Most people think in terms of product or service. But few offering fall into those black and white categories. Examples: Pure good: Shampoo Good dominated: A car (comes with warranties and service) Hybrid: A restaurant– Which is more important, the food or the atmosphere and service? Service Dominated: Your taxes. You get the service of having them done, but also the papers to send in and a copy to keep. Pure service: Having your car washed.
Goods are: Tangible: you can count them, inventory them, demonstrate them, see them before you buy Separable: It doesn’t matter who you buy it from, the product is the same Homogenous: In theory, every bottle of Suave shampoo is the same, regardless of where you buy it Non-perishable: If you don’t sell it today you can sell it tomorrow. Services are just the opposite.
The core is the automobile. You are buying transportation from point A to point B. The augmented product is a Honda Accord. The Accord is different from a Toyota Camry and even within the Accord you can choose package levels with different features.
The total product includes things like: Roadside assistance on your car Delivery of furniture and appliances Training on your new computer The more expensive and complex the product, the more it will need to include.
There are always caveats: If your name is Maine Street Accounting– what happens if you move? A patent attorney can look up trademarks and make sure you are not infringing on another company.
In idea generation it is important to get ideas from those who know best. Customers and salespeople who deal with them on a frequent basis often have great ideas for new products or modifications Ides screening Not all ideas are good ones, and some that are don’t fit the goals of your company Other ideas might be great but not have many potential customers Idea evaluation A Feasibility study helps you decide which ideas you should pursue Costs and profitability have to be address Concept testing, running the refined idea past the experts happens at this stage Product Development Reaching this stage means you have a viable, profitable idea Prototypes are made and tested, focus groups are used Once the prototype is well received test marketing can begin Successful test marketing leads to commercialization Commercialization Taking your product “live” to market This involves full production levels A complete marketing plan must be made which will reach your intended target market
The PLC can be used for either an industry or particular product. Characterizations of each stage are on the following slides.
If you have an elastic product a small price increase can dramatically cut back sales. Conversely, a small price cut can substantially increase sales unit and possibly profitability.
Customers gather pricing knowledge from a variety of places. The internet has expanded the ability to comparison shop and thus consumers are becoming more price savvy.
If your goal is to undercut the competition you’ll need low prices. An image of quality supports higher pricing. If you are reselling products some manufacturers have MAP (Minimum Advertised Pricing). MAP requires you not advertise below a certain price but does not regulate what the product actually sells for. This is an effort to improve profitability at all levels in some industries.
In skimming, you sell as high as you can, and when that market is done, you bring your price down to the next level. This method ‘skims’ as much profit off the top as is possible.
Is it $20.00 or $19.95? Studies have shown that the nickel difference psychologically makes a bid difference in consumers minds. The don’t want over $20, the want under $20.
Getting in a cycle of sales is a dangerous way to hurt your profitability and train customers only to but during a sale. Nordstroms has a well publicized policy of two sales per year, one for men and one for women.
Bundling could be selling shampoo and conditioner in a set for a lower price. Or a bundle of accessories for the main product.
The great thing about these programs is the psychology. People will buy the product with the coupon, rebate, or program in mind, but forget to use it. Coupons expire, but since they are up at the cash register the buy the product anyway. Many people forget to send in the rebate forms due to the time it takes to fill out the information. And collecting Stamps, stickers, or whatever on a small card is easy to lose.