Marketing Management

GBA2006-01
Week 6 (Class 11)

Professor. Hyejin Lee

Promotion: Advertising
〮 Key Concepts

1. Promotion
2. Promotion Mix
3. Objectives of Promotion and the Hierarchy of Effects Model
4. Advertising
5. Objectives of Advertising
6. Different Types of Advertising
7. Designing Good Advertising
〮 Promotion
〮 Promotion is _________________ product and service information to target
customers and other stakeholders of the firm.

〮 Besides customers, what other groups might be targets for promotion or marketing
communications by the firm?
☞ Employees, shareholders, suppliers, policy makers/regulators…
〮 Promotion Mix
〮 The Promotion Mix is __________________ firms use to communicate with
customers.

Promotional
Mix
Direct
Advertising Marketing

Sales Personal
Promotion Selling
〮 The Objectives of Promotion
〮 To ______ customers about a product – build awareness, increase knowledge

〮 To _______ them to buy – awareness without purchase is poor business

〮 To _______________– create loyal customers

〮 Hierarchy of Effects Model
Which steps are closely linked to informing
customers about a product and which are linked
to actual customer behavior?

Loyal/
Awareness Familiarity Consideration Purchase Satisfaction Repeat
purchase

Informing customers Actual customer behavior

about a product
〮 Hierarchy of Effects Model

On which steps would advertising be most effective?

How about sales promotions such as coupons?

Loyal/
Awareness Familiarity Consideration Purchase Satisfaction Repeat
purchase

Sales promotion
Ad Ad (coupons etc.) Ad
〮 What is Advertising?
〮 Advertising – Any paid form of non-personal
presentation and promotion of ideas, goods, or services
by an identified sponsor.

〮 Advertising can be delivered in many ways:

TV, banner ads and pop-ups on the computer, outdoor, radio, print, etc.
〮 Objectives of Advertising
〮 For new products, advertising should be __________ to
〮 build awareness
〮 induce trial
〮 educate
〮 For established brands, advertising should be __________ to
〮 remind people to use product
〮 increase frequency of use (penetration strategy)
〮 distinguish the brand from competitors and other brands in product line
〮 Advertising approach varies depending on the PLC stage
〮 The product life cycle describes the stages a new product goes through in the
marketplace: introduction, growth, maturity, and decline.

Informative Advertising Persuasive Advertising

Important Here Important Here
〮 Different Types of Advertising
〮 Types of Advertising
〮 Product/Service - objective is to increase purchases
〮 Institutional - objective is to highlight the organization or to increase overall demand
〮 Reminder - reinforce purchasing behavior; “remember to buy.....”
〮 Advocacy - communicates a marketer’s position on an issue; “Don’t drink and drive”
〮 Comparative - creating a differential advantage by comparing a product with a
competitor
〮 Comparative Advertising
〮 What are the advantages of Comparative Advertising?
☞ Highlight competitive advantages
☞ Highlight the difference/selling point to impress audience
☞ Beat competitors
〮 What are the disadvantages of Comparative Advertising?
☞ Lawsuits if not true
☞ More fierce competition
☞ Free advertising & legitimacy is given to your competition
☞ Potentially negative reactions from customers
☞ Not legal in some countries
〮 Good Ad Copy
〮 Ad copy are the words, pictures, messages, and themes contained in an ad.
What are the characteristics of good ad copy?
SCAB
〮 “Stopping Power” -- attract attention
〮 Clarity of message
〮 Attitude/beliefs modification
〮 Behavior change
〮 In-class Exercise In-class
exercise
#1.
〮 Do you have any ad copy that you remember right now?

〮 Why do you think this ad copy is rememberable?

〮 In-class Exercise In-class
exercise
#2.
〮 Suppose you are a copywriter for Netflix and propose an effective ad copy
for this brand.

SCAB
〮 “Stopping Power” -- attract attention
〮 Clarity of message
〮 Attitude/beliefs modification
〮 Behavior change
Sales Promotion
〮 Key Concepts

1. Sales promotion
2. Objectives of sales promotion
3. Examples of sales promotion
4. Research on sales promotion
〮 Promotion Mix
〮 The Promotion Mix is the combination of tools firms use to communicate with
customers.

Promotional
Mix
Direct
Advertising Marketing

Sales Personal
Promotion Selling
〮 Sales Promotion
〮 Sales Promotions are programs designed to build interest in or encourage purchase
of a product during a specified time period.

〮 Tends to focus on short-term objectives such as an immediate boost in sales.

〮 Objectives of Sales Promotion
How do the objectives of Sales Promotion differ from the objectives of Advertising?

〮 Advertising mainly aims to inform people about the product, or build awareness
and familiarity while sales promotion aims to close the deal.

〮 Sales promotion emphasizes a sense of urgency (e.g., one day or one week
promotion), and thus activates the actual purchase.

☞ The most important main objective of sales promotion is

to create an immediate sale.
〮 Hierarchy of Effects Model

On which steps would advertising be most effective?

How about sales promotions such as coupons?

Loyal/
Awareness Familiarity Consideration Purchase Satisfaction Repeat
purchase

Sales promotion
Ad Ad (coupons etc.) Ad
〮 Examples of Sales Promotion
1. Contests & Sweepstakes
2. Money-offs & Rebates
3. Loyalty programs
4. Samples
5. Displays
6. Coupons
〮 1. Contests & Sweepstakes
〮 A contest calls for consumers to submit an entry – a jingle, guess,
suggestion – to be judged by a panel that will select the best entries.

〮 A sweepstakes calls for consumers to submit their names for a drawing.

〮 1. Contests & Sweepstakes
〮 Advantages
〮 Increase consumer involvement
〮 Gain attention and higher brand awareness
〮 Generate excitement
〮 Disadvantages
〮 Requires creativity
〮 Must be monitored
〮 Sales often decline after the sweepstakes is over
〮 1. Contests & Sweepstakes
〮 2. Money-offs & Rebates
〮 Money-offs refer to an agreement between a business and customer
in which the customer can buy something for less than the usual price.

〮 A rebate is an amount paid by way of reduction, return, or refund on what

has already been paid or contributed.

Source: https://www.amnavigator.com/blog/2011/11/14/shop-discover-classic-example-of-cashback-affiliate/
〮 2. Money-offs & Rebates
〮 Advantages
Discounts: 〮 Encourage trial
〮 Reduce consumer risk
Rebates: 〮 Stimulate demand
〮 Get financing
〮 Low redemptions by consumers
〮 Disadvantages
Discounts: 〮 May reduce perception of value
Rebates: 〮 Easily copied by competitors
〮 3. Loyalty Programs
〮 A loyalty program is a rewards program offered by a company to
customers who frequently make purchases. A loyalty program may give
a customer free merchandise, rewards, coupons, or even advance
released products.
〮 3. Loyalty Programs
〮 The Value of Customer Loyalty

Why set up loyalty programs?

A 5% improvement in customer loyalty results in a 25-85% improvement in profits
Source: Frederich Reichheld and W. Earl Sasser, Jr.
"Zero Defections: Quality Comes to Services." HBR September-October 1990
〮 3. Loyalty Programs
〮 Advantages
〮 Create loyalty
〮 Encourage repurchase

〮 Disadvantages
〮 High costs to the firm
〮 Difficult to create differentiated value for the customer, given the many loyalty
programs currently available
〮 In-class Exercise In-class
exercise
#1.
〮 What kinds of point cards do you frequently use (e.g., CJ point card, Lotte
point card etc.)?

〮 What kinds of benefits do you get from these point cards?

〮 Suppose you are a marketing manager for any of point cards you own, what
rewards would you like to add?

〮 Would that satisfy customers? How about the cost?

〮 4. Samples
〮 The offering of a product free or at a greatly reduced price.
☞ Encourage trial
☞ But high cost to the firm
〮 5. Point of Purchase (POP) Displays
〮 Located in high-traffic areas, near the cash register, or the end of an aisle.
〮 5. Point of Purchase (POP) Displays
〮 Advantages
〮 High brand visibility
〮 Encourage brand trial

〮 Disadvantages
〮 Difficult to get a good location
〮 Execution costs may be involved for the firm
〮 6. Coupons
〮 Coupons are certificates that save buyers money when they purchase
specified products.
〮 6. Coupons
〮 6. Coupons
〮 Advantages
〮 Stimulates demand
〮 Allows direct tracing of sales
〮 Segments the market – effectively creating tiered pricing
〮 Disadvantages
〮 Low redemption rates
〮 Wasted costs related to distribution to non-coupon users/redeemers
〮 “Extreme Couponing” can reduce/eliminate profitability
〮 In-class Exercise In-class
exercise
#2.
〮 Please pick one product and propose as many sales promotions as possible.

1. Contests & Sweepstakes

2. Money-offs & Rebates
3. Loyalty programs
4. Samples
5. Displays
6. Coupons
〮 Research on Sales Promotion 1
〮 Temporary price reductions (TPRs) increase sales substantially; typically with a much
greater response than advertising. Why?
〮 It creates a sense of urgency.
〮 Consumers get immediate economic benefits from the sales promotion, but not
from the advertisement.
〮 Short term promotion drives consumers’ immediate purchase.
〮 Research on Sales Promotion 2
〮 High-market share brands are less promotion-elastic than low-share brands. What is
an explanation for this result?
〮 It’s more difficult for big brands to further increase market share than small brands.
Market saturation.
〮 Research on Sales Promotion 3
〮 Heavily promoted products lose brand equity. What is an explanation for this result?
〮 Lower prices damage the luxury brand’s image and equity as the price becomes
the focus rather than quality. Consumers begin to think of the brand in terms of
discounts and lower prices. It will therefore be much more difficult to get them to pay
the higher everyday price and buy into the value of the prestigious label.
〮 Research on Sales Promotion 4
〮 In-store displays and feature advertising in a retail grocery setting are very effective in
building sales. Why?
〮 They catch consumers’ attention and consumers may think
these are special.

〮 They are there to help consumers to make immediate purchase

decisions.
〮 Research on Sales Promotion 5
〮 Promotions cannibalize sales of competing brands and stimulate sales of
complementary brands.
〮 What is cannibalization?

〮 What are some examples of cannibalization?

〮 Why might a promotion build sales for a complementary product?

Source: Blattberg and Neslin 1995; Walters 1991