Copyright © 2005 by South-Western, a division of Thomson ...

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Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 14

Promotion and Pricing Strategies

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Integrated Marketing Communications

• Promotion—communication link between buyer and seller that performs the function of informing, persuading, and influencing a purchase decision.– Focusing on Primary Demand– Focusing on Selective Demand

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Integrated Marketing Communications

• Coordination of all promotional activities – media advertising, direct mail, personal selling, sales promotion, and public relations – to produce a unified customer-focused message.– Focuses on customer needs to create a

unified promotional message– Firms need a broad view of promotion to

implement IMC

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The Promotional Mix• Promotional Mix—combination of

personal and nonpersonal selling techniques designed to achieve promotional objectives.– Personal Selling– Nonpersonal selling

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• Comparing the Components of the Promotional Mix

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• Five Major Promotional Objectives

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The Promotional Mix• Objectives of Promotional Strategy

– Providing Information• Major portion of U.S. advertising is information-

oriented

– Differentiating a Product• Positioning: establishing a place in the minds

of customers by communicating meaningful distinctions about the attributes, price, quality, or use of a good or service

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The Promotional Mix• Objectives of Promotional Strategy

– Increasing Sales• Most common objective of a promotional

strategy

– Stabilizing Sales• Sales contests often used during slack periods• Sales promotion materials often distributed to

customers to stimulate sales during off-seasons

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The Promotional Mix

• Objectives of Promotional Strategy– Accentuating the Product’s Value

• Promotional strategies can enhance product values by explaining often unrecognized ownership benefits

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The Promotional Mix• Promotional Planning

– Increasing complexity and sophistication of marketing communications requires careful planning to coordinate IMC strategies

– Product Placement

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Advertising

• Advertising—paid nonpersonal communication delivered through various media and designed to inform, persuade, or remind members of a particular audience.

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Advertising• Advertising and the Product Cycle

– Product and Institutional Advertising fall into one of three categories, based on whether the ads intend to inform, persuade, or remind

– Informative Advertising—used to build initial demand for a product in the introductory phase of the product life cycle

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Advertising• Advertising and the Product 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—form of persuasive product advertising that compares products directly with their competitors

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Advertising

• Advertising and the Product Cycle– Reminder-oriented advertising—often

appears in the late maturity or decline stages of the product life cycle to maintain awareness of the importance and usefulness of a product, concept, or institution

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Advertising

• Advertising Media– Must choose how to allocate advertising

budget– All media offer advantages and

disadvantages– Must consider cost and which media is best

suited for communication

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• Advertising Media

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Advertising• Advertising Media

– Newspaper• Continue to dominate local advertising• Ads easily tailored for local tastes and

preferences• Can coordinate newspaper messages with

other promotional efforts• Disadvantage: relatively short life span

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– Television• America’s leading national advertising medium• An expensive advertising medium• Price for a 30-second ad during weeknight

prime time on network television generally ranges from $100,000 to more than $500,000

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Advertising

• Advertising Media– Radio

• Average U.S. household owns five radios• Captive audience of listeners as they commute to

and from work• In major markets, many stations serve different

demographic groups with targeted programming

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Advertising

• Advertising Media– Magazines

• Includes consumer publications and trade journals • Can often customize their publications and target

advertising messages to different regions of the country

• A natural choice for targeted advertising

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Advertising

• Advertising Media– Direct Mail

• Average American household receives about 550 pieces of direct mail each year, including 100 catalogs

• e-mail another option• Must overcome junk-mail and spam classification

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Advertising• Advertising Media– Outdoor Advertising

• Just over 2 percent of total advertising spending• Share is growing• Majority of spending is for billboards• Other types include: signs in transit stations, stores,

airports, and sports stadiums• Disadvantages include:

– Brief messages are required– Mounting concern for aesthetic and environmental issues

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Advertising

• Advertising Media– Online and Interactive Advertising

• Range from Web sites and CDs to information kiosks

• Currently commands only 3 percent of media spending, but is the fastest-growing media segment

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– Sponsorship—involves providing funds for a sporting or cultural event in exchange for a direct association with the event

– Sports sponsorships attract two-thirds of total sponsorship dollars

– Primary benefits: exposure to the event’s audience and association with the image of the activity

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– 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

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Sales Promotion• Sales promotion—nonpersonal

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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• Spending on Consumer-Oriented Promotions

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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

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Personal Selling• Personal selling—interpersonal

promotional process involving a seller’s face-to-face presentation to a prospective buyer. Used most often when:– Customers are relatively few in number and

geographically concentrated– Product is technically complex, involves

trade-ins, and requires special handling– Product is high in price– Product moves through direct-distribution

channels

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Personal Selling

• The Sales Process– Seven Steps in

the Sales Process

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Personal Selling• Recent Trends in Personal Selling

– Telemarketing• Outbound telemarketing—when a sales

representative calls you at your place of business

• Inbound telemarketing—when the customer calls a toll-free phone number to get information or place an order.

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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• Selecting a Promotional Mix

– Guidelines for allocating promotional efforts and expenditures among personal selling and advertising:

• What is your target market?• What is the value of the product?• What time frame is involved?

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Promotional Strategies• Pushing and Pulling Strategies

– Push strategy• Cooperative advertising—allowances in

which firms share the cost of local advertising of their product or line with channel partners

– Pull strategy

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Price in the Marketing Mix• Price—

exchange value of a good or service.

• Pricing Objectives

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Price in the Marketing Mix• Profitability Objectives

– Perhaps the most commonly used objective in firms’ pricing strategies

– Some firms try to maximize profits by reducing costs rather than through price changes

• Volume Objectives– Bases pricing decisions on market share– Market share: the percentage of a market

controlled by a certain company or product

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