Slide 6-1© 2010 Pearson Education, Inc. publishing as Prentice Hall CHAPTER 6 Integrated Marketing Communication Strategy and Management

Slide 6-1© 2010 Pearson Education, Inc. publishing as Prentice Hall

CHAPTER 6Integrated Marketing Communication Strategy and Management


1. Describe the practice and framework of integrated marketing communications.

3. Select the appropriate communication approach based on an offering’s marketing strategy and life cycle.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

2. Explain the process of how buyers purchase an offering.



6. Describe the types of marketing websites.

4. Describe the factors that influence the development of the integrated marketing communication mix.

5. Compare a push versus a pull communication strategy.



8. Discuss the mechanisms for evaluating and controlling the marketing communication process.

7. Identify the different approaches used to formulate a communications budget.


MARKETING COMMUNICATION

Marketing communication is the process by which information abouta firm and its offerings is disseminated to selected markets.

Its goals are to:

Achieve Postpurchase Satisfaction

Achieve Postpurchase Satisfaction

InduceInitial Trial

InduceInitial Trial

GenerateRepeat Sales

GenerateRepeat Sales



Communication informs buyers of the:

• Availability of an offering

• Unique benefits of the offering

• Where and how to obtain and use the offering

The message should be:

Exclusive tothe OfferingExclusive tothe Offering

Desirable tothe Target

Market

Desirable tothe Target

Market

Believable as tothe Offering’s

Benefits

Believable as tothe Offering’s

Benefits



MarketingCommunication

Mix

PersonalSelling

PersonalSelling

AdvertisingAdvertising

SalesPromotion

SalesPromotion

Direct Marketing

Direct Marketing

PublicRelations

PublicRelations



Examples:

Integrated marketing communication is the practice of blending different elements of the communication mix in mutually reinforcing ways to inform, persuade, and induce consumer action.

AdvertisingAdvertisingDevelop offering awareness and comprehension

PersonalSelling

PersonalSelling

Obtain final conviction and purchase

SalesPromotion

SalesPromotion

Increase purchase intention and induce actual purchase


INTEGRATED MARKETING

COMMUNICATION STRATEGY FRAMEWORK

CHAPTER 6: INTEGRATED MARKETING COMMUNICATION STRATEGY AND MANAGEMENT


INTEGRATED MARKETING COMMUNICATION STRATEGY DECISIONS

1. What are the info requirements of target markets?

2. What objectives must the communication strategy achieve?

3. How might the mix of communication activities be combined to convey information to target markets?

4. How much should be budgeted for communicating with target markets and how should resources be allocated among various communication activities?

5. How should the communication be timed and scheduled?

6. How should the communication process be evaluated?


INFORMATION REQUIREMENTS IN

PURCHASE DECISIONS



The purchase (or adoption) process model describes how buyers purchase a particular offering and defines the role of information

PurchasePurchaseConsiderationConsideration PreferencePreferenceAwarenessAwareness

INFORMATION REQUIREMENTS IN PURCHASE DECISIONS

At any point in time:

• Different buyers are in different stages of the model

• Each stage requires a different communication strategy


ConsumerConsumerInfluencerInfluencer DecisionMaker

DecisionMakerPurchaserPurchaser


A person may play more than one role

In a joint purchase decision, the roles may be played by different individuals

Purchase Decision RolesPurchase Decision Roles


The role consumers play is a prerequisite for successfully determining:


The communication message itself

To whom the message should be directed

How the message should be communicated

Purchase Decision RolesPurchase Decision Roles


To communicate effectively, a marketer must know:


Information consumers think is necessary (price, location, size, etc.).WhatWhat

Consumers will seek it (newspapers, the Internet, friends, etc.).WhereWhere

Consumers will seek it (how far in advance, on what days, etc.).WhenWhen

Consumers will apply theinformation obtained.HowHow


SETTING REASONABLE COMMUNICATION

OBJECTIVES



SETTING REASONABLE COMMUNICATION OJBECTIVES

Communication objectives depend on:

The offering-marketstrategies of the firm

The stage of theoffering life cycle



Communication objectives for offering-market strategies:

MarketPenetration

MarketPenetration

Emphasize more frequent offering usage

Build preference for or loyalty to the offering

MarketDevelopment

MarketDevelopment

Stimulate awareness and trial of the offering



Occurs early in the life cycle

The message focuses on:

• Introducing the benefits of an offering

• Overcoming the objections to the offering

Selective DemandSelective DemandPrimary DemandPrimary Demand

Communication goals for the offering life cycle:

Occurs later in the life cycle

The message:

• Focuses on the benefits of a specific brand or offering

• Differentiates the offering from competitive ones

Substitute offerings exist

Demand for the offering class Demand for a brand or offering



Communication objectives must be:

Among themselves and withother marketing elementsConsistentConsistent

For measurement and evaluation purposesQuantifiableQuantifiable

ArticulatedArticulated For both the IMC program and the marketing communication tools

• With an appropriate amount of effortand expenditure

• Within a specific time frame

AttainableAttainable


DEVELOPING AN INTEGRATED MARKETING

COMMUNICATION MIX



DEVELOPING AN INTEGRATED MARKETING COMMUNICATION MIX

Factors to consider when designing the communication mix are:

Information Requirements

of Buyers

Information Requirements

of Buyers

Nature of theTarget MarketsNature of the

Target Markets

Nature of the Offering

Nature of the Offering

Capacity of the Organization

Capacity of the Organization



Information Requirements of BuyersInformation Requirements of Buyers

Analyze the value of the communication tools used at various stages in the purchase-decision process

Identify consumer touch points to designate where, when, and how a customer or prospective buyer comes in contact with an offering, a firm, or a brand message


Nature of the OfferingNature of the Offering

Advertising is appropriate when the offering:

• Is not complex

Personal selling is used for a highly technical offering, one whose benefits are not readily apparent or is relatively expensive

• Is frequently purchased

• Has benefits that differentiates it from competing offerings

• Is relatively inexpensive

Sales promotion is used to induce consumer action



Target Market CharacteristicsTarget Market Characteristics

• Consist of a small number of potential buyers

Use personal selling when target consumers:

• Exist in close proximity to one another

• Purchase in large quantities

Use advertising and direct marketing whena mass market is geographically scattered



Many consumer-oriented firms:

Many industrial-oriented firms use Internet advertising to supplement personal selling

• Substitute mail and telephone solicitationsfor mass media advertising

• Use the Internet to complement advertising


Target Market CharacteristicsTarget Market Characteristics


Organizational CapacityOrganizational Capacity

Buy DecisionBuy Decision


Perform the communication mix activity internally with own human resources

Buy, contract, or outsource the communication mix activity externally with outside experts

Make DecisionMake Decision


MAKE-OR-BUY DECISION FACTORS

“Buy”Independent

SalesReps

Variable CostVariable Cost

Selects,trains, and supervisespersonnel

Selects,trains, and supervisespersonnel

FixedCost

FixedCost

EconomicDimensionEconomicDimension Behavioral DimensionsBehavioral Dimensions

Variable Cost

Variable Cost

ControlControlCostsCosts FlexibilityFlexibility EffortEffort Avail-abilityAvail-ability

Selection,training andsupervisiondone as wellby agenciesat no cost

to firm

Selection,training andsupervisiondone as wellby agenciesat no cost

to firm

Representonly firm’s

productline

Representonly firm’s

productline

Changesales-callpatterns

andcustomers;

transferpersonnel

Changesales-callpatterns

andcustomers;

transferpersonnel

Sales repmay not existin geographic

area;can

relocate

Sales repmay not existin geographic

area;can

relocate

Fixedinvestment

in sales forceis minimal

Fixedinvestment

in sales forceis minimal

Increasedsince

sales reps must live oncommissions

Increasedsince

sales reps must live oncommissions

Venturesomespirit

motivatessales reps

to gowherevereffectivedemandexists

Venturesomespirit

motivatessales reps

to gowherevereffectivedemandexists

“Make”Company

SalesForce

“Make”Company

SalesForce


MAKE-OR-BUY DECISION EXAMPLE

At what sales level (X) would a company sales forcecost more or less than independent sales reps?[Hint: This is a form of break-even analysis.]

Set the cost equations for both types of sales repsequal to each other to solve for the sales level (X)

Salary and Administration

Salary and Administration

= $500,000

3%CommissionCommission =

IndependentSales Reps


CommissionCommission 5%=

XX = Break-even sales level

CompanySales ForceCompany

Sales Force



=Cost of Independent

Sales RepsCost of Independent

Sales RepsCommissionCommission XX×( )

Setting the cost equations equal to each other solves for the break-even sales level:

( =CommissionCommission XX× +Salary and

AdministrationSalary and

Administration) CommissionCommission XX×( )

$500,000+×0.03( )XX = ×0.05( )XX

= 0.02 XX$500,000

=XX $25,000,000

CommissionCommission XX× +Salary and

AdministrationSalary and

Administration( )=Cost of Company

Sales ForceCost of Company

Sales Force



=Break-even Sales Level (X)Break-even Sales Level (X) $25,000,000

The break-even sales volume (X) at which the costs of a company sales force and independent sales representatives are equal is $25 million.



Use if expected sales volume is < $25 million

Use if expected sales volume is > $25 million

Cost of IndependentSales Reps

Cost of IndependentSales Reps

=Cost of Company

Sales ForceCost of Company

Sales Force

CompanySales ForceCompany

Sales Force


EXHIBIT 6.1: BREAK-EVEN CHART FOR COMPARING INDEPENDENT SALES REPRESENTATIVES AND A COMPANY SALES FORCE


MAKE-OR-BUY DECISION

Advertising make-or-buy decisions:

Intermediaries (wholesalers, retailers,and dealers) may assume advertising costs and placement responsibilities

Example: In cooperative advertising, a manufacturer and intermediaries sharethe costs of advertising or sales promotion


PUSH VERSUS PULL COMMUNICATION STRATEGIES

Push StrategyPush Strategy Pull StrategyPull Strategy

Buyers demand the product from intermediaries, pulling the offering through a marketing channel

The offering is pushed through a marketing channel to buyers in a sequential fashion

WholesalersWholesalers

RetailersRetailers

ProducerProducer

ConsumersConsumers

WholesalersWholesalers

ProducerProducer

ConsumersConsumers

RetailersRetailers



Push StrategyPush Strategy

Concentrates on building relationshipswith channel intermediaries

Sales aids and contests used as incentives to gain shelf space and distribution

Advertisements are likely to appearin trade journals and magazines

Personal selling emphasized with wholesalers and retailers



Push StrategyPush Strategy

An organization has easily identifiable buyers

Personal selling is used with resellers when:

The offering is complex

Buyers view the purchase as being risky

An offering is early in its life cycle

The firm has limited funds for direct-to-consumer advertising



Pull StrategyPull Strategy

Employs heavy consumer advertising, free samples, and coupons to stimulate consumer awareness and interest

Wholesalers and retailers must be willing and able to implement selling and sales promotion programs from manufacturers

Seeks to create initial interest for an offeringamong potential buyers who in turn demand itfrom intermediaries through the channel



An advertising opportunity exists for an offering when:

Favorable primary demand exists for an offering category

It can be significantly differentiated from its competitors

It has hidden qualities or benefits that can be portrayed effectively through advertising

There are strong emotional buying motives involved

Pull StrategyPull Strategy


MARKETING WEBSITES AND INTEGRATED

MARKETING COMMUNICATIONS



MARKETING WEBSITES AND IMC

TransactionalWebsite

TransactionalWebsite

PromotionalWebsite

PromotionalWebsite

Engages buyers/potential buyers in interactive communication to sell a firm’s offerings or move them closer to a purchase

Is an electronic storefront that tries to convert online browsers into online buyers

Promotes a firm’s offerings and provides information on how they are used and where they are purchased

Is a place where a provider makes available information to Internet users

MarketingWebsite

MarketingWebsite

WebsiteWebsite



Transactional WebsitesTransactional Websites

Feature well-known, branded offerings

Have a technological infrastructure designed to create a favorable shopping and buying experience

Are a form of direct distribution


Promotional WebsitesPromotional Websites


Engage visitors with an interactive experience involving games and contests

Provide prizes, such as electronic coupons

Generate awareness of, interest in, and trialof a firm’s offerings

Support a firm’s advertising program and traditional marketing channels

Are used for customer research and feedback




ViralMarketing

ViralMarketing

Word of Mouth

Word of Mouth

Is a powerful information sourcesthat involves brand and offering recommendations from friends

Consists of word-of-mouth behavior

Is an Internet-enabled strategy to:

Encourage individuals to forward marketer-initiated messages to others via email

Offer consumers incentives for referrals

BuzzBuzz




Early stages of the process-need recognition

Development of product specifications

Supplier search

Providing feedback on offering performance

Are cost effective in the:

Evaluation and selection of the buying process


COMMUNICATION MIX BUDGETING




Make the communication budget commensurate with the tasks requiredof the communication activities

The more important communication is in a marketing strategy, the larger the amountof funds that should be allocated to it

Set the budget so that the marginal costsof communication equals the marginal revenues resulting from it



Budgeting ApproachesBudgeting Approaches

Fixed Dollar Amount per Offering Unit

Fixed Dollar Amount per Offering Unit

• Budget equals the per-unit allocation multiplied by the number of units expected to be sold

• Used by durable-goods manufacturers

Percentageof Sales

Percentageof Sales

• Most widely used approach

• Past or anticipated sales are used as the basis

• When sales rise, communication expenses rise

• Simple to calculate

• Which comes first—sales or communication?

• Is not flexible or market-oriented



Objective-Task

Objective-Task

• Objectives are set for a communication program

• Costs are based on the tasks to achieve the goals

• Employed in introducing a new offering forwhich maximum exposure is desired

• Used by nonprofit organizations

All AvailableFunds

All AvailableFunds

Budgeting ApproachesBudgeting Approaches

CompetitiveParity

CompetitiveParity

• Uses advertising share of voice

• Expressed as a percentage of total advertisingby all competitors in a market at a point in time

• Balances the firm’s and competitors’ communication expenses



Objective-TaskObjective-Task

Involves three steps:

• Define the communication objectives

• Identify the tasks needed to attain the objectives

• Estimate the costs associated with the performance of these tasks

Is the best but most difficult method to apply


COMMUNICATION BUDGET ALLOCATION

A communication budget must be allocated across a firms’ communication tools

As a percentage of their communication budget:

• Marketers of consumer products and services spend more for advertising

• Marketers of industrial products and services spend more for personal selling



Six types of mass media to be selected:

TelevisionTelevision RadioRadio NewspapersNewspapers

MagazinesMagazinesOutdoorOutdoor InternetInternet



These media or channels, consists of:

VehiclesVehicles Specific entities in which ads can appear

Mass-AppealMass-Appeal

Selective-Appeal

Selective-Appeal

Vehicles that appeal to a broad audience

Vehicles that appeal to a narrow audience



Media can also be:

Reaching more than one level of a marketing channel

WholesalerWholesaler

ProducerProducer

RetailerRetailer

Vertical

Vertical

Reaching only one level of a marketing channel

HorizontalHorizontal

WholesalerWholesaler

ProducerProducer

RetailerRetailer

-or-

-or-



Media selection is based on these factors:

AudienceAudience

CostCost

ReachReach

FrequencyFrequency

Expressed as cost per thousand (CPM) readers or viewers to facilitate cross-vehicle comparisons

The number of buyers potentially exposed to an advertisement in a particular vehicle

The more closely target market’s characteristics match those of a vehicle’s audience, the more appropriate it is

• The number of times buyers are actually exposedto an ad in a given time period

• Total exposure ReachReach FrequencyFrequency= ×



Other media selection considerations:

The purpose of the ad (image building, etc.)

Ads emphasizing product needs:

The editorial climate of the vehicle

• Price and immediate purchase—place in newspapers

• Products requiring color illustration and detailed explanation—place in magazines

Offerings whose purchase is seasonal or geographical



Media timing strategies include:

BlitzStrategy

BlitzStrategy

Concentrating advertising dollars in a relatively short time period when new products or services are introduced

Concentrating its advertising but also attempts to maintain some semblanceof continuity

Spending advertising dollars over thelong term to maintain continuity

ContinuityStrategy

ContinuityStrategy

PulseStrategy

PulseStrategy


SALES FORCE BUDGET ALLOCATION: HOW MANY SALES REPS?

=NSNS Number of sales reps

= Number of customers (actual or potential)

LCLC

NCNC

FCFC

TATA

= Necessary frequency of customer calls

= Length of average customer call; includes travel time

= Average available selling time per sales rep

×=NSNS

×

TATA

LCLCNCNC FCFC

Note: The time period is normally one business year.


SALES FORCE BUDGET ALLOCATION: HOW MANY SALES REPS?

=NSNS Number of sales reps

= 2,500 potential customers

LCLC

NCNC

FCFC

TATA

= 4 customer calls per year

= 2 hours average customer call; includes travel time

= 1,340 average available selling time per sales rep

=NSNS

TATA

LCLCNCNC FCFC× ×

=NSNS×2,500 ×4 2

1,340

= 15 sales reps neededNSNS

Example:


SALES FORCE BUDGET ALLOCATION

A sales force should be allocated based on:

Have sales representatives specialize in:

• Organization and marketing objectives

• Offering characteristics

• Competitor and industry practices

• Certain offerings

• Customer types

• Combination of these


EVALUATION AND CONTROL OF THE COMMUNICATION

PROCESS



EVALUATION AND CONTROL OFTHE COMMUNICATION PROCESS

Continuously monitor the execution ofany communication plan or strategy to ensure that the communication objectives (sales, profits, etc.) are being met

Use budgeting to add/delete funds for specific communication activities as aform of control

Use incremental analysis to evaluate and control advertising, personal selling, and expenditures


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Slide 6-1© 2010 Pearson Education, Inc. publishing as Prentice Hall CHAPTER 6 Integrated Marketing Communication Strategy and Management