60 BHM 206 MODULE 2 SELF ASSESSMENT EXERCISE 2 Nowadays a number of well

60 bhm 206 module 2 self assessment exercise 2

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BHM 206 MODULE 2 SELF-ASSESSMENT EXERCISE 2 Nowadays, a number of well-established companies are trying to diversify into both existing as well as new areas. New companies are being started. For example, Guinness and Coca-cola have diversified some of their products. Find out three or four cases of diversification or entry into existing fields and study the advertisements issued by these companies and identify the critical advantage or the core benefit stressed in the advertising copy. 3.6 Roles of Pricing and Advertising in Marketing Mix (a) Advertising – Most often, only a few firms directly compete with one another in the same target market. Economists call such a situation an oligopolistic situation. In this type of situation, many firms prefer to increase their share by increasing demand through advertising rather than by reducing prices. The question that arises is – why do firms prefer such a strategy? The reason is that building up an image through advertising can be more difficult to match than a price cut. The assumption behind this preferred approach is that the firm can achieve a competitive edge in advertising and that it does not possess such a large cost advantage over competition as to make price cutting an attractive pre-empting strategy. (b) Pricing – Price may be the major element in the marketing mix. Pricing decisions should be carefully coordinated with decisions on product, promotion and distribution. For example, the luxury segments of consumer markets suggest a quality, branded product, extra-touches, high class outlets, appeals and media that capture the luxury image and a high price to match. SELF-ASSESSMENT EXERCISE 3 Are price and promotion, to some extent, substitutable? SELF-ASSESSMENT EXERCISE 4 State whether the following statements are true or false: 1. 2. 3. Advertising can have a wider reach and establish an image for a product that cannot be matched in personal selling. (True or False). Advertising can close a sale. (True or False). Advertising can distinguish suspects from prospects. (True or False). 61
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