INCREASING THE EFFECTIVENESS OF DUTY-FREE BUSINESS THROUGH DIVERSIFYING MARKETING STRATEGIES AT NOIBAI AIRPORT SERVICES JOIN-STOCK COMPANY

This chapter is concerned with some basic information about DFD, NASCO, duty-free shop formation of duty-free business in the world in general and in Vietnam in particular, and concepts of duty-free. Besides, readers will have detail introduction of problems related to the study, scope of the study, research questions, methodologies and methods of data collection.

ENGLISH FOR BUSINESS DEPARTMENT

FACULTY OF FOREIGN LANGUAGES

Hanoi, 05/2010 NATIONAL ECONOMICS UNIVERSITY

ENGLISH FOR BUSINESS DEPARTMENT FACULTY OF FOREIGN LANGUAGES

AT NOIBAI AIRPORT SERVICES

Rationale of the study

Scope and focus of the study

Research questions

Methodology

Structure of the report

CHAPTER 1 INTRODUCTION OF NOIBAI AIRPORT SERVICES JOIN-STOCK COMPANY, DUTY-REE DEPARTMENT, DUTY-FREE SHOPS, THE FORMATION AND CONCEPTS OF DUTY-FREE BUSINESS

1.1 Introduce NoiBai Airport Services Join-Stock Company (NASCO),

Duty-free Department (DFD) and Duty-free shops

1.1.1 NASCO

1.1.2 DFD

1.2 Formation of duty-free business in the world and in Vietnam

1.2.1 History and development of duty-free business in the world

1.2.2 The formation of duty-free business in Vietnam

1.3 Concepts of duty-free business

1.3.1 Definition

1.3.2 Kinds of duty-free shop

1.3.3 Characteristics of duty-free shops in Vietnam

border gates

1.4 Problems related to the research topic, research questions,

methodology and score of the research

1.4.1 Rationale of the study

1.4.2 Scope of the study, research questions and methodology

CHAPTER 2: THEORETICAL BACKGROUND OF MARKETING STRATEGY

2.1 Promoting products: Marketing communication strategy

2.1.1 Steps in developing effective communication

2.1.2 Growth of direct marketing

2.1.3 Integrated marketing communications

2.3 Promotion products: Personal selling and sales management

2.3.1 The role of personal selling

2.3.2 Managing the sales force

2.3.3 Steps in the selling process

CHAPTER 3 ANALYSIS AND FINDINGS

3.1 Result of duty-free business at NoiBai International Airport

3.1.1 Total revenue of duty-free business

3.1.2 Selling duty-free goods on international flights

3.1.3 Selling duty-free goods for people on exit and transit

3.1.3.1 In 2008

3.1.3.1 In 2009

3.2 Duty-free business situation

3.2.1 The rate of growth between goods made in Vietnam and import goods isnot fair

3.2.2 The weakness of advertisement activities, sales promotion, and publicrelations

3.2.2.2 Sales promotion

3.2.2.3 Public relations

CHAPTER 4 RECOMMENDATIONS

4.1 Improving state policies with duty-free goods

4.1.1 Goods made in Vietnam

4.1.2 Goods imported from foreign countries

4.2 Increasing activities of advertising, promotion programs, public

CHAPTER 1 INTRODUCTION OF NOIBAI AIRPORT SERVICES JOIN-STOCK COMPANY, DUTY-FREE

DEPARTMENT, DUTY-FREE SHOPS, THE FORMATION

AND CONCEPTS OF DUTY-FREE GOODS

This chapter is concerned with some basic information about DFD,NASCO, duty-free shop formation of duty-free business in the world in generaland in Vietnam in particular, and concepts of duty-free Besides, readers will havedetail introduction of problems related to the study, scope of the study, researchquestions, methodologies and methods of data collection

1.1 Introduction NoiBai Airport Services Join-Stock Company (NASCO)

and Duty-free Department (DFD) and Duty-free shops

1.1.1 NoiBai Airport Services Join-Stock Company (NASCO)

Noibai Airport Services Join-Stock Company which stands for NASCObecame known as Northern Airport Services Company in Vietnam It was a stateenterprise established and officially put into operation on July 1st, 1993 Thecompany has been through some dramatic changes to become what it is today

In May, 1995, Northern Airport Services Company was changed in name tobecome NoiBai Airport Services Company – NASCO being a member of VietnamAirlines Corporation

Minister of Transportation of Vietnam permitting NASCO to be privatized with anew name “NoiBai Airport Services Join-Stock Company” (NASCO)

operation After privatizing, inheriting and promoting solidary tradition, NASCOhas continued maintaining, and developing and enhancing the effectiveness of “TheQuality management system” with ISO 9001:2000 standard, investing moderntechnologies and the structure of management As a result, the manufacturingbusiness continues to grow, the brand of company is increasingly prestigious, jobsand workers’ lives are guaranteed

In addition to production and business development, social activities arealso always concerned by managers, and most of employees who respondedenthusiastically Activities of arts and sports are quite vibrant and helps employeesfeel relax and work comfortably Work of returning favor and supporting to victims

of wars and those who have difficult situations, etc are held with the order, not onlyhas contributed to solidarity but also builds cultural lives with a healthy spirit incompany.

activities after NASCO applies the model of join-stock Company, the President ofSocialist Republic of Vietnam signed the decision to offer NASCO the second-rateMedal of Labor

Structure of NASCO is not too complex through the following chart:

Noibai Airport Services Stock Company

NoiBai Aviation Commercial Enterprise

Hotel and tour service agency NoiBai Aviation General Service Enterprise NASCO Dept

Human Resources Dept

NASCO Branch

passengers like business passengers, first-rate passengers, etc at the airport; usingspecialized cars in the aircraft parking; cheking in and checking out for passengerswho live in the city Services of purchasing, importing, exporting, wholesaling andretailing goods include duty-free goods, groceries, souvenirs,etc Transportingpassengers by cars has airport taxi, airport bus Transporting, preserving, andpackaging goods include courier goods by domestical and international air, customswarehouse, packaged goods services, etc Besides, there are also the services oftourist, hotel and restaurant including domestical and international travel, transithotel at NoiBai International Airport, restaurants and coffee bar in inside andoutside the airport, etc Technological services have lots of functions likemaintaining and repairing cars, motorbikes; industrial hygiene, cleaningenvironment; industry and civil laundry; installing electrical equipments Agencies

to provide products and services consist of selling tickets, life insurance and life insurance, exchanging foreign currencies, providing fuel and liquefied gas

non-Therefore, each department of NASCO has its functions and takes animportant role in developing the company Especially, duty-free department (DFD)

is one of departments which have enjoyed remarkable growth in business

1.1.2 Duty-free department (DFD) and Duty-free shops

On June 23rd, 1990, at NoiBai International Airport, the Ministry ofCommerce of Vietnam issued a license of duty-free business No 076/TM-DT Thecontent of license permitted that NoiBai International Airport could cooperate withSundance Duty Free Sales Ltd - a Hong Kong partner in order to open the first duty-free shop serving exit passengers from Noibai International Airport

NASCO manages all of duty-free shops at Noibai International Airport.Duty-free department are directly responsible for selling duty-free goods forpassengers who exit, entry and transit, for international flights of Vietnam Airlinesonly and for importing and exporting goods at NoiBai International Airport

Duty-free shops are retail outlets that do not apply local or national taxesand duties In other words, duty-free shops are shops selling goods which areexempted from export tax, import tax for import-export, transit They operate underthe regulations issued by the Vietnam government and the license by state agencies

Duty-free shops appear in many countries in the world and are more andmore developing Duty-free goods have high quality, famous labels, and suitable

price So, many people usually choose to buy duty-free goods with lots of differentpurposes such as decorating, gifting, etc.

NASCO has three duty-free shops in NoiBai International Airport and oneshop in international flight of Vietnam Airlines Corporation Duty-free shopsprovide more than 4500 products For example: kinds of wine: Cognac, Whisky,Vodka, Gin, Rum,… importing from France, Italia, Scotland, Canada… withfamous labels such as Remy Martin, Hennessy, Martell, Camus, Chivas,Ballantines, Malibu…

Perfumes, cosmetic and skincare with various fragrances imported fromFrance, Italia… and famous labels like Christian Dior, Lancôme, Ralph Lauren,Giorgio Armani, Kenzo, Jean Paul Gaultier, Yves Saint Laurent, and Estee Lauder

Gifts and Accessories, jewelry and watches, leather and imitation leathergoods with high quality imported famous fashion brands such as Pierre Cardin,Kahuna, Lacoste, Swiss, Tommy, Hilfiger, Adidas, Cross, Dunhill…

Duty-free goods are imported and controlled strictly about origin, productquality in conformity with the provisions of relevant Vietnamese laws andinternational practices Besides, prices of duty-free goods can often be drivenupward by the costs of buyer convenience, e.g., in-flight sales by airlines

Vietnam has no regulations to limit the amount of duty-free goods whichexit and transit passengers purchase at duty-free shops Passengers can pay inforeign currency (U.S dollar, Euro) and Vietnam dong (be converted into foreigncurrencies under the current average price of Vietcombank)

With the quality management system ISO 9001:2008, structure of goodsand the way of services at duty-free shops of NASCO continuously improved tomeet needs of customers

1.2 The formation of duty-free in the world and in Vietnam

1.2.1 History and development of duty-free business in the world

Europe Ships which sold products from the mainland to the international waters inorder to buy to merchant ships, the Union sailors, and passengers’ ships ran acrossthe ocean Because every item was not sold in the territory of any countries, buyersdidn’t pay domestic consumption tax As a result, the definition of duty-free goodswas set up

On March 18th, 1947, Irish parliament passed The Customs Free AirportAct, exit and transit visitors didn’t pay tax for any goods bringing when exiting.

On May 18th, 1947, the world’s first duty-free shop was established atShannon Airport by Dr Brendan O’Regan in Ireland and is in service to this date.Shannon became a model for other duty-free facilities throughout the world Sincethen, many duty-free shops have opened inside international airports, where visitorscan shop without paying local taxes, or without having to file claims to receivemoney back from the country they’re visiting, to cover the money they did pay intaxes Such shops usually offer high end or luxury items, which are sometimesoffered at bargain prices Shoppers may still be limited by customs officials in theirown country as to how much they can legally purchase and bring home withoutpaying import taxes Allowance rate for purchases without paying duties variesfrom country to country Designed to provide a service for Trans-Atlantic Airlinepassengers typically traveling between Europe and North America whose flightsstopped for refueling on both outbound and inbound legs of their journeys, it was animmediate success and has been copied worldwide

In 1996, International Association of Airport Duty Free Stores (IAADFS) isestablished to meet the needs of the airport duty-free industry IAADFS has about

500 subsidiaries and usually held meetings to help subsidiaries have opportunities totalk and meet with customers at duty-free shops

On global scale, the largest retail duty-free shops include Abu Dhabi free Shop, Bharain Duty- Free, Dubai Duty-Free (in United Arab Emirates), Duty-free shops at Hongkong International Airport and Blue Water Bridge Duty FreeShop (in Canada)

Duty-About trading duty-free goods at airports, 5 shops having the largestrevenue consist of Dubai, duty-free shop at Heathrow Airport in London, ChangiAirport in Singapore, Amsterdam in Netherlands and Paris in France

Nowadays, Internet becomes a tool to help businesses develop and helpcustomers update necessary information about those businesses And the duty-freebusiness needs the Internet In September, 2005, a new website was set up by

necessary information about the differences between the price of duty-free goods inflights and the price of duty-free goods in airport in worldwide Besides, some ofwebsite appeared widely to advertise and introduce about duty-free business namely

such as http://www.themoodiereport.com, http://budgettravel.about.com,

http://www.duty-free.com, http://www.dutyfreezones.com, etc Or customers can

information about duty-free goods in the places they need

Besides, holding exhibitions from IAADFS about duty-free goods alsoattracts amount of large customers who come from many countries In the history of

which was held from October 31st, 2004 to November 4th, 2004 at Palais desFestivals at Cannes, France 500 multinational companies and 5100 visitors comingfrom 2614 companies joined So, the exhibition proved that duty-free business hasbeen a potential industry in the future

1.2.2 The formation of duty-free business in Vietnam

In Vietnam, duty-free business began to appear in the period whenVietnam economy opened, the structure of the economy shifted from centralizedmanagement to market economy with the management of the state under socialist-oriented market economy

Vietnam developed a multi-sector commodity economy under the management ofstate This innovation is an important prerequisite for the formation of duty-freebusiness in Vietnam

Opening the economy has helped Vietnam from the period embarking inimplementing innovations to nowadays have profound and comprehensive changes.Commercial activities have developed rapidly Thanks to open-door policy,multilateral policy, diversified policy about externally economic relations, Vietnamhas many relations with many countries and territories around the world

Premises for duty-free business were the development of foreign trade So,with efforts to speed up our economic development, expand trade and cooperatewith many local and regional economic organizations has promoted duty-freebusiness in Vietnam

Customs published inter-ministerial circular Trade - Customs “Provisions onorganizing activities of duty-free shops at marine ports and international civilaviation ports” At first, Ministry of Trade only issued the license for duty-free

shops at NoiBai International Airport, TanSonNhat International Airport, HaiPhongPort and DaNang Port

Till now, Vietnam has a large system of duty-free shops in many places.HoChiMinh City has eight duty-free shops including one diplomatic duty-free shop,

1 downtown duty-free shop of Vietnam Maritime Corporation, 1 duty-free shop atSaiGon Port, five duty-free shops at TanSonNhat International Airport of SASCO(4 exit duty-free shops, 1 duty-free shop in international flight) HaNoi City has 5duty-free shops consisting of 1 downtown duty-free shop, 4 duty-free shops ofNASCO (3 exit duty-free shops, 1 duty-free shop in international flight) Othercountries also have duty-free shops like HaiPhong, LaoCai, LangSon, QuangNinh,DaNang, HaTinh, BinhDinh, BaRia - VungTau

1.3 Concepts of duty-free shop in Vietnam

1.3.1 Definition

Duty-free shops are retail outlets that do not apply local or national taxesand duties In other words, duty-free shops are shops selling goods which areexempted from export tax, import tax for import-export, transit

1.3.2 Kinds of duty-free shop

There are 5five kinds of duty-free shops in the market Firstly, duty-freeshops for exit and transit passengers locate behind the place checking customsformalities and exit formalities of international airports, international borders andinternational railway Secondly, it is duty-free shop in international flights ofVietnam airlines Next, duty-free shops for entry passengers are located behind theplace checking entry formalities and in front of the area doing customs formalities

of NoiBai International Airport and TanSonNhat International Airport Fourthly,downtown duty-free shops are set up for tourists, overseas Vietnamese Last kind ofduty-free shop is established according to decree No 73/CP dated July 30th, 1994

of the Government on representatives of diplomatic missions, consulate offices andinternational organization in Vietnam being entitled to enjoy duty-free quotas

1.3.3 Characteristics of duty-free shops in Vietnam

1.3.3.1 Common characteristics

The first common characteristic is that imported goods which are sold induty-free shops are exempted from import tax, special consumption tax and valueadded tax Secondly, if Ministry of Trade permits imported goods are sold in duty-free shops in the domestic market, those shops must pay tax in accordance with the

regulations Thirdly, duty-free business is always controlled by Vietnam Customs,Ministry of Trade and Ministry of Finance Next, foreign currency used intransactions at duty-free shops is a freely convertible currency by the Bank ofVietnam’s announcement Lastly, Vietnamese enterprises are prioritized toparticipating duty-free business

1.3.3.2 Places of duty-free shops

Duty-free shops are located in international airports, international ports,international road border-gate, international railway border-gate, internationalflights, and domestic market They are places attracting a huge amount ofinternational passengers

1.3.3.3 Duty-free goods

Duty-free products include many kinds Firstly, duty-free goods includeimport goods, domestic goods Secondly, imported goods put on sale in duty-freeshops shall be affixed “Vietnam duty not paid” stamp Thirdly, for goods broken inthe course of transportation, the shops shall present certificates of inspection andwritten explanations In case the broken goods are in small quantity or of smallvalue, the customs offices shall carry out the certification Fourthly, for goods beingdestroyed after expiry dates thereof or goods deteriorated in quality, the shops shallpresent certificates of inspection and written explanations Fifthly, for goods to bere-exported: upon carrying out re-export procedures, the shops shall present thefollowing documents: written requests for re-export and permits of Ministry ofTrade; Customs procedures shall be the same as those applicable to re-export ofother consignments of goods

If the shops’ owners would like to sell the goods to the domesticconsumption, the shops’ owners shall present the following documents: writtenrequests and permits of the Ministry of Trade; Customs procedures shall be thesame as those applicable to goods imported for business purpose

1.3.3.4 Persons entitled to purchase goods on sale in duty-free shops

Representatives of Vietnam-based diplomatic missions, consulate offices,and international organizations eligible to enjoy duty-free quotas; persons on exit;persons on entry enjoying duty-free quotas; Foreign specialists involving in theimplementation of ODA projects and programs in Vietnam Besides, the overseasVietnamese people who return Vietnam to work at the invitation of VietnameseState authorities Ships’ captains purchasing goods for use during the period the

ships laid at anchor at the harbors or purchasing goods under purchase order fordelivery upon exit

1.3.3.5 Duty-free luggage quotas for people on entry at the Vietnamese

border gates

Ordinal

Number

- Liquor of 22% proof or higher

- Liquor of under 22% proof

- Alcoholic drinks, beer

1.5 liters2.0 liters3.0 liters

Under-18 peopleshall not beentitled to enjoythese quotas

quantity in service

of the trip’spurpose

mentioned at Items 1, 2, 3 and 4

in this Appendix

Total value notexceeding VND5,000,000

(Decree No 66/2002/ND-CP of July 1, 2002)

1.4 Problems related to the research topic, research questions, methodology

and score of the research

1.4.1 Rationale of the study

The world’s first duty-free shop was established at Shannon Airport inIreland in 1947 and is in service to this date Duty-free business also enteredVietnam market in 1990 and has contributed to promote to export, re-export, andincrease foreign exchanges and many different benefits Furthermore, developingduty-free business has been cared by many countries in the world

Duty-free business has been developed strongly in Vietnam airport,especially Noibai International Airport The revenue of trading this kind of revenue

is quite large Law documents about duty-free business are often adjusted, changed

in order to create convenient conditions to trade duty-free products On the February

the Regulations of the Duty-free shop business, through it: people who enterVietnam will not be allowed to buy duty-free products at the duty-free shops So,NASCO decided to close one entry duty-free shop at NoiBai International Airport

As a result, structure of duty-free shop became smaller than before This cannot bechanged because any reasons In fact, duty-free goods are good products but therearen’t many people knowing and buying them Customers only know those productswhen they come to airport So, marketing strategies are extremely strategies.However, NASCO hasn’t taken advantages of marketing strategies, duty-freemarket cannot develop strongly

Besides, forms of marketing of NASCO are still simple includingbrochures, catalogues The company hasn’t used other forms like videos, internet,etc Because lots of people don’t know this kind of business at NoiBai InternationalAirport, the revenue of the company decreases Most of people only know duty-freeproducts if they have opportunities to come to airport NASCO hasn’t diversifiedkinds of marketing and advertisements It is difficult for the company to sellproducts and develop market So, marketing strategies are main problems whichNASCO hasn’t solved

Briefly, problems in developing the marketing strategies and the structure

of trading goods make the development speed of duty-free business at NoiBaiInternational Airport be slow during many years

1.4.2 Scope of the study, research questions and methodology

The purpose of this study is to help Duty-free department (DFD) of NoiBaiAirport Services Join-Stock Company (NASCO) change some marketing strategies

in order that duty-free market can develop with larger size and popularize to allcustomers through the reality of business During the internship time, statistics andfigures were collected to help readers have deeper view about situation whichNASCO has been facing

Figures on Duty-free Department of NASCO including revenue by year,revenue by quarters will be collected through its annual performance reports The

study relies mainly on relevant theoretical background, books, statistics, periodicreports of DFD, analytical method to deal with research questions The study hasutilized both primary and secondary data In the first place, primary data aims atfinding out the formation and definition about duty-free business at DFD ofNASCO Theoretical background and articles were collected from DFD, NationalEconomics University Library as well as Internet – one of the most important toolshas useful functions to finish the report Moreover, periodic reports are collected

NoiBai International Airport to observe and research the way salespeople advertisedand sold to customers In the second place, the secondary data was obtained through

it advertises its goods, how it communicates with the publics and what its newpromotion tools are

To help readers understand the content of the report, I have three questionswhich will be answered throughout the report They will be answered in turn

1 What are realities of duty-free business at NoiBai International Airport?

2 What should duty-free department do to increase the effectiveness of thecompany’s strategy in trading duty-free goods?

3 Whether changes of marketing strategy help increase the effectiveness of thecompany’s duty-free goods business?

Briefly, I have just introduced basic information about duty-freedepartment, NoiBai Airport Services Join-Stock Company, duty-free shopsformation of duty-free business in the world and in Vietnam, concepts of duty-free,problems related to the study, scope of the study, methodologies, and researchquestions To help readers have a deeper view about problems and can understandrecommendations, I will perform theory background of marketing strategies of thisstudy in chapter 2

CHAPTER 2 THEORY BACKGROUND OF MARKETING

STRATEGY

Marketing takes an extremely important role in business If entrepreneursdon’t use marketing tools, they will have difficulties in developing their business.However, many people think of marketing only as selling and advertising Today,marketing must be understood not in the old sense of making a sale – “telling andselling” – but in the new sense of satisfying customer needs If the marketer does agood job of understanding consumer needs; develops products that provide superiorvalue; and prices, distributes, and promotes them effectively, these products willsell very easily.

Especially, duty-free business at Vietnam in general and in NoibaiInternational Airport in particular needs marketing strategy to popular its products

to international market Considering problems which duty-free department ofNASCO, I want to mention some theories about marketing strategies which are veryhelpful to develop this kind of goods Promoting products including 3 parts:marketing communication strategy; advertising, sales promotion, and publicrelations; personal selling and sales management But my study only focuses onusing marketing strategies like advertisement, promotion, public relations, I will

2.4 Promoting products: Marketing communication strategy

2.4.1 Steps in developing effective communication

Marketers need to understand how communication works Two of theseelements are the major parties in a communication - the sender and the receiver.Another two are the major communication tools - the message and the media Fourmore are the communication functions - encoding, decoding, response, andfeedback The last element is noise in the system They are several key factors ingood communication Senders need to know what audiences they wish to reach andwhat responses they want They must be good at encoding messages that take intoaccount how the target audience decodes them They must send messages throughmedia that reach target audiences, and they must develop feedback channels so thatthey can assess the audience’s response to the message Thus, the marketingcommunicator must do the following: identify the target audience; determine theresponse sought; choose a message; choose the media through which to send themessage; select the message source; and collect feedback

Steps in developing effective communication consist of identifying thetarget audience, determining the response sought, choosing a message (message

content, message structure, message format), choosing media (personalcommunication channels, non-personal communication channels), selecting themessage source, collecting feedback.

2.4.2 Growth of direct marketing

During the past several decades, companies around the world haveperfected the art of mass marketing – selling highly standardized products to masses

of customers In the process, they have developed effective mass media advertisingtechniques to support their mass marketing strategies However, as we move towardthe twenty-first century, marketing managers are facing some new marketingcommunicators realities

Direct marketing means marketing through various advertising media thatinteract directly with consumers, generally calling for the consumer to make a directresponse There are four major forms of direct marketing: direct mail and catalogmarketing, telemarketing, television marketing and on-line marketing

Direct-mail marketing through single mailings that include letters, ads,samples, foldouts, and other “salespeople on wings” sent to prospects on mailinglists Catalog marketing involves selling through catalogs mailed to a select list ofcustomers or made available in stores

Telemarketing using the telephone to sell directly to consumers has become

a major direct-marketing communication tool Most consumers appreciate many ofthe offers they receive by telephone Television marketing takes one of two majorforms Two forms are direct-response advertising (magazines, books, tapes and CDscollectibles) and home shopping channels (television programs or entire channels)dedicated to selling goods and services

On-line computer shopping is conducted through interactive on-linecomputer services These services create computerized catalogs of products andservices offered by producers, retailers, banks, travel organizations, and others

Successful direct marketing begins with a good customer database Amarketing database is an organized set of data about individual customers orprospects, including geographic, demographic, psychographic, and buying behaviordata

Besides, many direct marketers use only a “one-shot” effort to reach andsell a prospect or a single vehicle in multiple stages to trigger purchases A more

powerful approach is integrated direct marketing, which involves using vehicle, multiple-stage campaigns Such campaigns can greatly improve response.

multiple-2.4.3 Integrated marketing communications

The concept under which a company carefully integrates and coordinates itsmany communications channels to deliver a clear, consistent, and compellingmessage about the organization and its products Some communications channelsare mass media advertising, personal selling, sales promotion, public relations,direct marketing, packaging, and others

Integrated marketing communications produce better communicationsconsistency and greater sales impact It places the responsibility in someone’shands-where none existed before – to unify the company’s image as it is shaped bythousands of company activities It leads to a total marketing communicationstrategy aimed at showing how the company and its products can help customerssolve their problems

2.4.4 Direct marketing

Direct marketers and their customers usually enjoy mutually rewardingrelationships The aggressive and sometimes shady tactics of a few direct marketerscan bother or harm consumers, giving the entire industry a black eye Abuses rangefrom simple excesses that irritate consumers to instances of unfair practices or evenoutright deception and fraud During the past few years, the direct marketingindustry also has faced growing concerns about invasion of privacy issues.However, direct marketing is just too expensive to waste on consumers who don’twant it

2.5 Promotion products: Advertising, sales promotion, and public relations 2.5.1 Advertising

We define advertising as any paid form of non-personal presentation andpromotion of ideas, goods, or services by an identified sponsor Advertising can betraced back to the very beginnings of recorded history And marketing managementmust make five important decisions when developing an advertising program

The first step in developing an advertising program is to set advertisingobjectives which should be based on past decisions about the target market,positioning, and marketing mix An advertising objective is a specificcommunication task to be accomplished with a specific target audience during a

specific period to time Advertising objectives can be classified by primary purpose

- whether aim is to inform, persuade, or remind

Informative advertising is used to inform consumers about a new product orfeature and to build primary demand Persuasive advertising becomes moreimportant as competition increases It is used to build selective demand for a brand

by persuading consumers that it offers the best quality for their money Comparisonadvertising that compares one brand directly or indirectly to one or more otherbrands

After determining its advertising objectives, the company next sets itsadvertising budget for each product There are five factors that should be consideredwhen setting the advertising budget: stage in the product life cycle, market share,competition and clutter, advertising frequency, product differentiation So, the role

of advertising is to affect demand for a product

The third step in the developing an advertising program is advertisingstrategy Advertising strategy consists of two major elements - creating theadvertising message and selecting advertising media Creating the advertisingmessage is that the changing message environment: good advertising messages areespecially important in today’s costly and cluttered advertising environment.Today’s advertising messages are better planned, more imaginative, moreentertaining, and more rewarding to customers The first step in creating effectiveadvertising messages is to decide what general message will be communicated toconsumers – to plan a message strategy The impact of the message depends notonly on what is said, but also on how it is said Selecting advertising media: themajor steps in media selection are deciding on reach, frequency, and impact;choosing among major media types; selecting specific media vehicle; deciding onmedia timing

Advertising evaluation is the fourth step in the developing an advertisingprogram And the advertising program should evaluate both the communicationeffects and the sales effects of advertising regularly Measuring the communicationeffect of an ad - coy testing - tells whether the ad is communicating well There arethree major methods of advertising pre-testing including direct rating and portfoliotests There are two popular methods of post-testing advertisement They are recalltests and recognition test Measuring the sales effect by comparing past sales withpast advertising expenditures Another way is through experiments More complex

experiments could be designed to include other variables, such as difference in theads or media used.

The last step is international advertising decisions International advertisersface many complexities not encountered by domestic advertisers The most basicissue concerns the degree to which global advertising should be adapted to theunique characteristics of various country markets Many countries have extensivesystems of laws restricting how much a company can spend on advertising, themedia used, the nature of advertising claims, and other aspects of the advertisingprogram Such restrictions often require that advertisers adapt their campaigns fromcountry to country Thus, although advertisers may develop global strategies toguide their overall advertising efforts, specific advertising programs usually must beadapted to meet local cultures and customs, media characteristics, and advertisingregulations

2.5.2 Sales promotion

Sales promotion consists of short-term incentives to encourage purchase orsales of a product or service Whereas advertising offers reasons to buy a product orservice, sale promotion offers reasons to buy now Sales promotion includes a widevariety of promotion tools designed to stimulate earlier or stronger market response

It includes consumer promotion - samples, coupons, rebates, prices-off, premiums,contests, and others; trade promotion - buying allowances, free goods, merchandiseallowances, cooperative advertising, push money, dealer sales contest; and salesforce promotion - bonuses, contests, and sales rallies

Sales promotion has many purposes They used in markets where brandsare very similar usually produce high short-run sales response but little permanentmarket-share gain In markets where brands differ greatly, however, salespromotions can alter market shares more permanently Besides, sales promotions letmanufacturers adjust to short-term changes in supply and demand and to differences

in customer segments Sales promotions encourage consumers to try new productinstead of always staying with their current ones They lead to more varied retailformats, which gives consumers more choices Finally, sales promotions lead togreater consumer awareness of prices, and consumers themselves enjoy thesatisfaction of feeling like smart shoppers when they take advantage of pricespecials