chapter 2 principles ads

MDA 102: PRINCIPLES OF ADVERTISING

CHAPTER 2ADVERTISING AND THE MARKETING MIX

LEARNING OUTCOMES

At the end of this chapter, students should be able to:

Discuss and define marketing and how advertising relates to marketing strategy. Explain the marketing concepts. Outline the four tools of marketing and explain advertising’s relationship to them Describe the components of marketing communications.

TOPIC OUTLINES

2.1 Marketing2.1.1 Definitions2.1.2 Importance of Marketing

2.2 Marketing Mix2.2.1 Definitions

2.3 Four P’s2.3.1 Products2.3.2 Price2.3.3 Place2.3.1 Promotion

2.4 Marketing Communications1.4.1 Definitions

2.5 Marketing Communications Components1.5.1 Advertising1.5.2 Personal Selling1.5.3 Sales Promotion1.5.5.Public Relations1.5.4 Direct Marketing 1.5.6 Interactive/Internet Marketing1.5.7 Sponsorship1.5.8 Point-of-purchase1.5.9 Exhibitions/Trade Fairs

2.6 Summary

INTRODUCTION OF THE CHAPTER


After we have some understanding of advertising’s communication dimension, let’s consider the marketing dimension, because that’s what defines advertising’s role in business. Advertising is actually a specialty area within the broad domain of marketing. Of all business functions, marketing is the only one whose primary role is to bring in revenues. Without revenue, a company cannot recover its initial investment, pay its employees’ salaries, grow, or earn profit. So, learning marketing and its components are very important.

2.1 MARKETINGOver the years, the concept of marketing has evolved based on the supply and demand for products. As marketing relates to advertising, it is important that we understand its definition, concept and significance.

2.1.1 Definition

Marketing can be defined in many ways :

According to Chartered Institute of Marketing, MARKETING is the management process responsible for identifying, anticipating, planning and satisfying customer requirements profitably.

Marketing is the process of planning and executing the conception, pricing, distribution channel and promotion of ideas, goods and services to create exchanges that satisfy the perceived needs, wants and objectives of individuals and organizations.

2.1.2 Importance of Marketing

Marketing is a process – a series of actions and methods that take place sequentially – aimed at satisfying customers’ needs profitably. This process includes developing products, pricing them strategically, making them available to customers through a distribution network, and promoting them through sales and advertising activities.

Ultimate goal of marketing :• Earn a profit for a the firm by consummating the exchange of products or services with

those customers who need or want them. And the role of advertising :

• To inform, persuade and remind groups of customers, or markets, about the need-satisfying value of the company’s goods and services.

2.2 MARKETING MIXThe marketing mix approach is one model of crafting and implementing marketing strategies. It recognizes that marketers have essentially four variables to use when crafting a marketing strategy and writing a marketing plan.

2.2.1 Definitions

Product

Design and DevelopmentBrandingPackagingMaintenance

Distribution

Distribution ChannelsMarket CoverageStorage

Price

Price copyPsychological pricingPrice liningValue Determination

CommunicationPersonal SellingAdvertisingSales PromotionDirect MarketingMarketing/ Public RelationsCollateral materials


The term "marketing mix" was invented by Neil Borden in 1953 in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, described the role of the marketing manager as a "mixer of ingredients“ in 1948. Marketing educator E. Jerome McCarthy developed a mnemonic device to help recall four functions : Product, Price, Place and Promotion - or 4 P’s. In short, marketing mix is the way the marketer mixes and blends different elements (4 P’s) which create the company’s strategy.

2.3 FOUR P’sA prominent marketer, E. Jerome McCarthy, proposed a ’’Four P’s classification’’ in 1960, which has seen used widely until these days. Four P’s consist of PRODUCT, PRICE, PLACE and PROMOTION.

2.3.1 Products

Major activities in product element typically include the way product is designed and classified positioned, branded and packaged. Each of these affects the way the product is advertised. One of the important product attributes is brand, as it makes a product distinctive in the marketplace. A brand is a name, term, design, or symbol that identifies the goods, service, institution, or idea sold by marketers.

Brand name is the part of a brand that can be spoken (words, letters, numbers) Brand mark is the logo, symbol, picture, design, distinctive lettering, or colour combination.

Figure 1 : Elements in 4P's


Another important element in product is its packaging. Packaging is a physical appearance of the container includes design, color, shape, labeling and materials. Packaging serves marketers in four major ways :

Protection Preservation Information Promotion

Although the protection and preservation aspects reduce the costly effects of damage, pilferage and spoilage, the importance of packaging as an informational and promotional tool cannot be underestimated. An attractive package can create an immediate relationship with the customer, influence in-store shopping decisions, help set the product apart from competitors and inform customers of the product’s features and benefits.

2.3.2 PriceMany companies, especially small ones, request input from their advertising people about pricing strategies. That’s because, as we all know, the price element of the marketing mix influences consumer perceptions of the brand dramatically.

Price is determined by costs and expected profit level. Organizations use these kind of pricing elements: Price copy: an ad copy devoted to price information

Figure 2 : Examples of brands

Figure 3: Examples of Packaging


Psychological pricing: manipulate consumer judgment to make a product seem worthy or valuable. Example; buy today plasma TV Verra Panasonic RM 5K and now RM 2999

Price lining: variations of a product at different prices Customary or expected pricing uses a single, well-known price for a long period of time. Example;

Sale 70%, Special Sale Today.

A company often has relatively few options for determining its price strategy, depending on the desired product concept :

i. Market demand : if the supply of a product static but desire(demand) for it increases, the price tends to rise. If demand drops below available supply, price tends to fall. This may affect advertising messages in a major way.

ii. Production and distribution costs : The price of goods depends on the costs of production and distribution. One common advertising strategy is to tout the materials used in manufacturing a product. This can also help justify the prices manufacturers must charge to cover their production costs. Eg; TV commercial - Ferrero Roche, Yakult.

iii. Competition : Marketers believe that, in many product categories, consumers are less concerned with a product’s actual price than with its perceived price relative to competitors. For the advertisers, maintaining the value perception during periods of intense price competition and fluctuation is challenging and critically important. But this is one of the prime attributes of good advertising – maintaining the value perception.

iv. Corporate Objectives and Strategies: A company’s objectives also influence price. When introducing new products, companies often set a high price initially to recover development and startup costs. In other cases, if the objective were to position the brand as an inexpensive convenience item aimed at a broad target market, ads would stress the product’s economy.Price also depends on the company’s marketing strategy, and image advertising may be used to justify higher price. Many premium-priced brands, such as L’Oreal, are exposed for the very fact that they do cost more. Another example, Rolex - price is consistent with brand image.

v. Variable Influences : Economic conditions, consumer income and tastes, government regulations, marketing costs and other factors.

2.3.3 PlaceBefore the first as can be created, the distribution element, or place, must be decided. It is important for marketers to understand that the method of distribution, like the price, must be consistent with the brand’s image.

Simple term of distribution channel : People and institutions that move products from producers to customers. It may include middle man which are wholesalers, retailers, and modes of transportation.Channels can be indirect or direct :

Manufacturer

Wholesaler

Retailer

Consumer

Manufacturer

Wholesaler

Retailer

Consumer

Flow of marketing communication Mass advertising, Coupons, Sampling, Publicity

Manufacturer

Wholesaler

Retailer

Consumer

Flow of marketing communication Trade deals, Trade advertising, Personal Selling, Mass advertising, Sales promotion, Public Relation


Direct distribution happen when companies distribute products directly without the use of reseller. For example, Avon employs representative who work for the manufacturer rather than for a retailer and sell directly to consumers. Insurance companies, another example, often sell and distribute their products and services directly to customers without the use of wholesalers or retailers.

Indirect distribution usually refers to the usage of middle man. A reseller is a business firm that operates between the producer and the consumer or industrial purchaser. It deals in trade rather than production. Resellers include both wholesalers and retailers, as well as manufacturer’ representatives, brokers, jobbers and distributors.

Producers often expect wholesalers and retailers to participate in advertising programs through cooperative advertising allowances.

There are several strategies for distribution:

Pull: direct marketing efforts to the ultimate consumer. Example; using consumer advertising, coupon, rebates, free samples.

Push: direct marketing efforts at resellers. Example; using intermediate /reseller. Combination: combine of both, marketers are most using this strategy

PUSH PULL COMBINATION

Flow of demand

Flow of demand

Flow of demand

2.3.4 Promotion

Flow of marketing communication Trade deals, Trade advertising, Personal Selling


The final element of marketing strategy is promotion or also known as communication. The tools included under promotion elements are personal selling, advertising, public relations, sales promotion, direct marketing, event and sponsorships, point-of-sales, and the communication aspect of packaging. Each of the tools will be discussed further in the ‘’components of marketing communications’’ topic.

2.4 MARKETING COMMUNICATIONS As a consumer, we are exposed to hundreds and thousands of commercial messages everyday. They may be appeared in the form of billboards, TV, newspapers, magazines, internet, event sponsorship,

coupons and etc. These are just few of many communication tools used by a company. You may simply refer to them as ‘’advertising’’. BUT, in fact, the correct term for these various tools is marketing communications. Advertising is just one type of marketing communications.

2.4.1 Definitions Marketing communications (or famously known as MARCOM) typically refers to all the planned

messages that companies and organizations create and disseminate to support their marketing objectives and strategies. Marcom are messages and related media used to communicate with a market.

Marketing communications is a systematic methodology aimed at creating a niche for a particular product or service in the market through various modes of communication to reach the end user. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales promotion and online marketing are termed marketing communicators, marketing communication managers, or more briefly as Marcom managers.

2.5 MARKETING COMMUNICATIONS COMPONENTS The components of Marketing Communications :

1. Advertising2. Personal Selling3. Sales Promotion4. Direct Marketing5. Public Relations6. Interactive/Internet Media7. Sponsorship8. Point-of-purchase9. Exhibitions/Trade faurs

2.5.1 Advertising Advertising is a paid, non-personal communication from an identified sponsor using mass

media to persuade or influence an audience. As advertising reaches to large audience, sometimes it is called mass or non-personal selling.

Its usual purpose is to inform, persuade, and remind customers about particular products and services.


Advertising starts the process of brand communication and lets the audience know about a brand. This tool also allows advertisers to create an instant bond with the end user.

2.5.2 Personal Selling Personal Selling is defined as interpersonal communication process by which a seller

ascertains and then satisfies the needs of a buyer, to the mutual, long-term benefit of both parties.

Personal is all about seeing people and that’s also why personal selling is the best marketing communication tool for relationship building – because the sales representative and the customer are face to face.

But today’s technology manipulate the term face to face interaction as there are some form of telecommunications such as telephone sales and tele-conference take place.

2.5.3 Sales Promotion It is defined as a special category of communication tools and activities. Sales promotion is a

direct inducement that offers extra incentives anywhere along the marketing route to enhance or accelerate the product’s movement from producer to consumer.

Designed to supplement the basic elements of the marketing mix for short period of time, sales promotion is aimed to stimulating customers or members of the distribution channel to some immediate, overt behaviour.

This broad category includes trade deals, free samples, displays, trading stamps, sweeping-stakes, cents-off coupons, premiums and etc.

2.5.4 Public Relations PR is a management function that focuses on the relationships and communications that

individuals and organizations have with other groups (called publics) for the purpose of creating mutual goodwill.

Activities include publicity (news release, feature stories) and special events (open houses, factory tours, VIP parties, grand openings) to inform various audiences about the company and its products and to build corporate trustworthiness and image.

2.5.5 Direct Marketing It is defined as interactive system of marketing which uses one or more advertising media to

effect a measurable response and/or transaction at any location, with this activity stored in database.

It happens when organizations communicate directly with target customers to generate a response and /or a transaction.

It involves a variety of activities, including : a mail-order house that communicates directly with consumers through ads and catalogs, database management, direct selling, telemarketing, the internet, and various broadcast and print media.

2.5.6 Interactive/Internet Marketing


Interactive media is a digital media that allows for a back-and –forth flow of information whereby users can participate in and modify the form and content of the information they receive in real time.

This new media allow users to perform a variety of functions such as receive and alter information and images, make inquiries, respond to questions and of course, make purchase.

Others than internet, also include CD-ROMs, kiosks, interactive television and digital cell phone.

2.5.7 Sponsorship

Sponsorship is a cash or in-kind fee paid to a property (which may be a sports, entertainment, or non-profit event or organization) in return for access to the exploitable commercial potential associated with that property.

In other words, just as advertisers pay a fee to sponsor a program on radio or TV, they may also sign on to sponsor a bike race, an art show, festival, fair or exhibitions.

The sponsorship may be paid in cash or in kind(that is, through a donation of goods and services.)

The public approves of it. Roper Starch Worldwide reported that 80% of Americans believe corporate sponsorship is an important source of money for professional sports and 74% believe sponsorships provide benefits to the cities where events occur.

Have the ability to involve customers, prospects and other stakeholders.

2.5.8 Point-of-purchase

Point-of-purchase or P-O-P refers to display materials and advertising-like devices that are designed to build traffic, exhibit and advertise the product, and promote impulse buying. P-O-P materials may include window displays, counter displays, floor, wall racks to hold the merchandise, streamers, balloons and posters.

Trend toward self-service retailing. With fewer and less knowledgeable salespeople to help the customers, they are forced to make purchasing decisions on their own. Eye-catching, informative displays can give them the nudge they need.

Even in well-staffed stores, displays materials can offer extra selling information and make the product stand out from the competition.

To draw customer’s attention as well as maintain the beneficial relationship with the loyal customers.

2.5.9 Exhibitions/ Trade Fairs

Exhibitions and trade fairs is an event where manufacturers, dealers and buyers get together for demonstrations and discussion.

Companies use exhibits to describe the organization’s history, present new products, show how products are made or explain future planes. Exhibits are often prepare for local fairs, colleges and universities and trade shows.


Attract large numbers of audience and also sponsors, as well as exhibitors. Important for global marketers, because they may be the only place where an advertiser can

meet the company’s major international prospects at one time. The construction of trade-show booth and exhibits has become a major factor in sales

promotion plans.

2.6 Summary

Marketing is the management process responsible for identifying, anticipating, planning and satisfying customer requirements profitably.

The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product, and promotion.

Product element includes the way the product is designed and classified, positioned, branded and packaged.

Price refers to what and how a customer pays for a product. Companies use many common pricing strategies.

Place or distribution refers to how the product is placed at the disposal of the customers. The channel is either direct or indirect way.

Promotion or marketing communication refers to all marketing-related communication between the seller and the buyer. Tools included are personal selling, advertising, sales promotion, direct marketing, PR, sponsorship, point-of-purchase and exhibitions and trade fairs.

REFERENCES

George E. Belch, Michael A. Belch, 2007 Advertising & Promotion, An Integrated Marketing Communications Perspective, 7th International Edition, McGraw-Hill Higher Education.

Wells, Moriarty & Burnett 2006, Advertising – Principles and Practice, 7th edition, Pearson Prentice Hall Education, New Jersey.

William F. Arens, 2006, Contemporary Advertising, Tenth International Edition, McGraw-Hill Higher Education.

chapter 2 principles ads

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