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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

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busn 101 chapter 14

Busn 101 Chapter 14

Developing & Pricing Products and Services

  • 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
  • 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


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)
  • 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

  • A Brand that has been given exclusive legal protection for both the brand name and the pictorial design
  • 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?
  • 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
  • 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




Real guy, fake rank


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






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
  • 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 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
  • 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
  • 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)
  • 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
  • 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



Market Share







Fixed Cost

Variable Cost








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