Outline Chapter Fourteen


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Outline Chapter Fourteen

  1. 1. Contemporary Business 12th ed. page 1 of 4 Chapter 14 Summary 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-
  2. 2. Contemporary Business 12th ed. page 2 of 4 Chapter 14 Summary 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 pulling strategy promotes a product by generating consumer demand that prompts
  3. 3. Contemporary Business 12th ed. page 3 of 4 Chapter 14 Summary 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 Marketers must also consider the impact of prices on the way in which their goods are
  4. 4. Contemporary Business 12th ed. page 4 of 4 Chapter 14 Summary 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.