Marketing Management Chapter 14 — 2 Promotion and

Marketing Management Chapter 14 - 2 Promotion and Pricing Strategies 1 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Personal Selling ● Recent Trends in Personal Selling – Telemarketing Outbound telemarketing— calls you at your place of business Inbound telemarketing— customer calls a toll-free phone number – Relationship Selling—when a salesperson builds a mutually beneficial relationship with a customer – 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 sale – Team selling—joins salespeople with specialists from other functional areas of the firm to complete the selling process – Sales force automation (SFA)— uses a broad range of tools, from e-mail, telecommunications devices like pagers and cell phones, and laptop computers that automate the sales process 2 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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. 3 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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? 4 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Promotional Strategies ● Pushing and Pulling Strategies – Push strategy—intended to stimulate personal selling of the good or service, thereby pushing it through the channel Cooperative advertising – Pull strategy—stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service 5 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 information 6 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 messages 7 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 backlash 8 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Price in the Marketing Mix ● Price— exchange value of a good or service. ● Pricing Objectives 9 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Pricing Strategies ● Price Determination in Practice – Determined in two basic ways— By applying theoretical concepts of supply and demand By completing cost-oriented analyses ● In reality, you price what the market will bear 10 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 coverhead costs and generate profits. 11 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

● The Markup Chain for a Hardcover Book 12 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 = (in units) Total Fixed Cost Contribution to Fixed Costs Per Unit Breakeven point Total Fixed Cost = 1 – Variable Cost Per Unit/Price (in dollars) 13 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

● Breakeven Analysis 14 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 weapon ● 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 offerings 15 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 price ● Price is a proxy for quality 16 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

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 amounts – Items on sale may end in a different number, e. g. 7: $17. 97, $13. 87. 17 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Discussion ● You are to promote a new nightclub, opening in 3 months ● Objective – create a full house on opening and for two weeks thereafter ● You have $100, 000 to spend – Newspaper ad - $10 K per ad – Radio - $50 K for 3 weeks – Flyers - $500 per 1000 4 color flyers – Personal promoters - $20 per hour – Celebrity appearance - $10 K – Premiums – T-shirt $10 each ● Create a promotional campaign 18 Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.