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CHAPTER

17 Promotional Planning

LEARNING OBJECTIVES

By studying this chapter, you should be able to…

17-1 Describe the communication model and the factors that determine a promotional mix.

17-2 Explain methods of determining the appropriate level of promotional expenditures.

17-3 Explain how the Internet and social media are changing promotional practices.

17-4 Describe personal selling activities. 17-5 Identify advertising options for a small business. 17-6 Discuss the use of sales promotional tools.

INTRODUCTION

• Promotion – Marketing communications that inform and persuade consumers.

17-1 PROMOTION IS COMMUNICATION

• The basic communication model involves a sender, a message, a channel, and a receiver.

• An effective promotional strategy will take into account: • The promotional mix. • The costs of promotion. • The characteristics of the product. • Learning from competitors. • Listening to customers.

17-1a The Promotional Mix

• The promotional efforts of a small firm can encompass nonpersonal (advertising), personal (personal selling), combined (social media), and special (sales promotion) forms of communication. • A business combines these efforts in a promotional mix.

• Promotional mix – A blend of nonpersonal, personal, combined, and special forms of communication aimed at a target market.

• The particular mix of the various promotional methods— advertising, personal selling, social media, and sales promotional tools—is determined by many factors, one of which is geography. • A widely dispersed market generally requires mass coverage through

advertising or social media. • If the market is local or if the number of customers is relatively small,

personal selling and point-of-display promotion may be more feasible.

17-1b The Costs of Promotion

• Small firms may not select certain forms of promotion, especially time-honored media options, because the costs are just too high.

• The lower costs and more targeted nature of company websites have led many small firms to choose electronic media and social marketing strategies.

17-1c The Characteristics of Your Products

• Personal selling is an effective method for promoting products of high unit value and highly technical products. • Example: Manufacturing machinery and industrial

insulation products. • Nonpersonal advertising is more effective for a

relatively inexpensive item. • Example: Disposable razors.

17-1d Learning from Competitors

• Trying different promotional tactics from those that established companies are using may or may not work. • You may discover that your competitors have

already tried your idea and found that it did not attract buyers.

17-1e Listening to Customers

• Successful communication includes feedback. • Read online comments from customers about your

products and about other businesses to learn why customers are purchasing from them instead of from you.

• Consider meeting with a group of customers from time to time to get suggestions on how you can serve them better.

17-2 DETERMINING THE PROMOTIONAL BUDGET

• Four approaches that small business owners often use to determine the appropriate level of promotional expenditures include the following: 1. Budgeting a fixed percentage of sales. 2. Spending whatever is left over after other

expenses are covered. 3. Spending at the same level as competitors. 4. Determining how much is needed to achieve

objectives.

17-2a Budgeting a Fixed Percentage of Sales

• For small businesses that operate in stable markets with predictable revenue streams, the simplest method of determining how much to budget for promotion is to earmark promotional dollars based on a percentage of sales. • A firm’s own past experiences should be evaluated to

establish a promotion-to-sales ratio. • Example: If 2 percent of sales has historically been spent on

promotion with good results, the firm can safely budget 2 percent of forecasted sales for future promotion.

• A major shortcoming of allocating a percentage of sales is a tendency to spend more on promotion when sales are increasing and less when they are declining.

17-2b Spending Whatever Is Left Over after Other Expenses are Covered

• Spending only what can be spared after other expenses have been covered is a widely used approach to promotional budgeting. • This is sometimes called the “all you can afford”

method.

17-2c Spending at the Same Level as Competitors

• Spending as much as the competition does is a way to react to short-run promotional tactics of competitors. • However, if the competitor is a large business, this

method is clearly not feasible. • The biggest pitfall of this method is that it

makes you lazy. • This approach may also result in copying

competitors’ mistakes.

17-2d Determining How Much Is Needed to Achieve Objectives

• The preferred approach to determining promotional expenditures is to decide what it will take to do the job through a comprehensive analysis of the market.

17-3 PROMOTION USING THE INTERNET AND SOCIAL MEDIA

• At the end of 2017, there were over four billion Internet users, representing 54.4 percent of the world’s population.

• Approximately seven out of every ten Americans are connecting with one another via social media sites.

• Companies that fail to recognize how the Internet and social media are changing how people communicate and process information are not likely to prosper.

17-3a The Small Business Website (slide 1 of 3)

• Three critical startup tasks are related to the likely promotional success of a corporate website: 1. Creating a registering a site name. 2. Building a user-friendly site. 3. Promoting the website.

17-3a The Small Business Website (slide 2 of 3)

CREATING A REGISTERING A SITE NAME • The Domain Name System (DNS) allows users to find their way

around the Internet. • Domain names labels have a maximum of 63 characters

preceding the domain designation (.com, .net, .biz, .info., and .org).

• Domain names must begin and end with a letter or a number. • A small business’s website should have a descriptive and

appealing name and be user-friendly.

BUILDING A USER-FRIENDLY WEBSITE • Websites that have slow downloads or do not satisfy customers’

information needs will fail to retain customers.

17.1 Website Design Guidelines (slide 1 of 2)

• Select and register your domain name. Comply with registration rules, and choose a descriptive and user-friendly name.

• Choose a Web host. Determine the primary purpose of your website, and then locate a host that best fits that purpose (types of hosts include e- commerce, blogging, business, and similar options).

• Decide on the layout. Design a site that balances attractiveness with the ability to interact.

• Provide easy navigation. Do not overload a page. Enable users to access any content with as few clicks as possible.

• Stay consistent in style. Inconsistency in headings, fonts, page layouts, color schemes, and terms only confuses visitors and appear amateurish.

• Make sure the website can be accessed by multiple devices. Users may search for your company from smartphones and tablets, as well as desktops and laptops.

17.1 Website Design Guidelines (slide 2 of 2)

• Engage in search engine optimization (SEO). Serious competitors are applying SEO strategies to improve their websites’ visibility. Don’t be left behind.

• Keep the website fresh. Review your site frequently to remove outdated material, introduce new links, experiment with new formats, and make other changes.

• Include a call to action. Think again about your purpose, and invite users to take the action you are seeking.

• Supply contact information. Be sure that visitors know who you are and how to get in touch with you.

Sources: Vitaly Friedman, “10 Principles of Good Website Design,” https://www. smashingmagazine.com/2008/01/10-principles-of-effective-web-design, accessed May 28, 2018; Andy Crestodina, “Web Design Standards: 10 Best Practices on the Top 50 Websites,” https://www.orbitmedia.com/blog/web-design -standards, accessed May 28, 2018; and Denis Pinsky, “11 Website Design and Development Best Practices for 2018,” https://www.forbes.com/sites/denispinsky /2018/02/12/website-design-standards/#5a5b23dcf54f, accessed May 28, 2018.

17-3a The Small Business Website (slide 3 of 3)

PROMOTING THE WEBSITE • Efforts must be taken to promote websites to both existing and

prospective customers, such as: • Including the URL on print promotions, business cards, letterhead,

and packaging. • Designing special direct mail and radio campaigns. • Placing banner advertisements on other websites.

• Making your website as search engine–friendly as possible is a necessary activity to attract visitors to a small business website. • Search engine optimization (SEO) is the process of increasing the

volume and quality of traffic to a particular website.

17-3b Social Media (slide 1 of 2)

• Social media – Social networking and microblogging websites, as well as other means of online communication, where users share personal messages, information, videos, and other content.

• There are many tools available for engaging in marketing and promotion through social media, such as: • E-mail.

• E-mail promotion – Delivery of a firm’s message by electronic mail. • Reciprocal advertising. • Hyperlinks.

• Hyperlink – A word, phrase, or image that a user may click on to go to another part of a document or website or to a new document or website.

17-3b Social Media (slide 2 of 2)

• Blogs. • Blogs – An online journal that offers a writer’s experiences,

opinions, and more. • Apps.

• App – Abbreviation for a small, specialized software program.

• Consumer and commercial uses of mobile devices have exploded in recent years. • In 2018, 95 percent of U.S. adults owned a cell phone, 77 percent

had a smartphone, and over 50 percent owned computer tablets.

• Small business owners must stay informed about social media options, such as quick response (QR) codes. • Quick response (QR) code – A square bar code that

connects to a website, a video, or some other Web content.

17.2 Social Media Marketing Guidelines (slide 1 of 3)

Do’s Don’t • Do tell stories personalizing your

brand and company. Post videos of customers using and enjoying your products.

• Don’t overpromote. Provide more useful information than promotional information.

• Do build relationships with opinion leaders, including journalists. Show an interest in what others are writing about. Bloggers and reporters often ask questions that you or someone in your company may be able to answer.

• Don’t waste your time on the wrong network. Just because “everyone” seems to be on Facebook doesn’t mean that your customer will look there for what you are selling. Make sure you know your target customers and where they get their information.

17.2 Social Media Marketing Guidelines (slide 2 of 3)

Do’s Don’t • Do ask your customers to review the

products they buy from you. People trust the endorsements and recommendations of other customers more than those of someone who works for you.

• Don’t expect your customers to be perfect. They will make spelling errors typing in keywords. Keep common misspellings associated with your product and business in your search engine list to help people find you.

• Do keep it quick and short. Even 280 characters can be too long at times.

• Don’t use hype, slang, or abbreviations. They all look like spam and make your brand look cheap.

17.2 Social Media Marketing Guidelines (slide 3 of 3)

Do’s Don’t • Do take keywords seriously.

Keywords bring people to your site. Emphasize the keywords that your customers search for in your URL, in title tags, and in headings.

• Don’t overinvest in social media at the expense of building content on your own website.

Sources: Based on “Intel Social Media Guidelines,” http://www.intel.com/content/ www/us/en/legal/intel-social-media-guidelines.html, accessed June 2, 2018; Christy Hopkins, “Social Media Policy Template & How to Guide,” https://fitsmall business.com/social-media-policy-template, accessed June 2, 2018; and Ijeoma S. Nwatu, “Simple Social Media Guide for Small Businesses,” https://www.sba. gov/blogs/simple-social-media-guide-small-businesses, accessed June 2, 2018.

17-4 PERSONAL SELLING IN THE SMALL FIRM

• Personal selling – A face-to-face meeting with a customer. • Personal selling includes the activities of both inside

salespeople of retail, wholesale, and service establishments and outside sales representatives, who call on business customers and final consumers.

• In a small business, every person in the company is a salesperson.

• The entrepreneur’s responsibility is to make sure that all employees are prepared to do personal selling.

• For a small business, personal selling is labor intensive. • It takes you and your employees away from the many other

activities that may be critical to keeping your business alive.

17-4a The Importance of Product Knowledge

• Effective selling is built on a foundation of product knowledge. • With thorough knowledge, the salesperson can

explain the product’s or service’s advantages, uses, and limitations, and can educate customers by answering questions and countering objections.

17-4b The Sales Presentation

• The heart of personal selling is the sales presentation to a prospective customer. • A sales presentation is a process involving

prospecting, practicing the presentation, and then making the presentation.

• Prospecting – A systematic process of continually looking for new customers.

• Sources of prospects include: • Personal referrals (such as friends and business contacts). • Impersonal referrals (from media publications, public

records, and directories). • Market-initiated contacts (from telephone calls and surveys). • Customer-initiated contacts (from potential customers

that did not lead to an initial sale).

17.3 Successful Sales Techniques (slide 1 of 2)

• Be honest. Your prospect has to discover only one misrepresentation to lose all trust and confidence in you. You want customers who will come back to you and tell others how good you are.

• Know your audience. Are you talking with the decision maker, or does this person need approval from someone else? How is your product or service used by this customer?

• Know how much time you have, and get to the point. Many people recognize that time is their most valuable asset. Be sure to respect that. If you can’t make clear in the first sentence or two why you’re there, you’ll lose your prospect’s interest.

• Prepare an outline, and rehearse. Be sure to cover all critical issues and logically order your presentation. Then test your ideas on others. Do they understand your message?

• Be relevant, and engage the customer. Ask enough questions to know what is important to your prospective customer and how you can help him or her. Think of your presentation as a conversation. Be a better listener than a speaker.

17.3 Successful Sales Techniques (slide 2 of 2) • Believe in what you are selling, and be enthusiastic. Be able to genuinely

convey what makes your product or service better for the customer than anyone else’s. But recognize that the world’s best salespeople still hear no more than yes. Do not let that burn you out.

• Use visuals. Size, technology requirements, safety, and other issues might limit your ability to show your product. Nevertheless, visual representations help project customers into a situation where they better understand what the product will do for them.

• Get reactions from the prospect. If the prospect does not ask questions, it is a sign that you have not communicated your message successfully. Be ready with questions of your own, questions that will solicit more than yes-or- no answers. You want to know what is preventing you from getting the results that you seek. You want to know how to make the prospect happy.

Sources: Based on Kelley Robertson, “Creating a Powerful Sales Presentation,” http://www.businessknowhow.com/marketing/sales-presentation.htm, accessed June 2, 2018; Kevin Davis, “10 Tips for Winning Sales Presentations,” http://www.businessknowhow.com/marketing/wInslpres.htm, accessed June 2, 2018; and “The Keys to Great Sales Presentations,” http://www.allbusiness.com/ sales/selling-techniques/809-1.html#axzz2jtCKGWqf, accessed June 2, 2018.

17-4c Cost Control in Personal Selling

• Cost considerations are especially important for a new business that generally has very limited resources. • For a small firm, the most cost-efficient mode of

selling may be to use sales or marketing representatives, who are self-employed or work for a company whose purpose is to represent multiple businesses, thereby spreading out the costs of selling. • They will not focus on the business’s products alone, as

the firm’s own employees would, but the company will have to compensate them only as merchandise is actually sold.

17-4d The Compensation of Salespeople (slide 1 of 2)

• Salespeople can be motivated by nonfinancial compensation as well as money.

NONFINANCIAL COMPENSATION • Examples of nonfinancial rewards that motivate many

salespeople include: • Personal recognition (such as an engraved plaque or being

recognized as “Employee of the Week”). • The satisfaction of reaching a sales quota. • Opportunities for promotion, advanced education and training,

and job security.

17-4d The Compensation of Salespeople (slide 2 of 2)

FINANCIAL COMPENSATION • Two basic plans used for financial compensation are:

1. Commissions. • This plan is simple and directly related to productivity—a certain

percentage of sales generated by a salesperson represents his or her commission.

• Such a plan incorporates a strong incentive for sales effort. • Personnel on commission might be less likely to provide follow-

up service or complete after-sales paperwork. 2. Straight salary.

• This form provides salespeople with income security, regardless of sales made.

• Working for a straight salary can potentially reduce a salesperson’s motivation by providing income despite low performance.

17-5 ADVERTISING PRACTICES

• Along with personal selling, advertising is likely to be part of the promotional strategy for your business.

• Common advertising media include: • Television. • Radio. • Magazines. • Newspapers. • Direct mail. • Billboards. • The Internet.

17-5a Advertising Objectives

• Advertising – A strategy to sell by informing, persuading, and reminding customers of the availability or superiority of a firm’s products or services.

• Advertising must always be viewed as a complement to a good product and never as a replacement for a bad product.

• The importance of honesty in advertising cannot be overstated.

• At times, advertising may seem to be a waste of money. • It is expensive and adds little direct value to a product or

service.

17-5b Types of Advertising

• The two basic types of advertising are: 1. Product advertising – A presentation designed to

make potential customers aware of a specific product or service and create a desire for it.

2. Institutional advertising – A presentation of information about a particular firm, designed to enhance the firm’s image in order to make its product advertising more credible and effective.

• Most small business advertising is of the product type.

17-5c Advertising Specialists

• Sources for assistance with advertising include: • Advertising agencies.

• Advertising agencies provide many services, including: • Graphic design, artwork, and printing for specific

advertisements and/or commercials. • Recommendations for media with the greatest “pulling

power” for your product or service. • Copywriting. • Assistance with trade shows and merchandise displays. • Website design and social media management. • Mailing and e-mail list management.

• Suppliers. • Trade associations. • Advertising media.

17-5d Frequency of Advertising

• Advertising should be done regularly, and attempts to stimulate interest in a firm’s products or services should be part of an ongoing promotional process. • One-shot advertisements that are not part of a well-

planned promotional effort lose much of their effectiveness in a short period.

• However, some noncontinuous advertising may be justified, such as advertising to prepare consumers for the acceptance of a new product or advertising for holidays and seasonal events.

17-5e Where to Advertise

• Not everyone is a serious prospect for a business. • Thus, an entrepreneur has to restrict advertising, perhaps by

geography or customer type. • From among the many media available, a small

business owner must choose those that will provide the greatest return for the advertising dollar. • To make an informed selection, entrepreneurs should learn

about the strengths and weaknesses of each medium. • The most appropriate combination of advertising media

depends on the type of business and its current circumstances.

17.4 Advantages and Disadvantages of Major Advertising Media

17-6 SALES PROMOTION

• Sales promotion – An inclusive term for any promotional technique other than personal selling and advertising that stimulates the purchase of a particular product or service.

• For best results, sales promotion typically is used in combination with personal selling and advertising.

• Four widely used promotional tools include: 1. Specialties. 2. Trade show exhibits. 3. Coupons. 4. Publicity.

17-6a Specialties

• Specialty items include calendars, pens, key chains, coffee mugs, and shirts.

• Almost anything can be used as a specialty promotion, as long as each item is imprinted with the firm’s name or other identifying slogan.

• The distinguishing characteristics of specialties are their enduring nature and tangible value. • The key to an effective specialty item is that it lasts. • As functional products, they are worth something to recipients.

• Specialties are personal. • They are distributed directly to the customer in a personal way,

they can be used personally, and they have a personal message.

17-6b Trade Show Exhibits

• Trade show exhibits allow potential customers to get hands-on experience with a product.

• Trade show exhibits are of particular value to manufacturers. • The greatest benefit of these exhibits is the potential cost savings

over personal selling. • The following are tips for making an effective trade show exhibit:

• Check out the trade show’s history. • Apply for a speaking opportunity. • Pick a good location for the booth. • Prepare a professional-looking display. • Have a sufficient quantity of literature on hand. • Bring the right staff. • Have the right giveaways. • Find a partner. • Follow up.

17-6c Coupons

• Coupons have been used as promotional tools for over a hundred years.

• Not only do coupons attract customers to purchase products, they also have value even if they are not used. • A study found that consumers who received but did

not redeem coupons actually increased their purchasing from the stores associated with the coupons.

17-6d Publicity

• Publicity – A promotional strategy that provides visibility for a business at little or no cost.

• Publicity can be used to promote both a product and a firm’s image.

• It is a vital part of public relations for the small business.

• A good publicity program requires regular contacts with the news media.

17-6e When to Use Sales Promotion

• A small firm can use sales promotion to accomplish various objectives. • Small manufacturers can use it to stimulate channel

members—retailers and wholesalers—to market their product.

• Wholesalers can use sales promotion to encourage retailers to buy inventory earlier than they normally would.

• Retailers may be able to persuade customers to make a purchase.

Key Terms advertising app blog e-mail promotion hyperlink institutional advertising personal selling product advertising

promotion promotional mix prospecting publicity quick response (QR) code sales promotion social media

�CHAPTER�17��Promotional Planning
LEARNING OBJECTIVES
INTRODUCTION
17-1 PROMOTION IS COMMUNICATION
17-1a The Promotional Mix
17-1b The Costs of Promotion
17-1c The Characteristics �of Your Products
17-1d Learning from Competitors
17-1e Listening to Customers
17-2 DETERMINING THE PROMOTIONAL BUDGET
17-2a Budgeting a Fixed Percentage of Sales
17-2b Spending Whatever Is Left Over after Other Expenses are Covered
17-2c Spending at the �Same Level as Competitors
17-2d Determining How Much Is Needed to Achieve Objectives
17-3 PROMOTION USING THE INTERNET AND SOCIAL MEDIA
17-3a The Small Business Website (slide 1 of 3)
17-3a The Small Business Website (slide 2 of 3)
17.1 Website Design Guidelines (slide 1 of 2)
17.1 Website Design Guidelines (slide 2 of 2)
17-3a The Small Business Website (slide 3 of 3)
17-3b Social Media (slide 1 of 2)
17-3b Social Media (slide 2 of 2)
17.2 Social Media Marketing Guidelines (slide 1 of 3)
17.2 Social Media Marketing Guidelines (slide 2 of 3)
17.2 Social Media Marketing Guidelines (slide 3 of 3)
17-4 PERSONAL SELLING �IN THE SMALL FIRM
17-4a The Importance of �Product Knowledge
17-4b The Sales Presentation
17.3 Successful Sales Techniques (slide 1 of 2)
17.3 Successful Sales Techniques (slide 2 of 2)
17-4c Cost Control �in Personal Selling
17-4d The Compensation �of Salespeople (slide 1 of 2)
17-4d The Compensation �of Salespeople (slide 2 of 2)
17-5 ADVERTISING PRACTICES
17-5a Advertising Objectives
17-5b Types of Advertising
17-5c Advertising Specialists
17-5d Frequency of Advertising
17-5e Where to Advertise
17.4 Advantages and Disadvantages of Major Advertising Media
17-6 SALES PROMOTION
17-6a Specialties
17-6b Trade Show Exhibits
17-6c Coupons
17-6d Publicity
17-6e When to Use �Sales Promotion
Key Terms
Longenecker19e_PPT_Ch17_Final_31.pdf

�CHAPTER�17��Promotional Planning
LEARNING OBJECTIVES
INTRODUCTION
17-1 PROMOTION IS COMMUNICATION
17-1a The Promotional Mix
17-1b The Costs of Promotion
17-1c The Characteristics �of Your Products
17-1d Learning from Competitors
17-1e Listening to Customers
17-2 DETERMINING THE PROMOTIONAL BUDGET
17-2a Budgeting a Fixed Percentage of Sales
17-2b Spending Whatever Is Left Over after Other Expenses are Covered
17-2c Spending at the �Same Level as Competitors
17-2d Determining How Much Is Needed to Achieve Objectives
17-3 PROMOTION USING THE INTERNET AND SOCIAL MEDIA
17-3a The Small Business Website (slide 1 of 3)
17-3a The Small Business Website (slide 2 of 3)
17.1 Website Design Guidelines (slide 1 of 2)
17.1 Website Design Guidelines (slide 2 of 2)
17-3a The Small Business Website (slide 3 of 3)
17-3b Social Media (slide 1 of 2)
17-3b Social Media (slide 2 of 2)
17.2 Social Media Marketing Guidelines (slide 1 of 3)
17.2 Social Media Marketing Guidelines (slide 2 of 3)
17.2 Social Media Marketing Guidelines (slide 3 of 3)
17-4 PERSONAL SELLING �IN THE SMALL FIRM
17-4a The Importance of �Product Knowledge
17-4b The Sales Presentation
17.3 Successful Sales Techniques (slide 1 of 2)
17.3 Successful Sales Techniques (slide 2 of 2)
17-4c Cost Control �in Personal Selling
17-4d The Compensation �of Salespeople (slide 1 of 2)
17-4d The Compensation �of Salespeople (slide 2 of 2)
17-5 ADVERTISING PRACTICES
17-5a Advertising Objectives
17-5b Types of Advertising
17-5c Advertising Specialists
17-5d Frequency of Advertising
17-5e Where to Advertise
17.4 Advantages and Disadvantages of Major Advertising Media
17-6 SALES PROMOTION
17-6a Specialties
17-6b Trade Show Exhibits
17-6c Coupons
17-6d Publicity
17-6e When to Use �Sales Promotion
Key Terms