Marketing Principles, Part 3
Question 1: Explain how a business decides on its promotion budget.
Answer 1: How to spend its money and resources is one of the hardest decisions a company has to make because it is difficult to determine if its promotions are successful or not. There are generally four methods a company uses to determine how it will allocate its resources. Some companies use the affordable method, which is to set their promotion budget at a level the company can afford. Others match their budgets to that of their competitors, called the competitive-parity method. Some dedicate a certain percentage of their sales toward promotions, called percentage-of-sales method. Other companies base their budgets on logic and specific objectives, called the objective-and-task method.
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Question 2: Define and explain promotion mix.
Answer 2: Integrated marketing requires that a company blend its promotional tools carefully into its promotion mix. Companies must decide how important the characteristics of each tool are to their goals and objectives. Advertising, direct marketing, public relations, sales promotion, and personal selling are the parts of the promotion mix. Each one of these tools contains several different choices a company must make. For instance, industrial companies will spend much less on advertising than retail companies, but they will spend much more of their resources on personal selling than a retail company as a result of the nature of their business.
Question 3: Explain the promotion mix strategies that a company uses.
Answer 3: With their promotion mix in place, most companies use either a push or a pull strategy toward promotion. A push strategy involves using a sales force and promotion mix in a trickle-down promotion, where every channel from producer to wholesaler to retailer promotes the product. They promote the good to wholesalers and retailers as well as pushing the product to the consumer. The pull strategy creates a demand for a product through advertising and promotion. The goal is to get consumers to demand the product from retailers. Retailers will then pull the product from wholesalers or the company.
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