Entrepreneurs Resource Center
Digital LibraryDefining and Serving a MarketMarket strategy
How to Establish a Promotional Mix
You drive sales by promoting the benefits of your companys goods or services to pools of potential buyers. The ways you promote your organization will largely determine whether you successfully plant the right messages in the minds of your target audience. This module explains how you can establish a promotional mix best suited to your companys needs and resources
Even a superior product doesnt sell itself. Your customers need information about your product or service before they buy it. The ways you communicate features and benefits to your potential customers is called a promotional mix. This Business Builder will explain how you can maximize your companys promotional mix for best results.
WHAT YOU SHOULD KNOW BEFORE GETTING STARTED[top]
When you promote your business, youre engaging in persuasive communication: You want to convince others to buy from you. You must select the right promotional strategy to:
Capture the attention of the right group of potential customers in a credible yet catchy way.
Educate them about your products or services.
A promotional mix is an allocation of resources among five primary elements:
How you integrate these elements depends on what youre promoting, the biases and preferences of the potential customers youre courting, general market conditions and your promotional budget.
The communications process will succeed if:
You deliver a clear, compelling message.
You may have several important or beneficial product features, but if you dont emphasize whats most important to your target market or you overwhelm prospects with too much data, they might reject your message. Example: If the target-market customer cares most about saving money, your message should emphasize how this will happen.
You choose the most appropriate promotion method.
To convey your message effectively, you must understand the best way to reach your target market. If your key customers are manufacturers and you supply specialized equipment, communicating through an advertisement in a general interest consumer magazine will waste time and money.
UNDERSTANDING THE MAIN COMMUNICATION CHANNELS[top]Advertising.Advertising is any paid form of media communication. This includes print ads in magazines, trade journals and newspapers, radio and TV announcements, Web-based visibility-building, and billboards. Advertising is a nonpersonal promotional activity because the seller has no direct contact with the potential customer during the communication process.Sales Promotions.In-store demonstrations, displays, contests and price incentives (50% off, buy-one-get-one-free) are sales promotion techniques.Public Relations.These activities promote a positive image, generate publicity and foster goodwill with the intent of increasing sales. Generating favorable media coverage, hosting special events and sponsoring charitable campaigns are examples of public relations.Direct Marketing.A form of advertising aimed directly at target customers (usually in their homes or offices) that asks the receiver to take action, such as ordering a product, clipping a coupon, phoning a toll-free number or visiting a store. Catalogs, coupon mailers and letters are common forms of direct marketing.Personal Selling.Face-to-face communication between buyer and seller.
If you deliver your message in many different ways, you increase your odds of reaching your target market. Hundreds of messages a day bombard your target market, but only a select few penetrate their consciousnesses. Of those, an even smaller percentage eventually lead them to act.
You may want to communicate a range of messages to different markets. If you have a product, such as spot remover, thats used by general consumers but that auto mechanics apply in a more specialized way, you should communicate different messages to each market via different media and methods. You might air a TV commercial to reach consumers and place an ad in an auto magazine to reach mechanics.
Without the proper promotional mix, you may squander your limited resources by taking a scattershot approach. Promotion must advance your overall marketing plan and reinforce the dialogue you want to establish with the segments of the marketplace you covet most.
Beware:In their rush to expand, some fast-growth entrepreneurs fail to coordinate their marketing strategies with their specific promotional efforts. A common trap: You invest heavily on advertising or sales promotion, but you overlook quality control for your product or price it improperly.
ESTABLISHING YOUR PROMOTIONAL MIX[top]
Establishing the promotional mix thats right for your company involves seven steps:
The segment of people that needs, or would benefit from, your product or service is your target market. Understanding these individuals attitudes and behaviors will help you design the best message and select the right means to reach them.
Example:If you own an upscale jewelry store, you know from your sales history or marketing research that your target market is consumers earning more than $75,000 per year. Any print advertising should thus appear in publications in which readership income exceeds $75,000.
You must determine the response you want to elicit from your target market, such as motivating them to click on your Web ad or sign up for a free trial of your product.
Some entrepreneurs fail to define their objectives precisely. While you obviously want to increase sales, you need to decide the best way to build a relationship with shoppers. If you engage them effectively, then sales should inevitably follow.
Example:To introduce new customers to your product, a direct-marketing technique, such as a direct-mail letter with a money-saving offer to first-time customers, might work. Or you can try a sales promotion, such as two-for-the-price-of-one. If your target market has a misconception about your product (say, that its more expensive or less effective than rival products), you can correct the perception by providing comparisons or testimonials.
The following exercise can help you define your specific goals.
Check the objectives that apply to your current business situation:
_____ I need to introduce a new product to a new market.
_____ I have a product thats under attack by competitors products, and I need to retain my current customer base.
_____ I need to correct false impressions or counter false claims made about my product.
_____ I need to create greater brand awareness of my product.
_____ I need to communicate new features to increase consumption by present customers.
_____ I need to generate more buzz or word-of-mouth business.
_____ I need to build a new image and reposition my product.
_____ I need to persuade retailers to stock my product or make larger orders.
The design of your communication incorporates two main factors: content and format.
Content.The content is the words and images you use to appeal to your target market. You must give your potential customers reasons they should respond to your message. Think of the most important benefit a user of your product receives. That should lead you to the central theme of your messages content.
Benefits fulfill a human want or need. Examples: The desire to enhance status, save money and time, or increase safety or security.
In choosing your promotional mix, you must communicate how your product produces a positive emotion or satisfies a particular need. In the case of the jewelry store mentioned earlier, the message can appeal to the target markets desire to gain status, a likely motivator that drives jewelry shoppers. Or your message can communicate the desire to be loved: If you love her, then you will buy her this elegant ring to prove it.
Format.Each element of the promotional mix has its own format requirements. Web advertising relies on graphics, clarity and color, while personal selling may involve structured presentations, handouts and diagnostic tests to engage potential customers.
To determine the best format to deliver your content, consider the technical aspects of presenting your message. If you prefer to demonstrate a product to sell it, you should probably include a broadcast medium in your advertising. That in turn will lead to decisions about sound effects, camera angles, lighting, and so on. Format for print advertising depends on how long or big a headline should look, how to integrate graphics and what types of photos reinforce your message.
Entrepreneurs who miss revenue goals often explain the disappointing results by saying, We were out-marketed. That usually indicates a failure to plan and implement the right promotional mix.
By choosing the best methods to convey your message and extracting the most value from your financial and creative resources you can devise an integrated marketing communications program that reinforces your companys distinct character in your customers minds.
Weigh the pros and cons of each of the five promotional methods:
In one sense, advertising is old-fashioned. It has a long, storied history as a device to sell products. But the way we write and deliver ads today barely resembles the classic print, radio and TV pitches of the past.
Advertising is any paid form of nonpersonal communication about a company, product, service or idea by an identified sponsor. That means you must buy space or time for an advertised message, although in rare cases you can use public service announcements for which the media covers the cost.
Advertising involves mass media, from TV and radio to the Internet, magazines, newspapers and billboards. Its impersonal nature usually leaves little room for gathering instant feedback from receivers. Thats why you must study how your target audience will respond to your message before you send it.
Introduce your target market to new products, new product features and new applications.
Persuade your audience to choose your product over a competitors or to perceive your product in a new way, perhaps by launching an image appeal.
Remind your target market of your products features, benefits and availability.
By investing in a public presentation of your company and its products, you can enhance customers perceptions of legitimacy, permanence and quality that they associate with your enterprise.
You can repeat a message at strategic intervals. Repeating your message increases the likelihood that your target customer will see the message at a time where he is open to hearing it. The right timing can maximize your awareness-building efforts.
The best advertising puts a human face on a company and its products. It can convey a sense of adventure, challenge people to test their assumptions about your business or entertain or enlighten your audience. It can introduce consumers to images and symbols that differentiate your company from others.
Effective advertising enables you to create and nurture brand equity, a vital but intangible source of goodwill that flows from a favorable image associated with a brand name. Once your company establishes a distinctive trademark in the public eye, you have a competitive advantage.
Marketers often argue that advertising offers a cost-effective way to reach large groups, and its true that the cost per contact can prove lower than with other promotional methods. Nevertheless, many entrepreneurs lack the finances to invest heavily in advertising. Producing and placing professional advertisements is prohibitively expensive for many emerging-growth companies.
While attention-grabbing advertising can attract interest, even the most innovative campaigns can become stale over time. And entrepreneurs may grow to rely too much on advertising at the expense of more personal, direct appeals to niche audiences.
Measuring the success of advertising can prove impossible. Some of the best TV commercials from a stylistic standpoint may not increase sales for the advertiser.
As people get pelted with promotional messages throughout the day, they become better at screening out ads. Information overload and clutter can lead your target audience to turn away from your best efforts to engage them.
Online advertising is soaring as more people log onto the Internet. Over a billion people worldwide are projected to use the Web by 2005, according toComputer Industry Almanac. Online ad revenue after a tough year for dot-coms was still over $4 billion in 2001 [Where the Online Ad News is Good, by Jane Black,Business Week Online(January 17, 2002)].
Creating a Web site for your business can help you educate consumers, solicit feedback and provide online service. But dont expect your Web presence to build your companys exposure.
To advertise effectively on the Internet, you may need to pay high-traffic sites or Internet publications to list your URL or link to your home page.
The most common forms of Web advertising include:
usually appear at the top or bottom of a Web page as rectangular virtual billboards that link to your home page. At their best, they draw a browsers eye with sharp, lively graphics. You typically buy banner ads on an average CPM basis (cost per one thousand page views or ads shown), with rates ranging from $1 CPM to reach broad audiences to $50 CPM for more targeted sites. You can also pay for ads that flash onto the screen when triggered by a keyword search. Youll need to factor in the click-through rate, or the number of people who click on your ad divided by the number of page views shown, when weighing the cost-effectiveness of banner ads. The industry average is about 0.5%, but it varies considerably based on the type of business youre promoting.
Portal sites, such as America Online, Yahoo and Lycos, tend to attract the widest net of Web users. If youre building a sports-memorabilia business, you may want to pay for a listing under the Sports category of a major portal. This may cost a flat fee or a percentage of sales generated from the ad. To stake out a longer-term position on the Web, you can pay to sponsor a page on a Web site or e-mail newsletter that targets your customer base.
Some search engines and general Web sites sell online advertising on a per-click basis. Example: (click on Marketing) orValueClick.
A low-risk, low-cost way to experiment with Web-based advertising is to enlist affiliates who provide a link to your companys site. If you make a sale thanks to a customer coming through that link, your affiliate earns a commission of, say, 5% to 15% of the total purchase. You only pay for the advertising when you rack up a sale. Unless youre tech-savvy (in which case you can buy software to run your own program), farm out this advertising to a service bureau that charges an initial set-up fee and then a chunk of the commission you pay your affiliates.
Opt-in e-mail advertising
allows you to send your ad to list members whove agreed to accept e-mail promotions from businesses such as yours. Response rates range from 1% to 15%, depending on the mailing list and the appeal of your offer, according to Larry Chase, publisher of Web Digest for Marketers. Because youll collect 80% of e-mail responses within 48 hours, you can test ad campaigns quickly. And with rates of 15 cents to 35 cents per name, this approach can save money compared to direct mail (with its postage, printing and handling costs).
Beware:Opt-in lists are far superior to opt-out lists to which recipients get added involuntarily and from which they must unsubscribe to discontinue receiving your e-mail ads.
With effective public relations, you can increase sales through favorable, nonpaid media coverage and enhance your companys image. Public relations builds goodwill toward your business by raising your companys profile in the public eye.
Publicity is free advertising. You can generate publicity through press releases, special events, sponsorships, newsletters and community activities.
The most common form of publicity is press coverage. It fits into the promotional mix only when theres newsworthy information about your company such as:
Youve developed a breakthrough technology or service that no one else offers.
Youve won a prestigious award or industry prize thats widely recognizable.
Youve made a major investment in your community, whether in ramping up hiring (especially if youre aggressively courting people with disabilities, senior citizens or implementing welfare-to-work programs), purchasing land to build your new headquarters or donating goods to charities.
Youve acquired another company.
Youre hiring new executives or announcing the addition of new board members.
When publicity is not appropriate and your specific objective is to improve your companys image with the public, then consider sponsoring a charitable event. If your specific goal is to increase sales through better customer service and relations, produce a newsletter on a regular basis that provides your customers with useful information.
Most people perceive publicity as more credible and believable than a paid advertisement. When you run an ad, you can make any product claim you want. Consumers know this and often react with skepticism. But reporters dont have to feature you in their publications or on their programs and speak positively about your business. You dont control the message when you dont pay for it.
Your staff may work together to promote your companys charitable activities or host special events and celebrations for the community. The resulting publicity can boost their pride and enthusiasm for their jobs.
Educating visitors to your Web site.
Before the Internet, companies would issue press releases about news designed to interest newspaper reporters. Today, you can compose press releases and display them on your companys Web site. While this may not reach as many people as having a reporter integrate your press release into a news story, you can still reap competitive value. Web researchers may read your companys press pages to get updates on your product releases, expansion plans or personnel moves.
While arranging publicity generally costs less than advertising, it can prove surprisingly expensive. You may need to hire a public relations firm to develop campaigns, write press releases and follow up with journalists. Even if you bring these tasks in-house, the cost of developing publicity items and staging events can stretch your budget and divert workers from their primary responsibilities.
While you can invite the media to preview your new product or tour your new facility, theres no guarantee that a glowing article will result. Or information might be improperly reported or key details omitted. Whats worse, publicity can backfire if it downplays the positives and harps on negatives.
You can do everything right in generating the kind of favorable publicity you seek. But the message may not reach your desired audience. A newscast can run your segment at a time when fewer viewers are watching, or a newspaper can mention your company in a short article buried in a back section thats often discarded.
Sales promotions are marketing activities that provide extra value or incentives to your sales force, distributors or consumers.
Consumer-oriented sales promotion targets individual customers. It engages and motivates potential buyers. Examples include free samples, coupons, contests, rebates, premiums, point-of-sale displays and other incentives intended to stimulate immediate sales. For retailers, visual merchandising is especially important. Attractive window and interior displays and eye-catching exterior signs can lure shoppers and reinforce the unique theme or character of your store.
Trade-oriented sales promotion targets intermediaries, such as wholesalers, distributors and retailers. You can use promotional and merchandising allowances, price deals, sales contests and trade shows to persuade the trade to stock and promote your companys products.
Sales promotions tend to lose their luster after a few weeks or months. Theyre typically woven into a promotional mix to:
Encourage customers to use the product more frequently and to attract users of a competing brand.
Transform potential customers into actual customers.
Encourage retailers to carry more inventory.
When weighing whether to use a sales promotion, ask yourself two questions:
Will this promotion reach my targeted customers? and Will it make a lasting impression on them, or will it be tossed away and forgotten?
Sales promotions must complement your overall strategic planning. For instance, avoid offering a coupon unless it fits in with your larger plan to lure consumers to switch brands.
Experimentation helps you determine the most effective sales promotion tools. Pre-testing is vital to avoid costly mistakes. Example: Before producing and distributing 50,000 product samples with coupons on a consumers first purchase at 100 regional grocery stores, run a test. Go to five of the stores and distribute samples. Determine how many coupons you actually get back, and then decide whether to expand to the full sales promotion.
Trade-oriented promotions give marketing intermediaries a financial incentive to support your companys products. By offering discounts to retailers in exchange for prominent shelf space or end-of-the-aisle displays, for instance, you can strengthen relationships with key players who can help stimulate sales.
Many consumers love contests and sweepstakes. You can turn a drab purchase into a more lively event by promising cash prizes to lucky winners. At its best, a sales promotion adds alluring incentives for buyer action.
Using coupons or rebates can help you measure to what extent your shoppers base their buying decisions on price. You can also collect their addresses and other consumer profile data that can prove valuable in subsequent marketing campaigns.
Many fast-growth entrepreneurs rush to try some form of sales promotion, only to declare such efforts a waste. But problems often result from poor planning. You must first identify and develop specific strategies to boost sales before you target customers and choose sales promotion tools, rather than plunging into sales promotions without laying the groundwork first.
Business owners can grow to rely on sales promotion and dwell on short-term marketing ploys, at the expense of more coordinated long-range plans. Realize that sales gains from promotions often sputter after an initial spike and you can sacrifice long-term brand equity in the pursuit of short-term goals.
Giving out coupons or samples can undermine the image of exclusivity or prestige that you wish to associate with your product or company. Price-conscious consumers may also withhold purchases in the absence of sales promotions.
Direct marketing enables you to communicate with your customers in a more personalized way than advertising, such as greeting them with a letter or telephoning them directly. Telemarketing, direct mail, catalogs and coupon mailers are all examples of direct-marketing techniques.
Successful direct marketing depends on whether you can acquire and maintain a database of your target market. Some marketers find this alone justifies the cost of advertising in a national consumer publication instead.
Consider using direct marketing in your promotional mix if:
Your primary means of distributing your product is through the mail or directly to customers.
With the growth of the Internet, many companies dont use retail outlets at all. Others supplement their retail efforts by selling through the Web, the mail or telephone. Companies that distribute products through the mail must assemble and maintain databases and mailing lists. Direct mail is a particularly cost-effective communication vehicle for them.
You are selling products with many benefits.
Your product may have multiple benefits to the user, but space limitations in an advertisement may prevent you from mentioning all but the most prominent ones. A direct-mail letter lets you communicate
your benefits. Its also a good way to announce sales promotions or special discounts.
Your advertising efforts fail to reach your target market.
As the upscale jewelry store owner, you may feel that the ad you placed in a high-end magazine isnt increasing your business. You can try buying a list by ZIP code in an exclusive residential area. This assures you that youre concentrating on your actual target market.
You are selling an expensive product or service.
When youre engaging in high-ticket sales, you must expend more effort to convince potential customers to buy. A direct-mail letter gives you more opportunity to expand your appeal than an advertisement with limited space.
Your business depends on reorders and/or volume.
Magazine publishers use telemarketing because subscribers often put off renewing their subscriptions. A sales reps reminder call often spurs a renewal sale.
By staging initial tests and measuring the results, you can roll out a direct-marketing campaign to a wider universe of potential customers with a strong likelihood that it will succeed. You can mitigate your risk by strategic sampling.
Effectiveness in reaching the right target.
Through direct marketing, you can contact narrow market segments and customize your message to appeal to them.
Evaluating direct-marketing campaigns is straightforward because you can measure outcomes with quantifiable data, such as number and size of orders, leads generated or requests for more information.
Many consumers are rebelling against the onslaught of direct marketing. Theyre more apt to discard direct mail, resent telemarketing calls, turn away door-to-door salespeople and laugh off TV infomercials.
Reliance on obsolete direct-mail lists.
In this transient society, increasing numbers of people relocate more frequently or use two addresses. Despite advances in technology that update mailing lists, it remains difficult to buy reliable lists that reach the market segment you want. Incorrect list selection can wipe out the appeal of a great product, a great package or a great offer.
Heightened need for customer service.
If you rely on direct-response ads, telemarketing or direct mail to introduce your company to shoppers, you must deliver an even higher level of personalized service to win over prospective customers. This requires additional investment in staffing and customer service training and delivery that some entrepreneurs overlook.
Personal selling brings humanness to selling. Sales representatives do what advertisements do: inform, persuade or remind. But they do it in person and can thus give your company a distinct personality.
There are two types of salespeople,order gettersandorder takers. Order getters engage in creative selling by finding and winning over customers. Order takers are more passive: They wait for customers to find them.
The biggest factor in determining whether personal selling should become part of your mix is whether staffing a proactive sales force applies to your business model. Personal selling is most often used by companies that sell expensive, technical or highly specialized products.
A common method of establishing your promotional budget is to estimate what your competitors spend and then match it. You do this by monitoring their ads, promotions and special events they sponsor. While this lacks precision, it provides a ballpark estimate.
Once you gather data about your competitors promotional budgets, dont copy your rivals spending habits or promotional mix. Use your information as a guide.
A more exact way to determine your budget is to assemble a wish list of promotional methods you want to use to meet your objectives. Imagine that money isnt an issue. Then using actual rates for print and broadcast advertisements and estimated costs for sales promotion and publicity, determine each activitys dollar cost. Then scale the list down until you have a reasonable budget.
Television and national print advertising may prove too expensive or inappropriate at this time. In any case, consider testing a range of techniques rather than investing your promotional dollars in one area. Why? Because promotion requires experimentation. It may take several months and dozens of tests to uncover the most effective mix for your company. Expect to reevaluate your budget and make adjustments as you go along.
Establishing an effective promotional mix cannot occur if you allocate resources sporadically. For your marketing message to produce results, promotional activities must occur on a regular basis. Consumers rarely take immediate action and may benefit from repeated exposure to your message before they buy.
Now that you have completed all of the preceding steps, its time to formulate your actual promotional mix. The most common method for actually putting your mix on paper is to express it as a percentage of your overall promotional budget.
Example 1:Our upscale jewelers promotional mix based on a budget of $5,000 might look something like this:
Example 2:The promotional mix of the make