Promotion and Pricing Strategies

1. Chapter 14
Promotion and Pricing Strategies
Learning Goals
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 alter-
native pricing strategies.
Discuss consumer
perceptions of price.
1
2
3
4
5
6
7
8
9

2. 15-2
Chapter OverviewChapter Overview
 PromotionPromotion:
function of informing,
persuading, and
influencing the
consumer’s purchase
decision
 MarketingMarketing
CommunicationsCommunications:
transmission from a
sender to a receiver of
a message dealing
with the buyer-seller
relationship

3. 15-3
Integrated Marketing CommunicationsIntegrated Marketing Communications
 Coordination of all promotional activities –
media advertising, direct mail, personal
selling, sales promotion, and public relations
– to produce a unified customer-focused
promotional message
Success of any IMC program depends
critically on identifying the members of an
audience and understanding what they
want

4. 15-4
 Importance of TeamworkImportance of Teamwork
IMC requires a total strategy
including all marketing activities, not
just promotion
Successful implementation of IMC
requires that everyone involved in
every aspect of promotion – public
relations, advertising, personal
selling, and sales promotion –
function as a team

6. 15-6
Chrysler Crossfire: Using a Web Site and a
Toll-free Number in an IMC Campaign

7. 15-7
• Role of Databases in Effective IMCRole of Databases in Effective IMC
ProgramsPrograms
– With the growth of the Internet, marketers
have been given the power to gather
information faster and to organize it
easier than ever before
– By sharing this knowledge appropriately
among all relative parties, a firm can lay
the foundation for a successful IMC
program

8. 15-8
The Communications Process
• An effective promotional message
accomplishes three tasks:
– It gains the receiver’s attention
– It achieves understanding by both receiver
and sender
– It stimulates the receiver’s needs and
suggests an appropriate method of
satisfying them

9. The Top 5The Top 5
Airlines!Airlines!
Traveler Magazine
FlynnFlynn
The bikesThe bikes
the prosthe pros
use.use.
25% Off
Coupon
• AdvertisingAdvertising
• Personal sellingPersonal selling
• PublicityPublicity
• Sales promotionSales promotion
Communication Techniques

10. Promotional MixPromotional Mix

11. Purposes of PromotionPurposes of Promotion
To tell consumers about a company’sTo tell consumers about a company’s
……
GoodsGoodsServicesServicesImagesImagesIdeasIdeas

12. Purposes of PromotionPurposes of Promotion
To persuade consumers to buyTo persuade consumers to buy

13. Promotion’s Recipe
for Success:
Mix various
communication
activities together and
serve to potential
customers until desired
outcome is achieved.

14. The Combination, or Blend, ofThe Combination, or Blend, of
Marketing Communication Channels IsMarketing Communication Channels Is
Called the...Called the...

15. ImportanceImportance
of theof the
PromotionalPromotional
MixMix
• Plays a key role in obtainingPlays a key role in obtaining
and keeping customersand keeping customers
• Enables businesses toEnables businesses to
communicate effectively withcommunicate effectively with
customerscustomers
• Informs consumers aboutInforms consumers about
goods/services and persuadesgoods/services and persuades
them to buythem to buy

16. THE PROMOTIONAL MIX
Promotional mix Combination of personal and no personal selling techniques
designed to achieve promotional objectives.
Personal selling Interpersonal promotional process involving a seller’s face-to-
face presentation to a prospective buyer.
• No personal selling Advertising, sales promotion, direct marketing, and public
relations.

17. Major Decisions in Advertising
Objectives SettingObjectives Setting
Budget DecisionsBudget Decisions
Message DecisionsMessage Decisions Media DecisionsMedia Decisions
Campaign EvaluationCampaign Evaluation

18. Informative Advertising
Build Primary Demand
Informative Advertising
Build Primary Demand
Persuasive Advertising
Build Selective Demand
Persuasive Advertising
Build Selective Demand
Comparison Advertising
Compares One Brand to
Another
Comparison Advertising
Compares One Brand to
Another
Reminder Advertising
Keeps Consumers Thinking
About a Product.
Reminder Advertising
Keeps Consumers Thinking
About a Product.
Advertising Objectives
• Specific Communication Task
• Accomplished with a Specific Target Audience
• During a Specific Period of Time

19. 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-fal fairness treatment
• 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. -Telco call rate ad

20. The Five Ms of Advertising
Mission
Sales
goals
Adver-
tising
objectives
Money
Factors to
consider:
Stage in PLC
Market share
and con-
sumer base
Competition
and clutter
Advertising
frequency
Product
substituta-
bility
Message
Message generation
Message evaluation
and selection
Message execution
Social-responsibility
review
Media
Reach, frequency,
impact
Major media types
Specific media
vehicles
Media timing
Geographical
media allocation
Measure-
ment
Communi-
cation
impact
Sales
impact

21. Advertising Budget Factors
Stage in the
Product Life Cycle
Market Share &
Consumer Base
Competition &
Clutter
Advertising
Frequency
Product
Substitutability

22. Typical
Message
Execution
Styles
Typical
Message
Execution
Styles
Testimonial
Evidence
Testimonial
Evidence Slice of LifeSlice of Life
Scientific
Evidence
Scientific
Evidence
LifestyleLifestyle
Technical
Expertise
Technical
Expertise
FantasyFantasy
MusicalMusical
Personality
Symbol
Personality
Symbol
Mood or
Image
Mood or
Image
Turning the “Big Idea” Into an Actual Ad to Capture the
Target Market’s Attention and Interest.
Advertising Strategy-Message Execution

23. Advertising Program EvaluationAdvertising Program Evaluation
Communication Effects
Is the Ad Communicating Well?
Communication Effects
Is the Ad Communicating Well?
Advertising Evaluation
Sales Effects
Is the Ad Increasing Sales?
Sales Effects
Is the Ad Increasing Sales?

25. Objectives of Promotional Strategy

26. 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.

27. 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.

29. 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.

30. • In U.S., automotive, retail, and communications companies spend nearly $4
billion annually on advertising.

31. 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.

32. Advertising Media
• All media offer advantages and disadvantages

33. 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.
Newspapers
• Dominate local advertising.
• Easy to coordinate with other promotional efforts.
• Relatively short life span.
Radio
• Average household owns five radios.
• Commuters in cars are a captive audience.
• Satellite radio offers new opportunities.

34. 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.

35. Online and Interactive Advertising
• 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.

36. SALES PROMOTION
Sales promotion Nonpersonal marketing
activities other than advertising,
personal selling, and public relations
that stimulate consumer purchasing
and dealer effectiveness.

37. Why the increase in Sales
Promotion?
• Growing retailer power
• Declining brand loyalty
• Increased promotional sensitivity
• Brand proliferation
• Fragmentation of consumer market
• Short-term focus
• Increased managerial accountability
• Competition
• Clutter

38. Consumer Promotion
Consumer-Promotion
Objectives
Consumer-Promotion
Tools
Point-of-Purchase
Displays
Point-of-Purchase
Displays
PremiumsPremiums
Price PacksPrice Packs
Cash RefundsCash Refunds
CouponsCoupons
SamplesSamples
Patronage
Rewards
GamesGames
SweepstakesSweepstakes
ContestsContests
Advertising
Specialties
Advertising
Specialties
Patronage
Rewards
Entice Consumers to
Try a New Product
Entice Consumers to
Try a New Product
Lure Customers Away
From Competitors’ Products
Lure Customers Away
From Competitors’ Products
Get Consumers to “Load Up’
on a Mature Product
Get Consumers to “Load Up’
on a Mature Product
Hold & Reward Loyal
Customers
Hold & Reward Loyal
Customers
Consumer Relationship
Building
Consumer Relationship
Building

39. 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, logo, or slogan
of an organization.-key ring, tea shirt, bag etc

40. Trade-Promotion
Objectives
Trade-Promotion
Tools
Specialty
Advertising
Items
Specialty
Advertising
ItemsContestsContests
Free GoodsFree Goods
Buy-Back
Guarantees
Buy-Back
Guarantees
AllowancesAllowances
Price-OffsPrice-Offs
Patronage
Rewards
Push MoneyPush Money
DiscountsDiscounts
PremiumsPremiums
Displays
Persuade Retailers or
Wholesalers to Carry a Brand
Persuade Retailers or
Wholesalers to Carry a Brand
Give a Brand Shelf SpaceGive a Brand Shelf Space
Promote a Brand in
Advertising
Promote a Brand in
Advertising
Push a Brand to ConsumersPush a Brand to Consumers
Trade Promotions

41. 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.

42. Business-Promotion
Objectives Business-Promotion
Tools
Generate Business LeadsGenerate Business Leads
Stimulate PurchasesStimulate Purchases
Reward CustomersReward Customers
Motivate SalespeopleMotivate Salespeople
ConventionsConventions
Trade ShowsTrade Shows
Sales ContestsSales Contests
Business-to-Business
Promotion

43. When might you decide to use
Personal Selling?
• Tight budget (straight commission)
• Concentrated Market
– Few buyers
– High value product
• Product must be customized
• Personal contact important
• Must demonstrate product
• Product involves trade-in/up

44. Personal SellingPersonal Selling
Determines client needs/wants and respondsDetermines client needs/wants and responds
through planned, personalized communicationthrough planned, personalized communication
that influences purchase decisions and enhancesthat influences purchase decisions and enhances
future business opportunitiesfuture business opportunities
Are you planning
on replacing all
of your computers
at once?
My budget won’t
allow me to replace
them all at once,
but I want them to
be compatible.
You might want
to consider leasing
computers. You can
get free service
and upgrade to a
newer model whenever
you want!

45. 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 military.

46. Selling Advantages
• Immediate feedbackImmediate feedback
• FlexibilityFlexibility
I like the sound
of this stereo,
but I think it’s a
little large for
my dorm room.
We do carry a
bookshelf model
with similar
sound quality.
Selling Disadvantage
On a per contact basis,On a per contact basis,
selling is the most expensiveselling is the most expensive
form of promotion.form of promotion.

47. 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 Commission’s 1996 Telemarketing Sales Rule.

48. The Sales Process

49. 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
customer’s product lines and other pertinent
information before making the initial contact.

50. 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.

51. 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.

52. 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.

53. 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.

54. 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.

55. 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.

56. 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.

57. 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
• College students have $122 billion in buying power.

59. Mass media exposure
Source: NMS Study
TV is still a growing media

60. Cable TV Connection
CnS Penetration Trend in TV owning Households
Year Urban Rural All
2005 34.10% 7.20% 20.60%
2008 52.70% 21.10% 34.70%
2010 75.00% 37.00% 53.80%
Upcoming Channels

61. • Bangladesh Beter
– Many substations (Ka, Kha etc.)
– Signal (Recent FM Version of Bangladesh Beter)
• Radio Forti
– Dhaka Sylhet Rajshahi
– Chittagong Khulna Barishal
– Cox’s Bazar Rajshahi
• Radio Today
– Dhaka Chittagong
– Sylhet Khulna
– Bogra Cox’s Bazar
• Radio Amar -
• ABC Radio
• Radio Shadhin
FM is growing

62. Print at a glance
Newspaper : 297
 National : 101
 Regional : 196
Magazines : 174
 Monthly : 30
 Fort-nightly : 20
 Weekly : 122
Source: Dept. of Film & Publications; NMS’10
Print reach is 28.1%
Both male & female readership has increased

63. Team Unilever 63
2.7 million
Top Local Websites
Digital is the fastest growing Media
Facebook is phenomenally popular among the online users

64. PRICING OBJECTIVES IN THE
MARKETING MIX
Price Exchange value of a good or service.

65. 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.

66. 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.

67. 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.

68. 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

69. 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

70. 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

71. 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.

72. 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.

73. 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.