developing and pricing products

8/11/2019 Developing and Pricing Products

1/34

BUSIN

ESS

1

Developing andPricing Products


2/34

B

B

USIN

ESS

2

What Is a Product?

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

products

Benefitsare what the consumer derivesfrom the product: the want-satisfying value

Value packageis a product marketed as a

bundle of value-adding attributes

Features?

Benefits?


3/34

B

USIN

ESS

Types of ConsumerProducts

Convenience Goods: Commonly available,

generally affordable, often prone to rapid

consumption and re-buy, in which casethese are referred to as Fast Moving

Consumer Goods (FMCGs)


4/34

B

USIN

ESS


Shopping Goods: A 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 Types of

Consumer Products


5/34

B

USIN

ESS


Specialty Goods: A 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


6/34

B

USIN

ESS


Unsought Products: A category of products

about which the consumers are generally

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

compelled


7/34


8/34B

USIN

ESS

Types of Business Products

Fabricating Materials & Parts: Business

goods that become part of another tangible

product afterbeing processed Examples include sugar, flour, semi-

conductor micro chips in computers, and

zippers & buttons in clothing etc.


9/34B

USIN

ESS


Installations: Manufactured products that

form an organizations major, expensive

and long-lived assets Examples include machinery (heavy

generators, blast furnaces, machinery used

in production) and buildings


10/34B

USIN

ESS


Accessory Equipment: 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

Examples include workstations, fork lifts,

office furniture etc.


11/34B

USIN

ESS


Operating Supplies: Goods characterized

by low price and short life span, contributing

to an organizations operations Examples include stationery, fuel,

telephone sets etc.


12/34B

USIN

ESS

12

The Product Mix

Product mixis a group of products that afirm makes available for sale (e.g.Nestle)

Product lineis 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/


13/34B

USIN

ESS

Understanding Product Mix

Procter &Gamble

Body Wash& Soap

Antiperspirants

&Deodorants

Hair Care

Ivory Olay Old Spice

Safeguard

Camay Noxzema

Zest

Secret Pantene

Head &Shoulders

Herbal Essences

Infusium


14/34B

USIN

ESS

14

The Seven-Step ProductDevelopment Process

1. Produc t Ideas

2. Sc reen ing

3. Concep t Tes ting

4. Bus iness Analys is

5. Pro to type Development

6. Produc t Test ing and Test Market ing

7. Commerc ializat ion


15/34B

USIN

ESS

The Product Life Cycle

According to the PLC a product passesthrough many stages in its life

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

The concept of product life applies to a

generic categoryof products (not to brands)


16/34B

USIN

ESS

The PLC Stages

Introduction

Growth

Maturity

Decline


17/34B

USIN

ESS

Introduction

Customers: Few

Competition: Little or none

Sales: Low, but rising Profits: None

Cost per unit: High

Pricing: High

Distribution : Scattered Strategy: Product Awareness


18/34


19/34B

USIN

ESS

Maturity

Customers: Mass Market

Competition: Intense

Sales: Slow Growth Profits: Declining

Cost per unit: Stable

Pricing: Lowest

Distribution : Intensive

Strategy: Retention


20/34B

USIN

ESS

Decline

Customers: Loyalists

Competition: Decreasing

Sales: Declining Profits: Low or none

Cost per unit: Low

Pricing: Increasing

Distribution : Selective

Strategy: Exit


21/34BUSIN

ESS

Maturity

Time In Years


22/34

B

USIN

ESS

22

Branding Products

Brandingis the process of using symbolsto communicate the qualities of a product

made by a particular producer

Add ing Value through B rand Equi ty

Brand equityis the degree of consumers loyalty

to and awareness of a brand and its resultant

market share

Brand awarenessis the extent to which a brand

name comes to mind when the consumerconsiders a particular product category


23/34

B

USIN

ESS

23

Types of Brand Names

National brandis a product producedby, widely distributed by, and carry thename of the manufacturer

Licensed brandis a product forwhose name the seller has purchasedthe right from an organization orindividual

Private brand(or Private label) is aproduct that a wholesaler or retailerhas commissioned from amanufacturer

Costco-Kirkland


24/34


25/34BUSIN

ESS

25

What Is Pricing?

Process of determining whata company will receive in

exchange for its products

P i i t M t B i


26/34

B

USIN

ESS

26

Pricing to Meet BusinessObjectives

Pricing objectivesare goals

that producers hope to attain in

pricing products for sale

Profit-Maximizing Objectives Pricing for maximizing profits on

each unit sold

Market Share Objectives

Market shareis a companys

percentage of total market sales

for a specific product type


27/34

B

USIN

ESS

27

Cost-Oriented Pricing

Cost-oriented pricingconsiders the

firms desire to make a profit and its

need to cover production costs Markupis the amount added to an items

cost to sell it at a profit


28/34

B

USIN

ESS

28

Breakeven Analysis

Breakeven analysisassesses costs

versus revenues for various sales volumes

Variable cost is a cost that changes with the

quantity of a product produced or sold

Fixed costis a cost unaffected by the quantity

of a product produced or sold

Breakeven pointis the sales volume at whichthe sellers total revenue from sales equals total

costs with neither profit nor loss


29/34

B

USIN

ESS

Break Even Analysis

Break even point is that quantity of output

(sales) at which total revenue equals total

cost, at a certain selling price Break even point = Total Fixed Cost

Selling PriceVariable Cost (per unit)


30/34

B

USIN

ESS

30

Breakeven Analysis


31/34

B

USIN

ESS

31

Pricing Existing Products

Pricing above prevailingmarket prices for similarproducts

Pricing below market prices

Pricing at or near marketprices


32/34

B

USIN

ESS

32

Pricing New Products

Price skimmingis setting an

initial high price to cover new

product costs and generate a

profit

Penetration pricingis setting

an initial low price to establish

a new product in the market


33/34

B

USIN

ESS

33

Fixed versus Flexible Pricing

Flexible Pricing works where the sellerscan alter pricesprivately, on a one-to-one,

customer-to-customer basis.

Fixed pricingleaves no room for

bargaining


34/34

USIN

ESS

Pricing Tactics

Price liningis setting a fixed price forcertain categories of products

Psychological pricing or Odd Pricing

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

Uniform Pricingis when a diverse range ofgoods are given the same price

Discountis a price reduction offered as anincentive to purchase

developing and pricing products

Documents