The Nature and Role of Information 3

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Generally speaking, if a survey showed that 70 per cent of parents thought well of your company and its products you could say that, on the whole, parents were friendly. However, you would still have to think carefully about the other 30 per cent, particularly if later surveys showed the tide of opinion moving in their direction so that six months later only 65 per cent were favourable and 35 per cent were now against you.

The terms friendly and hostile are a bit extreme and are not the only possibilities. Publics may be neutral in their attitudes and indifferent to what the company is doing. They may even be ignorant of the company's existence altogether. This does not mean that they should be ignored - they may be indifferent to you (or ignorant of you), but that does not mean that you should not be interested in them.

When we talk about publics as being consumers, shareholders, suppliers, etc., it is easy to forget that no real person is ever just a consumer. Some of the company's consumers could also be among its suppliers, its shareholders and even its employees. It is not, therefore, possible to tell different stories to different publics and get away with it for very long. One of the advantages of a mission statement is that it focuses all sorts of messages in the same direction.

It is also important to recognise when a particular public is so adamantly hostile to you that you can never win it round and it is a waste of time trying. The point here is that you do not always need everybody on your side. In a contested take-over bid, all you need is a majority of the shares (not all of them) and in a general election a political party does not need all the seats (just more than the others).

Friendlies Hostiles Neutrals
Local councillors Friendly councillors Hostiles councillors Neutrals councillors
Local residents Friendly residents Hostiles residents Neutrals residents
Local businesses Friendly businesses Hostiles businesses Neutrals businesses

Fig. 14.1 Attitude matrix

Taking different types of publics and different attitudes a company could develop a matrix. A property developer, for example, could finish up with something like fig. 14.1.

Instead of treating all councillors as hostile or all businesses as friendly, the contractor could do some research and find out who is in each box. In PR terms, it might pay to treat the hostiles as a single public (regardless of whether they are residents, businesses or councillors) and see whether the grounds of their hostility are sufficiently alike to be dealt with by similar measures. For example, they might all have the same environmental objections to a new development - loss of civic facilities, increased traffic congestion, etc.

We can now see that publics:

- Can be made up of individuals (consumers or workers, for example) or of organisations (suppliers, retailers or agencies).

- Can be either very large (consumers may be numbered in tens or hundreds of thousands, even millions) or relatively very small (how many local councillors are there?).

- Can be internal or external to the organisation.

- Can be friendly, hostile or neutral.

- Can represent a wide variety of relationships with the company giving rise to different areas of public relations such as consumer PR, trade PR, supplier PR and internal PR.

We may also encounter product PR (to support an existing product or a new product launch), financial PR (aimed at shareholders) and PR which specialises in particular areas such as fashion PR.

Public relations crops up in different forms in non-business areas as well. Politicians and other public figures may have their own PR advisers. Local government utilises PR in communicating with residents and central government departments are among the biggest producers of press releases to publicise their decisions. Service organisations such as the police, ambulance and fire services also use public relations.


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Sales promotion

Introduction

It is sometimes said of sales promotion that its purpose is to be there during the final stages of the purchase decision process, either carrying the customers over the line between purchase and non-purchase or affecting the characteristics of the purchase, such as its size or timing. In the latter case, sales promotions may affect people who would have bought the product anyway: it is just that they buy sooner rather than later or more rather than less.

A professional buyer may be dealing with a salesperson or, as in a self-service retail outlet, the consumer purchaser may be alone. In the first case, sales promotions can work on the motivations and behaviour of both the seller and the buyer, rewarding the salesperson for making the sale and rewarding the buyer for making the purchase. In the second case, there is only the buyer to consider and, in the absence of a salesperson, all the emphasis, at the point of purchase, is put on offering the buyer an incentive. These relationships between rewards and selling (creating a push for the product) on the one hand and rewards and buying (creating a pull for the product) on the other are at the heart of sales promotion. The emphasis on sales in the term sales promotion is, perhaps, one-sided. Some aspects of sales promotion are really purchase promotion and it is interesting that what we call point of sale (POS) the Americans call point of purchase (POP).

In fact, even in a self-service outlet, there are still push elements at work. Shop displays, the position of the product on the shelf, or at or near the checkout can all stimulate sales: they act as 'silent salesmen' doing the work that a salesperson might otherwise do. Such things are normally the province of the retailer rather than the manufacturer and come under the heading of merchandising. In this chapter we will think of sales promotion as what the manufacturer does and merchandising as what the retailer does. Merchandising and sales promotion can work together but they can also conflict when the manufacturer's interests are not shared by the retailer.

There are moral dimensions to this. A retail customer seeking impartial advice as to which washing machine to buy may be unaware that the retailer may have particular reasons for pushing certain models. Where sales promotions are targeted at children, parents may be pestered into making purchases which strain the family budget (the expensive breakfast cereal with the free dinosaur as opposed to the cheaper, gift-free, own-brand).

Many practices are included under sales promotions: for example, premium offers, free offers, editorial promotions and charity-linked promotions. Sales promotion schemes are widely recognised to be complex to set up and administer. Sales promotions offered to the consumer come under the ASA and have the same requirements to be legal, decent, truthful and honest as any other form of advertisement.

Short-term and long-term considerations

Sales promotions were once thought of as having only a short-term tactical value in stimulating the sales of a slow-moving item. Today, it is recognised that they can have a longer-term strategic value. The spend on sales promotions now matches conventional advertising. This is due partly to manufacturers 'desire to find a cheaper alternative to expensive television advertising and partly to their wish to have more control over the fate of their products in the retail stores. The ability to tie sales promotions in with other activities such as sponsorship, direct mail or public relations has also played a part.

The development of sales promotion techniques to secure long-term goals, such as building customer loyalty, deseasonalising the demand for seasonal products, blocking off competitors and increasing market share, is now well recognised. Any promotion that requires the participating consumer to provide a name and address can also be used to build a mailing list and this might actually be its major purpose.

Sales promotion can occur at three levels:

- Sales-force incentives. The internal use of sales promotions aimed at the manufacturer's own sales force.

- Trade promotions or trade incentives. The external use of sales promotions aimed at wholesalers and retailers.

- Consumer promotions. The external use of sales promotions aimed at the consumer.

Fig. 18.1 illustrates the relationship between these elements.


Fig.18.1. The relationships between the manufacturer's verious sales promotion activities and the merchandising activities of the retailer

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The use of agencies

The choice between in-house and agency operations

As we observed in chapter 3, developing a strategy involves a consideration of the resources available to a company. Some of these resources may lie outside the company and some may belong to it. A manufacturer may decide to undertake its own deliveries or to pay an external carrier, or to manufacture its own component parts or to buy them in from outside. These 'make or buy' situations are widespread and no less common in the worlds of advertising and promotion than anywhere else.

When an organisation decides to do its own advertising we say that it is doing it in-house - in its own advertising department. When the organisation appoints an agency, we say that it is going out-of-house or just out-house. In this latter case, the organisation becomes the client of the agency and we talk of client-agency relationships.

However, even when the work is done in-house a form of client-agency relationship exists and this must be understood. An in-house public relations department, for example, does not work in isolation from the rest of the company pleasing itself as to what sort of public relations it will do and when. It works for another department of the company, or even the board of directors itself. In such cases, we say that there is an internal client. For example, the marketing department could be the client department of the PR department (which, in turn, is acting as a sort of internal agent). An in-house department needs to have as much care for its internal clients as an independent agency has for its external clients.

The decision whether to use in-house or out-house facilities is a complex one. When a company uses external suppliers (an advertising agency is a form of external supplier), it is operating in the external market with all the problems and benefits that external market operations involve. When it chooses to do the work itself, it abandons the external market in favour of its own internal market in which one part of the company is 'selling' its services to another part of the same company.

The question of whether to use an agency can be restated as the general policy question of whether a company is better off operating externally in the open market or operating internally in its own market. That is the question which we consider when we look at all the factors which will influence the decision as to whether or not to use an agency.

The range of in-house / out-house opinions

It is not a straightforward question of either doing all the work in-house or putting it all out to a single external agency. In practice, we may find any of the following options being pursued:

The company does all the work in-house.

The company gives all the work out to one agency.

The company splits the work between itself and one agency.

The company gives out all the work, but splits it between two or more agencies.

The company keeps some of the work in-house and divides the remainder between two or more agencies.

Many firms change their approach to these options and it is doubtful if there are any managers who would say that only one of the above options could ever be right.

When IBM awarded its ? 300 million worldwide account to British agency Ogilvy and Mather in 1994 it 'sacked' 40 other agencies across the globe (some in this country). O & M, to avoid conflict of interest, 'resigned' from accounts with IBM rivals Microsoft and Compaq.

Furthermore, even when the company puts work out to agencies, it must still employ sufficient people in-house to liaise with them and to co-ordinate their efforts.

Criteria for deciding between in-house and out-house

There are many factors which could affect the decision. Some are given a higher weighting by some companies than others and the weighting given may, itself, be influenced by the kind of work under consideration. The following list of different types of agencies should be borne in mind. (The list is not exhaustive.) Note that in the rest of this chapter the word agency is used to mean any of the following and not just advertising agencies:

- Advertising agencies.

- Conference organisers.

- Copywriting agencies.

- Design studios.

- Direct marketing houses.

- Exhibition organisers.

- Full service agencies.

- Media independents.

- Press cutting services.

- Photographic studios.

- Production companies.

- Public relations consultancies.

- Sponsorship agencies.

- Venue finders.

Costs

In some situations, where outputs can be standardised, cost comparisons are relatively easy to make. However, the planning and creative work involved in promotional campaigns is seldom standardisable and it might sometimes simply prove impossible ever to know for sure whether or not an agency would be cheaper.

A complication is the method by which the company handles its internal transfer pricing, when one department does work for another. Internal transfer pricing methods vary from organisation to organisation with the possible consequence that in-house work may appear cheaper or dearer to the client than it actually is. The following internal pricing methods might be used:

The internal supplier could be treated as a cost centre, there to provide a service, with its work written off and not charged to the client department.

The work could be charged through on a full-cost basis, but with no mark-up for profit.

The work could be charged on exactly the same basis as an external agency would charge for the same work.

There are no golden rules for deciding how internally generated costs should be distributed; but you should be aware that zero price and full-cost systems distort the comparison and market-price systems may be resented by a client department which is denied access to the market anyway. All of this supposes that the data exists to enable a comparison to be made.

Results

The problem with this criteria lies in the difficulty of ever knowing until after the event what results have been achieved as opposed to those which were hoped for. Results may be measured in such terms as having made X per cent of the public aware of the company's existence or of giving so many people an OTS (Opportunity To See) an advertisement. It is impossible to set up in advance an analytical model which will predict with total certainty whether an in-house campaign will produce better results than an out-house campaign, since there are too many non-controllable factors. Although a client might, subsequently, be disappointed with an agency's performance and suspect that it could have done better itself, it will simply never know.

Speed ??of delivery

Generally speaking, pro-active campaigns should be planned sufficiently well in advance that the pressure of time alone should not be a determining factor in deciding whether or not to use an agency. There are reactive situations, however, such as the need to respond quickly to a crisis situation, where an agency might have the resources to make a quicker response than an in-house department. It could, of course, go the other way, with the in-house department able to provide the necessary service faster. A company may, for example, have its own in-house print shop or reprographics unit to run off press releases or direct mail letters. In an emergency, however, it might find that an external printer can handle a particular job faster.

Confidentiality

A manufacturer working on a new product may wish to limit the number of people who know about it. Appointing an external advertising agency would inevitably involve letting the personnel of that agency 'in on the act' and that might just not be acceptable. This is an instance where acceptability becomes the main criterion - it is not acceptable to the company to divulge information about its new product plans to outsiders.

Objectivity

A company might feel that it will get objectivity, a more critical approach, horn an agency than it will from its own personnel who might be suspected of being unwilling to risk upsetting an internal client by being too critical or, just as likely, be unwilling to take a hard look at its own efforts.

Commitment

An agency is unlikely to have only one client and there will, therefore, often be demands made on its resources from its other clients. A company may begin to worry about whether it is getting its share of agency attention or whether, under pressure, the agency will not favour some other client. Additionally, as the client has no direct control over agency personnel, it might fear that agency people working on its account might leave and be replaced by others less experienced and less competent.

Accessibility

One advantage of having in-house facilities could be that they are easier to get at. However, with multi-site companies, a public relations department based at head office may be just as inaccessible to a particular centre of operations as an external agency.

Accessibility (proximity) is an important factor in the choice of agency. A company based in Manchester might well prefer to sign up a Manchester-based agency because it is seen as more accessible than a London agency, whereas another company might go in-house simply because there is no suitable agency within easy visiting distance.

With both commitment and accessibility there may be a misconception associated with in-house operations. An in-house facility may be working for several client departments at the same time and the problems of divided loyalties and inaccessibility might just as easily arise. Ask anybody who is in charge of an in-house print shop or reprographics unit.

Expertise

An agency may offer a particular skill which is not available in-house: for example, the ability to run a direct-mail operation. In this case it may pay the company to go out-house, particularly if direct-mail exercises are not to become a major part of the company's overall promotional activity. However, if it is envisaged that direct-mail shots are to become a regular feature, then the company might just as well appoint its own direct-mail manager.

Experience

It is sometimes suggested that agency personnel have wider experience than in-house personnel. However, given the ease with which a practitioner in, say, advertising or public relations can move between in-house and out-house appointments such claims must be looked at cautiously.

Creativity

There is obviously a need for creative thinking and imagination in designing promotional activities and an organisation may well feel that it will get access to more original ideas by going out of house.

Dismissibility

It has been argued that one advantage of appointing an agency is that it is much easier for a client to 'sack' an agency than it is to sack an entire in-house department. This is a rather negative view and is open to question. If a firm got a reputation for being difficult to work with and of too frequently sacking its agencies, it might find that other agencies would not wish to take it on. In any case, many firms have had no difficulty in the past in getting rid of an entire department. Indeed, closing down an existing department might be just one factor in developing a new strategy.

Making the decision

At the end of the day, there is no hard and fast formula for making the decision.

One approach, which attempts to bring all the above considerations under one umbrella is called cost-benefit analysis (CBA). Here the management would list under two separate headings the costs and the benefits associated with each option. A comparison could then be made to see which option might offer the better balance of benefits over costs. Costs and benefits are not to be defined only in terms of money; such non-quantifiable elements as loyalty and creativity must be included. This method is subject to a considerable degree of subjective judgement, but, like the scoring method discussed in chapter 3, it does at least provide the opportunity to consider all the angles. CBA can be used to evaluate other strategic decisions as well and scoring systems can be used in deciding whether to go out-of-house or not.

Perhaps, for many organisations, it is a question of liaison, co-ordination and control. The more facilities are internalised, the more control an organisation might think it has; the more they are externalised, the less control the organisation might have. Many organisations have ten or more agencies on their books at the same time. How does this affect overall monitoring and control?

Dividing the work between in-house and out-house

It is not merely a matter of doing all the work in-house or putting it all out-of-house. An organisation might decide to do some of the work itself and put the rest out. In such a case the question would be where to draw the line. A company which will not put the advertising campaign for its new products into an agency's hands may be perfectly happy to allow an agency to handle its mature products where there is no longer the need for confidentiality and secrecy. Some of the reasons for splitting the work might include:

The company has the occasional need for some service such as planning a sales promotion but does not run sales promotions sufficiently often to justify maintaining an in-house facility.

There may be peaks of activity once or twice a year such as a new product launch. Maintaining a department big enough to handle this peak work would mean that personnel would be underutilised during the rest of the year.

There might be an unusual event, such as celebrating the firm's hundreth year in business, and this might require extra advertising or public relations to be brought in.

It might even be that the company maintains some external agency on its books just to keep the in-house personnel on their toes. In this case, the external agency would be seen by the in-house group as a competitor rather than a co-operator, and this might not be a good recipe for success.

Dividing the work between two or more agencies

The attractions of using one big all-through or full-service agency are fairly obvious. There is only one external body to deal with and client-agency relationships are much simplified. There is not the problem of co-ordinating the work between agencies as might otherwise arise. There may, additionally, be economies in employing an advertising agency which has its own design department compared with using a smaller agency which, in turn, contracts design work out.

On the other hand, a full-service agency may be like the curate's egg - very good in parts but otherwise not so good. Going for smaller specialist agencies extends the range from which a company can choose and, furthermore, limits the dependency which a client may feel when it has only the one agency. It is never a clear-cut situation.

During a business boom, when money is flowing in, there may be a tendency to go for the one full-service agency and put all the work out. As recession sets in, firms may cut back on their promotional budgets and feel more able to do the work themselves. However, there may be parts of the work, which they might still want to put out. It does, at least, suggest that such decisions may have as much to do with the state of the economy as they do with anything intrinsic to the nature of advertising and promotion. Indeed some commentators suggest that it is little more than a matter of fashion. One year big full-service agencies are in; the next year the vogue is to go for the smaller specialist houses.

Agencies also go out of house

A big agency might have its own design and photographic studios. A smaller agency, needing the work of a photographer, may put the work out to an independent studio. The extent to which an agency may further subcontract work, the way in which it goes about it, and the basis upon which it eventually charges its own clients for the work involved is a matter of some concern and may be an additional factor affecting the choice of agency.

A client company would certainly be well advised to ask about such matters before signing a contract. The more an agency subcontracts the less control the client may have (will it have any influence, for example, on the agency's choice of a designer?). The more the agency marks up the money paid out by it before passing the charge on to its client, the less value for money the client will receive. Agency practices vary enormously from making no mark-up to modest administrative costs to a profiteering 25 per cent.

Approinting and working with an agency

If the decision is made to appoint an agency, the following points should be considered:

Preparing the brief.

Selecting and appointing the agency.

Client-agency relations.

Contractual and financial arrangements.

Preparing the brief

The following comments are fairly general ideas that would be useful in considering a brief for any kind of agency from direct mail to design or advertising to public relations. Advertising briefs are discussed more fully in chapter 10.

The brief is a written statement setting out what the client wants the agency to do. No agency likes to work for a client who does not know what it wants and the ability to write a good brief is crucial - a good agency will help to sort out the brief if necessary. At the end of the day the brief should be something to which both client and agency can commit themselves and it should be a result of discussion and negotiation. It is important for the client to be as open as necessary with the agency. Holding back vital information, which the agency might need is unfair to both sides. The agency is handicapped and the client can not get the best service.

The brief will cover the client's objectives, the time-scale involved and the size of the budget. It would be usual for the client to say how much it is prepared to spend, but the agency may produce good reasons for increasing the budget. It would not be unknown for an agency to decline an account if, in its opinion, the proposed budget was too small to get the sort of results the client was looking for. Finally, the brief might include a statement of the methods or tools to be used: for example, is it to be primarily a television campaign, or will direct mail play the major role? If more than one agency is to handle different parts of a project, then it is a good idea to let each agency see all the briefs and not just its own.

The client should be prepared with the clearest possible ideas as to what it wants. An insufficiently prepared client might find that the better agencies will not want to talk to it; or, what would be worse, the client might be talked into accepting unsuitable proposals by an agency that does not truly understand its needs. The client has a right to approve the brief and must not be afraid to say no. If the client does not like a proposal, the agency must justify it.

Selecting and appointing an agency

First of all, the client should look around to see what is available. The client might approach one of the professional bodies for a list of agencies or look for information in a trade journal such as Campaignor PR Week. A company might find that agencies approach it directly by putting it on their mailing lists or sending a promotional video or a representative.

At this stage, the company should try to match the profiles of the agencies against its own requirements, eliminating unsuitable ones and drawing up a list of the possibles. For example, a major retailer would want to look at agencies with retail campaign experience - some agencies have teams of retail specialists just as others have teams with business-to-business expertise. What sort of experience do they have, what about the people who work for them, what accounts do they currently handle, what accounts have they handled in the past, how long have they been in business, what is the size of their annual turnover or billings - these are all questions that should be asked.




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