Chapter 14

Promotion and Pricing Strategies

Go als
a rni ng 5 Describe pushing and pulling
Le promotional strategies.
Discuss how integrated marketing 6 Discuss the major ethical issues
1
communications relates to a firm’s involved in promotion.
overall promotion strategy.
7 Outline the different types of
2 Explain promotional mix and pricing strategies.
outline the objectives of promotion. Discuss how firms set prices in
Summarize the different types of 8 the marketplace, and
3
advertising and advertising media. describe the four alter-
native pricing strategies.
4 Outline the roles of sales
promotion, personal selling, and
9 Discuss consumer
public relations. perceptions of price.
Promotion 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.
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.
THE 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.
Objectives of Promotional Strategy
Providing Information
• Major portion of U.S. 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.
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.
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.
• Television networks earn $22 billion annually from
advertising.
• In U.S., automotive, retail, and communications
companies spend nearly $4 billion annually on
advertising.
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.
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.
Advertising Media
• All media offer advantages and disadvantages
Television
• Easiest way to reach a large number of consumers.
• Variety of channels on cable and satellite networks
allows advertisers to target specialized markets and
demographics.
• Most expensive advertising medium.
• 30 second prime time network spots can range from
$100,000 to $500,000.
Newspapers
• Dominate local advertising.
• Easy to coordinate with other promotional efforts.
• Relatively short life span.
Radio
• Average household owns five radios.
• Commuters in cars are a captive audience.
• Satellite radio offers new opportunities.
Magazines
• Consumer publications and trade journals.
• May be able to customize message for different areas
of the country.
Direct Mail
• Average American receives 550 pieces annually,
including 100 catalogs.
• High per person cost, but can be carefully targeted
and highly effective.
• Direct Marketing Association helps marketers combat
negative attitudes by offering its members
guidelines on ethical business practices.
Outdoor Advertising
• $3.2 billion annually, majority for billboards.
• Requires brief messages.
• Can be opposed by preservation and conservation
groups.
Online and Interactive Advertising
• Experts predict sales from online advertising will
double by 2010.
• Viral advertising Creates a message that is novel or
entertaining enough for consumers to forward it to
others, spreading it like a virus.
• Spreading the word costs the advertiser nothing.
• Not all online advertising is well received.
• Many consumers resent the intrusion of pop-up ads
that suddenly appear on their computer screen.
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
SALES PROMOTION
Sales promotion Nonpersonal marketing
activities other than advertising,
personal selling, and public relations
that stimulate consumer purchasing
and dealer effectiveness.
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
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.
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.
Sales Tasks
• All involve assisting customers in some way.
Order Processing
• Identifying customer needs, pointing out merchandise
to
meet them, and processing the order.
Creative Selling
• Promoting a good or service whose benefits are not
readily
apparent or whose purchase decision requires a close

analysis of alternatives.
Missionary Selling
• Representative promotes goodwill for a company or
provides technical or operational assistance to the
customer.
Telemarketing
The Sales Process
The Sales Process
• A good salesperson varies the sales process
based on customers’ needs and responses.
Prospecting, Qualifying, and Approaching
• Prospecting Identifying potential customers.
• Qualifying Identifying potential customers who
have the financial ability and authority to buy.
• Approaching Make careful preparations,
analyzing available data about a prospective
customer’s product lines and other pertinent
information before making the initial contact.
The Sales Process
• A good salesperson varies the sales process
based on customers’ needs and responses.
Presentation and Demonstration
• Presentation Salespeople communicate
promotional messages. They may describe
the major features of their products, highlight
the advantages, and cite examples of satisfied
consumers.
• Demonstration Reinforces the message that the
salesperson has been communicating.
The Sales Process
• A good salesperson varies the sales process
based on customers’ needs and responses.
Handling Objections
• Use objections as an opportunity to answer
questions and explain how the product will
benefit the customer.
The Sales Process
• A good salesperson varies the sales process
based on customers’ needs and responses.
Closing
• The time at which the salesperson actually
asks the prospect to buy.
• Even if the sale is not made, the salesperson
should regard the interaction as the beginning
of a potential relationship.
The Sales Process
• A good salesperson varies the sales process
based on customers’ needs and responses.
Follow-Up
• An important part of building a long-lasting
relationship.
• May determine whether the customer will
make another purchase.
Public Relations
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.
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.
ETHICS IN PROMOTION
Puffery and Deception
• Puffery Exaggeration about the benefits or
superiority
of a product.
• Legal because it doesn’t guarantee anything but
raises
ethical questions.
• May ultimately undermine the credibility of a firm’s
marketing messages.
• Deception Deliberately making promises that are
untrue, such as guaranteed weight loss in five days,
get-rich-quick schemes for would-be entrepreneurs,
or promised return on investments.
Promotion to Children and Teens
• Children and teens have enormous purchasing power.
• Children cannot analyze advertising messages.
• Can be socially responsible (e.g., healthy products).

Promotion in Public Schools and on College Campuses

• Schools earn income from in-school advertising, but
it is generating backlash.
• College students have $122 billion in buying power.
PRICING OBJECTIVES IN THE
MARKETING MIX
Price Exchange value of a good or service.
Profitability Objectives
• Most common objective.
• Some maximize profits by reducing costs
rather than raising costs.
• Sometimes maintain price while reducing
package size or amount of product.

Volume Objectives
• Bases pricing decisions on market share goals.
Pricing to Meet Competition
• Meeting competitors’ price so price becomes
a nonissue in the buying decision.
• Competitors cannot legally work together to
set prices.
• Competition can result in a price war.

Prestige Objectives
• Establishing a relatively high price to develop and
maintain an image of quality and exclusiveness.
• Recognition of the role of price in communicating
an overall image for the firm and its products.
PRICING STRATEGIES
• Pricing is influenced by people in different areas of
a company.

Price Determination in Practice

Cost-based pricing Adding a percentage (markup) to the base
cost of a product to cover overhead costs and
generate profits.
• Actual markup used varies by such factors as brand
image and type of store.
• Example: Typical clothing markup by retailers is
double the wholesaler price.
Breakeven Analysis
Breakeven analysis Pricing technique used to determine the
minimum sales volume a product must generate at a
certain price level to cover all costs.
Finding the Breakeven Point
Breakeven Analysis
Breakeven analysis Pricing technique used to determine the
minimum sales volume a product must generate at a
certain price level to cover all costs.
Finding the Breakeven Point
Breakeven Analysis
Breakeven analysis Pricing technique used to determine the
minimum sales volume a product must generate at a
certain price level to cover all costs.
Finding the Breakeven Point
Alternative Pricing Strategies
Skimming Pricing
• Setting an intentionally high price relative to the
prices of competing products.
• Helps marketers set a price that distinguishes a
firm’s high-end product from those of competitors.
• Helps a firm recover its product development costs
before competitors enter the field.
Penetration Pricing
• Setting a low price as a major marketing weapon.
• Often used with new products.
Everyday Low Pricing and Discount Pricing
• ELP Maintaining continuous low prices rather than
relying on short-term price-cutting tactics such as
cents-off coupons, rebates, and special sales.
• Discount pricing Attracting customers by dropping
prices for a set period of time.
• Helps a firm recover its product development costs
before competitors enter the field.
Competitive Pricing
• Reducing the emphasis on price competition by
matching other firms’ prices.
• Concentrate marketing efforts on the product,
distribution, and promotional elements of the
marketing mix.
CONSUMER PERCEPTIONS OF PRICE
Price-Quality Relationships
• Consumers’ perceptions of quality closely tied to
price.
• High price = prestige and higher quality.
• Low price = less prestige and lower quality.

Odd Pricing
• Setting prices in uneven amounts or amounts that
sound less than they really are.
• Example: $1.99 or $299.
• Also used as a signal a product is on sale.