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PESIT Bangalore South Campus
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Answer Key for INTERNAL ASSESSMENT TEST –2
Date
29/4/2015
Subject & Code : Integrated Marketing Communications – 12MBAMM417
Name of faculty: Ravi Urs
Max Marks: 50
Section
:A
Time
: 8.30 – 10.00 AM
Note: Answer all questions
1.
a
What is push and pull strategy in advertising?
3
Push strategy involves the manufacturer and the resellers. It includes trade-oriented
promotions like trade shows, cooperative advertising, displays, sales training, etc. Here
the wholesalers and retailers must entice the consumers to buy the product.
Pull strategy involves the manufacturers’ and the end consumers. It includes are
consumer-oriented promotions like rebates, coupons, sweepstakes, loyalty, event,
sampling, etc. Here the retailers have to just stock the products and these will be pulled
by the end consumers
b
c
MBA IV
If you are using "sampling" for your sales promotions campaign what are the various
sampling distribution methods available to you?

Door-to-door Methods

Sampling through the mail

In-store sampling

On-package sampling

Event sampling

Inserting packets in magazines or newspapers

Product given to people who call toll free number or mail in request form

Make use of specialized distribution service companies

Company websites where consumers register to receive free samples
Briefly explain various approaches for setting the promotional budget.
7
10
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
There are two broad approaches:
1) Top-down approaches
2) Build-up approaches
Top-down approaches
Budgetary amount is established at top level and then monies are passed down to
various departments. Budgets are predetermined and have no theoretical basis.
It includes:
a) The affordable method
b) Arbitrary allocation
c) Percentage of sales
d) Competitive parity
e) Return on Investment (ROI)
The affordable method
The amount to be spent in areas like production and operations is determined. What's
left is allocated for advertising/promotion. This amount is considered as what the firm
can afford. The task to be performed by advertising/promotion is not considered.
Likelihood of under or over spending very high. Companies spending within their limits,
no overspending is high. No guidelines for measuring the effects of various budgets are
established. This method is common among small firms and large firms which are not
market driven and so do not understand the role of advertising. The logic for this
approach is that the firm will not get in financial problems. This method does not make
any sound managerial decision making from a marketing perspective. Often, this method
does not allocate enough money to get the product off range A in S shaped curve. Or the
firm may be spending more by operation in range C. During tough times when sales
and/or profits gets to fall, this method will lead to budget cuts at a time when the
MBA IV
USN
1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
budgets have to be increased.
Arbitrary allocation
There is no theoretical basis and the budget is set by fiat. It is based on what
management feels to be necessary. There are no advantages in this method. There is no
systematic thinking. No objectives have been budgeted for. Concept and purpose of
advertising/promotion ignored.
Percentage of sales
It is one of the most commonly used method. The Advertising/promotion budget is
based on sales of product. The determination of the budget is done either as:
Taking a percentage of the sales dollars: The percentage is usually based on the industry
standard. It varies from industry to industry. Sometimes it can also be a percentage of
the projected sales rather than the previous year’s sales. Percentage of projected sales
helps in better management of changing environment as it reflects current conditions
and be more appropriate.
Assigning a fixed amount of the unit product cost to promotion and multiplying this
amount by the number of units sold: The number of units sold can be the projected
numbers for the upcoming year also.
Difficult to apply for new products as there is no sales history. Using projection is also
difficult for innovative products. During hard times when products re not selling much it
lead to cutting of budget making the product less competitive and loss of further market
share. Researchers have proved the positive effects of more ads during recession. There
are always problems with forecasting, cyclical growth and uncontrollable factors that
limit its effect.
Competitive parity
In this method, managers match the competitor's percentage-of-sales expenditures.
Companies that provide competitive advertising information, trade associates, and other
advertising industry periodicals are a source for competitor’s information. It may mean
using the collective wisdom of industry. It considers competition. It may lead to stability
in marketplace by minimizing marketing warfare. It is mostly used in conjunction with the
percentage-of-sales or other methods. Smaller companies may use clipping service,
where ads from the local print media are clipped and the company works backwards to
MBA IV
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
estimate the cost of budget.
Return on Investment (ROI)
Advertising/promotions are considered as investments. These investments lead to
certain returns. It is difficult to assess the returns provided by promotional effort. It is a
difficult method to employ. It leads to predetermined budget appropriation often not
linked to objectives and the strategies designed to accomplish them.
Build-Up approaches
It helps overcoming the short comings of Top-down approach. It considers the firm's
communicative objective and budget is set to accomplish the communicative objectives.
The idea of this method of budgeting is to ensure that the promotional mix strategies can
be implemented to achieve the stated objectives.
Objective and Task Method
Objective setting and budgeting must go hand in hand rather sequentially. Budgeting
must be to achieve a objective and objective has to be set based on the availability of
budget. This method uses the build-up approach. It has three steps:
1) Defining the communications objectives to be achieved
2) Determining the specific strategies and tasks needed to attain objectives
3) Estimating the costs associated with performance of these strategies and tasks
Total budget is based on the accumulation of these costs
Payout planning
Payout planning determines the investment value of the advertising and promotion
appropriation. The basic idea is to project the revenue that will be generated and the
cost that will be incurred over the next two to three years. Based on expected rate of
return, the payout plan will help in determining how much advertising and promotional
expenditure will be necessary when the return might be expected. The advertisement
and promotion figures are the highest in year 1 and decline in year 2 and 3. This reflects
the additional layout needed to make as rapid an impact as possible. When used in
conjunction with objective and task method, it provides a much more logical approach to
budget setting than the top-down approach.
MBA IV
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Quantitative models
Multiple regression models are used to determine the relative contribution of the
advertising budget to sales. It has met with limited acceptance.
2.
a
What is sales promotion?
3
Sales Promotion is defined as “a direct inducement that offers an extra value or incentive
for the product to the sales force, distributors, or the ultimate consumers with the
primary objective of creating an immediate sell.”
b
Explain advertisement scheduling methods.
Though ideally every marketer would like to show the product or brand at every given
opportunity it is not practical due to constraints like budget. Scheduling is intended to
time promotional efforts so that they will coincide with the highest potential buying
times.
Three types of scheduling methods can be used:
1) Continuity
2) Flighting
3) Pulsing
Continuity
It is a continuous pattern of advertising like every day, every week or every month. A
regular pattern is developed without gaps or non-advertising periods. This scheduling is
useful for food products, laundry detergents, or items consumed on an ongoing basis
without regard to seasonality.
Advantages
a) Serves as a constant reminder to the consumer
b) Covers the entire buying cycle
c) Allows for media priorities (quantity discounts, preferred locations, etc)
MBA IV
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Disadvantages
a) Higher costs
b) Potential for over exposure
c) Limited media allocation possible
Flighting
Here the scheduling is intermittent period of advertising and non-advertising
Advantages
a) Cost efficiency of advertising only during purchase cycles
b) May allow for inclusion of more than one medium or vehicle with limited
budgets
Disadvantages
a) Increased likelihood of ware out
b) Lack of awareness, interest, retention of promotional message during
nonscheduled times
c) Vulnerability to competitive efforts during nonscheduled periods
Pulsing
It is a combination of first two methods. Here the continuity is maintained with certain
periods of stepped up efforts. This strategy depends on objectives, buying cycles and
budget.
Advantages
a) Serves as a constant reminder to the consumer
b) Covers the entire buying cycle
c) Allows for media priorities (quantity discounts, preferred locations, etc)
MBA IV
USN
1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
d) Cost efficiency of advertising only during purchase cycles
e) May allow for inclusion of more than one medium or vehicle with limited
budgets
Disadvantages
a) Not required for seasonal or cyclical products
Recent researches have proved that continuity is more effective than flighting. It would
be better for advertisers to continue weekly schedules as long as possible
c
What are the advantages and limitations of television?
Television is said to be ideal advertising medium. It combines visual image, sound,
motion and color. It is very imaginative and creative media.
Advantages of TV
Creativity and impact
The interaction of sight and sound offers tremendous creative flexibility. Makes possible
dramatic, lifelike representations of products and services. Can be used to convey mood
or emotion. Can demonstrate a product or service.
Coverage and cost effectiveness
It reaches large audience. People of all demographic segments watch TV. It is cost
efficient for products for broad target audiences or for mass consumption products. Ad
messages have low cost per thousand.
Creativity and attention
It is intrusive as ads impose themselves on viewers. Viewers avoid ads through remote
control switching of channels. Research says as much as a third of program. audiences
lost during commercial break. Low involvement nature of consumer learning and
response processes means TV ads are affective.
Selectivity and flexibility
TV is a non selective media as it is difficult to select the target segment. Only
MBA IV
10
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1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
segmentation possible through programs, broadcast time and geographic coverage.
Cable TV has increased possibility of segmentation. Local or spot ads can be chosen for
specific geographic markets. Ads can be scheduled to run repeatedly or to take
advantage of special occasions.
Limitations of TV
Costs
It is expensive. Cost involves airtime and cost of producing ad. Small and medium size
advertisers are priced out.
Lack of selectivity
Specific, small target audience is not possible. Geographic selectivity is a problem as a
channel cost is based on total market area it reaches. As a media it has one of the lowest
selectivity.
Fleeting message
Lasts for a very small time of about an average of 30 seconds. It leaves nothing tangible
for viewer to examine or consider. Even 15 second and 10 second ads are being
accepted. This is also a result in belief that shorter ads are as effective as longer ads.
Clutter
It is a major problem. There are many ads and non-programming material seen during
commercial breaks. It annoys the viewer and makes them unable to remember or
properly identify the product or service advertised. It is compounded by shorter ads and
promotional ads by channel about is own programs.
Limited viewer attention
There is no guaranteed exposure. Sizes of viewing audience shrink during commercial
breaks. It is compounded by zipping and zapping. Zipping occurs when customers fast
forward through commercials in VCRs. Zapping is changing of channels to avoid
commercials. Ads shown at the end of the commercial break have better recall.
Distrust and negative evaluation
TV ads have the highest distrust. They are pervasive and intrusive. Viewers don not
MBA IV
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
control content shown.
3.
Case Study: (Compulsory)
Consumers are inundated with various options when selecting a sneaker. Nike, for
example, offers options such as monkey paw, ball control materials, N site, tensile sock
liner, abrasion resistant materials and foot form. Many of the options appear in shoes
targeted at particular athletic event. Monkey paw is for basketball players, ball control
materials and tensile sock liners are for soccer players, N-site and foot form are for
runners and abrasion resistant materials is for tennis players.
Over the past two decades, Nike's innovative product development process has become
the industry standard. In the late 1970s, Nike began the development of shoes with air
bag cushioning and 'Nike Air' was born. A few of the Nike shoes built on this air
technology were called Tailwind, Pagasus, Epic and Air Max. The introduction of Air Max
started the market trend of see through openings that allowed consumers to see the air
cushioning system. Throughout the company's history technological development has
been the corner stone of the brand's success. Although Nike will continue to follow a
strategy of continual product innovation, changes in the traditional footwear market are
driving Nike and other shoe manufacturers to rethink about their strategies.
For Nike this meant the creation of the Alpha project. The Nike Alpha project is an
attempt to focus on the broader needs of an athlete footwear, apparel and equipment.
Alpha will focus on a particular sport and market the entire line of Nike products to the
players of this particular sport. The company will have Alpha athletes with targeted ads
featuring the Alpha Athlete clad solely in Nike products. Perhaps Nike hopes this shift in
focus - from footwear technology to complete athletic outfitting - will help recapture the
attention of younger consumers who are leaving the sneaker market for walking shoe
market.
Questions:
a
MBA IV
Is Alpha project consistent with Nike's historical brand message? Give reasons.

Yes, the Alpha project is consistent with Nike’s historical brand image

Nike's historical brand message has been product innovation focused on making
3
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1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
the best sneakers for different sports.
b

Their attention was on giving the best comfort to players

The Alpha project is an continuation of the same brand message of product
innovation and giving the best products to the sportsmen

The renewed focus in Alpha project has been to choose a sport and to make an
entire line of Nike products for that sport.

They also plan to use Alpha athletes in each sport to promote products related to
that sport
What are the implications for Nike if the shift to complete athletic outfitting is
perceived by the market as a departure from the company's historic image and
positioning?

Sports persons may doubt the ability of Nike to be as innovative in creating other
products related to sport as they are with sneakers

Their new products will be compared with the products from existing
manufacturers

Nike may no longer to known as sneakers manufacturing company

Nike may get an opportunity to include more products in its portfolio

Alpha sportspersons will be needed to build Nike brand in related products

Nike will need to be more innovative in its product design

The sports it wants to focus has to be chosen carefully
4
Will the use of Alpha athletes bring younger buyers back to sneakers?
c

3
Alpha athletes have the following characteristics:
a) Famous
b) Young
c) Achievers
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PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
d) Idols
e) Heroes
f)
Best in the game

When these alpha players endorse Nike products, then certainly they will be
appealing to the young generation.

Since the young generation look up to their heroes (alpha athletes) there is a
very high probability that they will be able to bring the young buyers back to
buying Nike sneakers
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