Types of Promotion Tutorial
In this tutorial, we continue our coverage of promotion decisions with an overview of the different types of promotional methods (called promotion mix) that are available to marketers. Our main objective in this tutorial is to lay the groundwork for more in-depth discussion of each of the promotional methods that are examined in other tutorials.
We lay this groundwork by first focusing on the underlying characteristics of each type of promotion. We will see this by isolating eight key characteristics. Next, we introduce the promotion mix and show how each method of promotion is impacted by the eight characteristics. Finally, we look at other factors affecting promotional choice including those related to corporate strategy and objectives, and those related to marketing strategy and objectives.
Characteristics of Promotional Methods
Before we discuss the different promotional options available to the marketer, it is useful to gain an understanding of the key features that set different options apart. For our discussion, we isolate eight characteristics on which each promotional option can be judged. While these characteristics are widely understood as being important in evaluating the effectiveness of each type of promotion, they are by no means the only criteria used for evaluation. In fact, as new promotional methods emerge the criteria for evaluating promotional methods will likely change.
For our discussion we will look at the following eight characteristics of a promotional method:
1. Intended Audience: Mass vs. Targeted
Promotions can be categorized based on the intended coverage of a single promotional message. For instance, a single television advertisement for a major sporting event, such as the Olympics, NFL Super Bowl, or World Cup, could be seen by millions of viewers at the same time. Such mass promotion, intended to reach as many people as possible, has been a mainstay of marketers’ promotional efforts for a long time.
Unfortunately, while mass promotions are delivered to a large number of people, the actual number that fall within the marketer’s target market may be small. Because of this, many who use mass promotion techniques find it to be an inefficient way to reach desired customers. Instead, today’s marketers are turning to newer techniques designed to focus promotional delivery to only those with a high probability of being in the marketer’s target market. Google, through its AdWords service, and Microsoft, through its Bing Ads service, employ methods for delivering highly targeted ads to customers as they enter search terms. The assumption made by advertisers is that customers who enter search terms are interested in the information they have entered, especially if they are searching by entering detailed search strings (e.g., phrases rather than a single word). Following this logic, advertisers, who have the ability to associate relevant words and phrases with their ad, are much more likely to have their these displayed to customers within their target market leading to a potentially higher return on their promotional investment. The movement to highly targeted promotions has gained tremendous traction in recent years and, as new and improved targeting methods are introduced, its importance will continue to grow.
2. Payment Model: Paid vs. Non-Paid
Most efforts to promote products require marketers to make direct payment to the medium that delivers the message. For instance, a company must pay a magazine publisher to advertise in the magazine. However, there are several forms of promotion that do not involve direct payment in order to distribute a promotional message. While not necessarily “free” since there may be indirect costs involved, the ability to have a product promoted without making direct payment to the medium can be a viable alternative to expensive promotion options.
3. Message Flow: One-Way vs. Two-Way
Promotions can be classified based on whether the message source enables the message receiver to respond with immediate feedback. Such feedback can then be followed with further information exchange between both parties. Most efforts at mass promotion, such as television advertising, offer only a one-way information flow that does not allow for easy response by the message receiver. However, many targeted promotions, such as using a sales force to promote products, allow message recipients to respond immediately to information from the message sender.
4. Interaction Type: Personal vs. Non-Personal
Promotions involving real people communicating with other people is considered personal promotion. While salespeople are a common and well understood type of personal promotion, another type of promotion, called controlled word-of-mouth promotion (a.k.a., buzz marketing), has evolved as a form of personal promotion. Unlike salespeople who attempt to obtain an order from customers, controlled word-of-mouth promotion uses real people to help spread information about a product but is not designed to directly elicit orders.
One key advantage personal promotions have is the ability for the message sender to adjust the message as they gain feedback from message receivers (i.e., two-way communication). So, if a customer does not understand something in the initial message (e.g., doesn?t fully understand how the product works), the person delivering the message can adjust the promotion to address questions or concerns. Many non-personal forms of promotion, such as a television and radio advertisement, are inflexible, at least in the short-term, and cannot be easily adjusted to address questions that arise by the audience experiencing the ad.
5. Demand Creation: Quick vs Lagging
As we discussed earlier, the success of promotional activity may not always be measured by comparing spending to an increase in product sales since marketers may use promotion to achieve other objectives. However, when a marketer is looking to increase demand, certain promotional activities offer advantages in turning exposure to promotion into a quick increase in demand. In general, these activities are most effective when customers are offered a monetary (e.g., save money) or psychological (e.g., improves customer’s perceived group role or status level) incentive to make the purchase.
6. Message Control: Total vs. Minimal
Most promotions are controlled by the marketer, who encodes the message (or hires specialists such as advertising agencies to create the promotion) and then pays to have the message delivered. However, no marketer can totally control how the news media, customers, or others talk about a company or its products. Reporters for magazines, newspaper, and news websites, as well as those posting comments on social media, internet forums and online retailers, may discuss a company’s products in ways that can benefit or hinder a company’s marketing efforts. This is particularly true with non-paid promotions, where a marketer is looking to obtain a free “mention” by an influential message medium (e.g., newspaper article), but has little control in getting this to occur (for more see Disadvantages of Public Relations).
7. Message Credibility: High vs. Low
The perceived control of the message can influence the target market’s perception of message credibility. For example, many customers viewing a comparative advertisement in which a product is shown to be superior to a competitor’s product may be skeptical about the claims since the company with the superior product is paying for the advertisement. Yet if the same comparison is mentioned in a newspaper article it may be more favorably viewed since readers may perceive the author of the story (e.g., reporter) as being unbiased in her/his point-of-view.
8. Cost Assessment: Exposure vs. Action
Promotional cost is measured in several different ways. One commonly used method is based on assessing the cost of a promotion compared to the number of people exposed to the promotion. One method called cost-per-mille (CPM), relates to how many are exposed to a promotion in relation to the cost of the promotion. (CPM is also referred to as cost-per-thousand as mille means thousand and calculates how much promotion costs for each 1,000 exposures). CPM is a commonly used promotional measurement for mass media outlets, such as print and broadcast markets, although in the online advertising industry it is also used, though it is sometimes referred to as cost-per-impression (CPI). A national or international television advertisement, while expensive to create and broadcast, actually produces a very low CPM given how many people are exposed to the ad. Yet a low CPM can be misleading if a large percentage of the promotion’s audience is not within the marketers target market, in which case another measure, cost-per-targeted exposure (CPTE), may be a better metric for gauging promotion effectiveness. The CPTE approach looks at what percentage of an audience is within the marketer’s customer group and, thus, legitimate targets for the promotion. Clearly, CPTE is higher than CPM, but it offers a better indication of how much promotion is reaching targeted customers.
An even more effective way to evaluate promotional costs is through the cost-per-action (CPA) metric. With CPA, the marketer evaluates how many people actually respond to a promotion. Response may be measured by examining purchase activity, website traffic, taps on smartphone advertisements, number of phone inquiries, and other means within a short time after the promotional message is delivered. Unfortunately, measuring CPA is not always easy and tying it directly to a specific promotion can also be difficult. For example, a customer who purchases a snack product may have first learned about the snack product several weeks before from a television advertisement. The fact that it took the customer several weeks to make the purchase does not mean the advertisement was not effective in generating sales, though if the CPA was measured within a day or two after the ad was broadcast this person’s action would not have been counted.
However, marketers have at their disposal an ever-growing array of sophisticated customer tracking and analytics techniques, especially for promotions delivered through the internet and mobile networks. These techniques are continually improving marketers’ ability to match exposure to action. Consequently, CPA is bound to one day be the dominant method for measuring promotional effectiveness.
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The Promotion Mix
Marketers have at their disposal four major methods of promotion, which taken together comprise the promotion mix. On this page, a basic definition of each method is offered while in the next page a comparison of each method based on the characteristics of promotion is presented.
This form of promotion involves non-personal paid promotions often using mass media outlets to deliver the marketer’s message. While historically advertising has been a one-way form of communication with little feedback opportunity for the customer experiencing the advertisement, rapid developments in computer technology and digital networks are presenting customers with more options to provide their opinions on the ads they experience.
2. Sales Promotion
The promotional method involves the use of special short-term techniques, often in the form of incentives, to encourage customers to respond or undertake some activity. For instance, the use of retail coupons with expiration dates requires customers to act while the incentive is still valid.
3. Public Relations
Also referred to as publicity, this type of promotion uses third-party sources, and particularly the news media and those with a strong online presence, to offer a favorable mention of the marketer’s organization or products without direct payment to the third-party sources.
4. Personal Selling
As the name implies, this form of promotion involves personal contact between company representatives and those who have a role in purchase decisions (e.g., make the decision, such as consumers, or have an influence on a decision, such as members of a company buying center). Often the contact occurs face-to-face, over the telephone, or via online video conferencing.
Each of these methods will be covered in much greater detail in later tutorials.
Promotion Mix Summary Table
The table below compares each of the promotion mix options on the eight key promotional characteristics. The summary should be viewed only as a general guide since promotion techniques are continually evolving and how each technique is compared on a characteristic is subject to change.
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Factors Affecting Promotion Choice
With four promotional methods to choose from, how does the marketer determine which ones to use? The selection can be complicated by organizational and marketing decision issues. Organizational issues that affect the choice of promotional method include:
Promotional Objective – As we discussed, there are several different objectives a marketer may pursue with their promotional strategy. Each type of promotion offers different advantages in terms of helping the marketer reach their objectives. For instance, if the objective of a subscription-based genealogy website is to get customers to try their service, the use of sales promotion, such as offering a 14-day free trial, may yield better results than simply promoting through a general mobile app advertisement.
Availability of Resources – The amount of money and other resources that can be directed to promotion affects the marketer’s choice of promotional methods. Marketers with large promotional budgets may be able to spread spending among all promotion options, while marketers with limited funds must be more selective on the promotion techniques they use.
Company Philosophy – Some companies follow a philosophy that dictates where most promotional spending occurs. For example, some companies follow the approach that all promotion should be done through salespeople while other companies prefer to focus attention on product development and hope word-of-mouth communication by satisfied customers helps to create interest in their product.
Marketing issues that affect the choice of promotional method include:
Target Market – As one might expect, customer characteristics dictate how promotion is determined. Characteristics, such as size, location and type of target markets, affect how the marketer communicates with customers. For instance, for a small marketer serving business markets with customers widely dispersed, it may be very expensive to utilize a sales force versus using advertising.
Product – Different products require different promotional approaches. For the consumer market, products falling into the convenience and shopping goods categories are likely to use mass market promotional approaches while higher-end specialty goods are likely to use personalized selling. Therefore, for products that are complex and take customers extended time to make a purchase decision, personalize promotion may be more effective than methods of mass promotion. This is often the case with products targeted to the business market. Additionally, as we briefly discussed in the Managing Products Tutorial and will later see in the Planning With the Product Life Cycle Tutorial, products pass through different stages in the Product Life Cycle. As a product moves through these stages the product itself may evolve and also promotional objectives will change. This leads to different promotional mix decisions from one stage to the next.
Distribution – Marketing organizations selling through channel partners can reach the final customer either directly using a pull promotion strategy or indirectly using a push promotional strategy. The pull strategy is so named since it creates demand for a product by promoting directly to the final customer in the hopes that their interest in the product will help “pull” more product through the distribution channel. This approach can be used when channel partners are hesitant about stocking a product unless they are assured of sufficient customer interest. The push strategy uses promotion to encourage channel partners to stock and promote the product to their customers. The idea is that by offering incentives to channel members the marketer is encouraging their partners (e.g., wholesalers, retailers) to “push” the product down the channel and into customer’s hands. Most large consumer products companies will use both approaches while smaller firm may find one approach works better.
Price – Because customers generally need more time and more information when deciding to purchase higher priced products, marketers of these product are more likely to engage in personalized promotion compared to lower priced products that can be marketed using mass promotion.