Strategic Marketing

1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

CHAPTER 12
Promotion, Advertising, and Sales Promotion Strategies Promotion Strategy Advertising Strategy Sales Promotion Strategy
McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

PROMOTION STRATEGY

The Composition of Promotion Strategy Developing Promotion Strategy Communications Objectives Deciding the Role of the Promotion Components Determining the Promotion Budget Promotion Component Strategies

Integrating and Implementing the Promotion Strategy

Effectiveness of Promotion Strategy
12-3

Promotion Strategy:
planning, implementing, and
controlling an organizations communications to its customers

And other target audiences.

12-4

Composition of Promotion Strategy

Interactive/Internet Marketing Direct Marketing Personal Selling Public Relations
12-5

Advertising Promotion Components Sales Promotion

U. S. Annual Expenditures (billions)

$600
$400 $200 0

Sales Promotion Personal Selling

Advertising

12-6

INTERNET FEATURE

Brand Advertising On-Line Has Taken Off

SEARCH WORKS Google and Yahoo! Have demonstrated the power of the Web by using customers search queries to connect them with advertisers. CUSTOMERS ARE ONLINE More than half of American households have always-on Net connections. And the Web reaches millions at the office. The Big Three portalsYahoo, AOL, and MSNreach a combined 50 million a day-twice the TV audience of a World Series game. VIDEO ROCKS The adoption of broadband, which can handle videos, lets advertisers put TV-like ads online. Longer spots by BMW and Adidas have reached cult status. As demand for video soars, portals sell choice slots in advance, much like TVs up-front sales. FEEDBACK IS INSTANT Marketers and online publishers have tools to track an ads performance in real time allowing them to make quick adjustments if customers arent clicking. This turns the Net into a vast marketing lab. And as video grows, it becomes a test bed for TV ads. CUSTOMERS LEAVE TRAILS It was an empty promise during the dot-com days, but now advertisers have the technology to follow customers, click by click, and to hit them with relevant ads. The upshot? No wasted money peddling dog food to cat owners.
Source: Stephen Baker, The On-Line Ad Surge, BusinessWeek, November 22, 2004, 79.

12-7

DESIGNING THE PROMOTION STRATEGY

MARKET TARGETING AND POSITIONING STRATEGIES COMMUNICATION OBJECTIVES ROLE OF PROMOTION COMPONENTS
Advertising Sales Promotion Public Relations Personal Selling Direct Marketing Interactive/ Internet Marketing

PROMOTION BUDGET
Coordination with Product, Distribution, and Price INTEGRATE AND IMPLEMENT PROMOTION Strategies

PROMOTION COMPONENT STRATEGIES

COMPONENT STRATEGIES

EVALUATE EFFECTIVENESS OF PROMOTION STRATEGY

12-8

Illustrative Communications Objectives

Need Recognition Finding Buyers

Brand Building
Evaluation of Alternatives Decision to Purchase Customer Retention
12-9

Deciding the Role of the Promotion Components

Expected contribution for each of the promotion components.
Which communication objective(s) will be the responsibility of each component? What part of the budget will go to each component?

12-10

Factors Guiding the Role Assigned to Each Component

Market Target(s) Desired Positioning Role of Promotion in Positioning Product Characteristics Stage of Life Cycle Situation Specific Factors

12-11

Determining the Promotion Budget

Objective and Task

All You Can Afford

Budgeting Approaches

Percent of Sales

Follow the Competition

12-12

Budgeting Methods
Features
Percent of Sales Fixed percent of sales, often based on past expenditure patterns. Comparative Parity Budget is based largely upon what competition is doing. Objective and Task Set objectives and then determine tasks (and costs) necessary to meet the objectives.

Limitations
Percent of Sales The method is very arbitrary. Budget may be too high when sales are high and too low when sales are low. Comparative Parity Differences in marketing strategy may require different budget levels. Objective and Task The major issue in using this method is deciding the right objectives so measurement of results is important.

12-13

Integrating and Implementing Promotion Strategy

Avoiding fragmentation Difficulty in evaluating productivity Differences in priorities Separate organizational units Assigning integration responsibility

12-14

Illustrative Factors Affecting Promotion Strategy

Advertising/ sales promotion driven Balanced Personal selling driven

Large Low

Number and dispersion of buyers Buyers information needs Size and importance of purchase

Small High

Small Distribution

Large
Direct High Yes
12-15

Channel Product Complexity

Low No Post-purchase contact required

Promotion Strategy Issues

Expense/Response Relationships Allocation Impact on Brand Equity

Integration of Promotion Components

Effectiveness of the Strategy

12-16

ADVERTISING STRATEGY

Setting Objectives and Budgeting Creative Strategy Media/Scheduling Decisions Role of the Advertising Agency

Program Implementation and Measuring Effectiveness

12-17

The Internet is Shifting the Power Position to the Customer

* How the Money is Spent is Changing. * The Amount Spent on Internet Advertising is a Small Fraction of the Total, but Very Powerful and Growth is Accelerating. * Consumers Spend 10 hrs/person/day with Media of all KindsHow Much is Media Multi-Tasking? * Ad Spending Versus Consumers Time Allocations. * Advertising Agency Consolidation and Reorganizationthe Big 4. * Do Companies Recognize the Revolutionary Implications of Newly Empowered Consumers? * The Internet Will be the Most Prominent Medium in the Lives of the 18-34 Age Group.
Source: The Economist, Crowned at Last: A Survey of Consumer Power, April 2, 2005, 1-16.

12-18

Advertising Strategy
Target Audience

Advertising Objectives
Advertising Budget

Creative Strategy Advertising Media and Programming Schedules Evaluate the Effectiveness of the Strategy
12-19

Advertising Objectives
Expose communication to target audience Create awareness

Change attitude(s)

Increase Sales

Generate profits

12-20

Alternative Levels for Setting Advertising Objectives

Increasing Uncertainty About Impact on Purchasing Behavior Type of Objective Increasing Difficulty of Measurement Exposure Awareness Attitude Change Sales Profit
12-21

Budget Determination
OBJECTIVE AND TASK METHOD HAS THE MOST SUPPORT

Budget Determination

Media/ Scheduling Decisions

Creative Strategy
12-22

The Vuitton Machine*

Inside the worlds biggest, most profitable luxury brand BENCHMARKING VUITTON
Brand 2003 Sales Billions Percent Change* Operating Margin

Louis Vuitton Prada Gucci** Herms Coach

$3.80 1.95 1.85 1.57 1.20

+16% 0.0 -1.0 +7.7 +34.0

45.0% 13.0 27.0 25.4 29.9

*At constant rate of exchange **Gucci division of Gucci Group Data: Company reports. BW

Vuitton increased advertising 20% in 2003spends only 5% of revenues on advertisingabout half the industry average

*BusinessWeek, March 22, 2004, 98-102.

12-23

The creative strategy is guided by the market target and the positioning strategy.

CREATIVE STRATEGY

Product

Distribution

Price

Promotion
Advertising

(How to communicate intended positioning to buyers and others influencing the purchase.)

Provide a unifying concept that binds together the various parts of the advertising campaign.

Creative Strategy
12-24

Media/Scheduling Decision

Television
Radio Magazines Online Website

Outdoor

12-25

Relative access to the target audience

Favorable zone

Unfavorable zone Relative cost of reaching the target group(s)

12-26

Advertising Agencies in Perspective

Fast change has come to the advertising industry. Huge, integrated agencies face a challenging future. Do clients want a full-service agency? The business model is in need of change. The basis of compensation continues to be debated and altered. Specialists (e.g. media buying services) are being used. Importantly, the core of the creative process is the agency. Several methods are available to evaluate advertising results.

12-27

Role of the Advertising Agency

Target Audience

Advertising Objectives

Advertising Budget

Creative Strategy

Advertising Agency

Advertising Media and Programming

Evaluate the Effectiveness of the Strategy

12-28

Advertising Strategy Implementation and Effectiveness

Decide how to measure effectiveness before implementing the strategy. Assign responsibility for tracking performance. Assessing the quality of advertising is important. Exposure to advertising is not a very sensitive measure of effectiveness. Several methods are available to evaluate advertising results.

12-29

Rating Services Test Marketing Sales and Expense Analysis

MEASURING ADVERTISING EFFECTIVENESS

Recall Tests

Controlled Tests

12-30

SALES PROMOTION STRATEGY

SALES PROMOTION consists of various incentives, mostly short term, intended to stimulate quicker and/or greater purchase of particular goods/services by consumers or the trade.

12-31

STRATEGY FEATURE
* * * * * * * * *

The Realities of Mail-in Rebates

Consumers hate the hassles, companies love unredeemed rebates, and regulators are investigating the consumer complaints. As much as 40% of rebates never get redeemed. Some 400 million rebates are offered each year with a total value of $6 billion. Unclaimed rebates translate into more than $2 billion of extra revenue for retailers and their suppliers each year. Complex filing rules and long delays discourage consumers. Companies emphasize the filing processes are intended to discourage fraud. The largest rebate processor monitors 10,000 addresses suspected of submitting bogus rebates. Rebates offer companies an opportunity to promote small discounts without marking the products down. Rebates have become very popular with computer and consumerelectronics companies.
12-32

The value of rebates has also increased.

*
* * * *

Regulators are intensifying their scrutiny of the companies offering rebates.

The developing back-lash against rebates is pushing some companies to halt rebate strategies. Others are encouraging online filing. Fulfillment houses are revising their processing systems, using computer technology to validate claims. Consumers would like mail-in rebates to go away but want the best price they can get.

Source: Brian Grow, The Great Rebate Runaround, BusinessWeek, December 5, 2005, 34, 36, and 37.

12-33

Sales Promotion Activities and Targets

Activities include trade shows, specialty advertising, contests, displays, coupons, recognition programs, and free samples. SALES PROMOTION TARGETS
Consumer Buyers Salespeople Business Buyers Value Chain

12-34