Discuss integrated marketing communications (IMC).
Describe the different types of advertising.
Outline the tasks in personal selling.
Name and describe sales promotion activities.
Discuss publicity as a promotional tool.
Discuss pricing objectives and strategies.
What product has earned as much revenue in a year as Major League Baseball, or all the commercial films released in the United States?
The answer is Lipitor, the cholesterol-reducing drug taken by almost 9 million Americans. The most successful, most widely prescribed drug in the United States, for years Lipitor's patent protected it from competition, giving Pfizer the exclusive right to manufacture and market the drug. At one point Pfizer was earning almost $13 billion a year in sales, just from Lipitor.
Pfizer's patent on Lipitor has now expired, and competitors sell inexpensive generic versions of the drug, called atorvastatin. During the first six months, generic competition was limited by law to the first few companies that applied to the U.S. Food and Drug Administration, but after that any approved company could sell atorvastatin. At this point in a prescription drug's life, prices and revenues to the company that produced the drug typically plummet. Lipitor is no exception, as Pfizer's revenues from Lipitor went down 59 percent to $3.95 billion in 2012, its first full year of competition from generic drugs.
While patients and health care systems may directly benefit from the lower prices of generic drugs, there may be a downside. So many drugs are coming off patents in the next few years that some manufacturers have reduced their research and development budgets in anticipation of lower revenues. Without active research and development programs, drugs like Lipitor that improve the lives of millions of people may not be discovered as rapidly.1
Overview
promotion informing, persuading, and influencing a purchase decision.
This chapter focuses on the last two elements of the marketing mix, promotion and pricing. Promotion—informing, persuading, and influencing a purchase decision—is the first of these elements. The chapter takes a broad view of promotion as an integrated part of an organization's communication strategy. It examines the components of the promotional mix—advertising, sales promotion, personal selling, and public relations—and the importance of promotional planning.
price the exchange value of a good or service.
The final element of the marketing mix is price, the exchange value of a good or service. Since consumers have limited amounts of money and many ways to spend it, often price becomes the major factor in consumer buying decisions. This chapter addresses a variety of pricing strategies for goods and services.
integrated marketing communications (IMC) coordination of all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified, customer-focused promotional strategy.
Marketers choose from among many promotional options to communicate with potential customers. Each marketing message a buyer receives—whether through a television or radio commercial, a newspaper or magazine ad, a Web site, a direct-mail flyer, or a sales call—reflects the product, place, person, cause, or organization promoted in the content. Through integrated marketing communications (IMC), marketers coordinate all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified, customer-focused promotional strategy. This coordination is designed to avoid confusing the consumer and to focus positive attention on the promotional message.
Promotional objectives vary by organization. Some use promotion to expand their markets; others, to defend their current position. As FIGURE 13.1 illustrates, common objectives include providing information, differentiating a product, increasing sales, stabilizing sales, and accentuating a product's value.
positioning the act of establishing a product in the minds of customers by communicating meaningful distinctions about the attributes, price, quality, or use of a good or service.
pushing strategy personal selling to market an item to wholesalers and retailers in a company's distribution channels.
Before developing its promotional plan, a firm's marketers need to consider two general promotional strategies: a pushing strategy or a pulling strategy. A pushing strategy relies on personal selling to market an item to wholesalers and retailers in a company's distribution channels. So companies promote the product to members of the marketing channel, not to end users. Sales personnel explain to marketing intermediaries why they should carry particular merchandise, usually supported by offers of special discounts and promotional materials. All of these strategies are designed to motivate wholesalers and retailers to “push” the good or service to their own customers.
pulling strategy promoting a product by generating consumer demand for it, primarily through advertising and sales promotion appeals.
A pulling strategy attempts to promote a product by generating consumer demand for it, traditionally through advertising and sales promotions and more recently through Internet searches, social media, video-sharing sites, blogs, and other business directory/review services. From these sources, potential buyers develop favorable impressions of the product and then request that suppliers—retailers or local distributors—carry the product, thereby “pulling” it through the distribution channel. Given the success of the iRobot Roomba® robotic vacuum cleaner, many consumers wondered why they can't use similar technology to mow the grass. In response to this consumer demand (market pull), a number of leading lawn equipment manufacturers created automatic lawn mowers. Robotic mowers are projected to be among the most-demanded U.S. outdoor tools in the near future, according to Research and Markets, an international market research and data firm. A spokesman for Kyodo America Industries Co., the Atlanta-based manufacturer of LawnBott robotic mowers, stated, “In this next one- to three-year period, the market for robotic mowing in the United States is going to just explode.”3
promotional mix combination of personal and nonpersonal selling activities designed to meet the needs of a firm's target customers.
Once the objectives and strategy are set, marketers create a promotional mix that blends various facets of promotion into a cohesive plan. This mix consists of two broad components—personal and nonpersonal selling. Marketers combine elements of both personal and nonpersonal selling to effectively communicate their message to targeted customers.
Each component in the promotional mix has its own advantages and disadvantages, as described in TABLE 13.1
Quick Review
What is the objective of an integrated marketing communications program?
Name the five most common objectives of promotional strategy.
advertising paid nonpersonal communication, usually targeted at large numbers of potential buyers.
According to one survey, consumers receive from 3,000 to 20,000 marketing messages each day, many of them in the form of advertising.4 Advertising is the most visible form of nonpersonal promotion—and the most effective for many firms. Advertising is paid nonpersonal communication usually targeted at large numbers of potential buyers. Although Americans often regard advertising as a typically American function, it is a global activity. In a recent report, the spending on global advertising is expected to continue to grow and reach $518 billion as the global economy gets stronger. The report also indicated that spending for online advertising will overtake spending on print advertising in just a few years.5
Advertising expenditures vary among industries, companies, and media. The top five categories for global advertisers are consumer goods, entertainment, industry and services, health care, and automotive. The categories recently showing the greatest percent change were telecommunications and consumer goods. Because advertising expenditures are so great and because consumers around the world are bombarded with messages, advertisers need to be increasingly creative and efficient at attracting consumers' attention.6
product advertising messages designed to sell a particular good or service.
product placement form of promotion in which marketers pay placement fees to have their products showcased in various media, ranging from newspapers and magazines to television and movies.
The two basic types of ads are product and institutional advertisements. Product advertising consists of messages designed to sell a particular good or service. Advertisements for Nantucket Nectars juices, iPods, and Capital One credit cards are examples of product advertising. One relatively recent form of product advertising is the practice of product placement. A growing number of marketers pay placement fees to have their products showcased in various media, ranging from newspapers and magazines to television and movies. Coca-Cola gets prominent placement on American Idol, which features as many as 102 product placements in a single month.
institutional advertising involves messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities.
Institutional advertising involves messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities. Each year, the Juvenile Diabetes Research Foundation promotes its “Walk for the Cure” fund-raising event, and your college may place advertisements in local papers or news shows to promote its activities.
cause advertising form of institutional advertising that promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process.
A form of institutional advertising that is growing in importance, cause advertising, promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process about issues such as literacy, hunger and poverty, and alternative energy sources.
Both product and institutional advertising fall into one of three categories based on whether the ads are intended to inform, persuade, or remind.
Marketers must choose how to allocate their advertising budget among various media. All media offer advantages and disadvantages. Cost is an important consideration in media selection, but marketers must also choose the media best suited for communicating their message. As FIGURE 13.2 indicates, the three leading media outlets for advertising are television, the Internet, and newspapers.
NOTE: Percentages do not total to 100% due to rounding. Direct mail was not included in these data.
SOURCES: Data from, “U.S. Total Media Ad Spend Inches Up, Pushed by Digital,” eMarketer, August 22, 2013, http://www.emarketer.com.
Quick Review
What are the two main types of advertising? Into what three categories do they fall?
What is the leading advertising medium in the United States?
In what two major ways do firms benefit from sponsorships?
personal selling a direct person-to-person promotional presentation to a potential buyer.
Many companies consider personal selling—a person-to-person promotional presentation to a potential buyer—the key to marketing effectiveness. Unless a seller matches a firm's goods or services to the needs of a particular client or customer, none of the firm's other activities produces any benefits. Today, sales and sales-related jobs employ about 13.8 million U.S. workers.9 Businesses often spend five to ten times more on personal selling than on advertising. Given the significant cost of hiring, training, benefits, and salaries, businesses are very concerned with the effectiveness of their sales personnel.
How do marketers decide whether to make personal selling the primary component of their firm's marketing mix? In general, firms are likely to emphasize personal selling rather than advertising for sales promotion under four conditions:
Selling luxury items such as the Porsche 918 Spyder hybrid ($630,000) or a John Lennon–themed Steinway piano ($90,000) would require a personal touch. Then there's the $35,000 home theater device offered by Prima Cinema, which automatically sends Hollywood films to customers' home systems the same day they premiere. Installation, including instructions on how to use the system, would require personal selling.10
Personal selling can occur in several environments, each of which can involve business-to-business or business-to-consumer selling. Sales representatives who make sales calls on prospective customers at their businesses are involved in field selling. Companies that sell major industrial equipment typically rely heavily on field selling. Over-the-counter selling describes sales activities in retailing and some wholesale locations, where customers visit the seller's facility to purchase items. Telemarketing sales representatives make their presentations over the phone. A later section reviews telemarketing in more detail.
All sales activities involve assisting customers in some manner. Although a salesperson's work can vary significantly from one company or situation to another, it usually includes a mix of three basic tasks: order processing, creative selling, and missionary selling.
order processing form of selling, mostly at the wholesale and retail levels, that involves identifying customer needs, pointing them out to customers, and completing orders.
creative selling persuasive type of promotional presentation.
Most retail salespeople just process orders, but many consumers are looking for more in the form of customer service, which is where creative selling comes in. Personal shoppers at upscale Topshop help customers create entire looks from three floors of clothing. They also offer customers refreshments and the option to ring up purchases at a special cash register without waiting in line.
missionary selling indirect form of selling in which the representative promotes goodwill for a company or provides technical or operational assistance to the customer.
telemarketing personal selling conducted entirely by telephone, which provides a firm's marketers with a high return on their expenditures, an immediate response, and an opportunity for personalized two-way conversation.
Personal selling conducted by telephone, known as telemarketing, provides a firm with a high return on its marketing expenditures, an immediate response, and an opportunity for personalized, two-way conversation. Many firms use telemarketing because expense or other obstacles prevent salespeople from meeting many potential customers in person. Telemarketers can use databases to target prospects based on demographic data. Telemarketing takes two forms. A sales representative who calls you is practicing outbound telemarketing. And outbound telemarketers must abide by the Federal Trade Commission's 1996 Telemarketing Sales Rule. Congress enacted another law in 2003 that created the National Do Not Call registry, intended to help consumers block unwanted telemarketing calls. On the other hand, inbound telemarketing occurs when you call a toll-free phone number to get product information or place an order.
The sales process typically follows the seven-step sequence shown in FIGURE 13.3: prospecting and qualifying, the approach, presentation, the demonstration, handling objections, closing, and the follow-up. Remember the importance of flexibility, though; a good salesperson is not afraid to vary the sales process based on a customer's responses and needs. The process of selling to a potential customer who is unfamiliar with a company's products differs from the process of serving a long-time customer.
At the prospecting stage, salespeople identify potential customers. They may seek leads for prospective sales from such sources as business associates, existing customers, friends, and family. The qualifying process identifies potential customers who have the financial ability and authority to buy.
Companies use different tactics to identify and qualify prospects. Some companies rely on business development teams, passing responses from direct mail along to their sales reps. Others believe in personal visits. Many firms are now using social media, which costs little or nothing, to boost sales. Online newsletters, virtual trade shows, podcasts, Webinars, and blogs are good examples. Experts advise developing a clear strategy in order to be successful with social media.11
Successful salespeople make careful preparations, analyzing available data about a prospective customer's product lines and other pertinent information before making the initial contact. They realize the importance of a first impression in influencing a customer's future attitudes toward the seller and its products.
At the presentation stage, salespeople communicate promotional messages. They may describe the major features of their products, highlight the advantages, and cite examples of satisfied consumers. A demonstration helps reinforce the message that the salesperson has been communicating—a critical step in the sales process. Department store shoppers can get a free makeover at the cosmetics counter. Anyone looking to buy a car will take it for a test drive before deciding whether to purchase it.
Some salespeople fear potential customers' objections because they view the questions as criticism. But a good salesperson can use objections as an opportunity to answer questions and explain how the product will benefit the customer. Responding to a customer's objection that a product's price is too high, a salesperson might remind the individual that the product is exclusive and that a high price prevents the product from being widely available to everyone.
The critical point in the sales process—the time at which the salesperson actually asks the prospect to buy—is the closing. If the presentation effectively matches product benefits to customer needs, the closing should be a natural conclusion. If there are more bumps in the process, the salesperson can try some different techniques, such as offering alternative products, offering a special incentive for purchase, or restating the product benefits. Closing the sale—and beginning a relationship in which the customer builds loyalty to the brand or product—is the ideal outcome of this interaction. But even if the sale is not made at this time, the salesperson should regard the interaction as the beginning of a potential relationship anyway. The prospect might very well become a customer in the future.
A salesperson's post-sale actions may determine whether the customer will make another purchase. Follow-up is an important part of building a long-lasting relationship. After closing, the salesperson should process the order efficiently. By calling soon after a purchase, the salesperson provides reassurance about the customer's decision to buy and creates an opportunity to correct any problems.
Quick Review
Under what four conditions is a firm more likely to use personal selling rather than advertising or sales promotion?
Name the three basic tasks of personal selling.
What are the seven steps in the sales process?
sales promotion activities that support advertising and personal selling.
Traditionally viewed as a supplement to a firm's sales or advertising efforts, sales promotion has emerged as an integral part of the promotional mix. Sales promotion consists of activities that support advertising and personal selling.
Both retailers and manufacturers use sales promotions to offer consumers extra incentives to buy. Examples include samples, coupons, contests, displays, trade shows, and dealer incentives. Beyond the short-term advantage of increased sales, sales promotions can also help marketers build brand equity and enhance customer relationships.
The goal of a consumer-oriented sales promotion is to get new and existing customers to try or buy products. In addition, marketers want to encourage repeat purchases by rewarding current users, increase sales of complementary products, and boost impulse purchases. FIGURE 13.4 shows how marketers allocate their consumer-oriented spending among the categories of promotions.
SOURCE: Data from Kathleen M. Joyce, “Higher Gear,” Promo Magazine, http://chiefmarketer.com, accessed June 3, 2013.
Nearly six of every ten sales promotion dollars are spent on premiums—items given free or at a reduced price with the purchase of another product. Cosmetics companies such as Clinique often offer sample kits with purchases of their products. Customers redeem coupons for small price discounts when they purchase the promoted products. Such offers may persuade a customer to try a new or different product. Rebates offer cash back to consumers who mail in required proofs of purchase. Rebates help packaged-goods manufacturers increase purchase rates, promote multiple purchases, and reward product users. A sample is a gift of a product distributed by mail, door to door, in a demonstration, or inside packages of another product.
trade promotion sales promotion geared to marketing intermediaries rather than to final consumers.
Sales promotion techniques can also contribute to campaigns directed to retailers and wholesalers. Trade promotion is sales promotion geared to marketing intermediaries rather than to consumers. Marketers use trade promotion to encourage retailers to stock new products, continue carrying existing ones, and promote both new and existing products effectively to consumers. Successful trade promotions offer financial incentives. They require careful timing, attention to costs, and easy implementation for intermediaries. These promotions should bring quick results and improve retail sales. Major trade promotions include point-of-purchase advertising and trade shows.
point-of-purchase (POP) advertising displays or demonstrations that promote products when and where consumers buy them, such as in retail stores.
Point-of-purchase (POP) advertising consists of displays or demonstrations that promote products when and where consumers buy them, such as in retail stores. Marketing research has shown that consumers are more likely to purchase certain products when such displays are present. Sunscreen, painting supplies, and snacks are typically displayed this way.
Manufacturers and other sellers often exhibit at trade shows to promote goods or services to members of their distribution channels. These shows are often organized by industry trade associations and attract large numbers of exhibitors and attendees each year.
Quick Review
Why do retailers and manufacturers use sales promotion tactics?
Differentiate between consumer-oriented and trade-oriented promotions.
A final element of the promotional mix, public relations (PR)—including publicity—supports advertising, personal selling, and sales promotion, usually by pursuing broader objectives. Through PR, companies attempt to improve their prestige and image with the public by distributing specific messages or ideas to target audiences. Cause-related promotional activities are often supported by PR and publicity campaigns. In addition, PR helps a firm establish awareness of goods and services and then builds a positive image of them.
public relations organization's communications and relationships with its various public audiences.
Public relations refers to an organization's communications and relationships with its various public audiences, such as customers, vendors, news media, employees, stockholders, the government, and the general public. Many of these communication efforts serve marketing purposes. Public relations is an efficient, indirect communications channel for promoting products. It can publicize items and help create and maintain a positive image of the company.
The public relations department links a firm with the media. It provides the media with news releases and video and audio clips, as well as holding news conferences to announce new products, the formation of strategic alliances, management changes, financial results, and similar developments. Publications issued by the department include newsletters, brochures, and reports.
publicity nonpersonal stimulation of demand for a good, service, place, idea, event, person, or organization by unpaid placement of information in print or broadcast media.
The type of public relations that is tied most closely to promoting a company's products is publicity—nonpersonal stimulation of demand for a good, service, place, idea, event, person, or organization by unpaid placement of information in print or broadcast media. Press releases generate publicity, as does news or TV coverage. Publicity can even help find investors to grow a business. Shawn Davis appeared on the reality TV show Shark Tank recently hoping to have the show's entrepreneurs invest in his company. The investors didn't bite, but when the episode aired Davis received calls from other interested parties. He negotiated a deal and is moving forward with his plans to grow his food business.12
Not-for-profit organizations benefit from publicity when they receive coverage of events such as the Susan G. Komen Race for the Cure, which raises money for breast cancer research, community health outreach, advocacy, and programs. When a for-profit firm teams up with a not-for-profit firm in a fund-raising effort, the move usually generates good publicity for both organizations.
Quick Review
How does public relations serve a marketing purpose?
How does a firm use publicity to enhance their image?
Price, the last element of the marketing mix, can best be thought of as the sum of all the other parts. If a firm has a unique product, creates a world class distribution strategy, or has an inventive promotional campaign, they become a price setter such as Apple. On the other hand, if a firm sells an undifferentiated product, with no distribution or promotional advantages, they are most likely a price taker. While firms have the freedom to set their prices at any level they choose, their success will be determined by how the firm's competitors and customers react to their prices. For example, if a firm sets prices too high relative to the perceived value of the product, customers will not purchase the product and the firm will generate little revenue. Alternately, if they set their prices too low, the firm may sell all their products but not make needed profits.
In making pricing decisions, businesspeople seek to accomplish certain objectives. Pricing objectives vary from firm to firm, and many companies pursue multiple pricing objectives at the same time. Some try to improve profits by setting higher prices, while others set lower prices to attract new business. Whatever a company's objectives, determination of price generally falls into two areas, those based on external market issues and those based on a firm's production costs. The following sections detail both approaches, identifying the pricing objective and the strategies that support the objective.
Economic theory assumes that a market price will be set at the point at which the amount of a product demanded and the amount supplied are equal. Recall the supply and demand discussion from Chapter 3. In many lines of business, this holds true, as firms in any particular industry set their prices to match those of established leaders. In these markets, price becomes a nonissue and consumers will make their purchase decisions based on other attributes of the product or firm. Gas stations are a good example of this type of pricing. However, once a firm knows the equilibrium market price, the competitive price, they can choose to price their products at that price or move higher or lower to achieve specific business objectives. The following section describes pricing objectives that cause a firm to deviate from the equilibrium price.
volume objective pricing strategy that bases a pricing decision on the attainment of market share.
Marketers attempting to build market share may use price to achieve their goal. The volume objective makes pricing decisions based on market share, the percentage of a market controlled by a certain company or product. One firm may seek to achieve a 25 percent market share in a certain product category, and another may want to maintain or expand its market share for particular products.
Family Dollar Stores relies on volume sales to make a profit, and these types of retailers typically price products lower than their competition to build sales. The nationwide chain of stores, which sells everything from ice cube trays to holiday decorations—for a dollar each—must find ways to attract as much traffic and sell as much product as possible on a given day.
prestige pricing strategies that establish relatively high prices to develop and maintain an image of quality and exclusiveness.
On the other end of the spectrum, prestige pricing establishes a relatively high price to develop and maintain an image of quality and exclusiveness. Marketers set such objectives because they recognize the role of price in communicating an overall image for the firm and its products. People expect to pay more for a Mercedes, Christian Louboutin shoes, or a vacation on St. Barts in the Caribbean. Much of the value that consumers place on these types of products comes from the fact that they are expensive. A Rolex would not be a Rolex without a hefty price tag.
everyday low pricing (EDLP) strategy devoted to maintaining continuous low prices rather than relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
Everyday low pricing (EDLP) is a strategy devoted to maintaining continuous low prices rather than relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales. This strategy has been used successfully by retailers such as Walmart and Lowes to consistently offer low prices to consumers; manufacturers also use EDLP to set stable prices for retailers and create the impression among consumers that they do not need to shop the “sales” to find a good deal at these stores.
skimming pricing strategy that sets an intentionally high price relative to the prices of competing products.
A shorter-term strategy, skimming pricing, sets an intentionally high price relative to the prices of competing products. The term comes from the expression “skimming the cream.” This pricing strategy often works for the introduction of a distinctive good or service with little or no competition, although it can be used at other stages of the product life cycle as well. A skimming strategy can help marketers set a price that distinguishes a firm's high-end product from those of competitors. It can also help a firm recover its product development costs before competitors enter the field. This is often the case with prescription drugs.
penetration pricing strategy that sets a low price to enter competitive markets.
Another shorter-term approach and a variant of volume pricing is penetration pricing, a strategy that sets a low price in an effort to enter competitive markets. When using penetration pricing, businesses may price new products noticeably lower than competing offerings of competing brands. These firms may even price their products below their cost to gain market share. Once the new product achieves some market recognition through consumer trial purchases stimulated by its low price, marketers may increase the price to the level of competing products. However, stiff competition might prevent the price increase.
cost-based pricing strategy in which an organization calculates total costs per unit and then adds markups to cover overhead costs and generate profits.
Economic theory might lead to the best pricing decisions, but businesses may not have all the information they need to make those decisions. Additionally, many well-crafted pricing strategies end up costing the firm significant profits. So, firms almost always review their market-based strategies against their product costs using cost-based pricing formulas. Approaching pricing this way allows a firm to determine how much investment they will have to make to complete their strategy.
breakeven analysis pricing technique used to determine the minimum sales volume a product must generate at a certain price level to cover all costs.
Businesses often conduct a breakeven analysis to determine the minimum sales volume a product must generate at a certain price level to cover all costs. This method involves a consideration of various costs and total revenues. Total cost is the sum of total variable costs and total fixed costs. Variable costs change with the level of production, as labor and raw materials do, while fixed costs such as insurance premiums and utility rates charged by water, natural gas, and electric power suppliers remain stable regardless of the production level. Total revenue is determined by multiplying price by the number of units sold.
The level of sales that will generate enough revenue to cover all of the company's fixed and variable costs is called the breakeven point. It is the point at which total revenue just equals total costs. Sales beyond the breakeven point will generate profits; sales volume below the breakeven point will result in losses. The following formulas give the breakeven point in units and dollars:
A product selling for $20 with a variable cost of $14 per unit produces a $6 per-unit contribution to fixed costs. If the firm has total fixed costs of $42,000, it must sell 7,000 units to break even on the product, as shown in FIGURE 13.5. The calculation of the breakeven point in units and dollars is as follows:
Marketers use breakeven analysis to determine the profits or losses that would result from several different proposed prices. Because different prices produce different breakeven points, marketers could compare their calculations of required sales to break even with sales estimates from marketing research studies. This comparison can identify the best price—one that would attract enough customers to exceed the breakeven point and earn profits for the firm.
Quick Review
Why do marketers use breakeven analysis in pricing their good or service?
What is cost-based pricing?
The previous few chapters have explained the main principles underlying marketing management and described how each fits a firm's overall business strategy. The next set of chapters will help you understand how companies manage the technology and information that are available to businesses to create value for their customers and enhance their competitiveness in the marketplace. You'll also learn how firms manage their financial resources.
Weekly Updates spark classroom debate around current events that apply to your business course topics. http://www.wileybusinessupdates.com
NOTES
1. Renee Williams, “Pfizer's Earnings Receive Boost from Joint Venture with China (NYSE:PFE),” University Chronicle, May 22, 2013, http://www.ssuchronicle.com; Associated Press, “Joint Venture with China Lifts Pfizer's Earnings,” New York Times, April 30, 2013, http://www.nytimes.com; Larry Huston, “Generic Atorvastatin Hits the Market,” Forbes, November 30, 2011, http://www.forbes.com; Matthew Herper, “Why There Will Never Be Another Drug like Lipitor,” Forbes, November 30, 2011, http://www.forbes.com.
2. Jackie Judd, “FDA Calls Prescription Drug Ads Misleading,” ABC News, January 3, 2013, http://abcnews.go.com.
3. Dave Larson, “Robotic Lawn Mowers See Growing Demand,” Dayton Daily News, March 16, 2013, http://www.daytondailynews.com.
4. David Lamoureux, “How Many Marketing Messages Do We See in a Day?” Fluid Drive Media, February 23, 2012, http://www.fluiddrivemedia.com.
5. Dasha Afanasieva, “Economic Growth to Boost Global Advertising: Report,” Reuters, April 29, 2013, http://www.reuters.com.
6. “Ad Spend by Sector: Consumer Goods and Telecom Take the Cake in 2012,” Nielsen, April 25, 2013, http://www.nielsen.com.
7. Kantar Media, “2012 January-December Outdoor Advertising Expenditures,” Outdoor Advertising Association of America, February 2013, http://www.oaaa.org.
8. Company Web site, http://www.hendrickmotorsports.com, accessed May 9, 2013; “Top NASCAR Team Helps Marketing for Lowes, Pepsi, DuPont and GoDaddy,” Quarterly Retail Review, March 27, 2011, http://www.quarterlyretailreview.com.
9. U.S. Department of Labor, “Occupational Employment and Wages, May 2012,” Occupational Employment Statistics, Bureau of Labor Statistics, June 12, 2013, http://www.bls.gov.
10. John Sciacca, “Prima Cinema Brings in-the-Theater Movies Home for $500 Each … and It's Worth It,” Digital Trends, April 1, 2013, http://www.digitaltrends.com.
11. Eydie Stumpf, “Five Tips for Retailers to Drive Sales Using Social Media,” The Press Enterprise, April 26, 2013, http://www.pe.com.
12. Carol Tice, “How One Entrepreneur Used the Law of Publicity to Get Investors,” Entrepreneur, accessed September 20, 2013, http://www.entrepreneur.com.
CHAPTER THIRTEEN: REVIEW
Summary of Learning Objectives
Discuss integrated marketing communications (IMC).
In practicing IMC, a firm coordinates promotional activities to produce a unified, customer-focused message. IMC identifies consumer needs and shows how a company's products meet them. Marketers select the promotional media that best target and reach customers. Teamwork and careful promotional planning to coordinate IMC strategy components are important elements of these programs.
A company's promotional mix integrates two components: personal selling and nonpersonal selling, which includes advertising, sales promotion, and public relations. By selecting the appropriate combination of promotional mix elements, marketers attempt to achieve the firm's five major promotional objectives: provide information, differentiate a product, increase demand, stabilize sales, and accentuate the product's value.
A pushing strategy relies on personal selling to market a product to wholesalers and retailers in a company's distribution channels. A pulling strategy promotes the product by generating consumer demand for it, through advertising and sales promotion.
promotion informing, persuading, and influencing a purchase decision.
price exchange value of a good or service.
integrated marketing communications (IMC) coordination of all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified, customer-focused promotional strategy.
positioning the act of establishing a product in the minds of customers by communicating meaningful distinctions about the attributes, price, quality, or use of a product or service.
pushing strategy personal selling to market an item to wholesalers and retailers in a company's distribution channels.
pulling strategy promoting a product by generating consumer demand for it, primarily through advertising and sales promotion appeals.
promotional mix combination of personal and nonpersonal selling activities designed to meet the needs of a firm's target customers.
Describe the different types of advertising.
Advertising, the most visible form of nonpersonal promotion, is designed to inform, persuade, or remind. Product advertising promotes a good or service, while institutional advertising promotes a concept, idea, organization, or philosophy. Television, newspapers, and magazines are the largest advertising media categories. Others include direct mail, radio, and outdoor advertising. Interactive advertising directly involves the consumer, who controls the flow of information.
advertising paid nonpersonal communication, usually targeted at large numbers of potential buyers.
product advertising messages designed to sell a particular good or service.
product placement form of promotion in which marketers pay placement fees to have their products showcased in various media, ranging from newspapers and magazines to television and movies.
institutional advertising involves messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities.
cause advertising form of institutional advertising that promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process.
Outline the tasks in personal selling.
The three main tasks in personal selling are order processing, creative selling, and missionary selling.
personal selling a direct person-to-person promotional presentation to a potential buyer.
order processing form of selling, mostly at the wholesale and retail levels, that involves identifying customer needs, pointing them out to customers, and completing orders.
creative selling persuasive type of promotional presentation.
missionary selling indirect form of selling in which the representative promotes goodwill for a company or provides technical or operational assistance to the customer.
telemarketing personal selling conducted entirely by telephone, which provides a firm's marketers with a high return on their expenditures, an immediate response, and an opportunity for personalized two-way conversation.
Name and describe sales promotion activities.
Sales promotion accounts for greater expenditures than advertising. Consumer-oriented sales promotions such as coupons, games, rebates, samples, premiums, contests, sweepstakes, and promotional products offer an extra incentive to buy a product. Point-of-purchase advertising displays and trade shows are sales promotions directed to the trade markets. Personal selling involves face-to-face interactions between seller and buyer. The primary sales tasks are order processing, creative selling, and missionary selling. Public relations is nonpaid promotion that seeks to enhance a companys public image.
sales promotion activities that support advertising and personal selling.
trade promotion sales promotion geared to marketing intermediaries rather than to final consumers.
point-of-purchase (POP) advertising displays or demonstrations that promote products when and where consumers buy them, such as in retail stores.
Discuss publicity as a promotional tool.
Public relations—including publicity—is a final element of the promotional mix. It supports advertising, personal selling, and sales promotion usually by pursuing broader objectives.
public relations organization's communications and relationships with its various public audiences.
publicity nonpersonal stimulation of demand for a good, service, place, idea, event, person, or organization by unpaid placement of information in print or broadcast media.
Discuss pricing objectives and strategies.
Pricing objectives can be classified as profitability, volume, meeting competition, and prestige. Profitability objectives are the most common. Volume objectives base pricing decisions on market share. Meeting competitors' prices makes price a nonissue in competition. Prestige pricing establishes a high price to develop and maintain an image of quality or exclusiveness.
Although economic theory determines prices by the law of demand and supply, most firms use cost-based pricing, which adds a markup after costs. By conducting a breakeven analysis, marketers can determine the minimum sales volume a product must generate at a certain price to cover costs.
The four alternative pricing strategies are skimming, penetration, everyday low pricing and discounting, and competitive pricing.
volume objective pricing strategy that bases a pricing decision on the attainment of market share.
prestige pricing strategy that establishes relatively high prices to develop and maintain an image of quality and exclusiveness.
everyday low pricing (EDLP) strategy devoted to maintaining continuous low prices rather than relying on short-term price-cutting tactics such as cents-off coupons, rebates, and special sales.
skimming pricing strategy that sets an intentionally high price relative to the prices of competing products.
penetration pricing strategy that sets a low price as a way to enter competitive markets.
cost-based pricing strategy in which an organization calculates total costs per unit and then adds markups to cover overhead costs and generate profits.
breakeven analysis pricing technique used to determine the minimum sales volume a product must generate at a certain price level to cover all costs.
Quick Review
LO1
What is the objective of an integrated marketing communications program?
Name the five most common objectives of promotional strategy.
LO2
What are the two main types of advertising? Into what three categories do they fall?
What is the leading advertising medium in the United States?
In what two major ways do firms benefit from sponsorships?
LO3
Under what four conditions is a firm more likely to use personal selling rather than advertising or sales promotion?
Name the three basic tasks of personal selling.
What are the seven steps in the sales process?
LO4
Why do retailers and manufacturers use sales promotion tactics?
Differentiate between consumer-oriented and trade-oriented promotions.
LO5
How does public relations serve a marketing purpose?
How does a firm use publicity to enhance their image?
LO6
Why do marketers use breakeven analysis in pricing their good or service?
What is cost-based pricing?
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