price - weebly · 2018-04-24 · 3. price skimming skimming pricing involves charging a high price...
TRANSCRIPT
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T.P.Suraj Business Management & Economics Shanghai
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.
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T.P.Suraj Business Management & Economics Shanghai
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.
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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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T.P.Suraj Business Management & Economics Shanghai
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 $ 10.00 or $ 15,000). Hence customers
psychologically feel that they are getting a bargain or
better price for the product.
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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.
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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.
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T.P.Suraj Business Management & Economics Shanghai
7. Price leadership
Price leadership is a strategy that is often used for best-
selling products or brands. Competitors follow the leader
by establishing their prices based on the price set by the
market (or price) leader.
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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
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T.P.Suraj Business Management & Economics Shanghai
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
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T.P.Suraj Business Management & Economics Shanghai
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
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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
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T.P.Suraj Business Management & Economics Shanghai
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
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T.P.Suraj Business Management & Economics Shanghai
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
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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
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T.P.Suraj Business Management & Economics Shanghai
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, email, 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.
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T.P.Suraj Business Management & Economics Shanghai
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 emails and social
networking services.
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T.P.Suraj Business Management & Economics Shanghai
Social networking: platform used by individuals to
build social relationships. Example: facebook,
Social media marketing: social media is the tool, and
it is one directional
Example: video, (Youtube, Google, website, blogs,
news feed)
Guerrilla marketing
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T.P.Suraj Business Management & Economics Shanghai
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.
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NIVEA – cold cream
Amnesty international – Human rights
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T.P.Suraj Business Management & Economics Shanghai
SPIDERMAN -2 (Movie)
Video : Emirates airline, Palmolive
Unethical and socially irresponsible promotion
techniques.
Pester power
Confusion marketing
Ambush marketing