Instructor Manual for Advertising and Promotion An Integrated Marketing Communications Perspective 1 by digitaldownload87

Instructor Manual for Advertising and Promotion An Integrated Marketing Communications Perspective 10th Edition By George Belch, Michae Belch.

CHAPTER 1 AN INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS Chapter Overview The purpose of this opening chapter is to provide the student with an overview of the field of advertising and promotion and its role in the marketing process. We introduce the concept of integrated marketing communications (IMC), its evolution, and examine how various marketing and promotional elements must be coordinated to communicate effectively. We also discuss the reasons for the increasing importance of the IMC perspective in planning and executing advertising and promotional programs. Marketers understand the value of strategically integrating the various communication functions rather than having them operate autonomously. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology, and media. The various elements of the promotional mix are introduced in this chapter along with a brief discussion of these basic tools of IMC. We discuss how many companies are taking an audience contact or touch point perspective in developing their IMC programs and consider four basic categories of touch points. This chapter also examines the various tasks and responsibilities involved in advertising and promotion management and a model of the integrated marketing communications planning process is presented. Lastly, we give an overview of the perspective and organization of the rest of the text.

Learning Objectives 1. To examine the marketing communication function and the growing importance advertising and other promotional elements play in the marketing programs of domestic and foreign companies. 2. To introduce the concept of integrated marketing communications (IMC) and consider how it has evolved. 3. To examine the reasons for the increasing importance of the IMC perspective in planning and executing advertising and promotional programs. 4. To introduce the various elements of the promotional mix and consider their role in an IMC program. 5. To examine the various types of contact points through which marketers communicate with their target audiences. 6. To introduce a model of the IMC planning process and examine the steps in developing a marketing communications program.

Chapter 01 - An Introduction to Integrated Marketing Communications

Chapter and Lecture Outline I.

INTRODUCTION TO ADVERTISING AND PROMOTION

The chapter begins with a brief discussion of the changing roles of advertising and promotional strategy in modern marketing. Instructors should note the role and importance of an organization’s promotional efforts in various industries and markets. These might include the automotive market, the beer industry, soft drinks, and consumer electronics. The opening vignette on Gatorade provides a very good overview of this how various IMC tools are used by major marketers to communicate with their target audiences. II.

THE GROWTH OF ADVERTISING AND PROMOTION

Advertising and promotion are integral parts of our social and economic systems. Advertising has evolved into a vital communication system for both consumers and businesses. In market-based economies, consumers rely on advertising and other forms of promotion to provide them with information they can use in making purchase decisions. Corporations rely on advertising and promotion to help them market their products and services. Evidence of the increasing importance of advertising and promotion in the marketing process comes from the growth in expenditures in these areas over the past decade. In 1980, advertising expenditures in the U.S. were $53 billion and $49 billion was spent on sale promotion. By 2013 an estimated $198 billion was spent on advertising while sales promotion expenditures increased to more than $300 billion! Advertising expenditures outside of the U.S. increased from $55 billion in 1980 to $365 billion by 2013. Billions more are spent by both domestic and foreign companies in other promotional areas such as direct marketing, event sponsorship, interactive marketing, sponsorships and public relations. The tremendous growth in expenditures for advertising and promotion reflect the growth of the U.S. and global economies. Expansion-minded marketers are taking advantage of growth opportunities in various regions of the world and taking advantage of integrated marketing opportunities through methods such as event sponsorship and the use of the Internet. Particularly noteworthy is the increase in the amount of marketing communications dollars being spent online. Nearly $21 billion was spent for online and mobile search marketing in 2013 and another $4.6 billion on social media sites. Spending on Internet advertising – which includes mobile, social, display, and search ads – is growing rapidly and is expected to account for over 20 percent of advertising expenditures by 2014. Professor Notes

Chapter 01 - An Introduction to Integrated Marketing Communications

III.

THE ROLE OF MARKETING A. Many students may already have had a marketing course; however, it is still helpful to define marketing and stress that it involves more than just selling or other promotion functions. For more than two decades, the American Marketing Association, the association that represents marketing professionals in the United States and Canada, defined marketing as: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. This definition of marketing focused on exchange as a central concept and the various activities involved in the marketing process. Many experts argue that exchange is the core phenomenon or domain for study in marketing. The discussion can focus on the nature of exchange and what is needed for this process to occur including: two or more parties with something of value to one another; a desire and ability to give up their something of value to the other party; and a way for the parties to communicate with one another. B. Revised Definition of Marketing — In 2007 the AMA adopted a revised definition of marketing: Marketing is the activity, set of institutions, and processes for creating, communicating, and delivering exchange offerings that have value for customers, clients, partners and society at large. This definition of marketing is more reflective of the role non-marketers to the marketing process. It also focuses on the important role marketing plays in developing and sustaining relationships with customers and delivering value to them. Value is the customer’s perception of all of the benefits of a product or service weighed against all the costs of acquiring and using it. Benefits can be functional, experiential or psychological. Costs include the money paid for the product or service as well as other factors such as acquiring information, making the purchase, learning how to use a product/service, maintaining, and disposing of it. C. The Marketing Mix—The four elements of the marketing mix (product, price, place, and promotion) can be introduced and the task of combining these elements into an effective marketing program for facilitating exchange with a target audience should be noted. The instructor should point out that while this course focuses on the promotion element of the marketing mix, the promotional program must be part of a viable marketing strategy and coordinated with other marketing mix variables. This leads into a discussion of the concept of integrated marketing communications. Professor Notes:

Chapter 01 - An Introduction to Integrated Marketing Communications

IV.

INTEGRATED MARKETING COMMUNICATIONS

The Evolution of IMC—In the past, many marketers built strong barriers around the various marketing and promotional functions, planning and managing them separately with different budgets, different views of the market and different goals and objectives. In the 1990s, however, many companies began moving toward the concept of integrated marketing communications (IMC), which involves coordinating the various promotional elements along with other marketing activities that communicate with a firm’s customers. As marketers embraced the concept of IMC, they began asking their ad agencies to coordinate the use of a variety of promotional tools rather than relying primarily upon media advertising. A number of companies began looking beyond traditional advertising agencies and using other types of promotional specialists to develop and implement various components of their promotional plans. As the advertising industry recognized that IMC was more than just a fad, terms such as new advertising, orchestration and seamless communication were used to describe the concept of integration. A task force from the American Association of Advertising Agencies (4As) developed one of the first definitions of integrated marketing communications defining it as: A concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines—for example, general advertising, direct response, sales promotion, and public relations- and combines these disciplines to provide clarity, consistency, and maximum communications impact. Integrated marketing communications calls for a “big picture” approach to planning marketing and promotion programs and coordinating various communication functions. With an integrated approach, all of a company’s marketing and promotional activities should project a consistent and unified image to the marketplace. However, advocates of IMC have argued for an even broader perspective that considers all sources of brand or company contact that a customer or prospect has with a company, product or service.

A Contemporary Perspective of IMC—As IMC evolves and becomes marketers develop a better understanding of the concept, they are recognizing that it involves more than just coordinating the various elements of the marketing and communications program to reflect “one look, one voice.” IMC is being recognized as a business process that helps companies identify the most appropriate and effective methods for communicating and building relationships with customers and other stakeholders. Don Schultz of Northwestern University, who has been one of the major proponents and thought leaders in the area, developed a new definition of IMC which is as follows: Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.

Chapter 01 - An Introduction to Integrated Marketing Communications

This definition views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of this process beyond just customers. B.

Reasons for the Growing Importance of IMC—There are a number of reasons why marketers are adopting the concept of IMC. A very fundamental reason is that they recognize the value of strategically integrating the various communication functions rather than having them operate autonomously. The move also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. One of the major developments hat has led to the adoption of IMC is the fragmentation of media and the shift from mass to micromarketing. Advances in technology are also impacting IMC, particularly, the transformation of the Internet (Web 2.0) which is discussed in Digital and Social Media Perspective 1-1. The IMC movement is also being driven by a “marketing revolution” that is changing the ways companies market their products and services. Major characteristics of this marketing revolution include: • • •

•

A shifting of marketing dollars from traditional media advertising to other forms of promotion as well as nontraditional media. The rapid growth of the Internet and social media which is changing the nature of how companies do business and the ways they communicate with consumers. A shift in marketplace power from manufacturers to retailers. Due to consolidation in the retail industry, small local retailers are being replaced by large regional, national, and international chains that are using their clout to demand promotional fees and allowances. Retailers are also and using new technologies such as checkout scanners to assess the effectiveness of manufacturers’ promotional programs which is prompting many marketers to shift their focus to tools that can produce short term results, such as sales promotion. The growth and development of database marketing which is prompting many marketers to target consumers through a variety of direct-marketing methods such as telemarketing, direct mail and direct response advertising. Demands for greater accountability from advertising agencies and changes in the way agencies are compensated which are motivating agencies to consider a variety of communication tools and less expensive alternatives to mass media advertising.

V. The Role of IMC in Branding – one of the major reasons for the growing importance of integrated marketing communications over the past decade is that it plays a major role in the process of developing and sustaining brand identity and equity. Brand identity is a combination of many factors including the name, logo, symbols, design, packaging, and performance of a product or service as well as the associations that come to mind when consumers think about a brands. It is the sum of all points of encounter or contact that consumers have with a brand which includes the various forms of integrated marketing communication used by a company. Figure 1-1 shows the world’s 10 most valuable brands from the 2013 Interbrand rankings. IMC Perspective 1-1 discusses how branding has entered the relationship era. This IMC Perspective is based on an article by written by Doug Levy and Bob Garfield that appeared in Advertising Age and might be assigned as additional reading for students. The chart provides an interesting comparison of the older consumer era to the new relationship era.

Chapter 01 - An Introduction to Integrated Marketing Communications

VI.

THE PROMOTIONAL MIX: THE TOOLS FOR IMC

The Role of Promotion - Promotion is defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion to sell goods and services or promote an idea. It should be noted that promotion is best viewed as the communication function of marketing. The discussion of integrated marketing communications should point how other marketing elements such as brand name, package design, price or retail outlets implicitly communicate with consumers. However, most of an organization’s communication with the marketplace takes place through a carefully planned and controlled promotional program which utilizes elements of the promotional mix. The promotional mix is defined as the basic tools or elements that are used to accomplish organization’s objectives. The role and function of each promotional mix element in the marketing program can be discussed along with its advantages and limitations. A.

Advertising—any paid form of nonpersonal communication about an organization, product, service, or idea by an identified sponsor.

Advantages • cost-effective way for communicating, particularly with large audiences • ability to create images and symbolic appeals and for differentiating similar products and services • valuable tool for creating and maintaining brand equity • ability to strike responsive chord with audience through creative advertising • opportunity to leverage popular advertising campaigns into successful IMC programs which can generate support from retailers and other trade members • ability to control the message (what, when and how something is said and where it is delivered) Disadvantages: • • • •

the cost of producing and placing ads can be very high, particularly television commercials it can be difficult to determine the effectiveness of advertising there are credibility and image problems associated with advertising the vast number of ads has created clutter problems and consumers are not paying attention to much of the advertising they see and/or hear

The nature and purpose of advertising differs from one industry to another and across various situations as does its role and function in the promotional program. The common classifications of advertising to the consumer market include national, retail/local and direct-response advertising as well as primary versus selective demand advertising. Classifications of advertising to the business and professional market include industrial, professional and trade advertising. These classifications are described in Figure 1-4. Professor Notes

Chapter 01 - An Introduction to Integrated Marketing Communications

Direct Marketing—a system of marketing by which organizations communicate directly with target customers to generate a response and/or a transaction. Direct marketing has not traditionally been considered an element of the promotional mix. However, because it has become such an integral part of the integrated marketing communications program of many organizations, this text views it as a component of the promotional mix. Advantages: • changes in society (two-income households, greater use of credit) have made consumers more receptive to the convenience of direct-marketed products • allows a company to be very selective and target its marketing communications to specific customer segments • messages can be customized to fit the needs of specific market segments • effectiveness of direct-marketing efforts is easier to assess than other forms of promotion • many companies now have extensive data bases that can be used to target current and prospective customer, particularly through digital media Disadvantages: • consumers and businesses are being bombarded with unsolicited mail and phone calls which makes them less receptive to direct-marketing • direct marketing has image problems • problems with clutter as their are too many direct-marketing messages competing for consumers’ attention

Digital/Internet Marketing –digital media allow for a back-and-forth flow of information whereby users can participate in and modify the content of the information they receive in real time. The major interactive medium is the Internet, which is a global collection of computer networks linking both public and private computer systems. While the most prevalent perspective on the Internet is that it is an advertising medium, it is actually a medium that can be used to for other elements of the promotional mix as well including sales promotion, direct marketing, and public relations. The extensive penetration of smartphones) is leading to a rapid growth in mobile marketing whereby marketing messages are sent directly to these devices. Digital and Social Media Perspective 1-2 provides interesting insight into how Nike has shifted much of its marketing budget to digital media. Advantages: • the Internet can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling. The Internet is also the foundation for social media sites such as Facebook and Twitter, which are becoming an integral part of many marketers IMC programs, as well as mobile marketing • messages can be tailored to appeal to the specific interests and needs of the target audience • the interactive nature of the Internet leads to a higher degree of customer involvement when customers are visiting a web site.

Chapter 01 - An Introduction to Integrated Marketing Communications

•

the Internet makes it possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more. Information provided by marketers can be updated and changed continually. The Internet has tremendous creative potential as a well-designed web site can attract a great deal of attention and interest among customers and be an effective way to generate interest in a company as well as its various products and services.

Disadvantages • the Internet is not yet a complete mass medium as some U.S. households do not have access to the Internet and many do not have broadband access. In some countries this percentage is much higher. • there are problems with the Internet as an advertising medium as many Internet users do not pay attention to banner ads and the click-through rate on most is extremely low. • there is a great deal of clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention. D.

Sales Promotion—marketing activities that provide extra value or incentive to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales. Sales promotion is generally broken into two major categories: consumer-oriented and trade-oriented activities. Advantages: • provides extra incentive to consumer or middlemen to purchase or stock and promote a brand • way of appealing to price sensitive consumer • way of generating extra interest in product or ads • effects can often be more directly measured than those of advertising • can be used as a way of building or reinforcing brand equity

Disadvantages: • many companies are becoming too reliant on sales promotion and focusing too much attention on short-run marketing planning and performance • many forms of sales promotion do not help establish or reinforce brand image and short-term sales gains are often achieved at the expense of long-term brand equity • problems with sales promotion clutter as consumers are bombarded with too many coupons, contests, sweepstakes and other promotional offers • •

consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty. in some industries promotion wars may develop whereby marketers sales promotion incentives extensively which results in lower profit margins and makes it difficult to sell products at full price

Chapter 01 - An Introduction to Integrated Marketing Communications

It is important to address the potential terminology problem concerning the use of the terms promotion and sales promotion. In this text the term promotion represents an element of the marketing mix by which firms communicate with their customers and includes the various promotional mix elements. However, many marketing and advertising practitioners use the term promotion in reference to sales promotion activities. We use the term promotion in the broader sense. When discussing sales promotion activities, we are referring to this one specific element of the promotional mix. E.

Publicity/Public Relations Publicity—nonpersonal communications about an organization, product, service, or idea that is not directly paid for nor run under identified sponsorship. Public Relations—a management function which evaluates public attitudes, identifies the public policies and procedures of an individual or organization with the public interest, and executes a program of action to earn public understanding and acceptance. The distinction should be made between publicity and public relations noting that public relations generally has a broader objective than publicity, as its purpose is to establish and maintain a positive image of the company among its various publics. Publicity is an important communications technique used in public relations; however other tools may also be used. Advantages of Publicity: • credibility of publicity is usually higher than other forms of marketing communication • low cost way of communicating • often has news value and generates word-of-mouth discussion among consumers Disadvantages of Publicity: • lack of control over what is said, when, where and how it is said • can be negative as well as positive

Personal Selling—direct person-to-person communication whereby a seller attempts to assist and/or persuade prospective buyers to purchase a company’s product or service or act on an idea. Advantages: • direct contact between buyer and seller allows for more communication flexibility • can tailor and adapt message to specific needs or situation of the customer • allows for more immediate and direct feedback • promotional efforts can be targeted to specific markets and customers who are best prospects Disadvantages: • high cost per contact ($155 to $300, depending on the industry) • expensive way to reach large audiences • difficult to have consistent and uniform message delivered to all customers

Chapter 01 - An Introduction to Integrated Marketing Communications

Professor Notes

VI.

IMC INVOLVES AUDIENCE CONTACTS

The various promotional mix elements are the major tools that marketers use to communicate with current and/or prospective customers as well as other relevant audiences. Many companies are taking an audience contact perspective in developing their IMC programs whereby they consider all of the potential ways of reaching their target audience with their messages. The various ways that a customer can come into contact with a company or brand is are shown in Figure 1-5. It is the responsibility of those involved in the marketing communications planning process to determine how each of these contact tools can be used to communicate with the target audience and how they can be combined to form an effective IMC program. New to this edition is a discussion of four basic categories of contact or touch points which include: •

Company created touch points which are planned marketing communication messages such as advertisements, web sites, news/press releases, packaging, sales promotion offers and point-ofpurchase display.

•

Intrinsic touch points which are interactions that occur with a company or brand during the process of buying or using a product or service such as discussion with retail sales personnel or customer service representatives.

•

Unexpected touch points which are unanticipated references or information about a company or brand that a customer or prospect receives that is beyond the control of the organization. This includes word-of-mouth messages as well as information from various media sources.

•

Customer-initiated touch points or interactions that occur whenever a customer or prospect contacts a company. These contacts often involve inquiries or complaints that must be handled properly by the company such as through customer service departments.

VII.

THE IMC PLANNING PROCESS

Integrated marketing communications management is defined as the process of planning, executing, evaluating, and controlling the use of the various promotional-mix elements to effectively communicate with target audiences. It involves coordinating the promotional mix elements to develop a controlled and integrated program of effective marketing communication. It involves various decision areas such as: • • •

which promotional tools to use and how to combine them effectively determining the size of and distributing the advertising and promotional budget determining the influence of various factors on the promotional mix including the type of product, target market, decision process of the buyer, stage of the product life cycle, and channels of distribution

Chapter 01 - An Introduction to Integrated Marketing Communications

This process is guided by the development of the integrated marketing communications plan which provides the framework for developing, implementing, and controlling an organization’s IMC program and activities. At this point it is helpful to go through the Integrated Marketing Communications Planning Model presented in Figure 1-7 of the text. The steps in the Integrated Marketing Communications Planning Model include: 1.

Review of the Marketing Plan – the first step in the IMC planning process is to review the marketing plan which is a document that describes the overall marketing strategy and programs developed for an organization, a product/service line, or an individual brand.

Promotional Program Situation Analysis - Internal Analysis - External Analysis

Analysis of the Communications Process – determining how the company can effectively communicate with customers in the target market. An important part of this stage of the IMC planning process is developing communication objectives which refer to what the firm seeks to accomplish with its promotional program.

Budget Determination – two basic issues must be addressed with regard to the IMC budget: • How much money will be spent on marketing communication • How the money will be allocated across the various IMC tools Developing the Integrated Marketing Communications Program - the most involved and detailed part of the promotional planning process occurs at this stage as decisions have to be made regarding the role and importance of each IMC tool and their coordination with one another. Each IMC tool has its own set of objectives, budget, messaging, and media strategy. These include: • Advertising message and media strategy and tactics • Direct marketing message and media strategy and tactics • Interactive/Internet Marketing message and media strategy and tactics • Sales promotion message and media strategy and tactics • Public relations/publicity strategy and tactics • Personal selling – sales strategy and tactics Integrating and Implementing Marketing Communications Strategies – the various IMC tools must be integrated and steps must be taken to implement them. Most large companies hire external agencies to plan and develop their creative messages and media strategies as well as to implement them.

Monitoring, Evaluation and Control – the final stage of the IMC planning process involves monitoring, evaluating and controlling the promotional program. At this stage, the marketing should be gathering feedback concerning how well the IMC program is working and whether it is meeting its objectives. It is important to note that information regarding the results achieved by the IMC program is used in subsequent IMC planning and strategy development.

Chapter 01 - An Introduction to Integrated Marketing Communications

Professor Notes:

Teaching Suggestions This initial chapter is designed to provide the student with an overview of the field of advertising and promotion and a brief look at the role of IMC in the marketing process. The instructor should be careful not to go into an in-depth discussion of marketing since this is covered in detail in chapter 2. You should introduce the concept of integrated marketing communications discuss its evolution, and note how this approach differs from more traditional perspectives of advertising and promotional planning. In this edition we have provide an updated perspective of IMC which recognizes that it involves more than just coordinating the various elements into a “one look, one voice” approach. It is important to define the six elements of the promotional mix, discuss their role as marketing communication tools, their advantages and limitations. Note that our view of the elements of the promotional mix goes beyond the traditional communication tools of advertising, sales promotion, publicity/public relations and personal selling, as we also include direct marketing and digital/internet marketing as part of the mix. Direct marketing and digital/Internet have become major methods by which modern-day marketers communicate with their target audiences and we feel they are best viewed as distinct IMC tools. You should also emphasize that there are a variety of ways by which customers come into contact with a company and/or its brands. There is a discussion of IMC involving audience contacts and Figure 1-5 of the text is an excellent way of showing the various contact tools. New to this edition is a discussion of four major categories of contact points which have been noted by Tom Duncan. When discussing these various types of contact points, you might use Figure 1-6 to explain how these four types of contact points differ in terms of their effectiveness and a company’s ability to control or influence them. It is important to review the various factors that underlie the adoption of an IMC approach to advertising and promotion by many companies. You might also spend some time discussing the pros and cons of IMC. Although we advocate the IMC approach in this text, the discipline is still evolving. Excellent articles regarding the role and status of IMC can be found in special issues of the Journal of Advertising Research (March 2004, Volume 44. No. 1) and the Journal of Advertising (Winter 2005, Volume 34, No. 4). During an introductory lecture there is latitude to discuss various issues and aspects concerning each promotional mix variable. For example, various perspectives regarding advertising such as its social and economic effect might be noted along with common complaints and criticisms of advertising. We do not suggest going into a detailed discussion of these charges at this early stage of the course. We feel that students are best able to evaluate and appraise various arguments for and against advertising and other promotional mix elements toward the end of the course. Thus, the final chapter of the text evaluates the social and economic aspects of advertising. We feel that it is important in either the first or second lecture to cover the integrated marketing communications planning model in some detail. This text is built around this model and it provides the student with the “big picture” as to the decision sequence and various considerations involved in the development of an advertising and promotional program. It is also important to communicate to students that advertising and promotion management is a process. A great deal of internal and external analyses, as well as the coordination of the promotional mix elements, is required to develop an effective program of marketing communications that can be integrated into an organization’s overall marketing strategy and tactics.

Chapter 01 - An Introduction to Integrated Marketing Communications

Answers to Discussion Questions 1. Discuss the role of integrated marketing communications in the marketing program of a product such as Gatorade. How can Gatorade use the various IMC tools to achieve its objectives of expanding into the sports nutrition market? (LO2,05) Integrated marketing communications play a very important role in the marketing program for Gatorade. A variety of IMC tools are used to provide consumers with information about the various items in the Gatorade product line as well as to build and maintain its brand image. Gatorade uses all aspects of the promotional mix to market its sports beverages and nutritional products. Gatorade still spends heavily on mass media advertising through television, magazines, and banner ads to drive awareness, communicate information and maintain its brand identity. Gatorade advertises heavily during televised collegiate and professional sporting events such as football and basketball games and also uses print ads in various sports magazines such as Sports Illustrated and ESPN The Magazine and various vertical publications that focus on specific sports and fitness. Digital/internet advertising has also become an important part of the IMC program for Gatorade as online display ads are used as well as a variety of social media tools such as Facebook, Twitter and YouTube. Gatorade, like many other brands, has created its own YouTube channel where consumers can watch commercials for the brand as well as vides such as the “Everything to Prove” webisodes. The Internet has become an important IMC tool for Gatorade as they expand their product line as consumers can visit the their website (www.gatorade.com) to get information about the various G Series products as well as learn more about sports nutrition, hydration and recovery. Publicity/public relations is also an important part of the IMC program of Gatorade. The company’s uses the FleishmanHillard agency to handle its media relations and generate publicity for the brand such as through PR activities that result in stories in magazines, newspapers and various online news sources. Gatorade also uses sponsorships through its partnerships with professional sports leagues such as the NBA, NFL, MLB and NHL and individual teams as well as its sponsorship of major sporting events. Gatorade also uses various forms of nontraditional media to communicate with its core market of 13 to 17-year old performance focused athletes such as the Gatorade Mobile Locker Room which made its way to high schools across the country. Sales promotion is also an important part of the promotional mix for Gatorade including both consumer and trade promotions. Trade promotions are used to encourage retailer to stock and promote the Gatorade product line while consumer promotions such as contests, sweepstakes, coupons, price-off deals and other incentives are used to generate sales in stores. Personal selling is also an important part of Gatorade’s marketing program as the company has a sales force that calls on retail accounts. Gatorade recently rolled out its G-Force, which is a dedicated sales and marketing team that visits retailers and champions its products at a local level. Many of the members of the G-Force team are former college athletes who are hired specifically for their athletic knowledge and sports expertise. 2. Evaluate Gatorade’s decision to launch the new G Series product line and the challenge this represents to the company from an integrated marketing communications perspective. (L02,05) Gatorade’s decision to launch the new G Series product line is part of the company’s strategy to move beyond the sports beverage market and expand into the broader sports nutrition market. This strategic decision was largely based on the decline in sales for sports drinks which are facing increased demand from new types of beverages such as vitamin fortified water, energy drinks, and protein powders. Even though Gatorade maintains a dominant market share for sports drinks, the company has found it difficult to maintain its growth objectives as this market declines. Thus, expansion into the much larger sports nutrition market provides Gatorade with new growth opportunities by providing consumers with a full spectrum of sports nutrition products that go beyond hydration. As part of its new strategy to evolve from a sports drink company to a sports performance innovator, Gatorade is covering the sports nutrition market with a full spectrum of products designed to get the 1-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

body ready for exercise and help recover afterward including beverages, energy bars, gels, protein shakes and various other nutritional products. The first part of the new plan involved the repackaging and positioning of its three core product lines – the G Series, G Series Fit, and G Series Pro - with each consisting of multiple products designed to help athletes before, during and after practice, workouts, or competition. To implement its new strategy, Gatorade had to achieve a number of marketing communication objectives including driving awareness, trial and scientific understanding of the G-Series among the core performance target market as well as building scientific credibility and trust among key influencers. Consumers had to be educated on how the new G Series was designed to meet their nutritional needs before, during and after activity. Marketing platforms also had to be created through which Gatorade could share information on the new product line, deepen consumer engagement and deliver insights from competitive athletes and sports health professionals. While Gatorade still uses traditional media advertising, it has reduced its media spending and has developed fully integrated marketing campaigns that utilize a variety of tools to connect with consumers including grassroots efforts, sponsorships, the Internet and social media. 3. Discuss the role integrated marketing communications plays in the marketing program of companies and organizations. Discuss some of the reasons for the for the tremendous growth of in advertising and other forms of marketing communications in the United States as well as in global markets (L01). Integrated marketing communications plays a critical role in the marketing program most companies and organizations as it provides them with a way to communicate with consumers and help them influence their purchase decisions or other types of behavior. The fragmentation of mass markets, the rapid growth of the Internet and digital media, changing lifestyles and media consumption patterns of consumers are all factors leading to the growth of IMC. One of the key factors underlying the growth of advertising and other forms of marketing communication in the U.S. is the economic recovery. Advertising spending generally moves with the economy as companies spend more monies on advertising and other forms of marketing communication during good economic times. Many countries outside the U.S. are also experiencing strong economic growth which is leading to more spending on advertising and promotion such as the BRIC nations of Brazil, Russia, India and China. Many companies are also focusing on downstream activities such as marketing and brandings to achieve competitive advantage which is leading to more monies being spent on advertising and other forms of marketing communication. 4. Discuss how integrated marketing communications differs from traditional advertising and promotion. What are some of the reasons marketers are taking an IMC perspective to their advertising and promotional programs? (L01) IMC differs from traditional advertising and promotion in that it recognizes the value of using a variety of communication tools rather than just relying primarily on media advertising which might be supplemented with tactical promotions. IMC involves coordinating all a company’s promotional elements, as well as marketing activities, in a synergistic manner to send a consistent message to the target audience. While traditional advertising relies primarily upon the use of ads through the mass media to communicate with the target audience, IMC recognizes that consumers’ perceptions of a company and/or its brands are a synthesis of the bundle of messages or contacts they have with the firm. These contacts include media advertisements, packaging, sales promotion, messages received through interactive media such as web sites and other digital media, point-of-purchase displays, and other forms of communication. The IMC approach seeks to have all of a company’s marketing and promotional activities project a consistent, unified message and/or image to the market and consider which particular element of the promotional mix is the most effective way to communicate with customers in the target audience. There are many reasons why the IMC approach is becoming so popular among marketers. Probably the most fundamental reason is that marketers are recognizing the value of strategically integrating

Chapter 01 - An Introduction to Integrated Marketing Communications

the various communication functions rather than having them operate autonomously. By coordinating their marketing communication efforts, companies can avoid duplication, take advantage of synergy among various communication tools, and develop more efficient and effective marketing communication programs. The movement toward IMC is also being driven by changes in ways companies market their products and services. As discussed on pages 11-16 of the text, there is an ongoing revolution that is changing the rules of marketing and the role of traditional media advertising. Important aspects of this revolution include: a shifting of marketing dollars from media advertising to other forms of promotion, a movement away from relying on advertising-focused approaches (which rely on mass media such as television and magazines) to solve communication problems, a shift in marketplace power from manufacturers to retailers, the rapid growth of database marketing, demand for greater accountability from advertising agencies and the way they are compensated, and the rapid growth of the Internet. The growth of the integrated marketing communications is very likely to continue as it is being driven by fundamental changes in the way companies market their products and services resulting from the ongoing revolution that was discussed above. Moreover, many marketers and advertising agencies recognize the importance of taking an IMC approach and are becoming advocates of integration. The move to integrated marketing communications also reflects an adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. Major changes are occurring among consumers, particularly with respect to media use and buying and shopping patterns. Many consumers are turned off by traditional advertising which is leading marketers to look for alternative ways to communicate with their target audiences. The continued fragmentation of media markets and rapid growth of interactive media and online services are also creating new ways for reach consumers. While IMC will continue to have its critics and may undergo some changes, it is very unlikely that we will see a return to the traditional system where advertising in mass media dominates and advertising and other forms of promotion function autonomously. 5. Discuss how the digital revolution is impacting the way marketers plan and implement their integrated marketing communications programs. Identify three specific technological developments and discuss how each is impacting the IMC program of companies. (L03, 04). As discussed in Digital and Social Media Perspective 1-1, there are many technological developments that are impacting IMC. Cable and digital satellite systems have vastly expanded the number of channels available to television viewers which is contributing to the fragmentation of media markets. The average household in the U.S., as well as many other countries, now receives 135 television channels versus 60 at the beginning of the new millennium. The proliferation of channels as well the penetration of new technologies such as DVRs, video-on-demand, and shows that can be streamed to HDTV sets, personal computers or tablets via Netflix or Hulu Plus is also impacting television. The long predicted convergence of television with computers has become a reality as consumer now have many other viewing options beyond the programming offered by the television networks. The rapid penetration of the Internet is another development which is leading to media fragmentation as hundreds of millions of consumers are now online and can visit a myriad of different web sites. However, time spent on the Internet competes for time spent with traditional media such as television, radio, newspapers and magazines. One of the most significant changes is the penetration of smartphones as more than half of U.S. adults now own one and are using them to access the Internet. The growth in tablets such as the iPad and various devices using Google’s Android operating system are also bring yet another type of screen into the lives of many consumers. Most magazines and newspapers have developed digital versions of their publications for consumers who want to read them online as well as on their mobile devices. Marketers are responding to these changes by increasing their spending on highly targeted media that reach specific market segments. Monies that have traditionally been spent in broadly targeted mass media are now being allocated to more specialized media that reach specific market segments. Marketers are developing mobile marketing

Chapter 01 - An Introduction to Integrated Marketing Communications

applications that can deliver messages and promotional offers directly to consumer’s mobile devices and can be targeted to specific locations or consumption situations. They are also recognizing that it has become increasingly difficult to reach consumers through the mass media and are using a variety of other IMC tools such as sponsorships, branded entertainment, publicity/public relations, digital and social media (such as Facebook and Twitter) and in-store media to reach consumers. The Internet is another technological development having a tremendous impact on the way companies design and implement their entire business and marketing strategies as well as their integrated marketing communications programs. Companies ranging from large multinational corporations to small local firms have developed websites to promote their products and services by providing current and potential customers with information, building images for their companies and brands and even selling their products or services directly over the Internet. While many view the Internet as an advertising or promotional medium, it really is a marketing communications tool that can be used to execute all elements of the promotional mix. Companies can advertise on the Internet by running banner ads or sponsorships on the websites of other companies or organizations. Marketers can offer sales promotion incentives such as coupons over the internet and they can offer contests and sweepstakes online and encourage consumers to visit their web sites to enter them. Many companies are using the Internet for direct marketing. Companies such as Dell, L.L. Bean and Under Armour have made the Internet a major part of their direct-marketing efforts and encourage consumers to visit their websites to view their merchandise and to place orders online. Companies are also using the Internet for publicity and public relations activities as many activities such as the sending of press releases can now be done online. Many companies also maintain press releases on their web sites which can be accessed by the media and other relevant publics to learn more about these companies and their products and services. 6. Discuss how brand building is changing as marketing moves from the consumer era to the relationship era. Find an example of a company that has made the transition to the relationship area and discuss how it has done so. (L03) Branding involves building and maintaining a favorable identity and image of the company and/or its products or services in the mind of the customer. It involves building and maintaining brand awareness and interest, developing and enhancing favorable attitudes, and building and fostering relationships through interactions between customers and the brand. Brand identity is a combination of many factors including the name, logo, symbols, design packaging and performance of a product or service as well as the image or type associations that come to mind when consumers think about a brand. It is the sum of all the points of contact and/or interaction that consumer have with a brand. These contacts often come from various forms of IMC activities used by a company including media advertising, sponsorships, websites on the Internet, social media, sales promotion activities, direct mail and collateral materials. Consumers can also have contact with or receive information about a brands through in-store media such as point-of-purchase displays; articles they read, see and//or hear in the media; or through direct interactions with a company representative such as a sales person. Some companies are finding that finding new ways to build brands that include more than just spending large sums of money on media advertising. In the relationship era, companies are recognizing that trust and transparency are key factors that consumers use to evaluate companies, decide whether to purchase their products and services, and become loyal to their brands. Companies must be able to build sustainable relationships with consumer s based on honesty, engagement and authenticity rather than through a clever ad slogan. Some firms are recognizing that an effective way to build brand equity is by letting consumers experience their brands. Apple has opened hundreds of retail stores where consumer come in and experience products such as iPod, iPhones, iPads and Mac computers first hand. Starbucks has relied very little on media advertising to build its brand but rather has created a hip, relaxed atmosphere where consumer can receive quality products and excellent customer service. Some companies are also turning to branded entertainment as a way of 1-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

connecting with consumers and making their products and services part of movies and television shows. Google is another example of a company that has built a very strong brand image without using mass-media advertising. The company receives a tremendous amount of publicity because of the popularity of its search engine and its expansion into new markets and areas of advertising and marketing. The key to building successful brands in the future is not just for marketers to get consumers to buy their brands but to get them to buy into their brands. Students should be encouraged to find examples of companies that have built their brand equity through strong relationships with consumers. You might encourage them to visit the Interbrand website which ranks the world’s best global brands (http://www.interbrand.com/en/best-global-brands/2013/Best-Global-Brands2013.aspx) each year for examples. 7. Discuss the opportunities and challenges facing marketers with regard to the use of mobile marketing. What are some of the ways marketers can use mobile marketing as part of their IMC program. (L04,05) The Mobile Marketing Association defines mobile marketing a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network. It involves the use of wireless media, primarily smartphones, as an integrated content delivery and direct response vehicle within a cross-media marketing communications program. The growing popularity of smartphones, tablet PCs, and other handheld mobile devices along with the decision of the various wireless carriers to open their mobile phones services to these messages is opening up new marketing opportunities. Marketers are already sending interactive messages to consumers that contain promotional offers such as coupons that can be redeemed at the point-of-purchase. Many of these mobile messages are specific to a consumers’ location or consumption context. One of the major factors driving the growth of mobile marketing is the development of shopping services and apps that consumers can use to make shopping more efficient, productive and fun. Marketers are also developing their own brand specific applications such as games, video, and promotional offers as part of their mobile marketing programs. One of the challenges marketers will face with mobile marketing is possible resistance from consumers. Many consumers do not want to be bombarded with messages to their cell phones or other mobile devices. Thus, marketers will be dependent upon consumers “opting in” to receive these messages. There is also the issue of screen size which may limit the type of messages that be sent to mobile devices. However, it is likely that most marketers will tie-in their mobile marketing efforts to other components of their IMC programs such as sales promotions or incentives to visit a web site. Thus, mobile marketing will become yet another way for marketers to deliver messages to consumers and get them to take some form of action that helps in the marketing process. 8. What is meant by a customer contact or touch point? Choose a specific company or brand and discuss how it is using the four categories of contact points discussed in the chapter. (L05) Customer contact points are each and every opportunity the consumer has to see or hear about the company’s product/brand or have an experience or encounter with it. These contact points can be created by the company and include planned messages delivered through media advertising, packages, collateral materials, in-store displays, and public relations activities. They also can come from interactions with the brand that occur during the process of buying or using the brand as well as from information that consumers receive from word-of-mouth messages. Marketers must determine how important the various contact tools are for communicating with their target audience and how they can be combined to form an effective IMC program. Students should be encouraged to select a company or brand and discuss the various ways consumers come into contact with it. They might use IMC Contact tools shown in Figure 1-5 of the chapter as a

Chapter 01 - An Introduction to Integrated Marketing Communications

framework for conducting the contact point analysis. You might also ask them to discuss which contacts points are most effective or influential in shaping consumers’ impressions of the company or brand. For example, media advertising may be the most important influence for an image-laden product such as clothing or cosmetics while information from a web site may be the most important influence for a high tech brand such as a consumer electronics product. 9.

Evaluate Nike’s decision to move away from the use of traditional mass-media advertising and focus more of its marketing budget on digital media. Do you agree with this decision or do you think Nike should be allocating more of its IMC budget to traditional media advertising? (L05,06) For decades Nike relied primarily on mass-media advertising as their primary way to communicate with consumers and deliver its marketing messages. However, Nike is moving away from the use of mass-media advertising as they feel there are other IMC tools that may be more effective and provide a better return-on-investment for their marketing expenditures. Nike now views digital media as a more cost effective way to reach its target audience of younger consumers as they can be reached more easily online rather than through traditional media. Moreover, it is often very difficult to measure the return-on-investment for mass media advertising as there is no direct way to determine who is viewing, hearing, or reading a television, radio or print ad. Nike, like many other companies, prefers to use more targeted integrated marketing tools such as the Internet and social media where it is easier to measure response to an ad using various measures such as page views, click throughs, and other analytics. Nike is also using digital media to conduct direct marketing as well as build online communities of customers with whom they can interact on a regular basis. The use of social media has also become very important to Nike as they now have a Facebook page for nearly all of their brands which can be used to communicate with consumers and engage them in various ways. Rather than relying on traditional media, Nike often will release new commercials and other types of videos through various forms of social media such as Facebook as well as on their YouTube channel. Nike also recognizes that the use of social media is important is maintaining its image as a cool, interesting, innovative, and relevant brand among younger consumers. Most students will agree with the decision by Nike to allocate most of their IMC budget to digital media. However, there are also strong arguments as to why Nike should continue to use traditional media such as television and magazine advertising. Nike built its brand through the effective use of television and print advertising developed by its long-time agency Wieden+ Kennedy. For several decades W+K developed very powerful and impactful TV commercials that used some of the world’s top athletes such as Michael Jordan, Bo Jackson, Tiger Woods and others. One can argue that Nike should not totally abandon the approach that was very successful in making it the world’s most valuable sports brand. There is also a great deal of selectivity available today for traditional media through cable television, sports programming and magazines that reach various segments of the athletic and fitness market. Nike may be able to reach the younger consumer through traditional media and do so in an impactful way with ads created by W+K.

10. Why is it important for those who work in the field of advertising and promotion to understand and appreciate all the various integrated marketing communication tools, not just the area in which they specialize? (L05, 06) In today’s business world, marketers use a variety IMC tools to communicate with their customers. The various promotional mix elements have to be viewed as component parts of an integrated marketing communications program. An individual IMC activity such as advertising or sales promotion cannot be managed without considering its relationship to other promotional mix elements. Individuals working in various areas of advertising and promotion are expected to understand and use a variety of marketing communication tools, not just the one in which they specialize. For example, advertising agencies no longer confine their services to creating and placing ads. Many agencies are involved in sales promotion, public relations, Internet/interactive media, direct marketing, event

Chapter 01 - An Introduction to Integrated Marketing Communications

sponsorship and other communication areas. Thus, it is important for those who work in advertising and promotion, either on the agency or client side, to understand and appreciate the value and limitations of all the promotional mix elements and how they can be combined to develop an effective program of integrated marketing communications.

Additional Discussion Questions (not shown in text) 11. Compare the definition of integrated marketing communications developed by Don Schultz with the original definition that was developed by the American Association of Advertising Agencies. How do they differ? (L02) The new definition of IMC developed by Don Schultz of Northwestern University is as follows: “Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. The goal is to generate both short-term financial returns and build long-term brand and shareholder value.” This definition differs from the seminal definition of IMC developed by the 4As in several ways. It views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of the marketing communications process. These include customers, prospects suppliers, investors, interest groups, and the general public as well as internal audiences such as employees. The definition also reflects the increasing emphasis that is being placed on the demand for accountability and measurement of the outcomes of marketing communication programs. The original definition developed by the 4As has been criticized for focusing primarily on coordinating the various communication tools with the goal of making them look and feel alike. Both academicians as well as practitioners are recognizing that the broader perspective of IMC offered in the definition by Schultz is needed as it views the discipline from a more strategic perspective. 12. Choose a company and discuss how it communicates with its customers at the corporate, marketing, and marketing communications levels. (L01) Messages can originate at all three levels since all of a company’s corporate activities, marketing mix activities, and marketing communications efforts have communication dimensions and play a role in attracting and maintaining their customers. Students should be encouraged to choose a company and analyze how it communicates with its customers at each of these levels. At the corporate level the analysis should focus on how a firm’s business practices and philosophies, policies and procedures, hiring practices, corporate culture, and other factors communicate with customers and other relevant stakeholders. At the marketing level, the analysis should focus on how the company communicates through various elements of the marketing mix. The physical product communicates a great deal to consumers through elements such as shape, design or appearance of the actual product or the packaging. The price of a product may also send a message about quality. The brand name of a brand also is a form of communication. Companies also communicate with consumers through the choice of retail outlets where they choose to sell their products. Selling a product only through upscale specialty or department stores may communicate that it is a high quality item. On the other hand, selling a product through discount stores or mass merchandise outlets may send a cue of lower quality. There are many examples of how consumers communicate with consumers through their marketing activities. You might talk about products such as expensive watches (Concord, Movado, or Rolex) and how they are priced high, sold only through jewelry store or high end department stores and designed to reflect an image of quality, prestige and style. On the other hand brands such as Timex and Casio are designed more for function or sport, are priced lower, and sold in drug stores, sporting goods stores and mass merchandise outlets. At the marketing communications level, the analysis

Chapter 01 - An Introduction to Integrated Marketing Communications

should focus on the various IMC tools the company uses such as advertising, direct marketing, its web site, sales promotion messages, publicity/public relations activities such as event sponsorships, and personal selling efforts. The analysis of the company should consider whether all of these IMC tools communicate with one look, voice, and image and position and identify the company and/or brand in a consistent manner. 13. Why are marketers putting so much emphasis on developing strong brands? Choose one of the World’s 10 Most Valuable brands listed in Figure 1-1 and discuss how the company has used integrated marketing communications to build a strong brand image. (L03) There are a number of reasons why marketers are putting so much emphasis on building strong brands. Consumers have a tremendous number of choices available in nearly every product or service category and are have less time available to make purchase decisions. Thus they are putting a great deal of emphasis on well-known and trusted brand names to help simplify their decision making process. Also, consumers are often willing to pay a price premium for well-known brands which provides marketers with higher profit margins and helps them avoid price competition. Consumer product companies, as well as business-to-business marketers, recognize that brand equity is a very important asset and they are taking steps to build and maintain brand equity. Students should be encouraged to select one of the top 10 brands listed in Figure 1-1 and analyze how the company has used IMC to build a strong image. This analysis might include examination of the company’s advertising, sales promotion programs, product and service quality, public relations efforts, sponsorships, web site and other communication elements. 14. The various classifications of advertising to consumer and business-to-business markets are shown in Figure 1-4. Choose one category of advertising to consumer markets and one to the business-tobusiness market and find an ad that is an example of each. Explain the specific goals and objectives each company might have for the ad. (L04) Students should be encouraged to choose one of the various classifications of advertising to consumer and business-to-business and professional markets, find an ad that they feel is an example of each and explain the company, association or organization’s goals and objectives for the ad. Basic descriptions of each classification of advertising is provided in Figure 1-4 along with insight as to what the goals or objectives might be for using this type of advertising. This assignment is helpful in getting students to recognize that the nature and purpose of advertising varies from one industry to another and/or across situations. For example, you might encourage them to find an example of advertising done either by a company or an industry trade association where the focus is on primary demand stimulation. Advertising campaigns by the Beef Board, National Pork Producers Council, or Potato Board are all very good examples of primary demand advertising Students might also be encouraged to look in some industry or trade publications for examples of business-to-business or advertising targeted at retailers. Publications such as Progressive Grocer or Drug Store News are a good source of trade advertising. 15. What is meant by primary versus selective demand advertising? Provide examples of each. Discuss when a marketer might focus on primary demand stimulation versus selective demand stimulation. (L04) Primary demand advertising is designed to stimulate demand for the general product class or entire industry. Selective demand advertising focuses on creating demand for a specific company’s brand or a product or service. Primary demand advertising is often done by industry trade associations to generate demand for the product category. This is often done for commodity products where it is difficult to differentiate an individual brand or association members recognize the value of promoting the product category. Examples include products such as milk, orange juice, pork, beef, potatoes, 1-20 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 01 - An Introduction to Integrated Marketing Communications

avocados and raisins. Primary demand advertising is sometimes done by a company whose brand(s) dominates the market and will benefit the most from demand generation. For examples Gatorade has over 70 percent of the sports drink market and its ads often promote the value of its products for hydration versus water. Most advertising focus on selective demand as the goal is to create demand for a specific brand. Thus the advertising will emphasize reasons for purchasing a particular brand and focus on differentiating a particular brand of a product or service from the competition.

Chapter 02 - The Role of IMC in the Marketing Process

CHAPTER 2 THE ROLE OF IMC IN THE MARKETING PROCESS Chapter Overview The purpose of this chapter is to examine the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. A basic model of the marketing and promotional process is presented, which can be used as a framework for analyzing how advertising and promotion fit into a company’s marketing program. The chapter examines the various decision areas under each element of the marketing mix and how they influence and interact with advertising and promotional strategy. The chapter also introduces and/or refreshes the student on the concepts of target marketing, segmentation and positioning. The target marketing process is introduced, and the specific elements of this process—identifying markets with unfulfilled needs, market segmentation, selection of a target market and positioning—are described in detail.

Learning Objectives To examine the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. 1. To understand the marketing process and the role of advertising and promotion in an organization’s integrated marketing program. 2. To know the various decision areas under each element of the marketing mix and how they influence and interact with advertising and promotional strategy. 3. To understand the concept of target marketing in an integrated marketing communications program. 4. To recognize the role of market segmentation and its use in an integrated marketing communications program. 5. To understand the use of positioning and repositioning strategies.

Chapter and Lecture Outline I.

INTRODUCTION TO MARKETING AND PROMOTIONS PROCESS MODEL

A model is presented at the beginning of the chapter (Figure 2-1) which is a useful framework for analyzing how promotion fits into an organization’s marketing program. The model consists of four components: • • • •

The organization’s marketing strategy and analysis The target marketing process Marketing planning program development (which includes the promotional decisions) The target market

Chapter 02 - The Role of IMC in the Marketing Process

The first part of the chapter is devoted to examining the four components of this model and the role advertising and promotion play in each. As noted in the text, it is important to note that a firm’s promotional program is directed not only to the final buyer but also to channel or trade members who distribute its products/services to the ultimate customer. The role of promotion is discussed for building and maintaining demand not only in the consumer market, but among the trade as well. Professor Notes

II.

MARKETING STRATEGY AND ANALYSIS

The marketing process actually begins with the development of a marketing strategy whereby the company determines the product or services area and particular markets in which it wants to compete. A strategic marketing plan usually evolves from an organization’s overall corporate strategy and serves as a guide for specific marketing programs and policies. The development of a marketing strategy is based on a situation analysis (as discussed in Chapter 1) from which a firm develops an understanding of the market, the opportunities it offers, the competition and various segments or target markets the company may wish to pursue. Steps in the Development of a Marketing Strategy A.

Opportunity Analysis—a careful analysis of the marketplace should lead to alternative market opportunities or areas where the company feels there are favorable demand trends, where customer needs and/or wants are not being satisfied and where it could compete effectively. Market opportunities are usually identified by examining demand trends in various market segments. The discussion can focus on how market opportunities are identified and recent examples of companies finding and exploiting them. The chapter lead-in discusses the Millennial market and its idiosyncrasies. IMC Perspective 2-1 discusses the growth of the Hispanic market, and the difficulty in reaching it, which could be an interesting point of departure for a discussion about the opportunity created by new and growing segments. Competitive Analysis—in developing marketing strategies and programs a company must analyze the competition its products or services face in the marketplace. Competition can range from direct brand competition to other products and services that satisfy consumers’ needs and/or compete for their dollars. Competitors’ marketing programs have a major impact on a firm’s marketing strategy and must be carefully analyzed and monitored. Various aspects of advertising and promotion such as promotional spending, media and creative strategy, and sales promotion are often directly affected by competitors. An important aspect of marketing strategy development is the search for an advantage over the competition. A competitive advantage refers to something unique or special a firm does or possesses that gives it an edge over competitors. Competitive advantage can be achieved in a variety of ways, including having quality products that are differentiated from the competition and command premium prices, providing superior customer service, having the lowest production costs or dominating channels of distribution. Competitive advantage can also be achieved through having excellent advertising and promotion that creates and maintains product/service differentiation and brand equity. You might want to discuss how many companies have used advertising to achieve brand equity. It is also important to note the concerns of many advertising and marketing people that reductions in media advertising and increased spending in trade promotions may lead to losses in brand equity and competitive advantage.

Chapter 02 - The Role of IMC in the Marketing Process

Target Market Selection—after evaluating marketing opportunities for products/services in various markets, a company selects one or more as a target market for which it will develop a marketing program(s). This target market becomes the focus of the company’s marketing efforts. Selection of the target market is not only a very important part of a firm’s marketing strategy, but also has implications for advertising and promotional strategy and tactics.

Professor Notes

III.

THE TARGET MARKETING PROCESS

The concept of target marketing is introduced, noting that there are four distinct steps involved in this process—identifying target markets with unfulfilled needs, market segmentation, selecting a target market, and positioning through marketing strategies. From this point, the chapter will go on to discuss in detail the processes required in each step. A.

Identifying Markets—Target marketing involves the identification of the needs and wants of specific groups of people (or segments), selection of one or more of these groups as targets, and the development of marketing strategies aimed at each. This approach has found increased applicability for a number of reasons. • the diversity of consumers’ needs • increasing use of segmentation by competitors • more managers are trained in segmentation The instructor should note that this process leads to a more homogeneous grouping of potential customers, which allows the marketer to develop more precise strategies designed to reach them. Market Segmentation—Once the marketer has identified who it is that is to be targeted; these potential customers are grouped based on the fact that they have similar needs and/or behaviors that are likely to cause them to respond similarly to marketing actions. This breaking up of the market is referred to as the market segmentation process. This process includes five distinct steps: • Finding a way to group consumers according to their needs • Finding a way to group the marketing actions—usually the products offered—available to the organization • Developing a market-product grid to relate the market segments to the firm's products or actions • Selecting the target segments toward which the firm directs its marketing actions; and • Taking these actions. A number of bases for segmentation are available to the marketer including the following: (Figure 2-4 will be helpful here.) • Geographic—the market is divided into geographic units with alternative marketing strategies targeted to each • Demographic—division involves demographic variables such as age, sex, family size, income, education and social class among others

Chapter 02 - The Role of IMC in the Marketing Process

•

Psychographic—markets are divided based on the personalities and/or lifestyles of consumers. (The instructor should note that lifestyles have become a commonly employed segmentation strategy.) Programs such as VALS and PRIZM are commonly employed by marketers for this purpose. • Behavioristic—this form of segmentation divides consumers into groups according to their usage, loyalties or buying responses to a product. These characteristics are then usually combined with one of the previously mentioned bases to develop segment profiles. • Benefits—specific benefits offered by a product or service may also constitute a basis for segmentation. In many instances a variety of benefits may be derived for the same product among different groups. (For example, the instructor might ask students to suggest benefits to be derived from the purchase of a watch, noting that at certain times of the year these benefits will change based on the recipient of the watch!) The Process of Segmenting a Market—This section concludes by reminding the student that market segmentation is indeed a process that develops over time and is a critical part of the situation analysis. Selecting a Target Market—Having conducted the segmentation analysis, the marketer will be faced with two subsequent decisions: 1. Determining how many segments to enter 2. Determining which segments offer the most potential. The first of these decisions may lead the marketer to three potential strategies: • Undifferentiated marketing would involve the decision to ignore the segment differences and develop one product for the entire market. It should be noted that few firms pursue this strategy today. •

Differentiated marketing involves the decision to compete in a number of segments, developing different marketing strategies for each. • Concentrated marketing takes place when a firm decides to concentrate its efforts on one specific segment in an attempt to capture a large share of that market. (The examples of Volkswagen and Rolls Royce provided in the book will illustrate this point well.) Marketing Positioning—positioning has been defined as "the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from the competition." 1. Approaches to Positioning—this section discusses the approaches to positioning as well as a number of strategies for developing a position. Several distinct positioning strategies are offered including: a. positioning by product attribute/benefit—setting a product apart by stressing a specific characteristic or benefit offered. b. positioning by price/quality—in this strategy price/quality characteristics are stressed. For example, some products set themselves apart by assuming a very high price/quality association, while others become "price products." c. Positioning by use or application—how a product is to be used may in itself lead to a positioning strategy. The shoe industry example offered in the text, and products such as Arm and Hammer baking soda and Black & Decker have capitalized on this strategy. d. positioning by product class—the Amtrak example provided in the text in reflects this strategy in which the product is positioned against others that, while not exactly the same, provide the same class of benefits. The pork campaign ("The other white meat") is another example that might be cited, as well as the Dole campaign cited in the text.

Chapter 02 - The Role of IMC in the Marketing Process

e. positioning by product user—in this strategy the product is positioned at a particular group of users. The DC Shoes example in Exhibit 2-19 demonstrates this strategy in practice. f. positioning by competitor—in many cases the competition may be used to define the positioning strategy. Companies can position their products to set themselves apart from the competition, show superiority, etc. g. positioning by cultural symbol— the Jolly Green Giant and Chicken of the Sea’s mermaid are all examples of cultural icons, as are the Wells Fargo stagecoach, and Ronald McDonald. h. repositioning—declining sales or changes in market conditions may lead a firm to reposition. Companies such as Sears, and J.C. Penney are a few of the examples of companies that have attempted (both successfully and unsuccessfully) to assume a new position in the market. The Gatorade and MTV examples provide more current examples. 2. Determining the Positioning Strategy—while not noted in the text, the development of a positioning strategy involves six distinct steps: • Identifying competitors • Assessing consumers' perceptions of competitors • Determining competitors' positions • Analyzing consumers' preferences • Making the positioning decision • Monitoring the decision Professor's Notes

IV.

DEVELOPING THE MARKETING PROGRAM

The next stage of the marketing process involves combining the various elements of the marketing mix into a cohesive and effective marketing program. This requires that all elements of the marketing mix be combined effectively and that they be consistent with one another. It is important to stress that each element of the marketing mix is multidimensional in nature and includes a number of decision areas. In discussing the various elements of the marketing mix attention should be given to how each influences and interacts with promotion. A.

Product Decisions—an organization exists because it has some product, service, idea or cause to offer customers. Discussion can focus on benefits or values offered by the product and the fact that products and services satisfy not only functional but social and psychological needs as well. Product decision areas of branding and packaging are particularly important from a promotional perspective because of the role the brand name and package play in communicating attributes, information and meaning to the consumer. 1. Branding—choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. One important role of advertising in respect to branding strategies is creating and maintaining brand equity. Brand equity can be thought of as an intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name, or trademark. 2-5

Chapter 02 - The Role of IMC in the Marketing Process

2. Packaging – the role and function of packaging has changed because of the self-service emphasis of many stores and the fact that as many as two-thirds of all purchases made in the supermarket are unplanned. The Bumblebee Tuna package is an excellent example of how packaging can create new opportunities—sometimes for existing products. Price Decisions—the price variable of the marketing mix refers to what the consumer must give up in exchange for a product or service, Marketing managers must be concerned with establishing a price level, developing pricing policies and monitoring consumers’ and competitors’ reactions to price in the marketplace. Factors a firm must consider in determining price levels include: • costs • demand • competition • perceived value Interesting findings from the PIMS project concerning the relationship between price, product quality and advertising are discussed in the text. Distribution Channel Decisions—marketing channels or the place element of the marketing mix refers to the set of interdependent organizations involved in the process of making a product or service available to customers. Differences in direct versus indirect channel arrangements should be discussed. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. The Internet has become a new channel for a number of companies, and has had a demonstrable impact on the distribution system. Attention should be given to the need to develop promotional programs for the trade or resellers to encourage them to stock and promote a product. Developing Promotional Strategies: Push or Pull? – When a promotional push strategy is used, the goal is to persuade the trade to stock, merchandise and promote a company’s products by aggressively selling and promoting to resellers. This can be done by having the company’s sales representatives call on resellers and offering special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry such as Progressive Grocer or Drug Store News may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users which will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy.

Professor’s Notes

Teaching Suggestions This chapter is designed to provide the student with an overview of the overall marketing process and the role advertising and promotion play in the marketing program. The chapter may be somewhat of a review for some students, particularly those who have had a basic marketing course. However, we feel that this chapter is more than just a review of marketing principles or fundamentals. We have written the chapter to show the role advertising and promotion play in the marketing process as well as how promotional strategy is influenced by and interacts with marketing strategy and the various elements of the marketing program. Students will benefit from the discussion of the marketing mix from a promotional strategy perspective even if they have had an introductory marketing course.

Chapter 02 - The Role of IMC in the Marketing Process

We have found that the model of the marketing and promotion process is a very good framework for analyzing how promotion fits into an organization’s marketing program. The three components of the model cover the basic areas of marketing and the model shows that promotional programs must be developed for the trade as well as for the ultimate customer in the target market. It is important to stress to students the important role resellers play and the need to develop promotional programs to motivate the trade to get them to stock, merchandise and promote a company’s products. You might point out to students that the recent trends in the allocation of promotional budgets have seen a shift in monies away from media advertising and toward trade promotions. Another shift in budgets has been affected by the advent of the Internet. Students will see that the Internet has both benefited and negatively impacted traditional media. These issues are discussed is considerable detail in the sales promotion and Internet chapters.

Answers to Discussion Questions 1. The lead in to this chapter discussed the millennial generation. Discuss some of the ways this segment is different from previous age cohorts. (LO3) It seems that each generation has been seen as different. First it was the Baby Boomers, then Gen X, and now Millennials. While one has to be careful when stereotyping, it does seem that Millennials are different from previous generations and require different IMC strategies to effectively reach them. The world of this generation has changed. Consider that: The average salary for young college graduates has dropped 15 percent, or about $10,000, since 2000. In 1990 youth unemployment was 11%; now it is 16%. It costs about 5 times as much to go to college as it did 20 years ago. Financial security is uncertain, as is Medicare and Social Security. As a result, Millennials have very different lifestyles. Many move home after college, others live in apartments with one or more roommates. Many live close to the city center so they have transportation and don’t have to buy a car. They often don’t buy cars, as their salaries are not that high, and they would rather have a smart phone than a car payment. In general, they are just much less materialistic than their predecessors. Media wise, this is the Internet generation. YouTube is used way more often than TV. Print usage (both newspapers and magazines) barely exists. Millennials sleep with their phones, and are mesmerized with social media. Mobile is transforming almost every aspect of their lives. (For additional information on Millennials, see the chapter lead-in.) For previous generations who saw the introduction and growth of digital media, the transition has been slow to quickly. For Millennials, there was no transition. Digital has been their life from birth, and it is reflected in almost everything they do.

2. IMC Perspective 2–1 discusses the importance of the Hispanic market. What makes this subculture different, and what must marketers do to successfully target them? (LO2) Like other segments, the Hispanic segment must be understood if one hopes to successfully market to them. As noted in IMC Perspective 2-1, this segment is not constituted by just one group. Hispanics include those with descendants from Mexico, Cuba, Puerto Rico and other Latino countries, with each having its unique set of values, beliefs, lifestyles, etc.

Chapter 02 - The Role of IMC in the Marketing Process

Perspective 2-1 has presented some of the ways that companies are targeting these markets. Programming on television, Latino formatted radio, and digital media that are specifically targeted to the Hispanic community are just some of the ways marketers have adapted their strategies for this segment. There is an increased prevalence of Latino spokespersons, and—in some markets—Spanish language provided alongside English messages. The size and growth of this market in the U.S. mandates that marketers not only pay attention to the segment, but develop specific IMC strategies designed to appeal to it. Over the next 40 years, the population of this segment is estimated to grow by 167%, making it the fastest growing segment in the U.S. An article in Forbes Magazine in September 2013, listed five requirements for reaching Hispanics: 1. Define clear goals and objectives for reaching Hispanics 2. Engage in “hyper-local” strategies 3. Place your best talent on this market segment 4. Gather data and engage in using analytics to understand this market 5. Develop a new business management model. A quick Google search will result in numerous other articles that address the requirements successfully marketing to this segment. Like all other segmentation approaches, one must understand the segment, and adapt strategies to meet their needs.

3. What is meant by repositioning? Discuss some companies that have successfully employed this strategy. (LO4) Sometimes due to a downturn in sales, changing marketing conditions, or other reasons, companies may need to change their positioning strategy, also known as re-positioning. Perhaps the most often cited example of this is Rolling Stone Magazine which changed from a predominantly music oriented medium to include articles that reach a broader audience. Another example, is MTV, which started as a channel playing music to one that now contains much broader programming and only a small portion of music playing. It is not difficult to find companies that have repositioned themselves in recent years. A few of these include: Cadillac—the flagship of the GM line has tried to move away from the image of “my grandfather’s car to attract a younger market. Using rock stars, young athletes and others involved in sports and entertainment, and product placements are just a few strategies Cadillac has employed. IBM—once a computer company, IBM now has a completely different image as a solutions provider. Xerox—the copy machine company has almost no identity with copying services. Kia and Hyundai—these Korean manufactured automobiles have been forced to reposition from a low price positioning to one of higher quality. Both are doing so quite successfully.

Chapter 02 - The Role of IMC in the Marketing Process

Abercrombie—previously Abercrombie and Fitch, the difference between the Abercrombie of today and 20 years ago is worlds apart. While many companies successfully re-position, many others are less fortunate. To successfully reposition, brands must commit to the strategy in total. Failure to do so, will lead to failure in the marketplace.

4. Many companies have maintained their same brand identity for years by keeping the same logos, packaging, and so on, while others have made changes. Give examples of companies employing both of these strategies and discuss their results. (LO5) What comes to mind when you see the package or logo of Coke, Jaguar, Budweiser, Target or the Penn State football team? Each of these brands is clearly identifiable, with strong recognition and image identification (In 2012, Penn State changed its uniform for the first time in over 50 years by putting names on the back of the players’ jerseys.). When a consumer sees a Target store logo, as an example, it is clear as to what it means, and what is inside of that store. The BMW and Jaguar logos are clearly recognizable. UPS has extended its brown label to their packaging and shipping stores. On the other hand, what comes to mind when you see the package or logo of less well known and identifiable brands? Can you tell me what the Xerox logo looks like? What about Duracell batteries? Do you easily recognize a Postal Annex sign? While the first group sends a clear signal about what they stand for through their packages and or logos, the latter does not—either as a result of not building the brand image, or changing it too often. To establish a strong brand image, brands must promote and establish their logos and packages to add an extra communications contact point. They must also stick with this position and identity and not change it too often. In 2013, Saab, American Airlines, VH1 and the Miami Dolphins NFL team all changed their logos—some drastically, others minimally. Time will tell how this works out.

5. Some marketers feel that grouping consumers into age cohorts like Millennials, baby boomers, and so forth, results in unreliable generalizations and that such strategies might not be successful. Give the pros and cons of this argument. (LO2) This chapter discusses the strategy of segmentation, whereby groups exhibiting common characteristics (demographic, psychographic, etc.) are targeted with similar marketing and IMC strategies. Simply put, the assumption is that the commonalities between the groups allow for efficiencies in implementation, cost savings, and more effective strategies overall. Some believe that this strategy may not be as effective—particularly if taken to the extreme. We already noted in the chapter that not all Hispanics are the same, and that stereotyping them as such could backfire on the marketer. Likewise, all Millennials are not the same. While you may be very similar to your friends, for example, you no doubt know many others who are in your age range, in your college, etc, who are very different from you. Their lifestyles, values, interests, etc. make them seem almost alien, and you share nothing in common. When marketers segment, they are stereotyping to an extent. And while this strategy has been proven to be effective, it can also be dangerous if the marketer is to assume that by segmenting on any particular basis leads to one homogenous group that requires only one marketing strategy.

Chapter 02 - The Role of IMC in the Marketing Process

6. Discuss the role that integrated marketing communications plays in creating a brand image. How do media contribute to the development of these images? (LO1) IMC can be used to develop a brand image by focusing on the source, message, and media available to create the image sought. The source of the message (consider the use of Tiger Woods or Lance Armstrong as a spokesperson before and after their problems) creates an image of the type of person that might use the brand. The message—that is, what is said about the brand—positions the brand the way the marketer wants it to be perceived. Is it a luxury brand (Jaguar) or a low-cost brand (WalMart) or a combination (Kohls, Target). The photography, the background and the message all contribute to the brand’s overall image. Advertisers have discovered a new-found emphasis on media in developing a brand image. As one might expect, the medium in which the ad appears impacts the perception of the brand. An ad appearing in Vogue or GQ will be impacted differently than one in Time or The Economist. Ads appearing in or on different websites will be impacted by that medium as well. Recently, an ad featuring U2’s Bono appeared in a number of upscale print media including Vogue and Vanity Fair. The clothing ad had a setting with a small aircraft in the background in what appeared to be Africa. As one might imagine the ad was designed to create a high class image for the brand by using well known and liked celebrities in an image that spoke to high class. At the same time, ads for other brands may use non-celebrities such as everyday looking people to create their own image of being for everyone not just beautiful people. The Dove campaigns targeted to women are a classic example of successfully employing this strategy.

7. Choose a company and discuss how it communicates with its customers in different market segments. (LO4). Perhaps the best example might be an automobile company like Toyota. First of all, Toyota makes cars, trucks, SUV’s and vans, offering a vehicle for the needs and wants of a variety of segments. The car segment offers a range from its low-priced entry the Yaris to the higher end Avalon. In between are sports oriented vehicles, family vehicles and, of course, the hybrid Prius. Toyota also offers six varieties of SUV’s again, reaching various segments based on price as well as lifestyle, as the selection ranges from a small fuel-efficient RAV 4 to the large V8 Land Cruiser. Models at various prices offering specific benefits are offered in between. Lexus, made by Toyota is targeted to the luxury car market. Another good example is the Marriott hotel chain. A visit to the Marriott website shows that the chain includes offerings from over 15 brands ranging from economy pricing to luxury suites, and appealing to pleasure travelers, business travelers, families and long-stay occupants. The Marriott products reach a variety of segments based on a number of segmentation criteria.

Chapter 02 - The Role of IMC in the Marketing Process

8. Discuss the strategy of market segmentation, and some of the reasons marketers are employing such techniques. Are there any ethical issues involved in the strategy? (LO4) As noted in the text, market segmentation is the dividing up of markets into distinct groups that have common needs and will respond to the same marketing actions. Figure 2-4 lists a number of criteria for segmenting the market. Some examples of the various types of segmentation and companies employing this strategy include: Geographic

Automobile companies—import cars are purchased more in certain states or regions of the country—with the MidWest being the least likely to purchase. Mt. Dew sells better in the Suth than in other parts of the country.

Demographic

Age: Pottery Barn, among others, offers catalogs for adults and teens (PB Teen.) Sex: Secret and Soft & Dry Deodorants targeted to women. Old Spice Deodorant for men for men.

Psychographic

Alloy, Lucky Brands and Tommy Hilfiger targeting Gen Y. Burton targeting snowboarders; Rossignol targeting skiers.

Benefits

DSL companies offering more speed on the Internet Volvo offering safety; Kia low cost.

Usage

Lexus and Infinity targeting previous lower cost Toyota and Nissan brand owners moving up. Software companies providing different types of software for users.

Demographics (business markets) Sprint segments the market by size of company

In and of itself, the practice of segmentation imposes no specific ethical or moral issues. The basis for such a strategy is to improve product and service offerings, not to take advantage of consumers.

9. Marketing strategies are placing more and more effort on target marketing. What is target marketing? Give examples of companies currently employing this strategy. (LO4) Years ago, marketers could offer products to the entire market (Coca-Cola) (Ford), with pretty much one offering. As markets increasingly fragmented, this no longer became a viable marketing strategy. As a result, segmentation increased, and companies focused more and more attention to one or more of these segments, developing specific marketing strategies for each. This process of target marketing allows companies to operate more efficiently in the marketplace. It may be harder to provide examples of companies that do not target than those that do. Whether in the consumer or business markets, targeting is the mainstream practice today. Companies offer brands that reach the specific needs of a variety of consumers, even within segments, based on the specific needs and wants of these consumers.

Chapter 02 - The Role of IMC in the Marketing Process

10. Discuss the difference between demographic and psychographic segmentation. Give examples of companies employing each. (LO4). Demographic segmentation is the segmenting of markets based on age, income, sex, race, etc. Psychographic segmentation is based on interests, activities, opinions and factors such as personality and lifestyles—particularly the latter. Clearly, there are products targeted to the sexes. Those marketed to men and women, including media as well as products themselves. We have shown in the text that the teenage market is much different than those in midlife and those in older age brackets. Higher income groups are marketed to differently than lower income groups. Think of the strategies for Jaguar, Mercedes, and Bentley versus those for VW, Kia and Hyundai. The pricing is different, the product quality is different, and certainly the IMC strategies are different. Remember that Lexus and Infinity, are distributed in different dealerships. Consider two people with the same demographic characteristics, but different lifestyles. One is a businessman, active in sports, likes to travel, remains physically fit, etc. The other is a “self-defined” computer geek who does none of the above, but spends a majority of his waking hours at the computer. The two will require different products for their lifestyles, may prefer different brand name, may shop in different locations (stores, online) etc. Sports companies, travel agencies and health clubs are the products consumed by the former, with software and computer equipment by the latter.

Additional Discussion Questions (not in text)

11. In recent years a very good example of a successful IMC strategy is GEICO’s successful market approach. What factors have ed to the success of this company? (LO1) GEICO started off with a successful segmentation and target marketing strategy. By fulfilling the unmet needs of these segments, GEICO became quite successful. Rather than resting on this concentrated strategy, however, the company continued to pursue an aggressive strategy, expanding into different segments with a variety of product offerings. If you examine GEICO’s marketing strategy now, you will see that the company pursues a highly integrated approach, targeting a variety of segments. Their advertising and promotion budget has grown dramatically, and they develop very different IMC strategies for each segment they enter. Look at the variety of advertisements and commercials GEICO employs, depending on the segment targeted. Also pay attention to the variety of media the company uses. From TV commercials to internet advertising, direct mail, promotions and sponsorships, GEICO seems to appear everywhere. The company truly has a very pervasive media strategy. GEICO has also successfully pursued a strong customer relationship strategy with their customers. They maintain a high degree of customer satisfaction, and hold on to their customers by keeping them satisfied.

Chapter 02 - The Role of IMC in the Marketing Process

12. Marketers continue to increase their marketing efforts to the Hispanic market, while at the same time evidence suggests that younger Hispanics are becoming more integrated into the mainstream. What are the implications of these acculturation issues for the future of marketing? (LO3) As shown in the text, the Hispanic market—already very substantial in some areas of the country— continues to grow in size. This alone makes it an attractive market segment. While many of the younger Hispanics become more and more a part of the overall market in respect to values, lifestyles, etc., some will do so to a lesser degree. What this means is multiple market opportunities. For those who emulate the overall market, products and services that are adopted by the “mainstream” will become more desirable to the Hispanic market. Evidence of this exists, as many of the high end name brands now have high adoption rates among Hispanics. In addition, many of the media adopted by the mainstream market will now experience higher rates of adoption among Hispanics, including those who communicate in English. At the same time, there will always be those who do not assimilate into the “mainstream”, continuing to hold on to their cultural heritage as opposed to becoming “like everyone else”. For this group, brands that are targeted to Hispanics, rather than the mainstream market, will achieve success as Hispanics maintain their identity, and use products and brands that appeal to them on this basis. Overall, the growth of the Hispanic segment, and the increases in socioeconomic status that are also occurring make the Hispanic market attractive to many marketers. Marketers will have to determine which of the sub-segments of this market they wish to target—those who will attempt to integrate into the mainstream and purchase products and brands associated with that group, or those who will maintain their own identities and use brands more associated with them. The likelihood is that marketers will attempt to do both, as both are likely to increase in attractiveness.

13. As noted, packages are now becoming communications tools, serving as advertising vehicles. At the same time, packages are changing the other marketing mix elements as well. Discuss how packages are being used to impact price and distribution strategies as well as promotional strategies. (LO2) One such example is that of Coor’s Light’s cans which change colors when the product is at the preferred drinking temperature. This is just one of many examples, of the use of packaging more effectively in the marketing mix. In the Coor’s case, the uniqueness of the package design is, in itself, a potential selling point. As the same time, it is a beneficial package element that helps insure that the product is consumed at the point at which it will have the most flavor. From a promotional standpoint, packages can be effective in attracting attention, differentiating the product, and creating a brand image. The role of the package is to communicate and establish a position for the product and/or brand. Packages are also being used to make the product more convenient. Think about how lids have changed. Plastic is becoming more popular than cans, tuna can now be carried in an easy-open pouch instead of a can. Separate tops for consuming drinks while participating in sports, walking, etc. have now become more attractive. Package sizes are used to differentiate—family size bottles, to regular size cans, to half-cans, or mini-cans make consumption more convenient. Ultimately, the different packages impact the price variable. Sticking with the drink example, the sports packaged drinks cost more than the same amount of beverage in a non-sports package. Convenience packages of potato chips, cookies, etc. used for school children’s lunches cost more than 2-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02 - The Role of IMC in the Marketing Process

larger bags, etc. Typically, larger size containers cost less (on a relative basis) than do these convenience packaged items. Many companies have changed their package designs to accommodate retailers. With the enormous battle for shelf space comes a marketing opportunity or necessity. Uniquely designed packages that do not fit or take up too much room on the shelves must give way to those that do. Packages that are more durable are also being required in an attempt to eliminate or reduce breaking or spilling. Finally, from an IMC perspective, the package communicates a lot about the brand. The examples of Heinz or Arm & Hammer baking soda immediately communicate about what is inside of the package, its quality, and it’s longevity. Expensive brands rely on packaging as much as do the inexpensive ones in informing the consumer as to what to expect inside.

14. Discuss the difference between a push and a pull strategy. What kinds of firms would be more likely to employ each strategy? Give examples. (LO2) In a push strategy the communication and selling emphasis targets the channel of distribution members. Thus, programs are designed to persuade the trade to stock, merchandise, and promote manufacturers’ products. The goal of the strategy is to push the product through the channels by promoting them to the trade. In a pull strategy, the target audience is the end buyer and/or consumer. The goal is to create demand among consumers and have them demand the product from middlemen. Once retailers see the demand, they will request the product from the wholesaler or manufacturer directly. Companies may employ either a push or pull strategy. Proctor & Gamble—a perennial leader in advertising to consumers—learned years ago that it must get the products on the shelves to be sold. Thus, the company shifted much of its consumer targeted advertising to the trade to insure that it was stocked—thus, pursuing both a pull and push strategy. Others have used a pull strategy—for example, the Philadelphia Magazine ran an advertising campaign urging consumers to visit a newsstand to demand their magazine be carried. Companies pursuing a push strategy tend to rely more on their relationships with the trade, using IMC tools such as advertising, sales promotions, etc. that reach the middlemen. It is not at all uncommon for companies to incent sales employees to push their brands at the retail level. Decisions as to whether to emphasize a push or pull strategy depend on a number of factors including the company’s relation with the trade, the promotional budget and demand for the product. Companies with favorable channel relationships often use a promotional push strategy and work closely with channel members to encourage them to stock and promote their products. Firms with limited promotional budgets may not have the funds for advertising and promotion that are required for an effective pull strategy and may find it more feasible to target their efforts to the trade. Products with favorable demand resulting from unique benefits, superior advantages and/or popularity among consumers may use a pull strategy.

Chapter 02 - The Role of IMC in the Marketing Process

15. The text describes a number of different positioning strategies. Give examples of products and/or brands that utilize each of these different strategies. (LO5) The text lists a number of ways that companies can position their products. These include: a. Positioning by product attribute and benefits—in this case a company differentiates itself based on specific characteristics and/or benefits that it offers. Apple has positioned itself on its’ innovative technology and exciting products. BMW on its handling capabilities. b. Positioning by price/quality—companies like Bose, and Bang & Olefsen position themselves as very high quality brands that are worth the extra expense associated with their purchase. While not irrelevant, the companies want to communicate that price should not be the major factor considered in their purchase. Motel 6, on the other hand, positions itself as low cost, while still stressing the fact that they have not sacrificed quality in their motel rooms. c. Positioning by use or application—again using Bose as an example, the company advertises its expensive headset as the best for listening to music, and also as the best for its technological capabilities for noise reduction (for example when riding on an airplane). The company’s print campaign “Use it as a sanctuary or…. Reflects this positioning well. d. Positioning by product class—the now famous “Pork, the other white meat” is an excellent example of positioning by product class. A number of juice companies position themselves as a substitute fro eating fruit, and V* says to “drink your vegetables”.Yogurt has positioned itself as a fruit. e. Positioning by product user—Canon positions it’s cameras as being the best for the serious picture taker. The University of Phoenix positions itself as a college for working persons—not “your typical four year school.” f.

Positioning by competitor—credit card companies like Discover position themselves as offering more services than their competitors with no fees. Others credit card companies compare their rewards programs directly to competitors’.

g. Positioning by cultural symbols—The Jolly Green Giant, Quanta’s koala and the Pillsbury Doughboy are all examples of companies that have cultural symbols. Speedy Alka Seltzer and Ronald McDonald and the Wells Fargo stagecoach are other examples of this form of positioning.

IMC Exercise The text discusses a number of efforts by marketers to reach diverse market segments by targeting various ethnic groups and subcultures such as teenagers. Have students find ads targeted to specific market segments and have them bring these ads to class and discuss which market segment is being targeted, the type of appeal used in the ad, and whether they feel the targeting effort will be successful.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

CHAPTER 3 ORGANIZING FOR ADVERTISING AND PROMOTION: THE ROLE OF AD AGENCIES AND OTHER MARKETING COMMUNICATION ORGANIZATIONS Chapter Overview The purpose of this chapter is to familiarize the student with the various ways that organizations might organize for purposes of developing and executing integrated marketing communications programs. Students often have little or no idea of how the role of the various participants in the advertising and promotional program and how the IMC function is organized and coordinated. The chapter begins with a presentation of the various participants involved in the promotional planning process - advertisers, advertising agencies, media organizations, marketing communication specialist organizations, and collateral service organizations. This is followed by a discussion of the various organizational systems and the advantages and disadvantages of each. An in-depth discussion of the role and functions of advertising agencies is provided, as is an explanation of how agencies are compensated and evaluated. The chapter also discusses organizations that provide specialized integrated marketing communication services including direct-response, sales promotion and interactive agencies as well as public relations firms. It is very important for students to understand that a variety of different organizations may play a role in the development of various aspects of a company’s integrated marketing communications program.

Learning Objectives 1. To understand how companies organize for advertising and other aspects of integrated marketing communications. 2. To evaluate the advantages and disadvantages of the various ways companies organize for advertising and promotion. 3. To understand the role of advertising agencies and the services they perform as well as the various types of agencies and media specialist organizations. 4. To examine methods for selecting, compensating, and evaluating advertising agencies. 5. To explain the role and functions of specialized marketing communications organizations. 6. To examine various perspectives on the use of integrated services and responsibilities of advertisers versus agencies.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Chapter and Lecture Outline I.

PARTICIPANTS IN THE INTEGRATED MARKETING COMMUNICATIONS PROCESS

This chapter examines the various organizations that participate in the integrated marketing communications process, their roles and responsibilities, and their relationship to one another. Some companies choose to handle advertising, media buying and other parts of their IMC programs in-house. However, most major marketers use advertising agencies and other types of promotional specialist organizations to handle the various areas of their IMC programs as they do not have these capabilities internally. Marketers are always searching for creative ways to communicate with their customers and are looking for agencies that can offer a range of integrated marketing communication capabilities and help them compete in the rapidly changing world of advertising and promotion. The opening section provides an overview of the various participants in the integrated marketing communications process. The student should become familiar with the various players including clients, advertising agencies, media organizations, marketing communications specialist organizations, and those who provide collateral services. It is particularly important to note that with the movement toward IMC, marketing communication specialist organizations such as direct response agencies, sales promotion agencies, public relations firms, and digital/interactive agencies are playing an increasingly important role in the development and implementation of programs in their areas of expertise. However, decisions also have to be made regarding the coordination and control of the IMC program and whether this should be the responsibility of the client or turned over to the control of an outside agency. II.

ORGANIZING FOR ADVERTISING AND PROMOTION IN THE FIRM: THE CLIENT’S ROLE

How a firm organizes for advertising and promotions is a function of a number of factors including (1) the size of the organization, (2) the number of products it markets, (3) the role that advertising and promotion assume in the product mix, (4) the advertising and promotions budget, and (5) the structure of the firm. Three organizational designs are discussed: A.

The Centralized System—in this design, marketing activities are organized along functional lines. A common form is to have an advertising manager (or marketing communications manager) responsible for all advertising and promotions activities including planning and budgeting, administration and execution, and coordination with other departments and outside agencies. The Decentralized System—in this system, individual products or brands are the responsibility of the product manager or brand manager. All advertising and promotion for the brand or product will be this person’s responsibility (including responsibilities for working with all external agencies) and s/he will be in charge of all planning, implementation and control for that product or brand. Digital and Social Media Perspective 3-1 discusses how technology is changing the role of the brand manager. The In-House Agency—some companies develop their own internal ad agencies. The design of these agencies may vary from small advertising departments to operations as large as an external agency. In the latter case, the in-house agency will operate as a separate entity and control advertising and promotional expenditures in millions of dollars. Hyundai Motor Co.’s use of Innocean Worldwide America to handle its advertising and promotion in the U.S. market is a good example of this. The advantages and disadvantages associated with each of these organizational systems are shown in Exhibit 3-4. This exhibit can be used as an effective slide for class discussion purposes.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Professor Notes:

III. ADVERTISING AGENCIES Many large companies employ the services of an external advertising agency. In 2014 there were over 15,000 U.S. and international agencies listed in, (The “Red Book” can be accessed at www.redbooks.com) ranging in size from one and two person operations to those with almost a billion dollars in worldwide income. Red Books agency database contains detailed profiles of these agencies including clients, fields of specialization as well as an advertiser database with information on nearly 21,000 U.S. and international advertisers who each spend more than $200,000 annually on advertising. Over the past two decades the advertising industry has undergone major changes as many of the large agencies have merged with or acquired other agencies to form large advertising organizations. There are now four large agency holding companies including WPP Group, Omnicom Group, Publicis Group and the Interpublic Group. These four holding companies own multiple advertising agencies, media specialist companies, public relations firms, digital agencies and other types of marketing communication organizations. Exhibit 3-5 of the text shows the holding of the world’s five largest agency companies. An updated version of this is made available each year by Advertising Age and is available on the adage.com web site. The Ad Agency’s Role—external agencies provide a variety of services to their clients, including those discussed in the previous section. Though many clients have the capabilities of performing these roles themselves, they elect to use outside agencies for the following reasons: (1) the skills offered (2) objectivity and (3) experience. A.

Types of Advertising Agencies—all agencies are not the same of course. This section discusses the various types of agencies including the following: 1. Full Service—these agencies offer their clients a full range of services including account services, marketing planning and research, media planning and buying, sales promotion, creative services, and interactive media. The various departments of a full service agency include: •

Account services—the link between the advertising agency and its clients. Account executives serve as the liaison between the agency and client and are responsible for coordinating the agency's efforts in planning, creating and producing ads.

•

Marketing services—many full-service agencies provide a variety of marketing services to their clients and maintain departments such as research, strategy and planning and media. In many agencies the marketing services department may include account planners who are individuals that gather information that is relevant to the client’s product or service and can be used in the development of the creative strategy as well as other aspect of the IMC campaign. The research and media department provide important services that full-service agencies need to plan and execute their client’s advertising programs.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

•

Creative services—agency personnel in this department include artists and copywriters who are responsible for the creation and execution of the clients advertising messages. Creative services may also include print and broadcast production departments which are responsible for actually producing the advertising messages and putting them into final form. The traffic department coordinates all phases of production and sees that all ads are completed on time and deadlines for submitting the ads to the media are met.

•

Management and finance—like any other business, an advertising agency must be managed and must perform basic operating and administrative functions such as accounting, finance and human resources

Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agency’s clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business and it ensures continuity in servicing the account. 2. Other Types of Agencies and Services 1. Creative boutiques—these types of agencies specialize in and provide only advertising creative services. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Many creative boutiques are formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. 2. Media Specialist Companies—these are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. Professor Notes

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

IV.

AGENCY COMPENSATION

Agency agencies may be compensated in a variety of ways including: A.

Commissions from Media—the agency is compensated based on the time or space it purchases for its client. The commission has traditionally been 15% (16 2/3% for outdoor), but now is often negotiated downward. The commission system has been the target of criticism for a number of years as critics argue that it ties agency compensation to media costs and encourages agencies to rely too much on expensive, commissionable media such as network television and avoid noncommissionable media. Many advertisers have moved to a negotiated commission system that takes the form of reduced percentage rates, variable commission rates and minimum and maximum compensation rates. The most recent survey commissioned by the Association of National Advertisers, found that only 6 percent of clients pay a commission to their agencies. However, most clients do use the 15% commission as a benchmark to evaluate their current agency compensation agreement.

Fee, Cost and Incentive-based Systems—in situations where billings are low, and/or the client does not wish to pay a direct commission; an agreement may be reached in which the agency is compensated in the way of a fee, cost-plus or incentive-based compensation system. 1. Fee arrangements are of two types: a fixed-fee method where the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Under a fee-commission combination the media commissions received by the agency are credited against the fee. If commissions are less than the agreed-on fee, client must make up the difference. 2. Cost-plus agreement—under this compensation method the client agrees to pay the agency a fee based on costs of its work plus some agreed-on profit margin. This system requires the agency to keep detailed records of costs incurred in working on a client’s account. 3. Incentive-based compensation—while there are many variations on this system, the basic idea is that the agency’s compensation level will depend upon how well it meets predetermined performance goals for its clients such as sales or market share. Incentive-based compensation. Incentive based compensation systems are becoming more prevalent as marketers strive to make their agencies more accountable and reduce costs. Some companies, such as Coca-Cola, are moving toward a “value-based” compensation model whereby agencies are guaranteed only recouped costs, with any profit coming only in certain agreed upon targets are met.

Professor Notes

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Percentage Charges—when agencies purchase services from other outside agencies they typically add a percentage in the form of a markup charge as their compensation. These markups usually range from 17.65 to 20 percent.

The Future of Agency Compensation – Companies have continued to make significant changes in their agency compensation systems. The recent ANA survey showed that nearly half of advertisers are using some type of performance-based system versus only 13 percent a decade ago. Companies with large advertising budgets are even more likely to use incentive-based systems. Figure 3-8 shows some of the criteria used by for incentive-based compensation systems. More companies are changing their compensation systems as they move away from traditional mass media advertising and turn to a wider array of marketing communication tools. IMC Perspective 3-1 provides some interesting insights into changes that are occurring in the advertising agency business and how they are impacting agency compensation.

Professor Notes

EVALUATING AGENCIES

Given the substantial amounts of money being spent on advertising by many companies, demands for accountability are increasing. The agency evaluation process generally involves two types of assessments—financial audits and qualitative audits. The financial audit focuses on how the agency conducts its business including verification of costs and expenses, the number of personnel hours charged to an account and payments to media and outside suppliers. The qualitative audit involves the agency’s efforts in planning, developing and implementing the client’s advertising programs and the results achieved. An increasing trend among larger firms is to formalize this process. Exhibit 3-7 shows two components of the advertising agency performance evaluation system used by Whirlpool, the company that is one of the leading major appliance manufacturers. A. Gaining and Losing Clients—agencies are like their clients in the sense that they must solicit business, and often gain and lose business. The text offers a variety of reasons as to why agencies gain and lose clients, as well as some of the activities they perform in seeking new business. Current issues of Advertising Age or AdWeek will be useful in providing the instructor with examples of recent account changes and some of the reasons the clients decided to change agencies. 1. Reasons why agencies lose clients • Poor performance or service • Poor communication • Unrealistic demands by the client • Personality conflicts • Personnel changes

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

• • • • • • • •

Changes in size of the client or agency Conflicts of interest Changes in the client’s corporate and/or marketing strategy Declining sales and/or market share Conflicting compensation philosophies Changes in policies Disagreements over marketing and/or creative strategy Lack of integrated marketing capabilities

2. How agencies gain clients • • • • •

Referrals Solicitations Presentations Public relations Image and reputation

Professor Notes

VI.

SPECIALIZED SERVICES

In addition to advertising agencies, other outside organizations may provide marketers with specialized services that are important in developing and executing integrated marketing communication programs. A.

Direct Marketing Agencies—one of the fastest growing areas in IMC is direct marketing where companies communicate with their customers through telemarketing, direct mail and other forms of direct-response advertising. Direct response agencies provide their clients a variety of services including data base development and management, direct mail, research, media services, and creative and production capabilities.

Sales Promotion Agencies—there are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, fulfillment, premium design, and contest/sweepstakes management. Some time might also be spent discussing how promotional agencies are becoming important participants in the development of integrated marketing communications strategy for various companies.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Public Relations Firms —many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organization’s publicity, image, and affairs with consumers and other relevant publics including employers, suppliers, stockholders, government, labor and the general public. The role of PR firms is examined in more detail in Chapter 17.

Digital/Interactive Agencies—with the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communication organization has evolved—the digital agency. While many traditional agencies like have developed interactive capabilities or the major holding companies which they are part of have acquired interactive agencies. Many marketers are turning to interactive agencies to develop web sites, banner ads for the Internet, and other forms of interactive communications. The growth of social media and the increase in the number of marketers using them is giving rise to companies that specialize in developing applications and campaigns for platforms such as Facebook, Twitter and MySpace. Examples of these companies include AvenueSocial and Wildfire Interactive, Inc., both of which have web sites which can be accessed to show the services they provide.

Professor Notes

VII.

COLLATERAL SERVICES

The final group of participants in the promotional process is those organizations that provide collateral services such as marketing research, package design, consulting, photography, event sponsorship planning and production and broadcast production services. One of the more widely used collateral service organizations is marketing research firms that conduct both qualitative research such as focus groups and quantitative studies such as market surveys. VIII.

INTEGRATED MARKETING COMMUNICATION SERVICES

A significant trend in the advertising industry is to combine all of the above services under one roof. These one-stop service agencies bring together service providers so that the client needs only to use their firm to receive all of the marketing support s/he requires. Specific advantages and disadvantages of these arrangements have been cited:

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Pros and Cons of Integrated Services—It has been argued that IMC is nothing new, particularly in smaller companies and communication agencies that have coordinating promotion tools for years. The text discusses the advantages and disadvantages of the one-stop shop. 1. Advantages of integrated services • Greater control of the promotional process allows for more synergy among each of the communication program elements • More convenient for clients to coordinate all promotional efforts with one agency • Agencies with IMC capabilities can create a single image for the client 2. Disadvantages of integrated services • Synergy and economies of scale are often not achieved by a single agency handling all communication areas • Internal conflicts often arise within various departments within a large agency over areas such as advertising, public relations or sales promotion • Limits client’s ability to take advantage of specialists in various IMC areas

Responsibility for IMC: Agency versus Client—A final area covered in this section is a discussion of whether the client or advertising agency should have the primary responsibility for planning and coordinating the IMC process. Most marketers believe it is their responsibility to set strategy for and coordinated integrated campaigns while agency executives see this as their domain. The major barrier is a lack of people in agencies with the broad perspective and skills needed to make IMC work effectively. Internal turf battles, agency egos, and fear of budget reductions are also cited as major barriers to successful integrated marketing campaigns. A study by the Corporate and Executive Board’s Advertising and Marketing Roundtable found that for many companies, the traditional static model of a single ad agency or fixed roster of agencies working on a brand is being replaced by an open-source model whereby marketers hire multiple partners to leverage their talents and expertise in various areas. However, there is still the issue of who will coordinate the efforts the various specialist organizations as lead agencies prefer to handle many of these services themselves rather than overseeing the work of others.

Teaching Suggestions As noted earlier, the student is usually unfamiliar with how companies organize for advertising and promotion, and the role that various organizations play in this process. While most students are somewhat familiar with advertising agencies, they are less likely to know anything about direct response and sales promotion agencies, public relations firms and interactive agencies. You might note that there are some excellent career opportunities available in these areas. Students are often interested in working for an advertising agency. This chapter will help to familiarize them with other major participants in the IMC process and the important role they play. You might encourage students to visit the web sites of a promotion agency such as Aspen Marketing Services (www.aspenms.com ) or an interactive agency such as Razorfish (www.razorfish.com ) or Digitas, (www.digitas.com) all of which have very informative sites. A video case on Volkswagen and the PunchDub campaign created by the Deutsch LA agency, which is discussed in the chapter opener, is available on the Instructor DVDs that accompany the text and can be shown as part of your lecture.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Because of the rapidly changing advertising environment, it is important for the instructor to keep up to date with events that are taking place. Good sources of information on advertising are publications and their companion websites such as Advertising Age, (www.adage.com) AdWeek (www.adweek.com), and BrandWeek (www.brandweek.com). For excellent articles and sources of information on sales promotion students should be referred to Promo is now part of Chief Marketer and can be accessed online at http://www.chiefmarketer.com/promotional-marketing. Another excellent source of information on promotion is the Brand Activation Association (formerly the Promotion Marketing Association) which is the world’s leading non-profit promotion marketing trade association. The BAA has an excellent web site which can be found at www.baalink.org. Your lecture can be supplemented by articles from the sources listed above. We have also found strong student interest in identifying current ad campaigns have been created by various agencies. Most major agencies have excellent websites which contain client rosters, examples of their advertising, information about their advertising philosophy, approaches to branding and content related to other areas IMC areas.

Answers to Discussion Questions 1. The chapter opener discusses the success of Volkswagen in the U.S. market over the past five years. Evaluate the advertising the Deutsch LA agency has done for Volkswagen of America and the role it has played in helping to turn around the company in the U.S. market. How important is advertising for an automotive company such as Volkswagen? (L03,05) The Deutsch LA agency has developed a number of excellent advertising campaigns for Volkswagen and the various VW models such as the Beetle, Jetta, Passat, Touareg, Tiguan, and CC since taking over the account in 2009. Students are likely to be familiar with many of the Volkswagen commercials such as the popular “Force” spot that was one of the most popular spots on the 2011 Super Bowl and featured a little boy dressed as the Darth Vader character from the Star Wars movie. Deutsch LA has delivered outstanding creative work across all media channels for Volkswagen which has helped the company exceed its goals and achieve record sales in the U.S. market in 2012. Part of the success of Volkswagen is the new product line the company is marketing in the U.S. as well as improvements made in product quality. However, the advertising done by Deutch LA has also played an integral role in communicating the various features and benefits of the various Volkswagen vehicles and communicating how VW delivers German engineering a great value in a playful yet direct tone. Advertising and other forms of integrated marketing communications play a very important role in the marketing of automobiles. Many consumers base their purchase decisions on product related attributes such as price, quality, reliability, durability and performance, as well as on factors such as style and brand image. A variety of IMC tools are used to provide consumers with information about the various Volkswagen models as well as to create an image that will appeal to the target market for the car. Volkswagen uses all aspects of the promotional mix to market its vehicles. Advertising on television as well as in magazines and newspapers plays a very important role in building awareness and developing and reinforcing the image of the various VW models. Direct marketing is used by sending direct mail pieces such as brochures, DVDs and promotional offers to consumers the company is targeting or those who have indicated an interest in receiving more information and/or purchasing a VW. (This latter group is referred to as “hand raisers” in the automobile industry). Automotive marketers recognize that the Internet has become an important IMC tool as consumers spend a great deal of time online researching various vehicles before even going to dealerships. They will run use advertising and other IMC tools to drive consumers to their web sites where they provide detailed information about the various models, prices financing options and local dealers and can provide an interactive experience by allowing consumers to examine their vehicles and the various purchase options such as different colors, body styles and accessories. Automobile companies are 3-10 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

now using a variety of social media tools which have become an increasingly important part of the digital marketing campaigns of many companies. Television commercials as well as other videos can be viewed on YouTube and consumers are encouraged to connect with the companies through their Facebook page and on Twitter. Publicity for Volkswagen and its marketing communication campaigns is generated through press releases and other public relations activities that are designed to result in feature stories in magazines and newspapers as well as on the Internet. Automotive markets such as Volkswagen sponsors motor sports as well as various sporting events such as NASCAR, golf and tennis tournaments, ski races and even certain extreme sports to reach their target audience and build brand image. Promotional efforts for vehicles are extended to dealerships where point-ofpurchase displays and materials are provided along with training, contests, and incentives for sales people. For example, for the campaign launch Volkswagen provided its dealer with a PunchDub days point-of-sale and a Brand Construction kit that contained materials need to create local advertising and to carry the advertising theme to the dealer showroom. 2. Evaluate the “PunchDub” campaign that the Deutsch LA agency developed when it took over the Volkswagen of America account. Discuss the pros and cons of the campaign and assess the way it was implemented by the agency. (L03,05) The primary goal of the “PunchDub” campaign developed by Deutsch LA was to raise awareness of the Volkswagen product line in the North American market. Volkswagen of America has very aggressive growth plan for this market as the company plans to double sales from 400,000 to 800,000 vehicles by 2018. However, one of the challenges VW faced was that consumers knew the VW brand but were not buying the company’s cars as awareness was very high (nearly 80%) but market share was low (only 2%). And while overall awareness of the Volkswagen brand name was high, consumers recognized only a few of the VW models such as the Beetle and Jetta. The “PunchDub” campaign was designed to address this problem and make consumers aware of the other vehicles in the VW product line such as the Passat, Golf, GTI, Routan, Eos Tiguan, Touareg, and the new CC sedan. The campaign was built around the classic Punch Buggy (or Slug Bug) game that many consumers played in the heyday of the original VW Beetle where the first person to see one of the iconic vehicles would yell “Punch Bug” and playfully slug his or her friend. Deutsch put a new twist on the game by encouraging consumers to punch someone when they saw any VW model which was a clever way to increase attention to, and awareness of the VW product line. It is important to note that one of the major benefits of the campaign is that it worked very well online both through social media and on the Volkswagen web site. An online version of “Punch Dub” also debuted on the popular Facebook social network site on Super Bowl Sunday which encouraged people to dole out virtual “slugs” to friends and family for a chance to win a weekly prize (6-month leases on specific VW vehicles listed online) and the grand prize of a new Volkswagen CC sedan. Players could pick any one of thirteen VW vehicles, customize their punch and choose a Facebook friend to punch. The more friends they punched the better the chances to winning prize. The game was also available on the Volkswagen of America website and an online guide to the game was also available which players could use to develop and hone their punching technique. The PunchDub campaign was also supported by heavy advertising in traditional media including the Super Bowl where the first TV spot was one of the most popular commercials to air during the game. Within a few days the commercial had received more than 1 million online views while the game had 5,000 registered users and nearly 30,000 punches were thrown. The two-month campaign ran for two months and included outdoor, radio and newspaper advertising as well as an extensive public relations campaign that generated feature articles and stories in BusinessWeek and The Wall Street Journal as well as in local newspapers and on local television stations across the country. The campaign was also extended to Volkswagen dealerships as special point-of-sale-kits were developed to promote a National Sales event called “PunchDubDays” which included special offers on various VW models.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

The “PunchDub” campaign was implemented by using a variety of IMC tools and was a very good way to address the problem Volkswagen was facing of low awareness for many of the vehicles in its product line. The PunchDub game that was available on the VW web site provided consumers with an entertaining interactive experience and helped build awareness of the entire product line. In the second phase of the campaign Deutsch LA continued to showcase the entire VW product line but began to focus on specific attributes and features of the vehicles and how Volkswagen delivers German engineering at a great value. It is hard to find fault with the “PunchDub” campaign as it had a specific goal and the IMC strategy was well designed and executed. One limitation that might be noted is that of whether consumer would actually take the time to become engaged with the online campaign and play the “PunchDub” game. Consumers who did not do so would not learn more about the VW product line and one might argue that the IMC program would have been more effective if the monies had been spent by promoting the entire product line more directly. However, this would have been very expensive and may not have been as engaging and effective as the “PunchDub” campaign. 3. Who are the various participants in the integrated marketing communications process? discuss the roles and responsibilities of each. (L01)

Briefly

Advertisers or clients are the key participants. It is their product or service that is being offered and that must be marketed. The advertiser is responsible for all marketing aspects, and will ultimately have the final say regarding approval of the proposed integrated marketing communications program. It is the advertiser/client who ultimately must provide the budget and pay the bills as well. The advertising agency is an external organization specializing in the planning, creation, and production of the marketing communication messages. They may also provide additional services designed to facilitate the integrated marketing effort such as media planning and buying, research, strategic marketing planning, directing marketing, and digital/interactive marketing. Media organizations provide the advertiser with a channel for their communications. Media may include traditional forms such as print, broadcast, outdoor, as well as new digital media. Media organizations attempt to provide the advertiser with the proper environment for the message. Marketing communication specialist organizations provide services in specific areas of marketing communications. They include direct response agencies, sales promotion agencies, public relations firms and digital/interactive agencies. Collateral services participants are those who provide a wide range of support services including marketing research, package design firms, consultants, photographers, event sponsorship firms, and the like. Their function will vary in accordance with the needs of the integrated marketing communications program. 4. Discuss the various challenges faced by companies that use the brand management system when organizing for advertising and promotion. What are some of the things that marketers can do to address these problems and ensure that their brand managers are keeping abreast of external changes occurring in the market? (L02) Advantages of a decentralized or brand management system include the following: (1) the product or brand receives more concentrated managerial attention; (2) problems and opportunities may be responded to more quickly; (3) the product or brand has an advocate; and (4) the system offers increased flexibility. Under a decentralized system, the product manager has the primary responsibility for the planning, implementation and control of marketing programs for a specific product. S/he will also be responsible for sales projections, budgeting and profit performances. An important part of the product manager’s responsibility is to work with the advertising agency and other marketing communication organizations in developing promotional plans and programs for the brand. Product managers may have input into the advertising campaign including the creative strategy, media plan and evaluation of effectiveness.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

There are, however, drawbacks to the decentralized approach as brand managers may often lack experience and expertise as well as an understanding of the various IMC tools and how they can be used effectively. This system has also come under attack recently by those who argue that brand managers spend too much time on internal issues such as planning and budgeting and do not devote enough time to external matters or to creativity and problem solving. As discussed in IMC Technology Perspective 3-1, critics argue that the brand management system is becoming out-dated, particularly in the new world of digital media where brand meaning is increasingly being determined by consumers rather than marketers. It has been suggested that companies do away with the formal annual planning and budgeting process which consumes much of the time of brand managers in favor of more frequently updated and spontaneous plans that can be adapted as market conditions change. Companies will also have to allocate more resources to training brand managers on the rapidly developing world of digital and social media so they can better understand the capabilities of these tools and how they can be used to communicate with consumers. 5. Discuss the pros and cons of using an in-house agency. What are some of the reasons why companies might change from using an in-house agency and hire an outside agency? (L02) Some of the reasons why firms use in-house agencies include: (1) cost savings; (2) control; and (3) increased ability to coordinate marketing and promotional activities. Negative aspects include: (1) internal employees may have less experience and inferior skills than their external counterparts; (2) they may be less objective about the product and its capabilities; and, (3) they may be less flexible with respect to what they are willing and able to do with the product and/or brands programs. Companies often use an in-house agency when they have sufficient and capable staff to conduct the advertising and promotional activities themselves; they have a very large advertising and promotional budget and wish to save the costs of fees and commissions; and/or when they believe that the ability to coordinate and control the promotional activities is more feasible with this design. As discussed in the chapter, Hyundai Motor Co. recently moved all of their advertising to an agency which is owned by the company. Target is another example of a company that does its advertising in-house. The company likes to have control over its advertising as the role its plays in developing a strong brand image and position for the retailer. They also feel they have the creative capabilities to design and implement creative and effective advertising messages. However, in some cases Target will have some of its creative work done outside by a creative specialist or boutique. Companies change from using an in-house agency and hire an outside agency for various reasons. Many marketers feel that the use of an outside agency provides greater objectivity with respect to the advertising. When an in-house agency is used, management may get too close to the advertising process and product and lose its objectivity when evaluating the ads. Outside agencies can provide a more objective perspective on the market and business that is not subject to internal biases and politics. Companies often move from in-house to outside agencies as they become larger and their advertising and other marketing communication needs become greater. Rather than continuing to expand the in-house agency, many companies will move to using an outside agency that has the various services and expertise needed by the company. It should be noted that perhaps the major reason why outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in the advertising area. Outside agencies also offer more flexibility to an advertiser as they can always switch agencies and hire a new one if they are dissatisfied with the work being done. It is much more difficult to terminate an in-house agency and hire new personnel to replace them. 6. Discuss the reasons companies such as Under Armour or Calvin Klein might use an in-house agency rather than an external agency. Why might a company change from us9ng an in-house agency and hire an outside agency? Do you think they will continue to handle all of their advertising and IMC work in-house? Why or why not? (L02, 03)

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Companies often use an in-house agency when they have the staff and talent to conduct the advertising and promotional activities themselves; they have a very large advertising and promotional budget and wish to save the costs of fees and commissions; and/or when they believe that the ability to coordinate and control the promotional activities is more feasible with this design. Under Armour and Calvin Klein are companies that prefer to keep their advertising in-house to retain control over the creative process. They feel they have the capabilities to design and implement creative and effective advertising messages as their creative director has been with the company since it was founded and has a very good grasp of the creative process and the image UA wants to communicate through its IMC program. Both companies are able to attract creative talent to work on their advertising as they are high profile companies that provides creative personnel with autonomy as well as an opportunity to develop creative advertising that is seen and respected by others in the ad industry. Thus far, both have been able to develop very effective advertising and promotion campaigns using the in-house approach. As a company such as Under Armour continues to grow, the company will have to make a decision as to whether they want to continue with the in-house approach or switch to using an outside agency. The company’s major competitors such as Nike, adidas, Reebok and other athletic shoe and apparel companies use outside agencies to handle their advertising and promotion. While Under Armour may outsource some of its creative work, it is unlikely that the company will totally abandon the in-house model that has served it so well since its founding. However, they have recently hired external agencies to handle the advertising for new products such as basketball shoes as well as their women’s apparel. 7. Discuss how technology and the emerging role of digital and social media are impacting the role of brand managers. What types of skills are needed to be a successful brand manager today? What can companies do to train brand managers so they can keep up with the changes occurring in digital and social media? (L02) As discussed in Digital and Social Media Perspective 3-1, many brand managers are not well equipped to handle the new world of digital media where brand identity is increasingly being shaped by consumers rather than marketers. Middle and older-aged brand managers who are not digital natives may be particularly challenged to understand the role of social media and the important role they play in the lives of younger consumers. The increasing use of social media such as Twitter, Facebook, YouTube, Pinterest and the myriad of blogs is changing the way brands communicate with their customers. Many brand managers spend much of their time on internal issues such as planning and budgeting and do not have ample time to devote to managing the social identity of their brands. Companies can address these problems by developing training programs for brand managers to help them better understand the role of various social media and how they can be used as part of the IMC program for the brands they manage. Many digital media companies such as Facebook, Twitter, and Google also provide online courses and tutorials that managers can take to enhance their knowledge and understanding of digital and social media. 8. What is an agency holding company? Discuss how the emergence of major holding companies is impacting the advertising industry as well as the entire field of integrated marketing communications. An agency holding company is a large organization that owns multiple advertising agencies as well as other types of marketing communication companies such as public relations, digital/interactive, direct marketing and sales promotion agencies. The four main agency holding companies are WPP, Omincom Group, Publicis Groupe, and Interpublic Group of Companies and account for nearly half of the revenue generate by advertising agencies in the United States. Holding companies emerged during the 1990s as the agency business went through a wave of consolidation which saw many midsize agencies either be acquired by or form alliances with larger agencies. A major driver behind this was the desire by clients to have agencies with international capabilities and their alignment with larger agency organizations gave them access to a network of agencies around the world. Many holding companies also made acquisitions to expand their capabilities beyond traditional advertising 3-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

into other areas of integrated marketing communications such as public relations, direct marketing, sales promotion, and digital/interactive as their clients began allocating more of their marketing communication budgets to these IMC tools. The emergence of agency holding companies has resulted in more of the advertising agency business, as well as other areas of IMC, being controlled by a few major organizations. This makes it possible for large marketers to consolidate their advertising and other IMC tools with one holding company which can provide services across a variety of areas. 9. Discuss the role of media specialist companies. Why are marketers likely to use a media specialist company to handle their media buying and planning versus the media department of an agency? (L03) Media specialist companies specialize in media planning and the buying of media, particularly radio television and magazines. The task of purchasing media has grown increasingly complex as more media options emerge. Media specialist companies provide an important service by specializing in the analysis and purchasing of media time and space. Also, because media specialist companies purchase large amounts of time and space, they often receive large discounts and can save their clients money on media purchases or provide them with more exposure from a media budget. Many agencies, as well as their clients, have recognized that it is very difficult to staff and operate a media department that can provide the same level of service as media specialist companies. Thus, agencies have been unbundling media buying from the services they offer clients. Many large agency holding companies now own media services companies to better serve their clients. These media specialist companies often handle the media planning and buying for other companies that may use a different agency for their creative work. 10. Discuss the challenges advertising agencies face in negotiating compensation structures with their clients when the procurement department becomes involved in the process. How might an agency respond to clients who demand to see their labor costs overhead and profit margins as part of the negotiation process? (L04) As more marketers adopt an integrated marketing communication perspective and move away from traditional mass media, changes in compensation systems are taking place. These changes are taking place to encourage agencies to look beyond expensive commissionable media such as television and magazines and to make use of other IMC tools such as events, the Internet, and direct marketing. advertising in developing IMC programs. Many companies are also demanding more accountability from their agencies and are moving away from the traditional commission system and using incentive-based systems where agency compensation is tied to performance. The performance measures may include objective measures such as sales and/or market share as more subjective measures such as evaluations of the agency’s creative work. Companies feel that if agencies really want to be true partners, they will be willing to share in the sales performance of the product or service with them. Demands for accountability are also resulting in more scrutinizing of agency’s labor and other costs incurred in serving the account. Agencies are being viewed like other suppliers who are asked to continually lower their costs as clients are unwilling to compensate agencies for expenses that cannot be directly related to the performance of the advertising program. 11. Discuss the various criteria that might be used by an automobile company such as Volkswagen in evaluating its advertising agencies. Which of these criteria do you think would receive the most weight and why? (L04) The agency evaluation process usually involves two types of assessments, one which is more financial and operations focused and the other which is more creative and qualitative in nature. The financial audit focuses on how the agency conducts its business in working for the client and is designed to verify costs and expenses such as the number of personnel hours charged to and accounts, and payments to media and various other outside suppliers. The qualitative audit focuses on the

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

agency’s efforts in planning, developing and implementing the advertising and promotional program and the results achieved. Major automotive advertisers such as Volkswagen are likely to have a formal and systematic review process given the size of their advertising budgets and the important role advertising plays in the marketing of automobiles. Factors that are likely to be considered include the quality of the work done by the agency, particularly with respect to creative strategy and execution for advertising and other areas of the IMC program handled by the agency. The companies are also likely to focus on result achieved including sales and/or market share gains and losses. However, these companies recognize that it is often difficult to related outcome measures such as sales directly to advertising and other forms of promotion so they might considered other metrics such as awareness, recognition and various image related measures and how they have changed as a result of the advertising and promotion work done by the agency. 12. Discuss the reasons why advertising agencies lose accounts. Find an example of a company that changed advertising agencies and identify the factors that led them to switch to another agency. (L04) The relationship between a client and an agency is influenced by a variety of factors. An advertiser may decide to switch agencies for a number of reasons. Some of the most common reasons why clients switch agencies are discussed on pages 96-97 of the text. These include perspectives on compensation policies, the demands clients place on agencies, the level of service the agency provides, the personalities of agency and client personnel, the performance of the client’s product or service, the perceived quality of the agency work in various areas (including account planning and management, creative, media, use of non-traditional media), and changes in the competitive situation. Changes in top management of a client may also affect the agency client relationship. New management may prefer a particular agency or certain approach to advertising and promotion which can affect the client’s relationship with the agency. These reasons can apply to long-term clients as well. When marketers are having problems such as stagnant or declining sales or losses in market share they will often look to advertising. Often the problems are blamed on advertising agencies. In the competitive world of advertising, agencies are always looking for new business and major advertisers know they can attract a great deal of interest and attention when they put their accounts up for review. Students should be encouraged to find an example of a company that recently changed advertising agencies and identify the specific factors that led them to do so. Publications such as Advertising Age, AdWeek and BrandWeek often have stories about companies that change agencies and can be used to find specific examples to analyze. 13. Discuss the pros and cons for a marketer having one company handle all of its marketing communication needs versus using specialized marketing communication firms to handle the various components of the program. (L05,06) Some marketers prefer to have all of their IMC activities performed by one agency rather than using multiple agencies that specialize in various areas such as direct marketing, sales promotion, interactive marketing, and public relations. These companies feel that by having all of the IMC functions performed by one agency makes it easier to develop and implement a consistent and uniform program where everyone is working with the same information and toward the same goals and objectives. They also feel that giving one agency control of entire IMC program achieves greater synergy among each of the communication elements. It also makes it easier for the client when all of the promotional elements such as advertising, direct mail, event marketing, sales promotion, interactive marketing and public relations are handled by one large agency. However, some companies prefer to use companies that specialize in specific areas of integrated marketing communications such as sales promotion, public relations, direct marketing and interactive marketing. These agencies are important because they are specialists in planning, developing and implementing these various IMC functions and can provide a great deal of expertise to these areas.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

For example, an interactive agency is an organization that specializes in the development and strategic use of various interactive marketing tools such as websites for the Internet, banner ads, social media sites, and other forms of digital media. Many marketers are using digital agencies because they are specialists in field of interactive media and have capabilities beyond what might be found in a full service advertising agency. Companies that are making the Internet and social media a major part of their IMC programs may use a digital agency that has strategy, creative and technology capabilities and can help these companies integrate the Internet into various aspects of their business such as brand building, communications, transactions, and customer service. Companies may choose to use these specialized agencies rather than having one agency handle all of its IMC needs as they feel that they offer more expertise in a particular marketing communications area. These specialized agencies are often smaller and companies may feel that their account is getting more attention or is being handled by more talented individuals. The specialized agencies may also cost less since they may be smaller and thus have less overhead and other costs to cover.

Additional Discussion Questions (not in text) 14. Why might a company choose to use a creative boutique rather than a larger, full-service agency? Find an example of a company that uses a creative boutique and discuss why the decision to use a smaller agency may be appropriate for this firm. (L03) Creative boutiques are agencies that provide only creative services and have developed in response to some companies’ desires to use only the creative talent of agency. There are a number of reasons why marketers use creative boutiques. These smaller agencies often turn out excellent creative work and do not have the bureaucracy and politics of larger agencies. Many companies also feel that by working with a smaller creative boutique they can get more attention and better access to creative talent than they would at a larger agency. Many creative boutiques are formed when creative people leave large agencies and form their own agencies. Often they take with them a client with whom they have worked closely and developed a strong relationship. Another reason why a company might use a creative boutique is that there are companies available to handle other parts of the advertising and promotional program. Independent media buying companies can be used to develop and implement the media strategy and plan while other types of companies can provide specialized services in other areas such as direct response, sales promotion, and interactive agencies as well as PR firms. Students should be encouraged to identify a company that uses a creative boutique and evaluate why they do so rather than using an outside agency. Articles often appear in publications such as Advertising Age or Adweek that discuss agencies used by various companies. Alternatively, students might identify a creative boutique and look at the client list on the agency’s web site. 15. Discuss the changing role of account representatives in advertising agencies. Discuss how the role of account representative is changing and the developments that underlie these changes. Do you think account representatives will become obsolete in the future? Why or why not? (L03) Account representatives or executives are individuals who work in an advertising agency and serve as the liaison between the agency and the client. They are responsible for understanding the client’s marketing strategy as well as its advertising and promotion needs and interpreting and explaining them to agency personnel such as the creative department. Traditionally, their positions have involved working with the client to formulate the advertising plan, coordinating the agency’s services, and representing the client’s point-of-view to those in the agency. The role of account representatives is changing as they are now required to have a broader range of skills that they can use in interacting with the client. Agencies want account representatives who are good strategic thinkers and have a broad-based marketing and business perspective that extends beyond media advertising. As other integrated marketing communications tools such as direct, digital/interactive and non-traditional media become more widely used, they are expected to have an understanding of their value and how they can be used as part of an IMC programs. Many agencies are facing increasing pressure from 3-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 03 - Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

their clients to keep costs under control and to justify the number of individuals assigned to work on their account. Thus, the number of account representatives assigned to work for a client is being reduced and those who handle the account are being asked to do more. It is unlikely that account representatives will become obsolete as they still play an important role in serving as the link between the agency and its clients. However, the skill set required to be an account representative is changing and the position is likely to become more demanding as marketers continue to move away from traditional media advertising and utilize a variety of IMC tools. Thus, agencies are developing training programs for their account executives to better educate them in a variety of areas and provide them with the skills needed to interact with clients who are becoming increasingly demanding of them. 16. Discuss the responsibilities and duties of an advertising or marketing communications manager in a company that uses a centralized organizational system versus a company that uses a decentralized system. (L02) The specific duties of the advertising or marketing communications manager will vary depending upon the size, organization and makeup of the firm. In a centralized system the manager may have responsibilities for all promotional functions except sales. These responsibilities may include planning and budgeting, administration and execution of the promotional program, coordination with other departments and outside agencies, and program evaluation. An advertising or marketing communication manager is usually needed even if an outside agency is used, as the agency may not perform all of the marketing tasks required. There is also still a need for someone to plan and coordinate the IMC program internally as well as to serve as the liaison between the agency and the firm. In addition, the ad manager will be responsible for evaluating the external agency’s performance. Under a decentralized system, a product or brand manager has responsibility for total management of the brand which includes planning, budgeting, sales and profit performance. The brand manager’s responsibilities will be similar to those of the advertising or marketing manager in a centralized system as s/he will work closely with the outside advertising agency and other marketing communication specialists such as promotion or interactive agencies to develop budgets, define strategies, and oversee the implementation of the marketing program.. 17. Discuss some of the reasons why traditional advertising agencies have been developing more integrated marketing communications capabilities. What changes might traditional agencies have to make to improve their IMC capabilities? (L06) Traditional advertising agencies have been developing more IMC capabilities because their clients are shifting more and more of their promotional dollars away from mass media advertising to other areas of marketing communication such as direct marketing, public relations, sales promotion, the Internet and event marketing and sponsorships. By expanding their capabilities, traditional agencies can offer a full range of IMC services and provide a total communications solution to their clients. By expanding their IMC capabilities and services, traditional agencies can also make money from other areas of their clients promotional spending such as direct marketing, interactive, sales promotion and public relations. The greatest change that traditional agencies have to make to improve their IMC capabilities is to develop or acquire expertise in these other areas. Traditionally agencies have been experts in areas related to advertising including creative and media. To expand their IMC capabilities agencies have to offer a broader range of services and develop expertise in areas such as direct marketing, event marketing, sales promotion, digital and social media, and public relations. Many agencies have been acquiring these capabilities by purchasing companies such as interactive agencies, public relations and direct marketing firms or promotional agencies. Others have been working to develop these IMC skills internally through their hiring and training processes.

Chapter 4 - Perspectives on Consumer Behavior

CHAPTER 4 PERSPECTIVES ON CONSUMER BEHAVIOR Chapter Overview The purpose of this chapter is to examine the field of consumer behavior and to demonstrate how knowledge and understanding of the consumer can be used in developing promotional strategies and programs. This chapter utilizes the basic consumer decision making process model as a framework for examining consumer behavior. The chapter takes the student through the various stages of this model and discusses what occurs at each and how advertising and other forms of promotion can be used to influence consumer decision making. The influence of various psychological concepts or influences such as motivation, perception, attitudes and integration processes are examined at the appropriate stages of the decision process model. Attention is also given to the three major variations in the consumer decision making process: routine response behavior, limited problem solving and extended problem solving. Consideration is given to how advertising and promotional strategies may differ depending on the type of decision making process consumers are likely to be using.

Learning Objectives 1. To understand the role that consumer behavior plays in the development and implementation of advertising and promotional programs. 2. To understand the consumer decision-making process and how it varies for different types of purchases. 3. To understand various internal psychological processes, their influence on consumer decision making, and implications for advertising and promotion. 4. To recognize various approaches to studying the consumer learning process and their implications for advertising and promotion. 5. To understand external factors such as culture, social class, group influences, and situational determinants and how they affect consumer behavior. 6. To understand alternative approaches to studying consumer behavior.

Chapter and Lecture Outline I.

AN OVERVIEW OF CONSUMER BEHAVIOR

A brief introduction to the field of consumer behavior and an indication of the increased importance that this domain of study has assumed in marketing would be a good starting point. The instructor should discuss the fact that to operationalize the marketing concept it is critical that the marketer have an understanding of some of the consumer decision making processes. Likewise, to effectively design effective advertising and promotions programs, these processes must be understood and considered. It is important to point out that the development of successful marketing communication programs begins with understanding why consumers behave as they do. Those who develop advertising and other promotional strategies begin by identifying relevant markets and then analyzing the relationship between target consumers and the product/service or brand.

Chapter 4 - Perspectives on Consumer Behavior

Consumer Behavior can be defined as the process and activities that people engage in when searching for, selecting, purchasing, using, evaluating and disposing of products and services so as to satisfy their needs and desires. The decision process model should be introduced and a brief description given of the five stages: • Problem recognition • Information Search • Alternative Evaluation • Purchase Decision • Post purchase Evaluation You should let the students know that this model will be used as a framework for analyzing the consumer decision making process. You will be going through the various stages of the model, discussing what occurs at each and how advertising and promotion can be used to influence consumer decision making.

Professors Notes

II.

THE CONSUMER DECISION-MAKING PROCESS

The consumer purchase decision process is generally viewed as consisting of sequential steps or stages through which the buyer passes in purchasing a product or service. Figure 4-1 of the text shows the various steps in this process as well as the relevant internal psychological processes that occur at each stage such as motivation, perception, attitude formation, integration and learning. A.

Problem recognition—The first step in the consumer decision-making process is that of problem recognition, which is caused by a difference between the consumer’s ideal state and actual state. There are various causes of sources of problem recognition. These include: 1. Out of stock 2. Dissatisfaction 3. New needs/wants 4. Related products/purchases 5. Marketer induced problem recognition 6. New products Examining Consumer Motivations—the way a consumer perceives a need and becomes motivated to solve a consumption problem will influence the remainder of the decision making process. To better understand the reasons underlying consumer purchases, marketers develop considerable attention to examining motives or factors that compel or drive a consumer to take a particular action. Hierarchy of needs—one of the most basic and popular approaches to understanding consumer motivation is the classic theory of human motivation popularized by Maslow. His hierarchy of needs postulates five basic levels of human needs: • physiological needs • safety needs • social/love and belonging needs 4-2