2. Chapter 14 Themes for Class Discussion
Integrated Promotion Decisions
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

3. The best product at the right price in the right channel may not sell if customers don’t know it exists. What are the tools to develop this final element of the marketing mix?
The promotion mix
Advertising—Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
Examples: print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and s.
Personal selling—A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation.
Examples: Sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-to-face or via telephone.
Sales promotion—Incentives designed to stimulate the purchase or sale of a product, usually in the short term.
Examples: Coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
Public relations—Non-paid non-personal stimulation of demand for a product, service, or business unit by planting significant news about it or a favorable presentation of it in the media.
Examples: Newspaper and magazine articles/reports, TV and radio presentations, charitable contributions, speeches, issue advertising, and seminars.
Used together in a well planned an coordinated manner, and targeted at all stakeholders -- not just consumers -- these tools can be used to develop an integrated marketing communications plan.

4. Exhibit 14.2 Decision Sequence for Developing Promotion Mix
Define the audience to be targeted
(1)
Set the promotional objectives
(2)
Set the promotion budget
(3)
Note the importance of market segmentation and positioning for these steps. Without clear segmentation and positioning decisions, there’s no foundation on which to base these decisions.
Design the promotional mix
(4)
Evaluate the results
(5) 3

5. How do we decide whom is to be targeted?
Segmentation decisions ( as discussed earlier in the course), which are based on demographic variables, geographic criteria, or behavioral descriptors, are especially important to the marketing communications effort because they identify who the target market is.
Several products today are aimed at target audiences based on a combination of these criteria. For example, the audience for the Economist magazine, or a teen music magazine.

6. What do useful objectives of any kind look like? Promotional objectives? What should they specify?
All business objectives should meet the SMART test
Specific
Measurable
Attainable
Relevant (to the firm’s mission and overall market and competitive context)
Time-bound
Thus, what should good promotional objectives specify?
A statement defining the target audience
A statement of how some specific aspect(s) of the audience’s perceptions, attitudes, or behavior should change
A statement of how quickly such a change is expected to occur
A statement of the degree of change required
Note that different elements of the promotion mix may be called upon to meet different promotional objectives. Example for a new consumer packaged good product:
Personal selling and trade promotion: obtains distribution
Advertising: builds awareness
Consumer promotion: encourages trial

7. What are the merits and drawbacks of various approaches for budget setting?
Percentage of sales
Merits: simple to calculate and is risk-averse because spending is linked to sales
Drawbacks: illogical because sales determine the promotional activity, as opposed to setting a sales objective and then planning the budget necessary to reach it.
Competitive parity
Merits: tends to create stability in market shares among competitors and has the advantage of considering competition
Drawbacks: firms with small shares tend to overspend
Objective and task
Merits: forces firms to set specific promotional objectives through careful analysis of the specific situation
Drawbacks: difficult to implement

8. Which elements of the promotion mix are primary. When
Which elements of the promotion mix are primary? When? Which often play supporting roles?
In practice, either advertising or personal selling generally plays a dominant role in the promotion mix, with sales promotion and/or publicity playing supporting roles. Advertising is generally dominant when a pull strategy is used; personal selling is generally dominant when a push strategy is used.

9. Buyers’ information needs Size and importance of purchase
Exhibit 14.3 Strategic Circumstances and the Relative Importance of Personal Selling as a Promotional Tool
Advertising
relatively
important
Personal Selling
relatively
important
Number of customers
Buyers’ information needs
Size and importance of purchase
Postpurchase service required
Product complexity
Distribution strategy
Pricing policy
Resources available for promotion
Large
Low
Small
Little
Pull
Preset
Many
Small
High large
Much
High
Push
Negotiated
Few
This chart shows situations where advertising or personal selling is more or less likely to be an important part of the marketing mix (and budget!).
Source: Adapted from David W. Cravens, Strategic Marketing (Burr Ridge, IL: Richard D. Irwin, 1987), p. 508. 2

10. How should one decide which elements of the promotion mix should be used?
Instructor: Build on the board a chart like Exhibit 14.4

11. Amount of Information to be Communicated Credibility
Exhibit Comparing the Merits of the Promotion Mix Elements (Part 1)
Promotion mix Element
Amount of Information to be Communicated
Credibility
Control over the Message
Cost to reach one customer
Strategic suitability
Advertising
Varies: little
information in a radio or a TV ad, to lots on a website
Low
Good
Well-suited to a Pull Strategy
Personal Selling
Lots of information
Depends on the credibility of the company and the personality and sales skills of the salesperson
Poor, but training helps
Very high in developed countries, can be low elsewhere
Well-suited to a Push Strategy
See slide

12. Amount of Information to be Communicated Credibility
Exhibit Comparing the Merits of the Promotion Mix Elements (Part 2)
Promotion mix Element
Amount of Information to be Communicated
Credibility
Control over the Message
Cost to reach one customer
Strategic suitability
Sales Promotion
Virtually no information
Not Applicable
Good
Low and Self-liquidating: generally pays for itself as the product is purchased
Consumer promotion supports a pull strategy. Trade supports a push strategy
Public Relations
Lots of information
High
Poor
Very low or nil
Supports both pull and push strategies
See slide

13. So, if advertising is planned, what decisions must be made?
Set advertising objectives (SMART)
Choose media
Develop creative strategy and messages
Measure effectiveness: pre or post
Setting advertising objectives:
Communication objectives
Merits: allows assigning different roles to different advertising vehicles and measuring their effectiveness through marketing research
Drawbacks: requires marketing research to evaluate results and know whether the objectives were achieved.
Action objectives
Merits: facilitates measurement of results: By how much did sales increase?. Helps focus the advertising effort and agency on results, rather than cute ideas for their own sake.
Drawbacks: results may have occurred for reasons other than the advertising: weather, change in competitive climate, etc.
Choosing ad media -- key terms to understand and use
Reach: the total number of individuals or households exposed to at least one ad during a given period—typically four weeks
Frequency: the number of times an individual or household is exposed to an advertisement within a given period of time.
Gross rating points (GRPs): calculated by multiplying reach by average frequency
Cost per thousand (CPM): the cost of using the media vehicle to reach 1,000 people or households
Cost per customer acquisition: a measure that is useful for Web and other advertising that results directly in an actual customer purchase
Developing creative strategy and messages
See other coursework in the marketing curriculm

14. Media Choices Medium Clutter Info Content Ability to Target Ad
Lifespan
Production
Cost
CPM
Newspaper
Magazine TV
Radio
Outdoor
Direct Mail
Banner Ads
FOR EACH MEDIUM: CLUTTER / INFO CONTENT / ABILITY TO TARGET / AD LIFESPAN / PRODUCTION COST / CPM // OTHER COMMENTS
Newspaper: high / high / targetable geographically / short / low / /low // Good for retail, but only 60% of adults read daily.
Magazine: low / high / targetable demographically & psychographically / long / high / high // Long lead times.
TV: high / low / not very targetable / need frequency / high / low // A problem is the tune out factor: you may not get what you pay for.
Radio: high / low / targetable demographically & psychographically / need frequency / low / low // A problem is the tune out factor: you may not get what you pay for.
Outdoor: low / low / targetable geographically / short / low / low // Rule of thumb for a good billboard is 7 words or less.
Direct Mail: high / high / extremely targetable / long if it gets read / low / moderate // A problem: most direct mail never gets read.
Banner Ads: high / low / not very targetable / short / low / low // Can choose how to pay (CPM, click-throughs, or when customer buys). A problem: most are ignored.
high / high / extremely targetable / long if the reader saves or prints it / low / virtually free// Customer has to give permission to be sent marketing messages.

15. What about sales promotion? Two key questions
Specify objectives (SMART)
Most consumer and trade promotion is directly measurable
Consumer or trade promotion, or both?
What are the consumer promotion tools from which to choose? Examples?
Price-off promotions and coupons or various kinds
Premiums
Samples
Rebates
Contests and sweepstakes
New ones are invented regularly
What are the most common trade promotion tools? Examples?
Introductory or periodic promotional allowances: e.g., one case free with five
Cooperative advertising
Sales contests and incentives, spiffs
Note to instructor: The Procter & Gamble (B) case (HBSP ) is an old but very rigorous case for teaching sales promotion planning. It requires students to set precise objectives and determine specific promotional tactics to be used to achieve those objectives.

16. What’s involved in planning the personal selling portion of a marketing plan?
Clarify sales task: objectives, activities, and length of sales cycle
Design sales force architecture, account management policies, and systems
See slide

17. What’s a sales cycle? Why does it matter in an early stage company?
The duration—expressed both in calendar time and number of sales visits—that it will take to meet with the various decision makers and convince them to try the product, perhaps on a limited basis at first, and then to adopt it more fully.
Why does it matter in an early-stage company?
Determines selling costs: how many visits needed to make a sale
Determines when revenue will start coming!

18. Three Strategic Questions in Sales Force Design
Build a sales force or hire outside agents?
How to organize:
Geographically?
By product or product line?
By customer type?
By selling function?
How to use technology to enhance sales and customer service performance?
Q1 was covered in distribution channel decisions, in the previous chapter.
What about Q2? See next slide.

19. Q1: Should we use our own sales force or use outside agents
Q1: Should we use our own sales force or use outside agents? When and why?
This question was dealt with in the previous chapter on distribution channel decisions.

20. Q2: In designing the sales force architecture, should it be organized geographically, around products, around customers, or around selling functions? When and why?
Geographic sales organization
When does this make sense? Works well for smaller firms because it is relatively low in cost and it allows one sales rep to call on each customer, which alleviates any confusion about whom the customer should talk to if problems arise.
Drawbacks? It does not provide any of the benefits of specialization and division of labor.
By product or product line
When does this make sense? Many larger firms, particularly those in high-tech industries, need separate sales forces for their different products or product lines to deal with the complexity of those products and their applications. One salesforce could not adequately understand them all.
Drawbacks? There is duplication of effort with this sales force architecture. Salespeople from different product divisions assigned to the same geographic territories may call on the same customers and even compete for their business.
By customer type
When does this make sense? This approach makes sense when a sales person needs to understand the unique needs and requirements of a particular customer or market.
Drawbacks? A sales person responsible for selling a large or diversified company’s numerous—and perhaps quite different—product lines may have difficulty maintaining sufficient product knowledge to be effective across all these product lines.
By selling function
When does this make sense? This makes sense when it is necessary for sales people to specialize in different functions.
Drawbacks? High in cost.

21. Q3: What technology applications can enhance personal selling
Q3: What technology applications can enhance personal selling? What are their merits? What are the risks?
Most common applications
Contact management software
Customer relationship management software
What are the merits?
Enhanced productivity of sales staff and call center personnel
Enhanced ability to prioritize customers
What are the risks?
Efficiency may be gained in ways that customers don’t appreciate, thereby sacrificing effectiveness
Less personal, less knowledgeable service
The past data on what a customer is worth may not be a good predictor of that customer’s future value

22. The People Side of Sales Management: Some Advice
Incentives and rewards (financial and otherwise) matter greatly in personal selling
Selecting and training the right people makes a world of difference. In many companies, the top-producing sales people are paid more than some top managers -- and they’re worth it!
“What gets measured gets done.” Good sales management systems measure sales, costs and margins, and behavior
In start-ups, the top management team often is and should be the primary sales force
Who in the class has sales experience? What sort of incentives and rewards have helped motivate you?
Commissions and bonuses
Sales contest prizes
Pats on the bask
A key selection/training tradeoff is often whether to hire less experienced and less expensive sales people and train them or experienced people who can produce immediately.
What sort of sales behavior might be measured?
Number of sales calls
Number of new accounts opened
Frequency of sales calls at established accounts
Venture capitalists will rarely fund a new high-tech venture that lacks an experienced marketer as part of the founding team.

23. What about public relations. What does it take to get free publicity
What about public relations? What does it take to get free publicity? What is it most useful for?
What does it take?
Something newsworthy because the subject is new, different, or tells an interesting story about a local person or organization.
What is publicity best for?
Reinforcing the firm’s advertising campaign by increasing awareness and the believability of product claims.
Supporting the sales force to add credibility to their claims
Introducing a new product when there’s little or no promotional budget available