Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-21
5. Yellow Pages.
a. Advertisers spend about $8 billion in the U.S. on this medium.
b. 40 percent of U.S. consumers use print yellow pages at least once a year and
25 percent use online (desktop, tablet, mobile) yellow pages.
c. Advantages of yellow pages:
• Is a directional medium because they help consumers know where
purchases can be made.
• This occurs only after other media have created awareness and demand.
d. Disadvantage of yellow pages:
• Directories have proliferated to compete in cities and for ethnic groups.
• Examples: AT&T Yellow Pages, Yellow Book, and DEX.
• Have limited accountability and ROI metrics. Need to improve:
6. Internet.
a. Is a relatively new medium for advertisers.
b. Has attracted a wide variety of industries.
c. The advantages of using online advertising:
• Offers a visual message similar to print advertising.
• Can use the audio and video capabilities of the Internet to:
– Attract more attention from viewers.
– Provide an element of entertainment to the message.
• Allows for rich media, which:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-22
d. There are a variety of online advertising options:
• [Figure 18-4] The most popular options are paid search, displays (banner)
ads, classified ads, and video.
– Paid search is one of the fastest-growing forms of Internet advertising.
– About 80 percent of all Internet traffic begins at a search engine such
as Google or Yahoo!
• The use of display (banner), classified, and video ads are growing.
– Consumers are developing “banner blindness” because the click-
through rate has been declining to its current level of 0.1 percent.
– Classified ads, such as those on Craigslist, and video ads also
contribute to the growth of online advertising.
d. An advantage of online advertising is that it provides many of the advantages
and characteristics of other media TV, magazines, newspapers, etc.
• Mobile marketing now includes broad set of interactive messaging options
to engage with consumers through any mobile device.
f. Disadvantages of using online advertising:
• As a relatively new medium, technical and administrative standards are
still evolving.
– Makes it difficult for advertisers to run national online campaigns
across multiple websites.
• The difficulty of measuring the impact after viewers see an ad on their
computers and other devices.
– Nielsen Online Ratings:
* Measures actual Internet use through…
* Meters installed on the computers of…
* 500,000 individuals in 20 countries at home and work.
– comScore studied 139 online ad campaigns, which revealed that online
ads:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-23
MAKING RESPONSIBLE DECISIONS
Ethics: Who Is Responsible for Preventing Click Fraud?
Spending on Internet advertising is expected to now exceeds $69 billion as many
advertisers shift their budgets from print and TV to the Internet. One advantage of online
advertising is that they only pay when someone clicks on their ad. Unfortunately, the growth
of the medium has led to “click fraud,” which is the deceptive clicking of ads solely to
increase the amount advertisers must pay.
7. Outdoor.
a. Outdoor advertising is effective for reminding consumers about a product.
b. Billboards are the most common form of outdoor advertising.
• The advantages of using billboards are:
– Has good reach and frequency in a desired geographical area.
– Has been shown to increase purchase rates.
– Is a good visual medium.
– Offers supplemental reinforcement for well-known products.
– Is a relatively low-cost, flexible alternative.
• The disadvantages of using billboards are:
c. Transit advertising.
• Includes messages on the interior and exterior of buses, subways, light-rail
cars, and taxis.
• Is common in metropolitan areas.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-24
• Advantages are:
– Mass transit is growing.
– Selectivity—advertisers can buy space by neighborhood or route.
• A disadvantage is that:
– During heavy travel times when the audiences are the largest…
• The outdoor advertising industry has experienced a growth surge recently.
– According to the Outdoor Advertising Association of America,
outdoor advertising expenditures have grown to $7 billion annually.
– The growth is the result of:
* Creative forms of outdoor advertising.
* The conversion to digital billboards.
• New digital billboards:
– Allow advertisers to quickly present conditional content, which…
* Are based on current events, weather, business conditions, etc.
* Can display PSAs, such as Amber and weather alerts.
• A recent study found that:
– 80 percent of U.S. residents can be reached daily through outdoor
advertising.
– Make the commute more interesting.
• The outdoor advertising industry faces important environmental concerns:
8. Other Media.
a. Advertisers:
• Use nontraditional advertising options called out-of-home advertising.
• Is also referred to as place-based media because…
• Traditional media have become more expensive and cluttered.
b. Messages are:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-25
9. Selection Criteria.
Choosing between alternative media is difficult and depends on several factors:
a. The target audience’s media habits help decide among the alternatives.
b. Occasionally, product attributes determine the media used.
• Radio is excluded if color is a part of product appeal.
c. Alternative media are compared using reach and cost (CPM).
G. Scheduling the Advertising
• Three factors must be considered when scheduling a product ad:
a. Buyer turnover.
• Is how often new buyers enter the market to buy the product.
• The higher the buyer turnover, the greater the amount of advertising.
b. Purchase frequency. The more frequently the product is purchased, the less
repetition is required.
c. Forgetting rate. The speed with which buyers forget the brand if advertising
is not seen.
• Most companies follow one of three basic scheduling approaches:
a. Continuous (steady) schedule.
b. Flighting (intermittent) schedule.
• Periods of advertising are scheduled between periods of no advertising to
reflect seasonal demand.
• Examples: Snow skis or suntan lotion.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-26
c. Pulse (burst) schedule.
• Combines flighting and continuous schedules due to…
• Research indicates that:
a. The effectiveness of a particular ad wears out quickly.
b. Many alternative forms of a commercial may be more effective.
LEARNING REVIEW
18-5. You see the same ad in Time and Fortune magazines and on billboards and TV.
Is this an example of reach or frequency?
Answer: Reach—using more of the same media type (magazines) as well as using more
18-6. Why has the Internet become a popular advertising medium?
18-7. What factors must be considered when choosing among alternative media?
III. EXECUTING THE ADVERTISING PROGRAM
• Executing the advertising program involves:
a. Pretesting the advertising copy.
b. Carrying out the advertising program.
• Evaluating advertising efforts before and after the ads are run in the campaign ensures
that advertising expenditures are not wasted.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-27
A. Pretesting the Advertising
Pretests:
a. Are conducted before an advertisement is placed in any medium.
1. Portfolio Tests.
a. Are used to test copy alternatives.
b. The test ad is placed in a portfolio with other ads and stories.
2. Jury Tests.
a. Involve showing the ad copy to a panel of consumers.
b. Having consumers rate the ads in terms of:
• How they liked it.
c. Unlike the portfolio test, consumers see only the ad of interest; it isn’t hidden.
3. Theater Tests.
a. Are the most sophisticated form of pretesting.
b. Consumers are invited to view new television shows or movies in which test
commercials are also shown.
c. Viewers register their feelings about the ads:
B. Carrying Out the Advertising Program
[Figure 18-5] The responsibility for actually carrying out the advertising program can
be handled in one of three types of agencies:
• The full-service agency.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-28
a. Provides the most complete range of services, including:
• Market research. • Artwork.
• Media selection. • Production.
• Copy development.
b. Develops and places ads for a client.
c. Traditionally charged a commission of 15 percent of media costs.
d. With IMC approaches, most advertisers:
• Have switched from paying commissions.
• Includes:
– Agency costs.
– A 5 to 10 percent profit.
– Bonuses if specific performance goals are met such as.
• The Association of National Advertisers estimates that there may be a
shift away from this method.
e. Coca-Cola announced a new approach to compensating advertising agencies
called “value based compensation.”
– It is not based on time or cost, but rather is based on value.
• Limited-service agencies.
a. Specialize in one aspect of the advertising process.
• Provide creative services to develop the advertising copy.
• Buy previously unpurchased media space.
• Provide Internet services.
b. Are compensated by a contractual agreement for the services performed.
• In-house agencies.
a. Consist of the company’s own advertising staff.
b. May provide full services or a limited range of services.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-29
IV. ASSESSING THE ADVERTISING PROGRAM
Ads must be posttested to determine:
• Whether they are achieving their intended objectives.
• If changes must be made in the advertising program.
A. Posttesting the Advertising
Posttests are conducted after an advertisement has been shown to the target audience
to determine whether it accomplished its intended purpose.
1. Aided Recall. The Starch test determines the percentage of the sample who:
a. Remember reading, viewing, or listening to the ad (noted).
2. Unaided Recall.
a. Respondents are asked, “What ads do you remember seeing yesterday?”
3. Attitude Tests.
a. Respondents are asked questions to measure changes in their attitudes toward
4. Inquiry Tests.
5. Sales Tests.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-30
• Measure sales results from a given advertising campaign.
b. Can:
• Alter advertising variables (schedule or copy) through cable systems to…
• Observe subsequent sales effects by…
• Monitoring data collected at checkout scanners.
B. Making Needed Changes
Advertising copy posttest results can be used to change the advertising program.
• If the posttest results show that an advertisement is doing poorly in terms of
awareness, cost efficiency, or sales:
a. It may be dropped.
• Sometimes an advertisement may be so successful it is:
a. Run more frequently.
b. Used as the basis of a larger advertising program.
LEARNING REVIEW
18-8. Explain the difference between pretesting and posttesting advertising copy.
18-9. What is the difference between aided and unaided recall posttests?
Answer: Aided and unaided recall posttests are conducted after the ads are shown to the
target audience. Aided recall involves showing an ad to respondents who then are
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-31
V. SALES PROMOTION [LO 18-4]
• Sales promotion is a key element of the promotional mix, which now accounts for
more than $79 billion in annual expenditures.
• In a recent forecast by Zenith Media Services, sales promotion expenditures were
18 percent of all promotional spending:
• The allocation of marketing expenditures reflects the trend toward marketing
communications programs that include a variety of sales promotion elements.
• There are two kinds of sales promotions: consumer-oriented and trade-oriented.
A. Consumer-Oriented Sales Promotions
[Figure 18-6] Consumer-oriented sales promotions, or simply consumer
promotions, consist of sales tools used to support a company’s advertising and
personal selling directed to ultimate consumers.
1. Coupons.
a. Coupons are sales promotions that offer a discounted price to the consumer,
which encourages trial.
b. Selected coupon stats:
• 321 billion coupons were issued recently.
• $550 billion worth of coupons were distributed annually.
c. Firms like P&G, Nestlé, and Kraft have increased their use of coupons.
d. The top retailers for coupon redemption are Walmart, Kroger, and Target.
e. Coupons generated at Internet sites (Valpak, etc.) and mobile phones:
• Have been increasing although…
• Account for less than 1 percent of all coupons.
f. The 12% redemption rate for online coupons is substantially higher than other
forms of coupons.
g. “Daily deal” sites Groupon and LivingSocial have fueled the growth in
couponing.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-32
h. Coupons:
• Are available in almost every product category.
• Are used by men and women of all ages.
i. Coupons help increase sales and market share during the period immediately
after they are distributed.
j. Coupons do lower the price paid by loyal consumers, which reduce revenues.
k. Marketers:
• Are interested in coupon programs directed at potential first-time buyers
that…
• Use in-store coupon machines to match coupons to their recent purchases.
l. Coupons are often far more expensive than their face value.
• They can cost three times their face value after paying for the
advertisement, dealer handling, clearinghouse costs, and redemption.
• Misredemption:
• The Coupon Information Corporation estimates that companies pay out
refunds worth hundreds of millions each year as a result of coupon fraud.
• Marketers are considering adding holograms and visual aids to coupons to
help cashiers identify valid coupons.
2. Deals.
a. Are short-term price reductions, such as a “2 for 1” deal or BOGO (Buy One,
Get One).
3. Premiums.
a. Consists of merchandise offered free or at a large savings over their retail
price.
18-33
4. Contests.
a. Consumers apply their skill or analytical or creative thinking to win a prize.
b. Have been growing, as requests for videos, photos, and essays are consistent
with the trend toward user/consumer-generated content.
5. Sweepstakes.
a. Participants submit an entry but there is no analytical or creative effort.
b. Consist of two variations:
• One that offers products that consumers value as prizes.
• One that offers an “experience” as the prize.
c. The Federal Trade Commission and state laws to:
• Regulate fairness.
• Guarantee that prizes are actually awarded.
6. Samples.
a. Sampling:
• Is the offering of a product free or at a greatly reduced price.
b. A trial size is offered that is smaller than the regular package size.
c. If consumers like the sample, they may remember and buy the product.
[ICA 18-3: Valassis Product Sampling Promotions]
7. Loyalty Programs.
a. Are sales promotion tools that:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-34
b. The most popular are credit card reward programs.
c. Are becoming popular in other product categories.
d. There are more than 3.3 billion loyalty program memberships in the U.S.
e. One trend in loyalty programs today is to:
• Customize the rewards and benefits for different segments of the program,
which has led to promotions targeted at:
– New members.
• Another trend is:
– The shift from programs where points and rewards can be earned from
only one operator to…
– An “open economy” for loyalty where…
– Points and rewards can be earned from many interchangeable
programs.
8. Point-of-Purchase Displays.
a. A point-of-purchase display:
• Takes the form of advertising signs that…
• Sometimes hold, store, or display the product.
• Is often located in high-traffic areas:
• Is designed to maximize the consumer’s attention.
b. Annual expenditures on point-of-purchase promotions are expected to grow
and become integrated with other promotions.
c. One-third of a consumer’s buying decisions are made in the grocery store.
• Grocery product manufacturers want to get their message to you…
d. At a growing number of supermarkets, digital signage may be used.
e. Example: Whole Foods Market is using digital signage to educate shoppers
about sustainable growing practices.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-35
9. Rebates.
a. The cash rebate offers money based on proof of purchase.
b. On lower-priced items:
• Many buyers never mail in proof of purchase to take advantage of it…
c. Online consumers are more likely to use rebates.
10. Product Placements.
a. Product placements involve the use of a brand-name product in a movie,
television show, video game, or commercial for another product.
b. Examples—Movies: Reese’s Pieces in E.T.; Ray-Ban sunglasses in Top Gun;
Aston Martin and Omega watches in Skyfall.
c. Example—TV shows: Apple in Modern Family.
d. Companies are usually eager to gain exposure for their products.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-36
k. Reverse product placement is a variation of this form of promotion:
[ICA 18-4: Product Placement in Movies and TV]
B. Trade-Oriented Sales Promotions
Trade-oriented sales promotions, or simply trade promotions, are sales tools used
to support a company’s advertising and personal selling directed to wholesalers,
distributors, or retailers.
1. Allowances and Discounts.
a. Trade promotions often focus on maintaining or increasing inventory levels in
the channel of distribution.
b. Allowances and discounts:
• Are effective methods for encouraging intermediary purchases.
• Overuse can lead to changes in retailers’ ordering patterns.
c. Merchandise allowances.
• Reimburse a retailer for extra in-store support or special featuring of the
brand.
• Require performance contracts between the manufacturer and trade
member that…
– Specify the activity to be performed, such as…
d. Case allowances.
• Are discounts on each case ordered during a specific time period.
• Are usually deducted from the invoice.
• The “free goods” approach:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-37
– Example: 1 case free for every 10 cases ordered.
e. Finance allowances.
• Pay retailers for financing costs or financial losses associated with
consumer sales promotions.
• Take the form of:
– A floor stock protection program:
2. Cooperative Advertising.
a. Resellers often perform the important function of promoting the
manufacturer’s products at the local level.
b. Cooperative advertising:
• Consists of programs in which a manufacturer pays a percentage of the
retailer’s local advertising expense for advertising the manufacturer’s
products.
c. The manufacturer:
• May pay about 50 percent of the advertising cost up to a certain dollar
limit…
• Based on the purchases the retailer makes of the manufacturer’s products.
d. The manufacturer furnishes the retailer with a selection of different print or
broadcast ads for the retailer to adapt and use.
3. Training of Distributors’ Salesforces.
a. One of the many functions the intermediaries perform is customer contact and
selling for the producers they represent.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-38
• Training can increase resellers’ sales performances.
d. Training activities include:
• Producing manuals and brochures to educate the reseller’s salesforce, who
in turn use them in selling situations.
e. Manufacturers also develop incentive and recognition programs to motivate
reseller’s salespeople to sell their products.
LEARNING REVIEW
18-10. What’s the difference between a coupon and a deal?
Answer: Coupons and deals are consumer-oriented sales promotion tools used to
18-11. Which sales promotional tool is most common for new products?
18-12. Which trade promotion is used on an ongoing basis?
Answer: Trade-oriented sales promotions (or simply trade promotions) are sales tools
VI. PUBLIC RELATIONS [LO 18-5]
• Public relations:
a. Seeks to influence the image of an organization and its products and services.
b. Use a variety of tools directed at many distinct audiences.
• Public relations personnel:
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-39
a. Focus on communicating positive aspects of the business.
b. May be called on to minimize the negative impact of a problem or crisis.
• Publicity tools are methods of obtaining nonpersonal presentation of an organization,
product, or service without direct cost.
a. News release.
• Consists of an announcement about changes in the firm or its product line.
• Informs a newspaper, radio station, or other medium of an idea for a story.
b. News conference.
• Is where media representatives are:
– Invited to an informational meeting.
– Sent advance materials regarding the content.
• This tool is often used when:
c. Public service announcements (PSAs).
• Are free space or time donated by the media.
• Are relied upon heavily by nonprofit organizations.
• High-visibility individuals can create visibility and impact on public perceptions of
their companies, products, and themselves.
VII. INCREASING THE VALUE OF PROMOTION
Promotion practices have changed to improve transactions and increase customer
intimacy by emphasizing long-term relationships and increasing self-regulation.
A. Building Long-Term Relationships
• Promotion can contribute to brand and store loyalty by:
a. Improving its ability to target individual preferences.
b. Engaging customers in valuable and entertaining communication.
• New social and mobile media have provided immediate opportunities for
personalized promotion activities.
Chapter 18 - Advertising, Sales Promotion, and Public Relations
18-40
• Technological developments have helped traditional media (TV and radio) focus
on individual preferences through services such as Apple TV and SiriusXM
Radio.
• Marketers increasingly incorporate interactive technologies and new media into
the overall creative process.
B. Self-Regulation
• In the past, consumers have been misled, or even deceived, by some promotions.
a. Examples include:
• Sweepstakes, where the gifts were not awarded.
• Rebate offers that were a hassle.
• Advertisements, whose promises were overstated.
b. Promotions targeted at special groups such as children and the elderly also
raise ethical concerns.
• Some believe government regulation through:
