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CHAPTER TEN
RELATIONSHIP BUILDING: DIRECT MARKETING,
PERSONAL SELLING, AND SALES PROMOTION
OBJECTIVES
To emphasize the importance of relationship marketing in today's high-tech, over communicated
world and to demonstrate how various forms of marketing communications can be integrated
with advertising to manage an organization's relations with its various stakeholders. Relationship
marketing and IMC are two of the most important trends in marketing and advertising today.
Direct marketing, personal selling, and sales promotion play different but often overlapping roles
that are vitally important to IMC programs. Each offers many opportunities but also have
limitations that advertisers should be aware of. (p. 304)
After studying this chapter, your students will be able to:
1. Discuss the importance of relationship marketing and IMC.
2. Define direct marketing and discuss its role in IMC.
3. Explain the importance of databases to direct marketers.
4. Discuss the role of personal selling in an IMC program.
5. Describe the advantages and drawbacks of personal selling.
6. Define sales promotion and discuss its importance as a communications tool.
7. Identify the benefits and drawbacks of sales promotion.
8. Explain the difference between push, pull strategies, and give some tactical examples of
each in sales promotion.
TEACHING TIPS AND STRATEGIES
Students will be exposed in this chapter to how IMC is changing companies’ perspectives
when advertising. To convey to students the importance of this lesson I would take them
through the Dell story at the start of this chapter.
Dell utilizes many different functions when trying to target customers. They run
television ads, which list their 1-800 number, and Internet web address. In magazines
ads, they list the logo Dell and the 1-800 number/Internet web address. This helps to
build brand awareness for their brand.
As the book explains on (p. 305), Dell also launched campaigns such as going to the
website and entering to win $50,000. Although a purchase was not necessary, Dell was
able to sell many computers during this and other campaigns they have tied into their
websites.
I recommend going over the advantages of this type of communication strategies.
Students do not understand many times the importance of having an all for one attitude.
By building the brand around different levels of communications such as the website,
telephone, personal contact, catalog etc companies can enhance their brand image in
consumers’ minds.
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With the advent of computers as the book points out, database management is much
easier then it use to be. For instance, in the Dell examples above, Dell can easily track
your email address, address and telephone number and whether or not you made a
purchase. This can be done with no human interaction at all on the side of Dell. They
create a database to data mine (analyzing data for patterns), and then can send emails,
catalogs accordingly. This helps them to be more efficient and keep the top of mind
awareness that brands need to succeed.
LECTURE OUTLINE
Introduction (p. 305) — The story of the Dell computer sweepstakes 2002. Rather than
just run an advertising campaign, Dell used sweepstakes to increase consumer awareness
of its website and boost demand for its computers. Dell launched the campaign by
announcing a $50,000-a-Day Giveaway for the month of July and encouraged people to
visit their website for more information. If people purchased a computer, they were
entered into another drawling for $50,000 grand prize in the Back-to-school sweepstakes.
In August, Dell launched a Trip-A-Day Giveaway. In September, they launched BMWa-Day Giveaway. The goal was to get customers to visit their only storefront, their
website. What Dell has done so successfully is to employ a wide variety of
communication tools that consistently reinforce its main goals: serving customers’ needs
and growing the customer database
II. The Importance of Relationship Marketing and IMC (p. 307) As pointed out in Chapter
8, many environmental factors make building brand equity via customer relationships —
in which the sale is only the beginning — the key strategic resource of the successful 21st
century business. This is easier said than done since everything a company does – and
doesn’t do – sends a message. Seamless communication from every corner of the
company is how a company earns a good reputation, which is the principal objective of
IMC.
A simple adage: Advertising can create an image, but a reputation must be earned.
III. Understanding Direct Marketing (p. 307)
A. Direct Marketing is defined by the Direct Marketing Association (DMA) as “an
interactive system of marketing which uses one or more advertising media to affect a
measurable response and/or transaction at any location.”
1. After a study in 1997, the DMA broadened the definition to include: “any direct
communication to a consumer or business recipient that is designed to generate a
response in the form of an order (direct order), a request for further information
(lead generation), and/or a visit to a store or other place of business for the
purchase of a specific product(s) or service(s) (traffic generation).”
2. Direct Marketing magazine goes even further: “Direct marketing is a measurable
system of marketing that uses one or more advertising media to affect a
measurable response and/or transaction at any location, with this activity stored
in a database.”
3. Database marketing builds and maintains a base of data on current and
prospective customers and communicates with them using a variety of media; is
one of the fastest-growing marketing methods used today because it is an
efficient method for increasing sales. It is also a major component of most IMC
programs.
I.
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IV.
4. A good database enables marketers to target, segment, and grade customers. It
also helps them to identify customers and prospects, what and when they
purchase, and how to contact them.
5. Direct marketers use direct-response (or action) advertising aimed at
stimulating some action or response from the customer.
The Role of Direct Marketing in IMC (p. 309). Companies use a variety of media to
generate inquiry responses to build databases of names and addresses. Such media are
used as linkage media — media that help prospects and customers link up with a
company. Other companies may simply purchase a mailing list as the database. The
marketer communicates directly with the prospect to create a two-way link that
establishes or enhances a relationship.
A. The Evolution of Direct Marketing (p. 309)
1. Direct marketing is the oldest and fastest growing marketing method worldwide
due to advances in telecommunications and computer technology and to society.
With 64 percent of American women working outside the home, families have
more income, but less time—thus, shopping by telephone using credit cards and
by computer is causing greater growth in direct marketing practices. Such
electronic transactions make products easier and faster to purchase.
2. In 1999, $1.5 trillion in direct marketing sales (8.4 percent increase over 1998).
Business-to-business direct marketing grew 10.4 percent to $691.6 billion during
the same period. Ten percent growth predicted to continue until 2004.
10-1 Largest direct-response agencies in the United States (p. 309)
3. Boom in telecommunications and computer technology spurring the growth of
direct marketing worldwide. Toll-free numbers now available worldwide.
Limitations, though, come from differing legal restrictions.
B. The Impact of Databases on Direct Marketing (p. 310)
1. Modern computer technology enables marketers to compile and analyze
customer data in unprecedented ways.
a. With flattening profitability and a slowing growth rate in their customer base,
Pitney Bowes, the dominant company in the postal meter business, decided
to identify the best of its 1.2 million customers. This led to the creation of a
customer lifetime value (LTV) model based on its customers’ historical and
potential share of wallet. The company found it had a major customerretention problem. Cancellation rates from its low-volume and low-cost
accounts were running 40 percent per year. The company created distinct
direct-marketing programs, a loyalty program for its best customers, and a
retention program for its problem accounts. By the end of the first year,
attrition was reduced by 20 percent.
b. The database is the key to direct marketing success. It's the corporate
memory of all important customer information: name, address, telephone
number, NAICS code, source of inquiry, cost of inquiry, history of
purchases, etc. All of these give the company a competitive edge.
c. The database allows a company to measure efficiency of its direct-response
marketing efforts.
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2. Working with a marketing database requires two processes:
a. Data management is the process of gathering, consolidating, updating, and
enhancing information about customers and prospects that reside in the
database.
b. Data access enables marketers to manipulate, analyze, and rank information
to make better decisions. Suggested methods are:
1) Customer profiling refers to obtaining a snapshot of a customer at a
given time (identifies common characteristics and ranking of their
relative importance in different segments).
2) RFM formula (recency, frequency, monetary). Using the three measures
to help rank customers by the type of merchandise or services they buy,
how often they buy, or by how much they spend.
10-2 RFM analysis of accounts, December 2002 (p. 311)
A10-5
(p.311)
C. The Importance of Direct Marketing to IMC (p. 311). Perhaps the greatest reason for
direct marketing's growth is: marketers and agencies realize they cannot do the job
with one medium anymore, so direct marketing is the best way to develop a good
database.
1. With a database, companies can pick the prospects they can serve most
effectively and profitably — the purpose of all marketing;
2. Companies can send discrete messages to individual customers and prospects —
allowing people to feel unique, not part of a mass market.
3. Direct marketing gets a tangible response (marketers can count the responses and
determine the cost per response)
4. Direct marketing offers convenience to consumers, precision and flexibility to
marketers – best way to reach small BTB customers, for example
5. Becoming more and more economical vis-à-vis other media options
6. Direct marketing can be more private – a sales letter campaign can be waged
without the competition even knowing about it
D. Drawbacks to Direct Marketing (p. 313)
1. There are personal reasons people refrain from responding to direct marketing:
a. In the past, direct marketers were sales oriented, not relationship oriented.
This history has given direct marketing a bad name.
b. Consumers enjoy visiting retail stores and shopping.
c. Consumers like seeing products first hand, feel the goods personally, and are
hesitant to buy goods unseen.
2. Direct marketing efforts often have to stand on their own:
a. Direct marketing media don't always get the prestigious affiliation offered by
some media, making it more costly to build product image.
b. Clutter — direct mail, TV infomercials, and telemarketing pitches intrude on
consumers at home and at work, cluttering the minds of consumers.
c. Direct marketing raises consumer concerns over privacy.
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V.
Types of Direct-Marketing Activities (p. 314). All direct marketers face two basic
strategy decisions: the extent to which they will use “direct sales” and the extent to
which they will use “direct-response advertising”
Example: Database marketing was more difficult prior to computers (p. 314)
A. Direct Sales (p. 314). Marketer's representatives sell to customers directly, at home
or at work, rather than through a retail establishment or some other intermediary.
Direct sales feature:
1. Personal Direct Selling (p. 314) — face-to-face selling away from a fixed retail
location. There are two main forms:
a. Person-to-person. A representative introduces the product to the customer,
convinces the customer of the product's value, and completes the sale.
b. Group. In network marketing organizations like Amway, Rexall Showcase,
and Shaklee, the direct sales people are both distributors (sellers) and end
users. They often do little actual selling of products, but focus their actions
on recruitment of new distributors who will buy products at wholesale and
consume them personally.
2. Telemarketing (p. 315). A decades old method of direct sales, telemarketing
includes selling and prospecting by telephone, answering phone inquiries, and
providing sales-related services to callers.
a. Telemarketing is a major source of income for some companies and
organizations, especially nonprofit and charitable causes, political
candidates, and home-study courses.
b. In 1999, marketers spent 38 percent of all their direct media expenditures (an
estimated $66.9 billion) that generated an estimated $538.3 billion in total
sales.
c. Reasons for such widespread use of telemarketing:
1) Costs far less than personal selling.
2) Many consumers have accepted teleculture.
3) Telemarketing is the next best thing to face-to-face personal selling.
Telemarketers do more than just take orders, they counsel dealers with
display and promotion suggestions, offer advertising tips, and arrange for
special imprints.
4) When combined with other forms of direct-response media, a greater
effect is created (i.e., telemarketing plus direct mail usually results in at
least 10 percent increase in responses.
Ethical Issue: “Political Advertising-Positively Negative (pp. 312, 313)
B. Direct-Response Advertising (p. 315) asks the reader, viewer, or listener to provide
feedback straight to the sender. Any medium can be used, but the most common are:
1. Direct Mail — after personal selling and telemarketing, most effective method
for closing a sale or generating inquiries (more in Chapter 16).
2. Catalog Sales — the largest direct marketers are catalog companies. Catalogs
are reference books (now also CD-ROMs) that list, describe, and usually picture
the products sold by a manufacturer, wholesaler, jobber, or retailer.
10-3 Top 10 catalog companies (p. 317)
a. Catalog industry is big business. In 1999, the industry spent $12 billion in
advertising to generate $93 billion in BTB and consumer sales.
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b. To increase readership and stand out from the glut of other catalogs, some
marketers add editorial and slick photography to sell a certain image.
3. Direct-Response Print Advertising (p. 317) — newspapers and magazine ads and
inserts featuring coupons or listing toll-free phone numbers can be very effective
in stimulating customer responses. (More in Chapter 15).
4. Direct-Response Broadcast Advertising — direct marketers' use of TV has
increased dramatically in recent years. More people are watching infomercials
and featuring toll-free numbers and buying the advertised products. Direct
response radio has been successful in the past but has yet to grow substantially.
Example: T.V. is a powerful instrument for direct marketers (p. 317)
10-4 Who watches (and buys from) infomercials (p. 318)
5. Interactive Media (p. 318) allows users to control both the content and the pace
of presentations and to order merchandise directly from the system. On-line
personal computers are the most popular interactive medium (more in Chapter
17).
A10-2 Target provides customers the ability to shop on-line and register for
gift registries (p. 319)
VI. Personal Selling: The Human Medium. (p. 318)
Successful salesperson Sid Friedman says you must do three things to make big money in
sales: "See the people, see the people, and see the people.” In addition, that is what
personal selling is all about. It’s the interpersonal communication process by which a
seller ascertains and then satisfies the needs of a buyer, to the mutual, long-term benefit
of both parties.
A. Types of Personal Selling (p. 319)
1. Every person has to "sell" something at one time or another. In business,
however, personal selling is just one of the mix of communication tools
available.
2. Personal selling is used in many venues such as retail, business-to-business,
industrial, professional, etc.
3. Since advertising supports sales, ad people must understand the selling
environment their clients work in.
4. Ad people accompany a client's sales people to get first-hand knowledge of what
prospects are asking, and learn better how to communicate with the client's target
market.
B. Advantages of Personal Selling (p. 320)
1. Nothing is as persuasive as personal communication
a. Skilled salesperson can evaluate prospect's body language and read between
the lines.
b. Rep can answer questions as they arise (feedback).
c. Flexibility allows for negotiation
2. Face-to-face conversation is the best way to establish a relationship, better than
any nonpersonal medium.
C. Drawbacks of Personal Selling (p. 320)
1. Labor intensive
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2. Most costly method of communication with prospects (costs about $300 per sales
call today).
3. One-on-one fails to provide significant economies of scale (no cost per thousand,
for example).
4. The idea of "salesman" carries a poor reputation.
5. One salesperson can ruin a relationship established and maintained earlier by
many others at great cost and effort. A salesperson can make or break a delicate
relationship.
VII. The Role of Personal Selling in IMC (p. 321).
Sales people are more than just a company's communicators. In many cases, they are the
company to a client. Sales people provide four distinct communication functions:
information gathering, information providing, order fulfillment, and relationship building.
A. Gathering Information (p. 321)
1. Sales reps serve as the eyes and ears for the company while in the field (trade
shows, etc.)
2. They gather information as they research the market place while prospecting for
new business (they gather customers’ wants and needs, identity, etc.)
3. Monitor the competition.
B. Providing Information (p. 321)
1. Good salespersons can impart a lot of information to prospects in an articulate
manner.
2. They keep the organization informed upstream and downstream.
3. Personal selling involves all three of the IMC triangle ("say  do  confirm”).
Thus, what the rep says and does will color the relationship between the company
and its customer.
C. Fulfilling Orders (p. 321)
1. The salesperson is tasked with "closing," securing an agreement, the sale, with a
client. Something only a one-on-one meeting can produce well.
2. Sales people must assure complete follow-up is conducted after the sale, that
goods and services are delivered correctly ("do" and "confirm").
3. The point where cross-functional management can get coordinated, catch
glitches, and assure quality (controlling of unplanned messages). Good internal
communication assures good external relationships.
D. Building Relationships (p. 322)
1. The sales reps should be the ultimate relationship marketers. People often make
additional purchases based on the their impression of and trust in the salesperson.
2. Sales people build relationships by paying attention to three simple things:
a. Keeping commitments. Salesperson must assure products and services are
delivered on time, correctly. This task is made more difficult if they must
deal with the effects of puffery and over promising
b. Servicing their accounts. Keeping communication lines open and supporting
clients with services is paramount. This can be interrupted when telephone
lines are always busy due to downsizing...
c. Solving problems — uncovering problems of client's and their customers can
lead to successful relationships and successful ads.
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VIII. The Role of Sales Promotion in IMC (p. 323).
Sales promotion is a direct inducement that offers extra incentives anywhere along the
marketing route to enhance or accelerate the product's movement from producer to
consumer. There are three important elements to this definition. Sales promotion:
 May be used anywhere along the marketing route: from manufacturer to dealer,
dealer to customer, or manufacturer to customer.
 Normally involves a direct inducement (such as money, prizes, etc.) that provides
extra incentives to buy, visit the store, request literature, or take some other action.
 Is designed to speed up the selling process. Sales promotion expenditures in some
companies consume 75 percent of the advertising/promotion budget, compared to 25
percent for advertising. Sales promotion is expensive, but effective.
A. Positive Effect of Sales Promotion on Brand Volume (p. 324)
IX.
Checklist “Creating Effective Sales Promotions” (p. 324)
1. Sales promotion maximizes sales volume
2. Advertising helps develop and reinforce a quality, differentiated brand reputation
and build “market value.” Sales promotion helps build “market volume.”
B. The Negative Effect of Sales Promotion on Brand Value (p. 325)
1. Excessive promotion at the expense of advertising hurts profits
2. A high level of trade sales promotion relative to advertising and consumer sales
promotion has a positive effect on short-term market share but may result in a
negative effect on brand attitudes and long-term market share
3. Customers become deal-prone rather than brand-loyal
4. Overemphasis on price eventually destroys brand equity
5. High cost
6. Aggressive sales promotion or advertising can draw competitors into a war with
reduced sales and profits for everyone
7. Too much sales promotion will lead to high-volume, but low-profitability.
Sales Promotion Strategies and Tactics (p. 325)
Push strategies are primarily defensive tactics
designed to secure the cooperation of
retailers, gain shelf space, and protect against competitors.
Trade Promotion are sales promotions aimed at members of distribution channel- are
one of the principal tactics marketers use to “push” product through the distribution
pipeline.
Pull Strategies are offensive tactics designed to attract customers and increase demand
for the product. Consumer advertising and consumer sales promotions are examples of
pull strategies because they are designed to induce customers to seek the product and pull
it through the pipeline.
Exhibit 10 – 5 Marketing communication approaches of Push and Pull
Strategies (p. 325)
A10-3 (p.325)
A. Giving Brands a Push with Trade Promotions (p. 326)
Example: Trade promotions are business-to-business incentive programs (p. 326)
Manufacturers use push strategies (trade sales promotions) to secure cooperation of
retailers, gain shelf space, and protect the product against competitors. Trade
concentration (more products going through fewer retailers) gives greater control to
the retailer and less to the manufacturer. Trade tactics include:
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1. Slotting Allowances (p. 326), a very controversial practice
a. Fees manufacturers pay retailers for shelf or floor space for a new product
b. FTC and ATF investigated the legality of such fees and deemed they were
acceptable as long as the same allowances were offered to all retailers on
proportionally equal terms
2. Trade Deals (p. 327)
a. Trade deals offer short-term discounts or other dollar inducements with
retailers who pass the savings on to customers.
b. Excessive trade deals threaten brand loyalty by encouraging consumers to
buy whatever is on sale.
c. Abuse of trade deals by retailers can be done with forward buying and
diverting.
d. Forward buying is when a retailer stocks up on a product when it is
discounted and buys smaller amounts when it is at list price
e. Diverting means using the promotional discount to purchase large quantities
of an item in one regional promotion and ship portions of the buy to areas of
the country where the discount is not offered.
4. Display Allowances (p. 327) are fees retailers charge manufacturers for making
room for and setting up displays.
Example: Dewalt often pay a display allowance for their in-store exhibits,
banners, and shelf signs (p. 327)
4. Buyback Allowances (p. 327) are fees manufacturers pay retailers for the old
unsold products to make shelf room for the new product
5. Advertising Allowances (p. 328) are either a percentage of gross purchases or a
flat fee paid to the retailer for advertising the manufacturer's product
6. Cooperative (co-op) Advertising (p. 328) and advertising materials
a. Local advertising expenses shared by retailer, distributor, and manufacturer
b. Advertising materials— manufacturer-provided ads, photos, radio
commercials, preprinted inserts, etc.
7. Dealer Premiums and Contests (p. 328). Manufacturers offer special gifts and
prizes to encourage retail dealers and salespeople to reach specific sales goals or
to stock a certain product.
8. Push Money (PM) or spiffs (p. 328) are small money inducements to encourage
retail salespeople to push the sale of particular products
9. Company Conventions and Dealer Meetings are used to introduce new products,
sales promotion programs, or new advertising campaigns and to conduct sales
and service training sessions.
B. Using Consumer Sales Promotion to Pull Brands Through (p. 328). The proliferation
of cable TV, VCRs, etc. has fragmented advertising audiences, making pull
techniques more inviting as means to reach mass audience. Common consumer sales
promotions include:
1. Point-of-Purchase (P-O-P) Materials (p. 329)
a. Display materials and advertising-like devices designed to build traffic,
exhibit and advertise the product, and promote impulse buying.
b. Works best when used with other forms of advertising.
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c. In a Gallop poll, 56 percent of mass-merchandise shoppers and 62 percent of
grocery shoppers said they noticed P-O-P materials.
2.
5.
5.
6.
Ad Lab 9-A "Applying Push/Pull Strategies to Sales Promotion” (p.
329)
d. Effective — 66 percent of shoppers make decisions in the supermarket and
make unplanned (impulse) purchases 53 percent of the time — actions
directly influenced by P-O-P.
e. Includes window displays, counter displays, floor and wall racks, streamers,
and posters.
f. Self-service trend means P-O-P materials do more of the work of retail
salespeople.
g. Proliferation of P-O-P displays has led retailers to be more discriminating in
what they actually use.
h. The emphasis on P-O-P has led to greater variety and creativity, including
"talking" antacid boxes, jingles that play when display case door is opened,
and interactive computers for selecting products.
A10-4 Nokia’s point-of-purchase display (p. 328)
Coupons (p. 330)
a. A coupon is a certificate with a stated value that is presented to the retail
store for a price reduction on a specified item, some 250 billion were
distributed in the U.S. in 1999, but only 1.6 percent was ever redeemed.
b. Distributed in newspapers, in magazines, door to door, on packages, in
stores, or by direct mail
c. Greatest number distributed in newspaper freestanding inserts (FSIs),
colorful preprinted newspaper ads.
c. Coupons in or on packages have the highest redemption rates.
Electronic Coupons and Convenience Cards (p. 330)
Example: VIP stations use consumer’s membership card to issue a list of
discounts to the customer (p. 330)
a. High-tech electronic coupons work like paper coupons in that they entitle the
shopper to a discount.
b. Method of distribution differs. Interactive touch-screen videos at the point of
purchase, instant-print discounts, rebates, and offers to try new brands
c. Spreading quickly in the nation's supermarkets.
Cents-off Promotions, Refunds and Rebates (p. 331). Cents-off promotions are
short-term reductions in price of a product in the form of cents-off packages, onecent sales, free offers, box-top refunds
a. Refunds offered in form of cash or coupons toward future purchases; often
consumer must supply proof of purchase and sales receipt
b. Rebates are refunds on large-ticket items e.g., cars handled by the seller.
Premiums (p. 331) are items offered free or at a bargain price to encourage the
consumer to buy an advertised product — intended to improve product's image,
gain goodwill, broaden customer base, and produce sales quickly
Exhibit 10 - 6 Bar graph of promotions (p. 331)
A10-5 (p.331)
a. In-pack premiums (items such as prizes in Cracker Jack boxes)
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b. On-pack premiums (items attached to the outside of the package) have good
impulse value, but subject to pilferage
c. Self-liquidating premium (the consumer pays enough that the seller breaks
even but does not make a profit).
d. Continuity premium (given weekly to customers who frequent the same
store).
7. Sampling (p. 332) is a free trial offered in hopes of converting consumer to
habitual use. It's the most costly of all sales promotion techniques, and is limited
to products available in small sizes, purchased frequently, and supported by
advertising
a. Polybagging — samples delivered in plastic bags with the daily newspaper
or a monthly magazine
b. In-store sampling — demonstrators dispense samples of foods, beverages,
and other products to passing shoppers
8. Combination Offers (p. 332) involves tying two products together at a special
price; used to introduce a new product by tying its purchase to an established
product
9. Contests and Sweepstakes (p. 332). Contest offers prizes based on skill of
entrants. Sweepstakes offers prizes based on chance drawing of entrants' names.
A game has the chance element of a sweepstakes but is conducted over a longer
time.
A10-6, A10-7 Examples of contest and sweepstakes promotions Gold’s Gym
(p. 332)
a. Encourage consumption by creating consumer involvement
b. For a sweepstakes, no purchase can be required, and all postal laws must be
observed
c. Require good promotion and advertising and dealer cooperation.
AD LAB10-A “Applying Push/Pull Strategies to Sales
Promotion” (p. 329)
If you were working for Irwin/ McGraw-Hill (the publisher of this textbook), how would you
suggest using push and/or pull strategies to increase the sales of the company's textbooks? Which
strategy do you think would be more effective?
Student suggestions of push and pull strategies will vary.
The most effective strategy in this case would be a pull strategy. While students are the ones who
purchase the textbook, their purchase is a result of the professor's decision to require that
textbook. Using a pull strategy, offering incentives for the professor and his or her students, is
the most effective way to pull the product through the pipeline. Pushing the product into the
distribution pipeline is not effective because the distributor (the bookstore) has no part in the
decision to purchase the book.
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ETHICAL ISSUE “Political Advertising: Positively Negative?” (pp. 312-313)
(NOTE TO INSTRUCTOR: The questions below were left out of the Ethical Issue in the text.
You may want to use them for class discussion or a homework assignment.)
1.
Voters want information that helps them distinguish between two political candidates. Is
there a way to communicate this information without being negative?
Absolutely. Commercial advertisers differentiate themselves all the time with positive, imageoriented ads. Political candidates can and should do the same thing. Moreover, in fact, many of
them already do. The problem always seems to come up, though, as Election Day draws near and
the race heats up. One candidate starts slinging and then, out of self-defense, the other follows
suit.
2.
Some critics would like to hold political advertising to the same regulations as
commercial advertising. Would you agree with this? In addition, how would you justify it in
light of the First Amendment and our heritage of free political speech?
Student answers will vary.
Answer guidelines:
We do not live in a perfect world. Nevertheless, our First Amendment rights are the hallmark of
our freedom. We should do nothing to abridge those rights. If that means that some politicians
have to suffer some additional slings and arrows, then that’s the price we have to pay for our
freedom. It is naïve to think otherwise.
REVIEW QUESTIONS
1. Who are a company's best prospects for additional sales and profits? Why? (p. 305-307)
Loyal customers.
Lester Wunderman, the founder of Wunderman Cato Johnson (one of the largest directresponse agencies in the world) says that 90% of a manufacturer's profit comes from repeat
purchases; only 10% comes from trial or sporadic purchasers. The longer a customer stays
with a company, the more willing they are to pay premium prices, make referrals, need less
handholding, and increase their annual buying.
2. How should a large insurance company view integrated marketing communications? (p. 307309)
Insurance companies work contractually with customers — each contract serving to establish
a relationship. Moreover, as relationships are important to insurance companies, so must be
relationship marketing—a strategy for the fostering of long-term relationships and customer
loyalty. As IMC manages relationship marketing, insurance companies would do well to
view IMC favorably.
3. What are the basic strategic and tactical decisions direct marketers face? (p. 311-313)
All direct marketers face two basic strategy decisions: the extent to which they will use direct
sales and the extent to which they will use direct-response advertising.
4. How can an advertiser use a newspaper for direct-response advertising? (p. 317-318)
Direct response advertising asks the reader, viewer, or listener to provide feedback straight to
the sender. While newspapers are not the most common medium used for direct response
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advertising, newspaper ads and inserts, featuring coupons or listing toll-free phone numbers,
can be very effective at stimulating customer responses.
5. What distinct communications functions do salespeople provide? (p. 318-321)
Salespeople provide four distinct communications functions:
• Information gathering
• Information providing
• Order Fulfillment
• Relationship building
6. What are the three things salespeople must do to build relationships? (p. 322)
Salespeople build relationships by paying attention to three simple things:
• Keeping commitments
• Servicing their accounts
• Solving problems
7. What are the main purposes of sales promotion? (p. 323-324)
Sales promotion is a direct inducement that offers extra incentives anywhere along the
marketing route to enhance or accelerate the product’s movement from producer to consumer.
The main purpose of sales promotion is to speed up the selling process, either by changing
the timing of purchase, or shifting inventory to others in the channel.
8. Why is trade promotion controversial? (p. 325-328)
It is not known whether trade deals actually increase profits or simply sell products that
would have been sold later anyway.
However, it is known that trade deals can:
• Threaten brand loyalty
• Create a trap for marketers who rely on discounts too heavily
• Tempt retailers to abuse trade deals through forward buying and diverting
• Mislead managers into transferring too much money to trade deals and not leaving
enough money for consumer promotion or advertising.
9. What are the most common pull strategies? Which would you use if you wanted to launch a
new soft drink? (pp. 325-326)
Commonly used pull strategies (customer sales promotions) include: sampling, cents-off
promotions, refunds/rebates, coupons, electric coupons, combination offers, premiums,
contests and sweepstakes.
Include discussion on techniques useful for getting people to try a product, the pull strategy.
10. Why is there a trend away from push strategies and toward pull strategies? (p. 325)
No media — particularly TV — reaches the broad audiences as in the past. The result is
fragmentation of the audiences. This situation has fueled the trend away from push
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strategies. Now, other methods of reaching a mass audience (pull tactics such as coupons,
sweepstakes, etc.) must be used to attract the audience’s attention.
EXPLORING THE INTERNET
The Internet exercises for Chapter 9 address the following main areas covered in the chapter:
direct marketing and direct response (Exercise 1) and sales promotion (Exercise 2).
1. Direct Marketing & Direct Response
Direct marketing is not only vast, it’s ever changing in all its facets—direct sales, direct mail,
and direct response. Likewise, direct marketing agencies tend to differ from traditional
advertising agencies in strategy, organization, and clientele. Take a look at some of the
websites below and answer the questions that follow for each site:
PART I – Direct Marketing Organizations
 Canadian Marketing Association (CDMA) (www.cdma.org)
 DIRECT (www.mediacentral.com/direct)
 Direct Marketing Association (DMA) (www.the-dma.org)
 Direct Marketing News (www.dmnews.com)
 Direct Marketing Resources (www.direct-marketing.org)
 Direct Marketing World (www.dmworld.com)
 Direct Response.org (www.directresponse.org)
 Electronic Retailing Association (http://retailing.org)
 Los Angeles Direct Marketing Association (www.Ladma.org)
 The 900 Advertising Club (www.infoguru.com)
Answer the following questions for each site:
a. What group sponsors the site? Who is the intended audience(s)?
b. What is the size, scope, and purpose of the organization?
c. What benefit does the organization provide to individual members or subscribers? To the
overall advertising and direct marketing communities?
d. How important do you feel this organization is to the direct marketing industry? Why?
Sample Answer:
Direct Marketing Association
a. The Direct Marketing Association sponsors the site. The intended audience of the site
consists of DMA members and other marketing communication professionals, as well as
consumers seeking information on direct marketing.
b. The organization is international in scope, with more than 3,600 member companies from
the U.S. and 49 other nations; the DMA is a trade association of businesses and
practitioners who advertise their products and services directly to consumers by mail,
telephone, magazine, Internet, radio or television.
c. The benefits of DMA membership include an opportunity to network with peers and
potential clients, learn the latest direct marketing techniques, utilize the DMA’s extensive
research centers, as well as gaining influence and power through industry activism. The
DMA provides many benefits to the overall advertising and direct marketing
communities, including:
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 direct marketing library and resources
 self-regulation and peer review of marketing practices
 consumer and parental education
 publications and books
 the Direct Marketing Education Foundation (DMEF)
 local Direct Marketing Clubs
d. This organization is very important to the direct marketing industry, and much like the
Four A’s does for advertising agencies; this organization provides a central force for
information, education, resources, and control of the direct marketing industry.
PART II – Direct Firms
Select five of the following direct-marketing firms, visit their websites, and answer the
questions that follow.
 AGA Catalog Marketing & Design (www.aganet.com)
 CPS Direct (www.cpsDIRECT.com)
 Direct Resources International (DRI) (www.go-direct.com)
 Direct Results Group (www.directresults.com)
 Gage Marketing Group (www.gage.com)
 Harte-Hanks (www.harte-hanks.com)
 Hunt.DDBdirect (www.hunt.DDBdirect.com)
 Response Marketing Group (RMG) (www.800response.com)
Answer the following questions for each site:
a. Who is the intended audience of the site?
b. How does the agency position itself (i.e.—creative-driven, strategy (account)-driven,
media-driven, etc.)?
c. What is your overall impression of the agency and its work? Why?
Sample Answer:
Harte-Hanks
a. The audience for the site consists of direct marketing professionals, current/potential
clients, current/ potential employees, and current/potential investors.
b. The organization is largely media-driven, focusing on the various types of direct
marketing activities it undertakes, including telemarketing, database management, direct
mail, direct sales, and direct-response advertising.
c. The organization is very broad in its capabilities and seems to have a wealth of
experience in its areas of concentration. This success is largely due to its size, resources,
and a focus on providing strategic solutions that help its clients increase sales and
develop stronger relationships with their customers.
2. Sales Promotion
Sales promotion vehicles are key elements in integrated marketing communications
campaigns. Browse the websites of the following support organizations for the sales
promotion field and answer the questions.
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PART I - Sales Promotion Organizations
 PROMO (www.promomagazine.com)
 Promotion Marketing Association (PMA) (www.pmalink.org)
 Promotional Product Association International (PPAI) (www.ppa.org)
 Creative Magazine (www.creativemag.com)
 P.O.P. Magazine (www.popmag.com)
Answer these questions for each site:
a. What group sponsors the site? Who is the intended audience(s)?
b. What is the organization’s purpose?
c. Who makes up the organization’s membership? Its constituency?
d. What benefit does the organization provide individual members/subscribers? The overall
advertising and sales promotion communities?
Sample Answer:
Promotional Product Association International
a. Promotional Product Association International (PPAI) is the site’s sponsor; the intended
audience of the site is current and potential members, as well as promotion industry
practitioners and firms.
b. PPAI’s purpose is to lead the growing promotional products industry while helping both
suppliers and distributors prosper in an evolving business environment, all the while
providing professional education/ networking and preserving professional integrity in the
promotional products industry.
c. The organization’s membership is made of promotional firms, their employees, and their
marketing partners that supply and/or distribute in the industry.
d. The benefits of PPAI membership center on networking, training, discounts, conventions,
and publications. This organization provides the overall advertising and promotions
industries with a voice and activist for the education and prosperity of the promotional
products business.
PART II – Sales Promotion Agencies
Promotional companies, like their direct-marketing counterparts, differ somewhat from
traditional advertising firms. Visit five of the websites for the following sales promotion
companies, and answer the questions below for each.
 AdSolution (www.adsolution.com)
 Advanced Promotion Technologies (www.apt.com)
 BIC Graphic (www.bicgraphic.com)
 InterPromo, Inc. (www.interpromo.com)
 Promotions.com (www.promotions.com)
 StorePoint Communications (www.storepoint.com)
 Val-Pak Coupons (www.valpak.com)
Be sure to answer the following questions for each:
a. What is the focus of the company’s work (that is, consumer or trade)?
b. What is the scope and size of the company’s business?
c. What promotional services does the company offer?
d. What is your overall impression of the company and its work? Why?
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Sample Answer:
AdSolution
a. The focus of the company’s work is largely consumer, with most products tailored to
corporate merchandising.
b. Smaller, regional company whose presence on the Web provides international business.
c. The company specializes in developing wearable and specialty items for special events,
corporate merchandising, gifts, promotions, and direct marketing efforts.
d. For a regional firm, this company seems to be invoking guerrilla-marketing techniques
well, as it expands its business to the Web.
IMPORTANT TERMS
advertising allowances, 328
buyback allowance, 327
catalog, 316
cents-off promotion, 331
combination offers, 332
company conventions and dealer meetings, 328
consumer sales promotions, 326
contest, 332
cooperative (co-op) advertising, 328
coupon, 330
customer lifetime value (LTV), 310
data access, 311
data management, 311
database, 308
database marketing, 308
direct marketing, 307
direct-response (or action) advertising, 308,
315
direct-sales strategy, 314
direct selling, 314
display allowances, 327
diverting, 327
electronic coupons, 330
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forward buying, 327
freestanding inserts (FSIs), 330
game, 332
in-store sampling, 332
linkage media, 309
personal selling, 319
point of purchase (P-O-P) materials, 329
polybagging, 332
premium, 331
pull strategies, 325
push money (PM), 328
push strategies, 325
rebate, 331
RFM formula, 311
sales promotion, 323
sampling, 332
slotting allowances, 326, spiffs, 328
sweepstakes, 332
telemarketing, 315
trade advertising, 325
trade concentration, 327
trade deal, 327
trade promotion, 325
ANCILLARY
ACTIVITIES & EXERCISES
Choose a local business in which you are interested or for which you work. Develop a
promotional idea for the business. Present your idea by discussing it in terms of the following:
a) Objective of the promotion
b) Idea behind the promotion
c) Strategy of the promotion, including specific sales promotion devices and media, if any,
to be used
d) Estimated budget for the promotion
DEBATABLE ISSUE
Should Sweepstakes and Contests Be Prohibited?
Some communities have outlawed sweepstakes and contests. Others have placed restrictions on
advertising and promotional games in their local media. Should sweepstakes and contests be
prohibited nationwide?
PRO
Sweepstakes and contests should be prohibited nationwide because...
Promotional games cheapen a brand's image. It demeans a brand to have to resort to gimmicks to
sell the product. After all, sweepstakes and contests are a form of gambling. They capitalize on
the consumer's weakness and vulnerability to games of chance. Prizes such as "free groceries for
life" make the poor fall prey to the game in the hope of winning.
The money used to finance and promote sweepstakes and contests should be used instead to
lower prices. This would make everyone happier and benefit all who buy the product instead of
just the handful of sweepstakes or contest winners.
Sweepstakes and contests are class discriminatory since they are advertised almost exclusively to
literate persons, notably those who can afford access to the media, such as magazine subscribers
or households with television sets.
The majority of people who enter sweepstakes and contests don't win. This generates ill will
among the non-winners.
Despite regulatory laws, there have been instances of flagrant fraud in sweepstakes and contests,
even those sponsored by large, well-known companies.
CON
Sweepstakes and contests should not be prohibited nationwide because...
They are sales promotional tools that provide an effective stimulus for motivating consumers to
try a product or service. They also help to build store traffic, increase retail distribution, and level
out variations in seasonal sales. The value of sweepstakes and contests in introducing new
products and expanding an advertiser's market share has been proven.
Sweepstakes can be an effective tax shelter for advertisers. If the company soon faces a hefty
inventory tax, it can reduce its product inventory by sponsoring a contest or sweepstakes. This
reduces the taxes the firm would otherwise have to pay.
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Promotional games provide enjoyment to consumers and thereby promote goodwill toward the
advertiser. Participation is easy, and it's fun.
Federal and state laws protect consumers from unscrupulous sweepstakes and contest offerings
and from the companies or persons who promote them.
Questions
1. Do you participate in sweepstakes or contests? If so, why?
2. What other arguments, pro or con, can you add to these?
3. Which side do you feel provides the strongest point of view?
IMAGES FROM THE TEXT
Images are available as color acetates through your local McGraw-Hill/Irwin sales
representative.
A10-1 Exhibit 10-1
A10-2
A10-3 Exhibit 10-5
A10-4 Exhibit 9-11
A10-5
A10-6, A10-7
Largest direct-response agencies in the US (p. 309)
Target website (p. 319)
Two marketing communication approaches (p. 325)
Nokia point-of-purchase display (p.328)
Next to coupons, premiums are one of the most effective sales promotion
techniques for changing consumer behavior (p.331)
Gold’s Gym Sweepstakes (p.332)
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