Pricing, Placing and Promotion-bus 5011

8/3/2019 Pricing, Placing and Promotion-bus 5011

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CHAPTER 6PRICING DECISIONS

Definition of a price and pricing

Importance of price

Pricing objectives Price determinants

Pricing methods

Pricing strategies and policies


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6.1 DEFINITION OF A PRICE ANDPRICING

Price is value expressed in monetaryterms

Pricing is the process of determining aprice for a product


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6.2 IMPORTANCE OF PRICE

Basic regulator of the economy

The variable which is most influenced bythe state

Major determinant of demand

Quality indicator

Determinant of revenue and profitability

A competitive tool

A promotional tool


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6.3 PRICING OBJECTIVES

Macro Pricing objectives: Attainment of certain level ofprice stability and managing income policy

Market oriented objectives: to increase market share, topenetrate the market and to skim the market

Competition oriented objectives : To meet or toovercome competition.

Finance oriented objectives: Profit maximization, ROIand Cash flow

Promotional and image building objectives: Status quoand product quality.

Survival pricing objectives


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Pricing objectives

SurvivalProfit

ROI

Market

share

Cash flow

Status quo

Entry barriers

Followcompetition

Emphasisequality/brand

OBJECTIVES


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6.4 PRICE DETERMINANTS

Pricing objectives Demand for the product Cost of the product

Level of competition Pricing Policies Other Parts of the Marketing Mix Supply environment

Characteristics of Buyer Macro environmental Factors


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1 What value is placed onproduct by customer?

In relation tocompetitive products

In relation to

perception of relativevalue provided bycustomer (safetyzone)

In relation toEconomic Valuemaximum priceconsumers will pay ifthey fully understandvalue/benefits of

Superior value iswhen the customerrecognizes that youare offering acombination ofquality, price andservice which issuperior to your

customersexpectations and yourcompetitorsproposition


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6 Are returns worth the cost?

80:20/225:20 rules

Manage for profits not sales

Price should not cannibalise other sales

Price

Cost

Low

High

High


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Marketing is about creating customer

value

Product benefits

Service benefitsRelational benefits

Image benefits

Monetary costs

Time costsEnergy costs

Psychological costs

Customervalue

Perceived

benefits

Perceived

sacrifice

Positive Negative


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Costs

Competitors prices

Customers assessment of value

Price too high no demand

Price too Low no profitFloor

Ceiling

Pricing: 3Cs


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Price and the Product Life Cycle

Introduction

Growth Maturity Decline(Time)

(Sales)

Pre-Launch:Establishpriceobjectives

Penetration/

Skim

Use price

to combatcompetition/improvevalue perceptions

Price to

protectposition

Price to

maximiseprofits


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6.5 PRICING METHODS

Cost Oriented Pricing Methods: Cost plus,total cost, full cost, mark up, variable costand Break even analysis pricing methods

Demand Oriented Pricing Methods:Perceived value and Differential Pricingtechniques.

Competition Oriented Pricing Methods:Going rate and Sealed bid pricing methods


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Pricing methods

Cost

Competition Marketing

Pricingmethods


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6.6 PRICING STRATEGIESAND POLICIES

Price Discounts and Allowances: Trade, Quantity, Cash and Seasonaldiscounts.

Geographic Pricing Policies: Ex factory, Uniform delivered and Zonal pricingpolicies.

Pioneer Pricing Policies: Market Skimming and Penetration pricing policies. Product Mix Pricing Policies: Product lining, Optional product and Captive

product Pricing policies. Promotional Pricing Policies: Leader, Special event and Superficial

discounting pricing policies. Psychological Pricing Policies: Odd pricing policy Re sale Price Maintenance Policy: Providing suggested prices to retailers Discrimination Pricing Policy: Different prices being charged to give group

of buyers a competitive advantage.


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TOPIC 7DISTRIBUTION DECISIONS

Distribution defined

Distribution channel defined

Types of distribution channels

Types of channel flows

Functions of Distribution Channels

Channel determinants

Channel integration

Channel Management


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7.1 DEFINITIONS

Distribution is the process of moving theproducts from their points of production totheir points of consumption.

Distribution channel is the route throughwhich products and their titles move fromproducers to consumers.


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7.2 TYPES OF DISTRIBUTIONCHANNELS

1. Zero level Channel

2. One level Channel

3. Two level Channel

4. Direct Channel

5. Indirect Channel

6. Short Channel

7. Long Channel

8. Intensive Channel

9. Selective Channel

10. Exclusive Channel


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How intermediaries can improve efficiency

P

P

P

P

P

P

C

C

C

C

C

C

I


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7.4 FUNCTIONS OFDISTRIBUTION CHANNELS

1. Research

2. Promotion

3. Contacting

Prospective Buyers

4. Matching

5. Grading

6. Assembling7. Packaging

8. Negotiation

9. Physical Distribution

10. Transportation11. Storage

12. Financing

13. Risk Taking14. Product Assortment


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7.5 CHANNELDETERMINANTS

1. Market Factors

2. Product Factors

3. Company Factors4. Middlemen Factors

5. Competitive Factors

6. Macro Environmental Factors


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7.6 CHANNEL INTEGRATION

Consists of networks comprised ofinterconnected units each of which in theoryparticipates in facilitating the channel flow. Thevarious links or stages of the channel may becombined under the management of a channelleader either horizontally or vertically.

Integration may stabilize supply, reduce costsand increase coordination of channel members


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7.6.1 VERTICALINTEGRATION

Vertical integration combines two or more stages of thechannel under one management. Vertical marketingintegration may be corporate, administered orcontractual.

Corporate VMS combines successive stages ofproduction and distribution under single ownership.

Administered VMS coordinates successive stages ofproduction and distribution under the powerful channelmember.

Contractual VMS consists of independent firms atdifferent levels of production and distribution integratingtheir programs on contractual basis.


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7.6.2 HORIZONTAL VERTICALINTEGRATION

Horizontal channel integration combinesinstitutions at the same level of operationunder one management. For instance two

or more companies may join together toexploit an emerging marketing opportunity.Each company lacks the capital, knowhow, production or marketing resources to

venture alone, or it is afraid of risk, or itsees a substantial synergy in joining withanother firm.


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7.7 CHANNEL MANAGEMENT

Channel management involves selection,motivation and evaluation of individual channelmembers as well as channel modification. The

factors to be considered in selection are: accessto intended market, ability to carry adequatestock, effectiveness of promotional program,services to customer, payment of bills on time,

number of years in business, other lines carried,growth and profit record, solvency,cooperativeness and reputation.


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TOPIC 8PROMOTION DECISIONS

1. Promotion Defined

2. The roles of Promotion

3. Communication Process or Model4. Steps in Developing Effective Promotion

Program

5. Elements of the promotion Mix6. Determinants of the Combination of the

Promotion Mix


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Terminology

PROMOTIONPro - forwardMovere - to move

PUSHING FORWARDProductService

ADVERTISINGAd - towards

Vertere - to turn

TURNING THE CONSUMERTowards the product

Towards the service


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Promotion process - aims

Consumer realises need for product

Consumer can identify/recognise/recall product

Consumer has positive attitude towards brand

Consumer has intention to purchase

Other mix elements facilitate purchase


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The communication process

ReceiverEncodedmessage

Decodedmessage

TransmissionSource

(Marketer)

Feedback

Noise

Noise

Third Party


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8.1 PROMOTION DEFINED

Promotion is the personal or impersonalprocess in which applied communication isused by marketers for assisting or

persuading prospective customers to buya product or a service or to act favourablyupon an idea that has a commercial

significance to the seller.


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8.2 ROLES OF PROMOTION

1. Building Awareness

2. Developing Conviction

3. Reminding4. Prevent or Meet Competition

5. Enhancing Company Image

6. Educating Consumers7. Increasing Sales


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How promotion works

Awareness

Interest

Evaluation

Trial

Adoption

Awareness

Interest

Desire

Action

Awareness

Trial

Reinforcement


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The five Ms of promotion

MISSIONSales goalsPromotional

objectives

MONEYStage in PLCMarket share

Customer baseCompetitionFrequency

MEDIAReach

FrequencyImpactTiming

MESSAGEGenerationEvaluationSelectionExecution

MEASUREMENTComms impactSales impact


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Reaching the consumerthe promotional mix

MARKET RESEARCHCONSUMER

PRODUCER

PRODUCTPRICEPROMOTION

DISTRIBUTIONPEOPLEPHYSICAL EVIDENCEPROCESS

ADVERTISING

DIRECT MARKETING

SALES PROMOTIONPUBLIC RELATIONS

PERSONAL SELLING

INTERNET


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Advertising

Any paid form of nonpersonal communication ofideas, products or services in

prime media such as

television, press,posters,radio or cinema


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Awareness building

Repetition/enforcement

Brand communications

Legitimisesproduct/company

Can provide postpurchase reassurance

Cost

Impersonal

Difficult to close sale

Increased fragmentation

ADVANTAGES DISADVANTAGES

Advertising: evaluation


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Direct Marketing

The distribution of information andpromotional benefits to targetconsumers through interactivecommunication in a way which allows

response to be measured


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Target

E Media

Door to Door

Coupons

Inserts

Catalogues

Telemarketing

Direct Mail

Direct Marketing methods


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Individual targeting

Personalisedcommunication

Long term relationship

Measurement and trackingvia database

Recognises + consumersophistication

Fast/direct

Variable response rates

Junk mail

Poorinformation/targetingreduces brand value


Direct Marketing: evaluation

S l P ti


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Sales Promotion

Incentives to consumers or thetrade that are designed tostimulate purchase

S l P ti l ti


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Quick sales boost

Speeds up launchprocess

Increases visibility

Combats competitorsmarketing efforts

Motivational medium

Short term

Can cannibalisemargins

Money off can = branddilution

Can lose brandrecognition


Sales Promotion: evaluation

P l lli


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Personal selling

Oral communication withprospective purchasers with theintention of making a sale

Th l l


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The personal sales process

SELLING FUNCTION

Order Takers Order Creators Order Getters

Inside

DeliveryOutside Missionary

SalesPeople

Frontline

Sales

Sales

Support

P l lli l ti


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Interactive/personal

Process adaptable

Builds relationships

Objections overcome

Can close a sale

Important B2B

Costly

Risky

Can reach relatively fewprospects

Needs demonstration


Personal selling: evaluation

Public relations


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Public relations

The planned and sustained effort to establish

and maintain goodwill and mutualunderstanding between an organisation andits public

Communication of a product or business byplacing information about it in the mediawithout paying for the time or space directly

Organisations publics / stakeholders


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Organisations publics / stakeholders

ORGANISATION

Finance

Government

Media

Public

Employees

Commercial

Public relations: evaluation


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Credible third partyendorsement

Higher readership than

adverts

Can be cost effective

Influences allstakeholders/publics

Can create goodwillamongst stakeholders

Can negate problems

Poor hit rate

No control over media

Media cynicism

Consumer cynicism -spin


Public relations: evaluation

The Internet


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The Internet

The distribution of information andpromotional benefits to consumersthrough electronic media

The Internet: evaluation


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Convenience

Information

Choice

Global Multi media

Instant market research

Lower prices

Lower costs Customised promotion

Rapid response

Promotional costs stillvery high

Poor sites = negativeoverall perception

Variable fulfilment rates

Not stand alone


The Internet: evaluation

The importance of the database


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The importance of the database

Marketingdatabase

Promotionalinformation

Productinformation

Customer &

prospectinformation

Transactionalinformation

Geo-demographicinformation

8 4 DEVELOPING AN EFFECTIVE


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8.4 DEVELOPING AN EFFECTIVEPROMOTION PROGRAM

1. Identifying the target audience

2. Determining the promotion objectives

3. Designing the Message4. Selecting the Communication Channels

5. Establishing the total promotion budget

6. Deciding on the promotion Mix7. Measuring Promotion Results

The Internet: evolution


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ElectronicDirectory

Electronic

Advertising

InteractiveAdvertising

InteractiveDistribution

IntegratedProcesses

The Internet: evolution

The Promotion Pyramid


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Media Advertising

Public Relations & Publicity

Direct Mail

Trade shows, Seminars & Training

The Promotion Pyramid

Catalog, lit. & manuals

Telemarketing

Sales

Cost perContact

High

Low

Coverage of Target Audience

Broad to Narrow

The real challenge is to integratethe various elements of the

promotional mix in orderto get the optimal

results at the

lowest cost!

Consumer / industrial

Use of promotion elements in sequence


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Use of promotion elements in sequence

Advertising

PoS Exhibitions

Promotions

Goods

Services

PersonalSelling

Advertising

(Broadcast TV &Radio)

Low information/high frequency

Head and Heart

PR

Word of Mouth

Trade Journals

Website

Direct Mail

Productusage

Loyalty

Third partysupport(distributors)

Advertising

Reducecognitivedissonance

Promotions

Money

Posters

Awareness Action

RepeatBehaviour

Reinforce-ment

The different elements of the Promotional Mix achieve effectivenessat the appropriate stage in the persuasion process e.g.

8.6 DETERMINANTS OF THE


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8.6 DETERMINANTS OF THECOMBINATION OF THE

PROMOTION MIX1. Promotional

Objectives

2. Promotion Policy

3. Promotion Budget

4. Nature of the Market

5. Nature of theProduct

6. The Stages of thePLC

7. Distribution Intensity

8. The Costs of thePromotional Methods

9. Availability of Media

10. Buyers Readiness

Stage.

Documents

Pricing, Placing and Promotion-bus 5011