CH-1 An Overview of Integrated Marketing Communications – Advertising Promotion and Other Aspects of Integrated Marketing Communications : Chapter Notes

AN OVERVIEW OF INTEGRATED MARKETING COMMUNICATIONS Chapter Objectives Appreciate the practice of marketing communications and recognize the marcom tools used by practitioners. Differentiate among the following terms: marketing mix, marketing, communications, marketing communications, the promotional mix, and integrated marketing communications. Describe the philosophy and practice of integrated marketing communications (IMC) and the five key features of IMC. Recognize the activities involved in developing an integrated communications program. Identify obstacles to implementing an IMC program. Understand and appreciate the components contained in an integrative model of the marcom decision-making process. Chapter Overview This chapter discusses the nature of marketing communications, particularly at the brand level. Whereas the “4P” characterization has led to widespread use of the term “promotion” for describing communications with prospects and customers, the term marketing communications (marcom) is preferred by most practitioners and educators, and it is used to refer to the collection of advertising, sales promotion, public relations, event marketing, and other communication devices; comparatively, the term promotions is used to refer to sales promotions. Integrated marketing communications (IMC) is the philosophy and practice of carefully coordinating a brand’s sundry marketing communication elements, and five key features of IMC are discussed: (1) start with the customer or prospect; (2) use any form of relevant contact or touch point; (3) speak with a single voice; (4) build relationships; and (5) affect behavior. Changes in marcom practices as well as obstacles to implementing IMC are given. The latter portion of the chapter describes a model of the marketing communications decision-making process. The model includes fundamental decisions (i.e., targeting, positioning, setting objectives, and budgeting), implementation decisions (i.e., mixing elements, creating messages, selecting media, and establishing momentum), expected outcomes (i.e., enhancing brand equity and affecting behavior), and program evaluation. The chapter appendix provides information on important U.S. trade associations in the marketing communications field. Chapter Outline Introduction All firms employ marketing communications (marcom) to one degree or another. The focus may be directed at consumers (B2C), or focused on customers of other businesses (B2B). Marketing Communications Objectives and Terminology All organizations (i.e., B2B, B2C, not-for-profit) use various forms of marketing communications to promote their offerings and achieve financial and nonfinancial goals. Companies have a variety of general objectives for their marcom programs including informing and persuading customers and inducing action from customers. The primary forms of marketing communications include: traditional mass media advertising online advertising store signage and point-of-purchase communications direct-mail literature marketing-oriented public relations and publicity releases sponsorships of events and causes presentations by salespeople various collateral forms of communications devices. The marketing mix includes product, price, place, and promotion. The term, communications, refers to the process whereby commonness of thought is established and meaning is shared between individuals or between organizations and individuals. Figure 1.1 illustrates this idea in a Social Media Venn Diagram. Marketing is human activity directed at satisfying needs and wants through exchange processes. Marketing communications represents the collection of all elements in an organization’s marketing mix that facilitate exchange by establishing shared meaning with its customers. All marketing mix variables can communicate with customers. Further marketing communications may be intentional or unintentional. Promotional Mix Elements The promotional mix elements include advertising, public relations, sales promotion, personal selling, direct marketing, and online marketing/social media. Advertising is any paid form of non-personal communication of ideas, goods, or services by an identified sponsor. This includes traditional mass media outlets such as television, magazines, newspapers, and out-of-home. Public relations is an organizational activity involved with fostering goodwill between a company and its various publics. Sales promotion consists of all promotional activities that attempt to stimulate short-term buyer behavior. It may be directed toward the trade or toward the end consumer. Personal selling is paid, person-to-person communication in which a seller determines needs and wants of prospective buyers and attempts to persuade these buyers to purchase the company’s products or services. Direct marketing represents an interactive system of marketing which uses one or more advertising media to effect a measureable response. Direct-response advertising involves the use of any of several media to transmit messages that encourage buyers to purchase directly from the advertiser. Online marketing is the promotion of product and services over the Internet. Social media marketing represents marketing activities conducted using online social communities, channels and services as the venue. Figure 1.2 illustrates the promotional mix. The Primary Tools of Marketing Communications Table 1.1 provides a listing of possible marketing communication tools. The Integration of Marketing Communications Mountain Dew’s marketing communications is described as an example of an integrated communications plan. Why Integrate? Organizations have traditionally handled communication tools as separate, specialized practices within different units of the organization. IMC Practices and Synergy IMC is worth practicing because it can create synergy; in other words, multiple methods in combination with one another yield more positive communication results than do the tools used individually. Definition of IMC IMC is the coordination of the promotional mix elements with each other and with the other elements of the brands’ marketing mix (product, place, price) such that all elements speak with one voice. Key IMC Features The five key features of IMC are listed in Table 1.2. Key Feature #1: IMC Should Begin with the Customer or Prospect The marcom process should start with the customer or prospect and then work back (“outside-in” approach) to determine those communication methods that will best serve the customers’ information needs and motivate them to purchase the brand. Consumers in Control Consumers are increasingly active participants in the marcom messages to which they pay attention by choosing when, how, and where they view these messages. Reduced Dependence on the Mass Media Marcom should use the channels which reach people where, when, and how they wish. Key Feature #2: Use Any Form of Relevant Contact Select those tools that are most appropriate for the communications objective at hand. 1. Touch Points and 360-Degree Branding The IMC objective is to reach the target audience efficiently and effectively using appropriate touch points. Key Feature #3: Speak with a Single Voice The brand’s assorted communication elements must all strive to present the same message and convey that message consistently across diverse message channels, or points of contact. The single-voice principle involves selecting a specific positioning statement for a brand. A positioning statement is the key idea that encapsulates what a brand is intended to stand for in its target market’s mind and then consistently delivers the same idea across all media channels. Key Feature #4: Build Relationships Rather Than Engage in Flings A relationship is an enduring link between a brand and its customers. Loyalty Programs Can be used to build brand/customer relationships with frequency, and loyalty. Experiential Marketing Programs Involve creating brand sponsored special events and unique venues that are relevant to consumer’s life and lifestyle. Key Element #5: Don’t Lose Focus of the Ultimate Objective: Affect Behavior A final IMC feature is the goal of affecting the behavior of the target audience. Obstacles to Implementing the Key IMC Features Few providers of marketing communication services have the far-ranging skills to plan and execute programs that cut across all major forms of marketing communications. The Marketing Communications Decision-Making Process Figure 1.3 is a framework conceptualizing the various types of practical brand-level marcom decisions and the outcomes desired from those decisions. The model consists of a set of fundamental decisions, a set of implementation decisions, and program evaluation. Fundamental decisions include targeting, positioning, setting objectives, and budgeting and these influence the implementation decisions regarding the mixture of communications elements and the determination of messages, media, and momentum. The expected outcomes from these decisions are enhancing brand equity and affecting behavior. The objective is to enhance brand equity, the goodwill that an established brand has built up over its existence. Fundamental Marcom Decisions Targeting Allows marketing communicators to deliver messages more precisely and to prevent wasted coverage to people falling outside the intended audience. Positioning Represents the key feature, benefit, or image that it stands for in the target audience’s collective mind. Setting Objectives Ensures that decisions are grounded in the underlying goals, or objectives, to be accomplished for a brand. Budgeting Involves allocating financial resources to specific marcom elements to accomplish desired objectives. Different methods include: Top-down budgeting (TD) – senior management decides how much each subunit receives. Bottom-up budgeting (BU) – managers of subunits (i.e., product category level) determine how much is needed to achieve their objectives, and these amounts are then combined to establish the total marketing budget. Bottom-up/top-down process (BUTD) – subunit managers submit budget requests to a chief marketing officer, who coordinates the various requests and then submits an overall budget to top management for approval. Top-down/bottom-up (TDBU) – top managers first establish a total size of the budget and then divide it among the various subunits. BUTD process is the most frequently used. A Concluding Point All marketing communications should be (1) directed to a particular target market, (2) clearly positioned, (3) created to achieve a specific objective, and (4) undertaken to accomplish the objective within budget constraint. Marcom Implementation Decisions The fundamental decisions described are conceptual and strategic. The implementation decisions are practical and tactical. Mixing Elements Refers to the choice of exactly how to allocate resources among the various marketing communications tools. Marketing communications-mix decisions constitute an ill-structured problem because there is no way to determine the mathematical optimum allocation between advertising and promotion that will maximize revenue or profit. Figure 1.4 illustrates a buy-one, get-one free promotional. Creating Messages Refers to the creation of messages in the form of advertisements, publicity releases, promotions, package designs, social media, and any other form of marcom message. Selecting Media Involves choosing from all the different message transmission alternatives (e.g., selling, TV, etc.). Establishing Momentum Refers to selecting the speed of movement with which the messages are deployed. The effectiveness of each message form requires both a sufficient amount of effort and continuity of that effort. Marcom Outcomes Outcomes are twofold: enhancing brand equity and affecting behavior (each influences the other). Figure 1.3 displays a double-headed arrow between these outcomes. Program Evaluation This final step in the process is accomplished by measuring the results of marcom efforts against the objectives that were established at the outset. There is an increasing demand for accountability. Measures of communication outcomes include brand awareness, message comprehension, attitude toward the brand, and purchase intentions. Chapter Features Let’s Check In! Place-Based Apps, Mobile Scanning Devices, and Checking-In with Your “Friends” Facebook has launched a placed-based “app” (application) to compete with Foursquare that allows mobile device users with a Facebook account to share their exact location and find the whereabouts of their friends. Although the name may be evolving from Facebook “Places” to Facebook “Nearby Friends,” the social media network is committed to location-based services. It joins other such services used by smartphone users, such as Foursquare, Gowalla, Google Latitude, Loopt, Yelp, etc. to shop, communicate, socialize, and play games. Also, business owners, such as restaurant and retail managers, can search for, claim, and verify their locations on the Facebook sites, and then advertise a Facebook listing. Will this meet the needs of consumers? Creating a Pepsi Commercial in China To reach China’s Internet-savvy youth and to engage their interest in Pepsi, the Pepsi Creative Challenge contest was created. Consumers were invited to develop a TV spot that would star Jay Chow (also spelled Chou), a superstar throughout Asia. Contest entrants submitted scripts for a commercial, and other consumers logged on to a website then read and scored the scripts. The best ideas from highest-scoring entries were chosen and 15 finalists were identified. These scripts were posted online, and consumers voted for the best script. The winner received $12,500 and an opportunity to participate in the production of the commercial. More than 27,000 commercial scripts were submitted. A Pepsi Exec said “The reason why digital interactive marketing campaigns like the Pepsi Creative Challenge work is that they add value by creating a mechanism for consumers to get involved.” Of course, “getting involved” is simply another way of saying that consumers’ control over advertising content is increasing. The Laundry Hanger as an Advertising Touch Point Reaching large numbers of men with advertising messages is often difficult. Hanger Network arranges with laundry-supply firms to make and distribute laundry hangers carrying advertising messages for distribution in dry cleaners in the U.S. Mitchum deodorant used hangers as part of a multimedia campaign for its new brand of men’s deodorant. In a pretest of the hanger ads in two cities the brand experienced double-digit growth in consumer brand awareness and purchase intentions. Hanger Network’s ads have been used in approximately 40 percent of the 25,000 dry cleaning outlets in the United States. ENHANCING BRAND EQUITY AND ACCOUNTABLITY Chapter Objectives Explain the concept of brand equity from both the company’s and the customer’s perspectives. Describe the positive outcomes that result from enhancing brand equity. Describe the different models of brand equity from the customer’s perspective. Understand how marcom efforts must influence behavior and achieve financial accountability. Chapter Overview The basic issues addressed in this chapter are these: What can marketing communicators do to enhance the equity of their brands and, beyond this, affect the behavior of their present and prospective customers? Also, how can marketing communicators justify their investments in advertising, promotions, and other marcom elements and demonstrate financial accountability? The concept of brand equity is explained from both the company’s perspective and the consumer’s perspective. The firm-based viewpoint of brand equity focuses on outcomes extending from efforts to enhance a brand’s value to its various stakeholders and discusses various outcomes: (1) achieving a higher market share, (2) increasing brand loyalty, (3) being able to charge premium prices, and (4) earning a revenue premium. From the perspective of the customer, a brand possesses equity to the extent that they are familiar with the brand and have stored in their memory favorable, strong, and unique brand associations. Brand equity from the customer’s perspective consists of two forms of brand-related knowledge: (1) brand awareness and (2) brand image. The chapter covers three ways by which brand equity is enhanced and labels these the (1) speak-for-itself approach, (2) message-driven approach, and (3) leveraging approach. The chapter then discusses ten traits shared by the world’s strongest brands. The latter portion of the chapter covers the concept of ROMI, or return on marketing investments. Several difficulties of measuring marcom effectiveness are discussed: (1) choosing a metric, (2) gaining agreement, (3) collecting accurate data, and (4) calibrating specific effects. The chapter then discusses marketing-mix modeling (i.e., multivariate regression analysis) and how it can assist managers in determining the effect of each marcom element on sales volume. Chapter Outline Introduction Recall from Chapter 1 the framework for thinking about all aspects of the marcom process (see Figure 1.3). The framework included fundamental decisions, implementation decisions, two types of outcomes and an evaluation program. This chapter focuses on the desired outcomes of marcom efforts. Brand Equity A brand represents a “name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.” A brand includes what is known as trade dress, which refers to the appearance and image of the product, including its packaging, labeling, shape, color, sounds, design, lettering, and style. Brand equity is the goodwill that an established brand has built up over its existence. It can be considered from both the vantage point of the organization and the customer. A Firm-Based Perspective on Brand Equity The firm-based view of brand equity focuses on outcomes extending from efforts to enhance a brand’s value to its various stakeholders. As the value, or equity, of a brand increases, various positive outcomes result including achieving a higher market share, increasing brand loyalty, being able to charge premium prices, and earning a revenue premium, which is defined as the revenue differential between a branded item and a corresponding private labeled item. In addition to the revenue premium, there may also be a taste premium, which is the differential between a customer’s preference for the branded versus private label item. Table 2.1 presents the results of a study of equity premiums. Brand Equity Models There are several models of brand equity. Brand Asset Valuator Young & Rubicam (Y&R) developed a model of brand equity entitled the BrandAsset® Valuator (BAV). It is composed of four components or pillars of brand equity. These include differentiation, relevance, esteem, and knowledge. Figure 2.1 illustrates the BAV Power Grid. Dimensions of Brand Knowledge This brand equity model consists of two forms of brand-related knowledge: brand awareness and brand image, as shown in Figure 2.2. Brand awareness is an issue of whether a brand name comes to mind when consumers think about a particular product category and the ease with which the name is evoked. Figure 2.2 shows two levels of awareness: brand recognition and brand recall. The second dimension of consumer-based brand knowledge is a brand’s image. Brand image represents the associations that are activated in memory when people think about a particular brand. These associations can be conceptualized in terms of type, favorability, strength, and uniqueness. The Brand-Awareness Pyramid The progression of brand awareness is from first awareness to recognition, to recall, and to TOMA (top-of-mind awareness). Brand-Related Personality Dimensions Brands can have personalities just like people. The five brand-related personality dimensions include sincerity, excitement, competence, sophistication, and ruggedness. Relationships among Brand Concepts, Brand Equity, and Brand Loyalty Brand concept is the specific meaning that brand managers create and communicate to their target market. Brand concept management represents the analysis, planning, implementation, and control of a brand concept throughout the life of a brand. These are elaborated on in Chapter 5, but include functional needs, symbolic needs, and experiential needs. Figure 2.3 illustrates brands and their management. Strategies to Enhance Brand Equity There are three ways by which brand equity is enhanced: (1) speak-for-itself approach, (2) message-driven approach, and (3) leveraging approach. Enhancing Equity by Having Brand Speak for Itself By trying and using brands, consumers learn how good (or bad) they are and what benefits they are (in)capable of delivering. Marketers help the brand to speak for itself through point-of-purchase materials and appealing sales promotions. Enhancing Equity by Creating Appealing Messages Marcom practitioners can build advantageous associations via the dint of repeated claims about the features a brand possesses and/or benefits it delivers. This tack is effective if the marcom message is creative, attention getting, and believable. Enhancing Equity via Leveraging Brand associations can be shaped and equity enhanced by leveraging positive associations already contained in the world of people, places, and “things” that are available to consumers. Leveraging Associations from other Brands – alliances between two brands can enhance both brands’ equity and profitability. This is called co-branding. Leveraging Associations from People – aligning a brand with people, such as employees or endorsers, can be both advantageous and disastrous as the brand is linked with their reputation. Leveraging Associations from Things – events and causes provide opportunities for linkages with brands. Leveraging Associations from Places – the channel through which a brand is carried (Walmart vs. Nordstrom) or country-of-origin both serve as possible associations through which a brand can enhance their image. What Benefits Result from Enhancing Brand Equity? Brand loyalty determines the long-term growth and profitability of a brand. Characteristics of World-Class Brands The biannual EquiTrend survey uses three main dimensions to determine highly successful brands: familiarity with a brand, quality and likelihood of purchasing a product. Combining the three dimensions gives a brand equity score. The 10 world class brands identified in Table 2.2 include M&M’s, Hershey’s Kisses, Arm & Hammer Baking Soda, Reese’s Peanut Butter Cups, Hershey’s Milk Chocolate, Kleenex Facial Tissues, Campbell’s Soups, Google, and Crayola Crayons. The annual Interbrand ranking determines 100 top global brands by using (1) the percentage of a company’s revenue that can be credited to a brand, (2) the strength of a brand in terms of influencing customer demand at the point of purchase, and (3) the ability of the brand to secure continued customer demand. Top brands identified in Table 2.3 include Coca-Cola, IBM, Microsoft, Google, GE, McDonald’s, Intel, Nokia, and Disney. Affecting Behavior and Achieving Marcom Accountability Marcom efforts should be directed, ultimately, at affecting behavior rather than stopping with enhancing equity. Marcom’s objective is to ultimately affect sales volume and revenue and return on marketing investment (ROMI). Difficulty of Measuring Marcom Effectiveness Several reasons account for the complexity of measuring marcom effectiveness including the difficulty in: Choosing a Metric Gaining Agreement Collecting Accurate Data Calibrating Specific Effects Assessing Effects with Marketing Mix Modeling Marketing mix modeling employs statistical techniques (e.g., multivariate regression analysis) to estimate the effects that the various advertising and promotion elements have in driving sales volume. An example is presented. Chapter Features Are There Too Many Social Media Brands? Trying to keep up with the latest social media brands and content can be overwhelming. Many social media brands are vying to be the “owners” of different social media spaces. Brands and people can create lifestreams from the content they share in social spaces. It’s difficult for brands to stand out in social spaces just as it is in traditional media. This chapter illustrates how challenging building brand equity can be. Harley-Davidson—An Iron Horse for Rugged Individualists, Including Females! Past Harley-Davidson ads have depicted a driverless Harley-Davidson motorcycle on an open road in the American West. The message suggested freedom and independence. The Harley-Davidson brand is a strong one with a deep emotional bond to its customers. Females are rapidly joining the Harley-Davidson community. Neuromarketing and the Case of Why Coca-Cola Outsells Pepsi The infamous “Pepsi Challenge” was conducted with the use of neuromarketing, which is a specific application of the field of brand research called neuroscience. Functional magnetic resonance images (fMRIs) can scan the brains of individuals employing their various senses upon exposure to stimuli. Brain scans reveal which areas of the brain are most activated in response to external stimuli. In the new-fangled Pepsi Challenge, the reward center of the brain revealed a much stronger preference for Pepsi versus Coke when study participants were unaware of which brand they had tasted. However, the result was opposite when participants knew the name of the brand they were about to taste. In the non-blind taste test, a different region of the brain was more activated and Coca-Cola was the winner. Activation of the area of the brain associated with cognitive functions revealed that participants now preferred Coke. The inferred explanation is a difference in brand images, with Coke possessing the more attractive image earned through years of effective marketing and advertising effort. The World’s Perception of America Nations can be thought of as brands. Firms that use “country of origin” labels are affected by the positive or negative image of that country. Many countries actively market themselves with the goal of forging favorable and strong associations in the minds of people around the world. The Nations Brand Index (NBI) is a barometer of global opinion toward over 35 countries. Each quarter, 25,000 people are surveyed on their perceptions of these countries. Respondents are asked questions about each country in six areas: 1. Exports—satisfaction with products and services produced 2. People—thoughts and feelings about the people 3. Governance—perceptions of whether the country can be trusted to make responsible decisions and to uphold international peace and security. 4. Tourism— perceptions of a country’s natural beauty and historical heritage 5. Culture and Heritage—perceptions and feelings of a country’s heritage and its culture 6. Immigration and Investment—willingness to live, work, and/or pursue education. A nation’s “brand” image is the sum of its scores on these six dimensions. A country’s image, like any brand image, can be changed. It is important as a matter of international relations and economics that a country has a positive image. BRAND ADOPTION, BRAND NAMING, AND INTELLECTUAL PROPERTY ISSUES Chapter Objectives Appreciate marcom’s role in facilitating the introduction of new brands. Explain the innovation-related characteristics that influence adoption of new brands. Understand the role performed by brand names in enhancing the success of new brands. Explain the activities involved in the brand-naming process. Appreciate the role of logos. Describe the intellectual property rights associated with brands: patents, copyrights, and trademarks. Chapter Overview This chapter begins by discussing general factors that influence the likelihood that new products will be adopted and diffused among potential customers. The Brand Adoption Process indicates three main stages through which an individual becomes an adopter of a product: (1) awareness class, (2) trier class, and (3) repeater class. Marcom’s role in influencing consumers is discussed. The product characteristics of (1) relative advantage, (2) compatibility, (3) complexity, (4) trialability, and (5) observability are discussed. The next section of the chapter covers brand naming. Requirements of a good brand name include: (1) distinguish the brand from competitive offerings, (2) describe the brand and its attributes or benefits, (3) achieve compatibility with a brand’s desired image and with its product design or packaging, and (4) be memorable and easy to pronounce. The brand naming process is also discussed: (1) specify objective for the brand name, (2) evaluate candidate names, (3) evaluate candidate names, (4) choose a brand name, and (5) register a trademark. The role of logos is briefly discussed. The final section reviews the types of intellectual property rights including patents, copyrights, and trademarks. Chapter Outline I. Introduction II. Marcom and Brand Adoption The acceptance of new ideas, including new brands, has been traditionally referred to as product adoption. The process of brand adoption occurs when customers become aware of new brands, undertake trial purchases, and possibly become repeat buyers. The Brand Adoption Process is shown in Figure 3.1. Figure 3.2 is an ad for Fruit2O which illustrates the Brand Adoption Process. The process includes three classes: awareness, trier, and repeater. Make customers aware (“Awareness Class) of the new product’s existence with free samples and coupons, advertising, trade shows and personal selling (B2B), and distribution. Induce customers to try (Trier Class) the product with coupons, distribution, and price. Ensure repeat (Repeater Class) purchases with personal selling advertising, price, distribution, and product satisfaction. Brand Characteristics That Facilitate Adoption There are five brand characteristics which influence the likelihood of adoption. These are shared below. Relative Advantage Relative advantage is the degree to which consumers perceive a product innovation as being better than existing alternatives with respect to a specific attribute or benefit. Relative advantages exist to the extent that a new product offers (1) better performance compared to other options, (2) savings in time and effort, or (3) immediacy of reward. Compatibility Compatibility is the degree to which an innovation is perceived to fit into a person’s way of doing things. A new product is more compatible to the extent that it matches consumers’ needs, personal values, beliefs, and past consumption practices. Complexity Complexity refers to an innovation’s degree of perceived difficulty. The more difficult an innovation is to understand or use, the slower the rate of adoption. Trialability Trialability is the extent to which an innovation can be used on a limited basis. In general, products that lend themselves to trialability are adopted at a more rapid rate. Trialability is tied closely to the concept of perceived risk, and the trial experience serves to reduce the consumer’s risk of being dissatisfied. Observability Observability is the degree to which the product user or other people can observe the positive effects of new-product usage. In general, innovations that are high in observability/visibility lend themselves to rapid adoption if they also possess relative advantages. Figure 3.3 shows an ad which illustrates observability. Quantifying the Adoption-Influencing Characteristics Table 3.1 illustrates a procedure for quantifying the likely adoptability of a brand based on the five characteristics. Brand Naming A brand is a company’s unique designation, or trademark, which distinguishes its offering from other product category entries. Brand names have been described as “cerebral switches” that can turn on positive associations in the consumer’s mind. A brand name affects the speed at which consumers become aware of the brand, influences brand image, and influences brand equity formation. What Constitutes a Good Brand Name? Requirement 1: Distinguishes the Brand from Competitive Offerings Failure to distinguish a brand from competitive offerings creates consumer confusion and increases the chances that consumers will not remember the name or mistakenly select another brand. The Federal Trademark Dilution Act of 1995 protects owners of brand names and logos from other companies using the identical or similar names. The objective of the legislation is to ensure that trademarks are not at risk of losing distinctiveness. Requirement 2: Facilitate Consumer Learning of Brand Associations Brand names serve as memory cues that facilitate recall of product attributes and benefits and also predict product performance. Brand Name Suggestiveness – implies particular attributes or benefits in the context of a product category (e.g., Healthy Choice). Made-Up Brand Names – (i.e., created or fabricated) are not actual words. They may be morphemes which are semantic kernels of words (e.g., Compaq, Acura). Sound Symbolism and Brand Naming – research suggests that sounds that are made through the enunciation of a brand name influence the perceptions and evaluations of brand names. Individual sounds called phonemes are the basis for brand names. They can provide meaning about the brand through sound symbolism. Requirement 3: Achieve Compatibility with a Brand’s Desired Image and with Its Product Design or Packaging Figure 3.4 illustrates image-compatible brands. Requirement 4: Be Memorable and Easy to Pronounce Many brand names are short, one-word names that facilitate ease of memory and pronunciation (e.g., Tide, Bounce, Pledge). Some Exceptions to the “Rules” Some brands become successful in spite of their names (i.e., the first brand in a new product category). Some companies intentionally use an initially meaningless brand name (called the empty-vessel philosophy) and attempt to build positive associations to the new name. The Brand-Naming Process Figure 3.5 lists the steps in the brand-naming process. Step 1: Specify Objectives for the Brand Name Step 2: Create Candidate Brand Names Step 3: Evaluate Candidate Names Step 4: Choose a Brand Name Step 5: Register a Trademark The Role of Logos Figure 3.6 presents a collection of six famous logos. Consumers learn logos and easily recognize products upon which a known logo is emblazoned. Good logos are (1) recognized readily, (2) convey the same meaning to all target members, and (3) evoke positive feelings. The best strategy for enhancing likeability of a logo is to choose a design that is moderately elaborate rather than too simple or too complex. Figure 3.7 shows a natural design logo. Updating Logos Overtime, logos become dated and should be updated to reflect the times. Figure 3.8 shows the changing faces of the Betty Crocker logo. Intellectual Property Intellectual property refers to a number of different author or company creations for which a set of exclusive rights are recognized under law. Common types of intellectual property include patents, copyrights, and trademarks. A. Patents A patent permits the owner to secure a monopoly or exclusive rights to the use of an invention for a period of 20 years, which is generally not renewable. There are three types of patents: utility, design, and plant. A utility patent is the most frequent type of patent. The utility category includes patents for inventions such as biological, business method, chemical, and software patents. Design patents protect the appearance or shape. Plant patents offer protection for discovery of certain naturally occurring and previously uncultivated plants. Patent applications are filed with the Patent & Trademark Office (www.uspto.gov). B. Copyrights A copyright is a set of exclusive rights, not for an actual idea or invention, but for the form in which something is expressed. It should be in a tangible medium. The focus of the copyright protection is on the originality of the expression by the owner. Registration is not required but the work should be registered with the Copyright Office of the Library of Congress to receive these rights. A U.S. copyright is granted for the life of the author plus 70 years, or if “work for hire”, 90 years from the date of publication or 120 years from creation, whichever comes first. There are limits. The fair use doctrine (section 107 of 1976 Copyright Act) states that the use of the copyrighted work for the purpose of criticism, comment, news reporting, teaching, scholarship, or research is not an infringement of a copyright. C. Trademarks A trademark is a distinctive sign, or indicator used by an individual, business organization, or other legal entity to identify the goods or services to consumers with which the trademark appears and to distinguish its goods and services from competition. A trademark typically is a name, word, phrase, logo, symbol, design, image, or combination of these elements. Trade dress may encompass these as well as unconventional categories such as associations of the brand with color, smell, sounds, etc. A company can lose a trademark if the mark becomes a common descriptive work. Trademark dilution and trademark disparagement cases do arise. Chapter Features Back to the Future! The Vibram FiveFingers Running Shoe Vibram was named one of America’s Hottest Brands by Advertising Age. It was a surprise given that the company is 75 years old and was previously thought of as selling “ugly” products. However, Vibram was able to reinvigorate its brand with the unique running shoe. The shoe was discovered as viable for runners somewhat accidentally but once the product was identified for the running market, it had much positive feedback. The brand benefited from many of the factors which influence adoption rates. Washing Machines for the Masses in Brazil, China, and India Whirlpool has designed a washing machine named Ideale for distribution in these countries, where automatic washing machines is not yet in many homes. The retail price is in the range of $150 to $200, and the machines are designed to fit the consumption habits and preferences in each country. For Brazil, the machines are made to stand high on four legs because consumers like to clean under furniture and appliances. These consumers like to see the machine operate, so it is equipped with a transparent, acrylic lid. Chinese like to display their appliances in the living room, so the machine was made to be aesthetically appealing and blue or gray because the Chinese dislike white appliances as they show dirt and grime. However, Brazilians associate white with cleanliness, and in India, consumers can choose among white, blue, or green machines. A Musical Toothbrush That Encourages Children to Brush Longer Most children consider brushing their teeth an undesirable task and tend to spend too little time brushing. Tooth Tunes, a power toothbrush, plays pop songs lasting two minutes, the dentist recommended time for brushing. Using a technology called dentamandibular sound transduction, the music cannot be heard outside the head. The songs sound best with an up-and-down brushing stroke. Sound waves are transported from the front teeth, to the jawbone, and then to the inner ear. Each Tooth Tunes brush comes with a single song, but a variety of popular children’s artists are available. Since kids don’t often care about the cost of things, they will pester their parents to buy a new brush just as the parents pester their kid to brush more. ENVIRONMENTAL, REGULATORY, AND ETHICAL ISSUES Chapter Objectives Appreciate the role of marketing communications in environmental (green) marketing. Recognize the principles that apply to all green marcom efforts. Explain the role and importance of governmental efforts to regulate marketing communications. Be familiar with deceptive advertising and the elements that guide the determination of whether a particular advertisement is deceptive. Be acquainted with the regulation of unfair business practices and the major areas where the unfairness doctrine is applied. Know the process of advertising self-regulation. Appreciate the ethical issues associated with advertising, sales promotions, and other marcom practices. Understand why the targeting of marketing communications toward vulnerable groups is a heatedly debated practice. Chapter Overview This chapter examined a variety of issues related to green marketing initiatives, the regulation of marketing communications, and ethical marcom behavior. In the first section, environmental, or green, marketing was described, and implications for marketing communications were elaborated. Marketing communicators have responded to society’s environmental interests by developing more environmentally friendly packaging and undertaking other communications initiatives. Recommendations provided to marketing communicators for making appropriate environmental claims are to: (1) make the claims specific, (2) have claims reflect current disposal options, (3) make the claims substantive, and (4) make supportable claims. The second section examined the regulation of marcom activities. The regulatory environment was described with respect to both government regulation and industry self-regulation. The FTC’s role was explained in terms of its regulation of deception and unfair practices. False advertising under the Lanham Act, as well as self-regulation by the Council of Better Business Bureaus’ National Advertising Division (NAD) and National Advertising Review Board (NARB) were discussed. The last major section examines implications of ethical (and unethical) marketing communications. The ethics of each of the following marcom activities were discussed: the targeting of marketing communications efforts, advertising, public relations, packaging communications, sales promotions, and online marketing and social media communications. A concluding discussion examined how firms can foster ethical behavior. Chapter Outline I. Introduction This chapter examines three major topics: (1) environmental issues, (2) regulation, and (3) ethical issues. II. Environmental Marketing Communications People are concerned with the depletion of natural resources and the degradation of the physical environment. Companies have responded to environmental concerns by introducing environmentally oriented products and undertaking aggressive marketing communications programs referred to as green marketing. Unfortunately, there is relatively little evidence that many consumers are much interested in paying more for environmentally friendly products. The Global Focus feature is appropriate for coverage about here. Green Marketing Initiatives Green marketing initiatives have come about primarily for the point of achieving regulatory compliance, gaining competitive advantage, being socially responsible, and following the commitment of top management. Mostly responses have been in the form of new or newly revised products. Green Advertising Three types of green advertising and examples are provided in Figures 4.1 to 4.3: Address a relationship between a product/service and the biophysical environment. Promote a green lifestyle without highlighting a product or service. Present a corporate image of environmental responsibility. Reduced Packaging Responses Various efforts have been initiated to improve the environmental effectiveness of packaging materials (e.g., recyclable plastic bottles, using paperboard packages for burgers instead of polystyrene clamshell containers). On the negative side, however, there is evidence that package materials often are wasted due to the practice called short filling, which means that the package actually contains less than the amount indicated on the package. Seal-of-Approval Programs Organizations around the world have designed programs to assist consumers in identifying environmentally friendly products and brands. Germany – Blue Angel seal United States – Green Seal North America – 100% Recycled Paperboard Alliance with a logo that consists of small arrows pointing to the words 100% Recycled Paperboard. Sponsorship Programs: Cause-Related and Event Marketing Cause-oriented marketing is practiced when companies sponsor or support worthy causes (i.e., environmental causes) in anticipation that associating the company and its brands with a worthy cause will generate goodwill. Point-of-Purchase Programs A better understanding of retailers’ point-of-purchase needs would lead to fewer unused and discarded displays, and increased use of permanent displays. Direct Marketing Efforts Direct marketing materials such as brochures, pamphlets, and especially catalogs are voluminous, requiring, of course, major consumption of trees and use of huge amounts of natural gas in their production. Only 28 percent of direct marketers in a recent survey said that the environment is a frequent factor in their decision-making. Outdoor Advertising Responses The highways and streets of America are inundated with tens of thousands of outdoor signs. Most all of the billboards are covered either with banners made from polyvinyl chloride (PVC), a toxic petroleum-based product, or with thick paper that is impractical to reuse or recycle. Removal of these materials from billboards leads to massive waste that enters into landfills. Social Media Campaigns Some brands are launching environmental campaigns in social media like the one Corona did on Facebook. Guidelines for Green Marketing FTC’s guidelines for environmental marketing claims outline four general principles: Qualifications and disclosures should be sufficiently clear and prominent to prevent deception. Claims should make clear whether they apply to the product, the package, or a component of either. Claims should not overstate an environmental attribute or benefit, whether expressly or by implication. Comparative claims should be presented in a manner that makes the basis for the comparison sufficiently clear to avoid consumer deception. In addition to these general guidelines, marcom practitioners are offered four general recommendations: Make specific claims. Specific environmental claims enable consumers to make informed choices, reduce the likelihood that claims will be misinterpreted, and minimize the chances that consumers will think that a product is more environmentally friendly than it actually is. Reflect current disposal options. This recommendation is directed at preventing environmental claims that are technically accurate but practically unrealizable due to local trash disposal practices. Make substantive claims. Marketing communicators should not use trivial and irrelevant environmental claims to convey the impression that a promoted brand is environmentally sound. Make supportable claims. Environmental claims should be supported by competent and reliable scientific evidence. Regulation of Marketing Communications Regulation protects consumers and competitors from fraudulent, deceptive, and unfair business practices. When Is Regulation Justified? Regulation is needed most when consumer decisions are based on false or limited information. In theory, regulation is justified if the benefits realized exceed the costs. Benefits: Consumer choice among alternatives is improved when consumers are better informed in the market place. Product quality tends to improve when consumers are better informed. Reduced prices result from a reduction in a seller’s “informational market power.” Costs: Cost of complying with a regulatory remedy. Enforcement costs incurred by a regulatory agency and paid for by taxpayers. Unintended side effects that might result from regulations (e.g., compliance costs passed on to buyers in the form of higher prices). Regulation by Federal Agencies Governmental regulation takes place at both the federal (Federal Trade Commission) and state (National Association of Attorneys General) levels and includes all facets of marketing communications. Advertising, the most conspicuous aspect of marketing communications, receives the most attention. The FTC’s regulatory authority cuts across three broad areas that directly affect marketing communicators: deceptive advertising, unfair practices, and information regulation. Deceptive Advertising In a general sense, consumers are deceived by an advertising claim or campaign when the impression left by the claim or campaign is false (a claim-fact discrepancy) and consumers believe the false claim or campaign. There are three elements that provide the essence of the FTC’s deception policy: Misleading – there must be a representation, omission, or a practice that is likely to mislead the consumer. A misrepresentation is defined by the FTC as an express or implied statement contrary to fact. A misleading omission is said to occur when qualifying information necessary to prevent a practice, claim, representation, or reasonable expectation or belief from being misleading is not disclosed. Reasonable Consumer – the act or practice must be considered from the perspective of the “reasonable consumer.” The FTC evaluates advertising claims case by case in view of the target audience’s unique position—its education level, intellectual capacity, and mental frame of mind. Material – a material representation involves information that is important to consumers, is likely to influence their choice or conduct regarding a product, and pertains to the central characteristics of a product. Non-material representation usually involves information that, even if untrue, is not related to central characteristics of the product (e.g., how long a company has been in business). Covert Marketing Practices and Deception – a particularly cunning form of advertising deception occurs when consumers are exposed to covert forms of marcom messages, or what also is referred to as “masked marketing.” Unfair Practices A finding of unfairness to consumers may go beyond questions of fact and relate merely to public values. The criteria used to evaluate whether a business act is unfair involve such considerations as whether the act: Offends public policy as it has been established by statutes. Is immoral, unethical oppressive, or unscrupulous. Causes substantial injury to consumers, competitors, or other businesses. Congress defined unfair advertising as “acts or practices that cause or are likely to cause substantial injury to consumers, which is not reasonably avoidable by consumers themselves and are not outweighed by countervailing benefits to consumers or competition.” The FTC has applied the unfairness doctrine in three major areas: (1) advertising substantiation, (2) promotional practices direct at children and other vulnerable populations, and (3) trade regulation rules. Information Regulation Regulation may also provide consumers with information that they may not otherwise receive. The corrective advertising program is the most important of the FTC’s information provision programs. Corrective advertising is based on the premise that a firm that misleads consumers should have to use future advertisements to rectify the deceptive impressions it has created in consumers’ minds. It is used to prevent a firm from continuing to deceive consumers rather than to punish the firm. The most prominent corrective advertising order issued by the FTC was given to Warner-Lambert’s Listerine mouthwash over 30 years ago. The ads for this product misled consumers by claiming that Listerine helps to prevent colds and sore throats. In one of the first major applications of corrective advertising since the Listerine case, the FTC issued a corrective order against the Novartis Corporation and its Doan’s Pills for misrepresenting that Doan’s Pills outperform other over-the-counter analgesics in treating back pain. The objective of corrective advertising is to restore the marketplace to its original position prior to the deceptive advertising. Product Labeling The Food and Drug Administration (FDA) is the federal body responsible for regulating information on the packages of food and drug products. Prescription Drug Advertising Whereas the FTC is responsible for regulating deceptive and unfair advertising (including over-the-counter drugs), the FDA regulates advertisements for prescription drugs. This has been a major challenge in recent years with the onset of direct-to-consumer (DTC) advertising, which is a form of advertising involving messages for prescription drugs that are directed toward consumers. The FDA requires prescription drug advertisements to be balanced and to share full information about side effects as well as benefits. False Advertising and Lanham Act Cases in Federal Court Under the Lanham Act, in addition to fast injunctive relief from false advertising, monetary damages and attorney fees can be available to victorious plaintiffs. Unlike in FTC cases, plaintiffs must present extrinsic evidence as support for their complaint when implied ad claims are involved. Regulation by State Agencies Individual states have their own statutes and regulatory agencies to police the marketplace from fraudulent business practices. Increased activity in state efforts to regulate advertising deception and other business practices poses a potentially significant problem for national advertisers who find themselves subject to multiple and inconsistent regulations. Advertising Self-Regulation Self-regulation, when undertaken by advertisers themselves, is a form of private government whereby peers establish and enforce voluntary rules of behavior. Media Self-Regulation The advertising clearance process is a form of self-regulation that takes place behind the scenes before a commercial or other advertisement reaches consumers. The clearance steps include advertising agency clearance, approval from the advertiser’s legal department, and media approval. The Advertising Self-Regulatory Council (ASRC) The ASRC is a partnership of the Association of National Advertisers, the American Association of Advertising Agencies, the American Advertising Federation, Council of Better Business Bureaus, Electronic Retailing Association, Direct Marketing Association, and the Interactive Advertising Bureau. ASRC consists of three review units: The Children’s Advertising Review Unit (CARU), which monitors children’s’ television programming and commercials; National Advertising Division (NAD), which is the investigative arm that is responsible for evaluating, investigating, and holding initial hearings with an advertiser on complaints involving truth or accuracy of national advertising; and National Advertising Review Board (NARB), which is a court consisting of fifty representatives who are formed into five-member panels to hear appeals of NAD cases when an involved party is dissatisfied with the initial verdict. Ethical Issues in Marketing Communications Ethics in our context involves matters of right and wrong, or moral, conduct pertaining to any aspect of marketing communications (think of terms such as honesty, honor, virtue, and integrity). The Ethics of Targeting Targeting Children and Teens Advertising and in-school marketing programs urge kids to desire various products and brands. Critics contend that many of the products targeted to children are unnecessary and the communications are exploitative. Targeting Food and Beverage Products – the issue of childhood obesity and the marketing of food products to children is an especially hotly debated topic, especially the practice of using cartoon characters to sell sugared cereals and non-nutritious snacks. Targeting Tobacco and Alcohol Products – marketers also have been criticized for targeting adult products to teens and college students (e.g., beer and other alcoholic beverages, cigarettes). Targeting Miscellaneous Products – critics are also concerned with the marketing of adult-oriented entertainment products to children and teens, resulting in the FTC issuing a regular series of reports, titled Marketing Violent Entertainment to Children, that criticize the industry for targeting children with advertisements for violent films, video games, and music. Targeting Economically Disadvantaged Consumers – makers of alcohol and tobacco products frequently employ billboards and other advertising media in targeting brands to economically disadvantaged consumers. Ethical Issues in Advertising Advertising Is Untruthful and Deceptive Although two-thirds of American consumers think that advertising is untruthful, it would be naïve to assume that most advertising is deceptive. Advertising Is Manipulative Some critics assert that advertising has the power to influence people to do things they would not do if they were not exposed to advertising. When consumers are consciously aware that attempts are being made to persuade or influence them, they have the cognitive capacity to resist efforts to motivate them in a direction they wish not to be moved. Advertising Is Offensive and in Bad Taste Advertising critics contend that many advertisements are insulting to human intelligence, vulgar, and generally offensive to the tastes of many consumers. Advertising Creates and Perpetuates Stereotypes It is unfair to blame advertising for creating these stereotypes, which, in fact, are perpetuated by all elements in society. Advertising Persuades People to Buy Things They Do Not Really Need Criticism that advertising causes people to buy items or services they do not need is a value-laden judgment. Is influencing consumer tastes and encouraging people to make purchases they may not otherwise make unethical? Advertising Plays on People’s Fears and Insecurities Some advertisements appeal to the negative consequences of not buying a product. However, advertising possesses no monopoly on this transgression. A Trade Association’s Code of Ethical Standards The advertising industry has an important stake in its members acting ethically so as to ward off public criticism and governmental regulation. Accordingly, advertising practitioners typically operate under ethical codes of conduct, and the American Association of Advertising Agencies (AAAA) standard of ethics in advertising is given. Ethical Issues in Public Relations Many of the same ethical issues that apply to advertising apply here. One distinct aspect worthy of separate discussion is the matter of negative publicity. The primary ethical issue concerns whether firms confess to product shortcomings and acknowledge problems or attempt to cover up the problems. Ethical Issues in Packaging and Branding Four aspects of packaging involve ethical issues: Label information (e.g., presenting exaggerated information or by suggesting that a product contains more of a desired attribute or less of undesired attributes than is actually the case), Packaging graphics (e.g., when the picture on a package is not a true representation of product contents or the package of a store brand looks virtually identical to another, typically well-known, national brand), Packaging safety (e.g., packaging is not tamper-proof and contain dangerous products that are unsafe for children), Environmental implications of packaging (e.g., non-biodegradable packaging). Ethical Issues in Sales Promotions Ethical considerations are also involved with all facets of sales promotions including manufacturer promotions directed at wholesalers and retailers and to consumers. Slotting allowances, where retailers charge manufacturers a per-store fee for their willingness to handle a new stock unit from the manufacturer, is an issue that many feel has unethical overtones. Consumer promotions are unethical when manufacturers offer consumers a reward for their behavior that is never delivered (e.g., failing to mail a free premium object or to provide a rebate check) or leading consumers to believe their odds of winning a sweepstake or contest are much greater than they actually are. Ethical Issues in Online and Social Media Marketing Along with other ethical issues, privacy is probably the most important ethical issue that is unique to the online medium. Because online marketers can collect much information about people’s personal characteristics and behaviors, it is easy to invade individual privacy rights by selling information and divulging confidential information. Fostering Ethical Marketing Communications The primary responsibility for ethical behavior resides within each of us. Integrity involves avoiding deceiving others or behaving purely in an expedient fashion. Marketing communications itself is not ethical or unethical—it is the degree of integrity exhibited by communications practitioners that determines whether their behavior is ethical or unethical. Firms can foster ethical behavior by encouraging their employees to apply each of the following tests when faced with an ethical predicament: act in a way that you want others to act toward you (the Golden Rule Test); and take only actions that would be viewed as proper by an objective panel of your professional colleagues (the professional ethic test); and always ask, “Would I feel comfortable explaining this action on television to the general public?” (the TV test). Chapter Features Will Graphic Visual Tobacco Warnings in the United States Be Effective? The U.S. was the first nation in the world to require a health warning on cigarette packages in 1966. More recent updates to health warnings includes new graphic warnings. The ultimate question is whether these communication efforts will be effective. The Greendex: Environmentally Sustainable Consumption in 17 Countries National Geographic magazine together with a global research firm measured consumer progress in 17 countries toward sustainable environmental consumption. Results from the survey revealed that consumers in India and Brazil had the highest marks for having more environmentally friendly, or sustainable, consumer behavior. China, Mexico, Argentina, Russia, and Hungary followed as the next highest-scoring countries. The lowest scoring consumers were from France, Canada, and—in last place—the United States. Brazilian consumers scored the best in regards to being environmentally conscious consumers because they (1) live in small residences, (2) rarely use home heating, (3) wash their clothes in cold water, (4) are far below average (compared to other countries) in ownership of vehicles, (5) use public transportation, and (6) are concerned more than consumers in other countries about environmental problems. Comparatively, consumers in the United States scored the lowest on the Greendex because (1) heating and air-conditioning are commonplace and residences tend to be large, (2) a low percentage of American consumers use public transportation, (3) a small percentage of Americans walk or bike daily, (4) food consumption in the United States is the least environmentally sustainable of all countries (e.g., Americans are the least likely of all consumers in the 17 countries to consume locally grown foods, and over one-third of Americans drink bottled water daily), and (5) American consumers (along with Australian and European consumers) are much less concerned about environmental problems than those in emerging economies. A Rigged Promotion for Frozen Coke Mid-level executives at Coca-Col Company pitched the idea to Burger King to run a promotion offering a free Frozen Coke when customers bought a “value meal” at a Burger King outlet. It was argued that by offering the free Frozen Coke, Burger King could significantly increase customer traffic and thus the sales of value meals. However, Burger King’s executives were unwilling to commit to an expensive, nationwide promotion until they had some evidence that it would significantly increase sales, so they decided to run a test in Richmond, VA (the test city), where the free Frozen Cokes would be given away. The number of value meal purchased would then be compared to meal volume in Tampa, FL (the control city) where free Frozen Cokes were not given away with each value meal. Unfortunately, initial sales results in the test city were not much different than in the control city, so a couple of mid-level Coca-Cola executives developed a scheme to give $9,000 cash to a consultant to distribute to Boys & Girls Clubs in the Richmond area. Leaders of these clubs were instructed to treat the children to value meals at Burger King, and this increased sales in Richmond more than in Tampa during the test period. Based on these results, Burger King decided to take the promotion nationwide, which required a substantial investment. Coca-Cola’s corporate office laid the blame on the mid-level employees and agreed to pay Burger King up to $10 million to compensate it and its franchises for any financial losses. SEGMENTATION, TARGETING, AND POSITIONING Chapter Objectives Appreciate the importance of market segmentation for specific consumer groups and realize that the targeting decision is the initial and most fundamental of all marcom decisions. Understand the role of behavior segmentation is targeting consumer groups. Describe the nature of psychographic segmentation. Appreciate major demographic developments such as changes in the age structure of the population and ethnic population growth. Explain the meaning of geodemographics and understand the role for this form of targeting. Recognize that any single characteristic of consumers—whether their age, ethnicity, or income level—likely is not solely sufficient for sophisticated marcom segmentation. Appreciate the concept and practice of brand positioning. Chapter Overview This chapter focuses on the first two fundamental decisions in the marcom decision process—targeting and positioning. To target, it is necessary that the population be segmented using a segmentation base such as behavior, psychographics, geodemographics, and demographics. Behavioral segmentation uses information about the audience’s behavior. Particular attention is given to consumers’ online behavior and how that can be tracked so that relevant ads can be delivered to them. Psychographics captures aspects of consumers’ psychological makeup and lifestyles including their attitudes, values, and motivations. Geodemographics is based on demographic characteristics of consumers who reside within geographic clusters such as zip code areas and neighborhoods. Finally, demographics reflect measurable population characteristics such as age, income, and ethnicity, and the chapter covers three major demographic aspects that have considerable relevance for marcom practitioners: (1) the age structure of the population; (2) the changing household composition; and (3) ethnic population developments. From there the chapter moves into a discussion of positioning. A brand’s positioning represents the key feature, benefit, or image that it stands for in the target audience’s collective mind. In the theoretical discussion, semiotics, signs, and meaning are covered with the focus on how brands draw meaning from the culturally constituted world. In practice, brands can be positioned based on benefits (i.e., functional, symbolic, or experiential needs) or on attributes (i.e., product-related and non-product-related). Chapter Outline Introduction Recall that in Chapter 1, fundamental and implementation decisions in the marcom process were explained. This mantra was emphasized: “all marketing communications should be: (1) directed to a particular target market, (2) clearly positioned, and (3) created to achieve a specific objective, and 4) undertaken to accomplish the objective within budget constraints. The market segmentation process and targeting audiences can be considered the starting point for all marcom decisions. This chapter focuses on four sets of segmentation bases: behavioral segmentation, psychographics, demographics, and geodemographics. Figure 5.1 illustrates a classification of four general targeting characteristics. Then we cover positioning. Segments and the Market Segmentation Process A market segment is a group of customers who share a similar set of needs and wants. The process of market segmentation is the act of dividing a market into distinct groups of customers who might require separate products and/or marketing mixes. The major steps include: Market segmentation Market targeting Market positioning Segmentation Bases: Behavioral Segmentation Behavioral segmentation deals with segmenting people based on how they behave. Sometimes this data does not exist. Online Behavioral Targeting Online there may be data on which websites users visited and what they did while at each site. Ad networks can use this data to better target online ads. Figure 5.2 shows an illustration of an online ad process flow. Privacy Concerns Since hearings over the privacy concerns of online behavioral targeting, the FTC created a set of four behavioral advertising principles in 2009. These include transparence and consumer control, security for data retained, and two variations of express consent. Psychographic Segmentation Psychographics refers to information about consumers’ attitudes, values, motivations, and lifestyles as they relate to buying behavior in a particular product category. Customized Psychographic Profiles Table 5.1 presents a set of illustrative statements that were included in a psychographic study of consumer banking practices. General Purpose Psychographic Profiles Managers can purchase “off-the-shelf” psychographic data from services that develop psychographic profiles of people independent of any particular product or service. For example, Futures Company MindBase consists of 8 general segments and 32 specific subsegments (see Table 5.2 for names and descriptions). Another segmentation scheme is that of Strategic Business Insights (SBI). The VALSTM classification has 8 groups (see Figure 5.3). The horizontal dimension represents individuals’ primary motivations, whether in terms of their pursuit of ideals, their need for achievement, or drive to self-express. The vertical dimension reflects individuals’ resources as based on their educational accomplishments and income levels. Geodemographic Segmentation The premise underlying geodemographic targeting is that people who reside in similar areas, such as neighborhoods or postal zip code zones, also share demographic and lifestyle similarities. Several companies have developed services that delineate geographical areas into common groups, or clusters, wherein reside people with similar demographic and lifestyle characteristics. Some companies include CACI (ACORN), Donnelly Marketing (ClusterPlus), Experian (MOSAIC), Nielsen Claritas (PRIZMNE), and SBI (GeoVALSTM). PRIZMNE stands for Potential Rating Index by Zip Markets and NE represents the “new evolution” of Claritas’ original segmentation system. This classification system delineates every neighborhood in the U.S. into 1 of 66 clusters based on an analysis of neighborhoods’ demographic characteristics, such as educational attainment, race/ethnicity, predominant age range, occupational achievement, and type of housing. Demographic Segmentation This section examines three major demographic aspects that have considerable relevance for marcom practitioners: (1) the age structure of the population, (2) the changing household composition, and (3) ethnic population developments. Table 5.3 provides some population information on the world’s largest countries. Table 5.4 provides the percentage of the U.S. population by age group. The Changing Age Structure One of the most dramatic features of the American population is its relentless aging. Table 5.4 shows the population of the U.S. by age groups in 2010. Baby-boomers were born between 1946 and 1964. Children and Teenagers Marketers typically refer to children aged 4 through 12 as “kids.” Preschoolers – children aged 5 or younger and represent a cohort that has grown substantially in recent years. Figure 5.4 shows an appeal to preschoolers’ parents. Elementary-school-age children – includes children aged 6 to 11. Tweens – children between the ages of 8 and 12. The “youth materialism scale” indicates that youth who are highly materialistic shop more frequently; are more interested in new products; and more likely to: watch tv commercials, ask parents to buy products advertised, respond to celebrity endorsements, want more things for gifts, and like school less and have lower grades. Teenagers – people between the ages of 13 and 19 that have tremendous earning power and considerable influence in making personal and household purchases. They are often referred to as the Millennial Generation, Millenials, or Generation Y (Gen Y). Gen Y were born between 1982 and 1996. Young Adults Born between 1965 and 1981 and also referred to as baby busters and Generation X. Middle-Aged and Mature Consumers Middle age starts at age 35 and ends at 54, at which point maturity is reached. U.S. Census bureau’s designation classifies mature people as those who are 55 and older. Middle-aged – as of 2010, there were roughly 86 million Americans between the ages of 35 and 54, made up of younger baby boomers and older Generation Xers. Mature Consumers – (also called seniors) made up about 25 percent of the U.S. population in 2010. They are wealthier and more willing to spend than ever before, controlling nearly 70 percent of the net worth of all U.S. households. Research has identified four groups of mature consumers based on a combination of health and self-image characteristics: Healthy Hermits: though in good health, they are psychologically withdrawn from society Ailing Outgoers: though in poor health, they are socially active Frail Recluses: withdrawn socially and are in poor health Healthy Indulgers: vigorous, relatively wealthy, and socially active The Ever-Changing American Household As of 2010, there were 117.5 million households in the U.S., of which 78.8 million were family households and 38.7 nonfamily households. The average size of a household is 2.6 people. In 1960, married couples with children younger than 18 constituted nearly 50 percent of households. Ethnic Population Developments The largest ethnic groups in the U.S. are Hispanics and African-Americans, and ethnic minorities represent nearly 1 of 3 people in the U.S. Table 5.5 illustrates the population of different ethnic groups in the U.S. African-Americans While African-Americans share a common heritage (i.e., slavery, discrimination) and skin color, African-Americans are as diverse as any other ethnic market. They are slightly more than 13 percent of the U.S. population. They are attractive consumers because, as a group, they are younger than white population, geographically concentrated, and tend to purchase prestige and name-brand products in greater proportions than do whites. Figure 5.6 shows an appeal to African-American consumers. Hispanic Americans (Latinos) Hispanics are America’s largest minority group. They are primarily geographically concentrated mainly in California, Texas, New York, Florida, Illinois, Arizona, and New Jersey but are increasingly mobile. A key in designing effective advertising is to advertise to them in their dominant language. Table 5.6 provides estimates of the top 10 U.S. Hispanic markets. Asian-Americans Asian-Americans in the U.S. represent many nationalities including Asian Indians, Chinese, Filipino, Japanese, Korean, Vietnamese, and others. In 2010, about 14 million Asians lives in the U.S. Asians speak a wide variety of languages. Market Targeting Once segments are developed then marketers must decide whether these segments are attractive enough to be worth our attention. To decide, we ask to what extent is the potential segment (1) measureable, (2) substantial, (3) accessible, (4) differentiable, and (5) actionable? When selecting the segments, we may then use one of the target market strategies: (1) undifferentiated marketing, (2) differentiated marketing, or (3) concentrated marketing. Market Positioning in Practice: The Fundamentals The term positioning refers to the brand positioning and also to the brand’s meaning to consumers. Positioning is expressed as a short statement or word that represents the message you wish to imprint in customers’ minds. For example, Volvo pairs with safety, State Farm with good neighbor, Disney with family entertainment, and GE with innovation. A good positioning statement should reflect the brand’s competitive advantage and should motivate consumers to action. Figure 5.7 illustrates a framework for brand positioning. Benefit Positioning Brands can position using functional, symbolic, or experiential benefits. This was first presented in the brand equity framework. Positioning Based on Functional Needs Functional needs attempt to provide solutions to consumer’s current consumption-related problems or potential problems by communicating that the brand possesses specific benefits capable of solving these problems. Appeals to functional needs are the most prevalent form of brand benefit positioning. Positioning Based on Symbolic Needs Symbolic needs include those directed at consumers’ desire for self-enhancement, group membership, affiliation, altruism, and other abstract need states that involve aspects of consumption not solved by practical product benefits. Personal beauty products, jewelry, alcoholic beverages, cigarettes, and motor vehicles frequently appeal to symbolic needs. Positioning Based on Experiential Needs Experiential needs represent their desires for products that provide sensory pleasure, variety, and/or cognitive stimulation. Products positioned toward these needs are promoted as being out of the ordinary and high in sensory value (i.e., looking elegant, feeling wonderful, being exhilarating, etc.). Attribute Positioning A brand can be positioned in terms of a particular attribute or feature, provided that the attribute represents a competitive advantage and can motivate customers to purchase that brand rather than a competitive offering. Product-Related Product-related attributes include aspects such as product design, materials, colors, etc. Figure 5.10 shows an ad which illustrates product-related attribute positioning. Non-Product-Related: Usage and User Imagery A brand positioned according to the image associated with how it is used, its usage imagery, depicts the brand in terms of specific usages that become associated with it. User imagery positions brands in terms of the kind of people who use them. Figure 5.11 shows this form of attribute positioning. Repositioning a Brand There are points in a brand’s life when it will need to be repositioned. Marketing Mix Development The final step in the segmentation process is to apply the marketing mix elements to each segment. Chapter Features Positioning and “McBucks”: Is McDonald’s Becoming Starbucks? To most consumers, McDonald’s represents the golden arches, Ronald McDonald, French fries, Big Macs while Starbucks represent strong-tasting coffee and expensive specialty drinks. Just as Starbucks experimented with nontraditional breakfast items, McDonald’s added specialty coffee drinks. McDonald’s uses push-button machines to produce specialty coffee drinks and will price them about 50 cents less than at Starbucks. It is estimated that 20 percent of Americans drink an espresso-based coffee drink daily. The profit margins for specialty coffees are extremely attractive compared to most McDonald’s items. Despite McDonald’s decision to transform their company into a beverage destination, many franchise owners strongly oppose the decision. It cost roughly $100,000 to renovate and purchase the new equipment. Franchisees questioned whether there is sufficient customer interest in specialty coffee drinks at McDonald’s. Corporate officials estimated that offering specialty coffee products will boost individual stores’ annual revenue by approximately $125,000. Results thus far show that coffee has been a success at McDonald’s. Geodemographics and Smartphone Use: It’s Not What IT Seems Surprisingly the worldwide percentage of mobile phone users with smartphones was only at 11 percent as of 2011. In the U.S., the penetration rate was 54 percent. Worldwide, the average smartphone user is a male between the ages of 25 and 34. This information illustrates why it is important to consider geodemographic information when targeting. College Students: An Inviting Target for Odor-Fighting Products Dorm rooms and college student apartments are often dirty, cluttered, smelly, disgusting spaces. Procter & Gamble seeing the need to improve this situation, began marketing its Febreze line of products explicitly to college students; 18 million potential customers in the U.S. Reaching college students via conventional mass media would be too costly and ineffective. Instead, P&G opted to use Facebook as the medium and included an interactive website (www.facebook.com/pages/Telling-Febreze-WHAT-STINKS/21606803968). Special Beverage for Latino Consumers, Clamato Clamato, a tomato juice produced by Mott’s containing a hint of clam, has been on American supermarket shelves for over 25 years. The brand basically languished until Mott’s concentrated its entire marketing budget on the Latino market because these consumers have the impression that Clamato juice is an aphrodisiac. While Mott’s doesn’t make any claims as to the juice’s powers, it does use a tagline that translates to “Clamato adds flavor to the moment.” In a special appeal to Mexican-Americans, Mott’s offered phone cards with free minutes for calls to Mexico with purchases of the juice. This campaign has driven a substantial sales increase. Not Lovely, but Successful Crocs, the clumsy-looking shoes made from a plastic-like foam resin, are worn by young and old alike. The resin is lightweight, anti-bacterial, and foot forming. Originally, the shoes were made by a Canadian company, but three guys from Colorado purchased the product and founded Crocs in 2002. Since then Crocs has become a very successful brand. Initially, marketed at boat shoes, as the popularity grew based on word-of-mouth influence, widespread distribution in many different types of retail outlets became necessary. In 2007 Crocs generated sales of more than $800 million in over 40 countries! The brand’s success is attributable to fulfilling consumers’ functional needs for comfortable and easy-to-care-for footwear; and the emotional connection made by Crocs marketing strategy of affiliating with universities, professional sports teams, and other high-equity associations. The Symbolism of Certifying Products as Fair Traded While most consumers are aware that agricultural commodities often are imported from other countries, they are not aware that workers in other countries often are paid dreadfully low wages and farm owners have difficulty earning a profit. If supply exceeds demand, then prices fall. The only resolution to this imbalance is some form of “artificial” intervention, which has happened. Some consumers are willing to pay higher prices so that poor workers and growers are able to survive, and they have been given the label “LOHAS” consumers, which stands for “lifestyles of health and sustainability.” Increasingly, commodity products (e.g., coffee, grapes, mangos) are labeled with stickers bearing “Fair Trade Certified” (e.g., Dunkin’ Donuts and Starbucks coffee). Another label used by Procter & Gamble’s coffee products is “Rainforest Alliance Certified.” The author ties this back with consumers’ symbolic needs—the sense of being fair and socially responsible. Instructor Manual for Advertising Promotion and Other Aspects of Integrated Marketing Communications Craig J. Andrews, Terence A. Shimp 9781111580216, 9788131528242, 9781133191421, 9781337282659