Advertising and Promotion
Content
PROMOTION TOOLS
There are seven main aspects of a promotional mix. These are:
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Advertising - Any paid presentation and promotion of ideas, goods, or services by an identified sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and emails.
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Personal Selling - A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation. Examples: Sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-to-face or via telephone.
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Sales promotion - Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples: Coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
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Public relations - Paid intimate stimulation of supply for a product, service, or business unit by planting significant news about it or a favorable presentation of it in the media. Examples: Newspaper and magazine articles/reports, TVs and radio presentations, charitable contributions, speeches, issue advertising, and seminars.
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Corporate image - The Image of an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less willing to buy a product from this company as they would have been, if the company had a good image.
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Direct Marketing is often listed as a the fifth part of the marketing mix Exhibitions - are try-outs. You make your product, and let potential buyers try the product, this way, you know directly what people see in your product. The downside, your competitor can see exactly what you are doing.
Advertising - Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. There are three goals of advertising. These goals are to: Inform, Persuade, and Remind.
The
major
media
types
for
advertising
are:
Newspapers, Television, Direct mail, Radio, Magazines, Internet, Outdoor (billboards, blimps, etc.), Yellow pages, Newsletters, Brochures, and Telephone The traditional conceptual model for creating any advertising or marketing communications message is the AIDA Model: get Attention, hold Interest, arouse Desire, and then obtain Action.
The AIDA Model
John Caples, one of the greatest copywriters of all time, provides us the following principles (although he was talking about direct response marketing--more about that later--the wisdom is directly relevant to all forms advertising) when it comes to communicating an advertising message: Caples' Principles:
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Get attention Hold attention Create desire Make it believable Prove it¶s a bargain Make it easy to buy Give a reason to buy now
An effective headline is important for many reasons. The headline:
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Attracts attention Communicates a strong benefit Appeals to the self-interest of the reader. It answers the question, "What's in it for me?" Sets the tone for the offer A headline acts like a marquee does for a movie theater and selects the right audience.
Factors that determine the type of promotional tools used
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Promotion budget available Stage of product life cycle Nature of market situation Target of the promotion Nature of the product
Each of the above components of the promotional mix has strengths and weaknesses. There are several factors that should be taken into account in deciding which, and how much of each tool to use in a promotional marketing campaign: (1) Resource availability and the cost of each promotional tool Advertising (particularly on television and in the national newspapers can be very expensive). The overall resource budget for the promotional campaign will often determine which tools the business can afford to use. (2) Market size and concentration If a market size is small and the number of potential buyers is small, then personal selling may be the most cost-effective promotional tool. A good example of this would be businesses selling software systems designed for supermarket retailers. On the other hand, where markets are geographically disperse or, where there are substantial numbers of potential customers, advertising is usually the most effective. (3) Customer information needs Some potential customers need to be provided with detailed, complex information to help them evaluate a purchase (e.g. buyers of equipment for nuclear power stations, or health service managers investing in the latest medical technology). In this situation, personal selling is almost always required - often using selling teams rather than just one individual. By contrast, few consumers need much information about products such as baked beans or bread. Promotional tools such as brand advertising and sales promotion are much more effective in this case.
Personal selling - Personal presentation by the firm¶s sales force for the purpose of making sales and building customer relationships. Personal selling is paid personal communication that attempts to inform customers and persuade them to purchase products or services. Undoubtedly by now you've figured out that marketing enables both individuals and organizations to sell products and services to other people to help them satisfy their needs and wants. At some point in the selling process, personal selling usually becomes involved. It is the personal selling process that allows marketers the greatest freedom to adjust a message to satisfy customers' information needs. Personal selling allows the marketer or seller to communicate directly with the prospect or customer and listen to his or her concerns, answer specific questions, provide additional information, inform, persuade, and possibly even recommend other products or services. The personal selling process consists of the following steps: 1) Prospecting Prospecting refers to identifying and developing a list of potential clients. Sales people can seek the names of prospects from a variety of sources including trade shows, commercially-available databases or mail lists, company sales records and in-house databases, website registrations, public records, referrals, directories and a wide variety of other sources. Prospecting activities should be structured so that they identify only potential clients who fit the profile and are able, willing and authorized to buy the product or service. This activity is greatly enhanced today using websites with specially-coded pages optimized with key words so that prospects may easily find you when they search the web for certain key words related to your offering. Once prospecting is underway, it then is up to the sales professional to qualify those prospects to further identify likely
customers and screen out poor leads. Modern websites can go along way in not only identifying potential prospects but also starting this qualification process. 2) Pre-approach Before engaging in the actual personal selling process, sales professionals first analyze all the information they have available to them about a prospect to understand as much about the prospect as possible. During the Pre-approach phase of the personal selling process, sales professionals try to understand the prospect's current needs, current use of brands and feelings about all available brands, as well as identify key decision makers, review account histories (if any), assess product needs, plan/create a sales presentation to address the identified and likely concerns of the prospect, and set call objectives. The sales professional also develops a preliminary overall strategy for the sales process during this phase, keeping in mind that the strategy may have to be refined as he or she learns more about the prospect. 3) Approach The approach is the actual contact the sales professional has with the prospect. This is the point of the selling process where the sales professional meets and greets the prospect, provides an introduction, establishes rapport that sets the foundation of the relationship, and asks open-ended questions to learn more about the prospect and his or her needs. 4) Making the Presentation During the presentation portion of the selling process, the sales professional tells that product "story" in a way that speaks directly to the identified needs and wants of the prospect. A highly customized presentation is the key component of this step. At this point in the process, prospects are often allowed to hold and/or inspect the product and the sales professional may also actually demonstrate the product. Audio visual presentations and/or slide presentations may be incorporated at this stage and this is usually when sales brochures or booklets are presented to the prospect. Sales professionals should strive to let the prospect do most of the talking during the
presentation and address the needs of the prospect as fully as possible by showing that he or she truly understands and cares about the needs of the prospect. 5) Overcoming Objections Professional sales people seek out prospects' objections in order to try to address and overcome them. When prospects offer objections, it often signals that they need and want to hear more in order to make a fully-informed decision. If objections are not uncovered and identified, then sales professionals cannot effectively manage them. Uncovering objections, asking clarifying questions, and overcoming objections is a critical part of training for professional sellers and is a skill area that must be continually developed because there will always be objections. Trust me when I tell you that as soon as a sales professional finds a way to successfully handle "all" his or her prospects' objections, some prospect will find a new, unanticipated objection-- if for no other reason than to test the mettle of the sales person. 6) Closing the Sale Although technically "closing" a sale happens when products or services are delivered to the customer's satisfaction and payment is received, for the purposes of our discussion I will define closing as asking for the order and adequately addressing any final objections or obstacles. There are many closing techniques as well as many ways to ask trial closing questions. A trail question might take the form of, "Now that I've addressed your concerns, what other questions do you have that might impact your decision to purchase?" Closing does not always mean that the sales professional literally asks for the order, it could be asking the prospect how many they would like, what color they would prefer, when they would like to take delivery, etc. Too many sales professions are either weak or too aggressive when it comes to closing. If you are closing a sale, be sure to ask for the order. If the prospect gives an answer other than "yes", it may be a good opportunity to identify new objections and continue selling. 7) Follow-up
Follow-up is an often overlooked but important part of the selling process. After an order is received, it is in the best interest of everyone involved for the sales person to follow-up with the prospect to make sure the product was received in the proper condition, at the right time, installed properly, proper training delivered, and that the entire process was acceptable to the customer. This is a critical step in creating customer satisfaction and building long-term relationships with customers. If the customer experienced any problems whatsoever, the sales professional can intervene and become a customer advocate to ensure 100% satisfaction. Diligent follow-up can also lead to uncovering new needs, additional purchases, and also referrals and testimonials which can be used as sales tools. Sales promotion - Sales promotions are short-term incentives to encourage the purchase or sale of a product or service. Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-ofpurchase (POP) displays, contests, rebates, and sweepstakes. Sales Promotion Strategies There are three types of sales promotion strategies: Push, Pull, or a combination of the two. A push strategy involves convincing trade intermediary channel members to "push" the product through the distribution channels to the ultimate consumer via promotions and personal selling efforts. The company pro motes the product through a reseller who in turn promotes it to yet another reseller or the final consumer. Trade-promotion objectives are to persuade retailers or wholesalers to carry a brand, give a brand shelf space, promote a brand in advertising, and/or push a brand to final consumers. Typical tactics employed in push strategy are: allowances, buyback guarantees, free trials, contests, specialty advertising items, discounts, displays, and premiums.
A pull strategy attempts to get consumers to "pull" the product from the manufacturer through the marketing channel. The company focuses its marketing communications efforts on consumers in the hope that it stimulates interest and demand for the product at the end-user level. This strategy is often employed if distributors are reluctant to carry a product because it gets as many consumers as possible to go to retail outlets and request the product, thus pulling it through the channel. Consumer-promotion objectives are to entice consumers to try a new product, lure customers away from competitors¶ products, get consumers to "load up" on a mature product, hold & reward loyal customers, and build consumer relationships. Typical tactics employed in pull strategy are: samples, coupons, cash refunds and rebates, premiums, advertising specialties, loyalty programs/patronage rewards, contests, sweepstakes, games, and point-of-purchase (POP) displays. Car dealers often provide a good example of a combination strategy. If you pay attention to car dealers' advertising, you will often hear them speak of cash-back offers and dealer incentives. Public Relations (PR)
Public relations - Building good relationships with the company¶s various publics by obtaining favorable publicity, building up a good "corporate image," and handling or heading off unfavorable rumors, stories, and events. Let's talk a little bit about the Public Relations (PR) function and how it should be a critical element in your marketing plan. We will also take a look at a few examples. What is Public Relations? Public Relations, or PR, is the overall term for marketing activities that raise the public's consciousness about a product, service, individual or issue. In short, PR is the management of a company's public image that helps the public understand the company and its products. Public relations is most effective when it is viewed as a strategic management function supporting the business goals of the organization. PR can use all the same communications tools as in other areas of marketing. A healthy public relations strategy must permeate all aspects of the business. The PR mechanism itself exists in all organizations--whether formally managed
or not. Every communication to the outside world (and even the world inside your organization!) creates an impression, causes an emotional reaction, or makes a statement about who you are and what values you hold dear. Managing those impressions, reactions, and statements should be taken seriously by operating within a carefully planned, executed, and measured PR strategy. As the Marketing Plan comes from the Business Plan, so must a Public Relations Plan come from a strong Marketing Plan. Your Public Relations program should be planned, executed carefully, and measured to ensure success. Publicity: An important part of PR Publicity also aims to create interest in a person, product, idea, organization, or business establishment generally through the generation and placement of favorable stories in the news media such as newspapers, magazines, TV, and radio. Unlike advertising which relies on purchasing power to get a message across, publicity relies solely on the quality of content to persuade others to get the message out. Good publicity helps journalists find and report legitimate news that is important to their audience. Anyone can buy advertising space but not just anyone can earn the respect of media in order to establish an effective PR campaign. the primary tool of publicity is the press release, or news release. How to write press releases and manage effective PR campaigns A very important part of any PR plan is gaining press coverage. The first step in getting media attention is to establish and build a database of press contacts and editors of industry journals, magazines, and trade publications. Maintaining relationships with these press contacts is very important. Often these press contacts will let you know about upcoming features within their publications and ask you to submit materials such
as press releases and articles. This type of working relationship is important because it can often lead to press coverage that money can't buy. For the cost of a piece of letterhead, photo, envelope, and stamp you may be able to get exposure greater than what you could get from thousands of dollars worth of advertising. It is equally important to write effective press releases and send them out to media contacts on a regular basis. As with advertising or any other type of marketing communication, creating an attention-grabbing headline that crystallizes the information in one sentence usually makes the difference between a press release that gets read and one that gets tossed into the waste paper basket. Once you've captured attention with an effective headline, you need to get to the main point immediately (describe the "who", "what", "when", "where", "why", and "how") and then provide more detail deeper down in the press release. Once you've established the fact that the information is relevant to the reader (usually an editor or producer), then they will read the details to learn more and determine whether or not your release is worthy of them covering. Although editors will usually edit the information to fit their needs, writing effective news releases is a very important step in gaining publicity. These days, video news releases are also becoming popular, but there is no substitute yet for tried-and-true written news releases. Writing feature articles You should also consider writing your own articles and submitting them to editors so they may publish the article(s) in their publications. This is a highly effective PR tactic that not only helps others identify you as an expert in your field, but such articles also serve to educate your market, increase the visibility of your company, and may be an excellent way to find new customers for your business. Direct Marketing
Direct marketing - Direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting or enduring customer relationships. Direct marketing usually is carried out through telephone (telemarketing and telesales), direct mail (brochures, catalogs, flyers), direct-response broadcast advertising (television & radio), online computer shopping, and cable television infomercials and home shopping networks. There are many benefits of direct marketing--both to buyers and sellers. Customers enjoy the convenience of direct marketing as they do not have to battle traffic, find a parking space, or shop through stores. Often they can simply order from a catalog using the telephone or while shopping online and never even have to leave their home as good are shipped directly to their doors. Buying through direct marketing channels is also private and easy and does not have to involve a face-to-face interaction with a salesperson (being a sales and marketing professional myself, I find it hard to believe...but many people do not place a high value on dealing with sales people). Direct marketing can also offer a wider selection of products while making comparison shopping easier with greater access to alternative or competing products. Finally, direct marketing is immediate and good can be purchased immediately in the exact desired configuration. In short, direct marketing can be fun, save time, offer a broader selection, allow comparison shopping, and allow the individual to direct-order customized products.
Sellers also enjoy many benefits of direct marketing. It is a great tool in customer relationship building as it provides direct communication with customers. Direct marketers can also gather a great deal of information about their customers that not only enables them to provide addition value through new products and services, but it also allows them to more precisely target who likely customers are. Direct marketing also can reduce costs (minimize overhead of retail space, utilities, etc.) while increasing the speed and efficiency of the operation. In short, direct marketing allows sellers to customize offerings, create ongoing relationships directly with customers, preserve privacy, and constantly adjusted to improve response rates.
Some examples of direct marketing
Television Infomercial Direct Response Television Advertising: Those "dreaded" infomercials on television have proven to be effective and consumers have been receptive to them. Infomercials are a 125 billion dollar industry in which nearly two thirds of Americans 16 and older will have seen a direct response television ad (2002 data), translating to 136.2 million viewers. One in four American viewers says they have purchased an infomercial product, most often by calling a 1-800 number to order. Sales have more than doubled in the last five years. A successful infomercial product can generate more than 40 million dollars in sales in just three months. Retail sales generally come soon after, and on the average, are 4 to 8 times greater than television sales.
Catalog Marketing: Catalogs save time, appeal to those who are fearful of shopping due to crime rates, offer convenience, allow leisurely decisions, offer privacy, often offer toll-free telephone numbers to place orders, and allow comparison of quality and price.
Unit -2 Classification of advertising
Advertising is the paid, non-personal communication of information about products or ideas by an identified sponsor through the mass media in an effort to manipulate customer behavior. Advertising is non-personal because it's a fantasy created by a computer that selects one part of the target audience. It communicates information about products or ideas.
Advertising can be classified on the basis of Function, Region, Target Market, Company demand, Desired response and Media.
Classification based on function
Advertising performs some functions. (A) It can inform the customers about a product, service, or idea. (B) It can persuade the consumers to buy products, services, and ideas. (C) It can remove cognitive dissonance from the minds of the customers to reinforce the feeling that they have bought the best product, service, or idea and their decision is right. (D) It can remind existing customers about the presence of the product, service, or idea in the market till now. (E) It can dissuade the public at large from buying certain products or services that are harmful for them. Let us discuss some important types of advertising based on the functional aspect of advertising. Informative advertising This type of advertising informs the customers about the products, services, or ideas of the firm or organization. Examples: Vishal Megamart is offering 2 kg sugar for every Rs. 1,000/- purchase everyday. Persuasive advertising This type of advertising persuades or motivates the prospective buyers to take quick actions to buy the products or services of the firm. Example: ³Buy one, get one free´.
Reminder advertising This genre of advertising reminds the existing customers to become medium or heavy users of the products or services of the firm that have been purchased by them at least once. This type of advertising exercise helps in keeping the brand name and uses of the products in the minds of the existing customers. Negative advertising This type of advertising dissuades target audience from purchasing such products and services which would not only harm them but also the society in general. Examples: Advertisements of various civic authorities against alcohol, tobacco, and narcotics.
Classification based on region
We can also classify advertising according to the region Global advertising It is executed by a firm in its global market niches. Reputed global magazines like Time, Far Eastern Economic Review, Span, Fortune, Futurist, Popular Science. Cable TV channels are also used to advertise the products through out world. Supermodels and cinema stars are used to promote high-end products Examples: Sony, Philips, Pepsi, Coca Cola, etc. National advertising It is executed by a firm at the national level. It is done to increase the demand of its products and services throughout the country. Examples: BPL (Believe in the best). Whirlpool Refrigerator (Fast Forward Ice Simple) etc. Regional advertising If the manufacturer confines his advertising to a single region of the country, its promotional exercise is called Regional Advertising. This can be done by the manufacturer, wholesaler, or retailer of the firm. Examples: Advertisements of regional newspapers covering those states or districts where these newspapers are circulated. Eg. The Assam Tribune (only for the NE region) etc. Local advertising When advertising is done only for one area or city, it is called Local Advertising. Some professionals also call it Retail Advertising. It is sometime done by the retailer to persuade the customer to come to his store regularly and not for any particular brand. Examples: Advertisements of Ooo la la, Gupshup (Local FM channels) etc.
Classification based on targeted markets
Depending upon the types of people who would receive the messages of advertisements, we can classify advertising into four subcategories. Consumer product advertising This is done to impress the ultimate consumer. An ultimate consumer is a person who buys the product or service for his personal use. This type of advertising is done by the manufacturer or dealer of the product or service. Examples: Advertisements of Intel, Kuttons (shirt), Lakme (cosmetics) etc. Industrial product advertising: This is also called Business-to-Business Advertising. This is done by the industrial manufacturer or his distributor and is so designed that it increases the demand of industrial product or services manufactured by the manufacturer. It is directed towards the industrial customer. Trade advertising This is done by the manufacturer to persuade wholesalers and retailers to sell his goods. Different media are chosen by each manufacturer according to his product type, nature of distribution channel, and resources at his command. Hence, it is designed for those wholesalers and retailers who can promote and sell the product. Professional advertising This is executed by manufacturers and distributors to influence the professionals of a particular trade or business stream. These professionals recommend or prescribe the products of these manufacturers to the ultimate buyer. Manufacturers of these products try to reach these professionals under well-prepared programmes. Doctors, engineers, teachers, purchase professionals, civil contractors architects are the prime targets of such manufacturers. Financial advertising Banks, financial institutions, and corporate firms issue advertisements to collect funds from markets. They publish prospectuses and application forms and place them at those points where the prospective investors can easily spot them.
Classification based on company demand
There are two types of demand, as follows:(A) Market Demand: Advertising is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a defined marketing environment under a defined marketing programme. (B) Company Demand: It is the share of the company in the market demand. Accordingly, there are two types of advertising, as follows.
Primary demand advertising It is also called Generic Advertising. This category of advertising is designed to increase the primary demand. This is done by trade associations or groups in the industry. Primary advertising is done by many companies at the same time, but there is no competition. The idea is to generate a continual demand for the product. Selective demand advertising This is done by a company or dealer to increase the company demand. The company would advertise its own brand only. The retailer can also advertise a particular brand. Examples: Titan wrist watch , Hero Honda bike , Sony television etc
Classification based on desired responses
An ad can either elicit an immediate response from the target customer, or create a favourable image in the mind of that customer. The objectives, in both cases, are different. Thus, we have two types of advertising under this classification. Direct action advertising This is done to get immediate responses from customers. Examples: Season's sale, purchase coupons in a magazine.
Indirect action advertising This type of advertising exercise is carried out to make a positive effect on the mind of the reader or viewer. After getting the advertisement he does not rush to buy the product but he develops a favourable image of the brand in his mind. Surrogate advertising This is a new category of advertising. In this type of promotional effort, the marketer promotes a different product. For example: the promotion of Bagpiper soda. The firm is promoting Bagpiper Whisky, but intentionally shows soda. They know that the audience is quite well aware about the product and they know this fact when the actor states, "Khoob Jamega Rang Jab Mil Baithenge Teen Yaar ... Aap ... Main, Aur Bagpiper").
Classification based on the media used for advertisements
The broad classification based on media is as follows. Audio advertising It is done through radio, P A systems, auto-rickshaw promotions, and fourwheeler promotions etc. Visual advertising It is done through PoP displays, without text catalogues, leaflets, cloth banners, brochures, electronic hoardings, simple hoardings, running hoardings etc. Audio-visual It is done through cinema slides, movies, video clips, TV advertisements, cable TV advertisements etc. Written advertising It is done through letters, fax messages, leaflets with text, brochures, articles and documents, space marketing features in newspapers etc. Internet advertising The world wide web is used extensively to promote products and services of all genres. For example Bharat Matrimony, www.teleshop.com, www.asianskyshop.com etc. Verbal advertising Verbal tools are used to advertise thoughts, products, and services during conferences, seminars, and group discussion sessions. Kinesics also plays an important role in this context.
ADVERTISING BUDGET
The advertising budget of a business typically grows out of the marketing goals and objectives of the company, although fiscal realities can play a large part as well, especially for new and/or small business enterprises. As William Cohen stated in The Entrepreneur and Small Business Problem Solver, "In some cases your budget will be established before goals and objectives due to your limited resources. It will be a given, and you may have to modify your goals and objectives. If money is available, you can work the other way around and see how much money it will take to reach the goals and objectives you have established." Along with marketing objectives and financial resources, the small business owner also needs to consider the nature of the market, the size and demographics of the target audience, and the position of the advertiser's product or service within it when putting together an advertising budget. In order to keep the advertising budget in line with promotional and marketing goals, an advertiser should answer several important budget questions: 1. Who is the target consumer? Who is interested in purchasing the advertiser's product or service, and what are the specific demographics of this consumer (age, employment, sex, attitudes, etc.)? Often it is useful to compose a consumer profile to give the abstract idea of a "target consumer" a face and a personality that can then be used to shape the advertising message. 2. Is the media the advertiser is considering able to reach the target consumer? 3. What is required to get the target consumer to purchase the product? Does the product lend itself to rational or emotional appeals? Which appeals are most likely to persuade the target consumer? 4. What is the relationship between advertising expenditures and the impact of advertising campaigns on product or service purchases? In other words, how much profit is earned for each dollar spent on advertising? Answering these questions will provide the advertiser with an idea of the market conditions, and, thus, how best to advertise within these conditions. Once this analysis of the market situation is complete, an advertiser has to decide how the money dedicated to advertising is to be allocated.
BUDGETING METHODS
There are several allocation methods used in developing a budget. The most common are listed below:
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Percentage of Sales method Objective and Task method Competitive Parity method Market Share method Unit Sales method All Available Funds method
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Affordable method
It is important to notice that most of these methods are often combined in any number of ways, depending on the situation. Because of this, these methods should not be seen as rigid, but rather as building blocks that can be combined, modified, or discarded as necessary. Remember, a business must be flexible²ready to change course, goals, and philosophy when the market and the consumer demand such a change. PERCENTAGE OF SALES METHOD Due to its simplicity, the percentage of sales method is the most commonly used by small businesses. When using this method an advertiser takes a percentage of either past or anticipated sales and allocates that percentage of the overall budget to advertising. Critics of this method, though, charge that using past sales for figuring the advertising budget is too conservative and that it can stunt growth. However, it might be safer for a small business to use this method if the ownership feels that future returns cannot be safely anticipated. On the other hand, an established business, with well-established profit trends, will tend to use anticipated sales when figuring advertising expenditures. This method can be especially effective if the business compares its sales with those of the competition (if available) when figuring its budget. OBJECTIVE AND TASK METHOD Because of the importance of objectives in business, the task and objective method is considered by many to make the most sense, and is therefore used by most large businesses. The benefit of this method is that it allows the advertiser to correlate advertising expenditures to overall marketing objectives. This correlation is important because it keeps spending focused on primary business goals. With this method, a business needs to first establish concrete marketing objectives, which are often articulated in the "selling proposal," and then develop complimentary advertising objectives, which are articulated in the "positioning statement." After these objectives have been established, the advertiser determines how much it will cost to meet them. Of course, fiscal realities need to be figured into this methodology as well. Some objectives (expansion of area market share by 15 percent within a year, for instance) may only be reachable through advertising expenditures that are beyond the capacity of a small business. In such cases, small business owners must scale down their objectives so that they reflect the financial situation under which they are operating. COMPETITIVE PARITY METHOD While keeping one's own objectives in mind, it is often useful for a business to compare its advertising spending with that of its competitors. The theory here is that if a business is aware of how much its competitors are spending to inform, persuade, and remind (the three general aims of advertising) the consumer of their products and services, then that business can, in order to remain competitive, either spend more, the same, or less on its own advertising. However, as Alexander Hiam and Charles D. Schewe suggested in The Portable MBA in Marketing, a business should not assume that its competitors have similar or even comparable objectives. While it is important for small businesses to maintain an awareness of the competition's health and guiding philosophies, it is not always advisable to follow a competitor's course.
MARKET SHARE METHOD Similar to competitive parity, the market share method bases its budgeting strategy on external market trends. With this method a business equates its market share with its advertising expenditures. Critics of this method contend that companies that use market share numbers to arrive at an advertising budget are ultimately predicating their advertising on an arbitrary guideline that does not adequately reflect future goals. UNIT SALES METHOD This method takes the cost of advertising an individual item and multiplies it by the number of units the advertiser wishes to sell. ALL AVAILABLE FUNDS METHOD This aggressive method involves the allocation of all available profits to advertising purposes. This can be risky for a business of any size, for it means that no money is being used to help the business grow in other ways (purchasing new technologies, expanding the work force, etc.). Yet this aggressive approach is sometimes useful when a start-up business is trying to increase consumer awareness of its products or services. However, a business using this approach needs to make sure that its advertising strategy is an effective one, and that funds which could help the business expand are not being wasted. AFFORDABLE METHOD With this method, advertisers base their budgets on what they can afford. Of course, arriving at a conclusion about what a small business can afford in the realm of advertising is often a difficult task, one that needs to incorporate overall objectives and goals, competition, presence in the market, unit sales, sales trends, operating costs, and other factors.
There are seven main aspects of a promotional mix. These are:
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Advertising - Any paid presentation and promotion of ideas, goods, or services by an identified sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and emails.
y
Personal Selling - A process of helping and persuading one or more prospects to purchase a good or service or to act on any idea through the use of an oral presentation. Examples: Sales presentations, sales meetings, sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-to-face or via telephone.
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Sales promotion - Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples: Coupons, sweepstakes, contests, product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, and exhibitions.
y
Public relations - Paid intimate stimulation of supply for a product, service, or business unit by planting significant news about it or a favorable presentation of it in the media. Examples: Newspaper and magazine articles/reports, TVs and radio presentations, charitable contributions, speeches, issue advertising, and seminars.
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Corporate image - The Image of an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less willing to buy a product from this company as they would have been, if the company had a good image.
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Direct Marketing is often listed as a the fifth part of the marketing mix Exhibitions - are try-outs. You make your product, and let potential buyers try the product, this way, you know directly what people see in your product. The downside, your competitor can see exactly what you are doing.
Advertising - Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. There are three goals of advertising. These goals are to: Inform, Persuade, and Remind.
The
major
media
types
for
advertising
are:
Newspapers, Television, Direct mail, Radio, Magazines, Internet, Outdoor (billboards, blimps, etc.), Yellow pages, Newsletters, Brochures, and Telephone The traditional conceptual model for creating any advertising or marketing communications message is the AIDA Model: get Attention, hold Interest, arouse Desire, and then obtain Action.
The AIDA Model
John Caples, one of the greatest copywriters of all time, provides us the following principles (although he was talking about direct response marketing--more about that later--the wisdom is directly relevant to all forms advertising) when it comes to communicating an advertising message: Caples' Principles:
o o o o o o o
Get attention Hold attention Create desire Make it believable Prove it¶s a bargain Make it easy to buy Give a reason to buy now
An effective headline is important for many reasons. The headline:
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Attracts attention Communicates a strong benefit Appeals to the self-interest of the reader. It answers the question, "What's in it for me?" Sets the tone for the offer A headline acts like a marquee does for a movie theater and selects the right audience.
Factors that determine the type of promotional tools used
y y y y y
Promotion budget available Stage of product life cycle Nature of market situation Target of the promotion Nature of the product
Each of the above components of the promotional mix has strengths and weaknesses. There are several factors that should be taken into account in deciding which, and how much of each tool to use in a promotional marketing campaign: (1) Resource availability and the cost of each promotional tool Advertising (particularly on television and in the national newspapers can be very expensive). The overall resource budget for the promotional campaign will often determine which tools the business can afford to use. (2) Market size and concentration If a market size is small and the number of potential buyers is small, then personal selling may be the most cost-effective promotional tool. A good example of this would be businesses selling software systems designed for supermarket retailers. On the other hand, where markets are geographically disperse or, where there are substantial numbers of potential customers, advertising is usually the most effective. (3) Customer information needs Some potential customers need to be provided with detailed, complex information to help them evaluate a purchase (e.g. buyers of equipment for nuclear power stations, or health service managers investing in the latest medical technology). In this situation, personal selling is almost always required - often using selling teams rather than just one individual. By contrast, few consumers need much information about products such as baked beans or bread. Promotional tools such as brand advertising and sales promotion are much more effective in this case.
Personal selling - Personal presentation by the firm¶s sales force for the purpose of making sales and building customer relationships. Personal selling is paid personal communication that attempts to inform customers and persuade them to purchase products or services. Undoubtedly by now you've figured out that marketing enables both individuals and organizations to sell products and services to other people to help them satisfy their needs and wants. At some point in the selling process, personal selling usually becomes involved. It is the personal selling process that allows marketers the greatest freedom to adjust a message to satisfy customers' information needs. Personal selling allows the marketer or seller to communicate directly with the prospect or customer and listen to his or her concerns, answer specific questions, provide additional information, inform, persuade, and possibly even recommend other products or services. The personal selling process consists of the following steps: 1) Prospecting Prospecting refers to identifying and developing a list of potential clients. Sales people can seek the names of prospects from a variety of sources including trade shows, commercially-available databases or mail lists, company sales records and in-house databases, website registrations, public records, referrals, directories and a wide variety of other sources. Prospecting activities should be structured so that they identify only potential clients who fit the profile and are able, willing and authorized to buy the product or service. This activity is greatly enhanced today using websites with specially-coded pages optimized with key words so that prospects may easily find you when they search the web for certain key words related to your offering. Once prospecting is underway, it then is up to the sales professional to qualify those prospects to further identify likely
customers and screen out poor leads. Modern websites can go along way in not only identifying potential prospects but also starting this qualification process. 2) Pre-approach Before engaging in the actual personal selling process, sales professionals first analyze all the information they have available to them about a prospect to understand as much about the prospect as possible. During the Pre-approach phase of the personal selling process, sales professionals try to understand the prospect's current needs, current use of brands and feelings about all available brands, as well as identify key decision makers, review account histories (if any), assess product needs, plan/create a sales presentation to address the identified and likely concerns of the prospect, and set call objectives. The sales professional also develops a preliminary overall strategy for the sales process during this phase, keeping in mind that the strategy may have to be refined as he or she learns more about the prospect. 3) Approach The approach is the actual contact the sales professional has with the prospect. This is the point of the selling process where the sales professional meets and greets the prospect, provides an introduction, establishes rapport that sets the foundation of the relationship, and asks open-ended questions to learn more about the prospect and his or her needs. 4) Making the Presentation During the presentation portion of the selling process, the sales professional tells that product "story" in a way that speaks directly to the identified needs and wants of the prospect. A highly customized presentation is the key component of this step. At this point in the process, prospects are often allowed to hold and/or inspect the product and the sales professional may also actually demonstrate the product. Audio visual presentations and/or slide presentations may be incorporated at this stage and this is usually when sales brochures or booklets are presented to the prospect. Sales professionals should strive to let the prospect do most of the talking during the
presentation and address the needs of the prospect as fully as possible by showing that he or she truly understands and cares about the needs of the prospect. 5) Overcoming Objections Professional sales people seek out prospects' objections in order to try to address and overcome them. When prospects offer objections, it often signals that they need and want to hear more in order to make a fully-informed decision. If objections are not uncovered and identified, then sales professionals cannot effectively manage them. Uncovering objections, asking clarifying questions, and overcoming objections is a critical part of training for professional sellers and is a skill area that must be continually developed because there will always be objections. Trust me when I tell you that as soon as a sales professional finds a way to successfully handle "all" his or her prospects' objections, some prospect will find a new, unanticipated objection-- if for no other reason than to test the mettle of the sales person. 6) Closing the Sale Although technically "closing" a sale happens when products or services are delivered to the customer's satisfaction and payment is received, for the purposes of our discussion I will define closing as asking for the order and adequately addressing any final objections or obstacles. There are many closing techniques as well as many ways to ask trial closing questions. A trail question might take the form of, "Now that I've addressed your concerns, what other questions do you have that might impact your decision to purchase?" Closing does not always mean that the sales professional literally asks for the order, it could be asking the prospect how many they would like, what color they would prefer, when they would like to take delivery, etc. Too many sales professions are either weak or too aggressive when it comes to closing. If you are closing a sale, be sure to ask for the order. If the prospect gives an answer other than "yes", it may be a good opportunity to identify new objections and continue selling. 7) Follow-up
Follow-up is an often overlooked but important part of the selling process. After an order is received, it is in the best interest of everyone involved for the sales person to follow-up with the prospect to make sure the product was received in the proper condition, at the right time, installed properly, proper training delivered, and that the entire process was acceptable to the customer. This is a critical step in creating customer satisfaction and building long-term relationships with customers. If the customer experienced any problems whatsoever, the sales professional can intervene and become a customer advocate to ensure 100% satisfaction. Diligent follow-up can also lead to uncovering new needs, additional purchases, and also referrals and testimonials which can be used as sales tools. Sales promotion - Sales promotions are short-term incentives to encourage the purchase or sale of a product or service. Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-ofpurchase (POP) displays, contests, rebates, and sweepstakes. Sales Promotion Strategies There are three types of sales promotion strategies: Push, Pull, or a combination of the two. A push strategy involves convincing trade intermediary channel members to "push" the product through the distribution channels to the ultimate consumer via promotions and personal selling efforts. The company pro motes the product through a reseller who in turn promotes it to yet another reseller or the final consumer. Trade-promotion objectives are to persuade retailers or wholesalers to carry a brand, give a brand shelf space, promote a brand in advertising, and/or push a brand to final consumers. Typical tactics employed in push strategy are: allowances, buyback guarantees, free trials, contests, specialty advertising items, discounts, displays, and premiums.
A pull strategy attempts to get consumers to "pull" the product from the manufacturer through the marketing channel. The company focuses its marketing communications efforts on consumers in the hope that it stimulates interest and demand for the product at the end-user level. This strategy is often employed if distributors are reluctant to carry a product because it gets as many consumers as possible to go to retail outlets and request the product, thus pulling it through the channel. Consumer-promotion objectives are to entice consumers to try a new product, lure customers away from competitors¶ products, get consumers to "load up" on a mature product, hold & reward loyal customers, and build consumer relationships. Typical tactics employed in pull strategy are: samples, coupons, cash refunds and rebates, premiums, advertising specialties, loyalty programs/patronage rewards, contests, sweepstakes, games, and point-of-purchase (POP) displays. Car dealers often provide a good example of a combination strategy. If you pay attention to car dealers' advertising, you will often hear them speak of cash-back offers and dealer incentives. Public Relations (PR)
Public relations - Building good relationships with the company¶s various publics by obtaining favorable publicity, building up a good "corporate image," and handling or heading off unfavorable rumors, stories, and events. Let's talk a little bit about the Public Relations (PR) function and how it should be a critical element in your marketing plan. We will also take a look at a few examples. What is Public Relations? Public Relations, or PR, is the overall term for marketing activities that raise the public's consciousness about a product, service, individual or issue. In short, PR is the management of a company's public image that helps the public understand the company and its products. Public relations is most effective when it is viewed as a strategic management function supporting the business goals of the organization. PR can use all the same communications tools as in other areas of marketing. A healthy public relations strategy must permeate all aspects of the business. The PR mechanism itself exists in all organizations--whether formally managed
or not. Every communication to the outside world (and even the world inside your organization!) creates an impression, causes an emotional reaction, or makes a statement about who you are and what values you hold dear. Managing those impressions, reactions, and statements should be taken seriously by operating within a carefully planned, executed, and measured PR strategy. As the Marketing Plan comes from the Business Plan, so must a Public Relations Plan come from a strong Marketing Plan. Your Public Relations program should be planned, executed carefully, and measured to ensure success. Publicity: An important part of PR Publicity also aims to create interest in a person, product, idea, organization, or business establishment generally through the generation and placement of favorable stories in the news media such as newspapers, magazines, TV, and radio. Unlike advertising which relies on purchasing power to get a message across, publicity relies solely on the quality of content to persuade others to get the message out. Good publicity helps journalists find and report legitimate news that is important to their audience. Anyone can buy advertising space but not just anyone can earn the respect of media in order to establish an effective PR campaign. the primary tool of publicity is the press release, or news release. How to write press releases and manage effective PR campaigns A very important part of any PR plan is gaining press coverage. The first step in getting media attention is to establish and build a database of press contacts and editors of industry journals, magazines, and trade publications. Maintaining relationships with these press contacts is very important. Often these press contacts will let you know about upcoming features within their publications and ask you to submit materials such
as press releases and articles. This type of working relationship is important because it can often lead to press coverage that money can't buy. For the cost of a piece of letterhead, photo, envelope, and stamp you may be able to get exposure greater than what you could get from thousands of dollars worth of advertising. It is equally important to write effective press releases and send them out to media contacts on a regular basis. As with advertising or any other type of marketing communication, creating an attention-grabbing headline that crystallizes the information in one sentence usually makes the difference between a press release that gets read and one that gets tossed into the waste paper basket. Once you've captured attention with an effective headline, you need to get to the main point immediately (describe the "who", "what", "when", "where", "why", and "how") and then provide more detail deeper down in the press release. Once you've established the fact that the information is relevant to the reader (usually an editor or producer), then they will read the details to learn more and determine whether or not your release is worthy of them covering. Although editors will usually edit the information to fit their needs, writing effective news releases is a very important step in gaining publicity. These days, video news releases are also becoming popular, but there is no substitute yet for tried-and-true written news releases. Writing feature articles You should also consider writing your own articles and submitting them to editors so they may publish the article(s) in their publications. This is a highly effective PR tactic that not only helps others identify you as an expert in your field, but such articles also serve to educate your market, increase the visibility of your company, and may be an excellent way to find new customers for your business. Direct Marketing
Direct marketing - Direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting or enduring customer relationships. Direct marketing usually is carried out through telephone (telemarketing and telesales), direct mail (brochures, catalogs, flyers), direct-response broadcast advertising (television & radio), online computer shopping, and cable television infomercials and home shopping networks. There are many benefits of direct marketing--both to buyers and sellers. Customers enjoy the convenience of direct marketing as they do not have to battle traffic, find a parking space, or shop through stores. Often they can simply order from a catalog using the telephone or while shopping online and never even have to leave their home as good are shipped directly to their doors. Buying through direct marketing channels is also private and easy and does not have to involve a face-to-face interaction with a salesperson (being a sales and marketing professional myself, I find it hard to believe...but many people do not place a high value on dealing with sales people). Direct marketing can also offer a wider selection of products while making comparison shopping easier with greater access to alternative or competing products. Finally, direct marketing is immediate and good can be purchased immediately in the exact desired configuration. In short, direct marketing can be fun, save time, offer a broader selection, allow comparison shopping, and allow the individual to direct-order customized products.
Sellers also enjoy many benefits of direct marketing. It is a great tool in customer relationship building as it provides direct communication with customers. Direct marketers can also gather a great deal of information about their customers that not only enables them to provide addition value through new products and services, but it also allows them to more precisely target who likely customers are. Direct marketing also can reduce costs (minimize overhead of retail space, utilities, etc.) while increasing the speed and efficiency of the operation. In short, direct marketing allows sellers to customize offerings, create ongoing relationships directly with customers, preserve privacy, and constantly adjusted to improve response rates.
Some examples of direct marketing
Television Infomercial Direct Response Television Advertising: Those "dreaded" infomercials on television have proven to be effective and consumers have been receptive to them. Infomercials are a 125 billion dollar industry in which nearly two thirds of Americans 16 and older will have seen a direct response television ad (2002 data), translating to 136.2 million viewers. One in four American viewers says they have purchased an infomercial product, most often by calling a 1-800 number to order. Sales have more than doubled in the last five years. A successful infomercial product can generate more than 40 million dollars in sales in just three months. Retail sales generally come soon after, and on the average, are 4 to 8 times greater than television sales.
Catalog Marketing: Catalogs save time, appeal to those who are fearful of shopping due to crime rates, offer convenience, allow leisurely decisions, offer privacy, often offer toll-free telephone numbers to place orders, and allow comparison of quality and price.
Unit -2 Classification of advertising
Advertising is the paid, non-personal communication of information about products or ideas by an identified sponsor through the mass media in an effort to manipulate customer behavior. Advertising is non-personal because it's a fantasy created by a computer that selects one part of the target audience. It communicates information about products or ideas.
Advertising can be classified on the basis of Function, Region, Target Market, Company demand, Desired response and Media.
Classification based on function
Advertising performs some functions. (A) It can inform the customers about a product, service, or idea. (B) It can persuade the consumers to buy products, services, and ideas. (C) It can remove cognitive dissonance from the minds of the customers to reinforce the feeling that they have bought the best product, service, or idea and their decision is right. (D) It can remind existing customers about the presence of the product, service, or idea in the market till now. (E) It can dissuade the public at large from buying certain products or services that are harmful for them. Let us discuss some important types of advertising based on the functional aspect of advertising. Informative advertising This type of advertising informs the customers about the products, services, or ideas of the firm or organization. Examples: Vishal Megamart is offering 2 kg sugar for every Rs. 1,000/- purchase everyday. Persuasive advertising This type of advertising persuades or motivates the prospective buyers to take quick actions to buy the products or services of the firm. Example: ³Buy one, get one free´.
Reminder advertising This genre of advertising reminds the existing customers to become medium or heavy users of the products or services of the firm that have been purchased by them at least once. This type of advertising exercise helps in keeping the brand name and uses of the products in the minds of the existing customers. Negative advertising This type of advertising dissuades target audience from purchasing such products and services which would not only harm them but also the society in general. Examples: Advertisements of various civic authorities against alcohol, tobacco, and narcotics.
Classification based on region
We can also classify advertising according to the region Global advertising It is executed by a firm in its global market niches. Reputed global magazines like Time, Far Eastern Economic Review, Span, Fortune, Futurist, Popular Science. Cable TV channels are also used to advertise the products through out world. Supermodels and cinema stars are used to promote high-end products Examples: Sony, Philips, Pepsi, Coca Cola, etc. National advertising It is executed by a firm at the national level. It is done to increase the demand of its products and services throughout the country. Examples: BPL (Believe in the best). Whirlpool Refrigerator (Fast Forward Ice Simple) etc. Regional advertising If the manufacturer confines his advertising to a single region of the country, its promotional exercise is called Regional Advertising. This can be done by the manufacturer, wholesaler, or retailer of the firm. Examples: Advertisements of regional newspapers covering those states or districts where these newspapers are circulated. Eg. The Assam Tribune (only for the NE region) etc. Local advertising When advertising is done only for one area or city, it is called Local Advertising. Some professionals also call it Retail Advertising. It is sometime done by the retailer to persuade the customer to come to his store regularly and not for any particular brand. Examples: Advertisements of Ooo la la, Gupshup (Local FM channels) etc.
Classification based on targeted markets
Depending upon the types of people who would receive the messages of advertisements, we can classify advertising into four subcategories. Consumer product advertising This is done to impress the ultimate consumer. An ultimate consumer is a person who buys the product or service for his personal use. This type of advertising is done by the manufacturer or dealer of the product or service. Examples: Advertisements of Intel, Kuttons (shirt), Lakme (cosmetics) etc. Industrial product advertising: This is also called Business-to-Business Advertising. This is done by the industrial manufacturer or his distributor and is so designed that it increases the demand of industrial product or services manufactured by the manufacturer. It is directed towards the industrial customer. Trade advertising This is done by the manufacturer to persuade wholesalers and retailers to sell his goods. Different media are chosen by each manufacturer according to his product type, nature of distribution channel, and resources at his command. Hence, it is designed for those wholesalers and retailers who can promote and sell the product. Professional advertising This is executed by manufacturers and distributors to influence the professionals of a particular trade or business stream. These professionals recommend or prescribe the products of these manufacturers to the ultimate buyer. Manufacturers of these products try to reach these professionals under well-prepared programmes. Doctors, engineers, teachers, purchase professionals, civil contractors architects are the prime targets of such manufacturers. Financial advertising Banks, financial institutions, and corporate firms issue advertisements to collect funds from markets. They publish prospectuses and application forms and place them at those points where the prospective investors can easily spot them.
Classification based on company demand
There are two types of demand, as follows:(A) Market Demand: Advertising is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a defined marketing environment under a defined marketing programme. (B) Company Demand: It is the share of the company in the market demand. Accordingly, there are two types of advertising, as follows.
Primary demand advertising It is also called Generic Advertising. This category of advertising is designed to increase the primary demand. This is done by trade associations or groups in the industry. Primary advertising is done by many companies at the same time, but there is no competition. The idea is to generate a continual demand for the product. Selective demand advertising This is done by a company or dealer to increase the company demand. The company would advertise its own brand only. The retailer can also advertise a particular brand. Examples: Titan wrist watch , Hero Honda bike , Sony television etc
Classification based on desired responses
An ad can either elicit an immediate response from the target customer, or create a favourable image in the mind of that customer. The objectives, in both cases, are different. Thus, we have two types of advertising under this classification. Direct action advertising This is done to get immediate responses from customers. Examples: Season's sale, purchase coupons in a magazine.
Indirect action advertising This type of advertising exercise is carried out to make a positive effect on the mind of the reader or viewer. After getting the advertisement he does not rush to buy the product but he develops a favourable image of the brand in his mind. Surrogate advertising This is a new category of advertising. In this type of promotional effort, the marketer promotes a different product. For example: the promotion of Bagpiper soda. The firm is promoting Bagpiper Whisky, but intentionally shows soda. They know that the audience is quite well aware about the product and they know this fact when the actor states, "Khoob Jamega Rang Jab Mil Baithenge Teen Yaar ... Aap ... Main, Aur Bagpiper").
Classification based on the media used for advertisements
The broad classification based on media is as follows. Audio advertising It is done through radio, P A systems, auto-rickshaw promotions, and fourwheeler promotions etc. Visual advertising It is done through PoP displays, without text catalogues, leaflets, cloth banners, brochures, electronic hoardings, simple hoardings, running hoardings etc. Audio-visual It is done through cinema slides, movies, video clips, TV advertisements, cable TV advertisements etc. Written advertising It is done through letters, fax messages, leaflets with text, brochures, articles and documents, space marketing features in newspapers etc. Internet advertising The world wide web is used extensively to promote products and services of all genres. For example Bharat Matrimony, www.teleshop.com, www.asianskyshop.com etc. Verbal advertising Verbal tools are used to advertise thoughts, products, and services during conferences, seminars, and group discussion sessions. Kinesics also plays an important role in this context.
ADVERTISING BUDGET
The advertising budget of a business typically grows out of the marketing goals and objectives of the company, although fiscal realities can play a large part as well, especially for new and/or small business enterprises. As William Cohen stated in The Entrepreneur and Small Business Problem Solver, "In some cases your budget will be established before goals and objectives due to your limited resources. It will be a given, and you may have to modify your goals and objectives. If money is available, you can work the other way around and see how much money it will take to reach the goals and objectives you have established." Along with marketing objectives and financial resources, the small business owner also needs to consider the nature of the market, the size and demographics of the target audience, and the position of the advertiser's product or service within it when putting together an advertising budget. In order to keep the advertising budget in line with promotional and marketing goals, an advertiser should answer several important budget questions: 1. Who is the target consumer? Who is interested in purchasing the advertiser's product or service, and what are the specific demographics of this consumer (age, employment, sex, attitudes, etc.)? Often it is useful to compose a consumer profile to give the abstract idea of a "target consumer" a face and a personality that can then be used to shape the advertising message. 2. Is the media the advertiser is considering able to reach the target consumer? 3. What is required to get the target consumer to purchase the product? Does the product lend itself to rational or emotional appeals? Which appeals are most likely to persuade the target consumer? 4. What is the relationship between advertising expenditures and the impact of advertising campaigns on product or service purchases? In other words, how much profit is earned for each dollar spent on advertising? Answering these questions will provide the advertiser with an idea of the market conditions, and, thus, how best to advertise within these conditions. Once this analysis of the market situation is complete, an advertiser has to decide how the money dedicated to advertising is to be allocated.
BUDGETING METHODS
There are several allocation methods used in developing a budget. The most common are listed below:
y y y y y y
Percentage of Sales method Objective and Task method Competitive Parity method Market Share method Unit Sales method All Available Funds method
y
Affordable method
It is important to notice that most of these methods are often combined in any number of ways, depending on the situation. Because of this, these methods should not be seen as rigid, but rather as building blocks that can be combined, modified, or discarded as necessary. Remember, a business must be flexible²ready to change course, goals, and philosophy when the market and the consumer demand such a change. PERCENTAGE OF SALES METHOD Due to its simplicity, the percentage of sales method is the most commonly used by small businesses. When using this method an advertiser takes a percentage of either past or anticipated sales and allocates that percentage of the overall budget to advertising. Critics of this method, though, charge that using past sales for figuring the advertising budget is too conservative and that it can stunt growth. However, it might be safer for a small business to use this method if the ownership feels that future returns cannot be safely anticipated. On the other hand, an established business, with well-established profit trends, will tend to use anticipated sales when figuring advertising expenditures. This method can be especially effective if the business compares its sales with those of the competition (if available) when figuring its budget. OBJECTIVE AND TASK METHOD Because of the importance of objectives in business, the task and objective method is considered by many to make the most sense, and is therefore used by most large businesses. The benefit of this method is that it allows the advertiser to correlate advertising expenditures to overall marketing objectives. This correlation is important because it keeps spending focused on primary business goals. With this method, a business needs to first establish concrete marketing objectives, which are often articulated in the "selling proposal," and then develop complimentary advertising objectives, which are articulated in the "positioning statement." After these objectives have been established, the advertiser determines how much it will cost to meet them. Of course, fiscal realities need to be figured into this methodology as well. Some objectives (expansion of area market share by 15 percent within a year, for instance) may only be reachable through advertising expenditures that are beyond the capacity of a small business. In such cases, small business owners must scale down their objectives so that they reflect the financial situation under which they are operating. COMPETITIVE PARITY METHOD While keeping one's own objectives in mind, it is often useful for a business to compare its advertising spending with that of its competitors. The theory here is that if a business is aware of how much its competitors are spending to inform, persuade, and remind (the three general aims of advertising) the consumer of their products and services, then that business can, in order to remain competitive, either spend more, the same, or less on its own advertising. However, as Alexander Hiam and Charles D. Schewe suggested in The Portable MBA in Marketing, a business should not assume that its competitors have similar or even comparable objectives. While it is important for small businesses to maintain an awareness of the competition's health and guiding philosophies, it is not always advisable to follow a competitor's course.
MARKET SHARE METHOD Similar to competitive parity, the market share method bases its budgeting strategy on external market trends. With this method a business equates its market share with its advertising expenditures. Critics of this method contend that companies that use market share numbers to arrive at an advertising budget are ultimately predicating their advertising on an arbitrary guideline that does not adequately reflect future goals. UNIT SALES METHOD This method takes the cost of advertising an individual item and multiplies it by the number of units the advertiser wishes to sell. ALL AVAILABLE FUNDS METHOD This aggressive method involves the allocation of all available profits to advertising purposes. This can be risky for a business of any size, for it means that no money is being used to help the business grow in other ways (purchasing new technologies, expanding the work force, etc.). Yet this aggressive approach is sometimes useful when a start-up business is trying to increase consumer awareness of its products or services. However, a business using this approach needs to make sure that its advertising strategy is an effective one, and that funds which could help the business expand are not being wasted. AFFORDABLE METHOD With this method, advertisers base their budgets on what they can afford. Of course, arriving at a conclusion about what a small business can afford in the realm of advertising is often a difficult task, one that needs to incorporate overall objectives and goals, competition, presence in the market, unit sales, sales trends, operating costs, and other factors.
