Supply chain management- a management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value
Many modern companies are turning to supply chain management for competitive advantage.
The goal of supply chain management is to coordinate and integrate all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, ultimately giving supply chain managers "total visibility and control" of the materials, processes, money, and finished products both inside and outside the company they work for.
The philosophy behind supply chain management is that by visualizing and exerting control over the entire supply chain, supply chain managers can balance supply and demand needs, maximize strengths, and increase efficiencies at each level of the chain. Understanding and integrating supply and demand-related information at every level enables supply chain managers to optimize their decisions, reduce waste, and respond quickly to sudden changes in supply or demand.
Supply chain management, when performed well, reflects a completely customer-driven management philosophy. I
supply chain agility- an operational strategy focused on creating inventory velocity and operational flexibility simultaneously in the supply chain
Agile companies synchronize their activities through the sharing of supply and demand market information, spend more time than their competitors focusing on activities that create direct customer benefits, partner closely with suppliers and service providers to reduce customer wait times for products, and constantly seek to reduce supply chain complexity through the evaluation and reduction (or elimination) of stock-keeping units (SKUs) that customers aren't buying, among other strategies. By managing the product pipeline in this way, companies are able to reduce supply chain costs while at the same time offering better service levels, and in doing so, deliver more desirable products at better prices to customers.
In a supply chain, agility which involves being flexible, like star athletes, allows companies to adapt to customer needs.
Supply chain management is a key means of differentiation for a firm, and therefore represents a critical component in marketing and corporate strategy. Companies that focus on supply chain management commonly report lower inventory, transportation, warehousing, and packaging costs; greater logistical flexibility; improved customer service; and higher revenues. Research has shown a clear relationship between supply chain performance and both profitability and company value. Additionally, because well-managed supply chains are able to provide better value to customers with only marginal incremental expenditure on company assets, best-in-class supply chain companies such as Kimberly-Clark are becoming significantly more valuable investments for investors. Kimberly-Clark re-organized its supply chains by reducing distribution centers, increasing flexibility, and making its supply chain more "demand-driven." As a result, the company decreased forecasting errors by up to 35 percent each week, reduced fuel consumption by 2.4 million gallons per year, and reduced overall supply chain costs by millions of dollars per year*—all of which positively impact the company's bottom line. Under the DSI philosophy, those functional areas in a company charged with creating customer demand (such as marketing, sales, or research/development) communicate frequently and are synchronized with the parts of the business charged with fulfilling the created demand (purchasing, manufacturing, and logistics). This type of alignment enhances customer satisfaction by ensuring that, for example, salespeople make promises to customers that can actually be delivered on by the company's logistics arm, or that raw materials being purchased actually meet customer specifications before they are placed into production. Simultaneously, the company gains efficiencies from ordering and using only those materials that lead directly to sales. In short, companies operating under a DSI philosophy are better at their business because all of the different divisions within the company "play from the same sheet of music."* When firms practice good supply chain management, their functional departments or areas, such as marketing, research and development, and/or production, are integrated both within and across the linked firms.
Integration, then, is "how" excellent supply chain management works.
The business processes on which the linked firms work together represent the "what" of supply chain management—they are the objects of focus on which firms, departments, areas, and people work together when seeking to reduce supply chain costs or to generate additional revenues.
customer service management process- presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced
Whereas the CRM process is designed to identify and build relationships with good customers, the customer service management process is designed to ensure that those customer relationships remain strong. The customer service management process presents a multi-company, unified response system to the customer whenever complaints, concerns, questions, or comments are voiced. When the process is well executed, it can have a strong positive impact on revenues, often as a result of quick positive response to negative customer feedback, and sometimes even in the form of additional sales gained through the additional customer contact. Customers expect service from the moment a product is purchased until it is disposed of, and the customer service management process allows for touch points between the buyer and seller throughout this life cycle. The use of customer care software enables companies to enhance their customer service management process. Dell's customer support software, Clear View, enables staff members at the tech company's customer service command centers to view information from Dell's internal systems (as well as that of its partners) in real-time. This information is combined with a geographical system that allows Dell to match each customer's complaint with the proper service dispatch center, making its response both rapid and effective.*
Demand Management- seeks to align supply and demand throughout the supply chain by anticipating customer requirements at each level and creating demand-related plans of action prior to actual customer purchasing behavior
he demand management process seeks to align supply and demand throughout the supply chain by anticipating customer requirements at each level and creating customer-focused plans of action prior to actual purchases being made. At the same time, demand management seeks to minimize the costs of serving multiple types of customers who have variable wants and needs. In other words, the demand management process allows companies in the supply chain to satisfy customers in the most efficient and effective ways possible. Activities such as collecting customer data, forecasting future demand, and developing activities that smooth out demand help bring available inventory into alignment with customer desires.
Though it is very difficult to predict exactly what items and quantities customers will buy prior to purchase, demand management can ease pressure on the production process and allow companies to satisfy most of their customers through greater flexibility in manufacturing, marketing, and sales programs. One key way this occurs is through the sharing of customer demand forecasts and data during sales and operations planning (S&OP) meetings. During these meetings, the demand-generating functions of the business (marketing and sales) work together with the production side of the business (procurement, production, and logistics) in a collaborative arrangement designed to both satisfy customers and minimize waste. When work boot manufacturer Red Wing Shoes implemented S&OP in 2013, it was able to reduce inventory by 27 percent while simultaneously increasing customer service rates by 8 to 10 percent, leading to significant costs savings that were passed along to customers.*
Order Fulfillment- a highly integrated process, often requiring persons from multiple companies and multiple functions to come together and coordinate to create customer satisfaction at a given place and time
One of the most fundamental processes in supply chain management is the order fulfillment process, which involves generating, filling, delivering, and providing on-the-spot service for customer orders. The order fulfillment process is a highly integrated process, often requiring persons from multiple companies and multiple functions to come together and coordinate to create customer satisfaction at a given place and time.
Overall, the order fulfillment process involves understanding and integrating the company's internal capabilities with customer needs, and matching these together so that the supply chain maximizes profits while minimizing costs and waste. Amazon now uses Kiva robots to help workers pack three to four times more orders per hour than before. These robots bring shelves of products to the human packers based on what is in each customer's order. The packers then pick out the correct items, pack them, and send the complete box off to another robot to be shipped. This process has greatly increased the speed of Amazon's order fulfillment process: recent research found that the work robots do at Amazon shaves more than an hour off the time needed to pick and pack the average order.*
supplier relationship management process- supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers
The supplier relationship management process is closely related to the manufacturing flow management process and contains several characteristics that parallel the customer relationship management process. The manufacturing flow management process is highly dependent on supplier relationships for flexibility. Furthermore, in a way similar to that found in the customer relationship management process, supplier relationship management provides structural support for developing and maintaining relationships with suppliers. Thus, by integrating these two ideas, supplier relationship management supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers.
just as firms benefit from developing close-knit, integrated relationships with customers, close-knit, integrated relationships with suppliers provide a means through which performance advantages can be gained. For example, careful management of supplier relationships is a key step toward ensuring that firms' manufacturing resources are utilized to their maximum potential. It is clear, then, that the supplier relationship management process has a direct impact on each supply chain member's bottom-line financial performance. In certain instances, it can be advantageous for the supply chain to integrate via a formal merger. American pharmaceutical company Bayer HealthCare recently purchased German-based Steigerwald Arzneimittelwerk, a partnering pharmacy supplier that specializes in herbal medicines. Purchasing a supplier gave Bayer HealthCare access to new medications. At the same time, purchasing a supplier based in Germany gave Bayer HealthCare enhanced access to European markets. Managing supplier relationships not only gave Bayer HealthCare better access to supplies, it also offered a chance to increase its customer base. The acquisition of one by the other simply sealed the deal by making the partnership permanent.*
Product Development and Commercialization process -includes the group of activities that facilitates the joint development and marketing of new offerings among a group of supply chain partner firms
The product development and commercialization process (discussed in detail in Chapter 11) includes the group of activities that facilitate the joint development and marketing of new offerings among a group of supply chain partner firms. In many cases, more than one supply chain entity is responsible for ensuring new product success. Commonly, a multi-company collaboration is used to execute new-product development, testing, and launch, among other activities. The capability for developing and introducing new offerings quickly is key for competitive success versus rival firms, so it is often advantageous to involve many supply chain partners in the effort. The process requires the close cooperation of suppliers and customers, who provide input throughout the process and serve as advisers and co-producers for the new offering(s).
Designing a new product with the help of suppliers and customers can enable a company to introduce features and cost-cutting measures into final products. Customers provide information about what they want from the product, while suppliers can help to design for quality and manufacturability. Research has shown that when each supply chain partner shares responsibility for the design and manufacture of a new product, more obstacles can be identified early and opportunities for cost reduction are made possible. For example, Boeing involved a team of suppliers early in the development phase of its 787 Dreamliner aircraft, leading to a shift to a lighter composite material for the fuselage's outer shell. The lighter material is expected to make the aircraft substantially cheaper to operate on long haul flights.*
returns management process- enables firms to manage volumes of returned product efficiently while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chain
The final supply chain management process deals with situations in which customers choose to return a product to the retailer or supplier, thereby creating a reversed flow of goods within the supply chain. The returns management process enables firms to manage volumes of returned product efficiently while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chain. Returns have the potential to affect a firm's financial position in a major and negative way if mishandled. In certain industries, such as apparel eretailing, returns can amount to as much as 40 percent of sales volume.
In addition to the value of managing returns from a pure asset-recovery perspective, many firms are discovering that returns management also creates additional marketing and customer service touch points that can be leveraged for added customer value above and beyond normal sales and promotion-driven encounters. Handling returns quickly creates a positive image, and gives the company an additional opportunity to please the customer, and customers who have positive experiences with the returns management process can become very confident buyers who are willing to reorder, since they know any problems they encounter with purchases will be quickly and fairly rectified. In addition, the returns management process allows the firm to recognize weaknesses in product design and/or areas for potential improvement through the direct customer feedback that initiates the process.
The mobile phone industry has been able to use returns management to its advantage. In a typical year, almost 100 million mobile phones are returned to manufacturers. With a return of between 35 and 75 percent of their original value in the secondary market, reselling 250,000 out of the 100 million returned phones would result in more than $20 million in additional revenue. Returns management also allows mobile phone companies to reclaim rare materials, such as gold, silver, and palladium. For example, reclaimed metals from one million mobile phones returned to one company brought in more than $2.8 million.*
Partnering organizations are becoming increasingly efficient at dividing responsibility for supply chain management. Outsourcing, or contract logistics, is a rapidly growing initiative in which a manufacturer or supplier turns over an entire logistical function (often buying and managing transportation, warehousing, and/or light postponed manufacturing) to an independent third-party logistics company (3PL).
Outsourcing, or contract logistics- a manufacturer's or supplier's use of an independent third party to manage an entire function of the logistics system, such as transportation, warehousing, or order processing
Outsourcing enables companies to cut inventories, locate stock at fewer plants and distribution centers, and still provide the same level of service or even better. The companies then can refocus investment on their core business. In the hospitality industry, Avendra negotiates with suppliers to obtain virtually everything a hotel might need, from food and beverages to golf course maintenance. For example, by relying on Avendra to manage many aspects of the supply chain, companies like Fairmont Hotels & Resorts and Inter-Continental Hotels Group can concentrate on their core function—providing hospitality. The most progressive companies are engaging in vested outsourcing relationships, whereby both parties collaborate deeply to find mutually beneficial arrangements that allow both parties to "win" by reducing overall costs while achieving better performance.*
public-private partnerships (PPPs) -Critical to the satisfaction of both company and societal interests and provide a mechanism by which very-large scale problems or opportunities can be addressed
ometimes, the magnitude of a supply chain dilemma is too great for a company and its suppliers or outsourcing partners to handle alone. Increasingly, this is leading firms to work together with government agencies in the form of public-private partnerships (PPPs). PPPs are critical to the satisfaction of both company and societal interests and provide a mechanism by which very-large scale problems or opportunities can be addressed.
Though it is often assumed that industries and governments work poorly together (or in fact work against one another) when problems common to both emerge, a number of successful PPPs have formed over the past decade to diminish the negative impacts of potentially hazardous supply chain situations. For example, immediately following the September 11, 2001, terror attacks on the United States, representatives from both industry and government collaborated to develop the Customs-Trade Partnership Against Terrorism (C-TPAT) in an effort to protect U.S.-based supply chains from terrorist disruption. The program currently has more than 10,000 company participants and has, in general terms, been successful at protecting cargo inbound for the United States while only minimally impacting the performance of its members' supply chains. Similarly, governmental agencies like the Federal Emergency Management Agency (FEMA) and non-government organizations like the Red Cross have benefitted from the inclusion of commercial logistics expertise in their disaster response systems.* Efforts involving.
PPPs will likely factor into the solution of future national and global supply chain problems as well. For example, the dangerous combination of population growth and overuse of aging infrastructure has led to a situation whereby congestion and deterioration of roads imperils the timely shipment of goods. The U.S. Federal Highway Administration is openly soliciting proposals that would take some of the stress off of the U.S. highway network, including collaborating on building new toll roads and extending railways dedicated to cargo. These sorts of PPP-led advancements will play a critical role in the price of retail goods in upcoming years due to the costs associated with product and material delays.*
three-dimensional printing (3DP)- the creation of three-dimensional objects via an additive manufacturing (printing) technology that layers raw material into desired shapes
In the near future, however, electronic distribution will not be limited only to products and services that are mostly composed of information that can therefore be easily digitized. Experiments with three-dimensional printing (3DP) have been successful in industries such as auto parts, biomedical, and even fast food. Using 3DP technology, objects are built to precise specifications using raw materials at or near the location where they will be consumed. Charge Bikes prints customized titanium bicycle parts based on customer specifications, thus reducing the need to transport complete frames around the world before they can be assembled and sold. Shipping raw materials such as powdered titanium is cheaper than shipping finished bicycles because it can be packaged in a perfectly cubic container, making transportation much more efficient and cost effective. Powdered titanium is used only when it is needed, so virtually no waste is produced during printing. Web sites like 3DLT.com offer consumers templates for toys, dishes, and furniture that can be printed using the 3DP technology that is becoming increasingly available.
Many industry experts project that 3DP (sometimes referred to as additive manufacturing) will radically transform the ways global supply chains work by changing the basic platforms of business. With 3DP, smaller, localized supply chains will become the norm and small manufacturers will produce many more custom products than ever before over very short lead times. And because such platforms will remove much of the need for transportation of finished goods to distribution centers and retailers, 3DP is expected to have a very positive impact on businesses' carbon footprints and the environment at large. At the same time, these platforms should make it possible to deliver unique goods more quickly, creating perceptions of better service.*
Global markets present their own sets of challenges for supply chain managers. Strategically, there are many reasons why a company might wish to globalize its supply chain. The allure of foreign markets is strong, due to increasing demand for imported products worldwide. Cheap labor advantages and trade barriers/tariffs have encouraged firms to expand their global manufacturing operations. At the same time, globalization has brought about great uncertainty for modern companies, and specifically, their supply chains. Moving operations offshore exposes companies to risks associated with geopolitical conflict, foreign nationalization of assets and knowledge diffusion, and highly variable quality standards. Foreign suppliers are often less reliable, and due to the lengthening of the supply chain, variability in transportation service can lead to service failures. It is important to consider how sourcing and logistics will be impacted by supply chain globalization.
From a supply management standpoint, it often makes sense to procure goods and services from offshore suppliers. From an economic perspective, lower labor rates, government subsidies, and low materials costs are attractive, but are sometimes outweighed by the costs of quality variation and loss of intellectual property. Still, moving offshore also exposes the company to new technologies, introduces competition to domestic suppliers who have become lackadaisical, and build brand equity. Companies moving offshore must carefully consider the pros and cons, and build supply management systems that can manage very diverse tasks. Logistically, it is critical for importers of all sizes to understand and cope with the legalities of trade in other countries. Shippers and distributors must be aware of the permits, licenses, and registrations they may need to acquire, and depending on the types of product they are importing, the tariffs, quotas, and other regulations that apply in each country. Sometimes, the complexities of handling overseas logistics are too great to overcome. As companies lengthen their global supply chains in search of cost advantages, other less obvious risks emanating from outside the immediate supply chain are also starting to come into play. Longer shipping lanes can expose shipments to natural disasters and extreme weather; political instability and trade restrictions can abruptly halt or slow shipments; fluctuations in currency values and border delays can diminish the value of products while they are on the path to the customer; and theft and piracy can present a greater threat due to increased time of exposure. For these reasons, many companies are now creating contingency plans so they can react quickly when something goes wrong.*
Offshoring differs from nearshoring in that offshoring:
results in lower labor costs and high fuel costs.
disadvantage offshore suppliers
leads to the loss of intellectual property of companies
Indeed, as the world continues to globalize, supply chain management will undoubtedly continue to take on a globalized flavor. Worldwide, the resources needed to manufacture and sell increasingly demanded goods are becoming scarcer, and market boundaries are melting together. Free trade is expanding, and consumers in nations where demand has been traditionally low are viewing goods and placing orders via the Internet. Efforts to achieve world-class global supply chain management mean that the balancing of supply and demand—and the satisfaction of more and more customers worldwide—are becoming a reality for many companies.
In addition to outsourcing, globalization, PPPs, and 3D printing, other advancements in data and technology are beginning to exert an impact on the effectiveness and efficiency of the supply chain. First, a rapidly increasing prevalence of powerful computers and methods for capturing customer, supplier, and company information over the past two decades has resulted in the appearance of big data, a colloquial term for the explosive availability of data that has traditionally been hard to capture, store, manage, and analyze. marketing channel (also called a channel of distribution- a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer
marketing channel can be viewed as a canal or pipeline through which products, their ownership, communication, financing and payment, and accompanying risk flow to the consumer. A marketing channel (also called a channel of distribution) is a business structure of interdependent organizations that reaches from the point of production to the consumer and facilitates the downstream physical movement of goods through the supply chain. Channels represent the "place" or "distribution" element of the marketing mix (product, price, promotion, and place), in that they provide a route for company products and services to flow to the customer. In essence, the marketing channel is the "downstream" portion of the supply chain that connects a producer with the customer. Whereas "upstream" supply chain members are charged with moving component parts or raw materials to the producer, members of the marketing channel propel finished goods toward the customer, and/or provide services that facilitate additional customer value.
Because customers, like businesses, are specialized, they also rely on other entities for the fulfillment of most of their needs. Imagine what your life would be like if you had to grow your own food, make your own clothes, produce your own television shows, and assemble your own automobile! Luckily, members of marketing channels are available to undertake these tasks for us. However, not all goods and services produced by channel members exist in the form we'd most prefer, at least at first. Marketing channels are valuable because they aid producers in creating time, place, and exchange utility for customers, such that products become aligned with their needs.
form utility -the elements of the composition and appearance of a product that make it desirable
Producers, who sit at the top of the supply chain, provide form utility when they transform oats grown on a distant farm into the Cheerios that we like to eat for breakfast.
time- the increase in customer satisfaction gained by making a good or service available at the appropriate time
place utility- the usefulness of a good or service as a function of the location at which it is made available
Time and place utility are created by channel members, when, for example, a transport company hired by the producer physically moves boxes of cereal to a store near our homes in time for our next scheduled shopping trip.
exchange utility -the increased value of a product that is created as its ownership is transferred
And the retailer, who is often the closest channel member to the customer, provides a desired product for some amount of money we are reasonably willing to give, creates exchange utility in doing so.
Merchant wholesalers -an institution that buys goods from manufacturers and resells them to businesses, government agencies, and other wholesalers or retailers and that receives and takes title to goods, stores them in its own warehouses, and later ships them
They provide time and place utility and contact efficiency to retailers.
Merchant wholesalers are organizations that facilitate the movement of products and services from the manufacturer to producers, resellers, governments, institutions, and retailers. All merchant wholesalers take title to the goods they sell, and most of them operate one or more warehouses where they receive finished goods, store them, and later reship them to retailers, manufacturers, and institutional clients. Since wholesalers do not dramatically alter the form of a good nor sell it directly to the consumer, their value hinges on their providing time and place utility and contact efficiency to retailers.
wholesaling intermediaries who do not take title to a product but facilitate its sale from producer to end user by representing retailers, wholesalers, or manufacturers
Other intermediaries do not take title to goods and services they market but do facilitate exchanges of ownership between sellers and buyers. Agents and brokers facilitate the sales of products downstream by representing the interests of retailers, wholesalers, and manufacturers to potential customers. Unlike merchant wholesalers, agents or brokers only facilitate sales and generally have little input into the terms of the sale. They do, however, get a fee or commission based on sales volume. For example, grocery chains often employ the services of food brokers, who provide expertise for a range of products within a category. The broker facilitates the sale of many different manufacturers' products to the grocery chain by marketing the producers' stocks, but the broker never actually takes ownership of any food products.
which of the following is true of intermediaries that take title to a product.
They own the merchandise and control the terms of the sale.
Many different variations in channel structures are possible, with choices made based in large part on the numbers and types of wholesaling intermediaries that are most desirable. Generally, product characteristics, buyer considerations, and market conditions determine the types and number of intermediaries the producer should use, as follows:
Customized or highly complex products such as computers, specialty foods, or custom uniforms are usually sold through an agent or broker, who may represent one or multiple companies. In contrast, standardized product such as soda or toothpaste are often sold through a merchant wholesaler and retailer channel.
Buyer considerations such as purchase frequency or customer wait time influence channel choice. When there is no time pressure, customers may save money on books by ordering online and taking direct distribution from a wholesaler. However, if a book is needed immediately, it will have to be purchased at retail—at the school bookstore—and will include a markup.
Market characteristics such as how many buyers are in the market and whether they are concentrated in a general location also influence channel design. In a home sale, the buyer and seller are localized in one area, which facilitates the use of a simple agent/broker relationship, whereas mass-manufactured goods such as automobiles may require parts from all over the world and therefore many intermediaries.
Retailers- a channel intermediary that sells mainly to consumers
Retailers are those firms in the channel that sell directly to consumers as their primary function. A critical role fulfilled by retailers within the marketing channel is that they provide contact efficiency for consumers. Suppose you had to buy your milk at a dairy, your meat at a stockyard, and so forth. You would spend a great deal of time, money, and energy just shopping for just a few groceries. Retailers simplify distribution by reducing the number of transactions required by consumers, and by making an assortment of goods available in one location. Consider the example illustrated in Exhibit 13.1. Four consumers each want to buy a tablet computer. Without a retail intermediary like Best Buy, tablet manufacturers Samsung, Asus, Microsoft, Apple, and Lenovo would each have to make four contacts to reach the four consumers who are in the target market, for a total of twenty transactions. But when Best Buy acts as an intermediary between the producer and consumers, each producer needs to make only one contact, reducing the number to nine transactions. This benefit to customers accrues whether the retailer operates in a physical store location or online format.
Transactional functions contracting/promtoin, negotiating, risk taking.
Transactional functions involve contacting and communicating with prospective buyers to make them aware of existing products and to explain their features, advantages, and benefits.
logistical functions- Physicall disturbing, storing, Sorting.
Intermediaries in the channel also provide logistical functions. Logistical functions typically include transportation and storage of assets, as well as their sorting, accumulation, consolidation, and/or allocation for the purpose of conforming to customer requirements.
Facilitating functions researching, financing
The third basic channel function, facilitating, includes research and financing. Research provides information about channel members and consumers by getting answers to key questions: Who are the buyers? Where are they located? Why do they buy? Financing ensures that channel members have the money to keep products moving through the channel to the ultimate consumer. Although individual members can be added to or deleted from a channel, someone in the channel must perform these essential functions. Producers, wholesalers, retailers, or consumers can perform them, and sometimes nonmember channel participants such as service providers elect to perform them for a fee.
1. Direct channel
Direct channel- a distribution channel in which producers sell directly to consumers
When possible, producers use a direct channel to sell directly to consumers in order to keep purchase prices low. Direct marketing activities—including telemarketing, mail order and catalog shopping, and forms of electronic retailing such as online shopping and shop-at-home television networks—are good examples of this type of channel structure. There are no intermediaries. Producer-owned stores and factory outlet stores—like Sherwin-Williams, Polo Ralph Lauren, Oneida, and WestPoint Home—are also examples of direct channels.
By contrast, when one or more channel members are small companies lacking in marketing power, an agent/broker channel may be the best solution. Agents or brokers bring manufacturers and wholesalers together for negotiations, but they do not take title to merchandise. Ownership passes directly from the producer to one or more wholesalers and/or retailers, who sell to the ultimate consumer.
producer, agents or brokers, wholesalers, retailers, consumers
Most consumer products are sold through distribution channels similar to the other two alternatives: the retailer channel and the wholesaler channel.
3.. Retialer channel
A retailer channel is most common when the retailer is large and can buy in large quantities directly from the manufacturer. Walmart, Sears, and car dealers are examples of retailers that often bypass a wholesaler.
producer, retailers, consumers
4. Wholesaler channel
A wholesaler channel is commonly used for low-cost items that are frequently purchased, such as candy, cigarettes, and magazines.
producer, wholesalers, retailers, consumers
1. Direct cannel
Producer, Industrial users
2. Direct channel
Producer, Government buyers
3. Industrial distributor
Producer, Industrial distributor, industrial users,
producer, agents or brokers, industrial users
5.Agent/broker industrial distribution
producer, agents or brokers, industrial distribution, industrial users
As Exhibit 13.3 illustrates, five channel structures are common in business and industrial markets. First, direct channels are typical in business and industrial markets. For example, manufacturers buy large quantities of raw materials, major equipment, processed materials, and supplies directly from other producers. Manufacturers that require suppliers to meet detailed technical specifications often prefer direct channels. For instance, Apple uses a direct channel to purchase high-resolution retina displays for its innovative iPad tablet line. To ensure sufficient supply for iPad manufacturing, Apple takes direct shipments of screens from Sharp, LG, and Samsung.*
Alternatively, companies selling standardized items of moderate or low value often rely on industrial distributors. In many ways, an industrial distributor is like a supermarket for organizations. Industrial distributors are wholesalers and channel members that buy and take title to products. Moreover, they usually keep inventories of their products and sell and service them. Often small manufacturers cannot afford to employ their own sales force. Instead, they rely on manufacturers' representatives or selling agents to sell to either industrial distributors or users. Additionally, the Internet has enabled virtual distributors to emerge and has forced traditional industrial distributors to expand their business models. Many manufacturers and consumers are bypassing distributors and going direct, often via the Internet.
Industrial distributors are used by
companies selling standardized items of moderate or low value
strategic channel alliances- a cooperative agreement between business firms to use the other's already established distribution channel
Furthermore, companies often form strategic channel alliances that enable them to use another manufacturer's already-established channel. Alliances are used most often when the creation of marketing channel relationships may be too expensive and time consuming. For example, U.S.-based Vera Bradley, Inc. signed a deal with Mitsubishi Corporation and its partner Look, Inc. to distribute the former's handbags, luggage, and accessories in the Japanese department stores and boutiques in their respective networks. This alliance helps Vera Bradley reach new markets in foreign cities and diversifies its revenue base, while minimizing its risks of going abroad.*
In addition to using primary traditional and nontraditional channels to flow products toward customer markets, many businesses also employ secondary channels, using either an active or passive approach. For example, though most automobile manufacturers sell their finished products to end users through networks of owned or franchised dealers, they also sell cars to rental agencies such as Enterprise or Hertz, who then rent them to potential customers. Similarly, fashion apparel companies might distribute their premium products, such as silk ties or branded watches, through primary channels such as department stores or specialty stores, while using an off-brand or discount outlet for distribution of low-end products. In each case, the goal of the company is the same: to engage a segment of customers who might otherwise never experience the product by offering it at a more easily affordable price or under trial conditions.
reverse channels- channels that enable customers to return products or components for reuse or remanufacturing
Along with marketing channels that move products downstream to end customers, retailers and manufacturers also manage channels that move products upstream, in the direction of the producer. These reverse channels enable consumers to return products to the retailer or manufacturer in the event of a product defect, or at the end of the product's useful life to the consumer. The retailers or manufacturers can then recycle the product and use components to manufacture new products, or refurbish and resell the same product in a secondary market. Several large companies, including Apple, Best Buy, and Walmart, offer opportunities to recycle items ranging from plastic bags and batteries to televisions and Christmas trees. Consumers and companies alike view reverse channels as not just a way to reduce the firm's environmental impact, but also as a means to gain some financial benefits as well. For example, Apple will pay consumers for their old Apple products if they qualify for resale, or if their component parts are valuable for manufacturing new products. Drop and shop programs use convenience to get consumers to recycle products, like batteries or cell phones, during a regular trip to the store.
M-commercet- the ability to conduct commerce using a mobile device for the purpose of buying or selling goods or services
In response to the growth of digital channels, customers are turning in droves to M-commerce, whereby a mobile device is used to assess, compare, and/or buy products. For example, suppose you need a ride from one point in Chicago to another. Instead of having to hail a cab or walk to the nearest elevated train station, you can use Uber's smartphone app to contact a local driver who will take you directly to your destination. A key advantage of Uber and similar apps is their frictionless payment interface. When you are done with your ride, you just get out of the car and walk away while the app charges your credit or debit card and pays the driver.* M-commerce is currently experiencing the largest growth in both retail and channel decision-making, in part because of its more than $20 billion annual revenue.
M-commerce also enables consumers using wireless mobile devices to connect to the Internet and shop. Essentially, M-commerce goes beyond text message advertisements to allow consumers to purchase goods and services using wireless mobile devices. M-commerce users adopt the new technology because it saves time and offers more convenience in a greater number of locations. The use of M-commerce has become increasingly important as users grow in both number and purchasing power. Consumers have become more reliant on digital technologies, as shown in the world's first fully digital generation, the Millennials, and firms that fail to react to this trend risk losing a rapidly growing group of M-commerce customers*.
Many major companies, ranging from Polo Ralph Lauren to Sears, already offer shopping on mobile phones, and the growth potential is huge. Along with smartphone use, consumers are shopping with tablets just as much, if not more, than with company Web sites. One study even found that tablets accounted for twice as much in Web-based sales as smartphone purchases. M-commerce in the United States will exceed $41 billion by 2017 and sales made on mobile devices on a global scale will exceed $110 billion in the same time frame. In the United States, 87 percent of adults own a cellphone, 45 percent own a smartphone, 31 percent own a tablet, and 26 percent own an e-reader. Fifty-five percent of adults use the Internet on their mobile devices, and 31 percent report that they go online with their mobile device more than they do with a desktop or laptop computer. The gap between the number of smartphones owned and smartphones used for purchases is closing rapidly. During the holiday season, about 30 percent of smartphone owners check prices using some kind of price comparison app or read reviews online while inside a store, and almost 50 percent use their smartphones to call a friend or family member for purchase advice. Overall, more than two-thirds of Americans use their mobile devices to obtain shopping information.
Along with smartphone technology, companies are starting to look into other digital channels with which to connect with their customers. Social shopping allows multiple retailers to sell products to customers through social media sites. Aaramshop brings hundreds of neighborhood grocery stores to customers through Facebook. Customers makes their purchases online and their specific neighborhood stores take care of delivering the items directly to customers' homes.* Home delivery extends beyond groceries in many heavily populated areas. In China and India, McDonald's has started delivering directly to its customers instead of making consumers come to them.
which of the following is a similarity between traditional advertising and social media?
Both forms of advertising lack hard evidence as to the relative effectiveness of advertising goods.
Firms are also using social media Web sites as digital channels—even in some cases without offering a purchasing opportunity. Companies create profiles on Web sites like Pinterest or Facebook and use them not only to give customers information about their products, but also to collect customer information. According to one recent study, 38 percent of all online customers follow at least one retailer on a social networking site. Many customers use these Web sites to find product information or get information on special deals, and those who follow a company's blog or profile on a social media site often end up clicking through to the firm's Web site.*
While some services group retailers together in order to bring products to customers, others allow consumers to combine and order larger amounts. Web sites like Groupon and Livingsocial give customers the opportunity to fulfill their individual needs at group prices. Many of these sites are organized and managed by intermediaries between manufacturers and customers, but others may be customer initiated or even created by firms to better promote their own products and manage demand.*
Marketing managers must answer many questions before choosing a marketing channel. A book manufacturer must decide, for example, what roles physical and electronic distribution will play in the overall marketing strategy and how these two paths will fare against each other. In addition, managers must decide what level of distribution intensity is appropriate and must ensure that the channel strategy they choose is consistent with product, promotion, and pricing strategies. The choice of channels depends on a holistic analysis of market factors, product factors, and producer factors.
1. market factors
Among the most important market factors affecting distribution channel choices are market considerations. Specifically, managers should answer the following questions: Who are the potential customers? What do they buy? Where do they buy? When do they buy? How do they buy? Additionally, the choice of channel depends on whether the producer is selling to consumers directly, or through other industrial buyers, due to differences in the buying routines of these groups. The geographic location and size of the market are also important factors guiding channel selection. As a rule, if the target market is concentrated in one or more specific areas, then direct selling through a sales force is appropriate, whereas intermediaries would be less expensive in broader markets.
2. Product factors
Complex, customized, and expensive products tend to benefit from shorter and more direct marketing channels. These types of products sell better through a direct sales force. Examples include pharmaceuticals, scientific instruments, airplanes, and mainframe computer systems. On the other hand, the more standardized a product is, the longer its distribution channel can be and the greater the number of intermediaries that can be involved without driving up costs. For example, with the exception of flavor and shape, the formula for chewing gum is fairly standard from producer to producer. As a result, the distribution channel for gum tends to involve many wholesalers and retailers.
The stage in the product life cycle
The product stage in the life cycle is also an important factor in choosing a marketing channel. In fact, the choice of channel may change over the life of the product. As products become more common and less intimidating to potential users, producers tend to look for alternative channels. Similarly, perishable products such as vegetables and milk have a relatively short life span, and fragile products like china and crystal require a minimum amount of handling. Therefore, both require fairly short marketing channels. Online retailers such as eBay facilitate the sale of unusual or difficult-to-find products that benefit from a direct channel.
3. Producer factors
Several factors pertaining to the producer itself are important to the selection of a marketing channel. In general, producers with large financial, managerial, and marketing resources are better able to perform their own marketing, and thus will use more direct channels. These producers have the ability to hire and train their own sales forces, warehouse their own goods, and extend credit to their customers. Smaller or weaker firms, on the other hand, must rely on intermediaries to provide these services for them. Compared to producers with only one or two product lines, producers that sell several products in a related area are able to choose channels that are more direct. Sales expenses then can be spread over more products.
A producer's desire to control pricing, positioning, brand image, and customer support also tends to influence channel selection. For instance, firms that sell products with exclusive brand images, such as designer perfumes and clothing, usually avoid channels in which discount retailers are present. Manufacturers of upscale products, such as Gucci (handbags) and Godiva (chocolates), may sell their wares only in expensive stores in order to maintain an image of exclusivity. Many producers have opted to risk their image, however, and test sales in discount channels. For example, Levi Strauss expanded its distribution network to include JCPenney, Sears, and Walmart.
Organizations have three options for intensity of distribution:
Intensive distributiona form of distribution aimed at having a product available in every outlet where target customers might want to buy it
Intensive distribution is a form of distribution aimed at maximum market coverage. Here, the manufacturer tries to have the product available in every outlet where potential customers might want to buy it. If buyers are unwilling to search for a product, it must be made very accessible to buyers.
selective distribution- a form of distribution achieved by screening dealers to eliminate all but a few in any single area
The next level of distribution, selective distribution, is achieved by screening dealers and retailers to eliminate all but a few in any single area. Because only a few are chosen, the consumer must seek out the product. For example, HBO selectively distributes its popular television shows through a series of its own subscription-based channels (HBO, HBO on Demand, and HBO Go for mobile devices) and sells subscriptions or single episodes through Apple, Amazon.com, and Sony's online stores but does not stream them through Netflix or Hulu Plus.
3. exclusive distribution
exclusive distribution- a form of distribution that establishes one or a few dealers within a given area
The most restrictive form of market coverage is exclusive distribution, which entails only one or a few dealers within a given area. Because buyers may have to search or travel extensively to buy the product, exclusive distribution is usually confined to consumer specialty goods, a few shopping goods, and major industrial equipment. Products such as Rolls-Royce automobiles, Chris-Craft powerboats, and Pettibone tower cranes are distributed under exclusive arrangements.
In recent years, rapid changes in technology and communication have led to the emergence of new, experimental distribution methods and channel structures. For example, fashion flash sale sites like Gilt, JackThreads, and Ruelala have recently boomed in popularity. On these sites, new designer clothing items are made available every day—often at a discount from 15 to 80 percent, and always for an extremely limited time. The average fashion flash sale shopper is between 25 and 40 years of age and makes $100,000 a year—an ideal demographic for many marketers.
Another emerging channel structure involves renting items that are usually only sold to end consumers. For example, some Web sites allow customers to rent and return high fashion products (renttherunway.com and fashionrenting.com), handbags and accessories (lovemeandleaveme.com), and even furniture (fashionfurniture.com). Rental versus retail channels open up an entirely new customer base for certain products that were once reserved for a much smaller group.
For many years, subscription services such as book-of-the-month clubs have provided customers products periodically over time. More recently, subscription services have expanded far beyond books and magazines to include clothing (bombfell.com), shoes (shoedazzle.com), crafting kits (craftaholicsanonymous.net), and wine (www.clubw.com). Many Web sites require subscriptions to view premium content, and streaming media services like Spotify, Netflix, and OnLive offer a wholly new type of subscription service.
Digital marketplaces like Steam and the Google Play Store constitute another recent trend in marketing channels. Digital licensing adds an interesting facet to customer sales; instead of selling a tangible product, digital marketplaces sell the rights to songs, movies, and television shows through their Web sites and applications. Instead of leaving home to purchase a physical album, game, or movie, consumers can select specific media and download them directly to their computers or mobile devices.
Because of these varying preferences through different stages of the shopping cycle, many companies have begun to employ a multichannel marketing strategy, whereby customers are offered information, goods, services, and/or support through one or more synchronized channels. Recent studies have demonstrated that customers who use multiple channels when shopping become more engaged during the purchase process, and tend to spend more than customers who shop one channel only. The exception is when customers are buying simple, utilitarian products that are well known and intended for frequent use. Since customers are already familiar with these product types, single-channel designs are just as effective.*
Because consumers use multiple channels during the shopping experience, it has become important for channel members to create a seamless shopping experience across all physical and digital channels. Facilitating such customer activities as checking a store's inventory online, purchasing an item through an app for in-store pickup, allowing online purchases to be returned in-store, and enabling mobile payment while shopping in-store are only a few strategies that producers and retailers are using to give customers the appearance that multiple channels are behaving as one.*
However, it is important to understand that the multichannel design does create redundancy and complexity in the firm's distribution system. Selling through multiple channels is typically accompanied by the construction of multiple, parallel supply chains, each with its own inventory, processes, and performance metrics. Multichannel systems typically have meant that each channel would operate different transportation and distribution systems, hold and account for its own inventory, and otherwise act as independent sales and profit centers, with little knowledge of the operations of the other. This proved problematic for one retailer who was selling its products both in physical stores and on its Web site. The company had a distribution center in Kentucky for its Internet retailing business, and another near Chicago for its physical stores located there. When a customer in Chicago visited the local store looking for a certain product, the shelves were empty, and he was directed to order products from the company's Web site if he wanted one in time for the holidays. He did so, and the product was shipped to his home—at significant expense—from the Kentucky distribution center, while unused product sat only miles from his home in the Chicago distribution center, waiting to be stocked on local store shelves.
true of multichannel marketing
It requires each channel to hold and account for its own inventory
13-1Define the terms supply chain and supply chain management and discuss the benefits of supply chain management.
Management coordinates and integrates all of the activities performed by supply chain members into a seamless process from the source to the point of consumption. The benefits of supply chain management include reduced inventory, transportation, warehousing, and packaging costs; greater supply chain flexibility; improved customer service; and higher revenues.
13-2 Discuss the concepts of internal and external supply chain integration and explain why each of these types of integration is important.
In the modern supply chain, integration can be either internal or external. Internally, the very best companies develop a managerial orientation toward demand-supply integration. Externally, five types of integration are sought by firms interested in providing top-level service to customers: relationship integration, measurement integration, technology and planning integration, material and service supplier integration, and customer integration.
13-3 Identify the eight key processes of excellent supply chain management and discuss how each of these processes affects the end customer.
The key processes that leading supply chain companies focus on are (1) customer relationship management, (2) customer service management, (3) demand management, (4) order fulfillment, (5) manufacturing flow management, (6) supplier relationship management, (7) product development and commercialization, and (8) returns management. When firms practice excellent supply chain management, each of these processes is integrated from end to end in the supply chain.
13-4 Understand the importance of sustainable supply chain management to modern business operations.
Sustainable supply chain management involves the integration and balancing of environmental, social, and economic thinking into all phases of the supply chain management process.
13-5 Discuss how new technology and emerging trends are impacting the practice of supply chain management.
Several emerging trends are changing the job of today's supply chain manager. Some of the business trends affecting supply chain management include outsourcing logistics, public-private partnerships, electronic distribution, maintaining a secure supply chain, and new analytics tools. While these changes exert pressure on managers to change the way their supply chains function, they also help make supply chain management more integrated and easier to track.
13-6 Explain what marketing channels and channel intermediaries are and describe their functions and activities.
A marketing channel is a business structure of interdependent organizations that reach from the point of production to the consumer. Intermediaries negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller. Retailers are those firms in the channel that sell directly to consumers.
13-7 Describe common channel structures and strategies and the factors that influence their choice.
When possible, producers use the direct channel to sell directly to consumers. When one or more channel members are small companies, an agent/broker channel may be the best solution. Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel. Dual distribution may be used to distribute the same product to target markets, and companies often form strategic channel alliances to use already-established channels. Managers must decide what role distribution will play in the overall marketing strategy. In addition, they must be sure that the channel strategy chosen is consistent with market factors, product factors, and producer factors. Organizations have three options for intensity of distribution: intensive distribution, selective distribution, or exclusive distribution.
13-8Discuss multichannel and omnichannel marketing in both B-to-B and B-to-C structures and explain why these concepts are important.
Many companies have begun employing multichannel marketing strategies, whereby customers are offered information, goods, services, and/or support through one or more synchronized channels. While it can promote better consumer behavior, the multichannel design also creates redundancy and complexity in the firm's distribution system. Selling through multiple channels is typified by multiple parallel supply chains, each with its own inventory, processes, and performance metrics. Many companies are transitioning to omnichannel distribution operations that support their multichannel retail operations and unify their retail interfaces. With omnichannel operations, every customer receives equally efficient service.
retailing affects everyone, both directly and indirectly. The retailing industry is one of the largest employers in the United States, with almost 3.8 million U.S. retailers employing more than 29 million people—about one in five American workers. And the industry is expected to grow to more than 16 million by 2018. In addition, almost 10 percent of all businesses are classified as retailers..* Yet, retailing is still largely a mom-and-pop industry. Almost nine out of ten retail companies employ fewer than twenty employees, and according to the National Retail Federation, over 95 percent of all retailers operate just one store.*
Most retailers are quite small, but a few giant organizations such as Walmart dominate the industry. Walmart's annual U.S. sales are greater than the combined sales of the four next largest U.S. retailers. As the retail environment changes, so too do retailers. Trends and innovations relating to customer data, social media, and alternative forms of shopping are constantly developing, and retailers have no choice but to react. The best retailers actually lead the way by anticipating change and developing new and exciting ways to interact with customers. We discuss each of these issues and more in this chapter.
Depending on its ownership arrangement, a retailer can gain advantages from having a broad brand identity, or from having the freedom to take risks and innovate. Retail ownership takes one of three forms—they can be independently owned, part of a chain, or a franchise outlet.
1. independent retailer- a retailer owned by a single person or partnership and not operated as part of a larger retail institution
An independent retailer is owned by a person or group and is not operated as part of a larger network. Around the world, most retailers are independent, with each owner operating a singular store within a local community.
2. chain store- a store that is part of a group of the same stores owned and operated by a single organization
A chain store is a group of retailers (of one or more brand names) owned and operated by a single organization. Under this form of ownership, a home office for the entire chain handles retail buying; creates unified operating, marketing, and other administrative policies; and works to ensure consistency across different locations. The Gap and Starbucks are retail chains.
3. franchise- a relationship in which the business rights to operate and sell a product are granted by the franchisor to the franchisee
A franchise is a retail business where the operator is granted a license to operate and sell a product under the brand name of a larger supporting organizational structure, such as Subway or Supercuts. Under this arrangement, a franchisor originates the trade name, product, methods of operation, and so on. A franchisee, in return, pays the franchisor for the right to use its name, product, and business methods, and takes advantage of the franchisor's brand equity and operational expertise. The most successful franchises are increasingly services retailers. Three of the top five franchises recognized by Entrepreneur Magazine are primarily service rather than goods providers.*
franchisor- the originator of a trade name, product, methods of operation, and the like that grants operating rights to another party to sell its product
franchisee- an individual or business that is granted the right to sell another party's product
which of the following is true of franchisees
they take advantage of the franchisors brand equity and operational expertise
Supermarkets have a broad product assortment
Off-price retailers have a low level of service.
Specialty store have a high gross margin.
Drug stores have moderate prices.
Restaurants have a narrow product assortment.
The service levels that retailers provide range from full-service to self-service. Some retailers, such as exclusive clothing stores, offer very high or even customized service levels. They provide alterations, credit, delivery, consulting, liberal return policies, layaway, gift-wrapping, and personal shopping. By contrast, retailers such as factory outlets and warehouse clubs offer virtually no service. After stock is set out for sale, the customer is responsible for any information gathering, acquisition, handling, use, and product assembly. At the extreme low end of the service continuum, a retailer may take the form of a product kiosk or vending machine. retailers can also be categorized by the width and depth of their product lines.
Width refers to the assortment of products offered
depth refers to the number of different brands offered within each assortment.
Specialty stores such as Best Buy, Staples, and GameStop have the thinnest product assortments, usually carrying single or narrow product lines that are considerably deep. For example, a specialty pet store like PetSmart is limited to pet-related products, but may carry as many as twenty brands of dog food in a large variety of flavors, shapes, and sizes. On the other end of the spectrum, full-line discounters typically carry very wide assortments of merchandise that are fairly shallow.
Stores often modify their product assortments in order to accommodate factors in the external environment. Petitions started by concerned patrons in Australia and the United States caused major retailers to remove the Grand Theft Auto 5 video game and action figures from the popular television show Breaking Bad from store shelves. These patrons believed that the products' violent nature and association with the illegal drug culture were harmful to society.* Similarly, food products ranging from milk to vitamins to dog treats have been excluded from retail product lines in order to better ensure customer safety.
which of the following is a difference between specialty sores and full-line discounters?
Specialty stores have the thinnest product assortments, while full-line discounters have a wide assortment of merchandise.
Traditionally, retailers fall into one of several distinct types of retail stores, each of which features a product assortment, types of services, and price levels that align with the intended customers' shopping preferences. Recently, however, retailers began experimenting with alternative formats that blend the features and benefits of the traditional types. For instance, supermarkets are expanding their nonfood items and services, discounters are adding groceries, drugstores are becoming more like convenience stores, and department stores are experimenting with smaller stores. Nevertheless, many stores still fall into the traditional archetypes:
1.Department stores- a store housing several departments under one roof
Department stores such as JCPenney and Macy's carry a wide range of products and specialty goods, including apparel, cosmetics, housewares, electronics, and sometimes furniture. Each department acts as a separate profit center, but central management sets policies about pricing and the types of merchandise carried.
2. Specialty stores- a retail store specializing in a given type of merchandise
Specialty stores typically carry a deeper but narrower assortment of merchandise within a single category of interest. The specialized knowledge of their salesclerks allows for more attentive customer service. The Children's Place, Williams-Sonoma, and Foot Locker are well-known specialty retailers.
3. Supermarkets- a large, departmentalized, self-service retailer that specializes in food and some nonfood items
Supermarkets are large, departmentalized, self-service retailers that specialize in food and some nonfood items. Some conventional supermarkets are being replaced by much larger superstores. Superstores offer one-stop shopping for food and nonfood needs, as well as services such as pharmacists, florists, salad bars, photo processing kiosks, and banking centers.
4.Drugstores- a retail store that stocks pharmacy-related products and services as its main draw
Drugstores primarily provide pharmacy-related products and services, but many also carry an extensive selection of cosmetics, health and beauty aids, seasonal merchandise, greeting cards, toys, and some non-refrigerated convenience foods. As other retailer types have begun to add pharmacies and direct mail prescription services have become more popular, drugstores have competed by adding more services such as 24-hour drive-through windows and low-cost health clinics staffed by nurse practitioners.
5. convenience store- a miniature supermarket, carrying only a limited line of high-turnover convenience goods
A convenience store resembles a miniature supermarket but carries a much more limited line of high-turnover convenience goods. These self-service stores are typically located near residential areas and offer exactly what their name implies: convenient locations, long hours, and fast service in exchange for premium prices. In exchange for higher prices, however, customers are beginning to demand more from convenience store management, such as higher quality food and lower prices on staple items such as gasoline and milk.
6. Discount stores -a retailer that competes on the basis of low prices, high turnover, and high volume
Discount stores compete on the basis of low prices, high turnover, and high volume. Discounters can be classified into several major categories:
A. Full-line discount storesa discount store that carries a vast depth and breadth of product within a single product category
Full-line discount stores such as Walmart offer consumers very limited service and carry a vast assortment of well-known, nationally branded goods such as housewares, toys, automotive parts, hardware, sporting goods, garden items, and clothing.
B. Supercenters- a large retailer that stocks and sells a wide variety of merchandise including groceries, clothing, household goods, and other general merchandise
Supercenters extend the full-line concept to include groceries and a variety of services, such as pharmacies, dry cleaning, portrait studios, photo finishing, hair salons, optical shops, and restaurants. For supercenter operators such as Target, customers are drawn in by food but end up purchasing other items from the full-line discount stock.
C.specialty discount storesa retail store that offers a nearly complete selection of single-line merchandise and uses self-service, discount prices, high volume, and high turnover
Single-line specialty discount stores such as Foot Locker offer a nearly complete selection of merchandise within a single category and use self-service, discount prices, high volume, and high turnover to their advantage. A category killer such as Best Buy is a specialty discount store that heavily dominates its narrow merchandise segment.
category killer- a large discount store that specializes in a single line of merchandise and becomes the dominant retailer in its category
D. warehouse cluba large, no-frills retailer that sells bulk quantities of merchandise to customers at volume discount prices in exchange for a periodic membership fee
A warehouse club sells a limited selection of brand name appliances, household items, and groceries. These are sold in bulk from warehouse outlets on a cash-and-carry basis to members only. Currently, the leading stores in this category are Sam's Club, Costco, and BJ's Wholesale Club.
E. Off-price retailers- Off-price retailersa retailer that sells at prices 25 percent or more below traditional department store prices because it pays cash for its stock and usually doesn't ask for return privileges
Off-price retailers such as TJ Maxx, Ross, and Marshall's sell at prices 25 percent or more below traditional department store prices because they buy inventory with cash and they don't require return privileges. These stores often sell manufacturers' overruns, irregular merchandise, and/or overstocks that they purchase at or below cost. A factory outlet is an off-price retailer that is owned and operated by a single manufacturer and carries one line of merchandise—its own. Manufacturers can realize higher profit margins using factory outlets than they would by disposing of the goods through independent wholesalers and retailers. Used goods retailers turn customers into suppliers: pre-owned items bought back from customers are resold to different customers. Used goods retailers can be either brick-and-mortar locations (such as Goodwill stores) or electronic marketplaces (such as eBay).
factory outlet- an off-price retailer that is owned and operated by a manufacturer
Used goods retailers- a retailer whereby items purchased from one of the other types of retailers are resold to different customers
6. Restaurants- a retailer that provides both tangible products—food and drink—and valuable services—food preparation and presentation
Restaurants provide both tangible products—food and drink—and valuable services—food preparation and presentation. Most restaurants are also specialty retailers in that they concentrate their menu offerings on a distinctive type of cuisine—for example, Olive Garden Italian restaurants and Starbucks coffeehouses.
1. Automatic vending -the use of machines to offer goods for sale
Automatic vending entails the use of machines to offer goods for sale—for example, the soft drink, candy, or snack vending machines commonly found in public places and office buildings. Retailers are continually seeking new opportunities to sell via vending. As a result, modern vending machines today sell merchandise such as DVDs, digital cameras, perfumes, and even ice cream. A key aspect of their continuing success is the proliferation of cashless payment systems in response to consumers' diminishing preference for carrying cash.
2.Self-service technologies (SST)technological interfaces that allow customers to provide themselves with products and/or services without the intervention of a service employee
Self-service technologies (SST) comprise a form of automatic vending where services are the primary focus. Automatic teller machines, pay-at-the-pump gas stations, and movie ticket kiosks allow customers to make purchases that once required assistance from a company employee. However, as with any sort of self-service technology, automatic vending comes with failure risks due to human or technological error. Unless customers expect that they can easily recover from such errors, they may end up shopping elsewhere.
3.Direct retailing- the selling of products by representatives who work door-to-door, office-to-office, or at home sales parties
Direct retailing representatives sell products door-to-door, in offices, or at in-home sales parties. Companies like Avon, Mary Kay, and The Pampered Chef have used this approach for years. Man Cave, a new home sales party developed for men, has been described as "like Mary Kay on steroids." Man Cave representatives invite male friends and family over for testosterone-fueled parties at which Man Cave products are used and Man Cave foods are eaten. Affiliates earn commissions for the sale of beer mugs, grilling tools, frozen steaks, and other Man Cave products.*
4. Direct marketing (DM)techniques used to get consumers to make a purchase from their home, office, or other nonretail setting
Direct marketing (DM) includes techniques used to elicit purchases from consumers' homes, offices, and other convenient locations. Common DM techniques include telemarketing, direct mail, and mail-order catalogs. Shoppers using these methods are less bound by traditional shopping situations. Time-strapped consumers and those who live in rural or suburban areas are most likely to be DM shoppers because they value the convenience and flexibility it provides. DM occurs in several forms:
A. Telemarketing- the use of the telephone to sell directly to consumers
Telemarketing is a form of DM that employs outbound and inbound telephone contacts to sell directly to consumers. Telemarketing is a highly effective marketing technique; recent estimates indicate that 5,000 U.S. companies will spend over $15 billion on inbound and outbound calls by 2015.*
B. Direct mail- direct mailthe delivery of advertising or marketing material to recipients of postal or electronic mail
true of direct mail
it allows marketers to precisely target their customers according to demographic, geographic, and/ or psychographic characteristics.
Alternatively, direct mail can be a highly efficient or highly inefficient retailing method, depending on the quality of the mailing list and the effectiveness of the mailing piece. With direct mail, marketers can precisely target their customers according to demographic, geographic, and/or psychographic characteristics. Direct mailers are becoming more sophisticated in targeting the right customers. Microtargeting based on data analytics of census data, lifestyle patterns, financial information, and past purchase and credit history allows direct mailers to pick out those most likely to buy their products. U.S. companies spend more than $45 billion annually on direct marketing—a larger share of advertising expenditures than any other media except television. More than $11.5 billion of that is spent on data and software solutions intended to heighten customer responsiveness.
Microtargeting- the use of direct marketing techniques that employ highly detailed data analytics in order to isolate potential customers with great precision
C. Shop-at-home television networks- a specialized form of direct response marketing whereby television shows display merchandise, with the retail price, to home viewers
Shop-at-home television networks such as HSN and QVC produce television shows that display merchandise to home viewers. Viewers can phone in their orders directly on toll-free lines and shop with their credit cards. The shop-at-home industry has quickly grown into a multi-billion-dollar business with a loyal customer following and high customer penetration.
5. Online retailing, or e-tailinga type of shopping available to consumers with personal computers and access to the Internet
Online retailing, or e-tailing, enables a customer to shop over the Internet and have items delivered directly to her door. Global online shopping accounts for more than $1.3 trillion in sales today and is expected to reach $2.5 trillion by 2018.* Interactive shopping tools and live chats substitute for the in-store interactions with salespeople and product trials that customers traditionally use to make purchase decisions. Shoppers can look at a much wider variety of products online because physical space restrictions do not exist. While shopping, customers can take their time deciding what to buy.
Alternatively, specialty shops generally adopt a high-service approach that is supported by an agile approach to inventory. By keeping a greater amount of floor stock (inventory displayed for sale to customers) and back stock (inventory held in reserve for potential future sale in a retailer's storeroom or stockroom) on hand, a broader range of customer demands can be accommodated. This operating model also implies higher prices for customers, however, so retail managers must make sure that they deliver on the promises their firms make to customers in order to secure their loyalty. At the same time, these retail managers must control demand via promotions and other sales events in order to sell off slow moving and perishable items, thereby making more room for items that are more popular.
These sorts of tradeoffs have been partially responsible for the recent emergence of hybrid retail operating models. As an example of a hybrid strategy, the Spanish women's fashion retailer Zara employs a specialty retail format with a twist: It uses a mass merchandising inventory strategy. Zara offers high quality products and excellent customer service to draw customers into its stores but never replenishes specific inventory items that are sold. Rather, its designers and buyers are continually introducing new products in small or medium quantities. Once a product sells out, a new one replaces it, allowing for a very lean operation. This strategy not only lowers inventory costs (and thereby increases profitability) but also creates an aura of exclusivity around each piece that the retailer sells: Each skirt, blouse, and accessory is effectively a limited edition item. This strategy also has the ancillary benefit of driving customers back to the store in order to see what new products have arrived, and thus has the potential to increase repurchases.*
The tradeoffs inherent to retail operating models have both spurred the recent success of online-only retailers and led to a surge in online storefront development among retailers who have traditionally operated in physical formats only. A key advantage of online retail is that no physical retail store space is needed for displaying and selling merchandise. Lower cost remote distribution centers can be used since all of the showcasing occurs on the company's Web site. By moving online, a specialty store can gain the operational benefits of a mass merchandiser. It can showcase exclusive or trendy items in an almost-free space to potential customers located around the world, and can then fulfill demand from one of several localized distribution centers in a very short time. Fulfillment times are specified by the customer (according to their willingness to pay for greater shipping and delivery speed), and even this tradeoff is becoming less of a sticking point every year. Amazon's Prime subscription program, for example, includes free two-day shipping. The company recently revealed that it is experimenting with same day delivery via unmanned drones, and is already offering same-day delivery by traditional means within several limited geographic areas. Startup company Deliv positioned itself in 2015 as a cutting-edge crowdsourced courier service. Deliv provides its more than 250 national and regional U.S. retail partners (such as Macy's and Footlocker) a means of competing with Amazon by offering same-day home delivery. It will be very exciting to see how these advances continue to change retail strategies and operations in the years to come.
Today, most retail stores remain operationally and tactically similar to those that have been in business for hundreds of years; with one or more physical locations that the customer must visit in order to purchase a stocked product, and with strategies in place to attract customers to visit. The sorts of differences we have described among retail operating models imply that managing one type of store instead of another can involve very different experiences. But most of the decisions that retail managers make can be distilled down to six categories of activity, referred to as the retailing mix. These categories, described in the next section, are relatively universal to all forms of retailing, but are applied in different ways based on the retail format.
which of the following is true of a retailing mix.
it projects a stores image and influences customers perceptions
retailing mix- a combination of the six Ps—product, promotion, place, price, presentation, and personnel—to sell goods and services to the ultimate consumer
As previously noted, defining a retail operation entails combining the elements of the retailing mix to come up with a single retailing method to attract the target market. The retailing mix consists of six Ps: the four Ps of the marketing mix (product, promotion, place, and price) plus presentation and personnel (see Exhibit 14.2). The combination of the six Ps projects a store's (or Web site's) image and influences customers' perceptions. Using these impressions, shoppers position one store or Web site against another. Managers must make sure that the positioning is aligned with target customers' expectations.
1. product- With and depth of product assortment
2. Promotion- Advertising, publicity
3. place (distribution)- Location and hours
5. presentation- layout and atmosphere
6. personnel- Customer service and personal selling
The first element in the retailing mix is the product offering, also called the product assortment or merchandise mix. Developing a product offering is essentially a question of the width and depth of the product assortment. Price, store/Web site design, displays, and service are important to customers in determining where to shop, but the most critical factor is merchandise selection. This reasoning also holds true for online retailers. Amazon.com, for instance, offers enormous width in its product assortment with millions of different items, including books, music, toys, videos, tools and hardware, health and beauty aids, electronics, and software. Conversely, online specialty retailers such as Lemon and Mint and Bridge 55 focus on a single category of merchandise, hoping to attract loyal customers with a larger depth of products at lower prices and excellent customer service. Many online retailers purposely focus on single product line niches that could never attract enough foot traffic to support a traditional brick-and-mortar store. For instance, Web sites such as bugbitingplants.com and petflytrap.com sell and ship live carnivorous plants in the United States. After determining what products will satisfy target customers' desires, retailers must find sources of supply and evaluate the products. When the right products are found, the retail buyer negotiates a purchase contract. Retail promotion strategy includes advertising, public relations and publicity, and sales promotion. The goal is to help position the store or Web site in customers' minds. Retailers design intriguing ads, stage special events, and develop promotions aimed at their target markets. Today's grand-openings are a carefully orchestrated blend of advertising, merchandising, goodwill, and glitter. All the elements of an opening—press coverage, special events, media advertising, and store displays—are carefully planned. Other promotions that are often used successfully include sales events, coupons, and discounts for certain products or customer groups. One risk associated with store promotions, however, is brand cannibalization: a situation whereby the promotion intended to draw in new customers simply shifts current customers from buying one brand to another brand. For example, when TGI Fridays began offering $10 appetizers to boost unit sales, sales of some main course items decreased.* Brand cannibalization is dangerous to the retailer for two reasons. First, the retailer incurs significant expense in executing the promotion itself. Second, the promotion creates inaccurate sales forecasts for both the promoted and cannibalized products, leading to stockouts of the promoted brand and financial losses from discounting surplus inventory of the cannibalized brand. The latter types of losses can sometimes be significantly greater than the cost of the promotion itself. Therefore, retail managers should design their promotional activities carefully, with gaining new customers being the primary objective.
brand cannibalization- the reduction of sales for one brand as the result of the introduction of a new product or promotion of a current product by another brand
true of brand cannibalization
Promotion creates inaccurate sales forecasts for both the promoted and cannibalized products.
Unlike national retail advertising, local retail advertising:
provides specific information about a retailers store
Much retail advertising is focused on the local level. Local advertising by retailers usually provides specific information about their stores, such as location, merchandise, hours, prices, and special sales. In contrast, national retail advertising generally focuses on image. For example, Target uses advertisements similar to designer fashion advertisements to depict high-quality goods. Paired with the ubiquitous red target and tag line "Expect more. Pay less," Target is demonstrating that it sells products that consumers normally aspire to own at prices they can afford.
Target's advertising campaigns also take advantage of cooperative advertising, another popular retail advertising practice. Traditionally, marketers would pay retailers to feature their products in store mailers, or a marketer would develop a television campaign for the product and simply tack on several retailers' names at the end. But Target's advertising uses a more collaborative trend by integrating products such as Tide laundry detergent or Coca-Cola into the actual campaign. Another common form of cooperative advertising involves promotion of exclusive products. For example, Target hires famous trendy designers for temporary partnerships, during which they develop reasonably priced product lines available exclusively at Target stores. Recently, Target teamed up with Neiman Marcus to offer a collection of holiday luxury items. These items were sold both at Target and Neiman Marcus stores, as well as on both stores' outlet Web stores.
The retailing axiom "location, location, location" has long emphasized the importance of place to the retail mix. The physical location decision is important first because the retailer is making a large, semi-permanent commitment of resources that can reduce its future flexibility. Second, the physical location will almost inevitably affect the store's future growth and profitability. Many retailers work with consultants and/or city planners to determine the best sites for current sales as well as potential growth in the future.
Physical site location begins by choosing a community. Important factors to consider are the area's economic growth potential, the amount of competition, and geography. For instance, retailers like TJ Maxx and Walmart often build stores in new communities that are still under development. Fast-food restaurants tend to place a priority on locations with other fast-food restaurants because being located in clusters helps to draw customers for each restaurant. Even after careful research, however, the perfect location can be elusive in the face of changing markets. Mobile food trucks circumvent this problem by being able to relocate at will. By moving from spot to spot over the course of a day and parking outside events and heavily trafficked areas, mobile food trucks can maximize their exposure and adapt to changing markets.
After identifying a geographic region or community, retailers must choose a specific site. In addition to growth potential, the important factors to consider are neighborhood socioeconomic characteristics, traffic flows, land costs, zoning regulations, and public transportation. A particular site's visibility, parking, entrance and exit locations, accessibility, and safety and security issues are also important considerations.
A retailer should consider how its store fits into the surrounding environment. Retail decision makers probably would not locate a Dollar General store next door to a Neiman Marcus department store. Furthermore, brick-and-mortar retailers have to decide whether to have a freestanding unit or to become a tenant in a shopping center or mall. Large retailers like Target and sellers of shopping goods like furniture and cars often use an isolated, freestanding location. A freestanding store location may have the advantages of low site cost or rent and no nearby competitors. On the other hand, it may be hard to attract customers to a freestanding location, and no other retailers are around to share costs. To be successful, stores in isolated locations must become "destination stores." A destination store is a store consumers seek out and purposely plan to visit. Web sites can also be destinations for shoppers. Amazon is a destination Web site for a wide variety of products, and Google is a destination Web site for search information.
Freestanding units are increasing in popularity as brick-and-mortar retailers strive to make their stores more convenient to access, more enticing to shop, and more profitable. Freestanding sites now account for more than half of all retail store construction starts in the United States as more and more retailers are deciding not to locate in pedestrian malls. Perhaps the greatest reason for developing a freestanding site is greater visibility. Retailers often feel they get lost in huge shopping centers and malls, but freestanding units can help stores develop an identity with shoppers. Also, an aggressive expansion plan may not allow time to wait for shopping centers to be built. Drugstore chains like Walgreens have been purposefully relocating their existing shopping center stores to freestanding sites, especially street corner sites for drive-through accessibility.
destination store- a store that consumers purposely plan to visit prior to shopping
Shopping centers first appeared in the 1950s when the U.S. population started migrating to the suburbs. The first shopping centers were strip centers, typically located along busy streets. They usually included a supermarket, a variety store, and perhaps a few specialty stores. Then community shopping centers emerged, with one or two small department stores, more specialty stores, a couple of restaurants, and several apparel stores. These community shopping centers provided off-street parking and a broader variety of merchandise. Regional malls offering a much wider variety of merchandise started appearing in the mid-1970s. Regional malls are either entirely enclosed or roofed to allow shopping in any weather. Most are landscaped with trees, fountains, sculptures, and the like to enhance the shopping environment. They have acres of free parking. The anchor stores or generator stores (often major department stores) are usually located at opposite ends of the mall to create heavy foot traffic.
According to shopping center developers, lifestyle centers are emerging as the newest generation of shopping centers. Lifestyle centers typically combine outdoor shopping areas composed of upscale retailers and restaurants, with plazas, fountains, and pedestrian streets. They appeal to retail developers looking for an alternative to the traditional shopping mall, a concept rapidly losing favor among shoppers. Though shopping malls bring multiple retail locations together, location is often not the most important motivator for a customer to choose a specific store. Instead, most shoppers look for stores that guarantee product availability, more service employees, and time saving opportunities.
Many smaller specialty lines are opening shops inside larger stores to expand their retail opportunities without risking investment in a separate store. Toys"R"Us worked with Macy's to open stores-within-a-store at numerous Macy's locations. The 1,500-square-foot toy sections offered dolls, puzzles, and other potential stocking stuffers.* The Toys"R"Us modules reflect a popular trend of pop-up shops—tiny, temporary stores that stay in one location for only a few months. Pop-up shops help retailers reach a wide market while avoiding high rent at retail locations. They have become the marketing tool du jour for large companies.
The presentation of a retail store helps determine the store's image and positions the retail store in consumers' minds. For instance, a retailer that wants to position itself as an upscale store would use a lavish or sophisticated presentation. The main element of a store's presentation is its atmosphere, the overall impression conveyed by a store's physical layout, décor, and surroundings. The atmosphere might create a relaxed or busy feeling, a sense of luxury or efficiency, a friendly or cold attitude, a sense of organization or clutter, or a fun or serious mood. Urban Outfitters stores, targeted to Generation Y consumers, use raw concrete, original brick, rusted steel, and unfinished wood to convey an urban feel. These are the most influential factors in creating a store's atmosphere:
atmosphere the over- all impression conveyed by a store's physical layout, décor, and surroundings
1. Employee type and density:
Employee type refers to an employee's general characteristics—for instance, neat, friendly, knowledgeable, or service oriented. Density is the number of employees per thousand square feet of selling space. Whereas low employee density creates a do-it-yourself, casual atmosphere, high employee density denotes readiness to serve the customer's every whim.
2. Merchandise type and density:
A prestigious retailer like Nordstrom or Neiman Marcus carries the best brand names and displays them in a neat, uncluttered arrangement. Discounters and off-price retailers often carry seconds or out-of-season goods crowded into small spaces and hung on long racks by category—tops, pants, skirts, and so on—creating the impression that "We've got so much stuff, we're practically giving it away."
3. Fixture type and density:
Fixtures can be elegant (rich woods) or trendy (chrome and smoked glass); they can even consist of old, beat-up tables, as in an antiques store. The fixtures should be consistent with the general atmosphere the store is trying to create.
Sound can be pleasant or unpleasant for a customer. Music can entice some customers to stay in the store longer and buy more or to eat quickly and leave a table for others. It can also control the pace of the store traffic, create an image, and attract or direct the shopper's attention.
Smell can either stimulate or detract from sales. Research suggests that people evaluate merchandise more positively, spend more time shopping, and are generally in a better mood when an agreeable odor is present. Retailers use fragrances as an extension of their retail strategy.
6. Visual factors:
Colors can create a mood or focus attention and therefore are an important factor in atmosphere. Red, yellow, and orange are considered warm colors and are used when a feeling of warmth and closeness is desired. Cool colors like blue, green, and violet are used to open up closed-in places and create an air of elegance and cleanliness. Many retailers have found that natural lighting, either from windows or skylights, can lead to increased sales. Outdoor lighting can also affect a customer's choice of retailer.
layout- the internal design and configuration of a store's fixtures and products
The layout of retail stores is also a key factor in their success. The goal is to use all of the store's space effectively, including aisles, fixtures, merchandise displays, and non-selling areas. In addition to making shopping easy and convenient for the customer, an effective layout has a powerful influence on traffic patterns and purchasing behavior. Layout also includes where products are placed in the store. Many technologically advanced retailers are using a technique called market-basket analysis to sift through the data collected by their point-of-purchase scanning equipment. The analysis looks for products that are commonly purchased together to help retailers find ideal locations for each product. Walmart uses market-basket analysis to determine where in the store to stock products for customer convenience. Kleenex tissues, for example, are in the paper-goods aisle and also beside the cold medicines.
Retailers can better acquire and use assets when they customize store layouts and merchandise mixes to the tastes of local consumer bases. For example, O'Reilly Auto Parts designs each of its retail outlets with the wants and needs of local auto drivers in mind, creating a neighborhood-specific strategy for each location. By customizing layout and product mix to the vehicles owned and operated in a particular area, the company can simultaneously provide greater levels of availability and reduce inventory, creating savings that the company passes along to customers.*
People are a unique aspect of retailing. Most retail sales involve a customer-salesperson relationship, if only briefly. Sales personnel provide their customers with the amount of service prescribed by the retail strategy of the store.
Retail salespeople serve another important selling function: They persuade shoppers to buy. They must therefore be able to persuade customers that what they are selling is what the customer needs. Salespeople are trained in two common selling techniques: trading up and suggestion selling. Trading up means persuading customers to buy a higher-priced item than they originally intended to purchase. To avoid selling customers something they do not need or want, however, salespeople should take care when practicing trading-up techniques. Suggestion selling, a common practice among most retailers, seeks to broaden customers' original purchases with related items. For example, if you buy a new printer at Office Depot, the sales representative will ask if you would like to purchase paper, a USB cable, and/or extra ink cartridges. Suggestion selling by sales or service associates should always help shoppers recognize true needs rather than sell them unwanted merchandise.
Providing great customer service is one of the most challenging elements in the retail mix because customer expectations for service vary greatly. What customers expect in a department store is very different from what they expect in a discount store. Customer expectations also change. Ten years ago, shoppers wanted personal, one-on-one attention. Today, many customers are happy to help themselves as long as they can easily find what they need.
The fastest-growing part of our economy is the service sector. Although distribution in the service sector is difficult to visualize, the same skills, techniques, and strategies used to manage inventory can also be used to manage service inventory, such as hospital beds, bank accounts, or airline seats. The quality of the planning and execution of distribution can have a major impact on costs and customer satisfaction.
Because service industries are so customer oriented, service quality is a priority. To manage customer relationships, many service providers, such as insurance carriers, physicians, hair salons, and financial services, use technology to schedule appointments, manage accounts, and disburse information. Service distribution focuses on four main areas:
1. Minimizing wait times: Minimizing the amount of time customers wait in line is a key factor in maintaining the quality of service.
2. Managing service capacity: If service firms don't have the capacity to meet demand, they must either turn down some prospective customers, let service levels slip, or expand capacity.
3. Improving service delivery: Service firms are now experimenting with different distribution channels for their services. Choosing the right distribution channel can increase the times that services are available or add to customer convenience.
4. Establishing channel-wide network coherence: Because services are to some degree intangible, service firms also find it necessary to standardize their service quality across different geographic regions to maintain their brand image.
In spite of retailers' best intentions and efforts to satisfy each and every customer, all retailers inevitably disappoint a subset of their customers. In some cases, customer disappointment occurs by design. No retailer can be everything to every customer, and by making strategic decisions related to targeting, segmentation, and the retailing mix, retailers implicitly decide which customers will be delighted and which will probably leave the store unsatisfied. In other cases, service failures are unintentional. A product may be located where customers cannot easily find it (or it may remain in the stockroom, entirely out of customer view), or an employee may provide mistaken information about a product's features or benefits. Customers are generally indifferent to the reasons for retailer errors, and their reactions to mistakes such as product stockouts and unexpectedly poor quality products can range widely. Some may simply leave the store, while others will respond with anger or even revenge behaviors intended to prevent other customers from visiting the store.*
The best retailers have plans in place not only to recover from inevitable lapses in service but perhaps even to benefit from them. For these top-performing stores, service recovery is handled proactively as part of an overarching plan to maximize the customer experience. Actions that might be taken include:
1. Notifying customers in advance of stockouts and explaining the reasons why certain products are not available
2. Implementing liberal return policies designed to ensure that the customer can bring back any item for any reason (if the product fails to work as planned, or even if the customer simply doesn't like it)
3. Issuing product recalls in conjunction with promotional offers that provide future incentives to repurchase
In short, the best retailers treat customer disappointments as opportunities to interact with and improve relations with their customers. Evidence indicates that successful handling of such failures can sometimes yield even higher levels of customer loyalty than if the failure had never occurred at all.
big data analytics- the process of discovering patterns in large data sets for the purposes of extracting knowledge and understanding human behavior
Recently, the need for more and better information has led many retailers to use big data analytics, a process whereby retailers use complex mathematical models to make better product mix decisions. Dillard's, Target, and Walmart use big data analytics to determine which products to stock and at what prices, how to manage markdowns, and how to advertise to draw target customers. The data these and other companies collect at the point of sale and throughout their stores enable retailers and suppliers alike to gain better customer insights. For example, instead of simply unloading products into the distribution channel and leaving marketing, sales and relationship building to local dealers, auto manufacturers use Web sites to keep in touch with customers and prospects. They inquire about lifestyles, hobbies, and vehicle needs in an effort to develop long-lasting relationships in the hopes that these consumers will reward them with brand loyalty in the future.
Shopper marketing- understanding how one's target consumers behave as shoppers, in different channels and formats, and leveraging this intelligence to generate sales or other positive outcomes
true of shopper marketing
It focuses on understanding how a brand's target consumers behave as shoppers in different channels and formats
Shopper marketing is an emerging retailing trend that employs market data to best serve customers as they prepare to make a purchase. Shopper marketing focuses first on understanding how a brand's target consumers behave as shoppers in different channels and formats, and then using this information in business-based strategies and initiatives that are carefully designed to deliver balanced benefits to all stakeholders—brands, channel members, and customers. It may sound simple, but it is anything but. Whereas brand manufacturers used to advertise widely and tried to ensure that their products were available wherever consumers shopped, now they are placing far more emphasis on partnering with specific retailers or Web sites. Brand manufacturers work with retailers on everything from in-store initiatives to customized retailer-specific products. Shopper marketing brings brand managers and account managers together to connect with consumers along the entire path-to-purchase, whether it be at home, on the go via mobile marketing, or in the store.
Shopper marketing is becoming increasingly popular as businesses see the implications of this new method of customer research. One implication is the strategic alignment of customer segments. Brands' core target consumers are compared to retailers' most loyal shoppers in an effort to find intersecting areas where brands and retailers can pool their resources. The ideal outcome is a more focused marketing effort and a three-way win for brands, channel members, and customers.
Shopper marketing also has significant implications for retailers' supply chains. As in-store initiatives become more unique and short-term and products become more customized, supply chains must react more quickly to customer demand changes. Thus, shopper marketing has increased the need for sophisticated analytics and metrics. As with many modern business efforts, shopper marketing forces managers to coordinate better, measure more, think more creatively, and move faster.
click-and-collect- the practice of buying something online and then traveling to a physical store location to take delivery of the merchandise
However, not all retailers are embracing omnification as the way of the future. The alternative strategy, click-and-collect, also enables customers to make their purchases online. Rather than waiting for orders to arrive at their homes, customers drive to physical stores to pick their orders up.* When retailers use this strategy, customers benefit from greater speed of delivery (in fact, they become the delivery vehicle), while retailers themselves benefit from the fact that customers must enter their stores in order to claim their purchases. Once inside, customers can be marketed to, increasing the likelihood that they will purchase add-on items or otherwise engage in impulse buying. It remains to be seen whether one or both of these strategies will stand the test of time, but it is certain that retailers are preparing for the inevitability of the Internet as an important shopping and purchasing medium for the foreseeable future.
14-1 Explain the importance of the retailer within the channel and the U.S. economy
Retailing represents all the activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use, and has enhanced the quality of our daily lives. When we shop for groceries, hair styling, clothes, books, and many other products and services, we are doing business with retailers. Retailing affects all people directly or indirectly. Trends and innovations relating to customer data, social media, and alternative forms of shopping are constantly developing, and retailers have no choice but to react.
14-2 List and understand the different types of retailers
Retail establishments can be classified according to ownership, level of service, product assortment, and price. These variables can be combined in several ways to create various retail operating models. Retail ownership takes one of three forms: independent, part of a chain, or a franchise outlet. The service levels that retailers provide range from full-service to self-service. Retailers can also be categorized by the width and depth of their product lines. Price is the fourth way to position retail stores. Many stores fall into the basic types of retailers, but some companies have begun to experiment with alternative formats.
14-3 Explain why nonstore retailing is on the rise, and list the advantages of its different forms
Nonstore retailing enables customers to shop without visiting a physical store location. It adds a level of convenience for customers who wish to shop from their current locations. Due to broader changes in culture and society, nonstore retailing is currently growing faster than in-store retailing. The major forms of nonstore retailing are automatic vending, direct retailing, direct marketing, and Internet retailing.
14-4 Discuss the different retail operations models and understand why they vary in strategy and format
Retail formats are co-aligned with unique operating models that guide the decisions made by their managers. Each operating model can be summarized as a set of guiding principles. Today, most retail stores remain operationally and tactically similar to those that have been in business for hundreds of years; with one or more physical locations that the customer must visit in order to purchase a stocked product, and with strategies in place to attract customers to visit.
14-5 Explain how retail marketing strategies are developed and executed
Retail managers develop marketing strategies based on the goals established by stakeholders and the overall strategic plans developed by company leadership. Strategic retailing goals typically focus on increasing total sales, reducing costs of goods sold, and improving financial ratios such as return on assets or equity. The first and foremost task in developing a retail strategy is to define the target market. Then comes combining the elements of the retailing mix to come up with a single retailing method to attract that target market.
14-6Discuss how services retailing differs from goods retailing
The fastest-growing part of our economy is the service sector. Although distribution in the service sector is difficult to visualize, the same skills, techniques, and strategies used to manage inventory can also be used to manage service inventory, such as hospital beds, bank accounts, or airline seats. Because service industries are so customer oriented, service quality is a priority.
14-7 Understand how retailers address product/service failures and discuss the opportunities that service failures provide
No retailer can be everything to every customer, and by making strategic decisions related to targeting, segmentation, and the retailing mix, retailers implicitly decide which customers will be delighted and which will probably leave the store unsatisfied. The best retailers have plans in place not only to recover from inevitable lapses in service but perhaps even to benefit from them.
14-8 Summarize current trends related to customer data, analytics, and technology
Retailers are constantly innovating. They are always looking for new products and services (or ways to offer them) that will attract new customers or inspire current ones to buy in greater quantities or more frequently. Big data analytics, shopper marketing, mobile technology, and social media are at the front of this innovation. Some retailers have turned to channel omnification, while others have embraced click-and-collect.
Promotional strategy- a plan for the optimal use of the elements of promotion: advertising, public relations, personal selling, sales promotion, and social media
romotional strategy is a plan for the optimal use of the elements of promotion: advertising, public relations, personal selling, sales promotion, and social media. Promotion is a vital part of the marketing mix, informing consumers of a product's benefits and thereby positioning the product in the marketplace. As Exhibit 15.1 shows, the marketing manager determines the goals of the company's promotional strategy in light of the firm's overall goals for the marketing mix—product, place (distribution), promotion, and price. Using these overall goals, marketers combine the elements of the promotional strategy (the promotional mix) into a coordinated plan. The promotion plan then becomes an integral part of the marketing strategy for reaching the target market.
competitive advantage- one or more unique aspects of an organization that cause target consumers to patronize that firm rather than competitors
the main function of a marketer's promotional strategy is to convince target customers that the goods and services offered provide a competitive advantage over the competition. A competitive advantage is the set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition. Such features can include high product quality, rapid delivery, low prices, excellent service, or a feature not offered by the competition. Promotional strategies have changed a great deal over the years as many targeted customer segments have become more difficult to reach. Informative television advertisements are no longer enough, forcing marketers to think more creatively. Most modern campaigns utilize a variety of newer tactics—such as digital paid media, social media, and influencer marketing—in addition to more traditional media like television and print. Dodge, for example, chose fictitious Anchorman character Ron Burgundy (played by Will Ferrell) as its pitchman for the Durango SUV. The promotional strategy, which involved more than 80 Web and television ads, drove a 59 percent sales boost in the first month and an 80 percent increase in Web traffic for Dodge. Lower-level Web activities such as selecting automobile options and searching for a dealer rose more than 100 percent. Dodge's YouTube video views topped 15 million within two months, prompting guest appearances on several CNN programs and dozens of local newscasts in selected states. This campaign led some to feel that the Ron Burgundy character was overexposed, but the strategy proved extremely successful for Dodge.*
sender- the originator of the message in the communication process
The sender is the originator of the message in the communication process. In an interpersonal conversation, the sender may be a parent, a friend, or a salesperson. For an advertisement, press release, or social media campaign, the sender is the company or organization itself. It can sometimes be difficult to tell who the sender of a promotional message is, especially in the case of bold, avant-garde advertisements. Sometimes, senders intentionally cover up their identities in order to build buzz around an advertisement. For example, a video titled "Elevator Murder Experiment" recently went vital after mysteriously being uploaded to YouTube. In the video, the reactions of unsuspecting bystanders are secretly filmed as they witness a staged strangulation in a public New York City elevator. After the video went viral, it was revealed to be an advertisement for the Colin Farrell film Dead Man Down. The film's grim themes, extreme violence, and gritty settings were incorporated into the elevator prank video, which even used one of the film's plot points—murder in an elevator.
Encoding- the conversion of a sender's ideas and thoughts into a message, usually in the form of words or signs
Encoding is the conversion of the sender's ideas and thoughts into a message, usually in the form of words or signs. A basic principle of encoding is that what the source says is not what matters, but what the receiver hears. In the case of "Elevator Murder Experiment," the video encoded sentiments such as "you won't know what to expect" and "difficult ethical choices will need to be made"—provocative selling points for a gruesome action thriller.* One way of conveying a message the receiver will hear properly is to use concrete words and pictures.
channel- a medium of communication—such as a voice, radio, or newspaper—for transmitting a message
Transmission of a message requires a channel—a voice, radio, newspaper, computer, smartphone, or other communication medium. A facial expression or gesture can also serve as a channel. The Dead Man Down's marketing team used social media as the primary channel on which it distributed the advertisement. After marketers posted the video to YouTube, individuals fascinated by the social experiment ran with it. They shared the video with their friends in person, posted it to Facebook and Twitter, and shared it through several other unorthodox channels. Eventually, local and national media outlets published print articles and ran television segments about the video, creating new channels for the campaign as they did so.* The response to these viral activities clearly created a lot of free publicity.
Reception occurs when the message is detected by the receiver and enters his or her frame of reference. In a two-way conversation such as a sales pitch given by a sales representative to a potential client, reception is normally high. Similarly, when the message is a recommendation from a friend, the reception is high as well. By contrast, the desired receivers may or may not detect the message when it is mass communicated because most media are cluttered by noise—anything that interferes with, distorts, or slows down the transmission of information. In some media overcrowded with advertisers, such as newspapers and television, the noise level is high and the reception level is low.
noise- anything that interferes with, distorts, or slows down the transmission of information
receivers- the person who decodes a message
Marketers communicate their message through a channel to customers, or receivers, who will decode the message. It is important to note that there can be multiple receivers as consumers share their experiences and their recommendations online through social networks and other types of social media, as happened when the "Elevator Murder Experiment" video went viral. Online conversations are becoming an increasingly influential way to promote products and services. Indeed, this new empowerment of the receiver has transformed marketing and advertising. Receivers can easily share new information with their friends and followers on social media, and those new receivers can then share that information as well. This leads to a more diverse interrelationship between senders and receivers of social media messages. Decoding is the interpretation of the language and symbols sent by the source through a channel. Common understanding between two communicators, or a common frame of reference, is required for effective communication. Therefore, marketing managers must ensure a proper match between the message to be conveyed and the target market's attitudes and ideas.
Decoding- interpretation of the language and symbols sent by the source through a channel
Even though a message has been received, it may not necessarily be properly decoded because of selective exposure, distortion, and retention. When people receive a message, they tend to manipulate it to reflect their own biases, needs, experiences, and knowledge. Therefore, differences in age, social class, education, culture, and ethnicity can lead to miscommunication. Further, because people do not always listen or read carefully, they can easily misinterpret what is said or written. In fact, researchers have found that consumers misunderstand a large proportion of both printed and televised communications. YouTubers who watched the "Elevator Murder Experiment" and simply clicked away without absorbing that it was an advertisement for Dead Man Down received the message but could not decode it because they did not have adequate information. Bright colors and bold graphics have been shown to increase consumers' comprehension of marketing communication. Even these techniques are not foolproof, however.
Marketers targeting consumers in foreign countries must also worry about the translation and possible miscommunication of their promotional messages by other cultures. Global marketers must decide whether to standardize or customize the message for each global market in which they sell.
feedback- the receiver's response to a message
In interpersonal communication, the receiver's response to a message is direct feedback to the source. Feedback may be verbal, as in saying "I agree," or nonverbal, as in nodding, smiling, frowning, or gesturing. Feedback can also occur digitally, as in a Facebook like. Mass communicators are often cut off from direct feedback, so they must rely on market research, social media, or analysis of viewer responses for indirect feedback. They might use such measurements as the percentage of television viewers who recognized, recalled, or stated that they were exposed to the company's messages. Indirect feedback enables mass communicators to decide whether to continue, modify, or drop a message.
Some people who observed the video (receivers) found the "Elevator Murder Experiment" advertising stunt tasteless and macabre, while others praised it as an ingenious use of social media. YouTube users provided direct feedback by commenting on the video's page and clicking either the "Like" or "Dislike" button (the video garnered nearly 10,000 likes, versus approximately 700 dislikes). Regardless of receivers' responses and feedback, the video was effective, garnering more than 2.6 million views in just three days.*
With the increase in online advertising, marketers are able to get more feedback than before the Internet became such a driving social force. Using Web analytics, marketers can see how long customers stay on a Web site and which pages they view. Moreover, social media enable companies such as Dell and Comcast to provide instant feedback by responding to consumers' posts on Facebook and to complaints posted on Twitter.
The Internet and social media have had an impact on the communication model in two major ways. First, consumers are now able to become senders (as opposed to only brands being senders). A consumer who makes a recommendation on Facebook or Yelp is essentially a sender, meaning that the communication model is much more complicated today than it was just a few years ago. Second, the communication model shows the feedback channel as primarily impersonal and numbers driven. In the traditional communication process, marketers can see the results of customer behavior (for example, a drop or rise in sales) but are able to explain those changes only by using their judgment. Today, customers use social media platforms like Facebook and Twitter to comment publically on marketing efforts. These platforms enable marketers to personalize the feedback channel by opening the door for direct conversations with customers. However, because social media conversations occur in real time and are public, any negative posts or complaints are highly visible. Thus, many companies have crisis communication strategies to deal with negative information and promote good brand reputations.
true of social media as a platform for marketing?
most marketers have not been able to figure out how to measure the benefits of social media
Informative promotion seeks to convert an existing need into a want or to stimulate interest in a new product. It is generally more prevalent during the early stages of the product life cycle. People typically will not buy a product or service or support a nonprofit organization until they know its purpose and its benefits to them. Informative messages are important for promoting complex and technical products such as automobiles, computers, and investment services. For example, shortly after Google unveiled the Google Glass wearable computer and display, it released a series of commercials showing various practical uses for the device. A commercial titled "How It Feels" demonstrated point-of-view video and photo capture, messaging, video chatting, search, weather, mapping, and more. Even though it did not overtly explain the device's functions, the ad informed viewers how the device could record once-in-a-lifetime moments and provide the perfect solutions for life's little problems. Informative promotion is also important for a "new" brand being introduced into an "old" product class. When the upstart video game console Ouya began its Kickstarter campaign, it used a video to inform backers about its unique benefits (such as its low cost, open development, free-to-play games, and Web-based game market). When it launched, Ouya again used informative promotion to distinguish itself from seasoned competitors. New products cannot establish themselves against more mature products unless potential buyers are aware of them, value their benefits, and understand their positioning in the marketplace. Persuasive promotion is designed to stimulate a purchase or an action. Persuasion typically becomes the main promotion goal when the product enters the growth stage of its life cycle. By this time, the target market should have general product awareness and some knowledge of how the product can fulfill its wants. Therefore, the promotional task switches from informing consumers about the product category to persuading them to buy the company's brand rather than that of the competitor. At this time, the promotional message emphasizes the product's real and perceived competitive advantages, often appealing to emotional needs such as love, belonging, self-esteem, and ego satisfaction. For example, advertisers of Android-based smartphones try to persuade users to purchase their companies' devices instead of an iPhone (or even instead of another brand of Android phone). Advertising messages, therefore, highlight the unique technological benefits of Android phones such as a faster processors and larger screens.
Persuasion is important when the goal is to inspire direct action. In 2014, the ALS Association experienced a huge influx of donations through its "Ice Bucket Challenge" campaign. Pro Golfer Chris Kennedy kicked the vital hit off on his social network by pouring ice water over his head and then challenging others to do the same. The campaign spread all over Facebook and Twitter, was reported on cable television news shows, and eventually became part of popular culture. The effort raised $115 million, more than 20 times the usual donations received for that period of time. The "Ice Bucket Challenge" currently ranks as the largest social media fundraiser ever.* Persuasion can also be an important goal for very competitive mature product categories such as household items and soft drinks. In a marketplace characterized by many competitors, the promotional message often encourages brand switching and aims to convert some buyers into loyal users. Critics believe that some promotional messages and techniques can be too persuasive, causing consumers to buy products and services they don't really need.
The idea behind social media is to form relationships with customers and potential customers through technological ties such as Facebook, Twitter, YouTube, or other social media platforms. Indeed, some companies, such as Starbucks, have their own social networks that allow customers to share ideas, information, and feedback. By facilitating this exchange of information through a transparent process, brands are increasingly connecting with their customers in hopes they become brand advocates that promote the brand through their own social networks. Tools for connection include social networks, social games, social publishing tools, as well as social commerce. The ALS Association's "Ice Bucket Challenge" can also be considered an example of connecting since many people used videos posted to Facebook and Twitter to issue their challenges. Advertising- impersonal, one-way mass communication about a product or organization that is paid for by a marketer
Almost all companies selling a good or a service use advertising, whether in the form of a multi-million-dollar campaign or a simple classified ad in a newspaper. Advertising is any form of impersonal paid communication in which the sponsor or company is identified. Traditional media—such as television, radio, newspapers, magazines, pay-per-click online advertising, display advertising, direct mail, billboards, and transit advertising (such as on buses and taxis and at bus stops)—are most commonly used to transmit advertisements to consumers. Other options include Web sites, e-mail, blogs, videos, and interactive games. Marketers' budgets are shifting more and more toward these digital options (including social media). However, as the Internet becomes a more vital component of many companies' promotion and marketing mixes, consumers and lawmakers are increasingly concerned about possible violations of consumers' privacy. Social networking sites like Facebook and Google+ are having to re-examine their privacy policies.
One of the primary benefits of advertising is its ability to communicate to a large number of people at one time. Cost per contact, therefore, is typically very low. Advertising has the advantage of being able to reach the masses (for example, through national television networks), but it can also be microtargeted to small groups of potential customers, such as television ads on a targeted cable network. Although the cost per contact in advertising is very low, the total cost to advertise is typically very high. This hurdle tends to restrict advertising on a national basis. Chapter 16 examines advertising in greater detail.
mode of communication- indirect and impersonal
communicator control over situation- low
amount of feedback- little
speed of feedback- delayed
direction of message- one-way
control over message content- yes
identification of sponsor - yes
speed in reaching large audience- fast
message flexibility- same message to all audiences
Public relations- the marketing function that evaluates public attitudes, identifies areas within the organization the public may be interested in, and executes a program of action to earn public understanding and acceptance
Concerned about how they are perceived by their target markets, organizations often spend large sums to build a positive public image. Public relations is the marketing function that evaluates public attitudes, identifies areas within the organization the public may be interested in, and executes a program of action to earn public understanding and acceptance. Public relations helps an organization communicate with its customers, suppliers, stockholders, government officials, employees, and the community in which it operates. Marketers use public relations not only to maintain a positive image but also to educate the public about the company's goals and objectives, introduce new products, and help support the sales effort.
publicity- public information about a company, product, service, or issue appearing in the mass media as a news item
A public relations program can generate favorable publicity—public information about a company, product, service, or issue appearing in the mass media as a news item. Social media sites like Twitter can provide large amounts of publicity quickly. Organizations generally do not pay for the publicity and are not identified as the source of the information, but they can benefit tremendously from it. However, although organizations do not directly pay for publicity, it should not be viewed as free. Preparing news releases, staging special events, and persuading media personnel to broadcast or print publicity messages costs money. Public relations and publicity are examined further in Chapter 16.
mode of communication- usually indirect and impersonal
communicator control over situation- moderate to low
amount of feedback- little
speed of feedback- delayed
direction of message- one-way
control over message content- no
identification of sponsor - no
speed in reaching large audience- usually fast
message flexibility- usually no direct control over message audience
Sales promotion- marketing activities—other than personal selling, advertising, and public relations—that stimulate consumer buying and dealer effectiveness
Sales promotion consists of all marketing activities—other than personal selling, advertising, and public relations—that stimulate consumer purchasing and dealer effectiveness. Sales promotion is generally a short-run tool used to stimulate immediate increases in demand. Sales promotion can be aimed at end consumers, trade customers, or a company's employees. Sales promotions include free samples, contests, premiums, trade shows, vacation giveaways, and coupons. It also includes experiential marketing whereby marketers create events that enable customers to connect with brands. Increasingly, companies such as LivingSocial and Groupon have combined social networks and sales promotions. Facebook is a growing platform through which companies run sweepstakes. For example, JPMorgan Chase ran a sweepstakes where Facebook users entered a drawing for a $1,000 grocery store gift card by "liking" the Chase Freedom Facebook page. In the past, Chase Freedom has run other Facebook sweepstakes where players could "like" the page to win $1 million. In addition to being entered into the large drawing, players were entered for a chance to win $500 every hour. The company runs this type of sweepstakes to educate potential customers about its cash-back rewards program available through the Chase Freedom credit card.*
Marketers often use sales promotion to improve the effectiveness of other ingredients in the promotional mix, especially advertising and personal selling. Research shows that sales promotion complements advertising by yielding faster sales responses. In many instances, more marketing money is spent on sales promotion than on advertising.
mode of communication- Usually indirect and impersonal
communicator control over situation- moderate to low
amount of feedback- little to moderate
speed of feedback- varies
direction of message- mostly one- way
control over message content- yes
identification of sponsor - yes
speed in reaching large audience- fast
message flexibility- same message to varied targets
Personal selling- a purchase situation involving a personal, paid-for communication between two people in an attempt to influence each other
Personal selling is a purchase situation involving a personal, paid-for communication between two people in an attempt to influence each other. In this dyad, both the buyer and the seller have specific objectives they wish to accomplish. The buyer may need to minimize cost or assure a quality product, for instance, while the salesperson may need to maximize revenue and profits.
Traditional methods of personal selling include a planned presentation to one or more prospective buyers for the purpose of making a sale. Whether it takes place face-to-face or over the phone, personal selling attempts to persuade the buyer to accept a point of view. For example, a car salesperson may try to persuade a car buyer that a particular model is superior to a competing model in certain features, such as gas mileage. Once the buyer is somewhat convinced, the salesperson may attempt to elicit some action from the buyer, such as a test drive or a purchase. Frequently, in this traditional view of personal selling, the objectives of the salesperson are at the expense of the buyer, creating a win-lose outcome.
More current notions on personal selling emphasize the relationship that develops between a salesperson and a buyer. Initially, this concept was more typical in business-to-business selling situations, involving the sale of products like heavy machinery or computer systems. More recently, both business-to-business and business-to-consumer selling focus on building long-term relationships rather than on making a one-time sale.
true of relationship selling
it leads to increased loyal customer base, often with an increased share-of-purchase
Relationship selling emphasizes a win-win outcome and the accomplishment of mutual objectives that benefit both buyer and salesperson in the long term. Rather than focusing on a quick sale, relationship selling attempts to create a long-term, committed relationship based on trust, increased customer loyalty, and a continuation of the relationship between the salesperson and the customer. Personal selling, like other promotional mix elements, is increasingly dependent on the Internet. Most companies use their Web sites to attract potential buyers seeking information on products and services and to drive customers to their physical locations where personal selling can close the sale. Personal selling is discussed further in Chapter 17.
mode of communication- Direct and face-to-face
communicator control over situation- high
amount of feedback- much
speed of feedback- immediate
direction of message- two-way
control over message content- yes
identification of sponsor - yes
speed in reaching large audience- slow
message flexibility- tailored to prospective buyer
As promotional strategies change, and given brands' newfound ability to become publishers, content marketing has become a crucial part of promotion. Recall from Chapter 7 that content marketing entails developing valuable content for interested audience members and then using e-mail marketing, search engine optimization, paid search, and display advertising to pull customers to the company's Web site or social media channel so that they can learn about the brand or to make a purchase. Content created by brands is typically distributed through social media.
Recall that social media are promotion tools used to facilitate conversations and other interactions among people online. When used by marketers, these tools facilitate consumer empowerment. For the first time, consumers are able to speak directly to other consumers, the company, and Web communities. Social media include blogs, microblogs (such as Twitter), video platforms (such as You Tube, Twitch, and Vine), podcasting (online audio and video broadcasts), and social networks (such as Tumblr, Pinterest, Yik Yak, and Snapchat).
Initially, these tools were used primarily by individuals for self-expression. For example, a lawyer might develop a blog to talk about politics because that is her hobby. Or a college freshman might develop a profile on Facebook to stay in touch with his high school friends. But soon, businesses saw that these tools could be used to engage with consumers as well. Indeed, social media have become a "layer" in promotional strategy. Social media are ubiquitous—it just depends on how deep that layer goes for each brand. The rise of streaming video, for example, has created a completely new way for marketers to manage their image, connect with consumers, and generate interest in and desire for their companies' products. Now marketers are using social media as integral aspects of their campaigns and as a way to extend the benefits of their traditional media. Social media are discussed in more detail in Chapter 18.
mode of communication- Indirect but instant
communicator control over situation- moderate
amount of feedback- much
speed of feedback- intermediate
direction of message- two-way, multiple ways
control over message content- varies, generally no
identification of sponsor - yes
speed in reaching large audience- fast
message flexibility- some of the most targeted opportunities
Shift from one-way communication to customer-controlled, customized, many-to-many communication.
The Internet has changed how businesses promote their brands. Traditionally, marketing managers have been in charge of defining the essence of the brand. This included complete brand control and mostly one-way communication between the brand and customers. All of the content and messages were focused on defining and communicating the brand value. The focus for many campaigns was pure entertainment, and the brand created all of the content for campaigns—from the Web site to television spots to print ads.
That approach has now changed. The consumer has much more control (which makes some brands quite nervous!). The communication space is increasingly controlled by the consumer, as is the brand message. Perception is reality as consumers have more control to adapt the brand message to fit their ideas. Instead of repetition, social media rely on the idea of customization and adaption of the message. Information is positioned as more valuable as opposed to being strictly entertaining. Probably the most important aspect is the idea of consumer-generated content, whereby consumers are able to both take existing content and modify it or to create completely new content for a brand. For example, Doritos has the "Crash the Super Bowl" promotion, where ordinary people are invited to create television commercials for Doritos that are then uploaded to www.crashthesuperbowl.com and voted on by millions of Doritos fans. The winning spots then run during the Super Bowl.As a result of the impact of social media as well as the proliferation of new platforms, tools, and ideas, promotional tactics can also be categorized according to media type—paid, earned, or owned, as shown in Exhibit 15.3.
digital media types
1. Paid media
Paid media- a category of promotional tactic based on the traditional advertising model, whereby a brand pays for media space
Paid media is based on the traditional advertising model, whereby a brand pays for media space. Traditionally, paid media has included television, magazine, outdoor, radio, or newspaper advertising. Paid media also includes display advertising on Web sites, pay-per-click advertising on search engines, and even promoted tweets on Twitter. Paid media is quite important, especially as it migrates to the Web. Paid media is used with other media types to develop an integrated message strategy.
2. Earned media
Earned media- a category of promotional tactic based on a public relations or publicity model that gets customers talking about products or services
Earned media is based on a public relations or publicity model. The idea is to get people talking about the brand—whether through media coverage (as in traditional public relations) or through word of mouth (WOM). Word of mouth traditionally occurs face-to-face. Electronic word of mouth (EWOM), for example, sharing a movie review on a social media site, is growing rapidly. Earned media is often created when people talk and share content on social media. Additionally, search engine optimization (SEO), whereby companies embed key words into content to increase their positioning on search engine results pages (SERPs), can also be considered earned media.
3. Owned Media
Owned media- a new category of promotional tactic based on brands becoming publishers of their own content in order to maximize the brands' value to customers
Owned media is a new form of promotional tactic where brands are becoming publishers of their own content in order to maximize the brand's value to customers as well as increase their search rank in Google. Owned media includes the company's Web sites as well as its official presence on Facebook, Twitter, YouTube channels, blogs, and other platforms. This media is controlled by the brand but continuously keeps the customer and his or her needs in mind as it creates videos, blog posts, contests, photos, and other pieces of content. Owned media is often used as another term for content marketing, which is important to both B-to-B and B-to-C companies.
social media presence
The elements of the promotional mix differ in their ability to affect the target audience. For instance, promotional mix elements may communicate with the consumer directly or indirectly. The message may flow one way or two ways. Feedback may be fast or slow, a little or a lot. Likewise, the communicator may have varying degrees of control over message delivery, content, and flexibility. Exhibit 15.4 outlines characteristics among the promotional mix elements with respect to mode of communication, marketer's control over the communication process, amount and speed of feedback, direction of message flow, marketer's control over the message, identification of the sender, speed in reaching large audiences, and message flexibility.
social media is concentrated here, between owned and earned media, with some (but not much) paid media depending on the strategy
in the middle of the cirlces
mode of communication-
communicator control over situation-
amount of feedback-
speed of feedback-
direction of message-
control over message content-
identification of sponsor -
speed in reaching large audience-
rom Exhibit 15.4, you can see that most elements of the promotional mix are indirect and impersonal when used to communicate with a target market, providing only one direction of message flow. For example, advertising, public relations, and sales promotion are generally impersonal, one-way means of mass communication. Because they provide no opportunity for direct feedback, it is more difficult to adapt these promotional elements to changing consumer preferences, individual differences, and personal goals.
Personal selling, on the other hand, entails direct two-way communication. The salesperson receives immediate feedback from the consumer and can adjust the message in response. Unlike other promotional tools, personal selling is very slow in dispersing the marketer's message to large audiences. Because a salesperson can communicate to only one person or a small group of persons at one time, it is a poor choice if the marketer wants to send a message to many potential buyers. Social media are also considered two-way communication, though not quite as immediate as personal selling. Social media can disperse messages to a wide audience and allow for engagement and feedback from customers through Twitter, Facebook, and blog posts.
Owned mediaa new category of promotional tactic based on brands becoming publishers of their own content in order to maximize the brands' value to customers
this model proposes that consumers respond to marketing messages in a cognitive (thinking), affective (feeling), and conative (doing) sequence. First, a promotion manager may focus on attracting a consumer's attention by training a salesperson to use a friendly greeting and approach or by using loud volume, bold headlines, movement, bright colors, and the like in an advertisement. Next, a good sales presentation, demonstration, or advertisement creates interest in the product and then, by illustrating how the product's features will satisfy the consumer's needs, arouses desire. Finally, a special offer or a strong closing sales pitch may be used to obtain purchase action.
The AIDA concept assumes that promotion propels consumers along the following four steps in the purchase-decision process:
Attention: The advertiser must first gain the attention of the target market. A firm cannot sell something if the market does not know that the good or service exists. When Apple introduced the iPad, it quickly became one of the largest electronics product launches in history. To create awareness and gain attention for its revolutionary tablet computer, Apple not only used traditional media advertising but also contacted influential bloggers and journalists so that they would write about the product in blogs, newspapers, and magazines. Because the iPad was a brand extension of the Apple computer, it required less effort than an entirely new brand would have. At the same time, because the iPad was an innovative new product line, the promotion had to get customers' attention and create awareness of a new idea from an established company.
Interest: Simple awareness of a brand seldom leads to a sale. The next step is to create interest in the product. A print ad cannot tell potential customers all the features of the iPad. Therefore, Apple had to arrange iPad demonstrations and target messages to innovators and early adopters to create interest in the new tablet computer. To do this, Apple used both online videos on YouTube and personal demonstrations in Apple Stores. The iPad also received extensive media coverage from both online and traditional media outlets.
Desire: Potential customers for the Apple iPad may like the concept of a portable tablet computer, but they may not necessarily think that it is better than a laptop or smartphone. Therefore, Apple had to create brand preference with the iTunes Music Store, specialty apps, multiple functionality, and features such as better power management and a lighter weight unit. Specifically, Apple had to convince potential customers that the iPad was the best solution to their desire for a combination tablet computer and smartphone.
Action: Some potential target market customers may have been persuaded to buy an iPad but had yet to make the actual purchase. To motivate them to take action, Apple continued advertising to communicate the features and benefits more effectively. And the strategy worked—more than 250 million people own an iPad.*
Most buyers involved in high-involvement purchase situations pass through the four stages of the AIDA model on the way to making a purchase. The promoter's task is to determine where on the purchase ladder most of the target consumers are located and design a promotion plan to meet their needs. For example, if Apple learned from its market research that many potential customers were in the desire stage but had not yet bought an iPad for some reason, it could place advertising on Facebook and Google, and perhaps in video games, to target younger individuals and professionals with messages motivating them to buy an iPad.
The AIDA concept does not explain how all promotions influence purchase decisions. The model suggests that promotional effectiveness can be measured in terms of consumers progressing from one stage to the next. However, the order of stages in the model, as well as whether consumers go through all steps, has been much debated. A purchase can occur without interest or desire, perhaps when a low-involvement product is bought on impulse. Regardless of the order of the stages or consumers' progression through these stages, the AIDA concept helps marketers by suggesting which promotional strategy will be most effective.*
attention interst desire action
Advertising: very effective, very effective, somewhat effective, not effective
public relations: very effective, very effective, somewhat effective, not effective
sales promotion: somewhat effective, somewhat effective, vert effective, very effective
personal selling: somewhat effective, very effective, very effective, very effective
social media: very effective, very effective, somewhat effective, somewhat effective
Exhibit 15.5 depicts the relationship between the promotional mix and the AIDA model. It shows that although advertising does have an impact in the later stages, it is most useful in gaining attention for goods or services. By contrast, personal selling reaches fewer people at first. Salespeople are more effective at creating customer interest for merchandise or a service and at creating desire. For example, advertising may help a potential computer purchaser gain knowledge about competing brands, but the salesperson may be the one who actually encourages the buyer to decide a particular brand is the best choice. The salesperson also has the advantage of having the computer physically there to demonstrate its capabilities to the buyer.
public relations' greatest impact is as a method of gaining attention for a company, good, or service. Many companies can attract attention and build goodwill by sponsoring community events that benefit worthy causes such as an anti-bullying campaign or a global poverty program. Such sponsorships project a positive image of the firm and its products into the minds of consumers and potential consumers. Book publishers push to get their titles on the best-seller lists of major publications, such as Publishers Weekly or the New York Times. Book authors make appearances on talk shows and at bookstores to personally sign books and speak to fans. They also frequently engage with fans on social media like Facebook and Twitter.
Sales promotion's greatest strength is in creating strong desire and purchase intent. Coupons and other price-off promotions are techniques used to persuade customers to buy new products. Frequent-buyer sales promotion programs, popular among retailers, allow consumers to accumulate points or dollars that can be redeemed for goods. Frequent buyer programs tend to increase purchase intent and loyalty and encourage repeat purchases.
Social media are a strong way to gain attention and interest in a brand, particularly if content goes viral. It can then reach a massive audience. Social media are also effective at engaging with customers and enabling companies to maintain interest in the brand if properly managed.
Ideally, marketing communications from each promotional mix element (personal selling, advertising, sales promotion, social media, and public relations) should be integrated.
That is, the message reaching the consumer should be the same regardless of whether it is from an advertisement, a salesperson in the field, a magazine article, a Facebook fan page, or a coupon in a newspaper insert.
From the consumer's standpoint, a company's communications are already integrated. Consumers do not think in terms of the five elements of promotion: personal selling, advertising, sales promotion, public relations, and social media. Instead, everything is an "ad." The only people who recognize the distinctions among these communications elements are the marketers themselves. Unfortunately, many marketers neglect this fact when planning promotional messages and fail to integrate their communication efforts from one element to the next. The most common rift typically occurs between personal selling and the other elements of the promotional mix.
integrated marketing communications (IMC)- the careful coordination of all promotional messages for a product or a service to ensure the consistency of messages at every contact point at which a company meets the consumer
This unintegrated, disjointed approach to promotion has propelled many companies to adopt the concept of integrated
marketing communications (IMC).
Which of the following is a reason for the increasing popularity of the integrated marketing communications IMC concept?
marketers have slashed their advertisement spending in favor of promotional techniques that generate immediate sales responses.
IMC is the careful coordination of all promotional messages—traditional advertising, direct marketing, social media, interactive, public relations, sales promotion, personal selling, event marketing, and other communications—for a product or service to assure the consistency of messages at every contact point where a company meets the consumer. Following the concept of IMC, marketing managers carefully work out the roles that various promotional elements will play in the marketing mix. Timing of promotional activities is coordinated, and the results of each campaign are carefully monitored to improve future use of the promotional mix tools. Typically, a marketing communications director is appointed who has overall responsibility for integrating the company's marketing communications.
The IMC concept has been growing in popularity for several reasons. First, the proliferation of thousands of media choices beyond traditional television has made promotion a more complicated task. Instead of promoting a product just through mass-media options, like television and magazines, promotional messages today can appear in many varied sources.
Further, the mass market has also fragmented—more selectively segmented markets and an increase in niche marketing have replaced the traditional broad market groups that marketers promoted to in years past. Finally, marketers have slashed their advertising spending in favor of promotional techniques that generate immediate sales responses and those that are more easily measured, such as direct marketing. Online advertising has earned a bigger share of the budget as well due to its measurability. Thus, the interest in IMC is largely a reaction to the scrutiny that marketing communications has come under and, particularly, to suggestions that uncoordinated promotional activity leads to a strategy that is wasteful and inefficient.
Characteristics of the product itself can influence the promotional mix. For instance, a product can be classified as either a business product or a consumer product. (Refer to Chapters 7 and 10.) As business products are often custom-tailored to the buyer's exact specifications, they are often not well suited to mass promotion. Therefore, producers of most business goods rely more heavily on personal selling than on advertising, but advertising still serves a purpose in the promotional mix. Advertising in trade media can also help locate potential customers for the sales force. For example, print media advertising often includes coupons soliciting the potential customer to "fill this out for more detailed information."
By contrast, because consumer products generally are not custom-made, they do not require the selling efforts of a company representative who can tailor them to the user's needs. Thus, consumer goods are promoted mainly through advertising or social media to create brand familiarity. Television and radio advertising, consumer-oriented magazines, and increasingly the Internet and other highly targeted media are used to promote consumer goods, especially nondurables. Sales promotion, the brand name, and the product's packaging are about twice as important for consumer goods as for business products. Persuasive personal selling is important at the retail level for goods such as automobiles and appliances.
he costs and risks associated with a product also influence the promotional mix. As a general rule, when the costs or risks of buying and using a product or service increase, personal selling becomes more important. Inexpensive items cannot support the cost of a salesperson's time and effort unless the potential volume is high. On the other hand, expensive and complex machinery, cars, and new homes represent a considerable investment. A salesperson must assure buyers that they are spending their money wisely and not taking an undue financial risk.
Social risk is an issue as well. Many consumer goods are not products of great social importance because they do not reflect social position. People do not experience much social risk in buying a loaf of bread. However, buying many specialty products such as jewelry and clothing involves a social risk. Many consumers depend on sales personnel for guidance in making the "proper" choice.
The product's stage in its life cycle is a big factor in designing a promotional mix (see Exhibit 15.6). During the introduction stage, the basic goal of promotion is to inform the target audience that the product is available. Initially, the emphasis is on the general product class—for example, smartphones. This emphasis gradually changes to gaining attention for a particular brand, such as Apple, Nokia, Samsung, Sony Ericsson, or Motorola. Typically, both extensive advertising and public relations inform the target audience of the product class or brand and heighten awareness levels. Sales promotion encourages early trial of the product, and personal selling gets retailers to carry the product.
During the introduction stage, the basic goal of promotion is to inform the target audience that the product is available. Initially, the emphasis is on the general product class—for example, smartphones. This emphasis gradually changes to gaining attention for a particular brand, such as Apple, Nokia, Samsung, Sony Ericsson, or Motorola. Typically, both extensive advertising and public relations inform the target audience of the product class or brand and heighten awareness levels. Sales promotion encourages early trial of the product, and personal selling gets retailers to carry the product.
Heavy advertising and public relations to build awareness; sales promotion to induce trial; personal selling to obtain distribution
When the product reaches the growth stage of the life cycle, the promotion blend may shift. Often a change is necessary because different types of potential buyers are targeted. Although advertising and public relations continue to be major elements of the promotional mix, sales promotion can be reduced because consumers need fewer incentives to purchase. The promotional strategy is to emphasize the product's differential advantage over the competition. Persuasive promotion is used to build and maintain brand loyalty during the growth stage. By this stage, personal selling has usually succeeded in getting adequate distribution for the product.
Heavy advertising and public relations to build brand loyalty; decreasing use of sales promotion; personal selling to maintain distribution
As the product reaches the maturity stage of its life cycle, competition becomes fiercer, and thus persuasive and reminder advertising are emphasized more strongly. Sales promotion comes back into focus as product sellers try to increase their market share.
Decreased advertising that is more persuasive and reminder in nature; increased use of sales promotion to build market share; personal selling to maintain distribution
all promotion, especially advertising, is reduced as the product enters the decline stage. Nevertheless, personal selling and sales promotion efforts may be maintained, particularly at the retail level.
Advertising and public relations drastically deceased sales promotion and personal selling maintained at low levels
A target market characterized by widely scattered potential customers, highly informed buyers, and brand loyal repeat purchasers generally requires a promotional mix with more advertising and sales promotion and less personal selling. Sometimes, however, personal selling is required even when buyers are well informed and geographically dispersed. Although industrial installations may be sold to well-educated people with extensive work experience, salespeople must be present to explain the product and work out the details of the purchase agreement.
Often firms sell goods and services in markets where potential customers are hard to locate. Print advertising can be used to find them. The reader is invited to go online, call, or mail in a reply card for more information. As the online queries, calls, or cards are received, salespeople are sent to visit the potential customers.
example of individual making a routine buying decision
shaina purchases the soap she has been using for 20 years.
The promotional mix also depends on the type of buying decision—for example, a routine decision or a complex decision. For routine consumer decisions like buying toothpaste, the most effective promotion calls attention to the brand or reminds the consumer about the brand. Advertising, and especially sales promotion, are the most productive promotion tools to use for routine decisions.
If the decision is neither routine nor complex, advertising and public relations help establish awareness for the good or service. Suppose a man is looking for a bottle of wine to serve to his dinner guests. As a beer drinker, he is not familiar with wines, yet he has read an article in a popular magazine about Silver Oak Cabernet and has seen an advertisement for the wine. He may be more likely to buy this brand because he is already aware of it. Online reviews are often important in this type of buying decision as well because the consumer has any number of other consumers' reviews easily accessible.
By contrast, consumers making complex buying decisions are more extensively involved. They rely on large amounts of information to help them reach a purchase decision. Personal selling is most effective in helping these consumers decide. For example, consumers thinking about buying a car typically research the car online using corporate and third party Web sites like Kelley Blue Book. However, few people buy a car without visiting the dealership. They depend on a salesperson to provide the information they need to reach a decision. In addition to online resources, print advertising may also be used for high-involvement purchase decisions because it can often provide a large amount of information to the consumer.
Money, or the lack of it, may easily be the most important factor in determining the promotional mix. A small, undercapitalized manufacturer may rely heavily on free publicity if its product is unique. If the situation warrants a sales force, a financially strained firm may turn to manufacturers' agents, who work on a commission basis with no advances or expense accounts. Even well capitalized organizations may not be able to afford the advertising rates of publications like Time, Sports Illustrated, and the Wall Street Journal, or the cost of running television commercials during Modern Family, The Voice, or the Super Bowl. The price of a high-profile advertisement in these media could support several salespeople for an entire year.
When funds are available to permit a mix of promotional elements, a firm will generally try to optimize its return on promotion dollars while minimizing the cost per contact, or the cost of reaching one member of the target market. In general, the cost per contact is very high for personal selling, public relations, and sales promotions like sampling and demonstrations. On the other hand, given the number of people national advertising and social media reach, they have a very low cost per contact. Usually, there is a trade-off among the funds available, the number of people in the target market, the quality of communication needed, and the relative costs of the promotional elements. There are plenty of low-cost options available to companies without a huge budget. Many of these include online strategies and public relations efforts, in which the company relies on free publicity.
he last factor that affects the promotional mix is whether a push or a pull promotional strategy will be used. Manufacturers may use aggressive personal selling and trade advertising to convince a wholesaler or a retailer to carry and sell their merchandise. This approach is known as a push strategy (see Exhibit 15.7).
push strategy- a marketing strategy that uses aggressive personal selling and trade advertising to convince a wholesaler or a retailer to carry and sell particular merchandise
The wholesaler, in turn, must often push the merchandise forward by persuading the retailer to handle the goods. The retailer then uses advertising, displays, and other forms of promotion to convince the consumer to buy the "pushed" products. Walmart uses aggressive discounts to push products out of its stores. For example, First Lady Michelle Obama praised the retailer for using drastically reduced prices to push fresh meat, produce, and other healthy options to consumers in low-income areas. The move proved to be a win-win strategy. Fresh foods generated 70 percent of Walmart's sales growth in recent years, and customers have saved more than $2.3 billion on fresh fruits and vegetables by shopping at Walmart.* This concept also applies to services.
pull strategy- a marketing strategy that stimulates consumer demand to obtain product distribution
At the other extreme is a pull strategy, which stimulates consumer demand to obtain product distribution. Rather than trying to sell to the wholesaler, the manufacturer using a pull strategy focuses its promotional efforts on end consumers or opinion leaders. Social media and content marketing are the most recent (and best) example of pull strategy. The idea is that social media content does not interrupt a consumer's experience with media (like a commercial interrupts your favorite television program). Instead, the content invites customers to experience it on social media or a Web site. Consumer demand pulls the product through the channel of distribution (see Exhibit 15.7). Heavy sampling, introductory consumer advertising, cents-off campaigns, and couponing are part of a pull strategy.
Rarely does a company use a pull or a push strategy exclusively. Instead, the mix will emphasize one of these strategies. For example, pharmaceutical companies generally use a push strategy (personal selling and trade advertising) to promote their drugs and therapies to physicians. Sales presentations and advertisements in medical journals give physicians the detailed information they need to prescribe medication to their patients. Most pharmaceutical companies supplement this push promotional strategy with a pull strategy targeted directly to potential patients through advertisements in consumer magazines and on television.
15-1Discuss the role of promotion in the marketing mix.
Promotional strategy is the plan for using the elements of promotion—advertising, public relations, sales promotion, personal selling, and social media—to meet the firm's overall objectives and marketing goals. Based on these objectives, the elements of the promotional strategy become a coordinated promotion plan. The promotion plan then becomes an integral part of the total marketing strategy for reaching the target market along with product, distribution, and price. Promotional strategies have changed a great deal over the years as many target customer segments have become harder and harder to reach.
15-2Describe the communication process.
The communication process has several steps. When an individual or organization has a message it wishes to convey to a target audience, it encodes that message using language and symbols familiar to the intended receiver and sends the message through a channel of communication. Noise in the transmission channel distorts the source's intended message. Reception occurs if the message falls within the receiver's frame of reference. The receiver decodes the message and usually provides feedback to the source. Normally, feedback is direct for interpersonal communication and indirect for mass communication. The Internet and social media have had an impact on the communication model in two major ways: consumers are now able to become senders, and marketers can personalize the feedback channel by initiating direct conversations with customers.
15-3Explain the goals and tasks of promotion.
The fundamental goals of promotion are to induce, modify, or reinforce behavior by informing, persuading, reminding, and connecting. Informative promotion explains a good's or service's purpose and benefits. Promotion that informs the consumer is typically used to increase demand for a general product category or to introduce a new good or service. Persuasive promotion is designed to stimulate a purchase or an action. Promotion that persuades the consumer to buy is essential during the growth stage of the product life cycle, when competition becomes fierce. Reminder promotion is used to keep the product and brand name in the public's mind. Promotions that remind are generally used during the maturity stage of the product life cycle. Connection promotion is designed to form relationships with customers and potential customers using social media. Connecting encourages customers to become brand advocates and share their experiences via social media.
15-4Discuss the elements of the promotional mix.
The elements of the promotional mix include advertising, public relations, sales promotion, personal selling, and social media. Advertising is a form of impersonal, one-way mass communication paid for by the source. Public relations is the function of promotion concerned with a firm's public image. Sales promotion is typically used to back up other components of the promotional mix by stimulating immediate demand. Personal selling typically involves direct communication, in person or by telephone; the seller tries to initiate a purchase by informing and persuading one or more potential buyers. Finally, social media are promotion tools used to facilitate conversations among people online.
15-5Discuss the AIDA concept and its relationship to the promotional mix.
The AIDA model outlines the four basic stages in the purchase decision-making process, which are initiated and propelled by promotional activities: (1) attention, (2) interest, (3) desire, and (4) action. The components of the promotional mix have varying levels of influence at each stage of the AIDA model. Advertising is a good tool for increasing awareness and knowledge of a good or service. Sales promotion is effective when consumers are at the purchase stage of the decision-making process. Personal selling is most effective in developing customer interest and desire.
15-6Discuss the concept of integrated marketing communications.
Integrated marketing communications is the careful coordination of all promotional messages for a product or service to ensure the consistency of messages at every contact point where a company meets the consumer—advertising, sales promotion, personal selling, public relations, and social media, as well as direct marketing, packaging, and other forms of communication. Marketing managers carefully coordinate all promotional activities to ensure that consumers see and hear one message. Integrated marketing communications has received more attention in recent years due to the proliferation of media choices, the fragmentation of mass markets into more segmented niches, and the decrease in advertising spending in favor of promotional techniques that generate an immediate sales response.
15-7Describe the factors that affect the promotional mix.
Promotion managers consider many factors when creating promotional mixes. These factors include the nature of the product, product life-cycle stage, target market characteristics, the type of buying decision involved, availability of funds, and feasibility of push or pull strategies. As products move through different stages of the product life cycle, marketers will choose to use different promotional elements. Characteristics of the target market, such as geographic location of potential buyers and brand loyalty, influence the promotional mix, as does whether the buying decision is complex or routine. The amount of funds a firm has to allocate to promotion may also help determine the promotional mix. Last, if a firm uses a push strategy to promote the product or service, the marketing manager might choose to use aggressive advertising and personal selling to wholesalers and retailers. If a pull strategy is chosen, then the manager often relies on aggressive mass promotion, such as advertising and sales promotion, to stimulate consumer demand.
Measured media ad spending includes network and cable TV, newspapers, magazines, radio, outdoor, and Internet (though paid search and social media are not included).
spending must be estimated for unmeasured media, which includes direct marketing, promotions, co-op, coupons, catalogs, product placement, and event marketing.
Pioneering advertising- a form of advertising designed to stimulate primary demand for a new product or product category
Pioneering advertising is intended to stimulate primary demand for a new product or product category. Heavily used during the introductory stage of the product life cycle, pioneering advertising offers consumers in-depth information about the benefits of the product class. Pioneering advertising also seeks to create interest and, as such, can be quite innovative in its own right. For example, Motorola placed an ad for its new flagship smartphone, the Moto X, in Wired. The Moto X is highly customizable, featuring more than twenty different back plate and accent colors. Built in Austin, Texas, the Moto X is the first smartphone of its kind to be so customizable. Using an embedded LED array, microchip, and battery, the print ad allows the reader to push eleven different colored buttons, changing the color of the Moto X Smartphone pictured in the ad. A demonstration of the ad can be seen at
The five most valuable U.S. brands are Apple ($124 billion), Microsoft ($63 billion), Google ($57 billion), Coca-Cola ($56 billion), and IBM ($48 billion). These were all top brands the year before and all gained value, but Google jumped from fifth to third place. Most of these brands were built over many years by heavy advertising and marketing investments long ago. Google is the only exception—its brand value was built using digital platforms.* Today's advertising dollars for successful consumer brands are spent on maintaining brand awareness and market share.
New brands with a small market share tend to spend proportionately more for advertising and sales promotion than those with a large market share, typically for two reasons. First, beyond a certain level of spending for advertising and sales promotion, diminishing returns set in. That is, sales and market share improvements slow down and eventually decrease no matter how much is spent on advertising and sales promotion. This phenomenon is called the advertising response function.
advertising response function- a phenomenon in which spending for advertising and sales promotion increases sales or market share up to a certain level but then produces diminishing returns
Understanding the advertising response function helps marketers use budgets wisely. A market leader like Johnson & Johnson's Neutrogena typically spends proportionately less on advertising than a newer line such as Unilever's Vaseline Spray & Go brand. Neutrogena has already captured the attention of the majority of its target market. It only needs to remind customers of its product.
The second reason new brands tend to require higher spending for advertising and sales promotion is that a certain minimum level of exposure is needed to measurably affect purchase habits. If Vaseline advertised its Spray & Go moisturizers in only one or two publications and bought only one or two television spots, it would not achieve the exposure needed to penetrate consumers' perceptual defenses and affect purchase intentions.
Advertising affects peoples' daily lives, informing them about products and services and influencing their attitudes, beliefs, and ultimately, their purchases. Advertising affects the television programs people watch, the content of the newspapers they read, the politicians they elect, the medicines they take, and the toys their children play with. Consequently, the influence of advertising on the U.S. socioeconomic system has been the subject of extensive debate in nearly all corners of society.
Interestingly, despite a proliferation of new technology options, consumers still spend a lot of time consuming traditional media (where much of advertising exists). The average person, for example, spends about 273 minutes a day watching television. Americans report an average of 5.3 leisure hours a day, and most of it is spent watching TV. As a result, American consumers are exposed to thousands of advertising messages each year.
Advertising also reinforces positive attitudes toward brands. A brand with a distinct personality is more likely to have a larger base of loyal customers and market share. The more consistent a brand's personality, the more likely a customer will build a relationship with that brand over his or her lifetime. Consider Apple, for example. Sixty percent of iPhone users report they would switch to Apple's latest iPhone without considering any other options, admitting to "blind loyalty."* This is why market leaders spend billions of dollars annually to reinforce and remind their loyal customers about the benefits of their products.
Advertising can also affect the way consumers rank a brand's attributes. In years past, car ads emphasized such brand attributes as roominess, speed, and low maintenance. Today, however, car marketers have added technology, safety, versatility, customization, and fuel efficiency to the list.
A form of institutional advertising called advocacy advertising is typically used to safeguard against negative consumer attitudes and to enhance the company's credibility among consumers who already favor its position. Corporations often use advocacy advertising to express their views on controversial issues. For example, in celebration of the one-year anniversary of New York's Marriage Equality Act, Nabisco's Oreo posted a gay pride-themed image (an Oreo cookie with six rainbow-colored layers of cream filling) on its Facebook page. Accompanying the image were the phrases "Pride" and "Proudly support love!" Responses to the images were mixed: "I'm never eating Oreos again. This is just disgusting," wrote one commenter, while another replied, "I didn't think it was possible for me to love Oreo's more than I already did!!" Though controversial, the post drew a considerable amount of support from fans, generating approximately 15,000 shares and 87,000 "likes."* Alternatively, a firm's advocacy campaign might react to criticism or blame, or to ward off increases in regulation, damaging legislation, or the unfavorable outcome of a lawsuit. Once objectives are defined, creative work can begin on the advertising campaign. Advertising campaigns often follow the AIDA model, which was discussed in Chapter 15. Depending on where consumers are in the AIDA process, the creative development of an advertising campaign might focus on creating attention, arousing interest, stimulating desire, or ultimately leading to the action of buying the product. Specifically, creative decisions include identifying product benefits, developing and evaluating advertising appeals, executing the message, and evaluating the effectiveness of the campaign. A well-known rule of thumb in the advertising industry is "Sell the sizzle, not the steak"—that is, in advertising, the goal is to sell the benefits of the product, not its attributes. Customers do not buy attributes, they buy benefits. An attribute is simply a feature of the product such as its easy-open package, special formulation, or new lower price. A benefit is what consumers will receive or achieve by using the product, such as convenience or ease of use. A benefit should answer the consumer's question "What's in it for me?" Benefits might be such things as pleasure, improved health, savings, or relief. A quick test to determine whether you are offering attributes or benefits in your advertising is to ask "So?" Consider this example:
"DogsBestFriend is an all-natural skin care lotion for dogs that combines traditional medicines and Nigella sativa seed oils with the newest extraction technology." "So ...?"
"So ... DogsBestFriend acts as a natural replacement for hydrocortisone, antihistamines, and topical antibiotics that is powerful enough to combat inflammation, itching, and pain, yet safe enough to use on dogs of all ages."*
profit- Lets consumers know whether the product will save them money, make them money, or keep them from losing money.
health- Appeals to those who are body conscious or who want to be healthy; love or romance is used often in selling cosmetics and perfumes.
fear- Can center around social embarrassment, growing old, or losing one's health; because of its power, requires advertiser to exercise care in execution.
admiration- Frequently highlights celebrity spokespeople.
convenience- Is often used for fast-food restaurants and microwave foods.
fun and pleasure- Are the keys to advertising vacations, beer, amusement parks, and more.
vanity and egotism- Are used most often for expensive or conspicuous items such as cars and clothing.
Environmental Consciousness- centers around protecting the environment and being considerate of others in the community
Choosing the best appeal from those developed usually requires market research. Criteria for evaluation include desirability, exclusiveness, and believability. The appeal first must make a positive impression on and be desirable to the target market. It must also be exclusive or unique. Consumers must be able to distinguish the advertiser's message from competitors' messages. Most importantly, the appeal should be believable. An appeal that makes extravagant claims not only wastes promotional dollars but also creates ill will for the advertiser.
executional style description
Depicts people in normal settings, such as at the dinner table or in their car. McDonald's often uses slice-of-life styles showing youngsters munching on french fries from Happy Meals on family outings.
Shows how well the product will fit in with the consumer's lifestyle. As his Volkswagen Jetta moves through the streets of the French Quarter, a Gen X driver inserts a techno music CD and marvels at how the rhythms of the world mimic the ambient vibe inside his vehicle.
Can feature a celebrity, company official, or typical consumer making a testimonial or endorsing a product. Sheryl Crow represented Revlon's Colorist hair coloring, while Beyoncé Knowles was named the new face of American Express. Dell Inc. founder Michael Dell touts his vision of the customer experience via Dell in television ads.
Creates a fantasy for the viewer built around use of the product. Carmakers often use this style to let viewers fantasize about how they would feel speeding around tight corners or down long country roads in their cars.
Advertisers often use humor in their ads, such as Snickers' "Not Going Anywhere for a While"campaign featuring hundreds of souls waiting, sometimes impatiently, to get into heaven.
6. Real/Animated Product Symbols
Creates a character that represents the product in advertisements, such as the Energizer Bunny or Starkist's Charlie the Tuna. GEICO's suave gecko and disgruntled cavemen became cult classics for the insurance company.
7. Mood or Image
Builds a mood or image around the product, such as peace, love, or beauty. De Beers ads depicting shadowy silhouettes wearing diamond engagement rings and diamond necklaces portrayed passion and intimacy while extolling that "a diamond is forever."
Shows consumers the expected benefit. Many consumer products use this technique. Laundry detergent spots are famous for demonstrating how their product will clean clothes whiter and brighter. Fort James Corporation demonstrated in television commercials how its Dixie Rinse & ReUse disposable stoneware product line can stand up to the heat of a blowtorch and survive a cycle in a clothes washer.
Conveys the message of the advertisement through song. For example, Nike's ads depicted a marathoner's tortured feet and a surfer's thigh scarred by a shark attack while strains of Joe Cocker's "You Are So Beautiful" could be heard in the background.
Uses research or scientific evidence to give a brand superiority over competitors. Pain relievers like Advil, Bayer, and Excedrin use scientific evidence in their ads.
njecting humor into an advertisement is a popular and effective executional style. Humorous executional styles are more often used in radio and television advertising than in print or magazine advertising, where humor is less easily communicated. Recall that humorous ads are typically used for lower-risk, low-involvement, routine purchases such as candy, cigarettes, and casual jeans than for higher-risk purchases or for products that are expensive, durable, or flamboyant.*
Sometimes an executional style must be modified to make a marketing campaign more effective. Nowhere is this more evident than in the political realm, where advertisements for issues and candidates must account for ever-changing poll numbers and public sentiments. In Barack Obama's second presidential election, campaign advertisements taking aim at the president shifted in tone from sharply combative and accusatory to concerned—even mournful—about the state of the economy. According to Republican pollster Frank Luntz, focus group research revealed that ads that attacked Obama too personally turned people off in ways that kept them turned off. The Republican campaign shifted its executional style, opting for advertisements that appealed to citizens' worries and frustrations. In one ad, a forlorn-looking woman declares, "I supported President Obama because he spoke so beautifully. But since then, things have gone from bad to much worse."*
medium- The channel used to convey a message to a target market
A major decision for advertisers is the choice of medium —the channel used to convey a message to a target market.
Media planning- The series of decisions advertisers make regarding the selection and use of media, allowing the marketer to optimally and cost-effectively communicate the message to the target audience
Media planning, therefore, is the series of decisions advertisers make regarding the selection and use of media, enabling the marketer to optimally and cost-effectively communicate the message to the target audience.
Promotional objectives and the appeal and executional style of the advertising strongly affect the selection of media. Both creative and media decisions are made at the same time: creative work cannot be completed without knowing which medium will be used to convey the message to the target market. In many cases, the advertising objectives dictate the medium and the creative approach to be used. For example, if the objective is to demonstrate how fast a product operates, a television commercial that shows this action may be the best choice.
In 2015, U.S. advertisers spent about $180 billion on paid media monitored by national reporting services—newspapers, magazines, radio, television, the Internet, and outdoor/cinema. The remainder was spent on unmonitored media such as direct mail, trade exhibits, cooperative advertising, brochures, coupons, catalogs, and special events. More than 38 percent of every media dollar goes toward television ads (cable, syndicated, spot, and network); almost 25 percent toward Internet ads; 12 percent toward newspaper ads; 10 percent toward magazine ads; 9 percent toward radio ads; and 5 percent toward outdoor/cinema ads..* But these traditional mass-market media are declining in usage as more targeted media are emerging. Future growth lies primarily in the digital realm, both in paid media (display ads, video ads, and search ads) and earned media (social media).
Newspapers are one of the oldest forms of media. The advantages of newspaper advertising include geographic flexibility and timeliness. Although there has been a decline in circulation as well as in the number of newspapers, nationally, there are still several major newspapers including the Wall Street Journal, USA Today, the New York Times, the Los Angeles Times, and the Washington Post. But most newspapers are local. Because newspapers are generally a mass-market medium, however, they may not be the best vehicle for marketers trying to reach a very narrow market. Newspaper advertising also encounters distractions from competing ads and news stories. Therefore, one company's ad may not be particularly visible.
The main sources of newspaper ad revenue are local retailers, classified ads, and cooperative advertising. In cooperative advertising, the manufacturer and the retailer split the costs of advertising the manufacturer's brand. For example, Estée Lauder may split the cost of an advertisement with Macy's department store provided that the ad focuses on Estée Lauder's products. One reason manufacturers use cooperative advertising is the impracticality of listing all their dealers in national advertising. Also, cooperative advertising encourages retailers to devote more effort to the manufacturer's lines.
cooperative advertising- an arrangement in which the manufacturer and the retailer split the costs of advertising the manufacturer's brand
Television broadcasters include network television, independent stations, cable television, and direct broadcast satellite television. Network television reaches a wide and diverse market, and cable television and direct broadcast satellite systems, such as DIRECTV and DISH Network, broadcast a multitude of channels devoted to highly segmented markets. Because of its targeted channels, cable television is often characterized as "narrowcasting" by media buyers. DIRECTV is testing the ability to serve ads based on household data (as opposed to demographic and geographic data). To stay relevant amidst new technologies, DIRECTV and other television-focused companies are beginning to recognize the need for better audience targeting.*
Advertising time on television can be very expensive, especially for network and popular cable channels. Special events and first-run prime-time shows for top-ranked television programs command the highest rates for a typical commercial. For example, running a thirty-second spot during the sitcom How to Get Away with Murder on ABC costs $146,113, while running one during NFL Sunday Football costs $627,300. Cable programs like ESPN's Monday Night Football command similarly hefty price tags. A thirty-second spot during the Super Bowl costs approximately $4.5 million. Despite its high cost, many brands feel that a Super Bowl ad is a good investment given the earned media leading up to the game, during the game, and after the game.* An alternative to a commercial spot is the infomercial, a 30-minute or longer advertisement, which is relatively inexpensive to produce and air. Advertisers say the infomercial is an ideal way to present complicated information to potential customers, which other advertising vehicles typically do not allow time to do. Beachbody's P90X and Insanity exercise DVDs are advertised through infomercials.
infomercial- a 30-minute or longer advertisement that looks more like a television talk show than a sales pitch
Probably the most significant trend of concern to television advertising is the rise in popularity of digital video recorders (DVRs) and on-demand viewing. For every hour of television programming, an average of 20 minutes is dedicated to nonprogram material (ads, public service announcements, and network promotions), so the popularity of DVRs among ad-weary viewers is hardly surprising. Like marketers and advertisers, networks are also highly concerned about ad skipping. If consumers are not watching advertisements, then marketers will spend a greater proportion of their advertising budgets on alternative media, and a critical revenue stream for networks will disappear.
Online advertising has become a versatile medium to target specific groups. U.S. digital ad revenues exceed $50 billion annually and are expected to increase to $82 billion annually by 2018. This figure is projected to grow to more than $163 billion by 2016, at which point it will represent 26 percent of all advertising expenditures. Online advertising includes search engine marketing (e.g., pay-per-click ads like Google AdWords), display advertising (e.g., banner ads, video ads), social media advertising (e.g., Facebook ads), e-mail marketing, and mobile marketing (including mobile advertising and SMS). Some online channels like Google offer the ability to audience buy (whereby advertisers can purchase ad space targeted to a highly specific group), but others, such as Turner Digital's FunnyOrDie.com, believe the complex cookie-based strategy poses too many risks.
Popular Internet sites and search engines generally sell advertising space to marketers to promote their goods and services. Internet surfers click on these ads to be linked to more information about the advertised product or service. Both leading advertisers and companies whose ad budgets are not as large have become big Internet advertisers. Because of the relative low cost and high targetability, search engines generate nearly half of all Internet ad revenue. Display and banner ads are the next largest source of Internet revenue, followed by classifieds, mobile, and digital video.*
advergaming- placing advertising messages in Web-based, mobile, console, or handheld video games to advertise or promote a product, service, organization, or issue
another popular Internet advertising format is advergaming, whereby companies put ad messages in Web-based, mobile, console, or handheld video games to advertise or promote a product, service, organization, or issue. Gamification, the process of using game mechanics and a gaming mindset to engage an audience, is increasingly important for marketers to know about and utilize. Challenges, rewards, incentives, and competition are all important aspects in social media games like Candy Crush Saga and Candy Crush Soda Saga. Some games amount to virtual commercials; others encourage players to buy in-game items and power-ups to advance; and still others allow advertisers to sponsor games or buy ad space for product placements. Many of these are social games, played on Facebook or mobile networks, where players can interact with one another. Social gaming has a huge audience—according to Facebook CEO Mark Zuckerberg, 235 million people play social games on Facebook every month. The Facebook gaming market is projected to more than double in the next three years, attracting 554 million people and generating $5.6 billion.
More than three-fourths of Americans have mobile phones, and over one-third of those are smartphones. Fifty-five percent of mobile phone owners access the Web on their phones, making mobile Web sites and apps more important. Mobile advertising has substantial upside potential given that there are more than six billion cell phone users in the world, and an increasing number of those users have smartphones or tablets with Internet access. Mobile advertising is finally reaching its tipping point, reaching almost $24 billion annually. This accounts for nearly all growth in digital advertising. The primary reason is that people are spending more of their time (19.4 percent) on mobile devices rather than on desktops and laptops. As devices such as the iPad continue to grow in popularity, mobile advertising spending will continue to grow worldwide.
Outdoor or out-of-home advertising is a flexible, low-cost medium that may take a variety of forms. Examples include billboards, skywriting, giant inflatables, mini billboards in malls and on bus stop shelters, signs in sports arenas, and lighted moving signs in bus terminals and airports, as well as ads painted on cars, trucks, buses, water towers, manhole covers, drinking glass coasters, and even people, called "living advertising." The plywood scaffolding surrounding downtown construction sites often holds ads, which in places like Manhattan's Times Square, can reach over a million viewers a day.
Outdoor advertising reaches a broad and diverse market and is therefore ideal for promoting convenience products and services as well as directing consumers to local businesses. One of outdoor advertising's main advantages over other media is that its exposure frequency is very high, yet the amount of clutter from competing ads is very low. Outdoor advertising also can be customized to local marketing needs, which is why local businesses are the leading outdoor advertisers in any given region.
To cut through the clutter of traditional advertising media, advertisers are developing new media vehicles, like shopping carts in grocery stores, computer screen savers, interactive kiosks in department stores, advertisements run before movies at the cinema, posters on bathroom stalls, and advertainments—mini movies that promote a product and are shown online.
Marketers are looking for more innovative ways to reach captive and often bored commuters. For instance, subway systems are now showing ads via lighted boxes installed along tunnel walls. Other advertisers seek consumers at home. Some marketers have begun replacing hold music on customer service lines with advertisements and movie trailers. This strategy generates revenue for the company being called and catches undistracted consumers for advertisers. The trick is to amuse and interest this captive audience without annoying them during their ten- to fifteen-minute wait. After Yahoo! CEO Marissa Mayer called her company's on-hold message "garbage," audio production startup Jingle Punks hired Canadian rapper Snow (known for his 1992 hit "Informer") to write a humorous on-hold jingle for Yahoo! (you can hear the jingle at www.youtube.com/watch?v=vRmVDADlnOU). Yahoo! has yet to implement the jingle, however.*
Cost per contact- the cost of reaching one member of the target market
cost per thousand (CPM)- the cost of reaching one member of the target market
Cost per contact, also referred to as cost per thousand (CPM), is the cost of reaching one member of the target market.Naturally, as the size of the audience increases, so does the total cost. Cost per contact enables an advertiser to compare the relative costs of specific media vehicles (such as television versus radio or magazine versus newspaper), or more specifically, within a media category (such as People versus US Weekly). Thus, an advertiser debating whether to spend local advertising dollars for television spots or radio spots could consider the cost per contact of each. Alternatively, if the question is which magazine to advertise in, she might choose the one with the greater reach. In either case, the advertiser can pick the vehicle with the lowest cost per contact to maximize advertising punch for the money spent.
Media have either a short or a long life span, which means that messages can either quickly fade or persist as tangible copy to be carefully studied. A radio commercial may last less than a minute, but advertisers can overcome this short life span by repeating radio ads often. In contrast, a magazine has a relatively long life span, which is further increased by a high pass-along rate.
Media planners have traditionally relied on the above factors in selecting an effective media mix, with reach, frequency, and cost often the overriding criteria. Well-established brands with familiar messages, however, probably need fewer exposures to be effective, while newer or unfamiliar brands likely need more exposures to become familiar. In addition, today's media planners have more media options than ever before. (Today, there are over 1,600 television networks across the country, whereas forty years ago there were only three.)
the proliferation of media channels is causing media fragmentation and forcing media planners to pay as much attention to where they place their advertising as to how often the advertisement is repeated. That is, marketers should evaluate reach and frequency in assessing the effectiveness of advertising. In certain situations, it may be important to reach potential consumers through as many media vehicles as possible. When this approach is considered, however, the budget must be large enough to achieve sufficient levels of frequency to have an impact. In evaluating reach versus frequency, therefore, the media planner ultimately must select an approach that is most likely to result in the ad being understood and remembered when a purchase decision is being made.
Advertisers also evaluate the qualitative factors involved in media selection. These include such things as attention to the commercial and the program, involvement, program liking, lack of distractions, and other audience behaviors that affect the likelihood that a commercial message is being seen and, hopefully, absorbed. While advertisers can advertise their product in as many media as possible and repeat the ad as many times as they like, the ad still may not be effective if the audience is not paying attention. Additional research highlights the benefits of cross-media advertising campaigns. According to Rick Mandler, VP of Digital Ad Sales at television network ABC, running an ad both on television and online delivers a lower median age, but delivers greater frequency and reach in the 18 to 24 age range, as well as greater overall reach for adults ages 18 to 49. ABC Unified, a pioneering approach to cross-media advertising, is quickly gaining popularity among ABC's more than 200 advertisers.*
media schedule- signation of the media, the specific publications or programs, and the insertion dates of advertising
After choosing the media for the advertising campaign, advertisers must schedule the ads. A media schedule designates the medium or media to be used (such as magazines, television, or radio), the specific vehicles (such as People magazine, the show Scandal on television, or Rush Limbaugh's national radio program), and the insertion dates of the advertising.
There are four basic types of media schedules:
1.continous media schedule
continuous media schedule- a media scheduling strategy in which advertising is run steadily throughout the advertising period; used for products in the later stages of the product life cycle
A continuous media schedule allows the advertising to run steadily throughout the advertising period. Examples include Ivory soap and Charmin toilet tissue, which may have an ad in the newspaper every Sunday and a television commercial on NBC every Wednesday at 7:30 p.m. over a three-month time period. Products in the later stages of the product life cycle, which are advertised on a reminder basis, often use a continuous media schedule.
2. flighted media schedule
flighted media schedule- a media scheduling strategy in which ads are run heavily every other month or every two weeks to achieve a greater impact with an increased frequency and reach at those times
With a flighted media schedule, the advertiser may schedule the ads heavily every other month or every two weeks to achieve a greater impact with an increased frequency and reach at those times. Movie studios might schedule television advertising on Wednesday and Thursday nights, when moviegoers are deciding which films to see that weekend.
3. pausing media schedule
pulsing media schedule- a media scheduling strategy that uses continuous scheduling throughout the year coupled with a flighted schedule during the best sales periods
A pulsing media schedule combines continuous scheduling with flighted scheduling. It is continuous advertising that is simply heavier during the best sale periods. A retail department store may advertise on a year-round basis but place more advertising during certain sale periods such as Thanksgiving, Christmas, and back-to-school. Or beer may be advertised more heavily during the summer months and football season given the higher consumption levels at those times.
4. seasonal media schedule
seasonal media schedulea media scheduling strategy that runs advertising only during times of the year when the product is most likely to be used
Certain times of the year call for a seasonal media schedule. Products like Sudafed cold tablets and Coppertone sunscreen, which are used more during certain times of the year, tend to follow a seasonal strategy.
Product placement- a public relations strategy that involves getting a product, service, or company name to appear in a movie, television show, radio program, magazine, newspaper, video game, video or audio clip, book, or commercial for another product; on the Internet; or at special events
Marketers are increasingly using product placement to reinforce brand awareness and create favorable attitudes. Product placement is a strategy that involves getting one's product, service, or name to appear in a movie, television show, radio program, magazine, newspaper, video game, video or audio clip, book, or commercial for another product; on the Internet; or at special events. Including an actual product, such as a can of Pepsi, adds a sense of realism to a movie, television show, video game, book, or similar vehicle that cannot be created by a can simply marked "soda." Product placements are arranged through barter (trade of product for placement), through paid placements, or at no charge when the product is viewed as enhancing the vehicle it is placed in.
Global product placement expenditures total about $8 billion annually ($4.3 billion in the United States alone).* More than two-thirds of product placements are in movies and television shows, but placements in other alternative media are growing, particularly on the Internet and in video games. Digital technology now enables companies to "virtually" place their products in any audio or video production. Virtual placement not only reduces the cost of product placement for new productions but also enables companies to place their products in previously produced programs, such as reruns of television shows. Overall, companies obtain valuable product exposure, brand reinforcement, and increased sales through product placement.
sponsorship- a public relations strategy in which a company spends money to support an issue, cause, or event that is consistent with corporate objectives, such as improving brand awareness or enhancing corporate image
With sponsorship, a company spends money to support an issue, cause, or event that is consistent with corporate objectives, such as improving brand awareness or enhancing corporate image. The biggest category of sponsorships is sports, which accounts for almost 70 percent of spending in sponsorships and has seen steady growth in recent years.* Nonsports categories include entertainment tours and attractions, causes, arts, festivals, fairs and annual events, and association and membership organizations.
Although the most popular sponsorship events are still those involving sports, music, or the arts, companies have recently been turning to more specialized events such as tie-ins with schools, charities, and other community service organizations. Marketers sometimes even create their own events tied around their products. For example, energy drink manufacturer Red Bull hosted Stratos, a multimillion-dollar event where Austrian Felix Baumgartner skydived from the edge of space—nearly twenty-four miles above Earth's surface. Baumgartner became the first human to break the sound barrier in free fall, reaching 834 miles per hour before touching down safely in New Mexico. A major marketing victory for Red Bull, Stratos set its own record as the most-watched YouTube live stream of all time—more than eight million viewers tuned in to the event.*
Corporations sponsor issues as well as events. Sponsorship issues are quite diverse, but the three most popular are education, health care, and social programs. Firms often donate a percentage of sales or profits to a worthy cause favored by their target market.
sales promotion- marketing communication activities other than advertising, personal selling, and public relations, in which a short-term incentive motivates consumers or members of the distribution channel to purchase a good or service immediately, either by lowering the price or by adding value
in addition to using advertising and public relations, marketing managers can use sales promotion to increase the effectiveness of their promotional efforts. Sales promotion consists of marketing communication activities other than advertising, personal selling, and public relations, in which a short-term incentive motivates consumers or members of the distribution channel to purchase a good or service immediately, either by lowering the price or by adding value.
Sales promotion is usually cheaper than advertising and easier to measure. A major national television advertising campaign often costs $10 million or more to create, produce, and place. In contrast, promotional campaigns using the Internet or direct marketing methods can cost less than half that amount. It is also very difficult to determine how many people buy a product or service as a result of radio or television ads. With sales promotion, marketers know the precise number of coupons redeemed or the number of contest entries received.
Crisis management- a coordinated effort to handle all the effects of unfavorable publicity or another unexpected unfavorable event
Although marketers try to avoid unpleasant situations, crises do happen. In our free-press environment, publicity is not easily controlled, especially in a crisis. Crisis management is the coordinated effort to handle the effects of unfavorable publicity, ensuring fast and accurate communication in times of emergency.
When the Villa Fresh Italian Kitchen ran "Dub the Dew," an online contest to name a green apple-flavored variety of Mountain Dew exclusive to the restaurant, it was not long before Internet trolls descended. These digital pranksters submitted absurd and offensive names (such as "diabeetus," "gushing granny," and "Hitler did nothing wrong"), and then voted their submissions to the top of the contest leaderboard en masse. The contest's Web site was quickly taken offline, and Mountain Dew tweeted that the contest "lost to the internet." In an attempt to manage the crisis, the Villa Fresh Italian Kitchen issued an apologetic statement: "'Dub the Dew,' a local market promotional campaign that was created by one of our customers—not Mountain Dew—was compromised. We are working diligently with our customer's team to remove all offensive content that was posted and putting measures in place to ensure this doesn't happen again."*
1. type of buyer
Loyal customers- People who buy your product most or all of the time
Reinforce behavior, increase consumption, change purchase timing
sales promotion examples
Loyalty marketing programs, such as frequent buyer cards or frequent shopper clubs
Bonus packs that give loyal consumers an incentive to stock up or premiums offered in return for proofs of purchase
2. type of buyer
Competitor's customers- People who buy a competitor's product most or all of the time
Break loyalty, persuade to switch to your brand
sales promotion examples
Sampling to introduce your product's superior qualities compared to their brand
Sweepstakes, contests, or premiums that create interest in the product
3.type of buyer
Brand switchers- People who buy a variety of products in the category
Persuade to buy your brand more often
sales promotion examples
Any promotion that lowers the price of the product, such as coupons, price-off packages, and bonus packs
Trade deals that help make the product more readily available than competing products
4,type of buyer
Price buyers- People who consistently buy the least expensive brand
Appeal with low prices or supply added value that makes price less important
sales promotion examples
Coupons, price-off packages, refunds, or trade deals that reduce the price of the brand to match that of the brand that would have been purchased
Once marketers understand the dynamics occurring within their product category and determine the particular customers and behaviors they want to influence, they can then go about selecting promotional tools to achieve these goals.
As we'll discuss in section 16-6b, consumer promotions pull a product through the channel by creating demand. However, trade promotions push a product through the distribution channel (see Chapter 13). When selling to members of the distribution channel, manufacturers use many of the same sales promotion tools used in consumer promotions, such as sales contests premiums and point-of-purchase displays. Several tools, however, are unique to manufacturers and intermediaries:
1. trade allowancea price reduction offered by manufacturers to intermediaries such as wholesalers and retailers
Trade allowances: A trade allowance is a price reduction offered by manufacturers to intermediaries such as wholesalers and retailers. The price reduction or rebate is given in exchange for doing something specific, such as allocating space for a new product or buying something during special periods. For example, a local Best Buy outlet could receive a special discount for running its own promotion on Sony surround sound systems.
2. push money- money offered to channel intermediaries to encourage them to "push" products—that is, to encourage other members of the channel to sell the products
Push money: Intermediaries receive push money as a bonus for pushing the manufacturer's brand through the distribution channel. Often the push money is directed toward a retailer's salespeople. LinoColor, the leading high-end scanner company, produces a Picture Perfect Rewards catalog filled with merchandise retailers can purchase with points accrued for every LinoColor scanner they sell.
3. Training: Sometimes a manufacturer will train an intermediary's personnel if the product is rather complex—as frequently occurs in the computer and telecommunications industries. For example, representatives of major pharmaceutical companies receive extensive training because they need to provide accurate information to doctors and nurses.
4. Free merchandise: Often a manufacturer offers retailers free merchandise in lieu of quantity discounts. Occasionally, free merchandise is used as payment for trade allowances normally provided through other sales promotions. Instead of giving a retailer a price reduction for buying a certain quantity of merchandise, the manufacturer may throw in extra merchandise "free" (i.e., at a cost that would equal the price reduction).
5. Store demonstrations: Manufacturers can also arrange with retailers to perform an in-store demonstration. Food manufacturers often send representatives to grocery stores and supermarkets to let customers sample a product while shopping.
6. Business meetings, conventions, and trade shows: Trade association meetings, conferences, and conventions are an important aspect of sales promotion and a growing, multi-billion-dollar market. At these shows, manufacturers, distributors, and other vendors have the chance to display their goods or describe their services to potential customers. Companies participate in trade shows to attract and identify new prospects, serve current customers, introduce new products, enhance corporate image, test the market response to new products, enhance corporate morale, and gather competitive product information.
Trade promotions are popular among manufacturers for many reasons. Trade sales promotion tools help manufacturers gain new distributors for their products, obtain wholesaler and retailer support for consumer sales promotions, build or reduce dealer inventories, and improve trade relations. Car manufacturers annually sponsor dozens of auto shows for consumers. The shows attract millions of consumers, providing dealers with increased store traffic as well as good leads.
coupon- a certificate that entitles consumers to an immediate price reduction when the product is purchased.
A coupon is a certificate that entitles consumers to an immediate price reduction when the product is purchased. Coupons are a particularly good way to encourage product trial and repurchase. They are also likely to increase the amount of a product bought. Coupons can be distributed in stores as instant coupons on packaging, on shelf displays with pull-off coupon dispensers, and at cash registers, printed based on what the customer purchased; through freestanding inserts (FSIs); and through various Internet daily deal sites.
FSIs, the promotional coupons inserts found in newspapers, are the traditional way of circulating printed coupons. FSIs are used to distribute approximately 80 percent of coupons. Such traditional types of coupon distribution, which also include direct mail and magazines, have been declining for several years, as consumers use fewer coupons. About 3 billion coupons are redeemed annually. Mobile coupons have a much higher redemption rate than paper coupons.*
The Internet is changing the face of coupons. In addition to Internet coupon sites such as Valpak.com and Coolsavings.com, and social coupon sites such as Groupon and LivingSocial, there are also deal sites like DealSurf.com that aggregate offers from different sites for convenience. While daily deal sites have been quite popular with consumers, sites like Groupon and Living-Social are coming under some fire as many small businesses claim they lose money or drown under the flood of coupon redemptions. American Express is using Twitter to drive card use. After syncing their credit cards to their Twitter accounts, American Express customers can send tweets using an approved hashtag (or "cashtag") to pay for items purchased through third-party retailers. Cardholders can also receive automatic discounts from partner businesses on Twitter when they make purchases with their American Express cards.*
rebate- a cash refund given for the purchase of a product during a specific period
A rebate is similar to a coupon in that a rebate offers the purchaser a price reduction; however, because the purchaser must mail in a rebate form and usually some proof of purchase, the reward is not as immediate. Manufacturers prefer rebates for several reasons. Rebates allow manufacturers to offer price cuts to consumers directly. Manufacturers have more control over rebate promotions because they can be rolled out and shut off quickly. Further, because buyers must fill out forms with their names, addresses, and other data, manufacturers use rebate programs to build customer databases. Perhaps the best reason of all to offer rebates is that although rebates are particularly good at enticing purchase, most consumers never bother to redeem them—only about 40 percent of consumers eligible for rebates collect them.*
loyalty marketing program- a promotional program designed to build long-term, mutually beneficial relationships between a company and its key customers
which of the following statements is true of loyalty programs?
They provide information about customers and shopping trends
frequent buyer program- a loyalty program in which loyal consumers are rewarded for making multiple purchases of a particular good or service
A loyalty marketing program builds long-term, mutually beneficial relationships between a company and its key customers. One of the most popular types of loyalty programs, the frequent buyer program, rewards loyal consumers for making multiple purchases. The objective of loyalty marketing programs is to build long-term, mutually beneficial relationships between a company and its key customers.
There are almost three billion loyalty program memberships in the United States; the average household has signed up for 18 programs. Popularized by the airline industry through frequent-flyer programs, loyalty marketing enables companies to strategically invest sales promotion dollars in activities designed to capture greater profits from customers already loyal to the product or company. Co-branded credit cards are an increasingly popular loyalty marketing tool. Most department stores only offer loyalty programs if a customer opens their branded credit card. However, high-end chain Bloomingdales recently changed its rewards program to include anyone who will sign up. Members of the new Loyalist program receive one point for each dollar they spend and receive a $25 gift card after earning 5,000 points. While Bloomingdale's credit card holders receive more points per dollar spent, the company is hoping to monitor a greater number of its shoppers' spending habits by enabling non-cardholders to join Loyalist.
Through loyalty programs, shoppers receive discounts, alerts on new products, and other types of enticing offers. In exchange, retailers are able to build customer databases that help them better understand customer preferences.
Sampling- a promotional program that allows the consumer the opportunity to try a product or service for free
Sampling allows the customer to try a product risk-free. In a recent study, in-store sampling proved to be the most successful promotional tactic when researchers introduced a new dairy product to grocery stores. In-store sampling events increased sales 116 percent, outperforming aisle displays (70 percent), ad circulars (63 percent), and temporary price reductions (48 percent).*
Samples can be directly mailed to the customer, delivered door-to-door, packaged with another product, or demonstrated or distributed at a retail store or service outlet. Sampling at special events is a popular, effective, and high profile distribution method that permits marketers to piggyback onto fun-based consumer activities—including sporting events, college fests, fairs and festivals, beach events, and chili cook-offs. Distributing samples to specific location types, such as health clubs, churches, or doctors' offices, is also one of the most efficient methods of sampling. Online sampling is catching up in popularity, however, with the growth of social media. Branded products not only run contests through Facebook, but also connect with fans, show commercials, and offer samples of new products in exchange for "liking" the brand.
point-of-purchase (P-O-P) displaya promotional display set up at the retailer's location to build traffic, advertise the product, or induce impulse buying
A point-of-purchase (P-O-P) display includes any promotional display set up at the retailer's location to build traffic, advertise the product, or induce impulse buying. P-O-P displays include shelf "talkers" (signs attached to store shelves), shelf extenders (attachments that extend shelves so products stand out), ads on grocery carts and bags, end-aisle and floor-stand displays, television monitors at supermarket checkout counters, in-store audio messages, and audiovisual displays. One big advantage of the P-O-P display is that it offers manufacturers a captive audience in retail stores. According to POPAI's Shopper Engagement Study, approximately 76 percent of all retail purchase decisions are made in-store. Fifty-seven percent of shoppers buy more than they anticipated once in the store, so P-O-P displays can be very effective.* Other strategies to increase sales include adding cards to the tops of displays, changing messages on signs on the sides or bottoms of displays, adding inflatable or mobile displays, and using signs that advertise the brand's sports, movie, or charity tie-in.
The biggest trend in sales promotion on both the trade and consumer side has been the increased use of the Internet. Social media-, e-mail-, and Web site-based promotions have expanded dramatically in recent years. Marketers are now spending billions of dollars annually on such promotions. Sales promotions online have proved both effective and cost-efficient—generating response rates three to five times higher than off-line promotions. The most effective types of online sales promotions are free merchandise, sweepstakes, free shipping with purchases, and coupons. One major goal of retailers is to add potential customers to their databases and expand marketing touch points.
Marketers have discovered that online coupon distribution provides another vehicle for promoting their products. The redemption rate of online coupons has been growing substantially while total coupon redemption has remained steady. Online coupons can help marketers lure new customers, and with the speed of online feedback, marketers can track the success of a coupon in real time and adjust it based on changing market conditions.
Online versions of loyalty programs are also popping up, and although many types of companies have these programs, the most successful are those run by hotel and airline companies. A final major trend in sales promotion is the utilization of sales promotions on social media and at the point of purchase. Google's Zero Moment of Truth (ZMOT) insights illustrate how important consumer feedback is to consumer purchases, highlighting the importance of behavioral data when serving up a targeted sales promotion.*
16-1Discuss the effects of advertising on market share and consumers.
Advertising helps marketers increase or maintain brand awareness and, subsequently, market share. Typically, more is spent to advertise new brands with a small market share than to advertise older brands. Brands with a large market share use advertising mainly to maintain their share of the market. Advertising affects consumers' daily lives as well as their purchases. Although advertising can seldom change strongly held consumer attitudes and values, it may transform a consumer's negative attitude toward a product into a positive one. Finally, advertising can also change the importance of a brand's attributes to consumers. By emphasizing different brand attributes, advertisers can change their appeal in response to consumers' changing needs or try to achieve an advantage over competing brands.
16-2Identify the major types of advertising.
Advertising is any form of nonpersonal, paid communication in which the sponsor or company is identified. The two major types of advertising are institutional advertising and product advertising. Institutional advertising is not product oriented; rather, its purpose is to foster a positive company image among the general public, investment community, customers, and employees. Product advertising is designed mainly to promote goods and services, and it is classified into three main categories: pioneering, competitive, and comparative. A product's place in the product life cycle is a major determinant of the type of advertising used to promote it.
16-3Discuss the creative decisions in developing an advertising campaign.
Before any creative work can begin on an advertising campaign, it is important to determine what goals or objectives the advertising should achieve. The objectives of a specific advertising campaign often depend on the overall corporate objectives and the product being advertised and are often determined using the DAGMAR approach. Once objectives are defined, creative work can begin (e.g., identifying the product's benefits, developing possible advertising appeals, evaluating and selecting the advertising appeals, executing the advertising message, and evaluating the effectiveness of the campaign).
16-4Describe media evaluation and selection techniques.
Media evaluation and selection make up a crucial step in the advertising campaign process. Major types of advertising media include newspapers, magazines, radio, television, the Internet, and outdoor media such as billboards and bus panels. Recent trends in advertising media include shopping carts, computer screen savers, interactive kiosks, advertisements run before movies, posters on bathroom stalls, and advertainments. Promotion managers choose the advertising campaign's media mix on the basis of the following variables: cost per contact, reach, frequency, characteristics of the target audience, flexibility of the medium, noise level, and the life span of the medium. After choosing the media mix, a media schedule designates when the advertisement will appear and the specific vehicles in which it will appear.
16-5Discuss the role of public relations in the promotional mix.
Public relations is a vital part of a firm's promotional mix. A company fosters good publicity to enhance its image and promote its products. Popular public relations tools include new-product publicity, product placement, consumer education, sponsorship, and company Web sites. An equally important aspect of public relations is managing unfavorable publicity in a way that is least damaging to a firm's image.
Many people around the world work in some form of selling. Traditionally, salespeople engage in direct face-to-face contact with customers. This can take place either at the salesperson's place of business or at a secondary location (such as when a salesperson travels door-to-door or meets a customer at her office or home). Salespeople can be consumer-focused (as in the case of retail) or business-focused.
In many cases, consumer-focused salespeople require customers to come directly to a retail store, shortening the sales process time. Even though many retailers use multiple customer relationship management processes (including information kiosks, Web sites, and self-check outs), one-to-one interactions are often key to retail success. Most major retailers use trained salespeople—not just order takers—to enhance the customer experience. Nordstrom's, for example, offers a retail management internship that provides both hands-on selling experience and classroom learning for students looking for careers in retail management and sales.* By having knowledgeable salespeople, retailers can help their customers select the products or services that are best for them.
As previously discussed, some consumer-focused salespeople travel to their customers' locations. For example, many home improvement and maintenance salespeople meet potential customers at their homes. Certain cosmetics, small appliances, and magazine subscriptions are sold directly to customers at their homes. These salespeople are considered direct salespeople. Companies such as CUTCO Cutlery, AVON, and Mary Kay Cosmetics have been very successful in direct selling.
Business-focused salespeople call on other companies to sell their products. These business-to-business salespeople often spend a good deal of time traveling to customer locations to make sales calls, and the sales process generally takes a longer period of time. Often, business-to-business salespeople have more extensive sales training, are required to travel more, and receive a higher level of compensation.
The sales environment changes constantly as new competitors enter the market and old competitors leave. The ways that customers interact with salespeople and learn about products and suppliers are changing due to the rapid increase in new sales technologies. In order for companies to successfully sell products or services using a sales force, they must be very effective at personal selling, sales management, customer relationship management, and technology—all of which play critical roles in building strong long-term relationships with customers.
sales process, or sales cycle- the set of steps a salesperson goes through in a particular organization to sell a particular product or service
Completing a sale requires multiple steps. The sales process, or sales cycle, is simply the set of steps a salesperson goes through to sell a particular product or service. The sales process can be unique for each product or service offered. The actual sales process depends on the features of the product or service, characteristics of customer segments, and internal processes in place within the firm (such as how leads are gathered).
Some sales take only a few minutes to complete, but others may take much longer. Sales of technical products like a Boeing or Airbus airplane and customized goods and services typically take many months, perhaps even years, to complete. On the other end of the spectrum, sales of less technical products like stationery are generally more routine and often take less than a day to complete. Whether a salesperson spends a few minutes or a few years on a sale, there are seven basic steps in the personal selling process:
1. Generating leads
2. Qualifying leads
3. Approaching the customer and probing needs
4. Developing and proposing solutions
5. Handling objections
6. Closing the sale
7. Following up
As mentioned in Chapter 15, personal selling is a purchase situation involving a personal, paid-for communication between two people in an attempt to influence each other.
. In a sense, all businesspeople are salespeople. An individual may become a plant manager, a chemist, an engineer, or a member of any profession and yet still have to sell. During a job search, applicants must "sell" themselves to prospective employers in an interview. Personal selling offers several advantages over other forms of promotion:
personal selling advantages
1. Personal selling provides a detailed explanation or demonstration of the product. This capability is especially needed for complex or new goods and services.
2. The sales message can be varied according to the motivations and interests of each prospective customer. Moreover, when the prospect has questions or raises objections, the salesperson is there to provide explanations and guidance. By contrast, advertising and sales promotion can respond only to the questions and objections that the copywriter thinks are important to customers.
3. Personal selling should only be directed toward qualified prospects. Other forms of promotion include some unavoidable waste because many people in the audience are not prospective customers.
4. Costs can be controlled by adjusting the size of the sales force (and resulting expenses) in one-person increments. On the other hand, advertising and sales promotion must often be purchased in fairly large amounts.
5. Perhaps the most important advantage is that personal selling is considerably more effective than other forms of promotion in obtaining a sale and gaining a satisfied customer.
personal selling disadvantages
continual sales force management and training are necessary
Personal selling also has several limitations compared to other forms of promotion:
1. Cost per contact is much greater than for mass forms of communication, leading companies to be highly selective about where and when they use salespeople.
2. If the sales force is not properly trained, the message provided can be inconsistent and inaccurate. Continual sales force management and training are necessary.
3. Salespeople can convince customers to buy unneeded products or services. This can lead to increased levels of cognitive dissonance among buyers if a salesperson is being pushed to meet certain quotas.
personal selling becomes more important as the value of a product grows.
Personal selling often works better than other forms of promotion given certain customer and product characteristics. Generally speaking, personal selling becomes more important as the number of potential customers decreases, as the complexity of the product increases, and as the value of the product grows (see Exhibit 17.1). For highly complex goods such as business jets and private communication systems, a salesperson is needed to determine the prospective customer's needs and wants, explain the product's benefits and advantages, and propose the exact features and accessories that will best meet the client's needs. Many upscale clothing retailers offer free personal shopping, whereby consultants select and suggest designer clothing they believe will fit the customer's style and specified need. Bloomingdales' personal shoppers help customers select gifts for others, provide guidance tailored to the individual's personal tastes, coordinate gift wrapping and alterations, help navigate the entire store from clothing to home goods, and even schedule reminders for special occasions.*
Technology plays an increasingly important role in personal selling. Instead of being handed traditional sales pamphlets and brochures, consumers are now able to easily learn about products and services by searching the Internet before entering a store. Many consumers compare product features, prices, and quality online before even deciding which store to visit. Even after entering a store, consumers use their smartphones to browse competitors' Web sites while evaluating products. In addition to their own research, consumers are being bombarded with in-store messages, coupons, and sale information using beacon technology like Apple's iBeacon. Suffice to say, consumers are more educated about products and services today than they've ever been before.
his shift in technology has changed the dynamic of how information is obtained. If salespeople do not stay well informed about the products they're selling, consumers may enter the store knowing even more than they do. This reduces the ability of the salesperson to build trust and confidence. Salespeople are increasingly turning to social media like LinkedIn, Facebook, blogs, and Twitter to help establish their expertise within a field. With more than 300 million members, LinkedIn positions itself as the world's largest professional network. In addition to its networking function, LinkedIn offers sales solutions to help salespeople find prospects, qualify leads, and make product recommendations to decision makers. LinkedIn also provides free advice on how to effectively sell using social media, including a six-step guide to aid salespeople in successful social selling. LinkedIn also provides actionable social selling tips, making it a great resource for salespeople looking to harness the power of technology themselves.
Historically, marketing theory and practice concerning personal selling have focused almost entirely on planned presentations to prospective customers for the sole purpose of making sales. Marketers were mostly concerned with making one-time sales and then moving on to the next prospect. Traditional personal selling methods attempted to persuade the buyer to accept a point of view or convince the buyer to take some action. Frequently, the objectives of the salesperson were at the expense of the buyer, creating a win-lose outcome. Although this type of sales approach has not disappeared entirely, it is being used less and less often by professional salespeople.
Relationship selling, or consultative selling -a sales practice that involves building, maintaining, and enhancing interactions with customers in order to develop long-term satisfaction through mutually beneficial partnerships
By contrast, modern views of personal selling emphasize the relationship that develops between a salesperson and a buyer. Relationship selling, or consultative selling, is a multistage process that emphasizes personalization, win-win outcomes, and empathy as key ingredients in identifying prospects and developing them as long-term, satisfied customers. The focus, therefore, is on building mutual trust between the buyer and seller through the delivery of long-term, value-added benefits that are anticipated by the buyer.
Relationship or consultative salespeople, therefore, become consultants, partners, and problem solvers for their customers. They strive to build long-term relationships with key accounts by developing trust over time. The emphasis shifts from a one-time sale to a long-term relationship in which the salesperson works with the customer to develop solutions for enhancing the customer's bottom line. The end result of relationship selling tends to be loyal customers who purchase from the company time after time, often with an increased share-of-purchase. A relationship selling strategy focused on retaining customers is often less expensive to a company than having to constantly prospect for and sell to new customers. Relationship selling provides many advantages over traditional selling in the consumer goods market. Still, relationship selling is more often used in selling situations for industrial-type goods, such as heavy machinery and computer systems, and services, such as airlines and insurance, than in selling situations for consumer goods. Exhibit 17.2 lists the key differences between traditional personal selling and relationship or consultative selling.
As we have discussed throughout the text, customer relationship management (CRM) is the ultimate goal of a new trend in marketing that focuses on understanding customers as individuals instead of as part of a group. To do so, marketers are making their communications more customer specific using the CRM cycle, covered in Chapter 8, and by developing relationships with their customers through touch points and data mining. CRM was initially popularized as one-to-one marketing. But CRM is a much broader approach to understanding and serving customer needs than is one-to-one marketing.
hroughout the text, our discussion of a CRM system has assumed two key points. First, customers take center stage in any organization. Second, the business must manage the customer relationship across all points of customer contact throughout the entire organization. By identifying customer relationships, understanding the customer base, and capturing customer data, marketers and salespeople can leverage the information not only to develop deeper relationships but also to close more sales with loyal customers in a more efficient manner.
Like other forms of promotion, the steps of selling follow the AIDA concept discussed in Chapter 16. Once a salesperson has located and qualified a prospect with the authority to buy, he or she tries to get the prospect's attention. A thorough needs assessment turned into an effective sales proposal and presentation should generate interest. After developing the customer's initial desire (preferably during the presentation of the sales proposal), the salesperson seeks action in the close by trying to get an agreement to buy. Follow-up after the sale, the final step in the selling process, not only lowers cognitive dissonance (refer to Chapter 6) but also may open up opportunities for repeat business, cross-sales of related products and services, and new customer referrals.
raditional selling and relationship selling follow the same basic steps. They differ in the relative importance placed on key steps in the process. Traditional selling efforts are transaction oriented, focusing on generating as many leads as possible, making as many presentations as possible, and closing as many sales as possible. Minimal effort is placed on asking questions to identify customer needs and wants or matching these needs and wants to the benefits of the product or service. Often, traditional selling efforts allow little time for following up and ensuring that customers are satisfied with the products or services they received. Again, these types of sales generally generate lower levels of customer satisfaction and can result in more win-lose transactions for salespeople.
By contrast, salespeople practicing relationship selling emphasize a long-term investment in the time and effort needed to uncover each customer's specific needs and wants and meet them with the product or service offering. By doing their homework up front, salespeople often create the conditions necessary for a relatively straightforward close. In general, customers are more satisfied, engage in more repeat business, and provide higher shares-of-purchase over longer periods of time with relationship salespeople. In the following sections, we will examine each step of the personal selling process.
Lead generation, or prospecting- identification of those firms and people most likely to buy the seller's offerings
initial groundwork must precede communication between the potential buyer and the salesperson. Lead generation, or prospecting, is the identification of those firms and people most likely to buy the seller's offerings. These firms or people become "sales leads" or "prospects."
Sales leads can be obtained in many different ways, most notably through advertising, trade shows and conventions, social media, webinars, or direct mail and telemarketing programs. Favorable publicity also helps to create leads. Company records of past client purchases are another excellent source of leads. Many sales professionals are also securing valuable leads from their firm's Web site.
cold calling- a form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects' needs or financial status
A basic unsophisticated method of lead generation is done through cold calling—a form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects' needs or financial status. Although cold calling is still used in generating leads, many sales managers have realized the inefficiencies of having their top salespeople use their valuable selling time searching for the proverbial "needle in a haystack." Passing the job of cold calling to a lower-cost employee, typically an internal sales support person, allows salespeople to spend more time and use their relationship-building skills on prospects who have already been identified.
referral- a recommendation to a salesperson from a customer or business associate
Another way to gather a lead is through a referral—a recommendation from a customer or business associate. The advantages of referrals over other forms of prospecting are highly qualified leads, higher closing rates, larger initial transactions, and shorter sales cycles. Referrals are often as much as ten times more productive in generating sales than are cold calls. Unfortunately, although many clients are willing to give referrals, most salespeople do not ask for them. Effective sales training can help to overcome this reluctance to ask for referrals. To increase the number of referrals, some companies even pay or send small gifts to customers or suppliers that provide referrals. Generating referrals is one area that social media and technology can usually make much more efficient.
networking- a process of finding out about potential clients from friends, business contacts, coworkers, acquaintances, and fellow members in professional and civic organizations
Salespeople should build strong networks to help generate leads. Networking is using friends, business contacts, coworkers, acquaintances, and fellow members in professional and civic organizations to identify potential clients. Indeed, a number of national networking clubs have been started for the sole purpose of generating leads and providing valuable business advice. Increasingly, sales professionals are also using online networking sites like LinkedIn to connect with targeted leads and clients around the world, 24 hours a day.
When a prospect shows interest in learning more about a product, the salesperson has the opportunity to follow up, or qualify, the lead. Typically, unqualified prospects give vague or incomplete answers to a salesperson's specific questions, try to evade questions on budgets, and request changes in standard procedures like prices and terms of sale. In contrast, qualified leads are real prospects who answer questions, value the salesperson's time, and are realistic about money and when they are prepared to buy.
Lead qualification- determination of a sales prospect's (1) recognized need, (2) buying power, and (3) receptivity and accessibility
1. A recognized need: The most basic criterion for determining whether someone is a prospect for a product is a need that is not being satisfied. The salesperson should first consider prospects who are aware of a need but should not disregard prospects who have not yet recognized that they have one. With a little more information about the product, they may decide they do have a need for it. Preliminary questioning can often provide the salesperson with enough information to determine whether there is a need.
2. Buying power: Buying power involves both authority to make the purchase decision and access to funds to pay for it. To avoid wasting time and money, the salesperson needs to identify the purchasing authority and his or her ability to pay before making a presentation. Organizational charts and information about a firm's credit standing can provide valuable clues.
3. Receptivity and accessibility: The prospect must be willing to see the salesperson and be accessible to the salesperson. Some prospects simply refuse to see salespeople. Others, because of their stature in their organization, will see only a salesperson or sales manager with similar stature.
Often the task of lead qualification is handled by a telemarketing group or a sales support person who prequalifies the lead for the salesperson. Prequalification systems free sales representatives from the time-consuming task of following up on leads to determine need, buying power and receptiveness. Prequalification systems may even set up initial appointments with the prospect for the salesperson. The result is more time for the sales force to spend in front of interested customers.
Companies are increasingly using their Web sites and other software to qualify leads. When qualifying leads online, companies want visitors to register, indicate the products and services they are interested in, and provide information on their time frames and resources. Leads from the Internet can then be prioritized (those indicating short time frames, for instance, are given a higher priority) and then transferred to salespeople. Enticing visitors to register also enables companies to customize future electronic interactions.
Personally visiting unqualified prospects wastes valuable salesperson time and company resources. Many leads often go unanswered because salespeople are given no indication as to how qualified the leads are in terms of interest and ability to purchase. Inside salespeople and sales support staff assess leads to maximize successful meetings, while CRM systems provide resources to increase lead follow-up rates. Still, according to Salisify, salespeople only follow up on 10 percent of leads.*
Once the salesperson has gathered the appropriate information about the client's needs and wants, the next step is to determine whether her company's products or services match the needs of the prospective customer. The salesperson then develops a solution, or possibly several solutions, in which the salesperson's product or service solves the client's problems or meets a specific need.
These solutions are typically presented to the client in the form of a sales proposal presented at a sales presentation. A sales proposal is a written document or professional presentation that outlines how the company's product or service will meet or exceed the client's needs.
sales proposal- a formal written document or professional presentation that outlines how the salesperson's product or service will meet or exceed the prospect's needs
sales presentation- a formal meeting in which the salesperson presents a sales proposal to a prospective buyer
The sales presentation is the formal meeting in which the salesperson has the opportunity to present the sales proposal. The presentation should be explicitly tied to the prospect's expressed needs. Further, the prospect should be involved in the presentation by being encouraged to participate in demonstrations or by exposure to computer exercises, slides, video or audio, flip charts, photographs, and the like. Technology has become an important part of presenting solutions for many salespeople. In the past, salespeople took desktop PCs with them to make presentations. Today, they increasingly carry iPads and other tablets because they are lighter, more flexible, and can easily access information stored in the cloud.
Because the salesperson often has only one opportunity to present solutions, the quality of both the sales proposal and the presentation can make or break the sale. Salespeople must be able to present the proposal and handle any customer objections confidently and professionally. For a powerful presentation, salespeople must be well prepared, use direct eye contact, ask open-ended questions, be poised, use hand gestures and voice inflection, and focus on the customer's needs. Incorporating visual elements that impart valuable information, knowing how to operate the audio/visual or computer equipment being used for the presentation, and making sure the equipment works will make the presentation flow smoother. Nothing loses customers faster than a boring or ill-prepared presenter, and equipment mishaps can consume valuable (often limited) time for both the salesperson and customer. Often, customers are more likely to remember how salespeople present themselves than what they say.
preapproach- a process that describes the "homework" that must be done by a salesperson before he or she contacts a prospect
Before approaching customers, the salesperson should learn as much as possible about the prospect's organization and its buyers. This process, called the preapproach, describes the "homework" that must be done by the salesperson before contacting the prospect. This may include visiting company Web sites, consulting standard reference sources such as Moody's, Standard & Poor's, or Dun & Bradstreet, or contacting acquaintances or others who may have information about the prospect. Reading the prospect's social media sites (following the company's Twitter feed and reading its Facebook page, for example) is a great way to get to know the company culture, become acquainted with customer needs, and learn more about daily activities.* Another preapproach task is to determine whether the actual approach should be a personal visit, a phone call, a letter, or some other form of communication. Note that the preapproach applies to most business-to-business sales and outside consumer sales, but it is usually not possible when consumers approach salespeople in the retail store environment.
During the sales approach, the salesperson either talks to the prospect or secures an appointment to probe the prospect further about his or her needs. Relationship selling theorists suggest that salespeople should begin developing mutual trust with their prospect during the approach. Salespeople must sell themselves before they can sell the product. Small talk that projects sincerity and some suggestion of friendship is encouraged to build rapport with the prospect, but remarks that could be construed as insincere should be avoided.
needs assessment- a determination of the customer's specific needs and wants and the range of options the customer has for satisfying them
he salesperson's ultimate goal during the approach is to conduct a needs assessment to find out as much as possible about the prospect's situation. The salesperson should be determining how to maximize the fit between what he or she can offer and what the prospective customer wants. As part of the needs assessment, the consultative salesperson must know everything there is to know about the following:
1. The product or service:
Product knowledge is the cornerstone for conducting a successful needs analysis. The consultative salesperson must be an expert on his or her product or service, including technical specifications, features and benefits, pricing and billing procedures, warranty and service support, performance comparisons with the competition, other customers' experiences with the product, and current advertising and promotional campaign messages. For example, a salesperson who is attempting to sell a Canon copier to a doctor's office should be very knowledgeable about Canon's selection of copiers, their attributes, capabilities, technological specifications, and postpurchase servicing.
2. Customers and their needs:
The salesperson should know more about customers than he knows about himself. That's the secret to relationship and consultative selling, where the salesperson acts not only as a supplier of products and services but also as a trusted consultant and adviser. The professional salesperson brings each client business-building ideas and solutions to problems. For example, if the Canon salesperson is asking the "right" questions, then he or she should be able to identify copy-related areas where the doctor's office is losing or wasting money. Rather than just selling a copier, the Canon salesperson can act as a consultant on how the doctor's office can save money and time.
3. The competition:
The salesperson must know as much about the competitor's company and products as he or she knows about his or her own company. Competitive intelligence includes many factors: who the competitors are and what is known about them, how their products and services compare, advantages and disadvantages, and strengths and weaknesses. For example, if the competitor's Xerox copy machine is less expensive than the Canon copier, the doctor's office may be leaning toward purchasing the Xerox. But if the Canon salesperson can point out that the cost of long-term maintenance and toner cartridges is lower for the Canon copier, offsetting its higher initial cost, the salesperson may be able to persuade the doctor's office to purchase the Canon copier.
4. The industry:
Knowing the industry requires active research by the salesperson. This means attending industry and trade association meetings, reading articles published in industry and trade journals, keeping track of legislation and regulation that affect the industry, being aware of product alternatives and innovations from domestic and foreign competition, and having a feel for economic and financial conditions that may affect the industry. It is also important to be aware of economic downturns, as businesses may be looking for less expensive financing options.
Creating a customer profile during the approach helps salespeople optimize their time and resources. This profile is then used to help develop an intelligent analysis of the prospect's needs in preparation for the next step, developing and proposing solutions. Customer profile information is typically stored and manipulated using sales force automation software packages designed for use on laptop computers, smartphones, or tablets. Sales force automation software provides sales reps with a computerized and efficient method of collecting customer information for use during the entire sales process. Further, customer and sales data stored in a computer database can be easily shared among sales team members. The information can also be appended with industry statistics, sales or meeting notes, billing data, and other information that may be pertinent to the prospect or the prospect's company. The more salespeople know about their prospects, the better they can meet their needs.
which of the following is true of a customer profile?
it helps in developing and proposing solutions based on the customers needs.
A salesperson should wrap up the sales approach and need-probing mission by summarizing the prospect's need, problem, and interest. The salesperson should also get a commitment from the customer to some kind of action, whether it is reading promotional material or agreeing to a demonstration. This commitment helps to qualify the prospect further and justify additional time invested by the salesperson. When doing so, however, the salesperson should take care not to be too pushy or overbearing—a good salesperson will read a customer's social cues. The salesperson should reiterate the action he or she promises to take, such as sending information or calling back to provide answers to questions. The date and time of the next call should be set at the conclusion of the sales approach as well as an agenda for the next call in terms of what the salesperson hopes to accomplish, such as providing a demonstration or presenting a solution.
At the end of the presentation, the salesperson should ask the customer how he or she would like to proceed. If the customer exhibits signs that he or she is ready to purchase, all questions have been answered, and objections have been met, then the salesperson can try to close the sale. Customers often give signals during or after the presentation that they are ready to buy or are not interested. Examples include changes in facial expressions, gestures, and questions asked. The salesperson should look for these signals and respond appropriately.
Closing requires courage and skill. A salesperson should keep an open mind when asking for the sale and be prepared for both a yes and a no. Often, a salesperson will be told no flat out. In such a case, the salesperson must be resilient and must be able to handle this type of rejection gracefully and effectively. The typical salesperson makes several hundred sales calls a year, many of which are repeat calls to the same client in an attempt to make a single sale. Building and developing a good relationship with the customer is very important. Often, if the salesperson has developed a strong relationship with the customer, only minimal efforts are needed to close a sale (increasing the salesperson's closure rate).
Negotiation- the process during which both the salesperson and the prospect offer special concessions in an attempt to arrive at a sales agreement
which of the following statements is true of negotiation
salespersons should ask for trade-offs and try to avoid giving unilateral concessions
Negotiation often plays a key role in the closing of the sale. Negotiation is the process during which both the salesperson and the prospect offer special concessions in an attempt to arrive at a sales agreement. For example, the salesperson may offer a price cut, free installation, or a trial order. Effective negotiators, however, avoid using price as a negotiation tool and are able to show increased value in their products or services. Because companies spend millions on advertising and product development to create value, when salespeople give in to price negotiations too quickly, it decreases the value of the product. Salespeople should also be prepared to ask for trade-offs and try to avoid giving unilateral concessions. Moreover, if the customer asks for a 5 percent discount, the salesperson should ask for something in return, such as higher volume or more flexibility in delivery schedules.
More and more U.S. companies are expanding their marketing and selling efforts into global markets. Salespeople selling in foreign markets should tailor their presentations and closing styles to each market. Different personalities and skills will be successful in some countries and absolute failures in others. For instance, if a salesperson is an excellent closer and always focuses on the next sale, doing business in Latin America might be difficult because people there want to take a long time building a personal relationship with their suppliers. Similarly, personal space and physical contact are treated differently in different cultures. In many European and South American cultures, it is customary to kiss a business associate on both cheeks instead of shaking hands.*
Will the increasingly sophisticated technology now available at marketers' fingertips eliminate the need for salespeople? Experts agree that a relationship between the salesperson and customer will always be necessary. Technology, however, can certainly help to improve that relationship. Cell phones, laptops, text messaging, e-mail, and electronic organizers allow salespeople to be more accessible to both clients and the company. Moreover, the Internet provides salespeople with vast resources of information on clients, competitors, and the industry.
E-business—buying, selling, marketing, collaborating with partners, and servicing customers electronically using the Internet—has had a significant impact on personal selling. Virtually all large companies and most medium and small companies are involved in e-commerce and consider it to be necessary to compete in today's marketplace. For customers, the Web has become a powerful tool, providing accurate and up-to-date information on products, pricing, and order status. The Internet also facilitates cost-effective processing of orders and service requests. Although on the surface the Internet might appear to be a threat to the job security of salespeople, the Web is actually freeing sales reps from tedious administrative tasks like shipping catalogs, placing routine orders, or tracking orders. This leaves them more time to focus on the needs of their clients.
There is an old adage in business that nothing happens until a sale is made. Without sales, there is no need for accountants, production workers, or even a company president. Sales provide the fuel that keeps the corporate engines humming. Companies such as Cisco Systems, International Paper, Johnson Controls, and thousands of other manufacturers would cease to exist without successful salespeople. Even companies such as Procter & Gamble and Kraft Foods, which mainly sell consumer goods and use extensive advertising campaigns, still rely on salespeople to move products through the channel of distribution. Thus, sales management must be one of every firm's most critical specialties. Effective sales management stems from a success-oriented sales force that accomplishes its mission economically and efficiently. Poor sales management can lead to unmet sales and profit objectives or even to the downfall of the corporation.
Just as selling is a personal relationship, so is sales management. Although the sales manager's basic job is to maximize sales at a reasonable cost while also maximizing profits, he or she also has many other important responsibilities and decisions:
1. Defining sales goals and the sales process
2. Determining the sales force structure
3. Recruiting and training the sales force
4. Compensating and motivating the sales force
5. Evaluating the sales force
Effective sales management begins with a determination of sales goals. Without goals to achieve, salesperson performance would be mediocre at best, and the company would likely fail. Like any marketing objective, sales goals should be stated in clear, precise, and measurable terms and should always specify a time frame for their completion. Overall sales force goals are usually stated in terms of desired dollar sales volume, market share, and/or profit level. For example, a life insurance company may have a goal to sell $50 million in life insurance policies annually, to attain a twelve percent market share, and/or to achieve $1 million in profits. Individual salespeople are also assigned goals in the form of quotas. A quota is a statement of the salesperson's sales goals, usually based on sales volume alone, but sometimes including other focuses such as key accounts (those with greatest potential), new account generation, volume of repeat sales, profit margin, and specific product mixes sold.
quota- a statement of the salesperson's sales goals, usually based on sales volume
Because personal selling is so costly, no sales department can afford to be disorganized. Proper design helps the sales manager organize and delegate sales duties and provide direction for salespeople. Sales departments are most often organized by geographic regions, product lines, marketing functions performed (such as account development or account maintenance), markets, industries, individual clients, or accounts. For example, the sales force for Hewlett-Packard (HP) could be organized into sales territories covering New England, the Midwest, the South, and the West Coast or into distinct groups selling different product lines. HP salespeople might also be assigned to specific industries or markets (such as the telecommunications industry), or to key clients (such as AT&T, Virgin Mobile, and Verizon).
Market or industry-based structures and key account structures are gaining popularity in today's competitive selling environment, especially with the emphasis on relationship selling. Being familiar with one industry or market allows sales reps to become experts in their fields and thereby offer better solutions and service. Further, by organizing the sales force around specific customers, many companies hope to improve customer service, encourage collaboration with other arms of the company, and unite salespeople in customer-focused sales teams.
Sales force recruitment should be based on an accurate, detailed description of the sales task as defined by the sales manager. For example, General Electric (GE) uses its Web site to provide prospective salespeople with explanations of different career entry paths and video accounts of what it is like to have a career at GE. Aside from the usual characteristics such as level of experience or education, what traits should sales managers look for in applicants?
1. Ego strength: Great salespeople should have a strong, healthy self-esteem and the ability to bounce back from rejection.
2. Sense of urgency and competitiveness: These traits push their sales to completion, as well as help them persuade people.
3. Assertiveness: Effective salespeople have the ability to be firm in one-to-one negotiations, to lead the sales process, and to get their point across confidently without being overbearing or aggressive.
4. Sociable: Wanting to interact with others is a necessary trait for great salespeople.
5. Risk takers: Great salespeople are willing to put themselves in less-than-assured situations, and in doing so, often are able to close unlikely sales.
6. Capable of understanding complex concepts and ideas: Quick thinking and comprehension allow salespeople to quickly grasp and sell new products or enter new sales areas.
7. Creativity: Great salespeople develop client solutions in creative ways.
8. Empathetic: Empathy—the ability to place oneself in someone else's shoes—enables salespeople to understand the client.
n addition to these traits, almost all successful salespeople say their sales style is relationship oriented rather than transaction oriented.*
After the sales recruit has been hired and given a brief orientation, initial training begins. A new salesperson generally receives instruction in company policies and practices, selling techniques, product knowledge, industry and customer characteristics, and nonselling duties such as filling out sales and market information reports and using a sales automation computer program. Continuous training then keeps salespeople up-to-date on changes in products and services, technology, the competitive landscape, and sales techniques, among other issues. Continuous training can occur during sales meetings, annual meetings, or during the course of everyday business.
Training can take place in a classroom environment, in the field, or using online modules. When conducting job training in the field via a live sales call, the trainer should be a more experienced salesperson or sales manager. This type of training provides real world experience for the trainee, but may reduce the effectiveness of the call because it often entails a reduced selling time. Another form of training involves the trainee working in inside sales, primarily phone-based sales, for an extended period of time before being given an outside territory to cover. This enables the trainee to develop selling skills with less-important and/or less-established accounts before facing the challenges of outside sales.
ompensation planning is one of the sales manager's toughest jobs. Only good planning will ensure that compensation attracts, motivates, and retains good salespeople. Generally, companies and industries with lower levels of compensation suffer higher turnover rates. This increases costs (including training and recruiting costs), decreases sales effectiveness, and harms relationship management. Therefore, compensation needs to be competitive enough to attract and motivate the best salespeople. Firms sometimes take profit into account when developing their compensation plans. Instead of paying salespeople on overall volume, they pay according to the profitability achieved from selling each product.
Still other companies tie a part of the salesperson's total compensation to customer satisfaction. As the emphasis on relationship selling increases, many sales managers believe that a portion of a salesperson's compensation should be tied to a client's satisfaction. To determine this, sales managers can survey clients on a salesperson's ability to create realistic expectations and his or her responsiveness to customer needs. At PeopleSoft, a division of Oracle, structure, culture, and strategies are all built around customer satisfaction. Sales force compensation is tied to both sales quotas and a satisfaction metric that enables clients to voice their opinions on the services provided.*
Although a compensation-based plan motivates a salesperson to sell, sometimes it is not enough to produce the volume of sales or the profit margin required by sales management. Sales managers therefore often offer rewards or incentives, such as recognition at ceremonies, plaques, and/or monetary-based rewards such as vacations, merchandise, pay raises, and cash bonuses. Cash awards are the most popular sales incentive and are used by virtually all companies. Mary Kay Cosmetics offers a unique type of incentive whereby salespeople can earn the use of different types of vehicles—from a lowly Ford Fiesta all the way up to the coveted pink Mary Kay Cadillac. To qualify for these vehicles, salespeople must reach certain sales quotas.*
Recognition and rewards may help increase overall sales volume, add new accounts, improve morale and goodwill, move slow items, and bolster slow sales. They can also be used to achieve short- and long-term objectives such as reducing overstocked inventory and meeting a monthly or quarterly sales goal. In motivating their sales force, however, sales managers must be careful not to encourage unethical behavior.
The final task of sales managers is evaluating the effectiveness and performance of the sales force. To evaluate the sales force, the sales manager needs feedback—that is, regular information from salespeople. Typical performance measures include sales volume, contribution-to-profit, calls per order, sales or profits per call, or percentage of calls achieving specific goals such as sales of products that the firm is heavily promoting.
Performance information helps the sales manager monitor a salesperson's progress through the sales cycle and pinpoint where breakdowns might be occurring. For example, by learning the number of prospects an individual salesperson has in each step of the sales cycle process and determining where prospects are falling out of the sales cycle, a manager can determine how effective a salesperson might be at lead generation, needs assessment, proposal generation, presenting, closing, and follow-up stages. This information can then tell a manager which sales skills might need to be reassessed or retrained. For example, if a sales manager notices that a sales rep seems to be letting too many prospects slip away after presenting proposals, it might mean he or she needs help with developing proposals, handling objections, or closing sales.
Customer-centric- a philosophy under which the company customizes its product and service offerings based on data generated through interactions between the customer and the company
companies that have CRM systems follow a customer-centric focus or model. Customer-centric is an internal management philosophy similar to the marketing concept discussed in Chapter 1. Under this philosophy, the company customizes its product and service offering based on data generated through interactions between the customer and the company. This philosophy transcends all functional areas of the business, producing an internal system where all of the company's decisions and actions are a direct result of customer information.
ach unit of a business typically has its own way of recording what it learns, and perhaps even has its own customer information system. The departments' different interests make it difficult to pull all of the customer information together in one place using a common format. To overcome this problem, companies using CRM rely on knowledge management. Knowledge management is a process by which customer information is centralized and shared in order to enhance the relationship between customers and the organization. Information collected includes experiential observations, comments, customer actions, and qualitative facts about the customer.
Knowledge management- the process by which customer information is centralized and shared in order to enhance the relationship between customers and the organization
As Chapter 1 explained, empowerment involves delegating authority to solve customers' problems. Usually, organizational representatives, salespeople for example, are able to make changes during interactions with customers through phone, fax, e-mail, social media, or face-to-face.
An interaction occurs when a customer and a company representative exchange information and develop learning relationships. With CRM, the customer—not the organization—defines the terms of the interaction, often by stating his or her preferences. The organization responds by designing products and services around customers' desired experiences. Social media have created numerous new ways for companies to interact with customers—see Chapter 18 for more on this topic.
interaction- the point at which a customer and a company representative exchange information and develop learning relationships
The success of CRM—building lasting and profitable relationships—can be directly measured by the effectiveness of the interaction between the customer and the organization. In fact, what further differentiates CRM from other strategic initiatives is the organization's ability to establish and manage interactions with its current customer base. The more latitude (empowerment) a company gives its representatives, the more likely the interaction will conclude in a way that satisfies the customer.
As social media have become more popular, many companies have begun to use these media for "social CRM." ZDNet journalist Paul Greenberg recently named Salesforce, Microsoft, Blackbaud, Xactly, Infusionsoft, Accenture, and EY as companies to watch in the field of social CRM.* Essentially, social CRM takes the most successful aspects of traditional CRM, such as behavioral targeting, and expands them to include ways to engage customers through social media. This new paradigm includes a new customer recommendation value called the net promoter score. The net promoter score measures how much a customer influences the behavior of other customers through recommendations on social media. Its ultimate purpose is to gather all consumer interactions into a single database so that they can be analyzed and used to improve communication. Social CRM also enables marketers to focus more on the relationship aspect of CRM. For example, REI empowers customers to "carve your own adventure" through its YouTube channel. JetBlue uses Facebook and Twitter to provide advice and updates to travelers. To use social CRM effectively, companies must understand which sites customers use, whether they post opinions, and who the major influencers in the category are. They can then marry this information with behavioral data like purchases and purchase frequency. Vast amounts of data can be obtained from the interactions between an organization and its customers. Therefore, in a CRM system, the issue is not how much data can be obtained, but rather what types of data should be acquired and how the data can effectively be used for relationship enhancement.
The traditional approach for acquiring data from customers is through channel interactions. Channel interactions include store visits, conversations with salespeople, interactions via the Web, traditional phone conversations, and wireless communications. In a CRM system, channel interactions are viewed as prime information sources based on the channel selected to initiate the interaction rather than on the data acquired. In some cases, companies use online chat to answer questions customers have about products they are looking for. For example, 24 Hour Fitness has an online chat window that opens when a potential customer begins to review the Web site. If the visitor remains on the site, the online chat window asks if he or she needs help finding something specific.
Interactions between the company and the customer facilitate the collection of large amounts of data. Companies can obtain not only simple contact information (name, address, phone number) but also data pertaining to the customer's current relationship with the organization—past purchase history, quantity and frequency of purchases, average amount spent on purchases, sensitivity to promotional activities, and so forth.
In this manner, a large amount of information can be captured from one individual customer across several touch points. Multiply this by the thousands of customers across all of the touch points within an organization, and the volume of data can rapidly become unmanageable for company personnel. The large volume of data resulting from a CRM initiative can be managed effectively only through technology. Once customer data are collected, the question of who owns those data becomes extremely salient. In its privacy statement, Toysmart.com declared that it would never sell information registered at its Web site—including children's names and birth dates—to a third party. When the company filed for bankruptcy protection, it said that the information it collected constituted a company asset that needed to be sold off to pay creditors. Despite the outrage at this announcement, many dot-coms closing their doors found they had little in the way of assets and followed Toysmart's lead.
Campaign management- developing product or service offerings customized for the appropriate customer segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships
Through campaign management, all areas of the company participate in the development of programs targeted to customers. Campaign management involves monitoring and leveraging customer interactions to sell a company's products and to increase customer service. Campaigns are based directly on data obtained from customers through various interactions. Campaign management includes monitoring the success of the communications based on customer reactions through sales, orders, callbacks to the company, and so on. If a campaign appears unsuccessful, it is evaluated and changed to better achieve the company's desired objective.
Campaign management involves developing customized product and service offerings for the appropriate customer segment, pricing these offerings attractively, and communicating these offers in a manner that enhances customer relationships. Customizing product and service offerings requires managing multiple interactions with customers, as well as giving priority to those products and services that are viewed as most desirable for a specifically designated customer. Even within a highly defined market segment, individual customer differences will emerge. Therefore, interactions among customers must focus on individual experiences, expectations, and desires.
CRM provides many opportunities to cross-sell related products. Marketers can use the database to match product profiles and consumer profiles so that they can cross-sell customers products that match their demographic, lifestyle, or behavioral characteristics. The financial services industry uses cross-selling better than most other industries do. Cross selling is a key part of Wells Fargo's strategy, for example, and is a large contributor to the company's success in the industry. After engaging with customers to determine their financial needs and aspirations, Wells Fargo reps work to determine how the company's wide range of products can synergize to meet or exceed those financial goals.*
Internet companies use product and customer profiling to reveal cross-selling opportunities while customers surf their sites. Past purchases, tracking programs, and the site a surfer is referred from give online marketers clues about the surfer's interests and what items to cross-sell. Amazon, for example, has used profiling to better meet customer needs for years. The company systematically compares individuals' shopping habits and online activities to other Amazon customers to make better tailored recommendations. Customers are also able to proactively rate products, review products, add products to wishlists, recommend products, and save products for a later purchase—all of which make for a more customized customer experience.*
While marketers typically employ a social media strategy alongside traditional channels like print and broadcast, many budget pendulums are swinging toward social media. Forrester Research predicts that mobile marketing, social media, e-mail marketing, display advertising, and search marketing will grow to more than thirty-five percent of spending in the next few years, equaling spending on television today. The bulk of this budget will still go to search marketing and display advertising, but substantial investments will also be made in mobile marketing and social media.*
A unique consequence of social media is the widespread shift from one-to-many communication to many-to-many communication. Instead of simply putting a brand advertisement on television with no means for feedback, marketers can use social media to have conversations with consumers, forge deeper relationships, and build brand loyalty. Social media also allow consumers to connect with each other, share opinions, and collaborate on new ideas according to their interests.
With social media, the audience is often in control of the message, the medium, the response, or all three. This distribution of control is often difficult for companies to adjust to, but the focus of social marketing is unavoidably on the audience, and the brand must adapt to succeed. The interaction between producer and consumer becomes less about entertaining and more about listening, influencing, and engaging.
17-1Understand the sales environment.
Salespeople can be consumer-focused (as in the case of retail) or business-focused. The sales environment changes constantly as new competitors enter the market and old competitors leave. The ways that customers interact with salespeople and learn about products and suppliers are changing due to the rapid increase in new sales technologies. In order for companies to successfully sell products or services using a sales force, they must be very effective at personal selling, sales management, customer relationship management, and technology—all of which play critical roles in building strong long-term relationships with customers.
17-2Describe personal selling.
Personal selling is direct communication between a sales representative and one or more prospective buyers in an attempt to influence each other in a purchase situation. Broadly speaking, all businesspeople use personal selling to promote themselves and their ideas. Personal selling offers several advantages over other forms of promotion. Generally speaking, personal selling becomes more important as the number of potential customers decreases, as the complexity of the product increases, and as the value of the product grows. Technology plays an increasingly important role in personal selling. If salespeople do not stay well informed about the products they're selling, consumers may enter the store knowing even more than they do.
17-3Discuss the key differences between relationship selling and traditional selling.
Relationship selling is the practice of building, maintaining, and enhancing interactions with customers to develop long-term satisfaction through mutually beneficial partnerships. Traditional selling, on the other hand, is transaction focused. That is, the salesperson is most concerned with making a one-time sale and moving on to the next prospect. Salespeople practicing relationship selling spend more time understanding a prospect's needs and developing solutions to meet those needs.
17-4List and explain the steps in the selling process.
The selling process is composed of seven basic steps: (1) generating leads, (2) qualifying leads, (3) approaching the customer and probing needs, (4) developing and proposing solutions, (5) handling objections, (6) closing the sale, and (7) following up. The actual sales process depends on the features of the product or service, characteristics of customer segments, and internal processes in place within the firm (such as how leads are gathered). Some sales take only a few minutes to complete, but others may take much longer. Like other forms of promotion, the steps of selling follow the AIDA concept.
17-5Understand the functions of sales management.
The sales manager's basic job is to maximize sales at a reasonable cost while also maximizing profits. The sales manager's responsibilities include (1) defining sales goals and the sales process, (2) determining the sales force structure, (3) recruiting and training the sales force, (4) compensating and motivating the sales force, and (5) evaluating the sales force.
social media- any tool or service that uses the Internet to facilitate conversations
the most exciting thing to happen to marketing and promotion in recent years is the increasing use of online technology to promote brands, particularly using social media. Social media have changed the way that marketers can communicate with their brands—from mass messages to intimate conversations. As marketing moves into social media, marketers must remember that for most people, social media are meant to be a social experience, not a marketing experience. In fact, the term social media means different things to different people, though most people think it refers to digital technology. The American Bar Association uses a definition developed by social media expert Brian Solis. According to Solis, social media is "any tool or service that uses the Internet to facilitate conversations."* However, social media can also be defined relative to traditional advertising like television and magazines: whereas traditional marketing media offer a mass media method of interacting with consumers, social media offer more one-to-one ways to meet consumers.
Social media have several implications for marketers and the ways that they interact with their customers. First, marketers must realize that they often do not control the content on social media sites. Consumers are sharing their thoughts, wishes, and experiences about brands with the world through social media. Because of this level of visibility and discussion, marketers must realize that having a great ad campaign is not enough—the product or service must be great, too.
Second, the ability to share experiences quickly and with such large numbers of people amplifies the impact of word of mouth in ways that can affect a company's bottom line. Singer Katy Perry has more than 66 million Twitter followers, and as such, has a very large reach. YouTube is the company with the largest Twitter presence (more than 50 million followers), and Coca-Cola is the most liked brand on Facebook with almost 90 million fans. The total reach of these brands is difficult to quantify, but it is unquestionably massive. Many companies use mascots to drive their marketing messages on social media. For example, Progressive auto insurance's perky saleswoman Flo has almost 5.5 million Facebook fans that read her posts about Progressive products. According to the company, since Flo began appearing in ads, the company has seen yearly gains in the number of policies taken out.*
Third, social media allow marketers to listen. Domino's Pizza listened to what was being posted about its products (much of which was not nice) and decided to use that information to change its product. Social media, along with traditional marketing research, allowed Domino's to gain the insight needed to completely reinvent its pizza. Dell and Gatorade have taken social media monitoring to a whole new level as they literally put social media at the center of their marketing efforts. Premium sportswear company Lululemon was forced to acknowledge manufacturing problems after comments critical of the company's product quality were posted across its social media sites.*
Fourth, social media provide more sophisticated methods of measuring how marketers meet and interact with consumers than traditional advertising does. Currently, social media include tools and platforms like social networks, blogs, microblogs, and media sharing sites, which can be accessed through a growing number of devices including smartphones, e-readers, televisions, tablets, video game consoles, and netbooks. This technology changes daily, offering consumers new ways to experience social media platforms. As such, social media must constantly innovate to keep up with consumer demands.
Finally, social media allow marketers to have much more direct and meaningful conversations with customers. Social media offer a form of relationship building that will ultimately bring the customer and brand closer. Indeed, the culture of participation that social media foster may well prove to be a fifth "P" for marketing.
At the basic level, consumers of social media want to exchange information, collaborate with others, and have conversations. Social media are designed for people to socialize with each other. They have changed how and where conversations take place, even globalizing human interaction through rapidly evolving technology. Google+ Hangouts, a popular facet of the fledgling Google+social network, allows individuals around the world to video chat in real time. Competing with products such as Apple's FaceTime and Microsoft's Skype, Hangouts offers unique innovations such as live streaming and recording. Various companies have used Hangouts to conduct team meetings and webinars, offer consulting services, and host live press conferences. Bakespace.com has successfully utilized Hangouts as a potent marketing platform. The company interacts with customers, shares recipes, and hosts chats with celebrity chefs using Hangouts. And as a chef might say, the proof is in the pudding—Bakespace.com has more than 450,000 people in its Hangouts circle, compared to just 14,000 fans on Facebook.* Clearly, conversations are happening online; it is up to the marketer to decide if engaging in those conversations will be profitable and to find the most effective method of entering the conversation.
Companies are beginning to understand the implications of their employees' activities on social media. In fact, there have been several examples of employees getting fired for airing their personal feelings on social media platforms. To combat this, many companies have begun developing social media policies as to what can be posted and what is inappropriate. Some companies have rules concerning corporate blogs, Facebook, Twitter, LinkedIn, comments, and even passwords. Adidas has adopted an "encouraging but strict" approach whereby employees may state their affiliation with Adidas but must also state that any personal views are just that—personal. Obviously, employees are still prohibited from sharing sensitive information. Similarly, Best Buy has a clear set of social media guidelines stating that any negative posts regarding religion, race, or ethnicity will not be tolerated.* Having a social media policy can certainly help mitigate risk, but it is not a guarantee that employees won't occasionally slip up.
Marketers are interested in online communication because it is wildly popular: brands, companies, individuals, and celebrities all promote their messages online. In fact, some social media are becoming so important that celebrities, sports stars, and even hotels are hiring coaches to help them strike the correct tone. Britney Spears, Carly Rae Jepsen, and Will.I.Am all have coaches that help them navigate the perilous landscape of Twitter. Coaches instruct clients on best practices and advise them how to leverage their personal brands in online spaces. They also monitor clients' Twitter feeds in real time, acting as editor, security guard, and advisor all at once. Some celebrities have social media advisors accompany them to galas and award shows, but coaches are often underutilized by the entertainment elite. As one celebrity coach noted, "It can get really busy if you're doing interviews on the red carpet, and it's just nice to have someone with you who can say, 'Hey, you should take a picture with your other-famous-person friend right now. Here you go, now you should tweet it.'"*
Some companies go so far as to require Facebook and Twitter training for high-profile employees. Approximately thirty percent of Adobe's employees have gone through some form of social media training. According to Cory Edwards, head of Adobe's Social Business Center of Excellence, Adobe's social media training "helps employees understand key principles such as disclosure and who to contact with questions. Guided by a set of core Adobe principles, the program aims to build employee social media fluency through awareness, empowerment, and excellence."*
Before beginning to understand how to leverage social media for brand building, it is important to understand which social media consumers are using and how they are using them. It is safe to assume that many of your customers are active on Facebook. Targeting can be accomplished by using less ubiquitous platforms. Qzone and Sina Weibo are two of the largest social media platforms in China, for example. Match.com, OkCupid, and Tinder are great platforms to reach young adult singles. Y8 and Big Fish Games offer a wide variety of social games. Teens tend to use platforms like Snapchat, Instagram, Twitch, Yik Yak, and Tumblr. While Facebook is used widely by older teens and adults, its popularity among younger consumers is decreasing.*
Videos are another of the most popular tools by which marketers reach consumers, and YouTube is by far the largest online video repository—it has more content than any major television network. Twitter's Vine, which limits videos to six seconds in length, is also widely popular. Flickr, Twitter, and blogs—all of which will be discussed in more detail later on—are some of the other most popular social media destinations among consumers. In 2015:
1. Instagram grew by 50 percent to more than 300 million users; it is larger than Twitter and has one of the highest engagement levels of any social platform.
2. Millennials spent more than two hours per day on their smartphones and used an average of six apps during that time.
3. Facebook had more video views (12.3 billion) than YouTube (11.3 billion).
4. Snapchat grew by 56 percent.*
5. Tumblr added 120,000 new users per day.*
The bottom line, according to Universal McCann's Comparative Study on Social Media Trends, is that "if you are online, you are using social media."*
Increased usage of alternative platforms like smartphones and tablet computers has further contributed to the proliferation of social media usage. In the United States, ninety percent of American adults own a cell phone, while forty-five percent own a smartphone. These numbers jump to ninety-three percent and sixty-three percent for adults age eighteen to twenty-nine. Among all adults, 55 percent access the Internet on a mobile phone, and forty percent have accessed a social media Web site. Tablet usage has hit critical mass among mobile surfers—one in four smartphone users owns a tablet as well. According to Mark Donovan, senior vice president of mobile at ComScore, "Tablets are one of the most rapidly adopted consumer technologies in history and are poised to fundamentally disrupt the way people engage with the digital world both on-the-go and perhaps most notably, in the home.""* The overall impact of tablet computing on social media (and thus the discipline of marketing) is yet to be seen, but given the incredible impact that the smartphone has had in its short life span, tablets could indeed prove to be game changing.
social commerce- a subset of e-commerce that involves the interaction and user contribution aspects of social online media to assist online buying and selling of products and services
A new area of growth in social media is social commerce, which combines social media with the basics of e-commerce. Social commerce is a subset of e-commerce that involves the interaction and user contribution aspects of social online media to assist online buying and selling of products and services.* Basically, social commerce relies on user-generated content on Web sites to assist consumers with purchases. Pinterest lets users collect ideas and products from all over the Web and "pin" favorite items to individually curated pinboards. Other users browse boards by theme, keyword, or product; click on what they like; and either visit the originating sites or re-pin the items on their own pinboards. Social commerce sites often include ratings and recommendations (as Amazon.com does) and social shopping tools (as Groupon does). In general, social commerce sites are designed to help consumers make more informed decisions on purchases and services.
Social commerce generated almost $24 billion in sales in 2014, with nearly half of all online sales coming through social media sites.* There are seven types of social commerce:
1. Peer-to-peer sales platforms (like eBay and Etsy)
2. Social networking Web sites driven by sales (like Pinterest and Twitter)
3. Group buying platforms (like Groupon and Social Living)
4. Peer recommendation sites (like Yelp and JustBoughtIt)
5. User-curated shopping sites (like The Fancy and Lyst)
6. Participatory commerce platforms (like Kickstarter and Threadless)
7. Social shopping sites (like Motilo and GoTryItOn).*
As companies migrate to social commerce sites such as Pinterest, consumer interactions across the sites may change. One way that companies are leveraging Pinterest's user base is by running promotions. For example, Favorite Family Recipes offered two iPads as prizes for users who followed and pinned the logos of thirteen associated Pinterest boards. This type of promotion can undermine the authenticity that many consumers rely on when using social commerce sites. However, some companies hope to cultivate authentic relationships by staying away from promotions. Whole Foods pins items that relate to the company's values but are not promotional or linked back to the Whole Foods site. Customers have built a relationship with Whole Foods based on upcycled products and recipes, rather than free products.
Social media is an exciting new field, and its potential for expanding a brand's impact is enormous.
Because the costs are often minimal and the learning curve is relatively low, some organizations are tempted to dive headfirst into social media. As with any marketing campaign, however, it is always important to start with a strategy. For most organizations, this means starting with a marketing or communications plan. Important evaluative areas such as situation analysis, objectives, and evaluation are still essential. It is important to link communication objectives (for example, improving customer service) to the most effective social media tools (for example, Twitter) and to be able to measure the results to determine if the objectives were met. It is also important to understand the various types of media involved.
The new communication paradigm created by a shift to social media marketing raises questions about categorization. In light of the convergence of traditional and digital media, researchers have explored different ways that interactive marketers can categorize media types, namely owned, earned, and paid media (recall these concepts from Chapter 15). The purpose of owned media is to develop deeper relationships with customers. A brand's Facebook presence, YouTube channel, Twitter presence, Pinterest presence, and presence on other social platforms constitute owned media. Additional content such as videos, webinars, recommendations, ratings, and blog posts are also considered owned media since they are sharable on social media platforms. In an interactive space, media are earned through word of mouth or online buzz about something the brand is doing. Earned media include viral videos, retweets, comments on blogs, and other forms of customer feedback resulting from a social media presence. When consumers pass along brand information in the form of retweets, blog comments, or ratings and recommendations, this is an example of earned media. In other words, the word of mouth is spread online rather than face-to-face. Paid media are similar to marketing efforts that utilize traditional media, like newspaper, magazine, and television advertisements. In an interactive space, paid media include display advertising, paid search words, and other types of direct online advertising.* Ads purchased on Facebook, for example, are considered paid media since the brand is paying for the text-based or visual ad that shows up on the right-hand side of Facebook profiles.
As a result, social media can really be thought of as an additional "layer" that many brands decide to develop. Some layers are quite deep—Doritos, Old Spice, and Nike can be said to have deeper layers of social media since these are brands that people talk about. Other brands, for example, many B-to-B brands, may have a more shallow social media layer and provide access on only one or two social media platforms. At the end of the day, it really depends on the type of product being sold and the customer's propensity to participate in social media.
To leverage all three types of media, marketers must follow a few key guidelines.
First, they must maximize owned media by reaching out beyond their existing Web sites to create portfolios of digital touch points. This is especially true for brands with tight budgets, as the organization may not be able to afford much paid media.
Second, marketers must recognize that public and media relations no longer translates into earned media. Instead, marketers must learn how to listen and respond to stakeholders. This will stimulate word of mouth.
Finally, marketers must understand that paid media must serve as a catalyst to drive customer engagement and expand into emerging channels.* If balanced correctly, all three types of media can be powerful tools for interactive marketers.
The first action a marketing team should take when initiating a social media campaign is simple—it should just listen. Customers are on social media and assume that the brand is there as well. They expect a new level of engagement with brands. Developing an effective listening system is necessary to both understanding and engaging an online audience. Marketers must not only hear what is being said about the brand, the industry, the competition, and the customer, but they must also pay attention to who is saying what and act upon that information. The specific ways that customers and noncustomers rate, rank, critique, praise, deride, recommend, snub, and generally discuss brands are all important. Thus, social media have created a new method of market research: customers telling marketers what they want and need (and do not want and do not need).
Social media monitoring- the process of identifying and assessing what is being said about a company, individual, product, or brand
nce a company has started listening, it typically wants to develop a more formalized approach. Social media monitoring is the process of identifying and assessing what is being said about a company, individual, product, or brand. It can involve sentiment analysis and text mining specific key words on social networking Web sites, blogs, discussion forums, and other social media. Negative comments and complaints are of particular importance, both because they can illuminate unknown brand flaws and because they are the comments that tend to go viral. Listening is important because consumers believe that if negative comments about a brand go unanswered, that brand is insincere, and consumers will take their business elsewhere. Failure to respond to criticism typically leads to a larger crisis. Online tools such as Google Alerts, Google Blog Search, Twitter Search, Social Mention, Social Bakers and Socialcast are extremely helpful in monitoring social media. Larger companies typically use an enterprise system such as Salesforce.com's Radian6 CRM software to monitor social media.
Social media have the potential to revolutionize the way organizations communicate with stakeholders. Given the relative ease and efficiency with which organizations can use social media, a positive return on investment (ROI) is likely for many—if not most—organizations. A Forrester Research report found that ninety-five percent of marketers planned to increase or maintain their investments in social media. However, though they understand that it is a worthwhile investment, most marketers have not been able to figure out how to measure the benefits of social media.
As with traditional advertising, marketers lack hard evidence as to the relative effectiveness of these tools. Some marketers accept this unknown variable and focus on the fact that social media are less about ROI than about deepening relationships with customers; others work tirelessly to better understand the measurement of social media's effectiveness. A recent Ragan/NASDAQ OMX Corporate Solutions survey found that forty percent of marketers are unsure of what evaluative tools to use, and about seventy percent are only "somewhat satisfied" or "not satisfied at all" with how their companies measure social media. "I'm not sure what to measure or how," said one survey participant. "I know it's important, but I can't show my boss how many retweets a post received and expect him to care."*
While literally hundreds of metrics have been developed to measure social media's value, these metrics are meaningless unless they are tied to key performance indicators.* For example, a local coffee shop manager may measure the success of her social media presence by the raw number of friends on Facebook and followers on Twitter she has accumulated. But these numbers depend entirely on context. The rate of accumulation, investment per fan and follower, and comparison to similarly sized coffee shops are all important metrics to consider. Without context, measurements are meaningless. This is a hot topic, and several marketing blogs cover the areas of social media measurement. Jim Sterne's book Social Media Metrics is one of the best sources information on monitoring and using social media metrics.
WHICH METRICS ARE MOST EFFECTIVE?
Many social media marketers will simply need to start with good measurable objectives, determine what needs to be measured, and figure it out. Still, some social media metrics to consider include:
1. Buzz: volume of consumer-created buzz for a brand based on posts and impressions, by social channel, by stage in the purchase channel, by season, and by time of day.
2. Interest: number of "likes," fans, followers, and friends; growth rates; rate of virality or pass along; and change in pass along over time.
3. Participation: number of comments, ratings, social bookmarks, subscriptions, page views, uploads, downloads, embeds, retweets, Facebook posts, pins, and time spent with social media platform.
4. Search engine ranks and results: increases and decreases on searches and changes in key words.
5. Influence: media mentions, influences of bloggers reached, influences of customers reached, and second-degree reach based on social graphs.
6. Sentiment analysis: positive, neutral, and negative sentiment; trends of sentiment; and volume of sentiment.
7. Web site metrics: clicks, click-through rates, and percentage of traffic.
Understanding an audience necessitates understanding how that audience uses social media. In Groundswell, Charlene Li and Josh Bernoff of Forrester Research identify six categories of social media users:
1. Creators: Those who produce and share online content like blogs, Web sites, articles, and videos
2. Critics: Those who post comments, ratings, and reviews of products and services on blogs and forums
3. Collectors: Those who use RSS feeds to collect information and vote for Web sites online
4. Joiners: Those who maintain a social networking profile and visit other sites
5. Spectators: Those who read blogs, listen to podcasts, watch videos, and generally consume media
6. Inactives: Those who do none of these things*
A Forrester Research study determined that twenty-four percent of social media users function as creators, 36 percent function as critics, 23 percent function as collectors, 68 percent function as joiners, 73 percent function as spectators, and 14 percent function—or rather, do not function—as inactives.* Participation in most categories has slowed slightly, prompting analysts to recommend that marketers re-examine how they are engaging with their customers online.
Despite the apparent slowdown, research also shows that more social networking "rookies" are classified as joiners. Another bright spot is a new category, "conversationalists," or people who post status updates on social networking sites and microblogging services such as Twitter. Conversationalists represent 36 percent of users.* This type of classification gives marketers a general idea of who is using social media and how to engage them. It is similar to any type of market segmentation—especially the 80/20 rule. Those who are creating content and active on social media could be those consumers most likely to actively engage with a brand as well as actively post negative comments on social media. The critics and collectors make up most of this group. However, it is important not to miss the joiners and spectators, because they are eager to follow and act on the comments of their fellow customers.
Given that it is important for marketers to engage with customers on social media for the reasons mentioned earlier, there are a number of tools and platforms that can be employed as part of an organization's social media strategy.
Blogs, microblogs, social networks, media creation and sharing sites, social news sites, location-based social networking sites, review sites, and virtual worlds and online gaming all have their place in a company's social marketing plan. These are all tools in a marketing manager's toolbox, available when applicable to the marketing plan but not necessarily to be used all at once. Because of the breakneck pace at which technology changes, this list of resources will surely look markedly different five years from now. More tools emerge every day, and branding strategies must keep up with the ever-changing world of technology. For now, the resources highlighted in this section remain a marketer's strongest set of platforms for conversing and strengthening relationships with customers.
blog- a publicly accessible Web page that functions as an interactive journal, whereby readers can post comments on the author's entries
Blogs have become staples in many social media strategies and are often a brand's social media centerpiece. A blog is a publicly accessible Web page that functions as an interactive journal, whereby readers can post comments on the author's entries. Some experts believe that every company should have a blog that speaks to current and potential customers, not as consumers, but as people.* Blogs allow marketers to create content in the form of posts, which ideally build trust and a sense of authenticity in customers. Once posts are made, audience members can provide feedback through comments. Because it opens a dialogue and gives customers a voice, the comments section of a blog post is one of the most important avenues of conversation between brands and consumers.
Corporate blogs- blogs that are sponsored by a company or one of its brands and maintained by one or more of the company's employees
Blogs can be divided into two broad categories: corporate and professional blogs, and noncorporate blogs such as personal blogs. Corporate blogs are sponsored by a company or one of its brands and are maintained by one or more of the company's employees. They disseminate marketing-controlled information and are effective platforms for developing thought leadership, fostering better relationships with stakeholders, maximizing search engine optimization, attracting new customers, endearing the organization with anecdotes and stories about brands, and providing an active forum for testing new ideas. Many companies, however, have moved away from corporate blogs, replacing the in-depth writing and comment monitoring that come with blog maintenance with the quick, easy, and more social Facebook, Twitter, or Tumblr. Coca Cola, Walmart, and AllState operate some of the best big company corporate blogs. All are known for their creative and engaging content and the authenticity of their tone.*
non corporate blogs- independent blogs that are not associated with the marketing efforts of any particular company or brand
On the other hand, noncorporate blogs are independent and not associated with the marketing efforts of any particular company or brand. Because these blogs contain information not controlled by marketers, they are perceived to be more authentic than corporate blogs. Mommy bloggers, women who review children's products and discuss family-related topics on their personal blogs, use noncorporate blogs. The goal of mommy blogs is to share parenting tips and experiences and become part of a community. Food blogs are especially popular, particularly those posting restaurant reviews, diet and exercise tips, and recipes.
Because of the popularity of these and other types of blogs, many bloggers receive products and/or money from companies in exchange for a review. Many bloggers disclose where they received the product or if they were paid, but an affiliation is not always clear. Because of this, bloggers must disclose any financial relationship with a company per Federal Trade Commission rules. Marketing managers need to understand the rules behind offering complimentary products to bloggers before using them as a way to capitalize on the high potential for social buzz; four out of five noncorporate bloggers post brand or product reviews. Even if a company does not have a formal social media strategy, chances are the brand is still out in the blogosphere, whether or not a marketing manager approached a blogger.
Microblogs- blogs with strict post length limits
Microblogs are blogs that entail shorter posts than traditional blogs. Twitter, the most popular microblogging platform, requires that posts be no more than 140 characters in length. However, there are several other platforms, including Tumblr, Plurk, and, of course, Facebook's status updates. Unlike Twitter, these platforms allow users to post longer pieces of text, videos, images, and links. While some microblogs (such as Tumblr) do not have text length limits, their multimedia-based cultures discourage traditional blog-length text posts. The content posted on microblogs ranges from five-paragraph news stories to photos of sandwiches with the ingredients as captions (scanwiches.com). While Tumblr is growing rapidly, Twitter, originally designed as a short messaging system used for internal communication, is wildly popular and is used as a communication and research tool by individuals and brands around the world. Twitter is effective for disseminating breaking news, promoting longer blog posts and campaigns, sharing links, announcing events, and promoting sales. By following, retweeting, responding to potential customers' tweets, and tweeting content that inspires customers to engage the brand, corporate Twitter users can lay a foundation for meaningful two-way conversation quickly and effectively. Celebrities also flock to Twitter to interact with fans, discuss tour dates, and efficiently promote themselves directly to fans. Research has found that when operated correctly, corporate Twitter accounts are well respected and well received. Twitter can be used to build communities, aid in customer service, gain prospects, increase awareness, and, in the case of nonprofits, raise funds.
The ways a business can use microblogs to successfully engage with customers are almost limitless. A wide variety of companies find Tumblr's easy and customizable format a great way to promote an individual brand. Mashable uses its Tumblr to give a glimpse inside the offices and share the company's sense of humor. Ace Hotel, located in New York, Portland, Seattle, and Palm Springs, shows off its properties and local art exhibits on a spare, gallery-like Tumblr. Lure Fishbar shows off its delectable food on its Tumblr.*
Social networking sites- Web sites that allow individuals to connect—or network—with friends, peers, and business associates
Social networking sites allow individuals to connect—or network—with friends, peers, and business associates. Connections may be made around shared interests, shared environments, or personal relationships. Depending on the site, connected individuals may be able to send each other messages, track each other's activity, see each other's personal information, share multimedia, comment on each other's blog and microblog posts—or do all of these things. Depending on a marketing team's goals, several social networks might be engaged as part of a social media strategy: Facebook is the largest social network; Instagram and Snapchat are popular among younger audiences; LinkedIn is geared toward professionals and businesses who use it to recruit employees; and niche networks like Twitch, SoundCloud, Grindr, BlackPlanet, and ChristianMingle.com cater to specialized markets. There is a niche social network for just about every demographic and interest. Beyond those already established, an organization may decide to develop a brand-specific social network or community. Although each social networking site is different, some marketing goals can be accomplished on any such site. Given the right strategy, increasing awareness, targeting audiences, promoting products, forging relationships, highlighting expertise and leadership, attracting event participants, performing research, and generating new business are attainable marketing goals on any social network.
1. non-individual (usually corporate)
2. non-individual (usually corporate)
Fan of a page, tells fan's friends that the user is a fan, creates mini viral campaign
individual- Friend a person, send private messages, write on the Wall, see friend-only content
3.non-individual (usually corporate)
Privacy options, not searchable unless user enabled
By maintaining a popular Facebook page, a brand not only increases its social media presence, it also helps to optimize search engine results. Pages often include photo and video albums, brand information, and links to external sites. One of the most useful page features is the Timeline. The Timeline allows a brand to communicate directly with fans via status updates, which enables marketers to build databases of interested stakeholders. When an individual becomes a fan of your organization or posts on your Timeline, that information is shared with the individual's friends, creating a mini viral marketing campaign. Other Facebook marketing tools include groups, applications, and ads. Facebook is an extremely important platform for social marketers.
Facebook has proved to be fertile ground for new marketing ideas and campaigns. Many companies use Facebook as a way to share photos of the business they are doing, whether that is images of the plant where the product is made or finished construction on a new project. Offering guides relevant to a company's product or service as a way to educate interested customers has worked well for Kitchen Cabinet Kings, which found that educated customers make more purchases. Threadless' Voting Hub Facebook page allows fans to share, promote, and vote on new t-shirt design
nkedIn is used primarily by professionals who wish to build their personal brands online and businesses that are recruiting employees and freelancers. LinkedIn features many of the same services as Facebook (profiles, status updates, private messages, company pages, and groups) but is oriented around business and professional connections—it is designed to be information-rich rather than multimedia-rich. LinkedIn serves as a virtual rolodex, providing recruiters and job seekers alike a network to connect and conduct business. LinkedIn's question-and-answer forum, endorsement system, job classifieds platform, and acquisition of presentation-hosting Web site SlideShare set it apart from Facebook as a truly business-oriented space.* LinkedIn is the most effective social media platform for B-to-B marketing, as many use it for lead generation. Some companies use LinkedIn for recruiting, and others use it for thought leadership. Indeed, company pages on LinkedIn can serve as an effective hub for products and services, promotional videos, and company news. Media sharing sites- Web sites that allow users to upload and distribute multimedia content like videos and photos
Media sharing sites allow users to upload and distribute multimedia content like videos and photos. YouTube, Flickr, Pinterest, Instagram, Vine, and Snapchat are particularly useful to brands' social marketing strategies because they add a vibrant interactive channel on which to disseminate content. Suffice to say, the distribution of user-generated content has changed markedly over the past few years. Today, organizations can tell compelling brand stories through videos, photos, and audio.
Photo sharing sites allow users to archive and share photos. Flickr, Picasa, Twitpic, Photobucket, Facebook, and Imgur all offer free photo hosting services that can be utilized by individuals and businesses alike. Instagram is often used by brands to engage younger audience members. Snapchat is also useful, but since photos and videos are only visible for a few seconds, complex marketing messages cannot easily be conveyed.
Video creation and distribution have also gained popularity among marketers because of video's rich ability to tell stories. YouTube, the highest-trafficked video-based Web site and the third-highest-trafficked site overall, allows users to upload and stream their videos to an enthusiastic and active community.* YouTube is not only large (in terms of visitors), but it also attracts a diverse base of users: age and gender demographics are remarkably balanced.
Many entertainment companies and movie marketers have used YouTube as a showcase for new products, specials, and movie trailers. User-generated content can also be a powerful tool for brands that can use it effectively. While YouTube is still the champ, Vine is quickly becoming another popular platform for corporate promotion.
A podcast, another type of user-generated media, is a digital audio or video file that is distributed serially for other people to listen to or watch. Podcasts can be streamed online, played on a computer, uploaded to a portable media player, or downloaded onto a smartphone. Podcasts are like radio shows that are distributed through various means and not linked to a scheduled time slot. While they have not experienced the exponential growth rates of other digital platforms, podcasts have amassed a steadily growing number of loyal devotees. For example, Etsy, an online marketplace for handmade and vintage wares, offers a podcast series introducing favorite craftspeople to the world—driving business for those individuals.
Social news sites- Web sites that allow users to decide which content is promoted on a given Web site by voting that content up or down
Social news sites allow users to decide which content is promoted on a given Web site by voting that content up or down. Users post news stories and multimedia on crowdsourced sites such as Reddit for the community to vote on. The more interest from readers, the higher the story or video is ranked. Marketers have found that these sites are useful for promoting campaigns, creating conversations around related issues, and building Web site traffic.
If marketing content posted to a crowdsourced site is voted up, discussed, and shared enough to be listed among the most popular topics of the day, it can go viral across other sites, and eventually, the entire Web. Social bookmarking sites such as Delicious and StumbleUpon are similar to social news sites but the objective of their users is to collect, save, and share interesting and valuable links. On these sites, users categorize links with short, descriptive tags. Users can search the site's database of links by specific tags or can add their own tags to others' links. In this way, tags serve as the foundation for information gathering and sharing on social bookmarking sites.*
location-based social networking sites- Web sites that combine the fun of social networking with the utility of location-based GPS technology
Considered by many to be the next big thing in social marketing, location sites like Foursquare and Loopt should be on every marketer's radar. Essentially, location-based social networking sites combine the fun of social networking with the utility of location-based GPS technology. Foursquare, one of the most popular location sites, treats location-based micronetworking as a game: Users earn badges and special statuses based on their number of visits to particular locations. Users can write and read short reviews and tips about businesses, organize meet-ups, and see which Foursquare-using friends are nearby. Foursquare updates can also be posted to linked Twitter and Facebook accounts for followers and friends to see. Location sites such as Foursquare are particularly useful social marketing tools for local businesses, especially when combined with sales promotions like coupons, special offers, contests, and events. Location sites can be harnessed to forge lasting relationships with and deeply ingrained loyalty from customers.* For example, a local restaurant can allow consumers to check in on Foursquare using their smartphones and receive coupons for that day's purchases. Since the location site technology is relatively new, many brands are still figuring out how best to utilize Foursquare. Facebook added Places to capitalize on this location-based technology, which allows people to "check in" and share their location with their online friends. It will be interesting to see how use of this technology grows over time.
Review sites- Web sites that allow consumers to post, read, rate, and comment on opinions regarding all kinds of products and services
Individuals tend to trust other people's opinions when it comes to purchasing. According to Nielsen Media Research, more than seventy percent of consumers said that they trusted online consumer opinions. This percentage is much higher than that of consumers who trust traditional advertising. Based on the early work of Amazon.com and eBay to integrate user opinions into product and seller pages, countless Web sites allowing users to voice their opinions have sprung up across every segment of the Internet market. Review sites allow consumers to post, read, rate, and comment on opinions regarding all kinds of products and services. For example, Yelp, the most active local review directory on the Web, combines customer critiques of local businesses with business information and elements of social networking to create an engaging, informative experience. On Yelp, users scrutinize local restaurants, fitness centers, tattoo parlors, and other businesses, each of which has a detailed profile page. Business owners and representatives can edit their organizations' pages and respond to Yelp reviews both privately and publicly. Yelp even rewards its most popular (and prolific) reviewers with Elite status. Businesses like Worthington, Ohio's Pies & Pints will throw Elite-only parties to allow these esteemed Yelpers to try out their restaurant, hoping to receive a favorable review. A Tiki Beach Party for Yelp Elites at Montreal, Canada's Le Lab garnered thirteen reviews averaging five stars out of five.* By giving marketers the opportunity to respond to their customers directly and put their businesses in a positive light, review sites certainly serve as useful tools for local and national businesses.
Virtual worlds and online gaming present additional opportunities for marketers to engage with consumers. These include massive multiplayer online games (MMOGs) such as League of Legends, Destiny, and The Elder Scrolls Online as well as online communities (or virtual worlds) such as Second- Life, Poptropica, and Habbo Hotel. Although virtual worlds are unfamiliar to and even intimidating for many traditional marketers, the field is an important, viable, and growing consideration for social media marketing. Consultancy firm KZero Worldwide reported that almost 800 million people participate in some sort of virtual world experience, and the sector's annual revenue approaches $1 billion. Some of the most popular and profitable games, including Diamond Dash and FarmVille 2, are built on the Facebook platform. Much of these games' revenue comes from in-game advertising—virtual world environments are often fertile grounds for branded content. Organizations such as IBM and the American Cancer Society have developed profitable trade presences in Second Life, but others have abandoned the persistent online community as its user base has declined—the average number of users logged into Second Life has dropped almost 25 percent in the last four years.*
ne area of growth is social gaming. Nearly twenty-five percent of people play games like Words with Friends and Trivia Crack, either within social networking sites like Facebook or on mobile devices. Interestingly, the typical player is a forty-five-year-old woman with a full-time job and college education (while users who play on mobile devices tend to be younger). Women are most likely to play with real-world friends or relatives as opposed to strangers. Most play multiple times per week, and more than thirty percent play daily. Facebook is by far the largest social network for gaming, though hi5 is hoping to win over more users with its large variety of games. The top five games on Facebook are Candy Crush Saga, FarmVille 2, Texas HoldEm Poker, Pet Rescue Saga, and Dragon City. King's Candy Crush Saga entices more than ninety-three million users a day. These games are attractive because they can be played in just five minutes, perhaps while waiting for the train. Many mobile games use mobile ads to generate revenue for the game-makers. As long as the ads are not overly intrusive, most users opt to play the free game with ads over the paid version that does not have ads. Another popular strategy is to give an ad-free game away for free and then charge small sums of money for in-game items and power-ups. These microtransactions account for 21 percent of all mobile profits. Though Kim Kardashian: Hollywood is free to download and play, for example, the game has earned more than $200 million from in-game micro transactions.
Another popular type of online gaming targets a different group—MMOGs tend to draw eighteen to thirty-four-year-old males. In MMOG environments, thousands of people play simultaneously, and the games have revenues of more than $400 billion annually. Regardless of the type of experience, brands must be creative in how they integrate into games. Social and real-world-like titles are the most appropriate for marketing and advertising (as opposed to fantasy games), and promotions typically include special events, competitions, and sweepstakes. In some games (like The Sims), having ads increases the authenticity. For example, Nike offers shoes in The Sims Online that allow the player to run faster.
Worldwide, there are more than 6 billion mobile phones in use, 17 percent of which are smartphones.
The mobile platform is such an effective marketing tool—especially when targeting a younger audience
Worldwide, there are more than six billion mobile phones in use, seventeen percent of which are smartphones.* It is no surprise, then, that the mobile platform is such an effective marketing tool—especially when targeting a younger audience. Smartphones up the ante by allowing individuals to do nearly everything they can do with a computer—from anywhere. With a smartphone in hand, reading a blog, writing an e-mail, scheduling a meeting, posting to Facebook, playing a multiplayer game, watching a video, taking a picture, using GPS, and surfing the Internet might all occur during one ten-minute bus ride. Smartphone technology, often considered the crowning achievement in digital convergence and social media integration, has opened the door to modern mobile advertising as a viable marketing strategy.
Mobile advertising has grown as much as 80 percent per year in the U.S., but that rate is expected to slow to about 50 percent per year over the next few years. Digital advertising accounted for almost 34 percent of all U.S. ad spending in 2015, and mobile advertising alone made up about a third of that.* There are several reasons for the recent popularity of mobile marketing. First, an effort to standardize mobile platforms has resulted in a low barrier to entry. Second, especially given mobile marketing's younger audiences, there are more consumers than ever acclimating to once-worrisome privacy and pricing policies. Third, because most people carry their smartphones with them at all times, mobile marketing is uniquely effective at garnering customer attention in real time. Fourth, mobile marketing is measurable: metrics and usage statistics make it an effective tool for gaining insight into consumer behavior. Fifth, in-store notification technology such as Apple's iBeacon can send promotional messages based on real-time interactions with customers. Finally, mobile marketing's response rate is higher than that of traditional media types like print and broadcast advertisement. Some common mobile marketing tools include:
1. SMS (short message service): 160-character text messages sent to and from cell phones. SMS is typically integrated with other tools.
2. MMS (multimedia messaging service): Similar to SMS but allows the attachment of images, videos, ringtones, and other multimedia to text messages.
3. Mobile Web sites (MOBI and WAP Web sites): Web sites designed specifically for viewing and navigation on mobile devices.
4. Mobile ads: Visual advertisements integrated into text messages, applications, and mobile Web sites. Mobile ads are often sold on a cost-per-click basis.
5. Bluetooth marketing: A signal is sent to Bluetooth-enabled devices, allowing marketers to send targeted messages to users based on their geographic locations.
6. Smartphone applications (apps): Software designed specifically for mobile and tablet devices.
A popular use for barcode scanning apps is the reading and processing of Quick Response (QR) codes. When scanned by a smartphone's QR reader app, a QR code takes the user to a specific site with content about or a discount for products or services. Uses range from donating to a charity by scanning the code to simply checking out the company's Web site for more information. For example, Modify Watches offers a watch face with no hands. Instead it has a QR code that, when scanned, shows the correct time.*
Another smartphone trend is called "near field communication" (NFC), which uses small chips hidden in or behind products that, when touched by compatible devices, will transfer the information on the chip to the device. Barnes & Noble is hoping to work with publishers to ship hardcover books containing NFC chips to Barnes & Noble stores. The chips will be embedded with editorial reviews about that book from Barnes & Noble's Web site. When a NOOK user touches the hardcover with her NOOK, the book reviews will display on her tablet, helping her make a purchase decision. The Samsung Galaxy S6 smartphone can track users' eye movements and shift screen content depending on where they are looking. While a relatively new technology, eye tracking has interesting implications for mobile marketing in the near future.
Finally, mobile marketing is particularly powerful when combined with geo-location platforms such as Foursquare, whereby people can "check in" to places and receive benefits and special offers. These platforms allow retailers and other businesses to incentivize multiple visits, visits at certain times of the day, and positive customer reviews.
Given the widespread adoption of Apple's iPhone, Android-based phones, and other smartphones, it is no surprise that millions of apps have been developed for the mobile market. Dozens of new and unique apps that harness mobile technology are added to mobile marketplaces every day. While many apps perform platform-specific tasks, others convert existing content into a mobile-ready format. Whether offering new or existing content, when an app is well branded and integrated into a company's overall marketing strategy, it can create buzz and generate customer engagement.
Web widgets, also known as gadgets and badges, are software applications that run entirely within existing online platforms. Essentially, a Web widget allows a developer to embed a simple application such as a weather forecast, horoscope, or stock market ticker into a Web site, even if the developer did not write (or does not understand) the application's source code. From a marketing perspective, widgets allow customers to display company information (such as current promotions, coupons, or news) on their own Web sites or smartphone home screens. Widgets are often cheaper than apps to develop, can extend an organization's reach beyond existing platforms, will broaden the listening system, and can make an organization easier to find.*
1. Listen to customers: This is covered in more detail in section 18-2a.
2. Set social media objectives: Set objectives that can be specifically accomplished through social media, with special attention to how to measure the results. Numerous metrics are available, some of which are mentioned throughout the chapter.
3. Define strategies: This includes examining trends and best practices in the industry.
4. Identify the target audience: This should line up with the target market defined in the marketing plan, but in the social media plan, pay special attention to how that audience participates and behaves online.
5. Select the tools and platforms: Based on the result of Step 4, choose the social media tools and platforms that will be most relevant. These choices are based on the knowledge of where the target audience participates on social media.
6. Implement and monitor the strategy: Social media campaigns can be fluid, so it is important to keep a close eye on what is successful and what is not. Then, based on the observations, make changes as needed. It also becomes important, therefore, to go back to the listening stage to interpret how consumers are perceiving the social media campaign.
Listening to customers and industry trends, as well as continually revising the social media plan to meet the needs of the changing social media market, are keys to successful social media marketing. There are numerous industry leaders sharing some of their best practices, and sources such as Fast Company and the Wall Street Journal report regularly on how large and small companies are successfully using social media to gain market share and sales. A good example of using social media strategies is HubSpot, a company that practices what it preaches. HubSpot advocates the benefits of building valuable content online and then using social media to pull customers to its Web site. Social engine profiles have increased HubSpot's Web site traffic, which has made its lead generation program much more effective.
1. Yik Yak
Anonymous geolocated messaging
2. Microsoft Office 365, Google Drive
Integration with file hosting
Challengers to Facebook's dominance
Rewards program offers prizes for using Bing Search
5. The Internet of Things
Integration into wearables, appliances, apparel, and more
6. Apple Pay, Google Wallet, Bitcoin, and NFC- enabled payment options
Replace credit cards with various forms of digital payment
7. Loot Crate, Trunk Club, and NatureBox
Online and subscription-based personal shopping
8. Twitch, Meerkat, and Periscope
Live video streaming for everybody
9. Tinder and Grindr
The mainstreaming of geolocated dating apps
18-1Describe social media, how they are used, and their relation to integrated marketing communications.
Social media, commonly thought of as digital technology, offer a way for marketers to communicate one-on-one with consumers and measure the effects of those interactions. Social media include social networks, microblogs, and media sharing sites, all of which are used by the majority of adults. Smartphones and tablet computers have given consumers greater freedom to access social media on the go, which is likely to increase usage of social media sites. Many advertising budgets are allotting more money to online marketing, including social media, mobile marketing, and search marketing.
18-2Explain how to create a social media campaign.
A social media campaign should take advantage of owned media, earned media, and paid media. To use these types of media in a social media campaign, first implement an effective listening system. Marketers can interact with negative feedback, make changes, and effectively manage their online presence. Paying attention to the ways that competing brands attract and engage with their customers can be particularly enlightening for both small businesses and global brands. Second, develop a list of objectives that reflects how social media dynamically communicate with customers and build relationships.
18-3 Evaluate the various methods of measurement for social media.
Most marketers have not been able to figure out how to measure the benefits of social media. Hundreds of metrics have been developed to measure social media's value, but these metrics are meaningless unless they are tied to key performance indicators. Some social media metrics to consider include buzz, interest, participation, search engine rank and results, influence, sentiment analysis, and Web site metrics.
18-4Explain consumer behavior on social media.
To effectively leverage social media, marketers must understand who uses social media and how they use it. If a brand's target market does not use social media, a social media campaign might not be useful. There are six categories of social media users: creators, critics, collectors, joiners, spectators, and inactives. A new category is emerging called "conversationalists," who post status updates on social networking sites or microblogs.
18-5Describe the social media tools in a marketer's toolbox and how they are useful.
A marketer has many tools to implement a social media campaign. However, new tools emerge daily, so these resources will change rapidly. Some of the strongest social media platforms are blogs, microblogs, social networks, media creation and sharing sites, social news sites, location-based social networking sites, and virtual worlds and online gaming. Blogs allow marketers and consumers to create content in the form of posts, which ideally build trust and a sense of authenticity in customers. Microblogs allow brands to follow, repost, respond to potential customers, and post content that inspires customers to engage the brand, laying a foundation for meaningful two-way conversation. Social networks allow marketers to increase awareness, target audiences, promote products, forge relationships, attract event participants, perform research, and generate new business. Media sharing sites give brands an interactive channel to disseminate content. Social news sites are useful to marketers to promote campaigns, create conversations, and build Web site traffic. Location-based social networking sites can forge lasting relationships and loyalty in customers. Review sites allow marketers to respond to customer reviews and comments about their brand. Online and mobile gaming are fertile grounds for branded content and advertising.
18-6Describe the impact of mobile technology on social media.
The mobile platform is such an effective marketing tool—especially when targeting a younger audience. There are six reasons for the popularity of mobile marketing: (1) mobile platforms are standardized, (2) fewer consumers are concerned about privacy and pricing policies, (3) advertising can be done in real time, (4) mobile marketing is measurable, (5) in-store notification technology such as Apple's iBeacon can send promotional messages based on real-time interactions with customers, and (6) there is a higher response rate than with traditional advertising. Because of the rapid growth of smartphones, well-branded, integrated apps allow marketers to create buzz and generate customer engagement. Widgets allow customers to post a company's information to its site, are less expensive than apps, and broaden that company's exposure.
18-7Understand the aspects of developing a social media plan.
The social media plan should fit into the overall marketing plan and help marketers meet the organization's larger goals. There are six stages in creating an effective social media plan; (1) listening, (2) setting social media objectives, (3) defining strategies, (4) identifying the target audience, (5) selecting the appropriate tools and platforms, and (6) implementing and monitoring the strategy. Listening and revising the social media plan to accommodate changing market trends and needs is key to an effective social media plan.