product design pricing and strategies 2 chapter objectives differentiate between a product item and...
TRANSCRIPT
Chapter Objectives
Differentiate between a product item and product line.
Classify products as consumer goods or business goods.
Explain the seven steps in developing a new product.
Identify the stages in a product’s life cycle.
Define price and the role it plays in determining profit.
Describe the factors that affect pricing decisions.
Identify pricing strategies.
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Product Defined
A specific model of athletic shoe would be called a product itemproduct item.
product item specific model or size of a product
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The entire group of a manufacturer’s athletic shoes would be called a product line.
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Product Defined
Products can be classified as consumer goodsconsumer goods or business goodsbusiness goods.
consumer goods goods purchased and used by the ultimate consumer for personal use
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business goods goods purchased by organizations for use in their operations
Products need to have a point of differencepoint of difference.
point of difference a unique product characteristic or benefit that sets it apart from a competitor
Steps in New Product Development
The seven steps in new product development are:
focus group a panel of six to ten consumers who discuss opinions about a topic under the guidance of a moderator
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1. SWOT analysis (strengths, weaknesses, opportunities, and threats)
2. Idea generation
3. Screening and evaluation– Focus groupFocus group
continued
Steps in New Product Development
commercialization process that involves producing and marketing a new product
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4. Business analysis
5. Development
continued
6. Test marketing
7. CommercializationCommercialization
Product Life Cycle
The four stages in the product life cycle are:
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Introduction
Growth Maturity
DeclineProduct Life Cycle
Not all products fit the life-cycle pattern.
Management of the Product Life Cycle
The three ways to manage the product life cycle are:
repositioning changing a product’s image in relation to a competitor’s image
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Modifying the product.
Marketing the product.
RepositioningRepositioning the product.
Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.
Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.
Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.
E-Trading Collectibles
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caused lower prices. However, the latest hot items are autographs from Hall of Famers—and top players who don’t often sign baseballs, photographs, jerseys, or bats. You can find and bid on these curios at collectibles Web sites, including eBay—but be sure to get authentication when you score that vintage ball signed by Mickey Mantle.For more information on sports and entertainment marketing, go to marketingseries.glencoe.com.
A box of baseball cards may not be worth the price of college tuition anymore, because the so-called bull market for sports collectibles peaked in the 1990s. Lower demand has
Explain the seven steps involved in developing a new product.
Name the four stages in the product life cycle.
What three things can be done to manage a product through its life cycle?
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Pricing
PricePrice is important in a business because it helps determine a company’s profit or loss.
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price the value placed on goods or services being exchanged
Price plays a significant role in the marketing mix.
Determining Profit
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1,000baseballbats sold
$175 each
$175,000revenue= -
$90,000 topurchasethe bats
$90 each
-$60,000
in businessexpenses
=$25,000Profit
Subtract the cost of goods sold and the company’s expenses from the money it generated in sales revenue.
Pricing Considerations and Strategies
Three types of pricing strategies are:
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prestige pricing pricing based on consumer perception
Prestige pricingPrestige pricing
Odd-even pricingOdd-even pricing
Target pricingTarget pricing
odd-even pricing pricing goods with either an odd number or even number to match a product’s image
target pricing pricing goods according to what the customer is willing to pay
Pricing Considerations and Strategies
Other pricing considerations include:
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markup difference between the retail or wholesale price and the cost of an itemDemand
Cost– MarkupMarkup– Cost-plus pricingCost-plus pricing
Newness of the product
cost-plus pricing pricing products by calculating all costs and expenses and adding desired profit
non-price competition competition between businesses based on quality, service, and relationships
Competition– Non-price competitionNon-price competition
Pricing Objectives and Strategies
Pricing objectives and strategies include:
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market share the percentage of the total sales of all companies that sell the same type of product
Profit objective
Market shareMarket share objective
Special pricing– Price liningPrice lining
– Bundle pricingBundle pricing
– Loss-leader pricingLoss-leader pricing
– Yield-management pricingYield-management pricing
price lining selling all goods in a product line at specific price points
bundle pricing selling several items as a package for a set price
loss-leader pricing pricing an item at cost or below cost to draw customers into the store
yield-management pricing pricing items at different prices to maximize revenue when limited capacity is involved– Tiered pricing
Price Adjustments and Regulations
Manufacturers will offer discounts in the following situations:
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Buying in large quantities
Buying prior to the buying season
Allowances are reductions taken from the quoted price. One type of allowance is a trade-in.
Price Adjustments and Regulations
The Sherman Anti-Trust Act prohibits price fixingprice fixing and predatory pricing.
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price fixing an illegal practice whereby competitors conspire to set the same price
Price discrimination was originally prohibited by the Clayton Act and later by the Robinson-Patman Act.
How is pricing related to profit and the marketing mix?
List five factors that affect price decisions.
What are two common pricing objectives and special pricing strategies?
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Explain the difference between product item and product line.
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Name the ways products can be defined and classified.
A product item is a specific model or size of a product; a product line is a group of closely related products that are sold by a company.
1. Products can be classified as consumer goods or business goods. Products are goods, services, or ideas that satisfy consumer needs; products can be tangible (goods) or intangible (services).
2.
Explain the seven steps used in developing a new product.
SWOT analysis, idea generation, screening and evaluation, business analysis, development, test marketing, and commercialization are the seven steps.
3.
Checking Concepts
continued
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3.
Identify the four stages in a product’s life cycle.
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Define price.
Explain how price determines a company’s profit.
The stages are introduction, growth, maturity, and decline.
4. Price is defined as the value placed on goods or services being exchanged.
5. Every item sold carries a price. The number of items sold times the price equals sales revenue. The amount of profit equals costs subtracted from price.
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Identify the factors that may influence pricing strategies.
Pricing strategies are influenced by consumer perception, demand, cost, product life cycle stage, and competition.
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Checking Concepts
continued
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Markup is the difference between the retail or wholesale price and the cost of an item. Cost-plus pricing involves calculating all costs and expenses and adding desired profit to arrive at a price. In a sense, markup is the profit component in cost-plus pricing.
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8. Define and compare markup and cost-plus pricing.
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Critical Thinking
Checking Concepts
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