Understanding Promotion

Defining Promotion

As a key marketing element, promotion comprises communications tactics used to educate consumers, increase demand, and differentiate brands.

Learning Objectives

Describe how promotional tools work together to educate consumers and generate sales

Key Takeaways

Key Points

  • A promotional plan identifies where, when, and how advertising, personal selling, PR, sales promotion, and direct marketing tactics will be used to support sales and branding objectives.
  • Promotional tools are used to increase sales, build brand value and recognition, strengthen market positioning, and launch new products.
  • Online banner advertisements, store rebates, contests, events, and media placement are all examples of communications tactics used in the promotional mix.

Key Terms

  • stakeholder: a person or organization with a legitimate interest in a given situation, action, or enterprise
  • publicity: Advertising or other activity designed to rouse public interest in something.
  • Direct Marketing: Marketing that reaches customers by communications directly addressed to the customer.

What is Promotion?

Promotion is one of the primary elements used in the marketing mix. Thus, promotional efforts should work in harmony with product marketing, pricing, and distribution actions that target prospects and customers. When assembling a promotional plan, marketers typically employ one or more of the following five promotional subcategories: personal selling, advertising, sales promotion, direct marketing, and publicity (or public relations ).

These communication tools serve as tactics within the promotional plan to accomplish objectives such as:

  • Increasing sales
  • Launching new products
  • Creating and building brand equity
  • Establishing market positioning
  • Retaliating against competition
  • Strengthening brand image

As organizations implement their promotional plan, they also seek to educate consumers, increase consumer demand, and differentiate their products and services in the marketplace.

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Cingular Rewards Card: Companies use promotional tactics such as reward programs to increase sales and acquire customers.

The Promotional Mix

Increased market segmentation, information technologies, and digital communications have created new ways for promoting products across different media. Today, organizations can create online banner advertisements, social networking websites, blogs, and search engine optimization campaigns to promote their products and services. However, traditional promotional tools such as special events, celebrity endorsements, in-store coupons, and newspapers are also employed to entice customers to purchase goods. For example, retailers often use promotional tactics including discounts, store rebates, free items, contests, and other special offers to drive new sales and repeat purchases.

The promotional tools used to educate customers and generate sales vary depending on the organization’s objective. Because public relations (PR) focuses on influencing and shaping public opinion, PR efforts are useful for building brand value and generating positive stories around products and services. Events, which often generate publicity, can serve long-term objectives for building partnerships with external stakeholders, strengthening customer loyalty and enhancing industry credibility.

However, organizations may choose to use short-term mechanisms such as sales promotions and coupons to generate immediate customer interest and revenue. Direct mailers or email newsletters further support these incentives to prompt customer action and purchases. Print, television, radio, and online advertising can be used to promote all of these activities and drive sales for the organization. These promotional tools are even more effective when built into an integrated marketing communication strategy, since all communications work together simultaneously to multiply consumers’ exposure to brand messaging.

The Many Goals of Persuasion

Promotional tactics are frequently used by companies to persuade consumers to choose their products over competing brands.

Learning Objectives

Describe the techniques used to persuade consumers to purchase products over competing brands

Key Takeaways

Key Points

  • To convince consumers to purchase their products over competing brands, companies focus on differentiating their products, building brand awareness and loyalty, and providing consumer education.
  • Companies employ a myriad of design techniques to shape consumers’ perception of the physical products displayed in stores, on the street, or in the digital space.
  • Some of the promotional tools used to convince and persuade consumers to make purchasing decisions include reward programs, positive consumer reviews, and attractive advertisements.

Key Terms

  • differentiation: The process of distinguishing a product or offering from others to make it more attractive to a particular target market.

The Many Goals of Persuasion

To convince consumers that their products possess advantages over similar brands, companies focus on differentiating their brands using various promotional tactics. Advertising, personal selling, sales promotion, and public relations activities are commonly used to persuade consumers to make a purchase. Brands constantly promote product features and benefits to convince consumers that their products either address the consumer’s needs or solve a particular problem. By promoting their brand in creative and compelling ways, companies hope to create positive esteem and loyalty toward the brand to fuel repeat purchases and customer retention.

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T-Mobile Promotion: Companies use special promotions to drive repeat business and brand loyalty.

Product Differentiation

When running promotional programs, companies seek to clearly and effectively market their product’s differential factor. Differentiation sets similar products apart from one another, and creates value for consumers evaluating different brands. Differentiating products allows companies to influence consumers’ perception of their brand in an increasingly crowded marketplace. If the product’s differential factor is compelling enough, companies hope to convince consumers to continually choose their products over competitors.

Companies employ a myriad of techniques to shape consumers’ perception of the physical products displayed in stores or on the street. Common persuasive techniques include:

  • Using bright and attractive displays depicting emotions such as excitement, relaxation, or happiness.
  • Incorporating prominent and easily recognizable colors in billboards, print ads, and design packaging.
  • Strategically placing and arranging products in stores to allow for maximum visibility and purchase opportunities.

Colors and imagery can serve as powerful visuals for quickly conveying a product’s ability to successfully meet consumer needs. For instance, colors such as yellow and orange provoke excitement while blue and green establish trust, cleanliness, and calmness. As more consumers spend their time surfing the Internet on computers and mobile devices, similar strategies are used in online promotions such as banner ads and email communications. Digital communications, like traditional communications, rely on captivating and clever messaging to prompt open rates and click-throughs to advertisers’ landing pages. With social media, companies have the ability to advertise their product’s differential qualities to any person in the world, at any given instant.

Brand Awareness and Loyalty

The primary objective of marketers and advertisers is to present ideas in a manner that is so convincing that consumers will not just purchase a product or service once, but will do so repeatedly over time. Companies must thus remind customers of their product’s unique benefits using messaging that resonates with consumer needs and values. Branding, product marketing, and loyalty marketing all form part of the customer proposition – the subjective assessment by the customer on whether to purchase a brand based on the value they receive from each of these marketing elements.

As companies compete for consumer attention across print, television, radio, and the Internet, promotional tools such as reward and discount programs are repeatedly offered to loyal customers in return for their continued business. The airline industry’s frequent flyer program is a successful example of loyalty marketing. These programs rely on the earned loyalty of current customers to attract new loyalty from future customers. However, exclusive incentive programs must strike a balance between increasing benefits for new customers over any existing loyalty plan they are currently in and keeping existing customers from moving to new plans.

Consumer Education

Companies look to be brand leaders in their industry by providing consumers with relevant information on product pricing, functionality, and availability. Providing consumers and other brand stakeholders with the skills, concepts, and understanding required to achieve maximum satisfaction and utilization of the product can transform consumer needs into perceived wants. Even after a purchase is made, companies devote sales and customer service teams to supporting customers with training and other educational programs. This idea is especially true for highly technical products such as computer software, which regularly release upgrades and new features.

Reviews of products in trade publications and on websites can also help promote or downgrade products. Consumers may include review and rating websites such as yelp.com or consumer reports as part of their education on product features and benefits. These reviews also serve as indirect public relations for the brand, potentially enhancing and strengthening brand value. Outside consumer opinions and expert insight fall under the arsenal of promotional tools that can persuade consumers during the buying decision process.

Identifying Prospects

Organizations must identify prospective customers and understand their needs and wants to improve the odds of making a sale.

Learning Objectives

Outline the sales process, and tactics used to target prospects

Key Takeaways

Key Points

  • Personal selling functions as an essential component within a company’s larger integrated marketing communications strategy.
  • The first step in identifying a target market is analyzing whether there is a strong correlation between product benefits and customer needs.
  • Cold-calling, trade shows, direct mailings, product seminars, webinars, and advertisements are some of the promotional tools used to generate new leads.

Key Terms

  • bottom line: The final balance; the amount of money or profit left after everything has been tallied.
  • unique selling proposition: Any aspect of an object that differentiates it from similar objects.
  • sales pipeline: A visualization of the sales process of a company.

Identify Prospects

Personal selling functions as an essential component within a company’s larger integrated marketing communications strategy. Customer sales are the lifeblood of a business, contributing directly to the company’s bottom line. Before closing a sale or launching promotional activities, organizations must first understand the needs, wants, and habits of their target audience. Identifying these prospects or potential customers early in the sales process is key to keeping a company’s sales pipeline full. Generating a steady flow of prospective customers into this sales pipeline builds consistent revenue streams, ensuring longevity for the organization.

Two men conduct research.

Sales Presentation: Salespersons conduct significant research on their target markets to better market products and services to prospects.

The Importance of Sales Prospecting

Prospecting for customers is the first step in personal selling. Consequently, identifying and maintaining a steady list of prospects is usually a salesperson’s top priority. As a company introduces and markets new products, the number of customers will fluctuate depending on the needs of its target market. It is the salesperson’s job to continually replace these former customers to maintain and increase sales.

Prospects are usually labeled as sales leads, which can eventually be converted into contacts and opportunities. For sales prospecting to be an effective component of integrated marketing communications, organizations implement sales methodologies to qualify and track the conversion rate of sales leads. These systems are also used to map the different marketing communication touchpoints that help funnel leads into the organization’s sales process.

Tactics Used to Identify Prospects

Before an organization begins marketing to prospects, they must conduct extensive research and analysis on their potential market. Ideally, the organization’s salespersons are also working with marketers who are supplying marketing analysis to support sales efforts. Likewise, communications including websites, events, public relations, advertising, and social media are all promotional tools helping to drive prospects towards the organization.

The marketing and sales teams’ market analysis validates if a strong correlation exists between product benefits and customer needs. This entails finding out customers’ requirements, priorities, and budget. Other data companies use to build customer profiles include psycho-demographic characteristics such as age, sex, profession, personal interests, and buying habits. If the potential market is very large, then organizations must decide whether to target specialized segments to save time and money. Companies that are able to tailor their products or services to a specific niche market can develop a unique selling proposition ( USP ) in that particular market segment. A brand ‘s USP enables it to enter markets where there is less competition and greater potential to build brand equity and recognition. It can also shorten time to sale. The longer companies spend marketing to prospects, the more people and financial resources are spent to close a sale and generate revenue.

After researching and identifying their target market, organizations use promotional tools including cold-calling, trade shows, direct mailings, product seminars, webinars, and advertisements toward leads generation. Organizations also use these tools to build mailing lists for newsletters and other promotional activities to nurture relationships with prospects and guide them further along the buying process. Organic search engine results and word-of-mouth referrals, particularly through social media and other digital channels, can also be powerful tools for identifying potential customers. Many organizations focus on building a strong web presence using effective search engine optimization, along with both traditional and digital communication channels, to generate new leads.

Encouraging Product Trials

Promotional tactics such as free samples and discounts are often used to encourage consumers to participate in product trials.

Learning Objectives

Give examples of incentives used to encourage product trials

Key Takeaways

Key Points

  • Adjusting price, product, and place enhances both the trial offer and appeal of the final product or service for consumers.
  • Repackaging the offering so that consumers can test the product allows them to assess whether product benefits outweigh price and other factors during the buying process.
  • Radio and television advertisements, public relations events, and mailings comprise some of the tools companies use to promote the availability and appeal of product trials.

Key Terms

  • opt-in: The property of having to choose explicitly to join or permit something; a decision having the default option being exclusion or avoidance; used particularly with regard to mailing lists and advertisement.

Encourage Product Trial

Running a product trial is a common promotional tactic used by brands looking to enter a new market, release a new product, or increase existing sales. It is particularly useful for targeting specific audiences who are loyal to specific brands or are price-conscious. Product trials include free samples, price reductions, or other purchase incentives designed to encourage consumer use during and after the trial.

A sign that says "free samples."

Free Samples: As part of product trials, companies offer free samples to customers.

Product trials are useful when companies need to adjust parts of their marketing communications strategy to successfully target a market segment. For example, college students may be particularly budget-conscious and choose products based on price rather than quality or popularity. Repackaging the offering so that students can “test drive” the product allows students to assess whether product benefits outweigh price and other factors during the buying process.

Promotional Tactics

To encourage consumers to participate in free trials, brands can bundle their offers with other incentives and discounts. Perks such as free shipping and handling and future coupons can all drive consumers toward making a purchase after the end of the free trial period.

Adjusting these three variables – price, product, and place (distribution or location) – enhances both the trial offer and the appeal of the final product or service. Developing communications for selected audiences most receptive to the brand’s offer, reduces time and money spent on implementing promotional programs.

Some of the promotional tactics companies employ to encourage consumer participation in product trials include:

  • Advertising in media that target consumers are most likely to read or listen to.
  • Sponsoring or exhibiting at an event related to the target consumers’ interests and following up with press coverage in local and national publications.
  • Using an opt-in database to send mail-outs or email newsletters with information on how to take advantage of the product trial and related promotions.
  • Promote the product trial online via websites, social media, and paid and non-paid search marketing programs.

Stimulating Demand

For brands to successfully stimulate consumer demand, they must understand consumer needs and motives.

Learning Objectives

Discuss the psychological factors that drive consumer demand, and how they play into marketing segmentation

Key Takeaways

Key Points

  • Before a consumer is motivated to purchase a product, there must be a physical, mental, or emotional need for the product or service.
  • The source of motivation driving consumer demand can be internal, environmental, or psychological.
  • Studies on consumer motivation have led to the development of segmentation or personality profiles that factor traits such as age, sex, income, and lifestyle.
  • Companies can tailor their marketing communications strategy based on consumer segmentation to stimulate demand for products and services.

Key Terms

  • latent: Existing or present but concealed or inactive.
  • segmentation: The act or an instance of dividing into segments.
  • value proposition: The benefit (such as profit or convenience) offered by an organization’s product or service.
  • personality: a set of qualities that make a person (or thing) distinct from another

Stimulate Demand

Factoring consumer wants and needs is an essential component to assembling a successful marketing communications strategy. In the late 19th and early 20th centuries, most companies focused on producing products and services with little emphasis on customer needs and wants. Greater attention was given to the product or service, rather than understanding consumer behavior.

Customers shop in a grocery store.

Stimulate Demand: To stimulate demand, brands must understand customers’ needs and motives.

Given the emergence of globalization and information technologies in the last decade, new markets and increased competition have forced marketers to modify the traditional approach to marketing communications. Companies are now increasingly focusing on how to stimulate consumer demand and compete for customer loyalty. For brands to successfully compete, they must understand the consumer needs that lie at the center of marketing communications.

Deconstructing Motivation

For there to be a demand for products and services, there must be consumer need and motivation. The field of psychology defines motive as the inner drive or pressure to take action to satisfy a need. Motives produce goals, which can be positive or negative for the individual. In all cases, the need must be aroused or stimulated to a high enough level so that it can serve as a motive. It is possible and common to have latent needs that do not serve as the motive of behavior. The sources of this arousal may be internal (such as hunger); environmental (viewing a McDonald’s advertisement); or psychological (thoughts about food, which can cause hunger). For motivation to be useful in stimulating demand for products, brands must understand what motives and behaviors are influenced by the specific situation in which consumers engage in goal-directed, problem-solving behavior.

The difficulty of defining motives and dealing with motivation in consumer research accounts for its limited application in marketing. For the most part, the research in motivation involves benefit segmentation and patronage motives. Patronage motives typically concern the consumer’s reasons for shopping at a particular outlet. Benefit segmentation may include consumer labels such as price-conscious, convenience-oriented, service-oriented, or other motivation features. Factors including age, sex, lifestyle, profession, income, educational level, and personal interests have all been used to assemble personality profiles designed to decode consumer motives.

The Psychology Behind Demand

Knowing the basic personality traits of target customers can be useful information for companies when designing and implementing marketing communications campaigns. Promotional tactics such as contests might appeal to suburban moms, but be ignored by single, urban professionals. Nevertheless, marketers have found personality to be difficult to apply in marketing strategy. This is primarily due to the lack of metrics for assessing personality traits. Most available measures were originally developed to identify people with mental problems. These have little value or application for consumers who are mentally healthy. As a result, most marketers have turned to lifestyle analysis.

Lifestyle is one of the newer and increasingly important sets of factors being used to understand consumer behavior behind demand. Lifestyle has been generally defined as the attitudes, interests, and opinions of the potential customer. Such variables as interests in hunting, attitudes toward gender equality, and opinions on the importance of stylish clothing can be used to better understand consumer behavior. Lifestyle segmentation is one tool used by brands to connect their value proposition to the needs of particular individuals rather than large, undefined demographics. As a result, companies can tailor communications and promotional offers that target identifiable groups and stimulate their continued demand for products and services.

Reminding and Retaining Customers

Organizations have shifted to using personalized promotional tactics to retain customers and encourage repeat sales.

Learning Objectives

Discuss the strategies and tactics used to retain customers

Key Takeaways

Key Points

  • Personalized promotional tactics via websites and email marketing are particularly useful for customer retention programs.
  • Marketing tactics used to remind and retain customers include discounts, offer redemptions, reward programs, and cross- promotions.
  • Relationship marketing programs help companies counterbalance new customers and opportunities with current and existing customers to maximize profit.

Key Terms

  • personalization: The act of changing an option of a multi-user software product to change the product’s behavior or style for one user.

Remind and Retain Customers

The promotional activities of an organization continue long after customer acquisition. Incorporating communications tactics that are effective in reminding current customers why they should continue purchasing a brand ‘s products is just as important as promoting to potential customers. As more brands compete for consumer attention in an increasingly crowded marketplace, organizations must develop marketing communications strategies that address customer challenges, appeal to customer needs, and drive repeat sales.

A diagram that shows how businesses acquire new customers - acquisition (awareness, interest, desire, and action), retention (acknowledgment and dialogue), and new acquisition (incentivization and activation).

New Customers: Nurturing customer relationships can lead to customer referrals and new business.

Promotional Tactics for Driving Repeat Purchases

One method organizations use to show appreciation for existing customers is personalized marketing. This practice had been most useful in online marketing, particularly via websites and email marketing. For example, a website can track a customer’s interests and make suggestions for future purchases. E-commerce sites help customers select and prioritize choices by organizing items based on past online behavior and purchases. Some companies allow for products to be customized using a configuration system.

The emergence of database technology for developing personalized products, ads, and services for specific users with particular profile attributes has helped organizations tailor their offerings for existing customers. Amazon is one company that pioneered the “one-to-one marketing” and personalization tactics that delivered targeted offers and related products to users. Retention strategies that incorporate personalization features may include one or more of the following:

  • Product bundling (combining several products or services into one “package” and offering them at a single price)
  • Cross-selling (selling related products to current customers), cross promotions (giving discounts or other promotional incentives to purchasers of related products)
  • Loyalty programs (giving incentives for frequent purchases or customer referrals)
  • Increasing switching costs (adding termination costs, such as mortgage termination fees)
  • Integrating computer systems of multiple organizations (primarily in industrial marketing)

Other marketing communications tactics include discounts, offer redemptions, and point systems. The interactivity between brands and consumers occurs through the offer redemptions recorded by the point-of-sale systems, which can then update each individual shopper’s profile. Personalized marketing can be more accurate when based solely upon individual purchasing records due to the simplified and repetitive nature of retailers such as supermarkets.

Retaining Customers Through Relationship Marketing

Authors such as Don Peppers and Martha Rogers discuss the transition from managing products to managing customers, and differentiating customers rather than just products. This transition allows companies to develop economies of scope rather than economies of scale. To retain their customer base and satisfy customer requirements above those of competitors, brands must engage in the following process:

  • Identify potential customers.
  • Determine their needs and lifetime value to the company.
  • Interact with customers and gather data on their requirements and behavior patterns.
  • Customize products, services, and communications to individual customers.

Implementing these relationship marketing practices helps companies counterbalance new customers and opportunities with current and existing customers to maximize profit. It also counteracts the theory that new customers must be gained at the expense of losing older customers. Many companies in competing markets will redirect or allocate large amounts of resources toward customer retention, particularly in markets with increasing competition. Lead generation activities geared towards attracting new customers may be more expensive than the money and time spent on promotional tactics to retain existing customers. This idea represents a shift from classic marketing theories, which focus on attracting new customers and creating transactions rather than maintaining current customers.