Strategic Marketing

1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space
3. Strategic Market Segmentation
4. Strategic Customer Relationship Management
5. Capabilities for Learning about Customers and Markets
6. Market Targeting and Strategic Positioning
7. Strategic Relationships
8. Innovation and New Product Strategy
9. Strategic Brand Management
10. Value Chain Strategy
11. Pricing Strategy
12. Promotion, Advertising and Sales Promotion
Strategies
13. Sales Force, Internet, and Direct Marketing Strategies
14. Designing Market-Driven Organizations
15. Marketing Strategy Implementation And Control
 CHAPTER 12

Promotion, Advertising, and Sales

Promotion Strategies

 Promotion Strategy
 Advertising Strategy
 Sales Promotion Strategy

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 PROMOTION STRATEGY
 The Composition of Promotion Strategy
 Developing Promotion Strategy
 Communications Objectives
 Deciding the Role of the Promotion Components
 Determining the Promotion Budget
 Promotion Component Strategies
 Integrating and Implementing the Promotion Strategy
 Effectiveness of Promotion Strategy

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 Promotion Strategy:

planning, implementing, and

controlling an organization’s
communications to its customers
And other target audiences.

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 Composition of Promotion Strategy
Interactive/Internet
Marketing

Direct Advertising
Marketing
Promotion
Components
Personal Sales
Selling Promotion

Public
Relations
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U. S. Annual Expenditures (billions)

$600
Sales Promotion
Personal Selling
$400
Advertising
$200

0
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 INTERNET
FEATURE Brand Advertising On-Line Has Taken Off
SEARCH WORKS
Google and Yahoo! Have demonstrated the power of the Web by using customers’ search
queries to connect them with advertisers.
CUSTOMERS ARE ONLINE
More than half of American households have always-on Net connections. And the Web
reaches millions at the office. The Big Three portals—Yahoo, AOL, and MSN—reach a
combined 50 million a day–-twice the TV audience of a World Series game.
VIDEO ROCKS
The adoption of broadband, which can handle videos, lets advertisers put TV-like ads online.
Longer spots by BMW and Adidas have reached cult status. As demand for video soars,
portals sell choice slots in advance, much like TV’s up-front sales.
FEEDBACK IS INSTANT
Marketers and online publishers have tools to track an ad’s performance in real time allowing
them to make quick adjustments if customers aren’t clicking. This turns the Net into a vast
marketing lab. And as video grows, it becomes a test bed for TV ads.
CUSTOMERS LEAVE TRAILS
It was an empty promise during the dot-com days, but now advertisers have the technology
to follow customers, click by click, and to hit them with relevant ads. The upshot? No wasted
money peddling dog food to cat owners.

Source: Stephen Baker, “The On-Line Ad Surge,” BusinessWeek, November 22, 2004, 79. 12-7
 DESIGNING THE PROMOTION STRATEGY
MARKET TARGETING AND POSITIONING
STRATEGIES

COMMUNICATION
OBJECTIVES

ROLE OF PROMOTION
COMPONENTS
Advertising Sales Public Personal Direct Marketing Interactive/ Internet
Promotion Relations Selling Marketing
PROMOTION
BUDGET
Coordination
PROMOTION COMPONENT with Product,
STRATEGIES Distribution,
and Price
Strategies
INTEGRATE AND IMPLEMENT PROMOTION COMPONENT
STRATEGIES

EVALUATE EFFECTIVENESS OF
PROMOTION STRATEGY

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Illustrative Communications Objectives
 Need Recognition

 Finding Buyers

 Brand Building

 Evaluation of Alternatives

 Decision to Purchase

 Customer Retention
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 Deciding the Role of the Promotion Components

 Expected contribution for each of the

promotion components.
 Which communication objective(s) will be
the responsibility of each component?
 What part of the budget will go to each
component?

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Factors Guiding the Role Assigned to Each Component

 Market Target(s)
 Desired Positioning
 Role of Promotion in Positioning
 Product Characteristics
 Stage of Life Cycle
 Situation Specific Factors

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 Determining the Promotion Budget

Objective and
Task

All You Can Budgeting Percent of Sales

Afford Approaches

Follow the
Competition

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 Budgeting Methods
Features Limitations
Percent of Sales Percent of Sales
 Fixed percent of sales, often based on  The method is very arbitrary. Budget may
past expenditure patterns. be too high when sales are high and too
low when sales are low.

Comparative Parity Comparative Parity

 Budget is based largely  Differences in marketing strategy may
upon what competition is doing. require different budget levels.

Objective and Task Objective and Task

 Set objectives and then determine  The major issue in using this method is
tasks (and costs) necessary to meet deciding the right objectives so
the objectives. measurement of results is important.

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Integrating and Implementing Promotion Strategy

Avoiding fragmentation
Difficulty in evaluating productivity
Differences in priorities
Separate organizational units
Assigning integration responsibility

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 Illustrative Factors Affecting Promotion Strategy
Advertising/ sales Balanced Personal selling
promotion driven driven

Number and dispersion of buyers

Large Small

Buyers’ information needs

Low High
Size and importance of purchase
Small Large
Distribution
Channel Direct
Product Complexity
Low High
Post-purchase contact required
No Yes

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 Promotion Strategy Issues
 Expense/Response Relationships
 Allocation
 Impact on Brand Equity
 Integration of Promotion Components
 Effectiveness of the Strategy

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 ADVERTISING STRATEGY

 Setting Objectives and Budgeting

 Creative Strategy
 Media/Scheduling Decisions
 Role of the Advertising Agency
 Program Implementation and Measuring
Effectiveness

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 The Internet is Shifting the Power Position to the Customer
* How the Money is Spent is Changing.
* The Amount Spent on Internet Advertising is a Small
Fraction of the Total, but Very Powerful and Growth
is Accelerating.
* Consumers Spend 10 hrs/person/day with Media of
all Kinds—How Much is Media Multi-Tasking?
* Ad Spending Versus Consumers’ Time Allocations.
* Advertising Agency Consolidation and
Reorganization—the Big 4.
* Do Companies Recognize the Revolutionary
Implications of Newly Empowered Consumers?
* The Internet Will be the Most Prominent Medium in
the Lives of the 18-34 Age Group.
Source: The Economist, “Crowned at Last: A Survey of Consumer Power,” April 2, 2005, 1-16.
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 Advertising Strategy
Target Audience

Advertising
Objectives

Advertising Budget

Creative Strategy

Advertising Media and

Programming Schedules

Evaluate the Effectiveness of the

Strategy
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 Advertising Objectives
Expose communication to target
audience

Create awareness

Change attitude(s)

Increase Sales

Generate profits

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 Alternative Levels for Setting Advertising Objectives
Increasing Uncertainty
About Impact on
Purchasing Behavior

Type of Objective

• Exposure

• Awareness

• Attitude
Change

• Sales

Increasing Difficulty • Profit

of Measurement
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 Budget Determination

OBJECTIVE AND TASK METHOD HAS THE MOST

SUPPORT

Budget
Determination

Media/ Creative
Scheduling Strategy
Decisions
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 The Vuitton Machine*
Inside the world’s biggest, most profitable luxury brand
BENCHMARKING VUITTON
Brand 2003 Sales Percent Operating
Billions Change* Margin
Louis Vuitton $3.80 +16% 45.0%

Prada 1.95 0.0 13.0

Gucci** 1.85 -1.0 27.0

Hermès 1.57 +7.7 25.4

Coach 1.20 +34.0 29.9
*At constant rate of exchange **Gucci division of Gucci Group Data: Company reports. BW

Vuitton increased advertising 20% in 2003—spends only 5%

of revenues on advertising—about half the industry average

*BusinessWeek, March 22, 2004, 98-102.

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 CREATIVE STRATEGY
The creative strategy is guided by the market target and the positioning strategy.

Product Distribution Price Promotion

Advertising
(How to communicate
intended positioning to
buyers and others influencing
the purchase.)

Provide a unifying concept that

Creative Strategy
binds together the various parts of
the advertising campaign.
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 Media/Scheduling Decision

 Television
 Radio
 Magazines
 Online
 Website
 Outdoor

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Relative access
to the target
audience
Favorable zone

Unfavorable zone

Relative cost of
reaching the target
group(s)
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 Advertising Agencies in Perspective

 Fast change has come to the advertising industry.

 Huge, integrated agencies face a challenging future.
 Do clients want a full-service agency?
 The business model is in need of change.
 The basis of compensation continues to be debated and altered.
 Specialists (e.g. media buying services) are being used.
 Importantly, the core of the creative process is the agency.
 Several methods are available to evaluate advertising results.

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 Role of the Advertising Agency
Target Audience

Advertising Objectives

Advertising Budget

Creative Strategy
Advertising
Agency
Advertising Media and
Programming

Evaluate the Effectiveness of the

Strategy
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Advertising Strategy Implementation and Effectiveness

Decide how to measure effectiveness before

implementing the strategy.
Assign responsibility for tracking performance.
Assessing the quality of advertising is important.
Exposure to advertising is not a very sensitive
measure of effectiveness.
Several methods are available to evaluate
advertising results.

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 Rating
Services
Sales and
Test Expense Analysis
Marketing MEASURING
ADVERTISING
EFFECTIVENESS

Controlled Recall
Tests Tests

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 SALES PROMOTION STRATEGY

SALES PROMOTION

consists of various incentives, mostly short

term, intended to stimulate quicker and/or
greater purchase of particular goods/services
by consumers or the trade.

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 STRATEGY
The Realities of Mail-in Rebates
FEATURE
* Consumers hate the hassles, companies love unredeemed rebates, and
regulators are investigating the consumer complaints.
* As much as 40% of rebates never get redeemed.
* Some 400 million rebates are offered each year with a total value of $6
billion.
* Unclaimed rebates translate into more than $2 billion of extra revenue for
retailers and their suppliers each year.
* Complex filing rules and long delays discourage consumers.
* Companies emphasize the filing processes are intended to discourage
fraud.
* The largest rebate processor monitors 10,000 addresses suspected of
submitting bogus rebates.
* Rebates offer companies an opportunity to promote small discounts
without marking the products down.
* Rebates have become very popular with computer and consumer-
electronics companies.
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* The value of rebates has also increased.
* Regulators are intensifying their scrutiny of the companies offering
rebates.
* The developing back-lash against rebates is pushing some companies to
halt rebate strategies.
* Others are encouraging online filing.
* Fulfillment houses are revising their processing systems, using computer
technology to validate claims.
* Consumers would like mail-in rebates to go away but want the best price
they can get.

Source: Brian Grow, “The Great Rebate Runaround,” BusinessWeek, December 5, 2005, 34, 36, and 37.

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 Sales Promotion Activities and Targets
Activities include trade shows, specialty
advertising, contests, displays, coupons,
recognition programs, and free samples.
SALES
PROMOTION
TARGETS
Consumer Salespeople
Buyers
Business Value Chain
Buyers

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