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MT 219 Marketing Unit Five New Products and Pricing Note: This seminar will be recorded by the instructor. Agenda Unit 4 Review Unit 5 New Product Development Process • • • • • • • • Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback Marketing Strategy Development- initial marketing strategy for the new product Business Analysis – what is the potential for sales, costs, and profits? Product Development – lengthy and expensive Test Marketing – realistic settings Commercialization – when, where, and how New Product Development Process • Idea Generation – ideas come from many sources • Gatorade: New Product Development Process • Idea Generation – ideas come from many sources • Idea Screening – need to avoid “go” or “no go” error New Product Development Process • Idea Generation – ideas come from many sources • Idea Screening – need to avoid “go” or “no go” error • Concept testing – iterative process of consumer feedback New Product Development Process • Idea Generation – ideas come from many sources • Idea Screening – need to avoid “go” or “no go” error • Concept testing – iterative process of consumer feedback • Marketing Strategy Development- initial marketing strategy for the new product New Product Development Process • Idea Generation – ideas come from many sources • Idea Screening – need to avoid “go” or “no go” error • Concept testing – iterative process of consumer feedback • Marketing Strategy Development- initial marketing strategy for the new product • Business Analysis – what is the potential for sales, costs, and profits? New Product Development Process • • • • Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback Marketing Strategy Development- initial marketing strategy for the new product • Business Analysis – what is the potential for sales, costs, and profits? • Product Development – lengthy and expensive New Product Development Process • • • • Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback Marketing Strategy Development- initial marketing strategy for the new product • Business Analysis – what is the potential for sales, costs, and profits? • Product Development – lengthy and expensive • Test Marketing – realistic settings New Product Development Process • • • • • • • • Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback Marketing Strategy Development- initial marketing strategy for the new product Business Analysis – what is the potential for sales, costs, and profits? Product Development – lengthy and expensive Test Marketing – realistic settings Commercialization – when, where, and how Product Life Cycle • • • • • PLC Overview Introduction Stage Growth Stage Maturity Stage Decline Stage What is Price? • Value exchanged for products • Only source of revenue Price vs. Non-Price Competition • In price competition, competitors seek to match or beat the price of competitors • The major advantage is flexibility in a parity product market • In non-price competition, factors other than price are emphasized • This is especially useful when a marketer has a unique product, and helps avoid price wars Major Pricing Strategies • Customer value-based pricing • Cost-based pricing • Competition-based pricing Customer Value-Based Pricing • Assesses prices based on customer perceptions of value • Good-value pricing- The correct amount of quality and service at a fair price • Value-added pricing- Differentiates the product by attaching value-added features and services and charges higher prices for them Cost-Based Pricing • Assesses price based on costs • Cost-plus pricing- adds a markup to the cost of the product • Breakeven pricing- sets prices to ensure that costs are covered and there is a certain rate of return Breakeven Pricing (chart from Kotler) Competition-Based Pricing • Sets prices based upon what the competition’s strategies, market offerings, costs and prices are. • Consumers will look at value in the product compare it to the competition and make a purchase decision based on what they see. Other Considerations Impacting Pricing • • • • • • • Can be internal or external to the firm Marketing strategies and objectives Organizational considerations such as internal costs The economy Government requirements Social considerations Demand and the marketplace Price Elasticity • Measures the sensitivity of demand to price changes • If acceptable substitutes are available, markets tend to be elastic • If not, they tend to be inelastic New Product Pricing • Skimming – set initial price high. Useful for unique products when competition cannot follow quickly. • Where does the term come from? • Examples? • Penetration – set initial price low to capture as much of the market as possible before competition enters. • Examples? Product Mix Pricing • Attempts to maximize profits across the total product mix of the product line. • Product line pricing- Sets prices across an entire product line • Optional-product pricing- provides optional accessories available with the primary product Product Mix Pricing- continued • Captive-product pricing- Prices products that must be bought with the main product • By-product pricing- Pricing low-value by products to clear inventory • Product-bundle pricing- Pricing products that are sold in bundles Price Adjustments • Adjusts prices based on situational, product and customer differences • Discount and allowance pricing- price reductions are provided based on customer behavior such as frequent purchases and paying early • Psychological pricing- prices that impact the customer psychologically such as pricing products at $1.99 or reference pricing Any Questions? Thank you for attending! See you next week! Instructor will post the link to the recording of tonight’s seminar in the course Announcements.