Product Group Product Model Other Models and PricesCar Echo 2 Door 4 Door Corolla CE S XRS LE Avalon XL Touring XLS Limiting Matrix XR XRS Celica GT GT-S Camry Standard LE SE XLE Camry Solara SE Coupe SE Sport Coupe SLE Coupe Convertible SE Prius MR2 SpyderVan Sienna CE LE XLE XLE LimitedSUV RAV4 Highlander Standard Limited 4Runner SR5 Sport Edition Limited Sequoia SR5 Limited Land CruiserTruck Tacoma Regular Cab Tacoma Access Cab Tacoma Double Cab Tacoma X-Runner Tundra Regular Cab Tundra Access Cab Tundra Double Cab
Product Mix Decisions• What to think about: – Unprofitable product lines and products – Retailers can’t carry full range of merchandise – Feasibility of a line extension.
New Product Development• Most new product development is an improvement on existing products• Less than 10% of new products are totally new concepts.
Success rate of new products• The success rate of new products is very low – less than 5%. ‘You have to kiss a lot of frogs to find a prince.”• Product obsolescence is rapid with improvements in technology• Shorter PLCs
Product Development Stages• Idea generation• Idea screening• Concept development and testing• Concept testing• Conjoint analysis – to find out the best valued attributes by consumers
Business analysis• The most customer appealing offer is not always the most profitable to make• Estimate on costs, sales volumes,pricing and profit levels are made to find out the optimal price – volume mix.• Breakeven and paybacks• Discounted cash flow projections
Market testing• Test markets• Test periods• What information to gather?• What action to take?
Common Pricing Mistakes• Determine costs and take traditional industry margins• Failure to revise price to capitalize on market changes• Setting price independently of the rest of the marketing mix• Failure to vary price by product item, market segment, distribution channels, and purchase occasion 1-28
Setting Pricing Policy1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing method 6. Selecting final price 1-29
Step 1: Selecting the Pricing Objective• Survival• Maximum current profit• Maximum market share• Maximum market skimming• Product-quality leadership 1-30
Types of Costs Fixed Costs Variable Costs (Overhead) Costs that don’t Costs that do vary vary with sales or directly with the production levels. level of production. Executive Salaries Raw materials Rent Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production 1-32