Determine the promotional mix
Determine the promotional mix. The company must distribute the total promotion budget across five promotional tools which include advertising, sales promotion, public relations and publicity, sales force, and direct marketing.
Within the same industry, companies can differ greatly in the way they allocate their promotion budgets. Maybe a company wants to achieve a certain level of sales with a variety of promotional mixes.
Avon concentrates its promotional funds on personal selling, while Revlon spends them primarily on advertising. In selling vacuum cleaners, Electrolux spends large amounts of its promotional dollars on door-to-door sales, while Hoover relies more heavily on advertising.
Companies are always looking for ways to gain efficiency by substituting one promotional tool for another. Many companies have replaced some of their field sales activities with advertising, direct mail, and telephone marketing.
Other companies increase sales promotion spending more than on advertising. The ability to make substitutions between promotional tools explains why the marketing function must be coordinated within a single marketing department.
1. Factors In Developing Promotion Mix
Companies must consider several factors in developing their promotion mix, namely the type of product market they are selling in, whether to use a push or pull strategy, the level of consumer readiness to make a purchase, the stage of the product in the life cycle products, and the company’s market share ranking.
2. Types of Product Markets
The utilization rate of promotional tools varies between consumer and industrial markets (see Figure 9.3). Consumer goods companies spend on sales promotion, advertising, personal selling, and public relations, in that order.
Industrial goods companies spend on personal selling, sales promotion, advertising, and public relations, in that order. In general, personal selling is used more in selling complex, expensive, risky products and in markets with a small number of large sellers (i.e. industrial markets).
Although in the industrial goods market advertising is used less than sales calls, advertising still plays an important role. Advertising can perform the following functions in the market for industrial goods:
a. Building awareness
Prospective buyers who do not know about the company or products may refuse to meet the salesperson. Advertising can be a means of introduction for companies and their products.
b. Building understanding
If the product has some new features, part of the job of explaining it can be done effectively by advertising.
c. Efficient reminders
If the prospect knows the product, but is not ready to buy, reminder advertising will be more economical than a sales call.
d. Generating lead
Adverts offering flyers and including company phone numbers are an effective way to create leads for salespeople.
e. Legitimacy
Salespeople can use company advertisements that are published in well-known magazines to legitimize the existence of the company and its products.
f. Reassure them
Advertising can remind customers how to use the product and reassure them about their purchase.
The important role of advertising in marketing
A number of studies have shown the important role of advertising in business-to-business marketing, Morrill in his research on industrial commodity marketing shows that advertising combined with personal selling can increase sales by 23% over actual sales. done without advertising.
Total promotion costs as a percentage of sales decreased by 20%. Freeman developed a formal model for dividing promotional funds between advertising and personal selling based on which sales tasks each performs more economically.
Levitt’s research also shows the important role of advertising in business marketing. Specifically, Levitt found that:
- A company’s reputation increases its salespeople’s chances of getting attention or early acceptance of a product. Therefore, corporate advertising that can build a company’s reputation will help the company’s salespeople.
- Salespeople from well-known companies have an advantage in getting sales if they have a sufficient percentage of their sales. However, a salesperson from a less well-known company who makes a very effective sales presentation will be able to overcome the drawback. Small companies should use their limited funds to select and train good salespeople instead of spending money on advertising.
- A company’s reputation can be especially helpful when the product is complex, high-risk, and purchasing agents lack professional training.
- Lilien conducted research on industry marketing practices on a large project called an advisor, and reported the following:
- The average industrial company sets its marketing budget at 7% of sales. The company only spends 10% of its marketing budget on advertising. The rest goes to salespeople, trade shows, sales promotions, and direct mail.
- Industrial companies spend higher than average on advertising if their products are of higher quality, uniqueness, or purchase frequency, or there is greater customer growth.
- Industrial companies set marketing budgets that are higher than average if their customers are more dispersed or where customer growth rates are higher.
The role of personal selling Personal
selling can also make a large contribution to consumer goods companies. Some consumer goods marketers downplay the role of salespeople and use them solely to collect weekly orders from dealers and to check that there is sufficient stock on the shelves.
A common feeling is “the salesperson places the product on the crust and the ad blanks it out.” But an effectively trained salesperson can make three important contributions:
- Improve inventory position: The salesperson can persuade dealers to take on more inventory and allow more shelf space for the company’s brand.
- Build enthusiasm: Salespeople can build dealer enthusiasm for a new product by dramatizing planned advertising and sales promotion support.
- Missionary selling: The salesperson can get more dealers to sign contracts to sell the company’s brand.
3. Push versus Pull Strategy
Determine the promotional mix. The promotion mix is heavily influenced by whether a company chooses a push or pull strategy to generate sales.
A push strategy includes producer marketing activities (mainly salespeople and directed at trade promotion) directed at channel intermediaries. Its aim is to encourage intermediaries to order and sell the product and promote it to end users.
Read too Definition of marketing distribution
Determine the promotional mix. The push strategy is especially appropriate when the level of brand loyalty in a category is low, brand selection is made in stores, the product is an impulse item, and the benefits of the product are very clear.
The pull strategy includes marketing activities (mainly advertising and promotion to consumers) directed at the end user. The goal is to encourage end users to ask intermediaries for the product and thereby encourage intermediaries to order the product from producers.
The pull strategy is particularly appropriate when there is high brand loyalty and high involvement in the category, consumers perceive differences among brands, and people choose brands before they go to the store.
Firms in the same industry may differ in their emphasis on a push or pull strategy. For example, Lever Brothers places more emphasis on a push strategy, Procter & Gamble places more emphasis on a pull strategy.
4. Buyer Readiness Stage
Promotional tools differ in cost-effectiveness at different levels of buyer readiness. Advertising and publicity play the most important role in a more important stage than the role played by salesperson visits or by sales promotions.
The notion of the customer, in particular, is influenced by advertising and personal selling. Customer confidence is heavily influenced by personal selling and less by advertising and sales promotion. Orders are heavily influenced by personal selling and sales promotions.
Reordering is also heavily influenced by personal selling and sales promotion, and somewhat by reminder advertising. It is clear that advertising and publicity are most cost effective in the early stages of the buying decision process whereas personal selling and sales promotion are most effective in the later stages.
5. Stages of the Product Life Cycle
Determine the promotional mix. Promotional tools also differ in cost-effectiveness at different stages of the product life cycle. A speculative view of the relative effectiveness of promotional tools.
- In the introduction stage, advertising and publicity has the highest level of cost-effectiveness, then personal selling to gain distribution coverage and sales promotion to encourage consumers to try the product.
- In the growth stage, all promotional tools can be reduced in role because demand can move through word of mouth.
- At the maturity stage, sales promotion, advertising, and personal selling all increase in importance, in that order.
- In the decline stage, sales promotion remains strong, advertising and publicity is reduced, and the salesperson needs to pay little attention to the product.
6. Market Rating of Companies
Top rated brands will benefit more from advertising than from sales promotion. For the top three brands, return on investment (ROI) increased as the ratio between spending on advertising and spending on sales promotion increased.
For brands rated four or lower, profitability declines as you move from low to high advertising.
