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LEARNING REVIEW
17-7. Describe the promotional objective for each stage of the product life cycle.
17-8. At what stage of the consumer purchase decision process is the importance of
personal selling highest? Why?
17-9. Explain the differences between a push strategy and a pull strategy.
IV. DEVELOPING AN IMC PROGRAM [LO 17-4]
Due to high media costs, promotion decisions must be made carefully using a systematic
approach like the strategic marketing process.
• [Figure 17-6] The promotion decision process is divided into developing, executing,
and assessing the promotion program.
• Development of the promotion program focuses on the four Ws:
a. Who is the target audience?
b. What:
• Are the promotion objectives?
• Is the budget for the promotion program?
• Kinds of promotion should be used?
c. Where should the promotion be run?
d. When (and how often) should the promotion be run?
A. Identifying the Target Audience
• Target audience. The prospective buyers toward which the program is directed.
• Is the first decision in developing an IMC promotion program.
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• Market segmentation studies identify a firm’s target audience for its offering.
• Knowing a firm’s target audience’s profile (lifestyle, attitudes, values, and media
behavior) makes it easier to develop a promotion program.
• Behavioral targeting. Involves collecting information about a consumer’s web–
browsing behavior to determine the ads the consumer sees while surfing the web.
B. Specifying Promotion Objectives
• The hierarchy of effects is the sequence of stages a prospective buyer goes
through from initial awareness of a product to eventual action that includes five
stages, which are:
a. Awareness. The consumer’s ability to recognize and remember the product or
brand name.
b. Interest. An increase in the consumer’s desire to learn about some of the
features of the product or brand.
c. Evaluation. The consumer’s appraisal of the product or brand on important
attributes.
d. Trial. The consumer’s actual first purchase and use of the product or brand.
e. Adoption. The consumer’s repeated purchase and use of the product or brand
based on a favorable experience on the first trial.
• For a totally new product, the sequence applies to the entire product category.
• For a new brand competing in an established product category, the sequence
applies to the brand itself.
• Sometimes an objective for a promotion program:
a. Involves several steps in the hierarchy of effects.
b. Often focuses on a single stage.
• Promotion objectives may consist of the following:
a. Building awareness.
b. Increasing repeat purchases.
• Promotion objectives should posses these qualities:
a. Be designed for a well-defined target audience.
b. Be measurable.
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c. Cover a specified time period.
C. Setting the Promotion Budget
• [Figure 17-7] The promotion expenses to reach U.S. households are enormous.
• A firm must decide how much to spend using one of several budgeting methods.
• Determining the ideal amount for the promotion budget is difficult because there
is no precise way to measure the results.
1. Percentage of Sales.
a. Percentage of sales budgeting:
• Allocates funds to promotion as a percentage of past or anticipated sales,
in terms of either dollars or units sold.
• Is a common budgeting method.
b. The advantages are that it:
• Is simple.
• Ties the promotion budget to sales.
c. The major fallacy is that “sales cause promotion.” By using this method:
• A firm may reduce its promotion budget in situations when…
• Promotion may be needed the most, such as…
• During downturns in past or projected future sales.
APPLYING MARKETING METRICS
How Much Should You Spend on IMC?
Promotion-to-Sales Ratio
Marketers use the promotion-to-sales ratio to assess how effective the IMC program
expenditures are at generating sales. The promotion-to-sales ratio can compare programs
(1) on a year-to–year basis, (2) with competitor’s programs, and (3) with industry averages.
Your Challenge.
You decide to calculate the promotion-to-sales ratio for Dunkin’ Donuts, Starbucks,
Panera Bread, and the entire restaurant chain industry. The ratio is calculated as follows:
Promotion-to-Sales Ratio (%) = Total Promotion Expenditures ÷ Total Sales
(CONTINUED)
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[See UMD17PromoSalesRatio.xls]
Your Findings.
The graph on the marketing dashboard is generated from information obtained from
trade publications and annual reports. The chart shows the promotion-to–sales. Dunkin’
Donuts spent $130 billion on its IMC program to obtain $7.85 billion in U.S. sales for a ratio
of 1.65 (percent). Starbuck’s ratio was .57, Panera’s ratio was 1.12, and the industry average
was 1.23.
Your Actions.
Dunkin’ Donuts promotion-to-sales ratio is higher than both its competitors and
higher than the industry average (lower is better). This suggests that the current mix of
promotional activities and the level of expenditures may not be creating an effective IMC
program to generate sales of its vehicles. You will want to monitor the factors that influence
this ratio.
2. Competitive Parity.
a. Competitive parity budgeting:
• Allocates funds to promotion by matching…
– The competitor’s absolute level of spending or…
– The proportion per point of market share.
• Is also called matching competitors or share of market.
b. It is important to consider the competition in budgeting because consumers
are affected by competing promotional activities.
c. The competitor’s budget should not be the only determinant in setting a
company’s budget.
d. The competition may have very different promotional objectives that require a
different level of expenditures by the firm.
3. All You Can Afford.
a. All-you-can-afford budgeting allocates funds to promotion only after all
other budget items are covered.
b. While simple and conservative, it has little else to offer.
4. Objective and Task.
a. Objective and task budgeting allocates funds whereby the firm:
• Determines its promotion objectives.
• Outlines the tasks to accomplish these objectives.
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• Determines the promotion cost of performing these tasks.
b. The advantages of this method are that it:
• Takes into account what the company wants to accomplish.
• Requires that the objectives be specified.
• Integrates the strengths of the other budgeting approaches.
c. The disadvantage of this method is that the judgment required to determine
the tasks needed to accomplish objectives.
D. Selecting the Right Promotional Tools
• The relative combination of the five basic IMC tools must be specified.
• Due to the number and variety of promotional tools available to marketers, there
are many possible combinations that can achieve a given promotion objective.
• Therefore, marketers use an analytical approach and their experience to select the
appropriate tools for each promotional objective.
• The promotion mix can vary from a simple program using a single tool to a
comprehensive program using all forms.
• At this stage, it is important to assess the relative importance of the various tools.
[Video 17-4: Olympics Video]
E. Designing the Promotion
• The central element of a promotion program is the promotion itself.
a. Advertising consists of the copy and artwork for the target audience.
b. Personal selling depends on the characteristics and skills of the salesperson.
• The design of the promotion:
a. Determines the message that is communicated to the target audience.
b. Requires the most creativity.
c. Is the result of insights into consumers’ interests and purchasing behaviors.
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• One of the challenges of IMC is to design each promotional activity to
communicate the same message.
F. Scheduling the Promotion
• Once the design of promotional elements is complete, it is important to determine
the most effective timing of their use.
• The promotion schedule describes:
V. EXECUTING AND ASSESSING THE PROMOTION PROGRAM
• Carrying out promotion programs is expensive and time consuming.
• Firms with a market orientation are more likely to implement IMC programs.
• Firms with support from top management have more effective IMC programs.
• Media agency PHD Media:
a. Recently won Advertising Age magazine’s Media Agency of the Year award.
b. Part of a global network of 4,000 people in 80 countries.
[Video 17-4: PHD Media Video]
• Many agencies may still be specialists, focusing on one element of an IMC program.
• The trend is toward an integrated perspective that includes all forms of promotion.
• Agencies can accomplish this by including account managers, channel experts, media
specialists, and planning personnel in their campaign design efforts.
• To evaluate its IMC programs, a firm uses an IMC audit, which:
a. Analyzes the internal communication network of the firm.
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e. Determines the IMC expertise of company and agency personnel.
f. This process is becoming increasingly important as:
• Consumer-generated media like blogs and social networks become popular.
• The use of search engines, like Google and Bing, grows.
• In addition to ensuring that traditional forms of communication are integrated,
companies must be able to:
a. Monitor consumer content.
• Marketers should pretest each IMC program design before it is actually used to make
changes that improve its effectiveness.
• Posttests should evaluate the impact of each promotion and its contribution toward
achieving objectives.
• To fully benefit from IMC programs:
a. Companies:
• Must create and maintain a test-result database that…
• Allows comparisons of the relative impact of the promotional tools in various
situations.
b. Information from the database will:
• Currently:
a. 75 percent of businesses may test new communication elements.
• The assessment determines which element of promotion works better.
• In an integrated program:
a. The tools are used for different reasons.
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b. Their combined use creates a synergy that should be the focus of the assessment.
• Further assessment is necessary when firms have international promotion programs.
LEARNING REVIEW
17-10. What are the characteristics of good promotion objectives?
Answer: Promotion objectives should possess three important qualities. They should
17-11. What is the weakness of the percentage of sales budgeting approach?
17-12. How have advertising agencies changed to facilitate the use of IMC programs?
Answer: Some agencies have adopted: (1) a total communications solutions approach;
(2) a long-term perspective in which all forms of promotion are integrated; (3) an IMC
VI. DIRECT MARKETING [LO 17-5]
Direct marketing:
• Has many forms (direct mail, catalogs, television home shopping, telemarketing,
direct selling, direct response advertising, and interactive marketing).
• Uses a variety of media (print, direct response television, etc.).
A. The Growth of Direct Marketing
• Increased interest in customer relationship management has contributed to the
dramatic growth in direct marketing.
• The availability of databases and new printing technologies allows marketers to:
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a. Design customized direct marketing programs.
b. Create one-to-one interactions.
• Economically, direct marketing:
a. Growth has outpaced total economic growth.
• Direct marketing expenditures of $146 billion…
b. Marketers spend more than $47 billion on direct mail each year, generating a
3.4 percent response rate.
• [Figure 17-8] Shows some of the most popular forms of direct marketing and
their typical response rates.
• Many companies integrate their direct marketing with other forms of promotion
B. The Value of Direct Marketing
• Consumers benefit from direct marketing efforts, which enables them to:
a. Order products or services by phone or mail.
b. Make online purchases.
c. Respond to a TV or mobile (smartphone, etc.) offer.
d. Purchase a product they’ve seen portrayed positively in social media.
• Direct marketing generates several benefits that create value. Consumers:
a. Don’t have to go to a store. f. Have more fun and privacy.
• The value of direct marketing for sellers can be described in terms of the
responses it generates:
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a. Direct orders.
• Are the result of a direct marketing offer that…
• Contains all the information necessary for a prospective buyer to…
• Make a decision to purchase and complete the transaction.
b. Lead generation.
• Is the result of a direct marketing offer designed to…
c. Traffic generation.
• Is the outcome of a direct marketing offer designed to…
• Motivate people to visit a business.
C. Technological, Global, and Ethical Issues in Direct Marketing
• Information technology and databases:
a. Are the result of organizations’ efforts to create profiles of customers:
• Lifestyle, media use, and demographic data.
• Price, quantity, and brand data from businesses where purchases are made.
b. New integrated marketing databases match:
• Consumers’ postal addresses, telephone numbers, and e-mail addresses.
• Customer records with Facebook profiles, Twitter following behavior, and
Google search activity.
c. Are becoming even more important as a result of:
• The Direct Marketing Association estimates that e-mail advertising expenditures
outperform social media advertising by a ratio of 3-to-1.
• Catalog businesses have found they can reduce:
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• Related to postage fees, many direct marketers are assessing the potential impact
of the USPS plan for a five-day mail delivery cycle.
• Direct marketing faces several challenges and opportunities in global markets:
a. Several countries have mandatory “opt–in” requirements for customers to give
permission to include their name on a list for direct marketing solicitations.
b. Mail, telephone, and Internet systems in many countries are not as well
developed as they are in the U.S.
c. The need for improved reliability and security in these countries has slowed
the growth of direct mail.
• Direct marketers face ethical and sustainable challenges that are of increasing
concern to consumers, governments, and direct marketers.
a. Concerns about privacy have led to various attempts to provide guidelines that
balance consumer and business interests.
• The EU passed the Data Protection Directive, a consumer privacy law.
• The General Data Protection Regulation will address social networks and
cloud computing, and take effect in 2016.
b. There are growing concerns about web “tracking” tools used by direct
marketers to segment consumers and match them with advertising.
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MAKING RESPONSIBLE DECISIONS
Ethics: What Is the Future of Your Privacy?
In 2003, the Federal Trade Commission opened the National Do-Not-Call Registry to
give Americans a tool for maintaining their privacy on home telephone lines. More than 70
percent of all households have registered. Since then, several state legislatures have passed
laws to create do-not-call lists for “robo” telephone calls. New discussions have also begun
related to privacy of mail and computer use.
The big question is, “What information is private?” Are telephone numbers,
addresses of residences, and online activities private or public information? Proponents of a
Do-Not-Mail registry argue that citizens should be able to stop unsolicited mail. Those in
favor of Do-Not-Track regulations suggest that website owners who use cookies to collect
information about consumers’ shopping habits should only do so with the consumers’
consent. Marketers suggest that consumers who share this information are more likely to
receive messages and advertising that better match their interests.
The Direct Marketing Association advocates these solutions:
a. It created DMAchoice, an online tool to help consumers manage the types of mail
and e-mail they receive.
b. It designed a Self-Regulatory Program for Online Behavioral Advertising that
encourages advertisers to include an Ad Choices Icon in the corner of online ads
to allow consumers to opt out of having data collected about their online
activities.
The European Union recently passed the E-Privacy Directive to provide explicit laws
for website owners. The U.S. Senate is evaluating the Do-Not-Track Online Act. These
guidelines and regulations, of course, have huge implications for advertisers, portals such as
Facebook and Google, and consumers.
[Video 17-6: Ad Choices Video]
LEARNING REVIEW
17-13. The ability to design and use direct marketing programs has increased with the
availability of __________ and __________.
17-14. What are the three types of responses generated by direct marketing activities?
Answer: They are: (1) direct orders, the result of offers that contain all the information
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APPLYING MARKETING KNOWLEDGE
1. After listening to a recent sales presentation, Mary Smith signed up for membership
at the local health club. On arriving at the facility, she learned there was an
additional fee for racquetball court rentals. “I don’t remember that in the sales talk;
I thought they said all facilities were included with the membership fee,” complained
Mary. Describe the problem in terms of the communication process.
2. Develop a matrix to compare the five elements of the promotional mix on three
criteria—to whom you deliver the message, what you say, and when you say it.
Answer:
3. Explain how the promotional tools used by an airline would differ if the target
audience were (a) consumers who travel for pleasure and (b) corporate travel
departments that select the airlines to be used by company employees.
Answers:
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4. Suppose you introduced a new consumer food product and invested heavily both in
national advertising (pull strategy) and in training and motivating your field
salesforce to sell the product to food stores (push strategy). What kinds of feedback
would you receive from both the advertising and your salesforce? How could you
increase both the quality and quantity of each?
Answers: In general, you should expect little feedback from your national advertising
5. Fisher-Price Company, long known as a manufacturer of children’s toys, has
introduced a line of clothing for children. Outline a promotional plan to get this
product introduced in the marketplace.
6. Many insurance companies sell health insurance plans to companies. In these
companies, the employees pick the plan but the set of offered plans is determined by
the company. Recently, Blue Cross-Blue Shield, a health insurance company, ran a
television ad stating, “If your employer doesn’t offer you Blue Cross-Blue Shield
coverage, ask why.” Explain the promotional strategy behind the advertisement.
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7. Identify the sales promotion tools that might be useful for (a) Tastee Yogurt, a new
brand introduction, (b) 3M self-sticking Post-It® Notes, and (c) Wrigley’s Spearmint
Gum.
8. Design an integrated marketing communications program—using each of the five
promotional elements—for Rhapsody, the online music service.
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9. BMW recently introduced its first sport-utility vehicle, the X6, to compete with other
crossover vehicles such as the Mercedes-Benz R-class. Design a direct marketing
program to generate (a) leads, (b) traffic in dealerships, and (c) direct orders.
Answers: Students should consider the many forms of direct marketing including direct
mail and catalogs, television, telemarketing, direct selling, direct response advertising and
interactive online marketing. Instructors can remind students of the discussion of nonstore
retailing in Chapter 16 and alert them to the online discussion in Chapter 21.
10. Develop a privacy policy for database managers that provides a balance of consumer
and seller perspectives. How would you encourage voluntary compliance with your
policy? What methods of enforcement would you recommend?
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BUILDING YOUR MARKETING PLAN
To develop the promotion strategy for your marketing plan, follow the steps
suggested in the planning phase of the promotion decision process described in Figure 17-6.
1. You should (a) identify the target audience, (b) specify the promotion objectives,
(c) set the promotion budget, (d) select the right promotion tools, (e) design the
promotion, and (f) schedule the promotion.
2. Also specify the pretesting and posttesting procedures needed in the implementation
and evaluation phases.
3. Finally, describe how each of your promotion tools are integrated to provide a
consistent message.
Helping with Common Student Problems
What students are asked to do in Questions #1, #2, and #3 above is a very, very big order.
In fact, if done in detail for a large business, this could be a complete promotional plan written
for a promotion or advertising course. However, this experience could be both fun and
frightening for students if they are actually trying their hands at writing a promotional piece to
include in their marketing plans. For simplicity, have student outline a public relations, sales
promotion, or direct marketing strategy.
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TEACHING NOTE FOR VIDEO CASE VC-17
Taco Bell: Using IMC to Help Customers Live Mas!
This case describes how Taco Bell used integrated marketing communications (IMC) in
its “Live Mas” campaign and in the introduction of Doritos Locos Tacos. Taco Bell was
recognized by Advertising Age magazine as the winner of the Marketer of the Year award for
its extraordinary use of IMC. The campaign utilized traditional promotion tools and new social
media, and provides an excellent example of the shift to new IMC models of communication.
Synopsis
The founder of Taco Bell, Glen Bell, started his career as a pioneer of the fast-food
industry by opening a restaurant called Bell’s Burgers. One of his nearby competitors was a
similar fast-food restaurant run by two brothers named McDonald, and eventually the
competition between them convinced Bell to switch from hamburgers to tacos. Tacos and taco
restaurants were new to American consumers, so Bell used his entrepreneurial spirit to develop
the entire Taco Bell restaurant concept, including the crunchy taco shells, the mission-style
buildings, and the unique logo (with the bell). Today Taco Bell is a subsidiary of Yum!
Brands, and has more than 6500 locations and $7 billion in annual sales.
Taco Bell has a long history of creative promotional activities, including an offer of free
tacos for everyone in the United States if a piece of the falling Mir space station hit a target
Taco Bell placed in the Pacific Ocean. In addition, Taco Bell has developed many memorable
advertising campaigns such as “Yo quiero Taco Bell,” “Get it at The Bell,” and “Think Outside
the Bun.” As Taco Bell’s primary target customers (millennials) changed their perspective
from “food as fuel” to “food as experience” Taco Bell managers recognized an opportunity to
reposition the restaurant chain. The result was the “Live Mas” campaign which suggested a
new mindset and not necessarily an age range or demographic.
Taco Bell also went through three years of development, and 45 prototypes, before
launching its Doritos Locos Tacos. The product launch led to sales of 100 million tacos in its
first 10 weeks.
Teaching Suggestions
Most students will recognize Taco Bell because they have purchased something from a
Taco Bell restaurant or they have been exposed to Taco Bell advertising and branding efforts.
The following questions can be used to begin discussion of the video case:
1. How many of you have visited a Taco Bell restaurant? If some students are familiar with
Taco Bell, discuss its image, menu, and positioning relative to other fast food restaurants.
2. How many of you have heard the phrase, “Live Mas” or are familiar with the Doritos
Locos Tacos? If any students answer yes, ask them how they became aware of the
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campaign or the product. Their answers might include television advertising, social media,
and promotions.
These questions should help students begin to see how Taco Bell used integrated marketing
communications and social media to communicate its message.
Answers to Questions
1. What factors contributed to Taco Bell’s early success?
Answer:
.
2. Which of the promotional elements described in Figure 14-2 were used by Taco
Bell in its Doritos Locos Tacos campaign?