To Create Your Perfect 2015 Digital Marketing Strategy

It is hard to believe that 2015 is right around the corner.

As the weather starts to cool down, digital marketers’ brains just begin to warm up and think about the budget for the New Year. The million-dollar question is what are the best digital networks to invest into and what platforms should receive more exposure for 2015?

Malcolm X was quoted as saying; “The future belongs to those who prepare for it today.” If you are reading this article, you are likely a step ahead of the competition by staying sharp in news and trends in the online marketing field. By starting to think about the future of online marketing, you can plan out a successful 2015 year for your business while staying a step ahead of the competition.

The 15 step guideline for the perfect 2015 digital marketing strategy will provide you with a digital marketing blueprint for the upcoming year.

Once the ball drops on New Years at midnight, you won’t drop the ball when it comes to digital marketing strategy.

1. Get started on Instagram:

If you haven’t started an Instagram account for your business, what are you waiting for? The younger generation has flocked to this social media platform with over 200 million monthly active users. Advertisers are getting more of an opportunity to share their content through filtered photos. Instagram is one of the most natural ways to share content for your brand. It is better to be a step ahead of the game than 2 steps behind it.

2. Yahoo! Bing network:

The average cost per click on Yahoo! Bing was 10% to 24% lower than on Google Ad Words.  A lower cost per click can yield a lower cost per acquisition, which is the exact reason why you should start taking the search network seriously that receives 11.6% of the market share this upcoming year.

If you are in an expensive industry in the pay per click world like the legal profession, insurance industry or medical field, having a lower cost per click can help with a profitable PPC campaign.

3. Facebook lookalike audience:

What exactly is a Facebook Lookalike Audience? According to Facebook, Lookalike audiences let you reach new people who are likely to be interested in your business because they’re similar to a customer list you care about. When you use Custom Audiences, you can choose to create a lookalike audience that targets people who are similar to your Custom Audience list.

Let’s say you have an email marketing database over 5,000 contacts and are in the heating and cooling industry. You can upload this onto Facebook’s advertising platform and target the EXACT demographic similar to your existing customers! This is a neat feature that advertisers should at least test during the upcoming year.

4. Paid promotion on Facebook:

Adding just $5.00 in promotion to selected Facebook posts will drastically increase your interaction. You’ll start to notice a major spike in communication when you boost your post for a small budget. With Facebook’s Edgerank Algorithm, the likelihood for a business to appear high in the news feed is less likely. This is why for 2015, you should focus on posts that can yield the best results and boost them for a small budget.

5. Email marketing:

If you are a business that only sends out one email blast per month, start doubling this number and send out at least two per month. Nordstrom sends out multiple email blasts EACH DAY! If you have compelling content that would be informative to the subscribers on your email list, tell them about it via email communications.

6. Twitter outreach:

There has been a lot of frustration amongst marketers over all of the advertising that various social media channels are forcing businesses to partake in. Luckily, Twitter is still a great platform where you can grow your following organically. Start searching for hashtags within your industry and reaching out to users in this fashion. Compliment someone on Twitter about a blog post that they wrote. Begin asking questions related to your hashtag. The result will be more interaction and core following of people who are interested in your content! There is a reason why Twitter has nearly 1 billion registered users! Start reaching your target audience via tweets through the perfect Twitter outreach strategy in 2015.

7. Facebook re-marketing:

If you are a social media marketer and have not taken advantage of display advertising on Facebook, you are missing an outstanding opportunity. Not only will this yield one of the highest return on investments for your clients, it will help with brand exposure, lead to better conversion rates and provide a flexible budget which will lead to a more effective strategy.

An apartment community in Columbus implemented beautiful graphics with relevant messaging for one of its apartment communities for Facebook re-marketing. When someone would drop off of their website and visit Facebook, this messaging would follow them around. This resulted in a 33% uptick in conversion for their Polaris Apartments community!

Start seeing an uptick in conversion by implementing a Facebook re-marketing strategy for 2015.

8. Better blogging:

We like to refer to blog content as the match that starts the fire. When you write a compelling blog, it has the potential to rank well organically in the search engines. 80% of daily blog visits are new so this is a great driver of new website traffic! Additionally, a blog can serve as content for a Facebook and Twitter post as well as a teaser for an email marketing campaign. By creating better blog content in 2015, your web traffic will increase and your content will become more compelling

9. Google+ game plan:

Google+ might not gain you that much interaction on your social media posts. This social media platform plays a crucial role in search engine optimization on the localized level, which makes this a must for marketers in 2015.

The more reviews you get, the more content you post onto your page and the more followers your obtain, the higher the likelihood that you will start ranking well for localized search terms.

10. YouTube videos:

Did you know that Google owns YouTube? By implementing videos into your online marketing mix, you can start to get search engine exposure for the videos that you upload onto YouTube! There are a lot of great tricks to obtain more video SEO Exposure. Choosing a proper title tag, uploading a transcript and embedding the YouTube video are just some of the tricks for optimal SEO exposure. Online video should definitely be included in your 2015 digital marketing strategy as this form of rich media can be a game changer in terms of publicity for your company. People will interpret your YouTube videos that you are taking your marketing initiatives very seriously!

11. Compelling graphics:

The more compelling your graphics are on various social media channels, the more interaction you will receive. If you have a graphic designer, start sending him or her over your social media calendar so they can help create beautiful imagery. In 2015 you will want to increase engagement and great pictures certainly help. If you don’t have a graphic designer, don’t worry; there are affordable sites that offer stock photography like BigStock.

12. Search engine optimization:

Search Engine Optimization (SEO) leads have an average close rate of 14.6%, while outbound leads (such as cold calls or print advertising) have an average close rate of 1.7%. Having your website optimized for SEO is a necessity heading into 2015. By having an SEO strategy in place, you can increase your leads and grow your business for next year.

13. Content contribution:

If you want your content to be seen by more eyeballs and gain more exposure, start contributing content to other blogs in similar fields. If you own an apartment community in Nashville, start writing for a local Nashville website that talks about the best activities around town. You will be seen as an expert in your city and this can help drive more traffic to your website. While people might not be looking for an apartment immediately, they will remember that you have invested time and effort into content within the community!

14. Digital PR:

You can build off of the content contribution by implementing a Digital PR strategy. If you reach out to various media related websites and send them over a solid pitch, they might just write an article on your company or feature your CEO in a blog post.  The more people talking about your company, Tweeting about your business and mentioning your brand, the better exposure you will receive for the upcoming year.

15. Unique promotion:

Brainstorm a unique promotion that people will actually enjoy that can drive massive publicity for your company in 2015! Whether it is coming up with a user generated jingle contest or a photo upload promotion, entice your great fans on social media to interact with your brand in a clever way. If the promotion is a success, it will be one of the most talked about campaigns for your company in 2015.

We don’t expect digital marketers to hit on each and every one of the 15 guidelines referenced above. Within the list, some of the suggestions are relatively new while others have been around for the past decade. If you incorporate some of the 15 Steps from our Guideline, you might just have the perfect year in 2015 from an online marketing perspective!

Source :http://www.jeffbullas.com/

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Philip Kotler: Marketing

America knows how to market itself, its products, and its ideas. For better or for worse, for richer or poorer, American marketing creativity, power, and prestige influence consumers the world over.

PhilipKotler, best known for the marketing principle of the four Ps—product, price, promotion, and place—takes us on a guided tour of American marketing, including its origins and trends, its relationship to economics, and its criticisms. 

His talk will include examples of exemplary marketing. Kotler is professor of marketing at Northwestern University's Kellogg School of Management, and his textbooks serve as the basis for graduate business programs worldwide.

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Structuring Marketing Resources

Whether marketing activities are centralized or decentralized and whether they involve a fully integrated marketing department or a marketing unit with more limited responsibilities,structuring the array of marketing resources in a formal organization design involves important management choices.

1.Functional organizational design:

This design assigns departments,groups or individuals,responsibility for specific activities,such as advertising and sales promotion,pricing,sales,marketing research and marketing planning and services.

2.Product - focused design:

The product mix may require special consideration in the organizational design.New products often do not receive the attention they need unless specific responsibility is assigned to the planning and coordination of the new product activities.

Product-

The product or brand manager,sometimes assisted by one or a few additional people,is responsible for planning and coordinating various business functions for the assigned products.

Category Management-

Associated with the Efficient Consumer Response approach to supply chain management,one development in product focused organization is the adoption of category management structures.

Venture Teams-

The venture team requires the creation of an organizational unit to perform some or all of the new product planning functions.This unit may be a separate division or company created specifically for new product or new business ideas and initiatives.

New Product Teams-

The new product team is similar to a venture team in that it is comprised of functional specialists working on a specific new product development project.

3.Market -Focused Design:

This approach is used when a business unit serves more than one market target and customer consideration are an important factor in the design of the marketing organization.

4.Matrix Design:

This design utilizes a cross classification approach to emphasize two different factors,such as products and marketing functions.In addition to working with salespeople,product managers coordinate other marketing functions such as advertising and marketing research.

5.New Marketing Roles:

As we discussed early in the chapter,the use of self managing employee teams,emphasis on business processes rather than activities and the application of information technology are creating major changes in organization design.

*New Marketing Specializations-

The identification of new specialist roles in marketing processes raises the question of appropriate location in the organization structure.

*Venture Marketing Organizations-

An interesting approach adopted by some companies extends the idea of venture teams,as a way of responding to high priority opportunities faster than conventional organizational approaches allow.

*Partnering With Other Organizations-

Selecting or modifying marketing organization design should take into consideration the trade offs between performing marketing functions within the organization and having external organizations perform the functions.

*Networked Organizations-

The marketing coalition company has been proposed as another new organization form for marketing.The marketing coalition company is an horizontally aligned organization acting as the control center for organizing a network of specialist firms.

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What is Organizational Design?

Organizational design is the design and development of efficient and effective organization to implement marketing strategy.

Aligning the strategy and capabilities of the organization with the market in order to provide superior customer value,is a priority in companies across different industrial sectors.
Recent decades have seen a period of unprecedented organizational change and this activity promises to continue.

Companies have realigned their organizations to establish closer contact with customers,improve customer service,bring the internet into operations and marketing,reduce unnecessary layers of management,decrease the time span between decisions and results and improve organizational effectiveness in other ways.

Closely associated with Procter&Gamble's market driven business and marketing strategy initiatives were critically important organizational changes.

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Direct Marketing Methods

Direct marketing consist of direct communications with carefully targeted individual consumers to both obtain an immediate responses and cultivate lasting customer relationships.

1.Face-to-Face selling:

Direct selling is the selling of goods or services to consumers through personal demonstration and explanation.Contact by mail with potential buyers may generate orders by phone or mail or instead to encourage buyers to visit retail outlets to view goods and make purchases.

2.Telemarketing:

Telemarketing involves using the telephone to sell directly to consumers and business customers.This form of direct marketing consists of the use of telephone contact between the buyer and seller to perform all or some of the selling function.

3.Direct mail marketing:

Direct mail marketing involves sending an offer,announcement,reminder or other item to a person at a particular physical or virtual address.Many companies use television,radio,magazines and newspapers to obtain sales from buyers.Direct response from the advertising is obtained by mail,telephone and fax.

4.Catalog marketing:

Catalog marketing is direct marketing through print,video or electronic catalogs that are mailed to select customers made available in stores or presented online.

5.Direct response television marketing:

Direct response television marketing consists of direct marketing via television,including direct response television advertising and home shopping channels.

6.Kiosk marketing:

Kiosks are placing information and ordering machines in stores,airports and other locations.Kiosks may have internet linkages.Airline tickets and flight insurance are examples of products sold using kiosks.

7.Online marketing:

Online marketing is company efforts to market products and services and build customer relationships over the internet.

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Sales Force Evaluation and Control

Sales management is continually working to improve the productivity of selling efforts.During the last decade personal selling costs increased much faster than advertising costs,so achieving high sales force performance is important.The evaluation of sales force performance considers sales results,costs,salesperson activities and customer satisfaction.

Where to focus the analysis:

Evaluation extends beyond the salesperson to include other organizational units,such as districts and branches.Selling teams are used in some types of selling.Companies that use teams focus evaluations on team result.

Performance Measures:

Management needs yardsticks for measuring salesperson performance.For example the sales force of a regional food processor that distributes through grocery wholesalers and large retail chains devotes most of its selling effort to calling on retailers.Since the firm does not have information on sales of its products by each individual retail outlet,evaluations are based on the activities of salespeople rather than sales outcomes.

Setting performance standards:

Although internal comparisons of performance are frequently used,they are not very help full if the performance of the entire sales force is unacceptable.A major problem in setting sales performance standards is determining how to adjust them for factors that are not under the salespersons control.

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Managing The Sales Force

We know that salespeople differ in ability,motivation and performance.Managers are involved in selecting,training,monitoring,directing,evaluating and rewarding salespeople.A brief look at each activity illustrates the responsibilities and functions of a sales manager.

1.Finding and Selecting Salespeople:

In a major study the chief sales executives in over 100 firms selling business to business to business products indicated on a 1 to 10 scale how important twenty nine salesperson characteristics are to the success of their salespeople.The executive indicated that the three most significant success characteristics are

a) being customer driven and highly committed to the job

b) accepting direction and cooperating as a team player

c) being motivated by ones peers,financial incentives and oneself.

2.Training:

Some firms use formal programs to train their salespeople,while others use informal on the job training.Factors that affect the type and duration of training include type of sales job,product complexity,prior experience of new salespeople and management's commitment to training.Training topics may include selling concepts and techniques,product knowledge,territory management and company policies and operating procedures.In training salespeople companies may seek to :

a) increase productivity

b) improve morale

c) lower turnover

d) improve customer relations

e) enable better management of time and territory.

3.Supervising and Motivating Salespeople:

The manager who supervises salespeople has a key role in implementing a firm's selling strategy.She or he faces several important management issues.Coordinating the activities of a field sales force is difficult due to lack of regular contact,although internet access overcomes to some extent the lack of face to face contact.

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Designing The Sales Organization

Designing the sales organization includes selecting an organizational structure and deciding the number and deployment of salespeople to geographical area customers and prospects.

Organizational Design:

The organizational design adopted should support the firm's sales force strategy.As companies adjust their selling strategies,organizational structure may also require changes.The answers to several questions are helpful in narrowing the choice of an organizational design:

1.What is the selling job? What activities are to be performed by salespeople?

2.Is specialization of selling effort necessary according to type of customer,different,products or salesperson activities?

3.Are channel of distribution relationships important in the organizational design?

4.How many and what kinds of sales management levels are needed to provide the proper amount of supervision,assistance and control?

5.Will sales teams be used,and if so,what will be their composition?

6.How and to what extent will sales channels other than the field sales force be used to contact and serve customers?

Sales Force Deployment:

Sales management must decide how many salespeople are needed how to deploy them to customers and prospects.Several factors outside the salesperson's control often affect her sales results,such as market potential,number and location of customers,intensity of competition and market position of the company.

Several methods are available for analyzing sales force size and the deployment of selling effort including: 1.revenue /cost analysis 

2.single factor models 

3.sales and effort response models 

4.portfolio deployment models.

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Types of Sales Jobs

The salespeople who sell to ultimate consumers door to door,insurance sales,real estate brokers,retail store sales comprise a major portion of the number of salespeople,but a much greater volume of sales is accounted for by business to business salespeople.B2B sales may be to resellers,business users and institutions.Consumer and organizational sales are similar in several respects.

Sales Jobs

New Business Selling:

This selling job involves obtaining sales from new buyers.The buyers may be one time purchasers or repeat buyers.For example,recruiting a new online business  customer by an office depot salesperson is an illustration of a one time selling sityation.

Trade Selling:

This form of selling provides assistance and support to value chain members rather than obtaining sales.A producer marketing through wholesalers,retailers or other intermediaries may provide merchandising,logistical,promotional and product information assistance.

Missionary Selling:

A strategy similar to trade selling is missionary selling.In these selling situations a producer's salespeople work with the customers of a channel member to encourage them to purchase the producer's product from the channel member.

Technical Selling:

Firms that use this strategy sell to an existing customer base and provide technical and application assistance.These positions may involve the sales of complex equipment or services such as management consulting.

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Definition of Sales Force

Sales organizations in many companies around the world have experienced significant changes in how the selling function is being performed over the last decade.Many transnational selling activities are handled by the internet,while salespeople are more focused on collaborative and consulting relationships with customers.

"Sales force is an individual person who acts for a company by performing one or more of the following activities: prospecting,communicating,servicing and information gathering."      
>Philip Kotler & Gary Armstrong

Contrary to some forecasts the role of selling has not deteriorated.More than a few companies and business units have shifted resources from marketing to sales because management considers the sales organization is vital in attaining marketing and business strategy objectives.
Personal selling,the internet and direct marketing initiatives are being impacted by many changes in the twenty-first century.The internet has become an important and expanding avenue of direct contact between customers and companies selling goods and services.

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Designing Promotion Strategy

Market target and positioning strategies guide promotion decisions as several activities are involved in designing an organization's promotion strategy including: 1)Setting communication objectives 2) Deciding the role of each of the components make in the promotion program 3) Estimating the promotion budget 4) Selecting the strategy for each promotion component 5) Integrating and implementing the promotion component strategies 6) Evaluating the effectiveness of the integrated promotion strategies.

Communication Objectives:

Communication objectives help determine how the promotion strategy components are used in the marketing program.Several illustrative communication objectives follow.

1.Need Recognition: A communication objective,which is important for new product introductions,is to trigger a need.Need recognition may also be important for existing products and services,particularly when the buyer can postpone purchasing or choose not to purchase.

2.Finding Buyers: Promotion activities can be used to identify buyers.The message seeks to get the prospective buyer to respond.Recall,for example,the use of the internet to obtain instant feedback as discussed in the earlier internet feature.

3.Brand Building: Promotion can aid a buyer's search for information.One of the objectives of new product promotional activities is to help buyers learn about the product.Prescription drug companies advertise to the public to make people aware of diseases and the brand names of products used for treatment.

4.Evaluation of Alternatives: Promotion helps buyers evaluate alternative brands and such evaluations may be a primary objective of promotion activities.Both comparative advertising and personal selling are effective in demonstrating a brand's strengths over competing brand.

5.Decision to Purchase: Influencing the buyer's decision to purchase a brand is an important promotion objective.Several of the promotion components may be used to encourage the buyer to purchase a brand.

6.Customer Retention: Communicating with buyer after they purchase a product is an important objective of promotion for many brands.Follow up salespeople,advertisements stressing a firm's service capabilities and toll free numbers placed on packages to encourage users to seek information or report problems are illustrations of post purchase communications.

Deciding the role of the promotion components:

Early in the process of developing the promotion strategy,it is useful to set guidelines as to the expected contribution for each of the promotion components.These guidelines help determine the strategy for each promotion component.It is necessary to decide which communication objective will be the responsibility of each component.

Determining Promotion Budget:

Isolating the specific effects of promotion may be difficult due to pursuit of multiple promotion objectives,lags in the impact of promotion on sales,effects of other marketing program components and the influences of uncontrollable factors.

1.Objective and task method: This logical and cost effective method is probably the most widely used budgeting approach.Management sets the communication objectives,determines the tasks necessary to achieve the objectives and adds up costs.

2.Percentage of sales method: Using this method the budget is calculated as a percent of sales and is therefore quite arbitrary.The percentage figure is often based on past expenditure patterns.The method fails to recognize that promotion efforts and results are related.

3.Competitive parity method: Competitive parity method is setting the promotion budget to match competitors outlays.Promotion expenditures for this budgeting method are guided by how much competitors spend.Yet competitors may be spending too much on promotion.

4.Affordable method: Since budget limits are a reality in most companies,this method is likely to influence all budget decisions.Top management may specify how much can be spent on promotion.

Promotion Component Strategies:

The strategies for the promotion components need to be consistent with market targeting strategy and contribute to the desired positioning of the brand.Determining the strategy for each promotion component includes setting objectives and budget,selecting the strategy and determining the promotion activities to be pursued.

Integrating and Implementing the Promotion Strategy:

Several factors may affect the composition of the promotion program advertising,public relations,personal selling,direct marketing,internet and sales promotion strategies have the potential to be fragmented when responsibility is assigned across several departments.

Effectiveness of Promotion Strategy:

Tracking the performance of promotion strategy involves-evaluating the effectiveness of each promotion component and assessing the overall effectiveness of the integrated promotion strategy.

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The Composition of Promotion Strategy

Promotion strategy consists of planning,implementing and controlling an organization's communications to its customers and other target audiences.The purpose of promotion in the marketing program is to achieve management's desired communications objectives with each audience.

Advertising:

Advertising consists of any form of non personal communication concerning an organization,  product or idea that is paid for by a specific sponsor.The sponsor makes payment for the communication via one or more forms of media.

Among the advantages of using advertising to communicate with buyers are the low cost per exposure,the variety of media newspapers,magazines,television,radio,internet,direct mail and outdoor advertising control of exposure,consistent message content and the opportunity for creative message design.

Personal Selling:

Personal selling consists of verbal communication between a salesperson and one or more prospective purchasers with the objective of making or influencing a sale.Annual expenditures on personal selling are much larger than on advertising,perhaps twice as much.

Sales Promotion:

Sales promotion consists of various promotional activities including trade shows,contests, samples,point of purchase displays,product placement in films and other media,trade incentives and coupons.Sales promotion expenditures are much greater than spending on advertising and as large as sales force expenditures.

Direct Marketing:

Direct marketing includes the various communications channels that enable companies to make direct contact with individual buyers.Examples are catalogs,direct mail,telemarketing, television selling,radio and electronic shopping.

Internet Marketing:

Included in this promotion component are the Internet,CD-ROM,Kiosks and interactive television.Interactive media enable buyers and sellers to communicate with each other.The internet performs an important and rapidly escalating role in promotion strategy.

Public Relations:

Public relations for a company and its products consists of communications placed in the commercial media at no charge to the company receiving the publicity.For example,a news release on a new product may be published in a trade magazine.The media coverage is an article or news item.

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Definition of Promotion Strategy

Promotion strategy consists of planning,implementing and controlling an organization's communications to its customers and other target audiences.

Promotion strategy consists of advertising,personal selling,sales promotion,direct marketing and public relations into an integrated program for communicating with buyers and other who influence purchasing decisions.

The purpose of promotion in the marketing program is to achieve management's desired communications objectives with each audience.An important marketing responsibility is planning and coordinating the integrated promotion strategy and selecting the specific strategies for each of the promotion components.

Google provides an interesting perspective on how promotion strategy is changing.The search engine has transformed itself into a media octopus,generating $10.6 billion in advertising revenues in 2006.Google has a 31 percent share of online advertising revenue.

Initially Google linked keywords to advertiser's text ads and then expanded into print advertising,purchasing print ad space in magazines and selling the space to its ad customers.

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Determining Specific Prices and Polices

The last step in pricing strategy is selecting specific prices and formulating policies to help manage the pricing strategy.Pricing methods are first examined,followed by a discussion of pricing policy.

a.Determining Specific Prices:

It is necessary to either assign a specific price to each product item or to provide a method for computing price for a particular buyer seller transaction.Many methods and techniques are available for calculating price.

1.Cost -based pricing:

Cost based pricing are two parts.a) Cost plus Pricing b) Break even pricing

a)Cost plus pricing:

Markup pricing is an item  by adding a standard increase to the product's cost.

b) Break even Pricing:

Break even pricing is setting price to break even on the costs of making and marketing a product or setting price to make a target profit.

2.Demand oriented Pricing:

Demand oriented pricing is based on the level of demand for a product.The buyer is the frame of reference for these methods.One popular method is estimating the value of the buyer.The objective is to determine how much the buyer is willing to pay for the product based on its contribution to the buyer's needs or wants.Recall our earlier discussion of estimating value provided to the customer.

3.Competition based pricing:

Pricing decisions are always affected by competitors prices and their potential actions.In going rate pricing,the firm bases its price largely on competitor's prices.Sealed bid pricing forces the company to set prices based on what they think the competition will charge.

b.Establishing Pricing Policy and Structure:

1.Pricing Policy-

A pricing policy may include consideration of discounts,allowances,returns and other operating guidelines.The policy serves as the basis for implementing and managing the pricing strategy.The policy may be in written form although many companies operate without formal pricing policies.

2.Pricing Structure-

When more than one product item is involved,management must determine product mix and line pricing interrelationships in order to establish price structure.Pricing structure concerns how individual items in the line are priced in relation to one another.

c.Pricing Management:

Pricing strategy is an ongoing process rater than a once a year budgeting activity.Several principles of pricing management are outlined in importantly,pricing strategy is an interrelated process requiring central management direction and control.

1.Price Segmentation-

Price may be used to appeal to different market segments.For example,airline prices vary depending on the conditions of purchase.Different versions of the same basic product may be offered at different prices to reflect differences in materials and product features.

2.Value Chain Pricing-

The pricing strategies of sellers in the value chain should include consideration of the pricing needs of producers and facilitating firms.These decisions require analysis of cost and pricing at all value chain levels.If producer prices to intermediaries are too high,inadequate margins may discourage intermediaries from actively promoting the producer's brand.

3.Price Flexibility-

Will  prices be firm,or will they be negotiated between buyer and seller?Perhaps most important,firms should make price flexibility a policy decision rather than a tactical response.Some companies price lists are very rigid while others have list prices that give no indication of actual selling prices.

4.Product life cycle pricing-

Some companies have policies to guide pricing decisions over the life cycle of the product.Depending on its stage in the product life cycle,the price of  a particular product or an entire line may be based on market share,profitability,cash flow or other objectives.

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Selecting the Pricing Strategy

Analysis of the pricing situation provides essential information for selecting the pricing strategy.Using this information management needs to 1) determine extent of pricing flexibility 2) decide how to position price relative to costs and how visible to make the price of the product.

How much flexibility exists?

Demand and cost factors determine the extent of pricing flexibility.Within these upper and lower boundaries,competition and pricing objectives also influence the choice of a specific pricing strategy.

Price Positioning and Visibility:

A key decision is how far above cost to price a new product within the flexibility band.A relatively low market entry price may be used with the objective of building volume and market position,or instead, a high price may be selected to generate large margins.The former is a "penetration" strategy whereas the latter is a "skimming" strategy.Analysis of the results of low price strategies in highly competitive markets indicates that while the strategies are sometimes necessary,they should be used with considerable caution.

Illustrative Pricing Strategies:

The pricing strategy selected depends on how management decides to position the product relative to competition and whether price will perform an active or passive role in the marketing program.The use of price as an active factor refers to whether price is highlighted in advertising,personal selling and other promotional efforts.

1.High-Active Strategy:

Emphasizing a high price in promotional activities is intended to convey to the buyer that the expensive brand offers superior value.While used on a very limited basis,this pricing strategy has been employed to symbolically position products such as high-end alcoholic beverages.

2.High-Passive Strategy:

High prices may be essential to gain the margins necessary to serve small target markets,produce high-quality products or pay for the development of new products.Relatively high priced brands are often marketed by featuring non price factors rather than using high active strategies.

3.Low-Active Strategy:

Several retailers use this pricing strategy,including home depot,office depot and southwest airlines.The low-active strategy is also popular with discount stock brokers.When price is an important factor for a large segment of buyers,a low-active price strategy is very effective,as indicated by the rapid growth of retailers like Wal-Mart.

4.Low-Passive Strategy:

This strategy may be used by small producers whose brands are not familiar to buyers and have lower cost features than other suppliers.By not emphasizing a low price,the firm runs less danger that potential buyers will assume the brand is inferior to other brands.

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Analyzing the Pricing Situation

Pricing analysis is essential in evaluating new product concepts,developing test marketing strategy and designing a new product introduction strategy.Pricing analysis is also important for existing products because of changes in the market and competitive environment,unsatisfactory market performance and modifications in marketing strategy over the product's life cycle.

a.Customer Price Sensitivity: 

One of the challenges in pricing analysis is estimating how buyers will respond to different prices.The pricing of procter & Gamble Company's analgesic brand,Aleve,illustrates this situation.Analysis of buyers price sensitivity should answer the following questions:

1.Size of the product-market in terms of buying potential.

2.The market segments and market targeting strategy to be used.

3.Sensitivity of demand in each segment to changes in price.

4.Importance of non-price factors,such as features and performance.

5.The estimated sales at different price levels.

1.Price elasticity:

Price elasticity is the percentage change in the quantity sold of a brand when the price changes,divided by the percentage change in price.Elasticity is measured for changes in price from some specific price level so elasticity is not necessarily constant over the range of prices under consideration.

2. Non price Factors:

Factors other than price may be important in analyzing buying situations.For example,buyers may be willing to pay a premium price to gain other advantages or , instead,be willing to forgo certain advantages for lower prices.Factors other than price which may be important are quality,uniqueness,availability,convenience,service and warranty.

3.Forecasts:

Forecasts of sales are needed for the price alternatives that management is considering.In planning the introduction of Aleve,P&G's management could look at alternative sales forecasts based on different prices and other marketing program variations.

b.Cost analysis:

Cost information is essential in making pricing decisions.

1.Composition of Product Cost:

First,it is necessary to determine the fixed and variable costs involved in producing and distributing the product.Also,it is important to estimate the amount of the product cost accounted for by purchases from suppliers.It is useful to separate the costs into labor,materials and capital categories when studying cost structure.

2.Volume Effect on Cost:

The next part of cost analysis examines how costs vary at different levels of production or quantities purchased.Can economies of scale be gained over the volume range that is under consideration,given the target market and positioning strategy.

3.Competitive Advantage:

Comparing key competitors costs is often valuable.Are their costs higher,lower or about the same.Although such information may be difficult to obtain,experienced managers can often make accurate estimates.

4.Experience Effect:

It is important to consider the effect of experience on costs.Experience or learning curve analysis indicates whether costs and prices for various products decline by a given amount each time the number of units produced doubles.

5.Control Over Costs:

Finally,it is useful to consider how much influence an organization may have over its product costs in the future.To what extent can research and development,bargaining power with suppliers,process innovation and other improvements help to reduce costs over the planning horizon.

c.Competitor's responses analysis:

Each competitor's pricing strategy needs to be evaluated to determine:

1.Which firms represent the most direct competition for buyers in the market targets that are under consideration.

2.How competing firms are positioned on a relative price basis and the extent to which price is used as an active part of their marketing strategies.

3.How successful each firm's price strategy has been 

4.The key competitors probable responses to alternative price strategies.

d.Pricing Objectives:

Pricing strategies are expected to achieve specific objectives.More than one pricing objective is usually involved and sometimes the objectives may conflict with each other.If so,adjustments may be needed on one of the conflicting objectives.Several examples of pricing objectives follow:

1.Gain Market Position:

Low prices may be used to gain sales and market share.Limitations include encouraging price wars and reduction of profit contributions.Even though buyers may have been responsive to a price for MACH 3 that was 45 percent about SensorExcel,Gillette's management used a 35 percent price increase that was more likely to gain market position.

2.Achieve Financial Performance:

Prices are selected to contribute to financial objectives such as profit contribution and cash flow.Prices that are too high may not be acceptable to buyers.A key objective for Dell Inc.in the consumer market segment was pricing to achieve financial performance in combination with holding market position.

3.Product Positioning:

Prices may be used to enhance product image,promote the use of the product,create awareness and positioningobjectives.The visibility of price may contribute to the effectiveness of other positioning components such as advertising.

4.Stimulate Demand:

Price is used to encourage buyers to try a new product or to purchase existing brands during periods when sales slow down.A potential problem is that buyers may balk at purchasing when prices return to normal levels.

5.Influence Competition:

The objective of pricing actions may be to influence existing or potential competitors. Management may want to discourage market entry or price cutting by current competitors.

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