Promotion and Pricing Strategies

1
Chapter 14 Promotion and Pricing Strategies
Learning Goals
Describe pushing and pulling promotional
strategies. Discuss the major ethical issues
involved in promotion. Outline the different
types of pricing strategies. Discuss how firms
set prices in the marketplace, and describe the
four alter-native pricing strategies. Discuss
consumer perceptions of price.
5
Discuss how integrated marketing communications
relates to a firms overall promotion
strategy. Explain promotional mix and outline the
objectives of promotion. Summarize the different
types of advertising and advertising
media. Outline the roles of sales promotion,
personal selling, and public relations.
6
1
7
2
8
3
4
9
2
Promotion The function of informing, persuading,
and influencing a purchase decision. Integrated
marketing communications (IMC) Coordination of
all promotional activitiesmedia advertising,
direct mail, personal selling, sales promotion,
and public relationsto produce a unified
customer-focused message.
3
INTEGRATED MARKETING COMMUNICATIONS  Must take a
broad view and plan for all form of customer
contact.  Create unified personality and message
for the good, service, or brand.  Elements
include personal selling, advertising, sales
promotion, publicity, and public relations.
4
THE PROMOTIONAL MIX Promotional mix Combination
of personal and nonpersonal selling techniques
designed to achieve promotional
objectives. Personal selling Interpersonal
promotional process involving a sellers
face-to-face presentation to a prospective
buyer.  Nonpersonal selling Advertising, sales
promotion, direct marketing, and public relations.
5
(No Transcript)
6
Objectives of Promotional Strategy
7
Providing Information  Major portion of U.S.
advertising provides information about a
product. Differentiating a Product  Communicate
to buyers meaningful distinctions about the
attributes, price, quality, or use of a good or
service. Increasing Sales  Most common objective
of a promotional strategy. Stabilizing
Sales  Stable sales evens out the production
cycle, reduces some management and production
costs, and simplifies financial, purchasing, and
marketing planning. Accentuating the Products
Value  Explaining hidden benefits of ownership.
8
Promotional Planning  Product placement
Marketers pay placement fees to have their
products showcased in various media, ranging from
newspapers and magazines to television and
movies. Guerilla marketing Innovative, low-cost
marketing efforts designed to get consumers
attention in unusual ways.
9
ADVERTISING Advertising Paid nonpersonal
communication delivered through various media and
designed to inform, persuade, or remind members
of a particular audience.  Consumers receive
3,500 to 5,000 marketing messages each day.
 Television networks earn 22 billion annually
from advertising.
10
 In U.S., automotive, retail, and communications
companies spend nearly 4 billion annually on
advertising.
11
Types of Advertising Product advertising
Messages designed to sell a particular good or
service. Institutional advertising Messages
that promote concepts, ideas, philosophies, or
goodwill for industries, companies,
organizations, or government entities.  Cause
advertising Form of institutional messaging that
promotes a specific viewpoint on a public issue
as a way to influence public opinion and the
legislative process.
12
Advertising and the Product Life
Cycle  Informative advertising Used to build
initial demand for a product in the introductory
phase of the product life cycle.  Persuasive
advertising Attempts to improve the competitive
status of a product, institution, or concept,
usually in the growth and maturity stages of the
product life cycle.  Comparative advertising
Compares products directly with their competitors
either by name or by inference.  Reminder-oriente
d advertising Appears in the late maturity or
decline stages of the product life cycle to
maintain awareness of the importance and
usefulness of a product.
13
Advertising Media  All media offer advantages
and disadvantages
14
Television  Easiest way to reach a large number
of consumers.  Variety of channels on cable and
satellite networks allows advertisers to target
specialized markets and demographics.  Most
expensive advertising medium.  30 second prime
time network spots can range from 100,000 to
500,000. Newspapers  Dominate local
advertising.  Easy to coordinate with other
promotional efforts.  Relatively short life
span. Radio  Average household owns five
radios. Commuters in cars are a captive
audience.  Satellite radio offers new
opportunities.
15
Magazines  Consumer publications and trade
journals.  May be able to customize message for
different areas of the country. Direct
Mail  Average American receives 550 pieces
annually, including 100 catalogs.  High per
person cost, but can be carefully targeted and
highly effective.  Direct Marketing Association
helps marketers combat negative attitudes by
offering its members guidelines on ethical
business practices. Outdoor Advertising  3.2
billion annually, majority for billboards.
Requires brief messages.  Can be opposed by
preservation and conservation groups.
16
Online and Interactive Advertising  Experts
predict sales from online advertising will double
by 2010.  Viral advertising Creates a message
that is novel or entertaining enough for
consumers to forward it to others, spreading it
like a virus.  Spreading the word costs the
advertiser nothing.  Not all online advertising
is well received.  Many consumers resent the
intrusion of pop-up ads that suddenly appear on
their computer screen. Sponsorship  Providing
funds for a sporting or cultural event in
exchange for a direct association with the
event.  Benefits Exposure to target audience
and association with image of the event. Other
Media Options  Marketers look for novel ways to
reach customers.  Examples infomercials, ATM
receipts, directory advertising.
17
SALES PROMOTION Sales promotion Nonpersonal
marketing activities other than advertising,
personal selling, and public relations that
stimulate consumer purchasing and dealer
effectiveness.
18
Consumer-Oriented Promotions Premiums, Coupons,
Rebates, Samples  Two of every five promotion
dollars are spent on premiums, items given free
or at reduced price with the purchase of another
product.  Coupons attract new customers but
focus on price rather than brand
loyalty.  Rebates increase purchase rates,
promote multiple purchases, and reward product
users.  Three of every four consumers who
receive a sample will try it. Games, Contest, and
Sweepstakes  Often used to introduce new goods
and attract new customers.  Subject to legal
restrictions. Specialty Advertising  Gift of
useful merchandise carrying the name, logo, or
slogan of an organization.
19
Trade-Oriented Promotions  Sales promotion
geared to marketing intermediaries rather than to
consumers.   Encourage retailers in several
ways  To stock new products.  To continue
carrying existing ones. To promote both new
and existing products effectively to consumers.
 Point-of-purchase (POP) advertising Displays
or demonstrations that promote products when and
where consumers buy them, such as in retail
stores.  Promote goods and services at trade
shows.
20
PERSONAL SELLING  A person-to-person promotional
presentation to a potential buyer.  Usually used
under four conditions  Customers are
relatively few in number and geographically
concentrated.  The product is technically
complex, involves trade-ins, and requires special
handling.  The product carries a relatively
high price. It moves through
direct-distribution channels.  Example Selling
to the government or militarty.
21
Sales Tasks  All involve assisting customers in
some way. Order Processing  Identifying
customer needs, pointing out merchandise to meet
them, and processing the order. Creative
Selling  Promoting a good or service whose
benefits are not readily apparent or whose
purchase decision requires a close analysis of
alternatives. Missionary Selling  Representative
promotes goodwill for a company or provides
technical or operational assistance to the
customer. Telemarketing  Personal selling
conducted by telephone regulated by the Federal
Trade Commissions 1996 Telemarketing Sales Rule.
22
The Sales Process
23
The Sales Process  A good salesperson varies the
sales process based on customers needs and
responses. Prospecting, Qualifying, and
Approaching  Prospecting Identifying potential
customers.  Qualifying Identifying potential
customers who have the financial ability and
authority to buy.  Approaching Make careful
preparations, analyzing available data about a
prospective customers product lines and other
pertinent information before making the initial
contact.
24
The Sales Process  A good salesperson varies the
sales process based on customers needs and
responses. Presentation and Demonstration  Prese
ntation Salespeople communicate promotional
messages. They may describe the major features
of their products, highlight the advantages, and
cite examples of satisfied consumers.
 Demonstration Reinforces the message that the
salesperson has been communicating.
25
The Sales Process  A good salesperson varies the
sales process based on customers needs and
responses. Handling Objections  Use objections
as an opportunity to answer questions and
explain how the product will benefit the
customer.
26
The Sales Process  A good salesperson varies the
sales process based on customers needs and
responses. Closing  The time at which the
salesperson actually asks the prospect to
buy.  Even if the sale is not made, the
salesperson should regard the interaction as the
beginning of a potential relationship.
27
The Sales Process  A good salesperson varies the
sales process based on customers needs and
responses. Follow-Up  An important part of
building a long-lasting relationship.  May
determine whether the customer will make another
purchase.
28
Public Relations Public relations Public
organizations communications and relationships
with its various audience.  Helps a firm
establish awareness of goods and services and
builds a positive image of them. Publicity Publici
ty Stimulation of demand for a good, service,
place, idea, person, or organization by
disseminating news or obtaining favorable unpaid
media presentations.  Good publicity can promote
a firms positive image  Negative publicity can
cause problems.
29
PROMOTIONAL STRATEGY Pushing and Pulling
Strategies  Pushing strategy Relies on personal
selling to market an item to wholesalers and
retailers in a companys distribution channels.
 Companies promote the product to members of
the marketing channel, not to end users.
 Pulling strategy Promote a product by
generating consumer demand for it, primarily
through advertising and sales promotion appeals.
 Potential buyers will request that their
suppliersretailers or local distributorscarry
the product, thereby pulling it through the
distribution channel.  Most marketing
situations require combinations of pushing and
pulling strategies, although the primary emphasis
can vary.
30
ETHICS IN PROMOTION Puffery and
Deception  Puffery Exaggeration about the
benefits or superiority of a product.  Legal
because it doesnt guarantee anything but raises
ethical questions. May ultimately undermine
the credibility of a firms marketing
messages.  Deception Deliberately making
promises that are untrue, such as guaranteed
weight loss in five days, get-rich-quick schemes
for would-be entrepreneurs, or promised return on
investments.
31
Promotion to Children and Teens Children and
teens have enormous purchasing power.  Children
cannot analyze advertising messages. Can be
socially responsible (e.g., healthy
products). Promotion in Public Schools and on
College Campuses Schools earn income from
in-school advertising, but it is generating
backlash.  College students have 122 billion
in buying power.
32
(No Transcript)
33
PRICING OBJECTIVES IN THE MARKETING MIX Price
Exchange value of a good or service.
34
Profitability Objectives Most common objective.
 Some maximize profits by reducing costs
rather than raising costs. Sometimes maintain
price while reducing package size or amount of
product. Volume Objectives Bases pricing
decisions on market share goals.
35
Pricing to Meet Competition Meeting
competitors price so price becomes a nonissue
in the buying decision.  Competitors cannot
legally work together to set prices.  Competitio
n can result in a price war. Prestige
Objectives Establishing a relatively high price
to develop and maintain an image of quality and
exclusiveness. Recognition of the role of
price in communicating an overall image for the
firm and its products.
36
PRICING STRATEGIES Pricing is influenced by
people in different areas of a company. Price
Determination in Practice Cost-based pricing
Adding a percentage (markup) to the base cost of
a product to cover overhead costs and generate
profits.  Actual markup used varies by such
factors as brand image and type of
store.  Example Typical clothing markup by
retailers is double the wholesaler price.
37
Breakeven Analysis Breakeven analysis Pricing
technique used to determine the minimum sales
volume a product must generate at a certain price
level to cover all costs. Finding the Breakeven
Point
38
Breakeven Analysis Breakeven analysis Pricing
technique used to determine the minimum sales
volume a product must generate at a certain price
level to cover all costs. Finding the Breakeven
Point
39
Breakeven Analysis Breakeven analysis Pricing
technique used to determine the minimum sales
volume a product must generate at a certain price
level to cover all costs. Finding the Breakeven
Point
40
Alternative Pricing Strategies Skimming
Pricing  Setting an intentionally high price
relative to the prices of competing
products.  Helps marketers set a price that
distinguishes a firms high-end product from
those of competitors.  Helps a firm recover its
product development costs before competitors
enter the field. Penetration Pricing  Setting a
low price as a major marketing weapon.  Often
used with new products.
41
Everyday Low Pricing and Discount Pricing  ELP
Maintaining continuous low prices rather than
relying on short-term price-cutting tactics such
as cents-off coupons, rebates, and special
sales.  Discount pricing Attracting customers
by dropping prices for a set period of
time.  Helps a firm recover its product
development costs before competitors enter the
field. Competitive Pricing  Reducing the
emphasis on price competition by matching other
firms prices.  Concentrate marketing efforts on
the product, distribution, and promotional
elements of the marketing mix.
42
CONSUMER PERCEPTIONS OF PRICE Price-Quality
Relationships  Consumers perceptions of quality
closely tied to price.  High price prestige
and higher quality.  Low price less prestige
and lower quality. Odd Pricing  Setting prices
in uneven amounts or amounts that sound less than
they really are.  Example 1.99 or
299.  Also used as a signal a product is on
sale.