Transcript Chapter 14 - B-K

Marketing Management
Chapter 14
Promotion and Pricing Strategies
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Five Major Promotional Objectives
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The Promotional Mix
● Promotional Planning
– Increasing complexity and sophistication of
marketing communications requires careful
planning to coordinate strategies
– Product Placement
– Guerrilla Marketing
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Advertising
● Advertising Media
– Newspaper
– Television
– Radio
– Magazines
– Direct Mail
– Outdoor Advertising
– Online and Interactive Advertising
– Sponsorship
● Advantages/disadvantages, examples
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Advertising
● Advertising Media
– Other Media Options
 Infomercials: 30-minute programs that
resemble regular TV programs, but are
devoted to selling goods or services
 Other Media options include:
– Ads in movie theaters
– Ads on airline movie screens
– Printed programs, Subway tickets
– Turnpike toll receipts
– Automated teller machines
– Naming stadiums and arenas
– Naming statistics on sports shows
– Naming trivia questions on sports shows
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Sales Promotion
● Sales promotion — non-personal 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
– Premiums—items given free or at a
reduced price with the purchase of another
product.
– Coupons offer small price discounts
– Rebates offer cash back to consumers
– Sample—a gift of a product distributed by
mail, door-to-door, in a demonstration, or
inside packages of another product
– Games, Contests, and Sweepstakes
– Promotional Products (Specialty
advertising)
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Personal Selling
● Personal selling—interpersonal promotional process
involving a seller’s face-to-face presentation to a
prospective buyer.
● Sales Tasks
– Order Processing—involves identifying customer
needs, pointing them out to customers, and
completing orders
– Creative Selling— skillful proposals of solutions
for the customer’s needs
● Missionary Selling— specialized salespeople
promote goodwill among indirect customers, often by
assisting customers in product use
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Personal Selling
● The Sales Process
– Seven Steps in
the Sales
Process
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Discussion
● In small groups
– pick a product
– develop 3 promotional schemes for it
 who are you targeting
 why do you think it will be effective
● Pick a product that needs to be sold face-toface
– what approach would you use?
– what would you do at each step of 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
● Pushing and Pulling Strategies
– Push strategy—intended to stimulate
personal selling of the good or service,
thereby pushing it through the channel
 Cooperative advertising
– Pull strategy—stimulate demand among
final users, who will then exert pressure on
the distribution channel to carry the good
or service
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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
– Other promotional elements can also
involve deception
 Salespeople have deceived customers
with misleading information
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Price in the Marketing Mix
● Price—
exchange
value of a good
or service.
● Pricing
Objectives
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Pricing Strategies
● Price Determination in Practice
– Determined in two basic ways—
 By applying the theoretical concepts of
supply and demand
 By completing cost-oriented analyses
● In reality, you price what the market will bear
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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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● The Markup Chain for a Hardcover Book
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Pricing Strategies
● Breakeven Analysis—pricing technique
used to determine the minimum sales volume
a product must generate at a certain price
level to cover all costs.
Breakeven point
=
(in units)
Total Fixed Cost
Contribution to Fixed Costs Per Unit
Breakeven point
Total Fixed Cost
= 1 – Variable Cost Per Unit/Price
(in dollars)
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● Breakeven Analysis
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Pricing Strategies
● Skimming pricing strategy—sets an
intentionally high price relative to the prices of
competing products
● Penetration pricing strategy—sets 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 price-cutting tactics
● Competitive Pricing—product priced at the
general level of competing offerings
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Consumer Perceptions of Prices
● Price-Quality Relationships
– Consumers’ perceptions of product quality
is closely related to price
– Most marketers believe that this perceived
price-quality relationship holds over a
relatively wide range of prices
– In other situations, marketers establish
price-quality relationships with
comparisons that demonstrate a product’s
value at the established price
● Price is a proxy for quality
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Consumer Perceptions of Prices
● Odd Pricing
– Odd pricing (charging $39.95 or $19.98
instead of $40 or 20)
– Commonly-used retail practice, as many
retailers believe that consumer favor
uneven amounts
– Items on sale may end in a different
number, e.g. 7: $17.97, $13.87.
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Discussion
● You are to promote a new nightclub, opening in 3
months
● Objective – create a full house on opening and for two
weeks thereafter
● You have $100,000 to spend
– Newspaper ad - $10K per ad
– Radio - $50K for 3 weeks
– Flyers - $500 per 1000 4 color flyers
– Personal promoters - $20 per hour
– Celebrity appearance - $10K
– Premiums – T-shirt $10 each
● Create a promotional campaign
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