1.3.2 Promotion + 1.3.3 Pricing Stratagies Flashcards
What is the definition of promotion
The attempt to draw attention to a product or a business in order to gain new customers or retain existing
What are the objectives of promotion
1.To obtain and retain customers
2.To inform consumers about a new product
3. Reach a widely dispersed target audience (TV)
4. Remind customers about the product
5. Show that a product is better than its competitors
6. Develop or improve the image of a firm
What is above the line promotion
Advertising through the media such as radio or newspapers
What are the 2 basic functions of advertising
To be informative and persuasive
What are some mediums of advertising
Television
Newspapers
Cinemas
Radio
Internet
What is below the line promotion
Promoting through any method that does not involve advertising
What are the forms of below the line promotion
Sales promotion
Public relations
Direct mailing
Merchandising and packaging
What are the factors effecting choice of promotion
Cost
Marketing budget
Target audience
Advertising of competitors
The law
What is pricing strategy
A pricing approach used in order to achieve marketing objectives
What is pricing tactic
A pricing approach used to achieve specific short term objectives
What is price skimming
Charging a high price for a product while it is new to the market
What is penetration pricing
Charging a low price in order to break into the market, attracting customers and therefore achieving market share
What is cost-plus pricing
Occurs when the firm calculates the cost of making the good and then adds on a mark-up for profit
What is the formula for cost plus pricing
Cost of production per unit + % mark-up
What is competitive pricing
A strategy whereby firms follow the price set by the market leaders or by the other firms in a highly competitive market
What is predatory pricing
Occurs when a firm sets its prices lower than those of its competitors, often below average cost, in the hope that one or more firms will be driven out of the market because it cannot follow suit
What is psyhcological pricing
Setting the price at a level that appears to be lower to the customer (5 or 9)
How does the costs of production determine the most appropriate pricing strategy
Firms must make a profit to survive in the long term
Cost plus pricing is often used
What does the size of the profit mark-up depend on
The level of competition
The price customers are prepared to pay
The firms objectives
How does the PED determine the most appropriate pricing strategy
If the product has price inelastic demand then the firm can raise its price and then total revenue will also increase e.g. toothpaste
Price elastic products will benefit from price cuts
How does differentiation and USP determine the most appropriate pricing strategy
A USP means that a firm can charge a higher price
How does the level of competition determine the most appropriate pricing strategy
Highly competitive markets are likely to see competitive pricing
How does the strength of the brand determine the most appropriate pricing strategy
Strong brands can charge a higher price than weak ones
Promotional techniques are used to strengthen the brand
How does the stage in the product life cycle determine the most appropriate pricing strategy
Firms may adjust the price of a product as it goes through its life
Young products may use penetration pricing to enter a market
A product with growing sales may now be able to increase its price
