BUS602: Marketing Management

7a. Explain the various means of product promotion, such as direct mail and TV advertising 

• What are the elements of the promotional mix?
• What factors influence the choice of methods to promote a product or service?
  

Companies seek to have a consistent message when developing marketing campaigns, known as an Integrated Marketing Communications (IMC) strategy. They accomplish this through their promotional activities, known as the promotion or communication mix. The components of this mix include advertising, sales promotion, direct marketing, professional selling, public relations, and sponsorships.

Companies consider various factors when formulating strategies for their promotion and communication mix. The available budget can help determine the reach and frequency associated with advertising. Reach reflects the number of people exposed to a message, while frequency represents the number of exposures.

The stage in the product life cycle (discussed in an earlier Unit) can also impact the level of promotion. For example, a product in the introduction stage will require more promotional activity than a product in the decline stage. A complex or higher-priced product will require a more robust campaign effort than a convenience product purchased regularly. Knowing the habits of the target market can also influence promotion mix decisions. Understanding when consumers may make a decision and where they make their purchases will help determine where marketing is placed. Additionally, companies will consider the type of media preferred by the target market in the decision-making process. Increasingly, digital media and platforms, mobile devices, and social media are playing a more prominent role in promotion strategy decisions.

To review, see The Promotion (Communication) Mix, Factors Influencing the Promotion Mix, Communication Process, and Message Problems,  and Integrated Marketing Communications.

7b. Determine the type of promotional methods that are best suited to the product, target markets, and positioning strategy of a firm 

• What are some of the brand awareness factors marketers consider when developing their promotional activities?
• What are the primary online and social media outlets available to marketers?
  

When choosing promotional methods, marketers must consider various factors that relate to brand awareness. First, brand recognition can play a role in the promotional choices made. Marketing activities for a brand with strong recognition will differ from marketing for a brand with relatively little brand awareness.

A well-known trademark can also impact the promotional methods used to communicate with a target market. Consider the Nike swoosh or the Coca-Cola logos and how those are integrated into marketing communications. Additionally, the associations consumers have with brands will impact the content of a message, which will seek to generate positive attitudes about a brand.

A company's reputation and recognition go hand-in-hand. They can dictate the types of marketing messaging, a brand's position in the consumer's mind, and how a company can use this position to reach wider target audiences.

Brand loyalty will also influence the promotional activities a company develops. The content of those messages will also vary when reaching repeat customers vs. customers who may be new to a brand.

The variety of internet marketing tools available to companies grows and expands. The company website is one of the first places a consumer may visit to gather information about a company and their offerings. An effective website should be attractive, informative, and easy to use. For companies that sell directly from their websites, making a purchase should be quick and straightforward.

Digital advertising offers marketers a wide range of options from search engines, emails, videos, display ads, and mobile advertising.

Social media marketing provides companies with numerous ways to reach mass markets and niche markets. The ever-increasing number of social media platforms can enable a company to reach consumers in all demographic groups and craft messages that specifically address the needs of consumers in all segments of the population.

To review, see Raising Brand Awareness Through Internet Marketing Tools.

7c. Explain the various pricing methods, such as everyday low prices and penetration pricing, that firms can use for their products and services

• What are some of the pricing objectives companies consider when setting prices for their offerings?
• What are the factors that impact pricing decisions?
• What are the different pricing strategies available to companies?
  

Before setting a selling price for their products or services, a company must first identify their objectives for those products. ROI (return on investment) can play a role in pricing offerings, with companies determining they want to achieve a set profit level. Additionally, companies may set pricing to maximize profits so that as much revenue as possible can be earned, which can be at a high price point or a low price point. However, companies need to recognize the price/value relationship their customers will be evaluating.

Companies may also price to maximize sales, or generate as high a level of sales as possible, even if that pricing strategy does not profit. This might be done to generate needed cash, but this is generally a short-term strategy.

Maximizing market share leads to specific pricing strategies, as well. By generating a greater share of the marketplace, a company can remain viable, even if this doesn't translate to higher profits.

Sometimes a company is seeking only to maintain the status quo. Competitors will keep their prices relatively in line with each other to continue to capture target markets.

The factors that can impact pricing decisions can be external and internal to an organization.

One of the external factors focuses on a company's customers. For example, price sensitivity refers to how sensitive a customer is to price changes or how they perceive value plays a role in the price that is set for a product or service.

Competitors' pricing can play a role in the price set for a company's goods. If the price for a similar item is set at a lower price point, the consumer is more likely to buy from that company. Also, prices for substitute products can impact pricing strategies. For example, if someone is taking a trip, they will compare airline prices and may also look at prices for trains or rental cars.

Other external factors include the economy and government regulations. Consumers are less willing to buy expensive items or items they feel should cost less in a weak economy. Additionally, several laws, including the Robinson-Patman Act, regulate pricing decisions so that there is fair competition and ethical behavior among companies.

Finally, internal factors that affect pricing include production, distribution, and marketing costs. All of these elements are integrated into the selling price so that companies can meet their pricing objectives.

There are many pricing strategies companies use to bring their products to market. Often, this relates to the product life cycle. For example, a product that is new to the market will be subject to different kinds of introductory pricing strategies. These can include a skimming strategy, where an initial high price is set for a product, or a penetration pricing strategy, where the initial price is set at a low point.

Cost-plus pricing occurs when a company takes the cost of a product and adds a specific profit level to determine the price. Prestige pricing is used to showcase a product with a high-quality image; leader pricing is when a store prices certain items at a low point to attract shoppers, anticipating that they will buy higher-priced items in addition to low-priced merchandise.

To review, see Price, the Only Revenue Generator.

7d. Determine the pricing strategy, such as pricing for profit and increased sales, of various firms and industries 

• How is the market equilibrium price point determined?
• What is the impact of excess supply and excess demand on pricing strategies?
• What is the elasticity of demand?
  

When the demand for a good increases, the price tends to increase. When the supply for a good increases, the price also tends to decline. When we combine both the supply and demand curves, we can see where the two curves intersect. This is known as the market equilibrium, where the quantity demanded matches the quantity supplied.

An excess in supply forces companies to compete more aggressively, which results in pressure to lower prices. This continues until market equilibrium is reached once again. Excess demand generates greater competition for goods to be sold, which causes prices to rise. Again, this process will continue until market equilibrium is reached.

Elasticity of demand is the relative change in the quantity people will buy where there is a price change. Low elasticity is when there is little change in quantity purchased relative to a change in price. However, inelastic demand, which is high elasticity, is when there is a big change in the quantity purchased relative to a change in price.

To review, see Explain and Calculate Demand Elasticity: Market Equilibrium: Demand and Supply Curves and Elasticity of Demand.

Unit 7 Vocabulary 

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• brand awareness
• brand loyalty
• brand positioning
• competitor pricing
• cost-plus pricing
• demand
• digital media
• elasticity of demand
• Integrated Marketing Communications
• internet marketing
• introductory pricing
• leader pricing
• market equilibrium
• market share
• maximizing profits
• maximizing sales
• prestige pricing
• price/value relationship
• price sensitivity
• pricing objectives
• promotional mix
• Robinson-Patman Act
• ROI
• skimming
• social media
• social media marketing
• status quo
• substitute products
• supply
• trademarks