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Contemporary Business 12th ed.
Chapter 14 Summary
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PROMOTION AND PRICING STRATEGIES
1401 – Integrated Marketing Communications
An integrated marketing communications strategy, or IMC, focuses on the customer’s
need to create a unified promotional message in its ads, in-store displays, product
samples, and presentations by company sales representatives. Through the IMC,
marketing managers create a unified personality and message for a good or service that is
aligned with the firm’s overall organizational objectives and marketing goals.
1402 – The Promotional Mix
A promotional mix blends the many facets of promotion into a cohesive plan. The mix
has two components, personal and nonpersonal selling, that marketers use to reach their
target audience and effectively communicate their message. Personal selling involves
direct person-to-person communication, such as a face-to-face sales presentation or a
conversation via telephone or videoconference. Nonpersonal selling includes advertising,
sales promotion, direct marketing, and public relations. By selecting the most effective
combination of promotional mix elements, a firm can achieve its promotional objectives.
Common promotional objectives include providing information, differentiating a product,
increasing or stabilizing sales, and accentuating a product’s value.
1403 – Advertising
Many of the thousands of marketing messages consumers receive each day come in the
form of advertising, paid nonpersonal communication targeted at large numbers of
potential buyers. Firms use product advertising to sell specific products and rely on
institutional advertising to promote concepts, ideas, and philosophies. Advertising goals
change as products move through the product life cycle. Informative advertising happens
early in the life cycle as firms attract potential buyers with information about the benefits
of a new product. Firms use persuasive advertising during a product’s growth and
maturity phases to improve a product’s competitiveness in the market. Reminder-oriented
advertising, common toward the end of a product’s life cycle, is used to maintain product
awareness. Advertising messages are carried in various media, such as television,
newspapers, radio, magazines, direct mail, outdoor advertising outlets such as billboards,
online, and sponsorship, each with distinct cost structures, audiences, benefits, and
drawbacks.
1404 – Sales Promotion
An increasingly important part of the promotional mix is sales promotion, such as
coupons, product samples, and rebates that support advertising and personal selling.
Consumer-oriented sales promotion is designed to attract new customers and retain
existing ones. Forty percent of sales promotion dollars go to premiums, items given free
or at a reduced cost with the purchase of another product. Other common consumer-
Contemporary Business 12th ed.
Chapter 14 Summary
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oriented sales promotion strategies include contests, sweepstakes, and specialty
advertising such as a T-shirt imprinted with a company logo. Companies use many of the
same techniques in their campaigns targeted at retailers and wholesalers. Techniques such
as trade promotion, point-of-purchase advertising, and exhibitions at trade shows help
companies introduce new products and generate sales leads.
1405 – Personal Selling
Many firms view personal selling, the act of person-to-person promotional presentations,
as the key to marketing effectiveness. Firms are likely to emphasize personal selling if
customers are few in number and geographically concentrated, if the product is
technically complex, involves trade-ins, and requires special handling, if the product is
relatively expensive, and if the product moves through direct-distribution channels. All
sales activities assist customers in some way, but most usually involve a mix of three
basic tasks: order processing, creative selling, and missionary selling. Creative selling
promotes a good or service that requires close analysis or that has benefits that are not
obvious. Missionary selling involves the promotion of company goodwill through
technical or operational assistance offered by the buyer. Personal selling often takes the
form of telemarketing, selling conducted by telephone, which combines a high return on
expenditures, immediate response, and an opportunity for two-way conversation.
Telemarketing can be outbound—in which a firm calls consumers—or inbound, in which
consumers contact the firm. Outbound telemarketers are bound by the 1996
Telemarketing Sales Rules, which specifies legal parameters for acceptable telemarketing
behavior and stiff fines for violations.
Regardless of its form, the sales process typically follows seven steps: first, prospecting,
qualifying potential customers; second, approaching potential customers; third, product
presentation; fourth, product demonstration that involves the customer; fifth, handling
objections; sixth, closing, or asking the prospect to buy; seventh, follow-up that provides
reassurance about the buying decisions.
The promotional mix also includes public relations, which supports the advertising,
personal selling, and sales promotion processes. Public relations refers to an
organization’s communications with its various public audiences. Most companies rely
on publicity, nonpersonal stimulation of demand by unpaid placement of a company’s
messages in print or broadcast media. Companies try to get publicity in a variety of ways,
including through press releases, press conferences, and event sponsorship.
1406 – Promotional Strategies
By blending advertising, sales promotion, personal selling, and public relations,
marketers create an integrated promotional mix that reflects the market, product type,
stage in the product life cycle, price, and promotional budget. They then implement either
pulling or pushing promotional strategies to reach their market. A pushing strategy relies
on personal selling to market an item to wholesalers and retailer, not to the end user. A
Contemporary Business 12th ed.
Chapter 14 Summary
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pulling strategy promotes a product by generating consumer demand that prompts
retailers or distributors to ask for the product.
1407 – Ethics in Promotion
Promotion raises ethical issues because of its influence on consumers, its potential for
creating unnecessary needs and wants, and its delivery of inappropriate messages to
children. One common area of controversy is puffery and deception, exaggerations or
overtly false statements about a product’s benefits. A second controversial area is
promotion aimed at children and teenagers, who combine huge purchasing power with a
susceptibility to advertising messages. A third area of ethical concern is promotion in
pubic schools and on college campuses.
1408 – Pricing Objectives in the Marketing Mix
Price is a major factor in all consumer-buying decisions. When setting prices, businesses
typically have four categories of pricing objectives. Companies always consider how
pricing will affect profitability, or the difference between a firms revenues and expenses.
They also consider the impact of pricing on their volume objectives, such as expanding
market share. A third objective is related to the marketplace, as companies price their
goods to be competitive with those of other companies, a strategy that can backfire if
companies in an industry engage in a price war. Companies also must consider prestige
objectives because pricing plays a role in customers’ perceptions of brand image and
quality.
1409 – Pricing Strategies
Prices are set strategically based on input from different areas in a company, often
including accountants, financial managers, marketers, engineers, designers, and systems
analysts. There are two basic approaches to pricing: applying the principles of supply and
demand or competing a cost-oriented analysis. Most firms adopt cost-based pricing
formulas that calculate total costs per unit and then add markups to cover overhead costs
and generate profits. Businesses also usually conduct a breakeven analysis to determine
the minimum sales volume a product must generate to cover all costs. Sales beyond the
breakeven point will generate profits, and sales volume below the breakeven point will
result in losses. Companies consider the break-even point when setting prices to help
them identify the best price, one that attracts enough customers and produces the greatest
profit potential. Prices should grow out of one of four pricing strategies: a skimming
strategy, setting a price artificially high to quickly recover start-up costs; a penetration
strategy, setting a price well below competition to enter a competitive market and then
raising it later; an everyday low pricing strategy, maintaining continuously low prices;
and competitive pricing, matching other firms’ prices to reduce the importance of price
competition.
1410 – Consumer Perceptions of Prices
Contemporary Business 12th ed.
Chapter 14 Summary
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Marketers must also consider the impact of prices on the way in which their goods are
perceived. Consumers perceive a relationship between price and quality, believing a high
price indicates both prestige and quality. Marketers also use the practice of odd pricing,
prices such as $19.99 rather than $20, because they believe consumers uneven amounts
or amounts that sound less than they really are. Others use this strategy as cues that an
item has been marked down.