BYU M10-M12

Role of price in successfully marketing products and strategy

Price influences demand, perceptions of quality, and overall profitability for a business. Only element of marketing mix that generates revenue. A strong pricing strategy, including the ability to raise prices without losing customers, is a key indicator of a successful business

Fixed costs

Costs that do not vary with output quantity. Costs remains the same when company makes 100 units or 1000 units

Variable costs

Costs that are directly tied to the output quantity. As the company produces more or less of a product or service, total variable costs increase or decrease.

Unit contribution

Unit price minus the unit variable cost

Total contribution

Unit contribution multiplied by the total number of units sold. The amount of money available to “contribute” to fixed costs and then to profits.

Margin

Difference between a price and cost. The retail price is not the same price a manufacturer gets paid for a product.

Break-even analysis

A method for examining the relationships among price, costs, revenue, and profits to determine the break-even point at alternative prices and a given cost structure.

Break Even Volume

BEV, total revenue=total cost

BEV

Fixed Costs divided by price- Unit VC or fixed cost divided by unit contribution

How price influences profitability

Amount customers pay for product/service. Increasing price, while keeping costs and quantity the same, will increase profit.

How quantity influence profitability

The number of units sold. Selling more units, assuming each sale is profitable, will increase overall profit.

How cost influences profitability

The expenses incurred in creating and delivering value. These include fixed costs ( which do not vary with output, like rent) and variable costs (which do not vary with output, like raw materials)

Cost-plus pricing strategy

Pricing strategy based on the cost of the product and a predetermined margin. Accounting-based pricing is that products costs are irrelevant to buyers. Marketers price a product higher than customers will pay. For new products, the cost-plus price may be significantly higher than reference prices for comparable products, hindering success. Decisions are based on comparing product functionality rather than product form.

Competitive pricing

Strategy that considers pricing below, at, or above competitors prices.

Value pricing

Strategy that considers the customers perceived value of the product. Requires thorough research into company costs, customer value, competitor prices, and competitors costs. Doesn’t mean changing a low price or the highest price possible.

Golden goose pricing

Starts with understanding consumers like value pricing, but then businesses become greedy and price a product too high which invites competitors and ruins the market share. Charges highest price customer will pay. Long waiting list contributes to perceived value and customer demand. Invites competitors which can quickly erode market share.

Doesn’t understand competitors or customers

Cost-plus pricing

Doesn’t understand customers, understands competitors

Competitive pricing

Understands customers and competitors

Value pricing

Understands customers, doesn’t understand competitors

Golden goose pricing

Considerations marketers take into account when lowering and raising prices

Price indicates quality, the cost of lowering price, lower price indicates lower quality or fewer features, rasising price requires magic, pricing’s long term consequences

Price indicates quality

Setting initial prices is different from adjusting prices for established products, consumer perceptions of value and fairness complicate price adjustments

Cost of lowering price/lower price indicates lower quality or fewer features

Dropping prices too low without justification can be detrimental, consumers expect customers to-built sports cars to hold their value + retain exclusivity, price drop must be accompanied by a well-thought justification to avoid negative perceptions

Raising price requires magic

Raising prices on established brands is challenging because consumers are aware of prices for frequently purchased items. Consumers react negatively to price increases. Strategy: manufacturers may decrease product content while maintaining the same price. Strategy: combining technological change with “portion control” can justify higher prices.

Pricings long term consequences

Pricing decisions have long term consequences and should be strategic. Temp price promotions can permanently increase annual per capita consumption rates. Pricing incentives shouldn’t undermine customer value, increase price sensitivity, or allow excessive stocking up. Raising prices too quickly leads to customer dissatisfaction. Lowering prices without explanation can lead to perceptions of lost quality or resentment past prices.

Pricing

The amount of money exchanged for a product or service

Perceived value

The customers perception of the relationship between the benefits and costs of a product,

External reference price

The price everyone else is paying for the product

Internal reference price

The price consumers think they should pay, given past experience and the buying situation

Total costs

The total variable costs with the fixed costs

Total revenue

The price per unit multiplied by the total number of units sold

Break even point

The sales volume of which total revenue equals total cost. At this point, profits are zero.

FixeUnit contribution formula

Price - unit variable cost

percent margin

Price - unit variable cost divided by price

Break even point formula

Fixed costs divided by unit contribution margin

Total costs formula

Fixed costs + variable cost

Promotional mix

Sales promotion, advertising, personal selling, public relations, direct marketing

Working together in the firms integrated marketing communications to provide a consistent message to the firms target customers

Goals of promotional mix

1. Informing them about the benefits of the firms product offering

2. Persuading them to try or continue using the products

3. Reminding them of the product benefits they experience to encourage repeat purchases

Advertising + publicity

Best methods for creating product awareness and interest

Sales promotions + personal selling

Best for closing sales

Promotion strategy

Usually demands a lot of the marketing managers attention because promotional spending accounts for the biggest part of a marketing budget

Push strategy

Involves taking the product directly to the consumer by making products readily available through various channels of distribution. Direct marketing activities toward channel members to encourage them to order and stock the product. Personal selling + trade promotions important roles, Objective is to push products from producer to channel member and then from channel member to final consumers.

More effective ( pull or push )

Pull is more effective because goal is to create brand loyalty

Pull strategy

Producers direct marketing activities toward the final consumer to encourage them to ask retailers for the product. Demand from final consumes causes retailers to order the product from producers or manufacturers. Product pulled through the channel of distribution. Pull potential customers into a store to seek out + purchase a product.

Role of advertising and advertising objectives

1. Cognitive-build awareness

2. Gain interest + liking

3. Stimulate action

Cognitive stage

Advertising attempts to gain consumers attention by making consumers aware of the product and building knowledge in consumers minds

Affective stage

Advertising moves consumers from interest in the product to desiring the product

Behavioral stage

Advertising stimulates action-a purchase or a response to a request

Advertising is used

To build brand equity and boost sales

Value-added promotions

Promotions that add value for the customers such as contests, sweepstakes, self-liquidating premiums, or samples of a new product bundled together with a well-known product

Price promotions

Promotions when products are offered at a discount price

Cause related promotions

Allow customers to support a good cause along with purchasing a product they need

Trade promotions

Retailers who sell a company’s product are offered reduced prices called trade allowances, as well as free product displays, free merchandise, or other incentives to sell the product

Integrated marketing communicates

Shifts the focus to the consumer, the costs associated with product solutions in addition to purchase price, maximize the convenience of the consumption experience, and stress two-way company-consumer communication rather than one-way, top-down selling. Focuses on the 4Cs rather than the 4Ps

The 4 Cs

Consumer, cost, convenience, communication

ROI

Return on investment

Direct mail

A direct marketing activity who’s effectiveness is supported by multiple cited statistics (ROI, helpfulness to consumers, viewing/responding/purchasing rates)

How direct marketing plays a role in the marketing mix

Direct marketing focuses on direct communication with consumers to encourage a direct response for a purchase, request for information, or visit to a website. Use variety of direct marketing activities including direct mail, catalog, online retailing, mobile marketing, television home shopping, and telemarketing.

Direct marketing

Allows marketers to connect directly with targeted consumers, can use detailed information from extensive databases to customize product offerings for precisely defined segments

B2C Funnel

Business to consumers

B2B Funnel

Business to business

B2C funnel process

Awareness-search for info, interest-learn about products, consideration -read reviews and compare products, intent-put product in cart, evaluation-review shopping cart and go to check out, purchase-sales transaction is complete

B2B funnel process

Awareness-search for info, interest-buyers examine specific products and reviews, consideration-buyers share research on products and brands with other stakeholders, intent-buyers get product demo, evaluation-buyers get contract proposal, purchase-buyers get contract proposal

Creative brief

Important for advertising agency, helpful in getting the most out of agency

Steps to a creative brief

Advertising objective, target, insight, promise, support, tone, assignment

Insight step

What is in the mind and heart of your consumer? How would they say it? A good is insight will have rational, cognitive elements (consumer insights) State it all in one sentence. It should be in first person, or in the consumers words. It should sound conversational.

Promise step

How can we solve the consumers needs? How do we address the insight? Put here everything that must show up in the advertising. Every word counts. This is the inspiration for the creative team. This is essentially your positioning statement. How will you solve the consumers problems? Move them from current belief/do to desired belief/do?

Support step

Reasons to believe. Put there as bullet points. These should be reasons to believe based on your main (FOR) and dynamic (POD) variables. Thus, they should be both rational and emotional. Put them in order of importance and don’t repeat what’s in the promise.

Tone step

How should the advertisement feel? Three to four words describing the type of advertising you want produced. Be clear and decisive and maintain consistency with your brand.

Assignment step

What are the deliverables? What media? You should focus on the best way to get the message to the consumer, including non-conventional methods here. Be creative. Always keep your target in mind.

Role of social media in the marketing mix

Social media blends technology with social interaction to create social networking, interacting, and information sharing for consumers. Social media marketing used internet websites, apps, for marketing communications and product branding

Social media marketing offers

1. Greater flexibility for content and duration

2. Has credibility similar to word-of-mouth communications

3. Can build awareness and interest at a much lower cost than traditional media channels

Social media is used by marketing managers to

Reach, engage, and convert consumers

Reach

Build awareness and generate leads

Engage

Strengthen relationships and improve customer retention

Convert

Drive sales by winning new customers

Social media helps

Firms communicate and deliver value to target customers.

4 steps to creating a social media strategy

1. Set social media marketing goals

2. Know your buyers personas

3. Determine the social media network

4. Track success and improve

Set social media marketing goals

Start with clear goals-specific, attainable, and measurable so you can evaluate effectiveness. Social media goals must align with and contribute to the company’s marketing goals. Common social media goals and metrics contributing to bottom-line results: generate new sales leads, increase revenue, etc.

Know your buyers personas

Use buyers personas to create targeted, relevant social media content that supports engagement and conversions. When firms understand buyer personas, they are more successful in creating social media that is relevant useful, engaging content-builds brand awareness, eventually leads to conversions, leads to increased revenue.

Determine the social media network

After developing targeted content, choose the right social networks and how to use them. Select a few social media channels and manage them well versus using all of them “semi-well” and hoping for impact

Track success and improve

Track social media metrics to measure reach and bottom line impact, then use insights to improve strategy. Tracking and analyzing provides insights into (1) demographics + psychographics of buyers (2) the best time to engage buyers in social media (3) the most effective social network platforms for reach and impact (4) the content like links, videos, downloads, etc. that works best for a given audience

Best practices for using Facebook to market products and services

Marketing managers can target potential customers by using information individuals have made public. Pushing offers to people having a connection with the business’s page is particularly productive.

Best practice for using twitter to market products and services

Microblogging social media service used for online news and social networking. Businesses do reply when followers or customers tweet to the business, tweet on weekends, when people have more time to read and respond, invite followers to retweet, switch up the tweet types, post a photo of people using the product, advertise special opportunities and sales. Do not use a business account like a personal account, don’t stray from the product message, don’t fail to acknowledge, do not post tweets too frequently or too seldom.

Best practices for using YouTube to market products and services

Video content is an effective way to promote products, especially when brand champions create engaging homegrown videos. Using YouTube to advertise offers for free samples or other sales promotions may be productive.

Best practices for using TikTok to market products and services

Fast growing platform where marketers are beginning to connect with young audiences using user content and influencer partnerships.

Best practices for using product blogs to market products and services

Generate fresh content that drives traffic, improves search engine rankings and can build credibility by positioning contributors as experts.

Goals of using AdWords

Target potential customers when they are in the middle of a specific buying situation. Marketers use AdWords by bidding for search terms associated with their product and a winning bid can place the ad at the top of the search results. Overall, the goal is to drive high#intent traffic to the offer and generate results that lead to sales.

Basic marketing goals of search engine optimization (SEO)

A way to make a company more visible in internet search results and on social media platforms, so the brand shows up in relevant conversations across channels. To help potential customers find the brand in search (visibility) and to support engagement across platforms.

Channel and usage

Social media strategic options

Content creation strategy

Lucky or good, content is difficult, each social media strategic option has strengths & weaknesses, “none” might be the best answer

Most important part of content creation strategy

The social media strategy that you chose should be directly informed by the social media goals you got

Will strategy help accomplish your social media goals?

Guiding question to consider #1- Goals are based on wisdom + analysis of company, strategy needs to flow from goals

How many social media channels do you want to manage?

Guiding question to consider #2

Narrow specialization

1, 2, 3 channels

Omnipresence

All channels feel intuitive, but each is difficult to master and monitor, plus is costly

Problem of channels

Adding channels makes it more difficult

Size of channels audience/ Fit of channels audience with your targeted consumers

Guiding question to consider #3-Consider what they are now and in the future

How well does the viewers situation fit with your goals

Guiding question #4-poor, moderate, high fit depending on buyers situation + how it fits with the buying moments consumers are in

Does your company have the time & talent to create content

Guiding question #5-Content is difficult, video + audio is difficult