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
12-3
Promotion Strategy:
planning, implementing, and
controlling an organization’s
communications to its customers
And other target audiences.
12-4
Composition of Promotion Strategy
Interactive/Internet
Marketing
Direct
Marketing
Advertising
Promotion
Components
Personal
Selling
Sales
Promotion
Public
Relations
12-5
U. S. Annual Expenditures (billions)
$600
Sales Promotion
Personal Selling
$400
Advertising
$200
0
12-6
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
Promotion
Public
Relations
Personal
Selling
Direct Marketing Interactive/ Internet
Marketing
PROMOTION
BUDGET
Coordination
PROMOTION COMPONENT
with Product,
STRATEGIES
Distribution,
and Price
Strategies
INTEGRATE AND IMPLEMENT PROMOTION COMPONENT
STRATEGIES
EVALUATE EFFECTIVENESS OF
PROMOTION STRATEGY
12-8
Illustrative Communications Objectives

Need Recognition

Finding Buyers

Brand Building

Evaluation of Alternatives

Decision to Purchase

Customer Retention
12-9
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?
12-10
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
12-11
Determining the Promotion Budget
Objective and
Task
All You Can
Afford
Budgeting
Approaches
Percent of Sales
Follow the
Competition
12-12
Features
Budgeting Methods
Limitations

Percent of Sales
Fixed percent of sales, often based on
past expenditure patterns.

Comparative Parity
Budget is based largely
upon what competition is doing.

Objective and Task
Set objectives and then determine
tasks (and costs) necessary to meet
the objectives.



Percent of Sales
The method is very arbitrary. Budget may
be too high when sales are high and too
low when sales are low.
Comparative Parity
Differences in marketing strategy may
require different budget levels.
Objective and Task
The major issue in using this method is
deciding the right objectives so
measurement of results is important.
12-13
Integrating and Implementing Promotion Strategy
Avoiding fragmentation
Difficulty in evaluating productivity
Differences in priorities
Separate organizational units
Assigning integration responsibility
12-14
Illustrative Factors Affecting Promotion Strategy
Advertising/ sales
promotion driven
Large
Balanced
Number and dispersion of buyers
Buyers’ information needs
Low
Size and importance of purchase
Small
Distribution
Channel
Product Complexity
Low
No
Post-purchase contact required
Personal selling
driven
Small
High
Large
Direct
High
Yes
12-15
Promotion Strategy Issues

Expense/Response Relationships

Allocation

Impact on Brand Equity

Integration of Promotion Components

Effectiveness of the Strategy
12-16
ADVERTISING STRATEGY

Setting Objectives and Budgeting

Creative Strategy

Media/Scheduling Decisions

Role of the Advertising Agency

Program Implementation and Measuring
Effectiveness
12-17
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.
12-18
Advertising Strategy
Target Audience
Advertising
Objectives
Advertising Budget
Creative Strategy
Advertising Media and
Programming Schedules
Evaluate the Effectiveness of the
Strategy
12-19
Advertising Objectives
Expose communication to target
audience
Create awareness
Change attitude(s)
Increase Sales
Generate profits
12-20
Alternative Levels for Setting Advertising Objectives
Increasing Uncertainty
About Impact on
Purchasing Behavior
Type of Objective
Increasing Difficulty
of Measurement
•
Exposure
•
Awareness
•
Attitude
Change
•
Sales
•
Profit
12-21
Budget Determination
OBJECTIVE AND TASK METHOD HAS THE MOST
SUPPORT
Budget
Determination
Media/
Scheduling
Decisions
Creative
Strategy
12-22
The Vuitton Machine*
Inside the world’s biggest, most profitable luxury brand
BENCHMARKING VUITTON
Brand
2003 Sales
Billions
Percent
Change*
Prada
Gucci**
1.95
1.85
0.0
-1.0
13.0
27.0
Hermès
Coach
1.57
1.20
+7.7
+34.0
25.4
29.9
Louis Vuitton
$3.80
+16%
Operating
Margin
45.0%
*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.
12-23
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
binds together the various parts of
the advertising campaign.
Creative Strategy
12-24
Media/Scheduling Decision

Television

Radio

Magazines

Online

Website

Outdoor
12-25
Relative access
to the target
audience
Favorable zone
Unfavorable zone
Relative cost of
reaching the target
group(s)
12-26
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.
12-27
Target Audience
Role of the Advertising Agency
Advertising Objectives
Advertising Budget
Creative Strategy
Advertising
Agency
Advertising Media and
Programming
Evaluate the Effectiveness of the
Strategy
12-28
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.
12-29
Rating
Services
Test
Marketing
Controlled
Tests
Sales and
Expense Analysis
MEASURING
ADVERTISING
EFFECTIVENESS
Recall
Tests
12-30
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.
12-31
STRATEGY
FEATURE
The Realities of Mail-in Rebates
*
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 consumerelectronics companies.
12-32
*
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.
12-33
Sales Promotion Activities and Targets
Activities include trade shows, specialty
advertising, contests, displays, coupons,
recognition programs, and free samples.
SALES
PROMOTION
TARGETS
Consumer
Buyers
Salespeople
Business
Buyers
Value Chain
12-34