Chapter Fourteen Promotion & Pricing Strategies McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-1 Promotional Mix Personal Selling Non-Personal Selling Advertising Trade Shows Direct Mail Sales Promotions Samples Coupons Sweepstakes/Contests McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-2 Objectives of Integrated Marketing Build Brand Equity Provide Information Manage Demand & Build Sales Differentiate Products Influence Perceptions, Attitudes, & Buyer Behavior McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-3 Components of Integrated Marketing Advertising Corporate Communication Crisis Communication E-Commerce Event Marketing Internal Communication McGraw-Hill/Irwin Issues Management Marketing Multimedia Public Relations Sales Promotion Strategic Planning Web Design © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-4 Advertising Today Persuasive Communication Guerrilla marketing Viral marketing Infomercials Internet Global Advertising McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-5 Figure 16.3 Advertising Expenditure by Media McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-6 Automotive Marketing Autowrap Sales Promotion Tex Earnhardt rides a live bull Toyota dealer displays fiberglass lions McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-7 Century’s Top Ad Jingles “You deserve a break today” “Be all you can be” “Pepsi-Cola hits the spot” “Mm Mm good!” “See the USA in your Chevrolet” “I wish I were an Oscar Mayer wiener” “Double your pleasure, double your fun” “Winston tastes good like a cigarette should” “It’s the real thing” “A little dab’ll do ya” Source: Advertising Age McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-8 Thinking Out of the Box Kentucky Derby jockeys Ads on pants for 1st time in 2004 Marlins painted poles like No.2 pencils from Office Depot in 1994 Spiderman on baseball fields – 2004 $50-100,000 per team Fenway Park & Yankee Stadium McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-9 Do Blatantly Sexy Ads Turn You Off? Percent Men 80 70 60 50 40 30 20 10 0 Women 72 51 45 24 4 Strongly/Somewhat Agree Strongly/Somewhat Disagree 4 Don't Know Source: USA Today McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-10 Sex in Advertising BuyMusic.com Uncle Ben’s Rice Gillette’s Satin Care Dow Jones NewsPlus McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-11 Internet Advertising- 2004 Will reach $22 billion in the U.S. The rest of world will spend $10.8 billion. $27 billion (10% of all U.S. ad spending) will be siphoned from traditional media Hardest hit: newspapers and direct mail Source: CIO Web Business, 10/1/1999 McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-13 Office Depot 2003 Back to School starts July 4th $7.7b school supply market Integrated marketing campaign E-commerce Direct marketing Radio, newspaper (including AfricanAmerican focus), & TV ads (including Spanish-language stations) McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-15 Steps in Personal Selling Prospect/Qualify Presentation Objections Preapproach Close Approach McGraw-Hill/Irwin Follow-up © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-16 Public Relations Steps Listen Change/Develop Inform McGraw-Hill/Irwin Publicity Free More Effective Than Ad Believable No Control No Repetition © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-17 PR in Not–for-profit 3-26-03 WSJ Military are battling more than the enemy. Competing for valuable press attention that some believe can later pay off with fatter budget allocations in Congress. The Army with over 400 embedded journalists appears to have won the war. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-18 Sales Promotion Internal & External Sampling Word-Of-Mouth Viral Marketing/Swag Technology Testimonials McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-19 Celebrity Endorsers Celebrity Product(s) Catherine Zeta Jones Kristie Alley Jason Alexander Britney Spears Geoffrey the Giraffe McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-21 Push/Pull Push – personal selling to market a product to wholesalers & retailers Pull – promote a product by generating consumer demand for it, primarily through advertising & sales promotions McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-22 Promotional Strategies Push Strategy Promotion Distribution Retail Store McGraw-Hill/Irwin Customer Promotion Pull Strategy © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-23 Top Sports Endorsers Athlete Lebron Kobe Bryant Micheal Jordan Tiger Woods Arnold Palmer Andre Agassi Endorsements $90.0 Million (2003) $47.0 Million (2002) $24.0 Million (2002) $63.0 Million (2003) $16.0 Million (2002) $14.0 Million (2002) Source: Fortune Magazine McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-24 Hollywood as a Big Ad Miscellaneous Reese Pieces in E.T. Red Stripe in The Firm Accessories Ray-Ban Charlie’s Angels Men in Black Fashion Grant, Dean, Kelly Sex and The City Legally Blonde 2 Stila, OPI nail polish, Reem Acra bridal gown McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-25 Pricing Strategies Skimming Penetration McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-26 Breakeven Chart $1,200,000 $1,000,000 $800,000 Fixed Cost Total Cost Total Revenue $600,000 $400,000 $200,000 50,000 40,000 30,000 20,000 10,000 $0 0 Total Revenue or Total Cost (Figure 14.9) Number of Units McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-27 Pricing Using Breakeven Analysis Problem Should we charge $2 or $3 per box? Costs Total Fixed Costs $400,000 Variable Cost Market Research Forecast $ 1 per box Company can sell: 290,000 boxes at $2 @ 210,000 boxes at $3 @ Breakeven point = total fixed cost price - variable cost Breakeven (per unit) Analysis $2 price = $400,000 400,000 units to breakeven (per unit) $2 - $1 $3 price = $400,000 200,000 units to breakeven $3 - $1 McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-28 What They Cost When First Introduced 1927 Transatlantic Call $ 75/3 min. 1947 Microwave Oven $ 3,000 1964 FAX unit rental $ 850/month 1970 Pocket Calculator $ 150 1974 VCR Tape $ 50 Source: World Features Syndicate McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 16-30