Business Marketing Communications: Advertising and Sales Promotion

• Introduction: • Communication with existing and potential customer is vital for firm’s success• The benefits, problem solution and cost efficiencies of those products must be effectively

communicated to everyone who are influencers• Due to technical complexity of industrial products, number of potential buyers are small and

extensive negotiation process, the primary communication vehicle in industrial market is SALESPERSON

• Non-personal communication like advertising, category, internet, trade show have a unique effect

• To maximize return on promotional spending, industrial firm are developing integrated marketing campaigns that align marketing communications strategies to strategic objectives

• GE’s rebranding effort-more than lighting and appliances like in jet engines, water technology, health care technology, wind power, security system and financial systems.

• The campaign “Imagination At Work” celebrates the magic of big ideas that highlights the leading-edge technologies GE has pioneered

• Overall objective was aligning our market position with our future and creating a truly integrating campaign

• Had to be global, touch our internal and external constituencies and use as many media as possible

Role of Advertising

• Advertising and sales promotion are rarely used along• They are intertwined with total communication

strategy including personal selling• Personal and non personal forms of communication

interact to inform key buying influencers• Challenge is to create advertising and sales promotions

strategy that effectively blends with personal selling in order to meet sale and profit objectives

• Advertising, online media and sales promotion tools must be integrate to achieve desired results

Enhancing Sales Effectiveness• Effective advertising can make personal selling more productive• Dollar sales per salesperson call was significantly higher when

customers had been exposed to advertising• In addition to increasing company and product awareness, research

indicates that buyers who had been exposed to supplier's advertisement rated the supplier's salespeople substantially higher on product knowledge, service and enthusiasm

• Primary role of B2B advertising is to enhance reputation of supplier• Increases sales efficiency as increases spending on advertising lead to

greater brand awareness for industrial products, which results into larger market shares and higher profits

• Study under controlled experimental design: Gross margins ranged from 4-6 times higher with advertising than with no advertising

Increased Sales Efficiency• Effect of advertising on marketing program's overall efficiency is evident in

two ways: • 1) Industrial suppliers frequently need to remind actual and potential buyers

of their products or make them are of new products or services-done by salespeople but cost of reaching vast group is prohibitive

• Carefully targeted advertising extends beyond the salesperson's reach to indentifying buying influential's

• A properly placed advertisement can reach 100’s of buying influential's for few cents each, the average cost of a business sales calls currently more than $200

• Sales cost are determined by sales person's wages, travel and entertainment cost and fringe benefit costs

• If these calls total up to $800 per day and salesperson makes 4 calls per day, then each call costs $200.

• 2) Advertising appears to make all selling activities more effective• Advertising interacts effectively will all communication and selling activities

and it can boost efficiency for the entire marketing expenditure.

Create Awareness• From communications standpoint, the Buying process takes

potential buyers sequentially from unawareness of a product or supplier to awareness, to brand preference, to conviction that a particular purchase will fulfill their requirements and ultimately to actual purchase.

• Business advertising may also make some contribution to creating preference for the product-all cost effectively.

• Reply Cards-Many people are not aware of company till they fill these reply cards.

• Create cooperate identify or image• HP, IBM, Dell use ads in general business publciations like

Business Week

Interactive Marketing Communications

• Internet makes one way to two-way process marketing communication that permits markets and consumer to more readily exchange information

• Consumers receive and provide information by navigating websites, preferences and communicating with business marketers

• Marketers can use communication to provide better service to customers like personalized emails and information, customized service solutions or links to providers of complementary products and services

• Herman Miller, Official furniture manufacturer provides a “room planner; that website visitor can us to blends various combinations

• Internet allows business marketers to create value by customizing their messages and offering, helping the consumer search for specific products and gathering information about consumer preference to improve future products and services by creating new customers

What industrial Advertising cannot do

• To develop an effective communication program, the marketer must blend all communication fools into an integrated program, using each tool where it is most effective

• Business marketing has obviously limitations-cannot be Substitute for effective personnel selling.(it must supplement, support and complement that effort)

• In same way, personal selling is constrained by its cost• Advertising along cannot create product preference-that

requires demonstration, explanation and operational testing• Conviction and actual purchase can be ensured only by

personal selling

Advertising is only one aspect of the entire marketing strategy and must be integrated with other components to achieve strategic goals.

The advertising decision process begins with the formulation of advertising objectives, which is derived from marketing goal.

Equally important is the evaluation and selection of the media used to reach desired audience.

Evaluate the campaign’s effectiveness.

The Decision Stages for Developing the Business-to-Business Advertising Program

Defining Advertising objectives• What advertising must accomplish enables manager to determine advertising

budget1. Advertising mission flows directly from overall marketing strategy,

advertising must fulfill a marketing strategy objectives and its goal must reflect the general aim an purpose of the entire strategy

2. Advertising program's objectives must respond to roles for which advertising is suited: creating awareness, providing information, influencing attitudes and reminding buyers of company and product existence

• An advertising objective must be measurable, realistic and specify what is to be achieved and when

• Purpose is to have single working direction for everyone involved in creating, coordinating and evaluating the advertising program

• E.g.: Increase in partner association from 15% to 30%• Objectives directs managers to create a message related to major product

benefit using media that reaches general contractor• The objectives provides a way to measure accomplishment (awareness)

Advertising objectives• Industrial advertising objectives bear no direct relationship to specific dollar sales

target• All though dollar sales results would provide a hard measure of advertising

accomplishment• Personal selling, price, product performance and competitive actions have a more

direct relationship to sales levels. • Thus advertising goals are typically stated in terms of communication goals such as

brand awareness, recognition and buyer attitudes• The goals can be measured, it is presumed that achieving them stimulates sales

volume. • Target Audience: • Its Important to specify target audiences• Primary goal of advertising is to reach buying influential's which are inaccessible to

sales people• Each group of buying influential is concerned with distinct product and service

attributes, criteria's• Thus objectives must specify the intended audience and its relevant decision criteria

Advertising objectives• Creating Strategy statement: • Specific Strategy statement• Once the objectives and targets are established, creative strategy

statement provides guidelines for the company and the advertising agency on how to position the product in marketplace I.e.,. How the target market perceives the product

• E.g.: AC-unfavorable product position with regard to energy efficiency but due to recent product development, the performance is enhanced, firm might use the following strategy statement: Our basic creative strategy is to reposition the product that of reliable air conditioner to high-performance, energy-efficient air conditioners

• All creative efforts-copy, theme, color, etc, should support this statement• Planning an effective advertising campaign clearly defined objectives

that provide a foundation for selecting media and measuring results

Determine Advertising Expenditure• Industrial marketers use blend of intuition, judgment, experience and

only occasionally, more advanced decision-oriented technique to determine advertising budgets

• Some of the techniques business markets most commonly used are rules of thumb(past year’s sales) and objective-task methods

• Rules of Thumb: (Percent of Sales)• Allocate some percent of sales to advertising as advertising is relatively

small parts of total marketing budget in industrial marketing.• Makes advertising a consequence rather than a determinant of sales

and profits and easily give rise to dysfunctional policies• Suggest that industrial advertiser reduce advertising when sales volume

declines, just when increasing advertising may be appropriate

Determine Advertising ExpenditureObjective-Task Method• An attempt to relate advertising costs to the objective it is to accomplish.• Focuses on the communications effects of advertising, not on the sales effects• The objective-task method is applied by evaluating the tasks advertising will perform,

analyze the costs of each task and summing up the total costs to arrive at a final budget. The process can be divided into 4 steps:

1. Establish specific marketing objectives for the product in terms of such factors as sales volume, market share, profit contribution and market segments,

2. Assess the communication functions that must be performed to realize the marketing objectives and then determine the role of advertising and other elements of the communication mix in performing these functions

3. Define specific goals for advertising in terms of measurable communication response required to achieve marketing objective

4. Estimate the budget needed to accomplish the advertising goals• Here advertising is determinant of those results and not a consequence• Mangers allocate all funds necessary to accomplish a specific objective rather than

allocating some arbitrary percentage of sales

Determine Advertising ExpenditureObjective-Task Method- Disadvantage: • Management must have some instinct for the proper relationship between expenditure

level and communication response• It is difficult to know what produces a certain level of awareness amongst business

marketing busying influential E.g.: 12 two-page insertions in purchasing magazine over next six months or 24 insertions over one year is necessary?

• Budgeting for advertising must not ignore the political and behavioral aspects of process.• What actually determines the advertising budgets are power interests in the company

and the political behavior of various parties in the budgeting process• So budget should be made from both technique driven process as well as to include

political activity• Passing the Threshold: • Brand must surpass a threshold level of awareness in market before meaningful

additions can be made in its brand preference share.• Small budget may not allow this as the managers may stop the program prematurely

thus wasting past investor rather than pressing on to pass threshold awareness level.• Budgeting is so important to advertising effectiveness, managers should evaluate the

tasks required and their costs against industry norms

Developing the Message

Perception

Focus on Benefits

Understanding Buyer Motivations

Developing the Advertising Message• Complex, critical task-highlighting a product attribute that is unimportant to a particular

buying groups is waster of advertising dollars as well opportunity lost• Both appeal and the way it should be communicated is vital for successful

communication• Determine advertising objectives, evaluating buying criteria for target audience and

analyzing the most appropriate language, format, and style for presenting the message• Perception: • For an advertising to be successful, an individual should first be exposed to it and pay

attention to it• Once attention is caught individual will interpret it as the advertiser intended• Perceptual barriers often prevent a perceiver form perceiving the intended message• Individual is exposed to message but not guaranteed if he or she processes the

message (may read but find a meaning opposite to that advertiser intended)• Two elements of perception: Attention and interpretation• Buyers tend to screen out messages that are inconsistent with their own attitudes,

needs and beliefs and they tend to interpret information in the light of those beliefs• Technical ads

Developing the Advertising MessageFocus on Benefits:• A better way to accomplish some task, a less expensive way to produce a final product,

a solution to a problem or a faster delivery time• Focus on benefits seeked by customer and persuade the reader that advertiser can

deliver them• Direct appeals or calls to action are viewed to be stronger than those with diffuse or

indirect appeal to action• Show them test report, offer product demonstration, direct them to speak section of

website-everyone is busy and if you offer something that expedite to narrow their search, you were giving them something money cannot buy: free time

Understanding buyer Motivations:• Which product benefits are important to each group of buying influential's?• No assumption that a standard set of classical buying motives applies in every purchase

situation can be accepted• Many business advertisers do not understand buying motives of important market

segments.• Do extensive marketing research in order to fully delineate the key buying criteria of

each buying influencer in each of the firm's different target segments.

Selecting Advertising media for Industrial Markets

• Media is selected by target audience the particular purchase-decision participants to be reached

• First decision is whether to use trade publications, direct mail or both.

• Selection of media also involves budgetary considerations.

Search Engine Marketing at Google: The Right Message, The Right Time

• Awareness stage to retention-e-marketing campaigns, including keyword adverting through leading internet search engines-Google or Yahoo

• As marketing managers face increased pressure on ROI, keyword advertising provides compelling values it delivers qualified leads in the form of potential customers searching on terms specifically related to your products and services. You pay only when users lick on your ads

• Keyword advertising provides Lowest average cost-per-lead of any direct marketing methodsGuidelines for successful key word advertising: 1. Ensure that your website is search-crawler friendly by providing a clear hierarchy, text links and

information rich content2. Understand that relevance to the user is goal: the most successful ads connect customers to the

information or solution they are seeking3. Create a relevant, targeted keyword list by choosing specific words that accurately reflect your

website and advertised products4. Write clear and compelling ads that use the keywords and that isolate your unique value

proposition5. Track results and measure everything: • Monitor click -through rates to make adjustment to the campaign• Test different keyword and ad copy• Use free conversion tracking tools to analyze which keywords are providing the best returns• Calculate the return on investment

Business Publications• More than 2700 business publications carry industrial advertising for a total exceed USD 10

billion. E.g.: Drug Discovery and Development, Pharmaceutical Executive , Pharmaceutical Technology, Autocar, etc.

• Business publications are either horizontal or vertical • Horizontal Publications: are directed at a specific task, technology or function, whatever the

industry. Advertising Age, Purchasing and Marketing News• Vertical Publications: May be read by everyone from floor supervisor to president within a

specific industry E.g.: Chemical Business or Computer Gaming World Product with limited applications-Vertical Products with many industries as potential users-Horizontal • Requester Publications-Offer free subscriptions to selected reader-publisher can select

reader in a position to influence buying decisions and offer the free subscription in exchange for information such as title, function, buying responsibilities. Thus advertiser can tell whether each publication reaches the desired audience

• Publication choice is predicated on complete understanding of range of purchase decision participants and of industries where the product is used

• Only then can target audience be matched to circulation statements of alternative business publications

• Characteristics of an Effective Print Ad: • Marketing strategist should emphasize a RATIONAL APPROACH and provide a clear

description of the product and benefits if offers to customers• Effectiveness of ads are enhanced by detailing product quality and performance

information in a concrete and logical manner• Advertising Cost: • Circulation is important criterion in selection of publications, but circulation must be

tempered by cost. • Total advertising cost must be allocated to various advertising tools such as business

publications, sales promotion, direct marketing (mail & email) and internet advertising--vary with company situation and advertising mission

• Allocation of business publication budget among various journals depends on their relative effectiveness and efficiency , usually measured in cost per thousand using the following formula:

• Cost per thousand=Cost per page/ circulation in thousands• To compare 2 publication by their actual page rate is misleading as publication with lower

circulation is usually less expensive• The cost per thousand circulation should be based on circulation to target audience and not

to total audience.• Some publications are high on cost per thousand basis, they may in face be cost-effective,

with little waster circulation• Some publication have popular website that advertisers can use to create integrated

marketing communications

Frequency and Scheduling of ads

• Successful business publication advertisements are seen by only a small percentage of people who read the magazine, therefore one-time ads are generally ineffective

• Number of exposures are required before message sinks in and reading audience varies from month to month, a schedule of advertising insertions is required

• To build continuity and repetitive value, at least 6 insertions per year may be required in a month publication and 26-52 insertions (with a minimum of 13) in weekly publication

Direct Marketing Tools• Direct mail and email• Direct mails delivers the advertising message firsthand to selected individuals-like

sales introduction letter for a new product to a lengthy brochure or even a product sample

• Direct mail can accomplish all types of advertising functions but its real contribution is in delivering the message to precisely defined prospect

• Direct mail has substantial effect on creating and qualifying customer leads, if some important rules are strictly followed-always seek permission to send email and always provide the reception with the ability to opt out

• Used for corporate image promotion, product and service promotions sales force support, distribution channel communication and special marketing problems

• In promoting corporate image-direct mail helps to establish a firm's reputation of technological leadership

• Product adverting by direct mail can put specific product information in hand of buying influential's

• E.g.: UPS-from ground shipping company to a supply chain leader-strong results, 10.5% response rate with 36% of those respondents buying service

Direct Mail : Benefits and trade-offs• Benefits : • Supports salespeople by providing leads from returned inquired card and paving way for first

sales call• Used effectively to notify potential customers where to find local distributors• Direct mail applies to identifying new customers and markets, meeting competitor claims and

promoting items that are not receiving enough sales support• Direct mail: Trade-offs: • Form cost point of view, direct mail is efficient when compared to other media• It can be wasteful if prospects list are so general that its difficult to find common denominator

among the prospects• It is feasible only if potential buyers can be clearly identified and easily reached through mail• It is also cost effective in making contact with buying center members• When combined with telemarketing follow-up even inaccessible buying center members can

be exposed to promotional efforts• Gains full attention to reader-so greater impact than trade publication (except for top

executives)• Timing of direct mail advertising is flexible, a new price schedule or new service innovation can

be communicated to the buyer as needed• Easier for buyer to respond-reply post card

Interactive Marketing• Devote larger share of their advertising bus in budgets to online marketing • IBM’s customer relationship program, called Focusing on You, rests on simple but

powerful ideas-ask customers what information they want and give it to them. • By giving customer the choice, IBM learns about customer’s unique preferences

and is better equipped to tailor product and service information to that of customer's specific needs

• The program relies on email marketing, which is less costly than direct mail. • Email Campaigns have higher response than direct mail campaigns and results are

generated more quickly• Challenge: How customer want to interact with company and really taking

advantage of web and power….. there for self-service• Centralized database1. CRM software capture data from all corners (Salespersons, call center employees,

marketing managers) 2. Offering an email alert service, email newsletter asking for email addressed in

direct mail campaign and collecting email addresses at trade shows

Measuring Advertising Effectiveness• Rarely get orders from adverting as advertising is done to create awareness, stimulate loyalty

to company or create favorable attitude towards a product• But still advertising programs must be held accountable and marketing managers are facing

increased pressure to demonstrate actual Returns on marketing expenditures• Thus the industrial advertiser must be able to measure results of current advertising in order

to improve future advertising and evaluate the effectiveness of advertising expenditure against expenditures on other element so marketing strategy

• Measuring impact on the purchase decision • To measure effect on what intervenes between the stimulus (advertising) and the resulting

behavior (Purchase decision)• Gauge advertising’s ability to move an individual through purchase decision process• Business marketer should measure the indirect communication effects of advertising: • Advertising affects Word-of-mouth communications and such communication lay an important

role in buyer decision making• Advertising indirectly affects buyers on the basis of its effect on overall company reputation

and on the sale force's belief that advertising aids selling• Advertising effectiveness measurement includes procedure for tracking and measuring

advertising's effect on indirection communication effects• Also judged in finally analysis on cost per level of achievement and must be on line with

objectives.

The Primary Areas for Advertising Evaluation

1. A sound measurement program entails substantial advanced planning.

2. The advertising strategist must determine;

1. what is to be measured, 2. how,3. in what sequence.

3. A pre-evaluation phase is required to establish a benchmark. E.g.: To capture the existing level of awareness a firm’s product enjoys in defined target market

4. After advertisement campaign, its awareness against this benchmarked is meaured-5 parameters

Markets, Motives, Messages, Media, Results

•Evaluation of industrial marketing is demanding and complex and budgetary constraints are generally the limiting factors•Professional can be called for field research•Evaluations usually measure knowledge, recognition, recall, awareness, preference and motivation

Trade Shows: Strategy Benefits• Most industries stage an annual business show or exhibition to display new advances and

technologies in the industry• Typical exhibitor contacts 4-5 potential purchases per hour on the show floor• Opportunity to Publicize a significant contribution to technology or to demonstrate new and old

products• Major expenses (sales force and distributors)• An effective selling message can be delivered to a relatively large and interested audience at one

time.• New products can be introduced to a mass audience.• Customers can get hands-on experience with the product in a one-on-one selling situation.• Potential customers can be identified, providing sales personnel with qualified leads.• General goodwill can be enhanced.• Free publicity is often generated for the company.• Cost is very much lower than cost of making a personal sales call for manyu firms• Exhbition offers excellent cost effective short term method for intorudcing new products in new

forieng markets• To meet buyers directly, observe competiton and gatehr market research data• Entry time from 6 years can be brought down to 6 months by attending foreing trade fairs

Trade-Show Investment Returns• Research in controlled experiment indicates:• New product sales could be traced tocustomer both attending and not

attending the show, saleas levesl were higher among attendes• Proption fo customers who bough the proudct was highter among those who

had visited booth during the show• Postive return on trade-show investment (23%) based on icnremantal profits

related to the cost of trade shows• Improving Sales Efficiency: • Personal selling and trade shows work together in an integrated marketing

communciations straregy• Follow-up sales efforts generate higher sales productivity when customers

have alreadybeen exposed to the company’s prodcut at trade whow• Return on sales figuers are higher amiong show attendees than non attendees• Trade shows can be extermely costly and myust be carefully planned

Planning Trade Show Strategy• To develop an effective trade-show communications

strategy, managers must address four questions: 1. What functions should the trade show perform in the total

marketing communications program?2. To whom should the marketing effort at trade shows be

directed?3. What is the appropriate show mix for the company?4. What should the trade show investment—audit policy be?

How should audits be carried out?5. Answering these questions helps managers crystallize their

thinking about target audiences, about expected results and about how funds should be allocated

Trade Show Objectives• Generating sales include:• Indentifying decision influencers• Identifying potential customers• Providing product, service and company information• Learning of potential application problems• Creating actual sales• Handling customer problemsBesides selling: Building corporate image Gathering competitive intelligence Enhancing sales force moral Specific objectives are needed to guide the development of trade-show strategy

and to specify activities of company personnel while there Once objectives are finalized evaluate the alternative trade shows in light of target

market

Selecting the Show• Which show to participate and how much of promotion budget to spent• Shows frequented by its most important customer segments so marketers have to

solicit ideas form sales people and customers, leading trade show directions or from web-based trade show searchable database-www.exhibitnet.com

• Exhibit Surveys, Inc., a company that surveys trade shows audiences-developed two importance measures-Net buying influences and total buying Plans.

Net Buying Influences• Measures the percentage of the show audience that has decision authority for the

types of products being exhibited.Total Buying Plan• Measures the percentage of the audience planning to buy the products being exhibited

with the next 12 months.• Many firms survey their target prospects before the trade show to learn which trade-

show they will attend and what they hope to gain from attending• Firm rank order various shows based on expected profitability-calculated by calibrating

a model of lead efficiency using firm's historical sales led and lead conversion-to-sakes data, gross margin information and total attendance at past shows

• Lead Efficiency is number of sales leads obtained at the show divided by total number of show visitors with definite plans to buy the exhibitor’s product or one similar to it.

Managing Trade Show Exhibit• To generate interest in an exhibit business marketing firm run

advertisements in business publications profiling new projects they will exhibit at the show

• Trade show strategies should also be linked to interactive marketing communications-enables many exhibitors to schedule appointments with prospects and customers during show

• Salesperson has to be trained as he has 5-10 minutes to make presentation (reverse of you sell yourself, then company and finally product)

• System to respond effectively to inquiries generated at the show• Close loop with HO so that when prospects return to their offices

after the show, the material is immediately available to them

Evaluating Trade-Show Performance• Evaluate performance by considering traffic flow though firm’s both as a sequence

of 3 stages• 3 different indices of performance-attraction, contact and conversion efficiency • Link is better performance indices and key decision variables that firm must control• Attraction efficiency is the proportion of interested visitors that booth is able to

attract (usually smaller than total number of attendees at the show) • It is function of space (square fee). Show promotion, use of attention getting

techniques and so on• Similarly contact and conversion efficiencies are modeled as function of number of

booth personnel and their level of training• For an individual firm, trade-show expenditures should be tied to concrete

marketing communication goals to secure an adequate ROI-carefully evaluate each trade show and its expenses in terms of likely effect of sales, profit and corporate image

• Like other promotional vehicles, the planning and budgeting must focus on specific objectives-once these objectives are determined, rational approach will then identify what has to be done and how will be spent

Representation of Traffic Flow Model at Trade Shows as a Sequence of Stages

FLOWS

Show Attendees

Target Audience

Attracted to the Booth

Contact with Sales Person

Sales Lead

TACTICAL ACTIVITIES

Pre-Show and At-Show Impersonal

Promotional Activities

Personal Promotional Activities