PROMOTION MIX
In our daily life we
all are exposed to various tools of promotion aiming at communicating one thing
or the other to us. To illustrate, while at home welcome across advertisements
when reading a newspaper, watching TV, listening to radio or even examining the
water, electricity or telephone, bills. On our way to the office similar
communications face us on bus panels, roadside hoardings, neon sighs, posters
and banners etc. And, while at a retail shop these take the shape of traffic
builders, product displays, streamers, hangers, bins etc., all sharing
information relating to a specific product of a company.
Listed above are just
a few types of the various promotion tools available to a marketer. Before
proceeding further, let us take a look at the definitions of the four major
methods of promotion. These are: advertising, personal selling, sales
promotion and publicity. The committee on Definitions of the American
Marketing Association defined these components as under:
Advertising: Any paid form of non-personal presentation and promotion of
ideas, goods, or services by an identified sponsor. It includes the use of such
media as magazines, newspapers, outdoor posters, direct mail novelties, radio,
television, bus posters, catalogues, directories, programmes, circulars and
very recently online ads and social media ads.
Personal
selling: Oral presentation in a conversation with
one or more prospective purchasers for the purpose of making sales.
Sales
promotion: Those marketing
activities-other than personal selling, advertising, and publicity-that
stimulate consumer purchasing and dealer effectiveness such as displays, shows
and exhibitions, demonstrations, coupons, contests, and other non-routine
selling efforts. These are usually short-term activities.
Publicity: Non-personal stimulation of demand for a product, service or
business unit by generating commercially significant news about it in published media or
obtaining favourable presentation of it on radio, television or stage. Unlike
advertising, this form of promotion is not paid for by the sponsor.
Packaging,
public relations and role of other elements of marketing mix in promotion: Although definitions vary about the number of components that
constitute promotion, marketing practice brings out that almost all marketing
activities influence the promotion function. Notably, packaging performs the
promotion function in addition to providing protection to the product. By
incorporating creativity in its design, a package can add the `pick-me-up'
appeal to the product and also help to communicate its features, uses and
benefits more effectively. The promotion aspect of packaging is witnessing a
hit of revolution in India now a days with the introduction of innovative, packages
in, the field of consumer goods. For example, package design of Pepsi and
edible oils etc.
Public relation,
likewise, performs an important role in promotion insofar as it helps to create
a favourable image of the firm and allows the public to experience better
satisfaction in dealing with the firm.
High and consistent
product quality, provision of superior customer service, price promotions as a
way of increasing short-term sales and compatibility between the character of
distribution outlets and the product are the other ways which contribute to the
promotion function of this firm.
DETERMINING THE PROMOTION MIX
Marketers rarely rely
on only one promotion method. They make use of two or more methods to
accomplish promotion and marketing objectives. When a firm makes use of more
than one promotion method for one product, the promotion methods used
constitute the promotion mix for that product. For example, while TV spots,
newspaper and fashion magazine advertisements, and attractive festival displays
at the authorised retail shops constitute the promotion mix of Vimal fabrics; specialised
industry magazines and participation in national and international exhibition
of engineering goods constitute the promotion mix of Hindustan Machine Tools.
Promotion function
being linked with the ever changing market environment is a dynamic function.
The promotion mix, therefore, acquires the dimension of dynamism and varies
from product to product and over a period of time. Quite similar to the
problems faced by a marketer in the determination of the optimal marketing mix
are the problems faced in the determination of the promotion mix. The task
involved is rather more complex due to cross-substitutability of the various
promotion methods (i.e. each method is capable of achieving what the other
method may achieve) thereby making the measurement of promotional effectiveness
more difficult. Notwithstanding these difficulties, factors as mentioned below
act as the major determinants of the promotion mix:
1. Type of product
2. Nature of Market
3. Stage of product in its life-cycle
4. Available budget, and
5. Company policy.
These determinants are
briefly discussed.
Type of
Product: In terms of the promotion task involved the
type of product is the major influence on the promotion-mix. For example, a low
priced, frequently purchased consumer convenience item, say a toilet soap, a
toothpaste or a cigarette will require that repeat messages influencing and
reminding the existing consumers, and persuading the new consumers, be used in
a mass manner and at a high frequency. Newspaper and magazine advertisements,
TV spots and Cinema Slides, offer of incentives to consumers and organisation
of contests will, therefore, constitute the ‘promotion mix' of such
consumer goods. Now let us think of an industrial-product., say a
special purpose machine tool, which has a high unit value, is technical in
nature, is purchased in-frequently and requires demonstration and conviction
before it gets sold. Personal selling, quite obviously, becomes indispensable
for such a product along with organising product demonstrations and
exhibitions, holding seminars, etc. These then constitute the promotion mix in
the case of an industrial good with newspaper advertising playing only the
limited role of keeping the public informed about the company's
activities and accomplishments. Publicity however, to the extent it projects
the desired image of the company plays a more important role.
Nature of
Market: The locational characteristics of the customers,
intensity of competition in the market place and the requirements of
wholesalers and retailers influence the promotion mix relating to the product
in their own way For example, if the target audience of a consumer product is
both large as well as widely dispersed in different parts of the country,
advertising and sales promotions emerge to be both more effective and
economical promotional methods than the others. This is why advertising and
sales promotions are so dominant among consumer goods companies. Personal
selling also has a role to play among consumer goods companies but limited
mainly to wholesalers and retailers who receive greater focus for activities
such as pushing inventories, conducting displays, etc.
Stage in the
Product Life Cycle: The promotion mix
changes with the movement of the product from one stage to the other in its
life-cycle. For example, when the product is in the introduction and early
growth stages, and the tasks involved are that of building and motivating
trials of the product, the promotion mix comprises of publicity, informative
advertising, consumer sales promotions and trade deals. Later, as the product
reaches the maturity stage, and goals of maintaining brand loyalty and creating
brand preferences become more important, aggressive brand advertising and
dealer promotions become the key components of the promotion mix.
The Available
Budget: Each method of promotion has certain costs
associated with it. The level at which each promotion method is to be used and
the selection of the promotion mix is dependent on the promotion budget of the
firm. Firms with small promotional budgets have to be content with more
localised area activity, using dealer displays, wall writings, personal
selling, and other less sophisticated methods. It needs to be emphasised here
that for the promotion function to be effective the minimum threshold level
must always be exceeded.
Company
Policy: In the ultimate analysis an aggregate
consideration of the above four determinants along with the company's own
marketing and promotion policy determines the mix. Important factors here
include the conviction of the top management in the role of promotion and its
various components, the product market strategy, and the type of corporate
image it wants to project. For example, a company even under the seller's
market might still believe in keeping a high profile in public and thus may go
for extensive publicity and advertising programmes. Yet another company in the
same industry may rely more on personal selling, and continue to grow by
maintaining its promotions at low key.
THE PROMOTION BUDGET
As we noted above, the
promotion budget influences the level of promotional activity as well as the
promotion mix used by the firm. Budgeting for promotion is yet another area
where a lot of subjectivity prevails regarding what is the right amount to be
spent on the promotion function. Pending any clear cut relationship between the
promotion expenditure and the achievement of promotion objectives, recourse is
made to certain rules of the thumb. These are:
- Incremental promotional
expenditure yields, incremental sales to a certain extent;
- A minimum level of promotion
activity must be exceeded for promotion to have a meaningful effect. Often
such a minimum level of promotion is set by the competitor or more
appropriately by an average of the industry;
- Promotion activities when well integrated with other elements of the marketing mix produce greater than the planned results.
The above discussion
should not, however, lead us to understand that no attempts have been made to
shed light on the inherent uncertainty shrouding the cause-effect relationship
in this area of promotion budgeting. In fact, quite a few notable attempts, by
the economists in terms of application of marginal cost and marginal revenue
principle (additional promotional expenditure and additional revenue and
profits made), and by marketing researchers through experimentation and model
building approaches have been made. The substance of their findings is that
results of the promotion function should be constantly monitored in order to
establish more reliable parameters of cost-benefit relationships. Further,
cost-benefit analysis should form the basis of the trade off before promotion
budget is finalised by using any one of the following methods. These methods
include per cent-of-sales methods, fixed-sum per unit, affordable funds,
competitive parity, and objective and task method.
Percent-of-Sales:
This method views promotion budget
determination by linking the appropriation to a fixed percentage of sales of
the company products. Such sales may relate to the previous year, an average of
sales of the previous few years, projected sale of the next year or years or an
average of the previous few years sales, as well as the projected sales of the
next few years.
This method though
simple to use fails to account for the changing promotional costs, and relating
the appropriations made to the product-market needs. Particularly difficulties
are faced if the sales curve of a company is not smooth, hence resulting in
lower outlays for the years that follow the bad sales years. Also the
forecasted sales realisations remain uncertain. The ways out attempted have
been the adjustment provision of a fixed percentage to the average expenditure
of the past (i.e., last year plus 15%), or use of this method in combination
with the others that are discussed below.
Fixed-sum per
unit: Very much like the per cent-of-sales, under
this method the promotion budget is determined by allocating a fixed amount of
money per physical unit of product for either past of future sales or a
combination of the two. The only differentiating point of this method from the
per cent-of-sales method is that the base for budgeting, instead of being rupee
sales, is the number of product units sold or targeted to be sold. This method,
thus, has almost the same strengths and weaknesses as the ones associated with
per cent-of-sales method, namely, simplicity in the determination but arbitrariness
in arriving at the percentage or per unit allocation.
Affordable
funds: Continuing to think on the plane that
promotion expenditure is one of those business costs which are desirable or
avoidable as per the convenience of the top management, the funds for promotion
are appropriated on discretionary basis under this method. No wonder then, that
companies adopting this method find their promotion appropriations fluctuating
from year to year depending on the top management's thinking for the year.
Competitive parity: Incorporating a
measure of competitiveness in planning, this method guides the budget
determination in terms of relativity to what the competitors are likely to
allocate. Being a slightly more market-oriented method than the ones' discussed
so far, when based on the representative average of the industry promotion expenditure,
it becomes a good norm to moderate the promotion expenditure of a company.
Objective and
task method: This is one of the
most scientific methods of budget determination. It approaches the budget
exercise by first setting the specific objectives to be achieved. It then
identifies the tasks involved in achieving the said objectives followed by
ascertaining the costs involved in the performance of each task required. The result
of the exercise is an estimation of the amount required for accomplishing the
set promotion goals. Typical objectives might be to increase awareness say by
15% or increase message/theme recall say by 25%.
Indeed, it a good
method as far as promotion budgeting for new products is concerned, or when a
new thrust to the image of a company and its products is to be provided.
This method
presupposes that objectives set are realistic and promotion results can be
measured precisely. These assumptions continue to be the subject of unending
debate at the one end, and of pursuit of research on the other. It is as a
result of the continuing research that some models for promotion budgeting have
been developed and are now being refined to be of practical utility to the
marketer.
The practice: In practice most companies make use of more than one method for
determining the promotion budget. The research into the practices of the
companies in India in this regard revealed the above finding. Among the
individual methods used "affordable funds" method emerged as
the most popular. There were, however, quite a few companies which had started
using the approach of ‘objective and task’ in setting their promotion
budget either exclusively or in combination with other methods. Most of such
companies were dealing in consumer goods.
The practices of the
companies using a combination of methods for determining promotion budget
pointed to the efforts they were putting in to gather competitive promotion
outlays and its apportioning to various promotion components.
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