Quiz # 04: Date: 07 August, 2014 (Thursday) - Syllabus: Chapter 11 & 12

Quiz # 04
Date: 07 August, 2014 (Thursday).
Syllabus: Chapter 11 & 12
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
CHAPTER 13
Promotion and Pricing Strategies
14-2
Promotion
Promotion— communication link between buyer
and seller that performs the function of informing,
persuading, and influencing a purchase decision.
Focusing on Primary Demand
Focusing on Selective Demand
14-3
Integrated Marketing Communications
(IMC)
Coordination of all promotional activities – media
advertising, direct mail, personal selling, sales
promotion, and public relations – to produce a
unified customer-focused message.
Focuses on customer needs to create a unified
promotional message
Firms need a broad view of promotion to implement
IMC
14-4
The Promotional Mix
Promotional Mix— combination of personal and
nonpersonal selling components designed to meet the
needs of a firm’s target customers and effectively and
efficiently communicate its message to them.
Personal Selling— the most basic form of promotion:

a direct person-to-person promotional presentation to a
potential buyer.
Nonpersonal selling—consists of advertising, sales

promotion, direct marketing, and public relations
14-5
Comparing the Components of the Promotional Mix
14-6
The Promotional Mix
Objectives of Promotional Strategy
Providing Information
Differentiating a Product
Increasing Sales
Stabilizing Sales
Accentuating the Product’s Value
14-7
Five Major Promotional Objectives
14-8
The Promotional Mix
Providing Information
 Major portion of U.S. advertising is information-oriented
Differentiating a Product
 Positioning: establishing a place in the minds of
customers by communicating meaningful distinctions
about the attributes, price, quality, or use of a good or
service
14-9
The Promotional Mix
Increasing Sales
 Most common objective of a promotional strategy
Stabilizing Sales
 Sales contests often used during slack periods
 Sales promotion materials often distributed to customers
to stimulate sales during off-seasons
14-10
The Promotional Mix
Accentuating the Product’s Value
 Promotional strategies can enhance product values by
explaining often unrecognized ownership benefits
14-11
The Promotional Mix
Promotional Planning
Increasing complexity and sophistication of
marketing communications requires careful
planning to coordinate IMC strategies
Product Placement
Guerrilla Marketing
14-12
Advertising
Advertising—paid nonpersonal communication
delivered through various media and designed to
inform, persuade, or remind members of a
particular audience.
14-13
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
14-14
Advertising
Advocacy Advertising (Cause Advertising):
promotes a specific viewpoint on a public issue as a
way to influence public opinion and the legislative
process
14-15
Advertising
Advertising and the Product Cycle
Product and Institutional Advertising fall into one of
three categories, based on whether the ads intend to
inform, persuade, or remind
Informative Advertising—used to build initial

demand for a product in the introductory phase of
the product life cycle
14-16
Advertising
Persuasive Advertising—attempts to improve the
competitive status of a product, institution, or
concept, usually in the growth and maturity stages of
the product life cycle
 Comparative Advertising—form of persuasive product
advertising that compares products directly with their
competitors
14-17
Advertising
Reminder-oriented advertising—often appears in
the late maturity or decline stages of the product life
cycle to maintain awareness of the importance and
usefulness of a product, concept, or institution
14-18
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
14-19
14-20
Advertising
Television
 America’s leading national advertising medium
 An expensive advertising medium
 Price for a 30-second ad during weeknight prime time on
network television generally ranges from $100,000 to more

than $500,000
14-21
Advertising
Internet
 Online and interactive media have already changed the
nature of advertising. Starting with simple banner ads,
Internet advertising has become much more complex and
sophisticated
 The rising number of smart phones and tablets is affecting

this increase, as is the rapid multiplication of social media
An expensive advertising medium
 Viral Advertising
14-22
Advertising
Newspaper
 Continue to dominate local advertising
 Ads easily tailored for local tastes and preferences
 Can coordinate newspaper messages with other
promotional efforts
 Disadvantage: relatively short life span
14-23
Advertising
Radio
 Average U.S. household owns five radios
 Captive audience of listeners as they commute to and from
work
 In major markets, many stations serve different demographic
groups with targeted programming
14-24
Advertising
Magazines
 Includes consumer publications and trade journals
 Can often customize their publications and target
advertising messages to different regions of the country
 A natural choice for targeted advertising
Direct Mail
 Average American household receives about 550 pieces
of direct mail each year, including 100 catalogs
 e-mail another option
 Must overcome junk-mail and spam classification
14-25
Advertising
 Advertising Media
 Outdoor Advertising
 Just over 2 percent of total advertising spending
 Share is growing
 Majority of spending is for billboards
 Other types include: signs in transit stations, stores,
airports, and sports stadiums
 Disadvantages include:
 Brief messages are required
 Mounting concern for aesthetic and environmental issues
 Online and Interactive Advertising

 Range from Web sites and CDs to information kiosks
 Currently commands only 3 percent of media spending, but
is the fastest-growing media segment
Advertising
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
14-27
Advertising
Other Media Options
 Infomercials: 30-minute programs that resemble regular
TV programs, but are devoted to selling goods or services
 Other Media options include:
 Ads in movie theaters
 Ads on airline movie screens
 Printed programs, Subway tickets
 Turnpike toll receipts
 Automated teller machines
14-28
Sales Promotion
Sales promotion— consists of forms of promotion
such as coupons, product samples, and rebates that
support advertising and personal selling.
Potential advantages:
 Short-term increased sales
 Increased brand equity
 Enhanced customer relationships
14-29
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
14-30
Spending on Consumer-Oriented Promotions
14-31
Sales Promotion
Premiums—items given free or at a reduced price
with the purchase of another product.
Coupons offer small price discounts
Rebates offer cash back to consumers
Sample—a gift of a product distributed by mail,
door-to-door, in a demonstration, or inside packages
of another product
14-32
Sales Promotion
Games, Contests, and Sweepstakes
 Offering cash, merchandise or travel as prizes to participating
winners
 Often used to introduce new goods and services and to attract
additional customers
 Court rulings and legal restrictions have limited the use of
contests
14-33
Sales Promotion
Promotional Products (Specialty advertising)
 Because these specialty advertising products are useful, people
tend to keep and use them
 Gives advertisers repeated exposure
 Originally designed to identify and create goodwill for
advertisers
 Now generates sales leads and develops traffic for stores and
trade show exhibitors.
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.
14-35
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
14-36
Personal Selling
Personal selling—interpersonal promotional
process involving a seller’s face-to-face
presentation to a prospective buyer. Used most
often when:
Customers are relatively few in number and
geographically concentrated
Product is technically complex, involves trade-ins,
and requires special handling
Product is high in price
Product moves through direct-distribution channels
14-37
Personal Selling
Sales Tasks
Order Processing—selling, mostly at the wholesale
and retail levels, that involves identifying customer
needs, pointing them out to customers, and completing
orders
Creative Selling—personal selling involving situations
in which a considerable degree of analytical decision
making on the buyer’s part results in the need for
skillful proposals of solutions for the customer’s needs
Personal Selling
Sales Tasks
Missionary Selling—indirect form of selling in which
specialized salespeople promote goodwill among indirect
customers, often by assisting customers in product use.
Telemarketing- personal selling conducted entirely by

telephone, which provides a firm’s marketers with a high
return on their expenditures, an immediate response, and
an opportunity for personalized two way conversation.
14-39
Personal Selling
The Sales Process

Seven Steps in the
Sales Process
14-40
Personal Selling
Recent Trends in Personal Selling
Telemarketing
 Outbound telemarketing—when a sales representative
calls you at your place of business
 Inbound telemarketing—when the customer calls a
toll-free phone number to get information or place an

order.
14-41
Personal Selling
Recent Trends in Personal Selling
Relationship Selling—when a salesperson builds a
mutually beneficial relationship with a customer
through regular contacts over an extended period
Consultative selling—meeting customers’ needs by

listening to them, understanding and caring about their
problems, paying attention to details, suggesting
solutions, and following through after the sale
14-42
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.
14-43
Pushing and Pulling Strategies
Pushing strategy- personal selling to market an item
to wholesalers and retailers in a company’s
distribution channels.
Pulling strategy promoting a product by generating

consumer demand for it, primarily through advertising
and sales promotion appeals.
14-44
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?
14-45
Ethics in Promotion
Promotion to Children and Teens
Risk of deception is especially great with promotion
targeted to children and teens
Children not sophisticated at analyzing promotional
messages
14-46
Ethics in Promotion
Promotion in Public Schools and on College
Campuses
Includes promotional book covers, posters, and even
curriculum materials provided to today’s schools
Some schools sign contracts that give certain brands
exclusive access to their students
Can generate a backlash
14-47
Price in the
Marketing Mix
Price—exchange
value of a good or
service.
Pricing
Objectives
14-48
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
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
Pricing Strategies
Breakeven Analysis—pricing technique used to
determine the minimum sales volume a product must
generate at a certain price level to cover all costs.
Breakeven point Total Fixed Cost

=
(in units) Contribution to Fixed Costs Per Unit
Breakeven point Total Fixed Cost

(in dollars) = 1 – Variable Cost Per Unit/Price
14-51
Alternative Pricing Strategies
Skimming pricing strategy that sets an intentionally
high price relative to the prices of competing products.
Penetration pricing strategy that sets a low price as a

major marketing weapon.
14-52
Alternative Pricing Strategies
Everyday low pricing (EDLP)- is a strategy devoted to
maintaining continuous low prices rather than relying on
short-term price-cutting tactics such as cents-off coupons,
rebates, and special sales.
Competitive pricing- strategy that tries to reduce the

emphasis on price competition by matching other firms’
prices and concentrating their own marketing efforts on the
product, distribution, and promotional elements of the
marketing mix.
14-53
Consumer Perceptions of Prices
Price-Quality Relationships
Consumers’ perceptions of product quality is closely
related to price
Most marketers believe that this perceived price-
quality relationship holds over a relatively wide range
of prices
In other situations, marketers establish price-quality
relationships with comparisons that demonstrate a
product’s value at the established price
Consumer Perceptions of Prices
Odd Pricing
Odd pricing (charging $39.95 or $19.98 instead of $40 or
20)
Commonly-used retail practice, as many retailers believe
that consumer favor uneven amounts
14-55

Quiz # 04: Date: 07 August, 2014 (Thursday) - Syllabus: Chapter 11 & 12

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Quiz # 04: Date: 07 August, 2014 (Thursday) - Syllabus: Chapter 11 & 12

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Quiz # 04

Date: 07 August, 2014 (Thursday).

Syllabus: Chapter 11 & 12

Personal Selling— the most basic form of promotion:

Nonpersonal selling—consists of advertising, sales

to stimulate sales during off-seasons

Informative Advertising—used to build initial

network television generally ranges from $100,000 to more

 The rising number of smart phones and tablets is affecting

 Online and Interactive Advertising

trade show exhibitors.

Telemarketing- personal selling conducted entirely by

The Sales Process

toll-free phone number to get information or place an

Consultative selling—meeting customers’ needs by

Publicity—stimulation of demand for a good,

Pulling strategy promoting a product by generating

Breakeven point Total Fixed Cost

Breakeven point Total Fixed Cost

Penetration pricing strategy that sets a low price as a

Competitive pricing- strategy that tries to reduce the

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