Chapter 6
1) Define Pricing and Significance, Objective
Pricing is the process of determining the value or amount of money that a seller will charge for a product
or service. It is a crucial aspect of a business's overall strategy, impacting revenue, brand positioning, and
market competitiveness.
Significance of Pricing:
• Revenue Generation: The price determines how much revenue a company generates from its
products or services.
• Market Positioning: Pricing influences how customers perceive the value of a product or service
and its position in the market (e.g., premium or budget-friendly).
• Profitability: A well-set price allows businesses to cover costs and generate profits.
• Competitive Advantage: Effective pricing can help a company outperform its competitors.
Objectives of Pricing:
• Profit Maximization: Ensuring that the price covers costs and generates a reasonable profit.
• Market Penetration: Setting lower prices initially to gain market share or attract new customers.
• Survival: In some cases, businesses set prices to just cover costs and stay in the market.
• Price Leadership: Aiming to set a price that dominates a particular market, often for premium or
high-quality products.
2) Pricing Methods
• Cost-Plus Pricing: The price is set by adding a fixed markup to the cost of production.
• Penetration Pricing: A low price is initially set to attract customers and gain market share, with
the price increasing later.
• Skimming Pricing: A high price is set initially for a new or innovative product, and then gradually
reduced over time.
• Value-Based Pricing: Prices are set based on the perceived value of the product or service to the
customer, rather than the cost of production.
• Dynamic Pricing: Prices fluctuate based on demand, competition, or other factors, often seen in
industries like travel and entertainment.
3) Types of Markup and Mark Down
Markup:
A markup is the percentage added to the cost of a product to determine its selling price. It is used to
cover overhead and profit.
• Example: If the cost of a product is $100, and a business applies a 30% markup, the selling price
would be $130.
Mark Down:
A markdown refers to the reduction in the original selling price of a product. It is often used to clear out
inventory or respond to market changes.
• Example: If a product initially costs $150 but is marked down by 20%, the new price would be
$120.
4) Setting Retail Price Based on Markup Percentage
To calculate the retail price using a markup percentage:
• Retail Price = Cost + (Cost x Markup Percentage)
For example, if the cost of an item is $50 and the markup is 40%, the retail price would be:
• Retail Price = $50 + ($50 x 0.40) = $50 + $20 = $70
5) Popularity of Markup Pricing
Markup pricing is popular because:
• Simplicity: It’s straightforward to apply and calculate.
• Consistency: It ensures businesses can cover costs and maintain profitability.
• Flexibility: Markup percentages can be adjusted to account for changes in cost or market
conditions.
• Predictability: It makes revenue expectations easier to estimate.
6) Pricing Strategies
• Penetration Pricing: Setting a low price to enter a competitive market and gain market share
quickly.
• Skimming Pricing: Charging a high price initially for a new or unique product and then lowering
it over time.
• Premium Pricing: Setting a high price to reflect the perceived high value and quality of a
product.
• Psychological Pricing: Setting prices that have a psychological impact on consumers, such as
$9.99 instead of $10.
• Discount Pricing: Offering discounts to increase sales or attract price-sensitive customers.
7) Cash Discount Vs Cash Rebate
• Cash Discount: A reduction in price offered to customers who pay their bills early. It’s usually
expressed as a percentage of the invoice amount (e.g., 2/10, net 30 means a 2% discount if paid
within 10 days).
• Cash Rebate: A partial refund given to customers after the purchase, often offered as a
marketing tool to encourage purchases or loyalty. This is typically claimed after a product is
purchased, rather than immediately at the point of sale.
8) Quantity Discount Vs Bundling Pricing
• Quantity Discount: A price reduction given to customers who purchase in large quantities, often
to encourage bulk purchases. For example, buy 3 items and get 10% off.
• Bundling Pricing: Offering a package of products or services at a lower price than if they were
purchased individually. For example, a software bundle at a reduced price compared to buying
each product separately.
9) Loss Leader Pricing
Loss leader pricing involves selling a product at a loss (below cost) to attract customers. The goal is to get
customers into the store or onto a website, with the expectation that they will purchase additional items
that are more profitable. This is commonly used in retail to drive traffic.
10) Captive Product Pricing
Captive product pricing involves selling a basic product at a low price but requiring customers to
purchase related accessories or consumables that are priced higher. An example would be selling a
printer at a low price but requiring customers to purchase expensive ink cartridges.
11) Factors Leading to Less Price Sensitivity
• Brand Loyalty: Customers who are loyal to a brand are less likely to be sensitive to price
changes.
• Perceived Value: If customers perceive the product as high value, they may be less price-
sensitive.
• Lack of Substitutes: If there are few or no substitutes for a product, customers may be less
concerned about price.
• Income Level: Wealthier customers tend to be less sensitive to price changes.
• Convenience: Products or services that save time or effort for customers may have less price
sensitivity.
• Emotional Factors: Emotional attachment or desire for a product can reduce price sensitivity.
Chapter 8
1) Marketing Communication Definition
Marketing Communication refers to the various ways in which a company communicates with its
customers, prospects, and stakeholders to promote its brand, products, or services. It encompasses all
messages and media used to communicate with the market. The goal of marketing communication is to
create awareness, stimulate demand, build brand loyalty, and foster engagement.
2) Marketing Communication All 5 Tools
Marketing communication typically involves five primary tools, known as the promotion mix:
1. Advertising: Paid, non-personal communication through media (e.g., TV, radio, online ads,
billboards) to reach a wide audience and promote a product or service.
2. Sales Promotion: Short-term incentives or activities designed to encourage immediate action or
boost sales, such as coupons, discounts, or contests.
3. Public Relations (PR): Managing the company's image and building relationships with the public
through media coverage, events, press releases, etc.
4. Personal Selling: Direct communication between a sales representative and a potential
customer, typically face-to-face, to persuade them to make a purchase.
5. Direct Marketing: Communicating directly with targeted customers to generate a response or
sales, often through emails, telemarketing, or direct mail.
3) Design Message, Select Channels, Establish Budget, Decide On Media Mix
• Design Message: Crafting the core message that the company wants to convey to the target
audience. The message should be clear, persuasive, and aligned with the brand's values and
objectives.
• Select Channels: Choosing the appropriate communication channels through which the message
will be delivered. This could include traditional media (TV, radio), digital channels (social media,
email, websites), or direct contact (sales team, events).
• Establish Budget: Determining how much to spend on the marketing communication campaign.
This budget is allocated across various tools (advertising, PR, promotions) based on the
company’s goals and available resources.
• Decide On Media Mix: Deciding on the combination of media types that will best reach the
target audience. The media mix could include a mix of traditional media (TV, print) and digital
channels (social media, search engine ads). The selection depends on factors like audience
preferences, cost, reach, and effectiveness.
4) What Is Pure Click Company
A Pure Click Company is a business that operates entirely online, with no physical storefronts or
locations. All of its marketing, sales, and customer interactions take place over the internet. Examples of
pure-click companies include online retailers like Amazon, streaming services like Netflix, or digital
services such as Spotify.
5) Pure Click Vs Brick And Click Company
• Pure Click Company:
o Definition: An entirely online-based company that has no physical presence or stores.
o Example: Amazon (e-commerce), Netflix (streaming service), Uber (ride-sharing).
o Pros: Lower overhead costs, global reach, easy scalability, and the ability to leverage
digital marketing.
o Cons: Limited to the online space, may face challenges with customer trust or lack of
direct interaction.
• Brick and Click Company:
o Definition: A company that operates both physical retail locations (brick) and an online
presence (click). This hybrid model allows businesses to provide customers with multiple
ways to shop and interact with the brand.
o Example: Walmart (both physical stores and an online store), Best Buy (physical stores
and e-commerce).
o Pros: Broader customer base (online and offline), flexibility in shopping experience,
better customer engagement through both channels.
o Cons: Higher operational costs, more complex logistics and inventory management.
Chapter 9
1) Defining Marketing Control
Marketing Control refers to the process of measuring, evaluating, and managing marketing performance
to ensure that the marketing activities are achieving the set objectives. The goal of marketing control is
to make sure that the marketing strategies are aligned with the overall business goals, and to make
necessary adjustments if the strategies are not performing as expected.
Marketing control involves:
• Setting objectives and standards: Defining clear goals for marketing performance.
• Measuring performance: Using metrics such as sales figures, customer satisfaction, and market
share.
• Comparing actual performance to targets: Analyzing whether the marketing activities are
achieving the desired outcomes.
• Taking corrective actions: Making adjustments to strategies, tactics, or resources when
performance falls short of expectations.
2) Annual Plan and Profitability Control
Annual Plan Control:
Annual plan control refers to the ongoing evaluation of the company's marketing activities against the
annual marketing plan. This process ensures that the marketing efforts are on track and that resources
are allocated efficiently to achieve the business's objectives within the year.
Key aspects of annual plan control:
• Monitoring progress: Continuously checking if marketing objectives are being met during the
year.
• Budget management: Ensuring that the marketing budget is being spent effectively.
• Performance tracking: Assessing metrics like sales, market share, or customer acquisition, and
adjusting strategies as needed.
Profitability Control:
Profitability control is focused on evaluating whether the marketing strategies are delivering profits and
contributing to the bottom line of the business. It involves assessing the return on investment (ROI) of
marketing activities and ensuring that the company is achieving profitable growth.
Key aspects of profitability control:
• Evaluating profitability by product or service: Determining which products or services are
contributing the most to profits.
• Cost-effectiveness analysis: Ensuring that marketing expenditures are leading to higher profits
rather than incurring unnecessary costs.
• Identifying areas for improvement: Focusing on activities that drive high profits and cutting back
on low-performing strategies.
3) Defining Marketing Audit and Its 6 Components
Marketing Audit:
A Marketing Audit is a comprehensive, systematic, and periodic evaluation of a company’s marketing
activities, strategies, objectives, and results. The goal of a marketing audit is to identify strengths,
weaknesses, opportunities, and threats in the marketing process and to provide actionable
recommendations for improvement.
The six components of a marketing audit are:
1. Marketing Environment Audit:
o This examines the external factors that affect the company’s marketing, such as market
trends, competitive landscape, regulatory environment, and economic factors.
o Focus areas: Market dynamics, competitor analysis, and industry changes.
2. Marketing Strategy Audit:
o This evaluates the company’s overall marketing strategies, objectives, and how well they
align with the market’s needs and the company's business goals.
o Focus areas: Target market selection, positioning, value proposition, and competitive
advantage.
3. Marketing Organization Audit:
o This assesses the structure, roles, and responsibilities of the marketing department or
team, ensuring that the organization is capable of implementing the marketing
strategies effectively.
o Focus areas: Organizational structure, decision-making processes, team capabilities, and
resource allocation.
4. Marketing Systems Audit:
o This evaluates the systems, processes, and tools used to execute and manage marketing
activities, such as CRM systems, analytics tools, and communication platforms.
o Focus areas: Marketing technology, data management, and process efficiency.
5. Marketing Productivity Audit:
o This examines the efficiency and effectiveness of marketing efforts, measuring the return
on investment (ROI) and the impact of marketing campaigns on sales, profits, and brand
value.
o Focus areas: Marketing ROI, cost-effectiveness, campaign performance, and resource
utilization.
6. Marketing Performance Audit:
o This focuses on assessing the results of marketing activities, such as sales growth,
customer retention, brand awareness, and market share. It identifies how well the
company is achieving its marketing goals and objectives.
o Focus areas: Key performance indicators (KPIs), performance against targets, customer
satisfaction, and market position.
In summary, a marketing audit provides an in-depth analysis of a company’s marketing activities across
various dimensions and helps to pinpoint areas for improvement, aligning the marketing strategy with
broader business goals.
