Chapter 17 PDF

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Chapter 17 – Integrated Marketing Communications and Direct Marketing Promotional Mix – The combination of one or more communication tools used to: 1. Inform prospective buyers about the benefits of the product 2. Persuade them to try it 3. Remind them later about the benefits they enjoyed using the product Integrated Marketing Communications (IMC) – the concept of designing marketing communications programs that coordinate all promotional activities – advertising, personal selling, sales promotion, public relations, and direct marketing – to provide a consistent message across all audiences. Communication – the process of conveying a message to others. It requires six elements: a source, a message, a channel of communication, a receiver, and the processes of encoding and decoding. - Source – a company or person who has information to convey - Message – the information sent by the source - Channel of Communication – salesperson, advertising media, or public relations tools - Receivers – Consumers who read, hear, or see the message FEEDBACK LOOP:

Encoding and Decoding Encoding – the process of having the sender transform an idea into a set of symbols. Decoding – the reverse of encoding, or the process of having the receiver take a set of symbols, the message, and transform the symbols into an idea. Field of Experience – a similar understanding and knowledge that the sender and receiver share - a mutually shared understanding and knowledge that the sender and receive apply to the message so that it can be communicated effectively during the communication process Response - the impact the message had on the receiver’s knowledge, attitudes, or behaviors.

Feedback – the sender’s interpretation of the response and indicates whether the message was decoded and understood as intended Noise – extraneous factors than can work against effective communication by distorting a message or the feedback received. - Can be a simple error like a misprint that affects the meaning of an ad - Can be words or pictures that fail to communicate the message clearly. THE PROMOTIONAL ELEMENTS (5 elements):

Advertising – any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponser. - Must be paid - Nonpersonal – does not have a feedback loop like personal selling does - Advantages: o Can be attention getting o Can communicate product benefits to prospective buyers o Company can control what is wants to say and to whom the message is sent o Allows the company to decide when to send the message o The same message will be decoded by all receivers in the market segment - Disadvantages: o Costs to produce and place the message and high o Lack of direct feedback makes it difficult to determine how well the message was received

Personal selling – the two-way flow of communication between a buyer and seller designed to influence a person’s or group’s purchase decision. - Face-to-face communication - Advantages: o Salesperson can control to whom the presentation is made, reducing the amount of wasted coverage o Seller can see the potential buyer’s reaction to the message - Disadvantages: o Different salespeople can change the message so that no consistent communication is given to customers o High cost of personal selling o The most expensive for the five elements Public Relations – form of communication management that seeks to influence the feelings, opinions, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and other publics about a company and its products or services. - Uses special events, lobbying, annual reports, press conferences, social media - Publicity – a nonpersonal, indirectly paid presentation of an organization, product, or service o Can take the form of a news story, editorial, or product announcement o Difference between publicity and advertising and personal selling – “indirectly paid” – a company does not pay for space but attempts to get a medium to run a favorable story o Effective when consumers lack prior knowledge of the product or service o Advantage - credibility o Disadvantage – lack of user’s control over it – no guarantee that it will be favorable Sales Promotion – a short-term inducement of value offered to arouse interest in buying a product or service. - Coupons, rebates, samples, contests, and sweepstakes - Used in conjunction with advertising or personal selling - Offered to intermediaries as well as to ultimate consumers - Advantages – short-term in nature and stimulate sales - Disadvantages – temporary and sales drop off when the deal ends – advertising support is needed to convert the customer who tired the product because of the sales promotion Direct Marketing – uses direct communications with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet - Can take the form of face-to-face selling, direct mail, catalogs, telephone solicitations, direct response advertising, and online marketing - Interactive communication - Advantages – o being customized to match the needs of target audiences o messages can be developed quickly - One of the fastest growing forms of promotion - Disadvantages o Requires a comprehensive and up-to-date database with information about the target market

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Can be expensive Growing concern about privacy has led to a decline in response rates among some customer groups

TARGET AUDIENCE - Promotional Programs – directed to the ultimate consumer, to an intermediary (retailers, wholesaler, or industrial distributor) or to both o Use mass media when aimed consumers - Personal Selling – used at the place of purchase, like a retail store - Direct marketing- may be used to encourage first-time or repeat buyers. THE PRODUCT LIFE CYCLES

Promotional Objectives a the Different Stages of the Product Life Cycles: Introduction – informing customers to increase their level of awareness - All promotional elements are used here - Advertising and publicity are important - Example: news releases about a new dog food Growth - persuade the consumer to buy the product rather than substitutes - Sales promotion assumes a less importance in this stage - Publicity not a factor here - Primary element is advertising – stresses brand preferences - Personal selling is used to solidify the channel of distribution – the salesforce calls on wholesalers and retailers, hoping to increase inventory levels. Maturity – maintain existing buyers - Sales promotion in form of discounts and coupons to ultimate consumers and intermediaries - Direct marketing is used to maintain involvement with existing customers Decline – period of product phase out

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Little money spent on promotional elements

PRODUCT CHARACTERISTICS: The proper promotional mix depends on the type of products and should consider three characteristics. 1. Complexity – the technical sophistication of the product and amount of understanding needed to use it 2. Risk – financial, social, or physical risk to the buyer – is the product expensive - Example: A private jet might represent all three risks 3. Ancillary services required by a product – the degree of service or support required by a product STAGES OF THE CONSUMER JOURNEY:

Prepurchase Stage - Advertising is more helpful than personal selling because it informs the potential customer Purchase Stage - Personal selling is most important and advertising is lowest - Sale promotion in the form of coupons and rebates is helpful - Social media can play an important role - Direct marketing activities shorten the time consumers take to adopt a product or service Postpurchase Stage - Salesperson is still important - the more contact, the more the buyer is satisfied - Advertising and personal selling reduce postpurchase anxiety - Sales promotions in forms of coupons an direct marketing encourage repeat purchases

CHANNEL STRATEGIES – ways companies get intermediaries to offer their products to consumers: Push Strategy – directing the promotional mix to channel members to gain their cooperation in ordering and stocking the product - Personal selling and sales promotions play major roles to get wholesalers to order Pull Strategy – directing the promotional mix at ultimate consumers to encourage them to ask the retailer for a product - Example: Direct-to-consumer prescription drug advertising

Developing an Integrated Marketing Communications Program: Focuses on 4 questions: 1. Who is the target audience 2. What are the promotional objective, the amounts of money that can be budgeting for the promotion program, and the kinds of promotion to be used? 3. Where should the promotion run? 4. When should the promotion run?

Identify the Target Audience – target market for the firm’s product - Includes demographics, interests, preferences, media use, and purchase behaviors Specifying Promotion Objectives – what should the promotion accomplish - Customers respond in a customer path of hierarchy of effects FIVE STAGES/HIERARCHY OF EFFECTS:

Setting the Promotional Budget – deciding how much to spend can be difficult because there is no precise way to measure the exact results of spending promotional dollars; however several methods can be used to set the budget: - Percentage of Sales – funds are allocated to promotion as a percentage of the past or anticipated sales. o Example: the promotion budge is 3 percent of last year’s gross sales - Competitive Parity – matching the competitor’s absolute level of spending or proportion per point of market share o Known as Matching competitors or Share of Market - All-you-can-afford budgeting – money is allocated to promotion only after all other budge items are covered o Used my small businesses - Objective and Task Budgeting – the company determines its promotion objectives, outlines the tasks it will undertake to accomplish those objectives, and determines the promotion cost of performing those tasks o Best approach to budgeting

Selecting the Right Promotional Tools - Designing the Promotion – advertising copy and artwork - Scheduling the Promotion - determine most effective timing of release Executing and Assessing the Promotion Program - Promotional programs can be expensive and time-consuming. o Time to implement an IMC program:  1 year for companies with less than 10 million in sales  3 years for companies with 200 to 500 million in sales  5 years for companies with 2 to 5 billion in sales - 200 integrated marketing communications agencies exist to facilitate the transition o Example: Media company PHD delivers smart strategic thinking for the world’s leading brands – its clients include Google, Hyatt, Volkswagen o IMC Audit – analyzes the internal communication network of the company: identifies key audiences, evaluates customer databases, assesses messages in recent advertising, public relations releases, packaging, websites, email and social media communication, signage, sales promotion, and direct mail; and determines the IMC expertise of the company and agency personnel - Involves testing procedures for sales promotion and direct marketing efforts o Pretesting each design o Posttest to evaluate the impact of each promotion o Companies must maintain a test-result databases – allows comparison of the relative impact of promotional tools DIRECT MARKETING – huge growth - Direct marketing growth has outpaced economic growth - Direct marketing expenditures exceed $ 146 billion - Growing at a 9% rate - Marketers spend more than $ 47 billion on direct mail year VALUE OF DIRECT MARKETING: Direct orders – the results of offers that contain all the information necessary for a prospective buyers to make a decision to purchase and complete the transaction Lead generation – the result of an offer designed to generate interest in a product or service and a request for additional information. Traffic generation – the outcome of a direct marketing offer designed to motivate people to visit a business. Challenges for DIRECT MARKETING: Opt-In – many countries require potential customers to opt-in to marketing solicitations Ethical Issues – privacy guidelines exist today to balance consumer and business interests....