Chapter 16 – Advertising and Sales Promotions

Advertising

Advertising Plan

1. Identify Target Audience

A target audience can be determined from STP analysis (see Chapter 7).

2. Set Advertising Objectives

Pull Strategy – draw customers in to buy the product

Push Strategy - directed at salespeople (PUSH our product to consumers who enter your store through POP displays) and store managers (establish sales goals/incentives to influence your sales reps to sell more of our product)

Informative Advertising

Demonstrate attributes of a product, provide a logical argument as to why the product is useful and/or different from other products – usually for products in the early stages of their PLCs

Persuasive Advertising

To persuade consumers that they need this product or service to fulfill some desire or need
(consumer isn’t looking for a drill with a 1/4″ bit, consumer is looking for a way to drill a 1/4″ hole)
Usually early-to-mid PLC cycle – also persuades consumers to switch brands or to continue to use the brand 

Reminder Advertising

Coca-Cola’s umbrella or logo on a menu – mostly for products in the maturity stage of their PLCs

Top-of-the-mind Awareness

Ordering a Coke instead of a lemonade, because your mind chooses it almost automatically without really thinking about it

Focus of Advertisements:

Product-Focused Ads

Focused on only one type of product

Institutional Ads

PSA (Public Service Announcements)

Social Marketing

(see The More You Know – bringing about some social change through advertising)

Selective Demand

Demand for a particular product (often same ads as Product-Focused)

3. Determine the Advertising Budget

4. Convey the Message

What is The Message?

USP (Unique Selling Proposition)

What is The Appeal?

Informational Appeal - Show USP through informing the consumer of some special feature, or problem they can have if they don’t use the product – still trying to persuade (see 78 Honda Civic ad above)

Emotional Appeal – Influence through group affiliation, nostalgia, or a certain emotion felt when using the product (The Hallmark Channel)

5. Evaluate and Select Media

Media Planning – must plan the following when executing effective advertising while being cognizant of budgetary constraints

Media Mix - TV, Radio, Print, Internet?  In what percentages of the total budget?  Mass or Niche?

Mass Media – directed to the largest audience

Niche Media – directed to a select audience

Choosing the Right Medium – internet has opened a lot of possibilities, but perhaps TV/radio/print (the usual methods) would be more effective – must be a decision based on as much information as possible

Determining the Ad Schedule

Advertising Schedule:

Continuous Advertising Schedule – 24/7 (Tide)

Flighting Advertising Schedule – Only when the products have the most opportunities for sales (start of school, holidays) at one certain time per year

Pulsing Advertising Schedule – Short bursts at different points throughout the year, then little to none the remainder

6. Create Advertisements

The CLIO winners are:
(more winners HERE)

 

7. Assess Impact – Do surveys, closely examine sales information, ANALYZE

Pretesting

Tracking

Posttesting

Regulatory and Ethical Issues in Advertising

FCC site

FTC site

FDA site

Puffery – How much advertising should we believe? Is it our responsibility as consumers to evaluate all advertising? What part does/should the regulators really play when it comes to deceiving advertising?

Sales Promotions

Types:

Coupons - $1.00 off

Deals - BOGO

Premiums - free sample of hand lotion packaged on shampoo bottle

Contests - Enter to win a free cruise (way to collect advertising data)

Sweepstakes - Publisher’s Clearing House (the HUGE checks)

Samples – The Meow Mix(TM) Cafe (“wet” food line)

Loyalty Programs - Frequent Drinker cards @ coffee retailers, encourage repeat business

POP Displays - End caps in a store featuring certain items

Rebates - Apple gave me a free iPod Touch with my Macbook purchase (rebate came the next week!)

Product Placement – E.T. and the Reese’s Pieces

Using Sales Promotion Tools

Pop-Up Stores - “MeowMix(TM) Cafe” (people wanted to see how they could start a franchise – excellent!)

Cross-Promoting - Burger King uses movies, movies use Burger King to promote their products

Chapter 14 – Retailing

I’m going to try something new for this post.  I’m going to list terms and try to define them through illustrative examples (photo, video, site link) instead of writing out the definition in the book, followed by some notes on how our concepts between OB, MA and BP are overlapping.  I think that it will be a lot more useful for myself and any of my fellow students who read this blog.  The great thing about this blog is that I think it is really working in terms of supporting my organic learning process idea.

Retailing

 

 

Wholesalers

 

 to your local florist

 

The Big Middle segment

 

  

 

Private-Label (Store) Brands

 

 

Share of Wallet

 

  % of this each retailer gets – and they always want more!

 

Bricks-and-Mortar Retailer

See storefronts above for The Big Middle retailers (Wal-mart, Best Buy, Macy’s)

 

Trade Area

With online exposure, trade areas for even small, boutique retailers are growing.

 

Multichannel Retailers

See below, all of these brick-and-mortar retailers have websites – some offer sales on their sites, some offer orders on their sites and pickup at their stores (Best Buy.com is one example.)

 

Food Retailers:

 

Conventional Supermarket

Safeway

Big-Box Food Retailer

Sam’s Club

Convenience Store

7-Eleven

 

General Merchandise Retailers:

 

Discount Retailer

Target

Specialty Store

Payless Shoe Source

Category Specialist

Best Buy

Category Killer

Men’s Wearhouse

Department Store

Neiman Marcus

Drug Store

Walgreen’s

Off-Price Retailer

BIG LOTS!

Extreme Value Retailer

Save-A-Lot

Cobranding Cells on a New Level with Google’s “Android” (WSJ, Wired)

New Phone to Showcase Google Brand

 

 

Google Phone Running "Android"

Summary:  Google chases after iPhone.  If you look on your cellular phone or BlackBerryTM, you will see that the manufacturer and service provider are cobranded on it.  In Google’s partnership with HTC and T-Mobile (currently, is working on expanding to other providers), Google will also be shown on “The Dream” smartphone running Google’s proprietary software “Android”.  The question is whether or not this pairing will dilute (or strengthen) T-Mobile’s and Google’s brands.  From tech chatter with my fellow Applephiles, many of them stayed away from the iPhone, even after its price dropped significantly, due to AT&T being its sole service provider.  Apple’s brand wasn’t enough for some of us to want to adopt AT&T, whom some view to be an untrustworthy service compared to other networks.

For the techie, here is a WIRED article of the story of Android.
Here is WIRED’s blog article on the announcement dated today.

Chapter 12 – Pricing Concepts for Establishing Value

Some thoughts before getting into the meat of this chapter’s notes:

 I found it difficult to do anything with this chapter for my portfolio other than summarize the basic concepts.  I’ve inserted a few sidenotes at certain points, but mainly this is a summary.  I will try to insert examples in this outline as I find them in the marketplace.  I can see a lot of convergence on topics from all three of this semester’s courses.  For example, the economic and cost concepts were also found in our managerial/cost accounting text.  As a person who works in pricing, I can generally summarize that we use a comprehensive mix of the 5C’s when determining optimal price to meet organizational goals, which are in themselves a blend of many of the orientations noted below.  Our pricing strategies are very complex, to say the least…

 

 

Price:

Overall sacrifice a consumer is willing to make – money, time, energy – to acquire a specific product or service.

 

How do I define value?  I would be willing to pay more money for a food if I deemed it healthier than alternatives. However, it also depends on my income at the time and also the time value of money.  If I don’t have time to cook, I am willing to pay more for a convenience food to save me time.

The Five Cs of Pricing

1.      Company Objectives

• Profit Orientation: Companies objective implemented by focusing on target profit pricing, maximizing profits, or target return pricing.
  • Target Profit Pricing:  Strategy implemented by firms with a particular profit goal; uses price to stimulate sales at a certain profit per unit.
  • Maximizing Profits:  An economically based pricing strategy that attempts to identify the price at which a product or service’s profits are maximized.
  • Target Return Pricing:  Strategy implemented by firms interested in the rate of profits relative to investments; designed to produce specific return on investment (ROI), usually expressed as a percentage of sales.
• Sales Orientation:  Company objective based on the belief that increasing sales help the firm more than increasing profits.
• Competitor Orientation:  A company objective based on the premise that the firm should measure itself primarily against its competition.
  • Competitive Parity:  Strategy of setting prices similar to those of major competitors.
  • Premium Pricing:  Competitor-based pricing method; film deliberately prices products above competitors to capture consumers who always shop for the best or for whom price does not matter.
  • Status Quo Pricing: Competitor-oriented strategy; firm changes prices only to meet those of competition.
• Customer-Oriented Pricing: Orientation that explicitly invokes the concept of customer value and sets prices to match consumer expectations.
• Price Skimming:  Strategy of selling innovation at a high price that innovators and early adapters will pay to obtain it, then lowering the price to capture (or skim) the next most price sensitive segment.
• Market Penetration Pricing Strategy:  Pricing Strategy that sets low initial price of new product or service to build sales, market share, and profits quickly.
  • Experience Curve Effect:  Drop in unit cost as accumulated volume sold increases.

2.      Customers

 

Fender Stratocaster is too expensive for most consumers of guitars (students, hobbyists, semi-professionals and amateur players), so Fender put the V.C. Squier acquisition to use manufacturing guitars at a price point that allowed them to capitalize on this large consumer base.

• Demand Curve:  How many units of a product or service consumers demand during a specific period at different prices.
• Prestige Products or Services:  Consumers purchase for status rather than functionality.  (Price of luxury cruise – consumers feel that the higher-priced cruise shows that they are more affluent.)
• Price Elasticity of Demand:  Measures how changes in price affect quantity of product demanded; specifically, ratio of the percentage change in quantity demanded to the percentage change in price.
  • CD example:  -1 PeofD = Price is fairly right at point between Elastic and Inelastic
  • Steak cuts of meat are highly elastic
  • Gas prices are inelastic
  • Elastic:  Market for a product or service that is price sensitive; relatively small changes in price generate large changes in quantity demanded.
  • Inelastic:  Market for a product or service that is price insensitive; relatively small changes in price do not generate large changes in the quantity demanded.
  • Other factors that change price elasticity of demand:
    • Income Effect:  Change in the quantity of a product demanded by consumers due to a change in their income.
    • Substitution Effect:  Consumer’s ability to substitute other products for the focal brand and increase price elasticity of demand for the focal brand.
    • Cross-Price Elasticity:  Percentage change in demand for Product A in response to percentage change of Product B (when they are complimentary products).
    • Complimentary Products:  Products whose demand curves relate positively, such that they rise or fall together in exact proportions.
    • Substitute Products:  Products for which changes in demand relate negatively (or inversely); a percentage increase in quantity demanded for one means a percentage decrease in quantity demanded for the other.
  • Psychological factors:
    • Reference Prices:  Price against which buyers compare actual selling price of a product; facilitates evaluation processes.
      • External Reference Price:  Higher price which consumers can compare the selling price to evaluate a purchase.
      • Internal Reference Price:  Price information stored in the consumer’s memory, used to assess a current price offering.
    • Everyday Low Pricing (EDLP):  Strategy to emphasize the continuity of retail prices somewhere between the regular, non-sale price and deep-discount sale prices.
    • High/Low Pricing: Strategy to promote sales by temporarily reducing prices to encourage purchase.

3.      Costs

• Cost-based pricing:  Pricing strategy that involves determining the costs of producing a products and adding a fixed amount to arrive at the selling price.
  • Fixed Costs:  Costs that remain essentially at the same level, regardless of changes in the volume of production.
  • Variable Costs:  Costs, primarily labor and materials, that vary with production volume.
  • Total Cost:  Sum of variable and fixed costs.
  • Break-Even Analysis and Decision Making
    • BE Analysis:  Technique to examine relationships among cost, price, revenue, and profit over different production and sales levels to determine break-even point.
    • BE Point:  The point at which the number of units sold generates enough revenue to equal total costs; at this point, profits are zero.
      • TVC = VC X Q
      • TC = FC + VC
      • TR = P X Q
      • Contribution Per Unit: Revenue – Variable Cost
      • BE Point (Units) =  FC / CPU or FC + Target Profit / CPU (if target profit goal)

4.      Competition

• Oligopolistic Competition:  When a few firms dominate a market.
• Price War:  When two or more firms compete primarily by lowering prices.
• Price Fixing:  Practice of colluding with other firms to control prices.
• Monopolistic Competition:  Many firms sell closely related but not homogeneous products; products may be viewed as but are not perfect substitutes.
• Pure Competition:  When different companies sell commodity products that consumers perceive as substitutable; price usually set according to the laws of supply and demand.

Ethical Dilemma 12.1 – Do Protectionist Laws Hurt or Help Consumers?

For those who love Southwest, direct flights to and from major airports are nonexistent.  If they are willing (as many of them are), it is possible to use another gateway city by driving further to and from smaller airports from their destination cities.

 

5.      Channel Members

• Gray Market:  Employs irregular but not necessarily illegal methods; legally circumvents authorized distribution channels to sell goods at prices lower than those intended by the manufacturer.
• Unauthorized cheaply priced electronics vs. Authorized dealers with established sales rules – Protects brand.

Macro Influences on Pricing

• The Internet
  • Promotes shopper research
• Economic Factors
  • Cross-Shopping:  Pattern of buying both premium and low-priced merchandise or patronizing both status- and price-oriented retailers.

Chapter 12 – Packaging

Primary Package:

Packaging the consumer uses, such as toothpaste tube; typically seeks convenience in terms of storage, use, and consumption.

 

Secondary Package:

Wrapper or exterior carton containing primary package; provides UPC label used by retail scanners; can contain product information unavailable on the primary package.

 

Some innovations:

• Aluminum cans
• Ring-pull cans
• Aspect drink bottles
• Child-resistant/senior-friendly packages
• Using less packaging [in an effort to be more “environmentally friendly” while cutting down on packaging costs – how to still maintain requirements (FDA, etc)]
• Changing labeling to appeal to the health-conscious consumer (changing serving sizes for calorie, saturated fats, sodium and sugar counts)

Chapter 12 – Branding Strategies

Brand Ownership

Manufacturer’s (National) Brands:

Brands owner and managed by the manufacturer.

Private-Label (Store) Brands:

Brands developed and marketed by a retailer and available only from that retailer.

Generic:

Product sold without a brand name, typically in commodities markets.

Corporate (Family) Brand:

Use of a firm’s corporate name to brand all of its product lines and products.

Corporate and Product Line Brands:

Use of a product line name to brand rather than the corporate name.

 

Individual brands:

Use of individual brand names for each of a firm’s products.

What’s in a name?

May retain individual brand name to provide a unique identify, even if under the same corporate umbrella.

Brand Extension:

The use of the same brand name for new products introduced to the same or new markets.

Brand Dilution:

When a brand extension adversely affects customer perceptions about attributes of the core brand.

 

Cobranding:

Marketing two or more brands together in the same package or promotion.

 

Entrepreneurial Marketing – Exploring Virgin Territories

• Virgin has a strong brand, but must be careful in brand extension decisions. 
• They have been successful with unconventional extensions, but some of have failed.

Brand Licensing:

Contractual arrangement whereby one firm allows another to use its brand name, logo, symbols, or characters for a negotiated fee.

Brand Repositioning (Rebranding):

Strategy to change a brand’s focus to target new markets or realign the core emphasis with changing market preferences.

Chapter 12 – Branding

Value of Branding for the Customer and the Marketer

• Brands facilitate purchasing
• Brands establish loyalty
• Brands protect from competition and price competition
• Brands reduce marketing costs
• Brands are assets
• Brands impact market value

Brand Equity:

Assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service.

 

Brand Awareness:

Measure of how many consumers are familiar with the brand and its image; created through repeated exposures of brand elements in the firm’s communications.

 

Honda's Logo

 

Perceived Value:

Relationship between a product’s or service’s benefits and cost.

 

Brand Association:

Mental links between a brand and its key product attributes; can involve a logo, slogan, or famous personality.

 

Asimo has become a new character with whom Honda has become familiar with a new generation.

 

Brand Personality:

Set of human characteristics associated with a brand, with symbolic or self-expressive meanings for consumers.

Asimo = Technology, future thinkers, early adapters (trying to boost their manufacture of alternative fuel vehicles, of which consumers may not be as aware as they are of Toyota’s)

 

Brand Loyalty:

When consumers buy the same brand repeatedly over time rather than buying from multiple suppliers within the same category.

 

Although I am not brand loyal per se, I am loyal to the cars of Japanese auto makers due to my perceived value (reliability, longevity and low MPG/maintenance costs vs. cost) of their products.

 

Adding Value: Building a Brand from Scratch in the US

Shanghai Tang – Lessons Learned:

• Do your research
  • Does your target market want classic Chinese clothing, or something that is a modern blend of East/West?  Wanted the latter.
  • Americans have short attention spans – must keep them interested by introducing new product lines occasionally.
  • Element of prestige, but target market also wants something functional.

Chapter 12 – Product Assortment and Product Line Decisions (with Burt’s Bees)

Product Assortment (Product Mix):

Complete set of all products offered by a firm.

 

Burt's Bees Product Mix includes lip balm, moisturizer, shampoo/conditioner and sunscreen

 

Product Lines:

Groups of associated items, including those consumers use together or think of as part of a group of similar products.

 

Burt's Bees "Baby Bee" Line

Burt's Bees "Bay Rum for Men" Line

Burt's Bees "Outdoor" Line

Burt's Bees "Naturally Ageless" Line

 

Product Category:

Assortment of items the customer sees as reasonable substitutes.

 

Burt's Bees Lip Care Category

 

Brand:

Name, term, design, symbol, or any other features that distinguish a seller’s good or service from those of other sellers.

 

Burt's Bees "Bert" Logo

Burt's Bees "Name" Logo

 The Greater Good™

One of Burt’s Bees trademarked company value slogans.  They also support environmental causes to support their company core values, business objectives, and brand identity.

Product Line Breadth:

Number of product lines, or variety, offered by the firm.

Burt’s Bees product line breadth is fairly slim, but has been expanding steadily (especially since it was acquired by Clorox).

Product Line Depth:

Number of categories within a product line.

Again, Burt’s Bees focuses on a few categories within each product line.  For example, in their “Naturally Ageless” line, they offer:

Stock Keeping Units (SKUs):

Individual items within each product category; the smallest unit available for inventory control.

 

Naturally Nourishing Milk & Shea Butter Body Wash  Size: 12 fl. oz Bottle

$8.00

1

$8.00

Category Depth:

Number of SKUs within a category.

Some questions that firms consider when changing their product assortment/lines:

• Increase or decrease product mix breadth?  Burt’s Bees is steadily increasing.

• Increase or decrease product mix depth?  Burt’s Bees is steadily increasing.

• Change Number of SKUs?  Burt’s Bees is steadily increasing SKUs as breadth and mix increases.

• Product Line Decisions for Services  Burt’s Bees currently does not offer services, only products.

Chapter 9 – Product, Branding, and Packaging Decisions – Intro

Example – Diesel vs. Wrangler jeans

• Irreverent, stylish advertising and unconventional store design
• Promotes interaction between consumer and salesperson
• Justifies (differentiates) higher price

 Which would you buy?

 

 

Diesel Jeans Ad

Wrangler Jeans Ad

 

Product:

Anything that is of value to a consumer and can be offered through a voluntary marketing exchange.

Some of my favorite products (Later Marketing Portfolio posts will include more examples from these companies to illustrate marketing concepts):

 

Burt's Bees Pomegranate & Soy Very Volumizing Shampoo

 

Tazo "Zen" Green Tea (Iced from Starbucks is my usual)

Repositioning

Repositioning

Chrysler repositioning – “Drive + Love” is out, luxury + affordability is in.

I don’t think that Chrysler has achieved its goal yet.  People are still very untrustworthy of American-made luxury vehicles other than SUVs (and those are even notorious for unreliability according to Consumer Reports).  There is also still the old adage “You get what you pay for.”

According to the following Fortune Magazine article, the Consumer Reports ratings are based on their past problems, not necessarily what Chrysler is doing today.  The text is slightly outdated, as 80% of Chrysler was purchased from DaimlerChrysler in early August 2008 and more significant changes are to come.

CEO Nardelli and top execs LaSorda and Press on Cerberus and Chrysler’s turnaround