© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 1

Product and Product and Pricing StrategiesPricing Strategies

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 2

Types Types of Productsof Products

StagesStagesof Productsof Products

Product CharacteristicsProduct Characteristics

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 3

The Product The Product ContinuumContinuum

GoodsProducts

IdeasServices

Salt Shoes VCR Auto FastFood

Cruise Consulting EducationInsurance

TangibleDominant

IntangibleDominant

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 4

Augmenting the Basic Augmenting the Basic ProductProduct

Augmenting the Basic Augmenting the Basic ProductProduct

Core BenefitsCore Benefits

Actual ProductBrand Name Features

QualityLevel DesignPackaging

Augmented Product

Installation Warranty

Upgrades Accessories

Deliveryand Credit

After-SaleService

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 5

Characteristics ofCharacteristics ofService ProductsService Products

IntangibleIntangibleQualityQuality

IntangibleIntangibleQualityQuality

PerishablePerishableNatureNature

PerishablePerishableNatureNature

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 6

Consumer ProductsConsumer ProductsConsumer ProductsConsumer Products

SpecialtySpecialtyProductsProductsSpecialtySpecialtyProductsProducts

ConvenienceConvenienceProductsProducts

ConvenienceConvenienceProductsProducts

UnsoughtUnsoughtProductsProducts

UnsoughtUnsoughtProductsProducts

ShoppingShoppingProductsProducts

ShoppingShoppingProductsProducts

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 7

Industrial ProductsIndustrial Products

Expense ItemsExpense Items Capital ItemsCapital Items

PencilsPencils PrinterCartridges

PrinterCartridges ComputersComputersCopy

Machines

CopyMachines

Short-TermShort-Term Long-TermLong-Term

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 8

Products and Their UsesProducts and Their Uses

Raw materials

Components

Supplies

Installations

Equipment

Business services

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 9

TimeTime

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

In-FlightInternetService

Digital MusicPlayers

DVD Players VCRs

++00

Sal

es V

olum

e (u

nits

)S

ales

Vol

ume

(uni

ts)

Sales

Profits

The Product Life CycleThe Product Life Cycle

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 10

Product MakeoversProduct Makeovers

ReinvigoratedDesigns

ReinvigoratedDesigns

RefreshedMarketing Efforts

RefreshedMarketing Efforts

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 11

1.1. Screening of ideasScreening of ideas

2.2. Business analysisBusiness analysis

3.3. Prototype developmentPrototype development

4.4. Test marketingTest marketing

5.5. CommercializationCommercialization

New Product DevelopmentNew Product Development

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 12

Idea GenerationIdea Generation

Customers

Competitors

Employees

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 13

Consumer ProductsConsumer Products

Concept TestingConcept Testing

Industrial ProductsIndustrial Products

Feasibility StudyFeasibility Study

Idea ScreeningIdea Screening

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 14

Business AnalysisBusiness Analysis

Forecast Sales

Estimate Costs

Project Profits

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 15

Prototype DevelopmentPrototype Development

PackagingPackagingPackagingPackaging

Marketing MixMarketing MixMarketing MixMarketing Mix

ProductionProductionProductionProduction

ResourcesResourcesResourcesResources

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 16

Test MarketingTest Marketing

Introduce theIntroduce theProductProduct

Monitor Customer Monitor Customer ReactionsReactions

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 17

CommercializationCommercialization

ProductionProduction DistributionDistribution

ManufacturingManufacturing PackagingPackaging

DistributionDistribution PricingPricing PromotionPromotion

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 18

Product IdentitiesProduct Identities

Legal ProtectionsLegal ProtectionsUnique Name, Symbol or Design

Unique Name, Symbol or Design

Company orOrganization Brand

Company orOrganization Brand

The ProductBrand

The ProductBrand

Recognizing Products

Specifying Products

Marketing Products

Valuing Products

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 19

Branding of Branding of ProductsProducts

Equity Name Selection Sponsorship

Brand PreferenceBrand Preference

Brand InsistenceBrand Insistence

Brand LoyaltyBrand Loyalty

Brand AwarenessBrand Awareness

TrademarksTrademarks

Public DomainPublic Domain

Brand NamesBrand Names

Brand MarksBrand Marks

Generic ProductsGeneric Products

Co-Brandingand Licensing

Co-Brandingand Licensing

National BrandsNational Brands

Private BrandsPrivate Brands

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 20

Packaging and Packaging and LabelingLabeling

StrategyStrategy

Inventory ControlInventory Control

The ProductThe Product

InformationInformation

AppealAppeal

DisplayDisplay

DifferentiationDifferentiation

FunctionFunction

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 21

Product StrategiesProduct Strategies

ProductProductExpansionExpansionProductProduct

ExpansionExpansion

Product LineProduct LineProduct LineProduct Line

InternationalInternationalMarketsMarkets

InternationalInternationalMarketsMarkets

Product MixProduct MixProduct MixProduct Mix

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 22

Product LineProduct Lineand Product Mixand Product Mix

LengthLengthWidthWidth DepthDepth

Strengths andWeaknesses

Strengths andWeaknesses

Long-TermStrategy

Long-TermStrategy

Managerial Depth

Managerial Depth

Financial Resources

Financial Resources

RetailChannel

RetailChannel

Goods or Services

Risks orRewards

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 23

Product Expansion Product Expansion

Add Items in a Product Category Under the Same Brand NameAdd Items in a Product Category Under the Same Brand Name

Add New Products with the Same Product NameAdd New Products with the Same Product Name

Translate a Successful Brand in a Different Product FormatTranslate a Successful Brand in a Different Product Format

Apply a Successful Brand Name to a New CategoryApply a Successful Brand Name to a New Category

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 24

International MarketsInternational Markets

EntryRequirements

EntryRequirements

GovernmentGovernment

Tariffs andTrade Barriers

Tariffs andTrade Barriers

CultureCulture

LanguageLanguage

ConsumerPreferencesConsumer

Preferences

ExchangeRates

ExchangeRates

BusinessCustomsBusinessCustoms

StandardizationStandardization

CustomizationCustomization

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 25

Product PositioningProduct Positioning

FeaturesFeatures

ServicesServices

ImageImage

PricePrice

CategoryCategory

Size, ease of use, styleSize, ease of use, style

Convenience, customer supportConvenience, customer support

Reliability, sophisticationReliability, sophistication

Low cost or premiumLow cost or premium

Leading online sellerLeading online seller

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 26

ProductProductPositioning ErrorsPositioning Errors

ProductProductPositioning ErrorsPositioning Errors

UnderUnderPositioningPositioning

UnderUnderPositioningPositioning

OverOverPositioningPositioning

OverOverPositioningPositioning

ConfusedConfusedPositioningPositioningConfusedConfused

PositioningPositioning

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 27

Developing Pricing Developing Pricing StrategiesStrategies

QualityQualityPerceptionsPerceptions

QualityQualityPerceptionsPerceptions

MarketingMarketingObjectivesObjectivesMarketingMarketingObjectivesObjectives

ConsumerConsumerDemandDemand

ConsumerConsumerDemandDemand

GovernmentGovernmentRegulationsRegulations

GovernmentGovernmentRegulationsRegulations

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 28

Break-Even Analysis

Break-EvenPoint $$ Profits $$

More Than

$$ Losses $$

Less Than

Fixed costs

Selling price per unit-Variable costs per unit

Cost-Based PricingCost-Based Pricing

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 29

Break-Even Point Haircuts at $20 Break-Even Point Haircuts at $20 EachEach

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 30

Break-Even Point Haircuts at $30 Break-Even Point Haircuts at $30 EachEach

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 31

Other Pricing Other Pricing StrategiesStrategies

Price-BasedPrice-Based

OptimizationOptimization

SkimmingSkimming

PenetrationPenetration

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 13 - 32

Price AdjustmentPrice AdjustmentStrategiesStrategies

Discount PricingDiscount Pricing

BundlingBundling

Dynamic PricingDynamic Pricing