PRELIMINARY PERIOD

CHAPTER I – UNDERSTANDING TOURISM AND HOSPITALITY MARKETING

INTRODUCTION

Marketing
 an integrated communication-based process of determining and satisfying the needs and
wants of potential customers;
 is the process of identifying evolving customer preferences consumer

Marketing Concept
 Designing products/services to meet the needs and wants of customers.
 Focus on those people most likely to buy their product rather than the entire mass market.
 Develop marketing efforts that fit into their overall business objectives.

Tourism Marketing – is a managerial process of anticipating & satisfying “existing” & “potential”
visitor wants more effectively than competitive suppliers or destinations.

Four Factors to consider in Tourism Marketing Management

 Anticipation of market changes - Visitor retention
 The highly competitive market - Need to understand market structure; Direct focus on the
rapid growth of competing
 Social and environmental considerations -Benefits and costs of tourism development
 Consumer power - Interactive Marketing

THE TOURISM SYSTEM MODEL

CHAPTER II – PROCESS FLOW

Leiper’s Tourism System Model

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The Elements and its Description of Leiper’s Tourism System Model

Environmental Influences on Hospitality Organizations

Marketers need to understand and adapt to changes in the business environment. The marketing
environment is made up of:
 Macro-environment
 Micro-environment
Marketing Environment
All the factors and forces influencing the company’s ability to transact business effectively with its
target market. Includes:
 Micro environment – forces close to the company that affect its ability to serve its
customers.
 Macro environment – larger societal forces that affect the whole micro-environment.

The Marketing Environment

The Company’s Macro –

Environment

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 Demographic – monitors population in terms of age, sex, race, occupation, location and
other statistics.
 Economic – factors that affect consumer buying power and patterns.
 Natural – natural resources needed as inputs by marketers or that are affected by
marketing activities.
 Technological – forces that create new product and market opportunities.
 Political – laws, agencies and groups that influence or limit marketing actions.
 Cultural – forces that affect a society’s basic values, perceptions, preferences, and
behaviors.

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4
THE COMPANY’S MICRO-ENVIRONMENT

 Company’s Internal Environment- functional areas such as top management, finance, and
manufacturing, etc.
 Suppliers – provide the resources needed to produce goods and services.
 Marketing Intermediaries – help the company to promote, sell, and distribute its goods to
final buyers.
 Customers – five types of markets that purchase a company’s goods and services.
 Competitors – those who serve a target market with similar products and services.
 Public – any group that perceives itself having an interest in a company’s ability to achieve
its objectives.

CHAPTER II – CHARACTERISTICS OF TOURISM AND HOSPITALITY MARKETING

Underlying Principles of Tourism Marketing (that makes it different)

 Intangibility – impossible to consumer to touch, smell, or hear the service offering in the
same way as they can test a product.
 Perishability – it is not possible to store services. Service can not be stockpiled until
demand rises again.

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  Heterogeneity – difficulty to standardize service offering due to close contact between
staff and consumers.
 Inseparability – Both provider and consumer interact in the process of delivery.
Consumer involvement is high.
 Lack of Ownership – Consumer does not take title of goods as in tangible products. They
bring back memories & feelings from a holidays.

Intangibility

High risk associated with services. It is difficult to evaluate service before the experience.
Furthermore, lack of tangibility after the experience
Tangibilizing the intangible
 Create strong organization image
 Engage in post-purchase communication
 Stimulate “Word of Mouth” & Publicity

Perishability – Lack of Ability to Inventory

Capacity and demand management

Managing demand
 Understanding demand patterns
 Price, Shift demand
 Reservation, Overbooking
 Create promotional events
Managing capacity
 Cross-train employees
 Schedule downtime during periods of low capacity

Inseparability – The customer becomes part of the service

Service encounter, Moment of truth

Managing employees
 Communication training
 Empowerment
Managing customers
 What do you expect customers to do?

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  Interaction with other customers

Management Strategies for Service Business

 Positioning strongly in the chosen target markets

 Effective interaction between customers and employees
 Managing differentiation
 Managing service quality
 Tangibilizing the product

Variability – Lack of consistency

 Managing consistency
 Standardized procedure: industrialize service and cutting interaction
 Customized: taking care of individual
 Educate customers
 Train contact and non-contact employees
 Manage suppliers’ quality

Management Strategies for Service Business

 Tangibilizing the product

 Managing the physical surroundings
 Managing employees
 Managing perceived risk
 Managing capacity and demand
 Managing consistency

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The Marketing Mix and the 4Ps of Marketing
Understanding How to Position Your Market Offering

What Are the 4Ps of Marketing?

The 4Ps of marketing is a model for enhancing the components of your "marketing mix" – the way
in which you take a new product or service to market. It helps you to define your marketing
options in terms of price, product, promotion, and place so that your offering meets a specific
customer need or demand.

What is marketing? The definition that many marketers learn as they start out in the industry is:
putting the right product in the right place, at the right price, at the right time.

It's simple! You just need to create a product that a particular group of people want, put it on sale
some place that those same people visit regularly, and price it at a level which matches the value
they feel they get out of it; and do all that at a time they want to buy. Then you've got it made!
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There's a lot of truth in this idea. However, a lot of hard work needs to go into finding out what
customers want, and identifying where they do their shopping. Then you need to figure out how to
produce the item at a price that represents value to them, and get it all to come together at the
critical time.

But if you get just one element wrong, it can spell disaster. You could be left promoting a car with
amazing fuel economy in a country where fuel is very cheap, or publishing a textbook after the
start of the new school year, or selling an item at a price that's too high – or too low – to attract the
people you're targeting.
The marketing mix is a good place to start when you are thinking through your plans for a product
or service, and it helps you to avoid these kinds of mistakes.

Understanding the Tool

The marketing mix and the 4Ps of marketing are often used as synonyms for one another. In fact,
they are not necessarily the same thing.

"Marketing mix" is a general phrase used to describe the different kinds of choices organizations
have to make in the whole process of bringing a product or service to market. The 4Ps is one way –
probably the best-known way – of defining the marketing mix, and was first expressed in 1960 by
E. J. McCarthy in his book, "Basic Marketing - A Managerial Approach."

The 4Ps are:

 Product (or Service).
 Place.
 Price.
 Promotion.
A good way to understand the 4Ps is by the questions that you need to ask to define your
marketing mix. Here are some questions that will help you understand and define each of the four
elements:

Product/Service

 What does the customer want from the product /service? What needs does it satisfy?
 What features does it have to meet these needs?
 Are there any features you've missed out?
 Are you including costly features that the customer won't actually use?
 How and where will the customer use it?
 What does it look like? How will customers experience it?

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  What size(s), color(s), and so on, should it be?
 What is it to be called?
 How is it branded?
 How is it differentiated versus your competitors?
 What is the most it can cost to provide and still be sold sufficiently profitably?
Place

 Where do buyers look for your product or service?

 If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or
online? Or direct, via a catalog?
 How can you access the right distribution channels?
 Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or
send samples to catalog companies?
 What do your competitors do, and how can you learn from that and/or differentiate?
Price

 What is the value of the product or service to the buyer?

 Are there established price points for products or services in this area?
 Is the customer price sensitive? Will a small decrease in price gain you extra market share?
Or will a small increase be indiscernible, and so gain you extra profit margin?
 What discounts should be offered to trade customers, or to other specific segments of
your market?
 How will your price compare with your competitors?
Promotion

 Where and when can you get your marketing messages across to your target market?
 Will you reach your audience by advertising online, in the press, on TV, on radio, or on
billboards? By using direct marketing mailshots? Through PR? On the internet?
 When is the best time to promote? Is there seasonality in the market? Are there any wider
environmental issues that suggest or dictate the timing of your market launch or
subsequent promotions?
 How do your competitors do their promotions? And how does that influence your choice of
promotional activity?
Note
As the four Ps all need to be considered in relation to one another, it doesn't really matter in what
order you define them. This is why you may find them quoted in a different order from the one
used above. In particular, they're often referred to in the order "place, price, product, promotion."

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The 4Ps of marketing is just one of many lists that have been developed over the years. And, whilst
the questions we have listed above are key, they are just a subset of the detailed probing that may
be required to optimize your marketing mix.

Amongst the other models that have been developed over the years is Boom and Bitner's 7Ps,
sometimes called the extended marketing mix, which include the first 4Ps, plus people, processes
and physical layout decisions.

CHAPTER III – ROLE OF MARKETING IN STRATEGIC PLANNING

As defined in Principles of Marketing (2012) by Kotler and Armstrong, Strategic planning is “the
process of developing and maintaining a strategic fit between the organization’s goals and
capabilities and its changing marketing opportunities.” Kotler furthermore states the focus of
strategic planning as “the process of developing and maintaining a strategic fit be-tween the
organization’s goals and capabilities and its changing marketing opportunities.” (Kotler, 2012.
P.g.41)

Each company must establish a long-term plan, life cycle, that discovers the essentials of what is
needed to make a profit and survive in the given market. These essentials are the company’s
specific situation, opportunities, objectives, resources and many others. The company must create,
communicate, and deliver value to the target market while producing a profit. This is established
through product management, brand management and customer management. This is the focus of
the marketing role in strategic planning.

Marketing’s role in the company’s strategic plan is to implement it through their marketing
channels. Marketing makes sure that your target understands and knows what sets you apart.
Through marketing you show your value proposition, which is what sets you apart from your
competitors, what service or product you do best. It is marketing’s jobs to keep the life cycle going.
Once your product / service‘s life cycle starts declining the company needs to focus on creating or
revamping your product/service to and the marketing’s job is to sell your company’s strengths.
An example of marketing’s role in Bud lights strategic planning is their 2014 super bowl
commercial. They know and understand who their target is and not only showed an unforgettable
night after excepting a bud light but they also made the commercial engaging with their audience.
They showed you a few clips of the non actor, Ian, in his adventure, then asked you to go to their
website and see the whole experience. Bud Light’s commercial was the most talked about
commercial of the super bowl. The marketing team did a wonderful job at understanding who they
are and what they stand for to their consumer. Below is a flow chart signifying the process that a
company might implement to distinguish the company’s product value.
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In her article “What Is
Marketing Strategy
Planning?” Kristie
Lorette discusses the
use of strategic marketing plans along with the use, benefits, time frame, and consideration.
Lorette explains strategic marketing planning as:
“Strategic marketing planning involves combining customer experiences with the overall direction
the company wants and needs to take in order to succeed. For example, market segmentation
plays a vital role in strategic marketing. Geographic and demographic differences in a company’s
target markets can affect the purchasing habits of consumers. Strategic marketing planning allows
companies to go through the process of identifying what these differences are, and then adjusting
marketing messages and presentation of the company and the products and services of the
business to meet the individual needs of the different segments of the market.” (Lorette, 2014)

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 MIDTERM PERIOD
CHAPTER IV - Marketing Environment: Micro-Environment AND Macro-environment

The marketing environment of a company is composed of the people, institutions, and forces
outside marketing that influencer marketing management’s ability to develop and maintain a
successful relationship with its target customers.

Constantly watching and adapting to the changing marketing environment is important because
the marketing environment offers both opportunities and threats.
For example, an alliance with the supplier and distributor may help an organization to get a
competitive edge over its rivals.

On the other hand entry of many competitors poses a threat to the organization as some of their
customers may shift to a new seller.

By conducting a regular and systematic environmental analysis, the company can revise and adapt
marketing strategies to cope with the new challenges and opportunities in the marketplace.

The marketing environment is the combination of the microenvironment and macro environment.

According to Philip Kotler, “A company’s marketing environment consists of the internal factors &
forces, which affect the company’s ability to develop & maintain successful transactions &
relationships with the company’s target customers”.

To sum up, the marketing environment is a set of diverse, dynamic and uncontrollable forces that
impinge on an organization’s marketing operations and opportunities.

Let’s look at this chart that shows the micro (internal) and macro (external) elements of the
marketing environment.

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Macro Environment
of Marketing

Macro environment factors which consist of external forces. These external factors influence the
company’s marketing strategy is a great length.

The external environment factors are uncontrollable and the company finds it hard to tackle the
external factors.

Elements of macro-environment of marketing are;

1.Demographic factors

2.Economic factors

3.Natural forces

4.Technology factors

5.Political factors

6.Cultural factors

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In the following ways, they affect business strategy.

Demographic Environment

Demography is the study of human populations in terms of size, destiny, location, age, gender,
race, occupation, and other statistics.

This is the very important factors that help the marketer to divide the population into different
market segments and target markets.

Demographic data also helps in preparing geographical marketing plans, age, and sex-wise plans.

Economic Environment

Economic Environment is those macro factors that affect consumer buying power and spending
patterns.

It includes the level of income, policies, and nature of an economy, economic resources, trade
cycles, distribution of income and wealth.

When the income of a family or country (per capote income) changes it also changes the buying
behavior and spending pattern of the family or country.

Natural Environment

Natural environment involves the natural resources that are needed as inputs by marketers or
they are affected by marketing activities.

So marketers should be aware of several trends in the natural environment.

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Technological Environment

Technological forces are perhaps the most dramatic forces which are changing rapidly. These
macro-environmental forces create a new product, new markets and marketing opportunities for
marketers.

Political Environment

It includes government actions, government legislation, public policies, and acts which affect the
operations of a company or business.

These forces may affect an organization on a local, regional, national or international level.

So marketers and business management pay close attention to the political forces to judge how
government actions which will affect their company.

Cultural Environment

Cultural factors in heritage, living styles, religion, etc. also affect a company’s marketing
strategy . Social responsibility also becomes part of marketing and slowly emerged in marketing
literature.

Socially responsible marketing is that business firms should take the lead in eliminating socially
harmful products.

Micro Marketing environment

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The micro-environment refers to the forces that are close to the company and affect its ability to
serve its customers. It influences the organization directly.

It includes the company itself, its suppliers, marketing intermediaries, customer markets,
competitors, and the public.

5 components of the micro environment of marketing are;

1.Internal Organizational Environment.

2.Marketing Channel.

3.Types of Market.

4.Competition.

5.Organizational Objectives.

Internal Organizational Environment

The first is the organization’s internal environment—its several departments and management
levels as it affects marketing management’s decision making.

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Marketing Channel

The second component includes the marketing channel firms that cooperate to create value: the
suppliers and marketing intermediaries (middlemen, physical distribution firms, marketing-
service agencies, financial intermediaries).

Types of Market

The third component consists of the five types of markets in which the organization can sell: the
consumer, producer, reseller, government, and international markets.

Competition

The fourth component consists of the competitors facing the organization.

Organizational Objectives

The fifth component consists of all the public’s that have an actual or potential interest in or
impact on the organization’s ability to achieve its objectives: financial, media, government, citizen
action, and local, general, and internal publics.

Differences between Macro and Micro Environment of Marketing

Micro and macro refer to economic environments within which marketing takes place.

Though not exactly opposites, broad differences exist between macro marketing and
micromarketing.

The differences between macro environments and micro-environments may be relevant to

identify in the following table:

Point of difference Macro-environment Microenvironment

External environment of an
Meaning Inter environments of an organization.
organization.
Nature Very complex. Less complex to perceive.
Marketer interacts with, the elements The marketer interacts with other
The task of the marketer
prevailing outside the organization. functional areas of the organization.

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 Factors remain beyond the control of Factors may be controlled to a large
Extent of control
marketers. extent by a marketer.
It creates a huge impact on shaping Remains comparatively independent are
Impact
marketing decisions. shaping marketing decisions.
Factors reveal the capabilities of an
Factors may create an opportunity or
organization to exploit the opportunities
Function pose a threat to the marketing activities
or to combat the threat through its
of an organization.
marketing activities.

How environmental factors affecting the consumer decision process?

Economic factors

Economic factors play an important role in consumer buying behavior decisions. It also directly
affects the purchasing power of consumers.

If consumers’ purchasing power is weak, they cannot decide to buy goods or services even if they
like very much.

But, if they have purchasing power, they can take a prompt decision to buy goods or services they
like.

Income level, the income of their family members, liquid asset, spending attitude, credit facility,
etc. are the economic factors to determine consumers’ buying decision.

Technological factors

Technological forces are perhaps the most dramatic forces which are changing customer habit by
introducing a new product for the customer.

Cultural factors

Culture is crucial when it comes to understanding the needs and behaviors of an individual.
Throughout his existence, an individual will be influenced by his family, his

friends, his cultural environment or society that will “teach” him values, preferences as well as
common behaviors to their own culture and buying behavior.

Demographic factors

Demography is the study of human populations in terms of size, destiny, location, age, gender,
race, occupation, and other statistics. This is very important because these factors directly
influence consumer decision making.
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 CHAPTER V – CONSUMER MARKET AND CONSUMER BUYING BEHAVIOR

What is Consumer Buying Behavior?

Definition of Buying Behavior:

Buying Behavior is the decision processes and acts of people involved in buying and using
products.
Need to understand:
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 why consumers make the purchases that they make?
what factors influence consumer purchases?
the changing factors in our society.
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs
to analyze buying behavior for:
Buyers reactions to a firms marketing strategy has a great impact on the firms success.
The marketing concept stresses that a firm should create a Marketing Mix (MM) that
satisfies (gives utility to) customers, therefore need to analyze the what, where, when and
how consumers buy.
Marketers can better predict how consumers will respond to marketing strategies.
Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is
only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions
do not always include all 6 stages, determined by the degree of complexity...discussed next.
The 6 stages are:
1.Problem Recognition(awareness of need)--difference between the desired state and the
actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your
need to eat.
Can be stimulated by the marketer through product information--did not know you were
deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that
you need a new pair of shoes.
2.Information search--
Internal search, memory.
External search if you need more information. Friends and relatives (word of
mouth). Marketer dominated sources; comparison shopping; public sources etc.
A successful information search leaves a buyer with possible alternatives, the evoked set.
Hungry, want to go out and eat, evoked set is
chinese food
indian food
burger king
klondike kates etc
3.Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer
wants or does not want. Rank/weight alternatives or resume search. May decide that you
want to eat something spicy, indian gets highest rank etc.
If not satisfied with your choice then return to the search phase. Can you think of another

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 restaurant? Look in the yellow pages etc. Information from different sources may be
treated differently. Marketers try to influence by "framing" alternatives.
4.Purchase decision--Choose buying alternative, includes product, package, store, method of
purchase etc.
5.Purchase--May differ from decision, time lapse between 4 & 5, product availability.
6.Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive
Dissonance, have you made the right decision. This can be reduced by warranties, after
sales communication etc.
After eating an indian meal, may think that really you wanted a chinese meal instead.
Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity of interest in a
product in a particular situation.
Buyers level of involvement determines why he/she is motivated to seek information
about a certain products and brands but virtually ignores others.
High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and
the higher the risk the higher the involvement. Types of risk:
Personal risk
Social risk
Economic risk
The four type of consumer buying behavior are:
Routine Response/Programmed Behavior--buying low involvement frequently purchased
low cost items; need very little search and decision effort; purchased almost automatically.
Examples include soft drinks, snack foods, milk etc.
Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. Requires a
moderate amount of time for information gathering. Examples include Clothes--know
product class but not the brand.
Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or
infrequently bought products. High degree of economic/performance/psychological risk.
Examples include cars, homes, computers, education. Spend alot of time seeking
information and deciding.
Information from the companies MM; friends and relatives, store personnel etc. Go through
all six stages of the buying process.
Impulse buying, no conscious planning.

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The purchase of the same product does not always elicit the same Buying Behavior. Product can
shift from one category to the next.
For example:
Going out for dinner for one person may be extensive decision making (for someone that does not
go out often at all), but limited decision making for someone else. The reason for the dinner,
whether it is an anniversary celebration, or a meal with a couple of friends will also determine the
extent of the decision making.
Categories that Effect the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three factors:
1.Personal
2.Psychological
3.Social
The marketer must be aware of these factors in order to develop an appropriate MM for its target
market.
Personal
Unique to a particular person. Demographic Factors. Sex, Race, Age etc.
Who in the family is responsible for the decision making.
Young people purchase things for different reasons than older people.
Psychological factors
Psychological factors include:
 Motives--
A motive is an internal energizing force that orients a person's activities toward satisfying a
need or achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify motives then
they can better develop a marketing mix.
MASLOW hierarchy of needs!!
Physiological
Safety
Love and Belonging
Esteem
Self Actualization
Need to determine what level of the hierarchy the consumers are at to determine what
motivates their purchases.
Nutrament, a product marketed by Bristol-Myers Squibb originally was targeted at consumers
that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was
therefore targeted at consumers whose needs were for either love and Belonging or esteem. The
product was not selling well, and was almost terminated. Upon extensive research it was

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determined that the product did sell well in inner-city convenience stores. It was determined that
the consumers for the product were actually drug addicts who couldn't not digest a regular meal.
They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was
completely different to the motivation that B-MS had originally thought. These consumers were at
the Physiological level of the hierarchy. BM-S therefore had to redesign its MM to better meet the
needs of this target market.
Motives often operate at a subconscious level therefore are difficult to measure.
 Perception--

What do you see?? Perception is the process of selecting, organizing and interpreting
information inputs to produce meaning. IE we chose what info we pay attention to,
organize it and interpret it.
Information inputs are the sensations received through sight, taste, hearing, smell and
touch.
Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to
an event, satisfies current needs, intensity of input changes (sharp price drop).
Selective Distortion-Changing/twisting current received information, inconsistent with
beliefs.
Advertisers that use comparative advertisements (pitching one product against another),
have to be very careful that consumers do not distort the facts and perceive that the
advertisement was for the competitor. A current example...MCI and AT&T...do you ever get
confused?
Selective Retention-Remember inputs that support beliefs, forgets those that don't.
Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30
minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't
be expected to be aware of all these inputs, and certainly will not retain many.
Interpreting information is based on what is already familiar, on knowledge that is stored
in the memory.
Handout...South Africa wine....

Problems marketing wine from South Africa. Consumers have strong perceptions of the
country, and hence its products.
 Ability and Knowledge--
Need to understand individuals capacity to learn. Learning, changes in a person's behavior
caused by information and experience. Therefore to change consumers' behavior about
your product, need to give them new information re: product...free sample etc.

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South Africa...open bottle of wine and pour it!! Also educate american consumers about
changes in SA. Need to sell a whole new country.
When making buying decisions, buyers must process information.
Knowledge is the familiarity with the product and expertise.
Inexperience buyers often use prices as an indicator of quality more than those who have
knowledge of a product.
Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they
assume that the greater price indicates greater quality.
Learning is the process through which a relatively permanent change in behavior results
from the consequences of past behavior.
 Attitudes--

Knowledge and positive and negative feelings about an object or activity-maybe tangible or
intangible, living or non- living.....Drive perceptions
Individual learns attitudes through experience and interaction with other people.
Consumer attitudes toward a firm and its products greatly influence the success or failure
of the firm's marketing strategy.
Handout...Oldsmobile.....

Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by
class exercise) need to disassociate Aurora from the Oldsmobile name.
Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill.
Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike
rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market
returning to hard core. To change this they have a new slogan "Come ride with us".
Attitudes and attitude change are influenced by consumers personality and lifestyle.
Consumers screen information that conflicts with their attitudes. Distort information to
make it consistent and selectively retain information that reinforces our attitudes. IE brand
loyalty.
There is a difference between attitude and intention to buy (ability to buy).
 Personality--

all the internal traits and behaviors that make a person unique, uniqueness arrives from a
person's heredity and personal experience. Examples include:
Workaholism
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 Compulsiveness
Self confidence
Friendliness
Adaptability
Ambitiousness
Dogmatism
Authoritarianism
Introversion
Extroversion
Aggressiveness
Competitiveness.
Traits effect the way people behave. Marketers try to match the store image to the
perceived image of their customers.
There is a weak association between personality and Buying Behavior, this may be due to
unreliable measures. Nike ads. Consumers buy products that are consistent with their self
concept.
 Lifestyles--
Recent US trends in lifestyles are a shift towards personal independence and individualism
and a preference for a healthy, natural lifestyle.
Lifestyles are the consistent patterns people follow in their lives.
EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US
until 1920's. Now an assault by the American Academy of Dermatology.
Handout...Here Comes the Sun to Confound Health Savvy Lotion Makers..

Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family,
reference groups, social class and culture.
 Opinion leaders--
Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay)
spokespeople to market their products. Michael Jordon (Nike, McDonalds, Gatorade etc.)
Can be risky...Michael Jackson...OJ Simpson...Chevy Chase
 Roles and Family Influences--
Role...things you should do based on the expectations of you from your position within a
group.
People have many roles.

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 Husband, father, employer/ee. Individuals role are continuing to change therefore
marketers must continue to update information.
Family is the most basic group a person belongs to. Marketers must understand:
 that many family decisions are made by the family unit
 consumer behavior starts in the family unit
 family roles and preferences are the model for children's future family (can
reject/alter/etc)
 family buying decisions are a mixture of family interactions and individual decision
making
 family acts an interpreter of social and cultural values for the individual.
The Family life cycle: families go through stages, each stage creates different consumer
demands:
 bachelor stage...most of BUAD301
 newly married, young, no children...me
 full nest I, youngest child under 6
 full nest II, youngest child 6 or over
 full nest III, older married couples with dependant children
 empty nest I, older married couples with no children living with them, head in labor
force
 empty nest II, older married couples, no children living at home, head retired
 solitary survivor, in labor force
 solitary survivor, retired
 Modernized life cycle includes divorced and no children.
Handout...Two Income Marriages Are Now the Norm

Because 2 income families are becoming more common, the decision maker within the
family unit is changing...also, family has less time for children, and therefore tends to let
them influence purchase decisions in order to alleviate some of the guilt. (Children
influence about $130 billion of goods in a year) Children also have more money to spend
themselves.

Reference Groups--
Individual identifies with the group to the extent that he takes on many of the values,
attitudes or behaviors of the group members.
Families, friends, sororities, civic and professional organizations.
Any group that has a positive or negative influence on a persons attitude and behavior.
Membership groups (belong to)

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Affinity marketing is focused on the desires of consumers that belong to reference groups.
Marketers get the groups to approve the product and communicate that approval to its
members. Credit Cards etc.!!
Aspiration groups (want to belong to)
Disassociate groups (do not want to belong to)
Honda, tries to disassociate from the "biker" group.
The degree to which a reference group will affect a purchase decision depends on an
individuals susceptibility to reference group influence and the strength of his/her
involvement with the group.
 Social Class--
an open group of individuals who have similar social rank. US is not a classless society. US
criteria; occupation, education, income, wealth, race, ethnic groups and possessions.
Social class influences many aspects of our lives. IE upper middle class Americans prefer
luxury cars Mercedes.
Upper Americans-upper-upper class, .3%, inherited wealth, aristocratic names.
Lower-upper class, 1.2%, newer social elite, from current professionals and
corporate elite
Upper-middle class, 12.5%, college graduates, managers and professionals
Middle Americans-middle class, 32%, average pay white collar workers and blue
collar friends
Working class, 38%, average pay blue collar workers
Lower Americans-lower class, 9%, working, not on welfare
Lower-lower class, 7%, on welfare
Social class determines to some extent, the types, quality, quantity of products that a
person buys or uses.
Lower class people tend to stay close to home when shopping, do not engage in much
prepurchase information gathering.
Stores project definite class images.
Family, reference groups and social classes are all social influences on consumer behavior.
All operate within a larger culture.
 Culture and Sub-culture--
Culture refers to the set of values, ideas, and attitudes that are accepted by a homogenous
group of people and transmitted to the next generation.
Culture also determines what is acceptable with product advertising. Culture determines
what people wear, eat, reside and travel. Cultural values in the US are good health,

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 education, individualism and freedom. In american culture time scarcity is a growing
problem. IE change in meals. Big impact on international marketing.
Handout...Will British warm up to iced tea?

No...but that is my opinion!!...Tea is a part of the British culture, hot with milk.
Different society, different levels of needs, different cultural values.
Culture can be divided into subcultures:
geographic regions
human characteristics such as age and ethnic background.
IE West Coast, teenage and Asian American.
Culture effects what people buy, how they buy and when they buy.
Understanding Consumer Buying Behavior offers consumers greater satisfaction (Utility). We must
assume that the company has adopted the Marketing Concept and are consumer oriented

CHAPTER VI - Marketing Segmentation and Positioning

The STP Model of Marketing Segmentation, Targeting, and Positioning

To grow your business, you don’t have to sell to everyone. There are not a lot of products in the
online world that appeal to every single person on Earth.
So, instead of convincing yourself that everyone can be your customer, you need to direct your
focus towards finding your target market and selling your products/services there. If you discover

29
the people that are most likely to buy from you and target the marketing efforts towards them, the
sales process will be a breeze.

Discovering your customers and targeting them is the concept that stands behind the STP model
of marketing. The acronym stands for the following key parts of the concept:

Your marketing tactics will be much more fruitful and efficient if you follow the STP model. By
segmenting your target market, targeting the right customers and properly positioning your
products/services in the marketplace, you can grow your business at a faster rate.
Of course, there will be other factors that will influence the success and growth of your company.
But the three concepts above are critical if you want your marketing efforts to be effective within
the marketplace. To help you further comprehend them, let’s have a look at each of them
separately.

Segmentation
As stated at the beginning of this article, it is a massive mistake if you try to market to every
consumer on Earth. What can benefit your company more is marketing to individual
segments of the marketplace and develop product/services that would suit those segments.

You need to select the segment in which your venture will fit in perfectly. The application of
segmentation will help you further develop your competitive knowledge which will have a strong
effect on your newly formed competitive advantage.

There are different ways to segment your target market.

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For example:
Demographic – You segment consumers by personal characteristics such as age, gender,
marital status, ethnicity, education, occupation, etc.

Geographic – By country, region, city, county, etc.

Psychographic – Their personality, values, lifestyle, attitudes, interests, and opinions.

Among the strongest sources that form these factors are families, region, schooling, and
society.

Behavioral – How they use the products? Are they loyal to any product? What benefits are
people looking for from these products?
For example, you have a company that sells used cars. If you split your customers into more
segments, you can also differ the types of vehicles that you’ll sell to different customers. One
segment can be married couples looking for a family minivan. The other segment can be young
men who want a sports car. Then you have business people with bigger pockets who want a fully-
equipped luxury sedan.

These segments, although similar in scope, differ in their constructive elements and have a
different level of attractiveness for each target.

When you rationally segment your target customers you’ll discover more and better sales
opportunities. The best market segments satisfy the following criteria:

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Group Identity – The best target groups are similar inside segments and diverse across groups.

Methodical Behavior – Segments must react similarly to a given marketing tactic.

Efficiency Potential – Feasibility and cost of reaching a segment as well as its stability over
time depending on marketplace conditions.
Targeting

After you’re clear about your segments, your next step should be to aim at each segment that you
think will be profitable for your venture. Targeting is crucial at this point in your STP marketing
process.

What are the market segments that you consider as your best ROI (Return on Investment? It’s not
just a question of size/quantity, but like we said, it’s all about the profitability, are those people
prepared to pay what you want for your product?
That’s why you need to analyze the size and the potential growth for each of your segment groups
and do a comparison between each of them. Think thoroughly about how you can serve that
section of the marketplace. Also, you need to look into all the legal, technological and social
hurdles that may stop you from addressing the segment.
For the purpose, it is best to opt for PEST (Political, Economic, Socio-Cultural, and Technological)
Analysis. This type of analysis will help you rid yourself of every assumption about your target
segment and develop better goals for that section of the market.

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For example, you analyze the sales and profits from your used car company. You determine that
from the first segment you have $1,000,000 in profits. From the second segment, you have
$3,000,000 in profits. And from the third segment, you have $5,000,000 in profits. If you know that
the third segment is big enough and brings you the best ROI, you’ll focus only on serving that part
of the marketplace.

Positioning

The final stage of the STP marketing process is Positioning. Here, you need to figure out how
you’re going to place your product/service in front of the target segment that you chose in the
previous two phases. You need to focus on your marketing channels, as well as on the product
presentation.

The most important question that you need to have an answer to is “Why should the consumers
buy from me instead of my competitors?”

To answer that, you need to have your own unique selling proposition (USP) – a uniquely
positive and extremely useful trait that your competitors can’t or don’t offer. That should be your
“edge” and the sole reason why the customers will come knocking on your door.

However, finding your competitive edge is not easy. And when you find it, it’s really difficult to
keep it hidden from your competitors because they will want to emulate and improve it. To find
and keep your USP, you need to follow 3 major principles:

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Understand What Your Customers Appreciate – Brainstorm what your customers love about
your products or services. Then do the same for your competitors. Look at every trait that makes
people decide which company they’ll choose. Talk to your sales team and to your customer service
team, and most importantly, talk to your customers so you can figure it out.
Rank Every Competitor – After you learn about what your customers appreciate and value,
rank yourself and your competitors according to that. Base your ranking on data and
statistics, don’t assume anything. Think about the customers’ POV and how they perceive
every product in the segment.

Defend Your USP – As a business owner, you should always be prepared for competitive
attacks. Your competitors will try to neutralize, diminish and emulate what you offer with
your USP. Invest in PR, patents and legislative help to defend your USP once you start to use it
on your customers and establish it.
Think about it, what is it about your product/service that helps you stand out in the marketplace?
Are you more affordable than your competition? Are you more inclined towards custom packaging
and bargaining? Or do you offer much higher quality than the rest out there?

Whatever it is, it will decide whether you win the segment over or not. You need to establish the
value that you provide to your target consumers, and define your:
PODs (Points of Reference) – The characteristics of your product that can’t be found
anywhere else.

POPs (Points of Parity) – The attributes that you also share with other brands in the
marketplace.
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Again, if we take the used car company as an example, the cars that you sold to the business
segment will most likely be marketed in places where these people hang out online and offline.
After you pick the right places and the right marketing channels, you want your cars to be
marketed as premium vehicles that are sold in mint condition and fully equipped.

When you’ve positioned yourself properly and you’ve convinced your target market segment why
they should buy from you, that’s when the STP marketing model has done its job successfully.

Wrapping up

Utilizing the STP marketing model is one of the most crucial processes that you can undertake to
grow your business. With the STP model, you and your team will be put on a test where you’ll
learn whether you’re capable or not to take your business to the next level. It will test your ability
to research and think creatively about your target market and marketing approaches.

Working together with your sales and customer service team to implement the STP marketing
system will result in greater process effectiveness and better product positioning that you can
utilize to win over your marketplace.

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 PREFINAL PERIOD
CHAPTER VII – Design and Managing Products

What is a Product?
 A product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need
 Includes physical objects, services, places, organizations, and ideas
Product Levels
 Core Product
 Facilitating Products
 Supporting Products
 Augmented Products

Core Product
 What the buyer is really buying
 Every product is a package of problem-solving services

Facilitating Products
 Goods or services that must be present for the guest to use the core product

Supporting Products
 Extra products offered to add value to the core product and help to differentiate it from the
competition
 Supporting products offer a competitive advantage only if they are properly planned and
implemented
 They must meet or exceed customer expectations to have a positive effect

Augmented Product
 The augmented product includes accessibility, atmosphere, customer interaction with the
service organization, customer participation, and customers’ interaction with each other.

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Product Levels

Atmosphere:
The Physical Environment
 Can be the customer’s reason for choosing, or not choosing, to do business with an
establishment
 Multidimensional – Visual, aural, olfactory, tactile

Customer Interaction with the Service Delivery System

Joining stage is when the customer makes the initial inquiry contact
Consumption phase takes place when the service is consumed
Detachment phase is when the customer is through using a product and departs

Customer Interaction with Other Customers

 Hospitality organizations must manage the interaction of customers to ensure that some do
not negatively affect the experience of others

Customer Coproduction
 Increase capacity
 Improve customer satisfaction
 Reduce costs

Brand Decisions
A brand is a name, term, sign, symbol, design, or a combination of these elements that is intended
to identify the goods or services of a seller and differentiate them from competitors.

Brand
 Brands are among a company’s most valuable assets

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  A Brand represents what the company is and what it stands for
 A Brand implies trust, consistency, and a defined set of expectations
 The strongest brands own a place in the customer’s mind

New Product Development

Product life cycle
 Product is born
 Passes through several phases
 Eventually dies as younger products come along that better serve consumer needs

Product Life-Cycle Strategies

Product development
 Introduction
 Growth
 Maturity
 Decline

Product Development
 Product development begins when the company finds and develops a new product idea
 During development, sales are zero and the company’s investment costs add up

Product Life Cycle

Sales and Profits Over the Product’s Life From Inception to Demise

Introduction
 Introduction is a period of slow sales growth as the product is being introduced into the
market
 Profits are nonexistent at this stage due to high product introduction expenses
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Growth
 Growth is a period of rapid market acceptance and increasing profits

Maturity
 Maturity is a period of slowdown in sales growth because the product has achieved
acceptance by most of its potential buyers
 Profits level off or decline due to increased marketing outlays to defend the product against
competition

Decline
 Decline is the period when sales fall off quickly and profits drop

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 CHAPTER VIII – INTERNAL MARKETING

Internal marketing is the promotion of a company’s objectives, products and services to

employees within the organization. The purpose is to increase employee engagement with the
company’s goals and fostering brand advocacy.
Employees who are enthusiastic about their company and its offerings are likely to share that
enthusiasm with their social networks. As a result, internal marketing can be an effective part of
external branding and marketing efforts. However, internal marketing can only go so far since an
employee’s attitude toward the organization is affected by every element of that individual’s
experience working for the business. Keeping employees happy and engaged is important to
external marketing efforts as well.
Common internal marketing efforts include:

Ensuring that all employees know that their contributions are essential to the company’s
success.

Educating all employees about the company’s products and services.

Reinforcing the concept that customers are, when all is said and done, the source of
employees’ salaries.

Providing adequate salaries and benefits, plus a pleasant work environment.

Encouraging employee input on corporate policies, management and operation – including

criticism.

Acting on employee suggestions that have merit and publicly acknowledging the value of the
input.

Confirming that the corporate mandate and objectives are clearly described and disseminated
throughout the organization.

Providing opportunities for advancement, professional development and promotion.

Ensuring that the corporate culture is consistent with work-life balance.

Fostering communication and collaboration among employees through various methods from
formalized settings and to casual areas for gathering, such as lounges.
Internal marketing operates on the idea that customer opinions of a company are based on their
experiences with the business, not just with the products. By treating employees as “internal
customers", internal marketing helps employees align with the company’s vision and operations.
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In turn, they provide their customers with a consistent and valuable experience. Internal
marketing campaigns are often lead by a company’s human resources department, which is
responsible for distributing information and providing training on the company’s objectives and
strategies.

CHAPTER IX – PRICING PRODUCTS

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Product Pricing as a Marketing Strategy

Pricing isn't just about a number. There is a lot of strategy involved. Assume you make widgets for
$5 each. As a business owner, you want to achieve 20 percent profit. However, simply selling your
product for $6 may not work, as customers may not be willing to pay that much for your widget.
Or the nearest competitor may charge $8, so you could make an even bigger profit by charging $7.
Setting a reasonable pricing strategy constitutes one of the biggest marketing decisions a business
undertakes.

Measure the Market

Pricing strategy begins with a market analysis of what the optimal product price for a given
product or service should be. Business owners determine the total cost to produce one unit of a
product or service then conduct market research--including focus groups and comparative price
analyses--to determine the point where the company's willingness to supply a unit at a given price
is identical to the market's willingness to purchase a unit at that price. This point is called the
"equilibrium point," although companies are not required to sell at that price.

Cost-Plus Pricing

Cost-plus pricing ensures that the company's total costs plus a predetermined profit margin are
recovered in full. This is classic lemonade-stand pricing, and is common in the manufacturing
business-to-business sector. In this case, pricing equals costs plus a static profit.
Related is target-return pricing, in which the price is set to earn a specific return on an investment
(ROI). For example, a pharmaceutical company that spent $2 billion to develop a new drug, and
which has a 20-year patent on the drug, may set price to recover its research-and-development
costs, the research and development of failed drug development, marketing and salaries for the
projected demand over the life of the patent.
Demand Pricing
Demand pricing fluctuates with consumer needs. For example, gas station owners typically use
demand pricing for fuel, and during peak travel periods, the cost-per-gallon increases. Likewise,
when people typically stay off the road, prices decline.

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Demand pricing for items like fuel can also work as a "loss-leader." That is, a company might set a
two-hour period after the big local college football game, with a price-per-gallon equal to the total
score of the game. Consumers, eager for the deeply discounted fuel, will line up for gas, but the
station will partially recover the loss through the sale of additional items in the attached
convenience store, while earning public goodwill that may lead to repeat customers and future
sales.

Competitive Pricing

Tightly competitive industries, or industries where there is already an established market leader
and market price, feature competitive pricing. For example, the town's second pizzeria has less
room to set its own price because the competition already set the price for the community.
Therefore, the new shop may slightly undercut on price in order to earn the patronage of price-
conscious consumers.

Markup Pricing

Most retailers use markup pricing. They resell items they purchased from a wholesaler, and then
set a sale price to the final consumer that consists of a the original wholesale price plus the
retailer's marked-up profit margin. For example, a book store may sell books for 10 percent over
the costs the store incurred to buy its inventory.
This markup must defray the non-inventory costs of running the business (e.g., labor, insurance,
rent) and supply an additional profit margin.

Psychology of Pricing

Business owners must be sensitive to the emotional impact of price. Irrespective of the dollars and
percentages of profit margins, consumers like getting a deal and respect companies that provide
good quality at a fair price.

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 FINAL PERIOD
CHAPTER X – PROMOTION AND ADVERTISING

It's easy to become confused about these terms: advertising, marketing, promotion, public
relations and publicity, and sales. The terms are often used interchangeably. However, they refer
to different -- but similar activities. Some basic definitions are provided below. A short example is
also provided hopefully to help make the terms more clear to the reader.

One Definition of Advertising

Advertising is bringing a product (or service) to the attention of potential and current customers.
Advertising is focused on one particular product or service. Thus, an advertising plan for one
product might be very different than that for another product. Advertising is typically done with
signs, brochures, commercials, direct mailings or e-mail messages, personal contact, etc.
One Definition of Promotion
Promotion keeps the product in the minds of the customer and helps stimulate demand for the
product. Promotion involves ongoing advertising and publicity (mention in the press). The
ongoing activities of advertising, sales and public relations are often considered aspects of
promotions.
One Definition of Marketing
Marketing is the wide range of activities involved in making sure that you're continuing to meet
the needs of your customers and getting value in return. Marketing is usually focused on one
product or service. Thus, a marketing plan for one product might be very different than that for
another product. Marketing activities include "inbound marketing," such as market research to
find out, for example, what groups of potential customers exist, what their needs are, which of
those needs you can meet, how you should meet them, etc. Inbound marketing also includes
analyzing the competition, positioning your new product or service (finding your market niche),
and pricing your products and services. "Outbound marketing" includes promoting a product
through continued advertising, promotions, public relations and sales.
One Definition of Public relations
Public relations includes ongoing activities to ensure the overall company has a strong public
image. Public relations activities include helping the public to understand the company and its
products. Often, public relations are conducted through the media, that is, newspapers, television,
magazines, etc. As noted above, public relations is often considered as one of the primary activities
included in promotions.
One Definition of Publicity
Publicity is mention in the media. Organizations usually have little control over the message in the
media, at least, not as they do in advertising. Regarding publicity, reporters and writers decide
what will be said.

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One Definition of Sales
Sales involves most or many of the following activities, including cultivating prospective buyers
(or leads) in a market segment; conveying the features, advantages and benefits of a product or
service to the lead; and closing the sale (or coming to agreement on pricing and services). A sales
plan for one product might be very different than that for another product.
An Example of the Definitions
The following example may help to make the above five concepts more clear. I recently read that
the story comes from the Reader's Digest, a quote found in "Promoting Issues and Ideas" by M.
Booth and Associates, Inc.
"... if the circus is coming to town and you paint a sign saying 'Circus Coming to the Fairground
Saturday', that's advertising. If you put the sign on the back of an elephant and walk it into town,
that's promotion. If the elephant walks through the mayor's flower bed, that's publicity. And if
you get the mayor to laugh about it, that's public relations." If the town's citizens go the circus,
you show them the many entertainment booths, explain how much fun they'll have spending
money at the booths, answer their questions and ultimately, they spend a lot at the circus,
that's sales.
Advertising is a one-way communication whose purpose is to inform potential customers about
products and services and how to obtain them. Promotion involves disseminating information
about a product, product line, brand, or company. It is one of the four key aspects of
the marketing mix. Advertising may be one form of promotion.

Comparison chart

Advertising versus Promotion comparison chart

Advertising Promotion
Time Long term Short term
A Promotion usually involves an immediate
One-way communication of a persuasive
incentive for a buyer (intermediate distributor
message by an identified sponsor, whose
Definition or end consumer). It can also involve
purpose is non-personal promotion of
disseminating information about a product,
products/services to potential customers.
product line, brand, or company.
Price Expensive in most cases Not very expensive in most cases.
Suitable for Medium to large companies Small to large companies
Sales Assumption that it will lead to sales Directly related to sales.
Giving an advertisement in the Newspaper or
Example Giving free products, coupons etc.
TV about the major products of a company
Attract new tries or brand switchers, Reward
Brand Building, Continuity, Brand switch,
Purpose loyal customers, Increase sales and repurchase
Switching back
rates.
Result Slowly very Soon

45
 Advertising Promotion
Approach Unique to product/service Not necessarily unique to product/service
Sales promotions, on the other hand, are
Advertising is emotional in nature and the
unemotional in their approach. A cents-off
objective is to create an enduring brand
Nature of appeal to coupon for cereal appeals to the consumer's
image. Perfumes, makeup and jewelery need
the consumer rational mind and is a sales promotion. The
imaginative advertising to create the allure
consumer weighs the price of one cereal brand
needed to sell these products.
versus others.
Objective Building brand image and boosting sales. Short term sales push.
Advertising is a technique of driving public The set of activities that spread a word about the
Meaning attention towards a product or service,product, brand or service is known as
through paid network. promotion.
Communication One way Process Two way process
Strategy Promotional strategy Marketing strategy

Differences in Timeframe
Promotions are time specific and may be short term while advertising may be generically long
term. For example: ABS company may start a promotion of giving free drinks at a mall for a
day during the festive season, while the same company may advertise much before about
their drink at the start of the festive season and extend it during and beyond the season.
Advertising is aimed towards the long term building of the brand while Promotion is aimed at
the short term tactical goal of moving ahead in sales.

Types of promotion and advertising

Promotion is generally divided in two parts:

Above the line promotion: Promotion in the media.

Below the line promotion: All other promotion. Much of this is intended to be subtle
enough that the consumer is unaware that promotion is taking place. E.g. sponsorship,
product placement, endorsements, sales promotion, merchandising, direct mail, personal
selling, public relations, trade shows.

Advertising can be of the following types:

Media: Commercial advertising media can include wall paintings, billboards, street furniture
components, printed flyers and rack cards, radio, cinema and television ads, web banners,
mobile telephone screens, shopping carts, web popups, skywriting, bus stop benches etc.

Covert Advertising: Covert advertising is when a product or brand is embedded in

entertainment and media. For example: John Travolta wearing only "Diesel" clothing in a
movie.

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 Television Commercials: Virtual advertisements may be inserted into regular television
programming through computer graphics. It is typically inserted into otherwise blank
backdrops.

Internet Advertising: This is the newest form of advertising wherein web space is used and
email advertising is used. On the internet, there is often an overlap of advertising and
promotion on sites like Indiegogo and Kickstarter, where individuals and small businesses try
to raise funding for their ideas, often in exchange for promotional items or items that feature
advertising of the product/company.

Relationship of Sales with advertising and promotions

Typically promotions are directly linked with sales while advertising is an assumption that it
may lead to sales. For example: Giving 20% discount on products may attract a customer and
induce instant sale while giving a general brand creation advertisement in the newspaper
may not induce immediate sale.

Cost of advertising vs promotion

Promotions are directly linked to sales and hence for small companies it may be easier to use
promotional methods. Advertising may be more expensive for small companies and it may not
be feasible for them while in advertising it is being assumed that adverts will lead to sales.

For example: A store may give 20% discount on its products which may increase sales while
the same shop may find it difficult to advertise this in various medias.

CHAPTER XI – PUBLIC RELATIONS AND SALES PROMOTION

You just finished reading a great newspaper story about a local restaurant even though you know
the company has experienced several lawsuits and many customer complaints. The news story
makes the restaurant sound like a great corporate citizen and the best place to eat in town.
Sometimes a company gets “free” publicity such as news stories or reviews about its products
47
and services in the mass media, even though the organization has no control over the content of
the stories and might not even know about their publication. How did a restaurant with so many
complaints manage to get such a great story written about it? How did it get good coverage when
it might not be deserved? Perhaps the restaurant used part of its promotion budget to pay for
public relations efforts to generate positive stories and positive publicity.
Public relations (PR) includes information that an organization wants its public (customers,
employees, stakeholders, general public) to know. PR involves creating a positive image for a
company, an offering, or a person via publicity. PR has become more important in recent years
because there are now so many media outlets people pay attention to, including YouTube, social
networking sites, and blogs. It’s pretty easy for anyone to say anything about a company in public
forum. Indeed, publicity is a double-edged sword; it can result in negative news, such as a poor
review of a movie, restaurant, or car, or positive news. Organizations work hard to get favorable
news stories, so while publicity sounds free, building relationships with journalists does cost
money. Just like advertising (see Chapter 11 "Advertising, Integrated Marketing Communications,
and the Changing Media Landscape" for discussion), public relations and sales promotions are
critical components of the promotion budget for many firms.
Organizations also use sales promotions to generate positive customer perceptions and
sales. Sales promotions are promotional activities companies do in addition to advertising,
public relations, and personal selling in order to sell a product. Issuing coupons, running contests
and games, and offering rebates and mail-in offers are examples of sales promotions. In this
chapter, we examine the public relations and sales promotion tools that organizations use and
how they contribute to a company’s success.
Good public relations efforts can help a firm create rapport with its customers, promote what it
has to offer, and supplement its sales efforts. Many organizations that engage in public relations
have in-house PR departments, media relations groups, or investor relations groups. Other
organizations sometimes hire external PR firms or advertising agencies to find and create public
relations opportunities for them. PR specialists must build relationships with people at different
media outlets to help get their stories placed. Universities, hospitals, government organizations,
and charitable organizations often hire PR people to help disseminate positive information about
their services and to increase interest in what they do.
PR specialists also help political campaign managers generate positive information in the press.
PR specialists can handle damage control and put a positive view on situations when something
bad happens to an organization or person. In foreign markets, PR agencies may help ensure
product concepts are understood correctly. Getting all PR stories placed in desired media is not
guaranteed. A lot of time and effort is spent getting to know people who can help publish or
announce the information to the public.
Companies use a variety of tools for their public relations purposes, including annual reports,
brochures and magazines for both employees and the public, Web sites to show good things

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they’re doing, speeches, blogs, and podcasts. Some of the most commonly used PR tools include
press releases, sponsorships, product placements, and social media.

Press Releases
Part of a company’s public relations efforts includes putting a positive spin on news stories. As we
explained, a press release is a news story written by an organization to promote a product,
organization, or person. Consider how much better a story or a product recommendation is likely
to be perceived when the receiver thinks the content is from an objective third party rather than
an organization writing about itself. Public relations personnel frequently prepare press releases
in hopes that the news media will pick them up and disseminate the information to the public.
However, there is no guarantee that the media will use a press release. Some of the PR
opportunities that companies may seek to highlight in their press releases include charity events,
awards, new products, company reports, and things they are doing to improve the environment or
local community.

Damage control is the process of countering the extreme negative effects a company gets when it
receives bad publicity. Domino’s Pizza was forced to engage in damage control after two of its
employees created a video doing disgusting things to pizzas and then posting it to YouTube. If the
publicity is particularly bad, as it was for Domino’s, a company might hold a press conference or
prepare a speech for the top executive to give. For example, the president of Domino’s spoke on
video to try to control the damage to Domino’s business.

Similarly, companies that move into foreign markets are sometimes perceived negatively by locals
because they have little information about the firms. In India, the reputation of companies is very
important to workers and their families. As a result, U.S. employers recruiting in the tech industry
in India often have to work hard to make their brands and products known so people will want to
work for them. The firms do so via various PR efforts.
Just as press releases can be used to promote the good things an organization or person does,
press conferences can also be held when a company is simply seeking good PR. An organization
might hold a press conference to announce that it has hired new, highly sought-after executives,
that it is breaking ground on a new building, or to talk about its community service projects.
Sponsorships
Many of you have heard of the Staples Center (Figure 12.2), where the Los Angeles Lakers play
basketball. But imagine how many more people heard about the Staples Center following the
announcement that Michael Jackson’s public memorial would take place there. All the news stories
talking about tickets and information about the memorial provided “free” publicity for the center
and for the office supplies store, Staples, for which the center is named. Staples paid $375 million
for naming rights of the center, which was built in
1998.http://en.wikipedia.org/wiki/Staples_Center (accessed December 9, 2009). Indeed, the
chain has gotten a huge return on its sponsorship of the center.

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A sponsorship involves paying a fee to have your name associated with different things, such as
the following:
A particular venue (Wrigley Field; the Staples Center)
A superstar’s apparel (Tiger Woods wearing Nike hats and shirts)
An event (the AT&T National Golf Tournament; the Chick-fil-A Peach Bowl)
A cause (M&M’s support of the Special Olympics)
An educational workshop or information session
A NASCAR vehicle (by Pfizer, the maker of Viagra; see Figure 12.3)
Even though sponsorships are expensive, they are growing in popularity as corporations seek
ways to strengthen their corporate image, increase their brand awareness, differentiate their
products, and reach their target markets. Worldwide, corporations spent over $43 billion on
sponsorships in 2008;“Events and Sponsorship 2008 Marketing Fact Book,” Marketing News, July
15, 2008, 26. however, the recession has taken a toll and the new stadium for the Dallas Cowboys
still doesn’t have a sponsor with naming rights. Over two-thirds of the sponsorships in North
America are for sports, followed by entertainment (e.g., music and performing arts) and causes
(e.g., the Susan G. Komen Race for the Cure and “alternative spring breaks” for college students).
Other organizations and structures, such as buildings and bridges, may seek sponsorships as a
means of generating revenue. Imagine how many people drive across the Brooklyn Bridge in New
York or the Golden Gate Bridge in San Francisco and how much awareness an organization would
get if they were allowed to pay to have their name on either of the bridges.

Cause-related marketing is one of the fastest-growing types of sponsorships. It occurs when a

company supports a nonprofit organization in some way. For example, M&M’s sponsors the
Special Olympics and American Airlines raises money for breast cancer research with an annual
celebrity golf and tennis tournament. The airline also donates frequent flier miles to the cause.
Yoplait Yogurt donates money for breast cancer research for every pink lid that is submitted.
Cause-related marketing can have a positive PR impact by strengthening the affinity people have
for a company that does it.

Product Placements
Getting a company’s product included as part of a television show, movie, video game, special
event, or book is called a product placement . When you watch reruns of Seinfeld, you often see
different Coca-Cola products being consumed. Likewise, you might see a Nissan Maxima
on Desperate Housewives. Over four hundred product placements typically appear in each
episode of The Biggest Loser. Apple placed products in twenty-four movies that reached number
one between August 1, 2008, and August 1, 2009, while Ford products appeared twenty times and
Budweiser products appeared twelve times.http://brandchannel.com/features_effect.asp?
pf_id=489 (accessed December 9, 2009).

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Video Clip

Typically, a company pays a fee to have one of its products placed. But sometimes the company
pays nothing if the product is needed for a show in some way or as part of the plot. FedEx did not
pay for product placement in the
movie Castaway.http://en.wikipedia.org/wiki/Cast_Away (accessed December 9, 2009). Product
placement can improve a brand’s awareness and exposure and often increase its sales. Given the
number of exposures an organization receives with product placement, the cost of a product
placement can be less expensive than commercials might cost.
Although most product placements appear in television shows and movies, corporations are
pursuing other options. For example, they are now placing products in online videos, computer
games, and books. The number of product placements is expected to increase as consumers
continue to skip commercials and advertisements using digital video recorders (DVRs).

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