Chapter 14

Promotion and Pricing Strategies

5 Describe pushing and pulling
promotional strategies. involved in promotion.

Discuss how integrated marketing communications relates to a firms overall promotion strategy. outline the objectives of promotion. Summarize the different types of Outline the roles of sales promotion, personal selling, and public relations.

6 Discuss the major ethical issues 7

Outline the different types of pricing strategies. Discuss how firms set prices in describe the four alternative pricing strategies.

2 Explain promotional mix and

3 advertising and advertising media. 4

8 the marketplace, and

9 Discuss consumer

perceptions of price.

Promotion The function of informing, persuading, and influencing 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 customerfocused message.

INTEGRATED MARKETING COMMUNICATIONS

Must take a broad view and plan for all form of customer contact.

Elements include personal selling, advertising, sales promotion, publicity, and public relations.

THE PROMOTIONAL MIX

Promotional 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, direct marketing, and public relations.

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 Products 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.

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

ACTIVITIES FOR STUDENTS

1.Prepare a list of 10 different types of products or services. For each product, determine which type of promotional method(s) would be best for informing consumers about the product or service. Why did you select each method?

2.In teams of four to six, brainstorm strategies to promote your school. Discuss the value of developing a public relations program for the school to use within the community.

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.

Top 10 Advertisers 2nd Quarter 2004 RANK ADVERTISER SPENDING 2004 2nd Quarter* 1 PROCTER & GAMBLE PHILIPPINES INC. PHP 2,006,925,656.20 2 UNILEVER PHILIPPINES INC. PHP 1,178,187,325.00 3 COLGATE-PALMOLIVE PHILS. INC. PHP 894,479,783.80 4 NESTLE PHILS. INC. PHP 672,961,808.20 5 SAN MIGUEL CORPORATION PHP 537,265,362.00 6 UNITED LABORATORIES INC. PHP 507,994,133.0 7 GLOBE TELECOMMUNICATIONS INC. PHP 408,301,895.00

8 JOHNSON & JOHNSON (PHILS.) INC. PHP 335,097,105.0

9 MONDE DENMARK NISSIN BISCUIT CORP. PHP 280,201,534.60 10 JOLLIBEE FOODS CORPORATION PHP 229,727,419.60 *Based on published rate cards

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 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. 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.

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. 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 captive audience.

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 Experts predict sales from online advertising will double by 2010. 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 Non personal marketing activities other than

advertising, personal selling, and public relations that stimulate consumer purchasing and dealer effectiveness.

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 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, or slogan of an organization

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.

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.

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 Commissions 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 customers product lines and other pertinent information before making the initial contact.

The Sales Process

A good salesperson varies the sales process based on customers needs and responses. 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.

The Sales Process

A good salesperson varies the sales process based on customers needs and responses. Handling Objections Use objections as an opportunity to answer questions and explain how the product will benefit the customer.

The Sales Process

A good salesperson varies the sales process based on customers needs and responses. 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.

The Sales Process

A good salesperson varies the sales process based on customers needs and responses. Follow-Up An important part of building a long-lasting relationship. May determine whether the customer will make another purchase.

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.

Publicity
Publicity 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.

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 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 suppliersretailers or local distributorscarry 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.

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

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

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 Practice Cost-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.

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 on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair.

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.

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

Penetration Pricing Setting a low price as a major marketing weapon. Often used with new products. Pursues the objective of quantity maximization by means of a low price

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.

ACTIVITY: ROLE PLAY A SCENE WHERE IN GROUP OF STUDENTS WILL ACT AS A SALES AGENT AND A GROUP OF STUDENTS WILL ACT AS A BUYER. FOLLOW THE SELLING PROCESS WHERE OBJECTIONS MUST EXIST

ACTIVITY: BASED ON TV/ RADIO/ PRINT ADVERTISEMENT NAME AN ADS THAT FALLS UNDER PRODUCT, INSTITUTIONAL AND CAUSE ADVERTISING @ LEAST 3 ADS PER CATEGORY