Chapters 22 23
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Chapters 22 & 23. Product Development, Distribution, Pricing, & Promotion. Product Development. Product design levels Basic product- the physical product in the simplest form Enhanced product- the product that offers different features and options

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Chapters 22 & 23

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Chapters 22 23

Chapters 22 & 23

Product Development, Distribution, Pricing, & Promotion


Product development

Product Development

  • Product design levels

    • Basic product- the physical product in the simplest form

    • Enhanced product- the product that offers different features and options

    • Extended product- product that includes additional features that are not part of the physical product but increases its usability


Product development1

Product Development

  • Product Selection

    • Product Line- a group of similar products with obvious variations in the design and quality to meet the needs of different customer groups

    • Product Assortment- the complete set of all products a business offers to a market


Product development2

Product Development

  • Packaging- Serves 4 Purposes

    • Protects the product

    • Provides important information to the customer

    • Makes product easier to use

    • Promotional tool


Product development3

Product Development

  • Branding- product and store brands play a major role in buying decisions

  • Brand- name, symbol, word, or design that identifies a product, service, or company


Product development4

Product Development

  • Branding

    • Brand Equity- the value of the brand to the owner

    • Attitude Branding- to represent a feeling

    • Brand Extension- use an existing strong brand for new products

      • Line Extension- stay within the product category, but make a new product


Product development5

Product Development

  • Branding (Continued)

    • Multiple Brands- choosing to launch new brand that apparently competes with its own brand to obtain a greater market share

      • Cannibalization- problem with “multi-brand” approach; steal from your own brands


Product development6

Product Development

  • Branding (Continued)

    • Generic/Private Label Brands- unbranded goods save the cost of marketing activities (no advertising and plain packaging)

    • Co-Branding- multiple brand names on a single product or service

    • Brand Protection- register as a trademark


Product development7

Product Development

  • Levels of Consumer Brand Awareness

    • Consumers are unable to identify the brand

    • Consumers can identify the brand but it has limited influence on their purchase decision

    • Consumers can identify the brand but will not purchase it because of the brand

    • Consumers easily recognize the brand and will choose it if available

    • Consumers view the brand as the most satisfying; will not purchase a different brand


Product distribution

Product Distribution

  • Purposes of Distribution

    • Economic Discrepancies- differences between what businesses offer and what consumers want

      • Type of products

      • Quantities of products

      • Location of products

      • Timing of products


Product distribution1

Product Distribution

  • Channels of Distribution

    • Routes products follow while moving from the producer to the consumer, including all related activities and participating organizations

    • Channel Members- businesses that participate in the activities to transfer goods from producer to consumer


Product distribution2

Product Distribution

  • Channels of Distribution (Continued)

    • Direct Distribution- selling directly to the ultimate consumer

      • PRODUCER  CONSUMER


Product distribution3

Product Distribution

  • Channels of Distribution (Continued)

    • Indirect Distribution- product goes through many places/organizations before reaching final consumer

      • PRODUCERRETAILERCONSUMER

        Or

      • PRODUCERWHOLESALERRETAILERCONSUMER


Product distribution4

Product Distribution

  • Deciding on a Channel of Distribution

    • Perishability of product

    • Geographic distance between producer and consumer

    • Need for special handling of the product

    • Number of users

    • Number of types of products manufactured

    • Financial strength and interests of the producer


Product distribution5

Product Distribution

  • Transportation Decisions

    • Common transportation methods

      • Railway

      • Trucks

        • Piggyback service

      • Airplanes

    • Other transportation methods

      • Waterways

      • Pipelines

      • Containerization


Product distribution6

Product Distribution

  • Tracking Products- bar codes

  • Product Storage

    • Warehouse- buildings used to store large quantities of products until they can be sold

    • Distribution center- large building designed to accumulate and redistribute products efficiently


Product pricing

Product Pricing

  • The Business Buying Decision

    • What to purchase

    • When to purchase

    • From whom to purchase

    • How much to purchase


Product pricing1

Product Pricing

  • Payment Terms and Discounts

    • List price- the price posted on the product

    • Terms of sale are negotiated from the list price

    • Payment terms- listed on invoice


Product pricing2

Product Pricing

  • Payment Terms and Discounts

    • Discounts- reductions from the price of the product to encourage customers to buy

      • Trade discount

      • Quantity discount

      • Seasonal discount

      • Cash discount


Product pricing3

Product Pricing

  • Payment Terms and Discounts

    • Trade discount- a price reduction that manufacturers give to their channel partners

    • Quantity discount- a price reduction offered to customers that buy in larger quantities

    • Seasonal discount- price reduction offered for ordering or taking delivery of products in advance of the normal buying period

    • Cash discount- price reduction given for paying by a certain date


Product pricing4

Product Pricing

  • Example of Cash Discount

    • 2/10 n 30

      • Customer receives a 2% discount if they pay within 10 days of the invoice date, otherwise must pay full “net” balance within 30 days

      • $128,000, terms 2/10 n 30, Invoice date of Dec 1

      • If pay within 10 days?

        • $2,560 discount


Product pricing5

Product Pricing

  • Components of Price

    • Selling price- actual price customers pay for the product

      • List price – discounts = selling price

    • Cost of goods sold- the cost to produce the product or buy it for resale

    • Markup- the amount added to the cost of goods sold to determine the selling price

    • Markdown- any amount by which the original selling price is reduced before the item is sold


Product pricing6

Product Pricing

  • Pricing Strategies

    • Pricing to meet competition

    • Pricing to earn a specific profit

    • Pricing based on consumer demand

    • Pricing to sell more products

    • Pricing to provide customer services


Product pricing7

Product Pricing

  • Controlling Costs

    • Markdowns- product goes out of style, purchased too many

    • Damaged or stolen merchandise- shoplifting or employee theft; or products damaged

    • Returned merchandise- might have to sell at reduced price, expenses in handling


Product promotion

Product Promotion

  • Promotion as Marketing Communication

    • Consumer Decision-Making Process

      • Problem recognition- what do I need

      • Information search- solution to need

      • Alternative evaluation- weighs options

      • Purchase- chooses one & purchases

      • Post-purchase evaluation- how well did it meet need


Product promotion1

Product Promotion

  • Advertising Purpose

    • To inform and educate consumers


Product promotion2

Product Promotion

  • Advertising Purpose

    • To introduce a new product or business


Product promotion3

Product Promotion

  • Advertising Purpose

    • To announce an improvement or product change


Product promotion4

Product Promotion

  • Advertising Purpose

    • To reinforce important product features and benefits


Product promotion5

Product Promotion

  • Advertising Purpose

    • To increase frequency of use of product


Product promotion6

Product Promotion

  • Advertising Purpose

    • To increase variety of uses of a product


Product promotion7

Product Promotion

  • Advertising Purpose

    • To develop a list of prospects


Product promotion8

Product Promotion

  • Advertising Purpose

    • To convince people to enter a store


Product promotion9

Product Promotion

  • Advertising Purpose

    • To make a brand trademark or slogan familiar


Product promotion10

Product Promotion

  • Advertising Purpose

    • To improve image of company or product

Sam’s Club


Product promotion11

Product Promotion

  • Advertising Purpose

    • To gain support for ideas or a cause


Product promotion12

Product Promotion

  • Media Choices

    • Advertising Media- the methods of delivering the promotional message to the intended audience

      • Publication- newspapers, magazines, journals

      • Mass media- radio, television

      • Outdoor- billboards, signs, posters, vehicle signs, electronic displays

      • Direct- sales letters, catalogs, inserts, telemarketing, fax messages

      • Display-window, counter & aisle displays, trade shows

      • Internet-banners, pop-ups


Product promotion13

Product Promotion

  • Buying Motives

    StatusAppetiteComfortDesire for BargainsRecognitionEase of UseLove of Beauty

    AmusementDesire for Good HealthFriendship

    AffectionWealthEnjoymentPride

    FearFamilyLoveAdventure

    • A product can target more than one motive; potential customers are studied to determine the best motive to appeal to


Product promotion14

Product Promotion

  • Planning & Managing Advertising

    • Advertising Budget- amount allotted for advertising; usually for a one year plan

    • Timing of Advertising- when is advertising most effective


Product promotion15

Product Promotion

  • Personal Selling

    • Studying the wants of customers

    • Presenting and demonstrating the product

    • Answering customer questions

    • Closing the sale

    • Follow-up


Product promotion16

Product Promotion

  • Sales Promotions- any promotional activities, other than advertising and personal selling, intended to motivate customers to buy

    • Coupons

    • Window displays

    • Direct mail inserts


Product promotion17

Product Promotion

  • Truth in Advertising & Selling

    • False advertising- “misleading in a material respect”

    • Full disclosure- provide all information necessary for consumers to make an informed decision

    • Substantiation- be able to prove all claims made about the products and services in promotions


Product promotion18

Product Promotion

  • Truth in Advertising & Selling

    • Cease and desist order- requires the company to stop using specific advertisements

    • Corrective advertising- new advertising designed to change the false impression left by the misleading information

      • In unusual circumstances, the company may have to pay a fine to the government or the consumers harmed


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