CHAPTER 16: RETAIL COMMUNICATION MIX INSTRUCTOR NOTES ANNOTATED OUTLINE I.

Introduction See PPT 16-3 The communication program informs customers about the retailer as well as the merchandise and services it offers and plays a role in developing repeat visits and customer loyalty. Communication programs can have both long-term and short-term effects on a retailer's business. From a long-term perspective, communications programs can be used to create and maintain a strong, differentiated image of the retailer and its store brands. This image develops customer loyalty and creates a strategic advantage. Retailers frequently use communication programs to realize the short-term objective of increasing sales during a specified time period. Retailers often have sales during which some or all merchandise is priced at a discount for a short time.

II. Using Communication Programs to Develop Brand Images and Build Customer Loyalty A brand is a distinguishing name or symbol, such as a logo, that identifies the products or services offered by a seller and differentiates those products and services from the offerings of competitors.

See PPT 16-4

A. Value of Brand Image See PPT 16-5 Brands provide value to both customers and retailers. Brands convey information to consumers about the nature of the shopping experience the retailer's mix they will encounter when patronizing a retailer. They also affect the customers' confidence in decisions made to buy merchandise from Ask students how brands help them make decisions about products and retailers. One way to analyze the impact of brands on consumer decisions is to consider their decision to pull off an Interstate highway and stop to eat at a McDonald's versus some unknown local brand restaurant.

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a retailer. Finally, brands can enhance the customers' satisfaction with the merchandise and services they buy. The value that brand image offers retailers is referred to as brand equity. Strong brand names can affect the customers' decision-making process, motivate repeat visits and purchases, and build brand loyalty. In addition, strong brand names enable retailers to charge higher prices and lower their marketing costs. Customer loyalty to brands arises from heightened awareness of the brand and the emotional ties toward it. A strong brand image enables retailers to increase their margins. When retailers have high customer loyalty, they can engage in premium pricing and reduce their reliance on price promotions to attract customers. Brands with weaker images are forced to offer low prices and frequent sales to maintain their market share. Finally, retailers with strong brand names can leverage their brand to successfully introduce new retail concepts with only a limited amount of marketing effort.

B. Building Brand Equity See PPT 16-6, 16-7 The activities that a retailer needs to undertake to build the brand equity for its firm or its private-label merchandise are (1) create a high level of brand awareness, (2) develop favorable associations with the brand name, and (3) consistently reinforce the image of the brand.

1. Brand Awareness See PPT 16-8, 16-9 Brand awareness is the ability of a potential customer to recognize or recall that the brand name is a type of retailer or

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product/service. Thus brand awareness is the strength of the link between the brand name and the type of merchandise or service in the minds of customers. Aided recall is when consumers indicate they know the brand when the name is presented to them. Top-of-mind awareness, the highest level of awareness, arises when consumers mention a brand name first when they are asked about the type of retailer, a merchandise category, or a type of service. Retailers can build top-of-mind awareness by having memorable names; repeatedly exposing their name to customers through advertising, locations, and sponsorships; and using memorable symbols. Symbols involve visual images that typically are more easily recalled than words or phrases and thus are useful for building brand awareness.

The awareness and associations evoked by the brand in consumers' minds can also be discussed using positioning concepts discussed in Chapter 5.

For a hypothetical positioning diagram for women's clothing retailers, draw two separate axis -- fashion versus traditional and high/low service. Ask students to position the leading regional department store, Lerner's, The Gap, The Limited, Sears, K mart, Brooks Brothers, and JCPenney for women's clothing on the diagram. Discuss the various awareness and associations evoked by each retailer.

2. Associations See PPT 16-10 through 16-19 Brand associations are anything linked to or connected with the brand name in a consumers' memory. Some common associations that retailers develop with their brand name are (1) merchandise category, (2) price/quality, (3) specific attribute or benefit, and (4) lifestyle or activity. The brand image is a set of associations that are usually organized around some meaningful themes. a. Merchandise Category The most common association is to link the retailer to a category of merchandise, e.g., Office Depot. b. Price/Quality Ask students to name retailers whose image is linked to merchandise category, low price, high price, low quality, high quality, a lifestyle, convenience, etc.

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Some retailers, such as Neiman Marcus, want to be associated with offering high prices and unique, high fashion merchandise. Other retailers, such as WalMart, want associations with offering low prices and good value. c. Specific Attribute or Benefit

A retailer can link its stores to attributes such as convenience (7-Eleven) or service (Nordstrom). d. Lifestyle or Activity

Some retailers associate their name with a specific lifestyle or activity, e.g., The Nature Company.

3. Consistent Reinforcement The retailer's brand image is developed and maintained through the retailer's communication program as well as other elements of the communication mix, such as merchandise assortment and pricing, the design of its stores and website, and the customer service it offers. To develop a strong set of associations and a clearly defined brand image, retailers need to be consistent in portraying the same message to customers over time and across all elements of its retail mix. Retailers need to develop an integrated marketing communication program a program that integrates all of the communication elements to deliver a comprehensive, consistent message. Without this coordination, communication methods might work at cross-purposes. See PPT 16-23

C. Extending the Brand Name See PPT 16-20 and 16-21 Retailers can leverage their brand names to support their growth strategies. There are pluses and minuses to extending a brand name to a new concept. An

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important benefit of extending the brand name is that minimal communication expenses are needed to create awareness and a brand image for the new concept. Customers will quickly transfer the original brand's awareness and associations to the new concept. However, in some cases, the retailer might not want to have the original brand's associations connected with the new concept. These issues also arise as a retailer expands internationally. Associations with the retailer's brands that are valued in one country may not be valued in another. Retailers communicate with customers through five vehicles: advertising, sales promotion, publicity, store atmosphere and visual merchandising, and personal selling.

To illustrate the pluses and minuses of extending the brand name, give students examples of some well-known retailers, such as Wal-Mart, Circuit City, JCPenney, Kroger's, Blockbuster, and query them as to credibility of extending these brands to different hypothetical merchandise categories and retail store concepts.

II. Methods for Communicating with Customers The classification of communication methods is based on whether the methods are impersonal or personal and paid or unpaid.

See PPT 16-26 Ask students why retailers want to communicate with their customers? What do they want to tell them?

A. Paid Impersonal Communications Advertising, sales promotions, store atmosphere, and websites are examples of paid impersonal communications.

See PPT 16-25 Ask students to describe the different paid, personal communication they have received from retailers. Which form of paid, personal communication is most effective for communicating information about a sale? Information about the quality of merchandising carried in the store? Why?

1. Advertising Advertising is a form of paid communication to customers using impersonal mass media such as newspapers, TV, radio, direct mail, and the Internet. 2. Sales Promotion Sales promotions are paid impersonal communication activities that offer extra

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value and incentives to customers to visit a store and/or purchase merchandise during a specific period of time. The most common sales promotion is a sale. Other sales promotions involve special events, in-store demonstrations, coupons, and contests. Some retailers use in-store demonstrations and offer free samples of merchandise to build excitement in the store and stimulate purchases. Contests are promotional games of chance. They differ from price-off sales in that (1) only a few customers receive rewards and (2) winners are determined by luck. Coupons offer a discount on the price of specific items when they're purchased at a store. Although sales promotions are effective at generating short-term interest among customers, they are not very useful for building long-term loyalty. 3. Store Atmosphere The store itself provides paid impersonal communications to its customers. Store atmosphere is the combination of the store's physical characteristics, such as architecture, layout, signs and displays, color, lighting, temperature, sounds, and smells, which together create an image in the customer's mind. 4. Web Site Retailers use their websites to build their brand image; inform customers of store locations, special events, and the availability of merchandise in local stores; and sell merchandise and services. See PPT 16-27

B. Paid Personal Communications Retail salespeople are the primary vehicle

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for providing paid personal communications to customers. Personal selling is a communication process in which salespeople assist customers in satisfying their needs through face-to-face exchanges of information. E-mail is another paid personal communication vehicle that sends messages over the Internet. Retailers use e-mail to inform customers of new merchandise, confirm the receipt of an order, and indicate when an order has been shipped.

Communicating through salespeople is much more expensive than communicating through advertising. Ask students why department stores place more emphasis on paid personal versus impersonal communications. Why do supermarkets do just the opposite?

C. Unpaid Impersonal Communications See PPT 16-28 The primary method for getting unpaid impersonal communication is publicity. Publicity is communications through significant unpaid presentations about the retailer (usually a news story) in impersonal media. Publicity is often used to communicate with employees and investors. See PPT 16-29 Ask students if they have communicated with other students about retail stores. Why did they talk about the retailer? What did they say? Note word-of-mouth is usually about a bad experience, not a good experience. How can retailers stimulate favorable word-of-mouth? Ask students to describe some instances of retailers communicating through publicity. Publicity is cheap. Why don't retailers rely on publicity rather than advertising?

D. Unpaid Personal Communications Finally, retailers communicate with their customers at no cost through word of mouth (communication between people about a retailer). Word of mouth communications are very effective, but retailers encounter difficulties in harnessing that power in a disciplined, strategic way. Several firms, such as BzzAgent LLC, are now providing a service to help firms generate word of mouth.

E. Strengths and Weaknesses of Communication Methods Communications methods can be compared in terms of control, flexibility, credibility, and cost.

See PPT 16-26

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1. Control Retailers have more control when using paid versus unpaid methods. When using advertising, sales promotions, websites, e-mail, and store atmosphere, retailers determine the message's content, and for advertising, e-mail, and sales promotions, they control the time of its delivery. Retailers have less control over personal selling than other paid communication methods. Retailers have very little control over the content or timing of publicity and word-ofmouth communications. Ask students about the type of communication over which retailers have the most control. How can retailers control unpaid communications? Mergers, acquisitions, store openings and closing, and financial performance generate publicity. Discuss a recent event and ask students whether or not retailer received benefited from the publicity.

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2. Flexibility Personal selling is the most flexible communication method because salespeople can talk with each customer, discover their specific needs, and develop unique presentations for them. 3. Credibility Because publicity and word of mouth are communicated by independent sources, the information is usually more credible than information in paid communication sources. 4. Cost Publicity and word of mouth are classified as unpaid communication methods, but retailers do incur costs to stimulate them. . Paid impersonal communications often are economical. While maintaining a website on a server is relatively inexpensive, it is costly to design, continuously update the site, and promote the site to attract visitors, however, emails can be sent to customers at low cost. Typically, advertising in mass media advertising is most effective at building awareness. Websites, direct mail, and newspaper advertising are effective for conveying information about a retailer's offerings and prices. Personal selling and sales promotion are most effective at persuading customers to purchase merchandise. Mass media and magazine advertising, publicity, websites, and store atmosphere are most cost-effective at building the retailer's brand image and encouraging repeat purchases and store loyalty. Ask students if word-of-mouth and publicity are really free? Ask students which form is the most flexible in terms of tailoring the message to the specific customer.

Ask students which form of communications do customers find most credible -- the one in which they believe the information presented. Have students heard communications about a retailer they did not believe? Why?

III. Planning The Retail Communication Program The four steps in developing and

See PPT 16-28 Review steps in developing a communication

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implementing the retail promotion program are setting objectives, determining a budget, allocating the budget, and implementing and evaluating the mix. A. Setting Objectives Retailers establish objectives for promoting a program to provide (1) direction for people implementing the program and (2) a basis for evaluating its effectiveness. Some promotion programs have a longterm objective, such as creating or altering a retailer's brand image. Other communication programs focus on improving short-term performance, such as increasing store traffic on weekends. 1. Communication Objectives Retailers often use communications objectives rather than sales objectives to plan and evaluate their communication programs. Communication objectives are specific goals related to the retail promotion mix's effect on the customer's decision- making process. To effectively implement and evaluate a communication program, objectives must be clearly stated in quantitative terms. The target audience for the communication mix needs to be defined along with the degree of change expected and the time period over which the change will be realized. Even though vendors and retailers have different goals, they frequently work together to develop mutually beneficial outcomes.

program.

Discuss the goals for a communications program.

See PPT 16-31 and 16-32 Review the communication objectives. Ask students what communication problem is suggested by this pattern. What would a pattern look like if customers had little knowledge of the store? If customer only shopped during a sale? If customer found the location very inconvenient? Illustrate which methods are more effective at different stages of the decision making process. Why is advertising better than salespeople for creating awareness? Why are salespeople better than advertising for changing attitudes? How would an ad, directed at building awareness, differ from one directed at changing an attitude?

Describe the differences between the objectives and nature of the communications programs developed by retailers and vendors.

B. Setting The Communication Budget The second step in developing a retail promotion program is determining a

See PPT 16-33 Reviews the methods for setting a budget and illustrate the difference in the logic between marginal analysis and the rules of thumb

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budget. The economically correct method for setting the promotion budget is marginal analysis. 1. Marginal Analysis Method

methods.

See PPT 16-34 Marginal analysis is based on the economic principle that firms should increase promotion expenditures so long as each additional dollar spent generates more than a dollar of additional contribution. In most cases, however, it is very hard to do a marginal analysis because managers do not know the relationship between promotion expenses and sales. Sometimes, retailers do experiments to get a better idea of this relationship. 2. Objective-and-Task Method Ask students where the estimates come from. Indicate they are judgments that the manager has now stated explicitly.

See PPT 16-35 and 16-36 The objective-and-task method determines the budget required to undertake specific tasks for accomplishing communication objectives. The retailer first establishes a set of communication objectives. Then the necessary tasks and their costs are determined. The sum total of all costs incurred to undertake the tasks is the communication budget. 3. Rule-of-thumb Methods As in the marginal analysis, the relationship between the expenditures and the objective realized is based on the manager's judgment. The method simply quantifies the managers' judgment. By quantifying the judgments, people have a basis for discussing them.

In the previous two methods the communication budget is set by estimating communication activities' effects on the firm's future sales or communication objectives. The rule-of-thumb methods use the opposite logic by using past sales and communication activity to determine the present communication budget. a. Affordable Method

Ask students why the marginal analysis and objective-and-task methods are more appropriate than the rules of thumb for setting advertising budgets? If the rules of thumb are not good methods, why do retailers use them so frequently?

See PPT 16-37

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When using the affordable budgeting method, retailers first forecast their sales and expenses excluding communication expenses during the budgeting period. The difference between the forecast sales and expenses plus desired profit is then budgeted for the communication mix. The major problem with the affordable method is that it assumes that promotion expenses do not stimulate sales and profit. b. Percentage-of-sales Method See PPT 16-38 The typical advertising expenditures for food stores are 1.4% of sales. Ask students whether they would expect the typical expenditures for an everyday low pricing supermarket to be above or below 1.4%. Why? What about a convenience store?

The percentage-of-sales method sets the communication budget as a fixed percentage of forecast sales. Retailers use this method to determine the promotion budget by forecasting sales during the budget period and using a predetermined percentage to set the budget. The problem with the percentage-of-sales method is that it assumes the same percentage used in the past, or by competitors, is still appropriate for the retailer. One advantage of both the percentage-ofsales method and the affordable method for determining a communication budget is that the retailer will not spend beyond its means. c. Competitive Parity Method

See PPT 16-39

Under the competitive parity method, the communication budget is set so that the retailer's share of communication expenses equals its share of market. Like other rule-of-thumb methods, the competitive parity method does not allow retailers to exploit the unique opportunities or problems they confront in a market.

C. Allocation of the Promotional Budget After determining the size of the communication budget, the retailer decides

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how much of its budget to allocate to specific communication elements, merchandise categories, geographic regions, or long- and short-term objectives. Retailers often can realize the same objectives by reducing the size of the communication budget, but allocating the budget more effectively. An easy way to make such allocation decisions is just to spend about the same in each geographic region or for each merchandise category. Allocation decisions, like budget-setting decisions, should use the principles of marginal analysis. The retailer should allocate the budget to areas that will yield the greatest return. This principle for allocating a budget is sometimes referred to as the high-assay principle.

D. Planning, Implementing, and Evaluating Communication Programs Three Illustrations See PPT 16-40 The final two stages in developing a retail communication program are implementation and evaluation. 1. Advertising Campaign A specialty import home furnishing store decided to concentrate its limited budget on a specific segment and use highly distinctive copy and art in advertising. The advertising program emphasized the store's distinctive image. The newspaper was the major vehicle. An inexpensive tracking study was used to measure the campaign's effectiveness. 2. Sales Promotion Opportunity Many sales promotion opportunities undertaken by retailers are initiated by vendors. See PPT 16-43 Discuss the factors a retailer needs to consider when evaluating a promotion. Discuss how each factor has either a positive or negative effect on the retailer's profits. See PPT 16-41 and 16-42 Review the communication program developed by the furniture company in the text and how the retailer evaluated the effectiveness of the campaign.

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To evaluate a trade promotion, the retailer should consider (1) the realized margin from the promotion, (2) the cost of the additional inventory carried due to buying more than the normal amount, (3) the potential increase in sales from the promoted merchandise, (4) the potential loss suffered when customers switch to the promoted merchandise from more profitable unpromoted brands, and (5) the additional sales made to customers attracted to the store by the promotion. 3. Special Promotion Using a CRM/Campaign Management Tool

See PPT 16-44

A national retailer used a CRM/Campaign management system to plan, design, evaluate, and implement a special promotion. Direct-mail and e-mail communication channels were used along with supporting in-store promotions and existing advertising. A what-if analysis was conducted and the campaign plan was built with all the details and responsibilities of each department. The action plan included all the required steps in the campaign process, along with costs, dependencies, and deadlines on the marketing production schedule. The successful campaign was then templated for future use. Management was able to optimize resources and manage deadlines and deliverables, thus increasing productivity, efficiency, and ROI.

IV. Summary VI. Appendix 16A: Implementing Retail Advertising Programs Implementing an ad program involves developing the message, choosing the specific media to convey the message, and determining the frequency and timing of

See PPT 16-46

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the message. I. Developing the Advertising Message See PPT 16-47 Most retail advertising messages have a short life and are designed to have an immediate impact. This immediacy calls for a copy writing style that grabs the readers attention. Evaluate several ads that you cut out of the newspaper or magazines.

A. Assistance in Advertising Retailers get assistance in developing advertising campaigns from vendors through their co-op programs, advertising agencies, and media companies. 1. Cooperative advertising Cooperative (co-op) advertising is a program undertaken by a vendor. The vendor pays for part of the retailer's advertising, but the vendor dictates some conditions for the advertising. Co-op advertising enables a retailer to increase its advertising budget. Co-op advertising programs are often used to support a vendors efforts to discourage retailers from discounting the vendors products. Co-op advertising has other drawbacks. First, vendors want the ad to feature their products, while retailers are more interested in featuring their store's name, location, and assortment of merchandise and services offered. In addition, ads developed by the vendor often are often used by several competing retailers and may list the names and locations of all retailers offering their brands. Finally, restrictions the vendor places on the ad may further reduce its effectiveness for the retailer. Ask students the advantages and disadvantages of cooperative advertising.

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Retailers and vendors can also work together as partners on a co-marketing program. 2. Agencies Invite a local ad agency to come to class and describe an ad campaign they developed for a retail client. Ask students to discuss the advantages and disadvantages of using an ad agency versus having an internal advertising department design and place ads.

Advertising agencies are often used by large retailers to develop ads for store image campaigns. Many small retailers use local agencies to plan and create their advertising. Agencies also work on other aspects of the promotion programs, such as contests, direct mail, and special promotions. 3. Media Companies

The advertising media offer services to local retailers ranging from planning an ad program to actually designing the ads. See PPT 16-48, 16-49, and 16-50 Wal-Mart is the largest merchant. Why is Wal-Mart's advertising budget much small than Sears and Penney -- companies that are much smaller than Wal-Mart.? Why does McDonald's spend very little on newspapers compared to other retailers?

II. Choosing the Most Effective Advertising Medium The media used for retail advertising are newspapers, magazines, direct mail, radio, TV, outdoor billboards, the Internet, shopping guides, and the Yellow Pages.

A. Newspapers Growth in retail newspaper advertising has slowed recently as retailers have begun using other media. Still, 16 of the nation's 25 largest newspaper advertisers are retailers. In addition to displaying ads with their editorial content, newspapers distribute free-standing inserts -- an ad printed at the retailer's expense and distributed as an insert in the newspaper. Since newspapers are distributed in a welldefined local market area, they are effective at targeting retail advertising. Newspapers also offer quick response, given that there is a short time between the Ask students about the future of retail advertising in newspapers. What factors might cause it to increase in the future? Decrease in the future? Show examples of preprints from local newspapers. Why does Kmart and JCPenney use preprints rather than just buying ad space in the paper? Have a salesperson calling on retail accounts for local newspaper talk in class.

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deadline for receiving the ad and the time that the ad and the time that the ad will appear. Newspapers, like all print media, effectively convey a lot of detailed information, but are usually not effective for showing merchandise because of the poor reproduction quality. The life of a newspaper ad is short because the newspaper is usually discarded after it is read. The cost of developing newspaper ads is very low, but the cost of delivering the message may be high if the newspaper's circulation is broader than the retailer's target market, thus requiring the retailer to pay for exposures that won't generate sales.

B. Magazines Retail magazine advertising is mostly done by national retailers, but magazine advertising is increasing with the growth of local magazines and regional editions of national magazines. Retailers tend to use this medium for image advertising because reproduction quality is high. A disadvantage is that the timing of a magazine ad is difficult to coordinate with special events and sales. Ask students what types of advertising work best in magazines. What retailers tend to use magazines rather than other media?

C. Direct mail Retailers frequently use the data collected at POS terminals to target its advertising and sales promotions to specific customers using direct mail. Retailers' lists of credit card customers are often used as a mailing list. Retailers can also purchase a wide variety of lists for targeting consumers with specific demographics, interests, and Ask students what types of advertising work best using direct mail. What retailers tend to use direct mail rather than other media?

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life-styles. Also, many retailers encourage their salespeople to maintain a preferred customer list and use it to mail personalized invitations and notes. While direct mail can be very effective due to the ability to personalize the message, it is also costly. Many consumers ignore direct-mail advertising and treat it as junk mail.

D. Television TV commercials can be placed on a national network or a local station. A local commercial is called a spot. Retailers typically use TV for image advertising. To offset the high production and broadcast costs, many suppliers provide modular commercials, in which the retailer can insert its name or a "tag" after information about the vendor's merchandise. Ask students what types of advertising work best using television. What retailers tend to use television rather than other media?

E. Radio Many retailers use radio advertising because messages can be targeted to a specific segment of the market and production and placement costs are generally low. However, one disadvantage of radio is that listeners generally treat the radio broadcast as background, which limits the attention they give the message. Ask students what types of advertising work best using radio. What retailers tend to use radio rather than other media?

F. Internet See PPT 16-51 and 16-52 Three uses of the Internet by retailers to communicate with customers are (1) banner ads and affiliate programs to generate awareness and (2) websites to provide information about merchandise and special events, and (3) e-mails to target messages. Ask students if they pay attention to banner ads and affiliate programs on the Internet. Have they ever purchased something as a result?

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Banner ads and affiliate programs are very effective for targeting communication, but they are not cost effective for building awareness because the large number of web sites reduces the number of customers visiting a site and seeing a particular ad. However, Internet advertising is an excellent vehicle for conveying information to customers. Retailers can use the Internet to send emails to customers informing them of special events and new merchandise

G. Outdoor Billboards Billboards and other forms of outdoor advertising are effective vehicles for creating awareness for a limited amount of information to a narrow audience. Outdoor advertising is typically used to remind customers about the retailer or to inform people in cars of nearby retail outlets. Ask students what types of advertising work best using outdoor. What retailers tend to use outdoor rather than other media?

H. Shopping Guides Shopping guides are free papers delivered to all residents in a specific area. This medium is particularly useful for retailers who want to saturate a specific trading area. Shopping guides are very cost-effective and assure the local retailer 100 percent coverage in a specific area. Show local shopping guides and review retailers using guides.

I. Yellow Pages The Yellow Pages are useful for retailers because they have a long life. The Yellow Pages are used as a reference by consumers who are definitely interested in making a purchase and seeking information. Show examples of retailer display ads in the Yellow Pages and evaluate them. Why do small retailers tend to have display ads in the Yellow Pages while the national chains do not?

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J. Factors in Selecting Media See PPT 16-54 To convey their message with the most impact to the most consumers in the target market at the lowest cost, retailers need to evaluate media in terms of coverage, reach, cost, and impact of the advertising messages delivered through the medium. 1. Coverage Coverage refers to the number of potential customers in the retailers target market that could be exposed to an ad in a given medium. 2. Reach In contrast to coverage, reach is the actual number of customers in the target market exposed to an advertising medium. If on any given day, 60 percent of the potential customers who receive the newspaper actually read it, then the reach of the newspaper would be 36,000 (60 percent X 60,000). Retailers often run an ad several times, in which case they calculate the cumulative reach for the sequence of ads. When evaluating Internet advertising opportunities, the measure used to assess reach is the number of unique visitors the number of different people who access the web page on which the ad is located. 3. Cost The cost per thousand (CPM) measure is often used to compare media. Typically, CPM is calculated by dividing an ad's cost by its reach. CPM is a good method for comparing similar size ads in similar media, but CPM can be misleading when comparing the cost-effectiveness of ads in different types Review the example in the book to calculate cost per thousand and compare media Ask students when would they want to emphasize reach versus coverage. Ask students what media they would use if they opened up a new fast food restaurant near school, a bookstore, or a bicycle shop. Ask students to compare the various media in terms of coverage, reach, cost, and impact for the new stores.

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of media, such as newspaper and TV. A TV ad may have a lower CPM than a newspaper ad, but the newspaper ad may be much more effective at achieving the ads communication objectives, such as giving information about a sale. 4. Impact Why is radio so ineffective at gaining attention and creating recognition for a retailers name? Why is direct mail so effective at providing Due to their unique characteristics, different information and emphasizing quality? What media would be best for announcing a sale? media are particularly effective at Improving a stores image? accomplishing different promotion tasks. Impact is an ad's effect on the audience. TV is particularly effective at generating an audience's attention, demonstrating merchandise, changing attitudes, and announcing events. Magazines are particularly appropriate for emphasizing the quality and prestige of a store and its offering and for providing detailed information to support quality claims. Newspapers are useful for providing price information and announcing events. Websites are particularly effective for demonstrating merchandise and providing information. Outdoor advertising is most effective at promoting a retailer's name and location. Ask students to develop a media plan for a new pizza parlor selecting the media and indicating the timing of the ads. Assume the pizza parlor has new home delivery and pick-up near campus, but, The frequency and timing of ads determines no table service. The restaurant anticipates how often and when customers will see the annual sales of $200,000 and has budgeted 2% retailer's message. of sales for advertising. For what type of messages would a retailer want high frequency?

III. Determining Ad Frequency and Timing

A. Frequency Frequency is how many times the potential customer is exposed to an ad. The appropriate frequency depends on the

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ads objective. Typically, several exposures to an ad are required to influence a customer's buying behavior. Ask students when it would be best to place ads for a weekend sale at a local department store. A week before the sale, a couple days before, Friday before, Saturday, Sunday? Why? What is the best day for weekly sales ads placed by a supermarket? Why?

B. Timing Typically, an ad should appear on, or slightly preceding, the days when consumers are most likely to purchase merchandise.

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ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS

1.

How do brands benefit consumers? Retailers? In a competitive marketplace with numerous offerings, brands are crucial for identifying, differentiating, and recognizing individual offerings or retailers. For the consumers as well as retailers, brands represent evaluations, experiences and meanings associated with a product's consumption or retail mix. Brands convey information to consumers about the nature of the shopping experience the retailer's mix they will encounter when patronizing a retailer. Consumers can invoke their past evaluations and experiences as well as what they perceive the brand to represent in terms of quality, etc. These affect consumers' confidence in their decisions to buy merchandise from a retailer. Moreover, given the quality assurance and other signals associated with the brand, consumers' can feel more satisfied with the merchandise and service they buy. For retailers, brand image or brand equity helps affecting consumer decision-making processes and helps them motivate consumers to make repeat visits and purchases. Retailers could leverage their brand image to create emotional ties between consumers and brands and thus, build brand loyalty. Strong brand names help retailers differentiate their offerings from competition and also help them charge higher prices, while lowering the marketing costs associated with promotion and selling. Strong brand image helps retailers increase their margins and reduce their reliance on price promotions to attract consumers. Moreover, once a brand reputation is established, retailers can successfully introduce new retail concepts with limited marketing effort.

2.

How can advertising, personal selling, and promotion, complement one another in an integrated marketing communications program? Integrated marketing communications is the strategic integration of multiple communication methods to form a comprehensive, consistent message. An example of how advertising, personal selling, and promotion complement each other is Lane Bryants integrated approach to target the African American market. The focus of the program was a five-city mall tour coordinated by Essence magazine. Radio and TV ads were used to inform customers about the tour and the special mall event. Prior to the arrival of the tour, direct mail announcements were sent to consumers in the city announcing the mall event and the presenting Lane Bryants offering for African American customers. Ads with discount coupons placed in the Essence issues distributed during the tour offered additional encouragement to visit Lane.

3.

As a means of communicating with customers, how does advertising differ from publicity? Advertising is a form of paid communication to customers using impersonal mass media such as newspapers, TV, radio, and direct mail. Publicity is communications through significant unpaid presentations about the retailer (usually a news story) in impersonal media. Retailers have more control when using paid versus unpaid methods. When using advertising, retailers determine the message's content and the time of its delivery. Retailers have very little control over the content or timing of publicity. Since unpaid communications are designed and

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delivered by people not employed by the retailer, they can communicate unfavorable as well as favorable information. Because publicity is generated by independent sources, its information is usually viewed as more credible than the information in paid communication sources. It is important to note that generating publicity may be more costly than advertising. Creating a newsworthy event is typically very expensive, whereas placing an individual ad may not be. Basis of Comparison Control Advertising High control - retailer designs the ads Limited flexibility -Same message delivered to all people in audiences for media. themes and messages can be changed, but changes can not be made very quickly. Low credibility --consumers know that advertising is try to sell something. Modest cost --retailers pays for developing the ads and placing them in media. Publicity Low control -newspapers and magazine determine what is written about event or issue Limited flexibility -Same message delivered to all people in audiences for media.

Flexibility

Credibility

Cost

High credibility consumers feel the information is from an independent source. Low cost -- Retailer does not pay the media for the delivering the message, although there may be significant cost in developing a news worthy event.

4.

For which of the following growth opportunities do you think the retailer should use its brand name when pursuing the opportunity? Why? (a) McDonald's starts a new chain of restaurants to sell seafood in sit-down environment competing with Red Lobster. (b) Sears starts a chain of stand-alone stores that sell just home appliances. (c) Blockbuster starts a chain of stores selling consumer electronics. When extending a brand name to support growth opportunities, careful attention must be placed to the associations that consumers place on the current brand image as well as the extent to which the new growth opportunity is consistent with merchandise/concept for which the brand name is currently known in the market. (a) McDonald's is primarily known as a fast-food restaurant emphasizing convenience as its major differentiating feature, apart from food quality and service. It is debatable if consumers would be able to transfer McDonald's reputation of convenience, quality and service to a sit-down restaurant competing with Red Lobster. It may take more time, effort and money for McDonald's to convey and convince customers that McDonald's seafood restaurant provides great food and great service. In fact, it may be more cost-effective for McDonald's to open a seafood restaurant under a different name and create brand awareness and image for the new brand in the new market.

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(b) Sears is known for its reputation for selling home appliances and many of its private brands are leaders in their respective product categories. The Kenmore brand image evokes a history of quality and reliability and the Sears name has sufficient pull among consumers of home appliances. Given this synergy between the new retail concept/merchandise and the brand associations, Sears could use its existing brand names for the new concept. (c) Blockbuster is a market leader in the home video rental business. But, at the same time, Blockbuster's expertise in motion pictures is limited to the rental and sales to home consumers. Thus, the Blockbuster name is more associated with a specific type of retail concept that of rentals than with movies or electronics. There may be more positive associations if Blockbuster simply rents out consumer electronics (something that it already does in a limited way) than sell consumer electronics.

5.

What factors should be considered in dividing up the advertising budget among a store's different merchandise areas? Which of the following should receive the highest advertising budget: fashionable women's clothing, men's underwear, women's hosiery, or kitchen appliances? Why? The basic principle that should be considered in allocating the advertising budget across merchandise categories is the marginal return -- the greatest bang per buck. The question that needs to answered is: Which category will generate the most sales and profits from an additional dollar of advertising? Men's underwear and women's hosiery are probably not good candidates for advertising expenditures. This merchandise is frequently bought on impulse. Consumers usually are not stimulated to visit a department store in response to ads for this merchandise. On the other hand, women's fashion is a good candidate for high advertising expenditures. Consumers will be motivated to visit a department by ads for this type of merchandise. They typically buy this type of merchandise in a department store and visit department stores to see what the new fashions are. Also the image of a department store is often based on the nature of its fashionable merchandise, not its men's underwear, women's clothing, or kitchen appliances.

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6.

Outline some elements in a communication program to achieve the following objectives: (a) Increase store loyalty by 20 percent. (b) Build awareness of the store by 10 percent. (c) Develop an image as a low-price retailer. How would you determine whether the communication program met the objective? (See Chart Below) Objective increase store loyalty by 20%. Approach for Achieving Objective Frequent shopper program where customer earn points for making more purchases Introduce private label merchandise only available at store install a large sign in front of store hold an event that generates publicity radio or bill board advertising emphasizing the name and location of the store undertake image advertising on TV or in magazines Technique for Measuring Objective telephone or mail survey taken before and after new program asking customers their degree of loyalty, percent of expenses in category bought from store.

build awareness of the store by 10%.

develop an image as a low-price retailer.

telephone or mail survey taken before and after new program asking customers to name of the store they would consider (unaided recall) and then indicate whether o not they know of these stores (aided recall) telephone or mail survey taken before and after new program asking customers to describe the fovcial stores and other stores on a set of characteristics

7.

Retailers use TV advertising to build a brand image. TV advertisers have identified many types of markets on the basis of the day, time, and type of show during which their ads may appear. During which days, times, and types of shows would retailers advertise fresh produce and meat, power drills, beer, and health club memberships? Why? Fresh produce and meat -- This merchandise is typically bought by female homemakers -- people who prepare full meals. Thus a retailer would want to advertising on program watched by females and time the advertisements so that they are seen just before the consumers plan to go to the store to buy food for preparing a meal. Perhaps day-time talk shows and soap operas would be good candidates for advertising this merchandise. Power drills and beer are bought, used, and consumed primarily by men. Thus a retailer might consider advertising these products on TV coverage of sporting events. The power tools might also be advertised on a program about home repairs like This Old House or Home Improvements. In terms of timing, the ads might be placed just before the beginning of a weekend when the repairs are generally done.

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Health Club memberships might be advertised on exercise shows. Might consider advertising after consumer consumes have engaged in some "unhealthy" behaviors such as eating excessively during holidays or not getting much exercise during the winter.

8.

A retailer plans to open a new store near a university. It will specialize in collegiate merchandise such as tee-shirts, fraternity/sorority accessories, and sweat shirts. Develop an integrated communication program for the retailer. What specific advertising media should the new store use to capture the university market? While student responses will vary, some possible ideas are: The new retailer may want to use newspapers to reach this market. Student newspapers usually have a high student readership and will probably be an excellent choice. The local newspaper may also be a good choice, since the professors, staff, and some of the students will probably read it. Magazines associated with the university may also be a good place to advertise. Special magazines devoted to alumni or athletic events probably will help to focus in on the university market. A direct mailing may be good especially if the store can take advantage of a free campus mail system. Even if a free campus mail system is not available, using the student directory may be a good way to develop a mailing list that specifically targets this population. Radio, especially stations that carry formats popular with college students may be appropriate. If there is a university station, the store should look into purchasing advertising time, since the university students probably constitute the majority of the audience, and the time on these stations is usually relatively inexpensive. In terms of television, if the university has its own station, it may be a good idea to investigate purchasing time. Unless a specific television event related to the university is shown (such as an athletic event) television is probably not the best way to reach this market. Finally, outdoor advertising such as signs and posters around campus may be effective.

9.

Cooperative (co-op) advertising is a good way for a retailer to extend an advertising budget. Why isn't it always in a retailer's best interests to rely extensively on co-op advertising? Cooperative advertising can be overly restrictive, in that the retailer may be forced to spend a certain amount of space or time devoted to a particular product. In addition, the manufacturer may require that a certain ad be used which may also be used by competing retailers. Finally, manufacturer imposed time restrictions and media selection restrictions may not be convenient to or conducive for the retailer.

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10.

What positive brand associations do customers have with retail brand names? Select Target, Sears, Tiffany, or your favorite retail store and complete the table below: Retail brand: _______________________ Characteristic 1. Merchandise category 2. Price/quality 3. Attribute/benefit 4. Lifestyle/activity A sample answer for Target might include the following. Favorable Brand Association

Retail brand: Target Characteristic 1. Merchandise category 2. Price/quality 3. Attribute/benefit 4. Lifestyle/activity Favorable Brand Association Many of them! Great quality for reasonable price Variety, fashions, designers, convenience Something for everyone

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ANCILLARY LECTURES AND EXERCISES Ancillary Lecture 16-1: The Internet As An Advertising Medium
The following lecture notes can be used with PowerPoint slides 16-40 to 16-48. PPT # 16-40 Comments Internet advertising is a very small percent of the advertising expenditures for all U.S. firms across all industries now but expected to grow significantly. How does the use of different media by retailers differ from the other industries? Retailers tend to use more newspaper advertising since they primarily use advertising to promote sales rather than build an image of their store. Internet Advertising Multichannel retailers are using the Internet to build traffic. Applications However, the nature of the advertising expenses has shifted from banners to affiliate programs. Internet Advertising The Internet is a unique medium. While most media push messages Medium to a passive consumer, the Internet allows consumers to actively seek, or pull advertising. The Internet is much better at targeting messages and personalizing them, but it has a narrow reach compared to TV. The Internet is also unique in terms of measurability the advertiser knows which site each visitor came from. Thus Internet advertising allows a performance based fee (click throughs, purchases by visitors clicking through) rather than a flat fee for the placement of an ad. Types of Internet These different types are in order from the least effective to the most Advertising effective in stimulating traffic and purchases. Problems with It is difficult to compare the effectiveness of Internet advertising with Measuring other media using the typical reach and frequency measures. The Effectiveness Internet measure of reach, its unique visitors and the measure of frequency pages downloaded. The unique visitor measure is effected by the use of cookies and differ IP addresses. The pages downloaded measure is affected by caching. While Internet measures of effectiveness can be erroneous, they are useful for comparing the effectiveness of ad placements as different sites. Internet Ad The two approaches for measuring the effectiveness of Internet Measurement Models advertising are using a panel of consumers and tracking their Internet usage or counting visitors and page downloads on specific site. Each approach has its problems and limitations. Measuring These are measures that e-retailers use to assess traffic at their site Effectiveness Internet and relate to the communication goals discussed in the chapter. Marketer Perspective Generating Traffic This slide lists the approaches for generating traffic to a site. for Site Effectiveness of This slide lists the approaches for assessing how well an e-retailers Traffic Building traffic building strategies are working. Approaches Title U.S. Expenditures on Advertising

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