Lesson – 8

Retail Promotion Mix

Objectives:

After reading this lesson you will be able to understand:

Meaning and importance of Promotion mix,

Elements of Promotion Mix – Advertising, Personal Selling, Sales Promotion,

Publicity, and Public relations.

Promotion Budget methods and preparations.

Structure:

8.1 Retail promotion mix

8.2 Advertising

8.3 Public Relations

8.4 Personal Selling

8.5 Sales Promotion

8.6 Establishing an Overall Promotional Budget

8.7 Planning and Selection of Promotional Mix

8.1 Retail Promotion Mix:

Any communication by a retailer that informs persuades and/or remains the target market about any aspect of that firm.

Advertising, public relations, personal selling, and sales promotion are the four elements of promotion.  Retailers devote significant sums to promotion.  Most departmental stores chain invest heavily in sales promotion and use internal and external public relation offices to generate favorable publicity and reply to media information requests.

8.2 Advertising:

Advertising is paid, non-personal communication transmitted through out-of=store mass media by an indentified sponsor.  Four aspects of the definition merit further clarification: (i) paid form – This distinguishes advertising from publicity ( an element of public relations), for which no payment is made by the retailer for the time or space used to convey a message. (2) Non-personal presentation – In advertising, a standard message is delivered to the entire audience, and it cannot be adapted to individual customers (except when the World Wide Web is involved).  (3) Out-of store mass media – These include newspapers, radio, TV, the Web and other mass communication channels, rather than personal contacts.  In-store communications (such as displays and audio announcements) are considered sales promotion. (4) Identiied sponsor – Advertising clearly divulges the sponsor’s name, unlike publicity.

Difference between Retailer and Manufacture Advertising Strategies:  Although the definition cited applies to all advertising, it is important to examine some of the key distinctions between retailer and manufacturer advertising strategies.  First, retailers usually have more geographically concentrated target markets than manufacturers.  This means they can adapt better to local needs, habits, and preferences than manufacturers.  However, many retailers are unable to utilize national media as readily as manufacturers.  For example, only the largest retail chains and franchises can advertise on national TV programs.  An exception is direct marketing (including the World Wide Web) because trading areas for even small firms can be geographically dispersed.

Second, retail ads stress immediacy.  Individual items are placed for sale and advertised over specific, short time periods.  Timely purchases are sought.  In contrast, manufacturers are more often concerned with developing favorable product or company attitudes and not with short-rim sales increases.

Third many retailers stress prices in ads, whereas manufacturers usually emphasize several product attributes.  In addition, retailers often display a number of different products in one ad, whereas manufacturers tend to minimize the number of products mentioned in a single ad.

Fourth, media rates tend to be lower for retailer than for manufacturers.  Because of this factor and the desire of many manufacturers and wholesalers for wide distribution, the costs of retail advertising are sometimes shared by manufacturers or wholesalers and retailers.  Two or more retailers may also share costs.  This is known as cooperative advertising.

Objectives Retail advertising may be tied to specific goals, including

• Short-term sales increases.
• Greater customer traffic.
• Developing and/or reinforcing a retail image.
• Informing customers about goods and services and/or company attributes.
• Easing the job for sales personnel.
• Developing demand for private brands.

A retailer would select one or more goals and base advertising efforts on it (them).

Advantages and Disadvantages:  The major advantages of advertising are that:

• A large audience is attracted.  Also, for print media, circulation is supplemented by the passing of a copy from one reader to another.
• The costs per viewer, reader, or listener are low.
• A large number of alternative media are available.  Therefore, a retailer can match a medium to the target market.
• The retailer has control over message content, graphics, timing, and size (or length), so a standardized message in a chosen format can be delivered to the entire audience.
• In print media, a message can be studied and restudied by the target market.
• Editorial content (a TV show, a news story, and so on) often surrounds an ad. This may increase its credibility or the probability it will be read.
• Self-service or reduced-service operations are possible since a customer can become aware of a retailer and its offering before shopping.

The Major Disadvantages of Advertising:

• Because the message is standardized, it is inflexible (except for the Web, whose interactive nature can be tailored to people’s needs).  The retailer cannot focus on the needs of individual customers.
• Some ads require large investments.  This may reduce the access of small firms to certain media (such as TV).
• Media may reach large geographic areas, and for retailers, waste may occur.  Thus, a small supermarket chain may find that only 40 percent of a paper’s readers reside in its trading area.
• Some media require a long lead time for placing ads.  This reduces the retailer’s ability to advertise fad items or to react to some current events themes.
• Some media have a high throwaway rate.  For instance, circulars and mails ads may be discarded without being read.
• Ads often are brief. A 30-second TV commercial or small newspaper ad does not have many details.

These are broad generalities about advertising. The pros and cons of specific media are described next.

Media Retailers can choose from among papers, phone directories, direct mail, radio, TV, the World Wide Web, transit, outdoor, magazines, and flyers/circulars.

Papers can be classified a dailies, weeklies, and shoppers. Among retailers, the paper is the most preferred medium, having the advantages of market coverage, short lead time, reasonable costs, flexibility, longevity, graphics, and editorial association (ads near columns or articles).  Disadvantages include the possible waste (circulation to a wider geographic area than that containing the target market), the competition among retailers, the black-and-white format, and the appeal to fewer senses than TV.  To maintain their dominant position, many papers have redesigned graphics, and some run a limited number of color ads.  Free distribution shopper papers (“rupee savers”) – with little news content and delivery to all households in a geographic area – are growing in use, some times at the expense of other papers.

Phone directories (the White and Yellow Pages) are key advertising media.  In the White Pages, retailers get free alphabetical listings along with all other phone subscribers, commercial and non-commercial.  The major advantage of the White over the Yellow Pages is that people who are familiar with a retailer’s name are not exposed to competitors’ names.  The major disadvantage, in contrast with the Yellow Pages, is the alphabetical rather than type of business listing.  A customer unfamiliar with repair services in his or her area will usually look in the Yellow Pages under “Repair” and choose a firm.

With the Yellow Pages, firms pay for alphabetical listings (and larger display ads.  If desired) in their business category.  Most retailers advertise in the Yellow Pages.  The advantages include their widespread usage by people who are ready to shop and their long life (one year or more).  The disadvantages are that retailer awareness is not stimulated and there is a lengthy lead time for new ads.   Retailers have multiple Yellow Pages firms vying for their business-at competitive rates.

Direct mail is the medium whereby retailers send catalogs or ads to customers by the mail or private delivery firms.  Advantages are the targeted audience, tailored format, controlled costs, quick feedback, and potential tie-ins (such as including ads with billing statements).  Computerized data bases have raised the efficiency of direct mail ads.  Among the disadvantages are the high throwaway rate (“junk mail”), poor image to some people, low response rate, and outdated mailing lists (addresses may have moved).

Radio is used by a variety of retailers.  Advantages are the relatively low costs, its value as a medium for car drivers and riders, its ability to use segmentation, its rather short lead time, and its wide reach.  Disadvantages include no visual impact, the need for repetition, the need for brevity, and waste.  The use of radio by retailers has gone up in recent years.

TV ads, although increasing due to the rise of national and regional retailers, are far behind papers in retail promotion expenditures.  Among the advantages are the dramatic effects of messages, the large market coverage, creativity, and program affiliation (for sponsors).  Disadvantages include high minimum costs, audience waste, the need for brevity and repetition, and the limited availability of popular times for non-sponsors.  Because cable TV is more focused than conventional stations, it appeals to local retailers.

From an advertising perspective, retailers are utilizing the World Wide Web to provide information to customers about store locations, to describe the products carried, to let people order catalogs, and so forth.  More firms are also selling products through the Web.  Retailers have two opportunities to reach customers by the Web: advertising on search engines, browsers (such as Netscape and Microsoft Explorer), and other firm’s Web sites; and communicating with customers at their own sites.

Transit advertising is used in areas with mass transit systems.  Ads are displayed on buses and in trains and taxis.  Advantages are the captive audience, mass market, high level of irrelativeness and geographically defined market.  Disadvantages are the ad clutter, a distracted or uninterested audience, a lack of availability in small areas, restricted travel paths, and graffiti.  In addition to traditional transit ads, retailers often advertise on their delivery trucks, some times in a very unusual manner.

Outdoor (billboard) advertising is sometimes used by retailers.  Posers and signs may be displayed in public places, on buildings, and alongside highways.  Advantages are the large size of the ads, the frequency of exposure, the relatively low costs, and the assistance in directing new customers.  Disadvantages include the clutter of ads, a distracted or uninterested audience, the limited information, and some legislation banging outdoor ads.

Magazine usage is growing for retailers due to three factors: the rise in national and regional firms, the creation of regional and local editions, and the use by non store firms.  Advantages of magazines are their tailoring to specific markets, creative options, editorial associations, longevity of messages, and use of color.  Disadvantages include the long lead time, less sense of consumer urgency, and waste.

Flyers/circulars are also a major medium.  Single-page (flyers) or multiple-page (circulars) ads can be distributed in parking lots or right to consumer homes.  Advantages include a much targeted audience, low costs, flexibility, and speed.  Among the disadvantages are the level of throwaways, the poor image to some consumers, and clutter.  Flyers are good for smaller firms, while circulars are used by larger ones.

Types of Advertisements can be classified by content and payment method.

Ads may be pioneering, competitive, reminder, or institutional.  Pioneer ads have awareness as a goal and offer information (usually on new firms or locations).  Competitive ads have persuasion as a goal.  Reminder ads are geared to loyal customers and stress the attributes that public without emphasizing the sale of goods or services.  Public service messages are institutional in nature.

In placing ads, retailers may pay their own way or seek cooperative ventures.  For firms paying their own way, the major advantages are control and flexibility.  The major disadvantages are the costs and efforts required.  Cooperative ventures are those in which two or more parties share the costs and the decision making. News papers are preferred over other media for cooperative ads related to retailing.

In a vertical cooperative advertising agreement, a manufacturer and a retailer or a wholesaler and a retailer share an ad each party’s duties and responsibilities are usually specified contractually.  Retailers are typically not reimbursed until after ads are run and invoices are provided to the manufacturer or the wholesaler.  Vertical cooperative advertising is subject to the Robinson- Patman Act; manufacturers and other suppliers must offer similar arrangements to all retailers on a proportional basis.  The advantages of a vertical agreement to a retailer are reduced ad costs, the assistance in preparing ads, greater coverage of the market, and less time in planning.  Disadvantages to a retailer include less control, flexibility, and distinctiveness.  Some retailers are concerned about the requirements thymus meet to be eligible for support and the emphasis on the supplier’s name in ads manufacturers and other suppliers are responding by being more flexible and under standing of retailers concerns.  For instance, in the American Express cooperative program, restaurants can choose from among dozens of border designs and copy blocks (tailored to a wide variety of cuisines).  Restaurants an also inset their own logos and add other copy.

With a horizontal cooperative advertising agreement, two or more retailers share an ad.  A horizontal agreement is mot often used by small noncompeting retailers (such as independent hardware stores), retailers situated in the same shopping center, and franchisees of a given franchising firm.  Advantages and disadvantages are similar to those in a vertical agreement.  Two further benefits are the bargaining power of retailers in dealing with the media and then synergies of multiple retailers working together.

When planning a cooperative advertising strategy, retailers should consider such questions as these:

• What ads qualify, in terms of merchandise and special requirements?
• What percentage of advertising is paid by each party?
• When can ads can be run?
• What media can be used?
• Are there special provisions regarding message content?
• What documentation is required for reimbursement?
• How does each party benefit?
• Do cooperative advertisements obscure the image of individual retailers?

8.3 Public Relations:

Public relations entail any communicating that fosters a favorable image for the retailer among its publics (consumers, investors, government, channel members, employees, and the general public).  It may be non-personal or personal, paid or nonpaid, and sponsor con-trolled or not controlled.  Publicity is any non-personal form of public relations whereby messages are transmitted through mass media, the time or space provided by the media is not paid for, and there is no identified commercial sponsor.

The basic distinction between advertising and publicity is the nonpaid nature of the latter.  Due to this difference, publicity messages are not as readily controllable by a retailer.  A story on a store opening may not appear at all, appear after the fact, or not appear in the form desired.   Yet, to consumers, publicity (public relations) should be complements, not substitutes, for each other.  Many times, publicity should precede advertising.

Public relations can benefit both large and small retailers.  While the former often spend a lot of money to publicize events such as the Macy’s Thanksgiving Day Parade and the mailing of the annual Neiman Marcus Christmas catalog, small firms can creatively generate attention for them selves on a limited budget.  These are the recommendations can easily be adapted to any small retailers:

1. Eliminate Junk mail to editors:  Limit your press releases to only news they can use, thereby increasing your chances of getting coverage.
2. Never violate the 10-second rule: That’s how much time an editor will spend to determine whether your item will be used.  The headline and first sentence of your release better be interesting.
3. Get the chef out of the kitchen: Do cooking demonstrations in the restaurant and the community-sat stores and shopping malls.  It is a good way to gain new patrons, as well as PR exposure.
4. Promote your signature dish like crazy:  What, you don’t have a signature dish? Get one! Choose your most popular entrée; publicize it on your menu and through PR. Become famous for it.
5. TV or not TV? Local TV programmers and cable shows often look for restaurants to feature.  Contact your local stations and let them know that your restaurant is both unique and interesting.
6. Adopt a Charity: Two or three times a year, support a charity with a percentage of one night’s or one week’s profits.  The charity will usually publicize this.
7. Don’t just on a restaurant, make it an event.  Some time ago, we did an opening for a restaurant client and produced “the world’s longest ribbon-cutting” by stretching 150-yard ribbon past the restaurant and across a marina.  We had the mayor cut the ribbon from aboard a Coast Guard cutter.
8. Stop Procrastinating:  it’s time to created a Web site.  It need not be as expensive as you might think. Use to display your menu, feature special promotions or events (such as wine tastings), and how a favorite recipe from your chef.
9. Look for News potential in your patrons: recently a 102-year-old man visited one of our clients for dinner.  The general manager called me at home.  I grabbed my camera, hurried out, interviewed the man, and took his picture.  The story and photograph appeared in the paper the following week.
10. Host meetings and parties: Offer special menus and prices for lunches, dinners, or happy hours to business, civic, and community groups then, send press releases with photos.
11. Create a cookbook of your chef’s favorite recipes: make it available for sale at the restaurant and have the chef autograph it. Publicize the availability of the book.
12. Celebrity patrons are news: Where VIPs such as athletes, entertainers, TV and radio personalities, and government official’s visit, send press releases to the local paper, and display photos on the wall.

Objectives Public relations seeks to accomplish one or more of these goals:

• Increase awareness of the retailer and its strategy mix
• Maintain or improve a company’s image
• Show the retailer as a contributor to the public’s quality of like
• Demonstrate innovativeness
• Present a favorable message in a high believable manner
• Minimize total promotion costs.

Objectives:  Public relations seek to accomplish one or more of these goals;

• An image can be presented or enhanced
• A more credible source presents the message (such as a good restaurant)
• There are no costs for the message’s time or space
• A mass audience is addressed
• Carryover effects are possible (if a store is perceived as community-oriented.  Its value positioning is more apt to be perceived favorably).
• People pay more attention to news stores than to clearly identified ads
• Some retailers do into believe in spending any funds on image – related communication.
• With publicity, there is little retailer control over the message and its timing, placement and coverage by given medium.
• It may be more suitable of short-run, rather than long=-un planning.
• Although there are no media costs for publicity, there are costs for a public relation staff, planning activities, and the activities themselves (such as store openings).

Types Public relations can be classed as planned or unexpected, and image enhancing or image detracting.

With planned public relations, a retailer outlines its activities in advance, strives to have the media report on them, and anticipates that certain events will result in media coverage.  Community services, such as donations and special sales; parades on holidays (such as the Macy’s Thank giving Day parade); the sales of “hot” new goods and services; and the opening of a new store, are activities a retailer hopes will gain media coverage. The release of quarterly sales figures and publication of the annual report are events a retailer can anticipate will be covered by the media.

Unexpected publicity takes place when the media report on a firm’s performance without its having advance notice of the coverage.  TV and newspaper reporters may anonymously visit restaurants and other retailers to rate their performance and quality.  A fire, an employee strike, or other newsworthy event may be mentioned in a story.  Investigative reports on company practices may appear.

There is positive publicity when the media report on the firm in a complimentary manner, with regard to the excellence of its retailing practices, its efforts on behalf of its community, and so on.  However, the media may also provide negative publicity.  For instance, with a store opening, the media could describe the location in less than glowing terms, rap the store’s environmental impact, and otherwise be critical.  The firm has no control over the message, and the media may not cover this or any other company event that is why public relations must be viewed as a component of the promotion mix, not as the whole mix.

8.4 Personal Selling:

Personal selling involves oral communication with one or more prospective customers for the purpose of making sales.  The level of personal selling utilized by a retailer dependents on the image it wants to convey, the types of products sold, its level of self-service, and its interest in long-term customer relationships-as well as expectations of customers.

At J.C. Penney, this means better programs for sales associates. Why?  First, higher levels of selling are needed to reinforce its image as a more fashion-oriented department store.  Unlike discounters that rely on self-service merchandising, Penney wants to stress the advice given by its sales staff.  Second, Penney wants to stimulate cross-selling, whereby sales associates recommended related0item purchases to customers.  Effective cross-selling increases the average sales transaction.  Third, Penney wants sales associates to better “save the sale”, by suggesting to customers who are returning merchandise to try different colors, styles, or to me loyalty.

Objectives:  Among the goals of personal selling are to:

• Persuade customers to make purchases (because they often enter a store after acquiring some in promotion through advertising)
• Stimulate sales of impulse items or products related to customer’s basic purchases
• Complete transactions with customers.
• Feed back information to company decision makers.
• Provide adequate levels of customer service.
• Improve and maintain customer satisfaction.
• Create awareness of items also marketed through the Web, mail, and telemarketing.

Advantages and Disadvantages:  the major advantages of selling are related to the nature of personal contact:

• A salesperson can adapt a message to the needs of the individual customer.
• A salesperson can be flexible in offering ways to address customer needs
• The attention span of the customer is higher than with advertising
• There is often little or no waste; most people who walk into a store are potential customers
• Customers respond more often to personal selling than to ads
• Immediate feedback is provided

The major disadvantages of personal selling are than:

• Only a limited number of customers can be reached at a given time.
• The costs of interacting with each customer can be high.
• Customers are not initially lured into a store through personal selling.
• Some customers may not view salespeople as helpful and knowledgeable but as too aggressive.

Types Most retail sales positions can be categorized as either order taking or order getting

An Order-taking salesperson engages in routine clerical and sales functions, such as setting up displays, placing inventory on shelves, answering simple questions, filling orders, and ringing up sales.  This type of selling most often occurs in stores that have a strong mix of self-service with some personnel on the floor.

An order-getting salesperson is actively involved with informing and persuading customers, and in closing sales.  This is the true “sales” employee.  Order getters usually sell higher-priced or complex items, such as real-estate, autos, apparel, appliances, and consumer electronics.  On average, they are much more skilled and better paid than order takers.

A manufacturer may sometimes help fund personal selling by providing PMs (defined as promotional money, push money, or prize money) for retail salespeople selling that manufacturer’s brand.  PMs are in addition to the compensation received from the retailer.  Many retailers are concerned about this practice because it encourages their sales personnel to be loyal to the manufacturer, and salespeople may be less responsive to actual customer desires (if customer’s desire brands not yielding PMs)

Salespeople may work in a store, visit consumer homes or places of work, or engage in telemarketing.  Functions Store sales personnel may be responsible for all or many of these tasks greeting customers, learning customer wants, showing merchandise, giving a sales presentation, demonstrations, answering objections, and closing the sale.

On entering a store or a department in it (or being contacted at home), a customer is greeted by a salesperson.  Typical in-store greetings are: “Hello, may I help you?” Good morning [afternoon].  If you need any help, please call on me.” “Hi, is there anything in particular you are looking for?” With any greeting, the salesperson seeks to put the customer at ease and to build rapport.

Typical Personal Selling Function:

The salesperson next finds out what the person wants.  From the perspective of the retailing concept, a salesperson cannot succeed without first ascertaining customer wants; Is the person just looking, or is there a specific good or service in mind?>  For what purpose is the item to be used>  Is there a price range in mind?  What other information can the shopper provide to help the salesperson?

At this point, the salesperson may show merchandise.  Based on customer wants, heor she selects the product most apt to satisfy that customer.  The salesperson may tru to trade up (discuss a more expensive version) or offer a substitute (if the retailer does not carry or is out of the requested item).

The salesperson now makes a sales presentation to motivate the customer to purchase.  These are the two most common sales techniques: the canned sales presentation is a memorized, repetitive speech given to all customers interested in a particular item.  The need-satisfaction approach is based on the principle that each customer has a different set of wants; thus, a sales presentation should be geared to the demands of the individual customer.  This approach is being utilized more in retailing.

In a presentation, a demonstration can show the  utility of an item and allow customer participation.  Demonstrations are often used with stereos, autos, health clubs, dishwashers, video games, and watches.

A customer may have questions during the selling process, and the salesperson must address them properly.  After all questions are answered, the salesperson closes the sale.  This means getting the shopper to conclude the purchase.  Typical closing lines are: “will you take it with you or have it delivered?” “Cash or charge?” “Would like this gift wrapped?” “Have you decided on the color, red or blue?”.

For the personal selling process to be completed effectively, salespeople must be enthusiastic, knowledgeable about their firm and its offerings, interested in customers, and able to communicate effectively.

8.5 Sales Promotion:

Sales promotion encompasses the paid communication activities other than advertising, public relations, and personal selling that stimulate consumer purchases and dealer effectiveness.  Included are displays, contests, sweepstakes, coupons, frequent shopper programs, prizes, samples demonstrations, referral gifts, and other limited-time selling efforts outside of the ordinary promotion routine.

Objectives Sales promotion goals include:

• Increasing short-term sales volume.
• Maintaining customer loyalty.
• Emphasizing novelty.
• Complement in other promotion tools.

Advantages and disadvantages; the major advantages of sales promotion are that:

• If often has eye-catching appeal.
• Themes and tools can be distinctive.
• The consumer may receive something of value, such as coupons or free merchandise.
• It helps draw customer traffic and maintain loyalty to the retailer.
• Impulse purchases are increased.
• Customer can have fun, particularly with contests and demonstrations.

The major disadvantages of sales promotion are that:

• It may be difficult to terminate certain promotions without adverse customer reactions.
• The retailer’s image may be hurt if corny promotions are u sed.
• Sometimes, frivolous selling points are stressed rather than the retailer’s product assortment, prices, customer services, and other factors.
• Many sales promotions have only short-term effects.
• It should be used mostly as a supplement to other promotional forms.

Point-of-purchase promotion consists of in-store displays designed to increase sales. From a promotional perspective, the displays may remind customers, stimulate impulse behavior, facilitate self-service, and reduce retail promotion costs if manufacturers provide displays.  The long-term impact of point-of-purchase promotions must be studied.  For instance, in some product categories, total sales may not rise if special displays are used; instead, customers could stockpile items and buy less when the special displays are removed.

These data show the extent of point-purchase displays;

• Virtually all retailers deploy some type of POP displays.
• Among the retail categories with above average use of in-store displays are restaurants, apparel stores, music/video stores, toy stores, and sporting goods stores.
• Retailers spend one-sixth of their sales promotion budgets on displays.
• Display ads appear on shopping carts in the majority of supermarkets.  Also thousands of supermarkets have in-store electronic signs above their aisles promoting well known brands.
• Retailers use about two-third of all displays provided by manufacturers.

Contests and sweepstakes are similar in nature; they seek to attract and retain customers who participate in events that have large prizes.  A contest requires a customer to demonstrate some skill in return for a reward.  A sweepstakes requires only participation, with the lucky winer chosen at random.  Disadvantage of contests and sweepstakes are their costs, customer reliance on these tools as the reason for continued patronage, the effort required of consumers, and entries by non shoppers.

Coupons present discounts from the regular selling prices of manufacturer and retailer brands.  Coupons are offered to consumers by freestanding inserts in Sunday papers and placements in daily papers, direct mail. Web sites, regular magazines, and Sunday newspaper magazines.  They are also placed in or on packages and dispensed from electronic in-store machines.

These are they key advantages of coupons.   One, in many cases, manufacturers pay to advertise and redeem coupons.  Two, coupons are helpful to an ongoing ad campaign and increase store (Web) traffic. According to survey 99 per cent of consumers redeem coupons at least once during year.  Three, the use of coupons increases the consumer’s perception that a retailer offers good value.  Four, ad effectiveness can be measured by counting redeemed coupons.

Disadvantages of coupons include their possible negative effect on their retailer’s image, consumers shopping only if coupons are available, low redemption rates, the clutter of coupons, retailer and consumer fraud, and handling costs.

Frequent shopper programs foster consumer relationships by awarding discounts or prizes to people for continued patronage.  In most programs, customers accumulate points (or their equivalent) – which are redeemed for cash, discounts, or prizes.

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Advantages of frequent shopper programs are the loyalty bred (customers can amass points only by shopping at a specific firm or firms), the “free” nature of awards to many can feel frequent shopper programs are not really free and would rather shop at lower-priced stores without these programs, it may take customers a while to gather enough points to get price competitively with firms that do not have the programs.

As a complement to personal selling, free samples (such as a taste of a cake or a smell of a perfume) and demonstrations (such as cooking lessons) may be used.

Referral gifts are used to encourage existing customers to bring in new ones.  Direct marketers, such as book and music clubs, often use this tool.  It is techniques that has no important shortcomings and recognize the value of friends influencing purchasing decision.

Retailers may use special events to generate consumer enthusiasm.  Events an range from store grand openings to fashion shows to art exhibits.

8.6 Establishing an Overall Promotional Budget:

Five procedures for setting the size of a retail promotional budget are discussed here.

With the all-you-can-afford method, a retailer first allots funds for each element of the retail strategy mix except promotion.  The funds that are left go to the promotional budget.  This is the weakest of the five techniques.  Its shortcomings are that little emphasis is placed on promotion as a strategic mix variable; expenditures are not linked to goals; and if little or no funds are left over, the promotion budget is too small or nonexistent.  The method is used predominantly by small, conservative retailers.

The Incremental method relies on prior budgets for the allocation of funds.  A percent age is either added to or subtracted from one year’s budge to determine the next year’s.  if the years promotion budget is 1 billion, next year’s budget would be calculated by adding or subtracting a percentage to or from that amount.  A 10 percent rise means that next year’s budget would be 11 billions.  This technique is useful for  a small retailer.  A reference point is used.  The budget is adjusted based on the firm’s feelings about past success and future trends.  It is easy to use.  Yet, the budget is rarely tied to specific goals.  Intuition or “gut feelings” are used.  It is hard to assess effectiveness.

For the Competitive party method, a retailer’s budget is raised or lowered based on competitor’s actions.  If the leading firm in an area raises its budget by 8 percent, competitors in the are could follow suit.  This method is useful for small and large firms.  Advantages are that it uses a comparison point and is market-oriented and conservative.  Disadvantages are it is assumed that competitive data; and it is assumed that competitors are similar (in terms of the number of years in business, size, target market, location, merchandise, prices, and so on).  That last point is particularly critical because competitors may actually need quite different promotional budgets.

In the percentage-of-sales method, a retailer ties its budget to sale revenue.  First, the firm develops a promotion-to-sales ratio.  During each succeeding year, the ratio of promotion dollars to sales dollars then remains constant, while the dollar amount varies.  A firm could set promotion costs at 10 percent of sales.  If this year’s sales are expected to be 6,00,000 there is a 60,000 promotion budget.  It next year’s sales are projected at 7,20,000 budget is planned.  Benefits of this process are using sales as a base the adaptability, and correlating promotion to sales.  Shortcomings are that there is no relation to goals (for an established firm, a sales increase may not require an increase in promotion); promotion is not used to lead sales, but follows them; and promotion drops during poor sales periods, when increase might be helpful.  This technique provides excess financing in times of high sales and too few funds in periods of low sales.

Under the Objective-and-task method, a retailer clearly defines its promotion goals and prepares a budget to satisfy them.  A retailer may decide its goal is to have 70 percent of the people in its trading area know its name by end of a one-month promotion campaign, up from 50 percent currently.  To do so, it calculates what tasks and costs are required to achieve that goal:

The objective-and-task method is the best budgeting technique.  Advantages are that goals are clearly stated, spending is related to goal-oriented tasks, it is adaptable, and success of failure can be assessed. The major shortcoming is the complexity in setting goals and specific tasks, especially for small retailers.

When deciding how to plan their promotion budgets, retailers should weight the strengths and weaknesses of each method in relation to their own requirements and constraints.  To assist firms in their budgeting efforts, there is now computer software available.

8.7 Planning and Selection of  Promotional Mix:

After a budget is set, a retailer must determine the promotional mix; its combination of advertising public relations, personal selling, and sales promotion. A firm with a rather limited budget may rely on store displays, flyers, targeted direct mail, and publicity to generate customer traffic, while a firm with a big promotion budget may rely more on newspaper and TV ads.

The mix is often affected b the type of retailer involved.  Table :1 shows how small firms vary in terms of their promotion mixes – such as coin-operated laundries emphasizing Yellow Pages and flyers; and health food stores relying on local papers, as well as point-of-purchase displays.  In supermarkets, sampling, frequent shopper promotions, theme sales, and bonus coupons are among the techniques used most; these promotions do vary between independent and chain outlets. At upscale retail stores, there is more attention to personal selling and less to advertising and sales promotion as compared with discounters.

Retailers often use an assortment of promotional forms to reinforce each other.  A melding of media ads and POP displays may be more effective in getting across a message than either one from alone.

In reacting to a retailer’s communication efforts, consumers often go through a sequence of steps called the hierarchy of effects, which takes them from awareness to knowledge to liking to preference to conviction to purchase.  Different promotional mixes are needed in each step. Ads and public relations are most effective in developing awareness, while personal selling and sales promotion are most effective in changing attitudes and stimulating desires.  This is especially true for expensive, complex goods and services.

Implementing the Promotional Mix:

The implementation of a promotional mix involves choosing which specific media to use (such as, Newspaper A and Newspaper B), the timing of promotion, the content of messages, the makeup of the sale force, specific sales promotion tools, and the responsibility for coordination.

Media Decisions:

The choice of specific media is based on such factors as overall costs, efficiency (the cost to reach the target market), lead time, and editorial content.  Overall costs are important since extensively using one expensive medium may prelude a balanced promotional mix.  In addition, a firm may not be able to repeat a message in a costly medium and ads are rarely effective when shown only once.

A medium’s efficiency relates to the cost of reaching a given number of target customers.  Media rates are typically expressed in terms of cost per, 1,000 readers, watchers, or listeners:

Cost per thousand =             ^{Cost per Massage x 1,000}

^Circulation

A newspaper with a circulation of 4000,000 and a per-page advertising rate of $110,000 has a per-page cost per thousand of $25.

In this computation, total circulation was used to measure efficiency.  Yet, because a retailer usually appeals so a limited target market, only the relevant portion of circulation should be considered.  Thus, if 70 percent of a newspaper’s readers are target customers for a particular firm (and the other 30 per cent live outside its trading area). The real cost per thousand is

Cost per thousand (target market) = Cost Per page X 1,000

Circulation X Target market/circulation

$10,000X 1,000

400,000 X 0.70

= $35.71

Different media need different lead times.  A newspaper ad can be placed shortly before publication, whereas a magazine ad sometimes must be placed moths in advance.  In addition, the retailer must decide what kind of editorial content it wants neat its ads (such as a sports story or a personal care column).

Media decisions are not a simple as them seem.  For instance, despite spending billions of dollars on TV and radio commercials, banner ads at search engines, and other media, many Web retailers are finding that the most valuable medium for them may be common E-mail. It is fast, inexpensive, and targeted.

Timing of the Promotional Mix:

Promotion decisions must take reach and frequency into account.  Reach is the number of distinct people exposed to a retailer’s promotion efforts in a specific period.  Frequency is the average number of times each person who is reached is exposed to a retailer’s promotion efforts in a specific period.

A retailer can advertise extensively or intensively.  Extensive media coverage often means ads reach many people but with relatively low frequency.  Intensive media coverage generally means ads are placed in selected media and repeated frequently.  Repetition is important, particularly for a retailer seeking to develop an image or sell new goods or services.

In enacting its mix, a retailer must consider peak seasons and whether to mass or distribute efforts.  When peak seasons occur, all elements of the promotional mix are usually utilized; in slow periods, promotional efforts are typically reduced.  A massed promotion effort is used by retailers, such a toy retailers, that promote mostly in one or two seasons.  A distributed promotion effort is used by retailers, such as fast-food restaurants, that promote throughout the year.

Thought they are not affected by seasonality as much as other retailers, massed advertising is practiced by supermarkets, many of which use Wednesday for weekly newspaper ads.  This takes advantage of the fact that a high proportion of consumers do their major shopping trip on Thursday, Friday or Saturday.

Content of Messages:  whether written or spoken, personally or impersonally delivered, message content is important.  Advertising themes, wording, headlines, the use of color, size, layout, and placement must be selected.  Publicity releases need to be written. In personal selling, the greeting, the sale presentation, the demonstration, and the closing need to be applied.  With sales promotion, the firm’s message must be composed and placed on the promotional device.

To a large extent, the characteristics of the promotional form influence the message.  A shopping bag often contains no more than a retailer’s name, a billboard (seen while driving at 55 miles per hour) is good for visual effect but can hold only limited information, and a salesperson may be able to maintain a customer’s attention for a while, thus expanding the content of the message that is conveyed.  Some shopping centers use a glossy magazine format to communicate a community-oriented image, introduce new stores to consumers, and promote the goods and services carried at stores in the centre.

In advertising and public relations, distinctiveness can aid a retailer due to message contrast their offerings with competitors.  These ads can help position a retailer relative to competitors, increase awareness of the firm, maximize the efficiency of a limited budget, and provide credibility.  Yet, they provide visibility for competitors, may confuse people, and may lead to legal action by competitors.  Fast food and off-price retailers are among those using comparative ads.

Makeup of Sales Force: Qualifications for sales personnel must be detailed, and these personnel must be recruited, selected, trained, compensated, supervised, and monitored.  Personnel should also be classified as order takers or order getters and assigned to the appropriate departments.

Sales Promotion Tools:  the combination of tools depends on short-term goals and the other aspects of the promotion mix.  If possible cooperative ventures with manufacturers or other suppliers should be sought.  Tools inconsistent with the firm’s image should never be used; and retailers should recognize the types of promotions that customers really want: “Reality check for nervous store owners: Even the novelty of electronic commerce can’t dim the appeal of the shopping mall at the kickoff of the holiday season.

Responsibility for coordination: Regardless of the retailer’s size or organizational form, someone at the firm must have responsibility for the promotion function.  Larger retailers often assign this job a vice-president of promotion, who oversees display personnel, works with the firm’s ad agency, supervises the firm’s own advertising department (if there is one), and supplies branch outlets with the necessary in-store materials.  In a large retail setting, personal selling is usually under the jurisdiction of the store manager.

For a promotional strategy to succeed, its components have to be coordinated with other retail mix elements.  Sales personnel must be informed of special sales and know product features; featured items must be received, marked, and displayed; and accounting entries must be made.

An analysis of the success of promotion plan depends on its objectives, and that analysis is simplified if goals are stated in advance.  Revisions would be made for promotional tools not achieving heir pre-set goals.

Here are some ways to test the effectiveness of a promotional effort:

Although it may sometimes to tough to assess promotion efforts (for instance, increased revenue might be due to a variety of factors, not just promotion), it is crucial and retailers to systematically study and adjust their promotional mixes with appropriate.  Here is what three retailers are doing to assess their promotion effectiveness.

Questions:

1. What is the importance of advertising in retail business?
2. How do manufacturer and retailer cooperative advertising goals overlap? How do they differ?
3. Give three examples each of Order-taking salespeople and order-getting salespeople.
4. How can advertising, public relations, personal selling and sales promotion complement each other for a retailer?
5. Which method of promotional budgeting should small retailer use? A large retailer? Why?
6. Describe the difference between massed promotion and distributed promotion in retailing.  How may a retailer combine both methods?
7. For each of these promotional goals, explain how to evaluate promotional effectiveness:
   1. Maintain customer traffic.
   2. Develop an innovative image.
   3. Increase customer loyalty.

References:

• Barry Berman and Joel R. Evans. Retail Management A strategic Approach (eight edition), Pearson Education (Singapore) pte. Ltd., Indian Branch, Delhi. 2002.