Promotion & DistributionUnit III

Communication Process

Sender -> message content, structure, format, source

Message Encoded -> Decoded ->

ReceiverMedia

Selection

Response

Selective Attention Selective Distortion Selective RecallDesign msg to win attention Prevent distortion by

keeping msg simple & clear

Relate msg with long term memory

Developing Effective Communication•Marketing communicator follows 8 steps:

▫Identifying the target audience▫Determine the communication objectives▫Design the message▫Select the communication channels▫Establish the total promotion budget▫Decide on the promotion mix▫Measure promotion’s results▫Coordinate IMC process

•Identifying Target Audience:▫Assess audience’s current image of the

company, its products and its competitors.

•Determining the Communication Objectives:▫E.g. merely purchase, high satisfaction or

favourable word of mouth.▫Marketer can be seeking a cognitive

(rationality of audience), affective (emotionality) or behavioural response.

▫Moves in hierarchy: Awareness -> Knowledge -> Liking -> Preference -> Conviction -> Purchase

•Designing the Message:▫ Message should gain Attention (A), hold Interest

(I), arouse Desire (D) and elicit Action (A).

▫ Designing the message will require solving 4 problems: what to say (message content); how to say logically (message structure); how to say it symbolically (message format); and who should say it (message source).

•Selecting the Communication Channels:▫Personal communication: face-to-face, one-to-

many, telephone, through mails▫Non-personal communication: media and events

•Establishing the Total Promotion Budget▫Based on affordability▫Based on % of sales▫Based on competition▫Based on objective and task

•Deciding Promotion-mix▫Advertising▫Sales promotion▫PR▫Personal selling▫Direct marketing

Promotion-mix or promotion tools are: • Advertising: any paid form of non-personal presentation and

promotion of ideas, goods or services by an identified sponsor.

• Sales Promotion: a variety of short term incentives to encourage trail of purchase of a product or service.

• Publicity (PR): a variety of programs designed to promote / protect company’s image or its products.

• Personal Selling: face to face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.

• Direct Marketing: use of non-personal contact (mail, telephone, email etc.) tools to communicate directly (without middlemen) with customers or prospects.

Advertising

• Advertising is any paid form of non-personal presentation & promotion of ideas, goods or services by an identified sponsor.

• Advertising is a cost effective way to disseminate messages, to build brand preference & to educate people.

• Advertising goals pertain to sales, image, attitude & awareness.

Role of Advertising

• Attention – to bring the existence of company’s product in the attention of the target segment.

• Interest – to create ‘interest’ in the product by focusing on attributes, which is of interest to the consumers.

• Desire – to persuade them to make purchase, to stimulate demand for their product.

• Action – final purchase or not-to-use stage. The buyer decides finally, to make the purchase (action) or not to make the purchase (no action i.e. not stimulated by the advertisement).

5 Ms of Advertising • Mission:

▫Sales goals and Advertising objectives• Money: factors to consider –

▫Stage in PLC, Market share and Consumer base, Competition, Advertising frequency, Product suitability

• Message: ▫generation, evaluation and selection, execution and

review of message• Media:

▫Reach, Frequency and Impact, type of media, timing, geographical coverage

• Measurement: ▫Communication impact and Sales impact

Types of Advertising• Scientific Copy – technical specifications of a

product are explained.▫E.g. Suffola – low cholesterol edible oil

• Descriptive Copy – product attributes are described. ▫ E.g. Samsung – galaxy note

• Narrative Copy – a fictional story is narrated.▫E.g. NACO’s HIV campaign

• Colloquial Copy – an informal conversational language is used to convey the message. ▫E.g. harvest bread

Evaluating Advertising Effectiveness• DAGMAR approach given by Colley

▫ Defining advertising goals for measured advertising results.

▫ Approach refers to turning of advertising objectives into specific measurable goals.

▫ An advertising objective is a specific communication task and achievement level to be accomplished with a specific audience in a specific period of time.

▫ Advertising objectives can be classified according to whether their aim is to Inform, Persuade or Remind.

• Communication-effect Research:▫ Seeks to determine whether an ad is

communicating effectively, called as ‘copy testing’.▫ It is done before and after the ad is put into media.▫ It uses 3 methods to test advertising:

Direct rating method: asks consumers to rate alternative ads.

Portfolio tests: asks consumers to view or listen to a portfolio of advertisements, taking as much time as they need. They are then asked to recall the ads and their content. Their recall level indicates an ad’s ability to stand out.

Laboratory tests: use equipment to measure consumers’ physiological reactions – heartbeat, blood pressure, pupil dilation, perspiration – to an ad.

• Sales-Effect Research

▫ E.g. what sales are generated by an ad that increases brand awareness by 20% ad brand preference by 10%.

▫ It measures advertising results based on Share of Market against Advertising Expenditure.

▫ 2 Types to find out over-spending or under-spending:

Historical Approach: Correlating past sales to past advertising expenditure

Experimental Design: instead of spending normal % of advertising budget in all territories, company spends more in some and less in other territories. If the high-spending tests produce substantial sales increase, it appears that company has been under-spending.

Sales Promotion

• A diverse collection of incentive tools (coupons, samples) designed to stimulate quicker or greater purchase of company’s products / services by the consumers.

• Sales Promotion include tools for:▫ Consumer Promotion – samples, coupons, cash

refund offers, price-off/ discounts, gifts, patronage rewards, free trails, warranties, PoP displays & demonstration.

▫ Trade Promotion – advertising, discounts, display allowances, trade shows & conventions.

▫ Sales Force Promotion – trade fairs, roadshows, contests & specialty advertising.

Sales Promotion: Objectives

• To attract product trails.

• To increase repurchase rates of occasional users.

• To yield faster sales.

• To attract the brand switchers.

• Inducement toward sales.

• Sales promotion yield more measurable response than advertising does. (e.g. how many filled coupons received?)

• Good for small-share competitors because they can’t afford to match the market leader’s large advertising budgets.

Public Relations (PR) and Publicity• 3 distinct qualities: ▫ High credibility: News, stories and features are more

authentic and credible to readers than ads.

▫ Ability to catch buyers off guard: Public relations can reach many prospects who prefer to avoid salespeople and advertisements. The message gets to the buyers as news rather than as a sales-directed communication.

▫ Dramatization: Like advertising, public relations has the potential for dramatizing a company or product.

Personal Selling• 3 distinctive features:

▫ Personal confrontation: Personal selling involves an alive, immediate, and interactive relationship between two or more persons. Each party is able to observe the other’s needs and characteristics at close hand and make immediate adjustments.

▫ Cultivation: Personal selling permits all kinds of relationships to spring up, ranging from a matter of fact-selling relationship to a deep personal friendship.

▫ Response: Personal selling makes the buyer feel under some obligation for having listened to the sales talk.

Direct Marketing• Many forms of direct marketing exists – direct mail,

telemarketing, electronic marketing.

• 4 characteristics: ▫ Non-public: The message is normally addressed to a specific

person.

▫ Customized: The message can be customized to appeal to the addressed individual.

▫ Up-to-date: A message can be prepared very quickly for delivery to an individual.

▫ Interactive: The message can be altered depending on the person’s response.

Channels of Distribution

Channels of Distribution• Products must be brought to within reach of

consumers for use or consumption.

• Any series of firms or individuals who participate in the flow of goods from producer to consumer/ final user, refers to as Marketing/ Distribution/Trade Channels.

• Distribution means ‘availability of the product’ (for e.g. %age of total outlets reached)

• Distribution channels are sets of interdependent organisation involved in the process of making a product or service available for use or consumption.

• Short/ Single Channel:▫ Producer Consumer (zero-level)▫ Producer Retailer Consumer (one level channel)

• Long/ Multiple Channel:▫ Producer Agent Wholesaler Retailer Consumer

• Marketing channel involves – transporters, stockiest, agents & merchants, sales force, advertising agencies etc. who helps in distribution process, are known as intermediaries or middlemen.

• Marketing channel are associated with – ▫ Change of ownership & risk▫ Financing & payment▫ Communication/ Information▫ Logistics (physical distribution)

• Types of Intermediaries: ▫ Company Sales force: company owned / hired

direct sales force, assigned to different territories to contact all prospects in the area, or develop sales in those regions.

▫ Manufacturer’s Agency: agents that represents & sells the goods of several manufacturers.

▫ Broker: Whose job is to bring together buyers and sellers and who does not carry inventory.

▫ Merchant: Who buys, takes title of goods and re-sells merchandise.

▫ Agent: works for commission and does not take title to the goods.

▫ Wholesaler: a business enterprise that sell goods/services to those who but for re-sale or business use.

Functions of Distribution Channels

• Buy in large quantities from manufacturers & sell in smaller quantities to the buyer who demands less quantity & wide variety of goods (adjust discrepancy of quantity).

• Offer a complimentary mix of goods to the buyer, making purchase easier for buyer.

• Serve a local market territory & deliver goods to local customers, making goods widely available & accessible to target markets.

• Provides local warehousing, inventory for quicker delivery.

• Some take title of goods (ownership) thus, improving cash flow to producer.

• Some grant credit to customers, making it easy to buy. • Provide market information to manufacturer. Saves

cost to the producer.

CoD as cost saving function

•M1 C

•M2 C

•M3 C

•M x C = 3 x 3 = 9

•M1 C

•M2 D C

•M3 C

•M + C = 3 + 3 = 6

•Middlemen are used because they oftentimes can perform certain functions more effectively than producers.

•For e.g. Maruti sells its cars through dealer outlest.

•Chewing Gum manufacturer would not find it practical to establish small retail gum shops. It would have to sell gum along with many other small products in the grocery store or drug store for extensive distribution.

Channel Design Decisions

• What is ideal, feasible & available? • Designing a channel system calls for –

▫ Analyzing customer needs i.e. types and levels of services that people want & expect say, product variety, service backup (add on services like credit, delivery, installation, repairs)

▫ Establishing Channel Objectives: Which market segments to cater Vary with product characteristics (perishable, bulky

products, high value products) Strengths & weaknesses of the intermediaries Market environment -> economic depression means

shorter channel.

▫ Identifying Channel Alternatives:

Types of available intermediaries – like company sales force, manufacturer’s agent/agency etc.

Number of intermediaries: 3 strategies are available:

1) Exclusive Distribution limited no. of middlemen, great control over the product sellers do not carry competing brands increases products' image and allow high margins.

2) Selective Distribution usually more than a few amount of middlemen but not all of the

middlemen who are willing to carry the manufacturer’s product.

adequate market coverage with more control and less cost than intensive distribution.

Selected intermediaries

3) Intensive Distribution The manufacturer places the goods in as many as outlets

as possible. Great intensity of distribution. Generally used for convenience items.

▫ Evaluating The Channel Alternatives Economic criteria: each channel alternatives will

produce a different level of sales and costs. Say, company’s sales force who are better trained to sell but limited or very few within number whereas, a sales agency who have more representatives to make product sell; though not effectively trained.

Control criteria: direct control is effective. However, sales agency is required for intensive distribution, the control problem is severe in such a case. Agents also may not have technical details of company’s products.

The producer needs to seek channel structures and policies that maximize control and ability to change marketing strategy swiftly.

Channel Management Decisions

▫ After a company has chosen a channel alternative, individual intermediaries must be selected, motivated and evaluated. Also channel arrangements must be modified overtime.

• Selecting Channel Members:▫ Evaluate intermediaries no. of years in business▫ Product lines carried out by him▫ Growth & profit records▫ Reputation▫ Size & quality of sales force▫ Store’s location, future growth potential and type

of clientele.

•Motivating Channel Members:▫ Intermediaries can aim for a relationship

based on: Co-operation: through +ve motivators, such as

high margins, special deals , premiums, joint advertising, sales contests. Through –ve motivators like threat to reduce margins, slow down delivery or termination of relationship.

Partnership: for market coverage inventory levels, mktg information, technical advice & services.

Distribution Programming: jointly plan the merchandising programs, sales training requirements & advertising-promotional plans.

•Evaluating Channel Members:▫Against standards such as sales quota

attained, average inventory level maintained, customer delivery time, treatment of damaged & lost goods and cooperation in promotional & training programs.

End of Unit III