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PRICING AND PROMOTION
Module 7
PRICING STRATEGY
OUTLINE
Pricing ObjectivesAnalyzing the Price SituationPricing ProgramsAdditional Considerations
PRICING OBJECTIVES
Primary Demand Objectives Selective Demand ObjectivesProduct Based Objectives
PRIMARY DEMAND OBJECTIVES
Increase number of users– reduce economic risk of trial– offer better value
Increase rate of purchase– enhance frequency of consumption– enable use in wider situations
SELECTIVE DEMAND OBJECTIVES
Retention– Meet competition (establish price parity)
Acquisition– Undercut competition on price– Use price to signal premium quality
PRODUCT LINE BASED STRATEGIES
Substitutes– Trade up– Distinguish on the basis of features/benefits
Complements– Expand range purchased– Attract new customers
ANALYZING THE PRICE SITUATION
What will be market responsiveness to changes in price?
RESPONSE TO ALTERNATIVE PRICES
How large is the market?What segments exist?How sensitive is demand in segments of
interest to changes in price?How important are non-price factors?What are estimated sales at price levels?
PRICE ELASTICITY
What is elasticity?Price elasticity is the percentage change
in the quantity demanded (when price changes) divided by the percentage change in price.
ESTIMATING PRICE SENSITIVITY
Test marketingAnalysis of historical price/sales dataConsumer panelsExecutive (management) judgment
NON PRICE FACTORS
QualityUniqueness ServiceAvailabilityWarranty
FORECASTS
What are estimated sales at different price levels?
TYPES OF PRICING PROGRAMS
Skimming PricingPenetration PricingParity PricingPremium PricingFlexible Pricing
PRICING FOR SUBSTITUTES
Anchoring
PRICING FOR COMPLEMENTS
Leader pricingPrice Bundling
OTHER PRICE ELEMENTS
CouponsCents-off-dealsPromotion allowancesRebatesQuantity discountsCash discounts
OTHER PRICE ELEMENTS
Credit or financing assistanceLong term contractsNegotiated pricing
ADDITIONAL CONSIDERATIONS
Political/Legal environment International considerations
PROMOTION STRATEGY
OUTLINE
IntroductionFramework for developing an effective
promotion mixBudgetingOther Strategies
PROMOTIONAL MIX
Promotion (Communication) tools consist of:
–Advertising
– Personal Selling
– Sales Promotion
– Public Relations
ADVERTISING
Nonpersonal communication transmitted through the mass media
Sponsor identified
PERSONAL SELLING
Face to face interaction with the clientMore money is spent on the selling
function than is advertising!
SALES PROMOTION
Activities which supplement personal selling and advertising
Trade shows, contests, samples, point of purchase displays, coupons
PUBLIC RELATIONS
Public information about a company, good, or service appearing in the mass media
CHOOSE A STRATEGIC OBJECTIVE
Think about the the buyer’s decision process!
–Need Recognition
–Gathering Information
– Evaluation of Alternatives
–Decision to Purchase
– Product Use
FRAMEWORK FOR PROMOTION MIX
Characteristics of Target Market(s)Business Strategies– Prospectors– Niche Defenders
Positioning Internal EnvironmentExternal Environment
DETERMINING THE PROMOTION MIX
Product Factors– Industrial vs Consumer Goods– Perceived risk– Durable vs Nondurable– Frequency of Purchase
Market Factors– Stage of the PLC– Intensity of competition
DETERMINING THE PROMOTION MIX
Customer Factors– Ability to identify decision maker– Degree of self service
Marketing Mix Factors– Other elements of the Marketing Mix
BUDGETING
Percent of SalesComparative ParityObjective and Task
MEDIA SELECTION STRATEGY
Choosing the appropriate media channel Move customers from unawareness to
buying actionAdvertising objectives– Exposure, awareness, attitude change, sales
ADVERTISING COPY STRATEGY
Designing the content of an advertisement
Considerations? Source credibility, message repetition,
rational versus emotional appeals, comparative advertising
SELLING STRATEGY
Moving the customers to purchase through face-to-face contact
Issues– Sales force size – Organization– Motivating the salesforce– Compensation
SALES PROMOTION STRATEGY
Usually designed to raise awareness and trial
Coordinate with other promotional efforts