* * Chapter Fourteen Developing and Pricing Goods and Services Copyright © 2010 by the McGraw-Hill Companies, Inc. All rig...
DEVELOPING VALUE * * Product Development and the Total Product Offer <ul><li>According to the American Marketing Associati...
HOME COOKING in  HALF the TIME Spotlight on Small Business * * <ul><ul><li>Let’s Dish and Dream Dinners provides a service...
POTENTIAL COMPONENTS  of a TOTAL PRODUCT OFFER * * LG1 Developing a Total Product Offer 14-
UNDERSTANDING  PRODUCT LINES * * Product Lines & Product Mix <ul><ul><li>Product Line --  A group of products that are phy...
The PRODUCT MIX * * Product Lines & Product Mix <ul><ul><li>Product Mix --  The combination of all product lines offered b...
DIFFERENTIATING PRODUCTS * * Product Differentiation  <ul><ul><li>Product Differentiation --  The creation of real or perc...
CATEGORIES OF CONSUMER GOODS AND SERVICES <ul><li>1  CONVENIENCE GOODS AND SERVICES </li></ul><ul><li>2  SHOPPING GOODS AN...
CLASSIFYING CONSUMER  GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services  <ul><ul><li>Conve...
CLASSIFYING SHOPPING GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services  <ul><ul><li>Shoppi...
CLASSIFYING SPECIALTY GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services  <ul><ul><li>Speci...
CLASSIFYING UNSOUGHT GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services  <ul><ul><li>Unsoug...
CLASSIFYING INDUSTRIAL  GOODS and SERVICES  * * Marketing Industrial Goods and Services <ul><ul><li>Industrial Goods --  P...
COMPANY USES of PACKAGING  * * Packaging Changes the Product  <ul><ul><li>Companies often use packaging to change and impr...
SOME KEY FUNCTIONS of PACKAGING * * Packaging Changes the Product  <ul><ul><li>To attract buyers’ attention </li></ul></ul...
UNDERSTANDING BRANDING * * Branding and Brand Equity <ul><ul><li>Brand --   Name, symbol, or design that identifies the go...
KEY BRAND CATEGORIES * * Branding and Brand Equity <ul><ul><li>Manufacturers’ Brands –   Brand names of manufacturers that...
KEY BRAND CATEGORIES * * Branding and Brand Equity <ul><ul><li>Generic Goods --  Non-branded products that sell at a disco...
ESTABLISHING BRAND EQUITY  and LOYALTY * * Generating Brand Equity and Loyalty  <ul><ul><li>Brand Equity –  The combinatio...
BUILDING BRAND AWARENESS  * * Generating Brand Equity and Loyalty  <ul><ul><li>Brand Awareness --  How quickly or easily a...
BUILDING BRAND  ASSOCIATIONS * * Generating Brand Equity and Loyalty  <ul><ul><li>Brand Association --  Linking a brand to...
The NEW PRODUCT  DEVELOPMENT PROCESS * * The New Product Development Process LG5 14-
BRINGING NEW PRODUCTS  to the MARKET * * <ul><ul><li>Product Screening --  Reduces the number of new products a firm is wo...
BRINGING NEW PRODUCTS  to the MARKET * * <ul><ul><li>Concept Testing --   Takes a product idea to consumers to test reacti...
The FOUR STAGES of a  PRODUCT LIFE CYCLE * * The Product Life Cycle <ul><ul><li>Product Life Cycle --  A theoretical look ...
MARKETING EFFORTS IN PRODUCT LIFE CYCLE <ul><li>1.  introduction – keep prod mix small, use penetration pricing, use whole...
Marketing Efforts Cont. <ul><li>4.  Decline life cycle – cut product mix, consider raising price, limit distrib, reduce ad...
PRICING OBJECTIVES * * Competitive Pricing <ul><ul><li>Achieving a target return on investment or profit </li></ul></ul><u...
PRICING STRATEGIES * * Competitive Pricing <ul><ul><li>Cost-based pricing measures cost of producing a product including m...
USING BREAK-EVEN ANALYSIS * * Break-Even Analysis <ul><ul><li>Break-Even Analysis --  The process used to determine profit...
PRICING ALTERNATIVES * * Other Pricing Strategies <ul><ul><li>Skimming Price Strategy --  Pricing new products high to rec...
PRICING STRATEGIES  of RETAILERS * * Other Pricing Strategies <ul><ul><li>High-Low Pricing --  Using regular prices that a...
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  • See Learning Goal 1: Describe a total product offer.
  • See Learning Goal 1: Describe a total product offer.
  • See Learning Goal 1: Describe a total product offer. A product can be divided into the physical and the total product. Marketing managers must take the physical and add value to create the total product offer.
  • See Learning Goal 1: Describe a total product offer.
  • See Learning Goal 1: Describe a total product offer. To give students a visual of the products offered by Proctor and Gamble, use their website at www.pg.com and click on the products tab.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Location, brand awareness, and image are important in marketing these goods and services.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Brand name, price, and quality differences are important in marketing these goods and services.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Purchasers of the items listed on this slide are brand insistent and refuse to accept substitutes.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Unsought goods and services often rely on personal selling or specialty advertising - like the yellow pages.
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods.
  • See Learning Goal 3: Summarize the functions of packaging.
  • See Learning Goal 3: Summarize the functions of packaging.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Recognized trademarks include the Nike Swoosh, the Pillsbury Doughboy, and Apple’s Apple.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Manufacturers’ brand examples - Ford, Microsoft, Xerox Dealer brand examples - Kenmore from Sears
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Example Coca-Cola and Ziploc have strong brand equity.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
  • See Learning Goal 5: Explain the steps in the new product development cycle. Green Ketchup and New Coke are two of the many thousands of products that failed. New product failure is common due to the fact that companies fail to properly manage the new product development process.
  • See Learning Goal 5: Explain the role of brand managers and the steps of the new-product development process.
  • See Learning Goal 5: Explain the role of brand managers and the steps of the new-product development process.
  • See Learning Goal 6: Describe the product life cycle.
  • See Learning Goal 7: Identify various pricing objectives and strategies. One strategy many students have experienced but might not fully understand is the loss leader strategy. This strategy is often used around the Thanksgiving holiday when grocery stores offer to sell customers turkeys for much less than their actual cost in an effort to attract consumers into the store. This leads to more traffic and sales of more products.
  • See Learning Goal 7: Identify various pricing objectives and strategies.
  • See Learning Goal 7: Identify various pricing objectives and strategies.
  • See Learning Goal 7: Identify various pricing objectives and strategies. When Apple introduced the iPhone, they used a skimming price strategy. The everyday low pricing or EDLP has been effectively used by Wal-Mart to dominate the retail sector.
  • See Learning Goal 7: Identify various pricing objectives and strategies.
  • Chap014

    1. 1. * * Chapter Fourteen Developing and Pricing Goods and Services Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
    2. 2. DEVELOPING VALUE * * Product Development and the Total Product Offer <ul><li>According to the American Marketing Association, value is a foundation of marketing. </li></ul><ul><li>Value -- Good quality at a fair price. </li></ul><ul><li>Adapting products to new markets is an ongoing challenge. </li></ul><ul><li>Product development is a key activity in any modern business. </li></ul>LG1 14-
    3. 3. HOME COOKING in HALF the TIME Spotlight on Small Business * * <ul><ul><li>Let’s Dish and Dream Dinners provides a service where customers prepare meals then bring them home. </li></ul></ul><ul><ul><li>The companies provide a place to meet, has supplies and relieves the stress and mess for its customers. </li></ul></ul>14-
    4. 4. POTENTIAL COMPONENTS of a TOTAL PRODUCT OFFER * * LG1 Developing a Total Product Offer 14-
    5. 5. UNDERSTANDING PRODUCT LINES * * Product Lines & Product Mix <ul><ul><li>Product Line -- A group of products that are physically similar or intended for a similar market. </li></ul></ul><ul><ul><li>Product lines often include competing brands like: </li></ul></ul><ul><ul><ul><li>M&Ms </li></ul></ul></ul><ul><ul><ul><li>Peanut M&Ms </li></ul></ul></ul><ul><ul><ul><li>Mint M&Ms </li></ul></ul></ul><ul><ul><ul><li>Dark Chocolate M&Ms </li></ul></ul></ul>LG1 14-
    6. 6. The PRODUCT MIX * * Product Lines & Product Mix <ul><ul><li>Product Mix -- The combination of all product lines offered by a manufacturer or service provider. </li></ul></ul><ul><ul><li>Product mixes like Proctor & Gamble’s can be extensive: </li></ul></ul><ul><ul><ul><li>Laundry detergent </li></ul></ul></ul><ul><ul><ul><li>Cosmetics </li></ul></ul></ul><ul><ul><ul><li>Diapers </li></ul></ul></ul><ul><ul><ul><li>Potato chips </li></ul></ul></ul><ul><ul><ul><li>Bar soap </li></ul></ul></ul>LG1 14-
    7. 7. DIFFERENTIATING PRODUCTS * * Product Differentiation <ul><ul><li>Product Differentiation -- The creation of real or perceived product differences. </li></ul></ul><ul><ul><li>Marketers use a mix of pricing, advertising and packaging to create different images. Examples include: </li></ul></ul><ul><ul><ul><li>Bottled water </li></ul></ul></ul><ul><ul><ul><li>Aspirin </li></ul></ul></ul><ul><ul><ul><li>Fast-food </li></ul></ul></ul><ul><ul><ul><li>Laundry detergent </li></ul></ul></ul><ul><ul><ul><li>Shampoo </li></ul></ul></ul>LG2 14-
    8. 8. CATEGORIES OF CONSUMER GOODS AND SERVICES <ul><li>1 CONVENIENCE GOODS AND SERVICES </li></ul><ul><li>2 SHOPPING GOODS AND SERVICES </li></ul><ul><li>3 SPECIALTY GOODS AND SERVICES </li></ul><ul><li>4 UNSOUGHT GOODS AND SERVICES </li></ul>
    9. 9. CLASSIFYING CONSUMER GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services <ul><ul><li>Convenience Goods and Services -- Products consumers purchase frequently with minimal effort. These include: </li></ul></ul><ul><ul><ul><li>Candy and snacks </li></ul></ul></ul><ul><ul><ul><li>Gas </li></ul></ul></ul><ul><ul><ul><li>Milk and eggs </li></ul></ul></ul>LG2 14-
    10. 10. CLASSIFYING SHOPPING GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services <ul><ul><li>Shopping Goods and Services -- Products consumers buy only after comparing value, quality, price, and styles. These include: </li></ul></ul><ul><ul><ul><li>Clothes and shoes </li></ul></ul></ul><ul><ul><ul><li>Appliances and furniture </li></ul></ul></ul><ul><ul><ul><li>Childcare </li></ul></ul></ul><ul><ul><ul><li>Home remodeling </li></ul></ul></ul>LG2 14-
    11. 11. CLASSIFYING SPECIALTY GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services <ul><ul><li>Specialty Goods and Services -- Products with unique characteristics and brand identity. These include: </li></ul></ul><ul><ul><ul><li>Tiffany jewelry </li></ul></ul></ul><ul><ul><ul><li>Rolex watches </li></ul></ul></ul><ul><ul><ul><li>Lamborghini automobiles </li></ul></ul></ul><ul><ul><ul><li>Ritz Carlton Hotels </li></ul></ul></ul>LG2 14-
    12. 12. CLASSIFYING UNSOUGHT GOODS and SERVICES * * Marketing Different Classes of Consumer Goods and Services <ul><ul><li>Unsought Goods and Services -- Products consumers aren’t aware of or haven’t thought of buying until they need them. These include: </li></ul></ul><ul><ul><ul><li>Car-towing services </li></ul></ul></ul><ul><ul><ul><li>Funeral services </li></ul></ul></ul><ul><ul><ul><li>Renter’s insurance </li></ul></ul></ul>LG2 14-
    13. 13. CLASSIFYING INDUSTRIAL GOODS and SERVICES * * Marketing Industrial Goods and Services <ul><ul><li>Industrial Goods -- Products used in the production of other products and sold in the B2B market. </li></ul></ul><ul><ul><li>Industrial goods include: </li></ul></ul><ul><ul><ul><li>Installations </li></ul></ul></ul><ul><ul><ul><li>Capital items </li></ul></ul></ul><ul><ul><ul><li>Accessory equipment </li></ul></ul></ul><ul><ul><ul><li>Supplies </li></ul></ul></ul><ul><ul><ul><li>Service </li></ul></ul></ul>LG2 14-
    14. 14. COMPANY USES of PACKAGING * * Packaging Changes the Product <ul><ul><li>Companies often use packaging to change and improve their basic product. Examples include: </li></ul></ul><ul><ul><ul><li>Microwave popcorn </li></ul></ul></ul><ul><ul><ul><li>Tuna pouches </li></ul></ul></ul><ul><ul><ul><li>McDonald’s green packaging </li></ul></ul></ul>LG3 <ul><ul><ul><li>Good packaging can also make a product more attractive to retailers. </li></ul></ul></ul>14-
    15. 15. SOME KEY FUNCTIONS of PACKAGING * * Packaging Changes the Product <ul><ul><li>To attract buyers’ attention </li></ul></ul><ul><ul><li>Protect the goods inside and be tamperproof </li></ul></ul><ul><ul><li>Describe and provide information about the product </li></ul></ul><ul><ul><li>Explain the product’s benefits </li></ul></ul><ul><ul><li>Provide warranty information and warnings </li></ul></ul><ul><ul><li>Give an indication of price, value, and uses </li></ul></ul>LG3 14-
    16. 16. UNDERSTANDING BRANDING * * Branding and Brand Equity <ul><ul><li>Brand -- Name, symbol, or design that identifies the goods or services and distinguishes them from competitors’ offerings. </li></ul></ul>LG4 <ul><ul><li>Trademark -- A brand that has exclusive legal protection for both its brand name and design. </li></ul></ul>14-
    17. 17. KEY BRAND CATEGORIES * * Branding and Brand Equity <ul><ul><li>Manufacturers’ Brands – Brand names of manufacturers that distribute products nationally. </li></ul></ul><ul><ul><li>Dealer (Private-Label) Brands -- Products that carry a retailer’s or distributor’s brand name instead of a manufacturer’s. </li></ul></ul>LG4 14-
    18. 18. KEY BRAND CATEGORIES * * Branding and Brand Equity <ul><ul><li>Generic Goods -- Non-branded products that sell at a discount compared to manufacturers’ or dealers’ brands. </li></ul></ul><ul><ul><li>Knockoff Brands -- Illegal copies of national brands. </li></ul></ul>LG4 14-
    19. 19. ESTABLISHING BRAND EQUITY and LOYALTY * * Generating Brand Equity and Loyalty <ul><ul><li>Brand Equity – The combination of factors (awareness, loyalty, perceived quality, images, and emotions) that people associate with a brand name. </li></ul></ul><ul><ul><li>Brand Loyalty -- The degree to which consumers are satisfied and are committed to further purchases. </li></ul></ul>LG4 14-
    20. 20. BUILDING BRAND AWARENESS * * Generating Brand Equity and Loyalty <ul><ul><li>Brand Awareness -- How quickly or easily a given brand name comes to mind when someone mentions a product category. </li></ul></ul><ul><ul><li>Consumers reach a point of brand preference when they prefer one brand over another. </li></ul></ul><ul><ul><li>When consumers reach brand insistence , they will not accept substitute brands. </li></ul></ul>LG4 14-
    21. 21. BUILDING BRAND ASSOCIATIONS * * Generating Brand Equity and Loyalty <ul><ul><li>Brand Association -- Linking a brand to other favorable images, like celebrities or a geographic area. </li></ul></ul><ul><ul><li>Brand Manager -- Person responsible for a particular brand and handles all the elements of the brand’s marketing mix. </li></ul></ul>LG4 14-
    22. 22. The NEW PRODUCT DEVELOPMENT PROCESS * * The New Product Development Process LG5 14-
    23. 23. BRINGING NEW PRODUCTS to the MARKET * * <ul><ul><li>Product Screening -- Reduces the number of new products a firm is working on to focus on the most promising. </li></ul></ul><ul><ul><li>Product Analysis -- Focuses on the cost estimates and sales forecasts to get an idea of potential profitability. </li></ul></ul>LG5 The New Product Development Process 14-
    24. 24. BRINGING NEW PRODUCTS to the MARKET * * <ul><ul><li>Concept Testing -- Takes a product idea to consumers to test reactions. </li></ul></ul>LG5 The New Product Development Process <ul><ul><li>Commercialization -- Promoting the product to distributors and retailers and developing the promotional campaign. </li></ul></ul>14-
    25. 25. The FOUR STAGES of a PRODUCT LIFE CYCLE * * The Product Life Cycle <ul><ul><li>Product Life Cycle -- A theoretical look at what happens to sales and profits for a product over time. </li></ul></ul><ul><ul><li>Product Life Cycle Stages: </li></ul></ul><ul><ul><ul><li>Introduction </li></ul></ul></ul><ul><ul><ul><li>Growth </li></ul></ul></ul><ul><ul><ul><li>Maturity </li></ul></ul></ul><ul><ul><ul><li>Decline </li></ul></ul></ul>LG6 14-
    26. 26. MARKETING EFFORTS IN PRODUCT LIFE CYCLE <ul><li>1. introduction – keep prod mix small, use penetration pricing, use wholesalers, use dealer promotion </li></ul><ul><li>2. growth – improve prod, keep mix ltd, adjust price to meet competition, incr distrib, heavy competitive adv </li></ul><ul><li>3. maturity – differentiate prod, further reduce price, intensify distrib, emphasize brand name as well as product benefits & diff. </li></ul>
    27. 27. Marketing Efforts Cont. <ul><li>4. Decline life cycle – cut product mix, consider raising price, limit distrib, reduce adv, focus on loyal customers </li></ul>
    28. 28. PRICING OBJECTIVES * * Competitive Pricing <ul><ul><li>Achieving a target return on investment or profit </li></ul></ul><ul><ul><li>Building traffic </li></ul></ul><ul><ul><li>Achieving greater market share </li></ul></ul><ul><ul><li>Creating an image </li></ul></ul><ul><ul><li>Furthering social objectives both short-run and long-run </li></ul></ul>LG7 14-
    29. 29. PRICING STRATEGIES * * Competitive Pricing <ul><ul><li>Cost-based pricing measures cost of producing a product including materials, labor, and overhead. </li></ul></ul><ul><ul><li>Target Costing -- Making the final price of a product an input in the product development process by estimating the selling price consumers will pay. </li></ul></ul><ul><ul><li>Competition-Based Pricing -- A strategy based on what the competition is charging for its products. </li></ul></ul>LG7 14-
    30. 30. USING BREAK-EVEN ANALYSIS * * Break-Even Analysis <ul><ul><li>Break-Even Analysis -- The process used to determine profitability at various levels of sales. The break-even point is where revenues equals cost. </li></ul></ul><ul><ul><li>Total Fixed Costs -- All costs that remain the same no matter how much is produced or sold. </li></ul></ul><ul><ul><li>Variable Costs -- Costs that change according to the level of production. </li></ul></ul>LG7 14-
    31. 31. PRICING ALTERNATIVES * * Other Pricing Strategies <ul><ul><li>Skimming Price Strategy -- Pricing new products high to recover costs and make high profits while competition is limited. </li></ul></ul><ul><ul><li>Penetration Price Strategy -- Pricing products low with the hope of attracting more buyers and discouraging other companies from competing in the market. </li></ul></ul><ul><ul><li>Everyday Low Pricing (EDLP) -- Setting prices lower than competitors with no special sales. </li></ul></ul>LG7 14-
    32. 32. PRICING STRATEGIES of RETAILERS * * Other Pricing Strategies <ul><ul><li>High-Low Pricing -- Using regular prices that are higher than EDLP except during special sales when they are lower. </li></ul></ul><ul><ul><li>Psychological Pricing -- Pricing products at price points that make a product seem less expensive than it is. </li></ul></ul>LG7 14-

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