Reading: Lesson 6 - Promotion

11.6.A - Promotion

1. PROMOTION AS MARKETING COMMUNICATION

1. Marketing managers use communication strategies to create customer interest in products and services. Consumers need to have awareness of a product before they can buy it. They need to know a product is available and where they can purchase it. They must be able to easily see the differences among brands and determine which brand will best meet their needs. Promotion is the primary way that businesses communicate with prospective customers. Businesses use a promotional mix to inform consumers about the features and benefits of products and services, encouraging consumers to buy. The effective communication model is the basis for successful promotion. The company that develops the promotion is the sender. The information in the promotion is the message, and the method of promotion determines the communication medium. The prospective consumer is the receiver. Feedback from the receiver helps the sender determine if the promotion was successful and decide if the message needs adjustment. Marketing managers use a promotional mix to move customers from recognizing a need to purchasing a product that fills those needs. A promotional mix that businesses commonly use to communicate with customers includes advertising, personal selling, and sales promotions such as coupons, sampling, and in-store displays.
   
2. Consumers generally follow five steps in progressing toward a purchase decision. The Figure below summarizes the steps in the consumer decision-making process. Although the steps are common to all consumers, each consumer has different needs and gathers information in different ways to satisfy those needs. Some customers spend a great deal of time and consult many information sources before deciding to buy or not to buy. Other consumers might not be as careful or use the same methods. Therefore, businesses must provide appropriate information to help the greatest number of consumers move through the decision-making process to select the product that meets their needs. 
   

   
   

1.  Advertising is any form of paid promotion that delivers a message to many people at the same time. Because the message is designed to appeal to many people, it is rather impersonal. However, because the message reaches thousands of people, the cost of communicating with each person can be very low. Businesses spend more money each year in the United States on advertising than on any other type of promotion. The average business spends less than 3 percent of total sales annually on advertising, but some businesses spend over 20 percent. Companies in industries such as beverages, cosmetics, and electronics rely heavily on advertising and spend a significant amount throughout the year to keep their brand names in front of consumers.
   
2. Advertising is a powerful tool because it can help a business accomplish a variety of objectives. Companies must consider carefully what they want to communicate to consumers and plan specific advertising to accomplish that communication goal. The major purposes of advertising are shown in the Figure below. 
   

   
   

3. Most businesses use some form of advertising to attract prospective customers. However, the methods of reaching consumers—the advertising media—vary a great deal. Advertising media are the methods of delivering the promotional message to the intended audience. The most widely used forms of advertising media are classified by categories in the Figure below. 
   

   
   

4. Businesses have many choices of media to use to communicate information to customers. However, planning an advertising program involves more than selecting the type of media. Advertising should be planned to support other promotion and marketing decisions. Most businesses that spend a significant amount of money for advertising throughout the year develop an advertising plan. The plan outlines communication goals and specifies an advertising budget, a calendar of advertising activities, and a system for evaluating the advertising. Small businesses often need help in developing their advertising plans and writing their advertisements. A printing company may have specialists who can write the copy and design the advertisement for a direct-mail piece. The people who sell advertising space may offer suggestions for preparing ads. Radio and television station marketing people may also help plan advertising.
   

5. As the business grows, the owner has the option of hiring someone to handle the advertising or placing all of the company’s advertising planning in the hands of an advertising agency. Full-service agencies provide all the services related to planning and producing advertisements and buying the space or time for the ads in the media. Most agencies also offer research services to determine customers’ product and information needs. For their services, advertising agencies usually charge a percentage of the total amount spent for the advertising, but some may charge for the actual costs of developing and placing the ads. Some very large companies have a complete advertising department that performs all the functions of an advertising agency. Because of the amount of advertising large companies do and its cost, it is more efficient for those companies to have their own advertising personnel than to pay an agency.
   

6. Companies reserve a dollar amount for advertising when they develop their overall company budget. Most businesses plan the advertising program for one year or less. Of course, unexpected circumstances may arise that require a quick decision, but planning helps avoid budget misuse. If the company is developing a new product, it will usually prepare an advertising budget to support the new product’s introduction into the market. Large businesses often develop separate advertising budgets for new products, product lines, customer groups, or market regions. Separate budgets make it easier to determine the effects of specific advertising on sales and profits. The amount a business spends on advertising depends more on the characteristics of the product and target market than on the competition. A business with a loyal group of customers and a product that has been in the market for a long time may need to spend less than a business with a new or very complex product or one positioned in an extremely competitive market. A business that relies on advertising for the majority of its promotion will, of course, spend a larger percentage of sales on advertising than a business that has a balanced promotional program of advertising, personal selling, and sales promotion.
   

7. Advertising may be seasonal because it is more effective at certain times during the year or product life cycle. Companies determine the times when potential customers are most willing and able to buy the products or services advertised. Many products and services are seasonal, with the majority of sales concentrated in a few months of the year. Companies spend more advertising dollars during time frames when consumers are considering the purchase of the product than during time frames when customers are less likely to buy. For example, advertising for snowmobiles or ocean cruises increases during the winter months, and advertising for air conditioners and lawn mowers appears mostly in the spring and summer. Occasionally, companies advertise to increase purchases at times customers do not traditionally consider buying the product. By emphasizing new product development and advertising, turkey producers and processors have increased the sale of turkey products throughout the year. Those businesses had previously sold almost all of their products near the Thanksgiving holiday and other holiday times during the year. A single advertisement may produce temporary results, but regular advertising is important in building a steady stream of customers. If advertising does not appear frequently, customers tend to forget about the business or product. To keep their name and brands fresh in consumers’ minds, businesses often spread their advertising over the entire year. Only when the company wants an immediate impact, such as for a new-product introduction or for a special event, would it consider a large, one-time expenditure.
   

8. Advertising effectiveness is evaluated in a number of ways. Researchers measure which advertisements a market sees, what they remember from the ads, and whether or not the ads have influenced their attitudes or feelings about a product. A few companies specialize in advertising evaluations. The Nielsen Company measures advertising performance for broadcast media, online media, and mobile media. The Nielsen Audio subsidiary has people record in a diary which radio programs they listen to throughout a day. 
   

9. Laws and regulations protect consumers from unfair promotional practices. Nationally, the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) are responsible for regulating promotion. False advertising is a violation of the law. False advertising is defined by federal law as “misleading in a material respect” or in any way that could influence the customer’s purchase or use of the product. To protect consumers, advertisers are required to make full disclosure, providing all information necessary for consumers to make an informed decision. They must also provide substantiation—that is, be able to prove all claims they make about their products and services in promotions. If a business violates laws and regulations in its advertising, it may face three types of penalties from the regulating agencies: (1) The agencies may impose a cease-and-desist order, which requires the company to immediately stop using specific advertisements or practices. (2) If the advertising has harmed consumers, the company may be required to spend a specified amount to run corrective advertising. Corrective advertising is new advertising designed to change the false impression left by the misleading information. (3) In unusual situations, the company may have to pay a fine to the government or the consumers harmed by its illegal advertising. Long-term business success is built on honesty and fair practices. A business- person may occasionally be tempted to exaggerate or to imitate a competitor who seems to be stretching the truth. In the long run, however, it does not pay to destroy customers’ confidence. If customers do not get what they believed was promised to them in advertisements or by salespeople, they will likely not return to the business. On the other hand, a satisfied customer is often an important source of promotion for a business.
   

3. Personal Selling

1. Personal selling is promotion through direct, personal contact with a customer. The salesperson usually makes direct contact with the customer through a face- to-face meeting. There are many types of customers, and a salesperson must be able to adjust to each type. Some customers know exactly what they want, but others are in the early stages of decision making. A critical sales skill is understanding the customer’s motivations.
   
2. Individuals are motivated to buy for different reasons. Buying motives are the reasons people buy. Some common consumer buying motives are listed in the Figure below. To be successful, the salesperson must determine a particular customer’s buying motives and then customize the sales presentation to appeal to those motives. For instance, a laundry company representative attempting to sell laundry services to a working couple with three children may talk about the comfort and convenience of having the laundry done outside the home rather than doing it themselves. The salesperson may also explain that it is less expensive to send the laundry to a professional service because of various expenses involved in doing laundry at home. Suppose this same salesperson calls on the owner of a barbershop or beauty salon. The salesperson can emphasize a special sterilizing treatment given to towels, capes, and uniforms and the speedy delivery of the laundered items. Both the family and the business owner might find individually scheduled pickup and delivery services attractive. Providing customer satisfaction through a sale is the ultimate goal of a salesperson. This method of selling does not require high-pressure selling; it requires intentional customer-oriented selling. 
   

   
   

3. Customers are interested in what the product will do for them and how they can use it. Salespeople must have a thorough knowledge of the product so they can provide accurate information and answer questions. For example, customers might ask: “How much oil will I need to do a car oil change at home?” “Which tile is best for a non-slip surface?” “Why is this pair of shoes $68 and that pair $55?” Different customers value different types of information about the same product. Salespeople should study the products they sell as well as the competition’s products, so they can be prepared to answer any questions customers might ask. Listening to a salesperson talk at length about product information that is of no interest to the customer will not likely result in a sale.
   

4. In addition to giving customers information, salespeople should be able to demonstrate the use of the product so that customers can determine whether or not the product will meet their needs. It is usually a good idea for salespeople to show the product and its uses at the same time that they provide information about it. The salesperson can then focus the customer’s attention on the product while explaining its features and benefits. Whenever possible, salespeople should encourage the customer to participate. When a customer is directly involved and becomes comfortable using the product, initial interest can change to desire to own the product. In certain selling situations, such as when selling services or very large or bulky products, salespeople demonstrate without having the actual product. They use items such as photographs, charts, catalogs, or computer kiosks. Such situations make it more difficult for the customer to get a true feeling for the use of a product, so the salesperson must rely on effective communication to increase understanding and desire to purchase the product.
   

5. A customer usually has many questions during the salesperson’s presentation and demonstration. The salesperson should not be concerned by the questions but instead view them as an opportunity to better understand the customer’s needs and help the customer make the best decision. When customers are not certain the product is suitable for them, they may raise objections. Objections are concerns or complaints expressed by a potential customer. Objections may represent genuine concerns, or they may simply be an effort to avoid making a decision to purchase. It is difficult to second-guess a customer to determine if the objection is real or not. The salesperson should listen carefully to the objection and then help the customer make the best decision.
   

6. If the salesperson has involved the customer in the sales presentation and has listened carefully to the customer’s needs, the customer’s interest in buying should be rather apparent. Typically, effective salespeople give the customer the opportunity to buy several times during the sales presentation by asking for a decision on a specific model, color, price, or type of payment. If the customer continues to ask questions, the salesperson answers the questions and continues the discussion until the customer appears satisfied. Then the salesperson attempts to close the sale again. Many sales, particularly for expensive products, take several meetings between the salesperson and the customer. In business-to-business selling, teams of salespeople and company specialists may meet several times with teams of buyers from the customer. Several people will likely make the final decision. Salespeople should continue to work with the customers until it is clear that they do not want the product or until the sale is made.
   

7. The selling process is not complete just because the customer agrees to purchase a product. Selling is successful only when the customer is satisfied. Satisfied customers lead to recurring sales that help the company remain profitable in the future. A plan for retaining customers includes several follow-up activities after the sale. The salesperson should check with the customer to make sure that the order is correct, that the customer knows how to use the product, and that the product meets the customer’s needs. If there are problems, they should be corrected immediately. If following up with each customer is impractical, the business could periodically conduct a customer satisfaction survey. This could be done with an in-store, mailed, or emailed questionnaire or through phone calls to random customers. The follow-up contact will remind satisfied customers where they made their purchases, so they may choose to buy from the business again.
   

4. SALES PROMOTIONS

1. Sales promotions are any promotional activities other than advertising and personal selling intended to motivate customers to buy. Some sales promotions are designed to encourage customers to buy immediately. Others are designed to display the products in an attention-getting or attractive way to encourage customers to examine products for the first time. Coupons are a type of sales promotion used extensively to promote consumer products. Coupons are an effective method of increasing sales of a product for a short time. They are used primarily to introduce a new product or to maintain and increase a company’s share of the market for established brands. Coupons usually appear in newspaper and magazine advertisements, but they are also distributed by direct mail and available on the Internet. A coupon packaged with a product the customer just purchased may encourage the customer to buy the same brand the next time. Or the enclosed coupon may be for another product from the same company.
   
2. Manufacturers often cooperate with wholesalers and retailers by providing promotional materials. Some of these materials, commonly furnished by the manufacturer at a low cost, include window displays, layouts and illustrations for newspaper ads, direct-mail inserts, display materials, and sales presentation aids. When producers are introducing a new product, they may distribute samples through the mail. The purpose of this activity is to familiarize people with the products to create a demand for them in local businesses. Coupons often accompany the samples to encourage consumers to go to a local store and buy the product. Producers and distributors also cooperate with retailers by arranging special displays and demonstrations within stores. For example, demonstrators may cook and distribute samples of a new brand of pizza to customers in a grocery store. This practice usually helps the retailers sell the new product. The retailer gives this merchandise preference over other competing products because of this special promotion. Sometimes distributors pay retailers for the privilege of giving demonstrations or offer special prices for the opportunity.
   
3. Today, store designs, displays, labels, and packaging promote products so well that many stores let these promotions alone sell the products, rather than employ many salespeople. In self-service merchandising, customers select the products they want to purchase, take them to the checkout counter, and pay for them, without much assistance from salespeople. The display of merchandise in self-service stores attracts attention and makes it convenient for the shopper to examine the merchandise. The labels on the merchandise provide adequate information about the merchandise for the shopper to make a decision.