Transcript Advertising and Promotion

Chapter 11
Advertising and Promotion
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
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Learning Objectives
• Name the four basic components of the retailer’s
promotion mix and discuss their relationship with
other decisions.
• Describe the differences between a retailer’s long-term
and short-term promotional objectives.
• List the six steps involved in developing a retailer’s
advertising campaign.
• Explain how retailers manage their sales promotion
and publicity.
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The Retail Promotion Mix
LO 1
• Promotion
is a means that retailers use to bring traffic into their
stores, and it includes advertising, sales promotion,
publicity, and personal selling.
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The Retail Promotion Mix
LO 1
• Types of Promotion
• Promotion in the Supply Chain
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Types of Promotion
LO 1
• The four basic components of the retailer’s
promotional mix:
• Advertising
is paid, nonpersonal communication through various
media by business firms, nonprofit organizations, and
individuals who are in some way identified in the
advertising message and who hope to inform or
persuade members of a particular audience; includes
communication of products, services, institutions, and
ideas.
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Types of Promotion
LO 1
• Sales Promotion involves the use of media and nonmedia marketing pressure applied for a predetermined,
limited period of time as the level of consumer, retailer,
or wholesaler in order to stimulate trial, increase
consumer demand, or improve product availability.
• Publicity is non-paid-for communications of
information about the company or product, generally
in some media form.
• Personal Selling involves a face-to-face interaction
with the consumer with the goal of selling the
consumer merchandise or service.
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Types of Promotion
LO 1
• Promotional decisions relate to and most be integrated
with other management decisions, such as location,
merchandise, credit, cash flow, building and fixtures,
price, and customer service.
• Primary Trading Area is the geographical area where
the retailer can serve customers, in terms of
convenience and accessibility, better than the
competition.
• Secondary Trading Area is the geographic area where
the retailer can still be competitive despite a
competitor having some locational advantage.
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Promotion in the Supply Chain
LO 1
• Major differences in the way retailers and
manufacturers use promotion:
• Product image versus availability.
• Specific product benefits versus price.
• Focused image versus cluttered ads.
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Promotional Objectives
LO 2
• Long-Term Objectives
• Short-Term Objectives
• Interdependence
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Long-Term Objectives
LO 2
• Institutional Advertising
is a type of advertising in which the retailer attempts to
gain long-term benefits by promoting and selling the
store itself rather than the merchandise in the store.
• Creating a positive store image.
• Public service promotion.
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Positive Store Image
LO 2

Dee Lincoln, cofounder
of Del Frisco’s Double
Eagle Steakhouse, paid
a record $80,000 for a
1,309-pound Main-Anjou
Cross-breed at Denver’s
National Western Stock
Show to introduce her
new store and to
generate a positive store
image.
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Corporate Citizenship
LO 2

Wal-Mart sponsors a
variety of community
and public service
programs, which help to
promote its role as a
good corporate citizen.
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Possible Promotion Objectives in Retailing
LO 2: Exhibit 11.1
Improve Long-Run
Performance
Store Image
and Positioning
Improve Short-Run
Performance
Public
Service
Attract
New
Customers
From Existing
Trade Area
Increase
Patronage of
Existing
Customers
Expand
Trade Area
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Short-Term Objectives
LO 2
• Promotional advertising
is a type of advertising in which the retailer attempts to
increase short-term performance by using product
availability or price as a selling point.
• Increased patronage form existing customers.
• Attraction of new customers.
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Interdependence
LO 2
• Although promotion objectives can be established to
improve either long- or short-term financial
performance, programs designed to achieve either
objective will benefit as well.
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Steps in Planning a Retail Advertising Campaign
LO 3
• Selecting Advertising Objectives
• Budgeting for the Campaign
• Designing the Message
• Selecting the Media to Use
• Scheduling the Ads
• Evaluating the Results
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Selecting Advertising Objectives
LO 3
• Factors unique to retailing that should be considered
when determining objectives:
• Age of the store
• Store location
• Type of merchandise sold
• The competition
• The size of trading area
• Supplier support
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Selecting Advertising Objectives
LO 3
Make consumers in your trading area
aware that you offer the lowest prices...
Wal-Mart’s
“ Always Low Prices”
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Selecting Advertising Objectives
LO 3
Make newcomers in your trading area
aware of your existence...
The “welcome wagon” coupons given to
new residents of the area.
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Selecting Advertising Objectives
LO 3
Make customers aware of your
large stock selection...
Nordstrom’s promising the shopper a
free shirt if the retailer is “out of stock”
on the basic sizes.
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Selecting Advertising Objectives
LO 3
Making a specific target market aware of your
product offering...
JCPenney’s “At least part of you is
comfortable” campaign
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Selecting Advertising Objectives
LO 3
Increase traffic during slow sales
periods...
Subway Sandwiches Shop’s “Two-for-One
Tuesdays”
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Selecting Advertising Objectives
LO 3
Move old merchandise at the end
of of a selling season...
The “after-Christmas clearance sales”
that many retailers use.
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Selecting Advertising Objectives
LO 3
Strengthen your store’s image or reputation...
Neiman Marcus’s famous
Christmas catalog that
generates news stories
around the world when
the catalog is mailed to
customers.
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Selecting Advertising Objectives
LO 3
Identify your store with the nationally advertised
brands that it sells...
Dillard’s
featuring Tommy Hilfiger clothing in their
ads
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Selecting Advertising Objectives
LO 3
Reposition the image of your store
in the minds of consumers...
Holiday Inn’s “On the Way” campaign
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Selecting Advertising Objectives
LO 3
Cultivate new customers...
Any of the one-day discounts that a
customer gets for opening a charge
account with the retailer.
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Selecting Advertising Objectives
LO 3
Make consumers think of you first when
a need for your products occurs, especially if
they are not commonly purchased...
1-800-FLOWERS
or
“For a hole in your roof or a whole new
roof - Frederick Roofing”
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Selecting Advertising Objectives
LO 3
Retain your present customers...
Any of the airline’s frequent-flyer
programs, or supermarkets’ use of a
loyalty card
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Selecting Advertising Objectives
LO 3
Get customers who previously shopped at
your store, but no longer do, to return to your
store...
The JCPenney “I Love Your Style”
campaign
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Budgeting for the Campaign:
Retailer-Only Campaigns
LO 3
• Affordable method is a technique for budgeting
advertising in which all the money a retailer can afford
to spend on advertising in a given time period
becomes the advertising budget.
• Percentage-of-sales method is a technique for
budgeting advertising in which the retailer targets a
specific percentage of forecasted sales as the
advertising budget.
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Budgeting for the Campaign:
Retailer-Only Campaigns
LO 3
• Task-and-objective method
is a technique for budgeting in which the retailer
establishes its advertising objectives and then
determines the advertising tasks that need to be
performed to achieve those objectives.
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Advertising as a Percentage of Sales
LO 3: Exhibit 11.2
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Advertising as a Percentage of Sales
LO 3: Exhibit 11.2
Source: From Advertising Ratios& Budgets, published by Schonfeld & Associates,
2003. Used with permission.
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Task and Objective Method
of Advertising Budget Development
LO 3: Exhibit 11.3
Objective and Task
Estimated Cost
Objective 1: Increase traffic during dull periods.
Task A:
Task B:
15 full-page newspaper advertisements
to be spread over these dates:
February 2 - 16; June 8 - 23; October 4 - 18
240, 30-second radio spots split on two stations
and spread over these dates:
February 2 - 16; June 8 - 23; October 4 - 18
$22,500
4,320
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Task and Objective Method
of Advertising Budget Development
LO 3: Exhibit 11.3
Objective and Task
Estimated Cost
Objective 2: Attract new customers from newcomers
to the community
Task A:
Task B:
Task C:
2,000 direct-mail letters greeting new residents
to the community
$1,000
2,000 direct-mail letters inviting new arrivals in
the community to stop in to visit the store and fill
out a credit application
1,000
Yellow-Page advertising
1,900
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Task and Objective Method
of Advertising Budget Development
LO 3: Exhibit 11.3
Objective and Task
Estimate d Cost
Objective 3: Build store’s reputation.
Task A:
Task B:
weekly 15-second institutional ads on
the 10PM television news every Saturday
and Sunday
one half-page newspaper ad per month in
the home living section of the local newspaper
$20,800
9,500
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Task and Objective Method
of Advertising Budget Development
LO 3: Exhibit 11.3
Objective and Task
Estimated Cost
Objective 4: Increase shopper traffic in shopping center.
Task A:
cooperate with other retailers in the shopping
center in sponsoring transit advertising on buses
and cabs
$3,000
Task B:
participate in “Midnight Madness Sale” with other
retailers in the shopping center by taking out
2 full-page newspaper ads--one in mid-March
and the other in mid-July
3,000
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Task and Objective Method
of Advertising Budget Development
LO 3: Exhibit 11.3
Objective and Task
Estimated Cost
Objective 5: Clear out end-of-month, slow-moving merchandise.
Task A:
Task B:
run a full-page newspaper ad on the last
Thursday of every month
$18,000
run 3, 30-second television spots on the last
Thursday of every month
14,000
Total advertising budget
$99,020
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Factors in Allocating Advertising Dollars
LO 3
HIGH ADVERTISING
ALLOCATION
•High Gross Margin Percentage
•High Advertising Elasticity of
Demand
•Dominant or Potentially
Dominant Market Share in
Department or Merchandise Line
•Good Backup Resources
(Space, Inventory, Accounts
Receivable, People)
•Willingness to Allocate Enough
to Achieve “Critical Mass”
LOW ADVERTISING
ALLOCATIONS
•Low Gross Margin Percentage
•Low Advertising Elasticity of
Demand
•Low Market Share and Limited
Potential for Being Dominant
Market Share Department or
Line
•Poor Backup Resource (Space,
Inventory, Accounts Receivable,
People)
•Unwillingness to Allocate
Enough to Achieve “Critical
Mass”
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Co-Op Campaigns
LO 3

Vertical Cooperative Advertising occurs when the
retailer and other channel members (usually
manufacturers) share the advertising budget. Usually
the manufacturer subsidizes some of the retailer’s
advertising that features the manufacturer’s brands.

Horizontal Cooperative Advertising occurs when two
or more retailers band together to share the cost of
advertising usually in the form of a joint promotion of
an event or sale that would benefit both parties.
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Designing the Message
LO 3

Creative messages cannot be developed without
knowing which media will be used to carry out the
message to the target market.

Some Common Approaches:

Lifestyle

Fantasy

Humorous

Slice-of-life

Mood/Image
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Media Alternatives
LO 3
• Mass Media aimed at total markets:
Newspapers
Television
• Specific market media forms:
Radio
Magazines
Direct mail
Internet
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Media Alternatives
LO 3
• Miscellaneous Media
Yellow Pages
Outdoor advertising
Transit advertising
Electronic information terminals
Specialty firms
Shopping guides
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Media Alternatives
LO 3
• Creative Ads should seek to:
• Attract attention and retain attention.
• Achieve the objective of the advertising strategy.
• Avoid errors, especially legal ones.
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Media Alternatives
LO 3
• Monster.com’s parody of a popular Nike ad helped
increased its web site traffic from 1.5 million unique
visitors per month to more than 2.5 million.
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Media Selection
LO 3
• Coverage is the theoretical maximum number of
consumers in the retailer’s target market that can be
reached by a medium and not the number actually
reached.
• Reach is the actual total number of target customers
who come in contact with an advertising message.
• Cumulative Reach is the reach that is achieved over a
period of time.
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Media Selection
LO 3
• Frequency is the average number of times each
person who is reached is exposed to an advertisement
during a given time period.
• Cost Per Thousand Method (CPM) is a technique used
to evaluate advertisements in different media based on
cost. The cost per thousand is the cost of the
advertisement divided by the number of people
viewing it, which is then multiplied by 1,000.
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Media Selection
LO 3
• Cost Per Thousand – Target Market (CPM-TM) is a
technique used to evaluate advertisements in different
media based on cost. The cost per thousand per target
market is the cost of the advertisement divided by the
number of people in the target market viewing it, which
is then multiplied by 1,000.
• Impact refers to how strong an impression an
advertisement makes and how well it ultimately leads
to a purchase.
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Scheduling of Advertising
LO 3
• Ads should appear on, or slightly precede, the days when
customers are most likely to purchase.
• Advertising should be concentrated around times when people
receive their payroll checks.
• If the retailer has limited funds, it should concentrate its
advertising during periods of highest demand.
• The retailer should time its ads to appear during the time of day or
day of week when the best CPM-TM will be obtained.
• The higher the degree of habitual purchasing of a product class,
the more the advertising should precede the purchase time.
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Evaluating the Results
LO 3
• Advertising Effectiveness is the extent to which the
advertising has produced the result desired.
• Advertising Efficiency is concerned with whether the
advertising result was achieved with minimum
financial expenditure.
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Evaluating the Results
LO 3
• Most, but not all, ineffective advertising is due to one
of ten errors:
• Bombarding the customer with so many messages and
sales that any single message or sale tends to be
discounted.
• The advertising was not creative or appealing.
• The advertising didn’t give all the needed information.
• Advertising dollars were spread too thinly over too
many departments or merchandise lines.
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Evaluating the Results
LO 3
• Poor internal communication among salesclerks, cashiers, stock
clerks, and management.
• Advertisement not directed at the proper target market.
• Retailer did not consider all media options.
• Too many last-minute changes in the advertising copy.
• Retailer took co-op dollars just because they were “free” and
therefore presumably a good deal.
• Used a medium that reached too many people not in the target
market.
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Question to Ponder
• Should a retailer change its advertising campaign
every year so that consumers do not get bored with it?
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Does this Ad Discriminate?
LO 3
Consider the following ad that may be very similar to one in your
local paper this morning.
For Sale
A Spacious, Lovely House With a View. It has a
beautiful view overlooking Buffalo Lake, spacious
master bedroom, walk-in closets, and children’s rooms
at the opposite end, complete with maid’s/nanny’s
quarters. There’s even a family room/den downstairs.
It’s perfect for newlyweds or for young couples, since
it’s located in a peaceful residential community, within
walking distance to private schools and the beach.
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Management of Sales Promotions and Publicity
LO 4
• Role of Sales Promotion
• Types of Sales Promotion
• Evaluating Sales Promotions
• Publicity Management
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Types of Sales Promotions
LO 4
• Sole-Sponsored Sales Promotions are sales promotions that the
expense to the retailer may or may not be shared with others.
• Premiums are extra items offered to the customer when
purchasing promoted products.
• Contests and Sweepstakes are sales promotion techniques in
which customers have a chance of winning a special prize based
on entering a contest in which the entrant competes with others,
or a sweepstakes in which all entrants have an equal chance of
winning a prize.
• Loyalty Programs are a from of sales promotion program in which
buyers are rewarded with special rewards, which other shoppers
are not offered, for purchasing often from the retailer.
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Types of Sales Promotion
LO 4: Exhibit 11.5
Sales Promotions
Sole Sponsored
Joint Sponsored
Contest and Frequent Premiums Sweepstakes
Buyer
Programs
Coupons
In-Store Demonstrations
Displays and Sampling
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Types of Sales Promotions
LO 4
• Jointly Sponsored Sales Promotions offers retailer the
advantage of using “other people’s money” (OPM).
• Coupons are a sales promotion toll in which the
shopper is offered a price discount on a specific item if
the retailer is presented with the appropriate coupon at
time of purchase.
• In-Store Displays are promotional fixtures of displays
that seek to generate traffic, highlight individual items,
and encourage impulse buying.
• Demonstrations and Sampling are in-store
presentations with the intent of reducing the
consumer’s perceived risk of purchasing a product.
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Types of Sales Promotions
LO 4
• Jointly Sponsored Sales Promotions:
• Best Buy coordinates promotional efforts with
manufacturers to provide consumers price savings
through rebates.
• Pizza Hut’s premium offer of a 6 song custom made
CD stimulated sales of its New Yorker Pizza when first
introduced.
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Eight Most Popular Types of
Joint-Sponsored Sales Promotions
LO 4
Coupons in retailer ads
90%
Cents-off
90%
In-store coupons
88%
Refunds
85%
Electronic, in-store displays
83%
Samples of established products 78%
Premiums
75%
Sweepstakes
70%
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Percentage of Rebates
Redeemed by Dollar Value
LO 4
Value
Redeemed
Greater than $50
88%
$25.00 - 49.99
48%
$15.00 - 24.99
18%
$ 5.00 - 14.99
11%
$ 2.00 - 4.99
5%
Less than $2.00
1%
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Evaluating Sales Promotions: What Sales
Promotions Can and Cannot Achieve
LO 4: Exhibit 11.6

Tasks That Sales Promotion Can Accomplish:

Get consumers to try a new product

Stimulate the sales of products

Neutralize competitive advertising and sales
promotions

Encourage repeat usage by current users

Reinforce advertising
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Evaluating Sales Promotions: What Sales
Promotions Can and Cannot Achieve
LO 4: Exhibit 11.6

Tasks That Sales Promotion Cannot Achieve:

Change the basic non-acceptance of an undesired
product

Compensate for a poorly trained sales force

Give consumers a compelling reason to continue
purchasing a product over the long run

Permanently stop an established product’s declining
sales trend
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Publicity Management
LO 4

When publicity is formally managed, it should be
integrated with other elements of the promotion mix.
Advantages of publicity:
 Objective
 Credible
 Appeals to a mass audience


Disadvantages of publicity:

Difficult to control and time
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