wiki marketing & promo know how

7/28/2019 Wiki Marketing & Promo Know How

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Promotional mixThere are five main aspects of a promotional mix.[1]These are:

Advertising- Presentation and promotion of ideas, goods, or services by an identifiedsponsor.Examples: Print ads, radio, television, billboard, direct mail, brochures andcatalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads,

and emails. Personal sel li ng- A process of helping and persuading one or more prospects to

purchase a good or service or to act on any idea through the use of an oralpresentation.Examples: Sales presentations, sales meetings, sales training andincentive programs for intermediary salespeople, samples, and telemarketing. Can be

face-to-face selling or via telephone. Sales promotion- Media and non-media marketing communication are employed for

a pre-determined, limited time to increase consumer demand, stimulate marketdemand or improve product availability.Examples: Coupons, sweepstakes, contests,

product samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins,and exhibitions.

Public relations- Paid intimate stimulation of supply for a product, service, orbusiness unit by planting significant news about it or a favorable presentation of it inthe media.Examples: Newspaper and magazine articles/reports, TVs and radio

presentations, charitable contributions, speeches, issue advertising, and seminars. Direct Marketingis a channel-agnostic form of advertising that allows businesses and

nonprofits to communicate straight to the customer, with advertising techniques suchas mobile messaging, email, interactive consumer websites, online display ads, fliers,catalog distribution, promotional letters, and outdoor advertising.

Corporate imageCorporate image may also be considered as the sixth aspect of promotionmix. The Image of an organization is a crucial point in marketing. If the reputation of acompany is bad, consumers are less willing to buy a product from this company as theywould have been, if the company had a good image.Sponsorshipis sometimes added as anseventh aspect.[1]
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Sales promotion

Sales promotion is one of the seven aspects of thepromotional mix. (The other six parts ofthe promotional mix areadvertising,personal selling,direct marketing,publicity/public

relations,corporate imageandexhibitions.) Media and non-media marketing communicationare employed for a pre-determined, limited time to increase consumer demand, stimulatemarket demand or improve product availability. Examples includecontests,coupons,freebies,loss leaders,point of purchasedisplays,premiums,prizes,product samples, andrebates

Sales promotions can be directed at either thecustomer, sales staff, ordistributionchannelmembers (such asretailers). Sales promotions targeted at theconsumerare called consumersales promotions. Sales promotions targeted at retailers andwholesaleare called trade salespromotions. Some sale promotions, particularly ones with unusual methods, are consideredgimmicksby many.

Sales promotion includes several communications activities that attempt to provide addedvalue or incentives to consumers, wholesalers, retailers, or other organizational customers tostimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or

purchase. Examples of devices used in sales promotion include coupons, samples, premiums,point-of-purchase (POP) displays, contests, rebates, and sweepstakes.

Consumer sales promotion techniques

Price deal: A temporary reduction in the price, such as 50% off.

Loyal Reward Program: Consumers collect points, miles, or credits for purchases and redeemthem for rewards.

Cents-off deal: Offers a brand at a lower price. Price reduction may be a percentage markedon the package.

Price-pack deal: The packaging offers a consumer a certain percentage more of the productfor the same price (for example, 25 percent extra).

Coupons: coupons have become a standard mechanism for sales promotions. Loss leader: the price of a popular product is temporarily reduced in order to stimulate other

profitable sales

Free-standing insert (FSI): A coupon booklet is inserted into the local newspaper for delivery. On-shelf couponing: Coupons are present at the shelf where the product is available.

Checkout dispensers: On checkout the customer is given a coupon based on productspurchased.

On-line couponing: Coupons are available online. Consumers print them out and take themto the store.

Mobile couponing: Coupons are available on a mobile phone. Consumers show the offer ona mobile phone to a salesperson for redemption.

Online interactive promotion game: Consumers play an interactive game associated with thepromoted product.

Rebates: Consumers are offered money back if the receipt andbarcodeare mailed to theproducer.

Contests/sweepstakes/games: The consumer is automatically entered into the event bypurchasing the product.

Point-of-sale displays:-
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o Aisle interrupter: A sign that juts into the aisle from the shelf.o Dangler: A sign that sways when a consumer walks by it.o Dump bin: A bin full of products dumped inside.o Glorifier: A small stage that elevates a product above other products.o Wobbler: A sign that jiggles.o Lipstick Board: A board on which messages are written in crayon.o Necker: A coupon placed on the 'neck' of a bottle.o YES unit: "your extra salesperson" is a pull-outfact sheet.o Electroluminescent: Solar-powered, animated light in motion.[1]

Kids eat free specials: Offers a discount on the total dining bill by offering 1 free kids mealwith each regular meal purchased.

Sampling: Consumers get one sample for free, after their trial and then could decidewhether to buy or not.

Trade sales promotion techniques

Trade allowances: short term incentive offered to induce a retailer to stock up on a product. Dealer loader: An incentive given to induce a retailer to purchase and display a product. Trade contest: A contest to reward retailers that sell the most product. Point-of-purchase displays: Used to create the urge of "impulse" buying and selling your

product on the spot.

Training programs: dealer employees are trained in selling the product. Push money: also known as "spiffs". An extra commission paid to retail employees to push

products.

Trade discounts (also called functional discounts): These are payments to distribution channelmembers for performing some function .

Retail Mechanics

Retailers have a stock number of retail 'mechanics' that they regularly roll out or rotate fornew marketing initiatives.

Buy x get y free a.k.a. BOGOF forBuy One Get One Free Three for two Buy a quantity for a lower price Get x% of discount on weekdays. Free gift with purchase

Political issues

Sales promotions have traditionally been heavily regulated in many advanced industrialnations, with the notable exception of theUnited States. For example, theUnited Kingdomformerly operated under aresale price maintenanceregime in which manufacturers couldlegally dictate the minimum resale price for virtually all goods; this practice was abolished in1964.[2]Most European countries also have controls on the scheduling and permissible typesof sales promotions, as they are regarded in those countries as bordering uponunfair business

practices.Germanyis notorious for having the most strict regulations. Famous examples

include the car wash that was barred from giving free car washes to regular customers and abaker who could not give a free cloth bag to customers who bought more than 10 rolls.[3]
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Marketing strategy

Marketing strategy is defined by Prophet'sDavid Aakeras a process that can allow anorganization to concentrate its resources on the optimal opportunities with the goals of

increasing sales and achieving a sustainablecompetitive advantage.[1]

Marketing strategyincludes all basic and long-term activities in the field of marketing that deal with the analysisof the strategic initial situation of a company and the formulation, evaluation and selection ofmarket-oriented strategies and therefore contribute to the goals of the company and itsmarketing objectives.[2]

Developing a marketing strategy

Marketing strategies serve as the fundamental underpinning ofmarketing plansdesigned tofill market needs and reachmarketingobjectives.[3]Plans and objectives are generally testedfor measurable results. Commonly, marketing strategies are developed as multi-year plans,with a tactical plan detailing specific actions to be accomplished in the current year. Timehorizons covered by themarketing planvary by company, by industry, and by nation,however, time horizons are becoming shorter as the speed of change in the environmentincreases.[4]Marketing strategies are dynamic and interactive. They are partially planned and

partially unplanned. Seestrategy dynamics. Marketing strategy needs to take a long termview, and tools such ascustomer lifetime valuemodels can be very powerful in helping tosimulate the effects of strategy on acquisition, revenue per customer andchurn rate.

Marketing strategy involves careful scanning of the internal and external environments.[5]Internal environmental factors include themarketing mixandmarketing mix modeling, plus

performance analysis and strategic constraints.[6]

External environmental factors includecustomer analysis,competitor analysis,target marketanalysis, as well as evaluation of anyelements of the technological, economic, cultural or political/legal environment likely toimpact success.[4]A key component of marketing strategy is often to keep marketing in linewith a company's overarchingmission statement.[7]

Once a thorough environmental scan is complete, astrategic plancan be constructed toidentify business alternatives, establish challenging goals, determine the optimal marketingmix to attain these goals, and detail implementation.[4]A final step in developing a marketingstrategy is to create a plan to monitor progress and a set of contingencies if problems arise inthe implementation of the plan.

Marketing Mix Modelingis often used to help determine the optimal marketing budget andhow to allocate across the marketing mix to achieve these strategic goals. Moreover, suchmodels can help allocate spend across a portfolio of brands and manage brands to createvalue.

Types of strategies

Marketing strategies may differ depending on the unique situation of the individual business.However there are a number of ways of categorizing some generic strategies. A briefdescription of the most common categorizing schemes is presented below:
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xhttp://en.wikipedia.org/w/index.php?title=Marketing_strategy&printable=yes#cite_note-5http://en.wikipedia.org/wiki/Churn_ratehttp://en.wikipedia.org/wiki/Customer_lifetime_valuehttp://en.wikipedia.org/wiki/Strategy_dynamicshttp://en.wikipedia.org/w/index.php?title=Marketing_strategy&printable=yes#cite_note-AakerDavid-4http://en.wikipedia.org/wiki/Marketing_planhttp://en.wikipedia.org/w/index.php?title=Marketing_strategy&printable=yes#cite_note-3http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Marketing_planhttp://en.wikipedia.org/w/index.php?title=Marketing_strategy&printable=yes#cite_note-2http://en.wikipedia.org/w/index.php?title=Marketing_strategy&printable=yes#cite_note-1http://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/David_Aaker


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Strategies based onmarket dominance- In this scheme, firms are classified based on theirmarket share or dominance of an industry. Typically there are four types of marketdominance strategies:

Leader Challenger Follower Nicher

Porter generic strategies- strategy on the dimensions of strategic scope and strategicstrength. Strategic scope refers to the market penetration while strategic strength refers to thefirms sustainable competitive advantage. The generic strategy framework (porter 1984)comprises two alternatives each with two alternative scopes. These areDifferentiation andlow-cost leadership each with a dimension ofFocus-broad or narrow. **Productdifferentiation**Cost leadership**Market segmentation* Innovation strategiesThisdeals with the firm's rate of the new product development andbusiness model innovation. It

asks whether the company is on the cutting edge of technology and business innovation.There are three types: ** Pioneers ** Close followers ** Late followers * GrowthstrategiesIn this scheme we ask the question, How should the firm grow?. There are anumber of different ways of answering that question, but the most common gives fouranswers:

Horizontal integration Vertical integration Diversification Intensification

These ways of growth are termed as organic growth. Horizontal growth is whereby a firmgrows towards acquiring other businesses that are in the same line of business for example aclothing retail outlet acquiring a food outlet. The two are in the retail establishments and theirintegration lead to expansion. Vertical integration can be forward or backward. Forwardintegration is whereby a firm grows towards its customers for example a food manufacturingfirm acquiring a food outlet. Backward integration is whereby a firm grows towards itssource of supply for example a food outlet acquiring a food manufacturing outlet. A moredetailed scheme uses the categoriesMiles, Raymond (2003). Organizational Strategy,Structure, and Process. Stanford: Stanford University Press.ISBN0-8047-4840-3.:

Prospector Analyzer Defender Reactor Marketing warfare strategies- This scheme draws parallels between marketing strategies

and military strategies.

Strategic models

Marketing participants often employ strategic models and tools to analyze marketingdecisions. When beginning a strategic analysis, the3Cscan be employed to get a broad

understanding of the strategic environment. An Ansoff Matrix is also often used to convey anorganization's strategic positioning of theirmarketing mix. The4Pscan then be utilized to
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form a marketing plan to pursue a defined strategy.Marketing Mix Modelingis often used tosimulate different strategic flexing go the 4Ps.Customer lifetime valuemodels can helpsimulate long term effects of changing the 4Ps, e.g.; visualize the multi-year impact onacquisition,churn rate, and profitability of changes to pricing.

There are many companies especially those in the Consumer Package Goods (CPG) marketthat adopt the theory of running their business centered around Consumer, Shopper &Retailer needs. Their Marketing departments spend quality time looking for "GrowthOpportunities" in their categories by identifying relevant insights (both mindsets and

behaviors) on their target Consumers, Shoppers and retail partners. These GrowthOpportunities emerge from changes in market trends, segment dynamics changing and alsointernal brand or operational business challenges.The Marketing team can then prioritizethese Growth Opportunities and begin to develop strategies to exploit the opportunities thatcould include new or adapted products, services as well as changes to the 7Ps.

Real-life marketing

Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect informationand limited resources complicated by uncertainty and tight timescales. Use of classicalmarketing techniques, in these circumstances, is inevitably partial and uneven.

Thus, for example, many new products will emerge from irrational processes and the rationaldevelopment process may be used (if at all) to screen out the worst non-runners. The designof the advertising, and the packaging, will be the output of the creative minds employed;which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.

For most of their time, marketing managers use intuition and experience to analyze andhandle the complex, and unique, situations being faced; without easy reference to theory.This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy,coupled with the knowledge of the customer which has been absorbed almost by a process ofosmosis, will determine the quality of the marketing employed. This, almost instinctivemanagement, is what is sometimes called 'coarse marketing'; to distinguish it from therefined, aesthetically pleasing, form favored by the theorists.
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Marketing mix

The marketing mix is a business tool used inmarketingand by marketing professionals. Themarketing mix is often crucial when determining a product or brand's offering, and is often

synonymous with the four Ps:price,product,promotion, andplace; in service marketing,however, the four Ps have been expanded to the Seven Ps oreight Ps to address the differentnature of services.

In recent times, the concept offour Cs has been introduced as a more customer-drivenreplacement offour Ps.

[1]And there are two four Cs theories today. One is Lauterborn's fourCs (consumer, cost, communication, convenience), another is Shimizu's four Cs (commodity,cost, communication, channel).

History

The term marketing mix was coined in an article written by Neil Borden called The Concept

of the Marketing Mix.[2]He started teaching the term after he learned about it from an

associate, James Culliton, who in 1948 described the role of the marketing manager as a"mixerof ingredients"; one who sometimes follows recipes prepared by others, sometimes

prepares his own recipe as he goes along, sometimes adapts a recipe from immediatelyavailable ingredients, and at other times invents new ingredients no one else has tried.[3]

Producer-oriented model

The marketerE. Jerome McCarthyproposed a four Ps classification in 1960, which has since

been used by marketers throughout the world.[1]

Classification

Category Definition

Product

A product is seen as an item that satisfies what a consumer needs or wants. It is a

tangible good or an intangible service. Intangible products are service based like the

tourism industry, thehotel industryand thefinancial industry. Tangible products are

those that have an independent physical existence. Typical examples of mass-

produced, tangible objects are themotor carand the disposablerazor. A less obvious

but ubiquitous mass-produced service is acomputer operating system.[1]

Every product is subject to alife-cycleincluding a growth phase followed by amaturity phase and finally an eventual period of decline as sales falls. Marketersmust do careful research on how long the life cycle of the product they aremarketing is likely to be and focus their attention on different challenges thatarise as the product moves through each stage.[1]

The marketer must also consider theproduct mix. Marketers can expand the

current product mix by increasing a certain product line's depth or by increasingthe number of product lines. Marketers should consider how to position the
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product, how to exploit the brand, how to exploit the company's resources andhow to configure the product mix so that each product complements the other.The marketer must also consider product development strategies.[1]

Price

the amount a customer pays for the product. The price is very important as it

determines the company's profit and hence, survival. Adjusting the price has a

profound impact on the marketing strategy, and depending on theprice elasticityof

the product, often it will affect thedemandand sales as well. The marketer should set

a price that complements the other elements of the marketing mix.[1]

When setting a price, the marketer must be aware of thecustomer perceivedvaluefor the product. Three basic pricing strategies are:market skimming

pricing, marketpenetration pricingand neutral pricing. The 'reference value'(where the consumer refers to the prices of competing products) and the'differential value' (the consumer's view of this product's attributes versus theattributes of other products) must be taken into account.[1]

Promotion

all of the methods of communication that a marketer may use to provide information

to different parties about the product. Promotion comprises elements such as:

advertising,public relations,personal sellingandsales promotion.[1]

Advertising covers any communication that is paid for, from cinemacommercials, radio and Internet advertisements through print media and

billboards. Public relations is where the communication is not directly paid forand includes press releases, sponsorship deals, exhibitions, conferences,seminars or trade fairs and events.Word-of-mouthis any apparently informalcommunication about the product by ordinary individuals, satisfied customers or

people specifically engaged to create word of mouth momentum. Sales staffoften plays an important role in word of mouth and public relations (see'product' above).[1]

distribution

(Place)

refers to providing the product at a place which is convenient for consumers to access.

Variousstrategiessuch as intensive distribution, selective distribution, exclusive

distribution andfranchisingcan be used by the marketer to complement the other

aspects of the marketing mix.[1][4]

Theseven Psis an additional marketing model that refers to the already mentioned four Ps,plus 'Physical evidence', 'People', and 'Process':[5]

Classifications

Category Definition

Physical

evidence

elements within the store -- the store front, the uniforms employees wear,

signboards, etc.
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People the employees of the organization with whom customers come into contact.

Processthe processes and systems within the organization that affects its marketing

process.

These latter three factors are not cited nearly as often as the first four.

Consumer-oriented model

Robert F. Lauterborn proposed a four Cs classification in 1993 [6]which is a more consumer-oriented version of the four Ps that attempts to better fit the movement from mass marketingto niche marketing:

"P" category "C" category "C" definition

Product Consumer

shifting the focus to satisfying the consumer needs. By defining

offerings as individual capabilities that are combined and focused to a

specific industry, the result is a custom solution rather than the

pigeon-holing of a customer into a product.

Price Cost

reflecting the total cost of ownership. Many factors affect Cost,

including but not limited to the customer's cost to change or

implement the new product or service and the customer's cost for

not selecting a competitor's product or service.

Promotion Communication

represents a broader focus. Communications can include advertising,

public relations, personal selling,viral advertising, and any form of

communication between the organization and the consumer.

distribution

(Place)Convenience

With the rise of Internet and hybrid models of purchasing, Place is

becoming less relevant. Convenience takes into account the ease of

buying the product, finding the product, finding information about

the product, and several other factors.

Four Cs: in the Seven Cs Compass Model

(Corporation and consumer -oriented model)

After Koichi Shimizu proposed a four Cs classification in 1973, this was expanded to theseven Cs compass modelto provide a more complete picture of the nature of marketing in1981. It attempts to explain the success or failure of a firm within a market and is somewhatanalogous to Michael Porter'sdiamond model, which tries to explain the success and failureof different countries economically.[7][8][9]
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The seven Cs compass model are:

(C1)Corporation The core of four Cs is corporation ( company and non profit organization).C-O-S (Organization,Competitor,Stakeholder) within the Corporation. The company has to

think ofcomplianceandaccountabilityas important. The competition in the areas in which

the company competes with other firms in its industry.

The four elements in the seven Cs compass model are:

A formal approach to this customer-focused marketing mix is known asFour Cs(Commodity,Cost,Channel,Communication) in the seven Cs compass model. Thefour Cs

Model provides ademand/customercentric version alternative to the well-known four Ps

supply side model (product,price,place,promotion) of marketing management.[10]

o ProductCommodityo PriceCosto PromotionCommunicationo PlaceChannel

"P"

category"C" category "C" definition

Product (C2)Commodity

(Original meaning of Latin: Commodus=convenient) : It is not

"product out". The goods and services for the consumers or

citizens. Steve Jobs has been making the goods with which people

are pleased. It will not become commoditization if a commodity is

built from the start.

Price (C3)Cost

(Original meaning of Latin: Constare= It makes sacrifices) : There is

not only producing cost and selling cost but purchasing cost and

social cost.

Promotion (C4)Communication

(Original meaning of Latin:Communio=sharing of meaning) :

marketing communication : Not only promotion but communication

is important. Communications can include advertising, sales

promotion, public relations, publicity, personal selling, corporate

identity.

place (C5)Channel (Original meaning is a Canal) : marketing channels. Flow of goods.

The compass of consumers and Circumstances (environment) are:

(C6)Consumer (Needle of compass to Consumer)The factors related to consumers can be explained by the first character of four directionsmarked on thecompassmodel. These can be remembered by thecardinal directions, hence

the namecompassmodel:
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o N =Needso W =Wantso S =Securityo E =Education:(consumer education)

(C7)Circumstances (Needle of compass to Circumstances )In addition to the consumer, there are various uncontrollable external environmental factorsencircling the companies. Here it can also be explained by the first character of the fourdirections marked on thecompassmodel:

o N =NationalandInternationalo W =Weathero S =SocialandCulturalo E =Economic

These can also be remembered by the cardinal directions marked on a compass. The seven Cscompass model is a framework inco-marketing(symbiotic marketing). It has been criticizedfor being little more than the four Ps with different points of emphasis. In particular, theseven Cs inclusion of consumers in the marketing mix is criticized, since they are a targetofmarketing, while the other elements of the marketing mix are tactics. The seven Cs alsoinclude numerous strategies for product development, distribution, and pricing, whileassuming that consumers want two-way communications with companies.
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Pricing strategies

Pricing strategies forproductsorservicesencompass three main ways to improve profits.These are that the business owner can cut costs or sell more, or find more profit with a better

pricing strategy. When costs are already at their lowest and sales are hard to find, adopting abetter pricing strategy is a key option to stay viable.

Merely raising prices is not always the answer, especially in a poor economy. Manybusinesses have been lost because they priced themselves out of the marketplace. On theother hand, many business and sales staff leave "money on the table". One strategy does notfit all, so adopting a pricing strategy is a learning curve when studying the needs and

behaviors of customers and clients.[1]

Models of pricing

Cost-plus pricing

Main article:Cost-plus pricing

Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producingthe product and adds on a percentage (profit) to that price to give the selling price. Thismethod although simple has two flaws; it takes no account of demand and there is no way ofdetermining if potential customers will purchase the product at the calculated price.

This appears in two forms, full cost pricing which takes into consideration both variable andfixed costs and adds a percentage as markup. The other is direct cost pricing which is variable

costs plus a percentage as markup. The latter is only used in periods of high competition asthis method usually leads to a loss in the long run.

Creaming or skimming

In most skimming, goods are sold at higher prices so that fewer sales are needed to breakeven. Selling a product at a high price, sacrificing high sales to gain a high profit is therefore"skimming" the market. Skimming is usually employed to reimburse the cost of investmentof the original research into the product: commonly used in electronic markets when a newrange, such asDVDplayers, are firstly dispatched into the market at a high price. Thisstrategy is often used to target "early adopters" of a product or service. Early adopters

generally have a relatively lower price-sensitivity - this can be attributed to: their need for theproduct outweighing their need to economise; a greater understanding of the product's value;or simply having a higher disposable income.

This strategy is employed only for a limited duration to recover most of the investment madeto build the product. To gain further market share, a seller must use other pricing tactics suchas economy or penetration. This method can have some setbacks as it could leave the productat a high price against the competition.[2]

Limit pricing

Main article:Limit price
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A limit price is the price set by a monopolist to discourage economic entry into a market, andis illegal in many countries. The limit price is the price that the entrant would face uponentering as long as the incumbent firm did not decrease output. The limit price is often lowerthan the average cost of production or just low enough to make entering not profitable. Thequantity produced by the incumbent firm to act as a deterrent to entry is usually larger than

would be optimal for a monopolist, but might still produce higher economic profits thanwould be earned underperfect competition.

The problem with limit pricing as a strategy is that once the entrant has entered the market,the quantity used as a threat to deter entry is no longer the incumbent firm's best response.This means that for limit pricing to be an effective deterrent to entry, the threat must in someway be made credible. A way to achieve this is for the incumbent firm to constrain itself to

produce a certain quantity whether entry occurs or not. An example of this would be if thefirm signed a union contract to employ a certain (high) level of labor for a long period oftime. In this strategy price of the product becomes the limit according to budget.

Loss leader

Main article:Loss leader

A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulateother profitable sales. This would help the companies to expand its market share as a whole.

Market-oriented pricing

Setting a price based upon analysis and research compiled from the target market. This meansthat marketers will set prices depending on the results from the research. For instance if the

competitors are pricing their products at a lower price, then it's up to them to either price theirgoods at an above price or below, depending on what the company wants to achieve .

Penetration pricing

Main article:Penetration pricing

Penetration pricing includes setting the price low with the goals of attracting customers andgaining market share. The price will be raised later once this market share is gained.[3]

Price discrimination

Main article:Price discrimination

Price discrimination is the practice of setting a different price for the same product indifferent segments to the market. For example, this can be for different classes, such as ages,or for different opening times.

Premium pricing

Main article:Premium pricing

Premium pricing is the practice of keeping the price of a product or service artificially high inorder to encourage favorable perceptions among buyers, based solely on the price. The

practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume
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that expensive items enjoy an exceptional reputation, are more reliable or desirable, orrepresent exceptional quality and distinction.

Predatory pricing

Main article:Predatory pricing

Predatory pricing, also known as aggressive pricing (also known as "undercutting"), intendedto drive out competitors from a market. It is illegal in some countries.

Contribution margin-based pricing

Main article:Contribution margin-based pricing

Contribution margin-based pricing maximizes the profit derived from an individual product,based on the difference between the product's price and variable costs (the product'scontribution margin per unit), and on ones assumptions regarding the relationship between

the products price and the number of units that can be sold at that price. The product'scontribution to total firm profit (i.e. to operating income) is maximized when a price ischosen that maximizes the following: (contribution margin per unit)X(number of unitssold)..

Psychological pricing

Main article:Psychological pricing

Pricing designed to have a positive psychological impact. For example, selling a product at$3.95 or $3.99, rather than $4.00.

Dynamic pricingMain article:Dynamic pricing

A flexible pricing mechanism made possible by advances in information technology, andemployed mostly by Internet based companies. By responding to market fluctuations or largeamounts of data gathered from customers - ranging from where they live to what they buy tohow much they have spent on past purchases - dynamic pricing allows online companies toadjust the prices of identical goods to correspond to a customers willingness to pay. The

airline industry is often cited as a dynamic pricing success story. In fact, it employs thetechnique so artfully that most of the passengers on any given airplane have paid differentticket prices for the same flight.[4]

Price leadership

Main article:Price leadership

An observation made of oligopolistic business behavior in which one company, usually thedominant competitor among several, leads the way in determining prices, the others soonfollowing. The context is a state of limited competition, in which a market is shared by asmall number of producers or sellers.
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Target pricing

Pricing method whereby the selling price of a product is calculated to produce a particularrate of return on investment for a specific volume of production. The target pricing method isused most often by public utilities, like electric and gas companies, and companies whose

capital investment is high, like automobile manufacturers.

Target pricing is not useful for companies whose capital investment is low because,according to this formula, the selling price will be understated. Also the target pricing methodis not keyed to the demand for the product, and if the entire volume is not sold, a companymight sustain an overall budgetary loss on the product.

Absorption pricing

Method of pricing in which all costs are recovered. The price of the product includes thevariable costof each item plus a proportionate amount of thefixed costsand is a form ofcost-plus pricing

High-low pricing

Method of pricing for an organization where the goods or services offered by the organizationare regularly priced higher than competitors, but through promotions, advertisements, and orcoupons, lower prices are offered on key items. The lower promotional prices are designed to

bring customers to the organization where the customer is offered the promotional product aswell as the regular higher priced products.[5]

Premium decoy pricing

Method of pricing where an organization artificially sets one product price high, in order toboost sales of a lower priced product.

Marginal-cost pricing

In business, the practice of setting the price of a product to equal the extra cost of producingan extra unit of output. By this policy, a producer charges, for each product unit sold, only theaddition to total cost resulting from materials and direct labor. Businesses often set pricesclose to marginal cost during periods of poor sales. If, for example, an item has a marginal

cost of $1.00 and a normal selling price is $2.00, the firm selling the item might wish tolower the price to $1.10 if demand has waned. The business would choose this approach

because the incremental profit of 10 cents from the transaction is better than no sale at all.

Value-based pricing

Main article:Value-based pricing

Pricing a product based on the value the product has for the customer and not on its costs ofproduction or any other factor. This pricing strategy is frequently used where the value to thecustomer is many times the cost of producing the item or service. For instance, the cost of

producing a software CD is about the same independent of the software on it, but the pricesvary with the perceived value the customers are expected to have. The perceived value will
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depend on the alternatives open to the customer. In business these alternatives are usingcompetitors software, using a manual work around, or not doing an activity. In order toemploy value-based pricing you have to know your customer's business, his business costs,and his perceived alternatives.

Pay what you wantMain article:Pay what you want

Pay what you want is a pricing system where buyers pay any desired amount for a givencommodity, sometimes including zero. In some cases, a minimum (floor) price may be set,and/or a suggested price may be indicated as guidance for the buyer. The buyer can alsoselect an amount higher than the standard price for the commodity.

Giving buyers the freedom to pay what they want may seem to not make much sense for aseller, but in some situations it can be very successful. While most uses of pay what you wanthave been at the margins of the economy, or for special promotions, there are emergingefforts to expand its utility to broader and more regular use.

Freemium

Main article:Freemium

Freemium is a business model that works by offering a product or service free of charge(typically digital offerings such as software, content, games, web services or other) whilecharging a premium for advanced features, functionality, or related products and services.The word "freemium" is a portmanteau combining the two aspects of the business model:"free" and "premium". It has become a highly popular model, with notable success.

Odd pricing

In this type of pricing, the seller tends to fix a price whose last digits are odd numbers. This isdone so as to give the buyers/consumers no gap for bargaining as the prices seem to be lessand yet in an actual sense are too high, and takes advantage of human psychology. A goodexample of this can be noticed in most supermarkets where instead of pricing at $10, it would

be written as $9.99. This pricing policy is common in economies using the free marketpolicy.

Nine laws of price sensitivity and consumer psychology

In their book, The Strategy and Tactics of Pricing, Thomas Nagle andReed Holdenoutlinenine "laws" or factors that influence how a consumer perceives a given price and how price-sensitive they are likely to be with respect to different purchase decisions.[6][7]

They are:

1. Reference Price Effectbuyers price sensitivity for a given product increases the higher theproducts price relative to perceived alternatives. Perceived alternatives can vary by buyer

segment, by occasion, and other factors.

2.

Difficult Comparison Effect buyers are less sensitive to the price of a known or morereputable product when they have difficulty comparing it to potential alternatives.
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3. Switching Costs Effect the higher the product-specific investment a buyer must make toswitch suppliers, the less price sensitive that buyer is when choosing between alternatives.

4. Price-Quality Effect buyers are less sensitive to price the more that higher prices signalhigher quality. Products for which this effect is particularly relevant include: image products,

exclusive products, and products with minimal cues for quality.

5. Expenditure Effect buyers are more price sensitive when the expense accounts for a largepercentage of buyers available income or budget.6. End-Benefit Effect the effect refers to the relationship a given purchase has to a larger

overall benefit, and is divided into two parts: Derived demand: The more sensitive buyers

are to the price of the end benefit, the more sensitive they will be to the prices of those

products that contribute to that benefit. Price proportion cost: The price proportion cost

refers to the percent of the total cost of the end benefit accounted for by a given

component that helps to produce the end benefit (e.g., think CPU and PCs). The smaller the

given components share of the total cost of the end benefit, the less sensitive buyers will be

to the component's price.

7. Shared-cost Effect the smaller the portion of the purchase price buyers must pay forthemselves, the less price sensitive they will be.

8. Fairness Effect buyers are more sensitive to the price of a product when the price isoutside the range they perceive as fair or reasonable given the purchase context.

9. The Framing Effect buyers are more price sensitive when they perceive the price as a lossrather than a forgone gain, and they have greater price sensitivity when the price is paid

separately rather than as part of a bundle.


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Loss leader

A loss leader, or simply a leader,[1]is a product sold at a low price, at or below its marketcost[2]to stimulate other sales of more profitable goods or services. Using a loss leader, often

a very popular good or service, is a type ofsales promotionamarketingstrategy thatfocuses onpricing strategy. Sometimes "leader" is used as a related term and can mean any

popular article, i.e., one sold at a normal price.[3]

Strategy

One use of a loss leader is to drawcustomersinto a store where they are likely to buy othergoods. The vendor expects that the typical customer will purchase other items at the sametime as the loss leader and that the profit made on these items will be such that an overall

profit is generated for the vendor.

"Loss lead" describes the concept that an item is offered for sale at a reduced price and isintended to "lead" to the subsequent sale of other items, the sales of which will be made ingreater numbers, or greater profits, or both. It is offered at a price below its minimum profitmarginnot necessarily below cost. The firm tries to maintain a current analysis of itsaccounts for both the loss lead and the associated items, so it can monitor how well thescheme is doing, as quickly as possible, thereby never suffering an overall net loss.

Marketing academics have shown that retailers should think of both the direct and indirecteffect of substantial price promotions when evaluating their impact on profit.[4]To make avery precise analysis one should also include effects over time. Deep price promotions may

cause people to bulk-buy (stockpile), which may invalidate the long-term effect of thestrategy. This is theassociation ruleanalysis.[5]

When automobile dealerships use this practice, they offer at least one vehicle below cost andmust disclose all of the features of the vehicle (including theVIN). If the loss-leader vehiclehas been sold, the salesperson tries to sell a more upscale trim of that vehicle at a slightlydiscounted price, as a customer who has missed the loss-leading vehicle is unlikely to find a

better deal elsewhere.

Loss leaders can be an important part of companies' marketing and sales strategies, especiallyduringdumpingcampaigns.

Characteristics of loss leaders

A loss leader may be placed in an inconvenient part of the store, so that purchasers mustwalk past other goods which have higherpr

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