Assignment

on
Marketing Management

Title 01: Competitive Dynamics

Title 02: Managing Mass Communication

Title 03: Designing & Managing Integrated Marketing Channels

Submitted to:

Mohammad Imran
Assistant Professor
FBA, USTC

Submitted By:
Nazim Nazmul
Roll: 573
Batch: MBA 23rd (Executive for Engr.)
Session: 2019

Date of submission: 17th July 2020

Faculty of Business Administration

University of Science & Technology Chittagong

Chapter 11
COMPETITIVE DYNAMICS

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COMPETITORS AND THEIR
MARKETING STRATEGIES
Introduction:
Philip Kotler, the eminent writer, has discussed the military-type marketing strategies for competitors. He
adopted many terms from military science to suggest suitable strategic actions against the enemy. His work
is based on many research projects and studies carried out in the United States of America.
Though the strategies are based on American economic and marketing systems, they are equally
applicable to other countries including India. He is the only expert and writer on this topic who provides
sufficient insights into the competitive dynamics. The entire portion of the article is based on Kotler’s views.

Competitive Positions:
Normally, a firm occupies one of six positions in the target market:
1. Dominant:
The firm has control over other competitors. Naturally, it can enjoy more freedom to select suitable strategic
options.
2. Strong:
The firm doesn’t control behavior of other competitors but can take independent actions without
endangering its long-term position. Other competitors’ actions do not have a notable impact on its position.
3. Favorable:
The firm is in position to exploit opportunities to improve its position. It has to constantly adjust its strategies
to continue enjoying the better-than-average opportunities. It has to remain alert and struggle constantly.
4. Tenable (Average):
The firm has satisfactory performance but has to suffer due to dominant and strong competitors. It has less-
than-average opportunities to improve its position.
5. Weak:
The firm has unsatisfactory performance. However, there exists opportunities to improve its position. It
must change or adjust constantly to exist.
6. Nonviable (non-survivable):
The firm has unsatisfactory performance and has no opportunity to improve its performance and position.

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Major Types of Competitors:
Based on market position, market shares, brand image, resources capacities, and domination
power (degree of control over others), there are broadly four types of competitors, such as:
1. Market Leaders
2. Market Challengers
3. Market Followers
4. Market Nichers.
Every company must formulate different strategies to react with different competitors. Let us analyze
relevant marketing strategies for different position holders. Figure 2 shows broad strategies for different
competitors.

Marketing Strategies for Market Leaders:

Market leader has the largest market share in the relevant product in the industry. It has a a dominant
position in the market. Obviously, it leads other firms in new product development, price change,
distribution coverage, promotional activities, and novel experiments.
The leader may or may not be respected by other firms, but other firm has to acknowledge its dominance.
Other firms can challenge, follow or avoid the market leader. In India, well-known market leaders are Maruti
Suzuki in cars, Hero Honda in two-wheelers, Hindustan Unilever in consumer packages goods, Coca-Cola
in soft-drink, McDonald’s in fast food, Life Insurance Corporation in life-insurance, and so forth.
A few market leaders have monopoly in the market. They have to remain alert all the time leadership to
maintain their leader-position. Other firms are constantly challenging leadership position. A little mistake
can plunge the leader into second or third position. It has to adopt innovative practices in all the marketing
areas. Sometimes, it has to incur excessive costs to maintain the number-one position.

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Strategies:
It is hard task to remain the number one in market.
The firm desiring to maintain market- leader position has to adopt one or more of following three
major strategies:
1. Expanding Total Market
2. Defending Current Market Share
3. Expanding Market Share

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1. Expanding Total Market:
The leader normally gains more when the total market expands. Naturally, when total market or the industry
expands, major player will gain more.
Total market can be expanded in four different ways:
i. Add New Users:
The leader firm must try to add new users. Every product class has potential to attract new buyers who are
either not aware of the product or are resistant due to high price and lack of desired features.
New users can be added in several ways:
a. Convincing non-users to use the product (market penetration strategy).
b. Adding more users in user-class (new market strategy)
c. Winning competitors’ customers (aggressive strategy).
d. Selling product in other markets (geographical-expansion strategy).
ii. Discover New Uses:
Another option to expand the total market consists of discovering and promoting new uses of the existing
products. The strategy can be applied to industrial products as well as consumer products. A wise firm can
get idea regarding new uses of product from customers tactfully.
Users are encouraged to suggest the new/innovative uses of the product. In the same way, the company’s
research and development wing can also contribute in discovering the innovative uses of the product. After
discovering new uses, a heavy advertising and publicity must be undertaken to popularize new uses of the
product.

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iii. More Usage per Occasion/Time:
The third strategy to expand the market consists of convincing the present users to use more of the product
per use occasion. It is more applicable to edible-class products. Similarly, it can be extended to durable
products, too. More usage may be in forms of more quantity, numbers, time, amount, intensity, and so on.
A firm has a lot of promotional offers at its command to encourage more usage per occasion.
iv. More Frequent Uses:
Sometimes, a company tries to convince users to use the product more frequently to increase
consumption. If a particular product is used once in a day, it can be used twice or thrice in a day.
For example, in case gift articles, it is very common to discover different events when gifts can be offered.
Likewise, customers can be convinced to brush the teeth thrice a day or every time after consuming
sweets, instead of once in a day, normally, in the morning.

2. Defending (Maintaining) Current Market Share:

This strategy is based on the theme: ‘Customer-retention is more profitable than customer- creation.’ At any
cost, the current market share must not be endangered. While expanding total market, a market leader
must continuously defend its current market share against rivals’ attacks.
For example, Coca-Cola guards its market share against Pepsi-Cola. Hindustan Unilever protects its share
against Procter and Gamble. Maruti Suzuki India tries to protect its market against Tata Motors and
Hyundai Motors. A leader firm has to do everything possible to defend its current market share. Continuous
innovation, better customer service, distribution effectiveness, and cost-cutting can increase
competitiveness.
It has to ‘plague holes’ to keep the enemy away. In short, it must continuously monitor its operations to
avoid weaknesses that can attract rival attacks. Sometimes, leading firm has to apply the military principle –
The best defense is a good offense.
There are six defense strategies:
i. Position Defense:
The most basic defense strategy is to build an impregnable (indestructible, unconquerable, or unbeatable)
fortification (protecting fort) around one’s territory to keep the opponents away. It involves continuous
innovation, diversification, price-cuts, improving distribution, and strengthening promotional efforts.
ii. Flank Defense:
Here, the purpose is to protect weak sides or fronts. Flank defense consists of erecting/setting outposts to
protect weak fronts that are vulnerable to be attacked. Such protection attempts serve as invasion base for
counterattack, if needed. Quality improvement, introduction of low-price products, aggressive sales force,
etc., can make sense.

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iii. Preemptive or Preventive Defense:
The basic idea of preemptive defense is to launch the attack before the enemy starts attacking. It is like: To
attack the enemy earlier to avoid enemy’s attack. Playing the psychological games is very common to
discourage competitors’ maneuver (movement).
The company leaks the news by any of the media that it is considering to cut price and/or planning to build
another plant. Such news intimidates (threaten) the competitors who decide to cut price or enter the market
with the existing or new product.
iv. Counteroffensive Defense:
Counteroffensive indicates responding enemy’s attack with a counterattack. The leader cannot remain
passive when competitor’s attacks in forms of price-cut, product modification, promotion blitz
(bombardment), or any time of invasion on its sales territories. Leader firm has to undertake frontal, i.e.,
head-on attack in case of rapid erosion of market share.
When market leader’s territory is attacked, an effective counter attack is to invade the enemy’s territories so
that it has to pull back some of its troops (resources) to defend the territories. Sometimes, leader exercises
economic or political clout (influence, blow, or power) to discourage the attackers.
Economical clout includes applying further price- cut or may announce product up-gradation to delay
customers buying the competitors’ products while political clout includes lobbing legislators to take political
actions to hamper or slow down the enemy.
v. Mobile Defense:
Mobile defense – also called shifting defense – is much more than simply protecting the territories. The
leader stretches or expands its domain (area) over new territories that can serve as the future centers for
offense as well as defense. A leader will deploy its resources in such a way to avoid the future invasion and
create an impression in mind of competitors that leader is capable to safeguard its territories.
vi. Contraction Defense:
Sometimes, even large companies can no longer defend all territories. The best strategy in this situation is
a planned contraction, i.e., strategic withdrawal. Planned contraction doesn’t mean market abandonment
(fleeing from the market), but rather giving up weaker territories and concentrating on stronger territories.

3. Expanding Market Share:

Instead of expanding total market and defending current market shares, sometimes, the market leader
prefers to improve profitability by increasing market share. The extent to which the increased market share
results into improved profitability depends on a lot of variables. Here, company must do something to
snatch the market share from the pockets of competitors.

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There are several ways to expand market share:
i. Adding New Product Lines:
In order to expand market share, the market leader can add new and diversified product lines to make the
product mix comprehensive and attractive. However, there must be adequate demand for new product
lines.
ii. Expanding Existing Product Lines:
It is a product line extension strategy. It calls upon expanding current product lines by adding new models,
varieties or items with attractive features (colours, sizes, shapes, weights, get-ups, etc.) and superior
qualities (durability, taste, usefulness, safety, convenience, status, etc.) This strategy can attract more
customers. Research and development department must be active to grab emerging market opportunities.
iii. Improving Product Qualities:
Market share can be increased by improving qualities of current products so that customers expecting
better qualities can be attracted.
iv. Increasing Promotion Efforts:
Heavy advertising, aggressive sales force, effective sales promotion, and attractive publicity efforts can
help expanding market share faster relative to competitors.
v. Improving Distribution System:
Market share can be expanded via better distribution system. Both direct and indirect channels and overall
physical distribution system must be modified so that customers can avail the products with the least
difficulties. Similarly, effective distribution system can bring down overall selling costs which can further
improve profitability.
vi. Deploying Aggressive Sale Force:
Effective personal selling efforts also have positive impact on sales volume, market share, and profitability
as well.
vii. Applying Price-cut:
To attract price-sensitive customers, leader can practice price-cut strategy. This strategy is profitable only
when the per cent of sales-rise is more than per cent of price-cut.
viii. Improving Production Efficiency:
A leader must improve production efficiency to reduce overall costs. Due to improved production efficiency,
a firm can sell better-quality products even at low price.

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Marketing Strategies for Market Challengers:
Market challengers are known as runner-up firms. They occupy second, third and lower ranks in an
industry. Bajaj Auto in two-wheelers, Tata Motors and Hyundai in cars, Reliance Petro and Essar Oils in
refineries, Pepsi-Cola in soft-drink, Procter and Gamble in consumer-packaged goods, Vodafone in cellular
service providers, Sony and Samsung in cell-phone instruments, etc., are some of the market challengers
in India.
Market challengers are capable to attack the leader and other competitors. Sometimes, capable
challengers can overtake the leader, too. Let us examine three-staged marketing strategies available to
market challengers. Figure 4 shows the market challengers’ three-stage marketing strategies.

Strategies:
The challenger can exercise following strategies:

1. Defining Strategic Objectives and Opponents:

First of all, a market challenger firm must define its strategic objectives. Normally, most of market
challengers’ strategic objective is to increase market share. Then, the challenger has to decide on the
opponents to attack. Like market leaders, the challengers cannot fight against all opponents. Therefore, a
challenger firm has to select the specific opponent to attack.

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A market challenger can attack any of the following opponents:
i. Attacking the market leader.
ii. Attacking the firms of its own size that are not doing the job well and are underfinanced.
iii. Attacking the small local and regional firms that are not doing the job well and are underfinanced.

2. Choosing General Attack Strategies:

Once strategic objectives are defined, and opponents are selected, the challenger can apply
following attacking options:
i. Frontal Attack:
A frontal or “head-on” attack is an aggressive attack strategy. A challenger attacks the opponent’s strengths
rather than its weaknesses. The outcomes depend on who has more strengths and endurance. This option
is preferred by the firm with greater resources, otherwise it is proved as a suicide mission.
Frontal attack involves attacking opponent’s products, advertising and pricing, and lowering production
costs with heavy investment, etc. IBM’s attack on Microsoft is the best example of frontal attack. This
attacking option is widely practices in Banking, insurance, cell-phones, airways, etc.
ii. Flank Attack:
The challenger concentrates on opponent’s less-secured, rear-side or weak spots to attack. It is a side-
attack rather than a front attack strategy. This option is particularly attractive to an aggressor with less
resources than opponents. There are two strategic dimensions of a flank attack – geographical and
segmental.
In geographical attack, the challenger spots (locates) areas where the opponent is underperforming. And,
in segmental attack, a challenger spots the markets, which are not served by the leaders. The firm tries to
fill the gap by finding needs and satisfying them. Naturally, flank attacks are more likely to be successful
than the frontal attacks.
iii. Encirclement (All-round) Attack:
Encirclement attack is a form of all-rounded and comprehensive attack. It involves launching a grand
offensive attack on several fronts, so that the opponent must protect its fronts, sides, and rears
simultaneously.
The challenger may offer the market everything the opponent offers. This attack is meaningful only when
the aggressor commands superior resources and firmly believes that such attack will break the opponent’s
will.

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iv. Bypass Attack:
It is the most indirect attacking option to harm others. It indicates bypassing (i.e., ignoring or avoiding) the
enemy and attacking easier markets to broaden one’s resource base. This is the easiest way to face the
leader.
v. Guerrilla Attack:
This type of warfare contains making small and intermittent (sudden and irregular) attacks on enemy’s
different territories. A firm may undertake a few major attacks or continuous minor attacks for longer time. It
is more preparation for war than war itself.
Ultimately, the guerrilla attack must be backed by a stronger attack to beat the opponent. It is also
expensive and requires a good deal of resources. However, it is less expensive compared to other attacks.
The purpose of such attack is to confuse, harass and demoralize opponents, and finally make permanent
place in the market. Guerrilla attacks include selective price cuts, intense promotional efforts, more
attractive service offers, occasional legal actions, etc. Normally, such attacks are practiced by smaller firms
against lager firms.

3. Choosing Specific Attack Strategies or Attacking Tools:

The five main attack strategies – frontal attack, flank attack, encirclement attack, bypass attack, and
guerrilla attack – are very broad.
These strategies consist of many specific attack strategies, some of them have been described as
under:
i. Price-Discount Strategy:
It consists of offering a comparable product at a lower price. Success of price-discount strategy works
successfully if (1) the challenger can convince that products and services are comparable to that of leaders,
(2) buyers must be price- sensitive and feel comfortable to buy, and (3) market leader must not cut its price
in spite of challenger’s attack.
ii. Cheaper-good Strategy:
It consists of offering average or low-quality products at much lower price. The strategy works successfully
only when there are sufficient number buyers who are interested in the low-priced and low-quality products.
iii. Prestige-good Strategy:
It consists of launching the high-quality products and selling them at premium price. This strategy succeeds
if specific group of buyers are ready to pay high price for superior quality-prestigious products.
iv. Product-proliferation Strategy:
It consists of attacking leader by launching a large number of product varieties to give buyers more choice.
v. Product-innovation Strategy:
It consists of adopting product innovation to attack leaders’ position.

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vi. Improved-services Strategy:
It consists of offering the customers new and better services with same products. Such strategy is widely
practiced in consumer durables.
vii. Distribution-innovation Strategy:
It consists of attacking leaders by discovering new ways or channels of distribution. A challenger can apply
door-to-door selling, online selling, direct selling, opening stores at convenient places, etc., instead of
tradition way of distribution.
viii. Manufacturing-cost-reduction Strategy:
It consists of reducing manufacturing costs by more efficient purchasing, lower labour costs, modern
production equipment, and improved technology. The market challenger can apply lower cost to aggressive
pricing.
ix. Intensive Advertising and Promotion:
It consists attacking the leader by increasing advertising and promotional expenditures. The success of the
strategy depends on how far challenger can exhibit superiority over the leader.

Marketing Strategies for Market Followers:

The firms prefer to follow leader rather than to challenge are called the followers. They do not face the
leader directly. Some followers are capable to challenge but they prefer to follow. However, market
followers always react strongly in case of any loss.
In some capital goods industries like steel, cement, chemical, fertilizer, etc., product differentiation is low,
service qualities are similar, and price sensitivity is high. They decide to provide similar offers by copying
the market leader. But, one must be aware that followership is not always rewarding path to pursue.
Market followers prefer to follow the leader doesn’t mean that they don’t require specific market strategies.
They cannot be simply passive or a carbon copy of leaders. They must know how to hold current
customers and win a fair share of new customers. Followers must keep manufacturing cost low and offer
better quality products with satisfactory services. At the same time, they must enter new markets as and
when there are opportunities.
They have following strategic options:
1. Counterfeiter or Fraudster:
It is a simple way to follow the leader. The follower who wants to be counterfeiter duplicates the leader’s
product as well as package and sells it in the market through disrepute distributors. Products are marketed
secretly to avoid legal complications.
The product seems exactly similar to original product except basic quality and features. This is common
strategy in auto-parts and electronics products. People, knowingly or unknowingly, buy such duplicate
products as they are made available at low price.

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2. Cloner or Emulator:
The doner clones (emulates) the leader’s products, distribution, advertising and other aspects. Here,
product and packaging may be identical that of leader, but brand name is slightly different, such as
“Colgete” or “Colege” instead of “Colgate” and “Coka-Cola” instead of “Coca-cola.” This strategy is widely
practiced in computer business also. The cloned products are openly sold in the market due to different
brand names.
3. Imitator:
Some followers prefer to imitate/copy some aspects from the leader, but maintain differentiation in terms of
packaging, advertising, sales promotion, distribution, pricing, services, and so forth. Customers can easily
distinguish imitated product from original one. The leader doesn’t care for imitator until imitator attack the
leader aggressively. Quite obviously, such products are sold at low price.
4. Adaptor:
Some followers prefer to adapt the leader’s products and improve them. They make necessary
changes/improvements in the original products and develop little different products. The adapter may
choose to sell the products in different markets (country or area) to avoid direct confrontation with the
leader. Many Japanese companies have practiced this strategy and developed superior products.
Followers can earn more as they do not bear innovation expenses. In the same way, they can conserve
advertising and other promotional expenses. However, to be follower of a leader is not always better option
to pursue.

Marketing Strategies for Market Nichers:

A niche is a more narrowly defined small market (limited number of buyers) whose needs are not being
well-served by existing sellers. It is a small segment that has distinctive needs and is, mostly, ready to pay
high price. Marketers can identify niches by dividing a segment into sub-segments or by dividing a group
with a distinctive set of traits.
They may seek a special combination of benefits. Niches (small groups of buyers) are fairly small and
normally attract a few competing firms (nichers). A nicher is the small firm serving only small specific
groups of customers called as the niches. The firm’s marketing efforts to serve the niches successfully is
called nichemanship.
Nichers understand their niches’ needs so well and minutely that their customers are willing to pay a
premium price. They design special products with distinctive features, qualities, uses, and value for special
group of limited customers. They have the special skills to serve the niches in a superior fashion and can
gain certain economies through specialization.
For example, a footwear company can create niches by designing shoes for different sports (like crickets,
hokey, athletes, golf, etc.), 3nd exercises (like cycling, running, jogging, waking, etc). In the same way,
niches can be created in hotels, cosmetics, cloths, airways, hospitals, and others. Nichers can gain
comparatively high returns. They can achieve high margin while large companies can achieve high volume.

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Smaller firms normally avoid competing with larger firms by targeting small markets in which large firms
have a little or no interest. Companies with low market shares can be highly profitable through effective
niching. Nichers have to perform three main tasks – creating niches, expanding niches, and protecting
niches. They have to remain alert for all the time as they can be invaded any time by the large competitors.
Strategies:
Specialization is the basic idea to serve niches. Nichers can apply specialization on various aspects.
They can practice one or more of following marketing strategies:
1. End-user Specialist:
It is very popular and widely used option to serve niches. The firm prefers to operate one-type of end-use
customers, for example, a legal advisory firm can handle only criminal cases, or a fashion designer can
work only for a few film stars.
2. Vertical Level Specialist:
The firm can specialize at vertical level of production or distribution, for example, producing only raw-
materials for specific companies, only warehousing services, or it may concentrate only on retailing. It can
serve only a part of the total process.
3. Customer Size Specialist:
The firm can sell products only to small, medium, or large size customers. For example, a firm can supply
one or two components only to large companies.
4. Specific Customer Specialist:
A firm supplies its products only to distinct group of buyers. For example, designing special two-wheeler for
handicapped people or serving special foods to people who are suffering from certain diseases like
diabetes.
5. Geographic Specialist:
The firm serves customers of only specific region or area of the world, for example, specific need of the
people living in the hilly area.
6. Product or Product Line Specialist:
The firm produces or sells only one product or product line, for example, it sells only socks, ties, or tie pins.
A small finance company deals with only car loans or personal loans.
7. Event Specialist:
The firm concentrates its efforts only on particular events or occasions like marriage, grand inauguration,
birthday, anniversary, or some festivals. It offers goods or services for celebrating the events of target
buyers

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PRODUCT LIFE CYCLE
Overview
The product life cycle describes the life of a product in the market with respect to business/commercial
costs and sales measures. It proceeds through multiple phases, involves many professional disciplines and
requires a multitude of skills, tools and processes.
This is not to say that product lives cannot be extended – there are many good examples of this – but
rather, each product has a ‘natural’ life through which it is expected to pass.

What is Product Life Cycle – Meaning

Product life cycle can be understood as “the period of time over which an item is developed, brought to
market and eventually removed from the market. First, the idea for a product undergoes research and
development. If the idea is determined to be feasible and potentially profitable, the product will be
produced, marketed and rolled out. Assuming the product becomes successful and its production will grow
until the product becomes widely available. Eventually, demand for the product will decline and it will
become obsolete.”
Some of the important definitions are as under:
Philip Kotler, “The product life-cycle is an attempt to recognize distinct stages in the sales history of the
product.”
Arch Patton, “The life-cycle of a product has many points of similarity with the human life-cycle; the product
is born, grown lustily, attains dynamic maturity then enters its declining year.”
William J. Stanton, “From its birth to death, a product exists in different stages and in different competitive
environment. Its adjustment to these environments determines to a great degree just successful its life will
be.”
Analytical study of the above definitions indicates that different stages in the length of the life, through
which a product has to pass, are known as its life-cycle. The life of a product begins with its introduction
into the market. Then the product enters into a period during which its market grows rapidly. After this, the
product reaches maturity and then the stage of saturation comes. After the stage of saturation, the market
of the product starts to decline and finally the life of product comes to an end.
It is important to note in this reference that the length of life-cycle differs from product to product. The Life-
cycle of some products is very short such as fashionable ready-made garments. On the other band, some
are the products whose life-cycle goes on upto a long period such as machine. It is also important to note
that some of the products come out of the market even before passing through all the stages of their life-
cycle in the same manner as some persons die in childhood, or at young age.

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The stages of the product life cycle are:
• Introduction
• Growth
• Maturity
• Decline
PLC management makes these three assumptions:
1. Products have a limited life and, thus, every product has a life cycle.
2. Product sales pass through distinct stages, each of which poses different challenges, problems
and opportunities to its parent company.
3. Products will have different marketing, financing, manufacturing, purchasing and human resource
requirements at the various stages of its life cycle.
The product life cycle begins with the introduction stage (see). Just because a product successfully
completes the launch stage and starts its life cycle, the company cannot take its success for granted.

Product Development and Product Life Cycle:

The Product Life Cycle follows directly after new product development.
A company must succeed at both developing new products and managing them in the face of changing
tastes, technologies and competition. A good product manager should find new products to replace those
that are in the declining stage of their life cycles; learning how to manage products optimally as they move
from one stage to the next.

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Market Introduction
This stage is characterized by a low growth rate of sales as the product is newly launched and consumers
may not know much about it. Traditionally, a company usually incurs losses rather than profits during this
phase. Especially if the product is new on the market, users may not be aware of its true potential,
necessitating widespread information and advertising campaigns through various media.
However, this stage also offers its share of opportunities. For example, there may be less competition. In
some instances, a monopoly may be created if the product proves very effective and is in great demand.
Characteristics of the introduction stage are:
• High costs due to initial marketing, advertising, distribution and so on.
• Sales volumes are low, increasing slowly
• There may be little to no competition
• Demand must be created through promotion and awareness campaigns
• Customers must be prompted to try the product.
• Little or no profit is made owing to high costs and low sales volumes

Growth
During the growth stage, the public becomes more aware of the product; as sales and revenues start to
increase, profits begin to accrue.

Product Lifecycle Management Stage 2: Growth

The growth stage is the period during which the product eventually and increasingly gains acceptance
among consumers, the industry, and the wider general public. During this stage, the product or the
innovation becomes accepted in the market, and as a result sales and revenues start to increase. Profits
begin to be generated, though the breakeven point is likely to remain unbreeched for a significant time–
even until the next stage, depending on the cost and revenue structures.

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Growth Stage: The graph shows the growth stage in the overall product life cycle.
Initial distribution is expanded further as demand starts to rise. Promotion is increased beyond the initially
high levels, and word-of-mouth advertising leads to more and more potential customers hearing about the
product, trying it out, and–if the company is lucky–choosing to use the product regularly. Repeat orders
from initial buyers are also obtained.
If a monopoly was initially created, then it still exists in this stage. Because of this, the manufacturing
company can look at ways to introduce new features, alterations, or other types of innovation to the product
according to feedback from consumers and from the market in general. This would be done in order to
maintain growth in sales and ensure that interest in the product continues to grow and not stagnate, thus
maintaining the growth stage. In fact, the growth stage is seen as the best time to introduce product
innovations, as it creates a positive image of the product and diminishes the presence of competitors who
will be attempting to copy or improve the product, and present their own products as a substitute.
Features of the growth stage:
• Costs reduced due to economies of scale: as production and distribution are ramped up,
economies of scale kick in and reduce the per unit costs.
• Sales volume increases significantly: as the product increases in popularity, sales volumes
increase.
• Profitability begins to rise: revenues begin to exceed costs, creating profit for the company
• Public awareness increases: through increased promotion, visibility and word of mouth, public
awareness grows.
• Competition begins to increase with a few new players in establishing market
• Increased competition leads to price decreases: price wars may erupt, technology may get
cheaper, or other factors can ultimately lead to falling prices.

Maturity
During the maturity stage, sales will peak as the product reaches market saturation, and competition will
grow increasingly fierce.

Product Lifecycle Management Stage 3: Maturity

The maturity stage follows the growth stage in the product’s life cycle (see).

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Maturity Stage: The maturity stage of the product life cycle shows that sales will eventually peak and then
slow down.
During this stage, sales growth has started to slow down, and the product has already reached widespread
acceptance in the market, in relative terms. Ultimately, during this stage, sales will peak. The company will
want to prolong this phase so as to avoid decline, and this desire leads to new innovation and features in
order to continue to compete with the competition which, by now, has become very established, advanced
and fierce. Competitors ‘products will begin to cut deeply into the company’s market position and market
share. However, despite this, sales continue to grow in the early part of the maturity phase. But, these
sales will peak and ultimately decline, as the graph shows.
Demand for the product ultimately decreases due to competition and market saturation, as well as new
technologies and changes in consumer tastes. Actions the company takes may include:
• Improving specific features in order to resell the product (for instance, in the case of a car, the
manufacturer may include alloy wheels, new colors, sport or hybrid versions, or other changes in
order to keep sales going);
• Lowering prices in order to fight off competition;
• Intensifying distribution and promotional efforts;
• Differentiation efforts, in the hope that new customers will start to buy the product.
• Finding a new targeted market.
The stage that lasts the longest in the product life cycle is the Maturity stage. It is at this time that repeat
business and purchases take the place of new customer buying. So, during the maturity stage, the
following occurs:
• Costs are lowered as a result of production volumes increasing and experience curve effects
• Sales volume peaks and market saturation is reached
• Increase in numbers of competitors entering the market
• Prices tend to drop due to the proliferation of competing products
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 • Brand differentiation and feature diversification is emphasized to maintain or increase market share
• Industrial profits go down

Decline
During decline, sales growth becomes negative, profits decline, competition remains high, and the product
ultimately reaches its ‘death’.

Product Lifecycle Management Stage 4: Decline

The decline stage of the product life cycle is the one where the product ultimately ‘dies’ due to the low or
negative growth rate in sales (see ).

Decline Stage: The decline stage of the product life cycle is the terminal stage where sales drop and
production is ultimately halted.
Profitability will fall, eventually to the point where it is no longer profitable to produce, and production will
stop. As a number of companies start to dominate the market, it becomes increasingly difficult for the
company in question to maintain its level of sales. Consumer tastes also change, as do new technologies
which may make the product become ultimately obsolete (as in the case of CDs and DVDs, and now Blu-
Ray).
Features of the decline stage include:
• A decline in sales volume as competition becomes severe, and popularity of the product falls;
• A fall in prices and profitability (the latter ultimately moving in the negative zone);
• A counter-optimal cost structure;
• Profit increasingly becomes a challenge of production/distribution efficiency rather than increased
sales.

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It is important to note that product termination is not usually the end of the business cycle; rather, it is only
the end of a single entrant within the larger scope of an on-going business program.

Example:
The Personal Computer (PC)
shows the actual sales and price of the personal computer from 1992 to 2002. The PC was state-of-the-art
technology in 1992. Only technologically-advanced individuals would buy one at the very steep price of
$1800 (and bear in mind, $1800 in 1992 was worth a lot more than it is today). A large number of
companies were competing in the field. As the market grew, businesses learned to be more efficient in
producing the PC and prices came down. The drop-in prices and improvements in technology made PCs
more attractive to other consumers. However, the market became saturated after 2000 and went into
decline. PCs started to become obsolete as laptops, net books, tablets, and smart phones started to enter
the market, shifting the emphasis from power to portability. The PC is still used all over the world, but its
popularity has declined dramatically.

Product life cycle of the personal computer: The chart shows the rise and fall of personal computers.

Product Life-Cycle Curve

Product life cycles are a useful guide to lifetime sales and profits and can help marketers understand what
strategies to deploy & when.

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Understanding Product Life Cycle Curves
It is important for marketing managers to understand the limitations of the product life cycle model. A rise in
sales per se is not necessarily evidence of growth, just as a fall in sales does not typify decline. Some
products like Coca Cola and Pepsi may not experience a decline at all.
Differing products possess different product life cycle “shapes.” A fad product develops as a steeply-sloped
growth stage, a short maturity stage, and a steeply-sloped decline stage (for instance, the pet rock phase in
the 1970s). A product like Coca-Cola and Pepsi experiences growth, but also a constant level of sales over
decades. A given product may hold a unique product life cycle shape such that use of typical product life
cycle models are useful only as a rough guide for marketing management.
The duration of each product’s life cycle stage is unpredictable, making it difficult to detect when maturity or
decline has begun. Due to these limitations, strict adherence to the product life cycle model can lead a
company to misleading objectives and strategy prescriptions.
Rather, the product life cycle model should be used as a rough guide to predict how sales patterns may
play out given competitive and economic conditions. All in all, it is a useful model, but not a certainty.
The two charts and demonstrate the break-even point reached during the product life cycle as well as sales
and profits in general. They show that the product does not make much profit during early periods of the life
cycle, meaning the maturity stage must be extended to maximize profits.

Sales and Profits: The diagram shows the sales and profits of a given product during the course of the
product life cycle.

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Break Even: The diagram shows when a product is expected to break even once it is introduced into the
market.
Examples
Facebook
Facebook is in the mature phase of the product life cycle. Once it became the norm for everyone to have a
Facebook account, the growth stage passed. No new or obsoleting technology is expected to appear soon
which would put Facebook out of business. While Facebook competes with other social media sites like
Google+ and Twitter, it appears to be holding its own. Thus, we can say that Facebook is comfortably in the
maturity stage.
iPod
The iPod touch is currently in the mature phase of the product life cycle. This is because the iPod touch is
just an evolution of a product that has been around for long time. Competitors like Microsoft’s Zune have
just followed Apple’s design and technology, while the iPod has evolved over multiple “generations,” each
adding new features and functionalities. Today, the iPod touch is more than just a music player; it plays
videos, runs apps and can be used as an organizer. Such a product may be difficult to classify using the
product life cycle model – is it the same old iPod, or an entirely new product?

Impact of the Product Life Cycle on Marketing Strategy

The stage of the life cycle of the product affects how it is marketed.
The stages through which individual products develop over time is called commonly known as the “Product
Life Cycle.”

At each stage, marketing strategy varies.

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Strategies for the Different Stages of the Product Life Cycle
Introduction
The need for immediate profit is not a pressure. The product is promoted to create awareness and develop
a market for the product. The impact on the marketing mix and strategy is as follows:
• Product branding and quality level is established and intellectual property protection, such as
patents and trademarks are obtained.
• Pricing may be low penetration to build market share rapidly or high skim pricing to recover
development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build
product awareness and educate potential consumers about the product.

Growth
Competitors are attracted into the market with very similar offerings. In the growth stage, the firm seeks to
build brand preference and increase market share.
• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.

Maturity
Those products that survive the earlier stages tend to spend longest in this phase. At maturity, the strong
growth in sales diminishes. Competition may appear with similar products. The primary objective at this
point is to defend market share while maximizing profit.
• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive, and incentives may be offered to encourage preference over
competing products.
• Promotion emphasizes product differentiation.

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Decline
At this point, there is a downturn in the market. For example, more innovative products are introduced, or
consumer tastes have changed. There is intense price cutting, and many more products are withdrawn
from the market. Profits can be improved by reducing marketing spending and cost cutting.
As sales decline, the firm has several options:
• Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
• Harvest the product–reduce costs and continue to offer it, possibly to a loyal niche segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to
continue the product.
By imaginatively repositioning their products, companies can change how customers mentally categorize
them. They can rescue products struggling in the maturity phase of their life cycles and get them back to
the growth phase. And in some cases, they might be able take their new products forward straight into the
growth phase.

CRITICISMS OF THE PLC

As we have seen, the PLC has the ability to offer marketers guidance on strategies and tactics as they
manage products through changing market conditions. Unfortunately, the PLC does not offer a perfect
model of markets as it contains drawbacks that prevent it from being applicable to all products. Among the
problems cited are:
• Shape of Curve – Some product forms do not follow the traditional PLC curve. For instance,
clothing may go through regular up and down cycles as styles are in fashion then out then in again.
Fad products, such as certain toys, may be popular for a period of time only to see sales drop
dramatically until a future generation renews interest in the toy.
• Length of Stages – The PLC offers little help in determining how long each stage will last. For
example, some products can exist in the Maturity stage for decades while others may be there for
only a few months. Consequently, it may be difficult to determine when adjustments to
the Marketing Plan are needed to meet the needs of different PLC stages.
• Competitor Reaction is Not Predictable – As we saw, the PLC suggests that competitor
response occurs in a somewhat consistent pattern. For example, the PLC says competitors will not
engage in strong brand-to-brand competition until a product form has gained a foothold on the
market. The logic is that until the market is established it is in the best interest of all competitors to
focus on building interest in the product form itself and not on claiming one brand is better than
another. However, competitors do not always conform to theoretical models. Some will always
compete on brand first and leave it to others to build market interest for the product form.

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 Arguments can also be made that competitors will respond differently than what the PLC suggests
on such issues as pricing, number of product options, spending on declining products, to name a
few.
• Patterns May Not Apply to All Global Markets – Marketers who base their strategies on how the
PLC plays out in their home market may be surprised to see the PLC does not follow the same
patterns when they enter other global markets. The reason is that customer behavior may be quite
different within each market. For instance, a company may find that while customers in their home
market easily understand how the company’s new product could save them time in performing a
certain task, customers in a foreign market may not easily see the connection.
• Impact of External Forces – The PLC assumes customers’ decisions are primarily impacted by
the marketing activities of the companies selling in the market. In fact, as we discussed in
the Managing External Forces Tutorial, there are many other factors affecting a market, which are
not controlled by marketers. Such factors (e.g., social changes, technological innovation) can lead
to changes in market demand at rates that are much more rapid than would occur if only an
organization’s marketing decisions were being changed (i.e., if everything was held constant
except for company’s marketing decisions).
• Use for Forecasting – The impact of external forces may create challenges in using the PLC as a
forecasting tool. For instance, market factors not directly associated with the marketing activities of
market competitors, such as economic conditions, may have a greater impact on reducing demand
than customers’ interest in the product. Consequently, what may be forecast as a decline in the
market, signaling a move to the Maturity stage, may be the result of declining economic conditions
and not a decline in customers’ interest in the product. In fact, it is likely demand for the product will
recover to growth levels once economic conditions improve. If a marketer follows the strict
guidance of the PLC he/she would conclude that strategies should shift to those of the Maturity
stage. Doing so may be an overreaction that could hurt market position and profitability.
• Stages Not Seamlessly Connected – Some high-tech marketers’ question whether one stage of
the PLC naturally will follow another stage. In particular, technology consultant Geoffrey Moore
suggests that for high-tech products targeted to business customers, a noticeable space or
“chasm” occurs between the Introduction and Growth stages that can only be overcome by
significantly altering marketing strategy beyond what is suggested by the PLC.
While not perfect, the PLC is a marketing tool that should be well understood by marketers since its
underlying message, that markets are dynamic, supports the need for frequent marketing planning. Also,
for many markets the principles presented by the PLC will, in fact, prove to be very much representative of
the conditions they will face in the market.
Finally, the PLC is just one of many models that can assist marketers as they are engaged in the planning
process. Most are beyond the scope of this tutorial. For those interested in learning more about these
models, you are encouraged to consult one or more of the many excellent Marketing Strategy textbooks or
trade books.

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References
1. Aaker, D. (1995) Strategic Market Management, 4th edn. Wiley.
2. Davidson, H. (1997) Even More Offensive Marketing. Pengui
3. Fulmer, W. and Goodwin, J. (1993) Differentiation: Being with the Customer. Business Horizons,
Vol. 101, No. 5.
4. Hooley, G., Adeley, A.S. 1998). Marketing: Principles and Practice. Ikeja. Lagos: Malthouse Press
Limited.
5. Baker, Michael, J. (1992). Marketing Strategy and Management; Second Edition. London:
Macmillan Press Ltd.
6. Baker, Michael, .1. (ed.) (1999). The Marketing Book; 4lh Edition. Oxford: Butlerworth-Heinemann.
7. Buzzell, R.D. (1992). Competitive Behaviour and the PLC. In Baker, Michael J. (1992). Marketing
Strategy and
8. Management; Second Edition. London: Macmillan Press Ltd.
9. Czinkota, M.R.; Kotabe M. and Mercer, D. (1997). Marketing Management: Text and Cases.
10. Massachusetts: Blackwell Publishers, Inc.
11. Dhalla. N.K. and Yuspeh, S. (1976). Forget the PLC Concept. In Baker. Michael J. (1992).
Marketing Strategy and
12. Management: Second Edition. London: Macmillam Press Lid.
13. Kelly, Eugene J. (1972). Marketing Planning and Competitive Strategv. NewJersey: Prentice-Hall,
Inc.
14. Kotier, P. (2000), Marketing Management: 10th Edition, (The Millennium Edition). New Jersey:
Prentice-Mall, Inc.
15. McDonald, M. (1999). Marketing Plans: How to Prepare Them. Ho\v to Use Them (4th Edition).
Oxford:
16. Butterworth-Heinemann.
17. Morden, A.R. (1991). Elements of Marketing; Second Edition. London: DP Publications Ltd.
18. Gnu. A.J.C. (2002). Product Innovation: A Tool for Business Survival. In Confluence Journal of
Management. Anyigba:
19. Journal of the Faculty of Management Sciences, Prince Ahubakar Audu University, Vol. 2, No. 1.
1. Osuagwu, L. and Eniola,Saunders, J. and Piercy, N. (1999) Marketing Strategy and Competitive
Position, 2nd edn. Prentice Hall.

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CHAPTER 18
MANAGING MASS COMMUNICATION

|
Developing and Managing an
Advertising Program
Advertising can be a cost-effective way to disseminate messages, whether to build a
brand preference or to educate people. Even in today’s challenging media environment,
good ads can pay off, as they did for P&G.
In developing an advertising program, marketing managers start by identifying the target
market and buyer motives. Then they can make the five major decisions known as “the
five Ms”: Mission: What are our advertising objectives? Money: How much can we
spend, and how do we allocate our spending across media types? Message: What
should the ad campaign say? Media: What media should we use? Measurement: How
should we evaluate the results? These decisions are summarized in Figure 15.1 and
described in the following sections.
Setting the Advertising Objectives
An advertising objective (or goal) is a specific communications task and achievement
level to be accomplished with a specific audience in a specific period of time.2 We classify
advertising
Figure 1.1 The Five M’s of Advertising

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objectives according to whether they aim to inform, persuade, remind, or reinforce. These
goals correspond to stages in the hierarchy-of-effects model discussed in Chapter 14.
Informative advertising aims to create brand awareness and knowledge of new
products or new features of existing products.3 Persuasive advertising aims to create
liking, preference, conviction, and purchase of a product or service. Some persuasive
advertising is comparative advertising, which explicitly compares the attributes of two or
more brands. This works best when it elicits cognitive and affective motivations
simultaneously and when consumers are processing advertising in a detailed, analytical
mode.4 Reminder advertising aims to stimulate repeat purchase of products and
services. Reinforcement advertising aims to convince current purchasers they made
the right choice. Automobile ads often depict satisfied customers enjoying special
features of their new car.
The advertising objective should emerge from a thorough analysis of the current
marketing situation. If the product class is mature, the company is the market leader, and
brand usage is low, the objective is to stimulate more usage. If the product class is new,
the company is not the market leader, and the brand is superior to the leader, the objective
is to convince the market of the brand’s superiority.

Deciding on the Advertising Budget

Here are five specific factors to consider when setting the advertising budget:5

• 1. Stage in the product life cycle—New products typically merit large advertising
budgets to build awareness and gain consumer trial. Established brands usually
are supported by lower advertising budgets, measured as a ratio to sales.
• 2. Market share and consumer base—High-market-share brands usually require
less advertising expenditure as a percentage of sales to maintain share. Building
share by increasing market size requires larger expenditures.
• 3. Competition and clutter—In a market with a large number of competitors and
high advertising spending, a brand must advertise more heavily to be heard. Even
advertisements not directly competitive to the brand create clutter and a need for
heavier advertising.
• 4. Advertising frequency—The number of repetitions needed to put the brand’s
message across to consumers has an obvious impact on the advertising budget.
• 5. Product substitutability—Brands in less-differentiated or commodity-like
product classes (beer, soft drinks, banks, and airlines) require heavy advertising
to establish a unique image.

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Developing the Advertising Campaign
Advertisers employ both art and science to develop the message strategy or positioning
of an ad—what it attempts to convey about the brand—and its creative strategy—
how the ad expresses the brand claims. They use three steps: message generation and
evaluation, creative development and execution, and social-responsibility review.
Message Generation and Evaluation
A good ad normally focuses on one or two core selling propositions. As part of refining
the brand positioning, the advertiser should conduct market research to determine which
appeal works best with its target audience and then prepare a creative brief. This is an
elaboration of the positioning strategy and includes considerations such as key message,
target audience, communications objectives (to do, to know, to believe), key brand
benefits, supports for the brand promise, and media. The more themes explored, the
higher the probability of finding an excellent one. Marketers can also cut the cost of
creative dramatically by using consumers as their creative team, a strategy sometimes
called “open sourcing” or “crowdsourcing.”6
Creative Development and Execution

The adds impact depends not only on what it says but, often more important, on how it
says it. Creative execution can be decisive.7 Every advertising medium has advantages
and disadvantages. For example, television reaches a broad spectrum of consumers at
low cost per exposure. It can vividly demonstrate product attributes and explain their
benefits as well as dramatically portray brand personality and other intangibles. Print
advertising—which has declined in recent years—can provide detailed product
information and effectively communicate user and usage imagery.8 Radio, a flexible and
inexpensive medium, reaches 93 percent of the U.S. population age 12 and older, both
at home and away from home.

Legal and Social Issues

To break through clutter, some advertisers believe they have to push the boundaries of
advertising. They must be sure, however, not to overstep social and legal norms or offend
consumers. A substantial body of U.S. laws and regulations governs advertising.
Advertisers must not make false claims, use false demonstrations, or create ads with the
capacity to deceive, even if no one is actually deceived. Also, bait-and-switch advertising
that attracts buyers under false pretenses is illegal. “Marketing Insight: Off-Air Ad Battles”
describes one legal dispute about what should be permissible in a brand’s advertising.

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Advertising can play a more positive broader social role. The Ad Council is a nonprofit
organization that uses top-notch industry talent to produce and distribute public service
announcements for nonprofits and government agencies.

Choosing Media
After choosing the message, the advertiser’s next task is to select media to carry it. The
steps here are deciding on desired reach, frequency, and impact; choosing among major
media types;

• marketing
• Off-Air Ad Battles
• insight

In a highly competitive environment, not everyone sees eye to eye on what is suitable
advertising. For example, Splenda’s tagline for its artificial sweetener was “Made from
sugar, so it tastes like sugar,” with “but it’s not sugar” in small writing almost as an
afterthought. McNeil Nutritionals, Splenda’s manufacturer, does begin production of
Splenda with pure cane sugar but burns it off in the manufacturing process.

Merisant, maker of Equal, claimed that Splenda’s advertising confused consumers who
were likely to conclude that a product “made from sugar” is healthier than one made from
aspartame, Equal’s main ingredient. A document from McNeil’s own files and used in
court says consumers’ perception of Splenda as “not an artificial sweetener” was one of
the biggest triumphs of the company’s marketing campaign.
Splenda became the leader in the sugar-substitute category with 60 percent of the
market, leaving roughly 14 percent each to Equal and Sweet’N Low. Although McNeil
eventually settled the lawsuit and paid Merisant an undisclosed but “substantial” award
(and changed its advertising), it may have been too late to change consumers’ perception
of Splenda as something sugary and sugar-free.
Sources: Sarah Hills, “McNeil and Sugar Association Settle Splenda Dispute,” Food
Navigator-usa.com, www.foodnavigator-usa.com, November 18, 2008; James P Miller,
“Bitter Sweets Fight Ended,”
Chicago Tribune, May 12, 2007; Avery Johnson, “How Sweet It Isn’t:
Maker of Equal Says Ads for J&J’s Splenda Misled,” Wall Street Journal, April 6, 2007.
For a discussion of the possible role of corrective advertising, see Peter Darke, Laurence
Ashworth, and Robin J. B. Ritchie, “Damage from Corrective Advertising: Causes and
Cures,” Journal of Marketing 72 (November 2008), pp. 81-97.

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selecting specific media vehicles; and setting media timing and geographical allocation.
Then the marketer evaluates the results of these decisions.

Reach, Frequency, and Impact

Media selection is finding the most cost-effective media to deliver the desired number and
type of exposures to the target audience. The advertiser seeks a specified advertising
objective and response from the target audience—for example, a target level of product
trial. This level depends on, among other things, level of brand awareness. The effect of
exposures on audience awareness depends on the exposures’ reach, frequency, and
impact:
• • Reach (R). The number of different persons or households exposed to a
particular media schedule at least once during a specified time period
• • Frequency (F). The number of times within the specified time period that an
average person or household is exposed to the message
• • Impact (I). The qualitative value of an exposure through a given medium (thus, a
food ad will have a higher impact in Bon Appetit than in Fortune magazine)
Reach is most important when launching new products, flanker brands, extensions of
well- known brands, and infrequently purchased brands or when going after an undefined
target market. Frequency is most important where there are strong competitors, a
complex story to tell, high consumer resistance, or a frequent-purchase cycle.9 More
repetition is needed when a brand, product category, or message is associated with a
higher forgetting rate. Advertisers should not coast on a tired ad but insist on fresh
executions by their ad agency.

Choosing Among Major Media Types

The media planner must know the capacity of the major advertising media types to deliver
reach, frequency, and impact. The major advertising media along with their costs,
advantages, and limitations are profiled in Table 15.1. Media planners make their choices
by considering factors such as target audience media habits, product characteristics,
message requirements, and cost.

Place Advertising Options

Place advertising, or out-of-home advertising, is a broad category including many creative
and unexpected forms to grab consumers’ attention where they work, play, and shop.
Popular options include billboards (including 3D images), public spaces (such as on
movie screens and on fitness equipment), product placement (in movies and television),
and point of purchase (P-O-P), reaching consumers where buying decisions are made
through ads on shopping carts, in-store demonstrations, and live sampling.11 Mobile

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marketing reaches consumers via smart phones when in store. P-O-P radio provides FM-
style programming and commercial messages to thousands of food stores and drugstores
nationwide. Video screens in some stores, such as Walmart, play TV-type ads.12
Evaluating Alternate Media
Nontraditional media can often reach a very precise and captive audience in a cost-
effective manner, with ads anywhere consumers have a few seconds to notice them. The
message must be simple and direct. Unique ad placements designed to break through
clutter may also be perceived as invasive and obtrusive, however, especially in
traditionally ad-free spaces such as in schools, on police cruisers, and in doctors’ waiting
rooms.
Selecting Specific Media Vehicles

Media planners select the most cost-effective vehicles within each chosen media type,
relying on measurement services that estimate audience size, composition, and media
cost and then calculate the cost per thousand persons reached. They also consider
audience quality, audience-attention probability, the medium’s editorial quality, and extra
services. Media planners are using more sophisticated measures of effectiveness and
employing them in mathematical models to arrive at the best media mix.

TABLE 1.1 Profiles of Major Media Types

Medium Advantages Limitations

Flexibility; timeliness; good local Short life; poor reproduction

Newspapers market coverage; broad quality; small “pass-along”
acceptance; high believability audience

Combines sight, sound, and motion; High absolute cost; high clutter;
Television appealing to the senses; high fleeting exposure; less
attention; high reach audience selectivity

Audience selectivity; flexibility; no

Relatively high cost; “junk mail”
Direct mail ad competition within the same
image
medium; personalization

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Mass use; high geographic and
Radio
demographic selectivity; low cost
Audio presentation only; lower
attention than television; no
standardized rate structures;
fleeting exposure

High geographic and demographic

selectivity; credibility and prestige; Long ad purchase lead time;
Magazines
high-quality reproduction; long life; some waste in circulation
good pass-along readership

Flexibility; high repeat exposure; Limited audience selectivity;

Outdoor
low cost; low competition creative limitations

High competition; long ad

Excellent local coverage; high
Yellow Pages purchase lead time; creative
believability; wide reach; low cost
limitations

Very high selectivity; full control;

Newsletters interactive opportunities; relative Costs could run away
low costs

Flexibility; full control; can Overproduction could lead to

brochures
dramatize messages runaway costs

Many users; opportunity to give a Relative high cost; increasing

Telephone
personal touch consumer resistance

Selecting Media Timing and Allocation

In choosing media, the advertiser makes both a macro scheduling and a micro scheduling
decision. The macro scheduling decision relates to seasons and the business cycle.
Suppose 70 percent of a product’s sales occur between June and September. The firm
can vary its advertising expenditures to follow the seasonal pattern, to oppose the
seasonal pattern, or to be constant throughout the year. The micro scheduling

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decision calls for allocating advertising expenditures within a short period to obtain
maximum impact. Advertising can be concentrated (“burst” advertising), dispersed
continuously throughout the month, or dispersed intermittently.
In launching a new product, the advertiser must choose among continuity, concentration,
flighting, and pulsing. Continuity means exposures appear evenly throughout a given
period. Generally, advertisers use continuous advertising in expanding markets, with
frequently purchased items, and in tightly defined buyer categories. Concentration calls
for spending all the advertising dollars in a single period, which makes sense for products
with one selling season or related holiday. Flighting calls for advertising during a period,
followed by a period with no advertising, followed by a second period of advertising
activity. It is useful when funding is limited, the purchase cycle is relatively infrequent, or
items are seasonal. Pulsing is continuous advertising at low levels, reinforced
periodically by waves of heavier activity, to help the audience learn the message more
thoroughly at a lower cost to the firm.

Evaluating Advertising Effectiveness

Most advertisers try to measure the communication effect of an ad—that is, its potential
impact on awareness, knowledge, or preference. They would also like to measure its
sales effect. Communication-effect research, called copy testing, seeks to determine
whether an ad is

Figure 1.2 Formula for Measuring Different Stages in the Sales Impact of Advertising

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communicating effectively. Marketers should perform this test both before an ad is put
into media and after it is printed or broadcast. Many advertisers use posttests to assess
the overall impact of a completed campaign.

One way a company can find out whether it is overspending or underspending on

advertising is to work with the formula in Figure 15.2. A company’s share of advertising
expenditures produces a share of voice (proportion of company advertising of that
product to all advertising of that product) that earns a share of consumers’ minds and
hearts and, ultimately, a share of market.
Researchers can measure sales impact with the historical approach, which uses
advanced statistical techniques to correlate past sales to past advertising
expenditures.15 Other researchers use experimental data to measure advertising’s
sales impact. A growing number of researchers measure the sales effect of advertising
expenditures instead of settling for communication-effect measures.

Sales Promotion
Sales promotion, a key ingredient in marketing campaigns, consists of a collection of
incentive tools, mostly short term, designed to stimulate quicker or greater purchase of
particular products or services by consumers or the trade.17 Whereas advertising offers
a reason to buy, sales promotion offers an incentive.

Advertising versus Promotion

Although sales promotion expenditures increased as a percentage of budget expenditure
for a number of years, their growth has recently slowed, in part because consumers began
to tune out promotions. Some sales promotion tools are consumer franchise
building, imparting a selling message along with the deal (such as free samples,
frequency awards, and premiums related to the product). Consumer franchise-building
promotions build brand equity while moving product. McDonald’s, Dunkin’ Donuts, and
Starbucks have given away millions of new-product samples because consumers like
them and they often lead to higher long-term sales for quality products.18 Sales promotion
tools that are typically not brand building include price-off packs, consumer premiums not
related to a product, contests and sweepstakes, consumer refund offers, and trade
allowances.

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Sales promotions in markets of high brand similarity can produce a high sales response
in the short run but little permanent gain over the longer term. In markets with high brand
dissimilarity, they may be able to alter market shares permanently. In addition to brand
switching, consumers may engage in stockpiling—purchasing earlier than usual
(purchase acceleration) or buying extra quantities. But sales may then hit a post-
promotion dip.19
The fastest-growing area in sales promotions is digital coupons, redeemed via smart
phone or downloaded to a consumer’s printer. Digital coupons eliminate printing costs,
reduce paper waste, are easily updatable, and have higher redemption rates. Many
retailers now offer customized coupons based on consumer purchase histories.20

Major Decisions
In using sales promotion, a company must establish its objectives, select the tools,
develop the program, implement and control it, and evaluate the results.
Establishing Objectives
Sales promotion objectives derive from communication objectives, which derive from
basic marketing objectives for the product. For consumers, objectives include
encouraging more frequent purchases or purchase of larger-sized units among users,
building trial among nonusers, and attracting switchers away from competitors’ brands.
Ideally, consumer promotions have short-run sales impact and long-run brand equity
effects.21 For retailers, objectives include persuading retailers to carry new items and
more inventory, encouraging off-season buying, encouraging stocking of related items,
offsetting competitive promotions, building brand loyalty, and gaining entry into new retail
outlets. For the sales force, objectives of promotion include encouraging support of a
new product or model, encouraging more prospecting, and stimulating off-season sales.

Selecting Consumer Promotion Tools The main consumer promotion tools are
summarized in Table 15.2. Manufacturer promotions in the auto industry, for instance,
are rebates, gifts to motivate test drives and purchases, and high-value trade-in
credit. Retailer promotions include price cuts, feature advertising, retailer coupons, and
retailer contests or premiums.22
Selecting Trade Promotion Tools Manufacturers use a number of trade promotion tools
(see Table 15.3).23 They award money to the trade (1) to persuade the retailer or
wholesaler to carry the brand; (2) to persuade the retailer or wholesaler to carry more
units than the normal amount; (3) to induce retailers to promote the brand by featuring,
display, and price reductions; and (4) to stimulate retailers and their sales clerks to push
the product.

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Selecting Business and Sales Force Promotion Tools Companies spend billions of
dollars on business and sales force promotion tools (see Table 15.4 on page 268) to
gather leads, impress and reward customers, and motivate the sales force.24 They
typically develop budgets for tools that remain fairly constant from year to year. For many
new businesses that want to make a splash to a targeted audience, especially in the B-
to-B world, trade shows are an important tool, but the cost per contact is the highest of all
communication options.
TABLE 1.2 Major Consumer Promotion Tools

Samples: Offer of a free amount of a product or service delivered door to door, sent
in the mail, picked up in a store, attached to another product, or featured in an
advertising offer.

Coupons: Certificates entitling the bearer to a stated saving on the purchase of a

specific product: mailed, enclosed in other products or attached to them, or inserted in
magazine and newspaper ads.

Cash Refund Offers (rebates): Provide a price reduction after purchase rather than
at the retail shop: Consumer sends a specified “proof of purchase” to the manufacturer
who “refunds” part of the purchase price by mail.

Price Packs (cents-off deals): Offers to consumers of savings off the regular price of
a product, flagged on the label or package. A reduced-price pack is a single package
sold at a reduced price (such as two for the price of one). A banded pack is two related
products banded together (such as a toothbrush and toothpaste).

Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive

to purchase a particular product. A with-pack premium accompanies the product
inside or on the package. A free in-the-mail premium is mailed to consumers who
send in a proof of purchase. A self-liquidating premium is sold below its normal retail
price to consumers who request it.

Frequency Programs: Programs providing rewards related to the consumer’s

frequency and intensity in purchasing the company’s products or services.

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 Prizes (contests, sweepstakes, games): Prizes are offers of the chance to win cash,
trips, or merchandise as a result of purchasing something. A contest calls for
consumers to submit an entry to be examined by a panel of judges who will select the
best entries. A sweepstakes asks consumers to submit their names in a drawing.
A game presents consumer with something every time they buy—bingo numbers,
missing letters—which might help them win a prize.

Patronage awards: Values in cash or in other forms that are proportional to patronage
of a certain vendor or group of vendors.

Free Trials: Inviting prospective purchasers to try the product without cost in the hope
that they will buy.

Product Warranties: Explicit or implicit promises by sellers that the product will
perform as specified or that the seller will fix it or refund the customer’s money during
a specified period.

Tie-in Promotions: Two or more brands or companies team up on coupons, refunds,

and contests to increase pulling power.

Cross-Promotions: Using one brand to advertise another noncompeting brand.

Point-of-Purchase (P-O-P) Displays and Demonstrations: P-O-P displays and

demonstrations that take place at the point of purchase or sale.

Developing the Program

In deciding to use a particular incentive, marketers must determine the size of the
incentive, the conditions for participation, the duration of the promotion,
the distribution vehicle, the timing, and the total sales promotion budget. Next, the
marketing manager establishes the timing of the promotion and, finally, the total sales
promotion budget. The cost of a particular promotion consists of the administrative cost
(printing, mailing, and promoting the deal) and the incentive cost (cost of premium or
cents-off, including redemption costs)

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TABLE 1.3 Major Trade Promotion Tools

Price-Off (off-invoice or off-list): A straight discount off the list price on each case
purchased during a stated time period.

Advertising allowance: An amount offered in return for the retailer’s agreeing to

feature the manufacturer’s products in some way.
An advertising allowance compensates retailers for advertising the manufacturer’s
product. A display allowance compensates them for carrying a special product
display.

Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain
quantity or who feature a certain flavor or size.

TABLE 1.4 Major Business and Sales Force Promotion Tools

Trade Shows and Conventions: Industry associations organize annual trade shows
and conventions. Participating vendors can generate new sales leads, maintain
customer contacts, introduce new products, meet new customers, sell more to present
customers, and educate customers with publications, videos, and other audiovisual
materials.

Sales Contests: A sales contest aims at inducing the sales force or dealers to
increase sales results over a stated period, with prizes (money, trips, gifts, or points)
going to those who succeed.

Specialty advertising: Specialty advertising consists of useful, low-cost items bearing

the company’s name and address, and sometimes an advertising message, that
salespeople give to prospects and customers. Common items are ballpoint pens,
calendars, key chains, flashlights, tote bags, and memo pads.

multiplied by the expected number of units sold. The cost of a coupon deal recognizes
that only a fraction of consumers will redeem the coupons.

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Implementing and Evaluating the Program
For each promotion, implementation and control plans must cover lead time (for
preparation before launch) and sell-in time (beginning at launch and ending when 95
percent of the deal merchandise is in consumers’ hands). Manufacturers can evaluate
the program using sales data (including scanner data showing who bought and later
behavior toward the brand), consumer surveys (about recall, attitudes, and behavior), and
experiments (varying incentive value, duration, or distribution media).

Events and Experiences

Becoming part of a personally relevant moment in consumers’ lives through sponsored
events and experiences can broaden and deepen a company’s or brand’s relationship
with the target market. Daily encounters with brands may also affect consumers’ brand
attitudes and beliefs. Atmospheres are “packaged environments” that create or reinforce
leanings toward product purchase. For example, a five-star hotel will use elegant
chandeliers, marble columns, and other tangible signs of luxury.

Events Objectives
Marketers report a number of reasons to sponsor events:

1. To identify with a particular target market or lifestyle—Customers can be

targeted geographically, demographically, psychographically, or behaviorally
according to events. Old Spice sponsors college sports—including its college
basketball Old Spice Classic—to highlight product relevance and sample among
16- to 24-year-old males.
2. To increase salience of company or product name—Sponsorship offers
sustained exposure for a brand, a necessary condition for reinforcing brand
salience. Top-of-mind awareness for soccer World Cup sponsors McDonald’s and
Castrol is a benefit from repeated brand and ad exposure over the month-long
tournament.
3. To create or reinforce perceptions of key brand image associations—Events
themselves have associations that help to create or reinforce brand
associations.25 To toughen its image and appeal to the heartland, Toyota Tundra
sponsors B.A.S.S. fishing tournaments.
4. To enhance corporate image—Sponsorship can improve perceptions that the
company is likable and prestigious. Although Visa views its long-standing Olympic
sponsorship as a means of enhancing international brand awareness and

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 increasing usage and volume, it also engenders patriotic goodwill and taps into the
emotional Olympic spirit.
5. To create experiences and evoke feelings—The feelings engendered by an
exciting or rewarding event may indirectly link to the brand. Audi vehicles featured
prominently in the 2010 blockbuster movie Iron Man 2. After a month-long
marketing blitz, positive word of mouth doubled for the brand.26
6. To express commitment to the community or on social issues—Cause-
related marketing sponsors nonprofit organizations and charities. Firms such as
Stonyfield Farms, Home Depot, American Express, and Tom’s of Maine have
made their support of causes an important cornerstone of their marketing
programs.
7. To entertain key clients or reward key employees—Many events include lavish
hospitality tents and other special services or activities only for sponsors and their
guests to build goodwill and establish valuable business contacts. From an
employee perspective, events can also build participation and morale or serve as
an incentive.
8. To permit merchandising or promotional opportunities—Many marketers tie
contests or sweepstakes, in-store merchandising, direct response, or other
marketing activities with an event.

Despite these potential advantages, the result of an event can still be unpredictable and
beyond the sponsor’s control. And although many consumers credit sponsors for
providing the financial assistance to make an event possible, some may resent its
commercialization.

Major Sponsorship Decisions

Making sponsorships successful requires choosing the appropriate events, designing the
optimal sponsorship program, and measuring the effects of sponsorship.
• Choosing event opportunities. The event must meet the brand’s marketing
objectives and communication strategy, match the target market, have sufficient
awareness and favorable attributions, possess the desired image, and be able to
create the desired effects. An ideal event also is unique but not encumbered with
many sponsors, lends itself to ancillary marketing activities, and reflects or
enhances the sponsor’s brand or corporate image.27
• Designing sponsorship programs. Many marketers believe the marketing program
accompanying an event sponsorship ultimately determines its success. At least

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 two to three times the amount of the sponsorship expenditure should be spent on
related marketing activities. Event creation is a particularly important skill in
publicizing fund-raising drives for nonprofit organizations.
• Measuring sponsorship activities. The supply-side method for measuring an
event’s success assesses media coverage; for example, the number of seconds
the brand is clearly visible on a television screen. The demand-side method
identifies the sponsorship’s effect on consumers’ brand knowledge. Although
supply-side methods provide quantifiable measures, equating media coverage
with advertising exposure ignores the content of the respective communications.

Creating Experiences
A large part of local, grassroots marketing is experiential marketing, which not only
communicates features and benefits but also connects a product or service with unique
and interesting experiences. Consumers seem to appreciate that effort. In one survey,
four of five respondents found participating in a live event was more engaging than all
other forms of communication. The vast majority also felt experiential marketing gave
them more information than other forms of communication and would make them more
likely to tell others about the experience and be receptive to other marketing for the brand.

Public Relations
Not only must the company relate constructively to customers, suppliers, and dealers, it
must also relate to a large number of interested publics. A public is any group that has an
actual or potential interest in or impact on a company’s ability to achieve its objectives.
Public relations (PR) includes a variety of programs to promote or protect a company’s
image or individual products.

The wise company takes concrete steps to manage successful relationships with its key
publics. Most have a public relations department that monitors the attitudes of the
organization’s publics and distributes information and communications to build goodwill.
The best PR departments counsel top management to adopt positive programs and
eliminate questionable practices so negative publicity doesn’t arise in the first place. They
perform the following five functions:

1. Press relations—Presenting news and information about the organization in

the most positive light
2. Product publicity—Sponsoring efforts to publicize specific products

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 3. Corporate communications—Promoting understanding of the organization
through internal and external communications
4. Lobbying—Dealing with legislators and government officials to promote or defeat
legislation and regulation
5. Counseling—Advising management about public issues as well as company
positions and image during good times and bad

Marketing Public Relations

Many companies use marketing public relations (MPR) to support corporate or product
promotion and image making. MPR, like financial PR and community PR, serves a special
constituency, the marketing department. The old name for MPR was publicity, the task of
securing editorial space—as opposed to paid space—in print and broadcast media to
promote or hype a product, service, idea, place, person, or organization. MPR goes
beyond simple publicity and plays an important role in the following tasks:

• Launching new products. The amazing commercial success of toys such as Silly
Bandz owes a great deal to strong publicity.

• Repositioning mature products. New York City had extremely bad press in the
1970s until the “I Love New York” campaign.

• Building interest in a product category. Companies and trade associations have

used MPR to rebuild interest in declining commodities such as eggs and milk and
to expand consumption of such products as tea and pork.

• Influencing specific target groups. McDonald’s sponsors special neighborhood

events in Latino and African American communities to build goodwill.

• Defending products that have encountered public problems. PR professionals

must be adept at managing crises, such as those weathered by such well-
established brands as Toyota and BP.

• Building the corporate image in a way that reflects favorably on its products. The

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late Steve Jobs’s Macworld keynote speeches helped to create an innovative,
iconoclastic image for Apple Corporation.

As the power of mass advertising weakens, marketing managers are turning to MPR to
build awareness and brand knowledge for both new and established products. MPR is
also effective in blanketing local communities and reaching specific groups, and it can be
more cost-effective

TABLE 1.5 Major Tools in Marketing PR

Publications: Companies rely extensively on published materials to reach and

influence their target markets via annual reports, brochures, articles, newsletters and
magazines, and audiovisual materials.

Events: Companies can draw attention to new products or other activities by arranging
and publicizing special events such as news conferences, seminars, trade shows,
exhibits, contests and competitions, and celebrations that will reach the target publics.

Sponsorships: Companies can promote their brands and corporate name by

sponsoring and publicizing sports and cultural events and highly regarded causes.

News: One of the major tasks of PR professionals is to find or create favorable news
about the company, its products, and its people.

Speeches: Increasingly, company executives must field questions from the media or
give talks at trade associations or sales meetings, and these appearances can build
the company’s image.

Public Service activities: Companies can build goodwill by contributing money and time
to good causes.

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 identity Media: Companies need a visual identity that the public immediately
recognizes. The visual identity is carried by company logos, stationery, brochures,
business cards, buildings, uniforms, and dress codes.

than advertising. Increasingly, MPR takes place online, but it must be planned jointly with
advertising and other marketing communications.

Major Decisions in Marketing PR

In considering when and how to use MPR, management must establish the marketing
objectives, choose the PR messages and vehicles, implement the plan, and evaluate the
results. The main tools of MPR are described in Table 15.5.
In setting MPR objectives, a firm can seek to build awareness by placing stories in the
media to bring attention to a product, service, person, organization, or idea. It can
build credibility by communicating the message in an editorial context. It can help boost
sales force and dealer enthusiasm with stories about a new product before launch. It can
hold down promotion cost because MPR costs less than direct-mail and media
advertising.
Next, the firm will search for interesting stories or develop stories about the product or
brand. Whereas PR practitioners reach their target publics through the mass media, MPR
is increasingly borrowing the techniques and technology of online and direct-response
marketing to reach target-audience members one on one. The firm may have difficulty
assessing MPR’s contribution to the bottom line because MPR is used along with other
promotional tools. The easiest gauge of its effectiveness is the number
of exposures carried by the media. A better measure is the change in product
awareness, comprehension, or attitude resulting from the MPR campaign (after
accounting for the effect of other promotional tools as well as possible).

Conclusion
Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods,
or services by an identified sponsor. Developing an advertising program is a five-step
process: (1) set advertising objectives, (2) establish a budget, (3) choose the advertising
message and creative strategy, (4) decide on the media, and (5) evaluate communication
and sales effects. Sales promotion consists of mostly short-term incentive tools, designed

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to stimulate quicker or greater purchase of particular products or services by consumers
or the trade. In using sales promotion, a company must establish its objectives, select the
tools, develop the program, implement and control it, and evaluate the results.
Events and experiences are a means to become part of special and more personally
relevant moments in consumers’ lives. Well-managed events can broaden and deepen
the sponsor’s relationship with its target market. Public relations (PR) includes a variety
of programs designed to promote or protect a company’s image or its individual products.
Marketing public relations (MPR), to support the marketing department in corporate or
product promotion and image making, can affect public awareness at a fraction of the
cost of advertising and is often much more credible.

REFERENCES
1. Alexander Coolidge, “P&G Aims for Moms’ Heart with Latest ‘Thank You’ Ad,”
USA Today, January 8, 2013; Emma Bazilian, “Ad of the Day: P&G Has a Winner
with Latest Big Tearjerker Spot for Moms,” Adweek, January 7, 2014; “Procter &
Gamble Brands Unite to Kick Off Sochi 2014 Olympic Winter Games,” www
.pg.com, October 28, 2013; “In 2013, Once Again: Marketing Art Meets Science—
Best in Show Winners of the Advertising Research Foundation’s David Ogilvy
Awards,” Journal of Advertising Research 53,no.3 (2013);
2. Katy Bachman, “Brought to You by the Moms of the World,” Adweek, August 19,
2013; Dan Monk, “Procter & Gamble Company Aims to Win by Marketing ‘Like a
Girl,’” WCPO (Cincinnati), July 3, 2014, www.wcpo.com/money.
3. Russell H. Colley, Defining Advertising Goals for Measured Advertising
Results (New York: Association of National Advertisers, 1961).
4. Alicia Barroso and Gerard Llobet, “Advertising and Consumer Awareness of New,
Differentiated Products,” Journal of Marketing Research 49 (December 2012),
pp. 773-92; Wilfred Amaldoss and Chuan He,“Product Variety, Informative
Advertising, and Price Competition,” Journal of Marketing Research 47
(February 2010), pp. 146-56.
5. Debora Viana Thompson and Rebecca W. Hamilton, “The Effects of Information
Processing Mode on Consumers’ Responses to Comparative
Advertising,” Journal of Consumer Research 32 (March 2006), pp. 530-40.
6. Rajesh Chandy, Gerard J. Tellis, Debbie MacInnis, and Pattana Thaivanich, “What
to Say When: Advertising Appeals in Evolving Markets,” Journal of Marketing
Research 38 (November 2001), pp. 399-414; Gerard
7. Miguel Gomez, Vithala Rao, and Edward McLaughlin, “Empirical Analysis of
Budget and Allocation of Trade Promotions in the U.S. Supermarket
Industry,” Journal of Marketing Research 44 (August 2007); Norris Bruce,

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 Preyas S. Desai, and Richard Staelin, “The Better They Are, the More They Give:
Trade Promotions of Consumer Durables,” Journal of Marketing Research 42
(February 2005), pp. 54-66.
8. IBIS World USA, www.ibisworld.com; Noah Lim, Michael J. Ahearne, and Sung H.
Ham, “Designing Sales Contests: Does the Prize Structure Matter?,” Journal of
Marketing Research 46 (June 2009),pp. 356-71.
9. Bettina Cornwell, Michael S. Humphreys, Angela M. Maguire, Clinton S. Weeks,
and Cassandra Tellegen, “Sponsorship-Linked Marketing: The Role of Articulation
in Memory,” Journal of Consumer Research 33 (December 2006), pp. 312-21.
10. “Brands Suit Up for ‘Iron Man 2,'” Adweek, May 14, 2010.
11. T. Bettina Cornwell, Clinton S. Weeks, and Donald P. Roy, “Sponsorship-Linked
Marketing: Opening the Black Box,” Journal of Advertising 34 (Summer 2005).
12. “2006 Experiential Marketing Study,” Jack Morton, www.jackmorton.com.
13. “Do We Have a Story for You!,” Economist, January 21, 2006, pp. 57-58; Al Ries
and Laura Ries, The Fall of Advertising and the Rise of PR (New York:
HarperCollins, 2002).

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 Designing
&
Managing
CHAPTER 14 Integrated
Marketing
Channels
E- Commerce
With nearly every marketing operation now taking place online, it can be tough to distinguish between the
various types of digital marketing people use today.
Ecommerce marketing and digital marketing are not mutually exclusive. Ecommerce websites can use all
the above digital channels to promote a product and grow their business. This ecommerce marketing guide
will explore all of the digital media available today.

What is ecommerce marketing?

Ecommerce marketing is the act of driving awareness and action toward a business that sells its product or
service electronically.
Ecommerce marketers can use social media, digital content, search engines, and email campaigns to
attract visitors and facilitate purchases online.
Before we dive into more detail about what ecommerce marketing is and how to implement a strategy of
your own, let's review the definition of ecommerce advertising and advertising's parity with marketing for an
ecommerce business.

How to Build an Ecommerce Marketing Plan

As are laying the groundwork to the ecommerce future, it’s important to go through these exercises while
writing business plan to ensure that the methods and strategy are well thought out and will pass the test of
time. It can’t be overstated: these are the prerequisites to creating an effective marketing plan and building
a successful business.
1. Executive summary.
Now that have gathered substantive advice from knowledgeable mentors, the big picture overview will
come into focus. By writing an Executive Summary, it will be taking the first steps to crafting the
ecommerce marketing plan.
2. Goals & objectives.
Should make goals and objectives VERY clear and specific. Once begin to execute, there’s no shame in
amending the goals if they turned out to be too low or too high. Eventually, the primary focus should be
creating realistic, attainable goals. And then, layering in “stretch goals” to really excite the team.
That being said, make sure to include specific goals and metrics, such as:
• Increase sales by X% during the slow season.
• Increase AOV by X% on Black Friday & Cyber Monday.

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 • Increase email marketing conversion rates by X%.
3. Mission statement & value proposition.
• What’s the purpose of this company?
• What do you do?
• What don’t you do?
The company leadership must be able to answer these basic questions.
Not all companies need a philanthropic element to the business (which would be nice) but there needs to
be a clear mission and value proposition.
4. Target customers, personas & markets.
Know the audience.
If there is not a clear understanding of who is targeting, what characteristics define them and where they’re
located — it would be bounded to run inefficient campaigns that waste money targeting low-converting,
unqualified individuals.
Make sure to know the following:
• Age ranges.
• Gender breakdown.
• Geographic location.
• Purchasing power.
5. Situation analysis.
“You can only know where you’re going if you know where you’ve been.”
Therefore, perform a thorough assessment of the current state of the company, the competition and the
overall marketing plan. Leave no stone unturned. A better understanding of your current situation will lead
to better decision-making, and eventually, better results.
6. Pricing & positioning strategy.
Ensure the pricing and positioning provides real value to target audience. Forcing products upon your
target customers that they deem to be overpriced is a losing proposition, especially when price comparing
is SO easy these days.
7. Distribution & fulfillment plan.
Even if starting are small, there should be a clear understanding of the distribution and order fulfillment
requirements that will evolve as it grows.
Whether are packing and shipping, overseeing a small team, or leveraging a third party fulfillment shop, it
needs to know whether the fulfillment processes can meet the demand of upcoming marketing push.

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Ecommerce Marketing Channels, Tactics & Tools to
Consider

New marketing channels are opening every day. Huge networks, like Google and Facebook, will continue
to offer new ways to reach customers and attract more advertising dollars.
With that in mind, here’s a list of the best channels, tactics, and tools to consider when crafting your
ecommerce marketing plan.
1. Pay-Per-Click advertising (PPC).
Pay-per-Click advertising or PPC can be one of the foundational elements in your ecommerce marketing
strategy. To the unfamiliar personnel with PPC, every brand would pay an ad network, like Google, every
time someone clicks on advertisement.
Of course, there are several types of PPC advertisements that need to come to an attention – paid search,
display, and shopping campaigns – since they’re most relevant to ecommerce marketing success. Each
type of PPC advertising can play an important, yet different role in your overall marketing strategy.
That being said, there are different PPC ad networks, such as Bing Ads and Amazon Advertising, that are
definitely worth including in your overall PPC strategy.
Here’s a little more information about each:
• Paid Search Ads – A Paid Search ad will appear at the top of your search engine results and will
not include any type of imagery. Quite simply, Google serves the user a text-only advertisement
based on the user’s search terms. Therefore, it’s a great strategy, especially for “in market” sales
leads. In a thinkable way,
if there is a search for “non-iron button-down shirts” then one most likely need to go to look it in the
market to purchase that item. To identify a personal need, and to search for the best option “paid
search ads” are needed. Therefore, Paid Search advertisements can produce a high conversion
rate and should definitely be included in the overall strategy.

• Display Ads –
i. Display advertisements, sometimes referred to as banner ads, can be seen all over
popular websites, apps, and mobile games.
ii. Unlike Search ads, Display ads tend to follow you around based on your past browsing
history, which is referred to as “retargeting,” which I’ll touch on later.
iii. Display ads can also be served to the user based on the subject matter of the article or
website the user is viewing. So, if the user is reading an article about popular yoga studios
in their area, there’s a good chance that a Display ad for a nearby yoga studio will appear.
iv. Display ads can be great for building brand awareness and generating conversions when
used to retarget a customer, but in general, click through rates will be much lower than

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 Search ads. And, more importantly, the average conversion rate across all industries is
.77% with Display ads, compared to 3.75% for Search ads. (stats via Wordstream)

• Product Listing Ads (Shopping Campaigns) –

i. With Google Shopping Campaigns and Bing Product Ads your products can appear
directly within the search engine results. So, if the user is searching for “women’s red
boots,” they’ll see a bunch of images of red boots at the top of their search results. Then,
depending on the products that suit their taste, the user will click on the advertisement and
be redirected to your online store.
ii. In fact, advertisers have been flocking to Google Shopping, since it generated 60% of
clicks on Google in Q1 2018.

2. Search engine optimization (SEO)

Over the past 20 years, Search Engine Optimization has evolved for the better.
In the past, SEO experts were akin to snake oil salesman – using dishonest tactics and exploits to boost
website rankings. Now, on the other hand, SEO is more about adhering to on-site best practices and
earning your ranking, rather than “working the system.” That being said, SEO should NOT be overlooked.
In fact, 70-80% of Google users are only focusing on the organic search results. There are tons of useful
resources to test a site’s SEO health and track improvement over time, like SEMrush and MOZ. Plus,
through the BigCommerce apps like FavSEO, you can easily perform a website audit, monitor rankings,
and make improvements over time.

3. Content marketing
Content marketing is a bit of a unicorn in the ecommerce space.
When to have a highly-tested and comprehensive content marketing plan, just about every other marketing
channel it’s use becomes more successful in parallel. That’s because content marketing is the best means
to distribute your product to an audience.
Through blog posts, infographics, and videos, you reach more customers on their own turf: the internet. It’s
called inbound marketing — where shoppers come to you — and it costs significantly less than outbound
efforts, where you go out and find the shoppers for yourself. If your product has an environmental cause,
advanced technology, or is just plain innovative, consider launching some written blog posts outlining the
specifics of the products. Aside from being educational for anyone who visits your website, these blog posts
will help you get organic traffic from relevant keywords.

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4. Influencer marketing.
Influencer marketing is simple.
As consumers are exposed to more and more advertisements, brands are incorporating different strategies
to reach and appeal to customers. Therefore, a brand will align with an “influencer” – aka, somebody who
has a large following and credibility within a certain niche. Through this partnership, both parties will co-
create content that’s intended to build awareness and drive sales. And since the influencer already has the
attention and trust of their following, these paid product endorsements feel less intrusive than standard
advertisements. Thus, they’re a valuable tool in a marketer’s toolkit.
Influencer marketing is most commonly seen across social media, YouTube channels, and well-known
blogs. Fashionistas who share their style guides on Instagram and competitive gamers who stream game
reviews on YouTube or Twitch are generating measurable results when asked to subtly promote a brand.

5. Social media marketing.

Social media is (and will remain) a rapidly evolving landscape of networks and platforms that continually
change the way people interact with brands online. As marketers, we are tasked with understanding best
practices and implementing strategic campaigns that engage potential customers, create brand advocates
and eventually, fuel the bottom line.
Luckily, popular social networks like Facebook, Twitter, and Instagram have been continually rolling out
new features and tools to help brands effectively reach their target audience.
For example,
i. with Facebook’s new Dynamic Ads feature, a brand can upload its entire product catalog to
Facebook. Then, each product will be automatically shown to interested customers with up-to-date
pricing and availability, which is a great tool for Ecommerce marketers.
ii. According to Pinterest, their users spend 50% more on purchases than the average social media
user, and 20% more than people who purchased after clicking on a Search ad.
Social Media Advertising – Every popular social media network has useful tools for brands (and
marketers) to serve targeted advertisements to potential customers. Most of them operate in a similar
manner to Google’s PPC ads; you create an advertisement, set your budget, and pay for every click (or
number of impressions) the ad receives. Each social network offers a wide variety of ad types, tailored to
suit your advertising strategy and offer digital marketers the opportunity to get creative.
To save some time, the following social networks have proven to be the most widely-adopted and practical
for ecommerce marketing:
Social Commerce – As mentioned, social networks are constantly searching for new ways to entice
brands, and more importantly, advertisers to their networks. Therefore, networks like Facebook and
Instagram (in particular) have created (fairly) seamless ecosystems that allow customers to discover your
products, and more importantly, purchase your products without navigating away from the network.
This simplifies the path to purchase, and subsequently, increases conversion rates.

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Therefore, ensuring the ecommerce product catalog is synced with Facebook and Instagram will allow
more customers to find your products and increase the effectiveness of your social advertising campaigns.
The Facebook Ad app by Sales & Orders takes the existing product data in your BigCommerce store,
configures it, and publishes it out as a compatible Catalog for Facebook Product Ads to get paid Facebook
ads up and running quickly.
Organic Social Content – Before social networks were money-making behemoths, they were forums to
engage with customers and foster brand advocacy. Of course, that hasn’t disappeared entirely. But to a
certain extent, brands have been nudged towards the paid advertising route to produce the best results.
That being said, don’t forget about organic social content. It plays an important role when building brand
awareness, and at a minimum, is essential to maintain strong SEO. Make sure to couple your organic
social content with new social commerce features, like tagging your products
in Facebook and Instagram posts and creating “buyable” Pinterest posts.
That way, anyone will be able continuing to build the brand, while making it easy for potential customers to
find and purchase your products.

6. Email marketing.
When crafting a comprehensive ecommerce marketing plan, email can play a very important role.
On one hand, it may not receive the attention of newer, trendier avenues for marketing your ecommerce
business, but when done right, email can produce a consistently high return on investment. That being
said, don’t expect to “batch and blast” your way to high conversion rates and increased order values.
Taking a more strategic, thoughtful approach to email will eventually yield very positive results. At the end
of the day, customers are willing to read emails that pique their personal interests.
So, make sure your emails are contextual and engaging. Don’t send a concert ticket promotion for a show
in Los Angeles to your entire email list. That would be annoying for everybody outside of Southern
California. As a rule of thumb, try to segment your email list based on past purchase history. That way,
anyone can send emails that resonate with their personal tastes. Plus, with the latest email automation
features, you don’t even need to press “send.” As you get your start with email marketing, newsletter
campaigns are an easy and effective campaign to start with.
Nestled between promotions of your products, newsletter campaigns contain genuinely interesting content.
A newsletter format makes your emails stand out from the normal sales campaigns and is a great way to
build goodwill with new customers.
Aside from newsletter campaigns, at a bare minimum one should incorporate the following strategies:
• Abandoned Carts.
• Up-Sells and Cross-Sells.
• Promotional Offers.
• Customer Loyalty and Re-Engagement.

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7. Affiliate marketing.
Affiliate marketing is the process of an ecommerce merchant paying a commission to an external website
for any sales generated from their referral traffic.
The sales are tracked via affiliate links, which can be implemented by using various affiliate programs.
One great thing about affiliate marketing for ecommerce merchants is that you only pay after a sale occurs.
Merchants also get to choose their own commission rates, with is a percentage of the sale price usually
ranging from 5 to 30%. It’s also very ROI positive.
Once you factor in the affiliate commission and gross margin, you can enjoy a return on ad spend
(ROAS) of 10:1.

8. Local Marketing
Local marketing –
i. also known as “location-based marketing” and “neighborhood marketing” – is the process of
optimizing the website and online advertising to help drive foot traffic and awareness in local
regions.
ii. If someone is a brick and mortar store or brand that is looking to make a move online, it’s important
to not lose the existing in-person customers that they already have. In addition, if someone has a
storefront or local presence, there are a number of strategies that can be used to continue growing
that footprint.
iii. Optimize the site with local keywords
iv. Make sure to put relevant keywords about the town anyone in, as well as any bordering towns or
regions.
v. Develop specialized landing pages about own town,
vi. create product collections that champion local businesses or trends,
vii. or even make local event campaigns with neighboring businesses. Even as
businesses are continually moving more and more online, local marketing still has an impact on
plenty of decisions that shoppers make.
viii. If a user is hunting for a product online, relevant local shops will show up in search results.

Pure Click Companies

There are several kinds of pure click companies – Search engines, Internet Service Providers (ISPs),
commerce sites, transaction sites, content sites, and enabler sites. Search engines and portals such
as Yahoo! And Alta Vista started as search engines and later added services such as news, weather, stock
reports, entertainments, and store fronts hoping to become the user’s point of entry on the Internet. ISPs
such as AOL and CompuServe provide Internet and e-mail connections for a fee. Commerce sites sell
books, music, toys, insurance, stocks, clothes, financial services, and so on.

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Among the most prominent ones are Amazon and ebay.com. Transaction sites such as auctions and
brokerages like fabmart.com and others take a commission for transactions con-ducted on their sites.
Content sites such as The Street, New York Times, and Encyclopedia Britannica provides financial,
research, and other information. Enabler sites provide the hardware and software that enable Internet
communication and commerce.
Pure click companies on the web reached astronomical capitalization levels in the late 1990, in some cases
for exceeding the capitalization of major companies such as United Airlines or Pepsi-Cola. They were
considered a major threat to traditional businesses until the investing frenzy collapsed in 2000.
Dotcoms failed for a variety of reasons: Many rushed into the market without proper research or planning.
They had poorly designed Web sites with problems of complexity, poor navigation, and downtime. They
lacked adequate infrastructures for shipping on time and for answering customer inquiries. They believed
that the first company entering a category would win category leadership. These companies wanted to
exploit network economies, namely the fact that the value of a network to each of its members is
proportional to the number of other users (Metacalfe’s Law). Some just rushed into the market in the hope
of launching an initial public offering (IPO) while the market was hot.
To acquire customers, dotcoms spent large amounts on mass marketing and offline advertising. They relied
on spin and buzz instead of using target marketing and word-of-mouth marketing, and they devoted too
much effort to acquiring customers instead of building loyal and more frequent users among their current
customers. They did not understand customer behavior when it came to online surfing and purchasing.
Many dot-coms did not build a sound business model that would deliver eventual profits. The ease of entry
of competitors and the ease of customers switching Web sites in search of batter prices forced dot-coms to
accept margin-killing low prices. Webvan, the online grocer, illustrates how dot-coms failed to understand
their marketplace.
At the same time, many pure-click dot-coms are surviving and even prospering. Others are showing losses
today, but their business plans are fundamentally good.

BRICK AND CLICK COMPANIES

Although brick and click companies face channel conflict issues, they probably will have more online
success than their pure – click competitors. First, companies such as Compaq, Merrill Lynch, and Barnes &
noble have better known brand names; their cost of acquiring a new customer is $12 compared to the $82
that pure click e-tailors spend to acquire a new customer. Second, they have greater financial resources
and access to funds.

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Third, they have deeper industrial knowledge and experience, good relationships with key suppliers, and a
large customer base. Fourth, they can now be reached 24 hours a day, 7 days a week and merchandise
can be returned to their 9 to 5 stores. And fifth, the Internet allows them to reach and serve additional
customers who may be for away from their store locations. Gap illustrates the advantages of a brick-and-
click operation over a pure-click operation.

Pure Click VS Brick & Click

Pure-play Internet companies operate solely on the Internet, while click & mortar business models combine
a physical presence with online selling or marketing. Click & mortar businesses may operate a website that
sells products or advertises those it sells on the high street. The difference between the two business
models is reflected in running costs, marketing strategies and customer perceptions. Internet business
have fewer overheads but businesses that have a strong street presence inspire more customer
confidence.

Overheads
Clicks & mortar businesses have more overhead in the form of taxes, insurance and property maintenance
than their pure-play Internet counterparts. Pure-play companies still must pay taxes and sometimes
insurance, but have no property maintenance costs.

Benefits to Customers
Companies that only operate online can sell products at a greater discount to customers because they
have fewer operational costs. Clicks & mortar businesses can offer a more versatile service. Someone who
buys an item of clothing from a street store’s website, for example, might have the option of returning the
garment to her nearest store if it is faulty or doesn’t fit.

Perceptions
Business that combine a presence on the street with online retailing may inspire more customer confidence
than those that only operate online, according to the Internet Marketing Center. Customers believe that a
business is less likely to vanish overnight if it has a customer presence, the website explains. However,
online businesses that have built up an excellent reputation for customer service and respond to telephone
calls and emails quickly and professionally also inspire customer confidence.

Marketing
Pure-play companies have to invest more money, time and effort in marketing than a hybrid businesses.
Businesses that have a physical presence, particularly on a national or international scale, are already
known to potential customers, whereas Internet business have to advertise their presence more

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aggressively. The average Pure-play company spends $82 dollars to acquire a new customer, whereas a
traditional retailer spends $12 dollars, according to CRM magazine.

M-Commerce
M-Commerce or Mobile Commerce is one of the most integral parts of commercial sectors nowadays.
If stats are there to believe, then more than 30% of US e-commerce sales are occurring via m-commerce.
Mobile commerce or more commonly known as m-commerce is one of the leading industries when we talk
about business these days, and there is no doubt that every single person today is trying to adopt this form
of business for sure.
M-Commerce enables businesses and users to sell and buy products and services via mobile devices. You
can perform commercial activities via mobile devices by using the internet.
Well, mobile commerce allows the customers and the potential prospects to have products and search for
services along with comparing their prices to make payments effortlessly and in an easy manner.
The truth of the matter here is that you will be able to get more and more information about
the target customers that you have with the help of the amazing m-commerce sites. Also, making buying
decisions has become a lot easier with the help of this format for sure.

What is m-Commerce?
Mobile commerce, also called m-commerce or m-commerce, includes any monetary transaction completed
using a mobile device.
It is an advancement of ecommerce, enabling people to buy and sell goods or services from almost
anywhere, simply using a mobile phone or tablet device.
But mobile commerce is more than just a simple evolution of ecommerce.
It has also served as a trigger for new industries and services, or helped existing ones grow, including:
• Mobile money transfers.
• Electronic tickets and boarding passes.
• Digital content purchases and delivery.
• Mobile banking.
• Contactless payments and in-app payments.
• Location-based services.
• Mobile marketing, coupons, and loyalty cards.

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Types of M-Commerce
Generally, mobile commerce can be divided into three different types-
#1. Shopping M-Commerce
When using mobile phone and internet to do shopping, it is considered as Shopping M-commerce. It is one
of the most predominant types of m-commerce that is constantly increasing with the increase in the
numbers of mobile users across the world.
All the business sites to social media pages and applications are mobile-optimized these days just to enjoy
the amazing benefits of M-commerce.
#2. Payments M-Commerce
Use of digital means for making payments is also quite popular these days. It is Payments M-commerce.
Users are using it to pay their bills, buy and purchase goods and services. So, using mobile apps and the
internet to make payments is understood as Payments M-Commerce.
#3. Banking M-Commerce
Thanks to mobile commerce banking have become highly alleviated nowadays. Can be easily used from
the app of the bank of your phone to do different baking-related activities.
All sorts of important banking-related services are easily accessible on mobiles that make this type of M-
commerce highly useful.

Important Applications of M-Commerce

• Online shopping via mobile devices
• Purchase and download of mobile content
• Access to banking services
• Access to global information
• Effective marketing and advertising
• Effective targeting and widening reach to the palms and pockets of customers

In addition to these applications, m-commerce also has some significant advantages that we should also
pay heed to-
Notable Advantages of M-Commerce
• An easy and convenient way of targeting more audiences
• Wide variety of payment options

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 • Easy to carry and awesome mobile to do multitask from wherever you want
• A lesser requirement of electricity
• Multiple options of widening the reach and targeting more audiences

Key Performance Indicators of M-Commerce

We can say this definitely without any doubt that people from all over the world are trying to embrace the
amazing mobile commerce trends and if you are, then, you are definitely like the other retailers as well.
The reason behind doing that is to make sure that the engagement for the online store is increased and
more income is generated in the best way. Most people have their primary focus on the fact that their
visitors can access their sites in the best way.
Well, the role of the retailer is to find out all the factors which will help in boosting customer engagement
and provide more and more outcome for the business.
#1. SMS Supporting Reporting
It is one of the most important KPIs of M-commerce and should never be ignoring the SMS subscribers
because when someone subscribes to someone’s messages, they are more likely to make a purchase from
that person.
For effective m-commerce campaigns, it is important that to grow SMS databases. Loyal users will always
like to get important mobile alerts, and if do so, the chances of enjoying better sales will always increase.
#2. Mobile Add to Cart Rate
This is one of the most important metrics that don’t want to be ignored at all costs. Ignoring this factor there
is a chance that no one will be able to see the actions that are being taken by their customers. This can
increase the difficulties as there will be no way to know all about the customer’s behavior as well. So, it is
needed to make sure about properly monitoring all the mATCR that the customers are having.
In that way, you can minimize that the people have when they are adding the items to their cart on your
site.

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#3. Average Page Load Time
This one is, again, a very significant m-commerce KPI that helps in optimizing the performance of mobile
marketing and advertising campaigns.
It also plays a pivotal role in deciding the conversion rate of campaigns. If the page loads slow, there will be
witnessed an increase in churn rate as well, that is why paying heed to this KPI of M-commerce is highly
important.
#4. Average Ordering Value
It is really important always to have a track on the order value at an average with some period.Then also
need to compare all the results and that tool with the conversion rate that is there. In that case, the volume
of the sales will not be able to create any problem.
#5. Mobile Cart Conversion Rate
In case the MCC is poor, then there is a chance that the checkout process of your business needs to have
some sort of improvement, and that is something that you always need to keep in mind.

#6. Total Mobile Traffic Tracking

The main idea here is to help in making certain decisions of the purchase and since there has been an
increase in the traffic of m-commerce, monitoring the data is important if you want to have the best results.

Tips for using M-Commerce Effectively

1) Have a proper and uncluttered shopping cart for e-commerce
2) The right use of Social Media and Website Optimization of mobile users
3) Mobile oriented Email Marketing Campaigns
4) Proper tracking of m-commerce analytics
5) Automation of point of customer contact, service, distribution, etc. via m-commerce
6) Use of SMS Marketing and mobile digital wallet marketing

Tools to integrate M-Commerce with Marketing Campaign

1. mFoundry
This will let your customers use their mobile phones as cash or credit cards. Starbucks made this app for its
target stores, and it helps them with Loyalty Program Tracking and Mobile Wallet Solutions.
2. Bango
With the help of this tool, consumers can make payment for their purchased products from e-stores. It is
quite effective in opening up the online payment options to the mobile mass market.

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3. iBeacons
This m-commerce tool can help in detecting users around any particular area with the help of
BLE technology, which is known as Bluetooth Low Energy technology. By detecting users in a particular
location, businesses can send important information as per the users’ interests.

Conclusion
There are many different benefits of having mobile commerce for the business, and there are many
reasons why people all over the world are trying to adopt this amazing technique for their businesses.
There is seamless communication between the marketers and the customers with the help mobile
commerce, and there is also an improvement in the sales process too.

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