Developing and Pricing Products Leonardo Matarrese

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?


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


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


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


Developing New Products

The New Product Development Process Product Mortality Rates

Strategy of introducing new products to respond quickly to customer or market changes


Product Ideas

Screening

Concept Testing

Business Analysis

Prototype Development

Testing & Test Marketing

The Seven-StepDevelopment Process

Commercialization


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


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


Life Cycle Stages

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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


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


Packaging Products

Packaging Physical container in which a product is sold, advertised, or protected


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


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


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

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Breakeven Analysis

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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


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



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


International Pricing

Why is pricing products for sale in other countries so complicated?


Developing and Pricing Products Leonardo Matarrese

Business

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