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Flexibility (policies): One-price Flexible-price Skimming Penetration
Price mix components Product Place Price Promotion Target Market Objectives Flexibility (policies): One-price Flexible-price Skimming Penetration Introductory Obj circle It depends…
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Discounts/ Allowances
Objectives Price setting Flexibility Competition Discounts/ Allowances Legal environment Geographic terms Channel markup Competitive pricing Costs Demand
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Pricing strategies Target return Profit oriented Maximize profits
Status quo Profit oriented Target return Maximize profits Pricing objectives Sales oriented Dollar/unit growth Growth market share Meeting competition Nonprice competition Product Place Price Promotion Target Market Pricing strategies Discounts-allowances-geographic terms
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Discounts Allowances Geographic
Product Place Price Promotion Target Market Adjustments to list or quoted price Discounts Allowances Geographic Quantity Seasonal Trade Cash Trade-in FOB origin pricing Delivered pricing
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Producer Wholesaler Retailer Consumer Price equation $ $ $
Product Place Price Promotion Target Market Price equation $ $ $ Producer Wholesaler Retailer Consumer Selling Price = List price – (Incentives + Allowances) + Extra fees (to each channel member)
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Selling price ($5.00) – Cost ($1.00) = $4.00
Margin: difference between cost and selling price Producer Wholesaler Retailer Consumer $1.50 $2.50 $5.00 $ ¢ profit 50¢ $1.00 Selling price ($5.00) – Cost ($1.00) = $4.00 or 50¢ + $ $2.50 = $4.00 Mark-up Product Place Price Promotion Target Market Margin is the marketer’s “profit playground”
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Channel price ($1.50) = 33% or 50¢ + 50¢ + 50¢ = $1.50
Product Place Price Promotion Target Market Mark-up is the percentage of profit in the selling price Mark-up? 33% Mark-up? 67% 100% Mark-up? $1.50 $2.50 $5.00 $1.00 Producer Wholesaler Retailer Consumer Mark-up: percentage of profit in the channel selling price Profit (50¢) Channel price ($1.50) = 33% or 50¢ + 50¢ + 50¢ = $1.50
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Studio Distributor Theater Moviegoer
Mark-up? > ? ? ? Product Place Price Promotion Target Market Let’s apply mark-up/margin to the movie industry Studio Distributor Theater Moviegoer 37% 19% Channel margin: 5.26 ( ) or (8.00 – 2.74) 33% Cost: 2.74 Margin: 1.34 SP: 4.08 Cost: 4.08 Margin: 2.40 SP: 6.48 Cost: 6.48 Margin 1.52 SP: 8.00 .19 x $8 = 1.52 .30 x $8 = 2.40 .23 x $8 = 1.34 1.34 / 4.08 = 33% 2.40 / 6.48 = 37% 1.52 / 8.00 = 19%
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Public Relations (Publicity)
Promoting personal and mass selling Mass selling Personal selling Sales Promotion Product Place Price Promotion Target Market Number/kind of salespeople needed Kind of sales presentations Selection and training Target audience Kind/advertising Media types Copy thrust Who does work? Activities other than personal selling, advertising, or PR that create interest and stimulate trial » Advertising Public Relations (Publicity)
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Buying Decision? Influencer Initiator Decider Buyer User
Asking the right question of the right person Product Place Price Promotion Target Market
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about a specific product or service on an identified medium,
Form of non-personal communication that’s generally persuasive in nature, about a specific product or service on an identified medium, and it’s paid for. Advertising defined (5 key criteria) Product Place Price Promotion Target Market If it doesn’t meet the test, it’s sales promotion. Is painting a promotional message on the roof of a barn a form of advertising?
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Publics are “vested” Organization Customers Stockholders Community
Channel members Suppliers Stockholders Publics are “vested” Product Place Price Promotion Target Market Government
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Media terminology you’re apt to hear
Gross rating points (GRPs) Reach expressed as a percentage of the total market X frequency Cost per thousand (CPM) Cost of advertising divided by number of thousands of individuals/households that are exposed » Frequency Rating Reach Number of different people/households exposed to an advertisement Percentage of households in a market that are tuned to a particular TV show or radio station Average number of times an individual is exposed to an advertisement Product Place Price Promotion Target Market
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Sales promotion Sales promotion programs Coupons Deals Premiums
Co-op or POS/POP? » Sales promotion programs Product Place Price Promotion Target Market Sales promotion Coupons Deals Premiums Contests Sweepstakes Samples Continuity programs POP displays Rebates Product placement
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Personal selling (customized) Public relations (mass)
Promotional mix? Advertising (mass) Personal selling (customized) Public relations (mass) Sales promotion (mass) Direct marketing (customized) Product Place Price Promotion Target Market Quick feedback Persuasive Can select audience Give complex information Easily abused Price wars Easily copied Prepared quickly Facilities contact with customer Short term changes in behavior Quite flexible Effective for reaching large numbers Most credible source in mind of customer Extremely expensive per exposure Messages may differ among salespeople Strengths Weaknesses High costs Difficult to get feedback Difficult to get media cooperation Declining customer response Database management expensive
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Integrated marketing communications
Pre-purchase Purchase Post-purchase High Low Importance of tool Personal selling Sales promotion Public relations Advertising Product Place Price Promotion Target Market
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Promotional push strategy
Retailer Customer Producer Wholesaler Flow of demand Flow of product Promotional push strategy Promote to the TM > > > ”Go to your favorite store; ask for it by name.” Promotional pull strategy 1 2 3 Push/pull part of promotion and place strategy
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