ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion

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Principles of Marketing MGT301

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:

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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Principles of Marketing MGT301

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

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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Principles of Marketing MGT301

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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