Unit 3: Pricing and promotion decisions
Marketing Management notes · PTU syllabus (MBA 203-21)
On this page
- Unit summary
- Factors affecting pricing decisions
- Pricing objectives, methods, strategies and price changes
- Personal selling process
- Sales force management
- Compensating and motivating the sales force
- The promotion mix and IMC
- Advertising
- Sales promotion and public relations
- Key terms
- Quick revision
- Important questions
Unit summary
Price brings in revenue; promotion and personal selling persuade customers to buy. This unit covers pricing objectives, factors, methods, price changes and strategies, the personal selling process and sales force management, and the promotion mix — advertising, sales promotion and public relations.
After this unit you can
- Explain pricing objectives, factors and methods
- Explain pricing strategies and price changes
- Explain the personal selling process and sales force management
- Explain advertising, sales promotion and public relations
PTU syllabus topics
- Pricing objectives
- factors
- methods
- price changes and strategies
- personal selling process and sales force management
- promotion mix — advertising
- sales promotion
- public relations
Skimming
High launch price for early adopters
New smartphones
Penetration
Low price to win share fast
New streaming service
Value-based
Price on perceived value
Premium brands
Psychological
Prices just below round numbers
₹499
Topic 1
Factors affecting pricing decisions
Internal factors
Marketing objectives, costs, marketing mix strategy, organisational considerations
External factors
Nature of the market and demand, competition, economic conditions, government regulation, channel members
Customer factors
Perceived value, price sensitivity, buying power
- Price elasticity: elastic demand favours lower prices; inelastic demand allows higher prices.
Topic 2
Pricing objectives, methods, strategies and price changes
Objectives: survival, profit maximisation, market-share leadership, quality leadership and return on investment.
Cost-based
Cost-plus, mark-up, target return
Demand/value-based
Perceived value, what customers will pay
Competition-based
Going-rate, sealed-bid
New product strategies
Skimming (high) or penetration (low)
Product-mix pricing
Product line, optional, captive, bundle pricing
Adjustment strategies
Discounts, psychological (₹999), promotional, geographical pricing
Price changes
- Initiating price cuts: excess capacity, falling market share, cost leadership; risk of price wars and low-quality image.
- Initiating price increases: cost inflation, excess demand; use escalator clauses, unbundling, reduce discounts.
- Responding to competitors' price changes: maintain price, raise perceived value, reduce price, raise price and launch a fighter brand.
Topic 3
Personal selling process
Personal selling is direct, face-to-face (or virtual) communication by a salesperson to persuade a prospect to buy.
- 1Attention
Capture the prospect's interest
- 2Interest
Show relevant benefits
- 3Desire
Make them want the product
- 4Action
Ask for the order
- 5Satisfaction
Ensure satisfaction after the sale
- 1
Prospecting and qualifying
- 2
Pre-approach
Research the prospect
- 3
Approach
- 4
Presentation and demonstration
- 5
Handling objections
- 6
Closing
- 7
Follow-up
Topic 4
Sales force management
The sales force finds customers, communicates value, sells, services accounts, gathers market information and builds relationships. Sales force strategy decides structure — territorial (by area), product (by product line), customer/market (by customer type) or a combination.
Topic 5
Compensating and motivating the sales force
Straight salary
Fixed pay
Long selling cycles, service-heavy roles
Straight commission
Percentage of sales
Aggressive selling, new markets
Combination
Salary + commission or bonus
Most firms; balances security and incentive
Financial rewards: salary, commission, bonus, profit sharing and fringe benefits. Non-financial rewards: recognition, awards, promotion, training, contests and job enrichment.
Topic 6
The promotion mix and IMC
Advertising
Paid, non-personal, mass reach
Personal selling
Face-to-face persuasion
Sales promotion
Short-term incentives: coupons, discounts, contests
Public relations
Building goodwill and image
Direct and digital marketing
Email, social media, targeted messages
Integrated marketing communications (IMC) coordinates all promotional tools so that they deliver a clear, consistent and compelling message about the company and its brands.
- 1
Identify the target audience
- 2
Set objectives
Awareness, knowledge, liking, preference, conviction, purchase
- 3
Design the message
AIDA: attention, interest, desire, action
- 4
Choose channels
- 5
Set the budget
- 6
Measure results
Topic 7
Advertising
Advertising is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.
- 1Mission
Objectives — inform, persuade, remind
- 2Money
Budget — affordable, % of sales, competitive parity, objective-and-task
- 3Message
Creative strategy and execution
- 4Media
Reach, frequency, impact; TV, print, digital, outdoor
- 5Measurement
Communication and sales effects
- Regulation: ASCI self-regulation code; Consumer Protection Act 2019 penalties for misleading ads.
Topic 8
Sales promotion and public relations
- Sales promotion: short-term incentives to encourage purchase.
Consumer
Samples, coupons, cash refunds, price packs, premiums, contests, loyalty programmes
Trade
Discounts, allowances, free goods, dealer contests
Business
Trade shows, conventions, sales contests
- Public relations: building good relations with publics through favourable publicity, a good corporate image and handling of unfavourable events.
- PR tools: press releases, events, sponsorships, corporate social responsibility, speeches, corporate identity material, websites and social media, crisis communication.
Example
Amul's topical cartoon hoardings since 1966 earn free publicity and goodwill that paid advertising alone could not buy.
Key terms
- Penetration pricing
- Low initial price to gain market share
- Price skimming
- High initial price for early adopters
- AIDA
- Attention, interest, desire, action
- Sales promotion
- Short-term incentive to encourage purchase
- Public relations
- Building goodwill and image with publics
Quick revision
- Pricing factors: internal, external, customer.
- Methods: cost, value, competition-based; strategies: skimming, penetration, product-mix, adjustment.
- Price changes: cuts, increases, responses.
- Personal selling process; sales force structure, size, compensation.
- Promotion mix: advertising (5 Ms), sales promotion, PR; IMC.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.State four factors affecting pricing.
- Q2.Distinguish skimming and penetration pricing.
- Q3.List the steps in the personal selling process.
- Q4.What are the 5 Ms of advertising?
- Q5.Name four consumer sales promotion tools.
- Q6.What is public relations?
Long-answer questions
- Q1.Explain pricing methods and strategies.
- Q2.Discuss how firms initiate and respond to price changes.
- Q3.Explain the personal selling process and sales force management.
- Q4.Discuss advertising, sales promotion and public relations as tools of the promotion mix.
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