Unit-3

PRICING AND PROMOTION

B.com 2nd Year
Meaning of Pricing

Pricing is a crucial element of marketing strategy that involves determining the value of products or
services and setting appropriate prices to achieve business objectives. It plays a significant role in
influencing consumer behavior, profitability, and competitive positioning in the market.
While fixing the cost of a product and services the following point should be considered:
• The identity of the goods and services
• The cost of similar goods and services in the market
• The target audience for whom the goods and services are produces
• The total cost of production (raw material, labour cost, machinery cost, transit, inventory cost etc).
• External elements like government rules and regulations, policies, economy, etc.,
Significance of Pricing
1. Revenue Generation: Pricing directly influences a company's revenue
generation by determining the amount customers are willing to pay for its
products or services.
2. Profit Maximization: Effective pricing strategies aim to maximize profits by
finding the optimal balance between costs, demand, and competition.
3. Competitive Advantage: Pricing can be used strategically to gain a competitive
edge by offering better value or differentiation compared to rivals.
4. Brand Positioning: Pricing plays a key role in positioning a brand in the market,
whether it's as a luxury, premium, or budget option.
5. Financial Performance: Pricing directly impacts a company's financial
performance, affecting profitability, cash flow, and overall financial health.
Types of Pricing Method:

1. Cost-Plus Pricing: This approach entails computing the overall expenses incurred in manufacturing a product or
providing a service, then incorporating a markup (profit margin) to establish the selling price. The markup percentage
is usually determined by desired profitability targets or prevailing norms within the industry.

2. Competitive Pricing: Competitive pricing involves determining prices by considering the rates set by competitors
for similar products or services. Businesses may adjust their prices to match, surpass, or undercut competitors' prices,
depending on their market position and differentiation tactics.

3. Market-Based Pricing: This approach bases pricing on how much customers value the product or service,
adjusting prices accordingly. Instead of considering production costs or competitor prices, prices are determined by the
amount customers are willing to pay based on their perceived value of the offering.

4. Price Skimming: Price skimming is a method where companies initially set high prices for new or innovative
products, gradually reducing them as competition rises or demand steadies. This strategy aims to capture early adopters
and recoup development costs before targeting more price-sensitive customers.
Types of Pricing Method:

5. Penetration Pricing: Penetration pricing entails setting low prices initially to penetrate the market
quickly and gain market share. This strategy aims to attract price-sensitive customers and discourage
competitors from entering the market.
6. Bundle Pricing: Bundle pricing offers several products or services together at a discounted rate
compared to buying each item separately. This tactic motivates customers to purchase more and
enhances the overall value of the transaction.
7. Psychological Pricing: Psychological pricing utilizes psychological factors to set prices. Tactics
include charm prices (ending in "9" or "99").
8. Freemium Pricing: Freemium pricing offers basic products or services for free while charging for
premium features or additional services. This strategy allows businesses to attract a large user base with
free offerings and monetize through upselling or premium subscriptions.
 Meaning of Promotion
In marketing, promotion refers to the various activities and strategies that businesses use to communicate with,
persuade, and influence target audiences about their products, services, or brands. Promotion in marketing
typically involves:

 1. Advertising: Paid communication through various media channels such as television, radio, print, online
platforms, and social media to reach a large audience and promote products or services.
 2. Sales Promotion: Short-term incentives or promotions such as discounts, coupons, contests, giveaways,
and special offers aimed at encouraging immediate purchase or action from consumers.
 3. Public Relations (PR): Building and maintaining a positive image and reputation for the company or
brand through media relations, press releases, events, sponsorships, and other PR activities.
 4. Personal Selling: Direct communication between sales representatives or agents and potential customers
to provide product information, address inquiries, overcome objections, and close sales.
 5. Direct Marketing: Direct communication with individual consumers or targeted groups through channels
like email, telemarketing, or SMS marketing to deliver personalized messages and offers.
Advertising
• Advertising serves as a crucial element in the marketing mix, complementing
other promotional activities.
• It enables companies to create brand identity and differentiation, influencing
consumer perceptions and preferences.
• Effective advertising campaigns incorporate market research, creative
messaging, and strategic media planning to maximize reach and impact.
• Digital advertising platforms offer advanced targeting capabilities, allowing
advertisers to reach specific demographic segments with tailored messages.
Personal Selling

• Personal selling is particularly effective in industries where products or services

require demonstration, customization, or complex decision-making processes.
• Sales representatives act as brand ambassadors, building trust and rapport with
customers through interpersonal interactions.
• Personal selling offers opportunities for upselling, cross-selling, and relationship
building, leading to long-term customer satisfaction and loyalty.
• Sales training and ongoing development are essential for equipping sales
professionals with product knowledge, communication skills, and negotiation
techniques.
Publicity & Public Relations
• Publicity:
1. Publicity involves free exposure or coverage of a company, product, or event in the media.
2. It can be spontaneous or generated through press releases, news stories, interviews, or events.
3. Publicity aims to create awareness, generate interest, and build credibility by leveraging media channels.
4. Unlike advertising, publicity is not paid for and relies on newsworthiness to attract attention.

• Public Relations:
1. Public relations (PR) involves managing relationships between an organization and its stakeholders.
2. PR activities focus on building trust, credibility, and goodwill with customers, employees, investors, and
the community.
3. PR encompasses media relations, crisis communication, event management, and corporate social
responsibility.
4 . PR professionals monitor media coverage, engage with journalists, and leverage storytelling to shape
public perceptions.
Direct Marketing

• Direct marketing is a form of marketing where businesses communicate directly

with individual consumers or targeted groups of consumers to promote their
products or services.
• Direct mail, email marketing, and SMS campaigns offer opportunities for one-
to-one communication, fostering engagement and response.
• Direct marketing efforts are measurable, allowing companies to track response
rates, conversion rates, and customer lifetime value.
• Database management and CRM (Customer Relationship Management) systems
play a crucial role in direct marketing, enabling segmentation, automation, and
personalization.
Sales Promotion

 Sales promotion is a subset of the marketing mix.

 it specifically focuses on promotional activities aimed at stimulating
immediate sales.
 Sales promotion covers those marketing activities other than
advertising, publicity, and personal selling that stimulate consumer
purchasing and dealer effectiveness.
 The popular methods used for sales promotion are demonstration,
trade show, exhibition, exchange offer, seasonal discount, free
service, gifts, credit facilities, contests, and so on.
Characteristics
 1. It involves all the promotional efforts other than advertising, personal selling,
and publicity.
 2. The primary purpose is to induce customer for immediate buying or dealer
effectiveness or both.
 3. It is optional. Many companies do not practice it.
 4. It is directed for multiple objectives, like to maintain sales during off season, to
increase sales, to face competition, to clear stocks, to improve image, to promote
new products, etc.
 5. Sales promotion efforts consist of special selling efforts for the specific time
period in forms of short-term incentives and schemes undertaken at consumer
level, dealer level or at salesmen level.
Types of Sales Promotion
 Discounts: Temporary price reductions offered to customers.
 Coupons: Vouchers that entitle customers to a discount or rebate when they purchase a product.
 Rebates: Partial refunds given to customers after they purchase a product.
 Free Samples: Providing customers with a free trial of a product to encourage future purchases.
 Contests and Sweepstakes: Offering prizes or rewards to customers who participate in a
competition or draw.
 Buy One Get One (BOGO) Offers: Providing customers with an additional product for free or at
a reduced price when they purchase one.
 Loyalty Programs: Rewarding customers for their repeat purchases with discounts, freebies, or
exclusive offers.
Factors Affecting Promotion Mix Decisions

 Type of Product: The type of product significantly influences the selection of promotional strategies.
Whether it's branded or non-branded, necessity or luxury, or a new entry into the market, each product
category demands tailored promotional approaches.

 Use of Product: Products vary widely, falling into categories such as industrial, consumable,
necessities, or luxuries. This diversity impacts the choice of promotional tools and media. For instance,
consumer goods often leverage advertising and sales promotion, while industrial goods may rely more
on personal selling.

 Purchase Quantity and Frequency: Consideration of purchase frequency and quantity is crucial in
determining the promotion mix. Frequently purchased products typically benefit from advertising,
while infrequently purchased items often rely on personal selling and sales promotion.
Factors Affecting Promotion Mix Decisions

 Stage of Product Life Cycle: Products undergo distinct stages in their life cycle, each presenting
unique challenges and opportunities. Tailored marketing strategies are essential for each stage,
and the suitability of promotional tools varies accordingly.

 Level of Competition: Promotional efforts are crafted based on the competitive landscape,
adjusting to the type and intensity of competition. The aim is to safeguard the company's interests
against rivals, with the level of promotional intensity and tool selection contingent upon the
competitive environment.
Integrated Marketing Communication
(IMC)
 Integrated Marketing Communication (IMC) is a strategic approach to marketing that focuses on the seamless integration of
various marketing communication elements to deliver a consistent message to target audiences across multiple channels.
 IMC aims to ensure that all marketing efforts work together harmoniously to create a unified brand image and maximize the
impact of marketing campaigns.
Key Components of Integrated Marketing Communication:
 Advertising: Paid communication through various media channels such as television, radio, print, outdoor, and online
platforms to promote products or services.
 Public Relations (PR):Managing the reputation and public image of the organization through media relations, press releases,
events, sponsorships, and community engagement.
 Sales Promotion: Short-term incentives or promotional activities aimed at stimulating immediate sales, such as discounts,
coupons, contests, and loyalty programs.
 Digital Marketing: Leveraging digital channels such as websites, social media, search engines, content marketing, and mobile
apps to reach and engage with the target audience.
 Personal Selling: Face-to-face or one-on-one communication with potential customers to persuade them to purchase products
or services.
Benefits of Integrated Marketing
Communication:
1. Consistency: Ensures that all communication efforts convey a unified message and brand identity
to consumers.
2. Synergy: Maximizes the impact of marketing communication by integrating different channels and
leveraging their strengths.
3. Cost-Efficiency: Optimizes marketing budgets by coordinating communication activities and
avoiding duplication of efforts.
4. Customer Focus: Enables organizations to better understand and engage with their target audience
by delivering relevant and personalized messages.
5. Measurable Results: Allows for better tracking and evaluation of marketing effectiveness through
integrated metrics and analytics.
 Challenges of Integrated Marketing
Communication
 1. Coordination: Requires effective coordination and collaboration among different
departments, agencies, and stakeholders involved in marketing communication.
 2. Consistency: Maintaining consistency in messaging and branding across diverse
communication channels can be challenging.
 3. Integration: Integrating traditional and digital marketing channels seamlessly to create
a unified customer experience may require significant effort and resources.
 4. Adaptability: Keeping pace with rapidly evolving consumer trends, technologies, and
media platforms requires constant adaptation and innovation.