tion, and perceived value. From an IMC perspective, the price must be consistent with the perceptions of the product, as well as the communications strategy. Higher prices, of course, will communicate a higher product quality, while lower prices reflect bargain or "value" perceptions (Exhibit 2-26). A product positioned as highest quality but carrying a lower price than competitors will only confuse consumers. In other words, the price, the advertising, and the distribution channels must present one unified voice speaking to the product's positioning.

Relating Price to Advertising and Promotion Factors such as product quality, competition, and advertising all interact in determining what price a firm can and should charge. The relationship among price, product quality, and advertising was examined in one study using information on 227 consumer businesses from the Profit Impact of Marketing Strategies (PIMS) project of the Strategic Planning Institute.19 Several interesting findings concerning the interaction of these variables emerged from this study:

• Brands with high relative advertising budgets were able to charge premium prices, whereas brands that spent less than their competitors on advertising charged lower prices.

• Companies with high-quality products charged high relative prices for the extra quality, but businesses with high quality and high advertising levels obtained the highest prices. Conversely, businesses with low quality and low advertising charged the lowest prices.

• The positive relationship between high relative advertising and price levels was stronger for products in the late stage of the product life cycle, for market leaders, and for low-cost products (under $10).

• Companies with relatively high prices and high advertising expenditures showed a higher return on investment than companies with relatively low prices and high advertising budgets.

• Companies with high-quality products were hurt the most, in terms of return on investment, by inconsistent advertising and pricing strategies.

Exhibit 2-26 Some products compete on the basis of quality rather than price

Exhibit 2-26 Some products compete on the basis of quality rather than price

The study concluded that pricing and advertising strategies go together. High relative ad expenditures should accompany premium prices, and low relative ad expenditures should be tailored to low prices. These results obviously support the IMC perspective that one voice must be conveyed.

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