2. developing and pricing products

7/24/2019 2. Developing and Pricing Products

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Developing andPricing Products



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What Is a Product?

Features are the qualities, tangible andintangible, that a company builds into its

products

Benefits are what the consumer derivesfrom the product: the want-satisfying value

Value package is a product marketed as a

bundle of value-adding attributes

Features?

Benefits?



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Types of ConsumerProducts

Convenience Goods: Commonly available,

generally affordable, often prone to rapid

consumption and re-buy, in which casethese are referred to as ast !oving

Consumer Goods "!CG#s$



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%hopping Goods: & category of consumer

goods that are purchased after the buyer

has spent some time and effort comparingthe price, quality, style and other attributes

of the product in several stores 'ypes of

Consumer (roducts



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%pecialty Goods: & category of consumer

goods for which the consumers have a

strong brand preference and are willing tospend substantial time, effort and money for

acquiring the desired brand



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)nsought (roducts: & category of products

about which the consumers are generally

not aware, or if they are aware, they wouldrather not buy them unless otherwise

compelled


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Types of Business Products

*aw !aterial: +usiness goods that become

part of another tangible product before

being processed amples include natural resources,

minerals, agriculture, dairy and poultry

products etc.



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abricating !aterials / (arts: +usiness

goods that become part of another tangible

product after being processed amples include sugar, flour, semi-

conductor micro chips in computers, and

0ippers / buttons in clothing etc.



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nstallations: !anufactured products that

form an organi0ation#s maor, epensive

and long-lived assets amples include machinery "heavy

generators, blast furnaces, machinery used

in production$ and buildings



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&ccessory quipment: Goods that neither

become a part of finished goods nor are

directly involved in the manufacturingprocess, yet are essential in carrying out

various processes of a firm

amples include workstations, fork lifts,

office furniture etc.



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3perating %upplies: Goods characteri0ed

by low price and short life span, contributing

to an organi0ation#s operations amples include stationery, fuel, telephone

sets etc.



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The Product Mix

Product mix is a group of products that afirm makes available for sale "e.g. 4estle$

Product line is a group of similar products

intended for a similar group of buyers whowill use them in similar ways

http://www.nestle.com/

http://www.nestle.com/



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nderstanding Product MixProcter &Gamble

Body Wash& Soap

Antiperspirants

&Deodorants

Hair Care

Ivory Olay Old Spice

Safe!ard

Camay "o#$ema

%est

Secret Pantene

Head &Sho!lders

Herbal ssences

Inf!si!m



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The !e"en#!tep Product$e"elopment Process

1. Product Ideas

2. Screening

3. Concept Testing 4. Business Analysis

5. Prototype Developent

!. Product Testing and Test "ar#eting

$. Coerciali%ation



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The Product %ife Cycle

&ccording to the (6C a product passesthrough many stages in it#s life

t is important for managers to understandand formulate appropriate strategies foreach stage

'he concept of product life applies to a

generic category of products "not to brands$



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The P%C !tages

ntroduction

Growth

!aturity

7ecline



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Introduction

Customers: ew Competition: 6ittle or none

%ales: 6ow, but rising (rofits: 4one Cost per unit: 8igh (ricing: 8igh 7istribution : %cattered %trategy: (roduct &wareness



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&ro'th

Customers: !ass !arket Competition: ncreasing

%ales: *apid Growth (rofits: (eaking Cost per unit: 7eclining (ricing: 6ower 7istribution : ntensive %trategy: 7ifferentiation



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Maturity

Customers: !ass !arket Competition: ntense

%ales: %low Growth (rofits: 7eclining Cost per unit: %table (ricing: 6owest

7istribution : ntensive %trategy: *etention



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$ecline

Customers: 6oyalists Competition: 7ecreasing

%ales: 7eclining (rofits: 6ow or none Cost per unit: 6ow (ricing: ncreasing

7istribution : %elective %trategy: it


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1 n t r o d u

c t i o n

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(at!rity

7 e c l i n e S a l e s

V o l u m

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)ime In *ears



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Branding Products

Branding is the process of using symbolsto communicate the qualities of a product

made by a particular producer

Adding &alue t'roug' Brand ()uity

Brand equity is the degree of consumers# loyalty

to and awareness of a brand and its resultant

market share

Brand awareness is the etent to which a brand

name comes to mind when the consumerconsiders a particular product category



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Types of Brand (ames

(ational )rand is a product producedby, widely distributed by, and carry thename of the manufacturer

%icensed )rand is a product forwhose name the seller has purchasedthe right from an organi0ation orindividual

Pri"ate )rand "or Pri"ate la)el$ is aproduct that a wholesaler or retailerhas commissioned from amanufacturer

Costco-irkland



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Packaging and %a)elingProducts

Packaging is the physical container inwhich a product is sold, advertised orprotected

%a)eling can help market the product Label is the part of a product#s packaging

that identifies its name, manufacturer andcontents



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What Is Pricing?

Process of determiningwhat a compan will

receive in e!change forits products

P i i t M t B i



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Pricing to Meet Business*)+ecti"es

Pricing o)+ecti"es are goals

that producers hope to attain in

pricing products for sale

Profit#Maximi,ing *)+ecti"es Pricing for maximizing profits on

each unit sold

Market !hare *)+ecti"es

Market share is a company#s

percentage of total market sales

for a specific product type



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Cost#*riented Pricing

Cost#oriented pricing considers the

firm#s desire to make a profit and its

need to cover production costs Markup is the amount added to an item#s

cost to sell it at a profit



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Breake"en -nalysis

Breake"en analysis assesses costs

versus revenues for various sales volumes

Varia)le cost is a cost that changes with thequantity of a product produced or sold

Fixed cost is a cost unaffected by the quantity

of a product produced or sold

Breake"en point is the sales volume at whichthe seller#s total revenue from sales equals total

costs with neither profit nor loss



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Break ."en -nalysis

+reak even point is that quantity of output

"sales$ at which total revenue equals total

cost, at a certain selling price +reak even point ? 'otal ied Cost

%elling (rice @ Aariable Cost "per unit$



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Breake"en -nalysis



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Pricing .xisting Products

(ricing above prevailingmarket prices for similarproducts

(ricing below market prices

(ricing at or near marketprices



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Pricing (e' Products

Price skimming is setting an

initial high price to cover new

product costs and generate a

profit

Penetration pricing is settingan initial low price to establish

a new product in the market



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Fixed "ersus Flexi)le Pricing

Flexi)le Pricing works where the sellerscan alter prices privately , on a one-to-one,

customer-to-customer basis.

Fixed pricing leaves no room for

bargaining



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Pricing Tactics

Price lining is setting a fied price forcertain categories of products

Psychological pricing or 3dd (ricing

takes advantage of the idea that consumerstend to see prices in round figures

niform Pricing is when a diverse range ofgoods are given the same price

$iscount is a price reduction offered as anincentive to purchase

2. developing and pricing products

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