Pricing Promotional Activity

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Chapter 14Promotion and Pricing Strategies

Discuss how integrated marketing

communications relates to a firms

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 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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PromotionThe function of informing, persuading, andinfluencing a purchase decision.

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.

Elements include personal selling,

advertising, sales promotion, publicity, and

public relations.


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THE PROMOTIONAL MIXPromotional mix Combination of personal and non personal

selling techniques designed to achieve promotional

objectives.

Personal selling Interpersonal promotional process

involving a sellers face-to-face presentation to a

prospective buyer.

Non personal selling Advertising, sales promotion, directmarketing, 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 somemanagement 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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ACTIVITIES FOR STUDENTS

3. Prepare a list of 10 different types of products or services. For e

3. Prepare a list of 10 different types of products or services. For e

1.Prepare a list of 10 different types ofproducts or services. For each product,

determine which type of promotional

method(s) would be best for informingconsumers about the product or service. Why

did you select each method?

2.In teams of four to six, brainstorm strategiesto promote your school. Discuss the value ofdeveloping a public relations program for the

school to use within the community.


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ADVERTISINGAdvertising Paid nonpersonal communication

delivered through various media and designed to

inform, persuade, or remind members of aparticular audience.

Consumers receive 3,500 to 5,000 marketing

messages each day.

Television networks earn $22 billion annually from

advertising.


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Top 10 Advertisers 2nd Quarter 2004RANKADVERTISERSPENDING 2004 2nd Quarter*

1PROCTER & GAMBLE PHILIPPINES INC. PHP2,006,925,656.20

2UNILEVER PHILIPPINES INC. PHP 1,178,187,325.00

3COLGATE-PALMOLIVE PHILS. INC. PHP 894,479,783.80

4NESTLE PHILS. INC. PHP 672,961,808.20

5SAN MIGUEL CORPORATION PHP 537,265,362.00

6UNITED LABORATORIES INC. PHP 507,994,133.0

7GLOBE TELECOMMUNICATIONS INC. PHP 408,301,895.008JOHNSON & JOHNSON (PHILS.) INC. PHP 335,097,105.0

9MONDE DENMARK NISSIN BISCUIT CORP. PHP280,201,534.60

10JOLLIBEE FOODS CORPORATION PHP 229,727,419.60*Based on published rate cards


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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 messagingthat promotes a specific viewpoint on a public

issue as a way to influence public opinion and the

legislative process.


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Advertising and the Product Life Cycle

Informative 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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Television

Easiest way to reach a large number of consumers.

Variety of channels on cable and satellite networks allows advertisers totarget 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 two radios.

Commuters in cars are a ca tive audience.


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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 andhighly effective.

Direct Marketing Association helps marketers combat

negative attitudes by offering its members guidelines on

ethical business practices.
http://www.the-dma.org/http://www.the-dma.org/


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Outdoor Advertising

$3.2 billion annually, majority for billboards.

Requires brief messages.

Can be opposed by preservation and conservation groups

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 on their computer screen.


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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 PROMOTION

Sales promotionNon personal

marketing activities other than

advertising, personal selling, and public relations

that stimulate consumer purchasing

and dealer effectiveness.


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Consumer-Oriented Promotions

Premiums, 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 asample

will try it.

.


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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, orslogan 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 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 militarty.


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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 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 Process


based on customers needs and responses.

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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The Sales Process



Handling Objections

Use objections as an opportunity to answer

questions and explain how the product willbenefit the customer.


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The Sales Process



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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The Sales Process



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 Relations

Public 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.

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 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 toend 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 distributionchannel.

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.

Deception Deliberately making promises that are untrue,

such as guaranteed weight loss in five days, get-rich-quickschemes 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 College Campuses

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

generating backlash.


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PRICING OBJECTIVES IN THEMARKETING MIX

Price Exchange value of a good or service.


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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.


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Pricing to Meet Competition

Meeting competitors price so price becomesa 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 andmaintain an image of quality and exclusiveness.

Recognition of the role of price in communicating

an overall image for the firm and its products.


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PRICING STRATEGIES

Pricing is influenced by people in different areas of acompany.

Price Determination in Practice

Cost-based pricing Adding a percentage (markup) tothe base cost of a product to cover overhead costs and

generate profits.

Actual markup used varies by such factors as brandimage and type of store.

Example: Typical clothing markup by retailers is

double the wholesaler price.


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Target return pricing - set the price to

achieve a target return-on-investment.

Value-based pricing - base the price on the

effective value to the customer relative to

alternative products.

Psychological pricing - base the price onfactors such as signals of product quality,

popular price points, and what the

consumer perceives to be fair.


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Breakeven Analysis

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

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.

attempts to "skim the cream" off the top of the market by

setting a high price and selling to those customers who

are less price sensitive. Skimming is a strategy used to

pursue the objective of profit margin maximization


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Penetration Pricing

Setting a low price as a major marketingweapon.

Often used with new products.

Pursues the objective of quantity

maximization by means of a low price


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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 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

firmsprices.

Concentrate marketing efforts on the product, distribution, and

promotional elements of the marketing mix.


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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 lessthan they really are.

Example: $1.99 or $299.

Also used as a signal a product is on sale.


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ACTIVITY: ROLE PLAY ASCENE WHERE IN GROUP OF

STUDENTS WILL ACT AS ASALES AGENT AND A GROUPOF STUDENTS WILL ACT AS

A BUYER. FOLLOW THESELLING PROCESS WHERE

OBJECTIONS MUST EXIST


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ACTIVITY: BASED ON TV/RADIO/ PRINT

ADVERTISEMENT NAME ANADS THAT FALLS UNDER

PRODUCT, INSTITUTIONALAND CAUSE ADVERTISING

@ LEAST 3 ADS PERCATEGORY

Pricing Promotional Activity

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