Promotion and pricing are two key aspects of marketing that work together to help businesses effectively sell their products or services. Promotion refers to the ways a company communicates about its offering to potential customers, while pricing determines how much the company will charge for that offering.
What is promotion?
Promotion involves communicating information about a product or service to increase awareness, generate interest, and ultimately drive sales. The main goals of promotion are to:
- Inform potential customers about the existence of a product or service
- Convey the key benefits, features, and competitive advantages of the offering
- Persuade qualified prospects to purchase the offering
- Encourage repeat purchases among existing customers
Promotional strategies and tactics can be categorized into several main types:
Advertising
Advertising refers to paid messaging that is transmitted through various forms of mass media, such as print ads, TV commercials, radio spots, online ads, and mobile ads. Businesses pay to place these ads in channels where they will reach their target audience. The goal is to increase exposure and interest in the company’s products or services.
Personal Selling
Personal selling involves direct interaction between sales representatives and potential customers via in-person meetings, phone calls, emails, and more. Sales reps educate prospects on the company’s offering, respond to questions and concerns, and attempt to close sales. Unlike advertising, personal selling is a two-way communication method that allows for tailoring messages to individual customers.
Sales Promotion
Sales promotions refer to short-term incentives created to encourage the purchase or sale of a product or service. Examples include discounts, coupons, contests, product samples, loyalty programs, and more. Sales promotions attract consumer attention and provide motivation to buy the product.
Public Relations
Public relations (PR) focuses on building a positive public image for a company to generate goodwill. PR activities include media relations, event planning, writing press releases, managing social media, community outreach, and more. The goal is to develop positive relationships with stakeholders like customers, investors, journalists, and the general public.
Direct Marketing
Direct marketing refers to promotional methods that communicate straight to consumers, often on an individual level. This includes mail, email, text messaging, fliers, catalogs, and telephone. The messages are tailored specifically based on consumer data to more effectively influence buying decisions.
Content Marketing
Content marketing involves creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience. This content establishes the company as a trusted industry thought leader while also promoting its products or services.
Social Media Marketing
Social media marketing is the use of social networks like Facebook, Twitter, LinkedIn, and Instagram to connect with current and potential customers. This provides a platform to share content, engage in conversations, and build communities around brands.
Search Engine Optimization
Search engine optimization (SEO) is the process of improving a website’s organic visibility and ranking in search engine results pages (SERPs). By applying SEO best practices, companies can increase website traffic from search engines like Google.
Referral Programs
Referral marketing programs encourage existing customers to promote products or services to their personal networks through word-of-mouth. Typically rewards are offered for successful referrals that drive new business.
What factors determine which promotional strategies and tactics to use?
Choosing the optimal promotional mix for a company involves weighing several key factors:
- Target audience – Who exactly are you trying to reach with marketing efforts? Different groups respond better to certain strategies.
- Product/service – What are the specific features and benefits that should be emphasized?
- Message – What are the key points or brand image the promotion should communicate?
- Competition – What types of promotion are competitors utilizing?
- Budget – How much can be realistically spent on marketing activities?
- Timing – When would promotional efforts be most effective? Should campaigns align with seasonality or other events?
- Resources – Does the company have the required skills, staff, and technology to implement different tactics?
Analyzing these factors enables marketers to determine the optimal promotional mix – the combination of tactics that will deliver the greatest impact. The mix may involve utilizing multiple strategies simultaneously or focusing heavily on just a few specific channels. Marketers also regularly re-evaluate the promotional mix to adapt to changing market conditions over time. Testing and tracking results is crucial to refine approaches and maximize return on investment.
What are the main pricing strategies and approaches?
When bringing a new product or service to market, companies must establish pricing strategies and approaches to determine optimal prices. The main pricing strategies include:
Cost-Based Pricing
Cost-based pricing is exactly what it sounds like – prices are set based primarily on the costs incurred to produce, distribute, and sell the product. Profit margins are added to the total cost to reach the retail price. This method ensures the business covers costs and achieves profit goals, but does not consider consumer demand or competitors’ prices.
Competition-Based Pricing
With competition-based pricing, also known as benchmark pricing, companies set prices based on competitor prices for similar products. The goal is to keep prices in line with competitors to remain attractive in the marketplace. However, this strategy does not account for differences between cost structures or product positioning.
Value-Based Pricing
Value-based pricing focuses on the perceived value of the product or service in the customer’s mind rather than internal costs or competitor prices. Companies charge higher prices for offerings that provide superior value, quality, or benefits compared to other options in the market.
Dynamic Pricing
Dynamic pricing involves frequently adjusting prices in response to market conditions such as demand, inventory levels, and competitor actions. Airlines and hotels commonly use dynamic pricing to set higher prices when demand peaks. Dynamic pricing allows maximizing both profits and inventory utilization.
In addition to these broad strategies, pricing approaches or models include:
- Premium Pricing – Setting high prices to indicate exceptionally high quality, prestige, and status.
- Penetration Pricing – Setting low introductory prices to rapidly gain market share in a category.
- Economy Pricing – Offering no-frills, low-priced products aimed at budget-conscious consumers.
- Psychological Pricing – Pricing based on consumer perceptions – like pricing at $99 instead of $100.
- Bundle Pricing – Selling multiple products or services together in packaged deals.
- Captive Product Pricing – Setting high prices for products that must be used with a main product, like blades for razors.
Companies combine strategies and approaches to develop optimal pricing structures tailored to their unique business context and market dynamics.
How do promotion and pricing work together to achieve marketing objectives?
Promotion and pricing are fundamentally connected – proper coordination between the two is imperative for companies to meet their marketing goals. Some key ways promotion and pricing interact include:
- Promotions like sales, coupons, and discounts can be used to market reduced prices for price-sensitive customer segments.
- High-impact promotions are needed to communicate premium pricing strategies that set higher than average prices.
- Promotions can highlight dynamic price changes and value-based pricing models to convince customers of fair price points.
- Free or low-cost trial promotions demonstrate the value proposition and justify subsequent higher regular prices.
- Promotions advertising price increases must be carefully timed and communicated to avoid unfavorable customer reactions.
Additionally, marketers must ensure cohesive messaging in pricing and promotions. If sales promotions constantly market low price deals, it undermines premium pricing strategies. And promotions advertising high quality and exclusivity conflict with penetration pricing models relying on low introductory pricing. Consistent and reinforcing pricing and promotional strategies enhance marketing effectiveness.
Below is a table summarizing key factors for aligning pricing and promotional strategies:
| Pricing Strategy | Compatible Promotional Strategies |
|---|---|
| Premium Pricing | Focus messaging on prestige, status, and exclusivity. Use high-end channels liked luxury magazines and retailers. |
| Penetration Pricing | Promote introductory deals and pricing. Use broad channels like radio, telemarketing, and digital ads. |
| Economy Pricing | Emphasize affordability and value for money in advertising. Partner with budget retailers. |
| Dynamic Pricing | Use web banners, email, and apps to notify customers of real-time price changes. |
| Value-Based Pricing | Messaging should focus on product benefits, quality, and fair prices. Utilize social media and influencer marketing. |
Conclusion
Promotion and pricing are core marketing components that work hand-in-hand to influence sales. Promotional strategies raise awareness and communicate key messages about a company’s products or services to the right audiences. Pricing establishes monetary value for those offerings. Aligning pricing and promotions is essential for consistency in positioning and messaging. With thoughtful coordination, companies can optimize both product visibility as well as profit margins. Savvy marketers continuously evaluate and refine their promotional mix and pricing tactics to keep attracting customers and achieving business goals in an ever-evolving marketplace.