MARKETING MATERIAL
This chapter complements the previous one, by covering the other forms of mass promotion. Once again, therefore, it breaks down into three main areas: precision marketing, sales promotion and public relations, and each of these is effectively a separate topic. The objectives are therefore for students to:
1. Gain a sound understanding of the basic principles involved in the various forms of precision marketing.
2. Gain a sound understanding of the basic principles involved in the various forms of sales promotion.
3. Gain a sound understanding of the basic principles involved in public relations, both in terms of press relations and corporate relations.
4. Obtain an insight into other advertising techniques that are available.
This is, with the very important exception of public relations (PR), another specialist chapter - in that much of its subject matter should once more apply to only a minority of your students. On the other hand, PR should be an essential topic for all students; and precision marketing is developing its importance in all fields.
Once more, most of it is eminently practical, and there is very little true theory to provide a sound framework. Much of the work is genuinely creative, which means it is hard to describe what is going on (let alone prescribe what should happen).
[Acetate 10.01]
Three main topics are covered in this chapter. Of these, the first, precision marketing, is set to expand significantly over the decade with the advent of the computing power and data collection techniques needed to drive it. Currently, though, this is best evidenced by direct mail activity, but branch marketing also shares some of the characteristics; as does telesales.
Sales promotion, on the other hand, is used almost exclusively in support of other promotional activities since it offers essentially short-term gains - whether it takes the form of price- or non-price based promotions .
Public relations is a neglected resource in most organizations. In terms of press relations it offers a very cost-effective vehicle for promotion. In terms of corporate relations, it is the vehicle for dealing with many of the contacts with the external environment, at least those in the very important area of political activity, described in chapter 4. In both functions, professionalism is essential.
Exhibitions, demonstrations and seminars are specialized activities; they may, however, have much to offer some organizations.
This is, in this form,not covered by most marketing texts. Its emergence to wider significance, and ultimately to play a major role in marketing, is the result of the emergence of computer databases, and processing power, which mean that certain forms of mass marketing can be personalized sufficiently to offer some of the advantages of face-to-face selling - without its high cost.
Despite all the hype about the sales activities on the Internet, one complication is that its antecedent, and currently its main manifestation, has been direct marketing. This has a poor reputation in terms of marketing - largely because it has determinedly remained outside mainstream marketing; and has just as determinedly remained (with a few very important exceptions) an amateur's sport. The poor image of these current users (possibly combined with managers' fear of anything to do with computers) seems to be holding back more widespread usage, which is a pity since it offers a very productive means of communication. In any case, it is reasonable to expect that within the next few years its use will match its capabilities - and those organizations taking the lead will gain a very handsome dividend.
Its inclusion, therefore, is partly to explain the limited existing usage of these techniques but mainly to prepare students for developments to come in the not too distant future - and it is worth explaining at the start of this section that these are the specific objectives.
The key, which students need to understand, is the use of raw data. The rapidly growing availability of detailed data on consumers is why, and how, precision marketing will also develop as rapidly.
[Acetate 10.02]
MARKETING RESEARCH - from one direction, the size of groups which can be targeted is decreasing in size as marketing research explores ever smaller segments of the population. This is led by the work on local neighbourhoods (ACORN and PIMS in the UK), which is being extended by more detailed data from other providers (such as TGI). This is not the aspect of precision marketing which will expand most rapidly (since it does not make direct use of database information on individuals). Even so, it offers ever better-targeted marketing.
AVAILABILITY (AND CONSOLIDATION) - as more data comes into the public domain, from a variety of public sources (census etc.) and private (warranty card returns etc.) this will add to the pool. The biggest factor increasing its use is likely to be, however, the consolidation of this data, from a wide range of sources, to form one or more larger databases which have extensive details of many individuals. As is already happening with the neighbourhood data this data will be manipulated, and records extended on the basis of reasonable (researched) patterns to give a workable profile of the individuals held on the database.
EPOS AND EFTPOS - this is probably likely to be the most important stimulus. EPOS (electronic point of sale, using bar codes, which captures all the shopper's purchases) will tell retailers exactly what each customer buys (if they can find some way - such as a club card - to attach this to the individual). At the other end, EFTPOS, run by the banks, does not give details of individual product purchases - but it does give details of value of purchases across all organizations (and of course is clearly tied to an identifiable individual).
Combine the two and you have a perfect profile of each individual's purchases, and hence lifestyle, in great detail. Now you can see why this topic has such importance.
IN-HOUSE DATA - in the meantime organizations can make use of their own customer data, to which they normally pay scant attention - despite its undoubted value. After all, customers, not prospects, are what matters most to them - and details of all transactions, along with a host of other details, are held by many organizations; it is only a matter of unlocking such data and using it.
The one remaining limitation on the use of precision marketing is the development of computer programs which address the complexity of taking computerized decisions on the basis of so many factors - but, as has happened in other fields, it can reasonably be expected that this will come.
[Acetate 10.03]
The ultimate solution will be to develop genuine expert systems which take the same sort of decisions as the individual marketer or sales person - but that may take time, since their jobs are much more complex than is often allowed for.
In the meantime the principles being used on neighbourhoods can be used to produce aggregated groups which share many characteristics; and 'individual' marketing to them undertaken. Alternatively, simpler decisions may be taken (such as those of Sears on maintenance contracts). A useful starting point might be the 'rule-based' approach to stock control described in chapter 10.
This is the promotional aspect of the direct marketing described in chapter 10. It has a very specific profile, in terms of advantages and disadvantages - and consequent usage.
[Acetate 10.04]
The advantages have already been discussed: the disadvantages are generally a reflection of the last of these - the relatively poor state of development of the technique.
The specific stages of conducting a direct mailing operation, and the techniques involved, are distinctly rule of thumb. This may offend some, and it certainly lacks a degree of sophistication (which practitioners seem to revel in), but - as with much of the rest of marketing - it is these practicalities which make it work.
[Acetate 10.05]
MAILING LIST - this is the basic requirement. It can be bought from specialist suppliers, but beware the quality (which might damage your image as well as being unproductive). Best of all, build your own.
THE LETTER - this is where direct mail diverges significantly from almost all other forms of advertising/promotion. The letter is a personal communication (and to be effective has to be fully personalized, as though it has been specially typed, which is relatively easy with modern computers). As such it obeys rather different rules - which are not always clear. Some swear by short letters, others by long. Perhaps the short form ('less is more') is the safest bet. But the areas at the top and bottom (the P.S.) are the most important - such letter writing is a specialist skill.
INSERTS - this also requires a specialist skill (and again probably the best policy is 'less is more').
REPLY PAID CARDS - this is another unique feature (although response cards/sections are also used in some press advertising). It enables the vendor to find out details of the prospect/customer - and to start to build the database (for the secret of direct mail is not the first contact - which may be expensive - but the follow-ons, which should be very efficient indeed).
RESPONSE RATES - these returns can also be used very productively to fine-tune the promotional messages. The Reader's Digest is the supreme exponent of this. But there is a danger of appealing to an ever smaller and smaller group of customers.
[Acetate 10.06]
Door to door lacks the personalised advantages of true direct mail, but using neighbourhoods the offer can be quite tightly tailored to individual customers' needs.
Some publications which have mainly mail subscribers can (by using computer techniques to split their run into literally thousands of smaller ones) now offer quite small groups of subscribers, selected very tightly to match vendors specifications.
Despite all the hype about using the Internet to generate direct sales, the joker in the pack is still computer-mediated communications (CMC). In reality, this currently has a long way to go to become a major communications medium (except for some business uses) but by the end of the century may offer a very important (interactive) medium.
This is a very important aspect of service sector (retail) operations, and it offers many of the advantages of precision marketing - and should adopt many of its techniques (and be the first to make significant use of databases, for example). It relates very directly to precision marketing in a number of areas:
[Acetate 10.07]
location - in this case the techniques used to establish 'neighbourhoods' are being used to optimize branch locations.
range - they can also be used to determine the specific profile required to match the needs of its customers.
direct mail - this can be used very effectively, in a highly personalized manner, to attract new customers. The personalization can (if combined with a club approach) continue after they are customers.
personal contact - thus the customer can be 'recognized' (based on the club card, say) in the branch and treated personally (and most effectively, as an individual).
experimentation - branch managers have the great advantage that they, almost alone of marketers, can test out promotional and product ideas under controlled conditions - this would be a very powerful advantage were it ever used!
SALES PROMOTION
In many respects, I would argue, this should be a peripheral marketing activity. In earlier days it was an add-on, 'below the line' (because advertising agencies did not deign to handle it, and showed it below the cut-off on their listings of budgets). It came, as a strictly short-term, tactical element, only after the main strategic elements of the promotional mix had been decided; and it took only a small part of budgets, except for those organizations which were desperate for short-term sales.
Now it reportedly accounts for more than half of all promotional budgets! Yet nothing else has changed. Indeed a deal of evidence has accumulated which makes it clear that sales promotions are not particularly productive; they show very short-term gains which are quickly lost - and most actually make a loss.
It is not clear why their popularity has so dramatically increased; although it may reflect the increasing adoption of promotion by smaller organisations which cannot afford the option of expensive advertising campaigns (especially where they own only minor brands in their respective markets). Perhaps, though, it is just a function of the increased short-termism in the Western world.
[Acetate 10.08]
SALES PROMOTION
ADVANTAGES DISADVANTAGES
sales increase short term
defined target audience hidden costs
defined role confusion
indirect roles price cutting
Of the advantages only the sales increase really counts - generally speaking, the others only add up to the fact that it is targeted on the peripheral areas of marketing.
On the other hand, the disadvantages are all significant. The effect is definitely short term (where advertising is reckoned to be cumulative in effect - and can be treated as an investment). On the surface the costs seem reasonable, but there are a number of hidden costs - the diversion of management attention is possibly the worst of these. Promotions also tend to compete with the other promotional messages, and confuse the consumer; not least by sending signals that price cutting is the order of the day.
The genuine uses of sales promotions are, as might be expected, limited - though they can be powerful when used within these confines;
[Acetate 10.09]
TRIAL PURCHASE - sales promotions come into their own when they are specifically targeted at attracting new customers.
EXTRA VOLUME - this is, of course, the most frequent use.
REPEAT BUSINESS - they can, though, be specifically targeted (by using 'money of next purchase' coupons, say) on building repeat purchases.
POINT OF SALE IMPACT - above all, though, they are targeted at obtaining maximum distribution and then maximum exposure at the point of sale.
The majority of promotions are now designed to offer one form or another of price reduction. These may be direct, as straight reductions or free (extra) product, or more indirect, targeted with some specific role. The list in the acetate is explained in the student text:
[Acetate 10.10]
These were, in earlier times, as popular as price promotions, but more recently they have faded out of the scene somewhat - except for the occasional large competitions:
[Acetate 10.11]
Most of them appeared on the surface to be easy to run, but in practice the amount of administration was often crippling (both in terms of cost and diversion of management attention).
activity
A simple, but useful, exercise is to take your students to a supermarket (or perhaps more efficiently to let them go in their own time!) and just see what promotions are on offer (and ask why are they on offer, whether the promotions are successful - and, if so, how).
Probably the most effective way of gaining trial, for brands which are suitable, is sampling. This is very expensive, however, and is usually justified only for new product launches, where all the recipients will be non-users (though even then it is preferable to target them as tightly as possible, using residential neighbourhoods say, to reduce costs). It is the one guaranteed way of getting large numbers of people to try the product rapidly.
[Acetate 10.12]
This is mainly included for the sake of completeness, though it is an important medium for some organizations - especially those in industrial sales. It is mid-way between direct mail and sales; and in fact is often used as a mid-way stage between them.
[Acetate 10.13]
TELESALES
ADVANTAGES DISADVANTAGES
call rate (c.f. mail) no visual stimuli (c.f. sales)
success rate (c.f. mail) less persuasive (c.f. sales)
low cost (c.f. sales) high cost (c.f. mail)]
Because it requires special techniques (not least that of keeping the telesales team's morale up under adverse conditions) it is often given to specialist agencies to handle.
This is a much underrated, and equally underused, part of marketing.
Dollar for dollar, up to the (quite limited) ceiling of what can realistically be spent, it normally represents by far the best value of any form of promotion; for any type of organization. up to that ceiling PR budgets should take precedence over any other.
It is not merely a cost-effective form of promotion but, because it typically places the 'stories' in editorial material, it has considerable authority.
activity
A useful exercise is to get students to compare the influence of suitable news items versus advertisements.
The main part of public relations is, therefore, dealing with the press.
[Acetate 10.14]
MEDIA CONTACT - this is the heart of sound PR, but it has to be recognized that it is an investment process. It takes time to build the relationships of trust involved.
NEWS STORIES - placing these is seen to be the main task of PR departments, but the key is the 'news' element; which has to earn its place in the media in terms of its genuine newsworthiness - something which is often forgotten in the vast quantity of trivia which is pumped out.
MEDIA EVENTS - the same comment applies to these. The most important aspect is that (suitable) senior management should handle these contacts. This will probably require some training, which may be unwelcome to those involved, but the figures quoted in the text show just how much more effective is contact with 'company officials' than with any PR personnel.
PRESS OFFICE - and the routine support for the media should not be forgotten.
One aspect of PR which may be the province of the larger organizations is that which handles relations with the outside (stakeholder) world - though smaller organizations may feel they should know what their bigger competitors are up to. This is the function which handles all the tricky pressure groups and lobbying, both inwards from those outsiders who want to influence the organization and outwards from the organization to those it seeks in turn to influence.
Much of it represents relatively mundane work.
[Acetate 10.15]
But some aspects may be much more sensitive and, as described in the student text, demand very expert handling.
[Acetate 10.16]
They run across a range of target groups:
[Acetate 10.17]
Professionally handling the issues generated among these groups (especially government) requires a great deal of expert work, and it is said that an hour's work finding out in advance what is to happen is worth ten hours' work after the event.
[Acetate 10.18]
The surprising aspect of all of these contacts is, however, that they need to be based on integrity; exactly the opposite of what students would expect! This is described in more detail in the (student handout) Appendix A.
For the sake of completeness, these are briefly described at the end of the chapter in the student text.
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