Communicating Customer Value Advertising and Public Relations Chapter 12

Also referred to as “marketing communications mix”. Promotion Mix Specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships. Also referred to as “marketing communications mix”.

Promotion Mix Tools A company’s total promotion mix consists of five specific tools: Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. Sales promotion: Short‑term incentives to encourage the purchase of a product or service. Personal selling: Personal presentation by a firm’s sales force to make sales and build customer relationships. Public relations (PR): Building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling unfavorable rumors, stories, and events. Direct marketing: Direct connections with carefully targeted consumers to both obtain an immediate response and cultivate lasting customer relationships. 12 - 3

Figure 12.1: Integrated Marketing Communications

MARKETING COMMUNICATIONS (IMC): Changes and trends Several factors are changing the face of marketing communications: Consumers are changing. They are better informed and more communications-empowered. Marketing strategies are changing. Marketers are shifting away from mass marketing to targeted marketing. Advances in communication technology. They are changing the ways in which companies and customers communicate with each other. The Shifting Marketing Communications Model Although television, magazines, and other mass media remain very important, their dominance is declining. Companies are doing less broadcasting and more narrowcasting. Media costs are rising, ad clutter is increasing, and viewers are gaining more control over ad messages through technologies that let them skip unwanted commercials. Many advertisers are shifting their ad budgets away from television in favor of more targeted, cost-effective, interactive, and engaging media – especially digital media (e.g. internet).

MARKETING COMMUNICATIONS (IMC): Integrated marketing communications is defined as: Carefully integrating and coordinating the company’s many communication channels to deliver a clear, consistent, and unified message about the organization and its products. IMC recognizes the importance of all contact points where customers may encounter the company and its brands. Each contact point will deliver a message, whether good, bad, or indifferent. IMC ties together all of the company’s messages and images. 12 - 6

Overall Promotion Mix: Advertising Advantages: Advertising can reach masses of geographically dispersed buyers at a low cost per exposure It enables a seller to repeat a message many times. Large‑scale advertising is a positive indicator about a seller’s size, popularity, and success. Shortcomings: It is impersonal, thus less persuasive than company salespeople. It is a one‑way communication. It can be very costly (overall cost) .

Overall Promotion Mix: Personal selling Advantages: Personal selling is the most effective tool in building up buyers’ preferences, convictions, and actions. It involves personal interaction between two or more people. A buyer usually feels a greater need to listen and respond. It allows relationship building and two-way communication Shortcomings: It is the most expensive promotion tool. It requires long-term commitment to sales force

Overall Promotion Mix: Sales promotion Advantages: Sales promotion (e.g. coupons, contests, price-off deals, premiums, and others) attracts consumer attention. It offers strong incentives to purchase. It can be used to dramatize product offers and boost sales. It invites and rewards quick response Shortcomings: Sales promotion effect is often short-lived. It is not as effective as advertising or personal selling in building long‑run brand preference and customer relationships.

Overall Promotion Mix: Public Relations (PR) Nature of Public Relations: PR is very believable. News stories, features, sponsorships, and events seem more real and believable to readers than ads do. PR can reach many prospects who avoid salespeople and ads. PR can dramatize a company or product. Unfortunately, PR tends to be used as an afterthought.

Overall Promotion Mix: Direct Marketing Although there are many forms of direct marketing, they all share four distinctive characteristics: Direct marketing is nonpublic (less public). Direct marketing is immediate. Direct marketing is customized. Direct marketing is interactive. Direct Marketing is well suited to highly targeted marketing

Promotion Mix Strategies Marketers can choose from two basic promotion mix strategies: Push strategy: Promotion strategy that calls for using the sales force and trade promotion to push the product through channels. Pull strategy: Promotion strategy that calls for spending a lot on advertising and consumer promotion to induce final consumers to buy the product. Most large companies use some combination of both strategies. Factors to consider when designing promotion mix strategies include: type of product/market product life-cycle stage.

Figure 12.2: Push vs. Pull Promotion Strategy

Advertising: Overview Advertising has been used for centuries. worldwide spending on ads exceeds $604 billion. Advertising is used by: Business firms. Non-profit organizations. Professionals. Social agencies. Government. 12 - 14

Major Advertising Decisions Setting advertising objectives. Setting the advertising budget. Developing advertising strategy. Evaluating advertising campaigns. 12 - 15

Figure 12.3: Major Advertising Decisions

Setting Advertising Objectives Advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time. The overall advertising goal is to build customer relationships by communicating customer value. Advertising objectives can be classified by primary purpose as: Informative advertising is used to provide information. It is used heavily when introducing a new product. Persuasive advertising seeks to persuade consumers as competition increases. Here, a company’s objective is to build selective demand. One common form is Comparative advertising. Comparative advertising is directly or indirectly comparing one brand with another. Reminder advertising is important for mature products. It helps maintain customer relationships and keep consumers thinking about the product.

Setting the Advertising Budget Four common methods: Affordable method. Percentage-of-sales method. Competitive-parity method. Objective-and-task method.

Setting the Advertising Budget: 1- Affordable method The affordable method is setting the promotion budget at the level the company can afford. Small businesses often use this method. Shortcomings: It ignores the effects of promotion on sales. It gives promotion a lower spending priority, even when advertising is critical to the firm’s success. Annual promotion budget is an uncertain. Often, it leads to under-spending.

Setting the Advertising Budget: 2- Percentage‑of‑Sales Method The percentage‑of‑sales method is setting the promotion budget at a certain percentage of current or forecasted sales. It is simple to use It helps management think about the relationships between promotion spending, selling price, and profit per unit. Shortcomings: It views sales as a cause of promotion – not as a result. It is based on availability of funds – not opportunities. It may prevent an increased spending- sometimes needed to turn around falling sales. Because the budget varies with annual sales, long‑range planning is difficult.

Setting the Advertising Budget: 3- Competitive‑Parity Method Competitive‑parity is setting the promotion budgets to match competitors’ spending. Two arguments support this method: Competitors’ budgets represent the collective wisdom of the industry. Spending what competitors spend helps prevent promotion wars. In fact, neither argument is valid.

Setting the Advertising Budget: 4- Objective‑and‑Task Method Objective‑and‑task method is setting the promotion budget based on what the company wants to accomplish with promotion. This budgeting method helps the company to: Define specific promotion objectives, Determine the tasks needed to achieve these objectives, and Estimate the costs of performing these tasks. One advantage of this method is that it forces management to spell out its assumptions about the relationship between spending and promotion results. It is the most logical budget-setting method. Yet, It is the most difficult method to use.

Developing advertising strategy Advertising strategy consists of two major elements: Creating advertising message (message decisions). Selecting advertising media (media decisions).

Developing advertising strategy: Creating advertising message Today, the average household is exposed to many satellite channels, print media, internet, …etc which all compete for his/her attention. This causes advertising clutter. Breaking Through the Clutter. This increasing clutter in television and other ad media has created a hostile advertising environment. Just to gain and hold attention, ad messages must be better planned, more imaginative, more entertaining, and more rewarding to consumers. To break through the clutter, many marketers are now merging commercials with entertainment to produce the so-called “Advertainment” (The idea is to make the ads themselves so entertaining, or useful, that people actually want to watch them).

Developing advertising strategy: Creating advertising messages (cont’d) Message Strategy. The first step in creating effective advertising messages is to plan a message strategy (deciding what general message will be communicated to consumers). Developing an effective message strategy begins with identifying customer benefits that can be used as advertising appeals. The advertiser must next develop a creative concept — or “big idea”—that will bring the message strategy to life in a distinctive and memorable way. Advertising appeals should have three characteristics: They should be meaningful. Appeals must be believable. Appeals should be distinctive.

Developing advertising strategy: Message Execution Message Execution is turning the Creative Concept (big idea) to an actual ad execution that will capture a consumer’s attention and interest. Execution styles: Slice of life: Shows “typical” people using the product in a normal setting. Lifestyle: Shows how a product fits in with a particular lifestyle. Fantasy: Creates a fantasy around the product or its use. Mood or image: Builds a mood or image around the product or service, such as beauty, love, fun, peace... Etc. Music: Using music - singing about the product. Personality symbol: Creates a character that represents the product. Technical expertise: Shows a company’s expertise in making the product. Scientific evidence: Presents a scientific evidence showing the brand’ superiority. Testimonial evidence or endorsement: Features a highly believable, credible, or likable source endorsing the product.

Developing advertising strategy: Message Execution (cont’d) Consumer-Generated Messages is encouraging consumers to contribute to the ad message by submitting ad message ideas and videos. Benefits of consumer-generated messages: Collects new ideas and fresh brand perspectives at relatively little expense. Boosts consumer involvement and gets consumers talking and thinking about the brand.

Developing advertising strategy: Selecting advertising media The major steps (decisions) in advertising media selection are: Deciding on reach, frequency, impact. Choosing among major media types. Selecting specific media vehicles. Deciding on media timing

Selecting advertising media: 1- Deciding on reach, frequency, impact Reach: Percentage of people exposed to ad campaign in a given time period. Frequency: Number of times a person is exposed to advertisement. Media Impact: The qualitative value of a message exposure through a given medium.

Selecting advertising media: 2- Choosing among major media types Each media type has specific advantages and disadvantages. Choosing among media types requires consideration of the: Medium’s impact Message effectiveness Cost The media mix should be regularly reexamined.

The major media types are: Selecting advertising media: 2- Choosing among major media types (cont’d) The major media types are: Television, Internet, Newspapers, Direct mail, Magazines, Radio, Outdoor.

Selecting advertising media: 3- Selecting specific media vehicles Media vehicles are specific media within each general media type. Examples: choosing a specific channel or program in Television choosing a specific a type of magazine in Magazines choosing a specific location for outdoor advertising. Media planners must compute the cost per thousand persons reached by a vehicle, and also consider the costs of producing ads for different media. The media planner must balance media costs against several media effectiveness factors, which include: Audience quality. Audience engagement. Editorial quality.

Selecting advertising media: 4- Deciding on media timing Marketers must also decide on media timing- how to schedule the advertising over the course of a year. The advertiser chooses a pattern of ads: Continuous schedule: means scheduling ads evenly throughout a given period (Same coverage all year) Pulsing schedule: means scheduling ads unevenly over a given time period, but never reaching zero. Seasonal schedule: Follow a seasonal pattern

Evaluating Advertising and Return on Advertising Investment Return on advertising investment is the net return on advertising investment divided by the costs of the advertising investment. Evaluating advertising involves: Measuring the communication effects of an ad or campaign. It tells whether the ads and media are communicating the ad message well. Measuring the sales and profit effects of the ad campaign. 12 - 34

Organization of ad function Different companies organize in different ways to handle advertising. Organization of ad function: In small companies, ad is handled by one person in the sales dept. Large companies set up advertising dept, and may also work with ad agencies. Advertising agencies employ specialists who can often perform advertising tasks better than the company’s own staff. They also Bring outside viewpoints to problem-solving. Have a wide range of experience in ad development. 12 - 35

International advertising issues International advertisers face several challenges in global markets (e.g. great differences in cultural, demographics, legal, economic, and marketing conditions) The most basic question concerns the degree to which global advertising should be adapted to local conditions in various countries. Standardization produces many benefits (e.g. lower adv costs, more consistent worldwide image). Greater need for standardization of global brand advertising strategies. Specific advertising programs must usually be adapted to local cultures and other factors. In brief Although advertisers may develop global strategies to guide their overall advertising efforts, specific adaptation to local cultures and other factors is usually necessary.

Public Relations (PR) Building good relations with the firm’s various publics by obtaining favorable publicity, building up a good corporate image, and handling unfavorable rumors, stories, and events.

Public Relations: main functions PR should perform the following main functions: Press relations: Creating and placing newsworthy information in news media to attract attention. Product publicity: Publicizing specific products. Public affairs: Building and maintaining national or local community relations. Lobbying: Building and maintaining relations with legislators and government officials to influence legislation and regulation. Investor relations: Maintaining relationships with shareholders. 12 - 38

Public Relations: Role and Impact May strongly create public awareness at a lower cost than advertising. Can yield great results (e.g. enhance corporate image of a company and its products). Is beginning to play an increasingly important brand-building role (e.g. MPR). 12 - 39

Major Public Relations Tools News Speeches Special events Written materials Audiovisual materials Corporate identity materials Public service activities Buzz marketing & social networking Company Web site 12 - 40