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    Marketing Marketing Document Transcript

    • Marketing Product pricing and Product promotion Rohit Garg S.No. Topic Page1 Product pricing 1 1.1 Introduction 1 1.2 Factors affecting pricing products 1 1.3 Setting prices 2 1.4 Pricing strategies 2 1.5 Changing prices 32 Product promotion 4 2.1 Introduction 4 2.2 Selecting advertising media 4 2.3 Sales promotion 4 2.4 Personal selling 5 2.5 Direct selling 6
    • 1 Product Pricing1.1 IntroductionPrice is the amount of money carded for a product or service, or the sum of the values thatconsumers exchange for the benefits of having or using the product or service. Pricing is theonly element in the marketing mix that produces revenue; it is also the most flexible elementof the marketing mix. Dynamic pricing is the method of charging different prices dependingon individual customers and situations.1.2 Factors affecting pricing products Internal Factors: External Factors: 1. Marketing Objectives 1. Nature of the market 2. Marketing mix strategy Pricing and the demand 3. Costs decision 2. Competition 4. Organizational 3. Other external considerations factorsInternal factors 1. Marketing objectives: the company must decide on its strategy for the product. If the company has selected its target market and positioning carefully then its pricing will be fairly straightforward. General marketing objectives include survival, current profit maximization, and market share and product quality. Specific level objectives include setting low prices to avoid competition. 2. Marketing mix strategy: pricing is only one of the marketing mix tools that a company uses to achieve its marketing objectives. Pricing decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program. Companies often position their products on price and then tailor other marketing mix decisions to the prices they want to charge. 3. Costs: costs set the floor for the price that the company can charge. The company wants to charge a price that both covers all its cost for producing, distributing and selling the products and delivers a fair rate of return for its efforts and risk. 4. Organizational considerations: management must decide who within the organization should set prices. Prices can be set by top management or by the product line managers or by the marketing and sales department. Some companies have pricing department to set the best prices. Page | 1
    • External factors 1. Nature of the market and the demand: whereas costs set the lower limit of prices, the market and the demand set the upper limit. Both consumer and industrial buyers balance the price of a product or service against the benefits of owing it. The seller pricing freedom varies with different types of markets. In pure competition seller cannot charge more than going price, whereas in pure monopoly seller can set the prices according to his wish. 2. Competition: in setting prices, the company must also consider competitors’ costs and prices and possible competitors’ reactions to the company’s own pricing moves. 3. Other external factors: when setting prices a company must consider other external factors like economic conditions, government and legal framework, and social concerns.1.3 Setting pricesCost based pricing: is the simplest pricing method. It is adding a standard markup to the costof the product. This pricing method is not used because it ignores demand and competitorprices. Product → Cost → Price → Value → CustomerValue based pricing: it is setting price based on buyers’ perceptions of value rather than onthe seller’s cost. An increasing number of companies are setting their prices based on theproduct’s perceived value. The targeted value and price then derive decisions about productdesign and what costs can be incurred. Customer → Value → Price → Cost → ProductCompetition based pricing: it is setting prices based on the prices that competitors charge forsimilar products. Consumers will base their judgments of a product’s value on the prices thatcompetitors charge for similar products. In general a firm charges same as its majorcompetitors.1.4 Pricing strategiesNew product pricing strategyMarket skimming pricing Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price. The company makes fewer but more profitable sales.Market penetration pricing Setting a low price for a new product in order to attract a new large number of buyers and a large market segment. Page | 2
    • Product mix strategyProduct line pricing Setting the price steps between various products in a price line based on cost differences between the products, customers evaluations of different features, and competitors’ prices.Captive product pricing Setting a price for products that must be used along with a main product such as film for a camera.Product bundle pricing Combing several products and offering the bundles at a reduced price.Price adjustment strategiesDiscount and allowance Discount is a straight reduction in price on purchases during apricing stated period of time and allowance is promotional money paid by manufactures to retailers in return for an agreement to feature the manufacture’s product in some way.Segmented pricing Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.Geographical pricing Adjusting prices to account for geographical locations of customers.1.5 Changing pricesWhether the price is raised or lowered, the action will affect buyers, competitors, distributorsand supplies and may interest government as well. Customers do not always interpret pricesin a straightforward way. A firm considering price change has to worry about the reactions ofits competitors as well as those of its customers. Competitors are most likely to react whenthe product is uniform and the buyer is well informed. Page | 3
    • 2 Product Promotions2.1 IntroductionAdvertising is any paid form of non personal presentation and promotion of ideas, goods, orservices by an identified sponsor. Advertising can be traced back to the very beginning of therecorded history. Although advertising is used by many business firms, it is also used by awide range of non-for-profit organizations, professionals and social agencies that advertisetheir causes to various target publics. Marketing management must take four importantdecisions when developing an advertising program: 1. Setting advertising objectives 2. Setting the advertising budget 3. Developing advertising strategy 4. Evaluating advertising campaigns2.2 Selecting advertising mediaMedium Advantages LimitationsNewspaper Flexibility, timeliness, good local market Short life, poor reproduction coverage, broad acceptability qualityTelevision Good mass market coverage, low cost per High absolute cost, less exposure, appealing to senses audience selectivityDirect mail High audience selectivity, allows High cost per exposure personalizationRadio Good local acceptance, low cost, high Audio only, low attention, geographic and demographic selectivity fragmented audienceMagazines High quality reproduction, credibility, Little audience selectivity, prestige, high geographic and demographic creative limitations selectivityInternet High selectivity, low cost, interactive Relatively low impact, capabilities audience controls exposure2.3 Sales promotionSales promotion is the short term incentives to encourage the purchase or sale of a product orservice. Sellers may use sales promotion to increase short term sales or to help build longterm market share or to reinforce product’s position and build long term customerrelationships. Sales promotion tools are generally used by most organizations, includingmanufacturers, distributors, retailers, and not-for-profit organizations. They are targetedtowards the final buyers, retailers, and whole seller. The growing use of sales promotion hasresulted in promotion cluster. Page | 4
    • Major sales promotion toolsSample A small amount of a product offered to customers for trialCoupon Certificate that gives buyers the right to save money when they purchase a specific productPrice pack Receded price that is marked by the producer directly on label or packagePremium Goods offered either free or at low cost as an incentive to buy a productAdvertising Useful articles imprinted with an advertiser’s name, given as a gift to thespecialty consumers.Contests, Promotional events that give consumers the chance to win something – by luckgames or through extra effort.Major trade promotion toolsDiscount A straight reduction in price on purchases during stated period of time.Allowance Promotional money paid by manufactures to retailers in return for an agreement to feature the manufacturer’s products in some way2.4 Personal sellingSelling is one of the oldest professions in the world. Salesperson is an individual acting for acompany by performing one of more of the following activities: prospective communicating,servicing, and information gathering. Personal selling can be more effective than advertisingin more complex selling situations. Salesperson can probe customers to learn more abouttheir problems, then adjusting the marketing offer and presentation to fit the special needs ofeach customer. Sales force serves a critical role between the company and its customers.They represent the company to the customers and represent customers to the company.Sales force structure: 1. Territorial sales force: assigning each salesperson to an exclusive geographical area. 2. Product sales force: assigning each salesperson to an exclusive product. 3. Customer sales force: assigning each salesperson to certain customers.Steps in selling process: 1. Prospecting: salesperson identifies potential customers. 2. Pre-approach: salesperson learns as much as possible about a prospective customer. 3. Approach: salesperson meets the customer for the first time. 4. Presentation: salesperson tells the customer about the product. 5. Handling objectives: salesperson overcomes customer objections to buying. 6. Closing: salesperson asks the customer for an order. 7. Follow-up: salesperson follows up in order to ensure customer satisfaction.2.5 Direct sellingMany companies are adopting direct selling as primary marketing approach or as asupplement to other approaches. Direct marketing is direct communication with carefullytargeted individual customers, involves the use of telephone, mail, fax, email and other toolsto directly interact with the customers. Page | 5
    • Direct selling is a powerful tool to build customer relationships. Direct marketing offerssellers a low cost and efficient alternative for reaching their markets. Direct marketing offersbuyers convenient, easy to use, and privacy. It gives buyers access to information aboutdifferent products.Forms of direct marketing: 1. Telephone marketing 2. Direct mail marketing 3. Catalog marketing 4. Direct response television marketing 5. Face to face selling 6. Online marketing Page | 6