advertisements and the awareness. This type of measure is also subject to the same
criticisms as is applicable to direct measures of effectiveness (sales measures because
awareness also not the direct result of the advertisements. It is effected by many other
factors. But, for new products, changes in awareness can often be attributed to the
influence of advertising.
Comprehension
Consumers generally use advertisements as a means of obtaining information about
the product, brand of the manufacturer. They cannot be informed unless they
comprehend the message (grasp the message mentally and understand it fully). Various
tests formulating comprehension are available.
The recall test is an indicator of comprehension because it is evident that consumers
recall what they comprehend. Another measure of this variable is to ask questions
about how much they have comprehended a message they have recently heard or
seen. One may employ somewhat imprecise test of the comprehension of a newspaper
and radio advertisement. One may ask typical target consumers from time to time
such questions like what did you think of our new commercial? and Did it get the
message across? The answers of these questions will provide sufficient insight into
advertising decision-making.
Attitude Change
Since advertising is considered to be one way of influencing the state of the mind
of the audience towards a product, service or organization, the results are very often
measured in terms of attitudes among groups exposed to advertising communication.
Several measures are used ranging from asking the questions about willingness to
buy, the likelihood of buying, to the measurement of the extent to which specific
attributes (such as modern or new) are associated with a product.
NOTES
This involves the measurement of attitude of the customers towards the product,
service or organization in question both before and after the appearance of the
advertisement. This may be a pre-test or post-test effort. For gauging the attitude
change, attitude scales are used. A typical scale contains questions like:
NIRMA Detergent is:
Expensive Inexpensive
Strong Weak
A good brand A poor brand
The measuring instrument normally contains 15-20 scales (such as three set forth
above). This technique (called a semantic technique) provide a useful means of
measuring attitudes in a short period of time.
Other methods of measuring attitude change are recall and enquiries. The
assumption underlying these methods is that consumers generally recall or inquire about
what they prefer or to which they have a favourable attitude.
Action
One objective of advertisement may be assumed to be to stimulate action or
behaviour. The action or intention to take an action may be measured on the intention-
to-buy measuring instrument. Under this type of measure, consumers are asked to say
why they are interested in purchasing the product or brand. Their responses may
include such points as the following regarding the product under consideration:
(a) I already own it.
(b) I have no intention to buy the product.
(c) I hope to buy it soon or within a year.
(d) I will probably buy it sometime in the future.
(e) I am sure I will never buy it.
The classification and analysis of such responses will show the extent of the intention
of consumer towards the action they had in mind about the product and are indicative
of expected future purchasing activities.
One type of action that advertisers attempt to induce is buying behaviour. The
assumption is that if an increase in sales follows a decrease in advertising expenditure,
the change in sales levels are good indicators of the effectiveness of advertising.
Logic suggests that measurement of sales are preferable to other measurements.
Thus, these above measures (direct or indirect) are used to evaluate the
effectiveness of the advertisements. It seems from the analysis of the above methods
DBA 1738
NOTES
of measuring effectiveness that directly or indirectly changes in sales or profits are
taken as the measuring rod of the effectiveness of the advertising. After all, however,
advertisement is done either to increase or maintain sales whether directly or indirectly.
Pre-Test and Post-Test of Advertising Copy
Since almost every firm spends thousand of rupees on advertising every year, it
is pertinent to know the effectiveness of the advertisement copy. The main purpose of
every advertising is to arouse the interests of the people in the firms product. Can
everyone be persuaded by the same advertisement? Or will the same advertisement
satisfy all types of people? The answer is in the negative because people differ so
greatly in their wants, in the economic and other motives, which actuate them, and in
the various ways by which their interest is aroused. That is why some advertisements
are more effective than others. The amount is spent on advertising not only because
the advertisement does not get to the right people but also because it carries an appeal,
which does not interest those to whom it goes. An often quoted remark about
advertisement it that half the money spent on advertising is wasted; but no one knows
which half.
Everyone in the business, (Government and non-Govern-ment) heavily rely upon
advertisements to influence the mind, emotions and actions of the people favourably
towards the product or brand or an idea. Though advertising is expensive, it is vital to
every business. The advertiser wants that the audience should see or read his
advertisement with interest so that it may arouse a demand and desire for it.
For this purpose, advertising copy research is done to see how well an
advertisement succeeds in attracting the attention and stimulating the desire and action
of the people for whom it is made and how well it delivers the intended message about
a product or an idea.
Copy Testing
Copy testing is a tool involving a procedure where the effectiveness of an
advertisement is measured before it appears in its final form, during and after its exposure
to the audience to determine whether and to what extent, it has accomplished its
assigned task. Copy testing is a method used to control the effectiveness of future
advertising. It addresses the following questions:
(a) Will the proposed copy theme be effective at achieving advertising objectives?
(b) Does the set of advertising that makes up an advertising campaign create the
desired interest level and image; and
(c) Will an individual advertisement attract the attention of the audience?
NOTES
Copy testing is an important part of advertising management and also an interesting
subject from the professional and scientific points of view. Professionally, there are a
number of firms that offer such services of assessing the effectiveness of print
advertisements and broadcast commercials. It has developed as an industry today.
From the scientific point of view, advertising research reflects the application of theories
and methodologies that derive from psychology, sociology, and economics and more
specifically, from various brands of each of these disciplines.
The term copy tests rather than copy research or any other term is used to
emphasize that consumers reactions are sought concerning the copy and to highlight
that such tests usually focus on relative rather than absolute measures or effectiveness.
In many cases, for example, the advertiser wants to know whether one alternative is
relatively more effective than another, rather than how much sales a piece of copy
will generate in an absolute sense.
Types of Tests
Copy tests can be grouped as pre-tests and post-tests. Pre-tests are made before
an advertisement has been run. It can be done at three stages: (i) at the beginning of
the creation process, (ii) at the end of the creation process, and (iii) at the end of the
production stage. The main purpose of such testing is to measure the effectiveness of
different presentations of the message including alternative presentations of a single
theme. Such tests help one to choose the best form of advertisement before incurring
the expenses and the risk of presenting it on a full scale run. They are intended to
discover the plus and minus points of an advertising campaign and of the individual
advertisement.
The tests which are made after the campaign has been launched are generally
known as post-tests. These tests are conducted to determine the effectiveness of an
advertisement after it is published. Post-tests measure the impact of the message.
They seek to discover which advertisements and what elements of various
advertisements get the best response, what position produced better results, what
medium or issue of a medium pulls better or how well a whole advertising campaign is
progressing. Such tests provide information about whether a brand name or the selling
theme of a given advertisement or advertising campaign penetrated the readers mind
and the extent of its penetration.
These tests involve a huge expenditure and time so most firms do not follow
these tests. Those who do carry out these tests most often follow the first two stages
in pre-tests process. Stage 3 (test at the end of the production stage) is bypassed
particularly in such cases where the advertising has been shown or aired for several
years and the new copy is not radically different from what has gone before. For
entirely new products, or for products for which new advertising campaigns have
DBA 1738
NOTES
been developed, all the three stages in pre-testing stage and the post-test should be
followed. Testing strategy here is closely related to creation and production strategy.
The advertiser must decide whether to focus all energies on creating and predicting
one campaign or whether to produce several campaigns. There is also the issue of
whether several advertisements are needed to support the campaigner or whether
one is sufficient. Testing is still necessary even when only one advertisement is developed
in order to improve it to the satisfaction of the consumers by finding out the omission,
commission, or good in the past. Where several commercial advertisements are
produced for the same campaign the central objective of pre-and post-testing is to
choose the one to be used in the final campaign.
Techniques of Copy Testing
The widely used measuring techniques of copy testing are:
A) Pre-Test Techniques:
i) Consumer-jury survey
ii) Coupon-return analysis
iii) Sales area or local area test
iv) Controlled experiment.
B) Post-Test Techniques:
i) Recognition test
ii) Recall or impact test
iii) Psychological analysis.
Pre-Test Techniques
Consumer-jury survey
This method essentially involves the exposure of alternative advertisements to a
sample or jury of prospects and the securing of their opinions and reactions to the
advertisements. This test is designed to learn from a typical group of prospective
customers gathered in one place or a sample of prospects who are independently
visited by interviewers or contacted by mail, their preference for one advertisement
over the other or for several advertisements out of a group. Advertisements which are
unpublished, are mocked up on a separate sheet and these are presented before the
consumer jury either in personal interviews or group interviews. The juror (the person
who is surveying) is instructed to rank the advertisements in order of their likes and
dislikes. The ranks given by the surveyor represents the action provoking power of
the advertisements.
Advertising copy themes or messages may also be judged in personal interviews
with a consumer jury. The alternative wording under consideration are printed on
NOTES
separate cards. The consumer jury is given two cards at a time worded differently.
The respondent (consumer jury) reads them carefully and selects one out of the two,
which he considers most effective in terms of his personal reaction.
Another variation is a gift test in which the respondent is asked to choose one
brand out of a number of brands as described in different advertisements. In the
projective technique, the respondent jury is shown a picture of consumer using or
buying the particular brand and is asked to select froma variety of statements, the one
which is most applicable for describing the situation. In the product use test, the
respondent jury is given two types of a product to use and evaluate. The two types
are actually the same product, each accompanied by a different copy theme.
The method may seek a single or complex response from the jury member, based
upon unaided or aided recall of the advertisements just read seen by him. It may be
used to test any types on advertisements but is usually employed to pre-test print,
radio and television advertisements. The major value of this type of test is that it
separates weaker or advertisements from a stronger one, the sheep from the goat.
This method is widely used by advertisers because it affords a quick, economical
check on the subjective judgment of management and its specialists.
Coupon-return analysis
Sometimes advertisements contain certain offers. Readers or consumers are
requested to return that offer to the dealer concerned from whom they will purchase
the goods. On the basis of such returned-offers the themes, advertisements or various
elements are measured. The device used for this type of analysis are:
(a) An open coupon offer of a standard premium;
(b) A hidden offer; and
(c) Split-run technique.
An open coupon offer is generally an offer of a free sample of the product either
free or along with some other product of the firm. This method is considered to be a
more accurate gauge of the selling power of the advertising copy than an unrelated
premium.
In the hidden offer technique, a premium offer is burbled in the copy, nearly at the
end of the advertisement. In order to avail of the benefit of this offer, a reader is
attracted to read the advertisement completely. It also eliminates the coupon bounds:
who glance through media for free or inexpensive offers. But one must be cautious in
using this method because of the comparatively small number of returns received as a
result hiding the offer in this way.
DBA 1738
NOTES
The split run technique is a service used for testing print advertisements in which
the media co-operate with an advertiser in allowing the same space for two or more
copy variations to appear in systematic rotation throughout the entire circulation. If
an advertiser wishes to test two print advertisements every other copy combine off
the press will carry the same insertion. This permits simultaneous circulation of two or
more advertisements in identical editorial surroundings with comparable audience.
By means of coupon returns or other means, it can be determined easily which
advertisement pulls best. When publishers do not permit split-runs, the different
advertisements must be run at other times on as nearly a comparable basis as possible.
Sales Area or Local Area Test
This is a pre-test method of testing the effectiveness of different advertisements
in a group of local markets employing different themes or copy presentation techniques
through their effects on sales or through the ability of advertisements to communicate
the messages effectively under normal operating conditions. When attempting to
measure sales effect, the advertiser publishes different advertisements in different local
markets that are similar in characteristics and he collects sales data either fromretailers,
wholesalers or consumers. This test is, however, not employed extensively because of
the difficulty in controlling the many variables and time lag problem likely to distort the
results such as differences between markets, competitive activities, sales efforts,
seasonal demands and the media used.
Controlled Experiments
Such experiments are similar to sales area test in general character but are
conducted on a much similar scale. The methods used under this technique are:
(a) One method is to make use of display materials and signboards at the
point of sale. Different advertisements containing different themes or
messages are displayed in different groups of stores. The effectiveness of
each advertisement, then, can be measured by the resulting sales.
(b) A variation of the above method may be to make an attempt to sell the
product fromdoor to door conversing different messages to the consumers.
The percentage of successful sales may be the basis for measuring the
value of each theme.
(c) One more method under this technique may be to distribute the handbills
with coupons for offering a cash discount to the consumers. Each handbill
contains a different advertisement for the product. The redemption of
coupons may be the indication of sales effectiveness of the different
advertisements.
NOTES
Post-Test Techniques
The following are the post-test techniques for measuring the effectiveness of the
advertisements:
Recognition Test
This determines the readership of the advertisement in the newspapers and journals.
This test is conducted by personal interviews with readers of magazines or newspapers.
The interviewers locate the readers of the particular issue of the magazine in question.
They then go through the magazine page by page with the respondent indicating those
advertising elements, which he or she recognizes as having read.
The data collected by this test indicate the proportion of qualified readership of a
publication who claim to have seen, read some or read most of the elements of
the individual advertisement. These measurements may also seek to obtain quantitative
data regarding the parts of an advertisement which were seen or heard.
Recall or Impact test
The recognition test measurers the stopping power of the advertising but does
not tell us what the readers understood or retained of the advertisement. The recall
test is designed to measure the impression of readers or viewers of the advertisement.
If a reader has a favourable impression of the advertisement, he will certainly retain
something of the advertisement. The measures of interest would be obtained by
interviewing the readers or viewers or listeners, days after the advertisement or
commercial has appeared in the newspaper or on TV. The interviewer asks the question
from the readers/viewers and in response to the questions asked, the reader reveals
the accuracy and depth of his impression by his answers. A portfolio containing test
advertisements or one test advertisement among several control advertisements is
placed in the hands of respondents who are asked to read the advertisements, taking
immediately after the respondent has finished the reading the advertisement. The
performance of one advertisement is then evaluated against all others. The respondent
is asked a series of unaided or aided recall questions to determine which advertisements
are remembered and which features standout.
Another approach of the Recall Test is to supply a dummy magazine to a family
and then after a week, it should be picked up. The interviewer interviews the readers
on their recall of advertisements in the magazine.
The recall test can be used for pre-testing and post-testing work and with some
variations can be adopted to print and radio testing as well television.
DBA 1738
NOTES
Psychological analysis
The whole process of advertising is psychological in character. It is therefore,
natural to apply some psychological tests to measure the effectiveness of the advertising.
Four psychological testing techniques are most commonly used:
(a) Tests of readability and comprehension;
(b) Tests of believability;
(c) Attitude tests; and
(d) Triple associates test.
Test of readability and comprehension. In this technique, by means of a series
of penetrating questions and by other techniques developed by psychologists, the
case of readability and comprehension is determined, in advance of publication. It is
determined by the interviewer under this method whether and to what extent the readers
have gone through the advertisement.
Tests of Believability: An advertisement message effectiveness can be measured
by the degree of credibility the readers have in the product. A scale technique is generally
employed to measure the credibility by putting several statements or product claims
before the consumers and are rated by them. The statement or product claims gets the
highest priority votes may be taken as the most effective statement or claim.
Another method to test the believability of an advertisement is to ask respondents
which parts of an advertisement they believe the most or which parts they find hard to
believe, after they have been exposed so it.
Attitude Tests: A number of attitude tests are developed by the psychologists
which can be applied to copy testing. Typical consumers are exposed to sample
advertising messages, either printed or oral. The interviewer then asks a series of
penetrating questions to determine the attitude produced by these various messages.
Psychological reactions such as age, involvement, the type of person who would use
the product and the personality of the product reflected by the advertisement being
tested, are obtained. The researcher looks especially for elements in the advertising
which arouse psychological hostility.
Triple Associates Tests: This test in advertising with recall by seeking to learn
the extent of the consumers association with the product, the brand name and copy
theme. The test is useful only when the advertising features a specific theme or slogan,
which the reader may remember. This procedure is sometimes known as theme
penetration.
NOTES
Communication Effects of an Advertisement
The management should attempt to evaluate the effectiveness of the advertising
campaign if the firms advertising goals are to be achieved and the ad effectiveness is
to be increased. By regular evaluation of the effectiveness, the shortcomings and the
plus points would be revealed and the management would be able to improve the
campaign by negating the shortcomings and retaining the favourable points. For this
purpose, it is very necessary to know how advertising affects the buyers behaviours.
The effectiveness of advertising can be measured by the extent to which it achieves
the objectives set for it. If it succeeds in attaining the objectives, advertising can be
said to be effective otherwise it will be a waste of money and time. In this sense,
advertising can be recognized as a business activity like other activities.
In a very real sense the integrity of promotional activities rests on how well those
activities work. An advertising budget that is spent on some poorly defined task or on
undefined tasks may be regarded as an economic waste as compared to that spent to
achieve the well defined objectives for which the results can be measured. Any social
institution upon which a significant portion of our total productive efforts is expanded
should be able to point to its specific accomplishments. Indeed, it is a source of
discomfort that specific results of advertising activities have not always been subject
to precise measurement. Both practitioners and critics feel that promotional activities
should only be accepted as socio-economic institution with all rights and privileges. It
is undoubtedly a source of embarrassment that we cannot exactly measure the
effectiveness of advertising in definitive terms.
The exact result of advertising expenditure is very difficult to predict because:
(a) The reactions of consumer-buyers to the advertising efforts cannot be known
in advance;
(b) The reaction of competitors in the field cannot be guessed in anticipation; and
(c) The unexpected events (such as change in social and economic environment
and the Government policy, etc.) cannot be accurately anticipated. Such events
may influence the results of the advertising efforts.
Let us take a hypothetical case of a retailer who contracted to spent Rs. 5000 on
advertisement with a local newspaper for a special sales event. The advertisement is
seen and the response-is much greater than is anticipated. What caused the success -
of sale? There may be a number of reasons to be attributed to the success. The message,
theme, colour, etc., of the advertisement or the low prices quoted during the sale of
the superior quality of the product or absence of competition in the market on the day
or the favourable weather conditions or the goodwill of the firm, etc. The overwhelming
success of the sale is the joint result of all the above variables and it is quite impossible
DBA 1738
NOTES
to isolate the role of any one variable. It is so because the cause-and-effect relationship
cannot be established in advance when a multitude of variables impinge upon particular
event. It is entirely possible that a poor advertising support may push up the sale
because everything else falls into its proper place or the reverse may be possible. But
this does not mean that we cannot measure the effects of particular advertising effort.
Advertising executives are greatly concerned about the assessment of the
effectiveness of the advertising efforts. For this purpose, the management needs answers
to such questions as: Was the advertising campaign really successful in attaining the
advertising goals? Where our TV commercials as good as those of our competitors?
Will the print advertisement which we have designed make consumers aware of our
new product? To get the answers to these questions, various tests of effectiveness
(pre-tests and post-tests) are needed to determine whether proposed advertisements
should be used, and if they are not satisfactory, how they might be improved and
whether on going campaign should be stopped, continued or changed.
Most research focuses on the communication effect rather than sales effect because
it is a long-run process. In the short run, however, sales may be slight and important
but in the long run, its effects on brands and companies may be of great importance.
Indirectly it will affect the sales in the long run by changing the consumer awareness
and attitude. The advertisers are, therefore, concerned with their impact on consumer
awareness and attitude
Awareness builds a favourable or at least a curious attitude towards the product,
which leads to experimentation. If consumer is satisfied with the trial, he may decide
to purchase the product.
There are many critical and unresolved issues in determining how to test the
communication effects of advertising. Among these are:
Exposure Conditions
Should advertising be tested under realistic conditions or under more controlled
laboratory conditions?
Execution
Pre-testing a finished advertisement is expensive and time consuming. Does pre-
testing preliminary execution produce accurate and useful data?
Quality Vs. Quantity Data
Quantitative data are the easiest and the most precise to obtain. But qualitative
data collected through interviews may provide information that short answer questions
never can.
NOTES
It is Easier to Assess the Communication Effect than the Sales Effect of
Advertising
It is easier to assess the communication-effect of advertising than the sales effect.
Many firms try to measure the effectiveness of advertising in terms of sales results but
this practice is always misleading. Since the sales effect is the result of so many variables,
a distinct effect of advertising on sales cannot be correctly measured. However, there
may be some exceptions. For example, direct mail advertising can effectively be
measured by the inquiries received. But in many situations, the exact relationship
between advertising activity and sales cannot be established satisfactorily.
Thus, we may conclude that sales effect of advertising is difficult to measure
because a number of variables affect the quantum of sale and the contribution of
advertisement cannot be measured separately unless all other variables are presumed
to be constant. This situation is quite hypothetical and almost non-existent. Added to
this is the fact that advertisement itself is made of a variety of variables such as media,
messages, colours, page or time of the day, locations, the size of the headline and the
appeals used. Thus, even if the advertising variable is separated this would still not
answer the question about the effectiveness of the individual components of the
advertising campaign. So, advertisers try to measure the communication effect of the
advertising
Online Advertising
Many companies take there first stab at online advertising as a part of web marketing
by simply building a basic web site. They decide some advertise banner, buy several thousand
impressions on some leading sites and sit back to wait for the 2 percent or so of those who
see the advertisements to click on them and come to the site.
This is not to say that online advertising plays no part, of course. It can be very
important for many sites. US Webs definition of audience development is made up of two
key components: the audience creation techniques. This two-pronged strategy of paid and
non-paid promotion is directly akin to how public relations and advertising are counterparts
in most traditional marketing campaigns
Internet advertising is definitely coming into its own, experiencing a surge in 1997 that
even surprised many in the online industry. At a June 1997 meeting of the Internet Advertising
Bureau, whose members include many of the biggest sites and online advertisers, a
membership poll said that online ad spending for the year would be in the range of $500-
700 million, up fromaround $300 million in 1996.
However, it is strategically important to understand where the real benefits of online
advertising lie and how to use ads in harmony with the free media placement techniques
weve been describing.
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NOTES
3.8 ONLINE AD OBJECTIVES
As in other media, there are two principal objectives in advertising online: branding
and direct response. Both can be had online in a wide array of flavors and give you much
greater control than other media over market segmentation, performance review, speed to
execution, and other advantages. Most online marketers can benefit froma combination of
the branding and direct-response characteristics of Web advertising, but it pays to appreciate
the distinctions between the two.
Branding
By and large, marketers have been slow to embrace the brand-building potential of
Web ads. Its not hard to see where some of that reluctance comes from. For one thing,
page banners, the most common form of online advertising, are small. The most popular
size, 468 x 60 pixels, fills about 10% of a Web browser window on a 14-inch or 15-inch
monitor, and proportionally less on a larger monitor. For advertisers used to full-page
newspaper ads, 17-foot-tall billboards, and 30-second TV commercials to achieve their
branding objectives, a one-by-six-inch rectangle doesnt seem like much to work with.
Add to this the easy-to-measure click through ability inherent in the ads, and the
appeal of a direct-response model has generally overshadowed branding as the key online
advertising objective for many sites.
Measuring the success of Web advertising can be complex, taking into account
many different factors, said Guy Hill, media planner at US Web. We try to communicate
some of that in our reports to our clients, but often the top bosses dont have the time for
such subtleties. They want to be able to glance at one number and make a decision about
whether a campaign is working or not. So, by the time our contacts present our reports to
their bosses, everything gets reduced to a click through rate.
Types of Online Ads
Because the Internet is an amalgamation of several media experiences - text, images,
sound, video, 3D, chat, and so on - online ads also come in many varieties. Other than
scratch-and-sniff magazine ads, advertising on the Web can come close to matching the
experience of promotions in every other media, and then some.
Within the Banner
Before we get beyond the banner, an almost meaningless buzz phrase so many
online advertisers love to talk about (but seemingly rarely act upon), there is much for you
to consider within the realmof those lovable, ubiquitous hyperlinked rectangles.
When Hotwired introduced the first ad banner for AT&T in 1994, it was simply a
static graphic image fixed at the top of the page. No particular targeting, no rotation, no
NOTES
animation, nada. Pretty crude by todays standards. Now banners do more than act as
static, two-dimensional logos fixed on every page. In addition to advanced technical targeting
techniques, the banners have become dramatically more flashy and functional, thanks to
Shockwave, Java, compressed audio and video formats, and other hot technologies.
Animation
One drawback to using the rich-media formats (that is, anything much more exciting
than static graphics) in ad banners is that some users and even more sites dont support
them. The news for end users is more encouraging. According to the browser statistics
survey maintained by University of Illinois student Ed Kubaitis, Design Optimization, as
of December 1997 more than 80% of Internet users surfed on version 3.0 or higher of
Netscape and Microsofts browsers, which support Java by default and accept the more
sophisticated multimedia plug-ins, such as Shockwave.
Less encouraging for advertisers were the sites themselves. AdKnowledge, an
advertising services company that maintains a database of the 1,000 or so top Internet
publishers, reported in August 1997 that only 17% of sites they track support Java in ads,
and 14% support Shockwave. Although Java is by now a fairly reliable technology on
most browsers, Shockwave animations are limited by whether Web surfers have
downloaded and installed the required plug-in
The most common type of banner animation uses the GIF89 technique. Its popularly
stems fromits near-universal browser support (including the 2.0 versions of the big two
browsers), smaller file sizes than other animation types, and the relative simplicity of creating
the animations. The name derives froma 1989 adaptation of the graphic interchange format
(GIF) that CompuServe developed a few years earlier.
Interactivity
Realizing that about 98% of the time Web surfers dont want to click ad banners
because theyre happy with the site theyre on, some marketers have begun creating ads in
which Web surfers can performfunctions within the banner without needing to click through
to another destination.
Narrative Enlivens Ad Interactions
A company called Narrative Communications makes Enliven, a software product
that specializes in interactive banners. The ads are Java files, so they dont require any
special plug-ins on standard browsers, yet they deliver smooth animation and sound effects
sure to grab a Web surfers attention. Using streaming technology, the ads download
additional data from the server only when the user interacts, creating an experience of
seemingly endless new content without excessive delays.
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The result is a more powerful ad experience than possible on TV or in print. The user
truly interacts with the brand as she clicks on icons, selects choices frompull-down menus,
drags and drops items across the screen, and otherwise immerses herself in the ad. Although
still a novelty, the ads are fun and can typically absorb users for five minutes or more.
Advertisers such as Citibank, New Balance, and L.L. Bean have used Enliven in ads
to demonstrate product features, collect sweepstakes entries, provide useful consumer
information, and more, all within standard-size banner ads.
A competitor, Thinking Media, makes a similar product with an advantage to publishers
in that it doesnt require them to purchase a special server for the streaming effect, as
Narratives Enliven does. Which company, if either, will become the standard for interactive
ads is anyones guess at this point.
Another company, First Virtual, which specializes in secure transaction technology,
has developed a type of ad banner in which Web surfers can actually make secure purchases
within the banner (in addition to a newer, unrelated line of software for email commerce).
Customers of the banner technology, called Virtual TAG, include PC Zone, Casio, and the
U.S. Post Office, who have used it to sell computers, watches, and stamps.
One downside to interactive banners is that many users have become wary of clicking
on themdue to the trend of faux interactive ads. These deceptive ads invite the user to
click on a search field or Scrollbar within the banner, only to find that its a static graphic
that automatically transfers the user to a new page.
Porno sites, always at the vanguard of new techniques to attract users, favor this ruse.
Try searching on the word butt on Yahoo!, Excite, or another search engine. The resulting
banners for hardcore porno sites frequently indicate that theyre in the process of
automatically downloading a video clip to your desktop. They prominently feature a Cancel
button, but when you press it, it merely takes you to the site youre trying to avoid. The
search engines are unapologetic about displaying these all-round unsavory ads.
Interstitials
If ever a piece of computer jargon deserved to be hung up by its thumbs, it has to be
the abominable interstitials. These are the full screen ads that occasionally pop up between
pages on cutting-edge sites. Unfortunately, interstitial is indeed a genuine, if somewhat
obscure dictionary word meaning situated in the space that intervenes between things.
Interstitials are what TV advertisers have been waiting for on the Web. They get in
your face, take up the full browser screen, and dont go away until you click on them or
theyre done with their animation. The termhas been applied to splash screen ads, which
are simply static ad pages that the user has to click to go to the next page, but we prefer to
think of true interstitials as animated ones lasting 5-15 seconds.
NOTES
In addition to users annoyance at having their machines hijacked by intrusive ads
they cant avoid flying in the face of the innate freedomthe Web offers users theres
also the matter of delays while the interstitials download.
The interstitial aspect of .the ads is that they appear between Web pages.
Theoretically, while the user views page the interstitial file should download in the
background, ready to run instantly when the user clicks to go to page B. But anyone who
has waited for a 15-second Shockwave animation to download can guess that the experience
might not be so seamless.
Sponsorships
In addition to Jupiters prediction that interstitials will make up a quarter of all ad
spending by 2001, the analyst group thinks that half of all ad spending will remain with
banners, particularly interactive ones. The remaining quarter, they believe, will be applied
to sponsorships. We suspect that sponsorships will end up with a larger piece of the pie
than interstitials.
Already, sponsorships are popular across the Web in a variety of forms. With the
boundaries between online editorial and marketing still maturing, its frequently difficult to
tell where the content ends and the advertising begins. Regardless, a lot of marketers are
feeling confident in exploring sponsorships.
There is definitely a potential danger there for both sites and advertisers that users
may feel cheated, that what they thought was editorial content they later realize is paid
advertising, said Christopher Theodoros, VP and director of creative sponsorship strategies
at Double Click. When approached carefully, however, sponsorships can be an extremely
powerful form of advertising online. Its a question of preserving the credibility of the
content while enhancing it with the brand association.
Although in most forms of sponsorship Web surfers are encouraged to click through
to the sponsors site, the goal of this model is principally brand-building. Advertisers and
publishers are still playing with the definitions of sponsorship on the Web, and so far the
results have taken many different forms. In our view, based on current trends, there are
five basic types of sponsorships:
Branded content
Event promotions
Advertorials
Micro sites
Portals
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Branded Content
Branded content most closely follows the brought to you by model of early television
and todays public television.
In the branded content model, the advertiser has no hand in creating or shaping the
content. Editorial control is left entirely to the publisher, while the brand benefits from the
association with the quality content. These kinds of deals are frequently negotiated as
long-term contracts, normally in an exclusive arrangement so that no other advertiser,
particularly a competitor, is associated with the content.
Event Promotions
Event promotions involve a closer integration of publisher and advertiser content.
These promotions last only a short period, normally fromone to several weeks, and highlight
a special offer, contest, or event. Theyre frequently given great prominence by the publisher,
such as at the top of the homepage.
Yahoo! seems to run this type of contest sponsorship perpetually, with the promotion
frequently integrated into the Yahoo! logo. Later Yahoo! hosted a virtual road rally contest
sponsored by Volvo, with a grand prize of a trip to Scandinavia.
Movies frequently engage in this type of sponsorship. For the U.S. launch of the film
Mr. Bean, Rowan Atkinsons goofy character was spotted loping incongruously across
HotWireds pages. Disney, meanwhile, commemorated the opening of 101 Dalmatians by
adding black spots to the backgrounds of several prominent sites.
Advertorials
Further blurring the line between ad and editorial content online are advertorials.
Theyre a familiar tradition in print journalism, where publishers normally make it abundantly
clear that theyre paid advertisements. Typically they do this by setting the type in a distinct
font, surrounding the item in a border, and prominently labeling it Paid Advertisement.
Web publishers arent always so fastidious.
Many smaller publishers struggling to stay afloat are willing to cut corners on such
formalities and will display material in whatever way makes advertisers happy. Surprisingly,
even established media companies have shown a willingness to blur this line in their online
ventures.
Micro Sites
Micro sites expand the idea of the advertorial to multiple ad/content pages, along the
lines of special ad supplements to magazines and newspapers. Rather than drawing the
visitor away from the editorial site to the advertisers corporate site, these micro sites
NOTES
usually maintain a thematic congruity with the publishers content while allowing the
advertiser to immerse the visitor in the brand. For users, micro sites can be an attractive
way to explore a brand without a complete shift of context and the annoyance of waiting
for a whole new set of server connections to load a new site in the browser.
A good example of a micro site is Levis They Go On section within NBC.com.
The ad feature was highlighted prominently on NBCs homepage alongside micro sites for
the Homicide series.
Portals
What we refer to as portals are the murkiest category of sponsorship. Here, the
distinctions between advertising and syndication and revenue-sharing and other online
promotional and money-making strategies begin to meld completely.
A portal sponsorship, by our definition, is where one site agrees to integrate the
content of another site as a service to Web surfers and a branding value to the content
provider. Examples include a news site incorporating the functions of a leading search
engine, or a content aggregator like AOL linking to only one shopping site in a particular
category, or a business magazine offering up-to-the-minute stock quotes froma specialized
stock service.
Amazon.comand Barnes and Noble have been in pitched battle to secure exclusive
linking arrangements with leading sites as the preferred online bookstore. Amazon.com
Associates Program encourages smaller sites to post an Amazon.com logo with
recommendations of specific books, rewarding the sites with up to a 15% revenue share
on any subsequent sales via the link. Is that an ad or a sales commission?. The distinction
probably doesnt matter to the sites getting paid to host the link. Amazon.com wins either
way, getting free branding even if the link generates no sales.
In many portal arrangements, no money ever changes hands. ABCNews.com, for
example, links to Mr. Showbiz for its entertainment news, and likewise Mr. Showbiz links
to ABCNews.com on its home-page. Because both sites are properties of ABC, its a
pure cross- promotion deal.
3.9. SUMMARY
Measuring the effectiveness of the advertising is done with a view to improving
the advertising plan by having a comparative view of the objectives set out in the plan
and the objectives or goals achieved during the course of execution of the plan. If
achievement is higher an attempt should be made to maintain the position and if there
is an unfavourable attitude, this should be avoided by making the necessary adjustments
in the goals or by improving the functioning of the various activities. These variations
favourable or unfavourable may form the basis of the new advertising plan. Variation
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NOTES
is a must and it should be located properly and then corrective steps should be taken.
Thus, measuring the effectiveness is necessary for the planning.
Thus, we can conclude that measurement of effectiveness of advertising is necessary
otherwise the whole planning process will be disturbed. For this purpose, many tests
and surveys are conducted, necessary data are collected and are used extensively in
the decision making process. On the basis of the information collected during the
course of surveys, management confirms the standards and improves them wherever
necessary so that it may fetch the maximum out of its limited resources.
3.10. HAVE YOU UNDERSTOOD QUESTIONS
1. Explain the various types of retail advertisement which can achieve specific
objectives.
2. How do you design advertisements for different types of product?.
3. Define Media Plan?. What are the basic step involved in developing a retailer
advertising campaign?.
4. How do you measure retail advertisement effectiveness in terms of sales and profit?.
5. What do you mean by online advertising? Explain the current trend on online
advertising?
NOTES
UNIT IV
PUBLICITY AND PERSONAL SELLING
4.1. INTRODUCTION
Publicity is a sub-function of public relations in which the organization attempts to
attract attention through various media without paying for the time or space to do so. The
attention can be controlled or uncontrolled and can be positive or negative. Publicity might
be about a retailers employees, its customers (a very good idea), or the retailer as a whole
(perhaps, for instance, about the retailer being the largest contributor to a town beautification
project). In general, publicity is seen as more credible than advertising. The reason for this
is that in many instances publicity comes from an objective source as opposed to an
advertisement paid for by the retailer.
Publicity is referred to as being free, because media time and space are not purchased.
There are many costs associated with PR, however, such as those for hiring people to
write press releases, purchasing supplies, and so on. One example of the costs associated
with publicity involves the 1 Harry Potter book craze. In the summer of 2003, due to the
publicity surrounding the release of Ham/ Potter and the Order of the Phoenix, retailers
had to adopt increased security measures to guard against theft of the book before its
release.
Retailers must attempt to control and plan publicity, and it must be integrated with all
the other areas of the IMC mix. Unplanned publicity must be limited or eliminated completely.
All communications vehicles should provide customers with the same ongoing message, to
achieve continuity and thereby more communications power for the retailer.
There are two types of publicity: good and bad. Obviously, no retailer wants to
generate any bad publicity for its operations. Unfortunately, due to the number of media
outlets, misinformation about a retailer can spread rapidly and have a radical effect on an
organization. For example, in June 1993, consumer electronics retailer Best Buy got some
bad press when the retailer helped The Eagles release their new single. The band wanted
to bypass major record labels in releasing the song. They needed a fast method to get the
song into the retail venue and used Best Buy because of its distribution channels and ability
to promote the release. In exchange, Best Buy got to sell the single exclusively for the first
30 days of it release. The exclusivity agreement infuriated other retailers. The Coalition of
DBA 1738
NOTES
Independent Music Stores began a press war that called into question the integrity and
fairness of the band and made Best Buy appear to be a corporate bully.
When planning for publicity, one or more of the following objectives is generally
pursued:
i) Reputation management (e.g., consider Qwest, Arthur Andersen, or Martha
Stewart)
ii) Publications (annual reports, brochures, manuals, other house organ-
typepublications)
iii) Speech writing (for the CEO or other members of the executive staff whodo
not have the time to write their own speeches)
iv) Special - Events management (sports marketing, sponsorships, etc.)
v) Lobbying (also known as public affairs management).
Some methods of generating publicity, in conjunction with the PR department, would
be through news releases, photographs, event marketing, posters, exhibits, free sampling,
and fact sheets or media kits.
Retail sales people are the primary vehicle for providing paid personal communication
to customers. Personal selling is a communication process in which sales people assist
customers in satisfying their need, through face to face exchanges of information. Personal
Selling involves oral communication with one or more prospective customers for the purpose
of making sales. The level of personal selling utilized by a retailer depends on the images it
want, to convey, the types of product sold, it level of self service, and its interest in long
termrelationship as well on expectation of customers.
It is a process of learning the need, and the want of the buyer and trying to satisfy
themwith the required product or service. Personal Selling may occur within the environment
of the retail store where personnel selling require the sales person to satisfy the need of
the customers. Other tools of communication are aimed at market or segment of the target
audience. Personal selling is precise, it is aimed at specific individuals, developing a strong
sales force is hence an expensive proposition, as the sales person has to be trained on
various aspects of communication, like understanding the body language of the customer
etc. He also need to be knowledgeable about the features of the product and services
being offered by the retailer. So this is unit focusing on the management of store employer
complements, the strategic human resource management issues. This unit outlined the steps
in the employment management process that affect store employee productivity, selecting
training and motivating the right sales people.
This unit also focuses on the role of call centre and BPO in promoting the sales of
companies. This unit also discuss how a public relation programme can be designed in
promoting the performance of the company.
NOTES
To understand the role of publicity and its types as a retail promotion mix.
To understand the meaning of personal selling relative merits and demerits of various
types of it.
To know the various management problems involved in retail sales person selection.
To design the public relation programme on a promotion technique.
To assess the role of call centres and BPO to sales promotion.
4.3. ROLE OF PUBLICITY
Publicity is defined as the non-personal stimulation of demand for a product, service
or business unit by planting commercially significant news about it in a published medium
or obtaining favorable presentation of it upon radio, television or stage that is not paid for
by the sponsor. The salient features of this definition include:
Non-Personal/Mass Media: Like advertising, publicity also reaches a very large
number of people. At the same time through mass media such as newspapers,
magazines, radio, TV, etc (hence, non-personal).
Commercially Significant News: This is one of the features that distinguish
publicity from advertising. When information about a product or company is
considered newsworthy, mass media tend to communicate that information free of
cost. Since most publicity appears in the formof news items or articles originating
from the media, rather than the advertiser, it has higher credibility (believability).
No Sponsor. Since the information originates fromthe media, there is no sponsor,
which means the messages are unsigned. This is another point of difference between
advertising and publicity.
Not Paid For. Since the sponsor is not identified in publicity- and the information
is not disseminated at his behest, he does not pay for it. This is an additional feature
that differentiates publicity fromadvertising.
Purpose (Demand Stimulation): In some situations, where publicity is properly
planned, it may lead to the creation or reinforcement of a favorable impression
about the company and its products in the minds of people receiving the message.
This may lead to a favorable attitude towards the product or company and, thus,
leads to an increased demand for the product.
Negative publicity can damage the companys or products image, resulting in reduced
demand for the product. For instance, a great deal of adverse publicity was generated
when different media condemned the Union Carbides negligence in Bhopal gas tragedy
through articles and editorials.
Difference between Advertising and Publicity
The main points of difference are indicated in Table. A careful reading of the table will
help you to distinguish between the two types of promotion.
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NOTES
Publicity is quite similar to advertising, except that it involves an unsigned and unpaid
message, even though it may use the same mass media as advertising does.
Old Wine in a New Bottle (Marketing Public Relations / Publicity)
Many companies are turning to Marketing Public Relations (MPR) to support
corporate product promotion and image making. MPR, like financial PR and community
PR, serves special constituency, the marketing department.
The old name for MPR was publicity, which was seen as the task of securing editorial
1
spaceas opposed to paid spacein print and broadcast media to promote or hype a
product, service, idea, place, person, or organization. MPR goes beyond simple publicity
and plays an important role in the following tasks:
Assisting in the launch of new products. The amazing commercial success of
toys such as Teenage Mutant Ninja Turtles, Mighty Morphin Power Rangers,
Beanie Babies, Pokemon owes a great deal to clever publicity.
Assisting in repositioning a mature product. New York City had extremely
bad press the 1970s until the I Love New York campaign.
Building interest in a product category. Companies and trade associations
have us MPR to rebuild interest in declining commodities such as eggs, milk, beef,
and potatoes, a to expand consumption of such products as tea, pork, and orange
juice.
NOTES
Influencing specific target groups. McDonalds sponsors special neighborhood
events Latino and African American communities to build goodwill.
Defending products that have encountered public problems. PR professionals
must adept at managing crises, such as the Coca-Cola incident in Belgium over
allegedly contaminated soda, and Firestones crisis with regard to the tire tread
separation problem.
Building the corporate image in a way that reflects favorably on its products.
Bill Gates speeches and books have helped to create an innovative image for
Microsoft Corporation.
Clearly, creative public relations can affect public awareness at a fraction of the cost
of advertising. The company does not pay for the space or time obtained in the media. It
pays only for a staff to develop and circulate the stories and manage certain events. If the
company develops an interesting story, it could be picked up by the media and be worth
millions of dollars in equivalent advertising. Some experts say that consumers are five
times more likely to be influenced by editorial copy than by advertising. Heres an example
of a powerful PR campaign.
Major Decisions in Marketing PR
In considering when and how to use MPR, management must establish the marketing
objectives, choose the PR messages and vehicles, implement the plan carefully, and evaluate
the results. The main tools of MPR are described
Establishing Objectives MPR can build awareness by placing stories in the media to
bring attention to a product, service, person, organization, or idea. It can build credibility
by communicating the message in an editorial context. It can help boost sales force and
dealer enthusiasmwith stories about a new product before it is launched. It can hold down
promotion cost because MPR costs less than direct-mail and media advertising.
Whereas PR practitioners reach their target publics through the mass media, MPR is
increasingly borrowing the techniques and technology of direct-response marketing to
reach target audience members one-on-one.
Choosing Messages And Vehicles The MPR manager must identify or develop
interesting stories about the product. Suppose a relatively unknown college wants more
visibility. The MPR practitioner will search for stories. Do any faculty members have
unusual backgrounds, or are any working on unusual projects? Are any new and unusual
courses being taught? Are any interesting events taking place on campus? If there are no
interesting stories, the MPR practitioner should propose newsworthy events the college
could sponsor. Here the challenge is to create news. PR ideas include hosting major academic
conventions, inviting expert or celebrity speakers, and developing news conferences. Each
event is an opportunity to develop a multitude of stories directed at different audiences.
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NOTES
The best MPR practitioners are able to find or create stories even for mundane or
out-of-fashion products. Here is a recent success story.
Publications: Companies rely extensively on published materials to reach and influence
their target markets. These include annual reports, brochures, articles, company newsletters
and magazines, and audiovisual materials.
Events: Companies can draw attention to new products or other company activities by
arranging special events like news conferences, seminars, outings, trade shows, exhibits,
contests and competitions, and anniversaries that will reach the target publics.
Sponsorships: Companies can promote their brands and corporate name by sponsoring
sports and cultural events and highly regarded causes.
News: One of the major tasks of PR professionals is to find or create favorable news
about the company, its products, and its people, and get the media to accept press releases
and attend press conferences.
Speeches: Increasingly, company executives must field questions fromthe media or give
talks at trade associations or sales meetings, and these appearances can build the companys
image.
Public-Service Activities: Companies can build goodwill by contributing money and time
to good causes.
Identity Media: Companies need a visual identity that the public immediately recognizes.
The visual identity is carried by company logos, stationery, brochures, signs, business
forms, business cards, buildings, uniforms, and dress codes.
Implementing the Plan and Evaluating Results MPRs contribution to the bottom
line is difficult to measure, because it is used along with other promotional tools. Ti three
most commonly used measures of MPR effectiveness are number of exposures; awareness,
comprehension, or attitude change; and contribution to sales and profits.
The easiest measure of MPR effectiveness is the number of exposures carried by t
media.
This measure is not very satisfying because it contains no indication of how many
people actually read, heard, or recalled the message and what they thought afterward; or
does contain information on the net audience reached, because publications overlap in
readership. Because publicitys goal is reach, not frequency, it would be more useful to
know t number of unduplicated exposures.
A better measure is the change in product awareness, comprehension, or attitude
resulting fromthe MPR campaign (after allowing for the effect of other promotional tools).
F example, how many people recall hearing the news item? How many told others about
it measure of word of mouth)? How many changed their minds after hearing it?
NOTES
Sales-and-profit impact is the most satisfactory measure. For example, 9-Lives cat
food sales increased 43 percent by the end of the Morris the Cat PR campaign. However,
advertising and sales promotion had also been stepped up. Suppose total sales have
increased b $1.5 million, and management estimates that MPR contributed 15 percent of
the to for increase. Then the return on MPR investment is calculated as follows:
Total sales increase 1,500,000
Estimated sales increase due to PR (15 percent) 225,000
Contribution margin on product sales (10 percent) 22,500
Total direct cost of MPR program 210,000
Contribution margin added by PR investment 12,500
Return on MPR investment (12,500/ 10,000) 125%
Public Relations and Publicity
Marketers primarily focus on customers and distributors but needs and interests of
other groups such as those of employees, shareholders, local community, media, government
and pressure groups are also important.
Public relations are the management of relationships and communication to establish
goodwill and mutual understanding between an organization and its publics. Public relations
is more wide ranging than marketing which primarily focuses on markets, distribution
channels and customers. By communicating to other groups, public relations create an
environment in which it is easier to conduct marketing. Public relation activities include
publicity, corporate advertising, seminars, publications, lobbying and charitable donations.
A company has to understand the importance of stakeholders other than its customers,
suppliers and channel partners. A companys very existence as a business entity will be in
jeopardy if these stakeholders do not have positive perceptions of the company. For instance,
it will not be allowed to set up its factories and offices if it has antagonized the community
in which the business is to be set p. Public and banks would not finance its operation if it
lacks credibility. Aggrieved media and pressure groups can berate the company to the
extent that its suppliers and other partners would not want to do business with it. And all
these stakeholders shape customers opinion to some extent. In sum, a company would
find it impossible to do business if its major stakeholders are aggrieved with it, even if the
company has very good product and marketing program in place.
A company has to be deliberate in managing its relationship with its important
stakeholders. It cannot assume that its good practices will ensure good public relations. It
has to research the interests and expectations of various stakeholders and serve them. It
will be fatal to equate public relations with good corporate communication. For marinating
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NOTES
good relationship with important stakeholders, the company has to first serve their interests
and then communicate to them that their interests are being served in particular ways.
Focusing exclusively on communications would make the whole exercise a gimmick and
the stakeholders will see through the faade. Public relations are as real as any other
marketing activity, i.e. it is based on achieving something substantial for the stakeholders.
A major element of public relations is publicity. It is communication about a product
or organization by the placing of news about it in the media without paying for time and
space directly.
Though a company can manage to get talked about in the media without doing anything
which is newsworthy, it will not help its cause if the readers or the viewers do not find the
story about the company stimulating enough to take a note of it and register it in their
minds. A big portion of the publicity budget is spent on maintaining relations with media
with the hope that media will feature the company more frequently and prominently. This is
wasteful. Instead the company should expend its resources in staging events, building
associations, and doing other things depending upon the type of business the company is
in, that the public would be genuinely interested in knowing about.
Savvy companies know the triggering points of public and the media attention and
conduct themselves in a manner that invites the attention of the public and media. Their
publicity endeavor does not end with courting the media. Media, anyway, will carry the
stories that its readers and viewers will want to read and view
Tasks of Publicity Department
Responding to requests frommedia which requires availability of well organized
information of the company.
Supplying the media with information on events and occurrences relevant to the
organization. This requires developed internal communication channels and
knowledge of the media.
Stimulating the media to carry the information and viewpoint of the organization.
This requires creative development of ideas, developing close relationships with
media people and understanding their needs and motivations.
Characteristics of Publicity
One important task is to supply information to important stakeholders. Information
dissemination may be through news releases, news conferences, interviews, feature articles,
seminars and conferences. Publicity has five important characteristics:
Credible message: The message has high credibility than advertising as it appears
to the reader to have been written independently by a media person than by an
advertiser. Because of the high credibility it is more persuasive than a similar message
in an advertisement.
NOTES
No media cost: Since space or time in a media is not bought there is no direct
media cost; but someone has to write the news release, take, part in interviews or
organize the news conference. This may be organized internally by a press officer
or publicity department or externally by a public relation agency.
Loss of control of publication: Unlike advertising there is no guarantee that the
news itemwill be published. The decision is in the hands of the editor and not with
the organization. A key factor is whether the itemis judged to be newsworthy. The
itemmust be distinctive in the sense of having news value. The topic of news item
must be of interest to the publications readers.
Loss of control of content: There is no way of ensuring that the viewpoint of the
company is reflected in the published article.
Loss of control of timing: An ad campaign can be coordinated to achieve
maximumimpact. The timing of publication of news itemcannot be controlled.
The most popular method of disseminating information to the media is through news
release. The following guidelines will be helpful.
The headline: The headline should be factual. Avoid use of flamboyant, flowery
language that might irritate the editors. The headline should briefly introduce the
story, for instance, A new alliance between IBM and Microsoft.
Opening paragraph: Opening paragraph should be a brief summary of the whole
release. If this is the only part of the news release that is published, the writer will
have succeeded in getting across essential message.
Organizing the copy: The copy should be organized in such a manner that less
important message is placed towards the end of the news release. The lower the
paragraph the more the chances of it being cut by an editor.
Copy content: Like the headline, copy should be factual not fanciful. Wherever
possible, statements should be backed by facts. A statement claiming fuel economy
for a car should be supported by figures.
Length: News release should be as brief as possible. The idea that long releases
should be sent to editors so that they can cut out the parts that they do not want is
a fallacy. Editors self interest is that their job should be made as easy as possible.
The less work they have to do in amending the copy, greater the chance of publication.
Layout: The release should contain short paragraphs with plenty of white space
to make it appear easy to read. There should be margins on both sides and copy
should be double spaced so that amendments and instructions can be inserted by
the editor.
DBA 1738
NOTES
4.4. TYPES OF PUBLICITY
Publicity Tools
Public relations have its origin in publicity with a broader focus as it addresses a wider
set of audience. David Yale defines publicity as supplying information that is factual,
interesting, and media newsworthy and not controlled by the company. A critical aspect of
public relations, publicity is described as the process of planning, executing and evaluating
programs that encourage purchase and consumer satisfaction through credible
communication of information and impressions that identify companies and their products
with the needs, wants, concerns and interests of consumers. Public relations involve activities
related to persuading customer and prospects to buy (or continue to buy) the firms products
and services. We list here a set of publicity tools.
Press Releases
The press release is the basic building block of a publicity programconcerned with
story placement. This is where the important information about the product or services is
summarized in a way that will catch the medias attention. Just as the marketer would
customize the advertising message for each target, he needs to customize press releases
for various media he contacts.
Fact Sheets
A press release should be written so it can be used without any editing. That means all
the relevant information must be included. There may be additional important information
that doesnt really fit into the press release. Thats where the fact sheet comes in. Fact
sheets include more detailed information on the product, its origins, and its particular features.
By providing fact sheets, it is easier for the media to write a story about the product
because the fact sheet can help to clear up misperceptions and answer reporters questions,
saving thema phone call or e-mail query.
Press Kits
The press kit pulls together all the press releases, fact sheets, and accompanying
photographs about the product into one neat package. A comprehensive folder can serve
as an attention-getter and keep the provided materials organized. Many organizations
supply press kits and gifts to people so that the reporters can use themfor a longer period
of time.
Video News Releases
The video news release (VNR) is the video equivalent of a press release. Prepared
for use by television stations, the typical VNR runs about ninety seconds and can be used
to highlight some important features of the product. These are called infomercials. They
are based on facts and often help corporate communication and media relations people
release the video release through their channel.
NOTES
Employee/Member Relation Program
An organizations employees are an extremely important internal public. Corporate
public relations people often spend a great deal of time developing employee communication
programs, including regular newsletters, informational bulletin boards, and internet postings.
In service organizations these kinds of activities can be used to support brand communication
efforts. For example, using the company newsletter to remind employees about the
importance of prompt and polite customer service is an effective way of building a strong
brand image.
Community Relations Program
It is critical that companies maintain the role of good community citizens within the
markets where they have offices and manufacturing facilities. Many companies actively
encourage their employees to take part in community organizations, and local corporations
are often major sponsors of community events and activities such as art presentations,
blood donation drives, and educational activities. Tata group of companies highlight their
community relationship based communications for building a strong brand image within the
local community and stakeholders at large.
Financial Relations Programs
Most of the brand-marketing organizations are publicly held companies. Financial
relations have become a key aspect of public relations activity. Downturns in company
earnings quickly lead to decline in stock prices, leading to the exit of top executives. Financial
relations people are responsible for establishing and maintaining relationships with the
investment community, including industry analysis, stockbrokers, and journalists specializing
in financial reporting. The financial relations specialist has the job of getting maximumpress
coverage for a companys financial successes and putting the best face possible on any
financial loss. Financial relations personnel write the companys annual report as well as
any other communications directed to stockholders.
Industry Relations Programs
The primary public that industry relations specialists deal with is other businesses
operating within the same industry, as well as trade associations. The recent travails of the
tobacco companies of India help to underscore the importance of industry relations. While
various companies are not in agreement on all issues, they have banded together in many
instances to try to influence policy and legislations, with a thought that there should be
strength in numbers. Acceptance in peer firms and within trade associations helps in building
good public relations.
DBA 1738
NOTES
Development/Fund-Raising Program
This is a particularly important area for not-for-profit organizations such as art
organizations, educational institutions, and community service programs. These types of
companies often rely on donations fromthe public, government, and other organizations to
make up all or part of their operating budgets. Development specialists identify likely
prospects for donation; prepare proposals to present to those prospects, and work to
nurture ongoing relationships. Initiatives taken for fund raising include luncheons, seminars
and dinners among prospective donors.
Special Events
Event marketing is rapidly gaining popularity. Besides linking their brands to existing
events, marketers are also creating events of their own, designed to reach specialized
targets. The event itself can serve as a compelling news angle for related publicity efforts.
It can also be promoted through advertising, and can serve as a distribution point for sales
promotion incentives. With a little creativity, events can serve as an important point of
differentiation from competitors. Today we have many event management companies in
India, which specialize in product launch, fashion shows, and cultural programmarketing
in India.
House Ads
A company uses various media like newspapers, magazines and broadcast stations
to prepare advertisements for the internal public. Public relations programmanages these
house advertisements.
Public Service Announcements
These are ads for charitable and civic organizations that run free of cost on television
or radio or in the print media. These are called public service announcements. Many trade
associations, companies launch programs, which are called public service announcement
programs. These advertisements highlight the public and civic issues.
Corporate Advertising
This kind of advertising promotes corporate image or corporate viewpoints. These
advertisements dont talk about products and services. Public relations department prepares
these advertisements and sometimes tells about some issue and the companys stand on
the subject. Corporate identity advertisements are forms of advertisements in which the
company has a targeted and identified audience and tries to establish certain level of
awareness of the companys name and the nature of its message. Companies also deliver
their point of view messages through advocacy advertisement. Oil companies and cigarette
advertising companies use their point of view about environment and health respectively.
NOTES
Publications
Companies publish various publications in the formof pamphlets,-booklets, annual
reports, books, bulletins, newsletters, inserts and enclosures and position papers. Companies
publish annual reports explaining their performance and future plans. Collateral materials
are used to support their marketing public relations efforts.
Speakers, Photos and Films
Many companies use speaker bureaus to communicate with people about topics at
the publics interest. Some publics like news media also want pictures and video films for
use in their media. So public relations department uses speakers, photos and films for this
purpose.
Displays, Exhibits, Events and Tours
Exhibits, displays, tours and events are important tools for public relations. Companies
use displays and point of purchase materials for image building. Exhibits are also examples
used by companies to promote positive image. Staged events include open houses, planned
tours and event celebrations. Companies use events for guerrilla marketing.
Press Conferences
When a company spokesperson makes a statement, they use press conference in
front of media representatives. This is one of the riskiest public relations activities because
the media may not see the companys announcements as being the real news. Companies
have used press conferences for new product launch.
Online Communications
The companies use new electronic media, which is making the biggest change in the
communication landscape. E-mail, intranets, extranets are used for online communication.
Companies develop web sites and portals to provide corporate information on the World
Wide Web. Companies use intranet and emails to communicate with public.
4.5. SELECTION OF SALES PERSONS
Human Resources Issues and Concerns in Retailing
Like any other service organization, the HR function in retailing (as practiced by both
HR functionaries as well as managers in operations/retail) is extremely important. However,
as the industry evolves, some special issues have emerged. In fact HR managers may find
themselves focusing on just a few activities almost 90% of the time. These constitute:
(a) Manpower planning.
(b) Recruitment.
(c) Motivation and retention and building reward systems that ensure
DBA 1738
NOTES
Manpower Planning
Since manpower costs forma major part of costs for the retailer, the decision on how
many people it should have is crucial, and has a bearing on standards of performance and
productivity. Most important, it affects the kind of service that a retailer may like to offer.
Very often, retailers are so busy managing operations that the key issue of manpower
planning is relegated to the background. What they dont realize is that a proper plan can
perhaps improve performance on many fronts: the smoothness of operations, customer
service levels and profitability.
How does a retailer go about deciding how many people he should employ? The
following factors should be taken into consideration:
(1). Business Planning
The starting point in retailing, as in all businesses, is the annual plan. With this plan, the
retailer puts a fix on the volume and value of business that he intends to accomplish. This of
course has a direct effect on the number of people the retailer needs to recruit in the future.
For example, a retail organization needs to plan and recruit for new store openings. This
may start with an arithmetic calculation using current store manning levels as a basis. However,
after this, the number has to be revisited looking at other aspects that are mentioned below.
(2) Manning Standards and Utilization
. Developing manning standards helps optimize the number of staff. As each season
passes, the retailer finds that the standards get more refined and applicable for the purposes
of performance development. Factors that influence manning standards are:
(3). Work-Task Organization
Assuming that one is opening a new store, or is re-examining jobs with a view to
redesign themmore effectively, the retailer has to decide which tasks to group together to
forma particular function. This will mean a work task analysis with reference to functions
that characterize retailing: buying, selling, storing, transporting, financing, information gathering
and risk-taking. The retailer needs to identify tasks and map theminto jobs depending on
the chosen method of organization. Examples of tasks that characterize retail are given
below:
Some Typical Tasks in Retail
1. Forecasting Sales
2. Purchasing Supplies
3. Purchasing Merchandise
4. Building Merchandise Assortments
5. Pricing Merchandise
6. Selling
NOTES
7. Training Employees
8. Retail Management
9. Displaying Merchandise
10 Billing Customers
11. Packing and Gift Wrapping
12. Searching for Merchandise
13. Advertising
14. Handling Customer Complaints
15. Controlling Inventory
16. Transporting Merchandise
17. Supervising Employees
18. Hiring and Firing Employees
19. Cleaning the Store
20. Handling Cash
21. Paying Bills
22. Customer Research
23. Altering/Repairing Merchandise
24. Storing Merchandise
25. Preparing Merchandise Statistics
26. Maintaining the Store
27. Providing Store Security
The retailer needs to decide how tasks have to be grouped to provide the highest
level of efficiency. For example, in a store where customer walk-ins are few, and the
merchandise stocked are high-fashion garments, the same salesperson may be asked to
assist the customer in selection, bill the customer, collect payment and pack the item.
However, in a supermarket where a cash-and-carry systemexists, the jobs may be separate,
with different people stacking items on shelves, cashiering etc. In a store selling specialty
products like branded cosmetics there is no product development effort required
fromthe retailer since the brands are presenting developed and advertised lines. Hence the
salesperson may be asked to indent for reorders as well do selling, since he would know
which items are slow and which are fast movers. However, in a fashion garments store
which has its own label, a specialist merchandiser may be required to take decisions on re-
orders, deciding whether continuing the product line would benefit the store image or not.
(4). Store Positioning or Image
The number of staff hired is often dictated by the positioning of the store. For example,
a high-fashion boutique store promising exclusive service will need to ensure that every
customer who walks in is attended to personally. On the other hand, a warehouse store
can afford to have no staff to help the customer.
DBA 1738
NOTES
(5). Store Strategy
Sometimes the store strategy for the year might dictate a change in staffing patterns.
For example, a store that is experiencing a new business scenario such as a competitor
setting up store in its vicinity may want to increase staffing and provide better service as an
immediate strategy to retain the customer. Another example could be an internal strategy
of using employee creativity one may need to plan time off for employees to think
creatively, and therefore employ more staff.
(6). Productivity Requirements
For the retailer it is imperative that he evolves his own tangible standards of productivity
and as a corollary, manning standards. The standard could be per square foot coverage
per employee, per square foot sales per employee, or gross margin return on labour
(GMROL). Often retailers look at several of these standards in conjunction with one
another, the ultimate aimbeing to optimize (and not maximize) GMROL. Retailers often
use GMROL as a good indicator/standard. However GMROL should be taken into
account in conjunction with gross margin return on space and gross margin return on
inventory (GMROI). GMROI should be calculated as per product categories at each
location (and not only at a store or product category level) and standards should be evolved
over a period of time. The purpose is to optimize and not maximize GMROL, failing which
a situation may arise when staff numbers are cut to increase GMROL and thus lead to
deterioration in customer service. Hence, ideally GMROL should always be studied in
tandem with gross margin return on footage (GMROF) and GMROI.
(7). Type of Sale
While arriving at manpower numbers, it is important to examine the product and the
type of sale involved. For example, routine products such as toothpaste or soap can be
sold in a dispenser with minimumemployee interface. A specialty product such as a branded
shirt (whose sizes are standardized across brands) also does not require a great deal of
interface. A customer can buy a white shirt, size 42, by merely locating it (with the help of
the signage and shelf talkers) and putting it into a shopping basket. A salwar kameez on the
other hand is a shopping product that requires assistance (for explaining the cut, fabric,
sizing and assistance for trials) when the selection is being made.
(8). Ratio of Manpower Costs to Volume of Sales
At a macro level, this is a good method of planning manpower. Retailers can fix a
percentage of sales turnovers to be utilized on manpower costs. Micro planning can then
be made within this limit.
NOTES
(9). Shifts, Opening Days/Hours, Holidays, Leave Entitlement
The total number of staff depends on the shifts planned, and ideally should coincide
with the flow of customer traffic. This is a complicated process, with the quantumof leave
allowed, weekly offs, holidays etc. to be taken info account when planning.
(10). Issue of Availability
A customer-focused method of looking at staffing numbers is to decide on the level of
service to be offered. For example, on a particular floor, the retailer needs to decide how
many service personnel should be present at a given time (like peak customer traffic time).
Then staff strength should be decided after making allowances for leaves, weekly offs,
staff breaks, back office work etc. that take themaway fromthe customer. It is important
to then devise a method to track availability of staff for the customer, to ensure that the
targeted numbers are available.
(11). Importance of Manpower Information Systems and Audits Control
Manpower Planning.
A good manpower information system, integrated into the sales reporting system, is a
must for retailers to ensure efficient manpower planning. For example, staff availability and
its effect on performance can be measured by finding out the staff allocation for each
product category and location, tracking attendance (using an electronic attendance recording
system), and then comparing these with sales figures and fluctuations in them. The study of
GMROL can be made more meaningful if section-wise sales and staffing costs are captured.
Recruitment and Selection
Retailers across the world face a scarcity of trained manpower. And because of the
high employee turnover rates, they are saddled with constant recruitment activity.
Recruitment and selection has two objectives: (a) to recruit the right person for the
job, and (b) to ensure that the right person is not rejected. This activity is crucial for
retailers for the following reasons since proper recruitment and selection would ensure that
time is not wasted on activities that do not directly add value to the bottomline, reduces
recruitment costs, and, most important, reduces employee attrition rates.
Retail Employment Options
The retailer has several options in terms of types of employees, with a view to maximize
productivity and minimize costs.
Core Employees: These include full-time employees and critical resources that take
time and training to build up. They are on the rolls of the company and could also include
frontline sales staff.
DBA 1738
NOTES
Short-termContract Employees: These are on the rolls of the company for a specified
duration, following a mutual agreement between them and the retailer. This is a useful
option in the peak season Diwali to December when many retailers may chalk up
more than 50% of their sales, and need as many staff as they can get.
Apprentices: These are trainees who could be working and learning on the job, usually
for a specified duration.
Part-timers: This is an arrangement commonly used in countries where retailing is a
developed phenomenon. These employees are on the rolls of the company, but work for a
specified short duration every day (for example, four hours) and get paid on an hourly
basis. Popular choices for part-timers are college students and housewives. Using part-
timers helps adjust employee availability with customer in-flow.
Consultants/Retainers: This option is used to avail of the services of specialists who
may otherwise be too expensive to employ, and whose expertise may not be needed on a
regular basis, like legal experts, fashion design consultants or beauty consultants.
Sub-contracted Employees: Sub-contractors are awarded jobs within the company, but
are not part of its core competence. Outsourcing is gaining popularity since it works out to
be more cost-effective. In retailing, these areas typically are housekeeping, security,
transaction processing in accounts etc.
Self-employed Agents: These include commission agents not on the rolls of the retailer,
who operate outside the store and are instrumental in bringing in customers. These agents
get a percentage of the business they bring in, like taxi drivers bringing in tourists, tour
operators who bring in their own customers to the store.
Agency Temporaries: These are staff from agencies normally used for very short
durations for, say, promotions or events within the store.
Special Features of Retail Recruitment
a. Sources of Recruitment: In retailing, staff sources are varied and the recruiter
normally has to employ unconventional methods to hire them. Since the jobs
involve odd working hours, front-line staff is recruited from those living in the
vicinity of the store. This helps contain employee turnover. Also, references are
often a cost-effective source of recruitment, and it also has a high hit ratio.
b. Issues in the Retail Selection Process: While setting up selection policies, an
important issue is defining the selection process to ensure that the right person
comes on board that is, what is the process, is it correctly defined, who is the
authority making the final decision? In retail companies, where the emphasis is on
service, recruitment, selection processes and job criteria are well-defined.
Recruitment is viewed as an important activity, and conducted by a senior person.
Another issue in retail selection is that of integrity. Almost all jobs in retail, especially
NOTES
front-line sales, are open to the possibility of theft/ fraud/misappropriation. Hence
the need to define a selection process that identifies the trait of integrity. Many
retailers insist on careful preliminary screening of candidates, reference checks,
and detailed checkswith previous employers and so on.
c. Scarcity of Trained Manpower: The world over, the retail industry faces a shortage
of trained personnel. And while there is no dearth of people who want the jobs,
there is an acute shortage of institutes to train people in retail skills/knowledge.
Several retailers have established large training teams and even institutes affiliated
with them where people are trained for retail jobs on a large scale. The scarce
supply position means that poaching talent is rampant and frequent job changes
the norm.
d. Unsocial Hours: Recruiting in retail is difficult as front-line jobs involveunsocial
hours that is, on weekends and public holidays which is unavoidable for
the retailer. As a result, the pool of available and willing manpower shrinks.
e. Short-termManpower Demands: Customer-buying is seasonal and depends on
festivals, the weather, state of the economy and other factors. Hence there are
peaks and troughs in sales through the year. Recruitment must be adjusted to
take into account these variations. For example, in the peak season clothing or
jeweler retailer will need more staff. However, if permanent staff is hired according
to the demands of the peak season, they will be underutilized for the larger part of
the year. Hence retail recruitment demands greater flexibility and resourcefulness.
f. The Reputation Problem: In India, retailers still face a peculiar stigma where retail
front-end jobs are concerned. Candidates often feel that retail jobs are merely
standing in a dukaan, with no career prospects. This has, however, changed
with the advent of large, professionally-run department stores. But theres still a
long way to go before retail jobs are seen as serious career options.
g. Front-line Nature of Retail: All retail employees have to face customers and interact
with them to a certain extent. Hence, apart from technical/ job knowledge the
retail recruiter needs to look for additional attributes in the candidate such as
communication skills, personality and appearance. This makes finding candidates
more difficult.
h. Recruitment with Reference to Customer Profile: For all jobs that involve interaction
with customers, the impact on themhas to be taken into account. For example,
store personnel may need to know an additional language if a large proportion of
customers speak a specific language. Similarly, when the customers are children,
a salesman may need skills like storytelling, juggling or performing a few magic
tricks apart fromselling.
i. Need for Mobility: Front-line staff, like other employees, is concerned, even at
the time of recruitment, about the growth prospects in the organization. Often
sales people who seek careers in retail jobs aspire to move quickly up the ladder
and become supervisors, department managers, merchandisers, store heads etc.
However, the positions that become vacant are few compared to the number of
DBA 1738
NOTES
aspiring salespeople at a location, and competition is fierce. Retail businesses
grow by increasing their sales volume by setting up new stores in new locations.
And opportunities for jobs involving more responsibility often emerge there,
provided the employee ha geographic mobility and across functions. Hence
determining mobility while recruiting is important for employee retention.
j. Women in Retail: In economies where the retail industry is developed, more than
50% of women are employed in the industry. The natures of jobs that exist
such as customer service personnel or buyers make retail an attractive option
for women. In India, women are still reluctant to take on jobs that involve late
hours. However, recruitment decisions depend on customer expectations and
comfort. Will a female customer be comfortable buying lingerie froma salesman?
Will a 50- year-old male customer be comfortable if he needs to buy trousers
where a saleswoman may need to take measurements for alteration?
k. Legislation: In India legislation has to be taken into account while deciding staffing.
The Shops & Establishments Act has fixed store opening and closing timings, the
duration an employee can work, mandatory leave/holidays and breaks after a
specified number of hours, and special provisions for the employment of women.
Hence while deciding shifts, breaks, weekly offs and staffing patterns, the retailer
needs to ensure that he is on the right side of the law.
When poor selection decisions arc made, newly hired sales personnel leave their job,
the overall success of the firm decreases, and the costs to the firmare staggering. Total
costs incurred in the selection process include: generating applicants, screening job applicant
packages, interviewing and assessing potential candidates. These expenses, plus training
costs and he salary of the new hire- during the initiation period, are wasted when an
incorrect selection decision is made. Total expense can reach 150 percent of the workers
annual salary. To improve the probability of hiring success, and thereby lower salesperson
turnover, formalized selection process must be followed.
Characteristics of Successful Salespersons
Since the earliest days of modern sales activity, sales managers and business owners
have sought to identify specific characteristics that predict the successful salesperson. Until
now, no one characteristic has been identified that predicts success. What is difficult to
know is: if and how specific traits contribute to sales success and, more important for sales
selection, how specific attributes possessed by applicants can be identified during the
sales selection process.
What is known about successful salespersons?
A tremendous amount of salesperson research has been conducted in an attempt to
identify characteristics of sales success. Unfortunately, much of the research has contributed
to confusion about the characteristics that determine success. That is, for a variety of
reasons, inconsistent and conflicting results have been reported by researchers of sales
NOTES
success. Selecting salespersons for global customers is significantly more complicated than
for ones domestic customers. Multinational companies (MNCs) use educational levels,
interview skills, and previous experience to select global salespersons. However, personal
interviews can lack reliability in hiring situations. That is why it is important to identify
needed skills or competences and to properly prepare and conduct the normal interview.
The myriad characteristics of success studies examined aptitude (mental abilities
and personality traits), personal characteristics (education and lifestyle), skill levels
(learned knowledge), role perceptions (perceptions of job demands and expectations
of role partners), motivation (desire to devote time to job activities), and organizational/
environmental factors (company position in market, territory potential, and salesperson
autonomy). Each of these areas is discussed below.
Aptitude. Research has focused on intelligence, math ability, verbal ability and
sales aptitude. The reasoning is that an applicant who possesses these abilities
should be able- to performat a higher level than those not possessing these abilities.
Personal characteristics. Past studies have investigated responsibility, dominance,
sociability, self-esteem, creativity, need for achievement, and need for power.
Skill levels. These reamed proficiencies and altitudes encompass vocational skills,
sales presentation abilities, interpersonal skills, general management skills, and
vocational esteemskills.
Role perceptions. It is important for the salesperson to accurately understand
the expectations of both the firmand the customer. This requires open communication
and willingness by all parties to air concerns when they are not satisfied by the
salesperson.
Motivation. The salesperson must be motivated to devote the necessary time-
and energy to accomplish the job at hand, even when success is not guaranteed.
Most firms utilize- their compensation and management systems to motivate the
sales force.
Organizational and environmental factors. This variable recognizes that
other forces, outside the control of the salesperson, affect the success of the
salesperson. For example, a firmthat is the market leader adds prestige and ability
to meet with a potential client. On the other hand, a relatively unknown company
cans negatively affect a salespersons ability to gain a meeting with a potential
purchaser.
In a landmark investigation, these- characteristics were examined in a meta-analysis
that combined large- numbers of studies to identify which of the groups of characteristics
contributed to salesperson success. While none of the groups contributed significantly to
success, the areas most responsible for success were skill levels and role perceptions.
What this means is that sales managers can influence these variables through training and
managing the sales force.
DBA 1738
NOTES
Identifying successful characteristics
One way to determine the characteristics and skills needed for sales force positions is
to conduct a thorough job analysis and then write a job description. Sales managers may
not possess the technical expertise to conduct a job analysis, in which case a human resource
specialist or consultant should be contacted for assistance.
Job analysis
A job analysis provides the sales manager with a considerable amount of information
about a sales position. This information includes how a salesperson currently spends their
time and, more important, how - under ideal circumstances the salesperson should spend
their time. To gain this information, the person conducting the job analysis should talk to
current salespersons, when available, and sales supervisors. In this way, the analyst obtains
sources of information and perspectives from several vantage points.
Current salespersons should also be observed performing their job and interviewed
to insure their actions arc understood. This permits the person conducting the analysis to
identify and analyze the duties and responsibilities, needed skills, and abilities of the
salesperson Often the analyst discovers that the salesperson is not prioritizing activities
considered important by sales and upper management. These misunderstandings of role
accuracy demonstrate the importance of accurate and detailed job analyses.
Sales managers can also provide valuable input about how the salesperson should
conduct their job in an ideal market. Sales managers, can identify ideal behavior by analyzing
how the more successful members of the sales force prioritize their time. While it may be
helpful to understand how successful salespersons allocate their time, it must remembered
that each sales territory will vary by customer size, product complexity, and travel lime
and that these influences will alter the ideal time derived from this type.
Job description
Alter conducting a thorough job analysis, a written job description.
The nature of the product is/services sold.
Customer type(s) and call frequency.
The salespersons specific tasks and responsibilities.
Relationships) between the salesperson and others in the sales organization.
Intellectual and physical demands of the job,
Environmental factors affecting the sales position.
Once the job description has been written and agreed upon In management, the
document can he utilized to develop a statement of job qualifications. With statement of
job qualifications, sales management can list the necessary qualifications of the applicants.
NOTES
It should be dear that without an accurate job analysis and description that contributes to
a statement of job qualifications, it is difficult for a sales manager to select the- correct
person froma pool of applicants. I his initial stage determining the qualifications for a new
hire is the most difficult part of the sales selection process. However, culture influences the
adoption and use of job descriptions. In Japan, a written job description is employed less
frequently because sales personnel are oriented for the position by utilizing on-the-job
procedures.
The firms attempt to minimize the costs of recruiting outstanding salespersons believing
that training can correct individual weaknesses. However, such a strategy is fraught with,
danger because- short-term training cannot correct such key competences as language
fluency, maturity, and cross cultural experience. If specific attributes are required of the
new salesperson, then the sales manager must insure through the interview process that the
individual hired possesses the requisite skills, knowledge, and attitudes.
Generating Applicants
Sales managers often encounter problems generating a substantial pool of highly
qualified applicants fromwhich to till an open sales position. When sufficient applicants are
not generated, there may be a problem with the process used to generate applicants. This
section discusses a number of sources both internal and external to the company from
which to attract sales force applicants.
Internal applicants
Potential applicants for open sales positions may already work for the company as
engineers, product managers, buyers, or manufacturing managers. When seeking well
qualified sales position applicants one should not overlook outstanding candidates from
within the company. Management has access to information about internal applicants,
regardless of their current position that includes: work habits, personality, and potential for
assuming greater responsibility. This is critical information (or sales managers who must
make personnel decisions and it is more difficult to obtain such data about candidates who
apply from outside the firm. However, internal candidates normally do not possess sales
experience. Also, managers from other functional areas may view internal recruiting less
positively than the sales department.
Current salespersons may also provide the names of friends or acquaintances that are
seeking sales jobs. Since the salesperson would have to work with these applicants, they
would be cautious in their recommendation. Also, members of the sales force may know
competing salespersons that have expressed a desire to be considered for future openings
with the- firm. In some cultures, employees recommend their friends and relatives for
openings, for example, referrals are extremely important and should be expected in high
DBA 1738
NOTES
context cultures. However, established policies and legal codes must be followed when
seeking internal recommendations for open sales positions
External applicants
Often, internal sources alone do not produce either the quantity or the quality of
applicants desired by the firm. In these cases a firm utilizes external sources to generate
applicants for open sales positions.
Advertising
One of the most common methods of generating sales applicants is by advertising in
newspaper, magazine, and Trade publication outlets. More technical and highly qualified
applicants are reached through trade publications or in special issues of newspapers like
the European or Asian Willis Street journal. Advertisements assume many horizons,
but most follow a general format. Firms that seek professional salespersons communicate
certain information in the advertisement.
The Title of the Job Opening.
Minimumjob qualifications.
Preferred job qualifications.
Location of the sales territory.
Some discussion of pay and benefits
Who to contact and how.
Firms that run blind advertisements, generate applicants of varied quality.
Advertisements that generate a large pool of job seekers are not effective unless a significant
number of applicants are qualified for a personal interview. Conversely, too large a pool of
applicants results in costly screening activities. The goal of a sales force advertisement is
to generate a sufficient number of qualified applicants for an open position so that managers
can interview and then select highly qualified applicants. The more precisely the ad describes
the minimum acceptable requirements, the greater the probability of attracting qualified
applicants.
Employment agencies
For complex sales positions, such as technical and global sales, career counselors or
head-hunters from private employment firms are utilized to contact and conduct the
initial screening of applicants. Some career counselors specialize by industry or by company
and maintain a pool of applicants who arelooking to move to higher-paving and/or more
challenging sales positions. However, this avenue is criticized for being expensive and not
producing long-term employees, Fact of these concerns must be considered before
contracting with an employment firm.
NOTES
Educational institutions
If entry-level salespersons are being sought, then colleges and universities are excellent
sources of applicants. This is because college graduates have demonstrated through degree
completion and recommendations from professors the ability to think soundly, manage
their time, communicate, and remain focused on achieving a long-termgoal. Many colleges
and universities maintain well organized placement or career management centers that
actively cooperate with potential employers about their organizations most important output:
their students.
Job fairs/Career conferences
Job fairs and career conferences may be held in partnership with student organizations,
universities, cities, or business consortiums, job fairs occur when a group of firms that are
seeking job applicants organize a date and location that is publicized in newspapers,
television, radio, and at schools and universities. Firms that are seeking sales personnel
are available at the job booth between a certain period of time 10.00 a.m. until 5.00 p.m.
and job applicants simply walk up or stand in line until it is their turn to talk briefly with
representatives of the firm. In effect job fairs provide an opportunity for firms to reach
large numbers of potential applicants, to conduct initial screening interviews, and to
consolidate a pool of individuals for formal interviews. All this is accomplished at a reasonable
cost to the company.
If the job seeker feels to meets the stated qualifications for the position(s), a resume
or application form is completed by the applicant and then electronically mailed to the
appropriate person, who will review all applications. However, many firms conduct an
electronic evaluation of emailed resumes that use key words, which reduces the amount
of time managers must devote to screening applicant qualifications. Potential applicants
can also learn about the firm, the job opening and gain other valuable insight by reading the
firms web page and hyper linking to related web sites. The use of the Internet to match
sales job seekers with open positions is expected to become more dominant over time.
Creative external applicant sources
In certain cultures, where sales positions are viewed negatively, sales managers seek
applicants through nontraditional means. Electrolux spends a significant amount of sales
management time in Hong Kong, where it must interview 4(X) candidates in order to
select ten applicants that will attend sales training. In certain African countries, multinational
corporations discovered that highly qualified applicants were military veterans who were
completing their term of service. These former army veterans were: motivated to do a
good job, organized and dependable, and accustomed to working in adverse situations.
DBA 1738
NOTES
It is the total cost of generating applicants finding interested personnel and screening
the applications that managers must consider when computing the cost of generating
applicants for open sales positions, finally, the quality of the applicant pool is significantly
more important than the quantity of the group of interested persons.
Selection Procedures
Once a pool of applicants has been identified for further consideration for the sales
position, a formal interview process should be followed. The following five steps are followed
to assess the qualification level of the applicants and to provide management with feedback
that will permit the selection of the most qualified person for the job. These five steps,
which are discussed in detail below, include: (1) application form, (2) tests, (3) personal
interview, (4) references, and (5) physical exams.
Application forms
Although applicants for sales positions normally submit a resume, nearly all firms
require an applicant uncompleted a standardized application form. There are a number of
valid reasons for requiring applicants to complete this additional paperwork. First, completed
application forms provide management with consistent information about all applicants.
That is, resumes are the creation of the applicant and contain a variety of data, while
application forms ask for specific, information, such as dales, level of responsibility, and
supervisors names. Also, it may be required that the application formbe signed, thereby
granting legal permission for the interviewing firmto seek information about the applicants
qualifications fromthird parties.
Second, having to complete an application form requires the applicant to read and
follow directions, respond to the questions, and demonstrate the ability to express themselves.
While sales applicants should not perceive this requirement as a barrier to being hired,
themus application formprovides the hiring firmwith an initial impression of the applicant.
Even when electronic recruiting procedures arc employed, as discussed above, firms can
check applications for misspellings and proper grammar usage.
Third, sales managers and other interviewers can use information submitted on
application forms to plan the formal interview. For example, if managers want to delve into
how well the applicant planned during their college or university days, a common question
may be: I see that you majored in English . What made you choose English as a major for
your undergraduate studies? likewise, application forms also provide managers with an
opportunity to look for inconsistencies in dates or other questionable entries that can be
probed during the personal interview. One example of areas that may need further
exploration during the interview is why someone has frequently changed employers. Studies
have shown that length of employment at one firmstrongly influences how long the sales
applicant will remain employed with a new firm.
NOTES
Tests
Many firms test applicants and use the results as a confirmatory input to the interview
process. First, and foremost, testing provides managers with another view of the applicant,
but no one should be denied employment when all other indicators suggest an entirely
different perspective of the applicant. There are a variety of tests available to managers
that include personality tests, intelligence tests, and aptitude tests.
Personality tests can be used to evaluate numerous traits of an individual. These
tests arc-lengthy, time-consuming, and may gather information not relevant to sales positions.
There-are more concise tests that predict specific sales positions. Some tests mea-sure
traits such as empathy and ego drive to assess sales force applicants. Firms employ
intelligence tests to assess whether applicants have the mental abilities to performa job
successfully. Intelligence tests arc available to measure memory, reasoning, and verbal
ability. Aptitude tests designed to measure whether an applicant has an interest in or the
ability to perform certain tasks and activities in comparison with current successful
salespersons. Therefore, aptitude tests may not be appropriate for applicants without sales
experience.
Firms that employ tests must insure their validity. That is, the tests must discriminate
between applicants who will be successful and unsuccessful. Many lest routinely
discriminates between men, women, and/or minority members of society, then the test
may un-biased. There are statistical or psychometric procedures for validating human
resource tests and, if challenged to defend tests in a legal venue of nations where there are
nondiscriminationlaws, the firmwill be required to provide this information to the courts.
Managers are often skeptical of using tests to predict future sales success, because past
research has shown that no one personality or mental ability determines success as a
salesperson. This suggests that testing should be utilized as one factor in the selection
process.
Personal interview
The personal interview is, often called the most important step in the hiring process.
This is because the applicant appears before sales managers and other individuals where
his/her responses to questions and directions will directly influence the- interviewer to
recommend or not recommend that they join the firm. In effect, in many sales interviews
that are held in Western cultures, sales managers expect the applicant to sell themselves.
However, in certain cultures managers should not expect the sales applicant to demonstrate
aggressiveness during the initial interview by asking for the job.
There are a variety of ways to conduct a personal interview. The following discussion
focuses on three different interview approaches: structured, unstructured, and stress
interviews. Each has its place in the selection process.
DBA 1738
NOTES
Structured interview
A structured interview means that, before meeting with applicants, the sales manager
or a company team prepares a list of questions along with a range of acceptable answers.
For consistency, all applicants arc asked the same questions. In effect, the sales manager
prepares a long list of questions, that cuts across areas of the applicants background work
experiences, formal education, sales experience, and hobbies. An example of a structured
question might be: In your current job, how many hours must you work to be successful?
sales manager looks for the applicant to correctly respond with a range of hours between
forty-live and sixty. The acceptability of responses would vary across cultures.
Structured interviews have a number of advantages. First, if the sales manager is
inexperienced in interviewing applicants, a structured interview provides confidence and
structure to the process. Second, this approach insures that all areas are covered during
the interview, since managers would have an outline of questions to ask. Finally, standard
questions make it easier to compare applicant responses. Standardized terms allow the
interviewer to record the applicants response to questions. When multiple interviewers
are used, recorded responses allow the interviewers to compare answers and discuss
applicant responses. Structured interview s are twice as powerful a predictor of job
performance as unstructured interviews.
One criticismof structured interviews is that, if not experienced, the interviewer may
fail to describe the responses that deviate fromthe expected answers. That is, the interviewer
may focus on reading the questions and marking the applicants responses rather than
critically evaluating those communications. It is important for sales managers to ask the
question, evaluate the answer, probe when necessary, and take sufficient notes for future
evaluation. Inexperienced sales managers may need to receive training, travel in the field
with better performing sales representatives, and observe interviews conducted by more
experienced colleagues before attempting a solo interview.
Unstructured interview
An unstructured interview is the opposite of a structured interview. Basically, the
interviewee is asked a general question and then allowed to address the subject. An
example may be: Tell me about your experiences as a salesperson. Then, once the
interviewee begins to speak, the interview may interject: Why do you enjoy travel? The
belief is that, by allowing the interviewee to speak freely, significant insight can BE gained
about the applicant. The interviewer must be skilled at redirecting the discussion and
understand which areas require probing. Mainly sales managers are reluctant to employ
unstructured interviews, because they have not received training, nor do they possess the
experience necessary for successfully employing this interview approach. Research has
concluded that unstructured interviews are a less effective selection tool.
NOTES
Stress interview
Because salespersons find themselves in stressful situations, interviewers may place
sales applicants into fluid situations to gain additional insight about their abilities and
personalities. For example, during an interview, the applicant may be asked to sell the
interviewer an item, like a pen, ashtray, or piece of furniture. The basic premise is that the
salesperson makes a good faith effort to sell whatever they are asked to sell, then there is
a higher probability that potential clients will also be asked to buy something when they are
called upon.
Sales managers who place an applicant into a stressful situation should have a
predetermined range of acceptable behaviors in mind. That is, one can ignore the applicant,
be rude and obnoxious, ask the applicant to sell an item, or sit in silence waiting for the
applicant to react. All of these techniques are employed in an effort to gauge the experience
of the applicant in handling potential customer situations. No matter, the sales manager
must decide what the applicant can and cannot do to pass the stress interview. Firms that
employ the stress interview do in conjunction with the structured or unstructured interview.
Managers must also understand that if the stress interview is too stressful, the applicant
may seek employment elsewhere. Likewise, in many cultures a stress interview is an
inappropriate means of interviewing sales candidates.
References
One indicator of potential for success as a salesperson is performance in past activities.
Therefore, sales managers normally call previous employers or supervisors and seek
confirmation of how well the applicant performed in those positions. For example, if Ms.
Kenyon-Jones worked for sales firmin Birmingham, England, the sales manager at IBM in
London would call the former sales manager to inquire about Ms. Kenyon-Jones. Sales
managers seldomask directly: How would you rate her performance? This is because
this question is subjective in nature and is not factual. Instead, sales managers confirmthe
facts stated on the application form, such as: start and ending dates of employment, position
held, accounts served, level of sales, ranking in the office, training completed and, where
permissible, salary earned. If reference checks confirmthe applicant has provided false
information, then sales managers must question the basic honesty, trustworthiness, and
reliability of the applicant.
Managers should contact those references listed by the applicant, but understand that
the applicant, has most likely listed individuals who will say only positive things about them.
Where permitted, managers can ask former employers for other managers or individuals
who could provide a meaningful reference. It is also helpful to require the applicant to
provide different categories of references. That is, business references such as former
clients or employers, financial references like banks and financial institutions, and educational
DBA 1738
NOTES
references such as professors or counselors. In this way a more comprehensive examination
of the applicants background and previous experiences can be conducted.
Physical exam
Performing a sales job is hard work! Salespersons may need to carry samples and
products fromtheir automobile to clients, which require physical stamina. Likewise, the
salesperson must travel for extended periods, in diverse time zones, and unknown cultures.
The responsibilities of a global salesperson require that they be healthy and capable of
performing the sales job for which they are hired.
Firms may require that the salesperson, isa final condition of employment, undergo a
complete physical to rule out serious medical conditions that would preclude themfrom
successfully performing their duties. On occasions, physical defects are detected that are
unknown to the applicant and if the condition precludes completion of the job, then the job
supplier is withdrawn. Firms may also want to deflect potentially high cost physical ailments
like HIV, cancer, and pre-existing conditions that would result in exorbitant medical costs
for the hiring firms insurance provider. In some countries it is illegal to discriminate based
upon medical condition, so sales managers should seek legal guidance when hiring.
Making the Job Offer
Once all applicants have been interviewed, and their application packages considered,
the sales manager or a team of interviewers normally rank each applicant in terms of their
lit with the company and their potential for contributing to the firm. It is now time for the
manager to contact the top applicant to discuss a job offer.
The sales manager should call the top applicant and ask if they are still interested in a
sales position with the company. If the answer is yes, then the sales manager should
proceed with a description of the job responsibilities and make the job offer. Applicants
may attempt to delay accepting the position, especially if the applicant is highly competent
and interviewed with several firms, in hopes that a better offer may be forthcoming.
Alter talking with the applicant on the phone, the sales manager should send a first-
class letter to the finalist which is a formal offer of employment. The letter confirms the
telephone conversation and states all pertinent information about job responsibilities,
expectations, starting salary, moving expenses, formal training dates, time before the initial
performance review, vacation days awarded, and the period of time before first consideration
for salary increase. The letter should clearly slate a deadline for accepting the position.
Many firms allow one week or ten days for the applicant to formally accept the job offer.
Finally, if necessary, the sales manager should be prepared to negotiate salary, benefits,
and moving expense benefits with the job applicant in cultures where this is acceptable.
NOTES
4.6. TRAINING
When a new employee first joins a firm, he or she should receive pre-training, which
is an indoctrination on the firms history and policies, as well as a job orientation on hours,
compensation, the chain of command, and job duties. In addition, the new employee is
introduced to co-workers: An effective orientation program should inspire recruits to
week for the company and provide information that they still do not know about their jobs
and the retailer. What kind of first impression do orientation programs make? Do they
confirm the new hires choice that XYZ company is a good place to work? Or are the
programs so foreign to most new employees mindsets that they can dampen, if not negate,
enthusiasmfor the job?
Training programs are used to teach new (and existing) personnel how best to
perform their jobs or how to improve themselves. Training can range fromone- or two-
day sessions on writing up sales orders, operating a cash register, personal selling techniques,
or compliance with affirmative action programs to twoyear programs for executive trainees
on all aspects of the retailer and its operations. For example,
At Wal-Mart (www.wal-mart.com), assistant store manager trainees receive 17
weeks of instruction in three main areas: merchandising, people development, and
operations. Part of training is computerized and part is with a management sponsor.
Once the programis completed, each trainee becomes an assistant store manager
and has responsibility for his or her own section of a store, known as a store-
within-a-store with fiscal, merchan-dising, and human resource responsibility for
it.
Sears University opened in January 1995. It offers regular retail education courses
plus self-study options. Annually, 20,000 managers enroll in hands-on programs
ranging from one day to one week. Some programs provide managers with core
skills in buying, merchandising, and human resource management. Others help
participants function as strategic leaders. Courses are taught by seasoned line
managers, training and development experts, and university faculty consultants.
Effective retailers realize training is an ongoing activity. New equipment, changes in
laws, and new product lines (as well as motivating current personnel, employee promotions,
and employee turnover) necessitate not only training but retraining as well. Thus, Federated
Department Stores has a programcalled clienting, whereby sales associates are tutored
on how to develop better long-term relationships with specific repeat customers. Core
vendors of Federated are regularly involved in teaching sales associates about the features
and benefits of new merchandise when it is introduced.
Several training decisions need to be made. They can be divided into three categories:
identifying needs, devising appropriate training methods, and evaluation.
DBA 1738
NOTES
Short-term training needs for both new and existing employees can be identified by
measuring the gap between the skills those workers already have and the skills desired by
the firm(for each job). Training should prepare workers for possible job rotation, promotion
and emerging changes in the company. A longer plan for personnel development lets a
Tierra identify future needs and train workers. Short- and long-run training needs can be
unearthed by communicating with top management, formal evaluations, informal
observations, group discussions, employee requests, and employee performance.
After needs are identified, the best way(s) to address themmust be uncovered from
among lectures, demonstrations, films, programmed instruction, conferences, sensitivity
training, case studies, role playing, behavior modeling, and competency-based instruction
These techniques may be personalized; some may be computerized (as more firms art
doing). Retailers often use two or mow techniques of training to reduce boredom and
cover the material better.
Computer-based training has two formats: personal computer and Web. For example.
Strategic Systems Associates markets Cashier Training Software for less than $2,000. Its
multimedia CD-ROM for supermarkets has modules on the checkout counter, register
systems, scanning, tendering, adjustments, age-related sales (such as beer), and cashier
responsibilities. At the same time, the National Retail Federation is making its Performance.
TRAC training programs availablefor a feeon the Web for potential retail employees.
For retail training to succeed, an environment conducive to learning is necessary.
These are essential principles for enacting a positive training environment:
All people can learn if taught properly.
A person learns better when motivated; intelligence alone is not sufficient. Learning
should be goal-oriented.
A trainee learns more when he or she participates and is not a passive listener.
The teacher must provide guidance.
Learning should be approached as a series of steps rather than a one-time
occurrence.
Learning should be spread out over a reasonable period of time rather than be
compressed.
The learner should be encouraged to do homework or otherwise practice.
Different methods of learning should be combined.
Performance standards should be set and good performance recognized.
The learner should feel a sense of achievement.
The teacher should adapt to the learner and to the situation.
A training programmust be systematically evaluated for effectiveness. Comparisons
can be made between the performance of those who have received training and those who
have not. They may also be made among employees receiving different types of training
NOTES
for the same job. When a retailer measures the success of a training program, evaluations
should always be made in relation to stated training goals. In addition, training effects
should be measured over several time intervals (such as immediately, 30 days later, and 6
months later), and proper records maintained.
Compensating Retail Personnel
Total compensation should be fair to both the retailer and its employees to be effective.
Compensation includes direct monetary payments (such as salaries, commissions, and
bonuses) and indirect payments (such as paid vacations, health and life insurance benefits,
and retirement plans). To better motivate employees, some firms also have profit-sharing
plans. Smaller retailers often pay salaries, commissions, and/or bonuses, and have less
emphasis on fringe benefits. Bigger firms generally pay salaries, commissions, and/or bonuses
and have more emphasis on fringe benefits.
In a straight-salary plan, a worker is paid a fixed amount per hour, week,
month, or year Earnings are not directly tied to productivity. Advantages of this plan are
retailer control, employee security, and known expenses. Disadvantages are retailer
inflexibility, limited worker incentive to lift productivity, and fixed costs. Lower-level retail
workers (such as clerks and cashiers) are usually paid salaries.
With a straight-commission plan, earnings are directly tied to productivity (such
as sales volume). A fixed amount is not paid. Advantages of this plan are retailer flexibility,
the link to worker productivity, no fixed costs, and employee incentive. Disadvantages arc
the retailers potential lack of control over the tasks employees perform, the risk of low
earnings to employees, the variability of retail costs, and the lack of limits placed on worker
earnings. Sales personnel for autos, real-estate, insurance, furniture, jewelry, and other
expensive items are often paid on straight commissionas are direct-selling personnel.
To combine the attributes of both salary and commission plans, some retailers pay
their employees a salary plus commission. Shoe salespeople, major appliance
salespeople, and some management personnel are among the employees paid in this manner.
Sometimes, bonuses are awarded as supplements to salary and/or commission. These are
normally given for outstanding performance. At Finish Line stores, national, regional, district,
and store managers receive fixed salaries and earn bonuses based on the sales, payroll,
and theft rate goals of their stores. In certain cases, top retail management is paid via a
compensation cafeteria, whereby those executives can choose their own combination of
salary, bonus, defer bonus, fringe benefits, life insurance, stock options, and retirement
benefits.
One of the thorniest issues facing retailers today involves the benefits portion employee
compensation, especially as related to pensions and health care. It is very challenging in
this era with intense price competition, the growing use of part-time workers, and escalating
DBA 1738
NOTES
medical costs for retailers to balance their employees life-style needs with company financial
needs
Global firms understand the importance of training their sales force because training
provides numerous benefits for the sales force, the customer, and managers that include:
Higher sales force performance.
Improved customer relationships.
More efficient time management.
Less need for management supervision.
Greater product and market knowledge.
A more comprehensive understanding of company policies.
Sales force efficiency is a critical issue for firms worldwide because of the increasing
cost of conducting personal sales calls. Given the huge cost of maintaining a sales force, it
is imperative that sales activities be efficient. An equally important reason for providing
relevant sales training relates to relationship marketing. If customers arc not satisfied with
the service provided by their salesperson, they will switch to higher performing competitors
that better serve their needs.
In todays complex global marketplace, the salesperson must understand how to
operate and succeed when dealing with clients from different cultures, may need to be
fluent in a second language, and must be capable of performing as a company representative
thousands of miles from headquarters in diverse situations with customers. Stated quite
simply: sales techniques adopted and practiced in one country or culture - such as Great
Britain - are not relevant when operating in Japan, the United States, or Southeast Asia.
Here we detail how to provide the sales force with the necessary skills, knowledge, and
attitudes to succeed in an ever-expanding global marketplace.
Cultural Impact on Sales Training
Culture directly influences the personal selling process and, as such, impacts all sales
training activities. This means that national culture shapes the content and presentation
styles of sales representatives and the way business is conducted. An excellent example of
cultural influences on sales situations can be seen in Malaysia, a country comprised of
three cultural subgroups: Malay, Chinese, and Indian. Due to tensions that exist between
Chinese, who dominate commerce, and Malays, who are the political rulers, the government
has mandated a 30 percent hiring quota for Malays. Malay businessmen also prefer more
structured business situations where the status of each individual determines that persons
role. Global firms must insure training content and sales methods match local taste and
culture. Decisions about whether to standardize or localize training blocks are made based
upon the skills global companies want to transfer to trainees. Soft skills, such as
NOTES
supervisory or common motion skills, should be adapted to match local practices; however,
more technical skills can be standardized.
The Need for Sales Training
When an individual accepts a position or is transferred fromanother functional area
within the firm to perform sales duties, they will need to be socialized about the work
ethics, job expectations, and proper ways of conducting business. This means that the
composition of trainees in any global sales training class will be diverse and may include:
newly hired personnel without sales experience, new hires with sales experience, and in-
house managers who may be familiar with the product line, but who are unfamiliar with
sales activities. This learning situation is further complicated when trainees are also members
of different races, creeds, or cultures. The growing diversity of the workplace, both
domestically and globally, increases the importance of successful sales training. Sales training
provides the firmwith an opportunity to teach trainees job accuracy or the specific tasks
they should performon the job and set job expectations or the level of work expected by
the company. In this way the salesperson is being .socialized to the expectations of the
firm. Setting the correct expectations and providing the necessary skills to the sales force
should result in a positive return on the firms hiring and training investment. More importantly
there is a higher probability that customers will be better satisfied in their interactions with
the firmand this will result in long-term, profitable relationships.
The Sales Training Process
Sales training is a process, rather than a one time event. The sales training process
consists of six distinct stages: needs assessment, objective setting, planning the training
program, conducting the training program, evaluating the training program, and followup
training. As seen in figure 8.1, these stages are interconnected and require successful
completion of one stage in order to lead to success in subsequent stage. There are six
stages.
Needs Assessment
The purpose of the needs assessment stage is to determine the strengths and
weaknesses of the sales force regarding their current skills, knowledge, and attitudes. A
training need exists when there is a gap between the trainees actual and desired levels of
sales skills, knowledge of sales, product, market, and company information, and attitudes.
The purpose of needs assessment is to identify areas that training can enhance. There are
a number of specific methods for assessing sales training needs that fall into subjective,
objective, and general categories.
DBA 1738
NOTES
Subjective assessment methods
Upper management judgment. Upper management is aware of the role the sales
force will play-in achieving company goals, for example, a new product will be brought to
market late this year and the firms strategy will be to use the sales force to push the
product through the distribution value chain. In this case, the sales force will require at least
three training modules: new product training, advantages over competitor products, and
customer applications of the new product. Such knowledge, gained through training, will
greatly aid the sales force in introducing the new product to current and potential customers.
Sales management judgment. The sales manager, who makes calls with the sales
force, may observe that the majority of local salespersons are weak in presentation skills.
This observation needs to be taken into account for local training, but it may be difficult to
generalize to the entire sales force based upon the judgment of one or a few sales managers.
Since sales managers are often consumed by day-to-day business activities, they may be
less familiar with the level of training needed to support corporate goals.
Training department judgment. Because sales training is their primary focus, training
departments play a significant role in assessing sales training needs. This is because the
training department is aware of the topical and skill areas that have caused problems for
trainees during previous training sessions. Based upon in-class observations, trainers allocate
additional emphasis to perceived areas of weakness in future training programs.
Objective assessment methods
Interviews. Personal interviews or focus group interviews cm be conducted with
current salespeople, former salespeople, and customers. These interviews provide feedback
and lead to a more comprehensive understanding of perceived sales training needs.
Surveys. Surveys cm be utilized to assess training needs, First, the- sales force can
be asked to identify areas that require additional training. Second, sales managers can be
surveyed to gather inputs about needed sales training. Third, clients can be mailed surveys
in which they are asked to compare the firms sales force in relationship to the best in the
marketplace. Because of differing views and perspectives, it is important to gather input
about sales training programneeds fromsales managers, trainees, and trainers.
Performance measures. Analysis of such internal data as sales volume, customer
service feedback, number of sales calls to close, expense reports, customer complaints,
and turnover, when contrasted with the desired performance, can identify areas that require
additional training.
End-of-course evaluations, This method of assessment tells management how effective
the current programis and identifies gap(s) between desired and actual skill and knowledge-
levels, which pinpoints where future training programs should place additional emphasis
NOTES
General assessment methods
Organizational and sales training objectives. Sales training objectives should
evolve from the overall organizational objectives. That is, the corporation may adopt a
goal of increasing market share by penetrating the current marketplace. This means that
planned sales training must provide the sales force with the necessary skills to increase
sales to new customers in existing markets.
Competitors sales training programs. To insure competitiveness, many firms
benchmark their training programagainst competitors. This practice reduces the likelihood
of firms over looking important topical areas and provides a basis of comparison for existing
sales training programs.
Training Objectives
After assessing training needs, management sets objectives that communicate the
sales training programgoal(s). Normally, the objectives address the gaps identified during
the needs assessment phase. These objectives should be SMART: Specific, Measurable,
Attainable, Realistic, and Timely. When objectives meet these standards, training goals
state realistically what training will accomplish, how the objectives will be assessed, and
how long it will take for the training to become effective. A training objective that states,
Total sales revenue will increase by 10 percent for the Model XBS stereo component set
over the next six months, meets the standards listed above for writing effective training
objectives. A large number of firms do not set training objectives. Even when training
objectives are set they tend to be general, rather than specific, in nature. Objectives
communicate to planners the outcome of the training program. Without written and shared
training objectives there is no actual goal for the sales training programto work toward.
Clearly communicated and agreed upon objectives increase the probability of successful
sales training, since there is agreement between top management, trainers, and sales
managers
Planning Sales Training
Once the nerds and objectives of the sales training program are agreed upon,
management next determines the content of the training program and the instructional
methods to employ to transfer these topical areas to the sales trainees.
Methods
Methods refer to the theme, scope, coverage, length, instructor, location, media,
and materials employed in the training program. Training program content focuses on
the type of instruction, topics covered, budgets, and details about how and what specific
skills and abilities are imparted to the trainees.
DBA 1738
NOTES
Global companies utilize both on-the-job (OJT) and formal training programs. Sales
managers appear to be divided into different camps about OJT. For smaller firms, with
limited training budgets and few salespersons to train, OJT is imperative. A well planned
OJT program can transfer the needed knowledge in the form of an apprentice approach
where new hires work in one or more firmareas and receive instruction and oversight from
experienced company technicians and managers. On-the-job training works well when
the technicians and managers are carefully selected, arc motivated to help the newcomer
succeed, and can respond to the questions and misunderstandings that may arise when a
novice salesperson deals with clients. Firms may also utilize OJT as a way to provide the
sales neophyte an opportunity to practice sales techniques learned in a formal training
program.
Culture significantly impacts sales training. For example, Japanese salespeople receive
on-the-job training in a ritualistic formal setting that insures that constructive criticismdoes
not result in loss of face for the trainee.
9
Likewise, sales managers must move cautiously
when transferring sales training methods. Because languages vary so dramatically, sales
trainers must exercise caution in translating training manuals, and must be aware of the role
language plays on thought and behavior patterns.
10
Formal training means that a firms sales trainees attend a structured program, often
at a central location. For example, newly hired personnel in Europe may travel to London
to attend normal sales training provided by either headquarters staff or a combination of
local and home office personnel. Formal training is an expensive undertaking, since each
trainee is transported, housed, fed, and educated for a period of time. A secondary cost is
the lost opportunity attributable to the trainees not being in their territories serving their
customers. Actual planning problems encountered in an emerging nation.
Training program length
Many sales training programs are one to two weeks in duration, but may last as long
as a year. The formal classroom portion of the training program usually consumes six to
eight hours per day and generates thirty to forty hours of raining blocks or modules each
week. When planning training dates, local managers must be consulted to insure religious
or ethnic holidays do not fall within the tentative schedule. Likewise, in Moslemcountries,
planners should schedule prayer breaks for the trainees.
Differences in training program length can be attributed to a number of variables: (I)
industry type, (2) company size, (}) the adoption rate of high tech training, (4) training
budgets, and (5) corporate culture. The final length of sales training programs is a
compromise between the expected time required to transfer the skills, knowledge, and
attitudes balanced against the time and expense that can be invested to develop these sales
force assets.
NOTES
Sales personnel in the global marketplace should be taught: how to sell (even when
they possess extensive domestic selling experience), company policies and procedures,
product line and performance information, and local market conditions. Trainees should
also learn about their clients culture.
Participative and non-participative training methods
Participative training methods involve role playing, case methods, computer games,
and OJF. Non-participative training methods include lecture, videos, and guest speakers.
Each method contributes to successful sales training programs and should be considered
in the planning stage.
High-tech training methods. The adoption of technology in sales training courses
can be grouped into numerous categories: computer-based training, artificial
intelligence, hypertext, CDROM, training videos, videostreaming, and interactive
multimedia. Cost is an important factor in selecting and integrating high-technology
methods into sales training programs. Likewise, resistance to change and company
commitment are barriers to the adoption of high-tech training methods. Sales reps
also complain about the intrusiveness of high-technology training methods that
must be completed at night or weekends. However high-tech training methods,
that can be conducted and communicated by experts via satellite; or the worldwide
web (www), will revolutionize sales training in the twenty-first century.
Training methods. A wide variety of methods are employed in sales training
programs:
Lecture mode is employed by most sales training programs. Although cost-
effective and used for information transfer, it is not an effective method for skills
training. Experienced sales personnel like lectures, because they are able to engage
in a two-way dialogue. Lecture methods are accepted in many cultures because a
sage is providing guidance: to the students.
Programmed instruction employs a narrative- of facts and examples which are
followed Inquest ions that reinforce learning, and have been shown to be effective
for know ledge acquisition and retention. This form of training may be assigned
prior to formal training sessions or can be completed in the evening hours.
Case studies help improve trainee problem-solving skills. Trainees are presented
with actual held problems and limited information that must be analyzed. This
method permits trainees to present their solution and then be questioned about
their method of analysis and problem-solving skills. Additional learning occurs by
listening to the-logic employed by colleagues and instructors.
Coaching is a superior training method where the sales manager observes the
trainee in an actual or training situation and then offers guidance for improving
performance. For example, after a trainee calls upon a customer in the presence of
the- sales manager, the manager finds a quiet spot and asks the trainee specifically
how one area could be improved. The manager should model the correct behavior
and provide positive reinforcement for effective behavior.
DBA 1738
NOTES
Role playing requires trainees to play the part of either a salesperson or a customer.
In this way one trainee can assume the role of the salesperson and attempt to
gather information or proceed through the sales process. Many companies include
videotaping of roleplaying exercises so that study and critiquing of trainee behavior
can take place.
Business games require the trainee to engage in activity that increases
understanding of the product, company, or market. These games further ones
ability to understand why products work as they do, why the company requires
CERTAIN actions, and how competitors react in the- marketplace. Firms may use
in basket exercises to simulate a day in the office. This includes making
appointments, completing requests for quotations (RFQ), answering phone calls,
and making a formal sales presentation.
Discussions with experienced salespersons permit the interchange of ideas
and exchange of valuable information and experience-. The participating
salespersons must be carefully selected and portrayed as a role model.
Training program location
This decision is influenced by the physical location and availability of training facilities.
While it may be convenient for managers and trainers to conduct sales training sessions at
head quarters, planners must select a training facility that is comfortable, adequate in regard
to space and equipment, and private, so that trainees and managers are not distracted by
normal work activities. For these reasons, training programs are often concluded off site-
or at special company training facilities that allow both instructors and trainees to focus on
transferring skills, knowledge, and attitudes with the minimum of interruptions.
Evaluating Training
It is essential to evaluate sales training programs. The evaluation of sales training
programs is the most important area for future research. Conversely, another group of
sales managers reported that they would not evaluate their training programs even if sufficient
time and resources were available. The answer lies inthe difficulties encountered in evaluating
the effectiveness of training and because of the mixed results previously experienced by
managers who attempted to evaluate their training programs. Numerous factors can impact
sales training evaluations and are beyond the sales managerS control.
Even so, there remain ways to evaluate sales training programs that provide evidence
of success for management and feedback for improving future training programs. A number
of these methods are discussed below under the four evaluation levels of reaction, know
ledge, attitudes, and results.
NOTES
Reaction
Reaction refers to trainee response to the training program. Trainees provide feedback
about such pertinent areas as: the training location, meals, trainers, training methods, training
content, and progress checks. Critics of this type of evaluation claimit is too soft to be
reliable. However, the more important questions are: (1) what is the goal of obtaining
feedback and (2) can the feedback be utilized to improve the training process? Trainee
feedback can provide important information for managers to improve the process of future
sales training programs. In the global marketplace, there may be problems in gaining accurate
reaction fromtrainees. In some cultures, and especially those in Asia, individuals are less
likely to openly express dissatisfaction, particularly to their employers. Likewise, trainees
may perceive and select scale numbers differently than citizens fromthe home country. For
example, how would Vietnamese sales trainees respond to a Western European firm that
asked them to rate its program using a scale of (poor) to 10 (outstanding)? Since being
rated a 10 in Vietnamis not a positive attribute, trainees might select 8 or 9 to communicate
the training programmet their needs. Finally, words and phrases have different meanings
for sales trainees fromdifferent cultures. While these factors complicate reaction measures,
managers of sales training programs must still insist that reaction feedback be gathered.
For without feedback fromthe participants, how will trainers and managers become aware
of potential problems - from the trainees perspective that exist in the training process.
Knowledge
A trainees knowledge level can be assessed by completing written or experiential
examinations. That is, either at the end or during the training program, the trainee completes
a written test or performance exercise that demonstrates they have acquired the know
ledge or skill level sought by the training program. One way of improving the results of
knowledge-based tests is to provide the trainees with learning objectives. In this way, the
trainee is aware prior to each training session that: At the conclusion of this training block,
you will be- able- to correctly perform the six steps of a successful sales call. Learning
objectives inform the sales trainee what is important and what they need to know to
successfully complete the training program. Many training programs utilize progress checks
at key junctures and then employ a comprehensive exercise at the end of the session that
requires the trainees to integrate and apply their newly acquired knowledge. Trainers must
also have the option to assist trainees who experience trouble during a training session,
rather than wailing until the end to evaluate their performances. Early intervention is necessary
in order to minimize the number of trainees who are unable to succeed in the training
program. In many cultures this intervention requires confidentiality and private training
away fromnormal group training sessions.
A number of global firms schedule the training location at centralized sites that are
convenient for both trainees and managers. For example, one Asian company conducts all
DBA 1738
NOTES
its training at a hotel conference center in Manila, in the Philippines. The location is
centralized, travel costs arc economical for its Asian sales forces, the facilities are
comfortable, and the total cost is significantly less when compared to conducting the training
sessions in more expensive Asian locations. Similarly, IBM has a European training center,
and Bank of America manages its sales training fromoffices in three global cities - Tokyo,
Caracas, and London.
Instructor selection
A critical question is: should the instructor (s) be internal or external to the firm?
Larger companies have full-time sales trainers, assigned to a training department, that plan
and conduct training seminars. These individuals possess successful sales experience, are
formally educated in theories of adult learning, and are qualified to instruct sales trainees.
Consultants, who are viewed as outsiders, are perceived as being objective or less likely
to support the firms position. One concern about engaging training consultants is that they
may be less familiar with the firms products and their training programmay be generic in
content. Customization of a sales training program increases the consultants preparation
time and the firms total training cost.
Content
Training Topics
Based upon the objectives set, planners next select the training topics that are to be
taught in order to attain those objectives. That is, the trainees must be exposed to specific
amounts of product, market, and company information, sales techniques, and socialization
of company attitudes. In the United States, companies devote the majority of their time
transferring product information and sales techniques. However, the composition of training
programs varies by culture. Whatever the mix of topics presented, trainees must understand
the products and how to sell these products to their target customers. In effect, sales
training planners must strike the correct balance between the topical areas. Time devoted
to training topics will vary based upon industry market situation! and product line offered
by the firm.
Sales Training Program Content
Program content revolves around four topical areas: product knowledge, market
knowledge, company Information, and sales techniques. On average, firms report that
they provide about 35 percent of training programtime to product knowledge, 30 percent
to sales techniques, 15 percent to market information, and 10 percent to company
information and 10 percent to other miscellaneous topics.
Different firms emphasize disparate training content to meet the unique industry
environment. That is, industrial firms report a higher percentage of product knowledge
NOTES
content, while consumer companies provide greater sales techniques. Also the content of
higher performing firms differs fromlower performing firms. Specifically, the training program
content of top performing firms offers a broader range of topics that include: market
knowledge, industry knowledge, listening techniques, communication skills, and complaint
handling skills.
Successful companies also train their sales force to pursue a market orientation, which
leads to longer-termbuyer-seller relationships. The importance of customer-oriented selling
was supported in a cross-cultural comparison of training programs in Saudi Arabia and the
United States which concluded that, when contrasted with their Saudi counterparts, US
salespersons spent significantly more time on customer-oriented sales techniques than on
product-oriented selling activities.
Conducting Sales Training
When sales training programis conducted, the planning stage is put into action. Although
the best plans can go away, it is important that sales managers work to implement the plan,
but remain flexible should the plan obviously need on-the-spot modification. For example,
a US firmsent a teamto India to provide sales training that incorporated the latest computer
technology and graphics. Shortly after the teamleader welcomed everyone and started the
high-tech training session, the electricity went out! Rather than adapting to the fact that
power interruptions are common in many emerging nations, and remaining patient, the
teamleader began grumbling so loudly the trainees could hear his complaints about their
third world country being at fault for ruining the training program.
The sales training process consists of six stages: needs assessment, objective setting,
planning, conducting, evaluating results, and providing followup sessions that maintain
and enhance sales skill proficiency. Each stage of sales training is interconnected and
dependent upon the other five stages. Because of this, managers must insure all sales
training stages are conducted effectively so that trainees are provided with timely and
pertinent skills, knowledge, and attitudes.
The role of culture, whether encountered within or between countries, is making an
increasingly larger impact upon sales training programs. For example, culture complicates
all stages of the training process. Sales trainees in a worldwide marketplace must be trained
differently, to match the expectations of their customers. Although the salesperson may be
thoroughly grounded in product knowledge, they must also be able to behave and
communicate in a manner that is acceptable to the client. Also, trainees from dissimilar
cultures perceive the training process differently. This is true of scales and questions utilized
in needs assessment and evaluation, as well as the instructor method of presenting training
topics. The large influence of culture must always be considered when planning, conducting,
and evaluating sales training programs.
DBA 1738
NOTES
Sales training evaluation is extremely important, because this step provides management
with evidence of the training success. Because firms in the global marketplace invest large
sums, it is imperative to validate the success of the training effort. As the world enters the
twenty-first century, with attendant technology advances, managers must focus on
continually improving the sales training process. However, it will be difficult for continual
improvement to occur in sales training programs without an objective evaluation process
being in place.
Attitudes
Other indications of successful sales training outcomes are changes in attitudes. These
include attitudes about the customer, the company, and the job itself. One way of determining
attitudes is to take a before and then an after training measurement. However, this
exercise may only result in the sales trainees providing socially acceptable answers about
their beliefs. Therefore, many firms try to assess the trainees attitudes through surveys
completed by such third parties as managers and customers. This attitude measurement
provides managers with a benchmark for how trainees are applying the approaches and
techniques they have been taught in the training program.
There are some obvious concerns about assessing a salespersons attitudes through a
third party. These concerns include: accuracy, objectivity, and friendship. First, it is difficult
for a customer or manager to be accurate in their assessment of a salespersons attitudes.
What is really being measured is an opinion about the salespersons attitude based upon
their overt behavior. Second, because of established attitudes toward the salesperson, it
may be problematic for a third party to be objective. Instead of objective measures,
preconceived attitudes will influence the evaluation of the salesperson. Finally, depending
upon the level of friendship, managers and customers may bias their evaluation of the
salesperson. This means that, in certain cultures, customers will rate the salesperson higher
than deserved or simply rate themin the middle of the scale. Neither approach is helpful
for managers who need. accurate evaluations to improve the training process. One method
of minimizing these potential cultural problems is to ask numerous managers and customers
to evaluate the salesperson.
Results
Measuring sales training results refers to utilizing objective measures such as sales
revenue, profits, number of new customers, and travel expenses to assess the success of
the training program. In effect, this evaluation stage attempts to create a cause-and-effect
relationship. Accurate evaluation of results is the most useful of the four evaluation levels
discussed here, but it is also the most difficult of the four stages to objectively accomplish.
Many other variables like the economy, the weather, competitor actions, inaccurate
advertising messages for the culture or subculture, or changes in sales force compensation
and motivation plans can influence objective measures like sales revenue and profitability.
NOTES
That is because none of these variables can be controlled by sales force management.
However, one study of Caterpillar in international markets reported that the results of sales
training could be evaluated by matching and comparing locations that received training
with other locations that had not received training.
Other Evaluation Methods
Another method available to sales managers for evaluating sales training is to compare
the outcome of training against the objectives set for the training program. For example, a
stated training objective might be to teach a new sales process for product that will result
in a sales increase of 10 percent over the next year. Sales managers need only look at the
overall sales figure for product at the completion of one year to see if the objective was
reached. However, using objectives to determine sales training effectiveness requires the
establishment of SMART objectives. Otherwise, it is not possible to compare actual
performance against loosely stated objectives that were set many months (or even years?)
earlier.
Human resource managers also utilize utility analysis to assess the value of sales
training. Utility analysis requires managers to estimate costs and gains and then compute an
outcome utility. The greater the positive number, the higher the probability the training
program made a positive contribution. Basically, if the monetary benefits of the training
programexceed the monetary costs, the training programwas worth implementing.
24
Sales
managers should be aware of the existence and basic use of utility analysis to evaluate
sales training programs, but a detailed discussion is beyond the scope of this text. Because
utility analysis requires sales managers to estimate certain inputs, there has been criticism
of the methodology.
2
Follow-Up Training
Sales training is a continual rather than a one-time event. This is because salespersons
require repetitive training in order to maintain current skills, knowledge, and attitudes.
Because of this necessity, firms offer myriad types of follow-up training. Most firms have
initial sales training programs that are required of all newly hired personnel. Then additional
formal sales training is provided after a time in the field. Additional training may also be
required before salespersons move to specific assignments. However, global firms realize
the importance of reinforcing important concepts and maintaining salesperson proficiency
between formal training sessions. These follow-up training programs are provided as needed
at centralized locations, by sales managers in the field, by correspondence courses, by
traveling training teams, or through hightech methods. Firms continue to experiment with
technology so that the field salesperson remains current in the skills, knowledge, and attitudes
that lead to first-class service for customers. By establishing a well trained and competent
sale force, firms realize there is a higher probability of establishing and main-taining long-
term, profitable relationships with the customers in the global marketplace.
DBA 1738
NOTES
Continual training is especially important in the global marketplace, where salespeople
may cling to practices that are reinforced by local culture. For example, in the former
controlled markets of Russia and China, .merit performance was not rewarded under the
economic system. In these situations, it is necessary to modify such deeply held attitudes
during training sessions. Likewise, expatriates may be captive of their own ethnocentric
habits and patterns learned in their home culture, which calls for continual follow-up training.
Sales managers plan, implement, and control sales activities. In order to control
activities that lead to the attainment of planned goals, evaluation must occur. For
example, if a sales force goal is to increase the number of new customers by 10
percent in six months the sales manager must monitor progress toward that goal. Without
evaluation, it is difficult to know what has worked, what has not, and why. When
evaluating, the sales manager must pause, reflect on what has happened, and learn
from this experience. Since market and competitor conditions change rapidly, managers
must monitor past decisions to identify ways to improve future performance.
The purpose of evaluation is to improve salesperson and ultimately firm
performance. Without accurate sales force information, control decisions tend to be
weak and haphazard.

therefore, through evaluation and assessment efforts, sales
managers can gain important information and more effectively control the sales force
by:
Identifying recruiting criteria.
Determining training and counseling needs.
Providing information for human resource planning. Motivating salespersons.
Setting work expectations.
Tying compensation/rewards to actual salesperson performance. Identifying
individuals for promotion or termination.
Helping salespersons set career goals.
Identifying firmand individual deviations fromtargeted goals. Determining
the cause of identified deviations.
Comprehensive evaluations investigate whether identified deviations are
attributable to incorrectly set goals or weak performance in reaching those goals.
That is, did the sales force fail or were inappropriate goals set? evaluations differ, and
vary in form and content, depending upon their purpose. For example, if the goal of
the evaluation is to reward the salesperson, then the focus should be on such salesperson
activities and results as sales revenue, new business, or profitability. Conversely, if the
purpose of assessment is to identify promotion potential, then evaluation criteria should
examine factors related to success as a sales manager.
NOTES
Firms may already assess such marketing activities as sales training and advertising.
Even so, it is important to evaluate the sales force in order to spotlight situations that
are less transparent in specific evaluation efforts. First, a short discussion of evaluation
in the global marketplace is provided. Second, directions for evaluating sales force
activities and outcomes, with the goal of identifying deviations fromstandard or expected
performance, arc presented. Finally performance appraisal, that involves four areas
of individual salesperson assessment,, is discussed.
Rating of Interviewer
Having studied all the factors related to selection process, these should now be rated
on the placement summary. The various facts should be compared with the requirements
of the main profile and a score noted in the appropriate box. He should be rated 1 for a
perfect match, 2 for an average match, 3 for below average and 4 for totally unsatisfactory.
Comments should be made in the appropriate column to explain apparent discrepancies.
Overall comments can be made in the space provided.
The scores should not be totaled or averaged in arriving at the final recommendation,
as the weighing of the various factors will vary. What the manager must do is to consider
each candidate as a mixture of factors and by identifying strong and weak points, come to
a recommendation and score the man on the four-category scale. Category 1 men will
normally be offered jobs immediately. Category 2 are not qualified in all respects and
failing the appearance of anyone better, are worth employing. Only in dire circumstances,
when it is imperative that someone be employed, should category 3 men be taken on.
Category 4 staff should never be employed however desperate the manager might feel, for
they can only create worse problems rather than solving them.
On further considerations that the manager must take into account in arriving at his
decision are the compatibility of the man with his future colleagues and superiors and the
future management needs of the company.
How well a man fits into a teamcan often determine his success. It is usually fatal to
put a dynamic, aggressive, ambitious twenty six year old into a sales force consisting of
security minded senior citizens hanging on for their pensions. It is likewise dangerous to
have a man who is over-compatible with his superior. This often comes about by mirror-
image selection, a common fault of many inexperienced managers. Because a candidate
happens to have a similar background to the manager, that is, comes fromthe same part of
the country, went to the same school, shares an interest in water-polo and the like, it may
be tempting to assume that he possesses similar business abilities but if a manager is prone
to such temptations, it is better for himto ask a colleague to take over the interviewing.
DBA 1738
NOTES
Employment Offer
An employment offer is extended to the candidate who successfully passes through
all the preceding steps.
Placement of Sales Personnel
Once, an offer of employment has been extended and accepted the final stage in
procurement function is concluded, and the process of placement of the individual on the
new job and orienting himto the organization.
Placement may be defined as the determination of the job to which an accepted
candidate is to be assigned and his assignment to the job. It is a matching of what the
supervisor has reason to think he can do with the job demands (job requirements), it is a
matching of what he imposes (in strained working conditions) and what he offers in the
formof payroll, companionship with others, promotional possibilities, etc.
Probation
After selection, the employee is generally put on a probation period, ranging fromone
to two years, after which his employment may be regularized, provided that during this
period, his work has been found to be satisfactory. Only in very rare cases is the employee,
once placed, asked to quit and even then, it is only when there is something very serious
against himor he is found guilty of contained negligence in the performance of his duties.
The new employee is placed as a probationer until the trial period is over.
Future
Every company must look at its future management requirements as well as its need
for career salesman. Usually, these two demands will have to be met by different types of
staff. Therefore, two different man profiles may be necessary when looking to fill similar
sales positions. Those men with management potential should certainly score higher in
leadership, self-reliance and ability to accept responsibility categories than the career sales
staff. Unless different standards are adopted, too many men of high potential may be
employed who will quickly become frustrated and leave. If men who can be only career
salesman are taken on, there will no potential management pool for the future. The
relationship between the two categories will depend upon the spans of control, the number
of management levels and the life span of management in each job.
Training of the sales person will never become obsolete. As long as technology changes,
new people enter the work force, businesses rive to improve, organizations will need
training. The termtraining may change (e.g., it is currently referred to as learning, coaching,
facilitating, etc.) but the concept remains the samepeople continually need help in mastering
new skills, applying new knowledge and/or adjusting their attitudes.
NOTES
What many people fail to realize is that training is itself a skill that needs to be learned.
Expert trainers are aware of the labour involved in learning how to train. Novice trainers
also realize that training isnt an easy endeavour. And non-trainers often dont know where
to begin.
Building a sales training programme requires five major decisionsaim, content,
method, execution and evaluation. These are referred to as the A-C-M-E-E decisions.
The specific training aims must be defined, content decided, training methods selected,
arrangements made for execution and procedures set up to evaluate the results.
Training of salesmen is essential to make themskilled. Just as a gifted athlete needs
coaching and practice to performat his best, similarly a sales person also requires proper
training and development. After selection, personnel should be given formal training which
includes planned programmes complete with schedules, lesson plans, visual aids, other
teaching devices and systematic reviews and evaluation.
Informal training involves the continuous development of sales people. It is a prime
responsibility of the supervisor and includes working with sales people, finding their activities
and advising themon improvements that should be made. It is also known as field coaching.
Training varies with the sales persons career cycle Sales persons have varied
backgrounds, experience levels, learning abilities, etc. and therefore have their own training
needs. Another factor deciding the type of training is the stage of the career of the sales
person.
Sales persons career cycle is a conceptual framework which describes the stages
through which a sales person passes in his career cycle. There are four basic stages of
this cycle.
1. Preparation
2. Development
3. Maturity
4. Decline
This figure shows the four stages
DBA 1738
NOTES
Sales Persons Career Cycle
Preparation
For the sales person the emphasis should be on orientation and training. He should
know about the environment in which he has to function and given information about the
company and the products he has to sell. Selling instructions and basic selling techniques
are all important at this stage. Sometimes experienced sales persons new to the company
must also be acquainted with the policies and practices of the company.
Development
This is the second stage when the salesman becomes productive. He should be
supervised and provided field coaching. He should be able to identify the problems and be
kept away from acquiring bad habits.
Maturity
In maturity stage, the productivity of the sales person levels off. He works smarter
than harder. Sometimes refresher training is required to be given himto retrain and acquaint
him with new concepts and techniques. They can also be given new challenges and
transferred to new areas, new territories or can be promoted to more responsible positions.
Sometimes due to inadequate training career planning takes place. Lack of relevant training
hampers growth and development.
Decline
In this stage the sales person is a problemfor the management. A lot of motivational
retraining is required. The productivity of the salesman decreases considerably and is difficult
to avert.
Training imparted at proper time develops right working habits and offsets the effect
of detraining.
NOTES
Aim of Training
Defining the specific and general aims of a training programme is the first step in
training. General aims are translated into specific aims phrased in operational terms. These
can be defined in two ways:
1. Identify initial training needs.
2. Continuing sales training programmes.
Identifying Initial Training Needs
The initial training needs of sales training programme can be identified by the analysis
of three main factors.
Job Specification
The qualifications needed to performthe job are detailed in job specification. The set
of job specifications needs scrutinizing for clues to the points on which new personnel arc
most likely to need training.
Trainees Background and Experience
The gap between the qualifications in the job specifications and those a trainee already
has represents the nature and amount of training needed. But it is not always practical to
adjust training precisely to individual differences and time and money are saved by putting
all recruits through identical programmes.
In all organizations determination of the recruits real training needs is essential to
developing initial training programmes of optimumbenefit to company and trainee alike.
Sales-related Marketing Policies
The analysis of sales related marketing policies is also necessary to determine initial
sales training needs because the differences in products, markets and their selling practices
and policies determines the differences in training programmes.
For example, selling of highly technical goods involves training with lot of product
information while selling of non-technical goods involves only initial sales training
programmes.
Identifying Continuing Sales Training Programmes
The identification of continuing sales training needs means to identify training needs of
experienced sales personnel which are felt due to changes in market, product, marketing
policies, procedures, organization and even in the sales personnel itself.
DBA 1738
NOTES
Content of Training
The content of training is not the same for all the sales training programmes. It varies
fromcompany to company because of differences in products, markets, company policies,
trainees ability and experience and organizational size. Every initial sales training programme
comprises mainly four areas: product data, sales technique, markets and company
information.
Product Data
Product training depends on the nature of the product if the product is highly
technical then they will devote more than half of their programme to product training, if the
product is non-technical, then minimal amount of product training is required. But in all the
cases the sales person should know about the products, their uses and applications to
serve customers information needs.
Sales Technique
There are two views in this context. Some sales managers believe that if an individual
has an attractive personality, good appearance, voice and reasonable intelligence and knows
the product, he will sell it easily. But the predominant view is that new sales personnel need
basic instruction in how to sell. This view is reflected in most of the companies.
Markets
The sales person needs to know who the customers are, their particular locations and
particular products in which they are interested. Not only this, the sales person should also
know about their buying habits, motives and their financial condition. But the training in this
cone
Company Information
The company should essentially, informthe sales person about the companys pricing
policy, product services, spare parts and repairs, credit extension and customer relations.
To boost the employee morale and job effectiveness, the company should also provide
information to the sales personnel about their selection procedure, training programmes,
compensation, incentive systems, advancement requirements and opportunities, savings
and retirement plans, medical and insurance plans.
Methods of Training
The selection of appropriate training method for a training programme depends on
the content of training. Few of the important and appropriate methods of sales training are:
lecture, conference, demonstration replaying, case-discussion, important discussion, gaming,
on-the-job training, programmed learning, correspondence courses.
NOTES
The Lecture
Lecture is the method of learning through instructions fromtrainer to trainee. Trainees
mainly watch and listen, although some versions of lecturing permit questions.
Advantages
It is more economical as compared to other methods.
It is the only method to cover the desired training content if initialsales training is
brief.
It is the only practical way to handle instructions when the training group is too
large but it can also provide training appropriately to smaller training groups through
summary of major topics.
Disadvantages
Teaching is emphasized more than learning.
Only one-way communication between trainer and trainee prevails The personal
conference is an unstructured and informal method. It varies with the personalities
of the trainer and the trainee and the topics discussed. The trainer and trainee
jointly analyze problems such as effective use of selling time, route planning and
call scheduling and also handling unusual selling problems.
Personal Conference
The personal conference is an unstructured and informal method. It varies with the
personalities of the trainer and the trainee and the topics discussed. The trainer and trainee
jointly analyze problems such as effective use of selling time, route planning and call
scheduling and also handling unusual selling problems.
Demonstration
The demonstration method of training is where sales managers plan and carry out a
real selling call on a customer or prospect with the salesmen they are training present as
silent observers. The method is most appropriately used for training new salesmen.
Role Playing
In this method first the trainer describes the situations and different personalities
involved. Then, the trainee is asked to play the role of those personalities in different
situations. In the end both the trainer and trainee appraise each players effectiveness and
suggest how performance of each has been improved.
DBA 1738
NOTES
Thus, role playing can be defined as a method of human interaction which involves
realistic behaviour in an imaginary situation. The merits of the role-playing method are:
Learning by doing is emphasized.
Human sensitivity and interactions are stressed.
The knowledge of results is immediate.
Trainee interest and involvement tend to be high.
Trainees learn to accept criticismfromothers and the group soon recognizes that
sound suggestions benefit everyone.
Role players practice introspection through participating in the appraisal of their
own performances.
Role playing provides chance to learn valuable tricks and gain acting experience.
Case Discussion (Learning by Doing)
The case is a set of data (real or fictional, written or oral). Miniature description and
summary of such data presents issues and problems calling for solutions or action on the
part of trainee.
When the trainees are given cases to analyze, they are asked to identify the problem
and to recommend tentative solutions through group discussions.
Gaming Simulation
This method is somewhat similar to role playing with a unique feature that it uses
highly structured and contrived situations based on reality and players receive information
feedback.
Advantages
a Participants learn easily because they involve themselves in game play.
b Players develop skills in identifying key factors influencing decisions.
c Games have built-in information feedback features.
Limitations
a. Some minimumamount of time is required for playing, usually, three to four hours,
which is not sufficient to provide desired learning experience.
b. Since the game designs are based on ordinary decision making process their rules
often prevent play on unusual or novel approaches.
c. Poorly designed games may actually hinder instead of helping.
NOTES
On-the-Job Training (Coach-and-pupil Method)
In this the salesmen are coached and instructed by skilled co-workers or by
supervisors or by the special training instructor. They learn the job by personal observation
and practice as well as occasionally handling it.
This method involves three steps. First, the coach who is an experienced sales person
begins by describing particular selling situations, explaining various techniques and
approaches. Next, accompanied by pupil, the coach makes actual sales call, discussing
each with the trainee afterward.
Then, under coach supervision trainee makes sales calls, each one being followed
by discussion and appraisal.
Programmed Learning (Teaching by Machine Method)
Programmed instruction involves a sequence of steps which are often set up through
the central panel of an electronic computer as a guide in the performance of a desired
operation or service of operation.
It involves breaking down information into meaningful units and then arranging these
in a proper way to form a logical and sequential learning programme or package for use
with the machine.
But programmed instructions have not been widely adopted for sales training due
to their high cost of operation and other constraints.
Correspondence Courses
Companies with highly technical products and small but widely deployed sales forces
use correspondence courses to acquaint experienced sales people with new product
development and applications.
It is most appropriate as an interim training method when trainees are scattered
geographically but are assembled periodically for lectures, seminars, role playing and other
instructions.
Execution of Sales Training
Execution is the fourth step of the A-C-M-E-E approach of sales training. It involves
the following four key decisions:
i. Who will be the trainees?
ii. Who will be the trainers?
iii. When will the training take place? Where will the training site be?
DBA 1738
NOTES
Who Will be the Trainees?
The general criteria to identify trainees are:
1. Reward for good performance.
2. Punishment for poor performance.
3. Convenience of trainee and trainer.
4. Seniority. The greater the seniority, the greater opportunity for added training.
Who will be the Trainers?
The trainers who impart training during different training phases are: Initial Sales
Training: If the initial sales training is a line function then training is assigned to top sales
executive but if it is a staff function then the responsibility of initial sales training is given to
personnel director. Continuing Sales Training: Responsibility for continuing sales training
resides with the top sales executive. The top sales executive is in the best position to
recognize the need and design and execute the sales training programme.
Sales Training Staff: In large organizations the sales training director reports to the
top sale executive. The director conducts some training by himself and the rest is given on
decentralized basis by district sales managers.
In small organizations top sale executives have assistant sales managers or district
managers to impart the training.
Outside Experts: Sometimes outside experts are also hired to conduct portions of
sales training programmes relating to sales techniques like selling by telephone, prospecting,
etc.
When Will the Training Take Place?
Generally the training programmes are held on adhoc basis. But a number of factors
should be kept in mind while organizing a training programme.
Initial Sales Training Programmes: Timing for initial sales training programmes depends
upon the number of new personnel trained each year and this in turn depends upon the size
of the sales force, sales personnel, turnover and management plans for changing sales
force size.
For instance, if a large number of sales persons are recruited, training programmes
are scheduled several times a year whereas if a small number of sales persons are
recruited, training programmes are infrequent.
Continuing Sales Training Programme: The principle of an effective sales training
programme is that learning must be continuousnew information must be assimilated and
NOTES
other concepts modified in the light of new developments. This requires that each sales
persons training should continue as long as he is on the job.
Retraining helps in:
New refinements of selling techniques.
New product applications.
New customer problem.
Training
New selling aids.
Overcoming the forgetting tendency of human brain.
Where Will the Training Site Be
Training programmes are held either at centralised or decentralised points. The
centralised programme generally provides better product training but higher costs are
incurred in bringing trainees to the central point. But decentralised training has even more
serious defects. It cannot be executed properly unless supervised, by top management
Hence, an adhoc basis for centralised and decentralised training should be adopted by top
management.
Evaluation of Training Programmes
This is the last but not the least step of the training programme. Evaluation involves
the comparing of the training programmes aimwith the results and measuring its impact on
the sales person.
There is no direct method of measuring the impact of training but certain methods
could provide indications whether the results are positive or not. These are:
1. Market share percentages
2. Written Tests
3. Observers which work with sales personnel.
It is true that the training programmers effectiveness is widely dependent on trainers.
Hence, management reminds that If the trainee hasnt learned, the trainer hasnt taught.
Motivating Sales Personnel
Motivation of the salesman is important because the salesman has a monotonous job
to performand he gets up very soon wants a change. Through motivation the salesman is
stimulated action, so that he gets interested in the job and performs his duties to the best of
his capability. The primary purpose of motivation is to aid salesmen to satisfy their goals
by stimulating themto improve the efficiency of their work. Motivation can be defined in
many ways, it is a psychological aspect and helps the salesman to a goal directed behaviour.
DBA 1738
NOTES
Through motivation the needs of the salesmen may be fulfilled. Motivation can be carried
out through financial and non-financial incentives. It is continuous process that carries on
as the expectation of the sales person keep changing fromtime to time.
The main objectives of motivation are:
1. To stimulate the salesmen to improve their efficiency.
2. To establish cordial relationship between the managers and salesmen.
3. To maintain high morale among the salesmen.
4. To seek cooperation of the salesmen in achieving the sales target.
Need for Motivation
Motivation is specially required in sales management as the nature of job is different
from the usual work the other members of the organization are engaged in:
1. The job has a lot of obstacles for the salesman, as most of the customers visited
dont entertain the salesmen by giving orders.
2. The salesman has no family life as he is always enveloped in the market and the
traders.
3. He has to face acute competition from competitive products. There is no fixed
hour of working for a salesman.
4. The activities of a salesman are repetitive and he after gets dissatisfied fromrepeating
his work which becomes highly monotonous.
5. He is under pressure both fromthe customer (wholesaler, retailers and consumers)
and his supervisor, as both want to get the best from the deal. The salesman is
sandwiched between the two parties.
6. Too much of traveling and keeping away from home leads to health problems
which affects the salesman in long run.
7. By working in fields the salesman does not have contacts with his fellowmen or the
members of the organization and is posted at very distant places most of the year.
Thus, he does not have any group relationship and feels alone most of the time.
8. He does not work to full capacity and does an average job to remain in the job.
This can be overcome through proper motivation.
9. Most salesmen have a variety of needs including physiological and social needs
and thus feel that they cant satisfy their needs by remaining in the sales job which
gives themlesser opportunities to socialize with their kith and kin.
10. Motivation helps to build the morale of the salesman; it is a driving force for the
salesman. Motivation can overcome the lethargy and inactiveness of the salesman
so that he can perform to the best of his ability,
NOTES
Steps in Motivation
Needs
The needs of the salesman must be satisfied and this can be done by joining into the
depth of the expectation of salesman, the position held by them, their mental attitude and
differences between various salesman.
Motivation of Salesmen
Salesmen can be motivated through financial or non-financial incentives or both; while
deciding the same financial condition of the organization has to be taken into consideration.
Salesmen can also be motivated by changing their territory or area of work. For no-
financial incentives the salesmen can be given other prerequisites, like sending them for
training along with their families, for a holiday trip in attractive locales.
Communication
It is necessary that the communication be already understood, it should be simple and
should give special instructions to the salesmen. The interest of the company as well as that
of the salesman must always be kept in mind so that both are mutually benefited.
Feedback
The result achieved fromthe motivation programme must be evaluated so that the
effectiveness of the motivational programme can be assessed. The other points to be kept
in mind are the development of the team spirit and development of satisfaction fromthe
work, which is necessary for the success of the programme.
Motivational Theories
Motivation has been researched by psychologists and others for many years. A number
of theories have been evolved which are pertinent to the motivation of salespeople. These
are the theories of Maslow (1943), Hcrzberg et al (1959), Vroom (1964) and l.ikert
(1961).
Maslows Hierarchy of Needs
Maslows classic hierarchy of needs model proposed that there are five fundamental
needs which are arranged in a hierarchy as shown below.
DBA 1738
NOTES
Maslow argued that needs form a hierarchy in the sense that, when no needs are
fulfilled, a person concentrates upon his or her physiological needs. When these needs are
fulfilled, safety needs become preponderant and become important determinants of
behaviour. When these are satisfied, belongingness becomes important and so on up
the hierarchy.
Although Maslows belief, that one set of needs only becomes important after lower
order needs have been completely satisfied, has been criticized, the theory does have
relevance to sales force motivation. First, it highlights the perhaps obvious point that a
satisfied need is not a motivator of behaviour. Thus, for sales person who already receives
a more than adequate level of remuneration, additional payments may have no effect on
motivation. Second, the theory implies that what may act as a motivator for one sales
person may not be effective with another. This follows from the likelihood that different
salespeople will have different combinations of needs.
Effective motivation results froman accurate assessment of the needs of the individual
salespeople under the managers supervision. The overriding need of one sales person
may be reassurance and the building.
Herzberg
Herzbergs dual factor theory distinguished factors which can cause positive
dissatisfaction but cannot motivate (hygiene factors) and factors which cannot cause positive
NOTES
motivation. Hygiene factors included physical working conditions, security, salary and
interpersonal relationships. Directing managerial attention to these factors, postulated
Herzberg, would bring motivation up to a theoretical zero but would not result in positive
motivation. If this were to be achieved, attention would have to be given to true motivators.
These included the nature of the work itself which allows the person to make some concrete
achievement, recognition of achievement, the responsibility exercised by the person, and
the interest value of the work itself.
The inclusion of salary as a hygiene factor rather than as a motivator was subject to
criticisms fromsales managers whose experience led themto believe that commission paid
to their salespeople was a powerful motivator in practice. Herzberg accommodated their
view to some extent arguing that increased salary through higher commission was a
motivator through the automatic recognition it gave to sales achievement.
The sales person is fortunate that achievement is directly observable in terms of higher
sales (except in missionary selling, where orders are not taken, e.g., pharmaceuticals, beer
and selling to specifiers). However, the degree of responsibility afforded to salespeople
varies a great deal. Opportunities for giving a greater degree of responsibility to (and
hence motivating) salespeople include giving authority to grant credit (up to a certain value)
discretion to the salespeople. The results of an experiment with a group of British sales
people by Paul, Robertson and Her/berg (1969) showed that greater responsibility given
to salespeople by such changes resulted in higher sales success.
Herzbergs theory has been well received, in general, by practitioners, although
academics have criticized it in terms of methodology and oversimplification (see Dossier,
1979). The theory lies undoubtedly made a substantial contribution to the understanding of
motivation at work particularly in extending Maslows theory to the work situation and
highlighting the importance of job content factors which had hither to been badly neglected.
Vrooms Expectancy Theory
Basically this theory assumes that a persons motivation to exert effort is dependent
upon his expectations for success. Vroombased his theory on three concepts expectancy,
instrumentality and valence.
Expectancy. This refers to a persons perceived relationship between effort and*
performance, i.e., to the extent to which a person believes that increased effort will lead to
higher performance.
Instrumentality This reflects the persons perception of the relationship between
performance and reward, for e.g., it reflects the extent to which a person believes that
higher performance will lead to promotion. Valence: 1 his represents the value placed upon
a particular reward by a person. For some individuals promotion may be highly valued, for
others it may have little value. Thus, according to the theory, it a sales person believes that
DBA 1738
NOTES
by working harder he or she will achieve increased sales (high expectancy), and that higher
sales will lead to greater commission (high instrumentality) and higher commission is very
important (high valence), a high level of motivation should result. The nature of the
relationships in the sales setting are depicted in the following figure.
Clearly, different salespeople will have different valences (values) for the same reward.
Some might value increased pay very highly, while for others higher pay may have less
value; for some the sense of accomplishment and recognition may be very important, for
others much less so. Also different salespeople may view the relationship between
performance and reward, and between effort and performance, in quite different ways. A
task of sales management is to specify and communicate to the sales force these performance
criteria, which are important in helping to achieve company objectives and to relate rewards
to these criteria. Further this Theory supports the notion that performance targets, e.g.,
sales quotas, to be effective motivators, should be regarded as attainable (high expectancy)
by each sales person, otherwise the first link in the expectancy model will be severed.
Finally, this model provides a diagnostic framework for analyzing motivational problems
with individual salespeople and provides an explanation of why certain managerial activities
can improve motivation. Training in sales skills, for e.g., can improve motivation by raising
expectancy levels.
Adams Inequity Theory
Feelings of inequity (unfairness) can arise when an individuals effort or performance
on the job exceeds the reward which he or she receives. Salespeople who feel they
contribute more than others to the organization expect to receive proportionately greater
rewards. This is the essence of Adams inequity theory.
For a sales person inequity can be felt in such areas as:
Monetary rewards
Workload
Promotion
Degree of recognition
Supervisory behaviour
Targets/
Tasks
Motivation is often equated with incentives but Adams work emphasizes that the
elimination of disincentives (e.g., injustices, unfair treatment) may be an equally powerful
influence.
NOTES
Likerts Sales Management Theory
Unlike Herzberg, Maslow and Vroom, who developed general theories of motivation,
Likert (1961) based his theories on research which looked specifically at salesmens
motivation. His research related differing characteristics and styles of supervision to
performance. One of the hypotheses he tested was that the sales managers own behaviour
provides a set of standards, which, in themselves, will affect the behaviour of their
salespeople. He found that there was a link.-High performing sales teams usually had sales
managers who themselves had high performance goals. His research also investigated the
methods used by sales managers in the running of sales meetings. Two alternative styles
were compared (as given in the following figure) Sales managers who used the group
method of leading sales meeting encouraged their team both to discuss sales problems
which had arisen in the field and to learn from one another and sales managers who
monopolized the meeting as an opportunity to lecture them rather than to stimulate
discussion. There was a strong tendency for higher producing sales teams to use the group
method.
Several reasons can be put forward to explain this. First, it is likely that a problem
faced by one sales person has been met previously by another who may have found a way
of overcoming it; for e.g., a troublesome objection to one sales person may have been
successfully dealt with by another. The group method of leading a sales meeting, then,
encourages problem-solving and stimulates communication. Second, the more open style
of meeting enables the sales manager to gain a greater understanding of the needs and
problems of the sales force. Finally, the group method promotes a feeling of group loyalty
since it fosters a spirit of cooperation.
The research conducted by Likert, then, suggests that, to produce a highly motivated
sales force, the sales manager himself/herself should have high performance goals and
encourage analysis and discussion of sales peoples performance and problems through the
group method of conducting sales meetings.
DBA 1738
NOTES
Churchill, Ford and Walker Model of Sales Force Motivation
Churchill, Ford and Walker (1985) developed a model of sales force motivation that
integrated some of the ideas of Herzberg and Vroomas given in the following figure. This
suggests that the higher the sales persons motivation, the greater the effort, leading to
higher performance. This enhanced performance will lead to greater rewards which will
bring about higher job satisfaction. The circle will be completed by the enhanced satisfaction
causing still higher motivation.
The implications for sales managers arc that they should
1. Convince salespeople that they will sell more by working harder or by being trained
to work smarter (e.g., more efficient call planning, developing selling skills).
2. Convince salespeople that the rewards for better performance are worth the extra
effort. This implies that the sales manager should give rewards that are valued and
attempt to sell the worth of those rewards to the sales force.
They also found that the value of rewards differed according to the type of sales
person. Older salespeople who had large families valued financial rewards more. Younger,
better educated salespeople who had no or small families tended to value higher-order
rewards (recognition liking and respect, sense of accomplishment) more.
Financial Motivational Techniques
Mot salesmen prefer the financial benefit because the need at the lower level of
organization is more of physiological and safety needs, rather than esteemthose of esteem
and self actualization. Social needs are also necessary at all levels. The financial incentives
include:
1.Higher salary
2.More commission
3.Other monetary incentives
4.Profit sharing
5.Traveling allowance
6.Bonus, etc.
The financial incentives become less affective after some time and thereafter the
salesman is looking to non-financial incentives which have been discussed at length.
Non-Financial Motivational Technique
The simple motivational tools of early years such as only financial benefits prove to be
a poor method of motivation beyond physiological and safety needs satisfaction on account
of the unique aspects of a sales persons job.
NOTES
The non-financial incentives, thus, become an important component of the motivation
mix of a company. These are Specially relevant as Dawson has pointed, Business is on
the threshold of a new era of human and social concern, which will inevitably result in
greater attention to total human resource development by sales management.
Some of the unconventional factors that make a special rank on sales force motivation
are discussed below.
Meeting between Manager and Sales Force
These are highly regarded by sales managers in the motivation of their sales teams
as this provides opportunity to managers to meet their sales force ^n the field, at head
office and at the sales meetings/conventions.
These meetings allow the sales manager to understand the personality, needs and
problems of each sales person. The manager can then better understand the causes of
demotion/frustration in individual sales person and respond in a manner which takes into
account the needs, problems and personality of the sales person. Sales techniques can
thus be improved and confidence boosted. According to Likert, when the sales manager
encourages an open style of management, salesmen are encouraged to discuss their
problems and opportunities so that the entire sales teambenefits from the experience of
each salesman. This results in a greater sense of group loyalty and improved performance.
The success of the marketing teamcan be easily attributed to the open door policy adopted
by companies in India. As one manager put it, I know all my team of 166 sales
representatives personally, by name and make it a point to keep in touch with all of them.
They can walk in any time with their problems and they have got the confidence that most
of their problems will be handled to their satisfaction.
Clarity of Job
Clarity of job and what is expected from the sales person is a great motivator. The
objectives when duly quantified and well defined, properly connected and linked with the
reward and recognition serve as a source of motivation to the sales person.
Sales Targets or Quotas
If a sales target or quota is to be effective in motivating a sales person, it must be
regarded as fair and attainable and yet offer a challenge to him. Because the sales person
should regard the quota as fair, it is usually sensible to allow himto participate in the setting
of the quota. However, the establishment of the quotas is ultimately the sales managers
responsibility and he will inevitably be constrained by overall company objectives. If sales
are planned to increase by 10 per cent, then salesmens quotas must be altered in a manner
consistent with this objective. Variations around this average figure will arise through the
sales managers knowledge oft individual sales person and changes in commercial activity
DBA 1738
NOTES
within each territory; for e.g., the liquidation of a key customer in a territory may be,
reflected in a reduced quota. Quotas can be set on rupee sales, unit volume, margin,
selling effort or activity and product type. The attainment of a sales target or quota usually
results in some form of financial benefit to the sales person.
Sales Contest
The Sales contest is an important tool to motivate sales persons. The purpose; of
sales contest varies widely. It may encourage a high level of sales in general to increase the
sales of a slow-moving product or to reward the generation of new customers. It provides
an incentive to show better performance and secure more satisfactory results. However,
sales contest.; has a few disadvantages. One such disadvantage is that it can encourage
cheating. For e.g.. in one company which used a sales contest to promote sales at a series
of promotional events around the country with its dealers, .
sales persons stored up orders achieved prior to the event in order to increase the
apparent number of orders taken at the event. Also, contests, by pitching sales person
against sales person, militate against the spirit of mutual help and cooperation which can
improve sales force performance.
Sales Conventions and Conferences
These are the devices of group motivation. They provide opportunities for sales persons
to participate, gain social satisfaction and express their views on matters directly affecting
their work. They promote team work, dissolve social barriers, inspire and raise sales
persons morale Most of the companies in India are now a days adopting this method to
motivate their sales force.
Positive Effect
The positive effect method is also an important technique for motivating the sales
force to their best.
The proper application of praise, positive feedback, and human warmth and
understanding can impel others to perform up to their capabilities. This must be done in a
genuine way and not be perceived as overtly self serving.
Another form of motivation through positive effect occurs via a small group and peer
relations. Friendship, support and comradeship frequently serve as vehicles for creating
positive feelings towards company and job.
Leadership Style of the Manager
Leadership style of the manager plays an important role in motivating the sales person.
Inspirational leadership refers to influence through referent power. Identification of charismatic
NOTES
charmis an important tool in the motivational strategy of the management. It infuses the
images and expectations for extremes of effort, sacrifice achievement and in genera! the
right stuff. It is practiced through the use of professional speakers special audio tapes
and video tapes designed to arouse and stimulate sales persons. It also tries to create and
perpetuate certain corporate myths and success stories, which indirectly motivates sales
person to performat their best.
Freedom to Work
In order to performhis onerous duties and responsibilities, the sales person must be
given a reasonable amount of freedom and discretion in performing his job. Likert, in his
studies, has mentioned that lack of discretion has a negative impact on employees job
satisfaction.
Discretion and freedom may be accomplished by allowing sales person to develop
their own call patterns, more control over the types of promotional packages that they
offer to their customers, etc.
Freedomor autonomy satisfies the psychological needs and is like power pay (which
is a reward), making the job of sales person more important in the organization.
Reward and Recognition
Although the sales quotas, sales contests, convention and conferences have positive
carry over effects, these are short lived techniques of motivating salesmen. On the other
hand reward and recognition of sales persons accomplishments are more enduring and
relatively economic methods of motivation. Some of the ways to extend recognition and
honour to sales person include conferring the title of salesman of the month/year
congratulation telegrams from members of top management, sales trophies, offering
memberships of social clubs, mention in companys news letter, certificate etc. Recognition
and honour satisfy sales persons need for self esteem and self respect. These are like
status pay a public acknowledgment of the value that management places upon an
individual.
Persuasion
One of the common and recommended forms for inducing high levels of motivation is
through persuasion. In this situation, managers use rational arguments to convince sales
persons that it is in their own best interest to act in a preferred way. Persuasion has the
advantage of getting people to conclude that their actions were performed out of their own
free will. This leads to higher levels of self direction than reward or coercive modes of
influence where one perceives he or she acts more out of external compulsion than internal
volition.
DBA 1738
NOTES
Financial Incentives
Now we come to the financial aspects of the motivational technique. Financial incentives
are definitely a motivating factor, but they vary at the hierarchical level of the sales person.
The need is great at lower end of the hierarchy. Financial incentives not only keep sales
person on the company . roles but also motivates themto contribute to the growth of the
company and get grown individually, it is also an important managerial tool to control and
direct sales force to attain the sales objectives.
A poorly developed or administered financial plan may invite unions to organize sales
force as happened in some of the pharmaceutical companies in India. Therefore in the
management and motivation of sales force, a fairly reasonable financial incentive plan plays
a very important role. A sales force cannot be considered soundly managed unless there is
a well developed and well administered company plan.
The sales job is very monotonous and full of disappointments, therefore, a proper
motivation programme is to be followed. The sales personnel need to be given proper
incentives to reduce the labour turnover. It is important that the manager is skilled and
knows the technicalities of the job and is able to lead the personnel in an effective manner.
The financial and non financial incentives both need to be taken care of. As shown by
maslows Hierarchy of needs the needs of a sales person keep changing and as he moves
from lower to higher needs his thinking, his attitude and the mode of execution of work
also changes. All this is to be considered in motivating the sales force.
Motivation and Rewards for Performance
What Motivates Retail Sales People ?
The following is an illustrative list of different motivators. Most managers believe that
overall compensation ranks as the No. l motivator for salespeople. For themselves, on the
other hand, they say money comes second or third.
Non-monetary Factors
Encouragement and contact of supervisor
Opportunity for promotion
Advanced training
Participative goal setting
Sales quotas
Challenging/creative job
Opportunity for learning
NOTES
Information about the organizations goals
Opportunity to show creativity
Helpful colleagues
Monetary Factors
Special recognition for outstanding performance
Individual incentive/bonus
Commissions
Overall compensation
Contests travel or merchandise
Group incentive/bonus
However, most salespeople are just like managers when it comes to motivation.
Monetary motivations may rank No.2 or No.3 in importance for a retail salesperson
number one would be any one of the softer factors, such as respect, accomplishment/
achievement, status, security and stimulation.
Tools that can be used by a Sales Manager to motivate staff
Without exploring the theories of motivation, here are a few practical tips for retail
managers:
i. Job Variety: Salespeople get bored selling the same product day in and day
out, month after month. Rotation, changing products, allowing them to do
other associated jobs such as visual display, cashiering and retail statistics
reduce job monotony.
ii. Job Autonomy: Studies indicate that salespeople who are given greater/
autonomy like enriching the job with the responsibility of indenting, keeping
statistics of stocks, giving feedback to improve product design, redressing
customer complaints, participating in customer research etc. are more
responsible and have higher levels of productivity.
iii. Specialized Training: For many individuals the opportunity for growth and
knowledge acquisition are tremendous motivators. For salespeople, training
could be on product knowledge, service skills, computer skills, leadership
and teamwork, visual displays, merchandising basics etc.
iv. Public Recognition of Achievements, for example, Contests and Meetings:
The retail sales floor is a dramatic arena, where the skills and achievements of
participants are constantly on display for all superiors, peers and customers
to appreciate. Hence public recognition is often a powerful tool to motivate
employees.
DBA 1738
NOTES
v. Goal-setting: Setting performance benchmarks and linking rewards to the same
is a time-tested tool. Very often the retail manager may be remiss in fixing
targets.
vi. Incentives like Cash Prizes, Travel Opportunities, Merchandise: These could
vary froma straight percentage of sales, to innovative incentive designs which
tackle specific problems such as customer conversion, increasing ticket size,
increasing the number of items purchased by each customer, pushing slow
movers, improving customer service, mystery shopper schemes etc.
Retention : Motivating in the long run
High employee exit rates are the bane of retailers the world over. Large employee
turnover leads to high recruitment costs, time wasted on recruitment, and high induction
and training costs. It is important to remember that employees have a career life cycle. A
manager needs to respond to this and use the right motivators at each stage of his career.
He also needs to recognize when the employee is likely to disengage fromthe organization.
Remuneration : The Structure
Remuneration for salespeople can be structured in any of the following
Ways:
1. Salary only scheme
2. Commissions
3. Bonus
4. Non-cash Incentives
5. Special Remuneration in Retail
In retail, it is the customer who finally decides the structure. For example, a department
store format that advertises a USP of complete privacy and space to make ones own
choice would do well to ensure that it does not structure salespersons salaries with a
heavy emphasis on commissions. Such a structure would ensure that customers are mobbed
at the storefront by eager salespersons!
(1). Salary-only Scheme
This structure is chosen when:
(i) Product sales cannot be related to individual effort. For example, where sales
groups function in a cash-and-carry environment, where the sales effort involves a
series of negotiations over a period of time involving many people.
(ii) Where the focus is on non-selling activity also. For example, where service is the
USP.
NOTES
(iii) Where it is unethical to create a strong product push. For example, feeding bottles
or baby formula.
(iv) Where setting individual targets is difficult.
(v) Where sales have a partial influence on profitability.
(vi) Where representing the company is more important than mere sales.
i. Salespersons have security of income.
ii. High loyalty to the company.
iii. Greater flexibility. For example, transferring employees fromone work group to
another will meet with no resistance. Administratively simpler, since there are no
complex incentive calculations in salary. Internal problems of different
salespersons drawing different amounts and resulting comparisons are minimized.
Salary-only scheme: The Negatives
(i) Salespersons are less aggressive.
(ii) Salary costs are fixed, regardless of sales performance.
(2) Commissions
Commissions are chosen when:
(i) The market is highly competitive and products are not differentiated.
(ii) When the sales volumes are low
(iii) Where there are no seasonal/economic highs and lows in the year.
Types of Commissions
(i) Fixed: this is a constant percentage of sales. For example, 2% of business
brought in.
(ii) Progressive: here commission increases as sales grow. For example, 2% for
the first Rs.1 lakh, 3% for the second lakh and 4% for the third and so on.
(iii) Regressive: here, the commission rates start falling after a point. For example
2% for the first 3 lakhs, and 1.5% for sales beyond 3 lakhs. Regressive
commissions are used when sales expectations are exponentially high and it is
used as a tool to motivate multi-levels of people in the hierarchy.
Commissions Entail
(i) A clear basis for performance measures.
(ii) Agreed rate of commission.
(iii) Establishing a base salary to ensure that the take-home pay is adequate in a
bad month.
DBA 1738
NOTES
Commissions: the Positives
(i) Since pay is linked to sales volume, there is performance orientation and
sales aggression.
(ii) There is scope for flexibility. Commissions can vary for different groups of
people, different functions.
(iii) The cost of living is taken care of automatically.
(iv) Bad performers will leave the organization.
Commissions: the Negatives.
(i) Uncertain earnings may cause insecurity amongst employees.
(ii) There could be very high employee turnover.
(iii) Salespersons may turn unethical and pushy.
(iv) Excessive pushiness may jeopardize long-term relationships.
(v) Management has less control over earnings.
(vi) Undermines company loyalty.
(vii) Non-selling service suffers.
(viii) Differences in earnings may cause conflict between employees,
(ix) An increase in product prices leads to an automatic pay hike.
(3). Bonus
Bonus is a financial incentive provided in cases where the commission system is
inappropriate or dysfunctional.
Bonus: the Positives
(i) Can be used to encourage specific higher order needs.
(ii) Aids retention (if paid at regular intervals).
Bonus: the Negatives
Link between performance and reward may be weakened.
Is often complex to administer
(4). Non-cash Incentives
These are usually short-term like awards, contests for travel, merchandise, stock
options and given in addition to the salary. Sales contests in retail can be according to:
Increased cash volumes.
Stimulating more contacts and conversions.
Building off-season business.
Pushing slow movers or ageing stock.
NOTES
Stimulating balanced selling. For instance, shirts and trousers are sold together in
the proportion in which they are purchased.
Increased use of displays.
Improved sales ability. For example, mystery shopper schemes.
Building multiple sales.
Service-related contests. For example, grooming, customer adoption.
5) Special Remuneration in Retail
(i) Employee discounts: these are provided on items sold within the store. Discount
structures/percentages vary depending on the margin earned by the retailer on
different products.
(ii) ii)Push money: incentives whose cost is borne by a supplier/brand that wants
to push its own products on the retailers shelves. This could be transparent,
with the employee knowing that the supplier has offered the scheme, or it
could be managed as an incentive offered by the retailer.
(iii) Shift allowance/unsocial hours allowance.
(iv) Clothing/turnout allowance: often given in businesses where appearance and
grooming are critical to the sale, like beauty products.
4.7. PERFORMANCE APPRAISAL
Evaluating sales force performance
In general, sales managers evaluate overall sales force performance by analyzing
sales, cost, and profit data. Different evaluations are necessary because no one measure
of sales force effectiveness exists. That is, since firms set myriad goals, multiple measures
must be employed to assess company objectives. The three most common forms of
analysis are discussed below.
Sales analysis
Sales analysis consists of gathering, sorting, assessing, and making decisions based
upon company sales data. Firms routinely gather sales information for accounting
purposes, which means that the data are not organized in a form that is amenable to
sales analysis. No. Matter, the sales manager must insure the data are organized so
that market and salesperson deviations are evident. In global markets, it is important
to know how markets are performing in comparison with last year, but also in contrast
to one another.
10
sales analysis examines products, customers, markets, areas,
organizational units, order size, method of sale, terms of sale, selling strategy employed,
and time period. Sources of information include company records, sales reports,
managers field reports, and customer feedback.
DBA 1738
NOTES
Sales data are generally the most readily available, since firms collect and record
this type of information with each purchase. To analyze the information, companies
need only attach customer and salesperson numbers to the products sold. Sales data
are also deemed to be an important area to track, since the sales force is responsible
for increasing customer demand and reaching sales goals set by management. Because
of this, sales analysis provides important feedback for managers to gauge sales force
performance.
Managers must insure that two points related to sales are standardized. First, it is
important to consistently define the term sold. that is, some firms define sold as
when the item is ordered, others when the product is shipped, and still others when
the customer actually pays for the product. Second, when conducting sales analysis, it
is significant to examine sales in the local currency - dollars, pounds, yen, or euros
and units sold. In times of inflation or stagnant sales, firms can increase salts revenue
but actually sell fewer items. By analyzing both sales revenue and units sold, a sales
manager can more clearly understand the market situation.
Cost analysis
The second area of sales force evaluation is cost analysis, which focuses on the
relationship between costs incurred and sales generated. An analysis allows the sales
manager to calculate the variance between actual and budgeted expenses for sales
regions. In those regions where the actual costs exceed budgeted costs should be set
aside for further analysis. This does not mean that variations are either good or bad,
only that they should be investigated to understand the differences uncovered. Sales
costs are often stated as a percentage of sales, which permits managers to assess
whether the salescost relationship has been preserved.(for example, if sales expenses
were s percent of sales revenue this year, this method makes it easy to tell if the ratio
of expense to sales remained the same in subsequent time periods).
(cost data allow a firm to set pricing levels, budgets, and sales commission rates.
This type of analysis also permits a firm to determine which products cost more to
sell, whether the cost of a sales call is increasing, and when it is time to modify
commission rates for product classes. Because of the availability of data, sales and
cost analyses are the two most frequently used methods of evaluating sales force
effectiveness/ when firmorientation shifts fromsales volume to profitability, cost analysis
becomes even more important, )
Profit analysis
When firms combine sales and cost data, it is possible to compute profitability.
The equation sales costs = profits confirms that lower costs result in higher profits.
Profit analysis permits the sales manager to identify unprofitable territories and
NOTES
customer segments, evaluate territory and product performance, and calculate year
end bonuses for the ales force. Profitability analysis is easier to conduct with advanced
information technology and has become more important as firms follow a relationship
marketing approach to business. However, fewer lines analyze sales force profitability
than sales and cost analyses.
The second area of evaluation is the assessment of individual sales force members.
Most firms conduct individual performance appraisal on a regular schedule. For
example, salespersons receive evaluations at the end of the calendar or the fiscal
year. A few companies assess sales personnel two or more times a year, while some
firms do not formally evaluate their sales force at all!
The following evaluation practices have been reported:
Most firms examine both quantitative and qualitative input and output criteria.
However, greater emphasis is placed upon output measures like sales revenue.
Salesperson input is sought, to varying degrees, when setting quotas or
standards.
Sales objectives receive different weights based upon activities and territories.
Companies gather multiple sources of information to perform evaluations.
Field sales managers, who supervise the salesperson, conduct most evaluations.
Most salespersons receive a written evaluation conducted in an office setting.
12
Salesperson appraisals should cover a wide range of areas, since the salespersons
responsibilities are so diverse. This can result in four separate appraisal areas being
assessed: activities, outcomes, profitability, and personal development. In combination,
these four areas comprise a comprehensive evaluation process. That is, each set of
criteria provides management with different insights about how the salesperson is
performing and how they can be more effectively directed or controlled.
Activities
Formal evaluation efforts should include quantitative data that result in the same
figures being calculated regardless of who compiles them. The first group of data the
sales manager investigates is salesperson activities. For example, when assessing
salesperson activities, the sales managers may compute the number of:
Sales calls per period.
Required reports completed.
Customer complaints.
Customer training meetings conducted.
I cans or phone calls to customers.
Product demonstrations.
DBA 1738
NOTES
Service calls.
Sales calls per customer.
Dealer meetings held.
Advertising displays set up.
Sales managers may also subdivide types of sales calls into:
Existing versus potential customers.
Planned versus cold sales calls.
Sales versus service calls.
Telephone versus in-person sales calls.
The reason to separate call activities into distinct categories is that different
probabilities of success apply. That is, cold sales calls have a lower likelihood of
success than planned sales calls Likewise, most firms set minimum activity standards
like sales calls per day. If a sales manager discovers that one of his salespersons is
completing only three calls daily hut makes higher than average phone calls to customers,
this may indicate that: (1) the salesperson is not conducting enough in-person calls or
(2) the territory is too large to maintain the expected sales call work load. Only more
detailed analysis can solve this dilemma.
Managers may also examine the way a salesperson devotes their time and how
the sales call is spent. Time analysis provides managers with insight that allows the
setting of standards based upon the activities of top sales performers. An analysis
permits the sales manager to compare average or less productive sales members time
allocation with that of top performers. Deviations between high and low performing
groups may demonstrate how time can be spent more efficiently. How the salesperson
spends their time on the sales call allows the manager to improve the effectiveness of
the sales call. For example, managers can review the sales approach utilized and the
type(s) of questions posed to the buyer.
When sales management evaluates sales force effort, they signal concern about
the strategy used to close sales. This means that relationshiporiented companies
expect a number of sales calls to be made and rapport to be developed with the client
prior to a sale being made. Otherwise, the salesperson is not devoting adequate time
to build a relationship with the customer. Finally, managers discover that all sales
effort is not the same. This is evident when two salespersons conduct the same number
of customer calls, but one salesperson closes significantly higher levels of sales dollars.
The perceptive manager will realize that training can have the marginal salesperson
achieve higher quality and more effective sales calls.
NOTES
Appraisal and evaluation both are used synonymously in most of the cases as the
two, more or less, carry the same meaning. However, for the purpose of distinguishing and
identifying, sales evaluation can be defined as measuring the performance effectiveness of
sales people while performance appraisal is the measurement of effectiveness and
potentialities of sales managers or executives. Like sales person, sales managers or sales
executives are subject to periodic appraisal. Periodic appraisal of managerial personnel is
an essential need especially in big corporations to design or redesign the management
development programmes.
Performance evaluation of salespeople is conducted by the sales management, whereas
the performance appraisal of sales managers or sales executives is done by top management
in the organization. Such appraisal many be made either by the top management or by the
personnel management on behalf and under authority of top executive in large companies.
Managerial personnel appraisal is generally used at two occasion. One, initial appraisal
made at the time of selecting the managerial personnel for training and the other, promotional
appraisal or potential appraisal generally, carried out at the time of promotion at higher
post. The main purpose of initial appraisal is to find out, if the individual has an aptitude for
the job in which he is being trained. In companies, where there is no programme for
management training before placing the personnel on the job, the worth of the new incumbent
is appraised on the job during probation period. Promotional appraisal aims at locating
and identifying personnel for promotion to higher job from within the organization. Their
performance on the present job and potential for higher job are appraised the they are
finally selected for higher job.
Performance appraisal of sales executives has the following objectives :
(i) A well planned appraisal plan is necessary to locate and identify, personnel,
who may be promoted to higher job fromwithin the organization. Individuals,
who have potentials for promoting to, higher jobs selected are eligible for
selection.
(ii) Talents and capabilities of the old and the new executives may be located for
their future development.
(iii) The utility of the existing development programmes for executives may be
evaluated and assessed, whether there is a need of modification in the
programme.
(iv) The worth of each executive may also be evaluated taking into account the
job requirements.
(v) Top executives may have a comparative view of the capabilities of the
executives in the same cadre.
DBA 1738
NOTES
(vi) The performance appraisal of sales executives is useful not only to evaluate
their overall performance, but also facilitates the management to forma rational
transfer, policy in the best interest of the concern.
Performance appraisal of sales executives is virtually a control device in the hands of
management and also evaluates the sales department indirectly. Hence, performance
appraisal is a must in the organization as a control device.
Performance Appraisals What are they?
The performance appraisal is a time of reflection on the past and hope for the future.
It is a time of decision that may have lasting consequences on an individuals career and
life. In sales, the performance appraisal refers to a formal, structured systemof measuring
and evaluating a salespersons activities and performance. It is part of a marketing audit.
Management compares the results of a persons efforts against the goals set for that person.
The graphic appraisal scale is the most commonly used formfor evaluating salespeoples
performance. The manager fills out a form appraising all performance criteria. In this
example, the manager is appraising a salespersons selling skill. The first example uses two
cues or anchor words with a five-point scale ranging fromexcellent to poor. This scale
format is referred to as a semantic differential and uses The Purposes and Importance
of Performance Appraisal
The productivity improvement of salespeople is of major concern to all organizations.
What salespeople do or do not do influences their companys productivity. Salespeoples
productivity can be measured and evaluated in relation to their job activities and sales
quotas.
Numerous specific reasons for performance appraisals exist. The following are the
more important reasons:
Compensation: It helps determine appropriate pay for performance and equitable
salary and bonus incentives based on merit or results.
Development: It encourages continued successful performance and strengthens
individual weaknesses to make salespeople more effective and productive.
Feedback: It provides a format for dialogue between manager and salesperson
and improves understanding of personal goals and concerns. This can lead to trust
between the two people.
Goals: It outlines what is expected fromsalespeople.
Legal compliance: It helps establish the validity of employment decisions (for
example, selection, compensation, promotions, and penalties) made on the basis
of performance-based information.
Motivation: It has a major impact on motivating salespeople.
NOTES
Penalties: It influences decisions on demotions, firing, and layoffs.
Personnel: It allows for evaluating the recruitment and selection processes. Are
they meeting their objectives? Why or why not?
Planning: It provides information for planning such policies as employment, training,
and rewards.
Promotion: It helps determine who will be promoted.
Training: It indicates training areas needed.
Because they need to create a high-performance sales group, managers must set high
standards so sales reps can achieve outstanding results. The challenge to managers
materializes when it comes time to evaluate each salespersons performance. In order to
help an average performer improve, managers use the performance appraisal to indicate
where the individual fells below the preset benchmarks.
Moreover performance evaluation has some important purposes. Quite often, a single
purpose is related to one or more other purposes. For example, compensation is related
to motivation.
Are the Performance Criteria Appropriate?
The dictionary defines Criteria as a standard on which a judgment or decision may
be based. In our case, firms determine what type of performance or standard they expect
from their salespeople, and they determine how that particular criterion will be measured.
Usually, companies use several criteria. This results in the development of a performance
evaluation measurement instrument.
This may appear simple, easy to do, and straightforward. For many companies, it is
relatively easy to develop a fair evaluation instrument. However, some companies have
difficulty accurately and fairly judging a salespersons true performance.
Guidelines for Performance Criteria
Proper performance evaluation begins with the development of the proper criteria.
Performance criteria should be measurable, practical, relevant, discriminating, and stable
and should encompass both results and activities.
Measurable : The performance criteria should be measurable. For example,
managers can measure actual sales volume easily and accurately. But can they accurately
measure a salespersons human relations ability, general personality, ability to communicate,
and friendliness with customers?
Many companies do use these types of vague generalities. It may be easy to tell
whether someone is extremely poor in communication skills, but these negative extremes
are rarely found because people possessing themprobably never would have been hired
DBA 1738
NOTES
in the first place. How do you accurately measure this type of factor? It is difficult to do
objectively and thus is done solely on a subjective basis.
Practical : The criteria should be practical. Most companies use sales as the major
measure of job performance, but some companies do not. One national sales manager
says, We sell strictly through wholesalers. It is difficult to appraise directly a salespersons
dollar sales performance. An account in salesperson As territory often orders products
froma wholesaler in salesperson Bs territory. The wholesaler will not provide us with
information on specific sales to our various customers. Thus, using sales as a primary
indicator of performance, salesperson B would get credit for salesperson As sale.
Therefore, dollar sales of the individual salesperson would be difficult to determine. This
holds true for many companies in many different types of industries. Even though total
sales for the district or region are measurable, sales as a criterion for measuring an
individuals performance is not practical in such situations.
Relevant : A criterion should be relevant to job performance. Do not use a job
activity as a criterion if it is not related and important to the behavior desired from the
salesperson. This is particularly important today because of government guidelines on
employment discrimination.
Firms often develop a list of three to ten specific activities under each general job
category. Under the general category of territorial management, one company lists activities
such as planning, use of time, records, customer service, or collections. Each salesperson
ultimately can be evaluated on 50 to 100 items. Certainly, each activity is necessary.
However, measuring themis impossible for the rater and the person being rated. On the
job the salesperson identifies the most important activities of the 50 or so items and
concentrates on them.
Typically, the manager also selects certain items, such as quotas met, and may perceive
3 to 10 items of the 50 or so on the evaluation formas the activities that should be evaluated.
A point can be made that only the 3 to 10 items are actually used, and should be used, for
performance appraisal.
Discriminating: A criterion should discriminate among poor, average, and excellent
performance. After all, this is the major purpose of the evaluation. Even if all sales people
do a good job, it is still important to determine which ones are significantly above average.
Stable: A performance criterion may be measurable, practical, relevant, and discriminating
and still not be usable if it is not stable. Stability means the criteria can be judged or
evaluated by two or more raters and that they will agree on the individuals evaluation. If
different managers rate the same salesperson on productive use of business time, for
example, and one rates the person as excellent and the other rates the person as poor, then
NOTES
this criterion may need to be eliminated from the evaluation because it is a difficult criterion
on which to obtain a consensus.
Development of Performance Criteria: AS noted, both a salespersons results and
activities should be used as performance criteria. Results criteria are objective, quantitative
data such as total sales and percentage of sales increase. Activity criteria,
Many of which are subjective and qualitative, include factors such as recall preparation,
paperwork in on time, and number of displays.
Quantitative Performance Criteria: Of the two categories of performance criteria, the
quantitative criteria are better for effectively evaluating performance. This criteria category
represents end results or bottom-line, objective data such as:
1. Sales Volume
a. Percentage of increase
b. Market Share
c. Quotas obtained
2. Average sales calls per day
3. New customers obtained
4. Gross profit by product, customer and order size
5. Ratio of selling costs to sales
6. Sales orders
a. Daily number of orders
(1) Total
(2) By size, customer classification and product
b. Order to sales-call ratio
c. Goods returned
Qualitative Performance Criteria: Many organizations use qualitative performance criteria
because they represent the salespersons major job activities, and they indicate why the
quantitative measures look as they do. The evaluator should take care to minimize personal
biases and subjectivity when evaluating qualitative performance criteria. Examples of such
criteria follow:
1. Sales skills
a) Finding selling points
b) Product knowledge
c) Listening skill
d) Obtaining participation
e) Overcoming objections
f) Closing the sale
DBA 1738
NOTES
2. Territorial management
a) Planning
b) Utilization
c) Records
d) Customer service
e) Collections
f) Follow-up
3. Personal traits
a) Attitude
b) Empathy
c) Human relations
d) Teamspirit
e) Appearance
f) Motivation
g) Care of car
h) Self-improvement
Approaches to Performance Appraisal
Usually, there are three approaches to appraise the Sales managers and Executives :
(i) A casual, unsystematics and often haphazard appraisal, (ii) Traditional and highly
systematic appraisal and (iii) Mutual goal setting through Management by Objectives (MBO)
PROGRAMME. Casual or unsystematic approach is very common, but now trend has
been changed and many rums prefer to used systematic method of appraisal. But still small
firms cannot follow this system. In India, apart fromsmall firms, big firms do not use formal
appraisal systemextensively. However, in India, all firms, irrespective of their size, appraise
the performance of their executives one way or the other.
a) Informal Method or Appraisal
In small firms, (and in (same big firms, also) informal or casual methods are used.
Such method of appraisal are quite unsystematic and unscientific performances are evaluated
by the boss in a primitive way of informal rating system. The rating largely depends on the
behavior, humbleness, loyalty, Honesty and obedience in his performance. (Manager) accept
the goals set by the boss though unrealistic and whether they are able to achieve themor
not. However, they always strive had to achieve them. The result largely depends upon the
value judgment of the boss and what the, boss thinks of the subordinates.
The system cannot be said to be rational on two counts : (i) the behaviour of the
subordinate may be good towards his boss, whereas his general behaviour and attitude
may be harsh towards his customers and colleagues and may be detrimental to the business
NOTES
as a whole; (ii) the boss need not be an expert in rating and evaluation, which affects his
value judgment. There may be occasions, when the subordinate does not obey his boss,
but in the interest of the enterprise, he shall be regarded as disobedient in the eyes of the
boss, which may affect the appraisal a lot. Traditional boss wants implicit obedience of his
colleagues which the modern manager does not accept the situation. This approach,
therefore, never yield a good result. This is one of the reason, why many of the companies
make use of the systematic appraisal mechanism one way or the other.
b) Traditional, Formal and Systematic Appraisal
More and more large scale companies now use most modern appraisal techniques
like MBO. But traditional formal and systematic methods are not absent. Systematic
approach include various methods of performance appraisal for managerial personnel
including sales managers. Pertinent among themare : (i) Ranking (ii) Person to person
comparison, (iii) Grading method (iv) Graphic scales method, (v) Check lists method (vi)
Forced-choice description (vii) Selection of critical incidents method (viii) Descriptive
evaluation method (ix) Group appraisal method and (x) Field review method.
4.8. ROLE OF CALL CENTRES AND BPOS IN SALES PROMOTION
Contact Centre is a term that symbolizes all the possible activities that enables the
customer to contact the company. A call centre i.e. a centre which handles telephone calls
is one such method: a customer who wants to get in touch with the company can call a
number at his convenience, which is then answered by a customer service agent. Other
possible methods for the customer to contact a company include sending emails, or a chat
on the Internet etc. This is schematically given in the diagrambelow
Customer service agents (CSAs) have to undergo a training programme before they
can start interacting with the customer. The training programme consists of basic modules
that involve training the agent to talk courteously and correctly with customers. This also
includes accent training to help the agent speak in neutral accent and also answering
tough questions. Over and above this, agents are also given training on the customer
response processes and the domain knowledge about the product or service about which
they expect to get queries. For example, in the case of a contact centre on travel and
tourism run as an adjunct to a ticketing or tour booking office, customers can call in to
DBA 1738
NOTES
enquire about ideal holidays with a specific budget, availability of seats, ticket reservations/
cancellations etc. The CSAs should have all the information about various travel destinations,
the cost associated with each destination, cancellation procedures etc. at their fingertips so
that the customer does not have to wait for a response and is encouraged to use the
service more often.
That is where countries like Mexico, Puerto Rico, Philippines and India came into the
market.
Initially these call centres handled telephonic or voice-based customer enquiries, but
with the Internet the definition broadened to include email and chat interactions. They are
now called Contact centres due to the changed profile of the activities performed by them.
Apart fromcustomer service, Contact centres are used for a number of customer-related
functions like Tele-Marketing, order entry, billing, account maintenance, information
dispensing or help desk, advice, service dispatch, scheduling, and other more advanced
activities like collections, technical help desk and support etc. The business proposition
and dynamics vary significantly depending on the use of the contact centres or customer
interaction services. However, since call centres are more prominent in the entire contact
centre domain, they have been emphasized. However, telephone calls still dominate most
of the proceedings, the termCall Centre is used synonymously.
Types of Call Centres
Broadly, the service offerings of a call centre can be classified into two categories:
Inbound call centre: This type of call centre handles calls from customers aid is
responsible for either retaining existing customers through appropriate solutions to their
problems and queries or converting enquiries into sales and thereby crating new clients.
Examples include technical support, customer care, postages service, pre-sales enquiries
etc.
Outbound call centre: This type of call centre is responsible for customers for the
purpose of telemarketing, pre-sales, collections etc.
Many companies offer a mix of both these services. However they need different
technology training, skill sets etc. For example, fundamentally, and marketing CSA has to
be a good salesperson and every person cannot be mat; likewise a person trained for pre-
sales calls will not be comfortable handling post-sales calls etc. Also, in the case of an
outbound call centre the CSA call- the client for telemarketing purposes, which can sometimes
be bothersome fee the client, he or she may have to encounter rude behaviour. There have
been cases where customers have turned aggressive when they realize that the call is made
fromIndia. This can be unnerving and stressful (although the incentive arc high whenever
the CSA makes a sale). Hence the CSA also needs s| real training in sales skills and
handling rude and indifferent customers. In case of an inbound contact centre, process or
NOTES
product training is emphasized as the owner usually calls in to resolve a technical query or
problem s/he is facing: the CSA should be equipped in all aspects of the process/product
to be able to resolve such queries. More details about training and other aspects of careers
in a contract centre have been given in the accompanying case study.
Web-Enabled Call Centres
Web-enabled call centres represent a new generation of call centres, which while
using the low-technology telephone systemcan use the latest online collaborative technology.
Its capabilities range fromsimultaneous interactive voice and data access over the Internet
to the use of a web page as a simple but time-saving first step in the service process. Web
users who need extensive help click a call-back button to have an agent call them.
Customers with less-complex questions use an instant text-chat feature to get answers
fromagents almost immediately. Call-centre agents who use email, instant chat, and web
collaboration to interact with customers are able to more quickly and completely handle
questions and resolve problems. Hence, web-enabled call centres deliver a superior level
of customer service that goes far towards fostering customer loyalty. This also helps in
improving the productivity of a call centre agent as this substantially reduces the time the
agent spends with the customer; all the information is available at his fingertips and the
agent can finish the call fast. The other obvious benefits are reduction in queue time and
greater accuracy in the information provided across all the service channels. Needless to
say, the infrastructure and technology needs of a web-based call centre are very high (and
very costly), but given the critical role it plays, several companies across the world are
switching to this technology.
Call Centre Technology
A call centre operation is very technology-intensive; offshore call centres especially
necessitate huge investments in high technology. High technology solutions like interactive
voice response (IVR), computer telephony integration (CTI), automatic call distribution
(ACD), predictive dialing and sophisticated voice recording systems are necessary to
perform vital functions. There is also various sophisticated software to improve CSA
productivity and effectiveness. In addition, there is sophisticated telecommunications
infrastructure to seamlessly divert calls fromtoll free numbers in US/UK and make calls to
international customers.
Computer Telephony Integration (CTI)
CTI has existed since the early 1980s, but has evolved a lot in sophistication of
features as well as cost benefits. CTI links computing (data) and telephony (voice). The
functional integration of these technologies provides an applications platform for the
enhancement of numerous business processes. The basic components of all CTI systems
include a switch (e.g., central office switch or PBX), a computer (e.g., a desktop PC), a
gateway between the two and CTI-capable application software.
DBA 1738
NOTES
CTI system costs have declined dramatically with migration to LAN or PC-based
systems. Also, telephony-computer interconnection standards have emerged. CTI software
vendors have responded to wider market opportunities by, developing a range of
applications and tools that have made CTI technology more practical and therefore more
widely employed in business operations products.
The general benefits of CTI include:
Better customer service (e.g.. shorter holding times, extended service hours).
Increased effectiveness (e.g., screen pop of caller information, staff consistency in
routine calls).
Reduced costs (e.g.. increased throughput per agent, reduced need for specialist
staff).
Multiple service levels.
Automatic Call Distributor (ACD): ACD systems are the heart of inbound call centres.
An ACD is a device that distributes incoming calls to a specific group of terminals (call
centre agents). A basic ACD system processes incoming telephone calls on a first-come-
first-served basis. The system typically answers each call immediately and. if necessary
holds it in a queue until it can be directed to the next available terminal/CSA. When an
agent becomes available, the agent serves the first caller in this queue.
The obvious benefit is that it improves the productivity of the call centre by automatically
delivering a call to the appropriate service representative, significantly reducing customer
wait time.
Interactive Voice Response: IVR is a telephony technology in which customers use a
touch-tone telephone to interact with a database to acquire information fromor enter data
into the database. IVR technology does not require human interaction over the telephone
as the users interaction with the database is predetermined by what the IVR systemwill
allow the user access to. For example, banks and credit card companies use IVR systems
so that their customers can receive up-to-date account information instantly and easily
without having to speak directly to someone. IVR technology is also used to gather
information, as in the case of telephone surveys in which the user is prompted to answer
questions by pushing the numbers on a touch-lone telephone.
This is often used as a first level mechanismto try and give as much information to the
caller and solve as many queries as possible using links to the databases. Only after the
IVR software determines that it is unable to satisfy the caller, it automatically connects the
caller to the call centre. This is used in lieu of a switchboard operator, thereby making the
whole systemautomatic and reducing the load on the call centre itself.
Predictive Dialing: This is used extensively in outbound calling. The software automatically
redials outbound phone numbers at various times of the day until that call is answered. The
NOTES
call goes to the CSA or telemarketing executive only whether the customer picks up the
phone. This technology completely eliminates dialing and redialing, thereby improving
productivity and smoothening the overall working of the call centre.
Recording systems: These systems record, log and monitor inbound am outbound calls,
thereby allowing call centre management to evaluate the overall performance of the call
centre. Client companies also ask for a random sample o calls in order to determine the
quality of work being done by a call centre as also to directly understand the problems of
their customers (who are the callers) so a to figure out what are the most common problems
of customers. They use this a an input in their product/service strategy.
Components and Working of a Call Centre
A comprehensive call centre incorporates:
Communication resources: Telephone, fax, Internet, voice over IP (VoIP), high
bandwidth El/Tl lines etc.
Automatic call distribution (ACD)
Dialers and other productivity enhancing software
Interactive voice response (IVR).
Customer database
Data and transaction documentation: Agent desks, voice recording system(VRS),
document managing system (DMS), data entry software, mass storage etc.
The IVR can collect data fromthe customer by using automated speech recognition
(ASR) software or by asking the customer to enter information through the dial pad of the
phone (DTMF tones). Using this data, the IVR and ACD decide how to route the call into
the system. Also, the IVR can connect the call to an auto-attendant with a pre-recorded
answer to the customer enquiry and close the call without any human intervention fromthe
call centre; alternatively, it connects the call with a hold message telling the customer that
all agents are busy and the approximate time in which their call will be answered. The ACD
then connects the call to the next available best skilled agent. Sometimes, the call is sent
back to the IVR because the agent finds that the required service will be best supplied by
the IVR. If the company does not want to lose any calls or does not want the caller to be
irritated by being asked to hold on, the customer may be asked to enter his phone number
to be called back as soon as possible.
Identification using the calling phone number enables screen pop-ups of customer
data at the agents PC even before the caller is connected to the agent the ACD selected.
This goes a long way in speedy customer service and keeping the customer happy. Outbound
dialing to a customer or a potential customer by the company agent is both simplified and
speeded up by software like predictive dialing, thus minimizing down time and optimizing
call processing times in a company offering both type of solutions inbound and outbound
DBA 1738
NOTES
- and in they have been trained to handle both types of calls, agents may swap from
outbound to inbound calls or back depending on the traffic in the system.
Many companies have call centres in different geographical areas but networked
together. This configuration is called a virtual call centre. Here the customer usually calls a
toll-free number; his call is then forwarded to one of the destinations depending on certain
criteria. Call forwarding costs will be covered by the telephone infrastructure, with the
caller not being affected. Also here the caller does not notice who takes the call and from
where it is answered.
4.9. DESIGNING PUBLIC RELATION AS A PROMOTION TECHNIQUE
Not only must the company relate constructively to customers, suppliers, and dealers,
it must also relate to a large number of interested publics. A public is any group that has an
actual or potential interest in or impact on a companys ability to achieve its objectives.
Public relations (PR) involves a variety of programs designed to promote or protect a
companys image or its individual products. The wise company takes concrete steps to
manage successful relations with its key publics. Most companies have a public relations
department that monitors the attitudes of the organizations publics and distributes information
and communications to build goodwill. The best PR departments spend time counseling
top management to adopt positive programs and to eliminate questionable practices so
that negative publicity does not arise in the first place. They perform the following five
functions:
1. Press relations - Presenting news and information about the organization in the
most positive light.
2. Product publicity - Sponsoring efforts to publicize specific products.
3. Corporate communications - Promoting understanding of the organization through
internal and external communications.
4. Lobbying- Dealing with legislators and government officials to promote or defeat
legislation and regulation.
5. Counseling - Advising management about public issues and company positions
image during good times and bad.
Managing a campaign to create positive goodwill among identified audience is an
upheaval task for communication managers. It is necessary to have public relation skills
and planning base for developing a public relations program. The biggest asset that any
organization can have is public goodwill. An organizations survival depends on well-informed
public opinion and corresponding positive attitude of the public towards the firm. We will
try to find out the role of public relations in the organization and how this goodwill can be
used effectively in marketing a communication program. It is said that advertising and
public relations are two sides of the same coin. They supplement each other, yet are different.
For marketing tasks advertising is often used as the communication tool, but at times it is
NOTES
not helpful. In some situations, tools other than advertising, work. Advertising is the
communication armof the marketing process. In the concept of marketing mix, advertising
is of strategic significance, as the level and intensity of competition is increasing and
differentiation of products/services has become an inevitable market reality. Current trend
of globalization and continued search for competitive advantages have made advertising a
crucial component of the overall marketing strategy.
Advertising thinkers look up on advertising in varied ways, mostly in fresh creative
ways. Some instances include statements like advertising is poison gas. It should bring
tears to jour eyes. It should unhinge jour nervous system. It should knockout. Great
advertising should have the impact of a punch in the mouth, should never kneel or genuflect
or plead for sales. It should ask without literally asking, Do you get the message. And the
viewer should answer, without literally saying, Yeah, I got. (George Louis). Advertising is
mostly used as a medium of information. A good advertising is one, which is the product
without drawing attention to itself.
In contrast, public relations is the broadest of the marketing communication disciplines,
involving a wide range of activities and specializations, used to deliver corporate and brand,
messages. Public relations is defined as the management function that evaluates public
attitudes, identifies the policies and procedures of an individual organization without the
public interest, and executes a program to earn public understanding and acceptance.
Development of public relations is fromefforts specifically focused on selling products and
services through a corporate advisory role. Consequently, all public relations activities are
best classified as long term, brand-building options compared to direct, sales-oriented
advertising.
Many people confuse public relations with publicity, which refers to getting new media
coverage. But public relations is broader in scope. As per the definition of Public Relations
Society of America (PRSA), public relations help an organization and its public to adapt
mutually to each other. Public relations focuses on an organizations relationships with its
public. By public we mean group of people with whomthe company or organization has to
interact in creating and delivering value. This universe of public includes employees, media,
community people, government, industry association members, shareholders and large
stakeholders. The stakeholders include people with financial and non-financial stake in the
company. On the contrary, publicity is focused on news media and its audience, which is
just one aspect of public relations.
Public relations is practiced by an entire gamut of organizations, trade associations,
non-profit organizations, labor unions, politicians, and also the media to create a positive
goodwill in the minds of stakeholders. A positive image when reinforced helps in addressing
the negative situations in an organizations life.
DBA 1738
NOTES
Meaning and Scope of Public Relations
The origin of public relations happened with publicity, but today its scope has enlarged
to an extent that it is being defined as helping an organization and its public adapt mutually
to each other. The focus of this marketing function is on mutual accommodation rather than
on a process of one-sided imposition of a viewpoint. Its because of this reason that the
scope of public relations has come to be so broad and wide. Further, the use of variety of
terms as substitutes or euphemisms such as corporate communication, corporate affairs,
public affairs, has caused confusions about what public relations is.
Conventionally, public relations department is considered as a small appendage to a
large corporation with four major functional areas like finance, operations, and marketing
and human resource management. In such corporations, all such activity, which was not
specifically falling under the jurisdictions of any functional department was given to the
public relations department. However, today there is increasing realization on relations.
The public relations department is in constant interaction with all other functional departments.
For example, financial public relations help in resource mobilization; labor relations for
shop floor productivity; consumer relations for better understanding of customer needs;
and employee relations for morale and teambuilding. Not only this, today public relations
helps in strategy formulations and organizational policies as this is the department which
operates as the bridge between different publics of the organizations and functional
departments.
Objectives of Public Relations Program
Professional public relations programs help business organizations accomplish their
objectives. They can fulfill some of the objectives listed below.
Presenting a favorable image and its benefits
Promotion of products or services
Detecting and dealing with its publics
Determining the organizations posture in dealing with its publics
Goodwill of the employees or members
Prevention and solution of labor problems
Fostering the goodwill of communities in which the organization has units
Goodwill of the stockholders or constituents
Overcoming misconceptions and prejudices
Forestalling attacks
Goodwill of suppliers
Goodwill of the government
Goodwill of the government
NOTES
Goodwill of the rest of the industry
Goodwill of dealers and attraction of other dealers
Ability to attract the best personnel
Education of the public to the use of a product or service
Education of the public to the use of a product or service
Education of the public to a point of view
Goodwill of customers or supporters
Investigation of the attitude of various groups towards the company formulation
and guidance of policies
Fostering the viability of the society in which the organization functions
Directing the course of change
Types of Public Relations Program
As the public relations programaddresses a wide range of audiences, we can classify
the public relations programs on the basis of the type of audience they address. The word
relation refers to relationships with various factors. The key publics addressed by relationship
management programs in public relations are media, employee and financial community,
including a companys shareholders, governments and general public.
Media Relations
Media relations focus on developing media contacts i.e. knowing who in the media is
interested in the organizations story. The conventional idea of media relations includes
publicity covering only media relations. A successful relationship management program
establishes a link between the organization and the editor. It is based on honesty, accuracy
and professionalism. Once the reputation is lost, the public relations manager cannot function
in liaison with the press.
Employee Relations
These programs are aimed at communicating with internal employees. A related
program is also called internal marketing which is communication aimed at informing
employees about the company and marketing programs. This also helps in winning the
support of employees at the time of crisis so that employees can stay put with the company.
Financial Relations
These programs are aimed at financial public like stockholders, banks and financial
institutions involved with the company as investing public. These programs are aimed at
press releases sent to business publications, meetings with investors and analysts and the
annual report, which the central government requires of public listed companies.
DBA 1738
NOTES
Corporate Relations
These programs focus on an organizations image and reputation. The goal is to
persuade people to view the company in positive image. It takes a long time to build a
good corporate image and takes only a small mistake to spoil the show. The corporate
image is a fragile commodity. The goal of reputation management is to strengthen the trust
of stakeholders on the organization. The public affairs take care of corporate communication
with government, with the public on issues related to government and regulation. Lobbying
is also another formof public affairs. Issue management involves managing and monitoring
public opinion about issues central to the interest of organizations interest and developing
programs to communicate with public about these issues.
Functions of Public Relations
Public relations constitute one of the strategic tools in marketing function as its
responsibility lies in developing and maintaining a sustainable positive image in the minds of
its constituent public universe. Public relations contribute to the marketing function in six
different ways, apart fromsupplementing and enhancing the impact of the advertising effort.
Though public relations is used as a tool for supplementing the image building process, but
its contributions is well felt in many ways. We list here six functions of public relations for
better understanding.
Public relations is a growth area as marketing has recognized its power and value.
Increased advertising cost has led to exploration of more cost effective communication
channels.
Public relations aims at enhancing and sustaining the image of an organization towards
all its stakeholders. Companies must treat public relations as a proactive means of
communication, rather than being reactive. For instance, the reputation of a company or a
brand must be built consistently, instead of reacting only in case of new launches, or unforeseen
negative incidents. Public relation accomplishes many objectives.
Facilitates Companys Overall Operations
It fosters prestige and reputation which can help companies to sell products, attract
and keep good employees and promote favourable community and government relations.
Aids Promotion
It can help in promotion of products. Awareness and interest in products and
companies can be generated. Desire to buy a product is helped by unobtrusive things that
people read and see in the press. People increasingly understand that media has its own
interests to serve but still they are more likely to believe the story on a product appearing
in the media than the claims made by the company in its ad.
NOTES
Helps in Tackling Social and Environmental Issues
It helps in handing social and environmental issues and ensures that they are settled to
the mutual benefit of all parties involved. If the company has a good record of fulfilling its
societal obligations and safeguarding the environment, its occasional breach will be looked
at with benevolence and the organization will be allowed to mend its ways amicably by
government bodies and pressure groups. The company will be spared the damages that
would have befallen on it if the pressure groups had been stridently opposed to it. The
company gets the benefit of doubt in tricky and messy situations and survives to live another
day because of its impeccable public conduct in the past.
Ensures that customer are Treated Well
The company realizes that customers are habitual story tellers. If a customer is not
treated well by a company he will spread the story far and wide. And if he perceives that
the company has gone out of its way to be of help to him, he will be equally profuse in is
praise. The need to maintain good public relations ensures that customers are presented
with useful information, are treated well and have their complaints dealt with fairly and
speedily.
Helps in Attracting and Retaining Talented Employees
It creates and maintains respectability in the eyes of pubic so that best people are
attracted to work for the company. It promotes the sense of identification and satisfaction
of employees with their company. Talented employees will stay in an organization only if
they are proud of belonging to the organizations sordid deeds and its shoddy behaviour
are out in the open. But when the public respects his organization he feels good to be a part
of it. Activities such as internal news letters, recreation activities and awards for service
and achievement can be used.
Stakeholders Give it Benefit of Doubt
It helps in managing misconceptions about a company so that unfounded opinions do
not damage its operations. If the company has a good reputation, the public gives benefit
of doubt to the company till facts are verified and the truth is out. This period when the
public suspends its judgment about the company till the truth is out has become important
these days as the media is likely to keep the company embroiled in some controversy or
the other. It is debatable if companies misdeeds have increased but they are definitely
being reported more now, due to the proliferation of media and its constant search for
controversies to keep the public interested. In such times, a companys credibility among
its stakeholders can be a strong deterrent to medias fetish for stirring controversies.
DBA 1738
NOTES
Develops Reputation as a Good Supplier and Customer
It helps in building reputation as a good customer for its suppliers and a reliable
supplier for its distributors and customers. Customers and suppliers are likely to believe
that a company with good reputation with other stakeholders will also keep its commitments
with them. With increasing globalization of business getting a favorable international media
coverage has become imperative for attracting customers and suppliers fromacross the
world. When distances between a company and its suppliers and customers increase what
appears in the media about the company becomes a very important criteria in the decision
of the suppliers and customers to consider doing business with the company. Detailed
evaluations obviously follows but a company with a bad media coverage gets blocked out
right in the beginning of the customers and suppliers evaluation process.
Politicians and Public Officials are Favourably Inclined
It influences the opinions of public officials and politicians so that they feel that a
company operates in public interest. With companies looking at establishing designing,
manufacturing, and marketing facilities globally, perception of the host government about
the company has become very important factor in its success as a global player. A
government is likely to expedite the entry of company in its country if it has a good reputation
of becoming a good local citizen than if it was known for rabid profiteering
Responds Effectively to Negative Publicity
A company that understands the need to maintain good relationship with its
stakeholders will respond quickly, accurately and effectively to negative publicity. It
understands that negative publicity can overwhelm a business sooner than bad products
and services and will put all its resources in setting the record straight. It will not wait for
the negative publicity to the down on its own. It knows that stories in the media will cease
to appear after some time but people will have formed negative opinion about it and its
interaction with the company will reflect the opinion formed. A savvy company will counter
negative publicity vigorously and will not rest till public confidence in the company is restored.
Helping Create a Market
Marketing assumes the existence of a market, and the role of marketing invariably is
to satisfy the needs and wants of those who constitute the market. However, sometimes
companies face a situation where market is blocked for themand they just cant operate.
Many governments across the word, have developed protected economic systems, where
entries of new players, capacity expansion of existing players are under the control of
governments. So many firms, though they can sense an opportunity for business, find it
difficult to enter into business due to such restrictions. Till 1982, India was a blocked
market-for color television, as the color transmission didnt exist. For all television
NOTES
manufacturers, the marketing task was to convince the government to commence
transmission in color.
The opportunity was the Asian Games and the Ministry of Information Broadcasting
(MIB) was, perhaps, convinced on the need to telecast the prestigious games to the rest of
the world in color. Here, one can see the linkage between political strategies of a country
influencing the opening up of the markets. It is said that companies, therefore, must identify
the people with the power to open the gates of the blocked markets and prevail upon them
to exercise their power. Such tasks fall under the domain of Public Relations, and not
marketing promote such businesses. Companies and trade associations use lobbying as a
potential tool for building effective public relations programs.
Influencing Non-Consumer Groups
Invariably, marketing addresses its efforts to the ultimate consumer and overlooks
those, which might influence the bottomline. Such groups of people or publics are advertised
by the public relations function for overall organizational goals. When a medical representative
calls on a physician, he does not aimto sell medicines, like any typical salesperson involved
in marketing and selling. The medical representative has a purpose of just to keep the
physician informed about the new products and formulations the company has introduced
in the market though public relations expects the physician to recommend his companys
medicines to the patients. Similar is the case with representative of publishing houses who
visit professors and teachers in different schools, colleges to informteachers and not to
make them buy their books. One can identify many such examples where public relations
programs are strategically and regularly executed to meet the business objectives fromthe
target audience other than non-consumer groups.
Influencing the Influential in Crisis
It is very important to handle communication during crisis in the corporation. The
marketing crisis can range fromproduct failure or tampering during transit or by trade,
protests by activists (e.g., KFC in Bangalore), accidents (e.g., fire in a hotel) and government
pronouncements (level of pesticides in soft drinks).
Such situations of crisis get complicated and they get further messed up due to
inaccurate reporting. By not submitting clarifications to the media due to the fear of
jeopardizing the legal stand, the organizations end up with a negative image in crisis. Denials
or withholding information may be viewed as a cover up and even is viewed as admission
of guilt by the company. In such situations, legal and marketing objectives should be dealt
separately. In such situations, the organization should confirm facts rather than giving
explanations. It is likely that due to such a positive reporting, organizations will emerge
with a cleaner image.
DBA 1738
NOTES
Influencing the Dealers and Sales People
Most organizations find it difficult to reach their product to the consumers directly.
They use either a sales force to sell their goods door to door or to dealers and alternatively
they have a whole lot of intermediaries who participate in reaching the companys product
froma place of manufacturing to a place of consumption. It is the trade, which might push
the product in the market and give priority to a product over the competitors.
It is, therefore, important to exercise good relations with dealers, wholesalers who
contribute significantly in making the bottomline healthy. Dealer conferences, conventions,
display contents, gifts and in-house publications are all such public relations tools to achieve
dealers support and cooperation. Similarly, this is also significant for the sales force.
Influencing Direct Consumers through Means Other than Advertising
In certain industries, it is not possible to use the conventional promotion tools with
success. For example, there are organizations where the size of the operation is not large
enough to support a heavy promotional budget. There are others who find it difficult to
advertise or promote as it might lead to a bad taste. For example, a hospital might find it
very difficult to advertise abortion services. Similar could be the case for open-heart surgery
or other services for a hospital. There are some organizations that buy purely on the basis
of rational evaluation and objective evaluation criteria. Ability and scope of advertising for
bringing effectiveness is minimal.
There are some customers who avoid advertising, thinking that the marketer pays for
advertising. They are not very impressed by the dramatic presentation of facts through a
marketer-sponsored communication like advertising. Hence, public relations is an effective
media for reaching these customers, as the source is neutral. Since the sponsor is not
identified and there is a feature orientation in the communication, public relations work
more than any other form of advertising. Arising out of these reasons, the conventional
promotional tools have a limited use. There are very successful examples like a medical
doctor specializing in eye care running his own clinic-cum-nursing home and organizing
free eye camps in his region. The community service not only spreads his name, but also
proves his competence. The local newspapers might carry stories about such camps to
give further boost to the promotion. Therefore, promotional activities like community
relations, event management, media blitz, corporate identity programs have relevance and
they should be used for building a good image among the relevant public.
Influencing Employees to Serve the Customers Better
Marketing activities in all organizations can, be clubbed under three major heads
namely: external marketing, internal marketing and interactive marketing. The traditional 4
Ps of marketing mix are external to an organization as these efforts are targeted at customers.
However, every single individual in the organization plays some role in marketing a product
NOTES
or service and, therefore, effort by the company by way of training on product knowledge,
product handling, and customer knowledge and selling should be made. Interactive
marketing relates to the skill of employees in handling customer contact. A customer judges
the quality not only on the basis of technical quality of the product but also by its functional
quality.
Customers experiences at the moments of truth are based on certain expectations
created by the service provider. The traditional marketing efforts give promises, which
correspond with the personal needs and aspirations of the target group of customers. In
addition, employees abilities and motivation to meet the expectations of customer as created
by external marketing efforts are backed up by internal marketing efforts. Public relations
strategies help marketers in addressing image related issues for all the three types of
customers.
Models of Public Relations
There are four types of public relations models in current practice by marketing
organizations. The first model, most closely identified with P.T Barnum, is the press gentry
I publicity model. This kind of public relations is known as propaganda. It is focused on
sending out strongly positive messages about the product, service, or organization, with
little effort to strike a balance between puffery and fact.
The second model is the public information model, which is associated with the
early public relations practitioner Ivy Lee. This formof public relations focuses on educating
the public about organizations and issues. In this model, there is much greater emphasis on
truthfulness than in the press agency / publicity model. But in this case also public information
is a one-way flow of ideas, fromcompany to public, with little effort to conduct research to
assess either message content or effectiveness.
The third public relations model is the two-way asymmetric model, developed by
Edward L. Benays. He is referred to as the father of modern public relations. This model
has persuasion as its chief goal, and relies heavily on research, designed to monitor and
evaluate public attitudes on issues.
The final model is the two-way symmetric model, also associated with Benays but
further refined by educators and professional leaders. This model focuses on building
understanding between organizations and their publics through the use of research, intended
to evaluate what misunderstandings exist and how they might be cleared up. Both of the
two-way models are important aspects of successful public relations efforts today.
DBA 1738
NOTES
Role of Public Relations
Another way of looking at the scope of public relations is through the consideration of
different roles public relations practitioners play. Broomand Smith have identified five
roles commonly seen in the public relations industry.
The expert prescribes conducts research to identify and solve client problems. The
technical services provider is a specialist in an area such as writing, graphics, or production.
The communication process facilitator acts as professional mediator or moderator for the
organization and its various publics. The problem-solving process facilitator helps
organizational clients apply accepted processes for solving public relations problems. Lastly,
the acceptant legitimater provides support and approval for client decision-making. Each
role is important in the context of public relations. The particular public relations tool depends
on the specific nature of the problem. For example, if its time to begin developing next
years annual report to company shareholders, the technical services provider is the person
to call. If, on the other hand, management and employees are having major disagreements
over communication issues, a communication process facilitator might be needed to solve
the conflict.
Types of Public Relations Activities
As discussed, public relations encompass a broad range of activities. The major areas
are discussed below, with particular attention given to those used most frequently in brand
and corporate communication campaigns.
Counseling
Public relations managers in the most successful communication programs serve a
very important advisory role to senior management. They make recommendations on policy
issues as well as decisions related specifically to communication. They play the role of a
counselor as they have the first hand knowledge of the impressions public carry about the
company, its products and management.
Research
Companies practicing either of the two-way models of public relations make extensive
use of research to better understand and influence publics. Though it is difficult to gauge
public sentiment through research, companies try to gauge the impression of people through
constant monitoring of media and news coverage. The results of research help in monitoring
the image and finding out the factors in corporate behavior that affect the image of the
company.
NOTES
Media Relations
Media is a key influencer in building brand and corporate image. Though managers
tend to avoid media people, but in many situations, it is necessary to keep the media in
good faith. Press coverage is a critically important public relations output. Public relations
specialists use publicity efforts to try to get coverage in the print and broadcast media.
They also respond to requests for information or comment fromjournalists working on
stories that concern their company or the companys products and services. Media relation
activities include arranging press tours of manufacturing facilities, press conferences to
announce new product introductions, and coverage of the corporations annual stockholders
meeting.
Public relations (PR) is an organizations efforts to win the cooperation of various
publics. The basic task of the PR department is to generate goodwill toward the retail
organization, creating long-term, profitable relationships with the retailers community. In
particular, the PR department needs to create and maintain positive relationships with the
various media, including newspapers, radio and television stations, and regional or local
magazines. The task of internal employee communications also generally falls on the shoulders
of the PR office.
Although the Internet has improved the speed of communication with various publics,
there is also a risk in doing so, due to increasing expectations of accuracy. PR professionals
must learn to balance the time pressure to get information out on the Internet with the need
to check facts before posting content on the retailers website.
The area of public relations requires a plan, so that it will be integrated with the other
IMC functions. It is very important that the PR department be connected to the RIS. The
PR manager has the added responsibility of monitoring the publicity that the retailer seeks
to generate.
Thomas L. Harris, management consultant and author of a book about public relations,
calls PR the secret weapon of IMC because PR can make the other IMC components
{e.g., advertising, cyber marketing, and sales promotion) more credible. For retailers,
credibility in the eyes of the customer translates into increased sales and loyalty.
4.10. SUMMARY
Public relations is a diverse field incorporating a wide variety of activities in support of
both corporate and brand goals. In the communications context, public relations activities
such as product publicity and event marketing can help communicate brand building message
to customer and consumer groups that might not be reached effectively through other
marketing communications techniques. The greater credibility and often-superior media
placement gained through public relations efforts can be instrumental in building brand
image. Consumers understand the intent of advertising; they know the goal is to sell them
DBA 1738
NOTES
something. As a result, everything said in advertising, sales promotion, direct marketing
and packaging is viewed with at least some cynicismand sometimes with a great deal of
mistrust. But in publicity, the media, rather than the company, become the information
source. The credibility that comes from a positive news story can never come from an
advertising campaign.
The effectiveness of the sales manager is dependent to a great extend on the
effectiveness of the team supporting him. A success sales organization and sales force
dependent on proper staffing. While planning for recruitment in company promotion policies
retirement plans must be given due consideration. The selection policy is concerned with
quality and qualifications on man power.
1. Explain the role of publicity as a non paid communication mix in retail sales.
2. Explain the process of selecting the right sales people to is training necessary for
sales person.
3. Explain the techniques of motivating sales people.
4. How do you design a public relations programme as a retail sales promotion mix?
5. How do you make the performance appraisal of sales person ?. The importance
of call centre and BPOs are inevitable in retail trade?. Explain.
NOTES
UNIT V
ONLINE SALES PROMOTION
5.1. INTRODUCTION
The internet is a world wide network of computer that gives customer across to
information and documents fromdifferent sources. Internet has the capability to transform
wisely with the advent of the internet; distance is to that big an obstacle for commerce.
Internet is the most important communication mediumto have come along in the last few
decades and business have to make wise use of this medium. The concept of spreading
information about a company fromone person to another person with little input fromthe
firmcalled viral marketing. It is most often utilized by the smaller firms in an industry.
India is waking up to the huge potential of viral marketing. Interactive marketing
agencies are increasingly trying to maximize the effectiveness of their campaigns through
viral marketing. The rise in media reach and word of mouth reach beyond users of the
same are some of the benefits of viral marketing. For campaigns, the increase in reach
would even be to the tune of 150 percent.
Consumers need a compelling reason to visit a vehicle in the first place where internet
in a brand or business is high, the previous of product information.
After reading this unit you must be able
To understand the meaning for viral marketing and how it is practiced in retail
marketing.
To design a website so as to attract and retain online customers.
To give better customers service in retail business.
Techniques of employing customer response management principles.
5.3. VIRAL MARKETING
Viral marketing is a charming and cost-effective alternative formof promotion. The
Indian Market, given the state of brand clutter, online explosion and media boom, is ready
for a virus attack.
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Viral marketing and viral advertising refer to marketing techniques that use pre-existing
social networks to produce exponential increases in brand awareness, through self-replicating
viral processes, analogous to the spread of pathological and computer viruses. It can often
be word-of-mouth delivered and enhanced online; it can harness the network effect of the
Internet and can be very useful in reaching a large number of people rapidly.
Viral marketing sometimes refers to Internet-based stealth marketing campaigns,
including the use of blogs seemingly amateur web sites, and other forms of astro surfing,
designed to create word of mouth for a new product or service. Often the goal of viral
marketing campaigns is to generate media coverage via offbeat stories worth many times
more than the campaigning companys advertising budget.
The term viral advertising refers to the idea that people will pass on and share
interesting and entertaining content; this is often sponsored by a brand, which is looking to
build awareness of a product or service. These viral commercials often take the form of
funny video clips, or interactive Flash games, images, and even text.
Viral marketing is popular because of the ease of executing the marketing campaign,
relative low-cost (compared to direct mail), good targeting, and the high and rapid response
rate. The main strength of viral marketing is its ability to obtain a large number of interested
people at a low cost.
The hardest task for any company is to acquire and retain a large customer base.
Through the use of the internet and the effects of e-mail advertising, the business-to-
consumer (B2C) efforts have a greater impact than many other tools of marketing. Viral
marketing is a technique that avoids the annoyance of spammail; it encourages users of a
specific product or service to tell a friend. This would be a positive word-of-mouth
recommendation. One of the most successful perspectives found to achieve this customer
base is the integrated marketing communication IMC perspective.
Some argue the termviral marketing was originally invented by TimDraper and coined
by venture capitalist Steve Jurvetson of Draper Fisher Jurvetson in 1997 to describe
Hotmails e-mail practice of appending advertising for themselves to outgoing mail from
their users. The first to write about viral marketing was media critic Douglas Rushkoff in his
1994 book Media Virus. The assumption is that if such an advertisement reaches a
susceptible user, that user will become infected (i.e., sign up for an account) and can
then go on to infect other susceptible users. As long as each infected user sends mail to
more than one susceptible user on average (i.e., the basic reproductive raise is greater than
one), standard in epidemiology imply that the number of infected users will grow according
to a logistic curve, whose initial segment appears exponential.
If each user sends mail to more than one susceptible user then the campaign will in
theory continue forever, or at least until all susceptible users have already received the
message.
NOTES
Even if the message is not forwarded quite that often, the message might still be
forwarded many more times than it was initially sent. For example, consider a campaign
that starts out by mailing 100 users. Not all of them will forward the email, but some of
them might. This some would be tested using market research; say, for example, that it
turns out to be 80% and that each forwards it to only one friend. In this case, 80 people
would receive a first generation forwarded message. Fromthere it would decline roughly
exponentially, so that each generation would be smaller than the next, as 80, 64, 51, 41,
33...
Eventually the campaign would fade out. Research must be carried out on the life
expectancy of such a campaign. More complicated formulas can be generated, but this
would be the easiest for most marketing departments to work out. So the final campaign
would cost the original amount of funds needed to send the email to 100 users and the rest
would be users marketed by viral methods and normally for free.
Types of Viral Campaigns Pass-Along
A message which encourages the user to send the message to others. The crudest
formof this is chain letters where a message at the bottomof the e-mail prompts the reader
to forward the message. More effective are short, funny clips of video which people
spontaneously forward. Many of these, such as the Cog (television commercial) from
Honda began life as TV commercials and have since circulated on the web by word of
mouth. The number of people reached in this way is often much greater than the number
who viewed the original ad.
Incentives Viral
A reward is offered for either passing a message along or providing someone elses
address. This can dramatically increase referrals. However, this is most effective when the
offer requires another person to take action. Most online contests offer more chances of
winning for each referral given; but when the referral must also participate in order for the
first person to obtain that extra chance of winning, the chance that the referral participates
is much greater.
Undercover
A viral message presented as a cool or unusual page, activity, or piece of news,
without obvious incitements to link or pass along. In Undercover Marketing, it is not
immediately apparent that anything is being marketed. Particular effort is made to make
the discovery of the itemseemspontaneous and informal, to encourage natural semantic
behavior. Outside world clues, such as graffiti appearing in cities with key viral words, is
often used to direct people to search out the presented mystery. Because of the large
amount of unusual and entertaining content on the internet, this can be the hardest type of
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NOTES
viral to spot, especially as companies try to imitate the style and content of amateur websites
and authentic underground movements.
Edgy Gossip/Buzz Marketing
Ads or messages that create controversy by challenging the borders of taste or
appropriateness. Discussion of the resulting controversy can be considered to generate
buzz and word of mouth advertising. Prior to releasing a movie, some Hollywood movie
stars get married, get divorced, or get arrested, or become involved in some controversy
that directs conversational attention to them. An alleged example is the publicity campaign
about the dubious love affair between Tom Cruise and Katie Holmes that came out just
before each of them released a movie.
User-managed Database
Users create and manage their own lists of contacts using a database provided by an
online service provider. By inviting other members to participate in their community, users
create a viral, self-propagating chain of contacts that naturally grows and encourages others
to sign up as well. Examples of such services include anonymous matching services like
eCrush, business contact management services like Plaxo, and other social databases like
Evite and Classmates.com.
Transmission of viral marketing can occur in various ways:
Word of Web
Typing into a web-based formthat converts that information into an e-mail, sends to
recipients. An example of this is any article at MSNBC.com. In the article, there are links
that encourage readers to send the article to a friend; this brings themto a web-based form
to be filled out. This formconverts all of the information to the recipient in an e-mail.
Word of E-Mail
A very common type: forwarding e-mails, such as jokes, quizzes and compromising
pictures.
Word of IM
Perhaps the fastest-growing mode of transmission, hyperlinks are sent over instant
messaging servers such as Jabber, AIM, ICQ, MSN, Yahoo!, or Google Talk. This method
is popular with many young people who are arguably more likely to trust a link sent by a
friend via IM than by that same friend through e-mail.
Forum Discussions
Many online communities have forums dealing with a lot of topics. These forumtopics
can either give a positive or negative feedback, depending on the community culture.
NOTES
Social Book Marking
People submit links to a website, then the website compiles these links, to which
people can vote for a link that interests them.
Reward for Referrals
Sometimes, the marketing company offers a reward for referring customers,
encouraging them to use any of the above methods.
Communications Protocol
In amateur radio, the hamoperators on each end of a conversation generally exchange
QSL cards. The communication protocol generally expects each person to transmit their
QSL information to the other person. If that QSL information refers to an electronic QSL
card exchange, then the subscriber base of the exchange will grow exponentially.
Bluetooth
The widespread use of mobile phones which support free Bluetoothing has enabled
promotional videos to be distributed virally between handsets.
Blog Publicity
When enough opinion leaders in an industry discuss something, it will usually spread
to the other blogs as well. Copycat bloggers are pretty common, and the leaders are often
a source of information/inspiration/material-to-steal, which means that the sub-readerships
of the smaller blogs also get read.
Barriers to Viral Marketing Size
If viral content is a video clip or streaming video, it may be too large for the recipient
to receive. However, newer technologies are eliminating this problem, as internet connections
grow faster and e-mail inboxes become more capable of receiving large files.
Media Format
A viral marketing campaign will be unsuccessful if the message is in a format that most
people cant use; for example if particular software is needed that is not widely used, then
people will not be able to open or view the message.
E-mail Attachment
Many people receive viral marketing messages while at the office, and company anti-
virus software or firewalls can prevent people fromreceiving or viewing such attachments.
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NOTES
Cumbersome Referral Mechanism
For a viral marketing campaign to be successful, it must be easy to use. For example,
if the promotion is some sort of game or contest, then asking for referrals should be an
option immediately after the game, not as a condition to play.
Sabotage
Especially in the case of Undercover style marketing campaigns, the discovery of the
marketing nature of a popular campaign may cause the same social networks to inform
people of the commercial intent of the meme, and promote a formal or informal boycott of
the company or product in question.
Word Of Mouth Marketing / Word of Mouse Marketing
Word-of-Mouth Marketing, or WOMM, is a termused in the marketing and advertising
industry to describe activities that companies undertake to generate personal
recommendations as well as referrals for brand names, products and services.
Word-of-mouth promotion is highly valued by advertisers. It is believed that this form
of communication has valuable source credibility. Research points to individuals being
more inclined to believe WOMM than more formal forms of promotion methods; the
receiver of word-of-mouth referrals tends to believe that the communicator is speaking
honestly and is unlikely to have an ulterior motive (i.e. they are not receiving an incentive
for their referrals). In order to promote and manage word-of-mouth communications,
marketers use publicity techniques as well as viral marketing methods to achieve desired
behavioral response. Influencer marketing is increasingly used to seed WOMM by targeting
key individuals that have authority and a high number of personal connections.
A very successful word-of-mouth promotion creates buzz. Buzz generates a highly
intense and interactive formof word-of-mouth referral that occurs both online and offline.
Successful word-of-mouth initiatives do not follow a strictly linear process with information
flowing from one individual to rather successful models leverage subgroup connectivity
and relationships by pursuing a Reeds Law hub approach to message distribution. A
marketer has successfully created buzz when the interactions are so intense that the
information moves in a matrix pattern rather than a linear one. The result is everyone is
talking about or purchase the product or service.
Examples
Gmail
Google did no marketing, they spent no money. They created scarcity by giving out
Gmail accounts only to a handful of power users. Other users who aspired to be like
these power users lusted for a Gmail account and this manifested itself in their bidding for
NOTES
Gmail invites on eBay. Demand was created by limited supply; the cachet of having a
Gmail account caused the word of mouth, rather than any marketing activities by Google.
FreshDirect
FreshDirect did no marketing to cause the word of mouth. They did exceed
expectations of consumers who used their service. These consumers in turn raved about
FreshDirect to their friends voluntarily and even spent time convincing themto try it. Word
of mouth resulted from FreshDirect so far exceeding expectations that their customers
naturally wanted to share, brag, or talk about it.
New Media Marketing
New Media Marketing is a relatively new concept utilized by businesses in developing
an online community, which allows customer evangelists to congregate and extol the virtues
of a particular brand. In most cases, the online community includes mechanisms such as
blogs, podcasts, message boards, and product reviews, all of which contribute to a
transparent forumto post praises, criticisms, questions, and suggestions.
One of the primary arguments to promote New Media Marketing is the premise that
traditional advertising is losing its influence on consumers. Backed by statistical evidence
demonstrating a growing trend of consumers making purchasing decisions off Internet
research and referrals. These advocates strongly adhere to the notion that consumers are
more inclined to believe feedback fromlike-minded peers than corporate marketing verbiage
dispersed through traditional television, radio, direct mail, or newspaper advertising.
Although businesses would be exposing certain weaknesses to the marketplace by
allowing individuals, or even competitors, to post critical comments, responding with an
honest and transparent answer designed around solving the issue at hand may mitigate
potential risks.
Often referred by traditional advertising methods, New Media Marketing is most
effectively marketed by Internet driven technology such as RSS, email forwards, search
engine optimization, and reciprocal links.
Selling on the Internet
Retailers create Internet Web sites for their stores for a variety of reasons-not only to
attract new customers but to make shopping more convenient for existing customers. A
business that reaches out to its customers in a variety of ways other than a physical store
location establishes what are known as multichannel relationships. Even the most traditional
retailers, and the biggest of the big-box discount stores, now have Web sites. Its an
attempt to strengthen customer loyalty by offering yet another means of contact.
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Although the dot-comfrenzy didnt turn out to be as far-reaching as people originally
predicted, merchants can make money by selling merchandise over the Internet-if they
approach it as a new way to maintain the business they have and expand it into new
markets.
Leading Hollywood web portal India FM launched a viral marketing campaign for
the Abhishek Bachchan-starrer Bluffmaster. Net surfers were invited to play a game, after
which they were informed that they had won $100,00, only to learn later that it was all a
bluff. These users had the option of forwarding this bluff to their friends. A total of 30,000
users participated in this campaign and sent it to another 78,000 people.
India is waking up to the huge potential of viral marketing. Interactive marketing
agencies are increasingly trying to maximize the effectiveness of their campaigns through
viral marketing. Quasar Media has successfully completed campaigns for Motorola, Samsung
and makemytrip.com. The rise in media reach and word-of-mouth reach beyond users of
the same publisher are some of the benefits of viral marketing. For good campaigns, the
increase in reach could even be to the tune of 150 percent.
FedEx Express, a subsidiary of FedEx Corp, launched a region-wide viral marketing
campaign in India recently. Centered on the FedEx ads with comic sketches, some of
which are already popular in India, the campaign aimed at increasing brand awareness and
promoting key FedEx brand attributes. The advertisements are available for viewing,
download as well as for emailing to friends through a micro-website
(www.relaxiwillmange.com), and are communicated to customers and prospects through
banner advertisements on key websites, email communication and the distribution of a
CD-ROM.
Viral marketing campaigns need to have an element of community. As such, viral
marketing heavily relies on an individuals impulse to share information. While in some
cases, this might be the result of an incentive, it is also born out of a sense of sharing
information with ones social network. In fact, the uniqueness of a successful viral marketing
campaign can be judged by its ability to proliferate itself without any material incentive to
the customer. This can be triggered off though humor, privilege (creating exclusive mental
and physical spaces) or some other formof emotional appeal. The FedEx campaign cashes
in on humor. Google, on the other hand, capitalized on the values of privilege and community
to promote its Gmail through viral marketing. The campaign started with a small user base,
fromwhich a club was formed leveraging member contacts to expand the user base while
retaining the element of exclusivity through special invites, access, passes and so on.
Companies have been smart enough to realize that one of the triggers to create a
recall value for brands is by encouraging consumers to actively engage and interact with
brands. Corporates are focusing on enhancing the reaction quotient of consumers towards
brands. The internet happens to be one of the most critical media in this regard. This is not
NOTES
confined to only entertainment and FMCG categories. Technology companies are also
deploying this as a useful tool. One of the most recent examples of the successes of viral
marketing in India is Samsungs recent campaign to promote the Samsung X series of
Notebook PCs. The campaign sought to increase brand awareness among target consumers
(Internet users in the 24-45 age group) through an online contest that users were encouraged
to participate in, and refer to their friends. The prize of the contest was the product itself-
the X series Notebook PC. This campaign managed to pull 50,000 participants to the
site and delivered very good results.
Coke organized the SMS viral campaign for Vanilla Coke. It also came up with
CokeMusic.com. With its focus on being a hub for teenage music lovers, it managed to get
over a million page views a day, an average growth of over 200,000 unique visitors per
month, and average visits lasting longer than 25 minutes.
Internet marketers are using viral marketing as formof word of mouth or word of
mouse to draw attention to their sites. Viral marketing involves passing on company-
developed products, services or information fromuser to user. As a classic example. Hotmail,
an Internet Service Provider (ISP), offered a free e-mail account to anything who signed
up. Each e-mail sent by a Hotmail subscriber included the simple tag at the bottomof each
message : Get your free private e-mail at http://www.hotmail.com. Users were in effect
advertising Hotmail to others. Hotmail spent less than $500,000 on marketing and within
18 months attracted 12 million subscribers.
One teamof viral marketing experts caution that while influencers or alphas start
trends, they are often too introspective and socially alienated to spread them. They advise
marketers to cultivate bees, hyper-devoted customers who are not just satisfied knowing
about the next and but who live to spread the word. Heres how one company cultivated
bees and harvested honey in the formof millions of media impressions and huge sales.
5.4. DESIGNING WEBSITES
The design of a Web page involves three tasks:
Artistic design
Marketing design
Technical design
During the artistic design task, you decide which images to use on your Web pages,
how to lay them out most effectively, and what colors to include. Marketing design
incorporates traditional marketing strategies into your Web pages. During this task, you
write product descriptions and select which products to market most aggressively. During
the technical design task, you write the HTML code that makes the design work online.
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Although these three tasks are distinct activities, you must consider them together.
The graphic artist folks, for example, must design the images to fit the needs of the marketing
department, who cant plan a page layout thats technically impossible. A skilled Web
consultant can be of great help. He or she can coordinate your artistic ideas with your
marketing ideas and ensure theyre all technically feasible.
Every retailer must have a Web site. This rule is not negotiable. Many customers
today use the Internet much as they used the telephone directory a few years ago, so an
online presence is a requirement. Without it, customer is likely to assume that your business
isnt up-to-date, and they may even be reluctant to do business with you.
Many retailers believe what is often called the feel-and-touch philosophy -that their
customers wont buy as much online because they need to see it, hold it, and try it on.
While this may be true for some types of merchandise, even customers who feel this way
still go online to research their purchases. People do their initial shopping (checking out
prices, features, benefits, and so on) in the comfort of their homes, then come into the store
to make the actual purchase. The challenge for a retailer is to make sure these folks can
find the answers to their questions on the Web site.
The other major reasons for being on the Internet are not sales-related, but im-portant
to a growing business nonetheless. As a business owner, if sales increase, your orders to
vendors increase-giving you more purchasing power. You can use the Internet to locate
new suppliers; do your own shopping for merchandise and business services; register and
make travel arrangements for market weeks and trade shows; and, in some cases, set up
automatic ordering and billing systems with regular vendors that have compatible
technology-to name just a few.
Web Site Contents
In addition to greater convenience for existing customers, keep in mind that for
new customers, the Internet may be their very first point of contact with your
business. As a virtual brochure for the store, the Web site must include the logo
and branding information unique to the business. Its hard to decide how to be
everything to everybody online. Luckily, there are specific pieces of information
that must be included on an eCommerce site:
A site map or other navigational tools so people know how to get around on the
site.
Contact information-address, phone, fax, and e-mail.
Hours of operation, with directions and maps to store locations.
The stores specialty and philosophy. This may include the companys mission and
vision statement, but you dont have to be especially profound-just describe what
the store does, what kind of merchandise it carries, and how much good customer
service means to the business.
NOTES
An enticing description of your targeted clientele that indicates you truly understand
their needs and have exactly what they want.
Information about related services (for example, availability of online gift certificates;
alterations; simple return policies) and associated fees.
An easy online order form.
What credit cards are accepted.
A statement about your security policies and what you will (or will not) do with
buyers confidential information.
Shipping options and what they cost.
The ability to contact you or Customer Service by e-mail with questions.
Product photos.
The number of photos used will depend on how quickly you want the site to download
onto someones computer. The more photos (and/or more complex the graphics, such as
images that move), the more slowly the Web site will load onto older, slower computers
and those using dial-up Internet connections instead of high speed lines.
There are also some nice-to-have items, often seen on eCommerce sites:
A brief history of the business.
Contact information about key staff members.
A list of manufacturers whose products you carry.
Photos of the store and its smiling employees at work.
Testimonials, quotes fromcustomers about how great the store is, or how wonderful
the staff is. These lend credibility to the business, since they are real people sharing
their positive experiences with others.
Customers also want to know about other services and products you offer that they
might needmaybe even things they havent thought of yet. And the site must provide all
this information in a way that has value for todays busy customer and entices themto buy
fromyou instead of a competitor.
To build a good Web site, think about what it takes to open a good brick-and-mortar
store. It should be attractive, it should be organized so that its easy for customers to
locate what they want, and it should reflect the image the target customer expectsclassy,
trendy, professional, outdoorsy, and so forth. It should be easy to charge purchases and
easy to return themif they dont suit the customer once theyve been shipped.
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Creating a Web Site
Plenty of user-friendly software programs are available to help business and home
users design their own Web site. But we dont recommend it, for several reasons:
Designing a Web site takes a lot of time that you could better spend in other ways.
There are professional Web designers who already know what works. A site will
look different and load differently on different computers, operating at different
speeds.
Design is only the beginningyou must understand how to get the site listed with
search engines, troubleshoot if there are problems, and keep the site updated and
maintained.
As with any type of advertising, its important to be able to show a designer what you
like and dont like. Look around at other stores sites, especially those with businesses
similar to yours. Write down all the features you like and what annoyed you when navigating
the site. Spend a Sunday afternoon just searching sites, and youll be surprised how
opinionated you will soon become! As you surf, notice these key features about a site:
Careful organization. How easy is it to find things?
Good navigation. How easy is it to get around frompage to page on the site, and
to get back to where you started from?
Photos. A few are good-but too many, as weve mentioned, will slow the speed at
which the site can be downloaded, and thats a turnoff for people with older,
slower computers. How are photos and other graphic elements used?
Testimonials. Notice how other companies use quotes fromcustomers.
Security considerations. credit card fraud is prevalent internet transactions. It makes
people understandably nervous. What does the site do to reassure them that their
personal information (address, phone number, etc.) and credit card numbers will
be secure? Does the merchant agree not to release contact information to others?
Offer to pay the $50 limit on fraudulent credit card charges if there is any kind of
security breach on the site?
Video clips. Some of the most sophisticated Web sites show little mini movies,
clips of their merchandise. Its excitingbut again, not all computer users have the
technology to take advantage of it.
Choosing a Web Designer and Webmaster
When youre looking for a person (or people) to develop and maintain your Web
site, the best candidates are those who have worked in the retail industry and understand
your business. Use your retailers networkask around and see whether anyone can
refer you to a great Web designer.
NOTES
Creating the site requires three distinct skills: artistic talent to design the visuals and
layout; a copywriter to make the information sound just right; and technical expertise to
programthe site and make it work online. A Web design firmcan usually take care of the
design and technical needs, although the writer may be hired separately.
Advertising agencies often tout their Web design ability, and yes, an ad agency can
provide the copywriter and a clean, sharp look for the site. But most agencies simply
subcontract the programming work to Web site development people, then mark up their
fees. This only costs more money when you could have hired themyourself.
A Webmaster is the person or company who will keep the site up and running once
its in place, and make changes (or teach you how to do so) to update the site as necessary.
Choose this person carefully, because you hope to work with themfor a very long time.
High school kids are very Internet-savvy, but you want a professional who is going to be
around.
When the page is finished, you hire a Web hosting company to put the site onto its
dedicated master computer, and onto a server that makes it available on the Internet 24
hours a day. Web hosts also offer a variety of services, from blocking viruses and spam
(junk e-mail messages) to technical support. It is important to choose a reputable Web
host that responds to questions or problems quickly, can handle a high volume of online
traffic, and is up and running constantly without technical difficulties. Depending on the size
and complexity of the Web site, having a Web host can cost anywhere from$20 to $1.000
or more per month.
Selecting a Domain Name
A domain name is your address on the Internet, the name that a person types on his or
her computer keyboard to find you on the Internet. There arc a number of types of
domainssuch as .com. org. or .netat this writing, there are seven.
Ideally, the domain name should be the same as the actual name of the store, or as
close to it as possible. It should be easy to spell and remember too, if possible. Punctuation
marks and spaces are not permitted in domain names, so it would not be. For example,
Smiths Store.com. It would be smithsstore.com. Oh, in case you didnt notice, you dont
have to capitalize letters either. The Webmaster can register your domain name for you,
but if youre still searching for unclaimed domain names and want to see whats available,
search on www.register.com. This reliable resource maintains a list of registered domain
names, and it can be searched free of charge.
Making the Web Site Mesh with the Store
Why are store window displays so inviting? To prompt customers to come into the
store. For the same reason, the Web site must also look inviting. Ideally, it should present
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the same look and feel as the store. This helps reinforce the consistency that loyal customers
come to know and expect when doing business with merchants they frequentand its an
important part of developing the brand. Among the most important design considerations:
Colour sets the tone for the entire site. It is a subtle but very effective tool, and do
not underestimate its impact. Use the same colors on your Web site that you use in
your store.
Fonts or typefaces are important in any of your printed material, but theyre
especially critical on the Web site because theyll be viewed on a computer screen,
where eyestrain and monitor size come into play. Be aware that many people who
create Web sites are technically proficient, but they have a rather limited sense of
artistic design. Thats why so much text shows up onscreen in Arial or Times New
Roman font stylesno one considered the potential impact of a different font,
including the business owner.
Use the Web site to let customers know whats going on in the storeand use the in-
person contact at the store to inform people about the Web site. Some merchants offer
special discounts to customers who order online, to boost interest in their Web site.
Optional Web Site Features
In addition to the essential elements, a Web site can include other features that enhance
your customers overall viewing and ordering experience:
Shopping cart. Every retailer should at least offer a few things for sale, just to see
whether they actually sell on the Web site. This function is known as a shopping
cart, and can be programmed by the Webmaster. Experiment with selling a few
items at first, maybe five or six, and see what kind of response you get.
Catalogs. Once youve determined that you can sell through your Web site, youre
ready to create one or more online catalogs. Smaller stores could never get into
the mail-order catalog business before because of the cost. The Web makes it
easier to have a catalog. As for photographs, you have three options:
Ask your manufacturers for photos that can be scanned and uploaded to the
site.
Download pictures froma manufacturers Web site. Many manufacturers today
have sections on their own Web sites for this purpose, accessible only by
merchants who sell their product lines. Some of them even write copy that can
be downloaded for catalog use.
Use a digital camera to take your own pictures of the merchandise and upload
themto your site.
Affiliate programs. Many companies will pay the merchant a commission if a
customer buys something fromtheir sitebecause they got to it by using a link fromyour
site. The leader in this type of marketing is Amazon.com, but there are thousands of affiliate
NOTES
programs you can have on your site. If youre interested in this type of program, research
the Web site www.referit.com. It lists many of the popular affiliate programs.
Advertising. Web sites can include a section where the business re-creates its
newspaper ads, radio or television ads, and flyers that were distributed by more traditional
methods.
Coupons. These are valuable whether mailed, or offered on a Web site. Some
stores have fun contests or little quizzes on their sites and use discount coupons as the
prizes. E-couponing has become quite a marketing science, since more than 7 million
online coupons a year are redeemed. (Thats only a fraction of the 240+million that are
downloaded.
New products section. A Web site should also be used to help introduce new
items. Taking the digital camera to a trade show (if the rules allow photography; some
shows do not) gives you the opportunity to use snapshots of brand new merchandise-
youve ordered, and to give a short, written preview of it.
Bulletin boards. A bulletin board gives customers a place to leave questions and
comments for other readers to see and, if they choose, respond to. It can become a very
active area of a Web site, particularly if the store sells a type of collectible merchandise that
has a loyal customer base.
Book reviews. The wealth of new books always being published offers an
interesting way to add insight and opinion to a Web site. As a business owner, your
commentary on a new book, usually about some facet of your industry, can be a nice touch
and can help establish you as an expert resource. Many customers appreciate this feature.
They like the bit of online education, and status customers will love the element of snob
appeal associated with a book review by their favorite store owner.
Links. Other than affiliate programs, brainstormother sites your customers would
appreciate being able to access from your site. It could be as simple as a link to the
shopping mall in which you are located; in the golf business, a link to the PGA calendar of
events site may be worthwhile, and so on. Look for sites that would be helpful for your
customers, and ask your Web designer to create links to them.
Regardless of how simple or fancy a Web site is. it absolutely must be updated
regularly. Merchants who create their site, get it onto the Web, breathe a big sigh of relief,
and turn their attention to other things are doing their businesses a great disservice. Would
you go back to the same store if it displayed the same merchandise in its windows for a
year or two? No way! So why do it on your Web site?
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Advertising The Web Site
Of course, just because you have a Web site doesnt mean the cyber world will flock
to it. Therefore, it is important to include your Web address on everything that you print
shopping bags, register receipts, and all forms of advertising. In essence, youre starting a
new business.
The Web host and/or Webmaster have the capability to submit your site to various
search engines, so that people can find the site when they access a search engine and type
in certain words or phrases. On a search engine, sites are listed (usually 10 at a time),
based on whether their titles and/or summary lines match the keywords and/ or phrases.
So, of course, the goal is to be in the top 10the first 10 to come up. If youre on the tenth
page, for instance, very few people will have the patience to look through all the previous
pages before finding your site.
The listing process is called ranking, and there are dozens (if not hundreds) of theories
and studies about which keywords to use, or not use, to get search engines to notice a site
and rank it closer to the top, but a few basic pointers stand out:
Using a single word as the target keyword is not distinctive enough, because it
throws your site into instant competition with hundreds of thousands of sites that
contain the same word. Instead, choose a two- or three-word key phrase.
In fact, you can choose several two- or three-word phrases. Just be sure that at
least one of them is part of the title tag. The title tag is the first line of the Web site
description that comes up on the search engine.
Also be sure the key phrases appear near the top of the first page (in the first few
paragraphs) of the Web site copy. The search engine may scan an entire Web site,
not just the title tags, to locate these keywords.
Search engines cant read graphicsthey read plain old HTML text. So put the
text with keywords at the top of a page and graphics farther down the pageor,
at least, dont waste the keywords by putting them in graphics (like pictures or
charts).
Search engine providers are well aware of scammers who take advantage of the
systems by typing their keywords over and over again, or using them dozens of
times on the first page so the search engine will notice the site and rank it higher.
Dont try itor your site will be kicked off the search engine. Spamming is most
definitely considered an ethics violation in the computer world. However, it is
okay to have the Webmaster revise the site occasionally to try to prompt a higher
ranking.
Search engines also notice appropriate, valid links to other Web sites. In fact, they
routinely do link analysis and can detect bogus links that are put in to make a site
look like a real source of the information suggested by its keywordswhen its
not.
NOTES
Companies can also pay to get top billing on some search engines. Your Web host
will be able to explain the process and the fees.
E-mail marketing is the cheapest way for retailers to advertise. It has the same effect
as sending out a piece of regular mailonly far less expensive, and about 100 times faster!
Think about how nice it would be to write a quick note to a good customer telling her a
great outfit that would be perfect for her came in today. Then you snap a picture on your
digital camera, download it, and attach it to the e-mail message. From start to finish,
including taking-the picture, less than 15 minutes have elapsed. Anytime you can discover
a new way to do something that increases service and costs less, just do it.
Consider producing an electronic newsletter, or e-zine, for your store. Because
these are inexpensive to do, theyre very popular. The problem is that many people are
starting to be overwhelmed by the volume of spamand junk e-mail they getand even the
viable sources lead to information overload. Havent you just deleted things fromyour e-
mail box out of frustration at the sheer number of them? If you do decide to do an e-zine,
make it short, with short articles and lots of even shorter factoidsall useful, well-written,
and to the point.
Web Site Format
Before you launch your Web site, you must decide on the design format. The Web
site format is the overall layout, look, and feel of the site. To help you understand the
common formats, I like to compare a Website to its most similar conventional marketing
piece- does it feel like a small brochure or product catalog, a newspaper or a television
advertisement, or a retail store? By browsing the Web, youll find many popular Web site:
formats fromwhich to choose. Its also possible to combine elements fromdifferent formats
to create a style unique to your site. Surfing the Web is, of course, the best way to see how
other companies use the web sites formats. While youre there, you just might find a few
formats I missed.
Were covering Web site format first because it is one of the simplest Web site qualities
to understand. In truth, the final format you choose depends greatly on other decisions,
such as content, budget, and desired interactivity level.
Cybermalls
A cybermall is a collection of online storefronts on a single Web site. Cybermalls
usually have the look and feel of real-world shopping malls, and theyre often organized by
store-type category (like the shopping directory at a real mall). fu in real-world malls, the
stores in cybermalls generally deal in retail products rather than services. The stores are
almost always small businesses, usually specialty shops offering only a handful of items.
Generally, each individual business in a cybermall has only one or two simple Web pages,
and the stores look very much alike.
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Placing your Web site in a cybermall offers three key advantages-low price, short
lead time to get online, and the ability to share customers. Cybermalls are generally the
least expensive Web design style. The company operating the mall will design your pages
(usually one or two very plain and unoriginal pages) and fit themin among the other stores.
The simplicity of this design allows new businesses to get online very quickly, and the other
stores in the mall provide an instant pool of
shoppers for newcomers.
Some cybermalls provide the stores on their sites with online purchasing services that
enable customers to buy directly from the stores over the Internet. In other cybermalls,
stores list telephone numbers for customers to call to place orders. Unfortunately,
cybermalls are often poor-quality sites. The lack of integration between stores on these
sites prevents shoppers from buying products from more than one store at a time. And the
lack of originality prevents a company fromstanding out. The fact is, cybermalls are simply
not very popular among Web surfers.
Online Brochures
The online brochure is a popular Web site design style. In its simplest form, an online
brochure consists of one to five Web pages describing a company, product, or service.
The online brochure is probably the most typical Web site format for small businesses. It
includes a front page-called the home page-that usually lists general information about the
company, some additional pages with specific information about products or services, and
a page explaining how to contact the company for more information or to make a purchase.
Online brochures can be fairly inexpensive to design and maintain and can hold as
much or as little information as you want. In fact, nearly any Web site can be considered an
online brochure. These brochures mayor may not provide a means for making online
purchases.
Once a company publishes an online brochure, it can begin adding other Web features
as its time and budget allow. A Web site that be gins as a fivepage brochure can evolve
easily into some of the following Web site formats, including the online catalog.
Online Catalogs
Online catalogs can stand alone or be easily incorporated into a brochure-style Web
site. Catalogs provide a complete listing of all of the products and services a company has
to offer. Much like a conventional catalog, an online catalog is usually organized by category,
but because the catalog is digital, its simple to add a search capability as well. Each item
either has its own page or shares a page with several similar products. Prices are generally
(but not always) included.
NOTES
Large online catalogs can be expensive to create and maintain, especially as products
and pricing change. Including a picture of each itemhelps to liven up the site, but it can also
liven up the price of your site considerably. Youll probably want to include pricing
information in your catalog, but if your prices fluctuate and you need to update them
periodically, you can expect some cost (either direct or indirect) for making each change.
Because an online catalog can display all of your products and service~it can be an
invaluable resource for your customers, distributors, and sales force. Because visitors may
spend a lot of time browsing the products, large online catalogs provide many opportunities
for your company to display its name and logo.
Large online catalogs are generally supported by a product database( (The 1-800-
flowers Web site in a database.) Rather than create new HTML pages every time the price
of a product change! the company simply links the Web site to its product database (not a
small task). Whenever the Web site displays product information, we first consult with the
database so that the site will always display the most current information.
Most medium to large online catalogs also provide some method for making online
purchases, such as shopping carts (described in the for lowing section). But some users
are still more than a little way of the technology. If you set up an online catalog, let customers
know how to order your products or services offline, as well.
Shopping Carts
You most often see virtual shopping carts in medium to large online catalogs, where
the carts encourage the purchase of more than. one product at a time. Users browsing
catalogs with virtual shopping carts are able to load their carts as they browse. Each time
they find an itemthey want to buy, they simply add it to the cart. When theyre finished,
they pay for everything in the cart at once.
Without virtual shopping carts, visitors to your catalog must pay for each itemseparately
or remember items on their own and combine themmanually onto some online order form.
Virtual shopping carts have the advantage of providing the customer with an easy
way to purchase several products at once. They make purchasing three products as easy
as purchasing onea definite sales advantage. On the down side, the carts confuse some
users or even scare themaway. The technicalities involved in using virtual shopping carts
can also create Web design complications that ultimately make them fairly expensive.
Nonetheless, they are an excellent addition to almost any retail site.
Virtual Vendors
The most complicated style of online storefront design is the virtual vendor. Like
virtual shopping carts, virtual vendors remember which objects users select fromthe catalog.
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But virtual vendors can incorporate so many additional features, these sites may seem
more like MUSEs.
In its simplest form, a virtual vendor IS a virtual shopping cart with the look and feel
of a real store. This sort of interface can be more fun than a simple online catalog, allowing
browsers to walk around a store, looking at products. Though the results are the same-the
user has access to product details and the opportunity to collect and buy several things at
a time-the entertainment value of the virtual vendor encourages con-tinued browsing and
return visits.
The most sophisticated virtual vendors are actually MUSEs, with the look and feel of
retail stores. In these versions, shoppers not only feel as though theyre walking around the
store but also might actually meet store employees or other shoppers with whom they can
interact. This highly advanced mix of social interaction and online shopping is just beginning
to emerge on the Web but will quickly bring Web commerce into the mainstream, especially
among female shoppers (studies show that female surfers are highly appreciative of the
social nature of the Web).
Virtual vendors do, however, have disadvantages. Web designers are only beginning
to use this technology, so there are bound to be kinks to work out. Virtual vendors also
can be expensive to build and may become too graphically intensive for typical home
users dia1ing in to the Internet with a modem. And unless such sites are carefully
implemented, they can be confusing and even intimidating to users.
Just the Beginning
In truth, there are nearly as many unique Web site formats as there are Web sites.
Your site does not have to conformstrictly to any particular format, style, or look and feel.
What matters is that-before you go online-you have a dear understanding of the potential
of the Web and that you choose a starting point that will allow your Web site to grow with
you, and with the Web. For most small companies, I recommend starting with a basic
online brochure that focuses on products and services and provides a means to contact the
company for more information or to place an order. Within that effort, every company
should try to incorporate the three building blocks of a successful Web site. To be successful,
a Web site must
Entertain (or at least captivate)
Educate
Sell
These three building blocks are covered here. Larger companies may be able to
begin with a full-blown online cata-log, complete with shopping carts and other exciting
features, but you still may benefit by starting small and quickly adding more high-tech
NOTES
features- This approach allows you to establish (and learn from) a small Web presence
before you spend more time and money developing a larger presence.
Web Site Content
Perhaps the most crucial decision to make concerning your upcoming Web site is
what information to put online. The useful information you place on your Web site, whether
its text or multimedia, forms your Web site content. In contrast, the superfluous additions
to your site the features you add simply to be cutting edgeshould be used, only where
the) tastefully spice up the site or make it easier to use.
In many ways, Web site format and Web site content go hand in hand. If you choose
to put up a small brochure-type site, youll be choosing a small amount of general corporate
information as content. If you choose an online catalog, your content will include information
about each of your products. Likewise, your marketing goals will influence your choice of
content. If you are launching a new product line, youll probably include a large amount of
information about that line. If you are in the habit of issuing regular press releases, youll
want to devote a section of your Web site to those releases. In any event, you want to be
sure the content you put up is accurate and well presented.
Accuracy is easy enough to understand (though not always easy to ensure); well
presented means well written, attractive, easy to read and navigate, memorable, concise,
and a bunch of other properties that really just boil down to common sense. Well-presented
Web sites are in many ways similar to well-presented print marketing materials. Advertis-ing
agencies and public relations firms can help you choose and arrange your Web site content.
Adhering to the design concepts discussed later in this book will help ensure that your
content is well presented.
Interactivity Level
Perhaps interactivity level doesnt say enough. Perhaps we should say coolness
level or the wow factor. Regardless of what you call it, at some point youre going to
decide how much time and money to invest in making your Web site impressive. This
moment is hen the techies get to have their fun. The World Wide Web has brought forth
many new technologies that permit all sorts of multime4ia pizzazz. It covers some of this
glitz and how to use it in your Web site. But the question here is when to use it in your Web
site.
The trick is to balance the impressiveness of your Web site with the impressiveness of
your content. If youre selling a simple product and you jazz up your Web site to the
extreme, then your marketing message may be lost. You dont want to be tacky, and you
dont want people to leave your site saying, That was neat, but what was the point? And
remember, some Web browsers and configurations may not support (or worse, may actually
be troublesome for) many of the Web features you might add to your site.
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In spite of these reasons for moderation, budget is generally the limiting factor as
companies add zest to their Web sites. And that brings up another important decision you
will make. You will need to balance what you can do with what you want to spend. So
often I meet with a client who asks, Can we do this? or Can we do that? My answer
is always the same: Of course you can, for the right price.
Courting Your Customers
To be successful, a Web site must entertain (or at least captivate), educate, and sell.
These three building blocks stack upon each other like the layers of a pyramid. Much like
todays dating scene, if you want to catch your mate (the customer), youll need to attract
himor her with your charmand wit, let the person get to know you and discover your true
values. These three phases of dating translate to the Web sites three building blocks.
Entertain
With a base of entertainment (or captivation) value, your Web site will attract visitors
and ensure that they remain focused and motivated to browse. Like a dates personal
appearance, this feature is the Web site quality that most influences the visitors first impression
of your site.
By insisting that every Web site have entertainment value, we dont mean to imply
that every site needs an online game or some unrelated amusement. For many sites,
entertainment value is derived from having an appealing design or some flashy Web features
something to make surfers say Wow (or for the budget conscious, maybe just Cool).
Educate
Once you attract the customer, youll want to encourage him or her to learn more
about you-your products, services, company values. To refer again to the dating scene,
you need to show that youre more than just a pretty face.
So if you want your customers to learn more about you, youll need to educate them.
On the Web, providing information is fairly simple. Just organize your company and product
information in an interesting, concise, easytonavigate manner. And of course, you still
want to provide an attractive presentation.
Sell
Now for the pinnacle of your Web site-the final layer on your pyra-mid. You need to
close the deal with your customer. Move him or her from. interested to committed. You
need to make the sale.
To do so, your Web site must provide a sales avenue-some way to empower the
customer to purchase your products and services. Although primitive, you can always
provide a toll-free phone number by which callers may place their orders. If you are selling
NOTES
services or selling highly customized products, phone orders may be your best approach.
You may need that type of interaction fromyour customers while closing the sale. But for
most retail products, providing an online method of ordering and payment is more desirable.
Remember, many of your customers will be surfing from their homes using a modemand
their only phone line. If they have to hang up before they can call you, you risk losing their
interest or having them find a better deal before they call. So do your best to provide a
convenient and secure method of online sales. Its good for your business and your customer.
Although some experts argue that marketing makes the product (with several trendy
companies and products to back their argument), we warn you that even the best Web site
wont necessarily work miracles. Remember, the World Wide .Web as a selling tool is
available to your competitors as well. And because the Web is so good at educating
consumers, those consumers are using the Web to make educated purchasing decisions.
So, if your products are not cost or feature competitive, you simply may not fare well from
a textbook Web site. You may need to experiment with a less informative Web site that
uses more high pressure sales techniques. Although Web surfers are generally less
responsive to this type of commercial site, it may be, Your only choice (Of course, you
could try marketing a more competitive product.)
Its easy to create a Web page.
The HTML standard was designed to be easy to learn. The developers of HTML
knew that unless the average person could learn HTML quickly and effortlessly, the standard
wouldnt catch on. Remember, the task force that developed the standard wasnt trying to
make anybody rich. It wasnt out to develop tools that only companies with large amounts
of time and money to invest could use. In fact, the task force wasnt thinking about
companies at all. The HTML standard was created to be used by scientists, students, and
government agencies to promote the free exchange of information.
Web pages are so easy to create, many companies opt to build their own Web sites.
After all, if 16-year-old hobbyists are creating their own pages on the Web, why shouldnt
you?
Launching a Web site involves two distinct tasks: developing (or creating) the site and
hosting the site. The difference between these two tasks will become apparent as you read
on. But for now, it is important to understand that a web site needs both development and
hosting. To develop at least a very basic Web site, you will need five key ingredients:
Some graphic design talent (how much depends upon how visually stimulating
your site will be)
Some experience surfing the Web.
Some basic computer skills (word processing, general software knowledge, and
so on)
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NOTES
Enough technical ability to be able to learn the simple basics of HTML (of course
more technical ability will pay off later)
A collection of content-the information and images you want to publish (a logo,
slogan, and list of products will be a good start)
Most companies can rely on their marketing department to provide the content and
graphic design expertise, while the information services department provides the computer
skills, Web experience, and other technical abilities.
But building the site is only half of the battle. You will also need to host the Web site.
Hosting involves publishing your Web site on a computer that can adequately support all
the visitors you hope to attract. To host your own basic Web site, you need to either hire
an Internet service provider (ISP) or locate the following four ingredients:
A Web server (hardware)
Web server software
A high-speed, full-time Internet connection (not just a modem)
One computer expert (preferably a UNIX or NT systems administrator)
If your company already has an Internet connection, you may have a machine to use
as the server. You can obtain an acceptable version of the Web server software on the
Internet for free. All you really need is someone capable of setting it up.
If your company doesnt already have a full-time, high-speed Internet connection, get
one, along with the server hardware and probably a router (a machine that controls your
Internet connection). Together, these ingredients required for hosting will cost several
thousand dollars. Remember, if you hire an ISP to host your site, you wont need to
provide any of these four ingredients.
The Online Ordering Process
Most retail websites work in the same way by offering the visitor a variety of different
services, which are readily accessible. The home page is a vital part of internet and acts as
the gateway, or front door, of the virtual store. In fact the various parts of the website such
as doorways, shopping baskets and order forms are modeled on the conventional store
experience For the retailer, regardless of size, the order systemtends to work as follows;
Stage 1. Accept the order.
Stage 2. Validate the customer.
Stage 3. Wait until stock is present or with the supplier.
Stage 4. If stock is present, attempt to process the payment.
Stage 5. If payment correct, produce delivery note or direct shipment purchase order.
Stage 6. Pack and ship to customer.
NOTES
These processes are similar to those employed in conventional retail stores with one
major difference: in the virtual store there is no actual customer-employee contact. This
creates a significant difference in operation and simplifies the retailers job. However, as
some retailers have discovered, the lack of personal contact places Greater strain on
ordering and delivery systems. The reason for this is obvious. Customers rely on lots of
visual information when they walk into an actual store. A major part of this data evaluation
is usually based on the attitude, approach and knowledge displayed by the sales staff. This
important data source and confirmation of the purchase decision is absent in the virtual
store.
In financial services retailing, where the level of customer service is crucial, the problems
associated with the lack of personal contact has been overcome with the help of more
efficient systems. The fact that this has worked is surprising as retail services are traditionally
people focused and results hinge on the quality of sales personnel. However, in some areas
of retailing there appears to be a greater level of acceptance for remote selling. For example.
Direct Line Insurance provides a range of products including car and home insurance. To
counteract the lack of personal contact they operate a high-speed order processing service,
which provides on-the-spot quotes. The need for personal contact is removed with a
mixture of overnight delivery of documents, immediate debit or switch card payments and
reliable product information
Across most websites the entrances to sites are much the same regardless of the
company. Even big names like Next, Tesco and R&Q % average similar site formats
that are governed by the software and the computer screens we operate. This means that,
for customers, small independent retailers can appear similar, as the conventional method
of evaluation, namely the bricks and mortar, is absent. However, where well-known
retailer brands are involved a good knowledge of the retailer? It reduce the level of risk
for the customer when making a purchase. In other words, the Tesco website, for example,
is an extension of Tescos conventional store (and brand) and inspires similar confidence
and reduces the risk of purchase. For the lesser known independent retailer, new customers
may be reluctant to buy unknown brands, or they may have some concerns over delivery.
Retail Strategy and the Internet
A huge range of products and services are available on the World Wide Web, ranging
frombooks and clothes, to cars and music and holidays. For retailers the vast quantities of
goods being sold are unparalleled in the retail sector. Because of this many retailers have
chosen to launch Internet sites that either supplement business, or spearhead parts of the
business. The Internet and home shopping is the most significant format development affecting
retailers, and most companies see it as a major priority. Internet home shopping is being
developed by many of the leading multiples in the clothing sector on the principle that it
complements rather than competes with conventional store trading. This has been inspired
DBA 1738
NOTES
in part the success of the Next Directory clothing catalogue, which is seen as a major
growth area in the future and one that retailers cannot afford to ignore. Arcadia and Marks
& Spencer are currently offering printed catalogues and telephone ordering, but they arc
likely to take advantage of the Internet in the near future. Also in the clothing sector, a
number of new Internet-based stores have appeared such as Readytoshop.co.uk and
whyfronts.com. However, no Internet start-up companies appear to be succeeding in the
women swear sector. This is because women still like to visit conventional stores and
actually experience clothes shopping. Even those consumers who prefer to shop at home
find the task of searching the Internet time-consuming, and browsing extensive catalogues
of women swear on screen has low appeal Buying clothes on the Internet is likely to grow
but it will probably never replace the experience of shopping for clothes. This is because
consumers need to see, feel, smell and even hear the material that garments are made of.
The advantage then of the Internet to most retailers is that it offers a secondary channel
fromwhich to sell ranges. This allows customers to view the wide variety of merchandise
on offer. It is also important for retailers to be part of the drive towards Internet home
shopping, although the value of trading over the Internet has yet to be established. In time
this will change.
Non-store book selling is an area where major change is taking place. The benefits of
the Internet are enormous as it enables book retailers to offer huge databases of titles
without actually having to stock or display them. It is common for retailers to stock over 1
million titles, giving these Internet-based sellers a huge advantage over operators in
conventional retail premises.
5.5. ATTRACTING AND RETAINING ONLINE CUSTOMERS
In an attempt to offer the high-quality service expected and to reduce customer
defections, retailers are now engaging in relationship retailing programs.
2
Relationship retailing
includes all the activities designed to attract, retain, and enhance customer relationships.
No longer will retailing be driven by the expansion of large, homogeneous chains offering
only low prices. Profitable retailers of the future will be those that concentrate on building
long-termrelations with loyal customers by promising and consistently delivering high-
quality products, complemented with high-quality service, shopping aids to ease the purchase
process, and using honest prices to build and maintain a reputation for absolute
trustworthiness. Loyal customers, after all, are less price conscious and are less prone to
shop other retailers selling the same merchandise mix. In addition, a study by the U.S.
Office of Consumer Affairs revealed that it costs a retailer five times as much money to
attract a new customer as it does to get a former customer to return.
1
As a result, todays
retailers are not trying to maximize the profit on each transaction, but are instead seeking to
build a mutually beneficial relationship with their customers, even to the point of dropping
unprofitable customers. The new operating maximfor retailers is: Proper management of
relationships will produce a satisfied customer who will become a repeat customer, and
NOTES
repeat customers produce long-termprofits. Leo Shapiro, a well-known retail consultant,
claimed that the dollars that walk out of a store every day to be spent at a competitors
store represent the most immediate, major source of potential sales and profit growth. The
late Robert Kahn, another retail consultant, often argued that just reducing the amount of
customer defections by as little as 10 percent can often double a retailers profits.
In an attempt to offer the high-quality service expected and to reduce customer
defections, retailers are now engaging in relationship retailing programs.
2
Relationship retailing
includes all the activities designed to attract, retain, and enhance customer relationships.
No longer will retailing be driven by the expansion of large, homogeneous chains offering
only low prices. Profitable retailers of the future will be those that concentrate on building
long-termrelations with loyal customers by promising and con-sistently delivering high-
quality products, complemented with high-quality service, shopping aids to ease the purchase
process, and using honest prices to build and maintain a reputation for absolute
trustworthiness. Loyal customers, after all, are less price conscious and are less prone to
shop other retailers selling the same merchandise mix. In addition, a study by the U.S.
Office of Consumer Affairs revealed that it costs a retailer five times as much money to
attract a new customer as it does to get a former customer to return.
1
As a result, todays
retailers are not trying to maximize the profit on each transaction, but are instead seeking to
build a mutually beneficial relationship with their customers, even to the point of dropping
unprofitable customers.
4
The new operating maximfor retailers is: Proper management of
relationships will produce a satisfied customer who will become a repeat customer, and
repeat customers produce long-termprofits.
High-performance retailers can develop these relationships with their customers by
offering two benefits:
1. Financial benefits that increase the customers satisfaction, such as the frequent
purchaser discounts or product upgrades already offered by some supermarkets,
airlines, and hotels.
2. Social benefits that increase the retailers social experience with the customer.
For example, Nordstroms employees not only drop notes to their frequent
shoppers; they maintain a file on each customer that lists family members, their
birthdays, preferences, and sizes. Thus, no customer is a stranger more than once
to a Nordstrom salesperson.
The impact model of retailing is based on retailings three most basic tasks: getting
consumers from your trading area into your store, converting these consumers into
loyal customers, and doing so in the most efficient manner possible.
DBA 1738
NOTES
Three Basic Tasks of Retailing
Source: Based on Management Horizons Impact Model of Retailing. Used with
permission.
Retailers today are so standardized in either their physical layout or web site design,
with each one carrying the same merchandise styles and colors, that customers cannot tell
them apart. More important, many retailers have an indifferent and undertrained sales
force. As a result, there is a complete breakdown of what is essential for a successful
retailer: exciting merchandise, backed up by outstanding service, and personal selling that
generates loyal customers. In recent years, the intense competition fromdiscounters caused
many retailers to lower customer service levels as a means of staying price competitive.
These retailers felt that reduced service levels would lower their operating costs thus allowing
increased price competitiveness. No wonder that the shopping experiences for most
customers have not always met their expectations, resulting in an unsatisfying experience.
6
Retailers must differentiate themselves by meeting the needs of their customers better
than the competition. Thus, retailers have again come to realize that customer service is a
strength. Instead of frustrating the customer by not having the necessary stock on hand or
the proper selling support on the sales floor, todays profitable retailers realize that customer
service is a major demand generator for their merchandise. However, it is important that
retailers also remember that when you encourage your customers to establish high
expectations, the slightest disappointment in service can be a catastrophe. Even Nordstrom,
the retailer most famous for its outstanding service, cannot please all its customers all the
time. One study quoted an unhappy customer as saying, Never during our visit did she
ask me how much money I wanted to spend, who my favorite designers were ... or what
fashion pet peeves I had.
7
Although Nordstrom really did not make any mistakes, the
high service retailer failed to live up to the very high expectations that it trained its customers
to expect. After all, this is the retailer who has an on-line operation that carries some 20
million pairs of shoes from more than 60 manufacturers so as to never disappoint a
customer.
8
Not having those items in stock when customers want thempredictably lowers
customer service and the resulting levels of satisfaction
NOTES
5.6. CUSTOMER RESPONSE MANAGEMENT
Customer service consists of all those activities performed by the retailer that influence
(1) the ease with which a potential customer can shop or learn about the retailers offering,
(2) the ease with which a transaction can be completed once the customer attempts to
make a purchase, and (3) the customers satisfaction with the transaction. These three
elements are the pre-transaction, transaction, and post-transaction components of customer
service. Some common services provided by retailers include alterations, fitting rooms,
delivery, gift registries, check cashing, in-home shopping, extended shopping hours, gift
wrapping, charge accounts, parking, layaway, and merchandise return privileges. It must
be remembered that none of these services are altruistic offerings; they are all designed to
entice the customers with whomthe retailer is seeking to develop a relationship.
Retailers should design their customer service programs around pre-transaction,
transaction, and post-transaction elements of the sale in order to obtain a differential
competitive advantage. After all, in todays world of mass distribution, most retailers have
access to the same merchandise and, therefore, retailers can seldomdifferentiate themselves
fromothers solely on the basis of merchandise stocked. The same can be said regarding
location and store design advantages. Retailers can, however, obtain a high degree of
differentiation through the satisfaction of customers as a result of their customer service
programs.
A retail shopping experience is more than negotiating your way through the retailers
store, web site or catalog, finding the merchandise you want, interacting (or not interacting)
with the staff, and paying for the merchandise. It also involves your actions before and
after the transaction. Therefore, serving the customer before, during, and after the transaction
can help to create new customers and strengthen the loyalty of present customers. If
customer service before the transaction is poor, the probability of a transaction occurring
declines. If customer service is poor at the transaction stage, the customer may back out of
the transaction. If customer service is poor after the transaction, the probability of a repeat
purchase at the same store declines. The customer who visits a retailer and finds that the
level of service is below expectations or that the product is out of stock will become a
transient customer. This transient, or temporary, customer will seek a retailer with the level
of customer service he or she thinks is appropriate. At any given moment, for all lines of
retail trade, there are a significant number of transient customers. The retailer with a
superior customer service program has a significant advantage in turning these transients
into loyal customers. Thus, customer service can play a significant role in building a retailers
sales volume.
Customer service cannot happen all by itself, but must be integrated into all aspects of
retailing. That is why the profitable retailers of the future will know that the demand for
their merchandise is not just price elastic, as economists would have us believe, but also
DBA 1738
NOTES
service elastic. This means that an increase in service levels of 1 percent will result in a
more than 1 percent increase in sales.
Six Rules to Follow When Handling a Customer
Acknowledge the importance of the customer. Before the customer even begins
to explain his or her problem, acknowledge that the customer is important by
telling himor her that you are there to help. Try to ease the customers frustration.
Understand the customers problem. Ask all the questions needed to completely
understand the situation. Determine the responsibilities of each party and what
went wrong. Do not assign any fault at this stage.
Repeat the problem(as you understand it) to the customer. Without interrupting
the customer, paraphrase the problemas you understand it.
Think of all possible solutions. Using your creative powers, think of all possible,
even wild, solutions that could remedy the problem.
Agree on the solution. Determine the solution that is fair to both parties and then
have both parties agree to it.
Above all, make sure the customer leaves feeling as you would want to feel if you
were the customer. If you would not be satisfied with the solution if you were the
customer, start over. Remember, it is better to lose a little now than to take a
chance on losing a customer for life.
Response Management
A comprehensive set of features must track the response of customers. Based on the
response the following activities could be undertaken (a) sending another mailer (b) moving
a target to a different campaign (c) changing the value of target parameters (d) deleting a
target, or (e) generating an opportunity or an order.
Response to mailer : The response to the mailer could be tracked on the basis of both
the time taken for the response and the message body.
URL and banner tracking : Embedding the trackable URLs and banners in mailers.
When a customer clicks the URL or banner, the database automatically updates this
information.
Web forms : Inserting the web forms in a mailer. The information submitted in these
forms is collated and sent as an e-mail to the EcrmSOLUTION. The solution then interprets
the content and creates an interaction based on this information. This information is also
saved directly in the integrated customer database.
NOTES
Analytic Tool : The campaigns could be analyzed through a rich set of back-end
metrics and reports. These reports would capture the number of people who have responded
in a step (step efficiency), the number of people who responded within a list (list efficiency).
They could also track the costs associated with each step, calculate the return on investment
(ROI) for campaigns and specific steps, the success percentage and the types of response
actions taken. In addition, the click-through ratio, the cost per thousand (CPM) and the
responses to banner ads, could also be analyzed.
Customers. Ideally these relationships would be personal; however, given the large
customer bases most retailers have this is difficult to achieve. Many retailers utilize systems
known as customer response management (CRM) (also called customer relationship
management or customer-responsive management) to help them develop customer
relationships that enhance customer service. CRM is a process in which databases are
used to collect information from customers that the retailer can then use in developing
programs designed to increase brand loyalty. Although CRM systems were developed to
assist in the logistics chain, they can be very effective when totally integrated into the IRM
plan. The systems are particularly effective for E-Tailers and direct retailers. Tone be
integrated throughout the entire retailing process.
IN the early 1960s, retail managers began to realize that their organizations needed to
become more flexible to achieve higher levels of customer service. An increase in competition,
often international competition, resulted in decreased overall market share for many U.S.
retailers. Prior to the 1960s, firms had concentrated on larger, or mass, markets while
ignoring smaller markets. Thus, in the 1960s, retailers determined that they needed to
capture the smaller markets to maintain their levels of market share. The result was market
segmentation. Allied with these increases IN competition were external environmental issues
of high energy prices, increases in interest rates, and increased technologies.
To deal with these environmental pressures, retailers and other businesses began to
increase their managements flexibility to adapt to the changes in the marketplace and
allow them to respond to the smaller market segments. Advances in technologies and the
desire to increase market share through technology-based products led to the development
of CRM. CRM allows a retailer to provide service that differentiates it fromcompetitors.
In addition, CRM processes allow retailers to communicate with millions of consumers
and at the same time make the communications appear personalized.
One - to -one Marketing
one-to-one marketing is a trend in retailing whose focus is not on accumulating
more customers but on generating increased business fromcurrent customers. With 1:1
marketing, the CRM database is used to make products and services more personalized.
For example, Sharper Image, a San Francisco-based retailer, identifies top customers by
lifetime value, in terms of how much these customers spend and how recent their last
DBA 1738
NOTES
purchase was. Its best customers get special offers, preferred mailings, and gifts during the
holiday season and sneak-preview e-mails about special new items. 1:1 marketing has
become successful not only in the United States but internationally as well.
Whether a retailer is domestic or international, CRM is a valuable tool for creating
customer relationships and, in turn, excellent customer service. In a recent survey in 1 to 1
Magazine, readers were asked what they believed are the most important factors in the
overall success of a customer-based strategy. The top three responses were (1) customer
communications, (2) executive buy-in, and (3) maintaining a long-termfocus for the execution
of the strategy. The education and motivation of front-line employees were seen as a
building block for success.
WHAT IS THE RIGHT CUSTOMER SERVICE LEVEL
One problemretailers face when developing customer service programs is determining
at what levels they should provide service to customers. Increasing sales is the overall
objective of customer service programs. When retail executives cut back on customer
services, the retailers profits may increase in the short run. In the long run, however, the
retailer runs the risk of losing a significant number of previously loyal customers. How
should a retailer determine adequate customer service level?
DEVELOPING THE CUSTOMER SERVICE LEVEL
A number of factors need to be addressed when attempting to develop the right
customer service level for a retail business. The process involves identifying the appropriate
match between customer expectations and retailer expectations.
(i) Customer Service Costs: Perhaps the most important aspect of customer service
leveling is the cost of providing the services. The retailers financial statements
should be accessed and a breakeven analysis performed regarding the cost of the
services and the return on investment. In other words, how much of a sales increase
can be expected from the customer service program, and what is the cost of
providing the service(s)? The retailer needs to keep in mind that lost sales from
poor customer service must be taken into account when developing the breakeven
point (BEP). If the retailer reduces financial support for the customer service
program, what will be the total amount of lost sales over the life of one customer or
group of customers?
(ii) Competitive Analysis: The second area to assess is the retailers competition.
When one competitor offers a service, consumers begin to wonder why another
retailer does not offer the same service. There must be some tradeoff for lower
service levels. Some retailers (e.g., discount retailers) reduce the prices of their
products to differentiate themselves fromtheir competitors.
NOTES
(iii) Income Level of Targeted Market: The income of the retailers targeted market
will have an impact on the level of service developed. As a rule, the higher the
income of the market, the higher the customer service level should be.
(iv) Customers Wants and Needs: Above all, the customer should be the focus when
determining customer service levels. What does the customer want and need in
terms of services? The decision as to what customer service level to provide is a
difficult one. Costs must be calculated and the retailers overall image, the pricing
structure, types of merchandise offered, the target markets income, and the
competition must all be taken into account when determining a customer service
level.
In addition to determining the right customer service levels for its customers, the
retailer needs to assess what kind of customer service it wants fromits supply channel. In
evaluating suppliers, many businesses use a supplier rating systemthat allows themto rate
each supplier choice
In a survey of buyers, respondents ranked items according to their importance on a l-
to-10 scale. In a supply chain relationship, the retailer is dependent on the supplier to
deliver products and services when they are promised- Thus, the supply chain becomes an
important part of the overall customer service process for the retailer, and to build the
retailer-supplier relationship, retailers must also practice good customer service. Sams
Club executive vice president of merchandising, Doug McMillan, was concerned that the
warehouse club was losing out on obtaining new items because suppliers complained that
store buyers were inaccessible. Sams club management started tracking when their
employees were late for appointments, and everyone worked to improve their punctuality.
The company realized that treating suppliers with respects causes the retailer-supplier
relationship to improve.
Developing CRM Programs
Having segmented customers according to their future profit potential, the next step in
the CRM process is to develop programs for the different customer segments.
Customer Retention
Four approaches that retailers use to retain their best customers are: Frequent shopper
programs are used both to build a customer database by identifying customers with
transactions and to encourage repeat purchase behavior and retailer loyalty. Retailers provide
incentives to encourage customers to enroll in the programand use the card. These incentives
are either discount on purchases made from the retailer or points for every dollar of
merchandise purchased. The points are then redeemable for special rewards. Four factors
limit the effectiveness of frequent shopping programs.
DBA 1738
NOTES
First, they can be expensive. For example, a 1 percent price discount can cost large
retailers over $100 million a year. In addition, for a large retailer, the launch and maintenance
investment (store training, marketing, fulfillment support, and information technology and
systems costs) can be as high as $30 million. Annual maintenance costs can reach $5
million to $10 million when marketing, programsupport, offer fulfillment, customer service,
and IT infrastructure costs are figured in. Then there are the marketing support costs
needed to maintain awareness of the program.
Second, it is difficult to make corrections in programs when problems arise. Programs
become part of the customers shopping experience. Customers must be informed about
even the smallest changes in programs. They react negatively to any perceived take away
once a programis in place, even if they are not actively involved in it. The more successful
the program is, the greater the customer reaction to changes made by the retailer are, and
these negative reactions reduce customer trust and loyalty with the retailer.
Third, it is not clear that these programs increase customer spending behavior and
loyalty toward the retailer. For example, 48 percent of the customers enrolled in frequent
shopper programs with supermarkets indicated they had spent more with the retailer than
they would have if the program were not offered, but only ..18 percent of customers
enrolled in programs with apparel retailers indicated that the programincreased spending.
Finally, and perhaps most important, is the difficulty of gaining a competitive advantage
based on frequent shopper programs. Since the programs are so visible, they can be easily
duplicated by com- petites. For example, Tesco and Safeway, two large supermarket
chains in the U.K., got into a loyalty card war. They played a game of can you top this,
which benefited their customers but reduced their profits until Safeway closed down its
program.
To avoid this problem, retailers are offering benefits to their best customers that are
more personalized based on their unique knowledge of the customer and thus more
invisible to competitors.
Special Customer Services:
Retailers provide unusually high quality customer service to build and maintain the
loyalty of platinum customers. For example, Century Banks of Raleigh, North Carolina,
rates its 2 million customers on a profitability scale from1 to 5. The top-tier customers get
calls fromservice reps several times a year for what controller Terry Early calls a friendly
chat and get an annual call from Centaurs CEO to wish themhappy holidays. Due to
these special services, the retention rates for top customers has increased 50 percent.
Sometimes these special services are very subtle. For example, at the website for
First Bank in Baltimore, only top-tier customers get the option to CLICK on an icon that
connects Them to a live service agent for a phone conversation. Other customers never
NOTES
see this icon. When First Bank service reps bring up a customers account, colored squares
flash on their computer screens. Green means the caller is a profitable customer and should
be granted waivers and other special treatment. Reds are unprofitable customers who get
no special treatment.
Personalization
An important limitation of CRM strategies developed for market segments, such as a
platinum segment in the customer pyramid or early repeat customers in the RFM analysis
is that each lent is composed of a large number of customers who are not identical. Thus,
any strategy will be most appealing for only the typical customer in the segment, and not as
appealing to the majority of customers in the segment.
For example, customers in the platinumsegment with the highest LTVs might include
a 25-year-old single woman that has quite different needs than the 49-year-oldworking
mother with two children. With the availability of customer-level data and analysis tools,
retailers can now economically offer unique benefits and target messages to individual
customers. They now have the ability to develop programs for small groups of customers
and even specific individuals.
For example, a Harry Rosen salesperson can search the companys customer data
base identify customers who have bought Hugo Boss suits in the past, and send theman e-
mail informing themabout the shipment of new suits that just arrived in the store. Developing
retail programs for small groups or individual customers Preferred to as 1 -to-1 retailing.
Many small, local retailers have always practiced 1-to-l retailing. They know-each of their
customers, greet them by name when they walk in (he store, and often recommend
merchandise they know the customers will like. These local store-owners do not need
customer databases and data mining tools. They have the information in their heads. But
most large retail chains and their employees do not have this intimate knowledge of their
customers. Thus, the CRM process enables larger retailers to efficiently develop
relationships similar to those that many small local retailers have. The Internet channel
provides an opportunity for retailers to automate the practice of 1-to-l retailing. When
registered customers log on to Amazon.com, the first page they see is personalized for
them. Their name is displayed in a greeting, and products are displayed based on an
analysis of their past purchase behaviour.
For example, if a customer has bought mystery novels fromAmazon.comin the past,
the latest books from mystery book authors they have bought are presented. These
personalized rewards or benefits that customers receive are based on unique information
possessed by the retailer and its sales associates. This information, in the retailers customer
database, cannot be accessed or used by competitors. Thus, it provides an opportunity to
develop a sustainable competitive advantage. The effective use of this information creates
the positive feedback cycle in the CRM process. Increasing repeat purchases with a retailer
DBA 1738
NOTES
increases the amount of data collected fromthe customer, which enables the retailer to
provide more personalized benefits that in turn increases the customers purchases from
the retailer.
Community
A fourth approach for building customer retention and loyalty is to develop a sense of
community among customers. The Internet channel offers an opportunity for customers to
exchange information using bulletin boards and develop more personal relationships with
each other and the retailer. By participating in such a community, customers are more
reluctant to leave the family of other people patronizing the retailer.
For example, in addition to offering merchandise for sale, a sporting goods retailer
could provide an opportunity for organizers of local sporting events to post information
about these events on its website. The volunteers Organizing youth soccer and little league
baseball leagues and tennis and golf tournaments could provide information about meetings
and game dates, times, and places.
Then the retailer could collect information about the participants in local leagues and
offer discounts to encourage the teams to buy their uniforms and equipment and facilitate
their transactions.
Converting Good Customers Into Best Customers
In the context of the customer pyramid increasing the sales made to good customers
is referred to as customer alchemy-converting iron and gold customers into platinum
customers. Customer alchemy involves offering and selling my products and services to
existing customers and increasing the retailers share of wallet with these customers.
For example, Tesco, the U.K. supermarket chain, added a second tier to its frequent
shopper program to increase share of wallet. The first tier has a traditional design to
gather customer data. The second tier, targeted at its better customers, is more innovative.
Customers earn a key when they spend $38 or more in a single transaction. Fifty keys
make the customer a key holder, hundred keys a premiumkey holder. When customers
achieve these higher levels, they get discounts on popular entertainment events, theater
rickets, sporting events, and hotel vacations. The key programseeks to convert iron and
gold customers into platinumcustomers. In the four years since starting the key program,
Tesco has raised its market share from13 percent to more than 17 percent. The retailers
customer database reveals opportunities for cross selling and add-on selling.
1. Cross Selling
Cross selling is selling a complementary product or service in a specific transaction,
such as selling a customer a printer when he or she has decided to buy a computer. For
NOTES
example, Fresh Farm, a Norfolk, Virginia-based supermarket chain, has a frequent shopper
program, called the Gold Card program, for its best customers. When Gold Card member
Debra Onsager enters the store, she swipes her card at a kiosk, and a high-speed
printer provides a personalized shopping list with up to 25 deals. The deals offered are
based on Debras purchase history. If Debras history shows she frequently purchases
corn chips but does not buy dip. Shell get a deal on bean dip printed on her shopping list
to encourage her to try a new product. If she passes up the deal this time in the market, the
next time the value of the bean dip coupon will be automatically increased.
2. Add-on Selling
Add-on selling is selling additional new products and services to existing customers,
such as a bank encouraging a customer with a checking account to also apply for a home
improvement loan fromthe bank. Vons, a southern California division of Safeway U.S.,
explored the opportunity to offer dry cleaning services in its supermarkets. To determine
the stores and customers that would find this new service appealing, it looked through its
customer database for households with two-income professionals, 25 to 35 years old,
who sought one-stop shopping as indicated by purchases of cosmetics, hosiery, and
prepared meals.
3 Dealing with Unprofitable Customers
In many cases, the bottom tier of customers actually have negative life time value .
Retailers actually lose money on every sale they make to these customers. For example,
catalog retailers have customers who repeatedly buy three or four items and return all but
one of them. The cost of processing two or three returned items is much greater than the
profits coming from the one itemthat the customer kept. The process of no longer selling
to these unprofitable customers can be referred to as getting the lead out, in terms of the
customer pyramid.
Two approaches for getting the lead out are (1) offering less costly approaches for
satisfying the needs of lead customers, and (2) charging the customers for the services they
are abusing. Fidelity Investments has about 550,000 website visits a day and more than
700,000 daily calls, about three-quarters of which go to automated systems that cost the
company less than a $1.00 each. The remaining calls are handled by call center agents,
who cost $13 per call. Fidelity contacted 25,000 lower tiered customers who place a lot
of calls to agents and told themthey must use the website for automated calls for simple
account and price information. Each name was flagged and routed to a special representative
who would direct callers back to automated services and tell themhow to use it. If all our
customers chose to go through live reps, it would be cost-prohibitive, said a Fidelity
spokeswoman.
DBA 1738
NOTES
Implementing CRM Programs
Increasing sales and profits from the CRM programs is a challenge. For example,
according to a study, 52 percent of the retailers surveyed indicated that they were engaged
in some type of data mining, but 76 percent of those retailers undertaking data mining
indicated that the activity had made no contribution to the bottomline.
This experience of retailers emphasizes that effective CRM requires more than
appointing a manager of CRM, installing a computer systems to manage and analyze a
customer database, and making speeches about the importance of customers. The effective
implementation of CRM programs requires the close coordination of activities by different
functions in a retailers organization. The MIS department needs to collect, analyze, and
make the relevant information readily accessible for employees implementing the programs-
the front-line service .providers and sales associates and the marketers responsible for
communicating with customers through impersonal channels (mass advertising, direct mail,
and e-mail). Store operations and human resource management needs to hire, train, and
motivate the employees who will be using the information to deliver personalized services
Most retailers are product-centric, not customer-centric. Buyers in a retailer firm are
organized by type of product. Typically, there is no area of a retail firm organized by
customer type-responsible for delivering products and services to types of customers.
Perhaps in the future, retailers will have market managers to perform this coordinating.
CRM in Retail
The concept of CRM has special relevance in retail. If used effectively, it can add
value to the offering made by the retailer. Many a times, it is believed that CRM is one-to-
one marketing. However, this perception is incorrect, as through an effective use of CRM,
a retailer can create products and services to suit the needs of the customer The starting
point for creating an effective programme is to classify the customer segments into :
Lower Value Segments,
Growable Segments and
Most Valuable Segments
Once these segments of customers are identified, different marketing and
communication platforms are needed for each segment.
Personal Selling in Retail
Creating an environment or an organization which is focused on the consumer, requires
that the face of the organization to most of the customers, the salesperson is a satisfied and
happy employee. A survey conducted by Gallup found that most of the time, companies
lose customers due to the attitude of rude and indifferent employees. This was not a small
number, but a whopping 68%. That is the impact that the salesperson can have on the
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customer. He is in fact, most of the time, the customers only contact with the retail
organization.
Why Companies Lose Customers ?
Most of the time, we tend to classify all the persons doing the role of sales at a retail
store as salespersons, however, that may not be completely accurate. The role of the
salesperson changes with the type of retail organization and the products to be sold.
Merchandise sold at retail stores many be broadly classified into : convenience goods,
shopping goods and specially goods. In case of convenience goods such as goods such as
food, grocery, drugs and impulse items, which are purchased at frequent intervals, the
salesperson plays a limited role.
In case of shopping goods, where consumers usually shop around before buying,
salespersons need to have a good background of merchandise information because many
customers will be relying on them for assistance and advice. For specialty goods, selling is
the most difficult, because it usually involves the purchase of merchandise that is higher
prices and more expensive than other merchandise. Needless to say, customers for specialty
goods must frequently exert considerable shopping effort and give serious consideration
before they buying, such goods, many of which could be once-in-a-lifetime items. Customers
expect the salespersons will have a fair amount of information about the merchandise and
to be able to advise them correctly.
Interestingly, while nationally branded merchandise plays an important role in the
specialty goods field, the customers confidence in the retailer frequently plays an equally
important part. In retail, a salesperson represents the business to the customer in the following
ways :
As a source of information, i.e., being knowledgeable about the stores merchandise
and policies.
As a fashion and value counselor who assists the customer with value comparisons of
items in the store or possibly, those of competing brands.
As a public relations representative, the salesperson represents the business to the
public or to the customers.
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As a mover of stock who assists in turning over or selling the inventory, which is the
primary objective of the business.
As a seller who assists the customer in making a decision to purchase the stores
merchandise.
It is because of the various roles performed by the salesperson that he is often termed
as a boundary spanner-he represents the store to the consumers and communicates customer
feedback to the management.
5.7. SUMMARY
It has been realized frommany vendors that the CRM solutions were developed for
a single purpose-to help businesses to manage customer communications efficiently. These
systems are client/server-based, with a focus on handling the workflow within the
corporation, as well as on cost-reduction and resource allocation. By its nature, the CRM
is an internal mechanismfocused purely on automating the technical processes of sales and
service. The communication channels likewise are limited to low-tech avenues such as
storefronts, telephones and mail. Rather than providing the customer with an interactive
experience, the CRM focuses on helping the internal groups that could handle the customer
requests in a reactive way. The CRM limits the communications and information sharing to
only two groups-the service representatives and the customers.
Unfortunately, the business issues are rarely so limited: customers, partners, suppliers
and company representatives need communication interaction and information to access
across all parts of the organization and not just the service center. Even more limiting,
because customers, partners and suppliers have no access to information, they could not
find the relevant information or solve problems themselves, resulting in a more service-
intense, costly, less-satisfying relationship with the company.
The CRMs client/server technology has been able to create almost unlimited data
warehouses. But, as applications began to address the sales force automation (SFA),
customer profiling, product distribution, web-based interaction and e-commerce,
these applications were developed as separate information stovepipes with little or no
integration between the systems. As a result, valuable information remains untapped and
non-integrated and companies are missing out on the knowledge that they could gain by
viewing and managing the enterprise-wide relationships. The complexity only increased as
the bridges attempted to include various internal and external groups as well as multiple
communication channels including the e-mail, the web, phone, and wireless aided protocol
(WAP). When the Internet arrived, it sounded the death knell for client/server solutions
that cannot scale to meet the exponential increase in interactions and information needs the
Internet has unleashed. All of a sudden, the business enterprises must adapt to a new
business model and new solutions must be created for the new e-business economy.
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When companies use the new technology to its full potential, it could provide effective
market research to establish consumers areas of interest, as well as to gather electronic
information at the point of sale (POS) that providers do not currently hold in a usable
electronic format. Many financial services organizations are moving towards the business
models adopted by retailers-most of themhave an inbred marketing and service culture an
huge databases of customer information, allowing themto react quickly to changing market
conditions. However, many are still reactive rather than proactive, with even some of the
newer players not adapting to the changing market fast enough. To move towards a true
market-led culture, the providers should establish their customers requirements and
incorporate these into their business development plans. In this we have seen the practical
uses of the CRM and its components. Managing the customer relationship is one of the
uphill tasks of any organization in the present global scenario.
1. Explain the termviral marketing and assess its relative merits and demerits?
2. Explain the important factors to be considered in designing the website for your
retail business.
3. Explain the method of attracting and retaining online customers.
4. How the customers queries are managed in retail business?
DBA 1738
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1 ANNA UNIVERSITY CHENNAI

Person to person Store Telephone/television

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