Are you using promotional activity strategically?

Previously on this blog, I have discussed the concept of the extended marketing mix or the seven P’s (Product, Price, Promotion, Place, People, Process, Physical Evidence).  A critical element of this mix is Promotion.

Promotion is not just advertising, it is all communication between a business and its target customers.  Marketers talk of a promotional mix of different communication channels and the balance between each of these channels will differ depending on the customer segment the promotional activity is designed to reach.

P R Smith, the digital marketing academic lists ten tactical tools which can form part of a businesses promotional mix.  these are:

  1. Advertising – from traditional print advertising to internet pop-ups and not forgetting media such as radio and television.
  2. Public Relations – the use of press releases, media launches and celebrity endorsement
  3. Sponsorship – Sports, teams, events and service sponsorship
  4. Sales Representatives and telemarketing
  5. Exhibitions, events and conventions
  6. Location of premises/Head Office – for example, the RAC base is beside the M6 and therefore seen by thousands of drivers every day.
  7. Merchandising and packaging – such as locating products on supermarket aisle ends or at eye level. Designing packs to stand out from the competition.
  8. Word of Mouth – a critical tool for small businesses through the creation of brand advocates
  9. Sales Promotions – such as loyalty schemes, special offers and free gifts.
  10. Direct Mail/Email.

The promotional mix does not sit in isolation from your business strategy.  It must be created to specifically attract target customer groups and to reflect the stage of the relationship between the business and the customer.

However, all too often small businesses do not think of their promotional activity as being strategic in nature.  They stick to traditional forms of promotional activity because that is what has always been done or because it is how their competition act.  There is a ‘me too’ culture.

Such an approach could mean that a small business is not getting the best returns for their investment in promotional activity.  As the Chinese military strategist Sun Tze said in The Art of War, “Tactics without strategy is the noise before the defeat”.

There are three marketing concepts critical to deciding what promotional tactics to use for a particular customer segment.  The first is the theory of the customer ladder.  Ladder theory states that consumers move through different stages in their relationship with a firm, as if they were climbing a ladder.  At each rung on the ladder, a different mix of promotional tools will be needed to get that customer to move up the ladder.

Consumers begin as ‘suspects’.  This is the bottom rung of the ladder where consumers become aware of your existence.  The next rung is ‘prospects’, where consumers begin to examine your product offer in more detail. Once consumers actually buy your product, they become ‘customers’.  A consumer who begins to make repeat purchases becomes a ‘client’.  Finally, when a consumer recommends your products to a third-party, they become an ‘advocate’.

A small business, who relies on word of mouth for new business therefore needs to get consumers to move up the ladder quickly to increase the number of ‘brand advocates’ to generate new business.

The second concept to consider is the mnemonic AIDA.  This stands for Awareness, Information, Desire, Action.  It is critical at the bottom rungs of the customer ladder and describes the thought processes that a potential customer goes through.  Firstly through promotional activity a potential customer becomes aware of your business; then promotional activity informs them of what you offer; they then desire your products; and finally they act to purchase your product.

Take the example of a blockbuster Science Fiction movie such as the new Star Wars film.  First the studio uses a press release or a press conference to announce that a new film is going to be made.  This makes Star Wars fans aware a new product is on its way.  Then the studio creates a website for the new film informing fans of how production of the film is progressing.  Often this includes fan forums so the ‘Star Wars’ community can discuss news.  To build desire for the new film, teaser trailers and interviews with the stars are used.  Often these trailers are ‘premiered’ at science fiction conventions before being released on the internet.  Stars of the film also attend these events where they can discuss their role and give hints as to content. Finally, the date for the film’s release is announced and film premiere’s are arranged.  Competitions are used do that ‘superfans’ get the first opportunity to see the film first, increasing their role as brand advocates.  The release date and premiere are calls to action i.e. book your tickets NOW!

There has been significant psychological research carried out on the thought processes consumers go through when deciding to purchase goods or services.  This has led to criticism that AIDA is too formulaic and prescriptive; after all, people often do act on the spur of the moment and make snap decisions.  However, AIDA remains a good rule of thumb.

The third concept to remember is the mnemonic DRIP.  This stands for Differentiate, Remind, Inform, Persuade; and describes the purposes of promotional activity.  It differentiates your products from those of your competitors; it is used to remind customers that you exist; it informs customers as to what is on offer; and it persuades them to buy it.

Depending where your customers are on the ladder, the mix of the DRIP elements will differ.  Promotional activity aimed at new prospects may focus on differentiation and information.  Activity aimed at existing customers may focus on reminding them of your products and persuading them to rebuy.  Promotional activity aimed at brand advocates will likely be positioned to inform them of product updates and to persuade them to recommend your business to others.

Finally, for this blog entry, there is the concept of customer equity.  Philip Kotler, the Harvard marketing academic, analysed customer groups on the basis of profitability over time.  He split customers into four groups:

  1. Strangers – This is where there is a short-term, low-profitability relationship between a business and its customers.  Equity from these customers will be low.
  2. Butterflies – These are short-term but highly profitable relationships.
  3. Barnacles – This is where a long-term relationship with a customer exists but it offers low returns
  4. True Friends – These are highly profitable, long-term relationships.

Recognising the Pareto Principle (that 80% of the return of an activity comes from 20% of the effort), Kotler’s equity theory is one element used to decide whether a customer is a key account.  Recognising that some key accounts are not the most profitable key customers are likely to be True Friends, some Barnacles and some high-end Butterflies.  Strangers are unlikely to ever be classed as key customers.

IN many cases Key accounts are treated differently to other customers.  Often the relationship is one of colleagues with a common aim rather than the traditional consumer/supplier relationship.  This alters the promotional tactics used for these customers.  Information sharing becomes incredibly important and promotional activity will focus less on advertising and more on the activities of your representatives.

It is important when developing your promotional strategy to clearly identify your status in the market and the relationships you have with target customer groups.  You then need to develop a range of promotional tactics which best fits the needs of those groups. These tactics should differentiate you from your competition and help you carve out a distinct identity in the marketplace.

Philmus Consulting can help your business to develop strategic marketing plans which make the best use of your promotional activity and your available resources.