SMUASSIGNMENT

SEMESTER – 4MK0016

ADVERTISING MANAGEMENT & SALES PROMOTION

Set-1SUBMITTED BY:

GYANENDRA KUMAR MBA ROLL NO:-520941253

Q.1 How does advertising persuade buyers? Explain the role of persuasion in advertising.

Ans.: Effect of Advertising in Marketing:

It will be useful to refer to direct or perceived benefits of advertising which include the following:

1) Information

Consumers need information about various goods and services. Due to ignorance, a consumer may purchase an inferior product and pay higher prices or even may not know that a particular product exists. Information given in an advertisement may be about the company and its products or service. The advertisement for Zenith refrigerator, introduced in the year 1980, for example, incorporated details regarding the product feature. The inclusion of a water cooler in the refrigerator was emphasized. It was highlighted that this facility was available only in this brand of refrigerator, considering the need for cold water in a tropical country like India.

2) Brand Image Building

Very often, advertising is used to build a brand image. Images are mental pictures of brands that may appeal to different segments of the target audience in varying degrees. These may have their origin in real or assumed features. The images projected are geared to match the needs and expectations of the target audience. Favourable images will help in generating brand loyally and a disposition to buy that brand in preference to another. Certain advertisements of toilet soaps in India aim at image building through opinion leaders. A well-known campaign of longstanding for Lux toilet soap uses film stars (Exhibits 1.4). The campaign for VIP travel luggage seeks to achieve the objective of attributing a superior image through the association of the product with affluent foreign nationals in a series of ‘VIP’ interviews.

3) Innovations

Advertising is seen to perform this task most effectively for new products. In a way, it reduces the risk of innovation. The cost of innovation can be more than the profit recovered by the sales which advertising may generate and this encourages manufactures to undertake research and development. New brand launches seem to abound in the toiletry, cosmetic pharmaceutical, confectionery and tobacco markets advertising. At the same time, it must be pointed out that advertising does not guarantee the success of all new products.

4) New Product Launch

Various strategies, including advertising, are employed to make potential buyers aware of new products. The term ‘new product’ may include modifications of existing products, imitations of competitive products and product line acquisitions. Advertising can be used to promote new products and call attention to changes in old products. Advertising for the soft drink concentrate under the brand name Rasna aimed at enhancing the awareness of the product and creating a favourable disposition towards it.

5) Growth of Media

The acceptance of advertising enhances the potential for raising revenues. This in turn helps the launching of new publications and expanding the media. This development has been a characteristic of the Indian media scene in recent years. A number of periodicals and newspapers have been launched during the seventies and this trend continued through the early eighties.

6) Long-term and Indirect Benefits

Advertising is a feature of free competitive enterprise and can be a contributory factor towards greater availability of goods. It increases distribution not only of the advertised products, but of other products as well. Advertising helps to reduce the cost sold to the consumer. The costs of production and selling are lower when goods are produced and sold in larger quantities. It is also an important factor in product improvement. Advertising helps to make the purchase of commonplace products emotionally more satisfying. This may apply, for instance, to the consumers of Lijat Papad who may derive satisfaction out of buying advertised product, or for that matter, users of perfumes and lipsticks where association with advertising may be instrumental in reducing dissonance.

7) Limitations of Advertising

Advertising has several limitations. There is a view that advertising increases the cost of goods sold to the consumer. Advertising can be wasteful considering that only a small section of the audience covered by the media used may relate to the product advertising. The qualitative aspect of advertising is its strength. It can also be a major weakness when stereotyping an innovation. Advertising may encourage unsound or false values especially through its effect on children and youth. It creates an emotional appeal. Critics point out that any emotional appeal, in contrast to a rational appeal, is misleading. Finally, advertising can endanger competition. Big advertisers can monopolize the market.

Role of Advertising in Marketing: Advertising is an all-pervasive facet of most growing communities. It has important consequences for the advertisers who use it and for individuals who are exposed to it. However, its economic and social impact is a subject of continuous controversy. The following aspects illustrate the basic purpose of advertising:

1) Communication with Consumer

There is an increasing need for information about a wide variety of products as the economy expands and grows more complex. Advertising is a major way of establishing communications between manufactures and other Organisations providing services or trying to put across ideas and concepts, on the one hand, and customers, buyers and potential acceptors, on the other. Advertising is a reminder to the existing consumers and it aims at cultivating new prospects as well. Advertising has, therefore, been described as ‘effective communication’ with the target audience.

2) Persuasion

Advertising attempts to persuade prospective buyers to buy a product/service. According to Clyde Miller, all success in business, industry and similar activities depends upon the process of planned persuasion. In modern markets, the producer who is content with advertising that merely identifies or informs may soon find himself in a vulnerable position. The consumer should be aware of the advertiser’s persuasive interest, no matter how restrained or informative the message may be.

3) Contribution to Economic Growth

Advertising contributes to economic growth by helping to expand the market, particularly for new products, and by helping to develop new market segment. A company, which invests in research and development in order to develop new products, has to depend on advertising for establishing the market for these products. In the board social context, advertising can be motivating factor for the less privileged for increasing their purchasing power. Advertising is also a potent vehicle for achieving acceptance of desirable and useful concepts and ideas where the profit motive is minimal or missing altogether. This may be seen in the case of non-profit objectives, such as preventive aspects of public health, developing the small family norm especially in over-populated countries, dissuading drunken driving, and so forth.

4) Catalyst for Change

Creativity inherent in advertising leads to the discovery of new relationship that can change the perception of a prospect. Two aspects are of special significance: the originality of the message communicated, and the eventual effect on consumers’ standards of living. The ability to bring about changes comes from originality, ingenuity, innovation and imagination in advertising. This may be seen in promoting new products and ideas, as well as in the upgrading of products/ brands used by consumers. The contribution of advertising in bringing about a change is of special relevance to developing countries.

Q.2 Explain the factors that has an affect on Indian advertising.

Ans.: Factors that has an affect on Indian advertising:There are several factors affecting Indian Market.

1) It first runs on market sentiments.2) Global market based on that Indian market opens Foreign Institutional Investors heavy buy or selling leads to positive or negative3) Political news of India4) Government action on any increase or decrease on tax.5) Trend in positive trend points like inflation, crude oil price hike, RBI policy like CRR,6)Interest Rate hike does not effect much to market.

In down trend the same factors pulls down Indian market and heavy selling occurs.

Whether you're selling a product or service to a select group of consumers, creating a marketing plan helps outline how you will inform, persuade or remind the customers about what your business offers. An essential part of this plan includes coming up with a budget for advertising expenditures. While each company's advertising budget may differ, there are several factors that can affect even the smallest advertising budget.

1) Projected Annual Gross Sales

When entrepreneurs prepare to create advertising budgets for their businesses, it's important to take projected annual gross sales into account. This method helps protect entrepreneurs from spending too much or too little on advertising. "Entrepreneur," an online resource and magazine for business owners, suggests calculating your minimum and maximum advertising budget figures by calculating 10 percent and 12 percent of your projected annual gross sales. Then, multiply each figure by the markup you make on your average sales transaction. This figure can vary year-to-year depending on both your company's performance and your product markups.

2) Marketing Objectives

Marketing objectives vary across organizations and can greatly affect what appears on a company's advertising budget. Determine which marketing objective will help you reach your annual business goals. Marketing objectives might include obtaining 5 percent more repeat customers, experiencing growth each month or increasing annual sales by 10 percent. The objectives you come up with help you define marketing strategies and tactics, which ultimately give insight into how and where you advertise, both of which are things that can affect your budget.

3) Target Market

While one business is targeting customers whose annual household income is at least $500,000, another business may target recent college graduates who make at least $33,000 a year. The target market you're trying to reach has an impact on your advertising budget. Once you define your target market, you gain insight on how to reach them learning information such as what they read, where they shop, who they get advice from, their needs and wants and what motivates them to buy.

4) Types of Media

A print advertisement in a local publication may cost less than running an online advertisement with a popular, credible website. The types of media you select to promote your product, whether it's radio, print, web, email, billboards or direct marketing, can impact your advertising budget.

5) Time of Year

Advertising pricing may change during different times of the year, such as a new season or during popular holidays. While some advertisers may offer discounting, others will increase their prices if they feel their readership or viewer ship may peak during specific times or events. If you're trying to place an advertisement in a magazine's most popular issue of the year or a television commercial during a highly televised event, such as the Super Bowl, you can expect a change in the amount you spend to promote your product or service.

6) Product Launch vs. Existing Product

If you're introducing a new product to the market, consider this as you create your advertising budget, as it may affect how much you spend. When products are launched, business owners often go into overdrive coming up with various ways to advertise and promote their new product or service to potential clients. This may cause an advertising budget to be higher than it would be for a product that customers are already aware of and have purchased in the past.

Q.3 Supreme Ad agency is thinking about setting up two separate specialized agencies under it. If they do so, how do you think the working of departments and integration of services will be? Will it be beneficial to the clients?

Ans.: Points to be noticed while setting up of new advertising agency:

Advertising is a measure of the growth of civilization and an indication of the striving of the human race for betterment and perfection. Maslow has succinctly summed up the drive for survival and satisfaction and limits of human endeavour in his holistic, dynamic theory, which brings together several schools of thought on the subject. Maslow’s theory also has the advantage of experimental validity. There are five better known stages in Maslow’s hierarchy of needs, viz. physiological needs, safety needs, need for love and belongingness, self esteem needs and self actualization needs. There are two further goals to achieve, namely knowledge and beauty. The aspiration for knowledge arises from the need to know more and to develop greater understanding. The longing for beauty represents the ultimate in aesthetic satisfaction.

Maslow’s hierarchy of needs may be analytically viewed as a two dimensional paradigm. The satisfaction of physiological or safety needs, at the lower range of the hierarchy, may not be entirely devoid of the manifestation of needs of belongingness and love. For instance, a dish specially prepared for an occasion, such as an anniversary celebration, serves a dual purpose of a meal as well as a form of expression of closeness for the period concerned. Advertising has both forward and backward linkages in the process of satisfaction across the entire spectrum of needs. The explicit audience aware of the existence of the

product, service or idea would fulfill their felt needs and spell out the differential benefits in a competitive situation. On advertising also lies the onus, at least marginally, of motivating prospects to strive for creation of resources for fulfilling the new needs, or alternatively, to aid re-allocation of available resources. Advertising is not merely directed at selling, or for that matter, at achieving the objective of gaining acceptance for a worthwhile idea or programme. It may also be an instrument for developing basic motivations for creating resources for buying goods and services or generating favourable conditions for the acceptance of an idea.

Dwelling for a while on the motivational construction, the advertiser and the support systems, namely advertising agencies and media, have only a very limited role. Social scientists gave advertising a form and a focus, using the base of psychology against the background of socio-economic norms. Marketing men, quick on the uptake, assimilated the advertising concept swiftly and adopted it as a part of the marketing mix. Needs excavate and consumer perceptions of products and services also change, buyers’ attitudes towards products may be determined not merely by products as manufactured in factories, but also by what is added in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing and other things that people value.

Working of department and kind of services to be provided:

Advertising is an all-pervasive facet of most growing communities. It has important consequences for the advertisers who use it and for individuals who are exposed to it. However, its economic and social impact is a subject of continuous controversy. The following aspects illustrate the basic purpose of advertising:

1) Communication with Consumer

There is an increasing need for information about a wide variety of products as the economy expands and grows more complex. Advertising is a major way of establishing communications between manufactures and other organisations providing services or trying to put across ideas and concepts, on the one hand, and customers, buyers and potential acceptors, on the other. Advertising is a reminder to the existing consumers and it aims at cultivating new prospects as well. Advertising has, therefore, been described as ‘effective communication’ with the target audience.

2) Persuasion

Advertising attempts to persuade prospective buyers to buy a product/service. According to Clyde Miller, all success in business, industry and similar activities depends upon the process of planned persuasion. In modern markets, the producer who is content with advertising that merely identifies or informs may soon find himself in a vulnerable position. The consumer should be aware of the advertiser’s persuasive interest, no matter how restrained or informative the message may be.

3) Contribution to Economic Growth

Advertising contributes to economic growth by helping to expand the market, particularly for new products, and by helping to develop new market segment. A company, which invests in research and development in order to develop new products, has to depend on advertising for establishing the market for these products. In the board social context, advertising can be motivating factor for the less privileged for increasing their purchasing power. Advertising is also a potent vehicle for achieving acceptance of desirable and useful concepts and ideas where the profit motive is minimal or missing altogether. This may be seen in the case of non-profit objectives, such as preventive aspects of public health, developing the small family norm especially in over-populated countries, dissuading drunken driving, and so forth.

4) Catalyst for Change

Creativity inherent in advertising leads to the discovery of new relationship that can change the perception of a prospect. Two aspects are of special significance: the originality of the message communicated, and the eventual effect on consumers’ standards of living. The ability to bring about changes comes from originality, ingenuity, innovation and imagination in advertising. This may be seen in promoting new products and ideas, as well as in the upgrading of products/ brands used by consumers. The contribution of advertising in bringing about a change is of special relevance to developing countries.

It will be beneficial for clients due to good customer service and good quality of work.

Q.4 Is it important to have communication objectives in advertising? Why or why not?

Ans.: Importance of communication objectives :

Current Prospect

Awareness/

Interest Level

Desired

Communication Outcome

Sample

Communication Objective

Lack of Awareness Heightened company/product/brand awareness;

Requests for additional information

Measurable shift in awareness levels;

X% increase in website visits, store traffic, enquiries, requests for information

Lack of Interest Heightened awareness of product benefits and value proposition;

Product trial through events, samples, demonstrations, etc.

Measurable shift in perceived product attributes and company reputation; Increased customer involvement, measured by event and demonstration attendance, acceptance of trial offers or samples, etc.

Misperceptions Corrected impressions;

Improved target prospect knowledge

Measurable positive shift in consumer opinions and attitudes.

Interest but perceived lack of need

Heightened knowledge of value proposition; understanding of unique benefits; trial through introductory offers.

Measurable increase in serious buyer prospects, measured by requests for estimates, proposals, in-person presentations, introductory offers, etc.

Interest but lack of motivation to buy

Stimulate desire with time-sensitive and limited-quantity offers or short-term purchase incentives.

Measurable positive response to incentives and promotional offers, etc.

Interest and motivated to buy, but facing purchasing obstacles

Overcome barrier with easy-to-accept obstacle removal option.

Convert one of three reluctant prospects to purchasers.

Interested, motivated, serious prospect

Successful sales transaction Closure rate of one sale out of every three presentations to motivated prospects.

Triangle of Communication: The process of advertising communication may be succinctly expressed in the form of the eternal triangle of communication. The advertiser’s objective is to communicate with the audience in order to obtain the desired results arising from the responses of the audience.

1) Advertiser: The advertiser is commonly interpreted as a commercial organization, which has the paramount objective of making profits out of business activities. Profits are usually generated through marketing or trading activity, apart from the financial investments. Even in the last case, marketing has a role to play as the yield for investments in order companies and assets will, in turn, depend on the marketing activity of the latter. The communication logic will, however, also apply to the types of advertisers, which may have a societal or political objective. Advertising for family planning, road safety and the like, and election campaigns are no way different in this respect.

2) Audience: The team ‘audience’ has to be interpreted with care. Readers of newspapers of magazine, listeners to the radio, or viewers of cinema or television would not necessarily constitute the audience for an advertiser. The audience for specific advertising has to be defined and idea segmentation, which would help in defining and identification of the target audience, is no way less important for non-commercial advertising. The concept of target audience will, therefore, be applicable in all situations whether an advertising campaign or a detailed advertising programme for a product or service is under consideration.

3) Media: The third element of the triangle of communication is the media and that is where advertising tends to differ from other forms of communication. Advertising, as a rule, will not control the media. Hence, they will have to depend on the availability of media, and its appropriateness, to reach their target audience.

4) Dynamic Concept: Thus the triangle of communication consists of advertisers who are trying to convey advertising message to their target audience through media which are independent of advertisers. The basic concept, however, is not constrained to a static situation. First, the triangle may be interpreted both at the micro and macro levels, i. e. for an advertiser or for one campaign and collectively for several advertisers in a community or a country. More importantly, all three elements of the triangle are subject to continuous change. Audiences alter their patterns of behaviour under the influence of factors such as education, occupation, mobility and so forth. Definitions of target audience invariably need revision. Advertisers produce and market products and services, which may cater to the needs and tastes of their clientele. Primarily audiences to whom they have to relate influence the media, serving as the link. The cost economics of media, at the same time, involves advertising revenues. Both advertisers and media are ultimately dependent on the mass of buyers from amongst who both select their respective target audience.

5) Choice and Competition: The creative aspect of advertising comes into play when an advertiser formulates an appropriate message to be beamed across to its target audience for a specific campaign. Even

if we assume that segmentation has been efficiently done, it will be necessary to formulate the message and present it in such a way that it should appeal to the audience. This is essential when there is choice, and correspondingly, competition. The importance of appeal will obviously be less when there is little or limited choice, unless the advertiser has the objective of market development.

6) Advertising Agency: An advertising agency, working in unison with the advertiser, lends its professional services to the advertiser for formulation and presentation of message. However, it is the media, which provides basic sustenance to the advertising agency by allowing 15% commission (as in India) on the billing of advertisers. The system obviously has its origin in free market operations arising from competition within the media. The agency makes its recommendation as to whether a specific media vehicle is suited to the target audience and the advertising message.

7) Matching Message with the Media: The media has two major roles. First, it is the question of matching audience to media, the type of person who constitutes the readership, listener ship and viewer ship of the media vehicles. The second dimension is that of the frequency with which a specific media vehicle can put across the message to the target audience and the choice available to the advertiser. Both these dimensions are combined with the concept of exposure, which is translated into Opportunity To See (or hear), commonly known as OTS. A further dimension of the suitability of certain types of message to a specific media, whether print, audio or audio-visual, should also be kept in mind.

The achievement of an advertiser’s objectives is dependent on the appeal of the message to the target audience and the reach of the media. The qualitative aspects of creation of advertising and the quantitative estimation of exposures, which each unit of the target audience is subject to, must also have to be considered. It must also be pointed out that the reception of the advertiser’s message is also dependent to a great extent on various distractions and disturbances operating on the audience. These are inherent in the process of advertising communication. People select media primarily according to their interest and preferences. Advertising which may appear in these media is per se peripheral to the audience’s criteria of selection of media.

8) Distractions for the Audience: The following two factors aggravate the disturbances and distractions operating on the audience:

a. Competition between media: A number of media vehicles would normally compete for the attention of the audience.

b. Situational setting: Reception of the advertising message may also be affected by the time and occasion of reading, listening or viewing of the audience.

Considering the data available on exposures, for audiences in the USA and India, may indicate the cumulative effect of the above features. According to an estimate presented by Edwing W. Abel, Vice President and Marketing Director of General Foods Corporation, to the West Cost Meeting of the Association of National Advertisers, a typical metropolitan family in the USA would be exposed every day to 1518 advertising message. Such a family, i. e. husband, wife and children, would spend the national average amount of time on newspapers, magazines, home and car radios and television. On an average day, Adel as below estimated the estimated exposures:

Display advertisements in their specific newspapers read by a commuting husband and an active suburban wife. Radio commercials heard at breakfast, lunch or in the car. Advertisements in two specific national magazines read by the wife. TV commercials from dinnertime to 10.30. Subway (underground train and stations) posters and car cards along the husband’s route. Advertising in comics read by the couple’s children.

In India, Clasrion Mc Cann Advertising Company obtained similar estimate of possible advertising exposures for the city of Bombay in 1965. An educated man commuting to work to the commercial center

of the city or suburb may be subject to exposures of about 300 advertisements. Admittedly, the average for non-metro cities and towns, to say nothing of rural areas, would be lower.

The above estimates, although somewhat out of date, bring forth the following observations: An average person belonging to the target audience of an advertiser is subject to a rather large number of advertising exposures. As a corollary of the above, the number of advertisements actually seen or head, in full or part are likely to be much smaller than the maximum possible Opportunities To See (OTS), ranging from about 300 per person in India to about 700 in the USA, according to the above data.

9) Resource Constraints: Completing the cycle of communication, it is obvious that advertisers have their own resource constraints, both of funds as well as time. They can only afford to spend a certain amount of money on advertising in accordance with their marketing and advertising appropriation. The preparation of advertisements needs time. Finally, the feedback from the audience is an important input for the advertisers.

Q.5 Explain the advertising theories and its relevance. Ans.: Advertising theories and its relevance:

Every day, consumers are exposed to no less than 1000 commercial messages. Of all the different techniques and strategies that try to make an advertisement most effective, there is an underlying principle – persuasion.  The whole point of any marketing ploy is to get the audience’s attention and then change their mind to believe that their product or service is the best.

There are a variety of different media in which consumers are exposed to advertisements: television, radio, magazines, newspapers, billboards, and public transportation.  In all types of media, persuasion is used; yet there is not one theory that can establish a single hypothesis as to the direct route a message takes to make a favourable judgment.  In order to have a holistic knowledge about the psychology behind persuasion, seven main theories of persuasion will be examined.

The Cognitive-Response Model explains that the persuasion process takes place when a person reflects on the content of the message and has cognitive responses to the message.  Cognitive responses are thoughts that develop while the process of elaborating on the message occurs.  Cognitive responses can be relating the message to other messages previously exposed to or already existing knowledge of that product or service that is trying to be sold. This suggests then that persuasion happens when cognitive responses are favourable to the message.

The proposition of the Dual-Process Model is that there is more than one means to persuade the mind.  Commonly known as the Elaboration Likelihood Method, this theory states that there are two routes to persuasion; the central route and the peripheral route. The central route to persuasion is demonstrated when an active and conscious process is made to determine the merit of a claim.  Either favourable or unfavourable thoughts towards the argument are made to establish the decision of whether it has any value.  The peripheral route, however, does not analyze the messages because an audience is exposed to an enormous amount of messages a day, too many to actively process.

The Resource-Matching Theory asserts that in order for persuasion to be successful, the demand for cognitive responses and the supply of cognitive responses to a message must be comparable. For example, the Tide Rapid Action Tablets Advertisement provides a phrase to attempt persuasion.  If this slogan, “Almost as Easy as Having Your Mom Do It,” requires less thought response than a person is going to provide, message recipients may generate thoughts that question the claim or produce irrelevant thoughts that tend to be less favourable.  If, on the other hand, an audience devotes less processing of a message than

what the message requires, they are less likely to make favourable judgments because the claim was not entirely processed or was processed superficially.

A continuation of the Resource-Matching Theory, The Influence of Alternative Types of Elaboration on Persuasion hypothesizes that during message processing; elaboration can consist of two types – item specific and relational.  Item-specific elaboration centers on the specific product and/or brand and the unique features that are presented in the message.  Relational elaboration, however, focuses on finding similarities that categorize or connect individual concepts.  It is found that a person will only make favourable judgments towards the unique features if both types of elaboration are considered while processing the message.

A quite recent and in need of more refinement theory of persuasion is the Experiential Bases of Persuasion which states that judgments may be based on sensations or feelings that are triggered by a message. A judgment based on sensations and feelings does not need an abundant level of cognitive resources to be favourable, but is most effective when processing is limited. In fact, when people engage in careful resource processing they tend to experience frustration.

The Accessibility and Diagnostic as Determinants of Judgment theory suggests what information is likely to make judgments as opposed to how judgments are made.  If a message evokes relative information that is accessible and comes to mind readily, it will tend to influence judgments of a claim.

Further investigation of persuasion theories leads to the Context Effects and Attitude Correction theory that considers whether or not once judgments are formed they are subject to further consideration or adjustment (Gilbert 1991).  Contextual and other irrelevant information can affect judgments, although, in most cases comply with the original judgment.  As Meyers-Levy and Malaviya found, there are three conditions that must be met in order for a person to undertake correction of a judgment: first, the person must realize that irrelevant information may have influenced their initial conclusion about the persuasive message.  Second, the person must identify “a ‘naïve theory ‘that might account for why, how, and to what extent the biasing data could have had this effect”. Thirdly, the audience must be willing to generate further cognitive responses.  If these conditions are not met the assimilated judgments stay intact whereas if the conditions are met, people will try to discard the influences that biased their opinion/judgments about the message.  This theory is much more applicable to the persuasion process as it recognizes that even after a judgment has been made favourable or unfavourable towards a message it is still highly flexible.  As in the Tide advertisement, although an initial reaction to the claim may be to believe it, future use may prove otherwise, thus altering the judgment on the merit of the initial message.

Considering that persuasion is used in almost every advertisement is relevant to discuss the media persuasive messages are delivered.  Other than television and radio, print advertising is most commonly used to promote a product or service.  It is found by Krugman, Reid, Dunn and Barban (1994) that of every 5 readers only four get past the headline.  Taking this into account, it is most important for advertising creators to acknowledge the different theories of persuasion and how one message can greatly differ in effectiveness from another simply by the persuasive strategy used.

Q.6 Examine the role of visual strategies in ad copy design. Give suitable examples.

Ans.: Role of visual strategy in ad copy design:

Freelance designers who produce marketing materials will know that design and copy should be developed together to work well. But sometimes there aren’t enough budgets for teaming with a copywriter. Or the client needs a project in a hurry. That’s when being able to produce concept and copy in addition to design can be a powerful business advantage.

It goes without saying that an ability to write is fundamental. But you don’t have to be a copywriter to produce strong concepts and write copy for many smaller projects. Think of the concept as a hook, a lead-in that will grab readers’ attention and persuade them to read on. Think of the copy as a fulfillment of the concept’s premise, the fleshing out of the product story. Avoid trying to do too much, bombarding readers with multiple copy and visual messages. For any piece to be persuasive and memorable, its design, headlines, visuals, and copy must work together to communicate one single and strong message. As idea starters, below are thirteen simple concept/copy approaches. Each has been proven to help deliver sales results.

1. Focus on a particularly persuasive benefit.This is a fail-safe approach to communicating the product message in advertising. Brainstorm a list of product benefits and focus on the benefit your reader will find most appealing.Product: Beds. Headline: “Turn your back on aches and pains”. Visual: Profile of woman, back to camera, lying comfortably on a mattress.

2. Create a need—then show how the product fulfills it.A proven way to position a product is to show how it solves a need or a problem. The problem can be real…Product: Kitchen appliances. Message: “Everyone knows showers are more efficient than baths. So why do dishwashers work like baths?” Visual: Photo of shower cubicle alongside product.Or the problem can be imagined… Product: Teaching (recruitment drive). Headline: “Children have an energy and spontaneity that just aren’t found in many office jobs”. Visual: Happy child contributing in a classroom activity.

3. Focus on the product’s Unique Selling Point.The product you’re selling doesn’t need to fill an obvious gap in the market to have a Unique Selling Point (USP). A USP can be a fact about the product (such as sales history, brand reputation, or product origination)…Product: Muesli. Headline: “The original Swiss muesli”. Visual: Idyllic Swiss landscape.A USP can be a product feature (something the product has that no other product has)…Product: TV. Headline: “Color like no other.” Visual: Bright-colored paint splashing across a television set.Or a USP can be a product benefit (something a product does that no other product does)…Product: Educational textbook. Headline: “At last, a course book that puts you in control of your lessons”. Visual: confident looking teacher walking into the classroom..

4. Associate the product with a connected idea, feeling, or emotion.Metaphor is commonly used in consumer advertising, corporate-identity, and brand-building publicity. It can be particularly effective in activating an archetype that connects an emotion with the brand.Product: Cognac. Headline: “Let the conversation flow”. Visual: Glass of cognac in focus; a group of people in conversation after dinner out of focus.

5. Prove how popular the product is.People trust popular products because they are seen as reliable and imply good quality. Popularity messages also respond to deep emotional needs to feel part of a community.Product: Telecommunications. Headline: “Thousands of people are coming back to XYZ Telecom”. Visual: Woman opening door to friendly telecom engineer.

6. Use a case study.Case studies prove validity by showing how people have already benefited from the product in the past. They are particularly useful for highlighting success stories, before-and-after, or for demonstrating the versatility and universality of the product. Product: Weight-loss milkshake. Headline: “I lost 18 pounds in just one month on the Thin Quick Plan!” Visual: Before and after photos of individual alongside close-up of product.

7. Endorse the product.People trust respected figures in society. Your lead copy could be a published testimonial—or have the client pay a respected figure to put his/her name to the product.Product: Rowing machine. Headline: “The Gold Standard”. Visual: Snapshot of Olympic rower presenting product, with his signature.

8. Tell the product’s story.A product with an interesting background has real news value, and news makes for an attention-grabbing message, appealing to the reader’s sense of curiosity. Product stories can also initiate desire for the product by developing the reader’s emotional attachment to the brand. Product: French Beer. Headline: “When Edmund Williams created Bertillon Noir, he didn’t just break the mould. He broke the law.” Visual: Melodramatic black-and-white photo of character nervously hiding behind a door.

9. Put the product to the test. You can ‘test’ the product to highlight its key features such as convenience, strength, and versatility—or to show how the product compares with the competition.Product: Battery. Headline: “Duromax lasts up to three times longer than conventional alkaline batteries”. Visual: Battery-powered toy rabbit beating his competitors in a race.

10. Announce something new.The word ‘New’ is one of the most powerful words in advertising copy. Sometimes the most effective message is simply to announce the product’s newness. Product: Cat food. Headline: “Introducing new finest cuts from Feleba”. Visual: Plate of gourmet cat food hidden by a silver cover.

11. Guarantee the product.A guarantee quickly dissolves any scepticism your reader has about the reliability of the product. Guarantees can be based around results, quality, durability, strength, customer satisfaction, a commitment on behalf of the company, fixed price promises, and lowest price claims.Product: Golf clubs. Headline: “Guaranteed! Cut six to eight strokes off your game… or your money back!” Visual: Product photo overlaid with guarantee stamp.

12. Announce how much and where to buy. If the product is particularly good value for money, you can’t go wrong with “the three Ps”: show the Product, show the Price, and show where to Purchase. Product: Clothes. Headline: “Back-to-school sweat-shirts from just $4. at Berkley’s (opposite MacDonald’s)”. Visual: Photo of mothers and children choosing sweatshirts in-store, with map of where the shop is.

13. State the offer.People are always looking for a bargain, which is why the word ‘Free’ is another powerful word in the advertiser’s lexicon. If you have a good offer to tell readers about, lead with it. Product: Newspaper. Headline: “Get a free Mozart CD in tomorrow’s Sunday Bugle”. Visual: Huge ‘FREE’ flash alongside product.

This list of advertising concepts is hardly exhaustive, but can be used as a framework for brainstorming ideas. Whatever your concept, ask yourself this: “Am I effectively communicating the product message through my headline, visual, and body copy?” If you’re not, the chances are your concept is too complicated—you need to strip it down and focus on just one thing.

SMUASSIGNMENT

SEMESTER – 4MK0016

ADVERTISING MANAGEMENT & SALES PROMOTION

Set-2SUBMITTED BY:

GYANENDRA KUMAR MBA ROLL NO:-520941253

Q.1 Do demographic factors influence advertising strategies? Explain.

Ans.: Demographic factors and advertising strategies:

The demography of a region includes population size and composition, as well as key socio-economic attributes such as literacy levels and wide or narrow disparities in a society's distribution of income. Theoretically, the larger the total population in a region, the larger the potential market that will exist. In addition, the composition of a population in terms of age and sex will also influence the potential demand for specific products. For example, if a company wishes to market disposable nappies abroad, the number of women in a particular target market who are of child-bearing age is an important influence on the potential demand for that product. In effect, demographic factors such as literacy levels serve to stratify the total population into two different segments - those people who are likely to be potential consumers and those who are not.An overall increase in population size is therefore relevant to potential demand. Stratification of the overall market by demographic characteristics also helps to identify significant changes in potential marketing opportunities. For example, the ageing of the post-War 'baby-boomers' is creating a growing worldwide market for products and services geared to affluent and middle-income families.

Competitive and complementary products The current size and future growth of a potential market can be meaningfully evaluated only in relation to the share of the market, which a company can reasonably hope to attain. This, in turn, requires that you assess both existing competitors in the foreign market place as well as potential competitors. In order to effectively analyse competition, you need to focus on a number of structural and behavioural determinants of competition, including barriers to entry and exit, the number of competitors, the goals and capabilities of competitors, and the state of evolution of the industry concerned. The size and distribution of firms will have an important bearing on competitive conditions in the industry concerned. For example, competition in an industry made up of a number of large, well-financed firms is likely to be different from the competition in an industry made up of many medium-sized, expansion-minded firms. In evaluating the potential rivalry from substitute products, you need to consider the goals and objectives of the different competitors, as well as their competitive strengths and weaknesses. Thus, large but relatively complacent firms may offer less competition than smaller, expansion-minded firms may. Since the export firm is often operating (or contemplating operating) in unfamiliar markets, the task of identifying the likely strategies of its overseas competitors may be difficult.Competition and pricesThe extent of competition in the industry or sector will also influence the prices can be obtained for the goods and/or services. For instance, the widespread availability of substitute products makes consumers quite sensitive to price differences in the market place, and this places restrictions on the prices that can be charged without losing a large share of the market. On the other hand, a scarcity of good substitutes presents an opportunity of charging higher prices without suffering a significant decrease in market share.

Availability of complementary productsWhile it is sometimes overlooked, the availability of complementary products can enhance the economic outlook for a particular product. Complementary products are goods or services used in conjunction with the products that a company is contemplating introducing into foreign markets. For example, videocassettes are complementary to videocassette recorders. The widespread availability of complementary products makes the introduction of any new product in foreign markets a more attractive business opportunity. Indeed, the availability of complementary products may even be essential to the successful launch of a product.

Government policies toward foreign investmentThe policies of foreign governments toward international trade and investment constitute one of the most important influences on competitive conditions in foreign markets. Many governments, particularly in developing countries, protect local producers with a combination of tariff and non-tariff barriers. This often enables firms already established in a particular domestic industry to maintain their share of the local market while charging prices substantially higher than the cost of production.

Industrialized vs. developing countries

A company's export marketing strategy will depend to a large extent on whether the target market is to be found in an industrialized or a developing country.

Industrialized countriesThe terms industrialized or developed countries generally refer to the member countries of the Organization for Economic co-operation and Development (OECD) - they are also often referred to as the First World (perhaps unfairly so) They include the United States, Canada, the western European countries, Japan, Australia and New Zealand. They tend on the whole to be wealthy (i.e. they have a higher per capita income than most other countries) and they are oriented towards a free market economy. Population growth is often stagnant and the population tends to be an ageing one. Industrialized countries offer markets for a wide range of products in the luxury and high-tech categories.

Developing countriesDeveloping countries on the other hand refer to the more than 150 African, Asian and Latin American countries, which are economically less advanced than the First World. Some of the characteristics of developing countries are:A low average real per capita incomeA high proportion of the labour force being involved in agriculture and other primary activitiesLow life expectancyA high rate of illiteracyA high rate of population growthIn contrast to developed countries, third world countries tend:To have serious shortages of foreign exchangeTo be more protectionists about there economies and industries than industrialized countries. (i.e. Trade is restricted in order to protect local producers against competition from foreign produces of the same product(s), as well as to stimulate employment).Developing countries have a burgeoning youthful population and a great need for necessities at low prices. They often provide lucrative markets for services and products associated with infrastructure upgrading, particularly where development aid is available to fund certain projects.

Economies in transitionSince the fall of the Berlin Wall, a new category, Economies in Transition, has come about. These include most of the former Soviet Union countries and often include South Africa. Conditions are not as bad as in developing countries but neither are they developed. The potential in these markets is great, as are the risks.

Q.2 Which is the evolving consumer segments in the market? How do they affect advertising?

Ans.: Consumer segments in the market:

Segmentation is a means of focusing attention onto the needs of groups of customers, rather than having a "one size that fits all approach". Gordon Wyner, (2002) vice president of Mercer Management Consulting, writes that effective segmentation enables companies to allocate investment resources towards targeted customers that are most likely to be attracted to offers. Success is measured in terms of how well the organisation acquires and retains profitable customers.

A target market itself is a specific group of potential purchasers having needs and wants towards which organisations desire to direct their marketing efforts. The identification and analysis of target markets provides a foundation for which the appropriate marketing mix (product, pricing, promotion and distribution) and a focused marketing strategy can be developed. The target market may be further segmented to match the particular needs of customers within that market.

A Focus Marketing Strategy (FMS) is designed to address a particular segment of the marketplace, product form, or cost management process. Focus marketing, or niche marketing, is based on the concept of serving a particular group of customers in such an exceptional manner that it becomes very difficult for another party to compete it that market. Focus or niche markets commonly involve smaller market segments, however with minimal competition profit margins can be very high.

Note, in addition to the terms used above, targeted marketing, focused marketing, and niche marketing are among additional terms that are used in association with customer market segmentation.

Customer market segmentation is a powerful and commonly used mechanism enabling organisations to:

Divide markets into meaningful and measurable segments, which are aligned according to customers' needs, past behaviour, value to the organisation, or demographic profiles;

Determine the profit potential of each segment by analyzing the revenue and cost impacts associated with serving the segments;

Target specific segments according to their profit potential, and to the organisation's ability to serve them in a beneficial and unique way;

Better invest resources in tailored products, services, marketing, and distribution programs which match the needs of targeted segments;

Measure the performance of each segment, and to adjust the segmentation approach progressively as market conditions change.

Customer market segmentation strategies can lead to greater profits realization. This can result through:

Better communications with, and understanding of, the target market;

Improved design of products and services which better fit the needs of the desired segment;

Efficiencies gained through segmentation;

Gaining a reputation for expertise and quality in serving specific segments of the market;

Enabling the most profitable customer groups to be given special attention thus improving loyalty and retention;

Enabling less profitable groups to be retained without over-investment;

Enabling unprofitable groups to be handled appropriately.

In summary segmentation of customer markets is used:

To better match customers' needs and requirements;

To enhance business profits by reaching untapped revenue streams;

To provide opportunities for growth;

To retain customers as their needs, circumstances, and lifestyles change;

To achieve better communication through targeting a more relevant audience;

To gain market share by becoming a preferred supplier of a targeted market.

Consumer segmentation and advertising:

Customer Market segmentation gives marketers the information to speak more and more directly to the needs of specific groups of customers, with similar behaviors, tastes, styles, and opinions. Moreover, the sheer quantity of information available about customers, their preferences, habits, and yes, demographics, allows segmentation to be even more potent.

So what, exactly, does customer market segmentation bring to the new marketing toolbox?

With the explosion of data available on customers (and potential customers), customer market segmentation allows marketers to identify discrete groups of customers with a high degree of accuracy based on demographic, behavioral, and geographic data. Market research adds psychographics (attitudinal) and enriched behavioral and demographic data.

In the old school, market research drove the segmentation effort. Data on customers was relatively scarce, so market segmentation required market researchers to analyze survey data for attitudinal and behavioral characteristics and then map the resulting segments of customers primarily on the scanty demographic data available in internal company databases.

Now, market researchers can begin with robust internal databases brimming with behavioral and demographic data, using surveying to add psycho graphic and attitudinal variables, can classify segments with much greater precision.

Q.3 Outline those elements that are considered important in advertising execution. Present examples.

Ans.: Advertising Execution:

Developing Media Strategies

To achieve the key plan objectives of who (target), where (location), when (time frame), how long (duration), and what (the size of the ad), media planners use a selection process of choosing the best alternatives and methods to satisfy the plan’s needs. In all cases, the final media strategy that companies use to meet advertising objective are: target audience, geographic, timing and duration, and size and length strategies.

Target Audience Strategies: New Technology of Measurement:

Media planers are limited by mass media audience research. However, further developments may help them overcome this limitation so that they can better execute their target audience strategies.

Retail Scanners:

Many retail outlets, especially Supermarkets, use electronic scanners. When you shop at Safeway, each product you buy has an electronic bar code that contains the name of the product and its price. The regional Safeway system may decide to establish a consumer panel so that it can track sales among hundreds of

other customers, and would complete a fairly extensive questionnaire, and be assigned and ID number. You might receive a premium or a discount on purchase, for your participation. Each time you make a purchase, you also submit tour ID number. Therefore, if Safeway runs a two-page newspaper ad, it can track actual sales to determine to what extent the ad worked. Your panel questionnaire will also contain a list of media that you use; so media can also be evaluated.

Elements of Advertisement Execution

Advertising can take a number of forms, including advocacy, comparative, co-operative, and direct mail, informational, institutional, outdoor, persuasive, product, reminder, point-of-purchase, and specialty advertising.

1. Advocacy Advertising: Advocacy advertising is normally thought of as any advertisement, message, or public communication regarding economic, political, or social issues. The advertising campaign is designed to persuade public opinion regarding a specific issue important in the public arena. The ultimate goal of advocacy advertising usually relates to the passage of pending State or Federal legislation. Almost all non-profit groups use some form of advocacy advertising to influence the public’s attitude toward a particular issue. One of the largest and most powerful non-profit advocacy groups is the American Association of Retired Persons (AARP). The AARP fights to protect social programs such as Medicare and Social Security for senior citizens by encouraging its members to write their legislators, using television advertisements to appeal to emotions, and publishing a monthly newsletter describing recent State and Federal legislative action. Other major non-profit advocacy groups include the Environmental Organization Green-peace, Mothers Against Drunk Driving (MADD), and the National Rifle Association (NRA).

2. Comparative Advertising: Comparative advertising compares one brand directly or indirectly with one or more competing brands. This advertising technique is very common and is used by nearly every major industry, including airlines and automobile manufacturers. One drawback of comparative advertising is that customers have become more skeptical about claims made by a company about its competitors because accurate information has not always been provided, thus making the effectiveness of comparison advertising questionable. In addition, companies that engage in comparative advertising must be careful not to misinform the public about a competitor’s product. Incorrect or misleading information may trigger a lawsuit by the aggrieved company or regulatory action by a governmental agency such as the Federal Trade Commission (FTC).

3. Co-operative Advertising: Co-operative advertising is a system that allows two parties to share advertising costs. Manufacturers and distributors, because of their shared interest in selling the product, usually use this co-operative advertising technique. An example might be when a soft-drink manufacturer and a local grocery store split the cost of advertising the manufacturer’s soft drinks; both the manufacturer and the store benefit from increased store traffic and its associated sales. Co-operative advertising is especially appealing to small storeowners who, on their own, could not afford to advertise the product adequately.

4. Direct Mail Advertising: Catalogues, flyers, letters and post-cards are just a few of the direct mail advertising options. Direct mail advertising has several advantages, including details of information, personalization, selectivity, and speed. But while direct mail has advantages, it carries an expensive per-head price, is dependent on the appropriateness of the mailing list, and is resented by some customers, who consider it "junk mail."

5. Informational Advertising: In informational advertising, which is used when a new product is first being introduced, the emphasis is on promoting the product’s name, benefits, and possible uses. Car manufacturers used this strategy when sport utility vehicles (SUVs) were first introduced.

6. Institutional Advertising: Institutional advertising takes a much broader approach, concentrating on the benefits, concept, idea, or philosophy of a particular industry. Companies often use it to promote image-

building activities, such an environmentally friendly business practices or new community-based programs that it sponsors. Institutional advertising is closely related to public relations, since both are interested in promoting a positive image of the company to the public. As an example, a large lumber company may develop an advertising theme around its practice of planting trees in areas where they have just been harvested. A theme of this nature keeps the company’s name in a positive light with the general public because most people view the replanting of trees positively.

7. Outdoor Advertising: Billboards and messages painted on the side of buildings are common forms of outdoor advertising, which is often used when quick, simple ideas are being promoted. Since repetition is the key to successful promotion, outdoor advertising is most effective when located along heavily traveled city streets and when the product being promoted can be purchased locally. Only about 1 percent of advertising is conducted in this manner.

8. Persuasive Advertising: Persuasive advertising is used after a product has been introduced to customers. The primary goal is for a company to build selective demand for its product. For example, automobile manufacturers often produce special advertisements promoting the safety features of their vehicles. This type of advertisement could allow automobile manufactures to charge more for their products because of the perceived higher quality that the safety features offered.

9. Product Advertising: Product advertising pertains to non-personal selling of a specific product. An example is a regular television commercial promoting a soft drink. The primary purpose of the advertisement is to promote the specific soft drink, not the entire soft-drink line of a company.

10. Reminder Advertising: Reminder advertising is used for products that have entered the mature stage of the product life cycle. The advertisements are simply designed to remind customers about the product and to maintain awareness. For example, detergent producers spend a considerable amount of money each year promoting their products to remind customers that their products are still available and for sale.

11. Point-of-Purchase Advertising: Point-of-purchase advertising uses displays or other promotional items near the product that is being sold. The primary motivation is to attract customers to the display so that they will purchase the product. Stores are more likely to use point-of-purchase displays if they have help from the manufacturer in setting them up or if the manufacturer provides easy instructions on how to use the displays. Thus, promotional items from manufacturers who provide the best instructions or help are more likely to be used by the retail stores.

12. Specialty Advertising: Specialty advertising is a form of sales promotion designed to increase public recognition of a company’s name. A company can have its name put on a variety of items, such as caps, glassware, gym bags, jackets, key chains, and pens. The value of specialty advertising varies depending on how long the items used in the effort last. Most companies are successful in achieving their goals for increasing public recognition and sales through these efforts.

Q.4 Discuss the media planning in detail.

Ans.: Media Planning is the process of determining how to use time and space to achieve advertising objectives. One of those objectives is always to place the advertising message before a target audience. A medium is a single form of communication (television, billboards and online media). Combining media (using TV, Radio and magazines) is a media mix. A media vehicle is a single program, magazine, or radio station. Although these terms have specific meanings, people in the advertising industry typically use the term ‘media’ in most situations. For simplicity’s sake, we use that term, too.

Media planning demands the biggest portion of the advertiser’s budget (cost for space and time). Media planning is systematic and complex. But in fact, a media plan may be quite simple and somewhat haphazard. A psychotherapist operating out of his home may purchase small Yellow Pages along with a much smaller ad in the local newspaper, when his finances permit. That’s it-say $ 590 per year on media. Even a small sporting goods store may focus on a somewhat larger directory ad, along with a print ad placed biweekly in the local newspaper. The latter is likely paid for the various manufactures whose brands he carries. Total media costs, say $2,850 per year.

Regardless of whether a company is spending a few hundred dollars on one medium or millions of dollars on thousands of media alternatives, the goal is still the same: to reach the right people, at the right time, with right message. The same principles of media planning apply.

Audience Measures Used in Media Planning

In the same way that a carpenter uses feet, inches and a printer and picas, the media planner uses specific measurements to evaluate media plan: group’s impressions and gross rating points. Even through a carpenter is building your home, it would still be important for you to understand the jargon so that you could discuss the project in an intelligent manner. Likewise, everyone working on an ad should understand the language of the media planner.

Gross Impression: An impression is a person’s opportunity to be exposed to a program, newspaper, magazine, or outdoor location anywhere in an ad. Impressions are a measure of the size of the audience either for one media (one announcement or one insertion) or for a combination of vehicles as estimated by media research.

If the David Letterman Show has an audience of 100,000 viewers, then each time the advertiser buys time on that program to advertise (usually a 30-second commercial) in each of four consecutive broadcasts, the total viewer impressions would be 100,000 times 4, or 400,000. In practice, media planners use gross impressions as a primary measure. Gross impressions are the sum of the audiences of all the media vehicles used during a certain span of time when multiple vehicles are used. The summary figure is called ‘gross’ because the planner has made no attempt to calculate how many different people were in the audience.

Gross Rating Points: Gross impression figures become very large and difficult to remember. The gross rating (percentage of expose) is an easier measurement to work with because it converts the raw figure to a percentage. The sum of the total exposure potential expressed as a percentage of the audience population is called gross rating points (GRPs). GRPs are calculated by dividing the total number of impressions by the size of the audience multiplying by 100.

To demonstrate GRP calculations, let’s revisit our David Letterman example views (total number of households with televisions, whether the sets are on or off) at that hour. The 100,000 viewers watching Letterman out of the possible 500,000 would represent 20 percent of views, or a 20.0 rating point total on four telecasts would be 80 (20 rating X 4 telecasts).

2 Media Buying Functions

Media buyers have specific skills to implement these duties. In this section, we example the most important buyer functions: providing information to media planners, selecting the media, negotiating costs, monitoring the media choices, evaluating the media choice after the campaign, and handling billing and payment.

Providing Inside Information to the Media Planner

Media buyers are close enough to day-to-day changes in media popularity and pricing to be a constant source of inside information to media planners. For example, a newspaper buyer discovers that a key newspaper’s delivery staff is going on strict; a radio time buyer learns that a top disk jockey is leaving a radio station; or a magazine buyer’s source reveals that the new editor of a publication is going to change the editorial focus dramatically. All of these things can influence the strategy and tactics of current and future advertising plans.

Selecting Media Vehicles

One essential part of buying is choosing the best media vehicles to fit the target audience’s aperture (the time and place at which the audience is most receptive to the message). The media planner lays out the direction, but the buyer is responsible for choosing the specific vehicles.

Armed with the media plan directives, the buyer seeks answers to a number of difficult questions: Does the vehicle have the right audience profile? Will the program’s current popularity increase, stabilize, or decline? How well does the magazine’s editorial format fit the brand? Does the radio station’s choice of music offer the correct atmosphere for the creative theme? How well does the newspaper’s circulation pattern fit the advertiser’s distribution? The answers to those questions bear directly on the campaign’s success. For instance, Alternative Press Magazine clearly matches Generation X. As indicated in the “A Matter of Practice” box, instant message is medium that teens find attractive.

Negotiating Media Prices/ Authorizing the Buys

Aside from finding the aperture of target audiences, nothing is considered more crucial in media buying than securing the lowest possible price for placements. Time and space charge make up the largest portion of the advertising budget, so there is continuing pressure to keep costs as lows as possible. To accomplish this, buyers operate in a world of negotiation. Buying is a complicated and tedious process. The American Association of Advertising Agencies (AAAA) lists no less than 21 elements in the authorization for a media buy.

Monitoring Vehicle Performance

In an ideal world, every vehicle on the campaign schedule would perform at or above expectations. Likewise, every advertisement, commercial and posting would run exactly as planed. In reality, underperformance and schedule problems are facts of life. The buyer’s response to these problems must be swift and decisive. Poorly performing vehicles must be replaced or cost must be modified. Production and schedule difficulties must be rectified. Delayed response could hurt the brand’s sales.

Post Campaign Analysis

Once a campaign is completed, the planers’ duty is to compare the plan’s expectations and forecasts with what actually happened. Did the plan actually achieve GRP, reach, frequency and CPM objectives? Did the newspaper and magazine placements run in the positions expected? Such analysis is instrumental in providing the guidance for further media plans.

Billing and Payment

Bills from various customers come in continuously. Ultimately, it is the responsibility of the advertiser to make these payments. However, the agency may be contractually obligated to pay the initial invoice; or, because of various negotiations between the agency and selected media, it may be advantageous for the agency to make the payment and then bill the client. Keeping track of it and paying the bills is the responsibility of the media planner in conjunction with the Accounting Department.

These six tasks are the highlights of media buying. For a better understanding of buying operations, however, we need to look at some of these duties in closer detail.

The media-planning field has undergone a metamorphosis because of the proliferation of new media such as electronic billboards, the Internet and interactive media. Media department employees who once worked silently behind the scenes are now in the forefront, directing marketing strategy.

Traditionally, media planning was essentially based on a client’s media strategy. The ad agency was responsible for developing the media plan, which was usually devised jointly by the agency’s media department, the account and creative teams, and the marketer’s brand to the ad agency, executed it.

Today, an advertising client is just as likely to outsource media planning to an agency as it is to develop its own plan. Because of these shifts, the line between media planning and media buying has become hazy.

Consolidation is taking place within the media agency industry. During the 2000-2001 periods, at least a dozen major mergers took place. The largest was the creation of Magna Global, the first worldwide negotiation company, with initial total billing of over $40 billion. The primary reason for consolidation is that it not only creates definite cost savings, but also provides more opportunity to negotiate better process when buying media.

1 The Aperture Concept in Media Planning

Each prospective customer for a product or service has an ideal time and place at which he can be reached with an advertising message. This point can be when the customer is in the “search corridor”- the purchasing mode-or it can occur when the consumers is seeking more information before entering the corridor. The goal of the media planner is to expose the target audience to the advertiser’s message at these critical points.

This ideal point is called an aperture. The most effective advertisement should expose the consumer to the product when interest and attention are high. The ball meets the bat at the right spot and at the precise instant for maximum effect.

Locating the aperture opportunity is a major responsibility of the media planner. The planner must study the marketing position of the advertiser to determine which media opportunities will do the best job. Finding aperture opportunity is a complex, difficult assignment, and a sensitive understanding of the channels of mass communication.

2 Media Planning Information Sources

Some people believe that media are the hub in the advertising wheel, the central point where all campaign elements (that is, the spokes of the wheel) are joined. This belief may stem from the sheer volume of data and information that media planners must gather, sort, and analyze before media decision-making can begin.

In many ad agencies, account planners collect, gather, and analyze some of this market and creative information, especially if it relates to the target audience, message design, or brand image. The bases for the information selection process are the media objectives that start the media plan.

Q.5 How is ad spend on a particular ad campaign decided? Explain.

Ans.: Evaluating Advertising Campaigns

Advertising can take a number of forms, including advocacy, comparative, co-operative, and direct mail, informational, institutional, outdoor, persuasive, product, reminder, point-of-purchase, and specialty advertising.

1. Advocacy Advertising: Advocacy advertising is normally thought of as any advertisement, message, or public communication regarding economic, political, or social issues. The advertising campaign is designed to persuade public opinion regarding a specific issue important in the public arena. The ultimate goal of advocacy advertising usually relates to the passage of pending State or Federal legislation. Almost all non-profit groups use some form of advocacy advertising to influence the public’s attitude toward a particular issue. One of the largest and most powerful non-profit advocacy groups is the American Association of Retired Persons (AARP). The AARP fights to protect social programs such as Medicare and Social Security for senior citizens by encouraging its members to write their legislators, using television advertisements to appeal to emotions, and publishing a monthly newsletter describing recent State and Federal legislative action. Other major non-profit advocacy groups include the Environmental Organization Green-peace, Mothers Against Drunk Driving (MADD), and the National Rifle Association (NRA).

2. Comparative Advertising: Comparative advertising compares one brand directly or indirectly with one or more competing brands. This advertising technique is very common and is used by nearly every major industry, including airlines and automobile manufacturers. One drawback of comparative advertising is that customers have become more skeptical about claims made by a company about its competitors because accurate information has not always been provided, thus making the effectiveness of comparison advertising questionable. In addition, companies that engage in comparative advertising must be careful not to misinform the public about a competitor’s product. Incorrect or misleading information may trigger a lawsuit by the aggrieved company or regulatory action by a governmental agency such as the Federal Trade Commission (FTC).

3. Co-operative Advertising: Co-operative advertising is a system that allows two parties to share advertising costs. Manufacturers and distributors, because of their shared interest in selling the product, usually use this co-operative advertising technique. An example might be when a soft-drink manufacturer and a local grocery store split the cost of advertising the manufacturer’s soft drinks; both the manufacturer and the store benefit from increased store traffic and its associated sales. Co-operative advertising is especially appealing to small store-owners who, on their own, could not afford to advertise the product adequately.

4. Direct Mail Advertising: Catalogues, flyers, letters and post-cards are just a few of the direct mail advertising options. Direct mail advertising has several advantages, including details of information, personalization, selectivity, and speed. But while direct mail has advantages, it carries an expensive per-head price, is dependent on the appropriateness of the mailing list, and is resented by some customers, who consider it "junk mail."

5. Informational Advertising: In informational advertising, which is used when a new product is first being introduced, the emphasis is on promoting the product’s name, benefits, and possible uses. Car manufacturers used this strategy when sport utility vehicles (SUVs) were first introduced.

6. Institutional Advertising: Institutional advertising takes a much broader approach, concentrating on the benefits, concept, idea, or philosophy of a particular industry. Companies often use it to promote image-building activities, such an environmentally friendly business practices or new community-based programs

that it sponsors. Institutional advertising is closely related to public relations, since both are interested in promoting a positive image of the company to the public. As an example, a large lumber company may develop an advertising theme around its practice of planting trees in areas where they have just been harvested. A theme of this nature keeps the company’s name in a positive light with the general public because most people view the replanting of trees positively.

7. Outdoor Advertising: Billboards and messages painted on the side of buildings are common forms of outdoor advertising, which is often used when quick, simple ideas are being promoted. Since repetition is the key to successful promotion, outdoor advertising is most effective when located along heavily traveled city streets and when the product being promoted can be purchased locally. Only about 1 percent of advertising is conducted in this manner.

8. Persuasive Advertising: Persuasive advertising is used after a product has been introduced to customers. The primary goal is for a company to build selective demand for its product. For example, automobile manufacturers often produce special advertisements promoting the safety features of their vehicles. This type of advertisement could allow automobile manufactures to charge more for their products because of the perceived higher quality that the safety features offered.

9. Product Advertising: Product advertising pertains to non-personal selling of a specific product. An example is a regular television commercial promoting a soft drink. The primary purpose of the advertisement is to promote the specific soft drink, not the entire soft-drink line of a company.

10. Reminder Advertising: Reminder advertising is used for products that have entered the mature stage of the product life cycle. The advertisements are simply designed to remind customers about the product and to maintain awareness. For example, detergent producers spend a considerable amount of money each year promoting their products to remind customers that their products are still available and for sale.

11. Point-of-Purchase Advertising: Point-of-purchase advertising uses displays or other promotional items near the product that is being sold. The primary motivation is to attract customers to the display so that they will purchase the product. Stores are more likely to use point-of-purchase displays if they have help from the manufacturer in setting them up or if the manufacturer provides easy instructions on how to use the displays. Thus, promotional items from manufacturers who provide the best instructions or help are more likely to be used by the retail stores.

12. Specialty Advertising: Specialty advertising is a form of sales promotion designed to increase public recognition of a company’s name. A company can have its name put on a variety of items, such as caps, glassware, gym bags, jackets, key chains, and pens. The value of specialty advertising varies depending on how long the items used in the effort last. Most companies are successful in achieving their goals for increasing public recognition and sales through these efforts.

Areas of Assessment of Effectiveness

A meaningful measurement of the effectiveness of advertising will be possible only by divagating the total area to be covered and preparation of advertising and to the hierarchy of its possible effects. Research techniques may accordingly be applied at four stages:

1. A continuous analysis of past advertising experience, in search of guidelines for an analytical framework, is a very useful first step except in the case of new advertising strategy.

2. Surveys of buyer behaviour and consumer preferences are helpful in developing advertising objectives and strategy. Such research will also be useful in monitoring changes in the target segment.

3. The third area involves pre-testing advertisements before their release. This is very important in the evaluation of advertising effectiveness. Pre-testing provides an indication of the likely acceptance of an advertisement or a campaign by the target audience. Results of pre-testing will obviously be used for making improvements and changes as suggested by research. It will also bring forth limitations, if any, since media costs account for most of the cost advertising. A qualitative as well as quantitative aspect of evaluation of the media may also be required.

4. The post-test research involves testing of the reach and impact of advertising after it has been released. Pre-production research and post-testing are complementary. The former is diagnostic and is concerned with evaluation of notice ability, recognition, recall, comprehension and behavioural changes, if any, brought about by the advertising.

Pre-placement Evaluation of Advertising

Although past experience and a ‘feel’ for the market would always remain valuable aids for advertising executives, a systematic and methodical approach for estimating the possible effectiveness of the advertising before its release would be a worthwhile effort and might also be helpful in avoiding possible adverse effects later.

One of the first advertising decisions may require searching and screening of suitable advertising ideas. This may entail:

1. Quest for new ideas or for new expressions of old ones.

2. Collection of facts about what people knows or feels about a company.

3. Prediction of how people will probably react to a new advertising idea.

Testing of creative approaches and themes, prior to development of creative strategy, can give an early indication of effectiveness. Themes, product ideas, brand names, slogans and other element to be included in an advertisement can thus be evaluated.

Q.6 What is sales promotion? Explain in detail.

Ans.: Meaning of Sales Promotion

1. Sales promotion refers to activities, materials, devices, and techniques, which are used to supplement the advertising and marketing efforts and help to co-ordinate the advertising with the personal selling effort. Sweepstakes are among the most well known sales promotion tools, but other examples include special displays, coupons, promotional discounts, contests, and gift offers.

2. Casually, these are combined activities employed to sell a product or servic

Importance of Sales Promotion

Sales promotion is an important component of the overall marketing strategy of a small business along with advertising, public relations, and personal selling. The American Marketing Association (AMA) defines sales promotion as "media and non-media marketing pressure applied for a pre-determined, limited period of time in order to stimulate trial, increase consumer demand, or improve product quality." But this definition does not capture all the elements of modern sales promotion.

One should add that effective sales promotion increases the basic value of a product for a limited time and directly stimulates consumer purchasing, selling effectiveness, or the effort of the sales force. It can be used to inform, persuade, and remind target customers about the business and its marketing mix. Some common types of sales promotion include samples, coupons, sweepstakes, contests, in-store displays, trade shows, price-off deals, premiums and rebates.

Businesses can target sales promotions at three different audiences: consumers, re-sellers, and the company’s own sales force. Sales promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over another. It is particularly effective in spurring product trial and unplanned purchases.

Most marketers believe that a given product or service has an established perceived price or value, and they use sales promotion to change this price-value relationship by increasing the value and/or lowering the price. Compared to the other components of the marketing mix (advertising, publicity, and personal selling), sales promotion usually operates on a shorter time line, uses a more rational appeal, returns a tangible or real value, fosters an immediate sale, and contributes highly to profitability.

In determining the relative importance to place on sales promotion in the overall marketing mix, a small business should consider its marketing budget, the stage of the product in its life cycle, the nature of competition in the market, the target of the promotion and the nature of the product. For example, sales promotion and direct mail are particularly attractive alternatives when the marketing budget is limited, as it is for many small businesses.

In addition, sales promotion can be an effective tool in a highly competitive market, when the objective is to convince retailers to carry a product or influence consumers to select it over those of competitors. Similarly, sales promotion is often used in the growth and maturity stages of the product life cycle to stimulate consumers and re-sellers to choose that product over the competition – rather than in the introduction stage, when mass advertising to build awareness might be more important. Finally, sales promotion tends to work best when it is applied to impulse items whose features can be judged at the point of purchase, rather than more complex, expensive items that might require hands-on demonstration.

Tools and Techniques of Sales Promotion

Consumer sales promotions are steered toward the ultimate product users – typically individual shoppers in the local market – but the same techniques can be used to promote products sold by one business to another, such as computer systems, cleaning supplies, and machinery. In contrast, trade sales promotions target re-sellers – wholesalers and retailers – who carry the marketer’s product. Following are some of the key techniques used in consumer-oriented sales promotions.

1 Price Deals

A consumer price deal saves the buyer money when a product is purchased. The main types of price deals include discounts, bonus pack deals, refunds or rebates and coupons. Price deals are usually intended to encourage trial use of a new product or line extension, to recruit new buyers for a mature product, or to convince existing customers to increase their purchases, accelerate their use, or purchase multiple units. Price deals work most effectively when price is the consumer’s foremost criterion or when brand loyalty is low.

Buyers may learn about price discounts either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package, on signs near the product, or in storefront windows. Many types of advertisements can be used to notify consumers of upcoming discounts, including fliers and newspaper and television ads. Price discounts are especially common in the food industry, where local supermarkets run weekly specials.

The manufacturer, the retailer, or the distributor may initiate Price discounts. For instance, a manufacturer may "pre-price" a product and then convince the retailer to participate in this short-term discount through extra incentives. For price reduction strategies to be effective, they must have the support of all distributors in the channel. Existing customers perceive discounts as rewards and often respond by buying in larger quantities. Price discounts alone, however, usually do not induce first time buyers.

Another type of price deal is the bonus pack or banded pack. When a bonus pack is offered, an extra amount of the product is free when a standard size of the product is bought at the regular price. This technique is routinely used in the marketing of cleaning products, food, and health and beauty aids to introduce a new or larger size. A bonus pack offers rewards to present users but may have little appeal to users of competitive brands. A banded pack offer is when two or more units of a product are sold at a reduction of the regular single-unit price. Sometimes the products are physically banded together, such as in toothbrush and toothpaste offers.

A refund or rebate promotion is an offer by a marketer to return a certain amount of money when the product is purchased alone or in combination with other products. Refunds aim to increase the quantity or frequency of purchase, to encourage customers to "load up" on the product. This strategy dampens competition by temporarily taking consumers out of the market, stimulates the purchase of postponable goods such as major appliances, and creates on-shelf excitement by encouraging special displays. Refunds and rebates are generally viewed as a reward for purchase, and they appear to build brand loyalty rather than diminish it.

Coupons are legal certificates offered by manufacturers and retailers. They grant specified savings on selected products when presented for redemption at the point of purchase. Manufacturers sustain the cost of advertising and distributing their coupons, redeeming their face values, and paying retailers a handling fee. Retailers who offer double or triple the amount of the coupon shoulder the extra cost. Retailers who offer their own coupons incur the total cost, including paying the face value. In this way, retail coupons are equivalent to a cents-off deal.

Manufacturers disseminate coupons in many ways. They may be delivered directly by mail, dropped door to door, or distributed through a central location such as a shopping mall. Coupons may also be distributed through the media – magazines, newspapers, Sunday supplements, or freestanding inserts (FSI) in newspapers. Coupons can be inserted into, attached to, or printed on a package, or a retailer who uses them to generate store traffic or to tie in with a manufacturer’s promotional tactic may distribute them. Retailer-sponsored coupons are typically distributed through print advertising or at the point of sale. Sometimes, though, specialty retailers or newly opened retailers will distribute coupons door to door or through direct mail.

2 Contests/Sweepstakes

The main difference between ‘contests’ and ‘sweepstakes’ is that contests require entrants to perform a task or demonstrate a skill that is judged in order to be deemed a winner, while sweepstakes involve a random drawing or chance contest that may or may not have an entry requirement. At one time, contests were more commonly used as sales promotions, mostly due to legal restrictions on gambling that many marketers feared might apply to sweepstakes.

But the use of sweepstakes as a promotional tactic has grown dramatically in recent decades, partly because of legal changes and partly because of their lower cost. Administering a contest once cost about $350 per thousand entries, compared to just $2.75 to $3.75 per thousand entries in a sweepstake. Furthermore, participation in contests is very low compared to sweepstakes, since they require some sort of skill or ability.

3 Special Events

According to the consulting firm International Events Group (IEG), businesses spend over $2 billion annually to link their products with everything from jazz festivals to golf tournaments to stock car races. In fact, large companies like RJR Nabisco and Anheuser-Busch have special divisions that handle nothing but special events. Special events marketing offer a number of advantages.

First, events tend to attract a homogeneous audience that is very appreciative of the sponsors. Therefore, if a product fits well with the event and its audience, the impact of the sales promotion will be high. Second, event sponsorship often builds support among employees—who may receive acknowledgment for their participation—and within the trade. Finally, compared to producing a series of ads, event management is relatively simple. Many elements of event sponsorship are pre-packaged and reusable, such as booths, displays, and ads. Special events marketing are available to small businesses, as well, through sponsorship of events on the community level.

4 Premiums

A premium is tangible compensation that is given as incentive for performing a particular act – usually buying a product. The premium may be given for free, or may be offered to consumers for a significantly reduced price. Some examples of premiums include receiving a prize in a cereal box or a free garden tool for visiting the grand opening of a hardware store. Incentives that are given for free at the time of purchase are called direct premiums. These offers provide instant gratification, plus there is no confusion about returning coupons or box tops, or saving bar codes or proofs of purchase.

Other types of direct premiums include traffic builders, door openers, and referral premiums. The garden tool is an example of a traffic-builder premium – an incentive to lure a prospective buyer to a store. A door-opener premium is directed to customers at home or to business people in their offices.

For example, a homeowner may receive a free clock or radio for allowing an insurance agent to enter their home and listening to his sales speech. Similarly, an electronics manufacturer might offer free software to an office manager who agrees to an on-site demonstration. The final category of direct premiums, referral premiums, rewards the purchaser for referring the seller to other possible customers.

Mail premiums, unlike direct premiums, require the customer to perform some act in order to obtain a premium through return mail. An example might be a limited edition toy car offered by a marketer in exchange for one or more proofs-of-purchase and a payment covering the cost of the item plus handling. The premium is still valuable to the consumer because they cannot readily buy the item for the same amount.

5 Continuity Programs

Continuity programs retain brand users over a long time period by offering ongoing motivation or incentives. Continuity programs demand that consumers keep buying the product in order to get the premium in the future. Trading stamps, popularized in the 1950s and 1960s, are prime examples. Consumers usually received one stamp for every dime spent at a participating store.

The stamp company provided redemption centers where the stamps were traded for merchandise. A catalog listing the quantity of stamps required for each item was available at the participating stores. Today, airlines’ frequent-flyer clubs, hotels’ frequent-traveler plans, retailers’ frequent-shopper programs, and bonus-paying credit cards are common continuity programs. When competing brands have reached parity in terms of price and service, continuity programs sometimes prove a deciding factor among those competitors. By rewarding long-standing customers for their loyalty, continuity programs also reduce the threat of new competitors entering a market.

6 Sampling

A sign of a successful marketer is getting the product into the hands of the consumer. Sometimes, particularly when a product is new or is not a market leader, an effective strategy is giving a sample product to the consumer, either free or for a small fee. But in order for sampling to change people’s future purchase decisions, the product must have benefits or features that will be obvious during the trial.

There are several means of disseminating samples to consumers. The most popular has been through the mail, but increases in postage costs and packaging requirements have made this method less attractive. An alternative is door-to-door distribution, particularly when the items are bulky and when reputable distribution organizations exist.

This method permits selective sampling of neighborhoods, dwellings, or even people. Another method is distributing samples in conjunction with advertising. An ad may include a coupon that the consumer can mail in for the product, or it may include an address or phone number for ordering. Direct sampling can be achieved through prime media using scratch-and-sniff cards and slim foil pouches, or through retailers using special displays or a person hired to hand out samples to passing customers. Though this last technique may build goodwill for the retailer, some retailers resent the inconvenience and require high payments for their co-operation.

A final form of sample distribution deals with specialty types of sampling. For instance, some companies specialize in packing samples together for delivery to homogeneous consumer groups, such as newlyweds, new parents, students, or tourists. Such packages may be delivered at hospitals, hotels, or dormitories and include a number of different types of products.

7 Trade Promotions

A trade sales promotion is targeted at re-sellers – wholesalers and retailers – who distribute manufacturers’ products to the ultimate consumers. The objectives of sales promotions aimed at the trade are different from those directed at consumers.

In general, trade sales promotions hope to accomplish four goals: 1) Develop in-store merchandising support, as strong support at the retail store level is the key to closing the loop between the customer and the sale. 2) Control inventory by increasing or depleting inventory levels, thus helping to eliminate seasonal peaks and valleys. 3) Expand or improve distribution by opening up new sales areas (trade promotions are also sometimes used to distribute a new size of the product). 4) Generate excitement about the product among those responsible for selling it. Some of the most common forms of trade promotions – profiled below – include point-of-purchase displays, trade shows, sales meetings, sales contests, push money, deal loaders, and promotional allowances.

8 Point-of-Purchase (POP) Displays

Manufacturers provide point-of-purchase (POP) display units free to retailers in order to promote a particular brand or group of products. The forms of POP displays include special racks, display cartons, banners, signs, price cards, and mechanical product dispensers. Probably the most effective way to ensure that a reseller will use a POP display is to design it so that it will generate sales for the retailer. High product visibility is the basic goal of POP displays. In industries such as the grocery field where a shopper spends about three-tenths of a second viewing a product, anything increasing product visibility is valuable. POP displays also provide or remind consumers about important decision information, such as the product’s name, appearance, and sizes. The theme of the POP display should co-ordinate with the theme used in ads and by salespeople.

9 Trade Shows

Thousands of manufacturers display their wares and take orders at trade shows. In fact, companies spend over $9 billion yearly on these shows. Trade shows provide a major opportunity to write orders for products. They also provide a chance to demonstrate products, disseminate information, answer questions, and are compared directly to competitors. Related to trade shows, but on a smaller scale, do manufacturers or wholesalers sponsor sales meetings.

Whereas trade shows are open to all potential customers, sales meetings are targeted toward the company’s sales force and/or independent sales agents. These meetings are usually conducted regionally and directed by sales managers. The meetings may be used to motivate sales agents, to explain the product or the promotional campaign, or simply to answer questions. For re-sellers and salespeople, sales contests can also be an effective motivation. Typically, a prize is awarded to the organization or person who exceeds a quota by the largest percentage.

10 Push Money

Similarly, push money (PM) – also known as spiffs – is an extra payment given to salespeople for meeting a specified sales goal. For example, a manufacturer of refrigerators might pay a $30 bonus for each unit of model A, and a $20 bonus for each unit of model B, sold between March 1 and September 1. At the end of that period, the salesperson would send evidence of these sales to the manufacturer and receive a check in return. Although some people see push money as akin to bribery, many manufacturers offer it.

11 Deal Loaders

A deal loader is a premium given by a manufacturer to a retailer for ordering a certain quantity of product. Two types of deal loaders are most typical. The first is a buying loader, which is a gift given for making a specified order size. The second is a display loader, which means the display is given to the retailer after the campaign. For instance, General Electric may have a display containing appliances as part of a special program. When the program is over, the retailer receives all the appliances on the display if a specified order size was achieved.

12 Trade Deals

Trade deals are special price concessions superseding, for a limited time, the normal purchasing discount given to the trade. Trade deals include a group of tactics having a common theme—to encourage sellers to specially promote a product.

The marketer might receive special displays, larger-than-usual orders, superior in-store locations, or greater advertising effort. In exchange, the retailer might receive special allowances, discounts, goods, or money. In many industries, trade deals are the primary expectation for retail support, and the marketing funds spent in this area are considerable. There are two main types of trade deals: buying allowances and advertising/display allowances.

13 Buying Allowances

A buying allowance is a bonus paid by a manufacturer to a reseller when a certain amount of product is purchased during a specific time period. For example, a reseller who purchases at least 15 cases of product might receive a buying allowance of $6.00 off per case, while a purchase of at least 20 cases would result in $7.00 off per case, and so forth.

The payment may take the form of a check or a reduction in the face value of an invoice. In order to take advantage of a buying allowance, some retailers engage in "forward buying." In essence, they order more merchandise than is needed during the deal period, then store the extra merchandise to sell later at regular prices. This assumes that the savings gained through the buying allowance is greater than the cost of

warehousing and transporting the extra merchandise. Some marketers try to discourage forward buying, since it reduces profit margins and tends to create cyclical peaks and troughs in demand for the product.

The slotting allowance is a controversial form of buying allowance. Slotting allowances are fees retailers charge manufacturers for each space or slot on the shelf or in the warehouse that new products will occupy.

The controversy stems from the fact that in many instances this allowance amounts to little more than paying a bribe to the retailer to convince them to carry your company’s products. But many marketers are willing to pay extra to bring their products to the attention of consumers who are pressed for time in the store. Slotting allowances sometimes buy marketers prime spaces on retail shelves, at eye level or near the end of aisles.

The final type of buying allowance is a free goods allowance. In this case, the manufacturer offers a certain amount of product to wholesalers or retailers at no cost if they purchase a stated amount of the same or a different product. The allowance takes the form of free merchandise rather than money.