Products & Services

Products & Services

Name DevelopmentProduct names should:1. Inform customer about product2. Convey an imageQualityDetailPersonality3. Show product as part of particular line/series

Trader Joes Tissue

Selling StrategyCreating a desirable good1. Item satisfies/exceeds desired need2. Item includes expected accessories3. Item results in desire for more4. Item results in product/brand loyaltyPricing AssessmentCustomers perception in terms of price and value of my product/service

My price vs. competitors?

What values and benefits do my customers get from my product/service?

Are my prices consistent with those benefits and values?

Pricing AssessmentWhat is the current supply and demand relationship of my product/service?

Am I in an industry where the demand for my product/service has a short life cycle, and I need to cash in quickly?

Does my product have a recognizable name and allow me luxury of premium pricing?

An Actual Product

Pricing ResearchIs it necessary?Helps gain a competitive edgeFind out competitors price and your quality in comparisonHow to conduct it?Shop the competitionTrade publications and showsInternet

Pricing ResearchGo to the customerGive free samplesGive discountsTest with friends/familyAsk what they would pay

Market research with kids at Fundimensions.9Break EvenCost (Expenses)=Income (sales)Fixed Costs+(#units X variable costs)=#Units X price per unitOrFixed Costs/(Unit Selling Price Variable Costs) = Breakeven Point

THE NUMBER OF UNITS YOU MUST SELL IN ORDER TO START MAKING MONEYPricing Models

Selling handmade dolls; start ups costs are $200,000. Cost ea. doll (time and materials) = $2; 100,000 dolls x $2 = $200,000 + start up = $400,000. Do you want to break even or make a profit?To break even, sell dolls for $4 ($400,000/100,000 dolls)To make profit and make $100,000, charge $5 ($400,000 + $100,000 = $500,000/100,000 dolls)Craft ShowA weekend booth at the craft show costs $400. You are selling rocks that cost $10 per rock for $15 a piece.How many rocks do you need to sell before you break even?$400/ $15-$10=80How many rocks before your profit is equal to your fixed costs?$400+$400/$15-$10= 160

Break Even AnalysisMust know the following:Fixed costsnot changing, i.e., rent, insurance, start up costs, etc.Variable costsvaries with each unit you sell.

See additional slidesPricing ModelsOther expenses may be incurred; make sure to add those to the equation (taxes, shipping costs, etc.)Use pricing model for services as well as products: startup costs, rent, supplies, etc.List every penny spent up front and figure how much profit you want to make in a year = accurate pricingPricing ChecklistHave I accurately figured my start up costs? What are they?

What is my cost per unit?

In determining the cost per unit, have I figured in all money spent including labor, supplies, packaging, etc.

Pricing ChecklistHow many units can I produce or services can I provide in a year?

Do I want to make a profit in the first year, be content to break even or lose money?

If I want to make a profit in the first year, what is an attainable goal?

Pricing for ServicesResearch competitionCheck market; are customers willing to pay for what you have to offerMay have to charge less if supply is great; may charge more if demand is high.Good reputation is important; people will pay more Check marketpeople in NY willing to pay more for nails than in Idaho. Good reputationNina and nails. Do good job; responsible; provide last minute service, etc.17Is the Pricing Accurate?Keep accurate account of pricing and affect on sales

Be prepared to change prices if needed

Are my products moving or is there more or less demand than I anticipated based on research? Could any inequalities (supply and demand) be resolved by varying my prices?

PricingLower pricesEconomic conditionsNeed to generate additional revenue through higher salesMay produce product cheaperCompetitors lower pricesTemporarily through discounts and coupons

PricingRaise PricesInflationIncreased demand for your product/service which would require more expenses for your businessWhen you do, explain to customers why.Established name

Adding fuel surcharge.20Lower/Raise Prices AssessmentIs current product or services income insufficient?

Is economy suffering a downturn or recession?

Have any competitors recently lowered their prices?Lower/Raise Prices cont.Do prices match quality/value compared to competition? Is my revenue level suffering because of inflation?

Is the economy enjoying an upturn or boom?

Is my product or industry likely to be obsolete a year from now?Bottom Line . . .Must know what your expenses are . . .Must know if you want to break even or make a profit . . .Price product/service to cover all costs

Jeff and lawn serviceknow how much to charge covering labor, materials, gas, etc. Papa kept penciled records on hogshow much to feed, gas for tractor, medicine from first buying hog to selling it.23Fun ExerciseGather with your teamCome up with one product or service from your recent businessesWrite key factors about your product that would influence pricingDiscuss the reasoning behind your decisionsAlso give approximate percentage each product is of your total salesFocus on your target market

Jeff and lawn serviceknow how much to charge covering labor, materials, gas, etc. Papa kept penciled records on hogshow much to feed, gas for tractor, medicine from first buying hog to selling it.24