Chapter: 9

What is the Price?

 Price is the amount of money charged for a product or service, or the sum of values
consumers exchange for the benefits of having or using the product or service.
 Price is the only element of the marketing mix that produces revenue; all other elements
represent costs.
Considerations in Setting Price:

Cost based/Value-based Pricing:

Value-based pricing - Customers
Setting the price based on a product’s perceived value is defined as ‘setting price based on
buyers’ perceptions of value rather than on the seller’s cost’

Cost-based pricing - Companies

The company designs what is considered a good product, totals the costs of manufacturing, set
a price and convince buyers to buy them
Internal Factors to Consider When Setting Prices:
  Marketing objectives
 Survival
 Current profit maximisation
 Market-share leadership
 Product-quality leadership
 Marketing-mix
 Costs
 Fixed costs
 Variable costs
 Total costs
Pricing Decisions (Internal):
 Cost-plus pricing
 Adding a standard mark up to the cost of the product.
 Breakeven analysis and target profit pricing
 Setting the price to break even on the costs of making and marketing a product,
or to make the desired profit.
 Normally minimal profit; to recapitalize the market
 Organisational considerations
 Management must decide who within the organisation should set prices.
External Factors Affecting Pricing Decisions:
 The Market and Demand
 Pricing in different types of markets
 Consumer Perceptions of Price and Value
 Price and Demand Relationship
 Price Elasticity of Demand
 Competitor’s Prices and Offers
Analysing the Price-Demand Relationship:
 The demand curve shows the number of units the market will buy in a given time period
at different prices.
 Price elasticity is the measure of the sensitivity of demand to changes in price.
Two Hypothetical Demand Schedules:

Hypothetical Examples of Demand Curves:

Effects of Promotion:
Inelastic and Elastic Demand:

Competitors’ Strategies and Prices:

 The competitors’ prices and possible reactions to the company’s own pricing moves
must be considered.
 The company needs to learn the price and quality of each competitor’s offer. This can be
done in a number of ways e.g. comparison shopping, examining competitors’ products
and pricing, speaking to consumers.
New-Product Pricing Strategies: Pricing an Innovative Product:
 Market-skimming pricing: setting a high price for a new product to skim maximum
revenue from the segments willing to pay the high price, the company makes fewer
but more profitable sales. (E.G. Apple)
 Market-penetration pricing: setting a low price for a new product in order to attract a
large number of buyers and a large market share. (E.G. Microsoft XP 2001).
Nine Price/Quality Strategies:
Product-Mix Pricing Strategies:
 Product-Line Pricing
 Setting the price steps between product line items. (Fujitsu Aircondition
[different model different price])
 Optional-Product/Service Pricing
 Pricing optional products sold with the main product.
 Captive-Product Pricing
 Pricing products that must be used with the main product.
 Two-part pricing is a strategy for pricing services in which price is broken into a
fixed fee plus a variable usage rate.
 Example, Inkjet Printer. Printer is cheap but Ink is expensive.
 By-Product Pricing
 Pricing by-products to be more competitive. Selling it (example boxes) to
reduce cost of getting rid of it.
 Product-Bundle Pricing
 Pricing bundles of products sold together.
Price-Adjustment Strategies:
 Discount pricing and allowances
 Segmented pricing: setting different prices for different clients, product forms, places
or times.
 Psychological pricing: adjusting the price to communicate the product’s intended
competitive position.
Price-Adjustment Strategies:
 Promotional pricing: loss leader pricing, special and psychological discounting.
 Value pricing: right combination of quality at fair prices.
 Geographic pricing: different pricing for distant customers, zone pricing, basing point
pricing and freight absorption pricing.
 International pricing: the company adjusts its price to meet different conditions and
expectation in different world markets.
Lecture: 11
Integrated Marketing Communication (IMC):
 IMC entails co-ordinating the organisation’s promotional efforts using such major
communication elements as:
 Advertising.
 Sales promotion.
 Public relations.
 Direct and online marketing.
 Personal selling.
Defining Integrated Marketing Communications:
 IMC – “An organisation’s unified, coordinated effort to promote a brand concept
through the use of multiple communication tools that speak with a single
voice”(Shimp, 2000).
 IMC “is a cross-functional process for creating and nourishing profitable relationships
with customers and stakeholders by strategically controlling or influencing all
messages sent to these groups and encouraging data-driven, purposeful dialogue with
them” (Duncan, 2002).
 Using multiple communication tools in conjunction with one another can produce
greater results than tools used individually and in an uncoordinated fashion.
Defining Integrated Marketing Communications:
 IMC requires that all of a brand’s communication media deliver a consistent message.
 IMC considers all touch points, or sources of contact, that a customer has with the
brand as potential delivery channels for messages and makes use of all
communications methods that are relevant to customers.
 The IMC process further necessitates that the customer is the starting point for
determining the types of messages and media that will serve best to inform, persuade,
and induce action.
The Marketing Communication System:

Elements in the Communication Process:

Steps in Developing IMC:

The hierarchy of effects model:

DAGMAR model:
AIDA model:
 Ideally the message should:
 Get Attention
 Hold Interest
 Arouse Desires
 Obtain Action
(A framework known as the AIDA model)
Selecting a Message: Message Content:
 Rational Appeals
 Relate to the audience’s self interest. They show how the product will produce
the desires benefits.
 Emotional Appeals
 These stir up positive or negative emotions that can motivate purchase.
 Moral Appeals
 These are directed to the audience’s sense of what is right and proper.
 Message Structure
 Message Format
Choosing Media:
 Personal Communication channels
 Channels through which two or more people communicate directly with each
other, including face-to-face, person-to-audience, over the telephone or
through the mail.
 Non-personal communication channels
 Channels that carry messages without personal contact or feedback, including
media, atmosphere and events.
Selecting the Message Source:
 The message’s impact on the audience is also affected by how the audience views the
sender.
 Messages delivered by highly credible sources are more persuasive e.g. professionals,
actors and athletes.
 Sources are made credible by expertise, trustworthiness, and likeableness.
Collecting Feedback:
 After sending the message, the communicator must gauge its effect on the target
audience
Setting the IMC Mix:
 The marketing organisation must now divide the total marketing communication
budget among the major marketing communication categories specific media, tools
and technologies:
 Media advertising
 Public relations
 Sales promotion
 Direct and digital marketing
 Personal selling
ADVERTISING

Advertising Defined:
• Any paid form of non-personal presentation and promotion of ideas, goods or services
by an identified sponsor’ (Kotler et al., 1999).
• ‘Advertising is paid non-personal communication from an identified sponsor using
mass media to persuade or influence an audience’ (Wells et al., 1992).
• ‘Advertising is communication via a recognisable advertisement placed in a definable
advertising medium, guaranteeing delivery of an unmodified message to a specified
audience in return for an agreed rate for the space or time used’ (Crosier, 1999).
• Top Advertising Agencies in Morocco https://clutch.co/ma/agencies
Benefits of Advertising:
• it can reach mass audiences (large coverage),
• it, increasingly, is able to reach mass audiences selectively (i.e. better targeting),
• it may have low cost per thousand impressions (i.e. low CPM),
• it is economical, efficient and effective at achieving high levels of product awareness,
• it is successful at brand maintenance (and many argue that it is successful in brand
development).
Advertising:
 Advertising can be traced back to the very beginnings of recorded history. Early
Greeks, Romans and Phoenicians used advertising to inform and sell.
 Modern marketing is very different with $10 billion being spent each year on
advertising in Australia alone.
The Main Decisions in Advertising:
 Advertising Objective
 Budget Decisions
 Message Decisions
 Media Decisions
 Campaign Evaluation.
The Main Advertising Decisions:
Setting Advertising Objectives:
 An advertising objective is a specific communication task to be accomplished with a
specific target audience during a specific period of time.
 Advertising objectives can be classified by purpose: whether their aim is to inform,
persuade or remind. Resulting in:
 Informative advertising.
 Persuasive advertising.
 Comparison advertising.
 Reminder advertising.
Possible Advertising Objectives:

Setting the Advertising Budget:

 After determining its advertising objectives, the company can next set its advertising
budget for each product.
Developing a Message Strategy and Execution:
 A large advertising budget does not guarantee a successful advertising campaign.
 Two advertisers can spend the same amount on advertising yet have very different
results.
 Hence the need of effective message strategy and execution.
Selecting Advertising Media:
 The advertiser next chooses advertising media to carry the message.
 The four major steps in media selection are:
1. Deciding on reach, frequency and impact.
2. Selecting major media types.
3. Deciding on media timing.
4. Selecting specific media vehicles.
Profiles of the Main Media Types:

Advertising Evaluation:
 Measuring the communication effect (copy testing).
 Advertising pre-testing
 Post-testing advertisements:
 Recall tests
 Recognition tests
International Advertising Decisions:
 The major decision is the degree to which global advertising should be adapted to the
unique characteristics of various country markets.
 Standardisation has benefits such as lower costs and greater coordination of global
efforts but ignores cultural differences.
 Most companies think globally and act locally.
 Costs and legislative requirements in different countries need to be considered.
 PERSONAL SELLING
Personal Selling:
 Personal selling is the interpersonal arm of the
promotion mix.
 There are many types of personal selling jobs, and the role of personal selling can vary
greatly from one industry to another and from one company to another.
 The people who do the selling go by many names:
 Salespeople
 Sales representatives
 Account executives/representatives
 Sales consultants/engineers
 Marketing representatives
The Role of the Salesforce:
 Personal selling involves two-way, personal communication between salespeople and
individual customers—whether
 face-to-face
 by telephone
 through video conferences
 or by other means
This means that personal selling can be more effective than advertising in complex selling
situations.
Managing the Salesforce:
 Salesforce Management
 The analysis, planning, implementation and control of salesforce activities. It
includes setting salesforce objectives, designing salesforce strategy, and
recruiting, selecting, training, compensating, supervising and evaluating the
firm’s salesforce.
Personal Selling:
• If the terms of agreement cannot be varied, then you are selling, or persuading, not
negotiating.
• Transactional selling - where the emphasis is simply placed on achieving the sale and
following the steps proposed to a successful sale.
• Relationship marketing - view that emphasises the importance of the relationships
developed between an organisation and other parties including customers, partners,
suppliers and the trade.
Some Persuasive Tactics in Personal Selling:
• Establish trust and develop credibility.
• Understand the reader's purpose and align your own.
• Pay attention to language and nod Frequently During Face-to-Face Interactions.
• Make the Lead Feel Special.
• Never Ask, “Is This a Good Time to Talk?”.
• https://www.privacyshield.gov/article?id=Morocco-Selling-Factors-and-
Techniques
Traditional Stages of Selling:

The Personal Selling Process:

 Steps in the Selling Process:
 Prospecting
 Pre-approach
 Approach
 Presentation and demonstration
 Handling objections
 Closing
 Follow-up