Transcript
Product DesignProduct Design
Pricing and StrategiesPricing and Strategies
2
Chapter Objectives
Differentiate between a product item and product line.
Classify products as consumer goods or business goods.
Explain the seven steps in developing a new product.
Identify the stages in a product’s life cycle.
Define price and the role it plays in determining profit.
Describe the factors that affect pricing decisions.
Identify pricing strategies.
3
Product Defined
A specific model of athletic shoe would be called a product itemproduct item.
product item specific model or size of a product
4
The entire group of a manufacturer’s athletic shoes would be called a product line.
Product Defined
Products can be classified as consumer goodsconsumer goods or business goodsbusiness goods.
consumer goods goods purchased and used by the ultimate consumer for personal use
5
business goods goods purchased by organizations for use in their operations
Products need to have a point of differencepoint of difference.
point of difference a unique product characteristic or benefit that sets it apart from a competitor
Steps in New Product Development
The seven steps in new product development are:
focus group a panel of six to ten consumers who discuss opinions about a topic under the guidance of a moderator
6
1. SWOT analysis (strengths, weaknesses, opportunities, and threats)
2. Idea generation
3. Screening and evaluation– Focus groupFocus group
continued
Steps in New Product Development
commercialization process that involves producing and marketing a new product
7
4. Business analysis
5. Development
continued
6. Test marketing
7. CommercializationCommercialization
Product Life Cycle
The four stages in the product life cycle are:
8
Introduction
Growth Maturity
DeclineProduct Life Cycle
Not all products fit the life-cycle pattern.
Product Life Cycle--Introduction
Focus on promoting consumer awareness
Millions of dollars spent on educating through consumer through advertising and promotion
Skimming pricing: cover research and development
Penetration pricing: Most preferred method. Price lower than competition.
Distribution in marketplace important.
Convince retailers to carry product
Product Life Cycle—Growth
More competitors may enter market if product is successful (Gatorade then Powerade)
New features may be added to product (more flavors)
Add distribution outlets – From convenience and supermarket stores– To vending machines, fountain service, snack bars
Product Life Cycle—Maturity
When sales begin to slow down
Repeat customers may stop buying
Changes may be made to product to keep alive
New target market may be identified
Product Life Cycle—Decline
Sales/profits drop
Technological advances can cause an entire category of products to decline
Replaced by newer and improved models
Company may stop production
May keep to satisfy loyal customers, limit production
Product Life Cycle Considerations
Fads have a very short life cycle. – Koosh balls– Boom boxes
New sports drink may not stay in introduction stage
Management of the Product Life Cycle
The three ways to manage the product life cycle are:
repositioning changing a product’s image in relation to a competitor’s image
14
Modifying the product.
Marketing the product.
RepositioningRepositioning the product.
Explain the seven steps involved in developing a new product.
Name the four stages in the product life cycle.
What three things can be done to manage a product through its life cycle?
1.
2.
3.
15
Pricing
PricePrice is important in a business because it helps determine a company’s profit or loss.
16
price the value placed on goods or services being exchanged
Price plays a significant role in the marketing mix.
Determining Profit
17
1,000baseballbats sold
$175 each
$175,000revenue= -
$90,000 topurchasethe bats
$90 each
-$60,000
in businessexpenses
=$25,000Profit
Subtract the cost of goods sold and the company’s expenses from the money it generated in sales revenue.
Pricing & Marketing Mix
The product must be priced correctly to fit the target market’s pocketbook.
• Rollerblade inline skate company carries a wide range of inline skates.
• Lower priced skates are sold at WalMart & Target for value oriented customers.
• Higher priced, more advanced skates are sold in specialty shops to cater to serious skaters.
What affects price decisions?
Consumer perception
Demand
Cost
Product life cycle stage
Competition
Consumer Perception
What is the relationship of price and quality in a consumer’s mind?
• Many consumers believe that the higher the price, the better the quality.
• Markets will price goods/services to attract customers who have that perception.
• Image of a product is closely related to the price.• A very good quality product may sell better at a
higher price.
Pricing Considerations and Strategies
Three types of pricing strategies are:
21
prestige pricing pricing based on consumer perception
Prestige pricingPrestige pricing
Odd-even pricingOdd-even pricing
Target pricingTarget pricing
odd-even pricing pricing goods with either an odd number or even number to match a product’s image
target pricing pricing goods according to what the customer is willing to pay
Pricing Considerations and Strategies
Other pricing considerations include:
22
markup difference between the retail or wholesale price and the cost of an itemDemand
Cost– MarkupMarkup– Cost-plus pricingCost-plus pricing
Newness of the product
cost-plus pricing pricing products by calculating all costs and expenses and adding desired profit
non-price competition competition between businesses based on quality, service, and relationships
Competition– Non-price competitionNon-price competition
Pricing Objectives and Strategies
Pricing objectives and strategies include:
23
market share the percentage of the total sales of all companies that sell the same type of product
Profit objective
Market shareMarket share objective
Special pricing– Price liningPrice lining
– Bundle pricingBundle pricing
– Loss-leader pricingLoss-leader pricing
– Yield-management pricingYield-management pricing
price lining selling all goods in a product line at specific price points
bundle pricing selling several items as a package for a set price
loss-leader pricing pricing an item at cost or below cost to draw customers into the store
yield-management pricing pricing items at different prices to maximize revenue when limited capacity is involved– Tiered pricing
Price Adjustments and Regulations
Manufacturers will offer discounts in the following situations:
24
Buying in large quantities
Buying prior to the buying season
Allowances are reductions taken from the quoted price. One type of allowance is a trade-in.
Price Adjustments and Regulations
The Sherman Anti-Trust Act prohibits price fixingprice fixing and predatory pricing.
25
price fixing an illegal practice whereby competitors conspire to set the same price
Price discrimination was originally prohibited by the Clayton Act and later by the Robinson-Patman Act.
How is pricing related to profit and the marketing mix?
List five factors that affect price decisions.
What are two common pricing objectives and special pricing strategies?
1.
2.
3.
26
Explain the difference between product item and product line.
27
Name the ways products can be defined and classified.
A product item is a specific model or size of a product; a product line is a group of closely related products that are sold by a company.
1. Products can be classified as consumer goods or business goods. Products are goods, services, or ideas that satisfy consumer needs; products can be tangible (goods) or intangible (services).
2.
Explain the seven steps used in developing a new product.
SWOT analysis, idea generation, screening and evaluation, business analysis, development, test marketing, and commercialization are the seven steps.
3.
Checking Concepts
continued
1.
2.
3.
Identify the four stages in a product’s life cycle.
28
Define price.
Explain how price determines a company’s profit.
The stages are introduction, growth, maturity, and decline.
4. Price is defined as the value placed on goods or services being exchanged.
5. Every item sold carries a price. The number of items sold times the price equals sales revenue. The amount of profit equals costs subtracted from price.
6.
Identify the factors that may influence pricing strategies.
Pricing strategies are influenced by consumer perception, demand, cost, product life cycle stage, and competition.
7.
Checking Concepts
continued
4.
5.
6.
7.
Markup is the difference between the retail or wholesale price and the cost of an item. Cost-plus pricing involves calculating all costs and expenses and adding desired profit to arrive at a price. In a sense, markup is the profit component in cost-plus pricing.
8.
8. Define and compare markup and cost-plus pricing.
29
Critical Thinking
Checking Concepts
8.
30
End ofEnd of
top related