Download Price - Dicle Yurdakul

What is a Product?
 The starting point of the
“4 Ps”
 Includes:
 Physical unit
 Package
 Warranty
 Service
 Brand
 Image
 Value
 Products can be…
 Tangible goods
 Ideas
 Services
New Product
New Product
A product new to the world,
the market, the producer,
the seller, or some
combination of these.
New-Product
Development Process
New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
Idea Screening
The first filter in the product
development process, which eliminates ideas that are
inconsistent with the organization’s new-product strategy
or are inappropriate for some other reason.
Concept Test
A test to evaluate a
new-product idea, usually before any prototype has been
created. (Typically, researchers get consumer reactions to
descriptions and visual representations of a proposed product)
Business Analysis
Demand
Considerations
in
Business
Analysis Stage
Cost
Sales
Profitability
5
Development
 Creation of prototype
 Marketing strategy
 Packaging, branding,
labeling
 Promotion, price, and
distribution strategy
 Manufacturing feasibility
 Final government approvals
if needed
Test Marketing
The limited introduction of a product and
a marketing program to determine the
reactions of potential customers in a
market situation.
Commercialization
Production
Inventory Buildup
Distribution Shipments
Sales Training
Trade Announcements
Customer Advertising
Product Life Cycle
Product
Life Cycle
A concept that provides a
way to trace the stages of a
product’s acceptance, from
its introduction (birth) to its
decline (death).
Product Life Cycle
Growth
Stage
Maturity
Stage
Dollars
Introductory
Stage
Decline
Stage
Sales
Profits
0
Time
Product Life Cycles
INTRODUCTION
Sales
Product
Strategy
Limited models
Frequent
changes
GROWTH
More models
Frequent
changes.
Distribution
Strategy
Limited
Expanded
Wholesale/
dealers. Longretail distributors term relations
Promotion
Strategy
Awareness.
Aggressive ads.
Stimulate
Stimulate
demand.Sampling
demand
Pricing
Strategy
High to recoup
development
costs
Fall as result of
competition &
efficient production.
Time
MATURITY
DECLINE
Large number
Eliminate
of models.
unprofitable
models
Extensive.
Margins drop.
Shelf space
Advertise.
Promote
heavily
Prices fall
(usually).
Phase out
unprofitable
outlets
Phase out
promotion
Prices
stabilize at
low level.
Marketing Mix: The “Four Ps”
Price
Price is the amount of money charged for
a product or service.
It is the sum of all the values that
consumers give up in order to gain the
benefits of having or using a product or
service.
Pricing
Internal Factors
External Factors
• Positioning
• 4P
• Cost
• Competition
• Consumer
Perception
• Economic
situation
• Government
Chapter 1
Copyright ©2009, Cengage Learning. All rights reserved
13
Major Pricing Strategies
Customer Value-Based Pricing
Chapter 1
Copyright ©2009, Cengage Learning. All rights reserved
14
Chapter 1
Copyright ©2009, Cengage Learning. All rights reserved
15
Major Pricing Strategies
Customer Value-Based Pricing
Chapter 1
Copyright ©2009, Cengage Learning. All rights reserved
16
Major Pricing Strategies
Customer Value-Based Pricing
Understanding how
much value
consumers place on
the benefits they
receive from the
product and setting a
price that captures
that value
Chapter 1
Copyright ©2009, Cengage Learning. All rights reserved
17
Choose a Price Strategy
Price
Skimming
A firm charges a high
introductory price, often coupled
with heavy promotion.
Penetration
Pricing
A firm charges a relatively low
price for a product initially as
a way to reach the mass market.
Status Quo
Pricing
Charging a price identical to or
very close to the competition’s
price.
Price Skimming
Inelastic Demand
Situations
When
Price
Skimming
Is
Successful
Unique Advantages/Superior
Legal Protection of Product
Technological Breakthrough
Blocked Entry to Competitors
Penetration Pricing
Advantages



Discourages or blocks
competition from
market entry
Boosts sales and
provides large profit
increases
Can justify production
expansion
Disadvantages

Requires gear up for
mass production

Selling large volumes
at low prices

Strategy to gain market
share may fail
Status Quo Pricing
Advantages

Simplicity

Safest route to longterm survival for small
firms
Disadvantages

Strategy may ignore
demand and/or cost
Consumer Psychology
and Pricing
• Reference prices
• Price-quality inferences
• Price cues
Price Cues
•
•
•
•
•
“Left to right” pricing ($299 vs. $300)
Odd number discount perceptions
Even number value perceptions
Ending prices with 0 or 5
“Sale” written next to price
p.423
Possible Consumer Reference Prices
•
•
•
•
“Fair price”
Typical price
Last price paid
Upper-bound price
• Lower-bound price
• Competitor prices
• Usual discounted price
Brand Leader Responses to
Competitive Price Cuts
•
•
•
•
•
Maintain price
Maintain price and add value
Reduce price
Increase price and improve quality
Launch a low-price fighter line