C kotler ch 11 15

Chapter 11- slide 1
Chapter Eleven
Pricing Strategies

Pricing Strategies
• New-Product Pricing Strategies
• Product Mix Pricing Strategies
Topic Outline
Chapter 11- slide 2Copyright © 2010 Pearson Education, Inc.
Publishing as Prentice Hall
• Product Mix Pricing Strategies
• Price Adjustment Strategies
• Price Changes

New-Product Pricing
Strategies
• Market-skimming
pricing
• Market-
Pricing Strategies
• Market-
penetration pricing

New-Product Pricing
Strategies
Market-skimming pricing is a strategy with high
initial prices to “skim” revenue layers from the
market
• Product quality and image must support the price
• Product quality and image must support the price
• Buyers must want the product at the price
• Costs of producing the product in small volume
should not cancel the advantage of higher prices
• Competitors should not be able to enter the market
easily

New-Product Pricing
Strategies
Market-penetration pricing sets a low initial
price in order to penetrate the market quickly
and deeply to attract a large number of buyers
quickly to gain market share
Pricing Strategies
quickly to gain market share
• Price sensitive market
• Inverse relationship of production and
distribution cost to sales growth
• Low prices must keep competition out of the
market

Product Mix Pricing Strategies
Pricing Strategies
Product
line pricing
Optional-
product
pricing
Captive-
product
pricing
pricing pricing
By-product
pricing
Product
bundle
pricing

Product line pricing takes into account the
cost differences between products in the
line, customer evaluation of their
Pricing Strategies
line, customer evaluation of their
features, and competitors’ prices
Optional-product pricing takes into account
optional or accessory products along with
the main product

Captive-product pricing
involves products that
must be used along with
the main product
Pricing Strategies
the main product
Two-part pricing involves
breaking the price into:
– Fixed fee
– Variable usage fee

Price Mix Pricing Strategies
By-product pricing refers to products with
little or no value produced as a result of
Pricing Strategies
little or no value produced as a result of
the main product. Producers will seek
little or no profit other than the cost to
cover storage and delivery.

Price Mix Pricing Strategies
Product bundle pricing combines several
products at a reduced price
Pricing Strategies
products at a reduced price

Price-Adjustment Strategies
Discount and
allowance
pricing
Segmented
pricing
Psychological Promotional
Psychological
pricing
Promotional
pricing
Geographic
pricing
Dynamic
pricing
International
pricing

Discount and allowance pricing reduces
prices to reward customer responses such
Pricing Strategies
prices to reward customer responses such
as paying early or promoting the product
• Discounts
• Allowances

Segmented pricing is used when a
company sells a product at two or more
Pricing Strategies
company sells a product at two or more
prices even though the difference is not
based on cost

To be effective:
• Market must be segmentable
• Segments must show different degrees of
Pricing Strategies
Segmented Pricing
• Segments must show different degrees of
demand
• Watching the market cannot exceed the extra
revenue obtained from the price difference
• Must be legal

Psychological pricing occurs when sellers
consider the psychology of prices and not
simply the economics
Reference prices are prices that buyers carry in
Pricing Strategies
Reference prices are prices that buyers carry in
their minds and refer to when looking at a
given product
– Noting current prices
– Remembering past prices
– Assessing the buying situations

Promotional pricing is when prices are temporarily
priced below list price or cost to increase demand
• Loss leaders
• Special event pricing
Pricing Strategies
• Special event pricing
• Cash rebates
• Low-interest financing
• Longer warrantees
• Free maintenance

Risks of promotional pricing
• Used too frequently, and copies by
competitors can create “deal-prone”
Pricing Strategies
competitors can create “deal-prone”
customers who will wait for promotions
and avoid buying at regular price
• Creates price wars

Geographical pricing is used for customers in
different parts of the country or the world
• FOB-origin pricing
Pricing Strategies
• FOB-origin pricing
• Uniformed-delivered pricing
• Zone pricing
• Basing-point pricing
• Freight-absorption pricing

• FOB-origin (free on board) pricing means
that the goods are delivered to the carrier
and the title and responsibility passes to
Pricing Strategies
and the title and responsibility passes to
the customer
• Uniformed-delivered pricing means the
company charges the same price plus
freight to all customers, regardless of
location

• Zone pricing means that the company sets
up two or more zones where customers
within a given zone pay a single total price
• Basing-point pricing means that a seller
Pricing Strategies
• Basing-point pricing means that a seller
selects a given city as a “basing point” and
charges all customers the freight cost
associated from that city to the customer
location, regardless of the city from which
the goods are actually shipped

• Freight-absorption pricing means the
seller absorbs all or part of the actual
Pricing Strategies
seller absorbs all or part of the actual
freight charge as an incentive to attract
business in competitive markets

Dynamic pricing is when
prices are adjusted
continually to meet the
Pricing Strategies
continually to meet the
characteristics and
needs of the individual
customer and
situations

International pricing is when prices are set in a
specific country based on country-specific factors
• Economic conditions
Pricing Strategies
• Competitive conditions
• Laws and regulations
• Infrastructure
• Company marketing
objective

Price Changes
• Price cuts
• Price increases
Initiating Pricing Changes
• Price increases

Price Changes
Initiating Pricing Changes
Price cuts occur due to:
• Excess capacity
• Increased market share
• Increased market share
Price increase from:
• Cost inflation
• Increased demand
• Lack of supply

Price Changes
Price
increases
Price cuts
Buyer Reactions to Pricing Changes
• Product is “hot”
• Company greed
• New models
will be available
• Models are not
selling well
• Quality issues

Price Changes
Questions
– Why did the competitor change the price?
– Is the price cut permanent or temporary?
Responding to Price Changes
– Is the price cut permanent or temporary?
– What is the effect on market share and profits?
– Will competitors respond?

Price Changes
Solutions
– Reduce price to match competition
– Maintain price but raise the perceived value
– Maintain price but raise the perceived value
through communications
– Improve quality and increase price
– Launch a lower-price “fighting” brand

Price Changes

Public Policy and Pricing
Price competition is a core element of
our free-market economy. In setting
prices, companies usually are not free to
charge whatever prices they wish. Many
charge whatever prices they wish. Many
laws govern the rules of fair play in
pricing.
• The Monopolies and Restrictive Trade
Practices (MRTP) Act, 1969
• The Competition Act, 2002

Salient features of the Competition Act:
• anti-competitive agreements
• prohibition of abuse of dominant
• prohibition of abuse of dominant
positions by an enterprise
• regulation of combinations such as
acquisitions, mergers, joint ventures,
takeovers, and amalgamations

• Under the MRTP Act, acts such as
misleading consumers about the prices at
which goods and services are available in
the market and false offers of bargain
the market and false offers of bargain
prices are considered to be unfair trade
practices
• The Consumer Protection Act, 1986
(amended in 2002), also safeguards the
interests of consumers

Predatory pricing, or selling and providing
services with the intention of reducing
competition or eliminating competitors, is
not permissible under the MRTP Act or
not permissible under the MRTP Act or
the Competition Act.

With advancements
in technology,
additional concerns,
such as scanner
such as scanner
fraud, are on the
rise.

Chapter 12 - slide 1
Chapter Twelve
Marketing Channels: Delivering
Customer Value

Marketing Channels:
Delivering Customer Value
• Supply Chains and the Value Delivery Network
• The Nature and Importance of Marketing Channels
• Channel Behavior and Organization
Topic Outline
Chapter 12 - slide 2Copyright © 2010 Pearson Education, Inc.
• Channel Design Decisions
• Channel Management Decisions
• Public Policy and Distribution Decisions
• Marketing Logistics and Supply Chain Management

Supply Chains and the
Value Delivery Network
Upstream partners include raw material
suppliers, components, parts, information,
finances, and expertise to create a
Supply Chain Partners
finances, and expertise to create a
product or service
Downstream partners include the marketing
channels or distribution channels that
look toward the customer

Supply chain “make and sell” view includes the
firm’s raw materials, productive inputs, and
factory capacity
Supply Chain Views
Demand chain “sense and respond” view suggests
that planning starts with the needs of the target
customer, and the firm responds to these needs
by organizing a chain of resources and activities
with the goal of creating customer value

Value delivery network is
the firm’s suppliers,
distributors, and
distributors, and
ultimately customers
who partner with each
other to improve the
performance of the
entire system

The Nature and Importance of
Marketing Channels
Intermediaries offer producers greater
efficiency in making goods available to
How Channel Members Add Value
efficiency in making goods available to
target markets. Through their contacts,
experience, specialization, and scale of
operations, intermediaries usually offer
the firm more than it can achieve on its
own.

Marketing Channels
• From an economic view, intermediaries
transform the assortment of products into
assortments wanted by consumers
assortments wanted by consumers
• Channel members add value by bridging
the major time, place, and possession gaps
that separate goods and services from
those who would use them

Marketing Channels

Marketing Channels
Information Promotion Contact
Matching Negotiation
Physical
distribution
Financing Risk taking

Marketing Channels
Number of Channel Levels

Marketing Channels
Connected by types of flows:
• Physical flow of products
• Flow of ownership
Number of Channel Levels
• Flow of ownership
• Payment flow
• Information flow
• Promotion flow

Channel Behavior and Organization
Marketing channel consists of firms that
have partnered for their common good
with each member playing a specialized
role
Channel Behavior
role
Channel conflict refers to disagreement over
goals, roles, and rewards by channel
members
• Horizontal conflict
• Vertical conflict

Conventional distribution systems consist of
one or more independent producers,
wholesalers, and retailers. Each seeks to
Conventional Distributions Systems
wholesalers, and retailers. Each seeks to
maximize its own profits, and there is little
control over the other members and no
formal means for assigning roles and
resolving conflict.

Vertical marketing systems (VMSs) provide channel
leadership and consist of producers,
wholesalers, and retailers acting as a unified
Vertical Marketing Systems
wholesalers, and retailers acting as a unified
system and consist of:
• Corporate marketing systems
• Contractual marketing systems
• Administered marketing systems

Channel Behavior and
Organization
Corporate vertical marketing system
integrates successive stages of
production and distribution under
production and distribution under
single ownership

Contractual vertical marketing system consists of
independent firms at different levels of
production and distribution who join together
production and distribution who join together
through contracts to obtain more economies or
sales impact than each could achieve alone. The
most common form is the franchise
organization.

Franchise organization links several stages in the
production distribution process
– Manufacturer-sponsored retailer franchise system
– Manufacturer-sponsored wholesaler franchise
system
– Service firm-sponsored retailer franchise system

Administered vertical marketing system has a
few dominant channel members without
common ownership. Leadership comes from
common ownership. Leadership comes from
size and power.

Horizontal marketing systems are when two or
more companies at one level join together to
follow a new marketing opportunity.
Companies combine financial, production, or
marketing resources to accomplish more than
Horizontal Marketing System
Companies combine financial, production, or
marketing resources to accomplish more than
any one company could alone.

Multichannel Distribution systems (Hybrid
marketing channels) are when a single firm
Multichannel Distribution Systems
Hybrid Marketing Channels
marketing channels) are when a single firm
sets up two or more marketing channels to
reach one or more customer segments

Channel Behavior and
Organization
Multichannel Distribution System

Disintermediation occurs when product or
service producers cut out intermediaries
and go directly to final buyers, or when
Changing Channel Organization
and go directly to final buyers, or when
radically new types of channel
intermediaries displace traditional ones

Channel Design Decisions
Analyzing
consumer
needs
Setting
channel
objectives
needs objectives
Identifying
major
channel
alternatives
Evaluation

• Targeted levels of customer service
• What segments to serve
Setting Channel Objectives
• Best channels to use
• Minimizing the cost of meeting customer service
requirements

• Types of intermediaries
• Number of marketing intermediaries
Identifying Major Alternatives
• Number of marketing intermediaries
• Responsibilities of channel members

Identifying Major Alternatives
Intensive distribution
• Candy and toothpaste
Exclusive distribution
• Luxury automobiles and prestige
clothing
Selective distribution
• Television and home appliance

Each alternative should
be evaluated against:
Evaluating the Major Alternatives
be evaluated against:
– Economic criteria
– Control
– Adaptive criteria

• Channel systems can vary from
country to country
• Must be able to adapt channel
Designing International Distribution Channels
• Must be able to adapt channel
strategies to the existing structures
within each country

Channel Management Decisions
Selecting Managing Motivating Evaluating
Selecting
channel
members
Managing
channel
members
Motivating
channel
members
Evaluating
channel
members

Public Policy and Distribution
Decisions
Exclusive distribution is when the seller allows only
certain outlets to carry its products
Exclusive dealing is when the seller requires that
the sellers not handle competitor’s products
the sellers not handle competitor’s products
Exclusive territorial agreements are where
producer or seller limit territory
Tying agreements are agreements where the dealer
must take most or all of the line

Marketing Logistics and
Supply Chain Management
Marketing logistics (physical distribution)
involves planning, implementing, and
controlling the physical flow of goods,
services, and related information from
Nature and Importance of Marketing
Logistics
services, and related information from
points of origin to points of
consumption to meet consumer
requirements at a profit

Nature and Importance of Marketing Logistics

Supply chain management is the process of
managing upstream and downstream value-
Nature and Importance of Marketing Logistics
managing upstream and downstream value-
added flows of materials, final goods, and
related information among suppliers, the
company, resellers, and final consumers

Major Logistics Functions
Warehousing
Inventory
management
Warehousing
management
Transportation
Logistics
information
management

• How many
• What types
• Location
Warehousing Decisions
• Location
• Distribution centers

• Just-in-time systems
• RFID
– Knowing exact product location
Inventory Management
– Knowing exact product location
• Smart shelves
– Placing orders automatically

Major Logistics Functions
Transportation affects the pricing
of products, delivery
performance, and condition of
the goods when they arrive
the goods when they arrive
Truck Rail Water
Pipeline Air Internet

Logistics information management is the
management of the flow of information,
including customer orders, billing, inventory
Logistics Information Management
including customer orders, billing, inventory
levels, and customer data
• EDI (electronic data interchange)
• VMI (vendor-managed inventory)

Integrated logistics management is the
recognition that providing customer service
Integrated Logistics Management
recognition that providing customer service
and trimming distribution costs requires
teamwork internally and externally

Third-party logistics is
the outsourcing of
logistics functions to
third-party logistics
Integrated Logistics Management
third-party logistics
providers (3PLs)

Chapter 13- slide 1
Chapter Thirteen
Retailing and Wholesaling

Retailing and Wholesaling
• Retailing
• Retailer Marketing Decisions
• The Future of Retailing
Topic Outline
• The Future of Retailing
• Wholesaling

Retailing includes all the activities in selling
products or services directly to final
consumers for their personal, non-business
use
Retailers are businesses whose sales come
Retailing
Retailers are businesses whose sales come
primarily from retailing

Table 13.1
Major Store Retailer Types

Retailing
Amount of service:
• Self-service
Types of Retailers
• Self-service
• Limited service
• Full service

Retailing
Product Line
Specialty stores
• Narrow product line with deep assortment
Department stores
Department stores
• Wide variety of product lines
Convenience stores
• Limited line of high-turnover goods
Superstores
• Non-food goods
Category killers
• Deep in category with sales staff

Retailing
Types of Retailers
Relative Prices
Discount
stores
Off-price
retailers
stores retailers
Factory
outlets
Warehouse
clubs

Retailing
Types of Retailers
Organizational Approach
Corporate
chains
Voluntary
chains
Retailer
cooperatives
chains chains cooperatives
Franchise
organizations
Merchandising
conglomerates

Retailing
Corporate chains are two or more outlets
that are commonly owned and controlled
Types of Retailers
• Size allows them to buy in large quantities
at lower prices and gain promotional
economies
– Bata
– ChenOne, Pakistan

Retailing
Voluntary chains are wholesale-sponsored
groups of independent retailers that engage
Types of Retailers
groups of independent retailers that engage
in group buying and common merchandising

Retailing
Retailer cooperatives is a group of
independent retailers that band together to
set up a joint-owned, central wholesale
Types of Retailers
set up a joint-owned, central wholesale
operation and conduct joint merchandising
and promotion effort

Retailing
Types of Retailers
Franchise organizations are based on some
unique product or service; on a method of
doing business; or on the trade name, good
doing business; or on the trade name, good
will, or patent that the franchisor has
developed

Retailing
Merchandising conglomerates are
corporations that combine several retailing
Types of Retailers
corporations that combine several retailing
forms under central ownership

Retailing
Retailer Marketing Decisions

Retailing
Segmentation targeting, differentiation, and
positioning involves the definition and
profile of the market so the other retail
profile of the market so the other retail
marketing decisions can be made

Retailing
Product assortment and service decisions include:
Product Assortment and Service
• Product assortment
• Services mix
• Store atmosphere

Retailing
Price policy must fit the target market and
positioning, product and service assortment, and
competition
Price Decision
competition
• High markup on
lower volume
• Low markup on
higher volume

Retailing
High-low pricing involves charging higher
prices on an everyday basis, coupled with
frequent sales and other price promotions
Price Decision
prices on an everyday basis, coupled with
frequent sales and other price promotions
Everyday low price (EDLP) involves charging
constant, everyday low prices with few
sales or discounts

Retailing
Promotion Decision
Personal Sales
Advertising
Personal
selling
Sales
promotion
Public
relations
Direct
marketing

Retailing
Central business districts are located in cities and
include department and specialty stores, banks, and
movie theaters
Shopping center is a group of retail businesses
planned, developed, owned, and managed as a unit
Retailer Marketing Decisions - Place Decision

Retailing
Retailers have to consider:
– Non-store retailing
– Retail convergence
The Future of Retailing
– Retail convergence
– Megaretailers
– Retail technology
– Global expansion
– Retail stores as communities

Retailing
Wheel-of-retailing concept states that many new
types of retailing forms begin as low-margin,
low-price, low-status operations, and challenge
New Retail Forms and Shortening Retail Life Cycles
low-price, low-status operations, and challenge
established retailers. As they succeed they
upgrade their facilities and offer more services,
increasing their costs and forcing them to
increase prices, eventually becoming the
retailers they replaced.

Retailing
Growth of non-store retailing includes:
• Mail order
• Television
• Television
• Phone
• Online

Retailing
Retail convergence involves the merging of
consumers, producers, prices, and
consumers, producers, prices, and
retailers, creating greater competition for
retailers and greater difficulty
differentiating offerings

Retailing
The rise of megaretailers involves the rise of
mass merchandisers and specialty
superstores, the formation of vertical
superstores, the formation of vertical
marketing systems, and a rash of retail
mergers and acquisitions
• Superior information systems
• Buying power
• Large selection

Retailing
Growing importance of retail technology provides
better forecasts, inventory control, electronic
ordering, transfer of information, scanning,
ordering, transfer of information, scanning,
online transaction processing, improved
merchandise handling systems, and the ability
to connect with customers

Selling and promoting
Buying assortment building
Bulk breaking
Wholesaling
Wholesaling includes all activities involved in selling goods and
services to those buying for resale or business use
Bulk breaking
Warehousing
Transportation
Financing
Risk bearing
Market information
Management services and advice

Wholesaling
Selling and promoting involves the
wholesaler’s sales force helping the
manufacturer reach many smaller
Wholesaling
manufacturer reach many smaller
customers at lower cost
Buying assortment building involves the
selection of items and building of
assortments needed by their customers,
saving the customers work

Wholesaling
Bulk breaking involves the wholesaler buying
in larger quantity and breaking into
smaller lots for its customers
Wholesaling
in larger quantity and breaking into
smaller lots for its customers
Warehousing involves the wholesaler holding
inventory, reducing its customers’
inventory cost and risk

Wholesaling
Transportation involves the wholesaler
providing quick delivery due to its
Wholesaling
providing quick delivery due to its
proximity to the buyer
Financing involves the wholesaler providing
credit and financing suppliers by ordering
earlier and paying on time

Wholesaling
Risk bearing involves the wholesaler
absorbing risk by taking title and bearing
the cost of theft, damage, spoilage, and
Wholesaling
the cost of theft, damage, spoilage, and
obsolescence
Market information involves the wholesaler
providing information to suppliers and
customers about competitors, new
products, and price developments

Wholesaling
Management services and advice involves
wholesalers helping retailers train their sales
clerks, improve store layouts, and set up
Wholesaling
clerks, improve store layouts, and set up
accounting and inventory control systems

Wholesaling
Types of Wholesalers
Merchant
wholesalers
Agents and
brokers
Manufacturers’
sales branches
and offices

Wholesaling
Merchant wholesalers is the largest group of
wholesalers and include:
• Full-service wholesalers who provide a full
• Full-service wholesalers who provide a full
set of services
• Limited service wholesalers who provide
few services and specialized functions

Wholesaling
Brokers and agents do not take title, perform
a few functions, and specialize by product
a few functions, and specialize by product
line or customer type
• Brokers bring buyers and sellers together
and assist in negotiations
• Agents represent buyers or sellers

Wholesaling
Manufacturers’ sales branches and offices is
a form of wholesaling by sellers or buyers
a form of wholesaling by sellers or buyers
themselves rather than through
independent wholesalers

Wholesaling
Wholesaler Marketing Decisions

Wholesaling
Target market and positioning decisions
• Size of customer
• Size of customer
• Type of customer
• Need for service

Wholesaling
Marketing mix decisions
• Product
• Product
• Price
• Promotion
• Place

Wholesaling
Challenges
• Resistance to price increases
• Lack of suppliers
Trends in Wholesaling
• Lack of suppliers
• Changing customer needs
• Adding value by increasing efficiency
and effectiveness

Chapter Fourteen
Communicating Customer Value:
Integrated Marketing
Communications Strategy

Communicating Customer Value: Integrated
Marketing Communications Strategy
• The Promotion Mix
• Integrated Marketing Communications
• A View of the Communications Process
Topic Outline
• A View of the Communications Process
• Steps in Developing Effective Marketing
Communication
• Setting the Total Promotion Budget and Mix
• Socially Responsible Marketing Communication

The promotion mix is the specific blend of
advertising, public relations, personal
selling, and direct-marketing tools that the
The Promotion Mix
selling, and direct-marketing tools that the
company uses to persuasively
communicate customer value and build
customer relationships

The Promotion Mix
Major Promotion Tools

The Promotion Mix
Advertising is any paid form of non-personal
presentation and promotion of ideas, goods, or
services by an identified sponsor
• Broadcast
• Print
• Internet
• Outdoor

The Promotion Mix
Sales promotion is the short-term incentives to
encourage the purchase or sale of a product or
service
service
• Discounts
• Coupons
• Displays
• Demonstrations

The Promotion Mix
Public relations involves building good relations
with the company’s various publics by obtaining
favorable publicity, building up a good corporate
image, and handling or heading off unfavorable
favorable publicity, building up a good corporate
image, and handling or heading off unfavorable
rumors, stories, and events
• Press releases
• Sponsorships
• Special events
• Web pages

The Promotion Mix
Personal selling is the personal presentation
by the firm’s sales force for the purpose of
making sales and building customer
by the firm’s sales force for the purpose of
making sales and building customer
relationships
• Sales presentations
• Trade shows
• Incentive programs

The Promotion Mix
Direct marketing involves making direct
connections with carefully targeted individual
consumers to both obtain an immediate
response and cultivate lasting customer
response and cultivate lasting customer
relationships—through the use of direct mail,
telephone, direct-response television, e-mail,
and the Internet to communicate directly with
specific consumers
• Catalog
• Telemarketing
• Kiosks

Communications
• Consumers are better informed
• More communication
• Less mass marketing
The New Marketing Communications
Landscape
• Less mass marketing
• Changing communications
technology

Communications
Integrated marketing communications is the
integration by the company of its
communication channels to deliver a clear,
The Need for Integrated Marketing
Communications
communication channels to deliver a clear,
consistent, and compelling message about the
organization and its brands

A View of the Communication
Process
The Communication Process

Steps in Developing Effective
Marketing Communication
Identify the target audience
Determine the communication
objectives
Design the message
Choose the media
Select the message source

Communication
Identifying the Target market
What will
be said
How it will
be said
When it
will be said
Where it
will be said
Who will
say it

• Marketers seek a purchase response that results
from a consumer decision-making process that
includes the stages of buyer readiness
Determining the Communication Objectives
includes the stages of buyer readiness

AIDA Model
• Get Attention
Designing a Message
• Get Attention
• Hold Interest
• Arouse Desire
• Obtain Action

Message content is an appeal or theme
that will produce the desired response
• Rational appeal
Designing a Message
• Rational appeal
• Emotional appeal
• Moral appeal
Message Format

Rational appeal relates to the audience’s
self-interest
Designing a Message
self-interest
Emotional appeal is an attempt to stir up
positive or negative emotions to motivate
a purchase

Moral appeal is directed at the
audience’s sense of right and proper
Designing a Message

Personal communication involves two or more
people communicating directly with each other
• Face to face
Choosing Media
• Phone
• Mail
• E-mail
• Internet chat

Personal communication is effective because it
allows personal addressing and feedback
Choosing Media
allows personal addressing and feedback
Control of personal communication
• Company
• Independent experts
• Word of mouth

Opinion leaders are people within a reference
group who, because of their special skills,
knowledge, personality, or other
Choosing Media
Personal Communication
knowledge, personality, or other
characteristics; exerts social influence on
others
Buzz marketing involves cultivating opinion
leaders and getting them to spread
information about a product or service to
others in their communities

Non-personal communication is media that
carry messages without personal contact or
feedback, including major media, atmospheres,
and events that affect the buyer directly
Non-Personal Communication Channels
and events that affect the buyer directly

Major media include print, broadcast,
display, and online media
Non-Personal Communication Channels
display, and online media
Atmospheres are designed environments
that create or reinforce the buyer’s
leanings toward buying a product

Events are staged occurrences that
communicate messages to target
audiences
Nonpersonal Communication Channels
audiences
• Press conferences
• Grand openings
• Exhibits
• Public tours

The message’s impact on the target audience
is affected by how the audience views the
communicator
Selecting the Message Source
communicator
• Celebrities
– Athletes
– Entertainers
• Professionals
– Health care providers

Involves the communicator understanding
the effect on the target audience by
Collecting Feedback
the effect on the target audience by
measuring behavior resulting from the
behavior

Setting the Total Promotion
Budget and Mix
Affordable budget method sets the
budget at an affordable level
•Ignores the effects of promotion on
Setting the Total Promotion Budget
•Ignores the effects of promotion on
sales

Percentage-of-sales method sets the budget at a
certain percentage of current or forecasted sales
or unit sales price
Budget and Mix
or unit sales price
• Easy to use and helps management think about
the relationship between promotion, selling
price, and profit per unit
• Wrongly views sales as the cause rather than the
result of promotion

Competitive-parity method sets the budget to
match competitor outlays
• Represents industry standards
Budget and Mix
• Represents industry standards
• Avoids promotion wars

Objective-and-task method sets the budget based
on what the firm wants to accomplish with
promotion and includes:
Budget and Mix
promotion and includes:
• Defining promotion objectives
• Determining tasks to achieve the objectives
• Estimating costs

Budget and Mix
Advertising reaches masses of
geographically dispersed buyers at a low
Shaping the Overall Promotion Mix
The Nature of Each Promotion Tool
geographically dispersed buyers at a low
cost per exposure, and it enables the seller
to repeat a message many times

Personal selling is the most effective
method at certain stages of the buying
process, particularly in building buyers’
Budget and Mix
method at certain stages of the buying
process, particularly in building buyers’
preferences, convictions, actions, and
developing customer relationships

Sales promotion includes coupons, contests,
cents-off deals, and premiums that attract
Budget and Mix
cents-off deals, and premiums that attract
consumer attention and offer strong
incentives to purchase, and can be used to
dramatize product offers and to boost
sagging sales

Public relations is a very believable form of
promotion that includes news stories,
features, sponsorships, and events
Budget and Mix
features, sponsorships, and events
Direct marketing is a non-public, immediate,
customized, and interactive promotional tool
that includes direct mail, catalogs,
telemarketing, and online marketing

Promotion Mix Strategies
Budget and Mix

1. Identify customer touch points
2. Analyze trends—internal and external
Integrating the Promotion Mix
Checklist
Budget and Mix
3. Audit the pockets of communication spending throughout the
organization
4. Team up in communications planning
5. Create compatible themes, tones, and quality across all
communications media
6. Create performance measures that are shared by all
communications elements
7. Appoint a director responsible for the company’s persuasive
communications efforts

• Communicate openly and honestly with consumers and resellers
• Avoid deceptive or false advertising
• Avoid bait-and-switch advertising
• Conform to all federal, state, and local regulations
Socially Responsible Marketing
Communication
• Conform to all federal, state, and local regulations
• Follow rules of “fair competition”
• Do not offer bribes
• Do not attempt to obtain
competitors’ trade secrets
• Do not disparage competitors or
their products

Chapter Fifteen
Advertising and Public Relations

Advertising and Public
Relations
Topic Outline
Advertising
– Objectives
– Budget
– Budget
– Strategy
– Effectives
Public Relations
– Role and impact
– Tools

Advertising is any paid form of non-personal
presentation and promotion of ideas, goods, or
Advertising

Advertising
Developing and Advertising Programs

Advertising
Objectives are classified
Setting Advertising Objectives
An advertising objective is a specific
communication task to be accomplished with a
specific target audience during a specific time
Objectives are classified
by primary purpose
• Inform
• Persuade
• Remind

Advertising
Informative advertising is used when introducing a new
product category; the objective is to build primary
demand
Comparative advertising directly or indirectly compares the
Setting Advertising Objectives
Comparative advertising directly or indirectly compares the
brand with one or more other brands
Persuasive advertising is important with increased
competition to build selective demand
Reminder advertising is important with mature products to
help maintain customer relationships and keep
customers thinking about the product

Table 15.1
Possible Advertising Objectives

Advertising
Factors to consider when setting the budget
• Product life-cycle stage
Setting the Advertising Budget
• Product life-cycle stage
• Market share

Advertising
Product life-cycle stage
• New products require larger budgets
• Mature brands require lower budgets
Setting the Advertising Budget
Market share
• Building or taking market share requires larger
budgets
• Markets with heavy competition or high
advertising clutter require larger budgets
• Undifferentiated brands require larger budgets

Advertising
Advertising strategy is the strategy by which
the company accomplishes its advertising
objectives and consists of:
Developing Advertising Strategy
objectives and consists of:
• Creating advertising messages
• Selecting advertising media

Advertising
Advertisements need to break through the clutter:
• Gain attention
• Communicate
Creating the Advertising Message
• Communicate
well

Advertising
Advertisements need to be better planned, more
imaginative, more entertaining, and more
rewarding to consumers
rewarding to consumers
• Madison & Vine—the intersection of Madison
Avenue and Hollywood—represents the merging
of advertising and entertainment

Advertising
Message strategy
Message execution
Creative concept

Advertising
Message strategy is the general message that will
be communicated to consumers
• Identifies consumer benefits

Advertising
Creative concept is the idea that will bring the message
strategy to life and guide specific appeals to be used in
an advertising campaign
Characteristics of the appeals include:
• Meaningful
• Believable
• Distinctive

Advertising
• Message execution is when the advertiser
turns the big idea into an actual ad
execution that will capture the target
execution that will capture the target
market’s attention and interest.
• The creative team must find the best
approach, style, tone, words, and format
for executing the message.

Advertising
Slice of life Lifestyle Fantasy
Mood or
image
Musical
Personality
symbol
Technical
expertise
Scientific
evidence
Testimonial
or
endorsement

Advertising
Message execution also
includes:
• Tone
• Tone
– Positive or negative
• Attention-getting words
• Format
– Illustration
– Headline
– Copy

Advertising
• YouTube videos
• Brand Web site contests
• Positives
Consumer Generated Messages
• Positives
– Low expense
– New creative ideas
– Fresh perspective on brand
– Boost consumer involvement

Advertising
Major steps include:
• Deciding on reach-frequency-impact
Selecting Advertising Media
• Deciding on reach-frequency-impact
• Selecting media vehicles
• Deciding on media timing

Advertising
Reach is a measure of the percentage of people in
the target market who are exposed to the ad
campaign during a given period of time
campaign during a given period of time
Frequency is a measure of how many times the
average person in the target market is exposed
to the message
Impact is the qualitative value of a message
exposure through a given medium

Advertising
Selecting media vehicles involves decisions
presenting the media effectively and efficiently
to the target customer and must consider the
message’s:
message’s:
• Impact
• Effectiveness
• Cost

Advertising
Narrowcasting focuses the message on
selected market segments
Narrowcasting Versus Shotgun Approaches
selected market segments
• Lowers cost
• Targets more effectively
• Engages customers better

Advertising
When deciding on media timing, the
planner must consider:
• Seasonality
• Seasonality
• Pattern of the advertising
– Continuity—scheduling within a given
period
– Pulsing—scheduling unevenly within a
given period

Advertising
Communication effects indicate whether the ad and
media are communicating the ad message well
Evaluating the Effectiveness and Return on
Advertising Investment
media are communicating the ad message well
and should be tested before or after the ad runs
Sales and profit effects compare past sales and
profits with past expenditures or through
experiments

Advertising
• Organizing for
advertising
Developing and Advertising Programs
Other Advertising Considerations
– Agency vs. in-house
• International
advertising decisions
– Standardization

Public relations involves building good
relations with the company’s various
publics by obtaining favorable publicity,
building up a good corporate image,
Public Relations
building up a good corporate image,
and handling or heading off unfavorable
rumors, stories, and events
Public relations is used to promote
product, people, ideas, and activities

• Public relations department functions
include:
• Press relations or press agency
Public Relations
• Product publicity
• Public affairs
• Lobbying
• Investor relations
• Development

Public Relations
Press relations or press agency involves the
creation and placing of newsworthy
information to attract attention to a
person, product, or service
Product publicity involves publicizing specific
Product publicity involves publicizing specific
products
Public affairs involves building and
maintaining national or local community
relations

Public Relations
Lobbying involves building and maintaining
relations with legislators and government
officials to influence legislation and
regulation
Investor relations involves maintaining
Investor relations involves maintaining
relationships with shareholders and
others in the financial community
Development involves public relations with
donors or members of nonprofit
organizations to gain financial or
volunteer support

Public Relations
• Lower cost than advertising
• Stronger impact on public awareness than
The Role and Impact of Public Relations
• Stronger impact on public awareness than
advertising

Public Relations
Major Public Relations Tools
News Speeches Special events
Written
materials
Audiovisual
materials
Corporate
identity
materials
Public service
activities
Buzz marketing
Social
networking
Mobile tour
marketing
Internet

C kotler ch 11 15

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