Download Product Development Process

WEEK 8 - 9:
PRODUCT AND PRICING
STRATEGIES
BUSN 102 – Özge Can
The Marketing Mix:
13-2
The Product Continuum
14-3
Augmenting the Basic Product
14-4
Types
of
Products
14-5
Consumer Products
14-6

Convenience
Products
 Everyday
goods and
services that people
buy frequently,
usually without
much conscious
planning

Shopping
Products
 Fairly
important
goods and services
that people buy less
frequently with more
planning and
comparison
Consumer Products
14-7

Specialty Products
 Particular
brands that
the buyer especially
wants and will seek
out, regardless of
location or price

Unsought Products
 Consumer
aren’t
looking for the
product in question
Industrial & Commercial Products
14-8

Expense Items
 Inexpensive
products that organizations generally
use within a year of purchase

Capital Items
 More
expensive organizational products with a
longer useful life, ranging from office and plant
equipment to entire factories
Industrial and Commercial Products
14-9
Raw
materials
Installations
Components
Supplies
Equipment
Business
services
The Product Life Cycle
14-10

Product Life Cycle
 Four
stages through which a product progresses:
introduction, growth, maturity, and decline
The Product Life Cycle
14-11
12
Product Development Process
14-13

Product Development Process
A
formal process of generating, selecting,
developing, and commercializing product ideas
 Idea
generation
 Idea screening
 Business analysis
 Prototype development
 Test marketing
 Commercialization
Product Development Process
14-14
Product Development Process

Idea Generation
 Producing new
product ideas that
will satisfy unmet
needs
14-15
Product Development Process

Idea Screening
 Selecting a few ideas
that appear to be
worthy of further
development
 Feasibility studies
14-16
Product Development Process

Business Analysis

Reviewing the sales,
costs and profit
projections to determine
whether they meet the
company’s objectives
14-17
Product Development Process
14-18

Prototypes
 Pre-production
samples
of products used for
testing and evaluation
Product Development Process
14-19

Test Marketing
 The
stage of product
development in
which a product is
sold on a limited
basis to gauge its
market appeal
Product Development Process
14-20

Commercialization
(Product Launch)
 Large-scale
production
and distribution of a
product
Product Identities
14-21

Brand
A
name, term, sign, symbol, design, or
combination of those used to identify the products
of a firm and to differentiate them from competing
products
Product Identities
14-22

Brand Equity
 The
value that a
company has built up
in a brand

Brand Loyalty
 The
degree to which
customers continue to
purchase a specific
brand
Level 1: brand awareness
 Level 2: brand preference
 Level 3: brand insistence

Brand Name Selection
14-23

Brand Names
 The
portion of
brands that can be
expressed orally,
including letters,
words, or numbers

Brand Marks
 The
portion of
brands that cannot
be expressed
verbally
Brand Name Selection
14-24

Logo
A
graphical and/or
textual
representation of a
brand

Trademarks
 Brands
that have
been given legal
protection so that
their owners have
exclusive rights to
their use
Brand Ownership
14-26

National Brands
 Brands
owned by
manufacturers and
distributed nationally
 Coca-Cola, Pepsi
 Ariel

Private Brands
 Brands
that carry
the label of a retailer
or a wholesaler
rather than a
manufacturer
 Tansaş Cola
 Migros deterjan
Brand Ownership
14-27

Co-branding:
A
partnership between two or more companies to
closely link their brand names together for a
single product

License:
 An
agreement to produce and market another
company’s product in exchange for a royalty or
fee
Co-Branding Examples:
28
Packaging:
14-29


xxx
Lice
Labeling:
Product-Line and Product-Mix Strategies
14-30
Product-Line and Product-Mix Strategies
14-31

Brand Managers
 Managers
who develop and implement the
marketing strategies and programs for specific
products or brands
Product-Line and Product-Mix Strategies
14-32

Product Line
A
series of related products (in terms of their use
or characteristics) offered by a firm

Product Mix
 The
complete portfolio of products that a
company offers for sale

Example: http://www.generalmills.com/
Product mix:
33
Product mix:
34
Product mix vs. Product line
35
Product-Line and Product-Mix Strategies
14-36

A product mix is:
 Wide
if it has several different product lines
 Long if it carries several items in its product lines
 Deep if it has a number of versions of each
product in a product line
37
Product Expansion Strategies
14-38

Family Branding
 Using
a brand name on a variety of related
products

Brand Extension
 Applying
a successful brand name to a new
product category
 New products should not cannibalize the existing
ones under the same brand name
Product Strategies for International
Markets:
14-39

Which products and services to introduce in which
countries?
 Type
of government, market entry requirements, tariffs
and other trade barriers, cultural and language
differences, consumer preferences, foreign exchange
rates, business customs

Whether to standardize the product or customize it
for local markets?
Strategic Considerations in Pricing:
14-40
Marketing objectives
Government regulations
Customer perceptions
Market demand
Competition
Strategic Considerations in Pricing:
14-41

Marketing Objectives:
 Is
your goal to increase market share, increase sales,
improve profits, project a particular image or fight
competition?

Government Regulations:
 Three
areas of prohibited behavior:
 Price fixing, Price discrimination, Deceptive pricing
Strategic Considerations in Pricing:
14-42

Customer Perception:
 Avoiding
 “9

too low or too high prices
effect”
Market Demand:
 Demand
and supply – at market equilibrium, prices
stabilize.
 Price elasticity: How sensitive demand will be to a
change in price
Cost Structure
14-43

Fixed Costs
costs that
remain constant
regardless of the
number of units
produced

Variable Costs
 Business
 Business
 Ex:
 Ex:
rent, mortgage
payments, insurance
premiums,real estate
taxes, salaries
costs that
increase with the
number of units
produced
raw materials,
supplies, shipping,
sales commissions
Break-Even Analysis
14-44

Break-Even Analysis
A
method of calculating the minimum volume of
sales needed at a given price to cover all costs

Break-Even Point:
 Minimum
sales volume at a given price that will
cover all of a company’s costs
Break-Even Analysis: Example (1)
14-45
Break-Even Analysis: Example (2)
14-46
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Pricing Methods
14-47

Cost-Based Pricing (Cost-plus pricing)
A
method of setting prices based on production
and marketing costs, rather than conditions in the
marketplace
 Cost of production + Markup = Price

Value-Based Pricing
A
method of setting prices based on customer
perceptions of value
 Starts with a target price
Pricing Methods
14-48

Optimal Pricing
A
computer-based pricing method that creates a
demand curve for every product to help managers
select a price that meets specific marketing
objectives
 Profit, revenue or market share calculations
 “What-if” scenario analyses
Pricing Methods
14-49

Skim Pricing
 Charging
a high price for a new product during
the introductory stage and lowering the price late
 Take advantage of the strong demand from early
adopters

Penetration Pricing
 Introducing
a new product at a low price in hopes
of building sales volume quickly
 Important: whether the customers are pricesensitive
Pricing Methods
14-50

Loss-Leader Pricing
 Selling
one product at a loss as a way to entice
customers to consider other products

Auction Pricing
 The
seller doesn’t set a firm price but allows
buyers to competitively bid on the products being
sold
 Example: eBay, fine art, government bonds
Pricing Methods
14-51

Participative Pricing
 Allowing
customers to pay the amount they think
a product is worth
 “Pay what you want”: Radiohead

Free Pricing
A
pricing strategy of offering some products for
free while charging for others, or offering a
product for free to some customers while
charging others for it
Price Adjustment Tactics:
52

Discounts – temporary price reductions to
stimulate sales or to encourage certain behaviors
such as paying with cash

Bundling – Offering several products for a single
price that is presumably lower than the total of the
products’ individual prices

Dynamic pricing – Continually adjusting prices to
reflect changes in supply and demand
 Airlines
and hotels (yield management)
Assignment #1 (Due next week):
53




Building Your Team Skills (Chapter 14, p.327)
Select a high-profile product with which you
and your teammates are familiar. Do some
online research to learn more about that brand.
Then answer these questions and prepare a 1-2
page written paper summarizing your findings.
Group Assignment (3-5 persons)
Use the assignment format I uploaded to the
website.
Assignment #1:
54
1. Is the product a consumer product, industrial product, or
both?
2. At what stage in its life cycle is this product?
3. How appealing its packaging and labeling are to the
consumers? How is this product promoted by the company?
4. Is the product mix to which this product belongs: a) wide?
b) long? c) deep?
5. Is the product sold in international markets? If so, does the
company use a standardized or a customized strategy?
6. How is the product priced in relation to competing products?
Next Topic (Week 10):
55

Distribution and Logistics (Chapter 15)