When the Target Is Consumers

Sales promotionsA basic tool in the promotional mix; any activity intended to produce short-term change in behavior, including limited-time incentives for consumers and for trade partners. targeted to consumers encourage purchase or build interest in a product during a specified time period. The key element of sales promotions is its limited-time nature. Consumer sales promotion tools include the following:

Price or Value Discount Promotion Tools

Price or value discount promotion tools include couponsA tool in the promotional mix that offers consumers cents off the price and has an expiration date of a few months out, encouraging immediate purchase. for packaged-goods products like deodorant. These offer cents off the price and have an expiration date of a few months out, encouraging immediate purchase. Similarly, pizza delivery companies located near colleges typically have special deals at the start of the semester to entice new customers.

Figure 9.2

Coupons offer an incentive to purchase the product in a specified time frame.

© 2010 Jupiterimages Corporation

In addition to coupons companies place in newspapers, send by mail (or by mobile phone), or offer on a Web site, a marketer may offer a temporary price reduction at the store or offer a rebate. Unlike a coupon, which gives the discount immediately upon purchase, a rebateA tool in the promotional mix that refunds part of the purchase price after the consumer fills out and returns a form along with a sales receipt. refunds part of the purchase price to the consumer after the consumer fills out and returns a form along with a sales receipt to the company.

Bonus packsA tool in the promotional mix that packages an extra amount of the product for the same price; may be timed to economic cycles. deliver more product without more cost, such as 20 percent more nuts in a canned nut mix, or 33 percent more liquid soap for the same price. Some companies offer bonus packs twice a year as a way to reward customers with special offers. Other companies time their bonus packs to economic cycles. “Whenever there is a downturn in the economy, we do very well with bonus packs and opening price shampoos like Suave, VO5 and Jheri Rhedding,” said Larry Vick, divisional merchandise manager for ShopKo. During difficult economic times, people are careful with their money and like to buy products that offer more of the good for the same amount of money.Liz Parks, “Value-Priced Bonus Packs Revive Limp Hair Care Segment.” DSN Retailing Today, April 22, 2002, 19. Hint: With all of the economic woes surrounding us, the coupon business is a pretty nice place to be right now.

Volume-Increasing Promotion Tools

SamplingA tool in the promotional mix that offers consumers a product for free; samples are often trial size but may be full size. is a popular (though expensive) promotional tool. Food and beverage companies often provide free samples to consumers to give them a chance to try a new product for free. More than one college student has feasted for free by timing strategic visits to stores like Sam’s Club that provide tastes of new food items. Sometimes the packets will be a smaller trial size, such as two packets of Celestial Seasonings tea rather than a box; other times the sample will be full size, like a cup of Silk yogurt. In the example we mentioned previously, Unilever handed out free samples of its new detergent. Sampling intends to increase future sales volume by acquiring new customers for the product.

Figure 9.3

Sales promotion techniques are used to attract attention and make the product memorable.

© 2010 Jupiterimages Corporation

Loyalty programsA tool in the promotional mix that rewards consumers for their frequent, continuing purchase of a product; examples are airline frequent flyer programs and restaurant punch cards. reward consumers for their frequent, continuing purchase of a product. Frequent flyer programs such as the United Airlines Mileage Plus program offer free miles to their customers with each flight they purchase. The more miles they fly per year, the bigger the bonus mileage. For example, customers who fly fifty thousand miles or more per year get double bonus miles (a hundred thousand miles or the equivalent of four free airline tickets in the United States) for the miles they’ve purchased. These loyalty programs offer additional perks, such as shorter lines, to their loyal customers. Restaurants or coffee shops often have punch cards that reward customers with a free coffee or sandwich after the purchase of nine coffees or sandwiches.

Video Highlight

Loyalty Programs, Discounts, and Database Marketing Report from CBS News

(click to see video)

Loyalty programs and other discounts can drive purchases, but do they really result in loyalty or do they encourage consumers to shop for the best deal?

When the Target Is Trade Partners (Employees, Distributors, and Retailers)

As consumers we probably don’t see many of the more aggressive promotions that companies sponsor. Trade promotions are for a company’s employees or for channel partners such as retailers or wholesale distributors who help get the product in the hands of the ultimate customer.

Trade promotions fall into two main categories: discount promotions and industry visibility. Discount promotionsA tool in the promotional mix that encourages a trade partner to stock an item by offering a reduced cost or helping to defray the partner’s advertising expenses. offer the trade partner a reduced cost on the product or help to defray the partner’s advertising expenses. The goal is to encourage the partner to stock the item and bring attention to it. Promotions that increase industry visibility, on the other hand, focus on creating enthusiasm and excitement among salespeople and customers.

Press Release

One core tool of public relations is the press releaseA public relations tool in the form of a report of an event that the marketer (or the marketer’s PR agency) writes and distributes to the media in hopes that they will write about or feature the event., which can be anywhere from a paragraph to several pages long. The press release is a report of an event that the marketer (or the marketer’s PR agency) writes and distributes to the media in hopes that they will write about or feature the event. Related to the press release is the video news release (VNR)A public relations tool in the form of a video of an event which the marketer (or the marketer’s PR agency) produces and distributes to the media in hopes that they will show the video or feature the event., which describes the event via video rather than words. The topics covered by press releases are wide ranging, but the common thread is that they are topical and newsworthy, such as announcing a new product, new research, or timely helpful information to consumers, such as romantic getaway ideas a travel company publishes ahead of Valentine’s Day.

Press releases always conclude with contact information for the marketer and sometimes the PR company. This key piece is so that reporters can call for more information or an interview. A popular disseminator of press releases is PR Newswire; go to http://www.prnewswire.com to see the latest news releases.

Media Event

A company will often preannounce a forthcoming media eventA public relations tool in the form of a preannouncement to the media to garner attention for a product introduction, new channel partner, or major change in strategy. to garner attention for a product introduction, new channel partner, or major change in strategy. The goal is to give the media time to create background stories and bring reporters and news crews to the event to ensure the broadest possible audience. For example, when Apple brought the iPhone to the United Kingdom, it told the press that Steve Jobs, the company’s CEO, would be making an announcement at Apple’s London store in the heart of the city’s main shopping district.

Publicity

Public relations often aims to generate publicityUnpaid communication about an organization that appears in the media., which is unpaid communication about an organization that appears in the media. The success of a PR campaign is measured in terms of impressionsThe number of people who will be exposed to a message that appears in one or more media vehicles.—the number of times a company is mentioned in the media. For example, Ben & Jerry’s ice cream created the world’s largest baked Alaska for Earth Day 2005. It placed a 1,140-pound, four-foot-tall dessert made from Ben & Jerry’s Fossil Fuel flavor in front of the Capitol in Washington, D.C., to symbolize the environmental damage that drilling in the wildlife preserve would cause. The program cost only $40,000 but generated more than thirty million media impressions. The publicity program reinforced Ben & Jerry’s brand as a socially conscious, green company while bringing attention to its ice cream products.“Ben & Jerry’s: A Green Pioneer,” Advertising Age, June 11, 2007, S-8.

Crisis Management

As the Cartoon Network found out, publicity can cut both ways. Sometimes negative events happen to the company and the media reports these in great and glaring detail. Product defects, a serious accident at a company facility, management malfeasance, or major layoffs can tarnish the reputation of the firm. A company must be prepared to deal with such negative publicity.

Once the negative story is out there, there’s nothing you can do except minimize the damage. That calls for crisis managementPublic relations tool used when a negative event (a product defect, a serious accident, executive malfeasance) happens to the company; usually handled by appointing a single spokesperson to communicate with the media.. During such a time it’s important to present your side of the story as clearly as possible and to demonstrate integrity as you correct any mistakes. The best way to do this is to have a single spokesperson talk with the media. This may mean “locking the business down” by asking everyone on the staff not to comment on the news story but to refer the question to the spokesperson so that the message is consistent and accurate. The most trustworthy spokesperson for the company is usually its CEO, because such high-level attention will show that the CEO stands behind the company.

Figure 9.4

Personal selling can take place in business-to-business as well as consumer environments.

© 2010 Jupiterimages Corporation

When U.S. toy brand Mattel was forced to recall eighteen million toys after Chinese-made products were shown to be potentially unsafe, Mattel’s CEO, Bob Eckert, explained what went wrong, apologized, accepted responsibility, and took action. During the time of crisis, it’s crucial for the CEO or spokesperson to be upfront, direct, and very proactive. In addition to holding a press conference, Eckert filmed a separate online video apology. In his statements, he sympathized with parents, saying, “I’m a parent of four kids as well.” Mattel also took out full-page ads in major newspapers: the New York Times, the Wall Street Journal, and USA Today. Finally, Mattel’s Web site posted comprehensive recall details and explained how to receive a free replacement toy of equal value. Posting a response on their Web site is a faster way for companies to get the message out than might be possible through traditional media.Donna Goodison, “Weathering Toy Recall Crisis,” Boston Herald, August 16, 2007, 32.

Team Selling

Personal selling can also be done through an outside network of sales reps. For example, Barefoot Parties sells loungewear, accessories, and gifts for women through at-home parties held by its sales agents. Agents get bonuses based on the amount of income the party generates in addition to a minimum base commission of 20 percent from the party sales.Tim Parry, “Get in on the Party,” Merchant, January 1, 2007, n.p.

Some products and services are so complex and intertwined that a team sales approachSelling that is handled by a team of salespeople, technical specialists, field engineers, and supply chain specialists who coordinate the timetable from order to production to delivery; often used for complex business-to-business sales. is needed, in which the selling is handled by a team of salespeople, technical specialists, field engineers, and supply chain specialists who coordinate the timetable from order to production to delivery. Telecommunications equipment provider Lucent uses this kind of team approach, pairing supply chain executives with sales reps on the sales team. Technical specialists work with the customer to design a cell phone network, for example. In one case, Lucent created a CDMA (Code Division Multiple Access) cell phone network for a customer in India. The network included over fifty switching centers, twenty-five hundred base stations, and three hundred thousand circuit pack and cables. Such complexity demands a team sales approach.

Sales Force Automation (SFA)

Marketing information systems and CRM systems often include tools to help the sales force. Sales force automation (SFA)The use of computers to track such functions as contact management, sales quotes, sales order information, and reporting. includes a myriad of functions such as contact management, sales quote automation, sales order information, and reporting functions. The tools use CRM and other data to maximize the productivity and effectiveness of the sales force. For example, salespeople who use a service like Salesforce (http://www.salesforce.com) can keep track of their sales leads and construct their call schedules to be most efficient, while their managers can track their performance and identify bad and good performers easily.

Downsides of Personal Selling

The disadvantages of personal selling are its high labor costs and the corollary: it’s difficult to reach large numbers of people when you try to speak them to one-to-one. Also, the information communicated may vary from the intended message. Sometimes salespeople, in an effort to “get the sale” or “go the extra mile” for their potential customer, may bend the rules in a way that’s detrimental for the company, such as by promising a delivery date that forces the company to pay extra in expediting costs or overtime in an effort to meet the promised date. Worse, a company might suffer bad publicity as a result of a salesperson’s unethical actions.

Database Marketing

Many sophisticated advertisers understand that it makes sense to keep track of their customers—and perhaps even those who aren’t their customers (at least yet!). Database marketingA system of marketing that collects information on consumers such as name, purchasing profile, demographics, and credit rating and uses it to build a long-term relationship with a customer. is a system of marketing that collects information from consumers and then uses it to build a long-term relationship with a customer. Today this strategy underpins many promotional tools, especially those that have an element of direct communications with the customer, such as personal sales and direct marketing. Databases contain customer names, addresses, purchase profiles, psychographic and demographic details, purchase patterns, media preferences, credit ratings, and other information that helps a company target and create the right message and offer for each customer. This data can come from sources such as internal sales data, online opt-in registrations, loyalty program data, contest forms, third-party database sellers, and public government records (e.g., home sales).

Customer Relationship Management (CRM)

For this reason, database marketing has evolved to be called customer relationship management (CRM)Marketing that uses specific database marketing information about individual customers to create more effective marketing communications specific to them.. CRM uses the specific information about individual customers to create more effective marketing communications specific to them. For example, if you know that an individual customer has a ten-year-old child, you can target her with offers relevant to children in that age group, Or, if you know that the customer has bought Lunchables, you can send her a coupon to stimulate a repeat purchase or to cross-sell a related product.

Loyalty Programs

Loyalty programs that reward customers for continuing to purchase from the company make extensive use of CRM. For example, the retailer Brookstone uses its loyalty program to recognize customers who have purchased from its store, catalog, or Web site before (using an e-mail address, phone number, or membership number to recognize the customer). Brookstone records every sales transaction across every channel (whether at the store, online, or through a catalog) and rewards the customer with credits based on how much they have purchased from the company. Customers can apply these credits toward future purchases; this cements their relationship with the company.Connie Robbins Gentry, “Personal Recognition: Multichannel Retailers Market One-On-One to Loyal Shoppers,” Chain Store Age, January 2007, 78.

Behavioral Targeting

For better or worse, technological advances make it easier and easier for marketers to track us and our preferences very precisely. As we saw when we discussed target marketing, one hot trend is behavioral targeting, which refers to presenting people with advertisements based on their Internet use. For example, Microsoft combines personal data from the 263 million users of its free Hotmail e-mail service—the biggest in the world—with information it gains from monitoring their searches. When you sign up for Hotmail, the service asks you for personal information including your age, occupation, and address (though you’re not required to answer). If you use Microsoft’s search engine it calls Live Search, the company keeps a record of the words you search for and the results you clicked on. Microsoft’s behavioral targeting system will allow its advertising clients to send different ads to each person surfing the Web. For instance, if a twenty-five-year-old financial analyst living in a big city is comparing prices of cars online, BMW could send her an ad for a Mini Cooper. But it could send a forty-five-year-old suburban businessman with children who is doing the same search an ad for the X5 SUV.Aaron O. Patrick, “Microsoft Ad Push Is All about You: ‘Behavioral Targeting’ Aims to Use Customer Preferences to Hone Marketing Pitches,” Wall Street Journal, December 26, 2006, B3; Brian Steinberg, “Next Up on Fox: Ads That Can Change Pitch,” Wall Street Journal, April 21, 2005, B1; Bob Tedeschi, “Every Click You Make, They’ll Be Watching You,” New York Times Online, April 3, 2006, http://www.nytimes.com/2006/04/03/business/03ecom.html (February 10, 2009); David Kesmodel, “Marketers Push Online Ads Based on Your Surfing Habits,” Wall Street Journal on the Web, April 5, 2005, http://online.wsj.com/article/0,,SB111202090636790858,00.html? mod=mm_hs_advertising (February 10, 2009).

Going a step further, CBS recently announced that it is testing a system that customizes the ads you’ll see on your cell phone based on your location. Its CBS Mobile unit is teaming up with the social networking service Loopt, which allows its subscribers to track participating friends and family on their mobile phones.Laura M. Holson, “In CBS Test, Mobile Ads Find Users,” New York Times Online, February 6, 2008, http://www.nytimes.com/2008/02/06/technology/06mobile.html (accessed February 10, 2009). In the (near?) future, you might well find ads popping up on your cell phone from stores you are literally walking past on the street. Yes, they are watching you…