Marketing Communication (Question and Answer)
Question 1 a)Examine and review critically the four areas of marketing communication. Provide examples where necessary. (10 marks) b)Explain in detail the basic pricing strategies. Give examples to support your answers. (10 marks) Question 2 Identify and describe the most often used sources of differentiation. Give examples to support your answers. (20 marks) Question 3 Ursula is a marketing manager for a bathroom tile company. She is trying to figure out if her firm needs to utilize a push or pull strategy. What are the differences between a push and pull strategy. (20 marks) Question 4
Jessica has just been hired as a manager for a new retail store. She is working on creating an effective retail strategy, but has forgotten some of the steps. Walk Jessica through steps of creating an effective retail strategy. (20 marks) Question 5 Discuss the seven key success factors in personal selling. Provide examples where necessary. (20 marks) Question 1 (a) The four areas of marketing communication are as follows; i)Advertising Advertising is bringing a product or service to the attention of potential and current customers. Advertising is focused on one particular product or service.
Thus, an advertising plan for one product might be very different than that for another product. Advertising is typically done with signs, brochures, commercials, direct mailings or e-mail messages, personal contact, for example New Media Advertising (Internet), TV, radio, newspaper and magazine. ii)Personal Selling Personal selling is oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to “close the sale”.
Personal selling is one of the oldest forms of promotion. It involves the use of a sales force to support a push strategy (encouraging intermediaries to buy the product) or a pull strategy (where the role of the sales force may be limited to supporting retailers and providing after-sales service). iii)Public Relations Public relations include ongoing activities to ensure the overall company has a strong public image. Public relations activities include helping the public to understand the company and its products.
Often, public relations are conducted through the media that is, newspapers, television, magazines, etc. As noted above, public relation is often considered as one of the primary activities included in promotions. iv)Sales Promotion Sales promotion is any initiative undertaken by an organisation to promote an increase in sales, usage or trial of a product or service. Sales promotions are varied, and the examples are as follows; a)Buy-One-Get-One-Free (BOGOF) – which is an example of a self- liquidating promotion. This is known as a premium sales promotion tactic. )Customer Relationship Management (CRM) – incentives such as bonus points or money off coupons. There are many examples of CRM, from banks to supermarkets. c)New media – Websites and mobile phones that support a sales promotion. For example, in the United Kingdom, Nestle printed individual codes on KIT-KAT packaging, whereby a consumer would enter the code into a dynamic website to see if they had won a prize. Consumers could also text codes via their mobile phones to the same effect. d)Merchandising – additions such as dump bins, point-of-sale materials and product demonstrations. Question 1 (b)
Price plays an important economic function when it becomes a monetary exchange of value. Price is the amount that consumers are willing to pay for the value that they receive. Companies face a great challenge in determining an appropriate pricing structure for all items they have in their product line and product mix. As products progresses throughout their lifecycle, their characteristics such as customers, competitors, and costs would change. Such changes also merit an adjustment in their pricing structure. Generally, there are three basic pricing strategies: skimming, neutral, and penetration.
These pricing strategies represent the three ways in which a pricing manager or executive could look at pricing. Knowing these strategies and teaching them to your sales staff, and letting them know which one they should be using, allows for a unity within the company and a defined, company-wide pricing policy. i)Promotional Pricing The objective of promotional pricing is to stimulate short-term increase in sales. This is done by charging a price below the list price or sometimes even below cost for a specified time period. The examples are as follows; a)Special event pricing
Prices are reduced to commemorate a certain event to attract customers. For example, “ Hari Raya Sale”, “Chinese New Year Sale”, Christmas Sale” and “Back To School Sale”. b)Cash rebate Often used within a limited time period to encourage the purchase of a manufacturer’s product. Rebates are also used to move stocks without having to cut the stated list price. c)Longer payment term Financial institutions such as banks and credit corporations extend their loan periods to enable lower monthly installments to be paid by their customers.
For example, in recent years it is common for banks/finance companies to offer car financing for up to 7 years or even 9 years. ii)Geographical Pricing Variable-pricing method in which a selling price is computed according to the customer’s or market’s distance or transportation costs incurred. It is also an evident where there are variations in price in different part of the world. Form of geographical pricing includes: a)FOB-origin pricing A customer would have to pay the freight for their goods from the factory to the destination. However, the goods would be placed free on the board carrier. b)Uniform delivery pricing
This pricing strategy involves charging the same plus freight to every customer regardless of their location. Hence, whether a customer is located near or far, they will be charged the same price plus freight. c)Zone pricing A company would divide its market into a few or several zones. All customers within a specific zone would pay a fixed total price. d)Basing-point pricing A customer would pay their freight charges from the company’s base location to their location, regardless of where the goods are being shipped from. e)Freight-absorption pricing A company would absorb part or all the freight cost.
This strategy use to attract customers. iii)Price discounts Price discounts are incentives offered to customers, usually as a means of attracting repeat business from those customers. While the implementation of some type of discount on price will vary from one situation to another, the basic idea is to provide customers with a sense of receiving some type of additional value by not having to pay the standard or published price for goods and services. This type of strategy is often utilized to attract business clients and entice them to make long-term commitments to a specific vendor.
One of the more common examples of a price discount to a business or other type of organization is known as the volume price discount. With this approach, a vendor offers the client a discounted rate on each unit purchased, provided the client agrees to generate a certain level of business volume within a given period of time. Question 2 A differentiation strategy is one of creating a product or service that is perceived as being unique “throughout the industry”. The emphasis can be on brand image, proprietary technology, special features, superior service, a strong distributor network or other aspects that might be specific to your industry.
This uniqueness should also translate to profit margins that are higher than the industry average. In addition, some of the conditions that should exist to support a differentiation strategy include strong marketing abilities, effective product engineering, creative personnel, the ability to perform basic research and a good reputation. Product differentiation focuses on the price, quality and the features. Product differentiation is the process of identifying the distinctions that exist between goods and services that are intended for consumption by the same segment of the consumer market.
The idea behind this approach is usually to convince consumers that a particular product is able to fulfill all the functions associated with the competition, but to do so more efficiently and possibly at a lower cost. As part of the touting of the superior quality of the product, the advertising may also identify additional functions that the product can provide that are not offered by the competing products. It is important to note that the process of product differentiation relies heavily on creating the desired perspective among consumers.
While there may be no essential difference between the functions and quality of a given product over the products offered by the competition, the idea is to create a sense among consumers that there are compelling reasons to consider a given product more desirable than the rest. A number of different tactics can be used to create this perception, while still offering the customer some type of value added incentive. The brand differences are usually minor; they can be merely a difference in packaging or an advertising theme. The physical product need not change, but it could.
Differentiation is due to buyers perceiving a difference; hence causes of differentiation may be functional aspects of the product or service, how it is distributed and marketed, or who buys it. The major sources of product differentiation are as follows. •Differences in quality which are usually accompanied by differences in price for example, more value, cheaper price freebies – accessories, companion products, free upgrades, and coupons for future purchases, free shipping, that is, convenience sells, especially when it is free, and discounts that includes offering regular sales, coupons, etc. Differences in functional features or design •Sales promotion activities of sellers and, in particular, advertising •Differences in availability for example, timing and location Vertical differentiation is the comparing of many products in a single market and ordering them from lowest to highest, according to their perceived quality. Vertical differentiation occurs in a market where the several goods that are present can be ordered according to their objective quality from the highest to the lowest. Vertical differentiation : Decisive Feature – Vertical differentiation can be determined by comparing one key feature, such as taste, usability or color. •Wide Range – The differences in multiple goods can be ordered according to multiple values. One good may be better in one aspect and worse in another. •Identifying Traits – The goods can be ordered depending on whether or not certain traits are present – for example, the presence or absence of meat when looking for vegetarian food. •Perceived Difference – Vertical differentiation is entirely dependent upon consumers’ preferences and the differences that they perceive individually. Biased Perception – Many consumers have a biased perception about a product due to advertisement, reviews, stated opinions of friends or family and past experiences. For example, a beverage company may package its products in containers that are designed to store comfortably on the shelves built into a standard refrigerator door. If the competing products are of a size and design that require they take up more space on the interior shelves of the refrigerator, consumers who wish to make the most of the available space within the appliance may find this a good reason to purchase what they perceive is a more space efficient product.
This is particularly true if the consumer perceives that this space efficient product is of equal quality to the competition, and costs no more money. Question 3 Push and pull strategy are physical metaphors characterizing the promotional activities manufacturers undertake to encourage channel members or the trade to handle and merchandise brands and consumers to purchase them. The difference between push and pull strategy can be defined as follows; i)Push Strategy Push involves a forward thrust of effort, whereby a manufacturer directs personal selling, trade advertising, and trade-oriented promotions to wholesalers and retailers.
A push promotional strategy involves taking the product directly to the customer via whatever means to ensure the customer is aware of your brand at the point of purchase. The example of push tactics are, trade show promotions to encourage retailer demand, direct selling to customers in showrooms or face to face, negotiation with retailers to stock your product, efficient supply chain allowing retailers an efficient supply, packaging design to encourage purchase, and point of sale displays. The term ‘push strategy’ describes the work a manufacturer of a product needs to perform to get the product to the customer.
This may involve setting up distribution channels and persuading middle men and retailers to stock the product. The push technique can work particularly well for lower value items such as fast moving consumer goods, when customers are standing at the shelf ready to drop an item into their baskets and are ready to make their decision on the spot. This term now broadly encompasses most direct promotional techniques such as encouraging retailers to stock your product, designing point of sale materials or even selling face to face. ii)Pull Strategy
A pull strategy involves motivating customers to seek out your brand in an active process. Pull strategy refers to the customer actively seeking out your product and retailers placing orders for stock due to direct consumer demand. A pull strategy requires a highly visible brand which can be developed through mass media advertising or similar tactics. If customers want a product, the retailers will stock it – supply and demand in its purest form and this is the basis of a pull strategy. Create the demand, and the supply channels will almost look after themselves.
Examples of pull strategy tactics are advertising and mass media promotion, word of mouth referrals, customer relationship management and sales promotions and discounts. Diagram 1 Example differences between a push and pull promotional strategy In Ursula’s case for the bathroom tile company, it is best to take the pull strategy since it work well with highly visible brands, or where there is good brand awareness. This is usually developed through advertising to inform consumers about the product to gain customers’ attention in order to fulfill their needs and satisfactions. Question 4
The retail sector is one of the most competitive in the business world, and so effective marketing strategy is needed in order to be successful. Following are the effective retail strategy; i)Use the Internet With the Internet increasing in popularity all the time, it is extremely important to use Internet marketing as a way to improve market share. In order to improve the access to customers, create a web site where customers can view the merchandise and possibly buy products online. Selling products online is a great way of expanding the business without having to spend lots of money on new premises or retail locations.
Effective marketing strategy should use all mediums available to improve business exposure, and with online advertising a low cost and effective medium it makes sense to take advantage of the opportunity. ii)Offer a promotion Retail business is extremely competitive, and so even the smallest of promotions can give you an edge over competitors. The business strategy should be to come up with regular and innovative promotions to entice customers into to the store. These promotions can range from offering a free gift with certain products to a competition entry when certain items are purchased.
Maintaining marketing strategy fresh with new promotions will definitely remain competitive and will attract customers to the products. iii)Signage and storefront Change the display each season and alter the sign every few years to keep things looking good. Keep the signage constant so that the brand and store are easily recognizable. Make sure the sign can be seen from as far a distance as possible. Sometimes, the simplest marketing strategies are the best, and keeping the store bright and attractive is one such method.
The steps for effective retail strategy are as follows; a)Assess the long and short term goals Set the bar as for achievement. Establish both short term and long term objectives and make goals meaningful, specific, and measurable. b)Create product line and pricing strategy Setting price involves estimating the monetary value the customer will receive, and understanding the financial goals and objectives. Price the product/service at a rate higher than the fixed and variable cost. c)Create customer retention strategy To retain customer, they need to be entertained or valued.
By customer loyalty program for example, membership card can be given for customers besides giving them more discounts and gifts for every purchased items, points and rebates. d)Financial model The model is usually characterized by performing calculations, and makes recommendations based on that information. The model may also summarize particular events for the end user and provide direction regarding possible actions or alternatives. It also include inventory strategy replenish, sales forecast profit and sale. e)Review every quarterly of the sale and strategy
Conducting a quarterly review on the sales on profit and loss, followed by strategy on how to overcome each problem occurred in the sales and how to gain the business profits better. Question 5 Personal selling is a promotional method in which one party or salesperson uses skills and techniques for building personal relationships with another party that is, those involved in a purchase decision that results in both parties obtaining value. In most cases the value for the salesperson is realized through the financial rewards of the sale while the customer’s value is realized from the benefits obtained by consuming the product.
However, getting a customer to purchase a product is not always the objective of personal selling. For instance, selling may be used for the purpose of simply delivering information. Because selling involves personal contact, this promotional method often occurs through face-to-face meetings or via a telephone conversation, though newer technologies allow contact to take place over the Internet including using video conferencing or text messaging or online chat. Personal selling is oral communication with potential buyers of a product with the intention of making a sale.
The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to “close the sale”. Personal selling is one of the oldest forms of promotion. It involves the use of a sales force to support a push strategy that is, encouraging intermediaries to buy the product or a pull strategy, where the role of the sales force may be limited to supporting retailers and providing after-sales service. In comparison to other marketing communications tools such as advertising, personal selling tends to: •Use fewer resources, pricing is often negotiated. Products tend to be fairly complex (e. g. financial services or new cars). •There is some contact between buyer and seller after the sale so that an ongoing relationship is built. •Client/prospects need specific information. •The purchase tends to involve large sums of money. The seven key factors in personal selling can be described as follows; i)Prospecting: Salespeople use multiple sources to identify prospective buyers for their products and services. A potential buyer is considered a prospect when qualified in terms of need or want, ability to buy, authority to buy, and eligibility. i)Pre-approach: Information is gathered about the prospect in preparation for the sales call. This information is used to both further qualify the prospect and to develop an effective approach and presentation to the customer. This stage typically culminates in setting an appointment with the prospect. iii)Approach: This step covers the first few minutes of the sales call, a critical time for salespeople. The salesperson’s objective is to make a favorable first impression and to gain the customer’s attention and interest sufficiently to make the presentation. v) Sales Presentation This is the “core” of the sales process where salespeople present their offerings’ features and benefits to potential customers. Attempts are made to arouse customer’s desire for the product. v)Handling Objections and Overcoming Resistance Salespeople attempt to overcome the prospect’s resistance and reluctance to purchase by responding to objections and emphasizing particular product benefits to promote purchase decisions. vi)Closing Salespeople initiate purchase decisions through methods designed to solicit orders.
In the most appropriate and effective manner, customers are asked to purchase the offering. vii) Post-Sale Follow-up Salespeople continue to emphasize customer satisfaction in the post-sale period. Activities during this time include reducing post-purchase concerns of customers; ensuring timely delivery, installation, and/or training; providing periodic follow-up or maintenance service; and handling complaints and questions. In general, the goal is to build goodwill to enhance future sales chances.
For example, Mary Kay Cosmetics, unlike most other consumer product companies, relies primarily on personal selling which takes place in independent interactions or at Mary Kay parties where sellers and buyers meet. While Mary Kay products are available online for purchase, customers buy products through thousands of independent consultants nationwide because Mary Kay products are not available in retail stores. Advertisements such as this personal Mary Kay beauty consultant ad communicate the product to customers.
This example introduces customers to new beauty products and the concept of a personal seller who is in direct contact with the customers. These beauty consultants represent the company to consumers, acting as salespeople to share information with consumers about various products and also listening to their opinions to find the best fit for the consumer’s needs and wants. References 1. Baker, S. and Mitchell, H. (2000) Integrated Marketing Communications: Implications for Managers. European Society for Opinion Market Research, November.
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