The promotion decision should be made in the context of other aspects of the marketing mix. The price and quality of a product relative to competition affect the nature of its promotional perspectives. Higher prices must be justified to the consumer by actual or presumed product superiority. Thus, in the case of a product that is priced substantially higher than competing goods, advertising achieves significance in communicating and establishing the product’s superior quality in the minds of customers. The promotion mix is also influenced by the distribution structure employed for the product. If the product is distributed directly, the sales force can largely be counted on to promote the product. Indirect distribution, on the other hand, requires greater emphasis on advertising because the push of a sales force is limited. As a matter of fact, the further the manufacturer is from the ultimate user, the greater the need for the advertising effort to stimulate and maintain demand. The influence of the distribution strategy may be illustrated with reference to two cosmetics companies that deal in similar products, Revlon and Avon. Revlon distributes its products through different types of intermediaries and advertises them heavily. Avon, on the other hand, distributes primarily directly to end users in their homes and spends less on advertising relative to Revlon. Earlier we examined the effect on the promotion mix of a product’s position in its life cycle. The position of a brand in its life cycle also influences promotional perspectives. Positioning a new brand in the desired slot in the market during its introduction phase requires a higher degree of advertising. As a product enters the growth phase, advertising should be blended with personal selling. In the growth phase, the overall level of promotion declines in scope. When an existing brand reaches the maturity phase in its life cycle, the marketer has three options: to employ life-extension strategies, to harvest the brand for profits, and/or to introduce a new brand that may be targeted at a more specific segment of the market. The first two options were discussed in Article 1

3. As far as the third option is concerned, for promotional purposes, the new brand will need to be treated like a new product. Finally, the geographic scope of the market to be served is another consideration. Advertising, relatively speaking, is more significant for products marketed nationally than for those marketed locally or regionally. When the market is geographically limited, one study showed that even spot television advertising proved to be more expensive vis-à-vis the target group exposures gained. Thus, because advertising is an expensive proposition, regional marketers should rely less on advertising and more on other forms of promotion, or they should substitute another element of the marketing mix for it. For example, a regional marketer may manufacture private label brands.

Conclusion Although these factors are helpful in establishing roles for different methods of promotion, actual appropriation among them should take into consideration the effect of any changes in the environment. For example, in the 1980s soft drink companies frequently used sales promotion (mainly cents off) to vie for customers. In the 1990s, however, the markers of soft drinks changed their promotion mix strategy to concentrate more on advertising. This is evidenced by the fact that the five largest soft drink makers spent about $500 million on advertising in 1994, 40 percent more than they spent in 198

4. One reason for this change in promotional perspective was the realization that price discounting hurt brand loyalties; because Coke and Pepsi had turned their colas into commodities by means of cents-off promotion, the consumer now shopped for price. An empirical study on this topic has shown that consumers prefer incentives other than price. Price cuts also appear to have little lasting effect on sales volumes. For example, consumers exposed to repeated price cuts learn to ignore the “usual” price. Instead, they wait for the next discount and then stockpile the product. They also tend to become discount junkies, stimulated into buying only by ever-steeper discounts. In brief, price promotions not only cut margins, but also leave manufacturers to cope with costly fluctuations in stocks. In addition, the promotion mix may also be affected by a desire to be innovative. For example, Puritan Fashions Corporation, an apparel company, traditionally spent little on advertising. In the late 1970s, the company was continually losing money. Then, in the 1980s, the company introduced a new product, bodyhugging jeans, and employed an unconventional promotion strategy. It placed Calvin Klein’s label on its jeans, sold them as a prestige trouser priced at $35 (double the price of nonlabeled styles), and advertised them heavily. This promotion mix provided the company with instant success. Another example of promotion innovation is provided by Kellogg, which, instead of plastic toys and other gimmicks, now featured Microsoft Corp. software for children and adults. Although promotional innovation may not last long because competitors may soon copy it, it does provide the innovator with a head start. Promotional blending requires consideration of a large number of variables, as outlined above. Unfortunately, it is difficult to assign quantitative values to the effect that these variables have on promotion. Thus, decisions about promotional blending must necessarily be made subjectively. These factors, however, provide a checklist for reviewing the soundness and viability of subjective decisions. Recent research conducted by the Strategic Planning Institute for Cahners Publishing Co. identified the following decision rules that can be used in formulating ad budgets. These rules may be helpful in finalizing promotion mix decisions.

1. Market share Acompany that has a higher market share must generally spend more on advertising to maintain its share.

2. Sales from new products If a company has a high percentage of its sales resulting from new products, it must spend more on advertising compared to companies that have well-established products.

3. Market growth Companies competing in fast-growing markets should spend comparatively more on advertising.

4. Plant capacity If a company has a lot of unused plant capacity, it should spend more on advertising to stimulate sales and production.

5. Unit price (per sales transaction) The lower the unit price of a company’s products, the more it should spend on advertising because of the greater likelihood of brand switching.

6. Importance of product to customers (in relation to their total purchases) Products that constitute a lower proportion of customers’ purchases generally require higher advertising expenditures.

7. Product price Both very high-priced (or premium) products and very lowpriced (or discount) products require higher ad expenditures because, in both cases, price is an important factor in the buying decision and the buyer must be convinced (through advertising) that the product is a good value.

8. Product quality Higher-quality products require a greater advertising effort because of the need to convince the consumer that the product is unique.

9. Breadth of product line Companies with a broad line of products must spend more on advertising compared to companies with specialized product lines.

10. Degree of standardization Standardized products produced in large quantities should be backed by higher advertising outlays because they are likely to have more competition in the market.