Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

14. Promotion −
    Introduction to Integrated
    Marketing
    Communications

Text © The McGraw−Hill

Companies, 2002

Promotion_Introduction to Integrated Marketing Communications 415

During the sales decline stage, the total amount spent on promotion usually

decreases as firms try to cut costs to remain profitable. Since some people may still

want the product, firms need more targeted promotion to reach these customers.

On the other hand, some firms may increase promotion to try to slow the cycle—

at least temporarily. Crayola had almost all of the market for children’s crayons, but

sales were slowly declining as new kinds of markers came along. Crayola increased

ad spending to urge parents to buy their kids a “fresh box.”

Firms in monopolistic competition may favor mass selling because they have dif-

ferentiated their marketing mixes and have something to talk about. As a market

tends toward pure competition, or oligopoly, it is difficult to predict what will hap-

pen. Competitors in some markets try to outpromote each other. The only way for

a competitor to stay in this kind of market is to match rivals’ promotion efforts—

unless the whole marketing mix can be improved in some other way. We see a lot

of such competitive advertising in our daily newspapers and in cents-off coupons at

grocery store checkout counters.

In markets that are drifting toward pure competition, some companies resort to

price-cutting. This maytemporarily increase the number of units sold, but it may

also reduce total revenue and the amount available for promotion per unit.And

competitive retaliation, perhaps in the form of short-term sales promotions, may

reduce the temporary sales gains and drag price levels down faster. As cash flowing

into the business declines, spending may have to be cut back.^19

This ad uses humor to highlight

what’s distinctive about 2-Alarm

Chili—to stimulate selective

demand in a very competitive

market.

Sales decline

stage—“let’s tell those

who still want our

product”

Nature of competition

requires different

promotion

Size of budget affects

promotion efficiency

and blend

Setting the Promotion Budget

There are some economies of scale in promotion. An ad on national TV might

cost less per personreached than an ad on local TV. Similarly, citywide radio, TV,

and newspapers may be cheaper than neighborhood newspapers or direct personal