1. (a) The Promotion mix for a vacuum cleaner would certainly
differ from the promotion mix of Banking Services. Elucidate
and recommend the promotion mix for the above tow product/service
categories.
(b) Discuss the status of Radio and Television as media for
marketing Communication. Why is radio still used as an advertising
medium? Discuss in detail.
2. (a) Suggest a promotional campaign a FMCG which is on the
threshord of the maturity stage of life cycle. You may specify
your assumptions.
(b) What are the roles and responsibilities of a media planner
in relation to both, the agency to which he/she is attached
and the clients being serviced by the agency.
3 (a) “Advertisers who ignore research are as dangerous
as generals who ignore decodes of enemy
signals.” Explain.
(b) Discuss two methods, each for advertising pre–testing
and post–testing.
4 (a) Distinguish between Communication strategies and Advertising
strategies.
(b) It is being said that advertising strategy helps in developing
creative strategy and media strategy. Discuss by giving examples
SECTION - B
Read the case given below and answer the questions given at the end of the case.
PROMOTION IN A HIGHLY COMPETITIVE ENVIRONMENT
The American Express Company (AmEx) is a large, global, financial service organization. One of its core businesses, credit cards, is faced with heavy competitive pressure and is losing, market share. The number of American Express cardholders decreased by 500,000 in each of the first three-quarters of 1992. The challenge for AmEX is deciding how to use promotion to position its credit card more effectively.
AmEx began in the mid–1980s as a transporter of small
packages, important messages, and cash. It soon became apparent
that there was a strong demand among consumers for a safe and
economical method of
another. To satisfy that need, AmEx developed the money order
and, eventually, the traveler’s check.
In 1958 the firm expanded its financial products to include
a credit card designed for business travelers. The card–holder
makes purchases without the inconvenience of carrying cash and
obtains a monthly record of transactions for expense–account
and tax purposes. However, with the AmEx card, the user is required
to pay the full amount owed every month. The primary advantages
of the AmEx card are convenience and services (such as replacement
of lost cards and emergency cash advances). Because of these
features the AmEx card is known as a “travel and entertainment”
credit card.
In the early 1960s other financial institutions, particularly banks, recognized that an opportunity existed in providing consumers with what amounts to preapproved loans in the form of plastic credit cards. Over a period of years these individual bank credit card plans grew and consolidated into two major programs, now known as VISA and MasterCard. Bankcard plans differ from AmEx in that they offer revolving credit. That is consumers can choose to pay the entire balance monthly or pay only a portion of the outstanding amount each month and pay interest on the unpaid portion.
Bankcards offering revolving credit have proven very popular with consumers. From 1970 to 1991, U.S. consumer debt jumped from $125 billion to $765 billion. During the same period, the debt outstanding on credit cards grew from $4 billion to $194 billion. Interest payments on credit cards now amount to more than $33 billion a year. The rapid growth on outstanding debt on credit cards is a result of:
Greater accessibility (less stringent approval standards);
Increased desire for transactions convenience among consumers;
The relatively free–spending behaviour of the 1980s; and
Lower minimum monthly payments required by most cards.
Card issuers receive income from two sources: consumers come from annual membership fees and interest on outstanding credit balances. AmEx, which collects no interest, charges cardholders an annual membership fee that ranges from $55 for its standard Green Card to $300 for its Platinum Card. In comparison, the average annual fee for bankcards is $17.62.
The bankcards generate additional revenue from consumers and merchants. Consumers are charged interest on their unpaid credit card balances. The interest rate very among plants, but the typical range is an annual rate of 17 to 21 percent. The other income source is merchant fees. Depending on the volume of their credit business, merchants that accept bank cards pay a fee of 2 to 3 percent of the amount charged, while AmEx merchants fees that are somewhat higher, at 3 to 5 percent. Worldwide there are about 3.5 million merchants who accept the AmEx card, while VISA and MasterCard are each accepted by amount 10 million outlets.
Three recent events indicate how the competitive pressure in the credit card business has intensified:
The introduction of the Discover Card by Sears, Reobuck and
Co in 1986. Discover is a revolving–charge card with no
annual fee and an annual 1 percent rebate to the cardholder
on all purchases made with the card. As a Sears subsidiary,
Discover had immediate access to the charge and payment records
of all Sears credit card holders. Thus it had millions of preapproved
prospects. In addition, by dropping the annual fee, Discover
gained at least a temporary differential advantage over other
card issues. By 1992 Discover had over 41 million cardholders.
In 1990, American Telephone & Telegraph introduced its co–branded
credit card. The At&T Universal card has no annual fee and
a variable interest rate pegged to the prime rate set by the
Federal reserve Board. A co–branded card is one that is
sponsored jointly by a credit and company (such as VISA or MasterCard)
and another firm not normally associated with consumer credit
(such as AT&T). Co–branded cards include a special
feature provided by the sponsoring firm. For example, AT&T
cardholders can make long–distance phone calls at discounted
rate. Two other major firms subsequently introduced co–branded
cards. General Motors card rewards frequent users with rebated
that can be applied to the purchase of most new GM cars. Within
3 months of its introduction 1.5 million GM cards had been issued.
General Electric introduced the GE Regards card, which offers
discounts on a variety of products as an incentive for use.
These examples are only the tip of the iceberg. According to
one study, there are over 500 different credit card combinations
available from over 100 card issuers. They differ with respect
to the mix of annual fee, interest charges, the length of the
grace period between the time of a purchase and when the issuer
begins calculating interest, and rebates.
In 1991 the Senate passed a bill to put a limit on credit card
interest charges. The legislation was reaction to the fact that
interest rates on credit cards averaged 17.95 percent, while
the rate being paidc on bank savings accounts was less than
4 percent. The credit card industry responded with a tiered
rate structure that reduced rates slightly by providing the
lowest rates to charging delinquent cardholders higher rates.
The increased attention to interest rates on credit cards did
not go unnoticed by consumers. A 1992 survey showed that 32
percent would switch credit cards if the interest rate on a
new card was 1 percent lower than their current card.
These developments have increased the pressure on all credit card issuers. However, AmEx has felt the impact more than others. The traditional AmEx credit card positioning has been as a product that combined prestige of ownership with excellent service. The different advertising themes used over the years indicate how the form wants the card viewed. The first national advertising compaign was in 1958. It carried the descriptive slogan, “The Company for people who travel.” Later, the value of the card was reinforced with the long running “Don’t leave home without it” compaign. That was followed by compaigns designed to emphasize the status of card ownership by associating it with prominent people (the “Member since _________” compaign), and an appeal to the self–indulgance of the 1980s that used slogan “Membership has its privileges.” This positioning was successful through the 1970s and 1980s, but more conservative values in the 1990s have made it less appealing. The most recent compaign is intended to reinforce the prestige image of the card with the line. “The card. The American Express card.”
At least one competitor has taken a very practical comparative
approach in its advertising. For years VISA has emphasized the
greater number of merchants that accept its card over AmEx,
by focusing on specific examples and ending the ad with some
variation of the line “But don’t bother to bring
\your American Express card, because at ______________ they
only accept VISA.” As an official sponsor of the 1992
Winter Olympics, VISA used the same theme with ads that stated.
“The Olympics don’t take America Express.”
The ads referred to ticket sales for Olympic events and on–site
merchants, but AmEx felt they might be misleading. So it ran
ads urging consumers who were “going to the winter fun
and games” in Albertville not to believe that American
Express was not accepted by area merchants, as some “bank
cards” might suggest. AmEx called it clarification advertising.
VISA saw it as “ambush marketing –– trading
on an event for which a competitor has paid a sponsorship fee.
The recent advertising expenditures on credit cards by the major competitors in millions of dollars are:
| Card |
1990 |
1991 |
1992 |
| American Express |
$110 |
$100 |
$100 |
| Master Card |
49 |
44 |
60 |
| VISA |
66 |
60 |
65 |
| Discover |
50 |
50 |
50 |
An Ex has responded to the competition in two ways:
Expanding its offering by adding the Optima card. This product–line
extension offers the revolving–credit feature of bankcards
for a $15 annual fee to holders of an American Express card
($25 for noncardholders). The interest rate on the credit balance
ranges from 12 percent to 18.9 percent, depending on the amount
spent using the card and the cardholder’s payment record.
Since its introduction in 1987, it has attracted only about
3.5 million cardholders far fewer than VISA’s 185 million
and MasterCard’s 140 million.
Expanding the number of places the card is accepted, VISA and
MasterCard have already broadened the acceptance of credit card
use into nontraditional areas. For example, they convinced physicians
and dentists to accept their cards, and recently they have increased
their acceptance by grocery stores. Now they are approaching
“small–unit–transaction” markets such
as fast–food outlets, movie theaters, and convenience
stores. Faced with a declining number of cardholders. AmEx is
also seeking to increase income by having its card accepted
in more places. According to an AmEx executive, to “make
sure the card is accepted in all the places where members want
to use (it),” AmEx has created a special sales force to
call on large potential accounts such as Sears, Kmart and Walmart.
The Move by AmEx into fast–food, discount retailers, and other establishments will certainly expand the retailer base where the card can be used, and may also attract new card members. However, the AmEx card has always been aimed at upscale markets ––– upper–middle income and above. The key question is whether the advantages of this move will be more than offset by damage to the company’s image and its standing in its traditional markets.