Chapter 14
Promotion and
Pricing Strategies
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Promotion – communication to inform,
persuade, and influence a purchase decision.
 Integrated Marketing Communications
Coordination of all promotional activities
(advertising, personal selling, sales
promotion, and public relations) to produce a
unified customer-focused message.
14-2
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
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—consists of advertising,
sales promotion, direct marketing, and public
relations
14-3
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Comparing the Components of the
Promotional Mix
14-4
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Five Major Promotional Objectives
14-5
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Providing Information
Major portion of U.S. advertising is informationoriented
Differentiating a Product
Positioning: communicate meaningful
distinctions about the attributes, price, quality,
or use of a good or service
Increasing Sales
Most common objective
Stabilizing Sales
Stimulate sales during slack periods
Accentuating the Product’s Value
explain often unrecognized ownership benefits
14-6
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising
 Advertising—paid nonpersonal
communication delivered through various
media and designed to inform, persuade, or
remind members of a particular audience.
14-7
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising
 Types of Advertising
Product Advertising—consists of
messages designed to sell a particular
good or service
Institutional Advertising—involves
messages that promote concepts, ideas,
philosophies, or goodwill for industries,
companies, organizations, or government
entities
14-8
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising
 Advertising and the Product Cycle
Informative Advertising - seeks to build initial
demand for a product -Introductory stage
Persuasive Advertising - seeks to improve the
competitive status of a product, institution, or
concept, Growth and Maturity stages
Comparative Advertising - compares
products directly with their competitors
Reminder-oriented advertising - maintain
awareness, importance, and usefulness of a
product, concept, or institution Late maturity or
Decline stages
14-9
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising
 Advertising Media
Must choose how to allocate advertising
budget
All media offer advantages and
disadvantages
Must consider cost and which media is
best suited for communication
14-10
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising Media
Newspaper
Dominate local advertising
Disadvantage: relatively short life span
Television
America’s leading national advertising
medium
An expensive advertising medium
14-11
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising Media
Radio
Captive audience of listeners as they
commute to and from work
In major markets, many stations serve
different demographic groups with targeted
programming
Magazines
Includes consumer publications and trade
journals
Can often customize their publications and
target advertising messages to different
regions of the country
14-12
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising Media
Direct Mail
Address lists are the heart of this media
Benefit – can carefully target the mailing
Catalogs, “junk mail”, email
Online and Interactive Advertising
Web sites, banner ads, pop-up ads
Fastest-growing media segment
Outdoor Advertising
Very small part, but growing
Billboards, buses, signs in transit stations,
stores, airports, and stadiums
Disadvantages: Brief messages required
14-13
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising Media
Sponsorship—involves providing funds
for a sporting or cultural event in exchange
for a direct association with the event
Sports sponsorships attract two-thirds of
total sponsorship dollars
Primary benefits: exposure to the event’s
audience and association with the image of
the activity
14-14
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Advertising Media
Sponsorship—involves providing funds for a
sporting or cultural event in exchange for a direct
association with the event
Other Media Options
Infomercials
Ads in movie theaters
Ads on airline movie screens
Printed programs, Subway tickets
Turnpike toll receipts
Automated teller machines
14-15
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Sales Promotion
 Sales promotion—nonpersonal marketing
activities other than advertising, personal
selling and public relations that stimulate
consumer purchasing and dealer
effectiveness.
Potential advantages:
Short-term increased sales
Increased brand equity
Enhanced customer relationships
14-16
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Sales Promotion
 Consumer-Oriented Promotions
Goals of a consumer-oriented sales
promotion include:
Getting new and existing customers to
try or buy products
Encouraging repeat purchases by
rewarding current users
Increasing sales of complementary
products
Boosting impulse purchases
14-17
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Spending on Consumer-Oriented Promotions
14-18
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Sales Promotion
 Consumer-Oriented Promotions
Premiums - items given free with purchase.
Coupons - offer small price discounts
Rebates - offer cash back to consumers
Sample - a gift of a product
Games, Contests, and Sweepstakes - offering
cash, merchandise, etc. as prizes
Promotional Products - gift of useful
merchandise that carries the name, logo, or
slogan of organization. Ex: RVCC pen
14-19
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Sales Promotion
 Trade-Oriented Promotions
Trade promotion—sales promotion
geared to marketing intermediaries
Used to encourage retailers to:
Stock new products
Continue carrying existing ones
Promote products effectively to
consumers.
14-20
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Sales Promotion
 Trade-Oriented Promotions
Point-of-purchase (POP) advertising—
displays or demonstrations that promote
products when and where consumers buy
them
Takes advantage of many shoppers’
tendencies to make purchase decisions
in the store
Trade shows—promote goods or services
to intermediaries
14-21
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Personal Selling
 Personal selling—direct person-to-person
promotional presentation to a potential buyer.
Including face-to-face, via telephone,
videoconference, or interactive link. (Expensive)
 Used most often when:
Customers are relatively few in number and
geographically concentrated
Product is technically complex, involves tradeins, and requires special handling
Product is high in price
Product moves through direct-distribution
channels
14-22
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Personal Selling
 The Sales Process
Seven Steps in
the Sales
Process
14-23
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.
14-24
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?
14-25
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Pushing and Pulling Strategies
Pushing strategy—Promote to members
of the distribution channel, not to end
users. Thereby pushing it through the
channel
Cooperative advertising—allowances
in which firms share the cost of local
advertising of their product or line with
channel partners
 Pulling strategy— Generate consumer
demand by promoting to final users who
will then exert pressure on the distribution
channel to carry the good or service,
pulling it through the distribution channel
14-26
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
 Promotion to Children and Teens
Children not sophisticated at analyzing
promotional messages
 Promotion in Public Schools and on College
Campuses
Some schools sign contracts that give certain
brands exclusive access to their students
14-27
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
14-28
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Price in the Marketing Mix
 Profitability Objectives
Perhaps the most commonly used
objective in firms’ pricing strategies
Some firms try to maximize profits by
reducing costs rather than through price
changes
 Volume Objectives
Bases pricing decisions on market share
Market share: the percentage of a market
controlled by a certain company or product
14-29
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Price in the Marketing Mix
 Price to Meet Competition
Seeks to meet competitors’ prices
 Prestige Objectives
Prestige pricing encompasses the effect of
price on prestige
Prestige pricing establishes a relatively
high price to develop and maintain an
image of quality and exclusiveness
14-30
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 cover
overhead costs and generate profits.
14-31
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Breakeven Analysis—pricing technique used to
determine the minimum sales volume a product must
generate at a certain price level to cover all costs.
14-32
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
 Alternative Pricing Strategies
Skimming pricing strategy - set an
intentionally high price
Penetration pricing strategy - set 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 pricecutting tactics
Competitive Pricing - product priced at the
general level of competing offerings
Odd Pricing - Odd pricing (charging $39.95 or
$19.98 instead of $40 or 20)
14-33
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.