Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 11Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Integrated Marketing Communications and
Pricing Strategies
Integrated Marketing Communications and
Pricing Strategies
It Pays to Advertise!
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 22Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Developing a Marketing Developing a Marketing Communications PlanCommunications Plan
Step 1: Create specific, Step 1: Create specific, measurable objectives.measurable objectives.
Step 2: Identify and analyze Step 2: Identify and analyze the target audience.the target audience.
Step 3: Design an Step 3: Design an advertising message and advertising message and choose the media for choose the media for transmitting it. transmitting it.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 33Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Build Ads Around a UniqueBuild Ads Around a UniqueSelling Proposition (USP)Selling Proposition (USP)
USPUSP - A key customer benefit of a - A key customer benefit of a product or service that answers the product or service that answers the critical question that critical question that everyevery customer customer asks: “asks: “What's in it for meWhat's in it for me?”?”
Identify your product or service's USP Identify your product or service's USP by describing the primary benefit it by describing the primary benefit it offers customers and then list other offers customers and then list other secondary benefits it provides.secondary benefits it provides.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 44Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Build Ads Around a UniqueBuild Ads Around a UniqueSelling Proposition (USP)Selling Proposition (USP)
(continued)(continued)
Don’t overlook the intangible or Don’t overlook the intangible or psychological benefits your product psychological benefits your product or service offers. or service offers.
Briefly list a few facts that support Briefly list a few facts that support this USP.this USP.
Then, focus your ads to stress these Then, focus your ads to stress these top benefits and the facts supporting top benefits and the facts supporting them!them!
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 55Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
A Six-Sentence Advertising A Six-Sentence Advertising StrategyStrategy
What is the purpose of this ad?What is the purpose of this ad? What USP can you offer customers?What USP can you offer customers? What other key benefits support your USP?What other key benefits support your USP? At whom are you aiming the ad?At whom are you aiming the ad? What response do you want from your target What response do you want from your target
audience?audience? What image do you want to convey in your What image do you want to convey in your
ads?ads?
Five Fundamentals of a Successful Advertisement.Five Fundamentals of a Successful Advertisement.
It should attract attention.It should emphasize a keybenefit of the product orservice to the customer.
It should communicate the company’s UniqueSelling Proposition (USP).
It should prove the USPand benefits to the customerwith facts, statistics, or testimonials.
It should motivate customersto take action immediately.
Source: Adapted from Jerry Fisher, “Fine Print,” Entrepreneur, November 1994, pp. 145-147.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 77Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Can Your Ad Pass These 7 Tests?Can Your Ad Pass These 7 Tests?
Scan testScan testComprehension testComprehension testDifferentiation testDifferentiation testPuffery testPuffery testBelievability testBelievability test Immediate clarity testImmediate clarity testUSP test USP test Click Here
For Details
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 88Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Promotion Includes…Promotion Includes…
PublicityPublicity - any commercial news covered by the - any commercial news covered by the media that boosts sales but for which the small media that boosts sales but for which the small business does not pay.business does not pay.
Personal sellingPersonal selling - the personal contact between - the personal contact between sales personnel and potential customers sales personnel and potential customers resulting from sales efforts.resulting from sales efforts.
AdvertisingAdvertising - any sales presentation that is - any sales presentation that is nonpersonal in nature and is paid for by an nonpersonal in nature and is paid for by an identified sponsor.identified sponsor.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 99Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Tips for Stimulating PublicityTips for Stimulating Publicity
Write an article of interest Write an article of interest to customers.to customers.
Sponsor an off-beat event.Sponsor an off-beat event. Involve celebrities “on the Involve celebrities “on the
cheap.” cheap.” Offer to be interviewed on Offer to be interviewed on
TV and radio stations.TV and radio stations. Publish a newsletter.Publish a newsletter. Speak to local Speak to local
organizations.organizations.
Sponsor a seminar.Sponsor a seminar. Write news releases and fax Write news releases and fax
or e-mail them to the or e-mail them to the media.media.
Serve on community and Serve on community and industry boards and industry boards and committees.committees.
Sponsor a community Sponsor a community project or support a project or support a nonprofit organization.nonprofit organization.
Promote a cause.Promote a cause.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1010Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Sponsorships and Special EventsSponsorships and Special Events
Sponsoring special events generates Sponsoring special events generates publicity, attracts interest, and provides a publicity, attracts interest, and provides a lasting impression of a company in lasting impression of a company in customers’ minds.customers’ minds.
North American companies spend $7 North American companies spend $7 billion a year on sponsorships.billion a year on sponsorships.
Small companies can create their own Small companies can create their own special events. special events.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1111Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Tips for Sponsoring an EventTips for Sponsoring an Event
Don’t count on sponsorships for your Don’t count on sponsorships for your entire advertising campaign.entire advertising campaign.
Look for or create an event that is Look for or create an event that is appropriate for your business.appropriate for your business.
Research the event and the organization Research the event and the organization hosting it hosting it beforebefore agreeing to become a agreeing to become a sponsor. sponsor.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1212Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Tips for Sponsoring an EventTips for Sponsoring an Event(continued)(continued)
Try to become the dominant (or ideally, Try to become the dominant (or ideally, the only) sponsor of the event.the only) sponsor of the event.
Clarify the costs and the level of Clarify the costs and the level of participation required for sponsorship up participation required for sponsorship up front.front.
Get involved; take an active role in the Get involved; take an active role in the event. event.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1313Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Top Salespeople…Top Salespeople…
Are enthusiastic and alert to new Are enthusiastic and alert to new opportunities.opportunities.
Are experts in the products and services Are experts in the products and services they sell.they sell.
Concentrate on select accounts.Concentrate on select accounts.Plan thoroughly.Plan thoroughly.Use a direct approach.Use a direct approach.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1414Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Top Salespeople…Top Salespeople…
Work from the customer’s perspective.Work from the customer’s perspective.Use past success stories.Use past success stories.Leave sales material with clients.Leave sales material with clients.See themselves as problem solvers, not See themselves as problem solvers, not
just vendors.just vendors.Measure their success not just by sales Measure their success not just by sales
volume but by customer satisfaction. volume but by customer satisfaction.
(continued)(continued)
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1515Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Successful Personal SellingSuccessful Personal SellingRequires a Selling System Requires a Selling System
Create trust and respectCreate trust and respect - Establish rapport - Establish rapport with prospect.with prospect.
Interview the prospectInterview the prospect - Let the prospect - Let the prospect talk to determine the key criteria that talk to determine the key criteria that influence the buying decision.influence the buying decision.
Demonstrate, explain, and showDemonstrate, explain, and show – Make – Make clear the benefits of your product or service.clear the benefits of your product or service.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1616Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Successful Personal SellingSuccessful Personal SellingRequires a Selling System Requires a Selling System
ValidateValidate - Prove the claims about your - Prove the claims about your product or service.product or service.
Overcome objectionsOvercome objections- Listen for objections - Listen for objections and try to overcome them.and try to overcome them.
CloseClose - Stop talking and ask for the order. - Stop talking and ask for the order.
(continued)(continued)
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1717Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Selecting Advertising Media:Selecting Advertising Media:Key QuestionsKey Questions
How large is my firm's trading area?How large is my firm's trading area? Who are my customers and what are Who are my customers and what are
their characteristics?their characteristics? Which media are my target customers Which media are my target customers
most likely to watch, listen to, or read?most likely to watch, listen to, or read? What budget limitations do I face?What budget limitations do I face?
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1818Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Selecting Advertising Media:Selecting Advertising Media:Key QuestionsKey Questions
Which media do my competitors use?Which media do my competitors use? How important are repetition and How important are repetition and
continuity of my advertising message?continuity of my advertising message? How does each medium compare with How does each medium compare with
others in its audience, its reach, and its others in its audience, its reach, and its frequency?frequency?
What does the advertising medium cost?What does the advertising medium cost? Absolute cost Absolute cost Relative costRelative cost
(continued)(continued)
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 1919Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Advertising Media OptionsAdvertising Media Options
Outdoor adsOutdoor adsTransit advertisingTransit advertisingDirectoriesDirectoriesTrade showsTrade showsSpecialty advertisingSpecialty advertisingPoint-of-purchase Point-of-purchase
adsads
Word-of-MouthWord-of-Mouth NewspapersNewspapers RadioRadio TelevisionTelevision MagazinesMagazines Direct mailDirect mail World Wide WebWorld Wide Web
23.5%
19.3%19.1%
7.7%5.9% 4.8%
1.9% 2.2% 2.5%
13.0%
0%
5%
10%
15%
20%
25%
Pe
rce
nt
Medium
Advertising Expenditures by Medium
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2121Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
NewspapersNewspapers
AdvantagesAdvantages Selected geographic coverageSelected geographic coverage FlexibilityFlexibility TimelinessTimeliness Communication potentialCommunication potential Low costLow cost Prompt responsesPrompt responses
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2222Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
NewspapersNewspapers(continued)(continued)
DisadvantagesDisadvantages Wasted readershipWasted readership Reproduction limitationsReproduction limitations Lack of prominenceLack of prominence Declining readershipDeclining readership Short ad lifeShort ad life
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2323Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
RadioRadio
AdvantagesAdvantages Universal infiltrationUniversal infiltration Market segmentationMarket segmentation Flexibility and timelinessFlexibility and timeliness FriendlinessFriendliness
DisadvantagesDisadvantages Poor listeningPoor listening Need for repetitionNeed for repetition Limited messageLimited message
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2424Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Snappy Radio Copy Should....Snappy Radio Copy Should....
Stress benefits to the Stress benefits to the listener.listener.
Use attention-getters.Use attention-getters. Zero in on a particular Zero in on a particular
audience.audience. Be simple and to the Be simple and to the
point.point. Sell early and often.Sell early and often. Be written for the ear.Be written for the ear.
Be rehearsed before Be rehearsed before presentation.presentation.
Use positive action Use positive action words.words.
Put the listener in the Put the listener in the picture.picture.
Mention the advertiser Mention the advertiser often.often.
Focus on getting a Focus on getting a response.response.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2525Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
TelevisionTelevision
AdvantagesAdvantages Broad coverageBroad coverage Visual advantageVisual advantage FlexibilityFlexibility Design and production assistanceDesign and production assistance
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2626Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
TelevisionTelevision(continued)(continued)
DisadvantagesDisadvantages Brief exposureBrief exposure ClutterClutter ZappingZapping Fragmented audienceFragmented audience CostsCosts
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2727Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Creative Television AdsCreative Television Ads
Keep it simple.Keep it simple.Have one basic idea.Have one basic idea.Make your point Make your point
clear.clear.Make it unique.Make it unique.Get viewers’ Get viewers’
attention.attention. Involve the viewer.Involve the viewer.
Use emotion.Use emotion.Consider Consider
production values.production values.Prove your Prove your
product’s or product’s or service’s benefit.service’s benefit.
Identify your Identify your company well and company well and often.often.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2828Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
MagazinesMagazines
AdvantagesAdvantages Long life spansLong life spans Multiple readershipMultiple readership Target marketingTarget marketing Ad qualityAd quality
DisadvantagesDisadvantages CostCost Long closing timesLong closing times Lack of prominenceLack of prominence
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 2929Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Direct MailDirect Mail
AdvantagesAdvantages SelectivitySelectivity FlexibilityFlexibility Reader attentionReader attention Rapid feedbackRapid feedback Measurable results and Measurable results and
testable strategiestestable strategies EffectivenessEffectiveness
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3030Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Direct MailDirect Mail(continued)(continued)
DisadvantagesDisadvantages Inaccurate mailing listsInaccurate mailing lists ClutterClutter High relative costsHigh relative costs High throwaway rateHigh throwaway rate
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3131Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Creating Direct Mail Ads That Creating Direct Mail Ads That Really WorkReally Work
Promise benefits in the headline.Promise benefits in the headline. Use short “action” words.Use short “action” words. Use lots of white space.Use lots of white space. Use eye-catching words.Use eye-catching words. Forget grammatical rules.Forget grammatical rules. Repeat the offer at least three times.Repeat the offer at least three times. Offer proof of claims and endorsements.Offer proof of claims and endorsements. Ask for the order.Ask for the order.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3232Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Creating Direct Mail Ads That Creating Direct Mail Ads That Really WorkReally Work
Ask the reader questions in the copy.Ask the reader questions in the copy. Use high-quality paper and envelopes.Use high-quality paper and envelopes. People usually open envelopes that resemble People usually open envelopes that resemble
bills.bills. Address envelopes to a particular person.Address envelopes to a particular person. Use stamps if possible.Use stamps if possible. Use a “P.S.” because recipients almost always Use a “P.S.” because recipients almost always
read them.read them. Make the order form easy to fill out. Make the order form easy to fill out.
(continued)(continued)
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3333Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Advertising on the WebAdvertising on the Web
Banner adsBanner ads Pop-up adsPop-up ads CookiesCookies Full-page adsFull-page ads Push technology adsPush technology ads E-mail adsE-mail ads
Permission e-mailPermission e-mail SpamSpam
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3434Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Outdoor AdvertisingOutdoor Advertising
AdvantagesAdvantages High exposureHigh exposure Broad reachBroad reach FlexibilityFlexibility Cost efficiencyCost efficiency
DisadvantagesDisadvantages Brief exposureBrief exposure Limited ad recallLimited ad recall Legal restrictionsLegal restrictions Lack of prominenceLack of prominence
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3535Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Transit AdvertisingTransit Advertising
AdvantagesAdvantages Wide coverageWide coverage Repeat exposureRepeat exposure Low costLow cost FlexibilityFlexibility
DisadvantagesDisadvantages GeneralityGenerality Limited appealLimited appeal Brief messageBrief message
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3636Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
DirectoriesDirectories
AdvantagesAdvantages Prime prospectsPrime prospects Long lifeLong life
DisadvantagesDisadvantages Lack of flexibilityLack of flexibility Ad clutterAd clutter ObsolescenceObsolescence
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3737Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Trade ShowsTrade Shows
AdvantagesAdvantages Natural marketNatural market Pre-selected audiencePre-selected audience New customer marketNew customer market Cost advantageCost advantage
DisadvantagesDisadvantages Increasing costsIncreasing costs Wasted effortWasted effort
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3838Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Specialty AdvertisingSpecialty Advertising
AdvantagesAdvantages Reaching selected audiencesReaching selected audiences Personalized naturePersonalized nature VersatilityVersatility
DisadvantagesDisadvantages Potential for wastePotential for waste CostsCosts
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 3939Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Preparing An Advertising BudgetPreparing An Advertising Budget
What is affordableWhat is affordableMatching competitor's advertising Matching competitor's advertising
expendituresexpendituresPercentage of Sales Percentage of Sales
Past SalesPast Sales Forecasted SalesForecasted Sales
Objective-and-TaskObjective-and-Task
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4040Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
How To Advertise “Big”How To Advertise “Big”On A Small BudgetOn A Small Budget
Take advantage of cooperative Take advantage of cooperative advertising.advertising.
Consider shared advertising.Consider shared advertising.Repeat ads that have been successful.Repeat ads that have been successful.Use identical ads in different media.Use identical ads in different media.
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4141Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
How To Advertise “Big”How To Advertise “Big”On A Small BudgetOn A Small Budget
(continued)(continued)
Hire independent copywriters and Hire independent copywriters and artists.artists.
Concentrate advertising when customers Concentrate advertising when customers are most likely to buy.are most likely to buy.
Maximize publicity with techniques such Maximize publicity with techniques such as cause marketing.as cause marketing.
What determines price?What determines price?
Price CeilingPrice Ceiling ("What will the market bear?") ("What will the market bear?")
Price FloorPrice Floor ("What are the company's costs?") ("What are the company's costs?")
AcceptableAcceptable PricePrice RangeRange
??
??
??
??
??
????
??
??
??
??
Final PriceFinal Price (What is the (What is thecompany's desired "image?")company's desired "image?")
Final PriceFinal Price (What is the (What is thecompany's desired "image?")company's desired "image?")
??
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4343Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Introducing A New ProductIntroducing A New Product
3 Basic Strategies:3 Basic Strategies: PenetrationPenetration SkimmingSkimming Sliding-down-the-demand-curveSliding-down-the-demand-curve
3 Goals:3 Goals: Getting the product acceptedGetting the product accepted Maintaining market share as competition Maintaining market share as competition
growsgrows Earning a profitEarning a profit
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4444Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Pricing TechniquesPricing Techniques
Odd pricingOdd pricingPrice liningPrice liningLeader pricingLeader pricingGeographical pricingGeographical pricingOpportunistic pricingOpportunistic pricingDiscountsDiscountsSuggested retail pricesSuggested retail prices
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4545Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Pricing for Retailers: Pricing for Retailers: MarkupMarkup
Dollar Markup = Retail Price - Cost of MerchandiseDollar Markup = Retail Price - Cost of Merchandise
Percentage (of Retail Price) Markup = Percentage (of Retail Price) Markup = Dollar MarkupDollar MarkupRetail PriceRetail Price
Percentage (of Cost) Markup = Percentage (of Cost) Markup = Dollar MarkupDollar MarkupCost of UnitCost of Unit
ExampleExample::
Dollar Markup = $25 - $15 = $10Dollar Markup = $25 - $15 = $10
Percentage (of Retail Price) Markup = Percentage (of Retail Price) Markup =
$10$10
$25$25= 40%= 40%
Percentage (of Cost) Markup = Percentage (of Cost) Markup = $10$10
$15$15= 67%= 67%
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4646Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Pricing for Manufacturers: Pricing for Manufacturers: Breakeven Selling PriceBreakeven Selling Price
Breakeven Breakeven SellingSellingPrice Price
QuantityQuantity
== ProfitProfitVariable Variable
cost per cost per unitunit
producedproduced
Total Total fixed fixed costscosts++
{{{{ xx
}}}}++
Quantity producedQuantity produced
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4747Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Pricing for Manufacturers: Pricing for Manufacturers: Breakeven Selling PriceBreakeven Selling Price
BreakevBreakeven en
SellingSelling
Price Price
QuantiQuantityty
ExamplExample:e:
= ProfProfitit
Variable Variable cost per cost per unitunit
producproduceded
Total Total fixed fixed costscosts++
{{ xx
}} ++
Quantity Quantity producedproduced
BreakevBreakeven en
SellingSelling
Price Price
= $$00
6.98/6.98/unitunit
50,000 50,000 unitunit
$110,00$110,0000
+ { xx }+
50,000 50,000 unitsunits
= $9.18 per = $9.18 per unitunit
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4848Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Pricing for Service Firms: Pricing for Service Firms: Price per HourPrice per Hour
Price per Hour = Total cost per x 1Price per Hour = Total cost per x 1 productive hour (1 - net profit target productive hour (1 - net profit target
asas a % of sales)a % of sales)
Example: Ned’s TV Repair ShopExample: Ned’s TV Repair Shop
Price per Hour = $13.44 per x 1 Price per Hour = $13.44 per x 1 hour (1 -.18)hour (1 -.18)
= $16.38 per hour= $16.38 per hour
Chapter 8: Marketing Communications and PricingChapter 8: Marketing Communications and Pricing 4949Copyright 2005 Prentice Hall Inc. A Pearson Education CompanyCopyright 2005 Prentice Hall Inc. A Pearson Education Company
Consumer CreditConsumer Credit
Credit cardsCredit cardsNationalNational PrivatePrivate
Installment creditInstallment creditTrade creditTrade credit
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