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16 — 1 Promotional Planning CHAPTER 16 LECTURE NOTES Describe the communication process and the factors determining a promotional mix. PPT 16-1 Chapter 16 Promotional Planning PPT 16-2 Looking Ahead PPT 16-3/TM 16-3 The Communication Process in Promotion A. PPT 16-4 Similarity of Personal & Small Business Communication [Acetate 16-4] PPT 16-5 Promotional Communications 2 The communication process in promotion Explain to students that information about a new product must be communicated to target markets. Be sure that students understand that promotion is really nothing more than communication between a business and its target market. Discuss how communication is a process and has identifiable parts—a source, a message, a channel, and a receiver. Point out the similarity between personal and small business communication. Explore with students what is meant by the term promotional mix. List the three major factors that influence a particular promotional blend of the three classifications: Geographical nature of the market—broad versus focused Size of the promotional budget—some media are more expensive Product characteristics to be promoted—technical qualities, price, etc. Discuss methods of determining the appropriate level of promotional expenditure. PPT 16-6 Determining the Promotional Budget PPT 16-7 Four-Step Method of Determining a Promotional Budget [Acetate 16-7] PPT 16-8/TM 16-8 Comparing Alternative Promotion Expense Estimates B. Determining the promotional budget 1. Allocating a percentage of sales The advantage is that it is a simple method. The disadvantage is that it allocates less to promotion as sales go down. 2. Deciding how much can be spared This method is widely used by small businesses. The disadvantage is that it is a piecemeal approach and does not derive from analysis (ignores promotional goals). 3. Spending as much as the competition does This method can be used to react to short-run efforts of competitors. A disadvantage is that a business often lacks information on competitors, and it will be copying mistakes as well as successes. 4. Determining what it will take to do the job This is the preferred approach. The disadvantage is that it requires complete analysis of the market and the firm's goals. The most realistic approach to budgeting funds is a combination approach. 153 154 Part 4 Focus on the Customer: Marketing Growth Strategies 3 Describe personal selling activities. PPT 16-9/TM 16-9 Personal Selling in the Small Firm PPT 16-10 Importance of Product Knowledge C. Personal selling in the small firm Define personal selling as promotion delivered in a one-on-one environment. 1. 2. PPT 16-11,12 The Sales Presentation: Prospecting Ask students to give examples of each of the following sources of prospects: PPT 16-13 Practicing the Sales Presentation PPT 16-14/TM 16-14 Overcoming Customer Objections PPT 16-15 Making the Sales Presentation PPT 16-16 Customer Goodwill and Relationship Selling 3. 4. PPT 16-17,18 Compensating Salespeople 5. 4 The importance of product knowledge The sales presentation a. Using prospecting techniques—a systematic process of continually looking for new customers. personal referrals, impersonal referrals, marketer-initiated contacts, and customer-initiated contacts. b. Practicing the sales presentation Ask students how many times a salesperson should practice a sales presentation. Have students discuss the five techniques listed in the chapter for dealing with objections: Direct denial, indirect denial, boomerang technique, compensation method, pass-up method. c. Making the sales presentation—Have students discuss each of the following: “Canned” presentations won’t work with most buyers. Twenty percent of all salespersons secure 80 percent of all sales. Use of sales gimmicks or special sales techniques may work. Consumer goodwill and relationship selling Cost control in personal selling—personal selling has a high cost per contact The Compensation program for salespeople a. Nonfinancial rewards—recognition for achievement b. Financial rewards Discuss the advantages and disadvantages of commission plans and straight salary plans. A combination of the two plans may work best for small businesses. Identify advertising options for a small business. Chapter 16 Promotional Planning PPT 16-19 Advertising Practices for Small Firms D. 155 Advertising practices for small firms Define advertising as the impersonal presentation of an idea that is identified PPT 16-20 Types of Advertising PPT 16-21 Obtaining Assistance with Advertising PPT 16-22 Advertising Decision Factors PPT 16-23/TM 16-23 Advantages & Disadvantages of Traditional Advertising PPT 16-24, 25 Web Advertising 1. 2. 3. 4. 5. 6. PPT 16-26 Web Site Design Tips PPT 16-27 Home Page for the Gorilla Glue Product 5 with a business sponsor and is projected through mass media.) Advertising objectives—informing, persuading, and reminding Types of advertising—product versus institutional advertising Frequency of advertising—continuous versus noncontinuous Where to advertise—reaching, but not overreaching Obtaining assistance with advertising—relying on others to create the promotional message. Local television and radio stations will help small businesses create ads. Web advertising a. Banner ads and pop-ups b. Direct e-mail promotion c. Sponsorships and linkages d. Corporate Web sites 1. Creating and registering a site name—selection of a good domain name is important 2. Building a user-friendly web site Discuss what students like and dislike about certain web sites 3. Promoting the web site Discuss ways that small businesses can promote their web site Describe sales promotional tools. E. PPT 16-28 Sales Promotion Tools PPT 16-29 Sales Promotion Tools Sales promotional tools (Define sales promotion as promotional techniques that are neither personal selling nor advertising and that serve as an inducement to buy a certain product while offering value to recipients.) 1. Specialties Have students discuss whether specialty advertising works Specialty items are enduring in nature and have tangible value; they are called the “lasting medium.” The most widely used specialty item is the calendar. Specialty items are personal in distribution, usage, and message. 2. Trade show exhibits They provide customers with hands-on experience. They can be of particular value to manufacturers (e.g., they are cheaper than personal selling and advertising). Review the tips for trade shows from Sales & Marketing Management (see PPT 16-30 Sales Promotion Tools 3. PPT 16-31 Sales Promotion Tools 4. 5. — the chapter). Publicity It has high visibility. It can be almost free of charge. When to use sales promotion Strategic alliances and sales promotion SOURCES OF AUDIO, VIDEO, AND OTHER INSTRUCTIONAL MATERIALS 156 Part 4 Focus on the Customer: Marketing Growth Strategies South-Western’s BusinessLink video Second Chance Body Armor: A Study in Entrepreneurship may be used with this chapter. For a description, see the video section in Chapter 1 of this manual. Something Ventured is a comprehensive video primer with 26 half-hour programs produced to parallel this textbook. The video titled Out From the Crowd: Promotional Strategies looks at a variety of small businesses in the process of determining an appropriate promotional mix for their goods or services. Contact your South-Western/ITP sales rep or ITP Faculty Support (fax (415) 592-9081 or E-mail [email protected]). The Sales Connection is a new video series produced by INTELECOM that includes 26 half-hour segments featuring leading sales and business experts. Call INTELECOM at (818) 796-7300. Inc. Business Resources provides several videos related to selling in a series entitled Real Selling. These are Making Effective Sales Calls, How to Deal with Buying Objections, Closing the Deal: When and How, Successful Sales Relationships, and Effective Follow-up. Another video (not part of the series) is entitled How to Manage Your Sales Strategy. For information call (800) 468-0800. Marketing and Sales is a video from Venturing: The Entrepreneurial Challenge, a series produced by Vermont ETV. The entire series of 13 half-hour videos is available for under $100. Call (800) 866-1666. Nation’s Business magazine offers a video titled Prospecting and Networking for Qualified Sales Leads. To order call (800) 528-1993. — ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS 1. Discuss the parallel relationship that exists between a small business communication and a personal communication. The basic structure is the same. Each involves a source, a message, a channel, and a receiver. The difference between personal and small business communication is in the form of the communication elements. Figure 16-1 in the chapter depicts the similarity, as well as these differences in form. 2. Discuss the advantages and disadvantages of each approach to budgeting funds for promotion. a. Using a percentage of sales is simple and quick; the disadvantage is that a business spends more when sales are increasing but less when sales are declining. b. Spending what can be spared requires no knowledge of promotion to set the budget; its disadvantage is that it is not an organized approach. c. Spending as much as the competition does requires little knowledge of how promotion works; the disadvantage is that the competition may be promoting ineffectively, so a business that copies the competition may be copying a mistaken approach. d. Spending what it takes to do the job is most consistent with the goals of promotion; the disadvantage is that it is a time-consuming approach and requires a greater understanding of promotion. 3. Outline a system of prospecting that could be used by a small camera store. Incorporate all the techniques presented in this chapter. A list of prospects could be compiled by asking current customers about their friends who are interested in photography; obtaining mailing lists compiled by magazines in the field; noting responses to coupons or other promotional efforts, such as contests; identifying names of customers who have just walked into the store; monitoring the newspapers, photography club activities, and so on; and identifying names on film-developing envelopes. 4. Why are a salesperson’s techniques for handling objections so important to a successful sales presentation? They are important for two principal reasons. First, objections are negatives. An objection is an escape for the prospect. The salesperson must shut the door on this exit. Second, there is little or no time p. 353-354 p. 355 p. 356-357 p. 357 Chapter 16 Promotional Planning 157 during the presentation itself to prepare a response to objections. Thus, the preparation of techniques becomes vital. 5. Student Response “Exams are good learning tools.” “Not having exams leaves more days to listen to your wonderful lectures.” “I must have something to measure what you have learned.” “Exams do not measure what we really have learned. Trust your judgment.” “The school requires documentation for a grade.” “We won’t tell!” What are some nonfinancial rewards that could be offered to salespeople? The following might reward and motivate salespeople: An all-expenses-paid vacation A salesperson-of-the-month contest featuring display of the winner’s picture and name in the office A billboard displaying the name of the top salesperson of the year Use of a luxury car for one month A better office A service pin awarded to top performers 7. What are the advantages and disadvantages of compensating salespeople by salary? By commissions? What do you think is an acceptable compromise? Security for the salesperson is the greatest advantage of a salary plan. A straight salary makes it easier for the firm to require nonselling activities from its sales force. This method, however, does tend to restrict the earning ability of salespeople and can reduce their motivation. A commission plan allows salespeople to make as much money as their abilities will allow. It also gives strong incentive to the sales force. A commission plan, however, means “no sale, no income.” A combination of the two forms of compensation can give the small business the best of both worlds. 8. What are some approaches to advertising on the Web? Basic methods of Web advertising include (1) establishing a corporate Web site and (2) creating banner ads and pop-ups, (3) using direct e-mail promotions, and (4) taking advantage of sponsorships and linkages. Establishing a Web site places information about the firm and its products/services in a place where potential customers can find it. With banner ads and pop-ups, the firm takes its message to the customer by posting advertisements on Web pages where potential buyers can see them and respond. Using direct e-mail promotions is a very inexpensive way to get the word out, but target consumers are becoming more resistant to this form of advertising. By sponsoring a Web page for another organization and perhaps even featuring a click-on link to its own site, a firm can sometimes reach customers. 9. Discuss some recommendations for designing an effective web site. p. 358-359 p. 361-366 p. 367-368 Instructor Objection 6. p. 358 p. 363-364 Assume you have the opportunity to “sell” your course instructor on the idea of eliminating final examinations. Make a list of the objections you expect to hear from your instructor and describe how you would handle each objection. Answers to this question will vary. Following are examples of some of the points that may be presented and possible objections for each: Because first impressions are so important a small firm’s Web site needs to be attractive and inviting. Exhibit 16-4 on page 364 of the chapter lists ten Web site design tips. Students will surely use these as part of their answer. However, encourage them to expand the list and provide example Web sites for each suggestion they make. 10. How do specialties differ from trade show exhibits and publicity? Be specific. Specialties are different from trade show exhibits in that the former are enduring representations of the firm and its message, whereas trade show are experientially-based (i.e., they are time-constrained opportunities to create an impression and present information about the firm). These options always 158 Part 4 Focus on the Customer: Marketing Growth Strategies involve some cost. However, publicity works through various media to promote an image about the firm and it is often (though not always) free. — COMMENTS ON CHAPTER “YOU MAKE THE CALL” SITUATIONS Situation 1 1. What role, if any, should personal selling have in Arp’s total promotional plan? Arp could reap dividends from personal selling to certain institutional customers. Schools and certain civic groups that often promote safe driving could be profitable targets. On a broader scale, Arp might contact nationwide auto clubs that could be interested in his concept. 2. Arp is considering advertising in magazines. What do you think about this medium for promoting his product? Arp actually advertised in magazines and concluded they were a waste of his money. Many magazines reach audiences with broad demographic profiles. If Arp were to use a magazine, it would have to be selected carefully to provide exposure to the appropriate target market. 3. Of what value might publicity be for selling Arp’s stickers? Be specific. Publicity actually proved to be beneficial to Arp’s selling. After several radio stations interviewed him, there was heavy demand from parents who heard the programs. In one single two-month period following this exposure, he filled 5,000 orders! Situation 2 1. What suggestions can you offer that would help Moore make this decision? If the advertisements are of high quality and colorful, they should be attention-getting. The firm actually used full-scale ads covering the entire side of the trucks (9 ft. by 48 ft.). The image concern is an important consideration but should not be a problem for this product. It is likely that Moore will want to avoid some trucking companies—those from insecticides or animal product companies, for example. 2. How could Moore go about determining the cost-effectiveness of this strategy? Moore offered a trucking firm approximately $1,500 for the privilege to advertise on 25 of its trucks for three years. Using these cost figures, some exposure data provided by the American Trucking Association, and a reference showing that 90 percent of survey respondents notice truck advertising, Moore estimated that she is paying only 21 cents per thousand exposures. 3. What additional factors should Moore evaluate before advertising on trucks? One concern is a legal one. Does the Department of Transportation allow this type of advertising on the trucks it regulates? With certain restrictions, Moore’s ads were acceptable to the department’s Bureau of Motor Carrier Safety. Moore also had to evaluate whether the trucks would be traveling into markets where the salad products were not distributed. In fact, Moore received calls from people who had seen the truck advertising but could not find the product. Situation 3 1. When the product is ready to launch, what kinds of promotion should the company use? Why? Lathan and her company will need to consider very specialized forms of promotion, since the audience is very concentrated. For example, a direct marketing campaign focusing on private and public educational facilities that work with disabled children would be an option. To reach this market, however, she will need to exhibit at the appropriate trade shows. 2. What techniques might this firm use to set the promotional budget? Each of the techniques discussed in the chapter would apply in this situation. Chapter 16 Promotional Planning 3. — 159 In what way, if any, could Internet promotion help this business? The Internet will likely be the best place for Lathan to promote her product. Do a word search using JesterBot and you will see a number of articles and entries related to her product. She may also link up with educational organizations already on the Web and gain hits to her site from visitors to their sites. ANSWERS TO EXPLORING THE WEB EXERCISES For each chapter, the instructor’s manual will include a short summary of suggested results students will have after completing the various Web exercises. Because the Web is a constantly changing medium, the answers may vary, and the links may change as well. Thus, answers are only suggested, and the URL for resources, where required, is provided. Exercise 1 After completing the workshop, students can view the worksheet. According to the text of the worksheet, 37 percent is an average figure for advertising and promotional costs alone. Exercise 2 a. After completing the workshop, students’ can view the worksheet. According to the text of the worksheet, there are more than 10,000 tradeshows in the United States each year. The pros and cons of tradeshows suggested by the Web site are listed below. b. Pros: Trade shows are an excellent way to get industry information, meet competitors, network, find resources, receive product feedback, and explore new ways of marketing face-to-face with both exhibitors and attendees. The personal interaction represents selling at its best. If you can't close them here, you're at the wrong show or in the wrong business. Cons: While booth space may be inexpensive, don't forget to factor in the costs of assembling and staffing the booth and producing all of the promotional materials you'll be giving away. You'll also have to figure in the time you and your staff will miss at the office. Exercise 3 The article suggests do’s and don’ts for sales presentations. Do: Set clear starting and ending times. Use topic index cards or some other written cue cards summarizing your key points to keep you on track and ensure that you don't miss anything. Consider using more than one presentation tool, such as flip charts and an overhead projector. It's more interesting and engages the audience. Gain and maintain visual contact with every single member of your audience. Learn to scan the room with a sequence so you don't miss anyone. Keep a pitcher of water handy for yourself. Count to 10 after you ask any questions. And try this: "What questions do you have?" instead of "Are there any questions?" 160 Part 4 Focus on the Customer: Marketing Growth Strategies Don’t: Read statements from your notes verbatim. Talk while you are facing away from your audience. Interrupt people when they are talking. Continue to hold a pointer or marker after you've used it. The risk that you'll engage in a distracting nervous tic is just too high! Carry change in your pockets. Exceed 60 minutes without a break. — SUGGESTED SOLUTION TO CASE 16: SOLID GOLD HEALTH PRODUCTS 1. Which promotional methods has Sissy used to build her business? Be specific. Once you have a list of ways that she promoted her business, organize them into the categories discussed in the chapter: personal selling, advertising, and sales promotion. Personal selling: Sissy’s trip to England to meet with Philips Yeast and Buster Lloyd Jones is an example of personal selling. When company representatives work the booth at dog shows, or pay visits to veterinarians, they are also doing personal selling. Advertising: Sissy places detailed advertisements in dog enthusiast magazines. Ads in programs at dog shows also constitute advertising. Sales Promotion: The sales promotional tools mentioned in the chapter are publicity, trade show exhibits, and specialties. The articles Sissy writes and publishes are a form of publicity. Solid Gold also exhibits at trade shows and dog shows. 2. What role does Sissy’s knowledge and expertise play in her promotional activities? For Sissy, product knowledge extends from the product to the promotion of the product. Her degrees in nutrition can be considered the impetus for founding Solid Gold Health Products, and nutrition is the core of all the company’s promotional messages. For example, rather than use visual devices for the company’s advertising, Sissy chooses a unique format that shares a great deal of nutrition information with consumers. Her advertisements are more like the articles she publishes without copyright so that local kennel clubs can reprint and circulate them freely. Sissy’s emphasis on sharing her expertise makes her a well-known and reliable source of information on dog nutrition, which then extends to her brand: Dog owners trust her products because of her authority on nutrition. 3. The objectives of advertising are to inform, persuade, or remind consumers about the existence or superiority of a firm’s product or service. Which function best describes the goal of Sissy’s advertising? Explain why you think as you do. What type of advertising does Sissy create, product or institutional, or something else altogether? Advertising seeks to sell by informing, persuading, or reminding customers of the existence or superiority of a firm’s product or service. Sissy’s advertising is unique in that she focuses intently on the informational aspect of her advertising. As she says in the video, “Our advertising – these are articles. And if you take the two minutes to read the article, you’ll learn something. And people like to learn things.” By teaching consumers about animal nutrition and then showing how Solid Gold products are the most nutritious alternative for their pets, Sissy’s advertisements are first informative, and second, persuasive. Product advertising focuses on making potential customers aware of a particular product or service. Institutional advertising is designed to enhance the firm’s image. In many ways, Sissy’s advertising is a hybrid of the two. Although she is advertising her products, she is doing much more than that. She uses her advertising to position her company as an authority on animal nutrition (which enhances the company’s image, and is therefore institutional by definition), but she also talks about how the company’s products fulfill the nutritional needs of dogs and cats (which makes potential customers aware of her products, and is therefore product advertising). Chapter 16 Promotional Planning 161 4. Sissy owns a small retail shop that sells her products. The shop also offers do-it-yourself dog-washing facilities. Does this constitute a service or a promotional activity? Explain your answer. Students’ answers will vary. The dog-washing is only available as part of the company’s retail operation. If the company charged a fee for using the facilities, it would then be a product. If, however, Solid Gold offered free dog-washing on a particular day of the week (or with purchases over a certain amount), or if it took the dog-washing apparatus to trade shows, it could be considered a promotional activity. Solid Gold could also use such a unique service to generate publicity about its store and its food products. 5. Based on the promotional activities described in the video, how robust do you think Sissy’s promotion budget is? (Her annual sales are around $7.5 million.) How do you think Sissy determines her promotional budget? Explain your answer. The chapter identifies four ways to set a promotional budget. First, some businesses simply allocate a percentage of sales. If Solid Gold used this message, the sales manager, Manny Rosillo, would reserve a set portion of the expected sales for a given fiscal year to be used for promotional activities. A second way businesses set a promotional budget is to decide how much money can be spared. This method is most popular among small businesses, which typically think of promotions only after all other expenses have been covered. A third method is spending what it takes to meet the promotional activities of the competition. If Solid Gold were to use this method, it might run into difficulty, as its market includes some very large players, like Iams (owned by Procter & Gamble), Eukanuba, and Hill’s Science Diet. Those large competitors have deep pockets and wider distribution that the smaller companies, like Solid Gold, which also operate in the organic and specialty pet food market. The last method of setting a promotional budget is determining what it will take to do the job. This method requires comprehensive analysis of the market and the firm’s goals. Although nothing in the case indicates how much money Sissy spends on promotions, there are some clues that her budget is not very high. Even though Solid Gold takes out full page advertisements in four-color glossy magazines, the company only submits two-color (i.e., black and white) advertising copy. Since the ads are text-heavy and include minimal (if any) graphics and no photos, they are inexpensive to produce. The most expensive part of Sissy’s promotional plan is attendance at dog and trade shows. Travel expenses for salespeople, shipping expenses for the booth, and even printing expenses for the flyers and other brochures that Sissy indicated are part and parcel of dog shows all add up to make this type of promotion an expensive venture. Based on the types of promotion that Sissy uses and the company’s $7.5 million in annual sales, it is safe to assume that Sissy either determines what it will take to do the job, or she sets aside a portion of annual sales for her promotional methods. Because Sissy is regular about her promotional activities, it is unlikely that she just uses whatever money is left after satisfying other items in the expense budget. Activities Purpose: Solid Gold Health uses several types of promotional tools to communicate with potential and actual customers about its products. The following activities give students the opportunity to work in the context of the video case to explore additional promotional activities, like Internet marketing, and to experiment with altering various aspects of Sissy’s promotional plan to achieve different results. Setting it up: All three of the following activities are well suited to group work. Before assigning the activities, though, students will need to watch the video case, perhaps more than once. In addition to being appropriate out-of-class assignments, activities 2 and 3 should work well as in-class follow-up to the video itself. If you choose to use them in this way, show the video first. Then divide the class by some random way (counting off, birthday month, etc.) into groups of 3 to 4 students and give them roughly 10 minutes to work the first activity. When the time is up, reconvene as a class and have each group share their results. If you have enough time left, you can do the second activity in the same way, or if not, you can assign it for take-home work or start the next class period with it. 162 Part 4 Focus on the Customer: Marketing Growth Strategies 1. In the video case, Sissy does not mention the Internet as one of her promotional activities. Solid Gold does, however, operate a Web site. Visit http://www.solidgoldhealth.com and write down any types of promotional strategies Sissy is using on her site. Then, search for keywords “natural pet food” or “organic pet food” on Google or Yahoo. Visit the Web sites of some of the competition, and compare their Internet presence to Solid Gold’s. Then visit some online pet stores, like petsmart.com, happytailspetmart.com, and spoiledbratsnyc.com. Review the sites for various dog food promotions (coupons, rebates, contests, pop-up ads, etc.). How do the promotional strategies Sissy describes in the video compare with other companies in her industry? 2. Many veterinarians purchase and recommend Solid Gold products, but many do not. Review Sissy’s promotional techniques. How can she alter her promotional strategy to increase the number of veterinarians using and recommending her natural dog food? Design a promotional plan that will expand Sissy’s customer base among veterinary professionals. Could she use the same plan to expand sales among the general population of dog and cat owners? If not, then list the different promotional techniques that would be appropriate for that market. 3. Imagine that you have recently been hired by Solid Gold Health Products as a marketing manager. You are familiar with the company’s text-heavy, black and white advertising, and you would like to experiment with other ad formats. Before you present your ideas to Sissy, however, you decide to mock up some four-color ads (i.e., full-color) to show her. Create a full-page advertisement that communicates a message consistent with Solid Gold’s business philosophy (see the company’s Web site) using a flashier format. Modify this ad for Internet placement, for example on the American Kennel Club’s Web site or e-newsletter. (See http://www.akc.org.) On the back of your work, describe the various sections of each advertisement and the message you are trying to convey with the elements you have chosen. Share your ideas with your classmates. Sources: Small Business School video; company Web site at http://www.solidgoldhealth.com.