CH-15-16 Developing Integrated Marketing Communications – Business : Chapter Notes

This Document Contains Chapters 15 to 16 CHAPTER 15 Developing Integrated Marketing Communications 15.1 A WORD FROM THE AUTHORS This chapter concludes our unit on marketing. We focus on promotion, the fourth ingredient in the marketing mix. Because marketing is commonly (and erroneously) equated with promotion, we stress that promotion is communication—the process of informing, persuading, or reminding target markets of an organization or its products. We analyze each of the four principal elements in an organization’s promotion mix: advertising, personal selling, sales promotion, and public relations. Then we define selective, institutional, and primary-demand advertising and briefly describe various advertising media. We also outline the major steps in developing an advertising campaign. Next, we classify the types of personal selling, noting the importance of effective sales management. We also enumerate sales promotion objectives and point out effective techniques for reaching those objectives. Then we discuss several types and uses of public relations. Finally, we discuss promotion planning, the process of determining which of a firm’s marketing objectives call for promotion and which combination of promotion-mix ingredients will be most effective. 15.2 TRANSITION GUIDE New in Chapter 15: Developing Integrated Marketing Communications • A new example about the BP oil spill has been added to the section “The Role of Promotion.” • The Career Success feature, “Help Wanted: Marketing Communications,” has been deleted. • Updated statistics have been included in the section “Advertising.” • A new example about The Corn Refiners Association has been added to the section “Primary-Demand Advertising.” • A new example about BP’s ongoing campaign to clean up the Gulf of Mexico has been added to the section “Institutional Advertising.” • Updated statistics have been included in the section “Magazines.” • The Sustaining the Planet feature, “Go Postal for Greener Direct Mail Advertising,” has been deleted. • Updated statistics and examples have been included in the “Television” section. • A new example has been added to the “Internet” section. • A new Going for Success feature, “IKEA Remodels Perceptions with Fix This Kitchen,” describes how IKEA launched a new campaign to help change consumers’ perceptions of the store and to get consumers to the Web site. • The Ethical Challenges & Successful Solutions feature, “How Many Times Can a Company Violate a Customer’s Trust? Only Once!,” has been deleted. • New examples have been added to the section “Social Media.” • A new Social Media feature, “The Best Snacks on Earth,” describes how Frito-Lay uses social media effectively. • New examples have been added to the “Major Steps in Developing an Advertising Campaign” and “Samples” sections. • Table 15.1, “Who Spends the Most on Advertising?,” has been updated. • A new Entrepreneurial Success feature, “Via Ad Agency,” describes how Via is known for its responsive, results-oriented service. • Updated statistics and examples are included in the section “Coupons.” • A new example about how E3 is the world’s largest trade show for computers and video games has been added to the section “Trade Shows.” • A new example about how companies are using social media for public relations has been added to the section “The Uses of Public Relations.” • An example about how Nature Valley launched a new campaign has been added to the “Increasing Market Share” section. • A new Return to Inside Business about Old Spice have been provided at the end of the chapter. • A new Case 15.2, “Rebuilding Trust at Toyota,” has been added. • The Building Skills for Career Success section contains a new Social Media Exercise. • The Exploring the Internet feature in Building Skills for Career Success has been deleted. 15.3 QUICK REFERENCE GUIDE Instructor Resource Location Transition Guide IM, pp. 564–565 Learning Objectives Textbook, p. 423; IM, p. 567 Brief Chapter Outline IM, pp. 567–568 Comprehensive Lecture Outline IM, pp. 569–584 At Issue: Should beer and wine, as well as other alcoholic products, be banned from being advertised on television? IM, p. 577 Going for Success IKEA Remodels Perceptions with Fix This Kitchen Textbook, p. 431 Social Media The Best Snacks on Earth Textbook, p. 432 Entrepreneurial Success Via Ad Agency Textbook, p. 435 Inside Business By Incorporating Hot Guys and Humor, Old Spice Heats Up on Profits Textbook, p. 424 Return to Inside Business Textbook, p. 446 Questions and Suggested Answers, IM, p. 585 Marginal Key Terms List Textbook, p. 448 Review Questions Textbook, pp. 448–449 Questions and Suggested Answers, IM, pp. 585–588 Discussion Questions Textbook, p. 449 Questions and Suggested Answers, IM, pp. 588–589 Video Case 15.1 (L.L.Bean Employs a Variety of Promotion Methods to Communicate with Customers) and Questions Textbook, pp. 449–450 Questions and Suggested Answers, IM, pp. 589–590 Case 15.2 (Rebuilding Trust at Toyota) and Questions Textbook, pp. 450–451 Questions and Suggested Answers, IM, pp. 590–591 Building Skills for Career Success Textbook, p. 451 Suggested Answers, IM, pp. 591–592 IM Quiz I & Quiz II IM, pp. 593–595 Answers, IM, pp. 595–596 Classroom Exercises IM, pp. 596–597 15.4 LEARNING OBJECTIVES After studying this chapter, students should be able to: 1. Describe integrated marketing communications. 2. Understand the role of promotion. 3. Explain the purposes of the three types of advertising. 4. Describe the advantages and disadvantages of the major advertising media. 5. Identify the major steps in developing an advertising campaign. 6. Recognize the various kinds of salespersons, the steps in the personal-selling process, and the major sales management tasks. 7. Describe sales promotion objectives and methods. 8. Understand the types and uses of public relations. 9. Identify the factors that influence the selection of promotion-mix ingredients. 10. Identify and explain the criticisms of promotion. 15.5 BRIEF CHAPTER OUTLINE I. What Is Integrated Marketing Communications? II. The Role of Promotion III. The Promotion Mix: An Overview IV. Advertising A. Types of Advertising by Purpose 1. Primary-Demand Advertising 2. Selective-Demand Advertising 3. Institutional Advertising B. Advertising Media 1. Newspapers 2. Magazines 3. Direct Mail 4. Yellow Pages Advertising 5. Out-of-Home Advertising 6. Television 7. Radio 8. Internet 9. Social Media C. Major Steps in Developing an Advertising Campaign 1. Identify and Analyze the Target Audience 2. Define the Advertising Objectives 3. Create the Advertising Platform 4. Determine the Advertising Appropriation 5. Develop the Media Plan 6. Create the Advertising Message 7. Execute the Campaign 8. Evaluate Advertising Effectiveness D. Advertising Agencies V. Personal Selling A. Kinds of Salespersons 1. Order-Getters 2. Order-Takers 3. Support Personnel B. The Personal-Selling Process 1. Prospecting 2. Approaching the Prospect 3. Making the Presentation 4. Answering Objections 5. Closing the Sale 6. Following-Up C. Managing Personal Selling VI. Sales Promotion A. Sales Promotion Objectives B. Sales Promotion Methods 1. Rebates 2. Coupons 3. Samples 4. Premiums 5. Frequent-User Incentives 6. Point-of-Purchase Displays 7. Trade Shows 8. Buying Allowances 9. Cooperative Advertising VII. Public Relations A. Types of Public-Relations Tools B. The Uses of Public Relations VIII. Promotion Planning A. Promotion and Marketing Objectives 1. Providing Information 2. Increasing Market Share 3. Positioning the Product 4. Stabilizing Sales B. Developing the Promotion Mix IX. Criticisms of Promotion 15.6 COMPREHENSIVE LECTURE OUTLINE Promotion is communication about an organization and its products that is intended to inform, persuade, or remind target market members. A promotion mix (sometimes called a marketing communications mix) is the particular combination of promotional methods a firm uses to reach a target market. In this chapter, we examine the promotion methods of advertising, personal selling, sales promotion, and public relations. I. WHAT IS INTEGRATED MARKETING COMMUNICATIONS? Integrated marketing communications is the coordination of promotion efforts to ensure maximum informational persuasive impact on customers. A major goal of integrated marketing communications is to send a consistent message to customers. This approach fosters long-term customer relationships and efficient use of promotional resources. Integrated marketing communications has been increasingly accepted for a number of reasons. Mass-media advertising is used less today because of its high costs and unpredictable audience sizes. Marketers can now take advantage of more precisely targeted promotional tools, such as cable TV, direct mail, DVDs, the Internet, special-interest magazines, and podcasts. Database marketing allows marketers to be more precise in targeting individual customers. Until recently, specialists handled different aspects of marketing communication campaigns. Advertising agencies provided advertising campaigns, sales promotion companies provided sales promotion activities, and public relations firms handled public-relations efforts. Today, firms can rely on organizations that provide one-stop shopping to clients for all these activities. This is beneficial because marketing communications can be expensive, and it is important to ensure that promotional resources are used as efficiently as possible. Firms are even relying on customers to help develop effective advertisements and to design promotional activities. Viral marketing is another way to achieve broad advertising reach via digital channels for minimal cost. II. THE ROLE OF PROMOTION. Promotion is commonly the object of two misconceptions. The first misconception is that visible promotional activities such as advertising and personal selling make up the entire field of marketing. The second misconception is that people sometimes consider promotional activities to be unnecessary, expensive, and the cause of higher prices. Neither view is accurate. The role of promotion is to facilitate exchanges directly or indirectly by informing individuals, groups, or organizations and influencing them to accept a firm’s products or to have more positive feelings about the firm. To expedite exchanges directly, marketers convey information about a firm’s goods, services, and ideas to particular market segments. To bring about exchanges indirectly, marketers address certain interest groups, regulatory agencies, investors, and the general public concerning a company and its products. The broader role of promotion, therefore, is to maintain positive relationships between a company and groups in the marketing environment. Marketers frequently design promotional communications for specific groups, although some may be directed at wider audiences. Several different messages may be communicated simultaneously to different market segments. Marketers must plan, implement, and coordinate promotional communications to make the best use of them. The effectiveness depends greatly on the quality and quantity of information available to marketers about the organization’s marketing environment. (See Figure 15.1.) Marketers must gather and use information about particular audiences to communicate successfully with them. III. THE PROMOTION MIX: AN OVERVIEW. The methods that are combined to promote a particular product make up the promotion mix for that item. Advertising, personal selling, sales promotion, and public relations are the four major elements in an organization’s promotion mix. (See Figure 15.2.) Multiple elements are used in a promotion mix, depending on the type of product and target market involved. Advertising is a paid, nonpersonal message communicated to a selected audience through a mass medium. Personal selling is personal communication aimed at informing customers and persuading them to buy a firm’s products. Sales promotion is the use of activities or materials as direct inducements to customers or salespersons. Public relations is a set of communication activities used to create and maintain favorable relations between an organization and various public groups, both internal and external. Teaching Tip: Ask students to classify each of the following promotion efforts as advertising, public relations, sales promotion, and/or personal selling. • McDonald’s uses television to tell consumers about free French fries with purchase of a Big Mac. • A Toyota salesperson tells customers about the quality of Michelin tires. • CNN has a story about Keebler’s latest ad campaign. The story features a commercial with elves. • Quaker Oats places an ad in Good Housekeeping magazine with a coupon attached. • A pharmaceutical salesperson leaves free samples with a physician. Teaching Tip: Use the “Advertising Slogan Fun Quiz” to introduce the next section. Students are asked to identify the advertised brand from the listed slogans. This can be done individually or in groups and takes three to five minutes. IV. ADVERTISING. Figure 15.3 shows the proportion of total advertising dollars spent on selected media. A. Types of Advertising by Purpose. Depending on its purpose and message, advertising may be classified into three groups. 1. Primary-Demand Advertising. Primary-demand advertising is advertising aimed at increasing demand for all brands of a product within a specific industry. 2. Selective-Demand Advertising. Selective-demand (or brand) advertising is advertising that is used to sell a particular brand of product. a) It is the most common type of advertising and accounts for the lion’s share of advertising expenditures. b) Selective advertising that aims at persuading consumers to make purchases within a short time is called immediate-response advertising. c) Selective advertising aimed at keeping a firm’s name or product before the public is called reminder advertising. d) Comparative advertising compares specific characteristics of two or more identified brands. Teaching Tip: Ford Motor Company has been running some aggressive comparative advertising against the Toyota Camry (see YouTube). You may wish to show the ads and then go to http://usnews .rankingsandreviews.com/cars-trucks/Sedan-Smackdown-Ford-Fusion-vs-Toyota-Camry/ to see how U.S. News ranks them. Ask students how they feel about these specific commercials and comparative advertising in general. Follow up with a question about any ads they feel have gone too far in disparaging competition. 3. Institutional Advertising. Institutional advertising is advertising designed to enhance a firm’s image or reputation. B. Advertising Media. The advertising media are the various forms of communication through which advertising reaches its audience. 1. Newspapers. A large proportion of newspaper advertising is purchased by local retailers because it is relatively inexpensive compared to other media. a) It also provides only local coverage, so advertising dollars are not wasted in reaching people who are outside the market area. b) It is also timely; ads can be placed just a few days before they are to appear. c) There are some drawbacks to newspaper advertising. (1) It has a short life span; newspapers are read once and then discarded. (2) Newspaper readership is declining. (3) Color reproduction is usually poor. (4) Marketers cannot target specific demographic groups through news-paper ads. Teaching Tip: Ask students their source of news—whether they get it from newspapers, television, or the Internet. Given such sites as Google News, is the daily paper disappearing as a source of information and purveyor of advertising messages? How many of them watch Jon Stewart instead of the nightly news? 2. Magazines. The amount of money companies spend on magazine advertising has been flat over the last few years. However, advertisers can reach very specific market segments through ads in special-interest magazines. a) A number of magazines also publish regional editions, which provide advertisers with geographic flexibility. b) Magazine advertising is more prestigious than newspaper advertising, and it provides high-quality color reproduction. c) Magazine advertisements also have a longer life span. d) The major disadvantages of magazine advertising are high cost and lack of timeliness; magazine ads must be prepared two to three months in advance. 3. Direct Mail. Direct-mail advertising is promotional material mailed directly to individuals. a) Direct mail is the most selective medium: mailing lists are available (or can be compiled) to reach almost any target audience. b) The effectiveness of direct-mail advertising can be measured because the advertiser has a record of who received the advertisement and can track who responds. c) Some organizations are using direct e mail. To avoid customers receiving unwanted e-mail, a firm should ask customers to complete a request form in order to receive promotional e-mail from the company. d) A direct-mail campaign may fail if the mailing list is outdated and the mailing does not reach the right people. e) This medium is relatively costly. 4. Yellow Pages Advertising. Yellow Pages advertising appearing in print and online telephone directories is presented under specific product categories and may appear as simple listings or as display advertisements. a) Customers use Yellow Pages advertising to save time in finding products, to find information quickly, and to learn about products and marketers. b) Unlike other types of advertising media, Yellow Pages advertisements are purchased for one year and cannot be changed. Teaching Tip: Bring a copy of the Yellow Pages to class. Organize students into groups and give each group one clean overhead transparency, two or three overhead markers, and scrap paper. Ask each group to design a half-page Yellow Pages ad for the admissions department of the college or university. They should consider what information is important to prospective students. After 10 to 15 minutes, have each group present their finished ad. This exercise can also be done with students bringing in advertising from outside the classroom. 5. Out-of-Home Advertising. Out-of-home advertising consists of short promotional messages on billboards, posters, signs, and transportation vehicles. a) Sign and billboard advertising allows the marketer to focus on a particular geographic area, and it is fairly inexpensive. b) However, because most out-of-home advertising is directed at a mobile audience, the message must be limited to a few words. c) The medium is especially suitable for products that lend themselves to pictorial display. 6. Television. Television ranks number one in total advertising expenditures. a) Television advertising is the primary medium for larger firms whose objective is to reach national or regional markets. (1) A national advertiser may buy network time, which means that its message usually will be broadcasted by hundreds of local affiliated stations. (2) Both national and local firms may buy local time on a single station that covers a particular geographic selling area. b) Advertisers may sponsor an entire show, or they may buy spot time for a single commercial during or between programs. c) To an extent, they may select their audience by choosing the day of the week and the time of day when their ads will be shown. d) Marketers can also employ product placement, which is paying a fee to have a product appear in a television program or movie. (1) Through channel switching and personal DVRs, television viewers can avoid watching regular television commercials. (2) By placing the product directly into the program, viewers are likely to be exposed to the product. Music videos are increasingly a venue for product placement. e) An infomercial is a program-length televised commercial message resembling an entertainment or consumer affairs program. (1) Infomercials are becoming more common on network and local TV in addition to cable television and are responsible for marketing over $1 billion worth of products annually. f) Television advertising rates are based on the number of people expected to be watching when a commercial is aired. Teaching Tip: Ask students to identify the best commercials they can remember. You may wish to go to corporate Web sites to play some memorable commercials. In the insurance industry, for example, both Geico and Aflac have commercials on their sites, as do most manufacturers. 7. Radio. There are almost half a billion radios in the United States (about six per household), which makes radio the most accessible medium. a) Radio can be less expensive than other media. (1) Actual rates depend on geographic coverage, the number of commercials contracted for, the time period specified, and whether the station broadcasts on AM, FM, or both. (2) Even small retailers are able to afford radio advertisements. b) The disadvantages of using radios are the absence of visual images and the small audience size. 8. Internet. Spending on Internet advertising has increased significantly and can take a variety of forms. a) Banner ads are rectangular graphics appearing at the top of most consumer Web sites. b) Sponsorship (or cobranded) ads integrate a company’s brand with editorial comment. c) Internet advertisers can choose to purchase keywords on popular search engines so that every time someone conducts a search using that word, a link to the company’s Web site appears. d) Interstitial ads pop up to display a product ad when viewers click on a Web site. 9. Social Media. In the last few years, the use of social media as an advertising medium has increased dramatically, largely due to the perception that marketers can target, interact with, and connect more personally with their customers. Teaching Tip: Show the brief (3:18) video clip, “AdWords: Create Your First Campaign,” available at http://www.youtube.com/watch?v=Oz0V1Tqi7Wk&feature=relmfu. This video describes how to create an ad campaign using Google AdWords. After showing the video, ask students if they feel this would be an efficient way for marketers to reach customers via social media and if some products are better suited to Google AdWords than others. Teaching Tip: In the class prior to the coverage of this topic, ask students to surf their favorite Web sites and identify any ads that they like on the Internet. Ask them to write down the URL and why they like the ad. In this class, ask students to hand in their URLs, bring them up on the class computer, and explain why they liked them. Ask other students to comment. a) Most firms have a Web site and many also communicate information and relay promotions via Twitter, Facebook, and LinkedIn. b) Businesses may also post advertisements on social media sites and blogs. c) Despite the pressure on companies to incorporate digital media into their marketing mixes, research is not clear on the exact benefits of utilizing online social media for advertising. (1) Social media can be very low-cost and can be an excellent means of reaching a targeted audience, but social media sites are not as good at reaching broad or diverse audiences. (2) Measuring the return on investment of social media advertising also remains a challenge. Firms may measure followers, fans, and traffic to a site, but they have a hard time translating these data into an estimate on return on investment. C. Major Steps in Developing an Advertising Campaign. An advertising campaign is developed in several stages. 1. Identify and Analyze the Target Audience. The target audience is the group of people a firm’s advertisements are directed toward. a) To pinpoint the organization’s target audience and develop an effective campaign, marketers must analyze such information as the geographic distribution of potential customers; their age, sex, race, income, and education; and their attitudes toward both the advertiser’s product and competing products. Teaching Tip: Look through any magazines you have and bring in enough ads to hand out one ad per group of four students each. Give each group 10 minutes to “diagnose” the target audience for each ad. Ask them to not only look at demographics but also to consider lifestyle and attitudes. b) How marketers use this information will be influenced by the features of the product to be advertised and the nature of the competition. c) Precise identification of the target audience is crucial to the proper development of subsequent stages and the success of the campaign itself. 2. Define the Advertising Objectives. The goals of an advertising campaign should be stated precisely and in measurable terms. a) The objectives should include the firm’s current position, indicate how far and in what direction the company wishes to move, and specify a definite period of time for achievement of the goals. 3. Create the Advertising Platform. An advertising platform includes the important selling points or features that an advertiser wishes to incorporate into the advertising campaign. a) These features should be important to customers in their selection and use of a product and, if possible, these should be features that competing products lack. b) Although research into what consumers view as important is expensive, it is the most productive way to determine which issues to include in an advertising platform. 4. Determine the Advertising Appropriation. The advertising appropriation is the total amount of money designated for advertising in a given period. a) This stage is critical to the campaign’s success because advertising efforts based on an inadequate budget will under stimulate customer demand, while a budget too large will waste a company’s resources. b) Table 15.1 shows the nation’s top 20 advertising spenders. 5. Develop the Media Plan. A media plan specifies exactly which media will be used in the campaign and when advertisements will appear. a) Although cost-effectiveness is not easy to measure, the primary concern of the media planner is to reach the largest number of persons in the target audience for each dollar spent. b) Media planners must also consider the location, demographics, message content, and characteristics of the audience reached by various media. 6. Create the Advertising Message. The content and form of a message are influenced by the product’s features, the characteristics of people in the advertising target, the objectives of the campaign, and the choice of media. a) The copy, or words, of an advertisement should attempt to move the audience through attention, interest, desire, and action. b) Artwork and images should complement copy by attracting the audience’s attention and communicating an idea quickly. 7. Execute the Campaign. Execution of an advertising campaign requires extensive planning, scheduling, and coordination because many tasks must be completed on time and many people and firms are involved in a campaign’s execution. 8. Evaluate Advertising Effectiveness. A campaign’s success should be measured before, during, and/or after the campaign ends in terms of its original objectives. a) An advertiser should at least be able to estimate whether sales or market share went up because of the campaign or whether any change occurred in customer attitudes or brand awareness. b) Data from past and current sales and responses to coupon offers and customer surveys are some ways in which advertising effectiveness can be evaluated. D. Advertising Agencies. Advertisers can plan and produce their own advertising with help from media personnel, or they can hire advertising agencies. 1. An advertising agency is an independent firm that plans, produces, and places advertising for its clients. a) The media usually pay a commission of 15 percent to advertising agencies. Thus, the cost to the agency’s client can be quite moderate. b) The client may be asked to pay for selected services that the agency performs. 2. Firms that do a lot of advertising may use both an in-house advertising department and an independent agency. Teaching Tip: Ask students whether they feel that advertising is helpful overall to them as consumers or a social nuisance. V. PERSONAL SELLING. Personal selling is the most adaptable of all promotion methods because the person who is presenting the message can modify it to suit the individual buyer. However, personal selling is also the most expensive promotion method. Many selling situations demand face-to-face contact and adaptability of personal selling. This is particularly true of industrial sales, in which a single purchase may amount to millions of dollars. A. Kinds of Salespersons. Salespersons may be order-getters, order-takers, or support personnel. A single individual can, and often does, perform all three functions. 1. Order-Getters. An order-getter is responsible for what is sometimes called creative selling: selling the firm’s products to new customers and increasing sales to present customers. a) An order-getter must perceive buyers’ needs, supply customers with information about the firm’s product, and persuade them to buy the product. b) Order-getting activities fall into two groups. (1) In current-customer sales, salespeople concentrate on obtaining additional sales. (2) In new-business sales, sales personnel seek out new prospects and convince them to make an initial purchase. 2. Order-Takers. An order-taker handles repeat sales in ways that maintain positive relationships with customers. An order-taker sees that customers have products when and where they are needed and in the proper amounts. Order-takers often produce most of their companies’ sales. a) Inside order-takers receive incoming mail and telephone orders; they also include salespersons in retail stores. b) Outside (or field) order-takers travel to customers. 3. Support Personnel. Sales support personnel aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up service. a) A missionary salesperson usually works for a manufacturer and visits retailers to persuade them to buy the manufacturer’s products. If the retailers agree, they buy the products from wholesalers, who are the manufacturer’s actual customers. b) A trade salesperson generally works for a food producer or processor and assists customers in promoting products, especially in retail stores. He or she may obtain additional shelf space for the products, restock shelves, set up displays, and distribute samples. They are usually order-takers as well. c) A technical salesperson assists the company’s current customers in technical matters. He or she may explain how to use a product, how it is made, how to install it, or how a system is designed. Teaching Tip: Use the “What’s My Sales Role?” exercise here. This can be done individually or in groups and takes no more than three to five minutes. B. The Personal-Selling Process. Most salespeople follow the six-step procedure illustrated in Figure 15.4. 1. Prospecting. The first step in personal selling is to research potential buyers and choose the most likely customers, or prospects. The salesperson concentrates on those prospects that have the financial resources, willingness, and authority to buy. 2. Approaching the Prospect. The salesperson’s first contact with the prospect is crucial to successful selling. The best approach is one based on knowledge of the product, the prospect’s needs, and how the product can meet those needs. 3. Making the Presentation. The next step is the actual delivery of the sales presentation. In many cases, this includes demonstrating the product. The salesperson points out the product’s features and benefits and how it is superior to competitors’ merchandise. 4. Answering Objections. The prospect is likely to raise objections or ask questions. This gives the salesperson a chance to eliminate objections that might prevent a sale, point out additional features, or mention special services the company offers. 5. Closing the Sale. To close the sale, the salesperson asks the prospect to buy the product. This is considered the critical point in the selling process. Many experienced salespeople make use of a trial closing, in which they ask questions based on the assumption that the customer is going to buy the product, such as “When would you want delivery?” 6. Following-Up. The salesperson must follow up on the order to ensure that the product is delivered on time, in the right quantity, in good condition, and in proper operating condition. During follow-up, the salesperson also makes it clear that he or she is available in case problems develop. The salesperson’s job does not end with a sale; it continues as long as the seller and customer maintain a working relationship. Teaching Tip: Have students explain how they can use the steps in the personal-selling process in everyday activities such as dating, asking parents for money, negotiating a higher grade on a term project, getting a job, or asking for a pay raise. This could also be used as a role play exercise. C. Managing Personal Selling. A firm’s success often hinges on the competent management of its sales force. 1. Sales managers have responsibilities in a number of areas. a) They must set sales objectives in concrete, quantifiable terms. b) They must adjust the size of the sales force as changes in the firm’s marketing plan and marketing environment occur. c) They must attract and hire effective salespersons. d) They must develop a training program and decide where, when, how, and for whom to conduct the training. e) They must formulate a fair and adequate compensation plan. f) They must motivate salespersons to boost their productivity. g) They must define sales territories and determine scheduling and routing of the sales force. h) They must evaluate the operation as a whole through sales reports, communication with customers, and invoices. VI. SALES PROMOTION. Sales promotion consists of activities or materials that are direct inducements to customers or salespersons. Sales promotion techniques are used to enhance and supplement other promotional methods. A. Sales Promotion Objectives. Sales promotion activities may be used singly or in combination, both offensively and defensively, to achieve a goal or set of goals. 1. Marketers use sales promotion activities and materials for a number of purposes. (See specific purposes listed in the text.) B. Sales Promotion Methods. Most sales promotion methods can be classified as promotion techniques either for consumer sales or for trade sales. A consumer sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products. A trade sales promotion method encourages wholesalers and retailers to stock and actively promote a manufacturer’s products. A number of factors enter into marketing decisions about which and how many sales promotion methods to use, including the objectives of the promotional effort, product characteristics, distribution channels and availability of appropriate resellers, and competitive and regulatory forces in the environment. 1. Rebates. A rebate is a return of part of the purchase price of a product. a) Usually, the rebate is offered by the producer to consumers who send in a coupon along with a specific proof of purchase. b) Rebating is a relatively low-cost promotion method, but many people perceive the redemption process as too complicated. (1) Only about a half of individuals who purchase rebated products actually apply for the rebate. 2. Coupons. A coupon reduces the retail price of a particular product by a stated amount at the time of purchase. a) They are made available to customers through newspapers, magazines, direct mail, online, and in shelf dispensers in the store. b) Coupons may also offer free merchandise, either with or without an additional purchase of the product. c) Many firms are utilizing the Internet to target customers with deals and to distribute coupons. d) Although coupon use had been declining steadily for several years, the recent recession caused coupon usage to increase. 3. Samples. A sample is a free product given to customers to encourage trial and purchase. Marketers use free samples to stimulate the trial of a product, increase sales volume in the early stages of a product’s life-cycle, and obtain desirable distribution. a) Samples may be offered via online coupons, through direct mail, or in stores. b) Not all coupons are free. Some companies have realized that customers will pay a small fee to have regular access to high-end samples. 4. Premiums. A premium is a gift that a producer offers the customer in return for buying its product. They are used to attract competitors’ customers, introduce different sizes of established products, add variety to other promotional efforts, and stimulate customer loyalty. 5. Frequent-User Incentives. A frequent-user incentive is a program developed to reward customers who engage in repeat (frequent) purchases. a) Frequent-user incentives foster customer loyalty to a specific company or group of cooperating companies because the customer is given an additional reason to continue patronizing the business. b) A high proportion of upper-income customers use frequent-user programs, whereas moderate-income customers are not as likely to use them. 6. Point-of-Purchase Displays. A point-of-purchase display is promotional material placed within a retail store, usually near the product being promoted. a) It may actually hold merchandise or inform customers of what the product offers and encourage them to buy it. b) Most point-of-purchase displays are prepared and set up by manufacturers and wholesalers. 7. Trade Shows. A trade show is an industry-wide exhibit at which many sellers display their products. a) Some trade shows are organized exclusively for dealers—to permit manufacturers and wholesalers to show their latest lines to retailers. b) Others are promotions designed to stimulate consumer awareness and interest. 8. Buying Allowances. A buying allowance is a temporary price reduction to resellers for purchasing specified quantities of a product. a) A buying allowance may serve as an incentive to resellers to handle new products and stimulate purchase of items in large quantities. b) While buying allowances are simple, straightforward, and easily administered, competitors can respond quickly by offering a better buying allowance. 9. Cooperative Advertising. Cooperative advertising is an arrangement whereby a manufacturer agrees to pay a certain amount of the retailer’s media costs for advertising the manufacturer’s product. a) To be reimbursed, a retailer must show proof that the advertisements did actually appear. b) A large percentage of all cooperative advertising dollars is spent on news-paper advertising. Teaching Tip: Bring in the supplements from your Sunday newspaper, especially the free-standing inserts and pass them around the class as an illustration. VII. PUBLIC RELATIONS. Public relations is a broad set of communication efforts used to create and maintain favorable relationships between an organization and various public groups, both internal and external. These groups can include customers, employees, stockholders, suppliers, educators, the media, government officials, and society in general. A. Types of Public-Relations Tools. Organizations use a variety of public-relations tools to convey messages and to create images. 1. Public-relations professionals prepare written materials such as brochures, news-letters, company magazines, annual reports, and news releases. 2. Corporate identity material such as logos, business cards, signs, and stationery are also public-relations tools. 3. Event sponsorship is a public-relations tool in which a company pays for all or part of a special event such as a concert, sports competition, festival, or play. Teaching Tip: Use the “So You Think You Can Plan an Event!” group activity here. a) Sponsoring special events is an effective way for an organization to increase brand recognition and receive media coverage with relatively little investment. 4. Some public-relations tools are associated specifically with publicity. Publicity is communication in news story form about an organization, its products, or both. Publicity-based public-relations tools include: a) News release—one typed page provided by an organization to the media as a form of publicity. Table 15.2 lists some of the issues news releases can address. b) Feature article—a piece (of up to 3,000 words) prepared by an organization for inclusion in a particular publication. c) Captioned photograph—a picture accompanied by a brief explanation. d) Press conference—a meeting at which invited media personnel hear important news announcements and receive supplementary textual materials and photographs. e) Letters to the editor, special newspaper or magazine editorials, films, and tapes are also prepared and distributed to appropriate media for possible use. B. The Uses of Public Relations 1. Public relations can be used to promote people, places, activities, ideas, and even countries. 2. It focuses on enhancing the reputation of the total organization by making people aware of a company’s products, brands, or activities and by creating specific company images such as that of innovativeness or dependability. 3. Many organizations utilize social media to further connect to consumers, including YouTube and Twitter accounts, but smaller social media sites that focus on a specific area of interest can be an easy way to target a specific audience. VIII. PROMOTION PLANNING. A promotional campaign is a plan for combining and using the four promotional methods—advertising, personal selling, sales promotion, and public relations—in a particular promotion mix to reach one or more marketing goals. Integrated marketing communication requires a marketer to look at the broad perspective while planning promotional programs and coordinating the total set of communication functions. In planning a promotion, marketers must answer two basic questions: (1) What will be the role of promotion in the overall marketing mix? (2) To what extent will each promotional method be used in the promotion mix? A. Promotion and Marketing Objectives. Promotion naturally is better suited to some marketing objectives than to others. Some objectives that would require the use of promotion as a primary ingredient of the marketing mix are as follows: 1. Providing Information. This is the main function of promotion. 2. Increasing Market Share. Promotion can be used to convince new customers to try a product, while maintaining the product loyalty of established customers. 3. Positioning the Product. The sales of a product depend, to a great extent, on its competition. The stronger the competition, the more difficult it is to maintain or increase sales. For this reason, many firms go to great lengths to position their products in the marketplace. a) Positioning is the development of a product image in buyers’ minds relative to the images they have of competing products. (1) Promotion may be used to position a product away from a competing product to avoid competition. (2) Promotion may also be used to position one product directly against another product. 4. Stabilizing Sales. Special promotional efforts can be used to increase sales during slack periods, such as the “off season.” Promotion is also used to increase the sales of products that are in the declining stage of their life-cycle. Teaching Tip: Use the “Promotion, Promotion, Promotion!” group exercise here. Students are asked to develop brief outlines of a promotion plan for the same item for two different target audiences. This exercise should take approximately 20 to 30 minutes. B. Developing the Promotion Mix. Once the role of promotion is established, the various promotion methods may be combined in a promotional campaign. 1. Promotion planning begins with a set of specific objectives. The promotion mix is then designed to accomplish these objectives. 2. Marketers often use several promotion mixes simultaneously if a firm sells multiple products. 3. The amount of promotional resources available in an organization influences the number and intensity of promotion methods that marketers can use. a) An organization’s objectives also have an effect on its promotional activities. 4. The size, geographic distribution, and socioeconomic characteristics of the target market play a part in the composition of a product’s promotion mix. 5. In general, industrial products require a considerable amount of personal selling, whereas consumer goods depend on advertising, but this is not true in every case. 6. The price of the product also influences the composition of the promotion mix. 7. The cost and availability of promotion methods are important factors in the development of a promotion mix. Teaching Tip: Ask students which of the four promotion methods they would emphasize if they were developing the promotion mix for the following products. Ask them to defend their answers. • Hybrid car • Cereal • Halloween candy • Plasma television IX. Criticisms of Promotion. Even though promotional activities can help customers make informed purchasing decisions, promotion has come under criticism. There are two main reasons for such criticism: A. Promotional efforts have been called deceptive and have been blamed for increasing prices. B. Others feel that it manipulates consumers into buying products they don’t need, creates a more materialistic society, and causes other social problems. These are discussed in Table 15.3. CHAPTER 16 Exploring Social Media and e-Business 16.1 A WORD FROM THE AUTHORS We begin this chapter by examining why social media is important for both individual and business firms. Next, we discuss how companies can use social media to build relationships with customers, the goals for social media usage, and the steps required to build a social media plan and measure the effectiveness of a firm’s social media activities. In the last part of this chapter, we take a look at how firms use technology to conduct business on the Internet and what growth opportunities and challenges affect both social media and e-business. 16.2 TRANSITION GUIDE New in Chapter 16: Exploring Social Media and e-Business This chapter (along with Chapter 17, “Using Management and Accounting Information”) has been totally revised and both include new learning objectives and content. Below is a brief summary of how this chapter has been revised. For more information on revisions in Chapter 17, please see the Transition Guide for that chapter. • Chapter 16 now includes the major topics of social media and e-business. All of the content for social media is new; the e-business material was in this chapter in the last edition, but it has been revised. • The new learning objectives for social media are as follows: 1. Examine why it is important for a business to use social media. 2. Discuss how businesses use social media tools. 3. Explain the business objectives for using social media. 4. Describe how businesses develop a social media plan. • A new Inside Business feature describes how Rovio Entertainment developed the Angry Birds Internet game and why it is such a phenomenal success. • A new introductory paragraph sets the stage for the social media and e-business content in this chapter. • The first new section, “Why Is Social Media Important?,” provides a definition of social media and describes why individuals and businesses use social media. There is also information about how many people currently use social media. • Figure 16.1, “Timeline of Major Technology Events and Social Media,” lists the dates of major technology developments from 1966 to the present day. • Figure 16.2, “The Five Most Important Benefits for a Business that Uses Social Media,” describes how social media can be used to generate exposure for a business along with four other reasons for using social media. • A new Personal Apps feature provides additional information about why companies want you to “like” them. • The second new section, “Social Media Tools for Business Use,” describes how social content sites allow companies to create and share information about their products and services using blogs, photos, videos, podcasts, ratings, and games. • The third new section, “Achieving Business Objectives through Social Media,” provides information about how businesses can use social media to achieve their business objectives. Specific topics included in this section include the following: 1. Social Media Communities 2. Crisis and Reputation Management 3. Listening to Stakeholders 4. Targeting Customers 5. Social Media Marketing 6. Generating New Product Ideas 7. Recruiting Employees • Figure 16.3, “The Top Four Social Media Networking Sites Used by Businesses,” lists the four most popular social media sites ranked according to the percentages of businesses that use each site. • Figure 16.4, “LinkedIn’s Marketing Solutions for Other Businesses,” illustrates the types of social media tools businesses can use to attract other businesses and consumers. • The Career Success feature, “Make a Good Impression Using Social Media,” provides students with helpful hints that can be used to impress employers. • The fourth new section, “Developing a Social Media Plan,” describes how the following five steps can be used to develop a social media plan. 1. Step 1: Listen to Determine Opportunities 2. Step 2: Establish Social Media Objectives 3. Step 3: Segment and Target the Social Customer 4. Step 4: Select Social Media Tools 5. Step 5: Implement and Integrate the Plan • Figure 16.5, “Types of Information That Can Help Target Different Social Media Customers,” gives general information, identifying factors, and social media usage information about potential social media customers. • In the new section, “Measuring and Adapting a Social Media Plan,” both quantitative and qualitative measurements of social media are explored. Key performance indicators (KPIs) and sentiment analysis are also discussed in this section. • Table 16.1, “Quantitative Measurements for Selected Social Media Web Sites,” describes typical quantitative measurements that can be used to measure the effectiveness of popular social media sites. • In the “Defining e-Business” section, new material on the difference between e-business and e-commerce has been added. • The Ethical Challenges & Successful Solutions feature, “The Ethics of Ethical Hacking,” has been deleted. • A new Personal Apps feature points out that students may be able to try some digital products and apps before actually making a purchase. • A new Going for Success feature, “Macy’s and m-Commerce,” illustrates how Macy’s uses social media to reach consumers. • In Table 16.2, the example for the consumer-to-consumer model of e-business is now Bit Torrent (www.bittorrent.com), which allows individuals to exchange digital media files. • The “Internet Growth Potential” section includes completely revised statistics on the number of Internet users in the United States and the world. Also in this section, the phenomenal growth rate for Facebook is used as an example of how users often flock to a popular social media site. • The Sustaining the Planet feature, “The Green Grid,” has been deleted. • A new Sustaining the Planet feature, “Lululemon Develops Lasting Legacies,” describes how this online company is sustaining the planet while meeting consumers’ demand for technical athletic gear for yoga, dancing, and running. • A new Return to Inside Business feature about Angry Birds has been provided at the end of the chapter. • New material for the social media content in this chapter has been provided in the Summary, Key Terms, Review Questions, and Discussion Questions. • A new Video Case 16.1, “Luke’s Lobster: Entrepreneurs Use Social Networking to Claw Their Way Up the Food Chain,” has been included. • A new Case 16.2 about Facebook’s rapid growth has been provided. • The Building Skills for Career success section contains a new Social Media Exercise. • The Exploring the Internet feature in Building Skills for Career Success has been deleted. 16.3 QUICK REFERENCE GUIDE Instructor Resource Location Transition Guide IM, pp. 613–615 Learning Objectives Textbook, p. 456; IM, p. 617 Brief Chapter Outline IM, pp. 617–618 Comprehensive Lecture Outline IM, pp. 618–630 Career Success Make a Good Impression Using Social Media Textbook, p. 466 Going for Success Macy’s and m-Commerce Textbook, p. 474 Sustaining the Planet Lululemon Develops Lasting Legacies Textbook, p. 477 Inside Business The Big Business of Angry Birds Textbook, p. 457 Return to Inside Business Textbook, p. 479 Questions and Suggested Answers, IM, p. 631 Marginal Key Terms List Textbook, p. 481 Review Questions Textbook, p. 481 Questions and Suggested Answers, IM, pp. 631–635 Discussion Questions Textbook, p. 481 Questions and Suggested Answers, IM, pp. 635–636 Video Case 16.1 (Luke’s Lobster: Entrepreneurs Use Social Networking to Claw Their Way Up the Food Chain) and Questions Textbook, p. 482 Questions and Suggested Answers, IM, pp. 636–637 Case 16.2 (Facebook’s Rise From Dorm Room to Board Room) and Questions Textbook, p. 483 Questions and Suggested Answers, IM, pp. 637–638 Building Skills for Career Success Textbook, pp. 483–484 Suggested Answers, IM, pp. 638–640 IM Quiz I & Quiz II IM, pp. 641–643 Answers, IM, p. 643 Classroom Exercises IM, pp. 644–645 16.4 LEARNING OBJECTIVES After studying this chapter, students should be able to: 1. Examine why it is important for a business to use social media. 2. Discuss how businesses use social media tools. 3. Explain the business objectives for using social media. 4. Describe how businesses develop a social media plan. 5. Explain the meaning of e-business. 6. Understand the fundamental models of e-business. 7. Identify the factors that will affect the future of the Internet, social media, and e-business. 16.5 BRIEF CHAPTER OUTLINE I. Why Is Social Media Important? A. What Is Social Media and How Popular Is It? B. Why Businesses Use Social Media II. Social Media Tools for Business Use A. Business Use of Blogs B. Photos, Videos, and Podcasts C. Social Media Ratings D. Social Games III. Achieving Business Objectives through Social Media A. Social Media Communities B. Crisis and Reputation Management C. Listening to Stakeholders D. Targeting Customers E. Social Media Marketing F. Generating New Product Ideas G. Recruiting Employees IV. Developing a Social Media Plan A. Steps to Build a Social Media Plan 1. Step 1: Listen to Determine Opportunities 2. Step 2: Establish Social Media Objectives 3. Step 3: Segment and Target the Social Customer 4. Step 4: Select Social Media Tools 5. Step 5: Implement and Integrate the Plan B. Measuring and Adapting a Social Media Plan 1. Quantitative Social Media Measurement 2. Qualitative Social Media Measurement V. Defining e-Business A. Organizing e-Business Resources B. Satisfying Needs Online C. Creating e-Business Profit 1. Increasing Sales Revenue 2. Reducing Expenses VI. Fundamental Models of e-Business A. Business-to-Business (B2B) Model B. Business-to-Consumer (B2C) Model VII. The Future of the Internet, Social Media, and e-Business A. Internet Growth Potential B. Ethical and Legal Concerns 1. Ethics and Social Responsibility 2. Internet Crime C. Future Challenges for Computer Technology, Social Media, and e-Business 16.6 COMPREHENSIVE LECTURE OUTLINE In just a few short years, social media and technology have changed the way we communicate with each other, the way we meet people, and the way we shop. In this chapter, we explore how these trends affect both individuals and businesses. I. WHY IS SOCIAL MEDIA IMPORTANT? If you are a “digital native” (anyone under the age of 32), you know exactly what social media is because you have grown up with technology and are very comfortable sharing information about yourself. If you are anyone else, social media seems like a strange (but exciting) phenomenon. A. What Is Social Media and How Popular Is It? There are many definitions of social media because it is still developing and continually changing. 1. For our purposes, social media represents the online interactions that allow people and businesses to communicate and share ideas, personal information, and information about products and services. a) Social media is about people. b) It is about a culture of participation, meaning that people can now discuss, vote, create, connect, and advocate much easier than ever before. 2. A recent Pew Internet Research study showed that more than two-thirds of online adults use some sort of social media platform. a) Most say staying in touch with family and friends is their primary reason for using social media; roughly half say that reconnecting with old friends is a major reason why they use social media. b) Less important reasons are connecting with people who share interests, making new friends, and reading comments by public figures. Teaching Tip: Ask students what social media platforms they use regularly (such as Facebook, LinkedIn, Twitter, or MySpace) and what their primary purpose is in using social media. Is it to stay in touch with family and friends or to reconnect with old friends? How many use social media to connect with people who share interests and make new friends (such as online games or dating sites)? How many use social media to read comments by public figures? B. Why Businesses Use Social Media. Social media has completely changed the business environment. Early on, companies saw potential in the sheer number of people using social media, and that made using social media a top priority for many firms. By using social media, they could share information about their products and services. The fact that so many people are actively sharing information about themselves and their likes and dislikes was a driving force behind many companies’ attempts to develop a social media presence. Traditional marketing ads were top down; companies used ads to promote their product without any opportunity for feedback. With social media, this is no longer the case. If a person has a bad experience with a product or service, they tend to post it on their blog or on Facebook or tweet about it. Companies no longer have much control over what is said about their products or services, and many are not yet comfortable with new roles set forth by a consumer-dominated culture. Teaching Tip: Ask students if they have ever posted a bad experience with a product or service on a social media platform. What happened that caused them to post the information? Did the company respond or take action as a result? II. SOCIAL MEDIA TOOLS FOR BUSINESS. For a business, part of what makes social media challenging is the sheer number of ways to interact with other businesses and both existing and potential customers. Companies are using social media because it allows the company to (1) connect with customers, (2) listen to its main stakeholders, (3) provide another means of customer service, (4) develop content that is valuable to customers, and (5) engage customers in product development and formulation. Social content sites allow companies to create and share information about their products and services via blogs, photos, and podcasts. For businesses selling to other businesses, social media sites can also include webinars and informational promotional materials. Figure 16.2 gives an overview of how businesses can use social media tools. A. Business Use of Blogs. A blog is a Web site that allows a company to share information in order to increase its customers’ knowledge about its products and services, as well as to build trust. Once a story or information is posted, customers can provide feedback through comments, which is one of the most important ways of creating a conversation between business firms and consumers. Blogs are effective at developing better relationships with customers, attracting new customers, telling stories about the company’s products or services, and providing an active forum for testing new ideas. B. Photos, Videos, and Podcasts 1. In addition to blogs, another tool for social content is media sharing sites, which allow users to upload multimedia content, including photos, videos, and podcasts. Before participating in media sharing, a business should consider the following factors: a) Who will create the photos, videos, and podcasts that will be used? b) How will the content be distributed to interested businesses and consumers? c) How much will it cost to create and distribute the material? 2. Videos have also gained popularity because of their inherent ability to tell stories. YouTube is the largest video site and one of the largest general sites in the United States. It is not only large in terms of visitors, but the characteristics of its users are evenly split among different age groups and sexes. 3. Podcasts are digital audio or video files that people listen to or watch online on tablets, computers, MP3 players, or smartphones. C. Social Media Ratings. Social media enables shoppers to access opinions, recommendations, and referrals from others within and outside of their own social circles. This information is available via a social media site and can include reviews and ratings. Sites for ratings and reviews are based on the idea that consumers trust the opinions of others when it comes to purchasing products and services. According to Nielsen Media Research, more than 70 percent of consumers said that they trust online consumer opinions. This statistic was much higher when compared with the same type of research for traditional advertising. Teaching Tip: Ask students if they have used reviews and ratings to make product decisions. Do they trust the ratings and reviews they see online? Why or why not? Have they ever posted their own reviews of a product or service online? D. Social Games. A social game is “a multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players.” Research shows that the “gamification” of social media is a huge trend because people like the competition, social status, and rewards that they can earn through social gaming. For businesses that create games, it can be profitable through sales of game-related goods and services. While some businesses elect to create their own games, others choose to place advertising into a game. III. ACHIEVING BUSINESS OBJECTIVES THROUGH SOCIAL MEDIA. Many businesses are already using social media to achieve important objectives. Some of these are long-term, such as building brand awareness and brand reputation. Others are short-term, such as increasing Web site traffic and generating sales leads. A. Social Media Communities. For a business, social media can be used to build a community. Social media communities are social networks based on the relationships among people. They encourage two-way communication, allow for people to develop profiles, and identify other people to connect with by using technology and the Internet. People in each community can be called friends, fans, followers, or connections. Figure 16.3 shows how many businesses use the top four social media community sites. Different types of social communities include forums and wikis. 1. A forum is an interactive version of a community bulletin board and focuses on threaded discussions. These are particularly popular with people who share a common interest such as video games. 2. A wiki is a collaborative online working space that enables members to contribute content that is then sharable with other people. Wikipedia, the free online encyclopedia, is an example of a wiki. The whole purpose of social networks is to build communities and develop connections. Today, many companies are using social media to build communities with other businesses and consumers in order to achieve business objectives. B. Crisis and Reputation Management. One of the most important reasons for listening to stakeholders is to determine whether there is a crisis brewing. A majority of companies believe that their company is less than a year away from some potential crisis moment, and they monitor social media for conversations that may predict a crisis. C. Listening to Stakeholders. Listening to people, whether they are customers or not, is always an important aspect of a company’s social media plan. Listening to the conversations unfolding on Facebook or Twitter, for example, can be important to understanding just what people think about a company’s products and services. D. Targeting Customers. Many companies are using social media to increase awareness and build their brand among customers. It is especially valuable in targeting the Millennials, tech-savvy digital natives born after 1980. In some cases, awareness is not a problem, but the ability to connect with the customer is. Social media can be used to build that connection. E. Social Media Marketing. Social media marketing is the “utilization of social media technologies, channels, and software to create, communicate, deliver and exchange offerings that have value for an organization.” As companies become more comfortable with social media, we can expect more companies to use social media to market products and services to their customers. Research indicates that companies are shifting their advertising money from traditional marketing to digital marketing, and experts predict that social media will account for 26 percent of all online spending by 2016. The reason is simple: people are spending more time online. 1. Inbound marketing is a marketing term that describes new ways of gaining attention and ultimately customers by creating a Web site that pulls in customers. Tools used for inbound marketing programs include search engine optimization, blogging, videos, and social media. 2. As important as social media is, it is only one aspect of digital marketing, which is comprised of several areas, including: a) Online public relations—developing social media press kits b) Search engine optimization—using keywords in the Web site in order to rank higher in search engine results c) Search engine marketing—buying ads like Google’s AdWords to increase traffic to a company’s Web site d) Display advertising—buying banner ads e) E-mail marketing—targeting customers through opt-in e-mail campaigns f) Content marketing—developing photos, videos, podcasts, blog posts, and other tools to increase the value to the customer F. Generating New Product Ideas. Companies can use social media to conduct much of their consumer-based research. Crowdsourcing involves outsourcing tasks to a group of people in order to tap into the ideas of the crowd. In some cases, valuable information can be obtained by crowd voting. 1. Companies can even build communities for specific brands in order to obtain information and new ideas from consumers. Teaching Tip: Consider showing this brief (approximately four minutes), humorous, high-energy TED video, “How to Make a Splash in Social Media.” It discusses how Greenpeace, in an effort to “personify” its campaign against humpback whale killing, started a Web poll to name a tagged whale. The campaign caught on, and Greenpeace was able to create an entire market around it. The Web site for this video is http://www.ted.com/talks/alexis_ohanian_how_to_make_a_splash_in _social_media.html. G. Recruiting Employees. For years, companies have used current employees to recruit new employees because current employees’ friends and family may prove to be good job candidates. Social media takes that concept to a whole new level. 1. LinkedIn, the largest social network for professionals, has been used quite effectively by both large and small companies to recruit employees. Teaching Tip: Consider showing the brief (1:30) video, “Harnessing Social Media for Business Advantage,” here. In this video, CEOs at the 2010 World Economic Forum discuss the corporate use of social media for everything from finding customers to recruiting employees to burnishing their online reputations. The Web site for this video is http://mindgatemedia.com/lesson/harnessing-social-media-for-business-advantage/. IV. DEVELOPING A SOCIAL MEDIA PLAN. Before developing a plan to use social media, it is important to determine how social media can improve the organization’s overall performance and how it “fits” with a company’s other operational and promotional activities. A. Steps to Build a Social Media Plan. Once it is determined how social media links to the company’s other activities, several steps should be considered. 1. Step 1: Listen to Determine Opportunities. Often, social media is used to “listen” to what customers like and don’t like about a company’s products or service. a) Monitoring social media sites also allows managers and employees to enter the conversation and tell the company’s side of the story. b) In addition, companies can monitor social media sites to gather information about competitors as well as what is being said about the industry. c) After the listening phase, it is important to analyze the information to identify the company’s strengths, weaknesses, opportunities, and threats before taking the next step—setting objectives. 2. Step 2: Establish Social Media Objectives. After listening to and analyzing the information obtained from social media sites, it is important to use that information to develop specific objectives. For social media, an objective is a specific statement about what a social media plan should accomplish. a) For many companies, the most popular objectives are increasing brand awareness, acquiring new customers, introducing new products, retaining current customers, and gaining customer insight. b) Other objectives that are often important include improving search engine ranking, showcasing public relations activities, increasing Web site traffic, and generating sales leads. 3. Step 3: Segment and Target the Social Customer. Ideally, a company will have developed a customer profile that describes a typical customer in terms of age, income, gender, ethnicity, etc. It also helps to know how they think, how they spend their time, how much they buy, and how often they buy. Additionally, it is important to really understand how customers use social media. a) Do they create content like photos, videos, blog posts, etc.? b) Do they use social media for ratings and reviews? c) Do they post product reviews and ratings on Facebook accounts? d) Do they spend a lot of time using social media? According to Forrester Research, there are six types of individuals that use social media: creators, critics, collaborators, joiners, spectators or inactive. Figure 16.5 gives types of information that can help companies target social media customers. 4. Step 4: Select Social Media Tools. The search for the right social media tool(s) usually begins with the company’s objectives, outlined in Step 2. It also helps to review the target customer or segment the company is trying to reach. A company can use social communities, blogs, photos, videos, podcasts, or games to reach potential or existing customers. It helps to remember that social media is not free and can be quite expensive because it costs both time and money. 5. Step 5: Implement and Integrate the Plan. Once social media tools have been identified, a company can implement and integrate the social media plan. a) Social media plans differ from traditional advertising campaigns because they don’t necessarily have start and stop dates. Some social media activities continue and have a life of their own. Some companies feel that it is important to have a mix of short- and long-term media promotion. b) To increase the effectiveness of social media, companies often integrate online promotions with more traditional or offline promotions. As companies increase the amount of money spent on digital marketing and social media, they will attempt to tie online and offline promotions together in order to get “more bang for the buck.” B. Measuring and Adapting a Social Media Plan. Because social media is a relatively new method of reaching customers, many companies struggle when attempting to measure its effectiveness. Generally, there are two types of social media measurement: quantitative and qualitative. While both measurements can be used, most companies tend to use quantitative measurements. 1. Quantitative Social Media Measurement. Quantitative social media measurement consists of using numerical measurements, such as counting the number of Web site visitors, number of fans and followers, number of leads generated, and the number of new customers. Table 16.1 shows a few popular quantitative ways to measure social media. a) Because a company must invest both time and money when it uses social media, it is important to measure success and make adjustments if needed. Key performance indicators (KPIs) are measurements that define and measure the progress of an organization toward achieving its objectives. Generally, KPIs are quantitative. (1) If measuring the success or failure of social media activities with KPIs, the first step is to connect KPIs with objectives. (2) The second step is to set a benchmark—a number that shows what success should look like. (3) It is also possible to compare the company’s social media KPIs to its benchmarks over time. When trend comparison is used to measure the effectiveness of social media, the trend may be more important than the actual percentage of increase/decrease for just one measurement period. 2. Qualitative Social Media Measurement. Qualitative social media measurement is the process of accessing opinions and beliefs about a brand. This process primarily uses sentiment analysis to categorize what is being said about a company. Sentiment analysis is a measurement that uses technology to detect the mood, attitudes, or emotions of people who experience a social media activity. Other measurements for determining customer sentiment include: a) Customer satisfaction score—the relative satisfaction of customers. b) Issue resolution time—the percentage of customer service inquiries resolved satisfactorily using social media. c) Resolution time—the amount of time taken to resolve customer service issues. V. DEFINING e-BUSINESS. e-Business, or electronic business, can be defined as the organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet. In a strict sense, e-business is used when talking about all business activities and practices conducted on the Internet by an individual firm or industry. On the other hand, e-commerce is a part of e-business and usually refers only to buying and selling activities conducted online. A. Organizing e-Business Resources. To be organized, a business must combine human, material, informational, and financial resources, but the resources in an e-business may be more specialized than in a typical business. (See Figure 16.6.) 1. People who design, create, and maintain Web sites are only a fraction of the specialized human resources required by e-businesses. 2. Material resources must include specialized computers, sophisticated equipment and software, and high-speed Internet connections. 3. Computer programs that track the number of customers who view a firm’s Web site are generally among the specialized informational resources required. 4. Financial resources—the money required to start and maintain the firm and allow it to grow—usually reflect greater participation by individual entrepreneurs, venture capitalists, and investors willing to invest in a high-tech firm instead of conventional financial sources such as banks. 5. In an effort to reduce the cost of specialized resources that are used in e-business, many firms have turned to outsourcing, the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost. B. Satisfying Needs Online 1. As pointed out in the first part of this chapter, more and more people are using computers, the Internet, and social media as a way to connect with people. The Internet can also be used to purchase products or services. a) The Internet has created some new customer needs that did not exist before the creation of the Internet. b) e-Businesses can satisfy those needs, as well as more traditional ones. 2. In addition to purchasing products, the Internet can be used by both individuals and business firms to obtain information. a) Internet users can access newspapers, magazines, radio, and television programming at a time and place convenient to them. b) The Internet provides the opportunity for two-way interaction between an Internet firm and the viewer. c) Customers can respond to information on the Internet by requesting more information or posing specific questions, which may lead to purchasing a product or service. d) The Internet allows customers to choose the content they are offered. Knowing the interests of a customer allows an Internet firm to direct appropriate, smart advertising to a specific customer. C. Creating e-Business Profit. Business firms can increase profits either by increasing sales revenue or by reducing expenses through a variety of e-business activities. 1. Increasing Sales Revenue. Each source of sales revenue flowing into a firm is referred to as a revenue stream. a) One way to increase revenues is to sell merchandise on the Internet. Online merchants can reach a global customer base 24 hours a day, 7 days a week because the opportunity to shop on the Internet is virtually unrestricted. b) Intelligent information systems also help to generate sales for Internet firms. Such systems store information about each customer’s purchases, along with a variety of other information. Using this information, the system can assist the customer the next time he or she visits the Web site. c) Although some customers may not make a purchase online, the existence of the firm’s Web site and the services and information it provides may lead to increased sales in the firm’s physical stores. d) e-Business revenue streams are also created by advertising placed on Web pages and subscription fees charged for access to online services and content. e) Many Internet firms that distribute news, magazine and newspaper articles, and similar content generate revenue from commissions earned from sellers of products linked to the site. 2. Reducing Expenses. Reducing expenses is the second major way in which e-business can help to increase profitability. Providing online access to information that customers want can reduce the cost of dealing with customers. VI. FUNDAMENTAL MODELS OF e-BUSINESS. One way to get a better sense of how businesses are adapting to the opportunities available on the Internet is to identify e-business models. A business model represents a group of common characteristics and methods of doing business to generate sales revenues and reduce expenses. A. Business-to-Business (B2B) Model. Many e-businesses can be distinguished from others simply by their customer focus. Firms that use the Internet mainly to conduct business with other businesses are referred to as having a business-to-business (or B2B) model. When examining B2B firms, two clear types emerge. 1. In the first type, the focus is simply on facilitating sales transactions between businesses. 2. A second, more complex type of B2B model involves a company and its suppliers. Today, suppliers use the Internet to bid on products and services they wish to sell to a customer and learn about the customer’s rules and procedures that must be followed. B. Business-to-Consumer (B2C) Model. Companies that have a business-to-consumer (or B2C) model are focused on individual consumers. 1. Typically, a business firm that uses a B2C model must answer the following questions: a) Will consumers use Web sites merely to simplify and speed up comparison shopping? b) Will consumers purchase services and products online or end up buying at a traditional retail store? c) What sorts of products and services are best suited for online shopping? Teaching Tip: Ask students what types of goods or services they have purchased online and how they went about making their purchase decision. Did they look at the products in traditional (i.e., brick-and-mortar) stores before buying online? Did they do more research in making the online purchase than they normally would if making a purchase at a traditional retail store? Why or why not? 2. B2C firms also attempt to build long-term relationships with their customers by making a special effort to make sure that the customer is satisfied and that problems, if any, are solved quickly. 3. Specialized software also can help build good customer relationships. Tracking decisions and buying preferences as customers navigate a Web site, for instance, helps management make well-informed decisions about how best to serve online customers. VII. THE FUTURE OF THE INTERNET, SOCIAL MEDIA, AND E-BUSINESS. Since the beginning of commercial activity on the Internet, developments in computer technology and e-business have been rapid and formidable. However, a larger-than-usual number of technology companies struggled or even failed during the economic crisis. Today, most firms involved in the Internet, social media, and e-business use a more intelligent approach to development. Fortunately, the long-term view held by the majority of analysts is that the Internet, social media, and e-business will expand along with related computer technologies. A. Internet Growth Potential 1. To date, only a small percentage of the global population uses the Internet. At the beginning of 2012, estimates suggest that about 2.3 billion of the nearly 7 billion people in the world use the Web. 2. Americans comprise 11 percent of all users. Approximately 77 percent of the American population uses the Internet, indicating that future growth in the United States is limited. 3. Primary reasons for using the Internet include the ability to connect with other people, to obtain information, or to purchase a firm’s products or services. a) Of particular interest to business firms is the growth of social media. 4. Experts also predict that the number of companies using e-business to increase sales and reduce expenses will continue to rise. Firms that adapt existing business models to an online environment will continue to dominate development. Teaching Tip: Ask your students to form into groups of four to five. Give them 10 minutes to brainstorm possible ideas for an online business venture. B. Ethical and Legal Concerns. The social and legal concerns for the Internet, social media, and e-business extend beyond those shared by all businesses. Essentially, the Internet is a new “frontier” without borders and without much control by government or other organizations. 1. Ethics and Social Responsibility a) Social responsibility and ethical behavior by individuals and businesses on the Internet are major concerns. b) An ethically questionable practice is the unauthorized access and use of information discovered through computerized tracking of users once they are connected to the Internet. (1) A user may visit a Web site and unknowingly receive a small piece of software code called a cookie, which can track where the user goes on the Internet and measure how long the user stays at any particular Web site. (2) Although it can produce valuable customer information, it can also be viewed as an invasion of privacy, especially since users may not even be aware that their movements are being monitored. c) There are several other threats to users’ privacy and confidentiality. (1) Monitoring an employee’s computer usage may be intended to help employers police unauthorized Internet use on company time, but the same records can also give the firm an opportunity to observe what otherwise might be considered private and confidential information. (2) Experts suggest that, at the very least, employers need to disclose the level of surveillance to their employees and consider the corporate motivation for monitoring employees’ behavior. d) Some firms also practice data mining, the practice of searching through data records looking for useful information. Based on an individual’s information, data mining analysis can provide what might be considered private and confidential information about individuals. 2. Internet Crime a) Because the Internet is often regarded as an unregulated frontier, both individuals and business users must be aware of online risks and dangers. For example, malware is software designed to infiltrate a computer system without the user’s consent. It is often based on criminal or malicious intent and can include computer viruses, spyware, deceptive adware, and other software capable of criminal activities. b) A computer virus is a software code designed to disrupt normal computer activities. c) In addition to the risk of computer viruses, identity theft is one of the most common computer crimes that affect both individuals and business users. A recent study determined that more than 11.6 million Americans were victims of identity theft in just one year. Teaching Tip: Ask students if they have ever been victims of a computer virus. How do they protect their computers against viruses? Do they regularly scan their computers for malware or viruses? d) Most consumers are also concerned about fraud since it is almost impossible to know with certainty that the Web site, organization, or individuals that you believe you are interacting with are what they seem. C. Future Challenges for Computer Technology, Social Media, and e-Business 1. Today, there is more information available than ever before, and the amount of information will only increase in the future. In order to obtain more information in the future, both individuals and business users must consider the cost of obtaining information and computer technology. 2. In an effort to reduce expenses, some companies are using cloud computing, a type of computer usage in which services stored on the Internet are provided to users on a temporary basis. a) When cloud computing is used, a third party makes processing power, software applications, databases, and storage available for on-demand use from anywhere. b) Instead of running software and storing data on their employer’s computer network or their individual computers, employees log onto the third party’s system and use (and pay for) only the applications and data storage they actually need. 3. A business must consider a number of external and internal factors that affect computer technology and e-business. a) Internal environmental forces are those that are closely associated with the actions and decisions taking place within a firm. Figure 16.8 shows typical internal forces. b) A growing number of firms are also becoming concerned about how their use of technology affects the environment. Green IT describes all of a firm’s activities to support a healthy environment and the planet. 4. In contrast, external environmental forces affect a company’s use of technology and originate outside the organization. a) These forces are unlikely to be controllable by a firm. Instead, managers and employees generally will react to these forces, attempting to shield the organization from any undue negative effects and finding ways to take advantage of opportunities. b) The primary external environmental forces affecting a company’s use of technology include globalization, demographic, societal, economic, competitive, technological, and political and legal forces. Instructor Manual for Business William M. Pride, Robert J. Hughes, Jack R. Kapoor 9781133595854, 9780538478083, 9781285095158, 9781285555485, 9781133936671, 9781305037083