developing and pricing products leonardo matarrese
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Developing and Pricing Products - Leonardo MatarreseTRANSCRIPT
CHAPTER 12
Developing and Pricing Products
Leonardo Matarrese @MyPlick
Outline
What Is a Product?
Developing New Products
Identifying Products
Determining Prices
Pricing Strategies and TacticsLeonardo Matarrese @MyPlick
What Is a Product? Ideas, Goods, or Services Customers buy products because they like
what the products can do for them, either physically or emotionally--Utility
A product must include the right features and offer the right benefits to succeed
Feature Tangible quality that a company builds into a product
What are some feature the company’s build in?
Leonardo Matarrese @MyPlick
Classifying Goods & Services
Convenience Good/Service
Inexpensive product purchased and consumed rapidly and regularly
Shopping Good/Service Moderately expensive, infrequently purchased product
Specialty Good/Service Expensive, rarely purchased product
CONSUMER PRODUCTS
Leonardo Matarrese @MyPlick
Classifying Goods & Services
Expense Item Industrial product purchased and consumed rapidly and regularly for daily operations
Capital Item Expensive, long-lasting, infrequently purchased industrial product such as a building
INDUSTRIAL PRODUCTS
Leonardo Matarrese @MyPlick
The Product Mix
Product Mix
Group of products that a firm makes available for sale
Product Line
Group of similar products intended for a similar group of buyers who will use them in similar ways
Leonardo Matarrese @MyPlick
Developing New Products
The New Product Development Process Product Mortality Rates
Strategy of introducing new products to respond quickly to customer or market changes
Leonardo Matarrese @MyPlick
Product Ideas
Screening
Concept Testing
Business Analysis
Prototype Development
Testing & Test Marketing
The Seven-StepDevelopment Process
Commercialization
Leonardo Matarrese @MyPlick
Variations for ServicesService Ideas
Defining the Service Package—identification of the tangible and intangible features that characterize the service
Service Process Design
Services require a three-part service process design instead of prototype development
The Seven-StepDevelopment Process
Leonardo Matarrese @MyPlick
The Product Life Cycle (PLC)
Series of stages in a product’s profit-producing life
Introduction
Growth
Maturity
Decline
Introduction
Growth
Maturity
DeclineLeonardo Matarrese @MyPlick
Life Cycle Stages
# - # - 1111
Leonardo Matarrese @MyPlick
Life Cycle Stages
# - # - 1212
Leonardo Matarrese @MyPlick
Adjusting Marketing Strategy During the Life Cycle
Extending Product Life: An Alternative to New Products
Foreign Markets Offer Three Approaches to Longer Life Cycles
Product ExtensionProduct ExtensionExisting product is marketed globally, instead of just Existing product is marketed globally, instead of just domesticallydomestically
Product AdaptationProduct Adaptation Product modified to have greater appeal in foreign marketsProduct modified to have greater appeal in foreign markets
Reintroduction Reintroduction Process of reviving for new markets products that are obsolete Process of reviving for new markets products that are obsolete in older onesin older ones
Leonardo Matarrese @MyPlick
Identifying ProductsBranding: process of using symbols to communicate the Branding: process of using symbols to communicate the qualities of a product made by a particular producerqualities of a product made by a particular producer
Types of Brand NamesTypes of Brand Names
National Brand: brand-name product produced by, widely National Brand: brand-name product produced by, widely distributed by, and carrying the name of a manufacturerdistributed by, and carrying the name of a manufacturer
Licensed Brand: brand-name product for whose name the Licensed Brand: brand-name product for whose name the seller has purchased the right from an organization or seller has purchased the right from an organization or individualindividual
Private Brand (or Private LabelPrivate Brand (or Private Label):): brand-name product that a brand-name product that a wholesaler or retailer has commissioned from a manufacturerwholesaler or retailer has commissioned from a manufacturer
Leonardo Matarrese @MyPlick
Packaging Products
Packaging Physical container in which a product is sold, advertised, or protected
Leonardo Matarrese @MyPlick
Packaging ProductsLabeling Can help market the product
• Nonaerosol• Bio-Degradable• Recyclable• Ozone Friendly• Fat Free• Salt Free• Sugar Free• 30% More Free!
• Nonaerosol• Bio-Degradable• Recyclable• Ozone Friendly• Fat Free• Salt Free• Sugar Free• 30% More Free!
Contents Under PressureDo Not Puncture
Contents Under PressureDo Not Puncture
Address issues of consumer safety
FlammableDo Not Use Near Open Flame
FlammableDo Not Use Near Open Flame
Child Proof CapChild Proof CapLeonardo Matarrese @MyPlick
Labeling LawsFood, Drug and Cosmetic Act of 1938
Empowers the Food and Drug Administration to check the accuracy of product ingredients as reported on labels
Fair Packaging and Labeling Act of 1966
Requires labels to include the product name, the name and address of the manufacturer or distributor, and the net quantity of product contained in the package
Child Safety Protection Act 1995
Requires labels to identify toys that are choking hazards
Not For Children Under Three Years OldNot For Children Under Three Years Old
Leonardo Matarrese @MyPlick
Determining Prices Pricing
Process of determining what a company will receive in exchange for its products
Pricing Objectives
Goals that producers hope to attain in pricing products for sale
Market Share
As a percentage, total of market sales for a specific company or productLeonardo Matarrese @MyPlick
Price-Setting Tools Cost-Oriented PricingCost-Oriented Pricing
Markup: Amount added to an item’s cost to sell it at Markup: Amount added to an item’s cost to sell it at a profita profit
Breakeven Analysis: Cost-Volume-Profit RelationshipsBreakeven Analysis: Cost-Volume-Profit Relationships
Variable Cost:Variable Cost: Cost that changes with the quantity of a product produced or sold
Fixed Cost:Fixed Cost: Cost unaffected by the quantity of a product produced
Breakeven Analysis:Breakeven Analysis: Assessment of the quantity of a product that must be sold before the seller makes a profit Leonardo Matarrese @MyPlick
MarkupMarkup is usually stated as a percentage of selling price.
Price Sales
MarkupPercentage Markup
# - # - 2020
%7.4615$
7$Percentage Markup
Leonardo Matarrese @MyPlick
Breakeven PointQuantity of a product that must be sold before the seller covers variable and fixed costs and makes a profit
cost VariablePrice
costs fixed Totalunits)(in point Breakeven
CDs 14,286$8$15
$100,000
# - # - 2121
Leonardo Matarrese @MyPlick
Breakeven Analysis
# - # - 2222
Leonardo Matarrese @MyPlick
Pricing Strategies & TacticsPricing Strategies & Tactics
Pricing above prevailing market prices for Pricing above prevailing market prices for similar productssimilar products
Pricing below market pricesPricing below market prices
Pricing at or near market prices (market pricing)Pricing at or near market prices (market pricing)
Existing ProductsExisting Products
Price LeaderPrice LeaderDominant firm that establishes product prices that other Dominant firm that establishes product prices that other companies followcompanies follow
Price FixingPrice FixingOccurs when producersOccurs when producers illegally agree on prices among illegally agree on prices among themselvesthemselves Leonardo Matarrese @MyPlick
Pricing Strategies & TacticsPricing Strategies & Tactics
Price Skimming Price Skimming Setting an initial high price to cover new product costs Setting an initial high price to cover new product costs and generate a profitand generate a profit
Dynamic Pricing for E-businessDynamic Pricing for E-businessSellers can alter prices privately, on a one‑to‑one, Sellers can alter prices privately, on a one‑to‑one, customer-to customer basis customer-to customer basis
Penetration Pricing Penetration Pricing Setting an initial low price to establish a new product in Setting an initial low price to establish a new product in the marketthe market
Price LiningPrice LiningOffering all items in certain categories at a limited number Offering all items in certain categories at a limited number of prices of prices
New ProductsNew Products
Leonardo Matarrese @MyPlick
Pricing Strategies & TacticsPricing Strategies & Tactics
Psychological Pricing Psychological Pricing Pricing tactic that takes advantage of the fact that Pricing tactic that takes advantage of the fact that consumers do not always respond rationally to stated consumers do not always respond rationally to stated pricesprices
Odd-even Pricing Odd-even Pricing Psychological pricing tactic based on the premise that Psychological pricing tactic based on the premise that customers prefer prices not stated in even dollar amountscustomers prefer prices not stated in even dollar amounts
Discount Discount Price reduction offered as an incentive to purchasePrice reduction offered as an incentive to purchase
New ProductsNew Products
Leonardo Matarrese @MyPlick
International Pricing
Why is pricing products for sale in other countries so complicated?
Leonardo Matarrese @MyPlick