BUS110 Chap 14 - Pricing Goods and Services

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Pricing Goods and Services

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  • See Learning Goal 1: Describe a total product offer.
  • See Learning Goal 1: Describe a total product offer. “ Untouchable” Spending Cuts This slide profiles some of the goods and services people do not eliminate during a recession. Ask students: Why are the items listed on the slide “untouchables”? To further the discussion ask students: What items do they deem to be “untouchable” and why?
  • See Learning Goal 1: Describe a total product offer. “ Expendable” Spending Cuts This slide shows the flipside of the previous slide and lists items that people are most likely to eliminate. Ask students to get into groups and discuss: Why are these items “expendable,” but the items on the previous slide are “untouchable”?
  • See Learning Goal 1: Describe a total product offer.
  • See Learning Goal 1: Describe a total product offer. The total product offering includes tangible as well as intangible benefits.
  • 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. Identifying Consumer Goods Classifications: Beautyrest mattress - shopping good Honda Accord - shopping good McDonald’s Big Mac - convenience good Rolls Royce automobiles - specialty good Oreo Cookies - convenience good Harvard University degree - specialty good
  • See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Odd Product Ideas Not all successful products necessarily make sense. Take for example the products mentioned on this slide. To start a discussion on odd product offerings: Ask students to give examples of odd products that were successful or unsuccessful. For more examples of odd products that were not successful go to http://www.guidespot.com/guides/ridiculous_stupid_products_inventions.
  • 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. Origins of Automobile Symbols This slide presents the origins of car symbols. Ask the students: How important is the name and symbol of a product? What aspects should be considered in the naming process? ( Most students should suggest that the name of your product is very important, because it represents your company, tells the customers what the product is, and it should mean something.) Given that there are so many models of cars in so many different countries, naming cars becomes a very complex process. Should only one name be used in all countries or different names for the same model in different countries?
  • 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.
  • Also available on a Transparency Acetate See Learning Goal 4: Describe the differences among a brand, a brand name, and a trademark, and explain the concepts of brand equity and brand loyalty. 10 Most Valuable Brands This slide presents the 10 most valuable brands in the world. Before showing this slide, ask the students: Which brand do you believe is the most valuable in the world? Why? In Business Week’s ranking of top 100 brands in the world, each brand must derive about a third of its earnings outside its home country, be recognizable outside of its customer base, and have publicly available marketing and financial data. Business Week chose Interbrand Corp.’s methodology because it evaluates brands much the way analysts value other assets: on the basis of how much they are likely to earn in the future. Coca-Cola, Microsoft, and IBM ranked at the top of the list. (Source: Business Week, August 7, 2006)
  • Also available on a Transparency Acetate See Learning Goal 4: Describe the differences among a brand, a brand name, and a trademark, and explain the concepts of brand equity and brand loyalty. Best/Worst/Weirdest Brand Names This slide presents best, worst, and weirdest car brand names. Ask the students: How important is the name of a product? What aspects should be considered in the naming process? ( Most students should suggest that the name of your product is very important because it represents your company, tells the customers what the product is, and it should mean something…..well maybe!!) Given that there are so many models cars in so many different countries, naming cars becomes a very complex process. Should only one name be used in all countries or different names for the same model in different countries? Names should have a positive connotation such as Nova (in English, it means a bright star). Chevrolet used this word for one of its car name, Chevy Nova. It worked well in the United States. However, when they introduced this model with the same name in Spanish speaking countries, it created a mess. No va in Spanish means, it doesn’t go. Can you imagine, buying a new car that says, it doesn’t go?
  • 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 6: Describe the product life cycle. Profits Beyond the Grave This slide explores the top earnings of deceased celebrities. Ask students: What do you think the future earnings of Michael Jackson will be?
  • 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.
  • See Learning Goal 7: Explain various pricing objectives and strategies. Breakeven Chart This slide presents a simple breakeven chart. Fixed costs are $200,000 and total costs are $400,000. Where it matches with total revenue is 20,000 units, which is the breakeven unit sales. $400,000 / 20,000 units = $20 per unit price.
  • Also available on a Transparency Acetate See Learning Goal 7: Explain various pricing objectives and strategies. Pricing Using Breakeven Analysis This slide presents the breakeven analysis using different pricing. Students can use further different unit prices to find other breakeven points. Although the company can sell more units at $2 / unit, it will loose money since the breakeven point is 400,000 units. Therefore, it would be advisable to sell at $3 / unit, where the company will be making additional $30,000 beyond breakeven.
  • 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.
  • Also available on a Transparency Acetate See Learning Goal 5: Explain the role of brand managers and the steps of the new-product development process. People Behind Product Innovation This slide presents the people behind some of the popular office products inventions. Ask the students before you present this slide: How many of these products do you use or have you used and have you ever thought of who might have come up with these product ideas? More often many inventions come about due to some necessity. Share with the students the example of 3M’s Post-It note pads. By all 3M measures, it was declared a poor and failed product because of very weak adhesive. Until an employee who was looking for a temporary bookmark that would stay on the page but can be peeled off when not needed. The employee came across this failed product and the rest is history. Post-It notes are one of the most successful new products in 3M’s history.
  • See Learning Goal 1: Describe a total product offer. Product Innovation During the Great Depression The late twenties and thirties are associated with the Great Depression, but the period was also one of great product innovation. The items on the slide were invented during the Great Depression. Have students look at the items and ask: Why do you think these items were developed during a time when most Americans had very little discretionary income? Have students work with a partner or small group to come up with specific reasons they think these products developed.
  • See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
  • List two short-term and two long-term pricing objectives. Can the two be compatible? Short-term pricing objectives include loss leaders and is designed to build traffic as well as achieving greater market share. Long-term pricing objectives include achieving a target return on investment and creating a certain image. It is important that marketing managers set pricing objectives in context of other marketing decisions, since the pricing objectives may differ greatly. What are the limitations of a cost-based pricing system? The limit of a cost-based pricing system is that in the long run it is not the producer that establishes price but rather the market place. To effectively establish price, the producer must take into account competitor prices, marketing objectives, actual cost, and the expected cost of product updates. What’s psychological pricing? Psychological pricing involves setting the price of goods or services at price points that make the product appear less expensive. For example, a TV may be priced at $999, since it sounds less expensive than $1,000.
  • What value enhancers may be included in a total product offer? Some value enhancers that may be included in the total product offering include: brand name, warranty, service, store surroundings, and speed of delivery. What’s the difference between a product line and a product mix? Product line refers to the group of products that are physically similar or intended for a similar market. These products may face similar competition. For example, you can purchase a Diet Coke, Diet Coke with Splenda etc. The product mix is the total of the product lines offered by a particular company. The text uses the example of Procter and Gamble. Name the four classes of consumer goods and services and give examples of each. The four classes of consumer goods and services include: Convenience goods and services - candy, gum and milk Shopping goods and services - clothes, shoes and appliances Specialty goods and services - fur coats, imported chocolates and business consultants Unsought goods and services - burial service, insurance and emergency drain cleaning Describe three different types of industrial goods. Installation goods consist of major capital equipment. Capital items are expensive products that last a long time. Accessory equipment consists of capital items that are not quite as long-lasting or expensive as installations and include computers, copy machines, and various tools.
  • What six functions does packaging now perform? The six functions packaging performs include: attract the buyer’s attention, protect the goods inside, be easy to open, describe and give information, explain the benefits of the good inside, and provide information on warranties, warnings and other consumer matters. What’s the difference between a brand name and a trademark? Brand names consist of a word, letter or group of words or letters that set it apart from other goods and services. A trademark is a brand that has exclusive legal protection for both its brand name and design. Explain the difference between a manufacturers’ brand, a dealer brand, and a generic brand. A manufacturers’ brand represents manufacturers that distribute their products nationally such as Xerox or Dell. A dealer brand is often referred to as a private label and will not carry the manufacturers name, but rather carries the name of the distributor instead. For example, Kenmore is a dealer brand sold via Sears. A generic brand is the name of an entire product category. What are the key elements of brand equity? Brand equity is the value of the brand name and associated symbols. The elements of brand equity include: brand loyalty, brand awareness, and brand association.
  • What are the six steps in the new-product development process? The six steps in the new-product development process include: Idea generation, development, product screenings, testing, product analysis, and commercialization. What’s the difference between product screening and product analysis? During the product screening process the number of new-product ideas a firm is working on is reduced, so that it may focus on the most promising ideas. Product analysis occurs after screening and involves making cost estimates and sales forecasts to get a feeling for the profitability of new-product ideas. What are the two steps in commercialization? The two steps in commercialization involve promoting the product to distributors and retailers, and the development of strong advertising and sales campaigns. What’s the theory of the product life cycle? The product life cycle is a theoretical model which explains what happens to sales and profit for a product over a particular period of time. This model has four stages: introduction, growth, maturity, and decline.
  • BUS110 Chap 14 - Pricing Goods and Services

    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. PRODUCTS “UNTOUCHABLE” by SPENDING CUTS * * <ul><li>Internet service </li></ul><ul><li>Cell phone service </li></ul><ul><li>Cable television </li></ul><ul><li>Discount apparel </li></ul><ul><li>Haircuts and coloring </li></ul><ul><li>Fast-food </li></ul>LG1 Product Development and the Total Product Offer Source: www.bigresearch.com . 14-
    4. 4. PRODUCTS “EXPENDABLE” by SPENDING CUTS * * <ul><li>Luxury handbags </li></ul><ul><li>Satellite radio </li></ul><ul><li>Specialty apparel </li></ul><ul><li>High-end cosmetics </li></ul><ul><li>Facials </li></ul>LG1 Product Development and the Total Product Offer Source: www.bigresearch.com . 14-
    5. 5. 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-
    6. 6. DEVELOPING a TOTAL PRODUCT * * Developing a Total Product Offer <ul><ul><li>Total Product Offer -- Everything consumers evaluate when deciding whether to buy something. </li></ul></ul>LG1 <ul><ul><li>Products are evaluated on many different dimensions, both tangible and intangible. </li></ul></ul><ul><ul><li>Marketers must think like and talk to consumers to find out what’s important. </li></ul></ul>14-
    7. 7. POTENTIAL COMPONENTS of a TOTAL PRODUCT OFFER * * LG1 Developing a Total Product Offer 14-
    8. 8. 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-
    9. 9. 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-
    10. 10. 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-
    11. 11. 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 . </li></ul></ul><ul><ul><li>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-
    12. 12. 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-
    13. 13. 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 . </li></ul></ul><ul><ul><li>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-
    14. 14. 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-
    15. 15. IDENTIFYING CONSUMER GOODS CLASSIFICATIONS * * <ul><li>How would you classify these consumer products? </li></ul><ul><ul><li>Beautyrest mattress </li></ul></ul><ul><ul><li>Honda Accord </li></ul></ul><ul><ul><li>McDonald’s Big Mac </li></ul></ul><ul><ul><li>Rolls Royce automobiles </li></ul></ul><ul><ul><li>Oreo Cookies </li></ul></ul><ul><ul><li>Harvard University degree </li></ul></ul>LG2 Marketing Different Classes of Consumer Goods and Services 14-
    16. 16. ODD PRODUCT IDEAS that WERE SUCCESSFUL * * <ul><li>Pet Rock - For $3.95 you could buy a gift-wrapped rock with eyes and a training manual. </li></ul><ul><li>Garbage Pail Kids - Perhaps the grossest trading cards ever produced. </li></ul><ul><li>Mood Rings - Wildly popular as the changing colors of the ring supposedly measured your mood. </li></ul><ul><li>Chia Pets - Animal shaped clay figures that grew sprouts. </li></ul>LG2 Marketing Different Classes of Consumer Goods and Services 14-
    17. 17. 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-
    18. 18. 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-
    19. 19. 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-
    20. 20. 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-
    21. 21. 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-
    22. 22. 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-
    23. 23. 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-
    24. 24. ORIGINS of AUTOMOBILE SYMBOLS * * <ul><li>Volvo - Symbol for iron </li></ul><ul><li>Lamborghini - Company founder’s was a Taurus </li></ul><ul><li>Volkswagen - Product of an office contest </li></ul><ul><li>Porsche - Coat of arms for city and state headquarters </li></ul>LG4 Generating Brand Equity and Loyalty Source: World Features Syndicate. 14-
    25. 25. 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-
    26. 26. 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-
    27. 27. 10 Most Valuable Brands 14- Source: Business Week, August 7, 2006 Rank Product Brand Value (Billions) 1 Coca-Cola $67.00 2 Microsoft 56.93 3 IBM 56.20 4 GE 48.91 5 Intel 32.32 6 Nokia 30.13 7 Toyota 27.94 8 Disney 27.85 9 McDonald’s 27.50 10 Mercedes-Benz 21.80
    28. 28. Best/Worst/Weirdest Car Brand Names 14- Source: FT Weekend, November, 2005 Best Worst Weirdest Lamborghini Diablo Volkswagon Thing FSR Tarpan Honker Ford Mustang Honda That’s Mazda Bongo Friendee/ Brawny Mitsubishi Colt Nissan Cedric Isuzu Tractor Pontiac Firebird Toyota Toyopet Mitsubishi Delica Space Gear Rolls-Royce Silver Shadow Corbin Sparrow Suzuki Joy Pop Dodge Coronet Super Bee
    29. 29. Viral Ads <ul><li>Business Week Viral Ads </li></ul>14-
    30. 30. The NEW PRODUCT DEVELOPMENT PROCESS * * The New Product Development Process LG5 14-
    31. 31. 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-
    32. 32. 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-
    33. 33. Product Life Cycle (PLC) 14-
    34. 34. SALES and PROFITS DURING the PRODUCT LIFE CYCLE * * The Product Life Cycle LG6 14-
    35. 35. PROFITS BEYOND the GRAVE Top Earning Deceased Celebrities * * LG6 The Product Life Cycle Source: Forbes, www.forbes.com/deadcelebs . 14- Celebrity Earnings Year of Death Elvis Presley $52 Million 1977 Charles Schultz $33 Million 2000 Heath Ledger $20 Million 2008 Albert Einstein $18 Million 1955 Aaron Spelling $15 Million 2006 Dr. Seuss $12 Million 1991 John Lennon $9 Million 1980
    36. 36. 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-
    37. 37. 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-
    38. 38. WHEN SELLING SWEETS GOES SOUR (Reaching Beyond Our Borders) * * <ul><ul><li>Choco-Logo saw its costs increase dramatically in one year. </li></ul></ul><ul><ul><li>The company cut back by using less expensive packaging and reducing the size of a box of chocolates. </li></ul></ul><ul><ul><li>Pricing is a process that’s never simple. You need to maintain high quality while cutting costs. </li></ul></ul>14-
    39. 39. 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-
    40. 40. Breakeven Chart 14- Total Revenue or Total Cost Number of Units
    41. 41. Pricing Using Breakeven Analysis 14- Problem Should we charge $2 or $3 per unit? Costs Total Fixed Costs $400,000 Variable Cost $ 1 per unit Market Research Forecast Company can sell: 290,000 boxes at $2 / unit 210,000 boxes at $3 / unit Breakeven point = total fixed cost price - variable cost (per unit) (per unit) $2 price = $400,000 = 400,000 units to breakeven $2 - $1 $3 price = $400,000 = 200,000 units to breakeven $3 - $1 Breakeven Analysis
    42. 42. 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-
    43. 43. 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-
    44. 44. People Behind Product Innovation <ul><li>Liquid Paper – an American Secretary </li></ul><ul><ul><li>Liquid Paper History </li></ul></ul><ul><li>Paper Clip – a Norwegian Patent Clerk </li></ul><ul><li>Fax Machine – a Scottish Clock Maker </li></ul><ul><li>Pencil Sharpener – French Mathematician? </li></ul><ul><ul><li>John Lee Love </li></ul></ul><ul><li>Ballpoint pen – a Hungarian Journalist </li></ul><ul><ul><li>Ballpoint pen </li></ul></ul><ul><li>Eraser Head – English Chemist </li></ul>14- Source: World Features Syndicate
    45. 45. Review Only
    46. 46. RATAN TATA The Tata Group * * Profile <ul><li>Ratan Tata introduced the $2,500 “People’s Car” in 2008. </li></ul><ul><li>Tata Motors is part of the growing auto market in India - possibly the future’s largest market. </li></ul><ul><li>Tata expanded in 2008 by purchasing Jaguar and Range Rover from Ford . </li></ul>14-
    47. 47. PRODUCT INNOVATION DURING the GREAT DEPRESSION * * LG1 Developing a Total Product Offer Source: BusinessWeek Small Biz. 14- Year Product 1929 Electric Razors 1930 Car Radios 1930 Supermarkets 1933 Chocolate Chip Cookies 1933 Laundromats
    48. 48. COULDN’T YOU MAKE a SMALLER FOOTPRINT? (Thinking Green) * * <ul><ul><li>Timberland (U.S.A.) is putting a carbon label on its products. </li></ul></ul><ul><ul><li>Tesco (U.K.) puts carbon labels on all products - including grocery bags. </li></ul></ul><ul><ul><li>China and India, though, are building coal-powered plants and expanding car-use. </li></ul></ul><ul><ul><li>The focus on climate change varies from country to country. </li></ul></ul>14-
    49. 49. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>List two short-term and two long-term pricing objectives. Can the two be compatible? </li></ul></ul><ul><ul><li>What are the limitations of a cost-based pricing system? </li></ul></ul><ul><ul><li>What’s psychological pricing? </li></ul></ul>14-
    50. 50. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What value enhancers may be included in a total product offer? </li></ul></ul><ul><ul><li>What’s the difference between a product line and a product mix? </li></ul></ul><ul><ul><li>Name the four classes of consumer goods and services and give examples of each. </li></ul></ul><ul><ul><li>Describe three different types of industrial goods. </li></ul></ul>14-
    51. 51. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What six functions does packaging now perform? </li></ul></ul><ul><ul><li>What’s the difference between a brand name and a trademark? </li></ul></ul><ul><ul><li>Explain the difference between a manufacturers’ brand, a dealer brand, and a generic brand. </li></ul></ul><ul><ul><li>What are the key elements of brand equity? </li></ul></ul>14-
    52. 52. PROGRESS ASSESSMENT * * Progress Assessment <ul><ul><li>What are the six steps in the new-product development process? </li></ul></ul><ul><ul><li>What’s the difference between product screening and product analysis? </li></ul></ul><ul><ul><li>What are the two steps in commercialization? </li></ul></ul><ul><ul><li>What’s the theory of the product life cycle? </li></ul></ul>14-

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