© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter FifteenCreating and Pricing Products That Satisfy

Customers

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PRIDE HUGHES KAPOOR

INTRODUCTION TOBUSINESS

ELEVENTH EDITION

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objectives

1. Explain what a product is and how products are classified

2. Discuss the product life cycle and how it leads to new product development

3. Define product line and product mix and distinguish between the two

4. Identify the methods available for changing a product mix

5. Explain the uses and importance of branding, packaging, and labeling

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objectives (cont’d)

6. Describe the economic basis of pricing and the means by which sellers can control prices and buyers’ perceptions of prices

7. Identify the major pricing objectives used by businesses8. Examine the three major pricing methods that firms

employ9. Explain the different strategies available to companies

for setting prices10. Describe three major types of pricing associated with

business products

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Classification of Products

Define • Product

- Know the difference between a Consumer Product and a Business (Industrial) Product

• Convenience Product• Shopping Product• Specialty Product• Raw Material

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Business Product Classifications (cont’d)

Define• Major Equipment• Accessory Equipment• Component Part• Process Material• Supply• Business Service

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Product Life Cycle

Be able to explain the Product Life Cycle Know the stages

• Introduction• Growth• Maturity• Decline

Be able to explain what happens to sales and profits at each stage

Why is it important that marketers understand the product life cycle?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Product Line and Product Mix

Define• Product Line• Product Mix

- Be able to explain the width and depth of the mix

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Managing the Product Mix

Be able to discuss how firms manage existing products • Product Modification• Line Extensions• Deleting Products

Be familiar with the seven phases of New Product Development1. Idea development2. Screening3. Concept testing4. Business analysis5. Product development6. Test marketing7. Commercialization

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Why Do Products Fail?

Be prepared to discuss the reasons why products fail• Improperly/Incompletely planned and tested• Commercialization launched too quickly• Pushing ahead even when flaws are known• Inadequate financing

Be able to think of some prominent product failures

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Branding

Define • Brand• Brand Name• Brand Mark• Trademark• Trade Name

Know the different Types of Brands• Manufacturer (Producer) Brand• Store (Private) Brand• Generic

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Benefits of Branding

Be able to discuss the various Benefits of Branding

Define• Brand Loyalty• Brand Equity

What criteria should a firm consider when Choosing a Brand?

What steps must a firm take to Protect a Brand?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Branding Strategies

Know the different Branding Strategies• Individual Branding• Family Branding• Brand Extensions

What are the advantages and drawbacks of each of these strategies?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Packaging

Define Packaging Know the Functions of Packaging What are the principle Design Considerations?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Labeling

Define Labeling What information must be included on a

product’s label? What elements might be included on a

label? What is an Express Warranty?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Pricing Products

What is the meaning and use of price? Define

• Supply• Demand• Equilibrium Price

How does Supply and Demand affect prices? Be familiar with Supply and Demand Curves and how

to determine the Equilibrium Price

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Pricing Objectives and Methods

Define • Price Competition• Non-Price Competition

Be prepared to discuss Buyers’ Perceptions of Price Be able to define the following terms related to Pricing

Objectives• Survival• Profit Maximization• Target Return on Investment (ROI)• Market-Share Goals• Status Quo Pricing

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Breakeven Analysis

Understand Breakeven Analysis and the variables used to calculate it• Breakeven Quantity• Total Revenue• Fixed Cost• Variable Cost• Total Cost

Be able to read a table displaying the breakeven point

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Pricing Methods

Define• Cost-Based Pricing• Demand-Based Pricing• Price Differentiation• Competition-Based Pricing

When are each of these pricing methods used? What are the benefits and drawbacks of each of

these pricing methods?

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Pricing Strategies

Be familiar with the different types of Pricing Strategies

New-Product Strategies• Price Skimming• Penetration Pricing

Differential Pricing• Negotiated Pricing• Secondary-Market Pricing• Periodic Discounting• Random Discounting

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Pricing Strategies (cont’d)

Psychological Pricing• Odd-Number Pricing• Multiple-Unit Pricing• Reference Pricing• Bundle Pricing• Everyday Low Prices (EDLPs)• Customary Pricing

Product-Line Pricing• Captive Pricing• Premium Pricing• Price Lining

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© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Pricing Strategies (cont’d)

Promotional Pricing• Price Leaders• Special-Event Pricing• Comparison Discounting

Geographic Pricing• Deals with Delivery Costs• FOB (Free-on-Board) Origin Pricing• FOB Destination Pricing

Transfer Pricing Discounting

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Discounts Used for Business Markets

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Be able to list and describe discounts used exclusively for business markets• Trade (Functional)• Quantity• Seasonal• Allowance