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Your Marketing Investment
Part Ten

by Mark Levit

Previously, we’ve discussed establishing your marketing investment, the most common budgeting exercise, competitive position and market environment, new product activity, market growth, capacity utilization, budgeting for low ticket itemsbudgeting for the lower percentage of a customer’s total purchases, budgeting considerations and your brand’s characteristics and the price-performance relationship.

In this installment, we’ll discuss “your pricing relative to your competitiors’.

BUDGET DICTUM 7: Both premium pricing and discount pricing require the support of high marketing investments.

Conventional wisdom in marketing suggests you must support a premium price position in the market with aggressive advertising and sales promotion. This is needed to convince the customer that the quality of the product translates into superior value at the premium price. The investment patterns of businesses we have surveyed confirm this.

Our analysis only looks at relative price. Within each category (lower relative price, equivalent price, or higher relative price) is a mix of products with different relative quality. As we will explore later, higher quality products require higher advertising levels. Marketers offering higher quality products at discounted prices should expect to invest more in advertising then marketers offering equivalent quality products at a discounted price.

If you’d like to discuss the budgeting cycle or how to plan for
it, contact our Managing Partner, Mark Levit, at 212.696.1200 now.

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