Role of Promotion

Definition:
To communicate with individuals, groups or organizations to directly or indirectly facilitate
exchanges by informing and persuading one or more audiences to accept an organization's
products.

-Companies must communicate with their customers, this communication should not be left to
chance.
Design communication to your specific target audience:

 Target Market
 Part of Target Market
 Different stakeholders of your organization.

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Promotion and Society

Marketers need to coomunicate, therefore need a medium to facilitate communication.
$235 bn predicted to be spent in 1994 on advertising WW $94 bn in US.
Pay for media (1994)

 TV $27.1b 1994
 Newspapers $25b*1993
 Radio $9.57 b 1993
 Magazines $7.62 b 1993

Marketers need to communicate, therefore provide funds for Event Sponsorship

Handout...Projected surplus for 96 summer Olympics

no tax payer money needed to finance the games. Cost $1.54 bn, financed mostly by marketers
wanting to use the Olympics as a medium to communicate to customers.

Employment
sales people
advertising agencies etc.
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Promotion and the Communication Process

Handout...Chrysler market Cirrus...
This article illustrates a number of elements in the communication process.

Nine elements to the communication process.

Sender Chrysler and Receiver Target Market (35-50yr aspire BMW/Lexus) are the major parties
in the communication process.
Message New Car, Cirrus, comfort of a Lexus and handling of a BMW for less money and the
media TV, direct mail, Brooks Brothers etc are the major communication tools.

4 more major functions:

 Encoding--putting thought into symbolic form. Advertising Agencies creating radio

commercials, TV commercials, prepare direct mail pieces, sales pitch etc
 Decoding--consumer interprets message. Understanding the target market's perception
process is critical.
 Response--reaction of the receiver buy or not to buy, take next step down AIETA, go to
the showroom etc.
 Feedback--response communicated back to the sender 1-800 #s, increase in sales.
Number of customers in show room etc. Better for Personal Selling, not advertising

Last element is Noise in the system, more noise with non-personal communication

Sender needs to know:

 what audiences they want to reach

 what responses they want.
 how the target audience decodes messages
 what media will effectively reach the target audience

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Promotional Mix
Organizations combine specific ingredients of the promotional mix to promote a particular
product.

All promotionals tools (promotional mix):

 Advertising
 Sales Promotion
 Publicity

must blend harmoniously into an effective communication strategy, to meet the promotional
objectives.
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Advertising:

Definition:
Paid form of non personal communication about an organization or its products that is
transmitted to a target audience through a mass/broadcast medium.

Pros

 Flexibility allows you to focus on a small, precisely defined segment (School

newspapers) or a mass market (baseball show = Males, 35-50).
 Cost efficient-reach a large number at a low cost per person, allows the message to be
repeated, and can improve public image.
 Allows for repeating the message-lets the buyer receive and compare the messages of
various competitors.
 Very expressive, allows for dramatization.
 Also used to build a long term image of a product.
 Trigger quick sales, Sears advertising a weekend sale.

Cons

 Absolute $ outlay very high, make a national TV ad. approx $150,000, local ad. $60,000.
30 second spot, Superbowl $1.1 m 1995
 Rarely provides quick feedback, or necessarily any feedback
 Less persuasive than personal selling
 Audience does not have to pay attention
 Indirect feedback (without interactivity)

Cirrus...used national advertising, local, direct mail, posters etc.

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Personal Selling:

Occurs through personal communication in an exchange situation.

 More specific communication aimed at one or more persons.

 Effective at building buyers preferences, convictions and actions.
 Cost per person is high, most expensive promotional tool.
 Greater impact on consumers
 Provides immediate feedback
 Allows marketers to adjust message quickly to improve communication.
 Buyer feels a great need to listen and respond.
 Long term commitment is needed to develop a sales force.

Cirrus..sales representatives in show rooms.

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Public Relations/Publicity:

News story form about an organization or its products or both (MBA, Philadelphia Inquirer),
through mass medium at no charge.

Sponsor does not pay (generally), may be expected/required to run advertisements in the media.
Can be positive and negative. Pepsi Syringe.
Believable
Cirrus...Articles in Car and Buyer, WSJ, and this article etc.
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Sales Promotion:

Definition:
Materials that act as a direct inducement, offering added value, or incentive for the product, to
resellers, sales persons or consumers.
Designed for immediate (short term) increase in product sales.
Cirrus...Sweepstakes, cocktail parties, test drives
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Selecting Promotional Tools

A marketer must do the following while planning and sending communications to a target
audience:

1. Identify the Audience

Individuals, groups, special publics or the general public.
Intermediaries vs Consumer
2. Identify the Stage of Product Life Cycle
o Introductory Inform Publicity/Advertising/Sales force (interm.)/Sales promotion
(free samples)
o Growth Persuade Differentiate from competitors offering
o Maturity Remind Reminder advertising, Sales promotion (coupons)
o Decline Cut budget
3. Product Characteristics
o Complexity How much information must be communicated. The more complex
the message, the greater the need to use personal selling.
o Risk Greater risk, greater need for personal selling
4. Stages of Buying Decision
In many cases the final response sought is purchase, but purchase is the result of a long
process of consumer decision making. Need to know where the target audience now
stands (in the process), and what state they need to be moved to.

Adoption Process
 o Not Aware--Advertising/Publicity
o Aware--no knowledge Advertising/Publicity
o Interest--how do they feel? Personal Selling/SalesPromotion/Advertising
o Evaluation--should they try? sales promotion/personal selling
o Trial--test drive/sales promotion
o Adoption--do they purchase? Reminder/reinforce--advertising

Communication programs goal must lead consumers to take the final step.

5. Channel Strategies
-Push Vs Pull Policy
o Push-promotes product only to the next institutions down the marketing channel.
Stresses personal selling, can use sales promotions and advertising used in
conjunction.
o Pull-promotes directly to consumers, intention is to create a strong consumer
demand, primarily advertising and sales promotion. Since consumers are
persuaded to seek products in retail stores, retailers will in turn go to wholesalers
etc (use channels overhead)

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Nature of Sales Promotion

Encompasses all promotional activities and materials other than personal selling,
advertising and publicity. Grown dramatically in the last ten years due to short term focus
on profits. Funds are usually earmarked for advertising are transferred to sales promotion.
Often used in conjunction with other promotional efforts.
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Scope and importance of sales promotion:

o 323 billion coupons were distributed 1993 nationally annually (3,200/household),
only 2.3% are redeemed.
o 9000 trade shows containing 10 exhibits or more/year. New York auto show
attracts more than a million people per year.
o $15-20 billion/year spent on point of purchase material in stores.

Why??

o companies are looking to get a competitive edge

o quick returns are possible for short term profits
o more consumers are looking for promotions before purchase
o channel members putting pressure on mf. for promotions
o advances in tech. make SP easier (ie coupon redemption)
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Sales Promotion Opportunities and Limitations

o Increase in sales by providing extra incentive to purchase. May focus on resellers
(push), consumers (pull) or both.
o Objectives must be consistent with promotional objectives and overall company
objectives.
o Balance between short term sales increase and long term need for desired
reputation and brand image.
o Attract customer traffic and maintain brand/company loyalty.
o Reminder functions-calendars, T Shirts, match books etc.
o Impulse purchases increased by displays
o Contests generate excitement esp. with high payoffs.

Limitations

o Consumers may just wait for the incentives

o May diminish image of the firm, represent decline in the product quality.
o Reduces profit margins, customers may stock up during the promotion.
o Shift focus away from the product itself to secondary factors, therefore no product
differential advantage.

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Sales Promotion Methods

Consumer Sales Promotion Techniques

-encourage/stimulate customers to patronize a specific retail store or to try a specific

product.

o Coupons:

Usually reduce the purchase price or offered as cash. Need to state the offer
clearly and make it easy to recognize.

Handout...Awash in Coupons...

Looks at the volume of coupons (323 bn) and the poor redemption rate (less than
3%). Looks at more innovative media to deliver coupons (currently over 80% are
delivered via the Sunday paper)....in store by the products, as customers exit the
store based on purchases...discussed delivering coupons to customers as they
enter the store, using a card that swipes to indicate past purchases. Past buying
 behavior is the best predictor of future buying patterns!! Also discussed that they
may be delivered via TV, in conjunction with an advertisement.

Users only redeem coupons they would ordinarily purchase. 75% of the coupons
are redeemed by consumers who would buy the brand already.

Stores/marketers are honoring competitors coupons etc.

Stores often don't have enough of the couponed item in stock.

o Demonstrations:

Excellent attention getters. Labor costs are usually high.

o Frequent User Incentives:

Major airlines, helps foster customer loyalty to a specific company. Credit card
companies. Trading stamps-Co-ops back in England, foster retail loyalty.

Blockbuster's new credit card offers company products based on card usage.
Cindy Crawford "Why wait for whats coming to you" Co-Branded with
immediate rewards...this is what is very appealing about this card...immediate
reward, as opposed to having to build up points for an air flight etc.

Airlines have had to raise the threshold of their award programs 35,000 from
20,000, 2 free round trip tickets due to $3+trillion liabilities
Long Distance telephone also offer free air miles, >$25/mo = airmiles
Frequent User cards are used to collect information for companies enabling them
to better target their customers.

o Point of Purchase Display:

Outside signs, window displays, counter pieces, display racks. 90% of retailers
believe that point of purchase materials sell products.

Essential for product introductions. Also with 2/3 of purchasing decisions made in
the store, they are important.

o Free Samples:

Stimulate trial of product. Increase sales volume at the early stage of the product
life cycle and obtain desirable distribution.
Most expensive sales promotion technique.
Not appropriate for mature products and slow turnover products.

Handout...With Sampling there is too a free lunch

 Discusses the pros and cons of free sampling.

o Money Refunds/Rebates:

Submit proof of purchase and mail specific refund, usually need multiple
purchase for refund. Helps promote trial use, due to the complexity of the refund,
it has little impact.
Customers have a poor perception of rebate offered products.
Used extensively in the Auto and Computer industry.

o Premium Items:

Offered free or at minimum cost as a bonus. Used to attract competitors

customers, different sizes of established products.
Gas stations give free glasses--basics buy!! McDonalds premium items are
considered collectors items by some!
Flintstones program last year with McDonalds.
Burger King with the Lion King movie
Last summer the following tie-in premium programs.

 Casper with Pepsi, Pizza Hut, Choice Hotels

 Congo with Taco Bell
 Batman Forever with McDonalds, Kelloggs, Six Flags, Sears
 Pocahontas with Chrysler, Nestle,General Mills, Burger King
 Mighty Morphin with McDonalds
o Cents-off Offer:

Strong incentive for trying a product-very similar to coupons, but are a part of the
package.

o Consumer Contests and Sweepstakes:

Consumers compete based on their analytical or creative skills. Must be accurate

or you will anger customers/retailers.
Sweepstakes are prohibited in some states.

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Trade Sales Promotion Techniques

Push Policy emphasizes promotions focused on the next intermediary.

Trade Sales Promotion Techniques-stimulate wholesalers and retailers to carry products
and to market them aggressively.
Producers use sales promotion techniques to encourage resellers to carry their products
and to promote them more effectively.
 o Allowances and Discounts:
 Merchandise...reimburse for extra retail support, i.e. advertising, shelf
space
 Case...discount on cases ordered in specific period.
 Finance...Paying for financial costs/losses associated with consumer sales
promotions.
o Cooperative Advertising:

Manufacturer agrees to pay a certain amount of retailers media.

o Training of Sales Staff

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Publicity
At no charge (most of the time) Part of public relations, a broad set of communication
activities used to create and maintain favorable relations between the organization and its
publics:

o customers
o employees
o stockholders
o government officials
o society in general

Need to cultivate effective media relations, and targeting publicity to key markets are
viewed as the highest priorities.

Handout...Communicators Guide To Publicity

What is news?
Planning Publicity Program
Writing a news release
Photographs
Radio and TV News
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Publicity and Advertising compared

o Publicity is primarily informative
o Advertising is informative and persuasive
o Publicity is more subdued
o Publicity does not identify the sponsor
 o Publicity is free (??!)
o Publicity is part of a program or print story and appears more objective
o Publicity is not subject to repetition
o Publicity is more credible
o Little control over publicity

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Dealing with Unfavorable Publicity

Handout...The Right Moves Babes

Discusses how Pepsi dealt with the Syringe incident, using primarily publicity to
overcome bad publicity.

Bad news receives much attention in the media. Need to deal with bad publicity.
First, need to try to reduce the # of incidents that produce negative publicity (effective
TQM etc.), use policies and procedures to cover negative publicity.
Expedite coverage as opposed to blocking it.
Avoid rumors and misinformation.
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