Essential Marketing and Pricing Frameworks

Posted on Oct 10, 2025 in Business Management and Marketing

Price Elasticity of Demand (PED)

Formula:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

  • Elastic (> 1): Consumers are sensitive to price changes.
  • Inelastic (< 1): Consumers are less responsive to price changes.

Strategies to Make Demand Inelastic

  • Differentiating the product.
  • Building strong brand loyalty.

Elasticity and Product Types

  • Luxury Goods: High elasticity (flatter demand curve).
  • Normal Goods: Lower elasticity (steeper demand curve).
  • Perfectly Elastic Goods: Horizontal demand curve.
  • Perfectly Inelastic Goods: Vertical demand curve.

Key Pricing Concepts and Strategies

Degrees of Price Discrimination

  1. First Degree: Charging the maximum Willingness To Pay (WTP) for each customer.
  2. Second Degree: Pricing based on the quantity purchased (e.g., bulk discounts).
  3. Third Degree: Pricing based on customer groups (e.g., student discounts, geographic pricing).

Retail Pricing Models

  • EDLP (Every Day Low Prices): Maintaining consistently low prices (e.g., Walmart).
  • HILO (High-Low Pricing): Alternating between high regular prices and deep promotional discounts.

Advertising and Promotional Frameworks

Impact of Advertising Strength on Demand Curve

  • Strong Advertising: Leads to a higher intercept and a steeper slope (increased demand and reduced price sensitivity).
  • Weak Advertising: Results in a lower intercept and a flatter slope.

The 7 Ms of Marketing Communication

  1. Market: Defining the target audience.
  2. Mission: Establishing the communication objectives.
  3. Message: Determining the content and design.
  4. Media: Selecting the platforms to deliver the message.
  5. Money: Allocating the budget.
  6. Measurement: Tracking and evaluating success.

Hierarchy of Effects Model (AIDA)

The consumer journey stages:

Awareness → Interest → Desire → Action

Promotional activities should align with where the consumer is in their decision-making journey.

The STEPPS Framework for Virality

This framework identifies factors that make content shareable and memorable:

  • Social Currency
  • Triggers
  • Emotion
  • Public
  • Practical Value
  • Stories

Content linked to everyday cues is generally more memorable and shareable.

Promotional Budgeting Methods

  • Percentage of Sales: Budgeting based on past or forecasted future sales.
  • Competitive Parity: Matching competitors’ spending levels.
  • Objective and Task: Budgets determined by specific marketing goals and the tasks required to achieve them.
  • Affordable Method: Spending whatever remains after all other expenses are covered (often the least strategic method).

Incrementality

Incrementality measures the additional impact of a promotion or marketing activity beyond what would have occurred naturally (baseline sales).

Four Types of Media

Paid Media
Advertisements and sponsorships.
Owned Media
Content controlled by the brand, such as blogs and websites.
Earned Media
Voluntary exposure, such as customer reviews and social shares.
Hijacked Media
Unintended or negative messages, such as viral memes or public backlash.

Advanced Pricing Strategies and Behavioral Economics

Strategic Pricing Techniques

  • Versioning: Offering multiple product versions at different price points to capture various customer segments (e.g., software tiers like Basic, Pro, and Premium).
  • Targeting: Customizing marketing efforts and pricing to specific customer segments (e.g., student or senior discounts).
  • Dynamic Pricing: Real-time price adjustments based on fluctuating demand, supply, and market conditions. This is most effective in markets with high demand variability and customer acceptance of price changes.

The Role of Price Perception

Price often signals fairness, quality, and contributes to emotional satisfaction.

Key Behavioral Economics Concepts

Prospect Theory

Losses hurt consumers more psychologically than equivalent gains provide pleasure.

Endowment Effect

People tend to value items they currently own significantly more than identical items they do not own.

Brand Strategy and Architecture

Sources of Brand Value

  • Consumers: Value derived from trust, identity, and emotional connection.
  • Firms: Value derived from customer loyalty, pricing power, and reduced Customer Acquisition Cost (CAC).
  • Collaborators: Value derived from extended market reach and increased profitability.

Factors Determining Brand Strategy Authenticity

Consumers assess authenticity based on:

  • Consistency
  • Transparency
  • Relevance
  • Longevity

Key Principles of Brand Architecture

  • Clarity
  • Synergy
  • Efficiency
  • Flexibility

Brand Extension Types

Vertical Extension
Offering products at different price tiers (e.g., luxury and budget lines). Risk: dilution and cannibalization.
Horizontal Extension
Expanding into related categories or markets (e.g., a beverage brand launching snacks). Benefit: leverages brand equity, but may still dilute the core brand.

Brand Architecture Models

  • Branded House: A single master brand encompasses multiple products (e.g., Google).
  • House of Brands: Separate, distinct brands for different products (e.g., Procter & Gamble – P&G).

Strategic Collaboration and Value Creation

Three Types of Value Collaboration

  • Value Design Collaboration: Focuses on enhancing product features or innovation.
  • Value Delivery Collaboration: Focuses on improving customer experience and functionality (e.g., supply chain partnerships).
  • Value Communication Collaboration: Focuses on increasing brand awareness and reach for both collaborating brands (e.g., co-marketing).

The CUES Framework for Successful Collaboration

Criteria for evaluating potential brand partnerships:

  • Complementary: Brands should complement each other’s offerings or market position.
  • Uniqueness: The collaboration should offer a unique value proposition not achievable by either brand alone.
  • Efficiency: The collaboration must enhance overall profitability and operational efficiency.
  • Shared Values: The brands’ personalities, goals, and target audiences should align.

Brand Equity Measurement and Market Models

Consumer-Based Brand Equity Levels

These levels are best measured using quantitative research because the results are quantifiable and actionable:

  1. Brand Awareness
  2. Brand Associations
  3. Attitudes
  4. Loyalty

Brand Valuation Models

Interbrand Rankings Criteria

  • Financial performance of the branded products/services.
  • The brand’s role in influencing purchase decisions.
  • Overall brand strength and future potential.

Brand Asset Valuator (BAV) Model

The BAV model measures brand equity based on four pillars:

  • Differentiation
  • Relevance
  • Esteem
  • Knowledge

The Kahn Matrix

To achieve market leadership, a company must dominate at least two quadrants of the Kahn Matrix:

  • Amazon (Frictionless)
  • Sephora (Experiential)
  • Walmart (Low Cost)

Customer-Centric Omni-Channel Marketing

Integrating physical and digital channels to provide a seamless customer experience (e.g., ordering online and returning in-store).