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Integrated Marketing Communications

Integrated Marketing Communications

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Agribusiness project

INTEGRATED MARKETING COMMUNICATIONS
Trainer: Vladimir Pandurov

Learning Objectives ( day 1)
1. Discuss the concept of integrated marketing communications - IMC 2. Discuss the elements of the IMC (promotional) mix. 3. Describe the communication process.

Learning Objectives ( day 1)
4. Explain the goal and tasks of promotion. 5. Discuss the AIDA concept and its relationship to the IMC mix. 6. Describe the factors that affect the IMC mix. 7. Describe the IMC planning process. 8. Approaches to Determining the Promotional Budget

Learning Objective

1

Discuss the concept of integrated marketing communications - IMC

IMC definition(s) 1
Integrated Marketing Communications (IMC): “is the coordination and integration of all marketing communications tools, avenues, and sources within a company into a seamless program that maximizes the impact on consumer and other end users at a minimal cost.” Clow and Baack, 2004, p.8 – The concept under which a company integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organization and its products Source: Marketing: An introduction, Armstrong & Kotler

IMC definition(s) 1

The specific mix of advertising, personal selling, sales promotion, and public relations a company uses to pursue its advertising and marketing objectives. Kotler

“IMC is capable of enhancing the holistic consumer experience and creating a holistic brand value structure, which can unite the consumer’s sensory, emotional, social and intellectual experiences in a new and positive way.” Tsai (2005)

IMC definition(s) 1
Integrated Marketing Communications

• Integrated Marketing Communications is the integrated areas of marketing, advertising, sales promotion, and public relations. • There is a need for communications cross training as a basic requirement to function as a practitioner.

The Need for Integrated Marketing Communications

1

• The Marketing Communications Environment is Changing: – Mass markets have fragmented, causing marketers to shift away from mass marketing • Media fragmentation is increasing as well – Improvements in information technology are facilitating segmentation - Increasingly difficult to target audiences & communicate effectively Consumers no longer passive recipients They demand more than information From a myriad of sources

The Need for Integrated Marketing Communications

1

– Conflicting messages from different sources or promotional approaches can confuse company or brand images – The problem is particularly prevalent when functional specialists handle individual forms of marketing communications independently – The Web alone cannot be used to build brands; brand awareness potential is limited – Best bet is to wed traditional branding efforts with the interactivity and service capabilities of online communications – Web efforts can enhance relationships

The Reason for Integrated Marketing Communications • A shifting of marketing dollars from media advertising to other forms of promotion, particularly consumer and trade-oriented sales promotions.
– A movement away from relaying on advertising-focused approaches, which emphasize mass media such as network television and national magazines, to solve communication problems. – A shift in marketplace power from manufacturers to retailers.

1

The Reason for Integrated Marketing Communications – The rapid growth and development of database marketing. – Demands for greater accountability from advertising agencies and changes in the way agencies are compensated. – The rapid growth of the Internet, which is changing the very nature of how companies do business and the ways they communicate and interact with consumers.

1

Traditional Approach to Marketing Communications
Sales Promotion

1

Point of Purchase

Publicity

Special Events

Media Advertising

Packaging

Direct Response

Public Relations Direct Marketing

Interactive Marketing

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Contemporary IMC Approach

1

Packaging

Sales Promotion

Direct Response

Point of Purchase Publicity

Media Advertising

Public Relations

Interactive Marketing

Direct Marketing

Special Events

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Traditional Mass Marketing Communication Model

1

IMC Communication Model

1

Some Differences between Traditional Marketing Communication Efforts and IMC

1

Marketing Revolution and Shifting Tides From
Media Advertising Media Advertising Mass Media Mass Media Manufacturer Dominance Manufacturer Dominance General Focus General Focus Low Agency Accountability Low Agency Accountability Traditional Compensation Traditional Compensation Limited Internet Availability Limited Internet Availability

1

Toward
Multiple Forms of Communication Multiple Forms of Communication Specialized Media Specialized Media Retailer Dominance Retailer Dominance Data Based Marketing Data Based Marketing Greater Agency Accountability Greater Agency Accountability
Performance Based Compensation Performance Based Compensation

Widespread Internet Availability Widespread Internet Availability

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

IMC - The Customer’s Perspective •

1

Integrated marketing means approaching communication issues from the customer’s perspective
Consumers do not separate promotional material or newspaper advertising or community responsiveness into separate compartments They lump everything together to make judgments about services and organizations

IMC - The Customer’s Perspective

1

1. Integrated marketing communication is not about ads, direct e-mail pieces, or public relations projects
– It is about understanding the consumer and what the consumer actually responds to In other words, behavioral change is the communicators’ mission If the customer does not act, the communicator – and the communication have failed

– –

IMC - The Customer’s Perspective

1

2. Organization can not succeed without good relationship with their publics
– Organizations need relationships with their customers that go beyond the pure selling of a product or service They need to build relationships As the world becomes more competitive in everything, relationship building becomes more critical

– –

IMC - The Customer’s Perspective 3. Integrated marketing communications require collaboration on strategy
– – Not just on execution The entire communication function must be part of the launch of a product, service, campaign or issue from its inception Communicators must participate in the planning of a campaign, not just in the implementation of communication vehicles

1

IMC - The Customer’s Perspective

1

4. Strategic plans must be clear on the role that each discipline is to play in solving the problem
– – – – – The roles of advertising, marketing and public relations are different None of them can do everything by itself Therefore, although advertising might control the message Marketing and product promotion might provide support It is public relations that should provide credibility for the product and even more important for the organization

IMC - The Customer’s Perspective
5. Public relations is about relationships
– Public relations professionals can become proprietors of integrated marketing communications The essence of public relations is building relationship between institutions and its publics

1

Public relations professionals more than any others, should lead the integrated marketing initiative Such an understanding is pivotal to the successful rendering of integrated marketing communications

IMC - The Customer’s Perspective

1

6. To be players in integrated marketing communication, public relations professionals need to practice more than the craft of public relations
– Public relations people must expand their horizons, increase their knowledge of their discipline Seek out and participate in interdisciplinary skills building Public relations professionals must approach their task to enhance customer relationship through a strategy of total communication

– –

Case Study BMW MINI Canada

• • • • • •

Marketing the anything-but-ordinary car presented big challenges. The MINI is a tiny but potent car that has a retro 60s look. Canadians tend to be serious about their cars. The marketing team concluded that In Canada the car performance was the main attribute to stress. BMW choose Taxi as its advertising agency. Taxi created an integrated strategy with unified brand personality: “The MINI is an individualistic, highperformance, premium vehicle that’s fun to drive.” The campaign began with a 60second movie theatre spot called “Anthem”.

• • •

• • • •

Traditional print and outdoor advertising followed next: “parks as faster than a Ferrari”, “Onramps are foreplay”, and “The world is your gokart track”. Ads were placed everywhere Edgy and humorous TV spots were also used. Other components: “Velocity” parties, online contests, driving events, and investments in showroom improvements. Hip dealerships were selected and trained in a new soft-sell approach. Product placement in the remake of The Italian Job, online marketing, and publicity. Finally word of mouth. The campaign was a huge success and annual sales goals were exceeded.

14-25

Creative Outdoor Communication Humor

1

Learning Objective

2

Discuss the elements of the IMC mix (promotional mix).

The IMC mix
Advertising Advertising Direct Marketing Direct Marketing Interactive/ Interactive/ Internet Marketing Internet Marketing Sales Promotion Sales Promotion Publicity/Public Publicity/Public Relations Relations

2

Personal Selling Personal Selling

The IMC mix Advertising

2

Impersonal, one-way mass communication about a product or organization that is paid for by a marketer.

The IMC mix
Advertising Media Traditional Traditional Advertising Media Advertising Media Electronic Electronic Advertising Media Advertising Media

2

 Television  Radio  Newspapers  Magazines  Books  Direct mail  Billboards  Transit cards

 Internet  Computer modems  Fax machines

The IMC mix Advertising
Advantages • Ability to reach large number of people • Cost per contact is low • Ability to repeat message with frequency • Can be micro-targeted Disadvantages • Total cost is high

2

• Impersonal; one-way communication (no feedback from audience)

Creative Outdoor Communication

DEVELOPING AN ADVERTISING CAMPAIGN

2

Design Creative Strategy

Select Target Market

Determine Advertising Objectives

Determine Advertising Budget

Evaluate Advertising Effectiveness

Select & Schedule Media

ADVERTISING STRATEGY
• MESSAGE STRATEGIES  Objective vs. Subjective Messages  Comparative Message Techniques  Emotional Techniques: Mood, Fear, Humor  Celebrity Endorsements vs. Non-Celebrity Images • MEDIA STRATEGIES  Broadcast: Television, Radio  Print: Newspapers, Magazines, Journals  Specialized: Outdoor, Transit, Direct Mail, Internet

2

ADVERTISING STRATEGY
• RELATIVE STRENGTHS AND WEAKNESSES OF STRATEGIES  Effectiveness and Efficiency: Reach and Frequency  Target Capabilities  Cost  Believability  Appropriateness for Message (Image, Details)

2

ADVERTISING STRATEGY
Reach & Frequency

2

• Reach: number of different target consumers who are exposed to a message at least once during a specific period of time • Frequency: number of times an individual is exposed to a given message during a specific period of time • Cost per contact: cost of reaching one member of the target market – Allows comparison across advertising strategy vehicles

EVALUATING ADVERTISING EFFECTIVENESS
Tools: •Focus Groups •Screening •Persuasion Scores Tools: •Unaided Recall Tests •Aided Recall Tests •Inquiry Evaluations Tools: •Monitor Sales

2

Pretesting Pretesting

Posttesting Posttesting

Sales Effectiveness Sales Effectiveness Evaluations Evaluations

The IMC mix
Public Relations

2

The marketing function that evaluates public attitudes, identifies areas within the organization that the public may be interested in, and executes a program of action to earn public understanding and acceptance.

PUBLIC RELATIONS
• EFFORTS TO IMPROVE AND MANAGE RELATIONSHIPS WITH PUBLICS – Customers – Stock Holders – Community – Government – News Media • PUBLICITY – Not Overtly Sponsored – High Credibility

2

PUBLIC RELATIONS
Public Relations

2

Functions of Functions of Public Relations Public Relations
Evaluates public Evaluates public attitudes attitudes Identifies areas Identifies areas of public interest of public interest Executes Executes programs to programs to “win” public “win” public

Strengths of public relations Good citizenship Public relations Cost effective

2

Crisis manage ment Message flexibility

Advice on important tre nds
Difficult-toreach audienc es

More objective

Source: Pelsmacker, Patrick De., Geuens, Maggie and Bergh , Joeri Van den 2000. Marketing Communications Essex, England : Pearson Education Ltd. pp. 240.

Weaknesses of public relations
Effectiveness hard to measure

2

Lack of control Public relations Journalists as gatekeepers

Source: Pelsmacker, Patrick De., Geuens, Maggie and Bergh , Joeri Van den 2000. Marketing Communications Essex, England : Pearson Education Ltd. pp. 249.

Trends and challenges in public relations
Bad reputatio n
Measurin g effect
Good employee relation

2

Specialization

PR

Corporate branding
Growing consumer aw areness

Globalization New technologies

Single-issue publics

Source: Pelsmacker, Patrick De., Geuens, Maggie and Bergh , Joeri Van den 2000. Marketing Communications Essex, England : Pearson Education Ltd. pp. 249.

The IMC mix
Personal Selling

2

Planned presentation to one or more prospective buyers for the purpose of making a sale.

PERSONAL SELLING
• PERSONAL SELLING

2

– Oral presentation in a conversation with one or more prospective purchasers for the purpose of making a sale – Personal selling represents the most popular promotional effort in terms of financial expenditures and number of people employed

• Personal Selling is:
– (1) Dyadic, (2) Flexible, (3) Focused (personalized), and (4) Often results directly in a sale – Other promotional elements move the customer toward the sale, personal selling closes the sale

STEPS IN THE SELLING PROCESS: A RELATIONSHIP APPROACH
• INITIATING RELATIONSHIPS
– Prospecting – Pre-Call Planning – Approach

2

• DEVELOPING CUSTOMER RELATIONSHIPS
– Sales Communications and Presentations – Gaining and Managing Commitment

• ENHANCING CUSTOMER RELATIONSHIPS
– Follow-Up – Support

• TRADITIONAL vs. RELATIONSHIP APPROACHES

– Consultative (needs-satisfaction) vs. Manipulative (product-focused)

The IMC mix
Sales Promotion

2

Marketing activities--other than personal selling, advertising, and public relations--that stimulate consumer buying and dealer effectiveness.

Sales Promotion

2

Sales Promotion Sales Promotion Targets Targets
End End Consumers Consumers Trade Customers Trade Customers Company Company Employees Employees

Reasons for the Growth in Sales Promotion:

2

Consumer Factors Consumer Factors Accountability Accountability Impact of Technology Impact of Technology Short-Term Focus Short-Term Focus Increased Retail Power Increased Retail Power

OBJECTIVES OF CONSUMER PROMOTIONS

2

Encourage Stimulate Repurchase Trial Complementary Increase Products Consumption Support Flexible Pricing Neutralize Impulse Competitors Purchasing

CONSUMER SALES PROMOTION TECHNIQUES

2

Price Deals Advertising Specialties Coupons

Sampling

Rebates

Premiums Contests, Games, Sweepstakes

CrossPromotions

OBJECTIVES OF TRADE PROMOTIONS

2

Avoid Price Avoid Price Reductions Reductions Defend Against Defend Against Competitors Competitors Increase Reseller Increase Reseller Inventory Inventory

Gain/Maintain Gain/Maintain Distribution Distribution Influence Influence Reseller Promotion Reseller Promotion Influence Influence Price Discount Price Discount

LIMITATIONS OF SALES PROMOTION

2

Cannot Reverse Declining Sales Cannot Reverse Declining Sales Trend Trend Cannot Overcome Inferior Cannot Overcome Inferior Product Product May Encourage Competitive May Encourage Competitive Retaliation Retaliation May Hurt Profit May Hurt Profit

The IMC mix
Direct Marketing

2

It is a form of integrated marketing communications whereby an organization communicates directly with target customers to generate a response and/or transaction

The IMC mix
Direct Mail Internet Sales

2

Direct Response Advertising

Direct Direct Marketing Marketing
Shopping Channels Catalogs Telemarketing

Bose Uses Direct Response Advertising

2

Includes call for action. Phone number, mail-in form, website address provided.

Interactive/Internet Marketing
Interactive/Internet Marketing • Back-and-forth communication
– Users participate in and modify the form and content of information – Happens in real time

2

• Interactive media
– – – – – Internet CD-ROMs Kiosks Interactive television Digital cell phones

Using the Internet as an IMC Tool

2

The The Internet Internet

Educates or Educates or informs informs customers customers Obtains Obtains customer customer database database information information

A persuasive A persuasive advertising advertising medium medium

A sales tool A sales tool or an actual or an actual sales vehicle sales vehicle Builds and Builds and maintains maintains customer customer relationships relationships

Communicates Communicates and interacts and interacts with buyers with buyers

Provides Provides customer customer service and service and support support

It’s Google’s World

2

The most powerful brand in the world

It’s Google’s World

2

• Founded in 1998
– Delivers relevant search results by favoring pages linked to by other sites – Sells ads linked to search keywords – Annual revenue exceeds $10 billion

• Keys to success
– Simplicity – Speed – Accuracy

It’s Google’s World
Google Adwords • Keyword-targeting advertising
– Text ads at top or side of search results – Advertisers compete for top spot – Cost is “per click” (CPC)

2

• Contextual ads
– Appear on other relevant Web sites

• Site-targeted
– Generates sales and branding – Cost is per thousand impressions (CPM)

It’s Google’s World
Google Rapidly Expanding • Beyond online search advertising
– – – – – – Automated purchase of radio ads Magazine and newspaper ad-buying YouTube Google TV Ads Partnership with Nielsen Media Research New varieties of online ads

2

It’s Google’s World
Rapidly Changing Media Environment • Increasingly difficult to target audiences & communicate effectively
– Consumers no longer passive recipients – They demand more than information – From a myriad of sources

2

Integrated Marketing Approach

2

• Traditional mass media
– Television, radio, magazines, newspapers, billboards – Now drive consumers to Web sites

• Online strategies
– Provide detailed information – Be experiential, entertaining, interactive – MySpace, YouTube, Facebook, wireless mobile media devices, e-mail

Learning Objective

3

Describe the communication process.

Communication
Communication

3

The process by which we exchange or share meanings through a common set of symbols.

Communication
Marketing Communication Categories of Categories of Communication Communication

3

Interpersonal Interpersonal Communication Communication

Mass Mass Communication Communication

The Communication Process As Senders
Inform Persuade Remind

3

As Receivers
 Develop messages  Adapt messages  Spot new communication opportunities

The Sender and Encoding

3

Sender Sender

The originator of the message in the The originator of the message in the communication process. communication process.

Encoding Encoding

The conversion of a sender’s ideas The conversion of a sender’s ideas and thoughts into a message, usually and thoughts into a message, usually in the form of words or signs. in the form of words or signs.

The Communication Process
Noise Noise

3

Sender Sender

Encoding Encoding Message Message

Message Message Channel Channel

Decoding Decoding Message Message

Receiver Receiver

Message Message Channel Channel

Characteristics of Advertising
Advertising Advertising
Communication Mode Communication Mode Communication Control Communication Control Feedback Amount Feedback Amount Feedback Speed Feedback Speed Message Flow Direction Message Flow Direction Message Content Control Message Content Control Sponsor Identification Sponsor Identification Reaching Large Audience Reaching Large Audience Message Flexibility Message Flexibility Indirect and non-personal Indirect and non-personal Low Low Little Little Delayed Delayed One-way One-way Yes Yes Yes Yes Fast Fast Same message to all audiences Same message to all audiences

3

Characteristics of Public Relations
Public Relations Public Relations
Communication Mode Communication Mode Communication Control Communication Control Feedback Amount Feedback Amount Feedback Speed Feedback Speed Message Flow Direction Message Flow Direction Message Content Control Message Content Control Sponsor Identification Sponsor Identification Reaching Large Audience Reaching Large Audience Message Flexibility Message Flexibility Usually indirect, non-personal Usually indirect, non-personal Moderate to low Moderate to low Little Little Delayed Delayed One-way One-way No No No No Usually fast Usually fast Usually no direct control Usually no direct control

3

Characteristics of Sales Promotion
Sales Promotion Sales Promotion
Communication Mode Usually Indirect and non-personal Communication Mode Usually Indirect and non-personal Communication Control Moderate to low Communication Control Moderate to low Feedback Amount Little to moderate Feedback Amount Little to moderate Feedback Speed Feedback Speed Message Flow Direction Message Flow Direction Message Content Control Message Content Control Sponsor Identification Sponsor Identification Reaching Large Audience Reaching Large Audience Message Flexibility Message Flexibility Varies Varies Mostly one-way Mostly one-way Yes Yes Yes Yes Fast Fast Same message to varied target Same message to varied target

3

Characteristics of Personal Selling
Personal Selling Personal Selling
Communication Mode Communication Mode Communication Control Communication Control Feedback Amount Feedback Amount Feedback Speed Feedback Speed Message Flow Direction Message Flow Direction Message Content Control Message Content Control Sponsor Identification Sponsor Identification Reaching Large Audience Reaching Large Audience Message Flexibility Message Flexibility Direct and face-to-face Direct and face-to-face High High Much Much Immediate Immediate Two-way Two-way Yes Yes Yes Yes Fast Fast Tailored to prospect Tailored to prospect

3

Characteristics of Personal Selling
Direct Marketing Direct Marketing
Communication Mode Communication Mode Communication Control Communication Control Feedback Amount Feedback Amount Feedback Speed Feedback Speed Message Flow Direction Message Flow Direction Message Content Control Message Content Control Sponsor Identification Sponsor Identification Reaching Large Audience Reaching Large Audience Message Flexibility Message Flexibility Direct and impersonal Direct and impersonal High High Much Much Immediate Immediate Two-way Two-way Yes Yes Yes Yes Slow Slow More’less tailored to prospect More’less tailored to prospect

3

Learning Objective

4

Explain the goal and tasks of promotion.

Goals and Tasks of Promotion Informing Informing Reminding Reminding

4

Target Target Audience Audience

Persuading Persuading

Goals and Tasks of Promotion Informing Informing
PLC Stages: Stages Introduction Early Growth

4

Reminding Reminding
PLC Stages: Maturity

Target Target Audience Audience

PLC Stages: Growth Maturity

Persuading Persuading

Goals and Tasks of Promotion Informative Objective
• • • • Increase awareness Explain how product works Suggest new uses Build company image

4

Goals and Tasks of Promotion Persuasion Objective
• Encourage brand switching • Change customers’ perception of product attributes • Influence buying decision • Persuade customers to call

4

Learning Objective

4

Reminder Objective
• • • Remind customers that product may be needed Remind customers where to buy product Maintain customer awareness

Learning Objective

5

Discuss the AIDA concept and its relationship to the promotional mix.

Learning Objective The AIDA Concept

5

Model that outlines the process for achieving promotional goals in terms of stages of consumer involvement with the message.

The AIDA Concept

5

Action Desire Interest Attention

AIDA and the IMC Mix

5
Action Action
Not Not effective effective Not Not effective effective Very Very effective effective Somewhat Somewhat effective effective

Awareness Interest Awareness Interest
Advertising Public Public Relations Relations Sales Promotion Personal Selling
Very effective Very Very effective effective Somewhat effective Somewhat effective Very effective Very Very effective effective Somewhat effective Very effective

Desire Desire
Somewhat effective Very Very effective effective Very effective Very effective

Learning Objective

6

Describe the factors that affect the IMC mix.

Factors Affecting the Promotional Mix
Nature of Product Nature of Product Stage in PLC Stage in PLC Target Market Factors Target Market Factors

6

Factors Factors Affecting Affecting Choice of Choice of IMC Mix IMC Mix

Type of Buying Decision Type of Buying Decision Promotion Funds Promotion Funds Push or Pull Strategy Push or Pull Strategy

Nature of the Product

6

Factors that influence IMC mix
• Product characteristics – Business product vs. consumer product • Costs and risks • Social risk

Stage in the Product Life Cycle

6

Maturity
Sales ($)

Introduction

Growth

Decline

Time

Product Life Cycle and the IMC Mix
Maturity Introduction Growth Decline

6

Sales ($)

Time
Light Heavy use of Advertising, advertising, prePR for introduction awareness; Publicity sales promotion for trial Advertising, PR, Brand loyalty Personal Selling for distribution Ads decrease. Sales Promotion, Personal Selling Reminder & Persuasive AD/PR decrease Limited Sales Promotion, Personal Selling for distribution

Target Market Characteristics

6

FOR: • Widely scattered market • Informed buyers • Repeat buyers

Advertising Sales Promotion Less Personal Selling

Type of Buying Decision
Advertising Sales Promotion Advertising Public Relations

6

Routine Routine

Type of Type of Buying Decision Buying Decision affects affects Promotional Promotional Mix Choice Mix Choice

Not Routine Not Routine or Complex or Complex

Complex Complex

Personal Selling

Available Funds

6

• • • •

Trade-offs with funds available Number of people in target market Quality of communication needed Relative costs of promotional elements

Push and Pull Strategies
PUSH STRATEGY
Manufacturer Manufacturer promotes to promotes to wholesaler wholesaler Wholesaler Wholesaler promotes to promotes to retailer retailer Retailer Retailer promotes to promotes to consumer consumer

6

Consumer Consumer buys from buys from retailer retailer

Orders to manufacturer

PULL STRATEGY
Manufacturer Manufacturer promotes to promotes to consumer consumer Consumer Consumer demands demands product product from retailer from retailer Retailer Retailer demands demands product product from wholesaler from wholesaler Wholesaler Wholesaler demands demands product from product from manufacturer manufacturer

Orders to manufacturer

Push and Pull Strategies

6

• Push strategy is directed toward the channel members – Provide incentives for those in the distribution channels to buy the product • Pull strategy is directed toward the ultimate purchaser – The focus is on creating demand at the household or ultimate consumer level

Learning Objective

7

IMC PLANNING PROCESS

IMC PLANNING PROCESS

7

Marketing Plan Review Marketing Plan Review Situation Analysis Situation Analysis Communications Process Communications Process Analysis Analysis

METHODS PUSH vs. PULL

Budget Development Budget Development Program Development Program Development Integration & Implementation Integration & Implementation Monitoring, Evaluating, Monitoring, Evaluating, Controlling Controlling

IMC PLANNING PROCESS
Review of Marketing Plan Promotional Program Situation Analysis Analysis of the Communications Process Budget Determination Develop Integrated Marketing Communications Programs Advertising Advertising Objectives Message Strategy Sales Promotion Sales Promotion Objectives Sales Promotion Strategy PR/ Publicity PR/ Publicity Objectives PR/ Publicity Strategy Personal Selling Personal Selling Objectives Personal Selling Strategy Direct Marketing Direct Marketing Objectives Direct Marketing Strategy

7

Internet/ Interactive Internet/ Interactive Objectives Internet/ Interactive Strategy

Integration & Implementation of Marketing Communications Strategies Monitor, Evaluate & Control Promotional Program

Learning Objective

8

Approaches to Determining the Promotional Budget

Approaches to Determining the Promotional Budget

8

Affordable Percentage-of-Sales Competitive Parity Objective-and-Task
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 17-103

Affordable Method • Setting the promotion budget at the level that management thinks the company can afford. • Small companies project their total revenues, deduct their operating expenses and capital outlays, and then devote some of the remaining funds to advertising. • This method places advertising last among expenses, therefore, ignores the effects of promotion on sales. • This method may result in either over or under spending for advertising.

8

Percentage-of-Sales Method

8

• Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the sales price. • The advantage of this method is that it helps management think about the relationships between promotion spending, selling price, and profit per unit. • The disadvantages are; (1) it wrongly views sales as the cause of promotion rather than as the result, (2) it may prevent increase in promotional spending, when the sales are falling, (3) it does not provide any basis for choosing a specific percentage, except last year’s and competitors percentages. • Probably the most widely used as it is simple • But, what about cause and effect?

Competitive-Parity Method

8

• Setting the promotion budget to match competitor’s outlays. The company monitors competitor’s advertising or industry averages. • The advantage of this method is that it mat prevent promotional wars. • The disadvantages of this method are; (1) each company has its own promotional needs, therefore, the competitors’ spending may be misleading, (2) there is no guarantee that this method will prevent promotion wars.

Objective-and-Task Method

8

• Setting promotion budgets based on what the company wants to accomplish with promotion. • This is the most logical budget setting where the company (1) defines specific promotion objectives, (2) determines the tasks needed to achieve these objectives, (3) estimates the total costs of performing these tasks. • This is the most difficult method to use because it is hard to understand which tasks will achieve specific objectives. E.g. if Sony wants to create 95% awareness for its new camera within 6 months, it is difficult to decide what messages and promotions to use and how much to spend.

Media Strengths

8

Evaluating Media

8

• Example
– Grey’s Anatomy: 9.3 million TVs – Grey’s Anatomy: $440,000 per 30 seconds – McDonald’s meal contribution: $0.50

• $440,000/0.50 = 880,000 meals/breakeven
– 9.3 million viewers are exposed; thus, McDonalds needs 9.5% to purchase

• 880,000 / 9.3 million = 9.5%
– The question is…Is this reasonable?

Impact of Phone Contacts on Spending

8

Impact of Email Contacts on Spending

8

Impact of Mail Contacts on Spending

8

Impact on Profit of Different Combinations
$90 $70 $50
t i o f P

8

$30 $10

($10) 0 1 2
Equal # of contacts Phone=Mail, No email Email, No phone or mail

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THANK YOU VERY MUCH

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