Download Higher diploma in sales and marketing

Level
2.0 HIGHER DIPLOMA IN SALES AND
MARKETING
Module
Module 6 PROMOTIONAL PRACTICE
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Higher Diploma in Sales and Marketing
Content
1 PROMOTION PRACTICES PERSPECTIVES & ORGANIZATION
Sales setting
Channel structure
Types of production
Nature and role of public relation
2 THEORIES AND MODELS OF PROMOTION
Integrated marketing communication strategy
Determining the communication objectives
3 PROMOTIONAL TECHNIQUES
Advertising, sales promotion and public relations
Setting the advertising budget
Sales promotion
Trade promotion tools
Personal selling and direct marketing
Team selling
Direct marketing
Promotional tools
4 INTEGRATION, IMPLEMENTATION AND EVALUATION
The planning framework and budget
Types of objective
Market segmentation
5 CURRENT AND FUTURE ISSUES
Developing relationship marketing
The marketing communication industry
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1 PROMOTIONAL PERSPECTIVES & ORGANIZATION
Sales Settings
Environmental and Managerial Forces Impacting on Sales
A number of major behavioural, technological and managerial forces impact on how selling and sales
management are and will be carried out.
Behavioural forces
As customers adjust to a changing environment so sales has to adapt to a variety of influences:
a. Rising consumer and organizational buyer expectations
b. Customer avoidance of buyer-seller negotiations
c. Expanding power of major buyers
d. Globalization of markets
e. Fragmentation of markets.
Rising consumer/organizational buyer expectations and fulfillment or higher order needs
As consumers experience higher standards of product quality and services so their expectations are
fuelled to expect even higher levels in the future. This process may be hastened by experiences
abroad, and new entrants to industries (possibly from abroad) that set new standards of excellence.
The chief executive of customer satisfaction research firm J.D. Power explained: ‘what makes
customer satisfaction so difficult to achieve is that you constantly raise the bar and extend the finish
line. You never stop. As your customers get better treatment, they demand better treatment.’ The
implication for salespeople is that they must accept that both consumer and organizational buyer
expectations for product quality, customer’s service and value will continue to rise. They must
respond to this challenge by advocating and implementing continuous improvement in quality
standards. The same is of course true in respect of organizational buyers, especially in view to trends.
Globalization of marketers
As domestic markets saturate, companies are expanding abroad to achieve sales and profits growth.
Large companies such as Coca Cola, Colgate-Palmolive and Avon products now earn the largest
proportion of their revenues in foreign markets. The global challenge includes a correct balance
between expatriate and host country sales personnel, adapting to different cultures, lifestyles and
languages, competing against world-class brands and building global relationships with customers
based in many countries.
For example, 3M has a variety of global strategic accounts from industrial high-tech (e.g. Motorola,
Hewlett Packard, IBM, Texas Instruments) to original equipment manufacturers in electronics,
appliances, automotive, electrical, aerospace, furniture, consumer products and health care. A major
challenge for such transnational corporations is the co-ordination of global sales teams that sell of sell
located in over 20 countries and require special terms of sales, technical support, pricing and
customization of products. This complexity means that strategic account managers require both
enhanced teamwork and co-ordination skills to ensure that customers receive top quality services.
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Fragmentation of markets
Driven by differences in income levels, lifestyles, personalities, experiences and race, markets are
fragmenting to form markets segments. For example, the Campbell Soup Company has divided the
USA into 22 distinct markets segments based upon unique cultural and ethnic tastes for soups. This
means that markets are likely to become smaller with an increasing range of brands marketed to cater
for diverse needs (both functional and psychological) of customers. Marketing and sales managers
needs be adapt in identifying changes in consumer tastes and developing strategies that satisfy an
increasingly varied and multicultural society.
Technological forces
The importance of technological forces on selling and sales management is reflected in the attention
given. Three major forces are at play:
 Sales forces automation
 Virtual sales offices
 Electronic sales channels
Sales force automation includes laptop and palmtop computers, mobile telephone fax, e-mail and
more advanced sales software which aid such tasks as journey and account planning, and recruitment
selection and evaluation of sales personnel. In addition, electronic data interchange (EDI) provides
computers links between manufacturers and resellers (retailers, wholesalers and distributors),
allowing direct exchange of information. For example, purchase orders, invoices, price quotations;
delivery dates, reports and promotional information can be exchanged. Technological innovations
have made possible desktop video conferencing, enabling sales meetings, training and customer
interaction to take place without the need for people to leave their offices.
Improved technology has encouraged the creation of virtual offices, allowing sales personnel to keep
in contact with head office, customers and co-workers. The virtual office can be home or even a car.
This means cost and time savings and enhanced job satisfaction for salespersons who have spared
time waiting in traffic that is a feature of the job.
The faster growing electronic sales channel is undoubtedly the Internet. However, another emerging
channel is worthy of mention as it will reduce the need for field salesforces. This is television home
shopping which is popular in the USA. Viewers watch cable television presenters promote anything
from jewellery to consumer’s electronics and order by telephone. In effect, the presenter is the
salesperson.
Managerial forces
Managers can respond to the changes in the environment by developing new strategies and tactics to
enhance sales effectiveness, including:
a. Employing direct marketing techniques
b.Improving co-operation between sales and marketing
c. Encouraging salesperson to attend training programmes and gain professional qualifications
The increased role of direct marketing, including direct mail and telemarketing, has been discussed.
However, an emerging change is the use of computer stations, especially in US retail outlets, to
replace traditional salespeople. In Europe the serious use of computer stations began in car
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showrooms with Daewoo’s employment of kiosks where customers gather product and price
information.
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The process has moved further in the USA where several Ford dealerships have installed computers
stations that fully replace salesperson. Customers can compare features of competitive models
calculate running costs, compute monthly payment, and use the computer to write up the order and
transmit this to the factory without the intervention of a salesperson.
The development of effective relationships between sales and marketing is recognized but in practice
blending the two functions into an effective whole is sometimes hampered by poor communication.
The establishment of intranets that link employees, suppliers and customers through their PCs can
improve links and improve information exchange. Internet is used for such functions as e-mail, team
projects and desktop publishing. Their adoption can enhance the effectiveness of the field salesforce
that require fast access to rapidly changing information such as product specifications, competitors
news and price updates, and allows the sharing of information between sales and marketing.
Sales management is responding to new challenges by recognizing the importance of professional
qualifications. In the UK this has led to the formation of a new professional body, the Institute of
Professional Sales, as well as the long established Institute of sales and Marketing Management. The
bodies are charged with enhancing the profile of the sales function, promoting best practice and
developing education and training programmes to improve salespeople and sales management skills,
competence and professionalism.
Having examined the major forces impacting the sales function, we will now consider the specific
settings where selling takes place, and some of the activities such as sales promotions and exhibitions
that support selling activities.
Sales channels
Historically, distribution was simple with producers selling to their immediate neighbours, who often
collected goods themselves. Modern day manufacturing, more cosmopolitan consumers, better
transportation and business specialization have meant that channels decisions are now quite complex.
Distribution costs have risen relative to production. However, as a result of automation and
computerization, production costs as a percentage of total cost are now considerably lower than they
were only a few years ago. Management should constantly reappraise channels of distribution to
make cost savings, marketing channels are determined by company policy and this determines how
the sales force should be organized.
A sales channel is the route that goods take through the selling process from suppliers to customer.
Sometimes the channels is direct especially where goods sold are incorporated into a manufacturing
process. Final goods might then be sold through a different channel. A product example is fuel
injection systems that are sold to automobile manufacturers; automobiles are then sold to car
distributors and the car distributors sell to end consumers. A sales channel can also be indirect,
whereby a manufacturer sells to a wholesalers or agent, who sells in smaller lots to other customers.
This is known as ‘breaking bulk’.
Selecting/reappraising sales channels; Considerations in selecting/ reappraising sales channels are;
 The market
 Channel costs
 The product
 Profit potential
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 Channel structure
 Product life-cycle
 Non-marketing factors
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The market
This must be analyzed to ensure that as many potential consumers as possible will have an
opportunity to purchase the product or service. Channel compatibility with similar products in the
marketplace is important. Consumers tend to be conservative and any move from the accepted norm
can be viewed with suspicion. Unless there are sound reasons for so doing, it does not make sense to
go outside the established channel. For instance, a canned food producer would not normally
consider selling through mail order unless the company was providing a very specialist type of food
or perhaps providing it as part of a hamper pack. Instead, the company would use traditional
distribution outlets like food multiples and cash and carry.
Channel costs
Generally, short channel costs less. A company selling direct may achieve large market coverage, but
in addition to increased investment in the salesforce, the firm also incurs greater transportation and
warehousing costs. This is balanced against the fact that there will be greater profit margin, by virtue
of the fact that distributive intermediaries are obviated and their margins will not have to be met. In
addition to such financial criteria, short channels have an advantage to being nearer to end-users,
which means the company is in a better position to anticipate and meet their needs.
There has been a trend in the recent years for manufacturers to shorten their channels to control more
effectively distribution of their products, particularly where advertising has been used to pre-sell the
goods to consumers.
The product
Normally, low-cost, low-technology items are more suited to longer channels. More complex items,
often requiring much after-sale service, tend to be sold through short channels. This is why most
industrial products are sold direct from the producers to user. The width of the product line is
important in that a wide product line may make it worthwhile for the manufacturer to market direct
because the salesperson has a larger product portfolio with which to interest the customer that makes
for more profit-earning potential.
A narrow product line is more suited to a longer channel because along the distribution chain it can be
combined with complementary products of other manufacturers, resulting in a wider range of items
with which to interest the customer. In this case distributive intermediaries and not manufacturers are
performing the final selling functions. As example here is a manufacturer of bathroom fittings who
sells through builders’ merchants. Builders’ merchants then sell these fittings to builders alongside
other materials they require.
Profit potential
There comes a point when the costs of obtaining more sales through a channel outweigh revenue and
profits to be gained from increased sales. For instance, a manufacturer of an exclusive perfume
would not distribute through supermarkets or advertise during peak-time television viewing. If the
company did, then sales would no doubt increase, but costs of achieving those sales would make it
unprofitable. It is an accounting problem and a balance must be struck between channel expense,
profit and gross margins.
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A manufacturer using short channels is more likely to have high gross margins, but equally higher
channel expenses. A manufacturer using longer channels will have relatively lower gross margins,
coupled with lower channels expenses.
Channel structure
To some extent a manufacturer’s choice of distributive intermediaries is governed by the members in
that channel. If members of the channel are strong (by virtue of, say, their size), then it will be
difficult for a manufacturer to go outside the established channel.
In some cases it may be difficult to gain entry to the channel unless the product is differentiated by
way of uniqueness or lower price than those products already established in the channel. An example
is the potential difficulty that a new detergent manufacturer would have in attempting to sell products
through larger supermarkets. The manufacturer would have to convince members of the channels that
the detergent was in some way better than those already on the market, or offer ‘pull’ strategy that
relies on consumer advertising to create brand loyalty and presell the product to end customers. A
new manufacturer would have to spend a lot on mass advertising to create brand loyalty for the
product, or attempt to ‘push’ the product through the channel by providing trade incentives, with
probably a lower end price than competitive products coupled with larger profit margins for retailers.
It can be seen that it would be a daunting tasks for a new detergent manufacturer to enter the market
in a big way without large cash resources at its disposal.
Product life-cycle
Considerations must be given to how far the product is along the product life cycle. A new concept or
product just entering the life cycle might need intensive distribution so as to launch it on the market.
As it becomes established it may be that after-sales service criteria become important, leading to a
move to selective distribution, with only those dealers that are able to offer the necessary standard of
after-sales service being allowed to sell the product. Conversely, sales are low initially in keeping
with diffusion theory. It would then be the case that only selected few distributors are needed in the
early stages of the life cycle.
In the case of televisions the wheel has turned full circle, from intensive distribution to selective
distribution (for reasons just mentioned) and back to intensive distribution. This is because servicing
of televisions is now relatively simple, in that televisions are constructed similarly and standard units
are replaced when repairs are needed. A television repairer no longer needs to be a specialist in one
particular model. Television manufacturers realize that with comparative parity between models,
consumers are likely to be drawn towards a particular brand because of its supposed technical
superiority or standard of after-sales service. The most crucial factor now is ensuring the customer is
able to see the brand and compare it with competitors’ brands. Thus, maximum exposure at point of
sale is a manufacturer’s distribution objective.
Non-marketing factors
These might relate to the amount of finance available. In the case of an innovative product, it could
be that the firm is unable to exploit this to its fullest advantage because of financial constraints. The
firm may have to distribute through a middleman because it cannot afford to employ a field
salesforce. Conversely, the firm may use non-conventional channels such as mail order, which
requires minimal investment in salesperson, although the physical characteristics of the product might
not make it suitable for mail order.
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Non-marketing factors often apply when selling internationally, as many companies view export
orders as a supplement to home trade and are prepared to offer an agency to anybody who is likely to
obtain orders, irrespective of their commercial standing. A fuller discussion of international aspects,
but it should be noted that there were small and exporting was relatively unimportant.
As the companies grew they came to regard exporting as essential, but it proved difficult and
expensive to unwind hastily entered into agency agreements. Such companies in many cases had to
persevere with the original arrangements, often against long-term best interests.
Characteristics of sales channels
Marketing channels are one of the more stable elements in the marketing mix. A channel is costly
and complex to change, unlike say price, which is relatively easy to manipulate. For instance, a
switch from selective to intensive distribution is a policy decision that will have a direct effect upon
salesforce numbers, and even upon the type of selling methods to be used.
The main problem that companies have to face is in choosing the most appropriate channel. From the
viewpoint of sales management this includes the type of sales outlets that must be serviced.
Basically, a manufacturer has the choice of one of four types of distribution:
1. Direct. The manufacturer does not use a middleman and sells and delivers direct to the end
customer.
2. Selective. The manufacture sells through a limited number of middlemen who are chosen because
of special abilities or facilities to enable the product to be better marketed.
3. Intensive. Maximum exposure at the point of sale is needed and the manufacturer sells through as
many outlets as possible. Servicing and after-sales aspects are less important. Examples are
cigarettes, breakfast cereals and detergents.
4. Exclusive. The manufacturer sells to a restricted number of dealers. An example is the car
industry where distributors must provide levels of stockholding, after-sales service, etc., deemed
appropriate by manufacturers as their reputations depends ultimately upon back-up service given
by distributors.
Industrial/commercial/public authority selling
These categories are grouped together as the sales approach is similar and behavioural pattern
exhibited by each conform to organizational behaviour. A number of characteristics in these types of
market distinguish them from consumer markets.
Fewer customers
Institutions and businesses purchase goods either for use in their own organizations or for use in the
manufacture of other goods. There are few potential purchasers, each making high-value purchases.
Concentrated markets
Industrial markets are often highly concentrated an example being the UK textile industry, which is
centred in Lancashire and Yorkshire. An industrial salesperson who sells into one industry may deal
with only a few customers in a restricted geographical area.
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Complex purchasing decisions
Buying decisions often involve a large number of people, particularly in the case of a public authority
where a purchasing committee may be involved in a major purchase.
Many industrial buying decisions involve more than the buyer; in some cases the technical specified,
production personnel and finance personnel are involved and this is where the decision-making unit
can be seen in practice. This can lengthen negotiation and decision-making processes. Salespeople
have to work and communicate with people in a variety of positions and tailor their selling
approaches to satisfy individual needs. For example, specifiers need to be convinced of the technical
merits of the product, production people want to be assured of guaranteed delivery and buyers will be
looking for value and money.
For technically complicated products, a sales team sometimes performs selling, with each member
working with their opposite number in the buying team, e.g. a sales engineer works with engineers in
the buying company.
Long-term relationship
A life insurance policy salesperson might make a sale and never meet the customer again. The nature
of selling in industrial, commercial and public authority settings is that long-term relationships are
established and both parties become dependent upon each other one for reliable supplies and the other
for regular custom. There is a tendency to build up strong personal relationships over a long time and
high-pressure sales techniques could be counter-productive.
A more considered approach involving salespersons identifying needs of individual customers and
selling the benefits of the products to satisfy those needs of individual customers and selling the
benefits of the product to satisfy those needs is more likely to be successful. The ability of salespeople
to deal with complaints and provide a reliable after-sales how to develop and sustain relationships
with key customer groups, along the lines or relationship selling.
Reciprocal trading
This is an arrangement whereby company a purchase certain commodities manufactured by company
B and vice versa. Such arrangements tend to be made at senior management levels and are often
entered into when there is a financial links between the companies, such as those within the same
group (referred to as intergroup trading) or between companies whose directors simply want to
formalize an arrangement to purchase as much of each other’s products as possible.
Such arrangements can be frustrating for salesperson and buyers alike, as they deter free competition.
The buyer does not like to be told where they must purchase from, just the same as the salesperson
does not like having a large part of a potential market permanently excluded because of a reciprocal
trading arrangement.
Types of production
This relates mainly to industrial sales. The type of production operated by the firm to whom the
salesperson is selling can determine the type of selling approach to be used. There are a number of
different types of production.
1. Job (or unit or project) production: An item is produced or constructed to individual customer
requirements. It is difficult to forecast demand in such circumstances. Examples are ships,
tailormade suits and hospital construction.
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2. Batch production: A number of products or components are made at the same time, but not on a
continuous basis. As with job production, batches are normally made to individual customer
requirements, but sometimes batches are produced in anticipation of orders. Product examples
are books, furniture and clothes.
3. Flow (of mass or line) production: This is continuous production of identical or similar products
that are made in anticipation of sales. Examples are motorcars, video recorders and washing
machines.
4. Process (or continuous) production: The unit has raw materials coming into the manufacturing
process and a finished product emerging at the end. Examples are chemicals, brewing and plastic
processes.
Salespersons selling in a combination of such settings will have to adopt a different approach for
each. With flow production the salesperson will have to anticipate model changes to ensure the firm
is invited to quote at the outset, and follow up the quotation in the expectation of securing an order
which be fulfilled over the life of the product. If the salesperson is unsuccessful at this stage, then he
or she may not have the opportunity of selling to the firm again until the next model change, when it
will be difficult dislodging an established supplier.
Just-in-time manufacturing is normally operated in flow production situations. Reliability of quality
and delivery are of prime importance as manufacturers work on minimal stockholding of component
and raw materials. Long-term relationships with suppliers are prevalent. ‘Zero defects’ is the goal
suppliers must strive to achieve in terms of quality.
With job production, losing an order is not normally as critical, because as long as the firm has been
professionally represented, it should be invited to quote for the next order and perhaps be successful
then. Losing a potential order is serious but with job production it might mean waiting a short period
before being asked to quote again for a different job, whereas with flow production it might be years
before the model is changed and an opportunity provided to quote again) by which time the buyer
might have forgotten the existence of the salesperson).
Selling for resale
This includes selling to retailers, most of whom are multiples like Tesco, Sainsbury’s and Asda,
which effectively perform their own wholesaling functions. Independents purchase from wholesalers
or cash and carry operators like Makro. Some retailers belong to voluntary chains like Spar. Much
buying is centralized and in many cases the buyers visits the sellers (unlike industrial selling when the
seller normally visits the buyer). A look at changing patterns of retailing since the end of World War
II illustrates how retailing has been revolutionized.
Before examining these changing patterns or retailing, we first categories seven different types of
selling outlets:
1. Multiple: Classed as belonging to a retail organisation with ten or more branches, each selling a
similar range of merchandise. This has been one of the fastest growing areas of retailing and in
the UK multiples now dominate fast moving consumer goods (FMCG) retail trading.
2. Variety chains: Similar to multiples except that the qualifying number of stores is five and they
sell a wider range of merchandise.
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3. Co-operative societies: Owned and controlled by the people who shop there, each society is
governed by a board of directors elected from its won members. Anybody can be a member by
purchasing one share. The movement can be traced back to 1844 when it started in Rochdale.
Its principles are:
 Open membership
 Democratic control (one man, one vote)
 Payment of limited interests on capital
 Surplus arising out of the operation to be distributed to members in proportions to their
purchases originally distributed the through dividends, but later paid through trading stamps;
this has been generally abandoned in favour of lower prices
 Provision of education
 Co-operation amongst societies, both nationally and internationally
4. Department stores: Stores with five or more departments under one roof and at least 25
employees, selling a wide range of commodities including significant amounts of household
goods and clothing.
5. Independent: Traders who own their retail outlets. There are variations, the first being where the
independent belongs to a retail buying association. This is an informal grouping whereby retailers
(usually within a specific geographical area) group together to make bulk purchases. A higher
profile arrangement is when a wholesaler invites retailers to affiliate to them and agree to take the
bulk of their purchases from them. Such arrangements are termed voluntary groups (individual
wholesaler sponsored) or voluntary chains (group wholesaler sponsored). Participating
independent retailers have an identifying symbol (and for this reason they are termed “symbol
shops’ – like SPAR) in addition to their customary title. Retailers voluntarily agree to abide by
the rules of the group or chain, including matters of accounting procedures, shop facilities and
group marketing/ promotional schemes.
6. Mail order: This activity has expanded significantly in recent years. The most popular type of
arrangement is the mail order warehouse that carries a large range of goods. Business is conducted
by agents who sell to families and friends. Commodity specialists dealing in terms like gardening
produce, government surplies and hi-fi also carry out mail order. They advertise in appropriate
specialist press and through direct mail. This type of business has expanded largely as a result of
the expansion of Sunday colour supplements. Many companies deal in more general ranges of
goods and use such colour supplements to advertise. Some department stores offer postal services
and sometimes provide catalogues.
7. Direct selling: Party plan companies have sold direct to customers in their homes for a number of
years. Tupperware produces a range of high-quality kitchenware and other merchandise for food
and drink storage. A direct salesperson demonstrates products to a group of guests, invited by the
host in whose home the demonstration takes place. The host compensation is a percentage
commission on order taken. A long established company in the field of direct selling is Avon
Cosmetics whose part-time agent sells to people in a specific locality through the medium of a
catalogue. This company is the subject of a case study at the end of the chapter. Buying from a
‘traveling shop’ was popular after World War II, but as people became more mobile its popularity
waned. However, there is now a new trend to sell bespoke items through this medium.
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The success of the multiple has meant that manufacturers have had to reappraise their sales channels
with the concentration of purchasing power in fewer hands. In the FMCG field, manufacturers have
become increasingly involved in controlling distributing strategies. This has meant heavy advertising
expenditures and concurrent merchanding activity at point of sale has been necessary to ensure that
goods are promoted in-store to back up national advertising. As a result, large manufacturers
operating a ‘pull’ strategy have been able to exercise control over their distributive intermediaries
could only dismiss demand created through advertising and branding at the risk of losing custom.
This control has meant lower margins for retailers, with manufacturers being able to dictate the instore location of their particular products. The weight of advertising put behind major brands has
given these manufacturers influence over their distributive outlets.
Although, there was initially some resistance on the part of manufacturers to the development often
multiples, they eventually found it to their advantage to deal with them directly. This was because
multiples purchased in bulk often for delivery to a central depot, and placed large orders well in
advance of the delivery date, thus enabling the manufacturer to organize production more efficiently.
The implications for selling as a result compelled to sell the products in the old-fashioned ‘sales
representational’ sense as advertising has already pre-sold goods for them. Selling to multiple is
more a matter of negotiation at higher levels whereby the buyer and the sales manager negotiate price
and delivery and salespeople merely provide an after-sales service at individual outlets. Sometimes
salespeople carry out merchandising activities such as building up shelf displays, providing window
stickers and in-store advertising, although such duties may also be carried out by separate
merchandiser teams, particularly when some form of demonstration or product promotion is required.
The growing importance of retailers is reflected in the formation of trade marketing teams to service
their needs. A combination of key account management on the part of the salesforce and brand
management’s lack of appreciation of what retailers actually want has promoted many European
consumer goods companies to set up a trade marketing organization. A key role is to bridge the gap
between key account management and the salesforce. Trade marketers focus on retailer needs:
 The kinds of products they want
 In which sizes
 With which packaging
 At what prices
 With what kind of promotion
Information on trade requirements is fed back to brand management who develop new product, and to
the salesforce who can then better communicate with retailers. An important role for role trade
marketers is to develop tailored promotions for supermarkets. Wholesalers have suffered since the
post-war period and many have gone out of business because their traditional outlets (independents)
have also suffered. This is why wholesalers established voluntary groups or chains, in order to meet
the challenge of multiple and offer a similar type of image to the public.
However, this has largely failed because of inferior purchasing power and because wholesalers must
try to make their independent retailing members behave like multiple, using voluntary means. The
wholesalers only sanction against noncooperating members is to expel them from the group, whereas
in the case of multiple a store managers can be quickly removed. The post-way years have witnessed
growth of large-scale retailing including growth in the size of retail establishments, first to
supermarkets then to superstores, then hypermarkets and finally to megastores.
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Because of the large size of site required for such outlets, but also for customers’ convenience, the
trend has been towards out-of-town sites where easy parking is facilitated. Patterns of shopping have
changed in that shoppers have for most goods been prepared to dispense with the personal service of
the shopkeeper and self-service and self-selection have been readily accepted in the interests of lower
overheads and more competitive prices. There has been a growth in mass marketing because
improved standards of living have meant that products that were once luxury goods are now utility
goods and required by the mass of the population, e.g. cars, foreign holidays, television, telephones,
mobile phones. Because supply normally exceeds demands for consumers goods, there has been a
large increase in advertising and other forms of promotion in an attempt to induce brand loyalty; with
FMCGs being pre-sold to consumers by means of ‘pull’ promotional strategies. At the same time
retailers have encouraged shoppers to become ‘store loyal’ through the introduction of loyalty card
schemes. Thus, retailing has been one of dynamic change which has affected ways in which has
affected ways in which salespeople operate.
Franchising
A more recent trend in European retailing has been contractual systems of franchising. It is a
corporate vertical marketing system (VMS) as its power is based at a point in the channel that is one
or more stages removed from the end customer. The franchiser initiates the franchise and provides
the link to the ultimate franchisee on specific stages of the manufacturing/distribution process.
Franchising was originally a British development under the ‘tied public house’ system. Landlords
who owned their own premises were tied to a brewery under an agreement to purchase only that
brewery’s products. However, modern franchising is a US phenomenon that was introduced to the
UK in the 1950s. Since then it has grown enormously and now has a code of conduct that is
administered through a voluntary body called the British Franchising Association.
Franchising comes in a number of forms e.g.:
1. From manufacturers to retailers: e.g. a car manufacturer the franchisor) licenses car distributors
(franchisees) to sell its products.
2. From manufacturers to wholesalers: popular in the soft drinks industry, here manufacturers
sometimes supply concentrate (i.e. the ‘secret recipe’) which wholesalers then mix with water and
bottle for distribution to local retail outlets (e.g. Pepsi Cola, Coca-Coal). Manufacturers are the
driving force behind the brand image of the product and stringent consistency and control of
quality is of paramount importance.
3. From wholesalers to retailers: in decline from a number of years as a result of the rise of the
multiples mentioned. The most successful example is the voluntary group ‘SPAR’, which does
not manufacture, but its large wholesale buying power means it can pass on cost savings to
independent retailers who join the group and display the SPAR logo. They must abide by rules of
the group in relation to matters like price promotions, standards of store layout and opening hours
that the group uses as part of advertising ‘SPAR – your eight till late shop’.
4. Service firm sponsored franchises to retailers: this area has achieved largest growth over recent
years. Examples are found in the fast food business (e.g. Burger King, McDonald’s, Little Chef,
Kentucky Fried Chicken, Spud-U-Like, Pizza Hut): car rentals (e.g. Avis, Budget, Hertz); office
services (e.g. Prontaprint); hotels and resorts (e.g. some Sheraton and Holiday Inn hotels are
owned by individuals or groups who operate on a franchise basis).
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Module 6 Promotional Practice
1 Promotional Perspectives & Organization
Franchising arrangements have a common set of procedures:
1. The franchiser offers expert advice on such matters as location, finance, operational matters and
marketing.
2. The franchiser promotes the image nationally or internationally and this provides a wellrecognized name for the franchisee.
3. Many franchise arrangements have a central purchasing system where franchisee buys at
favourable rates or where a successful ‘formula’ is central to the operation of the franchise (e.g.
Kentucky fried chicken).
4. The franchise agreement provides a binding contract to both sides. This contract governs such
matters as hours of opening, hygiene and how the business is operated in terms of its dealings
with customers. Indeed, on this latter point, organizations like Little Chef employ ‘mystery
shoppers’ who call unannounced and order a meal anonymously. The check up on the operation
of franchisees to ensure they are following the franchise rules of operation. The mystery shopper
investigates matters such as how the customers is greeted;
5. Whether or not they were kept waiting; whether or not certain extra items of food were offered;
cleanliness of restroom facilities and if such facilities were checked in the last two hours from a
chart that if displayed on the wall.
6. The franchiser often provides initial start-up and then continuous training to the franchisee.
7.
A franchise arrangement normally requires the franchisee to pay a royalty or franchise fee to the
franchisor. However, the franchisee owns the business and is not employed by the franchisor.
This system of marketing has become popular over recent years. It provides an advantage to both
large-scale business the franchiser) and the small-scale business (the franchisee). In the case of the
latter, the opportunity to become self-employed and in control of their own destiny is a strong
motivating factor to work hard and make a success of the business. The fact that the name is
internationally recognized means that business is assured straight away.
Selling services
Just like tangible products, a service must satisfy needs of buyers. However, benefits are less tangible
than physical products in that they cannot be stored or displayed and satisfaction is achieved through
activities (e.g. transportation from one place to another rather than say, a seat on a train). Service
come in many forms and examples include:
 Transportation – air, sea, rail and road
 Power – electricity, gas and coal
 Hotels and accommodation
 Restaurants
 Communications – telephone, fax, e-mail
 Television and radio services
 Banking
 Insurance
 Clubs – social, keep fit, sporting, special interests
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Module 6 Promotional Practice
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 Repair and maintenance
 Travel agencies
 Accounting services
 Business consultancy – advertising, marketing research, strategic planning
 Architectural
 Cleaning
 Library
 Public (local) authority services and undertakings – disposal of refuse and road repairs
 Computing services
 Stockbroking services
There are more and they can be applied to both consumer and industrial users. The selling approach
to each category differs, depending upon customer needs, just as selling approaches differ when
considering physical products.
In the UK the services sector has grown tremendously over recent years, so much so that it is now
primarily a service rather than manufacturing economy. There are many reasons for this. For
example, more women work full time and the division of responsibilities between men and women is
breaking down more equitably. This has put pressure on the service sector to provide services that
can perform tasks which have hitherto been seen as the province of being provided in the home (e.g.
more eating out in restaurants and more holidays – often two per year – because of increased
disposable income).
Better technology has assisted the development and provision of a more comprehensive range of
service (e.g. banks offer internet banking credit cards, instant statements, quicker decisions on loans)
and Building societies now provide a broader range of services and have moved into areas
traditionally viewed as the province of the banks and the major ones have now become banks. This
has been a result of the ‘liberalization’ of their activities through the Financial services Act
(198Module 6 ). In addition to expansion of existing services in the financial sector, more services are
now available (e.g. professional drain clearing through the ‘Dyno-rod’ franchise). Public services
have become more marketing orientated and have to be seen to be more accountable to the publics
e.g. the police service is now more public relations conscious than in the past). Local authorities
spend money that is raised through council tax and the public now questions more closely how money
they have contributed is being spent. Thus, these organizations have to be seen to be spending money
wisely as they are publicly accountable. They have to communicate with their publics and explain
how services they provide are of value. Special characteristics of services include:
Products
Low
Low
Low
Low
Yes
Services
Intangibility
Inseparability
Variability (i.e. non-standard)
Perishability (i.e. inability to stock)
ownership
Higher Diploma in Sales and Marketing
High
High
High
High
No
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Module 6 Promotional Practice
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1. Intangibility
2. The difficulty of separating production from consumption as many services are consumed as they
are produced.
3. Services are not as ‘standard’ as products and more difficult to assess (in terms of value).
4. It is not possible to ‘stock’ services (e.g. unsold hotel rooms) unlike products.
The final criterion, ownership, shows that, unlike a product, the consumer does not secure ownership
of the service, but pays to secure access to the use of the service (e.g. a recreational facility like
exercise in a gymnasium).
The four Ps have been extended to include an extra three Ps; thus we have the ‘seven Ps’ of service
marketing. The three extra Ps are People, process and Physical evidence.
People are an important element in carrying out a service, especially those who are directly involved
with customers. Employees must be well trained and have a friendly general demeanour when
handling customers.
Process relates to how the service is provided and it deals with customers at the point of contact in
the supply of the service. Consistency and quality of service must be well planned and managed.
Physical evidence is included because of the intangibility of services. Marketing should highlight the
nature of the service being offered. This should be communicated to customers by emphasizing such
matters as levels of quality, types of equipment and physical facilities.
With this background in mind, the task of selling services is perhaps more difficult than selling
products because of its more abstract nature. A distinguishing feature is that those who provide the
service are often the needs who sell that service. Thus, providers of services must be more highly
trained in sales techniques and sales negotiation forms an important part of such interaction. It is
important too that close attention is paid to image building (e.g. banks and insurance companies must
to seen to be stable, reliable institutions, but with friendly, non-intimidating attitude – an image on
which banks in particular have spent a lot of money). Above all, as McDonald has pointed out,
because unlike a physical product it is never possible to know precisely what will be received until
the service is rendered, an element of trust is essential in selling services.
Sales promotions
Sales promotions include techniques that organizations can use as part of their marketing effort.
Objectives that can be achieved through sales promotional activities include:
 Encouragement of repeat purchase
 Building of long-term customer loyalty
 Encouragement of consumers to visit a particular sales outlet
 Building up of retail stock levels
 Widening or increasing the distribution of a product or brand
Sales promotions include:
 Price reductions
 Vouchers or coupons
 Gifts
 Competitions
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Module 6 Promotional Practice
 Lotteries
 Cash bonuses
1 Promotional Perspectives & Organization
Techniques cover:
 Consumer promotions
 Trade promotions
 Salesforce promotions
The importance of sales promotions has increased since the 19Module 6 0s, as have the sophistication
of methods used. It is sometimes implied that sales promotions is a peripheral marketing activity, but
companies increasingly realize the importance of a well-planned and co-ordinated programme of sales
promotion.
Within the UK, sales promotional activities have matured since the 1970s. At that time few attempts
were made to measure their effectiveness. Advertising agencies branched out into sales promotions
with the aim of offering an all-inclusive package to clients in an attempt to combat competition from
emerging sales promotion agencies. The mid-1980s brought increased economic pressure to be on
business activities that had the effect of making advertising agencies become more concerned about
reductions in company advertising budgets. They began to pay more attention to the effectiveness of
sales promotions and adopted a more integrated approach to advertising. There was a move towards
fee-based sales promotional agencies, which implied a longer term relationship between agency and
clients, rather than an existing adhoc commission structure. As a result of increased competition from
sales promotional agencies, advertising agencies have tended since the mid-1980s to take sales
promotion seriously and now offer sales promotion alongside advertising as an integrated
communications package. Since the late 1970s there has been a gradual erosion of the line between
sales promotion and advertising. Sales promotions can be divided into three main area of activity:
 Consumer promotions
 Trade promotions
 Personnel motivation
Consumer promotions
These are often referred to as pull techniques, since they are designed to stimulate final demand and
move products through the sales channel, with consumers providing the impetus. The most widely
used consumer promotion is the price reduction or price promotion:
1. The item is marked ’x pence off’. This can be manufacturer or retailer originated. This techniques
has to be used with caution by UK manufacturers, as recent legislation now make it illegal to state
this unless the previous price has been applied from a substantial period of time.
2. An additional quantity is offered for the normal price, e.g. ‘buy one get one free (BOGOF)’ of 10
per cent bigger – same price as usual.
3. Price-off coupons, either in or on pack, may be redeemed against future purchase.
4. Introductory discount price offers on new products.
A view held by many organizers of such promotions is that the consumer in economically difficult
times, is more likely to be attracted by the opportunity to save money than by incidental free offers or
competitions. Price promotions are predominantly used by FMCG producers, especially in the
grocery trade.
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Module 6 Promotional Practice
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Premium offers
Premium offers are techniques that give extra value to goods or services in the short terms part of a
promotional package:
1. Self-liquidating premium. An offer of merchandise is communicated to the customer on or off the
pack. The price charged to the customer covers the cost of the item to the promoter. The
promoters is able to purchase such merchandise in bulk and pass savings on to customers who
feel that they are getting something of additional value. These promotions are usually linked with
the necessity to collect labels or cut out tokens from a number of purchases of the same, or same
range of, products. The premium need not be connected with the product that carried the
premium. The idea is to stimulate purchase of the product and selling the premiums is of
secondary importance.
2. On-pack gifts. Here the premium is usually attached to the product. The premium may be
product related, e.g. a toothbrush attached to toothpaste; or not product related, e.g. an item of
merchandise such as a CD taped to a magazine.
3. Continuities. These are sets of merchandise that can be collected through a series or purchases,
e.g. picture cards, chinaware etc. The premium is either with the product or the purchaser has to
send off the premium.
4. Coupon plans. Coupons, contained within the pack, may be collected over time and exchanged
for a variety of products in a catalogue. Coupon techniques may be used by one producer or
supplier.
5. Promotion for its goods or services, or the plan may include a number of different producers’
products under one name. These schemes have in the main replaced trading stamps, which were
6. Used in a similar way. However, trading stamps and purchase vouchers that can be redeemed for
cash or goods are making a comeback in specialist retailing situations (e.g. petrol purchases).
7. Free sample. These are sample packs of products offered with brand related products, attached to
magazines, given away separately in retail outlets, delivered door-to-door, etc.
Merchandise as a premium does not have the appeal of money, but it may have a more pointed appeal
than cash or a price reduction. The premium chosen and the way it is offered may preselect a specific
type of customer but the offer can at least be targeted at the right market segment. Providing the
additional response generated more than covers the cost of the premium and
administration/distribution costs, the promotion should be cost effective.
The choice of premium and sales promotional technique is crucial. The problem is to find a premium
that is ‘different’ or unusual, has broad customer appeal and is available in sufficient quantity to meet
demand.
Competitions are popular in the UK and Germany. The advantage of running a competition is that it
should be cost effective, it’s the cost of the prizes that is spread over a large enough number of
entrants. Competitions for consumer goods are usually promoted on the pack concurrent with in-store
promotion, with an entry are accompanied by proof of purchase. More recently, free draws have
become popular whereby a purchase is not necessary and the shopper merely fills in his or her name on
an entry form and ‘posts’ it is an entry box in the retail outlet.
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Module 6 Promotional Practice
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Organization
There is scope for individuality and creativity in this method of promotion. It needs much preplanning and administration, which is probably the reason why competitions tend to be aimed at the
national level and involve high value prizes such as holidays and cars, so that consumer response is
great enough to cover the costs of the promotion. Lotteries and sweepstakes are also used as
promotional techniques, particularly by retail outlets, which use them to attract customers into their
stores.
Joint promotions are not specific to consumer goods and are used increasingly as companies attempt
to find new promotional techniques. They can involve two or more companies who tend to be related
not by product type but rather by similar customer profiles (e.g. the gin and tonic campaign that links
two manufacturers – Gordons and Schweppes). There are a number of such arrangements:
1. Between retailers and producers, where a branded good may carry a voucher redeemable at a
particular retail outlet.
2. Between two or more producers, where one manufacturer’s product carries a promotion for the
other, and vice versa. Here the relation is by customer profile and not by product.
3. Between a service organization and a producer, e.g. between a travel company and a breakfast
cereal manufacturer, or a dry cleaner and a clothes manufacturer.
Trade promotions
The aim is usually to push products through the channel towards the customer. Similar to consumer
promotions, incentives are offered through extra rewards like discount increased margins on sales,
dealer competitions, exhibitions, provision of demonstrators, free holidays (often in the guise of a
conference or product launch). The objectives of retailer-distributor promotions are:
 To achieve widespread distribution of a new brand
 To move excess stocks onto retailer’s shelves
 To achieve required display levels of a product
 To encourage greater overall stockholding of a product
 To encourage salespeople at distributor levels to recommend the brand – particularly in the case
of non-consumer products
 To encourage support for overall promotional strategy
There are problems associated with trade promotions. Too frequent use can mean that a salesperson
directs attention to the product involved and neglects other products in the line. The objectives of the
promoter may conflict with those of the retailer or distributor; some sales employees are not permitted
to accept incentives or participate in trade contests because their management wishes to maintain
control over their selling activities. There is also a danger that a trade promotion may be used to push
another brand or inferior product. Consequently, long-term measures to promote sales are not
feasible and manufacturers would be better advised to look to product improvement as part of longterm strategy. The British Code of Sales promotion Practice state: No promotion directed towards
employees should be such as to cause conflict with their loyalty to their employer. In case of doubt,
the prior permission of the employer, or the responsible manager should be obtained. Although
business gifts are not strictly sales promotions, they are relevant here. The business gift sector is
characterized by seasonal demand and it is estimated that 80 per cent of this business is conducted in
the last two months of every year. Apart from the obvious connotation that it puts the recipient under
Higher Diploma in Sales and Marketing
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some moral obligation to purchase, it also serves as an advertising medium if the company logo is
incorporated in the gift.
Module 6 Promotional Practice
1 Promotional Perspectives & Organization
From as early as 1981 the Chartered Institute of Purchasing and Supply took a serious and critical
interest in the use of business gifts, especially where the ‘giving’ was tied to the placing of orders.
They argued that such gifts could calendars, diaries, pens, etc. Recently, the giving of business gifts
has declined an employers have placed restrictions upon what their employees may receive. The
Chartered Institute of Purchasing and Supply has published a ‘blacklist’ of companies operating what
they consider to be gift schemes over the above items of nominal value.
Personnel motivation
These are promotions to the salesforce, but some apply to distributors and retailers. The most widely
used salesforce promotion is the sales incentives scheme. Rewards are offered to participants on an
equal basis, which are over and above normal sales compensation. They can be prizes in a
competition to individuals or groups who perform best against objectives. The problem is that
average or below average performers may not feel sufficiently motivated to put in an extra effort if
they consider that only top performers are likely to win. Thus, competitions tend to be used for group
or area sales force motivation.
When establishing a salesforce incentive scheme one must consider objectives, timing, scoring
methods and prize/rewards. Typical objectives of such schemes include:
 Introduction of a new product line
 Movement of slow-selling items
 Obtain wider territory coverage
 Develop new prospects
 Overcome seasonal sales slumps
 Obtain display
 Develop new sales skills
The timing of the scheme may depend on the size of the salesforce, the immediacy of action required
and the nature of the objectives to be achieved. An incentive programme runs on average for between
two and six months.
Scoring or measuring performance may be based upon value or unit sales. In order to overcome
territorial differences, quotas may establish for individual regions, areas or salespeople. Points, stamps,
vouchers, etc. may be awarded on the achievement of a pre-stated percentage of quotas or level of
sales, and continue to be awarded as higher levels are achieved. The recipient may then exchange such
tokens for merchandise, cash, etc. Sometimes catalogues are supplied giving a range of merchandise
for the salesperson or family to choose from. Vouchers for redemption or exchange in retail store can
be used as prizes or rewards.
During a scheme additional bonus points may be awarded for the attainment of more specific shortterm objectives such as increased sales of a particular product, increased numbers of new customers
or training and display objectives. In this way a long-running schemes can be kept active and exciting
for participants. Another form of motivation is the award of recognition in the form of a trophy of
‘salesperson of the year’ award.
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Exhibitions
Exhibitions are tangentially related to sales settings, as the objective is not to sell from display stands,
although in some circumstances (e.g. glassware and decorative ware sales from importers and
manufacturers the trade) exhibitions and trade fairs are where most business takes place.
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Module 6 Promotional Practice
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Generally speaking, their function is to build up goodwill and prepare the way for future sales.
Exhibitions were once regarded as a luxury items in a company’s marketing budget and exhibition
stand personnel often looked upon manning an exhibition stand as an easy option to their normal
duties. They were regarded as being a tool of public relations. Companies are now more aware of
their value as part of overall marketing and sales efforts.
The term ‘exhibitions’ covers a wider spectrum than that described. At a simple level ‘event
management’ concern activities that promotes the organization, but it is often an excuse to provide
hospitality to customers. ‘Corporate hospitality’ is an honest definition but for reasons of not wishing
to draw attention to marketing expenditure that might be regarded as a trivial, this term is rarely used.
This can take the form of the provision of seats or a box for invited guests at an event like Royal
Ascot, the Grand Prix at Silverstone or a test match. At a more sophisticated level, ‘conferences’ can
be sponsored that reflect the interests of the sponsoring company, but provide a more serious forum
for participants.
A study was undertaken by one of the authors to investigate how trade exhibitions could be better
used as part of a communications programme. These results (Lancaster and Baron, 1977) are now
presented together with updating information.
Characteristics of a good exhibition included:
 A wide range of products
 A large number of competitors
 A good amount of information on the products on show made available beforehand (emphasizing
the importance of pre-exhibition mailing)
 A large number of new products
 Nearness to the buyer’s home base
 Good exhibition hall facilities
 A simple stand that is always neat (no personal effects on display) and not cluttered with
unsuitable display material
Characteristics of a good exhibitor included:
 Exhibiting a full range of products, particularly large items that cannot be demonstrated by a
traveling representative
 Stand always manned by staff who do not spend time conversing with colleagues
 Well-informed and approachable stand staff
 Informative literature available
 Seat area or an office provided on the sand
 Refreshments for visitors and stand staff only using refreshment facility when with customers
 Staff not using mobile telephone in public when manning the stand
 Staff spending time with potential and known customers, making future appointments and
filtering away time wasters and ‘free loaders’
 Actively following up sales leads and debriefing the stand team afterwards
Use of trade exhibitions is on the increase and companies increasingly need to establish a more
scientific methods of managing this function, as it requires an understanding of how of how an
exhibitions stand communicates itself to the public. Setting exhibitions objectives and measuring
results are important as is the identifications and comprehension of elements in the exhibitions event.
Management should plan, co-ordinate and control the exhibitions mix.
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Module 6 Promotional Practice
1 Promotional Perspectives & Organization
Different communication problems exist for different types of product, including materials, services
and small or large simple or complex machinery. With materials the selling features or unique sales
unique sales proposition (USP) may be communicated quite simply or through a lowcommunication medium, e.g. the written word. The USP of a large piece of complex machinery
might only be communicated by the potential customer viewing the machinery working.
The different methods of communicating the USP of different types of product are termed
communication strata. A product with a simple USP can be communicated through a low
communication stratum, whereas a product with a complex USP can be best be communicated
through a high communication stratum.
Having selected the stratum needed to put across the USP, the other methods of communication used
must be organized to complement it. For example, if trade exhibitions are selected as the ultimate
communication medium all other marketing inputs, e.g. salesforce and media advertising must be coordinated with the programmed trade exhibition. If strata 5 or Module 6 are needed, there are needed
three communication media that can be used, such as trade exhibitions, demonstration centers or the
salesperson taking the product into the firm.
In the management of any function the setting of objectives is vital; without this, there is no basis for
planning, co-ordination, control or measurement of results. Such objectives can be enumerated as
follows:
1. Define the market with which it is intended to communicate by region by product or by any other
segmentation methods.
2. Define the value of potential purchases. Is the exhibition effort to be aimed at potential small or
large users?
3. Define the status of contact at whom to aim, e.g., purchasing manager, managing director, etc.
high-status contact cannot normally be attracted to small exhibitions –they may wish to speak to
top management or require personal invitations plus entertainment.
4. Define the preference towards company product. Is the exhibition effort to be aimed at present
customers? Is it principally to launch a new product? The danger is that personnel time can be
taken up talking to the converted, whereas the objective should be interest potential customers.
5. Define the communication level at which to aim:
 The ultimate (to sell the product from the stand)
 To obtain permission to quote
 To obtain permission to telephone for a follow-up sales interview
 To obtain permission to send further information
Methods used to attract visitors to a particular stand include the following:
 Direct mail
 Telephoning
 A personal sales call before the event
 An advertisement in the technical or trade press
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Module 6 Promotional Practice
Once there, attractions can include the following:
 A buffet
 Give-away
 Advertising material
 Films and seminars at the exhibition
 Attention gaining exhibits on the stand
1 Promotional Perspectives & Organization
The exhibition stand itself should have a number of elements:
1. Products on shoe will depend upon the target market. The more products, the higher the number
of prospects that will be interested, although a balance has to be struck so as not to provide so
wide a range as to make it confusing.
2. Literature should not be on a self-service display. When a prospect comes to the stand looking for
literature, this should be an ideal opportunity for the salesperson to establish contact and obtain
details of the prospect.
3. Graphics should include at least a display board featuring the product literature. Such aids make
the stand look more attractive. Models of the item being marketed are useful when the product
being sold is too large or bulkily to be physically displayed.
4. An office or interview room can take up a lot of expensive display space. An alternative is to
demonstrate the product and then ask the visitor to a nearby seating area to conduct the interview.
5. Refreshment facilities on the stand are good attractors and from the results of the study were a
major drawing force.
6. An area should be designated for storage of coats, briefcase, literature, materials, etc. To avoid
clutter and distractions from the main aim of the exhibitions.
7. An expensive, eye-catching stand can be double-edged weapon. It might attract visitors, but the
study indicated that visitors’ attitudes towards such ostentation were that it might be reflected in
the price of products.
The stand should be planned as early as possible by drawing up a checklist of everything required,
checking limitations on stand design, drawing up a checklist of stand services required and a progress
chart for the preparation of all products and exhibits, including their manufacture, transportation to the
exhibition, assembly and dismantling.
Exhibitions stand personnel must be able to communicate the USP of the products and have a sound
commercial and technical knowledge. They may come from variety of background such as sales,
marketing and technical, and should be briefed upon a number of areas beforehand:
1. Objectives of the exhibitions and set procedures to be used in achieving these objectives.
2. Features of the stand, who else is on the stand and the geography of the stand in the exhibition
complex. Who is the exhibition stand manager?
3. How to approach stand visitors, how to interview them and how to deal with irrelevant visitors.
4. Tips on physical appearance before manning the exhibition stand.
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Module 6 Promotional Practice
1 Promotional Perspectives & Organization
Nature and role of public relations
Public relations cover a broader spectrum than selling or indeed marketing. Its application is wider
and encompasses the entire organization and its various external and internal ‘publics’. Its role,
however, is increasingly important as an ancillary to selling both in the receiving and giving sense.
Selling needs publics relations to assist it in its everyday operation and selling is often called upon to
disseminate a public relations message. There has been a general recognition of the strategic role of
public relations; no longer is it viewed as a means of ‘covering up’ when something has gone wrong.
It has a positive role to lay in an organization and that role is now emphasized.
The public relations practitioner has to conduct activities that concern every public with which the
organizations has contact. The specific nature of such groups will vary according to circumstances.
Jefkins identifies seven basic publics:
 The community
 Employees
 Government
 The financial community
 Distributors
 Consumers
 Opinion leaders
Definition
The task of defining the exact nature of PR is difficult. A number definition exists, each emphasizing
a slightly different approach and each attempting to arrive at a simple, yet brief and accurate, form or
words. The difficulty in developing a single acceptable definition reflects the complexity and
diversity of the subject. We look at three definitions:
PR practice is the deliberate, planned and sustained effort to establish and maintain mutual
understanding between an organization and its public.
(Institute of Public Relations, IPR)
The essential features of this definition are first that PR practice should be deliberate, planned and
sustained – not haphazard (e.g. when responding to the accidental pollution of a river). Second,
mutual understanding is necessary in order to ensure that the communication between the
organization and its ‘publics’ is clear (i.e. the receiver perceives the same meaning as the sender
intended).
An alternative definition is given by the late Frank jefkins who widely authored on this subject:
PR consists of all forms of planned communications outwards and inwards, between an
organization and its publics for the purpose of achieving specific objectives concerning mutual
understanding.
This modified version of the IPR definition adds two dimensions:
1. ‘Public’ becomes ‘publics’, since PR address a number of audiences.
2. The inclusion of ‘specific objectives’ makes PR a tangible activity.
If we accept the jefkin’s, definition, then we accept its further implications – that PR exists whether an
organization likes it or not. Simply by carrying out its day-to-day operations, an organization
necessarily communicates certain messages to those with whom it interacts. Opinions are formed
about the organization and its activities. It is thus necessary that PR orchestrate these messages in
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Module 6 Promotional Practice
1 Promotional Perspectives & Organization
A more precise and comprehensive description of PR is provided by the Public relations Society of
America:
1. Anticipating, analyzing and interpreting public opinion, attitudes and issues which might impact,
for good or ill on the operations and plans of the organization.
2. Counseling management at all levels with regard to policy decisions, courses of action and
communication.
3. Researching, conducting and evaluating on a continuing basis, programmes of action and
communication to achieve informed public understanding necessary for the success of the
organization’s aims.
4. Planning and implementation the organization’s efforts to influence or change public policy.
5. Managing the resources needed to perform the functions of public’s relations.
(Publics Relations Society of America)
Communication is central to PR. The purpose of PR is to establish a two-way communication
process to resolve conflicts be seeking common ground or areas of mutual interest. This is, of course,
best achieved by word of mouth and is why the role of selling as the communication medium is so
potentially important for PR to be successful.
Corporate identity
The concept of corporate identity or personality is inextricably linked to PR. All PR activities must
be carried out within the framework of an agreed and understood corporate personality. This
personality must develop to reflect the style of the top management, since they control the
organization’s policy and activities.
A corporate personality can become a tangible assets if it is managed will consider the role of
personality when they make decisions. A PR executive thus needs to be placed so that s/he is aware
of all issues, policies, attitudes and opinions that exists in the organization which have a bearing upon
how it is perceived by the organization’s publics.
The use of the word ‘personality’ rather than ‘image’ is deliberate. An image is a reflection or an
impression, which may be a little too polished or perfect. True PR is deeper than this. To use a
common denigrating quote of a ‘PR job’ implies that somehow the truth is being behind a glossy or
false façade. Properly conducted, PR emphasizes the need for truth and full information. The public
relations executive, as a manager of the corporate personality, can only sustain in the long term an
identity that is based upon reality.
What public relations [PR] is not
Misunderstanding as to the nature of PR has led to confusion about its role. Certain distinctions are
clarified:
1. PR is not free advertising. Advertising complements selling. PR is informative, educational and
creates understanding through knowledge. PR is not free. It is time consuming and costs money
in terms of management expertise. Editorial space and broadcasting time have more credibility
than advertisements. Every organization, consciously or unconsciously, has PR. PR involves
communications with many groups and audiences, not just potential customers.
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2. PR is not propaganda. Propaganda is designed to indoctrinate to attract followers. It does not
necessarily call for an ethical content, so facts can be distorted or falsified for self-interest. PR
seeks to persuade by securing the willing acceptance of attitudes and ideas.
3. PR is not publicity. Publicity is a result of information being made known. The result may be
uncontrollable and either good or bad. PR is concerned with the behaviour of an organization,
product or individual that leads to publicity. It will clearly seek to control behaviour in such a
way as to attempt to ensure that the publicity is good.
Objectives of public relations
PR is used in order to create a better environment for the organizations and its activities. The
objectives may include the following:
 Attract sales inquiries
 Reinforce customer loyalty
 Attract investors
 Attract merger partners or smooth the way for acquisition
 Attract better employees
 Dissolve or block union problems
 Minimize competitor advantage while you catch up
 Open a new market
 Launch a new product
 Reward key people with recognition
 Bring about favourable legislation
In order to achieve such objectives, PR is viewed as part of a total marketing communications
strategy, the principal part of which is the selling function. At any point in a marketing programme
there can be PR activity, for the reason that PR is concerned with human relations and is a two-way
process. There is a PR element in every facet of marketing (e.g. a salesperson who exaggerates,
cheats or lets down customers is a PR liability).
Manufacturers have to get ‘closer’ to people. In order to reach different groups, each with separate
interests, they must employ the techniques of pres relations, house journals, seminars, works visits,
private demonstrations, exhibitions, videos, professionally designed websites, and other aids.
Moreover, they have to consider those who influence opinion, sales channels and all communications
media that express ideas and news.
Corporate public relations
This is concerned with group image and based on a long-term, carefully planned programme designed
to achieve maximum recognition and understanding of the organization’ objectives and performance
which is in keeping with realistic expectations.
The main medium for corporate PR is prestige advertising (e.g. ICI’s ‘pathfinders’ which present to
the public a progressive image of the huge conglomerate). Another medium is house style (e.g. a
specific logo like that woolmark sign devised by the International Wool Secretariat and displayed on
hats and uniforms worn by people they sponsor). Sponsorship is important for such sporting
activities as golf, football, crickets and motor racing. It can include partial funding for, and the
resultant publicity of, such events as concerts and community projects.
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Sponsorship is defined by Meenaghan as: ‘an investment in cash or in kind in an activity, in return for
access to the exploitable commercial potential associated with that activity’.
Effective public relations
Effective PR depends upon the following:
 Setting specific objectives that are capable of evaluation.
 Fully integrating the PR function into the organization.
 Selecting the right personnel to carry out the Pr function.
Objective setting
This is an essential requirement of PR practice. Bowman and Ellis state:
If a programme is to effective, then it is vital that its objectives be defined that means of achieving
them be determine and that progress, success and failure be reviewed.
Although it is sometimes difficult to decide how an objective can be measured an obvious objectives
can be cited in terms of increased sales, although it is sometimes difficult to determine whether such
an increase in sales was due to PR activity or to some other marketing activity.Crisis PR tends to
dictate its own objectives. If information is to be prevented from reaching the press, then the
yardstick that determine success or failure is whether that information reaches the press or not. If the
objective is to maintain the company’s reputation, then some attempt must be made to define
‘reputation’ in useful terms such that it can be measured and evaluated.
A traditional method of measuring PR activity is in terms of column centimeters gained from press
coverage. This method does not, however, account for the quality of such coverage. Furthermore, the
value of editorial cannot be quantified against equivalent advertising cost because of the greater
credibility of editorial.
Integration
The integration of the PR function into the organization is important. It should be decided whether PR
should act in a ‘technician’ or ‘policy-making’ roles; the implication being that a technician simply
carries out top management orders whereas the policy-maker inputs into corcorporate strategic plans.
Modern thinking favours the latter role because every decision has PR implications. If PR is not
involved in policy formation, then top management is implicitly assuming the PR mantle. The role that
is suggested for PR is far reaching, involving communication with large number of people. This
requires co-operation with other organizational functions. PR must then be a reasonably autonomous
unit so that it can serve all departments equally.
A staff function should be positioned so that it can funnel its services to the organizational levels that
may be the public face of the organization to outside groups. The importance of PR at lower
hierarchical levels cannot be overstated (e.g. from the way the secretary answers the telephone to the
attitude of the company’s delivery person). The extend of PR responsibility has to be established
initially by senior management and this can be achieved by objective setting and well-defined job
analyses. PR as a staff function exists to serve and facilitate line functions. Such lack of PR authority
is desirable since it minimizes conflict and ensures that the emphasis is upon co-operation and
consultation between line and staff. It also recognizes that day-to-day business and executive authority
are vested in line management. It does, however, mean that it is essential that PR has direct access to
the board in order that PR programme can be sanctioned and executed with full backing from top
management.
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Selection
The selection of the ‘right’ personnel is especially important for potential PR practitioners. The
practice of PR covers such a wide diversity of tasks that flexibility is very important. The Institute of
Public relations (IPR) recognizes: ‘There is no single set of ideal qualifications and no formal path
into the profession’. The IPR even states that formal qualifications are not necessary for PR
personnel. It may be that PR as a profession has now ‘come of age’ because Stirling University
introduced a Master’s degree in Public Relations in 1988 and Bournemouth University introduced a
Bachelor’s degree in 1989.
Practitioners have identified a number of skills and attributes necessary to be successful:
 Sound judgment
 Personal integrity
 Communications skills
 Organizational ability
 Strong personality
 Team player
The traditional importance of media relations has resulted in a strong journalist contingent in the PR
profession. However, some find it hard to adapt as the required writing style is different from the
planning horizons and work routines. As the wide range of necessary qualities and skills illustrates,
relevant experience can be obtained from almost any background. Personality is really of far more
importance, together with a sense of empathy and the ability to be adaptable. It goes without saying
that an ability to write and speak fluently is vital.
The use of public relations consultancies
In some situations, it is more cost effective to use a PR consultancy, especially in areas where the
organization is inexperienced (e.g. the City or Parliament). Quite often larger companies find that a
better interaction comes from an in-house PR department and an external specialist. Consultancies
are an integral part of the PR industry and posses certain advantages of experience, independences
and specialist skills that may not be evident internally.
External PR activities can be grouped as follows:
1. Freelance writers/consultants who are generally technical authors able to produce PR feature
articles.
2. PR departments of advertising agencies, which can vary from a small press office handling
product publicity to augments an advertising campaign, to a large comprehensive PR department
not unlike the agency set-up itself.
3. PR subsidiary of an advertising agency where there is a desire to permit a fuller development of
PR activity on the part of the advertising agency and indeed whose clients will provide a useful
source of potential business. Its association with an advertising agency can have benefits through
shared services such as art studios and production.
4. Independent PR consultants usually specialize in a particular class of business, and clients can
take advantage of this for adhoc or short-term assignment. Such consultants specialize in
charities and appeals theatre, finance, agriculture, building, shipping, travel, fashion, etc.
5. PR counselors are people who advise but do not carry out the PR work.
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2 THEORIES AND MODELS OF PROMOTION
Integrated Marketing communication strategy
Introduction
Modern marketing calls for more than just developing a good product, pricing it attractively, and
making it available to target customers. Companies must also communicate with current and
prospective customers, and what they communicate should not be left to chance. Just as good
communication is important in building and maintaining any kind of relationship, it is a critical
element in a company’s efforts to build customer relationships.
To communicate well, companies often hire advertising agencies to develop effective ads, sales
promotion specialists to design sales-incentive programmes, direct-marketing specialists public
relations firms to develop corporate image. They train their salespeople to be friendly, helpful and
persuasive. For most companies, the question is not whether to communicate, but how much to spend
and in what ways. All their communications efforts must be blended into a consistent and coordinated
communications programme.
A modern company has to communicate with its intermediaries, consumers and various publics. Its
intermediaries communicate with their consumers and publics. Consumers have word-of-mouth
communication with each other and with other publics. Meanwhile, each group provides feedback to
every other group. The company therefore has to manage a complex marketing communications
system. A company’s total marketing communications mix – also called its promotion mix consist of
the specific blend of advertising personal selling’s, sales promotions, public relations and direct
marketing tools that the company uses to pursue its advertising and marketing objectives.
Let us define the five main promotion tools:
 Advertising. Any paid form of non-personal presentation and promotion of ideas, goods or
services by identified sponsor.
 Personal selling. Personal presentation by the firm’s sales force for the purpose of making sales
and building customer relationships.
 Sales promotion. Short-term incentives to encourage the purchase or sale of a product or service.
 Public relations. Building good relations with the company’s various public by obtaining
favorable publicity, building up a good ‘corporate image’, and handling or heading off
unfavorable rumours, stories and events.
 Direct marketing. Direct connecting with carefully targeted individuals consumers both to obtain
an immediate response and to cultivate lasting customer relationships the use of telephone, mail,
fax, email, the Internet and other tools to communicate directly with specific consumers.
Each category in the promotions mix involves specific tools. For example, advertising includes print,
radio and television broadcast, outdoor and the forms. Personal selling includes sales presentations,
fairs and trade shows, and incentive programmes. Sales promotion includes activities such as pointof-purchase displays, premiums, discounts, coupons, competitions, speciality advertising and
demonstrations. Direct marketing includes catalogues, telephone marketing, fax, kiosks, the Internet
and more. Thanks to technological breakthrough, people can now communicate through traditional
media (newspapers, radio, telephone, television) as well as through newer types of media (fax
machines, mobile phones, computers).
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The new technologies have encouraged more companies to move from mass communication to more
targeted communication a one-to-one dialogue.
Figure 1. The marketing communications system
Company
Advertising
Personal selling
Sales
promotional
Public relations
Direct
marketing
Intermediaries
Advertising
Personal
selling
Sales
promotion
Public
relations
Direct
marketing
Consumer
Word of
mouth
Public
At the same time, communication goes beyond these specific promotion tools. The product’s design.
Its price, the shape and colour of its package and the stores that sell it all communicate something to
buyers. Thus, although the promotions mix is the company’s primary communication activity, the
entire marketing mix – promotion and product, price and place – must be coordinated for greatest
communication impact.
We start by examining the rapidly changing marketing communications environment, the concept of
integrated marketing communications and the communication process. Next, we discuss the factors
that marketing communicators must consider in shaping an overall communication mix. Finally, we
summarize the legal, ethical and social responsibility issues in marketing communications.
Integrated marketing communications
During the past several decades, companies around the world have perfected the art of mass
marketing selling highly standardized products to masses to customers. In the process they have
developed effective mass-media advertising techniques to support their mass-marketing strategies.
These companies routinely invest huge sums of money in the mass media, reaching tens of millions of
customers with a single ad. However, in the twenty-first century, marketing managers face some new
marketing communications realities.
The changing communications environment
Two major factors are changing the face to today’s marketing communications. First, as mass markets
have fragmented, marketers are shifting away from mass marketing.
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More and more, they are developing focused marketing programmes designed to build closer
relationships with customers in more narrowly defined micromarkets. Second, vast improvements in
information technology are speeding the movement towards segmented marketing. Today’s
information technology helps marketers to keep closer track of customer needs – more information is
available about customers at the individual and household level than ever before. New technologies
also provide new communications avenues for reaching smaller customer segments with more tailored
message.
The shift from mass marketing to segmented marketing has had a dramatic impact on marketing
communications. Just as mass marketing gave rise to a new generation of mass media
communications, so the shift towards one-to-one marketing is spawning a new generation of more
specialized and highly targeted communications efforts.
Given this new communications environment, marketers must rethink the roles of various media and
promotion-mix tools. Mass-media advertising has long dominated the promotion mixes of consumerproduct companies. For example, in 2003, media advertising represented 40.5 per cent of global
marketing spend, followed by sales promotion (20.5 per cent), PR and sponsorships (15.4 per cent),
direct mail (14.0 per cent) and interactive marketing (7.7 per cent). However, although, magazines
and other mass media remain very important, their dominance is declining. Companies are not giving
up on mass-media advertising, but are seeking ways to get better value for money.
For example, Unilever’s comfort Refresh, a clothing and fabric deodorant spray, is advertised in the
women’s lavatories of clubs and pubs, because its target audience of young females, who use it to
remove the smell of cigarette smoke from their clothing, are more likely to be out partying than sitting
at home watching television for hours at a time. Refresh also sponsors a TV series that appeals to
young females. In keeping with the assumption that the company can no longer expect to
communicate efficiently with consumers through a mere 30-second TV commercial, when the
company launched Comfort Easy Iron spray, product demonstrations were staged in shopping malls
across the country. Unilever is also increasing its use of outdoor poster advertising in brand-building
campaigns for product launches.
Market fragmentation has resulted in media fragmentation – in an explosion of more focused media
that better match today’s targeting strategies. Beyond the traditional mass-media channels, advertising
are making increased use of new, highly targeted media, ranging from highly focused speciality
magazines and cable or satellite television channels to CD catalogues and website on the Internet, to
airport kiosks and floor decals in supermarket aisles. Many companies are diverting marketing
spending to interactive marketing (online communication and sponsorship, websites and extranets,
email marketing and interactive digital TV), which can be focused more effectively on individual
consumer and trade segments. In all, companies are doing less broadcasting and more narrow casting.
The need for integrated marketing communications
The shift mass marketing and the corresponding use of a richer mixture of communication channels
and promotion tools, poses a problem for marketers. Customers do not distinguish between message
sources the way marketers do. In the consumer’s mind, advertising messages from different media
such as television, magazines or online sources blur into one. Messages delivered via different
promotional approaches all become part of a single overall message about the company. Conflicting
messages from these different sources can result in confused company images and brand positions.
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All too often, companies fail to integrate their various communications channels. The results are a
hodgepodge of communications to consumers. Mass-media advertisements say one thing, a price
promotion sends a different signal, a product label creates still another message. Company sales
literature says something altogether different, and the company’s website seems out of sync with
everything else.
The problem is that these communications often come from different company sources. Advertising
messages are planned and implemented by the advertising department or advertising agency.
Personal selling communications are developed by sales management. Other functional specialists
are responsible for public relations, sales promotion, direct marketing, online sites and other forms of
marketing communication.
Recently, such functional separation has been a major problem for many companies and their Internet
communications activities. Many companies first organized their new Web communications
operations into separate groups or divisions, isolating them from mainstream marketing activities.
However, although some companies have compartmentalized the new communication tools,
customers won’t. Customers may do a bit of Web-surfing to find at about companies’ products or
services, but this does not mean that they no longer pay attention to TV or magazine ads or take any
notice of firms’ sales promotion campaigns.
To be sure, the Internet promises exciting marketing communications potential. However, marketers
trying to use the Web alone to build brands face many challenges. One limitation is that the Internet
does not build brand awareness. The Web simply cannot match the impact of World Cups, Olympic
Games or Six Nations Rugby, where tens of millions of people see the same 30-second Nokia or Nike
ad at the same time. Instead, it is hard to establish universal meanings such as ‘Nokia Connecting
people’ or just do it, that are at the heart of brand recognition and brand value.
Thus, if treated as a special case, the Internet – or any other market communication tool – can be a
disintegrating force in marketing communications. Instead, all the communications tools must be
carefully integrated into the broader marketing communications mix.
In the past, no one person was responsible for thinking through the communication roles of the
various promotion tools and coordinating the promotion mix. Members of various departments often
differ in their views on how to split the promotion budget. The sales manager would rather hire a few
more salespeople than spend a few hundred thousand euros more on a single television commercial.
The public relations manager feels that he or she can do wonders with some money shifted from
advertising to public relations. Today, however, more companies are adopting the concept of
integrated marketing communications (IMC). Under this concept, as illustrated in the figure, the
company carefully integrated and coordinates its many communications channels to deliver a clear,
consistent and compelling message about the organization and its products. It builds a strong brand
identity in the marketplace by trying together and reinforces all the company’s messages, positioning
and images, and identify, coordinating these across all its marketing communications venues. It
means that your PR materials say the same thing as your direct mail campaign and your advertising
has the same ‘look and feel’ as your website.
IMC calls for recognizing all contact points where the customer may encounter the company, its
products and its brands. Each brand contact will deliver a message, whether good, bad or indifferent.
The company works out; the roles that the various promotional tools will play and the extent to which
each will be used to deliver a consistent and positive message at all contact points.
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It carefully coordinates the promotional activities and the timing of when major campaigns takes
place. It keeps track of its promotional expenditures by product, promotional tool, product life-cycle
stage and observed effect in order to improve future use of the promotion-mix tools. Finally, to
implement integrated marketing communications, some companies appoint a marketing
communications director – or marcom manager – who has overall responsibility for the company’s
communications efforts. Essentially, in order for the firm’s external communications to be integrated
effectively, it must first integrate its internal communication activities.
Figure 2. Integrated marketing communications
`
Advertising
Personal selling
Sales
promotion
Public relations
Consistent, clear and
compelling company
and product messages
Direct marketing
Integrated marketing communications produce better communications consistency and greater sales
impact. They place the responsibility in someone’s hands – where none existed before- to unify the
company’s image as it is shaped by thousands of company activities. They lead to a total marketing
communications strategy aimed at showing how the company and its products can help customers
solve their problems.
A view of the communication process
Integrated marketing communications involve identifying the target audience and shaping a wellcoordinated promotional programme to elicit the desired audience response. Too often, marketing
communications focus on overcoming immediate awareness, image or preference problems in the
target market. This approach to communication is too shortsighted. Today, marketers are moving
towards viewing communications as managing the customer relationship over time that is, during the
pre-selling, selling, consumption and post-consumption stages. Because customers differ,
communications programme need to be developed for specific segments, niches and even individuals.
Importantly, given the new interactive communications technologies, companies must ask not only
‘How can we reach our customers?’ But also ‘How can we find ways to let our customers reach us?’
Thus, the communication process should start with an audit of all the potential interactions that target
customers may have with the product and company.
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For example, someone buying a new personal computer may talk to others, see television
commercials, read articles and advertisements in newspapers and magazines, visit various websites
and try out computes in one or more stores. The marketer needs to assess the influence that each of
these communications experiences will have at different stages of the buying process. This
understanding helps marketers to allocate their communication budget more effectively and
efficiently.
Figure 3. Elements in the communication process
Sender
Encoding
Message
Decoding
Receive
r
Media
Noise
Feedback
Sender’s field of experience
Response
Receiver’s field of experience
To communicate effectively, marketers need to understand how communications works.
Communications involves the nine elements shown in the figure. Two of these elements are the
major parties in a communications – the sender and the receiver. Another two are the major
communication tools – the message and the media. Four more are primary communication function –
encoding, decoding, response and feedback. The last element is noise in the system. We will explain
each of these elements using an ad for Ericsson mobile phones.
 Sender. The party sending the message to another party – in this case, Ericsson.
 Encoding. The process of putting the intended message or though into symbolic form –
Ericsson’s advertising agency assembles words and illustrations into an advertisement that will
convey the intended message.
 Message. The set of words, pictures or symbols that the sender transmits – the actual ericsson
mobile phone ad.
 Media. The communication channels through which the message moves from sender to receiver
in this case, the specific magazines that Ericsson selects.
 Decoding. The process by which the receiver assigns meaning to the symbols encoded by the
sender – a consumer reads the Ericsson mobile phone ad and interprets the words and illustrations
it contains.
 Receiver. The party receiving the message sent by another party – the consumer or business
customer who reads the Ericsson mobile phone ad.
 Response. The reactions of the receiver after being exposed to the message – any of hundreds of
possible response, such as the customers is more aware of the attributes of the Ericsson mobile
phone, actually buys the mobile phone advertised, or does nothing.
 Feedback. The part of the receiver’s response communicated back to the sender – ericsson’s
research shows that consumers like and remember the ad, or consumer write or call the company
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praising or criticizing the ad or its products.
 Noise. The unplanned static or distortion during the communication process, which results in the
receiver getting a different message from the one the sender sent – for example, the customer is
distracted while reading the magazine and misses the Ericsson mobile phone ad or its key points.
For a message to be effective, the sender’s encoding process must mesh with the receiver’s decoding
process. Thus, the best messages consist of words and other symbols that are familiar to the receiver.
The more the sender’s field of experience overlaps with that of the receiver, the more effective the
message is likely to be. Marketing communicators may not always share their consumers’ field of
experience. For example, an advertising copywriter from one social stratum might create an ad for
consumers from another stratum – say, blue-collar workers or wealthy business executives. However,
to communicate effectively, the marketing communicator must understand the consumer’s field of
experience.
This model points out the key factors in good communication. Senders need to know what audience
they want to reach and what response they want. They must be good at encoding messages that takes
into account how the target audiences decode them. They must send messages through media that
reach target audiences and they must develop feedback channels so that they can assess the audience’s
response to the message.
Steps in developing effective communication
We now examine the steps in developing an effective integrated communication ad promotion
programme. The marketing communicator must identify the target audience, determine the
communications objectives, design a message, choose the media through which to send the message,
and collect feedback to measure the promotion’s results. Let us address each of these steps in turn.
-Identifying the target audience
A marketing communicator starts with a clear audience in mind. The audience may be potential
buyers or current users, those who make the buying decisions or those who influence it. The audience
may be individuals, groups, special publics or the general public. The target audience will heavily
affect the communicator’s decision on what will be said, how it will be said, when it will be said,
where it will be said and who will say it.
-Determining The Communication Objectives
Once the target audience had been defined, the marketing communicator must decide what response
is sought. Of course, in many cases, the final response is purchase. But purchase is the result of a
long process of consumer decision-making. The marketing communicator needs to know where the
target audience now stands and to what state it needs to be moved. To do this, he or she must
determine whether or not the customer is ready to buy. The target audience may be in any six buyerreadiness stages – the states that consumers normally pass through on their way to making a purchase.
These stages are awareness, knowledge, liking, preference, conviction and purchase. They can be
described as a hierarchy of consumer response stage. The purpose of marketing communication is to
move the customer along these stages and ultimately to achieve final purchase.
-Awareness
The marketing communicator’s target market may be totally unaware of the product, know only its
name or know one or a few things about it. If most of the target audience is unaware, the
communicator tries to build awareness, perhaps starting with just name recognition.
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The process can be begin with simple message that repeats the company or product name. For
example, when Orange introduced its mobile phone networks, it began with an extensive ‘teaser’
advertising camping to create name familiarity. Initial ads for Orange created curiosity and awareness
by emphasizing the brand name, but not the service.
Figure 4. Buyer readiness stage
Awareness
Preference
Knowledge
Conviction
Liking
Purchase
Knowledge
The target audience might be aware of the existence of the company or of the products, but not know
much more. The company needs to learn how many people in its target audience have little, some or
much knowledge about its offering. At launch, Orange ads created knowledge by informing potential
buyers of he company’s service and innovative features.
Liking
Assuming target audience members know the product, how do they feel about it? Once potential
buyers knew about Orange, the company’s marketers would want to move them along the next stage
– to develop favorable feelings about the brand. If the audience looks unfavorably on the brand, the
communicator has to find out why, and then resolve the problems identified before developing a
communications campaigns to generate favorable feelings.
Preference
The target audience might like the product, but not prefer it to others. In this case, the communicator
must try to build consumer preference by promoting the product’s quality, value and other beneficial
features. The communicator can check on the campaign’s success by measuring the audience’s
preferences again after the campaign. If Orange finds that many potential customers like its service
offering but prefer other mobile phone operators’ brands, it will have to identify those areas where its
offerings are not as good as competing deals and where they are better. It must then promote its
advantages to build preference among prospective clients, while redressing its weaknesses.
Conviction
A target audience might prefer the product, but not develop a conviction about buying it. Thus some
customers may prefer Orange to other mobile phone network brands, but may not be absolutely sure
that it is what they should subscribe to. The communicator’s job is to build conviction that the
offering is the best one for the potential buyer.
A combination of the promotion-mix tools should be used to create preference and conviction.
Advertising can be used to extol the advantages offered by the brand. Press releases and public
relations activities would be used to stress the brand’s specific features, such as its innovativeness or
performance.
Direct marketing tools could be used or dealer salespeople could be encouraged to educate potential
buyers about the product or service options, value for the price and after-sale service.
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Purchase
Finally some member of the target audience might be convinced about the product, but not quite get
around to making the purchase. Potential buyers might decide to wait for more information or for the
economy to improve. The communicator must lead these consumers to take the final step. Actions
might include offering special promotional prices, rebates or premiums. Salespeople might call or
write to selected customers, inviting them to visit the sales outlets for a special demonstration or
product trial.
In discussing buyer readiness stage, we have assumed that buyers pass through cognitive (awareness,
knowledge), affective (liking, preference, conviction), and behavioural (purchase) stages, in that
order. This ‘learn-feel-do’ sequence is appropriate when buyers have high involvement with a
product category and perceive brands in the category and perceive brands in the category to be highly
differentiated, such as the purchase of a car. But consumers often follow other sequences. For
example, they might follow a ‘do-feel-learn’ sequence for high involvement products with little
perceived differentiation, such as a central heating system. Still a third sequence is the ‘learn-do-fee’
sequence, where consumers have low involvement and perceive little differentiation, as is the case
when they buy a product such as salt.
Furthermore, marketing communications alone cannot positive feelings and purchases for the
product. So, for example, Orange must provide superior value to potential buyers. In fact, outstanding
marketing communications can actually speed the demise of a poor product. The more quickly
potential buyers learn about the poor product, the faster they become aware of its faults. Thus, good
marketing communications call for good deeds followed by good words. Nonetheless, by
understanding consumers’ buying stages and their appropriate sequence the marketer can do a better
job of planning communications.
Designing a message
Having defined the desired audience response, the communicator turns, to developing an effective
message. Ideally the message should get attention, hold interest arouse Desire and obtain action (a
framework known as the AIDA model). In practice, few messages take the consumer all the way from
awareness to purchase, but the AIDA framework suggests the desirable qualities of a good message.
In putting the message together, the marketing communicator must decide what to say (message
content) and how to say it (message structure and format).
-Message content
The communicator has to figure out an appeal or theme that will produce the desired response. There
are three types of appeal: rational, emotional and moral. Rational appeals relates to the audience’s
self-interest. They show that the product will produce the desired benefits. Examples are messages
showing a product’s quality, economy, value or performance. Thus, in it ads, Mercedes offers
automobiles that re ‘engineered like no other car in the world’, stressing engineering design,
performance and safety. Emotional appeals attempt to stir up either positive or negative emotions that
can motivate purchase. Communicators may use positive emotional appeals such as love, humour,
pride, promise of success and joy. Communicators can also use negative emotional appeals such as
fear, guilt and shame appeals in order to get people to do thing they should (brush their teeth, invest
in a pension plan, by new tyres) or to stop doing things they shouldn’t (smoke, drink to much, eat
fatty foods). For example, recent Crest ad invoked mild fear when it claimed ‘There are some things
you just can’t afford to gamble with’ (cavities). So did Michelin tyres ads that featured cute babies
and suggested ‘Because so much is riding on your tyres’.
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Moral appeals are directed to the audience’s sense of what is ‘right’ and ‘proper’. They are often
used to urge people to support social causes such as a cleaner environment, better race relations and
aid to the disadvantaged.
-Message structure
The communicator must decide how to say it. This requires the communicator to handle three
message-structure issues. The first is whether to draw a conclusion or to leave it to the audience.
Early research showed that drawing a conclusion was usually more effective where the target
audience is less likely to be motivated or may be incapable of arriving at the appropriate conclusion.
More recent research, however, suggests that in many cases where the targets are likely to be
interested in the product the advertiser is better off asking questions to stimulate involvement and
motivate customer to think about the brand, and then letting them come to their own conclusions.
The second message structure issue is whether to present a one-sided argument (mentioning only the
product’s strengths), or a two-sided arguments (touting the product’s strengths while also admitting
its shortcomings). Usually, a one-sided argument is more effective in sales presentations – except
when audiences are highly educated and likely to hear message-structure, issue is whether to present
the strongest arguments first or last. Presenting them first gets strong attention, but may lead to an
anticlimactic ending.
-Message format
The communicator also needs a strong format for the message. In a print as, the communicator has to
decide on the headline, copy, illustration and colour. To attract attention, advertisers can use novelty
and contrast, eye-catching pictures and headlines, distinctive formats, message size and position, and
color, shape and movement. If the message is to be carried over the radio, the communicator has to
choose words, sounds and voices. The ‘sound’ of an announcer banking services should be different
from one promoting quality furniture.
If the message is to be transmitted on television or conveyed in person, all these elements plus body
languages have to be planned. Presenters plan their facial expressions, gestures, dress, poster and
even hairstyle. If the message is carried on the product or its package, the communicator has to watch
texture, scent, colour, size and shape. For example, colour plays an important communication role in
food preferences.
Thus, if a coffee company wants to communicate that its coffee is rich, it should probably use a red
container along with label copy boasting the coffee’s rich taste.
Even when an individual is exposed to a message, he or she may pay no attention to the message
because it is either boring or irrelevant. The communicator increase the chances of the message
attracting the attention of the target audience by taking into consideration the following factors:
 The message must have a practical value to the target audience because individuals are in the
market for the product (for example, advertising pension schemes to undergraduates is a waste of
time as they are likely to find such policies irrelevant to them for the time being).
 The message must interest the target group.
 The message must communicate new information about the product or brand. Consumers pay
more attention to new message.
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 The message must reinforce or help to justify the buyer’s recent purchase decisions – if you have
recently bought a personal computer, it is likely that you will notice or your attention will be
quickly drawn to ads for the PC (the phenomenon is called cognitive dissonance reduction).
 The message must be presented in such a way as to make an impact. As explained above, this
objective can be achieved by paying attention to message formats and stressing creativity in the
way the copy, artwork/illustrations and physical layout or presentation are delivered.
While advertisers’ basic aim is to get their ads noticed, they must sensitive to, and comply with,
codes of practice operated by the industry watchdogs or country regulators. Messages should create
maximum impact but without causing public offence and irritation.
Choosing media
The communicator must now select channels of communication. There are two broad types of
communication channels: personal and non-personal.
a) Personal communication channels
In personal communication channels, two or more people communicate directly with each other.
They might communicate face-to-face, over the telephone or mobile phone, through the mail or even
through an Internet ‘chat’. Personal communication channels are effective because they allow for
personal addressing feedback.
Some personal communication channels are controlled directly by the company. For example,
salespeople contact buyers in the target market. Other personal communications about the product
may reach buyers through channels not directly controlled by the company. These might include
independent experts – consumer advocates, consumer buying guides and others – making statements
to target buyers. Or they might be neighbors, friends, family members and associates talking to target
buyers. This last channels known as word-of- mouth influence, has considerable effect in many
product areas.
Personal influence carries great weight for product that are expensive, risky or highly visible. For
example, buyers of cars and major appliances often go beyond mass-media sources to seek the
opinions of knowledgeable people. Companies can take steps to put personal communication
channels to work for them. For example, they can create opinion leaders – people whose opinions are
sought by others – by supplying certain people with the product on attractive terms. This also called
buzz marketing – cultivating opinion leaders and getting them spread information about a product or
service to their in the their communities. They could work through community members such as local
radio personalities, heads of local organizations or community leaders. They can use influential
people it their advertisements or develop advertising that has high ‘conversation value’.
b) Non-personal communication channels
Non-personal communication channels are media that carry messages without personal contact or
feedback. They include major media, atmospheres and events. Important media consist of print
media (newspapers, magazines, direct mail), broadcast media radio, television), display media
(billboards, signs, posters) and online and electronic media (online services, websites, CDs, DVDs).
Atmospheres are designed environments that create or reinforce the buyer’s leanings towards buying
a product. Thus lawyers’ offices and banks are designed to communicate confidence and other factor
that might be valued by their clients. Events are occurrences staged to communicate messages to
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target audiences. From example, public relations departments arrange press conferences, grand
openings, shows and exhibits, public tours and other events to communicate with specific audiences.
Non-personal communication affects buyers directly. In addition, using mass media often affects
buyers indirectly by causing more personal communication. Communications first flow from
television, magazines and other mass media and their audiences and carry messages to people who
are less exposed to media. This suggests that mass communicators should aim their messages directly
at opinion leaders, letting them carry the message to others. For example, pharmaceutical firms direct
their new drugs promotions at the most influential doctors and medical experts first – the ‘thought
leaders’ in the profession; if they are persuaded, their opinions have an impact upon the new
product’s acceptance by others in the field. Thus opinion leaders extend the influence of the mass
media. Or they may alter the message or not carry the message, thus acting as gatekeepers.
Selecting the message source
In either personal or non-personal communication, the messages impact on the target audience views
the communicator. The credibility and attractiveness of the message source – the company, the brand
name, the spokesperson for brand, or the actor in the ad who endorses the product – must therefore be
considered.
Messages delivered by highly credible sources are more persuasive. Pharmaceutical firm want
doctors to tell about their products’ benefits because doctors rank high on expertise in their field, so
they have high credibility. Many food companies promote to doctors, dentists patients. For example,
for years, sendodyne Toothpaste has promoted the product in dental surgeries, and ads use
endorsements by dental practitioners to persuade target users to adopt the brand. But, to remain
credible, the source must perceived by the target audience as being an expert where the product is
concerned, and trustworthy: that is, objective and honest in his or her opinion of the benefits claimed
for the product.
Marketers also use celebrity endorsers – top athletes, well-known film stars, fashion models and even
cartoon characters – to deliver their brand messages. Michael Owen, Paul Gascoigne and Gary
Lineker have all spoken for Walkers crisps, while Tiger Woods stands behind Nike, tag heuer and a
dozen other brands.
However, companies must careful when selecting celebrities to represent their brands. Picking the
wrong spokesperson can result in embarrassment and a tarnished image. Nike found this out when it
entrusted its good name to the care of Kobe Bryant who was trailed fro sexual assault. Pepsi and
Kodak faced similar embarrassment when their spokesperson, boxer Mike Tyson, was accused of
beating his wife and was later jailed for rape.
Collecting feedback
After sending the message, the communicator must research its effect on the target audience. This
involvement asking the target audience members whether they remember the message, how many
times they saw it, what points they recall, how they felt about the message, and their past and present
attitudes towards the product and company. The communicator would also like to measure
behaviours resulting in the message – how many people bought a product, talked to others about it or
visited the store. The figure shows and example of feedback measurements for two hypothetical
brands. Looking at Brand A, we find that 80 per cent of the total market is aware of it, that Module 6
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0 per cent of those aware of it have tried it, but that only 20 per cent of those who tried it were
satisfied.
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These results suggest that although the communication programme is creating awareness, the product
fails to give consumers the satisfaction they expect. Therefore, the company should try to improve
the product while staying with the successful communication programme. In contrast, only 40 per
cent of the total market is aware of Brand B, only 30 per cent of those aware of Brand B have tried it,
but 80 per cent of those who have tried it are satisfied. In this case, the communication programme
needs to be stronger to take advantage of the brand’s power to obtain satisfaction.
Setting the total promotion budget and mix
We have looked at the steps in planning and sending communications to a target audience. But how
does the company decide on the total promotion budget and its division among the major promotional
tools to create the promotion mix? By what process does it blend the tools to create integrated
marketing communications? We now look at these questions.
Setting the total promotion budget
One of the hardest marketing decisions facing a company is how much to spend on promotion. John
Wanamaker, an American department store magnate, once said: ‘I know that half of my advertising is
wasted but I don’t know which half. I spent &2 million for advertising, and I don’t know if that is
half enough or twice too much.’ It is not surprising; therefore, that industries and companies vary
widely in how much they spend on promotion. Promotion spending may be 20-30 per cent of sales in
the cosmetics industry and only 2 or 3 percent in the industrial machinery industry. Within a given
industry, both low and high spenders can be found. How does a company decide on its promotion
budget?
There are four common methods used to set the total budget for advertising: the affordable methods,
the percentage-of-sales methods, the competitive-parity methods and the objective-and-task methods.
a) Affordable method
A common ‘rule-of-thumb’ used by many companies is the affordable method. They set the
promotion budget at the level they think the company can afford. They start with total revenues,
deduct operating expenses and capital outlays, and then devote some portion of the remaining funds
to advertising.
Unfortunately, this method of setting budgets completely ignores the effect of promotion on sales. It
tends to place advertising last among spending priorities, even in situations where advertising is
critical to the firm’s success. It leads to an uncertain annual promotion budget, which makes longrange market planning difficult. Although the affordable methods can result in overspending on
advertising, it more often results in underspending.
b) Percentage-of-sale method
In the percentage-of-sale method, marketers set their promotion budget at a certain percentage of
current or forecast sales. Or they budget a percentage of the unit sales price. Automotive companies
usually budget a fixed percentage for promotion based on the planned car price. Fast-moving
consumer goods companies usually set it at some percentage of current or anticipated sales.
The percentage-of-sales method has advantages. It is simple to use and helps managers think about
the relationship between promotion spending, selling price and profit per unit. The method
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supposedly creates competitive stability because competing firms tend to spend about the same
percentage of their sales on promotion.
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Despite these claimed advantages, however, there is little to justify the method. It wrongly views
sales as the cause of promotion rather than as the result. The budget is based on availability of funds
rather than on opportunities. It may prevent the increased spending sometimes needed to turn around
falling sales. It fails to consider whether a higher or lower level of spending would be more profitable.
Because the budget varies with year-to-year sales, long-range planning is difficult. Finally, the
methods does not provide any basis for choosing a specific percentage, expect what has been done in
the past or what competitors are doing.
c) Competitive-parity method
Other companies use the competitive-parity method, setting their promotion budgets to match
competitors’ outlays. They watch competitors’ advertising or get industry promotion spending
estimates from publications or trade associations, and then set their budget based on the industry
average.
Two arguments support this method. First, competitors’ budget represents the collective wisdom of
the industry. Second, spending what competitors spend helps prevent promotion wars. Unfortunately,
neither argument is valid. There are no grounds for believing that the competition has a better is of
what a company should be spending on promotion than does the company itself. Companies differ
greatly in terms of market opportunities and profit margins, and each has its won special promotion
needs. Finally, there is no evidence that budgets based on competitive parity prevent promotion wars.
d) Objective-and-task method
The most logical budget-setting methods is the objective-and-task method, whereby the company sets
its promotion budget based on what it wants to accomplish with promotion. The methods entails (1)
defining specific promotion objectives, (2) determining the task needed to achieve these objectives,
and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed
promotion budget. The objective-and-task methods forces management to spell out its assumption
about the relationship between amount spent and promotion result. But it also the most difficult
method to use. Managers have to set sales and profit targets and then work back to what tasks must
be performed to achieve desired goals. Often it is hard to figure out which specific tasks will achieve
specific objectives. For example, suppose Philip wants 95 per cent awareness for its new DVD player
model during the six-month introductory period. What specific advertising messages and media
schedules would Philips need in order to attain this objective? How much would these messages and
media schedules cost? Philips management must consider such questions, even though they are hard
to answer. By comparing the campaign cost with expected profit gains, the financial viability of the
promotion campaign can be determined.
The main advantage of this method is that it gets managers to define their communication objectives,
how each objective will be met using selected promotion tools and the financial implications of
alternative communication programmes.
Setting the promotion mix
The concept of integrated marketing communications suggests that it must blend the promotion tools
carefully into a coordinated promotion mix. But how does the company determine what mix. But
how does the company determine what mix of promotion tools it will use? Companies are always
looking for ways to improve promotion by replacing one-promotion tools with another that will do
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the same job more economically. Many companies have replaced a portion of their field sales
activities with telephone sales and direct mail. Other companies have increased their sales promotion
spending in relation to advertising to gain quicker sales.
Designing the promotion mix is even more complex when one toll must be used to promote another.
Thus when British Airways decides to offer air Miles for flying with the company (a sales
promotion), it has to run ads to inform the public. When lever Brothers uses a consumer divesting
and sales promotion campaign to back a new washing powder, it has to set aside money to promote
this campaign to the resellers to win their support.
Many factors influence the marketer’s choice of promotion tools. We now look at these factors.
The nature of each promotion tool
Each promotion tool has unique characteristics and costs. Marketers must understand these
characteristics in selecting the promotion mix. Let us examine each of the major tools.
Advertising
The many forms of advertising make it hard to generalize about its unique qualities. However,
several qualities can be noted:
 Advertising can reach masses of geographically dispersed buyers at a low cost per exposure. For
example, TV advertising can reach huge audiences.
 Beyond its reach, large-scale advertising by seller says something positive about the seller’s size,
popularity and success.
 Because of advertising’s public nature, consumers tend to view advertised products as standard as
legitimate – buyers know that purchasing the product will be understood and accepted publicly.
 Advertising enables the seller to repeat a message many times, and lets the buyer receive and
compare the message of various competitors.
 Advertising is also very expressive, allowing the company to dramatize its products through the
artful use of visuals, prints, sound and color.
 On the one hand, advertising can be used to build up a long-term image for a product (such as
Mercedes-Benz car ads). On the other had, advertising can trigger quick sales (as when
department stores like Debenhams and Selfridges advertise a weekend sale)
Advertising also has some shortcomings:
 Although it reaches many people quickly, advertising is impersonal and cannot be as persuasive
as company salespeople.
 Advertising is only on a one-way communication with the audience, and the audience does not
feel that it has to pay attention or respond.
 In addition, advertising can be very costly. Although some advertising forms, such as newspaper
and radio advertising, can be done on smaller budgets, other forms, such as network TV
advertising, requires very large budgets.
Personal selling
Personal selling is the most effective tool at certain stages of the buying process, particularly in
building up buyers’ preference, convictions and actions. Compared to advertising, personal selling
has several unique qualities:
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 It involves personal interaction between two or more people, so each person can observe the
other’s needs and characteristics and make quick adjustments.
 Personal selling also allows all kinds of relationships to spring up, ranging from a matter-of-fact
selling relationship to a deep personal friendship. The effective salesperson keeps the customer’s
interest at heart in order to build a long-term relationship.
 Finally, with personal selling the buyer usually feels a greater need to listen and respond, even if
the response is a polite ‘no thank you’.
These unique qualities come at a cost, however. A sales force requires a longer-term commitment
than does advertising – advertising can be turned on and off, but sales force size is harder to change.
Personal selling is also the company’s most expensive promotion tool, costing companies several
hundred euros on average per sales call.
Sales promotion
Sales promotion includes a wide assortment of tools – coupons, contests, price reductions, premium
offers, free goods and other – all of which have many unique qualities:
 They attract consumer attention and provide information that may lead to a purchase.
 They offer strong incentives to purchase by providing inducements or contribution that give
additional value to consumers.
 Moreover, sales promotions invite and reward quick response. Whereas advertising says ‘buy our
product’ sales promotion offers incentives to consumers to ‘buy it now’.
Companies use sales promotion tools to create a stronger and quicker response. Sales promotion can
be used to dramatize product offers and to boost sagging sales. Sales promotion effects are usually
short-lived, however, and are often as effective as advertising or personal selling in building long-run
brand preference. To be effective, marketers must carefully plan the sales promotion campaign and
offer target customers genuine value.
Public Relations
Public relations or PR offer several unique qualities. It is all those activities that the organization
does to communicate with target audience, which are not directly paid for.
 PR is very believable: news stories, features, sponsorships and events seems more real and
believable to readers than ads do.
 Public relations can reach many prospects who avoid salespeople and advertisements, since the
message gets to the buyers as ‘news’ rather than as a sales-directed communication.
 Like advertising, PR can dramatise a company or product. The body shop is one of the few
international companies that have used public relations as amore effective alternative to mass TV
advertising.
Marketers tend to under use public relations or to use it as an afterthought. Yet, a well thought out
public reactions campaign used with other promotion-mix element can be very effective and
economical.
Direct marketing
Although there are many forms of direct marketing – direct mail, telemarketing, electronic – direct
mail, telemarketing, electronic marketing, online marketing and others – they all share four distinctive
characteristics.
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 Direct marketing is non-public as the message is normally addressed to a specific person.
 Direct marketing is immediate as messages can be prepared very quickly.
 Direct marketing can be customized, so messages can be tailored to appeal to specific customers.
 Direct marketing is interactive: it allows a dialogue between the communicator and the consumer,
and message can be altered depending on the consumer’s response.
Thus, direct marketing is well suited to highly targeted marketing efforts and building one-to-one
customer relationships.
Promotion mix strategies
Marketers can choose from two basic promotion mix strategies – push promotion or pull promotion.
The relative emphasis on the specific promotion tools differs for push and pull strategies. A push
strategies involves ‘pushing’ the product through distribution channels to final consumers. The firm
directs its marketing activities towards channel members to induce them to carry the product and to
promote it to final consumers. Using a pull strategy, the producer directs its marketing activities
toward final consumers will then demand the product from channel members, who will in turn
demand it from producers. Thus under a pull strategy, consumer demand ‘pulls’ the product through
the channels.
Some small industrial-goods companies use only push strategies; some direct-marketing companies
use only pull. However, most large companies use some combination of both. For example, Lever
Brothers uses mass-media advertising to pull consumers to its products and a large sales force and
trade promotion to push its products through the channels.
In recent years, consumer-goods companies have been decreasing the pull portions of their promotion
mixes in favor of more push. There are a number of reasons behind t-shirt in promotion strategy. One
is the rising cost of mass-media campaigns. Many firms have also found advertising less effective in
recent years. Companies are increasing their segmentation efforts and tailoring their marketing
programmes more narrowly, making national advertising less suitable than localized retailer
promotions. In these days of heavy brand extensions and me-too products, many companies are
finding it difficult to feature meaningful product differentiations in advertising. Instead, they
differentiate their brands through price reductions, premium offers, coupons and other promotions
aimed at the trade.
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Figure 5. Push strategy
2 Theories and Models of Promotion
Producer marketing activities
{Personal selling, trade
Promotion, other}
Producer
Figure Module 6 . Pull strategy
Producer
Reseller marketing
(personal selling,
advertising, sales
Promotion, other)
Retailers and
wholesalers
Retailers and
Demand
wholesalers
Consumers
Consumers
Producer marketing activities
(Consumer advertising, sales
promotion, other)
The growing strength of retailers is also a key factor influencing the shift from pull and push. Big
retail chains in Europe have greater access now than ever before to product sales and profit
information. They have the power to demand and get what they want from suppliers. And what they
want is margin improvements – that is, more push. Mass advertising bypasses them on its way to the
consumers, but push promotion give retailer an immediate sales boost and cash from trade allowances
pads retailer profits. So, manufacturers are compelled to use push promotions just to obtain good
shelf space and advertising support form their retailers.
However, reckless use of push promotion leads to fierce competition and a continual spiral of price
slashing and margin erosion, leaving less money to invest in the product R&D, packaging and
advertising that is required to improve and maintain long-run consumer could mortgage a brand’s
long-term future for short-term gains. While push strategies will remain important, particularly in
packaged-goods marketing, companies that find the best mix between the two – consistent advertising
to build long-run brand value and consumer preference and sales promotion to create short-run trade
support and consumer excitement are most likely to win the battle for loyal and satisfied customers.
Factors in designing promotion mix strategies
Companies consider many factors when designing their promotion mix strategies, including the type
of product/market, buyer-readiness stage and the product life-cycle stage.
-Type of product market
The importance of different promotional tool varies between consumer and business markets.
Consumers-goods companies usually put more of their funds into advertising, followed by sales
promotion, personal selling and then public relations. Advertising is relatively more important in
consumer markets because there are a larger number of buyers, purchase tend to be routine, and
emotions play a more important role in the purchase-decision process. In contrast, industrial-goods
companies put most of their funds into personal selling, followed by sales promotion, advertising and
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public relations. In general, personal selling is used more heavily with expensive and risky purchases,
and in markets with fewer and larger sellers.
Although advertising is less important than sales calls in business markets, it still plays and important
role. Advertising can build product awareness and knowledge, develop sales leads and reassure
buyers. Similarly, personal selling can add a lot to consumer-goods marketing efforts. It is simply not
the case that ‘salespeople put products on shelves and advertising takes them off. Well-trained
consumer salespeople can sign up more dealers to carry a particular brand, convince them to give
more shelf space and urge them to use special displays and promotions.
-Buyer-readiness stage
The effects of the promotional tools vary for the different buyer-readiness stages. Advertising, along
with public relations, plays the leading role in the awareness and knowledge stages, more important
than that played by ‘cold calls’ from salespeople. Customer liking, preference and conviction are
more affected by personal selling, which is closely followed by advertising. Finally, closing the sale is
mostly done with sales calls and sales promotion. Clearly, advertising and public relations are the
most cost-effective at the early stages of the buyer decision process, while personal selling, given its
high costs, should focus on the later stages of the customer buying process.
-Product life-cycle stage
The effects of different promotion tools also vary with stages of the product life cycle. In the
introduction stage, advertising and public relations are good for producing high awareness, and sales
promotion is useful in getting early trial. Personal selling efforts must be geared to persuading the
trade to carry the product. In the growth stage, advertising and public relation continue to be
powerful influences, whereas sales promotion can be reduced because fewer incentives are needed.
In the mature stage, sales promotion again becomes important relatives to advertising. Buyers know
the brands and advertising is needed only to remind them of the product. In the decline stage,
advertising is kept at a reminder level, public relations is dropped and salespeople give the product
only a little attention. Sales promotion however, might continue strong in order to stimulate trade and
prop up sales.
Integrated the promotion mix
Having set the promotion budget and mix, the company must now take steps to see that all of the
promotion mix elements are smoothly integrated. Here is a checklist for integrating the firm’s
marketing communications.
 Analyze trends – internal and external – that can affect your company’s ability to do businesses.
Look for areas here communications can help the most. Determine the strengths and weaknesses
of each communications functions. Develop a combination of promotional tactics based on these
strengths and weaknesses.
 Audit the pockets of communications spending throughout the organization. Item the
communications budgets and tasks and consolidate these into a single budgeting process.
Reassess all communications expenditures by product, promotional tool, stage of the life cycle,
and observed effect.
 Identify all contact point for the company and its brands. Work to ensure that communications at
each point are consistent with your overall communications strategy and that your
communications efforts are occurring when, where and how your customers want them.
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 Team up in communications planning. Engage all communications functions in joint planning.
Include customers, suppliers and other stakeholders at every stage of communications planning.
 Create compatible themes, tones and quality across all communications media. Make sure each
element carries your unique primary messages and selling point. This consistency achieves greater
impact and prevents the unnecessary duplication of work across functions.
 Create performance measures that are shared by all communications elements. Develop systems
to evaluate the combined impact of all communications activities.
 Appoint a director responsible of the company’s persuasive communications efforts. This move
encourages efficiency by centralizing planning and creating shared performance measures.
Socially responsible marketing communication
In shaping its promotion mix, a company must be aware of the large body of legal and ethical issues
surrounding marketing communications. Most marketers work hard to communicate openly and
honestly with consumers and resellers. Still, abuses may occur and public policy makers have
developed a substantial body of law and regulations to govern advertising, personal selling sales
promotion and direct marketing activities.
Advertising and sales promotion
By law, companies must avoid false or deceptive advertising. Advertisers must not make false
claims, such as suggesting that a product cures something when it des not. They must avoid ads
that have the capacity to deceive, even though no one may actually be deceived. A car cannot be
advertised as getting 45 km per gallon unless it does so under typical conditions, and a diet
bread cannot be advertised as having fewer calories simply because its slices are thinner.
Sellers must avoid bait-and-switch advertising or deceptive sales promotions that attract buyers
under false pretences. For example, a large retailer advertised a dishwashing machine at &250.
However, when consumers tried to buy the advertised machine, the seller downplayed its
features, placed faulty machines on showroom floors, understated the machine’s performance
and took other actions in an attempt to switch buyers to a more expensive machine. Such
actions are both unethical and illegal.
International advertisers must also observe local rules. For example, in the United States, directto-consumer advertising is allowed for prescriptions drugs. Pharmaceutical firm Eli Lilly uses
magazine advertisement to boost public awareness of its &2.4 billion per year anti-depressant,
Prozac. Heavy consumer promotion pushed up sales of cholesterol-lowering drugs, such as
Bristol-Myers Squibb’s Pravachol, Warner-Lambert’s Lipitor and Merck’s Zocor. By contrast,
in Europe, such advertisements are illegal. Prescription drugs can be promoted only in the
medical journals and other publications where qualified physicians are presumed to browse.
A company’s trade promotion activities are also closely regulated. For example, in some
countries, sellers cannot favor certain customers through their use of trade promotions. They
must make promotional allowances and services available to all resellers o proportionately
equal terms.Beyond simply avoiding legal pitfalls, such as deceptive or bait-and-switch
advertising, companies can invest in communications to encourage and promote socially
responsible programmer and actions. For example, earth-moving equipment manufacturer
Caterpillar is one of several companies and environmental groups forming the tropical forest
foundation, which is
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working to save the great Amazon rainforest. It uses advertisings to promote the cause and its
involvement. The Financial Times has run several FT Lunch/evening meal promotions, in
conjunction with participating restaurants in the UK, to raise money for the charity save the
children.
Personal selling
A company’s salespeople must follow the rules of ‘fair competition’. Some countries have
extracted deceptive sales acts that spell out what is not allowed. For example, salespeople may
not lie to consumers or mislead them about the advantages of buying a product. To avoid baitand-switch practices, salespeople’s statements must match advertising claims.
In business-to-business selling, salespeople may not offer bribes to purchasing agents or to
others who can influence a sale. They may not offer bribes t purchasing agents or to others who
can influence a sale. They may not obtain or use technical or trade secrets of competitors
through bribery or industrial espionage. And salespeople must not disparage competitors or
competing products by suggesting things that are not true.
No doubt, the laws governing sales and marketing practices differ across countries. Thus,
international marketers must be fully aware of the laws and regulations governing sales and
marketing communications practices, and how they differ across the countries in which they
operate, when designing cross-border communications programmer. Beyond understanding and
abiding by these laws and regulations, companies should ensure that they communicate honestly
and fairly with consumers and resellers.
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3 PROMOTIONAL TECHNIQUES
ADVERTISING, SALES PROMOTION AND PUBLIC RELATIONS
Introduction
These are also largely non-personal forms of communication and promotion. Companies must do
more than offer good products or services. As we gather form the prelude case, firms must inform
consumers about product or service benefits and carefully position these in consumers’ minds. To do
this, they must skillfully use the mass-promotion tools of advertising, sales promotion and public
relations.
Advertising
Advertising can be traced back to t he very beginnings of recorded history. Archaeologists working
in the countries around the Mediterranean Sea have dug up signs announcing various events and
offers. The Romans painted walls to announce gladiator fights, and the Phoenicians painted pictures
promoting their wares on large rocks along parade routes. A Pompeii wall painting praised a
politician and asked for votes. During the Golden Age in Greece, town criers announced the sale of
cattle, crafted items and even cosmetics. An early ‘singing commercial’ went as follows: ‘For eyes
that are shining, for cheeks like the dawn. For beauty that lasts after girlhood is gone. For prices in
reason, the woman who knows will buy her cosmetics from Aesclyptons.’
Modern advertising, however, is a far cry form these early efforts. At constant 2002 prices,
advertising expenditure in 2003 was estimated at US &78.7 billion in Europe, US &154.5 billion in
the US, US &Module 6 4.5 in Asia Pacific and globally ad spend is set to rise by 4.7 per cent in 2004.
global firms such as the consumer goods giant Unilever spent nearly &4 billion on advertising in
2002, making it the biggest advertiser in the world. The company recognizes that when it is fighting
for consumers’ hearts and minds in a cluttered world, message impact and reach are vital, with
advertising becoming more important than ever. As a senior marketer at Unilever Bestfoods says,
‘We aren’t going to see the death of advertising, nor the death of TV advertising, although over time,
more and more of our budgets will be going into other media. We define advertising as any paid form
of non-personal presentation and promotion of ideas, goods or services through mass media such as
newspapers, magazines, television or radio by an identified sponsor.
Although advertising is used mostly by business firms, it is also used by a wide range of not-for-profit
organizations, professionals and social agencies to communicate their causes to various target publics.
advertising is a good way to inform and persuade, whether the purpose is to sell Nokia mobile phones
worldwide or to encourage smokers to give up the habit. Advertising is used in order to stimulate a
response from the target audience. The response may be perceptual in nature: for example, the
consumer develops specific views or opinions about the product or brand, or these feelings are altered
by the ad. The response could be behavioural: for instance, the consumer buys the product or
increase the amount that he or she buys.
Impact decisions in advertising
Marketing management must make four important decisions when developing an advertising
programme: setting advertising objectives, setting the adverting budget, developing advertising
strategy and evaluating advertising campaigns.
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Setting Advertising Objectives
The first step is to set advertising objective. These objectives should be based on decisions about the
target market, positioning and marketing mix, which define the job that advertising must achieve in
the total marketing programme.
An advertising objective is a specific communication task to be accomplished with a specific target
audience during a specific period of time. Advertising objectives can be classified by primary
purpose – whether the aim is to inform, persuade or remind.
Informative advertising is used heavily when introducing a new product category. In this case, the
objective is to build primary demand. Thus producer of DVD players first informed consumers of the
image quality and convenience benefits of the new product.
Persuasive advertising becomes more important as competition increases. Here, the company’s
objective is to build selective demand. For example, when DVD players become established and
accepted, Sony begins trying to persuade consumers that its brand offers the best quality for their
money. Some persuasive advertising has become comparison advertising, in which a company
directly or indirectly compares its brand with one or more other brands:
There are potential dangers in using comparison advertising. As often happens with comparison
advertising, both sides complain that the other’s ads are misleading. The approach is legal in the
United Kingdom and the US, but its use is banned in a number of European countries. Belgium and
Germany regard it as tantamount to unfair competition. For example, a relatively innocuous Carlberg
commercial with the tagline ‘Probably the best lager in the world’ could not be run in those countries
because it implicitly identifies products offered by rivals. Similarly, Avis’s ‘We try harder’ as would
not have been allowed in Germany because, although nobody is named, Hertz is presumed to be the
only real competitor.
Efforts continue to harmonize EU rules on comparative advertising cross the EU. Meanwhile,
advertisers in the region must remain sensitive to individual country coded of practice and legislation.
The is style of communication will probably always exist in one form or another, as most advertising
is essentially comparative – after all, the aim of the advertiser is to persuade the consumer to respond
to one product offering rather than another. Reminder advertising is important for mature products as
it keeps consumers thinking about the product. Expensive Coca-Cola ads on television are often
designed to remind people about Coca-Cola, not merely to inform or persuade them. Advertisers
might also seek to assure existing customers that they have made the right choice. For example, car
firms might use reinforcement advertising that depicts satisfied owners enjoying some special
features of their new car.
Setting the advertising budget
After determining its advertising objectives, the company next sets its advertising budget for each
product. Here we describe some specific factors that should be considered when setting the
advertising budget:
 Stage in the product life cycle. A brand’s advertising budget often depends on its stage in the
product life cycle. New products typically need large advertising budgets to build awareness and
to persuade consumers to try the products. In contrast, mature brands usually require lower
budgets as a percentage of sales.
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 Market share. Market share also impact the amount of advertising needed. Because building the
market or taking share from competitors requires larger advertising spending than does simply
maintaining current share, low-share brands usually need more advertising spending as a
percentage of sales.
 Competition and clutter. In a market with many competitors and high advertising clutter, a brand
must be advertised more heavily to be noticed above the noise in the market.
 Advertising frequency. When many repetitions are needed to present the brand’s message to
consumers, the advertising budget must be larger.
 Product differentiation. Undifferentiated brands – those that closely resemble other brands in
their product class (coffee, laundry detergents, chewing gum, beer, soft drinks) – may require
heavy advertising to set them apart. When he product differs greatly from those of competitors,
advertising can be used to point out the differences to consumers.
No matter what method is used, setting the advertising budget is no easy task. How does a company
know whether it is spending the right amount? Some critics maintain that large consumer packagedgoods firms tend to overspend on advertising, while industrial companies generally underspend on
advertising. They also claim that, on the one hand, the large consumer companies use lots of image
advertising extensively without really knowing its effects. They overspend as a form of ‘insurance’
against not spending enough. On the other hand, business advertisers tend to rely too heavily on their
sales forces to bring in orders. They underestimate he power of company and product image in preselling to industrial customers. Thus they do not spend on advertising to build customer awareness
and knowledge.
Some companies have built sophisticated statistical models to determine the relationship between
promotional spending and brand sales, and to help determine the ‘optimal investment’ across various
media. Still, because so many factors affect advertising effectiveness, some controllable and other
not, measuring the results of advertising spending remains an inexact science. In most cases,
managers must rely on large doses of judgement along with more quantitative analysis when setting
advertising budgets.
Developing advertising strategy
Advertising strategy covers two major elements: creating the advertising messages and selecting the
advertising media. In the past, companies viewed media planning as secondary to the messagecreation process. Many companies also developed message and media independently. The creative
department first created the advertisements, then the media department selected the best media for
carrying these advertisements to the desired target audiences. Separation of the functions often
caused friction between ‘creatives’ and media planners. Today, however, media fragmentation,
soaring media costs and more focused target marketing strategies have promoted the importance of
the media planning function. In some cases, an advertising campaign might begin with a good
message idea followed by the choice of appropriate media. In other cases, however, a campaign
might begin with a good media opportunity, followed by advertisements designed to take advantage
of that opportunity. Increasingly, companies are realizing the benefits of planning these two
important activities jointly. More and more advertisers are orchestrating a closer harmony between
their message and the media that deliver them. Media planning is no longer an after-the-fact
complement to a new ad campaign. Media planners are now working more closely than ever with
creatives to allow media selection to help shape the creative process, often before a single ad is
written. In some cases, media people are even initiating ideas for new campaigns.
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Among the more noteworthy ad campaigns based on tight media-creative partnerships is the
pioneering campaign for Absolute vodka, marketed by Seagram.
Creating the advertising message
No matter how big the budget, advertising can succeed only if commercials gain attention and
communicate well.
The changing message environment
Good advertising messages are especially important in today’s costly and cluttered advertising
environment. The average consumer has numerous television channels and radio stations and
thousands of magazines to choose from. Add the countless radio stations, and a continuous barrage
of catalogues, direct-mail and online ads and out-of-home media. Consumers are bombarded with
ads at home, at work and at all points in between.
If all this advertising clutter bothers some consumers, it also causes big problems for advertisers – it
is very costly. Network TV advertisers could pay tens to hundreds of thousands or euros for a 30second slot during a popular prime-time TV programme. Also, their ads are sandwiched in with a
clutter of other commercials, announcements and network promotions in any viewing hour.
Until recently, television viewers were very much a captive audience for advertisers. Viewers had
only a few channels to choose from. But with the growth in cable and satellite TV, video cassette
recorders, DVDs and remote-controlled technologies, today’s audience have many more options. Thy
can avoid ads by watching commercial-free channels. With remote control, they can instantly turn off
the sound during a commercial or ‘zap’ around the channels to see what else is on.
Just to gain and hold attention, today’s advertising message must be better planned, more
imaginative, more innovative, more entertaining and more rewarding to consumers. Creative strategy,
even intentionally controversial ads, will pay an increasingly important role in helping advertisers
break through the clutter and gain attention for their products.
Message strategy
The first step in creating effective advertising message is to decide what general message will be
communicated to consumers – to plan the message strategy. Generally, the purpose of advertising is
to get target consumers to think about or react to the product or company in a certain way. People
will respond only if they believe they will benefit form doing so. Thus, developing an effective
message strategy usually begins with identifying target customer benefits that can be used as
advertising appeals. Ideally, advertising message strategy follows directly from the company’s
broader positioning strategy. Message strategy statements tend to be plain, straightforward outlines of
benefits and positioning points that the advertiser wants to stress. The advertiser must develop a
compelling creative concept – or big idea – that will bring the message strategy to life in a distinctive
and memorable way. At this stage, simple message ideas become great ad campaigns. Usually, a
copywriter and art director will team up to generate many creative concepts, hoping that one of these
concepts will turn out to be the big idea. The creative concept may emerge as visualization, a phrase
or a combination of the two. How should advertising planners evaluate advertising message?
Generally, the creative concept should guide the choice of specific appeals to be used in an ad
campaign. Advertising appeals should have three characteristics. First, they should be meaningful
pointing out benefits that make the product more desirable or interesting to target customers. Second,
appeals must be believable. This objective is difficult because many consumers doubt the truth of
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advertising in general. One study found that a full one-third of the public rates advertising message
as unbelievable. This objective also argue that the most meaningful and believable benefits may not
be the best ones to feature. Consumer skepticism is not surprising since many ads sell the notion that
the product is bigger, better, brighter or far longer-lasting than rival offerings. However, more
recently, a number of companies have adopted a different tack, using advertising that stresses honesty
in selling to consumers.
Appeals should also be distinctive in terms of telling consumers how the product is different from or
better than competing brands. For example, the most meaningful benefit of owning a wristwatch is
that it keeps accurate time, yet few watch ads feature this benefits. Instead, based on the distinctive
benefits they offer, watch advertisers might select any of a number of advertising themes. For years,
Timex has been the affordable watch that ‘Takes a licking’ and keeps on ticking’. In contrast, Swatch
has features style, fun and fashion, whereas Rolex stresses luxury and status. Advertisers should
therefore pre-test each ad to determine that it has the maximum impact, believability and appeal.
Message execution
The advertiser now has to turn the big idea into an actual ad execution that will capture the target
market’s attention and their interest. The impact of the message depends not only on what is said, but
also on how it is said. The creative people must find the best style, tone, words and format for
executing the message. Any message can be presented in different execution styles, such as the
following:
 Slice of life. This style shows one or more people using the product in a normal setting (e.g. the
classic Persil laundry detergent commercials which show the role of the mother who knows she
can rely on Persil to keep her family’s washing clean, white and bright).
 Lifestyle. This style shows how a product fits in with a particular lifestyle. For example, the UK
“After Eight’ mints advertisement (elegant dinner party in a period house) appeals to aspirations
more than anything else.
 Fantasy. This style creates a fantasy around the product or its use. For instance, many ads are
built around dream themes. Gap introduced a perfume named Dream. Ads shows a woman
sleeping blissful and suggest that the scent is ‘the stuff that clouds are made of’.
 Mood or image. This style builds a mood or image around the product, such as beauty, love
serenity. No claim is made about the product except through suggestion.Timotei shampoo
employs the mood for nature and simplicity – a strategy that has worked successfully in many
countries across the globe.
 Musical. The ad is built around a song or some well-known music, so that emotional responses to
the music are associated with the product. For example, one of the most famous ads in history
was a Coca-Cola ad built around the song ‘I’d like to teach the world to sing’.
 Personality symbol. This style creates a character that represents the product. The character
might be animated (e.g. Shreik for Hewlett-Packard office systems) or real (e.g. Gary Linkers for
Walkers’ Crisps; David Beckham for Marks & Spencer’s DB07 boys’ clothing range).
 Technical expertise. This style shows the company’s expertise in making the product. Thus
DaimlerChrysler promotes its investment in intelligent technologies to build tomorrow’s energyefficient automobiles, and Volkswagen-Audi cars imply superiority with the advertising slogan
‘Vorsprung durch Technik’.
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 Scientific evidence. This style presents survey or scientific evidence that the brand is better or
better liked than one or more other brands. For years, Crest toothpaste has used scientific
evidence to convince buyers that Crest is better than other brands at fighting cavities. In Elida
Gibbs relaunch of the skin-care brand pond’s, the advertisement referred to the ‘Pond’s Institute’
where women were shown having their skin analyzed, the ad emphasizing the brand’s scientific
problem-solving qualities.
 Testimonial evidence or endorsement. This style features a highly believable or likeable source
endorsing the product. It could be ordinary people saying how much they like a given product or
a celebrity presenting the product.
The advertiser must also choose a tone for the ad. Positive tones that evoke happiness, feelings of
achievement, fun and excitement tend to be more effective than negative tones. By contract, negative
appeals that evoke fear may discourage viewers from looking at the advertisement, and so would be
counterproductive. The advertiser not only has to use ad appeals that can break through the
commercial clutter, but also has to avoid appeals that take attention away from the message. The
advertiser must also use memorable and attention-getting words in the ad.
Finally, format elements make a difference in an ad’s impact as well as in its cost. A small change in
ad design can make a big difference in its effect. The illustration is the first thing the reader notices –
it must be strong enough to draw attention. Next, the headline must effectively entice the right people
to read the copy. Finally, the copy – the main block or text in the ad – must be simple but strong and
convincing.
Selecting advertising media
The advertiser must next decide upon the media to carry the message. The main steps in media
selection are:
1. Deciding on reach, frequency and impact
2. Choosing among chief media types
3. Selecting specific media vehicles
4. Deciding on media timing.
Deciding on reach, frequency and impact
To select media, the advertiser must decide what reach and frequency are needed to achieve
advertising objectives. Reach is a measure of the percentage of people in the target market who are
exposed to the ad campaign during a given period of time. For example, the advertiser might try to
reach 70 per cent of the target market during the first three months of the campaign. Frequency is a
measure of how many times the average person in the target market is exposed to the message. For
example, the advertiser might want an average exposure frequency of three. The advertiser must also
decide on the desired media impact – the qualitative value of a message exposure through a given
medium. For example, for products that need to be demonstrated, message on television may have
more impact than messages on radio because television uses sight and sound. The same message in a
national newspaper may be more believable than in a local weekly. In general, the more reach,
frequency and impact the advertiser seeks, the higher the advertising budget will have to be.
Choosing among chief media types
The media planner has to know the reach, frequency and impact of each of the major media types.
The major media types are newspapers, television, direct mail, radio, magazines, outdoors and the
Internet. As shown in the table each medium has advantages and limitations.
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How do advertisers select appropriate media from the range of media available? Media planners
consider many factor when making their media choices. The media habits of target consumers will
affect media choice and advertisers look for media that reach target consumers effectively. So will
the nature of the product: for example, fashions are best advertised in colour magazines and car
performance is best demonstrated on television. Different types of message may require different
media: for instance, a message announcing a big sale tomorrow will require radio or newspapers; a
message with a lot of technical data might require magazines or direct mailings or an online ad and
website.
Cost is also important consideration in media choice: whereas network television is very expensive,
newspaper or radio advertising costs much less but also reaches fewer consumers. The media planner
looks at both the total cost of using a medium and the cost per 1,000 exposures – the cost of reaching
1,000 people using the medium.
Media impact and cost must be re-examined regularly. For a long time, television and magazines
dominated it the media mixes of national advertisers, with other media often neglected. Recently,
however, as network television costs soar and audiences shrinks, many advertisers are looking for
new ways to reach consumers. The move towards micromarketing strategies, focused more narrowly
on specific consumers groups, has also fuelled the search for new media to replace or supplement
networked television. As a result, advertisers are increasingly shifting larger portions of their budgets
to media that cost less and target more effectively.
Three media benefiting greatly from the shift are outdoor advertising, cable television and digital
satellite television systems. Billboards have undergone a resurgence in recent years. Gone are the
ugly eyesores of the past; in their place we now see cleverly designed, colourful attention grabbers.
Outdoor advertising provides an excellent way to reach important local television and digital satellite
systems are also gaining importance. Such systems allow narrow programming formats such as all
sports, all news, nutrition, arts, gardening, cooking, travel, history and others that target select groups.
Advertisers can take advantage of such ‘narrowcasting’ to ‘rifle in’ on special market segments rather
than use the shotgun approach offered by network broadcasting.
Outdoor, cable and satellite media seem to make good sense. But, increasingly, ads are popping up in
far less likely places. In their efforts to find less costly and more highly targeted ways to reach
consumers, advertisers have discovered a dazzling collection of ‘alternative media’ ranging form
parking lot tickets and park benches to petrol pumps and public toilets.
Selecting specific media vehicles
The media planner must now choose the best media vehicle – that is, specific media within each
general media type. In most cases, there is an incredible number of choices. For radio and television,
and in any one country, there are numerous stations and channels to choose from, together with
hundreds, even thousands, of programme vehicles – the particular programmes or shows where the
commercial should be broadcasted. Prime-time programmes are the favourites, but costs escalate
with the popularity of the programme. In the case of magazines, the media planner must look up
circulation figures and the costs of different ad sizes, colour options, ad positions and frequencies for
specific magazines. Each country has its own high – or general-circulation magazines (for example,
radio and TV guides) which reach general audience groups. There is also a vast selection of specialinterest publications that enable advertisers to reach special groups of audiences (for example,
business magazines to reach business executive).
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The planner selects the media that will do the best job in terms of selectively reaching the target
customer group. Then he or she must evaluate each magazine on factor such as credibility, status,
reproduction quality, editorial focus and advertising submission deadlines. The media planner
ultimately decides which vehicles give the best reach, frequency and impact for the money. With
increasing emphasis on improving efficiency, some companies are seeking new ways to boost their
media buying power. For example, Sony has adopted a new approach in Europe based on the barter
system.
Media planners have to compute the cost per 1,000 persons reached by a vehicle. For example, if a
full-page, four-colour advertisement in a monthly business magazines costs &30,000 and its
readership is 3 million people, the cost of reaching each group of 1,000 persons is about &10. The
same advertisement in a regional trade magazine may cost only &20,000 but reach only 1 million
persons, giving a cost per 1,000 of about &20. The media planner would rank each magazine by cost
per 1,000 and favour those magazines with the lower cost per 1,000 for reaching target consumers.
Additionally, the media planner considers the cost of producing ads for different media. Whereas
newspaper ads may cost very little to produce, flashy television ads may cost millions.
Media costs vary across different countries, so care must be taken not to generalize the figures. Thus,
the media planner must balance media cost against several media impact factors. First, the planner
should balance costs against the media vehicle’s audience quality. For a personal digital assistant
(PDA) ad, business magazines would have a high-exposure value; magazines aimed at new parents or
woodwork enthusiasts would have a low-exposure value. Second, the media planner should consider
audience attention. Readers of fashion magazines such as vogue, for example, typically pay more
attention to ads than do readers of business magazines. Third, the planner should assess the vehicle’s
editorial quality. For example, the Financial Times and The Economist are more credible and
prestigious than tabloid newspapers such as the News of the World or weeklies and celebrity
magazines such as Hello and Now.
Deciding on media timing
The advertiser must also decide how to schedule the advertising over the course of a year. Suppose
sales of a product peak in December and drop in March. The firm can vary its advertising to follow
the seasonal pattern, to oppose the seasonal pattern, or to be the same all year. Most firms do some
seasonal advertising. Some do only seasonal adverting: for example, many department stores
advertise – usually their seasonal sales – in specific periods in the year, such as Christmas, Easter and
summer. Advertisers can also ensure greater efficiency in running their TV campaigns – in terms of
the number of television impacts and their price – by shifting TV campaigns into cheaper months.
Finally, the advertiser has to choose the patterns of the ads. Continuity means scheduling ads evenly
within a given period. Pulsing means scheduling ads evenly over a given time period. Thus 52 ads
could be either scheduled at one per week during the year or pulsed in several bursts. The idea is to
advertise heavily for a short period to build awareness that carries over to the next advertising period.
Those who favour pulsing feel that it can be used to achieve the same impact as a steady schedule, but
at a much lower cost.
However, some media planners believe that although pulsing achieves minimal awareness, it
sacrifices depth of advertising communications. Recent advances in technology have had a substantial
impact on the media planning and buying functions. Today, for example, new computer
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software applications called media optimizers allow media planners to evaluate vast combinations of
television programmes and prices. Such programmes help advertisers to make better decisions about
which mix of networks, programmes, and day parts will yield the highest reach per ad euro.
Evaluating advertising
The advertising programme should regularly evaluate both the communication impact and the sales
effects of advertising. Measuring the communication effects of an ad or copy testing tells whether the
ad is communicating well. Copy testing can be done before or after an ad is printed or broadcast.
Before the ad is placed, the advertiser can show it to consumers, ask how they like it, and measure
recall or attitude changes resulting form it. After the ad is run, the advertiser can measure how the ad
affected consumer recall or product awareness, knowledge and preference.
But what sales are caused by an ad that increased brand awareness by 20 per cent and brand
preference by 10 per cent? The sales effects of advertising are often harder to measure than the
communication effects. Sales are affected by many factors besides advertising – such as product
features, price and availability. Despite the difficulty of accounting for sales, advertising effects must
be monitored. The figure shows the levels of communication effect that advertisers are likely to
monitor and measure with respect to a campaign:
 The change in brand awareness is determined by the number of customers who were previously
unaware of the brand and the number who notice the advertisement and are now aware of the
brand, or by the difference in the number of customers who are aware that the brand exists before
and after the campaign. If there has been little increase or even a decline in brand awareness, the
advertiser has to determine whether the reason is the poor impact achieved by the
communications campaign or that customers forget because of poor recall or inadequate
advertising investment.
 The nature of consumers’ attitudes towards a brand can e ascertained before and after benefits. If
the message is poorly targeted, or conveys an undesirable or unbelievable message, consumers are
antipathetic towards the brand. The do not develop any liking for the product. Advertisers may
have to redesign the copy to generate greater interest among customers or improve message
content in order to enhance the level of comprehension of brand benefits among target customers.
 Consumers who are sympathetic towards advertised brand benefits would manifest their
favourable response in the form of stated brand preference. Similarly, before-and-after (the
campaign) studies would enable changes in consumer brand preference to be determined.
Reasons for brand rejection should be identified so that communication weaknesses can be
redressed.
 An advertising campaign may be used to turn preference among customers into more definite
intention to buy. Again, this response can be measured and changes in the level of buying intent
may be determined.
 It is usually difficult to measure the sales effect of a campaign. Questions such as ‘What sales are
caused by an ad that increase brand awareness by 20 per cent and brand preference by 10 per
cent? Are not easy to answer. Sales or trials are affected by many factors besides advertising,
such as product features, price and availability. One way to measure the sales effect of
advertising is to compare past sales with past advertising expenditures. Another way is through
experiments. For example, to test the effects of different advertising levels, Pizza Hut could vary
the amount it spend the normal amount in one market area. If the three market areas are similar,
and if all other marketing efforts in the area are the same, then the differences in sales in the three
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cities could be related to advertising level. More complex experiments could be designed to
include other variables, such as differences in the ads or media used.
 If the customer is satisfied with the brand he or he has bought, this will lead to repeat purchase on
another buying occasion. The extent to which advertising or a specific ‘reminder’ campaign
affects repeat purchase is difficult to measure because of the difficulty of separating out the
immediate and long-term effects of advertising. ‘Before-and-after’ types studies and controlled
experiments can be used, nonetheless, to detect changes in purchase and usage frequency. Again,
advertisers should obtain consumer feedback to increase their understanding of the impact of
communications on repeat purchase. Advertising may not be blamed for non-repeat sales due to
the nature of product consumption: for example, consumers get bored with the same product and
want variety. In this case, advertising is not powerful enough to arrest that desire. Few of us
would relish the thought of surviving on an uninterrupted diet of Heinz beans, Heinz soup and
Heinz sausages all year round.
Figure 7. Advertising: measuring communications and sales effectiveness
Repeat
Satisfied
Act
Accept
Sympathetic
Learn
Notice
Bored
Intention
Preference
Attitude
Aware
Unaware
Dissatisfied
Apathetic
Reject
Antipathetic
Forget
One way to measure the sales effect of advertising is to compare past sales with past advertising
expenditure. Another way is through experiments. For example, to test the effects of different
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advertising spending levels, the company could vary the amount it spends on advertising in different
market areas and measure the differences in the resulting sales levels.
It could spend the normal amount in one market area, half the normal amount in another area and
twice the normal amount in a third area. If he three market areas are similar, and if all other marketing
efforts in the area are the same, then differences in sales in the three areas could be related to
advertising level. More complex experiments could be designed to include other variables, such as
difference in the ads or media used.
Other advertising considerations
In developing advertising strategies and programmes, the company must address two additional
questions. First, how will it organize the advertising function – who will perform the advertising
tasks? Second, how will the company adapt its advertising strategies and programmes to the
complexities o international markets?
Organizing for advertising
Different organizations handle advertising in different ways. In small and medium-sized companies,
advertising might be handled by someone in the sales or marketing department. Large companies
might set up advertising departments whose job it is to set the advertising budget, work with the ad
agency and handle dealer displays and other advertising not done by the agency. Most companies,
small or large, tend to use outside advertising agencies because they offer several advantages.
There are disadvantages in relinquishing the advertising function to an outside agency: loss of total
control of the advertising process, a reduction in flexibility, conflicts arising when the agency dictates
working practices, and client ability to exercise control or coordination. Despite the potential
problems, however, most firms find that they benefits from employing the specialized expertise of
agencies.
How does advertising agency work? Advertising agencies were started in the mid-to-late nineteenth
century by salespeople and brokers who worked for the media and received commission for selling
advertising space to companies. As time passed, the salespeople began to help customers prepare
their ads. Eventually they formed agencies and grew closer to the advertisers tasks – research,
creative work – better than the company’s own staff. Agencies bring an outside point of view to
solving a company’s problems, along with years of experience from working with different clients
and situations. Thus, even companies with strong advertising departments of their own use
advertising agencies.
Some ad agencies are huge – McCann-Erickson has worldwide annual gross income of nearly &1.9
billion of billings (the dollar amount of advertising placed for clients) of almost &18 billion. In
recent years, many agencies have grown by gobbling up other agencies, thus creating huge agency
holding companies. An ‘agency mega-group’ such as WPP Group, includes several large advertising,
public relations and promotion agencies with a combined worldwide gross income of &8 billion on
billings exceeding &75 billion.
Most large agencies have staff and resources to handle all phase of an ad campaign for their clients,
from creating a marketing plan to developing campaigns and preparing, placing and evaluating ads.
Agencies usually have four departments: research, which studies audience characteristics and wants;
and business, which handles the agency’s business activities. Each account is supervised by an
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account executive and people in each department are usually assigned to work on one or more
accounts. Ad agencies have traditionally been paid through commission and fees. Higher
commissions are paid to the well-recognized agencies for their ability to place more advertisements in
media. However, both advertisers and agencies are becoming more and more unhappy with the
commission system. Larger advertisers complain that they have to pay more for the same services
received by smaller ones simply because they place more advertising. Advertisers also believe that
the commission system drives agencies away from low-cost media and short advertising campaigns.
Agencies, on the other hand, are unhappy because they perform extra services for an account without
getting more pay.
The commission formula also tends to overlook important emerging media such as the Internet. There
are been vast changes in how ad agencies reach consumers, using methods that go beyond network
TV or magazine advertising. As a result, new agency payment methods may now include anything
form fixed retainers or straight hourly fees for labour to incentives keyed to performance of the
agencies’ ad campaign or some combination of these.
Another trend is affecting the agency business. Many agencies have sought growth by diversifying
into related marketing services. These new diversified agencies offer a one-stop shop – a complete
list of integrated marketing and promotion services under one roof, including advertising, sales
promotion, marketing research, public relations and direct and online marketing. Some have added
marketing consulting, television production and sales training units in an effort to become full
‘marketing partners’ to their clients.
However, many agencies are finding that advertisers do not want much more from then than
traditional media advertising services plus direct marketing, sales promotion and sometimes public
relations. Thus, many agencies have recently limited their diversification efforts in order to focus
more on traditional services or their core expertise. Some have even started their own ‘creative
boutiques’ – smaller and more independent agencies that can develop creative campaign for clients
free of large-agency bureaucracy.
International advertising decisions
We have discussed advertising decision in general. International advertisers face many complexities
markets, a number of basic issues must be considered.
Standardization or differentiation
The most basic issue concerns the degree to which global advertising should be adapted to the unique
characteristics of various country markets. Some large advertisers have attempted to support their
global brands with highly standardize worldwide advertising, with campaigns that work as well in
Bangkok as they do in Budapest. For example, Coca-Cola’s Sprite brand uses standardized appeal to
target the world’s youth. Gillette’s ads for its Sensor Excel for Women are almost identical
worldwide, with only minor adjustments to suit the local culture. Ericsson, the Swedish
telecommunications giant, spent &100 million on a standardized global television campaign with the
tag line ‘make yourself heard’, which featured Agent 007, James Bond.
Standardization produces many benefits, such as lower advertising costs, greater coordination of
global advertising efforts and a more consistent worldwide company or product image. However,
standardization also has drawbacks. Most importantly, it ignores the fact that country markets, not
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just across the continents but also within supposedly ‘harmonized’ trading communities, such as the
European Union, differ greatly in their cultures, demographics and economic conditions. PanEuropean advertising, for example, is complicated because of the EU’s cultural diversity as reflected
in the differences in circumstances, language, traditions, music, beliefs, values and lifestyles among
member nations. Ironically, the English have more in common with the Australians, who live on the
opposite side of the globe, than with the Germans or the French, their closer neighbours. Cultural
differences also exist across Asian counties (Japanese and Indonesian markets. For example, the
three Baltic countries – Estonia, Latvia and Lithuania – are far from being a common market, each
having different languages, currencies and consumer habits.
Although advertising messages might be standardized, their executive cannot be, as culture invariably
dominates communications. Indeed, a survey of pan-European brand managers showed that a
majority believes it is difficult to standardize advertising execution. Thus, most international
advertisers ‘think globally, but act locally’. They develop global advertising strategies that make their
worldwide efforts more efficient and consistent. Then they adapt their advertising programmes to
make them more responsive to consumer needs and expectations within local markets. In many
cases, even when a standard message is used, execution styles are adapted to reflect local moods and
consumer expectations.
Successful standardized advertising is most likely to work for capital goods or business-to-business
marketing, where targets are more homogeneous in their needs and buy the product for the same
reasons. For example, whether for a European, Asian or American construction company, the
purchase of bulldozers is influenced by similar economies factors (for example, productivity, lifetime
cost of running the equipment, parts delivery). Consumer goods advertising is less amenable to
cross-cultural standardization. However, considerable similarities are found in segments, such as the
world’s rich to whom lifestyle goods and brands like Mont Blanc, Cartier and Hugo Boss appeal.
Similarly, youth culture across the globe may be targeted with a common message. Brands such as
Nike, Pepsi and Jeep are advertised in much the same way globally; Jeep has created a worldwide
brand image of ruggedness and reliability; Nike urges Americans, Africans, Asians and Europeans
alike to ‘just do it’; Pepsi uses a standard appeal to target the world’s youth.
Centralization or decentralization
Global advertisers are concerned with the degree to which advertising decision making and
implementation should be centralized or decentralized. Five key factors influence the choice between
centralization and decentralization of the responsibility for international advertising decisions and
implementation:
1. Corporate and marketing objectives. A company hose global marketing objectives dominate over
domestic objectives is likely to centralize advertising and communications decisions.
2. Product uniformity. The more similar the product service marketed across different countries, the
greater the feasibility of a uniform approach, which allows for centralized management of
advertising.
3. Product appeal. Underpinning the product’s appeal are the reasons why customers use the
product, which may differ among different cultures, whatever the demographics or
psychographics characteristics of consumers. Golf club membership is a status purchase in
Singapore; in the United Kingdom it is a moderate leisure activity, without such a label of
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exclusivity attached. Where underlying appeals vary significantly, decentralized decision making
makes better sense.
4. Cultural sensitivities. Where a product’s usage and appeal are culture-bound in terms of the local
attitudes towards consumption, habits and preferences, as in the case of drinks and food products,
more decentralization is necessary.
5. Legal constraints. Individual country rules and regulations affects advertising decisions and their
implementation. Decentralization of responsibility to tap local wisdom and knowledge makes
sense where strict country regulations apply. In the European Union, until real ‘harmonization’ is
achieved, cross-border advertisers must remain alert to subtle differences in nations’ rules and
codes of practice in order to avoid costly mistakes.
The modes used by firms vary. Some organizations exert tight control form the center and
executionary changes for local culture and conditions are closely monitored. Some corporations grant
local management some degree of freedom to develop advertising within broad strategic guidelines,
but with central directives on agencies and media buying groups. Yet others may give local
management total autonomy in both strategy determination and local implementation of advertising
strategies.
Worldwide advertising media
The international media comprises of an extensive mix:
 Newspapers. Faster and more efficient circulation is possible with new technologies, such as
satellite printing, which allows advertising copy to be sent by satellite to the printer. Many
international newspapers (e.g. International Herald Tribune, financial Times, Asahi Shimburn,)
are printed simultaneously in more than one country. In general, there have been enormous
developments in local and global press, and more newspapers have gone global to reach specific
audiences.
 Magazines. There are some national and international journals which carry ads that target
regional, international or global customers (e.g. Fortune, Newspaper, Time, The Economist).
Women’s magazines such as Cosmopolitan, Vogue and Harper’s Bazaar, are printed in different
editions for readers indifferent target countries/regions.
 Professional and technical magazines. In Europe alone, there are more than 15,000 titles, and the
number is rising yearly.
 Cinema. This is a relatively popular medium for reaching younger viewers, such as teenagers. In
developing and less developed nations, cinema remains important.
 Television. There are few country markets where television is not available or where advertising
is not carried via that medium. Satellite and cable opportunities have expanded enormously and
accelerated the use of TV for international advertising. A few stations – notably CNN, NBC
Super Channel and Eurosport – are well-recognized international media channels. Other
international TV channels include BBC Worldwide, Dow Jones’s European Business News and
NBC’s CNBC.
 Outdoors advertising and transport advertising. This medium is used throughout the world. In
the western developed markets, advertisers are expanding their repertoire of outside media (e.g.
park benches, trucks, taxis, bus stop shelters). This medium is used as an alternative in cases
where the product category cannot be advertised on TV, as the case of tobacco and alcoholic
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products. In some countries, such as India and the People’s Republic of China, outdoor
advertising has become more important.
 Interactive communication media. Interactive systems, such as videotext and pay-TV, have gained
importance as cable TV continues to develop. Not only is the Internet a new channel for
advertising, so are novelties such as TiVo, which allow viewers to store and play back TV
programmes in real time. Interactive TV services are also emerging that increasingly give viewers
control over time and what they watch and when they watch it, fragmenting further the mass
television audience.
 Radio. As a medium for international advertising, radio is constrained by availability in the sense
that most commercial radio is regional. Radio Luxembourg, the international European station,
transmits ads in several languages and reaches the whole of Europe.
 Place-based media. This is a worldwide development and advertisers are increasingly deploying
the medium to reach audiences wherever they happen to be – at work, the fitness center, the
supermarket, airports and in the aeroplane.
 Trade fairs and exhibitions. These can be costly, but are useful media for international
communications.
 Sponsorship. Sponsorship of sports or arts events, like the Olympic Games and the soccer World
Cup, offers vast audience reach. Such global audiences are rare and the effectiveness of the
initiatives is not always easy to measure.
 Other media. Point of sale materials is not easy to reproduce internationally. Invariably, they have
to be adapted to local conditions, specifically the language, regulations and distribution outlets.
Direct mail is used in many countries, but it primarily a local technique. As postal services vary
from country to country, including within the EU, the medium has yet to be applied
internationally. Nonetheless, credit card companies that have an international customer database
can exploit this medium for worldwide communications. Add to this online media such as the
Internet, which is growing in importance for organizations seeking to reach a global audience.
Media planning, buying and costs
International media planning is more complicated than local media planning as the media situation
differs from country to country. To plan effectively, international advertisers require high-quality,
reliable cross-country media and audience research data. In some countries, there is inadequate
media research. Moreover, research techniques and measurement standards vary greatly across
countries, making cross-country comparisons of media research data almost impossible.
Unless reliable inter-country comparisons can be made, international advertisers will find it difficult
to evaluate and quantify international media effectiveness. In the EU, the European Association of
Advertising Agencies has been working to bring together data to help pan-European media
researchers. Recent pan-European research projects, funded jointly by advertisers, agencies and print
ad TV media, have generated data that help media planners go some way towards building more
effective campaigns across Europe as well as in individual territories.
Prices and preference for certain media also vary greatly across countries. One survey suggests that,
in the Scandinavian countries, print media dominate as an advertising medium, with two in three
consumers polled voicing positive attitudes towards print advertising; only one in five held the same
opinion of TV advertising. The preference for the printed word has important implications for
advertising media choice. Another report suggests that at least 40 of the top 50 pan-European
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advertisers have reconsolidated their media buying into a single network in order to get cheaper
prices. Nonetheless, cultural differences remain in buying preferences. According to one source,
cultural differences stem from what planners feel ‘happy’ with, rather than rational reasons, often
resulting in local resistance to centralized or standardized approaches. Hence, it is difficult to
standardize pan-European media strategies.
If the Marketing Director at HQ were to tell her Italian operations that it is running advertising
weights that are two-and-a-half times higher than that run by the firm’s other European operations,
she will literally have to take on the Italian marketing team. Thus, firm that advertise their products in
different country markets must select the media to use based on a consideration of their target groups
and the budget available and must adapt their media strategy based on other media scene and elative
media cost-effectiveness in different countries.
International advertising regulations
Countries also differ in the extent to which they regulate advertising practices. Many countries have
extensive systems of laws restricting how much a company can spend on advertising, the media used,
the nature of advertising claims and other aspects of the advertising programme. In recent years,
much discussion in Europe has centred on laws governing marketing to children and the advertising
of tobacco and alcohol.
The Internal Market Commission continues to resolve the patchwork of national advertising
regulations in order into the EU’s multi-billion-euro advertising industry. Cross-border advertising
will develop further with the advent of online interactive media and electronic commerce. However,
cultural and regulatory differences means that advertising campaigns can never be truly panEuropean. Thus, although advertisers may develop standardized strategies to guide their overall
advertising efforts, specific advertising programmes and executions are usually adapted to meet local
cultures and customs, media characteristics advertising regulations.
Sales promotion
Sales promotion consists of short-term incentives, in addition to the basic benefits offered by the
product services, to encourage the purchase or sale of a product or services. Whereas advertising
offers reasons to buy a product or services, sales promotion offers reasons that would achieve
immediate sales. It seeks to motivate the customers to buy now.
Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or stronger
market response. These tools are used by many organizations – manufacturers, distributors, retailers,
trade associations and non-profits institutions – and may be targeted towards the consumers or final
buyers, business customers, the trade or retailers and the company’s sales force. Consumer
promotions include money-off, coupons, premiums, contests and others. Trade promotions range
from special discounts, free goods and loyalty bonuses to training. Business promotions include may
of the same tools used for consumer or trade promotions such as conventions and trade shows, as well
as sales contests. Sales force promotions include bonuses, commissions, free gifts and competitions.
Rapid growth of sales promotion
Several factors have contributed to the rapid growth of sales promotions, particularly in consumer
markets. First, inside the company, product managers face greater pressure to increase their current
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sales, and promotion is increasingly viewed as and effective short-run sales tool. In mature markets,
manufacturers are striving to maintain market share through a balance between longer-term ‘share-ofvoice’ gained from advertising and shorter-term incentives for the consumer. Second, externally, the
company faces more competition and competing brands are less differentiated. Increasingly,
competitors are using sales promotion to help differentiate their offers.
Third, advertising efficiency has declined because of rising costs, media clutter and legal restraints.
Sales promotion used in conjunction with other communications, such as direct mail, can offer a
more cost-effective route to reach target consumers. Fourth, consumers have become more deloriented and ever-larger retailers are demanding more deals from manufacturers.
Finally, developments in information technology, the reduction in data storage and retrieval costs, and
the increased sophistication of targeting techniques have facilitated implementation and enabled more
effective measurements and control of sales promotion efforts. The growing use of sales promotion
has resulted in promotion clutter, similar to advertising clutter. Consumers who are continually
bombarded with promotions are increasingly ‘tuning out’ promotions, weakening their ability to
trigger immediate purchase.
Manufacturers are now searching for ways to rise above the clutter, such as offering larger coupon
values, creating more dramatic point-of-purchase displays or developing more creative sales
promotion campaigns that stand out from the crowd.
In developing a sales promotion programme, a company must set sales promotion objectives and then
select the best tools for accomplishing these objectives.
Setting sales promotion objectives
Sales promotion objectives vary widely. Let us take consumer promotions first. Sellers may use
consumer promotions to:
1.
2.
3.
4.
Increase short-tem sales;
Help build long-term market share;
Entice consumers to try a new product;
Lure consumers away from competitors’ product; encourage consumers to ‘load up’ on a mature
product;
5. Hold and reward loyal customers.
Objectives for trade promotions include:
1. Motivating retailers to carry new items and more stock;
2. Inducing them to advertise the product and give it more shelf space;
3. Persuading them to buy ahead.
For the sales force, objectives may be to:
1. Get more sales force support for current or new products; or
2. Stimulate salespeople to sign up new accounts.
Sales promotions are usually used together with advertising, personal selling or other promotion mix
tools. Consumer promotions are usually advertised and can add excitement and pulling power to ads.
Trade and sales force promotions support the firm’s personal selling process. Objectives, however,
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should be measurable. Rather than stating that the promotion aims to increase sales, the objective
should be specific about the level of increase, who the main targets are and whether to come from
new triallists or from current consumers who are loading up or bringing forward their purchase.
In general, sales promotions should be consumer relationship building. Rather than creating only
short-term sales volume or temporary brand switching sales promotions should help to reinforce the
product’s position and build long-term relationships with customer relationships. Increasingly,
marketers are avoiding the ‘quick fix’, price-led promotions in favour of promotions designed to
build brand equity.
Even price promotions can be designed to build customer relationships. Example includes all the
‘frequency marketing programmes’, ‘loyalty card schemes’ and ‘club’ that have mushroomed in
recent years. If properly designed, every sales promotion tools has the potential to bid consumer
relationships. Sales promotions have certain limitations. Sellers need to recognize that new tries at
whom their promotions are targeted consist of consumers of the product category, loyal users of
another brands and users who frequently switch brands.
Sale promotions often attract the last group – brand switcher –because non-user of the brands do not
always notice or act on a promotion. Brand switchers are looking mostly for low price of good value.
Sales promotions are unlikely to turn them into loyal brand users.
Moreover, when a company uses price promotions for a brand too much of the time, consumers
begins to think of it as a cheap brand. Or many consumers will buy the brand only when there is a
special offer. Most analysts believe that sales promotion activities do not build long-term consumer
preference and loyalty, as does advertising. Instead, they only boost short-term sales that cannot be
maintained over the long run. Marketers therefore rarely use sales promotion for dominant brands
because it would do little more than subsidies current users.
Despite the dangers, many consumers packaged-good companies continue to use sales promotions.
Thee marketers assert that sales promotions benefits manufacturer by letting them adjust to short-term
changes in supply and demand and to differences in customer segments. Sales promotions encourage
consumers to try new products instead of always staying with their current ones. They lead to more
varied retail formats, such as the everyday-low-price stores or the promotional-pricing stores, which
give consumers more choice. Finally, sales promotions lead to greater consumer awareness of prices,
and consumers themselves enjoy the satisfaction to taking advantage of price specials.
Major sales promotion tools
Many tools can be used to accomplish sales promotion objectives. The promotion planner should
consider the type of market, the sales promotion objectives, the competition and the costeffectiveness of each tool. Descriptions of the main consumer and trade promotion tools follow.
-Consumer promotion tools
The main consumer promotion tools include sample, coupons, cash refunds, price packs, premiums,
advertising specialties, patronage rewards, point-of-purchase displays and demonstrations, and
contests, sweepstakes and games. Samples are offers of trial amount of a product. Sampling is the
most effective, but most expensive, way to introduce a new product. Consumer packaged-goods
marketers tend to use sampling as part of their promotion strategy. Some samples are free; for others,
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the company charges a small amount to offsets its cost. The sample might be delivered door to door,
sent by mail, handed out in a store, attached to another product or featured in an ad.
Coupons are certificates that give buyers a saving when they purchase specified products. They can
stimulate sales of a mature brand or promote early trial of a new brand. However, when used
excessively, they result in coupon clutter and a decline in redemption rates. Thus, most major
consumer goods companies are issuing fewer coupons and targeting them more carefully. They are
also cultivating new outlets from distribution coupons, such as supermarket shelf dispensers,
electronic point-of-sale coupons printers or through ‘paperless coupon systems’ that dispense
personalized discount to targeted buyers at the checkout counter in stores.
Cash refund offers (or rebates) are like coupons except that the price reduction occurs after the
purchase rather than at the retail outlets. The consumer sends a ‘proof of purchase’ to the
manufacturer, which then refunds part of the purchase price by mail. Price packs or reduced prices
offer consumers savings off the regular price of a product. The reduced prices are marked by the
producer directly on the label or package.
Price packs can be single packages sold at a reduced price (such as two for the price of one) or two
related products banded together (such as a toothbrush and toothpaste). Price packs are very effective
even more so than coupons – in stimulating short-term sales.
Premiums are goods offered either free or at low cost as an incentive to buy a product. A premium
may come inside the package (in-pack) or outside the package (on-pack) or through the mail.
Premiums are sometimes mailed to consumers who have sent in a proof of purchase, such as a box
top. A self-liquidating premium is a premium sold below its normal retail price to consumers who
request it.
Advertising specialties are useful articles imprinted with an advertiser’s name and given as gifts to
consumers. Typically items include pens, calendars, key rings, matches, shopping bags, T-shirts, caps
and coffee mugs. Patronage rewards are cash or other awards offered for the regular use of a certain
company’s products or services. For example, airlines offer ‘frequently flyer plans’, awarding points
for miles traveled that can be turned in for free airline trips. Hotels have adopted ‘honourned guest’
plans that award points to users of their hotels. And supermarkets and retailers issue ‘reward point’,
which translate into cash-off for certain, company products.
Point-of-purchase (POP) promotions include displays and demonstrations that take place at the point
of purchase or sale. Unfortunately, many retailers do not like to handle the hundreds of displays, sign
and posters they receive form manufacturers each year. Manufacturers have responded by offering
better POP materials, trying them in with television or print messages, and offering to set up them up.
Competitions, sweepstakes, lotteries and games give consumers the chance to win something, such as
cash, trips or goods, by luck or through extra effort. A competition calls for consumers to submit an
entry – a jingle, slogan, guess or suggestion – to be judged by a panel that will select the best entries.
A sweepstakes calls for consumers to submit their names for a draw. For lottery, consumers buy
tickets, which enter their names into a draw. A game presents consumers with something, such as
bingo numbers or missing letters, everytimes they buy, which may or may not help them win a prize.
A sales contest urges dealers and sales force to increase their efforts, with prizes going to the to
performances.
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Sales promotion in Europe
The sales promotion industry is relatively more developed in the Untied Kingdom than in the their
EU member states. Supermarkets retailing in the United Kingdom is dominated by a few key players
and decisions regarding acceptance of manufacturers’ sales promotion activities are centralized. Cost
effectiveness is increased as the sales promotion handling house is able to use the retailing groups’
own administrative processes.
Cultural differences affect consumers’ acceptance of different sales promotion techniques. An
incentives that is desirable in one country may have little appeal in another. Household items,
especially electrical goods, are very popular in Germany. Beach towels, sunglasses ad T-shirts are
more popular in Spain ad Portugal, while in France, it is pens, lighters and watches. In Italy, brand
association is important – if the merchandise features a designer name, a recognized brand name or a
football club, the chance are that it will be well received. Like advertising, sales promotion techniques
also face from legal constraints. Other Europe. In the UK, sales promotion activities are relatively
free from legal constraints. Other countries like Poland, Hungary and the Czech Republic have
relatively liberal policies on promotions and incentives. By contrast, legal controls re stricter in
Belgium, Germany, France and, notably so, in Norway.
An important part of the European Commission’s efforts to build a single market is to reduce the
myriad different national barriers to sales promotions through the introduction of new rules to free up
restrictive regulations. Arguably, liberalizing promotional offers – currently worth more than 40%
billion a year across the EU – would boost the retail sector. In essence, the Commission’s radical
reforms include scrapping all limits on promotional discount, free gifts and promotional offers, better
information on promotional games to be provided to participating consumers, and the harmonizing of
rules on promotional games such as scratch cards across the EU.
Countries that favour tighter promotional legislation claim they have consumers’ interests at heart, as
restriction on promotional offers are in important way of protecting consumers from unscrupulous
retailers. Proponents of greater liberalization, however, argue that increased regulation makes it more
difficult for consumers as less information is made available. The Commission believes that there is
urgent need to break down the barriers to marketing goods across the EU. Doing so will serve
consumer interests as well as prevent unfair trade practices.
However, the extent to which directives can truly protect consumers is now a hotly debated issue as
sellers turn increasingly to the Web to market products and services.
For now, the European Commission continues in its efforts to free up restrictive regulations on sales
promotions across the enlarged EU. Until true harmonization is achieved, marketers must remain
sensitive and adapt accordingly to national constraints. Even if sales promotion rules are harmonized
and pan-European campaigns are used, the cultural, linguistic and climatic differences across
countries mean that such campaigns, based on a central or core theme, will have to be adapted to
favour conditions in each territory. Ingenuity can help agencies to create pan-European sales
promotions, with only slight adaptations in each country.
Trade promotion tools
Trade promotion can persuade retailers or wholesalers to carry a brand, give it shelf space, promote it
in advertising and push it to consumers. Shelf space is so scarce these days that manufacturers often
have to offer price discount, allowances, buy-pack guarantees or free goods to retailers and
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wholesalers to get other shelf and, once there, to stay on it. Manufacturers use several trade promotion
tools. Many of the tools used for consumer promotions- contests, premiums, displays – can also be
used as trade promotions. Alternatively, the manufacturer may offer a straight discount off list price
on each case purchased during a stated of time (also called a price-off, off-invoice or off-list). The
offer encourages dealers to buy in quantity or to carry a new item.
Dealers can use the discount for immediate profit, for advertising or for price reductions toothier
customers. Manufacturers may also offer an allowance (usually so much off per case) in return for the
retailer’s agreement to feature the manufacturer’s product in some way. An advertising allowance
compensates retailers for advertising for product.
A display allowance compensates them for using special displays.
Manufacturers may offer free goods, which are extra cases of merchandise to intermediaries that buy
a certain quantity or that feature a certain flavour or size. They often offer push incentives – cash or
gifts to dealers or their sales force to ‘push’ the manufacturer’s goods. Manufacturers may give
retailers free specialty advertising items that carry the company’s name, such as pens, pencils, coffee
mugs, calendars, paperweights, matchbooks and memo pads.
Business promotion tools
Companies spend huge sums of money each year on promotion to industrial customers. These
business promotions are used to generate business leads, stimulates purchases, reward customers and
motivate salespeople. Business promotion includes many of the same tools used for consumer or
trade promotions. Here, we focus on two of the main business promotion tools – conventions and
trade shows, and sales contests.
Conventions and trade shows
Many companies and trade associations organize conventions and trade shows to promote their
products. Firms selling to the industry show their products at the trade show. Vendors receive many
benefits, such as opportunities to find new sales leads, contact customers, introduce new products,
meet new customers, sell more to resent customers and educate customers with publications and
audiovisual materials.
Trade shows also help companies reach many prospects not reaches through their sales forces. A
high proportion of a trade show’s visitors see a company’s salespeople for the first time at a show.
Business managers face several decisions, including which trade shows to participate in, how much to
spend on each trade show, how to build dramatic exhibits that attract attentions, and how to follow up
on sales leads effectively.
Sales contests
A sales contest is a contest for salespeople or dealers to urge their sales force to increase their efforts
over a given period. Sales contests motivate and recognize good company performers, who may
receive trips, cash prizes or other gifts. Sales contests work best when they are tied to measurable and
achievable sales objectives (such as finding new accounts, reviving old account or increasing account
profitability) and when employees believe they have an equal chance of winning. Otherwise,
employees will not take up the challenge.
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Developing the sales promotion programme
The market must make several other decisions in order to define the full sales promotion programme.
First, the marketers must decide on the size of the incentive. A certain minimum incentive is
necessary if the promotion is to succeed; a larger incentive will produce, more sales response. The
marketer must ensure that the promotion genuinely offers extra value and incentives to targets.
Importantly, the promotion must not be misleading, and the firm must have the ability to honour
redemption. If not, the campaign could back fire, exposing the firm to bad publicity, which damages
its reputation and brand image. The marketer must also set conditions for participation. Incentives
might be offered to everyone or only to select groups. Conditions, such as the proof of purchase or
closing date of the offer, must be clearly stated. The marketer must then decide how to promote and
distribute the promotion programme itself. A money-off coupon could e given out in a package, at
the store, by mail or in advertising. Each distribution method involves a different level of reach and
cost. Increasingly, marketers are blending several media into a total campaign concept.
The length of the promotion is also important. If the sales promotion period is too short, many
prospects (who may not be buying that time) will miss it. If the promotion runs for too long, the deal
will lose some of its ‘act now’ force.
The marketer also must decide on the response mechanism: that is, the redemption vehicle to be used
by the customer who takes part in the promotion. Immediate reward – for example, a price reduction,
or a free gift attached to the product on offer – often yields a higher response. If the incentive
requires further action to be taken by the consumer – for instance, to make another purchase or to
collect the required number of tokens in promotion packs and then put these off to claims a gift or
free product – the redemption rate can be reduced.
Whenever possible, sales promotion tools should be pre-tested to find out whether they are
appropriate and the right incentive size. Consumer sales promotions can be pre-tested quickly and
inexpensively. From example, consumers can be asked to rate or rank different possible promotions,
or promotions can able tried on a limited basis in selected geographic areas.
Companies should prepare implementation plans for each promotion, covering led time and sell-off
time. Lead-time is the time necessary to prepare the programme before launching it. Sell-off time
begins with the launch and ends when the promotion ends.
Evaluation is also very important. Many companies fail to evaluate their sales promotion
programmes, while others evaluate them only superficially. The most common evaluation method is
to compare sales before, during and after a promotion. Suppose a company has a Module 6 per cent
market share before the promotion, which jumps to 10 per cent during the promotion, falls to 5 per
cent right after and rises to 7 per cent later on. The promotion seems to have attracted new tries and
more buying from current customers. After the promotion, sales fall as consumers use up their
stocks. The long-run rise to 7 per cent means that the company gained some new users. If the
brand’s share has returned to the old level, then the promotion would have changed only the timing of
demand rather than the total demand.
Consumers research would also show the kinds of people who responded to the promotion and what
they did after it ended. Survey can provide information on how many consumers recall the
promotion, what they thought of it, how many took advantage of it and how it affected their buying.
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Sales promotions can also be evaluated through experiments that vary factors such as incentive value,
timing, duration and distribution method.
Clearly, sales promotion plays an important role in the total promotion mix. To use it well, the
marketer must define the sales promotion objectives, select the best tools, design the sales promotion
programme, pre-test and implement the programme, and evaluate the results. Moreover, sales
promotion must be coordinated carefully with other promotion mix elements within the integrated
marketing communications programme.
Public relations
Another important mass-promotion technique is public relations. This concerns building good
relations with the company’s various publics by obtaining favourable publicity, building up a good
‘corporate image’ and handling or heading off unfavourable rumours, stories and events. Public
elations (PR) departments perform any or all of the following function:
 Press relations or press agency. Creating and placing newsworthy information in the news media
to attract attention to a person, product or service.
 Product publicity. Publicizing specific products.
 Public affairs. Building and maintaining local, national and international relations.
 Lobbying. Building and maintaining relations with legislators and government officials to
influence legislation and regulation.
 Investor relations. Maintaining relationships with shareholders and others in the financial
community.
 Development. Public relations with donor or members of non-profit organizations to gain
financial or volunteer support.
Public relations is used to promote products, people, places, ideas, activities, organizations and even
nations. Trade associations have used public relations to rebuild interest in declining commodities
such as eggs, apples, milk and potatoes. Even nations have used public relations to attract more
tourists, foreign investment and international support. Companies can use PR to manage their way
out of crisis, as in the case of Johnson & Johnson’s masterly use of public relations t save Tylenol
from extinction after its product-tampering scare.
The role and impact of public relations
Public relations can have strong impact on public awareness at a much lower cost than advertising
can. The company does not pay for the space or time in the media. Rather, it pays for staff to
develop and circulate information and to manage events. If the company develops an interesting
story, several different media could pick it up, having the same effect as advertising that would cost
millions of euros. It would have more credibility than advertising.
Despite its potential strengths, a public relation is often described as a marketing stepchild because of
its limited and scattered use. The public relations department is usually located at corporate
headquarters. Its staff is so busy dealing with various publics – stockholders, employees, legislators,
city official – that public relations programmes to support product-marketing objectives may be
ignored. Moreover, marketing managers and public relations practitioners do not always talk the
same language. Many public relations practitioners see their job as simply communicating. In
contrast, marketing managers tend to be much more interested in how advertising and public relations
affect sales profits.
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This situation is changing, however. Although public relations still only a small portion of the overall
marketing budgets of most firms, PR is playing an increasingly important brand-building role as more
and more businesses view good public relations as a powerful brand-building tool. In fact, two wellknown marketing consultants have concluded that advertising doesn’t build brands, PR does.
In their book The Fall of Advertising and Rise of PR, the consultants Al, and Laura Ries assert that
the era of advertising is over, and that public relations is quietly becoming the most powerful
marketing communications tools. Although most marketers don’t go this far, the point is a good one.
Advertising and public relations should work hand in hand to build and maintain brands.
Major Public Relations Tools
PR professionals use several tools. One essential tool is news. PR professionals find or create
favourable news about the company and its product or people. Sometimes news stories occur
naturally. At other times, the PR person can suggest events or activities that would create news.
Speeches also create product and company publicity. Increasingly, company executives must field
questions form the media or give talks at trade associations or sales meetings. These events can either
build or hurt the company’s image.
Another common PR tool is special events, ranging from news conferences, press tours, grand
openings and firework displays to laser shows, hot-air balloon releases, multimedia presentations and
star-studded spectaculars, or educational programmes designed to reach and interest target publics.
Richard Branson, the chief executive of Virgin Group, offers a good example of a practitioner who
has perfected the art of deploying both speeches and special events for self – and corporate
promotion.
Public relations people also prepare written materials to reach and influence their target markets.
These materials include annual reports, brochures, articles and company newsletter and magazines.
Audiovisual materials, such as film, slide-and-sound pogrammes and video and audio cassettes, are
being used increasingly as communication tools.
Corporate-identity materials also help create a corporate identity that the public immediately
recognizes. Logos, stationery, brochures, signs, business forms, business cards, buildings, uniforms
and even company cars and trunks make effective marketing tools when they are attractive,
distinctive and memorable.
Finally, companies might improve public goodwill by contributing money and time to public service
activities: campaigns to raise funds for worthy causes – for example, to fight illiteracy, support the
work of a charity, or assist the aged and handicapped – help to raise public recognition.
Sponsorship is any vehicle through which corporations gain public relations exposure. Corporate
sponsorships have become an important promotional tool for companies looking to lift their brand
image, or introduce new product lines or services. Worldwide spending in sponsorships totaled
$24bn in 2002, an annual increase of 3.4 per cent, according to IEG, a Chicago-based research
company, while with US the figure totaled almost $10bn. Some companies have used sponsorship as
a strategic promotional tool to build brand image or launch new products and services. Witness, for
example, Samsung, which has successfully joined a small but distinguished brand of Olympic
sponsors. By focusing its sponsorship activities on a few premium global events such as the
Olympics, the company turned the Samsung name into a desirable global brand.
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A company’s website can also be a good public relations vehicle. Consumers and members of other
publics can visit the site for information and entertainment. Website can also be ideal for handling
crisis situations. As more and more people look to hate Net for information, a ‘web’ of opportunity
now unfolds for public relations.
Company websites are now used to post testimonials from satisfied buyers, to make new product
announcements and to allow the organization to respond publicly to events, particularly crises, swiftly
and to a broad audience at relatively low cot. The direct-to-consumer nature of corporate websites
means that firms’ PR departments and their agencies have greater control over the message to be
communicated. In the pre-Web era, firms would rely on journalists to write ‘stories’ about the
organization, its product or an employee to make the organization or event newsworthy and to win
credibility. One of the most important benefits of using company websites for public relations is a
greater control of message consistency.
Publicity materials can be used to support sales, where appropriate. For example, since an online
press release is going straight to the consumer, rather than journalists, links to sales or customer
enquiries can be made and consumers’ response can be attained instantaneously. The Internet many
change the fundamentals of public relations work. However, the Internet is not a substitute for
journalists and their high-impact editorials. The firm’s online PR efforts have to be supplemented
with direct an face-to-face communications with journalists and to other opinion-formers.
Main public relations decisions
As with the other promotion tools, in consideration when and how to use product public relations,
management should set PR objectives, choose the PR message and vehicles, implement the PR plan
and evaluate the results.
Setting public relations objectives
The objectives for public relations are usually defined in relation to the types of news story to be
communicated, the communication objectives to be achieved (for instance, awareness creation,
knowledge dissemination, generation of specific publicity for target groups) and the specific target
audiences.
Choosing public relations messages and vehicles
Message themes for the public relations exercise should be aligned with the organization’s PR
objectives. In some cases the choice of PR messages and tools will be clear-cut. In others, the
organization has to create the news rather than find it by sponsoring noteworthy events. Creating
events is especially important in publishing fund-raising drives for non-profit organizations. In the
past, fund-raisers have created a large set of special events, ranging from art exhibits, auctions and
dinners, to marathons, walkathons and swimathons.
Implementing the public relations plan
The PR campaign must be implemented with care. For example, a great story is easy to place, but,
unfortunately, most stories are not earth shattering and would not get past busy editors. Thus, PR
professionals have to acquire a good feel for what media editors want to feature in their papers and
magazines as well as establish good relationships with them. They view media editors as a market to
be satisfied so that editors will continue to sue their stories.
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Evaluating public relations results
Public relations results are difficult to measure because PR is used with other promotion tools and its
impact is often indirect. Ideally, the company should measure the change in product awareness,
knowledge and attitude resulting from the publicity campaign. Assessing the change requires
measuring he before-and-after-the-campaign levels of these measures. Finally, sales and profit
impact, if obtainable, is the best measure of public relations effort. If advertising sales promotion
were also stepped up during the period of the PR campaign, their contribution has to be considered.
Increasingly, companies, particularly high-media-profile organizations such as banks, food, chemicals
and pharmaceuticals firms, invest in longer-term media tracking to help public relations managers to
design and implement more effective PR programmes.
They employ specialist media analysis and evaluation agencies or PR consultants to conduct in-depth
media analyses which include coverage in both electronic and print media, and identity issues and
public perceptions about the organization’s reputation, product and services and those of their
competitors, as well as tracking legislative initiatives. They generate ‘management intelligence’ to
determine the effectiveness of an organization’s PR activities and to help forward planning of
communications and customer/public relationship building, including how management should react
in a crisis management situation. Finally, like the other communications tools, public relations,
should be blended smoothly with other promotions activities within the company’s overall integrated
marketing communications effort.
Personal selling and direct marketing
Introduction
The questions in the prelude case reflect some of the critical issues that management must address
when determining sales force strategy and structure. Indeed, the decisions called for are relevant not
only for MD Foods, as in the prelude case, but also for any firm that uses a sales force to help it
market its goods and services.
Personal selling is the interpersonal arm of marketing communications in which the sales force
interacts with customers and prospects to make sales and build relationships. Direct marketing
consists of direct connections with carefully targeted consumers to both obtain an immediate response
and cultivate lasting customer relationships. Actually, direct marketing can be viewed as more than
just a communications tool. In many ways, it constitutes an overall marketing approach – a blend of
communications and distribution channels all rolled into one. As you read on, remember that
personal selling and direct marketing as separate tools, they must be carefully integrated with other
elements of the marketing communication mix.
 Personal selling
Robert Louis Stevenson once noted that ‘everyone lives by selling something’. We are all familiar
with the sales forces used by business organizations to sell products and services to customers around
the world. Sales forces are found in non-profit as well as profit organizations. Churches use
membership committees to attract new members. Hospitals and museums use fund-raisers to contact
donors and raise money. In the first part of this, we examine the role of personal selling the
organization, sales force management decisions and the personal selling process.
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The nature of personal selling
Selling is one of the oldest professions in the worlds. The people who so the selling go by many
names: salespeople, sales representatives, account executives, sales consultants, sales engineers, field
representatives, agents, district managers, marketing representatives and account development reps, to
name a few.
When someone says ‘salesperson’, what image comes to mind? Perhaps its’ the stereotypical
‘traveling salesman’ – the fast-talking, ever-smiling peddler who travels his territory foisting his
wares on reluctant customers. Such stereotypes, however, are sadly out of date. Today, most
professional salespeople are well-educated, well-trained man and women who work to build longterm, value-producing relationships with their customers. They succeed not by taking customers in
but by helping them out – by assessing customer needs and solving customer problems.
The term salesperson covers, a wide range of positions. At one extreme, a salesperson might be
largely an order take, such as a department store salesperson standing behind the counter. At the
other extreme are the order getters, salespeople whose job demands the creative selling of products
and services ranging from appliances, industrial equipment or aeroplanes to insurance, advertising or
consulting services. Other salespeople engage in missionary selling, whereby they are not expected or
permitted to take an order, but only build goodwill or educate buyers. An example is a salesperson
for a pharmaceutical company who calls on doctors to educate them about the company’s drug
products and to urge them to prescribe these products to their patients.
The role of the sales force
Personal selling is the interpersonal arm of the promotion mix. Advertising consists of one-way, nonpersonal communication with target consumer groups. In contrast, personal selling involves two-way
personal communication between salespeople and individual customers – whether face-to-face, by
telephone, through videoconferences or by other means. As such, personal selling can be more
effective than advertising in more complex selling situations. Salespeople can probe customers to
learn more about their problems. They can adjust the marketing offer to fit the special needs of each
customer and can negotiate terms of sale. They build long-term personal relationships with key
decision makers.
The role of personal selling varies from company to company. Some firms have no salespeople at all
for example, organizations that sell only through mail-order catalogues or through manufacturers’
representatives, sales agents or broker. In most firms, however, the sales force plays a major role. In
companies that sell business products, such as ABB or DuPont, the salespeople may be only contact.
To these customers, the sales force is the company. In consumers product companies, such as Adidas
and Unilever, which sell through intermediaries, final consumers rarely, meet salespeople or even
know about them. Still, the sales force plays an important behind-the-scenes role. It works with
wholesalers and retailers to gain their support and to help them to be more effective in selling the
company’s products.
The sales force serves as the critical link between a company and its customers. In many cases,
salespeople serve both masters – the seller and the buyer. First, they represent the company to
customers. They find and develop new customers and communicate information about the
company’s products and services. They sell products by approaching customers, presenting their
products, answering objections, negotiating prices and terms, and closing sales. In addition, they
provide customer services and carry out market research and intelligence work.
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At the same time, salespeople represent customers to the company, acting inside the firm as a
‘champions’ of customers’ interests and managing buyer-seller relationships. Thus, the salesperson
often acts as an ‘account manager’ who manages the relationship between the seller and buyer.
Salespeople relay customer concerns about company products and actions back to those who can
handle them. They learn about customers needs and work with others in the company to develop
greater customer value. The old view was that salespeople should worry about sales and the company
should worry about profit. However, the current view holds the salespeople should be concerned
with more than just producing sales –they should work with others in the company to produce
customer satisfaction and company profit.
As companies move towards a stronger market orientation, their sales forces are becoming more
market focused and customer oriented. Today, organizations expect salespeople to look at sales data,
measure market potential, gather market intelligence and develop marketing strategies and plans.
They should know how to orchestrate the firm’s efforts towards delivering customers value and
satisfaction. A market-oriented rather than a sales-oriented sales force will be more effective in the
long run. Beyond winning new customers and making sales, it will help the company to create longterm, profitable relationships with customers. As such, the company’s sales team can be a central
force in an organization’s relationship marketing programme.
Managing the sales force
We define sales force management as the analysis, planning, implementation and control of sales
force activities. It includes setting sales force objectives, designing sales force strategy and structure,
recruiting, selecting, training, compensating, supervising and evaluating the firm’s salespeople. The
primary sales force management decisions are shown in table. Let us take a look at each of these
decisions next.
Setting sales force objectives
Companies set different objectives for their sales forces. Salespeople usually perform one or more of
the following tasks.
 Prospecting. Finding and developing new customers.
 Communicating. Communicating information about the company’s product and services.
 Selling. Selling products by approaching customers, presenting their products, answering
objections and closing sales.
 Servicing. Providing services to customers (e.g. consulting on problems, providing technical
assistance, arranging finance).
 Information gathering. Carrying out market research and intelligence work, and filling out sales
call reports.
Some companies are very specific about their sales force objectives and activities. For example, a
company may advise its salespeople to spend 80 per cent of their time with current customers and 20
per cent with prospects, and 85 per cent of their time on current products and 15 per cent on new
products. The company believes that if such norms are not set, salespeople tend to spend almost all
of their time selling current products to current accounts and neglect new products and new prospects.
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Figure 8. Major steps in sales force management
Establishing
sales force
objectives
Designing sales
force strategy,
structure and size
Compensating
salespeople
3 Promotional Techniques
Recruiting and
selecting
salespeople
Supervising
salespeople
Training
salespeople
Evaluating
salespeople
Every company competes with other firms to get orders from customers. Thus it must base its
strategy on Designing sales force strategy and structure. Marketing managers face several sales
force strategy and design questions. How should salespeople ad their tasks be structured? How big
should the sales force be? Should salespeople sell alone or work in terms with other people in the
company? Should they sell in the field or by telephone? How should salespeople be compensated?
And how should performance be rewarded where selling tasks are shared across members within the
sales team? We address these issues below.
Sales force strategy
Telephone understanding of the customer buying process. A company can use one or more of several
sales approaches to contact customers. An individual salesperson can talk to a prospect or customer
in person or over the phone, or make a sales presentation to a buying group. Similarly, a sales team
(such as a company executive, a salesperson and a sales engineer) can make a sales presentation to a
buying group. In conference selling, a salesperson brings resource people form the company to meet
with one or more buyers to discuss problems and opportunities. In seminar selling, a company team
conducts an educational seminar about state-of-the-art development for a customer’s technical people.
Often, the salesperson has to act as an account manager who arranges contacts between people in the
buying and selling companies. Because salespeople need help from others in the company, selling
calls for teamwork. Others who might assist salespeople include top management, especially when
big sale are at stake; technical people who provide technical information to customers; customer
service representatives who provide installation, maintenance and other services to customers; and
office staff, such as sales analysts, order processors and secretaries.
Once the company decides on a desirable selling approach, it can use either a direct or a contractual
sales force. A direct (or company) sales force consists of full-or part-time employees who work
exclusively for the company. This sales force includes inside salespeople, who conduct business
form, their offices via or visits form prospective buyers, and field salespeople, who travel to call on
customers.
A contractual sale force consists of manufacturers’ reps, sales agents or brokers who are paid a
commission based on their sales.
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Sales force structure
Sales force strategy influences the structure of the sales force. A company can divide up sales
responsibilities along any of several lines. The decision is simple if the company sells only one
product line to one industry with customers in many locations. In that case the company would use a
territorial sales force structure.
Territorial sales force structure
In the territorial sales force structure, each salesperson is assigned to an exclusive geographic area and
sells the company’s full line of products or services to all customers in that territory. This
organization clearly defines the salesperson’s job and fixes accountability. It also increases the
salesperson desire to build local business relationships that, in turn, improve selling effectiveness.
Finally, because each salesperson travels within a small geographic area, travel expenses are
relatively small.
Product sales force structure
Salespeople must know their products, a task that is not easy if the company’s products are numerous,
unrelated and technically complex. This, together with the growth of product management has led
many companies to adopt a product sales force structure, in which the sales force sells along product
lines. For example, Kodak uses different sales forces for its film products and its industrial products.
Their film products sales force deals with simple products that are distributed intensively, whereas the
industrial products sales force deals with complex products that require technical understanding. The
product structure can lead to problems, however, if a given customer buys many of the company’s
products. For example, a hospital supply company may have several product divisions, each with a
separate sales force. Several salespeople might end up calling on the same hospital on the same day.
This means that they travel over the same routes and wait to see the same customer’s purchasing
agents. These extra costs must be measured against the benefits of better product knowledge and
attention to individual products.
Customer sales force structure
More and more companies are using a customer sales force structure, whereby they organize the sales
force along customer or industry lines. Separate sales forces may be set up for different industries,
for serving current customers versus finding new ones, and for large accounts versus regular accounts.
Organizing its sales force around customers can help a company to become more customer focused.
For example, giant ABB, the Swiss-based industrial equipment maker, changed from a product-based
to a customer-based sales force. The new structure resulted in a stronger customer orientation and
improved service to clients.
Complex sales force structures
When a company sells a wide variety of products to many types of customer over a broad
geographical area, it often combines several types of sales force structure. Salespeople can be
specialized by customer and territory, by product and territory, by product and customer, or by
territory, product and customer. A salesperson might then report to one or more line and staff
managers. No single structure is best for all companies and situations. Each organization should
select a structure that best serves the needs of its customers and fits its overall marketing strategy.
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Sales force size
Once the company has set its strategy and structure, it is ready to consider sales force size.
Salespeople constitute one of the company’s most productive – and most expensive – assets.
Therefore, increasing their number will increase both sale and costs. The past few years have seen a
reduction in sales force size. Advances in selling technology, such as selling on the Internet or the
use of account management software, make salespeople more efficient in handling customers and can
even replace salespeople altogether.
Many companies use some form of workload approach to set sales force size. The company groups
accounts according to size, account status or other factors related to the amount of effort required to
maintain them. It then determines the number of salespeople needed to call on them the desired
number of times. The logic is as follows. Suppose we have 1,000 Type-A accounts each requiring
3Module 6 calls per year, and 2,000 Type-B accounts each requiring 12 calls per year. In this case,
the sales fore’s workload, as defined by the number of calls it must make per year, is Module 6 0,000
calls (3Module 6 ,000 + 24,000). Suppose our average salesperson can make 1,000 calls a year. The
company thus needs Module 6 0 salespeople (Module 6 0,000/1,00).
Other sales force strategy and structure issues
Sale management also have to decide who will be involved in the selling effort and how various sales
and sales support people will work together.
Outside and inside sales forces
The company may have an outside sales force (or field sales force), an inside sales force or both.
Outside salespeople travel to call on customers, whereas inside salespeople conduct business from
their offices via telephone or visits from prospective buyers. To reduce time demands on their outside
sales forces, many firms have increased the size of their inside sales team, which includes technical
information an answers to customers’ questions. Sales assistants provide clerical back-up for outside
salespeople. They call ahead and confirm appointments, conduct credit checks, follow up on
deliveries and answer customers’ queries when salespeople cannot be reached. Telemarketers use the
phone to find new leads and qualify prospects for the field sales force or to sell and service accounts
directly.
The inside sales force frees salespeople to spend more time selling to major accounts and finding
major new prospects. Depending on the complexity of the product and customer, a telemarketer can
make 20-30 decision-maker contacts a day, compared to the average of four that an outside
salesperson can make. For many types of product and selling situation, telemarketing can be as
effective as a personal sales call, but much less expensive. For example, whereas a typical personal
sales call can cost well cost well over &200, a routine industrial telemarketing call costs between $5
and $20 depending on the complexity of the call.
Just as telemarketing is changing the way that many companies go to market, the Internet offers
explosive potential for restructuring sales forces and conducting sales operations. More and more
companies are now using the Internet to support their personal selling efforts, ranging from selling
and training salespeople to conducting sales meetings and servicing accounts. Electronic negotiations
re also taking root, with more and more organizations using the Web to conduct sales negotiations.
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E-negotiation has its merits. For a start, the emails last forever. The durability of emails enables
negotiators to keep track of negotiations with each of the half-dozen or more companies involved at
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the same time. A second advantage is the instant record-keeping that e-negotiations entail. Although
the telephone is cheaper and faster and can convey more information that a quickly email, there are
distinct advantages for negotiators using email or electronic sites. The negotiations can be done at
lower cost and at times that is convenient for the parties involved. However, the durability and
immediacy of emails means that each piece of correspondence must be re-read and double-checked to
minimize confusion, misunderstanding and embarrassment. It is much more difficult for the
negotiator to retract information or ‘emotions’ once he or she has ‘hit the send button’. Experts urge
e-negotiators to heed the lessons learnt by every Victorian letter-writer – the bet policy is: ‘when in
doubt, leave it overnight’. There is no better filter to apply to an angry note than a good night’s sleep.
Team selling
As products become more complex, and as customers grow larger and more demanding, a single
salesperson simply can’t handle all of a large customer’s needs. Instead, most companies are now
using team selling to service large, complex accounts. Companies are finding that sales teams can
unearth problems, solutions and sales opportunities that no individual salesperson could. Such teams
might include people from any area or level of the selling firm – sales, marketing, technical and
support services, R&D, engineering, operations, finance and others. In team selling situations, the
salesperson shifts from ‘soloist’ to ‘orchestrator’ who helps coordinate a whole-company effort to
build profitable relationships with key customers.
Team selling does have its pitfalls. Selling teams can confuse and overwhelm customers who are used
to working with only one salesperson. Salespeople who are used to having customers all to
themselves may have trouble learning to work with and trust others on a team. Finally, difficulties in
evaluating individual contributions to the team selling effort can create some sticky compensation
issues.
Key account management
Continuing relationships with large customers dominate the activities of many sales organizations.
For makers of fast-moving consumer goods such as Procter & Gamble, Unilever and Donane, the
relationships is with major retailers such as Tengelmann, Carrefour, Tesco or Ahold. The importance
of these retailers has changed the way marketing as a whole is being organized. Account managers
often orchestrate the relationship with a single retailer, although some will manage several smaller
retailers or a group of independent outlets. Any major retailer will probably always be carrying major
manufacturers’ brands, so the account manager’s role is one of increasing the profitability of sales
through the channel. In this arrangement a great of sales promotions effort and advertising is
customized for retailers that want exclusive lines or restrict the sort of promotions that they accept.
The situation is very similar in industrial sales organizations when a supplier has to sell components,
raw materials, suppliers or capital equipment in the concentrated markets. Even when a prospect is
not a client, there are regular contacts at all levels between the organizations. When the client or
prospects is particularly important, key account managers are responsible. These aim for a mutually
beneficial relationship between the seller and buyer. The buyer benefits from traceability of supplies
smart purchasing, and lean supply and facilities management, while the seller gain market knowledge
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and profitable sales. In most companies, account mangers are like brand managers in not having
formal or informal teams working for them. This means the key account managers compete for the
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resources to serve their client. Their role is to maintain smooth but creative relationships between the
buying and selling teams.
Recruiting and selecting salespeople
At the heart of any successful sales force operation is the recruitment and selection of good
salespeople. The performance difference between an average salesperson and a top salesperson can
be substantial. In a typical sales force, the top 30 per cent of the salespeople might bring Module 6 0
per cent of the sales. Thus careful salesperson selection can greatly increase overall sales force
performance.
Beyond the differences is sales performance, poor selection results in costly turnover. When a
salesperson quits, the costs of finding and training a new salesperson, plus the costs of lost sales, can
be very high. Also, a sales force with many new people is less productive than one with a stable
membership.
What are the traits of a good salesperson?
Selecting salespeople would not be a problem if the company knew what traits spell surefire sales
success. If it knew that good salespeople were outgoing, aggressive and energetic, for example, it
could simply check applicants for thee characteristics. Many successful salespeople, however, are
also bashful, soft-spoken and laid back.
One survey suggests that good salespeople have a lot of enthusiasm, persistence, initiative, selfconfidence and job commitment to sales as a way of life and have a strong customer orientation.
Another study suggests that good salespeople are independent and self-motivated and are excellent
listeners. Still another study advises that salespeople should be a friend to the customer as well as
persistent, enthusiastic, attentive and, above all, honest. They must be internally motivated,
disciplined, hard working and able to build strong relationships with customers. Still other studies
suggest that good salespeople are team players, not loners.
When recruiting, companies should analyze the sale job itself and the characteristics of the most
successful salespeople to identify the traits needed by a successful salesperson in their industry. Does
the job require a lot of planning and paperwork? Does it call for much travel? Will the salesperson
face a lost of rejections? Will the salesperson be working with high-level buyers? The successful
sales candidate should be suited to these duties.
Recruiting procedures and selection
After management has decided on needed traits, it must recruit the desired candidate. The human
resources department looks for applicants by getting names form current salespeople, using
employment agencies and placing classified ads. Another source is to attract top salespeople from
other companies. Proven salespeople need less training and can be immediately productive.
Recruiting will attract many applicants, from which the company must select the bet. The selection
procedure can vary form a single informal interview to lengthy testing and interviewing. Many
companies give formal tests to sales applicants. Tests typically measure sales aptitude, analytical and
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organizational skills, personality traits and other characteristics. Test results count heavily in
companies such as IBM, Prodential, Procter & Gamble and Gillette. Gillette, for example, claims
that tests have reduced turnover by 42 per cent and that test scores have correlated well with the late
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performance of new salespeople. But test scores provide only one piece of information in a set that
includes personal characteristics, references, past employment history and interviewer reactions.
Training salespeople
New salespeople may spend anything from a few weeks or months to a year or more in training. The
average initial training period is four months. Then, most companies provide continuous sales
training via seminars, sales meetings and the Web throughout the salesperson’s career. Training
programmes have several goals. Salespeople need to know and identify with the company, so most
companies spend the first part of the training programme describing the company’s history and
objectives, its organizations, is financial structure and facilities, and its chief products and markets.
Because salespeople also need to know the company’s products, sales trainees are shown how
products are produced and how they work. They also need to know the characteristics of competitors
and customers, including distributors, so the training programme teaches them about competitor’s
strategies and about different type of customer an their needs, buying motives and buying habits.
Because salespeople must know how to make effective presentations, they are trained in the
principles of selling. Finally, salespeople need to understand field procedures and responsibilities.
They learn how to divide time between active and potential accounts and how to use an expense
account, prepare reports and route communications effectively.
Compensating salespeople
To attract salespeople, a company must have an attractive compensation plan. The plans vary greatly
both by industry and by companies within the same industry. Compensation is made up of several
elements – a fixed amount, a variable amount, expenses and fringe benefits. The fixed amount,
usually a salary, gives the salesperson some stable income. The variable amount, which might be
commissions or bonuses based on sale performance, rewards the salesperson for greater effort.
Expense allowance, which repays salespeople for job-related expenses, let salespeople undertake
needed and desirable selling efforts. Fringe benefits, such as paid vacations, sickness or accident
benefits, pensions and life insurance, provide job security and satisfaction. Management must decide
what mix of these compensation elements makes the most sense for each sales job.
Different combinations of fixed and variable compensation give rise to four basic types of
compensation plans – straight salary, straight commission, salary plus bonus and salary plus
commission. The sales force compensation plan can both motivate salespeople and direct their
activities. If sales management wants salespeople emphasize new account development, it might pay
a bonus of opening new accounts. Thus, the compensation plan should direct the sales force towards
activities that are consistent with overall marketing objectives.
Table 1. shows how a company’s compensation plan should reflect its overall marketing strategy. If
the overall marketing strategy is to grow rapidly and gain market share, the compensation plan should
be to reward high sales performance and new-account development. In contrast, if the marketing goal
is to maximize profitability of current accounts, the compensation plan might contain a larger base
salary component, with additional incentives based on current account sales and customer
satisfaction. In fact, more and more companies are moving away from high-commission plans that
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may drive salespeople to make short-term grabs for business. They may even ruin a customer
relationship because they were pushing too hard to close a deal. Instead, companies are designing
compensations plans that rewards salespeople from building customer relationships and growing the
long-run value of each customer.
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Table 1. The relationship between overall marketing strategy and sales force compensation
STRATEGIC GOAL
To gain market
Share rapidly
To solidify market
leadership
To maximize profitability
Ideal salesperson
An independent selfStarter
a competitive problem
problem
a team player
a relationship manager
Sales focus
deal making
Sustained
High effort
to capture accounts
To reward high
Performance
consultative selling
Account penetration
to reward new and existing
account sales
to manage the product mix
to encourage team selling
to reward account management
Compensation role
Supervising salespeople
New salespeople need more than a territory, compensation and training – they need supervision.
Through supervision, the company directs and motivates the sales force to do a better job.
Directing salespeople
How much should sales management be involved in helping salespeople manage their territories? It
depends on everything form the company’s size to the experience of its sales force.
Developing customer target and call norms
Companies vary in how closely they supervise their salespeople. Many help their salespeople in
identifying customer target and setting call norms. Companies often specify how much time their
sales force should spend prospecting for new accounts and set other time management priorities. If
left alone, many salespeople will spend most of their time with current customers, which are betterknown quantities. Moreover, whereas a prospect may never deliver any business, salespeople can
depend on current accounts for some business. Therefore, unless salespeople are rewarded for
opening new accounts, they many avoid new-account development.
Using sales time efficiently
Companies also direct salespeople in how to use their time efficiently. One tool is the annual call
schedules which shows which customers and prospects to call on in which months and which
activities to carry out. Activities include taking part in trade shows, attending sales meetings and
carrying out marketing research. Another tool is time-and-duty analysis. In addition to time spent
selling, the salesperson spends time traveling, waiting, eating, taking breaks and doing administrative
chores. This can be done by getting salespeople to use phones instead of traveling, simplifying
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record-keeping forms, finding better call and routing plans, and supplying more and better customer
information.
Many firms have adopted sales force automation systems; computerized sales force operations for
more efficient order-entry transactions, improved customer service and better salesperson decisionmaking support. Salespeople use computers to profile customers and prospects, analyze and forecast
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sales, manage accounts, schedule sales calls, enter orders, check inventories and order status, prepare
sales and expense reports, process correspondence and carry out many other activities. Sales force
automation not only lowers sales force calls and improves productivity; it also improves the quality of
sales management decisions.
Perhaps the fastest-growing sales force technology tool is the Internet. As more and more
organizations and individuals embrace Internet technology, salespeople are using the Internet
regularly in their daily selling activities. The most common uses include gathering competitive
information, monitoring customer websites and researching industries and specific customers. As
more and more companies provide their salespeople with Web access, experts expect continued
growth in sales force Internet usage.
Motivating salespeople
Beyond directing salespeople, sale managers must also motivate them. Some salespeople will do
their best without special urging from management. To them, selling may be he most fascinating job
in the world. But selling can also be frustrating. Salespeople usually work alone, and they must
sometimes travel away from home. They may face aggressive, competing salespeople and difficult
customers. They sometimes lack the authority to do what is needed to win a sale and may thus lose
large orders that they have worked hard to obtain.
Therefore, salespeople often need special encouragement to do their best. Management can boost
sales force morale and performance through its organizational climate, sales quota and positive
incentives.
Organizational climate
Organizational climate reflects the feeling that salespeople have about their opportunities, value and
rewards for good performance. Some companies treat salespeople as if they are not very important,
and performance suffers accordingly. Other companies treat their salespeople as valued contributors
and allow virtually unlimited opportunity for income and promotion. Not surprisingly, these
companies enjoy higher sales force performance and less turnover.
Sales quotas
Many companies motivate their salespeople by setting sales quotas – standards stating the amount
they should sell and how sales should be divided among the company’s products. Compensation is
often related to how well salespeople meet their quotas.
Positive incentives
Companies also use various positive incentives to increase sales force effort. Sales meetings provide
social occasions, breaks from routine, chances to meet and talk with ‘company brass’, and
opportunities to air feelings and to identify with a larger group. Companies also sponsor sales
contests to spur the sales force to make a selling effort above what would normally be expected.
Other incentives include honours, merchandise and cash awards, trips and profit-sharing plans.
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Evaluating salespeople
So far we have described how management communicates what salespeople should be doing and how
it motivates them to do it. This process requires good feedback, which means getting regular
information from salespeople to evaluate their performance.
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Sources of information
Management gets information about its sales people in several ways. The most important sources is
the sales report, including weekly or monthly work plans and longer-term territory marketing plans.
The work plan describes intended calls and routing, which provide management with information on
the salespeople’s whereabouts, and provides a basis for comparing plans and performance. The
annual marketing plans outlines how new accounts will be built and sales from existing accounts
increased.
Salespeople also write up their completed activities on call reports and turn in expense reports of
which they are partly or wholly repaid. Additional information comes from personal observation,
customers’ letters and complaints, customers’ surveys and talks with other salespeople.
Formal evaluation of performance
Using sales force reports and other information, sales management formally evaluates members of the
sales force. Formal evaluation forces management to develop and communicate clear standards for
judging performance. Management must also obtain well-rounded information about each
salesperson. Formal evaluation provides salespeople with constructive feedback, which helps them to
improve future performance and to motivate them to perform well.
We have looked at the key issues surrounding sales fore management – designing and managing the
sales force. Next we turn to the actual personal selling process.
The personal selling process
Personal selling is an ancient art that has spawned a large literature and many principles.
Effectiveness salespeople operate on more than just instinct – they are highly trained in methods of
territory analysis and customer management. Effective companies take a customer-oriented approach
to personal selling. They train salespeople to identify customer needs and solutions. This approach
assumes that customer needs provide sales opportunities, that customers appreciate good suggestions
and that customer will be loyal to salespeople who have their long-term interests at heart. By
contrast, those companies that use a sales-oriented approach rely on high-pressure selling techniques.
They assume that the customers will not buy except under pressure, that they are influenced by a slick
presentation and that they will not be sorry after signing the order (and that, even if they are, it no
longer matters).
Steps in the selling process
Most training programmes view he selling process as consisting of several steps that the salesperson
must master. These steps focus on the goal of getting new customers and obtaining orders from them.
However, many salespeople spend much of their time maintaining existing accounts and building
long-term customer relationship aspect of the personal selling process in a later section.
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Figure 9. Major steps in effective selling
Prospecting and
qualifying
Pre-approach
Handling
objections
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Approach
Closing
Presentation
and
demonstration
Follow-up
Prospecting and qualifying
The first step in the selling process is prospecting – identifying qualified potential customers. The
salesperson must approach many prospects to get just a few sales. Although the company supplies
some leads, salespeople need skill in finding their own. They can ask current customers for referrals.
They can build referral sources, such as suppliers, dealers, non-competing salespeople and bankers.
They can join organizations, to which prospects belong, or can engage in speaking and writing
activities that will draw attention. They can search or names in newsletters or directories and use the
telephone and post to track down leads. Or they can drop in unannounced on various offices (a
practice known as ‘cold calling’). Salespeople need to know how to qualify leads: that is, how to
identify the good ones and screen out the poor ones. Prospects can be qualified by looking at their
financial ability, volume of business, special needs, location and possibilities for sales growth.
Pre-approach
Before calling on a prospect, the salesperson should learn as much as possible about the organization
(what it needs, who is involved in the buying) and its buyers (their characteristic and buying styles).
This step is known as the per-approach. The salesperson can consult standard industry and online
sources, acquaintances and others to learn about the company. The salesperson should set call
objectives, which may be to qualify the prospect, to gather information or to make an immediate sale.
Another task is to decide on the best approach, which might be a personal visit, a phone call or a
letter. The best timing should be considered carefully because many prospects are busiest at certain
times. Finally, the salesperson should give thought to an overall sales strategy for the account.
Approach
During the approach step, the salesperson should know how to meet and greet the buyer, and get the
relationship off to a good start. This step involves the salesperson’s appearance, his or her opening
lines and the follow-up remarks. The opening lines should be positive to build goodwill from the
beginning of the relationship. This opening might be followed by some key questions to learn more
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about the customer’s needs, or by showing a display or sample to attract the buyer’s attention and
curiosity. As in all stages of the selling process, listening to the customer is crucial.
Presentation and demonstration
The presentation is that step in the selling process where the salesperson tells the product ‘story’ to
the buyer, presenting customer benefits and showing how the product solves the customer’s
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problems. The problems-solver salesperson fits better with today’s marketing concept than does a
hard-sell salesperson or the glad-handing extrovert. Buyers today want solutions, not smiles; results,
not razzle-dazzle. They want salespeople who listen toothier concerns, understand their needs and
respond with the right products and services.
Using this need-satisfaction approach calls fro good listening and problem-solving skills. The
qualities that buyers dislike most in salespeople include being pushy, late, deceitful, and unprepared
or disorganized. The qualities they value most include empathy, good listening, honesty,
dependability, thoroughness and follow-through. Great salespeople know how to sell, but more
importantly, they know how to listen and to build strong customer relationships.
Today, advanced presentation technologies allow for full multimedia presentations to only one or a
few people. Audio and video discs (CDs and DVDs), laptop computers with presentation software
and online presentation technologies have replaced the flipchart.
Handling objections
Customers almost always have objections during the presentation or when asked to place an order.
The problem can either logical or psychological, and objections are often unspoken. In handling
objections, the salesperson should use a positive approach, seek out hidden objections, ask the buyers
to clarify any objections, take objections as opportunities to provide more information, and to turn the
objections into reasons for buying. Every salesperson should be trained in the skills of handling
objections.
Closing
After handling the prospect’s objections, the salesperson now tries to close the sale. Some
salespeople do not get around to closing or do not handle it well. They may lack confidence, feel
guilty about asking for the order or fail to recognize the right moment close the sale. Salespeople
should know how to spot closing signals from the buyer, including physical actions, comments and
questions.
For example, the customer might sit forward and nod approvingly or ask about prices and credit
terms. Salespeople can use of several closing techniques. They can ask for the order, review points
of agreement, offer to help write up the order, ask whether the buyer wants this model or that one, or
note that the buyer sill lose out if the order is not placed now. The salesperson may offer the buyer
special reasons to close, such as a lower price or extra quantity at no charge.
Follow-up
The last step in the selling process- follow-up –is necessary if the salesperson wants to ensure
customers satisfaction and repeat business. Right after closing, the salesperson should complete and
details on delivery time, purchase terms and other matters. The salesperson should then schedule a
follow-up call then when the initial order is received to make sure there is proper installation,
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instruction and servicing. This visit would reveal any problems, assure the buyer of he salesperson’s
interest and reduce any buyer concerns that might have arisen since the sales.
International Selling
The typical sales process can be applied in international selling. However, intercultural trade always
requires special efforts in tailoring sales and negotiation approaches.
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Personal Selling and Customer Relationship Management
The principles of personal selling as described are transaction oriented, in that their aim is to help
salespeople close a specific sale with a customer. But in many case, the company is not seeking
simply a sale: it has targeted a major customer that if would like to win and keep. The company
would like to show the customer that it has the capabilities to serve the customer over the long haul,
in a mutually profitable relationship. The sales force usually plays an important role in building and
managing long-term customer relationships.
More companies today are moving away form transaction marketing, with its emphasis on making a
sale. Instead, they are practicing relationship marketing, which emphasizes maintaining profitable
long-term relationships with customers by creating superior customer value and satisfaction. They
realize that, when operating in maturing markets and facing stiffer competition, it costs a lot more to
wrest new customers form competitors than to keep current ones.
Today’s large customers favour suppliers who can sell and deliver a coordinated set of products and
services to many locations, and who can work closely with customers teams to improve products and
processes. For these customers, the first sale is only the beginning of the relationship.
Unfortunately, many companies are not set up for these developments. They often sell their products
through separate sales forces, each working independently to close sales. Their technical people may
not be willing to lend time to educate a customer. Their engineering, design and manufacturing
people may have the attitude that ‘it’s our job to make good products and the salesperson’s to sell
them to customers’. However, the more successful companies recognize that winning and keeping
accounts requires more than making good products and directing the sales force to close lots of sales.
It requires a carefully coordinated, whole-company effort to create value-laden, satisfying
relationships with important customers. Relationship marketing is based on the premise that
important accounts need focused and ongoing attention. Studies have shown that the best salespeople
are those who are highly motivated and good closers, but more than this, they are customer-problem
solvers and relationships builders.
Salespeople working with key customer-problem solvers and relationship builders. Salespeople
working with key customers must do more than call when they think a customer might be ready to
place an order. They also study the account and understand its problems. They call or visit frequently,
work with the customers to help solve the customer’s problems and improve its business, and take an
interest in customer to help solve the customer’s
Companies may take care of customers by offering them gifts, free entertainment or corporate
hospitality. Freebies, such as a calendar or a fountain pen carrying the supplier’s logo, are usually
accepted by clients without a second thought. A nice dinner merely to build client relations or to keep
in touch with a valued customer rarely raises an eyebrow. Corporate entertaining or hospitality is an
expected part of business life.
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Some managers argue that corporate entertaining serves a purpose. The idea is to get the client out
for a good time and to make them feel good about the company in the hope that the client will receive
the company’s sales representatives ahead of the competition. Furthermore, a night at the theatre or
opera, with a ticket for an accompanying partner, is useful when overseas visitors need to be
entertained in the evening.
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Weekend outings for clients and potential customers allow the company to buy a little of a contact’s
private time to talk about business. In some business cultures (e.g. Japan, Malaysia, Thailand and
most countries in the far East), offering and accepting hospitality is part of work and often seen as a
way of establishing relationships.
However, corporate hospitality can be costly. At top sporting events – such as the football Cup Final
at Wembley, or a day at Epsom for the horse racing – the cost would be astronomical. It costs
something upwards of &1,500 per hand to entertain at the Wimbledon men’s tennis finals. And don’t
ask what a meal for four in a Tokyo geisha club would amount to. Nevertheless, businesses will
spend that amount of money if they have big international customers coming into the city to talk over
deals that are worthy millions of pounds. So, when does an all-expenses-paid golfing trip, a free
weekend in Paris or a case of finest Moet & Chandon stop being part of corporate life and begin to
look like sleaze? What should businesspeople do when faced with freeloading opportunities? In the
absence of clear corporate or standard guidelines, how would managers decide whether a gift, meal or
trip is acceptable or sleazy?
The importance of relationship marketing is now widely recognized. Companies find hat they earn a
higher return from resources invested in retaining customers than from money spent to attract new
ones. Increasingly, companies also recognize the importance of establishing strategic partnerships
with valued customers, making skilled relationship marketing essential.
Direct marketing
Today, however, with the trend towards more narrowly targeted or one-to-one marketing, many
companies are adopting direct marketing, either as a primary marketing approach or as a supplement
to other approaches. Increasingly, companies are using direct marketing to reach carefully targeted
customers more efficiently and to build stronger, more personal, one-to-one relationships with them.
In this section, we explore the exploding world of direct marketing.
Direct marketing consists of direct communications with carefully targeted individual customers to
obtain an immediate response and cultivate lasting customer relationships. Direct marketers
communicate directly with customers, often on a one-to-one, interactive basis. Using detailed
database, they tailor their marketing offers and communications to the needs of narrowly defined
segments or even individual buyers. Beyond brand and image building, they usually seek a direct,
immediate and measurable consumers response. For example, Dell Compute interacts directly with
customers, by telephone or through its websites, to design built-to-order systems that meet customers’
individual needs. Buyers order directly form Dell, who quickly and deficiently delivers the new
computers toothier homes or offices.
The new direct-marketing model
Early direct marketing – catalogue companies, direct mailers and telemarketers – gathered customer
names and sold their goods mainly through the post and by telephone. Today, fired by rapid advances
in database technologies and new marketing media – especially the Internet and other electronic
channels – direct marketing has undergone a dramatic transformation.
Direct marketing can take the form of direct distribution – as marketing channels that contain no
intermediaries. We have also included direct marketing as one element of the marketing
communications mix – as an approach for communicating directly marketing as a supplementary
channel or medium for marketing their goods.
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Thus, companies such as Nokia and Lexus market mostly through mass-media advertising and their
dealer networks but also supplement these channels with direct marketing. Their direct marketing
includes promotional materials mailed directly to prospective buyers and their Web pages, which
provide customers with information about various models, financing (in the case of Lexus) and dealer
locations. Similarly, many department store and banks sell the majority of their merchandise or
services off their ‘bricks and mortar’ outlets as well as directly through telemarketing and their
websites.
However, for many companies today, direct marketing is more than just a supplementary channel or
medium. For these companies, direct marketing – especially Internet marketing and e-commerce –
constitutes a new and complete model for doing business. More than just another marketing channel
or advertising medium, their new model is rapidly changing the way companies think about building
relationships with customers. Whereas most companies use direct marketing and the Internet as
supplemental approaches, firms employing the direct model use it as the only approach. Example
include Dell, online bookseller Amazon.com, CoShopper.com, a Norwegian Internet shopping
company, Framfab, the Swedish Internet consultancy, and Direct Line, the UK-based insurance
company. This direct model has proved highly successful, not just for these companies, but for the
fast-growing number of other companies that employ it. Many strategists have hailed direct
marketing as the new marketing model of the next millennium.
Benefits and growth of direct marketing
Whether used as a complete business model or as a supplement to a broader integrated marketing
mix, direct marketing mix, direct marketing brings many benefits to both buyers and sellers. As a
result, direct marketing has grown very rapidly.
The benefits of direct marketing
Direct marketing benefits buyers in many ways. First, it is convenient. From the comfort of their
homes or offices, customers can browse mail catalogues or sellers’ websites at any time for the day or
night. Buying is easy and private. Customers confront fewer buying hassles and do not have to face
salespeople or open themselves up to persuasion and emotional pitches. Business customers can learn
about available products and services without waiting for and tying up time with salespeople. Direct
marketing often gives shoppers greater product access and selection. For example, the world’s the
limit for the Web. Cyberstores such as Amazon, CDNow and others can offer an almost unlimited
selection compared to the more meager assortments of counter-parts in the bricks-and-mortar world.
Beyond a broader selection of sellers and products, online and Internet channels also give buyers
access to a wealth of comparative information, information about companies, products and
competitors, at home and around the globe. Good websites often provide more information in more
useful forms than even the most solicitious salesclerks can.Amazon.com and CDNow, for example,
offer best-seller lists and reviews.
Direct marketing also yields many benefits to sellers. First, direct marketing is a powerful tool for
customer relationship building. Suing database marketing, today’s marketers can target small groups
or individual consumers, tailor offers to individual needs and promote these offers through
personalized communications. Direct marketing can also e timed to reach prospects at just the right
moment. For example, Nestle baby food division maintains a database of new parents and mails
them six personalized packages of gifts and advice at key stages n the baby’s life.
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Direct marketing also permits easy testing of alternatives media and messages. Because of its one-toone, interactive nature, the Internet is an especially potent direct-marketing tool. Direct marketing
also gives sellers access to buyers that they could not reach through other channels. For example, the
Internet provides access to global markets that might otherwise be out of reach.
Finally, direct marketing can offer sellers a low-cost, fast and efficient alternative for reaching their
markets. For example, direct marketing has grown rapidly in B2B marketing, partly in response to
the ever-increasing costs of marketing through the sales force. When personal sales calls cost several
hundred euros per contact, they should be made only when necessary and to high-potential customers
and prospects. Lower cost-per-contact media such as telemarketing, direct mail and company
websites – often prove more cost-effective in reaching and selling to more prospects and customers.
The growth of direct marketing
As a result of these advantages to both buyers and sellers, direct marketing has become the fastest
growing form of marketing. Sales through traditional direct-marketing channels (telephone
marketing, direct mail, catalogues, direct-response television, and others) have been growing rapidly.
During 1997-2002, the annual rate of growth in spending on conventional direct marketing channels
(e.g. direct mail) outstripped that for mass-marketing channels such as advertising. Total direct
marketing expenditure in Europe as a whole grew form &31, 725 million (at current prices) in 1997
to &4Module 6 ,330 million by 2002.
Customer database and direct marketing
Effective direct marketing begins with a good customer database. A customer database is an
organized collection of comprehensive data about individual customers or prospects, including
geographic, demographics, psychographics and buying behaviour data. The database can be used to
locate good potential customers, tailor products and services to the special needs to targeted
consumers, and maintain long-term customer relationships. Database marketing is the process of
building, maintaining and using customer database and other database (products, suppliers, resellers)
for the purpose of contacting and transacting with customers.
Although many companies are now building and using customer database for targeting marketing
communications and selling efforts at the individual customer, data protection regulations in some
countries may slow down growth in database marketing practices. For example, usage in the United
States and the United Kingdom is far more widespread, with data laws being much more open
compared to the rest of Europe. But the international race is on to exploit database marketing and
few businesses can afford to ignore this important vehicle for competitive success. As Tom Peters
comments in Thriving on Chaos, ‘A market has never bought things. Customers buy things. That’s
why database marketing’s ability to target the individual customer in the crowded marketplace is so
valuable. Many companies confuse a customer mailing list with a customer database. The former is
simply a set of names, addresses and telephone numbers. A customer database contains much more
information.
In business-to-business marketing, the salesperson’s customer profile might contain information such
as the products and services that the customer has bought, past volumes and prices, key contacts (and
their ages, birthdays, hobbies and favourites foods), competitive suppliers, status of current contracts,
estimated customers expenditures for the next few years, and assessments of competitive strengths
and weaknesses in selling and servicing the account.
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In consumer marketing, the customer database might contain a customer’s demographics (age,
income, family members, birthdays), psychographics (activities, interests and opinions), buying
behaviour (past purchase, buying preferences) and other relevant information. Companies must
distinguish between transaction-based and custom-built marketing databases. Transactional database
re put in by an accounts department for the purpose of sending invoices/bills out and getting money
back. By contrast, custom-built databases focus on what the firm’s marketing people need to know to
serve and satisfy customers profitably and better than the competition can- for example, the most
cost-effective way to reach target customers, the net worth of a transaction, customers’ requirements
and lifetime values, lapsed customers and why they departed, why competitors are making inroads
and where. Armed with the information in their database, these companies can identify small groups
of customers to receive fine-tuned marketing offers and communications. Companies use their
database in many ways. They can use a database to identify prospects and generate sales leads by
advertising products or offers. Or they can use database to profile customers based on previous
purchasing and to decide which customers should receive particular offers. Database can help the
company to deepen customer loyalty – companies can build customers’ interest and enthusiasm by
remembering buyer preferences and by sending appropriate information, gifts, or other materials.
The database can help a company make attractive offers of product replacements, upgrades, or
complementary products, just when customers might be ready to act.
Hence, a rich customer database allows the company to build profitable new business by locating
good prospects, anticipating customer needs, cross-selling products and services and rewarding loyal
customers. But many companies are skeptical about the returns on investment in databases. The
recent growth in companies’ customer databases has led to nothing more than information overload,
making it increasingly difficult grab customers’ attention. Like many other marketing tools, database
marketing requires a special investment. Companies must invest in computer hardware, database
software, analytical programme, communication links and skilled personnel. The database system
must be user-friendly, fit for its intended purpose and available to various marketing groups,
including those in product and brand management, new-product development, advertising ad
promotion, direct mail, telemarketing, Web marketing, filed sales, order fulfilment and customer
service. A well-managed database should lead to sales gains that will more than cover is costs.
Forms of direct marketing
The major forms of direct marketing include personal selling, the phone marketing, direct-mail
marketing, catalogue, marketing, direct response television (DRTV) marketing and online shopping.
Many of thee techniques were first developed in the United States, but have become increasingly
popular in Europe. In the EU, some forms of direct marketing notably direct mail and telemarketing
– are forecast to grow. In practice, however, the impact of a unified Europe has been limited by the
labyrinth of legislation across the Union, which means that certain direct marketing techniques are
feasible in some countries but not others.
Telephone marketing
Telephone marketing or telemarketing uses the telephone to sell directly to consumers. It has
become a major direct marketing toll. Marketers use outbound telephone marketing to generate and
qualify sales leads, and sell directly to consumers and businesses. Calls may also be for research,
testing, database building or appointment making, as a follow-up to a previous constant, or as part of
a motivation or customer-care programme.
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Marketers use inbound freephone numbers to receive orders from television and prints ads, direct
mail or catalogues. Marketers also use inbound telephone calls to receive customer enquiries and
complaints.
In Europe, telemarketing is more established in the UK and Netherlands than in Germany, which has
the toughest telemarketing laws. For example, in Germany the consent of the prospects or consumers
is required before they can be contacted. If someone buys a shovel form a garden center in winter,
ever if they gave their name and telephone number, the center cannot telephone them in the spring
with a special offer on bulbs because that would be illegal. Contrast the situation in Holland, where,
for example, before an election, political parties are permitted to ring voters to gain their support.
When properly designed and targeted, telemarketing provides many benefits, including purchasing
convenience and increased product and service information. However, the recent explosion in
unsolicited telephone marketing has annoyed many consumers who object to ‘junk pone calls’ that
pull them away form the dinner table or clog up their answering machines. Laws or self-regulatory
measures have been introduced in different countries in response to complaints from customers. At
the same tie, some consumers may appreciate the genuine and dwell-presented offers they receive by
telephone.
Direct-mail marketing
Direct-mail marketing involves sending an offer, announcement, reminder or other item to a person at
a particular address. Using highly selected mailing lists, direct marketers send out millions of mail
pieces each year – letter, ads, brochures, samples, video-and audiotapes, CDs, and other ‘salespeople
with wings’. Direct mail expenditures per capita varies across the major EU countries, but in general,
direct mail spend per head is disproportionately higher than that spent on telemarketing and, in a
majority of cases, represents well over half of the total direct marketing expenditure per capita. The
only exception is the UK where telemarketing expenditure per capita (&79.9) exceeded that for direct
mail (&Module 6 1.0) in 2001. Direct mail is well suited to direct, one –on-one communication. It
permits high target market selectivity, can be personalized, is flexible and allows easy measurement
of results.
Whereas the cost per 1,000 people reached is higher than with mass media such as television,
magazines, the people who are reached are much better prospects – direct-mail marketers target
individuals according to their personal suitability to receive particular offerings and promotions.
Direct mail has proved very successful in promoting all kinds of products, from books, magazines
subscriptions and insurance to gift items, clothing, gourmet food, consumer packaged goods and
industrial products. Direct mail is also used heavily by charities, such as Oxfam and Action Aid,
which rely on correspondence selling to persuade individuals to donate to their charity.
The direct-mail industry constantly seeks new methods and approaches. For example, videotapes and
CDs are now among the fastest-growing direct-mail media. Used in conjunction with the Internet,
CDs offer an affordable way to drive traffic to Web pages personalized for a specific market segment
or a specific promoting. They can also be used to demonstrate computer-related products. For
example, Sony sent out a CD that allowed PC users to demo its VAIO portable notebook their own
computers. Until recently, all direct mail was paper-based and handled by postal and telegraphic
services and other mail carriers. Recently, however, fax mail, email and voice mail have become
popular. These new forms deliver direct mail at incredible speeds, compared to the post office’s
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‘snail mail’ if set to people who have no interest in them. For this reason, direct marketers must
carefully identify their target to avoid wasting huge sums of money or the recipient’s time.
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Catalogue marketing
Catalogue shopping once started almost as explosively as the Internet, though few of us might
remember this. Cataloguers’ sales pitch was remarkably similar too – no need to struggle to the store,
vast choice, lower prices. Today, the growth in catalogue shopping has slower but catalogues are
increasingly used by store retailers, which see them as an additional medium for cultivating sales.
Most consumers enjoy receiving catalogues and will sometimes even pay to get them. Many
catalogues marketers are now even selling their catalogues at bookstores and magazines stands.
Many business-to-business marketers also rely heavily on catalogues.
Rapid advance in technology, however, along with the move to personalized one-to-one marketing,
have resulted in dramatic changes in catalogues marketing. With the stampede to the Internet, more
and more catalogues are going electronic. Many traditional print or mail-order catalogue firms have
added Web-based catalogues to their marketing mixes and a variety of new, Web-only cataloguers
have emerged. For example, Web-based sales account for 10 per cent of the turnover at Quelle, the
German mail-order company. Quelle expects half of the group’s sales to come via the Net within the
next five years. Other mail-order companies such as 3 Susses and La Redoute in France, and Lands,
End antipaste at least 15 per cent of sales to be generated online by 2005.
However, the Internet has not yet killed off printed catalogues – far from it. Web catalogues currently
generate only about 13 per cent of all catalogue sales. Printed catalogues remain the primary medium
and many former Web-only companies have created printed catalogues to expand their business.
Along with the benefits, however, Wed-based catalogues also present challenges. Whereas a print
catalogue is intrusive and creates its own attention, Web catalogues are passive and must be
marketed. It is much more difficult to attract new customers with a Web catalogues. And the online
cataloguers have to use advertising, linkage and other means or drive traffic to their sites. Thus, even
cataloguers who are sold on the Web are not likely to abandon their print catalogues completely.
Direct-response television marketing
Direct-response television (DRTV) takes one of two main forms. The first is direct-response
advertising. Direct marketers air television spots, Module 6 0 or 120 seconds long that persuasively
described a product or service and give customers a freephone number for ordering.direct-resposne
television advertising can also be sued took build brand awareness, convey brand/product
information, generate sales leads and build a customer database.
Television viewers may encounter longer, 30-minute advertising programmes, or ‘infomercials’, for a
single product, during the features or virtues or virtues of a product are discussed by ‘experts’ before
an audience. These are selling programmes which are presented in an entraining manner to attract the
target audience. Direct response TV commercials are usually cheaper to make and the media purchase
is less purchase is less costly. Moreover, results are easily measured as, unlike branding campaign,
direct-response ads always include a toll-free number or a Web address, making it easier for
marketers took gauge whether consumers are paying attention to their messages.
For years, infomercials have been associated with somewhat questionable pitches for juicers and
other kitchen gadgets, get-rich-quick schemes, and nifty ways to stay in shape without working very
hard at it. In recent years, however, a number of large companies have begun using infomercials to
sell their wares over the phone, refers customers to retailers, send out coupons and product
information, or attract buyers to their websites.
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Organizations ranging from mail order (e.g., Sounds Direct), leisure (e.g. Scandivian websites) and
financial services (e.g. Direct Line, AA Insurance Services) to cars (e.g. Daewoo Fiat), fast-moving
consumer goods (e.g. Britivic, Martini, McVitie’s) and government departments (e.g. the British
army, US navy) have been using DRTV marketing. DRTV marketing has also been used by charities
and fund-raising campaigners to persuade viewers to offer donations or volunteer services. Examples
include the ‘live Aid’ campaign that captured the imagination of millions of people across the globe,
‘children in need’ and many other international fund-raising events.
In recent years, direct-response TV advertising is giving way to interactive TV (TV). Advertisers,
from a range of sectors, including cars, travel, telecommunications and financial services, are actively
using TV to deliver more complex messages and information to target viewers. Audiences are
encouraged to interact with the company’s ads Module 6 through an impulse response format which
invites them to press the ‘red button’ on the remote control device for more information.
Home shopping channels, another form of direct-response television marketing, are TV programmes
or entire channels dedicated to selling goods and services. The programmes offer bargain in prices on
products ranging from jewellery, lamps, collectible dolls and clothing, to power tools and consumer
electronics – usually obtained by the home-shopping channel at close-out prices. The presentation of
products is upbeat and theatrical atmosphere is created, often with the help of celebrity guests, and
up-to-date information can be given on products availability, creating further buying excitement.
QVC and other TV shopping channels are now operating in Europe. These compete with large
European electronic home-shopping business such as TV shop. TV shop operates across Europe, of
which Germany is the biggest market. Financial account for some Module 6 0 per cent of the firm’s
turnover, its activities are wide ranging. It produces commercial videos and TV programmes, operates
a Swedish shopping channel, and runs electronic shopping malls as well as other internet-based sales
operations in Europe.
Access to TV shopping channels has been restricted to homes with satellite or cable TV. In Europe,
the Netherlands, Belgium, Luxembourg and Germany lead in terms of household penetration of cable
systems. However, over the next few years, the reach of TV shopping channels will increase as the
cable and satellite market grows. TV shopping channel operators believe that countries such as the
United Kingdom, France, Spain and Italy, with a lower level of satellite and cable penetration, offer
great potential for growth.
Integrated direct marketing
Too, often, a company’s individual direct marketing efforts are not well integrated with one another
or with other elements of its marketing and promotion mixes. For example, a firm’s media
advertising may be handled by the advertising department wortking with at traditional advertising
agency. Meanwhile, its direct mail and catalogue business activities may be handled by direct
marketing specialists while website is developed and operated by an outside Internet firm. Even
within a given direct marketing campaign, too many companies use a ‘one-shot, approach to reach
and sell a prospect or single vehicle in multiple stages to trigger purchases.
A more powerful approach disintegrated marketing, which, involves using multiples-vehicle,
multiple-stage campaigns to improve response. Whereas a direct-mail piece alone might generate a 2
per cent response, adding a website and freephone number can raise thee response rate by 50 per cent
to a 3 per cent response. A well-designed outbound telemarketing effort might multiply the response
rate by 500 per cent.
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Suddenly a 2 per cent response has growth to 15 per cent or more by adding interactive marketing
channels to a regular mailing.
More elaborate integrated direct-marketing campaign can be used. Consider the following
multimedia, multistage marketing campaign: Here, then paid and to target customers creates product
awareness and stimulates enquiries. The company immediately sends direct mail to those who
enquire. Within a few days, the company follows up with a phone call seeking an order. Some
prospects will order by phone or via the firm’s website; others might request a face-to-face sales call.
In such a campaign, the marketer seeks to improved response rates and profits by adding media and
stages that contribute more to atonal sales to additional costs.
Public policy and ethical issues in direct marketing
Direct marketers and their customers usually enjoy mutually rewarding relationships. Occasionally,
however, a darker side emerges. The aggressive and sometimes shady tactics of a few direct
marketers can bother or harm consumers, giving the entire industry a lack eye. Abuses range from
simple excess that irritate consumers to instance of unfair practices or even outright deception and
fraud. The direct marketing industry has also faced growing concerns about invasion –of-privacy
issues.
Irritation, unfairness, deception and fraud
Direct marketing excesses sometimes annoy or offered consumers. Most of us dislike direct
responses TV commercial that are too loud, too long and too insistent. Especially bothersome are
dinnertime or late-night phone calls. Beyond irritating consumers, some direct marketers have been
accused of taking unfair advantages of impulsive or less sophisticated buyers. TV shopping shows
and programme-long ‘infomercials’ seems to be the worst culprits. They features smooth-talking
hosts, elaborated staged demonstrations, claims of drastic price reduction, while they last time
limitations, and unequalled ease of purchase to inflame buyers who have low sales resistance. Worse
yet, so-called heat merchants design mailings and write copy intended to mislead buyers. Other direct
marketers pretend to be conducting research surveys when they are actually asking leading questions
to screen or persuade consumers. Fraudulent schemes, such as investment scams or phoney
collections of rcharity, have also multiplied in recent years. Crooked direct marketers can be hard to
catch: direct marketing customers often respond quickly, do not interact personally wit the seller, and
usually expect to wait for delivery. By the time buyers realize that they have been duped, the thieves
are usually somewhere else, plotting new schemes.
Invasion of privacy
Invasion of privacy is perhaps the toughest public policy issue now confronting the direct marketing
industry. These days, it seems that almost every time consumers order products by mail or telephone,
enter a sweepstake, apply for a credit card or take out a magazine subscription, or order products by
mail, telephone or the Internet, their names are entered into some company’s already bugging
database. Using sophisticated computer technologies, direct marketers can use these database to
microtarget their selling efforts.
Consumers benefits from such database marketing if they receive more offers that are closely
matched toothier interests. However, many critics worry that marketers may know too much about
consumers lives, and that they may use this knowledge to take unfair advantage of consumers. At
some point, they claim, the extensive use of database intrudes on consumer privacy.
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In their drives to build database, companies sometimes get carried away. For example, Microsoft
caused substantial privacy concerns when it introduced its Windows 95 software. It used a
‘Registration Wizard’, which allowed users to register their new software online.
However, when users went online to register, without their Microsoft ‘read’ the configurations of
their PCs to learn about the major software products running on each customer’s systems. When
users learned of this invasion, they protested loudly and Microsoft abandoned the practice. Such
access to and use of information has caused much concern and debate among companies, consumers
and public policy makers.
Direct marketers know that, left unattended to, unethical conduct will lead to increasingly negative
consumer attitudes, lower response rates, and calls for more restrictive legislation. More importantly,
most direct marketers want the same things that consumers want: honest and well-designed marketing
offers targeted only towards consumers who will appease and respond to them. Direct marketing is
just too expensive to waste on consumers who don’t want it.
Mass marketers have typically tried to reach millions of buyers in a single product and a standard
message communicated via the mass media. Consequently, most mass-marketing communications
were one-way communications directed at consumers rather than two-way communication with
consumers. Today, many companies are turning to direct marketing in an effort to reach carefully
targeted customers more efficiently and to build stronger, more personal, one-to-one relationships
with them.
Promotional tools
Setting the scene
There are a variety of tools that can be used to communicate with audiences.
Example
An understanding of the promotional tools and the ways in which they work is essential. What
is most important an appreciation of the way in which the tools can be co-ordinated in order that
consistent and meaningful messages be presented to target audiences.
This knowledge can be examined in a number of ways. One of the more obvious approaches is
through the preparation of a marketing communications plan. Other ways include direct
questions on co-ordination or the effectiveness of promotional tools.
Read campaign, Marketing week, Marketing and other trade journals on a regular basis and look
out for case histories that track the use of a selection of promotional.
An overview of the promotional tools
In this part of the Study Text the aim is to make you more familiar with the very broad range of
promotional tools and to provide some guidelines for choosing the most appropriate
promotional mix. With promotional tools this is not an easy job because usually it is not just
one tool that is required but a combination.
Having chosen a suite of promotional tools, and even allocated them as either primary or
secondary, it is important to be able to co-ordinated them in a comprehensive and cost effective
whole.
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The range of promotional tools
The range of promotional tools continues to grow. The variety of media that can be used for
above-the-line campaigns has expanded, both in the printed advertising field and in the
broadcast field. There are literally thousands of publications aimed at different target groups.
In the broadcast field the number of television stations steadily increases through satellite, cable
and digital television and the number of commercial radio stations has grown considerably.
Above-the-line campaigning is advertising placed in paid for media, such as the press, radio,
TV, cinema and outdoor sites. The ‘line’ is one in an advertising agency’s accounts, above
which are shown its earnings on a commission basis, from the buying of media space for clients.
Below-the-line promotion involves product-integral and negotiated sales incentives, such as
packaging, merchandising, on-pack discount and competitions and so on. (Agency earnings on
a fee basis are shown below the ‘line’ in their accounts.)
The diagram shows the range of tools that can be used to influence a customer or potential
customer. These tools represent the use of intentional methods calculated to bring about a
favorable response in the customer’s behaviour. The diagram represents the most obvious
methods though other parts of the marketing mix, including the product itself, pricing and
distribution channels, will also have decisive effects.
There are been major changes in way organizations communicate with their audiences. New
technology, new media and changes in the way that people spend their time (working from
home, shopping habits and leisure patterns etc) have meant that companies have to find new
ways to reach people. Direct marketing is now a more significant part of the marketing plan for
many products, along with interactive forms such as the Internet.
The traditional emphasis on heavy mass above-the-line advertising has given way to more
highly targeted campaigns. Below the line, and even what fill (2002) terms ‘through-the-line’
promotion is now far more common. To quote Fill:
“The shift is form an intervention-based approach to marketing communications (one based on
seeking the attention of a customer who might not necessarily be interested), towards permissionbased communications (where the focus is upon communications with members of an audience who
have already expressed an interest in a particular offering)”.
The concept of ‘through-the-line’ can be depicted on a diagram
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Figure 10. Through the line concept
3 Promotional Techniques
MASS ADVERTISING (ABOVE-THE-LINE)
T
H
R
O
DIRECT
UMARKETING
T
The line
‘
U
G
H
SALES PROMOTION, PUBLIC
RELATIONS
PERSONAL SELLING
(Below-the-line)
Primary and secondary roles
What should already be clear is that influencing customers and potential customers is a complex
business. Discussions of buyers behaviour have shown that there is not just one process that
influences the customers but a whole series. It follows therefore that each promotional tool will
have a variety of roles.
In terms of making management decisions and allocating budgets it is possible to consider
promotional tools in two broad categories of primary and secondary roles. For example, in a
consumer campaign it may be that television is used s the main vehicle for launch, which is then
sustained by a longer-lasting poster campaign.
The PLC and developing promotional strategy
According to the PLC model, each of the stages from introduction to decline have different
strategic requirements from their promotional activities.
The above sets out the strategic focus for each phase, and the main promotional activities to be
considered. What the table does not show is the way the promotional tools are used to support a push
as opposed to pull approach. One particular benefit of the PLC is that it is possible to overlay the
various stages of the process of diffusion.
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Through this it is possible to identify the different types of buyer involved with the product at each
stage and through this fine-tune the appropriate message and media.
Introduction
For consumer brands this phase is critical as the primary need is to secure trade acceptance (and
hence shelf space) and then build pubic (target audience) awareness. Sunny Delight was developed
by Procter & Gamble in consultation with major multiple grocers. When the product was launched
the multiples acceptance the brand as it has been developed partly to their specification on price,
ingredient and packaging/size.
Growth
During growth, promotional activity is used competitively to build market share. Customers are
normally willing to buy, having been made aware, but their problems becomes one of brand choice.
Marketing communications should therefore be used to differentiate and clearly position product such
that it represents significant value for the customer.
Maturity
One the rapid growth in a market starts to ease, the period of maturity commences. The primarily
characteristics of this stage is that there is little or no growth. The battle therefore is to retain
customer loyalty, and to do this, sales promotions are often used, to encourage trial by non-user of a
brand and as a reward for current users.
Marketing at work
Hoover have had to reposition themselves due to the market entry by Dyson with a technically
superior product. Sales promotions alone therefore may not be sufficient, and a whole repositioning
programme may be necessary to sustain a brand in competitive conditions.
Decline
As sales start to decline it is normal practice to withdraw a great deal of promotion support. Direct
marketing and a little well targeted advertising to remind and reassure brand loyal is the most
commonly used.
Example
Use of the tools of the promotional mix over the life of a product features on the specimen paper, so it
is worth thinking about which tools may be appropriate at which stage of the life cycle.
How to co-ordinate the tools
Promotion work is exciting because the aim is to influence customers favorably towards your
organization’s products or services. It is not an exact science. It is necessary to co-ordinate all the
promotional elements to achieve the maximum influence on the customer.
Having recognized the need for co-ordination, it is now necessary to consider some more practical
steps to ensure that co-ordination occurs. The following diagram shows that co-ordination can be
conscious choice during the planning process, and it can also be a necessary part of the review and
revision process.
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Figure 11. Integration of promotional tools into planning
2
Selection of
promotion tools
1
Analysis of
communication
needs
3
Integration into
marketing
communications
6
Review and revise
promotion tool
3 Promotional Techniques
4
Implementation of
promotion
campaign
5
Control,
comparing result
against objectives
The diagram below demonstrates the use of measures that can be taken to ensure co-ordination. The
first three involve asking questions about the effectiveness, economy and efficiency of the promotion
tools. The efficiency can be forecast in the pre-campaign phase and then measured by means of
tracking studies during the campaign. This will lead to a review, revision and further co-ordination of
the promotion tools.
Figure 12. Criteria for integrating promotion tools
2
Economy of
promotion tools
1
Effectiveness of
promotion tools
Integration
into marketing
communications
4
Review and revise
promotion tools
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Advertising
Advertising may be defined as non-personal paid-for communications targeted through mass media
with the purpose of achieving set objectives. Advertising is a means of reaching large audiences in a
cost-effective manner. Personalized feedback from an advertising message is not usually obtained.
The purpose of advertising is to achieve set objectives. These objectives will vary depending on the
following factor.
 The result of the context analysis
 The nature of the product or service to be advertised.
 The stage it has reached in its life cycle.
 The marketplace in which it operates
 The role advertising is to play
Personal selling
Personal selling is an oral presentation by a salesperson to a customer with the aim of gaining a sale
through persuasion. The advantage of personal selling is that technical detail can be given to the
customer, and the product can be demonstrated if necessary. All organizations have employees with
responsibility, know as the sales force, provide a vital function to the organization as they form a
direct link to the buyers.
An organization has a choice as to how it organizes itself for selling.
1. Employ a direct sales force, consisting of full-or part-time paid employees who work exclusively
for the company. This type of sales force may, in turn, consist of two groups: inside sales
personnel who conduct their business from the company premises via the telephone, or field
sales personnel what travel and visit customers.
2. An organization could employ a contractual sales force, which could comprise sales agents,
dealers or brokers who are a commission on the sales they generate.
Irrespective of the type of sales force a company may use the sales force needs the support of other
groups within the organizations if it is to operate efficiently and effectively. The activities of the
following groups impact upon the effectiveness of the sales force.
1. Top management who can be increasingly involved it the selling process, particularly with big
orders of key accounts.
2. Technical sales personnel who supply technical information and service to the customer before,
during or after the sale of the product.
3. Customer service representatives who provide installation, maintenance and other services to the
customer.
4. Office staff including sales analysts, administrators and secretarial staff.
Selling should increasingly be regarded as a team effort involving all these groups.
The tasks in the selling process
Personal selling is probably the area of the promotional mix that has the most stereotypes attached to
it. The image of the traveling salesman is an enduring one. However, the term sales representative
covers a broad range of positions, which vary tremendously in terms of tasks and responsibilities. The
‘degree of difficulty’ of the salesperson’s tasks increases the nearer the person gets to bring an order
getter.
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However, the art of selling in its narrowest sense is only one of numbered tasks that the salesperson
could perform. A salesperson could perform ands many as seven different activities.
Table 2. Types of salespeople
Role
Order collector
Order taker
Pre-order caller
Order supporter
Order getter
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Comment
The salesperson’s job is predominantly to
deal with routine orders normally through
telemarketing.
The salesperson passively takes orders
from the customer. This can be further
divided into inside order takers, such as
shop assistants, or outside order takers,
such as those salespeople who call on
regular customers to take an order
periodically.
The customer has already been persuaded
to use the product, or has been the product
in the past.
The salesperson is not expected or
permitted to take an order but is expected
to build goodwill or educate the customer
in the use of the product. Medical
representative
from
pharmaceutical
companies may fall into this category.
The salesperson’s main skill is the
application of his technical knowledge
relating to the product
The salesperson has to stimulate demand
and creatively sell tangible or intangible
products.
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Table 3. Sales person activities
Activity
Prospecting
Communication
Selling
Servicing
Information gathering
Allocating
Shaping
Comment
Gathering additional prospective customers in
addition to sales leads generated by the company
on his behalf
Communication information to existing and
potential customers about the company’s products
and services can take up a major proportion of the
salesperson’s time.
‘The art of salesmanship’, encompasses
approaching the customer, presenting, answering
objections and closing the sale.
A salesperson may provide various services to the
customer, such as consulting about their problems,
rendering technical assistance, arranging finance
and expediting delivery.
The salesperson can be a very useful source of
marketing intelligence because of his or her links
with the end customer. Many salespeople are
responsible for supplying regular reports on
competitive activity within their particular sales
area.
The salesperson may assist in evaluating customer
profitability and creditworthiness, and may also
have to control the allocation of products to
customers in times of product shortages.
An increasingly important role is to help build
and sustain relationships with major customers.
While a salesperson may engage in all these tasks from time to time, the mix of tasks will vary
according to the purchase decision process, company marketing strategy and the overall economic
conditions of the time. For example, the skills needed for a straight rebuy situation (where the
customer has bought the same way in the past) will be totally different from those required to develop
a new account. Sales force activity must also be undertaken within the context or the organization’s
overall marketing strategy.
1. For example, if the organization pursues a ‘pull’ strategy, relying on massive consumer
advertising to draw customers in to ask for the brand, then the role of the sales force may
primarily be a servicing one, ensuring that retailers carry sufficient stock, allocate adequate shelf
space for display and co-operate in sales promotion programmes.
2. Conversely, with a ‘push’ strategy, the organization will rely primarily on the sales force to sell
the brands to intermediaries, who will then assume the main responsibility for selling on the
brands to the end customer.
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The mix of a salesperson’s tasks may vary with the prevailing economic conditions. For example, in
times of product shortage the art of selling may not be as important. However, such a view neglects
the other roles of the salesperson that will be of greater importance in such circumstances, such as
allocating, counselling customers, communicating company policy to customers and perhaps selling
other products that are not in short supply.
Sales promotion
The institute of sales promotion (ISP) defines sales promotion as a range of tactical marketing
techniques, designed within a strategic marketing framework to add value to a product or service, in
order to achieve a specific sales and marketing objective.
1. Sales promotion encompasses a range of techniques appropriate for targeting consumers, for
instance via price reductions or gifts with purchases. However, trade and sales force incentives
are also implied under the general heading of sales promotion.
2. Sales promotion is viewed by the ISP as a tactical promotional tool. The majority of companies
will use sales promotion as a means of achieving a short-term objective, for instance to gain shortterm sales volume or to encourage trial and brand switching by a rival manufacture’s consumers.
3. Although it is used as a tactical tool, sales promotion works within a strategic marketing
framework. Sales promotion should start with due regard to the strategic objectives for the brand.
4. Sales promotion always seeks to add value to a product or service. Thus consumers are offered
something extra for their purchase, or the chance to obtain something extra.
Sales promotion includes the notion of both sales pull and sales push techniques. As we have seen,
sales pull techniques incentives the consumer to buy. Sales push techniques ensure that the
distribution pipeline is well loaded, and sales are pushed along the distribution chain.
Example
Be aware of the potential for confusion between the terms promotion (used as a synonym for
communication techniques in general) and sales promotion (which is a specialist term reserved for the
specific techniques). In examinations some candidates read the question paper very quickly and
mistake a question on sales promotion for one on promotion techniques in general. This unfortunate
slip can result in a candidate scoring virtually no marks. To reinforce this point, the specimen paper
for the new syllabus features a question asking for a comparison between sales promotion and public
relations.
Sales promotion objectives
Examples of consumer sales promotion objective.
 Increase awareness and interest amongst target audiences
 Achieve a switch in buying behaviours from competitor brands
 Incentivise consumers to make a forward purchase of your brand
 Increase display space allocated to your brand in store
 Smooth seasonal dips in demand for your product
 Generate a consumer database from mail-in applications
Objectives of promotional activity were a features of the December 2003 paper: in particular, brand
development and encouraging purchase. Sales promotion objectives will link into overarching
marketing and marketing communications objectives.
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Marketing objective
3 Promotional Techniques
To increase brand X market share by 2 percentages
point in the period January to December 2003
Marketing communications objective To contribute to brand share gain of 2% in 2003 by
increasing awareness of X from 50% to 70% among
target consumers.
Sales promotion objective
To encourage trial of brand X among target consumer
by offering a guaranteed incentive to purchase.
Public Relations
Definitions
The Institute of Public relations has defined Public relations (PR) as the planned and sustained effort
to establish and maintain goodwill and mutual understanding between an organization and its publics.
The public relations Consultants Association (PRCA) says that:
‘Public relations is the name given to the managed process of communication between one group and
another. In its purest form it has nothing to do with marketing, advertising or “commercialism”. It
will, however, often promote one group’s endeavors to persuade another group to its point of view
and it will use a number of different methods, other than (although often alongside) advertising to
achieve this aim.
The scope of PR
The scope of public relations activity is very broad.
 Government – national, local, international
 Business and industry – small, medium, large
 Community and social affairs
 Educational institutions, universities, colleges
 Hospitals and health care
 Charities and good causes
 International affairs
Whilst the specific practice of the discipline of public relations will vary from sphere to sphere (and
indeed, from organization to organization) there are numerous separate types of activities that the PR
practitioner may carry out some time.
 Counseling based on an understanding of human behaviours
 Analyzing future trends and predicting their consequences
 Research into public opinion, attitudes and expectations and advising on action
 Establishing and maintaining two-way communication
 Preventing conflict and misunderstandings
 Promotion mutual respect and social responsibility
 Harmonizing the private and public interest
 Promoting goodwill with staff, suppliers and customers
 Improving industrial relations
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 Attracting good personnel and reducing labour turnover
 Promoting products and services
 Projecting a corporate identity
3 Promotional Techniques
From this list of activities it can be seen that the scope of public relations activity, if implemented
effectively, should embrace the whole organization. A number of criteria have been put forward in an
attempt to define what constitutes ‘excellent’ public relations within an organization.
 Programmes should be managed strategically
 There should be a single integrated public relations department
 Public relations managers should report directly to senior management
 Public relations should be a separate function from marketing
 The senior public relations person should be at board level
 Communication should adhere to the ‘two-way symmetrical model’
Four models of PR
This last factor relates to the way in which public relations is practiced. Given the diversity of the
role of PR as emphasized above, it is logical to consider different ways in which PR could be
practiced. A framework for considering this has been propounded by Grunig and Hunt (1983), who
suggest that there are four models of public relations practice. Each model will be considered in turn.
Press agency/publicity
The role of PR is primarily one of propaganda, spreading the faith of the organizations, often through
incomplete, half-true or distorted information. Communication is one-way, form the organization to
its publics: essentially telling the publics the information the organization wants them to hear.
Public information
In this model the role of PR is the dissemination of information not necessarily with a persuasive
intent. As Grunig and Hunt state,’ the public relations person functions essentially as a journalist in
residence, whose job it is to report objectively information about his organization to the public’.
Two-way asymmetric
Gluing and Hunt describe the main function of the two-way asymmetric model as scientific
persuasion, using social science theory and research about attitudes and behaviour to persuade public
to accept the organization’s point of view and to behave in a way that support the organisation. The
aim is to achieve the maximum change in attitudes and behaviour.
Two-way symmetric
In the two-way symmetric model the PR practitioner serves as a mediator between the organisation
and its publics with the aim of facilitating mutual understanding between the two. If persuasion
occurs it is likely to persuade the organization’s management to change its attitudes, as it is to
persuade the publics to change theirs.
Public relations is, therefore, the management of an organization’s reputation with its publics and this
management involves a close consideration of the relationships involved. The organisation can be
either reactive or proactive in its management of these relationships.
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1. Reactive PR is primarily concerned with the communication of what has happened and
responding to factors affecting the organisation. It is primarily defensive, with little or not
responsibility for influencing policies.
2. In contrast, proactive public relations practitioners have a much wider role and thus have a far
greater influence on overall organizational strategy.
Inevitably some techniques will be more appropriate in certain circumstances with certain types of
publics than others. It is possible, therefore to classify the different types of techniques or media
according to the type of project areas in which they appear to be most effective. The most frequently
used techniques are as follows.
a. Consumer marketing support area techniques
 Consumer and trade press releases
 Product/service literature
 Promotional videos
 Special events (in-store competitions, celebrity store openings
 Consumer exhibitions
 In-house magazines for sales staff, customers and/or trade
 Salesforce/distributor incentive schemes
 Sport, and to a lesser extent, arts sponsorships
b. Business-to-business communication area techniques
 Corporate identity design
 Corporate literature
 Corporate advertising
 Trade and general press relations, possibly on a national or international basis
 Corporate and product videos
 Direct mailings
 Sports and arts sponsorships
 Trade exhibitions
c . Internal/employee communications area techniques
 In-house magazines and employee newsletters
 Employee relations videos
 Formal employee communication networks and channels for feedback
 Recruitment exhibitions/conferences
 Speech writing for executives
 Company notice boards
 Briefing meetings
d. Corporate, external and public affairs area techniques
 Corporate literature
 Corporate social responsibility programmes, community involvement
 Trade, local, national and possibly international media relations
 Issues tracking
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 Management counseling
 Local or central government lobbying
 Industrial lobbying
 Facility/visits
 Local/national sponsorships
3 Promotional Techniques
e. Financial public relations area techniques
 Financial media relations on both a national and international basis
 Design of annul and interim reports
 Facility visits for analysts, brokers, fund managers, etc
 Organizing shareholder meetings
 Shareholder tracking research
While this is not a comprehensive list it does give an indication of the many types of PR techniques
that can be used in various circumstances and how certain techniques will re-occur in various settings.
A Media relation, for example, is used in virtually all areas of activity.
Direct marketing
The aims of direct marketing are to acquire and retain customers. Here are two further definitions.
The Institute of direct Marketing in the UK defines direct marketing as ‘The planned recording,
analysis and tracking of customer behaviour to develop relational marketing strategies. The Direct
Marketing Association in the US defines direct marketing as ‘An interactive system of marketing
which uses one or more advertising media to effect a measurable response and/or transaction at any
location’. It is worth studying these definitions and noting some key words and phrases.
Table 4. Key word and phrases
Response
Interactive
Relationship
Recording and analysis
Strategy
Higher Diploma in Sales and Marketing
Comment
Direct marketing is about getting people to
send in coupons, or make telephone calls in
response to invitations ands offers.
It is a two-way process, involving the
supplier and the customer.
It is in many instances an on-going process
of selling again and again to the same
customer.
Response data are collected and analyzed
so that the most cost-effective procedures
may be arrived at. Direct marketing has
been called ‘marketing with numbers’. It
aims to take the waste out of marketing.
Direct marketing should not seen merely as
a ‘quick fix; a ‘one-off mailing’, a
promotional device. It should be seen as a
part of a comprehensive plan stemming
form clearly formulated objectives.
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Direct marketing helps create and develop direct relationships between you and each or your
prospects, between the consumer and the company on an individual basis. It is a form of direct
supply, embracing both a variety of alternative media channels (like direct mail), and a choice of
distribution channels (like mail order). Because direct marketing removes all channels intermediaries
apart from the advertising medium and the delivery medium, there are no resellers, therefore avoiding
loss of control and loss of revenue.
Components of direct marketing
Direct marketing encompasses a wide range of media and distribution opportunities.
 Television
 Radio
 Direct mail
 Direct response advertising
 Telemarketing
 Statement stuffers
 Inserts
 Take-ones
 Electronic media
 Door to door
 Mail order
 Computerized home shopping
 Home shopping networks
In developing a comprehensive direct marketing strategy, organizations will often utilize a range of
different yet complementary techniques. Direct mail tends to be the main medium of direct response
advertising. It has become the synonym for it. The reason for this is that other major media,
newspapers and magazines, are familiar to people in advertising in other contexts. Newspapers ads
can include coupons to fill out and return, and radio and TV can give a phone number to ring (DRTV
is now very common). However, direct mail has a number of strengths as a direct response medium.
a. The advertiser can target down to individual level.
b. The communication can be personalized. Known data about the individual can be used, while
modern printing techniques mean that parts of a letter can be altered to accommodate this.
c. The medium is good for reinforcing interest stimulated by other media such as TV. It can supply
the response mechanism (a coupon), which is not yet available in that medium.
d. The opportunity to use different creative formats is almost unlimited.
e. Testing potential is sophisticated: a limited number of items can be sent out to a ‘test’ cell and the
results can be evaluated. As success is achieved, soothe mailing campaign can be rolled out.
The cornerstone upon which the direct mailing is based, however, is the mailing list. It is far and
away the most important element in the list of variables, which also include the offer, timing and
creative content. A database is a collection of available information on past and current customer
together with future prospects, structured to allow for the implementation of effective marketing
strategies. Database marketing is a customer-oriented approach to marketing, and its special power
lies in the techniques its uses to harshness the capabilities of computer and telecommunications
technology. Building accurate and up-to-date profiles of existing customers enables the company to:
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 Extend help to a company’s target audience
 Stimulate further demand
 Stay close to them. Recording and keeping an electronic database memory of customers and
prospects and of all communications and commercial contacts helps to improve all future
contacts.
Telemarketing is the planned and controlled use of the telephone for sales and marketing
opportunities. Unlike all other forms of direct marketing it allows for immediate two-way
communication.
Telemarketing as a co-ordinated marketing activity
Role of telemarketing
a. Building, maintaining, cleaning and updating database. The telephone allows for accurate
data gathering by compiling relevant information on customers and prospects, and selecting
appropriate target groups for specific product offerings.
b. Market evaluation and test marketing. Almost any feature of a market can be measured and
tested by telephone. Feedback is immediate so response can be targeted quickly to exploit market
knowledge.
c. Dealer support. Leads can be passed on to the nearest dealer who is provided with full details.
d. Traffic generation. The telephone, combined with postal invitations, is the most cost effective
way of screening leads and encouraging attendance at promotional events.
e. Direct sales and account servicing. The telephone can be used at all stages of the relationship
with the prospects and customers. This includes lead generation, establishing buying potential for
appropriate follow-up and defining the decision-making process.
f. Customer care and loyalty building. Every telephone contact opportunity can demonstrate to
customer that they are valued.
g. Crisis management. If, for example, there is a consumer scare, immediate action is essential to
minimize commercial damage. A dedicated hotline number can be advertised to provide
information and advice.
The Internet and e-commerce
The Internet is the name given to the technology that allows a computer with a telecommunications
link to send and receive information from any other suitably equipped computer. Terms such as ‘the
net’, the information superhighway’, cyberspace, and the ‘World Wide Web (www) are used fairly
interchangeably. Access to the Internet is becoming easier and easier: most new PCs now come preloaded with the necessary software and developments in telecommunications networks will
eventually render modems unnecessary. The decision to use the Internet and related digital
technologies for either the whole or as a part of the business operations is a strategically significant
decision. The Internet can be used by organizations for business-to-consumer and/or business-tobusiness purposes. In the UK some 80% of Internet activity is business-to-business related, although
as more members of the publics get on line and telephone and access costs reduce, so this divide
should narrow.
Websites
Most companies of any size now have a ‘site’ on the Net. A site is a collection of screens providing
information in text and graphics form, any of which can be viewed simply by clicking the appropriate
button, word or image on the screen. The user generally starts at the site’s ‘home page’, which sets
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out the contents of the site. For instance, Penguin UK has a home page which includes the following
options.
Audience profile
The Internet is reckoned to be currently the fastest growing communications medium in Britain. It is
thought that use is growing at between 10% and 15% per month. Estimates of the number of Internet
users vary widely: one survey found that 4.Module 6 million adults in Britain (10%) of the population
had Internet access. Many net users it both at work and at home.
Internet Service providers (ISPs)
Connection (if not available through a user’s organisation) is made via an Internet Service Provider
(ISP). The user is registered as an Internet subscriber and pays a monthly fee. If access is via
telephone line, telephone charges may also be payable.
ISPs such as America Online (AOL) and Tiscali provide their own services, in addition to Internet
access and e-mail capability. For instance, AOL also offers a main menu with options such as Life,
Travel, Entertainment, Sport, and Kids. There are many ISPs offering a combination of cost and
performance. Many new also offer ‘broadband’ (very quick) access via cable or ADSL modem.
Browsers and search engines
Most people use the net through interface programs called browsers. Internet Explorer and Netscape
Navigator are two examples. Surfing the net is done using a search engine such as Yahoo or Google.
These guide users to destinations throughout the world: the user simply types in a word or phase such
as ‘beer’ to find a list of thousands of websites that contain something connected with beer.
Promotion: banner advertising
Companies such as Yahoo make money by selling advertising space. For instance if you type in
‘beer’, an advertisement for Miller Genuine Draft will appear, as well as your list of beer-related sites.
If you click on the advertisement you are taken to the advertiser’s website, perhaps to be favorably
influenced by the entertainment provided by the site, or perhaps even to buy some of the product.
The advertiser may get you to register your interest in the product so that you can be directly targeted
in future. At the very least advertisers know exactly how many people have viewed their message
and how many were interested enough in it to click on it to find out more.
E-mail as a promotional tool
E-mail is cheap, targeted and can be sent to millions of people at relatively little cost, and therefore
can be used in a number of different ways.
 To advertise a product/service, usually with a link to a website.
 To update a subscriber to a product/service with useful information
 To confirm an order
 To invite users to write in or to respond to a helpline.
Unsolicited e-mail is probably more intrusive than traditional ‘junk mail’, though less so than the
telephone. However, bad use of e-mail can have the habit of upsetting large numbers of people, to
the extent that in Europe regulation is felt to be needed.
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Curbing the cost of junk e-mail
The European Commission have published a report entitled ‘Unsolicited Commercial
Communications and Data Protection’, which highlights the significant issues of concern surrounding
the use of e-mail for consumer targeting. The report estimates that in future the cost of downloading
unsolicited e-mails could reach $Module 6 .4 billion a year. Regulations covering the use of direct
mail are relatively clear in most countries with opt in/out clauses and mail preferences services. The
situation online is far from clear. Issues surrounding costs to recipient’s presents a different aspects
to this form of communication. Unwanted direct mail can be thrown away whereas e-mail incurs in
viewing and downloading from the Internet.
‘Spamming’ – the process of sending millions of unsolicited messages at one go – creates major
problems for recipients imposing high cost. E-mailing is an attractive form of communication for
marketers, being cheap, fast and effective.
In Europe, four separate directives cover unsolicited e-mail but are considered to be unclear and
inconsistent. To date five countries (Austria, Denmark, Finland, Germany and Italy) have legislated
for opt-in systems, which allow for e-mail to be sent to consumers who have indicated they want to
receive them. However, the ‘policing’ of this issue is complex and will take some time to arrive at
any kind of international agreements.
Internal communication: intranet
The idea behind an ‘intranet’ is that companies set up their own mini version of the Internet, using a
combination of the company’s own networked computers and Internets technology. Each employee
has a browser, and a server computer distributes corporate information on a wide variety of topics and
also offers access to the global net.
Potential applications include daily company newspapers, induction material, online procedure and
policy manuals, employee web pages where individuals past up details of their activities and progress,
and internal database of the corporate information store.
Marketing and e-commerce
Before we look at some of the strategic issues associated with marketing communications and the
Internet, it is important to establish what is meant by some key terms, namely, e-commerce and
Internet marketing.
E-commerce is about transactions involving the exchange of goods and services, for payment, using
the Internet and related digital facilities.
Internet marketing is about the application of the Internet and related digital facilities to help
determine and satisfy marketing objectives.
Although Internet marketing is not concerned with the mechanics associated with payments and
security the boundaries between e-commerce and Internet marketing are becoming blurred. As a
result of this these phrases will be used interchangeably.
Strategic issues
The development of an interactive facility requires a major shift away from conventional commercial
activities. This is often achieved in three phases.
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Table 5. Strategic issue
Presentation
Interaction
Representation
3 Promotional Techniques
Comment
The use of a website to enable visitors/customers to
access information, provides an opportunity to stand out
from competitors and enhance corporate image. It is an
opportunity to illustrate the organization’s products and
services. This facility is often referred to as
bronchureware.
This phase is characterized by tow-way communication.
Questions and answers flow between system and the
user. Visitors to the site are able to enquire more deeply
than at the presentation stage and information about the
visitor is logged and stored on a database for future
reference and for both on and offline communications.
When this phase is reached the organization will have
replaced parts of its commercial activities with full
online transactions. The organization’s traditional
commercial trading methods and channels may still be
in place and the new interactive facility provides a
complementary and/or alternative method for particular
market segments.
It should not be assumed that all organizations move through each of these phases and if they do, it is
a different speeds. Those that do migrate do so according to a number of variables, including the
nature of the markets in which they operate, their strategy, technical resources, attitude to risk and
competitive pressures.
Internet technology can also be used strategically to enable communication with particular audiences.
a. The Internet itself enables public access to an organization’s website.
b.An intranet refers to a private internal network which is normally used to enable communication
with employees.
c. Extranets allow particular external audiences such as distributors, suppliers and certain customers
access to an organization’s facilities.
The Internet offers two main marketing opportunities, namely distribution and communication. The
ability to reach customers directly and so avoid many channel intermediaries reduces transaction costs
and is a prime goal for most organizations.
The use of the Internet as a communications medium is equally attractive. It is more than a medium as
it facilitates interactivity and a two-way dialogue that no other method of communication can support.
Unlike other forms of communication, dialogue is induced by the customer, the speed and duration of
the communication is customer controlled and the intensity of the relationship (with the online brand)
is again customer managed. All the traditional tools of the promotional mix can be deployed over the
Internet, with varying degree of success, but it appears that offline marketing communications are
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required to support the online communications and facilities. A combination of off and online
communications need to be determined if the overall communications are to fulfil the DRIP roles.
The use of the Internet can perhaps be best observed when set alongside the purchase decision
process.
Use of the Internet to support stages in the buying process
-Awareness
Not very effective at generating awareness and needs the support of offline communications to drive
visitors to the site.
-Positioning
As a means of presenting features and benefits the web is very good once a prospective customer has
determined a need for a supplier search and is looking to compare offerings.
-Lead generation
Once an active search commences leads can be obtained and used to reach prospects in the future.
-Purchase decision support
By carrying vast amounts of information at low cost websites provide good opportunities to impress
visitors and build credibility.
-Facilitate purchase
Through the provision of basic transaction facilities (credit card payment) sales should not be lost
once a decision to buy has been made.
-Post purchase support and retention
Through the provision of free customer support and advice, levels of cognitive dissonance in
customers can be reduced. Feedback from customers, e-mail updates about product developments and
the use of sales promotions to stimulate repeat site visits can improve reputation, enable cross selling
and promote favorable word of mouth recommendations.
E-commerce and website management
Management needs to attend to three main decisions concerning their Internet and digital related
facilities. These are their development, maintenance and promotion. All of these use resources and
management needs to be clear about the level of support that is appropriate. One of the key concerns
is that the websites should do the following.
a. Attract visitors – with online and offline methods.
b. Enable participation – interactive content, and suitable facilities to allow for transactions.
c. Encourage return visits – design targeted at needs of particular segments, free services and
added value facilities.
d.Allow for two-way information sharing – personalization reflecting visitor preferences, direct
marketing and information retrieval provide visitors with the information they are seeking.
Business-to-business e-commerce
Many observers are taking the view that the future of Internet marketing lies in the business-tobusiness (B2B) sector. The belief is based on the premises that:
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a. Selling low value items to consumers requires significant spending on advertising and promotion
and costly back up systems.
b.Consumers expect free content
c. Business which look for quotes can massively increase their source of suppliers, nationally and
globally
d. Suppliers have a wider market to appeal toB2B is therefore expected to break down barriers and
enhances supply management.
Key Media – Concept and effectiveness
Setting the scene
We will look at primary and secondary advertising media.
1. We will start by outlining the general criteria involved in media selection
 Criteria by which the effectiveness and efficiency of media can be evaluated
 How the major media can be compared with each other
2. We will then look at the characteristics of each of the major media (online and offline) in turn, and
at how opportunities to advertise in each can be evaluated.
Media selection
The general criteria for selecting a medium to convey the promotional message to the appropriate
audience are as follows:
 The advertiser’s specific objectives and plans
 The size of the audience which regularly uses the medium
 The type of people who form the audience of the medium
 The suitability of the medium for the message
 The cost of the medium in relation to its ability to fulfil the advertiser’s objectives
 The susceptibility of the medium to testing and measurements
The planning of an advertising campaign
1. The identification of the target audience: Who are they? Where are they? Which demographic
group do they fall in? What are their interests, media consumption habits, buying patterns,
attitudes and values?
2. The specification of the communication or promotional message. What do you need to say, and
in what way, in order to impact on the audience in such a way to achieve your marketing goals?
3. The setting of targets: what is the marketing goal to which the advertising can contribute? What
do you expect the ad to achieve and at what cost? What aspects of the audience’s thinking or
behaviour do you which to change, and how will you recognize and measure that change if and
when it occurs?
Balance of the message
The understanding of the level of involvement that may exist in the target audience can be used to
determine the overall balance of the message. If there is high involvement, messages tend to be
rational (or information based), proclaiming product benefits and the key attributes. Where there is
low involvement the audience are not really interested and the use of the emotion (or image)
predominates.
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There are a number of ways in which these information and emotional based messages can be
presented to audiences. These are referred to as message appeals and some of the more common
approaches are outlined below.
Table Module 6 . Information based appeals
Comment
Issue
The benefits are presented using reasoned, factual
Factual
arguments (e.g. nicotine patches).
Allow the target customer to identify with the character
Slice of life
s and a common problem. Brand X is then perceived as
a suitable solution (e.g. washing powders).
Show the audience how the product solves a problem
Demonstration
(e.g. floor cleaners, before and after use).
Through comparison it is possible to achieved enhanced
Comparative
status and superiority (e.g. credit and charge cards).
Table 7. Emotional based appeals
Issue
Fear
Humour
Animation
Sex
Music
Fantasy
Comment
The suggestion of physical danger or social rejection
might be alleviated through use of the brand (e.g. life
assurance, drink driving, anti-dandruff shampoo).
Attention and mood can be maintained by relaxing the
target audience (e.g. Batchelors Super Noodles).
For low interest products/services animation can attract
attention and covey complex products//issues in a novel
manner (e.g. inland revenue self assessment, Tetley tea
bags).
Used primarily to attract attention and to be salient (e.g.
Diet Coke, Wondebra, Citroen Xsara).
Provides campaign continuity and a degree of
differentiation through recognition (e.g. Ford Cougar,
Peugeot 40Module 6 ).
Used to engage an audience and to encourage the
question ‘what is going on here? (Bristol & West
Building Society, Silk Cut, Ericsson).
When an emotional approach to advertising is used, the aim is that the consumer will develop
positive feelings about the product being advertised. The role of what is termed likeability becomes
paramount.
People need to enjoy the advertisement at the same time as finding it credible. According to fill
(2002) those advertisement that are remembered have certain characteristics. These characteristics
add up to making an advertisement ‘likeable’
1. The product is different or new
2. The advertisement itself is ‘different’ or interesting
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3. The message proclaims something that is personally significant and relevant to the consumer
Researchers have isolated likeability as the only meaningful indicator of the success of advertising.
Likeable messages are more likely to be stored in the long-term memory, and retrieved when the
customer is ready to make a purchase. In an online context, the concept of likeability can also be
applied to websites. Those that are enjoyable to visit and use are more likely to be remembered and
revisited. In conclusion, according to De Pelsmacker et al (2000):‘Ad likeability might be an
important factor because of its ability to attract attention and facilitate information processing.
Peripheral cues such as humour, music, animals and children may attract attention, induce curiosity
which leads consumers to watch the whole ad, and induce a favourable attitude towards the ad, which
can lead to a favourable brand attitude.’
The size and type of audience
Each medium reaches number and type (demographic group, market segment, interest group) of
people. There is a trade-off between the size and relevance of the available audience.
General-interest, national mass-market medium (such as a national newspaper or television) will have
the largest circulation figures but may not reach the highest percentage of a particular market
segment.
1. Segmentation may be possible through the scheduling and placing of ads in large-scale media
(for example, in special-interest sections or supplements in the press, or by programme preference
in TV).
2. Targeted media may reach a smaller population, but a higher percentages of the target audience.
 Local or regional media (in the catchment area)
 Specialist magazines and journals related to the target audience
 Media which fit the ‘media habits’ of the target audience
The effective audience of a medium and therefore the competitiveness of different media is
influenced by the following factors.
a. Opportunity to use the medium. The potential audience will not be able to use TV during
working hours, or magazines while driving, or cinema over breakfast. Radio in the morning and
TV in the evening have bigger effective audiences.
b.Effort required to use the medium. People usually use the medium that will cost them least
effort. Print media require the ability to read and concentrate: television is comparatively
effortless.
c. Familiarity with the medium. People consume media with which they are familiar: hence the
survival of print media, since the education system is still predominantly print orientated.
Electronic media are however gaining ground.
d.Segmentation by the medium. The print media currently has the greatest capacity for
segmentation into special-interest audiences. Commercial television segment to a limited extent
thorough programming and cable/satellite television to a greater extent, through the proliferation
of channels. Some media only charge in proportion to the segment you are targeting, which is
more cost effective than paying for the full circulation.
Media research is designed to provide advertisers with detailed information on the size and
composition of the audience for relevant media and the reading and viewing habits of the different
types of people and so on. Media planners (the people in advertising agencies who plan how to
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deploy the main-media advertising budget) use as much reliable research data as they can obtain.
Here are some examples.
a. The national readership survey or JICNARS (Joint Industry Committee for National Readership
surveys) for major newspaper and magazines
b. BARB (the British Audience Research Bureau) for television
c. RAJAR (Radio Joint Audience Research) for radio
d. JICPAS for posters
e. The Screen Advertiser’s Association for cinema
A marketing organization may wish to commission or carry out its own research into the media habits
of its customers and potential customers.
The suitability of the medium for the message
Certain media ‘do’ certain things better than others. You might bear this in mind.
a. The technical characteristics of the medium. The success of a medium depends on its ability to
identify and offer the benefits which its technical characteristics are best suited to provide:
television for images and demonstrations, cinema for fantasy, visual impact, radio for music and
participation, print for detailed information.
b.The perceived function of the medium. Media users look to different media to perform
different functions in their lives: information/education (world news, local events, specialist
instruction) or entertainment (music, sport, escapism, community contact). These perceptions of a
medium’s functions and strengths will influence the orientation of its audience towards
advertising messages.
c. The impact/realism of the medium. One of the strengths of television is the impact to be derived
from its realistic merging of sight and sound.
Cost and value for money
Cost itself is not a helpful criterion (unless it rules out a medium by virtue of its exceeding the
spending budget). What advertisers need to know, in order to compare and evaluate media
meaningfully, is the following.
 How many relevant people are reached?
 How many times and how effectively?
 For how much?
The conventional criteria of value for money measurement is: cost per thousand people reached by a
medium. If an advertisement in a newspaper with a circulation of 2 million readers costs &7,000, the
cost per thousand is &3.50.
‘Cost per thousand’ is a common inter-media comparison-measuring device. However, it is only a
crude measure, which does not take everything into account.
a. The targeting or relevance of the audience reached by different media (or in different issues or
times slots)
b.The potential impact of an advertisement is different media (its size or length, colour or black and
white, positioning in the publication or programme schedule, proximity to competing ads).
c. Extended or repeated exposure to the ad (if people use the medium frequently, or pass it on to
friends).
d. Selective exposure to the ad (for example, people may not read the whole paper or magazine, or
may leave the room during TV commercials).
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The different media have their own methods of allowing for these factors when promoting their
effectiveness to advertisers, and we will look at some of them – such as television ratings.
Susceptibility to testing and measurement
Testing or measuring the effectiveness of advertisements is the only sure way to know what ‘works’
in terms of gaining a response. The same ad run in different media can demonstrate the comparative
effectiveness of the media, while different ads (size, position, timing, layout, response methods,
headlines) in the same media can indicate he most effective form of the promotional message.
Some media are better for testing ads than others and if this is important to you, you will need to ask
yourself the following questions.
a. How quickly do I want our test to yield results? (A daily publication produces response ore
quickly than a weekly.)
b.How effectively does the medium allow me to elicit direct responses? (Will it carry a directresponse coupon, memorable telephone number?)
c. Will I able to attribute increased enquiries/sales to their source in a particular ad? (Coded
coupons, tracking for example).
A general comparison of major media
Newspapers (daily metropolitan/national)
Advantages
 ‘Mass’ medium: large audience in single exposure
 Targeted sections (auto, home computers etc)
 Reader navigation: seeking news, information
 Short lead time for production: accept ads 24-48 hours before publication
 Flexibility to ad size
 Tangibility of ad (can be torn out and kept)
 Multiple readers/users
 Allows detailed information (prices, phone numbers etc)
 Allows (still) images
 Allows response mechanisms (eg captions)
Disadvantages
 Circulation does not mean readership: wasted circulation paid for
 Print/image reproduction of variable quality
 No exclusivity: ad may be next o competitor’s
 Costs loaded for preferred positions
 Short life-spans of news
Newspapers (local/free)
Advantages
 Low cost
 Geographical targeting
 High local readership
 Special section (especially local real estate, entertainment etc)
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Disadvantages
 Circulation of free papers/weeklies not always monitored/audited.
 Variable editorial content
 Subject to weather and junk mail rejection if letterbox dropped
3 Promotional Techniques
Magazines
Advantages
 High circulation (major titles)
 Targeted audiences (special)
 High quality reproduction (colour photography etc)
 Potential high prestige
 Reader motivation (selection, subscription)
 Long shelf life and multiple use/readership
 Tangibility, detail, images, response mechanisms (see newspapers)
Disadvantages
 High costs of production
 Hyper-segmentation (by interest and geography, may be insufficient circulation to support local
outlets)
 Long lead times: copy/artwork required 1 – 3 months before publication, can be inflexible.
Television
Advantages
 ‘Mass’ medium: large audience at single exposure, almost universal ownership/access
 Detailed monitoring of exposure, reach, viewer habits
 Allows for high degree of creativity
 Realism: impact of sound + sight + movement
 High-impact visual images reinforce retention
 Allows demonstration
 Flexibility as to scheduling
 Allows association with desirable products
Disadvantages
 Most expensive of all media costs
 High production costs
 Lack of selectivity (except via programming) of audience
 Lack of opportunity: does not reach commuters/workers
 Long lead times for booking and production: penalties for withdrawal: inflexibility
 Passive, unmotivated audience: ‘zapping’ by video fast-forward and remote controls erodes each.
Radio
Advantages
 ‘Mass’ medium: wide coverage/access
 Audience selectivity (local/regional) programme style/variety/content)
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 Opportunity: radio is portable – in-home, in-car, on public transport, shops, offices – even jogging
 Function: high usage for morning news, home ‘companionship’, background
 Personal (and potential for participation)
 Highly competitive costs of air time and production
 Can be backed by personal DJ promos
Disadvantages
 May be passive ‘background’ noise: low attention, retention
 May be: no tangibility (pressure on retention of message), no shelf-life or ‘pass on’ circulation, no
demonstration, no coupons, limited details
Outdoor media (poster sites bus stops, building etc)
Advantages
 Flexibility sites, duration of lease
 Comparatively low cost
 Opportunity: exposure to commuters, shoppers
Disadvantages
 Difficulty of verification of exposure/response
 Subject to weather
 Opportunity: site specific
 No audience selectivity (expect by site)
Cinema
Advantages
 Glamorous
 High, impact (large size, highly visual, loud sound, high quality)
 Captive audience (no TV ‘zap’ factor)
 Can segment by local area
Internet
Advantages
 Principally, sight, but with sound and colour further possibilities are developing
 Interactive, permitting direct response
 Able to track audience movements
 Message permanent, and can be down-loaded
Disadvantages
 Generally poor viewership
 Consumer confidence in security low (but improving)
 Possible to direct audience to information, but can be difficult to gain loge audience without
support from other media
 Not yet a mainstream media with broad customer appeal
 Speed of access depends on sophistication of technological link
 No universal computing language yet agreed.
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When are the messages to be communicated to the target audience? This depends on a number of
factors.
a. Objectives of the campaign. If these are short term, hen a concentrated burst will be best.
Longer-term objectives can probably be satisfied by a less intense campaign.
b. It is important to reach the consumer at a very near the point of purchase.
c. The level of involvement is important. For high involvement purchases, less repetition is needed
than for low involvement, where the message needs to be more frequent.
d. The characteristics of the target audience will also dictate scheduling times – when their favourite
programmes are on television, for instance.
e. The size of the promotional budget is also a key factor.
The following scheduling options have been identified.
Continuity patterns
These represent regular and uniform presentation of advertisements for reminder purposes, generally
on mature products and fmcg’s, where no additional information is needed by the customer prior to
purchase. The danger with this type of scheduling is that where the budget is limited, resources may
be spread too thinly over the period during which the advertisement is running.
Flighting patterns
Flighting means concentrating advertising in only a few periods, allowing advertisers to spread
resources over a longer period of time. No campaign is run at all in some months, in order to be able
to spend more during times of peak demand. For that reason it is appropriate in situation where there
is a varying demand for the product, or there is likely to be a sudden requirements for some kind of
competitive response.
Other situation where flighting may be appropriate include:
 Major sales promotions
 A response to adverse publicity
 One-off market opportunities
 Seasonality (such as tour operators advertising summer holidays in the depths of winter)
 Launch of new product
 Promotion of a particular event
Pulsing
The disadvantage of a flighting pattern is that the target customer can easily forget messages during
times of no advertising. A pulsing pattern represents a combination of both flighting and continuous
presentation. A certain level of advertising takes place during the whole period; with levels increased
are certain times of the year. This is a safe pattern, but is also likely to be comparatively expensive.
The key advantage of pulsing stops target customers from forgetting, building awareness and
providing a barrier in the customer’s memory against competitor advertising.
Press
Press or print media
Newspaper: daily and weekly, morning and evening, national and regional
Magazines, periodicals and journals: general appeal, special interest and trade
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Circulation and readership figures
The Audit Bureau of circulation (ABC) provides audited figures of the actual circulation of major
newspapers and magazines. This figure is often the basis of advertising rates. It offers only partial
information.
a. There may be many more readers than purchasers. People may pass a publication on to other to
read, or it may be perused by many people in dentists’ waiting rooms or hairdressers. If is the
estimated readership that interests the advertiser. The readership Survey publishes the average
readership per issue.
b.Readership data is also available on what types of readers consume various publications, with
what frequency and in what manner (all the way through or some sections only).
Types of press ads
Print media offer different types of advertising.
a. Classified advertising. The classified sections of publications offer small spaces for text-only
ads. The advantage is that classified space is very cheap and the publication usually typesets the
ad for you. The disadvantage is the difficulty of attracting attention with so much competition
and so little space: icons, headline, styles and impactful/incentive copy are required to make an
ad stand out.
b. Semi-display advertising allows you to use borders, typographic features and illustrations to
attract attention (although on a crowded page, white space and simplicity may be more effective).
Small ads in the Yellow pages are a good example.
c. Display advertising offers further opportunity for creativity: the advertisers design and provide
their own artwork or film, constrained only by the technical specifications (size, colour) of the
publication. Full-color magazine ads are a good example. ‘Long copy’ advertisements break the
usual simple visual style of display advertising by including lots of detailed information.
d. Advertorials are advertisements presented as edited copy in order to take advantage of the
perceivably objective authority of editorial matter. Features on health and beauty, advice, house
and garden are often advertisements for the products and services reviewed or recommended.
e. Loose inserts or ‘drop outs’ are printed leaflets (produced by the advertise) inserted into
magazines and newspapers. They usually work out 4 or 5 times more expensive than advertising
space – but draw up to 5 or Module 6 times as many responses as a full-page advertisement.
Press and rates
Print media is bought in column inches (or centimeters) or standard page divisions (quarter, half or
full page, or junior page). The cost/rate differs
 The size of the ad
 The number of colours in the ad and the production quality of the publication
 Position of the ad for which a premium may be changed
 The readership number of the publication
 The potential for readership targeting or niche marketing
 The prestige of the publication and the spending power of its readership.
Positioning press ads
Media research into traffic per page (the reading and noting of different pages in a print publication)
suggests the following.
 Early pages are read more than late pages (depending on editorial content)
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 Right-hand pages have higher noting scores than left-hand pages
 Pages opposite relevant or popular editorial content do better than pages opposite other
advertising and less read editorial content.
Cover space is particularly sought after because of its high visibility, and usually also because the
covers are printed on better quality paper for colour production. The outside front cover is likely to
be the most expensive, followed by the outside back, inside front (especially if opposite the contents
page) and inside back.
Scheduling of press ads
The approach to scheduling requires a combination of the following concepts.
 Reach or exposure – how many of the right type of people see the ad
 Frequency – how many times people see the ad. It does not cover the quality of the exposure or
whether any impact was made on the audience.
With press advertising, in some circumstances it is generally advisable to repeat an ad more often
 If the ad is small (and may not be noticed by all readers at one exposure)
 If the publication is high circulation (so the ad may not be noticed by all readers)
 If he product or ad is interesting (and will therefore continue to attract attention)
Radio
The perceived function and image of radio is an important factor in the response to radio advertising.
Radio is a personal and intimate medium which encourages relationship and trust according to the
Radio Advertising Bureau (ww.rab.co.uk), people are more likely to believe what they hear on radio
than what they see on television. Local radio has a particularly close ‘community’ image. National
radio stations are aimed more at a particular type of listener.
Radio tends to form the background to other activities. This enables it to have a wide reach (since it
can be listed to while driving, working, jogging), but also lessens’ attention to and retention of
advertising messages. The lack of visual images is also a disadvantage, but can be overcome by
different techniques: the use of dialogue, mood, drama, humour and curiosity.
Radio ads usually bought in series of 15 second or 30 second ‘slots’. Because of the high portability
of radio, there may be a wider range of off-peak scheduling opportunities.
Listenership figures
RAJAR (Radio Joint Audience research Ltd) release quarterly reports showing what
percentage/volume of the population listens to commercial radio, at what times and for how long,
with breakdowns for each radio station. Around 25% of the UK population listen to national
commercial radio, and 50% to local commercial radio, in the course of a week, for an average 15
hours per week. Over 70 % of 15 – 34 years olds listen to commercial radio and almost the same
proportion of business people and housewives with children.
Although such figures do not indicate whether people hear or take in any ads that they may air during
their listening hours, there are several positive indicators that radio can perform well in this respect.
 Prompted recall of radio ads is 80% of that of TV ads
 Radio listeners report that they do not generally switch stations when ads come on
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 An average weight campaign on radio will reach each consumer four times a week
 Talk-back radio has a high response rate, even late at night
Television
The Independent Broadcasting Authority (IBA) controls commercial TV (and radio) in the UK, and
licenses a number of regional companies.
Because of the high exposure, glamour and audio-visual impact of television, it has become the
favoured medium for launching new products, raising brand awareness and building brand loyalty, repositioning brands and also motivating the employees and supply chain partners of the advertising
organization. (This perception is encouraged by advertising agencies, whose commission on TV
airtime is many times higher than on print space and other media.)
A major recent trend is in the development of direct response TV advertising, in which the viewer is
given a telephone number and invited to call for more information or to place an order. This used to
be perceived as down-market and American, but research now shows that it accessible to customers.
Direct response advertisings has also enabled detailed measurements of the effectiveness of ads on
different stations, at different times, in different formats.
Viewership figures
As with radio, it is a complex matter to access not just how many sets are owned and switched on at
particular times, but how many people are actually watching – let alone consciously taking in what is
being transmitted.
The size of he television audience for a given programme (and advertising) is measured in rating:
rating points, or TVRs. One TVR point represents 1% of all homes which have a TV set in the region
to which the programme is broadcast. Ratings are used by TV stations to monitor the popularity of
their programmes, and to set advertising rates. The advertiser pays for the number of TVRs allocated
to given advertising spots.
1. A programme with 20 TVRs is seen by 20% of homes with a TV. This is the number of people
who will (in theory) see an ad once.
2. If you placed an ad in four programmes, each with a rating of 20 TVRs, you would achieve 80
TVRs. However, some homes might have seen the ad all four times, while others may have
missed it altogether. You need to distinguish between reach and frequency (the number of times
the ad is run, and therefore the number of opportunities to see it, or OTS).
3. Gross rating Point (GRPs) are a measure of probable reach multiplied by probable frequency. If
you buy 280 GRPs, about 70% of households should have 4 opportunities to see your ad.
4. Target Audience Rating Points (TARPs) measure reach and frequency against specific
demographics audiences, across a wide range of criteria (geographic, gender, age, socio-economic
bracket). These are the most effective guides for advertisers, since they allow the media planner
to devise a schedule, which will deliver the largest relevant audience for the available budget: the
gross cumulative exposure of the campaign to the target audience can be assessed on the standard
cost-per-thousand basis.
Reach refers to the size of the audience which is exposed to an ad, both net (number of people
reached) and gross (including cumulative multiple exposure)
Frequency refers to the number of times an ad is run, opportunities to see (OTS) the ad; or ‘impacts’
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Ratings are measurements of television audiences, which multiply reach by frequency (or OTS to
give the probable coverage and repetition of an ad, with (TARPS) or without (GRPs) The lowest cost
per thousand is not necessarily the best schedule: One recommendation is the purchase of at least 250
– 300 TVRs, giving 70% coverage and a minimum of three OTS, in order to make a TV campaign
worthwhile.
Statistically valid and helpful for comparison as ratings are, they still give only limited information
they count pairs of eyes’ not responsiveness to ads. Detailed qualitative media research is required to
indicate people media habits.
 Leaving the room during commercial breaks
 Using the remote control to change channel to avoid ads
 Videoing TV programmes and fast-forwarding through commercial breaks
Further testing will be required to gauge awareness and recall of specific ads.
Scheduling TV ads
In addition to TARPs, which suggest where and when to schedule ads in order to reach an optimum
number of target viewers an optimum number of times, the advertiser should consider the following.
1. Daytime audiences are more responsive. Direct responses to TV ads are greatest between 12
noons – 2pm and 2pm – 4pm on weekdays.
2. Audiences show greater recall of ads at the beginning of a long commercial break. The more ads
they see, the lower the recall of each.
3. Audiences tend to watch through commercial breaks in the middle of TV programmes, because
they do not want to miss any of the programme. However, viewers are reluctant to take action in
response to ads during the programme, so direct response ads are more successful during end
breaks. (Most people respond within 15 minutes of the ad spot.)
4. Advertising guru David Ogilvy suggests that while most advertisers uses 30-second ads, 90second or even two minute ads can be more effective (as with long-copy press ads) especially for
complex or expensive products.
5. Very short (10-second_ ads can also b effective, and offer much higher TARPs for the available
budget, since you can get more exposures. However, the greater impact of longer commercials
usually offsets the reduced TARPs which longer ads deliver.
6. Repetition of ads increases TARPs, but is subject to the law of diminishing returns. It is essential
for the message to sink in, but people easily become habitual and cease to notice or be motivated
by the ad.
7. One strategy is to have a set of related ads which can be rotated, reinforcing but varying the
message.
Duplication
As part of the consideration of the effectiveness of a media plan, and related to the concept of
frequency, it is important to think about how many times a message should be repeated. This goes
back to points (f) and (7) above.
There is a general agreement that there should be at least three OTD.
 First viewing:
“What is this?” (Seeking understanding)
 Second viewing: “What does this mean tome?” (recognition)
 Third viewing:
“Oh, I remember” (prompting action)
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Members of a target audience buy several magazines, and watch more than one television
programme. They are exposed to many media vehicles. Those who are exposed to an advertisement
only once are said to provide unduplicated reach.
When a target is exposed to two or more overlapping advertisements, this is referred to as duplicated
reach. Duplicated reach is obviously more expensive than unduplicated reach, and so any media plan
needs to specify how much of each type of reach is required.
Digital television
In the UK, it is predicted that digital TV will reach 13 million homes by 2004. Digital TV allows
viewers to obtain in-depth information about products and services, via their remote control.
Digital television also offers opportunities for better targeting and segmentation. In theory, TV
companies will be able to target particular advertisements to particular areas. However, this type of
interactivity is still in its early stage. There is wariness by some marketers about becoming too
intrusive.
Other media
Outdoor media
Poster advertising is one of the oldest media for consumer goods advertising. Sites on walls,
hoardings and bus shelters can be leased for a fee per calendar month. In addition, many vehicles
(buses, trucks and taxis) now carry external advertising, and some are tailor-made to do so
(advertising ‘floats’). Trains and buses also offer internal advertising positions. Size and visibility of
the site are the main consideration.
Cinema
Cinema advertising takes advantage of high audio-visual impact and a captive audience but still
requires a high quality and entertainment value.
Cinema advertising best suits ‘lifestyle’ products.
 Branded consumer goods with high style and profile, aimed mainly at young adults (such as jeans
and alcohol)
 Local services in the area of the cinema (particularly restaurants)
New media
Technology has widened the range of advertising media to include the following.
1. Videos including informational instructional videos and advertising accompanying entertainment
videos
2. Teletext (usually via sponsoring of relevant types of information which the target audience might
access)
3. Enhanced CD and CD-ROM (especially for selling merchandise related to the information or
entertainment contained on the CD)
4. Websites. Internet shopping and other transactions are on the increase, as issues of payment
security are sorted out. Websites with product/service information and related links vary in
sophistication, but can provide an attractive audio-visual and interactive experience of
promotional messages. In additional, they offer an opportunity for customers to access basic
information, which they might be reluctant to ask about over the phone.
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Advertising on the Internet
The opportunities to reach target audiences are now many and varied, but just because they exist, that
does not mean that they have to be used. The purposes of advertising is to ‘inform, influence or
persuade’ (CIM), regardless of the media used. To quote form the CIM again:
‘Matching medium to audience demands that the marketer consider a number of criteria, some of
which will be more important than others depending on the campaign aims and objectives. These
include cost, ability to reach the audience and creative ability of the medium.’
So the Internet has become a medium for carrying advertising in its own right. The same principles
that we have discussed centred around matching medium to audience, still apply. Companies need to
be sure that the web provides the right environment and audience profile to meet marketing
objectives. The most common form of web advertising occurs when the advertiser uses a range of
sites to drive visitors to a corporate site.
Companies are still earning what works with web advertising, and what does not. There are two basic
types of promotion associated with the Internet, online and offline.
Online promotion uses communication via the Internet itself to raise awareness. This may take the
form of links from other sites, targeted email messages or banner advertisements.
Offline promotion uses traditional media such as TV or newspaper advertising to promote a website
address (URL).
Figure 12. Website advertising
Portal
Eg Yahoo
Corporate
Website
General news service
Eg Sunday Times
Special interest site
Eg lifestyle magazine
A banner advertisement is “a typically rectangular graphic displayed on a web page for purposes of
brand-building or driving traffic to a site. It is normally possible to perform a click through to access
further information form another websites. Banners may be static or animated”. Banner adverts can
be targeted at a particular audience.
Placing and paying for banner advertising
Banner advertising can generally be placed through a traditional agency. It is typically paid for
according to the number of users who view the web page. Cost is calculated as cost per thousand ad
impressions.
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Measuring the effectiveness of Internet advertising
This is based upon the behaviour of web users. When using the Internet, users will go through
several stages:
 Be exposed to a message (for example, through a banner advertisement)
 Look for more information by clicking on the banner
 Go to the web page of the advertiser.
Based on this sequence, different types of ad effectiveness have been identified (listed by De
Pelsmacker (2000)). These can be measured for different online advertisements of the same
advertiser, on a daily basis if required, to monitor web ad effectiveness.
 Total ad impressions (number of contacts made by the ad)
 ‘Click throughs’ (contact by a user with advertisement)
 Ad transfer (successful arrival of a user at the advertiser’s website)
Other online advertising methods
These include:
1. Promotion in search engines and directories (such as Yahoo). Your company may want to
have its company website listed when a user types in a specific keyword, such as ‘office
equipment’. To achieve this, your website should be registered with each of the main search
engines (Yahoo, MSN, Infoseek, Netscape, Google, for example).
2. Links from other sites. This involves making sure that your site is linked to as many related
sites as possible.
3. Using e-mail for advertising new products directly to customers.
Pull,Push and Profile
Setting the scene
The focus in this part of the marketing communication process is to consider the emphasis of the
marketing strategy – the balance between the need to communicate with consumers, with distributors
and with all other stakeholders.
Type of Audience
Message focus
1. Consumers and business-to-business customers
Products and Services
2. Members of the marketing channels, such as dealers
Product and Services
3. All stakeholders, in order to raise the visibility
The organization
of the organization
These approaches are referred to as the 3Ps of marketing communication:
1. Pull communication
2. Push communication strategies
3. Profile communication strategies
Pull based communication strategies
A pull strategy is used to generate and sustain a dialogue with end user customers. These might be
consumers or they might be business customers where the customer is the end user and does not
move the product on through the marketing channel. Pull strategies encourage end-users to demand
the product from the distributors, pulling the product through the distribution network.
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Where a pull strategy is specific, then the promotional mix and the message and media combination
will need to be co-ordinated. This will be explored later.
Typical strategies are to create higher levels of product awareness (spontaneous or prompted).
A particular pull strategy that has been developed and refined over many years is branding.
Branding and customer retention
Branding originated as a means of differentiating products from commodities but it has come to be a
major importance for reasons far wider in power an implication, especially since the introduction of
mass media. In many markets it has taken over the role previously held by the direct selling
operation.
What is a brand?
The following is a useful definition of a successful brand.
A brand:
 Is an identifiable product, service, person or place
 Augmented so that the buyer or user perceives
 Relevant, unique, added values, which
 Match the buyer’s/user’s needs closely
It is possible to depict this definition in diagram form. The brand contributes the added value that can
be seen as adding ‘clothes’ to a naked product.
Figure 13. Added value concept
1
Core
Product
2 Added value
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Figure 14. The augmented product concept
3 Promotional Techniques
1
2
3
3
The core product satisfies the basic need of the customer, which is then built upon with actual product
features and the augmented product ‘embellishments’.
Another simple way of describing the difference between commodities and brands is the following
diagram.
Figure 15. Brand and commodity differentiation
High
Brands
Price
Differentiation
Low
Low
Commodities
Product/Image differentiation
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Branding encourages the consumer to associate certain attributes with a product. It differentiates very
similar products into distinct segments of the market. The process of differentiation through branding
allows the marketer to establish a unique position for a package. Thus goods, which in fact have very
close substitutes, as in fmcg markets, can be positioned as though there was very limited competition.
Brands are no longer simply a convenient device to differentiate they are of importance in their own
right. It is often the brand that is bought, not the product.
The underlying justification for a brand is that it builds profits.
Figure 1Module 6 . Co-ordinated marketing communications
BASIC PRODUCT
INVESTMENT IN BRANDING
SUSTAINABLE ADVANTAGE
MARKET SHARE INCREASE
ECONOMIES OF SCALE
INCREASED PROFITABILITY
LONG TERM BRAND VALUE
Table 8. Types of brand
Type of brand
Individual brand name
Comment
This is the option chosen by Procter & Gamble,
for example who even have different brand name
within the same product line, e.g. Bold and tide.
Blanket family brand name for all products This has the advantage of enabling the global
organization to introduce new products quickly
e.g. Hoover, Heinz
and successfully. The cost of introducing the new
product in terms of name research and awareness
advertising will be reduced.
Separate family name for different products This is the option for the global organization with
inconsistent products lie where a single brand
divisions
name is not appropriate.
The company trade name
(For example, Kelloggs Corn Flakes, Rice
Krispies). This option both legitimizes (because
of the company name). It allows new names to be
introduced quickly and relatively cheaper.
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Branding strategies
There are three main elements associated with successful branding: differentiation, added value and
integration.
Differentiation
Through branding it is possible to differentiate a product from, its competitors, make it
distinguishable and readily identifiable. It has been suggested that differentiation is a four part
process as shown below.
Table 9. Differentiation
Product
Generic product
Expected product
Augmented product
Potential product
Comment
Core product, nothing added (functional aspects
only)
Minimal value expected by buyer (features,
design, packaging and price)
Value that surpasses a buyer’s basic expectation
(service guarantees, add on, delivery and
availability
Binding buyers to the branded item (brand name,
quality and value perceptions, reputation)
Added value
Branding needs to add value so that the consumer perceives a meaning in a brand that is relevant to
them. This can be achieved through the way buyers perceive the performance of the brand, the
psychosocial meanings attached to a brand and the level of brand name awareness.
Table 10. Added value
Perceived performance
Psychosocial meanings
Level of brand awareness
Comment
A function of the overall perceived quality and
presence of importance or significance attributes
(e.g. Dyson)
A deduction of the social implication of brand
ownership (e.g. Marlboro cigarettes and the
differences between German /French cars).
This can range from a state of unawareness
thorough passive, active and Top-of-Mind
awareness level. This last stage is reached when
the brand name becomes synonymous with the
product category Walkman and Hoover.
Integration
For a brand to survive, the communications underpinning it must be consistent, uniform and
reinforcing, so that it is very clear what it stands for.
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Branding and marketing communications
The main idea behind branding is that a basic product can be converted with marketing
communications into a brand. These communications can take one or two main approaches.
Table 11. Branding and marketing communications
Approach
Comment
Functional
The aim is to provide information about the attributes and
benefits associated with band ownership. This is common
where persuasion is important and where involvement and
levels of perceived risk are also high.
Expressive
emotions and feelings are central to the message and the
prime goal is to develop audience likeability for the communication.
Where involvement is low and perceived risk is minimal, it’s common
practise to try to engage the audience on an emotional level.
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Table 12. Brand decision
Branding strategy
Line extensions
Brand extensions
Multibrands
New brands
Co-brands
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Description
Use o f the same brand name to introduce new
flavors, forms, colours and package sizes.
Use of an existing brand name to launch new
products in other categories (e.g. Mars into Mars
Ice Cream, Honda into lawn lowers).
The introduction of additional brands into a
particular markets (e.g. Electroclux owns
Frigidaire, Kelvinator, Westinghouse, Zanussi,
White and Gibson).
The development of a new product into a market
where none of the company’s current brands
would be applicable (e.g. Kellogg’s entry into
sportswear).
Occurs where tow or more established brands
combine together to generate increased impact.
There are number of variants:
Ingredient co-branding Volvo advertises that it
uses Michelin tryres, Intel and Nutrasweet are
other brands which are promoted within a brand
Same-company co-branding; When a company
promotes two or more of its own brands in the
same sector.
Joint Venture co-branding; Microsoft sponsoring
of the NSPCC charity.
The relevance of branding does not apply equally to all products.
1. The cost of intensive brand communications, principally advertising to project a brand image
nationally, may be prohibitively high.
2. Goods or services, which are sold in large numbers, on the other hand, promote a brand name by
their existence and circulation.
Where a brand image promotes an idea of quality, a customer will be disappointed if his or her
experience of a product fails to live up to expectations. Quality control is therefore an important
element in branding policy. It is especially a problem for service industries (eg hotels, airlines, retail
stores) where there is less possibility than in a manufacturing industry of detecting and rejecting the
work of an operator before it reaches the customer.
Customer retention
Arguably, this is another ‘pull-based strategy’ predicated on the notion that 20% of customers provide
80% of profits.
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New customers cost more because of advertising costs, sales administration costs, joining discounts
etc, hence some firms enact customer retention programmes. Retention is not loyalty (which is
‘emotional’), but it can be bought.
Impact on marketing communications
 Customer retention requires internal and external marketing
 Development of reward packages (eg Air Miles) and communication of these
 More use of direct marketing (perhaps the Internet) with known customers as opposed to abovethe-line advertising, relationship marketing
 The main communications burden may therefore be carried out by service staff.
Figure 17. Push based communication strategies
Manufacturer
Direction of
Communication
Wholesaler or
distributor
Retailer or value
added reseller
Consumer or
buyer
Push based communication strategies
Communication with members of the marketing channel, such as dealers and retailers, is absolutely
vital if sufficient exposure and visibility are to be obtained for the product. Without suitable
distribution it is unlikely that the marketing objectives will be met. It is therefore important to
determine a promotional strategy to reach channel members in order to maximize the impact of a coordinated marketing communications approach.
This strategy is referred to as a push
communications Strategy
A push strategy requires the identification of distributor needs and, through a combination of
elements, an attempt to meet and satisfy these needs in order that both the supplier and the distributor
are able to achieve their respective goals. The focus is on the intermediary. Members of a marketing
channel might be independent organizations and have their particular goals, but they choose to work
together and are therefore interdependent and share a common goal: consumer/customer satisfaction.
Understanding the needs of the people who make up the decision making unit and then
communicating effectively is an essential aspect of the push approach. Partnership success is
achieved through co-ordination, trust, participation and the quality of information shared.
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Key account management (KAM)
Key account management is an approach to determining which customer accounts are strategically
important. These may be large revenue-driven accounts or they might be accounts that offers access
to new markets or new technology, be competitively significant or represents a geographic advantage.
Key accounts are perceived to be strategically meaningful and the communications (primarily
personal selling) are geared to sustaining and developing the relationship between the two parties.
Table 13. Key account management (KAM)
t
Stage
Pre KAM
Early KAM
Mid KAM
Partnership KAM
Synergistic KAM
Uncoupling KAM
Activity
Identification of potential key accounts.
Tantavie agreements and probing
Account review and senior management
involvement
Joint problem solving and sharing sensitive
information
Synergy of shared values and a one-entity
perspective
A positive move recognizing that there is
no further value in the relationship
There is more on key account management in the context of relationship marketing.
Profile based communication strategies
The context analysis may have uncovered issues concerning the way the organization is perceived by
a range of stakeholders, perhaps as a result of an ethical issue or crisis that has struck the company
and the associated media comment. In these circumstances, one of the objectives of the marketing
communications strategy will be to correct or adjust the perception held by influential stakeholder
audiences.
The extent of the perception gap will have been uncovered during the analysis of the organization
context. This in turn should have been articulated as a corporate communication objective.
A profile strategy addresses how the corporate entity is perceived by a range of stakeholder
audiences. For example, it is quite common for an organization to develop a communications
campaign that is targeted at the financial markets and the stock market in particular. This is referred
to as investor communications.
Corporate identity
Corporate identity and corporate image are two different facets of the profile development strategy.
Increasingly organizations are adopting the phrase corporate branding as a substitute for corporate
identity. Corporate identity is about the way an organization communicates with its audiences. There
are two main forms of communication, those that are planned and pre-determined by the organization,
and those that are unplanned and unexpected.
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The individual communication methods that make up these planned and unplanned communications
are referred to as cues.
1. Examples of planned cues are letterheads, logos, signage, product quality and the behaviour and
level of knowledge of its employees.
2. Examples of unplanned cues are media comment, the cleanliness of the company’s vehicles and
any actions taken by competitors and consumer groups that may reflect or directly relate to the
organisation.
The way in which these cues are perceived frames the way an individual sees and understands an
organisation and helps form the image they have of an organization.
Corporate identity therefore is about how an organisation presents itself. Corporate image is what an
audience believes an organisation to be as a result of their understanding of the cues. Sometimes the
perception of these cues is correct and sometimes it is not correct. This may be because of the quality
of either corporate communications or corporate performance. Corporate reputation is an extension
of corporate image.
Corporate communication strategy
As well as communicating about its individual products and services, the company may wish to
pursue a corporate communication strategy. This can take either of two forms.
1. First, it can be a simple corporate communication campaign aimed at improving the company’s
identity and subsequently its image.
2. Secondly, it may be a campaign whereby the company associates itself with a current and
topical social issue.
Crisis communications
Closely allied to corporate identity is the field of crisis management (communications). Company
image and reputation can be severely tarnished or even ruined if a response to a crisis is deemed
inappropriate.
Some crises can be anticipated, perhaps because of the nature of the business environment in which
an organisation operates. For example, hospitals can plan for bed shortage caused by epidemics or
local accidents. Airlines plan meticulously to cope with air accidents although their incidence is
relatively rare. However, the kidnapping of a senior executive cannot be anticipated with such clarity
and neither can product sabotage and other seemingly unprovoked attacks on an organisation.
The following table sets out the phases through which most crises pass. The duration of each phase
will vary, depending upon the nature of the disaster and the quality of the management and planning
processes.
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Table 14. Crisis process
Disaster phase
Scanning
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Actions
Scanning of the environment to pick up signals that might herald a disaster.
Many signals fail to materialize but those that do not surprise the
Organisation.
Identity the nature of different crises that might hit the organization. Where
And when will it affect the organization?
Devise alternative crisis programmes for differing disasters. Establish
Appropriate communication channels, internally and externally. Chief
Executive to formalize the programme and establish its significance
throughout the organisation.
Pre-impact
Preparation of a specific crisis plan accompanied by the deployment of
crisis teams in order to minimize the effects, and to inform stakeholders
of the proximity of the crisis. Select key senior personnel and delegate
Responsibility. Instigate training programmes as necessary.
Impact
Implementation of the plan and continued communication with key
stakeholder groups. The aim is to neutralize and localize the affect of the
crisis but not to hide or diminish its significance. Maintain close contact
with the media and stakeholders with access to specific personnel.
Anticipate questions, do not speculate, use facts when answering questions
and track
media comment.
Readjustment
company’s
The speed of recovery is partly dependent upon the strength of the
Image/reputation before the crisis struck. However, internal and external
(media, police) investigations characterize this phase. The organization’s
attitude must remain consistent, positive and concerned.
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4 INTEGRATION, IMPLEMENTATION $ EVALUATION
The Planning framework and Budget
Setting the scene
Marketers must be aware of how these can be expected to work in the marketplace. They cannot
control all the information that customers gather and process about products, but nevertheless
marketing organizations must use these principles of communications in order to develop an effective
co-ordinated marketing communications plan, and thereby exert some form of control.
Such plans are vitally important in the modern market, because the marketing mix variables on which
marketers have traditionally relied to distinguish themselves from their rivals (product design, lower
prices, distribution channels etc) have been changed by the marching of technology. Competitors can
copy what is done quicker than ever before.
It could be that marketing communications is one area where it is still possible to differentiate your
product or services – making the customer believe what you want him to believe about your
company, product, brand or service.
Major tasks facing those responsible for marketing communications
 Who should receive messages
 What the messages should say
 What image of the organization/brand receivers should retain
 How much is to be invested in the process
 How the messages are to be delivered
 What actions receivers should take
 How the whole process should be controlled
 Determine what was achieved
The nature of the prevailing market conditions is an important context that needs to be considered
when planning and developing marketing communications activities.
Like all other areas of business activity, marketing communications needs careful housekeeping. The
amount of money available is the key constraint on marketing communications, and there is growing
pressure on total communications expenditure. This is because of fluctuating world economies,
increasing media costs and also because methods of measuring the effectiveness of spending have
been improved, and wastefulness is more transparent. We will consider who sets the budget and how,
and that can be done to control expenditure and get the best value for money.
The business context
An organization’s interaction with the various markets in which it operates is, of course, crucial. In
order that its marketing communications be effective it is necessary to understand the conditions and
elements that prevail in specific markets.
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 Is the market expanding or contracting?
 What are the values and beliefs held by the target audience towards your products and those of
your competitors?
 What are the attitudes of intermediaries?
 What is the nature of competitive communications?
These elements (and others) constitute the business context. An organization’s primary linkage with
the market in which a product/brand is distributed is through the strategies and plans that it develops
in order to articulate its intentions and manage its designated resources.
Corporate strategy and business strategy
Corporate strategy is concerned with identifying the scope of activities and markets with which the
company wishes to be associated.
The directions in which a company will move forward will be dependent upon a number of factors.
 The nature of the changing environment
 The existing and future resource capabilities of the organization
 The strategies adopted by competitors
 The expectations and values of the management and workforce
 The maintenance of a competitive position within the market
The strategic triangle
One way of looking at this is from the perspective of the three main players, as in the ‘strategic
triangle’, so called by Japanese management consultant Kenichi Ohmae (1983)
Figure 18. Strategic Triangle
Multiple
segments
Customers
Value
Value
Company
Cost comparison
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Once the corporate strategy has been decided, this may then be translated into a business unit strategy.
Business unit strategy is concerned with how individual strategic business units will compete within
their chosen market.
Functional strategic (or operational strategies) encompassing marketing, finance, production and
personnel will then be created to support the corporate or individual businesses unit strategy. As part
of the marketing mix, a promotional strategy will be devised that will integrate into the strategic
marketing plan and contribute to the fulfillment of business unit objectives.
The framework within which the promotional strategy operates is built upon prior decisions regarding
product policy, segmentation and targeting. As a consequence, should any of these decisions be
fundamentally flawed, then the promotional strategy is somewhat restricted by these decisions.
Creative advertising may sell the product once, but should the product not meet customer
expectations, it may not sell it again.
This example highlights the contribution that a promotional strategy makes within the overall
corporate strategy. It also shows how corporate level or business level decisions provide the
framework within which the promotional plan can function.
In the short term, marketing communications are directed against competitors because marketing
communications are types of ‘noise’. Two examples are:
 Repositioning
 ‘Knocking copy’ (e.g. disputes on which is the cheapest air fare)
Marketing Communication Objectives
As we have already emphasized, the nature of marketing communications strategy has to be viewed
within the context of an overall marketing strategy, since a promotional strategy cannot exist in
isolation. Prior to the promotional strategy being decided, the company will make a series of
corporate and/or business unit decisions that will determine the nature of the overall marketing
strategy. It is this, which will then lay down the parameters within which a promotional strategy will
be developed.
Each level of the organization has a hierarchy of:
 Objectives
 Strategy
 Tactics
The tactics of the upper level then become the objectives of the next level down in the organization.
The levels we can usually consider are:
 Corporate (and then business, if separately managed)
 Functional (including marketing)
 Activity (including marketing communications)
An organizations’ mission statement is a description of long-term vision and values. Mission
statements have become increasingly common because they can provide clear guidance to managers
and employees on the future direction of the organization. In particular the mission statement can be
sued to develop the hierarchy of objectives that link the long-term vision and values with specific
objectives at each level of the organization.
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In order to deliver an effective plan, it is important to establish marketing communications objectives.
These will involve variables such as perception, attitudes developing knowledge and interest or
creating new levels of prompted and spontaneous awareness.
It should be clear form the diagram below that for out purposes there are three different forms of
objectives: corporate, marketing and communications objectives. Collectively these are referred to as
promotional goals or objectives.
Figure 19. Marketing Objectives
Marketing
goal
Communication
goals
Promotional
objectives
Corporate
goals
Promotional objectives
Objectives need to be specific in that they must be capable of communicating to a target audience
(who), a distinct message (what), over a specified time frame (when). Promotional objectives must
therefore include:
 Identification of the target audience
 A clear message
 Expected outcomes in terms of trial purchase, awareness and so on
 A measurement of results
 Mechanisms for monitoring and control
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The objectives need to be measurable and therefore quantifiable. Statements such as ‘increase
consumer awareness’ are vague, whereas ‘increase awareness of the 55 – Module 6 5 year age group
from 40% to 80% is more precise and capable of measurement.
Objectives need to be achievable. Purely from an internal company perspective, if sales are targeted
to increase by 25% over a designated time period then manufacturing capacity will have to be secured
to meet this target. Likewise, attempting to gain additional shelf space within a retail outlet will
require that additional resources are devoted to the sales force, to sales promotional and to
advertising.
Objectives need to be set with a degree of realism rather than on the basis of wild imagination.
Otherwise, a company would be better off having no targets at all. An unrealistic target would tend to
ignore the competitive and environmental forces affecting the company, the available resources at the
company’s disposal and the time frame in which the objectives have to be achieved.
Finally, objectives need to be timed over a relevant time period. Although a plan of action, may be
drawn up for a year, it will be the case that the plan will be reviewed against target, for example
monthly or quarterly, so as to enable corrective action to be taken.
These principles of SMART (Specific, Measurable, Achievable, Realistic and Timed) apply not only
to the overall communication strategy but also to the setting of objectives for each tool within the
promotional mix. Once the overall communication strategy has been set then individual (yet coordinated) plans need to be devised for each of the five main promotional tools. Using the SMART
principle, objectives can be set for advertising, sales promotion, public relations, direct marketing and
personal selling.
Types of objective
Earlier it was identified in the diagram that there were different types of objectives (or goals). These
are corporate objectives, marketing objectives and marketing communications objectives. Each
consists of one two main components – they are either sales or communications based.
Sales goals
If you ask most people what the goal of marketing communications is, then most will respond ‘to
increase sales’. Ultimately this (and profit) is an important outcome, but ask yourself this: are sales
generated by marketing communications alone? What role does each of the other elements of the
marketing mix play? How will sales vary if a competitor reduces its prices or you increase yours?
What impact do marketing channel and product availability play in sales performance? Marketing
communications is important but it is not the sole contributor to marketing success or failure.
One further difficulty associated with sales goals concerns the impact of past promotional activities.
This is referred to as the ad stock effect. Sales today might be the result of last year’s (month’s,
week’s) communications. It is just that the customer was not ready to buy then, but the significance
of the communication enabled them to store salient messages and use them when they were ready.
Setting sales-based goals fail to account for this important point.
Sales goals are important and performance can be determined in terms of sales volumes, sales value
or revenue, market share, or profitability measures such as return on investment (ROI). They are a
useful management aid as they are easy to comprehend and measurement is straightforward.
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Communication Goals
The AIDA and other ‘hierarchy of effects’ models are no longer accepted as valid interpretations of
the overall process. However, the essence of these sequential models is that in order to achieve a
sale, each buyer must move or be moved, through a series of steps. These steps are essentially
communication-based stages whereby individuals learn more about a product and mentally become
more disposed towards adjusting their behaviour in favour (or not) of purchasing the item.
Awareness is an important state to be achieved as without awareness of a product’s existence it is
unlikely that a sale is going to be achieved. To achieve awareness people need to see or perceive the
product, they need to understand or comprehend what it might do for them (benefits) and they need to
be convinced that such a purchase would be in their best interest and to do this there is a need to
develop suitable attitudes and intentions.
Corporate communication goals
Analysis of the organizational context will have determined the extent to which action is required to
communicate with members and non-members. Corporate communications, particularly with
employees, and corporate branding to develop the image held by key stakeholders, should be integral
to such co-ordinated marketing communication campaigns. These tasks form a discrete part of the
communication programme.
In addition to this, it is the responsibility of the communication programme to communicate the
mission and purpose of the organization in a consistent and understandable form. In addition, the
organization needs to be ale to listen and respond to communications form their stakeholders in order
that they are able to adjust their position in the environment and continue to pursue their corporate
goals.
Marketing planning
Marketing communication strategies are intended to support and deliver the marketing objectives.
Marketing objectives are prepared and articulated through a marketing plan. This document acts as a
cornerstone for the development of effective marketing communications.
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Figure 20. Marketing communications planning framework
Context
analysis
Marketing
research
Corporate goals
Marketing
goals
Communication
goals
Promotional goals
Promotional strategy
Pull
Push
Agencies
Co-ordinated
Communications mix
Scheduling
Profile
Resources
Implementation
Control and Evaluation
Context analysis
It should be clearer now that each marketing communications programme is developed in unique
circumstances. It is vitally important that the contextual conditions are analyzed in order that any
factor that may influence the content, timing or the way the audience receives and interprets
information be identified and incorporated within the overall plan.
In order to help provide for a systematic appraisal of the prevailing and future conditions, a context
analysis is recommended when formulating a marketing communications programme. This consists
of a review of the various sub-contexts.
Main sub-contexts:
The Business Context
The Customer Context
The Organisation Context
The Stakeholder Context
The External Context
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The elements of context analysis
The business context
This part of the analysis involves a consideration of the market and conditions in which the
organization is operating, which are of prime concern for the co-ordinated marketing communication
programme.
Competitors’ communications, general trading conditions and trends, the organization’s corporate
and marketing strategies a detailed analysis of the target segment’s characteristics and a brand audit
are the primary activities associated with this context.
The customer context
Here the emphasis is upon understanding buyer behaviour and hate decision-making processes that
buyer in the market exhibits. The objective is to isolate any key factor in the process or may bond
that customers might have with the product/brand. This can then be reflected in any communication.
The stakeholder context
Co-ordinated marketing communications recognizes that there are audiences other than customers,
with whom organizations need to communicate. For example, members of the marketing channel, the
media, the financial community, local communities and shareholders all seek a dialogue with the
focus organization. The strength and duration of the dialogue may vary but message need to be
developed and communicated and the responses need to be understood an acted upon wherever
necessary.
The organizational context
The characteristics of the organisation can impact heavily on the nature and form of the
communications they enter into. It is important, therefore, to consider the culture and the strength of
identity the workforce has with the organisation. This is of absolute importance if truly co-ordinated
communications are to be forged. In order to appreciate the strength of this sub-context think about
the way the staff of different companies communicates with you as a customer. Internal and external
audiences communicate with each other and this is a significant part of co-ordinated marketing
communications.
External context
Co-ordinated marketing communications is influenced by a number of factors in the wider
environment. These political, economic, social and technological elements are largely uncontrollable
by organizations, for example economic conditions or the laws and regulations. Nevertheless, they
can shape and determine what, when and how messages are communicated to audiences.
Segmenting the market
With this framework, an understanding of the target audience is fundamental to marketing
communications.
The target marketing process (TMP) consists of segmenting the market, targeting particular segments
and then positioning the offer in the selected segment in order to achieve the marketing goals.
We have included information about segmentation here as it is an important part of the promotional
plan, although you will be familiar with much of this material.
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Market segmentation
Market segmentation is the process of breaking down the total market into segments that share
common properties, that is, customers who behave in a similar way and who can be reached by
similar strategies.
The overriding requirement for modern marketing is better targeting at specific segments. This
applies to a range of activities including the location of a new retail superstore, the stocking of a range
of products, the placement of an advertisement in a newspaper and the launching of a new product
into the market. The key aim is to communicate effectively with as many people as possible within a
given market, while minimizing the waste in communicating with those people in whom the
organization is not interested.
Bases for segmentation
The major issue surrounding the debate on market segmentation is the criteria upon which markets
are segmented. There are five main bases upon which markets can be segmented.
 Geographic
 Demographics (including socio-economics, age, race, religion)
 Geodemographics
 Psychographics (including attitudes, interests, opinions and lifestyle)
 Behaviour (including benefits sought, brand loyalty/usage rates, situation specifics)
Geographic segmentation
Geographic segmentation is possibly one of the easiest forms of dividing markets into individual
segments. This form of segmentation depends upon there being discernible disparities in consumer
buying behaviour between one region and the next.
Demographic segmentation
Demographics encompass age, sex, education, income, occupation and family composition.
Consumption of holidays and of clothing provide good example of segmentation based upon age. An
important element within this form of segmentation is the family life cycle. Wells and Gubar
established the nine family life cycle outlined below. The changing political and social environment,
and altering attitudes and expectations are impinging upon this analysis. The traditional associations
between age and life-style are changing requiring a new marketing focus. Some examples include:
1. More women are having children later in life.
2. Older people are now more likely to engage in leisure and sports pursuits later in their lives, as
well as embarking upon new challenges, such as education
3. There is a rising incidence of divorce, and so there are more single parent families
4. Many young couples are leaving it later and later to get married
5. The need for increased financial awareness and planning at a younger age will affect disposable
income in earlier years (i.e. stages 2 and 3), while improving financial spending power in later
years (stages Module 6 and 7). This has been brought about because of the prospect o cutbacks
instate pensions so that many more people have taken out their own pensions policies. This has
provided the opportunity for financial institutions to promote a wide range of products to the
younger age groups.
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One of the more common means of demographic segmentation is by socio-economic grading. This
involves characterizing a market by occupational status, related specifically to the head of the
household. Commonly referred to as the AB/C1/C2/DE classification, it is that buying behaviour is
related to occupational types:
A:
B:
C1:
C2:
D:
E:
Upper middle class
Middle class
Lower middle class
Skilled working class
Manual workers
Those at the lowest level of subsistence
This approach has some major weaknesses.
1. It tends to ignore income, especially dual incomes where both the husband and wife are in
employment.
2. Concentration on the head of household occupation wrongly assumes that buying behaviours by
other family members will be related to this.
3. While comparisons between the highest and lowest categories may afford some benefits,
comparisons between the middle groups are somewhat less useful.
Nonetheless, this basis is still widely used because the main newspapers present their readership
profiles in this manner and because the information that supports this systems is relatively easily
obtained.
Geodemographics
Geodemographics (locality marketing) can be defined as the analysis of people according to where
they live. It relies on the concept that people live in relatively homogenous neighbourhoods, and that
these neighborhoods are capable of classification.
Widely used geodemographic systems
1. ACORN (A Classification Of Residential Neighbourhoods) divides up the entire UK population
in terms of the types of housing in which they live. For each of these areas, a wide range of
demographic information is generated and the system affords the opportunity to assess product
usage patterns, dependent upon the research conducted within national surveys.
There are 54 separate grouping, including, the following examples.
 Wealthy suburbs, large detached houses
 Private flats, elderly people
 Gentrified multi-ethic areas
 Rural areas, mixed occupations
 Council areas, residents with health problems
2
.MOSAIC. This system also analyses information form various sources including the census,
which is used to give housing, socio-economic, household and age data; this electoral roll, to give
household composition nod population movement data; postcode address files to give information
on housing and special address types such as farms and flats; and the CNN files/Lord
Chancellor’s office to give credit search information and bad debt risk respectively.
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Behavioural segmentation: benefits sought
Benefit segmentation relates to the different benefits being sought from a product or service by
customer groups. Individuals are segmented directly according toothier needs. In this form of
segmentation, it is usual for varying customer groups to obtain the same benefits from the product or
service.
Individuals can be categorized by usage patterns, whether they are light, medium or heavy users of a
product or service. The TGI (Target Group Index) helps to identify these groups for a wide range of
products and services. This form of segmentation assists the marketer in developing distinct and
personalized strategies aimed at specific users, based upon their existing consumption of a product or
service. For example, banks and to their financial institutions are introducing incentive schemes for
customers when using their credit cards. This potentially allows heavy users of the service to a mass
points and convert them into gifts.
Behavioural segmentation: situation specific
Situation specific segmentation refers to the actual situation in which consumption of the product
takes place. Dependent upon the situation, it would appear that a different form of the product may
be appropriate, or even an alternative brand.
For example, the purchase office cream may vary in relation to the following situations:
 A special occasion
 Everyday consumption by the family
 An outdoor picnic
 In a restaurant
 In groups or alone
In each of these situations the consumers will evaluate alternative product types and brand offerings.
Where the evaluation of brands takes place, the attributes of each brand will also vary in importance
depending upon the situation in which consumption takes place. Part of the communication process
is to keep the brand at the forefront of the consumer’s evoked set, and to emphasize the situation
specific benefits of the product.
Psychographics
An individual’s activities, interests, opinions and values represent that person’s lifestyle. Quantitative
measures of lifestyle are known as psychographics. Psychographics segmentation provides a richer
analysis of the consumer than is provided by simple demographic segmentation. It does not replace
demographic segmentation but enhances it, and in so doing provides the opportunity to target
individual consumers more precisely within a specific geographic area.
Example
A major tour operator in the UK recognized the difference between demographics and
psychographics and the implications for developing a promotional strategy. Two families living next
door to one another, with similar family life cycles and income profiles, demonstrated different
attitudes to spending their holidays. One family was keen on package holidays abroad, while the
other family preferred camping and walking holidays. The two families have similar demographic
profiles but contrasting psychographics lifestyles. The consequence is a need for alternative
communication strategies.
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Lifestyle segmentation groups people in relation to how they spend their time and money. Traditional
socio-economic grouping aggregate individuals in terms of their occupation. Recent lifestyle analysis
deals with how people spend their money rather than how much they earn. Young and Rubicam, the
international advertising agency, developed an alternative segmentation system, the Four Cs (CrossCultural Consumer Classification), which identified the following groups.
The major problem with psychographics is that, unlike other segmentation approaches, it is difficult
to assign any form of specific measures. Although it is possible to identify the number of males aged
24-35 in a given area earning &25,000 per annum, it is almost impossible to estimate how many are
fun loving, carefree and fashion-oriented. Nonetheless, this does not prevent advertising agencies
portraying these and other characters as part of the communications message. Psychographics today
within the advertising industry is inextricably tied in with that of the demographic and economic
descriptions.
Criteria for effective segmentation
One of the problems of market segmentation is determining to what extent definable market segment
are worth pursuing, especially when considering developing an individual promotional campaign.
There are a number of criteria that need to be satisfied in order for a market segment to be deemed
commercially viable.
Size or substantiality. One of the first questions to be asked concerns whether the market is of
sufficient size to justify attention. Will the segment generate sufficient demand and hence sales to
help create the required return form the sector? This will depend to some extent on the resources at
the disposal of the company. Many small segments can be identified but they are not seen as being
worthy of any further attention. Morgan, the family run car manufacturer, which produces fewer than
10 cars a year, finds the segment in which it competes lucrative, while ford an GM would
undoubtedly find this market unprofitable.
Measurability. The market segment needs to have characteristics that will assist in measuring the
market potential both for the producer and the consumer. It is necessary to establish whether there are
discrete groups of people with relatively homogeneous buying habits.
Access. A necessary prerequisite is that the market is capable of being accessed both from the point of
distribution and promotion. A fairly scattered market segment in terms of geographic penetration
would reach to wasted promotional expenditure if it appealed to only 10% of the market. Modern
direct marketing techniques, however, reduce the potential waste, especially if the market segment
can be easily identified.
Uniqueness in response. The market segment identified must exhibit similar behavioural
characteristics in as much as the individuals making up the segment would all respond in a similar
way to a targeted marketing strategy.
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Table 14. Behavioural characteristics
Group
Mainstreamers
Aspirers
Achievers
Reformers
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Characteristics
 Brand conscious
 Seek security/reliability
 Risk averse
 Buy British
 Image conscious
 Seek individual recognition
 Conspicuous consumption
 Fashion oriented
 Career oriented
 Achieved personal success
 Like to be in control
 Personal wealth
 Value of life
 Highly educated
 Independent
 Family oriented
Stability. For any company to divert resources to a particular market segment that has been
identified, it must reassure itself that the segment will remain fairly stable over a long enough time
period to warrant specific marketing attention.
Actionability. This is the degree to which marketing programmes can be formulated for attracting
and servicing segments.
Market targeting
Once the market has been segmented along the relevant bases, the marketing manager must decide
which market to target. The target market decision relates to the selection of the specific segment or
segments towards which the promotional effort will be focused.
The firm has four options:
 Undifferentiated marketing
 Differentiated marketing
 Concentrated marketing
 Customized marketing
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Figure 21. Market targeting
Undifferentiated marketing
FIRM
MARKET
Differentiated marketing
SEGMENT 1
FIRM
SEGMENT 2
SEGEMNT 3
Concentrated marketing
FIRM
SEGMENT 1
SEGMENT 2
SEGMENT 3
Customized marketing
FIRM
CUSTOMER
Undifferentiated or mass marketing occurs where an organisation tends to ignore the differences
that exist within a market, and aims to provide a standard product or service to a wide variety of
customers. It is more appropriate for some product forms (for example, Intel computer chips) than
others.
Differentiated marketing acknowledges the differences that exist in customer taste and a separate
marketing .Mix is developed for each identifiable market segment. This strategy is quite common in
large companies, as is reflected in a trend towards multiple product offerings. Kellogg’s, the
breakfast cereal manufacturer, adopts multiple marketing strategies to accommodate the requirement
of a diverse market, including children, adults, families, the health conscious and weight watchers
Concentrated marketing focuses attention solely upon a distant customer group to the exclusion of
all others. The aim to concentrate on one-segment and focus resources on excellence. Example
includes Ferrari (car manufacturer) and Steinway (piano manufacturer), where the company targets
individuals and/or groups on one or a combination of characteristics, such as income or age. The
danger of concentration is that a market can dry up with amazing rapidity.
Customized marketing refers to the extent to which organizations will move towards individually
tailored products to meet individual customer needs. Some car manufacturers are working towards
computer-generated cars, which will reflect the personal whims and desires of the customer.
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Financial products offered by the banking and financial sector are increasingly reflecting the need for
tailoring to individual financial circumstances. The fundamental basis on which the marketer selects
one of thee approaches to the segments available is a cost-benefits analysis. The marketer expects to
generate additional revenue form a segment by satisfying the needs of that group, and by developing
effective promotional activities that better match that segment. In doing so, the marketer incurs
additional costs for new advertisements, promotions, sales force activities, public relations campaigns
and so on. The marketer will only choose to develop a new segment if the incremental revenues
generated exceed the incremental costs of serving that segment.
Effective positioning
According to the basic principles of marketing products and services are created to solve customer
‘problems’ (that is, to satisfy needs and wants) and provide benefits. Thus, to be effective positioning
must promise the benefits the customer will receive expectation and offer a solution to the customer’s
problems. If at all possible, the solution should be different from and the competition’s solution,
especially if the competitors are already offering their own solution.
Positioning is about how the target market perceives the presentation of the product/service relative
competing products. It is what is in the minds of the target audience. Positioning should be a singleminded concept an umbrella from which everything else in the organization flows. Perhaps the most
important aspect of positioning is that a company should not try to be all things to all people. A
company that tries to be the high quality service provider to all niches while offering an array of
special capabilities at a low price is likely to fail.
Properly targeted, single-minded positioning affects everything a product does or stands for, not only
advertising, but also all its promotions. Positioning also affects policies and procedures, employee
attitudes, customer relations, complaints handling and the myriad of other details that combines to
make up the customer’s experience. There must be a consistency among a company’s various
offerings and it is the positioning statements that guides this consistency.
Tests of effective positioning
 The position must be believable in the customer’s mind.
 The product must deliver that promise on a consistent basis.
There is no point in implementing a particular positioning strategy just because a market analysis
revels that an opportunity exists. For instance, if an analysis reveals a potential opportunity for a
high-quality premium-priced positioning strategy, the first thing to ask is whether your company is
suited for such an approach.
It is important that everyone in the company’s ‘buys into’ the strategy. In other words, the
positioning strategy should permeate the entire organization, from the CEO to the sales force to the
delivery driver. The biggest positioning mistake a company can make is to create a false impression
that it cannot live up to in the marketplace.
Developing a successful positioning strategy
The positioning process consists of the various steps needed to develop an effective positioning
strategy. This process must be continuous to keep up with changes in the environment, including the
changing needs of the customer and the competitors’ tactics.
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Market positioning
Market positioning is the first step.
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Marketing positioning is defined as the process of identifying and selecting markets or segments that
represents business potential, to determine the criteria for competitive success.
This must be based on a thorough knowledge of the needs, wants, and perceptions of the target
market, along with the benefits offered by the company’s products or services.
 What is important to the target market?
 How does the target market perceive the product?
 How does the target market perceive the competition?
 What attributes should a product use to differentiate itself?
The reality is that if the target market does not perceive the image, does not exist. If the target market
does not believe that what the product has to offer is a benefit, it is not a benefit. If the target market
doesn’t believe that the benefits can be delivered, promises are meaningless. If the benefit isn’t
important to the target market, it isn’t important. If the benefits is not perceived as being different
form that of the competition, then differentiation has not succeeded. In short, images, benefits, and
differentiation are solely the perception of the customer, not the perceptions of production managers
or marketers.
Psychological positioning
This step utilizes communications to convey a product’s identity and images to the target market. It
converts customer’s needs into images and positions a product in the customers’ minds.
Psychological positioning is a strategy employed to create a unique product image with the objective
of creating interest and attracting customers.
There are two kinds of psychological positioning:
Objective positioning and Subjective positioning
a. Objective positioning
I. What is it? Objective positioning is concerned, almost entirely, with the objective attributes of
the physical product. It means creating an image about the product that reflects its physical
characteristics and functional features.
II. How is it used? If a product has some unique feature, that feature may be used to position the
product objectively, to create an image, and to different ate it from the competition.
III. Drawbacks. Less successful objective positioning occurs when the features is not unique. This
is why many product promotions fail to create a distinct image or successfully differentiate the
product. One of the first rules of effective positioning is uniqueness.
b. Subjective positioning
What is it? Subjective positioning is concerned with subjective attributes of the product.
Subjective positioning is the image, not of the physical aspects of the product, but of other
customer (that is, attributes perceived by the attributes that do not necessarily belong to the
product but to the customer’s mental perception). These perceptions and the resulting images
may not necessarily reflect the true state of the product’s physical characteristics. They may
simply exist in the customer’s mind and not all customers’ imaginings will agree with a particular
perception or image. What the marketer hopes is that the people in the target market will agree on
a favourable image whether or not the image is true.
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Positioning strategies
Marketers may decide deselect the most appropriated of the following strategies, depending on the
information gathered during market and psychological positioning. (There is some overlap between
the strategies: for instance superb after-sale services could be offered simply as a customer benefits or
as something that a competitor does not offer).
 Attribute, features of customer benefit
 Price and quality
 Use of application
 Product user
 Product class dissociation
 Competitor
Positioning by attribute or feature involves positioning the product by clearly identifying it with a
distinct set of attributes, which distinguish the product within the market. BMW, the German car
manufacturer, while positioned within the luxury end of the car market, make constant reference to
the engine performance and design as part of their positioning statement. Likewise, Volvo the
Swedish car manufacturers have for many years positioned themselves on safety feature incorporated
into the design of the car.
Another way to differentiate yourself from the competition is by providing a unique range of services.
Depending on the characteristics of your local market, unique capabilities could include 24-hour
operations, free pickup and delivery, or electronic commerce (online file transfer an don-demand
output).
Exceptional customer service can be another differentiator. For obvious reasons, customers prefer
vendors who follow their instructions and offer a simple ordering system, on-time delivery easy
problem-resolution, timely and accurate invoicing, and personalized service.
Price and quality
Price and quality are becoming increasingly important as companies attempt to offer more features,
better value and improved quality at competitive prices.
Price. Some companies go for the bottom line: they attract customers by being the lowest cost
services providers in the market. They do this by having highly efficient operations, so their cost-perunit (e.g. per square foot, per page, etc) of output is the lowest. This does not necessarily mean those
businesses spend lee money than their competitors. For example, the price leader in a given market
will probably do the most advertising, but because for the high volume of work the advertising helps
brings in the business will achieve the lowest cost per unit. However, a low-price positioning strategy
always requires a high volume of business.
Quality. A company that provides exceptional quality to its customers can command a higher price
for its services than its less quality-conscious competitors. However, quality is a variable that
customers may take for granted after a while. When a competitor offers those customers a lower
price, some of them might give the competitor a try and may find out they ‘get what they pay for’. If a
company intends to sell its quality programme in order to charge higher prices for its services, then it
must be willing to invest the time and money required to live up to the higher expectations of is
costumers. If it creates expectations of superior quality but fails to deliver, few customers will give
the company a second chance.
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Use or application
In the third case, the company attempts to position its product or service by deliberately associating it
with a specific use or application. Kellogg’s the cereal manufacturer, in striving to defend their
market position and increase sales, have positioned their main product Corn Flakes as an ‘any time of
day food’, and not just to be eaten at breakfast.
Product user
Positioning by virtue of product user associates the product with a particular class of user.
SmithKline Beecham have positioned ‘Lucozade Sport’ with the sporting fraternity, and have
strengthened this through endorsement using major sporting personalities.
Product class dissociation
It is possible to position a company brand against a product class or an associated product class,
claiming that yours is different from the rest. Heinz, who produces a range of ‘Weight Watcher’
foods, are positioning these against normal but more calorific foods.
Competitors
A competitor’s position within a market may be used as a frame of reference in order to create a
distinct positioning statement. Avis car rental used the slogan ‘We’re number 2, so we try harder’.
Here the market leader is being used as a reference point to create a competitive campaign which use
blatant comparisons can be substantiated through better quality, service, value, cost and so on.
This approach is used when it is necessary to meet the competition head-on; to bring out differences
between products. For example, Visa credit cards competed with American Express but do accept
visa.
Perceptual product mapping
Part of the positioning strategy involves mapping the competing products within a defined product
class so that specific gaps may be identified into which the company may place a new product
offering. These perceptual product maps identify the attributes that are strongly associated within a
given product class. For example, below is shown a hypothetical product map that may be
appropriate for the shampoo market.
By plotting the competing products on this map, it would be possible to identify the gaps that exit
within the market, and enable new products to be positioned accordingly in the mind of the factors
will need to be taken into consideration, such as price, which will undoubtedly affect the optimal
marketing mix employed for the new product.
How to decide budgets
There is no one uniform method of deciding what to spend on marketing communications. This is
not so surprising. The following are home of the considerations that can affect the amount of
expenditure.
 What variety of marketing communications is to be used?
 What tasks are to be undertaken?
 How competitive is ht market place?
 How well known is the organisation?
 Are there any special requirements?
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Costs to be budgeted
 Air time and broadcast media
 Space and printed media
 Production costs
 Staff salaries
 Overheads and expenses
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Theoretical approaches to budgeting
Theoretical approaches to setting budgets, for example by marginal costing approaches, have not
found favour in industry because the effects of any marginal increase on expenditure are likely to be
swamped, or al least hidden, by many other marketing variables. The effects of any expenditure will
have both long-term and short-term effects. It is worthwhile emphasizing the view here that
marketing communications should be treated as an essential long-term investment.
Methods of deciding budgets have been developed over a period of time and, in the absence of clearer
guidance, are useful in approaching a budget decision for the first time. After several years
operations it is possible to use experience to make decisions. One, or a combination of more than
one, of the following methods can be used to approach the problem.
 Completely arbitrarily
 All you can afford
 Historical basis
 Matching the competition
 Percentage of sales
 Experiment and testing
 Modeling an simulation
 Objective and task method
Recent research has indicated a growing trend towards database methods and especially favours the
objective and task method.
Completely arbitrarily
There are many examples of budgets being set in an apparently arbitrary way be senior management.
There may be a link between the personality of the decision maker and the level of expenditure. This
link may not be obvious to people elsewhere in the organisation. Subsequent arbitrary cuts in
expenditure if trading becomes difficult and the profit margins begin to suffer are more worrying.
All you can afford (usually a minimum)
This often applies to a new company starting up or to existing company advertising for the first lime.
The conscious decision has to be taken to forgo immediate profits or to forgo an investment in
another area in favour of an investment in marketing communications. This often means investing at
a minimum level. This will necessarily limit the scope of the work, however, and limit the results to
be achieved.
Historical basis
We have already indicated that with experience managers are able to form their own judgement of the
effectiveness or otherwise of particular expenditure levels and different promotional methods. Yearon-year figures provide the basis for following trends and making decisions accordingly.
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a. The danger of inertia: a temptation just to keep it the same, in which case all the elements of the
environment and the cost associated with the task facing the organization are ignored
b.A slight improvement is to use a media multiplier, which at least recognizes that media rate card
costs may have increased.
Matching the competition
In many cases an organisation is trying to reach exactly the same customers through exactly the same
channels. In order to obtain a certain market share it is then necessary to match the competition and
particularly the market leader.
Percentage of sales methods
The percentage of sales is a commonly used method of determining a marketing communications
budgets because:
 It is easy to calculate
 It is precise
 It can be quickly monitored
 It can be varied in progressive steps
 It appears logical
 It is financial safe
However, the percentage chosen should be conditioned by all the variable listed earlier (not least by
whether the market is a consumer or industrial one) and it should be dependent upon how competitive
the market is. The following figures are suggested based on experience of different accounts.
If all companies in an industry use a similar calculation then expenditure will approximate to market
share positions. However, it must be clear that the real position is very complex and sales are the
result of marketing communications and not the other way round. The method is in reality oversimplistic but does form a good basis of calculation.
Once a sales forecast has been made then the approximate budget level can be obtained. It can then
be moderated for special circumstances such as the degree of competition experienced in the previous
year or expected in the next year.
Experiment and testing method
This method involves selecting a set of matched markets. Different final promotional budgets can be
set for each of these markets and the results carefully monitored. The resulting levels of awareness
and sales delivered can be compared. For example, this method can be used to evaluate alternative
media schedules. Problems associated with this method include:
 The cost of conducting the experiment
 The time it takes to get results
 The premature information of competitors
 The fact that markets can never be completely matched
Modelling and simulation method
With advancing use of computer database and more precise promotional media it is possible to build
models to forecast the likely performance of different media schedules. There are likely to be an
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increasing number of PC-based modeling programs available which will allow a number of business
variables to be examined including:
 Sales levels
 Purchase frequency
 Awareness levels
 Profits achievable
Problems associated with modelling include time and cost and the validity of the chosen model.
The objective and task method
The objective and task method is probably the one which is most logical and appropriate to the
complex situation found in planning marketing communications programmes. Basically the logic of
the methods is as follows.
Figure 22. The objective and task method
Determine the marketing
communications objectives
Determine tasks necessary to
achieve these objectives
Determine the cost of cash
element
This approach is simple to understand and it embodies some elements of the marginal cost approach,
but this time in conjunction with carefully considered and linked objectives and tasks. It is necessary
to be realistic about the objectives and accurate in the costing of the tasks.
A systematic approach to applying the objective and task method will pay dividends because of its
rigorous nature. Although it will not necessarily produce perfect results it will lead to disciplined
thinking and provide an excellent communication and decision device.
Ten steps in applying the objective and task method
Step 1. Define marketing and promotion objectives
Step 2. Determine the tasks to be undertaken
Step 3. Build up expenditure by costing the tasks
Step 4. Compare the result against industry averages
Step 5. Compare the result as a percentage of sales
Step Module 6 .
Reconcile differences between steps 3, 4 and 5
Step 7. Modify estimates to meet company policies
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Step 8. Specify when expenditures are to be made
Step 9. Maintain an element of flexibility
Step 10.Monitor actual results against these forecasts
Strategic considerations
You may notice, say, that you see British Telecom ads more frequently than ads for most of its
competitors such as the cable companies’ telephone services. BT is, of course, the largest player in
the market. But then, French car ads are more often to be seen than ads for Japanese cars, yet the
Japanese have a larger share of the market. How can we analyze these strategies?
Advertising to sales ratios (A/S Ratios)
One of the important factors that always need to be considered is the amount spent on
communications by competitors. It can be difficult determining the amount spent by competitors on
below-the-line activities, although accurate guesstimates can often be made by those actively
involved in the market.
Above-the-line activities can be measured (data bought from various marketing research agencies)
and can be used to gain an insight into possible strategies.
The A/S ratio for an industry provides a benchmark against which it is possible to determine how
much should be spent or stimulate consideration of why certain amounts have been spent.
The A/S ratio is different for each market sector. It is calculated by working out the total amount
spent on advertising (usually at rate card cost) as a proportion of the sales in the market. Therefore, if
sales in a market are valued at $150 million per year and the amount spent on advertising is $14
million then the A/S ratio is said to be 9.33%.
Part of the strategic decision is to decide whether an individual company’s A/S ratio should be higher
or lower than, or the same as (at equilibrium with) the industry average.
a. Reasons to spend more might be hat a new product or variant is being introduced to the market so
greater effort is require to develop awareness (reach) and then perhaps knowledge and/or establish
brand values.
b.Reasons to understand the industry average might include trying to maintain an established
market position or directing spend to other products in the portfolio or deciding to put more work
below-the-line.
Share of voice
Within any market the total of all advertising expenditure (adspend), that is, all the advertising by all
the players can be analyzed in the context of the proportions each player has made to the total.
If one advertiser spends more than any other then more of their messages will be received and
therefore stand a better chance of being heard and acted upon. If a brand’s share of market (SOM) is
equal to its share of voice (SOV) equilibrium can be said to have been reached. It is possible that
organizations can use their advertising spending either to maintain equilibrium (SOV = SOM) or to
create disequilibrium.
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The following matrix shows how different spending strategies are appropriate depending on your
competitors’ share of voice and your own share of market.
Your share
Of market
Low
High
competitors
share of
voice
Low
High
Decrease spending to the amount
defend
Needed to defend your niche.
Increase spending to
Attack: spend more so that your
slightly,
SOV is greater than your current
SOM
Maintain spending
Your brand
above equilibrium level
Note that careful monitoring of the fortunes of competitors is needed: if you know that a competitor is
spending large sums on restructuring, say, they may not be in a position to retaliate to a sudden
advertising burst by your company.
Controlling the budget
Marketing communication budgets may be very substantial and have a major effect on profitability.
Controlling the effectiveness’ of the budget may be difficult if not impossible. What is possible is to
use normal budgetary control techniques in marketing expenditure, and to review its effectiveness
regularly, even if this is only by means of informed judgment.
Figure 23. Controlling the budgets and effectiveness
Set communications
objective and tasks
Measure
effectivene
ss
Set communications
budgets
Measure
expenditure
Compare with
objectives
Compare with
budgets
Reset
objectives
and tasks
Reset
budgets
Developing and Maintaining Marketing Channels
Setting the scene
Business-to business relationships include marketing channel relationships and supply chain
networks. We will look at the nature of various distribution structures and discusses some of the
influence, which affect the choice and configuration of the marketing channel.
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For many manufacturers, distribution is the ‘Cinderella’ of the marketing mix, less glamorous and
‘creative’ than promotion and less involved in the heart of the company than the product. However,
some firms use distribution as a means of competitive advantages and retailers, of course, take
distribution very seriously. Marketing communicators also need to take account of its importance.
Distribution has two aspects, expanded upon the next paragraph.
 Tangible – the physical movement and delivery of goods.
 Intangible – aspects of channel (or supply chain) management, control and communication. This
forms the focus for this chapter
A firm’s marketing communications will be strongly influenced by the extent to which the firm is
able to obtain wide distribution. Key issues in distribution are these.
I. Coverage and density, in other words the number of sales outlets.
 Countries like the UK and US allow large stores
 In Japan, there have been restrictions on store size, to protect the livelihood of small retailers.
2. Channel lengths – the number of intermediaries between producer and consumer.
3. Power and alignment. The marketer has to realize that distribution channel power is not equal.
Different roles are played by retailers, wholesalers and agents. For example, wholesalers are most
important where retailing is fragmented. In the UK, where, in groceries, concentration of retail
power has gone furthest, the major supermarket chains are powerful.
4. Logistics and physical distribution
Logistic systems are expensive and can be very damaging to corporate profitability if badly handled.
There are several areas which are crucial.
 Transport and transport management (delivery time and costs)
 Inventory control (minimum stock without effective service)
 Order processing
 Material handling and warehouse
 Fixed facilities location management
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Table 15. The chain of distribution
In order for a product to be distribution a number of basic functions usually need to be fulfilled.
Transport
Stock holding and storage
Local knowledge
Promotion
Display
This function may be provided by the supplier, the
distributor or may be sub-contracted to a
specialist. For dome products, such as perishable
goods, transport planning is vital.
For production planning purpose, an uninterrupted
flow of production is often essential, so stocks of
finished goods accumulate and need to be stored,
incurring significant costs and risks.
For consumer goods, holding stock at the point of
sale is very costly; the overheads for city centre
retail locations are prohibitive. A good stock
control system is essential, designed to avoid
stockouts whilst keeping stockholding costs
below.
As production has tended to become centralized in
pursuit of economies of scale, the need to
understand local markets has grown, particularly
when international marketing takes place. The
intricies and idiosyncrasies of local markets are
key marketing information.
Major promotional campaigns for national
products are likely to be carried out by the
supplier.
Presentation of the product is often a function of
the local distributor. Specialist help from
merchandisers can be bought in.
Points in the chain of distribution
An intermediary is someone who ‘mediates’ or brings about a settlement between two person: in this
case between the original supplier and the ultimate buyer. There are a variety of types of intermediary
and several may intervene before a product gets from the original provider and the final buyer.
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Figure 24. Points in the chain of distribution
4 Integration, Implementation & Evaluation
Manufacturer
Agent
Wholesaler
Retailer
distributor or
franchisee
Wholesaler or
central buyer for
retail group
Retailer
Retailer
Consumer
a. Retailers. These are traders operating outlets, which sell directly to households. They may be
classified in a number of ways.
b. Types of goods sold (e.g. hardware, furniture)
c. Types of service (self-service, counter service)
d. Size
e. Location (rural, city-centre, suburban shopping mall, out-of-town shopping center)
f. Independent retailers (including the local corner shop, although independents are not always as
small as this)
g. Multiple chains, some of which are associated with one class of product while others are ‘variety’
chains, holding a wide range of different stocks
h. Still others are voluntary groups of independents, usually grocers.
Wholesalers. These are intermediaries who stock a range of products form competing manufacturers
to sell on to other organizations such as retailers. Many wholesalers specialize in particular product.
Most dealing customer goods, but some specialize in industrial goods, such as steel stockholders and
builders’ merchants.
Distributors and dealers. These are organizations, which contract to buy a manufacturer’s goods
and sell them to customers. Their function is similar to that of wholesalers, but they usually offer a
narrower product range, sometimes (as in the case of most car dealers) the products of a single
manufacturer. In addition to selling on the manufacturer’s product, distributors often promote the
product and provide after-sales services.
Agents. Agents differ form distributors.
 Distributors buy the manufacturer’s goods and re-sell them at a profit.
 Agents do not purchase the manufacturer’s goods, but earn a commission on whatever sales they
make.
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Franchisees. These are independent organizations which, in exchange for an initial fee and
(usually) share revenue, are allowed to trade under the name of a parent organization. Most fast food
outlets are franchises.
Multiple stores (e.g. supermarkets) buy goods for retailing direct from the producer, many of them
under their ‘own label’ brand name.
Do not forget that direct selling also occurs.
 Mail order
 Telephone selling
 Door-to-door selling
 Personal selling in the sale of industrial goods
 An organization which includes both manufacturing and retail outlets
 TV shopping
 E-commerce
Factors in relationship with the distribution channels
In working with distributors, the marketer needs to bear in mind the following points.
1. The independent commercial objectives of the distributor. Distributors are business
organizations with their own requirements for efficiency and profitability. They do not stock
products or run promotions as a favour to the supplier.
 You need to negotiate and contract terms.
 You need to promote the benefits of the product or collaboration to the distributor.
2 The distributor’s relationship with competitors. Bear in mind that a retailer or wholesaler
may well be stoking and promoting competing products. You will need to be discreet to
differentiate your product and promotions, and to be aware of opportunities to gain useful market
intelligence.
3 The distributor’s knowledge of the consumer. Distributors are in the front line of contact with
consumers. Be prepared to seek and respect their research or sense of what will work in terms of
product and promotion.
4 The distributor’s power in the market. Major distributors have considerable buying power
over suppliers, and good working relationships must be preserved with them, usually at the
expense of autonomy and control over promotions. A major distributor may ask for exclusive
rights to sell a product, or ask to sell it under an ‘own brand’ label. It may control all point-ofscale and media promotions regarding its sale of the product, charging a fee for promotional space
and collaboration.
5 The mutual benefits of promotional collaboration
 If the supplier promotes the product to consumers through PR, advertising and consumer
incentives, the distributor selling the product to consumers will benefits.
 If the distributor promotes the product to consumers – through advertising its availability
through the distributor, or through in-store display and incentives – the supplier will benefits.
Choosing distribution channels is important for any organizations, because once a set of channels has
been established, subsequent changes are likely to be costly and slow to implement. Distribution
channels fall into one of two categories: direct and indirect channels.
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Direct distribution means the product going directly from producer to consumer without the use of a
specific intermediary. These methods are often described as active since they typically involve the
supplier making the first approach to a potential customer. Direct distribution methods generally fall
into two categories: those using media such as the press, leaflets and telephones to invite response
and purchase y the consumer and those using a sales force to contact consumers face to face.
Indirect distribution is a system of distribution, common among manufactured goods, which makes
use of intermediaries; wholesaler, retailers or perhaps both. In contrast to direct distribution, these
methods are often thought of as being passive in the sense that they rely on consumers to make the
first approach by entering the relevant retail outlet.
In building up efficient channels of distribution a manufacturer must consider several factors.
1
2
3
4
How many intermediate stages should be used and how many dealers at each stage?
What support should the manufacturer give to the dealers? It may be necessary to provide an
after-sale and repair service, and regular visits to retailers’ stores. The manufacturer might need
to consider advertising or sales promotion support, including merchandising.
To what extent does the manufacturer wish to dominate a channel of distribution? A market
leaders might wish to ensure that its market share is maintained, so that it could, for example,
offer exclusive distribution contracts to major retailers.
To what extent does the manufacturer wish to integrate its marketing effort up to the point of sale
with the consumer? Combined promotions with retailers, for example, would only be possible if
the manufacturer dealt directly with the retailer (rather than through a wholesaler).
Supply chain management
Many enterprises have been getting larger. Some writers are arguing that the trend will continue – so
that for many sectors there will be fewer players of world class dominating the field. We have seen
this is the automobile industry for example, with many European companies merging to be able to
compete effectively with US giants and the Japanese.
There have been, at same time, much closer links with companies in the supply chain in order to
extract best value for money and reduce stockholdings. This has had major consequences on the
distribution methods of companies in these supply chains, delivering to their customers on a just in
time (JIT) basis.
Historically, businesses in the supply chain have operated relatively independently of one another to
create value for an ultimate customer. Independence was maintained through holding buffer tocks,
managing capacity and lead-times. This is represented in the ‘Traditional’ model shown below.
There was very little control over other channel members, and no wider perspective on the systems as
a whole.
Market and competitive demands are now, however, compressing lead times and businesses are
reducing inventories and excess capacity. This new condition is shown in the ‘Integrated supply
chain” model.
There seems to be increasing recognition that, in the future, it will be whole supply chains which will
compete and not just individual firms. This will continue to have a great impact upon distribution
methods.
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Supply chain management is about optimizing the activities of companies working together to
produce goods and services.
The aim is to co-ordinate the whole chain, form raw material suppliers of end customers. The chain
should be considered as a network rather than a pipeline – a network of vendors support a network of
customers, with third parties such as transport firms helping to link the companies. In marketing
channels, organizations have to manage the trade-off between the desire to remain independent and
autonomous, and the need to be interdependent and cooperative.
Independence: each channel members operates in isolation and is not affected by others, so
maintaining a greater degree of control.
Interdependence: each channel member can affect the performance of others in the channel.
If the supplier ‘knows’ what his customers want, it does not necessarily have to guess, or wait until
the customer places an order. It will be able to better plan its own delivery systems. The potential for
using the Internet to allow customers and suppliers to acquire up-to-date information about forecast
needs and delivery schedules is a recent development, but one which is being used by an increasing
number of companies.
Stakeholders
Linked to the idea of networks is the stakeholder concept.
‘The concept of different groups influencing an organization and in turn being influenced is an
important element in the development of integrated marketing communications. The concept enables
an organization to identify all those other organizations and individuals who can be or are influenced
by (its) strategies and policies.’
Stakeholders are groups or individuals having a legitimate interest in the activities of an organization,
generally comprising customers, employees, the community, shareholders, suppliers and lenders. The
organization will generally seek to add value for stakeholders, in accordance with their varying
objectives.
There are three broad types of stakeholders in an organization, as follows:
 Internal stakeholders (employees, management)
 Connected stakeholders (shareholders, customers, suppliers, financiers)
 External stakeholders (the community, government, pressure groups)
Internal stakeholders: employees and management
Because employees and management are so intimately connected with the company, their objectives
are likely to have a strong influence on how it is run. They are interested in the following issues.
1. The organization’s continuation and growth. Management and employees have a special interest
in the organization’s continued existence.
2. Managers and employees have individual interests and goals, which can be harnessed, to the goal
of the organization.
Connected stakeholders
Increasing shareholder value usually assumes the core role in the strategies management of an
international business. If management performance is measured and rewarded by reference to changes
in shareholder value then shareholders will be happy, because managers are likely to encourage longterm share price growth. Customers, suppliers and consumers can increasingly be thought of as
‘investing in the company’
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whenever they buy or sell a particular product or service. They judge the total value that the company
can offer. This can include:
 Expertise (e.g. support/training offered by manufacturers to retailers)
 Information (as offered by retailers to suppliers on market trends)
 Influence
 Infrastructure (use of buying power to source raw material)
 Resources
 Responsive attitude (such as alignment of ordering and payment processes between supply chain
partners)
 Social responsibility
External stakeholders
External stakeholder groups – the government, local authorities, pressure groups, the community at
large, professional bodies – are likely to have quite diverse objectives.
Stakeholder networks and the marketing channel
Stakeholders ‘maps’ indicate the primary relationships and patterns of interdependence within the
marketing channel. These networks ‘not only constitute those organizations that make up the
marketing channels but also seek to integrate all those other organizations that assist the channel
members to achieve their objectives of satisfying customer needs’.
Within the marketing channels, there are two primary stakeholder roles, connected to the idea of
internal, connected and external stakeholders described above.
1. Performance – directly involved with adding value in the marketing channel (manufacturer,
wholesaler, retailer). These are interdependent.
2. Support – banks, consultancies, government and so on, supporting the ‘performing’ members.
These have so such interdependence.
Channel design decisions
In setting up a channel of distribution, the supplier must consider five things.
 Customers
 Product characteristics
 Distributor characteristics
 The channel chosen by competitors
 The supplier’s own characteristics
Customers
The number of potential customers, their buying habits and their geographical locations are key
influences. The use of mail order for those with limited mobility (rural location, illness) is an
example of the influence of customers on channel design. Marketing industrial components to the car
industry needs to take account of the geographic distribution of the car industry in the UK. The
growth of Internet trading, both in consumer and business-to-business markets, has been built on the
rapid spread of fast Internet access.
Product characteristics
Some product characteristics have an important effect on the design of the channel of distribution.
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1. Perishability
Fresh fruit and newspapers must be distributed very quickly or they become worthless. Speed of
delivery is therefore a key factor.
2. Customization
Customized products tend to be distributed direct. When a wide range of options is available, sales
may be made using demonstration units, with customized delivery to follow.
3. After-sales services/technical advice
Extent and cost must be carefully considered, staff training given and quality control systems set up.
Training programmes are often provided for distributors by suppliers.
4. Franchising
Franchising has become a popular means of growth both for suppliers and for franchisees that carry
the set-up costs and licence fees. The suppliers gains additional outlets quickly and exert more
control than is usual in distribution.
Distributor characteristics
The capability of the distributor to take on the distributive functions already discussed above is
obviously an important influence on the supplier’s choice.
Competitors’ channel choice
For many consumer goods, a supplier’s brand will sit alongside its competitors’ products and there is
little the supplier can do about it. For other products, distributors may stock one name brand only (for
example, in a car distribution) and in return be given an exclusive area. In this case, new suppliers
may face difficulties in breaking into a market if all the best distribution outlets have been taken up.
Supplier characteristics
A strong financial base gives the supplier the option of buying and operating their own distribution
channel. Boots and Chemist is a prime example. The market position of the supplier is also
important: distributors are keen to be associated with the market leader but the third, fourth or fifth
brand in a market is likely to find more distribution problems.
Factors favouring the use of direct selling
 An expert sales force will be needed to demonstrate products, explain product characteristics and
provide after-sales services.
 Intermediaries may be unwilling or unable to sell the product. For example, the ill-fated Sinclair
C5 eventually had to be sold by direct mail.
 Existing channels may be linked to other producers or reluctant to carry new product lines.
 The intermediaries willing to sell the product may be too costly, or they may not be maximizing
potential sales.
 If specialized transport requirements are involved, intermediaries may not be able to deliver goods
to the final customer.
 Where potential buyers are geographically concentrated the supplier’s own sales force can easily
reach them (typically an industry market). One example is the financial services market centred on
the City of London.
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Factors favouring the use of intermediaries
a. There are insufficient resources to finance a large sales force.
b. A policy decision to invest in increased productive capacity rather than extra marketing effort may
be taken.
c. The supplier may have insufficient in-house marketing ‘know-how’ in selling to retail stores.
d. The assortment of products may be insufficient for a sales force to carry. A wholesaler can
complement a limited range and make more efficient use of his sales force.
e. Intermediaries can market small lots as part of a range of goods. The supplier would incur a
heavy sales overhead if its own sales force took small individual orders.
f. The existence of large numbers of potential buyers spread over a wide geographical area. This is
typical of consumer markets.
Making the channel decision
Producers have a number of decisions to make.
a. What types of distributor are to be used (wholesalers, retailers, agents)?
b. How many of each type will be used? The answer to this depends on what degree of market
exposure will be sought.
 Intensive – blankets coverage
 Exclusive – appointed agents for exclusive
 Selective – some but not all in each area
c. Who will carry out specific marketing tasks?
 Credit provision
 Delivery
 After-sales services
 Sales and product training
 Display
To develop a co-ordinated system of distribution, the supplier must consider all the factors
influencing distribution combined with knowledge of the relative merits of the different types of
channel available.
Multi-channel decisions
The distribution channels appropriate for industrial markets may not be suitable for consumer
markets. A producer serving both industrial and consumer markets may decide to use the following.
a. Intermediaries for his consumer division.
b.Direct selling for his industrial division. For example, a detergent manufacturer might employ
salesmen to sell to wholesalers and large retail groups in their consumer division. It would not be
efficient for the sales force to approach small retailers directly.
Industrial and consumer distribution channels
Industrial markets may be characterized as having fewer, large customers purchasing expensive
products, which may be custom, built. It is due to these characteristics that industrial distribution
channels tend to be more direct and shorter than for consumer markets. It has to be remembered,
however, that the most appropriate distribution channels will depend specifically on the objectives for
the company regarding market exposure. There are specialist distributors in the industrial sector,
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which may be used as well as, or instead of, selling directly to the companies within this sector. There
are fewer direct distribution channels, from the manufacturer to the consumer in the consumer
market. Example may be found in small ‘cottage’ industries or mail order companies. It is more
usual for companies in consumer markets to use wholesalers and retailers to move their product to the
final consumer.
a. Wholesalers break down the bulk form manufacturers and pass products on to retailers. They
take on some of the supplier’s risks buy funding stock. Recently in the UK there has been a
reduction in importance of this type of intermediary.
b.Retailers sell to the final consumers. They many five consumers added benefits by providing
services such as credit, delivery and a wide variety of goods. In the UK, retailers have increased
in power whilst wholesalers have declined. Retailing has also become more concentrated with
increase dominance of large multiples.
Marketing channel strategy
There are three main strategies.
a. Intensive distribution involves concentrating on a segment of the total market, such as choosing
limited geographical distribution rather than national distribution.
b. Using selective distribution, the producer selects a groups of retail outlets form amongst all retail
outlets on grounds of the brand image, or related to the retailer’s capacity to provide after-sales
services
c. Exclusive distribution is an extension of selective distribution. Particular outlets are granted
exclusive handling rights within a prescribed geographical area. Sometimes exclusive
distribution, or franchise rights, is coupled with making special financial arrangements for land,
buildings or equipment, such as petrol station agreements.
Channel dynamics
Organizations groups together when they cannot achieve their objectives independently. If a
marketing channel is to function effectively, cooperation is paramount.
a. A distribution system with a central core organizing and planning marketing throughout the
channel is termed a vertical marketing system (VMS). Vertical marketing systems provide
channels role specification and co-ordination between members. There is much more
interdependence than is featured in a conventional system.
b. In corporate marketing systems the stages in production and distribution are owned by a single
corporation in a fairly rigid structure. This common ownership permits close integration and
therefore the corporation controls activities along the distribution chain. For example, Laura
Ashley shops sells goods produced in Laura Ashley factories.
c. Contractual marketing systems involve agreement over aspects of distribution marketing. One
example of a contractual marketing system that has become popular over the last decade is
franchising.
d. If a plan is drawn up between channel members to help reduce conflict this is often termed an
administered marketing system.
Channel conflict
Channels are subject to conflict between members. This need not be destructive as long as it remains
manageable. Manufacturers may have little influence on how their product is presented to the public.
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Conflict is the breakdown in cooperation between channel partners.
The cause of conflict needs to be identified, so that strategies can be formulated to repair any
damage. Conflict stems form four main problems
 Failure to do the job as understood by the rest of the channel
 Disagreement over a policy issue, such as territory or margin
 Differing perceptions on how to get the job done
 Inadequate communications
Inter organisational communication
Communication is key conflict resolution. The management of communications is usually
undertaken by a dominant member – the channel ‘leader’ or ‘captain’ who holds most of the power in
the in the channel. Industrial markets where channels lengths are generally short, power often lies
with manufacturers of the products rather than ‘middlemen’.
Communication within networks travels not only between levels of dependence (up and down the
network) but also across, such as from retailer to retailer. Reflecting its role its push strategy, it has
the following roles.
 Provide persuasive information
 Foster participate decision making
 Provide for co-ordination
 Allows the exercise of power
 Encourages loyalty and of commitment
 Reduces the likelihood of tension and conflict
Trust in and commitment to the network is crucial for success.
Trust: the degree to which partners are confident the each will act in the best interests of the
relationship.
Commitment: the desire to maintain a valuable relationship.
International channels
As markets open to international trade, channels decisions become more complex. A company can
export using host country middlemen or domestic middlemen. These may or may not take title to the
goods. Implications of channels management in the case of exporters include a loss of control over
product policies like price, image, packaging and service. A producer may undertake a joint venture
or licensing agreement or even manufacture abroad. All will have implications for the power
structure and control over the product.
Marketing channels and information technology
In recent years new technologies have emerged that have changed, and are continuing to change, the
way business is conducted. Among the most significant changes are changes relating to the
following.
 Mobile communications
 Electronic communications and commerce (e.g. Electronic Data Interchange (EDI))
 Satellite and cable digital television
 The Internet
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The full impact of new technology has only just begun, but already significant changes have occurred
in some organizations distribution channels.
Internet distribution
Display
Information gathering is still the most common Internet activity, whether it be information about a
historical fact, a medical problem or, hopefully, about your product. At present the five most
common online purchase categories are books, CDs, clothing, toys and games, and computer
software, but many buyers for other types of product do their initial ‘window shopping’ online and
then go to a more conventional distribution outlets to actually make their purchase.
The Internet is perfect for the display of many types of product – anything, in fact, that customers
don’t need to be able handle physically, but which can be adequately shown off in words, still and
moving pictures and sound.
A website offers an effortless and impersonal way for customers to find out the details of the products
and services that a company provides, and spend as long as they live they like doing so: much longer
than they might feel comfortable with if they had a sales person hanging over them.
For businesses the advantage is that it is much cheaper to provide the information in electronic form
than it would be to employ staff to man the phones on an enquiry desk or walk the shop floor, and
much more effective than sending out mailshots that people would either throw away or forget about.
Transport
The Internet can be used to get certain products directly into people’s homes. Anything that can be
converted into digital form can simply be uploaded onto the seller’s site and then downloaded onto
the customer’s PC. The Internet offers huge opportunities to producers of txt, graphics/video, and
sound-based products. Much computer software is now distributed in this way.
Disintermediation
Disintermediation: this term implies the process of ‘removing the middleman’, giving the consumer
direct access to information that would otherwise require an intermediary, such as a salesperson or
retail channel.
Reintermediation: refers to the replacement of offline intermediaries with online ones.
The new technology of the Internet and e-commerce gives consumers the power to find product
information directly, either removing the need for the salesperson altogether, or at least changing the
relationship between buyer and seller.
The impacts of the Internet on channel decisions
Strategic (‘board level’)
-Improve corporate image
-Increase visibility in the market
-Create market growth opportunities
-Lower costs
-Appeal to customers
-Access to the full competitive arena
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Operational (‘day-to-day’ on the factory floor)
-Speed of transactions increased
-Management of information improved
-Increased service levels
-Removal of time and distance constraints
-Complete transactions electronically
-Opportunity for new revenues
-Cost effectiveness
-Closer relationships with business partners
-Improved understanding of customer requirements
4 Integration, Implementation & Evaluation
The Use of Technology
Setting the scene
The collapse in the share prices of many ‘dot-com’ enterprises has led some of question the expected
impact of the Internet, but in business-to-business markets especially, the Internet is radically
affecting business life. According to Pelmacker et al (Marketing Communications, 2001) the
following communication objectives can be pursued on the Internet.
 Creating attitudes and building brand/product awareness
 Delivering detailed information
 Stimulation of customer response, form information request to final purchase
 Facilitation of transactions
 Retention of customers
At the time of writing, the uses of the Internet already embrace the following:
 Dissemination of information –generally free of charge
 Product/service development – through almost instantaneous test marketing
 Transaction processing - both business-to-business and business-to-consumer
 Relationship enhancement – between various groups of stakeholders, but principally (for our
purposes) between consumers and product/service suppliers
 Recruitment and job search – involving organizations worldwide
 Entertainment – including music, humour, art and games
There is agreement on at least one thing; namely, that the Internet is the greatest force for
commoditisation the world has ever seen. This is because it enables goods (and some services) to be
sourced worldwide, easily and cheaply; it also enables them to be promoted worldwide at relatively
low cost. The Internet therefore drives prices downwards, with implications for marketing, margins,
infrastructure costs, and customer dynamics.
What is different about the Internet?
There are several features of the Internet which makes it radically different from what has gone
before.
1. It challenges traditional business models – because, for example, it enables product/service
suppliers to interact directly with their customers, instead of using intermediaries (like retail
shops, travel agents, insurance brokers, and conventional banks).
2. Although the Internet is global in its benefits are not confined to large (or global) organizations.
Small companies can move instantly into a global marketplace.
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3. It offers a new economics of information – because with the Internet, most information is free.
Those with Internet access can view all the world’s major newspapers and periodicals without
charge.
4. It supplies an almost incredible level of velocity – virtually instant access to organizations, plus
the capacity (at least theoretically) to complete purchasing transactions within seconds.
5. It has created new networks of communications – between organizations and their customers
(either individually or collectively), between customers themselves (through mutual support
groups), and between organizations and their suppliers.
6. It has led to affiliate programmes – involving the creation of ‘portals’ through which small
enterprises can gain access to customers on a scale which would have been viewed as impossible
a few years ago.
7. It promotes transparent pricing – because potential customers can readily compare prices not only
form suppliers within any given country, but also from suppliers across the world.
8. It facilitates opportunities for very high levels of (apparent) customer intimacy between service
suppliers and their clients because each client can believe that he or she is receiving personalized
attention – even if such attention is actually administered through impersonal, yet highly
sophisticated IT systems and customer database manipulation.
9. With e-commerce, customer intimacy can be secured without significant cost penalties.
10. It makes possible sophisticated market segmentation opportunities. Visualizing and approaching
such segments may be one of the few ways in which e-commerce entrepreneurs can truly create
competitive advantage.
11. The web can either be a separate or a complementary channel. Although much prominence is
being given to web-only businesses, in many cases organizations can use the web merely as an
additional channel.
12. A new phenomenon is emerging in the form of dynamic pricing, whereby companies can readily
change their prices to reflect the current state of demand and supply.
Growth of the Internet
This will be fuelled by:
1. Many households have multiple Internet access points, through both parents and children.
2. Changes in the telecom markets are likely to mean that Internet connection time will be come
much cheaper, if not free.
3. Digital TV will permit the Internet to be accessed without the necessity for purchase of a personal
computer. This in turn will widen the market place for the Internet to encompass those in the
lower socio-economies categories who are more likely to subscribe to cable or satellite TV
companies.
4. Web-enabled mobile phones are already on the market. The emergence of WAP (Wireless
Application Protocol) is allowing the use of mobile phones for a wide range of interactions with
the web.
5. For many, the preferred Internet interface is not the PC but the PDA (Personal digital Assistant).
In the USA and more recently in the UK, there are already several wireless based PDAs being
used to link investors to stock market information.
A critical factor in the long-run expansion of the Internet is its use today by children, the adult
consumers of tomorrow.
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As access to the Internet accelerates, so does the provision of websites. Websites are not commercial,
have no transaction facilities, and are not truly significant form any marketing viewpoint, yet
nonetheless the scale of Internet activity continues to grow at a rate which most observers describes as
impressive.
At the same time, the Internet is not expanding at the same rate in every area of business. In reality its
growth is very context-dependent, with the significant influencing factors being as follows.
1. The degree to which the customer can be persuaded to believe that using the Internet will deliver
some added-value – in terms of quickness, simplify, price, and so forth.
2. Whether there are ‘costs’ which the customer has to bear – not exclusively ‘costs’ in the financial
sense, but also such psychological ‘costs’ at the loneliness of single person shopping.
3. The market segment to which the individual belongs – since the Internet is largely the preserve of
younger, more affluent, more technologically competent individuals with above-average amounts
of disposable income.
4. The frequency of supplier/customer contact required.
5. The availability of incentive which might stimulate Internet acceptance for example, interest rtes
n bank accounts which are higher than those available through conventional banks (Egg), the
absence of nay charges (Freeserve), the creation of penalties for over-the-counter transactions
(Abbey National), and the expectations of important customers (IBM’s relationships with its
suppliers).
The major growth so far in the field of e-commerce has concentrated on the business-to-business
(B2B) sector. Intel claims to be doing more than $1 billion of e-commerce per month. Here are some
examples to show the growing significance of the Internet in many business-to-business sectors.
1. Major companies are setting themselves up as e-businesses.
2. IBM now requires all its suppliers to quote and invoice electronically – no paper documentation is
permitted.
3. Many firms are using the Internet to exploit the transparency of supplier prices, and to maximize
their purchasing benefits from the availability of worldwide sourcing. Robert Bosch, the German
kitchen appliance manufacturer, require all its suppliers to have web-based catalogues and prices.
4. Companies are also increasing their customer service through the web. Dell, the computer
company, has created extranets for its major business customers, enabling them to receive
personalized customer support, their own price lists, and some free value-added services.
5. What constitutes effective and efficient customer service on the web? To answer this question we
must find disentangled and deconstruct the various elements of customer service from the
customer’s standpoint. Effective customer service (in any arena of activity, whether Internetbased or not) comprises three levels of perception.
a. The foundation of service: what the customer expects. Customers now expect that at least
minimal levels of functionality will be met by any product or service they purchase; they expect
that goods ordered will be delivered within an acceptable time-frame; they expect opportunities
for redress if post-purchase problems are experienced. Merely to remain in business, companies
must meet these basic customer requirements.
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b. Customer-centered service: what differentiates one organization from another. This is the
point at which customers begin consciously to choose one product/service supplier rather than
another, because of perceptions about trust, value and customer focus.
c. Value-added service: what excites the customer. What Tom Peters calls the “Wow” sensation
happens when the customer receives a level of service which is well beyond the conventional:
when response times are almost immediate, when the degree of personal attention if exceptional,
when service is proactively connected to customer needs.
Creating a strategy for e-commerce
What follows is a set of guidelines for organizations, which are considering the addition of an Internet
capability to their sales/marketing repertoire. At the outset, this capability may solely dispense
information (operating like a product catalogues), but it may eventually become transactional (so that
individual can place orders) and/or interactive (dealing with queries, complaints and other kinds of
customer communications). The typical questions, which have to be asked, by entrepreneurs,
executives and managers responsible for existing organizations are these:
1. How will the Internet impact my industry? Will it operate only at the periphery, perhaps
opening up new market opportunities (for ourselves and out competitors), but no more, or will it
fundamentally change our activities?
2. Will the Internet imply significant changes tour current business model? If at present we
communicate to our customers through conventional retail outlets, will we be able to approach
them directly via a transactional websites, thus cutting our costs but imperiling the future for out
retailing ‘partners’?
3. Will the Internet create new channels of distribution, customer contact, supplier
relationships, and customer feedback? If this happens, will these new channels eventually
replace the existing ones, or will they remain purely supplementary?
4. What new roles will develop? Will we ourselves become more dependent on IT and our
software suppliers?
5. What about pricing transparency and the open access to information by customers? The
availability of pricing information, in detail, will undoubtedly facilitate product/service price
comparisons – is that a problem for us? How will we (or can we) manage the opportunity created
to our customers to contact us 24 hours a day, seven days a week?
6. What new markets and customer segment opportunities are now presented to us? If, at
least in theory, we can gain access to worldwide purchasers, does that make it worthwhile to
generate further product/service variations to cater for segment which were hitherto too small to
be worthwhile?
7. Who will (or could) attack us? Looking at the situation in other sectors like financial services,
competitors can emerge from anywhere: if they did, where would they come form and (more
importantly) what might they do in order to take away our customers? How can we pre-empt
their activities?
Most observers and experts agree that a successful strategy for e-commerce cannot simply be bolted
on to existing processes, systems, delivery routes and business models. Instead, management groups
have, in effect, to start again, by asking themselves such fundamental questions as:
 What do customers want to buy form us?
 What business should we be in?
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 What kind of partners might we need?
 What categories of customers do we want to attract and retain?
Ten key steps to constructing an effective strategy for e-commerce
Step 1: Upgrade customer interaction
The first thing for the organization to do is to upgrade the interaction with its existing customers.
1. Create automated responses for the FAQs (Frequently Asked Questions) posed by customers, so
that customers become conditioned to electronic communication. Automated responses, perhaps
surprisingly in view of their impersonal nature, can help to improve customer confidence and
trust.
2. Set fast response standards, at least to match anything offered by the competition.
3. Use e-mail in order to confirm actions, check understanding, and reassure the customer that their
business is being taken forward.
4. Establish ease of navigation around your website and enhance the site’s ‘stickiness’ so that there
is a measurably reduced likelihood that actual or potential customers will migrate elsewhere.
Step 2: Understand customer segments
Secondly, the organization preparing its e-commerce strategy should understand its customer
segments and classify each segment against the likelihood that it will be receptive to an Internet
business route.
1. Some will be eager to transfer to the new technology, others will do so if persuaded (or
incentivised), and residual groups will prefer to remain as they are.
2. Once the degree of profitability-per-customer has been established, efforts should be made to
automate the provision of customer service and transaction capability so far as low-value
customers are concerned.
3. By contrast, the organization may establish personalized service relationships with key (i.e. high
profit-generating) customers, with privileged access to named personnel.
Step 3: Understanding service processes
Thirdly, the organization must understand its customer service processes in order to disentangle those
processes, which can safely be put on to the web and those which have to be delivered in other ways.
1. Typically, organizations serving customers may find that there are between five and ten generic
transaction types, which describe their relationships with these customers (ego information query,
complaints, and so forth).
2. This analysis is essential for addressing such questions as: Which of these processes is appropriate
for low-touch automation? Which of these process will work better, form the customer’s
standpoint, if put on the web?
3. Transaction costs also need to be investigated, again form the perspective of the organization and
its overheads, and also taking into account the transactions costs incurred by the customer. These
may involve money, but customers are often more conscious about time and timeliness.
4. A short simple transaction is often better conducted over the telephone.
Step 4: Define the role
Forth, the organization needs to define the role for live interaction with its customers.
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1. Live interaction may be very useful if there is scope for cross-selling and the conversion of
enquiries into sales.
2. The availability of service supplied by human intervention can also be appropriate if the
organization needs built trust (e.g. it is a new brand which must work hard to establish
confidence) and secure diagnostic information from the customer before any product or service
can be delivered.
3. E-mail may not be sufficient as a communications route, especially if it involves a delay before
replies or acknowledgements are forthcoming.
4.
Live interaction can be essential for customers who have a strong preference for human contact.
Step 5: Decide technology
Making the key technology decisions, the fifth step, involves some tough choices. Given the pace of
change and innovation in this arena, it is difficult to know whether to initiate a pilot progamme
immediately, with the full IT and people investment scheduled for later, or whether to go for full
integration at once. The risk with a pilot programme is that the organization can be overtaken by
pioneering competitors; the risk with full integration is that new systems can be inadequate or may
even collapse completely, causing irretrievable havoc with customers.
Step Module 6 : Deal with the tidal wave
There is much evidence that offering an internet-based service can lead to a major increase in
customer interaction. This might involve:
 Ensuring sufficient capacity is available for worst-case scenarios.
 Using low-touch technologies and system design.
 Setting targets fro low-touch interaction.
 Ensuring facilities are scaleable if demand rapidly outstrips supply
Step 7: create incentives
Seventh, especially if confronted by customer resistance, the organization may have to create
incentives for use of the lowest-cost channels, with savings passed on the customer through
discounts, higher interests rates (in the case of bank accounts) or lower interest rates (in the case of
credit cards). In the YK, banks have faced this by getting people to use automatic teller machines,
utilities have encouraged customers to use direct debits. In essence, the alternatives are:
1. To create incentives to switch to the lowest-cost channels, through financial inducements,
training, additional benefits, and so forth.
2. To introduce disincentives for continuing to use existing channels. Thus Abbey National has
implemented a $5 charge for customers who purse over-the-counter cash transactions in their
branches. Such tactics almost invariably generate very hostile reactions from customers
themselves and from consumers groups.
Step 8: decide on channel choices
The eighth consideration involves the decision about which cannel choices to offer, and whether for
instance, to confine operations to the ‘click’ route or whether to simultaneously maintain the ‘brick’
presence through a branch network. There are two crucial questions:
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1. Whether to offer the customer a choice of channels, e.g. face-to-face, post, phone and Internet.
Many banks offer all four; some have single-channel accounts (phone or Internet only), whilst
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others (like egg) allow constrained choice: egg (the Internet and telephone banking arm of the
Prudential Assurance Company) will allow telephone and Internet customer interaction, but only
permits new customers to enroll via the web.
2. How to balance the costs of different channels whilst managing the Customer Relationship
Management (CRM) database. In most customer service environments, the quality and scope of
the CRM database in central to the successful delivery of service, so it becomes desirable not to
operate each customer/communication channel separately, but to integrate existing channels
around a single CRM database.
Step 9: Exploit the Internet
The organization should exploit the Internet in order to create new relationships and an experience.
1. It is desirable to create tailor-made service sites for significant customers.
2. Proactive product/service offerings should be regularly incorporated into the website architecture.
3. Communities of users and /or customers (depending on whichever is appropriate) should be
facilitated, since these generate additional business through referral and may well undertake a
large proportion of the customer-service activity among themselves. Such communities may also
stimulate product/service innovation, new uses for existing products and services, and
product/service extensions.
4. Deliberate mechanisms need to be developed in order to turn browsers into buyers, and transform
one-off customers into repeat purchasers.
5. Any successful e-commerce strategy presupposes the likelihood that the product/service supplier
can engage the potential customer emotionally despite the technology which surrounds Internet
availability.
Step 10: Implement
The concluding and tenth issue concerns the need to implement the strategy. No strategy is worth the
paper is written on if it simply remains a document, gathering dust: as Peter Drucker once pointed
out, ‘Strategy is nothing until it degenerates into work’.
Customer dynamics and the Internet
It was once believed that potential customers for Internet businesses were relatively relaxed in their
expectations about service, but even if this were the case in the first few years of Internet actions, it is
far from being the reality today. Internet customers are just as demanding as customers everywhere.
Effective, competent and acceptable customer service through the Internet is a combination of the
following factors.
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Table 1Module 6 . Customer dynamics and the Internet
FACTOR
COMMENT
If the website is not fast, the transient potential shopper will simply
Rapid response
on to another. These ‘fickle’ visitors to a website will only allow
around five to eight seconds: if the site has not captured their
attention in that time-frame, they will move elsewhere
The website must be legible with appropriate graphics and
Response quality
meaningful, relevant information supplied. Generally speaking,
website visitors are not interested in the company’s history and size:
they are much more concerned about what the company can offer
them.
It is important to create a website which caters for every conceivable
Navigability
customer interest and question. Headings and category-titles should
be straightforward and meaningful, not obscure and ambiguous.
Again, these need to be rapid, given that many internet shoppers
Download times
regard themselves (rightly or otherwise) as cash-rich and time-poor.
One of the biggest barriers to the willingness of potential internet
Security/trust
customers actually to finalize a transaction is their fear that
information they provide about themselves (such as credit card
details) can be ‘stolen’ or used as the basis for fraud.
Customers must believe that if they order goods and services, the
Fulfillment
items in question will arrive, and will do so within acceptable time
limits (which will generally be much faster than the time limits
normally associated with conventional mail order). Equally,
customers need to be convinced that if there is a subsequent need for
service recovery, then speedy and efficient response can be secured
either to rectify the matter or to enable unsatisfactory goods to be
returned without penalty.
Just as window displays need to be constantly refreshed, so do
Up-to-date
websites require frequent repackaging and redesign.
Can the user reach the site 24 hours a day, seven days a week? Is the
Availability
down-time minimal? Can the site always be accessed?
Site effectiveness and Is the website intuitive and easy to use? Is the content written in a
language which will be meaningful even to the first-time browser
functionally
(i.e the potential customer).
.
We have already seen that Internet customers display little loyalty. Many organizations are busy
engaged in mechanisms which will promote emotional connectivity (and thus, it is believed, customer
retention for reasons which go beyond the purely mechanistic and instrumental arguments of price).
Some of these mechanisms involve ‘real’ people, whilst others call for simulations and ‘virtual’
people.
Digital TV
In the past, television was ‘analogue’. The development of digital technologies can be applied to
television. Digital TV takes a number of forms.
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1. Digital terrestrial televisions delivered via the old ‘analogue’ aria.
2. Digital satellite televisions, which digital signals are sent via an existing satellite dish (e.g. Sky
digital)
3. Digital cable television, which digital TV is delivered via the cable network.
In outline, transmitting programmes by digital signal rather than by conventional means dramatically
increases the number of services which can be delivered to audiences: as many as ten digital services
will be able to occupy the frequency previously occupied by one conventional ‘analogue’ service. In
addition, digital broadcasting allows viewers greater choice how and when they watch, eventually
allowing them to interact with programmes and select their own programme content. More
immediately, the new technology offers many viewers the prospects of improved reception.
The impact was described in depth in a BBC document, extending choice in the Digital Age, form,
which must of the following is derived.
Digital technology removes the constraints imposed by conflicting demands within the confines of a
few television and radio networks. Viewers and listeners often miss programmes, and it is hard to
schedule a range of programmes, which suit everyone all the time. At present, programmes can only
be scheduled in sequence, with the viewer having to make an appointment with the television to
watch a specific programme at a set time. In the digital world, a spectrum can be used to allow
networks to have many layers and branches: there is much more flexibility to match services to the
viewer’s personal timetable.
Using digital flexibility and extra capacity, broadcaster are able to offer additional programmes,
information, sound and graphics, to complement what is being shown on the main channel, and to
allow viewers to catch up on programmes they have missed. These extra services can be offered
alongside (and do not interrupt) the continuing programme schedule.
At the touch of a button, viewers are able to get supplementary information on the programmes they
are watching. The BBC, for instance, envisaged that viewers could have instants access to the
following.
 The musical scores for Young Musician of the Year
 A ‘guess the value’ game to accompany The Antiques Roadshow
 A summary of the story so far for viewers late to join a film or play
Broadcasters are also able to make use of the improved sound quality available on digital television to
offer alternative soundtracks, for example the original language version of foreign films.
A key feature of the technology is the way it allows users to respond to, or interact with, the material
they are receiving. Interactive progammes that can be used on computers, or eventually on-demand
from the television, will transform on-screen education.
Impact of interactive systems
The ability to shop from home and choose items directly with the use of scanners can be co-ordinated
with direct advertising. Infomercials (which combine information with a commercial), which the
consumer has chosen from a databank, will be relayed directly to the home down cable links. These
may take the form of recipes, DIY hints, car repairs and so on. Consumers will also be able to
purchase the necessary ingredients or parts simultaneously, simply by pointing a mouse on a
computer screen at the desired goods and clicking its buttons.
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It is, however, difficult to predict how successful and how big the market for home shopping will
become in the UK.
1. Geography. In the UK and other European countries, distances to retail shopping centers are
small. (On the other hand, traffic congestion continues to be an issue.)
2. However, people are often ‘time poor’ and Internet shopping with convenient delivery times is
becoming popular for some consumers, for example books, CDs and now groceries.
3. Success depends on consumers’ acceptance of technology and the reliability of that technology.
Technology that is hard to use or unreliable will discourage sales.
Advantages of interactive systems
 Saving time spent in shopping visits
 Savings use of cars and car parking
 Reduction in congestion and pollution
 Greater variety of products to choose from
 Ability to watch demonstrations from the comfort of one’s home
 Ability to browse
 Ability to interrogate, get technical advice
 Getting bank balance immediately
 Transferring funds between accounts
 Paying bankers orders
 Access to directories of suppliers
 It may be possible to closely segment markets
 The specific needs to individual customers could be met
 The cost of stockholding could be reduced.
Home shopping in America is a billion business and is growing at the rate of 20% per annum. These
shopping channels are increasingly being used by professionals without time to wander around
department stores. The amount of broad band multimedia will accelerate the process, first, by
increasing the number of channels available, and secondly by increasing the interactivity. Instead of
having to ring up to order, viewers will be able to punch in a code on their handset and pay by
swiping their credit card through a slot in the set top box.
There are limitations to such interactive systems, which may be related to the state of the technology
or to ingrained social and cultural habits.
 There are inevitably high set up costs.
 There is a lack of knowledge of the systems.
 Some people suffer from technophobia.
 There is a lack of personal contact.
 Expectations of quality may not be realized.
 It is necessary to touch, feel, smell or taste some products.
 Shopping for some people has social benefits.
 Existing shopping centers may be destabilized.
Measuring the effectiveness of online marketing
Many e-commerce enterprises are equipped with little more than guesswork when designing their
initiatives and assessing their commercial value. As the e-commerce environment matures, so the
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necessity for objectives and dispassionate measurements of performance accelerates. Here are some
of the key issues.
First, the success of a commercial website has to be evaluated against the overall product/service
offer from the company.
1. In words of ww.emystery.shopper.com ‘An e-commerce site has to be a complete customer
service fulfillment picture; it can’t just be one bit working online that is not supported offline.
2. Thus website usability + e-mail + telephone contact + product fulfillment + customer interaction
= the customer experience; it is not website usability on its own.
Channel satisfaction is typically scored through online focus groups or online questionnaires, or both.
1. Online focus groups are cheap but hard to moderate dispassionately.
2. Online questionnaires are also cheap, but present problems with sample bias, since those most
likely to respond are either committed advocates or deeply hostile aliens (i.e. customers and excustomers who are too alienated to be objective or constructive).
3. For sample of online questionnaires, see www.Epson.Ico.uk.
Channel buyer behaviour is measured by the extent to which the customer interacts with onsite
marketing communications. Website registration usually provides information about the prospective
purchaser’s lifestyle and can therefore contribute to segmented behaviour profiles. Techniques for
quantifying customer reactions include log file analysis (see www.webtrends.com) and key ratios
(e.g. page impressions per websites visit).
Channel promotion. Significant criteria in this arena include volume (number of ‘hits’ or views of
the website’s home page) and quality (the degree to which visitors are appropriate to the target market
and whether they have a propensity to purchase the products or services being offered). Log files can
produce basic data about ‘hits’ but no more, so there are important data gaps here.
Channel outcomes. The traditional marketing objectives apply: sales, leads, conversion rates, repeat
purchases, and so forth. Problems can occur (so far as website effectiveness is concerned) if
customers obtain product information from the Internet, and then make their purchases through
conventional outlets.
Channel profitability. The key index here is achievement of a targeted proportion of sales via the In
1998, EasyJet (the low-cost airline based in the UK) set out to achieve a contribution target of 30% of
ticket sales via the Internet by the year 2000 and this was achieved within twelve months.
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5 CURRENT AND FUTURE ISSUE
DEVELOPING RELATIONSHIP MARKETING
The nature of the customer
As you must be aware from earlier in this text, customers make up one of the groups of stakeholders
whose interest marketing management should address. The stakeholder concept suggests a wider
concern than the traditional marketing approach of supplying goods and services, which satisfy
immediate, needs.
The stakeholder approach demands that the supplier-customer relationship extends beyond the basic
transaction. The customer needs to remain satisfied with his purchase and positive about his supplier,
long after the transaction has taken place. If his satisfaction is muted or grudging, future purchase
may be reluctant or non-existent and, most importantly, he may advise others of his discontent. We
have already discussed the power of word of mouth communication.
Customer variation will exist to a greater or lesser extent in all industries. However, even within a
single business, customers will vary significantly in the following areas.
 The frequency and volume of their purchases.
 Their reasons for buying
 Their sensitivity to price changes
 Their reaction to promotion
 Their overall attitude to the supplier and the product.
Many businesses sell to intermediaries rather than to the end consumer. Some sell to both categories.
You must recognize that the intermediary is just a customer as the eventual consumer.
Customer retention
Variation in customer behaviour was mentioned above. The most important aspect of this variation is
whether or not the customer comes back for more. Customers should be seen as potentially providing
a lifetime of purchases so that the turnover form a single individual over time might be very large
indeed.
It is widely accepted that there is a non-linear relationship between customer retention and
profitability in that a fairly small amount of repeat purchasing generates significant profit. This is
because it is far more expensive in promotion and overhead costs to convert a non-buyer into an
occasional buyer than to turn an occasional buyer into a frequent buyer:
 Does not have to be persuaded to give the product a try
 Does not need to be tempted by special deals
 Needs less attention from sales staff
 Already has his credit account set up
Today’s highly competitive business environment means that customers are only retained if they are
very satisfied with their purchasing experience. Any lesser degree of satisfaction is likely to result in
the loss of the customer. Companies must be active in monitoring customer satisfaction because very
few will actually complain. They will simply depart. Businesses, which use intermediaries, must be
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particularly active, since research shows that even when complaints are made, the principals hear
about only a very small proportions of them.
The most satisfactory way to retain customer is to offer them products which they perceive as
providing superior benefits at any given point. There are specific techniques to increase customer
retention. Loyalty schemes such as frequent flyer programmes augment the product in the customer’s
eyes. The club concept, as used by Sainsbury and Tesco, offers small discounts on repeated
purchases.
The principal benefits of both these types of scheme is the enhanced knowledge of the customer
which they provide. Initial registration provides name, address and postcode. Subsequent use of the
loyalty cards allows a detailed purchasing profile to be built up for customer retention must address
the need for careful selection and training of these staff. It is also a vital factor in relationship
marketing.
Relationship marketing
Relationship marketing is defined very simply as the management of a firm’s market relationships.
Much has been written in recent years on relationships marketing. It can only really exist when the
marketing function fasters a customer-oriented service culture, which supports the networks of
activities that deliver value to the customer. The metaphor of marriage has been used to describe
relationship marketing, emphasizing the nature of the necessary long-term commitment and mutual
respect.
It must be remembered, however, that the effort involved in long-term relationship building is more
appropriate in some markets than in others. Where customers are purchasing intermittently and
switching costs are low, there is always a chance of business. This tends to be the patterns in
commodity markets. Here, it is reasonable to take a transaction approach to marketing and treat each
sale as unique.
A relationship marketing approach is more appropriate where switching costs are high, and a lost
customer is thus probably also for a long time. Switching costs are raised by such factors as the need
for training on systems and high capital costs.
The conceptual or philosophic nature of relationship marketing leads to a simple principle, that of
enhancing satisfaction by precisely meeting the needs of individual customers. This depends on
extensive two-way communication to establish and record the customer’s characteristics and to build
a long-term relationship. Three important practical methods contribute to this end.
 Building a customer database
 Developing customer-oriented service systems
 Extra direct contact with customers
Modern computer database systems have enabled the rapid acquisition and retrieval of the individual
customer’s details, needs and preferences. Using this technology, relationship marketing enables
telephone sales staff to greet the customer by name, know what he is likely to want. It enables new
products to be developed that are precisely tailored to the customer’s needs and new procedures to be
established which enhance his satisfaction. It is the successor to mass marketing, which attempted to
be customer-led but which could only supply a one-size-fits-all product. Relationship marketing
extends the principles of customer care. Customer care is about providing a product which is
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augmented by high quality of service, so that the customer is impressed during his transaction with
the company. The customer is anonymous. Relationship marketing is about having the customer
come back for further transactions by ending the anonymity. The culture must be right; the right
people must be recruited and trained; the structure, technology and processes must be all right.
It is inevitable hat problems will arise. A positive way of dealing with errors must be designed into
the customer relationship. Front line sales people cannot usually deal with the causes of mistakes as
they are built into the products, systems and organization structure. It is therefore necessary for
management to promote vertical and horizontal interaction in order to eliminate the sources of
mistakes.
The most important issue in customer retention is focusing marketing efforts on activities that
promote a strong relationship rather than a single transaction.
Customer analysis will almost certainly conform to a Pareto distribution and show, for instance, that
80% of profit comes from 20% of the customers, while a different 20% generate most of the credit
control or administrative problems. Some businesses will be very aggressive about getting rid of their
problem customers, but a more positive technique would be to concentrate effort on the most
desirable ones. These are the key accounts and the company’s relationships with them can be built up
by appointing key account managers.
Key account management is often seen as a high level selling task, but should in fact be a business
wide team effort about relationships and customer retention. It can be seen as a form of co-operation
with the customer’s supply chain management function.
The key account manager’s role is to:
 Integrate the efforts of the organization in order to deliver an enhanced service
 Maintain communication with the customer
 Note any developments in his circumstances
 Deal with any problems arising in the relationship
 Develop the long-term business relationship
1. The key account relationship may progress through several stages, leading ultimately to trust and
commitment.
2. At first, there may be a typical adversarial sales-purchasing relationship with emphasis on price,
delivery and so on. Attempts to widen contact with the customer organization will be seen as a
threat by its purchasing staff.
3. Later, the sales staff may be able to foster a mutual desire to increase understanding by wider
contacts. Trust may increase.
4. A mature partnership stage may be reached in which there are contacts at all levels and
information is shared. The key account manager becomes responsible for integrating the
partnership business processes and contributing to the customer’s supply chain management.
High ‘vendor ratings’, stable quality, continuous improvement and fair pricing are taken for granted.
Internal marketing
The term internal marketing has been used in a variety of ways. It has, for instance, been adopted in
the field of quality management where the concept of the internal customer is used to motivate staff
towards achieving quality objectives. In its most common usage, internal marketing means the
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promotion of a marketing orientation throughout the organization and, in particular, creating customer
awareness among staff who are not primarily concerned with selling. Hotel housekeeping staff, for
instance, may rarely be seen by the guests, but their work makes a major contribution to the guests’
perception.
The achievement of such a widespread marketing orientation may involve major changes in working
practices and organizational culture. The successful management of organizational change depends
to a great extent upon successful communication and communication is a major marketing activity.
‘Internet marketing’ has therefore also come to mean the communication aspect of any programme of
change and, even more simply, the presentation by management to staff of and information at all.
Internal marketing can refer to any of the following:
 Quality management programmes
 Promotion of a marketing orientation
 Creating customer awareness
 Management of organizational change
 Communication of change programmes
Internal marketing as part of marketing management
If we concentrate on the use of the term to mean the use of marketing approaches and techniques to
gain the support and co-operation of other departments and managers for the marketing plan, we will
see that a number of challenges may exist. The first is hat we may well be looking at a major cultural
shift. Even in businesses, which have highly skilled and motivated sales teams, there may be areas of
the organization whose culture, aims and practices have nothing to do with customer satisfaction.
Organizational change
1. Measuring activities against contribution to customer satisfaction means that some areas of the
organization are likely to shrink. The process of delayering may be necessary. This utilizes
modern information technology systems to replace the chiefly ‘communications’ role of middle
management. The result is a much reduced requirement for general managers and an increased
span of control.
2. At the same time as these changes are being made, front line sales and marketing capability will
probably have to be enhanced. This is likely to involve more than just an increase in numbers.
New methods of working will be introduced, including working in cross-functional teams. In
particular, the natural partner of delayering is empowerment. Front line staff will take greater
responsibility for delivering customer satisfaction and will be given the necessary authority to do
so. Relationship marketing database and staff will be installed and key account managers
appointed.
Such restructuring of the organization has important human resources (HR) implications.
1. There are likely to be redundancies. Staff who cannot adjust to the new methods must be
released, with proper attention to both the legal requirements relating to redundancy and the
organization’s policies on social responsibility.
2. Recruitment will continue, because of natural wastage, but it will probably be necessary to adjust
recruitment policy and practice to select the new requirements. Recruits must be selected who
will be able to absorb the new approach and respond to the necessary training.
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3. Training will become a major features of the change management programme. As well as new
recruits, existing staff must be educated in the new methods and approach. The marketing
department may have an input here, or the task of inculcating the marketing orientation and ideal
of customer service may b contracted out to consultants.
Research suggests that although the principles involved may be acknowledged by a large number of
companies, formalized internal marketing programmes in the UK are still fairly uncommon. Initial
findings make several other suggestions.
1. Internal marketing is implicit in other strategies such as quality programs and customers care
initiates, rather than standing alone as an explicit policy in its own rights.
2. Where it is practiced, internal marketing tends to involve a core of structured activities
surrounded by less rigorously defined ad hoc practices.
3. To operate successfully, internal marketing relies heavily on good communication networks.
4. Internal marketing is a key factor in competitive differentiation.
5. Conflicts between functional areas are significantly reduced by internal marketing.
6. Internal marketing depends heavily on commitment at the highest level of management, cooperation, and on the presence of an open management style.
The marketing mix for internal marketing
Product under the internal marketing concept is the changing nature of the job. Price is the balance
of psychological costs and benefits involved in adopting the new orientation, plus those things which
have to be given up in order to carry out the new tasks. Difficulties here relate to the problem of
arriving at an accurate and adequate evaluation of psychological costs. Many of the methods used for
communication and promotion in external marketing may be employed to motivate employees and
influence attitudes and behaviour. HRM practice is beginning to employ techniques, such as multimedia presentations and in-house publications. Presentational skills are borrowed from personal
selling techniques, while incentive schemes are being employed to generate changes in employee
behaviour.
Advertising is increasingly used to generate a favourable corporate image amongst employees as well
as external customers. Federal Express has the largest corporate television network in the world, with
1,200 sites.
Distribution for internal marketing means e-mail, meetings, conferences and physical means like
noticeboards, which can be used to announce policies and deliver policies and training programmes.
Physical evidence refers to tangible items, which facilitate delivery or communication of the product.
Quality standards such as BS 5750/ISO 9000, for instance, place great emphasis on documentation.
Other tangible elements might involve training sessions, which would constitute a manifestation of
commitment to standards or policies.
Process, which refers to how a ‘customer’ actually receives a product, is linked to communication
and the medium of training, which may be used to promote customer consciousness.
Participants are the people involved in producing and delivering the product, and those receiving the
product, who may influence the customer’s perceptions, are clearly important within the internal
marketing process. Communications must be delivered by someone of the right level of authority in
order to achieve their aims. The way in which employees act is strongly influenced by fellow
employees, particularly their immediate superiors. Inter-departmental or interfunctional
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communications are likely to be least effective, because they have equal status or lack the authority to
ensure compliance.
Segmentation and marketing research can also be used in internal marketing. Employees may
be grouped according toothier service characteristics, needs, wants or tasks in order to organize the
dissemination of a service orientation. Research will monitor the needs and wants of employees, and
identify the impact of corporate policies.
Problems with the internal marketing concept.
Even effective use of inwardly directed marketing techniques cannot solve all employee related
quality and customer satisfaction problems. Research clearly shows that actions by the personnel
department, or effective programmes of personal selection and training, are likely to be more effective
than marketing based activities. Claims that marketing can replace or fulfil the objectives of some
other functional are clearly overstated. However, the internal marketing concept has a major role to
play in making employees- customer conscious.
Types of outside resources
In the modern world, it is possible to outsource everything. There are many great management and
marketing consultants in the UK. The CIM, for example, provides a comprehensive service. Some
consultants specialize in design, research or promotion.
Marketing research agencies
Not many organizational find it necessary form time-to-time to outsource survey to specialists.
Promotional agencies
There is a great variety of promotional agencies including advertising agencies and agencies
specializing in sales promotion, in PR, in telesales/telemarketing. Within sales promotion there is a
range of specialists in such areas as packaging design, POS display material, exhibition services, and
mail order.
Full-service agencies
Full service agencies supply the full range of marketing services. In smaller companies, many of the
functions associated with marketing may actually be sourced form outside the company. Obvious
examples would be market research services, advertising, design of packaging, and specialist aspects
of products testing (for example, sensory testing of new food products, or safety tests on new
electrical goods). When promotional campaigns are being mounted, ‘leafing’ is typically the province
of small subcontractors as are teams who dispense free samples during in-sore promotional exercises.
Employing advertising agencies not only gives access to their expertise but may also improve the
finances of a media campaign because of the commission which the media pay to bonafide agents
only. The use of outside resources can add a great deal of flexibility to an organization. It reduces the
need for investment and offers the possibility of greater profits.
Outsourcing also reduces the strain on the organization’s limited human resources and frees
marketing management to concentrate on the more important strategic rather than tactical aspects of
its marketing plans.
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Action programme 3
What are the main advantages of outsourcing?
Briefing
Good briefing ensures good working relationships. Bad briefing will need to misunderstandings
between client and supplier to the detriment of the ultimate customer. In the event of a dispute, a full
brief will leave less room for doubt as to the requirements of the contract. There must be basic ground
rules for briefing outside suppliers.
 To what extent do we take outside suppliers into our confidence?
 What do they need to know?
 Who will draw up the briefs?
 How often should the brief reviewed?
Management of externally sourced factors
Control and review
Direct supervision of externally sourced staff and equipment will normally be the responsibility of the
contractor, but the hiring company must maintain its own management input into the relationship.
Costs, benefits and risks must be considered during the life of the contract as well as before it is let.
The company must be clear about what it wants to achieve from outsourcing and set quantifiable
standards against which the contractor’s performance can be reviewed.
One or more mangers should be charged with oversight of every important aspect of every contract.
These managers should also maintain communication with the contractors and promote good
relations between the parties. If performance is unsatisfactory, the contractor must be informed
directly rather than via the operational staff so that effective corrective action is taken.
Cost, risks and performance should be reviewed regularly and the result reported to the senior
managers responsible for outsourcing policy. A framework for review is given below. The
supervising manager should be particularly alert to developments which may affect the relationship,
such as new legislation and changes in labour relations. For instance, minimum wage legislation will
undoubtedly affect the profitability of many contractors, and some will be tempted to evade it. No
company conscious of its image would wish to be associated with such evasion.
One of the main potential problems is lack of response to client input. There are some mechanisms,
such as staged payments and incentive structure, which attempt to address this issue by making the
outsourced function responsible for meeting particular targets, and holding back payment. There is a
tendency of this to be seen as somewhat excessive in smaller contracts. Control rests, ultimately, upon
the market power of the client, and on the quality of the management control system operated
within the client organization.
Control might be applied selectively. Should a supplier who involves small or spasmodic expenditure
be subjected to the same degree of control as a supplier the organization uses regularly or
extensively? The answer cannot depend on expenditure alone. The organization could, for example,
be making a relatively small spend with an agency on concept testing proposed new product.
However, this proposed new product could be vital to the organization’s future and therefore the
agency could require stricter control than a dependable supplier of raw materials.
The nature of the control should perhaps be different according to the nature of the product or service
being bought for raw material suppliers, an organization might have scientist tests on quality and
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maintain records of deliveries late/on time/before time. However, for an advertising agency, control
might be more informal and based on frequent personal meetings.
A framework for review
 Supplier’s name, address, telephone number
 Names and positions of contacts
 Description of types of goods and services supplied
 Total annual spend for last three years
 Splits of annual spends by types of product/service where relevant
 Number of years we have been trading with this supplier
 Record of improvements made by supplier during trading period
 Perceived strengths and weaknesses of supplier
 Record of growth of supplier: turnover, staff, number of branches
 List of alternative suppliers
 Perceived strengths and weaknesses of top three alternative suppliers
 Date of last review of this supplier
 Name/position of person conducting this last review
 Recommended date of next review
The Marketing communications industry
1. Setting the Scene
External agencies exist to provide services that a client does not retain in-house. Indeed, the argument
that communication activity should be kept in-house is discredited, as the communications techniques
available are now so varied that it makes no commercial sense to retain in-house the entire range,
when each specialties is only likely to be called upon infrequently. Agencies are generally dealing
with a number of clients and will be more in touch with the latest techniques and developments.
Competitive deals on media buying, for example, are far more likely to be achieved by a large agency
than by a single staff member in a relatively small marketing department.
So, in the last few decades marketing techniques have increased dramatically in range and
complexity. The marketing communications industry has had to evolve as technology and business
realities contribute to both audience and media fragmentation.
Standard ‘above-the-line’ marketing (where media space is paid for), handled by large advertising
agencies, has been increasingly replaced by ‘below –the-line’ (promotional) and through-the-line’.
Agencies specializing in sales large direct marketing and PR have sprung up as independent
operations and divisions of large advertising agencies. Many companies now use more than one
agency to handle a portfolio of techniques above, below- and through the line, or to cover local and
on-going work as well as national strategic campaign. As a result, many larger, integrated agencies
now have divisions specializing various areas.
 Sales promotion
 Direct marketing
 Public relations
 ‘New’ media (internet, CD-ROM)
 Design
According to fill (200) the marketing communications industry consists of four principals groups.
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 Media
 Clients
 Agencies
 Support organizations (such as production companies and research agencies)
There is a certain level of interdependence between these organizations, so co-operative working
relationships between them are required.
Broadly speaking there are only two types of agency that a marketing communicator will deal with:
creative advertising agencies and research agencies. Advertising agencies are still the most commonly
used marketing service. Agencies come in a range of sizes and specialisms to reflect the increasingly
fragmented and diverse range of media.
2. Research agencies
It is essential that a marketing communicator has a thorough understanding of the role, scope, and
reliability of both quantitative and qualitative research. Thus equipped he can develop a healthy
distrust of data that is presented in the form of research. Unless the research proves itself to be both
relevant and valid for the intended purpose it should not be trusted.
The cost of research
Cost of a major problem in securing accurate primary research. Budget constraints sometimes reduce
a sample size to a very level and however impressively they may be presented, the results can be
misleading. Secondary sources, such as syndicated surveys, tend to carry a high price, and value must
therefore be the criteria pf purchase.
Research decision sequence
Prior to commissioning research the decision sequence should be this
Step 1. Do we need research?
Step 2. If so, shat for?
Step 3. By when is it needed?
Step 4. How much can we afford?
Step 5. Can we locate a quality researcher who is free at the time needed?
When deciding on sources of research it is essential to consider what is really needed in terms of
sample reliability rather then to choose on the basis of viability or cheapness. It is essential to check
the credentials of many research organization: can it deliver what you want that the time that you
want it? Most say they can, but what is their record?
All advertising agencies have links with the other specialists that are needed. Clients should therefore
remember that the benefits of engaging specialists who are used to working together could be
outweighed by the specialists’ natural desire to continue working together whether or not it is
appropriate to the client’s needs to do so.
Retail audits (e.g. AC Nielsen)
a. These measure stocks moving through retail outlets. However, Nielsen have been denied access to
certain major stores such as Marks & Spencer so their data has to be adjusted. Their data shows
sales in any two-month period, but does not show usage.
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b.Such research can be self-fulfilling, however. When Nielsen declare the market shares for each
segment shops tend to adjust their shelf-space allocation so that the market share percentage is
given to each segment shops tend to adjust their self-space allocation so that the market share
percentage is given to each brand stocked.
Consumer panels comprise shoppers who compete diaries showing purchases in detail. Alternatively,
researchers are sent into the home to carry out ‘pantry checks’ in similar fashion to retail audit. They
have not made inroads into Nielsen’s supremacy, but provide very useful data that helps in the
marketing communications task.
Omnibus surveys are vehicles provided by a research organization that carries out a regular survey on
a syndicated basis.
a. Client companies are invited to buy questions at a fixed price. Discounts are usually available for
several questions and/or for repeating the questions in a series of surveys.
b. The research is carried out at a far lower than could be achieved by individual commission. They
are particularly suitable for those who want to ask a limited number of questions of a large,
representative sample of the population. The largest is the ICD survey.
c. There are many general omnibus surveys available and each claims to offer unique benefits.
Potential clients should consider not only t he sample size, but also its quality in terms of structure
and method of data collection.
d. There are wide variety of specialist omnibus surveys working to niche markets such as motorists
or mother with children under two.
Target group index
The TGI is a national product and media survey which collects information from 24,000 adults each
year. The TGI is a ‘single source’ measurement and all elements of the survey can be cross-referenced
or example media usage brand to product usage; brand usage to demographics.
Action programmes 2
Here are two small ads from a recent edition of marketing week. (These names have been omitted.)
What sort of companies/products might use these services?
Market research limited trade research specialist
 Retail audits
 Product availability
 Mystery shopping
 Shop testing
 Trade interviews
 Tailor made studies
 Overnight pricing checks
 Customer interviews
 Consumer research
CHILDREN AND YOUTH BRITAIN CONTINENT
GB core sample: 1200 7 – 190 years olds with bi-monthly extensions to include ages 3 to Module 6
and 20-24. Any age range within these limits.
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Field dates: every 2 – 4 weeks.
Rates: from $290 per questions according to age range covered.
Continent: five country child and youth surveys
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Other marketing communications agencies
Before we look at creative agencies in detail in the next section, here is an outline of some other
agencies available for the marketing communicator.
Promotion agencies
Promotional activities- collaborations between brands, competitors and incentives - have been a huge
growth area in marketing. Some agencies specialize in these areas.
 Sourcing promotional incentive products and merchandise
 Devising links and negotiating deals between brands
 Organizing competitions
 Designing and producing promotional packaging and information material
PR consultancies handle several areas.
a. Media or press relations (keeping the media informed, in order to manage the company’s
portrayal and secure ‘free’ coverage of product/service information)
b. Corporate relations (promotion a corporate image to the public, market and business world,
through a range of PR techniques)
c. Marketing support (promoting specific products or services via publicity, events, press coverage
and so on)
d. Government relations (lobbying on behalf of the company’s interests)
e. Community relations (targeted at the general public or local residents, via communication and
social programmes, community involvement, sponsorships etc)
f. Financial relations (communicating with shareholders, financial media, the stock market)
g. Employee relations (communication with staff)
PR agencies are less easy to manage than advertising agencies, because their activity and output is
often less tangible. The major cost is their time plus expenses. In order to make cost effective use of
their services you need to consider the following.
 Set clear objectives for the on-going PR plan or specific project
 Set a project fee where possible
 Brief comprehensively
 Monitor activity perhaps via an independent cuttings or media monitoring agency
 Monitor expenditure
Direct marketing services
Direct marketing agencies (and separate specialists) offer a range of services from database and
mailing list development, analysis and segmentation to telemarketing, direct mail package design,
copy writing, mailing, and fulfilment. This area of marketing has grown with Internet usage, as many
of the ‘doctoms’ have used direct mail to drive visitors to their websites.
Brand identity
There are specialist agencies which perform specific brand-related services.
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 Design and produce product packaging and display
 Orchestrate the up-dating of brand identity and style
 Research, devise, market-test and register brand names
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Sponsorship
Agencies undertake negotiations
 Sponsoring agreements
 Product endorsements by celebrities
 Product placement (the inclusion of branded products in films or TV programmes)
Table 18. Creative agencies
Types of agency
Full service This is an agency which provides a complete advertising services encompassing
agency
creative work, production, media planning and buying. The full service agency may
also provide or sub-contract research services for a client. Some large advertising
agencies will provide other communications services, for example direct
marketing, public relations or sales promotion. There has been some concern that
such large agencies may not always be able to provide a full quality service in all
the areas that hey cover. Some creative teams left large agencies to set up their own
creative shops (or ‘HotShops’) to provide an alternative.
Media
Media independents provide media services (such as planning and buying) only.
independents
A la carte
A client may decide to share out his communication task, choosing to cherry pick
services a la carte from the different providers available. Responsibility for
controlling and coordinating the activities of these service providers rests with the
client, usually in the form of the brand or marketing manger.
New media
This area has grown hugely in recent years. The main area of work is the provision
of internet facilities. Agencies tend to fall along a spectrum of expertise and be
either marketing oriented, or technology specialists.
Agency selection
The pages of the trade magazine campaign regularly carry news of client accounts kon the move from
one agency to another. There are a number of reasons why clients may change agencies. The client
may feel the agency is lacking in new ideas, or is overhanging. Alternatively, a new client won by the
agency may result in a conflict of interests between new and old clients. Often, a change in personnel
on either the client or the agency side can result in an account moving on.
Sources of information include the following:
a. Publication such as campaign portfolio provide a listing of agencies and the types pf business they
handle, alongside addresses and contact numbers.
b. The advertising agency register (AAR) is a specialist intermediary type service which clients can
use to help them with their search. For a fee, AAR will provide a list of candidate agencies and a
section of their work.
c. Many agencies engage in self promotion via advertising, direct mail or even cold calling.
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d. Personal recommendation may bring some agency names to light.
e. Some agencies now produce CD-ROMs containing case studies, examples of work and
background information about them and their offices.
Shortlist
From the initial search, a shortlist of perhaps six to eight agencies will be drawn up, usually on the
basis of their current work and past track record. The prospective client will then visit those agencies
for a series of what are known as credentials presentations. A preliminary evaluation of the agencies
may be carried out using the criteria below.
a. Previous work handled
b. Experience in relevant fields of business (for example, if they handle other clients with similar
target audiences to mine? Have they carried out work in the fmcg/industry/business-to-business
market before?)
c. Agency costs/terms of business
d. Resources in-house as opposed to bought in
e. Staff-expertise
f. Personalities
Agency pitch
Following these initial visits, it is likely that a smaller number of agencies will be formally invited to
pitch for the client’s business. There is some controversy regarding whether an agency should be
reimbursed for a pitch. Some agencies will only carry out pitches if they can claim some of the
expense back again form the potential client. Other agencies will only carry out an ideas pitch as
opposed to presenting creative work.
Normally, three or four agencies will be invited to compete for the client’s business. All will receive a
standard brief and will be given a set period in which to reply to the brief.
Detailed selection process
It is essential that each agency is judged by the same criteria. The criteria should be established by the
client in advance, and they must be understood and agreed by all who will be part of the selection
team.
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Module 6 Promotional Practice
Issue
5 Current and Future
Table 19. Criteria for assessing an agency
Item
Item
Present work present work
Present clients





Chemistry




Staffings
Staffing


eeee
Evidence
The agency
Understanding







Specialized k specialized knowledge

Price

Price
Judgment


Comment
Is it exciting/interesting?
Is it affective? What proof is there?
It is allied to our marketplace?
Are there any clashes that will worry us or the
agency or the other client(s)?
Do previous clients come back for more or are
agency/client relationship short-lived?
Is the chemistry between us good?
Will we feel able to trust the agency all the way?
Will the trust be reciprocated?
Will the people worked on the pitch would on the
account?
How stable will our account item be?
What depth of experience can the account team
offer?
Is it a package or tailored specially?
Does it arouse us to buy?
Is its size, age and structure suitable?
Does it have to have international capacity?
Is it a full service agency or a specialist?
What is its workload? Does it have time for us?
Foes it possess the necessary business skills? (For
example, has it negotiated a fee for specialized work
necessary to meet the requirements of our invitation
to pitch fort the account?
Has it demonstrated realistic and satisfactory
understanding of our organization and market?
Does the asking fee represent value for money when
the above points are taken into account?
Does the agency know its value to us?
Is this the agency for us?
Judgment
Final selection
The final selection will involve a judgment about how well the client believes the agency has
responded to the brief in terms of the strategic thinking involved, the creative work (if presented) and
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the agency’s around understanding of the client’s industry. Courtesy dictates that the client should
inform both the successful agency and the unsuccessful ones in a prompt manner
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Criticism of the formal selection process
The formalized process is now being questioned, especially because with the arrival of new media
and Internet technology, campaigns are to be resolved in days rather than weeks. The pitching process
can lead to tensions, especially on the part of unsuccessful agencies who may have invested a great
amount of time and effort for no reward. Perhaps most significantly for them, they will share their
ideas, over which they will no subsequent control.
The pitching process also gives little insight into subsequent working relationships.
Marketing at work
An example solution to thus particular (cited by fill, 2002) is that adopted by Iceland and Dyson.
They invite agencies to discuss and work with client on ‘mini-briefs’ for a day. Such briefs are more
like discussion topics for the agency to think about, as opposed to the traditional ‘outline your
proposed campaign for product X and we’ll tell you if we like it’ approach. Most importantly, it gives
senior management the chance to see agency and client staff working together on a task, and the
agencies are spared weeks of costly preparation work.
Briefing the agency
The agency brief is the initial and most important stage of any project undertaken. The planning and
creative teams of the agency need initially to get to know the client, it’s products, brands, market and
customers, and its culture’s style, self-image designed image.
Comprehensive brief will include the following details:
a. The product: including its design and marketing history, and current ‘life cycle’ storage its
technical specifications, pack sizes, shelf-life, packaging/distribution arrangements and
associated after-sales services.
b. The market: who uses the product, how, when and why, how it is distributed (via wholesale,
retail or direct selling), the product’s current and desired market share, pricing and
discount/margin policies for the product and sales strategies.
c. Previous advertising: the previous advertising budget (if any), competitors’ advertising spend,
breakdown of spend above- and below- the-line.
d. Current advertising policy: budget available, desired image for the product and company
objectives advertising.
The brief may also contain the company’s current ideas about the theme for advertising: what it
believes is the key concept or unique selling proposition (USP) of the product or brand. The brief is
usually given to the agency account executive who relays it to the relevant agency personnel.
Managing the relationship
The specialist agencies providing support services (advertising, public relations, sales promotion,
research) usually all work too march the same principles. There will be an account director directly
responsible for the client’s account and working directly with the client brand manager. Thus all
contact between client and agency is via the audit established by these two individuals.
Who’s who in the agency?
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 The account executives service the clients on a day-to-day basis
 The account director monitors work on given accounts
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 The creative team ‘produces’ the ad
 The traffic/production team plans and schedules agency workflow, monitors progress against
deadlines and ‘chases’ work
The account director/manager is vitally important because a full service agency will provide the
services of not fewer than 20 departments, and these need to be coordinated around a client focus.
The departments commonly found in a full serviced agency are as follows:
 Creative
 Typography
 Studio
 Account management
 Economic forecasting
 Research
 TV and radio production
 Press production
 Print buying
 Art buying
 TV and radio buying
 Sales promotion
 Marketing media planning
 Personnel
 Finance
 Administration
 Management
a. The advertising coordinator (or marketing department head) briefs the agency.
b. The marketing department head approves the agency’s assessment of the advertising objective,
strategy, schedule and cost estimates.
c. The advertising coordinator provides the agency with all available materials and information to
help the creative team to produce effective ads.
d. The advertising coordinator is the first one to see work that comes back form the agency at each
stage of production (copy, story boards, sketches), and will probably check, correct and
recommend any necessary changes before the ad is finally approved by the marketing department
head.
e. The ad is returned to the agency for typesetting, final art, filming and sound production.
f. The advertising coordinator carries out final checks, and gets final approval before giving the
agency clearance to release the ad to the media.
Establishing a relationship with a creative agency take time. The end result has to be on-going
relationship based upon mutual understanding and respect. Therefore both the selection process and
the day-to-day relationships have to receive very careful attention.
A creative agency should be a full member of the client’s, marketing team. As such, members of the
agency have to be trusted with market information and, to some extent, with profit information as
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well. If they are not, then information will be withheld and the relationship will suffer. The creative
work will suffer too, and sales and profitability will fall. If an agency understands the costing of a
Module 6 Promotional Practice
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package it is less likely to spend time devising a promotion that the client will not be able to afford,
and to keeping working data from an agency is counter productive, morale sapping and expensive.
The only reason an agency is engaged is because it can do or provide a service better (and more
quickly) than the client can do to himself. It follows that the client should not meddle with their work.
If the client does not like it, of course, he must say so, but the test must be will it work with the target
audience?
Key principles for managing the relationship
1. Management is by the client
2. The agency team must work closely within the client’s marketing department
3. Briefings must be specific and unambiguous
4. All research data and management control information available to the brand manager must be
provided to the agency
5. The agency should sit on the client’s strategic planning meetings as an equal member, and of right
6. Time and cost requirements must be reasonable and must be accepted by the agency
7. The client should not meddle in the creative process and the agency should not interfere with the
production of the package, although both may makes an input, ass appropriate, as part of the
strategic planning process.
8. Full credit must be given when the agency is successful, and shared responsibility must be
accepted as appropriate.
9. Fees and commissions should be agreed in advance and accounts should be paid promptly.
10. Copy should never be changed once it has been approved. It should be fully checked before it is
signed off. Changes get at the stage are not only expensive but more importantly they are
damaging to the brand manager’s personal credibility with the agency.
Payment of creative agencies
Historically, agencies have earned their money through commission on media space purchased for
their clients. The practice arises from the time when the advertising agent was a media broker who
also provided other services. This method of payment also highlighting the agency’s legal standing.
The agency is liable for bills to the media if the client defaults on payment. Nearly 50% of agency
income still comes form commission, according to a recent survey.
Agency commission
15% used to be the standard rate of agency commission. This is now no longer the case. Some large
clients argue that they should pay the agency a discounted rate of commission, because of the volume
of media throughout that the agency handles. Other clients, themselves under pressure to make
advertising money work harder, have argued for commission rates of 10% or 13%.
Fee payment
Some advertisers and their agencies prefer to work on a project-by-project fee system. This ensures
the agency earns money, whether or not the work is media based. About 40% of agency income is
earned in this way.
Marketing at work
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David Ogilvy is on record as saying ‘ I pioneered the fee system but no longer care how I get paid,
providing I make a reasonable profit. With a fee system the advertiser pays only for the services he
wants, no more and no less. Every fee account pays its own way.
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Large profitable accounts do not subsides small, unprofitable ones. Cuts in client’s budgets do not
oblige you to cut staff. When you advise a client to increase his advertising he does not suspect your
motive.’
Payment by results
Payment by results schemes have been used mainly in the USA, although they are becoming more
common in the UK. With performance-related payment, the agency is judged on the effect its
advertising has on client company sales. Different rates of commission then come into force,
depending on performance to target, over-achievement or under-achievement. The major drawback to
this method of remuneration is that it pre-supposes a direct correlation between advertising effort and
sales.
Agency structures
Within the agency, a variety of personnel will be involved in handling the client’s business. The
account executive or account manager is the lynchpin between the numerous agency personnel and
their client. His row is to liaise with client staff and to brief, supervise and coordinate the appropriate
agency staff appropriate times.
The internal structure of an agency can best be explained by considering how the agency handles a
piece of client work.
a. The client problem and agency who have been together for some time will built up a good
working relationship.
The agency will understand the client’s business, and the motivations and decision-making
processes of end consumers. A new product or service, new situation to changing market
conditions may provide the starting point for a new role to be performed by advertising. The client
needs to brief the account executives on the task in hand.
b. The internal briefing
The account executives will brief the members of the account team who work on the client’s
business. These members are:
i. An account planner, responsible for using market research to develop advertising strategy for the
client’s
ii. A creative team or duo of art director and copywriter, responsible for conceiving a creative idea
which meets the advertising brief and working that idea up into visual form and written copy.
A media planner/buyer, responsible for recommending an appropriate media strategy and ensuring
media is bought cost effectively.
c. The client presentation
The account executive will present back to the client. He will show examples of how the final
advertising execution will look, using rough visuals or storyboards and will explain the rationale
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for the ideas presented. Depending on the client’s reaction to the team’s interpretation of the brief,
the team will either be asked to ahead in developing the work, or will be asked to rework their
ideas.
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The go-ahead stage may include a decision to test the advertising in research prior to full production
of the advert.
d. Production of advert(s)
Some simple advertising executions will be carried out almost entirely in-house by the advertising
agency. For more complex executions, the agency will be agreed with media owners. During this
stage, there will be continuous liaison between the account executive and the client. The client is
likely to attend some of the key production stages such as filming or photography of the
commercial.
If time allows, further research may take place to identify the need for any additional changes.
e. The campaign appears
The time span between the briefing for the account executive by the client and the campaign
appearing can be as little as six or eight weeks for a simple photographic newspaper execution to
20 weeks plus for an animated TV commercial. Once the campaign has appeared, it is important
that it is properly evaluated against the objectives initially set.
Members of the account team, who work directly on the client’s, business in creating a campaign, are
those the client is most likely to come into contact with, although the main point of contact will of
course be the account executive. There are other behind the scenes staff with whom the account
executives must liaise but who will not have direct contact.
i.
ii.
iii.
iv.
Accounts department, responsible for billing the client and paying agency invoices
Vouchers department checks that press adverts appearance
Traffic department ensures that jobs are taken through their different stages on time
A large agency may additionally have an information or library service, and legal department.
International agency selection and management
International agencies
Over the last forty years, as companies have expanded their operations internationally, so too have
advertising agencies, Many of the large agencies have developed internationally, either by setting up
branch offices in foreign countries or by merging with or acquiring local agencies.
Some agencies expanding abroad prefer to establish internationally networks or alliance where local
offices are not wholly controlled. The argument is that local partners with a stake in the agency will
be motivated to produce superior work.
Media independents. Have mirrored the pattern of agency development and many belongs to
international media planning and buying groups. The trend amongst clients is towards the
centralization of advertising. Many large companies believe international brands are best served by an
agency operating internationally.
Selection
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Selecting an international advertising agency will follow a series of well-defined stage. Locating
suitable agency candidates is the first step in the process.
a. Initial search. Prospective clients will probably be aware of the large multinational agencies based
within their own country.
Module 6 Promotional Practice
5 Current and Future Issue
b. A shortlist of agencies will then be drawn up, usually on the basis of their current work and past
track record.
c. The client will then visit the local offices of those agencies for a series of credentials
presentations. These initial visits will help to form an opinion about which candidates should be
requested to
d. Formally pitch for the client’s business. All agencies involved in the pitch should be given the
same written brief to follow.
e. The agency’s response to the brief will usually involves a formal presentation bucked by a written
proposal document with several important features:
 The agency’s interpretation of the client’s advertising problem
 The creative and media strategy which will ensure objectives are met
 Control mechanisms to be sued
 Timing schedules
 Allocation of responsibilities
 Costing
 Terms and conditions of business
f. The final selection decision will have to take into account many client side factors such as the
client’s organizational structure and management style, the number of brands to be advertised and
the degree to which brands penetrate different markets.
Other criteria for selection would include the following.
a. The types of advertising and other communications services offered
b.Level of expertise in the client’s field of work
c. The agency’s international creative track record
d.The balance within the agency of campaigns handled for local clients and those handled for
international ones
e. Whether the agency has strong local offices in the client’s home and other key markets
f. The extent to which the agency’s culture and management style fits with that of the prospective
client.
g.The potential conflict with existing business handled within the agency network
h.The control and coordination procedures in place
Action programme 4
Your company is about to launch a group of new consumer toiletries products in the Middle East.
What sorts of assurance would you want from an advertising agency pitching for this account?
The advantages of using an international agency
 Less duplication and dilution of effort on the part agency and client
 Centralized control of all advertising effort
 Speedy response across markets
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 Pooling of talent and ideas form the entire agency network
 Specialized resources available
 Standardized working methods by the agency
 Reduced costs due to economies of scale
Module 6 Promotional Practice
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Possible criticisms of international agencies
 They provide an uneven quality of service in their different branches
 They produce bland campaigns
 Quality control suffers due to handling hundreds of campaigns simultaneously
 Small or medium sized clients suffer a lack of attention from senior staff
 High staff turnover rates exist amongst creative employees
Local or international?
Despite the increasing presence and power of international advertising and media networks,
independent local agencies exist in the markets of most countries. Some companies prefer to retain
country-by-country agency arrangements, believing local agencies to be creatively closer to their own
markets. Cherry picking local agencies is an appropriate strategy for the client who has a small
portfolio of products to be advertised in a limited number of markets.
Management issues
External factors, such as market diversity, segmentation and completion affect the type of
coordination chosen. International promotions.
a. Organization structure
i.Local autonomy.
Each subsidiary of an international agency may act as a separate profit centre, attracting its won
clients in the home market. Upon appointment, the subsidiary, which has brought in the client,
takes the role of lead agency office, with overall supervision of the client’s account.
ii.Central control.
Alternatively, an agency may exert strong central control on regional offices from its headquarters
base.
c. Organization culture.
Managers may have different assumptions as to how advertising ought to be done, and it might be
a hidden assumption that decisions are taken at the top or, on the other hand, by giving local
managers their head.
d. The need for coordinated marketing communications; firms with worldwide exposure may need
central control of marketing communications to ensure they are, in fact, coordinated.
Control
The advertiser
A number of management and control need attention.
a. Budgets. If advertising budgets will be split among the different units, the money might be spent
less effectively than if control is centralized.
b.Timing. The local advertising campaigns might need to be coordinated so that the production
side can cope with demand. This is especially true if the firm is an exporter, with a number of
local sales offices and warehouses. Local advertisers may generate demands which cannot be
met.
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c. Some central review is necessary so that good ideas can be passed around within the group.
d.Expertise. The person responsible for advertising in a ‘small’ subsidiary may not have great deal
of expertise and may rely too much on local advertising agencies for ideas, rather than
controlling the output directly.
Module 6 Promotional Practice
5 Current and Future Issue
e. Finally, all advertising campaigns need to be evaluated for effectiveness.
i.Local campaigns may have different objectives, and so appropriate effectiveness measures need
to be outlined.
ii.It is easier to measure message recall and media buyer efficiency in advanced economies, and
there may not be the facilities in less developed countries, even if these promise high growth.
Between client and agency
Relationships with agencies need to be managed. In many agencies, there will be ‘account manager’
responsible for overall liaisons with client. It is in the agency’s interests to establish a long-term
relationship with the client.
The agency’s account executive is a lynchpin, in communication the client’s needs to hit creative
team. The agency must also be able to liaise, where necessary, lower down the chain of command,
and to communicate to the units of the business, in clear terms, the objectives of the promotion
campaign.
With the agency
Within the agency, there are the following issues of management and control.
a. A general problem of central direction vs. local freedom. This we have already discussed, in
terms of tailoring local advertising campaigns or adopting a standard approach.
b.Conflicts of interest: how free are local offices to tout for business, if this involves offending a
major client?
c. How do you coordinate the activities of different creative teams?
d.There may exist problems of corporate culture, particularly if an agency grows up the result of a
take over.
e. Performance appraisal and culture.
f. Many human resources issues are relevant (e.g. corporate culture details of organization
structure).
Current cline/agency issues
As markets expand, clients are likely to forsake traditional, vertical organizational structures where
brands are managed on a country-by-country basis, in favour of a horizontal structure which cuts
across country divides. This implies brand and product management at a centralized level and may
result in a preference for centralized agencies.
Consequence might be as follows:
a. Clients are likely to become more demanding of their agencies, as clients strive to ensure that
their advertising is accountable and effective. In America, the trend is already towards payment by
results. Clients are also likely to demand a larger base of expertise in terms of communications
and research services provided.
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b.Agencies will continue to expand internationally to meet the needs of their clients. This may lead
to a concentrate in advertising agency ownership as the large agencies seek to expand still further
by way of acquisitions and merger.
c. Agency expansion will also mean that an increasing number of local agency offices will be
established in new markets (e.g. Russia, eastern Europe, china). Agencies may need to take a
long-term perspective on emerging markets. Initial resource requirements will be high.
Module 6 Promotional Practice
5 Current and Future Issue
Media buying and selling power continues to concentrate. On the hand, large international media
independents hold consolidated buying power and have the ability to level volume or other discounts.
On the other hand there is increasing concentration in global media ownership.
Controlling the marketing communication industry 12/03
There are two types of control in the marketing communications industry in the UK. And they are
specifically mentioned in the syllabus.
 Voluntary. This provides self-regulation to promote high standards of practice, often in areas that
are difficult to judge in law.
 Statutory protection afforded to consumer by the legal framework
Self-regulation
The self-regulatory system of advertising control consists of the following bodies, between them
covering non-broadcast media.
a. The Advertising Standards Authority (ASA)
i. This covers the non-broadcast media (press, posters, cinema direct mail, sales promotion, lists
and databases), and ensures that the Britain code of advertising practice functions in the public
interest. This is the body to which the public and industry company about advertisements that are
not ‘legal’ decent, honest and truthful.
ii. It scrutinizes advertisements in order to anticipate potential complaints and problems
iii. It provides a copywriting advice service to advertisers
b. The committee of advertising practice (CAP) runs in parallel with the ASA and coordinates the
trade and professional organizations that comprise the advertising business. Together, the ASA and
the CAP ensure that the British code of advertising practice (as put together by CAP) is followed.
c. The independent television commission (ITC) governs television advertising with its own code of
advertising standards and practice, which has the force of law.
d. Radio advertising is regulated by the radio authority (RA), which also has its own code with
statutory force.
e. Bodies representing particular sectors in the industry, such as the institute of sales promotion and
the direct selling association, also have their own codes of practice.
Statutory regulation
This system of self regulation (which is not punishable by the courts) is designed to operate alongside
the legal protection that is now afforded to the consumer by statue, via government departments
including the office of fair trading. Criminal and civil prosecution could be expected by those who
break the laws contained within the following:
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 Trade Descriptions Act 19Module 6 8
 Fair Trading act 1973
 Unfair contract Terms Act 1977
 Food Act 1984
 Weights and Measures Act 1985
 Consumer Protection Act 1987.
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