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ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion

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Principles of Marketing ­ MGT301
VU
Lesson ­ 34
Lesson overview and learning objectives:
Today we will continue and discuss the remaining steps in major advertising decisions and other
topic of today's Lesson is
ADVERTISING
(CONT.)
SALES PROMOTION
b) Selecting advertising media.
The major steps in media selection are:
i.
Deciding on reach, frequency, and impact;
ii.  Choosing among major media types;
iii.  Selecting specific media vehicles;
iv.
Deciding on media timing.
I. Deciding on Reach, Frequency, and Impact
To select media, the advertiser must decide what reach and frequency are needed to achieve
advertising objectives. Reach is a measure of the percentage of people in the target market who are
exposed to the ad campaign during a given period of time. For example, the advertiser might try to
reach 70 percent of the target market during the first three months of the campaign. Frequency is a
measure of how many times the average person in the target market is exposed to the message. For
example, the advertiser might want an average exposure frequency of three. The advertiser also
must decide on the desired media impact--the qualitative value of a message exposure through a given
medium. For example, for products that need to be demonstrated, messages on television may
have more impact than messages on radio because television uses sight and sound. The same
message in one magazine may be more believable than in another. In general, the more reach,
frequency, and impact the advertiser seeks, the higher the advertising budget will have to be.
II. Choosing Among Major Media Types
The media planner has to know the reach, frequency, and impact of each of the major media types.
The major media types are newspapers, television, direct mail, radio, magazines, outdoor, and the
Internet. Each medium has advantages and limitations.
Media planners consider many factors when making their media choices. The media habits of target
consumers will affect media choice--advertisers look for media that reach target consumers
effectively. So will the nature of the product--for example, fashions are best advertised in color
magazines, and automobile performance is best demonstrated on television. Different types of
messages may require different media. A message announcing a major sale tomorrow will require
radio or newspapers; a message with a lot of technical data might require magazines, direct
mailings, or an online ad and Web site. Cost is another major factor in media choice. For example,
network television is very expensive, whereas newspaper or radio advertising costs much less but
also reaches fewer consumers. The media planner looks both at the total cost of using a medium
and at the cost per thousand exposures--the cost of reaching 1,000 people using the medium.
Media impact and cost must be reexamined regularly. For a long time, television and magazines
have dominated in the media mixes of national advertisers, with other media often neglected.
Recently, however, the costs and clutter of these media have gone up, audiences have declined, and
marketers are adopting strategies beamed at narrower segments. As a result, advertisers are
increasingly turning to alternative media--ranging from cable TV and outdoor advertising to
parking meters and shopping carts--that cost less and target more effectively.
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III. Selecting Specific Media Vehicles
The media planner now must choose the best media vehicles--specific media within each general
media type. Media planners must compute the cost per thousand persons reached by a vehicle. The
media planner ranks each magazine by cost per thousand and favors those magazines with the
lower cost per thousand for reaching target consumers.
The media planner must also consider the costs of producing ads for different media. Whereas
newspaper ads may cost very little to produce, flashy television ads may cost millions. In selecting
media vehicles, the media planner must balance media cost measures against several media impact
factors. First, the planner should balance costs against the media vehicle's audience quality.
IV. Deciding on Media Timing
The advertiser must also decide how to schedule the advertising over the course of a year. Suppose
sales of a product peak in December and drop in March. The firm can vary its advertising to
follow the seasonal pattern, to oppose the seasonal pattern, or to be the same all year. Most firms
do some seasonal advertising. Some do only seasonal advertising. Finally, the advertiser has to
choose the pattern of the ads. Continuity means scheduling ads evenly within a given period. Pulsing
means scheduling ads unevenly over a given time period.. The idea is to advertise heavily for a
short period to build awareness that carries over to the next advertising period. Those who favor
pulsing feel that it can be used to achieve the same impact as a steady schedule but at a much lower
cost. However, some media planners believe that although pulsing achieves minimal awareness, it
sacrifices depth of advertising communications.
Recent advances in technology have had a substantial impact on the media planning and buying
functions.
a. Evaluating Advertising
The fourth step in the advertising campaign is evaluation of the campaign. The advertising
program should evaluate both the communication effects and the sales effects of advertising
regularly. Measuring the communication effects of an ad--copy testing--tells whether the ad is
communicating well. Copy testing can be done before or after an ad is printed or broadcast. Before
the ad is placed, the advertiser can show it to consumers, ask how they like it, and measure recall or
attitude changes resulting from it. After the ad is run, the advertiser can measure how the ad
affected consumer recall or product awareness, knowledge, and preference.
But what sales are caused by an ad that increases brand awareness by 20 percent and brand
preference by 10 percent? The sales effects of advertising are often harder to measure than the
communication effects. Sales are affected by many factors besides advertising--such as product
features, price, and availability.
b. Ways to Handle Advertising
Different companies organize in different ways to handle advertising. In small companies,
advertising might be handled by someone in the sales department. Large companies set up
advertising departments whose job it is to set the advertising budget, work with the ad agency, and
handle other advertising not done by the agency. Most large companies use outside advertising
agencies because they offer several advantages.
How does an advertising agency work? Advertising agencies were started in the mid-to-late 1800s
by salespeople and brokers who worked for the media and received a commission for selling
advertising space to companies. As time passed, the salespeople began to help customers prepare
their ads. Eventually, they formed agencies and grew closer to the advertisers than to the media.
Today's agencies employ specialists who can often perform advertising tasks better than the
company's own staff. Agencies also bring an outside point of view to solving the company's
problems, along with lots of experience from working with different clients and situations. Thus,
today, even companies with strong advertising departments of their own use advertising agencies.
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Most large advertising agencies have the staff and resources to handle all phases of an advertising
campaign for their clients, from creating a marketing plan to developing ad campaigns and
preparing, placing, and evaluating ads. Agencies usually have four departments: creative, which
develops and produces ads; media, which selects media and places ads; research, which studies
audience characteristics and wants; and business, which handles the agency's business activities.
Each account is supervised by an account executive, and people in each department are usually
assigned to work on one or more accounts.
However, both advertisers and agencies have become more and more unhappy with the
commission system. Larger advertisers complain that they pay more for the same services received
by smaller ones simply because they place more advertising. Advertisers also believe that the
commission system drives agencies away from low-cost media and short advertising campaigns.
Another factor is vast changes in how ad agencies reach consumers that go way beyond network
TV or magazine advertising. Another trend is affecting the advertising agency business: Many
agencies have sought growth by diversifying into related marketing services. These new diversified
agencies offer a complete list of integrated marketing and promotion services under one roof,
including advertising, sales promotion, marketing research, public relations, and direct and online
marketing. Some have even added marketing consulting, television production, and sales training
units in an effort to become full "marketing partners" to their clients.
However, agencies are finding that most advertisers don't want much more from them than
traditional media advertising services plus direct marketing, sales promotion, and sometimes public
relations. Thus, many agencies have recently limited their diversification efforts in order to focus
more on traditional services. Some have even started their own "creative boutiques," smaller and
more independent agencies that can develop creative campaigns for clients free of large-agency
bureaucracy.
A. Sales Promotion
Sales promotion consists of short-term incentives to encourage the purchase or sale of a product
or service. Whereas advertising and personal selling offer reasons to buy a product or service, sales
promotion offers reasons to buy now.
Several factors have contributed to the rapid growth of sales promotion, particularly in consumer
markets. First, inside the company, product managers face greater pressures to increase their
current sales, and promotion is viewed as an effective short-run sales tool. Second, externally, the
company faces more competition and competing brands are less differentiated. Increasingly,
competitors are using sales promotion to help differentiate their offers. Third, advertising
efficiency has declined because of rising costs, media clutter, and legal restraints. Finally,
consumers have become more deal oriented and ever-larger retailers are demanding more deals
from manufacturers.
The growing use of sales promotion has resulted in promotion clutter, similar to advertising clutter.
Consumers are increasingly tuning out promotions, weakening their ability to trigger immediate
purchase. Manufacturers are now searching for ways to rise above the clutter, such as offering
larger coupon values or creating more dramatic point-of-purchase displays.
a. Sales Promotion Objectives
Sales promotion objectives vary widely. Sellers may use consumer promotions to increase short-
term sales or to help build long-term market share. Objectives for trade promotions include getting
retailers to carry new items and more inventories, getting them to advertise the product and give it
more shelf space, and getting them to buy ahead. For the sales force, objectives include getting
more sales force support for current or new products or getting salespeople to sign up new
accounts. Sales promotions are usually used together with advertising or personal selling.
Consumer promotions must usually be advertised and can add excitement and pulling power to
ads. Trade and sales force promotions support the firm's personal selling process.
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In general, sales promotions should be consumer relationship building. Rather than creating only short-
term sales or temporary brand switching, they should help to reinforce the product's position and
build long-term relationships with consumers. Increasingly, marketers are avoiding "quick fix,"
price-only promotions in favor of promotions designed to build brand equity.
b. Major Sales Promotion Tools
Many tools can be used to accomplish sales promotion objectives. Descriptions of the main
consumer, trade, and business promotion tools follow.
Consumer Promotion Tools
The main consumer promotion tools include samples, coupons, cash refunds, price packs,
premiums,  advertising  specialties,  patronage  rewards,  point-of-purchase  displays  and
demonstrations, and contests, sweepstakes, and games.
·
Samples are offers of a trial amount of a product. Sampling is the most effective--but
most expensive--
Consumer Sales Promotion
way to introduce a
new product. Some
Techniques
samples are free;
for  others,  the
Price Deals
company charges a
small amount to
Advertising
Coupons
Specialties
offset its cost. The
sample might be
delivered door-to-
Rebates
Sampling
door, sent by mail,
handed out in a
Cross-
store, attached to
Premiums
Promotions
another product, or
Contests, Games,
featured in an ad.
Sweepstakes
Sometimes,
samples
are
combined into sample packs, which can then be used to promote other products and
services.
·
Coupons are certificates that give buyers a saving when they purchase specified products.
Most consumers love coupons: Coupons can stimulate sales of a mature brand or promote
early trial of a new brand. However, as a result of coupon clutter, redemption rates have
been declining in recent years. Thus, most major consumer goods companies are issuing
fewer coupons and targeting them more carefully.
·
Cash refund offers (or rebates) are like coupons except that the price reduction occurs
after the purchase rather than at the retail outlet. The consumer sends a "proof of
purchase" to the manufacturer, who then refunds part of the purchase price by mail.
·
Price packs (also called cents-off deals) offer consumers savings off the regular price of
a product. The reduced prices are marked by the producer directly on the label or package.
Price packs can be single packages sold at a reduced price (such as two for the price of
one), or two related products banded together (such as a toothbrush and toothpaste). Price
packs are very effective--even more so than coupons--in stimulating short-term sales.
·
Premiums are goods offered either free or at low cost as an incentive to buy a product,
ranging from toys included with kids' products to phone cards, compact disks, and
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computer CD-ROMs. A premium may come inside the package (in-pack), outside the
package (on-pack), or through the mail.
·
Advertising specialties are useful articles imprinted with an advertiser's name given as
gifts to consumers. Typical items include pens, calendars, key rings, matches, shopping
bags, T-shirts, caps, nail files, and coffee mugs. Such items can be very effective. In a
recent study, 63 percent of all consumers surveyed were either carrying or wearing an ad
specialty item. More than three-quarters of those who had an item could recall the
advertiser's name or message before showing the item to the interviewer.
·
Patronage rewards are cash or other awards offered for the regular use of a certain
company's products or services. For example, airlines offer frequent flier plans, awarding
points for miles traveled that can be turned in for free airline trips.
·
Point-of-purchase (POP) promotions include displays and demonstrations that take
place at the point of purchase or sale. Unfortunately, many retailers do not like to handle
the hundreds of displays, signs, and posters they receive from manufacturers each year.
Manufacturers have responded by offering better POP materials, tying them in with
television or print messages, and offering to set them up.
·
Contests, sweepstakes, and games give consumers the chance to win something, such
as cash, trips, or goods, by luck or through extra effort. A contest calls for consumers to
submit an entry--a jingle, guess, suggestion--to be judged by a panel that will select the
best entries. A sweepstakes calls for consumers to submit their names for a drawing. A game
presents consumers with something--bingo numbers, missing letters--every time they
buy, which may or may not help them win a prize. A sales contest urges dealers or the sales
force to increase their efforts, with prizes going to the top performers
i.
Trade Promotion Tools
Trade promotion can persuade resellers to carry a brand, give it shelf space, promote it in
advertising, and push it to consumers. Shelf space is so scarce these days that manufacturers often
have to offer price-offs, allowances, buy-back guarantees, or free goods to retailers and wholesalers
to get products on the shelf and, once there, to stay on it.
Manufacturers use several trade promotion tools. Many of the tools used for consumer
promotions--contests, premiums, displays--can also be used as trade promotions. Or the
manufacturer may offer a straight discount off the list price on each case purchased during a
stated period of time (also called a price-off, off-invoice, or off-list). The offer encourages dealers to buy
in quantity or to carry a new item. Dealers can use the discount for immediate profit, for
advertising, or for price reductions to their customers.
Manufacturers also may offer an allowance (usually so much off per case) in return for the
retailer's agreement to feature the manufacturer's products in some way. An advertising
allowance compensates retailers for advertising the product. A display allowance compensates
them for using special displays.
Manufacturers may offer free goods, which are extra cases of merchandise, to resellers who buy a
certain quantity or who feature a certain flavor or size. They may offer push money--cash or gifts
to dealers or their sales forces to "push" the manufacturer's goods. Manufacturers may give
retailers free specialty advertising items that carry the company's name, such as pens, pencils, calendars,
paperweights, matchbooks, memo pads, and yardsticks.
ii.
Business Promotion Tools
Companies spend billions of dollars each year on promotion to industrial customers. These
business promotions are used to generate business leads, stimulate purchases, reward customers,
and motivate salespeople. Business promotion includes many of the same tools used for consumer
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or trade promotions. Here, we focus on two additional major business promotion tools--
conventions and trade shows, and sales contests.
Many companies and trade associations organize conventions and trade shows to promote their
products. Firms selling to the industry show their products at the trade show. Trade shows also
help companies reach many prospects not reached through their sales forces. About 90 percent of
a trade show's visitors see a company's salespeople for the first time at the show. A sales contest is a
contest for salespeople or dealers to motivate them to increase their sales performance over a given
period. Sales contests motivate and recognize good company performers, who may receive trips,
cash prizes, or other gifts. Some companies award points for performance, which the receiver can
turn in for any of a variety of prizes. Sales contests work best when they are tied to measurable and
achievable sales objectives (such as finding new accounts, reviving old accounts, or increasing
account profitability).
c. Developing the Sales Promotion Program
The marketer must make several other decisions in order to define the full sales promotion
program. First, the marketer must decide on the size of the incentive. A certain minimum
incentive is necessary if the promotion is to succeed; a larger incentive will produce more sales
response. The marketer also must set conditions for participation. Incentives might be offered
to everyone or only to select groups.
The marketer must decide how to promote and distribute the promotion program itself. A 50-
cents-off coupon could be given out in a package, at the store, by mail, or in an advertisement.
Each distribution method involves a different level of reach and cost. Increasingly, marketers are
blending several media into a total campaign concept. The length of the promotion is also
important. If the sales promotion
period is too short, many prospects
(who may not be buying during that
Deciide on tthe Siize off tthe IIncenttiive
Dec de on he S ze o  he ncen ve
time) will miss it. If the promotion
runs too long, the deal will lose
Sett Condiittiions fforr Parrttiiciipattiion
some of its "act now" force.
Se Cond ons o Pa  c pa on
Evaluation is also very important.
Detterrm iine How tto Prrom otte and
De e m ne How o P om o e and
Yet many companies fail to evaluate
Diisttrriibutte tthe Prrom ottiion Prrogrram
D s  bu e he P om o on P og am
their sales promotion programs, and
others
evaluate
them
only
Detterrm iine tthe Lengtth off tthe Prrogrram
De e m ne he Leng h o  he P og am
superficially. Manufacturers can use
one of many evaluation methods.
The most common method is to
Evalluatte tthe Prrogrram
Eva ua e he P og am
compare sales before, during, and
after a promotion. Suppose a
company has a 6 percent market share before the promotion, which jumps to 10 percent during
the promotion, falls to 5 percent right after, and rises to 7 percent later on. The promotion seems
to have attracted new triers and more buying from current customers. After the promotion, sales
fell as consumers used up their inventories. The long-run rise to 7 percent means that the company
gained some new users. If the brand's share had returned to the old level, then the promotion
would have changed only the timing of demand rather than the total demand.
Consumer research would also show the kinds of people who responded to the promotion and
what they did after it ended. Surveys can provide information on how many consumers recall the
promotion, what they thought of it, how many took advantage of it, and how it affected their
buying. Sales promotions also can be evaluated through experiments that vary factors such as
incentive value, length, and distribution method.
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Clearly, sales promotion plays an important role in the total promotion mix. To use it well, the
marketer must define the sales promotion objectives, select the best tools, design the sales
promotion program, implement the program, and evaluate the results. Moreover, sales promotion
must be coordinated carefully with other promotion mix elements within the integrated marketing
communications program.
d. Sales Promotion Uses and Limitations of Sales Promotion
Sales promotion tools are effective for the organizations in different aspects like they can be used
to Introduce new products, making existing customers to buy more, Attract new customers,
Combat competition, Maintain sales in off season, Increase retail inventories, Tie in advertising and
personal selling, Enhance personal selling efforts. Beside these advantages, sales promotions have
certain limitations as well like Cannot Reverse Declining Sales Trend, Cannot Overcome, inferior
Product, May Encourage Competitive Retaliation, May Hurt Profit
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Table of Contents:
  1. PRINCIPLES OF MARKETING:Introduction of Marketing, How is Marketing Done?
  2. ROAD MAP:UNDERSTANDING MARKETING AND MARKETING PROCESS
  3. MARKETING FUNCTIONS:CUSTOMER RELATIONSHIP MANAGEMENT
  4. MARKETING IN HISTORICAL PERSPECTIVE AND EVOLUTION OF MARKETING:End of the Mass Market
  5. MARKETING CHALLENGES IN THE 21st CENTURY:Connections with Customers
  6. STRATEGIC PLANNING AND MARKETING PROCESS:Setting Company Objectives and Goals
  7. PORTFOLIO ANALYSIS:MARKETING PROCESS,Marketing Strategy Planning Process
  8. MARKETING PROCESS:Analyzing marketing opportunities, Contents of Marketing Plan
  9. MARKETING ENVIRONMENT:The Company’s Microenvironment, Customers
  10. MARKETING MACRO ENVIRONMENT:Demographic Environment, Cultural Environment
  11. ANALYZING MARKETING OPPORTUNITIES AND DEVELOPING STRATEGIES:MIS, Marketing Research
  12. THE MARKETING RESEARCH PROCESS:Developing the Research Plan, Research Approaches
  13. THE MARKETING RESEARCH PROCESS (Continued):CONSUMER MARKET
  14. CONSUMER BUYING BEHAVIOR:Model of consumer behavior, Cultural Factors
  15. CONSUMER BUYING BEHAVIOR (CONTINUED):Personal Factors, Psychological Factors
  16. BUSINESS MARKETS AND BUYING BEHAVIOR:Market structure and demand
  17. MARKET SEGMENTATION:Steps in Target Marketing, Mass Marketing
  18. MARKET SEGMENTATION (CONTINUED):Market Targeting, How Many Differences to Promote
  19. Product:Marketing Mix, Levels of Product and Services, Consumer Products
  20. PRODUCT:Individual product decisions, Product Attributes, Branding
  21. PRODUCT:NEW PRODUCT DEVELOPMENT PROCESS, Idea generation, Test Marketing
  22. NEW PRODUCT DEVELOPMENT:PRODUCT LIFE- CYCLE STAGES AND STRATEGIES
  23. KEY TERMS:New-product development, Idea generation, Product development
  24. Price the 2nd P of Marketing Mix:Marketing Objectives, Costs, The Market and Demand
  25. PRICE THE 2ND P OF MARKETING MIX:General Pricing Approaches, Fixed Cost
  26. PRICE THE 2ND P OF MARKETING MIX:Discount and Allowance Pricing, Segmented Pricing
  27. PRICE THE 2ND P OF MARKETING MIX:Price Changes, Initiating Price Increases
  28. PLACE- THE 3RD P OF MARKETING MIX:Marketing Channel, Channel Behavior
  29. LOGISTIC MANAGEMENT:Push Versus Pull Strategy, Goals of the Logistics System
  30. RETAILING AND WHOLESALING:Customer Service, Product Line, Discount Stores
  31. KEY TERMS:Distribution channel, Franchise organization, Distribution center
  32. PROMOTION THE 4TH P OF MARKETING MIX:Integrated Marketing Communications
  33. ADVERTISING:The Five M’s of Advertising, Advertising decisions
  34. ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion
  35. PERSONAL SELLING:The Role of the Sales Force, Builds Relationships
  36. SALES FORCE MANAGEMENT:Managing the Sales Force, Compensating Salespeople
  37. SALES FORCE MANAGEMENT:DIRECT MARKETING, Forms of Direct Marketing
  38. DIRECT MARKETING:PUBLIC RELATIONS, Major Public Relations Decisions
  39. KEY TERMS:Public relations, Advertising, Catalog Marketing
  40. CREATING COMPETITIVE ADVANTAGE:Competitor Analysis, Competitive Strategies
  41. GLOBAL MARKETING:International Trade System, Economic Environment
  42. E-MARKETING:Internet Marketing, Electronic Commerce, Basic-Forms
  43. MARKETING AND SOCIETY:Social Criticisms of Marketing, Marketing Ethics
  44. MARKETING:BCG MATRIX, CONSUMER BEHAVIOR, PRODUCT AND SERVICES
  45. A NEW PRODUCT DEVELOPMENT:PRICING STRATEGIES, GLOBAL MARKET PLACE