Unit-4 Price-Marketing Management | BBA 2nd Sem

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Unit-4

Meaning of Price

• The meaning of price in simple terms is the amount of money or resources that you need to give up in order to obtain a particular product or service. It’s basically the value assigned to something in exchange for acquiring it. Prices can vary depending on factors like supply and demand, production costs, competition, and market conditions. Understanding pricing is important for businesses and consumers alike, as it helps determine the worth of goods and services in the market.

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Objective of Price

1. Revenue Generation: One of the primary objectives of pricing is to generate revenue for the organization. By setting the right price for products or services, a company aims to maximize its sales and ultimately increase its overall revenue.
2. Profit Maximization: Price plays a crucial role in maximizing profits. Organizations strive to set prices that not only cover their production costs but also generate a reasonable profit margin. This objective ensures the financial sustainability and growth of the business.
3. Market Penetration: Price can be used as a strategic tool to penetrate new markets or gain a larger market share. Setting competitive prices or offering discounts can attract new customers and encourage them to switch from competitors to the organization’s products or services.
4. Market Skimming: On the other hand, organizations may adopt a market skimming strategy by setting higher prices initially to target a niche market segment willing to pay a premium. This approach allows companies to capitalize on the early adopters and maximize profits before gradually lowering prices to reach a broader customer base.
5. Competitive Advantage: Pricing can be used as a means to gain a competitive advantage in the market. By offering unique value propositions and competitive prices, organizations can differentiate themselves from competitors and attract customers who perceive their products or services as superior in terms of quality or value.
6. Demand Management: Price can be used to manage demand for products or services. By adjusting prices, organizations can influence consumer behavior, stimulate demand during off-peak periods, or control demand during peak seasons. This objective helps in maintaining a balanced supply and demand equilibrium.
7. Customer Perception: Price has a significant impact on how customers perceive the value of a product or service. Setting the right price can create a perception of quality, exclusivity, or affordability, depending on the target market and positioning strategy. This objective ensures that customers perceive the organization’s offerings as being worth the price.
8. Ethical Considerations: Pricing decisions should also take into account ethical considerations. Organizations should ensure that their pricing practices are fair, transparent, and in compliance with legal and ethical standards. This objective promotes trust and long-term relationships with customers.
9. Long-term Sustainability: Price objectives should align with the long-term sustainability of the organization. Pricing strategies should consider factors such as cost fluctuations, inflation, market trends, and customer preferences to ensure that the organization can maintain its pricing structure over time.

Wikipedia- https://en.wikipedia.org/wiki/Price

Factors Influencing Pricing

1. Cost of Production: The cost of producing a product or delivering a service is a fundamental factor in pricing decisions. Organizations need to cover their production costs, including raw materials, labor, overhead expenses, and any other expenses associated with the production process. The price should be set at a level that ensures profitability while considering the cost structure.
2. Competition: The competitive landscape plays a significant role in pricing decisions. Organizations need to assess the prices set by their competitors for similar products or services. They may choose to set their prices lower to gain a competitive advantage or higher to position themselves as a premium brand. Understanding the competitive environment helps organizations determine their pricing strategy.
3. Customer Demand: Customer demand and willingness to pay are crucial factors in pricing. Organizations need to assess the demand for their products or services and understand how price sensitivity varies among different customer segments. By considering customer preferences and their perceived value, organizations can set prices that align with customer expectations and maximize sales.
4. Market Conditions: Market conditions, such as supply and demand dynamics, can influence pricing decisions. In a highly competitive market with low barriers to entry, organizations may need to set lower prices to attract customers. On the other hand, in a market with limited supply or high demand, organizations may be able to set higher prices. Understanding market conditions helps organizations adjust their pricing strategies accordingly.
5. Brand Positioning: The positioning of a brand in the market can impact pricing decisions. A premium brand may set higher prices to maintain an image of exclusivity and quality. In contrast, a budget brand may set lower prices to appeal to price-sensitive customers. The brand’s perceived value and target market influence the pricing strategy.
6. Product Differentiation: The unique features, quality, and value-added services associated with a product or service can influence pricing decisions. If a product offers distinct features or superior quality compared to competitors, organizations may justify setting higher prices. Product differentiation allows organizations to command a price premium based on the perceived value they offer to customers.
7. Legal and Regulatory Factors: Organizations must consider legal and regulatory factors when setting prices. Antitrust laws, price-fixing regulations, and price discrimination laws may impact pricing decisions.

Pricing Methods

1. Cost-Plus Pricing: Cost-plus pricing involves calculating the total cost of producing a product or delivering a service and then adding a markup to determine the selling price. This method ensures that the organization covers its costs and generates a desired profit margin. It is a straightforward approach but may not consider market demand or competition.
2. Market-Based Pricing: Market-based pricing involves setting prices based on the prevailing market conditions and customer demand. Organizations analyze the prices set by competitors for similar products or services and adjust their prices accordingly. This method aims to align with market expectations and maintain competitiveness.
3. Value-Based Pricing: Value-based pricing focuses on the perceived value that customers derive from a product or service. Organizations set prices based on the benefits, features, and overall value proposition offered to customers. This approach allows organizations to capture the value they provide and cater to different customer segments with varying price sensitivities.
4. Penetration Pricing: Penetration pricing involves setting an initially low price to enter a market and gain market share. This strategy aims to attract customers by offering a lower price than competitors. Over time, the organization may increase prices once it has established a customer base. Penetration pricing is often used in competitive markets or when introducing new products.
5. Skimming Pricing: Skimming pricing involves setting an initially high price for a new or innovative product and gradually lowering it over time. This method targets early adopters or customers willing to pay a premium for the latest technology or features. Skimming pricing allows organizations to maximize profits before competitors enter the market or prices become more competitive.
6. Bundle Pricing: Bundle pricing involves offering a package or bundle of products or services at a discounted price compared to purchasing them individually. This method encourages customers to buy more by offering cost savings and added value. Bundle pricing can help increase sales volume and customer satisfaction.
7. Psychological Pricing: Psychological pricing takes advantage of customers’ perception of prices. It includes strategies like setting prices just below a round number (e.g., $9.99 instead of $10) or using odd pricing (e.g., $9.95 instead of $10). These tactics create the illusion of a lower price and can influence customer purchase decisions.

Meaning of Promotion

• Promotion refers to the various activities and strategies used by organizations to communicate, advertise, and market their products or services to target customers. It plays a crucial role in creating awareness, generating interest, and ultimately persuading customers to make a purchase.
• Promotion encompasses a range of marketing tactics that are designed to reach and engage with potential customers. These tactics can include advertising, personal selling, sales promotions, public relations, and direct marketing. Each of these methods has its own unique characteristics and objectives.
• Advertising is one of the most common forms of promotion. It involves using paid media channels, such as television, radio, print, online platforms, and social media, to communicate messages about products or services to a wide audience. Advertising aims to create brand awareness, inform customers about product features, and influence their purchasing decisions.
• Personal selling, on the other hand, involves direct interaction between a salesperson and a potential customer. This method allows for personalized communication, building relationships, and addressing specific customer needs. Personal selling is often used in industries where products or services require a more consultative approach, such as high-end electronics or complex financial services.
• Sales promotions are short-term incentives that are designed to encourage immediate sales. These can include discounts, coupons, buy-one-get-one-free offers, loyalty programs, or limited-time promotions. Sales promotions create a sense of urgency and can attract customers who are price-sensitive or looking for a deal.
• Public relations (PR) activities are aimed at managing and enhancing the reputation and image of an organization. This can involve media relations, press releases, sponsorships, events, and community outreach programs. PR helps in building a positive brand image, establishing credibility, and maintaining relationships with the public and stakeholders.
• Direct marketing involves reaching out to potential customers directly through various channels such as email, direct mail, telemarketing, or SMS. This method allows for targeted communication and personalized messaging, enabling organizations to tailor their promotions to specific customer segments.
• The ultimate goal of promotion is to create awareness, generate interest, and drive customer action. It is essential for organizations to carefully plan and execute their promotional strategies to ensure they reach the right audience, convey the desired message, and achieve their marketing objectives.
• When developing a promotion strategy, organizations need to consider factors such as their target market, competition, budget, and desired outcomes. It’s important to select the most effective promotional mix that aligns with the organization’s goals and resources.

Meaning of Promotion Mix

• The promotion mix refers to the combination of promotional tools and tactics that organizations use to communicate with their target audience and promote their products or services. It involves selecting and integrating different promotional methods to effectively reach and engage customers. Let’s explore the meaning of the promotion mix in more detail!
• The promotion mix is made up of several key elements, each with its own purpose and characteristics. These elements include advertising, personal selling, sales promotion, public relations, and direct marketing. By utilizing a mix of these promotional tools, organizations can create a comprehensive and impactful marketing campaign.
• Advertising is one of the most well-known components of the promotion mix. It involves using paid forms of communication, such as television, radio, print media, online platforms, and social media, to reach a wide audience. Advertising helps build brand awareness, inform customers about product features and benefits, and influence their purchasing decisions. It allows organizations to create compelling messages and visuals to grab the attention of potential customers.
• Personal selling is another important element of the promotion mix. It involves direct interaction between a salesperson and a potential customer. Personal selling allows for personalized communication, building relationships, and addressing specific customer needs. This method is particularly effective for products or services that require a more consultative approach or involve a higher level of customer engagement.
• Sales promotion refers to the use of short-term incentives to encourage immediate sales. This can include discounts, coupons, buy-one-get-one-free offers, loyalty programs, or limited-time promotions. Sales promotions create a sense of urgency and can attract customers who are price-sensitive or looking for a deal. They are designed to stimulate immediate action and generate sales in a shorter time frame.
• Public relations (PR) activities are an integral part of the promotion mix. PR focuses on managing and enhancing the reputation and image of an organization. It involves activities such as media relations, press releases, sponsorships, events, and community outreach programs. PR helps build a positive brand image, establish credibility, and maintain relationships with the public and stakeholders.
• Direct marketing is the final component of the promotion mix. It involves reaching out to potential customers directly through various channels such as email, direct mail, telemarketing, or SMS. Direct marketing allows for targeted communication and personalized messaging, enabling organizations to tailor their promotions to specific customer segments. It provides an opportunity to establish direct contact with customers and build long-term relationships.

Tools of Promotion Mix

1. Advertising: This involves using paid channels such as TV, radio, print media, online platforms, and social media to reach a wide audience and promote products or services.
2. Personal Selling: This is a direct form of communication where salespeople interact with potential customers, providing personalized information and addressing their specific needs.
3. Sales Promotion: This includes short-term incentives like discounts, coupons, contests, or loyalty programs to encourage immediate sales and create a sense of urgency.
4. Public Relations (PR): PR activities focus on managing the organization’s reputation and building positive relationships with the public through media relations, sponsorships, events, and community outreach programs.
5. Direct Marketing: This involves reaching out to potential customers directly through channels like email, direct mail, telemarketing, or SMS, allowing for targeted and personalized communication.
6. Social Media Marketing: Utilizing social media platforms like Facebook, Instagram, Twitter, or LinkedIn to engage with customers, build brand awareness, and promote products or services.
7. Content Marketing: Creating and sharing valuable content such as blog posts, articles, videos, or info graphics to attract and engage customers, establish thought leadership, and drive brand loyalty.
8. Influencer Marketing: Collaborating with influential individuals or social media personalities to promote products or services to their followers and leverage their credibility and reach.
9. Sponsorships and Partnerships: Associating the brand with events, sports teams, or other organizations to enhance brand visibility, reach a specific target audience, and create positive associations.
10. Publicity: Generating media coverage and attention through newsworthy events, press releases, or media relations, which can help increase brand exposure and credibility.

Objective of Marketing Promotion

1. Build Awareness: One of the main objectives of market promotion is to make sure that people know about your product or service. By using various promotional tools like advertising, social media, and public relations, you can reach a wide audience and let them know that you exist.
2. Generate Interest: Once people are aware of your product or service, the next step is to generate interest. You want to capture their attention and make them curious about what you have to offer. This can be done through compelling messaging, creative advertising campaigns, and engaging content.
3. Stimulate Demand: The ultimate goal of market promotion is to create a desire for your product or service. You want people to feel like they need what you’re offering and that it will add value to their lives. By showcasing the benefits, unique features, and competitive advantages of your offering, you can stimulate demand and drive sales.
4. Establish Brand Recognition: Market promotion is also about building a strong brand presence. You want people to recognize your brand and associate it with positive attributes. This can be achieved through consistent branding, memorable advertising campaigns, and delivering a great customer experience.
5. Differentiate from Competitors: In a competitive market, it’s important to stand out from the crowd. Market promotion helps you differentiate your product or service from competitors by highlighting its unique selling points and advantages. By showcasing what sets you apart, you can attract customers who resonate with your brand and offerings.
6. Drive Sales: Ultimately, the objective of market promotion is to drive sales and increase revenue. By creating awareness, generating interest, and stimulating demand, you can encourage customers to make a purchase. This can be achieved through various promotional tactics like discounts, limited-time offers, or loyalty programs.
7. Foster Customer Relationships: Market promotion is not just about acquiring new customers, but also about building long-term relationships with them. By providing exceptional customer service, personalized communication, and ongoing engagement, you can foster loyalty and encourage repeat purchases.
8. Expand Market Share: Another objective of market promotion is to expand your market share. By reaching new audiences, targeting different demographics, or entering new geographic markets, you can increase your customer base and grow your business.

Media Selection

1. Understand Your Target Audience: The first step in media selection is to have a clear understanding of your target audience. Who are they? What are their demographics, interests, and behaviors? By knowing your audience, you can identify the media channels they frequent and tailor your promotional efforts accordingly.
2. Research Different Media Channels: Once you know your audience, it’s time to research different media channels. There are various options available, such as television, radio, print publications, social media platforms, websites, and mobile apps. Each channel has its own strengths and weaknesses, so it’s important to consider factors like reach, cost, and effectiveness.
3. Consider Traditional Media: Traditional media channels like television, radio, and print publications still hold value in certain contexts. Television ads can reach a wide audience and have a visual impact, while radio ads can be effective for targeting specific demographics or geographic areas. Print publications, such as newspapers and magazines, can be useful for reaching niche audiences.
4. Embrace Digital Media: In today’s digital age, digital media channels play a significant role in market promotion. Social media platforms like Facebook, Instagram, Twitter, and LinkedIn allow you to target specific demographics and engage with your audience through content, ads, and influencer partnerships. Websites and mobile apps can also be effective for reaching and engaging your target audience.
5. Consider Content Marketing: Content marketing involves creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience. It can be done through blog posts, articles, videos, podcasts, and more. Content marketing helps establish your brand as a thought leader and builds trust with your audience.
6. Leverage Influencer Marketing: Influencer marketing involves partnering with individuals who have a strong online presence and a significant following in your target market. Collaborating with influencers can help you reach a wider audience and build credibility for your brand. It’s important to choose influencers whose values align with your brand and whose audience matches your target market.
7. Analyze Metrics and Data: Once you’ve implemented your media selection strategies, it’s crucial to regularly analyze metrics and data to evaluate the effectiveness of your promotional efforts. This can include tracking website traffic, social media engagement, conversion rates, and customer feedback. By monitoring these metrics, you can make informed decisions and optimize your media selection for better results.

Media Selection Management

1. Define Your Objectives: Clearly define your marketing objectives and goals. Are you looking to increase brand awareness, drive website traffic, generate leads, or boost sales? Knowing your objectives will help you select the right media channels.
2. Understand Your Target Audience: Conduct thorough market research to understand your target audience’s demographics, interests, behaviors, and media consumption habits. This will help you identify the most effective media channels to reach them.
3. Analyze Media Consumption Patterns: Study the media consumption patterns of your target audience. Do they prefer traditional media like TV, radio, and print, or are they more active on digital platforms like social media, websites, and mobile apps? This analysis will guide your media selection.
4. Consider Reach and Frequency: Evaluate the reach and frequency of different media channels. Reach refers to the number of people who will be exposed to your message, while frequency refers to how often they will see it. Strike a balance between broad reach and sufficient frequency for effective communication.
5. Assess Cost and Budget: Consider the cost of advertising on different media channels and align it with your budget. Compare the cost per thousand impressions (CPM) or cost per click (CPC) to determine the most cost-effective options.
6. Evaluate Targeting Capabilities: Assess the targeting capabilities of various media channels. Can you specifically target your desired audience based on demographics, interests, location, or other relevant criteria? The more precise your targeting options, the better your media selection.
7. Leverage Data and Analytics: Utilize data and analytics to inform your media selection decisions. Analyze past campaign performance, customer insights, and market trends to identify the most effective channels for your specific goals.
8. Consider Integration and Consistency: Ensure your media selection aligns with your overall marketing strategy and brand image. Create a consistent message and brand experience across all selected media channels to maximize impact and reinforce your brand identity.
9. Explore Cross-Channel Promotion: Consider combining multiple media channels to create a cross-channel promotional campaign. This can enhance brand visibility and reinforce your message across different touch points, increasing the likelihood of audience engagement.
10. Monitor and Optimize: Continuously monitor the performance of your media selection. Track key metrics such as reach, engagement, conversion rates, and return on investment (ROI). Use this data to optimize your media selection strategy and make informed adjustments for better results.