Advertising, Publicity, and Sales Promotions

Key Terms: promotion (or marketing communications) mix, integrated marketing communications, public relations, publicity, sales promotions, rebates, advertising specialties, POP displays, slotting fees, trade promotions, institutional (corporate) advertising, advocacy advertising, affordable method, percentage-of-sales method, CPM, competitive-parity method, objective and task approach, USP, AIDA, advertising agency, selectivity, reach, frequency, and copy testing, cause-related marketing, product placement, pay-per-click advertising, click fraud. 

The promotion mix (also known as the marketing communication mix) includes publicity, sales promotion, advertising, direct marketing, and personal selling.

Integrated Marketing Communications – is a communication strategy under which an organization attempts to use all of the promotion tools it has available to present a unified, consistent, clear, and coherent image/message to customers.

Public Relations – Firms have to communicate with their various publics (customers, employees, stockholders, potential investors, channel members, and government, and the general public). It is important for a firm to have a solid reputation and a positive image if it desires to attract employees, investors, and customers. A company that is thought of as unethical (e.g., one that pollutes and/or sells defective products) will not only have trouble finding employees, but might also attract unwelcome government interest. Sometimes firms use public relations to deal with false rumors about the company (Procter and Gamble once had to deal with a false rumor that the company was owned by Satanists). If a product manufactured by a firm turns out to be defective or dangerous, the public relations department often has to act and find a way to convince the public that this was a sincere mistake and not due to corporate greed or inefficiency.

Take a look at the PR Newswire website to acquire a deeper understanding about the importance of public relations:  http://www.prnewswire.com/

Cause-Related Marketing (Also known as Cause Marketing) -- Many companies are raising money for charity. One key benefit to the firm is enhancing its image.  Also, consumers, especially those who are under 30, will purchase brands that are helping improve the world. Teenagers claim that they are more likely to buy products that support charitable causes ("We're Good Guys, Buy From Us," Business Week, November 22, 2004, 72-74, ). Nike raised millions for cancer research by selling the one dollar yellow bracelets. This helped Nike improve an image that was tarnished by reports that their products were made in foreign sweatshops.  Young people think it is cool to wear a rubber bracelet to finance cancer research.  Target is also donating profits for breast cancer research. Target donated $27 million to schools via the "Take Charge in Education" program.  The GAP sells $20 teddy bears with the proceeds going to purchase winter coats for poor children.  The IEG Sponsorship Report estimates that the amount spent on cause marketing in 2006 will be about $1.3 billion.  According to Craig R. Johnson, president of Customer Growth Partners, "such retail-hosted charitable events and promotions have at least tripled since 2000 and have clearly accelerated in the past year" (NY Times, December 16, 2004, p. A1, C6).  

One of the best definitions of cause marketing is by Marconi cited in Berglind and Nakata (Business Horizons, 48(5), pp. 443-453 "Cause-Related Marketing:  More Buck than Bang?")

"The practice of marketing a product, service, brand, or company through a mutually beneficial relationship with a non-profit or social cause organization."

In 1983, American Express may have been the first company to use cause marketing.  The Statue of Liberty needed a great deal of private funding for repairs.  American Express offered to give one dollar towards the rehabilitation of the Statue of Liberty for every new credit card issued and one cent for every use of its credit card.  American Express promoted this "relationship" and eventually raised over $1 million for the Statue of Liberty.  American Express also got something out of this:  there was a 17% surge in new card applications and usage rate rose by 28% (Berglind and Nakata).

Do not confuse cause-related marketing with social marketing.  Social marketing is usually done without the assistance of businesses.  The purpose may be to help society or groups by using marketing tools. It may take the form of trying to get people to do something positive (getting an education) or avoiding something that is negative (taking illegal drugs).  It is not meant to benefit any companies so you generally do not have the "mutually beneficial relationship." Moreover, social marketing is done by government or government agencies. 

To learn more about cause marketing, go to the Cause Marketing Forum Website: http://www.causemarketingforum.com/page.asp?ID=188

Publicity
(a tool used in public relations) is nonpersonal communication, that is typically in the form of a news story, that is transmitted through the mass media. The purpose of publicity is to draw favorable attention to a company and/or its products without having to pay the media for it. The way it often works is as follows: a company sends a press release (often with a video tape) to the media (e.g., New York Times, Wall Street Journal, Business Week, Newsweek, ABC News, NBC News, CBS News, Fox News, etc. ) with the hope that it is newsworthy enough to be mentioned in the mass media. The advantage of publicity, besides the fact that it is free, is that it tends to more credible than advertising. On the other hand, there is no guarantee that the media will find the story newsworthy. Also, they might change the press release around so that it does not help the organization in any way. One product that received an incredible amount of publicity was Viagra. Sometimes, a film – especially one that is controversial – can generate a great deal of publicity. Several years ago, Brooklyn College received much publicity regarding its innovative core curriculum, one that is being copied by universities all over the world.

To learn more about how advertising differs from public relations, check out this Web site from the Online Women’s Business Center:
http://www.onlinewbc.org/DOCS/market/adv_vs_pr.html

Sales Promotions are inducements or gimmicks whose purpose is to encourage the purchase of a product/service immediately. Unlike advertising, where the objective is usually to influence long-term buying behavior, sales promotions are concerned with the short-term. A problem with promotions is that they sometimes cause consumers to focus more on the promotion than the product. In fact, sometimes consumers are not at all loyal to the product but are attracted to the coupon, gift, or rebate.

Some examples of sales promotions aimed at consumers (consumer promotions):
(a) coupons (b) free samples (c) refunds and rebates (d) demonstrations (e) premiums (gift for purchasing a product) (f) contests and sweepstakes (g) advertising specialties (some common ones are calendars, caps, refrigerator magnets, and pens with the name of the product or company) (h) point-of-purchase displays (displays in stores that are often used for impulse items such as magazines and candy) (i) shows or exhibits for consumers (J) special events (k) frequent-shopper gifts.

Rebates:  Brian Grow ("The Great Rebate Runaround," Business Week, 12/5/2005, pp. 34-37) wrote an interesting article on rebates.  Mail-in rebates are the major cause of customer complaints at Staples.  There are a huge number of complaints about rebates; customers tend to lose them (or the required receipts) or are late in sending them back.  Indeed, 40% of rebates never get redeemed.  The total value of all rebates is $6 billion so companies are quite happy when they are not used.  This is why manufacturers and retailers like them. It makes a product seem like it is cheaper but many customers end up paying the full price.

Advertising specialties
are a good way for a company to increase awareness of  its name, phone number, and or brands.  It can be a way to keep the company's name or logo in front of the customer for hours every day (e.g., on a mouse pad, mug, or pen).  I know a very successful air conditioner/refrigerator/stove repairperson.  He happens to be very good but I can never remember his name --I only need him once every several years.  He knows about the problem and has a simple solution.  He gives every customer a kitchen magnet with the name and phone number of his company. Now, when something breaks, I go to the refrigerator and see his name and phone number.  If you want to learn more about advertising specialties, check out the advertising specialty institute website (www.asicentral.com/).  

Point of purchase displays (POP displays) are important to marketers since the best time to influence customers is when they have the money and are ready to make a purchase, i.e., when they are in the store.  A good POP display attracts attention.  POP displays include signs, displays, cardboard cutouts, and posters. Today, digital signs are used in stores at the checkout counter to influence shoppers.  Below (in red) I have reproduced what the Point of Purchase Advertising Institute (POPAI) has to say about POP on its website (http://www.popai.com):

Retail Marketing is persuasive. Serving as the last three feet of the marketing plan, P-O-P advertising is the only mass medium executed at the critical point where products, consumers and the money to purchase the product all meet at the same time. It is no coincidence that with 74 percent of all purchase decisions in mass merchandisers made in store, an increasing number of brand marketers and retailers invest in this medium.

Retail Marketing serves as the silent salesman. P-O-P signage and in-store media educate and draw attention to consumers about a product's availability and attributes. Coming at a time when most consumers want more information, and retailers have reduced staffing levels, Retail Marketing performs a vital service and augments cost-reduction efforts.

Retail Marketing is flexible. It is the only mass advertising medium that can convey the same overall strategic message in differing languages to varying audiences in the same village, city or region.

P-O-P Advertising is increasingly sophisticated in its construction and utilization. Today's P-O-P displays are easily assembled, maintained and, at the same time, more powerful in entertaining and informing in the retail environment.

Retail Marketing is used increasingly by retailers to enhance the shopping experience. P-O-P is used to help overhaul a store's image, re-direct store traffic and bolster merchandising plans.

Please go to the POPAI website to learn more about this exciting area.

Trade Promotions (aimed at wholesalers and retailers) include:
(a) advertising allowances (b) display allowances (c) slotting fees (payment for shelf space) (d) trade shows (e) sales contests (f) free merchandise (g) training (h) cooperative promotions (manufacturer pays part of the expense of advertising or giving away caps with names of manufacturer and retailer)

Advertising:

The advertising/sales ratio varies from industry to industry and averages about 2.5% .

One key distinction to make when studying advertising is between general advertising and direct response advertising (i.e., direct marketing).  General advertising does not attempt to achieve an immediate measurable response.  The ad might be for a soft drink, say, Coca Cola and show people enjoying a can of the soft drink while having fun on the beach.  The person seeing the ad does not have to do anything.  Of course, the ultimate goal of the ad is to get you to buy Coca Cola when you shop for a soft drink. However, an immediate response on the part of the person seeing the ad is not expected.  With a direct response advertisement, the goal of the ad is to elicit a direct response.  This is the reason the ad must have a device (usually a phone number to call) so that the prospect can do something  after viewing the ad. For example, a person seeing an ad for Bowflex exercise equipment is, hopefully, going to call the toll-free telephone number within 60 minutes after  seeing the commercial.  The advantage of direct marketing is that there is a way of knowing how effective the ad (and the advertising medium) was by simply counting how many people called after seeing it.  This is what is refereed to as measurable response. We can use the measurable responses to compare different ads for the product or different advertising media (radio vs. televisio) or even different vehicles within the same medium (e.g., two different television programs or two radio shows).  Also, once people call in, we can capture their names and addresses and use them to build a database of customers or prospective customers.

Some types of advertising:

Product advertising – Attempts to sell a product.

Institutional (corporate) advertising – Attempts to enhance an organization’s image and reputation.

Advocacy advertising – Attempts to change public opinion in an area where there is controversy. For example, ads run by the teachers’ union against vouchers or the coal industry ads encouraging the use of coal by power plants. Some claim that this may not be advertising.

Steps in developing an Advertising Campaign:

(1) Define the advertising objectives:

What do you want the advertising to accomplish?
Objectives can be informative (to help promote a new product to a certain target market), persuasive (encourage consumers to switch to your brand), or reminder (maintain brand awareness). Objectives might focus on sales or image. You may also want to decide whether you want to use general advertising or direct response advertising.

(2) Determine the advertising appropriation/budget

There are four popular methods for determining how much to spend on advertising:
(a) affordable method --what you think you can afford (b) percentage-of-sales method -- some percentage of sales, say, 5% of your expected sales for the following year (c) competitive-parity method -- matching your competition (d) objective and task approach—this is probably the best method. There probably is no one amount that should be spent on advertising by a firm. It really depends on what you want the advertising campaign to accomplish in terms of product awareness, company image, and/or market share. Generally, the more you try to accomplish, the more you have to spend.

One problem with the percentage-of-sales method is that if your sales are declining, this method will result in less money spent on advertising. Is this wise? It might make more sense to increase advertising when sales are in decline.

(3) Creating the advertising message

Decide what points you want to stress in the ads. One famous approach is USP = unique selling proposition. Find something that is unique, i.e., a benefit your product has that others do not, and stress this in your advertising.

Message execution: There are numerous ways the message can be presented ranging from an expert endorsement to a slice-of-life ad. AIDA (Attention, Interest, Desire, Action) is an approach used in advertising. According to this approach, the first job of advertising is to get people’s attention, then their interest, …, and finally, get them to act.

Ads can be created in-house or by an advertising agency. Advertising agencies traditionally work for a 15% commission. This is changing and some firms are basing compensation on performance (performance-based compensation). An important advantage of advertising agencies is that they are outsiders and should therefore be more objective than in-house agencies. They can be easily fired and replaced with another agency.

(4) Developing the media plan

The primary goal of the media planner is to reach the largest number of individuals in the advertising target (i.e., the prospective customers) per dollar spent on media. Some media that might be considered include: television, newspapers, direct mail, radio, magazines, outdoor advertising, and Web advertising.

Some considerations in media selection:
Absolute cost, CPM (Cost per Thousand), reach, frequency, and selectivity.

CPM calculations:

CPM = (Cost x 1,000) / Size of the Audience

(a) Suppose a certain TV program is watched by 60,000,000 people and the cost of a 30-second commercial is $300,000. Calculate the CPM.

Answer: CPM = ($300,000 x 1,000) / 60,000,000 = $5       It costs you $5 to reach one thousand people.

(b) Suppose a certain magazine is read by 5,000,000 people and the cost of a full-page advertisement is $100,000. Calculate the CPM.
Answer: CPM = ($100,000 x 1,000) / 5,000,000 = $20

(c) Suppose a newspaper is read by 1,400,000 people and the cost of a full-page advertisement is $42,000. Calculate the CPM.
Answer: CPM = ($42,000 x 1,000) / 1,400,000 = $30

Note that CPM enables advertisers to compare different media. Of course, other factors should also be considered. Some ads may work better in a print medium than a broadcast medium and vice versa. For example, product demonstrations usually work best on television.

Selectivity = You want your ad to reach people in your target market. Suppose a product is used by women between the ages of 18 and 49. You want to know the cost of reaching one thousand 18 to 49-year old women. The CPM of females 18 to 49 is more useful to you than a CPM that includes men, children and the elderly. Some media are very selective and give you the ability to zero in on your target. Direct mail and magazines are probably the most selective media. Outdoor ads (usually placed on highways so motorists driving by can see them) are probably the least selective. Outdoor ads are also quite limited in terms of creativity.  The message on a billboard has to be very simple since motorists driving by at 55 mph can read only a few words.

Question: You have a product that would appeal to stamp collectors. Which media would you consider? [Answer: Buy or rent a list of stamp collectors and use direct mail to reach them, find a magazine read by stamp collectors and advertise there, and/or advertise on a Website for stamp collectors.]

Reach refers to the percentage of a defined audience (prospects or advertising target) that is exposed to the ad within a given period (usually four weeks).

Frequency refers to the average number of times a defined audience (prospects or advertising target) is exposed to the ad within a given period (usually four weeks). For example, outdoor ads on highways have high frequencies since individuals driving to work are exposed to them every day when driving to and from work.

The following Web site from the Online Women’s Business Center is a good place to learn more about choosing the right media for your advertising. It lists the advantages and disadvantages of various advertising media.
http://www.onlinewbc.org/docs/market/mk_adv_medium.html

(5) Evaluating the effectiveness of the advertisement

Copy testing can be done as a before test (before the ad is run) or after test (after the ad is run). A before test is a pretest and three things are tested: persuasiveness of the ad, communication (i.e., is the ad understandable), and recall. Please note that it is much easier to measure how well an ad communicates than its effect on sales.  

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New Trends in Advertising:  There has been a huge growth in Internet advertising.  According to Business Week, the Internet now accounts for 14% of the media time of Americans.  Advertisers are very excited about an advertising medium that has a built-in tool to measure the effectiveness of the ad.  Television ratings, on the other hand,  measure how many individuals watch a particular program but many of the viewers do not actually see the commercial. 

The Internet is used by consumers to search for information--according to one study, car shoppers spent an average of 5 hours researching cars on the Internet before visiting a showroom.  This makes it very important to use online advertising.

Another interesting trend is the fact that Google is becoming an important advertising vehicle. When you do a search, say, for "arthritis" you will get many hits. On the right-side of the page you will see ads for various kind of products and directing you to websites. For example,

Rheumatoid Arthritis Info
Learn about an advanced treatment
that may stop joint damage from RA.
Rheumatoid Arthritis Information

Amazing Arthritis Relief
Quickly And Easily End Arthritis
All-Natural. Safe. Very Effective.
www.AmazingArthritisRelief.com

Note that the ads usually come with 12 words of text.  This has become a huge business for Google.  Google's advertising revenue which derives mainly from searches is about $40 billion in 2010.  Why is Google so successful?  Companies like the fact that the people who see the ad are searching for information (in this case, arthritis) related to the ad.  Also, companies only pay when users click on the ads.  This means the company has a "measurable response."  Google uses sophisticated mathematical tools to match the user and ad to encourage the clicking.  These mathematical tools work since Google knows a great deal about the user.  The model considers such factors as time of day, gender, location of user, and much more.  The key is to connect the user with the ad that is most relevant to him/her.  According to a recent article (Saul Hansell, "Your Ads Here (All of Them)," NY TIMES Sunday Business, 1, 9, October 30, 2005):  "Google already collects and keeps vast amount of data about what Web pages and advertisements each of its users click on, and it can evaluate that history--and compare it with that of hundreds of millions of other users -- to select the ad shown on each page."  

Google and Yahoo are the two major pay-per-click advertisers. However, since the advertiser pays every time a Web surfer clicks on his link, this can lead to fraud.  Click fraud has become a serious problem.  According to Click Forensics, a company that is paid by advertisers to reduce click fraud, 17% of all online advertising clicks are fraudulent.  There are websites that pay people (they often live in poor countries and need the money) to click on ads and in this way increase revenues.  There are ways to detect click fraud. Suppose a company does not do any business in say, Albania, notices that there were 100,000 clicks from that part of the world, they would assume it was click fraud. Every computer has an IP address that identifies where it is located.  Also, people engaged in click fraud spend very little time on each page of the ad  ("Pay-Per-Click Web Advertisers Combat Costly Fraud"  by Susanna Hamner, New York Times, May 2009).

Why are advertisers shifting to pay-per-click advertising [it is now 57% (2008) of Internet adverting]?  Advertisers feel that it is more cost effective; this can easily be determined since it is a measurable response.  You can see how many clicks per dollar you are getting and you can also see how many of the clicks became actual customers.  

Facebook is also trying to find a way to make money from advertising.  They do not have the advantage that Google has with its ability to customize advertisements based on what the prospective customer is searching for (Sengupta, NY Times, July 23, 2012, p. B1).  Facebook has approximately 900 million users but has to figure out a way to prove to advertisers that advertising on Facebook is profitable (as noted, a "measurable response" is very important in marketing).  Facebook cannot easily customize ads based on what the prospect is searching for.  They have to customize the ads based on the kind of person you are and the kind of people you befriend. This is much more complicated.  One thing Facebook is working with is Facebook Exchange.  Facebook is going to track the sites you visit when you leave Facebook so that they can then show you a customized ad when you return to Facebook.  For example, you are on Facebook early in the morning and then go to a few sites dealing with exciting graduate business programs at, say Brooklyn College. when you  return, you find an ad for the MS in Business Economics Program at Brooklyn College and checklists for the three options in the program:  http://depthome.brooklyn.cuny.edu/economics/infobmf.htm  [I hope you do not mind a plug for the program I developed. After all, I am in marketing :)  ]

By the way, Facebook gets 85% of its revenues from advertising (Sengupta, NY Times, July 23, 2012, B1+,  "Facebook Advertising Efforts..").  Facebook is working on ways to reach mobile users with advertising. That is where retailers are advertising. 

Product Placements and Television Programming -- 

Product placements, where a television character is openly using a sponsor's product (and sometimes even praises it), is becoming more common on television.  For example, Subway sponsors a television show on NBC.  In a recent episode, one of the characters, Big Mike, who is quite overweight, asked a subordinate to get him a juicy foot-long sandwich.  He is praising the sandwich in the show.  This product placement has the advantage of positioning the Subway sandwich as delicious fast food for those concerned about being overweight.   Also, you can't zap this "commercial" since it is part of the program.  More and more television programs are doing product placements within television shows (Snapple, Coke, Vitamin Water, etc.).  In one show, judges for American Idol are openly drinking from Coca Cola cups.  Product placements have been around a long time in films. One of the more famous product placements was for Reese's Pieces in the movie E.T.  Steven Spielberg originally approached Mars and asked the company if they would pay for a product placement for M&Ms candy. Mars declined because they purportedly did not think anyone would want to see the film.  


 
New Trends in Film Advertising:

There is a new trend in advertising films (see David Carr, NY Times, May 29, 2006; "Studios Turn Thumbs Down on Film Critics,"  pp. C1, C2).  In the past, film critics were very important in spreading the word about a film.  Film producers spent a huge amount on newspaper advertising for films and held special screenings for the film critics.  Thus, the press and the film critics working for the newspapers had a great deal of power.  There appears to be a shift away from newspapers towards the Internet.  Many films do not have special screenings for the film critics; little money is being spent on newspaper advertising for the films. Instead, the films have websites and web promotion and advertising is used extensively.  Fox Atomic, a division of Fox Film Entertainment, wants to make films aimed at teenagers with no money spent on print.  They will rely exclusively on the Web.  Needless to say, the newspaper industry is concerned about losing a great deal of advertising revenue.

Trends:  Newspapers, Television, Online:

There is no question that newspapers are in trouble:  the number of subscribers continues to decline.  The same is true of books--the number of people reading books continues to go down.  Surprisingly, television is holding its own.  In fact, advertisers see television as a complement to online media  According to Nielsen Media Research, for the quarter ending 9/30/2008, the average household has 2.7 people and 2.9 television sets; the average American spends 142 hours per month watching television and 27 hours a month on the Internet.  Advertisers like television because it offers what they refer to as an "immersive experience."  Audiences immerse themselves in a television program because people like "video on a screen" more than text.  Advertisers talk of three screens -- television, Internet, and mobile devices -- all have become very important to them to reach consumers.   YouTube is another way audiences demonstrate interest in the video mode.  In December 2008, according to comScore's latest research, approximately 100 million American viewers watched 5.9 billion YouTube videos.  YouTube has not had an adverse effect on television; it is simply seen as another way to enjoy video on a screen. ["Why Television Still Shines in a World of Screens" by Randall Stross, NY Times, Sunday Business, p. 3.]

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[See "How to Build Must-See Fever"  by Brooks Barnes, NY Times, 3/19/2012, pp. B1, B2]

The movie industry is moving away from the old-fashioned way of marketing films-- trailers in movie theaters, newspaper advertisements, and television.  Today, movies are likely to be marketed using social media including Facebook, YouTube, Twitter, iPhone games, and fan blogs (e.g., Tumblr blog).  Barnes (2012) describes how the film "Hunger Games" which is targeted to teenagers is using a great deal of digital media. _________________________________________________________________________________________________________________


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(c) 2012 H.H. Friedman