Download Chapter 14 - B-K

Marketing Management
Chapter 14 - 2
Promotion and Pricing Strategies
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Personal Selling
● Recent Trends in Personal Selling
– Telemarketing
 Outbound telemarketing— calls you at your place of
business
 Inbound telemarketing— customer calls a toll-free phone
number
– Relationship Selling—when a salesperson builds a mutually
beneficial relationship with a customer
– Consultative selling—meeting customers’ needs by listening to
them, understanding and caring about their problems, paying
attention to details, suggesting solutions, and following through
after the sale
– Team selling—joins salespeople with specialists from other
functional areas of the firm to complete the selling process
– Sales force automation (SFA)— uses a broad range of tools,
from e-mail, telecommunications devices like pagers and cell
phones, and laptop computers that automate the sales process
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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—intended to stimulate
personal selling of the good or service,
thereby pushing it through the channel
 Cooperative advertising
– Pull strategy—stimulate demand among
final users, who will then exert pressure on
the distribution channel to carry the good
or service
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Ethics in Promotion
● Puffery and Deception
– Puffery—exaggerated claims of a
product’s superiority or use of doubtful,
subjective, or vague statements
– Other promotional elements can also
involve deception
 Salespeople have deceived customers
with misleading information
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Ethics in Promotion
● Promotion to Children and Teens
– Risk of deception is especially great with
promotion targeted to children and teens
– Children not sophisticated at analyzing
promotional messages
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Ethics in Promotion
● Promotion in Public Schools and on
College Campuses
– Includes promotional book covers, posters,
and even curriculum materials provided to
today’s schools
– Some schools sign contracts that give
certain brands exclusive access to their
students
– Can generate a backlash
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Price in the Marketing Mix
● Price—
exchange
value of a good
or service.
● Pricing
Objectives
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Pricing Strategies
● Price Determination in Practice
– Determined in two basic ways—
 By applying the theoretical concepts of
supply and demand
 By completing cost-oriented analyses
● In reality, you price what the market will bear
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Pricing Strategies
● Price Determination in Practice
– Cost-based pricing—practice of adding a
percentage of specific amounts (mark-up)
to the base cost of a product to cover
overhead costs and generate profits.
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● The Markup Chain for a Hardcover Book
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Pricing Strategies
● Breakeven Analysis—pricing technique
used to determine the minimum sales volume
a product must generate at a certain price
level to cover all costs.
Breakeven point
=
(in units)
Total Fixed Cost
Contribution to Fixed Costs Per Unit
Breakeven point
Total Fixed Cost
= 1 – Variable Cost Per Unit/Price
(in dollars)
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● Breakeven Analysis
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Pricing Strategies
● Skimming pricing strategy—sets an
intentionally high price relative to the prices of
competing products
● Penetration pricing strategy—sets a low
price as a major marketing weapon
● Everyday Low Pricing and Discount
Pricing—Strategy devoted to maintaining
continuous low prices rather than relying on
short-term price-cutting tactics
● Competitive Pricing—product priced at the
general level of competing offerings
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Consumer Perceptions of Prices
● Price-Quality Relationships
– Consumers’ perceptions of product quality
is closely related to price
– Most marketers believe that this perceived
price-quality relationship holds over a
relatively wide range of prices
– In other situations, marketers establish
price-quality relationships with
comparisons that demonstrate a product’s
value at the established price
● Price is a proxy for quality
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Consumer Perceptions of Prices
● Odd Pricing
– Odd pricing (charging $39.95 or $19.98
instead of $40 or 20)
– Commonly-used retail practice, as many
retailers believe that consumer favor
uneven amounts
– Items on sale may end in a different
number, e.g. 7: $17.97, $13.87.
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Discussion
● You are to promote a new nightclub, opening in 3
months
● Objective – create a full house on opening and for two
weeks thereafter
● You have $100,000 to spend
– Newspaper ad - $10K per ad
– Radio - $50K for 3 weeks
– Flyers - $500 per 1000 4 color flyers
– Personal promoters - $20 per hour
– Celebrity appearance - $10K
– Premiums – T-shirt $10 each
● Create a promotional campaign
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