Communication decisions must be made each period for each of your marketed products. Indeed, the practice in Markstrat is to communicate on products rather than on company names. As a consequence, even if your firm markets several products, possibly to the same customer segment, these products will not benefit from the company’s identity and image.
The primary objective of communication is to build awareness for product names and to make customer familiar with the characteristics and price of your product. Communication is crucial for new products, but is also important for products that have been on the market for some years. Indeed, customers tend to forget about a product in the absence of communication.
Another objective of communication is to develop demand for the whole market. Indeed, as potential customers become more familiar with the products and their characteristics they are more likely to purchase one of them. The size and growth rate of customer segments is influenced by the amount spent in communication by the entire industry.
Finally, communication will influence the decision of whether or not distributors will carry or not your products. Spending more in communication will most likely increase your distribution coverage. It also creates a barrier to entry for your competitors.
The absolute amount of communication spent on your products is a key factor in the success of your campaign. But because of the competitive nature of the Markstrat industry, your communication share of voice is important as well. The share of voice is calculated by dividing your own communication budget (usually several million dollars for a given product and period) by the industry average communication budget. Thus, a share of voice equal to 1 means that you spend as much as your average competitors. A share of voice greater than 1 is required for a successful new product launch.
There are two separate communication budgets: communication media and communication research. As its name indicates, the communication media budget is used to purchase media space and time. Communication research is about the creative work, media selection, or other activities conducted by communication agencies, that improve the quality and the persuasive power of your message.
If your objective is to increase or maintain awareness, you should spend the bulk of your budget in media space purchase and only a small percentage in communication research to make your communication more effective (for instance 4% to 8%). If your objective is to reposition a product, i.e. to change customers’ perceptions, then you should spend a significant percentage of your total budget in communication research (usually from 10% to 15%). In past years, companies have devoted on average 4% of their total communication expenditures to communication research.
You are also required to specify which segments should be targeted with your communication. This decision should be consistent with the marketing strategy of your firm and/or product. The communication agency will select the most appropriate media vehicle for the targeted segments (for instance, targeting Oil Industries through specific magazines, professional associations or trade-shows). Because media selection is not an exact science, some customers may be exposed to your communication campaign even if you do not target them explicitly.
Finally, you must define perceptual communication objectives for each product. This enables you to convey a perceptual message and emphasize, for instance, that a given product is very powerful or that another one delivers a very high pressure while having a small volume. You will learn more in the Repositioning section at the end of the handbook; it is devoted to product positioning through communication and explains how to set perceptual objectives.
Communication budgets must be entered each period in the Marketing Mix decision form. Both the communication media and research budgets must be given in thousands of dollars. You must also indicate the proportion of the budget targeted to each segment. The percentages must add to 100.