Chapter

Promotions Opportunity Analysis

CHAPTER OUTLINE
Promotions Opportunity Analysis
A promotions opportunity analysis is the process by which marketers identify target
audiences for the goods and services produced by the company. There are two objectives.
1. Determine which promotional opportunities exist for the company.
2. Identify the characteristics of each target audience so consumers can be reached
with coherent advertising and marketing communications messages.
There are five steps in developing a promotions opportunity analysis. As shown in Figure
4.1, they are:
1. Conducting a communications marketing analysis.
2. Establishing objectives.
3. Creating a budget.
4. Preparing a promotional strategy.
5. Matching tactics with the strategy.
Communication Market Analysis
Communication market analysis is the process of discovering the organizations strengths
and weaknesses in the area of marketing communication, and combining that information
with an analysis of opportunities and threats that are present in the firms external
environment. This includes examining five areas:
1. Competitors.
2. Opportunities
3. Target markets
4. Customers
5. Product positioning
Competitors
The analysis identifies major competitors. The objective is to discover who the competition
67
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

is, and what they are doing in the areas of advertising and communication.
Make a list of all of the competing firms.
Collect secondary data, from statements made by competitors about themselves
in: advertisements, promotional materials, annual reports, a prospectus for a
publicly held corporation, and Web sites.
Study what other people are saying about the competition.
Analyze the competition using primary research, such as a store visit.
Opportunities
Watch carefully for new marketing opportunities by examining all of the data and
information about the market that is available.
As shown in Figure 4.1, some questions that are helpful in conducting an opportunity
analysis are:
Are there customers that the competition is ignoring or not serving?
Which markets are heavily saturated and have intense competition?
Are the benefits of our goods and services being clearly articulated to our
customers?
Are there opportunities to build relationships with customers using a slightly
different marketing approach?
Are there opportunities that are not being pursued, or is our brand positioned
with a cluster of other companies in such a manner that it cannot stand out?
Target Markets
Target markets are often carefully specified as part of the market segmentation process,
which is discussed in detail later in this chapter.
Customers
There are three types of customers that should be studied:
1. Current company customers.
2. The competitions customers.
3. Potential new customers.
Product Positioning
Positioning is the perception created in the consumers mind regarding the nature of a
company and its products relative to the competition. Positioning is created by:
The quality of products being sold
Prices being charged
Methods of distribution
Image
Communication tactics
68
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Various product positioning strategies are shown in Figure 4.3

Establishing Marketing Communication Objectives
As noted in Figure 4.4, the most common marketing communications objectives that firms
establish are:
Develop brand awareness
Increase product/service category demand
Change customer beliefs or attitudes
Enhance purchase actions
Encourage repeat purchases
Build customer traffic
Enhance firm image
Increase market share
Increase sales
Reinforce purchase decisions
Benchmark measures, which consider a starting point in relation to a degree of change
following a campaign, are useful to IMC programs
Establishing a Communications Budget
Budgeting Assumptions
There are several important budgeting items to consider, including:
Promotional goals
Threshold effects, which occur when enough attention is captured to increase
sales
Carry-over effects, which mean the consumer remembers the product or
company when it is time to buy
Wear-out effects, which means an ad can become old or boring
Decay effects, when a company stops advertising, consumers forget the brand or
the company
Random events, which can disrupt any advertising or promotional campaign at
any time.
The Sales-Response Function Curve, Figure 4.5, displays many of these effects. The decay
effects model is displayed in Figure 4.6.
The concave downward function indicates when further advertising expenditures result in
diminishing returns.
A marginal analysis indicates when further advertising expenditures adversely affect
revenues and profits.
69
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Types of Budgets
The various types of budgets are listed in Figure 4.7.
1. Percentage of Sales Method
a. Sales from the previous year
b. Anticipated sales for the next year
2. Meet-the-Competition Method
3. What We Can Afford Method
4. Objective and Task Method
5. Payout Planning
6. Quantitative Models
The first three are self-explanatory.
The Objective and Task method lists the costs associated with reaching a marketing
objective. It is more difficult but may be useful to more accurately allocate funding.
The Payout Planning methods establishes a ratio of advertising to sales or market share. It
indicates the often the results of advertising are cumulative over time.
Quantitative Models are simulations of relationships between advertising and sales or
profits. They may be difficult to create accurately.
Budgeting Expenditures
In terms of budget expenditures:
Media advertising normally accounts for 40% of a communications budget
Trade promotions receive about 25%
Consumer promotions are given on average about 25%
The final 3-5% goes to other expenses.
There are variances from industry to industry
Business-to-business firms have allocations, which are not the same as
consumer-oriented firms and also vary by industry
Figure 4.8 is a graphic breakdown of marketing expenditures. Figure 4.9 shows those
expenditures in other countries.
Figure 4.10 breaks down advertising expenditures by media. Figure 4.11 breaks them down by
industry.
Preparing Promotional Strategies
Strategies are sweeping guidelines concerning the essence of the companys marketing
efforts. Strategies provide the long-term direction for all marketing activities.
Matching Tactics with Strategies
70
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Tactics are the things companies do to support overall promotional strategies. Tactics
include promotional campaigns designed around themes, which are based on strategic
objectives. Methods used in tactical campaigns include:
Advertisements based on the major theme or a subtheme
Personal selling enticements (bonuses and prizes for sales reps)
Sales promotions (posters, point-of-purchase displays, end-of-aisle displays,
freestanding displays)
Special product packaging and labeling
Price changes
Besides the methods of communicating with consumers and sales reps that offer the
products, companies are able to add other enticements. The items that may be included in
tactical efforts include:
Coupons
Gift certificates
Purchase bonuses (a second product attached to a first)
Special containers (e.g., holiday decanters or soft-drink glasses)
Contests and prizes
Rebates
Volume discounts (larger sized packages, buy one, get one free promotions, etc.)
Market Segmentation
Market segmentation is the process of identifying purchasing groups based on their needs,
attitudes, and interests.
A market segment is a set of businesses or group of individual consumers with distinct
characteristics.
Some of the advantages of market segmentation are listed in Figure 4.12.
For a market segment to be considered a viable target for a specific marketing
communications campaign, it should meet the following tests:
The individuals or businesses within the market segment should be similar in
nature, having similar needs, attitudes, interests, and opinions. This means
persons or businesses within the segment are homogenous.
The market segment differs from the population as a whole. Segments are
distinct from other segments and the general population.
The market segment must be large enough to be financially viable to target with
a separate marketing campaign.
The market segment must be reachable through some type of media or
marketing communications method.
Market segments occur in two general areas: consumer markets and business-to-business
markets.
71
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Market Segmentation by Consumer Groups

Figure 4.13 displays the methods of segmenting the consumer market, including:
Demographics (gender, age, income, ethnic groups)
Psychographics
Generations
Geographic area
Geodemographics
Benefits
Usage
Segments Based on Demographics
Gender
Males and females purchase differing products, buy similar products with
different features (e.g., deodorants for women versus men), buy the same products for
dissimilar reasons (stereos, televisions), and buy the same products after being influenced
by different kinds of appeals through different media.
Age Children, young adults, middle-aged grown-ups, and senior citizens are all targeted
by different types of marketing campaigns. Often age-related factors are combined with
other demographics such as gender. Children have a major impact on the purchasing
decisions their parents make. Another age-based demographic group, which appeals to
many firms, is seniors, defined as individuals over the age of 55.
Income
Spending is normally directed at three large categories of goods: necessities,
sundries, and luxuries. The amount of goods in each category a consumer will purchase is
highly dependent on their income.
Ethnic Groups
The three major ethnic groups in the United States are African
Americans, Hispanics, and Asian Americans.
Although different in many ways, there are several common threads among these ethnic
groups. They all tend to be more brand loyal than their white counterparts. They value
quality and are willing to pay a higher price for quality and brand identity. They value
relationships with companies and are loyal to the companies that make the effort to establish
a connection with them.
Ethnic marketing is similar in some ways to global marketing. It is important to present one
overall message that is then tailored to fit the needs and values of various groups.
Psychographics
Psychographics emerge from patterns of responses, which reveal a persons attitudes,
interests, and opinions (AIO).
72
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Segments Based on Generations

Table 4.1 identifies the characteristics of various generational segments. The idea behind
generational segments is that each generation goes through similar events that create similar
viewpoints and attitudes.
Segmentation by Geographic Area
This method is especially useful for retailers who want to limit marketing communication
programs to specific areas and for companies conducting direct mail campaigns in target
areas.
Geodemographic Segmentation
Geodemographics combines census data with psychographic information. An example
would be PRIZM (Potential Rating Index by Zip Marketing), which is a company that
specializes in geodemographics. PRIZM has identified 62 different market segments in the
United States.
Benefit Segmentation
Benefit segmentation focuses on the advantages consumers receive from a product rather
than the characteristics of consumers themselves. Demographics and psychographic
information can be combined with benefit information to better identify segments.
Usage Segmentation
The goal of usage segmentation is to seek to provide the highest level of service to a firms
best customers although promoting the company to casual or light users.
Many companies are able to identify heavy users by utilizing their own databases, using barcode scanners, point-of-sale systems, and credit/debit transaction cards data.
Business-to-Business Segmentation
Segmentation by Industry
Many firms use the NAICS (North America Industry Classification System) code. The
NAICS code is replacing the SIC (Standard Industrial Classification) coding system.
Firms can target specific industries such as construction (23) or wholesale trade (42). They
can also segment within a specific category.
Segmentation by Size
The rationale for this method is that large firms have different needs than smaller companies
73
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

and therefore should be contacted in a different manner.

Segmentation by Geographic Location
This approach is especially beneficial for businesses that have customers concentrated in
geographic pockets such as the Silicon Valley area of California.
Companies can also use geodemographics, combining geographic areas with demographic
and psychographic data.
Segmentation by Product Usage
Business markets can be segmented by how the good or service is used. Many services
(financial, transportation, shipping, etc.) have a variety of uses for distinct customers.
Segmentation by Customer Value
This method of segmentation is much easier for business-to-business firms to utilize than it
is for consumer businesses, due to the availability of in-depth data about each business
customer. A more precise value can be assigned to each individual business through sales
records and other sources of data and information.
International Implications
Figure 4.15 identifies some of the tactics used by successful globally integrated marketing
communications programs.
Recognizing the many cultural nuances throughout the world is an important key for GIMC
programs. A borderless marketing plan suggests that the firm is going to use the same basic
marketing approach for all of its various markets. At the same time, it allows each
subsidiary the freedom to determine how that marketing plan will be implemented. A
successful GIMC is likely to develop local partnerships to assist in developing borderless
marketing plans. Local partners can be marketing research firms or advertising firms that
are familiar with the local language and culture.
As with domestic markets, segmentation is critical. It is also important to conduct a welldesigned market communications analysis. Marketing managers must identify strengths and
weaknesses of local competitors and places where opportunities exist. They must also
develop an understanding of how their own firms are perceived in the international
marketplace. A cultural assimilator can be of great help in this area.
Solid communication objectives based on an effective market communication analysis will
greatly improve the chances that a GIMC program will be successful. Language, culture,
norms, beliefs, and laws all must be taken into consideration as the GIMC program is being
developed.

74
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

IMPLICATIONS FOR BRAND AND PROMOTION

MANAGERS
(Note to professors -- these materials are not in the text. They provide a method for
you to summarize the chapter in a different way)
Recognize the connection between planning processes and evaluation processes. In other
words, planning should only begin after previous efforts have been reviewed and analyzed.
This would lead the account executive to ask the following questions about previous
marketing communications and campaigns.
What was done right?
What was done wrong?
What are the companys strengths and weaknesses?
Did the last campaign (or previous promotional efforts) change this companys
strengths and weaknesses?
When conducting a promotions opportunity analysis, the account executive should be aware
of the following items:
What the competition is doing (and plans to do, if that can be discovered)
What opportunities are present in the environment
How current company objectives can be integrated into the overall IMC
approach
What kinds of promotional strategies are in place
Alternative tactics that will help support the companys strategies
As potential new market segments are being examined, consider the following criteria.
Contribution to sales
Contribution to profits, including how much should be spent in order to induce
sales and revenues from the segment
Potential for growth of the segment
Potential to build company and brand loyalty in the segment
Potential for competition from other firms seeking to capture the same segment
The ability to match the firms message to the particular attitudes and needs of
the segment
The possibility of combining segments or designing similar appeals to segments.
Other short- and long-term implications of designing promotional efforts toward
the segment
Appraise global markets using the same criteria as were used for local target markets.

REVIEW QUESTIONS
1.

What is a promotions opportunity analysis? Why is it a critical part of a

75
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

companys marketing effort?

A promotions opportunity analysis is the process by which marketers identify target
audiences for the goods and services produced by the company. It is important to
companies because it gives an idea of who buys company products, which allows
the company to market to a particular group.
2.

What are the five parts of a promotions opportunity analysis planning

process?
The five parts in the promotions opportunity analysis are:
1. Completing a communications marketing analysis
2. Establishing objectives
3. Creating a budget
4. Preparing a promotional strategy
5. Matching tactics with the strategy

3.

What common marketing communications objectives do firms establish?

The most common marketing communications objectives that firms establish are:
Develop brand awareness
Increase product/service category demand
Change customer beliefs or attitudes
Enhance purchase actions
Encourage repeat purchases
Build customer traffic
Enhance firm image
Increase market share
Increase sales
Reinforce purchase decisions

4.

Name and describe the types of communications budgets. Which is best? Why?
The types of communications budgets are:
Percentage of sales method, which uses a percentage of the previous years sales
and a projection of the coming years sales.
Meet the competition, which is designed to prevent a loss of market share.
What we can afford, which establishes the marketing budget after all other
budgets have been set.
Objective and task method, which allows management to set goals and ways to
achieve those goals through marketing dollars.
Payout planning, which establishes a ratio of advertising to sales or market share
based on Nielsen ratings.
Quantitative models, which uses computer simulation models to locate
relationships between advertising and promotional expenditures and sales or
profits.
76
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Students should probably answer that the objective and task method is the best
because it relates dollar costs to achieving specific marketing objectives.
5.

What is a strategy? Give an example of a promotional strategy.

A strategy is defined as sweeping guidelines concerning the essence of the
companys marketing efforts. An example of a promotional strategy would be Nike
trying to market to the physically fit, sporty individuals (student answers will vary).

6.

What are tactics? How are they related to strategies?

Tactics are the activities companies perform to support overall promotional
strategies. They are related to strategies because they support the overall theme or
message of the company through short-term promotional actions.

7.

Define demographics. How are they used to segment consumer markets?

Demographics are population characteristics. They are used to segment markets by
differentiating consumers by certain characteristics such as gender, age, education,
income, race or ethnicity, and psychographic information.

8.

How can firms take advantage of target markets by gender?

Firms can take advantage of target markets by gender because it is easier to identify
buyer characteristics. There are differences in buying patterns, products used, and
personal preferences of both genders.

9.

What generational cohorts have marketing experts identified?

Marketing experts have identified the following generational cohorts: Generation Y,
Generation X, Younger Boomers, Older Boomers, Empty Nesters, and Seniors.

10.

What problems are associated with segmented markets by geographic areas?

The main problems associated with segmenting the market geographically are that
everyone in the geographic area is targeted, with no focus on personal preferences or
individual differences.

11.

What are geodemographics? Why have they been so successful in defining

marketing segments?
Geodemographics is a combination of using census data with psychographic
information. This approach can be successful because marketers can conclude that
people in certain areas tend to have the same basic needs. Geodemographics
segmentation goes a step further by suggesting common personal preferences in
77
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

individual geographic areas.

12.

Describe usage segmentation and benefit segmentation.

Usage segmentation is defining the market by usage or purchases. It is designed to
maximize sales to all user groups. Companies then gather information from their
most frequent customers and form their own database of customers describing their
wants and needs.
Benefit segmentation is focusing on the advantages consumers receive from a good
or service rather than the characteristics of consumers themselves. Companies use
this technique to understand the preferences of different groups of consumers.

13.

What are the common business-to-business market segmentation concepts?

The common business-to-business market segmentation concepts are by industry,
business, and size. Segmentation by industry is utilizing the NAICS codes to
identify a companys potential of being a quality customer.

14.

Describe the NAICS approach to segmentation.

The NAICS approach to segmentation is using the companys business code to
decipher what products the firm will need or purchase. It is better than the old SIC
code because it broadens the product categories from 10 to 20. This allows for a
more precise classification of businesses.

15.

Describe a usage segmentation approach in a business-to-business setting.

An example of a usage segmentation approach in a business-to-business setting
would be that although Xerox markets to most businesses, the company pays extra
attention to schools, because these organizations utilize so many copiers, allowing
for both sales and service contracts. (Student answers will vary.)

16.

Describe a segmentation approach based on company size.

A segmentation approach based on company size would target companies within a
certain range. For instance, an advertising agency may target firms that have sales
from $3 million to $20 million. Another agency may target the small firms, with
incomes less than $3 million. Another agency may go after extremely large
international firms, with sales over $1 billion.

17.

How does the idea of a promotions opportunity analysis fit with a GIMC
program?
The promotions opportunity analysis process must be taken into consideration when
the GIMC program is being developed. Laws concerning marketing and advertising
78
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

are different in each country. Effective marketing occurs when the companys
marketing team is aware of these differences when creating a marketing approach
tailored to markets identified in individual countries and the competitors in those
countries.

CRITICAL THINKING EXERCISES

Discussion Questions
1.

For each of the following goods or services, identify the various benefits that
consumers may derive when buying them. Does the advertisement or any other
element of the IMC use this benefit as the central part of its appeal?
a. AXA life insurance
b. Dulux paints
c. Tourism Malaysia
d. Panadol or any other brand of paracetmol
Benefits include peace of mind for AXA, intrinsic and extrinsic benefits for Dulux
e.g. personally feeling nice at home and showing off to friends, relaxation for touring
Malaysia, and getting rid of a headache and feeling better for Panadol.

2.

Gather marketing information on five hotel brands. Perform a competitive

analysis on these five branded hotels. Determine how they differ in terms of their
product/service, including their star rating, rooms, restaurants, unique features,
and other services and facilities. What types of promotional appeals and special
offers does each hotel brand use?
Students could get information from ads, brochures, websites or on their visits to any
of the hotel brand, and then come up with a matrix. A collection of promotional
material i.e. ads from magazines, DVD tapes of the hotels ads, brochures can bring
life to the discussion.

3.

Marketers recently have been targeting older consumers. These consumers have
more disposable income than younger consumers, and they are ready to spend
their money. In 2005, 96-year-old Irene Sinclair became the new face of
Unilevers Dove soap on billboards in London, New York, and Paris. Identify
five consumer goods or services that are segmented based on older consumers.
Discuss these products and services in terms of the benefit offered, the message
strategy, and the advertisement campaign.
One such product is Nivea Vital targeted to the 50+ woman this text comes with a
79
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

DVD which illustrates this. It would be a good idea to show this during this session.
4.

The romantic comedy The Holiday created a boom in the online home-swap
business. Visit HomeExchange.com (www.homeexhange.com) to learn more
about this rather new and unique product. If you were the marketing manager
of a home-exchange business, what would your primary target market be? What
benefits would this target market be looking at? Do you think this form of
accommodation is likely to grow into the future?
Young and educated, long stay traveller. Benefits would be saving accommodation
money, a relaxed experience staying at home away from home and not a hotel. Very
likely do an investigation and come up with statistics.

INTEGRATED LEARNING EXERCISES

1.

Adage.com provides the latest ad agency news and account news. Go to the
Web site at www.adage.com. Scan through the news articles about
advertising, accounts, and ad agencies. Pick two that interest you and write a
short summary report about the contents of each article.
Student answers will vary based on the articles they select.

2.

For consumer markets, a leading geodemographic firm is Claritas. Go to the

Web site at www.claritas.com and explore the various methods of
segmentation. What information does Claritas provide? How would it help a
company develop an integrated marketing communication plan?
Claritas offers "precision marketing tools" that cover customer segmentation
systems, geodemographic solutions, enhanced and updated census data, consumer
and business data, and market analysis and site selection page. Each could be used
as part of a promotions opportunity analysis program.

3.

Values and lifestyles (VALS) psychographic segmentation can be a valuable

tool for marketers as they prepare their marketing materials. Access VALS2
on
the
Business
Intelligence
Center
Web
site:
www.sricbi.com/VALS/presurvey.shtml. Once at the VALS site, examine the
characteristics of each of the groups. Then take the test to determine which
group you belong to. How can VALS2 help marketers develop advertising
messages?
Students will receive different group locations based on their answers. VALS2 can
then target the individual groups with more specific messages.

4.

A current trend for many companies is the development of marketing

messages for specific demographic, ethnic, or lifestyle group. This allows for
a more targeted message than is possible for the mass audience. Go to the
80
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

following Web sites. What types of marketing messages are on each site? How
could the information on these Web sites be used to develop integrated
marketing communication plans?
a.
b.
c.
d.

Women (www.iVillage.com)
Hispanics (www.hispaniconline.com)
African Americans (www.targetmarketnews.com)
Gays and lesbians (www.planetout.com)

iVillage features sections on beauty and style, health and well-being, diet and
fitness, love and sex, pregnancy and parenting, house and home, entertainment, and
magazines.
Hispanic Online.com has sections on arts and entertainment, politics and opinion,
lifestyle, business and finance, a career center, technology, education, research and
resources, and sports.
Targetmarketnews.com has a wide list of media featuring black performers and
participants.
PlanetOut.com offers personals, shopping, entertainment, news, and other topics
including money and careers, families, health and fitness, living, pride, romance and
dating, and travel.
5.

Choose one of the following Internet companies. Examine each company's Web
site to determine what segmentation strategy the firm uses. Describe the
intended target market for the Web site. Using Figure 4.3 as a guide, what
communication objective(s) do you think the company is trying to accomplish?
a.
b.
c.
d.

Sports Spectrum Greeting Cards (http://wwwsportsgreeting cards.com)

Ty Beanie Babies (http://www.ty.com)
Sara lee (http://www.saralee.com)
Dr. James R. Romano (http://www.jromano.com)

Answers will vary depending what is on the Web site at the time the students access
them.

Student Project: Creative Corner

This exercise is designed to help students create ads for DIRECTV using the VALS2 typology
of segments.

CASES
81
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Case 1
(1)

Burger Wars
Conduct a communication marketing analysis for one of the following:
McDonald's, Burger King, Sonic, Wendy's, or Hardees.
Student responses will vary depending on which chain is chose and which approach
they decide to take.

(2)

Besides children, identify the target markets that are best suited to each of the
following: McDonald's, Burger King, Sonic, Wendy's, or Hardees.
Some potential answers include business people for lunch, people close to the unit
(geographic), mothers with children, vacationers, and others.

(3)

What types of promotional budget should each major competitor use?

Student answers will vary. The smaller chains would have a hard time with meet the
competition.

(4)

Base on the information in this chapter, how would a company like Hardees or
Carl's Jr. (which owns Hardees) compete effectively against McDonalds? What
type of communication strategy and budget would work best?
Student answers will vary. The companies could focus on specific market segments,
such as older males, sports fans, or some other category. An objective and task method
could be used to reach these specific segments.

Case 2
(1)

Its Not A Burqa Or A Bikini: Its A Burqini

Perform a promotions opportunity analysis for the Burqini.
For this question the answer lies in a discussion on conducting a communication
market analysis, then establishing a communication obkective, followd by
promotional strategies and tactics.

(2)

Identify the market segments that Aheda Zanetti must maintain. What
secondary segments can she attract? (Think of some not mentioned in the case.)
Females between a certain age group that belong to the Muslim religion and other
religions and cultures that have a strict code of dress for females e.g. Orthodox Hindus
and Jews. As the case mentions burn victims, athletes, and swimmers.

(3)

Describe ways that Zanetti can reach key market segments effectively in your
country.

82
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

This is country specific but Answer 2 could be a good guide.

(4)

Will the company be successful if it takes the business online, targeting and
marketing the product online?
Certainly since conservative and orthodox females prefer shopping for personal
products online. May be other views that for personal items such as clothes online may
not be an ideal channel.

BONUS CASE
COMMERCIAL CONSOLIDATED
John Mulvaney had been a marketing account manager for many years. He left a private
firm to take a position at a local bank, Commercial Consolidated. Bank officials
concluded that because the marketplace for financial services had become so competitive,
they needed an on-staff marketing executive to continually fine-tune the banks
advertising program. The companys headquarters were in Johns hometown, only 12
blocks from his house. John saw the opportunity to make a lifestyle move while staying
active in his chosen profession.
Once he was settled in, the first issue John pursued was a promotional analysis,
focusing on various customers. His research indicated that in most banks, 10 percent to
20 percent of the small-business accounts yielded 80 percent to 90 percent of the banks
profitability. Upon being informed of this statistic, bank officials set the goal of moving
some of the small businesses within the 80 percent that was not currently profitable to
become more like the 10 percent to 20 percent.
John told the banks leaders that he wanted to pursue a customer valuation
83
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

segmentation approach, assigning each business a value related to the banks level of
profitability. To illustrate how this segmentation method works, John described the ways
banks could market to small businesses. He noted that the first step in customer value
segmentation is to identify the drivers that impact each business customers profitability
potential. For a bank providing financial services to small businesses, the primary value
drivers are:

Deposit balances wherein interest and other revenues exceed requirements for
servicing the account.

Consistent fee income from sundry banking and financial services.

Efficient lending practices emphasizing underwriting, approval, and processing of

profitable loans.

Targeted customer development focusing on building relationships that would lead to

profitable transactions between the bank and the small business.

Sales and service delivery programs that match the banks profitability goals.

John told Commercial Consolidateds management team that not all customers have
the potential to be highly profitable accounts. He noted that by segmenting its small
customers into customer value clusters, the bank could design different marketing
programs for each segment to maximize effectiveness while minimizing marketing costs.
He suggested putting a greater marketing effort into an account with high profitability
potential than into one with low potential for profitability.
The marketing team decided to segment various small-business customers along
several dimensions. Codes placed in each customers data file allowed for easy clustering.
The team used seven characteristics to code the banks small-business customers.
84
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Account managers were given the following instructions for each account and its
particular characteristics:
Value segment. Code the account based on how profitable it has been over the last 12
months. Codes range from highly profitable to unprofitable.
.Long-term

value segment. Code the account based on profitability potential for the next 5

years.
Industry growth potential segment. Code the growth potential of the industry in which the
firm operates, from high-growth industry to negative anticipated growth.
Industry position segment. Relative to the industry, code the size of the firm from large to
small within the same industry.
Transaction frequency segment. Code the business customers from high to low based on
frequency of transactions with the bank over the past 6 months.
Product propensity segment. Code the business customers based on their propensity to
purchase a 401(k) plan with the bank. This code would be based on the firms size
and growth characteristics, from high potential for a 401(k) to low potential.
Creditworthiness segment. The code indicates the businesses relative credit risk.
This coding system allowed the bank greater flexibility in designing its marketing
program. The codes identified customers with the highest profit potential based on these
factors.
Commercial Consolidateds overall theme had always been focused on its
hometown bank image. Advertisements and other promotions restated the message that

85
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

dollars invested locally were more valuable to the community than those shipped to the
home office of a competitor in another city or state.
Using this technique, a bank could assign customers to clusters based on loan usage.
Another set of clusters could be developed for investment services. A bank could develop
many different clusters with customers assigned to clusters based on their purchase
behavior of that particular type of service.
From there the bank generated an aggressive marketing program including
advertising, direct-mail pieces, and some personal visits to companies with high profit
potential. Customers with a medium level of transaction frequency could be targeted to
increase their transactions with the bank if their potential was high. The bank aimed the
direct marketing program at its top 20 customers; advertising was designed to reach the
next 100 customers (in terms of profit potential); and the remainder of the firms
advertising funds were spent on brand awareness commercials.
Next, individual consumers were segmented and targeted. The bank was most
interested in increasing use of their highly profitable consumer credit card. To do so, it
needed to understand the usage of the credit card. The banks customer cluster analysis
identified the following seven clusters:
1. The

uncommitted. The newest users of the credit card, these individuals tended to use

the card infrequently and make relatively small purchases. This cluster primarily
consisted of retired persons and individuals with low incomes.
2. Convenience

users. These customers used their cards frequently and normally paid

off their balances at the end of each monthly billing cycle. This cluster tended to have
86
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

below average assets and slightly less than average household income.
3. Starting

out. This cluster was predominantly young adults with lower than average

incomes and low assets. They tended to have high purchases and carry moderate to
high balances on their cards.
4. Channel

shoppers. Consisting of older cardholders, these individuals had the highest

income levels and were primarily females or married couples. This cluster had a low
level of delinquency, low service charges, and moderate card activity.
5. Credit

addicts. This group had the longest tenure of cardholders in the bank. They had

the highest credit limits, the greatest spending, and the highest payments due each
month. This cluster was of average age with above average income.
6. Cash

driven. As the cash-hungry cluster, these individuals tended to pay off account

balances slowly, had moderate credit limits, and used the card frequently to garner
cash advances. This cluster generally included younger males and other singles with
low assets.
7. Borderline.

The youngest of the clusters with the lowest card activity, these

customers had a high delinquency rate and had low incomes.

Using the cluster information, the bank sought to expand revenues by targeting
current customers. They developed specialty marketing communication pieces for each
cluster. Based on the demographic and psychographic information from each cluster,
marketing pieces were designed to elicit responses. This clustering information helped the
bank prevent customer defections to the competition by meeting the needs of each
individual segment. To maximize the success of the program, the firms marketing team
87
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

made sure that the correct services were matched with customer needs. This information
was used to focus media and advertising strategies creating specific messages for specific
customers.
Within a few months, bank profits had risen significantly. John received a healthy
raise and concluded he had made a wise choice in moving to this particular organization.

(1)

Explain how the steps of a promotions opportunity analysis are present in

this case.
To explain the steps of a promotions opportunity analysis present in the Commercial
Consolidated case, the companys strengths and weaknesses were examined and a
response was formed. This completed the communications marketing analysis part
of the plan. Setting the objectives was accomplished by differentiating customers.
The company established objectives and a budget was set to support the objectives.
By preparing a promotional strategy targeting different customer groups, the
company tried to generate growth in those individual segments. The overall strategy
was to target customers based on segments, so tactics would be to offer different
promotions geared toward the different groups, advertising differently, and many
others matched the tactics with the strategy.

(2)

Explain why John and Commercial Consolidated were so successful.

Commercial Consolidated was successful because John successfully identified
markets for Commercial Consolidated and he used promotions to target these
specific markets. This helped the company get the best return out of their
investment.

(3)

Based on information in this case, design a business-to-business print

advertisement offering local businesses loans or investment services.
Where should the ad be placed? Why?

Student answers will vary. Advertising messages should show how the bank could
meet the needs of various businesses.
(4)

Choose one of the credit card customer clusters listed in the case. Design a
print advertisement to reach this group. Where should the print ad be placed?
What other marketing tools could be used with the print advertisement?
Student answers will vary. They could show elderly people using the credit (debit)
88
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

card in a senior citizens magazine. An informative commercial aimed at young

people could talk about using credit responsibly in teen magazines.

89
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall