Developing and Pricing Products Leonardo Matarrese


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Developing and Pricing Products - Leonardo Matarrese

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Developing and Pricing Products Leonardo Matarrese

  1. 1. CHAPTER 12 Developing and Pricing Products Leonardo Matarrese @MyPlick
  2. 2. Outline <ul><li>What Is a Product? </li></ul><ul><li>Developing New Products </li></ul><ul><li>Identifying Products </li></ul><ul><li>Determining Prices </li></ul><ul><li>Pricing Strategies and Tactics </li></ul>Leonardo Matarrese @MyPlick
  3. 3. What Is a Product? <ul><li>Ideas, Goods, or Services </li></ul><ul><li>Customers buy products because they like what the products can do for them, either physically or emotionally--Utility </li></ul><ul><li>A product must include the right features and offer the right benefits to succeed </li></ul><ul><li>Feature  </li></ul><ul><ul><li>Tangible quality that a company builds into a product </li></ul></ul>What are some feature the company’s build in? Leonardo Matarrese @MyPlick
  4. 4. Classifying Goods & Services <ul><li>Convenience Good/Service   </li></ul><ul><ul><li>Inexpensive product purchased and consumed rapidly and regularly </li></ul></ul><ul><li>Shopping Good/Service  </li></ul><ul><ul><li>Moderately expensive, infrequently purchased product </li></ul></ul><ul><li>Specialty Good/Service  </li></ul><ul><ul><li>Expensive, rarely purchased product </li></ul></ul>CONSUMER PRODUCTS Leonardo Matarrese @MyPlick
  5. 5. Classifying Goods & Services <ul><li>Expense Item  </li></ul><ul><ul><li>Industrial product purchased and consumed rapidly and regularly for daily operations </li></ul></ul><ul><li>Capital Item  </li></ul><ul><ul><li>Expensive, long-lasting, infrequently purchased industrial product such as a building </li></ul></ul>INDUSTRIAL PRODUCTS Leonardo Matarrese @MyPlick
  6. 6. The Product Mix <ul><li>Product Mix  </li></ul><ul><ul><li>Group of products that a firm makes available for sale </li></ul></ul><ul><li>Product Line  </li></ul><ul><ul><li>Group of similar products intended for a similar group of buyers who will use them in similar ways </li></ul></ul>Leonardo Matarrese @MyPlick
  7. 7. Developing New Products <ul><li>The New Product Development Process </li></ul><ul><li>Product Mortality Rates </li></ul><ul><ul><li>Strategy of introducing new products to respond quickly to customer or market changes </li></ul></ul>Leonardo Matarrese @MyPlick Speed to Market
  8. 8. The Seven-Step Development Process Product Ideas Screening Concept Testing Business Analysis Prototype Development Testing & Test Marketing       Commercialization  Leonardo Matarrese @MyPlick
  9. 9. <ul><li>Variations for Services </li></ul><ul><li>Service Ideas </li></ul><ul><ul><li>Defining the Service Package — identification of the tangible and intangible features that characterize the service </li></ul></ul><ul><li>Service Process Design </li></ul><ul><ul><li>Services require a three-part service process design instead of prototype development </li></ul></ul>The Seven-Step Development Process Leonardo Matarrese @MyPlick
  10. 10. The Product Life Cycle (PLC) <ul><li>Series of stages in a product’s profit-producing life </li></ul>Introduction Growth Maturity Decline Leonardo Matarrese @MyPlick
  11. 11. Life Cycle Stages # - Leonardo Matarrese @MyPlick
  12. 12. Life Cycle Stages # - Leonardo Matarrese @MyPlick
  13. 13. Adjusting Marketing Strategy During the Life Cycle <ul><li>Extending Product Life: An Alternative to New Products </li></ul><ul><li>Foreign Markets Offer Three Approaches to Longer Life Cycles </li></ul><ul><li>Product Extension </li></ul><ul><ul><li>Existing product is marketed globally, instead of just domestically </li></ul></ul><ul><li>Product Adaptation   </li></ul><ul><ul><li>Product modified to have greater appeal in foreign markets </li></ul></ul><ul><li>Reintroduction  </li></ul><ul><ul><li>Process of reviving for new markets products that are obsolete in older ones </li></ul></ul>Leonardo Matarrese @MyPlick
  14. 14. Identifying Products <ul><li>Branding: process of using symbols to communicate the qualities of a product made by a particular producer </li></ul><ul><li>Types of Brand Names </li></ul><ul><li>National Brand: brand-name product produced by, widely distributed by, and carrying the name of a manufacturer </li></ul><ul><li>Licensed Brand: brand-name product for whose name the seller has purchased the right from an organization or individual </li></ul><ul><li>Private Brand (or Private Label ): brand-name product that a wholesaler or retailer has commissioned from a manufacturer </li></ul>Leonardo Matarrese @MyPlick
  15. 15. Packaging Products <ul><li>Packaging  </li></ul><ul><ul><li>Physical container in which a product is sold, advertised, or protected </li></ul></ul>Leonardo Matarrese @MyPlick
  16. 16. Packaging Products <ul><li>Labeling </li></ul><ul><ul><li>Can help market the product </li></ul></ul><ul><li>Nonaerosol </li></ul><ul><li>Bio-Degradable </li></ul><ul><li>Recyclable </li></ul><ul><li>Ozone Friendly </li></ul><ul><li>Fat Free </li></ul><ul><li>Salt Free </li></ul><ul><li>Sugar Free </li></ul><ul><li>30% More Free! </li></ul>Contents Under Pressure Do Not Puncture <ul><ul><li>Address issues of consumer safety </li></ul></ul>Flammable Do Not Use Near Open Flame Child Proof Cap Leonardo Matarrese @MyPlick
  17. 17. Labeling Laws <ul><li>Food, Drug and Cosmetic Act of 1938 </li></ul><ul><ul><li>Empowers the Food and Drug Administration to check the accuracy of product ingredients as reported on labels </li></ul></ul><ul><li>Fair Packaging and Labeling Act of 1966 </li></ul><ul><ul><li>Requires labels to include the product name, the name and address of the manufacturer or distributor, and the net quantity of product contained in the package </li></ul></ul><ul><li>Child Safety Protection Act 1995 </li></ul><ul><ul><li>Requires labels to identify toys that are choking hazards </li></ul></ul>Not For Children Under Three Years Old Leonardo Matarrese @MyPlick
  18. 18. Determining Prices <ul><li>Pricing  </li></ul><ul><ul><li>Process of determining what a company will receive in exchange for its products </li></ul></ul><ul><li>Pricing Objectives  </li></ul><ul><ul><li>Goals that producers hope to attain in pricing products for sale </li></ul></ul><ul><li>Market Share  </li></ul><ul><ul><li>As a percentage, total of market sales for a specific company or product </li></ul></ul>Leonardo Matarrese @MyPlick
  19. 19. Price-Setting Tools <ul><li>Cost-Oriented Pricing </li></ul><ul><ul><li>Markup: Amount added to an item’s cost to sell it at a profit </li></ul></ul><ul><li>Breakeven Analysis: Cost-Volume-Profit Relationships </li></ul><ul><ul><li>Variable Cost: Cost that changes with the quantity of a product produced or sold </li></ul></ul><ul><ul><li>Fixed Cost: Cost unaffected by the quantity of a product produced </li></ul></ul><ul><ul><li>Breakeven Analysis: Assessment of the quantity of a product that must be sold before the seller makes a profit </li></ul></ul>Leonardo Matarrese @MyPlick
  20. 20. Markup <ul><li>Markup is usually stated as a percentage of selling price. </li></ul># - Leonardo Matarrese @MyPlick
  21. 21. Breakeven Point <ul><li>Quantity of a product that must be sold before the seller covers variable and fixed costs and makes a profit </li></ul># - Leonardo Matarrese @MyPlick
  22. 22. Breakeven Analysis # - Leonardo Matarrese @MyPlick
  23. 23. Pricing Strategies & Tactics <ul><li>Pricing above prevailing market prices for similar products </li></ul><ul><li>Pricing below market prices </li></ul><ul><li>Pricing at or near market prices (market pricing) </li></ul>Existing Products <ul><li>Price Leader </li></ul><ul><ul><li>Dominant firm that establishes product prices that other companies follow </li></ul></ul><ul><li>Price Fixing </li></ul><ul><ul><li>Occurs when producers illegally agree on prices among themselves </li></ul></ul>Leonardo Matarrese @MyPlick
  24. 24. Pricing Strategies & Tactics <ul><li>Price Skimming  </li></ul><ul><ul><li>Setting an initial high price to cover new product costs and generate a profit </li></ul></ul><ul><li>Dynamic Pricing for E-business </li></ul><ul><ul><li>Sellers can alter prices privately, on a one‑to‑one, customer-to customer basis </li></ul></ul><ul><li>Penetration Pricing  </li></ul><ul><ul><li>Setting an initial low price to establish a new product in the market </li></ul></ul><ul><li>Price Lining </li></ul><ul><ul><li>Offering all items in certain categories at a limited number of prices </li></ul></ul>New Products Leonardo Matarrese @MyPlick
  25. 25. Pricing Strategies & Tactics <ul><li>Psychological Pricing  </li></ul><ul><ul><li>Pricing tactic that takes advantage of the fact that consumers do not always respond rationally to stated prices </li></ul></ul><ul><li>Odd-even Pricing  </li></ul><ul><ul><li>Psychological pricing tactic based on the premise that customers prefer prices not stated in even dollar amounts </li></ul></ul><ul><li>Discount  </li></ul><ul><ul><li>Price reduction offered as an incentive to purchase </li></ul></ul>New Products Leonardo Matarrese @MyPlick
  26. 26. International Pricing <ul><li>Why is pricing products for sale in other countries so complicated? </li></ul>Leonardo Matarrese @MyPlick