MCM605_Marketing Management

Promotion Management 143 9.6 Promotion Mix Strategies – Push And Pull Marketing people have the option to choose from two different promotion mix strategies — Push Promotion and Pull Promotion. As shown in Fig. 9.1 the relative emphasis on the specific promotion tools differs for push and pull strategies. A push strategy (product push) involves pushing the product through distribution channels (wholesalers and retailers) to final consumers. The manufacturer directs all marketing activities, especially personal selling and trade promotion toward channel members to induce them to carry the product in large quantities and to promote it to the final consumers. The product is pushed through the channel towards customers. Using a pull strategy (demand pull), the manufacturer directs all marketing activities, especially advertising and consumer promotion, toward the final consumers to induce them to buy the product. If the pull strategy is implemented properly, consumers will demand the product from channel members, who will in turn demand it from the manufacturers. Thus, under a pull strategy, consumer’s demand pulls the product through the channels. Top marketing companies like Coca- Cola, Pepsi, Nike and Intel skilfully employ both push and pull strategies. 9.7 Factors Determining Promotion Mix Five major factors are considered by companies while determining the promotion mix strategy. They are: 1. Type of product 2. Nature of market 3. Stage of product in its life cycle 4. Budget availability 5. Company policy 1. Type of Product: The promotion task depends on the type of product marketed. Low- priced, frequently purchased consumer goods like toilet soap, toothpastes, soft drinks, etc., will need frequent repeat messages to influence and remind the existing consumers about the brand and to persuade new consumers to buy. Advertising is used for such products on a mass scale at a high frequency. The promotion mix will consist of press ads, magazine ads, TV spots, cinema slides, incentive offers, contests, etc. For an industrial product of high value and high technology which is purchased infrequently, personal selling, product demo, exhibition, and sales presentations become the necessary promotion mix. CU IDOL SELF LEARNING MATERIAL (SLM)

144 Marketing Management 2. Nature of Market: The intensity of competition in the market, locational characteristics of the consumers, and the requirements of channel members also influence the promotion mix decision. If the target audience is large and widely spread out in different parts of the country, advertising and sales promotion will be effective and economical. E.g.: Consumer goods. 3. Stage in the Product Life Cycle: Based on the stage at which the product is in the PLC the promotion mix has to change. When the product is in the introduction and early growth stages, the tasks involved are awareness creation and motivating product trials. The best promotion mix will consist of publicity, spreading information, advertising, consumer sales promotions and trade promotions. Later, as the product reaches the maturity stage, the objectives of maintaining brand loyalty and creating brand preferences become more important. Aggressive brand advertising and dealer promotions become important components of the promotion mix at that stage. 4. Budget Availability: Using each promotion tool adds to the cost. Hence, the budget availability with a company has to be considered while deciding the promotion mix. Companies with limited resources will have to go for localized activities like dealer display, wall paintings, and personal selling. Companies with larger resources can go for large scale and more sophisticated promotion tools. 5. Company Policy: All the above mentioned considerations should fit in with the overall marketing and promotion policy of the company, while deciding the promotion mix. The conviction of the top management in the role of promotion, the product market strategy, and the type of corporate image it wants to project are factors influencing the decision. 9.8 Sales Promotion According to Philip Kotler, “Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. Whereas advertising and personal selling offer reasons to buy a product or service, sales promotion offers reasons to buy now.” Marketers use advertising, personal selling and sales promotion in a combination of the three. Sales promotions are temporary incentives by a marketer or manufacturer to induce the trade (wholesalers and retailers), and/or the consumers, to buy a brand and encourage the sales force to aggressively sell it. Often, the retailers also use sales promotion to encourage increased purchases from their customers. The incentive is in addition to the basic benefits provided by the brand and temporarily changes its perceived price or value to the customer. Increased competition in the CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 145 market, increased brand parity (similar substitutes) and price sensitivity, reduced brand loyalty among customers, and favourable responsiveness to money-saving opportunities by the trade and consumers have contributed to the growth and popularity of sales promotion as a tool. The role and objectives of sales promotion are the following: 1. Help the launch of a new product by introducing it to the trade and consumers. 2. Obtain trial purchases from consumers. 3. Stimulate sales force enthusiasm. 4. Invigorate sales of mature brands. 5. Increase shelf space in the market. 6. Neutralise competitive advertising and sales promotions. 7. Hold current users by encouraging repeat purchasing. 8. Increase product usage rate. 9. Pre-empt competition. 10. Reinforce advertising. The limitations of sales promotions are as below: 1. It cannot compensate for a poorly trained and ineffective sales force. 2. It cannot give the trade or consumers any compelling long-term reason to continue purchasing a brand. 3. It cannot permanently stop an established brand’s declining trend or change the basic nonacceptance of an undesired brand. Sales promotions are normally targeted at consumers (consumer sales promotion) and the trade (trade promotions). (a) Consumer Sales Promotions Different types of sales promotion methods are used to encourage the consumers to purchase one brand over another, to purchase a particular brand more often, and to purchase in larger quantities. Consumer sales promotions include tools like samples, coupons, refunds, rebates, premiums, POP promotions, patronage reward, sweepstakes and contests. Samples are offers of a small quantity of a product offered to consumers for trial. They could be free or at discounted prices. Coupons are certificates offering discounts at the time of purchase of a specific product. Rebates or cash refunds give reduction after the purchase, with proof of purchase. CU IDOL SELF LEARNING MATERIAL (SLM)

146 Marketing Management Premiums are goods offered either free or at a discounted price as an incentive to buy a product. Point-of-Purchase (POP) promotions include exhibition or display and demonstrations at the point of purchase, i.e., retail points. Patronage rewards are cash or other gifts or rewards for regular use of a product or service. The ‘frequent flier’ plan of Indian Airlines and Jet Airways with reward points redeemable as free air tickets, First Citizen Club reward scheme of Shoppers’ Stop enabling reward points redeemable as products are examples. Sweepstakes and contests are promotional events which give the consumers a chance to win some prize, by luck, competition or extra effort. (b) Trade Promotions Manufacturers use a combination of push and pull strategies to accomplish both retail and consumer purchasing. Trade promotions are directed at wholesalers, retailers and other marketing intermediaries. Unless trade promotion efforts have succeeded in making the trade purchase, distribute and stock adequate quantities of the products, consumer promotions are likely to fail. The special incentives offered by manufacturers to their channel members are expected to be passed through to consumers in the form of price discounts offered by retailers and often stimulated by advertising support and special displays. The objectives of trade promotions are as follows: 1. To introduce new or revised product. 2. To increase distribution of new packages or sizes. 3. To build up retail inventories. 4. To maintain or increase the manufacturer’s share of shelf space. 5. To obtain displays outside normal shelf locations. 6. To reduce excess inventory and increase sales turnover. 7. To counter competitor’s activity. 8. To sell as much as possible to final consumers. Most of the trade-oriented promotional incentives offered by manufacturers are in the form of trade allowances. They are needed to encourage retailers to stock the manufacturer’s brand, discount the brand’s price to consumers, feature it in advertising, or provide special display or other point-of-purchase (POP) support. Off-invoice allowances are very commonly used to CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 147 persuade retailers to buy the manufacturer’s brand in large quantity and increase retail sales. Manufacturers sometimes give advertising allowance and display allowance to retailers. Free goods are also supplied. ‘Push money’ in the form of cash or gifts is offered occasionally to push the particular brand. Also, speciality advertisement items with the company logo or name like pens, calendars, bags, etc., are also supplied to the trade as incentives. Advantages and Disadvantages of Sales Promotion Advantages: Provides extra incentive to consumer or middlemen to purchase or stock and promote a brand. Way of appealing to price sensitive consumer. Way of generating extra interest in product or ads. Effects can often be more directly measured than those of advertising. Can be used as a way of building or reinforcing brand equity. Disadvantages: Many companies are becoming too reliant on sales promotion and focusing too much attention on short-run marketing planning and performance. Many forms of sales promotion do not help establish or reinforce brand image and short- term sales gains are often achieved at the expense of long-term brand equity. Problems with sales promotion clutter as consumers are bombarded with too many coupons, contests, sweepstakes and other promotional offers. Consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty. In some industries promotion wars may develop whereby marketers sales promotion incentives extensively which results in lower profit margins and makes it difficult to sell products at full price. 9.9 Public Relations Public relations or PR is a valuable promotion tool that is suitable for fostering goodwill between a company and its various publics. Public relations involve building good relations with the company’s publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumours, stories and events. When effectively integrated CU IDOL SELF LEARNING MATERIAL (SLM)

148 Marketing Management with advertising, personal selling, and sales promotion, public relations are capable of accomplishing objectives other than goodwill. It can also increase brand awareness, build favourable attitude toward a company, and its products, and encourage purchase behaviour. The public relations department normally carries out the following functions: Press relations, Product publicity, Lobbying, Investor relations, Social service, etc. Public relations are used to promote products, celebrities and political candidates, places, ideas, organizations or nations. Public relations people make use of various tools like news, special events, speeches, mobile marketing, reports, brochures, articles, company newsletters and magazines, audiovisual materials, corporate identity materials and gifts, and public service or social service activities. It is necessary here to differentiate between the traditional role of public relations and the new role. The traditional role reflects a management function that has as its primary responsibility the goal of communicating and the gaining acceptance of the organization’s policies and programs within its various communities. The New Role of PR—The new role assumes a much broader, and more marketing-oriented, perspective. In the new orientation, the public relations department operates in close communication with the marketing department (rather than as separate entities) to develop programs and policies. Integrating PR into the Promotional Mix—The activities of the public relations department must be coordinated with marketing, and integrated into the overall promotional mix. Marketing Public Relations (MPR) Functions—Public relations activities designed to support marketing objectives are called marketing public relations functions. There are numerous ways that MPR adds value to the integrated marketing program. The Process of Conducting Public Relations The actual process of conducting public relations will require a number of tasks. These tasks will involve both traditional and new role activities. CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 149 (A) Determining and Evaluating Public Attitudes: The first step in the public relations process is to determine the public’s existing attitudes toward the firm and/or its products. Four reasons are given to explain why this step is necessary: To provide input into the planning process To serve as an “early warning system” for potential problems To secure internal support To increase the effectiveness of the communication (B) Establishing a Public Relations Plan: Too many firms do not establish a formalized public relations plan. As a result, actions tend to be more reactive than proactive. A formal plan — coordinated with marketing — needs to be developed. (C) Developing and Executing the Public Relations Program: A number of activities must be conducted once the plan has been established. Determining relevant target audiences: Target audiences may be categorized as internal or external. Internal audiences include: (a) Employees (b) Stockholders and investors (c) Community members (d) Suppliers and customers External audiences may include: (a) The media (b) Educators (c) Civic and business organizations (d) Governments (e) Financial groups Implementing the public relations program: Once the target audience has been established, and objectives established, a number of tools may be used for implementation or delivery including: Press releases Press conferences Exclusives Interviews CU IDOL SELF LEARNING MATERIAL (SLM)

150 Marketing Management (D) Advantages and Disadvantages of Public Relations: There are a number of advantages and disadvantages associated with the use of public relations. Advantages include: Credibility Low cost Less clutter Lead generation Ability to reach specific groups Image building The primary disadvantages result more from improper implementation of the programs than with public relations in and of itself. These include: Not completing the communication process. Redundancies with the marketing effort. (E) Measuring the Effectiveness of Public Relations: A variety of criteria can be used as dependent variables in the measurement of the PR program. In addition, a number of methods can also be employed in this process including Personal observation and reaction Matching objectives and results The team approach Public opinions and surveys Management by objectives Audits 9.10 Publicity Publicity can be defined as non personal communications about an organization, product, service or idea that is not directly paid for nor run under identified sponsorship. The distinction between publicity and public relations is not always clear. The dissemination of publicity is a task that is the responsibility of the public relations department, as is the development of programs to deal with publicity originating from other sources. At the same time, CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 151 public relations activities are under the control of the firm. The same cannot always be said for publicity. (A) The Power of Publicity: Publicity is powerful enough to make or break a firm. Products such as aspirin and red wines are testimonials as to the way that companies can benefit from this power. In addition to those stated above, products such as Audi, Texaco and Tylenol have all felt the negative impact of this communication form. Given this power, the firm must have programs in place to capitalize on or control and minimize the effects of these messages. (B) The Control and Dissemination of Publicity: While the marketer may not be able to control all publicity, it is possible to impact these communications in a number of ways. For example, press releases, or “leaks” may be used to make sure that the information gets out. Publicity can also be managed or turned around to be used as an advantage (Pokemon, Power Rangers examples), or responded to (Tree Top). (C) Advantages and Disadvantages of Publicity: Publicity offers the advantages of: 1. Credibility; 2. News value; 3. High word-of-mouth communications; and 4. Prceived endorsement by the media. Disadvantages include possible problems with respect to: 1. Timeliness 2. Can be negative also 3. Accuracy. (D) Measuring the Effectiveness of Publicity: The measures employed in assessment of the public relations program can also be used here. In addition, the Ketchum Effectiveness Yardstick might also be employed. 9.11 Summary The main objectives of advertising are as below: Informative: Informs people about availability of products/brands Persuasive: Persuades or motivates people to buy and use products/brands Reminder: Frequently reminds people to buy or use a product/brand CU IDOL SELF LEARNING MATERIAL (SLM)

152 Marketing Management Reinforcement: Gives assurance to buyers about the correctness of their buying decisions. Promotion mix is also called the marketing communications mix. Communication is an important function in marketing, and constitutes one of the 4Ps of the marketing mix, i.e., Promotion, the other three being Product, Price and Place. Promotion management consists of managing the different components of promotion mix. IMC involves integrating different forms of communications into one consistent and unified one to achieve more impact. Promotion mix consists of advertising, personal selling, direct marketing, interactive and internet, direct marketing, publicity and public relations. Each of these has advantages and disadvantages. The common classifications of advertising to the consumer market include national, retail/local and direct-response advertising as well as primary versus selective demand advertising. Classifications of advertising to the business and professional market include industrial, professional and trade advertising.Marketing people have the option to choose from two different promotion mix strategies — Push Promotion and Pull Promotion. The Integrated Marketing Communication process involves participants who can be divided into five major groups: (1) The advertiser or client (2) Advertising agency (3) Media organizations (4) Marketing communications specialist (5) Collateral services. 9.13 Key Words/Abbreviations Advertising: Paid non personal presentation of products using print, TV, etc Publicity: Awareness creation about brands among public Public relations: Building good relations with govt, media, public etc IMC: Integrated Marketing Communications Primary demand: Demand for generic product Specific demand: Demand for a brand Direct marketing: Direct communications from company to customers Personal selling: Face to face interaction in selling Promotion mix: Mix of tools available for promotion Push and pull promotion: Strategy of pushing product to customers and customers pulling Retail advertising: Retailers like Big Baazar advertising CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 153 Interactive and internet promotion: Online links and ads inviting customers to chat Stealth messages: Hidden messages National advertising: Advertising nationally Local advertising: Ads released only in selected cities or localities Generic advertising: Advertising for increasing primary demand AIDAS mode: Attention, interest, desire, action, satisfaction Advertising agency: Companies who specialise in advertising work Media organisations: Specialists in media buying and booking Collateral services: Extra jobs like marketing research, photography, etc. 9.14 Learning Activity 1. Identify 4 examples of each of the classifications of advertising. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 2. Give 4 examples of primary demand advertising and specific demand advertising. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 3. Identify 4 examples of publicity activities related to brands, companies or products. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 4. Give 4 examples of adverse publicity that happened in India for brands/companies. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 9.14 Unit End Questions (MCQ and Descriptive) A. Descriptive Types Questions 1. Success of a marketing company depends on its proper use of promotion mix. Discuss how each component in the promotion mix has an important role to play in marketing. CU IDOL SELF LEARNING MATERIAL (SLM)

154 Marketing Management 2. Marketers use push and pull promotion strategies for product/brand promotion in the market. Elaborate the two methods using examples. 3. Explain the meaning and significance of sales promotion and the methods used for consumer and trade promotions by companies. 4. IMC’s objectives are to achieve required positive impact in the market. Justify. 5. Differentiate public relations and publicity using suitable examples. 6. Using the AIDA model and Hierarchy-of-effects model, bring out the significance of persuasive communication in promotion. 7. Discuss the factors to be considered while determining the promotion mix strategy of a company. 8. You are advertising manager of organization producing refined oil. Which media will you choose to advertise your product and why? 9. Explain various tools commonly employed for sales promotion. 10. Distinguish between direct marketing and personal selling with the help of suitable examples. B. Multiple Choice/Objective Type Questions 1. AIDA stands for (a) Attention (b) Interest (c) Desire (d) Action (e) All of above 2. Objectives of advertising are (a) Informing (b) Persuading (c) Reminding (d) Reinforcing (e) All of above 3. Pull promotion involves (a) Consumers demanding for products (b) Dealers hard selling to consumers (c) Manufacturers pushing products (d) All of above 4. Maximum promotion will be needed at (a) Introduction stage (b) Product development stage (c) Maturity stage (d) All of above CU IDOL SELF LEARNING MATERIAL (SLM)

Promotion Management 155 5. National advertising is done usually for (a) FMCG products (b) Consumer durables (c) Pharma products (d) All of above Ans.: 1. (e), 2.(e), 3. (a), 4. (a), 5. (a). 9.15 References Text Books 1. Dr. K. Karunakaran, Marketing Management, HPH 2. Philip Kotler, Marketing Management, 10 Ed., Pearson/PHI. Reference Books Belch and Belch, Advertising and Promotion, 4 Ed., Tata McGraw Hill. Web Resources www.tutor2u.net. CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 10 MANAGING NON-PERSONAL COMMUNICATION CHANNELS Structure: 10.0 Learning Objectives 10.1 Introduction 10.2 The Five M’s of Advertising 10.3 Appeals and Execution Styles 10.4 Creative Tactics for Developing Communications 10.5 Managing the Support Media 10.6 Out-of home Media 10.7 Promotional products marketing 10.8 Other Media 10.9 Summary 10.10 Key Words/Abbreviations 10.11 Learning Activity 10.12 Unit End Questions (MCQ and Descriptive) 10.13 References 10.0 Learning Objectives Studying this unit will help you to Understand the steps in developing effective marketing communication Learn the execution appeals and creative strategies To recognize the various support media available to the marketer in developing non- personal communication

Managing Non-Personal Communication Channels 157 10.1 Introduction In developing an effective advertising programme, marketing managers should always start by identifying the target audience. Target Audience: The marketing communicator has to start with a clear target audience in mind. It may be potential customers or current customers, those who make the buying decision, or those who influence it. The target audience can be individuals, groups, special public, or the general public. The target audience will heavily affect the marketing communicator’s decision on what will be said, how it will be said, when it will be said, where it will be said, and who will say it. 10.2 The Five M’s of Advertising After the target audience is identified, the marketing communicator can proceed through the five steps to develop the advertising programme, known as the five M’s of advertising, which is shown in Fig. 10.1 and explained below: 1. MISSION: The advertising objectives. 2. MONEY: How much to spend. 3. MESSAGE : What message can be sent. 4. MEDIA: What media can be used. 5. MEASUREMENT: How to evaluate the results. Fig. 10.1. The Five M’s of Advertising (Source: Philip Kotler, Marketing Management, 12 ed., Pearson/PHI) CU IDOL SELF LEARNING MATERIAL (SLM)

158 Marketing Management 1. Mission: The first step consists of setting the advertising objectives in tune with the sales goals. Sales goals are the targeted sales and targeted growth in market share, sales turnover, etc., set as part of the marketing strategy or plan. The advertising objectives are based on prior decisions on target market, market positioning and marketing mix. An advertising objective is a specific communication task and achievement level to be accomplished with a specific target audience, in a specific period of time. Russel Colley has proposed about 52 possible advertising objectives and also outlined a method called DAGMAR (Defining Advertising Goals for Measured Advertising Results) for turning objectives into specific measurable goals. According to him, “Advertising succeeds or fails depending on how well it communicates the desired information and attitudes to the right people at the right time and at the right cost.” Advertising objectives aim at different stages in the hierarchy of effects, and could be classified according to whether their aim is to inform, persuade, remind, or reinforce. Informative advertising aims to create awareness and knowledge about new products or new features of existing products. Persuasive advertising aims to create liking, preference, conviction, and purchase of a product or service, (e.g., Coke, Pepsi). Reminder advertising aims to stimulate repeat purchase of products and services. Reinforcement advertising aims to convince current purchasers that they made the right choice. A thorough analysis of the current market situation and competitor analysis is to be done before deciding advertising objectives. 2. Money: The company should be careful to spend only the right amount of money for advertising; not more, not less. Five specific factors are to be considered when setting the advertising budget. (i) Stage in the product life cycle: New products will need large advertising budgets to build awareness and persuade product trials by buyers. Established brands can operate with a lower budget as a ratio to sales. (ii) Market share and consumer base: In the case of established brands with high market share, advertising budget could be less as a percentage of sales to maintain the share. In order to increase the size of the market and build up the share, larger budget will be needed. (iii) Competition: If the market has a large number of competitors who spend large sums for advertising, the brand will need heavier advertising budget to be heard. (iv) Frequency of advertisements: The repetitions needed to remind the consumers about the brand have an impact on the budget. CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 159 (v) Product substitutability: Some brands in a particular commodity group like soft drinks, liquor and cigarettes need heavy advertising budget to establish product differentiation image among substitutes. 3. Message: Choosing the right advertising message requires four major steps — message generation, message evaluation and selection, message execution, and review of social responsibility. (i) Message generation: Choosing the right advertising message involves developing the message content, i.e., what to say, and the message structure and format, i.e., how to say it. Basically, the message must be able to attract the Attention of the target audience, hold their Interest, arouse Desire in the product and obtain Action of buying, according to the AIDA model. (ii) Message content: The content of the message should be capable of appealing to the target audience and it should make them respond favourably. Appeals can be rational (product quality, value for money, performance), emotional (human, happiness, affection, ego) or moral (ethics, equality, helping the disabled).They should invariably be believable and distinctive. (iii) Message structure: Messages could be structured as concluding or leaving conclusions to the receiver, one-sided (positive) arguments or two-sided (positive and negative) arguments, and stressing strong points and weak points. (iv) Message format: The message should invariably have a strong format, consisting of the headline, copy, visuals, and colour. Audio messages should have sound and voices of a good announcer. If it is on TV or personal presentation, all the mentioned elements plus the body-language (expressions, gestures) will form the format. Messages could be presented using many execution styles like slice of life, lifestyle, fantasy, mood or image, musical, personality symbol, testimonial evidence, etc. 4. Media: The next step in the development of an advertising programme is choosing the appropriate channels of communication. Personal communication channels involve interaction between two or more persons. The communication process could be face-to- face presentation, over the telephone, through mail, or the Internet. Word of mouth communication is a media where consumers and their friends, neighbours and others discuss orally about a product or service. Opinion leaders also communicate to others, who value their opinions on various matters. Buz marketing uses opinion leaders to communicate about products or services to consumers in their neighbourhood. Non- CU IDOL SELF LEARNING MATERIAL (SLM)

160 Marketing Management personal communication channels are media for communication without personal contact or interaction. They consist of print media like the newspapers and magazines, audio- visual media like TV or radio, display media like hoardings, wall paintings and posters, and online media using the Internet. Exhibitions, launching and inaugural shows, press meets and other events are also useful as non-personal media. In selecting the media, it should be ensured that messages are delivered by highly credible sources, to be effective and persuasive. The marketers hire celebrity endorsers or brand ambassadors for this - Amitabh Bachchan for Reid & Taylor suitings, Virat Kohli for Boost, Shah Rukh Khan for Santro Xing, and so on. Appropriate media has to be selected based on reach, frequency and impact, and then the specific media vehicles and media timing have to be decided. Selecting the Media: Selection of appropriate media involves identifying the most cost- effective media to be used to deliver the desired number and type of exposures to the target audience. The desired number of exposure will depend on the advertising objective and response from the target audience, like a target level of product trial by prospective customers. Product trial will depend, among other things, on level of brand awareness. The effect of exposures on the target audience’s awareness depends on the exposure’s reach, frequency and impact. Reach means the number of different persons or households exposed to a particular media schedule at least once during a specified time period. (E.g., FMCG ads on TV channels and newspapers). Frequency means the number of times within the specified time period that an average person or household is exposed to the advertisement message. (E.g., Repetitive ads for FMCG on TV channels). Impact is the qualitative value of an exposure through a given medium. (A health drink ad in a health magazine will have more impact than in a business magazine). Appropriate media has to be selected based on understanding the capacity of the major advertising media types to deliver reach, frequency and impact. The following variables are considered while making the choice of the media: The following variables are considered while making the choice of the media: (i) Media Habits of Target Audience: If the objective is to reach teenagers, FM Radio and television are the most effective media. CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 161 (ii) Product Characteristics: Choice of media depends on product characteristics. Different media have different scope for demonstration, visualisation, believability and advantage of colour. Sarees and jewellery are best shown in colour magazines or on TV. (iii) Message Characteristics: Media choice is influenced by timeliness and information content. If BIG BAZAAR wants to announce a major sale tomorrow, they have to choose FM Radio, TV, or the newspaper. (iv) Cost: Newspaper advertising is comparatively cheap while television is very costly. Specific media vehicles are chosen based on the estimates of audience size (circulation for newspapers and magazines; viewership for TV channels), composition (effective audience exposed to the vehicle) and media cost (cost per thousand persons reached). 5. Measurement: The final stage of the process of developing an advertising programme involves evaluation or measurement. After the message is sent to the target audience, the marketer has to evaluate its efficacy. Evaluation of advertising efficiency is done based on two types of research studies – (i) Communication effect research and (ii) Sales effect research (i) Communication effect research Communication-effect research involves understanding whether an advertisement is actually communicating effectively. A method called copy testing is done before an advertisement is released into media or after it is printed or broadcast over TV or the radio. Post-tests are used to evaluate the impact of a completed campaign. (ii) Sales effect research Sales-effect research involves studying the sales generated by an advertisement. After understanding the incremental sales due to the advertisement’s effect, decision to continue the ad, increase the frequency, modify, etc. can be taken by the media planner. The methods of DAGMAR, which create measurable goals for advertising are useful to evaluate the persuasive effect on the audience. Information is collected from the target group of consumers about their recall of the advertisement, how many times they saw it, what the important facts they recall are, how they feel about the message, their past and present attitude towards the product, or company, etc. The purchase behaviour based on the advertisement can also be measured. Based on the CU IDOL SELF LEARNING MATERIAL (SLM)

162 Marketing Management evaluation, if necessary, changes could be made in the message or media, to make it more effective and persuasive. Box 10.1: DAGMAR Model In 1961, Russel Colley prepared the model called Defining Advertising Goals for Measured Advertising Results (DAGMAR). It propounds that communications ’ effects are the logical basis for advertising goals and objectives against which success or failure should be measured. Advertising ’ s job is to communicate to a defined audience information and a frame of mind that stimulates action. Advertising succeeds or fails depending on how well it communicates the desired information and attitudes to the right people at the right time and at the right cost. Under the DAGMAR approach, an advertising goal involves a communication task that is specific and measurable. Colley proposed that the communications task be based on a hierarchical model of the communications process with four stages: 1. Awareness: Making the consumer aware of the existence of the brand or product or company. 2. Comprehension: Developing an understanding of what the product is and what it will do for the consumer. 3. Conviction: Developing a mental disposition in the consumer to buy the product. 4. Action: Getting the consumer to purchase the product. Colley argued that advertising objectives should be stated in terms of concrete and measurable communications task, specify a target audience, indicate a benchmark starting point and the degree of change sought, and specify a time period for accomplishing the objectives. According to DAGMAR, the objective must also be measurable. For example, Jet Airways can measure its communications objective by asking airline travellers whether they thought Jet Airways fares were higher than those of competing airlines. Many promotional planners use this model as a basis for setting objectives and assessing the effectiveness of their promotional campaigns. 10.3 Appeals and Execution Styles Once the major selling idea has been agreed upon, the creative team then turns its attention to determining the specific type of appeal and execution style that will be used to carry out the creative concept. A. Advertising Appeals The advertising appeal refers to the basis or approach used in the advertisement to elicit some consumer response or to influence their feelings toward the product, service, or cause. At CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 163 the broadest level, these approaches can be broken down into two categories or classes which are informational/rational appeals and emotional appeals. 1. Informational/rational appeals: These types of appeals focus on the consumer's practical, functional or utilitarian need for the product or service and/or specific reasons for owning a particular brand. Examples of product - or service-related appeals that would fall under the category of rational appeals include: Feature appeals Competitive advantage appeals Favourable price appeals News appeals Product/service popularity appeals B. Emotional Appeals These types of appeals relate to consumers' social and/or psychological needs for purchasing a product or service. Emotional appeals have become very popular in advertising as marketers recognize that many purchase decisions are made on the basis of feelings and emotions since rational, functional-based differentiation is often very difficult. Psychological states or feelings can serve as a basis for emotional appeals. Another reason for using emotional appeals is to influence consumers' interpretations of their product usage experience through the use of transformational advertising. This type of advertising creates feelings, images, meanings and beliefs about the product or service that may be activated when the consumer uses it and thus \"transforms\" their interpretation of the usage experience. 1. Combining rational and emotional appeals: Many purchase decisions are made on the basis of both rational and emotional motives. Thus, rational and emotional appeals may be combined in the advertisement to attempt to influence both types of purchase motives. 2. Additional types of appeals: Other appeal types include reminder advertising and teaser advertising. C. Advertising Execution Creative execution refers to the manner in which an advertising appeal is carried out or presented. A particular advertising appeal can be executed in a variety of ways and a particular means of execution can be applied to a variety of advertising appeals. Some of the more commonly used execution techniques include: CU IDOL SELF LEARNING MATERIAL (SLM)

164 Marketing Management 1. Straight-sell or factual message: This type of execution relies on a straightforward presentation of information about the product or service such as specific attributes or benefits. 2. Scientific/technical evidence: A variation of the straight sell where scientific or technical evidence or information is presented in the ad to support a claim. 3. Demonstration: This type of execution is designed to illustrate the key advantages or benefits of a product or service by showing it in actual use or in some contrived or staged situation. 4. Comparison: This type of execution involves a direct or indirect comparison of a brand against the competition. 5. Testimonials: Many advertisers present their advertising messages in the form of a testimonial whereby a person speak on behalf of the product or service based on his or her personal use of and/or experiences with it. 6. Slice of life: This type of execution is often based on a problem/solution type of format. The ad attempts to portray a real-life situation involving a problem, conflict or situation consumers may face in their daily lives. The ad then focuses on showing how the advertiser's product or service can resolve the problem. Slice-of-life executions are also becoming very common in business-to-business advertising as companies use this approach to demonstrate how their products and services can be used to solve business problems. 7. Animation: This technique used animated characters or scenes drawn by artists or on computer. Animation is often used as an execution technique for advertising targeted at children. Some advertisers have also been Roger Rabbit style ads that mix animation with real people. 8. Personality symbol: This type of execution involves the use of a central character or personality symbol to deliver the advertising message and with which the product or service can be identified. The personality symbol can take the form of a person who is used as a spokesperson, animated characters or even animals. 9. Fantasy: This type of appeal is often used for image advertising by showing an imaginary situation or illusion involving a consumer and the product or service. Cosmetic companies often use fantasy executions although the technique has also been used in advertising for other products such as automobiles and beer. CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 165 10. Dramatization: This execution technique creates a suspenseful situation or scenario in the form of a short story. Dramatizations often use the problem/solution approach as they show how the advertised brand can help resolve a problem. 11. Humor: Humor can be used as the basis for an advertising appeal. However, humor can also be used as a way of executing the message and presenting other types of advertising appeals. 12. Combinations: Many of these execution techniques can be combined in presenting an advertising message. For example, slice-of-life ads are often used to demonstrate a product or make brand comparisons. 10.4 Creative Tactics for Developing Communications Once the creative approach, type of appeal, and execution style has been determined, attention turns to creating the actual advertisement. The design and production of an advertising message involves a number of activities such as writing copy, developing illustrations and other visual elements of the ad and bringing all of the pieces together in a finished product. A. Creative tactics for print advertising There are three basic components of a print ad including the headline, body copy, and the visual elements or illustrations. These elements are brought together through a layout. 1. Headlines: The headline refers to the words in the leading position of the advertisement—those that are likely to be read first or are positioned to draw the most attention. The most important function of a headline is to attract the readers’ attention and make them interested in the remainder of the advertising message. There are various types of headlines including: Direct headlines: Straightforward and informative in terms of the message presented. Indirect headlines: Provoke curiosity and intrigue by using questions, challenges, provocations, and other methods. 2. Subheads: Many ads also contain a main headline and one or more secondary headlines or subheads. These subheads usually appear in a smaller type size than the main headline and are generally larger the type size used for the body copy. They are used to break-up or section off large amount of body copy and highlight key sales points in the ad. CU IDOL SELF LEARNING MATERIAL (SLM)

166 Marketing Management 3. Body copy: The main text portion of a print ad is referred to as the body copy. Body copy content depends on the type of advertising appeal and/or execution style being used. 4. Visual elements: Another major component of a print ad is the visual elements or illustrations. Visual components often dominate print advertising and play a very important role in determining effectiveness. 5. Layout: A layout refers to the physical arrangement of the various parts of the ad including the headline, subheads, illustrations, body copy and any identifying marks. B. Creative Tactics for Television As with print ads, television commercials have several components which must work together to create the right impact and communicate the advertiser's message. 1. Video: The video or visual elements are what is seen on the television screen. Decisions have to be made regarding the main focus of the visual such as the product, the presenter, action sequences, lighting graphics, color and other factors. 2. Audio: The audio portion of a commercial includes several elements such as voice, music and sound effects. Voices may be heard in several ways such as through the direct presentation of a spokesperson or as a dialogue or conversation among people in the commercial. A common method for presenting the audio portion of a commercial is through a voice-over whereby the message is delivered or action on the screen is narrated by the voice of an announcer who is not visible. A trend among major advertisers is to hire celebrities with distinctive voices to do the voice overs for their commercials. 3. Music: A very important part of many television commercials is music which plays various roles and functions such as providing a pleasant background or helping create the appropriate mood or setting. Marketers use popular songs to help deliver their advertising messages. Another important musical element in both television and radio commercials is jingles, which are catchy songs about a product or service that usually carry the advertising theme and a simple message. 4. Planning and production of television commercials: The various elements of a television commercial are brought together in a document known as a script which is a written version of a commercial that provides a detail description of its video and audio content. The script indicates the various audio components of the commercial such as the copy to be spoken by voices, music and sound effects. The video portion of the script provides the visual plan of the commercial. Once the basic script has been conceived, the writer and art director get together to produce a storyboard or a series of drawings used CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 167 to present the visual plan or layout of a proposed commercial. Once the client approves the storyboard, the commercial is ready to move to the production phase. The production process for a commercial actually involves three phases: Pre-production: All the work and activities that occur before the actual filming of a commercial. Production: The period during which the commercial is filmed or videotaped and recorded. Post-production: Activities and work that occur after the commercial has been filmed and recorded. 10.5 Managing the Support Media In addition to the broadcast and print media discussed in the two previous chapters, marketers have a variety of alternative media from which to choose. In fact, the number of support media continues to increase almost daily, with advertisements appearing almost everywhere. In addition to the familiar outdoor ads and transit ads, a number of new media have recently appeared. Parking meters, trash cans, restroom walls, videotapes, sidewalks, and shopping carts are just a few of the many places now carrying ads. These media, often referred to as support media are assuming an increasing role in the media mix. Support media are referred to by several titles, among them alternative media, non-measured media and nontraditional media. Many advertisers, as the top 10 advertising agencies, have increased their use of nontraditional support media, and as new alternatives are developed, this use will continue to grow. 10.6. Out-of-Home Media A variety of out-of-home advertising are available to the marketer. Outdoor billboards and signs, transit ads, station posters, and skywriting are just a few of the alternatives that can be used. A. Outdoor Advertising While one of the oldest advertising mediums, outdoor advertising has recently come under attack by environmentalists, city governments, and the public as a whole. The net result has been a decline in the number of billboards across the nation. At the same time, the outdoor advertising industry continues to grow and be successful as the amount of dollars billed in this medium has increased continuously since 1982. Much of the reason for this success can be attributed to the ability of the industry to become more creative and CU IDOL SELF LEARNING MATERIAL (SLM)

168 Marketing Management innovative through the design of billboards as well as new media such as inflatables, rolling boards and point-of-purchase materials. 1. Advantages of outdoor advertising: Wide coverage of local markets Frequency Geographical flexibility Creativity Ability to create awareness Efficiency Effectiveness Production capabilities 2. Disadvantages include: High waste circulation Limited message capabilities Wearout High cost Measurement problems Image problems B. Additional Outdoor Media As noted, the outdoor advertising industry has been able to remain successful through the development of new outdoor media, as well as innovations in existing ones. Some additional outdoor media of note are aerial advertising, rolling boards, point-of-purchase media and a variety of others such as parking meters, ski-lift poles, etc. C. In-Store Media Advertisers spend crores of rupees to promote their products in supermarkets and other stores with untypical media like displays, banners, and shelf signs. These point of purchase (POP) materials include video displays on shopping carts, kiosks that provide recipes and coupons at counters and cash registers, LED boards, and ads that broadcast over in-house screens. CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 169 D. Audience Measurement Several sources of audience measurement are available to purchasers of outdoor advertising. E. Transit Advertising Another form of out-of-home advertising is transit advertising. While similar to outdoor in the sense that signs and electronic billboards are often employed, transit differs in that these ads are oriented around transportation. Buses, taxis, commuter trains, airplanes, and subways are some of the transit forms employed. 1. Types of transit advertising: Three types of transit advertising are most commonly employed: (a) Inside cards are found on the insides of buses, taxis or commuter trains. (b) Terminal posters are those found on the backs and tops of taxis, and/or on the backs, sides and fronts of buses. (c) Outside posters are found in bus and train stations, airport terminals, and on train platforms. 2. Advantages of transit advertising: Exposure Frequency Timeliness Geographic selectivity Cost 3. Disadvantages of transit advertising: Image factors Reach Waste coverage 4. Audience measurement in transit: The cost basis for transit is similar to that used in outdoor. A major problem with purchasing advertising in this medium is a lack of objective audience measures and means by which to measure the effectiveness of ad placements. CU IDOL SELF LEARNING MATERIAL (SLM)

170 Marketing Management 10.7. Promotional Products Marketing The Promotional Products Association International defines promotional products marketing as: “The advertising or promotional medium or method that uses promotional products such as ad specialties, premiums, business gifts, awards, prizes or commemoratives.” This definition succeeds the older definition of specialty advertising: “an advertising, sales promotion and motivational communications medium which employs useful articles of merchandise imprinted with an advertiser’s name, message, or logo.” Over 15,000 advertising specialties such as ball-point pens, matchbook covers, mugs, or expensive gift items have been used to account for over a thousand rupees per year in expenditures in this medium. A. Advantages and Disadvantages of Promotional Products Marketing Because of the wide variety of forms that this form of advertising might assume this medium offers advertisers a variety of advantages. Selectivity, flexibility, frequency, low cost, goodwill and the ability to supplement other media are just a few of these. At the same time, image problems brought on by the perception that many of these specialty ad forms are little more than junk, and the fact that there are so many different companies employing this medium (leading to saturation) often offset some of the advantages. B. Audience Measurement The Promotional Products Association International (PPAI) is the trade organization of the industry. While no formal audience measurement organizations or effectiveness measures currently exist, this organization continues to originate and support research in these areas. C. Yellow Pages Advertising One of the more commonly utilized—and overlooked—forms of advertising is the Yellow Pages. Over 200 publishers produce more than 6,500 Yellow Pages throughout the U.S. A variety of Yellow Pages exists including specialized directories, audiotex, interactive and other services. 1. Advantages of Yellow Pages Advertising Wide availability Action-oriented ads Costs High frequency of exposure Non-intrusiveness CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 171 2. Disadvantages include: Highly fragmented markets Timeliness Lack of creativity Long lead times for ad placements 10.8 Other Media Almost every day a new advertising medium seems to emerge. Ads are appearing on restroom walls, in elevators, on movies and videotapes, and seemingly everywhere a message can be fit. Some of the more common and more pervasive ones are discussed here. A. Advertising in Movie Theaters and on Videotapes Two of the fastest growing advertising media are ads at the movies and on rental movie videotapes/DVD’s. While the former has come under fire from movie makers and consumers, the latter are being used more and more for the advertising of new movies and videotapes as well as products and/or services. Advantages and disadvantages of movie and videotape/DVD advertising: The text notes that the advantages associated with these forms of advertising include: high exposure, ability to create mood, low costs, high recall, and the avoidance of clutter. Disadvantages may also include cost (relative to some other media) and irritation. It is noted that the latter of these is particularly critical, as strong opposition has been voiced in this regard. B. Product Placements in Movies Whether one considers product placements an advertising form or a form of promotion, no one can argue the fact that this means of getting exposure to a product is on the increase. Ever since the incredible success of Reese’s Pieces (in the movie ET) more and more products are appearing in movie theaters and on television. Ashton Martin car in James Bond movies is example. 1. Advantages and disadvantages of product placements: There are a variety of advantages and disadvantages associated with this product placements. These include the advantages of: high exposure, high frequency, ability to support other media, high source association, low relative cost, and high recall. Disadvantages include: high absolute cost, low exposure time, limited message appeals, lack of control, and negative public reaction. CU IDOL SELF LEARNING MATERIAL (SLM)

172 Marketing Management 2. Audience measurement: No formal audience measurement organizations exist, nor is there specific effectiveness criteria established. The limited amount of data that is available in these areas is a result of specific primary studies that have been conducted. C. In-flight Advertising In-flight television commercials are one of the more rapidly growing mediums in use. Advantages and Disadvantages of In-flight Advertising: Advantages of in-flight advertising include a desirable audience (high income), a captive audience, and low cost and good segmentation capabilities. Disadvantages include: irritation, limited availability of media time, lack of attention, and wearout. 10.9 Summary In developing an effective advertising programme, marketing managers should always start by identifying the target audience. The communication process has a five step process called the Five M’s of Advertising. It includes: mission, money, message, media and measurement. The first step consists of setting the advertising objectives in tune with the sales goals. The company should be careful to spend only the right amount of money for advertising; not more, not less. Five specific factors are to be considered when setting the advertising budget. Choosing the right advertising message requires four major steps — message generation, message evaluation and selection, message execution, and review of social responsibility. The next step in the development of an advertising programme is choosing the appropriate channels of communication. The final stage of the process of developing an advertising programme involves evaluation or measurement. After the message is sent to the target audience, the marketer has to evaluate its efficacy. Evaluation of advertising efficiency is done based on two types of research studies – Communication effect research and Sales effect research. Advertising execution styles include rational, emotional, humorous, fear related and other appeals. Support media like out of store, in store, out of home, transit etc are also popular with companies. All have advantages and disadvantages. 10.10 Key Words/Abbreviations Media: Communications outlet Message: Information communicated Support media: Hoardings, wall paintings, blimps, etc. CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 173 Transit advertisement: Ads in trains, buses and planes Transformational advertisement: Which attempt to transform customers Story board: Pictorial framework of commercial Advertising script: Written framework of ad Reach, frequency and impact: No of people reached, how many times, response Jingles: Musical ads. Headline: Top heading of an ad. Body copy: Middle portion descriptive information part POP display: Point of purchase display Product placement: Introducing products through movies and TV serials The five M’s of advertising: Mission – Money – Message – Media – measurement Target audience: Intended segment of consumers Execution styles: Different ways of communications Creative Strategy: Innovations and novel ideas Creative tactics: Implementing the strategy Promotional products marketing: Gift articles with company logo DAGMAR: Defining advertising goals for measuring advertising results Buzz marketing: A publicity stunt by creating noise or buzz Brand ambassadors: Brand endorsers/celebrities 10.11 Learning Activity 1. Identify 5 advertisements which use unique execution styles. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 2 Select 5 print advertisements from the newspaper and identify their headline, message, body copy and appeals used. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- CU IDOL SELF LEARNING MATERIAL (SLM)

174 Marketing Management 3. Identify 4 comparative advertisements and describe their method of conveying the intended message. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 4. Identify 4 advertising campaigns that used humour appeal and discuss their success factors. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 5. Take the examples of advertisement for a car, a motorbike and a laptop and identify how they use rational appeal in their communication. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 10.12 Unit End Questions (MCQ and Descriptive) A. Descriptive Types Questions 1. The process of developing marketing communications is a challenging job. Elaborate. 2. Explain the different advertising appeals and execution styles used by marketing companies giving examples for each. 3. Discuss the nature and role of support media in marketing communications and its different types, using examples. 4. Print media has advantages and disadvantages. Justify. 5. Discuss the nature and role of TV as a media and its advantages and disadvantages. 6. Elaborate the need and nature of scripts and story boards in advertising. 7. Dabur Chywanprash launched the ‘Swastha Chetna Abhiyan’ to drive awareness and benefits of Chywanprash usage. Demonstrate the various steps involved in developing effective communication strategy for the same. 8. “One of the most difficult marketing decisions is determining the total marketing communications budget.” Elaborate. 9. Illustrate the various factors to be considered while designing an effective communication program? CU IDOL SELF LEARNING MATERIAL (SLM)

Managing Non-Personal Communication Channels 175 B. Multiple Choice/Objective Type Questions 1. Support media consists of (a) Out of home media (b) Wall paintings/hoardings (c) Transit advertising (d) Sky writing (e) All of above 2. Media includes (a) Print (b) TV (c) Outdoor (d) Transit (e) All of above 3. Advertising specialities include (a) Printed leaflets (b) Discount coupons (c) Gift items (d) Product placement (e) All of above 4. Transit advertisements are found in (a) Magazines (b) TV and radio broadcast (c) Buses and trains (d) Movie theatres (e) All of the above Ans.: 1. (e), 2. (e), 3. (c), 4. (c). 10.13 References Text Books Dr. K.Karunakaran, Marketing Management, HPH Reference Books Belch and Belch, Advertising and Promotion, 4 Ed., Tata McGraw Hill. Web Resources 1. www.adforum.com 2. www.adcritic.com CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 11 DISTRIBUTION MANAGEMENT Structure: 11.0 Learning Objectives 11.1 Introduction 11.2 Need and importance of channels 11.3 Selection of Channel Members and Design of Channel 11.4 Channel Motivation using Channel Power 11.5 Channel Conflicts and Control 11.6 Summary 11.7 Key Words/Abbreviations 11.8 Learning Activity 11.9 Unit End Questions (MCQ and Descriptive) 11.10 References 11.0 Learning Objectives After studying this unit you will be able to: Understand the need for marketing channels Learn the selection process of channels Familiarise with the control and motivation procedure of channels 11.1 Introduction The operational success of a company depends not only on how well it performs in terms of production and sales but also on how well its entire marketing channels of distribution compete

Distribution Management 177 with competitors’ channels. A company may produce the best products but still not do well if its dealers perform poorly in sales and service against the competitors’ dealers. A channel of distribution (or marketing channel) is “a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.” (Philip Kotler). 11.2 Need and Importance of Channels Marketing channels play an important role in marketing, because of many vital functions performed by them. Effective and well-managed channels provide sound competitive advantage to companies. The necessity for channels of distribution arises because the product has to move to the customer from the factory, in the right quantity, at the right time, and at the right place. Very few manufacturers sell their goods directly to the final customers. Instead, the majority uses marketing channels or intermediaries to move their products from the factory to the market. The utilisation of channel intermediaries with their specialization in marketing activities streamlines activities for manufacturers and also benefit customers. Various types of channel members exist , all of them contributing in their own way. A manufacturer’s decisions on channels of distribution directly affect all other marketing decisions. Through their contacts, experience, specialization and sale of operation, channel members normally offer the company more than it can achieve on its own. Marketing channels transform the bulk assortments of products made by manufacturers into small assortments wanted by customers. Intermediaries buy large quantities from many producers and break them down into smaller lots and broader assortments, thereby matching supply and demand. In making products and services available to customers, channel members add value by bridging the time, place and possession gaps that separate goods and services from those who would buy and use them. Each of them add a utility for customers as shown below: CU IDOL SELF LEARNING MATERIAL (SLM)

178 Marketing Management Time utility: The channels make the goods and services available to customers at the time they need them. Place utility: The channels arrange for transport and storage of goods at convenient places where customers can buy them. Possession utility: The channel members arrange for transfer of ownership (possession) of goods from seller to the buyer. 11.3 Selection or Design of Channel The channel selection or design process is an exercise which is very vital for companies. In the process of designing channels, companies have to study and compromise between what is ideal and what is practicable. The different steps involved in the channel design process are as below: 1. Determining the channel objectives 2. Identifying functions 3. Matching channel design to product attributes 4. Evaluating legal aspects and the distribution environment 5. Assessing competitors’ channel design 6. Assessing company resources and matching channel design to it 7. Final selection of the best design 1. Determining the Channel Objectives Effective channel planning starts with a determination of what is to be achieved by using the channels. The objectives include effective coverage of the target market, efficient and cost- effective distribution, making products available nearest to the consumption points, ensuring uninterrupted sales and prompt customer service. The marketing objectives determine channel objectives which, in turn, determine the channel design. Since channel objectives differ from company to company, their channel designs also differ. For example, Eureka Forbes has only a few products and since they have the objective of direct marketing, dealers are not used at all. FMCG manufacturers like Hindustan Unilever Ltd. (HUL) and Procter & Gamble have many products which are to be made available nearer to the consumption points, and hence use wholesalers and retailers. CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Management 179 2. Identifying Functions The functions to be performed by the channel are to be identified next. Out of the various functions listed out earlier in this chapter, like providing information, promotion, contact, breaking bulk, etc., the functions expected of the channel have to be decided. 3. Matching Channel Design to Product Attributes Products differ from each other and hence require different channel systems. The channel system that is best suitable for a product should be selected. Industrial and consumer products, for example, are different and need different channels. Some industrial products need specialist distributors. Even within the category of consumer goods, different sub-categories such as convenience goods, shopping goods, and speciality goods need different channel systems. 4. Evaluating Legal Aspects and the Distribution Environment The distribution environment in the country or territory has to be reckoned while deciding on the channel design. The proposed channel should be compatible with the features of the distribution environment, including the trade-related environment. 5. Assessing Competitors’ Channel Design The channel patterns of competitors should be evaluated before deciding on channel design. The strength and weaknesses of competitor’s channels have to be assessed in order to get an edge over them. 6. Assessing Company Resources and Matching Channel Design to it Channel decision is influenced by the availability of resources in the company. While a company with limited resources may opt for conventional channels, companies with larger resources will opt for wider distribution channels, with company showrooms, on retail outlet on the one hand and conventional route like wholesalers and retailers on the other. For example, leading textile companies like Reliance Industries, Bombay Dyeing and Mafatlal have opted for two-way channel design, one their own and the other conventional. 7. Evaluation and Final Selection of the Best Design After the various alternatives are evaluated, the company chooses the best among them. Each alternative needs to be evaluated against economic, control and adaptive criteria. Economic criteria: Each channel alternative will provide a different level of sales and costs. The first issue is whether more sales will be generated through a company sales force or through a sales agency. The next step is to estimate the costs of selling different volumes through each channel. CU IDOL SELF LEARNING MATERIAL (SLM)

180 Marketing Management Control criteria: The evaluation must be broadened to consider control issues with the channels. When intermediaries are appointed, they are given some control over the marketing of the product. It will be ideal for the company to keep as much control as possible on its marketing. Adaptive criteria: Normally channels involve long-term commitments, but the company wants to keep the channel flexible so as to make it adaptable to environmental changes. This adaptability is assessed using the adaptive criteria. After a company has chosen a channel alternative, individual middlemen must be selected, trained, motivated and evaluated. While selecting the channel members, the company should consider the member’s experience in business, other product lines carried, growth and profit record, financial strength, and business reputation. Next, the company must plan and organize adequate training programmes for the channel members. Channel motivation is done to improve their performance and behaviour using ‘channel power’ (coercive, reward, referent, etc.). The company has to evaluate the channel members’ performance against predetermined standards. Channel modification must be performed periodically because of the continuously changing marketing environment. The company has to evaluate adding or dropping individual channels and possibly modifying the whole channel. 11.4. Channel Motivation with Channel Power An important activity in channel management is motivating the channel members. The company should be able to motivate the distributors to achieve high-level performance. For doing this, companies have to use the channel power. Channel power is the ability of a company to alter channel members’ behaviour so that they take actions they would not have taken otherwise. Marketing organizations can use different types of channel power to motivate and ensure the co- operation of channel members. They are as follows: 1. Coercive Power: This is a method where a company threatens to withdraw a resource or terminate a relationship (dealership) if intermediaries fail to co-operate. This is a very effective power, but its use may produce resentment and can generate conflict. Sometimes the channel members may organize cartels and countervailing power against the company. 2. Reward Power: This is a positive action where the company offers the dealers some extra benefit for performing specific actions or functions satisfactorily. Reward power always produces better results than coercive power. CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Management 181 3. Legitimate Power: Here, the company requests for a behaviour and performance based on a contractual obligation from the channel members. This will have legal binding. Legitimate power will work when the dealers recognise a company as a legitimate market leader. 4. Expert power: Some companies have special knowledge, which is valued and respected by the dealers. This expertise can be used to motivate the intermediaries to perform well. 5. Referent Power: In the case of some market leaders, the companies are very highly respected that the channel members are proved to be associated with them. Referent power is high for companies like IBM, Philips, Nokia, Samsung, Unilever and P & G. 11.5 Channel Conflicts and Control Disagreement among marketing channel members on goals and roles – who should do what and for what rewards – leads to channel conflict. Ideally, all channel members should work together smoothly, understanding their roles and channel goals. This does not always happen. Conflicts are of different types. Horizontal conflict happens among dealers at the same level of the channel. For example, some fertilizer dealers may complain that the other groups of dealers are selling at a discount or selling outside their allotted territories, which affect their sales. Vertical conflict is conflicts between different levels of the same channel. Franchisees of Hyundai Motors will complain if Hyundai opens company’s own showrooms and starts selling directly. Though some amount of conflict in the channel may be good for healthy competition, severe or prolonged conflict will be harmful. Companies must, therefore, manage channel conflicts or keep them from getting out of hand. Marketing Logistics Logistics of physical distribution involves planning, implementing and controlling the physical flow of goods and services, and related information from points of origin to points of consumption to meet customer requirements at a profit. In short, it involves getting the right product to the right customer in the right place at the right time. Supply Chain Management Marketing logistics involves entire supply chain management – managing upstream (raw materials and supplies from suppliers to factory) and downstream (finished products from factory CU IDOL SELF LEARNING MATERIAL (SLM)

182 Marketing Management to dealers and consumers) value added flows of materials, final goods and related information among suppliers, the company, resellers and final consumers. The logistic manager’s task is to co-ordinate activities of suppliers, purchasing agents, marketers, channel members, and customers. These activities include forecasting, managing information systems, purchasing, production planning, order processing. 11.6 Summary A channel of distribution (or marketing channel) is “a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.” Marketing channels fulfil the need to bridge the gap between manufacturer and consumers. Channels provide time, place and possession utility for customers. The channel selection or design process is an exercise which is very vital for companies. In the process of designing channels, companies have to study and compromise between what is ideal and what is practicable. Selection of channel members and designing marketing channel are important decision areas in marketing management. After a company has chosen a channel alternative, individual middlemen must be selected, trained, motivated and evaluated. While selecting the channel members, the company should consider the member’s experience in business, other product lines carried, growth and profit record, financial strength, and business reputation. Next, the company must plan and organise adequate training programmes for the channel members. Channel motivation is done to improve their performance and behaviour using ‘channel power’ (coercive, reward, referent, etc.). The company has to evaluate the channel members’ performance against predetermined standards. Channel modification must be performed periodically because of the continuously changing marketing environment. The company has to evaluate adding or dropping individual channels and possibly modifying the whole channel. Disagreement among marketing channel members on goals and roles – who should do what and for what rewards – leads to channel conflict. Ideally, all channel members should work together smoothly, understanding their roles and channel goals. 11.7 Key Words/Abbreviations Marketing channel: intermediaries Time, place and possession utility: Value addition by distributers Channel motivation: Encouraging channel members to increase sales Evaluation: Performance appraisal CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Management 183 Channel power: Control over channel members Logistics: Storage and transportation Supply chain management: Inwards and outwards movement of supplies/ products Channel design: Deciding the type of channel Intermediaries: Dealers Channel evaluation: Economic criteria, control criteria, adaptive criteria: Coercive power: Controlling dealers through threats Reward power: Controlling dealers with rewards Referent power: Status symbol of having dealership of prestigious company Legitimate power: Control based on legal angle Expert power: Control based on technical expertise Channel conflict: Differences of opinion between dealers and company Horizontal: Vertical conflicts- dealer to dealer/dealer to company conflicts 11.8 Learning Activity 1. Take the example of 4 FMCG companies and study their channel design. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 2. Identify at least 4 cases of channel conflicts that happened in India recently and explain how they were solved. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 3. Using examples of 5 companies, identify how their channels provide the 3 utilities to consumers. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 4. Identify the channel objectives of 4 FMCG companies. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- CU IDOL SELF LEARNING MATERIAL (SLM)

184 Marketing Management 5. Identify the channel objectives of 4 consumer durable companies. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 11.9 Unit End Questions (MCQ and Descriptive) A. Descriptive Types Questions 1. Marketing channels play a vital role in the success of a company. Elaborate. 2. Discuss the need and scope of channel powers and how they are used to motivate channel members. 3. Elaborate the necessity for evaluating channel members and the criteria used for the evaluation. 4. Channel conflicts can impede the smooth functioning of marketing activities. Discuss the different types of conflicts and how to solve them. 5. Channel design is a challenging management decision area involving several steps. Elaborate. 6. Explain in detail how supply chain management is different from logistics management. 7. Analyze the various factors that a marketer has to keep in mind while designing the channels of distribution for customers. 8. Think of your favorite retailers. Critically analyze their method of integrating their channel system? 9. “Channel image does not really affect the brand image of product.” Do you agree with the statement? Support your views with the help of relevant examples. B. Multiple Choice/Objective Type Questions 1. Channels are evaluated using (a) Economic criteria (b) Control criteria (c) Adaptive criteria (d) All of above 2. Channel power consists of (a) Coercive power (b) Reward power (c) Referral power (d) All of above CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Management 185 3. Channel conflict happens when (a) Channel members perform well (b) Channel members don’t make profit (c) Channel members disagree with company (d) All of above 4. Logistics involves (a) Buying raw materials (b) Logical reasoning (c) Transferring salesforce (d) Transport/storage Ans.: 1. (d), 2. (d), 3. (c), 4. (c). 11.10 References Text Books Dr.K.Karunakaran, Marketing Management, HPH Reference Books Philip Kotler, Marketing Management, Pearson, PHI Web Resources 1. https/www. journals.elsevier.com 2. https//www.managementstudyguide.com CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 12 DISTRIBUTION CHANNEL DECISIONS Structure: 12.0 Learning Objectives 12.1 Introduction 12.2 Functions of Channels 12.3 Channel Levels 12.4 Types of Intermediaries and Number 12.5 Retailing – Types of Retailing 12.6 Wholesaling – Types and Service 12.7 Vertical and Horizontal Marketing Systems 12.8 Multi-channel Marketing Systems 12.9 Network Marketing 12.10 Summary 12.11 Key Words/Abbreviations 12.12 Learning Activity 12.13 Unit End Questions (MCQ and Descriptive) 12.14 References 12.0 Learning Objectives After studying this unit you will be able to: Learn about the types of intermediaries Understand channel levels Learn the functions of intermediaries Familiarise with the types and services of retailers & wholesalers

Distribution Channel Decisions 187 12.1 Introduction In this unit you will be learning about the major types of intermediaries and the channel levels. You will also understand the functions of channel members. Also, you will familiarise with the nature and roles of retailers and wholesalers. Then you will study the marketing systems like vertical and horizontal and also multi-channel marketing and network marketing. 12.2 Functions of Channels Members of the marketing channel perform many key functions. Basically, they ensure physical distribution efficiency by bringing together the manufacturer and the customer in a cost- effective manner. 1. Provide Market Information Channels provide market intelligence and other information gathered from the market, to the manufacturers. Since they are in constant touch with the customers, they feel the pulse of the market and provide accurate information about market condition, trends, consumer preferences, changing tastes, competitors’ activities, etc., which helps in planning market strategies. 2. Promotion Channels help the manufacturer by taking on the job of promotion. They develop and spread persuasive communications about a product to customers. Many retailers arrange window displays, send direct mail to prospects, depute salesmen to demonstrate products at residences and distribute product leaflets. 3. Contacts Channels help by reducing the number of contacts needed for reaching consumers. No manufacturer can economically contact all the customers. The intermediaries find the customers and do the communication and selling to them. They use their own salesmen to contact prospects and do personal selling. 4. Breaking Bulk Manufacturers produce and supply many products in ‘bulk’, but customers need them in small sizes. Channels break the bulk and meet the small size needs of individual consumers. They also carry out grading and packaging in small lots according to the customer’s requirements. For example, provisions like rice, sugar, dal, atta, etc., are purchased by supermarkets in bulk (in tons) and packed in small sizes of ½ kg, 1 kg, or 2 kg, and sold. CU IDOL SELF LEARNING MATERIAL (SLM)

188 Marketing Management 5. Supply in Assortments Consumers need an assortment of various products from various companies. Channels do the job of combining products manufactured by different manufacturers and offer them in assortments that are convenient to customers. This function involves ‘matching segments of supply with segments of demand’. For example, a consumer may want Lux soap, Tide detergent, Colgate toothpaste, Bru coffee, and Horlicks. The dealer procures all this from different manufacturers and builds up an assortment. 6. Price Negotiation Channel members conduct price negotiations with buyers on behalf of the manufacturers and assist in reaching an agreement on price and other terms of the offer which are acceptable to both buyer and producer. For example, manufacturers would have indicated a discount rate of 10-20% on maximum retail price for a product; the dealer negotiates with the consumer and fixes the discount within that range. 7. Physical Distribution Some of the physical distribution functions like transportation, handling, warehousing, subdistribution, order processing and inventory management are also carried out by marketing channels. They often taken delivery of products ex factory in bulk and redistribute to subdealers in small lots as per requirement. 8. Risk Taking Channels absorb most of the business risks, especially the risk of failure to sell goods, product obsolescence, or changes in the prices of the goods. Products can be damaged in transit, or in storage or deteriorate in quality before sale. This risk is borne by dealers. 9. Financing Channels help by extending credit to customers and ensuring sales. Also, by maintaining inventories of products for manufacturers, they reduce their working capital requirements. For example, in cement, paint and fertilizers, dealers often buy on cash and extend credit supplies to customers. They also buy in bulk and store the products in their godowns. 10. Selling Marketing channel members promote products to potential customers. They help in introducing and establishing new products in the market. Many buyers depend on the recommendations of the dealers. Other than persuasive selling, the channel also helps by CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Channel Decisions 189 providing pre-sale and after-sale service to the customers. Dealers also assist through merchandising, especially Point of Purchase (PoP) displays to attract customers. 11. Flows of Distribution Marketing channels handle and take care of all the flows involved in distribution – the physical flow of products, the title or ownership flow, the risk flow, the negotiation flow, the financing or payment flow, the information flow and the promotion flow. Some of these flows are forward, some backward and others are a both-ways process. For example, products flow forward from the manufacturers to customers through distribution channels; the title and ownership also flow forward; credit or financing flows forward, while payments flow backwards to manufacturers; market information and product information flow both ways; and promotion flows forward. Channels of distribution acquire their importance by virtue of the functions they perform as explained above. 12.3. Channel Levels A channel level is a distinctive layer or tier of marketing intermediary which functions as a channel member, doing fully or partly the work of bringing products and their ownership closer to the customers. The number of intermediary levels indicates the ‘length’ of a channel. The channel level is short if there is only one intermediary and long if there are more levels. Some alternative channel types used by various companies are given below. Alternative Channel Levels A zero level channel consists of the manufacturer selling directly to the consumers. It is also known as direct marketing channel. Three main means of direct marketing are door-to-door, mail order and manufacturer’s own stores. Example: Eureka Forbes sells Aqua Guard water purifier on a door-to-door basis. Bata shoes, Raymond suiting, and Titan watches are available through the manufacturers’ showrooms. A one level channel consists of one selling intermediary, i.e., the retailer in consumer markets. E.g.: Modern Bread sold through provision stores. A two-level channel consists of two members, i.e., the wholesaler as well as the retailer in consumer markets. E.g.: HLL, P & G soaps, detergents, etc. A three-level channel will contain three intermediaries, i.e., wholesaler, jobber and retailer. E.g.: Philips appliances – C&F Agents, distributors, retailers. These three channel types are also known as indirect marketing channels. CU IDOL SELF LEARNING MATERIAL (SLM)

190 Marketing Management 12.4. Types of Intermediaries and Number A company should evaluate the various types of intermediaries available to carry out its channel work, and decide on the best. The company can expand direct sales force, or find industrial distributors. Companies have to decide on the number of middlemen to use at each channel level. Three strategies are available to them. They are: 1. Intensive distribution: Stocking the products in as many outlets as possible. Producers of convenience products use this strategy. E.g.: Toothpaste, soaps, cigarettes, Coke, Pepsi. 2. Exclusive distribution: Only limited number of dealers granted exclusive rights of distribution in a territory. E.g.: Hyundai, Maruti cars. 3. Selective distribution: Appointing more than one, but less than all the dealers willing to carry a product. Consumer durables like television, fridge, washing machines and grinders are distributed thus. Adequate market coverage with more control and less cost is possible in such a system. 12.5. Retailing Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal non-business use. Any institution that does this selling – whether a manufacturer, wholesaler or retailer – is doing retailing. A retailer is any business enterprise whose sales volume primarily comes from retailing. Types of Retailing Retailers can be classified based on the following characteristics: 1. Amount of service. 2. Product lines. 3. Relative prices charged. 4. How they are organized. CU IDOL SELF LEARNING MATERIAL (SLM)

Distribution Channel Decisions 191 1. Amount of Service Various types of products require varying amounts of service, and customer service preferences vary. Based on their service, retailers can be self-service retailers (supermarkets), limited-service retailers (shopping goods), and full-service retailers (speciality stores). 2. Product Lines Classification of retailers can also be done by the length and breadth of their product assortments. Speciality stores carry narrow product lines with deep assortments within those lines. Department stores carry a wide variety of product lines, and each line is operated as a separate department. Supermarkets are large low cost, low margin, high volume self-service stores that carry a wide variety of food, laundry and household products. Convenience stores are small stores located near residential areas, open long hours, seven days a week and carry a limited line of high turnover convenience goods. A Superstore is a store much larger than a regular supermarket, and it carries a large assortment of routinely purchased food and non-food items and offers services such as dry cleaning, post offices, cheque cashing, bill paying, lunch and fast food counters, car care and even pet care. Of late, superstores have been growing in popularity and developing into giant speciality stores also called Category Killers. They carry a very deep assortment of a particular line and are staffed by knowledgeable employees. They cover a range of items like toys, books, electronics, furnishing, sports goods, etc. Hypermarkets are huge superstores or shopping malls providing a large variety of merchandise and entertainment facility to customers. Spencer Plaza in Chennai, Big Bazaar and Forum in Bangalore and Crossroads in Mumbai are examples. There are also retailers whose product line is actually a service. Service retailers can be hotels, banks, airlines, hospitals, bus service, cinema theatres, restaurants and fast food centres (like McDonald’s, Pizza Hut, Domino’s). 3. Relative Prices Retailers can also be classified according to the prices they charge. Most retailers charge regular prices and offer normal quality goods and customer service. Others offer higher quality goods and service at higher prices. Discount stores sell standard goods at lower prices by CU IDOL SELF LEARNING MATERIAL (SLM)

192 Marketing Management accepting lower margins and selling higher volumes. Off-price retailers buy at less than regular wholesale prices and charge consumers less than retail. Factory outlets are off-price retailing operations that are owned and operated by a manufacturer that normally carry the manufacturer’s surplus, discontinued or seconds goods. 4. How they are Organized An increasing number of retail stores are banding together into a corporate or contractual organization. Corporate chain stores are two or more outlets that are commonly owned and controlled and sell similar lines of products and have centralized buying. Voluntary chains are wholesaler-sponsored groups of retailers. Retailer co-operatives are independent retailers who set up a central buying organization and conduct a joint promotion effort. Consumer cooperatives are retail firms owned by their member consumers. They are started by community residents who feel that local traders are not serving them well. A franchise firm is a contractual association between a franchiser (manufacturer or wholesaler) and franchisees (independent businessmen). Merchandising conglomerates are corporations that combine several different retailing firms under central ownership. Retailer Marketing Decisions Target Market: A retailer’s most important decision concerns the target market. Until the target market is defined and profiled, the retailer cannot make consistent decisions on product assortment, store decor, and advertising messages and media, price levels and so on. A retailer should carry out periodic marketing research to check that it is satisfying its target customers. Price Decision: The retailer’s prices are a key competitive factor and reflect the quality of goods carried and services offered. Product Assortment and Services: Retailers have to decide on the following major ‘product variables’: Product assortment must match the shopping expectations of the target market. Services mix is one of the key tools of non-price competition for differentiating one store from another. The typical retail services are pre-purchase services like accepting telephone or mail orders, advertising, display, fashion shows, post-purchase services like delivery, gift wrapping, engraving, ancillary services like cheque cashing, free parking, repairs, restaurants, credit etc. The store’s atmosphere should be congenial to the target market. Promotion Decision: Retailers advertise in newspapers, magazines, radio and TV. It is supplemented by handbills and direct mail, store demonstrations, grand prizes, etc. CU IDOL SELF LEARNING MATERIAL (SLM)