Chapter 3 Effects of IT on Strategy and Competition

Chapter 3 Effects of IT on Strategy and Competition

Part 5 PROMOTION DECISIONS Dr. Chen, Principle of Marketing 15: Integrated Marketing Communications 16: Advertising and Public Relations 17: Personal Selling and Sales Promotion Dr. Chen, Principle of Marketing Chapter 15 Integrated Marketing Communications Professor Jason C. H. Chen, Ph.D. School of Business Administration Gonzaga University

Spokane, WA 99258 [email protected] Dr. Chen, Principle of Marketing Learning Objectives Describe the nature of integrated marketing communications Examine the process of communication Understand the role and objectives of promotion Explore the elements of the promotion mix Examine the selection of promotion mix elements Understand word-of-mouth communication and how it affects promotion Understand product placement promotions Examine criticisms and defenses of promotion Dr. Chen, Principle of Marketing 4

Integrated Marketing Communications Refer to coordination promotion and other marketing efforts for maximum informational and persuasive impact Goal - To send a _________ consistent message to customers Allow an organization to coordinate and manage its promotional efforts Enable synchronization of promotion elements Improve the efficiency and effectiveness of promotion budgets Foster long-term customer relationships Dr. Chen, Principle of Marketing 5 Communication Process Communication: Sharing of meaning through the transmission of information

Source: Person, group, or organization with a meaning it tries to share with a receiver or an audience Receiver: Individual, group, or organization that decodes a coded message Coding process: Converting meaning into a signs series of _____ or symbols Communications channel: Medium of transmission that carries the coded message from the source to the receiver Dr. Chen, Principle of Marketing 6 Figure 15.1 - The Communication Process Dr. Chen, Principle of Marketing

7 Decoding Process Converting signs or symbols into concepts and ideas Noise: Anything that reduces a communications clarity and accuracy Has many sources and may affect any or all parts of the communication process Occurs when a source uses signs or symbols that are unfamiliar to the receiver Can originate in the receiver Dr. Chen, Principle of Marketing 8 Decoding Process

Feedback: Receivers response to a decoded message Coded and sent through a communications channel Decoded by the receiver Immediate during face-to-face communication Slow when mass communication is used Channel capacity: Limit on the volume of information a communication channel can handle effectively Dr. Chen, Principle of Marketing 9 Sources of News Information for Americans Dr.

Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-10 Promotion Promotion is communication that builds and maintains favorable relationships by informing, reminding one or more audiences persuading and _________ To view an organization _________ positivelyand ______ accept its

products For maximum benefit, marketers strive for proper: Planning Implementation Coordination Control Dr. Chen, Principle of Marketing of communications 11 Figure 15.2 - Information Flows Are Important in Integrated Marketing Communications Dr. Chen, Principle of Marketing 12

Table 15.2 - Possible Objectives of Promotion awareness is crucial to initiating the product For example, ___________ adoption process for new products or a line extension (For target market and market segmentation) Dr. Chen, Principle of Marketing 13 Create Awareness Awareness is crucial to initiating the product adoption process for new products For existing products, promotional efforts create increased awareness of Brands Product features

Image-related issues Operational characteristics Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 14 17-14 AIDA Model (Also study p. 466 in ch16)

Awareness Create _________ Interest Produce _________ Create _______ Desire Result in purchase Action Dr. Chen, Principle of Marketing 15 Fig. Extra -1: Relation of Promotion Objectives, Adoption process, and AIDA Model Promotion Objectives Adoption Process

AIDA Model Informing Awareness Interest Evaluation Attention Interest Persuading Trail Desire Decision

Reminding Dr. Chen, Principle of Marketing Confirmation Action 16 Fig. Extra-2: Impact of promotional tools on consumer response Advertising Effectiveness Personal Selling Public relations and publicity Awareness/Attention

Dr. Chen, Principle of Marketing Interest Sales promotion Desire Action 17 Stimulate Demand Primary demand: Demand for a product category rather than for a specific brand through pioneer promotion Pioneer promotion: Informs consumers about a new product

A way to stimulate primary demand Selective demand: Demand for a specific brand Requires singling out attributes important to potential buyers Dr. Chen, Principle of Marketing 18 Encourage Product Trial If customers stall in the evaluation stage, marketers can use methods to encourage product trial in order to move them to product adoption Trial Techniques: Free samples

Coupons Test drives Limited free-use offers Contests Games Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-19 Identify Prospects Certain types of promotional efforts aim to identify customers who are interested in the firms product and are likely potential buyers

Techniques Include: Television advertisement encouraging the viewer to visit the companys website to share information and receive something of value Company should respond with phone calls, e-mail, or personal contact by salesperson Social media technology? Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-20

Retain Loyal Customers The primary goal of marketing is to maintain long-term customer relationships Keeping current customers is less costly than acquiring new customers Retention techniques include: Frequent-user programs Special offers for existing customers CRM? (Data mining tools) Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-21

Customer Retention Q: How many times more to find a new customer and keep him/her as a regular customer? Listening to the customer Loyalty programs to reward most-valued customers e-Communications e-newsletters, e-cards, or e-alerts Interactive promotions Sweepstakes and contests Events Seminars, workshops, etc. Client appreciation programs Invitations to special events, etc. Dr. Chen, of Marketing Copyright

2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-22 Facilitate Reseller Support Reseller support is a two-way street: Producers Resellers Strong relationships with resellers are important to an organizations ability to maintain a sustainable competitive advantage Various promotional methods help achieve this goal Resellers view promotion as form of support Share promotional expense Special offers/buying allowances

Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-23 Combat Competitive Promotional Efforts Promotional activities may aim to offset or lessen the effect of a competitors ______ promotional and marketing activities This type of promotional activity does not necessarily increase sales or market share, but it

prevent a sales or market share loss. may _______ A combative promotional objective is used most often by firms in highly competitive consumer markets Dr. Chen, Principle of Marketing Reduce Sales Fluctuations A business cannot operate at peak efficiency when sales fluctuate rapidly with the following factors Holidays Seasonal products Climate Promotional activities are often designed to stimulate sales during slumps

Snapper may offer sales prices on lawn mowers into the fall season to extend the selling season Dr. Chen, Principle of Marketing Figure 15.3 - The Four Possible Elements (Methods) of a Promotion Mix Product Personal selling Place C Promotion Public relations

Price Advertising Sales promotion Promotion mix: Combination of specific methods used to manage the integrated marketing communications for a particular product Dr. Chen, Principle of Marketing 26 Advertising A paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media Advertising is changing as mass media

consumption habits are changing The Internet and digital media aim at smaller, more targeted audiences Advertising is highly flexible and can reach large or small audiences depending on need Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-27 Advantages and Disadvantages of Advertising

Advantages: Cost-efficient when it reaches a vast number of people at a low cost per person It lets the source repeat the message several times Adds to a products value and Includes celebrity endorsers can enhance a firms and product's image Visibility gained from advertising can enhance a firms image Disadvantages: Absolute dollar outlay is ____ high Rarely provides rapid feedback Difficult to measure its effect on sales Less persuasive than personal selling Limited time available to communicate a message to customers Dr. Chen, Principle of Marketing Personal Selling and its Advantages and Disadvantages Personal selling is a paid personal communication

that seeks to inform customers and persuade them to purchase products in an exchange situation Advantages Is a more specific form of advertising Has greater impact on consumers Provides immediate feedback Disadvantages Is ________ expensive Is directed to a ________ number of individuals small Dr. Chen, Principle of Marketing 29

Public Relations Public relations is a broad set of communication efforts used to create/maintain favorable relationships between organization and stakeholders Publicity is a non-personal communication in a newsstory form about an organization, its products, or both Is transmitted through a mass medium at no charge Public relations should be viewed as an ongoing program during crises and good times and should have someone responsible for public relations either internally or externally. Goal positive image of the organization To create and enhance a ________ Dr. Chen, Principle of Marketing

Public Relations Tools Publicity Annual reports Brochures Event sponsorships Sponsorship of socially responsible programs Press releases/Conferences/Feature articles Dr. Chen, of Marketing

Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-31 Sales Promotion Activities or materials that act as a direct inducement, offering added value or incentive for the product to resellers, salespeople, or customers

Free samples Games Rebates Sweepstakes Contests Premiums Coupons Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-32

Top Coupon Categories Dr. Chen, of Marketing Copyright 2014Principle South-Western, Cengage Learning. ALL RIGHTS RESERVED. 17-33 Selecting Promotion Mix Elements 1. Resources, Objectives, Policies 5. Push and Pull Channel

Policies Promotional Mix 4. Cost and Availability of Promotional Methods Dr. Chen, Principle of Marketing 2. Characteristics of the Target Market 3. Characteristics

of the Product 34 Promotional Resources, Objectives, and Policies The size of an organizations promotional budget affects the number and intensity of promotional methods used A companys objectives and policies influence the types of promotions used Different objectives will require different promotional mixes. E.g., creating mass awareness of a new convenience good (breakfast cereal), its promotion mix may be: advertising, sales promotion, and public relations Dr. Chen, Principle of Marketing

Characteristics of the Target Market Size When limited - Promotion mix may emphasize personal selling ________ _______ When large - Promotion mix may be _________ advertising and sales promotion When the population density is uneven - Marketers may utilize regional advertising and target larger markets Dr. Chen, Principle of Marketing 36

Characteristics of the Target Market Geographic distribution Personal selling is used when the customers are concentrated in a small area Regional or national advertising is used when the customers are numerous and dispersed Demographic characteristics affect: Types of promotional techniques selected Messages and images employed Dr. Chen, Principle of Marketing 37

Characteristics of the Product Business products Concentrate on personal selling Use some advertising and sales promotion Consumer products Advertising and sales promotion for convenience goods Personal selling for consumer durables Public relations for both convenience goods and consumer durables Product price is an important factor Dr. Chen, Principle of Marketing

38 Characteristics of the Product Price influences the promotion mix Personal selling High-priced products - ______________ Low-priced products __________ Advertising Distribution intensity affects the promotion mix Intensive distribution - Advertising and sales promotion Selective distribution - Promotion mixes vary Exclusive distribution - Personal selling Usage affects the combination of promotional methods

Highly personal products Advertising Service businesses use tangible products to promote their intangible services Dr. Chen, Principle of Marketing 39 Push and Pull Channel Policies Push policy: Promoting a product only to the next institution down the marketing channel Promotion mix: stress on _______________ personal selling , sometimes sales promotion and advertising

Pull policy: Promoting a product directly to consumers Develops strong consumer demand that pulls products through a marketing channel Promotion mix: primarily focus on ____________ advertising and sales promotion Not mutually exclusive and can be used simultaneously Dr. Chen, Principle of Marketing 40 Figure 15.4 - Comparison of Push and Pull Promotional Strategies Dr. Chen, Principle of Marketing

41 Word-of-Mouth (WOM) Communications Personal, informal exchanges of communication shared by customers about products, brands, and companies Most customers are likely to be influenced by friends and family members when making purchases Crucial for customers in selecting services Leads to new-customer acquisition Effective WOM relies on marketers identifying opinion leaders and is for _______-market and more expensive _______ new-to products Electronic word of mouth (E-WOM) Communicating about products through websites, blogs, email, social networks, or online forums

Dr. Chen, Principle of Marketing 42 Growing Importance of Word-of-Mouth Communications Buzz marketing: Attempt to incite publicity and public excitement surrounding a product through a creative event Should not violate any laws or have the potential to be misconstrued and cause undue alarm Viral marketing: Strategy to get consumers to share a marketers message Done

through e-mail or online video Done in a way that spreads dramatically and quickly Dr. Chen, Principle of Marketing 43 Viral Marketing Viral marketing, viral advertising, or marketing buzz are buzzwords referring to marketing techniques that use pre-existing social networking services and other technologies to try to produce increases in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes, analogous to the spread of viruses or computer viruses. In Volkswagen's The Fun Theory, the brand used a series of experiments to find out if you could make people healthier, more environmentally conscious, safer, etc., if you made a mundane activity more fun. In addition to piano stairs and the world's deepest trashcan, the brand

invited creative people to come up with their ways of making boring things fun. Dr. Chen, Principle of Marketing 44 Product Placement A form of advertising that strategically locates products or product promotions within entertainment media content to reach the products target market Important due to increasing fragmentation (target market) of television viewers In-program product placements Successful in reaching consumers as they are being entertained (e.g., X Factor) Has become more important as more consumers

bypass advertisements (about 60 80% users) through digital video recorders, TiVo, and the Internet Dr. Chen, Principle of Marketing 45 Criticisms and Defenses of Promotion Even though promotional activities can help customers make informed purchasing decisions, social scientists, consumer groups, government agencies, and members of society in general have long criticized promotion. Two main reasons for such criticism: 1) Promotion does have flaws, and 2) it is a highly visible business activity that pervades our daily lives.

Is promotion deceptive? Some are, but not all promotion should be condemned Laws, government regulation, and industry self-regulation have helped decrease deceptive promotion Does promotion increase prices? If promotion is working to stimulate demand, producing and marketing larger quantities can actually help _______ reduce prices Dr. Chen, Principle of Marketing

46 Criticisms and Defenses of Promotion Does promotion create needs? aware Marketing does not create needs, but makes consumers ______ of needs they already have Does promotion encourage materialism? Marketers assert that values are instilled at home and promotion does not change people into materialistic consumers Does promotion help customers without costing too much?

Promotions inform customers about a products uses, features, advantages, prices, or purchase locations Should potentially harmful products be promoted? Defenders argue that, as long as it is legal to sell a product, promoting it should also be allowed Dr. Chen, Principle of Marketing 47 Table 15.4 - Criticisms and Defenses of Promotion Dr. Chen, Principle of Marketing

48 Video Case VIDEO CASE 15: FRANK PEPES PIZZERIA NAPOLETANA USES POSITIVE WORD-OF-MOUTH TO BECOME A PREMIERE PIZZERIA: THE TALE OF NEW BELGIUM BREWING Dr. Chen, Principle of Marketing 49 Summary This case discusses how a pizzeria successfully uses integrated marketing communication. Positive word-ofmouth marketing about the companys products has increased its customer base. The pizzeria uses personal selling to communicate the value of its products when customers enter the store. It also uses advertising such as

direct mail and digital marketing on sites like Facebook and Twitter. A major form of sales promotion that the pizzeria uses is free pizza the week before opening a new store. Finally, the company makes use of public relations through fundraisers and donations. Frank Pepes Pizzeria Napoletana has become an expert at using all four parts of the promotion mix to attract customers. Dr. Chen, Principle of Marketing 50 1. What are the various promotion elements that Pepes uses to communicate with customers? Pepes uses personal selling to communicate the value of its products when customers enter the store. It also uses advertising such as direct mail and digital marketing on sites like Facebook and Twitter. A major form of sales promotion that the pizzeria uses is

free pizza the week before opening a new store. The company also makes use of public relations through fundraisers and donations. These different components coupled with a premium product and quality experience has led many customers to tell others about the company (word-of-mouth marketing). Dr. Chen, Principle of Marketing 51 2. What role does word of mouth play in Pepes integrated marketing communications? Word-of-mouth marketing is one of the strongest forms of marketing because consumers tend to trust other consumers. Pepes uses a combination of strong customer relationships, premium product offerings, and strong integrated marketing to create customer satisfaction.

These satisfied customers often tell their friends and family about their positive experience with Pepes, leading to additional customers. Dr. Chen, Principle of Marketing 52 3. Evaluate free pizza as a form of sales promotion in Pepes success. Pepes provides a week of free pizza before opening a new location. This allows the company to attract new customers who might not have known about Pepes before and also helps employees to break in new ovens and become familiar with Pepes culture. Not only does this form of sales promotion allow customers to try Pepes quality product, but it also

builds goodwill and a positive image among the community. Dr. Chen, Principle of Marketing 53

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