Contemporary business, 12 by kurts CB12eCh14

Chapter 14 Promotion and Pricing Strategies al s o G ng i n r Lea Discuss how integrated marketing communications relates to a firm’s 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 pulling promotional 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 alternative pricing strategies Discuss consumer perceptions of price Promotion The function of informing, persuading, and influencing a purchase decision Integrated marketing communications (IMC) Coordination of all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified customer-focused message INTEGRATED MARKETING COMMUNICATIONS • Must take a broad view and plan for all form of customer contact • Create unified personality and message for the good, service, or brand • Elements include personal selling, advertising, sales promotion, publicity, and public relations 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-toface presentation to a prospective buyer • Nonpersonal 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 Product’s 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 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 • In U.S., automotive, retail, and communications companies spend nearly $4 billion annually on advertising Public Relations Public relations Public organization’s 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 firm’s 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 company’s 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 suppliers—retailers or local distributors—carry 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 • Legal because it doesn’t guarantee anything but raises ethical questions • May ultimately undermine the credibility of a firm’s marketing messages • 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 • College students have $122 billion in buying power 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 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 Finding the Breakeven Point 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 Finding the Breakeven Point 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 Finding the Breakeven Point 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 firm’s high-end product from those of competitors • Helps a firm recover its product development costs before competitors enter the field Penetration Pricing • Setting a low price as a major marketing weapon • Often used with new products Everyday Low Pricing and Discount Pricing • ELP Maintaining continuous low prices rather than relying on short-term pricecutting 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 ... 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... 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... or operational assistance to the customer Telemarketing • Personal selling conducted by telephone; regulated by the Federal Trade Commission’s 1996 Telemarketing Sales Rule The Sales Process The