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Review of MM1
Coverage in MM-1• Marketing Plan• Marketing Environment • Buyer Behavior
– Consumer Buying
– Business Buying
• Rural Marketing • Product
– New Product Development
– Product Strategy
• Branding – Brand Positioning and Equity
• Pricing • Services Marketing
Marketing Evolution
• Started as branch of applied economics– Study of Distribution Channels
• Became a management discipline – Engineering increase in sales
• Applied behavioral science– Concerned with understanding of buyer and seller
systems involved in marketing of goods and services
– Social Focus• Market efficiency, value, quality, social impact
Core Concept of Marketing
• Transaction
– Exchange of values between two parties
– Things of Value
• Not limited to goods, services and money
• Include other resources
– Time, energy, feeling
– Examples of such transactions
» Watching a cricket match: exchanging time for entertainment
Core Concept of Marketing
• Producing desired responses in free individuals by judicious creation and offering of values
• Concept of Value is central to marketing – Marketer is trying to get value from market by
offering value to it (exchange)» Value is completely subjective
– Marketer must understand market in order to be effective in creating value
What is Marketing?
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders
» American Marketing Association
• CCDVTP – Philip Kotler
What is Marketing?
What is value?
• Sum of perceived tangible and intangible benefits and costs to customers
• Customer Value Triad• Quality, Service and Price (qsp) • Value is directly proportional to Service and Quality• Inversely proportional to Price
How Marketers Create Value?
• Marketer creates value in four ways– Design the offering more attractively
• Configuration
– Put attractive terms on the offering• Valuation
– Add symbolic significance to the offering• Symbolization
– Make it easier for the market to obtain offering• Facilitation
• Offering– Value Proposition: Product, Services, Experiences and Information
Concept of Marketing Mix
• Marketing executive a ‘Mixer of Ingredients’– List of marketing mix of manufacturers
– Product Planning– Pricing– Branding – Channels of distribution– Personal selling– Advertising– Promotions – Packaging– Servicing– Physical handling– Fact finding and analysis
Concept of Marketing Mix - 4 P’s of Marketing
• Marketing is specifically concerned with how goods (or services) and transactions are
– created » Product
– valued » Price
– facilitated » Place
– stimulated » promotion
Seven Core Processes in Marketing• Sensing Value
– Bringing customer insight into the organization – Understanding opportunities and threats in the environment
• Defining Value – Converting insights into value propositions that is compelling for customers
• Realizing Value – Conversion of value proposition to an offering that is relevant and compelling to
customers• Delivering Value
– Taking the offering to the marketplace thru distribution channels and partnerships• Sharing Value
– Figuring out appropriate pricing mechanisms and revenue streams and being able to recapture some the value you have created
• Communicating Value – Articulating what your value proposition is, positioning, building brands (IMC)
• Sustaining Value – Continuous improvement of customer experience – Relationship marketing
Distribution Channels
Introduction
• How do you make your product available to consumer? – Moving– Storing– Merchandising
• Does it matter where you are sold?
• Is it an important decision?
Introduction
• Distribution cost as proportion of overall cost of the product to customer– A significant percentage of the price paid for the product
by the customer is cost of getting that product to customer– Estimating exact cost of distribution is difficult at best– Route(s) to Market’ is critical and difficult !!
Introduction
• Most producers do not sell their goods directly to the final users– between them stands a set of intermediaries performing a
variety of functions.
• These intermediaries constitute a marketing channel – trade channel or distribution channel
• Objective of the Marketing Channel– Make it easier and easier for the customer to buy your product– Not only serve the market but also create market
Distribution – Concepts
• Distribution – The act of spreading or apportioning
• Channel – Any distinct part of distribution system through which
a supplier reaches a customer
• Distribution Channel– A mechanism through which products are directed to
customer either through intermediaries or direct
Marketing Channel - Definition
• Set of interdependent organizations involved in the process of making a product (or service) available for use or consumption
• An organized network (system) of agencies and institutions which, in combination, perform all the functions required to link producers with end customers to accomplish the marketing task
Marketing Channel - Definition
A set of institutions necessary to transfer the title to goods and to move goods from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process
» American Marketing Association
Key Points in the Definition
• Organized Network
• System’s view
• Interdependent Agencies
• Makes products/services available to consumer
• Links producers to end users and vice-a-versa
• Transfer of title of goods
• Movement of goods
Marketing Channel – Economic Utility Perspective
• Channel is an orchestrated network that produces value for consumer by creating economic utilities – Form, possession, time and place
Form Utility
Bulk Breaking
Lot Sizing
Place Utility
Place of Convenience
Time Utility
Convenient Time– When customer wants to
buy
Possession Utility
• Transfer of Ownership to Consumer
– Permanent • As in standard goods
– Temporary• Car Rental
Dimensions, Determinants and Bridging Activities
Processing, sorting, assorting and screening
Standardization and Classification
Quality 4
Collection and Distribution No. of buyers and sellers, volume of flows and transactions
Quantity 3
StoringProduction and TransportTime 2
TransportGeographical Distance Place 1
Key Bridging Activities DeterminantsDimensions
Different Views on Marketing Channels
– Supply chain view • forward to markets
• Physical linear flows
– Demand chain view • Backwards from customer
• Starts with the customer as focal point
• Providing solutions and not just goods
– Value Network• A system of partnerships and alliances that a firm creates to
source, augment and deliver its offers.
Route to market affects…
• Product Differentiation
– Dell vs. Others in personal computer industry
Route to market affects…
• Access
– Coca Cola
– Pepsi
Route to market affects …
• Brand Image
– Maruti
• Service Network
– Eureka Forbes• Maintenance services
Route to market affects …
• Pricing of products– based on type of channel
Online is usually cheaper than boutiques
Type of Channel Members
• Merchants– Take title to – Resell merchandise
– Examples– Retailers – Wholesalers
Type of Channel Members
• Agents – Do not take title to goods– Search customers– Negotiate
– Examples– Property Brokers– Sales Agents
Type of Channel Members
• Facilitators– Neither take title to nor negotiate – Support overall distribution process
– Examples– Banks– shared warehouses– transport companies
Why Channels?
• Why would a producer delegate some of the selling job to intermediaries?
• Delegation means relinquishing some control over how and to whom the products are sold
• What do Producers gain by using intermediaries?
• How do intermediaries add value to a product?
• The question is not whether various channel functions needs to be performed but rather, who is to perform them?
Why producers appoint intermediaries?
• Many producers lack the financial resources to carry out direct marketing
• Producers who do establish their own channels can often earn a greater return by increasing investment in their main business
Why producers appoint intermediaries?
• In some cases, direct sales is simply is not feasible – Examples: Soap, pens, matchbox etc.
• Intermediaries normally achieve superior efficiency in making goods widely available and accessible to target markets
• Through their contacts, experiences, specialization, and scale of operations
Functions
• A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need and want them – Members of the marketing channel perform a number
of key functions • forward flow of activity • backward flow of activity• both ways
Functions
• Typical functions of a traditional channel member– Gather information– Develop and disseminate persuasive communications– Reach agreements on price and terms– Acquire funds to finance inventories– Assume risks– Provide for storage– Provide for buyers’ payment of their bills– Oversee actual transfer of ownership
Functions
• All channel functions have three things in common
– They use up scarce resources
– They can often be performed better though specialization
– They can be shifted among channel members– Cannot be eliminated
Functions
• A manufacturer selling a physical product might require Four channels
1. A sales channel
2. A delivery channel
3. A service channel
4. Reverse Channel
Marketing Channel Flows Reverse Channel Flows
• Channels normally describe a forward movement of products from source to user
• Reverse-flow channels are important in the following cases
– To reuse products or containers– To refurbish products for resale– To recycle products– To dispose of products and packaging– To recall
Major Participants in the Marketing Channel
Producers&
Manufacturers
WholesaleIntermediaries
RetailIntermediaries
Intermediaries
Consumers Industries
Final Users
Commercial Channel Target Markets
Channel Levels
• The producer and the final consumer are part of every channel
• A zero-level channel – also called a direct-marketing channel– a manufacturer selling directly to the final consumer
• A one-level channel – contains one selling intermediary
• A two-level channel– contains two intermediaries
Push strategy involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end user
Pull Strategy – Channel Context
Pull strategy involves the manufacturer using advertising and promotion to induce consumers to ask intermediaries for the product, thus inducing the intermediaries to order it
Push vs. Pull Strategy Decision
• Push strategy is appropriate where – there is low brand loyalty in a
category– brand choice is made in the
stores – the product is an impulse item– product benefits are well
understood
• Pull strategy is appropriate when – there is high brand loyalty
and high involvement in the category
– people perceive differences between brands
– people choose the brand before they go to the store
Push vs. Pull Strategy Decision
A combination of Push and Pull is the best strategy
Channel Development
• A new firm typically starts as a local operation selling in a limited market, using existing intermediaries
• If the firm is successful, it might branch into new markets and use different channels in different markets
– International markets pose distinct challenges– Customers’ shopping habits can vary by countries– The channel system evolves as a function of local
opportunities and conditions
Hybrid Channels
• Simultaneous use of two or more channels
• Companies that manage hybrid channels must make sure these channels work well together and match each target customer’s preferred ways of doing business
Hybrid Channels
• Customers expectations from channel integration
– The ability to order a product online and pick it up at a convenient retail location
– The ability to return an online ordered product to a nearby store of the retailer
– The right to receive discounts based on total online and off-line purchases.
Consumer Behavior & Marketing Channels
• Different consumers have different needs during the purchase process
• The same consumer may choose to use different channels for different functions in making a purchase
Consumer Behavior & Marketing Channels
• Buyer Categories
– Habitual shopper• Purchase from the same place in same manner over time
– High value deal seekers• Know their needs • Channel surf a great deal before buying at the lowest possible price
– Variety-loving shoppers• Gather information in many channel, • take advantage of high touch services • buy in favorite channel• regardless of price
– High-involvement shoppers• Gather information in all channels • make their purchase in low cost channel • take advantage of high touch channel customer support
Consumer Behavior & Marketing Channels
• Type of shoppers and their store preferences– Service/quality customers
• Variety and performance of products• Service provided by the store
– Price/value customers• Concerned about spending money wisely
– Affinity customers• Stores that suited people like themselves or the members of groups they
aspire to join
Distribution Channels in India
Challenges
• Country of Retailers – 12 Million+ retailers
• What are the challenges ? – Infrastructure
– Logistics cost is more than 13% of GDP – Cold chains not available– Public Distribution system is inefficient
– Remote rural areas – Unorganized and Fragmented system
Indian Rural Markets
• The Myth– Huge geographical dispersion, uneconomical to
• The Reality • Through the 3000-odd town and 5000 wholesale assembly markets (with
a lot of overlap) and about 25,000+ 'haats/shandies', penetration into rural areas facilitated through the wholesaler, semi-wholesaler retailer, 'arhatia' and itinerant merchant network is quite efficient and effective
BangloreMysore
Typical rural market Rural market buying power
Taxonomy of Indian Consumer & Channel
Channel Decisions
Objective
• To understand
– Channel Design
– Channel Management
• How? – Theory & Examples
• Dabur Story
Channel Design
Analyze customer needs
Evaluate major channel alternatives
Identify major channel alternatives
Establish channel objectives
Decision Areas in Marketing Channels
Place Objectives
Direct
Type of Channel Desired Customer
Service Level
Indirect Lot Size
Delivery Time
Spatial Convenience
Product Variety
Service Backup
Degree of market exposure desired
(Intensive, Selective, Exclusive)
Type of Middlemen or
Facilitators Needed
How to Manage
Channel Relationships
Channel Design & Modification
Channel Modifications
• Distribution channels become outdated
– a gap arises between the existing distribution system and the ideal system that would satisfy target customers’ needs and desires
– Most marketing channels will not remain effective over the whole product life cycle
Channel Modifications
• In competitive markets with low entry barriers, the optimal channel structure inevitably changes over time
• Change can be in form of: – Adding or dropping individual channel members
– Adding or dropping particular market channels
– Developing a totally new way to sell goods
Channel Modification
• It becomes necessary when– the distribution channel is not working as planned
– consumer-buying patterns change
– new competition arises
– Innovative/new distribution channels emerge
– the product moves into the later stages in the product life cycle
Kalyan Pharma Ltd.
Objectives for Distribution System
• Improving Customer Service
• Bringing down cost of distribution
• Special Concerns – Order processing time – Stock levels at different points in distribution system
• 1972: Sole selling agency• Exclusive sole selling agent for distribution
– Distributed all company products at commission of 15%• Agent developed 30 branches located in important cities
• 1979: Regional Marketing Companies• Strengthening presence in secondary and tertiary markets in four zones• Distribution taken over by KPL
– Distribution from the company branch to the retailers • Promoting products to doctors and retailers given to regional marketing
company • Company’s own branches (42 in number) served as stock points as well
as offices for regional marketing companies
Changes in Distribution System at KPL
• 1979-87: Introduction of wholesalers– DPCO (drug price control order) led to reduction in retailer
margins• Retailers became reluctant to deal directly with company
– Company started giving credit and annual sales target based rebates
– Wholesalers were appointed – around 2000• Expected to provide credit• Reduced company’s efforts on invoicing and order processing
– Wholesalers neither equipped nor willing to promote products led to higher book debts and high costs of distribution
– KPL did away with regional marketing companies and took the marketing/sales staff under its direct control
Changes in Distribution System at KPL
• 1987-1991– In 1987, brought down number of branches from 42 to
21• Bringing down cost of distribution
– KRDs (Stock Points) in each state• Stocks to be dispatched from KRD to branches • Most KRD were in same location as branch with enhanced
warehousing infrastructure • Disadvantages of KRD
– Higher cost of distribution– Poor customer service– 60 of manager’s time at branch was spent on distribution and
collection » Sale promotion was neglected
KPL Distribution - Pre 1991
Factory KRDDistributing Branches
Wholesalers
Retailers / Doctors
Goods Flow
Information Flow
Changes in Distribution System at KPL
• 1991– Cutting down number of branches resulted in poorer
service and higher cost of distribution– A new link (Distributors) were added to system
• Service to customers (wholesalers)• Reducing accounts receivables • Improving sales and profitability
– Physical flow• Factory KRD Distributors Wholesalers • Branches cut off from physical distribution • Better service to wholesalers
Changes in Distribution System at KPL
• 1991– April 1991, KPL had 40 distributors in total – New distribution system comprising of distributors
resulted in • Reduced inventory levels at different links• Book debts went down from 90 days to 7 days
– Increased profitability
• Distribution manpower at KPL reduced from 600 to 200• Customer service improved
– Fast order processing
KPL Distribution in 1991
FG Stores at Factory KRD Branch
DistributorsStockist / Wholesaler
Goods Flow
Order Information Flow
Retailer
Institutional Buyers
Theoretical Connect
• How the distribution channels evolve over time
– Modifications to a channel depending on
• need of the market
• objectives of the company
• Physical distribution
– Inventory, Order processing, Warehousing and IT
Sales and Distribution
Illustration of Pharmaceutical Industry
Introduction
• Pharmaceutical marketing
– a specialized field
– Medical Representatives (MR) assigned to defined territories form the backbone of entire marketing and sales effort
– Role of MR• meet doctors, chemists and
stockiest as per company norms
• try to influence prescription pattern of doctors in favor of their brands
Role of Distributors and/or Wholesalers
• Direct to Pharmacy – Number of interactions?
• Via Distributor – Number of interactions and
transactions routine?
Producers or Intermediaries May Be Channel Captains Push vs. Pull System• Acute Therapy Area • Chronic Therapy Area
Current Distribution System Current Distribution System
• Prices and Margin at different levels of distribution – CFA– Stockists or Distributors– Retailers
Channel Decisions
Continued…
Decision Areas in Marketing Channels
Place Objectives
Direct
Type of Channel Desired Customer
Service Level
Indirect Lot Size
Delivery Time
Spatial Convenience
Product Variety
Service Backup
Degree of market exposure desired
(Intensive, Selective, Exclusive)
Type of Middlemen or
Facilitators Needed
How to Manage
Channel Relationships
Channel Design
Analyze customer needs
Evaluate major channel alternatives
Identify major channel alternatives
Establish channel objectives
Channel Design & Modification
Channel Design
Channel Service Outputs – Understanding and Segmenting the market
Lot size
Waiting/delivery time
Spatial convenience
Product variety
Service backup
Channel Design
• Establishing Objectives and Constraints
– Channel institutions should arrange their functional tasks to minimize total channel costs and still provide desired levels of service outputs
– Planners can identify several market segments that want different service levels
Channel Design
• Establishing Objectives and Constraints
– Channel objectives vary with product/market characteristics
– Channel design must take into account the strengths and weaknesses of different types of intermediaries
– Legal regulations and restrictions also affect channel design
Identifying Major Channel Alternatives
– Each channel has unique strengths as well as weaknesses
– Most companies use a mix of channels
– Each channel (hopefully) reaches a different segment of buyers and delivers the right products to each at the least cost
Identifying Major Channel Alternatives
• A channel alternative is described by three elements:
• The types of available business intermediaries
• The number of intermediaries needed.
• The terms and responsibilities of each channel member
Types of intermediaries
Number of intermediaries
Terms and responsibilities
Identifying Major Channel Alternatives
• Types of Intermediaries
– A firm needs to identify the types of intermediaries available to carry on its channel work
– A Real Estate Company• Its own branch offices • Property brokers
Identifying Major Channel Alternatives
• Sometimes a company chooses an unconventional channel because of the difficulty, cost, or ineffectiveness of working with the dominant channel
• The advantage is that the company will encounter less competition during the initial move into this channel
– Eureka Forbes took a different route to market » Why?
– Amway/Tupperware went into network marketing» What is the benefit of MLM?
Identifying Major Channel Alternatives
• Number of Intermediaries
Exclusive
Selective
Intensive
Identifying Major Channel Alternatives
• Terms and Responsibilities of Channel Members– determine the rights and responsibilities of
participating channel members • The main elements in the “trade-relations mix”
are– Price policy– Conditions of sale– Distributors’ territorial rights– Mutual services and responsibilities
Evaluating the Major Alternatives
• Economic Criteria– Different channels produce a different level of sales,
service and costs
– Align customers and channels to maximize demand at the lowest overall cost
– Replace high-cost channels with low-cost channels as long as the value added per sale is sufficient
Value-Adds vs. Costs Evaluating the Major Alternatives
• Control and Adaptive Criteria• Commitment
– leads to a decrease in the producer’s ability to respond to a changing marketplace
• In volatile markets– the producer needs channel structures and policies that provide high
adaptability
• Asset specificity, relational investments and dilemma of flexibility vs. relationship
“You must control the end-outlets in order to increase your sales. Controlling end-outlets is costly, but not controlling them is even more costly. If you lose a prospective buyer, he is not likely to comeback”
Inventory Classification Techniques
• ABC– Based on Usage Value
• Not volume
• FSN• FMG/SMG/NMG
– Movement or Velocity
• VED– Criticality (Vital-Essential-Desirable)
Order Size and Frequency
• Effect of Order Size and Frequency
– On inventory level in Synnex Distribution Chain
– Service Level• Stock out and availability
Why consumers buy online?
The InternetThe Internet
• Steps in Buying Decision
– Recognition of need
– Definition of product needed
– Develop specifications
– Search for the product
– Analyze offers
– Evaluate
– Select
These steps now
being done more and
more on the Internet
Why Consumers Buy Online
• Communication
– Marketer to Consumer
– Consumer to Marketer
– Consumer to Consumer
• Blogs, Social Networking
Multichannel Marketing
Multichannel Marketing
The blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships
with consumers who shop and buy in the traditional marketplace
eCommerce
• E-commerce – the company or site offers to transact or facilitate the
selling of products and services online – pure-click companies and brick-and-click companies
• M-Commerce
Multichannel Marketing
• Dual Distribution
• Multichannel Retailing
• Multichannel Marketing
Multichannel Marketing
• Implementation of Multichannel Marketing
– Transactional Website • Channel Conflicts
– Promotional Website
Multi Channel - Example
Publisher
of
Computer
(Specialty)
Books
General Book Wholesaler
Computer Supplies
and Accessories
Specialty Wholesaler
Internet Book
Retailer
Independent Book
Retailer
Electronics Superstore
Chain
Book Store Chain
Final
Consumer
Direct Salefrom
Publisher Website
Multi-channel
• Companies can gain three important benefits
– Increased market coverage
– Lower channel cost• Not always!
– More customized selling
• Problems of cooperation, control and conflict
Channel Management Decisions
Channel-Management Decisions
Selecting channel members
Training channel members
Motivating channel members
Evaluating and Controlling channel members
Modifying channel members
Selection of Channel Members
• General Criteria
– Number of years in business
– Other lines carried
– Growth and profit records
– Financial strength
– Cooperativeness
– Service reputation
Selection of Channel Members
• If the intermediaries are sales agents– Number and character of other lines carried– Size and quality of the sales force
• If the intermediaries are department stores that want exclusive distribution– Locations– Future growth potential– Type of clientele
Training and Motivating Channel Members
– understand their needs and wants
– provide training programs and market research programs to improve their performance
– communicate its view that the intermediaries are partners in a joint effort to satisfy end users of the product
Evaluating Channel Members
– Benchmarks or Performance Standards• sales quota attainment• average inventory levels• customer delivery times• treatment of damaged and lost goods• cooperation in promotional and training programs
– Under performers can be • counseled • retrained • motivated • terminated
Channel Conflict
• Channel conflict – when one channel member’s actions prevents the
channel from achieving its goal
• Channel coordination – when channel members are brought together to
advance the goals of the channel, as opposed to their own potentially incompatible goals
Types of Conflict
• Vertical channel conflict – conflict between different levels within the same channel.
• Horizontal channel conflict – conflict between members at the same level within the
channel.
• Multi-channel conflict – when the manufacturer has established two or more channels
that sell to the same market
– when the members of one channel get a lower price or work with a lower margin
Causes of Channel Conflict
• goal incompatibility
• unclear roles and rights
• differences in perception
Managing Channel Conflict
• Adoption of super-ordinate goals • Exchange persons between two or more channel levels • Co-optation
– an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, and the like
• Joint membership in and between trade associations • Diplomacy• Mediation• Arbitration• Lawsuits
Managing Channel Conflict
• Channel Power– the ability to alter channel member’s behavior
• Types of power used to motivate channel members and elicit cooperation
– Objectively Observable• Coercive power• Reward power
– Subjective in Nature • Legitimate power• Expert power• Referent power
Channel Integration
• Vertical Marketing System (VMS)– the producer, wholesaler(s), and retailer(s) acting as
a unified system – One channel member, the channel captain, owns the
others, franchises them, or has so much power that they all cooperate
– VMSs achieve economies through• Size• Bargaining power• The elimination of duplicated services
Channel Integration
• Three types of VMS– Corporate VMS
• combines successive stages of production and distribution under single ownership
– Administered VMS• coordinates successive stages of production and distribution through the
size and power of one of the members – Manufacturers of a dominant brand are able to secure strong trade
cooperation and support from resellers
– Contractual VMS• independent firms at different levels of production and distribution
integrating their programs on a contractual basis to obtain moreeconomies or sales impact than they could achieve alone
– two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity
Rural Distribution Rural Distribution
• Traditional Channels for Reaching Out to Rural Customers– Haats– Mandis– Melas
Rural Distribution
• Innovative Distribution Channels for Rural Markets
– Hub and Spoke (Dabur, Reliance World etc.)
– Mobile shops and offices– Linkage with community based
organizations• (SHGs, NGOs, and cooperatives)
Retailing &
Wholesaling
RETAILING
• Retailing includes all the activities involved in selling goods or services directly to final consumers for personal non-business use
• Retailer – any business enterprise whose sales volume comes
primarily from retailing. – Any organization selling to the final consumer—no
matter how or where they are sold
Levels of Service
• Retailers can position themselves as offering one of four levels of service:– Self-service– Self-selection– Limited service– Full service
• Wheel of Retailing
Non-store retailing
• Non-store retailing has been growing much faster than store retailing
Direct selling
Buyingservice
Automatic vending
Directmarketing
Retailing vs etailing
• Advantages over etailing– Products that consumers can actually see, touch, and
test
– Real-life customer service
– No delivery lag time
– Provide a shopping experience • In-store entertainment
Private Labels
• A private label – also called reseller, store, house, or distributor
brands– is developed by retailer’s and wholesalers
• Experts Belief– 50 percent is the natural limit for carrying private
brands because:• Consumers prefer certain national brands• Many product categories are not feasible or attractive on a
private-brand basis
Why Private Labels ?
• They are more profitable than national brands
• Retailers develop exclusive store brands to differentiate themselves from competitors
Private Labels
• Growing power of store brands – Consumers are more price-sensitive.
– They are noting the better quality of the private-label brand
– Reduction in brand equity caused by a reduced advertising by national brand
– The endless stream of brand extensions and line extensions has blurred brand identity and led to a confusing amount of product proliferation
Generics
• Unbranded, plainly packaged, less expensive versions of common products. – offer standard or lower quality
• at a price that may be as much as 20 to 40 percent lower than nationally advertised brands
• 10 to 20 percent lower than private label brands
• The lower price of generics is made possible by lower-quality ingredients, lower-cost labeling and packaging, and minimal promotion
WHOLESALING
Includes all the activities involved in selling goods and services to those who buy for resale
or business use
Wholesalers vs. Retailers
• Pay less attention to promotion, atmosphere, and location
• Mostly deal with business customers
• Transactions are usually larger
• Cover a larger trade area
• The government deals with them differently in terms of legal regulations and taxes
WHOLESALING
• Wholesalers are more efficient in performing the following functions
• Selling and promoting• Buying and assortment building• Bulk breaking• Warehousing• Transportation• Financing• Risk bearing• Market information• Management services and counseling
MARKET LOGISTICS
Involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer
requirements at a profit
MARKET LOGISTICS
• The total cost of market logistics can amount to 30 to 40 percent of the product’s cost
– Lower market-logistics cost will permit lower prices
– A well-planned market-logistics program can be a potent tool in competitive marketing.
MARKET LOGISTICS
• Each possible market-logistic system will lead to the following costs:
M = T+FW+VW+S
• Where M = total market-logistic cost of proposed system
• Where T = total freight cost of proposed system
• Where FW = total fixed warehouse cost of proposed system
• Where VW = total variable warehouse costs (including inventory)
• Where S = total cost of lost sales due to average delivery delay under proposed system
MARKET LOGISTICS
• Role of Market Logistics– Deciding on the company’s value proposition to its
customers– Deciding on the best channel design and network
strategy for reaching the customers– Developing operational excellence in sales forecasting,
warehouse management, transportation management, and materials management
– Implementing the solution with the best information systems, equipment, policies, and procedures
MARKET LOGISTICS
• Supply Chain Management (SCM) Perspective – Supply chain management starts before the physical
distribution and helps in • Procuring the right products
• Converting them efficiently into finished products
• Dispatching them to their final destinations
• Identifying superior suppliers and distributors and improving their productivity
Market-Logistics Decisions
• Four major decisions must be made with regard to market logistics:– Order Processing
• How should orders be handled?
– Warehousing • Where should stocks be located?
– Inventory• How much stock should be held?
– Transportation• How should goods be shipped?
Market-Logistics Decisions
• Order Processing– the order-to-payment cycle
• That is the elapsed time between an order’s receipt, delivery, and payment
• Most companies today are trying to shorten the order-to-payment cycle
• The longer this cycle takes the lower the customer’s satisfaction and the lower the company’s profits.
Market-Logistics Decisions
• Warehousing – Every company has to store finished goods until they
are sold• production and consumption cycles rarely match
– Storage function helps smooth discrepancies between production and quantities desired by the market
– Number of inventory stocking locations• goods can be delivered to customers more quickly
• higher warehousing and inventory costs
Market-Logistics Decisions
• Inventory– Inventory decision making involves knowing
• when to order?&
• how much to order?
– The optimal order quantity can be determined by observing how order-processing costs and inventory-carrying costs sum up at different order levels
Determining Optimal Order Quantity Market-Logistics Decisions
• Inventory Classification– Companies are reducing their inventory costs
by treating inventory items differently• They are positioning inventory items according to risk and
opportunity
• They are also keeping slow-moving items in a central location while keeping faster moving items closer to customers
• Combination of Two Modes of Transportation– Piggyback
• rail and trucks
– Fishyback• water and trucks
– Trainship• water and rail
– Airtruck• air and trucks
Integrated Logistics Systems (ILS)
• An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information technology
Viral Marketing
• What is Viral Marketing?
– WOMM• Origin of Viral Marketing
– Connected Marketing
– Role of Internet
Viral Marketing
The use of electronic media, alone or in
conjunction with other media, to generate
the distribution of an idea/message within
an active network of consumers
My network offriends/associates
One-to-One W3 Marketing
Many-to-Many Social Network Marketing
Your network of friends/associates
Their network offriends/associates
Mass MarketingOne-to-Many
Models of Media Influence (Source: Marsden) Media Mix
• Conventional Media vs. Internet
– What will be the future?
Personal SellingPersonal Selling
Introduction
• Promotion is communicating with potential customer– Personal selling is one of the most effective way
• Personal Selling is often a company’s largest single operating expense
What is Personal Selling?
• Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.
• Personal selling is paid personal communication that attempts to inform customers and persuade them to purchase products or services
What is Personal Selling?
• Personal selling allows the marketer or seller to– communicate directly with the prospect or customer
and listen to his or her concerns
– answer specific questions
– provide additional information
– inform
– persuade
– sometimes even recommend other products or services
What is Personal Selling?
• Personal Selling
– Is it a Marketing Channel?
– Is it part of Promotion and/or Communication?
– What was Eureka Forbes doing with Direct Sales Model?
Strategy Planning for Personal Selling
Target Market
Product Place Promotion Price
PersonalSelling
MassSelling
SalesPromotion
Numberand type of
salespersonsneeded
SalesTechnology
Support
Selection and
TrainingProcedure
Compensationand
Motivation Approach
Personal Selling
Techniques
Designing a Sales Force
Sales force objectives
Sales force strategy
Sales force structure
Sales force size
Compensation
Marketing Communications
Marketing Communications
Marketing communications are the means by which firms attempt to inform, persuade, and
remind consumers, directly or indirectly, about the products and brands they sell.
Marketing Communications
• Inform, Persuade and Remind
• Directly or Indirectly
Marketing communications represent the ‘voice of the brand’ and are a means by which it can
establish a dialogue and build relationships with consumers.
Marketing Communications Mix
• Advertising
• Sales promotion
• Events and experiences
• Public relations and
publicity
• Direct marketing
– Interactive marketing
– Word-of-mouth / Word-of-
web marketing
• Personal selling
Communication Platforms
Advertising• Print and broadcast ads• Packaging inserts• Motion pictures• Brochures and booklets• Posters• Billboards• POP displays• Logos• Videotapes
Elements in the Communications Process key factors in effective communication
– Senders must know what audiences they want to reach and what response they want to get
– They must encode their messages so that the target audience can decode them
– They must transmit the message through media that reaches the target audience
– Develop feedback channels to monitor the responses
Field of Experience
Receiver’s field
Sender’s field
Communication Process & Perception
• Perception depends on
– the physical stimuli
– the stimuli in relation to the surrounding field
– The conditions within the individual
Communication Process & Perception
• The key point is that perception can vary widely among individuals exposed to the same reality
• In marketing, perceptions are more important than the reality – it is perceptions that will affect consumers actual
behavior
•People can emerge with different perceptions of the same object because of three perceptual processes
Selective attention
Selective distortion
Selective retention
Communication Process & Perception
Selective Attention
• It has been estimated that the average person may be exposed to over 1,500 ads or brand communications a day – A person cannot possibly attend to all of these stimuli – Selective attention means that marketers have to work
hard to attract consumers notice
• The real challenge is to explain which stimuli people will notice
Selective Attention
• People are more likely to notice stimuli – that relate to a current need
» A person who is motivated to buy a computer will notice computerads; he or she will be less likely to notice DVD ads
– that they anticipate » more likely to notice computers than radios in a computers store
– whose deviations are large in relation to the normal size of the stimuli
» more likely to notice an ad offering $100 off the list price of a computer than one offering $5 off
– which is unexpected » Sudden offers
Selective Distortion
• Even noticed stimuli do not always come across in the way the senders intended
• Selective distortion – the tendency to interpret information in a way that will
fit our preconceptions – Consumers will often distort information to be
consistent with prior brand and product beliefs
Selective Distortion & Strong Brands
• Selective distortion can work to the advantage of marketers with strong brands when consumers distort neutral or ambiguous brand information to make it more positive
– Food may seem to taste better– An automobile may seem to drive more smoothly
– When tasting both on a blind basis • Consumers were found to be equally split in their preference
for Diet Coke versus Diet Pepsi
– When tasting the branded versions • Consumers preferred Diet Coke by 65% and Diet Pepsi by
only 23%, with the remainder seeing no difference
Selective Retention
• People fail to register much information to which they are exposed in memory, but tend to retain information that supports their attitudes and beliefs
• Because of selective retention people are likely to remember good points about a product they like and forget good points about competing product
Selective Retention
• Selective retention also works to the advantage of strong brands
• It explains why marketers need to use repetition in sending messages to their target market – to make sure their message is not overlooked
Micro Models Communication
• It is necessary to explore the possibilities people have for – thinking– feeling – behaving
towards the various products and services in their lives
Response Hierarchy Models
How advertising and promotions work?
• This isn’t easy because we are all capable of being
– logical and illogical
– objective and subjective
– obvious and subtle
all of this simultaneously
Theories of Advertising Effectiveness
• Economic– a rational consumer who consciously considers functional cost-
utility information in a purchase decision
• Responsive– a habitual consumer conditioned to thoughtlessly buy through
rote, stimulus-response learning
• Psychological– an unpredictable consumer who buys compulsively under the
influence of unconscious thoughts and indirect emotions
• Social– a compliant consumer who continually adjusts purchases to
satisfy cultural and group needs for conformity
Economic theory
• Consumers act in their own financial self-interest– They look for maximum utility at the lowest cost– Rational, methodical calculation
• Consumers must have functional information to make a decision
• This old, much-revered theory most often applies to commodity items
Responsive theory• Consumers are lazy and want to buy with
minimum effort– They develop habits through stimulus-response
learning
• The process is non-rational and automatic as repetition builds and then reinforces buying activity for routine products
• Information serves a reminder/exposure, ratherthan thoughtful, purpose
Psychological theory
• Explains consumer behavior as ego involvement– the personality must be defended or promoted– essentially unpredictable, undeliberate and latent
• Implicit product attitudes are more important thanfunctional benefits for the selective products that touch people so deeply
Social theory
• Describes consumers as basically imitative– People watch what others buy and comply/adjust
to get along or be inconspicuous• It is an emotional, insecure behavior
– Group role, prestige, status and vanity concerns are involved
• Opinion leaders and word-of-mouth communication are important for the visible products affected
Involvement
• a continuum of consumer interest in products and services– On the high side are those that are important in
money cost, ego support, social value or newness• they involve more risk, require paying more attention to
the decision and demand greater use of information
– Low involvement decisions are at the other extreme
• they arouse little consumer interest or infor-mation handling because the risk is small and effort can be reduced accordingly
Modified Response Hierarchy
• Learn-Feel-Do
– Does not necessarily occur in sequential path
– Sequence can change
Alternative Response Hierarchies: Three-Orders Model
Perceived Product
Differentiation
High
Low
(Learning model)
Cognitive
Affective
Conative
(Dissonance attribution model)
Conative
Affective
Cognitive
(Low Involvement model)
Cognitive
Conative
Affective
High Low
Topical Involvement
Strong vs. Weak theories of Advertising
• Jones’s Strong Theory of Advertising
– Consumers are passive
– Ad can persuade & generate repeat purchase behavior
• Ehrenberg’s Weak Theory of Advertising
– Consumers are active problem solvers
– Driven by habit to make a purchase
– Awareness-Trial-Reinforcement framework (ATR)
Steps in Developing Effective Communications
Identify target audience
Determine objectives
Design communications
Select channels
Establish budget
Decide on Communication mix
Measure results/ manage IMC
Identify Target Audience
• Who are they?– Potential buyers of the
company’s products– Current users, deciders, or
influencers– Individuals, groups, or
particular publics– General public
• Decisions based on target audience– What to say– How to say it– When to say it– Where to say it– To whom to say it
Steps in Developing Effective Communications
Identify target audience
Determine objectives
Design communications
Select channels
Establish budget
Decide on Communication mix
Measure results/ manage IMC
Communications Objectives
Category Need Brand Awareness
Brand Attitude Purchase Intention
Category Need
• Communication objective of establishing a category need– Establishing a product or service category as necessary
to remove or satisfy a perceived discrepancy between a current motivational state and a desired emotional state
– Used for new-to-the-world products
Brand Awareness
• Ability of identify (recognize or recall) the brand within the category in sufficient detail to make a purchase
• Brand Recognition vs. Brand Recall – Recall is important outside the store
– Planned purchases
– Recognition is important inside the store– Impulse items
Brand Attitude
• Evaluating the brand with respect to its perceived ability to meet a currently relevant need.
• Relevant brand need can be – Negatively Oriented
• Problem removal, problem avoidance, incomplete satisfaction and normal depletion
– Positively Oriented • Sensory gratification, intellectual stimulation or social
approval
Brand Purchase Intention
• Self instructions to purchase the brand or to take purchase related action
– Encouraging consumers to make a mental commitment to buy
– Sales Promotions often help in this• BOGOF
Consumer States for Two Brands Steps in Developing Effective Communications
Identify target audience
Determine objectives
Design communications
Select channels
Establish budget
Decide on Communication mix
Measure results/ manage IMC
Design Communications
What to Say?Message Strategy
How to Say?Creative Strategy
Who should Say?Message Source
Design Communications – Message
What to Say?Message Strategy
AppealsThemes Ideas
Brand Positioning
Point of Parity OR Point of Difference
• Creative Strategy
– how a message is being expressed
– content of the message itself
Creativity Design Communications – Creativity
Information Appeal
– Product benefits or attributes
– Assumes rational processing on part of consumer
– Problem solving, product demonstration, product comparison, testimonials
Information Appeal
• Three types of informational appeals
– Conclusion drawing
– One-versus-two-sided arguments
– Order of argument presentations
Transformational Appeals
– Non-product-related benefit or image
• What kind of person uses a brand?
• What kind of experience results from using the brand?
Design Communications – Which Appeals?
• Negative appeals – Fear– Guilt– Shame
• Positive appeals – Humor– Love– Pride– Joy
Points-of-difference (PODs)
• Attributes or benefits consumers strongly associate with a brand, positively evaluate and believe they could not find to the same extent with a competing brand
– points where you are claiming superiority or exclusiveness over other products in the category
Points-of-parity (POPs)
• Associations that are not necessarily unique to the brand but may be shared by other brands
– where you can at least match the competitors claimed benefits
– they may usually not be the reason to choose a brand, but their absence can certainly be a reason to drop a brand
Herzberg’s Theory
– Two Factory Theory
• Motivation – PoD
• Hygiene – PoP
Borrowed Interest
• Motivational or “borrowed interest” devices are often employed to attract consumer attention and raise their involvement with an ad
– Borrowed interest advertising • firms “borrow” consumers’ interest in something outside the
company — is a way for companies to ride on the success/appeal of larger events,
» Example: Olympics, president’s birthday, a steep rise in gas prices, Valentine’s day promotion.
Borrowed Interest
• You don’t need to borrow any interest if you communicate the things that buyers are interested in hearing
• Archie's advertising valentine’s day gifts during February – “borrowed interest”?
Break Through the Clutter
• A challenge in arriving at the best creative strategy– figuring out how to “break through the clutter” to attract
the attention of the consumer—but still be able to deliver the intended message
Break Through the Clutter
• With so many advertisers vying for the attention of consumers in so many places– How can any particular message get noticed?– How to fight advertising glut?
• Get noticed amidst the glut by adding to it — “adjusting”spending levels to market conditions
• Advertising, Events and Experiences, PR• Personal Selling; Direct Marketing and SP
– Growth• Word of Mouth
– Maturity • All
– Decline • SP
Major Media Types
• Newspapers
• Television
• Direct mail
• Radio
• Magazines
• Outdoor
• Yellow Pages
• Newsletters
• Brochures
• Telephone
• Internet
Choosing Among Major Media Types
• Target audience and media habits
• Product characteristics
• Message characteristics
• Cost
Cost Effectiveness by Buyer Readiness Stage
Promotional Tools and Purchase Decision Stages Two Step Process – Integration of Channels
• Mass communications affect personal attitudes toward behavior through a two-step process
– Ideas flow from mass media to opinion leaders
– Opinion leaders to the less media-involved population groups
Models of Media Influence (Source: Marsden) Models of Media Influence
• The influence of mass media on public opinion is not as direct, powerful, and automatic as supposed– It is mediated by opinion leaders– People interact primarily with their own social groups
and acquire ideas from opinion leaders in their group
• Hence, mass communicators should – direct messages specifically to opinion leaders, and – let opinion leaders carry the message to others
Deciding On Media Timing and Allocation
• The macro-scheduling problem – scheduling the advertising in relation to seasons and the business
cycle
• Micro-scheduling problem – allocating advertising expenditures within a short period to obtain
maximum impact
Factors Affecting Timing Patterns
• Buyer turnover– the higher this rate, the more continuous the
advertising should be
• Purchase frequency– the higher the purchase frequency, the more
continuous the advertising should be
• Forgetting rate– the higher the forgetting rate, the more continuous the
advertising should be
Media Schedule Patterns
• The advertiser has to choose among
– Continuity
– Concentration
– Flighting
– Pulsing
Classification of Advertising Timing Patterns
Media Selection
• Finding the most cost-effective media to deliver the desired number and type of exposures to the target audience
• Deciding on– Reach– Frequency– Impact
• Readership and Circulation
Reach– Launching new products
– Flanker brands
– Extensions of well-known brands
– Infrequently purchased goods
– Going after an undefined target market
Frequency – There are strong competitors
– A complex story to tell
– High consumer resistance
– A frequent-purchase cycle
Relationship Among Trial, Awareness, and the Exposure Function
• The relationship between reach, frequency, and impact is captured in the following concepts:
– Total number of exposures (E) is reach times the average frequency:
E = R x F– Also called GRP (Gross Rating Points)
– Weighted number of exposures (WE) is the reach times average frequency times average impact:
WE = R x F x I
Selecting Specific Vehicles
• Most cost-effective vehicles within each chosen media type
– asks consumers for their reactions to a proposed ad
– Portfolio tests– ask consumers to view or listen to a portfolio of advertisements,
then consumers are asked to recall all the ads and their contents
– Laboratory tests– uses equipment to measure physiological reactions to an ad
• Sales-Effect Research
Measuring Sales Impact of Advertising Consumer States for Two Brands
Advertising
• What is Advertising?
– Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor
• Half of ad dollars are wasted.. The problem is we don’t know which half ?
– Can be a cost-effective way to disseminate message• to build a brand preference
or • to educate people
Advertising
• Five M’s of Advertising
Advertising
• An advertising goal
– specific communication task and achievement level
– to be accomplished with a specific audience
– in a specific period of time
Advertising Objectives
Informative advertising
Reminderadvertising
Reinforcementadvertising
Persuasiveadvertising
Advertising
• Classification of Advertising Objectives– Informative Advertising
• to create brand awareness
• knowledge of new products
• new features of existing products
– Persuasive Advertising • to create liking, preference, conviction, and purchase of a
product or service
Advertising
• Classification of Advertising Objectives
– Reminder Advertising
• to stimulate repeat purchase of products and services
– Reinforcement Advertising
• to convince purchasers that they made the right choice
Advertising
• Advertising Spend (Budget)?
– Are you spending the right amount?
– treated as a current expense
– an investment in building brand equity
Advertising Budget – Factors to Consider
Market share and consumer base
Competition and clutter
Advertising frequency
Product substitutability
Stage in the product life cycle
Television
Advantages• Reaches broad spectrum
of consumers
• Low cost per exposure
• Ability to demonstrate product use
• Ability to portray image and brand personality
Disadvantages• Brief
• Clutter
• High cost of production
• High cost of placement
• Lack of attention by viewers
Print Ads
Advantages• Detailed product
information
• Ability to communicate user imagery
• Flexibility
• Ability to segment
Disadvantages
• Passive medium
• Clutter
• Unable to demonstrate product use
How to Evaluate Print Advertisements
• Is the message clear at a glance? Can you quickly tell what the advertisement is all about?
• Is the benefit in the headline? • Does the illustration support the headline? • Does the first line of the copy support or explain
the headline and illustration? • Is the ad easy to read and follow? • Is the product easily identified? • Is the brand or sponsor clearly identified?
Advertising
• Radio Ads– Radio’s main advantage is flexibility:
• Stations are very targeted• Ads are relatively inexpensive to produce and place• Short closing allow for quick response
– Disadvantages • The lack of visual images• Relatively passive nature of the consumer processing that
results
Actual and Projected Growth of Indian Radio Industry
InternetInternet
Online Promotional Opportunities
• Websites
• Microsites
• an individual web page or cluster of pages which are meant to function as an auxiliary supplement to a primary website
• Search ads & Display ads
• Interstitials
– web page advertisements that are displayed before or after an expected content page
• Sponsorships
• Online communities
• Email
• Mobile marketing
• Internet-specific ads and videos
Alternative Advertising Options – Place Advertising
• Creative and unexpected ad placement to grab
consumer’s attention
• Reaching people in other environments, such as
where they • Work
• Play
• Shop
Place Advertising
• Examples- Billboards- Public places- Product placement- Point-of-purchase
Public Relations Public Relations
PUBLIC RELATIONS
Public relations (PR) involves a variety of programs designed to promote or protect a company’s image or its individual products
– A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives
Tasks Aided by Public Relations
• Launching new products• Repositioning a mature product• Building interest in a product category• Influencing specific target groups• Defending products that have encountered public
problems• Building the corporate image in a way that
reflects favorable on products
Public Relations Functions
• Press relations
• Product publicity
• Corporate communications
• Lobbying
• Counseling
Major Tools in Marketing PR
• Publications
• Events
• Sponsorships
• News
• Speeches
• Public Service Activities
• Identity Media
Decisions in Marketing PR
Establish objectives
Choose messages
Choose vehicles
Implement
Evaluate results
Direct Marketing
What is Direct Marketing?
Direct marketing is the use of consumer-direct channels to reach and deliver goods and services to customers without using market middlemen
– Permits target market selectivity– Can be personalized– Is flexible– Allows for early testing and response measurement
Direct Marketing Channels
Direct mail
Catalogs
Telemarketing
Other direct response
Constructing a Direct-Mail Campaign
Establish objectives
Select target prospects
Develop offer elements
Test elements
Execute
Measure success
RecencyRecency
FrequencyFrequency
Monetary valueMonetary value
RFM - Selecting Prospects
Events &
Experiences
Introduction
• A phenomenon or any observable occurrence that has a beginning and an end i.e. it occurs in a specific time period
• It also means some type of gathering– Ceremonies, exhibitions, performances, festivals,
media events, parties, competition, convention (meeting) etc
• Involvement of customer – Creates experiences and feelings about products or
brands
Events and Experiences
• Involvement of Brand in events and experiences can broaden and deepen its relationship in consumers’ lives– Becoming part of a special and more personally
relevant moment in consumers’ lives
– affecting consumers’ brand attitudes and beliefs
– Atmospheres or “packaged environments” create or reinforce leaning toward product purchase
Why marketer’s sponsor events ?
• To identify with a particular target market or life style• To increase awareness of company or product name• To create or reinforce consumer perceptions of key
brand image associations• To enhance corporate image dimensions• To create experiences and evoke feelings• To express commitment to the community or on social
issues• To entertain key clients or reward key employees• To permit merchandising or promotional opportunities
Major Sponsorship Decisions
Choosing Events
Designing Sponsorship Programs
Evaluating Sponsorship Activities
Choosing an Event – An Ideal Event
Audience closely matches target market
Event generates media attention
Event is unique with few sponsors
Event lends itself to ancillary activities
Event enhances brand image of sponsor
Sales PromotionSales Promotion
IntroductionIntroduction
Sales promotion and packaging help move prospects and customers through the decision process started by
other MC functions
Sales promotion and packaging help move prospects and customers through the decision process started by
• Sales promotions consist of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade
• Includes tools for– Consumer promotion– Trade promotion– Sales-force promotion
What is Sales Promotion?
• The media and non-media marketing pressure applied for a predetermined, limited period of time at the level of consumer, retailer, or wholesaler in order to stimulate trial, increase consumer demand, or improve product availability
The use of incentives to motivate end users to purchase a brand and thus pressure retailers to stock that brand•Used by marketers as part of a pull strategy
The use of incentives to motivate end users to purchase a brand and thus pressure retailers to stock that brand•Used by marketers as part of a pull strategy
The use of incentives to motivate the buying and reselling of products•Used as part of a push strategy
The use of incentives to motivate the buying and reselling of products•Used as part of a push strategy
Types of SP. . . .
Manufacturer Trade
Customer
Trade Promotions
Retailer PromotionCustomer Promotion
Push
Push
Pull
• What do we want the consumers and trade to do?
– Buy More
– Buy Now
Major Sales Promotion Decisions
Establish objectives
Select tools
Develop program
Pretest
Implement and control
Evaluate results
Sales promotions objectives
• Objectives can be classified into three different categories – Consumers – Retailers or Intermediaries– Sales Force
Considerations in Developing a Sales Promotion
• Short term impact
– Sales
• Long term effect on the brand
– Brand equity
– Profitability
• Competitive reaction
– Retaliatory promotions
• Quick fix?
Types of Buyers
• Loyals– Buy a particular brand on a more or less consistent basis
• Competitive loyals– People who are loyal to the competing brand
• Switchers– Purchase of various brands in one category
• Trade-promotion tools – award money/incentive to the trade
• Sales-force-promotion tools – used to gather business leads, impress, and reward customers,
and motivate the sales force to greater effort
Franchise-Building and Non-franchise Building Promotions
Consumer Franchise Building Promotions – Promotional activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity.
Examples: free samples, in-store demonstrations and service materials like recipes
Consumer non-Franchise Building Promotions – Promotional activities that are basically intended to generate immediate sales, or shorten the buying decision process rather than implanting unique and important ideas about the brand in the consumer’s mind.
• Non-FB promotions– accelerate purchase decision process
– generate immediate increase in sales
– borrow customers from other brands
Franchise-Building and Non-franchise Building Promotions
CFB activities affect sales for about 4 years
Non-CFB activities affect sales for 1 year or less
When you spend too much on non-CFB relative to
CFB, profits decline within 2 years
Franchise-Building and Non-franchise Building Promotions Developing the Program
• Factors to be considered– The size of the incentive
– The conditions for participation
– The duration of the promotion
– The distribution vehicle
– The timing of the promotion
– The total sales-promotion budget
Pre-testing
• To determine if
– the tools are appropriate
– the incentive size optimal
– the presentation method efficient
Implement and Control
• Prepare implementation and control plans for each individual promotion that cover lead-time and sell-in time
• lead-time – the time necessary to prepare the program prior to
launching it • sell-in time
– begins with the promotional launch and ends when the merchandise is in the hands of consumers
Evaluation
• Can be evaluated using three methods
– Sales data
– Consumer survey
– Experiments
• Evaluate the effect on brand image/loyalty
Advertising versus Sales Promotion
• Above the Line vs. Below the Line• Advertising to sales promotion ratio
– The ratios of advertising expenditure to that of sales promotion in developed countries is around 30:70
– Although focus on advertising is higher, a trend of preference for Sales Promotion over advertising is visible in developing countries as well
– What are the Reasons ??
Impact of displays/featuring
• Average sales increase with a 10% price cut = 20%
• Increase with 10% price cut AND ad feature = 78%
• Increase with 10% price cut AND display = 105%
• Increase with all three = 203%
Why the Growth???
• Instant results
• Faster implementation
• Measurable
• Relatively easy and inexpensive
Integrated Marketing Communications
(IMC)
• Conceptualize IMC in
terms of “All Contacts”
between customer &
brand
What is IMC ?
IMC is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, persuasive brand communication programs with consumers, customers, prospects employees and other relevant external and internal audiences.
The goal of IMC is to generate
short‐term financial returns
and build long‐term brand
value.
What is IMC?
• It is concept of marketing communications planning that recognizes the added value of a comprehensive plan
– Such a plan evaluates the strategic role of a variety of communications disciplines – for example, general advertising, direct response, sales promotion, and public relations – and combines these disciplines to provide clarity, consistency, and maximum impact through the seamless integration of messages
Reasons for Growing Importance of IMC
Traditional compensationTraditional compensation Performance-based compensation Performance-based compensation
Media advertisingMedia advertising Multiple forms of communicationMultiple forms of communication
Mass mediaMass media Specialized mediaSpecialized media