ME Ch 19 1

The Role of Promotion

• Promotion- any form of communication a business or organization uses to inform, persuade, or remind people about its products and improve its public images.

Product promotion

• used to convince potential customers to buy products from it instead of from a competitor.– Explains major features and benefits of its

products– Tells where those products are sold– Advertises sales on those products– Answers customer questions– Introduces new products

•Primary & Secondary

Primary product promotion

• Emphasis is on the product and its uses, and not on a particular brand.

• Primary product promotion aims to stimulate demand or consumer desire for an entire class of goods and services.

• Competition is between the two different industries.

• This type promotion useful when introducing a new concept or a totally new product.

• Ex. Coke vs. Pepsi

Secondary product promotion • Also known as selective product

promotion. Secondary product promotion is used to stimulate the demand for a specific brand of a product.

• Used to compete against other makers of the same type of product.

• Ex. Coke Zero vs. Pepsi Max

ME Ch 19 5

Institutional Promotion

• used to create a favorable image for itself. Does not directly sell a certain product. However, may ultimately result in increased sales of a company’s products.

• There are three kinds of institutional promotion:– public service, – public relations, and – patronage.

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Institutional Promotion (cont)• the company is the focus of the promotion

instead of any products it sells. • concerned with the reputation of the store, with

style leadership, quality merchandise and services.

• Organizations promote concepts, ideas or philosophies that they want consumers to associate with their brands.

• Ex. Scotties Tissues plants three trees for every one tree used emphasizing how important the environment is to the company.

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Institutional Promotion (cont)• tends to be expensive because it

doesn't rely on immediate spending from the consumer.

• also forces the organization to be accountable for its promises. If the organization fails to live up to the image it has created in the promotions it will lose brand loyalists to its competitors.

Public service promotions

• inform customers about non-controversial issues that are in the public’s best interest.

• Many times, companies sponsor public-service announcements on local television stations, highlighting issues such as community drug prevention or after-school participation in sports or arts programs.

• Public-service promotions build goodwill for the company, especially when they depict the company as a friend of the community.

• Ex .Insurance companies sometimes promote improved health through changes in dietary and exercise habits.

Public relations promotions• created to deal with issues that are in the public’s

interest but are also related to the company or its products.

• These promotional activities may be either proactive (the business takes the initiative to promote itself) or reactive (the business engages in the activities in response to an external situation, such as a lawsuit).

• They are used to influence company’s image directly, such as improving a negative image or establishing a positive one before negative feelings arise.

• Ex. After the oil spill in the Gulf of Mexico, BP used their own employees that lived in the Gulf area to reinforce the fact that the area is safe, food is safe, and efforts to clean up are successful.

Patronage

• Designed to get the customers coming back to the company, therefore, patronage promotion promotes a firm’s prestige or the firm features.

• Ex. PetSmart offers a Pet Perks loyalty card.

Uses of institutional promotion 1. Change a particular attitude toward a firm

or its products: • EX: In recent years, the tobacco industry

has come under fire for promoting its products, which are associated with various form of disease. In an effort to clean up this negative image, tobacco companies such as Philip Morris have been engaging in institutional promotions such as its Quit Assist program and resources for helping smokers kick the habit.

Uses of institutional promotion (cont) 2. Inform customers of the company’s

interest in social or environmental issues: • EX: Corporate giant IBM has a long-

standing commitment to environmental leadership in the business world. The company has a written environmental-affairs policy and participates in many voluntary initiatives, such as membership in the Wildlife Habitat Council.

Uses of institutional promotion (cont)

3. Inform the public about the company’s future:

• EX: When wireless communication provider Verizon bought Alltel in 2009, the company engaged in a promotional campaign to let its customers and the general public know about the change.

Uses of institutional promotion (cont)4. Inform customers of the company’s

name and its type of business : • EX: During the rise in the popularity

of the Internet, many online travel agencies such as Expedia and Travelocity were born, and then they began promotions to let the public know about their services.

Uses of institutional promotion (cont)5. Show the company’s commitment to

quality, technology, or research : • EX: The world’s largest research-

based pharmaceutical company, Pfizer, uses institutional promotion to demonstrate to the public its commitment to using research to help people live longer, healthier, happier lives.

Uses of institutional promotion (cont)

6. Enhance company morale and recruit new employees :

• EX: Battelle, a global science and technology corporation, holds many recruiting events and initiatives all over the country .

Uses of institutional promotion (cont)7. Build or reinforce a favorable

company image : • EX: Coca-Cola’s $5 million donation

of bottled water and other beverages to hurricane-ravaged New Orleans in 2005 is one example of institutional promotion meant to help build a highly favorable company image.

Advantages of promotional activities • Promotion is an important part of the

marketing mix that communicates information about goods, services, images, or ideas to customers.

• Promotion can accomplish a number of objectives—building awareness, increasing demand, differentiating a product from its competitors, highlighting a product’s value, and changing or reinforcing customer attitudes.

Several advantages of promotional activities • They contribute to economic growth and business

activity.• They support the mass communication media.• Companies benefit directly because these

activities create awareness of the company and its products.

• Customers benefit because these activities raise our standard of living and make us better educated customers who are able to make more intelligent purchases.

• Create jobs due to the need to mass produce products based on customer demand.

• Encourages consumers to purchase and use new and improved products

Disadvantages of promotional activities

• They can be deceptive, manipulative, and play on consumers’ fears.

• They can be offensive and reinforce stereotypes. • They have limited abilities.

– Product promotion does not add value to goods and services.

– Institutional promotion can be costly and difficult to measure.

– Promotion cannot make up for poor quality products– Promotion cannot substitute for well-trained sales

staff/sales person– Promotion cannot achieve major success

REVIEW

• What are the 4 elements of the PROMOTIONAL MIX?

• What are the +’s of each?

• What are the -’s of each?

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Four Types of Promotion

• 1. Advertising - any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

• Six Advantages of Advertising– 1. A large number of people usually see the advertiser’s

message– 2. Costs per potential customer are usually lower than other

forms of promotion– 3. Can choose the most appropriate media to reach target mkt– 4. Can control the content of an advertisement– 5. Ads are subject to repeat viewing– Ads can “presale” products

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Advertising Disadvantages

• Four Disadvantages of Advertising– 1. Cannot focus well on individual needs– 2. Some forms of advertising can be too expensive

for many businesses– 3. Sometimes advertising is wasteful and inefficient -

message may be spent on non-potential customers– 4. Advertising must be brief

ME Ch 19 24

Four Types of Promotion

• 2. Publicity & PR- placing newsworthy information about a company, product, or person in the media. Can be used to promote particular events and promote particular products. The main purpose of publicity is to build an image. Image - the way a business or organization is defined in people’s minds.

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Publicity & PR + /-

• Advantages of Publicity– Publicity is free; advertising is not– Can be used to create a positive image within the

community– Viewed as being more credible or believable than

advertising– Viewed as news, people more attention to publicity

• Disadvantages of Publicity– Give up much of your control of your message– Not all publicity is positive– Lack of control by the business - bad stories can get printed

ME Ch 19 26

Publicity and Public Relations• Public Relations - any activity designed to create

goodwill toward a business.• Benefits of PR

– Increasing sales– Increasing firm’s good reputation– Increasing customers reception of advertising messages– Spreading accurate information to the public– Conditioning customers to expect quality products from

the company– Reducing the impact of problems– Helping to obtain better treatment from government

ME Ch 19 27

Audiences for PR

• Internal Audiences - groups within the organization

• Employee Relations - goal is to keep your employees happy by using:– Tuition reimbursement– Newsletters– Health and wellness programs– Opportunities for communications

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Audiences for PR

• External Audiences - groups outside the organization

• Customers - Satisfied customers = repeat business. Ways to keep customers happy include:– Provide special services and amenities such as gift-

wrapping, check cashing, free delivery, free parking, etc.

– Advisory boards - panels of consumers that make suggestions about products and businesses

– Customer newsletters, annual reports– Customer events - seminars, lunches, entertainment

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Audiences for PR

• Community - company sponsors activities that benefit the civic, social, and cultural life of the community. Activities can include:– School partnerships - HP donating computers to the

high school– Sponsorship of community events– Scholarships

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PR – News Release • = a pre-written story about the company that is

sent to various media for publication. It usually contains information about the company’s employees, stores, operations, products, corporate philosophy, or participation in an event or program. Can contain hard or soft news.

– Hard News - information that should be announced right away because the public will want to know about it immediately

– Soft News - information that does not need to be announced immediately because it will be of as much interest to the public later as it is now

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Purposes of News Releases• To introduce new products• To keep the business in the public eye• To position the business’s image• To support good employee relations• To create good community relations

ME Ch 19 32

Getting Your News Release in the Media• Include a captioned photograph with the release• Meet media deadlines• Write an appropriate number of releases• Direct the release to a specific person• Advise the staff that you have sent out a release• Reread the release after setting it aside• Keep a copy of every release• Send a cover letter with the release• Send a thank-you note after the release is used• Avoid pressuring the editor• Avoid mentioning publicity or advertising• Avoid playing favorites

ME Ch 19 33

Public Relations

• Press Kit - a folder containing articles, news releases, feature stories, and photographs about a company, product, or person. Press kits are given to the media to assist them in reporting on the intended news item.

• Press Conference - a meeting in which media members are invited by the business or organization to hear an announcement about a newsworthy event.

ME Ch 19 34

Four Types of Promotion• 3. Sales Promotion - All marketing activities,

other than personal selling, advertising, and publicity, that are used to stimulate consumer purchasing and sales effectiveness.

• Objectives of Sales Promotion– Increase sales– Inform customers about new products– Create a positive store or corporate image

• 3 Characteristics– Short term activities– Offers some type of incentive– Can be successfully used in all channels of

distribution

ME Ch 19 35

Sales promotion can be either consumer or trade oriented

• Trade Promotions - sales promotion activities designed to gain manufacturers’, wholesalers’, and retailers’ support for a product. More money is spent on promoting to businesses than to consumers.1. Slotting allowances - a cash premium paid by the

manufacture to a retail chain for the costs involved in placing a new product on its shelves.

2. Buying allowances - special price discount given by manufacturers to wholesalers and retailers to encourage them to either buy a product or buy a larger quantity.

3. Trade Shows and Conventions - designed to reach wholesalers

4. Sales incentives - awards given managers and employees who successfully meet or exceed their company’s set sales quota.

ME Ch 19 36

Sales promotion can be either consumer or trade oriented(cont)• Consumer Sales Promotions - designed to

encourage customers to buy a product.1. Licensing - Organizations, such as manufactures,

movie makers, sports teams, and celebrities, may license for a fee their logo, trademark, trade characters, names and likenesses, or personal endorsements to a business to be used in promoting the business’s products.

2. Promotional tie-ins - involve sales promotional arrangements between one or more retailers or manufacturers. They combine their resources (advertising and sales promotional activities) to do a promotion that creates additional sales for each partner.

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Consumer Sales Promotion (cont.)

– 3. Visual Merchandising and Displays -

– Visual Merchandising - the coordination of all physical elements in a place of business so that it projects the right image to its customers

– Displays - visual and artistic aspects of presenting a product to a target group of customers.

ME Ch 19 38

Consumer Sales Promotion (cont.)

4. Premium and Incentives - most popular and frequently used sales promotion type

Premiums - low cost items given away free to consumers as a condition of purchase.

Coupons - certificates given to customers entitling cash discountsFactory Packs (in-packs)- free gifts placed in product packagesTraffic Builders - low cost premiums like key chains, pensCoupon Plans - ongoing programs in exchange for labels, coupons,

or other tokens from one or more purchasesIncentives - higher-priced products given in contests or sweepstakes

5. Product Samples - free trial size of a product that is sent through the mail, distributed door-to-door, or through retail stores and trade shows

ME Ch 19 39

Sales Promotion + /-

• Advantages of Sales Promotions– Unique and has special appeal to a potential customer– Helps build customer loyalty

• Disadvantages of Sales Promotions– Difficult to end without the customers becoming

dissatisfied – Store image and sales can suffer if the promotion is

not properly planned and managed– Only designed to supplement other promotional

efforts and cannot make up for poor products

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Four Types of Promotion

• 4. Personal Selling - making an oral sales presentation to one or more potential buyers. On a per contact basis, personal selling is the most expensive form of promotion.– Order-taking personnel - cashiers, counter clerks,

and sales associates, perform routine tasks.– Order-getting personnel - professional salespeople,

are more involved in informing customers and helping them to buy. Usually sell big ticket items like real estate, cars, appliances, and industrial goods

ME Ch 19 41

Promotional Mix

• = a combination of different types of promotion. A business decides on a promotional mix that will be most effective in persuading customers or other businesses to purchase and support the business’s products.

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Promotional Mix

• Factors affecting the selection of a promotional mix– Good, Service, or Idea

• Type of product • Product nature• Stage of life cycle

– Product’s market• Type of consumer• Number of Consumers• Geographical location

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Promotional Mix Factors (cont)

– Distribution System– Product’s Company

• Historical perspective• Available funds• Size of sales force

– Competition

>>>> LAP HANDOUT - READ & HIGHLIGHT

Three types of products (effects the promotional mix)

•convenience,

•shopping, and

•specialty

Convenience products• items that are purchased

frequently with minimal effort.

• EX: toothpaste, ballpoint pens, and eggs—all routine buying decisions.

• Because customers are typically already familiar with these products, personal selling need not be

• included in the promotional mix. Instead, advertising and sales promotion are used to promote them.

Shopping products

• goods and services such as automobiles, laptop computers, and cell phone plans that are purchased after a customer has made comparisons of competing products.

• The customer checks prices, styles, colors, and qualities of different products and “shops around” for the best buy.

• Personal selling and national television advertising are often used to promote shopping products.

Specialty products• have unique characteristics that are prized

by customers who make special efforts to obtain them.

• Customers who purchase consumer specialty products, for instance, spend a good deal of time making their selections.

• Examples include expensivejewelry and rare antiques.

• The same is also true of industrial specialty goods such as complicated medical equipment and sophisticated computer software.

• Businesses usually do extensive research before purchasing such expensive technical products.

Specialty products (cont)

• Typically require more personal selling so that customers can learn about product features as well as how to operate the products.

• Also, in many cases, the image associated with a specialty product determines the type of promotional mix used.

• Marketers promoting designer handbags and expensive sports cars, for instance, often incorporate distinctive advertising, specialty catalogs, attractive visual displays, and publicity in their promotional mixes.

Stage of life cycle effects the promotional mix • Just as people develop and mature

by stages, so do goods and services.

• They go through life cycles by stages that include being introduced to the market, growing, maturing, and declining.

Introductory stage

• During a product’s introductory stage, the new product is introduced to the market.

• Promotional efforts are designed to inform customers about the existence of the new product.

• Sales promotions and advertising are commonly used at this stage of the product’s life.

Growth stage

• Competing products appear during the product’s growth stage.

• Promotional activities focus on pointing out differences between products.

• Advertising is used extensively.

Maturity stage

• At this point in the product life cycle, the product is well-established on the market.

• Promotion is used to remind customers of the product’s benefits

Declining stage

• During a product’s declining stage, newer products enter the market, taking the place of existing ones.

• Companies may slow or stop production of the product.

• The little money that is invested in promotional activities is often aimed at maintaining a positive image for the company.