4.4 Communication Decisions in:

Svend Hollensen, Marc Oliver Opresnik

Marketing, page 286 - 344

A Relationship Perspective

1. Edition 2010, ISBN print: 978-3-8006-3722-5, ISBN online: 978-3-8006-4870-2,

Bibliographic information
4. Marketing Mix in the Marketing Planning Process272 4.4 Communication Decisions Communication is the remaining decision about the marketing programme. The role of communication is to communicate with customers and to provide information which buyers need to make purchasing decisions. Although the communication mix carries information of interest to the customer, in the end it is designed to persuade the customer to purchase a product. Communication involves sharing points of view and is at the heart of forming relationships. A company simply cannot connect with customers unless it – directly or indirectly – communicates with them. Promotion is the process whereby marketers inform, educate, persuade, remind, and reinforce consumers through communication. It is designed to influence buyers and other stakeholders. Although most marketing communications are aimed at consumers, a significant number also address shareholders, employees, channel members, suppliers, and society. In addition, effective communication is a two-way road: Receiving messages is often as important as sending them. Integrated marketing communication (IMC) is the coordination of advertising, sales promotion, personal selling, public relations, and sponsorships to reach consumers with a powerful unified effect. These five elements should not be considered separate entities. In fact, each element of the communication plan often has a multiplier effect on the other. For example, it implies that website visuals are consistent with the images portrayed in advertising and that the messages conveyed in a direct marketing campaign are in line with those developed by the public relations department. 4.4.1 The Communication Process To communicate effectively, marketers need to comprehend how communication works. A simple model of the communication process is shown in Figure 4.34. The sender (also called source or communicator) encodes a message by translating the idea about a product or service to be communicated into a symbol consisting of words and/or pictures, such as an advertisement. The message is transmitted through media, such as television or the internet. An important point to consider in this respect is the degree of ‘fit’ between medium and message. For example, a complex and wordy message would be better for the press than for a visual medium such as television or cinema. ‘Noise’ – distractions and distortions during the communication process – may prevent or disturb the intended transmission to some of the target audience. The vast amount of messages a customer receives daily makes it a tough challenge for marketers to cut though this noise. When a receiver sees and/or hears the message it is decoded. This is the process by which the receiver interprets the symbols transmitted by the sender. The aim is for the receiver’s decoding to coincide with the sender’s encoding process. The receiver thus interprets the message in the way intended by the source. To communicate in an effective way, the sender needs to have a clear understanding of the purpose of the message, the audience to be reached and how this audience will interpret and respond to the message. In a personal selling situation, feedback from buyer to salesperson may be immediate. Kapitel_4.indd 272 03.08.2010 13:01:53 Uhr 4.4 Communication Decisions 273 Opinion Leadership Marketing communications reach customers directly and indirectly. Figure 4.35 illustrates both paths. In one-step communication, all members of the target audience are simultaneously exposed to the same message. Multiple-step communication uses influential members of the target audience, known as opinion leaders, to filter a message before it reaches other group members, modifying its effect positively or negatively for the rest of the group. Because of their important role, opinion leaders have often been called gatekeepers to indicate the control they have over ideas flowing into the group. Marketers interested Sender Feedback Encoded message Transmission Decoded message Receiver Noise Noise Source: Adapted from Jobber, 2010, modified Figure 4.34: The communication process One-step communication (Direct) Multi-step communication Marketers Opinion leader Customer 1 Customer 2 Customer 3 Marketers Customer 1 Customer 2 Customer 3 Figure 4.35: Opinion leadership in the communication process Kapitel_4.indd 273 03.08.2010 13:01:53 Uhr 4. Marketing Mix in the Marketing Planning Process274 in maximizing communication effectiveness nearly always attempt to identify opinion leaders. Opinion leaders are open to communication from all sources. They are more inclined to be aware of information regarding a broad range of subjects. They read a lot, talk to salespeople and other people who have information about products. Opinion leaders can have a sort of multiplier effect, intensifying the strength of the message if they respond positively and pass it on to others, especially if it is going on through the mass media. Consequently, the resources used to gain support from opinion leaders are eventually well spent. Buyer Initiative in the Communication Process With reference to the above mentioned communication process the seller is the initiator of the communication process. However, if the seller and the buyer have already established a relationship, it is likely that the initiative to the communication process will come from the buyer. If the buyer has positive post-purchase experience with a given offering in one period of time, this may dispose the buyer to re-buy on later occasions: that is, take initiatives in the form of making enquiries or placing orders (so-called reversed marketing). The likely development of the split between total sales volume attributable to buyer and seller initiatives is shown in Figure 4.36. The relative share of sales volume attributable to Source: Adapted from Hollensen, 2004, modified Seller initiative Buyer initiative (reverse marketing) Buyer initiative Seller initiative Caused by: Caused by: Sa le s re ve nu e to s el le r Past Expansion of a relationship Present Time Start of buyer / seller relationship: often ‘traditional‘ seller initiative Buying and consuming products post-purchase experience If the buyer has positive post-purchase experience higher degree of buyer initiative and involvement / reverse marketing Figure 4.36: The shift from seller initiative to buyer initiative in buyer/seller relationships Kapitel_4.indd 274 03.08.2010 13:01:54 Uhr 4.4 Communication Decisions 275 buyer initiative will tend to increase over time. Present and future buyer initiatives are a function of all aspects of a firm’s past market performance: that is, the extent, nature and timing of seller initiative, the competitiveness of offerings, post-purchase experience, the relationships developed with buyers as well as the way in which buyer initiative has been dealt with (Ottesen, 1995). 4.4.2 The Promotional Mix To communicate with and influence customers, several tools are available. Advertising is usually the most visible component of the promotional mix and to many people advertising epitomizes marketing: it is what they believe marketing to be. Evidently, this is a restricted view as marketing concerns much broader issues than simply how to advertise. Nevertheless, advertising is an important element in the promotional mix. The entire range of techniques available to the marketer is the promotional mix and comprises seven key elements: Advertising• : any paid form of non-personal communication of products in the prime media, i.e. television, the press, outdoor, cinema, and radio. Sales promotion• : incentives to customers or the trade that are designed to stimulate purchase. Public relations• : the communication of a product or business by placing information about it in the media. Sponsorship• : the association of the company or its products with an individual, event or organisation. Internet promotion• : the promotion of products to customers and businesses through internet technologies. Direct marketing• : the distribution of products, information and promotional benefits to target customers through interactive communication in a way that allows response to be measured. Personal selling• : oral communication with potential purchasers with the intention of making a sale. In addition to these key tools, the marketer can also use other techniques, such as exhibitions, and product placement in movies, songs or video games. It is of paramount importance to stress that promotional mix decisions should not be made in isolation as all aspects of the marketing mix need to be consistently blended in order to achieve a sustainable competitive advantage. Consequently, the promotional mix must be aligned with the decisions made with regard to product, pricing and distribution, in order to effectively communicate benefits to target customers. Each of the above mentioned major promotional tools has its own strengths and limitations; these are summarized in Table 4.5. In the following sections we will now describe each of the tools in more detail. Kapitel_4.indd 275 03.08.2010 13:01:55 Uhr 4. Marketing Mix in the Marketing Planning Process276 Mix Element (section no. in the chapter) Advantages Disadvantages 4.4.3 Advertising: Any paid form of non-personal communication of products in the prime media i.e. television, newspapers, magazines, billboards, radio, cinema, etc. Advertising is intended to convince and to inform. The two basic aspects of advertising are the message (what you want your communication to say) and the medium (how to get your message across). Good for creating • awareness Effective at reaching a • wide audience Repetition of main • brand and product value proposition helps build customer trust Impersonal – cannot • answer all customer questions Inappropriate at getting • customers to make a final purchasing decision 4.4.4 Sales promotion: Providing incentives to consumers or to the distribution channel to stimulate interest and demand for a product or service. Can stimulate quick • increases in sales by targeting promotional incentives on particular products Fine short term tacti-• cal tool If used over the long-• term, customers may get accustomed to the effect Too much promotion • may tarnish the brand image 4.4.5 Public Relations (PR): The communication of a product, brand or business by placing information about it in the media. PR communicates via a news release to news media in order to gain secondary exposure to a target audience. Often seen as more • convincing – since the message seems to be coming from a third party (e.g. magazine, newspaper) Inexpensive way of • reaching numerous customers – if the publicity is achieved through the right media Risk of losing control • in terms of what other people write about the product 4.4.6 Internet marketing: The Internet represents a change away from a push strategy towards a pull strategy in which the manufacturer communicates directly with the customer. Examples include banner ads, sponsorships, mobile marketing, and viral marketing. Interactive communi-• cations with customers Reduced global adver-• tising costs Access to directories • that guide people to visit the site The promoted product • cannot be touched (important for tangible products, not important for intangible products) Online advertising mes-• sages are often perceived in a local context, and should be adapted to the local environment; this will increase total advertising costs 4.4.7 Direct marketing: Communicates person-to-person, but through an intervening channel, such as the post (direct mailing), the telephone (telemarketing) or e-mail, guaranteeing exposure to a selected individual within a target market. Person-to-person • interactive communication Direct exposure to se-• lect individuals within a target market Messages can be • targeted Higher cost per recipi-• ent, but less expensive than ‘personal selling’ Kapitel_4.indd 276 03.08.2010 13:01:55 Uhr 4.4 Communication Decisions 277 4.4.3 Advertising Advertising is one of the most visible forms of communication. Because of its wide use and its limitations as a one-way method of communication, advertising in international markets is subject to a number of difficulties. Advertising is often the most important part of the communications mix for consumer goods, where there are a large number of small-volume customers who can be reached through mass media. For most business-tobusiness markets, advertising is less important than the personal selling function. Of all the elements of the marketing mix, decisions involving advertising are those most often affected by cultural differences among country markets. Consumers respond in terms of their culture, style, feelings, value systems, attitudes, beliefs, and perceptions. Because advertising‘s function is to interpret or translate the qualities of products and services in terms of consumer needs, wants, desires, and aspirations, the emotional appeals, symbols, persuasive approaches, and other characteristics of an advertisement must coincide with cultural norms if the ad is to be effective. Global advertising can be defined as advertising more or less uniform across many countries, often, but not necessarily, in media vehicles with global reach. In many cases complete uniformity is unobtainable because of linguistic and regulatory differences between nations or differences in media availability. In contrast, multidomestic advertising is international advertising deliberately adapted to particular markets and audiences in message and/or creative execution. We shall revert to international communication strategies and its affecting factors later in this chapter. Theories of how Advertising Works For many years there has been substantial debate about how advertising works. Researchers agree that there can be no single all-embracing theory that explains how all advertising works because it has varied tasks (Wright and Crimp, 2003). Mix Element (section no. in the chapter) Advantages Disadvantages 4.4.8 Personal selling: Oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the buyer, but will always ultimately end with an attempt to ‘close the sale’. Highly interactive • – plenty of communication between the buyer and seller Excellent for com-• municating detailed product information and features Expensive – employing • a sales force has many hidden costs in addition to wages Not suitable if there are • thousands of important buyers Relationships can be • built up – important if closing the sale make take a long time Source: Adapted from Hollensen, 2006, modified Table 4.5 Advantages and disadvantages of each element of the promotional mix Kapitel_4.indd 277 03.08.2010 13:01:55 Uhr 4. Marketing Mix in the Marketing Planning Process278 The basic competing views on how advertising works have been phrased the strong theory of advertising and the weak theory of advertising (Jones, 1991). The strong theory is shown on the left-hand side of Figure 4.37. A person passes through the stages or awareness, interest, desire and action (AIDA model). According to this theory, advertising is powerful enough to increase people’s knowledge and change their attitudes, and as a consequence is capable of persuading people who had not previously bought a product to buy it. It is therefore a conversion theory of advertising: non-buyers are converted to become buyers. Advertising is assumed to have a powerful influence on consumers. This model has been criticized substantially as for many types of products there is little evidence that customers experience a strong desire before buying the brand. For example, in rather inexpensive product fields a brand may be bought on a trial basis without any strong conviction that it is superior to competing brands. Furthermore, the theory is criticized because it is limited to the conversion of a non-buyer to a buyer and ignores what happens after action (Ehrenberg, 1992). The major opposing model is shown on the right-hand side of Figure 4.37. The stages in this model are awareness, trial and reinforcement (ATR model). The ATR model suggests that advertising has a much less powerful influence than the AIDA model would suggest. Ultimately, the target is existing buyers who presumably are well disposed to the brand, and advertising is designed to reinforce these favourable perceptions so they continue to buy it. As already mentioned in earlier chapters, level of involvement plays a critical part in determining how people make purchasing decisions. Jones (1991) suggests that involvement may explain when the strong and weak theories apply. For high-involvement decisions such as the purchase of expensive consumer durables, the decision-making process is studied with many alternatives evaluated and an extensive information search undertaken. Therefore, advertising is more likely to follow the strong theory. However, for low-involvement purchase decisions such as low-cost packaged goods people are less likely to consider a wide range of brands thoroughly before purchase. Consequently, the Desire Interest Awareness Action Reinforcement Trial Awareness Strong: AIDA (High-involvement) Weak: ATR (Low-involvement) Source: Adapted from Jobber, 2010, modified Figure 4.37: Strong and weak theories of how advertising works Kapitel_4.indd 278 03.08.2010 13:01:55 Uhr 4.4 Communication Decisions 279 weak theory of advertising is more probable to apply. Advertising is mainly intended to keep customers doing what they already do by providing reassurance and reinforcement. Developing an Advertising Strategy We now examine the different steps in developing an effective advertising strategy. The basic framework and concepts of international advertising are essentially the same wherever used. Figure 4.38 shows the different steps and decisions, which are involved. It is worthwhile to state that each of the stages identified in Figure 4.38 is appropriate irrespective of whether the company is conducting an advertising campaign, a direct marketing or sales promotion campaign, all that changes is the detail involved. In the following we examine some specific advertising issues. Source: Adapted from Hollensen, 2004, modified Objective setting ß Communication objectives ß Sales objectives Budget decisions ß Percentage of sales/affordable approach ß Competitive parity approach ß Objective and task approach Message decisions (creative strategy) ß Unique selling proposition (USP) ß Standardization versus adaptation Media decisions ß Reach ß Frequency ß Impact ß Types (TV, radio, newspapers) Agency selection National (local) versus international agency Advertising evaluation ß Communication impact ß Pretesting of print/TV ads ß Testing finished ad: recall, competitor testing ß Sales impact: experiments Marketing strategy Understand and identify the target audience Figure 4.38: Developing an advertising strategy Kapitel_4.indd 279 03.08.2010 13:01:55 Uhr 4. Marketing Mix in the Marketing Planning Process280 Marketing Strategy The foundation for developing an advertising strategy is a clear definition of the marketing strategy as advertising is only one element of the marketing mix and decisions should not be taken in isolation. The following questions are of central importance in this respect: what is the product’s competitive position? What is the target market and what differential advantage does the product possess? Target market definition allows the target audience to be identified in rough terms and identification of the product’s differential advantage points to the features and benefits of the product that should be highlighted in its advertising. Identify and Understand the Target Audience The target audience is the group of people at which the advertisement strategy is aimed. The audience may be potential buyers or current users, those who make the buying decision or those who strongly influence it. The audience may be individuals, groups, or the general public. Once the target audience has been identified, it needs to be understood. Buyer motives and choice criteria need to be thoroughly analyzed. This process is vital as it has fundamental implications for message and media decisions and all later stages. Objective Setting Although, ultimately advertising is a means of stimulating sales and increasing profits, a clear understanding of its communication objectives is important. Major advertising objectives (and means) might include some of the following (Jobber, 2010): Create awareness• : Advertising can be used to create awareness of a brand, or a particular service. Awareness creation is of critical importance when a new product is being launched or when the company is entering a new market. Stimulate trial• : In addition, advertising can be used to stimulate trial, such as car advertising encouraging motorists to take a test drive. Position products in customers’ mind• : Advertisement has a major role to play in positioning brands in the ‘hearts and minds’ of the target audience (Ries and Trout, 2001). Creative positioning involves the development or reinforcement of an image or set of associations for a brand, such as L’Oréal’s repeated use of the slogan ‘Because I’m worth it’. Correct misconceptions• : Another objective of advertising might include the correction of misconceptions about a product or service, reminding customers of sales, special offer and specific benefits of the product. Remind and reinforce• : Once a clear collection of perceptions in the minds of the target audience has been established, the objective of advertising might be to remind consumers of the product’s existence, and to reinforce image. This strategic objective is especially appropriate for leading brands in mature markets, such as Coca-Cola and Nivea cosmetics. The goal of those companies is to maintain top-of-mind awareness and positive associations. Given their rather strong market position, a major advertising task is to defend against competitive products trying to gain market share. Kapitel_4.indd 280 03.08.2010 13:01:56 Uhr 4.4 Communication Decisions 281 Budget Decisions The amount that is spent on advertising governs the achievement of communication objectives. Controversial aspects of advertising include determining a proper method for deciding the size of the promotional budget, and its allocation across markets and over time. In general, there are four methods of setting advertising budgets (Lane et al., 2005): Percentage-of-sales method • This approach bases advertising on a specific percentage of current or expected sales revenue. Alternatively, the company may budget a percentage of the unit sales price. This method is easy to apply and makes management think about the relationships between promotion spending, selling price, and profit per unit. However, this approach fosters a decline in advertising expenditure when sales decline, a move that may encourage a further downward spiral of sales. In addition, it ignores market opportunities, which may suggest the need to spend more (or less) on advertising. Finally, the method fails to provide a means of determining the correct percentage to use. Affordable method • This approach bases advertising expenditure on what level management regards as an amount that can be afforded. SMEs often use this method, reasoning that the company cannot spend more on advertising that it actually has. Problematically, this approach of setting budgets completely ignores the effects of promotion on sales. Its use as the sole criterion for budget neglects the communication objectives that are highly relevant for a firm’s products and the market opportunities that may exist to grow sales and profits. Competitive-parity method • Some firms use the competitive-parity method, setting their promotion budgets based upon matching expenditure to, or using a similar percentage of sales figure as their major competitors. However, matching expenditure assumes that the competition has arrived at the ‘correct’ level of budget, and ignores market opportunities and communication objectives. Using a similar percentage of sales ratio likewise lacks strategic vision and might only be justified if it can be shown to prevent costly advertising wars. Furthermore, the method does not recognize that the firm is in different situations in different markets. If the firm is new to a market, its relationships with customers are different from those of existing domestic companies. This should also be reflected in its promotion budget. Objective-and-task method • The weaknesses of the above approaches have led some firms to follow this approach, which develops the promotion budget by defining specific objectives, determining the tasks that must be performed to achieve those objectives, and estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget. The advantage of this approach is that it stimulates management to think about objectives, media exposure levels and the resulting costs. However, it is also the most difficult method to apply. Often, it is extremely complicated to figure out, which specific tasks will achieve a stated objective. A research study (Hung and West, 1991) showed that only 20 per cent of companies in the USA, Canada and the UK used the objective and task approach. Although it is the ‘theoretically correct’ way of determining the promotion budget, it is sometimes more important to be operational and to use a ‘percentage of sales’ approach. This is Kapitel_4.indd 281 03.08.2010 13:01:56 Uhr 4. Marketing Mix in the Marketing Planning Process282 not necessarily an inappropriate method if company experience shows it to be reasonably successful. If the percentage is flexible, it allows different percentages in different markets. Message Decisions (creative strategy) This step concerns decisions about what unique selling proposition (USP) needs to be communicated, and what the communication is intended to achieve in terms of consumer behaviour in the country concerned. These decisions have important implications for the choice of advertising medium, since certain media can better accommodate specific creative requirements (use of colour, written description, high definition, demonstration of the product, etc.) than others. An important decision area for international marketers is whether an advertising campaign developed in the domestic market can be transferred to foreign markets with only minor modifications, such as translation into the appropriate languages. Complete standardization of all aspects of a campaign over several foreign markets is rarely attainable. Standardization implies a common message, creative idea, media and strategy, but it also requires that the firm’s product has a USP that is clearly understood by customers in a cross-cultural environment. Standardizing international advertising can lead to a number of advantages for the firm. For example, advertising costs will be reduced by centralizing the advertising campaign in the head office and transferring the same campaign from market to market, as opposed to running campaigns from different local offices. However, executing an advertising campaign in multiple markets requires a balance between conveying the message and allowing for local nuances. The adaptation of global ideas can be achieved by various tactics, such as adopting a modular approach, adapting international symbols and using international advertising agencies. Before a message can be decided, a sound understanding of the advertising platform should be acquired. The advertising platform is the foundation on which advertising messages are built. The platform should be important to the target audience and communicate competitive advantages. This is why an understanding of the motives and choice criteria of the target audience is essential for effective advertising. The advertising message translates the platform into words, symbols and illustrations that are attractive and meaningful to the target audience. As we shall see below, the choice of media available to the advertiser is vast, therefore one of the central challenges of message formulation is to keep the message succinct and adaptable across various media. Most of those who look at a press advertisement read the headline but not the body copy. Because of this, some advertisers suggest that the company or brand name should appear in the headline Example 29: Emotions like pleasure and humour can sell brands, as this poster for Mars bars illustrates Kapitel_4.indd 282 03.08.2010 13:01:56 Uhr 4.4 Communication Decisions 283 otherwise the reader may not know the source of the advertisement. For example, the headline ‘United Colours of Benetton’ and ‘Nokia: Connecting people’ score highly because in one statement they associate a costumer benefit with the brand (Jobber, 2010). Messages broadcast via tele vision also need to be built on a strong advertising platform. Because TV commercials are usually 30 seconds or less in duration, most advertisers communicate only one key selling appeal which is the single most motivating and differentiating thing that can be said about the brand (Silverman, 2006). A variety of creative treatments can be used, from lifestyle, to humour, to shock advertising. Media Decisions The selection of the media to be used for advertising campaigns needs to be done simultaneously with the development of the message theme. A key question in media selection is whether to use a mass or target approach. The mass media (television, radio and newsprint) are effective when a significant percentage of the general public are potential customers. This percentage varies considerably by country for most products, depending on, for example, the distribution of incomes in different countries. The selection of the media to be used in a particular campaign typically starts with some idea of the target market’s demographic and psychological characteristics, regional strengths of the product, seasonality of sales, and so on. The media selected should be the result of a careful fit of local advertising objectives, media attributes and target market characteristics. Furthermore, media selection can be based on the following criteria: Reach• . This is the total number of people in a target market exposed to at least one advertisement in a given time period (‘opportunity to see’, or OTS). Frequency• . This is the average number of times within a given time period that each potential customer is exposed to the same advertisement. Impact• . This depends on compatibility between the medium used and the message. High reach is necessary when the firm enters a new market or introduces a new product so that information about, for example, a new product’s availability is spread to the widest possible audience. A high level of frequency is appropriate when brand awareness already exists and the message is about informing the consumer that a campaign is under way. Sometimes a campaign should have both a high frequency and extensive reach, but limits on the advertising budget often create the need to trade off frequency against reach. A media’s gross rating points (GRPs) are the result of multiplying its reach by the frequency with which an advertisement appears within the media over a certain period. Hence it contains duplicated exposure, but indicates the critical mass of a media effort. GRPs may be estimated for individual vehicles, for entire classes of media or for a total campaign. The cost of running a media campaign also has to be taken into consideration. Traditionally, media planning is based on a single measure, such as ‘cost per thousand GRPs’. When dealing with two or more national markets, the selection of media also has to take into account differences in: the firm’s market objectives across countries• media effectiveness across countries.• Since media availability and relative importance will not be the same in all countries, plans may require adjustment in cross-border campaigns. Kapitel_4.indd 283 03.08.2010 13:01:56 Uhr 4. Marketing Mix in the Marketing Planning Process284 As a way of distributing advertising messages through new communication channels, co-promotion has got a strong foothold. The media planner faces the choice of using television, press, cinema, posters, radio or a combination of median classes. Each medium possesses its own set of creative qualities and restrictions. We shall now take a closer look at the main media types: Television • Television is an expensive but commonly used medium in attempting to reach broad national markets. It can be used to demonstrate the product in action, or to use colour and sound to build an atmosphere around the product, thus enhancing its image. Although TV was traditionally one of the most powerful advertising mediums, concerns about fragmentation of the audience have led many advertisers to move away from it or reduce their spending accordingly. In addition, research has again questioned whether viewers actually watch ads when they are on, finding that people may spend as little as 23 per cent of the time the ads are on watching them, with the remainder spent talking, reading, surfing between channels or doing tasks such as cleaning, ironing of office work (Ritson, 2003). However, television is still the largest advertising medium (see Figure 4.39) and it continues to play a significant role in brand building (ZenithOptimedia, 2010). Newspaper • Press advertising is useful for providing factual information and offers an opportunity for consumers to re-examine the advertisement at a larger stage. In virtually Source: Based on ZenithOptimedia research, www.zenithoptimedia, accessed 5th March 2010 Television 39% Cinema 1% Newspapers 23% Internet 12% Magazines 10% Radio 8% Outdoor 7% Figure 4.39: Global shares of display advertising revenue 2009 Kapitel_4.indd 284 03.08.2010 13:01:57 Uhr 4.4 Communication Decisions 285 all urban areas of the world, the population has access to daily newspapers. In fact, the problem for the advertiser is not having too few newspapers but too many. Most countries have one or more newspapers that can be said to have a truly national circulation. However, in many countries newspapers tend to be predominantly local or regional and, as such, serve as the primary medium for local advertisers. Attempting to use a series of local papers to reach a national market is considerably more complex and costly. Magazines • In general, magazines have a narrower readership than newspapers and can be used to target particular markets. One growing sector is customer magazines, whereby leading brand such as Audi and Mercedes-Benz produce colour magazines of pictures and editorial about their products. For technical and industrial products, magazines can be quite effective. Technical business publications tend to be international in their coverage. These publications range from individual businesses (e.g. beverages, construction, textiles) to world-wide industrial magazines covering many industries. Marketers of international products have the option of using international magazines that have regional editions (e.g. Newsweek, Time and Business Week). Radio • Radio is limited to the use of sound and it therefore more likely to be useful in communicating factual information rather than building brand image. Radio is a lowercost broadcasting activity than television. Commercial radio started several decades before commercial television in many countries. Radio is often transmitted on a local basis and therefore national campaigns have to be built up on an area-by-area basis. Cinema • Cinema benefits from colour, movement and sound, as well as the presence of a captive audience. In countries where it is common to subsidize the cost of showing movies by running advertising commercials prior to the feature film, cinema advertising has become an important medium. India, for example, has a relatively high level of cinema attendance per capita (few have television at home). Therefore cinema advertisements play a much greater role in India than in, for example, the United States. Cinema is a particularly good but expensive medium for brands trying to reach young audiences. Outdoor advertising • Outdoor advertising includes posters/ billboards, shop signs and transit advertising. This medium shows the creative way in which space can be sold to customers. In the case of transit advertis- Example 30: Example for extensive outdoor advertising: a German TV television transmitter under public law creates attention for its erotic movies without advertisement interruption Kapitel_4.indd 285 03.08.2010 13:01:57 Uhr 4. Marketing Mix in the Marketing Planning Process286 ing, for example, a bus can be sold as an advertising medium. In Romania transit advertising is very effective. According to a survey by Mueller (1996), in Bucharest 91 per cent of all consumers surveyed said they remembered the content of transit advertisements, compared with 82 per cent who remembered the content of print adverts. The use of transit media is expanding rapidly in China as well. Outdoor posters/billboards can be used to develop the visual impact of advertising. France is a country associated with the effective use of poster/billboard advertising. In some countries, legal restrictions limit the poster space available. Outdoor advertising is believed to be effective for reminder advertising. Technology is helping outdoor advertising gain a bigger share of advertising in the prime media as backlit and scrolling sites are gradually replacing more traditionally glued posters. Internet Advertising/Promotion • This medium allows global reach to be achieved at relatively low cost. The number of website visits, clicks on advertisements and products purchased can be measured and interactivity between supplier and consumer is enabled. Google and Yahoo! are market leaders in so-called ‘paid search’ or ‘pay-per-click’ advertising. The disadvantages of Internet advertising are that it is impersonal and requires consumers to visit a website. This may require high expenditure in traditional media or the placing of sponsored links on search engines. This tool is further dealt with in Chapter 4.4.7. Agency Selection Confronted with the many complex problems that international advertising involves, many businesses instinctively turn to an advertising agency for advice and practical assistance. Agencies employ or have instant access to expert copywriters, translators, photographers, film makers, package designers and media planners who are skilled and experienced in the international field. Only large multinational enterprises can afford to carry such people in-house. Smith and Taylor (2004) describe the agency selection procedure as follows: 1. define requirements 2. develop a pool list of agencies 3. credentials (e.g. examples of current and previous work, team members, profiles) pitch by agencies 4. issue brief to shortlisted agencies 5. analysis of pitch 6. select winner 7. agree contract details 8. announce winner. If the international marketer decides to outsource the international advertising functions, he or she has a variety of options including the following: use different national (local) agencies in the international markets where the firm is • present use the services of a big international agency with domestic overseas offices.• In Table 4.6 the different factors favouring a national or an international agency are listed. The single European (pan-European) market is used as an example of an international agency. Kapitel_4.indd 286 03.08.2010 13:01:57 Uhr 4.4 Communication Decisions 287 The criteria relevant to the choice of a national or an international agency include the following: Policy of the company• . Has the company got any realistic plans for a more standardized advertising approach? Nature of the advertising to be undertaken• . Corporate image advertising might be best undertaken by a single large multinational agency which operates throughout the world via its own subsidiaries. For niche marketing in specialist country sectors, a local agency might be preferred. Type of product• . The campaign for an item that is to be presented in a standardized format, using the same advertising layouts and messages in all countries, might be handled more conveniently by a single multinational agency. Advertising Evaluation Advertising evaluation and testing is the final stage in the advertising decision process shown in Figure 4.38. The key questions in advertising research are what, when and how to evaluate. What should be measured depends on whatever the advertising is trying to achieve. Measurement can take place before, during and after campaign execution. Pretesting takes place before the campaign is executed and is part of the creative process. This is typically done with a focus group, which is shown various alternative commercials and the members are asked to discuss their likes, dislikes and understanding of each other. Post-testing can be used to assess a campaign’s effectiveness once it has run in order to provide necessary information to plan future campaigns. The major mea sures used in post-test television advertising research are image/attitude change, actual sales and usage, though other financial measures such as cash flow, shareholder value and return on investment are increasingly being used (Jobber, 2010). Testing advertising effectiveness is normally more difficult in international markets than in domestic markets. An important reason for this is the distance and communication gap between domestic markets and foreign markets. Thus, it can be very difficult to transfer testing methods used in domestic markets to foreign markets. For example, the conditions for interviewing people can vary from country to country. Consequently, many firms try to use sales results as a measure of advertising effectiveness. It is also possible to make a pre-test, e.g. regarding two different commercials. National (local) Pan-European (international) Supports national subsidiary. Reflects new European reality and trends. Investment in existing brand best handled nationally. Economies of scale in new product development and branding. Closer to marketplace. Uniformity of treatment across Europe. Smaller size more conducive to personalized service and greater creativity. Resources and skills of major European or global agency. Diversity of ideas. Easier to manage one agency group. Source: Adapted from Lynch, 1994 Table 4.6 European agency selection: national (local) or pan-European (international) Kapitel_4.indd 287 03.08.2010 13:01:57 Uhr 4. Marketing Mix in the Marketing Planning Process288 Standardization or Adaptation of Global Advertising The global advertiser faces a multifaceted task. The communication has to be appropriate for each local market, while at the same time there is a need to coordinate campaigns and control expenditures across the globe. Because of the varying media availability in different countries and differing effectiveness of global media, the feasible channels for advertising will differ. But customizing the advertising to each individual country leads to increased costs and unwieldy control procedures. The ads can be identical, usually with localization only in terms of language voice-over changes and simple copy translations. Pan-European advertising featuring Exxon gasoline’s tiger in the tank and Marlboro cigarettes’ cowboy is an example. In some cases the identical ads or commercials can be used without any translation at all. Levi’s, the jeans manufacturer, uses cartoons with rock music and unintelligible, vaguely Esperantosounding vocals in one commercial where the Levi’s-wearing hero rescues a beautiful woman from a burning building, an easily comprehended message. In other cases the commercials simply carry subtitles. IBM shows Italian-speaking nuns discussing the pros and cons of Internet surfing with subtitles translating the conversation: global ad, with a local touch. It might be assumed that global products and brands need global advertising. This is often true. The campaigns for Swatch watches, Club Med, Benetton, and Reebok are very similar across continents. But there is often a need to do some local adaptation of global campaigns. For example, a global product and brand such as Levi’s jeans targets specific segments with different appeals in each local market, since the positioning of the product and brand varies as the target markets differ (Hollensen, 2003). Sometimes a brand’s global campaign has misfired and the company has retreated to a more multi-domestic adaptation. Parker Pen, a globally recognized American brand name, shifted to global advertising in the mid-1980s only to return to multi-domestic advertising after sales slumped badly, and the result was successful. The cause of failure was the lack of cooperation on the part of the company’s country subsidiaries, whose previously successful campaigns were discontinued. In summary, global advertising is most powerful under the following conditions: the • image communicated can be identical across countries. the • symbols used carry the same meaning across countries. the product • features desired are the same. the • usage conditions are similar across markets. If all of these conditions hold, as they do in the case of the airlines, global advertising is a natural. When one or more are not fulfilled – as in the case of Levi’s – even standardized products may need adapted multi-domestic advertising. If the conditions are not right, global advertising will fail, which helps explain why there is still so much controversy about global versus multi-domestic advertising. 4.4.4 Sales Promotion Sales promotions are marketing activities that stimulate consumer purchases and improve retailer or middlemen effectiveness and relationship. Sales promotion communicates via an array of promotions not encompassed by any of the definitions above, each aiming for exposure to a target audience and some furthermore offering an incentive Kapitel_4.indd 288 03.08.2010 13:01:57 Uhr 4.4 Communication Decisions 289 to respond actively. Examples include money off and free gifts (consumer promotions), price discounts (trade promotions) and sales force competitions (business promotions). Sales promotions are short-term efforts directed to the customer or retailer to achieve such specific objectives as consumer-product trial or immediate purchase, consumer introduction to the store, gaining retail point-of-purchase displays, encouraging stores to stock the product, and supporting and augmenting advertising and personal sales efforts (Hollensen, 2006). In this sense, sales promotion may be regarded as a short-term tactical device. A typical sales pattern initially involves sales boost during the promotion period because of the incentive effect. This is followed by a fall in sales to below normal level because some consumers will have stocked up on the product during the promotion. The long-term sales effect of the promotion could be positive, neutral or negative. If the promotion has attracted new buyers, who find that they like the brand, repeat purchases from them may give rise to a positive long-term effect. Alternatively, if the promotion has devaluated the brand in the eyes of customers, the effect may be negative (Rothschild and Gaidis, 1981). A vast amount of money is spent on sales promotion and many companies are engaging in joint promotions. Some of the key reasons for the growth in sales promotion include the following (Peattie and Peattie, 1983): Increased impulse purchasing• : the rise in impulse purchasing favours promotions that take place at the point of purchase. The rising cost of advertising and advertising clutter• : these factors erode advertising’s cost-effectiveness. Shortening time horizons• : the attraction of the fast sales boost of a sales promotion is raised by greater competition and shortening product life cycles. Competitor activities• : in some markets, sales promotions are used so often that all competitors are simply forced to follow suit. Measurability• : measuring the sales impact of sales promotions is relatively easy compared to advertising since its effect is more direct and, usually, short term. Major Sales Promotion Tools Sales promotion can be directed at the customer, the trade or the business. We shall now discuss the main consumer, trade, and business promotion tools (Kotler and Armstrong, 2009). Consumer Promotion Tools Consumer promotion tools include premiums, money off, free samples, coupons, prize promotions, bonus packs, and loyalty cards: Premiums• Premiums are any merchandise offered free or at very low cost as an incentive to purchase a product. They can come in three forms: free in- or on-pack gifts, free inthe-mail offers and self-liquidating offers, where customers are asked to pay a sum of money to cover the costs of the merchandise. The key objective of premiums is in encouraging bulk purchasing and maintaining share. Money off • Money-off promotions provide direct value to customer, and consequently an unambiguous incentive to purchase. Although they have proven track record of stimulat- Kapitel_4.indd 289 03.08.2010 13:01:57 Uhr 4. Marketing Mix in the Marketing Planning Process290 ing short-term sales increases they can easily be matched by competitors and if used frequently, can devalue brand image. Free samples • Free samples of a brand may be delivered to the home or given out in a store and are used to stimulate trial. For new brands or brand extensions (for example, a new shampoo) this is an effective, if sometimes expensive, way of generating trial. There are a variety of methods of delivering samples including direct mail, inserts within publications or packages, or sampling points inside stores. Sampling is a relatively expensive form of promotion, which often involves a high degree of wastage. It can also be difficult to assess its effectiveness, since there is no way to establish whether those who receive samples later go on to purchase unless the sample is accompanied by a coupon. Coupons • Coupons are certificates that give buyers a saving when they purchase specified products. They can promote early trial of a new brand or stimulate sales of a mature brand. Coupons can be delivered by direct mail, in stores, as inserts in publications or on packages. The traditional disadvantages of couponing are in the logistical effort of the redemption handling process, and consumer resistance to the need to physically clip and carry coupons. New technology may overcome all of these problems with innovations such as barcode scanning for coupons, and ‘smart cards’ for consumers, which store information about coupon entitlements. Prize promotions • There are three main types of prize promotions: competitions, draws and games. These are often used to attract attention or stimulate interest in a brand. Competitions require participants to exercise a certain degree of skill and judgement and entry is usually dependent or purchase at least. Draws make no demands on skill or judgement and the result depends on chance. A classic example of draw is when direct mail recipients are asked to return a card on which there is a set of numbers. These are then compared against a set of winning numbers. An example of game promotion is where a newspaper encloses a series of bingo cards and customers are told that, over a specified period of time, sets of bingo numbers will be published. If these numbers form a line or full house on a bingo card a prize is won. Such a game fosters repeat purchase of the newspaper. Bonus packs • Bonus packs give added value by giving customers extra quantity at no additional cost and are often used in the drinks, confectionary and detergent markets. The promotion might be along the lines of ‘Buy 10 and get 2 extra free’. Because the price is not lowered, this form of promotion is less risky concerning the devaluation of the brand image. Loyalty cards • A major development in retailing is the offering of loyalty cards to consumers. Points are then gained every time money is spent at an outlet. Other loyalty schemes might involve the accrual of points that can be swapped for money-off vouchers to be used against purchases at the store or for bargain offers on other purchases such as theatre tickets. The goal is to attract customers back to the outlet. In addition, some schemes Kapitel_4.indd 290 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 291 collect information on the customer including his or her name and address and, when it is swiped through the checkout machine detailed information on purchases is recorded. This implies that the purchasing behaviour of individual customers is better known to the retailer, which can then use this information to target tailored direct mail promotions at those who are likely to be responsive. Loyalty cards are very popular, with over 90 per cent of people in the UK holding at least one loyalty card and, of these, 78 per cent carrying more than one loyalty card (Dourado, 2003). Despite their growth, loyalty schemes have attracted their critics. Schemes may simply raise the cost of doing business and, if competitors respond with me-too offerings, the final outcome may be no more than a minor tactical advantage (Dowling and Uncles, 1997). Shell, for example, reportedly spent GBP 20 million on hardware and software alone to launch its Smart Card, which allows drivers to collect points when purchasing petrol (Burnside, 1995). Trade Promotion Tools The trade may be offered or may demand discounts in return for purchase, which may be part of a joint promotion whereby the retailer agrees to devote extra shelf space, buy larger quantities, engage in a joint competition and/or allow demonstrations in the outlet. Manufacturers may use several trade promotion tools. Many of the tools used for consumer promotions such as prize promotions and premiums can also be used as trade promotions. Major trade promotion tools include price discounts, free goods, and allowances: Price discounts • The trade may be offered a straight reduction in price on purchases during a stated period of time. The concentration of buying power into fewer trade outlets has placed increasing power with these institutions and this influence is often translated into discounts from manufacturers. Volume discounts are given to retailers that hit sales targets (Quilter, 2005). Free goods • An alternative to a price discount is to offer more merchandise at the same price. Allowances • A manufacturer may offer an allowance in return for retailers providing promotional facilities in store. For example, allowances would be needed to stimulate a supermarket to display cards on its shelves indicating that a brand was being sold at a special price. Business Promotion Tools Companies spend a vast amount of money every year on promotion to industrial customers. These business promotion tools are used to generate business leads, stimulate purchase, reward customers, and motivate sales people. Business promotion includes many of the same tools used for consumer or trade promotions. Here, we focus on two additional major tools – conventions and trade shows, and sales contests: Conventions and trade shows • Many enterprises and trade associations organize conventions and trade shows to promote their products and services. Companies selling to the industry show their products at the trade show. Vendors receive many benefits, such as opportunities to Kapitel_4.indd 291 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process292 find new sales leads, contact customers, introduce innovative products, and inform customers with publications. Sales contests • A sales contest is a contest for sales people or dealers to motivate them to increase their sales efforts and ultimately performance over a given period. These contests motivate and recognize good company performers, who may receive trips, cash prizes, or other incentives. Developing the Sales Promotion Program The marketer must make several other decisions in order to define the complete sales promotion program. First, the marketer has to decide on the size of the incentive and set conditions for participation. Incentive might be offered to everyone or merely to specific groups. Hereafter, the marketer must decide how to promote and distribute the promotion program. In this respect, marketers are increasingly blending several media coherent campaign concept. Furthermore, the length of the promotion is also an important issue (Kotler and Armstrong, 2009). The final stage in a sales promotion program involves testing the promotion. As with advertising, both pre-testing and post-testing methods are available. The major pre-testing techniques include group discussions (testing ideas on groups of potential targets), hall tests (bringing a sample of customers to a room where alternative promotions are tested) and experimentation (where, for example, two groups of stores are selected and alternative promotions run in each). After the sales promotion has been implemented the results have to be monitored carefully. The company should thoroughly analyze sales before, during and after the promotion. Clearly, sales promotion plays an important role in the total promotion mix. To use it in a sophisticated way, the marketer must define the sales promotion objectives, select the most appropriate tools, design the promotion program, implement the program, and evaluate the results. There are many benefits of using sales promotions, but they have also limitations. They will neither compensate for fundamental weaknesses in the rest of the marketing mix, nor revive the fortunes of an outdated brand, and overuse can be counterproductive. Many companies fail to integrate the sales promotions with the rest of the marketing strategy and mix. 4.4.5 Public Relations A company is dependent on many groups if it wishes to succeed. The marketing concept focuses on customers and distributors, but the needs and interests of other stakeholders (such as employees, shareholders, the local community, the media, government and pressure groups) are also of central importance and public relations is concerned with all of these groups. Public relations can be defined as building good relations with the company’s various publics by obtaining favourable publicity, building a positive corporate image, and handling or heading off unfavourable rumours, stories, and events (Kotler and Armstrong, 2009). Kapitel_4.indd 292 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 293 Public relations can accomplish many objectives, as outlined below (Lesly, 1998): Prestige and reputation• : It can foster prestige and reputation, which can help companies to sell products, attract and keep good employees, and promote favourable community and government relations. Promotion of products• : the desire to buy a product can be supported by the unobtrusive things that people read and see in the press, radio and TV. Awareness and interest in products and companies can be stimulated. Dealing with issues and opportunities• : the ability to handle social and environmental issues to the mutual benefit of all stakeholders involved. Goodwill of customers• : ensuring that customers are presented with useful information, are treated with respect and have their complaints dealt with fairly and speedily. Goodwill of employees• : promoting the sense of identification and satisfaction of employees with their company. Activities such as internal newsletters, recreation activities, and awards for service and achievement can be used. Overcoming misconceptions• : managing misconceptions about a company and its products so that unfounded opinions do not severely damage its operations. Goodwill of suppliers and distributors• : building a reputation as a good customer and a reliably supplier. Goodwill of government• : influencing the opinions of public officials and politicians so that they feel the company operates in the public interest. Dealing with unfavourable publicity• : responding rapidly, accurately and effectively to negative publicity. Public relations firms’ billings in the international arena have been growing at double digit rates for some years. Handling such international PR problems as global workplace standards is big business for companies serving corporate clients such as Mattel Toys, McDonald’s, and Nike. Fast growth is also being fuelled by the expanding international communications industry. New companies need public relations consultation for ‘building an international profile’. Three major reasons for the growth in public relations are a recognition of the power and value of public relations, increased advertising costs leading to an exploration of more cost-effective communication routes, and improved understanding of the embracing role of public relations. 4.4.6 Sponsorship Sponsorship can be defined as a business relationship between a provider of funds, resources or services and an individual, event or enterprise which offers in return some rights and association that may be used for commercial advantage (Sleight, 1989). Companies have a wide range of entities and activities from which to choose, including sports, arts, community activities, teams, tournaments, music festivals, individual personalities or events, competitions, fairs and shows. Sport sponsorship is by far the most popular sponsorship medium as it usually offers high visibility through extensive television coverage, the ability to attract a broad cross-section of the community and to service specific niches (Jobber, 2010). Kapitel_4.indd 293 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process294 Principle Sponsorship Objectives Organisations should be clear about their reasons for spending money on sponsorship. The five principal objectives of sponsorship are to gain publicity, create entertainment opportunities, foster favourable brand and company associations, improve community relations and create promotional opportunities: Gaining publicity • Sponsorship provides multiple opportunities to create publicity in the media. With the advent of global media the possibilities for global sponsorships are opening up. Sponsoring soccer World Cup or the Olympic Games by plastering the brand name on the bleachers has helped global companies to establish a strong identity in the global marketplace. For example, Dunhill’s sponsorship of major golf tournaments allows the brand name to be exposed to its more upmarket customer segment. Creating entertainment opportunities • Another major objective of sponsorship is to create entertainment opportunities for customers and the trade. Sponsorship of music, the performing arts and sports events can be particularly effective. For example, Barclays Capital sponsored a fashion show at London’s Natural History Museum for 450 of its clients that were attending a global forum. Fostering favourable brand and company associations • A further objective of sponsoring is to create favourable associations for a brand and company. For example, Red Bull’s sponsorship of events such as ‘Flugtag’, at which amateur pilots launch handmade flying machines off a ramp, reinforces its ‘weird’ image and its energy associations (Clark, 2005). Improving community relations • Sponsorship of schools – for example, by providing low-cost personal computers – and supporting community programmes can foster a socially responsible, caring reputation for an organisation. Creating promotional opportunities • Sponsored events provide a perfect opportunity to promote company brands. Sweatshirts, bags, pens, etc., carrying the company logo and the name of the event can be sold to a captive audience. A recent estimate indicates that approximately 25 percent of American commercials use celebrity endorsers (Silvera and Austad, 2004). In support of this practice, research indicates that celebrity endorsements can result in more favourable advertisement ratings and product evaluations and can have a substantial positive impact on financial returns for the companies that use them. One possible explanation for the effectiveness of celebrity endorsers is that consumers tend to believe that major stars are motivated by genuine affection for the product rather than by endorsement fees. Celebrities are particularly effective endorsers because they are viewed as highly trustworthy, believable, persuasive, and likeable (Hollensen, 2006). Basically, six factors account for the growth of sponsorship (Jobber, 2010): restrictive government policies on advertising (e.g. tobacco and alcohol)• escalating costs of media advertising• increased leisure activities and sporting events• the proven record of sponsorship• great media coverage of sponsored events• the reduced efficiencies of traditional media advertising• Kapitel_4.indd 294 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 295 Components of Assessing a Sponsorship Property Selection of an event, programme or celebrity to sponsor should be undertaken by assessing the following components: Cost of initial sponsorship outlay • Budget needed for supporting marketing or public relations activity • Time & resource implications for firm’s staff• : the number of staff and the quantity of resources that are needed, so as the sponsorship opportunity can be fully leveraged. Duration of relationship• : the benefits of a positive sponsorship association can take time to develop. Sponsors frequently seek out options to extend the contracts of their sponsorship relationship. If a sponsor can only avail of a short-term contract, with no options for a contract extension then the sponsorship property, will prove unattractive for investment. Targeted groups• : a variety of different stakeholders can be targeted by sponsorship campaigns. A firm must ensure there is a match between the audience of the sponsored property and their selected target market. The sponsor can associate itself with a certain lifestyle or consumer segment. The stronger the association between a sponsor’s target audience and the sponsorship properties target audience, the better the strategic ‘fit’. Geographic scope• : how far reaching is the sponsorship property? Will it have an impact in foreign markets? For example, certain sports sponsorship properties have a far greater reach in global geographic markets (e.g. F1 car racing, Vodafone & Manchester Utd.). Sponsorship properties that have good geographic reach are expensive and scarce in supply. Strategic fit between sponsor and sponsorship property• : compatibility is needed between the two entities. Marketers can use the sponsorship association with a property to give a clear message about their product and what their company stands for. Uniqueness to break through clutter• : companies strive for sponsorship opportunities that break through the sponsorship clutter that exists, gaining sufficient media coverage, and helps form positive brand associations. Specsavers, an optician chain, exploited a unique sponsorship opportunity by sponsoring referees for football games, creating a distinctive and powerful message – ‘That referee needs glasses!’ Image of sponsored property• : a sponsor has to assess whether the sponsored property is seen in a positive or negative light. Likeability of the sponsored property can transfer through to likeability of the sponsor. Estimated number of viewers, listeners, or attendees to the sponsored property• : the attendance at a sponsored event is a basic evaluation metric used. Similarly viewing or listener figures are used for broadcast sponsorship activities. Estimated media coverage• : the sponsored property needs to acquire the right amount and right type of media coverage. The company should assess the newsworthiness of a sponsorship property. Corporate hospitality potential• : some events are highly sought after for their potential to entertain clients. Sponsoring sports or entertainment events allow firms the opportunity to build and enhance relations with channel members and corporate accounts (e.g. Heineken sponsors European Club Rugby Championship, which provides Heineken the opportunity to provide corporate hospitality to publicans). Kapitel_4.indd 295 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process296 Leverage potential• : here the firm evaluates if there is any marketing, sales or sales promotion spin offs that may accrue from the sponsorship. In order for any sponsorship to work effectively to its full potential, it must be supported by other marketing communications activities. The sponsors must communicate the association between themselves and the sponsorship property. Exclusivity on sponsorship property• : some sponsorship properties offer sponsors different tiers of sponsorship association, having multiple sponsors. This in turn may confuse the intended target as to who is sponsoring a particular property. If a sponsor has complete exclusivity over a sponsorship property, then they can leverage the relationship more effectively. For example, Coca-Cola and Pepsi used Beckham in campaigns causing confusion. Legacy effects• : sponsors must assess whether past historical linkages with an incumbent sponsor may be broken. Otherwise sponsorship confusion may arise. Typically firm’s who have strong past relationships with a sponsorship property, that may be have been built over numerous years, have stronger sponsorship legacy effects. Potential for negative exposure• : firms should make risk assessment on whether a potential sponsorship may backfire in a blaze of negative publicity. For example, the Festina, watch brand was decimated when during the Tour de France, the cycling team they sponsored where found to be drug cheats. Similar examples include: Roy Keane & 7Up during the infamous Saipan World Cup incident, Michelle Smith & Pantene, Philips and the sinking of their Team Philips boat during their around the world sailing record attempt. The pros and cons of such a linkage have to be assessed. Risks Associated with Sponsorship As already stated above when discussing the components which need to be assessed in the framework of a sponsorship property selection process a company should also acknowledge the associated risks of sponsorship. Some of the major perils associated with sponsorship are as follows: Negative publicity• : certain instances may occur through no fault of the sponsors, where the sponsored event garners negative media coverage. Prospective sponsors have to make sponsorship risk assessments on the proposed sponsorship property. Legacy effects• : sponsored property may still be associated with past sponsors, such as adidas or Pepsi. This legacy effect is determined by the duration of the past association and the successfulness of the past sponsor to create strong linkages. Strong legacy effects can only be overcome through strong and prolonged supporting marketing communications activity. Falling popularity of sponsored property• : some properties fall in their popularity due to changing trends. Once an endorsers success or newsworthiness dwindles, so too Example 31: Sport sponsoring example shows the newspaper The Times as the official media partner of The Emirates Airlines Dubai Rugby Sevens, Dec 3-5, 2009 Kapitel_4.indd 296 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 297 does the associated media interest. Some sponsors may not reap the same positive elements of a sponsorship as they once did. Failure of sponsored property or long-term injury of sponsored property• : if a sponsored property fails, this can place the sponsor in a negative light. For example, if a firm sponsors a highly publicised rock concert, which is cancelled at the last minute. This can lead to stakeholder frustration, which is transferred onto the sponsor’s brand. Examples include the loss of a team at an early stage of competition or poor competitive form. Too successful a sponsorship property• : very rare in occurrence, but can happen. For example, if a sponsor offers corporate hospitality at a sponsored event, and certain trade customers cannot be invited because of over subscription to the event. This can cause trade customer dissatisfaction. An example of this was when certain publicans threatened to boycott a drinks manufacturer, if they could not deliver on rugby tickets to a much sought after match. Sponsorship Evaluation Despite the phenomenal growth of sponsorship over the last decade, there still remains much ambiguity about sponsorship evaluation. There is no definitive framework for evaluating a sponsorship programme. Yet companies spend millions on sponsorships annually. To evaluate any sponsorship effectively they must first set measurable goals. Firms must utilize both quantitative and qualitative evaluation techniques to accurately measure the effects of sponsorship. We shall describe possible evaluation techniques in more detail now: Exposure obtained• : an organisation could view the number of people who attended an event as an easy key performance indicator to use in the evaluation process. The amount of media exposure and quality of media coverage could be qualitatively assessed such as radio airplay or editorial space. For example a media clippings book could be generated, with all the media stories related to the event, documented for assessment. Media audits analysing the quantity and quality of coverage can be undertaken. Communications results• : the firm could track recall levels amongst target audiences, to gauge any communications impact, from the sponsorship. Increasing sales or market share• : companies could use bottom-line metrics as an indication of the success of a sponsorship programme. However this would be a naive metric to use in isolation, as sales may have been impacted due to an exogenous variable within the marketing environment, and may not be attributable directly to a sponsorship programme. Competitor activity, changing trends or changing economic conditions, may be the cause of sales changes, not sponsorship activity. Feedback gained from participating groups• : a firm could gauge the reactions of stakeholders to the sponsored property. A firm could undertake surveys or in-depth interviews to gauge stakeholder reactions to these sponsorships. 4.4.7 Internet Advertising/Promotion With the creation of the World Wide Web and Web browsers in 1990s, the Internet was transformed from a mere communication platform into a certifiably revolutionary tech- Kapitel_4.indd 297 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process298 nology. For consumers, digital technologies have not only provided the means to search for and buy products while saving time and money, but also to socialize and be entertained. The emergence of social networking sites such as MySpace and Facebook has enabled consumers to spend time socializing, and the development of video streaming and music downloads means that they can be entertained as well. A major challenge for marketers is to tap in to the huge audiences using the net. The Internet is considered to be a global channel of communication, but the advertising messages are often perceived in the local context by the potential customer. Herein lays the dilemma that often causes the results from internet promotion to be less than anticipated. Traditional media have two capabilities – building brands and direct marketing. In general, most promotional forms are useful for one or the other. The internet however, has the characteristics of both broadcast mass media and direct response advertising. In the conventional model of communications in the marketplace, there are clear distinctions between the sender, the message and the recipient, and control of the message is with the sender. In ‘market space’, control of the message is shared between sender and receiver because of the interactivity of the medium, its ability to carry a message back in reply to that sent, and the impact of the information technology on time, space and communication. The above stated impacts on the feedback loop are built into the Internet and on the aspects of interference. In general, interference is more likely to be from internet clutter and less from external sources. The web represents a change away from a push strategy in international promotion, where a producer focuses on compelling an intermediate to represent the products or services or a distributor to stock its goods, towards a pull strategy in which the producer communicates directly with the customer. In this transition process promotional costs and other transaction costs are reduced. The differentiating feature of the Internet from other promotional vehicles is that of interactivity. This results in the special feature that Internet combines the attributes of both selling and advertising. Interactivity facilitates a completely innovative approach to reaching potential customers. Unlike television, for example, where the consumer passively observes, with the web there is an active intent to go onto the Internet and a greater degree of attention to content as a result. In the Internet the potential customer has a high involvement approach to advertising. A continual stream of decisions is demanded from the user. Each click represents a decision and therefore the web is a very high involvement medium. In addition, unlike traditional media, the web is a medium by which the user can click through and obtain more information or actually purchase the product. Web advertisements can and are often targeted to a user profile that in turn affects the way the message will be received. Increasingly, the ads displayed on the web are specific to user interests and appear as these interests are revealed while the user navigates the web. In order to provide value to the potential international customer and hold interest, the web site must be attractive and user friendly. This involves an appealing design, being available in the buyer’s language (or one with which the buyer is likely to be familiar) and be aesthetic in terms of colour and background (taking into account buyer’s cultural norms). It should be easy to navigate, contain the information that the buyer is likely to want and be easy to access. The most common form of advertising on the web (as opposed to advertising the existence of the web site) is banners across the top of commercial sites (Fletcher et al., 2004). Kapitel_4.indd 298 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 299 Effective Online Advertising Strategy Marketers can use online advertising to build their brands or to attract visitors to their Web sites. Online advertising can be described as advertising that appears while customers are surfing the Web, including banner and ticker ads, interstitials, skyscrapers, and other forms (Kotler and Armstrong, 2009). An effective advertising strategy for online advertising aims at targeting the right advertisement message to the right person at the right time (Kumar and Shah, 2004). Who to Advertise to? Is online advertising for everyone? Knowledgeable marketers will state that advertisement design depends on the type of product or service being sold and the desired target segment. In this respect, it is instrumental to divide the desired target segment according to first-time visitors to the company’s Web site, registered users, and general information seekers. There is bound to be some overlap across these segments. However, this form of segmentation can provide useful insights while designing online advertising. Based on the user segment, the Web site can be programmed to respond appropriately. For example, every first-time visitor to a Web site can be made to see the same advertisement. Visitors identified as information seekers may be shown useful content instead of products and services directly, and registered users may see a customized advertisement message based on their profiles. Technologically, it is feasible to identify the type of user by studying their browsing behaviour through clickstream data and by using ‘cookie’ files. How to Advertise? After identifying the user or the Web site visitor, the next step is determining how to advertise or what format to use for advertising. There are several different formats of Internet advertisements: banner ads (which move across the screen), skyscrapers (tall, skinny ads at the side of a Web page) and interstitials (ads that pop up between changes on a Web site). Content sponsorships are another form of Internet promotion. Many companies achieve name exposure on the Internet by sponsoring special content on various Web sites, such as news or financial information. These sponsorships are best placed in carefully targeted sites where they can offer relevant information or service to the audience. The type of advertisement chosen should be directed toward not only ‘pushing’ the message across but also ‘pulling’ the customer to click deeper into the Web site by designing ads that contribute to the overall Web site experience. For example, a Web site with too many pop-up ads on the first page runs the risk of driving the user away. What to Advertise? People use the Internet to seek information as well as products and services. Marketers can be creative and design advertisements that could just give out helpful information to the user. For example, a user browsing for a digital camera may be offered useful tips and pointers on how to get the best results from digital photography. Non-commercial advertising like this may not have a short-term financial gain but may definitely contribute to superior browsing experience leading to customer loyalty and repeat visits from the user. Kapitel_4.indd 299 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process300 If customer profile or past history of purchase is known, it is possible to predict future purchase behaviour and companies can program buying information in the Web site code. The next time the company’s Web site detects a particular user returning to the Web site, there will be an advertisement ready with an appropriate and tailored content. If deployed properly, this approach can help marketers cross-selling products through combinations of online advertisement messaging. When to Advertise? The first three dimensions of the advertising strategy discussed so far would be rendered ineffective if the timing is not right. In the case of offline media, one can proactively call up the customer or send him/her a direct mailer at a specific time with a customized advertising message. However, these rules do not apply online. In the case of the Internet, users may decide to go online and visit the Web site during work, in the middle of the night, or whenever they want to. Therefore, timing in the Internet context would refer to the time from the instance a user is detected online. The question is when to activate the advertisement. As soon as the user comes online, after he/she has browsed for a while, or at the time of the first purchase? Studies conducted with Internet ad timings have indicated that generally response (click-through) to pop-ups is greater when the ad appears immediately after the user enters the site. However, the results could vary greatly depending on the user segment and the user’s information-seeking purposes. employs a subtle form of advertisement in real time. Basically, while performing a search for a particular book, the search also throws up a list on the side or bottom of the page of relevant books that may complement the book the user was originally considering purchasing. was first to use ‘collaborative filtering’ technology, which sifts through each customer’s past purchases and the purchasing patterns of customers with similar profiles to come up with personalised site content. Furthermore, the site’s ‘Your Recommendations’ feature prepares personalized product recommendations, and its ‘New for You’ feature links customers through to their own personal ised home pages. In perfecting the art of online selling, has become one of the best-known names on the Web. Where to Advertise? It is crucial to make Internet ads visible at vantage points to maximize their hit-rate with the intended target segment. Unlike other forms of media, where one can pick a welldefined spot within a finite set of possibilities, cyberspace offers an infinite number of possibilities across thousands of portals, search engines, and online publishers, as well as multiple possibilities within the vendor’s Web site. Finding the perfect spot may seem like finding a needle in a haystack. There are two ways to tackle this. The first is the easy way out. Follow intuition and place advertisements at obvious locations, such as frequently visited portals and search engines. However, this is not a cost-effective solution. A more refined approach involves analyzing the browsing pattern of an Internet user on a company’s Web site using the Web site’s log files. Analysis of the log files can help model the browsing behaviour of a random visitor to the Web site. Based on this information, Internet ad displays may be placed at appropriate locations. Marketing managers can also leverage this model to sell complementary products to potential users. For example, a department store such as Kapitel_4.indd 300 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 301 Marks & Spencer may advertise cosmetics on the page where a user is buying fragrances online. An electronics store like Best Buy may advertise the latest CD releases on the page listing different audio systems. However, this form of analysis is limited to advertising within the company’s Web site. A more advanced research approach involves modelling browsing behaviour at multiple Web sites using clickstream data. Information analyzed in this manner renders a total view of a customer’s online habits before purchase consideration. Such information is invaluable to marketers who would be interested in knowing when and where they’re most likely to find their potential customers and, based on that information, how they should place the Internet advertisements to pull the relevant customers to their site. Online Performance Tracking (metrics) Having designed an online advertising strategy, the next critical step is to track its performance. Traditional offline media (radio, television, and print advertisements) have well-defined and well-researched metrics in place that can accurately measure ad effectiveness. For example, there are many years of research testimony to show what a television commercial can do. Internet advertisements have a long way to go on this front. Some of the most commonly used measures include: clickthroughs• : the number of times that users click on an advertisement cost per click• : the amount spent by the advertiser to generate one click-through cost per action/lead (CPA/L)• : the amount spent by the advertiser to generate one lead, one desired action, or simply information on one likely user. The advertiser pays an amount based upon the number of users who fulfil the desired action. cost per sale (CPS)• : the amount spent by the advertiser to generate one sale. Here, the advertiser pays an amount based upon how many users actually purchase something. Increasingly, a large number of marketers claim to be optimizing their online campaigns using the ‘cost per sale’ metric, but it is clear that they are looking at sales (through online advertisements) as strictly margin transactions. The problem with this approach is that, while each individual transaction may look profitable to start with, it may not necessarily hold true over the lifetime duration of the customer. Similarly, initial returns that seem to be unprofitable may translate into very profitable transactions when measured over the lifetime value of the customer. Therefore, Customer Lifetime Value (CLV), which may be defined as the measure of expected value of profit to a business derived from customer relationships from the current time to some future point, is maybe the most relevant of all metrics. It provides a direct linkage on a customer-by-customer basis to what is most important for any company-profits. Marketing spend and outcome of advertisements guided by lifetime value measures would yield the most superior decision support system for a marketer. As companies become increasingly customer-centric, a switch to a customer lifetime value metric and building of buyer loyalty will become inevitable (Hollensen, 2006). Building Buyer Loyalty Using the web as a vehicle for building loyalty on the part of international buyers involves a number of different stages (Fletcher et al., 2004): Kapitel_4.indd 301 03.08.2010 13:01:58 Uhr 4. Marketing Mix in the Marketing Planning Process302 Attract• : attracting clients to visit the web site. They do so on a voluntary basis and will not come simply because a site has been created. To create awareness of the site, it is necessary to use banner ads and links to other sites Engage• : engaging visitor’s attention. This is necessary in order to get the visitor to the site to participate and encourage interaction. Most sites fail as promotional mediums because they are boring and have poorly presented material. In this connection, the content of the site is most important. Retain• : retain the visitor’s interest in your site. This is important to ensure repeat visits to the site and the creation of a ‘one-to-one ‘relationship between the firm and its potential overseas customer. One way of achieving this is by persuading the customer to provide information on their requirements so that the firm can customize its offering and thereby increase switching costs. Learn• : learn about the client and their preferences. This is enabled by providing on the site a facility for easy feedback and comment. The use of cookies can assist. Relate• : adopt a deliberate policy of building relationships with site visitors. This is achieved by providing value added content, by tailoring the product/service to the needs of each customer and promising customized delivery. The Web as Customer Acquisition Tool Attracting visitors to the company’s website is a huge step, but it only the first. Turning them into buyers is a bigger challenge, one at which many online sellers fail: the average sales conversion ratio across online B2C merchants is just 1.8 % (Vishwanath and Mulvin, 2001). Companies lose potential customers at different stages in the purchasing process – see also Figure 4.40. The stages at which customers lose interest can be summarized under the following headings: Visit of homepage Search of product or service Found product Placed product in shopping cart Purchase of product Repeat purchase Abandoned at homepage Abandoned after product is found Abandoned shopping cart Abandoned mid product search Did not purchase again Internet user / Customer Source: Adapted from Hollensen, 2006, modified Figure 4.40: Internet buying behaviour Kapitel_4.indd 302 03.08.2010 13:01:58 Uhr 4.4 Communication Decisions 303 home page• product search• after product found• shopping cart• failure to repeat purchase• A reason for defection which applies throughout each of these stages is unacceptable download times. We will now look at each of these stages in turn: Abandoned at home page • There are many reasons why a visitor may take one look at a company’s home page and decide to leave. Errant advertising is a leading cause. Established clicks-and-mortar companies have an advantage over pure-plays in attracting visitors. People know from experience what the company sells. But even wellestablished brands can lose a significant percentage of their homepage visitors. Often, it is poor design features such as time-consuming download time or confusing navigation that drive them away. Abandoned mid product search • Customers who leave the website while they’re still perusing merchandise typically do so when they can’t find what they’re looking for. Perhaps the selection is too narrow, or the shopper has run out of gift ideas. Best-practice merchants such as Victoria’s Secret overcome such problems by feeding the visitor suggestions (‘We think you’ll also love …’), directing them to the recipient’s wish list, or promoting online gift certificates. Abandoned after product is found • Even after online customers find what they are looking for, many stop short of making a purchase. There are numerous reasons: For example, net shoppers who decide not to purchase holiday gifts online may want to actually see the physical product before buying it. Small pictures and incomplete product information keep many browsers from buying online. Out-of-stock items and high prices are also deterrents. To stem the tide of customer defections at this stage of the buying process, some online merchants such as Lands End offer a live chat feature so shoppers can get their questions answered on the spot. Abandoned shopping cart • The foremost reason customers abort an online shopping trip is a cumbersome checkout process. Other reasons include excessive shipping costs and concerns about creditcard security or making returns. In this final moment of weighing up, multi-channel companies whose offline business has already established a strong brand and loyal customers are less likely to lose out on the sale. Retailers must have an efficient checkout process that minimizes the amount of information shoppers have to enter and closes the sale as quickly as possible. Failure to repeat purchase • A repeat customer is likely to be more favourable than a new customer since repeat shoppers tend to spend more. One of the main reasons why customers do not return is delivery problems. As the customer expectations are very high in this regard online marketers must make or buy a back-end system that will meet or exceed customer needs. Managing customer expectations is also important. In the case of stock outs or backorders, it Kapitel_4.indd 303 03.08.2010 13:01:59 Uhr 4. Marketing Mix in the Marketing Planning Process304 is better to give shoppers the bad news before they submit an order than to send a follow-up e-mail, as some e-retailers do. While the result may be a lost sale, preserving the customer relationship is more profitable in the long run. Unacceptable download times • Another factor in customer abandonment that is relevant at all points in the transaction chain is slow download and server response times. Five seconds is considered a ‘breaking point’ for page downloads, above which customers will go elsewhere. Meanwhile, consumer expectations are continually mounting. Companies that decline to make the necessary investments to keep their websites fast may see declines in sales and retention. But, companies should be cautious how they invest in their sites; fancy graphics and interactivity features designed to simplify the purchase process can actually slow down transaction times, especially since many potential customers do not have high bandwidth. Even if the servers are adequate, a data-rich website (such as one with lots of images, flash capabilities, or sound) may render your site maddeningly slow and impractical for a large percentage of your potential customers. The key for retailers is to find the balance between the site’s marketing impact, its functionality, and the ability of company and consumer infrastructure to handle the content. Viral Marketing Another example of cost-effective internet promotion for online customer acquisition is viral marketing, the multiplier effect achieved when visitors to a website provide contact information not only for themselves but also for others who may be interested in a product or service, or when they pass on a site’s information to others. Viral marketing can be considered as the Internet version of word-of-mouth marketing. It involved creating an e-mail message or other marketing event that is so ‘infectious’ that customers will want to pass it along to their friends. Because customers pass the message or promotion along to others, viral marketing can be very effective yet inexpensive because when the information comes from a friend, the recipient is much more likely to open and read it. The basic idea is to get the customers to do the company’s marketing for the organisation. Visitors to, for example, can choose from an assortment of flowers and vases to create and send a virtual bouquet – for free. In exchange, the company gets email addresses for two potential customers – the flowers’ sender and their recipient – to whom they can then market the real thing (Vishwanath and Mulvin, 2001). M-Marketing Mobile marketing or M-marketing should be considered within the context of m-business and m-commerce. Emerging from recent developments in communications technology, m-business represents ‘mobile’ business and ‘refers to the new communications and information delivery model created when telecommunications and the Internet converge’. Thus m-marketing is defined as the application of marketing to the mobile environment of smart phones, mobile phones and personal digital assistants (PDA). M-marketing is characterized by both the interaction with the World Wide Web and the location-specific context which enhances communication and delivery of information. Marketing communication and information can be delivered to mobile devices via voice-activated portals, text applications such as SMS, using e-mail (the current I-mode application), and via Web-mediated delivery using the 3G spectrum. Kapitel_4.indd 304 03.08.2010 13:01:59 Uhr 4.4 Communication Decisions 305 Predominantly ‘Short-messaging-services’ (SMS) has become a new technological buzzphrase in business-to-consumer markets. Marketing communication messages can be sent directly to customers’ devices. Numerous companies add text message numbers to their marketing messages to capture the interest of the consumers. This form of advertising is being used to enhance customer relationships, and to carry out direct marketing and promotional activities. The advantages of this approach for marketers are as follows (Jobber, 2010): Cost effective• : the cost per message is substantially lower compared to direct mail. Personalised• : like direct mail each message is sent to individuals, in contrast to traditional advertising. Targeting• : given that SMS use among 15-25 year-olds is 86 per cent, and 87 per cent among 25-34 year-olds in the UK, mobile marketing has high potential as a youth targeting tool (Middleton, 2002). Interactive• : the receiver can respond to the text message, setting up the opportunity for two-way dialogue. Customer relationship building• : by establishing an ongoing dialogue with consumers it can support the relationship-building process. Time flexible• : unlike direct mail, mobile marketing can be sent at various times of the day, giving greater flexibility. Immediate and measurable• : the results of the mobile campaign can be immediate and the results are measurable. Database building• : creative use of mobile marketing allows marketers to gather consumer information, which can be stored on a database. M-commerce combines the power and speed of the Internet with the geographic freedom of mobile telephony in terms of receiving and transmitting data and, importantly, the ability to conduct transactions. The emerging capacity to communicate with any individual, from any place, over any network, and to any device, regardless of time or geographical location provides enormous potential for marketers. For this reason, the impact on marketing strategies for direct marketers needs to be addressed. The emphasis on real-world interactions is paramount and creates a compelling difference between m-applications and traditional Web-based delivery. The mobile environment is not suitable for surfing the net, sorting through large and random accumulations of information requiring large amounts of time. Therefore, information needs to be in small packets, and products and applications should be developed around business models likely to deliver real value using the unique features to customers particularly through the immediacy of mobile interactivity. Volvo was the first company to use direct m-marketing in Australia to launch the Volvo S60. This successful campaign using wireless hand-held palm pilots highlights the potential for targeting appropriate segments cost effectively by using opt-in e-mail (Mort and Drennan, 2002). 4.4.8 Direct Marketing Many of the marketing and promotion tools that we have discussed so far in previous sections were developed in the context of mass marketing: targeting broad markets with standardized messages and offers distributed through intermediaries. Today, however, with the trend toward more specifically targeted or one-to-one marketing, many companies are adopting direct marketing, either as a primary marketing approach or Kapitel_4.indd 305 03.08.2010 13:01:59 Uhr 4. Marketing Mix in the Marketing Planning Process306 as an important supplement to other strategies. Direct marketing consists of direct connections with thoroughly selected individual consumers to both obtain an immediate response and cultivate enduring customer relationships. Direct marketers communicate directly with customers, often on a one-to-one, interactive basis. Making use of detailed databases, they tailor their marketing offers and communications to the specific needs of narrowly defined segments or even individual buyers. Beyond brand image building, direct marketers typically seek a direct, immediate, and measurable consumer response (Kotler and Armstrong, 2009). Direct marketing is a more encompassing concept than direct sales, which simply refers to sales from the producer directly to the ultimate consumer, bypassing the channel middlemen. This approach is not so much a promotional tool as a new distribution channel, but it grew out of direct mail, which is a traditional advertising medium. The traditional direct mail promotions of various products often offered ‘direct response’ options, including requests for more information, redeemable cents-off coupons, and participation in contests and lottery drawings. It was only a small step to a completed sale, and especially since credit cards became common, direct mail has become an important promotion and sales channel (Hollensen, 2006). Benefits of Direct Marketing For customers, direct marketing is convenient, easy to use, and private. From the comfort of their homes or offices, they can browse mail catalogues or company Web sites at any time. Direct marketing gives clients immediate access to a variety of products and information ‘at their fingertips’. In addition, direct marketing is immediate and interactive as buyers can interact with sellers by phone or on the seller’s Web site to create the configuration of information, products, and services they desire, and then order them instantly. For Sellers, direct marketing is a powerful tool for building customer relationships. With the use of databases, marketers can target narrow groups or individual con sumers, tailor their offers to the specific needs and wants, and promote these offers through personalised communications. Direct marketing can also be timed to reach prospects at just the right moment. Furthermore, this tool enables sellers access to buyers that they could eventually not reach through other channels. Finally, direct marketing can offer sellers a low-cost, efficient alternative for reaching their markets (Kotler and Armstrong, 2009). Example 32: Direct marketing campaign for Elefanten shoes Kapitel_4.indd 306 03.08.2010 13:01:59 Uhr 4.4 Communication Decisions 307 Growth of Direct Marketing As already outlined, direct marketing activities have grown substantially over the last years. Predominantly, the following factors have fuelled this rise (Smith and Taylor, 2004): Market and media fragmentation • The trend towards market fragmentation has limited the effectiveness of mass-marketing techniques to reach market-segments with increasingly individualised needs and wants. The growth of specialist media (media fragmentation) has implied that direct response advertising is more effective since market niches can be tightly targeted. Developments in technology • The rise in accessibility of computer technology and the improving sophistication of software, allowing the generation of personalised letters, has eased the tasks of direct marketers. Huge databases holding detailed information on individuals can be stored, updated and analysed to augment targeting. The rise of customer relationship management software has enabled companies to manage one-to-one relationships with huge numbers of consumers. The list explosion • The risen supply of lists and their diversity has provided the raw data for direct marketing activities. List brokers act as an intermediary in the supply of list names and addresses from list owners and aid the process of finding a suitable list for marketing purposes. Sophisticated analytical techniques • By using geo-demographic analysis, households can be classified into a neighbourhood type. These in turn, can be cross-referenced with product usage, media usage and lifestyle statements to create market segments that can be targeted by direct mail. Coordinated marketing systems • The high costs of personal selling have led an increasing number of organisations to take advantage of direct marketing techniques such as direct response advertising and telemarketing to make sales force more cost effective. Database Marketing At the centre of much direct marketing activity is the marketing database, since direct marketing greatly depends on customer information for its effectiveness. A marketing database is an organized collection of comprehensive data about individual consumers or prospects, including geographic, demographic, psychographic, and behavioural data (Kotler and Armstrong, 2009). Database marketing is an interactive approach to marketing that uses individually addressable marketing and media channels such as mail, telephone and the sales force to provide information to a target audience, stimulate demand, and stay close to customers by recording and storing electronic database memory of consumers, prospects and all communication and transactional data (Stone et al., 1995). The computer provides the capability of storing and analysing large quantities of data from diverse sources and presenting information in a convenient, accessible and useful format (Linton, 1995). Numerous companies and marketers confuse a customer mailing Kapitel_4.indd 307 03.08.2010 13:01:59 Uhr 4. Marketing Mix in the Marketing Planning Process308 list with a customer database. Whereas a customer mailing list is simply a set of names, addresses, and phone numbers, a customer database contains much more information. In business-to-business marketing, the salesperson’s customer profile might contain the products and services the customer has purchased; past volumes and prices; key contacts (and their ages, birthdays, hobbies etc.); competitive suppliers; status of current contracts; estimated customer spending for the next few years; and assessment of competitive strengths and weaknesses in selling and servicing the account. In consumer marketing, the database might contain a customer’s demographics (age, income, family members, birthdays etc.), psychographics (activities, interests, and opinions), buying behaviour (past purchases, buying preferences), and other relevant information (Kotler and Armstrong, 2009). Some of these databases are tremendously huge. For example, Ford’s customer database contains information on more than 33 million customers, including warranty information, survey results, retail sales data, finance records etc. Internet portal Yahoo! records every click made by every visitor, adding some 400 billion bytes of data per day to its database – the equivalent of 800.000 books. And Wal-Mart’s database contains more than 100 terabytes of data – that is 100 trillion bytes, equivalent to 16.000 bytes for every one of the world’s 6 billion people (Davenport, 2001). Using the information in their databases, companies can identify small groups of customers to receive fine-tuned marketing offers and communications. Firms can use a database to identify prospects and generate sales leads by advertising products or offers; they can build consumer’s interest and enthusiasm by remembering buyer preferences and sending appropriate information and gifts. Or companies might use the database to profile and segment customers based on previous purchasing and to decide which customers should receive particular offers. Major Direct Marketing Tools The major forms of direct marketing include personal selling, telephone marketing, direct mail marketing, catalogue marketing, direct-response advertising, and online marketing. We shall look at personal selling later in this chapter and examined online marketing already above. Here, we examine some other tools within the framework of online marketing as well as the other direct marketing forms. Direct Mail Marketing Direct mail marketing involves sending an offer, announcement, reminder, or other material to a person at a particular address with the purpose of promoting a product and/ or maintaining an ongoing relationship. Direct mail at its best allows close targeting of individual customers in a way not feasible using mass advertising media. Direct mail is well suited to direct, one-to-one communication. It permits high target market selectivity, can be personalised, is flexible, and allows easy tracking of results. Clearly, the effectiveness of direct mail relies heavily on the quality of the target customer data. In summary, direct mail can be very cost-effective at targeting specific segments of the market, with easily measurable results. However, critics point to low response rates, the existence of junk mail, the fact that personal information can be sold to mailers without the knowledge of the subject, and the fact that some firms persist in sending mail even when they have been asked to stop. In addition, direct mail may work out more expen- Kapitel_4.indd 308 03.08.2010 13:01:59 Uhr 4.4 Communication Decisions 309 sive than e-mail campaigns, which are becoming more attractive as access to broadband expands rapidly (Benady, 2005). Telemarketing Telephone marketing (also called telemarketing) involves using the telephone to sell directly to consumers and business customers. There are a number of reasons why telemarketing has grown substantially in recent years. First, it has lower costs per contact than a face-to-face salesperson visit. Second, it is less time consuming than personal visits. Third, the growth in telephone ownership has increased access to households, and the use of toll-free lines has reduced the cost of responding by phone. Finally, despite the reduced costs compared to a personal visit, the telephone retains the advantage of two-way communication. However, telephone marketing suffers from a number of disadvantages. First, it lacks the visual impact of a personal visit and it is not possible to assess the mood or reactions of the buyer through observation of the body language. It is easier for a consumer to react negatively over the telephone and the number of rejections can be quite high as telephone selling can be considered intrusive. Finally, although cost per contact is less expensive than a personal sales call, it is more expensive than direct mail, media advertising or the Internet (Jobber, 2010). Catalogue Marketing Catalogue marketing is the sale of products through catalogues distributed to agents and consumers, usually by mail or at stores. In addition, most print catalogues have added Web-based catalogues to their marketing offer, and a variety of new Web-only cata loguers have emerged. When used effectively, catalogue marketing to customers provides a convenient way of selecting products at home that allow in-depth discussion and evaluation with family members in a relaxed atmosphere away from crowded shops. Especially for remote rural locations it provides a valuable service, preventing the necessity to travel long distances to town shopping areas. For catalogue marketers, the expense of high-street locations is removed and there is the opportunity to display a wider range of products than in a shop. Nevertheless, catalogues are quite expensive to produce and they require Example 33: Promotion of a new IKEA catalogue with lots of new products. The company used the existing architecture of the south station in Vienna. The box-looking windows of the frontside were converted into a giant EXPEDIT rack filled with new IKEA products. It’s size: 480 square meters Kapitel_4.indd 309 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process310 regular updating, particularly when selling fashion items. In addition, they do not allow goods to be tested (e.g. shaver) or tried on (e.g. clothing) before purchase (Jobber, 2010). Most companies use the Internet as an added sales tool to augment their printed catalogues. Whereas print-catalogue space is limited, online catalogues can offer an almost unlimited amount of merchandise. Furthermore, online catalogues can be enhanced with interactive features, such as games, contests, and daily specials. However, Webbased catalogues have disadvantages as well. Whereas a print catalogue is intrusive and creates its own attention, Web catalogues are passive and must be marketed. Thus, even cataloguers who are sold on the Web are not like to abandon their print catalogues as the example of Otto shows. Direct Response Advertising Direct response advertising appears in the prime media, such as television, newspapers and magazines, but differs from standard advertising as it is designed to elicit a direct response such as an order, enquiry or request for a visit of a salesperson. Typically, a free contact number is included in the advertisement and a website address. This tool combines the ability of broadcast media to reach large sections of the population with direct marketing techniques that allow a rapid response. Direct response television (DRTV) generally entails telephone numbers to let viewers call for purchases. The advantage is that marketer can get direct response to a massmarket advertisement, but whether viewers will interrupt their programme viewing to surf the Internet for a listed Web site or calling a particular contact number is questionable (Murphy, 2001). Online Marketing There is no doubt that the Internet has changed the way people communicate. For many, e-mail has virtually replaced traditional letters and even telephone calls as the choice for correspondence. Every day, billions of e-mail messages are sent out. This has also influenced the way of doing business. Prepared well, e-mail marketing can be one of the most cost-effective communications tools. It is fast, inexpensive, and effective, and its response rates are many times that of direct mail. However, the e-mail marketing landscape is beleaguered with examples of marketers getting labelled as spammers, annoying customers, violators of privacy laws and worse. A major strength of direct e-mail is its ability to qualify leads. Appropriate software allows the firm to track who is reading and responding along with the types of responses. This enables the firm to segment the audience accordingly, targeting future communications based on recipients’ self-reported priorities. A checklist for launching a successful e-mail marketing campaign includes the following aspects (Linkon, 2004): Solid planning• . Companies are required to have clear and measurable objectives, and they must carefully plan their campaign. Excellent content• . Standards are higher with e-mail, so firms have to make sure they are offering genuine value to the subscriber. Appropriate and real ‘from’ field• . This is the first thing recipients look at when they are deciding whether to open an e-mail. Kapitel_4.indd 310 03.08.2010 13:02:00 Uhr 4.4 Communication Decisions 311 Strong ‘subject’ field• . The next place recipients look before deciding whether to open an e-mail is the subject field. Therefore, it needs to be compelling. Right frequency and tim-• ing. Organisations must not overwhelm their audience. They are not supposed to send e-mail Friday through Monday or outside of normal business hours. Appropriate use of graph-• ics. Businesses should not get carried away. If graphics add real value and aren’t too big, they could be used. Lead with company’s strength• . Companies should not bury the best content or offer. They need to ensure it is at the top or at the e-mail equivalent of ‘above the fold’. Shorter is better• . Nobody reads a lot these days, and they read less in e-mail than anywhere else. Personalize• . Marketers should use just three or four elements of personalization, and response rates can potentially improve by 60 per cent. They should try to go beyond just the first name and learn about the subscribers. Link to company’s Web site• . This is where the richness of content and interactivity can really reside. Marketers should tease readers with the e-mail so they will link to the Web site. Advertising can also be incorporated, serving the same role as the initial e-mail: to create a desire in the audience for more information. The Web site catch page is crucial to this tactic and is often where many people falter when integrating traditional advertising with online promotions. Measure and improve• . The ability to measure basics such as open and click-through rates is one of the main advantages of e-mail marketing, but companies should not stop there. They should also track sales or other conversions and learn from what works and make necessary adjustments. 4.4.9 Personal Selling The final major element of the promotional mix is personal selling. This involves face-toface contact with a consumer and, unlike advertising, promotion and other forms of nonpersonal communication, personal selling allows a direct interaction between buyer and seller. This process implies that the seller can identify the specific needs and wants of the buy an tailor the sales approach and presentation accordingly. However, such flexibility is expensive as the cost of a car, travel expenses and sales office overheads can mean that the total annual investment for a salesperson is often twice the level of a salary. Example 34: Online marketing campaign: Zoogami releases a new beer and wants to position it as a modern product that follows the evolutions of the world. This is the Contemporary Beer project, born to explain, in a completely revolutionary way, what happens in the world in real time Kapitel_4.indd 311 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process312 Sales Management Establishing the company’s own sales force requires sophisticated planning and considerable resources. Sales force management can be defined as the analysis, planning, implementation, and control of sales force activities (Kotler and Armstrong, 2009). The following steps are involved in structuring and managing a sales force (Cateora and Graham, 2004): 1. designing sales force strategy and structure 2. recruiting salespeople 3. selecting salespeople 4. training salespeople 5. motivating sales personnel 6. designing compensation systems 7. evaluating and controlling sales representatives We shall discuss these major sales force management decisions in the following sections. Designing Sales Force Strategy and Structure Based on analyses of current and potential customers, the selling environment, competition, and the firm’s resources and capabilities, marketing managers face two critical design decisions. They need to determine the sales force size and organize the sales force. The most practical method for deciding the number of sales people required is the ‘workload approach’. It is based on the calculation of the total annual calls required per year divided by the average calls per year that can be expected from one salesperson (Talley, 1961). A company can divide up sales responsibilities along any of several lines. There are three alternative approaches to organizing the sales force: Territorial sales force structure • In the territorial sales force structure, each salesperson is assigned to an exclusive geographic area and sells the company’s full line of products and services to all customers in that territory. This type of organisation plainly defines each salesperson’s job and determines accountability. Furthermore, it is likely to increase the salesperson’s desire to build local business relationships that, in turn, improve selling efficiency and effectiveness. Product sales force structure • A product sales force structure is a sales force organisation under which salespeople specialize in selling only a portion of the company’s products or lines. This structure might be effective where a company has a diverse product range selling to different customers or at least different people within a given organisation. However, this approach can lead to problems, if a single large customer buys many different company products. Customer sales force structure • An increasing number of companies are using a customer sales force structure, in which they organize the sales force along customer or industry lines. Different sales forces may be set up for various industries, for serving current customers versus finding new ones, and for major accounts versus regular accounts. Organizing the sales force around consumers can help a company build in-depth relationships with important key customers. Kapitel_4.indd 312 03.08.2010 13:02:00 Uhr 4.4 Communication Decisions 313 Recruiting Salespeople At the heart of any successful sales force operation is the recruitment and selection of high-calibre salespeople as the performance difference between an average salesperson and a top salesperson can be quite substantial. In an international context, the number of marketing management personnel from the home country assigned to foreign countries varies according to the size of the operation and the availability of qualified locals. The largest personnel requirement abroad for most companies is the sales force, recruited from three sources: expatriates, local nationals, and third-country nationals. A company’s staffing pattern may include all three types in any single foreign operation, depending on qualifications, availability, and a company’s needs. The advantages and the disadvantages of the three types of international sales force are summarized in Table 4.7. Selecting Salespeople To select personnel for marketing positions effectively, management must define precisely what is expected of its people. A formal job description can aid management in expressing long-range needs as well as current needs. In addition to descriptions for each marketing position, the criteria should include special requirements indigenous to various countries. Category Advantages Disadvantages Expatriates (Person sent out from home base – HQ) Greater control is feasible • from home base (HQ) Knowledge about prod-• uct, technology, and management policies High service• Willing to learn as it is • often a training for later promotion Highest costs • High training expenses• Lack of local cultural • understanding High staff turnover • Host country (local person) Economical ‘good’ • solution Best cultural knowledge• High local market famili-• arity Local language skills • Access to local network of • relevant decision-makers and stakeholders Requires product training• May be held in low • esteem Importance of language • skills declining Complicated to ensure • loyalty Third country Allows regional coverage• Cultural sensitivity• Language skills• Economical• May face identity • problems Income gaps• Blocked for promotions in • the company Resources necessary for • loyalty assurance Source: Adapted from Hollensen, 2006, modified Table 4.7: Advantages and disadvantages of international sales force types Kapitel_4.indd 313 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process314 International personnel require a kind of emotional stability not necessarily demanded in domestic positions. Regardless of location, these people are living in cultures dissimilar to their own; to some extent they are always under scrutiny and always aware that they are official representatives of the company abroad. They need sensitivity to behavioural variations in different countries, but they cannot be so hypersensitive that their behaviour is adversely affected. Managers or salespeople operating in foreign countries need considerable breadth of knowledge of many subjects both on and off the job. The ability to speak one or more other languages is always preferable. An international salesperson must have a high level of flexibility, whether working in a foreign country or at home. Expatriates working in a foreign country must be particularly sensitive to the habits of the market; those working at home for a foreign company must adapt to the requirements and ways of the parent company. Cultural empathy is also clearly a part of the basic orientation because it is unlikely that anyone can be effective if confused about the environment. Finally, international sales and marketing personnel must be energetic and enjoy travel. Selection mistakes are costly. When an expatriate assignment does not work out, hundreds of thousands of dollars are wasted in expenses and lost time. Getting the right person to handle the job is also important in the selection of locals to work for foreign companies within their home country (Hollensen, 2006). Training Salespeople New and experienced salespeople may spend anywhere from a few weeks or months to a year or more in training. Many companies send their new sales representatives into the field almost immediately upon hiring them, after only a cursory training program. The rationale is that time is best spent prospecting and meeting with customers, rather than sitting in a training centre (Crittenden and Crittenden, 2004). It is factual that detailed training can be costly and may result in lost opportunities when a seller is not in the field. Yet effective long-term sellers must not only have appropriate personal characteristics, they must also know and identify with the company and its products, understand customer buying motives, and be prepared to make an effective sales presentation, counter initial resistance, and dose the sale. Moreover, to be successful, the seller has to know how to develop and maintain the records necessary to process orders, service customers, and cultivate repeat sales. Training programs have several goals. Salespeople need to know and identify with the company and its products and services, so most training programs begin by describing the company’s objectives, organisation, financial structure, facilities, and main products and markets. They also need to know about customers and competitors. Finally, in order to sell effectively, they are also trained in the basics of the selling process (Kotler and Armstrong, 2009). The nature of an international training program depends largely on whether expatriate or local personnel are being trained for overseas positions. Training for the expatriates focuses on the customs and the special foreign sales problems that will be encountered, whereas local personnel require greater emphasis on the company, its products, technical information, and selling methods. Kapitel_4.indd 314 03.08.2010 13:02:00 Uhr 4.4 Communication Decisions 315 The Internet now makes some kinds of sales training much more efficient. Users can study text on-screen and participate in interactive assessment tests. Firms may also need to devote resources toward training the trainers. Top sellers who move into positions where they also manage other sales representatives do not necessarily have the appropriate skills, mindset, or disposition to train others. Motivating Salespeople Effective motivation is based on a deep understanding of salespeople as individuals, their personalities and value systems. According to Luthans (1997) the basic motivation process involves needs (deprivations) which set drives in motion (deprivations with direction) to accomplish goals (anything which alleviates a need and reduces a drive). Motivation has been the subject of much research over many years. Maslow, Herzberg, Vroom, and Likert, among others, have produced theories that have implications for the motivation of salespeople. In summary, the implications are that sales managers should (Jobber, 2010): get to know what each salesperson values and what each one is striving for (unreal-• ized needs) be willing to increase the responsibility given to salespeople in mundane jobs• realize that training can improve motivation as well as capabilities by strengthening • the link between effort and performance provide targets that are believed to be attainable yet provide a challenge to sales-• people link rewards to the performance they want enhanced recognize that rewards can be both financial and non-financial (e.g. praise).• Designing Compensation Systems To attract good salespeople, a company must have an appealing compensation plan. Compensation is made up of several elements – a fixed amount, a variable amount, expenses, and fringe benefits. Developing an equitable and functional compensation plan that combines balance, consistent motivation, and flexibility is extremely challenging in international operations. Besides rewarding an individual’s contribution to the firm, a compensation program can be used effectively to recruit, develop, motivate, or retain personnel. International compensation programs also provide additional payments for hardship locations and special inducements to reluctant personnel to accept overseas employment and to remain in the position. Compensation plans of companies vary substantially around the globe, reflecting the economic and cultural differences in the diverse markets served. Management has to decide what mix of compensation elements is most effective for each sales job. Different combinations of fixed and variable compensation give rise to three basic types of compensation plans. We shall now examine the different types of compensation: fixed salary, straight commission and salary plus commission/bonus (Hollensen, 2006): Fixed/straight salary • Perhaps the simplest reward system for salespeople involves paying a fixed amount each pay period. The major benefits of salary are more control over wage levels and generally lower compensation for field salespeople. With a salary plan, wages are a Kapitel_4.indd 315 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process316 fixed cost to the firm, and the proportion of wage expense tends to decrease as sales increase. In addition, fixed salary also provides the income security that many salespeople value. Straight salary is common in industrial selling where service and engineering skills are important. Straight salary is also effective when salespersons spend their time calling on retailers to set up displays, take inventory, and arrange shelves. Pharmaceutical detail people, for example, are not expected to make direct sales and are paid a salary to strengthen relations with doctors and pharmacists. Because pay is not tied directly to performance, salary systems are often criticized for failing to provide incentives for extra effort. Furthermore, the system may lead to perceived injustices if higher-performing salespeople are not being paid more than their lower-achieving colleagues. Straight commission • The straight commission plan rewards people for their accomplishments rather than for their time. Also, salespeople who are paid commissions typically make more money than with other wage programs. Higher wages tend to attract better qualified applicants and provide a strong incentive to work hard. Despite some obvious advantages, straight commission has a number of drawbacks. The major problem is that sales managers have small control over commission salespeople, and nonselling activities are likely to be ignored. Commission salespeople are tempted to sell themselves rather than the company, as well as to service only the best accounts in their territories. Because salespeople’s wages are directly related to sales to particular accounts, sa1espeople are often reluctant to have their territories changed in any way. Salary plus commission/bonus • The most common compensation plan combines a base salary with a commission and/or bonus. The base salary provides salespeople with income security and the commission and/or bonus give added incentives to meet the company’s objectives. If an organisation wants a modest incentive, the plan could be designed so that 70 percent of the compensation was salary and 30 percent was earned by commissions or bonuses. Firms that needed more push to move their products could raise the incentive portion to 50 percent or more. Evaluating and Controlling Salespeople Sales force evaluation provides the information necessary to check if targets are being achieved, and provides the raw information to steer training and motivation. In evaluation and control of sales people, emphasis is often placed on individual performance, which can easily be measured by sales revenues generated (often compared with past performance, forecasts, or quotas). These quantitative measures can be compared against target figures to identify strengths and weaknesses. In addition, qualitative measures rely on soft data. They are intrinsically more subjective and include assessment of sales skills (e.g. making presentations), customer relationships (e.g. how much confidence do customers have in the salesperson), product knowledge (e.g. how well informed is the salesperson regarding company and competitor products), self-management (e.g. how ell are calls prepared), and cooperation and attitudes (e.g. to what extent does the salesperson show initiative). The use of quantitative and qualitative measures is interrelated and essential in the framework of evaluation processes. Evaluation of the personal selling function should Kapitel_4.indd 316 03.08.2010 13:02:00 Uhr 4.4 Communication Decisions 317 also include assessing the quality of its relationship with marketing and other organisational units. Salespeople that manage the external relationship with distributors (e.g. retailers) must collaborate internally with their colleagues in finance and marketing and other divisions to agree joint business objectives and to develop coherent marketing programmes (Dewsnap and Jobber, 2002). The Personal Selling Process The actual selling process consists of several steps that the salesperson must master. These stages focus on the goal of getting new customers and receiving orders from them. However, most salespeople spend a great deal of their time maintaining existing accounts and building long-term customer relationships. We discuss the relationship aspect of the personal selling process in a later section. The selling process consists of seven steps: prospecting and qualifying, pre-approach, approach, presentation and it demonstration, handling objections, closing, and follow-up. We will now examine in more detail (Kotler and Armstrong, 2009). Prospecting and Qualifying The first step in the selling process is prospecting – identifying qualified potential consumers. Usually, the salesperson must often approach many prospects to get just a few sales. Although the company supplies some guidance, salespeople require skill in finding their own. They can ask current customers for referrals. They can cultivate referral sources, such as suppliers, dealers, and bankers. Or they can search for prospects in directories or on the Web and track down leads using the telephone and direct mail. Pre-Approach The pre-approach is the step in the selling process in which the salesperson learns as much as possible about a prospective customer before making a sales call or visit. The preparation carried out prior to a sales visit can reap dividends by enhancing confidence and performance when the salesperson is face-to-face with the customer. Salespeople will benefit from gaining knowledge of their own and competitor’s products, by understanding buyer behaviour and by having clear sales call objectives and by having planned their sales representation. This is because the success of the sales interview is customer-dependant. Approach During the approach step, the salesperson should know how to create a favourable initial impression with customers as this can often affect later perceptions. This step involves the salesperson’s appearance, opening lines, and the follow-up remarks. Positive impressions can be gained by adopting a businesslike approach, being friendly but not overly familiar, being attentive to detail, and observing common courtesies. As in all stages of the selling process, listening to the customer is crucial. Presentation and Demonstration The presentation step of the selling process offers the opportunity for the salesperson to convince customers that they can supply the solution to their problem. Consequently, it should focus on customer benefits rather than product features. The salesperson should continue to ask questions during the presentation to ensure that the customer has under- Kapitel_4.indd 317 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process318 stood what he or she has said, and to check that what the salesperson has talked about really is of importance to the consumer. Handling Objections Customers almost always have abjections during the presentation or when asked to place an order. The problem can be either logical or psychological, and objections are often unspoken. Although objections can cause problems, they should not be regarded negatively per se since they highlight issues that are important to the customer. It is of paramount importance in handling objectives to touch both substantive and emotional aspects. Salespeople have to listen to the objection without interruption and should employ an ‘agree and counter’ technique, where they agree with the buyer but then put forward an alternative point of view with respect to the problem of the consumer. In summary, the salesperson should use a positive approach, seek out hidden objections, ask the buyers to clarify any objections, take objections as opportunities to provide more information, and then turn the objections into reasons for purchasing. Closing After handling the prospect’s objections, the salesperson tries to close the sale. Salespeople should know how to recognize closing signals from the buyer, including physical actions, comments, and questions. They can use several closing techniques: they can simply ask for the order, review points of agreement and offer to help write up the order. In this context, the salesperson may offer the buyer special reasons to close, such as a lower price or an extra quantity at no charge. Follow-Up Follow-up is the last step in the selling process. Right after closing, the salesperson should complete any details on delivery time, purchase conditions, and other subjects. The salesperson then should schedule a follow-up call when the initial order is received, to ensure there is proper installation, instruction, and servicing. This visit would eventually reveal any problems, assure the buyer of the salesperson’s interest, and reduce any buyer concerns that might have arisen since the sale. Personal Selling and Customer Relationship Management The principles of personal selling as just describe are transaction oriented – their aim is to aid salespeople close a specific sale with a customer. However, in many cases, the company is not striving solely for a sale: when a firm has targeted a major customer it would like to show that is has the capabilities to continuously serve the client in a mutually profitable relationship. The sales force typically plays an important role in building and maintaining profitable customer relationships. Today large customers favour suppliers who can sell and deliver a coordinated set of products and services to many locations, and who can work closely with customer teams to continuously enhance products and processes. For these customers, the initial sale is only the beginning of the relationship. Unfortunately, some companies ignore these realities and sell their products through separate sales forces, each working independently to close sales. Their salespeople focus in pushing products toward customers rather than listening to them and providing appropriate solutions. Kapitel_4.indd 318 03.08.2010 13:02:00 Uhr 4.4 Communication Decisions 319 Other companies, however, recognize that winning and keeping accounts requires more than simply making good products and directing the sales force to close lots of sales. It requires listening to customers, understanding their needs and wants, and carefully coordinating the whole company’s efforts to create long-term customer value and to build lasting relationships with key clients (Kotler and Armstrong, 2009). 4.4.10 Product Placement Product placement is the deliberate placing or products and/or their logos in movies and television, usually in return for money. While it has been giant business in some countries, like the United States, for some time, restrictions preventing product placement have only recently been relaxed in Europe. For example, Steven Spielberg’s science-fiction film ‘Minority Report’ featured more than 15 major brands, including Gap, Nokia, Pepsi, Guinness, Lexus and Amex, with their logos appearing on video billboards throughout the film. These product placements earned DreamWorks and 20th Century Fox $ 25 million, which went some way towards reducing the $ 102 million production costs for the film (Jobber, 2010). The Growth in Product Placement Product placement has grown substantially in recent years for the following reasons: Mass-market reach• : media fragmentation implies that it is increasingly difficult to reach mass markets; Movies can reach hundreds of millions of consumers worldwide, creating instant brand awareness. Positive associations• : brands can benefit from positive images in a film or television programme. For example, James Bond to be seen driving an Aston Martin, imparts the Bond association of sophistication, masculinity and style to the car. Credibility• : many consumers do not realize that brands have been product-placed. The brands are perceived being used rather than appearing in a paid-for advertisement. This can substantially add to the credibility of the associations sought. Message repetition• : movies are often repeated on television and bought on video or DVD, creating opportunities for brand message repetition. Avoidance of advertising bans• : with bans on advertising certain products, such as alcohol and cigarettes, in particular media, product placement is an opportunity to reach large audiences. Example 35: Aston Martin successfully utilizes product placement in the James Bond films Kapitel_4.indd 319 03.08.2010 13:02:00 Uhr 4. Marketing Mix in the Marketing Planning Process320 Targeting• : by choosing an appropriate film or television programme, specific market segments can be reached. Branding opportunities• : new brands can be launched linked to the movie. Promotional opportunities• : placements in films can provide promotional opportunities by creating related Web sites. Risk Associated with Product Placement Although product placement has the above mentioned advantages, there are also risks involved (Jobber, 2010): Movie and programme failure• : just as brands can benefit from movie or television success, failures can eventually tarnish brand image by association. Lack of prominence• : the brand may be overshadowed by action in the movie and not be noticed properly. Audience annoyance• : obvious product placement may cause audience annoyance, tarnishing any positive brand association. Loss of control• : other people and stakeholders, such as directors, editors, and critics reduce the marketer’s degree of control compared to standard advertisement. 4.4.11 Push and Pull Strategies Marketers can choose from two basic promotion mix strategies – push promotion or pull promotion. The distinguishing features of ‘push’ and ‘pull’ strategies are illustrated in Figure 4.41 (in the distributor-box, both the wholesaler and the retailer are contained). Push Strategy A ‘push’ promotional strategy involves ‘pushing’ the product through distribution channels to final customers. It makes use of a company’s sales force and trade promotion activities create distributor demand for a product. The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers. A good example of ‘push’ selling is mo- Source: Adapted from Kotler and Armstrong, 2009, modified ConsumerRetailers andwholesalersManufacturer Producer marketing activities (consumer advertising, sales promotion, other) ConsumerRetailers andwholesalersManufacturer Demand push push pull Demand Producer marketing activities (personal selling, trade promotion, other) Reseller marketing activities (personal selling, advertising, sales promotion, other) Figure 4.41: Push-and-pull strategies Kapitel_4.indd 320 03.08.2010 13:02:01 Uhr 4.4 Communication Decisions 321 bile phones, where major handset manufacturers, such as Nokia, promote their products via retailers such as Carphone Warehouse. Personal selling and trade promotions are often the most effective promotional tools for companies such as Nokia – for example, offering subsidies on the handsets to encourage retailers to sell higher volumes. Pull Strategy A ‘pull’ selling strategy is one that requires high spending on advertising and consumer promotion to build up consumer demand for a product. If the pull strategy is effective, consumers will then demand the product from channel members, who will in turn demand it from producers. Thus, under a pull strategy, consumer demand ‘pulls’ the product through the channels. A good example of a pull is the heavy advertising and promotion of children’s toys – mainly on television. For example, the BBC used this approach for its pre-school program ‘Fimbles’. Aimed at two to four-year-olds, 130 episodes of Fimbles have been made, and they are featured everyday on digital children’s channel CBeebies and BBC2. As part of the promotional campaign, the BBC has agreed a deal with toy maker Fisher- Price to market products based on the show, which it hopes will emulate the popularity of ‘Tweenies’ (another successful TV-series for kids). Under the terms of the deal, Fisher- Price develops, manufactures and distributes a range of ‘Fimbles’ products including soft, plastic and electronic learning toys for the UK and Ireland. In 2001, BBC Worldwide (the commercial division of the BBC) achieved sales of £90m from its children’s brands and properties. The demand created from broadcasting of ‘Fimbles’ and a major advertising campaign was likely to ‘pull’ demand from children and encourage of retailers to stock ‘Fimbles’ toys in the stores (Hollensen, 2006). Companies need to consider many factors when designing their promoting mix strategies, including type of product/market and the product life-cycle stage. For example, the importance of different promotion tools varies between consumer and business markets. Business-to-consumer (B2C) companies usually ‘pull’ more, putting more of their funds into advertising, followed by sales promotion, personal selling, and then public relations. In contrast, business-to-business (B2B) companies tend to ‘push’ more, putting more of their funds into advertising, followed by sales promotion, personal selling, and then public relations. In general, personal selling is used more extensively with expensive and risky products and services and in markets with fewer and larger sellers (Kotler and Armstrong, 2009). 4.4.12 Multi-Channel Customer Management (MCCM) Companies are gradually more moving towards the world of multichannel integration. Along with this development a growing integration between distribution channels (through which products or services reach customers from suppliers, including transfer of title) and communication channels (through which customers and suppliers communicate with each other before, during and after distribution channels do their work) can be observed (Hollensen, 2006). Multichannel customer management is the use of more than one channel or medium to manage customers in a way that is consistent and coordinated across all the channels Kapitel_4.indd 321 03.08.2010 13:02:01 Uhr 4. Marketing Mix in the Marketing Planning Process322 or media used. Many companies are in a transition phase in terms of channel management: they are moving away from channels devoted to restricted tasks and not communi-• cating with each other, but are not certain how far to move towards channels which all work with the same data and to the same objectives they have seen some of the disadvantages of having different and possibly incompat-• ible technology platforms for each channel, but are not certain of the benefits of moving to a single platform they have been through the process of setting up dotcoms as separate web channels • separate web channels often had their own objectives, management, staff and sys-• tems, usually experienced escalating costs, provided a customer experience which was very different from that of other channels, and in some cases created brand damage and increased customer churn. A multichannel strategy is one that provides numerous customer touch-points – the points at which products and services are purchased or serviced – across several distribution channels, such as: direct channels, e.g. telephone, Internet, mobile telephone (voice, SMS and eventually) • and interactive television (iTV) counter and kiosk service in branch networks or retail outlets – partnerships and al-• liances – sales force service force• In some cases, these may be supported by broadcast media, in which the customer is not necessarily identified (e.g. television, radio, press and some Web applications). Why is Multichannel Customer Management Important? There are two main reasons for the importance of multichannel customer management: Developments in new channel technology• : increasing reliability and speed of storage and telecommunications technology, convergence of voice, video and data. Customer requirements and expectations• : some (not all) customers expect technology and processes to be used to manage them more consistently across channels. Although it is currently easier to ensure that every channel dealing directly with a given customer has the latest data on the state of interaction between supplier and customer, and follows related, connected processes, this is not costless or without technical problems. In particular, it should be noted that the companies for whom it is suggested that multi channel customer management will yield the most benefits are those for whom achieving it is most problematic. They have the largest customer bases, the most complex lines and the longest history of systems development, with many business-critical systems that support the process of customer management being quite old. This applies, for example, to many companies in financial services, logistics and manufacturing companies. Drivers of Multi-Channel Customer Management The seven factors discussed below are causing companies to focus on multichannel management. Kapitel_4.indd 322 03.08.2010 13:02:01 Uhr 4.4 Communication Decisions 323 Customer Demand Customers’ desire for convenience has partly fuelled the increasing requirement for multichannel integration. Increased customer expectations translate to a demand for high-speed access and choice in how they interact with a company. Customers often have strong preferences for using a specific channel for particular kinds of interaction, for example, they may use the in-store channel to commit to a buying decision, while using the more convenient online channel for exploring options Strategic Competitive Advantage and Differentiation Products can be copied within days (some fashion retailer can copy a design from the catwalk and get it on the High Street within a week). Pricing can be undercut within minutes. Apart from branding, multichannel management is one of the few customerfacing differentiators that can deliver true sustainable competitive. Channel Costs Maintaining channels (including marketing, advertising and managing the channels themselves) can typically account for around 40 per cent of a company’s costs. Channels tend to be managed and maintained in silos with multiple infrastructures, management teams, technology and, possibly, different marketing strategies. The potential sharing and reuse of people, process and technology that can be achieved through an integrated channel strategy can, however, help improve an organisation’s channel cost structure. Furthermore, the mapping of high-value customer usage and preferences can help identity channel areas of over-investment and channels which are not providing their optimum ROI and consequently identify channels that require some form of disinvestment and asset reallocation. Allowing Customers to Manage Relationships Deficiently executed customer relationship management (CRM) can result in the organisation trying to control customers almost against their will through specific channels at specific times in the buying cycle. Customers can end up being made to feel like cattle being herded. Customer satisfaction and sales plummet. The term ‘customer-managed relationships’ (CMR) recognizes the possibility of the customer being in control and the idea that it is the supplier’s job to nurture and service the relationship. Convergence of Channel Roles Traditionally, channels were usually silos with most, if not all, of the functions required in the customer-buying cycle being fulfilled through one channel. Now in many companies, several channels are used during each customer-buying cycle and need to be designed, maintained and measured appropriately. Increased Variety in Customers’ Channel use Patterns Those who synchronise their distribution channels will preserve or gain market share. Research has shown that multichannel shoppers in the financial services and retail sectors represent an increasingly large proportion of the attractive buying population. Furthermore, in the retail banking sector, multi channel customers are 2S to 50 per cent more profitable than those using one channel while retail shoppers who use multichannel purchasing spend two to four times more than those who purchase through a single Kapitel_4.indd 323 03.08.2010 13:02:01 Uhr 4. Marketing Mix in the Marketing Planning Process324 channel. These findings are reinforced by the Boston Consulting Group whose research revealed that European retailers who have an off-line presence and manage an integrated Internet channel enjoy a disproportionate market-share and on-line satisfied customers spend 71 per cent more and transact 2,5 times more than dissatisfied ones (Stone et al., 2002). Providing the target high-value multichannel customer segment with increased convenience through integrated channel management therefore not only encourages customer lock-on and brand loyalty, but results in improved customer lifetime value. Regulatory Pressure In some sectors (e.g. financial services, public sector) government has a strong interest in the cost-effectiveness and quality of channel use, particularly where high channel costs lead to customers apparently getting poor value or even to customers being excluded or disenfranchised. Benefits and Problems with Multi-Channel Customer Management The benefits of multichannel customer management are numerous. These include benefits that work through customers, ones that work for customers and ones that work through efficiency, as described below. The benefits for companies working with MCCM are: the identification and capture of opportunities for increasing value per customer• increased convenience and an improved experience, reducing customer churn rates • and increasing their motivation to buy more from the supplier the ability to leverage an established brand creating positive impacts on brand per-• ception and mitigating the risk of brand damage, increasing the incentive for customers to stay and buy more increased efficiency through the sharing of processes, technology and information• increased organisational flexibility• increased efficiency in dealing with business partners, so they can reduce their costs• increased efficiency in exploiting customer data to identify customer needs, possibly • indicating new paths for growth. The benefits for customers are: increased choice in the way they can interact• the ability to switch easily between the various channels, when it suits them and • wherever they want to, depending on their preference and the type of interaction, whether it be the exploration or purchase of a product or service. For the supplier, channel integration helps the sharing of customer data across channels to create a more complete customer profile, which will help to maximize cross-selling opportunities. However, multi-channel integration does not come without its challenges. Problems experienced by companies include: heavy investments in unconvincing multi channel strategies and technologies that • result in a poor return on investment (ROI) Kapitel_4.indd 324 03.08.2010 13:02:01 Uhr 4.4 Communication Decisions 325 problems in bringing together and standardizing data about customers or resulting • from interactions with them problems unifying different systems which may have very different data models• difficulties in reducing or abolishing organisational boundaries.• Managing Multi-Channel Customer Management Within the framework of a sophisticated planning of multi-channel customer management organisations need to consider the aspects discussed below (Hollensen, 2006). Determining Channel Functionality Careful thought needs to be paid to the use of each channel in multichannel programmes – ‘one channel fits all’ is not the case anymore. Car buyers no longer just visit their local dealer, and television buyers no longer just go down to their local electrical store. Research suggests that many customers use multiple channels throughout the buying cycle; some channels are used to research while others are used to purchase or service. If a company decides to adopt a multichannel strategy, it must consider whether all its channels should offer the same range of products and services, and whether all channels should support all functionality areas. It is essential to define the role of the various channels and how they interact. This helps identify and clarify the target customer usage and preferences. Customer experience should be the starting point for defining required channel functionality. Consistency Suppliers should plan for consistency of their brand, customer information and the customer experience across different channels. Channel synchronization may be used to deliver a consistent customer experience. Consumers can become disturbed when suppliers’ online channels only sell a selection of their offline products or services or altogether different products or services. Many suppliers, however, offer either the same or fewer product categories online as in other channels to improve consistency in the product/services offering, suppliers should stage online product roll-ours, first focusing on depth in their core product/services categories, then add breadth through new complementary products and final1y, once the depth and breadth of products online reach critical mass, suppliers should introduce not-so-obvious categories and services both on and offline. Alternatively, the on- and offline channels should be clearly positioned as different. Consistency in Customer Service and Promotions Services and promotions can be integrated across channels. Companies can use various strategies to achieve this: merging mailing lists to target e-mail and catalogue promotions better; launching cross-channel loyalty programmes to increase customer retention; rewarding customers for whichever channel they complete their transaction within; and using bricks and mortar stores to provide local services to improve customer convenience for online shoppers. Examples of the latter include accepting returns instore from online shoppers and offering in-store pick-up to get online shoppers to favour them. Where companies fail to integrate services and promotions across channels this will shift the balance of business elsewhere as customers’ expectations are not met. Kapitel_4.indd 325 03.08.2010 13:02:01 Uhr 4. Marketing Mix in the Marketing Planning Process326 Pricing In making the transition from single, channel to multichannel, companies face the challenge of pricing issues, i.e. can they charge different prices to their customers for the same product online and offline? Many believe that different prices for the same product from the same company are not feasible; customers expect to be charged the same price whether purchasing online or offline, whether or not it is more cost effective for a supplier to sell online. The argument of suppliers is that a universal pricing strategy is not realistic, as offline customers must inevitably pay a premium for the added satisfaction of the in-store shopping experience. Therefore, in developing their channel strategy, companies must give consideration to the very real consumer pricing expectations – consumers expect prices to be competitive, whichever website they purchase from, regardless of whether the site is a pure Internet operation or an online channel as part of a wider multichannel operation. Organisational Issues Multichannel integration requires a new organisational model – one that adapts people, processes and technology to meet this coordinated approach to channel management. Redefining the organisation and processes and technology that support it, to meet the multichannel challenge, requires strong support from the chief executive and the senior management team. They need a clear vision of how channel integration will generate business value for the organisation and where the main changes need to be in the organisation. Decisions will need to be taken on the size of team and skills to ensure the necessary resources and flexibility. Employees must have the right skills to understand increasingly sophisticated customers analyze customer preferences and create value from these customer relationships. An organisation is unlikely to get it right first time, so it is vital to measure, monitor and review channel integration programmes. Financial measures are important but they are a blunt instrument in a multi channel world where not all channels are used to fulfil or ‘close the deal’. Instead a balanced scorecard approach is needed, in which a mixture of relevant strategic and operational measures are applied. This includes customer-focused measures, innovation and learning measures and process measures, all of which drive the financial and value measures. Profit rather than sales targeting, should be used (sales targeting focuses on promoting volume at the expense of profits and the quality of the customer base, while profit targeting focuses on contribution rather than volume and provides a basis for prioritizing multichannel offers). Consideration should be given to how to measure employees. Employees should be measured on customer profitability (present or ideally estimated future), as opposed to rewards being tied to a particular channel, as this can lead to focus on maximizing returns from that while organisations must train their employees to develop the right skills. Organisational processes must be redefined to overcome organisational barriers, reduce operational costs, increase efficiency and improve the cross-channel customer’s experience. Organisational structures can be a barrier to multichannel integration when a company is product or function-focused rather than customer-focused. While developing a new organisational model for multichannel integration, organisations should consider cross-channel opportunities generated through channel cooperation. Online cooperation of retailers with their manufacturers can enhance sales through referrals. Kapitel_4.indd 326 03.08.2010 13:02:01 Uhr 4.4 Communication Decisions 327 The power of manufacturers online lies in their ability to affect retailers’ sales, both online and offline. Consumers will take what they’ve learned while manufacturer sites and spend their money in brick-and-mortar stores and via catalogues. A bricks and mortar employee is unlikely to divert customers to a low-cost Web channel if this reduces his or her bonus. Consequently, single channel metrics should be replaced with cross-channel metrics. This may include crediting one channel for purchases through another channel or rewarding different customer service representatives for their shared involvement in resolving a customer inquiry. A five-stage roadmap for formulating a multichannel strategy may be suggested: 1. Analyze the industry structure; use market mapping and intermediation analysis. 2. Define channel chains to describe how channels combine to serve customers through their lifetime; consider both current and potential combinations and fit with customer lifecycle. 3. Compare value proposition; use the channel curve to test whether a channel innovation will win market acceptance. 4. Set channel strategies; by considering strategic options and the channel mix using the classic channel choice portfolio matrices for prioritizing. 5. Determine channel tactics; consider organisational structure, HR and reward systems, and project management and IT. A starting point could be to transform yesterday’s cost-intensive call centre into today’s multichannel Customer Interaction Centre (CIC). The CIC is the first line of communication with customers and its ‘hub-like’ quality means that all customer touch-points and departments connect to it. The solution can include call recording on a sampling basis, searchable tagging to route intelligence about customers to where it is needed most, and the ability to monitor any call at any time from any location. Another advantage is the ability to build and maintain a data-rich profile of each customer such that even if a customer leaves and then returns the company is able to view and maintain a complete record of the relationship. 4.4.13 Factors Affecting International Promotion Strategies There are several factors affecting the communication situation: language differences, economic differences, socio-cultural differences, legal and regulatory conditions and competitive differences. We will briefly look at these major aspects now. Language Differences A slogan or advertising copy that is effective in one language may mean something different in another language. Thus, the trade names, sales presentation materials and advertisements used by firms in their domestic markets may have to be adapted and translated when used in other markets. There are many examples of unfortunate translations of brand names and slogans. General Motors has a brand name for one of its models called the ‘Vauxhall Nova’ – this does not work well in Spanish-speaking markets because there it means ‘no go’. In Latin America, ‘Avoid embarrassment – Use Parker Pens’ was translated as ‘Avoid pregnancy – Use Parker Pens’ (Joensen, 1997). Another example is Kellogg which had to rename ‘Brand Buds’ cereal in Sweden, where the name roughly translates as ‘burned farmer’. Kapitel_4.indd 327 03.08.2010 13:02:01 Uhr 4. Marketing Mix in the Marketing Planning Process328 Coca-Cola’s ‘Coke adds life’ theme in Japanese translated into ‘Coke brings your ancestors back from the dead.’ In Chinese, the KFC slogan ‘fingerlickin’ good’ came out as ‘eat your fingers off’ (Croft, 2003). Economic Differences In contrast to industrialized countries, the developing countries may have radios but not television sets. In countries with low levels of literacy, written communication may not be as effective as visual or oral communication. Socio-Cultural Differences Dimensions of culture (religion, attitudes, social conditions and education) affect how individuals perceive their environment and interpret signals and symbols. For example, the use of colour in advertising must be sensitive to cultural norms. In many Asian countries, white is associated with grief; hence an advertisement for a detergent where whiteness is emphasized would have to be altered for promotional activities in, say, India. Legal and Regulatory Conditions Local advertising regulations and industry codes directly influence the selection of media and content of promotion materials. Many governments maintain tight regulations on content, language and sexism in advertising. The type of product that can be advertised is also regulated. Tobacco products and alcoholic beverages are the most heavily regulated products in terms of promotion. However, the manufacturers of these products have not abandoned their promotional efforts. Philip Morris engages in corporateimage advertising using its Marlborough man. Regulations are found more in industrialized economies than in developing economies, where the advertising industry is not yet as highly developed. Competitive Differences As competitors vary from country to country in terms of number, size, type and promotional strategies used, a firm may have to adapt its promotional strategy and the timing of its efforts to the local environment. Designing effective communication strategies between and within different countries poses a difficult challenge with respect to the above mentioned factors influencing the communication process. We shall discuss international communication decisions further in Chapter 5. Example 36: Colour in advertising is of key importance but must be sensitive to cultural norms which implies that Audi is not likely to use this ad for Asian countries Kapitel_4.indd 328 03.08.2010 13:02:01 Uhr 4.4 Communication Decisions 329 Summary This chapter has provided an overview of the promotional mix and examined some important mass communications and direct communications techniques. Sales promotions are a powerful technique for giving a short-term boost to sales or for stimulating trial. Some of the most popular consumer promotion techniques include premiums, coupons, loyalty cards and money-offs. Public relations plays a very important role in the promotional mix. It is the mechanism through which organizations communicate with their various stakeholders. It has more credibility than advertising and incurs no direct media costs. Sponsorship is an increasingly popular form of promotion. The most common types of sponsorship include sports, the arts, community activities and celebrities. Its principal objectives are to generate publicity for the sponsor, create entertainment opportunities and foster favourable brand and company associations. Product placement is a rapidly growing form of promotion, which is also controversial because of its subtle nature. Product placement is the deliberate placing of products in movies, television programmes and video games, often in exchange for money. Direct marketing is a growing area where consumers are precisely targeted through a variety of diverse techniques including direct mail, telemarketing, mobile marketing, direct response advertising and catalogue marketing. The development of the Internet has facilitated the growth of new business possibilities. Internet-based businesses have four potential advantages over their offline rivals, namely lower costs and prices, superior customer service, greater product variety, and product customization. Personal selling plays an important role in the promotional mix. Salespeople provide information on their products and services, use persuasion and salesmanship to obtain and sustain a competitive advantage and are responsible for building relationships. Questions for discussion 1. Comment on the opinion that ‘practically speaking, neither an entirely standardized nor an entirely localized advertising approach is necessarily best.’ 2. How does each stage in the communications process require modification when communicating in international markets? 3. Within an advertising context, what is ‘positioning in the mind of the customer’? 4. Why do more companies not standardize advertising messages worldwide? Identify the environmental constraints that act as barriers to the development and implementation of standardized global advertising campaigns. 5. Compare domestic communication with international communication. Explain why ‘noise’ is more likely to occur in the case of international communication processes. 6. Is international personal selling a reality? Or is all selling national, regardless of who performs it? 7. What is the role of public relations (PR) in global marketing? 8. Evaluate the ‘percentage of sales’ approach to setting advertising budgets. 9. Identify and discuss problems associated with allocating the company’s promotion budget across several foreign markets. 10. What effect will the Internet have on international marketing communications? Kapitel_4.indd 329 03.08.2010 13:02:02 Uhr 4. Marketing Mix in the Marketing Planning Process330 Case 4 Heinrich Deichmann GmbH International Expansion of the Shoe Retail Chain – One day in Spring 2010 Heinrich Deichmann, CEO of the DEICHMANN Group, enjoys the nice weather, but at the same time he thinks about the opportunity of penetrating the US shoe market with the retail business of his family … Heinrich Deichmann-Schuhe GmbH & Co. KG ( is a retailer of footwear. The company products include footwear, sport shoes, bags for women, men and children. Deichmann also provides services like shoe tips. The company has 2,300 stores in 17 countries all over the world. Deichmann offers its products through online stores also. Heinrich Deichmann-Schuhe GmbH & Co. KG is headquartered in Essen, Germany and employs about 28,000 people (by end of 2008). Deichmann is engaged in retailing of footwear and accessories. It offers several branded footwear for men, women and children, including leisure shoes, trekking shoes and sports shoes. In addition, it also offers accessories including bags. Deichmann sells under their own retails brands such as Graceland, Memphis One, Janet D., Gallus, Borelli, Falcon and Yorik. A smaller part of Deichmann’s turnover is the sales of global brands like adidas, Puma, Fila and other such brands. The company operates about 2,546 stores under several banners including Deichmann, Roland, Dosenbach, Ochsner, Ochsner Sport, van Haren, Rack Room Stores and Off Broadway. In addition, it also sells its merchandise through website. The company is headquartered at Essen, Germany. The current subsidiaries operate in 19 countries: United States, United Kingdom, Turkey, Switzerland, Sweden, Slovenia, Slovakia, Romania, Poland, Netherlands, Lithuania, Italy, Hungary, Germany, Denmark, Czech Republic, Croatia, Bulgaria and Austria. The company’s overall strategy is to expand its shoe business by answering all consumer demands offering quality shoes at low price. This is in accordance with the well-known slogan of the company ‘Markenschuhe so günstig – Deichmann’ (branded shoes at favourable prices – Deichmann). History 1913: Incorporation/Establishment: The company opened a shoemaker’s workshop in the Borbeck district of Essen. Kapitel_4.indd 330 03.08.2010 13:02:02 Uhr

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Marketing – A Relationship Perspective

Moderne Grundlange zum Marketing

Das Lehrbuch behandelt eines der wichtigsten und aktuellsten Themenfelder des modernen Marketings. Der Ansatz verbindet dabei den klassischen Ansatz der strategischen Marketingplanung und seiner Instrumente mit dem neuen Ansatz des Relationship Marketing. Der ganzheitliche Ansatz des Buches umfasst dabei die aktuellen Marketing-Grundlagen, Praxisbeispiele sowie anwendungsorientierte Fallstudien und eignet sich somit ideal sowohl für Manager und Entscheidungsträger im Marketing-Bereich, Studenten in Bachelor- und Materstudiengängen sowie Dozenten und Trainer.