Proposed Marketing Budget: $3.3M

1. Does Natureview Have the Marketing Capabilities & Resources Required to Enter the 6-8 oz Supermarket Market? Proposed Marketing Budget: $3.3M /2.9% Share  $1.1M/Share Point Danon & Yoplait spend >: $120M /57% Share  $2.1M/Share Point Natureview’s Projected Share of Supermarket Market: ~ 2.9%

2. Does Natureview Have the Marketing Capabilities & Resources Required to Enter the 32 oz Supermarket Market? Proposed Marketing Budget: $1.5M /.9% Share  $1.7M/Share Point Danon & Yoplait spend >: $120M /57% Share  $2.1M/Share Point Natureview’s Projected Share of Supermarket Market: ~ .9%

3. Does Natureview Have the Marketing Capabilities & Resources Required to Take 68% Share of the Multipack Natural Foods Market? Proposed Marketing Budget: $250K /11% Share  $23K/Share Point Current Marketing Spend: $360K /24% Share  $15K/Share Point Natureview’s Projected Share of NF Market: ~ 11%

4. Natureview Key Takeaways • The value of identifying competitive advantage for the focal company, key competitors, and key downstream collaborators. In other words, understanding competition at each level in the channel. • The value of identifying stage of the life cycle for each product-market. • The value of identifying the key capabilities required to achieve competitive advantage in each product-market. • The value of identifying gaps between current capabilities and capabilities required to achieve success in new product-markets. • The value of questioning the face validity of sales forecasts.

5. Integrated Marketing Communications Key Learning Points • Basic model of communication and how technology is changing that model. • IMC Strategy • Target Audience(s) & Communication Objective(s) • Communications Mix, Message & Media • Communications Budget • Evaluation & Control Doubt everything or believe everything: these are 2 equally convenient strategies. With either we dispense with the need for reflection. Henri Poincare

6. Traditional Mass Marketing Communication Model

7. Mass Communication Model with Interactive Media

8. The Social Media Process

9. If Twitter is a never-ending barrage of babble and nonsense, does it really matter?

10. Integrated Marketing Communications Strategy • Select Target Audience(s) & Communication Objective(s) • Flows from marketing strategy but may include noncustomer targets (e.g., influencers) • Identify information requirements: what, where, when • Customer response, sales or profit objectives • Models are all hierarchical and have three basic stages: cognitive, affective, and behavioral. • Select the Communications Mix, Message & Media • Based on product-market characteristics, communication objectives, organizational capabilities & channel considerations • Consistent concept and message across the communications mix • Establish & Allocate the Communications Budget • Percentage of sales; Competitive-parity; Objective & task • Evaluation & Control

11. K&P Purchase-Process Model Awareness Consideration Preference Purchase Repurchase

12. Flare’s Communication Strategy for Savvy For example: “You are the love in Loveliest”

13. McKinsey Word-of-Mouth Marketing Experiential (50-80%); Consequential; Intentional (e.g., celebrity)

14. Introducing Socialnomics 78% of consumers trust peer recommendations Only 14% trust advertisements Influentials typically generate three times more word-of-mouth messages than noninfluentials do, and each message has four times more impact on a recipient’s purchasing decision. About 1 percent of these people are digital influentials—most notably, bloggers—with disproportionate power. McKinsey Word-of-Mouth Marketing

15. Integrated Marketing Communications Strategy 2. Select the Communications Mix, Message & Media • Based on product-market characteristics, communication objectives, organizational capabilities & channel considerations • Advertising & social media usually line up with intermediate (i.e., cognitiveor affective) customer response objectives • Select media & vehicles that “fit” & reach target audience(s) • Publicity & PR typically have advertising-type objectives but may quantify them as media-buy objectives (e.g., generate $xxx worth of media exposure). • Sales promotion, direct marketing & personal selling typically have behavioral (i.e., sales and profit) objectives • Consistent concept and message across the mix • Informational/Rational Appeals focus on functional or practical aspects of the product & feature a unique selling proposition. • Emotional Appeals address underlying psychological aspect of purchase decision using Humor, Fear, Guilt, Sex to enhance recall & brand liking.

16. Integrated Marketing Communications Strategy 2. Select the Communications Mix, Message & Media • Based on product-market characteristics, communication objectives, organizational capabilities & channel considerations • Advertising & social media usually line up with intermediate customer response objectives • Select media & vehicles that reach target audience(s) • Publicity & PR typically have advertising-type objectives but may quantify them as media-buy objectives (e.g., generate $xxx worth of media exposure). • Sales promotion, direct marketing & personal selling typically have sales or profit objectives • Consistent concept and message across the mix • Informational/Cognitive Appeals focus on functionalor practical aspects of the product & feature a unique selling proposition. • Emotional Appeals address underlying psychological aspect of purchase decision using Humor, Fear, Guilt, Sex to enhance recall & brand liking.

17. Designing Cognitive Ads Comparative ad • Brand and competitive brand are mentioned • Usually not done by market leaders • e.g., Coke may not mention Pepsi, but Pepsi mentioned Coke in its “Pepsi Challenge”

18. Designing Emotional AdsHumor Marketers tend to build campaigns around emotional positioning, yet we found that consumers actually tend to talk—and generate buzz—about functional messages. McKinsey Word-of-Mouth Marketing

20. Designing Emotional Ads • Image ads • Are more abstract; used to convey an image • Great for positioning

21. Integrated Marketing Communications Strategy 3. Establish the Communications Budget • Competitive-parity: Same $ level as key competitors • Percentage of sales: Same % as key competitors • Objective & task: How do you achieve the objectives? • Consideration, preference, (re)purchase Allocate to Communications Mix & Specific Media • Advertising & Social Media (usually part of a Pull Strategy) • Cost per thousand (CPM), reach, frequency & gross rating points (GRPs), ratings, awareness, and circulation data… • Personal Selling (usually part of a Push Strategy) • Number of customers, frequency of contact, length of call, sales • Direct Marketing & Sales Promotion • Response rates, purchase rates, purchase dollars…

22. Impact of Phone Contacts on Spending

23. Impact of Email Contacts on Spending

24. Impact of Mail Contacts on Spending

25. Impact of Different Combinations on Spending

26. Integrated Marketing Communications Strategy 4. Evaluation & Control • Objective Guarantees • Marketing Mix Modeling • ST revenue elasticity wrtadvertising = 22% • LT revenue elasticity wrt advertising = 41% • LT carryover effects. • NB: elasticitieswrt advertising are dropping! • Tracking success over time • If possible, sales, inquiries, repeat purchases or other behavioral measures • If not… • Top-of-mind awareness (unaided recall) • Aided recall

27. Cumulative Ad Spending and Market Share

28. Loveliest ('75) Summit ('98) Essential ('00) What is demand (or revenue) elasticity with respect to Media Spend? Swept Away ('03) Awash ('96) Natural '06

29. Revenue Elasticity wrt Promotion % change in demand (or revenue) E = % change in promotion spend Media $D from $0.51 (SweptAway)$1.44 (Essential) (37.5-23.4)/23.4 EMedia$ = = .33 (1.44-.51)/.51 Media $D from $1.44 (Essential)  $2.72 (Summit) (50.1-37.5)/37.5 EMedia$ = = .38 (2.72-1.44)/1.44 • ST revenue elasticity wrt advertising = 22% • LT revenue elasticity wrtadvertising = 41% See Demand Elasticity Final Exam Problem

30. Loveliest ('75) Summit ('98) Essential ('00) Swept Away ('03) Why is it different for new products (Natural & Savvy?) versus established products? Awash ('96) Natural '06

31. Flare This case requires that you analyze different growth opportunities and develop recommendations – supported by clear and compelling strategic and financial analyses – that will allow you to achieve your sales growth objective. You must consider positioning, branding strategy, channel strategy, and especially the integrated communications strategy. Summary Marketing Strategy for 3 brands Flare’s competitive advantage is Based on:

32. Review Questions • Identify the 4 key steps in an Integrated Marketing Communications Strategy. • Identify the three key stages (or objectives) in a hierarchical response model. • Which communication mix elements are most effective for achieving different communication objectives? See you in Plano Next Week!