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BUAD 210: Chapter 13-Products
Transcript of BUAD 210: Chapter 13-Products
Single v.s. Multiple Units
Environmental responsibility Labeling presentation of info on a product or its a package federal regulations Federal Regulations on garments, food labels, & non edible items express warranty ex. L.L.Bean Pricing Products Meaning and use of price Supply & Demand affects price Price & Non-price competition Buyer's perceptions of price price: the amount of money a seller excepts in exchange for the product Price serves the function of allocator supply demand price competition non-price competition product differentiation narrow ranges of price and wider ranges of price management should be aware of the limits of acceptability - everything one receives in an exchange, including all tangible and intangible attributes and expected benefits; it may be a good, a service, or an idea Consumer products
Business products Consumer products Business products convenience product
specialty product raw materials
business service -a series of stages in which a products sales revenue and profit increase, reach a peak, and then decline
- a firm must be able to launch, modify, and delete products from its offering of products in response to changes in product life-cycles or else… the firm will fail The product life-cycle Introduction stage Growth Maturity Decline -consumer awareness and acceptance of the product are low
-sales rise gradually, as a result of promotion and distribution activities
Example: the Ipad by Apple -sales increase rapidly as the product becomes well known
-other firms have begun producing competing market products
-the competition and lower unit costs result in a lower price which reduces the profit per unit
- have to start creating modified versions of the products
-goal is to stabilize and strengthen the product’s position by encouraging brand loyalty
Example: the Ipod by Apple (many modifications, ipod touch, ipod nano, ipod shuffle, etc) -sales are still increasing but the rate of increase has slowed
-industry profits decline throughout this stage
-market share may be strengthened by redesigned packaging or style changes
-consumers may be encouraged to use the product more often or in new ways -sales volume decreases sharply
-profit continues to fall
-the number of competing firms declines
-when a product adds to the success of the overall product line, the company may retain it; otherwise management must determine when to eliminate the product Managing the product mix Inadequate financing
Not planned/tested Why products fail? Developing new products 1. Idea Generation
3. Concept testing
4. Business analysis
5. Product development
6. Test marketing
7.Commercialization Deleting Products Negative image
Systematic review Managing exsisting products Product modification
Line extensions innovations adaptations imitations Must meet 3 conditions modifiable
perceptible to change
greater satisfaction what is a brand brand name brand mark trademark trade name branding benefits types of brands choosing & protecting a brand generic product store (or private)
(or producer) brand short, distinctive, sets it apart check infringement make it unique protect against a "generic" name brand equity brand loyalty company consumers recognition
loyalty reduced shopping time
psychological reward "status" quickly identify reduced risk good
idea Pricing Objectives -management must set pricing objectives that are in line with both organizational and marketing objectives -A firm may have to price its products to survive to survive.
-The firm will cut its price to attract customers, even if it must operate at a lost.
-EX: A&F resorts to price reduction in recent economic downturn.
Must adjust price to complement customer’s smaller budgets. Survival Profit maximization Target return on investment Market share goals Status-quo pricing -Maximizing profit is a goal that is impossible to define.
-Firms that wish to set profit goals should express them as specific dollar amounts, or percentage increases over previous profits. -ROI – amount earned as a result of that investment.
-Some firms set an annual percentage ROI as their pricing goal.
-Example: Copy and Printing Company market share – proportion of total industry sales-aggressive pricing and marketing efforts are attempts to maintain or increase their market shares. -avoid making waves or maintaining the status quo-*charging the same price as other competitors for a similar product. Pricing Methods -Factors for Price setting
Recognition that the market ultimately determines price at which a product sells.
Awareness that costs and expected sales can be used only to establish some sort of price floor(minimum price at which the firm can sell its product without incurring a loss.
-Methods: Cost-based, demand-based, and competition-based pricing Cost Based Demand-Based pricing Competition-Based Pricing Cost of producing one unit of product + amount to cover additional costs(insurance or interest) and profit. Markup Breakeven quantity Total Revenue Fixed cost Variable Cost Total cost a cost incurred no matter how many units of products are produced or sold. EX: Rent, will remain the same whether its 1 or 1000 units. total amount received from the sales of a product. Number of units that must be sold for total revenue to equal the total cost.Can be found graphically or by using a formula.
(Selling Price – Varible Price) / Total Fixed Cost a cost that depends on the number of units produced.
Producing or buying more product could be cheaper per unit but cost more because more products are being produced. Sum of the fixed costs and variable costs attributed to those units.
Fixed costs + variable cost The amount added to the cost of producing one unit.A firms management can calculate markup as a percentage of its total cost.
Has 2 major flaws:
Difficulty of determining an effective markup percentage. (too high = overpriced, and too low = low profit)
Seperates pricing from other business fuctions. ( Being most effective requires the integration of all business factors should have an impact on marketing and pricing decisions) considering cost and revenue secondary to competitors prices.
-important when there are other similar products on the market.
-May choose to be below competitors prices, or slightly above competitors’ prices, or at the same level
-Pricing objective to increase sales or market share.
-May be combined with other cost approaches to arrive at a profitable levels Pricing method based on level of demand for product.-High Price when Product is in demand and Low Price when demand is weak.-A marketer estimates the amount of product that customers will demand at different prices and then choose the price that generates the highest total revenue.
-The effectiveness of this method depends on the firm’s ability to estimate demand accurately.
-Price differentiation(demand-based pricing) is used when a firm wants to use more than one price in the marketing of a specific product.
A company must be able to segment market on the basis of different strengths of demand. Demand-based pricing places a firm in a better position to attain higher profit levels.Consideration of time, Type of customer, Type of distribution channel, geographical location. Example: hotels are more expensive in the summer seasons Pricing strategies actions designed to achieve pricing objectives Product-Line Pricing establishing and adjusting the prices of multiple products within a product line •Captive Pricing
•Price Lining encourage purchases based on emotional responses rather than economical rational responses Psychological Pricing •Odd-Number pricing •Multiple-unit pricing
•Everyday Low Prices(EDLPs)
•Customary Pricing charging different prices to different buyers for the same quality and quantity of product Differential Pricing •Negotiated Pricing
•Random Discounting strategies for pricing new products New-Product Pricing •Price skimming
•Penetration Pricing another ingredient part of marketing mix Promotional Pricing •Price Leaders
•Special-Event Pricing •Comparison Discounting Pricing Business Products deduction from the price of an item Discounting • Trade
• Allowances strategies that deal with delivery costs Geographic Pricing •FOB origin
•FOB destination Transfer Pricing •prices charged in sales between an organization’s unit Let's take a closer look... Main reason for labeling: to protect customers from misleading products and improper use of products three alterations quality
aesthetic a product purchased to satisfy personal and family needs a product bought for resale, for making other products, or for use in a firm’s operations Thank you