Marketing Mix: Promotion PDF

15 The marketing mix: promotion This chapter will explain: the aims of promotion different forms of promotion and how they influence sales, for example, advertising, sales promotion the need for cost effectiveness in spending the marketing budget on promotion. The role of promotion decisi...

15 The marketing mix: promotion This chapter will explain: the aims of promotion different forms of promotion and how they influence sales, for example, advertising, sales promotion the need for cost effectiveness in spending the marketing budget on promotion. The role of promotion decisions in the marketing mix Promotion gives the consumer information about the rest of the marketing mix – without it, consumers would not know about the product, the price it sells for or the place where the product is sold. It is often thought that promotion is just about advertising the product, but it includes several different types of sales promotion as well as advertising. Commodities such as oil and iron are not advertised or promoted, but nearly all processed and manufactured goods and most services are. Most products are sold in competitive markets so advertising and promotion have an important role to play in making them successful. Producer goods are often sold directly by sales representatives visiting businesses, but even these products are advertised in trade magazines, or leaflets are sent out to businesses informing them about the product. Promotion is essential when a brand image, especially for consumer goods, is being created for a product. Promotion as part of the marketing mix includes the following: Advertisements – this involves ‘above-the-line’ promotions. These can take different forms, such as advertising on television, via the internet including social media, in newspapers and magazines, and other forms of advertising media. Sales promotion – this involves ‘below-the-line’ promotions. These are often used for short periods of time in order to reinforce the above-the-line promotions. Examples include giving money-off coupons or free gifts, or product placements in television programmes or in newly released films. The aims of promotion As you can see, promotion includes many activities that are undertaken by businesses. All these activities have one thing in common – their objective – which is to raise awareness of a business’s products and encourage consumers to make a purchase. The specific aims of promotion are summarised in the diagram on the next page. Advertising Advertising communicates to potential customers to encourage them to buy a product. This is sometimes known as ‘above-the-line’ promotion. Different types of advertising Advertising can be either informative or persuasive. ‘1 million’ by Paco Rabanne is an expensive aftershave. It is not sold by telling people all about what it will do for the skin. The advertising is meant to make consumers think that when wearing the aftershave they will smell nice to the opposite sex and look more attractive. The adverts for the aftershave used in magazines show a picture of an attractive man, which is meant to persuade the readers to buy the aftershave so that they will be attractive like the man in the advert. Would consumers buy a laptop that was shown in adverts as being used by an attractive person, but with no technical information provided? Probably not. When buying a laptop or tablet, consumers want to know what speed it will run at and what memory it has. They want information about the product and its price. The advertising process When planning an advertising campaign the business will need to go through the steps shown in the diagram on page 187. The following table shows types of advertising media that businesses can use, together with the advantages and disadvantages of each and some examples of when they may be used. Key info It is estimated that total global expenditure by businesses on promotion in 2017 was US$1 trillion, of which US$552 billion was spent just on advertising. Case study ING is a global institution of Dutch origin, offering banking, investments, life insurance and retirement services. As it is a large international business, it can afford a large marketing budget. It uses advertising on the internet, television, magazines and billboards. Activity 15.1 Read the case study above. Do you think ING’s current methods of advertising are the best methods to use or should it change them? Explain your answer. REVISION SUMMARY Types of advertising media Activity 15.2 a Choose ten products which you and your friends buy regularly. Collect examples of the advertising for them and write down where the products are advertised. Copy out the table below and fill in the blanks when you have all your examples. After you have filled it in: b What can you observe from your completed table? c Do the places where the adverts are found suggest a particular target audience for the products? d Is the target population a very large number of people or a relatively small number of people? e Do the places suggest the product is only sold locally or also nationally? f Are these findings what you expected? Explain your answer. Study tips Make sure you can select suitable types of advertising for particular products and explain why they are suitable. Activity 15.3 For each of the following products, decide on the best advertising media to use. Explain your choice in each case. a Nike, which produces an established brand of sports shoes that is sold to teenagers as a leisure shoe, wants to become more competitive with rival companies. This product is sold in many areas of the country. b A new bicycle has been produced which is suitable for using over rough ground and for cycling up mountains. c A new computer game has been developed. d A new restaurant in a small town has opened. e A famous brand of carbonated soft drink wants to expand its sales. f A local town is holding a festival. Sales promotion Different types of sales promotion Promotion is used to support advertising and encourage new or existing consumers to buy the product. This is sometimes known as ‘below-the-line’ promotion. Sales promotion is used in the short term to give a boost to sales, but it is not used over long periods of time. An example of this might be when a new chocolate bar has been introduced on to the market and is being advertised on television. In the shops where the chocolate bars are to be sold, free samples may be given out to encourage the customers to try the new chocolate bar and, if they like it, to become regular buyers. There are several different types of sales promotion that can be used by businesses. After-sales service With expensive products, like cars or computers, providing an after- sales service can be a way of encouraging the customer to buy. They can be reassured that, if the product goes wrong in the first few weeks or months after they have bought it, they will be able to take it back and get it repaired with no additional charge to themselves. This may make the customer buy from a shop that offers an after-sales service rather than from somewhere that does not. Gifts Sometimes small gifts are placed in the packaging of a product to encourage the consumer to buy it. This is often used with products like breakfast cereals and the gifts are usually aimed at children. Sometimes coupons are put on the back of packets and have to be cut out and collected. When a specific number have been gathered they can be exchanged for a gift, such as a book. If the item on offer is more expensive, the coupons may be exchanged for the item but a small additional charge may also have to be paid. Collecting coupons requires several packets of the product to be purchased before the gift can be claimed and so several packets of the product will be sold. The aim is that the customer may continue buying the product even after the promotion has ended. BOGOF This is where multiple purchases are encouraged (for example, ‘Buy one, get one free’). Price reductions Examples include reduced prices in shops at specific times of the year and money-off coupons to be used when a product is next purchased. These can be linked to loyalty cards and customers sent money-off coupons after they have spent a certain amount of money at the shop. Money-off coupons are sometimes found on the bottom of leaflets, in newspapers or on the packet of the product itself, for example, ‘$1.00 off your next packet’. This encourages the consumer to try the product and hopefully they will become a regular customer. ‘Flash sales’ are big discounts on certain products for a very limited time period – sometimes just an hour or two. These can be advertised on the internet or ‘in-store’ as customers are browsing in the shop or emailed directly to potential customers. Competitions The packaging of a product may include an entry form which allows the customer to enter a competition. The prize is often an expensive item, such as a car. This again obviously encourages the consumer to buy the product. Point-of-sale displays and demonstrations Point-of-sale is the place where the product is being sold – usually a shop. In the shop, there may be a special display of the product. With some products it can be an advantage to show how they should be used and therefore a demonstration in the shop can be a good way of encouraging customers to buy. Free samples This is most commonly used with products like food, shampoo and cleaning products. A free sample can be handed out in the shop to encourage the customer to try the product and hopefully buy it. Free samples can be delivered to people’s houses – although this would not be to every person’s house, just the neighbourhoods where the business thinks people will buy the product. Free samples can also be given away with other products. For example, new washing machines often contain a free sample of washing powder. Product placement This is when branded goods and services are featured in television programmes, movies or music videos. Products are associated with the image in the programme or movie. A specific audience who view the programme, movie or music video can be targeted. However, it can be expensive to pay for the placement of the product in the programme and it may have negative effects on the consumer if the image is not attractive to them. Expensive, high-powered cars used in James Bond films that portray excitement and speed are a good example of successful product placement. Study tips Make sure you can select a suitable sales promotion for particular products and explain why it is suitable. REVISION SUMMARY Types of sales promotion The advantages of sales promotion It can promote sales at times in the year when sales are traditionally low (off-season purchases). It encourages new customers to try an existing product. It encourages consumers to try a new product. It encourages existing customers to buy a product more often or in greater quantities, increasing consumer loyalty. It encourages customers to buy your product instead of a competing brand. Activity 15.4 Choose ten products which you and your friends buy regularly. Collect examples of sales promotions that have been used for these products and explain why these methods of promotion were used. Activity 15.5 For each of the following five products decide the best method of sales promotion to use. Explain your choice in each case. a A new magazine aimed at teenage boys. b A new type of pen which is very comfortable to use and does not smudge. c A company making a famous brand of football boots wants to expand sales. d A new fast-food takeaway opens in a small town. e A soft toy has been invented that changes colour when hugged and can be dressed in different clothes which also change colour when warmed. Key info The use by McDonald’s restaurants of the ‘Monopoly’ game as a form of promotion, turning peeling stickers into a high-stakes game, has been one of the most successful sales promotions of all time. Over US$1 billion in cash and prizes have been given away in the last ten years. During this period McDonald’s sales have increased by 25 per cent and some analysts believe that much of this growth has been due to Monopoly. Case study Mattel sells a range of Barbie dolls for young children. They are sold through toy shops, where a special stand is provided for the shop to display the dolls so that they are easily seen by customers. A new Chinese Barbie doll in the range has just been introduced. To show children the new doll and its range of clothes, a representative of the company is visiting toy shops to demonstrate the doll and its accessories. Also, with each purchase of the new doll there is a chance to enter a prize draw – the first prize is a trip to Disneyland. Activity 15.6 Read the case study on page 193. Do you think all these ways to promote this range of Barbie dolls will be effective? Explain your answer. The importance of the marketing budget When deciding which type of promotion (advertising and sales promotion methods) will be most suitable to use for a particular product, the marketing budget is perhaps the most important factor. So, the size of the marketing budget is crucial. It specifies how much money is available to market the product or range, so that the Marketing department knows how much it may spend. If the business cannot afford a very large budget, this will limit the places where the business can advertise. For instance, if the budget is small then television advertising will not be possible, and the number of times adverts appear in a magazine could be higher if the budget was larger. The need for cost effectiveness in spending the marketing budget is very important. A business will need to compare the cost of advertising with the increase in expected sales. It is not good to spend large amounts of money on an advertising campaign if there is only a small increase in sales. Small businesses will find it very difficult to compete with larger ones because of the large marketing budget available to them. Which type of promotion should be used? The following points also need to be considered when deciding on the type of promotion to use: The stage of the product life cycle that has been reached. Read Chapter 12, page 165, to see which stages of the life cycle require different methods of promotion. If the product is new and has just been launched the advertising may be more informative, but if the product is well established and is at maturity then the advertising may be persuasive. The nature of the product itself. If the product is a producer good, the type of promotion that would be used when promoting the product to other producers would be quite different to the methods used with consumer goods. For example, money-off coupons would not be suitable, but discounts when goods are purchased in bulk would be appropriate. Businesses would not be influenced by collecting money-off coupons, but they will buy in large quantities and will be influenced by a discount. A product sold to other businesses, for example, a machine to wrap perfume, will not be advertised in the same way as the perfume itself, which will be bought by consumers. The advertising for the machine will be informative, while the advertising for the perfume will be persuasive. The cultural issues involved in international marketing. If the product is to be sold abroad then different types of promotion may be appropriate. The advertising media used will be dependent on factors such as the number of televisions owned, literacy of the population, availability of radio and cinema. It is no use advertising in a national newspaper if most of the population do not read or cannot afford a newspaper. Free samples, competitions, special offers, and so on, will also have to be suitable for the culture of the population. In some countries it might not be usual to enter competitions and therefore this promotional route would not act as an attraction to buy the product. The business might need to consider the types of promotion in terms of what is acceptable to  people in the countries where the product is being sold. For instance, the use of women in adverts or the promotion of alcohol would not be allowed in some parts of the world. The nature of the target market – whether it is local, national or international and its size – a local market will require different media to a national or international one. Is the product a specialist product, such as water skis, or is it one that is sold to the majority of the population, such as cola? If the target market is mainly formed of young people then social media could be the most effective form of promotion to use. Study tips Remember that advertising does not necessarily increase sales and profits. A lot of money can be spent on advertising and not be effective. Advertising may increase sales, but if prices have been reduced and advertising expenditure increased then profits may not increase. Public relations/sponsorship This is concerned with promoting a good image for the business and/or its products. Public relations can take many forms, from sponsoring events such as football matches, to publicity stunts where employees, or owners of the company, take part in a sponsored activity for a good cause or to raise awareness. Another example is where companies donate some of their products to charity – for relief when there has been a natural disaster, or food for victims of a famine. All these types of activity raise the public’s awareness of the company and its products, and increase the likelihood of their choosing its products over its competitors’. International business in focus Justin Bieber Justin Bieber is a Canadian pop/R&B singer, songwriter and actor. He was discovered in 2008 by Scooter Braun, who came across Bieber’s videos on YouTube and later became his manager. Justin is very popular, particularly among younger age groups. He is preparing to go on a world tour. The tour will involve concerts in many countries around the world and it is predicted that tickets for his concerts will be sold out very quickly. Discussion points Discuss the best way for the tour dates of the concerts to be advertised. Choose another singer and consider what other promotions could be used to promote them and their music. Exam-style questions: Short answer and data response 1 TP manufactures expensive shoes for women. It sells its range of shoes through shops which also sell made-to-measure designer clothes for women. ‘We need to be clear who our target market is,’ says the Marketing Manager. TP’s Directors want to reduce costs to try to improve profitability. One Director thinks that as TP is a well-known business, advertising is a waste of money. a Define ‘target market’. b Identify two examples of advertising TP could use. c Outline two reasons why it is important for TP to know the target market when deciding how to advertise the shoes.  d Explain two possible aims for TP’s promotion. e Do you think advertising is needed for TP’s range of shoes? Justify your answer. 2 FK is a partnership and it manufactures drinking glasses. Customers pay FK to put their own designs or messages on the outside of the glass. These are often given as gifts at weddings, births or other special celebrations. FK is planning to also manufacture plain glasses for everyday use. These glasses would be sold in supermarkets, but the specially designed glasses can only be ordered on the internet. FK only has a small marketing budget so the owners will have to think carefully about where will be the best place to advertise the plain glasses. a Define ‘marketing budget’. b Identify two places, other than the internet, where FK could advertise its glasses. c Outline two reasons for promoting the plain glasses. d Explain two methods of sales promotion FK could use to promote the plain glasses sold in supermarkets. d Do you think the promotion of the plain glasses should be different to the promotion used for the specially designed glasses? Justify your answer. Revision checklist In this chapter you have learned: about the role of promotion decisions in the marketing mix about the aims of promotion differences between advertising and sales promotion how to select appropriate types of advertising and sales promotion for different products/business objectives how to spend the marketing budget effectively the importance of the marketing budget in making promotion decisions. NOW – test your understanding with the revision questions in the Student etextbook and the Workbook. Definitions to learn Promotion is where marketing activities aim to raise customer awareness of a product or brand, generating sales and helping to create brand loyalty. Advertising paid for communication with potential customers about a product to encourage them to buy it. Informative advertising is where the emphasis of advertising or sales promotion is to give full information about the product. Persuasive advertising is advertising or promotion which is trying to persuade the consumer that they really need the product and should buy it. The target audience refers to people who are potential buyers of a product or service. Sales promotions are incentives such as special offers or special deals aimed at consumers to achieve short-term increases in sales. A marketing budget is a financial plan for the marketing of a product or product range for a specified period of time.