You are here:

Managing a Business/answers required please send


QUESTION: D)Illustrate with examples, the difference between Product marketing & service marketing?
E)Illustrate with examples, the methods/ ways of evaluating advertising effectiveness?
F) Discuss the factors which contribute in deciding the "price" of the product? Discuss various pricing methods?
G)"Laco Industries" has planned to introduce new baby shampoo in the kids market. The company conducted a research in selected tierII cities in India to know the demand & successfully launched its product. In this context, discuss the characteristics of the good research?

I  will send  the balance  asap.


E)Illustrate with examples, the methods/ ways of evaluating advertising effectiveness?

Proving the commercial value of advertising, that is, its contribution to shareholder value, rather than just its creative merit.
The Need to Measure Advertising Effectiveness
-To justify money spent (budgets), ROI
-To determine if the advertising campaign should be stopped or continued
-To determine possible areas of modifications in the campaign messages
-In the longer interest of the profession (some evidence of the relevance of advertising & the practitioners

Problems With Measuring Advertising Effectiveness
•   Irrational consumer behaviour
•   Lack of widely acceptable scientific approach
•   The difficulties of determining consumer influences (multiple factors)
•   The validity and reliability of data gathered
•   Suitability of research methods & instruments used
•   Poor research skills & Sampling issues
•   Inadequate resources/funding
•   Setting non-SMART objectives
•   ----------------------------------------------------------------------------------------
•   Stages of Advertising Campaign Measurement
•   Pre-production/campaign stages - (copy testing, message & symbols testing etc)
•   Production/campaign stages - (visibility, awareness research etc)
•   Post-production/campaign stages (behavioural change, objectives, effectiveness research)
•   Feedback is needed at every stage to  influence future campaign efforts
Methods of Measuring Advertising Effectiveness
•   Checking advertising objectives  set before the campaign with results achieved afterwards
•   Measuring the volume of sales before the campaign & the volume afterwards
•   Calculating the number of returned coupons & ref no. quotes
•   Calculating sales leads and responses as a result of advertising (ad to sales ratio)
•   Asking customers directly …How did you hear about us…Were you…
•   -------------------------------------------------------------------------------------------------
•   Examples of Advertising Objectives & How Success can be Measured (1)
•   Stimulate an increase in sales- Number of enquiries from advert, - Number of enquiries converted into sales
•   Remind customers of the existence of a product- Test customer awareness both before and after the advertising campaign, - Number of enquiries
•   Inform customers- Test customer awareness, - Number of requests for further information
Examples of Advertising Objectives & How Success can be Measured (2)
•   Build a brand image- Test customer awareness of brand recognition and perceived values
•   Sales- Levels of repeat purchase
•   Build customer loyalty and relationship- Levels of customer retention
•   Change customer attitudes- Measure demographic profile of purchases
- Measure type of goods ordered by new purchasers
- Compare with previous data
•   --------------------------------------------------------------------------------------------------
•   Advantages & Disadvantages
Please note that for each method used in
measuring advertising effectiveness,
there are advantages and disadvantages,
what are they?
Research Methods
•   Primary & Secondary Research
•   Past sales records/Current sales records
•   Observations
•   Testing (pilot surveys), focus groups etc
•   Questionnaires
•   Interviews (one-on-one, group) etc

How to do an Advertising Effectiveness Study via Mail Survey (Conversion Study)
Audience: Primarily intended for tourism associations doing marketing for a variety of businesses.
Step 1: Identify the Issues
The issues identified for the  XXXXX  area were:
Effectiveness of TV and Outdoor Magazines to determine if they are worth the investment
Measure the use of area services
Measure the ability of promotion to attract new customers
Step 2: Determine How the Issues Will Be Measured
In the Ely study, the effectiveness measure was Return On Investment (ROI).
Return = $ spent by tourists adjusted for influence of information
•   Dollars spent in area
•   proportion of travelers influenced by information
Make sure that 1 or 2 questions on the survey will elicit data appropriate to each issue.
Step 3: Write the Survey
Print our   SURVEY  FORM  and customize it to fit your needs.
Step 4: Send Out a Sample Mailing
Choose a small group of people to test the survey. Evaluate the responses and correct any ambiguous questions.
Step 5: Determine Your Sample
In determining the size of the group to receive the survey (sample) there are a few rules of thumb:
•   Your goal should be a 50% response rate to your survey.
•   You must have at least 400 surveys for significant findings
•   Some of the surveys you mail will be returned as undeliverable
•   Therefore, the sample size should be at least 825.
Once your size is determined, you must select your sample. You must use a scientifically selected random sample to create your survey group.
You will most likely have to do 3 or 4 mailings to reach the 50% response rate.
* If you don't have 800+ inquiries from visitors, simply send a mailing to everyone. This is called a census. Your minimum response rate should still be 50%.
5A: Comparing different groups or populations
If you want to compare a subset of your population (i.e., you want to know how people responding to television ads responded compared to the population as a whole), use a second survey to measure the conversion rate of that sub-population.
Examples of comparisons from the XXXX Area Survey follow.
Conversion Rates by Population

Average Number of Nights in Area

Step 6: Sending Out the Survey
You must expect to send out multiple mailings to reach the 50% response rate goal. To send out multiple mailings you will need to keep track of who in your sample, has returned their survey to you. There are many ways to do this. Here is the method used in the XXXX   Area survey.
Assign each person in the sample a number
Write the number on the survey being mailed to that person
Mark off the names associated with the numbers on the incoming surveys
Send out the next mailing only to those whose survey has not been received
The mailings should be sent in 10 day increments. Here is the schedule we used along with the cumulative response rate for each mailing:
Number of Days Elapsed   Mailings   Response Rate After Mailing
0   1st Mailing   23%
10   2nd Mailing   39%
20   3rd Mailing   48%
30   4th Mailing (postcard)   51%
You may also want to consider sending an abbreviated survey as your last mailing. Send only 2 or 3 questions total on a self-addressed, stamped postcard.
Step 7: Gathering the Data
Enter your survey responses into a spreadsheet. A standard program such as Microsoft Excel or Quattro Pro is all that is needed.
Simply create a column for each question on the survey and put the responses for each survey in a separate row.
Step 8: Analyzing Your Data
In analyzing your data there are usually only two kinds of numbers you will generate:
Both require that you analyze the data for the question based on the number of people who responded to that question, not the number of people who sent in surveys.
Step 9: Extrapolating From Your Data
Once you have analyzed your data, you know that 35% of the people in your survey that reached you with inquiries actually came to visit. You can assume that at least 35% of your total inquiries have come to visit, but what about the 49% of your sample that did not respond? That's 49% of your total inquiries that are unrepresented in the data.
The people that did not respond are not as likely to have traveled to your area as the people who did respond. However, that does not mean that none of them came.
The simplest method follows.
All examples are based on the data in theXXXX Area Survey:
Conversion Rate of those who replied: 35%
Response Rate: 51%
Total Number of Inquires: 29,949.
1. Find the Best Case Scenario
Take the conversion rate from the respondents and assume that the conversion rate will hold for the non-respondents as well
If the conversion rate of those who responded is 35%, then in the "Best Case Scenario" that figure holds and 35% of both the respondents and non-respondents visited
2. Find the Worst Case Scenario
Take the conversion rate from your data (i.e., 35% of the respondents visited the area) and assume that no one else came.
If the conversion rate of those who responded is 35%, and no one else visited, then the conversion rate of the whole is 35% of the 51% response rate
35% x 51% = 17.85% Conversion Rate for all
3. Find the Most Probable Scenario
It is unlikely that either the Best or Worst Case Scenarios are true. The following is the most accurate method for finding the reality that lies in between the two extremes.
Add your best and worst case scenario conversion rates and divide by 2. The average of the two numbers is the best estimate you are going to get without resorting to statistics.
35% + 17.85% = 52.85%
52.85 / 2 =26.43%

Extrapolated Total Expenditures of Visitors in the XXXX Area

Inquiries Generated for Information on the XXXX Area
And How would you measure the effectiveness of the following Marketing Communication programmes:
1.Road shows for a newly launched car with a limited period “Price-Off”,
1.Survey  a   sample  number  of  people  about  the  ''awareness''.
2.Survey  a sample  number  of  people  about  the  ''intention'' of buying.
3.Survey  a  sample  of  current  users of   cars, about  the  possibility  of  ''TRADE-IN''.
4.Survey  all the  dealership  in the  region,  who  are  franchised  to sell
the  car ,  about  the  sales for  the  limited  period.
A sales production programme for a TV, Apex fare for an airline

1.Survey  a   sample  number  of  people  about  the  ''awareness''.
2.Survey  a sample  number  of  people  about  the  ''intention'' of buying  under  the  scheme.
3.Survey  a  sample  of  current  fliers , about  the  possibility  of   using  the scheme.
4.Survey  all the  travel  agents   in the  region,  who  are  franchised  to sell
the  tickets,  about  the  sales for  the  limited  period.
F) Discuss the factors which contribute in deciding the "price" of the product? Discuss various pricing methods?


Pricing is an important part of your marketing mix strategies. Pricing can help or hinder your product or service sales. Given that your product is good quality, that it has the features and benefits that your buyers want and need, that it is differentiated from your competition, and that it has a good cost structure and a good, strong promotion and distribution program, your pricing strategy for your product or service can help you sell it, or not. Pricing strategies can have a very direct impact on growing your market share.
Four alternative pricing strategiess for your business are:
•   Generic or economy pricing. This strategy treats generic or economy-type brands with a low price - the value to the buyer is in the low price. Your business approach to this pricing strategy must be rooted in a low cost structure, minimal features, minimal promotion but still solid (not extravagant) benefits.
•   Differential Pricing. With this strategy, you might choose to price your product differently by buyer type (e.g. retail store, online store, a department store), by geographic region (e.g. the California market might be higher priced than Illinois), by volume purchased (e.g. a customer buying a large volume would receive a different price than one buying a small volume), by national account segment (e.g. you might negotiate special differential pricing with a national account versus the price you would charge to a local account). With all of these differential prices, there must be a justifiable reason for the price differences.
•   Premium Pricing. This strategy is commonly used for luxury items or high end, high value goods, such as expensive jewellery, boats, planes, estates, etc. Only use this strategy if your product's value is recognized by your market as being a premium or luxury good.
•   Captive Product or Companion Product Pricing. This pricing strategy is also used in product line pricing. This strategy bundles, and usually packages, like products together to be priced as companions (for example, a mixer and a mixing bowl) and as captives (for example, pens that have to have a specific refill (not generic), razors that can only use a specific blade, etc.). Captive or Companion product pricing often relies on packaging to offer the two products in one package (for example, a trial pack of blades with the razor; one pen refill packaged with the pen; or the tape refill with the tape dispenser). Then when those blades, refills or other companion products are used, the price to buy new blades, refills or other products is significantly higher than the original priced package.
Thoroughly analyze your product, your buyers, your competitors (and their possible actions and reactions), and your market before you decide which pricing strategy would best-fit your business. Then review pricing strategy by product, and by product line, on a regular basis to make sure that the fit remains the best.

Is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organisation. Pricing should take into account the following factors:
•   Fixed and variable costs.
•   Competition
•   Company objectives
•   Proposed positioning strategies.
•   Target group and willingness to pay.
Pricing Strategies
An organisation can adopt a number of pricing strategies. The pricing strategies are based much on what objectives the company has set itself to achieve.
Penetration pricing: Where the organisation sets a low price to increase sales and market share.
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer.
Competition pricing: Setting a price in comparison with competitors.
Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits.
Bundle Pricing: The organisation bundles a group of products at a reduced price.
Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead £1 or $199 instead of $200
Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc.
Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.


1.What mix of products are you offering? The mix of
products you have available will either limit or broaden
the pricing strategies available for you to use. If you feel
that a particular strategy would assist you in achieving
your pricing objective, then you may want to consider
making changes to your product mix.

2.Who or what is your target market? The demograph-
ics of your target market will help you identify appropri-
ate pricing objectives and strategies. Are target custom-
ers interested in value, quality, or low cost?

3.are you distributing your product wholesale or
retail? Your method of product distribution can impact
the pricing objectives and strategies you are able to use.
Direct marketing gives you more control than wholesale
marketing over how products are grouped, displayed,
and priced.

4. What is the estimated life cycle of your product/ser-
vice? The life cycle of your product can impact your
choice of pricing objectives and strategies. With a short
estimated life cycle, it will be necessary to sell greater
quantities of product or generate larger profit margins
than with products where the life cycle is longer. Longer
life cycles give you more time to achieve your pricing

5.What is the projected demand for the product? When
demand for a product is expected to be high, you have
more flexibility in choosing pricing strategies because
customers are less likely to be concerned with price and
packaging since they really want your product. For ex-
ample, consider the prices people are willing to pay when
new video game consoles debut.

6.are there other entities, such as the government,
that may dictate the price range for your product?
Some products, such as milk, have government-imposed
regulations limiting the price that can be charged. Be
familiar with any pricing regulations that apply to your
industry or product.

Pricing Objectives
Many pricing objectives are available for careful consider-
ation. The one you select will guide your choice of pricing
strategy. You’ll need to have a firm understanding of product
attributes and the market to decide which pricing objective to
employ. Your choice of an objective does not tie you to it for
all time. As business and market conditions change, adjusting
your pricing objective may be necessary or appropriate.
How do you choose a pricing objective? Pricing ob-
jectives are selected with the business and financial goals
in mind. Elements of your business plan can guide your
choices of a pricing objective and strategies. Consider your
business’s mission statement and plans for the future. If one
of your overall business goals is to become a leader in terms
of the market share that your product has, then you’ll want
to consider the quantity maximization pricing objective as
opposed to the survival pricing objective. If your business
mission is to be a leader in your industry, you may want to
consider a quality leadership pricing objective. On the other
hand, profit margin maximization may be the most appropri-
ate pricing objective if your business plan calls for growth in
production in the near future since you will need funding
for facilities and labor. Some objectives, such as partial cost
recovery, survival, and status quo, will be used when market
conditions are poor or unstable, when first entering a market,
or when the business is experiencing hard times (for example,
bankruptcy or restructuring). Brief definitions of the pricing
objectives are provided below.
Partial cost recovery—a company that has sources of
income other than from the sale of products may decide to
implement this pricing objective, which has the benefit of
providing customers with a quality product at a cost lower
than expected. Competitors without other revenue streams
to offset lower prices will likely not appreciate using this ob-
jective for products in direct competition with one another.
Therefore, this pricing objective is best reserved for special
situations or products.

***Profit margin maximization—seeks to maximize the per-unit
profit margin of a product. This objective is typically applied
when the total number of units sold is expected to be low.

***Profit maximization—seeks to garner the greatest dollar
amount in profits. This objective is not necessarily tied to the
objective of profit margin maximization.

***revenue maximization—seeks to maximize revenue from
the sale of products without regard to profit. This objective
can be useful when introducing a new product into the mar-
ket with the goals of growing market share and establishing
long-term customer base.

***Quality leadership—used to signal product quality to the
consumer by placing prices on products that convey their

***Quantity maximization—seeks to maximize the number of
items sold. This objective may be chosen if you have an un-
derlying goal of taking advantage of economies of scale that
may be realized in the production or sales arenas.

***status quo—seeks to keep your product prices in line with
the same or similar products offered by your competitors
to avoid starting a price war or to maintain a stable level of
profit generated from a particular product.

***survival—put into place in situations where a business needs to
price at a level that will just allow it to stay in business and cover
essential costs. For a short time, the goal of making a profit is
set aside for the goal of survival. Survival pricing is meant only
to be used on a short-term or temporary basis. Once the situa-
tion that initiated the survival pricing has passed, product prices
are returned to previous or more appropriate levels.

INTERNAL / EXTERNAL  Factors Affecting Pricing Decision

The final price for a product may be influenced by many factors which can be categorized into two main groups:
•   Internal Factors - When setting price, marketers must take into consideration several factors which are the result of company decisions and actions. To a large extent these factors are controllable by the company and, if necessary, can be altered. However, while the organization may have control over these factors making a quick change is not always realistic. For instance, product pricing may depend heavily on the productivity of a manufacturing facility (e.g., how much can be produced within a certain period of time). The marketer knows that increasing productivity can reduce the cost of producing each product and thus allow the marketer to potentially lower the product’s price. But increasing productivity may require major changes at the manufacturing facility that will take time (not to mention be costly) and will not translate into lower price products for a considerable period of time.
•   External Factors - There are a number of influencing factors which are not controlled by the company but will impact pricing decisions. Understanding these factors requires the marketer conduct research to monitor what is happening in each market the company serves since the effect of these factors can vary by market.
Internal Factors
The pricing decision can be affected by factors that are controlled by the marketing organization. These factors include:
Company and Marketing Objectives
Marketing decisions are guided by the overall objectives of the company. While we will discuss this in more detail when we cover marketing strategy in a later tutorial, for now it is important to understand that all marketing decisions, including price, work to help achieve company objectives.
Corporate objectives can be wide-ranging and include different objectives for different functional areas (e.g., objectives for production, human resources, etc). While pricing decisions are influenced by many types of objectives set up for the marketing functional area, there are four key objectives in which price plays a central role. In most situations only one of these objectives will be followed, though the marketer may have different objectives for different products. The four main marketing objectives affecting price include:
•   Return on Investment (ROI) – A firm may set as a marketing objective the requirement that all products attain a certain percentage return on the organization’s spending on marketing the product. This level of return along with an estimate of sales will help determine appropriate pricing levels needed to meet the ROI objective.
•   Cash Flow – Firms may seek to set prices at a level that will insure that sales revenue will at least cover product production and marketing costs. This is most likely to occur with new products where the organizational objectives allow a new product to simply meet its expenses while efforts are made to establish the product in the market. This objective allows the marketer to worry less about product profitability and instead directs energies to building a market for the product.
•   Market Share – The pricing decision may be important when the firm has an objective of gaining a hold in a new market or retaining a certain percent of an existing market. For new products under this objective the price is set artificially low in order to capture a sizeable portion of the market and will be increased as the product becomes more accepted by the target market (we will discuss this marketing strategy in further detail in our next tutorial). For existing products, firms may use price decisions to insure they retain market share in instances where there is a high level of market competition and competitors who are willing to compete on price.
•   Maximize Profits – Older products that appeal to a market that is no longer growing may have a company objective requiring the price be set at a level that optimizes profits. This is often the case when the marketer has little incentive to introduce improvements to the product (e.g., demand for product is declining) and will continue to sell the same product at a price premium for as long as some in the market is willing to buy.

Marketing Strategy
Marketing strategy concerns the decisions marketers make to help the company satisfy its target market and attain its business and marketing objectives. Price, of course, is one of the key marketing mix decisions and since all marketing mix decisions must work together, the final price will be impacted by how other marketing decisions are made. For instance, marketers selling high quality products would be expected to price their products in a range that will add to the perception of the product being at a high-level.
It should be noted that not all companies view price as a key selling feature. Some firms, for example those seeking to be viewed as market leaders in product quality, will deemphasize price and concentrate on a strategy that highlights non-price benefits (e.g., quality, durability, service, etc.). Such non-price competition can help the company avoid potential price wars that often break out between competitive firms that follow a market share objective and use price as a key selling feature.

For many for-profit companies, the starting point for setting a product’s price is to first determine how much it will cost to get the product to their customers. Obviously, whatever price customers pay must exceed the cost of producing a good or delivering a service otherwise the company will lose money.
When analyzing cost, the marketer will consider all costs needed to get the product to market including those associated with production, marketing, distribution and company administration (e.g., office expense). These costs can be divided into two main categories:
•   Fixed Costs - Also referred to as overhead costs, these represent costs the marketing organization incurs that are not affected by level of production or sales. For example, for a manufacturer of writing instruments that has just built a new production facility, whether they produce one pen or one million they will still need to pay the monthly mortgage for the building. From the marketing side, fixed costs may also exist in the form of expenditure for fielding a sales force, carrying out an advertising campaign and paying a service to host the company’s website. These costs are fixed because there is a level of commitment to spending that is largely not affected by production or sales levels.
•   Variable Costs – These costs are directly associated with the production and sales of products and, consequently, may change as the level of production or sales changes. Typically variable costs are evaluated on a per-unit basis since the cost is directly associated with individual items. Most variable costs involve costs of items that are either components of the product (e.g., parts, packaging) or are directly associated with creating the product (e.g., electricity to run an assembly line). However, there are also marketing variable costs such as coupons, which are likely to cost the company more as sales increase (i.e., customers using the coupon). Variable costs, especially for tangible products, tend to decline as more units are produced. This is due to the producing company’s ability to purchase product components for lower prices since component suppliers often provide discounted pricing for large quantity purchases.
Determining individual unit cost can be a complicated process. While variable costs are often determined on a per-unit basis, applying fixed costs to individual products is less straightforward. For example, if a company manufactures five different products in one manufacturing plant how would it distribute the plant’s fixed costs (e.g., mortgage, production workers’ cost) over the five products? In general, a company will assign fixed cost to individual products if the company can clearly associate the cost with the product, such as assigning the cost of operating production machines based on how much time it takes to produce each item. Alternatively, if it is too difficult to associate to specific products the company may simply divide the total fixed cost by production of each item and assign it on percentage basis.
External Market Factors
The pricing decision can be affected by factors that are not directly controlled by the marketing organization. These factors include:
Elasticity of Demand
Marketers should never rest on their marketing decisions. They must continually use market research and their own judgment to determine whether marketing decisions need to be adjusted. When it comes to adjusting price, the marketer must understand what effect a change in price is likely to have on target market demand for a product.
Understanding how price changes impact the market requires the marketer have a firm understanding of the concept economists call elasticity of demand, which relates to how purchase quantity changes as prices change. Elasticity is evaluated under the assumption that no other changes are being made (i.e., “all things being equal”) and only price is adjusted. The logic is to see how price by itself will affect overall demand. Obviously, the chance of nothing else changing in the market but the price of one product is often unrealistic. For example, competitors may react to the marketer’s price change by changing the price on their product. Despite this, elasticity analysis does serve as a useful tool for estimating market reaction.
Elasticity deals with three types of demand scenarios:
•   Elastic Demand – Products are considered to exist in a market that exhibits elastic demand when a certain percentage change in price results in a larger and opposite percentage change in demand. For example, if the price of a product increases (decreases) by 10%, the demand for the product is likely to decline (rise) by greater than 10%.
•   Inelastic Demand – Products are considered to exist in an inelastic market when a certain percentage change in price results in a smaller and opposite percentage change in demand. For example, if the price of a product increases (decreases) by 10%, the demand for the product is likely to decline (rise) by less than 10%.
•   Unitary Demand – This demand occurs when a percentage change in price results in an equal and opposite percentage change in demand. For example, if the price of a product increases (decreases) by 10%, the demand for the product is likely to decline (rise) by 10%.
For marketers the important issue with elasticity of demand is to understand how it impacts company revenue. In general the following scenarios apply to making price changes for a given type of market demand:
•   For elastic markets – increasing price lowers total revenue while decreasing price increases total revenue.
•   For inelastic markets – increasing price raises total revenue while decreasing price lowers total revenue.
•   For unitary markets – there is no change in revenue when price is changed.

Customer and Channel Partner Expectations
Possibly the most obvious external factors that influence price setting are the expectations of customers and channel partners. As we discussed, when it comes to making a purchase decision customers assess the overall “value” of a product much more than they assess the price. When deciding on a price marketers need to conduct customer research to determine what “price points” are acceptable. Pricing beyond these price points could discourage customers from purchasing.
Firms within the marketer’s channels of distribution also must be considered when determining price. Distribution partners expect to receive financial compensation for their efforts, which usually means they will receive a percentage of the final selling price. This percentage or margin between what they pay the marketer to acquire the product and the price they charge their customers must be sufficient for the distributor to cover their costs and also earn a desired profit.

Competitive and Related Products
Marketers will undoubtedly look to market competitors for indications of how price should be set. For many marketers of consumer products researching competitive pricing is relatively easy, particularly when Internet search tools are used. Price analysis can be somewhat more complicated for products sold to the business market since final price may be affected by a number of factors including if competitors allow customers to negotiate their final price.
Analysis of competition will include pricing by direct competitors, related products and primary products.
•   Direct Competitor Pricing – Almost all marketing decisions, including pricing, will include an evaluation of competitors’ offerings. The impact of this information on the actual setting of price will depend on the competitive nature of the market. For instance, products that dominate markets and are viewed as market leaders may not be heavily influenced by competitor pricing since they are in a commanding position to set prices as they see fit. On the other hand in markets where a clear leader does not exist, the pricing of competitive products will be carefully considered. Marketers must not only research competitive prices but must also pay close attention to how these companies will respond to the marketer’s pricing decisions. For instance, in highly competitive industries, such as gasoline or airline travel, competitors may respond quickly to competitors’ price adjustments thus reducing the effect of such changes.
•   Related Product Pricing - Products that offer new ways for solving customer needs may look to pricing of products that customers are currently using even though these other products may not appear to be direct competitors. For example, a marketer of a new online golf instruction service that allows customers to access golf instruction via their computer may look at prices charged by local golf professionals for in-person instruction to gauge where to set their price. While on the surface online golf instruction may not be a direct competitor to a golf instructor, marketers for the online service can use the cost of in-person instruction as a reference point for setting price.
•   Primary Product Pricing -  marketers may sell products viewed as complementary to a primary product. For example, Bluetooth headsets are considered complementary to the primary product cellphones. The pricing of complementary products may be affected by pricing changes made to the primary product since customers may compare the price for complementary products based on the primary product price. For example, companies that sell accessory products for the Apple iPod may do so at a cost that is only 10% of the purchase price of the iPod. However, if Apple were to dramatically drop the price, for instance by 50%, the accessory at its present price would now be 20% of the of iPod price. This may be perceived by the market as a doubling of the accessory’s price. To maintain its perceived value the accessory marketer may need to respond to the iPod price drop by also lowering the price of the accessory.
Government Regulation
Marketers must be aware of regulations that impact how price is set in the markets in which their products are sold. These regulations are primarily government enacted meaning that there may be legal ramifications if the rules are not followed. Price regulations can come from any level of government and vary widely in their requirements. For instance, in some industries, government regulation may set price ceilings (how high price may be set) while in other industries there may be price floors (how low price may be set). Additional areas of potential regulation include: deceptive pricing, price discrimination, predatory pricing and price fixing.
Finally, when selling beyond their home market, marketers must recognize that local regulations may make pricing decisions different for each market. This is particularly a concern when selling to international markets where failure to consider regulations can lead to severe penalties. Consequently marketers must have a clear understanding of regulations in each market they serve.

The  roles  of  pricing   are  multi-angled  in  the  retail  business.
If your price is too high, you may not be able to achieve adequate market share and lose important sales and profits. If your price is too low you may be leaving money on the table and you might not have enough profit to sustain your operations.

purpose is  to  develop a   Price Strategy and avoid killing a marketing or advertising campaign. Which is central to the overall development of a successful marketing strategy.
Price objections can kill your business. Generally, the less personal interaction you will have with a customer the more accurate you need to be about your pricing strategy. Before we get started lets review the Definition of Marketing. A process by which:
Information about a product or service designed to meet a need - real or otherwise - is presented or communicated to those who have the need. The process can take place in the spur of the moment or be planned. However, the goal is always the same. To get people to consider the merits of whatever is being marketed.
Remember, marketing is communicating the benefits of a product or service. If your price is too high or low, your prospects/customers may not take you seriously or dismiss your proposition outright. The entire purpose of marketing is to communicate and create a perception of value!
Choosing the correct price is essential to creating the right perception of value - this is where developing a market price strategy comes into the picture.
A Market Price Strategy is the art of balancing the role of price as a means to attracting customers and keeping customers.
Every price creates a ‘perception of value’ in the mind of your prospect or customer. The goal is to find the fine line between a price that is low and unsustainable vs. too high which handicaps the marketing and sales process.
A price that’s too high or low can still create a perception problem. Over priced products or services do not have enough ‘value’ in the mind of the customer. A price that is too low could create the perception that the product or service is of poor quality.
Both scenarios create a ‘perception’ problem. An effective market price strategy strikes a balance between real perceived value and the maximum sustainable price for goods and services for a particular market segment.
A Market Price Strategy that works well in one market segment may fail in another. You cannot assume, you must research your competitors pricing strategy, test your own with real live customers and then adjust to fit the market.
Pricing your product or service to achieve maximum profits and market share is a delicate balance. The problem is that most companies do not have a Market Price Strategy or policy. If you choose to ignore this important marketing principle you do so at your own peril. For example:
If your price is too high, you may not be able to achieve enough market share and lose important sales and profits. If your price is too low you may be leaving money on the table and you would not have enough profit to sustain your operations.
The solution?
To make a decision on your Market Price Strategy you will need to consider the following points:
Determine an acceptable range of prices: based upon your corporate values and objectives do you want to establish a discount image, or a quality image? The key is to make sure that your decision is in keeping with your corporate values.
Set a target price for a specific target market: based upon your understanding of this market and the estimated demand you next set a price that will maximize sales and profits.
Estimate the demand: compared to your competitors will your price bring you enough market share? If the share is too small either adjust the value in the proposition or select a new price.
Try to determine competitors reaction: if your price and expected share generate enough volume you will want to anticipate your competitors reaction. If your price is too low a price war could break out. If your price is too high it might stimulate a new competitor with a lower price.
Compare and test the price against your financial goals: can you meet an acceptable level of return on your investment or will the pay back period be too long? It is best to test your price against your financial needs and goals as early as possible.
Is your price congruent: the price must be evaluated based upon a number of factors. Such as: comparable products or services, distribution channel, advertising expenses, any personal selling strategies that will be used.
Develop a Profit Plan: create a spreadsheet that looks at the cost of production plus the cost of marketing and distribution at the anticipated sales levels. A lack of profit will require establishing a new price or finding ways to reduce costs or add value.
Finally, set your final price. take into account the price of competing products or services and adjust your price to fit. For example a price of $91.56 may have been established but the final price may be $89.95 for psychological reasons.
SIGNIFICANCE  OF  Product Pricing Strategies

The most important element of an effective market strategy is the ability to maximize and protect the price of the product. Price is the final measure of customer value and competitive advantage.

Strategic Pricing clarifies the relationship between market segmentation and price, and delivers the tools your organization needs to stay focused on value as you determine break-even, define price elasticity, and analyze tradeoffs between features and price points. Using strategic pricing tools yields a better positioning approach.
Strategic Pricing will help you determine the appropriate price to capture the value you provide to your customers:
•   Understand how costs, competition, and customer values influence the price you choose
•   Determine how customer values drive segmentation decisions, which in turn affect the benefits customers seek and the price they are willing to pay
•   HELPS  to conduct break-even analysis, measure price elasticity, and evaluate features/price trade-offs through relationship analysis

*Identify lifecycles to establish prices for current and future market conditions
•   Decide when and how to raise prices
*Address price erosion situations
Some reasons pricing is important include:
•   Most Flexible Marketing Mix Variable – For marketers price is the most adjustable of all marketing decisions. Unlike product and distribution decisions, which can take months or years to change, or some forms of promotion which can be time consuming to alter (e.g., television advertisement), price can be changed very rapidly. The flexibility of pricing decisions is particularly important in times when the marketer seeks to quickly stimulate demand or respond to competitor price actions. For instance, a marketer can agree to a field salesperson’s request to lower price for a potential prospect during a phone conversation. Likewise a marketer in charge of online operations can raise prices on hot selling products with the click of a few website buttons.
•   Setting the Right Price – Pricing decisions made hastily without sufficient research, analysis, and strategic evaluation can lead to the marketing organization losing revenue. Prices set too low may mean the company is missing out on additional profits that could be earned if the target market is willing to spend more to acquire the product. Additionally, attempts to raise an initially low priced product to a higher price may be met by customer resistance as they may feel the marketer is attempting to take advantage of their customers. Prices set too high can also impact revenue as it prevents interested customers from purchasing the product. Setting the right price level often takes considerable market knowledge and, especially with new products, testing of different pricing options.
•   Trigger of First Impressions - Often times customers’ perception of a product is formed as soon as they learn the price, such as when a product is first seen when walking down the aisle of a store. While the final decision to make a purchase may be based on the value offered by the entire marketing offering (i.e., entire product), it is possible the customer will not evaluate a marketer’s product at all based on price alone. It is important for marketers to know if customers are more likely to dismiss a product when all they know is its price. If so, pricing may become the most important of all marketing decisions if it can be shown that customers are avoiding learning more about the product because of the price.
•   Important Part of Sales Promotion – Many times price adjustments are part of sales promotions that lower price for a short term to stimulate interest in the product.  

G)"Laco Industries" has planned to introduce new baby shampoo in the kids market. The company conducted a research in selected tierII cities in India to know the demand & successfully launched its product. In this context, discuss the characteristics of the good research?

The consumer  behaviors   are  affected by  the  environmental  factors.

The  differences can  be

-the  facilities  like  electricity, internet,roads ,  buildings,
Educational  institutions, financial  institutions,
Communications, and  organized  market,other  facilities
Differs in  urban and  rural markets. In urban everything
Gets  implemented  very  quickly and  availability is  also
There. Where as  in  rural market  everything takes  a good
Amount  of  time.

-here  the  economy  means ,the  earning  capacity in  a  rural  
Market  . The  cost  of  living  always depends  upon their  
Way  of  earnings. So the income  levels  are  unreliable  
As most  of  them  are depended  on  the  seasons  and
Agriculture , so  the  income  levels  cannot  be  fixed  one.

The  lifestyle, that  is living pattern  of  both the  markets
Differ   a  lot. This  can be  important factor which  influences
The  companies to  think of when they  approach rural market.

Due  to  the  illiteracy level, and  culture  adaptability  from  
Long  time  the  rural market always  gets differ  than the  urban  market . The  superstition  and  other  belief as  well  as  the  way of  thinking  towards  products and  goods  differ  in  these  two  markets.

Due  to  the  areas  which are  diverted  geographically  
And  heterogeneous market  the  reach is very  difficult.
The  logistics for  rural market  is   a tough  task than  to  reach  the  urban market.

The  daily  routine of  the  people  makes  them to  cultivate  
Different  habits. Apart  from  due  to  the  awareness is low
In media  terms  there  will be  a  difference  in  the  habits.

The  competition  in the  market for  brands  and  companies
Always  differ. As  in  rural markets ,it is  always the  channel
Partner  and  retailer plays  the  vital  role. But  whereas  in  the  urban market  brand  plays   a  vital role.

Last  but  not  least, the  consumer  behavior is  the  task  for  
The  companies. The  mindset of  the  rural consumer  is  completely  different   from   the  urban  consumer.
The  mindset  of  the  consumer  is different.
In  urban market, to buy electronic  item the  consumers think
Of  BRAND  and its  updated  features,  where   as  in  rural
Market  thinks  in  many  ways ,such as, money  , durability,
Buying  capacity , and  so on.  SO  THESE  MINDSETS


Social Influence & Reference Groups
We already know that a consumer's cognitive state has a large impact on his or her behavior in the rural   marketplace.

Social Norms also have tremendous impact on the behavior of consumers in the rural marketplace. All behavior is driven by some motivating force and the motivating force that drives purchasing behavior is social acceptance. In other words, consumers are often influenced in their purchasing decisions by whether or not they believe that a particular purchase will or will not lead to social acceptance.
Of course, not everyone aims to be accepted by everyone else. Individuals usually care most about what their refernece group thinks about a particular purchase or subject.
A reference group is  "one or more people that someone uses as a basis for comparison or point of reference in forming affective and cognitive responses and performing behaviors".  
Thus marketers must pay close attention to the reference groups of their target markets. Marketers must remember when they are creating an image and advertisements for their product, that they must keep in line with the reference groups' expectations.

Reference Groups, Community, Family  in  the  RURAL  AREAS.

I. Reference groups are important to consumer behavior, especially in the rural sector.

II. There are many types of groups: normative, comparative, formal, informal, aspirational, contactual, disclaimant.

III. The family is one of the most important reference groups  in  the  rural sector.

IV. Family functions influence behavior.

V. Families (and marketers) use many of the same strategies to influence behavior.

in influencing  individuals  behaviors   using



1.BY MAKING  ''STRONG''  [BC]  AND  ''STRONG''  [PC]  associated with
reference  groups   to  PUBLIC LUXURIES,  it can influence rural buyers to
product groups  like  '' GOLF CLUBS''  as an example.

2.BY MAKING  ''WEAK''  [BC]  AND  ''WEAK''  [PC]  associated with
reference  groups   to  PRIVATE NECESSARIES,  it can influence rural buyers to
product groups  like  '' MATTRESSES''  as an example.

3.BY MAKING  ''STRONG''  [BC]  AND  ''WEAK''  [PC]  associated with
reference  groups   to  PUBLIC  NECESSARIES,  it can influence rural buyers to
product groups  like  '' WRIST WATCHES/ CLOTHINGS''  as an example.

4.BY MAKING  ''WEAK''  [BC]  AND  ''STRONG''  [PC]  associated with
reference  groups   to  PRIVATE  LUXURIES,  it can influence rural buyers to
product groups  like  '' TV SETS/ VIDEO  GAMES ''  as an example.

•   People like to think of themselves as making their own consumption choices.  In truth, such decisions are very much shaped by the individual’s particular social context
•   .
•   Studies suggest that buyers name interpersonal sources more frequently than any other source in describing their external search efforts.
•   The power of word-of-mouth communication to  motivate attitudes and behaviors is well known.
•   Recommendations from someone who knows  something about the individual is often more  useful than what experts or critics have to say.
•   People tend to define their social context locally  rather than globally.

•   A reference group, or comparison group, is a group whose presumed perspectives, attitudes, or behaviors are used by an individual as the basis for his or her perspectives, attitudes, or behaviors.
•   Types of Reference Groups
•   Membership
•   Formal and informal
•   Attraction
•   The level and direction of affect (or emotional response) that the group holds for an individual
•   Degree of contact
•   Primary and secondary

Three types of product choices:
•   Search goods
•   Products for which it is possible to observe the quality of the product from observation.
•   Experience goods
•   Require experience before it’s possible to ascertain product quality.
•   Importance of “Surrogate experience” – the reported experience of someone else.
•   Credence goods
•   one for which even after purchase and consumption it’s difficult to evaluate quality.


---------- FOLLOW-UP ----------

QUESTION: QUESTION: D)Illustrate with examples, the difference between Product marketing & service marketing?

D)Illustrate with examples, the difference between Product marketing & service marketing?

Product marketing deals with the first of the "4P"'s of  MARKETING , which are PRODUCT , PRICING , PLACE , and PROMOTIONS.Product marketing, deals with more outbound   MARKETING  tasks. For example, product management deals with the nuts and bolts of  PRODUCT  DEVELOPMENT   within a firm, whereas product marketing deals with marketing the PRODUCT  to PROSPECTS CUSTOMERS , and others.

Role of product marketing
Product marketing in a business addresses five important strategic questions:
1   What products will be offered (i.e., the breadth and depth of the PRODUCT LINE ?
2   Who will be the target customers (i.e., the boundaries of the market segments to be served)?
3   How will the products reach those (i.e., the distribution channel)?
4   How much should the products be priced at?
5   How to introduce the products (i.e., the way to promote the products)?


-your  product  has a  '' unique  advantage/benefits.

-your  product  offers  the  most  competitive  ''value  for  money''.

-your  product is  one  of   the  affordable   in the   market  for  its  range.

-your  product  positioning  in the  niche  market.

-your  product  distribution  is  matchless  in the  market,  available  at   arms  length.

-your  product  merchandising   is   the  most  attractive  at  the  retail   level.

etc etc.


Services marketing is  MARKETING  based on relationship and value.
Marketing a service-base business is different from marketing a goods-base business.
There are several major differences, including:
The buyer purchases are intangible
The service may be based on the reputation of a single person
It's more difficult to compare the quality of similar services
The buyer cannot return the service
The major difference in the services marketing versus regular marketing is that instead of the traditional "4 P's," Product, Price, Place, Promotion, there are three additional "P's" consisting of People, Physical evidence, and Process. Service marketing also includes the servicescape referring to but not limited to the aesthetic appearance of the business from the outside, the inside, and the general appearance of the employees themselves.


Service quality is not one-dimensional; it encompasses numerous factors that are important to customer satisfaction. Satisfaction basically is related to expectations and perceived delivery on these dimensions and as shown by the equation given below.
The quality of service delivery results in customer satisfaction & their retention as it reinforces the perception that the value of the service received is grater than the price paid for it.
Quality is defined as the ability of the service provider to satisfy customer needs. Customer perception , service quality & profitability are interdependent variable.
Even in the case of products, quality is difficult to define because it is highly dependent upon customer perception. The task is made more complicated in the case of service because of the intengible nature of service & the variation in services offered to different customers.
There are several reasons why customers must be given quality service. Most important of them are

1. Industry has become so competitive that customers now have variety of alternatives. If the customers are lost, it can be extremely difficult to win back the individual.

2. Most customers do not complain when they experience problems, these customers simply opt out & take their business elsewhere.

What is CUSTOMER  Satisfaction?
CUSTOMER  Satisfaction = function of {CUSTOMER -Expectation and Perceived delivery}
A person is said to be dissatisfied when the perceived delivery is lower than expectation; he/she is satisfied when they match; delighted when the delivery exceeds expectation and astonished when the delivery far exceeds expectation. The following equations explain these relationships.
Perceived Delivery < Expectation --> Dissatisfaction
Perceived Delivery = Expectation --> Satisfaction
Perceived Delivery > Expectation --> Delight
Perceived Delivery >> Expectation --> Astonishment
Dimensions of Service Quality:
There   are  various aspects that a customer expects from different services.

1. Reliability: This refers to the ability of the company to perform the promised service dependably and accurately. Reliability is probably the single most important dimension of quality. Customers expect that companies will do what they say and they will do when they say they will do it.

2. Tangibles: This refers to the appearance of the physical facilities, equipment, personnel, and communication materials. As services are intangible, the tangibles give an impression to the customers about the quality of service they can expect from a firm. A bank in a shabby building will make the customer wonder whether their money will be safe in such a bank.

3. Responsiveness: This refers to the willingness of the employees to help customers and provide prompt service. When you go to a bank the minimum that you expect is that the employees would attend to you rather than chit-chat amongst themselves.

4. Assurance: This factor is linked to several minor factors such as competence, courtesy, credibility and security. Competence depends on the service provider's possession of the required skills and knowledge to perform the service. The politeness, respect, consideration, and friendliness of the service providers can be bundled into the term courtesy. Credibility refers to the perceived trustworthiness, believability, and honesty of the service provider. Security refers to the fact that the service should be free from danger, risk, and doubt. In sum, the assurance factor refers to the knowledge and courtesy of employees and their ability to inspire trust and confidence.

5. Empathy: Empathy refers to the caring, individualized attention the firm provides to its customers. It includes access, communication and understanding. Access refers to the approachability and ease with which the customer can contact the firm. Communication refers to keeping the customer informed in the language they can understand and listening to them. Understanding has to do with the efforts made by the service provider to know customers and their needs.
The Service Quality Gaps:
Gaps between perceived & expected levels of service quality delivery result in the failure of the service provider.
These are the  5   gaps.
-The First gap does not know what customers expect. rea
-The second gap is between what the customer expects and what the management understands as the customers' expectation from the company.
-The third gap is with reference to the management's understanding of the customer expectations and the service quality standards set by the management.
-The fourth gap is between the quality specifications and actual service delivery.
-The fifth gap is between what is communicated to customers and what is actually delivered.
It is possible to measure the gaps and take corrective actions to fill them to the extent possible. The most difficult gap to fill is the one between customer expectations and the perceived service delivery. The expectation of the customers keeps rising with every good experience. When a customer visits the service organization, he/she expects a better service than what was experienced in the last encounter.
The service marketing  challenges  are
-to generate  re-sales
-to create  a  waiting list
-to create a positive word of  mouth advertising
as  a  lot  of  new  business  is generated  from  satisfied  customers.
-product  attributes/benefits
-pricing  strategy
-place [ right / easy  place to buy]
-promotions [ selected  weighted  mix]
-intangible, the greater the  intangibility the  more  complex
the  promise.
-perishable /heterogeneous, the  production  and consumption are  often  simulaneous.
-product service [ features/benefits]
-place [ flexibility]
-price [ flexi]
-promotions [ selected  weighted  mix]
-people [ ability,competent, right  attitude ]
-physical  evidence
*service  delivery
*service  quality
*customer satisfaction/ relation   management
-service  recovery
-service  management  audit.
-by designing  the  customer  oriented business  process
-cost  effective  service
-continuous  improvements through research/development
-improving  people's  abilities/competences.
-by  managing  customer behavior
-by conducting  customer research
-by  managing  customer expectations
-by reverse-engineering  the  product/service  portfolio.
-by determining  what  service  the  market  needs/ we can  offer.
-what  do  we  need  to  do  to  fill  the  gap.
when the  service  marketing  is intergrated with service  management
that is ,what you  promise [either explicitly or  implicitily]  and  
what  you deliver
There  is no  gap

Company launching non aerated fruit juice,
consumer coupons
consumer  volume   discounts and sales,  
consumer  contests
point of purchase displays
free samples  

-stockholding  bonus
-sales  target
-bonus  for performance
-retailer contests.
-special   rebate  for  above  target  performance.
Consumer durable product like Air conditioner, where dealer support is necessary to achieve target,
consumer  contests
point of purchase displays
free samples  
incentive items

-stockholding  bonus
-sales  target
-bonus  for performance
-retailer contests.
-special   rebate  for  above  target  performance.

Toilet Soaps,A detergent facing Heavy Competition.
consumer coupons
consumer  volume   discounts and sales,  
consumer  contests
point of purchase displays
free samples  
incentive items
free travel, such as free flights

-stockholding  bonus
-sales  target
-bonus  for performance
-retailer contests.
-special   rebate  for  above  target  performance.

EXAMPLE   Low Cost domestic Airliner
Consumer sales promotion techniques
-Price deal: A temporary reduction in the price, such as off-season.
•Loyalty rewards program: Consumers collect points, miles, or credits for purchases and redeem them for rewards.

•Price-pack deal: The packaging offers a consumer a certain percentage more of the product for the same price
[ buy  one ticket  and  get  another  for half  the price]
•Coupons: coupons have become a standard mechanism for sales promotions-discount  coupons.

•Free-standing insert (FSI): A coupon booklet is inserted into the local newspaper for delivery.
•On-line couponing: Coupons are available on line. Consumers  buy  ticket  for   a  discounted  rate.
•Contests/sweepstakes/games: The consumer is automatically entered into the event by purchasing the ticket,
like  a trip  to  a  resort for 2.
•   Point-of-sale displays:
•   Aisle interrupter: A sign the juts into the aisle from the shelf  at  the  travel  agents.
•   Dangler: A sign that sways when a consumer walks by it  at  the  travel  agents.
TRAVEL  AGENT --Trade sales promotion techniques
•   Trade allowances: short term incentive offered to induce THE  TRAVEL AGENT  to SELL  up on a product.
•   Trade contest: A contest to reward  TRAVEL   AGENTS  that sell the most product.
Point-of-purchase displays: Extra sales tools given to  TRAVEL  AGENTS  to boost sales.


Managing a Business

All Answers

Answers by Expert:

Ask Experts


Leo Lingham


In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.


18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.


24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.




©2017 All rights reserved.