Simon's Pre-Master's 1 2010: whole essay of Kelvin

Promotion is the leader of the 4ps

Promotion always takes away money from your wallet!

It is complicated to discuss what are the factors should a successful corporation have. Someone might say good management or strong brand name. Definitely, these are the factors that every corporation should have or aspire to develop. Indeed, marketing strategy or marketing mix had been a popular and essential study topic in the business world nowadays. As we all know, most corporations are selling product or service to their customers in order to survive and develop. Marketing mix is the crucial tool to help company to target their customer and sell the product successfully. However, what is marketing mix? Basically, marketing mix is including product, price, place of distribution and promotion. Product is the good or service offered by the company including variety of product mix such as features, design and package. Price is the amount in term of money that charged by the company for the product or service. Place of distribution is the channel and coverage such as the transportation and physical store as well as the online shop. Promotion is the personal or non-personal communication with the target customer in order to inform them with the information of the overall product. The combination of these four elements is called marketing mix. In addition, company has the option of adding, subtracting, or modifying in order to create a desire marketing strategy (Larry Steven Londre, 2009). In fact, someone always comes up with the question that is which one is the most important one in the marketing mix. In the following paragraphs, which are going to illustrate why, promotion is the leader of the marketing mix but not the other by using some real cases.

Promotion activities occur through out the product life cycle (PLC) that is a course of a product’s sales and profit over its lifetime. In fact, there are four stages, which are introduction, growth, maturity and decline. No matter in which stages, promotion plays a main or even leading role comparing with the other three elements in marketing mix. Initially, hardly can the firm generate any revenues during the introduction stage. Meanwhile, it is not necessary to modify or develop the product due to insufficient information form the market. Alternatively, raising the awareness of the product is the sovereign. If the products are welcome by the target market, it will entre growth stage. In this stage, each of the elements contributes lots to the successful of the product. Firm need to modify the product if there is a need to do that as well as keep the quality at the high level. Additionally, increase the coverage of the product is an attempt to enhance the customer based that is important to the following stages. What is the role of promotion in the second stage? The buyer from the first stage might continue to buy, however, promotion does try to “pull” more new buyers from the market by heavy advertisement and word-of-mouth. In the third stage, products entre maturity stage in which sales and profit go to the peak and the competition is fierce. Therefore, the reminders in the market are trying to compete in term of price and product. They might set an attractive price and sell the quality product to the customer. In this sense, spending on promotion should be decreased in order to keep the competitiveness in the keen market. Brand visibility, nevertheless, is the key thing that firm need to focus on. It is meaningless to have a superior product but no one see it in the store. That’s why keep the visibility is so important. By achieving this aims, of course, place of distribution such as point of sale can help to reach the objective. However, the key question is why the intermediary should put your product on the top on the shelf. Therefore, do promotion among yours’ distributer and retailer. At the end of the final stage, sales and profit drop steadily. Plan to phase out the product or introduce new version of the product are the two main roads in the decline stage. If the firms do not want to invest anymore, it better to cut promotion budget as well as the input of R&D and the distribution channel. On the other hand, to a certain extent, new version of product is starting a new PLC. Therefore, different promotion strategies should be carried out in order to raise the awareness and enhance the market share and maintain the visibility.

Promotion acts as a stimulator to impinge the irrational buying. According to Abraham Maslow (1954), there was a model that illustrated the human being’s needs in different level. Based on the model, the basic needs of us or consumer are the necessaries such as food, house and cloths. The upper level relate to the social status and self-actualization needs. From this point of view, consumer will only purchase the product beyond necessaries by two stimulations. The first one is to satisfy the higher level of needs whilst the second one is irrational buying. Promotion does little on the first one that is an internal stimulator. However, promotion acts a tool to stimulate the irrational buying that can be affected externally. Making it simply, there are two kinds of goods that are necessary and luxury. Firms selling necessary such as food and cloths use promotion strategy to “ force” consumer to buy more than what they really need. For instance, there are sales discount for the chocolate bar such as buy one get one free. Seeing that, consumer might consider the promotion price, which is cheaper than just buy one chocolate bar. However, more often than not the customer plans to buy only one chocolate bar that is the initial need. Conversely, luxury goods refer to the product and service that are not essential and the demand will be increased as higher incomes. (Financial Times Lexicon) To be more precise, matching with the Maslow’s hierarchy, luxury goods are the needs located at the upper level such as diamond or travel holiday. Considering that, firms really need intensive promotion strategy to convince the buying decision. Normally, when consumers are received some stimulation such as sales discounts or attracted by the persuasive advertisement, irrational buying might occur. For example, aimed at stimulating the travel in US during 2010 summer, there are intensive promotion strategies like 50 percent price cut or even private jet to Las Vegas and so on. Sony made a sale discount of its most powerful product, PS3, in the Christmas holiday last year to stimulate sales. All of the above cases are to tell the effect on the irrational buying of the luxury goods.

People argue that the influence of promotion is not immediacy whilst price is the most effective stimulator. First of all, it is important to clear a concept. For a successful marketing mix, each of the four elements makes contribution and is essential. It is no doubt that product is the fundamental of the marketing mix. However, the product nowadays is no more just a tangible thing that you can tough it and feel it. Recently, Facebook is the most successful business all around the world. We are now using facebook as a service but we cannot feel it or get some form it. Facebook attempts to use promotion strategy actively and passively. In fact, facebook is a free service that we don’t need to pay for it. However, we are doing the promotion for it. Facebook uses our personal information and connection to increase the customer base. Meanwhile, word-of-mouth is one of the key strategies for Facebook. The existing users will advise their friends to be the new user because of the marvelous experience on facebook. In this case, there is no real product and the customers don’t need to pay, therefore, promotion becomes the most useful tool.

Apart from the contribution, we can see the importance from the investment in promotion. As mentioned before, promotion is the personal or non-personal communication with the target customer in the market. It is impossible that no communication between the company and the market. Firms might contribute part of the total sale revenue into the promotion budget in the next year. Furthermore, some company might follow their main competitors to set the promotion budget. As we all know that, although Apple has a strong brand name and good reputation, the expenditure of the advertising is tremendous. According to the figure, more than 10% of the SG &A expense (selling, general and administrative) were used for advertising in 2008 (Apple’s Nov. 5 10-K filing on page 62). It shows that even the well-known company in the world, promotion should be an important consideration drawing the huge attention and investment form the company.

“I know that half of my advertising budget is wasted, but I’m not sure which half.” John Wanamaker who was the father of modern advertising said that. Actually, the effect of promotion is sometimes not immediacy or nor easy to see. However, the effect is there and the influences are sometimes immense and last for a long time. One topical case was the cowboy advertisement from Marlboro. At that moment, most youngsters thought that smoking is cool and smart but nothing more. Promotion cannot replace the function of product; price and place of distribution or vice versa in the marketing mix because all of them are unique and have their own value. By contrast, promotion does is to connect and maximize the function of each element. More important, our mind and decision are affected by promotion that exists everywhere near us. That’s why promotion is always the leader of 4ps. Beware your money will be taken away by an “invisible hand”.

References:

1.Larry Steven Londre Marketing, IMC, Advertising, Promotion, Media and More. 2009

www.londremarketing.com/documents/Nineps05122009.pdf

2.Sale promotion strategy by William King

http://ezinearticles.com/?Sales-Promotion-Strategies&id=3959138

3.Stage of the Product Life Cycle, Business Strategy, Business Performance

By Carl R. Anderson and Carl P. Zeithaml , 1984 Mar, P5-P.8

4. Principles Marketing, Third European Edition by Philip Kotler, Gary Armstrong,

John Saunders and Veronica Wong

5.Introduction to Marketing by Geoff Lancaster and Paul Reynolds, 1999

6. http://lexicon.ft.com/term.asp?t=luxury-goods

7.http://www.travelagentcentral.com/community/first-ever-industrywide-promotion-stimulate-travel-21211