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For the effective promotion of any product or service, there are a number of promotion tools that can be utilized in a promotion program. These should be applied carefully according to given circumstances because every promotion tool is suitable for certain situations. The following are some important promotion tools in this regard:

Types of Promotion Tools Used in Marketing

1. Advertising

2. Personal Selling

3. Sales Promotion

4. Public Relations

5. Direct Marketing

Advertising:

Large masses of customers dispersed geographically can be reached through advertising, which can be repeated multiple times. The popularity, size, and success of the selling organization are enhanced through large-scale advertising. Customers consider advertised products more legitimate due to the public nature of advertisements.

Moreover, it is the quickest way to promote a product to a large and diverse audience. Another important feature of advertising is that it is highly expressive, allowing organizations to dramatize their products by applying impressive print, sound, visuals, and colors.

On one hand, advertising is very beneficial, but on the other hand, it also has some disadvantages. Advertising cannot directly stimulate customers because it is impersonal. It is based on one-way communication, which means that the audience does not have the option to give feedback or responses to advertising messages.

One major drawback of advertising is that it is very expensive. Some forms of advertising, like radio and newspaper advertising, can be utilized within smaller budgets, but other forms, such as network television advertising, require much larger budgets.

Personal Selling:

At certain stages of the buying process, personal selling is the most effective promotion tool for creating customer preferences, convictions, and actions. In personal selling, personal interactions between two or more people take place, allowing both parties to understand the characteristics and needs of one another and make immediate adjustments.

Different types of relationships are developed in personal selling, such as professional selling relationships and personal friendships. Salespersons have professional expertise through which they focus on customer interests and develop healthy relationships.

Moreover, customers give extra time and attention to listening to the offerings of salespersons, even if their final decision is negative.

Personal selling also involves extra cost and effort in training salespersons to make them committed to their tasks. Advertising can be adjusted by continuing or discontinuing it under certain conditions, but the size of the sales force is much harder to change in personal selling.

Sales Promotion:

Promotion tools include sales promotion, which contains a broad assortment of elements such as:

• Coupons
• Cents-off Deals
• Premiums
• Other Tools

Sales promotion tools are applied to boost declining sales by attracting customers and offering distinct purchase incentives. A quick response can be generated through sales promotion.

If advertising says “buy our product,” sales promotion represents “buy the product now.” In the short run, sales promotion is an effective promotional tool, but in the long run, it is not favorable for developing lasting customer relationships and brand preference like advertising and personal selling.

Public Relations:

Public relations are different from advertisements and are often more influential. Public relations consist of news stories, events, and features that are considered more realistic, and therefore readers consider them more believable.

Many prospects avoid advertisements and personal selling, but they can still be influenced by public relations. The message in public relations is considered “news” rather than sales-centered communication. Products of organizations can also be dramatized through public relations.

Public relations should not be overused or treated as an afterthought. They should be combined with other elements of the promotional mix to be used effectively and economically.

Direct Marketing:

Direct marketing may take the following forms:

• Telemarketing
• Electronic Marketing
• Online Marketing
• Direct Mail

There are four distinct characteristics shared by all these forms.

The first characteristic is that direct marketing is non-public in nature, meaning that a specific person is addressed rather than the general public.

Furthermore, direct marketing is customized and immediate, meaning that messages can be tailored to the specific requirements of customers and developed very quickly.

Lastly, direct marketing is interactive, meaning that customers and marketers can engage in dialogue. Messages can be changed according to customer responses.

In short, direct marketing is one of the most effective promotional tools for developing one-to-one customer relationships and executing highly targeted marketing efforts.

Marketing communications consist of integrated activities in which the targeted audience is identified and a well-coordinated promotional program is prepared to generate the desired response from the audience. Most problems of preference, image, and immediate awareness among target customers are addressed by marketing communication. However, there are certain limitations associated with the concept of communication. These limitations include high cost and short-term duration, which cannot generate the desired results from targeted customers.

In recent years, marketing communication has been used by most marketers to build customer relationships at the stages of pre-selling, selling, utilization, and post-utilization. Due to differences among customers, different communication programs are developed for specific segments and niches.

Elements of Communication Process

For effective communication, the marketer should know how communication works. The following are the nine elements involved in the communication process:

1. Sender

2. Encoding

3. Message

4. Media

5. Decoding

6. Receiver

7. Response

8. Feedback

9. Noise

Each of these is discussed below.

Sender:

The party or person who sends the message to another party or person is called the sender.

Encoding:

The conversion of thoughts into meaningful symbols is called encoding.

Message:

The group of symbols transmitted by the sender is called a message.

Media:

The channel of communication through which the message is transferred from sender to receiver is called media.

Decoding:

The conversion of symbols into meaning by the receiver is called decoding.

Receiver:

The person or party that receives the message is called the receiver.

Response:

The reaction shown by the receiver after receiving the message is called the response.

Feedback:

The portion of the receiver’s response that is sent back to the sender is called feedback.

Noise:

Unplanned distortion during the communication process, due to which the receiver understands the wrong meaning of the original message, is called noise.

An effective message is one where the process of encoding matches the decoding of the message. The message sent should consist of words and symbols that are familiar to the receiver.

Steps Involved in Effective Communication Process:

There are certain steps that should be included in the communication process to make it more effective. Marketing and promotional activities should focus on these steps to attract a large number of long-term customers.

The following steps make the communication process effective:

1. Identification of the Target Audience

2. Determination of Communication Objectives

3. Designing the Message

4. Message Content

5. Message Structure & Format

6. Choosing Media

7. Collecting Feedback

Each of these is explained below.

Identification of the Target Audience:

The first step in the effective communication process is to identify the target audience. This audience may include potential customers or other people who can influence customer decisions. The audience may consist of individuals, groups, the general public, or a specific public.

The audience directly affects communication decisions like what to say, how to say it, and when to say it.

Determination of Communication Objectives:

In this step, the marketing communicator should clearly define the objectives of the communication process. In most situations, the marketing communicator aims to generate purchases, but purchases are made after a prominent customer decision-making process. Communicators should also understand the customer’s current position.

Generally, there are six stages of customer readiness through which a customer passes before making a purchase:

a) Awareness
b) Knowledge
c) Liking
d) Preference
e) Conviction
f) Purchase

The target group may not be familiar with the new product or its features. Therefore, the marketing communicator should create awareness and knowledge about the new product and its features. However, this does not guarantee success; the product must also provide superior customer value.

Designing the Message:

In this step, the marketing communicator focuses on designing the message. A message that attracts attention, develops interest, arouses desire, and stimulates action is considered effectively designed.

This procedure is best known as the AIDA model, which helps make messages effective and persuasive. The marketing communicator also decides the content and structure of the message.

Message Content:

In this step, the content of the message is determined. The theme or appeal is selected to bring the desired response from the audience.

The following three appeals are commonly used:

a) Rational Appeal:
Focuses on the audience’s self-interest by highlighting the benefits gained from using the product.

b) Emotional Appeal:
Stimulates positive or negative emotions to encourage product purchase.

c) Moral Appeal:
Includes moral values in the message to influence target customers.

Message Structure & Format:

In this step, important issues related to message structure and format are analyzed. It must be decided whether the message should include a conclusion or leave it for the audience to draw their own conclusion.

The message may present only the strengths of the product or both strengths and weaknesses. Moreover, message format is also considered, including size, shape, eye-catching colors, and headlines, to ensure maximum effectiveness.

Choosing Media:

Communication channels are selected in this step. These channels may take the following two forms:

a) Personal Communication:
Two or more people communicate directly, such as face-to-face, through mail, telephone, or internet chat. Personal addressing and feedback are possible in personal communication.

b) Non-Personal Communication:
Messages are delivered through channels that do not allow direct feedback. These include print media, display media, broadcast media, and online media.

Collecting Feedback:

This is the final step of the communication process, where feedback is collected from target customers after the marketing message has been delivered. This helps the marketer modify promotional programs or other marketing activities.

For this purpose, the buying behavior of target customers is analyzed in relation to the new product. Customers may also be asked questions to gather their views about the positive and negative aspects of the product.

The storing, handling, and moving of products and services so that customers can get them at the right time, at the right place, and in the right assortments is called logistics.

Major Logistic Functions

A logistic system is designed on the basis of stated logistics objectives so that minimum cost is incurred for the accomplishment of these objectives. The following are the major logistic functions that are performed under the designed logistic system:

1. Order Processing

2. Warehousing

3. Inventory Management

4. Transportation

Now each of these is discussed one by one.

Order Processing

There are many ways of submitting an order like:

• By mail
• By telephone
• Through a salesperson
• Through computer and EDI
• In some cases, orders are generated by suppliers for their customers

When an order has been received, it should be quickly and accurately processed by the organization. When processing is done effectively, both the organization as well as the customer benefit.

Nowadays, sophisticated computerized order processing systems are used by most companies that speed up the cycle of ordering, shipping, and billing. For example, a company named General Electric uses a computer-based system in which, when a customer order is received, it checks the credit standing of the customer as well as the availability of the required stock. Then, a set of internal orders is generated by the system, like an order to ship, an order to bill, and a production order, etc. All of these systematic activities happen within 15 seconds.

Warehousing:

Almost every organization is bound to store its products because there is always some gap between production and consumption. An organization must determine important aspects of the warehousing function like:

• How many warehouses are required?
• What kinds of warehouses are needed?
• The location of the warehouses, etc.

Warehousing can take the following two forms:

a) Storage Warehouses
b) Distribution Centers

Storage Warehouses:

Goods can be stored for average to long periods in storage warehouses.

Distribution Centers:

Distribution centers are more sophisticated in that they are involved more in the movement of goods and less in storage. These distribution centers are highly automated and larger facilities designed for the receipt of goods from various suppliers and plants. Customer orders are received and processed efficiently, and quick distribution of the ordered goods is made from these centers.

In the modern technological age, new highly automated warehousing systems are replacing older warehousing systems. In these latest warehouses, effective centralized computerized material handling systems are used. There are very few employees working, and most of the work is done through computerized machines and robotics.

Inventory Management

Inventory is also one of the major logistic functions in which an effective level of inventory is maintained. The major issue in this function is to maintain a complicated balance between carrying too little inventory and carrying too much of it.

Carrying too much inventory results in stock obsolescence and higher inventory carrying costs. On the other hand, carrying too little inventory results in costly production & emergency shipments, stockouts, and finally customer dissatisfaction. So, the management of the organization makes effective inventory decisions by comparing inventory carrying costs with generated sales and profits.

In recent years, new inventory handling systems have replaced old high-cost methods. Just-in-Time is one of the effective inventory systems in which the level of inventory maintained is kept very low. Inventory is ordered just after receiving sales orders from customers. Inventory arrives quickly, and the resulting sales orders are efficiently completed by the organization. In this way, inventory maintenance cost is reduced, resulting in increased profit. This JIT system is effectively used in Japan.

Transportation

Major logistic functions include transportation, in which certain decisions about the transportation of goods are made in light of the interests of the organization. The transportation function is important because it affects delivery performance, product pricing, and the condition of arriving goods, etc. This ultimately affects customer satisfaction.

There are five different transportation modes that can be adopted by organizations in delivering their products to dealers, warehouses, and customers. These five modes of transportation are as follows:

1. Rail

2. Truck

3. Pipeline

4. Air

5. Water (Shipping)

Rail:

The largest carrier in any nation is the railway system, which handles the delivery of about 26% of total cargo ton-miles. Large amounts of bulk products can be delivered to distant locations in a cost-effective way through railway transportation, such as sand, coal, farm and forest items, minerals, etc.

In recent years, certain improvements have been made in railway systems for effective transportation of goods from one place to another like:

• Special flat cars are provided to carry truck trailers by rail
• Provision of in-transit services, etc.

Trucks:

In recent years, trucks have played a significant role in the transportation of goods from one place to another with a share of 24% of total cargo ton-miles. Within cities, trucks are considered the largest transportation mode. The routing and timing schedules of trucks are highly flexible, and their service is much faster than railways. High-value goods for short hauls are effectively transported through trucks.

Pipelines:

For the shipment of petroleum, chemicals, and natural gas from source markets, a specialized means of transportation called pipelines is used. Pipelines are mostly used by owners for the delivery of their own products.

Air:

Air transportation is the least used mode among business organizations, and only about 1% of total cargo is transported by air. However, this mode of transportation is becoming increasingly popular. The cost of air transportation is much higher due to high freight rates, but it is the quickest mode of transporting products, especially perishable goods and small quantities of highly valuable products.

Shipping (Water):

Shipping is the oldest mode of transporting goods from one region to another, but it is more time-consuming than other modes. Shipping is used together with other modes of transportation.

The following are some combinations of intermodal transportation:

• Fishybacks: Water and trucks
• Tranships: Water and rail
• Airtrucks: Air and trucks

Marketing is simply to create, communicate & deliver value to the targeted customer at a profit.

Explanation:

Marketing does not mean only to sell & distribute goods or services & advertise the product or service by using promotional media. Modern marketing starts from identifying customer needs & wants, that is what the customer desires in a targeted market by researching the market or creating wants for the customer.

Then communicate to the customers how a businessman/marketer fulfills those needs & wants of the customer through the proper promotional media & finally delivering the goods or services (value) through proper distribution channels. Building a strong relationship with the customer is also an important part of modern marketing by providing after-sales services, proper feedback & other such mediums.

Process of Marketing:

Marketing is done through identifying customer needs, communicating with customers & finally delivering the goods or services to customers. The detailed process of marketing is given below.

Identifying Customer Needs:

This is the first step of marketing i.e. identifying the needs & wants of customers in the targeted market — what the customer is really demanding by researching the market & then finding out how these needs can be satisfied through which product or service. Market research is an important tool in this process.

Communicating with the Customer:

This step involves communicating with the customer through a proper communication channel about how a businessman/marketer should fulfill the relevant needs & desires of the customer & what product or service he offers to fulfill those needs & desires. The communication medium which should be chosen depends upon the type of market & customer being targeted by the marketer.

Delivery of Goods & Services:

This is the third step of marketing i.e. transferring products or rendering services to customers — how one delivers his product or service to the customers & how the goods or services are easily made available within customers’ reach. This involves proper distribution channels & sales services.

Feedback:

This is the final step of modern marketing which involves taking proper feedback from customers regarding how much they are satisfied with the product or service & how that product or service can be improved further. This guides the businessman/marketer about how much he satisfies the needs & desires of customers. Providing after-sales services & other such services help in building long-term relationships with customers.

7 P’s of Marketing:

The basic ingredients used in marketing are also called the P’s of marketing which are product, price, place, promotion, people, positioning & personal relationships. All of these are discussed below in detail.

Product:

This includes what a person/businessman is selling in the market; it may be a product or service. It may also include the type of product which he is selling that is necessary for life e.g. products such as food or luxury items such as toys.

Price:

This includes the pricing strategy at which one is selling his product or service. It may be a low-cost strategy that is selling goods & services at low cost, targeting customers who are more conscious about high prices. However, on the other hand, a differentiation pricing strategy does not focus on cost; they target customers that demand unique & different features in products & are willing to pay high prices.

Place:

This includes how a person/businessman is distributing & placing his product or service in the market. The place strategy also depends upon the type of product being sold & the targeted market.

Promotion:

The promotion strategy includes how the marketer informs customers about the product or services that best satisfy their needs & desires. This includes different promotional media such as television, newspapers, internet, banners, etc. The type of promotional medium that should be selected depends upon the type of customer & market being targeted.

Positioning:

Positioning includes how one wants customers to perceive his product. What the customer thinks about his product & service after using it. It involves the quality of the product & service which one is delivering.

People:

This is an important feature for service-based organizations, and the people who are rendering the services are part of marketing. Services are mostly performed by people, so it is an important feature for service-based organizations. However, for manufacturing organizations that deal in goods, people working there are not important for customers in marketing strategy.

Personal Relationships:

Consumer relationships are an important part of modern marketing. It means how a marketer builds long-term relationships with customers by taking proper feedback, providing after-sales services & loyalty cards. It may also include involving customers in the product or service manufacturing so that it becomes more satisfying for them.

Importance of Marketing:

Marketing plays an important role not only for businesses but also in people’s daily lives & for society. It turns from a consumer push to a consumer pull strategy that involves customers in marketing to best satisfy their needs & demands. It helps society by providing a workforce in the marketing field. It is the most critical success factor for an organization in achieving its organizational objectives.

Setting the price for a product or service is not an easy task. The price of a product or service is kept at a level that can generate both profit as well as demand. Generally, the cost of the product or service provides the lower limit of the price, and the perceived value by consumers provides the upper limit for setting the price. Business organizations should also take into account the prices of their competitors along with other internal and external factors.

Different Types of Pricining Approaches

There are general pricing approaches that can be applied by businesses in setting prices for their products or services. These pricing approaches are of three types:

1. Cost-Based Pricing Approach

2. Buyer-Based Pricing Approach

3. Competition-Based Pricing Approach

Each of the above is based on different dimensions of a product or service. Each of these is now discussed one by one.

Cost-Based Pricing Approach:

This pricing approach is the simplest approach in which the cost of a product or service is added to a certain proportion of markup as profit to determine a price. Examples include construction businesses that estimate the cost of a project and submit their bid by adding a certain portion of profit to their estimated cost. Moreover, accountants, lawyers, and other professionals charge a price for their services by adding the cost of work with a certain proportion of markup.

Markup pricing is not regarded as an effective pricing model as it ignores both demand and the pricing of competitors. Therefore, it is almost impossible for a business to keep its price as the best one by adopting this category of pricing. However, cost-based pricing is still popular due to the following reasons:

• It makes pricing simpler, so marketers do not change the price of their product or service with changing demand.
• When the majority of businesses in the market adopt this pricing model, there is minimum price competition due to similarity in prices.
• Generally, cost-based pricing looks fairer for both buyers and sellers, as buyers are not exploited under conditions of higher demand, and sellers can earn a reasonable profit through such pricing.

Target Profit Pricing and Break-Even Analysis:

Target profit pricing is also called break-even analysis, in which the total cost and total revenue are forecast at different levels of sales. In this way, a reasonable profit can be earned at a reasonable price.

Fixed costs remain unchanged even at zero levels of production and sales. On the other hand, variable costs change with the level of production and sales. Both of these costs are combined to determine the expected total cost at certain sales volumes.

When sales volume increases, total cost per unit decreases and total revenue increases. Break-even is the point of sales volume where cost is equal to revenue and profit is zero. The estimated demand, break-even points, and profits are compared with different prices by business management.

Value-Based Pricing Approach:

This pricing approach is extensively applied by many organizations in which the perceived value of buyers is regarded as a base for setting the price of a product or service. In this pricing model, the value of a product or service as perceived by customers provides guidelines for pricing.

In other words, the price is not set after the production of the product but before production. This means that the organization considers customers along with their perceptions about a certain product or service. On this basis, the business sets a certain price and then starts manufacturing that product. The expected value and price provide guidelines for the cost and design of the product so that it can match customer perceptions.

It is difficult for business organizations to determine the different perceived values of customers for different products. For this purpose, organizations conduct surveys and experiments. If a business keeps the price of its product higher than the perceived value of customers, its sales are affected. On the other hand, if a business keeps its product’s price lower, sales may increase, but profit does not increase accordingly.

Therefore, organizations that want to adopt this value-based pricing strategy should keep the price of their products in accordance with their perceived value by customers. A more effective strategy is that businesses should try to deliver more value to customers than they expect in order to retain them as loyal customers.

Competition-Based Pricing Approach:

In this pricing model, businesses set the prices of their products or services on the basis of competitor pricing. Customers in the market also perceive the value of any product or service in relation to the prices of similar products offered by competitors.

There is a type of going-rate pricing in which product prices are adjusted according to changes in competitor pricing. This means that price does not take into account the cost or demand of the product or service.

For example, paper, steel, or fertilizer manufacturing businesses face oligopolistic competition in which they charge almost similar prices in the market. There is a market leader whose price is followed by smaller competitors. When the market leader changes its price, other competitors also adjust their prices accordingly.

Some smaller businesses may keep a slight difference in price compared to the market leader, but this difference remains constant under different conditions. A major advantage of adopting this going-rate competition-based pricing is the prevention of price wars among competitors.

Another form of competition-based pricing is sealed-bid pricing, in which the price of a job is determined by considering competitor prices. In this case, pricing also ignores cost and demand factors, but businesses try to keep their prices slightly higher than their costs in order to earn revenue.

Pricing is not confined to the above categories; there are other factors that affect pricing decisions, such as environmental factors, etc.