What is Consumer Buying Behavior?

Definition of Buying Behavior: Buying Behavior is the decision processes and acts of people involved in buying and using products. Need to understand:

why consumers make the purchases that they make? what factors influence consumer purchases? the changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing strategy has a great impact on the firms

success.

The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies. Return to Contents List Stages of the Consumer Buying Process Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next. The 6 stages are: 1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. 2. Information search-o Internal search, memory. o External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is
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chinese food indian food burger king klondike kates etc

3. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives. 4. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc. 5. Purchase--May differ from decision, time lapse between 4 & 5, product availability. 6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead. Handout...Pillsbury 1-800#s 1-800 #s gives the consumer a way of communicating with the marketer after purchase. This helps reduce cognitive dissonance when a marketer can answer any concerns of a new consumer. Return to Contents List Types of Consumer Buying Behavior Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation. Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others. High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:

Personal risk Social risk Economic risk

The four type of consumer buying behavior are:

Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc. Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand. Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding. Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process.

Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next. For example: Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making. Return to Contents List Categories that Effect the Consumer Buying Decision Process A consumer, making a purchase decision will be affected by the following three factors: 1. 2. 3. Personal Psychological Social

The marketer must be aware of these factors in order to develop an appropriate MM for its target market. Return to Contents List Personal Unique to a particular person. Demographic Factors. Sex, Race, Age etc. Who in the family is responsible for the decision making. Young people purchase things for different reasons than older people. Handout...From choices to checkout... Highlights the differences between male and female shoppers in the supermarket. Return to Contents List Psychological factors Psychological factors include:

Motives--

A motive is an internal energizing force that orients a person's activities toward satisfying a need or achieving a goal. Actions are effected by a set of motives, not just one. If marketers can identify motives then they can better develop a marketing mix. MASLOW hierarchy of needs!!
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Physiological Safety Love and Belonging Esteem

Self Actualization

Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases. Handout...Nutrament Debunked... Nutrament, a product marketed by Bristol-Myers Squibb originally was targeted at consumers that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was therefore targeted at consumers whose needs were for either love and Belonging or esteem. The product was not selling well, and was almost terminated. Upon extensive research it was determined that the product did sell well in inner-city convenience stores. It was determined that the consumers for the product were actually drug addicts who couldn't not digest a regular meal. They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was completely different to the motivation that B-MS had originally thought. These consumers were at the Physiologicallevel of the hierarchy. BM-S therefore had to redesign its MM to better meet the needs of this target market. Motives often operate at a subconscious level therefore are difficult to measure.

Perception--

What do you see?? Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it. Information inputs are the sensations received through sight, taste, hearing, smell and touch. Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies current needs, intensity of input changes (sharp price drop). Selective Distortion-Changing/twisting current received information, inconsistent with beliefs. Advertisers that use comparative advertisements (pitching one product against another), have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. A current example...MCI and AT&T...do you ever get confused? Selective Retention-Remember inputs that support beliefs, forgets those that don't. Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30 minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't be expected to be aware of all these inputs, and certainly will not retain many. Interpreting information is based on what is already familiar, on knowledge that is stored in the memory. Handout...South Africa wine.... Problems marketing wine from South Africa. Consumers have strong perceptions of the country, and hence its products.

Ability and Knowledge--

Need to understand individuals capacity to learn. Learning, changes in a person's behavior caused by information and experience. Therefore to change consumers' behavior about your product, need to give them new information re: product...free sample etc. South Africa...open bottle of wine and pour it!! Also educate american consumers about changes in SA. Need to sell a whole new country. When making buying decisions, buyers must process information. Knowledge is the familiarity with the product and expertise. Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product. Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they assume that the greater price indicates greater quality. Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior.

Attitudes--

Knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible, living or non- living.....Drive perceptions Individual learns attitudes through experience and interaction with other people. Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy. Handout...Oldsmobile..... Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by class exercise) need to disassociate Aurora from the Oldsmobile name. Exxon Valdez-nearly 20,000 credit cards were returned or cut-up after the tragic oil spill. Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market returning to hard core. To change this they have a new slogan "Come ride with us". Attitudes and attitude change are influenced by consumers personality and lifestyle. Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and selectively retain information that reinforces our attitudes. IE brand loyalty. There is a difference between attitude and intention to buy (ability to buy).

Personality--

all the internal traits and behaviors that make a person unique, uniqueness arrives from a person's heredity and personal experience. Examples include:

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Workaholism Compulsiveness Self confidence Friendliness Adaptability Ambitiousness Dogmatism Authoritarianism Introversion Extroversion Aggressiveness Competitiveness.

Traits effect the way people behave. Marketers try to match the store image to the perceived image of their customers. There is a weak association between personality and Buying Behavior, this may be due to unreliable measures. Nike ads. Consumers buy products that are consistent with their self concept.

Lifestyles--

Recent US trends in lifestyles are a shift towards personal independence and individualism and a preference for a healthy, natural lifestyle. Lifestyles are the consistent patterns people follow in their lives. EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US until 1920's. Now an assault by the American Academy of Dermatology. Handout...Here Comes the Sun to Confound Health Savvy Lotion Makers.. Extra credit assignment from the news group, to access Value and Lifestyles (VALS) Program, complete the survey and Email [email protected] the results. This is a survey tool that marketers can use to better understand their target market(s). Return to Contents List Social Factors Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family, reference groups, social class and culture.

Opinion leaders--

Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market their products. Michael Jordon (Nike, McDonalds, Gatorade etc.) Can be risky...Michael Jackson...OJ Simpson...Chevy Chase

Roles and Family Influences--

Role...things you should do based on the expectations of you from your position within a group. People have many roles. Husband, father, employer/ee. Individuals role are continuing to change therefore marketers must continue to update information. Family is the most basic group a person belongs to. Marketers must understand: that many family decisions are made by the family unit consumer behavior starts in the family unit family roles and preferences are the model for children's future family (can reject/alter/etc) o family buying decisions are a mixture of family interactions and individual decision making o family acts an interpreter of social and cultural values for the individual.
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The Family life cycle: families go through stages, each stage creates different consumer demands:
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bachelor stage...most of BUAD301 newly married, young, no children...me full nest I, youngest child under 6 full nest II, youngest child 6 or over full nest III, older married couples with dependant children empty nest I, older married couples with no children living with them, head in empty nest II, older married couples, no children living at home, head retired solitary survivor, in labor force solitary survivor, retired Modernized life cycle includes divorced and no children.

labor force
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Handout...Two Income Marriages Are Now the Norm Because 2 income families are becoming more common, the decision maker within the family unit is changing...also, family has less time for children, and therefore tends to let them influence purchase decisions in order to alleviate some of the guilt. (Children influence about $130 billion of goods in a year) Children also have more money to spend themselves.

Reference Groups--

Individual identifies with the group to the extent that he takes on many of the values, attitudes or behaviors of the group members. Families, friends, sororities, civic and professional organizations. Any group that has a positive or negative influence on a persons attitude and behavior. Membership groups (belong to) Affinity marketing is focused on the desires of consumers that belong to reference groups. Marketers get the groups to approve the product and communicate that approval to its members. Credit Cards etc.!!

Aspiration groups (want to belong to) Disassociate groups (do not want to belong to) Honda, tries to disassociate from the "biker" group. The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group.

Social Class--

an open group of individuals who have similar social rank. US is not a classless society. US criteria; occupation, education, income, wealth, race, ethnic groups and possessions. Social class influences many aspects of our lives. IE upper middle class Americans prefer luxury cars Mercedes.
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Upper Americans-upper-upper class, .3%, inherited wealth, aristocratic Lower-upper class, 1.2%, newer social elite, from current professionals and

names.
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corporate elite Upper-middle class, 12.5%, college graduates, managers and professionals Middle Americans-middle class, 32%, average pay white collar workers and blue collar friends o Working class, 38%, average pay blue collar workers o Lower Americans-lower class, 9%, working, not on welfare o Lower-lower class, 7%, on welfare
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Social class determines to some extent, the types, quality, quantity of products that a person buys or uses. Lower class people tend to stay close to home when shopping, do not engage in much prepurchase information gathering. Stores project definite class images. Family, reference groups and social classes are all social influences on consumer behavior. All operate within a larger culture.

Culture and Sub-culture--

Culture refers to the set of values, ideas, and attitudes that are accepted by a homogenous group of people and transmitted to the next generation. Culture also determines what is acceptable with product advertising. Culture determines what people wear, eat, reside and travel. Cultural values in the US are good health, education, individualism and freedom. In american culture time scarcity is a growing problem. IE change in meals. Big impact on international marketing. Handout...Will British warm up to iced tea? No...but that is my opinion!!...Tea is a part of the British culture, hot with milk. Different society, different levels of needs, different cultural values.

Culture can be divided into subcultures:

geographic regions human characteristics such as age and ethnic background.

IE West Coast, teenage and Asian American. Culture effects what people buy, how they buy and when they buy.

Elements of a Product Mix If an organization is marketing more than one product it has a product mix.

Product item--a single product Product line--all items of the same type Product mix--total group of products that an organization markets

Depth measures the # of products that are offered within each product line. Satisfies several consumer segments for the same product, maximizes shelf space, discourages competitors, covers a range of prices and sustains dealer support. High cost in inventory etc. Width measures the # of product lines a company offers. Enables a firm to diversify products, appeals to different consumer needs and encourages one stop shopping. Proctor & Gamble example in class. Why so many different products? Different needs of different target markets for the same product. Channels of distribution economies etc. Return to Contents Product Positioning and Product Repositioning Definition: This refers to a place a product offering occupies in consumers' minds on important attributes, relative to competing offerings. How new and current items in the product mix are perceived, in the minds of the consumer, therefore reemphasizing the importance of perception!! New Product--need to communicate benefits Established Products--need to reinforce benefits Ideal Characteristics Need to introduce products that possess characteristics that the target market most desires, ideal. Product positioning is crucial.

Consumers desires refer to the attributes consumers would like the products to possess-IDEAL POINTS. Whenever a group of consumers has a distinctive "ideal" for a product category they represent a potential target market segment. A firm does well if its attributes (of the product) are perceived by consumers as being close to their ideal. The objective is to be "more ideal" than the competitors. Each product must provide some unique combination of new features desired by the target market. Instead of allowing the customer to position products independently, marketers try to influence and shape consumers concepts and perceptions. Marketers can use perception maps. Return to Contents Existing Products Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers ^ | | Old Position | New Position | | | Glamour--------------------------------------------------Health | | | | | | | Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc. Dermatologist reports...skin cancer etc. Lifestyle needs change, move to more health conscious (previously discussed) Need to reposition sun tan lotion as a healthy way to be exposed to the sun. Target market has shifted from the left quartile to the right quartile as far as needs are concerned. Sun tan marketers need to do same as far as changing consumers perception for the product. How?

Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan for...Be Sun Smart Change Product: Sunscreen and sunless tanning agent. Handout...BMW Banks on Affordability... ^

Very Safe | Lexus/infiniti | Mercedes | BMW | | | Cheap--------------------------------------------------Expensive | | | | | | | Very Unsafe BMW, to reposition up to the left Due to the exchange rate, Lexus moves to the right Why did they repositition? Safety Affordability Competitors include Infiniti, Lexus, Mercedes Benz and Aurora If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and brand image should give a product distinct appeal. Return to Contents New Product Positioning When developing a new product, a company should identify all the features that are offered by all its major competitors. Second, identify important features/benefits used in making purchase decisions. Determine the overall ranking of features by importance and relate the importance of each feature to its "uniqueness". For example you wouldn't buy a spreadsheet program that if it didn't perform basic math, so basic math is very important. However since every spreadsheet has that its an "important fundamental feature", instead of an "important differentiating feature". The flip side would be a spreadsheet that displays all numbers in binary (0-1) instead of "normal" numbers (0-9). This is unique but not important. The evaluation becomes a 2 x 2 matrix with uniqueness on the X-axis and importance on the Y-axis. ^

X Important to TM (Stockbroker) X Math functions | Import Data | | | | | ----------------------------------------------------------Unique | | | | | | | X Binary Data If the feature is in the upper right hand corner then you have probably got a winning feature. This is known as feature positioning, as opposed to product positioning. One can then see what type of customer needs the important (and perhaps unique) features. If your spreadsheet accepts continuous data in real-time (such as stock market data) while Lotus 1-2-3 doesn't, you'd position your spreadsheet as a "real-time spreadsheet with all calculations needed by Wall Street." Its a claim that tells something unique about your product, who it's for, and by implication, that Lotus 1-2-3 can't do it. Return to Contents Developing and Managing Products To compete effectively and achieve goals of an organization, the organization must be able to adjust its product mix. Need to understand competition and customer attitudes and preferences. Handout...At Timex, They're... 1982, Timex turned down the opportunity to market "Swatches". Timex was resting on its laurels, simple low cost watches. Digital revolutionized industry (technological change), Timex stuck with analog. DID NOT KEEP UP WITH WATCHES EVOLUTION FROM A FUNCTIONAL OBJECT TO A FASHION ACCESSORY. Now consumer owns 5 watches up from 1.5 30 years ago (emphasizing fashion need). Timex has acquired Guess and Monet Jewellers (distribution outlets) in an effort respond to change. Product mix: Dressy watches to Walt Disney Character watches, Indigo. Now have 1,500 styles, 300 in

1970. Return to Contents Developing New Products Need to develop new products. A new product can be:

Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously marketed by the firm, but by others Dynamic Continuous Innovation...minor education needed for consumers to adopt product Discontinuous Innovation...entirely new consumption patterns Handout...In Battle over Video Disk Standard What will be the winning format? New Product (Technology) Need to appeal to:
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Hollywood Ultimate consumers

Battle between:
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Sony and Phillips Toshiba, Pioneer and Time Warner

Swing voter...Matsushita Electric Industry (Toshiba/Pioneer) DVD could transform movie business (like CDs for music) Movie studios can resell all movies in new format therefore very important to them, also sell through market, video rentals are decreasing, due to competing service. Set of requirements:
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135 mins on 1 disc quality superior to vhs cd quality audio able to add multiple languages parent lockout system iron clad copying protection

Sony announced going ahead (Vaporware!) If 2 systems go to market, best system will win, only one technology can survive, WINNER WINS BIG...LOSER LOSES BIG (DUE TO INVESTMENT) VHS vs Betamax For a new product to succeed it must have:

desirable attributes be unique have its features communicated to the consumer (mkt support necessary)

Developing new products is expensive and risky. Failure not to introduce new products is also risky. IE Timex Firms develop new products in two ways:

By acquisition, i.e. Timex bought Guess and Monet Jewellers in 1992, bringing in new products to their product mix. Internal development, this is what we are going to focus on. 17,363 (8,077 food) new items hit supermarket and drug stores in 1993, according to marketing experts, a 9.3% increase over 1992. Launching a new product name along with new product is very risky and expensive therefore 75% of new products were brand-extension brands in 1993, up from 68% in 1992 (continuous innovations) Return to Contents Why New Products Fail

Lack of differentiating advantage Poor marketing plan Poor timing Target market too small Poor product quality No access to market

Return to Contents Seven phases to new product development: 1. New Product Strategy Development

Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment. Return to Contents 2. Idea Generation

Continuous systematic search for new product opportunities. Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research. 1-800#s, research etc. o Laboratory oriented sources--identify opportunities based on pure research or applied research. o Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it, from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing products, reading trade publications. Brainstorming for your group project. Ideas should not be criticized, no matter how off-beat they are.
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Return to Contents 3. Product Screening and Evaluation

New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared. --General characteristics, Marketing Characteristics and Production Characteristics. Ideas with the greatest potential are selected for further research. Do they match the organizations goals (DuPont and ICI have many patents that they have not exploited for this very reason.) Look at companies ability to produce and market the product. Need to look at the nature and wants of the buyers and possible environmental changes. Concept Testing Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions. This is done before investing considerable sums of money and resources in Research and Development. Can better understand product attributes and the benefits customers feel are most important. Would you buy the product? Would you replace your current brand with the new product? Would this product meet real needs? Return to Contents 4. Business Analysis

Analyze potential contribution to sales, costs and profits. Does the product fit into the current product mix? What kind of environmental and competitive changes can be anticipated? How will these changes effect sales etc.? Are the internal resources adequate? Cost and time line of new facilities etc.? Is financing available? Synergies with distribution channel etc. MIS to determine the market potential sales etc. Patentability should be determined, last 17 years, 14 years for a pharmaceutical product. Find out if it is technically feasible to produce the new product. If you can produce the new product at a low enough cost so as to be able to make a profit. Return to Contents 5. Product Development

Develop a prototype, working model, lab test etc. Attributes that consumers have identified that they want must be communicated through the design of the product. Return to Contents 6. Test Marketing

Can observe actual consumer behavior. Limited introduction in geographical areas chosen to represent intended market. Aim is to determine the reaction of probable buyers. It is the sample launch of the Marketing Mix. Determine to go ahead, modify product, modify marketing plan or drop the product. PROS are:
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Lessens the risk of product failure. Reduces the risk of loss of credibility or undercutting a profitable product. Can determine the weaknesses in the MM and make adjustments. Can also vary parts of the MM during the test market. Need to select the appropriate MM and check the validity.

CONS are: Test market is expensive. Firm's competitors may interfere. Competitors may copy the product and rush it out. IE Clorox detergent with bleach P&G. "In a live test you've tipped your hand, and believe me, the competition is going to come after you. Unless you have patented chemistry, they can rip you off and beat you to a national launch" -Director of Marketing at Gillette's Personnel division.
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Alternatively can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later. Handout...Miller's Momemtum.... Return to Contents 7. Commercialization

Corresponds to introduction stage of the Product Life Cycle. Plans for full-scale marketing and manufacturing must be refined and settled. Need to analyze the results of the test market to determine any changes in the marketing mix. Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can offer a competitive advantage. Spend alot of $s on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

Handout...American Express To Try a Credit Card... All stages above are identified in this article except market testing. Need to consider:

the speed of acceptance among consumers and channel members; intensity of distribution, production capabilities, promotional capabilities, prices, competition, time period to profitability and commercialization costs.

Return to Contents Buyers' Product Adoption Process 1. Awareness

Buyers become aware of the product 2. Interest

Buyers seek information and is receptive to learning about product 3. Evaluation

Buyers consider product benefits and determines whether to try it 4. Trial

Buyers examine, test or try the product to determine usefulness relative to needs 5. Adoption

Buyers purchase the product and can be expected to use it when the need for the general type of product arises. Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts. Return to Contents Diffusion Process The manner in which different members of the target market often accept and purchase a product (go through the adoption process) 1. Innovators

Techno-savvies first customers to buy a product, 2.5 % of consumers 2. Early Adopters

Tend to be opinion leaders. Adopt new products but use discretion, 13.5% 3. Early Majority

34% of consumers, first part of the mass market to buy the product 4. Late Majority

Less cosmopolitan and responsive to change, 34% 5. Laggards

Price conscious, suspicious of change, 16%, do not adopt until the product has reached maturity. Implications to marketers, company must promote product to create widespread awareness of existence and benefits.

Scope and Importance of Advertising Advertisements are important for:

standardized products products aimed at large markets products that have easily communicated features products low in price products sold through independent channel members and/or are new.

Broadcast Ad spending is at an all time high due to heavy competition in the:

Computer industry Telecommunications Industry Auto Industry

Whenever severe competition between marketers, introducing new products etc. Even with evolution of direct marketing, and interactive media. Return to Content List Nature of Advertising Used by many types of organizations including Churches, Universities, Civic groups and charities, politicians!! Need to consider the following issues:

Does the product possess unique, important features to focus on Unique Selling Point (USP) Are the hidden qualities important to the buyers Is the general demand trend for the product adequate Is the market potential for the product adequate Is the competitive environment favorable Is the organization able and willing to spend the required money to launch an advertising campaign

Return to Content List Use of Advertising CLASSIC DISTINCTIONS

Promoting Products or Organizations Institutional Advertising promotes organizations, images, ideas or political issues. IE Beer company sponsors responsible drinking to promote the company image. PHILIP MORRIS ADVERTISING Product Advertising promotes goods and services.

Stimulating Primary and Selective Demand First to introduce product needs to stimulate primary demand. Pioneer Advertising informs people about the product (introduction stage of the product life cycle). Do not emphasize the brand name. Can also be used to stimulate the demand for a product group, IE Beef council. For Selective demand, advertisers use Competitive advertising, brand uses, benefits not available with other brands. Can use comparative advertising, 1988 Trademark Law Revision Act, cannot misinterpret. American Express et al. Handout...When Visa and American Express... Deals with the competitive advertising between Visa and Amex AT&T True Rewards...using new kind of math/use former MCI customers MCI Friends and Family...hammer advantages of friends FF..."Put It In Writing"... Sprint 10 cents a minute

Offsetting Competitors Advertising Defensive advertising, offset to lessen the effect of competitors advertising. Used in fastfood industry, extremely competitive consumer products markets.

Making salespersons more effective Tries to presell product to buyers by informing them of uses, features and benefitsencourage them to contact dealers etc. Cars...bring to retail store.

Increasing use of product Consumer can consume only so much of a product, this limits absolute demand. May need to convince the market to use the product in more than one way.

Reminding and reinforcing customers Reminder, need to keep company/product name at the forefront of consumers' minds in the competitive marketplace. Reinforcement prevents cognitive dissonance.

Reducing Sales fluctuations Increase sales during slow periods will help increase production efficiency, IE advertising reduced prices of lawn mowers in the winter months (reduce inventory costs). Coupons for Pizza only Mon-Thurs.

Return to Content List Developing an Advertising Campaign Integrated marketing...incorporate w/ sales promotions, and other communications tools. Video...development of an ad within a campaign Designing a series of advertisements and placing them in various advertising media to reach a particular target market. Seven steps. Return to Content List 1. Identify and Analyze the Advertising Target. The group of people for which the advertisement is aimed at, may direct campaign at only a portion of the target market. Research and analyze advertising targets to establish an information base for a campaign. Generally increase advertisers knowledge about their target--the more effective the campaign. David Ogilvy Award focuses on rewarding research in advertising: 1994 finalists: Nabisco's Oreo Cookie campaign, nostalgic feeling re: cookies, slogan "Unlock the magic!"....Winner!! o AT&T "You will campaign", customers did not feel AT&T was innovative o Goodyear, Aquatred ads, customer concerns were related to tires traction ability in the wet.
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Return to Content List 2. Defining Objectives. What the firm hopes to accomplish from the campaign, should be clear, precise and measurable, can help measure the success at the end of the campaign. Use a benchmark.

At what stage are the target market in the Product Adoption Process. What are the goals of the campaign...to increase purchases, to generate traffic in the retail store etc. Demand oriented objectives vs. image oriented objectives Increase product/brand awareness Change consumer attitudes...reposition product Increase customer knowledge of product features Return to Content List 3. Determine the Advertising Appropriation Total amount of money that a marketer allocates for advertising in a specific period. Objective and Task Approach determine the objectives, then list the tasks needed to achieve the objectives. o Percent of Sales Approach Sales create marketing?! What happens when the products sales are declining. o Competition Matching Approach Other companies have different advertising objectives. o Arbitrary Approach determined by high level executives, Delaware MBA Program
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Return to Content List 4. Creating an Advertising Message A function of the product's features, uses and benefits. Must be aware of the characteristics of target market, different message to different target market. Dependant on objective of the campaign. Can use a Spokesperson. Celebrities 1993 ranked: 1. Cindy Crawford...Pepsi Cola, Revlon 2. Candice Bergen...Sprint (1/3 believe either AT&T or MCI ;)...don't want the personality to overwhelm the brand) 3. Bill Cosby...Jello Sports: 4. Michael Jordon, 6th time in 7 years Components of the advert:
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Headline Illustrations SubHeadline BodyCopy Signature

Copy verbal portion of the advert. Includes all aspects except the illustrations. Attempts to move the reader through:

10. Awareness 11. Interest 12. Desire 13. Action Headline--should attract readers attention, make readers want to read the copy. Return to Content List 5. Developing a Media Plan Sets forth the exact media vehicles to be used and dates and times of ads. Effectiveness of plan determines how many people in the advertiser's target will be exposed to the message. Need to select the media to be used and dates and times ads appear. Primary goal--reach the highest # of people (within the advertiser's target) per $ spent. Achieve the appropriate message reach and frequency for the target audience while staying within the budget. Various Media
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TV Channels/programs, Baseball = male 18-49 Academy awards = female 1849 Sponsor cable channels, Reebok with Cable Health Club "Reebok University" Radio, Becoming more segmented, also allowed to own 2 FM stations in one area. Magazines, Lead time considerations, also pass along rate, subscription plus news agent sales. Newspapers, Local vs. national Direct Mail, Evolution of Database marketing, able to narrowly target with DM. Outdoor, Billboards Atlanta is most billboard per capita city, Transit...City Buses, Blimps...At Events Placed-Based, Schools, also sponsor educational programs, Supermarkets, Health Clubs, Dining Halls. Intrusive..."Only go where you are wanted!!". Target market is known...not assumed. Electronic, WWW, Compuserve et al.

Need to select general media, IE Newspapers, then subclass, IE Philadelphia Inquirer. Look at location and demographics of advertisers target, use media that appeals to this group. Content of message to present affects the choice of media. Cost of media, use cost comparison indicator-within specific media (IE between two magazines), CPM "cost per thousand" for magazines. -cost, total cost; per reader/viewer cost -reach, #viewers/readers in the audience, print media includes circulation and pass on, more for magazines than newspapers -waste, portion of marketer's audience that are not in the target market -frequency, how often can the medium be used/changed, i.e., TV radio hourly, newspapers daily, Yellow pages yearly. -message performance, number of exposures each advertisement generates and how long it remains available to the audience; outdoor ads, many exposures/message,

magazines retained for a long period of time. -clutter, # of advertisements contained in a single program/issue of a medium. TV ads moving to 15 secs. each is increasing clutter. Some moving to 2 minutes...or even 5, especially if there is a complex message...telecommunications...cars maybe!! Primetime:
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CBS 13mins 52 secs of non programming time ABC 13mins 24 secs Daytime 8-19 mins ESPN 13mins 28 secs Discovery 15mins 20 secs

Return to Content List 6. Executing the Campaign Requires extensive planning and coordination. Advertising Agencies, production costs, research organizations, media firms, printers, photographers, and commercial artists etc. Detailed schedules are needed to insure everything is accomplished on time. (video) Return to Content List 7. Evaluating the effectiveness of the campaign Measure the achievement of the objectives, assessing the effectiveness of the copy etc., and the media. Typical consumer is bombarded with about 300 advertising messages/day, 109,500 per year. 80% of people cannot remember a typical ad one day after seeing it. NEED CREATIVITY!?!? Pretests before campaign, use a consumer jury. During the campaign, "inquiries"-coupons numbered. Posttests after the campaign, use consumer surveys to measure the change in communication objectives, change in sales or market share. Cannot be precise due to the environment. Use recognition tests to determine the degree to which consumers recognize advertisements. Recall evaluation, consumers are asked what they have seen lately. Aided or unaided. Handout...Loved the Ad. May (or May Not)... Since there is no direct feedback loop, it is hard to determine the effectiveness of an advertising campaign. Many other factors effect sales. Handout...Mercedes-Benz Tries Out Humor, Youth TM = Younger consumers, need to be more approachable TV & Print Ads Example of Copy ...Dreams, Dreams are what drive us. But sometimes life is good...you get to drive your dream. Vehicles:

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Monday Night Football NYPD Blue 60 Minutes Mad About You Seinfeld

Handout...Lexus, Sales Skidding... Budget = $50 million Changing market-place Less opportunities for Lexus Need to develop heritage National TV...Image Local TV...Competitive $s Magazines...Features, 12 page insert Direct Mail...current customers Return to Content List Who develops the advertising campaign? Advertising Agencies receive 15% commission from media purchases, this can offset cost of using an agency. Advertising Future!! Handout...Fresh Alarm is Sent Over Interactive Age Handout...Advertisers Anticipate Interactive Media... Interactive media READ USES AND BENEFITS SECTION FROM DEMYSTIFYING THE INTERNET Traditional media communication Source-------------------Medium-----------------TM ^ | | | | | | | ------------------Feedback-----------------------

Problems with this model include: Feedback takes place outside the medium, therefore there is no direct feedback as to its effectiveness. Can attempt by using 1-800 #s etc., but not 100% accurate. o Company designs message to meet the assumed needs of its target market(s).
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Interactive media communication

Source-----------------Medium-----------------Consumer

Advantages of this model include: Direct feedback, can directly determine consumers response, can offer more information based on individual customer needs. o Individual consumer designs message based on his/her informational needs, around information provided by marketer. o Direct count of the number of consumers exposed to the message, and the effectiveness of the message content.
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WWW is a working model for the future of interactive media. Extra credit assignment...access Sony's homepage, browse the information and Email me what you learnt. Future: TV...Be able to query commercials with remote control to get more information, can develop into a retailing transaction. Ads specific to your information needs will be delivered to you, based on your prior buyer behavior and query habits...not dependent on the programs you watch as is the case now. Therefore consumers watching same programs will receive different advertisements, advertisements will not be dependent on the programs, as they are now, but on the individual house holds passed buying behavior and needs!! Role of Promotion Definition: To communicate with individuals, groups or organizations to directly or indirectly facilitate exchanges by informing and persuading one or more audiences to accept an organization's products. -Companies must communicate with their customers, this communication should not be left to chance. Design communication to your specific target audience:

Target Market Part of Target Market Different stakeholders of your organization.

Return to Content List Promotion and Society Marketers need to coomunicate, therefore need a medium to facilitate communication. $235 bn predicted to be spent in 1994 on advertising WW $94 bn in US. Pay for media (1994)

TV $27.1b 1994

Newspapers $25b*1993 Radio $9.57 b 1993 Magazines $7.62 b 1993

Marketers need to communicate, therefore provide funds for Event Sponsorship Handout...Projected surplus for 96 summer Olympics no tax payer money needed to finance the games. Cost $1.54 bn, financed mostly by marketers wanting to use the Olympics as a medium to communicate to customers. Employment sales people advertising agencies etc. Return to Content List Promotion and the Communication Process Handout...Chrysler market Cirrus... This article illustrates a number of elements in the communication process. Nine elements to the communication process. Sender Chrysler and Receiver Target Market (35-50yr aspire BMW/Lexus) are the major parties in the communication process. Message New Car, Cirrus, comfort of a Lexus and handling of a BMW for less money and the media TV, direct mail, Brooks Brothers etc are the major communication tools. 4 more major functions:

Encoding--putting thought into symbolic form. Advertising Agencies creating radio commercials, TV commercials, prepare direct mail pieces, sales pitch etc Decoding--consumer interprets message. Understanding the target market's perception process is critical. Response--reaction of the receiver buy or not to buy, take next step down AIETA, go to the showroom etc. Feedback--response communicated back to the sender 1-800 #s, increase in sales. Number of customers in show room etc. Better for Personal Selling, not advertising

Last element is Noise in the system, more noise with non-personal communication Sender needs to know:

what audiences they want to reach what responses they want. how the target audience decodes messages what media will effectively reach the target audience

Return to Content List Promotional Mix

Organizations combine specific ingredients of the promotional mix to promote a particular product. All promotionals tools (promotional mix):

Advertising Sales Promotion Publicity

must blend harmoniously into an effective communication strategy, to meet the promotional objectives. Return to Content List Advertising: Definition: Paid form of non personal communication about an organization or its products that is transmitted to a target audience through a mass/broadcast medium. Pros

Flexibility allows you to focus on a small, precisely defined segment (School newspapers) or a mass market (baseball show = Males, 35-50). Cost efficient-reach a large number at a low cost per person, allows the message to be repeated, and can improve public image. Allows for repeating the message-lets the buyer receive and compare the messages of various competitors. Very expressive, allows for dramatization. Also used to build a long term image of a product. Trigger quick sales, Sears advertising a weekend sale.

Cons

Absolute $ outlay very high, make a national TV ad. approx $150,000, local ad. $60,000. 30 second spot, Superbowl $1.1 m 1995 Rarely provides quick feedback, or necessarily any feedback Less persuasive than personal selling Audience does not have to pay attention Indirect feedback (without interactivity)

Cirrus...used national advertising, local, direct mail, posters etc. Return to Content List Personal Selling: Occurs through personal communication in an exchange situation.

More specific communication aimed at one or more persons. Effective at building buyers preferences, convictions and actions. Cost per person is high, most expensive promotional tool. Greater impact on consumers Provides immediate feedback

Allows marketers to adjust message quickly to improve communication. Buyer feels a great need to listen and respond. Long term commitment is needed to develop a sales force.

Cirrus..sales representatives in show rooms. Return to Content List Public Relations/Publicity: News story form about an organization or its products or both (MBA, Philadelphia Inquirer), through mass medium at no charge. Sponsor does not pay (generally), may be expected/required to run advertisements in the media. Can be positive and negative. Pepsi Syringe. Believable Cirrus...Articles in Car and Buyer, WSJ, and this article etc. Return to Content List Sales Promotion: Definition: Materials that act as a direct inducement, offering added value, or incentive for the product, to resellers, sales persons or consumers. Designed for immediate (short term) increase in product sales. Cirrus...Sweepstakes, cocktail parties, test drives Return to Content List Selecting Promotional Tools A marketer must do the following while planning and sending communications to a target audience: 1. Identify the Audience Individuals, groups, special publics or the general public. Intermediaries vs Consumer 2. Identify the Stage of Product Life Cycle o Introductory Inform Publicity/Advertising/Sales force (interm.)/Sales promotion (free samples) o Growth Persuade Differentiate from competitors offering o Maturity Remind Reminder advertising, Sales promotion (coupons) o Decline Cut budget 3. Product Characteristics o Complexity How much information must be communicated. The more complex the message, the greater the need to use personal selling. o Risk Greater risk, greater need for personal selling 4. Stages of Buying Decision In many cases the final response sought is purchase, but purchase is the result of a long process of consumer decision making. Need to know where the target audience now stands (in the process), and what state they need to be moved to. Adoption Process

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Not Aware--Advertising/Publicity Aware--no knowledge Advertising/Publicity Interest--how do they feel? Personal Selling/SalesPromotion/Advertising Evaluation--should they try? sales promotion/personal selling Trial--test drive/sales promotion Adoption--do they purchase? Reminder/reinforce--advertising

Communication programs goal must lead consumers to take the final step. 5. Channel Strategies -Push Vs Pull Policy o Push-promotes product only to the next institutions down the marketing channel. Stresses personal selling, can use sales promotions and advertising used in conjunction. o Pull-promotes directly to consumers, intention is to create a strong consumer demand, primarily advertising and sales promotion. Since consumers are persuaded to seek products in retail stores, retailers will in turn go to wholesalers etc (use channels overhead) Return to Content List Nature of Sales Promotion Encompasses all promotional activities and materials other than personal selling, advertising and publicity. Grown dramatically in the last ten years due to short term focus on profits. Funds are usually earmarked for advertising are transferred to sales promotion. Often used in conjunction with other promotional efforts. Return to Content List Scope and importance of sales promotion: 323 billion coupons were distributed 1993 nationally annually (3,200/household), only 2.3% are redeemed. o 9000 trade shows containing 10 exhibits or more/year. New York auto show attracts more than a million people per year. o $15-20 billion/year spent on point of purchase material in stores.
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Why??
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companies are looking to get a competitive edge quick returns are possible for short term profits more consumers are looking for promotions before purchase channel members putting pressure on mf. for promotions advances in tech. make SP easier (ie coupon redemption)

Return to Content List Sales Promotion Opportunities and Limitations

Increase in sales by providing extra incentive to purchase. May focus on resellers (push), consumers (pull) or both.

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Objectives must be consistent with promotional objectives and overall company objectives. Balance between short term sales increase and long term need for desired reputation and brand image. Attract customer traffic and maintain brand/company loyalty. Reminder functions-calendars, T Shirts, match books etc. Impulse purchases increased by displays Contests generate excitement esp. with high payoffs.

Limitations
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Consumers may just wait for the incentives May diminish image of the firm, represent decline in the product quality. Reduces profit margins, customers may stock up during the promotion. Shift focus away from the product itself to secondary factors, therefore no product differential advantage.

Return to Content List Sales Promotion Methods Consumer Sales Promotion Techniques -encourage/stimulate customers to patronize a specific retail store or to try a specific product.
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Coupons: Usually reduce the purchase price or offered as cash. Need to state the offer clearly and make it easy to recognize. Handout...Awash in Coupons... Looks at the volume of coupons (323 bn) and the poor redemption rate (less than 3%). Looks at more innovative media to deliver coupons (currently over 80% are delivered via the Sunday paper)....in store by the products, as customers exit the store based on purchases...discussed delivering coupons to customers as they enter the store, using a card that swipes to indicate past purchases. Past buying behavior is the best predictor of future buying patterns!! Also discussed that they may be delivered via TV, in conjunction with an advertisement. Users only redeem coupons they would ordinarily purchase. 75% of the coupons are redeemed by consumers who would buy the brand already. Stores/marketers are honoring competitors coupons etc. Stores often don't have enough of the couponed item in stock.

Demonstrations: Excellent attention getters. Labor costs are usually high.

Frequent User Incentives: Major airlines, helps foster customer loyalty to a specific company. Credit card companies. Trading stamps-Co-ops back in England, foster retail loyalty. Blockbuster's new credit card offers company products based on card usage. Cindy Crawford "Why wait for whats coming to you" Co-Branded with immediate rewards...this is what is veryappealing about this card...immediate reward, as opposed to having to build up points for an air flight etc. Airlines have had to raise the threshold of their award programs 35,000 from 20,000, 2 free round trip tickets due to $3+trillion liabilities Long Distance telephone also offer free air miles, >$25/mo = airmiles Frequent User cards are used to collect information for companies enabling them to better target their customers.

Point of Purchase Display: Outside signs, window displays, counter pieces, display racks. 90% of retailers believe that point of purchase materials sell products. Essential for product introductions. Also with 2/3 of purchasing decisions made in the store, they are important.

Free Samples: Stimulate trial of product. Increase sales volume at the early stage of the product life cycle and obtain desirable distribution. Most expensive sales promotion technique. Not appropriate for mature products and slow turnover products. Handout...With Sampling there is too a free lunch Discusses the pros and cons of free sampling.

Money Refunds/Rebates: Submit proof of purchase and mail specific refund, usually need multiple purchase for refund. Helps promote trial use, due to the complexity of the refund, it has little impact. Customers have a poor perception of rebate offered products. Used extensively in the Auto and Computer industry.

Premium Items: Offered free or at minimum cost as a bonus. Used to attract competitors customers, different sizes of established products. Gas stations give free glasses--basics buy!! McDonalds premium items are considered collectors items by some! Flintstones program last year with McDonalds. Burger King with the Lion King movie Last summer the following tie-in premium programs.

Casper with Pepsi, Pizza Hut, Choice Hotels Congo with Taco Bell Batman Forever with McDonalds, Kelloggs, Six Flags, Sears Pocahontas with Chrysler, Nestle,General Mills, Burger King Mighty Morphin with McDonalds o Cents-off Offer:

Strong incentive for trying a product-very similar to coupons, but are a part of the package.
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Consumer Contests and Sweepstakes: Consumers compete based on their analytical or creative skills. Must be accurate or you will anger customers/retailers. Sweepstakes are prohibited in some states.

Return to Content List Trade Sales Promotion Techniques Push Policy emphasizes promotions focused on the next intermediary. Trade Sales Promotion Techniques-stimulate wholesalers and retailers to carry products and to market them aggressively. Producers use sales promotion techniques to encourage resellers to carry their products and to promote them more effectively. Allowances and Discounts: Merchandise...reimburse for extra retail support, i.e. advertising, shelf space Case...discount on cases ordered in specific period. Finance...Paying for financial costs/losses associated with consumer sales promotions. o Cooperative Advertising:
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Manufacturer agrees to pay a certain amount of retailers media.

Training of Sales Staff

Return to Content List Publicity At no charge (most of the time) Part of public relations, a broad set of communication activities used to create and maintain favorable relations between the organization and its publics:
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customers employees stockholders government officials society in general

Need to cultivate effective media relations, and targeting publicity to key markets are viewed as the highest priorities. Handout...Communicators Guide To Publicity What is news? Planning Publicity Program Writing a news release Photographs Radio and TV News Return to Content List Publicity and Advertising compared
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Publicity is primarily informative Advertising is informative and persuasive Publicity is more subdued Publicity does not identify the sponsor Publicity is free (??!) Publicity is part of a program or print story and appears more objective Publicity is not subject to repetition Publicity is more credible Little control over publicity

Return to Content List Dealing with Unfavorable Publicity Handout...The Right Moves Babes Discusses how Pepsi dealt with the Syringe incident, using primarily publicity to overcome bad publicity. Bad news receives much attention in the media. Need to deal with bad publicity. First, need to try to reduce the # of incidents that produce negative publicity (effective TQM etc.), use policies and procedures to cover negative publicity. Expedite coverage as opposed to blocking it. Avoid rumors and misinformation. Return to Content List Limitations of Using Publicity Media must judge publicity to be news worthy, timely, interesting and accurate. Cannot control the content or timing. May delete the most important part.