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Intro to mktg_itm_sept-2012_session-3


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ntroduction to Marketing - Session 3 at ITM, Mumbai. Includes:
Promotion and Advertising
• Promotional activities
o Trade shows, sponsorship, trade-fairs, contests, coupon programme, community projects
• Advertising
o TV, radio, trade magazines, direct mailing, billboards, packaging, internet
• Public Relations
o Relationships with media, customer’s community, public speaking, research
• Personal Selling
o B2B and B2C
• Marketing Accessories
Brochures, newsletters, fliers, give-aways
Pricing and Distribution
 Price is unique among the 4 Ps in that it directly affects the company’s revenues and profits.
 Pricing is both a science and an art
 Pricing seems to be the one “P” that has been dramatically affected by the use of the Internet
Pricing and Distribution
• Cost based pricing
• Value based pricing
• Premium pricing
• Discount / promotional pricing
• Price Skimming
• Psychological pricing
• Geographic pricing
• Product line pricing

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Intro to mktg_itm_sept-2012_session-3

  1. 1. Introduction to Marketing Week 3 NANDA KISHORE SETHURAMAN ITM SEPTEMBER 2012
  2. 2. Agenda Promotion and Advertising  Pricing and Distribution  Promotional activities  Cost based pricing  Trade shows, sponsorship, trade-  Value based pricing fairs, contests, coupon  Premium pricing programme, community projects  Discount / promotional pricing Advertising  Price Skimming  TV, radio, trade magazines, direct  Psychological pricing mailing, billboards, packaging, internet  Geographic pricing Public Relations  Product line pricing  Relationships with media, customer’s community, public speaking, research Personal Selling  B2B and B2C Marketing Accessories  Brochures, newsletters, fliers, give-aways
  3. 3. Promotion & Advertising
  4. 4. Learning Goals Discuss how integrated marketing communications relates to a firm’s overall promotion strategy. Explain promotional mix and outline the objectives of promotion. Summarize the different types of advertising and advertising media. Outline the roles of sales promotion, personal selling, and public relations. Describe pushing and pulling promotional strategies. Discuss the major ethical issues involved in promotion.
  5. 5. Promotions – What is it?Promotion is the function of informing, persuading, and influencing a purchase decision.Integrated marketing communications (IMC) Coordination of all promotional activities—media advertising, direct mail, personal selling, sales promotion, and public relations—to produce a unified customer-focused message.
  6. 6. Integrated Marketing CommunicationsMust take a broad view and plan for all form of customer contact.Create unified personality and message for the good, service, or brand.Elements include personal selling, advertising, sales promotion, publicity, and public relations.
  7. 7. 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 Advertising, sales promotion, direct marketing, and public relations.
  8. 8. Components of Promotional Mix
  9. 9. Objectives of Promotional Strategy
  10. 10. Objectives of Promotional StrategyProviding Information  Major portion of advertising provides information about a product.Differentiating a Product  Communicate to buyers meaningful distinctions about the attributes, price, quality, or use of a good or service.Increasing Sales  Most common objective of a promotional strategy.Stabilizing Sales  Stable sales evens out the production cycle, reduces some management and production costs, and simplifies financial, purchasing, and marketing planning.Accentuating the Product’s Value  Explaining hidden benefits of ownership.
  11. 11. Promotional PlanningProduct placement Marketers pay placement fees to have their products showcased in various media, ranging from newspapers and magazines to television and movies.Guerilla marketing Innovative, low-cost marketing efforts designed to get consumers’ attention in unusual ways.
  12. 12. Advertising Advertising Paid nonpersonal communication delivered through various media and designed to inform, persuade, or remind members of a particular audience. Consumers receive 3,500 to 5,000 marketing messages each day. Types of Advertising  Product advertising Messages designed to sell a particular good or service.  Institutional advertising – Messages that promote concepts, ideas, philosophies, or goodwill for industries, companies, organizations, or government entities.  Cause advertising – Form of institutional messaging that promotes a specific viewpoint on a public issue as a way to influence public opinion and the legislative process
  13. 13. Advertising and the Product Life Cycle Informative advertising – Used to build initial demand for a product in the introductory phase of the product life 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 – Compares products directly with their competitors either by name or by inference. Reminder-oriented advertising – Appears in the late maturity or decline stages of the product life cycle to maintain awareness of the importance and usefulness of a product.
  14. 14. Advertising and the Product Life Cycle Entertain emind R Convince Attract Attention
  15. 15. Advertising and the Product Life Cycle •Only few brands available in its •High involvement / High Risk High space • Can’t afford to make mistakes • Includes existing users also • Promiscuous users • Ex: Durables / Hospitals • The job of Advertising is to • The job of Advertising is toInvolvement ‘ENTERTAIN’ ‘CONVINCE’ • Marketing Paradigm: FEEL / DO / • Marketing Paradigm: LEARN / FEEL / FEEL DO •Commoditised Brands •Commoditised Brands • Predominantly speaking to ‘Own Past • Experienced by ‘New Brands’ entering Users an existing market • The job of Advertising is to ‘REMIND’ • Talks predominantly to ‘New users’ • Marketing Paradigm: DO / FEEL / DO only • The job of Advertising is to ‘ATTRACT Low ATTENTION’ • Marketing Paradigm: LEARN / DO / FEEL Low Brand Risk High
  16. 16. Vehicles Television  Direct Mail  Largest reach  High per person cost, but can be  Large variety of channels with carefully targeted and highly varied interests effective.  Expensive  Outdoor Advertising Newspapers  Requires brief messages.  Short life span  Online and Interactive  Possibility to localize Advertising  Easy to coordinate with other  Experts predict sales from online promotional efforts. advertising will double in 2012. Radio  Virals – Kolaveridi?  Latest entrant (after a hiatus)  Low cost  Car commuters – captive audience  Sometimes Intrusive Magazines  Including Consumer publications and trade journals.
  17. 17. More Vehicles…Sponsorship  Providing funds for a sporting or cultural event in exchange for a direct association with the event.  Benefits: Exposure to target audience and association with image of the event.Other Media Options  Marketers look for novel ways to reach customers.  Examples: infomercials, ATM receipts, directory advertising
  18. 18. SALES PROMOTIONSales promotion Nonpersonal marketing activities other than advertising, personal selling, and public relations that stimulate consumer purchasing and dealer effectiveness.
  19. 19. Consumer-Oriented PromotionsPremiums, Coupons, Rebates, Samples  Two of every five promotion dollars are spent on premiums, items given free or at reduced price with the purchase of another product.  Coupons attract new customers but focus on price rather than brand loyalty.  Rebates increase purchase rates, promote multiple purchases, and reward product users.  Three of every four consumers who receive a sample will try itGames, Contest, and Sweepstakes  Often used to introduce new goods and attract new customers.  Subject to legal restrictions.Specialty Advertising  Gift of useful merchandise carrying the name, logo, or slogan of an organization.
  20. 20. Trade-Oriented PromotionsSales promotion geared to marketing intermediaries rather than to consumers.  Encourage retailers in several ways:  To stock new products.  To continue carrying existing ones.  To promote both new and existing products effectively to consumers.  Point-of-purchase (POP) advertising Displays or demonstrations that promote products when and where consumers buy them, such as in retail stores.  Promote goods and services at trade shows
  21. 21. PERSONAL SELLINGA person-to-person promotional presentation to a potential buyer.Usually used under four conditions:  Customers are relatively few in number and geographically concentrated.  The product is technically complex, involves trade-ins, and requires special handling.  The product carries a relatively high price.  It moves through direct-distribution channels.  Example: Selling to the government or military.
  22. 22. The Sales Process
  23. 23. Public RelationsPublic organization’s communications and relationships with its various audience.  Helps a firm establish awareness of goods and services and builds a positive image of them.Publicity  Publicity Stimulation of demand for a good, service, place, idea, person, or organization by disseminating news or obtaining favorable unpaid media presentations.  Good publicity can promote a firm’s positive image  Negative publicity can cause problems.
  24. 24. PROMOTIONAL STRATEGYPushing and Pulling Strategies  Pushing strategy Relies on personal selling to market an item to wholesalers and retailers in a company’s distribution channels.  Companies promote the product to members of the marketing channel, not to end users.  Pulling strategy Promote a product by generating consumer demand for it, primarily through advertising and sales promotion appeals.  Potential buyers will request that their suppliers—retailers or local distributors—carry the product, thereby pulling it through the distribution channel.  Most marketing situations require combinations of pushing and pulling strategies, although the primary emphasis can vary.
  25. 25. Pricing Strategies
  26. 26. Learning Goals1. Identify and define the internal factors affecting a firm’s pricing decisions2. Identify and define the external factors affecting pricing decisions, including the impact of consumer perceptions of price and value3. Contrast the three general approaches to setting prices
  27. 27. DefinitionPrice  The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.Rent Tuition • BribeFee Fare • SalaryRate Toll • WageCommission Premium • InterestAssessment Retainer • Tax
  28. 28. Factors in Setting Price
  29. 29. Factors to Consider When Setting Price  Market positioning influences Internal Factors pricing strategy  Other pricing objectives: Marketing objectives  Survival Marketing mix  Current profit maximization  Market share leadership strategies  Product quality leadership Costs Organizational considerations
  30. 30. Factors to Consider When Setting Price Internal Factors  Pricing must be carefully coordinated with the other Marketing objectives marketing mix elements  Target costing is often used to Marketing mix support product positioning strategies strategies based on price Costs  Non-price positioning can also Organizational be used considerations
  31. 31. Factors to Consider When Setting Price Internal Factors  Types of costs:  Variable Marketing objectives  Fixed Marketing mix  Total costs  How costs vary at different strategies production levels will Costs influence price setting Organizational  Experience (learning) curve considerations affects price
  32. 32. Factors to Consider When Setting Price  Who sets the price? Internal Factors  Small companies: CEO or top management Marketing objectives  Large companies: Divisional Marketing mix or product line managers strategies  Price negotiation is common in industrial settings where Costs pricing departments may be Organizational created considerations
  33. 33. Factors to Consider When Setting Price  Types of marketsExternal Factors  Pure competition  Monopolistic competition Nature of market and  Oligopolistic competition demand  Pure monopoly Competitors’ costs,  Consumer perceptions of price prices, and offers and value  Price-demand relationship Other environmental  Demand curve elements  Price elasticity of demand
  34. 34. Factors to Consider When Setting Price  Consider competitors’ costs, prices, and possible reactionsExternal Factors  Pricing strategy influences the nature of competition  Low-price low-margin Nature of market and strategies inhibit competition demand  High-price high-margin Competitors’ costs, strategies attract competition prices, and offers  Benchmarking costs against the Other environmental competition is recommended elements
  35. 35. Factors to Consider When Setting PriceExternal Factors  Economic conditions  Affect production costs  Affect buyer perceptions of Nature of market and price and value demand  Reseller reactions to prices Competitors’ costs, must be considered prices, and offers  Government may restrict or Other environmental limit pricing options  Social considerations may be elements taken into account
  36. 36. General Pricing ApproachesCost-Based Pricing: Cost-Plus Pricing  Adding a standard markup to cost  Ignores demand and competition  Popular pricing technique because:  It simplifies the pricing process  Price competition may be minimized  It is perceived as more fair to both buyers and sellers
  37. 37. General Pricing Approaches Cost-Based Pricing Example- Variable costs: Rs.20 - Fixed costs: Rs.500,000- Expected sales: 100,000 units - Desired Sales Markup: 20% Variable Cost + Fixed Costs/Unit Sales = Unit Cost Rs.20 + Rs.500,000/100,000 = Rs.25 per unit Unit Cost/(1 – Desired Return on Sales) = Markup Price Rs.25 / (1 - .20) = Rs.31.25
  38. 38. General Pricing ApproachesCost-Based Pricing: Break-Even Analysis and Target Profit Pricing  Break-even charts show total cost and total revenues at different levels of unit volume.  The intersection of the total revenue and total cost curves is the break-even point.  Companies wishing to make a profit must exceed the break-even unit volume.
  39. 39. Breakeven AnalysisBreakeven analysis Pricing technique used to determine theminimum sales volume a product must generate at acertain price level to cover all costs. Finding the Breakeven Point
  40. 40. General Pricing ApproachesValue-Based Pricing:  Uses buyers’ perceptions of value rather than seller’s costs to set price.  Measuring perceived value can be difficult.  Consumer attitudes toward price and quality have shifted during the last decade.  Value pricing at the retail level  Everyday low pricing (EDLP) vs. high-low pricing
  41. 41. General Pricing ApproachesCompetition-Based Pricing:  Also called going-rate pricing  May price at the same level, above, or below the competition  Bidding for jobs is another variation of competition-based pricing  Sealed bid pricing
  42. 42. Equilibrium Price: Supply = Demand Price per flash drive/memory stick Number of flash drives/memory sticks demanded
  43. 43. Elasticity of Demand measure of the sensitivity of demand to changes in prices Inelastic Demand Elastic DemandPrice Price Electricity Recreational P2 P2 Vehicles P1 P1 Q2 Q1 Quantity Q2 Q1 not price sensitive Quantity no real change in demand price sensitive - changes in demand
  44. 44. Marketing Strategy Over the Product Life Cycle INTRODUCTION GROWTH MATURITY DECLINEMarketing strategy Market development Increase market Defend market Maintain efficiency inemphasis share share exploiting productPricing High price, unique Lower price Price at or below Set price to remainstrategy product / cover over time competition profitable or reduce production costs to liquidatePromotion Mount sales Appeal to Emphasize Reinforce loyalStrategy promotion for mass market brand differences, customers; reduce product awareness benefits & loyalty promotion costsPlace strategy Distribute through Build intensive Enlarge Be selective in selective outlets network of distribution distribution, trim outlets network unprofitable outlets
  45. 45. Alternative Pricing StrategiesPricing Existing Products/Services - 3 options  Pricing below market prices - Price wars  EX: airlines, store brand vs. manufacturer’s brand  Dumping  Pricing above prevailing market prices for similar products  EX: Sony – higher price = higher quality?  Pricing at or near market prices
  46. 46. Alternative Pricing Strategies Penetration Price Strategy  PenetrationPRICE  Low price  establish product in the market  Elastic demand; Predatory Skimming Price Strategy pricing  SkimmingPRICE  High price; unique product; appeal to early adopters; Prestige pricing  Recovering high R&D Skimming > Penetration costsPRICE  Combination  Move inventory; stimulate D; extend product life
  47. 47. Penetration PricingApplies to large markets with elasticdemand, economies of scale, intensecompetition
  48. 48. Pricing of iPhones
  49. 49. Market SkimmingApplies to new, distinctiveproducts, early in the PLC
  50. 50. Pricing Tactics Price Lining  Setting a limited number of prices for certain categories of products Psychological Pricing  Pricing to take advantage of the fact that consumers do not always respond rationally to stated prices Discounting  Price reductions offered as an incentive to purchase High tech Pricing: giving it away!
  51. 51. Captive Product Pricing Gillette Fusion Manual Razor Gillette Fusion Manual Razor with cartridges
  52. 52. Price Adjustment Strategies 52 Strategies  Types of discounts  Cash discount  Quantity discount Discount / allowance  Seasonal discount Segmented  Allowances Psychological  Trade-in allowances Promotional  Promotional allowances International
  53. 53. Seasonal Discounts 53
  54. 54. Bundling
  55. 55. (Mixed) Bundling 55
  56. 56. Price Adjustment Strategies Strategies  Types of segmented pricing strategies:  Product-line pricing Discount / allowance  Location pricing Segmented  Time pricing  Also called revenue or yield Psychological management Promotional  Certain conditions must exist International for segmented pricing to be effective
  57. 57. Segmented Pricing Effectiveness Market must be “segmentable” Segments must show different demand Pricing must be legal Costs of segmentation cannot exceed revenues earned Segmented pricing must reflect real differences in customers’ perceived value
  58. 58. Pricing a Product LineHighQuality Toyota Camry W1Low Toyota CorollaQuality Altis 58
  59. 59. Time Pricing
  60. 60. Price Adjustment Strategies Strategies  The price is used to say something about the product.  Price-quality relationship Discount / allowance  Reference prices Segmented  Differences as small as Re.1 can be important Psychological  Numeric digits may have Promotional symbolic and visual qualities that psychologically influence International the buyer
  61. 61. PsychologicalPricing
  62. 62. Psychological PricingMercs can actually be more important to many people thantheir spouses. That is a price they are willing to pay. Luxury Car!
  63. 63. Price Adjustment Strategies Strategies Temporarily pricing products below the list Discount / allowance price or even below cost Segmented  Contracts, Special-event pricing Psychological  Cash rebates Promotional  Low-interest financing, International warranties  Loss leaders
  64. 64. P Promotional CellphoneRO P Pricing 64M RO IT CI IO NN GAL
  65. 65. No Promotional Pricing
  66. 66. Price Adjustment Strategies 66 Strategies  Prices charged in a specific country depend on many factors Discount / allowance  Economic conditions Segmented  Competitive situation Psychological  Laws / regulations Promotional  Distribution system  Consumer perceptions International  Corporate marketing objectives  Cost considerations
  67. 67. India USA
  68. 68. Price Transparency
  69. 69. Select the appropriate pricing strategy. Explain your choice.  Wal-Mart launches a new range of own-label soups.  Cunard launches two new cruise ships.  A cable TV provider moves into a new area and needs to achieve a market share.  Holiday Inns try to fill hotels during winter weekends.  Burger King introduces a new range of value meals.  Nokia launches a new videophone.
  70. 70. What is the need for a Marketing Channel?Many producers lack the financial resources to carry out direct marketingIn some cases direct marketing simply is not feasibleProducers who do establish their own channels can often earn a greater return by increasing their investment in their main business
  71. 71. Role of IntermediariesGreater efficiency in making goods available to target markets.Intermediaries provide  Contacts  Experience  Specialization  Scale of operationMatch supply and demand
  72. 72. What does a channel do?Key functions include:  Gather information about potential and current customers, competitors, and others  Develop and disseminate persuasive communications to stimulate purchasing  Reach agreements on price and other terms so that transfer of ownership or possession can be effected  Place orders with manufacturers  Acquire funds to finance inventories at different levels in the marketing channel  Assume risk connected with carrying out channel work  Provide for the successive storage and movement of physical products  Oversee actual transfer of ownership from one organization or person to another
  73. 73. What does a channel do?Breaking bulkReduce number of transactions and create bulk for transportAccessibility to marketsProvide specialist support service M C M C M C C M I M C M C
  74. 74. Channel intermediaries - WholesalersBreak down ‘bulk’  buys from producers and sell small quantities to retailersProvides storage facilities  reduces contact cost between producer and consumerWholesaler takes some of the marketing responsibility e.g sales force, promotions
  75. 75. WholesalingSelling and promotingBuying and assortment buildingBulk breakingWarehousingTransportationFinancingRisk bearingMarket informationManagement services and counseling
  76. 76. Wholesaler Marketing DecisionsTarget MarketProduct Assortment and ServicesPrice DecisionPromotion DecisionPlace Decision
  77. 77. Channel intermediaries - AgentsMainly used in international marketsCommission agent - does not take title of the goods. Secures orders.Stockist agent - hold ‘consignment’ stockControl is difficult due to cultural differencesTraining, motivation, etc are expensive
  78. 78. Channel intermediaries - RetailerMuch stronger personal relationship with the consumerHold a variety of productsOffer consumers creditPromote and merchandise productsPrice the final productBuild retailer ‘brand’ in the high street
  79. 79. Types of Retailers Specialty Store:  Narrow product line with a deep assortment. Department Store  Several product lines with each line operated as a separate department Supermarket  Relatively large, low-cost, low-margin, high volume, selfservice operation Convenience Store  Relatively small store located near residential area Nonstore retailing  Categories of nonstore retailing  Direct selling  Direct marketing  Telemarketing  Television direct-response marketing  Electronic shopping  Automatic vending  Buying service Corporate Retailing
  80. 80. RetailingMarketing DecisionsTarget MarketProduct Assortment and Procurement  Breadth  DepthProduct-differentiation Strategy Possibilities  Feature exclusive national brands that are not available at competing retailers  Feature mostly private branded merchandise  Feature blockbuster distinctive merchandise events  Feature surprise or ever-changing merchandise  Feature the latest or newest merchandise first  Offer merchandise customizing services  Offer a highly targeted assortment
  81. 81. Channel intermediaries - InternetSell to a geographically disperse marketAble to target and focus on specific segmentsRelatively low set-up costsUse of e-commerce technology (for payment, shopping software, etc)Paradigm shift in commerce and consumption
  82. 82. Six basic channel decisionsDirect or indirect channelsSingle or multiple channelsLength of channelTypes of intermediariesNumber of intermediaries at each levelWhich intermediaries? Avoid intrachannel conflict
  83. 83. Marketing Flows in the Channel
  84. 84. Channel-Design Decisions Analyzing Consumer Service Needs Analyzing Consumer Service NeedsSetting Channel Objectives & ConstraintsSetting Channel Objectives & Constraints Identifying Major Alternatives Identifying Major Alternatives Intensive Intensive Selective Selective Exclusive Exclusive Distribution Distribution Distribution Distribution Distribution Distribution Evaluating the Major Alternatives Evaluating the Major Alternatives
  85. 85. The Value-Adds versus Costs of Different Channels
  86. 86. Channel Strategy•Market factors •Intensive distribution •Conventional channels •Buyer behavior, •use of all available markets •Independence of channel geographical concentration (e.g. cigarettes) members, little or no control of customers •Selective distribution (e.g. pricing, brand image)•Producer factors •use of a limited number of •Franchise operation •Available resources outlets in a geographical •Legal contract in which product mix offered area (e.g. computers) producer and channel•Product factors •Exclusive distribution intermediaries agree each a •Product size, bulky or •only one intermediary is member’s rights and difficult to handle? used in a geographic area obligations•Competitive factors (e.g. cars sold by only one •Channel ownership •Competitor’s control over dealer in each town) •By purchasing retail outlets, traditional distribution producers control their channels) purchasing, production and marketing activities
  88. 88. Channel Behavior and ConflictThe channel will be most effective when:  Each member is assigned tasks it can do best.  All members cooperate to attain overall channel goals and satisfy the target market.Focus on individual goals leads to conflict  Horizontal Conflict occurs among firms at the same level of the channel.  Vertical Conflict occurs between different levels of the same channel.
  89. 89. Channel Management Decisions Selecting Selecting FEEDBACK Motivating Motivating Evaluating Evaluating
  90. 90. LogisticsInvolves entire supply chainIncreasing importance of logistics  Effective logistics is becoming a key to winning and keeping customers  Logistics is a major cost element for most companies  The explosion in product variety has created a need for improved logistics management  Information technology has created opportunities for major gains in distribution efficiency
  91. 91. Goals of Logistics systemProvide a Targeted Level of Customer Service atthe Least Cost.Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels
  92. 92. Logistics FunctionsOrder ProcessingWarehousingInventory ManagementTransportationDesign system to minimize costs of attaining objectives
  93. 93. Transportation Modes Rail RailNation’s largest carrier, cost-effective Nation’s largest carrier, cost-effectivefor shipping bulk products, piggyback for shipping bulk products, piggyback Truck Truck Flexible in routing & time schedules, efficient Flexible in routing & time schedules, efficient for short-hauls of high value goods for short-hauls of high value goods Water Water Low cost for shipping bulky, low-value Low cost for shipping bulky, low-value goods, slowest form goods, slowest form Pipeline Pipeline Ship petroleum, natural gas, and chemicals Ship petroleum, natural gas, and chemicals from sources to markets from sources to markets Air Air High cost, ideal when speed is needed or to High cost, ideal when speed is needed or to ship high-value, low-bulk items ship high-value, low-bulk items
  94. 94. Selection considerationMarket segment - must know the specific segment and target customerChanges during plc - different channels are exploited at various stages of plcProducer-distributor fit - their policies, strategies and imageQualification assessment - experience and track record must be establishedDistributor training and support
  95. 95. End of Day 3