Elements of a Promotion

You should not confuse a planned promotion with a simple distribution of specialties. Promotions require considerable forethought and work and, consequently, they are likely to be much more productive. Promotions are composed of a number of elements:

Establishing objectives

Defining target audiences

Adopting a distribution method

Developing a theme and copy

Selecting the appropriate specialties

Implementing the promotion

Evaluating the results

Objectives. No one advertises without a reason and an expectation of accomplishment. However, sometimes the reasons and the expectations are not clearly understood and stated. Unless you set forth at the beginning realistic objectives, consistent with your budget, you become a traveler embarking on a trip without any conception of how or where you're going.

Target audiences. These are the prospects for your business. Sometimes they are qualified on the basis of probable use of your products or services: heavy users and light users. Greater promotional weight may then be applied to the heavy users' group that will produce more revenue for your business. You may recall the adage that 80 percent of a firm's business comes from 20 percent of its customers.

Distribution method. advertising specialties are distributed to the targeted prospects in a number of ways: over the counter in the advertiser's place of business; by a second party whose business is related in some way to the advertiser or its customers; by direct mail solicitation; and by sales people calling on prospects.

Proper attention to distribution is essential, because the promotion will fail if the specialties don't reach the right people.

Theme and copy. The theme is what gives a promotion an identity, ties it together and makes it memorable. The copy that appears on the specialties and the accompanying product or service literature should relate to that theme. If you are mounting a full-fledged campaign involving other media, be sure you coordinate the specialties with the over-all campaign theme.

Selection of advertising specialties. This is a key element that should not be slighted. It involves much more than examining a couple of catalogs and choosing a specialty that catches your eye.

In making your selection, you must first, of course, consider your budget. Suppose you've allocated $1,000 to purchase specialties and you have in mind a target audience of 1,000 persons. This means your choice is limited to specialties costing no more than $1 apiece. If you think a higher-ticket item will be more effective, you can reduce your intended target audience to, say, 250 persons, thus allowing for a $4 item. Another alternative is to increase your budget. You can also make a stratified distribution, whereby the higher priced specialties are directed to the best prospects and the lower-priced items are distributed to lesser prospects.

The next thing to be examined is the desired audience reaction. If you are simply trying to get noticed, an attention-getter is required. This can be anything from a balloon or novelty item like the giant Styrofoam We're Number One fingers. On the other hand, if you want to be remembered over a period of time, choose a specialty that is more useful and practical and, hence, more likely to be retained by the recipients.

Your distribution method must be considered, too, when you select specialties. For example, if you intend to mail the specialties to your target audience, you should either consider the weight and size of the articles or add to your postage budget.

Whenever possible, the specialties should be related in some way to your product or service, to your target audience, or to your promotion theme. This is why optometrists often use packets of eyeglass lens tissues to promote their practices and why auto dealers give key-tags to prospective car buyers. The association between the specialty and the advertiser or the item and the audience usage has the effect of triggering audience recall.

Implementation. This is the point where the promotion strategy is executed. It involves not only distributing the specialties to the target audience but also securing whatever information and cooperation is needed to make the promotion work. Examples of implementation will be described in the next section covering typical promotion objectives.

Evaluation. This is something that is often ignored because it is either impractical in relation to the promotional investment or because the response is difficult to measure. Yet whenever possible, business owners should try to get a reading on the promotional efficiency of all media they use because it helps them determine whether the promotion should be repeated, revised or discontinued and whether or not the budget is sufficient. Promotions employing a direct mail solicitation, for example, are easy to measure. All you need to do is make a split-run mailing in which half the audience gets the specialty and product literature and the other half gets only the literature. Then you compare the response rates between the two audience segments.

Typical Promotional Products Objectives

There are hundreds of applications for promotional products. These are some of the most frequent uses by small businesses:

Celebrating grand openings or special events

Building store traffic

Developing or qualifying business leads

Promoting image and maintaining customer goodwill

Introducing new products and services

Opening doors for salespeople

Grand openings and special events. Whether a business is brand new in town or has been around awhile, it needs to make prospects aware of its existence. One of the best ways is to bring prospects to the establishment so they can see for themselves what the firm's . capabilities are.

Example: Management of a welding and metal fabricator wanted a large turnout at its open house and wished to assure that guests saw every phase of production. The invitation promised each guest an unidentified gift for attending. In addition, prizes were to be awarded at random. Since it was impossible to give each guest an escorted tour, prize stations were set up in each work area. Guests were given their gift, a pewter letter opener embossed with the advertiser's logo, and an itinerary showing the prize stations. At each station was an RFD-type mailbox containing an envelope that could be slit with the letter opener. The message inside indicated if guests had won a prize or should try their luck at the next station. Of the 797 persons invited, 575 attended and toured the entire facility.

Before opening your business you Need to decide upon the general Cost Level you expect to maintain. Will you appeal to individuals
buying in the large, medium, or low budget? Your choice of location, appearance of your institution, quality of merchandise
handled, and solutions to be provided will all depend on the clients you would like to attract, and so will your costs.

After establishing this overall price level, you are ready to cost Individual products. In general, the price of an item has to
cover the price of this product, all other costs, and a profit. Therefore, you'll have to markup the item by a specific sum to
cover costs and earn a profit. In a company that sells few things, total prices can readily be allocated to each item and a markup
quickly ascertained. With a variety of things, allocating costs and determining markup may need an accountant. In retail
operations, products are often marked up by 50 to 100 per cent or more simply to earn a 5 percent to 10% gain!

Let's work through a markup example. Suppose your company sells 1 product, Product A. The supplier sells Product A to you for
$5.00 each. You and your accountant decide the prices involved in selling Merchandise A are $4.00 per item, and you want a $1 per
item profit. What is your markup? The selling price is: $5 and $4 and $1 or $10; the markup consequently is 5. As a percent, it's
100%. So you need to markup Merchandise A by 100% to make a 10% profit!

Many small business managers are interested in understanding what Industry markup standards are for a variety of products.
Wholesalers, distributors, trade institutions and company research firms publish a huge assortment of these ratios and company
statistics. They're useful as guidelines. Another ratio (along with the markup percentage) significant to small businesses is your
Gross Margin Percentage.

The GMP is comparable to your markup percent but whereas markup Identifies the percent over the cost to you of each product that
you must set the selling price in order to cover all other costs and make profits, the GMP shows the association between sales
revenues minus the expense of the product, which can be your gross profit margin, along with your sales revenues. What the GMP is
telling you is your markup bears a certain relationship to your sales revenues. The markup percentage and the GMP are basically
the exact same formula, together with the markup speaking to individual product pricing and GMP referring to this product prices
times the number of items sold (quantity ).

Maybe an illustration will clarify the point. Your firm sells Product Z. It costs you .70 each and you choose to sell it for $1
per cent to cover costs and gain. Your markup is 43%. Let up state you sold 10,000 Product Z's Last month hence producing $10,000
in revenues. Your price to buy Product Z was $7000; your gross margin was $3,000 (revenues minus cost of products sold).
Additionally, this is your gross mark for the month's volume. Your GMP will be 30%. Both of these percentages use the exact same
basic amounts, differing just in branch. Both are utilized to set up a pricing system. And both are published and may be used as
guidelines for small businesses beginning out. Often managers determine what Gross Margin Percentage they'll need to earn a profit
and simply visit a printed Markup Table to find the percent markup that correlates with that margin requirement.

While this discussion of pricing might seem, in some respects, to Be directed only to the pricing of retail merchandise it could
be applied to other types of companies as well. For solutions the markup has to cover administrative and selling costs as well as
the immediate cost of doing a particular service. If you're producing a product, the costs of direct labor, supplies and
materials, parts purchased from other concerns, special tools and equipment, plant overhead, selling and administrative expenses
must be carefully estimated. To calculate a price per unit requires an estimate of the amount of components you plan to produce.
Before your factory becomes too big it would be smart to consult a lawyer in a cost accounting system.

Not all items are marked up from the typical markup. Luxury articles Will require more, staples . For example, increased sales
volume by a lower-than-average markup on a specific thing - a"loss leader" - may bring a higher gross profit unless the price is
lowered too much. Then the resulting increase in sales won't raise the entire gross profit enough to compensate for the low cost.

Sometimes you Might Wish to market a particular item or service at a lesser Markup in order to boost store visitors with the
expectation of increasing earnings of Regularly priced merchandise or generating a large number of new support contracts.
Competitors' costs will also regulate your prices. You cannot market a Product if your competition is greatly underselling you.
These and other reasons Can make you change your markup among items and solutions. There is no magic Formula which will work on
each item or each service all the time. However, You ought to keep in mind the general average markup which you need to generate a
Profit.

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