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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

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
product distribution3
Product Distribution
  • Channels of Distribution (Continued)
    • Indirect Distribution- product goes through many places/organizations before reaching final 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

Status Appetite Comfort Desire for BargainsRecognition Ease of Use Love of Beauty

Amusement Desire for Good Health Friendship

Affection Wealth Enjoyment Pride

Fear Family Love Adventure

    • 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