Principles of Marketing (activebook 2.0 ): Chapter 15 (2024)

Chapter: Integrated Marketing Communication Strategy

Add/Edit Comments

Wehave looked at the steps in planning and sending communications to atarget audience. But how does the company decide on the total promotion budget and its division among the major promotional tools to create the promotion mix? By what process does it blend the tools to create integrated marketing communications? We now look at these questions.

Add/Edit Comments

Setting the Total Promotion Budget

Add/Edit Comments

Oneof the hardest marketing decisions facing a company is how much tospend on promotion. John Wanamaker, the department store magnate, oncesaid, "I know that half of my advertising is wasted, but I don't knowwhich half. I spent $2 million for advertising, and I don't know ifthat is half enough or twice too much." Thus, it is not surprising thatindustries and companies vary widely in how much they spend onpromotion. Promotion spending may be 20 to 30 percent of sales in thecosmetics industry and only 2 or 3 percent in the industrial machineryindustry. Within a given industry, both low and high spenders can befound.¹²

Add/Edit Comments

Howdoes a company decide on its promotion budget? We look at four commonmethods used to set the total budget for advertising: the affordable method, the percentage-of-sales method, the competitive-parity method, and the objective-and-task method.¹³

Add/Edit Comments

Affordable Method

Add/Edit Comments

Some companies use the affordable method:They set the promotion budget at the level they think the company canafford. Small businesses often use this method, reasoning that thecompany cannot spend more on advertising than it has. They start withtotal revenues, deduct operating expenses and capital outlays, and thendevote some portion of the remaining funds to advertising.

Add/Edit Comments

Unfortunately,this method of setting budgets completely ignores the effects ofpromotion on sales. It tends to place advertising last among spendingpriorities, even in situations in which advertising is critical to thefirm's success. It leads to an uncertain annual promotion budget, whichmakes long-range market planning difficult. Although the affordablemethod can result in overspending on advertising, it more often resultsin underspending.

Add/Edit Comments

Percentage-of-Sales Method

Add/Edit Comments

Other companies use the percentage-of-sales method,setting their promotion budget at a certain percentage of current orforecasted sales. Or they budget a percentage of the unit sales price.The percentage-of-sales method has advantages. It is simple to use andhelps management think about the relationships between promotionspending, selling price, and profit per unit.

Add/Edit Comments

Despitethese claimed advantages, however, the percentage-of-sales method haslittle to justify it. It wrongly views sales as the cause of promotion rather than as the result."A study in this area found good correlation between investments inadvertising and the strength of the brands concerned—but it turned outto be effect and cause, not cause and effect.… The strongest brands hadthe highest sales and could afford the biggest investments inadvertising!"¹⁴Thus, the percentage-of-sales budget is based on availability of fundsrather than on opportunities. It may prevent the increased spendingsometimes needed to turn around falling sales. Because the budgetvaries with year-to-year sales, long-range planning is difficult.Finally, the method does not provide any basis for choosing a specific percentage, except what has been done in the past or what competitors are doing.

Add/Edit Comments

Competitive-Parity Method

Add/Edit Comments

Still other companies use the competitive-parity method,setting their promotion budgets to match competitors' outlays. Theymonitor competitors' advertising or get industry promotion spendingestimates from publications or trade associations, and then set theirbudgets based on the industry average.

Add/Edit Comments

Twoarguments support this method. First, competitors' budgets representthe collective wisdom of the industry. Second, spending whatcompetitors spend helps prevent promotion wars. Unfortunately, neitherargument is valid. There are no grounds for believing that thecompetition has a better idea of what a company should be spending onpromotion than does the company itself. Companies differ greatly, andeach has its own special promotion needs. Finally, there is no evidencethat budgets based on competitive parity prevent promotion wars.

Add/Edit Comments

Objective-and-Task Method

Add/Edit Comments

The most logical budget-setting method is the objective-and-task method,whereby the company sets its promotion budget based on what it wants toaccomplish with promotion. This budgeting method entails (1) definingspecific promotion objectives, (2) determining the tasks needed toachieve these objectives, and (3) estimating the costs of performingthese tasks. The sum of these costs is the proposed promotion budget.

Add/Edit Comments

Theobjective-and-task method forces management to spell out itsassumptions about the relationship between dollars spent and promotionresults. But it is also the most difficult method to use. Often, it ishard to figure out which specific tasks will achieve specificobjectives. For example, suppose Sony wants 95 percent awareness forits latest camcorder model during the six-month introductory period.What specific advertising messages and media schedules should Sony useto attain this objective? How much would these messages and mediaschedules cost? Sony management must consider such questions, eventhough they are hard to answer.

Add/Edit Comments

Setting the Overall Promotion Mix

Add/Edit Comments

Theconcept of integrated marketing communications suggests that thecompany must blend the promotion tools carefully into a coordinated promotion mix.But how does the company determine what mix of promotion tools it willuse? Companies within the same industry differ greatly in the design oftheir promotion mixes. For example, Avon spends most of its promotionfunds on personal selling and direct marketing, whereas Revlon spendsheavily on consumer advertising. Hewlett-Packard relies on advertisingand promotion to retailers when marketing personal computers, whereasDell Computer uses only direct marketing. We now look at factors thatinfluence the marketer's choice of promotion tools.

Add/Edit Comments

The Nature of Each Promotion Tool

Add/Edit Comments

Eachpromotion tool has unique characteristics and costs. Marketers mustunderstand these characteristics in selecting their mix of tools.

Add/Edit Comments

ADVERTISINGAdvertisingcan reach masses of geographically dispersed buyers at a low cost perexposure, and it enables the seller to repeat a message many times. Forexample, television advertising can reach huge audiences. An estimated120 million to 130 million Americans tuned in to at least part of themost recent Super Bowl, more than 72 million people watched at leastpart of the last Academy Awards broadcast, and nearly 52 millionwatched the final episode of the first Survivor series. "Ifyou want to get to the mass audience," says a media services executive,"broadcast TV is where you have to be." He adds, "For anybodyintroducing anything who has to lasso audience in a hurry—a newproduct, a new campaign, a new movie—the networks are still the biggestshow in town."¹⁵

Add/Edit Comments

Beyondits reach, large-scale advertising says something positive about theseller's size, popularity, and success. Because of advertising's publicnature, consumers tend to view advertised products as more legitimate.Advertising is also very expressive—it allows the company to dramatizeits products through the artful use of visuals, print, sound, andcolor. On the one hand, advertising can be used to build up a long-termimage for a product (such as Coca-Cola ads). On the other hand,advertising can trigger quick sales (as when Sears advertises a weekendsale).

Add/Edit Comments

Advertisingalso has some shortcomings. Although it reaches many people quickly,advertising is impersonal and cannot be as directly persuasive as cancompany salespeople. For the most part, advertising can carry on only aone-way communication with the audience, and the audience does not feelthat it has to pay attention or respond. In addition, advertising canbe very costly. Although some advertising forms, such as newspaper andradio advertising, can be done on smaller budgets, other forms, such asnetwork TV advertising, require very large budgets.

Add/Edit Comments

PERSONAL SELLINGPersonalselling is the most effective tool at certain stages of the buyingprocess, particularly in building up buyers' preferences, convictions,and actions. It involves personal interaction between two or morepeople, so each person can observe the other's needs andcharacteristics and make quick adjustments. Personal selling alsoallows all kinds of relationships to spring up, ranging from amatter-of-fact selling relationship to personal friendship. Theeffective salesperson keeps the customer's interests at heart in orderto build a long-term relationship. Finally, with personal selling, thebuyer usually feels a greater need to listen and respond, even if theresponse is a polite "No thank you."

Add/Edit Comments

Theseunique qualities come at a cost, however. A sales force requires alonger-term commitment than does advertising—advertising can be turnedon and off, but sales force size is harder to change. Personal sellingis also the company's most expensive promotion tool, costing companies$170 on average per sales call.¹⁶ U.S. firms spend up to three times as much on personal selling as they do on advertising.

Add/Edit Comments

SALES PROMOTIONSalespromotion includes a wide assortment of tools—coupons, contests,cents-off deals, premiums, and others—all of which have many uniquequalities. They attract consumer attention, offer strong incentives topurchase, and can be used to dramatize product offers and to boostsagging sales. Sales promotions invite and reward quickresponse—whereas advertising says, "Buy our product," sales promotionsays, "Buy it now." Sales promotion effects are often short-lived,however, and often are not as effective as advertising or personalselling in building long-run brand preference.

Add/Edit Comments

PUBLIC RELATIONSPublicrelations is very believable—news stories, features, sponsorships, andevents seem more real and believable to readers than ads do. Publicrelations can also reach many prospects who avoid salespeople andadvertisem*nts—the message gets to the buyers as "news" rather than asa sales-directed communication. And, as with advertising, publicrelations can dramatize a company or product. Marketers tend tounderuse public relations or to use it as an afterthought. Yet awell-thought-out public relations campaign used with other promotionmix elements can be very effective and economical.

Add/Edit Comments

DIRECT MARKETINGAlthoughthere are many forms of direct marketing—telephone marketing, directmail, online marketing, and others—they all share four distinctivecharacteristics. Direct marketing is nonpublic: The message is normally directed to a specific person. Direct marketing is immediate and customized: Messages can be prepared very quickly and can be tailored to appeal to specific consumers. Finally, direct marketing is interactive:It allows a dialogue between the marketing team and the consumer, andmessages can be altered depending on the consumer's response. Thus,direct marketing is well suited to highly targeted marketing effortsand to building one-to-one customer relationships.

Add/Edit Comments

Promotion Mix Strategies

Add/Edit Comments

Marketers can choose from two basic promotion mix strategies—push promotion or pullpromotion. Figure 15.4 contrasts the two strategies. The relativeemphasis on the specific promotion tools differs for push and pullstrategies. A push strategyinvolves "pushing" the product through distribution channels to finalconsumers. The producer directs its marketing activities (primarilypersonal selling and trade promotion) toward channel members to inducethem to carry the product and to promote it to final consumers. Using apull strategy,the producer directs its marketing activities (primarily advertisingand consumer promotion) toward final consumers to induce them to buythe product. If the pull strategy is effective, consumers will thendemand the product from channel members, who will in turn demand itfrom producers. Thus, under a pull strategy, consumer demand "pulls"the product through the channels.

Add/Edit Comments

Someindustrial goods companies use only push strategies; somedirect-marketing companies use only pull. However, most large companiesuse some combination of both. For example, Kraft uses mass-mediaadvertising and consumer promotions to pull its products and a largesales force and trade promotions to push its products through thechannels. In recent years, consumer goods companies have beendecreasing the pull portions of their mixes in favor of more push. Thishas caused concern that they may be driving short-run sales at theexpense of long-term brand equity.

Add/Edit Comments

Add/Edit Comments

Companies consider many factors when designing their promotion mix strategies, including type of product/market and the product life-cycle stage.For example, the importance of different promotion tools varies betweenconsumer and business markets. B2C companies usually "pull" more,putting more of their funds into advertising, followed by salespromotion, personal selling, and then public relations. In contrast,B2B marketers tend to "push" more, putting more of their funds intopersonal selling, followed by sales promotion, advertising, and publicrelations. In general, personal selling is used more heavily withexpensive and risky goods and in markets with fewer and larger sellers.

Add/Edit Comments

Theeffects of different promotion tools also vary with stages of theproduct life cycle. In the introduction stage, advertising and publicrelations are good for producing high awareness, and sales promotion isuseful in promoting early trial. Personal selling must be used to getthe trade to carry the product. In the growth stage, advertising andpublic relations continue to be powerful influences, whereas salespromotion can be reduced because fewer incentives are needed. In themature stage, sales promotion again becomes important relative toadvertising. Buyers know the brands, and advertising is needed only toremind them of the product. In the decline stage, advertising is keptat a reminder level, public relations is dropped, and salespeople givethe product only a little attention. Sales promotion, however, mightcontinue strong.

Add/Edit Comments

Integrating the Promotion Mix

Add/Edit Comments

Havingset the promotion budget and mix, the company must now take steps tosee that all of the promotion mix elements are smoothly integrated.Here is a checklist for integrating the firm's marketing communications.¹⁷

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

Add/Edit Comments

© 2006 Pearson Prentice Hall, Inc.