Promotion, the fourth element in the marketing mix, is the most difficult one to describe. It is all the communicative activities you use to ensure that customers know about your offerings, have a favorable impression of them, and actually make a transaction. Promotion represents all of the communications that a marketer may insert into the marketplace. These activities include advertising, catalogs, contests, public relations and personal selling. Within these categories we have TV, radio, and print ads, billboards, product placements in movies, sponsorship of public TV and radio channels, two-for-one dinner specials, customer loyalty programs, telemarketing, direct mail sales, and door-to-door solicitations. And on and on.
The many faces of promotion are too numerous to cover in a book of this size. Suffice it to say that, along with market research, promotion provides the critical communication link between your company and the customers you aim to serve.
Sunday, July 22, 2007
Price
Price is what a buyer must give up in exchange for your product or service. Pricing in a competitive environment is both critical and challenging. If you set the price too low, you'll increase unit sales at the expense of profits. If you set it too high, some of your customers will walk into the waiting arms of competitors. Price decisions include price point, list price, discounts, payment period, and so on.
In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, barring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the product life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.
Generally, your flexibility in pricing is a function of the uniqueness of your product or service. This is because customers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car.
Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cosmetics industry.
Wherever you price your product or service, that price is an important element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to increase unit sales, profits, or market share; to undermine a competitor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind.
In free and competitive markets, pricing is the linchpin of most transactions. When a customer who wants a product perceives that its value is worth the asking price, a transaction will take place, barring other choices. Thus, moving the price higher or lower regulates the quantity of units sold. This point has implications for the product life cycle. You can price much more aggressively when your product is perceived as new, unique, and without strong substitutes, but you must often reduce your price as substitutes and competitors appear in the maturity stage of the cycle.
Generally, your flexibility in pricing is a function of the uniqueness of your product or service. This is because customers have difficulty in assessing the value of more unique offerings, such as a custom-built guitar or a fully restored 1962 MG sports car.
Some sellers successfully maintain a high price by surrounding their very ordinary products with an aura of uniqueness, quality, or exoticism. This approach is commonplace in, for example, the cosmetics industry.
Wherever you price your product or service, that price is an important element of the marketing mix and will have an impact on your results. You can price for any of the following objectives: to increase unit sales, profits, or market share; to undermine a competitor; or to keep competitors from entering your turf. Successful companies design their new products with specific price targets in mind.
Thursday, July 19, 2007
Place
Place refers to the point of sale and distribution of the product or service. Place represents the location where a product can be purchased. It is often referred to as the distribution channel. Place may be a retail store, a national distributor network, an e-commerce Web site, or a direct mail catalog.
Few companies use a single place for transacting business with customers. Many have market channels through which they meet customers; the more numerous and effective these channels are, the greater the opportunities to make sales.
Few companies use a single place for transacting business with customers. Many have market channels through which they meet customers; the more numerous and effective these channels are, the greater the opportunities to make sales.
Product
The product (or service) is the centerpiece of the marketing mix. Whether it's a life insurance policy, a washing machine, or a broadband Internet service, the product is the company's offer to customers. That offer includes physical aspects as well as the less tangible elements, such as warranties, option choices, and after-sales service. Thus, the product is the entire package you offer to customers.
You can differentiate products physically or through the services your company provides in support of the product. Products' physical distinctions include the following:
• Form. Size, shape, physical structure
• Features.
• Performance quality. The level at which the product's primary characteristics function
• Conformance quality. The degree to which all the units of the product perform equally
• Durability. The product's expected operating life under natural or stressful conditions
• Reliability. The probability that the product won't malfunction or fail
• Repairability. The ease with which the product can be fixed if it malfunctions
• Style. The product's look and feel
• Design. The way all the foregoing qualities work together (it's easy to use, looks nice, and lasts a long time)
You can also differentiate your product by service distinctions that set it apart. Service distinctions include the following:
• Ordering ease. How easy it is for customers to buy the product
• Delivery. How quickly and accurately the product is delivered
• Installation. How well the work is done to make the product usable in its intended location
• Customer training. Whether your company offers to train customers in using the product
• Customer consulting. Whether your company offers advice or research services to buyer.
• Maintenance and repair. How well your company helps customers keep the product in good working order.
The actual design of the product or service should be guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.
You can differentiate products physically or through the services your company provides in support of the product. Products' physical distinctions include the following:
• Form. Size, shape, physical structure
• Features.
• Performance quality. The level at which the product's primary characteristics function
• Conformance quality. The degree to which all the units of the product perform equally
• Durability. The product's expected operating life under natural or stressful conditions
• Reliability. The probability that the product won't malfunction or fail
• Repairability. The ease with which the product can be fixed if it malfunctions
• Style. The product's look and feel
• Design. The way all the foregoing qualities work together (it's easy to use, looks nice, and lasts a long time)
You can also differentiate your product by service distinctions that set it apart. Service distinctions include the following:
• Ordering ease. How easy it is for customers to buy the product
• Delivery. How quickly and accurately the product is delivered
• Installation. How well the work is done to make the product usable in its intended location
• Customer training. Whether your company offers to train customers in using the product
• Customer consulting. Whether your company offers advice or research services to buyer.
• Maintenance and repair. How well your company helps customers keep the product in good working order.
The actual design of the product or service should be guided by a deep understanding of what customers need, want, and are willing to pay for, as determined by market understanding and research.
Differentiation
Approaches to differentiation are limited only by the human imagination, but they generally take one of these form:
• Appealing design, for example, Braun kitchen products
• Superior performance, for example, the Apple PowerBook, Porsche, and Lexus automobiles
• Technical innovation, for example, hybrid-powered vehicles introduced by Toyota and Honda
• Reliability and durability, for example, Maytag appliances
• Convenience and ease of ordering, for example, Amazon.com
• Owner safety, for example, Volvo and Saab automobiles
A vendor can also differentiate itself through what many refer to as atmospherics: the physical or psychological environment in which business is conducted. This can be a powerful differentiator. Many people look for a satisfying environment in which to make their purchases, and they are willing to pay for it.
Branding
Branding is another approach to differentiation. One could make a case that branding is the culmination of efforts to differentiate product or service. By building a positive and familiar image for your offering, you have a better than even chance of becoming the buyer's first choice among many competitors.
A strong brand either will become the default choice when the customer goes to make a purchase, or--the next best outcome--it will get the product or service onto the short list of possible choices.
Brand-name products have an aura of quality or utility that rival products in the same category do not possess. That aura usually translates into premium prices over nonbranded rivals. Brand power also leads to higher unit sales, because customers don’t have to agonize over whether or not to buy them. As Patrick Barwise and Sean Meehan have written, "Familiar brands reduce risks in a reliable, affordable, convenient way." A recognizable brand acts as an imprimatur of reliability, making the consumer's choice easy. People mostly don’t have time or energy to compare and consider other products when they are shopping. When people find something that works for them, they tend to stay with it. So they reflexively add products to their carts based on brands that they already have in mind.
The power of some categories of consumer packaged-goods brands may be diminishing, however, as customers come to understand that the aura of superiority may be nothing more than a curtain of advertising, and that nonbranded products may deliver the same utility at significantly lower cost. This understanding is gaining ground as supermarkets and drugstores place their lower-cost-generic products side-by-side with more expensive brands.
Differentiation That Matters
Differentiation matters only to the extent that customers value the difference. If the targeted customers truly value the difference that sets your product or service apart, they will either (1) select yours over others (2) be willing to pay a premium for what you offer, or (3) act on some combination of 1 and 2. Experience and market research are the best way to determine whether your difference is valued by customers.
There is growing evidence, however that many physical products fail to differentiate themselves in ways that customers really value. Company marketers and product developers sometimes add bells and whistles to new and enhanced product versions without giving much thought about whether customers care about or are willing to pay for them.
Do consumers want the many capabilities built into their DVD players, VHS machines, digital cameras, and office software suites? Engineers love these things and dedicate enormous effort to making them part of their products. This explains why every new version of Microsoft Word and Excel gets bigger and more complex, even though 90 percent of users probably use only a small fraction of these capabilities.
According to Patrick Barwise and Sean Meehan, being the best at what matters to customers produces a winner, and in many cases being the best is achieved when a product or service performs as it should, is easy to buy and operate, and is backed by excellent service.
They argue that most companies have taken differentiation so far that they have left their customer behind. The emphasis on being different is probably driven by ad people, who desperately need something different to talk about so as to cut through the smog of contemporary media. In advertising today, you must say something very different to be noticed. According to them, many customers don’t want bells and whistles and other differentiators as much as they want quality products, reliable service, on-time-delivery, and fair value for their money.
To be more succeed, then you have to be different.
• Appealing design, for example, Braun kitchen products
• Superior performance, for example, the Apple PowerBook, Porsche, and Lexus automobiles
• Technical innovation, for example, hybrid-powered vehicles introduced by Toyota and Honda
• Reliability and durability, for example, Maytag appliances
• Convenience and ease of ordering, for example, Amazon.com
• Owner safety, for example, Volvo and Saab automobiles
A vendor can also differentiate itself through what many refer to as atmospherics: the physical or psychological environment in which business is conducted. This can be a powerful differentiator. Many people look for a satisfying environment in which to make their purchases, and they are willing to pay for it.
Branding
Branding is another approach to differentiation. One could make a case that branding is the culmination of efforts to differentiate product or service. By building a positive and familiar image for your offering, you have a better than even chance of becoming the buyer's first choice among many competitors.
A strong brand either will become the default choice when the customer goes to make a purchase, or--the next best outcome--it will get the product or service onto the short list of possible choices.
Brand-name products have an aura of quality or utility that rival products in the same category do not possess. That aura usually translates into premium prices over nonbranded rivals. Brand power also leads to higher unit sales, because customers don’t have to agonize over whether or not to buy them. As Patrick Barwise and Sean Meehan have written, "Familiar brands reduce risks in a reliable, affordable, convenient way." A recognizable brand acts as an imprimatur of reliability, making the consumer's choice easy. People mostly don’t have time or energy to compare and consider other products when they are shopping. When people find something that works for them, they tend to stay with it. So they reflexively add products to their carts based on brands that they already have in mind.
The power of some categories of consumer packaged-goods brands may be diminishing, however, as customers come to understand that the aura of superiority may be nothing more than a curtain of advertising, and that nonbranded products may deliver the same utility at significantly lower cost. This understanding is gaining ground as supermarkets and drugstores place their lower-cost-generic products side-by-side with more expensive brands.
Differentiation That Matters
Differentiation matters only to the extent that customers value the difference. If the targeted customers truly value the difference that sets your product or service apart, they will either (1) select yours over others (2) be willing to pay a premium for what you offer, or (3) act on some combination of 1 and 2. Experience and market research are the best way to determine whether your difference is valued by customers.
There is growing evidence, however that many physical products fail to differentiate themselves in ways that customers really value. Company marketers and product developers sometimes add bells and whistles to new and enhanced product versions without giving much thought about whether customers care about or are willing to pay for them.
Do consumers want the many capabilities built into their DVD players, VHS machines, digital cameras, and office software suites? Engineers love these things and dedicate enormous effort to making them part of their products. This explains why every new version of Microsoft Word and Excel gets bigger and more complex, even though 90 percent of users probably use only a small fraction of these capabilities.
According to Patrick Barwise and Sean Meehan, being the best at what matters to customers produces a winner, and in many cases being the best is achieved when a product or service performs as it should, is easy to buy and operate, and is backed by excellent service.
They argue that most companies have taken differentiation so far that they have left their customer behind. The emphasis on being different is probably driven by ad people, who desperately need something different to talk about so as to cut through the smog of contemporary media. In advertising today, you must say something very different to be noticed. According to them, many customers don’t want bells and whistles and other differentiators as much as they want quality products, reliable service, on-time-delivery, and fair value for their money.
To be more succeed, then you have to be different.
Tuesday, July 17, 2007
Integrated Marketing Communication (IMC)
Managers have always had to face the challenge of creating awareness among targeted customers and bringing them to the point of interest and confidence when they will reach for their wallets and make a purchase. Over the years various forms of marketing communications have been used for this purpose: media advertising, personal selling, direct mail, and so forth. Web marketing is a recent addition to this communications mix.
With people receiving so many messages from so many sources, managers face a new challenge: producing a consistent brand message at each customer touch point. The answer to this challenge is a strategic process generally known as integrated marketing communications (IMC).
The American Marketing Association suggests that IMC is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” This concept includes many online and offline marketing channels. Online marketing channels include any e-marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relation, billboard, radio, and television.
IMC's goal is to use multiple modes of communication to foster awareness of a company's products or services, inform people about features and benefits, and move them to make a purchase. Those multiple modes must be consistent and complementary.
The Goal of Marketing Communications
The ultimate goal of marketing communications is to influence someone to make a purchase. But like most goals, it is attainable only through a number of process steps. Consider these:
1. Create awareness. People will not buy a product or service that they are not aware of. Consequently, companies go to great lengths to create awareness.
2. Provide knowledge. This step involves providing information about product or service features. What is the product? What does it do?
3. Create a favorable impression. People don't buy features; instead, they buy benefits--things that will make their lives better, solve a nagging problem, or save them money.
4. Attain a preferred position in the customer's mind. Deliver the clear objective to the customer to get the strategic position in customer's mind. Make the customer realizes about the benefits that other companies don't give.
5. Create a purchase intention. If the marketer has done a good job of addressing earlier steps in the process, the customer will resolve to make a purchase.
6. Make the sale. If all the other steps have been completed, the prospect will become a customer. The cash register will ring.
Those are the steps that typically lead to a purchase. An alternative is to use market research to classify targeted customers in the following order: (1) is unaware of our product; (2) is aware of the product but considers it similar to others being considered; (3) is favorably disposed to our product; (4) would select our product if the purchase were made today; and (5) buys our product.
Communications Vehicles
A marketer with a generous budget has access to an arsenal of communication options: electronic media (TV and radio), print media (newspapers and magazines), direct mail solicitations, telemarketing, personal selling, and the Web. Even public relations is a means of communicating with current and potential customers.
Conceptually, the vehicles of marketing communications can be categorized in two dimensions. The first dimension relates to targeting and customization, which can be divided into two parts. The first part is communications that address an individual prospect whose needs and interests already known by the company (targeted communication). Another part is mass communications (scattered communication), as in a TV commercial that runs on network TV during the final game of the World Series. That ad will be watched by millions of people--an undifferentiated cross section of society. As a practical matter, the commercial cannot be targeted to individual viewers or customized in any way.
The next dimension is divided into one-way and two-way communication, with an intermediate section. A TV commercial is strictly a one-way message; it can create awareness, and it may impart information about the features and benefits of the product, but not much else. The salesperson's visit with the purchasing manager, in contrast, is a two-way conversation in which the salesperson can describe his wares and the buyer can describe her particular needs and her reservations about pricing or terms, and can ask for specific information. The salesperson and the buyer can negotiate and perhaps conclude with a transaction. This two-way communication is effective in moving the buyer along the final steps of the purchasing process.
In choosing communication vehicles, it is necessary if company considers where potential customers are in the purchasing process, then use the most highly targeted vehicles that company can do.
Where Public Relations Fits In?
Public relations (PR) is a form of communication that aims to increase public awareness and understanding of, and to promote a favorable opinion of, a company, its products, and its services. PR tools include press releases, speeches by executives, and public service activities. Unlike other forms of communication, PR operates through unpaid channels. Consequently, company has no control over how their PR efforts will play out.
The primary virtue of PR in marketing communications is casting the company in a favorable light among the general public. Some of that aura can be expected to adhere to the company's products and services.
Formulating the Integrated Marketing Communications Program
According to Harvard Business School Press Article, there are several aspects that need to be concerned in planning the communications program, usually called the Six M's model:
1. Market. To whom is your communication addressed?
2. Mission. What is your objective in communicating?
3. Message. What specific points must be communicated?
4. Media. Which communication vehicles should you use to get the message across?
5. Money. How much will be budgeted for the effort?
6. Measurement. How will you assess the impact of your communication?
The Management Challenge
Marketing managers have an important two-part challenge with respect to IMC: (1) finding the best way to allocate financial resources in support of their brands, and (2) coordinating their spending so that all customer touch points are getting consistent messages.
Because channels of distribution and customer communication are so many and so varied nowadays, managers must optimize resource allocation among all the activities that touch customers: packaging, point-of-sale display and promotion, Web-based selling, and ad agency work. They may find themselves pulled in different directions by the advice of brand consultants, direct marketing agencies, e-commerce advisers, and after-sales support. Managers must also ensure that each of these activities represents the product to customers in a consistent manner. To put yourself in the customer's shoes is a practical way to avoid inconsistency.
There are also other challenges that can come up in implementing IMC:
1. Roles of Individual Media
This goal may appear simple but, for companies with different teams of people working on each element of the campaign, it can be a challenge to create effective advertising for all media using the same images and messages. Tactically, most marketers think the goal of each medium is different. For example, television ads are generally used for awareness generation, print to educate, and outdoor and radio to keep the message top-of-mind. In reality, the goal of all advertising, including packaging, is to sell. (Young, 2006)
2. Identifying Best Marketing Elements
The biggest difficulty IMC marketers face is summed up by Chuck Young of Ameritest, “Even though the different elements in a campaign are designed to work together, that does not mean that all the creative executions will work equally well.” This obstacle can be overcome by using advertising to identify the images and messages that will work best across media platforms. Marketers cannot compare a banner ad’s click-through rate to a print ad’s eye-tracking data to a TV commercial’s branded attention score. Therefore, it is important the ad research system provides performance metrics that make it easy for ad managers to make comparisons across media platforms. (Young, 2006)
With people receiving so many messages from so many sources, managers face a new challenge: producing a consistent brand message at each customer touch point. The answer to this challenge is a strategic process generally known as integrated marketing communications (IMC).
The American Marketing Association suggests that IMC is “a planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time.” This concept includes many online and offline marketing channels. Online marketing channels include any e-marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relation, billboard, radio, and television.
IMC's goal is to use multiple modes of communication to foster awareness of a company's products or services, inform people about features and benefits, and move them to make a purchase. Those multiple modes must be consistent and complementary.
The Goal of Marketing Communications
The ultimate goal of marketing communications is to influence someone to make a purchase. But like most goals, it is attainable only through a number of process steps. Consider these:
1. Create awareness. People will not buy a product or service that they are not aware of. Consequently, companies go to great lengths to create awareness.
2. Provide knowledge. This step involves providing information about product or service features. What is the product? What does it do?
3. Create a favorable impression. People don't buy features; instead, they buy benefits--things that will make their lives better, solve a nagging problem, or save them money.
4. Attain a preferred position in the customer's mind. Deliver the clear objective to the customer to get the strategic position in customer's mind. Make the customer realizes about the benefits that other companies don't give.
5. Create a purchase intention. If the marketer has done a good job of addressing earlier steps in the process, the customer will resolve to make a purchase.
6. Make the sale. If all the other steps have been completed, the prospect will become a customer. The cash register will ring.
Those are the steps that typically lead to a purchase. An alternative is to use market research to classify targeted customers in the following order: (1) is unaware of our product; (2) is aware of the product but considers it similar to others being considered; (3) is favorably disposed to our product; (4) would select our product if the purchase were made today; and (5) buys our product.
Communications Vehicles
A marketer with a generous budget has access to an arsenal of communication options: electronic media (TV and radio), print media (newspapers and magazines), direct mail solicitations, telemarketing, personal selling, and the Web. Even public relations is a means of communicating with current and potential customers.
Conceptually, the vehicles of marketing communications can be categorized in two dimensions. The first dimension relates to targeting and customization, which can be divided into two parts. The first part is communications that address an individual prospect whose needs and interests already known by the company (targeted communication). Another part is mass communications (scattered communication), as in a TV commercial that runs on network TV during the final game of the World Series. That ad will be watched by millions of people--an undifferentiated cross section of society. As a practical matter, the commercial cannot be targeted to individual viewers or customized in any way.
The next dimension is divided into one-way and two-way communication, with an intermediate section. A TV commercial is strictly a one-way message; it can create awareness, and it may impart information about the features and benefits of the product, but not much else. The salesperson's visit with the purchasing manager, in contrast, is a two-way conversation in which the salesperson can describe his wares and the buyer can describe her particular needs and her reservations about pricing or terms, and can ask for specific information. The salesperson and the buyer can negotiate and perhaps conclude with a transaction. This two-way communication is effective in moving the buyer along the final steps of the purchasing process.
In choosing communication vehicles, it is necessary if company considers where potential customers are in the purchasing process, then use the most highly targeted vehicles that company can do.
Where Public Relations Fits In?
Public relations (PR) is a form of communication that aims to increase public awareness and understanding of, and to promote a favorable opinion of, a company, its products, and its services. PR tools include press releases, speeches by executives, and public service activities. Unlike other forms of communication, PR operates through unpaid channels. Consequently, company has no control over how their PR efforts will play out.
The primary virtue of PR in marketing communications is casting the company in a favorable light among the general public. Some of that aura can be expected to adhere to the company's products and services.
Formulating the Integrated Marketing Communications Program
According to Harvard Business School Press Article, there are several aspects that need to be concerned in planning the communications program, usually called the Six M's model:
1. Market. To whom is your communication addressed?
2. Mission. What is your objective in communicating?
3. Message. What specific points must be communicated?
4. Media. Which communication vehicles should you use to get the message across?
5. Money. How much will be budgeted for the effort?
6. Measurement. How will you assess the impact of your communication?
The Management Challenge
Marketing managers have an important two-part challenge with respect to IMC: (1) finding the best way to allocate financial resources in support of their brands, and (2) coordinating their spending so that all customer touch points are getting consistent messages.
Because channels of distribution and customer communication are so many and so varied nowadays, managers must optimize resource allocation among all the activities that touch customers: packaging, point-of-sale display and promotion, Web-based selling, and ad agency work. They may find themselves pulled in different directions by the advice of brand consultants, direct marketing agencies, e-commerce advisers, and after-sales support. Managers must also ensure that each of these activities represents the product to customers in a consistent manner. To put yourself in the customer's shoes is a practical way to avoid inconsistency.
There are also other challenges that can come up in implementing IMC:
1. Roles of Individual Media
This goal may appear simple but, for companies with different teams of people working on each element of the campaign, it can be a challenge to create effective advertising for all media using the same images and messages. Tactically, most marketers think the goal of each medium is different. For example, television ads are generally used for awareness generation, print to educate, and outdoor and radio to keep the message top-of-mind. In reality, the goal of all advertising, including packaging, is to sell. (Young, 2006)
2. Identifying Best Marketing Elements
The biggest difficulty IMC marketers face is summed up by Chuck Young of Ameritest, “Even though the different elements in a campaign are designed to work together, that does not mean that all the creative executions will work equally well.” This obstacle can be overcome by using advertising to identify the images and messages that will work best across media platforms. Marketers cannot compare a banner ad’s click-through rate to a print ad’s eye-tracking data to a TV commercial’s branded attention score. Therefore, it is important the ad research system provides performance metrics that make it easy for ad managers to make comparisons across media platforms. (Young, 2006)
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