Damat Hotel & Business College

Marketing
department
 Course Title: Coordinate Sales Performance

Individual assignment

Samueal assefa mekuriya

ID number Dat/0501/14

Academic year-2022

Question no 2. What is the major reason that business want to charge a higher price than
its competitors? Explain types of pricing strategies that a company may follow set price.
The price you charge for your product or service is one of the most important business
decisions you make. Setting a price that is too high or too low will - at best - limit your
business growth. At worst, it could cause serious problems for your sales and cash flow.
When setting your prices you must make sure that the price and sales levels you set will
allow your business to be profitable. You must also take note of where your product or
service stands when compared with your competition.

It's important to find out what your competitors offer and what they charge. If you phone
your rivals and ask them for a quote, you can use this information as a framework.

It's probably unwise to set your prices too much higher or lower without a good reason. If
you price too low, you will just be throwing away profit. If you price too high, you will lose
customers, unless you can offer them something they can't get elsewhere.

The perception of your product or service is also important. In many markets, a high price
contributes to the perception of your product as being of premium value. This might
encourage customers to buy from you - or it might deter price-conscious customers.

It can be useful to charge different prices to different customers, e.g. to customers who

purchase repeatedly, or buy add-on or related products, as a thank you for their loyalty.
Bear in mind that customers who are expensive to satisfy will be less profitable, unless you
charge them higher prices. One-off sales may cost you more than repeat business. You can
also use pricing tactics to attract customers. See the section below on different pricing
tactics. Whatever prices you set, check that they cover your costs and can deliver a profit.

Types of pricing strategies are the following

1. pricing at a premeim
2. Economy pricing
3. price skimming
4. psychology pricing
5. Bundle pricing

Premium pricing

Premium pricing is a strategy that involves tactically pricing your company’s product
higher than your immediate competition. The purpose of pricing your product at a
premium is to cultivate a sense of your product’s market being just that bit higher in
quality than the rest. It works best alongside a coordinated marketing strategy designed to
enhance that perception.

Premium pricing is closely related to the strategy of price skimming

(https://www.profitwell.com/recur/all/price-skimming). However, unlike skimming,
prestige pricing involves setting high prices and keeping them. Luxury brands have often
implemented premium pricing.
Market penetration pricing strategy

The penetration pricing strategy involves offering a new product or service at a low initial
price to gain customers' attention. The goal is to aggressively get customers in the door
with low prices and gain market share. 

With penetration pricing, new products are sold at low prices to build a customer base. In
the short term, profit margins are lower, but heavy sales volumes compensate for the small
margins. You can raise the price as demand increases. 

The theory behind market penetration pricing is that a low initial price secures market
acceptance and forms customer habits. The method is effective for entering new markets
with little difference between products, like kitchen appliances or internet service
providers. 

According to the Law of Demand, lowering prices will increase demand. When you offer
more value for less, consumers are more likely to buy what you have to offer.

Let's say you sell refrigerators. They all do the same thing: keep food cold. There are some
with HD touchscreens and smartphone connectivity. Some have specialty ice dispensers.
For the average consumer, those features don't matter much. They want a fridge that keeps
their food cold and fresh.

A market penetration strategy would be a great way to introduce a new refrigerator to the
market.

Economy Pricing Strategy

Economy pricing is a pricing strategy where products have lower prices due to low
production costs. Economy pricing allows businesses to price products according to their
production value because they don't acquire the extra costs of advertising or marketing.
But making a profit with economy pricing is a volume game - meaning the only way to a
profit is to consistently entice a large number of customers.

Production costs, profit margins, and cost are the three factors behind economic pricing.
Production cost is the amount of money that goes into creating a product. It includes a
variety of expenses, from labor to raw materials. Profit margin indicates the profitability of
a product or service. Businesses should consider both these factors to determine how low
they can make their prices.

Price skimming

Skim pricing, also known as price skimming, is a pricing strategy that sets new product
prices high and subsequently lowers them as competitors enter the market. Skim pricing is
the opposite of penetration pricing, which prices newly launched products low to build a
big customer base at the outset.
Businesses adopt a skim pricing model for several purposes, including:

*Samuel assefa

*Attracting early adopters

*Segmenting customers as the price drops, according to what they are willing to pay for a
new product

     Big brands like Apple and Nike tend to do well with price skimming and provide
excellent price skimming examples to examine.

*Apple periodically introduces new iPhones with the latest features at a high price, attracts
price-insensitive customers who value having the latest device to hit stores, and then sells
them at lower prices to price-sensitive customers as newer versions are introduced.

*Nike, an athletic apparel market leader, regularly introduces new designs at higher prices,
relying on early adopters and loyal customers to purchase products at the introductory
price. These prices can last for several months before Nike lowers the cost to sell remaining
inventory to price sensitive customer

Psychology pricing

Psychological pricing is a strategy that uses pricing to influence a customer's spending or

shopping habits to make more or higher value sales. The goal is to meet a customer's
psychological need for something, whether that's saving money, investing in the highest
quality item, or getting a "good deal. "Psychological pricing plays on the fact that
consumers rarely know what something should cost. Most often the way we're able to
determine if something is a good deal is by getting it for a lower price than normally listed
or by comparing it to similar products in the same category.

"Marketers and salespeople knew too well that what a customer was willing to pay was
changeable and that there was money to be made from that fact,,

-William Pound stone,

Priceless

In his book Priceless: The Myth of Fair Value, William Pound stone writes. "Marketers had
long been doing experiments in the psychology of prices. In the heyday of mail order, it was
common to print up multiple versions of a catalog or flyer in order to test the effect of
pricing strategies. These findings must have dispelled any illusions about the fixity of
prices. Marketers and salespeople knew too well that what a customer was willing to pay
was changeable and that there was money to be made from that fact."
Bundle pricing is a strategy where companies combine complementary products/services
together and offer them at a single (often reduced) price. These bundles have a greater
perceived value to customers and bring many benefits to the company such as increased
average revenue per user (ARPU) and user engagement. Customers benefit from receiving
a suite of products/services for one price while sellers realize more value. A win- win for
everyone!

Bundle pricing

Bundle pricing is applied in many industries to incentivize customers to purchase

additional products/services that are of value.

Bundle pricing is a great strategy for when you have multiple complementary
products/services to offer or when you want to increase the perceived value of low-volume
items. When sold together, the complementary products/services provide the customer
with the most value, improving their purchasing experience, leading to a more engaged and
loyal customer base.

Another situation where bundling is useful is if you need to discount certain

products/services. Discounting is a necessary part of doing business and can help you stay
competitive when the market gets saturated, or customers lose engagement. However, too
many discounts may lower your perceived value or can even start a price war. Bundling
products/services to provide a discount can help mitigate these risks by capturing more
revenue for each purchase and increasing the value add for the customer. It also forces the
customer to buy more of your products /services so there is a trade-off in giving them a
discount. Moreover, it is harder for competitors to directly react as they would have to
create comparable bundles which may not always be possible or drive complexity

Question no.3 list down types of selling strategies; discuss the selling strategies with the
help of example. what is the difference between need satisfaction and consultative selling
strategies?

There are essentially four selling strategies;

1. Script-based selling
2. Needs-Satisfaction selling
3. consultative Selling
4. Strategic Partnering

Script-Based Selling

Salespeople memorize and deliver sales pitches verbatim when they uti- lize a script-based
selling strategy. Script-based selling is also called canned selling. The term "canned" comes
from the fact that the sales pitch is standardized, or "straight out of a can." Back in the late
1880s, com- ponies began to use professional salespeople to distribute their prod- ucts.
Companies like National Cash Register (NCR) realized that some salespeople were far more
effective than others, so they brought those salespeople into the head office and had them
give their sales pitches. A stenographer wrote each pitch down, and then NCR's sales
executive’s com- binned the pitches into one effective script. In 1894, the company started
one of the world's first sales schools, which taught people to sell using the types of scripts
developed by NCR. Salespeople were far more effective than others, so they brought those
salespeople into the head office and had them give their sales pitches. A stenographer
wrote each pitch down, and then NCR's sales executive’s com- binned the pitches into one
effective script. In 1894, the company started one of the world's first sales schools, which
taught people to sell using the types of scripts developed by NCR.

Script-based selling works well when the needs of customers don't vary much. Even if they
do, a script can provide a salesperson with a polished and professional description of how
an offering meets each of their needs. The salesperson will ask the customer a few
questions to uncover his or her need, and then provides the details that meet it as spelled
out in the script. Scripts also ensure that the salesperson includes all the important details
about a product.

Needs-Satisfaction Selling

The process of asking questions to identify a buyer's problems and needs and then tailoring
a sales pitch to sat- isfy those needs is called needs-satis- faction selling. This form of selling
works best if the needs of customers vary, but the products being offered are fairly
standard. The salesperson asks questions to understand the needs then presents a solution.
The method was popularized by Neil Rackham, who developed the SPIN selling approach.
SPIN stands for situ- ation questions, problem questions, implications, and needs-payoff,
four types of questions that are designed to fully understand how a blem is creating a need.

For example, you might wander onto a car lot with a set of needs for a new vehicle.
Someone else might purchase the same vehicle but for an entirely different set of rea- sons.
Perhaps this person is more in- terested in the miles per gallon, or how big a trailer the
vehicle can tow, whereas you are more interested in the vehicle's style and the amount of
legroom and headroom it has. The ef- fective salesperson would ask you a few questions,
determine what your needs are, and then offer you the right vehicle, emphasizing those
points that meet your needs best.The vehicle's miles per gallon and towing capacity
wouldn't be mentioned in a conversation with you because your needs are about style and
room.

Consultative Selling

To many students, needs-satisfaction selling and consultative selling seem the same. The
key difference between the two is the degree to which a cus- atomized solution can be
created. With consultative selling, the seller uses special expertise to solve a complex
problem in order to create a some- what customized solution. For exam- ple, Schneider-
TAC is a company that creates customized solutions to make office and industrial buildings
more energy efficient. Schneider-TAC sales- people work with their customers over the
course of a year or longer, as well as with engineers and other tech- nical experts, to
produce a solution.

Strategic-Partner Selling

When the quality of the relationship. Between the buyer and seller moves toward a
strategic partnership, the selling strategy gets more involved than even consultative selling.
In strategic-partner selling, both par- ties invest resources and share their expertise with
each other to create solutions that jointly grow one another's businesses. Schulte, for ex-
ample, positions himself as a strategic partner to the cardiologists he works with. He tries
to become a trusted partner in the patient care process.

For many persons, needs- satisfaction selling and consultative selling seem the same. The
key difference between the two is the degree to which a customized solution can be
created. With consultative selling, the seller uses special expertise to solve a complex
problem in order to create a somewhat customized solution. For example, Schneider-TAC is
a company that creates customized solutions to make office and industrial buildings more
energy efficient. Schneider-TAC salespeople work with their customers over the course of a
year or longer, as well as with engineers and other technical experts, to produce a solution.

Question no.4 what are difference characteristics of service marketing? List down and
discuss characteristics of service marketing

Service marketing is a type of marketing that is used to market a service rather than a
product. Differing from product marketing, service marketing is more focused on building
relationships and providing value to the customer. Service marketing has four distinctive
characteristics; intangibility, inseparability, variability, and perishability.

Intangibility

McDougall and Snetsinger (1990) defined intangibility as "the lack of physical evidence"
and "the degree to which a product or a service cannot provide a clear concrete image".
Services cannot be seen, tasted, felt, heard, or smelled before buying. For example, a
customer of a hair salon only has an appointment and the promise of a fresh haircut. The
salon wants to convey the idea that its service is professional yet personalized. They need
to position themselves as such and truly commit to it.

The salon's exterior and interior should look clean and showcase high-quality products, the
staff needs to dress properly, and be welcoming and approachable towards customers. The
tools and equipment need to look clean and modern. The salon's value proposition should
extend to its online presence; its website, social media, email campaigns, loyal customer
programs, and other communication should convey feelings of professional service and
quality.

Inseparability

The definition of inseparability in the dictionary is "the quality or state of being incapable
of being separated or divided." One of the characteristics of service marketing is
inseparability. When purchasing a product, most customers can separate the product from
the staff member who provides it. However, when purchasing a service, customers
commonly purchase a service at the time they want to consume them. This can make it
challenging to separate the service they receive from the business or staff member who
provides the service. For example, a restaurant sells goods, as well as provides services-
they prepare and serve food, set and clean tables, provide a menu, and may even offer
entertainment. When visiting a restaurant, the customer will consume their meal while at
the restaurant. But even if their meal is satisfactory, their overall experience can be bad due
to service, the atmosphere, or even the restaurant's location. It can be challenging for
guests to separate the service they receive from the quality of the food because many
factors can influence their experience. Every interaction is inseparable from the overall
experience.

Variability

Variability means a lack of consistency and measures how much data or experiences vary.
When purchasing a physical item, the product is consistent regardless of the store or online
vendor selling it. When purchasing services, there is greater variability-there will always be
changes in the experience of the same service provided by different vendors.

For example, when dealing with insurance claims, one staff member may be responsive and
helpful, while another could be unpleasant and apathetic. Even the quality of the service
being provided by a single staff member is variable. The level of service they provide could
be different from one customer to another and could be greatly affected by their workload
and state of mind. The quality of the service a consumer receives may depend on which
vendor they choose, and which staff attends to them.

Perishability

Perishable goods refer to products and services that have an expiration date. Services, like
foods, are perishable, meaning that services cannot be stored for later use. Foods may go
bad if they are not consumed in a certain period; the same applies to some services. Movie
tickets, theater reservations, doctor's appointments, and hotel bookings cannot be stored
or kept for later use. When left unused, the service vanishes, and a new ticket or another
reservation will need to be made. There are several steps that businesses can take to adjust
the demand and supply of their services. For example,
For example, hotel rates for the same room will vary depending on peak season or off-peak.
Part-time employees may be hired during the peak season to share the workload and serve
more tourists.

The five service quality dimensions are tangibility, reliability, responsiveness, assurance,
and empathy. 

Tangibility

Tangibility is the appearance of physical facilities, equipment, personnel, and

communication materials. 

Customers tend to expect clean and professional facilities and shops, employees who look
groomed and neat, and well-written and designed materials such as menus, websites, and
signs. Attention to appearance can indicate that your company takes customer comfort
seriously. 

While appearance is not the most critical aspect of service, it does make a difference in how
customers perceive your business, especially if your brand promises a premium or luxury
experience. 

Reliability

Reliability is the ability to perform the promised service dependably and accurately.

Doing what you say you’re going to do when you say you’re going to do it is essential to
pleasing your customers. They want to rely on your business to deliver a working product
or effective service, to get help when they need it, and for all of this to happen in a timely
fashion. 

Customers want to count on the businesses they buy from - that’s at the heart of this
dimension. 

Responsiveness

Responsiveness is the willingness to help customers and provide prompt service.

Responding quickly to customer questions and concerns is vital, especially in today’s fast-
paced world. Responsiveness even applies when customers are slow in responding to you.
Answer swiftly to, at the very least, let customers know that you’re working on their
request. 

Responsiveness lets your customers know that you’re listening to them and working
actively to solve their problems. 

Assurance
Assurance is the knowledge and courtesy of employees and their ability to convey trust and
confidence.

Customers expect businesses to be the experts in the service they deliver. Communicating
that expertise to customers helps reassure them that they can trust you, whether you
accomplish this by displaying credentials and industry certifications
(https://www.getfeedback.com/resources/cx/best-places-for-customer-service-
certification-and-training/) or customer testimonials. 

Assurance is significant when customers have many options but aren’t sure who to trust
when purchasing. Suppose you run an ecommerce store, for example. In that case,
customers are bombarded regularly with ads from potentially untrustworthy online shops
all day, so you need to determine how to set yourself apart and gain consumer trust. 

Empathy

Empathy is the caring, individualized attention the firm provides its customers.

Customers want to feel like they’re more than a transaction; they want to build a
relationship with your business. Even if you have the best product or services on the
market, you can still fall short of their expectations. 

Showing empathy to customer’s means ensuring your company showcases your care.
Training employees on how to provide excellent and empathetic service—where smiles
and engaging conversation occur regularly—can help you exceed expectations. 

Question no,5 Differentiate product marketing and service marketing,and mention factors
that affect service quality

Key Differences Between Product Marketing and Service Marketing

In the points given below, the differences between product marketing and service
marketing is elaborated:

1. The process in which the marketing activities are aligned to promote and sell a specific
product for a particular segment is called product marketing. The marketing of economic
activities, offered by the business to its clients for adequate consideration, is known as
service marketing.

2. In a product marketing, only 4 P's of the marketing mix are applicable which are product,
price, place and promotion, but in the case of service marketing, three more P's are added
to the conventional marketing mix, which are people, process and physical existence.
3. When a product is marketed, the company offers value, as it fulfils customer's
requirements. Conversely, when service is marketed by a company, it offers a relationship
to its clients.

4. One thing to be noted that, in product marketing, the company promotes something
whose ownership can be transferred/resold to another party. But in the case of service
marketing, the company promotes something, whose ownership can neither be transferred
nor it is resold to the other party.

5. In product marketing, products reach the buyers, as they can be transported from one
place to another through various distribution channele.Unlike service marketing, where
customers come to the services or the service provider visit customer because services
cannot be transported, they are location based.

6. Products are tangible in nature, they can be felt and touched, which make its promotion
easier. On the other hand, services are intangible, people can only experience it, and so
marketing of services is a bit difficult.

7. If the quality of a certain product is not up to the mark, or it does not fulfil the desired
requirement, it can be returned to the seller. However, it is impossible in the case of
services, because once the services are delivered, they cannot be taken back. So, the
marketing of services, should be done keeping the returnability factor in mind.

8. In product marketing, the product can be separated from its producer, and so they are
durable and can be inventoried. On the contrary, in service marketing, services can not be
separated from its source, i.e. service provider. Hence the production and consumption of
services are simultaneous; they are perishable.

9. Product offered by a company under a particular segment are standardised; they cannot
be changed or altered as per customer's requirement. In contrast, services offered by a
company are highly variable and can be easily customised as per the requirements.

10. It is a human tendency, that we respond quickly, to what we see and it is a major pro, of
product marketing that it grabs our attention, and encourages sales. As against this,
services can't be seen it can only be experienced and so the response it a little slow, while
marketing services.

11. In product marketing, the quality of the product can be measured by making a
comparison between various products, but this is just opposite in service marketing, where
the measurement of services is not possible.

Conclusion
Whether, it's a product marketing or a service marketing, the task is equally onerous.
However, with the former, there are some advantages such as tangibility, separability,
durability, transferability, etc. which the latter lacks, making it a bit difficult. Demonstration
of product or service is one of the best ways to promote it. Further, word of mouth also
helps in marketing them.

The five service quality dimensions are tangibility, reliability, responsiveness, assurance,
and empathy. 

Tangibility

Tangibility is the appearance of physical facilities, equipment, personnel, and

communication materials. 

Customers tend to expect clean and professional facilities and shops, employees who look
groomed and neat, and well-written and designed materials such as menus, websites, and
signs. Attention to appearance can indicate that your company takes customer comfort
seriously. 

While appearance is not the most critical aspect of service, it does make a difference in how
customers perceive your business, especially if your brand promises a premium or luxury
experience. 

Reliability

Reliability is the ability to perform the promised service dependably and accurately.

Doing what you say you’re going to do when you say you’re going to do it is essential to
pleasing your customers. They want to rely on your business to deliver a working product
or effective service, to get help when they need it, and for all of this to happen in a timely
fashion. 

Customers want to count on the businesses they buy from - that’s at the heart of this
dimension. 

Responsiveness

Responsiveness is the willingness to help customers and provide prompt service.

Responding quickly to customer questions and concerns is vital, especially in today’s fast-
paced world. Responsiveness even applies when customers are slow in responding to you.
Answer swiftly to, at the very least, let customers know that you’re working on their
request. 

Responsiveness lets your customers know that you’re listening to them and working
actively to solve their problems. 
Assurance

Assurance is the knowledge and courtesy of employees and their ability to convey trust and
confidence.

Customers expect businesses to be the experts in the service they deliver. Communicating
that expertise to customers helps reassure them that they can trust you, whether you
accomplish this by displaying credentials and industry certifications
(https://www.getfeedback.com/resources/cx/best-places-for-customer-service-
certification-and-training/) or customer testimonials. 

Assurance is significant when customers have many options but aren’t sure who to trust
when purchasing. Suppose you run an ecommerce store, for example. In that case,
customers are bombarded regularly with ads from potentially untrustworthy online shops
all day, so you need to determine how to set yourself apart and gain consumer trust. 

Empathy

Empathy is the caring, individualized attention the firm provides its customers.

Customers want to feel like they’re more than a transaction; they want to build a
relationship with your business. Even if you have the best product or services on the
market, you can still fall short of their expectations. 

Showing empathy to customers means ensuring your company showcases your care.
Training employees on how to provide excellent and empathetic service—where smiles
and engaging conversation occur regularly—can help you exceed expectations.