Download Marketing Strategies - aishscbusinessstudies

Class – Soaring Eagle
Price, Promotion, Place, E-Marketing
Price
Price: "amount of money a customer is prepared to offer in exchange for a product"
PRICING METHODS:
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Pricing decisions - influenced by internal/external factors
Starting point for pricing - marketing objectives, costs of production, competition,
government regulations, life cycle, level of economic activity
Three Main Pricing Methods:
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Cost-Based
Market-Based
Competition-Based
1. Cost-Based (Mark-Up) Pricing
 "A pricing method derived from the cost of producing or purchasing a product and
then adding a mark-up."
 Starting point - business determines total cost of producing one unit of the
product
 Then, business adds amount to cover additionally costs (e.g. interest payments,
insurance, transport & to provide a profit margin
 Mark-Up - "predetermined amount (expressed as a percentage) that a business
adds to the cost of a product to determine its basic price"
 Mark-Up Formula - Cost + (Cost x Mark-Up Percentage) = Price
2. Market-Based Pricing

"Method of setting prices according to the interaction between the levels of
supply and demand - whatever the market is prepared to pay."
 Demand > supply = shortage in market = Price Increase
 Demand < supply = excess in market = Price Decrease
 Therefore, prices of products are constantly changing in relation to fluctuations of
supply and demand
3. Competition-Based Pricing
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"where the price covers cost (cost of raw materials & operating the business) and
is comparable to the competitor's)
 Often used when there is a high degree of competition
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Price Leader - "major business in an industry whose pricing decisions heavily
influence the pricing decisions of its competitors."
 Once a business has established a base price, it can decide to choose a price
either:
 BELOW COMPETITORS: e.g. breaking into established market
 EQUAL TO COMPETITORS: easy option, as it avoids market research to find out
what consumers will pay. Additionally, it avoids the risk of a price war
 ABOVE COMPETITORS: businesses wish for consumers to perceive the product as
superior (for a status-conscious consumer)
PRICING STRATEGIES
- Once the basic price has been set using the preferred pricing method, the business then fine-tunes
this price in line with its pricing strategy
- There are four main pricing strategies:
1.
Price skimming
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Which occurs when a business charges the highest possible price for the product
during the introduction stage of its life cycle
 The objective of price skimming is to recover the costs of research and
development as quickly as possible, before competition enters the market
1.
Price penetration
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Occurs when a business charges the lowest price possible for a product
The strategy aims to quickly achieve a large market share for a product
(sometimes call mass-market pricing)
 The objective is to sell a large number of products during the early stages of the
life cycle and thus discourage competitors from entering the market, or take market
share from existing businesses
3. Loss leader
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Is a product sold at or below cost price
Used for a special promotion by many businesses, especially retailers, deliberately
sell a product at a loss to attract customers
 Often used when the business:
 Is overstocked or a product is slow to sell
 Wants to increase the traffic flow in the expectation of gaining new
customers
 Wants to build a reputation for having low prices
4. Price points
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Price points (or price lining) is selling products only at certain predetermined
prices
 Used mainly by retailers; the business chooses a limited number of key prices or
price points for selected product lines
 This means the store would not apply a fixed mark-up to the products
QUESTIONS
1)
Define the term prestige pricing.
2)
2.
Outline a problem with price skimming
3)
3.
Explain why a business will use price penetration
4)
4.
Identify the 3 pricing methods
5)
5.
Define competition-based pricing and provide characteristics and features.
ANSWERS
Questions:
1)
Define the term prestige pricing.
A pricing strategy where a high price is charged to give the product an aura of quality and status
2)
Outline a problem with price skimming
As price skimming involves a business charging the highest possible price for the product, the
consumer may not want to purchase the product at such a high price but also if the business
eventually lowers the price consumer may become outraged.
3)
Explain why a business will use price penetration
A business will use penetration pricing to sell a large amount of products during the early stages
of the product lifecycle as well as discourage competition from entering the market or in an
attempt to take market share from existing businesses.
4)
Identify the 3 pricing methods
Cost-based pricing
Market base pricing
Competition base pricing
5)
Define competition-based pricing and provide characteristics and features.
Competition-based pricing is where the price cover cost and is comparable to the competitor’s
price. The characteristics and features are, once a business has established a base price they
can then choose a price that is either;

Below that of competitors – Used as a way of breaking into an established
market

Equal to that of competitors - The price is established by a price leader and is an
easy option for a business because it avoids having to undertake market
research for what a consumer will actually pay
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Above that of competitors – Is a favored practice by businesses who wish
consumer to perceive their product as superior.
Promotion

Describes the methods used by a business to inform, persuade and remind a
target market about its product
 Promotion attempts to
o Attract new customers by heightening awareness of a particular product
o Increase brand loyalty by reinforcing the image of the product
o Encourage existing customers to purchase more of the product
o Provide information so customers can make informed decisions
o Encourage new and existing customers to purchase new product
Elements of the promotion mix
-
Advertising is one of four element of the promotion mix
A promotion mix is the various promotion methods a business uses in its promotional
campaign
The promotional mix is:
o Advertising
 Is a paid non-personal message communicated through a mass medium
 Essential tool for a business marketing
 Successful advertisement can lead to increase in sales and profit
 Purpose of advertising is to inform, persuade and remind
 Main advantage is that the business is flexible to reach a large audience
or small markets segments
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o
o
o
Advertising media is a term for many forms of electronic and print
communication used to reach an audience, 6 main strategies:
 Mass market
 Direct marketing catalogues
 Telemarketing
 e-marketing
 Social media advertising
 Billboards
 The type of advertising depends on:
 Types of product and its positioning
 Size of the target market and its characteristics
 Businesses marketing budget
 Cost of the advertising medium
 Products position on the product life cycle
Personal selling
 Personal selling involves that activities of a sales consultant directed to a
customer in an attempt to make a sale
 personal selling is a expensive promotional method
 Businesses are willing to use it because it offers 3 unique advantages:
 The message can be modified to suit the individual customers
circumstances
 The individualized assistance to a customer can create a longterm relationship resulting in repeat sales
 The sales consultant can provide after-sales customer service in
relation to product features, installation, warranties and servicing
 The success of the marketing plan often depends on the competency of
the businesses sales force
Relationship marketing
 Businesses are looking for ways to develop long-term, cost effective and
strong relationships with individual customers, a process known as
relationship marketing
 The aim is to create customer loyalty by meeting the needs of customers
on an individual basis creating reasons for people to keep coming back
 Highly successful relationship marketing strategy introduced during the
early 1990's was the fly buys loyalty reward program operated by the
Coles group
 Followed by the 2007 Woolworths everyday rewards scheme
 Relationships can provide a business with a competitive advantage
Sales promotion
is the use of activities or materials as direct inducements to customers.
This type of promotion aims to:
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Entice new customers
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Encourage trial purchase of a new product
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Increase sales to existing customers and repeat purchases
Sales Promotion Techniques are used to increase the effectiveness of other promotion
activities, especially advertising.
Examples of Special Promotion:
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Coupons- offer discounts on particular items at the time of purchase.
(Work best for new or improved products.
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Premiums- are gifts that a business offers the customer in return for
using the product.
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Refunds- Part of the purchase price is given back to those customers
who send in a voucher with a specific proof of purchase.
-
Samples- this is a free item or container of a product. (e.g. when sales
representatives at supermarkets encourage you to taste their product)
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Point-of-purchase displays – Special signs, displays and racks are
installed by the manufacture in retail outlets. They are usually located
at the end of supermarket aisles, as a way of gaining consumer
attention.
QUESTIONS
Questions:
1. What are the five key aspects in the promotion mix?
2. i) What are the four stages in the promotional life cycle of a product?
Ii) in what stage would advertising towards I wider market take place?
3. Compare personal selling to mass marketing.
4. Give an example of relationship marketing used in Australia.
5. Free Samples are an example of sales promotion. Why is this effective or not?
Answers:
1. advertising, personal marketing, relationship marketing, sales promotion, publicity and
public relations
2. i. introduction, growth, maturity, decline
ii. maturity phase, because existing customers (primary customers) know the product
therefore the business wants to expand their consumer base
3. .
4. e.g. Bakers Delight loyalty card, Woolworths Everyday Rewards
PLACE
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distribution channels
channel choice -intensive, selective, exclusive
physical distribution issues -transport, warehousing, inventory
 people, processes and physical evidence
 e-marketing
 global marketing
global branding
standardisation
customisation
global pricing
competitive positioning
Place are activities that make the products available to customers when and where they want to
purchase them.
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For this to happen an efficient distribution system is required.
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Distribution Channels
Channels of distribution are the routes taken to get the product from the factory to the customer
For example: a wholesaler, broker, agent or retailers
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Traditional Distribution Channels
The four most commonly used channels of distribution are:
1. Producer to customer
This is the simplest channel and involves no intermediaries
2. Producer to retailer to customer
A retailer is an intermediary who buys from producers and resells to customers. It’s the channel often
used for bulky items such as furniture.
3. Producer to wholesaler to retailer to customer
It’s the most common method and a wholesaler used for distribution of consumer goods. A wholesaler
is an intermediary who buys in bulk from the producer then resells it in smaller quantities to retailers.
4. Producer to agent to wholesaler to retailer to customer
An agent distributes products to wholesalers but never owns the product. Agents are paid a commission
by the producer. A business that does not have any sales representatives, will often use an agent instead
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Innovative Distribution Methods- non-store retailing
Non-store retailing is retailing activity conducted away from the tradition store
E.g.: door to door selling, mail order catalogs, party plan merchandizing and vending machines.
Two are the most rapidly developing methods are telemarketing and internet marketing
 Telemarketing
Is the area of interactive technology, that uses a telephone which will allow customers to purchase by
their television or computer.
 Internet Marketing
They use the internet as a promotional tool. A business obtains a domain name and a website and
begins marketing their product via the internet.
Electronic post and parcel delivery channels will b e used more extensively to meet the increasing
demand.
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Channel Choice - Including intensive, selective and exclusive
Market Coverage refers to the number of outlets the firm chooses for its product. A business can decide
to cover the market in one or three ways:
1. Intensive Distribution
Occurs when the business wishes to saturate the market with its product. It is intended to be soled to
everyone.
2. Selective Distribution
Involves using only a moderate proportion of all possible outlets. For example clothing, furniture and all
electrical appliances
3. Exclusive Distribution
This is the use of only one retail outlet for a product in a large geographic area and is commonly used for
exclusive expensive products.
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Physical Distribution issues
Physical distribution is all those activities concerned with the efficient movement of the product from
the producer to the customer .
It is a commination of several interrelated functions including transportation, warehousing and
inventory control.

Transport
Transportation is required to deliver the vast array of products on supermarket shelves.
The method of transportation a business uses will largely depend on the type of the product and the
degree of service the business wishes to provide.
The four most common methods of transport are roads, air, sea and rail.
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Warehousing
Set of activities involved in receiving storing is dispatching goods. It acts as a essential organising point
for the efficient delivery of products
 Inventory
Inventory control system is a system that maintains quantities and varieties of products appropriate for
the target market
If a business carries too much stock, it will experience high storage costs. However, too little stock
results in lost sales or stock out costs. The goal of inventory is to find the correct balance between these
two situations
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People, Processes and Physical Evidence
 People
This element refers to the interaction between the consumer and the employees in the business that
deliver the service.
Consumers judge the business on their treatment by employees.

Processes
This element refers to the flow of activities that a business will follow to deliver its service.
Because the business does not have a tangible product efficiency most be high to meet the customers
satisfaction.
 Physical evidence
Physical evidence refers to the environment in which the service will be delivered. It also includes
materials needed to carry out the service such as signage, brochures, calling cards, letterheads, business
logo and website.
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Customers initially buy services based on trust. Consequently a business should provide high
quality physical evidence to create an image of value and excellence
QUESTIONS
1. Identify the 4 most commonly used channels of distribution.
2. Define place/distribution
3. Propose a distribution channel for the sale of:
A) Coke
B) LAPTOP
C) IMPORTED MOTORCYCLE
D) A COUCH
4. Which are the correct three physical distribution issues?
5. Determine which method of transportation would be most appropriate for the
following products: road, rail, air or boat.
ANSWERS
Place
1.
Identify the 4 most commonly used channels of distribution.
-Producer to customer.
-Producer to retailer to customer.
-Producer to wholesaler to retailer to customer
-Producer to agent to wholesaler to retailer to customer.
2.
Define place/distribution.
Activities that makes the product available to customers when and where they want to
purchase them.
3.
Propose a distribution channel for the sale of:
a) Coke
Producer to retailer to customer.
b) A laptop
Producer to wholesaler to retailer to customer
c) An imported motorcycle
Producer to agent to wholesaler to retailer to
d) A couch
Producer to wholesaler to retailer to customer
4.
Which are the correct three physical distribution issues?
a) Transport, warehousing, retailing
b) Advertising, pricing, inventory
c) Transport, warehousing, inventory
d) Product, price, place
5.
Determine which method of transportation would be most appropriate for the
following products: road, rail, air or boat.
a) Oil to Australia
Boat, rail, road.
b) Bread to markets
Road
c)
Fresh fruit to Singapore
Road, air
d) Gold from Australia to the port
road, rail, air
E-Marketing
E-commerce notes:
Glossary:
E-marketing
Web page
Website
SMS (short
message service)
Weblog or blog
Web 2.0
Is the practice of using the internet to perform marketing activities.
Display of information accessible on the web through a web browser
A collection of related web pages, usually associated with a particular
businesses or organization
Text messages can be sent between mobile phones
An online journal that can be added to by readers
Transformation of the world wide web into a more creative and interactive
platform for information sharing, rather than just a means of retrieving
information.
Social media
Form of online advertising using social media platforms such as Facebook,
advertising (SMA) Youtube and Twitter to deliver targeted commercial messages to potential
consumers.
Reach
An advertisement measures the average number of times someone is
exposed to the message
Frequency
An advertisement measures average number of times someone is exposed
to the message
Australia:
 Consumers in Australia have high population of shopping and purchase goods online.
This keeps local businesses to overseas businesses. Therefore, Australia businesses have
to implement online component.
 Technology not only provides a faster, more efficient way of doing businesses, it also
very effective way to attract new customers.
E-marketing strategies:
Web page
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Contains basic information about the business and number of links to other web pages
within the website that provide detail information about the business. Eg: location,
products.
Podcasts
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Business main target is to promote and advertise.
Particular podcast is aimed to target consumers of business and is effective way to
reach those consumers.
Eg: specialist food store owner could look at advertising on a podcast aimed at
vegetarians and vegans.
SMS:
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Advantage over e-mail as it can send to one or more recipients without consumers' log
on.
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Alert regular consumers of any special deals on offer or new products.
Blogs:
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Possible to add comments, ask questions, provide feedback or share opinions on a
blog.
 Business sets up blogs to communicate between business and potential or existing
consumers and use to announce new products, gather feedback.
 Advantages are:
 Business owner and employees to establish reputation for expertise, by providing
detailed information on products and services.
 New ideas for goods or service can be put to the public and gain comments/feedbacks.
 Present a human face to the public and build trust with customers.
Web 2.0
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Businesses or individuals can create and share many contents through Facebook,
twitter and etc…
 Business can use social networking to provide public relations- low cost.
 Networking also accepts paid advertising that links to the site's search engine and
social media advertising.
Social media advertising (SMA)
 Business creates social network site (popular) to share their experiences of using
products.
Eg: Coca-Cola sent out a sponsored tweet promotion a product and was seen 89m times.
 Advantages of using SMA:
 Inexpensive in comparison to traditional advertising method
 Easy to use and monitor
 Effective to gain exposure
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Disadvantages of using SMA:
Marketer cannot control over what online customers write about the business's
products. Bloggers have freedom to discuss, review, criticize and ridicule of the product.
 Difficult to measure the reach and frequency.
 SMA enables businesses to build relationship with their consumers as businesses
getting customers via social networks.
 SMA raises concerns: issues of privacy, accuracy, honesty and consumer trust. Number
of legal issues: age limits for users, proliferation of fake and unofficial 'fan pages'
Quiz:
1. Define e-commerce
2. Business uses blog only for advertising their products? Yes/ No
3. Describe the advantages and disadvantage of business using SMA.
4. What are the benefits for businesses to adopt e-marketing?