business copyright 2005 prentice- hall, inc. 11-1

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Copyright 2005 Prentice- Hall, Inc. 11-1 Business

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Page 1: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-1

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Page 2: Business Copyright 2005 Prentice- Hall, Inc. 11-1

11-2

ChapteChapte

rr 1111

Developing And Developing And Pricing ProductsPricing Products

Page 3: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-3

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ess Chapter OutlineChapter Outline

What Is A Product?What Is A Product?Developing New ProductsDeveloping New ProductsIdentifying ProductsIdentifying ProductsDetermining PricesDetermining PricesPricing Strategies & TacticsPricing Strategies & Tactics

Page 4: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-4

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ess Product?Product?

• Value PackageValue Package

• FeaturesFeatures–TangibleTangible

– IntangibleIntangible

Warranty

Page 5: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-5

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Goods/Services-Goods/Services-ClassificationClassification

• ConsumerConsumer

• IndustrialIndustrial

Page 6: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-6

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ess Consumer ProductsConsumer Products

• Convenience- Rapidly ConsumedConvenience- Rapidly Consumed• ShoppingShopping–Moderately PricedModerately Priced– Infrequent PurchaseInfrequent Purchase

• SpecialtySpecialty–ExpensiveExpensive–Rarely PurchasedRarely Purchased

Page 7: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-7

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ess Online ShoppingOnline Shopping

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2002 2003 2004

In $ BillonIn $ Billon

Source: VeriSign “VeriSign Reports $8.8 Billion in Onlines Purchases During the 2004 Holiday Shopping Season”, http://www.verisign.com/verisign-inc/news-and-events/news-archive/us-news-2004/index.html

Thanksgiving - Thanksgiving - ChristmasChristmas

Page 8: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-8

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Average Online Transaction Size Average Online Transaction Size (Thanksgiving – Christmas)(Thanksgiving – Christmas)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2002 2003 2004

Source: VeriSign “VeriSign Reports $8.8 Billion in Onlines Purchases During the 2004 Holiday Shopping Season”, http://www.verisign.com/verisign-inc/news-and-events/news-archive/us-news-2004/index.html

Page 9: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-9

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ess Industrial ProductsIndustrial Products

• Expense ItemsExpense Items–Regularly PurchasedRegularly Purchased

–Consumed RapidlyConsumed Rapidly

• Capital ItemsCapital Items–ExpensiveExpensive

– Long-lastingLong-lasting

– Infrequently PurchasedInfrequently Purchased

Page 10: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-10

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ess Product MixProduct Mix

• Product LineProduct Line–Similar ProductsSimilar Products

–Similar BuyersSimilar Buyers

–Similar UseSimilar Use

• SingleSingle

• Multiple/DiversifiedMultiple/Diversified

Page 11: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-11

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Product Mix-Product Mix-Minute MaidMinute Maid

Page 12: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-12

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New Product New Product DevelopmentDevelopment

• Product Mortality- Failure Product Mortality- Failure Or Obsolescence Or Obsolescence

• Speed To Market- Market Speed To Market- Market ChangesChanges

Page 13: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-13

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New Product New Product Development ProcessDevelopment Process

Product Product IdeasIdeas

ScreeningScreening

Concept TestingConcept Testing

Business Business AnalysisAnalysis

PrototypePrototype

Testing & Testing & MarketingMarketing

CommercializationCommercialization

Page 14: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-14

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ServicesServicesProcess VariationsProcess Variations

• Service Package- Tangible & Service Package- Tangible & Intangible FeaturesIntangible Features

• Service Process Service Process DesignDesign–Process SelectionProcess Selection

–Worker RequirementsWorker Requirements

– Facility RequirementsFacility Requirements

Page 15: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-15

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ess Product Life CycleProduct Life Cycle

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Copyright 2005 Prentice- Hall, Inc. 11-16

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Stages OfStages OfProduct Life CycleProduct Life Cycle

• Introduction- New ProductIntroduction- New Product• GrowthGrowth–Consumers AttractedConsumers Attracted–Sales ClimbSales Climb

• Maturity- Sales Level-OffMaturity- Sales Level-Off• DeclineDecline–Other Competing New Products Other Competing New Products

IntroducedIntroduced–Sales & Profits DeclineSales & Profits Decline

Page 17: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-17

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Alternatives ToAlternatives ToNew ProductsNew Products

• ExtensionExtension

• AdaptationAdaptation

• ReintroductionReintroduction

Page 18: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-18

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ess Identifying ProductsIdentifying Products

• BrandingBranding

• PackagingPackaging

• LabelingLabeling

Page 19: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-19

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ess Product BrandingProduct Branding

• Adding ValueAdding Value–Brand EquityBrand Equity–Brand AwarenessBrand Awareness

• E-BusinessE-Business• Types Of Brand NamesTypes Of Brand Names–NationalNational– LicensedLicensed–PrivatePrivate

Page 20: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-20

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World’s 10 MostWorld’s 10 MostValuable BrandsValuable Brands

Page 21: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-21

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ess Pricing ObjectivesPricing Objectives

• Profit-MaximizingProfit-Maximizing

• E-BusinessE-Business

• Market-ShareMarket-Share

Page 22: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-22

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ess Cost-Oriented PricingCost-Oriented Pricing

• ComponentsComponents–Markup $Markup $–Markup %Markup %–Sales PriceSales Price

Page 23: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-23

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Breakeven Analysis Breakeven Analysis ComponentsComponents

• Variable CostVariable Cost

• Fixed CostFixed Cost

• Breakeven PointBreakeven Point

Page 24: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-24

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ess Breakeven AnalysisBreakeven Analysis

Page 25: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-25

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ess Pricing Existing ProductsPricing Existing Products

• Relative To Current Market Relative To Current Market Prices For Similar ProductsPrices For Similar Products

• Current MarketCurrent Market–AboveAbove

–BelowBelow

–At/NearAt/Near

Page 26: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-26

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ess New Product PricingNew Product Pricing

• Price SkimmingPrice Skimming

• Market PenetrationMarket Penetration

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Copyright 2005 Prentice- Hall, Inc. 11-27

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ess E-Business PricingE-Business Pricing

• Fixed- Most CommonFixed- Most Common

• Dynamic- Available Dynamic- Available Information Forces Constant Information Forces Constant Price AdjustmentPrice Adjustment

Page 28: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-28

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ess Pricing TacticsPricing Tactics

• Price LiningPrice Lining

• Psychological- Psychological- Odd/EvenOdd/Even

• DiscountingDiscounting

Page 29: Business Copyright 2005 Prentice- Hall, Inc. 11-1

Copyright 2005 Prentice- Hall, Inc. 11-29

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ess International PricingInternational Pricing

• Determine What Market Will Determine What Market Will BearBear

• Post-Purchase- Encourage To Post-Purchase- Encourage To Trade Up As Personal Trade Up As Personal Economics AllowEconomics Allow

• DumpingDumping