The document discusses product and pricing strategies, including the types of products and the product life cycle phases: introduction, growth, maturity, and decline. It covers brand development, packaging, and labeling strategies as well as various pricing methods such as price skimming and penetration pricing, and the impact of demand and competition on pricing decisions. Additionally, it emphasizes the importance of effective product positioning and adapting strategies for international markets.

1. Product & Pricing Strategies By Ashraf Ayoub 31 st Mar’09 References: Business Today Book, 10 th Edition by M.Mescon . C.Bovee. J.Thill

2. Developing Product Strategies

3. Product: Good or service used as a bases of commerce Types of products Tangible & intangible products Consumer products Organizational products

4. Tangible & Intangible Products Product Continuum: relative amounts of tangible & intangible components in a product How to market Service product? By compensate intangibility: by using tangible symbols or by adding tangible components Services cannot be created in advance or kept in storage, services are time sensitive To shift consumer demand on service during slow periods, marketers offer discounts or promotions

5. The Product Continuum Products contain both tangible & Intangible components; predominantly tangible products are categorized as goods. Whereas predominantly intangible products are categorized as service Tangible Dominant Intangible Dominant GOODS IDEAL SERVICES Education Automobile Fast Food Cruise Consulting Insurance Salt Shoes VCR

6. Consumer Products Classification Convenience products: bought frequently without much conscious thought) Shopping products: important products bought less frequently, requires more thought & comparison shopping to check price, features, quality, & reputation Specialty products: brands people buyer specialty wants & seek out regardless of price or location & rarely accept substitutes for Unsought products Products people do not think of buying

7. Organizational Products Categories Expense Items: inexpensive goods & services used within a year of purchase Capital items: more expensive & have longer useful life

8. Organizational Products Classification Raw materials (used in production final products) Components (part of manufacturer’s final products) Supplies (used in daily operations) Installations (major capital projects) Equipment (shorter lived than installations) Business services (risk free services complex services)

9. Product Life Cycle It’s a four basic stages through which a product progress Stages: Introduction Growth Maturity Decline Describes: Product class (longest life cycle) Product form (longest life cycle) Product brand (shorter life cycle)

10. The Product Life Cycle most products & product categories move through a life cycle similar to the one represented by the curve in this diagram. However, the duration of each stage varies widely from product to product Sales Volume (units) Introduction Growth Maturity Decline Sales Time 0 Profits Internet VCR Cassette tapes DVD players

11. Product Life Cycle (cont.) Amount of time product remain in any stage depend on: Customer needs Customer Preferences Economic conditions Nature of product Marketer strategy

12. Introduction Stage Characteristics Stage of products launch & demand stimulation Spend heavily on research & development to create new product Developing promotion to build awareness Establish distribution system to get product into marketplace Profits are little

13. Growth Stage Characteristics Rapid jump in sales Increase in number of competitors & distribution outlets Struggle for market share Introduction of new features Maintain large promotional budgets Maintain competitive prices Reap handsome profits for who survive

14. Maturity Stage Characteristics Sales begin to level off or show slight decline Competition increases Market share is maximized (further expansion difficult) Mature Products kept alive to use profits in funding new products development To extend the stage life products characteristics modified to improve quality & performance

15. Decline Stage Characteristics Sales & profits slip then fade away Reasons: changing demographics, shifts in taste, product competition, advances in technology Stage of decide whether keep product or discontinue & focus on newer products development Declining products could need innovation to survive (e.g.new bottles, limited edition line, deep discounts)

16. New Product Development Process Only 5% of new products are true innovation To develop new products from familiar ones: Change packaging Improve formula Modify form or flavor Product development process: series of stages through which a product idea passes Prototyping: turning an idea into a working model Innovative companies prototype ideas in couple of days Reason of new products development: terrific new concept, or following footsteps of competitors

17. Product Development Process Idea generation Idea screening Business analysis Prototype development Test marketing Commercialization

18. Process Development Process for every hundred ideas generated, only one or two salable products may emerge from the lengthy & expensive process of product development 1 idea commercialization Test Marketing Prototype Development Business Analysis Screening of Ideas 1 00 ideas

19. Idea generation Come up with ideas satisfy unmet needs Idea Sources: Customers, Competitors, employees

20. Idea screening Cull few ideas appear worthy of further development Criteria: Ability to use existing production facilities Technical & marketing risk involved Industrial/technical products: feasibility study phase (define features, test workability) Consumer products: evaluate new ideas (by MKT consultants & Agencies) Concept testing: potential customers asked for thinking about new product idea

21. Business Analysis Review sales, costs, profit projections to match company’s objectives Investment worth? Forecast sales of product Assume various pricing strategies Estimate the costs with different production levels Calculate potential profits Decide if results meets company objectives

22. Prototype Development Develop product concept into physical product Create & test prototype as a product & its packaging Put marketing mix together Evaluate feasibility of large scale production Specify resources to bring product to market

23. Test Marketing Product-development stage in which a product is sold on a limited basis – a trial introduction Used if cost of marketing exceeds cost of development Potential risks: chance for competitors to find out newest ideas

24. Commercialization (Product Launch) Large-scale production & distribution of survived developed product Coordination of manufacturing, packaging, distribution, pricing, & promotion Classic mistake: promoting before adequate quantities supply Roll-out new products gradually from one geographic area to next (to spread launch cost over longer period, to refine strategy while rollout proceeds)

25. Brand Manager The person who develops & implements a complete strategy & marketing program for a specific product or brand

26. Product-Line & Product-Mix decisions Product Line: a series of related products offered by a firm Product mix: complete list of all products that a company offers for sale Within each product line company confronts decisions about number of goods or services to offer

27. Dimension Of Product Mix Dimensions: Width: several product lines Length: product line carries several items Depth: products has number of versions To decide dimensions weigh the risks & reward with various approaches Focus on few selected items strategy: economical (low production costs, limited selling expenses, single sales force) Full line strategy: protection against shifts in technology, taste, & economic conditions

28. Product Line Expansion Introduce additional items in same product category under same brand (new flavors, forms, colors, ingredients, package size, products) Overextended brand name causes: lose specific meaning Sales of extension is expense of other items in the line Expansion works best when take sales from competing brands & not when cannibilizes company’s other items

29. Product Positioning Product positioning: Place it occupies in consumer mind relative to competing products Consumers simplify the buying process by organizing products into categories based on perceived position of high-performance vehicles Products position is placed by customers or by marketers Product position is defined & chosen before developing marketing strategy Choose Position in selected markets that will give the product greatest advantage

30. Product Positioning Strategies On specific Product features or attributes (size or ease of use or styles) On service accompany product (convenient delivery or lifetime customer support) On products image (reliability or sophistication) On price (low cost or premium) On category leadership (leading business)

31. Major Positioning Errors Under positioning: fail to position the product Over positioning: promoting too many benefits so no one stand out Confused positioning: mixing benefits that confuse buyer “such as sophisticated image & low cost”

32. Product Strategies For International Markets Consider following factors: Which product to introduce in which country Type of government Market entry requirements Tariffs & other trade barriers Cultural & language differences Consumer preferences Foreign exchange rates Differing business customs Decide whether to standardize or customize product

33. Standardized Product Selling the same product everywhere

34. Customize product To accommodate lifestyles & habits of target markets Degree of customization vary: Change product name Change packaging Offer completely different product in different markets You can switch from standardized to customized strategy by adjusting marketing mix, when customers not all alike

35. Developing Brand & Packaging Strategies

36. Developing Brand & Packaging Strategies Brand: a name, term, sign, symbol, design, or combination of those used to identify the products of a firm & to differentiate them from competing products Brand Names: portion of a brand that can be expressed orally, including letters, words, or numbers Brand Mark: portion of a brand that cannot be expressed verbally

37. Developing Brand & Packaging Strategies (cont.) Well known brand name, generates more sales than unknown name Trademark: brand that has been given legal protection so that its owner has exclusive rights to its use Too widely using brand name, it no longer qualified for production under trademark laws

38. License Sell rights to specific well-known names & symbols & then manufactures use licensed labels to help sell products

39. Winning At The Name Game Elements of good name: Speak directly to target customers Motivate consumers to buy Stick in consumer’s mind Be distinctive to prevent unauthorized use Be distinguishable from competition

40. Winning At The Name Game (cont.) Tips for choosing names: Name selection (frustrating, time consuming, & fraught with legal difficulties) Be sure to Find a flexible name for your company (describes what you do now, in future, & allows to roll-out range of products) Check for potential cultural conflicts Keep it legible (easy to spell, pronounce, & read) Keep it meaningful, friendly, & personalized (creates emotional bond between consumer & company Know the law (might to consult an attorney)) Get professional help

41. Brand categories National brands: brands owned by the manufacturers & distributed nationally Private brands: brands that carry the label of a retailer or a wholesaler rather than a manufacturer Generic products: Products characterized by a plain label, with no advertising and no brand name Generic products cost up to 40% less than brand-name products (because uneven quality, plain packaging, lack of promotion)

42. Brand Equity & Loyalty Brand equity: notion of value of a brand Brand loyalty: commitment to a particular brand Strong brands command premium price in marketplace Building on recognition of existing brand, cuts costs & risks of introducing new products

43. Degrees Of Brand Loyalty Brand awareness: level of brand loyalty at which people are familiar with a product; they recognize it Brand preference: level of brand loyalty at which people habitually buy a product if it is available Brand insistence: level of brand loyalty at which people will accept no substitute for a particular product

44. Approached To Build Brands Create brands for products targeting different customer segments Operate under one brand everywhere in world Put separate brand identities to each business chain

45. Family Branding Using a brand name on a variety of related products

46. Brand Name Stretching Limits of stretch to accommodate new products & still fit perception depends on what brand stands for Overextended brand: Alienate loyal customers Put it in danger of losing identity

47. Co-branding Partnership between two or more companies to closely link their brand names together for a single product Help companies reach new audiences & tap equity of particularly strong brands Help in changing product image

48. Packaging & Labeling Your Products Packaging: Protect product from damage or tampering Make product convenient for customers to purchase Makes products easier to display Facilitates sale of smaller products Provide convenience (e.g. foods: ready to eat out of wrapper) Essential part of some products (e.g. toothpaste) Important role in Marketing strategy Package shape, composition & design: Attract consumers attention Promote product’s benefits Innovative packaging give product powerful marketing boost while poorly designed packaging may drive customers away

49. Labeling Labeling is integral part of packaging & serves to identify a brand Label types: Separate element attached to package Printed part of container Label uses: Gives grading information about product, or about ingredients, operating procedures, shelf life, or risks Labeling of foods, drugs, cosmetics & health products regulated under federal laws which requires disclosure about benefits, dangers & other issues consumers need Communicate with consumers Tool for monitoring performance & inventory of manufacturers & retailers

50. Universal Product Codes (Upcs) A bar code on a product’s package that provides information read by optical scanners

51. Developing Pricing Strategies

52. Developing Pricing Strategies Price: is only element in marketing mix produces revenues, all other elements represent cost determines the amount of income generated from sales of product differentiate product from competitors If too much generate fewer sales If too little sacrifice profits

53. Break-even Analysis Break-even analysis: method of calculating the minimum volume of sales needed at a given price to cover all costs Variable costs: business costs that increase with the number of units produced Fixed Costs: business costs that remain constant regardless of the number of units Break-even point: sales volume at a given price that will cover all of a company costs

54. Break Even Analysis (cont.) Doesn’t dictate price to charge Provides some insight into number of units to sell at a given price to make profit Useful when calculating the effect of special pricing promotion Allows to try different prices & see results by using spreadsheet software

55. Break-even Point Break-even point= fixed costs selling price per unit – variable costs per unit

56. Factors Affecting Pricing Decisions Pricing determined by: Manufacturing Selling costs Competition Needs of distributers (wholesalers & retailers)

57. Pricing Influenced By: Marketing objectives Government regulations Consumer perceptions Consumer demand

58. Price & Marketing objectives Match price to objectives in strategic marketing plan Common objectives increase market share increase sales improve profits project a particular image combat competition Slashed prices boost sales & fend-off lower-priced rival brands Premium pricing with other marketing mix give luxury position

59. Price & Government regulations To protect consumers & encourage fair competition Classes of pricing regulated: Price fixing (agreement among companies supplying the same products as to prices they will charge) Price discrimination (unfairly offering attractive discounts to some customers not to others) Deceptive pricing (pricing schemes consider misleading)

60. Pricing & Consumer perceptions Customers will elicit perception of quality from price Rough price range usually in customers mind Unexpectedly low price triggers fear the item is low quality Unexpectedly high price make buyers question is product worth

61. Pricing & Consumer demand Costs establish floor for price Demand establish ceiling for price Theoretically: if price too high demand fall & Producers reduce prices to stimulate demand if price too low demand increases & producers motivated to raise prices When prices climb & profits improve producers boost output until supply & demand balance

62. Price elasticity Some products insensitive to changes in price & Some products highly responsive Price elasticity: a measure of the sensitivity of demand to changes in price

63. Pricing Methods Cost-based & Priced-based pricing Price skimming Penetration pricing

64. Cost-based Pricing Cost-based pricing (cost plus pricing): Starting with cost of production Then add markup to the cost of product Simple but little sense Ignores demand & competitors prices, & not lead to best price Ensure certain profit but sacrifice profit opportunity

65. Priced-based Pricing Maximize profit by establishing optimal price for product How to optimize the price? Based on analysis of product’s competitive advantage User’s perception of item Market targeted When price established, focus on keeping costs at level allows healthy profit Few businesses fail from over pricing Many businesses fail from underpricing

66. Price Skimming Skimming: charging a high price for a new product during the introductory stage & lowering the price later Price vary depending on stage in product life cycle During introductory phase objective to recover development costs ASAP, so price is high & the drop later when product no longer novelty & competition heats up Makes sense under 2 conditions: Product quality & image support higher price Competitors cannot enter market with competing products & undercut price

67. Penetration Pricing Penetration Pricing: introducing a new product at a low price in hopes of building sales volume quickly Advantages: discouraging competition because the low price Limits profit for everyone Helps expanding entire product category by attracting customers who don’t buy at higher, skim-pricing levels If you compete pioneers in category, this strategy helps in taking customers away from pioneer Makes sense when market highly price sensitive, so low price generates additional sales & company maintain low-price position long to keep out competition

68. Price Adjustment Strategies Price discounts Bundling Dynamic Pricing

69. Price Discounts Discount Pricing: offering a reduction in price Depend on type of customer targeted & type of item offered Discount boost sales but can touch off price wars between competitors Price war encourage customers to focus only on pricing not on value or benefits Price war can hurt entire industry for years To offset loss of revenue stock shelves with more profitable items otherwise if you couldn't compete you close up business

70. Examples Wholesaler or retailer Discount: to encourage orders Customer cash discount: to reward customers who pay cash or pay promptly Quantity discount: to Large volumes buyer Seasonal discount: to who buy out of season Value pricing: charging affordable price for high quality offering (for certain times or certain customer segment)

71. Bundling Definition: Combining several products & offering the bundle at a reduced price Promote sales of products consumers might not otherwise buy Make products harder for consumers to make price comparison

72. Dynamic Pricing Definition: Charging different prices depending on individual customers & situations By using internet technology Enables to move slow-selling merchandise instantly Allows to experiment with different pricing levels Tactics: Auction pricing (buyers bid against each other & the highest bid buy) Group buying (buyers obtain volume discount by joining buying groups) Name-your-price (buyers specify how much to pay & sellers choose whether to sell)