978-0134149530 Chapter 12 Lecture Note Part 1

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

CHAPTER 12

ENGAGING CONSUMERS AND COMMUNIATING CUSTOMER VALUE:

ADVERTISING AND PUBLIC RELATIONS

PREVIEWING THE CONCEPTS – CHAPTER OBJECTIVES

1. Define the five major promotion mix tools for communicating customer value.

2. Discuss the changing communications landscape and the need for integrated marketing

communications.

3. Describe and discuss the major decisions involved in developing an advertising program.

4. Explain how companies use public relations to communicate with their publics.

JUST THE BASICS

CHAPTER OVERVIEW

This chapter concentrates on the final element of the marketing mix—promotion.

Companies use promotion to communicate customer value clearly and persuasively.

Promotion is not a single tool but rather a mix of several tools.

Ideally, under the concept of integrated marketing communications, the company will carefully

coordinate these promotion elements to deliver a clear, consistent, and compelling message about

the organization and its products.

The chapter begins by introducing the various promotion mix tools.

Next, it examines the rapidly changing communications environment and the need for integrated

marketing communications.

Finally, the chapter looks closely at two of the promotion tools—advertising and public relations.

ANNOTATED CHAPTER NOTES/OUTLINE

GEICO: From Bit Player to Behemoth through Good Advertising

Founded in 1936, GEICO initially targeted a select customer group of government employees

and noncommissioned military officers with exceptional driving records. Unlike its competitors,

GEICO had no agents. Instead, the auto insurer marketed directly to customers.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

In 1994, however, when GEICO decided to expand its customer base, it knew that it must also

expand its marketing. So it entered the world of mass media.

By now, you know a lot about GEICO and its smooth-talking gecko. But at the start, the insurer

faced a tough task—introducing a little-known brand with a funny name to a national audience.

To this day, every single one of the hundreds of ads and other content pieces in the GEICO

campaign has driven home the now-familiar pitch: “15 minutes could save you 15 percent or

more on car insurance.”

GEICO has also adapted its content delivery to the fast-changing digital times. The brand was

one of the first in its industry to provide customers with mobile apps and options for obtaining

quotes, buying policies, and managing their accounts. The company is also an acknowledged

leader in the use of online and social media.

The brand’s advertising has changed the way the entire insurance industry markets its products.

Their strategy is absolutely working for GEICO. It is a testament to how GEICO has used

advertising to evolve from a bit player to a behemoth.

INTRODUCTION

Building good customer relationships calls for more than just developing a good product, pricing

it attractively, and making it available to target customers.

Companies must also engage consumers and communicate their value propositions to customers.

THE PROMOTION MIX

Use Key Term Promotion Mix (Marketing Communications Mix) here.

Use Chapter Objective 1 here.

The promotion mix is also called the marketing communications mix.

It consists of five tools:

Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods,

or services by an identified sponsor.

Sales promotion: Short-term incentives to encourage the purchase or sale of a product

or service.

Personal selling: Personal presentation by the firm’s sales force for the purpose of

making sales and building customer relationships.

Public relations (PR): Building good relations with the company’s various publics by

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

obtaining favorable publicity, building up a good corporate image, and handling or

heading off unfavorable rumors, stories, and events.

Direct and digital marketing: Direct connections with carefully targeted individual

consumers to both obtain an immediate response and cultivate lasting customer

relationships.

Use Key Terms Advertising, Sales Promotion, Public Relations, Personal Selling, and Direct

and Digital Marketing here.

Use Discussion Question 12-1 here.

Use Chapter Objective 2 here.

INTEGRATED MARKETING COMMUNICATIONS

The New Marketing Communications Landscape

Factors which are changing the face of marketing communications:

1. Consumers are changing. They are better informed and more

communications-empowered.

2. Marketing strategies are changing. As mass markets have fragmented, marketers are

shifting away from mass marketing.

3. Changes in digital technology are causing changes in the ways in which companies and

customers communicate with each other.

Use Key Term Brand Content Management here.

Use Marketing at Work 12.1 here.

The Need for Integrated Marketing Communications

Integrated marketing communications (IMC) requires the company to integrate its many

communications channels carefully to deliver a clear, consistent, and compelling message about

the organization and its brands. (Figure 12.1)

Use Key Term Integrated Marketing Communications here.

Use Figure 12.1 here.

Use Discussion Question 12-2 here.

IMC leads to a total marketing communications strategy aimed at building strong customer

relationships by showing how the company and its products can help customers solve their

problems.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

SHAPING THE OVERALL PROMOTION MIX

The concept of integrated marketing communications suggests that the company must blend the

promotion tools carefully into a coordinated promotion mix.

The Nature of Each Promotion Tool

Each promotion tool has unique characteristics and costs.

Advertising

Advantages:

1. Advertising can reach masses of geographically dispersed buyers at a low cost per

exposure, and it enables the seller to repeat a message many times.

2. Large-scale advertising says something positive about the seller’s size, popularity, and

success.

3. Consumers tend to view advertised products as more legitimate.

Shortcomings:

1. Advertising is impersonal and cannot be as directly persuasive as can company

salespeople.

2. Advertising can carry on only a one-way communication with the audience.

3. Advertising can be very costly.

Personal Selling

Advantages:

1. Personal selling is the most effective tool at certain stages of the buying process,

particularly in building up buyers’ preferences, convictions, and actions.

2. It involves personal interaction between two or more people.

3. With personal selling, the buyer usually feels a greater need to listen and respond.

Shortcomings:

1. A sales force requires a longer-term commitment than does advertising.

2. Personal selling is the company’s most expensive promotion tool.

Sales Promotion

Sales promotion includes a wide assortment of tools—coupons, contests, cents-off deals,

premiums, and others.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Advantages:

1. They attract consumer attention.

2. They offer strong incentives to purchase.

3. They can be used to dramatize product offers and to boost sagging sales.

4. Sales promotions invite and reward quick responses.

Shortcomings:

1. Sales promotion effects are often short-lived.

2. They are often are not as effective as advertising or personal selling in building long-run

brand preference and customer relationships.

Public Relations (PR)

Public relations is very believable—news stories, features, sponsorships, and events seem

more real and believable to readers than ads do.

Public relations can reach many prospects who avoid salespeople and advertisements.

Public relations can dramatize a company or product.

Direct and Digital Marketing

Although there are many forms of direct marketing, they all share four distinctive characteristics:

1. Direct marketing is nonpublic:

2. Direct marketing is immediate.

3. Direct marketing is customized.

4. Direct marketing is interactive.

Promotion Mix Strategies (Figure 12.2)

Marketers can choose from two basic promotion mix strategies—push promotion or pull

promotion.

A push strategy involves “pushing” the product through marketing channels to final

consumers.

A pull strategy involves the producer directing its marketing activities toward final

consumers to induce them to buy the product.

Most large companies use some combination of both strategies.

Factors to consider when designing promotion mix strategies include type of product and market.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Use Key Terms Push Strategy and Pull Strategy here.

Use Discussion Question 12-3 here.

Use Figure 12.2 here.

Use Linking the Concepts here.

ADVERTISING

U.S. advertisers now spend almost $183 billion yearly on advertising.

Use Figure 12.3 here.

Use Chapter Objective 3 here.

The four decisions to make when developing an advertising program are (see Figure 12.3):

1. Setting Advertising Objectives

Advertising objectives should be based on past decisions about the target market, positioning,

and the marketing mix, which define the job that advertising must do in the total marketing

program.

Use Key Term Advertising Objective here.

An advertising objective is a specific communication task to be accomplished with a specific

target audience during a specific period of time.

Advertising objectives can be classified by primary purpose (Table 12.1):

Use Table 12.1 here.

Use Key Term Advertising Budget here.

Informative advertising is used heavily when introducing a new product category.

Persuasive advertising becomes important as competition increases. Here, the

company’s objective is to build selective demand.

oComparative advertising (attach advertising) involves directly or indirectly

comparing one brand with another.

Reminder advertising is important for mature products—it helps to maintain customer

relationships and keep consumers thinking about the product.

2. Setting the Advertising Budget

Here are the four common methods used to set the total budget for advertising:

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Affordable Method

The affordable method involves setting the promotion budget at the level believed to be what

the company can afford.

Small businesses often use this method.

Shortcomings:

It ignores the effects of promotion on sales.

It tends to place promotion last among spending priorities, even in situations in which

advertising is critical to the firm’s success.

It leads to an uncertain annual promotion budget.

It more often results in under spending.

Percentage-of-Sales Method

The percentage-of-sales method involves setting the promotion budget at a certain

percentage of current or forecasted sales.

It is simple to use and helps management think about the relationships between promotion

spending, selling price, and profit per unit.

Shortcomings:

It wrongly views sales as the cause of promotion rather than as the result.

It is based on availability of funds rather than on opportunities.

It may prevent the increased spending sometimes needed to turn around falling sales.

Because the budget varies with year-to-year sales, long-range planning is difficult.

The method does not provide any basis for choosing a specific percentage.

Competitive-Parity Method

The competitive-parity method requires setting the promotion budgets to match competitors’

outlays.

Two arguments support this method.

Competitors’ budgets represent the collective wisdom of the industry.

Spending what competitors spend helps prevent promotion wars.

Neither argument is valid.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Objective-and-Task Method

The most logical budget-setting method is the objective-and-task method, whereby the

company sets its promotion budget based on what it wants to accomplish with promotion.

This budgeting method entails:

(1) Defining specific promotion objectives,

(2) Determining the tasks needed to achieve these objectives, and

(3) Estimating the costs of performing these tasks.

The advantage of the objective-and-task method is that it forces management to spell out its

assumptions about the relationship between dollars spent and promotion results.

It is the most difficult method to use.

Use Marketing by the Numbers here.

Use Key Terms Affordable Method, Competitive-Parity Method, Percentage-of-Sales Method,

and Objective-and-Task Method here.

3. Developing Advertising Strategy

Advertising strategy consists of two major elements:

Creating advertising messages

Selecting advertising media.

Creating the Advertising Message and Brand Content

Today, the average household receives about 189 TV channels, and consumers have more than

7,200 magazines from which to choose.

Breaking Through the Clutter. Ads are sandwiched in with a clutter of other

commercials, announcements, and network promotions, totaling nearly 20 minutes of

non-program material per prime-time hour with commercial breaks coming every 6 minutes on

average.

Use Key Terms Advertising Strategy and Madison & Vine here.

Use Online, Mobile, and Social Media Marketing here.

Such clutter in television and other ad media has created an increasingly hostile advertising

environment.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Just to gain and hold attention, today’s advertising messages must be better planned, more

imaginative, more entertaining, and more rewarding to consumers.

Merging Advertising and Entertainment. To break through the clutter, many marketers

are now subscribing to a new merging of advertising and entertainment, dubbed “Madison &

Vine.”

Madison & Vine is the merging of advertising and entertainment in an effort to create new

avenues for reaching consumers with more engaging messages.

The merging of advertising and entertainment takes one of two forms:

1. Advertainment involves making the ads themselves so entertaining, or useful, that

people actually want to watch them.

2. Branded Entertainment (brand integration) involves making the brand an inseparable

part of some other form of entertainment. The most common form is product placement.

Message and Content Strategy. The first step in creating effective advertising messages

is to plan a message strategy—to decide what general message will be communicated to

consumers.

Developing an effective message strategy begins with identifying customer benefits that can be

used as advertising appeals. The advertiser must next develop a compelling creative concept—

or “big idea”—that will bring the message strategy to life in a distinctive and memorable way.

Advertising appeals should have three characteristics.

Being meaningful

Being believable

Being distinctive

Message Execution. The advertiser has to turn the big idea into an actual ad execution

that will capture the target market’s attention and interest.

Execution styles include the following:

Slice of life: This style shows one or more “typical” people using the product in a normal

setting.

Lifestyle: This style shows how a product fits in with a particular lifestyle.

Fantasy: This style creates a fantasy around the product or its use. For instance, many ads are

built around dream themes.

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Chapter 12 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations

Mood or image: This style builds a mood or image around the product or service, such as

beauty, love, or serenity.

Musical: This style shows people or cartoon characters singing about the product.

Personality symbol: This style creates a character that represents the product.

Technical expertise: This style shows the company’s expertise in making the product.

Scientific evidence: This style presents survey or scientific evidence that the brand is better or

better liked than one or more other brands.

Testimonial evidence or endorsement: This style features a highly believable or likable

source endorsing the product.

Use Key Terms Creative Concept and Execution Style here.

Use Critical Thinking Exercise 12-6 here.

Use Marketing Ethics here.

The advertiser must choose tone, words, and format for the ad.

Consumer-Generated Messages. Taking advantage of today’s interactive technologies,

many companies are now tapping consumers for message ideas or actual ads.

If used carefully, consumer-generated advertising efforts can produce big benefits.

For little expense, companies can collect new creative ideas.

These campaigns can boost consumer involvement and get consumers talking and

thinking about a brand and its value to them.

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