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Marketing Management    Prepared by    Mehul RasadiyaK.K.Parekh Institute of Management of Studies                  Copyri...
Chapter 14 Promotion andPricing Strategies      Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. Al...
Chapter Objectives1. Discuss how integrated marketing communications   relates to a firm’s promotional strategy.2. Explain...
Integrated Marketing Communications Promotion—communication link between  buyer and seller that performs the function of ...
Integrated Marketing Communications Coordination of all promotional activities –  media advertising, direct mail, persona...
The Promotional Mix Promotional Mix—combination of personal  and nonpersonal selling techniques designed to  achieve prom...
 Comparing the Components of the  Promotional Mix14-7        Copyright © 2005 by South-Western, a division of Thomson Lea...
The Promotional Mix Objectives of Promotional Strategy  Providing Information  Differentiating a Product  Increasing S...
 Five Major Promotional Objectives14-9         Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. Al...
The Promotional Mix  Objectives of Promotional Strategy   Providing Information      Major portion of U.S. advertising ...
The Promotional Mix  Objectives of Promotional Strategy   Increasing Sales      Most common objective of a promotional ...
The Promotional Mix  Objectives of Promotional Strategy   Accentuating the Product’s Value      Promotional strategies ...
The Promotional Mix  Promotional Planning   Increasing complexity and sophistication of     marketing communications req...
Advertising Advertising—paid nonpersonal  communication delivered through various  media and designed to inform, persuade...
 The 15 Largest Advertisers in the United States14-15        Copyright © 2005 by South-Western, a division of Thomson Lea...
Advertising  Types of Advertising    Product Advertising—consists of     messages designed to sell a particular     good...
Advertising  Advocacy Advertising (Cause Advertising):   promotes a specific viewpoint on a public   issue as a way to in...
Advertising  Advertising and the Product Cycle   Product and Institutional Advertising fall     into one of three catego...
Advertising Advertising and the Product Cycle  Persuasive Advertising—attempts to    improve the competitive status of a...
Advertising  Advertising and the Product Cycle   Reminder-oriented advertising—often     appears in the late maturity or...
Advertising  Advertising Media   Must choose how to allocate advertising     budget   All media offer advantages and   ...
 Advertising Media14-22        Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising  Advertising Media   Newspaper     Continue to dominate local advertising     Ads easily tailored for loca...
Advertising  Advertising Media   Television     America’s leading national advertising       medium     An expensive a...
Advertising  Advertising Media   Radio     Average U.S. household owns five       radios     Captive audience of liste...
Advertising  Advertising Media   Magazines     Includes consumer publications and       trade journals     Can often c...
Advertising  Advertising Media   Direct Mail      Average American household receives       about 550 pieces of direct ...
Advertising Advertising Media  Outdoor Advertising    Just over 2 percent of total advertising      spending    Share ...
Advertising  Advertising Media   Online and Interactive Advertising     Range from Web sites and CDs to       informati...
Advertising  Advertising Media   Sponsorship—involves providing funds     for a sporting or cultural event in exchange  ...
Advertising  Advertising Media   Other Media Options     Infomercials: 30-minute programs that       resemble regular T...
Sales Promotion  Sales promotion—nonpersonal marketing   activities other than advertising, personal   selling and public...
Sales Promotion  Consumer-Oriented Promotions   Goals of a consumer-oriented sales     promotion include:      Getting ...
 Spending on Consumer-Oriented Promotions14-34       Copyright © 2005 by South-Western, a division of Thomson Learning, I...
Sales Promotion  Consumer-Oriented Promotions   Premiums—items given free or at a     reduced price with the purchase of...
Sales Promotion  Consumer-Oriented Promotions   Games, Contests, and Sweepstakes     Offering cash, merchandise or trav...
Sales Promotion  Consumer-Oriented Promotions   Promotional Products (Specialty advertising)     Because these specialt...
Sales Promotion  Trade-Oriented Promotions    Trade promotion—sales promotion     geared to marketing intermediaries    ...
Sales Promotion  Trade-Oriented Promotions    Point-of-purchase (POP) advertising—     displays or demonstrations that p...
Personal Selling  Personal selling—interpersonal promotional   process involving a seller’s face-to-face   presentation t...
Personal Selling  Sales Tasks   Order Processing—selling, mostly at the     wholesale and retail levels, that involves  ...
Personal Selling  Sales Tasks   Missionary Selling—indirect form of     selling in which specialized salespeople     pro...
Personal Selling The Sales Process   Seven Steps in    the Sales    Process14-43        Copyright © 2005 by South-Wester...
Personal Selling  The Sales Process    Prospecting, Qualifying, and Approaching      Prospecting involves identifying p...
Personal Selling  The Sales Process    Presentation and Demonstration      Involves communicating promotional       mes...
Personal Selling  The Sales Process    Handling Objections      Allows sales personnel to remove       obstacles and co...
Personal Selling  The Sales Process    Closing      Critical point in a selling relationship—       the time at which t...
Personal Selling The Sales Process   Follow-up     Salesperson’s actions after the sale may well      determine whether...
Personal Selling  Recent Trends in Personal Selling   Telemarketing      Outbound telemarketing—when a       sales repr...
Personal Selling  Recent Trends in Personal Selling   Relationship Selling—when a     salesperson builds a mutually bene...
Personal Selling  Recent Trends in Personal Selling   Team selling—joins salespeople with     specialists from other fun...
Public Relations  Public Relations—organization’s   communication and relationships with its   various audiences.  Publi...
Promotional Strategies  Selecting a Promotional Mix   Guidelines for allocating promotional     efforts and expenditures...
Promotional Strategies  Pushing and Pulling Strategies   Pushing strategy—promotional effort by a     seller to members ...
Promotional Strategies  Pushing and Pulling Strategies   Pulling strategy—promotional effort by a     seller to stimulat...
Ethics in Promotion  Puffery and Deception   Puffery—exaggerated claims of a     product’s superiority or use of doubtfu...
Ethics in Promotion  Promotion to Children and Teens   Risk of deception is especially great with     promotion targeted...
Ethics in Promotion  Promotion in Public Schools and on   College Campuses   Includes promotional book covers, posters, ...
Price in the Marketing Mix Price—  exchange  value of a good  or service. Pricing  Objectives14-59          Copyright © ...
Price in the Marketing Mix  Profitability Objectives   Perhaps the most commonly used     objective in firms’ pricing st...
Price in the Marketing Mix  Price to Meet Competition   Seeks to meet competitors’ prices  Prestige Objectives   Prest...
Pricing Strategies  Price Determination in Practice   Determined in two basic ways—      By applying the theoretical co...
Pricing Strategies  Price Determination in Practice   Cost-based pricing—practice of adding a     percentage of specific...
 The Markup Chain for a Hardcover Book14-64        Copyright © 2005 by South-Western, a division of Thomson Learning, Inc...
Pricing Strategies  Breakeven Analysis—pricing technique   used to determine the minimum sales volume   a product must ge...
 Breakeven Analysis14-66       Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Pricing Strategies  Alternative Pricing Strategies   Skimming pricing strategy—sets an     intentionally high price rela...
Pricing Strategies  Alternative Pricing Strategies   Everyday Low Pricing and Discount     Pricing—Strategy devoted to m...
Consumer Perceptions of Prices  Price-Quality Relationships   Consumers’ perceptions of product quality     is closely r...
Consumer Perceptions of Prices  Odd Pricing   Odd pricing (charging $39.95 or $19.98     instead of $40 or 20)   Common...
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  1. 1. Marketing Management Prepared by Mehul RasadiyaK.K.Parekh Institute of Management of Studies Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  2. 2. Chapter 14 Promotion andPricing Strategies Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  3. 3. Chapter Objectives1. Discuss how integrated marketing communications relates to a firm’s promotional strategy.2. Explain the concept of a promotional mix and outline the objectives of promotion.3. Summarize the different types of advertising and advertising media.4. Describe the role of sales promotion, personal selling, and public relations in promotional strategy.5. Identify the Profitabilitynfluence the selection of a promotional mix.6. Discuss the major ethical issues involved in promotion.7. Outline the different types of pricing objectives and discuss how firms set prices in the marketplace.8. Summarize the four alternative pricing strategies.9. Discuss consumer perceptions of price.14-3 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  4. 4. Integrated Marketing Communications Promotion—communication link between buyer and seller that performs the function of informing, persuading, and influencing a purchase decision. Focusing on Primary Demand Focusing on Selective Demand14-4 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  5. 5. Integrated Marketing Communications Coordination of all promotional activities – media advertising, direct mail, personal selling, sales promotion, and public relations – to produce a unified customer-focused message. Focuses on customer needs to create a unified promotional message Firms need a broad view of promotion to implement IMC14-5 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  6. 6. The Promotional Mix Promotional Mix—combination of personal and nonpersonal selling techniques designed to achieve promotional objectives. Personal Selling—interpersonal promotional process involving a seller’s face-to-face presentation to a prospective buyer. Nonpersonal selling—consists of advertising, sales promotion, direct marketing, and public relations14-6 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  7. 7.  Comparing the Components of the Promotional Mix14-7 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  8. 8. The Promotional Mix Objectives of Promotional Strategy Providing Information Differentiating a Product Increasing Sales Stabilizing Sales Accentuating the Product’s Value14-8 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  9. 9.  Five Major Promotional Objectives14-9 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  10. 10. The Promotional Mix  Objectives of Promotional Strategy Providing Information Major portion of U.S. advertising is information-oriented Differentiating a Product Positioning: establishing a place in the minds of customers by communicating meaningful distinctions about the attributes, price, quality, or use of a good or service14-10 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  11. 11. The Promotional Mix  Objectives of Promotional Strategy Increasing Sales Most common objective of a promotional strategy Stabilizing Sales Sales contests often used during slack periods Sales promotion materials often distributed to customers to stimulate sales during off-seasons14-11 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  12. 12. The Promotional Mix  Objectives of Promotional Strategy Accentuating the Product’s Value Promotional strategies can enhance product values by explaining often unrecognized ownership benefits14-12 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  13. 13. The Promotional Mix  Promotional Planning Increasing complexity and sophistication of marketing communications requires careful planning to coordinate IMC strategies Product Placement Guerrilla Marketing14-13 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  14. 14. Advertising Advertising—paid nonpersonal communication delivered through various media and designed to inform, persuade, or remind members of a particular audience.14-14 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  15. 15.  The 15 Largest Advertisers in the United States14-15 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  16. 16. Advertising  Types of Advertising Product Advertising—consists of messages designed to sell a particular good or service Institutional Advertising—involves messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities14-16 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  17. 17. Advertising  Advocacy Advertising (Cause Advertising): promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process14-17 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  18. 18. Advertising  Advertising and the Product Cycle Product and Institutional Advertising fall into one of three categories, based on whether the ads intend to inform, persuade, or remind Informative Advertising—used to build initial demand for a product in the introductory phase of the product life cycle14-18 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  19. 19. Advertising Advertising and the Product Cycle Persuasive Advertising—attempts to improve the competitive status of a product, institution, or concept, usually in the growth and maturity stages of the product life cycle Comparative Advertising—form of persuasive product advertising that compares products directly with their competitors14-19 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  20. 20. Advertising  Advertising and the Product Cycle 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 institution14-20 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  21. 21. Advertising  Advertising Media Must choose how to allocate advertising budget All media offer advantages and disadvantages Must consider cost and which media is best suited for communication14-21 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  22. 22.  Advertising Media14-22 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  23. 23. Advertising  Advertising Media Newspaper Continue to dominate local advertising Ads easily tailored for local tastes and preferences Can coordinate newspaper messages with other promotional efforts Disadvantage: relatively short life span14-23 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  24. 24. Advertising  Advertising Media Television America’s leading national advertising medium An expensive advertising medium Price for a 30-second ad during weeknight prime time on network television generally ranges from $100,000 to more than $500,00014-24 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  25. 25. Advertising  Advertising Media Radio Average U.S. household owns five radios Captive audience of listeners as they commute to and from work In major markets, many stations serve different demographic groups with targeted programming14-25 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  26. 26. Advertising  Advertising Media Magazines Includes consumer publications and trade journals Can often customize their publications and target advertising messages to different regions of the country A natural choice for targeted advertising14-26 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  27. 27. Advertising  Advertising Media Direct Mail Average American household receives about 550 pieces of direct mail each year, including 100 catalogs e-mail another option Must overcome junk-mail and spam classification14-27 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  28. 28. Advertising Advertising Media Outdoor Advertising Just over 2 percent of total advertising spending Share is growing Majority of spending is for billboards Other types include: signs in transit stations, stores, airports, and sports stadiums Disadvantages include: Brief messages are required Mounting concern for aesthetic and environmental issues14-28 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  29. 29. Advertising  Advertising Media Online and Interactive Advertising Range from Web sites and CDs to information kiosks Currently commands only 3 percent of media spending, but is the fastest- growing media segment14-29 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  30. 30. Advertising  Advertising Media Sponsorship—involves providing funds for a sporting or cultural event in exchange for a direct association with the event Sports sponsorships attract two-thirds of total sponsorship dollars Primary benefits: exposure to the event’s audience and association with the image of the activity14-30 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  31. 31. Advertising  Advertising Media Other Media Options Infomercials: 30-minute programs that resemble regular TV programs, but are devoted to selling goods or services Other Media options include: Ads in movie theaters Ads on airline movie screens Printed programs, Subway tickets Turnpike toll receipts Automated teller machines14-31 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  32. 32. Sales Promotion  Sales promotion—nonpersonal marketing activities other than advertising, personal selling and public relations that stimulate consumer purchasing and dealer effectiveness. Potential advantages: Short-term increased sales Increased brand equity Enhanced customer relationships14-32 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  33. 33. Sales Promotion  Consumer-Oriented Promotions Goals of a consumer-oriented sales promotion include: Getting new and existing customers to try or buy products Encouraging repeat purchases by rewarding current users Increasing sales of complementary products Boosting impulse purchases14-33 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  34. 34.  Spending on Consumer-Oriented Promotions14-34 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  35. 35. Sales Promotion  Consumer-Oriented Promotions Premiums—items given free or at a reduced price with the purchase of another product. Coupons offer small price discounts Rebates offer cash back to consumers Sample—a gift of a product distributed by mail, door-to-door, in a demonstration, or inside packages of another product14-35 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  36. 36. Sales Promotion  Consumer-Oriented Promotions Games, Contests, and Sweepstakes Offering cash, merchandise or travel as prizes to participating winners Often used to introduce new goods and services and to attract additional customers Court rulings and legal restrictions have limited the use of contests14-36 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  37. 37. Sales Promotion  Consumer-Oriented Promotions Promotional Products (Specialty advertising) Because these specialty advertising products are useful, people tend to keep and use them Gives advertisers repeated exposure Originally designed to identify and create goodwill for advertisers Now generates sales leads and develops traffic for stores and trade show exhibitors.14-37 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  38. 38. Sales Promotion  Trade-Oriented Promotions Trade promotion—sales promotion geared to marketing intermediaries Used to encourage retailers to: Stock new products Continue carrying existing ones Promote products effectively to consumers.14-38 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  39. 39. Sales Promotion  Trade-Oriented Promotions Point-of-purchase (POP) advertising— displays or demonstrations that promote products when and where consumers buy them Takes advantage of many shoppers’ tendencies to make purchase decisions in the store Trade shows—promote goods or services to intermediaries14-39 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  40. 40. Personal Selling  Personal selling—interpersonal promotional process involving a seller’s face-to-face presentation to a prospective buyer. Used most often when: Customers are relatively few in number and geographically concentrated Product is technically complex, involves trade-ins, and requires special handling Product is high in price Product moves through direct-distribution channels14-40 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  41. 41. Personal Selling  Sales Tasks Order Processing—selling, mostly at the wholesale and retail levels, that involves identifying customer needs, pointing them out to customers, and completing orders Creative Selling—personal selling involving situations in which a considerable degree of analytical decision making on the buyer’s part results in the need for skillful proposals of solutions for the customer’s needs14-41 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  42. 42. Personal Selling  Sales Tasks Missionary Selling—indirect form of selling in which specialized salespeople promote goodwill among indirect customers, often by assisting customers in product use14-42 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  43. 43. Personal Selling The Sales Process Seven Steps in the Sales Process14-43 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  44. 44. Personal Selling  The Sales Process Prospecting, Qualifying, and Approaching Prospecting involves identifying potential customers Qualifying involves identifying potential customers who have the financial ability and authority to buy. Before making the initial contact: Careful preparations are made Available data about a prospective customer and other pertinent information is analyzed14-44 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  45. 45. Personal Selling  The Sales Process Presentation and Demonstration Involves communicating promotional messages Major features of the product, highlights of the advantages, and examples of satisfied consumers are typically presented Involves the prospect in the sales presentation Reinforces the message that the salesperson has been communicating14-45 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  46. 46. Personal Selling  The Sales Process Handling Objections Allows sales personnel to remove obstacles and complete the sale Can become a positive part of the sales process Allows the salesperson to present additional information14-46 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  47. 47. Personal Selling  The Sales Process Closing Critical point in a selling relationship— the time at which the salesperson actually asks the prospect to buy If the presentation effectively matches product features to customer needs, the closing should be a natural conclusion.14-47 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  48. 48. Personal Selling The Sales Process Follow-up Salesperson’s actions after the sale may well determine whether the customer will make another purchase Building a long-term relationship By calling soon after a purchase, the salesperson provides psychological reinforcement for the customer’s decision to buy Also gives the seller a chance to correct any problems 14-48 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  49. 49. Personal Selling  Recent Trends in Personal Selling Telemarketing Outbound telemarketing—when a sales representative calls you at your place of business Inbound telemarketing—when the customer calls a toll-free phone number to get information or place an order.14-49 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  50. 50. Personal Selling  Recent Trends in Personal Selling Relationship Selling—when a salesperson builds a mutually beneficial relationship with a customer through regular contacts over an extended period 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 sale14-50 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  51. 51. Personal Selling  Recent Trends in Personal Selling Team selling—joins salespeople with specialists from other functional areas of the firm to complete the selling process Sales force automation (SFA)— incorporates a broad range of tools, from e-mail, telecommunications devices like pagers and cell phones, and laptop computers to increasingly sophisticated software systems that automate the sales process14-51 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  52. 52. 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.14-52 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  53. 53. 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?14-53 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  54. 54. Promotional Strategies  Pushing and Pulling Strategies Pushing strategy—promotional effort by a seller to members of the distribution channel intended to stimulate personal selling of the good or service, thereby pushing it through the channel Cooperative advertising—allowances in which firms share the cost of local advertising of their product or line with channel partners14-54 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  55. 55. Promotional Strategies  Pushing and Pulling Strategies Pulling strategy—promotional effort by a seller to stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service, pulling it through the distribution channel14-55 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  56. 56. 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 information14-56 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  57. 57. 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 messages14-57 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  58. 58. 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 backlash14-58 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  59. 59. Price in the Marketing Mix Price— exchange value of a good or service. Pricing Objectives14-59 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  60. 60. Price in the Marketing Mix  Profitability Objectives Perhaps the most commonly used objective in firms’ pricing strategies Some firms try to maximize profits by reducing costs rather than through price changes  Volume Objectives Bases pricing decisions on market share Market share: the percentage of a market controlled by a certain company or product14-60 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  61. 61. Price in the Marketing Mix  Price to Meet Competition Seeks to meet competitors’ prices  Prestige Objectives Prestige pricing encompasses the effect of price on prestige Prestige pricing establishes a relatively high price to develop and maintain an image of quality and exclusiveness14-61 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  62. 62. Pricing Strategies  Price Determination in Practice Determined in two basic ways— By applying the theoretical concepts of supply and demand By completing cost-oriented analyses14-62 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  63. 63. 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.14-63 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  64. 64.  The Markup Chain for a Hardcover Book14-64 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  65. 65. 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 Total Fixed Cost = (in units) Contribution to Fixed Costs Per UnitBreakeven point Total Fixed Cost (in dollars) = 1 – Variable Cost Per Unit/Price14-65 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  66. 66.  Breakeven Analysis14-66 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  67. 67. Pricing Strategies  Alternative 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 weapon14-67 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  68. 68. Pricing Strategies  Alternative Pricing Strategies 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 offerings14-68 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  69. 69. 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 price14-69 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
  70. 70. 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 amounts14-70 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
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