Effective Promotional Strategy Through Decentralization

Martin R. Schlissel, Ph.D.

St. John's University*

INTRODUCTION

This article suggests that the planning of promotional strategy should be decentralized to the regional level, or even that of the territory. Various reasons are presented in support of this suggestion. The article examines the effect of the suggestion upon the marketing organization, and the marketing manager's function. It is contended that share of market is the most useful measure of the effectiveness of a promotional strategy. Two major types of promotional strategies are presented.

PROMOTIONAL STRATEGY AND THE MARKET PLACE

Promotional strategy is the coordination of various means of persuasive communication for the purpose of facilitating sales and influencing the choice of a target group of people. Among the constraints within which strategy is determined are the reference framework of the target group, the strengths and weaknesses of the promoting firm, and the market situation.

The major means of promotion are personal selling, mass communica- tions methods such as advertising and publicity, and sales promotion aids. Numerous approaches may be tried within each, with various degrees of emphasis. When used in combinations with each other to provide communications impact and support, the total number of combinations is almost incalculable. Messages should emphasize those characteristics of the firm and its products or services which customers and prospects will recognize as presenting a unique advantage of the firm, compared to its competitors. 1 This differential advantage should therefore provide the target group with a strong reason to at least consider the firm as a potential source of supply, even though it may not constitute a sufficient

* Jamaica, N. Y. 11432 59

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reason to buy. The creation of the point of differential advantage and the coordinated use of various means to communicate this concept in the form of a customer appeal to a responsive target group are at the heart of effective promotion strategy. The ultimate responsibility for planning promotion strategy is that of the marketing manager. He has the general responsibility for earning the income for the firm, and, all other things being equal, promotion strategy directly affects that responsibility.

But promotion strategy is not an isolated, independent force acting in the market place. It interacts with, and is affected by, the other elements of the firm's marketing strategy. It is merely one of the tools employed to achieve the firm's goals. Promotion strategy, however, may be assigned a sub-goal, which, if achieved in concert with sub-goals assigned to other of the firm's strategic elements, will lead to success for the firm. These various goals therefore serve as standards against which actual attainment may be measured.

To be worthwhile, standards of performance must be related to the firm's basic, long term survival goal, and serve as a guide to effective performance in the short run. The usual standards of successful marketing are market share, sales volume and profitability. Market share and sales volume are both measures of promotion strategy, also, in the short run. Both are useful because they indicate market responsiveness to the firm's persuasive communications, and it is comparatively easy to measure variations in each from one period to the next.

However, market share is the more useful indicator of the two. It reflects changes in market potential and in competitive positions of the various firms in the market. This important market information is concealed by sales volume figures. It has a greater significance still, for promotional strategists, in that it is an indicator of the importance of the firm as a vital supplier of its type of goods and services. Over the long run, share of market mirrors the ability of the firm to adjust its promotional, and marketing, stance in markets which fluctuate. Profits, on the other hand, are not as useful as market share, as short run indicators of promotion strategy because of the difficulty of isolating the contribution of promotion strategy to profits, which are often influenced by other organization procedures. The major measure of the success of promotion strategy should therefore be the change in market share, from one period to the next.

For reasons of convenience and organization structure, marketing and promotion strategy are usually planned by one coordinating individual or group, with a single plan being created for the entire firm. Indeed,

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appfication of the marketing concept to department organization may seem to infer a centralization of planning. But, the execution of these plans must envision their operation at the different points where the purchase decision will be made. At these different locations, the correctness of the plans will be judged, in the nature of the purchase response. Marketing strategists recognize the importance of the point of purchase environment by building their plans around the needs and perceptions of the purchase decision maker and those who influence him.

However, important local factors, which influence the purchase decision maker's choice and differ from one region to the next, are often not included. 2 Such factors as colloquial speech, humor, tastes in color preferences, climate, readiness to adopt new products, economics, etc., vary between regions. Influenced in part by the culture of its early European and/or African settlers, each region seems to have its own sub-culture. While values may be similar from one region to the next, the ways in which they are expressed differ, as do behavior patterns. 3 Thus, there is a different-though similar-frame of reference used by the purchase decision makers of each of the various regions.

The purchase decision maker is also influenced by his perception of the status of the promoting company and its industry position, as compared to its competitors. That products and companies do not generally have the same market standing from one region, or territory, to the next is accepted. There are many reasons for this condition. The finn's poor showing in a market may be due to an earlier decision to introduce the firm, or its products, on a sequential basis, region by region. While this is strategically advisable for firms that are not well financed or well staffed, such a policy gives competitors the opportunity to establish themselves firmly in the other regions, or territories. Products may be in different stages of acceptance and of the life cycle, in each region served by the firm, because of the sequential introduction strategy, and because of regional preferences, may be reflecting the sub-culture. One must not overlook, too, that the firm's competitors may be stronger in some territories than others, perhaps because of greater congruence between their strategies and the characteristics of the territory's culture.

It should also be considered that channels of distribution vary in their strength in different regions, and in their requirements for promotional aid from manufacturers. Similarly, they vary in their ability to lend support to a promotional program. It is obvious that, as distributors are not equally capable, salesmen also are of uneven quality.

For the reasons mentioned above, and because of regional differences in

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culture, it is conceivable that promotion strategists may have to plan a strategy for individual regions and/or territories, assuming a satisfactory market potential.

DECENTRALIZE PROMOTIONAL STRATEGY

An obvious deficiency of any centralized operation is that it is not flexible. In the case of a strategy, inflexibility is due to the plan not incorporating a sufficient number of correct premises. In order for a plan or strategy to be successful, the outline of the situation as it unfolds must have been foreseen with reasonable accuracy when the premises were established.

For reasons stated in the previous section, it is quite likely that a different set of premises needs to be established for each area in which the firm wishes to operate. Whether several different premises and strategies for promotion can be established more or less simultaneously by a management group that does not operate physically in the geographic areas in which the plans are to be implemented is open to question. The importance of personal knowledge of local customs, speech patterns, and other manifestations of the sub-culture, in order to facilitate personal persuasive communications, is the underlying factor for the recommended recruitment of local area residents as salesmen. 4

For more effective planning of promotional strategy, it appears that the planning should be performed at that level of organizational competence which is closest to the territory or region in which the problem exists. The territory salesman, if competent in the planning of promotional strategy, may be able to create the best plan because he is most familiar with the cultural and market variables in his territory. He should know best the particular qualities of the purchase decision makers and how best to communicate meaningfully with them. He also is most keenly aware of the firm's position in the territory and that of the competition. The details of the plan could include target selection; establishing a point of differential advantage; which assorted promotional means to employ and the emphasis to be placed on each; assignment of objectives to each element of the strategy; and how the different parts of the plan should be coordinated to help achieve the firm's goals in the area.

It is likely that marketing management in the future will be forced to decentralize, as regional markets rise in importance, s The shifts in population and industry, from the northeast quarter of the nation

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outward, will increase the importance of geographic segmentation of markets.

Decentralization of planning, as suggested above, would affect the marketing manager's responsibilities and job performance, although it is obviously not possible to state with confidence all of the ramifications. Aside from the selection of subordinates who are qualified to exercise the high responsibility of planning the promotional strategy they will execute, the marketing manager must determine suitable short range objectives, approve and authorize each plan after reviewing its details and premises, and check each plan for consistency with company policies and goals. He must also evaluate the effectiveness of each plan after it becomes operational.

The program budget appears to be most useful as a device for coordinating and controlling promotional activities. 6 With the goals to be accomplished known and stated, the various tasks that must be performed to reach them are itemized and quantified. The listed tasks make up the details, or tactics, of the strategy, i. e., personal selling, advertising, publicity events, direct mail, etc. Then, the costs of performing each task in the magnitude stated must be determined and listed next to the itemized task, or in the appropriate sub-section. 7 To the degree that funds are allocated according to the plan, the entire program becomes operational.

However, in determining the tasks that must be performed, the planner must bear in mind the constraints of the situation, and how they can be overcome, given the organization's resources of personnel and capital. The essence of promotion strategy is to employ a combination of promotion methods that minimize, if not overcome completely, the firm's weak- nesses, and maximize its advantages in order to achieve a marketing goal.

For instance, in territory A, the most practical strategy in the situation may be to emphasize personal selling, supported by advertising and/or other means of promotion. In territory B, perhaps the reverse strategy combination may be best, because of differences in market conditions. The degree of emphasis to be placed upon each of the methods employed, in each regional strategy, should be determined, of course, and incorporated into the over-all plan, represented by the program budget.

When final plans are approved and made operational by funding, the quantified tasks then may be communicated formally to operational personnel as quotas, with quota performance scheduled over the budget period. Then, field performance may be monitored by marketing

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management, by comparing quota task performance against budgeted requirements. Where significant deviations from quota are detected, corrective actions may be taken.

PROMOTIONAL STRATEGIES AND SHARE OF MARKET

Market penetration and market occupancy are two shares of market promotional strategies. Market penetration refers to the strategy of increasing market share by increasing the sales volume from a firm's existing customers. This is executed by either selling additional products, never before purchased, to the customer, or by selling him increased quantities of those products he currently buys from the vendor. Market occupancy refers to increasing the number of customers a firm serves. While it is common for firms to pursue both strategies simultaneously in all territories, it appears wise for a decision to be made at some point concerning which will be the major strategy, at a given place and time. Because he is closest to the situation, the territorial manager is in the best position to make this decision, so that all necessary means of promotion may be brought to bear on the prospect, in a coordinated manner.

For instance, if salesmen are the major means of promotion being used, their time budget and assigned personal quotas would vary with the strategy being followed. A penetration strategy would probably require the salesman to spend more time with each customer as he attempts to sell more of the product line and build closer ties by giving more service. His success would be judged by increases in sales volume and profits per customer. His goal, devolving from the program budget as described earlier, of course would have been presented as a sales volume quota. Sales volume may be expressed in terms either of dollars, or units, or both. The tasks, related to the goal, may be expressed in terms of frequency of sales calls per customer, number of demonstrations per customer or product, entertainment expense, time per call, samples distributed, etc.

The market occupancy strategy can best be executed, if carried out through salesmen, by having the salesman get as many initial orders as possible from new accounts. It is not a profitable short run strategy, but it is necessary for the achievement of long run profit and survival goals. The success of this strategy would be measured by the number of new accounts that were secured, and the budgeted goal would be quantified accordingly. Related tasks could be appropriately expressed in terms of number of sales calls upon prospects, demonstrations, new orders, sample requests, and other criteria.

The two examples of executing promotional strategies assumed the use

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of personal selling as the major form of promotion, but other promotional methods may be used, instead. The role assigned to any promotional means would depend upon the relative advantages and disadvantages of each, in the situation. While personal selling is an expensive means of promotion because of the salesman's limited ability to see customers and prospects, there are offsetting advantages. The salesman can close a sale, demonstrate products, overcome objections, provide continuous service, and create need, among other things. When a product is expensive or technically complex-at least, so far as the customer's knowledge and requirements are concerned-or the product is not sufficiently differen- tiated from its competitors, the salesman should bear the promotional burden.

Mass communications methods are comparatively inexpensive and can quickly disseminate information. However, they are inflexible in their message platform. In general, the criticisms of mass communications methods are that they cannot accomplish the same things as a salesman, in as effective a manner. But such personal attention as a salesman can provide is not always necessary.

Mass communications are most effective when the promotional objective is limited to creating awareness for the firm and its products. Sales may result if the message target has sufficient technical knowledge of the product, knows its differentiating features, if any, and accepts the firm as a good one with which to do business. If the average order size is small, the use of mass communications may almost be mandatory because of the low cost of delivering a persuasive message.

Either of the two major means of promotion-personal selling and mass communications-may be used to execute penetration and occupancy strategies. But, since each has certain advantages not possessed by the other, the strategic decision should be to employ each in support of the other, where possible. In that way, the weaknesses of one will be cancelled by the strengths, or capabilities, of the other.

If we assume an occupancy strategy for a firm that is not clearly differentiated, we may assign the major task to personal selling, and use advertising to pave the way for the salesman, thus reducing the cost of personal selling by conserving the salesman's time. At the same time, some of the obstacles to the salesman's success-for instance, the customer's lack of knowledge about the f i rm-may be eliminated, or reduced at least, by the message. Trade shows may be given the objective of building market awareness for the firm and its products. Direct mail and advertising may be employed in prospecting for new accounts.

The role of the salesman in executing a penetration strategy is clear.

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However, mass communications may also be employed for this strategy. In most such instances, direct mail is the medium of communication, and has been successful most often in the consumer goods field.

SUMMARY

The suggestion to decentralize the planning of promotional strategy has been presented against the background of a national market, consisting of purchase decision makers who are influenced in their choices by different cultures, peculiar to the regions in which they operate. Thus, a separate promotional strategy for each region would appear to be warranted. The significance of this suggestion is further amplified by the experience of most firms of an uneven market share throughout the territories they serve. Other possible causes were presented, in addition to differences in regional cultures. The future growth of regional markets was brought out, as a further factor to indicate the potential importance of the article's main idea.

Certain issues have not been presented in this article, and may be worthy of further research. Some of them are the calibre and training of the personnel required for this type of program, at the regional and territorial levels; the interface between them and the firm as they perform the planning function; the criteria by which they may judge which strategies to recommend; and the kind of marketing organizations that will be needed in the future.

REFERENCES

1. James F. Engel, Hugh Wales, and Martin Warshaw, Promotional Strategy (Revised; Homewood: R. D. Irwin, Inc., 1971), p. 337.

2. Thomas L. Berg, Mismarketing: Case History of Marketing Misfires (Garden City: Doubleday & Co., 1970), pp. 132-156. Also, Carroll J. Swan, "What Will Sell Where-The Third Dimension in Marketing," Pn'nters' Ink, August 12, 1949.

3. Jerome B. Kernan, Wm. P. Dommermuth, and M. P. Sommers, Promotion: An Introductory Analysis (New York: McGraw-Hill Book Co., 1970), p. 56.

4. Kenneth R. Davis and Frederick E. Webster, Jr., Sales Force Management (New York: Ronald Press, Inc., 1968), p. 385.

5. Fabian Linden, "Regional Patterns of Demand," The Conference Board Record, September, 1968, pp. 44-46.

6. David Novick, ed., Program Budgeting (Washington, D.C.: U.S. Government Printing Office, 1965).

7. David L. Hurwood and James K. Brown, Some Guidelines for Advertising Budgeting (New York: The Conference Board, Inc., 1972), pp. 48-51. Presents a close example.

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ABOUT THE AUTHOR

DR. SCHLISSEL is assistant professor of marketing at St. John's University, Jamaica, N. Y. He is a graduate of Brooklyn College and New York University, where he received the M.B.A. and Ph.D. degrees. On the marketing "front lines" for many years, he was marketing manager for a national hardware manufacturing company before entering upon an academic career. Besides teaching, he is active as a consultant to firms in various fields.