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Chapter 12 Creating and Pricing Products That Satisfy Customers - Coggle…
Chapter 12 Creating and Pricing Products That Satisfy Customers
Product
– everything one receives in an exchange, including all tangible and intangible attributes and experienced benefits; it may be a good, a service, or an idea
Consumer product
– a product purchased to satisfy personal and family needs
Business product
– a product bought for resale, for making other products, or for use in a firm’s operations
CONSUMER PRODUCT
Convenience product
– a relatively inexpensive, frequently purchased item for which buyers want to exert only minimal effort
Examples: bread, gasoline, newspapers
Shopping product
– an item for which buyers are willing to expend considerable effort on planning and making the purchase
Examples: appliances, bicycles, mobile phones
Specialty product
– an item that possesses one or more unique characteristics for which a significant group of buyers is willing to expend considerable purchasing effort
Examples: sports cars, original artwork
BUSINESS PRODUCT
Raw material
– a basic material that actually becomes part of a physical product; usually comes from mines, forests, oceans, or recycled solid wastes
Major equipment – large tools and machines used for production purposes
Examples: cranes, stamping machines
Accessory equipment
– standardized equipment used in a firm’s production or office activities
Examples: hand tools, photocopiers, calculators
Component part
– an item that becomes part of a physical product and is either a finished item ready for assembly or a product that needs little processing before assembly
Examples: tires, computer chips
Process material
– a material that is used directly in the production of another product but is not readily identifiable in the finished product
Examples: industrial glue, food preservatives
Supply
– an item that facilitates production and operations but does not become part of a finished product
Examples: paper, pencils
Business service
– an intangible product that an organization uses in its operations
Examples: financial services, legal services
PRODUCT LIFE CYCLE
1 INTRODUCTION
2 GROWTH
3 MATURITY
4 DECLINE
PHASES OF NEW PRODUCT DEVELOPMT
1 Idea Generation
2 Screening
3 Concept testing
4 Business Analysis
5 Product Development
6 Test marketing
7 Commercialization
Types of brands
Manufacturer (or producer) brand
– a brand that is owned by a manufacturer
Store (or private) brand
– a brand that is owned by an individual wholesaler or retailer
Generic product (or generic brand)
– a product with no brand at all
BRAND STRATEGIES
Individual branding
– the strategy in which a firm uses a different brand for each of its products :!:
Advantages
:
A problem with one product will not affect the good name of the firm’s other products.
The different brands can be directed toward different market segments.
Family branding
– the strategy in which a firm uses the same brand for all or most of its products : :!:
Advantages
Successful promotion for any one item that carries the family brand can help all other products with the same brand name.
A new product has a head-start when its brand name is already known and accepted by customers.
Price
– the amount of money a seller is willing to accept in exchange for a product at a given time and under given circumstances
Price serves the function of allocator
Price competition
– an emphasis on setting a price equal to or lower than competitors’ prices to gain sales or market share
Used most effectively when a seller must have the flexibility to change prices often, rapidly, and aggressively in response to competitors’ price changes
Allows a marketer to set prices based on product demand or in response to changes in the firm’s finances
Non-price competition
– competition based on factors other than price
Used most effectively when a seller can make its product stand out through distinctive product quality, customer service, promotion, packaging, or other features
Product differentiation – the process of developing and promoting differences between one’s product and all similar products
Pricing objectives
One objective of pricing is to make a profit, but one or more of the following factors may be just as important:
Survival
Profit maximization
Target return on investment
Return on investment (ROI) – the amount earned as a result of a financial investment
Market-share goals
Market share – the proportion of total industry sales
Status-quo pricing
Pricing Strategies
New product pricing
Price skimming
– the strategy of charging the highest possible price for a product during the introduction stage of its life-cycle
Penetration pricing
– the strategy of setting a low price for a new product
Differential Pricing
Negotiated pricing
– establishing a final price through bargaining
Secondary-market pricing
– setting one price for the primary target market and a different price for another market
Periodic discounting
– temporary reduction of prices on a patterned or systematic basis
Example: annual holiday sales, seasonal sales
Random discounting
– temporary reduction of prices on an unsystematic basis
Pyschological pricing
Odd-number pricing
– the strategy of setting prices using odd numbers that are slightly below whole-dollar amounts
Example: charging $4.99 for an item, rather than $5
Multiple-unit pricing
– the strategy of setting a single price for two or more units
Example: two cans for 99 cents, rather than 50 cents a can
Reference pricing
– pricing a product at a moderate level and positioning it next to a more expensive model or brand
Bundle pricing
– packaging together two or more complementary products and selling them for a single price
Example: telecommunications companies selling service bundles of cable, Internet, and phone service for one price
Everyday low prices (EDLPs)
– setting a low price for products on a consistent basis
Customary pricing
– pricing on the basis of tradition
Product-line pricing
Captive pricing
– pricing the basic product in a product line low, but pricing related items at a higher level
Example: A razor handle is generally priced quite low, but the razor blades are usually very expensive.
Premium pricing
– pricing the highest-quality or most-versatile products higher than other models in the product line
Examples: small kitchen appliances, beer, ice cream
Price lining
– the strategy of selling goods only at certain predetermined prices that reflect definite price breaks
Example: A shop may sell men’s ties only at $22 and $37.
Promotional pricing
Price leaders
– products priced below the usual markup, near cost, or below cost
Special-event pricing
– advertised sales or price cutting linked to a holiday, season, or event
Comparison discounting
– setting a price at a specific level and comparing it with a higher price