promotion and pricing strategies

Chapter 14Promotion and Pricing Strategies

Learning Goals

Discuss how integrated marketing communications relates to a firm’s 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.

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.

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Chapter OverviewChapter Overview

PromotionPromotion: function of informing, persuading, and influencing the consumer’s purchase decision

Marketing Marketing CommunicationsCommunications: transmission from a sender to a receiver of a message dealing with the buyer-seller relationship

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Integrated Marketing CommunicationsIntegrated Marketing Communications

Coordination of all promotional activities – media advertising, direct mail, personal selling, sales promotion, and public relations – to produce a unified customer-focused promotional messageSuccess of any IMC program depends

critically on identifying the members of an audience and understanding what they want

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Importance of TeamworkImportance of TeamworkIMC requires a total strategy

including all marketing activities, not just promotion

Successful implementation of IMC requires that everyone involved in every aspect of promotion – public relations, advertising, personal selling, and sales promotion – function as a team

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Chrysler Crossfire: Using a Web Site and a Toll-free Number in an IMC Campaign

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• Role of Databases in Effective IMC Role of Databases in Effective IMC ProgramsPrograms– With the growth of the Internet, marketers

have been given the power to gather information faster and to organize it easier than ever before

– By sharing this knowledge appropriately among all relative parties, a firm can lay the foundation for a successful IMC program

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The Communications Process• An effective promotional message

accomplishes three tasks:– It gains the receiver’s attention– It achieves understanding by both receiver

and sender– It stimulates the receiver’s needs and

suggests an appropriate method of satisfying them

The Top 5 The Top 5 Airlines!Airlines!

Traveler Magazine

FlynnFlynnThe bikesThe bikesthe prosthe prosuse.use.

25% OffCoupon

• AdvertisingAdvertising

• Personal sellingPersonal selling

• PublicityPublicity

• Sales promotionSales promotion

Communication Techniques

Promotional MixPromotional Mix

Purposes of PromotionPurposes of PromotionTo tell consumers about a company’s To tell consumers about a company’s

……

GoodsGoodsServicesServicesImagesImagesIdeasIdeas

Purposes of PromotionPurposes of Promotion

To persuade consumers to buyTo persuade consumers to buy

Promotion’s Recipe for Success:

Mix various communication

activities together and serve to potential

customers until desired outcome is achieved.

The Combination, or Blend, of The Combination, or Blend, of Marketing Communication Channels Is Marketing Communication Channels Is

Called the...Called the...

Importance Importance of the of the

Promotional Promotional MixMix

• Plays a key role in obtaining Plays a key role in obtaining and keeping customersand keeping customers

• Enables businesses to Enables businesses to communicate effectively with communicate effectively with customerscustomers

• Informs consumers about Informs consumers about goods/services and persuades goods/services and persuades them to buythem to buy

THE PROMOTIONAL MIX

Promotional mix Combination of personal and no personal selling techniques designed to achieve promotional objectives.

Personal selling Interpersonal promotional process involving a seller’s face-to-face presentation to a prospective buyer.

• No personal selling Advertising, sales promotion, direct marketing, and public relations.

Major Decisions in AdvertisingMajor Decisions in Advertising

Objectives SettingObjectives Setting

Budget DecisionsBudget Decisions

Message DecisionsMessage Decisions Media DecisionsMedia Decisions

Campaign EvaluationCampaign Evaluation

Informative AdvertisingBuild Primary Demand

Informative AdvertisingBuild Primary Demand

Persuasive AdvertisingBuild Selective Demand

Persuasive AdvertisingBuild Selective Demand

Comparison AdvertisingCompares One Brand to

Another

Comparison AdvertisingCompares One Brand to

Another

Reminder AdvertisingKeeps Consumers Thinking

About a Product.

Reminder AdvertisingKeeps Consumers Thinking

About a Product.

Advertising Objectives

• Specific Communication Task • Accomplished with a Specific Target Audience • During a Specific Period of Time

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-fal fairness treatment

• Comparative advertising Compares products directly with their competitors either by name or by inference.

• Reminder-oriented 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. -Telco call rate ad

The Five Ms of Advertising

Mission

Salesgoals

Adver-tisingobjectives

Money

Factors toconsider:

Stage in PLC

Market shareand con-sumer base

Competitionand clutter

Advertisingfrequency

Productsubstituta-bility

Message

Message generation

Message evaluationand selection

Message execution

Social-responsibilityreview

MediaReach, frequency,impactMajor media typesSpecific mediavehicles

Media timingGeographicalmedia allocation

Measure-ment

Communi-cationimpact

Salesimpact

Advertising Budget Factors

Stage in the Product Life Cycle

Market Share &Consumer Base

Competition &Clutter

AdvertisingFrequency

ProductSubstitutability

TypicalMessage

ExecutionStyles

TypicalMessage

ExecutionStyles

TestimonialEvidence

TestimonialEvidence Slice of LifeSlice of Life

ScientificEvidence

ScientificEvidence

LifestyleLifestyle

TechnicalExpertise

TechnicalExpertise

FantasyFantasy

MusicalMusical

PersonalitySymbol

PersonalitySymbol

Mood orImage

Mood orImage

Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest.

Advertising Strategy-Message Execution

Advertising Program EvaluationAdvertising Program Evaluation

Communication Effects

Is the Ad Communicating Well?

Communication Effects

Is the Ad Communicating Well?

Advertising Evaluation

Sales Effects

Is the Ad Increasing Sales?

Sales Effects

Is the Ad Increasing Sales?

Objectives of Promotional Strategy

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 Product’s Value

• Explaining hidden benefits of ownership.

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.

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.

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

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.

Advertising Media• All media offer advantages and disadvantages

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.

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.

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.

Online and Interactive Advertising

• 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.

SALES PROMOTION

Sales promotion Nonpersonal marketing activities other than advertising, personal selling, and public relations that stimulate consumer purchasing and dealer effectiveness.

Why the increase in Sales Promotion?

• Growing retailer power• Declining brand loyalty• Increased promotional sensitivity• Brand proliferation• Fragmentation of consumer market• Short-term focus• Increased managerial accountability• Competition• Clutter

Consumer PromotionConsumer Promotion

Consumer-Promotion Objectives

Consumer-Promotion Tools

Point-of-PurchaseDisplays

Point-of-PurchaseDisplays

PremiumsPremiums

Price PacksPrice Packs

Cash RefundsCash Refunds

CouponsCoupons

SamplesSamples

Patronage Rewards

Patronage Rewards

GamesGames

SweepstakesSweepstakes

ContestsContests

AdvertisingSpecialties

AdvertisingSpecialtiesPatronage Rewards

Entice Consumers to Try a New Product

Entice Consumers to Try a New Product

Lure Customers AwayFrom Competitors’ Products

Lure Customers AwayFrom Competitors’ Products

Get Consumers to “Load Up’on a Mature Product

Get Consumers to “Load Up’on a Mature Product

Hold & Reward Loyal Customers

Hold & Reward Loyal Customers

Consumer Relationship Building

Consumer Relationship Building

Consumer-Oriented PromotionsPremiums, 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.-key ring, tea shirt, bag etc

Trade-Promotion Objectives

Trade-Promotion Tools


Items


ItemsContestsContests

Free GoodsFree Goods

Buy-BackGuarantees

Buy-BackGuarantees

AllowancesAllowances

Price-OffsPrice-Offs

Patronage Rewards

Patronage Rewards

Push MoneyPush Money

DiscountsDiscounts

PremiumsPremiums

Displays

Persuade Retailers or Wholesalers to Carry a Brand

Persuade Retailers or Wholesalers to Carry a Brand

Give a Brand Shelf SpaceGive a Brand Shelf Space

Promote a Brand in Advertising

Promote a Brand in Advertising

Push a Brand to ConsumersPush a Brand to Consumers

Trade Promotions

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.

Business-Promotion Objectives Business-Promotion

ToolsGenerate Business LeadsGenerate Business Leads

Stimulate PurchasesStimulate Purchases

Reward CustomersReward Customers

Motivate SalespeopleMotivate Salespeople

ConventionsConventions

Trade ShowsTrade Shows

Sales ContestsSales Contests

Business-to-Business Promotion

When might you decide to use Personal Selling?

• Tight budget (straight commission)• Concentrated Market

– Few buyers– High value product

• Product must be customized• Personal contact important• Must demonstrate product• Product involves trade-in/up

Personal SellingPersonal SellingDetermines client needs/wants and responds Determines client needs/wants and responds through planned, personalized communication through planned, personalized communication that influences purchase decisions and enhances that influences purchase decisions and enhances future business opportunitiesfuture business opportunities

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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 military.

Selling Advantages

• Immediate feedbackImmediate feedback

• FlexibilityFlexibility

I like the soundof this stereo,

but I think it’s alittle large for

my dorm room.

We do carry abookshelf model

with similarsound quality.

Selling Disadvantage

On a per contact basis, On a per contact basis, selling is the most expensive selling is the most expensive

form of promotion.form of promotion.

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 Commission’s 1996 Telemarketing Sales Rule.

The Sales Process

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 customer’s product lines and other pertinent information before making the initial contact.



Presentation and Demonstration

• Presentation 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.



Handling Objections

• Use objections as an opportunity to answer questions and explain how the product will benefit the customer.



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.



Follow-Up

• An important part of building a long-lasting relationship.

• May determine whether the customer will make another purchase.

Public RelationsPublic relations Public organization’s communications and

relationships with its various audience.

• Helps a firm establish awareness of goods and services and builds a positive image of them.

PublicityPublicity 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 firm’s positive image

• Negative publicity can cause problems.

PROMOTIONAL STRATEGY

Pushing and Pulling Strategies• Pushing strategy Relies on personal selling to market

an item to wholesalers and retailers in a company’s 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 suppliers—retailers or local distributors—carry 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.

ETHICS IN PROMOTION

Puffery and Deception• Puffery Exaggeration about the

benefits or superiority of a product.

• Legal because it doesn’t guarantee anything but raises ethical questions.

• May ultimately undermine the credibility of a firm’s 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.

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

• College students have $122 billion in buying power.

Mass media exposure

Source: NMS Study

TV is still a growing media

Cable TV Connection

CnS Penetration Trend in TV owning Households

Year Urban Rural All

2005 34.10% 7.20% 20.60%

2008 52.70% 21.10% 34.70%

2010 75.00% 37.00% 53.80%

Upcoming Channels

• Bangladesh Beter

– Many substations (Ka, Kha etc.)– Signal (Recent FM Version of Bangladesh Beter)

• Radio Forti– Dhaka Sylhet Rajshahi– Chittagong Khulna Barishal– Cox’s Bazar Rajshahi

• Radio Today

– Dhaka Chittagong– Sylhet Khulna– Bogra Cox’s Bazar

• Radio Amar -• ABC Radio• Radio Shadhin

FM is growing

Print at a glance

Newspaper : 297

National : 101

Regional : 196

Magazines : 174

Monthly : 30

Fort-nightly : 20

Weekly : 122

Source: Dept. of Film & Publications; NMS’10

Print reach is 28.1%

Both male & female readership has increased

Team Unilever 63

2.7 million

Top Local Websites

Digital is the fastest growing Media

Facebook is phenomenally popular among the online users

PRICING OBJECTIVES IN THE MARKETING MIX

Price Exchange value of a good or service.

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.

Pricing to Meet Competition• Meeting competitors’ price so price becomes

a nonissue in the buying decision.

• Competitors cannot legally work together to set prices.

• Competition 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.

PRICING STRATEGIES

• Pricing is influenced by people in different areas of a company.

Price Determination in PracticeCost-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.

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

Alternative Pricing StrategiesSkimming Pricing

• Setting an intentionally high price relative to the prices of competing products.

• Helps marketers set a price that distinguishes a firm’s 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.

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.

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.

promotion and pricing strategies

Business

objectives of promotion

sales promotion function

roles of sales promotion

promotional strategies

marketing activities

effective promotional

teamwork imc

imc campaign