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Busn 101 Chapter 14. Developing & Pricing Products and Services. Goals . Total Product Offer Consumer And Industrial Goods Functions Of Packaging Describe The Differences Between: Brand Brand Name Trademark Brand Equity Brand Loyalty Brand Manager New Product Development Process

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busn 101 chapter 14

Busn 101 Chapter 14

Developing & Pricing Products and Services

goals
Goals
  • Total Product Offer
  • Consumer And Industrial Goods
  • Functions Of Packaging
  • Describe The Differences Between:
    • Brand
    • Brand Name
    • Trademark
    • Brand Equity
    • Brand Loyalty
    • Brand Manager
  • New Product Development Process
  • Product Life Cycle
  • Pricing Objectives And Strategies
  • Nonpricing Strategies
value
Value
  • Good quality at a fair price
  • When customers calculate the value of a product, they look at the benefit and then subtract the cost to see if the benefits exceed the cost
  • Value = Benefits – Costs
  • If Benefits > Costs, Then: Value, Otherwise: Not Value
  • Why would someone buy Milk at 7-11 that cost $3.99 when it is $2.50 at Safeway?
  • Best value includes factors such as price, benefits sought, service they receive, and more
better products and services
Better Products and Services
  • With global competition, companies try to avoid market share loss by continuing to design and promote better products
  • To satisfy customers, marketers must:
    • Learn to listen to customers better than they do now
    • Adapt to constantly changing market demands
  • This means: listen to customers, make what they want
  • Example of listening:
    • Product: Fast food restaurants offer salads
    • Service: Fast food restaurants accept credit cards
  • Continually developing new products is a key activity for businesses around the globe
better products and services economist meg oct 11 2007
Better Products and Services (Economist meg, Oct 11, 2007)
  • Lego listened to customers (and others) when they designed Lego-Mindstorms
  • GM launched OnStar, a mobile-information system meant only to provide safety and emergency services for drivers
    • But customers wanted it to do more:
      • See if car is working properly
      • Open the doors for a driver who accidentally locks the keys inside
      • Locate the nearest pizza place
total product offer or value package
Total Product Offer or Value Package
  • Everything that consumers evaluate when deciding whether to buy something
    • From a strategic marketing point of view, total product offer is more than just the product or service
products at a business
Products at a Business
  • Product Mix
    • The combination of product lines offered by a manufacturer
  • Product Line
    • A group of products that are physically similar or are intended for a similar market
  • More on Products: http://pgdba.blogspot.com/2008/05/product-mix-product-line.html
university products http www enotes com business finance encyclopedia product mix
University Products (http://www.enotes.com/business-finance-encyclopedia/product-mix)
procter gamble products
Procter & Gamble Products

http://www.pg.com/common/product_sitemap.shtml

product differentiation
Product Differentiation
  • The creation of real or perceived product differences
  • Actual product differences can be quite small, so marketers must use a creative mix of value enhancers:
    • Price
    • Advertising
    • Packaging
    • Image
product differentiation1
Product Differentiation
  • How much difference is there between: Bounce, Cheer, Downy, Dreft, Era, Febreze Air Fresheners, Gain, Ivory and Tide?
groups of consumer goods
Groups of Consumer Goods
  • Convenience Goods and Services
  • Shopping Goods and Services
  • Specialty Goods and Services
  • Unsought Goods and Services
convenience goods and services
Convenience Goods and Services
  • Products that the customer wants to purchase frequently and with a minimum of effort
  • Examples:
    • Milk
    • Gum
    • Gas
    • ATM
  • Important marketing considerations:
    • Location
    • Brand awareness
    • Image
  • Some convenience items are available on the internet: Banking services, Books
shopping goods and services
Shopping Goods and Services
  • Those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers
  • Examples:
    • Appliances
    • Repair Services
    • Shoes and Clothes
  • Important marketing considerations:
    • Price differences
    • Quality differences
specialty goods and services
Specialty Goods and Services
  • Consumer products with unique characteristics and brand identity
  • Because these products are perceived as having no substitute, the consumer puts forth a special effort to purchase them
  • Examples:
    • Medical specialists
    • Expensive cars
    • Fancy foods
  • Important marketing considerations:
    • High quality, Image, Service, Brand Name
  • Sold through:
    • Internet, specialty goods retailer or specialty magazines
unsought goods and services
Unsought Goods and Services
  • Products that consumers are unaware of, haven’t necessarily thought of buying, or find that they need to solve an unexpected problem
  • Examples:
    • Emergency car-towing
    • Burial services
    • Insurance
industrial goods or business goods or b2b goods
Industrial Goods or Business Goods or B2B Goods
  • Products used in the production of other products
  • Examples:
    • Rubber for a tire factory
    • Microsoft Office can be both a B2B Good and a Consumer Good
importance of packaging
Importance Of Packaging
  • Protection
  • Attraction
  • Description
  • Explain Benefits
  • Information on warranties, warnings, etc.
  • Indication of price, value, and uses
packaging is important and can change the product
Packaging is important and can change the product
  • Morton’s
    • When it rains, it pours
  • Squeeze bottles
  • UPCs (Universal Product Code) makes check out and inventory control much easier
  • RFID (Radio frequency identification chip)
brand
Brand
  • A name, symbol, or design that identifies the goods or services and distinguishes them from the goods and services of competitors
  • Examples of Brand Names:
    • Campbell
    • Coca Cola
    • WholeFoods
    • Toyota

trademark
Trademark
  • A Brand that has been given exclusive legal protection for both the brand name and the pictorial design
brands
Brands
  • Brand name assures quality
  • Reduces search time
  • Adds prestige to purchase
  • Generic Name
    • Name for product category
  • Companies are afraid to have brand name become a generic name
  • Examples:
    • Aspirin, Linoleum, Kleenex, Styrofoam, Rollerblade
manufacturers brand name
Manufacturers’ Brand Name
  • The brand name of manufacturers that distribute products nationally and internationally
  • Examples:
    • Sony
    • Honda
    • Kodak
dealer private label brands or house brands or distributor brands
Dealer (Private Label) Brands or House Brands or Distributor Brands
  • Products that do not carry the manufacturer’s name but carry a distributor or retailer's name
  • Examples:
    • 365 Everyday Value
      • http://www.wholefoodsmarket.com/products/private-label.php
    • Kenmore at Sears
generic goods
Generic Goods
  • Nonbranded products that usually sell at a sizable discount compared to national or private label brands
  • Examples:
    • Lucky Foods Yellow Brand
    • Generic cigarettes
knockoff brands
Knockoff Brands
  • Illegal Copies of national brand name goods
  • Examples:
    • Is you expensive watch or dress a knockoff?
brands1
Brands
  • Brand Equity
    • The combination of factors – such as loyalty, perceived quality, images, and emotions – that people associate with a given brand name
      • Examples: Ziploc, GE
  • Brand Loyalty
    • The degree to which customers are satisfied, like the brand, and are committed to further purchases
  • Brand Awareness
    • How quickly or easily a given brand name comes to mind when a product category is mentioned
  • Brand insistence  Specialty Good
brands2
Brands
  • Brand Association
    • The linking of a brand to other favorable images
    • Think of Michael Jordon, Tiger Woods
  • Brand Manager or Product Manager
    • A manager who has direct responsibility for one brand or one product line
characteristics of a good brand name
Characteristics of a Good Brand Name
  • Short, sweet, and easily pronounced, but flexible and expandable, and does not lend itself to abbreviation
  • Unique within its industry and retain its age
  • Legally available and defensible
  • Good alliteration and linguistically clean
  • Embraces company personality / brand portfolio

Source: The Brand Name Awards 2005

best worst weirdest car brand names
Best/Worst/Weirdest Car Brand Names

Source: FT Weekend, November, 2005

brand characters are they real or fake
Betty Crocker

Chef Boyardee

Uncle Ben

Colonel Sanders

Little Debbie

Fake

Real

Both

Real guy, fake rank

Real

Brand Characters: Are They Real or Fake?

Source: Fast Company, August 2004

10 most valuable brands
10 Most Valuable Brands

Source: Business Week, August 7, 2006

top 10 favorite mascots of america
Top 10 Favorite Mascots of America
  • M&Ms figures / Mars
  • Doughboy / General Mills, Smucker’s
  • Duck / Aflac
  • Tony the Tiger / Kellogg
  • Gecko / Berkshire Hathaway’s Geico
  • Chester the Cheetah / Pepsi’s Frito-Lay
  • Energizer Bunny / Energizer Holdings
  • Kool-Aid Man / Kraft Foods
  • Trix Rabbit / General Mills
  • Snap, Crackle and Pop / Kellogg

Source: Forbes, January 9, 2006

developing new products
Developing New Products
  • 86% of new products fail to reach the business objectives within one year of release
    • Reasons:
      • Poor positioning
      • Little differentiation from other products
      • Poor packaging
new product development process
Idea Generation

Screening

Analysis

Development

Testing

Commercialize

New-ProductDevelopment Process
new products
New Products
  • Product Screening
    • A process designed to reduce the number of new product ideas being worked on at any one time
      • Does product fit well with present products?
      • Is it profitable?
      • Is it marketable?
      • Do we have the equipment and personnel?
new products1
New Products
  • Product Analysis
    • Making costs estimates and sales forecasts to get a feeling for profitability of a new product idea
  • Concept Testing
    • Taking a product idea to consumers to test their reactions
      • Are there benefits?
      • How frequently would you buy it?
      • What price would you pay?
      • Try different packaging, branding, ingredients
commercialization
Commercialization
  • Promoting a product to distributors and retailers to get wide distribution, and develop strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers
  • Commercialization:
    • Promoting to get wide distribution (distributors & retailers)
    • Advertising and sales efforts to generate & maintain interest (distributors & retailers & consumers)
    • Internet can speed this process up
first products produced by five major companies
First Products Producedby Five Major Companies
  • Hershey - Caramels
  • Amway - No-rinse car wash
  • Heinz - Horseradish
  • Avon - Little Dot perfume set
  • 3M - Sandpaper

Source: World Features Syndicate

people behind product innovation
People Behind Product Innovation
  • Liquid Paper – an American Secretary
  • Paper Clip – a Norwegian Patent Clerk
  • Fax Machine – a Scottish Clock Maker
  • Lewis Waterman Fountain Pen – an American Insurance Salesman
  • Pencil Sharpener – French Mathematician
  • Ballpoint pen – a Hungarian Journalist
  • Eraser Head – English Chemist

Source: World Features Syndicate

best product innovation of all time
Best ProductInnovation of ALL Time

% of Consumers’ Choice

Source: American Demographics

product life cycle
Product Life Cycle
  • The theoretical model of what happens to sales and profits for a product class over time (not all products follow this model, especially brands and classics)
pricing
Pricing
  • Pricing is important because it is a CRITICAL ingredient in consumer evaluation of product
  • Objectives of Pricing
  • ROI: gain a profit (long-run)
  • Traffic: get people into your store (short-run)
  • Market Share: gain market share (short-run)
  • Image: Price high to give status (long-run)
  • Social: Lower price to help people with little money
  • No matter what a business does, ultimately, prices are set in the market
pricing1
Pricing
  • Cost-Based Pricing
    • Cost + Profit = Price
    • Price is based on what it cost to produce
    • Cost accounting is very important to firms
    • Price is not necessarily an input into the product development process
  • Demand-Based Pricing
    • Price – Profit = Cost
    • Final price is an input into the product development process
    • Target Cost
      • Designing a product so that it satisfies customers and meets the profit margins desired by the firm
pricing2
Pricing
  • Competition-based pricing
    • A pricing strategy based on what all the other competitors are doing: Below, At, Above competitors, prices
  • Price leadership
    • The procedure by which one or more dominant firms set the price practices that all competitors in an industry follow
break even analysis
Break-Even Analysis
  • Break-Even Analysis
    • The process used to determine profitability and various levels of sales
  • Total Fixed Costs (FC)
    • All the expenses that remain the same no matter how many units are made or sold
  • Variable Costs (V)
    • Costs that change as the number of units made changes
  • Price = Price Changed to Consumer (P)
  • Break Even Point = FC/(P-VC)
pricing3
Pricing
  • Skimming Price Strategy
    • Strategy in which a new product is priced high to make optimum profit while there is little competition (iPhone, iPod)
  • Penetration Strategy
    • Strategy in which a product is priced low to attract many customers and discourage competition (VCR recorders)
  • EDLP
    • Setting prices lower than competitors and then not having any sales
  • High-Low Price Strategy
    • Setting prices that are higher than EDLP stores, but having many special sales where the prices are lower than competitors
pricing4
Pricing
  • Bundling
    • Grouping two or more products together and pricing them as a unit (Microsoft)
  • Psychological Pricing
    • Pricing goods and services at price points that make the product appear less expensive then it is
    • Instead of $23.00, charge $22.99
    • Gas = $2.99 9/10
  • Demand-orientated pricing
    • Gas prices go up during summer when everyone drives
    • Low rates for children at movie theaters
  • Internet Influence on Prices?
nonprice competition
Nonprice Competition
  • Product image
  • Consumer benefits such as:
    • Comfort
    • Durability
    • Convenience
    • Style
    • Service
list and describe the functions of packaging
List And Describe The Functions Of Packaging
  • Protection
  • Attraction
  • Description
  • Explain Benefits
  • Information on warranties, warnings, etc.
  • Indication of price, value, and uses
describe the differences between
Describe The Differences Between:
  • Brand
    • A name, symbol, or design (or combination thereof) that distinguishes them from the goods and services of competitors
  • Trademark
    • Brand that is legally protected
  • Brand Equity
    • The combination of factors – such as loyalty, perceived quality, images, and emotions – that people associate with a given brand name
  • Brand Loyalty
    • The degree to which customers are satisfied, like the brand, and are committed to further purchases
new product development process1
New Product Development Process
  • Idea Generation
  • Screening
  • Analysis
  • Development
  • Testing
  • Commercialize
pricing objectives and strategies
Objectives

ROI

Traffic

Market Share

Image

Social

Cost-Based

Demand-Based

Competition-Based

Break-Even

Fixed Cost

Variable Cost

Strategies

Skimming

Penetration

EDLP

High-Low

Bundling

Psychological

Market Forces

Pricing Objectives And Strategies
nonpricing strategies why they are becoming more important
Nonpricing Strategies (Why They Are Becoming More Important)
  • Because Prices are often similar
  • Internet makes it easy to find the best price