The 30 Day MBA (21 page)

You could consider starting your own online auction house. The case study example below is a good one, with an interesting twist. To lend a bit of extra credibility, the products being sold can be seen in the showroom.

Pay-what-you-like pricing

This strategy is based on the auction concept but buyers set their own price. The twist is that there is no limit on supply, so everyone can have one at the price they want to pay. Radiohead, the band, released its seventh album
In Rainbows
in October 2007 as a download on its website where fans could pay what they wished, from nothing to £99.99 ($157/€112). Estimates by the online survey group comScore indicate that of the 1.2 million visitors to Radiohead's website, three out of five downloaders paid nothing and the payers averaged £3 ($4.7/€3.37) per album, so allowing for the freeloaders the band realized £1.11 ($1.74/€1.25) per album. The band reckons that was more than they would have made in a traditional label deal. In fact the version of the album released in this way was not the definitive one; that was released three months later in CD format, debuting at No 1 in the United States and the UK.

A number of restaurateurs have experimented with this pricing strategy with some success, but as yet it is in its infancy. Still, eBay is only a ‘baby' in the business model world, so watch this space, as they say in the marketing world.

Promotion and advertising

The answers to these five questions underpin all advertising and promotional strategies:

• What do you want to happen?
  
• If that happens, how much is it worth?
  
• What message will make it happen?
  
• What media will work best?
  
• How will you measure the effectiveness of your effort and expense?
  

What do you want to happen?

Do you want prospective customers to visit your website; phone, write to you or e-mail you; return a card; or send an order in the post? Do you expect them to have an immediate need to which you want them to respond now, or is it that you want them to remember you at some future date when they have a need for whatever it is you are selling?

The more you are able to identify a specific response in terms of orders, visits, phone calls or requests for literature, the better your promotional effort will be tailored to achieve your objective, and the more clearly you will be able to assess the effectiveness of your promotion and its cost versus its yield.

How much is that worth to you?

Once you know what you want a particular promotional activity to achieve, it becomes a little easier to estimate its cost. Suppose a $/£/€1,000 advertisement
is expected to generate 100 enquiries for your product. If experience tells you that on average 10 per cent of enquiries result in orders, and your profit margin is $/£/€200 per product, then you can expect an extra $/£/€2,000 profit. That ‘benefit' is much greater than the $/£/€1,000 cost of the advertisement, so it seems a worthwhile investment. Then, with your target in mind, decide how much to spend on advertising each month, revising that figure in the light of experience.

Deciding the message

Your promotional message must be built around facts about the company and about the product. The stress here is on the word ‘fact', and while there may be many types of fact surrounding you and your products, your customers are interested in only two: the facts that influence their buying decisions, and the ways in which your business and its products stand out from the competition.

These facts must be translated into benefits. (See also ‘Features, benefits and proofs' in this chapter.) There is sometimes an assumption that everyone buys only for obvious, logical reasons, when we all know of innumerable examples showing this is not so. Do people buy new clothes only when the old ones are worn out? Do bosses have desks that are bigger than their subordinates' because they have more papers to put on them?

The message should follow the AIDA formula: get Attention, capture Interest, create Desire and encourage Action. Looking at each in turn:

• Getting attention requires a hook. Colour, humour and design are tools used to focus people on your offer and away from the masses of distracting clutter that occupy minds.
  
• Interest is achieved by involving people in some aspect of the product, perhaps by posing a question such as one diet company does with its challenge ‘would you like to lose 2 kg in two weeks?'.
  
• Desire is about showing people the end result they could achieve by having or using your product. Every speedboat advertisement has a beautiful bikini-clad girl posing on the bow, the inference being that if you owned the boat you would be sure to get the girl too.
  
• Action means provoking a painless way for people to start the buying process. Free trial, money-back guarantee, offer only lasts this week and so forth are examples of the strategies used to achieve this result.
  

UACCA – Unawareness, Awareness, Comprehension, Conviction, Action is another acronym used in this context.

Choosing the media

Your market research (see below) should produce a clear understanding of who your potential customer group are, which in turn will provide pointers as to how to reach them. But even when you know whom you want to reach
with your advertising message it's not always plain sailing. The
Fishing Times
, for example, will be effective at reaching fishermen but less so at reaching their partners who might be persuaded to buy them fishing tackle for Christmas or birthdays. Also, the
Fishing Times
will be jam packed with competitors. It might just conceivably be worth considering a web ad on a page giving tide tables to avoid going head to head with competitors, or getting into a gift catalogue to grab that market's attention.

If a consumer already knows what they want to buy and are just looking for a supplier then, according to statistics, around 60 per cent will turn to print Yellow Pages (or similar); 12 per cent will use a search engine; 11 per cent will use telephone directory enquiries; and 7 per cent online Yellow Pages. Only 3 per cent will turn to a friend. But if you are trying to persuade consumers to think about buying a product or service at a particular time then a leaflet or flyer may be a better option. Once again it's back to your objectives in advertising. The more explicit they are the easier it will be to choose media.

Above or below the line

Advertising media are usually clustered under two headings, above the line and below the line. It has to be said that the line is becoming increasingly indistinct but it is still a term that is part of the lexicon in setting the advertising budget.

Above the line
Above the line (ATL) involves using conventional impersonal mass media to promote products and services, talking at the consumer. Major above-the-line techniques include:

• TV, cinema and radio advertising: The vast array of local newspapers, TV channels and digital radio stations can make this a more targeted advertising strategy than has been the case.
  
• Print advertising in newspapers, magazines, directories and classified ads: Print of all forms has the merit of having a long life, so it can be used for handling more complex messages than, say, radio or TV.
  
• Internet banner ads act as a point of entry for a more detailed advert.
  
• Search engines: Search engine advertising comes in two main forms. PPC (pay per click) is where you buy options on certain key words so that someone searching for a product will see your ‘advertisement' to the side of the natural search results. Google, for example, offers a deal where you pay only when someone clicks on your ad and you can set a daily budget stating how much you are prepared to spend, with $5 a day as the starting price.
  
• Podcasts, where internet users can download sound and video free, are now an important part of the E-advertising armoury.
  
• Posters and billboards.
  

Below the line
Below the line (BTL) talks to the consumer in a more personal way using such media as:

• Direct mail – leaflets, flyers, brochures: Response rates are notoriously low, often less than 1 per cent resulting in sale, but direct mail has the merit of being a proven method of reaching specific targeted market segments.
  
• Direct e-mail and viral marketing: The latter is the process of creating something so hot that the recipients will pass it on to friends and colleagues, creating extra demand as it rolls out. Jokes, games, pictures, quizzes and surveys are examples.
  
• Sales promotions, including point of sales material: Activities carried out in this area include free samples, try before you buy, discounts, coupons, incentives and rebates, contests, and special events such as fairs and exhibitions.
  
• PR (public relations): This is about presenting yourself and your business in a favourable light to your various ‘publics' – at little or no cost. It is also a more influential method of communication than general advertising – people believe editorials. There may also be times when you have to deal with the press – anything from when you are trying to get attention for a new product to handling an adverse situation, say if your product has to be recalled for quality reasons, or worse.
  
• Letterheads, stationery and business cards are often overlooked in the battle for customer attention, but are in fact often the first and perhaps only way in which a business's image is projected.
  
• Blogs, where the opinions and experiences of particular groups of people are shared using online communities such as MySpace, for example, are an extension of this idea. Neilson NetRatings reported in 2008 that over 2 billion community sites are viewed every month in the UK alone.
  

Push or pull
Like above or below the line, push and pull are different advertising strategies used for achieving different results. Pull advertising is geared to drawing visitors into your net if they are actively looking for your type of product or service. Search engines, listings in on- and off-line directories, Yellow Pages and shopping portals are examples here.

Push advertising tries to get the word out to groups of potential customers in the hope that some of them will be considering making a purchase at about that time. Magazines, newspapers, TV, banner ads and direct mail both on- and off-line are examples here.

As with above and below the line, the distinctions are fast becoming blurred, but the message used in your advertising will be different. With pull there is the assumption that people want to buy, and they just need convincing that they should buy from you. Push calls for a different message convincing them of their need and desire in the first place.

Measuring results

A glance at the advertising analysis in
Table 3.3
will show how to tackle the problem. It shows the advertising results for a small business course run in London. At first glance the Sunday paper produced the most enquiries. Although it cost the most, $/£/€3,400, the cost per enquiry was only slightly more than for the other media used. But the objective of this advertising was not simply to create interest; it was intended to sell places on the course. In fact, only 10 of the 75 enquiries were converted into orders – an advertising cost of $/£/€340 per head. On this basis the Sunday paper was between 2.5 and 3.5 times more expensive than any other medium.

TABLE 3.3
  
Measuring advertising effectiveness

Judy Lever, co-founder of Blooming Marvellous, the upmarket maternity-wear company, believes strongly not only in evaluating the results of advertising, but in monitoring a particular media capacity to reach her customers:

We start off with one-sixteenth of a page ads in the specialist press, then once the medium has proved itself we progress gradually to half a page, which experience shows to be our optimum size. On average there are 700,000 pregnancies a year, but the circulation of specialist magazines is only around the 300,000 mark. We have yet to discover a way of reaching all our potential customers at the right time – in other words, early on in their pregnancies.

Place (distribution and logistics)

Place is the fourth ‘P' in the marketing mix. This aspect of marketing strategy is about how products and services are actually delivered into the customers' hands.

If you are a retailer, restaurant or hotel chain, for example, then your customers will come to you. Here, your physical location will most probably
be the key to success. For businesses in the manufacturing field it is more likely that you will go out to ‘find' customers. In this case it will be your channels of distribution that are the vital link. For many businesses delivering a service the internet will be both the ordering and fulfilment vehicle.