The Advertising and Promotion of Print since the Fifteenth Century

Walker, George A. (2010)
Papers of the Bibliographical Society of Canada Spring 2010, v48 i1, p212(3) 

Robin Myers, Michael Harris, and Giles Mandelbrote, eds. Books for Sale: The Advertising and Promotion of Print since the Fifteenth Century. New Castle: Oak Knoll Press; London: The British Library, 2009. 256 pp.; US $49.95 ISBN 9781584562658
For the book lover, looking for a book that inspires and entertains is a passion that never dies. How we discover book treasures is a combination of serendipiry and the cunning promotional efforts of the publisher and bookseller. It will come as no surprise then that the history of advertising and promotion in the book trade is rich with remarkable stories. Books for Sale is a collection of papers delivered at the thirteenth annual Book Trade History conference held at the Foundling Museum in London, England, in November 2008. As the subtitle suggests, the topics covered span from incunabula to the Internet and give us a broad picture of the experiments and innovations in book promotion that have driven sales for the past five hundred years.
Robin Myers sets the tone for this collection by providing a solid introduction to the study of the business of bookselling and introducing us to the topics covered by the eight authors. The first essay, by Lotte Hellinga, gives us an ample account of the surviving advertisements (44 in total) from the fifteenth century. Julianne Simpson traces the sale and distribution of Christopher Plantin's Biblia Regia completed in 1572. Simpson provides us with evidence of Plantin's shrewd business acumen and his innovative use of printed advertisements for books. Ali this information she collected from her research at the Plantin archives in Antwerp.
When does printed information become advertising? Michael Harris addresses this issue as a subtext in his essay on eighteenthcentury advertising and throws light on the symbiotic relationship of advertising in the promotion of printed material and consumer goods. This essay is not about the advertising of books as much as it is about the role of advertising in print. Harris examines the business of John Houghton and how his printed matter diversified and cross-subsidized other ventures such as medical cures. The essay is illustrated with reproductions from various publications and gives usa picture of the blurred lines between what is information for the public good and what is mercantile commercialism. Building on this, Phillippa Plock's essay inspects the world of eighteenth-century trade cards preserved in Lord Rothschild's Waddesdon Manor in Buckinghamshire, England. Plock focuses on the Parisian book trade and the use of "visual rhetoric" to persuade wealthy recipients to purchase books. Six reproductions of these cards illustrate this style of advertising and give usa glimpse into their power to convince and intrigue.
Charles Benson invites the reader to explore the Irish book trade and its expansion in the nineteenth century. He is the Keeper of Early Printed Books at Trinity College in Dublin, Ireland, which gives him a unique advantage to peruse the collection of advertising ephemera there. Benson discusses the considerable advertising expenditure made by Irish publishers to promote their projects by the use of newspapers, magazines, wrappers, inserts and subscriptions and promotional offers. One interesting detail about the publication of Deighan's A Complete Treatise on Arithmetic (1804) is that the publisher printed the names of subscribers in the book if they paid the full price in advance. Deighan's book also contained advertisements (as was the custom) for other editions. Benson also describes how the printing of testimonials and endorsements was a popular practice to encourage buyers. Although these new advertising methods were not unique they are an example of how the publishing trade in Ireland flourished as it embraced the emerging age of persuasion.
Alan Powers discusses the appearance of a powerful device for catching the reader's eye and providing a stage for endorsements and promotional blurbs--the dust jacket. It is interesting to note that Marshall McLuhan declared the future of the book to be: "the blurb." The importance of the dust jacket as an advertisement and a surface for the display of design and art was underappreciated. Today we take the dust jacket for granted as a mark of a properly packaged, hardcover trade book, but there was a time when it was an innovation, a sign of modernist novelty by which the publishing industry and readers distinguished the new from the old. Many despised it and thought it a waste of paper. Powers explains with illustrations of popular jackets how the paper wrapper book jacket emerged as an advertising device. Today, of course, early dust jackets are prized items for collectors, precisely because so few survived the initial contempt with which they were greeted.
What does the world of literary prizes have to do with bookselling? Everything, it seems, and Peter Straus outlines their impact on sales in Britain and its tangent markets. Straus's experience as a literary agent is evident in his insider's understanding of book marketing and the impact a prize may (or may not) have on sales. A breakdown of the implications of the Booker prize on Rushdie's Midnight's Children gives the reader a care insight into the actual numbers publishers must consider when developing their profit and loss projections. This is a good article that could be expanded to include the impact of the new mass-market technologies of the Internet and mobile devices and how these have contributed to the impact of literary awards on sales.
The impact of the Internet is the focus of Udo Gollmann's article. Gollmann is an ABE Books employee in Europe who provides a survey of the effects of digital technology on book sales. Gollmann predicts that the future of the printed book will remain intact and that it will only be a more treasured and sought after commodity as digital technologies improve. Missing from Gollmann's prediction is the impact of digital piracy on the book trade and the role of the Google settlement on future printed books sales. As publishers struggle to find a business model for book sales in the light of new technologies like the Amazon Kindle and the Apple iPad, it is becoming increasingly apparent that a seismic shift in the culture of bookselling is on the horizon. Complete with contributors' bios and an index, Books for Sale gives us the perspective to reflect upon the book technologies that have driven sales and changed our relationship with reading.
GEORGE A. WALKER
Ontario College of Art & Design

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Relationship between sale promotions, duration of receiving reward and customer preference: a case study on financial products

Boonlertvanich, Karin (2010)
 Journal of Academy of Business and Economics Jan 2010, v10 i1, p53(12)

Abstract: 

Under current competitive environment in the banking industry, coupled with the fact that dissimilarity between each bank's financial products has been gradually dissolved, many banks are now competing on sales promotion differentiation for their customer acquisition. The purpose of this study is to examine the influence of sale promotion and the duration of receiving reward on customer preference, as well as the contingent effect from different types of financial products. Types of sales promotion studied are monetary and non-monetary promotions, while the duration of receiving reward is separated between instantaneous and delayed reception. There are four types of financial products in this study: fixed deposits, credit cards, mutual funds and bancassurances. Utilizing three-way ANOVA analysis, the findings revealed that sales promotions in monetary terms are more preferable than those in non-monetary terms for all products. Also, an instant-reception of a reward is preferred over a delayed-reception. The contingent effect of product types has a significant impact on the relationship between the type of promotion and customer preference. Offering a monetary promotion on a credit card product is more effective than offering a monetary promotion on other products. However, the contingent role of the product category has no impact on the relationship between reward reception duration and customer preference.
Keywords: Sales promotions, monetary promotion, delayed-reward promotion, customer preference


External:
1. INTRODUCTION
Sales promotion is one of the key marketing mix used as a tool to increase short-run sales, to attract new customers and to retain existing customers, as well as a tool to stimulate repurchasing behavior. For the industry or business that is in its mature phase of the business cycle, product or service quality can no longer be the key differentiation. As a result, greater market competition in this kind of industry usually leads to the greater role of sale promotions. The classical style of promotions such as price reduction, refunds or sweepstakes have been transformed into a more complex and diverse form, such as reward point redemption or privileged service offerings (Kotler, 2000).
The effect of monetary promotion on consumer attitudinal and behavioral responses has been intensively studied (Dobson et al, 1978, Gupta, 1988). It is of particular importance for researchers to investigate how the monetary promotion, such as coupon promotion, affects customer perceived value on products and services and how it impacts brand loyalty in the long-run (Alvarez & Casielles, 2005, Darke & Chung, 2005, Dawes, 2004, Garretson & Burton 2003, Krishna & Zhang 1999).
In contrast, the effect of non-monetary promotions on customer preference has been less investigated (Palazon-Vidal & Delgado-Ballester, 2005). Despite their lower impact on customer preference, non- monetary promotions can be considered as an alternative promotional tool especially for preserving long- term brand equity under short-term price or promotional competition.
Existing research usually focused on the effect of different types of promotions on consumer preference in the consumer goods arena (Palazon-Vidal & Delgado-Ballester, 2005, Shu-ling, 2006). Palazon-Vidal & Delgado-Ballester (2005) studied the effect from different types of promotional rewards on consumer preference for generic detergents, paper towels, chocolates and perfumes. Shu-ling (2006) also studied the effects on tissue paper, mobile phones and the CD album market. This kind of research has been absent in studies of financial products, especially the impact of different types of sale promotions on customer preference among each financial product category. Since most of the financial product offerings are now very similar to each other, as financial institutions are subjected to more intense competition, the increase in sales promotion as a tool to increase market share or capture leadership in business has become a preferred strategy among many financial institutions.
The present study proposes that the effects from the different types of sales promotions may vary among different types of financial products, which may be in line with or different from those found in consumer product studies. Credit-related products, e.g. credit cards, may intensify the preferential difference between monetary and non-monetary promotion benefits compared to investment products, including deposits, mutual funds and bancassurances. In addition, it is also hypothesized that a contingent effect from product types on the relationship between the duration of receiving a reward and consumer preference may also exist. The intangible nature of financial products may underline various reference points for assessing the perceived value obtained from an instantaneous reward compared to a delayed reception of a reward. Therefore, the purpose of this study is to focus on the effects of sales promotions and duration of reward reception on customer preferences along with the contingent role of a financial product category.
Bank executives can apply the results from this research in their promotional strategy planning such as the determination on the reward reception period and the type of sales promotion in accordance with customer preference and product types. This helps to reduce the risk and cost from an ineffective promotion campaign, while balancing the tradeoff between monetary promotion and corporate image.
2. LITERATURE REVIEW
2.1 Type of Sales Promotions
Sales promotions can be a direct incentive offers that have value or special incentives for the sales force or distributors aiming primarily on stimulating immediate sales. In this study, only consumer promotions, i.e. direct promotions to the end-consumer of financial products, will be studied. According to Chandon et al (2000), sales promotions can be categorized into two types: monetary promotions and non-monetary promotions.
Monetary promotions are a kind of promotion that enables customers to purchase goods or services at a lower price than the regular price or receive some kind of cash-equivalent gift or voucher, which can be made at the point of sale or occur later. On the other hand, non-monetary promotions usually result in customers purchasing goods or services at the regular price and then receive some kind of courtesy or privilege that cannot easily be converted into cash.
Chandon et al (2000) found that the effectness of monetary sales promotions are similar to the effectiveness of a direct price discount. For non-monetary sales promotion, Palazon-Vidal & Delgado- Ballester-Vidal et al (2005) found that if the promotional reward is the same product as the main purchasing product, customers can evaluate the value of the promotion and may react to the promotion in a similar fashion as when receiving a monetary promotion. In contrast, the effectiveness of a non- monetary promotion, that is very different from the main purchasing product, can be difficult to assess.
Therefore, both monetary and non-monetary sales promotions have their own advantages for customers, but in different aspects.
2.2 Duration of reward receiving
Shu-ling (2006) studied the effect of non-monetary promotions and classified the duration of reward reception into to two types, namely, instant reward and delayed reward reception. D'Astous (2002) studied the effect of promotional premiums and separated the premiums into direct premiums and delayed premiums. Hence, with regard to the reward reception period or time-related sales promotion, two categories of reward reception can be considered:
1. Instant reward reception which enables customers to receive rewards or promotions immediately at the point of sale when they follow the terms of the promotion.
2. Delayed reward reception where the company will send or allow the customers to come back and pick up their reward or promotions for some time period after the sale occurrence.
Typically, the longer the time one needs to wait to receive the reward the less preference the customer has for the reward. This may be due to various factors such as the weariness of waiting, the deterioration of value according to time versus the value of money concept and, the most important factor, the worry or concern over actually receiving the reward at all (Shu-ling, 2006). However, since many financial institutions are now moving toward offering delayed-reception rewards due to corporate and product concern, it is important to study the effect of the duration of reward reception on customer preference across different product types.
2.3 Contingent role of product types
Kotler (2000) classified consumer goods into four main categories, as follows:
1. Convenience goods: products that customers frequently purchase and use with small effort to buy and little comparison shopping, and are suitable for mass promotion.
2. Shopping goods: products that customers will purchase only after comparing various products and brands available. They are usually less frequently purchased products, requiring more shopping effort, and suitable for advertising through local or specialty media and personal selling.
3. Specialty goods: products that customers seek out because of their unique characteristics or brand identification. It usually requires a special effort to purchase a strong brand preference and loyalty, low price sensitivity, and suitable for carefully targeted promotions and personal selling.
4. Unsought goods: products that customers are either unaware of or have little interest in actively pursuing, so that, heavy promotions are often required to sell them successfully.
In this study, despite the fact that financial products are mostly intangible products and are quite different than consumer goods, we tried to select four kinds of financial products that can resemble the aforementioned classification of consumer products. First, fixed-deposits were chosen as a representative of convenience products since they are one of the simplest forms of financial products that all banks offer. Moreover, under the current full-blanket deposit guarantee from the government for all bank deposit accounts, all depositors need not to consider or assess the credit risk of the financial institutions with whom they are establishing a deposit account.
Second, credit cards were chosen as a representative of shopping products due to the variety of types and features currently available among different banks. Third, mutual funds were chosen as a representative of specialty products. Even though mutual fund investments may seem to be popular in most developed countries, they are relatively new to Thai investors. Customers are required to put some effort into understanding investment policy and the risk and return tradeoffs. Finally, bancassurance, particularly life insurance, was chosen as an unsought product. This final product fits reasonably well with the reviewed definition and is usually used as an example of an unsought product in most literature.
Many researches have investigated the contingent effect of product types on the effectiveness among various sales promotions. Bell et al (1999) indicated that different product types result in a different level of sales promotion recognition. For convenience goods, promotional products that use the same product as the one being purchased will provide superior results. In contrast, for shopping products, promotional products that use different products from the one being purchased will provide more effectiveness. In addition, it has been found that instant reward reception yields better results in specialty products compared to convenience products.
Tietje (2002) reported that the relationship between the type of sales promotion and the duration of reward reception will be different for different kinds of products. Therefore, in this study, we investigated the contingent effect of product types on the impact of sales promotion and the duration of reward reception on customer preferences.
[Graphic omitted]2.4 Related Research
Chandon et al (2000) studied the two kinds of customer benefits obtained from sales promotions including utilitarian benefits and hedonic benefits. Also, the research studied two types of sales promotions which are monetary and non-monetary sales promotions. The research found that monetary sales promotions will be more effective for products that provide utilitarian benefits, while non-monetary promotions will be more effective for products providing hedonic benefits especially from a brand awareness aspect.
D'Astous and Landreville (2002) conducted research to investigate customer response to different types of sales promotions for low involvement types of products. The results show that direct premium, e.g. instantaneous reward, results in a more positive preference than delayed premium.
Palazon-Vidal & Delgado-Ballester (2005) found that sales promotions can be used as a marketing tool to enhance brand recognition since it stimulates customer preferences in the product offering. Also, the research revealed that monetary sales promotions would be effective only for utilitarian-based products. On the other hand, non-monetary sales promotions are effective for both utilitarian and hedonic based products.
Shu-ling (2006) studied the impact of non-monetary sales promotions on customer preferences in three types of consumer products, namely, convenience goods, shopping goods and specialty goods. The research results indicated that customers preferred to receive promotional products similar to their purchasing product for convenience and specialty goods, while they preferred to receive promotional products different than their purchasing product for shopping goods. In addition, instantaneous reward is more preferred to delay reward reception for all types of products.
3. RESEARCH OBJECTIVES
Based on reviewed theories and literature, this study aims to integrate various associated elements of sales promotion to the financial product context. As a result the objectives of this research are as follows:.
1. To study the influence of the type of promotions, both monetary promotions and non-monetary promotions, on consumer preferences.
2. To study the influence of the duration of reward reception, both instantaneous and delayed reception, on consumer preferences.
[Graphic omitted]3. To study the contingent impact from types of financial products on the relationship between types of sales promotions, duration of reward reception and consumer preferences.
4. RESEARCH FRAMEWORK AND HYPOTHESES
Although there are a number of research studies on the effects from different types of sales promotions, most of them studied a single aspect one at a time (D. 'Astous and Landreville, 2002; Dawes, 2004; Raghubir, 2004). Studies on a multi-aspect of sales promotions, especially with the contingent role of product types, was limited (Shu-ling, 2006)
In addition, since most of the past research were often done in the context of consumer products, the obtained results may or may not be applicable to financial products, which are intangible in nature and may also contain an embedded financial risk. The research framework of this research, as shown in Figure 1, aimed to achieved the stated objectives and fill in the gaps of knowledge for financial product marketing.
[FIGURE 1 OMITTED]
From the research objectives and the research framework, three research hypotheses can be offered as follows:
H1: Different types of sales promotions, either monetary or non-monetary promotions, have a different impact on customer preferences.
H2: Different durations of reward reception, either instantaneous or delayed reception, have a different impact on customer preferences.
H3: Different types of financial products affect the relationship between types of sales promotions and durations of reward reception on customer preferences.
5. RESEARCH DESIGN AND METHOD
5.1 Sampling and Data Collection
The conducted research surveyed customers who recently purchased at least one financial product during the last three months and had an understanding of all the products. A total sample of 400 surveys was collected from a population in Bangkok. The cluster sampling method was used to first select 10 out of 18 provinces within Bangkok, then a proportionate sampling was used to determine the numbers of required sampling in each province.
[Graphic omitted]In general, the majority of the samples were (1) female (62%), (2) between 25-30 years old (41.5%), (3) completed at least a college degree (70.5%), (4) are working as professionals in private companies (81.5%), and have monthly income between 20,0001-30,000 baht (28.7%), see Appendix A for details.
5.2 Measures
The questionnaire used in this study is divided into 3 parts.
Part 1 is a set of questions for assessing the knowledge of each type of financial products to make sure that respondents have enough product understanding. There were 14 questions.
Part 2 is a set of questions about demographic characteristics of respondents including gender, age, occupation, education level, and monthly income.
[Graphic omitted]Part 3 is composed of questions on customer preferences to promotional advertising by a picture made of 16 color images, without a specific brand of the financial institution, as shown in Appendix B and C. The respondents were requested to indicate the extent to which they prefer or not prefer, based on the offering sales promotions in each financial product type. For each item, a five-point Likert scales anchored by 1 = strongly prefer and 5 = strongly not prefer with 3 = neutral (neither prefer nor not prefer) as the midpoint were utilized. For the reliability evaluation of the questionnaire, the Cronbach's Alpha on customer preferences for each product type were computed and revealed the reliability of the questions, value between 0.8233 and 0.9529.
From Table 1, there are four forms of sales promotion for each financial product, resulting in 16 different print ads questionnaire, similar to Palazon-Vidal & Delgado-Ballester, 2005; Shu-ling, 2006.
6. RESEARCH RESULTS
Table 2 shows the customer preferences on each combination of the sales promotion and duration of reward reception for each product type. In general, it can be seen that monetary sales promotion has higher preferential score than non-monetary promotion and instantaneous reward reception also has higher preferential score than delayed-reward reception. Moreover, sales promotions for credit product, i.e. credit cards, make stronger preference compared to investment products, e.g. fixed deposits, mutual funds and bancassurance.
[Graphic omitted]Results of the first hypothesis testing using a paired sample t-test showed that the test statistic is equal to 8.428 and p-value is less than the 0.05 level of significance. This confirmed that different types of sales promotions have a different impact on customer preferences and monetary sales promotions are more preferred to non-monetary promotions.

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Promotion Mix

The Promotion Mix
The promotion mix is the specific blend of advertising, public relations, personal selling, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships.

• Advertising
• Sales promotion
• Public relations
• Personal selling
• Direct marketing

Advertising

Developing Advertising Programs

Setting Advertising Objectives

• An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific time.
• Informative advertising is used when introducing a new product category; the objective is to build primary demand.
• Comparative advertising directly or indirectly compares the brand with one or more other brands.
• Persuasive advertising is important with increased competition to build selective demand.
• Reminder advertising is important with mature products to help maintain customer relationships and keep customers thinking about the product.

Advertising strategy is the strategy by which the company accomplishes its advertising objectives. It consists of two major elements:

• Creating the advertising message
• Selecting the advertising media

Creating Advertising Message
Creative concept is the idea that will bring the message strategy to life and guide specific appeals to be used in an advertising campaign.
Characteristics of the appeals include

• Meaningful
• Believable
• Distinctive

Message execution captures the target market’s attention and interest, and can include the following execution styles.

• Slice of life
• Lifestyle
• Fantasy
• Mood or image
• Musical
• Personality symbol
• Technical expertise
• Scientific evidence
• Testimonial evidence or endorsement

Selecting Advertising Media
Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time.
Frequency is a measure of how many times the average person in the target market is exposed to the message.
Impact is the qualitative value of a message exposure through a given medium.
Selecting media vehicles involves decisions that present the media effectively and efficiently to the target customer and must consider the message’s

• Impact
• Effectiveness
• Cost 

Evaluating Advertising Effectiveness

• Communication effects indicate whether the ad and media are communicating the ad message well and can be tested before or after the ad runs.
• Sales and profit effects compare past sales and profits with past expenditures or through experiments.

Personal Selling

Salespeople can include an order taker such as someone standing behind the counter or an order getter whose position demands more creative selling and relationship building.

Salespeople can be more effective than advertising

• Learn about customer problems and adjust the marketing offer and presentation accordingly to meet the special needs of each customer.

Salespeople are an effective link between the company and its customers to produce customer value and company profit by

• Representing the company to customers
• Representing customers to the company

Sales Force Structure

Territorial sales force structure

• Each salesperson is assigned an exclusive geographic area and sells the company’s full line of products and services to all customers in that territory.
• Defines salesperson’s job
• Fixes accountability
• Lowers sales expenses
• Improves relationship building and selling effectiveness

Product sales force structure

• Each salesperson sells along product lines.
• Improves product knowledge
• Can lead to territorial conflicts

Customer sales force structure

• Each salesperson sells along customer or industry lines.
• Improves customer relationships

Complex sales force structure

• A wide variety of products is sold to many types of customers over a broad geographic area and combines several types of sales force structures.

Sales Promotion

• Sales promotion is the use of short-term incentives to encourage purchases or sales of a product or service.
• Product managers are under pressure to increase current sales.
• Companies face more competition.
• Competing brands offer less differentiation.
• Advertising efficiency has declined due to rising costs, clutter, and legal constraints.
• Consumers have become more deal-oriented.

Consumer Promotion Tools

• Price packs offer consumers savings off the regular price of a product.
• Premiums are goods offered either free or at low cost to buy a product.
• Advertising specialties are useful articles imprinted with the advertiser’s name, logo, or message that are given as gifts to consumers.
• Samples offer a trial amount of a product.
• Coupons are certificates that give buyers a saving when they purchase specified products.
• Cash refunds are similar to coupons except that the price reduction occurs after the purchase.
• Contests, sweepstakes, and games give consumers the chance to win something, such as cash, trips, or goods, by luck or through extra effort.
• Contests require an entry by a consumer.
• Sweepstakes require consumers to submit their names for a drawing.
• Games present consumers with something that may or may not help them win a prize.

Direct Marketing

Direct marketing consists of direct connection with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships.

• No intermediaries
• An element of the promotion mix
• Fastest-growing form of marketing

Benefits to Sellers

• Tool to build customer relationships
• Low-cost, efficient, fast alternative to reach markets
• Flexible
• Access to buyers not reachable through other channels

Benefits to Buyers

• Convenience
• Ready access to many products
• Access to comparative information about companies, products, and competitors
• Interactive and immediate

Forms of Direct Marketing

Direct Marketing Tools
Direct-mail marketing involves an offer, announcement, reminder, or other item to a person at a particular address.

• Personalized
• Easy-to measure results
• Costs more than mass media
• Provides better results than mass media

Catalog direct marketing involves printed and Web-based catalogs.

• Benefits of Web-based catalogs
• Lower cost than printed catalogs
• Unlimited amount of merchandise
• Real-time merchandising
• Interactive content
• Promotional features

Telephone direct marketing involves using the telephone to sell directly to consumers and business customers.

• Outbound telephone marketing sells directly to consumers and businesses.
• Inbound telephone marketing uses toll-free numbers to received orders from television and print ads, direct mail, and catalogs.

Direct-response television (DRTV) marketing involves 60- to 120-second advertisements that describe products or give customers a toll-free number or Web site to purchase products, and 30-minute infomercials such as home shopping channels.

• Less expensive than other forms of promotion
• Easier to track results

Kiosk marketing involves placing information and ordering machines in stores, airports, trade shows, and other locations.

Digital Direct Marketing Technologies

• Mobile phone marketing
• Podcasts
• Vodcasts
• Interactive TV

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Pricing Strategies

General pricing approaches

• Cost-based pricing
• Value-based pricing
• Competition-based pricing

 

Cost-based pricing

• Adding a standard markup to cost
• Ignores demand and competition
• Popular pricing technique because:
• Sellers more certain about cost than demand
• Simplifies pricing
• When all sellers use, prices are similar and competition is minimized
• Some feel it is more fair to both buyers and sellers

 

Value-based pricing

• Uses buyers’ perceptions of value rather than seller’s costs to set price.
• Measuring perceived value can be difficult.
• Consumer attitudes toward price and quality have shifted during the last decade.
• Introduction of less expensive versions of established brands has become common.

 

Competition-based pricing

• Going-Rate Pricing:
• Firm bases its price largely on competitors’ prices, with less attention paid to its own costs or to demand.
• Sealed-Bid Pricing:
• Firm bases its price on how it thinks competitors will price rather than on its own costs or on demand.
• May price at the same level, above, or below the competition

Factors to Consider When Setting Prices

Customer Perception of Value

• Value-based pricing uses the buyers’ perception of value, not the seller’s cost, as the key to pricing. Price is considered before the marketing program is set.
• Value-based pricing
• is customer-driven.
• Represents the price ceiling
• Cost-based pricing
• is product-driven.
• Represents the price floor

Customer Perception of Value

• Good-value pricing offers the right combination of quality and good service to fair price.
• Existing brands are being redesigned to offer more quality for a given price or the same quality for less price.

Customer Perception of Value

• Everyday low pricing (EDLP)
• a constant everyday low price with few discounts.
• High-low pricing
• higher prices everyday but frequent promotions to lower prices temporarily on selected items.

Other Internal and External Considerations Affecting Price Decisions

• External factors
• The market and demand
• Types of markets
• Analyzing the price-demand relationship
• Competitors’ strategies and prices
• Other environmental factors

The Market and Demand
Types of markets

• Pure competition
• Monopolistic competition
• Oligopolistic competition
• Pure monopoly

Pure competition is a market with many buyers and sellers trading uniform commodities where no single buyer or seller has much effect on market price.

 

Monopolistic competition is a market with many buyers and sellers who trade over a range of prices rather than a single market price with differentiated offers.

 

Oligopolistic competition is a market with few sellers because it is difficult for sellers to enter who are highly sensitive to each other’s pricing and marketing strategies.

 

Pure monopoly is a market with only one seller. In a regulated monopoly, the government permits a price that will yield a fair return. In a non-regulated monopoly, companies are free to set a market price.

 

Analyzing the Price-Demand Relationship

• Before setting prices, the marketer must understand the relationship between price and demand for its products.
• The demand curve shows the number of units the market will buy in a given period at different prices.
• Normally, demand and price are inversely related.
• Higher price = lower demand
• For prestige (luxury) goods, higher price can equal higher demand when consumers perceive higher prices as higher quality.

Price Elasticity of Demand

• Price elasticity of demand illustrates the response of demand to a change in price.
• Inelastic demand occurs when demand hardly changes when there is a small change in price.
• Elastic demand occurs when demand changes greatly for a small change in price.

 

Factors affecting price elasticity of demand

• Unique product
• Quality
• Prestige
• Substitute products
• Cost relative to income

Factors to consider:

• Comparison of offering in terms of customer value
• Strength of competitors
• Competition pricing strategies
• Customer price sensitivity

Market-skimming pricing
Set a high price for a new product to “skim” revenues layer by layer from the market.
Company makes fewer, but more profitable sales.
When to use:
Product’s quality and image must support its higher price.
Costs of smaller volume cannot be so high they cancel the advantage of charging more.
Competitors should not be able to enter market easily and undercut the high price.

Market-penetration pricing
Set a low initial price in order to “penetrate” the market quickly and deeply.
Can attract a large number of buyers quickly and win a large market share.
When to use:
Market must be highly price sensitive so a low price produces more market growth.
Production and distribution costs must fall as sales volume increases.
Must keep out competition and maintain low price or effects are only temporary.

Market-skimming VS Market-penetration

Product-line pricing
Involves setting price steps between various products in a product line based on:
Cost differences between products
Customer evaluations of different features
Competitors’ prices

 

Optional-product pricing
Pricing optional or accessory products sold with the main product (e.g., ice maker with the refrigerator).

 

Captive-product pricing
Pricing products that must be used with the main product (e.g., replacement cartridges for Gillette razors).

 

By-product pricing
Pricing low-value by-products to get rid of them and make the main product’s price more competitive.

 

Product bundle pricing
Combining several products and offering the bundle at a reduced price.

 

Product-adjustment pricing strategies

• Discount and Allowance pricing
• Segmented pricing
• Psychological pricing
• Promotional pricing
• Geographic pricing
• International pricing

 

 

 

 

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Distribution Strategies

Conventional Distribution Systems

• Consist of one or more independent producers, wholesalers, and retailers.
• Each seeks to maximize its own profits and there is little control over the other members.
• No formal means for assigning roles and resolving conflict.

 

Vertical Marketing Systems

 

Vertical marketing systems (VMS) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of:

• Corporate marketing systems
• Contractual marketing systems
• Administered marketing systems

Corporate vertical marketing system integrates successive stages of production and distribution under single ownership.

Contractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone.
Most common form is the franchise organization

Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power.
Franchise organizations link several stages in the production distribution process.

 

Conventional VS Vertical system

 

Horizontal Marketing Systems

• Horizontal marketing systems include two or more companies at one level that join together to follow a new marketing opportunity
• Companies combine financial, production, or marketing resources to accomplish more than any one company could alone.

 

Multichannel Distribution Systems

• Hybrid marketing channels exist when a single firm sets up two or more marketing channels to reach one or more customer segments.

Disintermediation

• Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones.

 

Number of marketing intermediaries

 

 

Intensive distribution is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible.

 

Exclusive distribution is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute products in territories

 

Selective distribution is a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products.

 

 

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Product Life-Cycle Strategies

Product life-cycle (PLC) is the course that a product’s sales and profits take over its lifetime.

• Product development
• Introduction
• Growth
• Maturity
• Decline

 

 

Introduction stage is when the new product is first launched.

Takes time

Slow sales growth

Little or no profit
High distribution and promotion expense

 

 

Growth stage is when the new product satisfies the market. Sales increase

New competitors enter the market
Price stability or decline to increase volume
Consumer education
Profits increase
Promotion and manufacturing costs gain economies of scale
Product quality increases
New features
New market segments and distribution channels are entered

 

 

Maturity stage is a long-lasting stage of a product that has gained consumer acceptance.
Slowdown in sales
Many suppliers
Substitute products
Overcapacity leads to competition
Increased promotion and R&D to support sales and profits.

 

 

Decline stage is when sales decline or level off for an extended time, creating a weak product.
Maintain the product
Harvest the product
Drop the product

 

 

Modifying Strategies

Market modifying strategy is when a company tries to increase consumption of the current product.

• New users
• Increase usage of existing users
• New market segments

Marketing mix modifying strategy is when a company changes one or more of the marketing mix elements.

• Price
• Promotion
• Distribution channels

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Product, Services and Branding Strategy

Products, Services and Experiences

 

A product is anything that can be offered in a market for attention, acquisition, use, or consumption that might satisfy a need or want.

 

Service is a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership.

 

Experiences represent what buying the product or service will do for the customer.

 

 

Level of Products and Services

 

• Core benefit: show the accurate time
• Actual product: Swatch, high quality that meet the Swiss watch standard, young and stylish design, packed in high-quality clear plastic box.
• Augmented product: 1 year international warranty, worldwide service center.

 

Product and Service Classification

 

Consumer products:

• Convenience products
• Shopping products
• Specialty products
• Unsought products

Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort.
Newspapers
Candy
Fast food

 

Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style.
Furniture
Cars
Appliances

 

Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
Designer watches
Branded fashion wear
High-end electronics

 

Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying.
Life insurance
Funeral services
Blood donations

 

Industrial products are products purchased for further processing or for use in conducting a business.
Classified by the purpose for which the product is purchased
Materials and parts
Capital
Raw materials

 

 

Branding Strategy: Building Strong Brand

 

Brand represents the consumer’s perceptions and feelings about a product and its performance. It is the company’s promise to deliver a specific set of features, benefits, services, and experiences consistently to the buyers.

 

 

Brand strategy decisions include:

• Brand positioning
• Brand name selection
• Brand sponsorship
• Brand development

 

 

Brand Positioning:
Product attributes
Product benefits
Product beliefs and values

 

Brand name selection
Suggests benefits and qualities
Easy to pronounce, recognize, and remember
Distinctive
Extendable
Translatable for the global economy

 

Brand sponsorship:
Manufacturer’s brand
Private brand
Licensed brand
Co-brand

 

Private brands provide retailers with advantages.
Product mix control
Slotting fees for manufacturers’ brands
Higher margins
Exclusivity

 

 

Branding Strategy: Brand Development

 

Line extensions: occur when a company extends existing brand names to new forms, colors, sizes, ingredients, or flavors of an existing product category.

 

Brand extensions: is using a successful brand name to launch a new or modified product in a new category.

 

Multibrands: New brand names introduced in the same product category. This offers a way to establish different features and appeal to different buying motives.

 

New brand: New brand names in new product categories. This is developed based on the belief that the power of its existing brand is waning and a new brand name is needed.

 

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