Transcript Chapter 14 - Raritan Valley Community College

Chapter 14
Promotion and
Pricing Strategies
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 Promotion – communication to inform,
persuade, and influence a purchase decision.
 Integrated Marketing Communications
Coordination of all promotional activities
(advertising, personal selling, sales
promotion, and public relations) to produce a
unified customer-focused message.
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The Promotional Mix
 Promotional Mix—combination of personal
and nonpersonal selling techniques designed to
achieve promotional objectives.
 Personal Selling—interpersonal promotional
process involving a seller’s face-to-face
presentation to a prospective buyer.
 Nonpersonal selling—consists of advertising,
sales promotion, direct marketing, and public
relations
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 Comparing the Components of the
Promotional Mix
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 Five Major Promotional Objectives
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Providing Information
Major portion of U.S. advertising is informationoriented
Differentiating a Product
Positioning: communicate meaningful
distinctions about the attributes, price, quality,
or use of a good or service
Increasing Sales
Most common objective
Stabilizing Sales
Stimulate sales during slack periods
Accentuating the Product’s Value
explain often unrecognized ownership benefits
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Advertising
 Advertising—paid nonpersonal
communication delivered through various
media and designed to inform, persuade, or
remind members of a particular audience.
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Advertising
 Types of Advertising
Product Advertising—consists of
messages designed to sell a particular
good or service
Institutional Advertising—involves
messages that promote concepts, ideas,
philosophies, or goodwill for industries,
companies, organizations, or government
entities
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Advertising
 Advertising and the Product Cycle
Informative Advertising - seeks to build initial
demand for a product -Introductory stage
Persuasive Advertising - seeks to improve the
competitive status of a product, institution, or
concept, Growth and Maturity stages
Comparative Advertising - compares
products directly with their competitors
Reminder-oriented advertising - maintain
awareness, importance, and usefulness of a
product, concept, or institution Late maturity or
Decline stages
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Advertising
 Advertising Media
Must choose how to allocate advertising
budget
All media offer advantages and
disadvantages
Must consider cost and which media is
best suited for communication
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Advertising Media
Newspaper
Dominate local advertising
Disadvantage: relatively short life span
Television
America’s leading national advertising
medium
An expensive advertising medium
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Advertising Media
Radio
Captive audience of listeners as they
commute to and from work
In major markets, many stations serve
different demographic groups with targeted
programming
Magazines
Includes consumer publications and trade
journals
Can often customize their publications and
target advertising messages to different
regions of the country
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Advertising Media
Direct Mail
Address lists are the heart of this media
Benefit – can carefully target the mailing
Catalogs, “junk mail”, email
Online and Interactive Advertising
Web sites, banner ads, pop-up ads
Fastest-growing media segment
Outdoor Advertising
Very small part, but growing
Billboards, buses, signs in transit stations,
stores, airports, and stadiums
Disadvantages: Brief messages required
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Advertising Media
Sponsorship—involves providing funds
for a sporting or cultural event in exchange
for a direct association with the event
Sports sponsorships attract two-thirds of
total sponsorship dollars
Primary benefits: exposure to the event’s
audience and association with the image of
the activity
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Advertising Media
Sponsorship—involves providing funds for a
sporting or cultural event in exchange for a direct
association with the event
Other Media Options
Infomercials
Ads in movie theaters
Ads on airline movie screens
Printed programs, Subway tickets
Turnpike toll receipts
Automated teller machines
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Sales Promotion
 Sales promotion—nonpersonal marketing
activities other than advertising, personal
selling and public relations that stimulate
consumer purchasing and dealer
effectiveness.
Potential advantages:
Short-term increased sales
Increased brand equity
Enhanced customer relationships
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Sales Promotion
 Consumer-Oriented Promotions
Goals of a consumer-oriented sales
promotion include:
Getting new and existing customers to
try or buy products
Encouraging repeat purchases by
rewarding current users
Increasing sales of complementary
products
Boosting impulse purchases
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 Spending on Consumer-Oriented Promotions
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Sales Promotion
 Consumer-Oriented Promotions
Premiums - items given free with purchase.
Coupons - offer small price discounts
Rebates - offer cash back to consumers
Sample - a gift of a product
Games, Contests, and Sweepstakes - offering
cash, merchandise, etc. as prizes
Promotional Products - gift of useful
merchandise that carries the name, logo, or
slogan of organization. Ex: RVCC pen
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Sales Promotion
 Trade-Oriented Promotions
Trade promotion—sales promotion
geared to marketing intermediaries
Used to encourage retailers to:
Stock new products
Continue carrying existing ones
Promote products effectively to
consumers.
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Sales Promotion
 Trade-Oriented Promotions
Point-of-purchase (POP) advertising—
displays or demonstrations that promote
products when and where consumers buy
them
Takes advantage of many shoppers’
tendencies to make purchase decisions
in the store
Trade shows—promote goods or services
to intermediaries
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Personal Selling
 Personal selling—direct person-to-person
promotional presentation to a potential buyer.
Including face-to-face, via telephone,
videoconference, or interactive link. (Expensive)
 Used most often when:
Customers are relatively few in number and
geographically concentrated
Product is technically complex, involves tradeins, and requires special handling
Product is high in price
Product moves through direct-distribution
channels
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Personal Selling
 The Sales Process
Seven Steps in
the Sales
Process
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Public Relations
 Public Relations—organization’s
communication and relationships with its
various audiences.
 Publicity—stimulation of demand for a good,
service, place, idea, person, or organization
by disseminating news or obtaining favorable
unpaid media presentations.
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Promotional Strategies
 Selecting a Promotional Mix
Guidelines for allocating promotional
efforts and expenditures among personal
selling and advertising:
What is your target market?
What is the value of the product?
What time frame is involved?
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 Pushing and Pulling Strategies
Pushing strategy—Promote to members
of the distribution channel, not to end
users. Thereby pushing it through the
channel
Cooperative advertising—allowances
in which firms share the cost of local
advertising of their product or line with
channel partners
 Pulling strategy— Generate consumer
demand by promoting to final users who
will then exert pressure on the distribution
channel to carry the good or service,
pulling it through the distribution channel
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Ethics in Promotion
 Puffery and Deception
Puffery - exaggerated claims of a product’s
superiority or use of doubtful, subjective, or
vague statements
 Promotion to Children and Teens
Children not sophisticated at analyzing
promotional messages
 Promotion in Public Schools and on College
Campuses
Some schools sign contracts that give certain
brands exclusive access to their students
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Price in the Marketing Mix
 Price—
exchange
value of a good
or service.
 Pricing
Objectives
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Price in the Marketing Mix
 Profitability Objectives
Perhaps the most commonly used
objective in firms’ pricing strategies
Some firms try to maximize profits by
reducing costs rather than through price
changes
 Volume Objectives
Bases pricing decisions on market share
Market share: the percentage of a market
controlled by a certain company or product
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Price in the Marketing Mix
 Price to Meet Competition
Seeks to meet competitors’ prices
 Prestige Objectives
Prestige pricing encompasses the effect of
price on prestige
Prestige pricing establishes a relatively
high price to develop and maintain an
image of quality and exclusiveness
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Pricing Strategies
 Price Determination in Practice
Cost-based pricing—practice of adding a
percentage of specific amounts (mark-up)
to the base cost of a product to cover
overhead costs and generate profits.
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 Breakeven Analysis—pricing technique used to
determine the minimum sales volume a product must
generate at a certain price level to cover all costs.
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 Alternative Pricing Strategies
Skimming pricing strategy - set an
intentionally high price
Penetration pricing strategy - set a low price
as a major marketing weapon
Everyday Low Pricing and Discount Pricing Strategy devoted to maintaining continuous low
prices rather than relying on short-term pricecutting tactics
Competitive Pricing - product priced at the
general level of competing offerings
Odd Pricing - Odd pricing (charging $39.95 or
$19.98 instead of $40 or 20)
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