Strategic Marketing Essentials: Pricing, Product, and Communication

Posted on Jun 11, 2025 in Business Administration and Management (BAM)

Price as a Strategic Business Variable

Price is a key factor in business strategy, significantly influencing revenue, profitability, and competitiveness.

Key factors influencing price include:

  • Operating costs
  • Demand and supply balance
  • Competition
  • Customer perception
  • Shipping costs

Effective pricing also influences product positioning, customer segmentation, and overall revenue generation.

Understanding Price Elasticity of Demand (PED)

Price Elasticity of Demand (PED) measures how demand for a product or service changes in response to price fluctuations.

  • Elastic (>1): Demand changes significantly with price changes.
  • Inelastic (<1): Demand changes very little with price changes.
  • Unitary (=1): Demand changes proportionally to price changes.

Examples of PED:

  • Gasoline: Inelastic (people still need to drive).
  • Luxury goods: Elastic (demand drops significantly if prices rise).
  • Medications: Inelastic (essential for health).
  • Air travel: Elastic (consumers are sensitive to ticket prices).

Core Pricing Objectives

Clearly defined objectives are fundamental to shaping a successful pricing strategy:

  • Profit maximization
  • Revenue maximization
  • Market share growth
  • Brand positioning and image

Demand is further influenced by customer price sensitivity, perceived value, and the broader market context.

Cost-Based and Competition-Based Pricing Models

  • Cost-Based Pricing: Price is determined by adding a desired margin to the total cost.
    • Example: A sofa costing $500 with a 50% markup is priced at $750.
  • Competition-Based Pricing: Prices are set primarily based on competitors’ pricing.
    • Cooperative: Matching competitors’ prices.
    • Aggressive: Pricing lower to gain market share.
    • Premium: Pricing high to convey exclusivity or superior quality.
    • Dismissive: Ignoring competitors’ prices, focusing solely on customer value.

Advanced Pricing Strategies

  • Price Skimming: Setting a high initial price for a new product and gradually lowering it over time.
    • Example: Apple iPhones upon their initial launch.
  • Penetration Pricing: Setting a low entry price to quickly gain market share.
    • Example: Netflix in its early stages.
  • Value-Based Pricing: Pricing a product or service based on its perceived value to the customer, rather than its cost.

Internal and External Factors Influencing Pricing

Pricing decisions are shaped by a combination of internal and external factors:

  • Internal Factors:
    • Company goals and objectives
    • Distribution channels
    • Product cost structure
    • Product differentiation
    • Product lifecycle stage
    • Target consumer type
    • Ethical considerations
  • External Factors:
    • Customer behavior and preferences
    • Market price sensitivity
    • Overall demand for the product/service
    • Economic conditions
    • Supplier relationships and costs
    • Government policies and regulations

Dynamic Pricing Strategies

Dynamic pricing involves adjusting prices in real-time based on fluctuating supply, demand, seasonality, and competitor pricing.

Commonly used in:

  • Airlines and hotels
  • Sports and entertainment events
  • Ride-sharing services (e.g., Uber)
  • Online retail

Pros: Higher profit margins, better customer insights.

Cons: Can lead to customer dissatisfaction or perception of unfairness.

Consumer Market Pricing Tactics

  • Psychological Pricing: Setting prices to appeal to consumers’ emotional responses (e.g., $9.99 instead of $10.00).
  • Price Bundling: Selling multiple products or services together at a discounted price compared to buying them individually.
  • Discount Strategies: Offering price reductions based on various criteria:
    • Seasonal discounts
    • Volume discounts
    • Loyalty programs
    • Promotional offers
    • Early bird discounts

Product Strategy and Management

Products are fundamental to business strategy, directly affecting growth, revenue, market differentiation, and customer satisfaction.

Example: Apple’s iPhone launch in 2007 served as a strategic milestone, redefining the mobile phone market.

Product Development Lifecycle Stages

  1. Idea Generation
  2. Validation and Feasibility
  3. Prototyping
  4. Testing & Feedback
  5. Messaging & Strategy Development
  6. Minimum Viable Product (MVP) Build
  7. Launch
  8. Continuous Improvement and Iteration

Kotler & Keller’s Five Product Levels

According to Kotler and Keller, a product can be understood at five distinct levels:

  1. Core Benefit: The fundamental service or benefit the customer is truly buying.
  2. Basic Product: The tangible version of the core benefit.
  3. Expected Product: A set of attributes and conditions buyers normally expect when they purchase this product.
  4. Augmented Product: Additional services and benefits that differentiate the product from competitors.
  5. Potential Product: All possible augmentations and transformations the product might undergo in the future.

Understanding the Product Lifecycle

The Product Lifecycle describes the stages a product goes through from introduction to withdrawal from the market:

  • Introduction: High costs, low demand, focus on building awareness.
  • Growth: Rapid increase in sales and revenue, market acceptance.
  • Maturity: Sales plateau, intense competition, need for innovation or differentiation.
  • Decline: Sales drop, time to redefine the value proposition or phase out the product.

Effective Product Positioning Strategies

Product positioning involves creating a unique and desirable image of the product in the consumer’s mind relative to competitors.

Key aspects include:

  • Highlighting competitive advantages.
  • Building strong brand recognition and customer loyalty.
  • Ensuring clear differentiation from competitors.

Strategic Brand Management

Brand management focuses on building and maintaining a strong, positive perception of a product, service, or company.

A key decision in brand management is whether to use the same name and logo for new products (brand extension) or create new ones.

Effective branding adds emotional value, strengthens customer loyalty, and enhances market differentiation.

Tactics for Building Brand Meaning:

  1. Focus on the emotions the brand evokes.
  2. Understand and appeal to customer motivations.
  3. Stay relevant to evolving market trends and consumer needs.
  4. Build strong, lasting relationships with customers.
  5. Develop a consistent and engaging conversational brand language.

Services Marketing Versus Product Marketing

Services are inherently intangible, often personalized, and not owned by the customer, unlike physical products.

Key Differences Between Services and Products:

  • Tangibility: Services are intangible; products are tangible.
  • Customization: Services are often highly customized; products are standardized.
  • Trust: Trust is paramount in services due to their intangible nature.
  • Time-Limited: Services are consumed at the point of delivery and cannot be stored.
  • Market Size: Can vary significantly based on the nature of the offering.

Services marketing places a greater emphasis on the customer relationship and the overall experience rather than just ownership.

Product Portfolio Decisions

The objective of product portfolio management is to align the entire product range with overarching business goals.

This involves evaluating which products to keep, develop further, or phase out.

Benefits of Product Portfolio Management:

  • Better resource allocation and optimization.
  • Increased revenue and operational efficiency.
  • Enhanced strategic visibility and decision-making.

Key Steps in Product Portfolio Management:

  1. Assess the current product portfolio.
  2. Identify market opportunities and gaps.
  3. Align the portfolio with strategic business goals.
  4. Prioritize products based on potential and fit.
  5. Allocate resources effectively across the portfolio.
  6. Monitor performance and make necessary adjustments.

Product Portfolio Analysis

Product portfolio analysis identifies opportunities, risks, and profitability within a company’s product mix.

It utilizes performance data, investment levels, profitability metrics, and strategic alignment to inform decisions.

Methods and Models for Portfolio Analysis:

  • BCG Matrix (Boston Consulting Group Matrix)
  • Hofer Matrix
  • GE/McKinsey Matrix

Communication and Advertising in Marketing

Communication is the fundamental exchange of information and is essential in marketing to effectively reach, persuade, and retain customers.

Effective communication builds brand awareness, supports the strategic vision, and influences consumer behavior. Both internal communication (vertical, horizontal, upward, downward) and external communication (towards customers, media, etc.) must work in harmony to build consistency and reinforce brand messaging.

Communication Components: Message, Sender, Receiver, Media

The communication process involves several key components:

  • Sender: The source of the message.
  • Message: The information being conveyed.
  • Channel: The medium through which the message is sent.
  • Receiver: The intended audience.
  • Decoding: The process by which the receiver interprets the message.
  • Feedback: The receiver’s response to the message.
  • Noise: Any interference that distorts the message.
  • Context: The environment in which communication occurs.

The typical 7-step communication process includes:

  1. Develop Idea
  2. Encode Message
  3. Choose Channel
  4. Deliver Message
  5. Receive Message
  6. Decode Message
  7. Provide Feedback

Examples of Successful Communication Campaigns

  • Dove’s “Real Beauty” Campaign: Focused on body positivity and authenticity, resonating deeply with consumers.
  • Nike’s “Just Do It” Campaign: Inspired empowerment and athletic achievement, becoming a timeless slogan.

Types of Advertising Media

Advertising media are the channels used to deliver promotional messages to target audiences:

  • Online Media:
    • Owned (e.g., company website, blog)
    • Earned (e.g., social media mentions, PR)
    • Paid (e.g., display ads, search engine marketing)
  • Broadcast Media:
    • Television
    • Radio
    • Film (e.g., product placement)
  • Print Media:
    • Newspapers
    • Magazines
    • Brochures and flyers
  • Outdoor Media:
    • Billboards
    • Transit advertising (buses, trains)
    • Street furniture (bus shelters, kiosks)
  • Ambient Media: Unconventional advertising in unexpected spaces (e.g., restrooms, sky ads, laser projections).
  • Specialty Media: Branded promotional items (e.g., pens, keychains, calendars).

Digital Marketing and Effectiveness Measurement

Digital marketing encompasses various online tactics to promote products and services.

Digital Marketing Tactics:

  1. Affiliate Marketing
  2. Content Marketing
  3. Email Marketing
  4. Marketing Analytics
  5. Mobile Marketing
  6. Pay-Per-Click (PPC) Advertising
  7. Search Engine Optimization (SEO)
  8. Social Media Marketing

Effectiveness Metrics for Digital Marketing:

  • Reach (number of unique viewers)
  • Frequency (average number of times a person is exposed to a message)
  • Gross Rating Points (GRP)
  • Cost Per Mille/Thousand (CPM)
  • Conversion Rate
  • Customer Acquisition Cost (CAC)
  • Return on Investment (ROI)
  • Engagement Rate
  • Brand Awareness

Steps for Measuring Digital Marketing Effectiveness:

  1. Set clear, measurable goals.
  2. Collect relevant data from all channels.
  3. Measure audience reach and impressions.
  4. Identify message frequency and exposure.
  5. Optimize touchpoints for better performance.
  6. Refine the media mix based on results.
  7. Link marketing efforts directly to revenue generation.

Advertising Management for Business & Non-Business

Advertising management involves planning, executing, and evaluating advertising campaigns to achieve specific objectives.

Primary Goals of Advertising:

  • Introduce: To inform and create awareness for new products or services.
  • Persuade: To convince consumers to purchase or adopt a product/service.
  • Remind: To reinforce brand messaging and maintain top-of-mind awareness.

Key Functions of Advertising Management:

  • Building and maintaining brand equity.
  • Guiding overall marketing strategy.
  • Ensuring effective audience targeting.
  • Measuring and analyzing campaign results.

Advertising Management Process:

  1. Review the overall marketing plan.
  2. Set specific advertising objectives.
  3. Determine the advertising budget.
  4. Develop a comprehensive media plan.
  5. Execute the advertising campaign.
  6. Monitor and evaluate performance.