INTEGRATED MARKETING COMMUNICATION

Introduction to IMC Module 1

Compiled by Prof Alex Daniel CIM Sem III. Batch 2011-2013 CHRIST CAMPUS

Topics covered. Meaning of IMC. Role of IMC in Marketing process, Traditional Communication v/s IMC. Introduction to IMC tools Advertising, sales promotion, publicity, public relations, and event sponsorship; the role of advertising agencies and other marketing organizations providing marketing services and perspective on consumer behavior.

Foreword
Dear friends at CIM, Welcome to SEM III of your masters program. Congratulations on your choice of Marketing as specialization in MBA. While you have understood the basics of Marketing in your last semester, this time we will try to understand a few of the concepts in an in-depth manner. Marketing is a very dynamic field where changes occur on a daily basis and more so now that we have a greater penetration of Internet in India. While there are quite a few who are sure or at least aware of what they want to do or which area of Business Management to focus on, many of you must be wondering what to look for in future other than selling (goods and/or services). Advertising is a very important part and parcel of the Marketing process. So those of you with good writing skills, creative and visualization skills and of course an out of the box approach to provide solutions to various problems, this is a field to look into. In terms of study materials we were very dependent on foreign authors for their books. As much as they were interesting there were not many books that had an Indian perspective. We are a very different market with very different needs. It feels very satisfactory to say that at least now we have couple of books. Advertising and Promotions an IMC perspective by Kruti Shah and Alan D'Souza. Another book with the same title by George & Michael Belch and Keyoor Purani are written with an Indian perspective. This booklet will try to cover material with reference to the 1st Module of IMC. This module introduces the concept of integrated marketing communications (IMC), its evolution, and looks at how various marketing and promotional elements must be coordinated to communicate effectively. We discuss the reasons for the increasing importance of the IMC in planning and executing advertising and promotional programs. Marketers understand the value of strategically integrating the various communication functions rather than having them operate individually. The various elements of the promotional mix are introduced in this module along with a brief discussion of these basic tools of IMC. Best wishes for a productive semester ahead.

Thanking you

Alex Daniel
Christ Institute of Management

Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

Table of Contents

SECTION 1 INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS SECTION 2 THE PROMOTIONAL MIX: THE TOOLS FOR IMC The Most Common Forms of Advertising Direct Marketing Interactive Marketing Sales Promotions Public Relations SECTION 3 Advertising agency Types of Advertising Agencies Agency Compensation Top Advertising Agencies of India Specialized Sevice Organisations SECTION 4 Consumer Behavior Consumer Decision Making Process Consumer Learning Process Environmental Influences on Consumer Behavior 24 24 29 30 15 17 19 20 22 8 9 10 11 12 13 4

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Module 1
Section 1
AN INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS
For more than two decades, the American Marketing Association, the association that represents marketing professionals in the United States and Canada, defined marketing as: The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

Revised Definition of Marketing In 2007 the AMA adopted a revised definition of marketing: Marketing is the activity, set of institutions, and processes for creating, communicating, and delivering exchange offerings that have value for customers, clients, partners and society at large.

This definition focuses on the important role marketing plays in developing and sustaining relationships with customers and delivering value to them. Value is the customers perception of all of the benefits of a product or service weighed against all the costs of acquiring and using it. Benefits can be functional, experiential or psychological. Costs include the money paid for the product or service as well as other factors such as acquiring information, making the purchase, learning how to use a product/service, maintaining, and disposing of it. Relationship Marketingmost marketers are seeking more than just a one-time exchange or transaction with customers. The focus of market-driven companies on developing and sustaining relationships with their customers should be noted. Factors that influence Relationship Marketing are: Companies recognizing that customers have become much more demanding and want personalized products and services tailored to their specific needs and wants Advances in information technology, along with flexible manufacturing systems which have led to the mass customization. An emphasis on the lifetime value of a customer as companies recognize that it is often more cost effective to retain customers than to acquire new ones Information technology, particularly database systems, is an integral part of CRM systems. Marketing communications is also an important part of CRM as companies strive to create more personalized and meaningful one-to-one communications with customers.
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American Association of Advertising Agencies (4As) developed one of the first definitions of integrated marketing communications defining it as: A concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplinesfor example, general advertising, direct response, sales promotion, and public relations- and combines these disciplines to provide clarity, consistency, and maximum communications impact.

Integrated marketing communications calls for a big picture approach to planning marketing and promotion programs and coordinating various communication functions. With an integrated approach, all of a companys marketing and promotional activities should project a consistent and unified image to the marketplace. Experts are recognizing that it involves more than just coordinating the various elements of the marketing and communications program to reflect one look, one voice. IMC is being recognized as a business process that helps companies identify the most appropriate and effective methods for communicating and building relationships with customers and other stakeholders. Don Schultz of Northwestern University, who has been one of the major proponents and thought leaders in the area, developed a new definition of IMC which is as follows: Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, brand communications programs over time with consumers, customers, prospects, employees, associates and other targeted relevant external and internal audiences. This definition views IMC as an ongoing strategic business process rather than just tactical integration of various communication activities. It also recognizes that there are a number of relevant audiences that are an important part of this process beyond just customers. Integrated Marketing Communications (IMC) is the coordination and integration of all marketing communication tools, avenues, functions and sources within a company into a seamless program that maximizes the impact on consumers and other end users at a minimal cost 1 . Promotion is one of the Ps in the marketing mix. Promotion has its own mix of communications tools. All of these communications tools work better if they work together in harmony rather than in isolation. Provided they speak consistently with one voice all the time, every time. Integrated Marketing Communications is a set of strategies that remove the traditional boundaries between public relations, marketing, advertising and other corporate messaging, in both the online and offline spaces, to create an environment where all efforts are coordinated in a synchronized way2.

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http://en.wikipedia.org/wiki/Integrated_marketing_communications#cite_note-0 http://joelfoner.com/2010/02/3-simple-reasons-integrated-marketing-communications-already-won/

Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

These debates repeatedly raise a few questions. Is IMC a winning strategy? Is it the future? Is it the right thing to do? Can it be implemented in an old-school (traditional) organization? Reasons for the Growing Importance of IMCThere are a number of reasons why marketers are adopting the concept of IMC They recognize the value of strategically integrating the various communication functions rather than having them operate autonomously. An adaptation by marketers to a changing environment, particularly with respect to consumers, technology and media. A shifting of marketing budgets from media advertising to other forms of promotion particularly trade-oriented sales promotion. A movement away from relying on advertising-focused approaches, which emphasize mass media such as network television and national magazines, to solve communication problems and more attention to smaller, targeted media alternatives. A shift in marketplace power from manufacturers to retailers. Due to consolidation in the retail industry, small local retailers are being replaced by large regional, national, and international chains that are using their clout to demand promotional fees and allowances. The rapid growth and development of database marketing which is prompting many marketers to target consumers through a variety of direct-marketing methods such as telemarketing, direct mail and direct response advertising. Demands for greater accountability from advertising agencies and changes in the way agencies are compensated which are motivating agencies to consider a variety of communication tools and less expensive alternatives to mass media advertising. The rapid growth of the Internet, which is changing the very nature of how companies do business and the ways they communicate and interact with consumers.

One of the major reasons for the growing importance of integrated marketing communications over the past decade is that it plays a major role in the process of developing and sustaining brand identity and equity. Brand identity is a combination of many factors including the name, logo, symbols, design, packaging, and performance of a product or service as well as the associations that come to mind when consumers think about a brands

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

Section 2 THE PROMOTIONAL MIX: THE TOOLS FOR IMC

Promotion is defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion to sell goods and services or promote an idea. The promotional mix is defined as the basic tools or elements that are used to accomplish organizations objectives.
Advertising

Personal Selling

Direct Marketing

Publicity /Public Relations

Interactive/Internet Marketing

Sales Promotion
Figure 2 The Promotional Mix

A) Advertisingany paid form of non personal communication about an organization, product, service, or idea by an identified sponsor. Advantages cost-effective way for communicating, particularly with large audiences. ability to create images and symbolic appeals and for differentiating similar products and services and a valuable tool for creating and maintaining brand equity ability to strike responsive chord with audience through creative advertising opportunity to leverage popular advertising campaigns into successful IMC programs which can generate support from retailers and other trade members ability to control the message (what, when and how something is said and where it is delivered)
Disadvantages:

the cost of producing and placing ads can be very high, particularly television commercials it can be difficult to determine the effectiveness of advertising there are credibility and image problems associated with advertising the vast number of ads has created clutter problems and consumers are not paying attention to much of the advertising they see and/or hear
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 The Most Common Forms of Advertising: 1) Directed towards Consumers and 2) Directed towards Businesses:

National Advertising done by large companies on a nationwide basis. Ads for well-known brands and companies shown on television

Retail / Local Advertsing done by retail and local merchants encouraging consumers to shop at a specific store, use a local service, or patronize a particular establishment

Primary v/s Selective Advertising primary demand advertising is designed to stimulate demand for the general product class or industry. Selective-demand focuses on creating demand for a specific company and/or its brands.

Figure 2.1 Consumer Advertising

Business-to-Business Advertising: advertising that targets individuals who buy or influence the purchase of industrial goods or services for their companies.

Professional advertising advertising targeted to professionals such doctors, lawyers, engineers, and the like.

Trade advertising targeted to marketing channel members such as wholesalers, distributors, and retailers.

Figure 2.2 Business Advertising

The nature and purpose of advertising differs from one industry to another and across various situations as does its role and function in the promotional program. The common classifications of advertising to the consumer market include national, retail/local and directresponse advertising as well as primary versus selective demand advertising. Classifications of advertising to the business and professional market include industrial, professional and trade advertising.

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B) Direct Marketing: Direct marketing is one of the fastest-growing sectors. It is a form of

integrated marketing communications whereby an organization communicates directly with target customers to generate a response and/or transaction. It involves a variety of activities, including: 1. Direct mail 2. Direct response advertising (on TV, radio or in magazines or newspapers) 3. Telemarketing 4. Internet Sales 5. Catalogs 6. Shopping channel
Direct Mail
Internet Sales
Direct Marketing Shopping Channels Direct Response Advertising

Telemar keting
Catalogs

Figure 2.3 Direct Marketing Components

It is a system of marketing by which organizations communicate directly with target customers to generate a response and/or a transaction. Direct marketing has not traditionally been considered an element of the promotional mix. Advantages: Changes in society (two-income households, greater use of credit) have made consumers more receptive to the convenience of direct-marketed products Allows a company to be very selective and target its marketing communications to specific customer segments. Messages can be customized to fit the needs of specific market segments effectiveness of direct-marketing efforts are easier to assess than other forms of promotion Disadvantages: consumers and businesses are being bombarded with unsolicited mail and phone calls which makes them less receptive to direct-marketing Direct marketing has image problems. Problems with clutter as there are too many direct-marketing messages competing for consumers attention
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C) Interactive/Internet Marketing interactive media allows back-and-forth flow of information whereby users can participate in and modify the content of the information they receive in real time. The major interactive medium is the Internet, which is a global collection of computer networks linking both public and private computer systems. While the most prevalent perspective on the Internet is that it is an advertising medium, it is actually a medium that can be used to for other elements of the promotional mix as well including sales promotion, direct marketing, and public relations. Advantages: The Internet can be used for a variety of integrated marketing communication functions including advertising, direct marketing, sales promotion, public relations and selling The Internet can be used to target very specific groups of customers with a minimum of waste. Messages can be tailored to appeal to the specific interests and needs of the target audience The interactive nature of the Internet leads to a higher degree of customer involvement when customers are visiting a web site. The Internet makes it possible to provide customers with a great deal of information regarding product and service descriptions and specifications, purchase information and more. Information provided by marketers can be updated and changed continually. The Internet has tremendous creative potential as a well-designed web site can attract a great deal of attention and interest among customers and be an effective way to generate interest in a company as well as its various products and services. Disadvantages The Internet is not yet a complete mass medium as only a quarter of Indian households have access to the Internet. In some countries this percentage is much higher. There are problems with the Internet as an advertising medium as many Internet users do not pay attention to banner ads and the click-through rate on most is extremely low. There is a great deal of clutter on the Internet which makes it difficult for advertising messages to be noticed and/or given attention. Audience measurement for the Internet is still a problem as is measuring the effectiveness of banner ads and other promotional messages on the Internet.
Obtains customer database information
Educates or informs customers

The Internet

Communicates and interacts with buyers

A persuasive advertising medium

Provides customer service and support

A sales tool or an actual sales vehicle

Builds and maintains customer relationships

Figure 2.4 Internet or Interactive Marketing

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D) Sales Promotionmarketing activities that provide extra value or incentive to the sales force, distributors, or the ultimate consumer and can stimulate immediate sales. Sales promotion is generally broken into two major categories: consumer-oriented and tradeoriented activities. Advantages: provides extra incentive to consumer or middlemen to purchase or stock and promote a brand way of appealing to price sensitive consumer way of generating extra interest in product or ads effects can often be more directly measured than those of advertising can be used as a way of building or reinforcing brand equity Disadvantages: many companies are becoming too reliant on sales promotion and focusing too much attention on short-run marketing planning and performance many forms of sales promotion do not help establish or reinforce brand image and short-term sales gains are often achieved at the expense of long-term brand equity problems with sales promotion clutter as consumers are bombarded with too many coupons, contests, sweepstakes and other promotional offers consumers may become over-reliant on sales promotion incentives which can undermine the development of favorable attitudes and brand loyalty. in some industries promotion wars may develop whereby marketers sales promotion incentives extensively which results in lower profit margins and makes it difficult to sell products at full price

Sales Promotion
Consumer-oriented
Coupons /Samples /Premiums Contest/Sweepstake Refunds/Rebates Bonus Packs /Loyalty Programs Events

Trade-oriented
Trade Allowances POP Displays / Training Programs Trade Shows Co-op Advertising

Figure 2.5 Types of Sales Promotion Activities

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E) Publicity/Public Relations

Publicitynon-personal communications about an organization, product, service, or idea that is not directly paid for nor run under identified sponsorship. Public Relationsa management function that evaluates public attitudes, identifies the public policies and procedures of an individual or organization with the public interest, and executes a program of action to earn public understanding and acceptance. The distinction should be made between publicity and public relations noting that public relations generally has a broader objective than publicity, as its purpose is to establish and maintain a positive image of the company among its various publics. Publicity is an important communications technique used in public relations; however other tools may also be used. Advantages of Publicity: credibility of publicity is usually higher than other forms of marketing communication low cost way of communicating often has news value and generates word-of-mouth discussion among consumers Disadvantages of Publicity: lack of control over what is said, when, where and how it is said can be negative as well as positive
Figure 1.6 Types of Publicity Vehicles

Feature Articles

News Releases

Interviews

Publicity Vehicles

Press Conference

Special Events

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 Public Relations: Systematically planning and distributing information in an attempt to control and manage image and the nature of the publicity received.

Publicity Vehicles Special Publications Community Activities Corporate Advertising Cause-related Marketing Special Event Sponsorship Public Affairs Activities
Figure 2.7 Public Relation Tools

F) Personal Selling Personal selling is the final element of an organizations promotional mix. Unlike advertising, personal selling involves direct contact between buyer and seller. This can be face-to-face or through some form of telecommunications, such as telephone sales. This interaction allows the seller to see or hear the potential buyers reactions and modify the message accordingly. Personal Selling is a direct person-to-person communication whereby a seller attempts to assist and/or persuade prospective buyers to purchase a companys product or service or act on an idea. Advantages: direct contact between buyer and seller allows for more communication flexibility can tailor and adapt message to specific needs or situation of the customer allows for more immediate and direct feedback promotional efforts can be targeted to specific markets and customers who are best prospects Disadvantages: high cost per contact (depending on the industry) expensive way to reach large audiences difficult to have consistent and uniform message delivered to all customers

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Section 3 ROLE OF ADVERTISING AGENCIES

Advertising agency or ad agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services. An agency can also handle overall marketing and branding strategies and sales promotions for its clients. Typical ad agency clients include businesses and corporations, non-profit organizations and government agencies. What does an Advertising Agency Do? Businesses, Corporations, Government Organizations and Non Profit set-ups hire advertising agencies to advertise their products, brands and services to present and prospective customers. An advertising Agency should: 1 Understand the Product / Company: An advertising agency begins by getting well acquainted with the client's goals, products & target audience. This knowledge proves beneficial in planning and creating an effective advertising campaign. 2 Plan & Create an Advertising Campaign: Once an advertising agency understands its clients' needs, the process of brainstorming and planning begins. Keeping in mind the client's goals (which can range from pushing sales of its products and services introducing new products in the market reiterating its brand's benefits attracting new customers or keeping in touch with old ones the advertising executives work towards creating an effective advertising campaign (a single or a series of attention grabbing and unique ads) which is within the client's marketing goals and budget. This includes creating interesting slogans, attractive jingles and attention grabbing body copy for advertisements. The client has the final word and may ask for rework. 3 Strategize: Some Companies like to outsource their overall marketing responsibilities to advertising agencies. In such a case, the ad agency takes over the process of brand building, strategizing and pushing sales through other promotion techniques like sales promotions etc. Advertising Agencies vary in size in India & abroad - from a couple of people handling all responsibilities to a medium or large sized agency that hires specialized professionals to function each department. It has been generally seen that Full Service Ad Agencies are well equipped to plan and create advertising campaigns for a range of media including TV commercials, Radio jingles, print advertisements etc. Depending on the budget, client's select their agency.

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Ad Agencies Have Skilled Specialists

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Types of Advertising Agenciesall agencies are not the same of course. This section discusses the various types of agencies including the following:

1. Full Servicethese agencies offer their clients a full range of services including account services (The link between agency and client, managed by the account executive), marketing planning and research(Research department, may include account planners, media dept. obtains media space, time, media planning and buying, sales promotion), creative services(Creation, execution of ads copywriter artists, other specialists and interactive media). The various departments of a full service agency include: Account services, Marketing services, Creative services, Management and finance. Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agencys clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business and it ensures continuity in servicing the account.

Producing advertising Creating advertising Performing research

Planning advertising
Figure 3.1 Services offered by Advertising agency

Full range of marketing communication and promotion services

Selecting media

Direct marketing Sales promotions

Interactive capabilities Package design

Strategic market planning

Non advertising services

Public relations and publicity

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Other types of Agencies and Services 2. Creative boutiquesthese types of agencies specialize in and provide only advertising creative services. They have the ability to turn out inventive creative work quickly. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Creative boutiques developed in response to some clients desire to use only the creative talent of an outside agency while maintaining other functions internally. Clients seek the help of creative boutiques when an extra creative effort is required, or because its own employees do not have sufficient skills. They can be used in these ways: By client companies for creative services only Full service agencies may subcontract for their creative services when busy or when not wanting to add permanent employees Other functions such as advertising planning, research and media buying may be done internally within the company or contracted out 3. Media Specialist Companiesthese are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. The task of purchasing advertising media has grown more complex as specialized media proliferate. Media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. Agencies and clients usually develop their own media strategies and hire independent buying services to execute them. Some of the characteristics of media specialist companies include: They specialize in buying media time, particularly radio and television time Because they purchase large amounts of time and space, they usually receive large discounts and can save the agency/company money on media purchases They are paid a fee or commission for their work The agency or client may often develop the media strategy Media buying organizations may be used to implement the media strategy and buy broadcast time and/or space in print publications

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Methods of Agency Compensation Because the type and amount of service an agency performs can vary from one client to another, a variety of methods are used to compensate them for their services. Various ways for compensating agencies are shown in this slide and include: Commission method traditional method, whereby the agency receives a specified commission (usually 15%) from the media on any advertising time or space it purchases for a client. Fee, cost, and incentive-based systems: Fee arrangement the agency charges a basic monthly fee for all of its services. Agency and client agree on work to be done and the amount to be paid. This is the primary method accounting for 68 percent of the compensation plans. Cost-Plus arrangement the client pays a fee based on the costs of its work plus some agreed-on profit margin (a percentage of total costs). This method requires careful accounting and detailed records of agency costs. Incentive-based fee is based on how well the agency meets its performance goals such as sales or market share. There is a general movement toward the use of this method by many companies.

Percentage Charges adding a markup to the various services the agency purchases from outside providers. These may include market research, artwork, printing, photography, etc., and range from 17.65 to 20 percent.

Evaluation of an Advertising Agency: They would be typically evaluated by clients on the following criteria: 1) 2) 3) 4) 5) 6) How good are they in their understanding of the product category? Do they have any experience in handling the product category? What is the reputation of the team that is going to handle the business? What is the overall reputation of the agency? How sound is the agency financially? What are the financial terms that they operate on?

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Top Advertising Companies of India 2010:3

Ogilvy and Mather: This is one of the leading advertising companies in India. This organization believes that devotion to the brand defines the profile of their company. This company has offices across the globe. The objective of the company is to build brands. I t is a subsidiary of WPP Group plc. The headquarter of the company is in New York. J Walter Thompson India: One of the most popular companies in the advertising industry is J Walter Thompson India. Their objective is to make advertising a part of the life of the consumers. This is also world's best advertising brand with about 200 offices in 90 countries. This company is the first one to introduce pioneer careers in ad for women, sex-appeal ads and also produced the first ever sponsored -TV program. Mudra Communication Pvt. Ltd: This is one of the renowned advertising companies of India. This advertising organization was founded in the year 1980 at Mumbai. Recently the Ad company declared the addition of public relations, rural marketing, events etc. The head office of the company is in Bombay. FCB-Ulka Advertising Ltd: One of the best companies in India in the advertising arena is FCB-Ulka Advertising Ltd. In US, this advertising company ranks third and tenth in the world having about 188 offices in 102 countries. Their aim is to reflect the needs of the brand and not the personality of the brand. It has about 500 professionals and no prima donnas. Rediffusion-DY&R: This advertising company of India has made a benchmark in the field of creativity. India's 5th largest advertising company is Rediffusion. This advertising agency offers a wide array of integrated pr services for external and internal communications. The primary strength of the company lies in the media relations. McCann-Erickson India Ltd: The prominent name among the best advertising companies of India is McCann-Erickson India Ltd. They define work in relation to the impact that advertising has on the lives of masses. The testimony of the company in which it firmly believes is the campaign of Coca -cola-'Thanda Matlab Coca Cola'. RK Swamy/BBDO Advertising Ltd: It maintained the record of remaining consistently among the top ten advertising agencies in India. Established in 1973, This advertising reached great heights. This is also India's No.1 research company in the market sector and is fully run by Indians. Brand Equity is an integral part of the company.

http://www.bestindiansites.com/top-companies/advertising/ (as accessed on 30 May 2011)

th

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Grey Worldwide (I) Pvt. Ltd: A significant name in India in the world of advertising agencies is Grey Worldwide (I) Pvt Ltd. The company is primarily based in Mumbai and has offices in Kolkata, Ahmedabad, Bangalore and New Delhi. It is a subsidiary of Grey Worldwide. The company specializes in advertising and marketing services. Leo Burnett India Pvt. Ltd : It has a significant presence in about 96 offices in 10 countries. This advertising agency was awarded the 'Worldwide Agency of the Year' in 2004.They are proficient in explaining how a single image is worth thousand words and can break the barriers of language but not at the cost of the ad's emotional power. Contract Advertising India Ltd: This advertising company of India is one of the leading advertising agencies in India. It is oneto-one customer lifecycle management advertising agency. It was founded in 1992 and is situated in Mumbai. It offers a wide range of services like online marketing and strategy and many others.

1. Reasons why agencies lose clients Poor performance or service Poor communication Unrealistic demands by the client Personality conflicts Personnel changes Changes in size of the client or agency Conflicts of interest Changes in the clients corporate and/or marketing strategy Declining sales Conflicting compensation philosophies Changes in policies Disagreements over marketing and/or creative strategy Lack of integrated marketing capabilities 2. How agencies gain clients Referrals Solicitations Presentations Public relations Image and reputation
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SPECIALIZED SERVICES
In addition to advertising agencies, other outside organizations may provide marketers with specialized services that are important in developing and executing integrated marketing communication programs. Direct Response Agenciesone of the fastest growing areas in IMC is direct marketing where companies communicate with their customers through telemarketing, direct mail and other forms of direct-response advertising. Direct response agencies provide their clients a variety of services including data base development and management, direct mail, research, media services, and creative and production capabilities.

Direct Response Agencies Database management Direct mail Research Media services Production

Figure 3.2 Activities performed by Direct response agencies

Sales Promotion Agenciesthere are many companies specializing in the provision of sales promotions such as contests, games and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, fulfillment, premium design, and contest management.

Promotional planning Sales Promotion Agencies Contest management

Figure 3.3 Sales promotion agencies

Tie-in coordination

Refund and rebate offers

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Public Relations Firms many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organizations publicity, image, and affairs with consumers and other relevant publics including employers, suppliers, stockholders, government, labor and the general public.

Public affairs

News releases, communication

Managing crisis

Generating publicity

Coordination with promotional areas

Figure 2.4 Functions of a PR firm

D.

Interactive Agencieswith the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communication organization has evolvedthe interactive agency. While many traditional agencies like have developed interactive capabilities or the major holding companies which they are part of have acquired interactive agencies. Many marketers are turning to interactive agencies to develop web sites, banner ads for the Internet, and other forms of interactive communications.

Web sites

Web banner ads Interactive Media Creation

Text messages

Kiosks

CD-ROMs

Search engine optimization

Figure 3.5 Tasks performed by Interactive Agencies

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Section 4 CONSUMER BEHAVIOR

The purpose of this chapter is to examine the field of consumer behavior and to demonstrate how knowledge and understanding of the consumer can be used in developing promotional strategies and programs.

Consumer Behavior can be defined as the process and activities that people engage in when
searching for, selecting, purchasing, using, evaluating and disposing of products and services so as to satisfy their needs and desires.

I.

THE CONSUMER DECISION-MAKING PROCESS

Consumer Decision Making Process

Problem recognition

Information search

Alternative evaluation

Purchase decision

Postpurchase evaluation

Psychological Process

Motivation

Perception

Attitude formation

Integration

Learning

Figure 4.1 Consumer Decision making process alongside Psychological process

The consumer purchase decision process is generally viewed as consisting of sequential steps or stages through which the buyer passes in purchasing a product or service. Figure 4.1 shows the various steps in this process as well as the relevant internal psychological processes that occur at each stage such as motivation, perception, attitude formation, integration and learning.

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

A.

Problem recognitionThe first step in the consumer decision-making process is that of problem recognition, which is caused by a difference between the consumers ideal state and actual state. There are various causes of sources of problem recognition. These include: 1. Out of stock 2. Dissatisfaction 3. New needs/wants 4. Related products/purchases 5. Marketer induced problem recognition 6. New products

Examining Consumer Motivationsthe way a consumer perceives a need and becomes motivated to solve a consumption problem will influence the remainder of the decision making process. To better understand the reasons underlying consumer purchases, marketers develop considerable attention to examining motives or factors that compel or drive a consumer to take a particular action. Hierarchy of needsone of the most basic and popular approaches to understanding consumer motivation is the classic theory of human motivation popularized by Maslow. His hierarchy of needs postulates five basic levels of human needs: Physiological needs Safety needs Social/love and belonging needs Esteem needs Self-actualization needs Psychoanalytic theoryOne of the initial approaches to the study of consumer behaviors in marketing used Freuds Psychoanalytic Theory as its basis. This approach viewed consumers as having complex, subconscious motivations for purchasing. Motivation research in marketingWhile very popular in the late 1950s, this area of studyknown as motivation researchreceived much less attention through the 1960s and 1970s. The text brings up several associations related to products and brands. Very recent applications of motivation research are discussed.

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

B.

Information Searchthe second step in the consumer decision making process is information search. Internal search involves a scan of information stored in memory to recall past experiences or knowledge regarding purchase alternatives. External search involves go to outside sources to acquire information such as personal sources, marketer controlled sources, public sources, or through personal experiences such as examining or handling a product. Perceptionperception is the process by which an individual receives selects, organizes, and interprets information to create a meaningful picture of the world. There are a number of processes involved in perception which determine how marketing information will be received: Sensationthe immediate and direct response of the senses to a stimulus such as an advertisement. Selecting informationdetermining whether incoming information will be attended to and how much attention it will be given. Interpretationthe process by incoming information is interpreted and assigned meaning. Selective perceptiona filtering or screening may occur at various stages of the perceptual process such as exposure, attention, comprehension and retention. Subliminal perceptionrefers to the ability of an individual to perceive a stimulus that is below the level of conscious awareness. Alternative Evaluationafter acquiring information during the information search stage the consumer moves to alternative evaluation. At this stage the consumer compares the various brands and services he or she has identified as being capable of solving the consumption problem and satisfying the needs or motives that initiated the decision process. The evoked set is a subset of all the brands of which the consumer is aware and actively considering in the decision process. A goal of marketers is to ensure that their brands are included in the evoked set of consumers. There are a number of important factors and processes that are important during the alternative evaluation stage: 1. Evaluative criteria and consequencesevaluative criteria are the dimensions or attributes of a product or service that are used to compare different alternatives. Consequences are the specific events or outcomes that consumers experience when a product or service is purchased and/or consumed. Functional consequences are tangible and can be experienced directly by consumers. Psychosocial consequences are more intangible, subjective and personal. 2. Attitudesattitudes refer to a summary construct that represents an individuals overall feelings or evaluation of an object such as a brand, a company, another person, a retail store, or even an advertisement. Attitudes are one of the most heavily studied concepts in consumer behavior. Marketers keen interest in attitudes is based on the assumption that they are related to purchase behavior. Advertising and
26 Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

C.

promotion are used to create favorable attitudes toward new products/services, reinforce or maintain existing favorable attitudes, and/or change negative attitudes. a. Multi attribute attitude models have been used by marketers to study consumer attitudes. These models view an object such as a product as possessing a number of attributes that provide the basis on which consumers form their attitudes. According to this model consumers have beliefs about specific brand attributes and attach different levels of importance to these attributes. b. Attitude change strategiesThe multi-attribute model focuses on the underlying structure or basis of an attitude and provides insight into ways marketers can influence or change consumers attitudes such as: increasing or changing the strength or belief rating of a brand on an important attribute changing consumers perceptions of the importance or value of an attribute adding new attributes to the attitude formation process changing perceptions of belief ratings for a competing brand 3. Integration Processes and Decision Rulesan important aspect of the alternative evaluation stage is the way consumers integrate or combine information to evaluate alternatives and arrive at a purchase decision. Consumers may use formal integration rules which require examination and comparison of alternatives on specific attributes. These include both compensatory and non-compensatory integration strategies. Consumers may also use informal integration rules which are often referred to as heuristics. Promotional planners need to understand consumers integration processes and the types of decision rules they might use in a situation. Advertising messages can be constructed to be consistent with these decision rules or to suggest how consumers might go about making a decision. It is also important for marketers to recognize that some purchase decisions are the result of a constructive process that occurs at the time of purchase. D. Purchase Decisionas an outcome of the alternative evaluation stage the consumer may develop a purchase intention or predisposition to buy a certain brand. Once a purchase intention has been made and an intention formed, the consumer must still implement it and make the actual purchase. Many purchase decisions are made on the basis of brand loyalty which is a preference for a particular brand that results in its repeated purchase. Many purchase decisions for non-durable, low involvement items take place in the store and decision and purchase occur almost simultaneously. For these types of decisions topof-mind awareness of a brand is important as is the influence of packing, shelf displays, point-of-purchase materials, and various sales promotion tools.

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

E.

Post-purchase Evaluationthe consumer decision process does not end once the product or service has been purchased. After using a product or service the consumer compares the level of performance with expectations. Satisfaction occurs when the consumers expectations are either met or exceeded, while dissatisfaction results when performance is below expectations. Another possible outcome of purchase is cognitive dissonance which refers to a feeling of psychological tension or post-purchase doubt a consumer may experience after making a difficult purchase choice. Consumers often look to advertising for supportive information regarding the choice they have made. Variations in Consumer Decision Makingconsumers do not always engage in all five steps of the purchase decision process nor proceed in the sequence presented. There are three major variations of the consumer decision making process: 1. Routine response behaviormany purchase decisions for low-priced, frequently purchased products are based on a habitual or routine choice process consisting of little more than recognizing the problem, engaging in brief internal search and making the purchase. Marketers of products characterized by routine response behavior must get and/or maintain their brands in the consumers evoked set and encourage brand loyalty. Those not in the evoked set must encourage trial and brand switching. 2. Limited problem solvingoften a consumer has a limited amount of experience in purchasing a product or service but in somewhat aware or knowledgeable of the brands available and/or the criteria to use in making a purchase decision. When consumers purchase a product through limited problem solving, marketers should make information available to consumers that will help them make their decision. 3. Extended problem solvingthe most complex and detailed form of decision making occurs when consumers have little, if any, knowledge regarding the criteria to use in making a purchase decision or the various brands available. As with limited problem solving, marketers of products characterized by extensive problem solving must provide consumers with detailed information that helps them in making their purchase decision.

F.

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

II.

THE CONSUMER LEARNING PROCESS

There are alternative perspectives regarding how consumers acquire the knowledge and experience they use in making purchase decisions. Consumer learning is the process by which individuals acquire the purchase and consumption knowledge and experience they apply to future related behavior. A. Behavioral Learning Theorybehavioral learning theory emphasizes the role of external or environmental stimuli in causing behavior while minimizing the significance of internal psychological processes. There are two major behavioral learning approaches to learning: 1. Classical conditioningthis approach assumes that learning is essentially an associative process whereby the relationship between an unconditioned stimulus and conditioned stimulus develops through repetition and contiguity. Classical conditioning has many applications in advertising as products and services are become associated with perceptions, images, and emotions that evoke favorable reactions from consumers. 2. Operant conditioningthis approach, which is sometimes called instrumental conditioning, requires the individual to operate or act on some aspect of the environment for learning to occur. Learning occurs as a result of the outcomes or consequences associated with a particular response. Reinforcement refers to a reward or favorable consequences associated with a behavior and are an important element of instrumental conditioning. Many advertisements emphasize the benefits or rewards a consumer will receive from using a product or service or encourage a consumer to use a brand to avoid unpleasant consequences. Cognitive LearningCognitive learning theory has as its basis a problem-solving, information processing, reasoning approach to human behavior. In contrast to behavioral learning theory perspectives, cognitive orientations emphasize internal processing or thinking. Many consumer researchers disagree with the simplified explanations of behavior offered by behavioral learning theories and are more interested in examining the complex mental processes that might underlie consumer decision making. Thus the cognitive approach to studying learning and consumer decision making has dominated the field of consumer behavior. The various processes examined during the discussion of the consumer decision making process are all relevant to a cognitive learning approach to consumer behavior.

B.

Goal

Purposive Behavior

Insight

Goal Achivement

Figure 4.4 Cognitive Learning Process

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

III.

ENVIRONMENTAL INFLUENCES ON CONSUMER BEHAVIOR

Consumers do not make purchase decisions in isolation as there are various external factors that may influence their purchase decisions. These include:

Culture Family Influences

Sub-Culture

Situational Determinants Reference Group

A.

Social Class

Cultureculture refers to the complexity of learned meanings, values norms, and customs shared by members of a society. The importance of understanding the impact of culture on consumer behavior has become increasingly important as marketers expand their international marketing efforts. Subculturessubcultures refer to smaller groups or segments in a society that possess similar beliefs, values, norms and patterns of behavior that set them apart form the larger cultural mainstream. Subcultures may be based on age, geography, race, religion, racial, lifestyles, and ethnicity. Social Classsocial class refers to relatively homogenous divisions in a society into which people sharing similar lifestyles, values, norms, interests, and behaviors can be grouped. Social class structures in the United States are generally based on occupational status, educational attainment and source of income. Social class is important to marketers because consumers within various social strata often exhibit similar values, lifestyles and buying behaviors thus providing a natural basis for market segmentation. Reference Groupsa reference group is a group whose perspective or values are being used by an individual as the basis for his/her judgments, opinions and actions. Marketers utilize reference group influences in developing advertisements by associating, or sometimes disassociating, products, services or certain behaviors with certain types of groups.
30 Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS

B.

C.

D.

E.

Family Influencesmany purchased decisions are made by families rather than by individuals. Marketers must understand the various roles in the family decision making process such as initiator, information provider, influencer, decision maker, purchaser and user or consumer. They must also determine who in the family is responsible for the various roles in the decision making process so messages can be targeted to them. Messages must also be designed so as to appeal to the appropriate family member(s). Initiatordifferent family members may initiate the purchase decision process. For example, a teenager who is very much into music may request the family consider the purchase of a new music system. The mother or the father may initiate the idea for a new family car, etc. Information providerdifferent levels of expertise in product categories may lead to various family members assuming the role of information provider. For example, as teenagers become more involved with the Internet, they may be called upon to provide information into a variety of areas. For example, they may be asked to search the Internet for vacation destination, music equipment or other products or services and provide information back to the family. The influencereach family member may have their own criteria in mind in the purchase decision process. The father may want an economical car, the mother an SUV for functional purposes, the children something more sporty to impress their friends. Again, depending on their involvement and expertise, various family members may be able to exert more or less influence. The decision makerwho actually makes the purchase decision? It used to be that the mother had influence at various stages for autos, but the father actually made the final decision. In many families, this is not longer the case. In two car families, the mother may have her car, and the father his, both of whom made the decision as to what it would be. The purchasing agentregardless of the various roles assumed, the parent(s) may actually be the purchasing agent. When children are not of age to make the purchase, do not qualify for financing, or for other reasons, the parent may act as the purchasing agent to expedite or culminate the purchase decision. The consumerin the case of the family car, vacation or stereo all family members may ultimately be consumers. For other products, perhaps computers, all may use the product, but some may use it more than others. In others, some family members may be involved in the decision making process, but never use the product (the child helps research the vacation, but doesnt actually go along).

F.

Situational Determinantsanother type of external factor that promotional planners must consider is that of situational determinants on consumer behavior. Three types of situational determinants may have an effectthe specific usage situation, the purchase situation, and the communications situation.

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Compiled by :Asst. Prof Alex Daniel | Christ Institute of Management, Rajkot alexdaniel@outlook.com | CHRIST CAMPUS