Intro to Business Ch. 13 - Promotion and Pricing Strategy

The Components of the Promotional Mix

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Everyday Low Pricing (EDLP)

A strategy devoted to continuous low prices rather than relying on short-term price cutting tactics such as cents-off coupons, rebates, and special sales.

Competitive Pricing

A strategy that ties to reduce the emphasis on price competition by matching firms' prices and concentrating their own marketing efforts on product, distribution, and promotional elements of the marketing mix.

Infomercials (Direct-Response Television (DRTV))

Are a form of broadcast direct marketing; 30 min programs that resemble regular TV programs, but are devoted to selling goods or services.

Profitability Objectives

Are the most common objectives included in the strategic plans of most firms. Profits are the revenue a company brings in, minus its expenses.

Persuasive Advertising

Attempts to improve the competitive status of a product, institution, or concept, usually in the growth or maturity stage of the product life cycle.

Pulling Strategy

Attempts to promote a product by generating consumer demand for it, primarily through advertising and sales promotion appeals.

Point-of Purchase (POP) Advertising

Consists of displaying or demonstrations that promote products when and where consumers buy them, such as retail stores.

Sales Promotion

Consists of forms of promotion such as coupons, products samples, and rebates that support advertising and personal selling.

Product Advertising

Consists of messages designed to sell a particular good or service.

Promotional Mix

Consists of two components - personal and nonpersonal selling - that marketers need to combine to meet the needs of their firm's target customers and effectively and efficiently communicate its message to them.

Primary Demand

Consumer desire for a general product category. (Some promotional strategies try to develop this.)

Prestige Pricing

Establishes a relatively high price to develop and maintain an image of quality and exclusiveness.

Product Placement

Form of promotion in which marketers pay placement fees to have their products showcased in various media, ranging from news papers and magazines to television and movies.

Cost-Based Pricing

Formulas that calculate total costs per unit and then add markups to cover overhead coast and generate profits.

Price War

The ability of competitors to match a price cut. Leads many marketers to try to avoid price wars by favoring other strategies, such as adding value, improving quality, educating consumers, and establishing relationships.

Price

The exchange value of a good or service. This becomes a major factor in consumer buying decisions.

Breakeven Point

The level of sales that will generate enough revenue to cover all of the company's fixed and variable costs. It is the point at which total revenue just equals to total costs. Sales above breakeven point = profits Sales below breakeven point = losses

Seven Steps in the Sales Process

1. Prospecting and Qualifying- Identify Potential Customer 2. Approach- Prepare for the Sales Interview 3. Presentation- Tell the Product's Story 4. Demonstration- Involve the Customer in the Presentation 5. Handling Objects- Answer the Prospect's Questions 6. Closing- Ask for the Order 7. Follow-Up- Thank the Customer and Begin the Process of Maintaining Mutually Beneficial Relationships That Result in Future Sales

Sample

A gift of a product distributed by mail, door to door, in a demonstration, or inside packages of another product.

Creative Selling

A persuasive type of promotional presentation. Promotes a good or service whose benefits are not readily apparent or whose purchase decision requires a close analysis of alternatives.

Outbound Telemarketing

A sales representative that calls you

Cooperative Advertising

Allowances provided by marketers in which they share the cost of local advertising of their firm's product or product line with channel partners.

Missionary Selling

An indirect form of selling in which the representative promotes goodwill for a company or provides technical or operational assistance to the customer.

Public Relations

An organization's communications and relationships with its various public audiences, such as customers, vendors, news media, employees, stockholders, the government, and the general public.

Volume Objective

Bases pricing decisions on market shares, the percentage of a market controlled by a certain company or product.

Informative Advertising

Builds initial demand for a product in the introductory phase of the product life cycle.

Discount Pricing

Businesses hope to attract customers by dropping prices for a set period of time.

Nonpersonal Selling

Consists of advertising, sales promotion, direct marketing, and public relations. Advertising is the best-known form of nonpersonal, but sales promotions account for about half of these marketing expenditures.

Variable Costs

Change with the level of production, as labor law and raw materials do.

Comparative Advertising

Compares products directly with their competitors - either by name or inference.

Total Revenue

Determined by multiplying price by the number of units sold.

Selective Demand

Desire for a specific brand. (Most promotional strategies develop this)

Breakeven Analysis

Determine the minimum sales volume a product must generate at a certain price level to cover all costs.

Consumer-Oriented Promotions

Goal is to get new and existing customers to try or buy products. Premiums, Coupons, Rebates, and Samples

Detailers

Introduce the firm's latest offerings.

Guerrilla Marketing

Involves innovative, low-cost marketing efforts designed to get consumers' attention in unusual ways.

Institutional Advertising

Involves messages the promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities.

Sponsorship

Involves providing funds for a sporting or cultural event in exchange for direct association with the event. Sporting sponsorship's attract 2/3 of sponsorship dollars in the US alone.

Specialty Advertising (Advertising Specialties)

Involves the gift of useful merchandise carrying the name, logo, or slogan of a profit-seeking business or a not-for-profit organization.

Premiums

Items given for free or at a reduced price with the purchase of another product. Ex. Clinique - Free sample kit with purchase of prooducts Ex. Burger King - Free toy with purchase of kids meal

Positioning

Marketers attempts to establish their products in the minds of customers. The idea is to communicate to buyers meaningful distinctions about the attributes, prices, quality, or use of a good or service.

Integrated Marketing Communication (IMC)

Marketers coordinate all promotional activities - media advertising, direct mail, personal selling, sales promotion, and public relations - to produce a unified customer-focused promotional strategy.

Order Processing

Most often related to retailing or wholesale firms. Involves identifying customer needs, pointing them out to customers, and completing orders.

Publicity

Nonpersonal stimulation of demand for a good, service, place, idea, event, person, or organization by unpaid placement of information in print or broadcast media. Ex. Press releases generate publicity, as does news coverage.

Rebates

Offer cash back to customers who mail in required proofs of purchase.

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.

Advertising

Paid nonpersonal communication usually targeted at large numbers of potential buyers.

Telemarketing

Personal selling conducted by the telephone, provides a firm's marketers with a high return on expenditures, an immediate response, and an opportunity for personalized two-way conversation. Sales representatives make their presentations over the phone.

Odd Pricing

Pricing method using uneven amounts, which sometimes appear smaller than they really are to customers.

Cause Advertising

Promotes a specific viewpoint on a public issue as a way to influence public opinion and legislative process about issues such as literacy, hunger and poverty, and alternative energy sources.

Objectives of Promotional Strategy

Providing Information Differentiating a Product Increasing Sales Stabilizing Sales Accentuating the Product's Value

Pushing Strategy

Relies on personal selling to market an item to wholesalers and retailers in a company's distribution channels. Promoted to members of the marketing channel, not the end user.

Over-the-Counter Selling

Sales activities in retailing and some wholesale locations, where customers visit the the seller's facility to purchase the items.

Trade Promotion

Sales promotion geared to marketing intermediaries rather than to consumers. Marketers can use trade promotions to encourage retailers to stock new products, continue carrying existing ones, and promote both new and existing products effectively to consumers.

Field Selling

Sales representatives who make sales calls on prospective customers at their business. Ex. Companies that sell major industrial equipment typically rely heavily on field selling.

Coupons

Small price discount when customers purchase the promoted product(s).

Penetration Pricing

Strategy sets a low price as a major marketing weapon.

Skimming Pricing

Strategy sets an intentionally high price relative to the prices of competing products

Fixed Costs

Such as insurance premiums and utility rates charged by water, natural gas, and electric power suppliers are constants regardless of the production rate.

Personal Selling

The most basic form of promotion: a direct person-to-person promotional presentation to a potential buyer.

Promotion

The process of informing, persuading, and influencing a purchase decision.

Total Cost

The sum of total variable costs and total fixed costs.

Inbound Telemarketing

When you call a toll-free phone number to get product information or place an order.