Marketing Management

Dr. Rana Shaaban

Price
• Companies should sell value not price
• It is the amount of money charged for a product/service
• Price remains one of the most important elements that determines a
firm’s market share and profitability
• Only element in marketing mix that produces revenue, all other
elements represent costs
• It’s one of the most flexible marketing mix elements, it can be changed
quickly
• A small % improvement in price can generate a large % increase in
profitability
Major Pricing Strategies
• Customer perceptions of the product’s value set the ceiling for its price
• If customer perceives that product price is greater than its value they wont buy it
• Product costs set floor for product price
• If company prices product below costs, the company’s profits will suffer
• Must set price between the 2 extremes putting into considertion external and internal factors as
competitors’ strategies and prices, the overall marketing strategy and mix, and the nature of market
and demand
 A. Customer value based pricing
• Use buyers’ perceptions of value as key to pricing
• Marketer can not design a product and marketing program, and then set price. Price is considered along with
all other marketing mix variables before the marketing program is set
• Cost based pricing: is product driven, the company designs product, adds up the costs of making it, and set
the price that covers the costs plus a target profit.
Marketers then must convince buyers that the product’s value at the price justifies its purchase, if it appears to be
too high, the customer must settle for lower markeups
• Value based pricing: reverses the cost based pricing by first assessing customer needs and value
perceptions. It then sets its target price based on customer percpetions of vale, the targeted value and price
drive decisions about what costs can be incurred and resulting product design
1. Good Value pricing
• Less expensive versions of established brand name products or new
lower price lines

• OR good value pricing can be involved with the redesigning of

existing brands to offer more quality for a given price or the same
quality for less

Apple offers products like the iPhone SE, which brings premium
features at a lower price point, appealing to budget-conscious
consumers who still want quality.
2. Value added pricing
• Rather than cutting prices to match competitors, they attach value
added features and services to differentiate their offerings and
support higher prices like certain luxury movie theatres

Apple frequently adds exclusive features, such as advanced processors

or cameras, to justify higher prices, especially in flagship models like
the iPhone Pro series.
B. Cost- Based Pricing
• Setting prices based on cost of producing, distributing and selling the
product plus a fair rate of return for the company’s effort and risk
1. Cost plus pricing
• Also named markup pricing
• Adding a standard markup to the cost of the product
• Like accountants and Lawyers
Its popular for many reasons:
ØSellers are more certain about costs than demand
ØWhen all firms in the industry use this pricing method, prices tend to
be similar, so competition is minimized
Competition based pricing
• Set prices based on competitors’ strategies, costs, prices and market
offerings.
• Consumers will base their judgements of a product’s value on the
prices that competitors charge for similar products
New Product Pricing Strategies
• Market- Skimming Pricing
Setting a higher price for a new product to skim maximum revenues layer by layer from
segments willing to pay the high price, the company makes fewer but more profitable
sales.
As when Apple first introduced iPhone, initial price was as high as $599, six months later
apple dropped it to $399 for 8GB model and $499 for 16GB to attract new buyers. Within a
year it dropped prices again to $199 for 8GB model and $299 for 16GB.

Apple’s new product launches often use a skimming approach, starting at a high price that
decreases over time, maximizing revenue from early adopters.

• This is for certain situations:

• Product’s quality and image support higher price
• Enough buyers want the product
New Product Pricing Strategies
• Market- Penetrating Pricing
Setting a low price for a new product in order to attract a large number of buyers
and a large market share

The high sales volume results in falling costs, allowing companies to cut their
prices even further. For example Samsung has used penetration pricing to quickly
buld demand for its mobile devices in fast growing emerging markets

This calls for many conditions to be present:

• Market must be highly price sensitive so that a low price produces more market
growth
• Low price must help keep out competition, and the penetration pricer must
maintain its low price position otherwise the price advantage will be temporary
Product Mix Pricing Strategies
Product Line Pricing
Setting price across an entire product line, management here must determine the price steps to set between the various product lines
Like packages for car wash
Apple creates price tiers within product lines, like the iPhone SE, iPhone 14, and iPhone 14 Pro Max, catering to different budgets and
preferences.

Optional Product Pricing

Pricing optional or accessory products sold with the main product. A car buyer may choose to order a navigation system and premium
entertainment system with the car
Apple offers accessories like AirPods and Apple Pencils as optional add-ons to enhance the experience of core products, with a premium attached.

Captive Product Pricing

Pricing products that must be used with the main product as printer cartidges and e-books. The main products may be priced low and high
markups are set on the supplies
In some cases, captive product pricing can be broken down to two part pricing: fixed fee and variable usage rate. Like Six Flags and other
amusement parks, you pay a daily ticket plus additional fees food and other in park features
Apple charges premium prices for accessories, such as chargers and dongles, creating a captive market for users who need proprietary items for
compatibility.
Product Mix Pricing Strategies
Product Bundle Pricing
Pricing bundles of product sold together like fast food meals, travel
agency trips and bath and body works bundle offers. They can promote
the sales of products consumers might not otherwise buy
Price Adjustment Strategies
Discount and allowance pricing
Compnies adjust basic price to reward customers for certain responses as
volume purchases, paying bill earlier, off season buying. These adjustments
are discounts and allowences

Discount: straight reduction in price on purchases during a stated period of

time or of large quantities. Quantity discount, functional/trade discount and
seasonal discount

Allowances: promotional money paid by manufacturers to retailers in return

for an agreement to feature the manufacturer’s product in some way. Trade in
allowances: are price reductions given for turning in an old item.
Price Adjustment Strategies
Segmented pricing
Companies adjusting prices to allow for differences in customers, products
and locations.

The company sells a product/service at two or more prices, even though the
difference in prices is not based on differences in costs

Customer segment pricing: different customers pay different prices for the
same product as prices that are charged lower for students and senior
citizens. Economy vs business class are also examples

Location based pricing: charging different prices for different locations,

theater vary seat prices and higher tuition for our state students

Time based pricing: Theaters charge less during daytime.

Price Adjustment Strategies
Psychological pricing
Here sellers consider the psychology of prices not simply the economics
Cosumers usually perceive higher priced products as having higher
quality

Reference prices are another aspect of psychological pricing (prices that

buyers carry in their minds and refer to when looking at a given product
like placing a highly priced product besides a model that has been
newly added and even higher in price to make the other look cheaper
3.99 signals a bargain
Price Adjustment Strategies
Promotional pricing
Temporairly pricing products below the list price, and sometimes even
below the cost to increase short run sales
A seller can simply offer discounts: to increase sales and reduce
inventory
Sellers can use special event pricing: November and December to
attract holiday shoppers in store
Limited time offers: such as online flash sales
Marketing Channels
Nature and Importance of Marketing Channels
Marketing Channel (Distribution Channel): set of interdependent
organizations that help make a product or service available for use or
consumption by the consumer or business user

Channel decisions affect other marketing decisions

Pricing depends on whether the company works with national discount

chains, uses high quality specialty stores, or sells directly to consumers
online
Nature and Importance of Marketing
Channels

Distribution channel decisions often involve long term commitments to

other firms. For example: Ford, Mcdonald’s and Nike can easily
change their advertising, pricing or promotion. They can scrap old
products and introduce new ones. But when the set up distribution
channels through contracts with franchises, independent dealers or
large retailers they cant easily replace these with company owned stores
or internet sites
Number of Channel levels

Each layer of marketing intermediary that performs some work in

bringing the product and its ownership closer to the final buyer is a
channel level

The number of intermediary levels indicates the length of the channel

 Marketing Channels
Direct Marketing Channel:
has no intermediary levels,
the company sells directly

Indirect Marketing Channel:

containing one or more
intermediaries

Apple uses a mix of direct

(Apple Stores, Apple.com)
and indirect channels
(authorized resellers like Best
Buy). For corporate clients,
Apple may work directly,
offering custom enterprise
solutions.
Multichannel Distribution System
A distribution system in which a single firm sets up two or more
marketing channels to reach one or more customer segments
Changing Channel organization:
Disintermediation
• Changes in technology, and growth in direct and online marketing
have great impact on the nature and design of marketing channels
• A trend is towards disintermediation: cutting out marketing channel
intermediaries by product or service producers or the dispplacement
of traditional resellers by new types of inetrmediaries
• Anghami and spotify are examples of disintermediating digital
download services
Channel Design Decisions
• Analyzing consumer needs: what the customer wants (values) from the channel (do they
want near by channels or centalized locations, would they rather buy in person, over the
phone or online, do they value breadth of assortment or specialization, do they want many
add on services “delivery, installation, repairs” or wil they seek them elsewhere). The faster
the delivery, the greater the assortment, the more add on services, the greater the
channel’s service level. But, this isnt always feasibleà consumers will often accpet lower
service for lower prices
Apple understands its customers’ preference for premium, experiential shopping, reflected in its
luxurious Apple Stores with hands-on product displays, expert support, and add-on services.

• Setting Channel objectives: Apple prioritizes high levels of customer service with direct control over
customer experience in Apple Stores. Its online store also offers centralized purchasing for convenience.
Channel Design Decisions
• Identifying Major Alternatives:
ØTypes of Intermediaries
Direct/Indirect
Phone, internet marketing, direct sales force, retailers, distributors and dealers
Stuck in the middle (competition between direct and indirect for same customers)
ØNumber of Marketing Intermediaries
• Intensive : Apple uses intensive distribution for popular items like AirPods, available across Apple
stores, online, and authorized resellers.
• Exclusive: Some high-end products or collaborations (e.g., Hermes Apple Watch bands) are
available exclusively through certain channels.
• Selective: Apple carefully selects authorized resellers to maintain control over the customer
experience and pricing.
Engaging Customers and Communicating
Customer Value
Building good customer relationships calls for more than just
developing a good product, pricing it attractively and making it
available to target customers

Companies must communicate their value propositions to customers

All communications must be planned and blended

Communication is important in building and maintaining relationships,

engaging customers and building profitable relationships is also crucial
The promotional mix
• Also called marketing communciation mix (it is the blend of promotional tools
that the company uses to engage consumers, persuasively communicate
customer value and build customer relationships)
ØAdvertising (paid/non personal à broadcast, print, online, mobile and outdoor)
ØSales Promotion (short–term incentivesà discounts, coupons, displays and
demonstrations)
ØPersonal Selling (intercations by sales force to enage customers à presentaions
and tradeshows)
ØPublic Relations (good relationship with publicsà press releases, sponsorships
and events)
ØDirect and Digital Marketing (engage directly with target consumers and
communities to gain imeediate response àdirect mail, online, social media and
mobile marketing)
The New Marketing Communciation Model
• Regardless of the communication channel, the key is to integrate all of
these media in a way that best engages customers, communicates the
brand message and enhances the customer’s brand experience
• Marketers are now content marketing managers: creating, inspiring
and sharing brand messages and conversations with and among
consumers across a fluid mix of paid, owned, earned and shared
channels
Integrated Marketing Communication
• Conflicting content from different sources of communciation can
result in confused company images, brand positions and customer
relationships
• Making IMC, important: carefully integrating and coordinating the
company’s many communications channels to deliver a clear,
consistent and compelling message about the organization and its
products (recognize touchpoint encounters)
Communication Process
Identify Target Audience :
• Current/potential users, those making buying decision/or influencing
it; they affect what will be said, how, when, where and who
Example:
Primary Audience: Nike targeted active individuals, athletes, and fitness enthusiasts aged 18-35, who value
sportswear that represents both high performance and personal style.
Secondary Audience: Beyond direct customers, Nike aimed to reach influencers in the sports and fashion
industries, as well as the general public interested in athletic lifestyles and trends.
Buyer Persona Example: One buyer persona might be “Jane,” a 25-year-old aspiring marathon runner who
values products that support high performance, sustainability, and align with her social values.
Determining Communication objectives
• Awareness: Nike wanted to renew public
awareness of its brand, especially among
younger consumers. They used memorable,
high-profile campaigns to ensure visibility.
• Knowledge: By highlighting stories of
perseverance from athletes like Colin
Kaepernick and Serena Williams, Nike educated
its audience on the brand’s values beyond
products.
• Liking: Nike aimed to create emotional
connections, encouraging viewers to see the
brand as a symbol of courage, resilience, and
social justice.
• Preference: The campaign highlighted Nike’s
commitment to values that resonated with the
target audience, aiming to make it the preferred
brand for those who support its mission.
• Conviction: Nike’s message reinforced
customer loyalty by validating the audience’s
belief in their products and values.
• Purchase: Ultimately, the campaign encouraged
customers to buy Nike products, viewing them
as part of a movement rather than just a brand.
Steps in Developing Effective Marketing
Communication
• Designing a message: (AIDA MODEL)
• Attention: The campaign featured high-profile athletes in striking, high-contrast black-and-white visuals, instantly capturing
attention.
• Interest: By focusing on powerful personal stories (e.g., Colin Kaepernick’s stance on social justice), Nike drew viewers in with
narratives.
• Desire: The message "Believe in something. Even if it means sacrificing everything" created an emotional appeal, inspiring
viewers to align themselves with the brand’s message of standing up for beliefs.
• Action: Nike directed viewers to visit their website, follow on social media, and, ultimately, purchase products as a way to support
and join the movement.

ØMessage Content:
Decide on appeals: rational (benefits), emotional (love, joy, humor, fear and guilt)
and moral (social cause)
Message Structure: draw conclusion or leave to audience; better ask questions,
presenting strong arguments first or last, admiting one sided argument or two sided
Message Format: headline, illustration, colors, message size, position, shape,
movement, motion, pace and sound
Steps in Developing Effective Marketing
Communication
• Choosing Communication Channels and Media
Personal Non Personal

2 or more people communicate directly with Media that carry messages without personal
eachother (face to face, phone, mail, emailor contact or feedback
internet)
Personal communication channels controlled by Print media (newspaper, magazines, direct mail)
the company: sales people Broadcast media (TV and Radio)
Display media (Billboards, signs and posters)
Personal communication channels not controlled Online media (email, websites), Events
by the company: consumer advocates, bloggers,
neighbours, friends, family, members, associates,
opinion leaders and influencers (WORD OF
MOUTH, BUZZ Marketing)
Choosing Communication Channels and Media
Applied to Nike example
• Social Media: Nike leveraged Instagram, Twitter, and Facebook to reach young, active audiences. They
shared campaign images, videos, and short clips that users could engage with and share.
• Television: The campaign included TV commercials aired during high-traffic events like sports
championships, maximizing exposure to a large audience.
• Outdoor Advertising: Nike used billboards in key locations globally, ensuring visibility to both urban and
suburban audiences.
• Digital Ads: Nike ran targeted ads on platforms like YouTube, ensuring the campaign reached users actively
engaged in fitness and sports content.
• Retail Presence: In-store promotions included campaign visuals, promotional materials, and specific
product displays that supported the campaign’s theme.
Steps in Developing Effective Marketing
Communication
• Selecting the message source
Messages delieverd by highly credible sources are more persuasive
(using dcotors, celebrities, cartoon characters, influencers)
But, companies must be careful when selecting celebrities, picking the
wrong spokeperson can result in embarassement and tarnished image
• Credible Sources: Nike chose athletes who embodied their campaign’s message of resilience and social
justice, including Colin Kaepernick, Serena Williams, and LeBron James. These personalities brought
authenticity and credibility, making the message more persuasive to the target audience.
• Brand Voice: Nike used a bold, straightforward tone in its messaging, consistent with its brand identity as a
promoter of courage and high performance.
Steps in Developing Effective Marketing
Communication
• Collecting feedback
Research effect on target, asking (whether the remember content, how many
times they saw it, what do they recall, how they felt, past and present attitudes
towards brand and company) and behavior changes after content (how many
people bought it, talked about it or visited the store)
• Social Media Engagement: Nike monitored social media metrics like shares, comments, and likes, gaining insight
into audience reception. The high level of engagement indicated that the message resonated.
• Sales Data: Nike’s online and in-store sales following the campaign were key indicators of its success. The
campaign led to increased sales and higher demand for products associated with the athletes featured.
• Surveys and Focus Groups: Nike conducted market research post-campaign to assess public perception,
understanding the campaign’s impact on brand loyalty and purchase behavior.
• Media Analysis: Coverage in the press and analysis of public discussions around the campaign allowed Nike to
measure brand sentiment and adjust strategies if needed.
Promotional Mix Strategies