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Chapter 14Promotion and Pricing Strategies

Discuss how integrated marketing

communications relates to a firms

overall promotion strategy.

Explain promotional mix andoutline the objectives of promotion.

Summarize the different types of

advertising and advertising media.

Outline the roles of sales

promotion, personal selling, and

public relations.

Describe pushing and pullingpromotional 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.

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Promotion The function of informing, persuading, and influencing a purchasedecision.

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.

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INTEGRATED MARKETINGCOMMUNICATIONS

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.

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THE PROMOTIONAL MIXPromotional 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 sellingAdvertising, sales promotion, direct marketing, and public

relations.

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Objectives of Promotional Strategy

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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.

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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.

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ADVERTISINGAdvertising 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.

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In U.S., automotive, retail, and communications companies spend nearly $4billion annually on advertising.

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Types of AdvertisingProduct 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 thelegislative process.

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Advertising and the Product Life CycleInformative advertisingUsed to build initial demand for a product in the

introductory phase of the product life cycle.

Persuasive advertisingAttempts to improve the competitive status of a product,

institution, or concept, usually in the growth and maturity stages of the product

life cycle. Comparative advertisingCompares products directly with their competitors

either by name or by inference.

Reminder-oriented advertisingAppears in the late maturity or decline stages of

the product life cycle to maintain awareness of the importance and usefulness

of a product.

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Advertising MediaAll media offer advantages and disadvantages

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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.

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Magazines Consumer publications and trade journals.

May be able to customize message for different areas of the country.

Direct Mail

AverageAmerican receives 550 pieces annually, including 100 catalogs.

High per person cost, but can be carefully targeted and highly effective.

Direct MarketingAssociation 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.

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Online and Interactive Advertising

Experts predict sales from online advertising will double by 2010.

Viral advertisingCreates 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 ofpop-up ads that suddenly appear ontheir 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.

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SALES PROMOTIONSales promotion Nonpersonal marketing

activities other than advertising,

personal selling, and public relations

that stimulate consumer purchasing

and dealer effectiveness.

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Consumer-Oriented PromotionsPremiums, Coupons, Rebates, Samples

Two of every five promotion dollars are spent onpremiums, 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 productusers.

Three of every four consumers who receive asample 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.

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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.

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PERSONAL SELLINGA 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 military.

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SalesTasks

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 orprovides technical or operational assistance to the customer.

Telemarketing

Personal selling conducted by telephone; regulated by the

Federal Trade Commissions 1996 Telemarketing Sales Rule.

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The Sales Process

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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.

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The Sales ProcessA good salesperson varies the sales process


Presentation and Demonstration

Presentation Salespeople communicate

promotional messages. They may describethe major features of their products, highlight

the advantages, and cite examples of satisfied

consumers.

Demonstration Reinforces the message that the

salesperson has been communicating.

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Handling Objections

Use objections as an opportunity to answer

questions and explain how the product willbenefit the customer.

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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.

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Follow-Up

An important part of building a long-lasting

relationship.

May determine whether the customer will

make another purchase.

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Public RelationsPublic 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

Publicity 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.

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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.

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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.

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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 CollegeCampuses

Schools earn income from in-school advertising, but it is generating backlash.

College students have $122 billion in buying power.

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PRICING OBJECTIVES IN THEMARKETING MIX

Price Exchange value of a good or service.

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Profitability ObjectivesMost 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.

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Pricing to Meet CompetitionMeeting competitors price so price becomes

a nonissue in the buying decision.

Competitors cannot legally work together to

set prices.

Competition can result in aprice 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 communicatingan overall image for the firm and its products.

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PRICING STRATEGIESPricing is influenced by people in different areas of a company.

Price Determination in Practice

Cost-based pricingAdding 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.

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Breakeven AnalysisBreakeven 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

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Alternative Pricing StrategiesSkimming 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.

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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 pricingAttracting customers by dropping prices for a set period of

time.

Helps a firm recover its product development costs before competitors enter thefield.

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.

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CONSUMER PERCEPTIONS OFPRICE

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.

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