When you want to use the telephone ask yourself the question: is it necessary to phone or can it be done by fax? If you decide to use the phone prepare yourself for the call. Introduce yourself in a clear way and explain the reason for the conversation. Have always pen and paper ready to note answers you receive from the customer. Listen to the other person and avoid unnecessary interruptions. Be precise in your questions and remarks.

For the sales of consumer goods the telephone is used as a primary instrument for selling which is know as telemarketing. For the sales of professional goods that require person to person selling, it can be used to gather information, to provide information to customers and to provide customer service.

Sometimes it is better to separate the selling process from the information-gathering process. In such cases, you should emphasise to customers and prospects that you are genuinely interested in what they have to say and that you want their honest perceptions, which are not related to any selling effort from your side. This applies in particular to market research.

Market research, in its most simple form, involves asking questions. There is no medium more effective for this purpose than the telephone. It is quick and cost-efficient. The market research should be carried out by a skilled researcher to find out basic information about the customer and to develop better prospect lists. Typical questions for this would include the following:

- What are my best customers like and why are they my best customers? (Who are they, in what field do they work, how do they feel about my products and doing business with me?).

- What do my best customers think about my competition? (What are they buying from my competitors, why am I at an advantage or disadvantage?).

- What are my customer’s plans for the future? (What products do they need from me?).

- What else can I sell to my customers? (Are they fully aware of my product line or should I develop new products?).

- How satisfied are my customers?(What can I do to improve or what other services should I offer?).

- Why have many leads not been converted to first time sales? (What can “rejecters” tell me about what I am doing wrong or did not do for them?).

- Why have my first time customers failed to become regular customers? (Was our product not up to their expectations, are they aware of the other products we sell?).

- Why have some customers become irregular buyers? (How did I loose contact, have their needs changed, is competition more active?).

Answers to these questions, well recorded and tabulated should help you to increase your business and improve your sales approach.

For the sales force the telephone is an instrument to make appointments, follow up visits if a quick reply is required, provide information and maintain a regular contact with the customers in between the calls and establishing contacts with prospects. Making appointments can be done by the salesman himself or a secretary. The appointments should always be confirmed by fax.

Questions that are asked during the visits sometimes require quick action. If it concerns factual information the fax can be used. If it requires explanation you should use the phone. Assure yourself that you have all information required to avoid an unnecessary second call.

If you have information that could interest a customer and might lead to a visit, you can use the phone as well. It gives the opportunity to hear the reaction of your customer and might lead to another visit or offer. Customer contact can be compared to a stone thrown in the water: when it touches the water you see the effect clearly but this disappears very fast. Therefore it is necessary to maintain the contact on a regular basis! Use the phone to show your interest in this customer, ask for possible developments and the eventual necessity to see him. When leaving too much time between your calls, your competitors might have reacted in a better way and you can loose an order. Loosing an order, by not knowing that it existed, should never happen to you!

When a customers needs assistance he will normally phone the salesman, who should assess the importance of the problem to be solved. He should explain to his customer what steps will be taken by the company:

- he will answer himself

- he will contact the department that must provide the solutionin that case he will inform the customer what action will be taken

- he will inform the customer when he will be contacted again by phone.

You undoubtedly will have some small customers that you do not want to loose, but that do not justify frequent visiting. Also here the telephone is the most efficient way to maintain contact.

Prospecting new customers could also be done properly by the phone. You must have your story ready to interest these potential customers as the phone call should lead to a sales visit in order to add them to your customer list.

The lesson to be learned is simple. Using the telephone in an intelligent and innovative way can save a lot of money if calls substitute more expensive ways of reaching the customer.

In later sessions, we shall go into detail about the selling techniques and the preparation of the salesmen to be successful but we shall concentrate on the tools you should provide your salesmen to assist him on the job. Somebody has said that eyes are more intelligent than ears. You can tell a long story to convince your customer of the merits of the products and still not succeed. But with the proper documents in hand he can see straight away what the product looks like, how it is assembled, how it can be handled, connected, operated and what it can do for him.

All types of company documents, from brochures to annual reports, are important promotion tools.

The documentation should be made in such a way that it attracts the immediate attention of the customer and he will be interested to hear your explanation. The quality of the brochure reflects the quality of the company. It will stay with the customer and should impress him when he sees it. The brochure must be prepared carefully by professionals who understand it has to convey messages to the customer. Important criteria are:

the material it is made of

the artwork

the product information

the information about your company.

Brochures

The basic material must be of good quality and appealing.It should contain photos of the products and some applications where and how it is used. The customer might recognise these applications which will put him at ease, and gives the salesman the possibility to explain how you satisfied the wishes of the user. A photograph of your factory or workshop can lead to an explanation about your company and the way the material is produced, to create confidence. Schematic designs of the product and the range of possibilities it can offer. The text should be concise and inviting to questions, emphasising the strong features of the products and the variety of applications. Technical data of the product, indicating the standard execution and possible options.

A resume about your company explaining the sales records and the confidence you already obtained from other (prestigious) customers.

Next to the technical information, the salesman should be instructed how to present the offer for the material or equipment requested by the customer. Selling professional equipment means very often the supply of a number of products or a complete installation, that requires careful calculation of several elements:

- One product supplied in larger quantities for different applications

- the combination of different products

- installation of auxiliary equipment

- electrical or mechanical connections at the customer

- training of the customer’s personnel on site.

If the project involves some of these elements no price should be given during the visit. He should explain to the customer that the policy of his company insists on providing of the correct pricing for the whole job stating separately the different items. Such an offer can only be provided after consulting the different departments like production, engineering and sales. The quotation always should be presented in a written offer, with the proper description of the different items. Also in this case, the offer should reflect the quality of your company. It must have a structure to make it easy to read and provide all information required by the customer. The quotation always must start with the indication that the offered products are made to meet the application specified by the customer, mentioning this application.

Give a clear description of the complete supply Give the technical details of the different items

Explain the functioning of the proposed material Give the price(s) of the described material List the optionals that can be added with their prices Mention the cost of packaging Mention the cost of transport.

Mention the installation cost (if required), stating the number of days required as you expect at this moment. As this can vary considerably, depending of the conditions at the customer, it should be discussed and agreed upon when the order is placed.

Add your company’s sales conditions including:

- validity time of the offer.

- warranty period on the proper functioning of the equipment (6 months/ 1 year)

- delivery time.

- payment conditions.

These last two items are always argued by the customer, so you have to leave a margin for negotiations. Finish your offer with the phrase that you are willing to visit the customer to discuss the offer in detail. This justifies a follow-up phone call to find out first reactions of the customer. A well-prepared and well-presented offer is an excellent tool for the salesman during his negotiations.

For the selling of individual and simple products the salesman should be in possession of a price list to present the prices on the spot. The prices of these smaller items can often be negotiated during a visit and the immediate reaction can lead to an instant order. The price list should only be used after the technical discussion, when it is perfectly clear what the customer wants and when the salesman feels, that providing the prices can lead to the conclusion of the order. Giving your prices on the wrong moment might enable the customer to use them with your competitors and get a better deal from them.

A price list should be prepared in a logic manner for easy reading by the user. Make clear separation between the different products groups, state the standard execution and the optionals that can be added. Each item must have its own reference number that is used in all departments of your company who are involved in the preparation of the order.

Discount schemes for larger quantities should be given on a separate page to avoid that they are spotted by the customer at the wrong moment. They can be used when the salesman is close to the conclusion of the order, providing this extra incentive to increase the order volume.

Well-prepared documents are always a boost to the image of your company, they represent additional cost, but a good return on investment is assured.

Prices for professional equipment are generally determined on a costs-plus basis in which plus represents the profit. The prices which can be asked depend of course also on the prices of competing products. But a profit of about 15% is necessary to make a project generally financially viable. The cost of a product has various elements: development costs, marketing costs, manufacturing costs, component costs and sales costs.

Development costs and marketing costs have to be made before the product produces revenues. These costs are largely independent on the quantity to be produced and sold. It is good practice to write-off these costs completely per product produced in the first five years. This leaves some extra margin when the product has to compete with newcomers on the market.

Manufacturing costs per product are dependent on the total number of products which will be produced as tooling costs and production start-up costs have to be amortised. Also here it makes sense to consider in the costs per product only the quantity planned for the first five year of production. It makes sense to make a proper estimation of costs of materials and components bought from outside, of labour time and costs and add overhead costs which are not covered at another place, as e.g. administration.

Many products require the purchase of electronic components from foreign companies. Prices of components, which have to be imported, are quite dependent on quantities bought per year. A proper contract with a supplier may reduce prices considerably. When components are imported from other countries, suppliers will often require payment at delivery or even pre-payment. This type of payment without risk for the supplier will normally allow discounts of 5%. The time from delivery of components to the moment of payment for the final product may be quite long, for some products even 12 months. The capital required for these foreign components can be a substantial part of the capital required for the successful execution of the project.

Sales costs are for a part dependent on the quantity sold. This is the result of the commissions paid to the salesmen. The fixed parts of the salaries and the travel and lodging costs are less dependent on the quantities sold. However, it is common experience that quantities depend heavily on the effort put into sales actions. For professional products the sales costs per product are normally estimated at 20% of the price per product quoted to the customer.

Kotler indicates that sales promotion has “distinctive qualities”.

Insistent presence. An attention-getting quality that can break through buyer inertia.

Product demeaning. Careless or too frequent use can cause people to question the value of the product.

Factors accounting for the increasing use of sales promotion:

The proliferation of new brands. Sellers have to work hard to get people to try their brand

Low quality retail staff and growth in self service. Sales promotion is often associated with the point of sale (eg an on-pack promotional gift) where the purchasing decision is made

Many sales promotion activities can be introduced quickly. e.g.: “10p-off” coupons and can produce sales quicker than advertising

It can contribute to the effectiveness of other elements in the promotional mix (synergistic effect)

Some problems associated with the use of sales promotion:

Product demeaning

It can be expensive e.g.: unexpected high demand for free gift

Problem of subsidising already loyal users. e.g.: 20% extra free packs

Targets of Promotion:

1. The trade. Examples include prizes for high sales levels and discounts to encourage dealers to stock

2. The consumer. Examples include free samples to encourage trial of a new product or a competition to encourage consumption of a product in the off season.

3. The sales force. Examples include holidays as a reward for meeting sales targets, and sales conferences as a means of improving sales force motivation and morale.

Publicity

Kotler indicates that publicity has the following qualities:

High credibility. News stories and features seem more credible than adverts.

Off guard. Publicity reaches people who might avoid salesmen and adverts

Dramatisation. Like adverts it can dramatise a company or product.

Free, win save!

A Guide to the Use of Sales Promotion Techiques

Offers. There’s so many different types, – competitions, buyback offers, free draws, money-off coupons, sweepstakes, phone—ins, free samples, share-outs, charity promotions, free mailings, self-liquidating premiums and so on. The list seems endless. Promotions are now an integral part of the modem business scene. No longer are they purely in the supermarket domain. More and more industries are learning how to use sales promotion as part of their marketing effort.

It’s important to bear in mind, however, that promotions are just one part of the marketing mix and consequently you need to consider whether or not investment in other areas eg. on improving the product or on advertising might meet your objectives in a more cost-effective manner. Once the decision has been made that a promotion is required – how does one select the most relevant technique from the wide variety available? In the first stage it is a question of defining the promotional objectives. Techniques can vary considerably in their effectiveness at solving particular problems. Sales promotions can assist in solving quite diverse problems such as: stimulating stock movement, encouraging repeat purchase, securing marginal buyers, increasing penetration of new or existing products, increasing sales volume, bringing forward buying peaks e.g.: seasonal sales, attracting customers to premises, correcting poor distribution levels, increasing awareness and loyalty, securing display in store, or broadening the brand’s appeal.

Promotions cannot change long term trends in the life of a brand or take the place of advertising and personal selling, nor are they any substitute for healthy consumer demand. For example, promotions may slow down the rate of decline of a brand but cannot reverse it without a significant and lasting change in the value (product and advertising based) that the brand offers the customer.

Promotions are generally regarded as short term marketing tools which are used to achieve specific objectives during a defined time period. Whilst they are acknowledged to be a means of offering temporary added value to the customer they should, nonetheless, form an integral part of the brand’s long term strategy. Unlike advertising, promotions act at the point of sale. As such they can be extremely versatile. They can be used against specific target groups e.g.: particular groups of customers, stores on a geographic or time basis, sales can be substantially increased during the promotional period and their effect and cost can usually be assessed in advance by prior testing. On the downside, most often fail to provide a lasting sales increase, there can be considerable extra costs involved; special displays, extra packaging, time and effort by the salesmen which is frequently ignored in evaluation. Price promotions if run for too long could establish a lower price level or price war with competitors and a profusion of price promotions cannot only seriously undermine brand loyalty but can increase the likelihood of switching between brands.

Sales promotion activity will impact on a company’s sales operation and in particular the sales force, so it is essential to plan ahead and co-ordinate promotional activity across all the company’s brands. Promotional activity should be tied in to key marketing activity such as new product introductions, relaunches, merchandising activity or price increases. Not only will this result in more cost-effective promotions but will also help to avoid difficulties such as conflict of sales force priorities, repetitious use of identical promotional techniques, over-promoting a brand, the incorrect timing or use of promotions. Forward planning can help identify when it might be appropriate to mount multi-brand schemes, merchandising activity, tailor-made promotions and so on. Identifying the promotional objectives is an essential pre-cursor to effective and efficient promotional activity. Aspects to consider in drawing up the objectives include: the nature of the problem the promotion is to solve; penetration, repeat purchase, distribution, or display, the budget available, the nature of the product or service involved and target group the promotion is seeking to influence.

Finally, it is important that all promotional activity is evaluated against pre-set action standards, as this can help in the design and budgeting of future promotional activities. Wherever possible, promotional objectives should be quantified in order to provide a yardstick against which the promotion can be measured. Money off coupons are used extensively to secure brand trial. In this respect couponing, after free samples, is the most effective device to introduce a new or improved product. It is also effective at building onto existing users, winning back lapsed users and encouraging repeat buying.

They can also be used to counter competition with a price incentive that does not alter the on-shelf price. No wonder that nearly 8 billion, are distributed every year, and of these around 350 million are actually redeemed (a 4.3% redemption rate). Redemption rates for specific coupons depend upon a wide variety of factors, and consequently vary considerably.

It is difficult to estimate redemption rates. Nielson Clearing House have a wealth of data on coupon redemption levels and are willing to provide information as to the likely redemption rate that a particular promotion might obtain. As a guide for established brands the average redemption levels are of the following order; for coupons directed at the consumer: on-pack 30%, door-to-door leaflets 7-8%, national press and magazines 2-2-1/2%, coupons carried on other brands 10-16%, and those handed out by in-store girls 20-30%. Trade coupons on the other hand give rise to the following redemption levels: magazines 2%, trade mailshots 30%, and in-case coupons 50-60%.

Coupons are distributed through four main media: newspapers, magazines, door-to-door and in/on-pack. Newspapers still account for the vast majority (73%) of coupons distributed whilst the majority of redemptions (62%) are accounted for by in/on-pack coupons. The face value of coupons has steadily increased and is now nearly 10p. Most of us enjoy competitions – the challenge of trying to beat others to win a glittering prize. Indeed, competitions are one of the most widely used sales promotion techniques. It is important to be aware of the definition of competition. It is the allocation of prizes based upon the judgement of merit and not by chance or gratuitous distribution. If success in a competition does not depend to a substantial degree upon the exercise of skill then it is illegal.

Well planned competitions can be particularly effective in securing repeat purchase, penetration and in-store display, as well as helping to build a brand’s distribution when they’re directed at the trade. Compared to other techniques, competitions can be mounted quickly, have a fixed cost, are relatively easy to manage and can be used across trade and consumer sectors. However, they do not provide an immediate benefit to the consumer, the redemption rate is normally low (typically less than 0.5-1% of promotional packs/leaflets distributed). Checking answers can also involve high administrative costs, and the cost of prizes that are offered tends to escalate as manufacturers compete to offer bigger and better prizes.

Effective and successful competitions should be simple to understand, easy to enter (but still skilful), have rules that are easy to read and comprehend, have a low proof of purchase requirement, are difficult to win and offer a range of attractive and exciting prizes. Opinion tends to be divided between a prize structure that involves a major prize (e.g. a house) with a few minor prizes and that which has a large number of smaller prizes with an “everybody wins” element.

Price reductions – featured price reductions of a product or service – are the most widely used promotion technique. Such price cuts may be on a single unit of the product or may be on several units banded together into one pack.

The price cut varies according to the product field but is typically between 10-20% of the normal retail price. This type of offer can be printed on-pack by the manufacturer or marked on the pack in store by the retailer/wholesaler.

Consumers and the trade love price promotions as the benefit is immediate. With on-pack price offers the consumer receives all the price benefit. The technique can be used tactically on different packages, and is effective for both big and small brands as there are no economies of scale.

Unlike most promotions there is also little actual administrative effort involved. However, the Government has added a little spice to the scene with two pieces of legislation: The Trade Descriptions Act 1968 and the Price Marking (Bargain Offers) Act 1979. These both contain complex regulations for statements, claims and comparisons about price and value claims – get them wrong and you should be guilty of a criminal offence.

The method of distribution used will depend upon the sample size, its packaging, budget available, target group and any security considerations (e.g. removal in transit or on shelf)

The strongest possible promotion for new or improved brands has to be sampling. Mind you it is the most expensive type of promotion, requiring considerable administration particularly when delivered door-to-door or sampled in-store. So the brand should deliver superior performance to competitors and have mass market appeal. Unless some sort of filtering mechanism is employed it can subsidise existing users and may require the production of expensive sample packs. Distribution costs can be high as well as the level of wastage unless controlled. Even so, the conversion of consumers to the sampled product can still be as low as 5%. However, there’s much to recommend this technique. It can create interest, rapid and widespread trial, can secure the display of a brand when conducted in-store and can help to force trade distribution of the product. For most consumers sampling, above all, demonstrates confidence in the product.

Getting the sample into the consumer’s grubby little hands can be achieved in a variety of ways: by cross sampling with another product, given away on a media magazine, handed out by an in-store demonstrator, retailer or dealer on home delivery, sent out on application of the consumer, sold as a trial size or given out at a specific location e.g.: exhibitions.

How much of the product to give away also has to be carefully considered. The consumer must be given enough to appreciate the qualities of the product but not to the extent that they feel Christmas has arrived early. Factors such as the nature and value of the product, consumer usage, method of distribution (magazines for instance can only handle certain sizes), the cost of any sample packaging and the budget have to be carefully considered.

The sampling of food and drink has to be undertaken with care. Such sampling must conform to hygiene, local licensing and other relevant laws. The Food and Drugs Act makes it illegal to supply food which is not fit for human consumption. Samples obviously should not be dangerous if picked up by children or animals and if there’s any risk, no matter how slight, the sample should be personally handed over. Giving something away free is not as easy as it seems!

Whilst the law ultimately regulates promotional activity there are several cedes of practice which are recognised as important guides. The most comprehensive of these is the British Code of Sales Promotion Practice. This covers most forms of promotional practices as well as sales and trade incentives. It has been drawn up by the Code of Advertising Practice (CAP) Committee. It is always advisable before embarking on a promotion to check that it satisfies any relevant code of practice.

Administratively, promotions can be a bit of a nightmare. There’s a great deal to consider: closing dates (which must be on the outside of the packaging), application forms, proof of purchase requirements, despatch date (which should NOT be more than 28 days), rules, tie breakers, criteria for judging and evaluation of entries, use of independent judges and observers presentation and availability of promotional offers, coupon codes, and legal wording, to name but a few. Many promoters have omitted to include some minor element with the result that a seemingly straightforward promotion has been turned into a disaster.

Typical problems and possible promotional solutions The Problem / The Solution

Major target groups and appropriate promotions

1. Advertising Objectives The basic advertising objectives can be considered as being to inform, persuade, or remind. In addition advertising objectives might be categorised as:

Sales objectives e.g. to increase sales by 10% in 3 months. A problem with sales objectives is that it is difficult to relate an adverts effectiveness to sales levels since so many factors have an impact on sales besides advertising e.g.: competitors activities.

Communications objectives. Russell Colley’s DAGMAR “hierarchy of effects” model shows levels of understanding gone through before a purchase:

Awareness of existance of a brand or company.

Comprehension of what a product is and what it will do.

Conviction to buy the product.

Action e.g. purchase.

Thus, an advertising objective relating to the above might be to move the target market from a position where 50% of them are unaware of the existence of a brand, to the position where within a period of 6 months 70% of them are aware of the existence of the brand.

In general terms the tasks of advertising might include announcing product changes, creating a brand or company image, aiding entry into a new market and so on.

2. The Target Audience

Companies may wish to appeal to particular segments of a market e.g. the teenage segment.

3. The Advertising Message

A good message is memorable and might be one that gets Attention, holds Interest, arouses Desire and obtains Action (AIDA). In generating a message the following steps are involved:

Message generation. This involves developing messages which will help the product achieve its desired positioning in the market e.g.: “Have a Coke and a smile”.

Message evaluation and selection. A message could be assessed on the basis of:

Desirability. Something desirable or interesting should be said about the product, in addition, the source of the communication e.g. an actor on a TV commercial should be attractive in some way.

Exclusiveness. That which is said about the product should be distinctive. The message may contain a Unique Selling Proposition e.g.: “the toothpaste with fluoride in the stripes”. This, it is argued, makes advertisements more effective.

Believable. The message should be believable or provable.

Understandability. The message must for example use language that the target audience understands.

c) Message execution. Advertising messages may be put across using particular:

Styles. For example fantasy might be used in advertising, as might testimonial evidence, or the use of personalities such as well-known sportsmen.

Tones. For example humour or fear might be used in advertising to sell products.

Words. They should be attention getting and memorable.

Format factors. This involves a consideration of size, colour, use of cartoons, and so on.

Message structure. The message should be considered in terms of:

Polarity e.g.: whether the message is one sided and solely mentions the plus points of the product or whether a two sided approach is best in order perhaps to make the advert more believable.

Order e.g.: whether to put the best argument at the beginning or end of the advertisement.

Completion i.e.: do we draw specific conclusions such as “Buy now” or leave the conclusions more open ended in our approach.

4. Media

In determining media to be used the following would be considerations.

Reach or Coverage. This is the number of people in the target audience to be exposed to the advertising campaign during the specified time e.g.: 50% of the target audience in 3 months. To improve reach, more media may be used.

Frequency. The number of times the average person in the target audience should be exposed to the message in the specified time e.g.: 3 times.

Impact. This relates to the ability to stimulate and is often measured by the extent of recall, attitude change, and strength of desire to buy. A half page press advertisement would have less impact than a full page one.

Continuity. Consumers may forget if advertising is not continuous. There may be continuity problems due to the expense of e.g.: TV advertising. The ideal is to deliver the greatest number of effective advertising messages to the greatest number of people in the target market at the lowest cost and with maximum impact.

Media planners make their choice among the major media types such as press, TV, outdoor etc.. taking into account the following:

Reach, frequency, impact and continuity.

Lead time. This varies and can be short for daily newspapers, but long for magazines, which are only published monthly. Also, particular media may be ‘fully booked’ in terms of advertising space, resulting in a waiting list.

Target audience media habits.

The product Particular media may be superior in terms of their potential for visualisation, demonstration and colour (TV is good in these areas). Microwave ovens cannot be effectively demonstrated on radio.

Regionality. The ability to advertise mainly or solely in a particular geographic area.

The message. Long advertising copy containing a lot of technical data might not be appropriate for TV advertising.

The environment of the medium e.g.: cinema might be described as escapist and for the young.

h) Cost. Discounts may be given to regular advertisers. Advertising on TV isgenerally considered expensive.

i) Objectives of the campaign e.g.: it might be appropriate to advertise inHomes and Gardens if the objective of advertising is to position theproduct as an up market product for higher socio-economic groups.

j) Activities of competitors e.g.: in order to defend market share it might be

considered appropriate to use the same media as the competition. k) The law. It is, for example, illegal to advertise cigarettes on TV. l) Experience. Knowledge of what has worked well in the past.

In selecting specific media vehicles e.g.: Jackie, Oh Boy! etc. within each media type the factors mentioned above would be taken into account as would the Cost Per Thousand Persons Reached criteria.

The CPT approach has the following drawbacks:

Not all users of a medium may see the advert and in addition not all users of a medium may be interested in the product. The advertiser is really paying for “opportunities to see”.

It does not take into account factors such as colour re- production, and the prestige associated with particular media vehicles.

5. Media Scheduling

Objectives

Ultimate purpose is increased awareness (not all advertising is to increase profits, e.g. smoking, road safety).

To build demand.

To introduce a price deal.

To inform about a product’s availability.

To build brand recognition or preference.

To inform about a new product’s availability, features or price.

To help salesmen by building an awareness of a product among retailers.

To make a reputation for service or reliability. -..

To increase market share.

To modify existing product appeals and buying motives.

To increase frequency of use of a product.

To inform about new uses of a product.

To increase the number or quality of retail outlets.

To build the overall company image (long term objective).

To affect immediate buying action.

To reach new areas or new segments of population within existing areas.

To develop overseas markets.

The Structure of Advertising

Three separate parties are involved.

The advertiser.

The advertising agent.

The media owners. What are the major advertising decisions?

How much to spend?

What the message should be?

What the mode of presentation should be used? e.g. block/display ad.

What media should be used?

What should the timing schedule be?

How best to gauge effectiveness?

Indirect or direct.

Indirect = export markets contacted through a domestically located middleman (located in the exporter’s country of operation).

Of great utility when the prospective exporter has no knowledge of export markets.

Middlemen of various types can have intimate

Knowledge of a range of export markets.

Main types:-brokers

Combination export managersmanufacturer’s export agents

Direct exporting

- exporting done through intermediaries located in the

Overseas markets.

Requires a larger degree of expertise.

But, gives more control over distribution channels

Than when using indirect exporting.

Intermediaries overseas may be:­foreign sales subsidiary of main companyan independent distributor

Both have pros and cons…

A. Foreign sales subsidiary

Side-steps independent middlemen.

Subsidiary performs:­stock holdingassuming credit riskselling and promoting.

Offers full control of overseas marketing.

Important if a very specialised marketing programme is to be used (specialist selling techniques, advertising,

After sales service, etc.).

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Can export, in a controlled way, not only the product, but the total marketing support package.

Major consideration = cost. B. Independent distributor

Earns a margin on the selling price of the products.

Manufacturer must carefully assess the cost/benefit of choosing a distributor, as opposed to setting up a

Sales subsidiary.

Also as the breakeven calculations demonstrated with

Increasing volume the incentive to switch increases. E.g. guinness

Had used independent distributor in japan for many years.

Independent distributors were handling “grey”

Imports of johnny walker.guinness vertically integrated (forwards) and

Bought out its main distributors thus regaining

Control of its brand identity.became a world-wide trend:- guinness now markets

75% of its spirits volume through sales subsidiaries,

Compared to 25% in 1987.

E.g.: nissan

For years, used an independent distributor in the u.k.

(nissan u.k.:- actually owned by an individual).nissan u.k. had exclusivity and had built up sales of

About 15,000 per year.nissan u.k., however, in 1990, accused nissan of

Overpricing in the u.k. market.nissan used its right to terminate exclusivity, and now

Has its own wholly owned sales subsidiary to cover the

U.k. market.

Licensing as an entry strategy

A company assigns the right to a patent (which protects a product technology, or process) or to a trademark (which protects a product name) to another company for a fee or royalty.

Can gain entry without an equity investment.

Right may be exclusive (to a defined geographic region) or unrestricted.

E.g.: anheuser-buschlargest us brewer

First major u s brewer to internationalise

Strategy = to enter key foreign markets by licensing

To the country s leading brewer / beverage

Manufacturer.

“budweiser”

Licensed in canada to labatt.licensed in japan to suntory.also u.k., france, germany.

Reasons for licensing?

May not have knowledge or time to engage more actively in international marketing.

Target market/segment may not be substantial enough to support manufacturing.

Marketing/logistic resources may be limited.

Avoid over exposure of assets in politically or economically volatile markets.

Foreign governments may block all other entry methods

Problems with licensing!

Total dependence upon local licensee to produce revenues and thus royalties.

Eg johnson & johnson

Drug “hismanal” (antihistamine)licensed overseas in 1985 116 countriesjapanese licensee “mochida” performing extremely poorly

Elsewhere “hismanal” is j+j’s fastest growing drugin 1990. J+j removed this licensee and set up its own japanese sales subsidiary (300 sales reps)

Fate of technology tied up with fate of licensee.

E.g.: pepsi in france

Licensed through perrier

Supermarkets de-listed perrier water, in favour of

Evian and badoit.pepsi, as part of perrier’s portfolio, also suffered,

Losing half of its market share.licensing now disbanded

A special form of licensing:- franchising

Franchiser makes a total marketing programme available.

Brand name, logo, products, method of operation, etc.

More comprehensive than patent or trademark licensing:- total operation is contractually agreed.mcdonalds kentucky fried chickenburger kingholiday inns

Local manufacturing as an entry strategy

Many reasons

Local costs

Market size

Tariffs

Laws

Politics

3 main methods

- Contract manufacturing

- Assembly

- Fully integrated productioncontract manufacturing

Typically used for markets withlow volume market potentialhigh tariff protection

Local production advantageous to avoid restrictive import barriers, but market not sufficient to justify building a production plant

Local manufacturer’s responsibility restricted to production

Products turned over to international company for promotion, distribution, pricing, selling, etc

Well suited to the smaller countries of central america. Africa and asia

Assembly

Locating a portion of the manufacturing operation in the overseas market.

Involves heavy use of labour rather than extensive investment in capital or equipment.

Two driving forces:­price driven (low labour costs of final assembly).political: local government forces the setting up of assembly operations by banning import of finished products or charging excess tariffs.

Some countries do not allow assembly-only operations

In serving their market.

E.g.: brazilian car industry: 70% of parts produced

Locally.

Fully integrated production

Greatest commitment a company can make to a foreign market.

Often done to get access to new business:- showing a high commitment is often the only way to convince clients to switch suppliers.

Particularly important in industrial markets, where service and reliability of supply are main factors in supplier choice.

E.g.: guardian industries

U s. Flat glass manufacturer.

Unable to win custom from major european buyers until it committed to establishing a fully-integrated operation in europe.

Built two plants in luxembourg.

Began to win business with distributors who were also fearful of saint-gobain (france) and pilkington (u.k.)

Integrating forwards.

Now also plants in spain, france, hungary.

Joint ventures in entering foreign markets

Need not only to consider entry strategy, but also the degree and form of ownership of the overseas operation.

Jv is an increasingly popular method.

The international company invites a partner from the host country to share stock ownership in the new overseas unit.

Why j.v.s?

Risk-sharing

J.v. partner may have market-specific

Knowledge/skills. may be well connected in local business and/or

Government.

Necessary to enter state controlled economies: foreign investors normally allowed by law only to have a minority holding.

J.v. partner may also represent a major buyer.

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Tpb nsmirb alli an trteraiise: b ap anrt

Strategic alliances entering foreign markets

More recent development than j.v.s.

In a j.v. the partners share equity in a new joint entity.

In an alliance two entire firms pool resources directly in a collaboration that goes beyond the j.v.

Forming a new entity (j.v. company) not necessary.

Pool complementary corporate skills and resources for mutual benefit.

3types:

- Technology-based alliances

- Production-based alliances

- Distribution-based alliances

Technology-based alliances

E.g.: at&t (u.s.a.)

Olivetti (italy)

Formed alliance in 1984.

At & t needed to enter european computer market to obtain economies of scale for the u.s. operation.

Olivetti was keen to add larger computers to its existing mix.

At & t tapped into europe using olivetti’s marketing and distribution technologies.

Olivetti became key supplier of larger computers to at & t, allowing it security to invest in larger computer technology.

Production-based alliances

Common in automobile industry

Based on improved efficiency through component linkages which may include engines, gear boxes, etc

Eg renault/volvo

Both will own 45% of each other’s truck and bus

Divisions

Renault buys 25% of volvo’s car operation and 10% of Volvo corporation volvo buys 20% of renault and an option to buy a Further 5%.

Results to be greater synergy and international marketing competitiveness in trucks and buses first, then in cars

Global purchasing. Development. Design. And joint production to bring big savings

Distribution-based alliances

Eg: gener al mills/nestle

General mills long been number two u.s. breakfast

Cereal marketer (g.m. 27%; kelloggs 45%).g.m. had no effective position outside the u.s.a.formed a global alliance with nestle in 1989 called

“cereal partner worldwide”.g.m. will utilise nestle’s distribution network and

Expertise in europe, far east, latin america.g.m. will provide technology and cereals marketing

Expertise.

Partnership needs to compete with kelloggs 200 million dollar advertising spend outside the u.s.a.:- neither company can do this alone!

However multiple channel multiple market segments networks can induce complex analyses and would probably be dependent upon a host of Judgements. These would include the likelihood of ‘cannibalisation’ between channels in a three channel system the analysis of the costs imposed by any two rests on assumptions about the market coverage of those two and how much of the third channel’s coverage they would take.

In assessing channel acceptability it may also be necessary to include a number of additional factors, many derived from consideration of the factors considered earlier. They could be combined into a listing of criteria and subjective evaluations made about the actual or likely performance of alternative channels. This might be with each criterion being given a differential weight to reflect its importance to the firm at that time. Or, as discussed in new product, screening some kind of series of hurdles may be operated where each channel alternative is assessed against one criterion and those that pass move on to be assessed against a further criterion and so it continues until all criteria have been employed.

The availability of complementary products or services can offer added values to buyers or be part of their established expectations. In either case this could become another important influence upon channel design.

Purchase size and frequency should also be considered. This will be related to consumer willingness to hold stocks, and to their consumption levels. Products with a weekly repurchase cycle provide enormous distribution problems and require vast channel arrangements. These would be eased if customers were willing to take a six months’ supply of (say) breakfast cereal at a time. They would be simpler still if customers were willing to travel fifty miles to collect their breakfast cereal. But naturally, customers value convenience in the availability of such products.

Customers’ expectations about product availability can vary from one country to another and even regionally within the same country. In the UK most people expect a daily home delivery of milk and newspapers and many expect a similar service for bread. This is not the case elsewhere. The high cost of such a system is apparently acceptable to British consumers although it seems a matter of historical accident that it his endured in this country. Departures from established custom are possible but they can encounter considerable consumer resistance. This has been demonstrated in recent years with the experiments with one-trip non returnable milk containers, which had to be withdrawn from the experimental areas after consumer action groups collected all the containers and deposited them at the Town Hall.

Competitors channel arrangements will also have to be investigated. It may be necessary to ensure similar market coverage by employing the same channels. But as mentioned earlier strategic advantage may be gained by being different. Both product positioning and market coverage decisions embody the impact of competitors’ channel strategies.

Channel characteristics refer to actual and latent channels. Performance of existing channels needs to be evaluated. They may give insufficient or inappropriate market coverage and if so the firm would have to investigate the possibility of its own channel innovation. This could entail making the product or service available through its own outlets some franchising agreement or introducing novel mechanisms for transferring product to buyer or buyer to service point.

Another environmental consideration in channel design is that of “political influences”. For example Yves Saint Laurent Parfums have recently had to bow to the dictates of the European Commission and change from a very exclusive distribution policy to a more selective one. Traditionally Yves Saint Laurent Parfums has strictly limited the number of retailers allowed to sell its perfume, skin care and beauty products, giving it an exclusively positioned exclusively distributed premium-priced product. Now it must allow any outlet that meets its standards to sell the range. The company must also allow retailers to set prices for the products. So much for the “free” European market! The Commission are reported to be on the scent of another French perfume company for the same reasons: Givenchy SA

Strategic Factors

Product positioning is so fundamental to marketing strategy that it naturally occurs as a basic element in channel design. Its influence is related to how the positioning is defined. If the positioning emphasises a product or service feature then the channel chosen would have to support and perhaps enhance that position. Claims such as ‘instant access’ ‘guaranteed freshness’ ‘the full service company’, ‘the one with the widest product line’, ‘top technical back up’, or ‘buy with confidence – life time care warranty’, all impose strictures on channel options if they are to be credible. If the positioning is related to particular users or use occasions then again the channel choice needs to be consonant. If the position taken relies upon competitive positioning head on or side step it must be influenced by the channel choices of competitors. With head on competitive positioning it would follow that channel design mirrors that of the competitors. With side step competitive positioning a deliberate decision to employ distinctive channels might be more supportive.

Intensity of market coverage intended by the firm will be one of the outcomes of the product positioning strategy. This intensity is dependent upon the decision made about product or service availability to buyers Intensive coverage implies numerous outlets or service points. Selective coverage implies far fewer and this might be taken as far as implying an exclusive franchise for one outlet or service point in an area or region. To reinforce a high quality image the firm may decide to restrict availability. Rolls Royce or BMW cars cannot be bought at just any car showroom. Ercol, G-Plan or Nathan furniture is only available at restricted outlets though frequently together. Many expensive kinds or clothing or jewellery are similarly restricted. The opposite approach is apparent for goods and services with a high purchase frequency, which people wish to buy with minimum effort such as groceries or petrol or fast food. An important consideration in this decision is the trade-off between market exposure and control over the channel. Wide availability in numerous outlets reduces the seller’s control but restricted availability limits potential sales.

This trade off between exposure and control is illustrated in the figure below:

Remember as well that the extent to which the channel is integrated vertically, also determines the degree of market control available.

Thus two important strategic considerations impacting upon overall channel

control are:­

- Degree of vertical integration

- Intensity of exposure

See the figure below: