Communication link between buyers and sellers; the function of informing, persuading, and influencing a consumer’s purchase decision.
- Messages that deal with buyer-seller relationships.
- Transmission of messages from a sender to a receiver
Integrated marketing communications (IMC)
Coordination of all promotional activities – media advertising, direct mail, personal selling- to produce a unified, customer-focused promotional message.
- Consumers receive many marketing messages all day.
- Strategy begins with their wants or needs and then works backward to product.
- Must segment market according to customer demographics and preferences.
- Success depends on 2 activities
- a.) identifying the members of an audience
- b.) AND understanding what they want
Importance of teamwork
- Requires consistent, coordinated promotional effort at every stage of customer contact.
- Involves both in-house resources and outside vendors.
Role of data bases in Effective IMC Programs
- Internet allows companies to gather information faster and organize it more easily.
- Ability to harness data challenges ability to sift through it effectively. Direct sampling also provides customer opinions.
The Communication Process
- Effective message does three things:
- 1.) Gains the receiver’s attention.
- 2.) Achieves understanding by both sender and receiver.
- 3.) Stimulates receiver’s needs and suggests appropriate means of satisfying them.
- Steps through which an individual reaches a purchase decision: attention, interest, desire, and action.
- • AIDA concept is vital for understanding an reaching customers. • Noise can be a particular issue in international communications, including in the world’s 74 English-speaking countries. SENDER-> ENCODING-> CHANNEL-> DECODING-> RESPONSE-> FEEDBACK-> NOISE (chart pg. 492)
Objective of Promotion
- 1) Provide info (#1 traditional objective)
- Goal is informing the market about the availability of a product.
- 2) Inc. demand- May increase primary demand, or desire for a particular product category.
- May increase selective demand, or desire for a specific brand.
- 3) Diferentiate the Product- Differentiation allows firms more control over marketing variables such as price.
- 4) Accentuate the Products value- Greater value helps justify a higher price in the marketplace.
- Marketers advise staying away from these words—quality, value, service, caring, and integrity—because they are overused and vague.
- 5) Stailize Sales- for the typical firm
- Can help make demand more consistent throughout the year.
- Stabilizing these variations is often objective of promotional strategy
Elements of Promotional Mix
- Subset of the marketing mix in which marketers attempt to achieve the optimal blending of the elements of personal and nonpersonal selling to achieve promotional objectives.
- Personal selling, advertising, and sales promotion usually account for the bulk of a firm’s promotional expenditures.
- Oldest form of selling.
- A seller’s promotional presentation conducted on a person-to-person basis with the buyer.
- More than 13 million people in U.S. have careers in personal sales.
- Sales Promotion
- Trade Promotion
- Direct Marketing
- Public Relations
- Guerrilla Marketing
Marketing activities other than personal selling, advertising, guerrilla marketing, and public relations that stimulate consumer purchasing and dealer effectiveness.
incentives to encourage marketing intermediaries to sell more of certain items or product lines.
Direct communications, other than personal sales contacts, between buyer and seller, designed to generate sales, information requests, or store or Web site visits.
Communications and relationships with various publics.
nonpersonal stimulation of demand unpaid placement of news about it or through a favorable presentation of it on the radio or television.
Unconventional, innovative, and low-cost marketing techniques designed to get consumers’ attention in unusual ways
Putting a Product in a movie
- Relationship in which an organization provides funds or in-kind resources to an event or activity in exchange for a direct association with that event or activity.
- Sponsor purchases access to event’s audience and image associated with activity. Sponsorship often more cost effective but usually offers less control over market coverage. Audiences often view sponsorship more positively than advertising.
Direct Marketing Communication Channels
- Direct mailings such as brochures and catalogs.
- Telecommunications and television and radio.
- Internet via e-mail and electronic messaging.
- Print media such as newspapers and magazines.
- Specialized channels such as electronic kiosks.
Promotional effort by the seller to stimulate final-user demand, which then exerts pressure on the distribution channel.
- Promotional effort by the seller directed to members of the marketing channel rather than final users.
- Advertising creates an environment for successful personal selling and remains important as an affirmation of customer’s decision.
Delevoping an Optimal Promotional Mix
- Nature of market
- Stage in product lifecycle
- Paid, non- personal communication through various media about a business firm, not-for-profit organization, product, or idea by a sponsor identified in a message that is intended to inform or persuade members of a particular audience.
- Advertising is a means of bringing buyers and sellers together.
- Marketers often combine several strategies to meet their objectives.
Types of Advertising
Product advertising Nonpersonal selling of a particular good or service. Institutional advertising Promotion of a concept, an idea, a philosophy, or the goodwill of an industry, company, organization, person, geographic location, or government agency.
Objectives of Advertising
- Informative advertising Promotion that seeks to develop initial demand for a good, service, organization, person, place, idea, or cause.
- Persuasive advertising Promotion that attempts to increase demand for an existing good, service, organization, person, place, idea, or cause.
- Reminder advertising Advertising that reinforces previous promotional activity by keeping the name of a good, service, organization, person, place, idea, or cause before the public. Advertisers coordinate advertising objectives with the product’s stage in the product life cycle.
- Comparative advertising Advertising strategy that emphasizes messages with direct or indirect promotional comparisons between competing brands.
- Market leaders seldom acknowledge competing brands
- Celebrity testimonials-
- Use of celebrity spokespeople for products.
- Can build brand equity but can hurt brand if celebrity is hit by scandal.
- Retail advertising-
- Includes all advertising by retail stores that sell goods or services directly to the consuming public.
- Cooperative advertising Strategy in which a retailer shares advertising costs with a manufacturer or wholesaler. (Foot Locker and Skechers)
- Interactive advertising-
- Involves two-way promotional messages transmitted through communication channels that induce message recipients to participate actively in the promotional effort.
- Changes balance between marketers and consumers.
- Series of different but related ads that use a single theme and appear in different media within a specified time period.
- Should have one clear reason, rational or emotional, as to why the consumer should buy the product or service
- Appeals can provide information or appeal to emotion.
- Fear appeals—imply or state that incorrect buying decisions could lead to bad consequences.
- Humor seeks to create positive mood related to good or service.
- Ads based on sex can be attention-getting, but they boost recall only if the appeal is appropriate to the type of product.
Goals of Advertising
- Gain attention.
- Inform and/or persuade.
- Lead to purchase or other desired action
After idea conception, ad must be refined from rough sketch to finished layout.
- After selecting media, marketers determine the most effective timing and sequence for a series of advertisements.
- Influenced by seasonal sales patterns, repurchase cycles, and competitors’ activities.
Measure Effectiveness in 3 Ways
- Reach—the number of people exposed to an advertisement.
- Frequency—the number of times an individual is exposed to an advertisement. Minimum of three exposures is recommended.
- Gross rating point—the product of the reach times the frequency. (R)X(F)= Gross rating point
- Broadcast Television
- Cable Television
- Direct Mail
- Magazines- Consumer/Business
Firm’s communications and relationships with its various publics, including customers, employees, stockholders, suppliers, and government agencies.
- Nonmarketing public relations—a company’s messages about general management issues.
- Marketing public relations (MPR)—
- narrowly focused public relations activities that directly support marketing goals.
Nonpersonal stimulation of demand for a good, service, place, idea, person, or organization by unpaid placement of significant news regarding the product in a print or broadcast medium.
Measuring Advertising Effectivenes
- Media research—assesses how well particular medium delivers message, where and when to place the message, and the size of the audience.
- Message research—tests consumer reactions to an advertisement’s creative message. Pretesting—assessing an advertisement’s likely effectiveness before it is completed. Posttesting—assessing advertisement’s effectiveness after it has appeared.
Elements of advertising planning process
- Research Inputs-> Strategic decision-> tactical execution-> measuring advertisement effectiveness-> advertising evaluation
- Considerations of constraints and uncontrollable factors in strategic decision
- Interpersonal influence process involving a seller’s promotional presentation conducted on a person-to-person basis with the buyer.
- Sixteen million people in the U.S. are employed in sales.
- Personal selling is the single largest marketing expense in many firms.
- Salespeople are problem solvers who focus on meeting customers’ needs before, during, and after the sale.
Four Sales Channels
- Over-the-counter selling Personal selling conducted in retail and some wholesale locations in which customers come to the seller’s place of business.
- Field selling Sales presentations made at prospective customers’ locations on a face-to-face basis. -most expensive Telemarketing Promotional presentation involving the use of the telephone on an outbound basis by salespeople or on an inbound basis by customers who initiate calls to obtain information and place orders. Inside selling Selling by phone, mail, and electronic commerce. Firms generally blend sales channels in their sales organization.
Trends in Personal Selling
- Companies rely on three major personal selling approaches to meet customer needs.
- Relationship selling Regular contacts between sales representatives and customers over an extended period to establish a sustained buyer-seller relationship.
- Consultative selling Meeting customer needs by listening to them, understanding their problems, paying attention to details, and following through after the sale.
- Team selling Selling situation in which several sales associates or other members of the organization are recruited to help the lead sales representative reach all those who influence the purchase decision.
- 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 that involves 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.
- Missionary selling Indirect type of selling in which specialized salespeople promote the firm’s goodwill among indirect customers, often by helping customers use products.
- Personal selling that involves 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.
- Generally used to develop new business with either new customers of new products for existing customers.
- Indirect type of selling in which specialized salespeople promote the firm’s goodwill among indirect customers, often by helping customers use products.
- Example: Pharmaceutical companies that use free samples, educational seminars to court doctors.
- May involve both field selling and telemarketing.
Sales Process with AIDA
- Attention- step 1 prospecting and qualifying
- step 2 approach
- Interest- step 3 presentation
- Desire- step 4 demonstration
- step 5 handling objections
- Action- step 6 closing
- step 7 follow ups
- Prospecting and Qualifying Prospecting—identifying potential customers.
- Qualifying—determining that the prospect really is a potential customer.
- Approach- Initial contact with prospective customer.
- Use precall planning research to identify how your products might best meet customer’s needs.
- Presentation- Conveying marketing message to the customer.
- Features-benefits framework focuses on the good or service in terms that are meaningful to the buyer
- Demonstration- Buyer has a chance to try a product or see how it works.
- Handling objections- Expressions of resistance, such as stalling or indecision, by the prospect are an opportunity to reassure the buyer or offer suitable alternatives.
- Point at which salesperson asks the prospect for an order.
- Let buyer know you are ready to be of service in the future.
- Successful sales people turn today’s customers into tomorrow’s by reinforcing the purchase decision.
- Ensure that customer service needs are met.
Managing the Sales Effort
- Sales managers mix sales and management skills to manage the overall direction and control of the personal selling effort.
- Recruitment and selection- Important because of company investment in the hiring process and the potential damage to customer relationships and overall performance. Training- Primary methods are on-the-job training, individual instruction, how-to classes, and external seminars; often ongoing for experienced salespeople. Organization- National accounts organization—assigning senior sales personnel or sales teams to major accounts in each market.
Evaluation and Control
- Managers must set standards and choose the best methods for measuring sales performance.
- Sales quotas—specified sales or profit targets that the firm expects salespeople to achieve.
- Other measures include customer satisfaction, profit contribution, share of product-category sales, and customer retention.
- Evaluations should motivate improved performance.
- Marketing activities other than personal selling, advertising, and publicity that enhance consumer purchasing and dealer effectiveness.
- Goal is speeding the sales process and increasing sales volume.
- Produce best results when combined with other other marketing activities, such as advertising.
- Cannot overcome poor brand images, product deficiencies, or poor training for salespeople.
Consumer-Oriented Sales Promotions
- Goals: Encourage repurchases by rewarding current users, boost sales of complementary products, and increase impulse purchases.
- Coupons—most widely used form of sales promotion.
- Refunds or rebates—help packaged-goods companies increase purchase rates, promote multiple purchases, and reward product users.
- Samples, bonus packs, and premiums—a “try it, you’ll like it” approach.
- Contests—require entrants to complete a task such as solving a puzzle or answering questions in a trivia quiz.
- Sweepstakes—choose winners by chance; no product purchase is necessary.
- Specialty Advertising—sales promotion technique that places the advertiser’s name, address, and advertising message on useful articles that are then distributed to target consumers.
Trade Oriented Promotions
- Sales promotion that appeals to marketing intermediaries rather than to final consumers.
- Accounts for half of typical firm’s promotion budget.
- Trade allowances—special financial incentives offered to wholesalers and retailers that purchase or promote specific products.
- Point-of-purchase advertising—display or other promotion located near the site of the actual buying decision. Trade shows—vendors who serve the industries display and demonstrate their products for members.
- Dealer incentives, contests, and training programs.
Pricing Objective and Marketing Mix
- Profitability- if company is a price leader- profit maximazation, target return objective, Profit Impact of Market Studies (PIMS) project
- Volume – expose foreign markets to competition when trade barriers are lowered- sales maximization, market-share objectives
- Meet the competition- important in Europe where common currency has led to price convergence- focus on non-price competition, Value pricing
- Prestige- valid when products are associated with intangible benefits, such as high quality, exclusiveness, or attractive design- prestige objective, high price to think of high quality, status-conscious or high-tech consumer
- note;Pricing prospective: return on investments
- Prices and sales determine revenue
- Prices thus influence the firms profits
- Prices also influence the firm’s employment of the factor of production:
- Natural Resources
- Human Resources
- Profit maximization Point at which the additional revenue gained by increasing the price of a product equals the increase in total costs.
- Target-return objective Short-run or long-run pricing objectives of achieving a specified return on either sales or investment. (more common)
- Sales maximization- A minimum..
- Market share objectives
- (Same Price)
- Profit Impact of Market Studies (PIMS) project Research that discovered a strong positive relationship between a firm’s market share and product quality and its return on investment.
- Value pricing Pricing strategy emphasizing benefits derived from a product in comparison to the price and quality levels of competing offerings.
- (Higher Price)
- Establishing a relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers.
Pricing Objectives of Not-for-Profit Organizations
- Pricing strategy helps them achieve specific goals:
- Profit maximization.
- Cost recovery.
- Market incentives that encourage increased usage.
- Market suppression that discourages the use of certain products, such as taxes that raise the price of tobacco products.
Methods for Determining Price
- Prices traditionally determined in two basic ways:
- Supply and demand.
- Cost-oriented analyses.
Price Determination in Economic Theory
- Demand —the amounts of a firm’s product that consumers will purchase at different prices during a specified time period.
- Supply—the amounts of a good or service that will be offered for sale at different prices during a specified period.
Pricing Determination in Practice
- Cost-plus pricing—uses a base-cost figure per unit and addsa markup to cover unassigned costs and to provide a profit. (most common)
- Full-cost pricing—uses all relevant variable costs in setting a product’s price.
- Incremental-cost pricing—attempts to use only costs directly attributable to a specific output in setting prices.
Four Market Structures
- Pure competition—a market structure with so many buyers and sellers that no single participant can significantly influence price.
- Monopolistic competition—diverse parties exchange heterogeneous, relatively well-differentiated products, giving marketers some control over prices. (bp oil station)
- Oligopoly—relatively few sellers; each has large influence on price. (Oil)
- Monopoly—a market structure in which only one seller of a product exists and for which there are no close substitutes
2 Reasons economic theory and Supply and Demand dont Mix
- Can't accurately assess the demand
- We don't alway go for profit maximizatio
Pricing technique used to determine the number of products that must be sold at a specified price in order to generate sufficient revenue to cover total cost
Modified breakeven analysis
- Demand consderation include:
- Degree of price elasticity.
- Consumer price expectations.
- Existence and size of specific market segments.
- Buyer perceptions of strengths and weaknesses of substitute products.
- Pricing technique used to evaluate consumer demand by comparing the number of products that must be sold at a variety of prices to cover total cost with estimates of expected sales at the various prices.
- Skimming Pricing Strategy
- Penetration Pricing Strategy
- Everyday Low Pricing
- Competitive Priving Strategy
Skimming Pricing Strategy
- Pricing strategy involving the use of a high price relative to competitive offerings.
- Commonly used as a market entry price for distinctive goods or services with little or no initial competition.
- Example: When introduced, average price of HDTV with installation was $19,000.
- Permits marketers to control demand but also attracts competitors.
- Price declines can help marketers capture greater market share during late growth and early maturity stages.
Penetration Pricing Strategy
Pricing strategy involving the use of a relatively low entry price compared with competitive offerings, based on the theory that this initial low price will help market acceptance.
Everyday Low Pricing
- Strategy devoted to continuous low prices as opposed to relying on short-term, price-cutting tactics such as cents-off coupons, rebates, and special sales.
- Disadvantages: easy for competitors to match, can reduce revenue throughout industry, may hurt image of product quality.
Competitive Pricing Strategy
- Pricing strategy designed to deemphasize price as a competitive variable by pricing a good or service at the general level of comparable offerings.
- Forces firms to compete based on nonprice variable in the marketing mix.
- Market price Price that a consumer or marketing intermediary actually pays for a product.
- Cash discounts—reductions in price in exchange for prompt payment of bills.
- Trade discounts—payments to channel members for performing marketing functions.
- Quantity discounts—price reductions granted for large-volume purchases.
- Cumulative quantity discounts—prices reduced in amounts determined by purchases over stated time periods. Noncumulative quantity discounts—onetime reductions in the list price.
- Allowances Specified deduction from list price, including a trade-in or promotional allowance.
- Rebates—refund of a portion of the purchase price.
- A general guideline that reflects marketing objectives and influences specific pricing decisions.
- Psychological pricing Pricing policy based on the belief that certain prices or price ranges make a good or service more appealing than others to buyers.
- Includes prestige pricing, odd pricing, and unit pricing.
- May have price flexibility, in which variable prices are set for different customers.
- One-price policies suit mass-selling marketing programs.
- Variable pricing more likely to be applied in marketing programs based on individual bargaining.
- Product-line pricing Practice of setting a limited number of prices for a selection of merchandise and marketing different product lines at each of these price levels.
- Allows customers to focus on desired prices ranges.
- Promotional pricing Pricing policy in which a lower-than-normal price is used as a temporary ingredient in a firm’s marketing strategy.
- Loss leader Product offered to consumers at less than cost to attract them to stores in the hope that they will buy other merchandise at regular prices. –black friday
- Leader pricing Variant of loss-leader pricing in which marketers offer prices slightly above cost to avoid violating minimum-markup regulations and earn a minimal return on promotional sales. Price affects consumer perception of quality.
- Customers often associate prestige with high prices.
The Transfer Pricing Dilemma
- Large organizations face the problem of determining an internal transfer price—the price for moving goods between profit centers.
- Profit centers—any part of the organization to which revenue and controllable costs can be assigned. Questions arise over whether internal customers should pay the same prices as external ones. Governments monitor transfer pricing because it can be used to avoid paying taxes.
Traditional Global Pricing Strategies
- Standard worldwide:pricing in which exporters set standard worldwide prices for products regardless of markets
- Dual pricing: pricing that distinguishes between domestic and export sales
- Market differentieated: flexible pricing strategy that sets prices according to local marketplace and economic conditions