The percentage of sales method is one of the most common ways of setting a promotional budget. What are some advantages and disadvantages of this method? 2. Apply the five major tools in the marketing communication mix to a hospitality or travel company by showing how a company can use all these tools. 3. What is meant by the term public? Can a company have more than one public?
The Correct Answer and Explanation is:
1. Percentage of Sales Method – Advantages and Disadvantages
Correct Answer:
The percentage of sales method sets a promotional budget based on a fixed percentage of past or anticipated sales.
Advantages:
- Simple and easy to apply.
- Aligns promotion spending with business performance.
- Reduces risk of overspending during slow periods.
Disadvantages:
- Ignores market opportunities and competition.
- Assumes sales cause promotion, rather than the reverse.
- Can lead to underinvestment in times when aggressive promotion is needed most.
Explanation (300 words):
The percentage of sales method is a traditional approach where the promotional budget is calculated as a fixed percentage of past or expected sales revenue. This technique is favored for its simplicity and cost-control benefits. Companies find it convenient because it requires minimal analysis and ensures that promotional expenditures are aligned with the firm’s financial performance.
An important advantage is its self-regulating nature. If sales drop, the promotional budget also drops, which helps in maintaining financial discipline. Moreover, this method is often perceived as a conservative approach to budgeting, reducing the likelihood of overspending.
However, there are significant downsides. This method assumes a direct relationship where sales drive promotion, while in reality, promotion can significantly drive sales. Relying solely on sales figures to determine the promotional budget can result in a vicious cycle—low sales lead to lower promotional budgets, which may further depress sales due to lack of market visibility.
Additionally, this method fails to consider the competitive landscape or market potential. If a competitor launches an aggressive marketing campaign, a company using the percentage of sales method may be unable to respond effectively, losing market share.
In summary, while the percentage of sales method is easy and financially safe, it lacks strategic foresight and can hinder growth if used as the sole budgeting approach.
2. Application of Five Major Tools in the Marketing Communication Mix to a Hospitality or Travel Company
Correct Answer:
The five major tools are:
- Advertising
- Sales Promotion
- Public Relations (PR)
- Personal Selling
- Direct and Digital Marketing
Application Example – Marriott Hotels:
- Advertising: Marriott can run TV ads and online video campaigns showcasing luxury stays and unique locations, targeting both business and leisure travelers.
- Sales Promotion: They may offer limited-time discounts or loyalty point bonuses for booking directly on their website.
- Public Relations: Marriott might issue press releases about new hotel openings or sustainability initiatives, building a positive image.
- Personal Selling: For large group bookings or corporate clients, Marriott uses sales representatives to negotiate packages and build relationships.
- Direct and Digital Marketing: Marriott sends personalized emails to members of their Bonvoy program and uses social media ads to retarget users who visited their site.
Explanation (300 words):
The marketing communication mix refers to the specific blend of promotional tools that companies use to pursue their advertising and marketing objectives. In the hospitality and travel industry, these tools must be integrated effectively to deliver a consistent message and drive customer engagement.
- Advertising helps build awareness and brand recognition. Marriott Hotels, for instance, may use television, digital media, or print ads to target different segments like luxury travelers, families, or business professionals. These ads highlight features like amenities, destinations, and customer experiences.
- Sales Promotion involves short-term incentives to encourage booking. Marriott often offers discounts, free upgrades, or added loyalty points during off-peak seasons. These promotions are especially effective for converting potential customers who are comparison shopping.
- Public Relations (PR) builds credibility and positive image. Marriott’s PR team can arrange media coverage of a hotel opening, sponsor community events, or engage in corporate social responsibility projects, such as sustainability programs, which attract socially conscious travelers.
- Personal Selling is crucial for B2B transactions, such as corporate travel accounts or event planning. Marriott assigns sales professionals to liaise with clients, customize packages, and maintain relationships, which helps secure long-term contracts.
- Direct and Digital Marketing involves reaching out to customers through email, apps, and social media. Marriott uses targeted campaigns through its Bonvoy app and retargeting ads to drive repeat bookings, offering tailored recommendations and exclusive deals.
Together, these tools create a cohesive strategy to attract, convert, and retain guests.
3. What is Meant by the Term “Public”? Can a Company Have More Than One Public?
Correct Answer:
A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. Yes, a company can have multiple publics.
Explanation (300 words):
In marketing and public relations, the term “public” refers to a group of people or organizations with a stake or interest in the actions and performance of a company. These groups can influence the company’s operations directly or indirectly and may include both internal and external parties.
Common types of publics include:
- Customers: The most obvious public, as they directly affect revenue.
- Employees: Their morale and performance impact service delivery and brand image.
- Investors/Shareholders: Interested in financial performance and company governance.
- Government and Regulatory Bodies: Influence through laws, regulations, and compliance.
- Media: Shapes public perception and can impact brand reputation.
- Local Communities: Affected by the company’s physical presence and corporate citizenship.
- Suppliers and Partners: Affect supply chain efficiency and business continuity.
Yes, a company can and typically does have multiple publics. For example, a hotel chain like Hilton must address the needs and expectations of its guests (customers), employees, investors, government regulators, and local communities where its properties are located.
Each public has its own concerns and expectations. Customers care about service quality and value; investors focus on profitability and sustainability; local governments might be concerned with zoning laws and environmental impact.
Managing relationships with these various publics is a key function of public relations and marketing communications. It involves tailored messages, media strategies, and engagement initiatives that help the company maintain a favorable image and build trust across different segments of its ecosystem.
In summary, understanding and managing multiple publics is critical to long-term success, particularly in industries like hospitality where reputation and customer trust are paramount.