Integrated Marketing Communications 18 Integrated Marketing Communications

The Nature of Integrated Marketing Communications Agenda The Nature of Integrated Marketing Communications The Role of Promotion Objectives of Promotion The Promotion Mix Selecting Promotion Mix Elements Criticisms and Defenses of Promotion Copyright © Houghton Mifflin Company. All rights reserved.

What is “Integrated Marketing Communications”? Coordination of promotion and other marketing efforts for maximum informational and persuasive effect Major goal is to send a consistent message to customers Copyright © Houghton Mifflin Company. All rights reserved.

What is “Integrated Marketing Communications”? (cont’d) Reasons for acceptance of integrated communications Decreased use of mass media advertising Database marketing provides more precise targeting of customers More broadly diversified suppliers of advertising Increased management demands for returns on investments in marketing efforts Copyright © Houghton Mifflin Company. All rights reserved.

Information Flows Are Important in Integrated Marketing Communications FIGURE 18.1 Copyright © Houghton Mifflin Company. All rights reserved.

The Role of Promotion Promotion Communication to build and maintain relationships by informing and persuading one or more audiences Overall role of promotion is to help business by building and enhancing customer relationships. focusing customers on information about company activities and products. promoting programs that help selected groups to build goodwill. sponsoring special events that generate positive promotion of an organization and its brands. Copyright © Houghton Mifflin Company. All rights reserved.

Objectives of Promotion Create Awareness Is crucial to initiating the product adoption process Helps generate revenues to recoup R&D costs Refresh interest in existing brands and products Stimulate Demand Primary demand is demand for a product category rather than for a specific brand Selective demand is demand for a specific brand Pioneer promotion is promotion that informs consumers about a new product Copyright © Houghton Mifflin Company. All rights reserved.

Objectives of Promotion (cont’d) Encourage Product Trial Distributing product samples fosters consumer evaluation of a product. Identify Prospects Customer-response promotions generate sales leads. Retain Loyal Customers Frequent-user programs reward loyal customers. Facilitate Reseller Support Advertising by producers promotes sales for resellers. Copyright © Houghton Mifflin Company. All rights reserved.

Objectives of Promotion (cont’d) Combat Competitive Promotional Efforts Promotions countering competitors’ own promotions Reduce Sales Fluctuations Promotion raises sales in off-peak sales periods. Copyright © Houghton Mifflin Company. All rights reserved.

The Four Possible Elements of a Promotion Mix FIGURE 18.3 Copyright © Houghton Mifflin Company. All rights reserved.

The Promotion Mix Advertising A paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media Benefits Extremely cost efficient (cost per person) in reaching a large audience Repeatable several times and in several media markets Adds value to a product and enhances a firm’s image Copyright © Houghton Mifflin Company. All rights reserved.

Benjamin Moore Paints Uses Advertising to Promote Product Benefits Image courtesy of Benjamin Moore & Co. Copyright © Houghton Mifflin Company. All rights reserved.

Influential Forms of Media 3,000 U.S. adults were asked what forms of media influence them most on grocery buying decisions. Type of Media Percentage most influenced Advertising inserts/circulars Television Newspaper ads Catalogs Magazines Direct mail Radio Internet E-mail 28% 22% 18% 6% 5% 4% 3% 1% Source: Vertis, Inc., Baltimore, as reported in Marketing News, June 15,2004, p.4. Copyright © Houghton Mifflin Company. All rights reserved.

U.S. Ad Spending Totals by Media Medium U.S. Ad Spending 2002 (in billions) Direct mail Newspapers Broadcast television Radio Cable television Yellow pages Consumer magazines Out of home Internet Business publications $46.07 $44.03 $42.07 $18.88 $16.30 $13.78 $11.00 $5.18 $4.88 $3.98 Source: Advertising Age Fact Pack 2004 Edition, p.15. Copyright © Houghton Mifflin Company. All rights reserved.

Top 10 Advertisers Company Ad Spending 2003 (in millions) Procter & Gamble Co. General Motors Corp. Time Warner Inc. Walt Disney Co. DaimlerChrysler AG Ford Motor Co. Johnson & Johnson Pfizer Altria Group Inc. Nissan Motor Co. $2,807 $2,172 $1,533 $1,397 $1,344 $1,331 $1,186 $1,072 $1,059 $1,007 Source: “U.S. Advertising Spending Rose More than 5% in 2003, Nielsen Monitor-Plus Reports,” Nielsen Media Research, press release, February 19, 2004, www.nielsenmedia.com. Data based on spending estimates in the following media: Network TV, Spot TV, Syndicated TV, Hispanic TV, National/Local Magazine, Network/Spot Radio (19 markets), Outdoor, FSI (CPGs only), National/Local Newspapers (display ads only), National/Local Sunday Supplements. Copyright © Houghton Mifflin Company. All rights reserved.

More Info . . . Marketers that use television and radio commercials depend on organizations such as ACNielsen Corporation (www.acnielsen.com). Although ACNielsen offers many research services, it’s best known for its international television audience ratings. Another important rating service is Arbitron (www.arbitron.com/), which measures radio audiences in local markets across the U.S. The Audit Bureau of Circulations, known as the ABC, (www.accessabc.com) does the same for print publications. Copyright © Houghton Mifflin Company. All rights reserved.

The Promotion Mix (cont’d) Personal Selling A paid personal communication that seeks to inform customers and persuade them to purchase products in an exchange situation Advantages Is a more specific form of advertising Has greater impact on consumers Provides immediate feedback Limitations Is an expensive form of advertising Is labor intensive and time consuming Copyright © Houghton Mifflin Company. All rights reserved.

The Promotion Mix (cont’d) Public Relations A broad set of communication efforts used to create and maintain favorable relationships between the organization and its stakeholders Publicity is a nonpersonal communication in a news story form about an organization or its products, or both, transmitted through a mass medium for free Copyright © Houghton Mifflin Company. All rights reserved.

The Promotion Mix (cont’d) Sales Promotion An activity or material that acts as a direct inducement, offering added value or incentive for the product, to resellers, salespeople, or consumers Copyright © Houghton Mifflin Company. All rights reserved.

Primary Factors Affecting the Choice of Promotion Mix Components Promotional Resources, Objectives, and Policies Selection of Promotion Mix Components Characteristics of the Target Market Cost and Availability of Promotional Needs Characteristics of the Product Primary Factors Affecting the Choice of Promotion Mix Components Copyright © Houghton Mifflin Company. All rights reserved.

Selecting Promotion Mix Elements Promotion Resources, Objectives, and Policies A limited promotional budget affects the number and types of promotion mix components affordable to a firm. Objectives and policies influence the types of promotion selected. Characteristics of the Target Market Market size, geographic distribution, and demographics help dictate the choice of promotion mix elements. Copyright © Houghton Mifflin Company. All rights reserved.

Selecting Promotion Mix Elements (cont’d) Characteristics of the Product Copyright © Houghton Mifflin Company. All rights reserved.

Selecting Promotion Mix Elements (cont’d) Costs and Availability of Promotional Methods Large expenditures, large audience Small, local efforts Availability of advertising media, particularly in foreign countries Availability of qualified sales personnel Copyright © Houghton Mifflin Company. All rights reserved.

Selecting Promotion Mix Elements (cont’d) Word-of-mouth communication has a strong impact on consumers’ buying tendencies. Buzz marketing and viral advertising are marketers’ attempts to take advantage of word-of-mouth communications Buzz marketing is an attempt to create a trend or acceptance of a product through word-of-mouth Viral marketing is a strategy to get users of the Internet to pass on ads and promotions to others. Copyright © Houghton Mifflin Company. All rights reserved.

Exercise The promotion mix includes advertising, public relations, sales promotion, and personal selling. How would you classify each of the following promotion efforts? McDonald’s uses television to tell consumers about free french fries with the purchase of a Big Mac. A Toyota salesperson tells customers about the quality of Michelin tires. This exercise should help students see that promotional efforts cannot always be easily and clearly classified into advertising, public relations, sales promotion, or personal selling. In the real business world, each category often overlaps with the others. The promotional efforts described in the exercise can be classified as follows: Advertising and sales promotion Personal selling Publicity-based public relations Personal selling and sales promotion Copyright © Houghton Mifflin Company. All rights reserved.

Exercise (cont’d) CNN has a story about Energizer’s latest ad campaign. The story features a commercial with the Energizer bunny. Quaker Oats places an ad in Good Housekeeping magazine with a coupon attached. A pharmaceutical salesperson leaves free samples with a physician. Copyright © Houghton Mifflin Company. All rights reserved.

Push and Pull Channel Policies Push Policy Promoting a product only to the next institution down the marketing channel Pull Policy Promoting a product directly to consumers to develop stronger consumer demand that pulls products through the marketing channel Copyright © Houghton Mifflin Company. All rights reserved.

Comparison of Push and Pull Promotional Strategies FIGURE 18.4 Copyright © Houghton Mifflin Company. All rights reserved.

Criticisms and Defenses of Promotion Is Promotion Deceptive? Does Promotion Increase Prices? Does Promotion Help Customers Without Costing Too Much? Does Promotion Create Needs? Should Potentially Harmful Products Be Promoted? Copyright © Houghton Mifflin Company. All rights reserved.