T.P.Suraj Business Management & Economics Shanghai

Transcription

1 1 PRICE The price decision is a crucial part of any marketing campaign. Deciding on the right price for a product is not an easy task. In fact, research has shown that many products fail due to poor pricing decisions. Pricing Decision: Price Makers and Price Takers Some firms are in a better position than others to set prices. A monopolist (single supplier of a product) will have a high degree of market power and therefore has the ability to set its own prices. Monopolist are therefore said to be price makers or price setters. In a highly competitive market, the firms that do not have much power over the setting of prices are referred to as price takers. They take the price given by others in market.

2 2 1. Cost-plus pricing (mark-up pricing) This pricing strategy involves adding a percentage or predetermined amount of profit to the average cost of production to determine the selling price. Advantage: simple and easy to calculate. 2. Penetration pricing Penetration pricing is a strategy used for a new product to help establish itself in the industry. This method involves setting a relatively low price in order to gain market share and brand awareness. This strategy is suitable for mass market products that sell in large volumes to sustain low profit margin, such as fast moving consumer goods.

3 3 3. Price skimming Skimming pricing involves charging a high price for innovative or high-tech products for an initial period. A high selling price is initially set to recoup the costs of research and development. The strategy can also create a unique, high quality or prestigious image for the product.

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7 7 4. Psychological pricing Psychological pricing is a strategy that involves using numbers, such as $ 9.99 or $ 14,995, to make prices seem lower (than $ or $ 15,000). Hence customers psychologically feel that they are getting a bargain or better price for the product.

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9 9 5. Loss leader Loss leader pricing involves selling a product at or below its cost value. This is a short-term strategy that aims to entice customers to buy more profitable products at the same time as buying the loss leader. Retailers, such as supermarkets often use this strategy.

10 10 6. Price discrimination Price discrimination occurs when the same product, usually a service, is sold in different markets at different prices. This is a perfectly legal act. Examples: Airline tickets for infant, children and adults are different. Entrance fees in theme parks, cinemas for children and adults are different.

11 11 7. Price leadership Price leadership is a strategy that is often used for bestselling products or brands. Competitors follow the leader by establishing their prices based on the price set by the market (or price) leader.

12 12 8. Predatory pricing Predatory pricing is a competition-based pricing strategy that involves a firm setting prices so low that other competitors, especially smaller firms, cannot compete at a profitable level. (Reducing price is an attempt to force rivals out of the industry). Uber has been accused of using predatory pricing

13 13 Price wars Involves businesses competing by a series of intensive price cuts to threaten the competitiveness of rival firms. In a price war Consumers benefit from big price cuts But firms lose profits and some firms may be forced to close which may reduce competition in the long run

14 14 PROMOTION Promotion is a component of the marketing mix. It refers to the methods used to inform, persuade or remind people about its products, brands or business. It is the key element of any marketing strategy. Examples of promotion include sales promotion, branding, raising publicity, and advertising campaigns. Objectives of promotion Inform Informative promotions aim to alert the market about a firm s products, especially new ones. Persuade Persuasive promotions aim to encourage customers to make a purchase, to switch from rival brands and to create loyalty for the product or brand. It is therefore commonly used in highly competitive markets. Remind Reminder promotion techniques are used to retain customer awareness and interest of an

15 15 established product. Reminder promotions are suitable for products that are in the maturity or saturation stages of their product life cycle. Most promotional campaigns contain an element of both persuasion and information. However the vast majority of promotions, especially advertising are of the persuasive kind. Types of promotion 1. Above-the-line (ATL) : refers to the use of mass media sources such as television, magazines and radio to promote or to establish a favourable long term image of a business, its brands or its products. 2. Below the-line (BTL) : refers to the use of non mass-media promotional activities such as sponsorship, direct mailing, slogans, word of mouth, packaging, sales promotion and trade fairs. Main methods of ATL promotion Television advertising Radio

16 16 Newspaper Magazines Billboards Posters Main methods of BTL promotion Branding Slogans Logos Packaging Word-of-mouth Direct marketing Direct mail Sales promotion discounts, coupons, free samples, free gifts

17 17 Point of sales Sponsorship Popular business Slogans The ultimate driving machine BMW The world s local bank HSBC Just do it Nike I m Lovin It Mc Donald s Connecting People - Nokia Word-of-mouth promotion Word of mouth (WOM) refers to the spreading of information from one person to another through oral communication. Promotional Mix Promotional mix refers to the combination of individual promotional methods used by a business, such as advertising, directing marketing, packaging and sales

18 18 promotions. In deciding on a promotional mix, marketers often consider the marketing acronym AIDA. Attention The promotional mix should raise existing and potential customers awareness of the product by engaging their attention. Interest it should also stimulate and keep customers interested, perhaps by using memorable and interesting advertisements. Desire The promotional mix should generate a desire or felling of need for the product, perhaps through the use of free samples to lure customers. Action it is vital that a promotional mix encourages customers to take action. i.e to purchase the product, perhaps through the use of discount vouchers or other sales promotion methods. In devising a promotional strategy, marketers will consider a combination of factors, such as : Cost of promotional medium The nature of the product

19 19 The products position in its life cycle Legislation Common advertising techniques Bargaining appeals goods deals and give-away schemes that attract customers to buy a product on preferential term. Example: reduced price for a limited time only. Celebrity endorsement using famous celebrities to advertise a product or brand. Comparative advertising comparing a product or brand with substitutes on the market. Direct response advertising using contact details (phone number, , fax or mailing address) to encourage customers to directly respond to an advertisement. Feel good factor focus on the morale and image boosting benefits of buying a particular product, such as health-care, luxury sports cars.

20 20 Guarantees using promises, such as guaranteed to work on your money back schemes, to entice and reassure customers. Numerical or scientific claims advertisements that use alleged statistics to promote their products or brands. Slogans using catchphrases, tunes and music that stick in the minds of customers. Activity: Collect advertisements on different advertisement techniques. Identify the techniques used in each of the advertisement and give a brief explanation. Technology and promotion Viral marketing: peer-to-peer (P2P) Marketing done through internet via s and social networking services.

21 21 Social networking: platform used by individuals to build social relationships. Example: facebook, Instagram Social media marketing: social media is the tool, and it is one directional Example: video, (Youtube, Google, website, blogs, news feed) Guerrilla marketing

22 22 Guerrilla marketing aims to ambush or catch the attention of customers through unusual/ or shocking techniques. It is more controversial and designed to be cheap but provocative risk-taking form of promotion.

23 23 NIVEA cold cream Amnesty international Human rights

24 24 Kitkat chocolates

25 25 SPIDERMAN -2 (Movie) Video : Emirates airline, Palmolive Unethical and socially irresponsible promotion techniques. Pester power Confusion marketing Ambush marketing

26 26 Infiltration marketing Pop-up advertisement