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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
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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
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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
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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.