THE ROLE OF PROMOTION IN BUSINESS TO BUSINESS MARKETS
I assume that because you are reading this white paper that you operate in a business to business market. I can confidently guess that you could volubly describe to me your company’s product (or service) together with the many product variations you can offer. You could no doubt also tell me the prices of your products. There would be no problem asking you to describe the channels by which your products get to market. However, if I was to ask you how people get to know about your products and the effectiveness of your many and scattered forms of promotion, I am sure that you would need time to think about your answer.
There must be more misunderstood money spent on business to business promotions and advertising than on anything else in the marketing budget. Maybe your promotional spend is excessive; maybe it isn’t enough. What we do know is that it is difficult to measure its effectiveness and very few people even try.
Let us begin by thinking our way through the way that promotions work. The AIDA model helps in this respect. This hierarchical model follows the decision making process from lighting the lamp for people through to the sale itself. At each level in the process the numbers of people dramatically reduce so that those who take action are a small fraction of those who are aware of or interested in the product.
Figure 1 The AIDA Hierarchical Decision Making Model
The AIDA model is also important because it gives us four levels to measure and explore when we are looking at the effectiveness of promotions.
Those of you who have been following the B2B white papers will know that one of the key characteristics of business to business markets, that distinguishes it from consumer markets, is the complicated DMU (decision making unit) within industry. There may only be one person placing an order within a company but almost certainly there will be one or two others influencing the decision in their own special ways. A production person may approve or veto products that are effective in the workplace. Someone else could endorse companies with the appropriate financial stability to be a supplier. Yet a further person could impose conditions on health and safety issues. A study of advertising effectiveness requires us to understand the role played by the different parties in the DMU and how they are influenced by promotions.
A typical business to business promotional campaign may have a budget of just a few thousand pounds. £50,000 is a large campaign. There is good reason for this. The target audiences for business to business companies are small in number and measured in their thousands and not in millions as is the case with our consumer cousins. With this small number of customers in their sites, the best means of contacting the larger accounts is in person. Not surprisingly, therefore, consumer and business to business companies spend significantly different amounts of their promotional budgets on different types of promotions.
Figure 2 The Importance Of Different Types Of Promotions Between Consumer & Industrial Companies
The other point to make by way of an introduction is that promotions have different objectives at different times in the product life cycle. At the beginning of the life cycle, promotions are designed to build awareness and establish the credibility of products and in later years the promotions have to sustain demand. Any consideration of the effectiveness of promotions must have the objective of the promotion in mind.
Figure 3 The Role Of Communications In The Product Life Cycle
Click to enlarge
Part 2 of this white paper will be published on Thursday. The are more white papers on our corporate website.
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