Transcript Chapter 9

B202A (Block 2)
Marketing
J Blythe. Essential of Marketing
Chapter 7(p154-164) & Chapter 9 (p190-222)
7- Pricing Strategies
9- Communications & promotional tools
Prepared by
Ateyyah Al Zafiri
Pricing & Market Orientation
3 main methods of pricing:
1- cost-based pricing
2- customer based pricing
3-compititor based pricing
Ateyyah Al Zafiri
1- Cost-based pricing
a) Cost – plus pricing
-It works by calculating the cost of
manufacturing (the product , including
distributed overhead costs and research and
development costs ), then adding on a fixed
percentage profit to this figure in order to arrive
at the price .This allows the firm to calculate a
break –even point at which further sales will be
profitable
-The method does not take account of how
customer will react to the price??.
Ateyyah Al Zafiri
1- Cost-based pricing
b) Mark- up pricing
-Retailer buys in stock & adds on a fixed
percentage (mark-up) to arrive to shelf price.It
is identical to the cost plus method except for :
1-the retailer is usually in close contact with
the customers &feels what customers will be
prepared to pay; 2- retailers have ways of
disposing of unsold stock , as can be returned
for credit .
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2- Customer-based pricing
a) Customary pricing
- It provides the customer with the product
for the same price at which it has always
been offered . An example ( taxis , some
children's sweets , and gas or electricity prepayment meters). If this method were to be
used for most products there would be a
steady reduction in the firm's profits as the
costs caught up with the selling price , so the
method is not practical for every firm.
Ateyyah Al Zafiri
2- Customer-based pricing
b) Demand pricing
- The marketer assesses what the demand will be for
the product at different price levels by asking the
customers what they might expect to pay for the
product , and seeing how many choose each price
level . Then to calculate the cost of the product. The
cost of producing each item falls as more are made.
Then to select the price that will lead to maximization
of profits . There is a trade – off between quantity
produced and quantity sold : as the firm lower the
selling price, the mount sold increases but the
income generated decreases.
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2- Customer-based pricing
c) Product-line pricing
- To set prices within linked product groups (sales of
one product will be linked to the sales of another ). It
is possible to sell one item at a low price in order to
make a greater profit on the other one . Gillette
>(razors- low price) >(blades- profitable in the long
run ) Polaroid chose to sell its >(instant cameras
cheap) while>( films profitable).This strategy aims to
overcome the initial resistance of consumers towards
buying something untried , but allows the firm to
show high profits for years.(This approach
incidentally, was first used by Gillette )
.
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2- Customer-based pricing
d) Price Skimming
-It starts with a high price for a product , then reducing it as sales
level off .
-It relies on:1) not all customers have the same perception of
value for money, 2) the company has a technological lead over
the opposition.
-This works for firms which have developed a technically
advanced product.
-Its objective is to 'skim' maximum revenue from the market
before substitutes products appear .
-Profit may not be high because the number of units sold will low
- When the competition is beginning to enter the market, the firm
can drop the price and 'skim' the next layer of the market ,.
-The advantage of this method is that the cost of developing the
product is returned fairly quickly .
Ateyyah Al Zafiri
2- Customer-based pricing
d) Price Skimming
-Skimming
is commonly in consumer electronics markets ,
because firms establish a technological lead over the
competitors , and can protect their products by taking out
patents, which take some time for competitors to overcome . an
example of this is the MP3 player , which sold at a premium price
when it was first launched . as competitors entered the market
with closed products , the price dropped dramatically ..
-Skimming requires carful judgment of what is happening in the
marketplace in terms both of observing customer behaviour, and
of observing competitive response .market research is therefore
basic to the success of a skimming policy , and very careful
monitoring of sales is needed to know when to cut the price
again..
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2- Customer-based pricing
e) Psychological Pricing
-It relies on emotional responses from the consumer. Higher prices are often used as an indicator of quality
so some firms will use ''prestige pricing''.
-This applies in many service industries (restaurants
& hairdressers) . consumers' expectations of high –
priced are linked to higher quality of service provided.
Odd-even pricing practice of ending prices with Odd number (KD 9.95 ,KD 149 ,KD 3997)
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2- Customer-based pricing
f) Second-market discounting
--It is common on service industries &
International markets.
--A brand is sold at one price in one market &
in lower in other market( discount offer for a
certain people..)
--different prices for a brand in different
countries.
Ateyyah Al Zafiri
3- Competitor-based pricing
a) Penetration Pricing
--is used when the firm wants to capture large part of
the market quickly by lowering the price.
- firm to find out what competitors price for nearest
similar product
-Then to cut profits even below acceptable level.
-b) Predatory Pricing
-Prices are pitched below the cost of production in
order to bankrupt the competition to take over the
entire market
Ateyyah Al Zafiri
Marketing communications &
promotional tools chapter 9
Developing effective marketing
communication follows a six-stage
-Identify the target audience
-Determine the response sought
-Choose the message
-Choose the channel
-Select the source’s attributes
-Collect feedback
Marketing communications &
promotional tools chapter 9
Communications often follows the AIDA
approach:
Attention (getting the customer attention)
Interest (sending an interesting message)
Desire (lead to the desire for the product)
Action (Action to buy the product)
Marketing communications &
promotional tools chapter 9
The Promotional mix
Promotional mix is a recipe ( the ingredients are not
interchangeable )
The promotional mix consists of advertising ( Sales
promotion , Personal selling and PR )
The promotional mix shows how the mix operation (
Messages from the company about its products and it
self are transmitted via the element of the promotional
mix to ( consumers , employees, pressure groups and
other publics ) each of these groups is receiving the
messages from more than one transmitter
.
Marketing communications &
promotional tools chapter 9
Managing advertising
•advertising defined as a paid message inserted in a
medium , this definition can be broken down as
•Most advertising works below the conscious level
•Advertising is a non-personal communication , it has
some advantage such as ( it has to speak a large
number of people , the message has to be clear for all
the target audience to understand)
•advertising is higher under the following conditions
the product is standardized
there are many end users
the typical purchase amount is small
sales are made through channel intermediaries
Marketing communications &
promotional tools chapter 9
Different categories of advertisement
campaigns:
Teaser campaigns: here the advertiser runs an
initial advertisement that is meaningless in
itself. Once the advertisement has run for a
few weeks, the advertiser runs a second ad
which explains the first one.
Lifestyle campaign: product with desirable
lifestyle
Rational campaign: persuade by rational
argument ex. Medication, shampoo etc.
Managing Advertising- chapter 9
Purposes of Advertising
Can be used for the following purposes :
•To help the sales force to open sales
•To stimulate demand for the product category
•To promote specific brands
•To counteract competitors
•To suggest new ways to use the product
•To remind consumers about the product
•To reinforce consumers good feeling about
the product
•To support the value of the company’s shares
Managing Advertising- chapter 9
Advertising Planning Functions
•Setting the budget
•Identifying the target
•Media planning
•Defining the objectives
•Creating the advertising platform
Assessing advertising effectiveness by:
•Awareness
•Liking
•Interest
•Enjoyment
Managing Advertising- chapter 9
Techniques of Evaluating advertising
effectiveness :
•Pre-tests
•Coupon returns, or enquiries
•Post-campaign tests ( Post-tests )
•Recognition test and recall tests
Sales Promotion chapter 9
Some of the techniques of sales promotion :
•free taster samples in supermarkets
•money-off vouchers in press
advertisements
•two-for-the-price-or-one
•piggy-backing with another product
•instant-lottery or scratch cards
•free gift with each purchase
Sales Promotion chapter 9
Purposes of Trade promotions :
•To increase stock levels
•To gain more or better shelf space
•To launch a new product
•To even out fluctuating sales
•To counter the competition
Sales Promotion chapter 9
Purposes of Retailer promotions :
•To increase store traffic
•To increase frequency and amount
of purchase
•To increase store loyalty
•To increase own-brand sales
•To even out busy periods
Sales Promotion chapter 9
Purposes of Manufacturer promotions :
•To encourage trial
•To expand usage
•To attract new customers
•Trade up
•Load up
• To generate a mailing list for direct
marketing purposes
•To enhance brand values by running
some types of self-liquidating offers .
Managing Personal Selling chapter 9
Categories of Sales Persons :
1. order takers ( who collect orders for goods
from customers who have already decided to
buy )
2. order getters ( who find solutions for new
and existing customers and persuade them
to buy )
3. missionaries ( who seek out new customers
and prepare then to buy
4. support staff such as technical salespeople
who demonstrate technical products and
persuade users to adopt them
Managing the Salesforce chapter 9
Sales managers are responsible for:
• recruitment,
• training,
• payment
•motivation,
• controlling and evaluating sales force
activities .
•managing sales territories .
Managing Public Relations (PR)
chapter 9
PR =is defined as the planned and
sustained effort to establish and
maintain goodwill and mutual
understand between an organization
and its publics :(customers , employees ,
shareholders, trade bodies , suppliers,
Government official and society in general )
The public relations managers have the
task of co-ordinating all the activities that
make up the public face of the organization.
Managing Public Relations (PR)
chapter 9
PR Role ( handles the following activities):
•organizing press conferences
•staff training workshops
•events such as annual dinners
•handling incoming criticisms or
complaints
•grooming senior management for the
press or TV appearances
•internal marketing
Managing Public Relations (PR)
chapter 9
2 Types of PR
•Defensive PR who is responding to attacks
from outside the firm and counteracting
them as they arise .
•Proactive PR who is setting out
deliberately to influence opinion , without
waiting for an attack from outside .
Managing Public Relations (PR)
chapter 9
What PR will do
help build a positive image
counter bad publicity
improve employee motivation
improve the effectiveness of both advertising
and sales force .
What PR will not do
directly increase sales
cover up something adverse to the company
replace other promotional activities
Managing Public Relations (PR)
chapter 9
word-of-mouth
is probably the most powerful communication medium in
existence and can be used by marketers to good effect.
The reasons for the power of word-of-mouth ( advantage ):
•it is interactive , involving a discussion between the parties
•it allows for feedback and confirmation of the messages
•the source being a disinterested friend or acquaintance,
carries a lot more credibility than any marketer-generated
communications .
ways to encourage positive word-of-mouth
•press releases
•bring-a-friend schemes
•awards and certificates
•t-shirts
Integrating The Promotional Mix
chapter 9
The hierarchy of communication effects
model:
•brand ignorance
•awareness
•knowledge
•liking
•preference
•conviction
•Purchase
It is helpful in planning communications campaigns ,
since different communications methods and styles
can be used according to the consumer’s level on the
hierarchy.