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Developing and Pricing Products Leonardo Matarrese
- 1. CHAPTER 12 Developing and Pricing Products Leonardo Matarrese @MyPlick
- 2. Outline What Is a Product? Developing New Products Identifying Products Determining Prices Pricing Strategies and Tactics Leonardo Matarrese @MyPlick
- 3. What Is a Product? Ideas, Goods, or Services Customers buy products because they like what the products can do for them, either physically or emotionally--Utility A product must include the right features and offer the right benefits to succeed Feature Tangible quality that a company builds into a product What are some feature the company’s build in? Leonardo Matarrese @MyPlick
- 4. Classifying Goods & Services Convenience Good/Service Inexpensive product purchased and consumed rapidly and regularly Shopping Good/Service Moderately expensive, infrequently purchased product Specialty Good/Service Expensive, rarely purchased product CONSUMER PRODUCTS Leonardo Matarrese @MyPlick
- 5. Classifying Goods & Services Expense Item Industrial product purchased and consumed rapidly and regularly for daily operations Capital Item Expensive, long-lasting, infrequently purchased industrial product such as a building INDUSTRIAL PRODUCTS Leonardo Matarrese @MyPlick
- 6. The Product Mix Product Mix Group of products that a firm makes available for sale Product Line Group of similar products intended for a similar group of buyers who will use them in similar ways Leonardo Matarrese @MyPlick
- 7. Developing New Products The New Product Development Process Product Mortality Rates Strategy of introducing new products to respond quickly to customer or market changes Leonardo Matarrese @MyPlick
- 8. Product Ideas Screening Concept Testing Business Analysis Prototype Development Testing & Test Marketing The Seven-Step Development Process Commercialization Leonardo Matarrese @MyPlick
- 9. Variations for Services Service Ideas Defining the Service Package—identification of the tangible and intangible features that characterize the service Service Process Design Services require a three-part service process design instead of prototype development The Seven-Step Development Process Leonardo Matarrese @MyPlick
- 10. The Product Life Cycle (PLC) Series of stages in a product’s profit-producing life Introduction Growth Maturity Decline Leonardo Matarrese @MyPlick
- 11. Life Cycle Stages # - 11 Leonardo Matarrese @MyPlick
- 12. Life Cycle Stages # - 12 Leonardo Matarrese @MyPlick
- 13. Adjusting Marketing Strategy During the Life Cycle Extending Product Life: An Alternative to New Products Foreign Markets Offer Three Approaches to Longer Life Cycles Product Extension Existing product is marketed globally, instead of just domestically Product Adaptation Product modified to have greater appeal in foreign markets Reintroduction Process of reviving for new markets products that are obsolete in older ones Leonardo Matarrese @MyPlick
- 14. Identifying Products Branding: process of using symbols to communicate the qualities of a product made by a particular producer Types of Brand Names National Brand: brand-name product produced by, widely distributed by, and carrying the name of a manufacturer Licensed Brand: brand-name product for whose name the seller has purchased the right from an organization or individual Private Brand (or Private Label): brand-name product that a wholesaler or retailer has commissioned from a manufacturer Leonardo Matarrese @MyPlick
- 15. Packaging Products Packaging Physical container in which a product is sold, advertised, or protected Leonardo Matarrese @MyPlick
- 16. Packaging Products Labeling Can help market the product • Nonaerosol • Bio-Degradable • Recyclable • Ozone Friendly • Fat Free • Salt Free • Sugar Free • 30% More Free! Contents Under Pressure Do Not Puncture Address issues of consumer safety Flammable Do Not Use Near Open Flame Child Proof Cap Leonardo Matarrese @MyPlick
- 17. Labeling Laws Food, Drug and Cosmetic Act of 1938 Empowers the Food and Drug Administration to check the accuracy of product ingredients as reported on labels Fair Packaging and Labeling Act of 1966 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 Child Safety Protection Act 1995 Requires labels to identify toys that are choking hazards Not For Children Under Three Years Old Leonardo Matarrese @MyPlick
- 18. Determining Prices Pricing Process of determining what a company will receive in exchange for its products Pricing Objectives Goals that producers hope to attain in pricing products for sale Market Share As a percentage, total of market sales for a specific company or product Leonardo Matarrese @MyPlick
- 19. Price-Setting Tools Cost-Oriented Pricing Markup: Amount added to an item’s cost to sell it at a profit Breakeven Analysis: Cost-Volume-Profit Relationships Variable Cost: Cost that changes with the quantity of a product produced or sold Fixed Cost: Cost unaffected by the quantity of a product produced Breakeven Analysis: Assessment of the quantity of a product that must be sold before the seller makes a profit Leonardo Matarrese @MyPlick
- 20. Markup Markup is usually stated as a percentage of selling price. Price Sales Markup Percentage Markup # - 20 % 7 . 46 15 $ 7 $ Percentage Markup Leonardo Matarrese @MyPlick
- 21. Breakeven Point Quantity of a product that must be sold before the seller covers variable and fixed costs and makes a profit cost Variable Price costs fixed Total units) (in point Breakeven CDs 14,286 $8 $15 $100,000 # - 21 Leonardo Matarrese @MyPlick
- 22. Breakeven Analysis # - 22 Leonardo Matarrese @MyPlick
- 23. Pricing Strategies & Tactics Pricing above prevailing market prices for similar products Pricing below market prices Pricing at or near market prices (market pricing) Existing Products Price Leader Dominant firm that establishes product prices that other companies follow Price Fixing Occurs when producers illegally agree on prices among themselves Leonardo Matarrese @MyPlick
- 24. Pricing Strategies & Tactics Price Skimming Setting an initial high price to cover new product costs and generate a profit Dynamic Pricing for E-business Sellers can alter prices privately, on a one-to-one, customer-to customer basis Penetration Pricing Setting an initial low price to establish a new product in the market Price Lining Offering all items in certain categories at a limited number of prices New Products Leonardo Matarrese @MyPlick
- 25. Pricing Strategies & Tactics Psychological Pricing Pricing tactic that takes advantage of the fact that consumers do not always respond rationally to stated prices Odd-even Pricing Psychological pricing tactic based on the premise that customers prefer prices not stated in even dollar amounts Discount Price reduction offered as an incentive to purchase New Products Leonardo Matarrese @MyPlick
- 26. International Pricing Why is pricing products for sale in other countries so complicated? Leonardo Matarrese @MyPlick