General Policy Microeconomics Issues

General Policy Microeconomics Issues The promotion mix In modern, highly industrialized societies, where oligopoly or near oligopolistic markets are common, non-price competition is of great importance to the supplier. It can assume four separate forms: 1. Personal selling. This is the classic salesman-customer relationship, where personal communication is used to sell the product, usually on a face-to-face basis but sometimes by telephone. 2. Publicity. This is non-personal communication in the mass media, not paid for by the supplier (although perhaps subtly influenced by him). 3. Examples would be news stories or programmes including the company's products (either in a central or peripheral role), or favourable editorial comment in the specialist press. 4. Advertising. This is paid non-personal communication in the mass media, and will often be the largest single item in selling costs. 5. Sales promotion. This could be defined as any persuasive activity not included in the first three categories, such as exhibitions, demonstrations, money-off coupons, samples, or sponsorship. The effectiveness of each of the four promotional means in the sales process can be seen in Figure. Personal selling is a powerful tool, and its potential for actually creating sales is considerable, but it is time-consuming and limited by the size of the sales force. Publicity has the benefit of greater credibility than any house campaign or comments, but its use lies largely out of the firm's control. Advertising provides the mass exposure that personal selling lacks, and its strength lies in heightening consumer awareness and understanding. However, its potential for converting this into a sale is less than the direct personal approach. Sales promotion can be very variable in its effects: sponsorship can stimulate awareness of a product, exhibitions and demonstrations can increase the public's understanding, and money-off coupons and samples can encourage the all-important first trial that can lead on to further full-priced sales. Reliance on any one of these four methods would obviously be exceptional; more usually, the firm will combine them, and the so-called promotion mix will be the specific combination selected by the firm for its own particular circumstances. Factors which will affect the individual mix would be as follows: 1. Product life cycle. The characteristics of the different stages in the life cycle will demand changes in the promotional mix, as Table demonstrates. 2. Market size and geographical location. Large, geographically diverse markets will obviously have different promotional requirements to those which are smaller or more geographically concentrated. As an example of the former, a branded confectionery or grocery product would normally use mass media advertising and sales promotion as the prime elements in the mix; in the latter category, a local bakery or dairy would rely largely on personal selling. In a similar way, the relatively small market for an industrial machine will lend itself to a mix in which personal selling 3. Product type. Where a product is homogeneous, sales are largely a function of the service offered by distributors, and personal selling is likely to be a major feature of the mix, although promotional material such as diaries and calendars can play a useful part. For non-homogeneous products, the mix will reflect the technical complexity of the individual item in the hands of the consumer: at one end of the spectrum will be the highly complex and specialized industrial product that requires the detailed technical communication that only personal contact will provide; at the other end, the promotional needs of a product which is either readily understandable or, if complex in design, is not so in use, can be met largely by advertising.