Download Bonus Chapter - Advertising in Specialized Environments: Business

Bonus Chapter - Advertising in Specialized Environments: Business-to-Business and Retail
Advertising in Specialized Environments: Business-to-Business and Retail
After studying this chapter, you will be able to
•
Identify the types of customers who comprise the business-to-business market
•
Explain the unique characteristics associated with organizational buying behaviour
•
Assess the role that advertising plays in business communications
•
Identify the special creative strategy and media strategy considerations in business
advertising
•
Assess the role and importance of advertising in retail communications activity
•
Explain the categories and types of retail advertising
•
Determine the budgeting methods and allocation procedures common to retail advertising
•
Assess the creative and media considerations exclusive to retail advertising
Business advertising can be defined as messages directed at industrial, institutional, commercial,
and professional end users, as well as at purchasing agents or distributors whose occupation
involves purchasing products and services. The business and industrial markets in Canada are
composed of diverse organizations that require unique product and service mixes. These markets
represent a wealth of purchasing opportunities, so marketing organizations must define target
markets, identify the demand characteristics (the more precise needs of business and industry),
and develop a responsive marketing communications program to present products and services
so that they appear favourably to business customers.
The Business-to-Business Market
Types of Customers
The business-to-business market can be divided into four distinct buying groups: business and
industry, governments, institutions, and professional occupations.
Business and industry buying organizations include users, original-equipment manufacturers,
dealer and distributor networks, and a host of service businesses. Users purchase products to
produce other products (i.e., to produce equipment, machinery, and so on). Original-equipment
manufacturers (OEMs) purchase industrial products for inclusion directly in other products.
General Motors would be classified as an OEM, based on its purchase of radios, spark plugs, and
tires for its automobiles. Dealers (retailers) and distributors are intermediaries who purchase
products for resale to other intermediaries or end users. Finally, service businesses comprise
industries such as banks, real estate companies, and insurance companies, which collectively
require a variety of products and services.
Collectively, the federal, provincial, and local governments form Canada’s largest buying group.
Governments tend to have a more specialized buying procedure, involving detailed order
specifications and tender submissions from potential suppliers.
The third major buying group is the institutional market, which includes hospitals, restaurants,
and educational establishments. These customers require a varied mix of product and service
items from potential suppliers.
The professional market comprises doctors, lawyers, architects, engineers, accountants, and so
on. Professional market segments can be reached by publications that are tailored to the needs of
the various segments.
Characteristics of the Business Market
When a firm develops a marketing strategy for business customers, it should understand the
elements that influence the decision-making process in organizations. Business markets are quite
different from consumer markets. Their principal distinctions are that they have fewer buyers
than consumer markets; the buyers tend to be concentrated near each other; the buying criteria
are practical; and, a formal buying process is used. Let’s examine the characteristics of
organizational buying behaviour in more detail.
Number of Buyers
There are fewer buyers or customers in the business-to-business market than there are in
consumer markets, but these few buyers have immense buying power. To illustrate, the “Big
Three” (General Motors, Ford, and Chrysler) dominate the automobile industry, just as two large
Canadian breweries (Molson and Labatt) dominate the beer industry. Firms like these are few in
number but purchase incredible quantities of products (e.g., the new tires required by the
automakers and beer bottles required by the breweries). In the business market, the dollar value
of individual purchases is much larger than it is in the consumer market (e.g., the value of a
capital good like a computer compared to a consumer shopping good like a dress shirt). For this
reason, marketing organizations will spend more to reach these customers with various forms of
marketing communication.
Due to restructuring in many large business marketing organizations, a phenomenon caused by
the poor economy in the early nineties, small business customers now represent greater
opportunity. Compaq Canada, for example, recognized that small business represented 25% to
30% of PC sales in Canada. Such a market requires special attention. Consequently, Compaq
tailored certain product lines for small business and developed a distinct promotional campaign
aimed at that segment.1
Location of Buyers
Business markets tend to concentrate; the Quebec City-to-Windsor corridor is a popular location
for manufacturers. Ontario and Quebec account for 70% of the nation’s manufacturing
establishments, with 76.9% of the value of goods manufactured and 78% of all industrial
employees in the manufacturing sector.2 This area is also the centre of banking and financial
services in Canada. Resource-based industries such as agriculture, forestry, and fishing dominate
other regions.
The combination of fewer buyers, with higher dollar value, and geographic concentration makes
personal selling an attractive and practical way to market goods and services to these markets
despite the high costs of such activity. However, other promotional techniques such as direct
mail, telemarketing, and the Internet now play an expanding role in helping firms penetrate the
business-to-business marketplace.
The Buying Criteria are Practical
In business and industry, the buying criteria tend to be practical and rationally pursued. Although
impractical or irrational motives may sometimes be present, they generally play a small role.
Quality, price, and service form the basis for buying decisions in business and industry.
Central to the buying procedures of organizations is a vendor analysis. A vendor analysis entails
an evaluation of potential suppliers based on an assessment of their technological ability,
consistency in meeting product specifications, overall quality, on-time delivery, and their ability
to provide needed quantity. How well a supplier rates in these areas affects its chances of
selection, but price also plays a key role in the decision. Before signing a deal, the buyer may
request bids based on predetermined specifications or negotiate an acceptable price from a
supplier that the vendor analysis indicates is acceptable.
Let’s examine these criteria in more detail:
1.
Price Price is usually evaluated in conjunction with other buying goals. The lowest price
is not always accepted, since the low-priced product may not satisfy other purchase criteria.
Where the cash outlay is significant, cost is viewed from a long-term perspective. Potential longterm savings as a result of the purchase are weighed against the high purchase cost in the short
term.
2.
Quality Business customers look for sources of supply that can provide the same
unvarying quality with each order. Since a supplier’s product becomes part of a new product
during manufacturing, it could affect the quality of the final product if the supplier’s product
were inconsistent in quality. Generally, when business customers assess price-quality
relationships, they do not sacrifice quality for price.
3.
Service and Services Offered Customers frequently review a supplier’s reputation for
keeping its current customers satisfied. They do so by contacting other customers to see how
well the supplier performs the service function. The primary concern of the buying organization
is that repair and replacement service be readily available when needed.
4.
Continuity of Supply Customers are concerned about the long-term availability of a
product or service. They want to know how reliable the supplier is in meeting customer demand.
To maintain a steady source of supply, customers often deal with numerous suppliers, knowing
that factors such as strikes could halt the flow of product from any one supplier. Further, the
location of potential suppliers is now less important in the decision-making process. Companies
now search the world for suppliers who can best combine the qualities of price, quality, and
delivery. In the automobile industry, North American suppliers must compete for contracts with
suppliers from the Far East and Europe.
UPS is an example of how marketing organizations appeal to their customers on the basis of
combinations of price, quality, service, and additional services provided. The primary benefit is
on-time delivery, the most important benefit that a courier company can offer.
A Formal Buying Process is Followed
In many business organizations, one individual has the authority to sign the purchase order, but
many other individuals may influence the purchase decision. There are two primary causes of
this situation in modern business. First, businesses today often utilize buying committees, which
bring individuals together to share the responsibility of making the purchase decision. Second,
businesses may hold meetings of various informed groups of people in order to arrive at a
purchase decision. This informal approach, involving several people in the organization, leads to
what are called buying centres.
1.
Buying Committees To illustrate the concept of a buying committee, we will assume that
a firm is considering the purchase of a million-dollar piece of production-line equipment. Since
the financial ramifications are significant, it is imperative that the firm make the best possible
decision. Consequently, the firm appoints a committee consisting of key personnel from
Production, Engineering, Finance, Marketing, and Purchasing, so that the decision can be
evaluated from a variety of angles. Theoretically, such a decision-making process is very
rational, and the participants are comforted to know that a costly purchase decision is a shared
one.
2.
Buying Centres In buying centres, which are more informal than buying committees, the
individuals involved have certain roles. Researchers have identified five specific roles:3
•
Users—those who use the product (e.g., a word processor is used by a secretary)
•
Influencers—those who assist in defining specifications for what is needed (e.g., an
engineer designs a production line)
•
Buyers—those with the authority and responsibility to select suppliers and negotiate with
them (e.g., a purchasing agent)
•
Deciders—those with formal or informal power to select the actual supplier (e.g., a highdollar-value purchase of technical equipment may ultimately be the responsibility of a vicepresident of manufacturing)
•
Gatekeepers—those who control the flow of information to others in the centre (e.g., a
purchasing agent may block certain information from reaching influencers and deciders).
From a marketing perspective, it must be determined who on the committee or within the buying
centre has the most influence. Once that is known, the best means of communicating with the
influence centre must be determined. What role should personal selling, sales promotion,
advertising, and direct marketing have in the overall strategy, and what priority should each
have?
Centralized Purchasing
In today’s economic environment, buying organizations are looking for the best possible prices
and value for dollars spent. Consequently, many firms have developed centralized purchasing
systems in order to secure better price discounts based on volume purchases. For example, The
Bay and Zellers, both owned by The Hudson’s Bay Company, have formed one large buying
division that purchases for each retail division. In these situations, marketers must deal with just
a few buyers, all at a high level of management.
Decisions on what product lines to carry and how much inventory to stock are made easier by
sophisticated computer-controlled systems. Working from the electronic cash register at the
point-of-sale, a retail buyer can track the movement of goods in all retail outlets on a daily basis.
For many retail organizations, automatic computer ordering is now the standard practice. Such
systems consider product movement, desired inventory levels, and delivery time.
Personal Characteristics
Business buyers are just as human as other consumers; thus, the more knowledge a marketer has
about the specific buyer, the more impact the marketing message can have. To address the needs
of certain personalities, emotional appeals centred on status and prestige may be included in
overall marketing strategies, along with ordinary rational appeals.
Relationships are Sought
In today’s marketplace, organizations that deal directly with one another (suppliers,
manufacturers, and distributors) are doing so in a more co-operative, less competitive way.
Programs are being established to evaluate the flow and use of goods and services through the
channel of distribution. The aim of a partnership is to devise and implement strategies that will
produce mutual benefits for all participants. The concept of building relationships is discussed in
detail in the next section.
Given that the characteristics of business markets are quite different from those of consumer
markets, how a company employs the marketing mix and marketing communications mix will
also be different.
The Role of Advertising in Business Communications
The primary role of advertising in the business communications process is to complement and
supplement the efforts of the field sales force. Advertising is not intended to make the sale, but it
should generate awareness of and interest in a product or service in such a way that it opens
doors for more convincing presentations by the sales force. Advertising can make a contribution
in two specific areas. First, it contributes to an integrated and efficient communications program,
and second, it contributes to company recognition and product line awareness. Achieving a sale
in business marketing is a culmination of the efforts of marketing communications, sales force
activity, and the product or service itself.
Advertising Contributes to Efficient Communications
When used to advantage, advertising works in harmony with personal selling and sales
promotion activity to develop a unified presentation for prospective customers. In terms of
efficiency, advertising can reach a large number of buyers at a reasonable cost compared to
personal selling, where costs per call are extremely high.
Advertising Creates Recognition and Awareness
Advertising can be a useful vehicle for establishing company recognition and product awareness
in the minds of influence centres (i.e., those who influence the final decision). From a strategic
planning viewpoint, advertising that is placed in the right business publications or is directed at
the right individual via direct response advertising will reach individual influencers that a sales
representative may never be able to reach.
Some marketing studies have shown that sales to business customers have been higher among
firms predisposed to advertising than among those that have not advertised. It is generally felt
that prospects are more receptive to sales representatives from firms that advertise, probably due
to the knowledge of the company and product they have received from advertising. Further, as an
important information source, advertising in industrial and trade magazines ranks first among the
five commonly used communication channels for reaching business buyers. Business
organizations are starting to use Internet advertising and Web pages to communicate company
and product information. On-line advertising will play a stronger role in the communications mix
in the future.
Specific Advertising Objectives for Business Communications
Business-to-business advertising objectives should be based on what advertising can accomplish,
and therefore should be stated in terms of goals for awareness and recognition, for influencing
buyer attitudes, for communicating specific product information, and for generating leads.
Objectives that are achieved should have a positive impact on sales. Let us examine some of the
more common objectives of business-to-business advertising.
To Develop or Improve Company Image
In the case of advertising aimed at developing or improving company image, the advertiser
wants to inform customers about the company behind the products, to create, for the long term, a
favourable impression of the company among potential customers. The development of a
positive image, which often focuses on the strength of a company’s resources (people,
technology, progress, and so on), can enhance the reputation of the company and have an effect
on customers’ perceptions of individual product lines.
To Create Awareness and Demand for Product Lines
If the objective is to create awareness and demand for product lines, a number of situations are
possible. Advertising may be the form of communication initially used to introduce a new
product line to the market. It can also be used effectively to inform new targets about established
product lines, or to reach “influencers” that other communications, such as personal selling,
cannot reach.
To Secure Leads
Perhaps the primary objective of a business-to-business advertising campaign is to generate leads
for follow-up by the sales force. By analyzing advertising efforts of the past, advertisers may be
able to predict the number of leads that a particular campaign or advertisement will draw. Since
this is an important objective, business advertisers include tear-out coupons, reply cards, or tollfree telephone numbers with their advertisements. Such techniques make it very easy for
prospective customers to seek more information about a product or service. Accumulated
coupons and reply cards can be used to develop prospect lists that can be passed on to the sales
force for follow-up. Personal contact with an interested customer should result in lower sales
costs and marketing costs overall, as the reply cards act as a means of qualifying customers.
Creative Strategy in Business Communications
When messages for the business market and related markets (industry, trade, professional, and so
on) are being developed, certain characteristics of the market must be considered. First, in
comparison to consumer-directed advertising messages, which can be emotional in nature,
messages for the business market rely more on rational appeals (functionality, cost savings,
dependability, and so on). A condition that all business market segments have in common is a
need for products and services that will resolve a problem. Consequently, messages for the
business market tend to use more straightforward appeals and provide potential buyers with
sound reasons why they should consider buying the product. The message must be convincing
enough to generate leads for the sales force.
Creative Strategy Considerations
The different customers in the various business market segments all have unique problems that
must be addressed by advertisers. Unlike personal selling, advertising cannot accommodate
messages specifically designed for unique situations. Since messages are targeted at customer
groups, copy must be fairly general in nature, catering to the basic motives of the various
business segments. Print media are the vehicles most widely used for reaching the business
market segments. In the print media, there are five necessary ingredients for obtaining higher
readership.4 These elements, if properly used, can together create an effective print
advertisement for business market segments.
Colour
Some studies have indicated that the use of colour increases readership by as much as 50%;
therefore, the costs of adding colour (of using the four-colour process) must be weighed against
the higher potential readership. Does the increase in readership justify the cost?
Size of Advertisement
There are many page options to choose from (full page, half page, third page, and so on).
Generally, full-page ads attract more readers than do fractional-page ads, and indeed doublepage spreads are becoming more popular with business advertisers. However, a very small ad
can be just as effective in getting the message across.
Message Appeal
Owing to the dominance of rational buying motives in the business market, it is preferable to
communicate benefits in a straightforward manner. A single dominant component—a big
picture, a bold headline, or even white space—will stop the reader. The ultimate is an interesting
picture combined with a challenging headline. A good headline and illustration should create
attention and interest; body copy should substantiate claims.
Reader Interest
Homework and preparation are imperative for successful business advertising. Research should
be conducted to discover reader interests. The layout, design, and copy should appeal to those
interests.
A Hook
Good business advertisements include a convenient means for prospective customers to take
action. Consequently, advertisers frequently use tear-out coupons, business reply cards, or 1-800
telephone numbers and a Web site address so that prospects can pursue additional information.
Leads generated by such advertising initiatives can also be a useful test of advertising
effectiveness.
Media Strategy in Business Communications
In selecting the media that will effectively and efficiently reach the various business market
segments, business advertisers must consider numerous strategic factors. These factors include
the target market; the budget; the nature of the message; the combination of reach, frequency,
and continuity; the coverage; and the best time to reach the target. There are, however,
differences in approach between consumer and business media strategies.
Factors Affecting Media Strategy
Target Markets and Database Marketing
In contrast to consumer goods advertisers, business-to-business advertisers have for some time
made use of database marketing practices. Computer technology allows organizations to
accumulate, analyze, and use customer information for communications purposes. Such
information is often secured via reply cards and return telephone calls that were linked to past
advertising.
Having access to a database and considering the availability of targeted publications in many
business segments aids advertisers enormously in the communications process. If magazines are
the medium of choice, two types of publication categories service the needs of business
segments: horizontal publications and vertical publications.
Horizontal Business Publications
These publications reach people who hold similar jobs in different companies and business
market segments. Magazines such as Marketing and Traffic Management are titles of horizontal
publications. Other, more general business publications, such as Canadian Business and The
Financial Post Magazine, can also be classified as horizontal publications. These magazines
focus on issues of concern to business generally, and appeal to a diverse group of management
personnel.
Vertical Business Publications
These publications reach people with different jobs in specific industries and, consequently, are
read by all employed within a buying organization or industry segment. Magazines such as
FoodService and Hospitality and Canadian Plastics Directory and Buyer’s Guide are classified
as vertical publications.
Budget
As mentioned earlier, advertising budgets in business marketing are not necessarily large, since
more money is traditionally allocated to personal selling. Nonetheless, even with smaller
budgets, media choices can be cost-efficient. Once the decision has been made whether to use
horizontal or vertical publications, or a combination, the advertiser must select from among the
alternative means of reaching the target market. As in consumer media situations, advertisers
look at the CPM figures for the alternatives. Advertisers also evaluate the quality of the
publication (specifically, its editorial content) when choosing between alternatives.
Nature of the Message
Messages generally concentrate on product details, and are informative in tone and style.
Commonly, ads use long copy to provide proof of product claims. Consequently, the print media
(vertical and horizontal publications) and direct mail are very attractive media options. On-line
communications also satisfy the need to transfer detailed information. The home page for
Comcheq, an abundance of information about the services of the company, and other relevant
information of interest to prospective clients, is readily available simply by clicking.
Reach versus Frequency versus Continuity
Since business publications offer targeted capabilities, they enable advertisers to effectively
reach their audience. However, the numbers that are reached are very low compared to the
numbers reached by consumer advertising. Considering the specific nature of the purchase
decision in the business market (it is rational, more complex, and usually time-consuming), it is
preferable to keep a message in front of the target in order to reinforce previous advertising and
personal-selling messages. As a result, frequency and continuity variables are more important
strategy considerations than reach.
Best Time to Reach Business Targets
Business publications and direct response advertising are geared to reach prospective buyers in
their working environment. Since the prospect may be pressed for time and read only portions of
a publication at work, many details of advertisements may be overlooked, and many ads will not
be seen at all. To counter this problem, numerous business advertisers are allocating more media
dollars to approaching business customers and shifting their media strategy toward using
consumer-oriented mass media (television, outdoor, and broader circulation magazines). The
advantage of this strategy is that customers are reached when they are in a relaxed environment
(non-business hours). Hence, they are more receptive to messages, which means higher levels of
product awareness.
Media Execution
The traditional and most commonly used media include trade publications, business
publications, television, direct marketing, and trade shows.
Trade Publications
Trade publications are frequently chosen because they reach the target where decisions are made.
Industry-specific publications are widely read by company employees; hence, they are ideal for
building awareness and interest in a product or service. Canadian Advertising Rates and Data
classifies trade publications into more than 200 industry-specific categories.
Business Publications
Typically, these publications (The National Post, The Globe and Mail, Report on Business
Magazine, and others) include articles of interest to opinion leaders in companies. Although the
influence of these individuals on purchase decisions may be indirect, advertising in such
publications will help to build corporate image in the mind of an executive reader.
Broadcast Television
Each year, more and more advertisers are employing television advertising. Television is ideal
for creating awareness and for providing information on how more detailed information can be
obtained. Most television advertisers include an 800 number or a Web address. The advantage of
television is that it reaches the decision-maker in a relaxed environment. Finance, insurance, and
telecommunications companies are the largest users of television advertising.
Direct Response and Internet
Among direct response alternatives, direct mail remains the most frequently chosen alternative.
The primary advantage of direct mail is its ability to reach a predetermined and precisely defined
target market (organizations that the advertiser has defined as good prospects for its product or
service). Direct mail, then, is cost-efficient and provides a good conversion rate (i.e., conversion
to actual sales) if proper follow-up procedures are in place in the marketing organization.
Manufacturers can purchase lists from a variety of Canadian list sources or develop their own
lists using the Standard Industrial Classification system.
Other forms of direct marketing that are popular include telemarketing, and print and broadcast
direct response advertising, and the Internet. The Internet is seen as the best new development
tool for direct marketing. The Web is one of the critical tools for business-to-business marketing
due to the economies it offers. The Internet will play a much larger role in the way information
on customers is captured and as a means of communicating to the customer.
Trade Shows
A trade show showcases any number of a company’s product lines. For sellers, the primary
advantage of a trade show is that it provides them with the opportunity to present product
information on a personal basis, in a situation where the buyer comes to the seller. Essentially,
the seller has a captive audience that is prepared to be very receptive to advertising messages.
The success of any trade show depends on the integration of personal selling, demonstrations,
displays, advertising, and promotional literature. Trade shows also present sellers with
opportunities to secure business cards from prospects, which can be used later as leads for a sales
force or advertising follow-up.
Specialty Advertising
The impact of specialty advertising is underestimated, mainly due to its trashy image. Specialty
advertising embraces promotional merchandise such as T-shirts, key chains, pens, and an
assortment of other items that are emblazoned with a company logo and message. Many of these
items remain in the office so they serve as a constant reminder to a buyer. As well, items such as
T-shirts and jackets bearing a company name and logo become walking billboards for the
sponsoring organization. The use of specialty advertising is discretionary and its primary role is
to create good will for the company and to complement advertising in other media.
The Retail Market
Retail advertising in Canada covers a broad spectrum of retail operations, from the local and
independent sole proprietor to the largest national department-store chain. Consequently, the role
and importance of advertising vary considerably from one advertiser to another. This section of
the chapter will highlight those aspects of advertising that are critical to the successful operation
of a retail establishment. Many of the concepts have been discussed in other chapters, but this
chapter brings them together in the context of retail applications.
The Role of Retail Advertising
The role that advertising plays in the retailing environment can vary considerably, depending on
variables such as the size of the retail operation and the retailer’s perception of advertising’s
importance in the promotion mix.
Small retailers, who often lack expertise in marketing and advertising planning, tend to question
the value of advertising. They often view advertising as an expense item that has an immediate—
and negative—impact on profit margins. In contrast, large retailers such as department stores and
national specialty-store chains always expect to advertise in order to remain competitive. The
uppermost question in their minds is how much to spend on advertising. These retailers view
advertising as a necessary investment that contributes to the long-term success of their
operations.
Some retailers emphasize advertising at the expense of other elements such as sales promotion
and personal selling. For example, many retailers have moved toward a self-serve concept to
save money on salaries. Such a strategy, however, is usually a mistake. The principle of the
promotion mix is the same for retailing operations as it is for nationally branded products: all
promotion mix elements must be considered equal when a retailer develops a marketing plan. All
the advertising in the world may be ineffective if a retailer does not provide adequate levels of
in-store service to keep customers satisfied.
Types of Retail Advertising
Product Advertising
Product advertising, often referred to as promotional advertising, is designed to obtain immediate
response from the target audience (that is, to increase store traffic). This type of advertising
announces store sales on regular merchandise, inventory clearance sales, and so on, to urge the
consumer to visit the store and buy. In many cases, a sense of urgency is associated with the
advertising (declarations such as “only three days left,” or “best-buys-ever sale” are not
uncommon). Product advertising does not have to be “sale”-oriented. Many retailers advertise
the quality of their merchandise and differentiate their stores from competitors’ on different
bases. For example, a retailer may attract customers with its wide assortment of merchandise, its
exclusivity, or its newness.
Institutional Advertising
Institutional advertising is designed to create a favourable image of a retail store. Generally, the
objectives of such advertising are long term. The advertising attempts to position the store in
customers’ minds so that they will consider a visit when they must make a specific purchase. A
clothing store may, for example, attempt to position itself as a fashion leader, a leader in brandname selection, or a leader in superior, personal service. A discount drug-store chain may
consistently position itself as having the lowest prices.
A generally accepted rule of thumb is that it is necessary to integrate the short-term components
of product advertising with the long-term components of institutional advertising in all forms of
retail advertising communications. On the creative side, it is also important to be consistent in
the use of type style, art work, and store logos, and lettering in order to present a consistent
image. Logos, in particular, are something that customers can easily remember.
Co-operative Advertising
Co-operative advertising is the sharing of advertising costs and materials between suppliers and
retailers, or between several retailers working together on an advertising campaign. There are
two different types of co-operative advertising: vertical and horizontal.
Vertical Co-operative Advertising
The sharing of costs by a supplier and a retailer is known as vertical co-operative advertising.
The supplier and retailer agree to a specified cost-sharing plan (e.g., a 50/50 split or some other
agreed-upon ratio). The manufacturer may provide finished print and broadcast advertising
materials to which the retailer may add the store’s name, or which the retailer might integrate
into the store’s own advertising. For example, a car dealer may utilize film footage from a
national advertisement for a specific automobile.
Horizontal Co-operative Advertising
The sharing of costs by a group of retailers is known as horizontal co-operative advertising. Such
advertising efforts are designed to encourage consumers to visit a specific shopping mall or
shopping district in a certain area of a city. For example, local merchants might form a
downtown business association, which could decide to advertise co-operatively to promote
shopping downtown or to promote a special event such as a sidewalk sale.
Retail Advertising Objectives
So that there is guidance for retail advertising planning, proper advertising objectives must be
established. In a retailing situation, the advertising objectives can be classified as long term,
which include the creation and development of an image along with profitability concerns; and
short term, which include increasing awareness, planning sales events, and building store traffic.
Regardless of whether the objectives of the advertising are long term or short term, the
advertising campaign should strive to obtain store preference—in other words, to establish the
store within the consumer’s frame of reference as a preferable place to shop for certain items.
Creative Objectives
There are a variety of creative objectives a retailer might consider when developing an
advertising plan: increasing consumers’ awareness of the store and of the merchandise it carries,
developing the store’s image, positioning the store, promoting special events, building store
traffic, increasing the average number of purchases, and increasing sales.
Increasing Awareness of Store and of Merchandise Carried
The retailer must communicate important details about the store in order to attract customers.
Hence, retail ads commonly focus on the store’s name and location, the variety of merchandise it
carries, and the services it offers. For the sake of current customers, anything that is “new”
should be communicated (new lines, new services, or new policies).
Developing a Store Image
Retailers must continuously strive to differentiate themselves from competitors; otherwise, they
risk falling behind in the race for share of store traffic. The image a store strives for is based on
the quality and variety of the merchandise it carries and on the additional services it provides for
customers. There are a wide range of potential store images. For example, image can be based on
size, as is the case with some specialty boutiques (small) and department stores (large). Image
can be based on price: a retailer might claim that it will not be undersold, or that it will match all
competitive prices. Slogans usually play a key role in establishing the image of a retail operation.
Positioning the Store
As discussed in Chapter 4, positioning refers to the image the product (in this case, the store) has
in the minds of consumers. Therefore, positioning and image objectives are similar, but
positioning more clearly involves the competitive aspects of retailing practices today.
To illustrate the importance of positioning in retailing, consider the advertising of Canadian Tire.
Canadian Tire spends a fortune in national television and print advertising to convince people
that it sells more than just tires. The company’s message is designed to dispel misconceptions
held by the public. In the food distribution industry, Loblaws successfully positioned itself,
through advertising, as the innovator of generic products and by promoting its President’s
Choice label. Now, Eaton’s is attempting to become the Bloomingdales of Canada by
reinventing itself with an upscale fashion image that will appeal to teens and twenty-somethings.
For more details see the Advertising in Action vignette, Can Eaton’s Be Hip?
Promoting Special Events
A special event gives customers one more reason for visiting a store. Special events are often
tied in with other forms of sales promotion activity, and are usually planned well in advance.
Event-oriented advertising usually revolves around a certain theme that the target market will
find appealing (e.g., Father’s Day, Valentine’s Day, Back-to-School, etc.).
Building Store Traffic
Traffic refers to the number of people who visit a store, and the frequency with which they visit.
The surest way to improve retail sales is to attract more customers to the store. If they do not
make a purchase on the first visit, at least they will have been exposed to the merchandise and
services provided by the retailer. Stores such as The Bay, Zellers, and Sears frequently offer
discounts on regularly priced merchandise to build traffic on Saturday (a key shopping day for
department stores). These campaigns stress a sense of urgency—they tend to be one-day-only
events. Retailers may easily measure the success of these types of promotions by comparing the
average number of sales transactions on the discount Saturday with the average number of
transactions on a regular Saturday. The value of the transactions is not important.
Increasing Sales
The most important business objective for any retailer is to increase sales (and profits) each year.
As is the case with any product advertising campaign, it is difficult, if not impossible, to link
advertising effort directly to sales performance. Customer purchases are influenced by other
factors such as price, store location, quality of merchandise, and service provided. For this
reason, retailers should not establish advertising objectives that are related to sales.
For more insight into how these objectives affect retail advertising planning, refer to the
Advertising in Action vignette Canada’s Store Wars: The Bay Responds.
Creative Strategy in Retail Advertising
With its advertising and communications objectives defined, the retailer is ready to proceed with
the development of creative strategy. As discussed in detail in chapter 6, creative strategy
focuses on how the message will be communicated to the target audience. Generally, messages
are developed to appeal to the rational or emotional buying motives of the customer.
The Use of Themes
As stated earlier in the chapter, all retail advertising should integrate product-specific
(promotional) advertising with institutional advertising. Strategically, all advertising should
revolve around a central theme or slogan, and provide continuity of style. A theme may be
explicitly or implicitly stated, but it should accomplish three major purposes:
•
Impress the target audience with a unique and favourable image of the retail business
•
Provide continuity for an advertising campaign that will have longevity
•
Promote the achievement of the advertising objectives the retailer has established
Themes usually involve a carefully worded slogan that helps position the store in the mind of the
customer. The slogan is a summary statement of the key benefits the store is trying to
communicate, so it should be short, easy to remember, and visible in all media advertising. The
Bay, for example, recently switched to the slogan, “Canada’s store, Canada’s style,” in an effort
to create a contemporary image while retaining its heritage.
Themes and store image can also be communicated implicitly through the layout and design of
advertisements. For example, an advertisement that appears cluttered suggests a discount- or
bargain-oriented store. In contrast, advertisements that utilize space better and employ beautiful
typography and artwork may suggest a more upscale retail operation.
Creative Design Considerations
Since newspaper is the medium most commonly used by retailers, the design considerations
presented in this section focus mainly on print media. Nonetheless, broadcast advertising is
employed by larger advertisers, so certain considerations regarding broadcast media must be
noted. For both television and radio commercials, two essential elements must be included:
•
The identity of the store and its particular superiority over its competitors must be
established during the flow of the commercial.
•
A thematic event of high interest to the target audience should be included.
In addition, commercials should clearly establish the prices of the items in order to maximize the
next day’s sales response; finally, there should be continuity from promotion to promotion in
terms of creative approach and production techniques in order to maximize long-term impact on
consumers.
Regarding copy and art work, the components of headline, body copy, illustrations, and
signature combine to make an impression on consumers. Since these concepts have been
discussed previously, material presented here focuses on the retailing implications of each area.
Headlines
The headline serves two basic purposes: to attract attention and to lure the potential customer
into reading the body copy of the advertisement. Retail headlines tend to be “news-oriented”;
they make announcements of special events and sales. Consider the following examples:
“Huge Expansion Sale!”
“Grand Opening!”
“The Best-Buys-Ever Sale.”
As can be seen by these examples, the headline communicates the basic sales message; other
components would give more specific details.
Body Copy
The body copy helps to develop interest and desire in the reader. To get the desired response, the
copy should be simple and direct. It should also be informative and elaborate on the headline
where applicable. A common practice in retail advertising is to use a series of subheadlines
instead of body copy. Extraneous copy should be avoided at all costs.
Illustrations
In retail advertising, line drawings and photography are both popular. Regardless of the type of
illustration used, the illustration must be meaningful and grab the reader’s attention. Since body
copy is less important in retail advertising, the combination of headline and illustration must
combine effectively to make a favourable impression on readers. To add visual impact to the
advertisement, the retailer has the option of presenting the product alone or showing it in proper
context. For example, the latest in fashion swimwear might be photographed by a pool or at the
beach. In the case of IKEA, the furniture and housewares are presented in a home environment.
Signature
A retailer should use the same signature in all forms of its retail advertising and other
communications (store sign, point-of-purchase displays, shopping bags and boxes, etc.). The
store’s distinctive logo and slogan should be in keeping with the image the retailer is attempting
to convey, and, wherever appropriate, should summarize the central theme of the institutional
advertising message (refer to the examples of slogans for department stores presented earlier in
this chapter). Logos are an important communications device, since they are easy to remember.
For example, even very young children can identify McDonald’s by the golden arches, which
can be seen from a great distance.
IKEA effectively combines the elements of headline, illustration, and signature, to communicate
the value that its furniture and houseware lines offer (good quality at reasonable prices). IKEA
used a common creative strategy in a multi-media campaign that included television, magazine,
newspaper, outdoor, and transit advertising.
Media Strategy in Retail Advertising
This section of the chapter focuses on the media considerations that surround retail advertising
activity. The budgeting process is examined in the context of the retail environment, and then the
various media alternatives are evaluated with regard to their role in retail advertising.
Budgets
A national product manufacturer must first develop a total budget, and then divide the budget
among the various individual products that are to be advertised. In retailing, the situation is
similar, but the manner in which the total budget is divided is quite different. In the case of a
large department-store retailer, the first step is to develop the total budget and then divide it
among departments, merchandise lines, media, and times (days, weeks, months). There are three
budgeting methods that are specifically appropriate for retail operations: the all-you-can-afford
method, the percentage-of-sales method, and the objective, or task, method.
Budget Allocations
Once the budget has been developed and approved, the next task is to divide the budget between
departments, merchandise, media, and seasons (times of year).
By Media
The retailer can select from a variety of media, with local newspapers and radio being the most
popular among smaller and medium-sized advertisers. Other media options include transit,
outdoor, newspaper supplements, direct mail, the Internet, and television, if affordable. Media
selection will be discussed in greater detail in a subsequent section of this chapter.
By Time of Year
Retail advertising is usually distributed cyclically over one year. For example, an outboardmarine/motorcycle-dealer retail operation will advertise in the spring, as consumers prepare for
the summer. For such an operation, advertising may also be heavy in the late summer and early
fall period, when the retailer wants to clear out inventories.
Other retail businesses may not be influenced by seasonality factors. In this case, retailers
normally schedule advertising in accordance with sales patterns throughout the year (advertising
is generally scheduled before peak buying periods). For the average retailer, a month-by-month
media plan is the logical approach, with the amount actually spent fluctuating in accordance with
sales expectations.
By Department and Merchandise
For larger retail operations with a greater variety of merchandise and departments within the
total operation, the selection of what merchandise to advertise may be linked to seasonality
factors. The decision might also be made to allocate funds to fast-moving lines or slow-moving
lines. Some retailers subscribe to the practice of promoting fast movers in order to sell more of
them, while others prefer to promote slow movers to deplete inventories. Stores that do carry a
wide assortment of merchandise may take a straight-line approach to advertising (media dollars
allocated evenly), with the actual products to be advertised varying from season to season (or
from month to month).
Media Selection
A variety of media are suitable for retail advertising. As is the case with product advertising, the
retailer selects the media that will reach the greatest number of people within the target market,
at the lowest possible cost (a mix of media effectiveness with media efficiency).
Newspapers
Newspaper is the primary medium used by retailers, since it allows the visual illustration of the
items offered for sale (the communication of sale items is a common advertising objective). In
most local markets, the daily newspaper is widely read; therefore, the advantages of cost and
coverage come to the forefront. In addition, only short lead times are required, so last-minute
copy changes can be accommodated with relative ease.
Supplements
Supplements are prepared (pre-printed) advertisements inserted into the fold of a newspaper, or
delivered directly to households in a specified trading area. The costs of supplements are
partially offset by co-operative advertising funds available to retailers from suppliers. Generally,
the use of supplements is confined to larger retail advertisers who can afford it. Supplements for
large department-store chains appear in major newspapers on a weekly basis and are designed to
assist consumers in their shopping preparations.
Radio
Radio is also popular with local market retailers, since the medium offers selectivity and
frequency. Station formats appeal to different target markets, so if the station target market
matches the retailer’s target market, radio can be an excellent media alternative. The cost of
radio is low compared to the costs of other media, so the medium offers the advantage of
frequency-of-message to the retailer.
Direct Response, Catalogues, and Internet
In the case of direct marketing, a message can reach consumers through any of the mass media—
television, radio, newspaper, and magazine, or consumers can be contacted by telephone or mail.
Catalogues are an important form of communications for large national retail organizations.
They are a constant reminder to customers of the products and services available at the store, and
they are a source of reference that customers refer to frequently when specific purchases are
contemplated. In Canada, Sears is probably the biggest direct marketing organization, selling
goods directly through the Sears catalogue. Other big users of catalogues are Canadian Tire and
Grand & Toy.
It was previously mentioned that The Bay was the first Canadian retailer to introduce an
electronic catalogue on the Internet. Other organizations are following suit as the cybermall
concept is becoming popular among time-pressed shoppers.
Television
From a retailing perspective, the store’s image and personality can be portrayed effectively via
television, but the costs of this medium are very high, making it an unrealistic alternative for
smaller retailers. Large chains such as Canadian Tire use the medium to achieve institutional
advertising objectives (i.e., to establish an image and to assist in positioning the operation in the
consumer’s mind).
Outdoor and Transit
These two media alternatives are grouped together because the advantages they offer the retailer
are quite similar. Both media are suited for reminder-oriented communications; they are good
supplements to a primary medium such as newspapers. Also, they are useful for communicating
a consistent message—they can focus on store image, while other media focus on sales
merchandise, special events, and so on.
Magazines
Since most Canadian magazines are distributed regionally or nationally, they are unlikely
candidates for retail advertising. However, the growth of city magazines such as Toronto Life,
Vancouver, and Montreal Magazine has resulted in greater media usage by certain types of retail
advertisers. These magazines generally appeal to an upscale target market, so they are
appropriate for advertising high-fashion clothing stores, fine restaurants, and entertainment
establishments.
Yellow Pages
The yellow pages are a staple advertising medium for local market advertisers, particularly for
the trades and services sector. To illustrate the importance of the yellow pages for this group of
advertisers, let’s assume you want your leaking roof repaired. Probably no retailer is in your
frame of reference, so the first source you are likely to check will be the yellow pages of the
telephone directory. You could very well contact a few of the firms that are advertised
“attractively” in the yellow pages.
Summary
In order to advertise effectively to the Canadian business market, advertisers must recognize that
the variables and behaviour characteristics that influence business purchases are quite different
from those that influence consumer purchases.
When developing communications programs for business markets, advertisers must consider the
nature of organizational buying. Important factors that are considered include the number and
location of buyers, the practical buying criteria, the fact that a formal buying process is followed,
and that ongoing relationhsips (partnerships) are sought in the process.
The primary role of advertising in the business communications process is to complement and
supplement the efforts of personal selling. Advertising creates awareness and interest for a
business product or service, improves a company’s image, and helps secure leads for the sales
force to follow up.
In terms of creative strategy, effective business-oriented advertisements offer to resolve a
problem for the prospect. The message is communicated in a straightforward manner and
provides sound reasons why a company should buy the product or service advertised. Traditional
media used in business advertising include trade publications, consumer-oriented business
magazines, television, direct marketing, trade shows, and the Internet. More recently, there has
been a shift toward using television and consumer magazines, and the Internet is receiving more
consideration as a communications vehicle. Advertisers now believe that reaching the same
prospects when the prospects are in a more relaxed environment can work to the advertisers’
advantage. The use of mass media has also changed the nature and content of business-tobusiness advertising messages; emotional appeals have been added to the base of rational appeal
techniques commonly used in business-to-business communications.
The role of advertising in a retail operation is dependent upon the size of the retailer and the
importance of advertising in the retail promotion mix. As with product advertising, the retail
promotion mix includes the elements of advertising, personal selling, sales promotion, public
relations, and event marketing and sponsorships.
There are three basic types of retail advertising. Product advertising, or promotional advertising,
is designed for immediate target response, and includes announcements of sale events and
special offers. Institutional advertising is designed to develop an image for the retailer—that is,
to provide an ongoing reason for consumers to shop at the store. Co-operative advertising refers
to the sharing of advertising costs and materials between suppliers and retailers (vertical cooperative advertising) and between a group of retailers (horizontal co-operative advertising).
The objectives of retail advertising are both long term and short term. Long-term objectives are
institutional, and focus on the image of the retailer. Short-term objectives are product-specific,
and activities resulting from those objectives are designed to build store traffic, to create
awareness of the store and its merchandise, to assist in positioning the store in the customer’s
mind, and to promote special events.
Creative considerations for retail advertising centre on the use of themes. Themes may have an
institutional orientation. They involve slogans that give consumers a reason to consider shopping
at a store, or they may be product- or event-oriented (announcements of annual sales, seasonal
sales, etc.). In terms of creative execution, it is recommended that all advertising incorporate
both institutional and product, or promotional, advertising elements.
With respect to media strategy, the newspaper and radio media are most popular with retailers
because of the local-market coverage benefits they offer. Television is usually too expensive for
small retailers, but is appropriate for large retailers who spend a considerable amount on image
advertising. For small retailers who do not spend much on media advertising, local newspaper
media and the yellow pages are important forms of advertising. Innovative retailers are starting
to use the Internet to communicate information.
Review Questions
1.
Identify and briefly explain the fundamental characteristics of organizational buying
behaviour.
2.
What do “multiple buying influences” refer to, and how do they affect the
communications process between advertisers and buyers?
3.
Identify and briefly explain the rational buying motives that business-oriented advertising
messages must appeal to.
4.
What are some objectives of business-to-business advertising?
5.
What variables tend to positively influence the readership of business-oriented
advertisements?
6.
Distinguish between institutional advertising and promotional advertising.
7.
What is co-operative advertising? What are the benefits and limitations of co-operative
advertising from the retailer’s point of view? from the manufacturer’s point of view?
8.
Identify the basic differences between retail advertising’s long-term objectives and shortterm objectives.
9.
What is the basic role of each of the following copy elements in retail advertising?
(i) headline
(ii) body copy
(iii) illustration
(iv) signature
10.
Briefly describe the following terms, as they apply to retail advertising:
(i) vertical co-operative advertising
(ii) horizontal co-operative advertising
(iii) traffic
(iv) supplements
Discussion Questions
1.
“The expanded use of mass media in business communications is a wise investment for
business-to-business advertisers.” Identify and discuss the pros and cons of this statement.
2.
“The future of business-to-business marketing lies in direct marketing and direct
advertising strategies.” True or false? Discuss this statement, using examples of your own
choice.
3.
Refer to the vignette, Doing Business on the Web. What is your opinion of the role of the
Internet in future business-to-business communications strategies? How significant will it be?
4.
Themes play a major role in retail advertising. Discuss the role of themes, using
examples of your choice to substantiate your opinions.
5.
Assume you are an owner of an upscale dining establishment appealing to higher-income
groups. You are located in the downtown core of a major Canadian city. Which media would
you use to create awareness of and interest in your restaurant? In justifying your selection,
provide an appropriate rationale and rank the media from most important to least important.
6.
You are about to open an independent painting and decorating shop in a small town
(population 10 000). Your store is located on the main street in the downtown area. How will
you make the residents of this town aware of your store? Briefly discuss an appropriate media
strategy, and provide supporting rationales for your decisions. Identify a specific town and
specific media, if you like.
Notes
1
Patrick Allossery, “Compaq to target small firms,” Strategy, January 9, 1995, p.13.
2
Statistics Canada , Canada Year Book 1994 (Ottawa: Ministry of Industry, Science and
Technology), p.192.
3
Adapted from Frederick E. Webster and Yoram Wind, Organizational Buying Behaviour
(Englewood Cliffs, NJ: Prentice-Hall, 1972), pp.78-80.
4
Robert Black, “A weak advertisement with a strong message can still be a winner,”
Business-to-Business Marketing, March 1986, p.B14.
The Practice of Advertising
The Importance of an Integrated Promotion Mix
Building a Strong Consumer Franchise Requires Balance
A key objective of most—if not all—marketing, promotion and advertising managers is to attract
and retain customers. Often referred to as “building a consumer franchise,” the process of
developing a relationship with customers requires a manufacturer or retailer to constantly remind
customers, through advertising, of the benefits offered by the manufacturer or retailer and then
persuade customers to actually buy a particular brand rather than that of a competitor. Seldom
will advertising alone accomplish all of this.
In meeting this challenge, the manager must decide what promotion mix is best. A crucial aspect
of developing a balanced plan is deciding how much money to allocate to advertising, consumer
promotion, trade promotion, and event sponsorships. Equally important may be the need for
programs aimed at new users as well as current users. Different strategies are needed depending
on who the customer is.
Several things are known about consumers and what makes them respond to promotion activity.
In the packaged goods arena, for example, consumers are known to migrate among a short list of
brands. Heavy users, on average, rotate among 3.6 brands. This suggests that a brand has to
implement strategies that are both offensive in nature (to attract new users) and defensive in
nature (to protect current users from switching to another brand).
National marketers consider sampling as an effective strategy to elicit personal involvement and
win favour among new and established customers. It helps enhance the relationship between the
brand and the customer. But, other combinations offer certain opportunities as well. A recent
study conducted by Clayton/Curtis/Cottrell (U.S.) on promotion methods that most motivate
shoppers to try a new brand gave sampling a high rating. It reported the following results to the
question of what persuaded 2700 shoppers to try a new brand:
Advertising via TV, radio, and magazines
Home-delivered sample
55.6%
48.6%
In-store sample with coupon 48.6%
In-store sample
40.3%
Home-delivered coupon
37.5%
Coupon on product package 29.2%
In-store coupon
28.5%
In-store product deal 27.8%
Coupon dispensed on shelf
In-store display
24.3%
13.2%
There is little doubt that consumers like samples. In fact, with a product they already use, there is
a 65% to 35% preference in favour of a free sample. Further, 47% of respondents indicated that
they switched brands after being informed of a new or improved product through samples and
coupons.
Another popular alternative is the bonus pack, of which there are three basic methods: units free
(extra weight or pieces); percent free (as a percentage of the bonus size); and percent more free
(as a percentage of the smaller regular size). Research shows that 58% of shoppers will switch to
the “deal” brand to take advantage of the bonus offer, while 51% will buy more than planned if
the deal is on their regular brand.
Consumers also like low prices. The success of private label and generic brands in the grocery
industry and the domination of the Canadian grocery market by so few retailers (the top 8
distributors account for 76% of all food store sales) have placed added pressure on national
brand marketing budgets. These chains demand a certain amount of trade promotion activity.
Once the support of this activity stops, a brand may find itself delisted by the chain. Hence the
constant need to allocate enough funds for trade promotions at the expense of other activities like
advertising and consumer promotions.
Here are a few examples of what some brands are doing:
1.
Kraft Canada’s new Extra Rich Original Bar-BQ Sauce was involved in a national atshelf 30-cent redemption couponing program in the summer of 1995. More than 700 000
coupons were distributed across Canada. About 2000 stores received two coupon pads per week
for six weeks. According to product manager Joe Santos, couponing is effective for trials in the
short term, but repeat purchases depend on the quality of the product, not the coupon. He further
suggests that sampling is more effective in stimulating trial, but such programs are too costly for
the average grocery product. According to Santos, couponing is a crucial element of the
marketing mix, especially when promoting a new product. When Kraft launches a brand, it
usually uses television spots and print ads to create awareness. Coupons offer a lower price point
which induces trial.
2.
Kellogg’s recently distributed unaddressed single-serving individual packages of its Just
Right cereal, which does not have a particularly strong shelf presence. According to Carol
Stewart, marketing director at Kellogg Canada, Kellogg saw an opportunity to increase trial and
awareness of the Just Right brand. When dealing with foods, it is important to get a product in
the hands of consumers so they can make up their minds based on taste. Sampling was a means
to get new customers. Stewart says when consumers get free samples or are offered in-store
samples, the product is more likely to be tasted. If the brand delivers on the consumer’s
expectations, the consumer will buy the product. She does acknowledge however, that measuring
the effectiveness of door-to-door sampling is virtually impossible. There is no way of knowing if
the consumer actually tried the product or whether he or she repurchased based on trial or
previously established brand loyalty.
3.
Benetton Sportsystem of Montreal developed a trade promotion that would not only
move product, but would also build awareness of a company that manufactures a lot more than
colourful sweaters and controversial ads. The promotion was called “Hot Hot Hot.” Benetton
offered all of its retailers discounted product based on the retailer’s sales success—the more
Kastle skis and Nordica boots they sold, the cheaper they could purchase them from Benetton.
The heart of the promotion was aimed at the sales staff. With so many brands available it is
important to motivate the retailers sales staff. That motivation came in the form of an incentive.
Any salesperson who sold 25 adult pairs of skis and boots qualified for a grand prize draw—a
week and a half European tour to a variety of Benetton manufacturing facilities. Also included
was a visit with Benetton’s Formula One racing team that was competing in a Grand Prix. Three
hundred sales people qualified for the draw—that’s a lot of skis and boots. Hot Hot Hot was one
of their best trade promotions ever. For Benetton, the trade promotion didn’t cost that much. It
was just a plane ticket, hotel, and food costs, along with the in-store display material. But, for the
lucky salesperson, it was a big deal!
These examples demonstrate the need for managers to consider alternatives other than
advertising in order to build a strong customer base. Consumer promotions and trade promotions
such as these provide consumers with an extra impetus to buy, and they are particularly good in
persuading customers to buy a particular brand or shop in a certain location. Generally speaking,
consumer and trade promotions can accomplish numerous goals. For example, a well-conceived
promotion can
•
Position a brand in the marketplace
•
Establish a brand’s key benefits
•
Provide a unique selling feature at the point of sale
•
Remove some of the risk for consumers in trying a new product
•
Create a theme around which a seasonal or special sales effort can be built
•
Gain in-store displays and merchandising support
The objective of a campaign often dictates the type of consumer promotion the campaign
employs. A coupon directly influences the price side of the price-value relationship by providing
a direct price reduction to consumers. Coupons encourage trial purchase and are also effective in
bringing back former customers. A cash refund is another direct price reduction that encourages
repeat or multiple purchase among a current user group. Instant-win contests work best for
frequently purchased items or items purchased on impulse. They increase the value of a brand
and encourage multiple or repeat purchases. Sweepstakes also improve the value side of the
price-value relationship by adding excitement to a brand’s advertising and a theme for in-store
displays. Sampling is effective when used to gain trial among new users or among users of
competing products.
In Canada, trade promotion activity is also a priority. According to Adrian Sark, vice-president,
strategic planning, Media Buying Services, almost every retail sector is becoming more
consolidated, with much of the distributor power now resting with a handful of retailers. Fewer
channels of distribution mean that each retailer becomes crucial, creating a situation in which the
trade can use their power to effectively extract special considerations from the companies that
want distribution. In industries such as food and beverages, it is the distributors of the products,
not the manufacturers, who call the shots. Buying power is very concentrated in this segment;
eight distributor organizations control 80% of the buying. Because of their organizational buying
power and the sophisticated wholesaling and retailing network they control, these organizations
actually determine the success or failure of a brand. A popular saying among these distributors
(Loblaws, Safeway, and A&P, to mention a few) is that “you can do all of the advertising you
want, but if I don’t carry your product, my customers can’t buy it.” The implication of this
statement is clear—retailers must be satisfied with the turnover and profit margin of the brands
they carry. No longer can managers be satisfied with improving only their own profit goals. They
must now focus more effort on satisfying the profit goals of their trade customers.
Trends now indicate that trade promotion is getting a fair share of the budget allocations in
Canada. In 1983 trade promotion accounted for 54% of marketing budgets. In 1997 it had soared
to 77%. Advertising presently garners about 13% of the budget and consumer promotion 10%. In
the U.S., the corresponding trade promotion figure is around 48%. What, then, is to be gained
from the high spending on promotion? Promotion money directed at the trade influences feature
pricing and in-store merchandising support, both important influences on consumer purchases—
that is to say, trade promotion spending alters the price side of the price-value relationship.
Marketing research information from Nielsen Marketing Research verifies the importance of
trade spending. In the top ten high-volume categories in food stores, the incidence of consumers
purchasing a feature-priced product is quite high. The percentage varies from 32.5% for readyto-eat cereals to 61.4% for packaged laundry detergent. More importantly, for the brand leaders
in each of the ten categories, there is a higher rate of purchase when the brand is feature-priced.
Refer to Exhibit 1 for details.
What can be concluded from this case? For building a consumer franchise, it is essential that
strong, creative, and continual advertising be considered as a means of positioning a brand or
company in the customer’s mind and of clearly defining the benefits offered by the brand or
company.
Consumer promotion helps pull a product through the channel of distribution, so it must be
considered a crucial element in the mix. A well-conceived and well-executed promotion allows a
manager to deal directly with the end users and to encourage them to buy and use more of a
branded product. Much like advertising, a promotion is an activity that the manager can control.
Trade promotions ensure that products are available in the distribution channel. In today’s pricesensitive environment, trade promotion helps ensure that a brand gets its share of feature pricing,
co-operative advertising support, and in-store displays while it helps trade customers achieve
their own profit objectives. Clearly, a balanced plan including all three elements—advertising,
consumer promotion, and trade promotion—is crucial to the success of any brand or company.
Exhibit 1
Top ten product categories—share of volume sold at feature price
Product Category
Leading BrandPercent of Sales at Feature Price
Ready-to-Eat Cereal 32.5
50.3
Packaged Laundry Detergent 61.4
Fruit Juices
54.6
84.3
Packaged and Canned Soup 40.9
Bathroom Tissue
56.0
74.4
Frozen Dinners
40.9
n/a
Cookies
n/a
41.7
72.1
Regular Coffee
54.4
Instant Coffee 54.5
69.8
Drinks and Nectars
40.4
61.3
n/a
68.1
Adapted from Jo Marney, “Freebies have legs,” Marketing, September 29, 1997, p.30, Wayne
Mouland, “A Special Presentation on Promotion Fundamentals,” presented at Queen’s
University, March 1997 and Holly Longdale, “Giving new products an initial boost,” Strategy,
September 18, 1995, pp.22,23.
Discussion Questions
1. The case discussion suggests that price (low price) is a major influence among consumers
when deciding what brands to purchase. Is price the most important factor today or are
consumers looking more closely at other qualities? If so, how will this affect the allocation of
budgets between advertising, trade promotion, and consumer promotion?
2. The distribution channel in Canada for grocery products is controlled by a few chains (e.g., 8
distributors control 80% of the stores). Such control forces manufacturers to spend a lot of
money in short-term trade promotion activity at the expense of long-term brand building activity.
What recommendations can you offer to remedy this situation? Are there alternative strategies
that could be implemented that would satisfy the distributor’s desire for profit and the
manufacturer’s desire for higher market share and profit?
Ford
www.ford.com
Figure 14-1
An ad that stresses price, quality, and related services
Courtesy: United Parcel Service
3M
www.mmm.com
Federal Express
www.fedex.com
Doing Business on
the Web
Doing business on the Web involves more than just setting up a site and hoping that customers
will visit and revisit. Sprint Business has a Web site that is positioned as a business resource.
According to Sue Sentell, vice-president of marketing communications for Sprint Business, “The
critical element is making the content relevant to the target audience.” The Sprint site is focused
on a friendly-looking file cabinet. It downloads extremely quickly so users do not waste time
waiting for complicated graphics.
While a company can get on to the Web for as little as $1000, Sprint invested heavily in its site.
Putting money into a site was seen as a continual investment that would need nurturing. Sprint
spent over $250 000 developing its site and continues to build on it. Next in line will be the
addition of massive areas targeted to different customer groups, such as government and health
care.
The true value of the Net to Sprint is its sales potential. Sprint can track leads and possible sales
that are generated through requests made on the Web site. In terms of advertising it can track the
number of exposures generated by the site and compare that to the cost of generating equivalent
exposures through print and other forms of advertising. Each measurement shows the value of
the site and builds awareness and interest in Sprint services. Sprint says that the traffic on the site
has, by far, exceeded its expectations.
Based on Sprint’s experience on the Net, it offers the following tips for companies wishing to
develop a site. It suggests that a site be brought to life quietly before planning an official launch.
“The Internet is very fluid and people will come on their own.” As well, there must be a firm
understanding of the company’s positioning and branding before building the site map.
“Companies can actually water down their brand on the Internet, if they don’t do it right.”
While Sprint’s experience on the Web has been positive so far, many companies claim that the
Web is a long way from being a significant advertising medium. In order for the Net to fully
develop, these companies claim that more speed, availability, and security are needed. In two
surveys conducted for Internet Marketing, the ability to perform secure transactions and the
speed of the Web were viewed as obstacles to the successful development of the Web as a
business-to-business marketing tool. On a more positive note, the surveys revealed that 40% of
Web users said they purchased computers and computer-related products because of information
and advertising found on-line. In terms of on-line transactions, one-third of Web users said they
had purchased directly over the network.
There is little doubt that the Internet will play a more important role in business-to-business
marketing in the future.
Adapted from Kim Cleland, “How Sprint does business on the Web,” Business Marketing, May
1996, p.M4 and Chuck Paustian, “How the business world views the World Wide Web,”
Business Marketing, May 1996, p.M7.
Can Eaton’s Be Hip?
In 1997, Eaton’s filed for bankruptcy—one of Canada’s oldest and respected retailers couldn’t
cut it in the highly competitive retail marketplace. To revive itself, Eaton’s chose what looks like
a risky strategy, dumping or downsizing the selection of many products—including appliances
and furniture—and replacing them with brand name clothing.
Part and parcel of the new image, is a rejuvenated store atmosphere that features higher ceilings,
softer lighting, and glamorous new brand-name merchandise: more clothing from Ralph Lauren
and Tommy Hilfiger, and bags and shoes from Kenneth Cole.
According to, George Kosich, company president at the time, “Eaton’s’ survival depends on
being able to distinguish itself from chains like Sears and The Bay. Being third is tantamount to
failure.” To succeed, Kosich is determined to carve out a niche he says exists between The Bay
and Holt Renfrew. He declares that “Eaton’s will be the Bloomingdale’s of Canada.”
The key demographic for Eaton’s is teens and early 20 somethings. This target represents 3.8
million Canadians who spend close to $6 billion annually. They are the customers of today and
the future. Eaton’s goal is to form brand loyalties now so they will be better off in the future.
To reach this group the stodgy image had to go. Eaton’s is attempting to reposition itself with a
new corporate symbol and store logo (the letter e in a circle), a new image created by edgy
advertising strategy, and the slogan, “Times have changed.” In its place is a new image created
by an edgy advertising strategy. The bold multi-million dollar, multi-media campaign quickly
points out that Eaton’s is no longer “mom’s store.” The unusual ads were launched in the
summer of 1998 in conjunction with the opening of new teen shops in all 64 of its department
stores across Canada. A teen-focused line of clothing called Diversity is featured in the
advertising.
Some critics are not exactly happy about the new style of advertising. Monique McQuay, a
freelance art director in Eaton’s own art department, says two ads portray Black people in a
derogatory way. In one of the ads where a young Black woman is shown wearing a brown suit,
the caption reads: “Surprisingly, chocolate can make you look thinner.” McQuay says the ad is
tacky and insensitive. Apparently chocolate has been used as a derogatory word against Blacks.
In another ad a Black man identifies himself as being from the Projects, low-income housing
found in U.S. inner cities, not Canada, but there are no Projects in Canada.
Eaton’s is trying to win back customers who left for the Gap and Club Monaco by enticing them
with new advertising and new merchandise. The combination will give Eaton’s an attitude. After
doing research with teens, Eaton’s quickly concluded that fashion had to be the priority. Teens
simply walked through Eaton’s on their way to upscale specialty shops. Eaton’s had to grab their
attention. The stores were redesigned to reflect a trendy, urban feel, with concrete floors,
couches, and a young sales staff. Sound systems pump out rap and alternative tunes, and
projection TVs feature extreme sports and music videos.
The merchandise will appeal to various “tribes” in the increasingly diverse youth market.
There’s Fubu for hip-hoppers, Quicksilver for skateboarders, and Polo Ralph Lauren for
preppies. Geeks will not be a focal point. Eaton’s has decided that they are too busy with
homework to bother with fashion.
The breadth of the advertising campaign is impressive. Television commercials are strategically
placed on shows currently hot with young viewers—South Park, Dawson’s Creek, Party of Five,
and Beverly Hills 90210. Ads also appear in subway stations and teen magazines. Print ads are
featured in Toronto Life, Flare, and Elle Quebec. Rounding out the media strategy is a 128-page
oversized catalogue called Preview, a Web site, and a 32-page catalogue target-mailed to teen
customers.
Altering the image of Eaton’s is a huge challenge. Unlike a specialty store that focuses on a
specific target, department stores appeal to a variety of consumers. Eaton’s wants to attract teens
but they can’t forget about their mothers or grandmothers. Considering the hoopla over the new
image, old Timothy Eaton must be rolling in his grave, but certainly he would approve of any
plan that would make money.
Adapted from John Heinzl, “Eaton’s goes on a youth kick,” The Globe and Mail, July 30, 1998,
p.B9, Mikala Folb, “New Eaton’s ads shatter old image,” Marketing, September 14, 1998, p.2
and Kimberley Noble, “Fashioning a gamble to survive,” Maclean’s, September 28, 1998,
pp.46,47.
IKEA
www.ikea.com
Grand & Toy
www.grandandtoy.com