Marketing Management - II

Module 3
Developing Pricing Strategy and
Communicating Value
Assess Market Communicate
Choose Value Design Value Deliver Value
Opportunities Value

Understand
Customer
Segmentation Product and
needs and Promotion
Targeting and Pricing Place Strategies
wants through Strategies
Positioning Strategies
Market
Research Marketing Mix
Pricing Strategies
Developing Pricing Strategy
Factors influencing pricing decisions

External factors
Internal factors
• Nature of market &
• Marketing
demand
Objectives
• Competition
• Marketing Mix
• Other
• Costs
environmental
• Organisational
factors (Economy
considerations
etc)
Approaches to Pricing
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)

Cost
Based

Pricing
Compe-tit Customer
ion Based Based
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)

Cost
Based

Pricing
Compe-tit Customer
ion Based Based
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Cost Based Pricing

There are 2 main approaches to Cost Based Pricing….

Cost Plus
Pricing

Break-even Analysis and

Target Profit Pricing
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Cost Based Pricing : Cost Plus Pricing

Competition, Consumer
Product internal & perceptions
Adding a standard markup to Costs external factors of value
the cost of the product
Price Floor Price Ceiling
No profits below No demand
this point above this point

Cost Plus pricing is popular because:

Sellers are surer about costs than about demand
When everyone in the industry uses this method, price competition is eliminated
Fair to buyers and sellers. Sellers get a good ROI and do not exploit buyers when demand increases
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Cost Based Pricing : Cost Plus Pricing (Mark-up Pricing)

• Variable Cost = Rs 10 300000

• Fixed Costs = Rs 300000 Unit Cost = 10 + = Rs 16
• Expected Sales = 50000 units 50000
• 20% markup on sales
Unit Cost
Markup =
Fixed Cost (1-Desired return on sales)
Unit Cost = Variable Cost +
Unit Sales
16
Markup = = Rs. 20
(1-.2)
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Cost Based Pricing : Break Even Analysis and Target Profit Pricing

Setting price to break even on costs Setting price to make a

of making and marketing the product predetermined target profit is called
is called Break Even Analysis Target Profit Pricing
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)

Cost
Based

Pricing
Compe-tit Customer
ion Based Based
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Customer Value Based Pricing
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Value Based Pricing
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Value Based Pricing

Price is considered along with the

Value based pricing uses buyers marketing mix variables before the
perception of value, not the sellers marketing program is set
cost, as the key to pricing
It means that the buyer cannot design
a product and then set a price The targeted value and price then
drive decisions about product price
and cost to be incurred
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Value Based Pricing

Everyday Low Pricing (EDLP)

Everyday low price is a pricing strategy

promising consumers a low price
without the need to wait for sale price
events or comparison shopping. EDLP
saves retail stores the effort and
expense needed to mark down prices in
the store during sale events, and is also
believed to generate shopper loyalty.
This term was first used and popularized
by Walmart
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Value Based Pricing

High-Low Pricing

High–low pricing is a type of pricing

strategy adopted by companies, usually
small and medium-sized retail firms,
where a firm initially charges a high price
for a product and later, when it has
become less desirable, sells it at a
discount or through clearance sales
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Value Based Pricing

High-Low Pricing

High–low pricing is a type of pricing

strategy adopted by companies, usually
small and medium-sized retail firms,
where a firm initially charges a high price
for a product and later, when it has
become less desirable, sells it at a
discount or through clearance sales
Developing Pricing Strategy
General Approaches to Pricing (3C Approach)
Everyday Low Pricing High-Low Pricing
Higher prices on daily basis but runs frequent low
Constant low prices with little price promotions price promotions with prices lower than EDLP
levels on few days

Eliminates week-to-week price uncertainty Creates excitement

Improves inventory management Same products appeal to multiple markets

Developing Pricing Strategy
General Approaches to Pricing (3C Approach)

Cost
Based

Pricing
Compe-tit Customer
ion Based Based
Developing Pricing Strategy
General Approaches to Pricing
Competition Based Pricing

Consumers form judgements on a They do not base pricing decisions

products value based on the prices based on their own costs.
which competitors charge for similar
products

One form of competition based As a result the firm ends up charging

pricing is going-rate pricing, in which same as, or more than or less than its
the firm bases its prices on major competitors
competitor’s prices
Developing Pricing Strategy
General Approaches to Pricing
Competition Based Pricing

Commodity industries like steel or They change their prices, not based
paper charge more or less the same on demand or supply of their
price as the leader. The small firms products but when the industry leader
follow the leader changes its prices
Pricing strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies

New
product
pricing

Price Pricing Product

Changes Strategies mix pricing

Price
adjustment
strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies

New
product
pricing

Price Pricing Product

Changes Strategies mix pricing

Price
adjustment
strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing

Innovative Products Imitative Products

Market
Skimming Market
Penetration 9 Grid Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing

Innovative Products Imitative Products

Market
Skimming Market
Penetration 9 Grid Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Skimming
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Skimming

Companies who invent new products, set

high initial prices to “skim” revenues layer
by layer from the market

They set high prices to maximise on The company ends up making fewer
revenues, layer by layer from the segments number of sales, but extremely profitable
willing to pay the high price sales
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Skimming
Conditions that favor Market Skimming

The product's quality and image

must support high price and enough
consumers must want the product at
that price

Costs of producing a smaller volume

Competitors should not be able to
cannot be so high that it cancels the
enter the market easily and undercut
advantage of a high price
the high price
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing

Innovative Products Imitative Products

Market
Skimming Market
Penetration 9 Grid Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Penetration
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Penetration

They do this to attract a large number of

It is the opposite of market skimming
buyers quickly and win a large market share

Under market penetration pricing, The high sales results in falling costs which
companies set a low initial price in order to enables the company to reduce prices
penetrate the market quickly and deeply. further
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Penetration

Market should be price sensitive so

that low prices drive growth of the
market

Low price should keep competition out

Production and distribution costs
and the company must hold on to the low
must fall as sales volumes increase
price else the advantage will be temporary
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : Market Skimming vs Market Penetration
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing

Innovative Products Imitative Products

Market
Skimming Market
Penetration 9 Grid Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
New Product Pricing : 9 Grid Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies

New
product
pricing

Price Pricing Product

Changes Strategies mix pricing

Price
adjustment
strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

The pricing strategy will have to change when the product is

part of a product mix.

In such a situation the company looks out for a set of prices

which maximizes profit on the total product mix
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing : Product Line Pricing

As discussed, companies usually

develop product lines rather than
single products

Product line pricing is setting the price steps The seller’s task is to establish perceived
between various products in a product line quality differences that support price
based on cost differences between the differences
products, customer evaluation of different
products and competitors’ prices
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing : Optional Product Pricing

Pricing these options is a challenge as

Under optional product pricing companies
companies have to decide which items to
offer to sell optional or accessory products
include in the base price and which to
along with their main products
offer as options
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing : Captive Product Pricing

In the case of services, this strategy is

Companies that make products that must
called two-part pricing. The price of the
be used with the main product are using
service is broken into a fixed fee + a
Captive Product pricing
variable user rate

Often, the prices of the main products are Basic data plan + per kb charge for
kept low and high markups are charged on consumption above the basic level
the consumables
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing : Pricing of By-products

A marketer will seek a market for these

In the case of products like petroleum,
by-products and should accept any price
chemicals or even sugarcane there are often
which covers more than the cost of
by-products
storing & delivering them

If the by-products have no value and To realize value from the by-products,
getting rid of them is costly, the pricing of manufacturers need to find new markets
the main product is impacted for these by-products
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing

Product
line

Product Optional
bundle product

By-produ Captive
ct product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Product Mix Pricing : Pricing of Bundled Products

Price bundling can promote sale of a

Sellers often combine several of their product consumers may not otherwise
products and offer the bundle to buy, but the combined price should be
consumers at a special price low enough to get consumers to buy the
product
Creating Value : Product and Pricing Strategies
Pricing Strategies

New
product
pricing

Price Pricing Product

Changes Strategies mix pricing

Price
adjustment
strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies

Segment Pricing

Discount and Allowance Price Psychological Pricing

Pricing Adjustment
Strategies

Geographic and
International Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies

Segment Pricing

Discount and Allowance Price Psychological Pricing

Pricing Adjustment
Strategies

Geographic and
International Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Discount and Allowance Pricing

Discounts : a reduction in the product

price by a defined amount during a
Companies adjust their prices to reward defined period
customers for certain responses i.e.
volume purchase or off season buying.
Adjustments take the form of discounts Allowances : promotional money paid to
or allowances trade in return for an agreement to
feature the manufacturer’s product in
some way
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Discount and Allowance Pricing

Cash Discount : A price Functional or trade discount :

reduction to buyers, who pay to the trade who perform
their bills on time certain functions

Quantity Discount : a price Seasonal Discount : price

reduction for buyers who buy reduction to buyers who buy
large volumes merchandise, out of season
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Discount and Allowance Pricing

Promotional allowance : Payments or

Trade in allowance : price reduction
price reductions to reward dealers for
given for turning in an old item when
participating in advertising or sales
buying a new one
support campaigns
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies

Segment Pricing

Discount and Allowance Price Psychological Pricing

Pricing Adjustment
Strategies

Geographic and
International Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Segment Pricing

Customer Segment Pricing

Selling a product or service at two or Product Form Pricing

more prices, where the difference in
prices is not based on differences in
costs
Location Pricing

Time Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Segmented Pricing
Customer Segment Pricing : Different
customers pay different prices for the
same product or service

Product Form Pricing : Different

versions of the product are priced
differently, but not according to
difference in their costs
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Segmented Pricing

Location Pricing : Company can

charge different prices, location-wise
even though the cost of offering at
each location is the same

Time Pricing : A firm can vary its prices

by the season, the month or even the
hour
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies

Segment Pricing

Discount and Allowance Price Psychological Pricing

Pricing Adjustment
Strategies

Geographic and
International Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Psychological Pricing

A pricing approach which considers

the psychology of prices and not the
economics

The price makes a statement about

the product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Psychological Pricing

Another aspect of psychological pricing is

reference price – the price which buyers
carry in their minds and refer to when
looking at a given product

The Reference price is formed by noting

current prices, remembering past prices or
assessing the buying situation
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Psychological Pricing

Small differences in price can also signal differences. A

product priced at 300 sends different signals versus a
product priced for 299

The difference is just 1 rupee. However the 299 product

will be seen by consumers as a product in the in the 200
range rather than the 300 range

The 299 product will be seen as a bargain product,

whereas the 300 product will end up being seen as a
quality product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies

Segment Pricing

Discount and Allowance Price Psychological Pricing

Pricing Adjustment
Strategies

Geographic and
International Pricing
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : Geographic Pricing

A company must also decide how to

price products for customers located
in different parts of the country

Let us examine this through an

example
A = Manufacturer based in Pune
B = Customer based in Mumbai
C = Customer Based in Bangalore
D = Customer based in Mysore
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : International Pricing

Pricing could also be a function of the

marketing objectives of a company and
these objectives could change from
country to country
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategies : International Pricing

US$ 199 = INR 12000

Market Penetration Pricing

This is only for illustration. This example may not be technically correct
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Adjustment Strategy : International Pricing

INR 56000

Market Skimming Pricing

Creating Value : Product and Pricing Strategies
Pricing Strategies

New
product
pricing

Price Pricing Product

Changes Strategies mix pricing

Price
adjustment
strategies
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes

Companies often face situations

where they must initiate price
changes or respond to price
changes by competitors
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes
Factors leading to Price Cuts

Excess capacity : A key reason for price Market domination : Company could
cuts. The firm needs increased business also cut prices to dominate the market
and just increased sales efforts will not through lower costs
help

Falling shares : Another reason could

be falling shares in face of increased
competitive activity or strong price
competition
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes
Factors leading to Price Increases

Increase profits : A key reason for price Cost Inflation : Rising costs squeeze
increases. A successful price increase profit margins and as a result the
adds to the company’s bottom-line companies pass on the costs to
customers

Over demand : In the case of over demand the

company cannot address customer needs and is
left with no option but to increase prices and /
or ration the product
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes
Managing Price Increases

Communicate : The key to managing Elimination : Make low visibility price

increases is communication. Increases needs moves like eliminating discounts,
to be backed by communication explaining increasing min order size etc will help
the logic behind the increase reduce the quantum of increase

Cost management : Where ever possible, the

company should find ways to eliminate costs and
find cost effective ways of doing operations
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes

How should a company respond to a price change by a competitive brand?

Understand why the competitor The company also has to look internally
changed price? and understand the impact of the cut.
• Gain share? • Product’s stage in the life cycle
• Get rid of excess inventory? • Products importance in its portfolio
• Is this temporary or permanent? • Availability of resources to fight
• Will other people also respond?
Who all will respond and who will
not?
Creating Value : Product and Pricing Strategies
Pricing Strategies
Price Changes
How do you react to Competition changing prices
Integrated Marketing Communications
Why Integrated Marketing Communications?

Integrated

Marketing

Communication
Integrated Marketing Communications
Why Integrated Marketing Communications?

Integrated

Marketing

Communication
I. Communication
Integrated Marketing Communications
The Communication Process

To communicate effectively,
marketers need to understand how
communication works

In all communication, involves nine

elements or steps
Integrated Marketing Communications
The Communication Process

Sender Encoding Message Decoding Receiver

Media

Noise

Feedback Response

Sender’s field of experience Receiver’s field of experience

Integrated Marketing Communications
The Communication Process
Integrated Marketing Communications
The Communication Process

Sender : The party sending the

message to another party
In this case : Mitsubishi Motors
Integrated Marketing Communications
The Communication Process

Encoding : The process of putting

thought into symbolic form
In this case : In this case the agency
assembles words and illustrations
into an ad which conveys the
message
Integrated Marketing Communications
The Communication Process

Message : The set of symbols the

sender transmits
In this case : In this case the actual
ad
Integrated Marketing Communications
The Communication Process

Media : The communication channels

through which the message moves
from the sender to the receiver
In this case : In this case magazines
or newspapers used
Integrated Marketing Communications
The Communication Process

Decoding : The process by which

the receiver assigns meaning to the
symbols encoded by the sender
Integrated Marketing Communications
The Communication Process

Receiver : The party receiving the

message sent by the other party.
In this case : HNWI, Auto
enthusiasts, Rally drivers
Integrated Marketing Communications
The Communication Process

Response : The reaction of the

receiver after being exposed to the
ad – many responses possible, from
asking for information to actually
checking price, to asking for a test
drive
Integrated Marketing Communications
The Communication Process

Feedback : The part of receiver’s

response communicated back to the
sender – Research feedback,
consumer or trade feedback
Integrated Marketing Communications
The Communication Process

Noise : The unplanned static or

distortion during the communication
process, which results in the
receiver getting different message
than the one the sender sent –
Missed the ad, interpreted differently
Integrated Marketing Communications
Developing an Effective Communication Process

Identifying
the TA

Commun-ica
Collect
tion
feedback
Objectives

Select
Message
message
design
source

Choosing
Media
Integrated Marketing Communications
Brand Identity v/s Brand Image
The Brand’s Identity is the Positioning desired by the Marketer. The Brand’s Image how the consumers perceive
the brand. The Brand Identity is converted into a Brand Image through the communication that the marketers
make.

The Brand Identity is converted

into the Image through Effective
Communication.
IMAGE
Brand Identity : Created Brand Image : formed by
by the Sender (Marketer) the Receiver (Consumer)
II. Integration
Integrated Marketing Communications
Why Integrated Marketing Communications?

Integrated

Marketing

Communication
Integrated Marketing Communications
Why Integrated Marketing Communications?

Integrated

Marketing

Communication
Integrated Marketing Communications
Why ‘Integrated’ communications.

The
consumer
Integrated Marketing Communications
Why ‘Integrated’ communications.

In the absence of integration, different

stakeholders in the company will end up sending
out conflicting signals on the brand, to the
consumers
Integrated Marketing Communications
Why ‘Integrated’ communications.

To address these issues, companies are

adopting the concept of Integrated Marketing
Communication

Under IMC, a company integrates and

co-ordinates its many communication
channels to deliver a clear, consistent and
compelling message about the organization
and its brands.
Integrated Marketing Communications
Why ‘Integrated’ communications.

Enables “one voice” across all possible

marketing touch points
Integrated Marketing Communications
Why ‘Integrated’ communications.

Contact at any touch point is treated as an

advertising message by the consumer

Consumers do not distinguish between

message sources the way marketers do
Integrated Marketing Communications
Why ‘Integrated’ communications.

Multiplicity of touch points will create

disharmony for the brand and in the minds
of the consumers

Reason for the companies to move to

Integrated Marketing communication
where all channels of communication
operate in harmony and send out one
signal
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

TVC
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

Print Ads
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

Outdoor Advertising : Malls

Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

PR
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

Website
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

Event Sponsorships
Integrated Marketing Communications
Why ‘Integrated’ communications.
The Axe Effect Case

Sales Promotion –
Discount Coupons
III. Promotion Mix Strategies
Integrated Marketing Communications
Promotion Mix Strategies
There are two basic Promotion mix strategies…

• Push strategy involves “pushing” the product through the distribution channel
to final consumers
Push Strategy • Manufacturer ensures his marketing activities towards channel members to
induce them to carry the product and promote to final consumers

• The manufacturer uses pull strategy and directs marketing activities (advertising
and consumer promotion) towards final consumers to induce them to buy the
product
Pull Strategy • If the pull strategy is effective, consumers will demand the product from the
channel, who in turn will demand the same from the manufacturers. Consumer
demand “pulls” the product through the channel
Integrated Marketing Communications
Promotion Mix Strategies
Push and Pull Strategies
Integrated Marketing Communications
Promotion Mix Strategies

The company’s promotions mix, consists of a Advertising

blend of advertising, promotions, PR, personal
selling and DM tools that the company uses to
pursue its advertising and marketing objectives
Sales Personal
Promotion Selling

The company must blend promotions into a

coordinated promotions mix to maximize
impact. Each promotion tool has unique
characteristics and costs. It is essential that Direct Public
these characteristics are understood in selecting Marketing Relations
the correct mix
Integrated Marketing Communications
Why ‘Integrated’ communications.
Personal presentation by the
Any paid form of non-personal
firm’s sales force for making the
presentation & promotion of ideas, goods
sale or building customer
or services by an identified sponsor
relationships

Building relations with the company’s various publics

by obtaining favourable publicity, building up a good
“corporate image” and handling or heading off
unfavourable rumours and stories

Direct communication with carefully targeted Short term incentives to encourage

individual consumers – through the use of phone, purchase or sale of a product or
mail, fax, e-mail and internet and other tools to service
communicate directly with specific customers
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies
Advertising

Any paid form of non-personal presentation and

promotion of ideas, goods or services by an
identified sponsor

Marketing management must make four important

decisions when developing an advertising program
Integrated Marketing Communications
Promotion Mix Strategies
Advertising : Advertising decisions to be made

Message
decision
Budget decision Message strategy
Campaign
Affordable Message execution
Objective setting evaluation
approach
Communication Communication
Percent of sales
obj. impact
Competitive parity
Media decision Sales impact
Objective & task
Reach, frequency
& impact
Major media types
Specific media
vehicles
Media timing
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion

Short term incentives to encourage

purchase or sale of a product or service

At a broader level, promotions should be

leveraged to reinforce the products
position and create customer
relationships, rather than temporary
spurts in sales
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion
Types of Sales Promotions

• Increase short-term sales

Consumer Promotions • Build market share

• Get trade to carry new products

Trade Promotions • Co-advertising
• Getting them to buy ahead

• Get sales force support for current or new products

Sales Force Promotions • Getting them to sign-up new business or accounts
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion : Consumer Promotions Tools

Samples : small amount of a Coupouns : Certificate Cash refund offer/ rebates

product offered to which gives buyers a saving Offer to refund part of the
consumers for trial. when they buy a specified purchase price of a
Extremely expensive. product product to consumers
who send a “proof of
purchase” to the
manufacturer
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion : Consumer Promotions Tools

Price packs : Reduced Premiums : Good offered Advertising specialties

price, marked by the either free or at a low also called promotional
manufacturer, directly on cost as an incentive to buy products. Useful articles
label or package the product imprinted with the
advertiser’s logo and
given as gifts to
consumers
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion : Consumer Promotions Tools

Patronage reward: Point-of-purchase Contests /

Cash or other awards promotions : Display or sweepstakes / games
for regular use of a demo at the point of events which give
company’s products or purchase or sale consumers a chance to
services win something – cash,
trip or goods, by luck
or through extra effort
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion : Trade Promotions Tools
More sales promotion money
Discount : A straight
directed towards businesses and Allowance Promotional
reduction in price on
consumers money paid by
purchases during a stated
manufacturers to
Trade promotions can persuade period of time.
retailers in return for an
resellers to carry a brand, give it agreement to feature the
shelf space, promote it and push it manufacturer’s product
to consumers in some way. Display
allowance. Advertising
Shelf space is so scarce that allowance
manufacturers pay retailers thru
price offs, buy-back guarantees to
get products on shelves
Integrated Marketing Communications
Promotion Mix Strategies
Sales Promotion : Trade Promotions Tools

Used to motivate or encourage sales

force to push for additional volume Sales contests: is a contest for
or value of business sales people to motivate them,
to increase their sales
Based on the profile of the sales performance over a given
force and the nature of business, the period
manufacturer will have to evolve a
robust sales force program
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies
Public Relations

Building good relations with the company’s ‘publics’

by obtaining favorable publicity, building a good
corporate image and handling or heading off
unfavorable rumors, stories and events

Can be used to promote people, products, places,

ideas, activities, organizations and even nations
Integrated Marketing Communications
Promotion Mix Strategies
Public Relations

1 2
Press relations – Creating and
placement of newsworthy Product publicity – Publicising
information in media to attract specific products
attention

3
Public affairs – Creating, building
and maintaining national or local
community relations
Integrated Marketing Communications
Promotion Mix Strategies
Public Relations

Lobbying – Building and

4 5
Investor relations – Maintaining
maintaining relations with relationship with shareholders and
legislators and government officials the financial community
to influence legislation and
regulation

6
Development – Public relations
with donors or members of
not-for-profit organisations to
get financial or volunteer
support
Integrated Marketing Communications
Promotion Mix Strategies
Public Relations

1 2
News – PR professionals find or Speeches – can also be leveraged
create news about the company, for PR. Speeches by executives
products or people and Q & A sessions

Buzz marketing – creates

4
Special events – News

3 conferences, openings etc are

designed to reach the interest
target publics
excitement and generates
favorable word-of-mouth.
Consumers start spreading the
message
Integrated Marketing Communications
Promotion Mix Strategies
Public Relations
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies
Personal Selling

People who sell go by many names: salespeople, sales

representatives, account executives, sales
consultants, agents, account development
representatives etc
At one level a salesperson can be just an order taker
and at the other extreme an order getter who needs
to not just sell but build relationships

While advertising in one way non-personal

communication, Personal Selling is two-way, personal
communication between salesperson and individual
customers
Integrated Marketing Communications
Promotion Mix Strategies

Advertising

Direct Sales
marketing promotion

Personal Public
Selling Relations
Integrated Marketing Communications
Promotion Mix Strategies
Direct Marketing

Tele-marketing Personal Selling

Direct marketing consists of

direct connections with
On-line
carefully targeted consumers Marketing
Catalogue
to obtain an immediate
Marketing
response and cultivate lasting
relationships
Direct Response
Direct Mail on TV
End of Module 3