CU-MBA-SEM-IV-Marketing Analytics

MASTER OF BUSINESS ADMINISTRATION SEMESTER IV MARKETING ANALYTICS

First Published in 2021 All rights reserved. No Part of this book may be reproduced or transmitted, in any form or by any means, without permission in writing from Chandigarh University. Any person who does any unauthorized act in relation to this book may be liable to criminal prosecution and civil claims for damages. This book is meant for educational and learning purpose. The authors of the book has/have taken all reasonable care to ensure that the contents of the book do not violate any existing copyright or other intellectual property rights of any person in any manner whatsoever. In the event the Authors has/ have been unable to track any source and if any copyright has been inadvertently infringed, please notify the publisher in writing for corrective action. 2 CU IDOL SELF LEARNING MATERIAL (SLM)

CONTENT Unit 1: Introductionto Marketing Analytics ........................................................................... 4 Unit 2: Pricing Decisions & Pricing Strategies .................................................................... 19 Unit 3: Promotion Tools, Promotion Decisions & Distribution ............................................ 41 Unit 4: Models Using Analytical Tools, Branding, Brand Awareness .................................. 57 Unit 5: Brand Architecture & Brand Equity......................................................................... 72 Unit 6: Customer Lifetime Value, Calculating Customer Value........................................... 87 Unit 7: Monte Carlo Simulation Marketing Expriments..................................................... 103 Unit 8: Behavioral Segmentation, A/B Testing .................................................................. 116 Unit 9: Slicing & Dicing Data ........................................................................................... 134 Unit 10: Creating Marketing Analytics Dashbards............................................................. 142 Unit 11: Regression Analysis, Market Basket Analysis ..................................................... 161 Unit 12: Web Analtytics, Sentiment Analysis.................................................................... 178 Unit 13: Cluster Analysis, Conjoint Analysis .................................................................... 190 Unit 14: Mds & Discriminant Analysis ............................................................................ 207 3 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 1:INTRODUCTIONTO MARKETING ANALYTICS STRUCTURE 1.0 Learning Objectives 1.1 Introduction to Marketing Analytics 1.2 Analysing Product launch decisions 1.3 marketing Analytics Objectives 1.4 Scope for Marketing Analytics 1.5 Importance of Marketing Analytic 1.6 Role of Marketing Analysis in Business Development 1.7 Process of Product Development 1.8 New Product Launching 1.9 Summary 1.10 Keywords 1.11 Learning Activity 1.12 Unit End Questions 1.13 References 1.0 LEARNING OBJECTIVES After studying this unit, students should learn:  Explain the concept of Marketing Analytics  Discuss the valueMarketing Analytics  Explain the scope for Marketing Analytics  Describe the features of Marketing Analytics  Identify the role of Marketing Analytics in business development  Discuss the limitations of Marketing Analytics with examples 1.1 INTRODUCTION We will study various tools for generating marketing insights from data in such areas as segmentation, targeting and positioning, satisfaction management, customer lifetime analysis, 4 CU IDOL SELF LEARNING MATERIAL (SLM)

customer choice, product and price decisions using conjoint analysis, and text analysis and search analytics. This will be a hands-on course based on the Marketing Engineering (Enginius) approach and Excel software, in which you apply the tools studied to actual business situations. You will also complete a case study in which will be analysed & help your class mates to gain lots of knowledge about business strategies. Market Analytics is a form of secondary research, a summary of descriptive documentation & synthesis of data drawn from a number of sources. Market Analytics offer online behavior and patterns that consumer might not think to share,& keep it all in a consolidated database. You can use the two together to validate that your online data matches offline data. That is your analytics reflects your research,& vice versa. 1.2 MEANING & DEFINITION The economic landscape has been fundamentally altered by technology and globalization. A market analysis is a quantitative and qualitative assessment of a market. It examines the market size, various market segments, and customer buying patterns, the competition, and the economic environment. ... It also focuses the target market, conducts a competitive analysis, and identifies cultural and legal regulations. Purpose of Market Analysis Creating a market analysis helps you truly understand your target audience and the conditions of the market, which will inform your ability to create a successful service or product. It will also allow you to distinguish yourself from the competition and stand out in a crowded market. What is a market analysis? How suitable is your offer for a certain market? A market analysis will answer these important questions. Every market participant – whether companies, founders, or private customers – can carry out a market analysis. In any case, it serves as a basis for decision- making. Information is collected and evaluated from suppliers and buyers in order to make purchase or sales decisions. Furthermore, you can evaluate your current market or view new markets. What is a market analysis for? If you want your business plan to be successful, you will need to carry out a market analysis. A comprehensive market analysis forms the basis of the development of a marketing strategy and concrete marketing measures. Further reasons for conducting a market analysis: 5 CU IDOL SELF LEARNING MATERIAL (SLM)

 With a market analysis, you can back up your business idea with figures, data, and facts, and therefore provide a convincing business plan.  You can recognize market potential at an early stage and avoid making the wrong decisions.  You can identify any existing knowledge gaps and fill them in on time.  A market analysis shows you which competing products are already on the market.  With a market analysis, you can identify the market entry barrier and estimate the market attractiveness. 1.3 OBJECTIVES OF MARKETING ANALYTICS The following are the aim of Marketing Analysis: Marketing analytics help you understand how well your marketing initiatives are working to achieve business goals or key performance indicators (KPIs). By tracking the KPIs most relevant to your company's goals, you can appropriately adjust marketing strategy and budgets for higher positive impact. Analytics uses data and math to answer business questions, discover relationships, predict unknown outcomes and automate decisions. Marketing analytics is a set of technologies and methods used to transform raw data into marketing insights. The goal of marketing analytics is to maximize ROI from an enterprise’s marketing initiatives. Marketing analytics encompasses tools for planning, managing, and evaluating these efforts across every channel. Marketers use established business metrics, and sometimes create new KPIs, to measure the success of their organizations’ marketing initiatives. These metrics include:  Profitability segmented by demographic  Churn rate  Customer lifetime value  Customer satisfaction  Public perception Businesses can analyze performance indicators alongside other data, such as customer profiles or demographic trends, to reveal the causal links between marketing decisions and actuals 1.4 SCOPE OF MARKETING ANALYTICS The scope of Marketing Analytics. Assessing marketing campaigns: 6 CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Analytics tools provide precise information about campaign performance along with determining areas of improvement if any and predicting how they would perform in the future. The benefits of marketing analytics include helping you to:  Understand your audience. ...  Identify trends. ...  Measure performance and KPIs. ...  Optimize campaigns. ...  Forecast future results. ...  Make better decisions. ...  Optimizing workflows. ...  Predict customer lifetime value. A math-based discipline that seeks to find patterns in your marketing data to increase actionable knowledge that you can use in your marketing strategy to improve your marketing performance. Marketing analytics is the study of data garnered through marketing campaigns in order to discern patterns between such things as how a campaign contributed to conversions, consumer behaviour, regional preferences, creative preferences and much more. ... Marketing analytics benefits both marketers and consumers. 1.5 IMPORTANCE OF MARKETING ANALYTICS As a marketing manager you should study is Marketing Analytics Tough & competitive market is helping customer to have more &choicer of buying the best products with many options New Channels of communication,internet, direct marketing are the main reason behind rapid growth of marketing & marketing program.This change has brought rapid changes in the life style & status of consumer who is really king of the market with deep pockets... Top Marketing Teammust focus on updated market information with reporting formats to analyze data from a combination of channels where marketing activity was carried out. This will help to take sound & logical marketing decisions which will help increase sales volume & growth with budgeted profitability. The Marketing Mix needs modifications from time to time, place to place, customer to customers, segments to segments, region to region which will help to improve marketing campaign performance. Any business unit will be focusing on profit maximization with highest customer satisfaction & overall cost reductions. 7 CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Analytics helps to improve all channels of communication,channels, overall business development. 1.6 ROLE OF MARKETING ANALYTICS IN BUSINESS DEVELOPMENT A topic of growing importance, marketing analytics, plays a crucial role in identifying business opportunities and improving operational excellence. At a time, when the value and power of data is tremendous, marketing analytics is important for marketers, more than ever before, to overcome their challenges and benefit from big data. As a matter of fact, the global marketing analytics market is expected to reach $5.52 billion by 2025 (Verified Market Research). What is marketing analytics? Marketing analytics is the practice of measuring, managing, and analysing the marketing efforts from various data sources like social media, emails, events, websites, blogs, etc. Marketing analytics is crucial as it provides a holistic view of the performance of the marketing activities of an organization. Why is it important? According to Forbes, companies that don’t make data-driven decisions in marketing and sales are losing a 15-20% increase in marketing ROI. Data and marketing analytics can empower businesses to make better decisions. Following are the reasons that underline why marketing analytics is important in the big data world:  To learn what has happened: Using marketing analytics, businesses can glean insights on the performance of previous strategies and study them to understand why results have shaped in a particular way. By analysing previous performances, marketing teams can avoid making similar mistakes in the future.  To understand what is happening: Besides offering insights on past activities, marketing analytics can also provide information on the performance of current marketing efforts. Real-time status on marketing efforts can help marketers improve and optimize current campaigns in real time.  To know what might happen: Leveraging marketing analytics’ predictive models such as clustering, regression analysis, and collaborative filtering, businesses can forecast changes in consumer behaviour. For example, they can predict when a viewer is likely to leave their website, or which lead might convert into a client. The advent of machine learning and other sophisticated statistical algorithms will help in expediting the process and predicting the likelihood of future outcomes.  Maximize efforts and streamline budgets: Coupling marketing analytics with market research could be instrumental in optimizing efforts and streamlining budgets. Translating marketing analytics insights into market research objectives will 8 CU IDOL SELF LEARNING MATERIAL (SLM)

enable businesses in harnessing big data, channelizing efforts and streamlining budgets in the right direction and at the right time. Nearly 84% of marketers state they cannot measure and report their program’s contribution to business. This underscores the need for marketing analytics for marketers. Also, it is very important to track and measure the performance of marketing efforts and compare the results against the set objectives. Using marketing analytics, businesses can validate if their marketing actions resonate with their goals and vision. Apart from comprehending market trends and customer behaviours, they can also create a metrics framework to monitor and evaluate marketing performance. This will help in mitigating marketing budget wastage and maximizing ROI by making data-driven decisions. Marketing analytics comprises the processes and technologies that enable marketers to evaluate the success of their marketing initiatives. ... Marketing analytics uses important business metrics, such as ROI, marketing attribution and overall marketing effectiveness. Encompasses the technologies and processes that measure, manage, and analyze marketing data so you can make effective and efficient decisions about marketing activities. The insights gained from marketing analytics can help you understand how well your marketing initiatives are working, their contributions toward achieving business goals — and which aspects of those activities can be improved or repeated for better results. Importance of marketing analytics Marketing can be one of the largest cost centers in any organization. When sophisticated marketing analytics tools are applied to mine and analyze data, teams gain valuable insights into preferences of current and prospective customers, market trends, and campaign performance. Those insights can drive more efficient and cost-effective efforts, helping marketing teams better demonstrate ROI. Demonstrating measurable value to an enterprise helps justify the budget allocation and spend necessary to expand marketing efforts. Before advanced marketing analytics were available, companies had to rely on time-delayed measurements of the effects of a marketing initiative, channel by channel. That siloed data offered broad insight into the process of buying, rather than explaining the experience of the individual consumer. Today, marketing analytics can provide deeper insights into audiences at an individual level, as well as highlight how each channel contributes to driving customer acquisition and revenue. Benefits of marketing analytics Marketing analytics allows you to better understand your prospects and customers, as well as how marketing initiatives have worked previously and are working in real-time. Through 9 CU IDOL SELF LEARNING MATERIAL (SLM)

marketing analytics, your company can closely measure and monitor every campaign and demonstrate their contribution toward company goals. The benefits of marketing analytics include helping you to: Understand your audience Marketing analytics helps you better understand your customers and your prospects along the entire buyer journey. Through marketing analytics, you can learn how their interests and values drive engagement with your brand — and where they are entering (or dropping out of) the conversion funnel. Identify trends When you can identify important trends — such as how your customers engage with your brand, or how your marketing initiatives are working — you can take quick action to capitalize on those trends or reverse them. Marketing analytics helps you see the big picture regarding market trends and provides insight to help you predict (and manage) future trends. Measure performance and KPIs Marketing analytics help you understand how well your marketing initiatives are working to achieve business goals or key performance indicators (KPIs). By tracking the KPIs most relevant to your company’s goals, you can appropriately adjust marketing strategy and budgets for higher positive impact. Learn more about how to create insightful marketing reports using KPIs and goals by downloading our whitepaper. Optimize campaigns Marketing analytics can help ensure you’re using marketing spend as efficiently and effectively as possible. When you analyze data about your marketing campaigns, you can see which campaigns are most effective and identify areas of improvement to optimize. You can also see which campaigns are not performing and pause or discontinue them. Forecast future results Marketing analytics allow you to use historical data about customer behavior to identify likely future outcomes of marketing initiatives and strategies. This data can make decision- making across your organization more effective. Marketing analytics examples By measuring and analyzing marketing performance, you can better drive leads, improve conversion rates, and manage spend. Business intelligence from marketing analytics can help you uncover insights that accelerate marketing performance in many ways. Make better decisions 10 CU IDOL SELF LEARNING MATERIAL (SLM)

When you want to make sense of all the data across various marketing channels, marketing analytics tools can instantly connect with and explore that data for enhanced decision- making. Optimizing workflows Marketing teams need to understand what is happening — and when — with every campaign. Marketing analytics tools can offer features like alerts and scheduling as well as automate data reports in a way that makes your marketing team’s workflow easier and more efficient. Predict customer lifetime value Marketing analytics combined with sales or financial data can help predict and enhance customer lifetime value. This data helps marketers optimize spending to impact any number of initiatives, including customer acquisition strategy, campaign targeting, customer retention, and customer service. Examples of Marketing Analytics: Why Data Analytics Matters In Digital Marketing  Understand Your Customers. ...  Make Data-Informed Predictions. ...  Optimize Your Results. ...  Prevent Repetitive Losses. ...  Monitor Performance. ...  Discover Hidden Opportunities. ...  Current and Previous Data Analysis. ...  Customer Segmentation Analysis. 1.7 PROCESS OF PRODUCT DEVELOPMENT Product development process is expensive, risky and time consuming. Though world-shaping innovations have emerged from the ‘garages’ and will continue to do so, companies cannot depend solely on flashes of brilliance and inspiration to provide their next bread earner or even their next blockbuster. It is too frightening. In absence of any better method to bring out new products a formal process with review points, clear new product goals, and strong marketing orientations underlying the process is being relied upon by companies to achieve greater success. An eight step new product development process consists of new product strategy, idea generation, screening, concept testing, business analysis, product development, market testing and commercialization. New products pass through each stage at varying speeds. New product strategy: 11 CU IDOL SELF LEARNING MATERIAL (SLM)

Senior management should provide vision and priorities for new product development. It should give guidelines about which product or market the company is interested in serving. It has to provide a focus for the areas in which idea generation should take place. By outlining their objectives, for instance, market share, profitability, or technological leadership for new products, the senior management can provide indicators for screening criteria that should be used to evaluate these ideas. A development team is likely to achieve better results if it concentrates its resources on a few projects instead of taking shots at anything that might work. Since the outcome of new product development process is unpredictable, a company might believe that it is taking a risk by working on only a few new ideas. However unpredictable the new product development process may be, chances of success will definitely improve if the team knows precisely what it wants to achieve from the process, puts its best people in the project, and has enough resources to commit to the project. Idea generation: Developing an innovative culture that kindles imagination is a prerequisite. In such an environment every employee is alert to new opportunities. Great ideas come in a period of quiet contemplation, uninterrupted by bustle of everyday life and work. Sources of new product ideas can be internal to the company. Scientists, engineers, marketers, salespeople, designers can be rich sources of new ideas. Companies use brainstorming to stimulate creation of ideas and financial incentives to persuade people to put forward ideas they have. Though anyone can come up with a brilliant idea, a company can work systematically to generate great ideas. A company can follow the following practices: i. A company can look outside markets that are currently being served. It may not be manufacturing the precise product which the new market requires, but it may realize that it has the competence and the technology to serve the needs of the new market. When a company scrutinizes its core competences, it may discover that its various core competences may be combined in a new way to serve a new market. Apart from people who specialize in various technologies, it is important that a company has a few market savvy people who understand all its technologies. These people will combine technologies to serve customer needs in interesting ways. ii. For too long, companies have viewed a market as a set of customer needs and product functionalities to serve these needs. But they should begin to ask as to why the product has to be like this. Can the customer need be satisfied with some other product form? 12 CU IDOL SELF LEARNING MATERIAL (SLM)

Companies will realize that their products have shaped consumer expectations about the appropriate solution to their needs but if the companies become bold and persistent, customers will accept new solutions to their needs. iii. A company should question conventional price and performance relationships. It should explore the possibility of providing the same value at lesser price or try to make the customers pay more by serving their needs in a new or better way. A more rigorous market research may reveal more sophistication in customers’ needs which the company can serve with a novel product. A company should reject the idea that an existing product is the only starting point for new product development. The greatest hindrance to development of novel products is the existing product. Developers keep making mental references to the existing product in terms of how their new product will be different or better than the existing ones. Having some people from outside the industry will help the development team in distancing themselves from the existing product. A development team comprising solely of outsiders can be tried if the company desperately wants a novel product. iv. Customers rarely ask for truly innovative products. A company can try to lead customers by imagining unarticulated needs rather than simply following them. It involves a blend of creativity and understanding the needs, lifestyles and aspirations of people. The developers have to have an in- depth talk with customers and observe closely a market’s sophisticated and demanding customers. But an innovation need not always be more sophisticated than the current products. Customers might be using sophisticated products because they do not have a choice but may be looking for a much simpler solution. In quite a few markets companies have to reduce the sophistication of their products. Customers are not using a quite a few features of the current products and it is a nightmare to use some of these products. The customers need to acquire quite a few skills to use such products. They would be happier using a simpler product at a lesser price. v. A company should examine competitors’ products at frequent intervals. Though copying competitors’ products may not inspire many developers, a company can use competitors’ products to identify features and benefits that its product lacks. If a competitor’s product is more advanced or sophisticated the company can use the competitor’s product as a base and develop the product further. Retailers deal in the company’s customers and can give very useful ideas. Retailers experience the anguish and glee of customers firsthand and handle both repeat purchases and product returns. These experiences of retailers can provide very useful information about customers’ experience with the company’s offerings. A company’s salespeople and even the top executives should be in constant interaction with retailers so that they are able to glean customers’ opinions about their product from the 13 CU IDOL SELF LEARNING MATERIAL (SLM)

retailers. Retailers are also in contact with customers of competitors’ products and the company can get feedback about the competitors’ product from the retailers. vii. Customers are the original sources of new product ideas. Lead users, who are the most sophisticated users of a product, are excellent sources of ideas for new products, as they are most likely to encounter new problems due to the increased sophistication of their needs. Business customers who are innovators and market leaders in their own marketplace are sources of new product ideas, as they have advanced needs and are likely to face problems before other product users. But companies who focus on lead users may develop products which may be too sophisticated for the average users of the product. It may contain features and benefits that the average customer may not need, but will have to pay for. viii. Customers can give feedback about the products that they are familiar with, and these inputs can be used to drive innovations which will be incremental in nature. But for breakthrough innovations, ideas must come from other sources such as the R&D team. 1.8 NEW PRODUT LAUNCHING A new product development is a part of business’s planned and team effort to launch a new product to the target market andensure that product generally available for customer attention &trail. A product launch starts with Testing,Sampling,and feedback& then actual product offerings New Prospects are glad to acquire the new product. It also helps acompany to forecast market demand,seasons, target segment by collecting market feedback from dealers, early users, and industry. Process of Innovative Products / Services Businesses need to plan their product launches strategically and well in advance of their planned launch date. This is because a successful product launch requires the coordinated effort of many teams and departments across the company—not only product management and development, but also marketing, sales, customer support, finance, PR, etc. Every organization’s circumstances are unique, but a typical checklist should include at least the following: 1. Make sure the team has successfully executed on the strategic vision outlined in the product development process 2 Sampling & testing the market (Note: Product launches for software products typically happen only after several levels of testing have been completed. Alpha testing is a product’s first round of end-to-end testing, usually done by the company’s employees. When the product clears this level, the company 14 CU IDOL SELF LEARNING MATERIAL (SLM)

will send for beta testing, which involves real users but is still before the official commercial release of the product.) 3. Draft and distribute sales and marketing collateral 4. Train the sales team on the innovative products 5. Train the customer support department on the improved products 6. Complete the product’s support and/or technical documentation 7. Let your entire organization know about the approaching product launch 8. Develop and review the customer journey to acquire the product, make sure the process is as smooth as possible 9. Devise a plan for tracking user behavior and/or gathering feedback from early users 10. Decide on the metrics you and your team will use to judge the success or failure —for example, revenue or new users within a certain timeframe. 1.9 SUMMARY  Marketing Analytics is a well-plannedprocess of studying for generating marketing insights from empirical data in such areas as segmentation, targeting and positioning, satisfaction management, customer lifetime analysis, customer choice, product and price decisions using conjoint analysis, and text analysis and search analytics.  Business Results gives more clear picture about your business growth  Collect & manage your valid data into information. All businesses with focus on marketing today have access to customer data and modern web analytics tools.  Proper Data review & study helps to develop more & more clues for further business development.  Total focuses on Business Goal All Business Managers have their goals to support business operations.  Proper Business Review helps to improve sales revenue, Market Share & Overall Company growth. 1.10 KEYWORDS  Marketing Analytics:Marketing analytics is the study of data garnered through marketing campaigns in order to discern patterns between such things as how a campaign contributed to conversions, consumer behaviour, regional preferences, new demand, needs, & new trends in the market. The purpose of marketing analysis as a practice is to use these trends and modifying your marketing plans & programs to maximise business growth  Consumer Behaviour : How consumer behaves in different market situations 15 CU IDOL SELF LEARNING MATERIAL (SLM)

 Marketing Landscape : More precise reports of marketing operations  ROI : The gain on Investment for business growth  Marketing Data : Information , inputs pertain to market 1.11 LEARNING ACTIVITY 1. How to start the review Marketing Analytics for a medium size FMCG Company? ___________________________________________________________________________ _____________________________________________________________________ 2. What is the difference between Business Analytics & Marketing Analytics with suitableexamples? ___________________________________________________________________________ _____________________________________________________________________ 3. Why Product Innovation & Development is so important in today’s competitive market? ___________________________________________________________________________ _____________________________________________________________________ 1.12 UNIT END QUESTIONS A. Descriptive Questions 16 Short Questions 1. Define Marketing Analytics. 2. Identify the scope of Marketing Analytics 3. Business Analytics & Marketing Analytics 4. What the role of Marketing Manager in Market Analysis? 5. What the advantages of Marketing Analytics? 6. What the online & offline Marketing? 7. Define the concept Product? 8. Explain different elements of Product Life Cycle 9. What is Product Mix? 10. Why Product Fails? 11. Explain different strategies in different stages of Product Life Cycle. 12. What is Product Bundling? Long Questions CU IDOL SELF LEARNING MATERIAL (SLM)

1. Is Marketing Review& Marketing Analyticssame? 17 2. What ae different types of Marketing Analytics 3. What the different methods of Marketing Analysis? 4. What is SWOT & PEST Analysis? 5. Which factors you willconsider for New Product Development? 6. Why Product decision is important? 7. Product & services are both important pillars of Marketing, do you agree? 8. Why Product Life Extension is required? 9. Explain the steps of New Product Launching. 10. How to eliminate old products? B. Multiple choice Questions 1. Marketing Mix consists of following a. Product, Profit, People, Place b. Product, Price, Place, Promotion c. Product, Planet, People, Place d. Product, Price, Process, Packaging. 2. Marketing Analytics helps for higher ___________ a. Profit b. Market Share c. ROI d. Growth 3. All Modern Marketing Plansare focused on _________ a. Consumer b. Competitions c. Product Innovations d. Product & Service 4. ____________ is done before starting of any businesses CU IDOL SELF LEARNING MATERIAL (SLM)

a. SWOT Analysis b. Market Analysis c. Market sampling d. Advertising 5. Any Business Unit aims at Profit Maximization & ____________ a. Losses Minimization b. Customer Service c. Business Share d. CSR Activities. Answers 1-b, 2-c, 3-a, 4-b, 5a. 1.13 REFERENCES Textbooks  T1 Grigsby, M. 2115. Marketing Analytics: A practical guide to real marketing science, Its Ed., Kogan Page, India, ISBN: 978-0749474171.  T2 Winston, W. 2114.Marketing Analytics: Data Driven Technique using MS. Excel’s Ed. John Wiley & Sons, India, ISBN: 978-1118373439. Reference Books:  R1 Grigsby, M. 2116. Advanced Customer Analytics: Targeting, Valuing, Segmenting and Loyalty Techniques (Marketing Science). Ist Ed. Kogan Page. India. ISBN: 978-0749477158. Websites  https://springer.com  https://michaelpawlicki.com  https://statisticshowto.com 18 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 2: PRICING DECISIONS & PRICING STRATEGIES STRUCTURE 2.0 Learning Objectives 2.1 Introduction of Price element in Marketing Mix 2.2 Definitions of Pricing 2.3 Objectives of Pricing Policy 2.4 Importance of Pricing Decisions in Marketing Analytics 2.5 Different Pricing Methods 2.6 Different Pricing Strategies 2.7 Different Pricing Approaches in Competitive Market 2.8 Right Price for the Right Products / Services 2.9 Summary 2.10 Keywords 2.11 Learning Activity 2.12 Unit End Questions 2.13 References 2.0 LEARNING OBJECTIVES After studying this unit, students should know:  Explain the different Policy of Pricing.  Discuss the nature and scope of Pricing  Explain the scope of Pricing in Marketing Mix  Describe the different Pricing Methods & Policies  Identify the role of Marketing Analytics in Price setting  Discuss the Price discrimination & Price Adjustment 2.1 INTRODUCTION Pricing which Helps in Determining Return, We should be learning Importance of customer market demand , sales forecasting , brand image , various sales promotion all are associated 19 CU IDOL SELF LEARNING MATERIAL (SLM)

with the setting of right price & pricing methods sales of the product, acceptability of the product to the customers and maintain customer retention with CRM. Setting the right pricingwith right pricing cost methods & strategies are important decision- making aspect after the product is manufactured&marketed. Price decides about product acceptance in the market which leads to building up the future sales, newproductacceptance by the customers and overall business development.. It is very flexible as per market conditions. As a Business Manager should be able to work out Cost and price analysis of the Products / Services are explored to help you determine the right proposed price for your products and services. As a Business manager you should study all pricing methods & policies for setting right price for your product basket. Pricing policies are aimed at achieving various objectives. Company has several objectives to be achieved by the sound pricing policies and strategies. Pricing decisions are based on the objectives to be achieved. Objectives are related to sales volume, profitability, market shares, or competition. Let’s study five pricing objectives 1) Sufficient return on Capital investments 2) Price Stability 3) Develop & maintain market share 4) Manage competitions 5) Increased profit from various segments, Before fixing the price of the product, costing, strategy for right targets market should be properly evaluated 2.2 MEANING & DEFINITION Pricing is the process whereby a business sets the price at which it will help for selling its products baskets, services, and may be part of the business's marketing plan. ... The needs of the consumer can be converted into demand only if the consumer has the willingness and capacity to buy the product. Pricing is the method of determining the value a producer will get in the exchange of goods and services. In short, pricing method is fixed & set the price of producer’s offerings relevant to both the producer and the market. Allbusinesses operate with the main objective of earning profits, and this can be achieved through the right pricing methods adopted by the firms. 20 CU IDOL SELF LEARNING MATERIAL (SLM)

Some tips for Price Setting  products /service its category  The competitive price of same product or service in the market.  Prospective buyers with Target audience i.e., for whom the product is manufactured for offering with segments (high, medium or lower class, premium market )  The break up cost of making goods viz. fixed cost & variable cost, (Labor cost, raw material cost, depreciation,machinery cost, inventory cost, transit cost, etc.)  Outside uncontrollable External factors e.g.PEST Analysis, Economy, Government policies, Legal issues, etc. 2.3 OBJECTIVES OF PRICING POLICY Pricing policies are aimed at achieving various objectives. Company has several objectives to be achieved by the sound pricing policies and strategies. Pricing decisions are based on the objectives to be achieved. Objectives are related to sales volume, profitability, market shares, or competition. The pricing policy of the firm may vary from firm to firm depending on its objective. In practice, we find many prices for a product of a firm such as wholesale price, retail price, published price, quoted price, actual price and so on. Special discounts, special offers, methods of payment, amounts bought and transportation charges, trade-in values, etc., are some sources of variations in the price of the product. For pricing decision, one has to define the price of the product very carefully. Pricing decision of a firm in general will have considerable repercussions on its marketing strategies. This implies that when the firm makes a decision about the price, it has to consider its entire marketing efforts. Pricing decisions are usually considered a part of the general strategy for achieving a broadly defined goal. While setting the price, the firm may aim at the following objectives: (i) Price-Profit Satisfaction: The firms are interested in keeping their prices stable within certain period of time irrespective of changes in demand and costs, so that they may get the expected profit. (ii) Sales Maximization and Growth: A firm has to set a price which assures maximum sales of the product. Firms set a price which would enhance the sale of the entire product line. It is only then, it can achieve growth. (iii) Making Money: Some firms want to use their special position in the industry by selling product at a premium and make quick profit as much as possible. 21 CU IDOL SELF LEARNING MATERIAL (SLM)

(iv) Preventing Competition: Unrestricted competition and lack of planning can result in wasteful duplication of resources. The price system in a competitive economy might not reflect societies real needs. By adopting a suitable price policy the firm can restrict the entry of rivals. (v) Market Share: The firm wants to secure a large share in the market by following a suitable price policy. It wants to acquire a dominating leadership position in the market. Many managers believe that revenue maximization will lead to long run profit maximization and market share growth. (vi) Survival: In these days of severe competition and business uncertainties, the firm must set a price which would safeguard the welfare of the firm. A firm is always in its survival stage. For the sake of its continued existence, it must tolerate all kinds of obstacles and challenges from the rivals. (vii) Market Penetration: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing. (viii) Marketing Skimming: Many companies favor setting high prices to ‘skim’ the market. Dupont is a prime practitioner of market skimming pricing. With each innovation, it estimates the highest price it can charge given the comparative benefits of its new product versus the available (ix) Early Cash Recovery: Some firms set a price which will create a mad rush for the product and recover cash early. They may also set a low price as a caution against uncertainty of the future. (x) Satisfactory Rate of Return: Many companies try to set the price that will maximise current profits. To estimate the demand and costs associated with alternative prices, they choose the price that produces maximum current profit, cash flow or rate of return on investment. 2.4 IMPORTANCE OF PRICING DECISIONS IN MARKETING Meaning of Pricing Policy: A pricing policy is a standing answer to recurring question. A systematic approach to pricing requires the decision that an individual pricing situation be generalised and codified into policy coverage of all the principal pricing problems. Policies can and should be tailored to 22 CU IDOL SELF LEARNING MATERIAL (SLM)

various competitive situations. A policy approach which is becoming normal for sales activities is comparatively rare in pricing. Most well managed manufacturing enterprises have a clear cut advertising policy, product customer policy and distribution-channel policy. But pricing decision remains a patchwork of ad hoc decisions. In many, otherwise a well managed firm, price policy has been dealt with on a crisis basis. This kind of price management by catastrophe discourages the kind of systematic analysis needed for clear cut pricing policies. The following considerations involve in formulating the pricing policy: (i) Competitive Situation: Pricing policy is to be set in the light of competitive situation in the market. We have to know whether the firm is facing perfect competition or imperfect competition. In perfect competition, the producers have no control over the price. Pricing policy has special signifi- cance only under imperfect competition. (ii) Goal of Profit and Sales: The businessmen use the pricing device for the purpose of maximizing profits. They should also stimulate profitable combination sales. In any case, the sales should bring more profit to the firm. (iii) Long Range Welfare of the Firm: Generally, businessmen are reluctant to charge a high price for the product because this might result in bringing more producers into the industry. In real life, firms want to prevent the entry of rivals. Pricing should take care of the long run welfare of the company. (iv) Flexibility: Pricing policies should be flexible enough to meet changes in economic conditions of various customer industries. If a firm is selling its product in a highly competitive market, it will have little scope for pricing discretion. Prices should also be flexible to take care of cyclical variations. (v) Government Policy: The government may prevent the firms in forming combinations to set a high price. Often the government prefers to control the prices of essential commodities with a view to prevent the exploitation of the consumers. The entry of the government into the pricing process tends to inject politics into price fixation. (vi) Overall Goals of Business: Pricing is not an end in itself but a means to an end. The fundamental guides to pricing, therefore, are the firms overall goals. The broadest of them is survival. On a more specific level, objectives relate to rate of growth, market share, maintenance of control and finally 23 CU IDOL SELF LEARNING MATERIAL (SLM)

profit. The various objectives may not always be compatible. A pricing policy should never be established without consideration as to its impact on the other policies and practices. (vii) Price Sensitivity: The various factors which may generate insensitivity to price changes are variability in consumer behavior, variation in the effectiveness of marketing effort, nature of the product, importance of service after sales, etc. Businessmen often tend to exaggerate the importance of price sensitivity and ignore many identifiable factors which tend to minimize it. (viii) Reutilization of Pricing: A firm may have to take many pricing decisions. If the data on demand and cost are highly conjectural, the firm has to rely on some mechanical formula. If a firm is selling its product in a highly competitive market, it will have little scope for price discretion. This will have the way for routinised pricing. Pricing is important due to the following factors: Factor # 1. Flexible Element of Marketing Mix: Price is the most adjustable aspect of the marketing mix. Prices can be changed rapidly, as compared to other elements like product, place or promotion. Changes in product design or distribution system would take a long time to be implemented. Bringing about changes in advertisements or promotional activities is also a time consuming task. But price is very flexible and can be changed according to the needs of the situation. Therefore it is a very important component of marketing mix. Factor # 2. Right Level Pricing: The wrong price decision can bring about the downfall of a company. It is extremely significant to fix prices at the right level after sufficient market research and evaluation of factors like competitors’ strategies, market conditions, cost of production, etc. Advertisements: Low prices may attract customers in the initial stages, but it would be very hard for the company to raise prices on a future date. Similarly, a very high price will ensure more profit margins, but lesser sales. So in order to maintain balance between profitability and volume of sales, it is important to fix the right price. Factor # 3. Price Creates First Impression: Often price is the first factor a customer notices about a product. While the customer may base his final buying decision on the overall benefits offered by the product, he is likely to compare the price with the perceived value of the product to evaluate it. After learning about the price, the customers try to learn more about the product qualities. 24 CU IDOL SELF LEARNING MATERIAL (SLM)

If a product is priced too high, then the customer may lose interest in knowing more. But if he thinks that a product is affordable, then he would try to get more information about it. Therefore price is a critical factor that influences a buyer’s decision. Factor # 4. Vital Element of Sales Promotion: Being the most flexible component of marketing mix, price is the most important part of the sales promotion. In order to encourage more sales, the marketing manager may reduce the price. In case of goods whose demand is price sensitive, even a small reduction in price will lead to higher sales volume. However prices should not be fluctuated too frequently to stimulate sales. Importance of Pricing – Inflation in the Economy, Mature Products and Markets, Customers Value Perception, Inter-Firm Rivalry and a Few Others Pricing is one of the significant elements of the marketing mix, if late; it has come to occupy the centre stage in marketing wars. The reasons for this are as follows: 1. Firm Now Finds Itself in a Dilemma: In case it passes the increase in input costs to the customer in the form of a price increase, and there are equally attractive alternatives at lower prices available to him, the firm may lose the customer. And if it doesn’t increase the price, it incurs a loss. The challenge of price management is also higher when the firm realises that there are other firms in the industry that operate at a more efficient level in an inflationary economy. 2. Inflation in the Economy: Advertisements: It turns in the cast of inflationary economy. Inflation affects pricing in two ways: (i) It lowers the purchasing power of the customer and hence a search for low priced substitutes. (ii) It increases a firm’s cost because of the inputs costing more, thus forcing the price of the product upwards. 3. Mature Products and Markets: Advertisements: At the time of entering the maturity stage the products, and the markets are mature, the only way to differentiate the various offers is on the basis of augmented service or price cuts. 4. Customer’s Value Perception: The customer’s perception of the product’s current and potential value is another factor contributing to the importance of pricing decisions. To a customer, price always represents 25 CU IDOL SELF LEARNING MATERIAL (SLM)

the product’s value. Many times, the customer’s perception of the product value may not necessarily be in line with its price. There are instances in which the product is overpriced when its value perception is lower than the price tag on it, and vice-versa. For a marketer, it is important that products are priced at the right level. 5. Inter-Firm Rivalry: As the entry and exit barriers in the industry are lowered the intensity in inter-firm rivalry increases. With an increase in this rivalry, marketers find that a firm’s cost of operation also increases, as it now has to spend more money to lure customers and middlemen. It has also invested money in new product development. 6. Product Differentiation Getting Blunted: The differentiation among firms on the basis of the product is going to get blunted when technologies get standardised. More products and brands will transcend to a commodity situation. This is an unhealthy sign as commodities are always subject to price fluctuations and price wars. For, at this stage, the only way to differentiate between brands is the price. Important of Pricing Traditionally, price has operated as the major determinant of buyer choice. Although recently there has been a shift in buyer behaviour with non-price factors also playing a role in the consumer decision process, price still remains the major factor that influences the buyer’s decision. Price is the only element of the marketing mix that generates revenues while all other elements lead to costs. Similarly, price is also the most flexible element of the marketing mix, as in, it can be changed quickly, unlike other elements such as – product features, promotional campaigns or channel relationships. Organisations are known to handle price in different ways. In small organisations, prices are often set by the top management, whereas in large organisations, it is seen that pricing is handled by Product Line Managers for those lines of products that they are responsible for. However, irrespective of the size of the organisation, the general pricing objectives and policies are laid down by the top management. Price is an important element of the marketing mix for the following reasons: i. Price is the most important factor for a consumer when it comes to making a purchase decision. Rarely will it be otherwise. As such, the right kind of pricing strategy can help achieve organisational goals. ii. Price can be easily changed and is flexible thereby helping the organisation to respond quickly to marketplace changes. 26 CU IDOL SELF LEARNING MATERIAL (SLM)

iii. Price can also be used as a differentiating factor to set aside the said product from other products in the same category. iv. Price is also often used to target a particular segment of customers. v. And, last but not the least; price is the only element of the marketing mix that fetches revenue for the organisation. Importance of Pricing – Economy, Determinant of Profit, Beating Competition, Demand Regulator, Crucial Decision Input, Important Part of Sales Promotion and a Few Others We, the consumers take price for granted. It is something, the seller tells us, we pay that and forget it, but price is a very important factor. The following points highlight the importance of pricing: i. The economy – The entire economy depends on the price. It is the price which decides trade and the economy depends on the trading activity in the country. Price of a product influences profit, rent, interest, wages which are the prices paid to the factors of production- entrepreneurship, land, capital and labour respectively. Thus price acts as a regulator of economy, because it influences the allocation of the factors of production. ii. Determinant of profit – Profit is the basic objective of any commercial undertaking and the profit directly depends on the price. iii. Beating competition – Price is a very important weapon which a seller can use to overcome competition. A seller, by fixing a reasonable price and by offering value for money can overcome competition. iv. Demand regulator – It is a simple law in Economics that price and demand are inversely proportional. Thereby a seller can either increase the demand or decrease the demand for his products by setting a low or a high price. v. Crucial decision input – Price as a factor constitutes a very important decision. A company has to price appropriately because several factors depend on the price such as the demand, the profit, the market share, the competition etc. Factors such as product place and promotion are causes of expenditure but price is the only factor that brings in revenue to the seller. vi. Important Part of Sales Promotion – Many times price adjustments form a part of sales promotion that a lower price in the short term stimulates interest in the product. vii. Trigger of First Impressions – Often, customers’ first perception of a product is formed as soon as they learn the price viii. 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 27 CU IDOL SELF LEARNING MATERIAL (SLM)

decisions is particularly important in times when the marketer seeks to quickly stimulate demand or respond to competitor price actions. ix. Perception of quality – Several customers develop a perception about the quality of the product based on its price. To such customers, high price is better quality and vice-versa. Therefore the right price must be fixed for the product depending on the customer perception desired. x. Legal aspects – A wrong price may attract legal complications. Therefore a seller has to consider these factors also while fixing price. 2.5 DIFFERENT PRICING METHODS Meaning of Pricing: Pricing is a process of fixing the value that a manufacturer will receive in the exchange of services and goods. Pricing method is exercised to adjust the cost of the producer’s offerings suitable to both the manufacturer and the customer. The pricing depends on the company’s average prices, and the buyer’s perceived value of an item, as compared to the perceived value of competitors’ product. Every businessperson starts a business with a motive and intention of earning profits. This ambition can be acquired by the pricing method of a firm. While fixing the cost of a product and services the following point should be considered:  The identity of the goods and services  The cost of similar goods and services in the market  The target audience for whom the goods and services are produces  The total cost of production (raw material, labour cost, machinery cost, transit, inventory cost etc).  External elements like government rules and regulations, policies, economy, etc., What is Pricing Method? Pricing method is a technique that a company apply to evaluate the cost of their products. This process is the most challenging challenge encountered by a company, as the price should match the current market structure and also compliment the expenses of a company and gain profits. Also, it has to take the competitor’s product pricing into consideration so, choosing the correct pricing method is essential. Types of Pricing Method: The pricing method is divided into two parts: 28 CU IDOL SELF LEARNING MATERIAL (SLM)

 Cost Oriented Pricing Method– It is the base for evaluating the price of the finished goods, and most of the companies apply this method to calculate the cost of the product. This method is divided further into the following ways.  Cost-Plus Pricing- In this pricing, the manufacturer calculates the cost of production sustained and includes a fixed percentage (also known as markup) to obtain the selling price. The mark up of profit is evaluated on the total cost (fixed and variable cost).  Markup Pricing- Here, the fixed number or a percentage of the total cost of a product is added to the product’s end price to get the selling price of a product.  Target-Returning Pricing- The company or a firm fix the cost of the product to achieve the Rate of Return on Investment.  Market-Oriented Pricing Method- Under this category, the is determined on the base of market research  Perceived-Value Pricing- In this method, the producer establish the cost taking into consideration the customer’s approach towards the goods and services, including other elements such as product quality, advertisement, promotion, distribution, etc. that impacts the customer’s point of view.  Value pricing- Here, the company produces a product that is high in quality but low in price.  Going-Rate Pricing- In this method, the company reviews the competitor’s rate as a foundation in deciding the rate of their product. Usually, the cost of the product will be more or less the same as the competitors.  Auction Type Pricing- With more usage of internet, this contemporary pricing method is blooming day by day. Many online platforms like OLX, Quickr, eBay, etc. use online sites to buy and sell the product to the customer.  Differential Pricing- This method is applied when the pricing has to be different for different groups or customers. Here, the pricing might differ according to the region, area, product, time etc. Cost-based Pricing: Cost-based pricing refers to a pricing method in which some percentage of desired profit margins is added to the cost of the product to obtain the final price. In other words, cost- based pricing can be defined as a pricing method in which a certain percentage of the total cost of production is added to the cost of the product to determine its selling price. Cost- based pricing can be of two types, namely, cost-plus pricing and markup pricing. These two types of cost-based pricing are as follows: 29 CU IDOL SELF LEARNING MATERIAL (SLM)

i. Cost-plus Pricing: Refers to the simplest method of determining the price of a product. In cost-plus pricing method, a fixed percentage, also called mark-up percentage, of the total cost (as a profit) is added to the total cost to set the price. For example, XYZ organization bears the total cost of Rs. 100 per unit for producing a product. It adds Rs. 50 per unit to the price of product as’ profit. In such a case, the final price of a product of the organization would be Rs. 150. Cost-plus pricing is also known as average cost pricing. This is the most commonly used method in manufacturing organizations. In economics, the general formula given for setting price in case of cost-plus pricing is as follows: P = AVC + AVC (M) AVC= Average Variable Cost M = Mark-up percentage AVC (m) = Gross profit margin Mark-up percentage (M) is fixed in which AFC and net profit margin (NPM) are covered. AVC (m) = AFC+ NPM ii. For determining average variable cost, the first step is to fix prices. This is done by estimating the volume of the output for a given period of time. The planned output or normal level of production is taken into account to estimate the output. The second step is to calculate Total Variable Cost (TVC) of the output. TVC includes direct costs, such as cost incurred in labor, electricity, and transportation. Once TVC is calculated, AVC is obtained by dividing TVC by output, Q. [AVC= TVC/Q]. The price is then fixed by adding the mark-up of some percentage of AVC to the profit [P = AVC + AVC (m)]. iii. The advantages of cost-plus pricing method are as follows: a. Requires minimum information b. Involves simplicity of calculation c. Insures sellers against the unexpected changes in costs The disadvantages of cost-plus pricing method are as follows: a. Ignores price strategies of competitors b. Ignores the role of customers iv. Markup Pricing: Refers to a pricing method in which the fixed amount or the percentage of cost of the product is added to product’s price to get the selling price of the product. Markup pricing is more 30 CU IDOL SELF LEARNING MATERIAL (SLM)

common in retailing in which a retailer sells the product to earn profit. For example, if a retailer has taken a product from the wholesaler for Rs. 100, then he/she might add up a markup of Rs. 20 to gain profit. It is mostly expressed by the following formulae: a. Markup as the percentage of cost= (Markup/Cost) *100 b. Markup as the percentage of selling price= (Markup/ Selling Price)*100 c. For example, the product is sold for Rs. 500 whose cost was Rs. 400. The mark up as a percentage to cost is equal to (100/400)*100 =25. The mark up as a percentage of the selling price equals (100/500)*100= 20. Demand-based Pricing: Demand-based pricing refers to a pricing method in which the price of a product is finalized according to its demand. If the demand of a product is more, an organization prefers to set high prices for products to gain profit; whereas, if the demand of a product is less, the low prices are charged to attract the customers. The success of demand-based pricing depends on the ability of marketers to analyze the demand. This type of pricing can be seen in the hospitality and travel industries. For instance, airlines during the period of low demand charge less rates as compared to the period of high demand. Demand-based pricing helps the organization to earn more profit if the customers accept the product at the price more than its cost. Competition-based Pricing: Competition-based pricing refers to a method in which an organization considers the prices of competitors’ products to set the prices of its own products. The organization may charge higher, lower, or equal prices as compared to the prices of its competitors. The aviation industry is the best example of competition-based pricing where airlines charge the same or fewer prices for same routes as charged by their competitors. In addition, the introductory prices charged by publishing organizations for textbooks are determined according to the competitors’ prices. Other Pricing Methods: In addition to the pricing methods, there are other methods that are discussed as follows: i. Value Pricing: Implies a method in which an organization tries to win loyal customers by charging low prices for their high- quality products. The organization aims to become a low cost producer without sacrificing the quality. It can deliver high- quality products at low prices by improving its research and development process. Value pricing is also called value-optimized pricing. 31 CU IDOL SELF LEARNING MATERIAL (SLM)

ii. Target Return Pricing: Helps in achieving the required rate of return on investment done for a product. In other words, the price of a product is fixed on the basis of expected profit. iii. Going Rate Pricing: Implies a method in which an organization sets the price of a product according to the prevailing price trends in the market. Thus, the pricing strategy adopted by the organization can be same or similar to other organizations. However, in this type of pricing, the prices set by the market leaders are followed by all the organizations in the industry. iv. Transfer Pricing: Involves selling of goods and services within the departments of the organization. It is done to manage the profit and loss ratios of different departments within the organization. One department of an organization can sell its products to other departments at low prices. Sometimes, transfer pricing is used to show higher profits in the organization by showing fake sales of products within departments. A break-even analysis is a useful tool for determining at what point your company, or a new product or service, will be profitable. Put another way, it's a financial calculation used to determine the number of products or services you need to sell to at least cover your costs. In accounting, the breakeven point formula is determined by dividing the total fixed costs associated with production by the revenue per individual unit minus the variable costs per unit. In this case, fixed costs refer to those which do not change depending upon the number of units sold. For example, selling 10,000 units would generate 10,000 x $12 = $120,000 in revenue. ... The break-even point is at 10,000 units. At this point, revenue would be 10,000 x $12 = $120,000 and costs would be 10,000 x 2 = $20,000 in variable costs and $100,000 in fixed costs. 32 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig. 2.1 2.6 DIFFERENT PRICING STRATEGIES Pricing Strategies Pricing is a significant factor for financial growth of any company. Organizations develop numerous pricing strategies to market their products in order to attract consumers. Pricing strategy in marketing is the search of identifying the best price for a product. This strategy is combined with the other marketing standards which are recognized as the 4 P's (product, place, price, and promotion), market demand, product characteristics, competition, and economic patterns. The pricing strategy is major components of the marketing mix that produces revenues for the firm, while all the others are related to expenses (Finch et al., 1998). Price is the most flexible part of marketing strategy in that pricing decisions can be implemented consistently rapidly as compared to the other elements of marketing strategy. But Pricing decisions are complex. Though pricing of the company's marketing strategy is significant, there seems to be a lack of interest among marketing scholars. Penetration Pricing: A penetration pricing strategy is intended to grab market share by entering the market with a low price relative to the competition to attract buyers. The main purpose is that the business will be able to raise awareness and get people to try the product. Even though penetration pricing may initially make a loss for the company, it will help to 33 CU IDOL SELF LEARNING MATERIAL (SLM)

create this technique is a simple strategy for implementation because there are no sophisticated calculations and it leads to price peace. There is a difference between native and sophisticated going-rate pricing. Native means that the price is at the same level as that of competitors without taking into consideration costs and demand. Sophisticated going-rate pricing sets the price in a defined section in which the company considers certain degree conditions of demand and costs (Van Looy et al., 2003). Word-of-mouth and awareness among a crowded market category. Penetration pricing needs thorough planning. It can result in fast diffusion and adoption. This strategy develops cost controls and cost reduction pressure from the beginning which results in good efficiency. Other benefit of this strategy is that it can produce high stock turnover through the distribution channel. Buy major limitation is that it establishes long term price expectations for the product and image to the brand and company. This makes difficult to increase price. Price penetration is suitable in conditions where product demand is high price elastic, substantial economies of scales are available, product is suitable for mass market. Premium Pricing: Premium pricing strategy sets a price higher than the competitors. This strategy can be successfully used when there is something exclusive about the product or when the product is first to market and the business has a dissimilar competitive advantage. Premium pricing can be suitable for companies entering new to the market and maximize revenue at initial stages of the product life cycle. Discount Pricing: Companies adopt discount pricing for product promotions in order to attract new customers. This discounted pricing draws attention to the product and can be used as a hook to bring in customers who will potentially purchase other items. This strategy is appropriate when seasonal changes in which company offers discounted prices of the items that are going out of season. The main advantages of this strategy are that it discounts to reward volume customers, repeat customers and employees develop customer loyalty. Loss leaders are effective for retailers who need to increase traffic in the store. Promotional discounts used carefully offer momentary advantages such as maximizing sales, income and profit. During a short-term discount period, more units are sold, allowing the company to reduce inventory and temporarily increase income. There are some disadvantages also such as consumer associate low price with low quality, particularly when the brand name is not aware. Discounted price strategy may lead to perception of poor quality. Skim Pricing: Skim pricing is a procedure that companies adopt in launching new product. It is to find the best price point for a product, usually exceptional items with unidentified consumer demand. The price skimming strategy comprises of the company setting the primary product price high to rapidly cover embedded costs and then begins to gradually reduce the price to being the product to large market. The main objective of this strategy is to maximize potential profits until the optimum price is reached. The major benefits of this strategy are high profit margin, cost recovery, dealer's profit and quality image. Price skimming method has some limitations such as there is continual competitive pressure and 34 CU IDOL SELF LEARNING MATERIAL (SLM)

cost inefficiency. Adopting this strategy enable to recover development cost through high profit margin. 2.7 DIFFERENT PRICNG APPROACHES IN GLOBAL MARKET  Psychological Price  Product Line Pricing  Bye-Product Pricing  Optional Product Pricing  Captive Product Pricing  Product Bundle Pricing  Promotional Pricing  Geographical Pricing  Value Pricing  Price Discrimination  Off Season Pricing  Cash Discount Pricing  Qty Discount Pricing  Functional Discount Pricing  Group Discount Pricing  Special Allowance Pricing  Segmented Pricing  International Pricing 2.8 RIGHT PRICE FOR THE RIGHT PRODUCTS / SERVICES Pricing is managers’ biggest marketing headache. It’s where they feel the most pressure to perform and the least certain that they are doing a good job. The pressure is intensified because, for the most part, managers believe that they don’t have control over price: It is dictated by the market. Moreover, pricing is often seen as a difficult area in which to set objectives and measure results. Ask managers to define the objective for the company’s manufacturing function, and they will cite a concrete goal, such as output and cost. Ask for a measure of productivity, and they will refer to cycle times. But pricing is difficult to pin down. High unit sales and increased market share sound promising but they may in fact mean 35 CU IDOL SELF LEARNING MATERIAL (SLM)

that a price is too low. And forgone profits do not appear on anyone’s scorecard. Indeed, judging pricing quality from outcomes reported on financial statements is perilous business. Eight Steps to Better Pricing Fitting a pricing policy to a marketing strategy and considering the relevant information in a coordinated manner are broad goals. The following eight steps deal with the essentials of setting the right price and then monitoring that decision so that the benefits are sustainable. 1. Assess what value your customers place on a product or service 2. Look for variation in the way customers value the product. 3. Assess customers’ price sensitivity. 4. Identify an optimal pricing structure. 5. Consider competitors’ reactions. 6. Monitor prices realized at the transaction level. 7. Assess customers’ emotional response. 8. Analyze whether the returns are worth the cost to serve. When considering the coordination of the pricing process, managers should ask the following questions:  What is our pricing objective?  Do all the participants in the process understand the objective?  Do they all have an incentive to work in pursuit of the objective? 2.9 SUMMARY  Pricing is a process of fixing the value that a manufacturer will receive in the exchange of services and goods. Pricing method is exercised to adjust the cost of the producer's offerings suitable to both the manufacturer and the customer.  Pricing Strategies When you have a specific idea of the value of your products and a rough idea of how much your goods cost to produce, you are ready to refine your pricing strategy: pricing for profit, pricing for value or pricing against competition. A. Pricing for Profit Every retailer should be pricing for profit.  Getting your pricing right will make an enormous difference to your turnover and profits. But it's a difficult art - set it too high and your customers will flock to cheaper competitors set it too low and people will assume your product or service is low quality and steer clear.  Price is important to marketers because it represents marketers' assessment of the value customers see in the product or service and are willing to pay for a product or 36 CU IDOL SELF LEARNING MATERIAL (SLM)

service. ... Both a price that is too high and one that is too low can limit growth. The wrong price can also negatively influence sales and cash flow. 2.10 KEYWORDS  Pricing: is a managerial task that involves establishing pricing objectives, identifying the factors governing the price, ascertaining their relevance and significance, determining the product value in monetary terms and formulation of price policies and the strategies, implementing them and controlling them for the best results”.  Skim Pricing: Skim pricing is a procedure that companies adopt in launching new product. It is to find the best price point for a product, usually exceptional items with unidentified consumer demand.  Premium Pricing: Premium pricing strategy sets a price higher than the competitors  Penetration Pricing: A penetration pricing strategy is intended to grab market share by entering the market with a low price relative to the competition to attract buyers.  Demand-based Pricing:Demand-based pricing refers to a pricing method in which the price of a product is finalized according to its demand.  Cost-based Pricing:Cost-based pricing refers to a pricing method in which some percentage of desired profit margins is added to the cost of the product to obtain the final price. 2.11 LEARNING ACTIVITY 1. What are the Different Pricing Methods? ___________________________________________________________________________ ___________________________________________________________________ 2. Explain the difference between Market Skimming & Market Penetration Policy? ___________________________________________________________________________ _______________________________________________________________ 3. Explain different approaches in Pricing? ___________________________________________________________________________ _______________________________________________________________ 2.12 UNIT END QUESTIONS A. Descriptive Questions 37 Short Questions 1. Define Pricing CU IDOL SELF LEARNING MATERIAL (SLM)

2. Why Pricing is so important in Business? 38 3. Pricing is the major elements in Marketing Mix that earns Revenue. Justify 4. Explain different Pricing Methods 5. What is importance of pricing in Marketing Analysis? 6. Explain Market Skimming Policy 7. Explain Market Penetration Policy 8. Why you need pricing strategies? 9. Define Pricing & profit 10. Explain the concept of Price adjustment Long Questions 1. What is scope of Pricing? 2. Explain different types of Pricing Methods in Marketing 3. Explain the Cost-Plus Method 4. Notes on Break Even Analysis. 5. What the factors to be considered for setting a price of products? 6. Why Price decision is important? 7. Price adjustment will lead to reduction of profit. Do you agree? 8. What is Sealed Bid Pricing? 9. Explain the process of price setting. 10. How to set a price for Global Market? B. Multiple Choice Questions 1. Important elements of Modern Marketing Mix a. Product b. Price c. Place d. Process 2. Good Profit will help to gain higher ___________ a. Business Growth b. New Products CU IDOL SELF LEARNING MATERIAL (SLM)

c. Sampling d. Customer Satisfaction 3. Break Even Analysis is used mainly for _________ a. Old Products b. Global Business c. Seasonal Business d. FMCG Products 4. ____________ is done before setting a price of products a. Sampling b. Test Marketing c. Competition Mapping d. Advertising 5. Any Business Unit avoids _____________ & ____________ a. Losses & damage reputations b. New Market development c. Market Testing d. Customer interaction Activities. Answers 1-b, 2-a, 3-d, 4-c, 5a. 2.13 REFERENCES Textbooks  T1 Grigsby, M. 2115. Marketing Analytics: A practical guide to real marketing science, Its Ed., Kogan Page, India, ISBN: 978-0749474171.  T2 Winston, W. 2114.Marketing Analytics: Data Driven Technique using MS. Excel’s Ed. John Wiley & Sons, India, ISBN: 978-1118373439. Reference Books: 39 CU IDOL SELF LEARNING MATERIAL (SLM)

 R1 Grigsby, M. 2116. Advanced Customer Analytics: Targeting, Valuing, Segmenting and Loyalty Techniques (Marketing Science). Ist Ed. Kogan Page. India. ISBN: 978-0749477158. Websites  https://springer.com  https://michaelpawlicki.com  https://statisticshowto.com 40 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3: PROMOTION TOOLS, PROMOTION DECISIONS & DISTRIBUTION STRUCTURE 3.0 Learning Objectives 3.1 Introduction of Promotion element in Marketing Mix 3.2 Definitions of Promotion 3.3 Objectives of Promotion 3.4 Importance of Promotion & Publicity Decisions in Marketing 3.5 Different Promotional Tools 3.6 Allocation of Promotional Tools in B2B & FMCG Market 3.7 Introduction of Distribution in Marketing 3.8 Selecting Right Channels for the Right Products 3.9 Summary 3.10 Keywords 3.11 Learning Activity 3.12 Unit End Questions 3.13 References 3.0 LEARNING OBJECTIVES After studying this unit, students will be able to:  Critically evaluate the key analytical frameworks and tools used in marketing.  Understand importance of Promotion to ensure sales growth.  Utilise information of a firm's external and internal marketing environment to identify and prioritise appropriate marketing  Discuss the various channels of distribution  To understand the channels of distribution business might use when they grow  To study each & every Channels of distribution  To understand how the products is delivered to ultimate consumer  To study different Logistic Methods & Transportation Cost 41 CU IDOL SELF LEARNING MATERIAL (SLM)

3.1 INTRODUCTION OF PROMOTION ELEMENT IN MARKETING MIX  4 P’s of Marketing Mix, in simple words promoting products by way of various tools including Pull & Push strategy to inform & convince potential customer to make the final purchases.  These tools/elements are used in different combinations depending upon the necessity of information. What is promotional mix? These tools are in the form of- (a) Advertisement. (b)Personal Selling. (c) Publicity. (d) Sales Promotion. It is no longer enough for a business to have great products. Lots of businesses have those too. Customers should know about a great product and be persuaded to buy. This is the aim of promotion. Promotion in simple words is just communication with customers why because promotion is the way in a business makes its products known to the customers, both current and potential. In marketing, promotion refers to any type of marketing communication used to inform target audiences of the relative merits of a product, service, brand or issue, most of the time persuasive in nature. It helps marketers to create a distinctive place in customers' mind; it can be either a cognitive or emotional route. Promotions refer to the entire set of activities, which communicate the product, brand or service to the user. The idea is to make people aware, attract and induce to buy the product, in preference over others. ... This can also be expensive and time consuming, but is best for high value or premium products. Why Are Promotions Important? The most important purpose that a promotion serves is that it sets a business apart from its competitors. No business will ever need to run any promotions if there wasn't any competition. You have to stay ahead of your competitors in order for customers to keep doing business with you. Marketing and promotional strategies are closely tied together. Marketing includes all aspects of developing, promoting and selling products or services to customers. Promoting is a key element in communicating the benefits of products once they are researched and developed. Effective marketing and promotion strategies drive the long-term success, customer development and profitability for companies. 42 CU IDOL SELF LEARNING MATERIAL (SLM)

Promotions are essentially the alarm that you sound to let customers know you exist and why they should care. Without the use of promotions, your fabulous products and services can't garner the interest of preoccupied and on-the-move customers. Initially, advertising, public relations, social media, personal selling and other forms of communication are used to create awareness about brands and products. Subsequent goals include gaining marketing share, getting customers to buy and growing revenue. The media you select and the messages you formulate are keys in building effective promotional strategies that achieve these communication goals. The main aim of promotion is to ensure that customers are aware of the existence and positioning of products. Promotion is also used to persuade customers that the product is better than competing products and to remind customers about why they may want to buy. The five major objectives of a promotional strategy are 1. providing information, 2. differentiate a product, 3. increase sales, 4. stabilize sales, and 5. accentuate product value What is Sales Promotion? It refers to short term incentives which are offered to the ultimate customers to encourage them to make immediate purchase of the product or service. 3.2 MEANING & DEFINITION OF PROMOTION Promotion is communication intended to persuade, inform, or remind a target audience about a business or its products. Definition: Promotions refer to the entire set of activities, which communicate the product, brand or service to the user. The idea is to make people aware, attract and induce to buy the product, in preference over others. Promotion is nothing but of marketing communication with target customers with close interaction for giving updates , information, persuasion, and convince to buy the products.. The promotion has main three specific purposes: communicating marketing information to consumers, users, and repeat &resale customers. Promotional efforts are strongly focused on competition providing latest updates on entire marketing program. The promotion has been defined as “the coordinated self-initiated efforts to establish smooth channels of information and persuasion to facilitate or push the sale of goods or services,” According to Philip Kotler, “Promotion includes all the activities the company undertakes to communicate and promote its products to the target market.” 43 CU IDOL SELF LEARNING MATERIAL (SLM)

According to W.J.Stanton, “Promotion is the element in an organization’s marketing mix that serves to inform, persuade and remind the market of the organization or its products.” The promotion strategy involves planning, determining the right promotional mix, and selecting specific promotional activities. The Marketing Promotion strategy is thehighly visible marketing plans with strategy, designed to get the attention of target customers with current customers and convince them to buy from you. Promotional Programs with right tools must be in right mix for FMCG & B2B businesses. Elements of Promotional Mix  Advertising  Personal Selling  Sales Promotion  Publicity  Internet Marketing When selecting elements for a promotional mix, consider:  target market  Product Value  Promotional Channels  Time Frame  Cost 3.3 OBJECTIVES OF PROMOTION  Main aims of promotion  Promotional activities have a variety of aims:  To inform current and potential customers about the existence of products  To explain the potential benefits of using the product  To persuade customers to buy the product  To help differentiate a product from the competition  To develop and sustain a brand  To reassure customers that they have made the right choice Promotions refer to the entire set of activities, which communicate the product, brand or service to the user. The idea is to make people aware, attract and induce to buy the product, in preference over others. 44 CU IDOL SELF LEARNING MATERIAL (SLM)

In marketing, promotion refers to any type of marketing communication used to inform target audiences of the relative merits of a product, service, brand or issue, most of the time persuasive in nature. It helps marketers to create a distinctive place in customers' mind; it can be either a cognitive or emotional route. The aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty. It is one of the basic elements of the market mix, which includes the four Ps, i.e., product, price, place, and promotion. [1] Promotion is also one of the elements in the promotional mix or promotional plan. These are personal selling, advertising, sales promotion, direct marketing publicity, word of mouth and may also include event marketing, exhibitions and trade shows. [2] A promotional plan specifies how much attention to pay to each of the elements in the promotional mix, and what proportion of the budget should be allocated to each element. Promotion covers the methods of communication that a marketer uses to provide information about its product. Information can be both verbal and visual. 3.4 IMPORTANCE OF PROMOTION & PUBLICITY DECISIONS IN MARKETING Why Are Promotions Important? The most important purpose that a promotion serves is that it sets a business apart from its competitors. No business will ever need to run any promotions if there wasn't any competition. You have to stay ahead of your competitors in order for customers to keep doing business with you. Promotion is all about communication. Promotion is the way in a business makes its products known to the customers, both current and potential. It is a common mistake to believe that promotion by business is all about advertising. It isn't. There are a variety of approaches that a business can take to get their message across to customers, although advertising is certainly an important one. The main aim of promotion is to ensure that customers are aware of the existence and positioning of products. Promotion is also used to persuade customers that the product is better than competing products and to remind customers about why they may want to buy. It is important to understand that a business will use more than one method of promotion. The variety of promotional methods used is referred to as the promotional mix. The following are the main roles of promotion: i. To create product and brand awareness – Several sales promotion techniques are highly effective in exposing customers to products and brands for the first time and can serve as key promotional components in the early stages of new product and brand introduction. This awareness is the basis for all other future promotional activities. Promotional activities motivate the customers to try new products and brand and the dealers also to push the new products and brands. 45 CU IDOL SELF LEARNING MATERIAL (SLM)

ii. To create interest – Sales promotions are very effective in creating interest in a product. In fact, creating interest is often considered the most important use of sales promotion. In the retail industry an appealing sales promotion can significantly create customer interest. iii. To provide information – Promotional activities provide substantial information about the product to the customers. This goes a long way in converting interest into actual sales. iv. To stimulate demand – Effective promotional activities can stimulate demand for the product by convincing the customers to buy the products. Publicity is important because it helps increase awareness and visibility of your company while establishing it as a worthwhile business to purchase products or services from. There are many advantages to publicity, including: Publicity is less expensive than marketing efforts. A business firm can get various benefits from use of publicity as promotion mix. Its credibility, greater numbers of readers, adequate information, low cost and greater speed of passing information are the main causes to make it important. Significance or importance of publicity can be described as follows: 1. Credibility As sponsor is not mentioned or not identified in publicity, the information and message about goods or services communicated by independent source become more credible and dependable. 2. Greater readership As information and messages about goods or services are communicated mostly through important newspapers or other media, greater number of readers can read the information 3. Contains more information Publicity is used as more information and messages can be included in it than in other promotion methods, specially, advertisement. Many aspects of goods or services of business firm can be covered in special feature articles. 4. Cost benefit Not so considerable cost is needed in publicity. Advertisement is a costly method of promotion, but publicity is comparatively much economical method. In other words, if calculated the cost for advertisement, more benefits can be received from publicity. 5. Speed Speed is another importance of publicity. It is the faster means for communication, information and messages about firm and its goods or services. Publicity has greater speed to reach the public. 46 CU IDOL SELF LEARNING MATERIAL (SLM)

3.5 DIFFERENT PROMOTIONAL TOOLS Marketing Promotional Tools For an effective promotion of any product or service, there are a number of marketing promotional tools that can be utilized in a promotion program. These should be applied carefully according to the given circumstances. Since every promotional tool is suitable for certain circumstances. The following are the important types of marketing promotional tools that must be in your mind.  Advertising  Personal Selling  Sales Promotion  Public Relations  Direct Marketing Ways of Marketing Promotional Tools Following are the ways of Promotional Tools in Marketing: Advertising The masses of customers dispersed geographically can be reached with the Promotional Tools of advertising. Actually this can be repeated for a number of times. The popularity, size and success of the selling organization are enhanced by the large scale advertising. Therefore the customers consider the advertising products as most legitimate due to the public nature. Moreover, it’s the quickest way to promote a product to a large portion of diversified customers. Another important feature of advertising is that it is much more expressive. In such a way that the selling organization dramatizes its products by applying certain impressive print, sound, visuals and colors, etc. On the one hand, advertising is very beneficial. However on the other hand, it has some disadvantages too. Thus the advertising cannot stimulate the customers directly, because it is impersonal. The advertising is based on one way of communication. Actually which means that the audience of the advertisement has not the option to give feedback or respond to the advertising messages. One of the biggest drawbacks of advertisements is that they are very expensive. There are some types of advertising, like radio and newspaper advertising that can be utilized within a range of smaller budgets. However the other kinds of advertising, like network television advertising, are not covered in smaller budgets, but in larger budgets. 47 CU IDOL SELF LEARNING MATERIAL (SLM)

Personal Selling At certain stages of the buying process, personal selling is the most effective promotion tool in creating customer’s preferences, convictions and actions. In personal selling, personal interactions between two or more people take place. Actually that can allow both parties to understand the characteristics and needs of one another. Therefore then make immediate adjustments. All types of relationships are also flourishing in personal selling like selling relationships of the matter of fact and personal friendship etc. The salespersons have professional expertise by which they focus on the interests of the customers. Although then develop a healthy relationship over it. Moreover, the customer also gives extra time and attention to listening to the offerings of salespersons even though his final decision is no. Personal selling is also faced with extra cost and effort in training salespersons to make them committed to the given tasks. The advertising can be altered by continuing and discontinuing it in certain conditions. However the size of the sales force is much harder to change in case of personal selling. Sales Promotion These Promotional tools include sales promotion which further contains a broad assortment of elements like:  Coupons  Cent-off Deals  Premiums  Other Tools The tools of sales promotion are applied to boost sagging sales by attracting the customers and offerings of distinct incentives of purchase. A quick response is generated by using this promotion tool for sales promotion. If advertising is related to “buy our product” then sales promotion is the representation of “buy the product now”. In the short run, sales promotion can be regarded as an effective promotion tool. However in the case of the long run it is not favorable in developing long-lasting customer relationships. Thus the brand preferences just like advertising and personal selling do. Public Relations Public relations are much different from the ads and they are more influential than these ads. So public relations consist of news stories, events and features. Actually that is considered as more real. Therefore the readers also consider them more believable. 48 CU IDOL SELF LEARNING MATERIAL (SLM)

Many prospects avoid advertisements and personal selling. However they can also be influenced by public relations. So the real message in public relations is considered to be “news” by the customers rather than as a sales centered communication. The product of an organization is also dramatized by public relations. Public relations should not be used too much or it should be used as an afterthought. It is combined with the elements of the other promotional mix to use it in an effective and economical way. Direct Marketing Direct marketing may take the following forms.  Telemarketing  Electronic Marketing  Online Marketing  Direct Mail There are four distinct characteristics that are shared in all of the above forms. The first characteristic is direct marketing, which is non-public in nature. It means that a specific person is addressed in this form of promotion tool rather than focusing on the general public. Furthermore, direct marketing is customized and immediate, which means that the messages can be fitted to the specific requirements of the customers and they are developing very quickly. At last, direct marketing is interactive which means that customers and Marketing may show a dialogue with each other. Promotional tools are tactics or activities you plan and execute to persuade consumers to buy your products or services. As a consumer, you likely partake of these activities yourself without realizing it; as a businessperson on the selling side, finding effective tools is challenging. Try a combination and make note of what works. If what you’re selling is fairly generic, your promotional tools will typically be price-oriented, such as discounts. If you are a specialized seller, find tools other than price to persuade consumers to buy. Sampling Offering a sample of your product or service is a tool to get your customers to try it, with the goal of them paying for it next time. This is typically effective if you position yourself as different from other businesses, where customers might be unwilling to pay for something new when what they are purchasing now is familiar to them and satisfying. Discounts and Sales Implement pricing strategies such as discounts and sales as promotional incentives for customers to buy. Discounts can be offered in advance, such as through direct-mail offers. You can also send quick response codes, known as QR or bar codes, to customers’ phones for instant discounts that don’t require a paper coupon or ad. Sales can be promoted in 49 CU IDOL SELF LEARNING MATERIAL (SLM)

advance and also on location for retail businesses. These tactics can encourage sales during the offer period; devise customer follow-up methods to turn these into repeat buyers, particularly if what you are selling is similar to what your competitors sell. Sweepstakes and Contests Designing a sweepstakes or contest can promote your product or services in a participatory manner, but they can be tricky. There are legal considerations with sweepstakes, such as not mandating a purchase in order to participate and in some states they may be banned completely. Subjectively judging contest entries can lead to disgruntled participants. You can mitigate potential issues by having multiple winners, such as first- through fifth-place winners in age categories. Having children draw a picture of your product or business and then displaying the entries is an example of a contest. Displays Prominent displays in retail stores and other business establishments draw attention to a product or service. Put the display in a high-traffic area, such as near a restroom or, in retail stores, next to the check-out register or other popular products. The display can advertise another consumer promotion tool, such as a sale. Service providers can integrate a continuous-loop video about their services, or to offer instructions or advice. Premiums Premiums can promote sales and build brands. Examples of premiums are loyalty programs, offering discounts or something free after a certain number of visits or purchases, and a bonus with a purchase. For example, a bonus could either be extra volume of the same product or an additional product. A toy hidden in a box of cereal is an example of a bonus premium. To enhance building your brand, consider offering a bonus such as a t- shirt or hat with your company’s name on it. A promotional budget refers to money earmarked for the marketing, advertisement, or sales of a product or brand. The amount to budget to promote a new or existing product will depend on business analytics, market research, and anticipated return on investment. A promotional budget is a specified amount of money set aside to promote the products or beliefs of a business or organization. Promotional budgets are created to anticipate the essential costs associated with growing a business or maintaining a brand name. Five important factors to keep in mind when setting your marketing budget:  1 Your Per-Channel Goals. All channels provide a different level of ROI. ...  2 The Competitive Landscape. Competition is a major factor in how much paid advertising costs will change over time. ...  3 Remarketing. ...  5 Fixed Brand Building. 50 CU IDOL SELF LEARNING MATERIAL (SLM)