creating products and pricing strategies to meet customers’ needs chapter 11 the future of...

CreatingProducts

and PricingStrategies to

Meet Customers’ Needs

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The Future of BusinessThe Essentials 4th EditionGitman & McDaniel

Prepared byDeborah BakerChapter 11

Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved

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Learning Goals

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1 What are the marketing concept and relationship building?

2 How do managers create a marketing strategy?

3 What is the marketing mix?

4 How do consumers and organizations make buying decisions?

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Learning Goals (continued)

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5 What are the five basic forms of market segmentation?

6 What is a product, and how is it classified?

7 How do organizations create new products?

8 What are the stages of the product life cycle?

9 What strategies are used for pricing products?

10 What trends are occurring in products and pricing?

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marketing

The process of discovering the needs and wants of potential buyers and customers and then providing goods and services that meet or exceed their expectations.

The Marketing Concept

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exchange

The process in which two parties give something of value to each other to satisfy their respective needs.

The Marketing Concept

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Marketing: The “Right “ Principle

Gettingthe right goods or services

tothe right people

atthe right place, time, and price

usingthe right promotion techniques

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What are the marketing concept and relationship building?1

The Marketing Concept

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Focusing on customer wants so the organization can distinguish its products from competitors’ offerings.

Integrating all of the organization’s activities to satisfy these wants.

Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly.

The Marketing Concept

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The Marketing Concept

CustomerSatisfaction

The customer’s feeling that a product has met or exceeded

expectations.

CustomerValue

The ratio of benefits to the sacrifice necessary to obtain those benefits,

as determined by the customer.

RelationshipMarketing

A strategy that focuses on forging long-term partnerships with customers

by offering value and providing customer satisfaction.

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CONCEPT check

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Explain the marketing concept.

Explain the difference between customer value and customer satisfaction.

What is meant by relationship marketing?

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How do managers create a marketing strategy? 2

Creating a Marketing Strategy

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environmental scanning

The process in which a firm continually collects and evaluates information about its external environment.

The External Environment

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The External Environment Social forces

Demographic forces

Economic forces

Technological forces

Political and legal forces

Competitive forces2

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target market

The specific group of consumers toward which a firm directs its marketing efforts.

Defining the Target Market

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competitive advantage

A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition; also called differential advantage.

Creating a Competitive Advantage

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Creating a Competitive Advantage

Differential CompetitiveAdvantage

A firm’s ability to provide a unique product or service that offers something of value besides a lower price.

CostCompetitiveAdvantage

A firm’s ability to produce a product or service at a lower cost than its competitors.

NicheCompetitiveAdvantage

A firm’s ability to target and effectively serve a single segment of the market within a limited geographic area.

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CONCEPT check

What is environmental scanning?

What is a target market, and why should a company have one?

Explain the three types of competitive advantages and provide examples of each.

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What is the marketing mix?3

Developing a Marketing Mix

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marketing mix

The blend of product offering, pricing, promotional methods, and distribution system that brings a specific group of consumers superior value.

Developing a Marketing Mix

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Elements of the Marketing Mix

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Product

Promotion

Price

Place

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CONCEPT check

What is meant by the marketing mix?

What are the components of the marketing mix?

How can marketing techniques help not-for-profit organizations?

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How do consumers and organizations make buying decisions?

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Buyer Behavior

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buyer behavior

The actions people take in buying and using goods and services.

Buyer Behavior

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(5)Postpurchase Behavior

(4)Purchase

(3)Evaluation of Alternatives

(2)Information Search

(1)Need Recognition

Cultural, social, individual and psychological

factors affect

all steps

Consumer Decision-Making Process

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Influences on Consumer Decision Making

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Cultural Factors

Psychological Influences

Individual Influences

Social Factors

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Characteristics of the Business- to-Business Market

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CONCEPT check

Explain the consumer decision-making process.

How do business markets differ from consumer markets?

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What are the five basic forms of market segmentation?

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Market Segmentation

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Volume

Benefit

Psychographic

Geographic

Demographic

Amount of use (light versus heavy)

Benefits provided by the good or service

Lifestyle, personality, interests, values, attitudes

Regional location, population density, city/county size, climate

Age, education, gender, income, race, social class, household size

Market Segmentation

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Example of Age Segmentation

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Using Marketing Research

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Observationresearch

An investigator monitors respondents’ actions without interacting directly with respondents.

ExperimentAn investigator changes one or more variables while observing the effects of these changes on another variable.

Surveyresearch

Data is gathered fromrespondents to obtain facts, opinions, and attitudes.

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CONCEPT check

Define market segmentation.

List and discuss the five basic forms of market segmentation.

How does market research help companies make better use of their marketing budgets?

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What is a product, and how is it classified?6

What is a Product?

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product

In marketing, any good or service, along with its perceived attributes and benefits, that creates value for the customer.

What is a Product?

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Consumer Product Classifications

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ConvenienceProduct

Relatively inexpensive items that require little shopping effort and are purchased routinely without planning.

UnsoughtProduct

Products that either are unknown to the buyer or are known but the buyer does not actively seek them.

SpecialtyProduct

Items for which consumers search long and hard and for which theyrefuse to accept substitutes.

ShoppingProduct

Items that are bought after considerable planning, including comparisons of price, suitability, and style.

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Consumer Product Classifications

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capital productsLarge, expensive items with a long life span that are purchased by businesses for use in making other products or providing a service.

expense itemsItems, purchased by businesses, that are smaller and less expensive than capital products and usually have a life span of less than one year.

Classifying Business Products

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1. Installations

2. Accessories

3. Component parts and materials

4. Raw materials

5. Supplies

6. Services

Industrial Product Classifications

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CONCEPT check

What is a product?

What are the classes of consumer goods?

Explain how business products are classified.

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How do organizations create new products?7

Creating Products That Deliver Value

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focus group

A group of 8 to 12 participants led by a moderator in an in-depth discussion on one particular topic or concept.

Focus Group

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brainstorming

A method of generating ideas in which group members suggest as many possibilities as they can without criticizing or evaluating any of the suggestions.

Brainstorming

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product manager

The person who develops and implements a complete strategy and marketing program for a specific product or brand.

Product Manager

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CONCEPT check

How do companies organize for new-product development?

What are the steps in the new-product development process?

Explain the role of the product manager.

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What are the stages of the product life cycle?8

The Product Life Cycle

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product life cycle

The pattern of sales and profits over time for a product or product category.

Consists of:• introduction• growth• maturity• decline

The Product Life Cycle

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The Product Life Cycle

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Light competition Frequent product modifications Limited distribution Heavy promotion High failure rate High production and marketing

costs Low sales volume Small or negative profits

Introduction

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The Product Life Cycle

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Growth Sales grow at an increasing rate Healthy profits Many competitors enter market Large companies may acquire pioneering firms Promotion emphasizes aggressive brand ads

and the differences between brands Adequate distribution is a major key to success Prices normally fall at end of growth phase Priority is increasing/retaining market share and

enhancing profits

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The Product Life Cycle

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Maturity Sales growth—but at a decreasing rate Saturated markets Product line extensions through product variations Global introduction of products

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The Product Life Cycle

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Decline

Sales and profits fall Trade allowances eliminated Most advertising and sales promotions eliminated

The rate of decline is governed by:

Rate of change in consumer tastes Rate at which new products are introduced

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CONCEPT check

What is the product life cycle?

Describe each stage of the product life cycle.

What are the marketing strategies for each stage of the product life cycle?

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What strategies are used for pricing products?9

Pricing Strategies

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Pricing Strategies

price skimmingIntroducing a product with a high initial price and lowering the price over time.

penetration pricingSelling new products at low prices in the hope of achieving a large sales volume.

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Pricing Strategies

leader pricingThe strategy of pricing products below the normal markup or even below cost to attract customers to a store where they would not otherwise shop.

bundlingThe strategy of grouping two or more related products together and pricing them as a single product.

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Pricing Strategies

odd-even pricingThe strategy of setting a price at an odd number to connote a bargain and at an even number to suggest quality.

prestige pricingThe strategy of increasing the price of a product so that consumers will perceive it as being of higher quality, status, or value.

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CONCEPT check

What is the difference between penetration pricing and price skimming?

Explain the concept of price bundling.

Describe odd-even pricing and prestige pricing.

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What trends are occurring in products and pricing?

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Trends in Developing Products and Pricing

Trends in Developing Products and Pricing

Internet

One-to-One Marketing

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Trends in Developing Products and Pricing

one-to-one marketing

Creating a unique marketing mix for every customer.

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The Impact of the Internet on Pricing Buyers can compare products and prices

Sellers can collect detailed data about customers’ buying habits

Sellers can monitor the competition’s prices

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Trends in Developing Products and Pricing

product line (or brand) extension

Taking a product with a well-developed brand image and using that brand name for a new product in either the same product category or a different product category.

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Trends in Developing Products and Pricing

private-label branding

Where a retailer, or wholesaler, has a manufacturer produce products and the retailer, or wholesaler, puts its own name on the item.

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CONCEPT check

How have online price-comparison engines helped consumers shop for the best price?

Describe one-to-one marketing and the role of marketing databases.

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