IMC Chapter15

Note: • Textbook is the only source for exams’ questions. Therefore, reading and studying the textbook is a must for all students.

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Part Seven Promotional Decisions

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Chapter 18 Integrated Marketing Communications

Objectives • Describe nature of integrated marketing communications • Examine process of communication • Understand role/objective of promotion • Explore elements of promotion mix • Examine major methods of promotion • Describe factors affecting choice of promotional methods • Understand word-of-mouth communication and how it affects promotion • Examine criticisms/defenses of promotion Copyright © Houghton Mifflin Company. All rights reserved.

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Goals • Consistent message

• Coordinate/manage promotional efforts • Synchronization of promotional elements • Use more precisely targeted promotional tools • Use of database marketing • Protect consumer privacy

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Integrated Marketing Communications (IMC) • Coordination of promotion and other marketing efforts for maximum information and persuasive impact. • A major goal of integrated marketing communication is to send a consistent message to customers. • The concept of IMC has been increasingly accepted for several reasons: • 1- mass media advertising, a very popular promotional method in the past, is used less frequently today because its high cost and lower effectiveness in reaching some target segments. Copyright © Houghton Mifflin Company. All rights reserved.

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Continue • 2- marketers can now take advantage of more precisely targeted promotional tools, such as cable TV, direct mail, the internet, special interest magazines, cell phones, and iPods. • 3- database marketing is also allowing marketers to more precisely target individual customers.

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The Communication Process • For communication to take place, both the sender and receiver of information must share common ground. ] • They must have common understanding of the symbols, words, and pictures used to transmit information. • Communication: a sharing of meaning through the transmission of information. • Communication begins with a source. A source is a person, group, or organization with meaning to share with audience. • A receiver is the individual, group, or organization that decodes a coded message, and an audience is two or more receivers. Copyright © Houghton Mifflin Company. All rights reserved.

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Coding process • To transmit meaning, a source must convert the meaning into a series of signs or symbols representing idea or concept. This is called the coding process or encoding. • When coding meaning into message, the source must consider certain characteristics of the receiver or audience. • To share meaning, the source should use signs or symbols familiar to the receiver or audience. • Marketers should understand the importance of knowing there target market and the language that they use. Copyright © Houghton Mifflin Company. All rights reserved.

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Examples of Translation Problems • • •

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KFC experienced real problems when the phrase “finger lickin’ good” came out in Chinese as “eat your fingers off.” General Motors' Chevrolet Nova vehicle translated in Spanish in Central and South America as: "No va", "It Doesn't Go"; Pepsi’s "Come Alive with the Pepsi Generation" slogan translated in Chinese: "Pepsi Brings Your Ancestors Back from the Grave”; Parker Pen's slogan "It won't leak in your pocket and embarrass you" translated in Mexico: "It won't leak in your pocket and make you pregnant. Braniff Airlines launched a new leather first class seats ad campaign (1977-78) in the Mexican market: "Fly in Leather" meant "Fly Naked" (vuela en cuero); Copyright © Houghton Mifflin Company. All rights reserved.

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The Communication Process

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Coding a Meaning • Communication channel - medium that carries coded message • Decoding process - converting signs and symbols into concepts and ideas • Noise - reduces communication’s clarity and accuracy • Feedback - receiver’s response to decoded message • Channel capacity - limit on volume of information a channel can handle effectively

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Communication channel • To share a coded meaning with the receiver or audience, a source selects and uses a communication channel, the medium of transmission that carries the coded message form the source to the receiver or audience. • when a source chooses an inappropriate communication channel, several problems may arise: 1- the coded message may reach some receivers, but the wrong ones. • 2- coded message may reach intended receivers in incomplete form because the intensity of the transmission is weak.

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Decoding process. • In the decoding process, signs or symbols are converted into concepts and ideas. • Seldom does a receiver decode exactly the same meaning the source coded. • When the result of decoding differs from what was coded, noise exist. Noise is anything that reduces the clarity and accuracy of the communication; it has many sources and may affect any or all parts of the communication process. • Noise sometimes arises within the communication channel itself . Noise may also occur when the source uses unfamiliar signs or symbols. Copyright © Houghton Mifflin Company. All rights reserved.

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Decoding process. • Noise may also originate in the receiver; a receiver may be unaware of a coded message when perceptual process blocked it.

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Feedback • The receiver response to decoded message is feedback to the source. • During feedback, the receiver or audience is the source of message directed toward the original source, which then becomes a receiver. • During face-to-face communication, such as occurs in personal selling and product sampling, verbal and nonverbal feedback can be immediate. • When mass communication such as advertising is used, feedback is often slow and difficult to recognize. • It may take several years to see he effects of a promotion. Feedback does exist in the mass media in the form of measures of change in sales volume or consumers attitudes… Copyright © Houghton Mifflin Company. All rights reserved.

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Channel Capacity • Each communication channel has a limit on the volume of information it can handle effectively, this limit called Channel Capacity. • Channel capacity is determined by the least efficient component of the communication process. • Example: although a radio announcer can read several hundred words a minute, a one minute advertising message should not exceed 150 words because most announcers cannot articulate words into understandable message at a rate beyond 150 words per minute. Copyright © Houghton Mifflin Company. All rights reserved.

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Promotion -Communication to build and maintain relationships by informing and persuading one or more audiences to view an organization positively and accept its products. -Marketers also indirectly facilitate favorable relationships by focusing information about company activities and products on interest groups, current and potential investors, regulatory agencies, and society in general. -For maximum benefit from promotional effort, marketers strive for proper planning, implementation, coordination, and control of communications. -Because customers derive information and opinions form many different sources, IMC planning also takes into account informal methods of communication such as word of mouth and other sources such as internet. Copyright © Houghton Mifflin Company. All rights reserved.

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Maximize Benefits Promotional Efforts • Proper planning • Implementation • Coordination • Control of communication

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Information Flows In IMC

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Possible Objectives Of Promotion Promotional objectives vary considerably form one organization to another and within organization over time. Large firms with multiple promotional programs operating simultaneously may have quite varied objectives.

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Create Awareness • For an organization introducing a new product or line extension, making customers aware of the product is crucial to initiating the product adoption process. • To create awareness of its new spicy premium chicken sandwich, for example, McDonald’s passed out samples of the sandwich, coupons, T-shirt, and iPod covers in 14 cities. • Creating awareness is also important for existing products. Promotional efforts may aim to increase awareness of brands, product features, image issue operational characteristics. Copyright © Houghton Mifflin Company. All rights reserved.

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Create Awareness • Awareness is crucial to initiating product adoption process • Increase awareness of brands, product features, image-related issues, or operational characteristics

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Stimulate Demand • When a organization is the first to introduce an innovative products, it tries to stimulate primary demand for a product category rather than for a specific brand of products through pioneer promotion. • Primary demand: demand for a product category rather than for a specific brand. • Pioneer promotion: promotion that informs consumers about a new product. ( what is it. What it does, how it can be used, and where it can be purchased) • At what stage of the product life cycle we use pioneer promotion? Copyright © Houghton Mifflin Company. All rights reserved.

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Stimulate Demand • To build selective demand, demand for a specific brand, a marketer employs promotional efforts that point out the strengths and benefits of a specific brand. • Selective demand can be stimulated by : • 1- differentiating the product. • 2- increasing the number of product uses. • 3- promoting them by advertising campaigns. • 4- price discount, free samples, coupons, consumer contests and games, and sweepstakes. Copyright © Houghton Mifflin Company. All rights reserved.

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Stimulate Demand • Primary - demand for a product category rather than a specific brand – Pioneer promotion – informs consumers about a new product

• Selective - demand for a specific brand

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Encourage Product Trial • When attempting to move customers through the product adoption process, a marketer may successfully create awareness and interest but customers may still during the evaluation stage. • In this case certain types of promotion such as free samples, coupons, test drive, or limited free use offers, contests, and games are employed to encourage product trial. • • • •

Encourage product trial may be an objective for: 1- a product that is first in a product category. 2- a new brand in an existing category. 3- an existing brand seeking customers. Copyright © Houghton Mifflin Company. All rights reserved.

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Encourage Product Trial • 4- trial-inducing promotional efforts aim to make product trial convenient and low risk for potential customers.

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Encourage Product Trial • Free samples • Coupons • Test drives • Limited free-use offers • Contests

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Encouraging product trial through a free offer

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Identify Prospects • Here, the aim is to identify customers who are interested in the firm’s product and are more likely to buy it. • A marketer may use a magazine advertisement with direct response information form, requesting the reader to complete and mail the form to receive additional information. • Some advertisements used toll-free number. • Here, we are talking about customers that have a high interest in the product. Copyright © Houghton Mifflin Company. All rights reserved.

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Retain Loyal Customers • Promotion effort directed at customer retention can help organization control costs because the cost of retaining customers are usually considerably lower than those of acquiring new ones. • To retain loyal customers, marketers use and advertise loyalty program, and reinforcing advertisement that assure current customers that they have made the right brand choice and tells them how to get the most satisfaction form the product.

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Retain Loyal Customers • Cheaper than acquiring new ones • Frequent-user programs • Special offers © Microsoft Power Point Clip Art

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Facilitate Reseller Support • Reseller support is a two way street; producers want to provide support to resellers to maintain working relationships, and in turn they expect resellers to support their products. • To encourage wholesalers and retailers to increase inventories of its products, a manufacturer may provide them with special offers and buying allowances. • Strong relationships with resellers are important to a firm’s ability to maintain a sustainable competitive advantage. The use of various promotional methods can help an organization achieve this goal. Copyright © Houghton Mifflin Company. All rights reserved.

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Combat Competitive Promotional Efforts • At time a marketer’s objective in using promotion is to offset or lessen the effects of a competitor’s promotional program. • This type of promotional activity does not necessarily increase the organization’s sales or market share, but it may prevent a sales or market share loss. • A combative promotional objective is used most often by firms in extremely competitive consumer markets, such as fast-food and automobile industries. • Read the example at page 377. Copyright © Houghton Mifflin Company. All rights reserved.

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Combat Competitive Promotional Efforts • Does not increase sales or market share • Prevents lose of sales and market share • Used in extremely competitive consumer markets

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Reduce Sales Fluctuations • Demand for many products varies from one month to another because of such factors as climate, holiday, and seasons. • A business cannot operate at peak efficiency when sales fluctuate rapidly. • Changes in sales volume translate into changes in production, inventory levels, personnel needs, and financial resources • The aim is to reduce fluctuations by generating sales during slow periods, so firms can use it resources more efficiently. Copyright © Houghton Mifflin Company. All rights reserved.

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Reduce Sales Fluctuations • Example: advertisement that promotes a price reduction of lawn care equipment can increase sales during fall and winter months. • During peak period a marketer may refrain from advertising to prevent stimulating sales to the point where the firm can not handle all the demand. • On occasion, an organization advertises that customers can be better served by coming in on certain days. • Read the pizza example on page 378. Copyright © Houghton Mifflin Company. All rights reserved.

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Reduce Sales Fluctuations • Minimize seasonal variations in – – – – –

Sales Production Inventory levels Personnel needs Financial resources

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• Become more efficient Copyright © Houghton Mifflin Company. All rights reserved.

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Promotion Mix A combination of promotional methods used to promote a specific product: 1- advertising. 2- personal selling. 3- public relations. 4- sales promotion.

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Four Possible Elements Of A Promotion Mix

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Advertising • A paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media, including television, radio, the internet, newspapers, magazines, direct mail, out door displays, and signs on mass transit vehicles. • Individual and organizations use advertising to promote goods, services, ideas, issues, and people. Being highly flexible, advertising focuses can reach an extremely large target audience or focus on a small, precisely defined segment. Copyright © Houghton Mifflin Company. All rights reserved.

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Advertising • Advertising offer several benefits: 1- it is extremely cost efficient when it reaches a vast number of people at low cost per person. Read the Time magazine example. 2advertising also lets the source repeat the message several times, advertising repetition has been found to be especially effective for brand name extensions beyond the original product category. 3- furthermore, advertising a product in a certain way can add to the product’s value, and the visibility an organization gains form advertising can enhance its image. At times a firm tries to enhance its own or its products image by including celebrity endorsers in advertisement. Copyright © Houghton Mifflin Company. All rights reserved.

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Advertising • Advertising has disadvantages as well : 1- even though the cost per person reached may be low, the absolute dollar outlay can be extremely high, especially for commercials during popular television shows. 2- advertising rarely provides rapid feedback. Measuring its effect on sales is difficult, and it is ordinarily less persuasive than personal selling. 3-In most instances the time available to communicate a message to customers is limited to seconds. Copyright © Houghton Mifflin Company. All rights reserved.

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Personal Selling A paid personal communication that seeks to inform customers and persuade them to purchase products in an exchange situation. Personal selling has both advantages and limitations when compared with advertising: advertising is general communication aimed at relatively large target audience, whereas personal selling involves more specific communication directed at one or more several individuals. Reaching one person through personal selling costs considerably more than through advertising, but personal selling efforts have greater impact on customers. Copyright © Houghton Mifflin Company. All rights reserved.

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Personal Selling • Personal selling also provides immediate feedback, allowing marketers to adjust their messages to improve communication. • When a salesperson and a customer meet face to face, they use several types of interpersonal communication. • The predominant communication form is language, both spoken and written. • Also, a salesperson and customer use Kinesic communication, Proxemic communication, and Tactile communication Page 504. Copyright © Houghton Mifflin Company. All rights reserved.

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Types Of Interpersonal Communication • Kinesic - movement of head, eyes, hands, leg, or torso • Proxemic - varying physical distance in face-to-face • Tactile - touching

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Personal Selling vs. Advertising • Specific communication aimed at one/several individuals • Higher cost

• Greater impact on customers • Immediate feedback

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Public Relations • Other stakeholders such as suppliers, employees, shareholders, the media, in addition to customers are important to an organization. • To communicate with customers and stakeholders, a company employs Public Relations. • PR is a broad set of communications efforts used to create and maintain favorable relationships between an organization and with one or more stakeholders. • Maintain positive relationships with stakeholders can affect a firm’s current sales and profits, as well as its long survival. Copyright © Houghton Mifflin Company. All rights reserved.

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Public Relations • PR uses a variety of tools, including annual reports, brochures, event sponsorship, and sponsorship of socially responsible programs aimed at protecting the environment or helping disadvantaged individuals. • Publicity is another form of tools, which is a component of public relations. • Publicity is non-personal communication in news story form about an organization or its products, or both, transmitted through a mass media at no charge. • A few examples of publicity-based public relations tools are news releases, press conferences, and feature articles. Copyright © Houghton Mifflin Company. All rights reserved.

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Public Relations • Unpleasant situations and negative events, such as product tampering or an environmental disaster, may generate unfavorable public relations for an organization. • Read Wal-Mart example. • To minimize the damaging effects of unfavorable coverage, effective marketers have policies and procedures in place to help manage any public relations problems. • All organizations should have an ongoing Public Relations program. PR should not be viewed as set of tools to be used only during crises. Copyright © Houghton Mifflin Company. All rights reserved.

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Public Relations • Broad set of communication efforts used to create/maintain favorable relationships between organization and stakeholders • Focuses on stakeholders other than customers • Affects short-term sales/profits and longterm survival • Can be unfavorable

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PR Tools • • • • •

Nonpersonal communication Annual Reports Brochures Event Sponsorships Sponsorship of Socially Responsible Programs • Press Release/Conference/Feature Articles

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Sales Promotion • Sales promotion is an activity or material that acts as a direct inducement, offering added value or incentive for the product, to reseller, salespeople, or consumers. • Example include, free samples, games, rebates, sweepstakes, contests, premiums, and coupons. • Sales promotion should not be confused with promotion, sales promotion is just one part of the comprehensive area of promotion. Copyright © Houghton Mifflin Company. All rights reserved.

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Sales Promotion • Generally, when companies employ advertising or personal selling, they depend in these activities continuously. • A marketer’s use of sales promotion tend or be irregular. • Marketers frequently rely on sales promotion to improve the effectiveness of other promotion mix elements, especially advertising and personal selling. Copyright © Houghton Mifflin Company. All rights reserved.

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Sales Promotion • Acts as direct inducement • Offering added value • Incentive

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• Examples – – – – – – –

Free Samples Games Rebates Sweepstakes Contests Premiums Coupons

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Product Categories With Greatest Use Of Coupons

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Selecting Promotion Mix Elements • Many firms that market multiple product lines use several promotion mixes simultaneously. • 1- promotional resources, objectives, and policies. • The size of an organization’s promotional budget affects the number and relative intensity of promotional methods included in a promotion mix. • When a company’s promotional budget is extremely limited, the company may rely on personal selling because it is easier to measure a salesperson’s contribution to sales than to measure the sales effectiveness of advertising. • Organizations with extensive promotional resources generally include more elements in their promotion mix. Copyright © Houghton Mifflin Company. All rights reserved.

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Selecting Promotion Mix Elements • An organization's promotional objectives and policies also influence the types of promotion selected. • For example if a company aims to create mass awareness of a new convenience good, its promotion mix probably leans heavily toward advertising, sales promotion, and possibly public relations. • Whereas if a company want to educate consumers about the feature of a durable good, its mix will combine a moderate amount of advertising, possibly sales promotion designed to attract customers to retail stores, and a great deal of personal selling because this method is an efficient way to inform customers about such products. Copyright © Houghton Mifflin Company. All rights reserved.

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Selecting Promotion Mix Elements • If a firm objective is to produce immediate sales of nondurable services, the promotion mix will probably stress advertising and sales promotion. • For example, dry cleaning and carpet cleaning firms are more likely to use advertising with a coupon or discount rather than personal selling.

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Selecting Promotion Mix Elements • 2- characteristics of the target market: • Size, geographic distribution, and demographic characteristics of an organization’s target market help dictate the methods to include in product’s promotional mix. • If the size is limited, the promotion mix will probably emphasize personal selling. • Also, organizations selling to industrial markets and firms marketing products through only a few wholesalers frequently make personal selling the major component of their promotional mix. Copyright © Houghton Mifflin Company. All rights reserved.

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Selecting Promotion Mix Elements • Advertising and sales promotion will be used more heavily when a products market consists of millions of customers because these methods reaches masses of people at a low cost per person. • Geographic distribution of a firm’s customers also affects the choice of promotional method. Personal selling is used when customers are concentrated in small area • Whereas advertising is used when customers are numerous and dispersed across vast regions.

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Target Market Characteristics • Help dictate methods included in promotion mix • Market size determines composition of mix

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Selecting Promotion Mix Elements • 3- characteristics of the product: • Generally promotion mixes for business products concentrate on personal selling, whereas advertising plays a major role in promoting consumer goods. • personal selling is used extensively for consumer durables, whereas consumer convenience items are promoted mainly through advertising and sales promotion. • Pubic relations appears in promotion mixes for both business and consumer products. • Marketers of highly seasonal products often emphasize advertising, and sometimes sales promotion, why? Copyright © Houghton Mifflin Company. All rights reserved.

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Selecting Promotion Mix Elements • Products price also influence the composition of the promotional mix. • High priced products call for personal selling because consumers associate greater risk with the purchase of such products and usually wants information form salesperson. • For low priced convenience items, marketers use advertising rather than personal selling • Another consideration in creating an effective PM is the stage of the PLC…read paragraph four at page 508. Copyright © Houghton Mifflin Company. All rights reserved.

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Product Life Cycle Stage • Introduction = advertising • Growth/Maturity – Consumer = advertising – Business = personal selling and sales promotion

• Decline = reduction of all promotional activities © Microsoft Power Point Clip Art

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Product Characteristics • Business products – personal selling – sales promotion

• Consumer products – Convenience = advertising – Durables = personal selling

• Both = public relations

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Selecting Promotion Mix Elements • Moreover, the intensity of market coverage is still another factor affecting composition of the PM. • When Intensive distribution is used, firms depend strongly on advertising and sales promotion. • When selective distribution is used promotion mixes vary considerably. • Items handled through exclusive distribution typically require a significant amount of personal selling. • Finally, product’s use also has some effects. Advertising are used for promoting products such as laxatives, feminine hygiene because many customers do not want to talk with salespeople about these products. Copyright © Houghton Mifflin Company. All rights reserved.

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Distribution Intensity • Intense = advertising, sales promotion • Selective = vary • Exclusive = personal selling

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Selecting Promotion Mix Elements • 4- costs and availability of promotional methods: • National advertising and sales promotion require large expenditures. The cost per person reached may be quite small if the efforts succeed in reaching extremely large audiences. • In foreign countries some media may be unavailable or advertising using these media may be illegal. • Available media may not be open to certain types of ads. For example, in some countries it is forbidden to make brand comparisons on TV. • Availability of qualified sales force. Copyright © Houghton Mifflin Company. All rights reserved.

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Costs And Availability Of Promotional Methods • National Advertising/Sales Promotion = high expense but lower cost per individual is lower • Internationally = may have restricted availability • Unavailability of sales force = less personal selling

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Selecting Promotion Mix Elements • 5- Push and Pull channel policies: • With a push policy, the producer promotes the product only to the next institution down the marketing channel. Each channel member in turn promotes to the next channel member. • While the firm that use the pull policy promotes directly to consumers to develop strong consumer demand for its products. It does so primarily through advertising and sales promotion. Copyright © Houghton Mifflin Company. All rights reserved.

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Push vs. Pull Promotional Strategies

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Push and Pull Channel Policies • Push policy – promoting a product only to the next institution down the marketing channel • Pull policy – promoting a product directly to consumers to develop strong consumer demand that pulls products through the marketing channel

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Personal And Electronic Word-Of- Mouth Communication • Word-of-Mouth – personal informal exchanges customers share with one another about products, brands, and companies • Effective marketers who understand the importance of word-of-mouth communication attempt to identify opinion leaders and encourage them to try their products in the hope they will spread favorable word, • Buzz marketing – an attempt to gain acceptance of product by word-of-mouth • Viral marketing – strategy to get Internet users to share ads and promotions with their friends. Copyright © Houghton Mifflin Company. All rights reserved.

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Criticisms And Defenses Of Promotion • • • • •

Promotion deceptive? Does promotion increase prices? Does promotion create needs? Does promotion encourage materialism? Does promotion help customers without costing too much? • Should potentially harmful products be promoted?

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