developing and pricing goods and servicesrvhs.redmond.k12.or.us/files/2013/12/chap014.pdf ·...
TRANSCRIPT
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*
* Chapter
Fourteen
Developing
and Pricing
Goods and
Services
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
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*
* Profile
• Ratan Tata introduced the $2,500 “People’s Car”
in 2008.
• Tata Motors is part of the growing auto market in
India - possibly the future’s largest market.
RATAN TATA The Tata Group
• Tata expanded in 2008
by purchasing Jaguar
and Range Rover from
Ford.
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*
* Product
Development and
the Total Product
Offer
• According to the American Marketing
Association, value is a foundation of marketing.
• Value -- Good quality at a fair price.
• Adapting products to new markets is an ongoing
challenge.
• Product development is a key activity in any
modern business.
DEVELOPING VALUE
LG1
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*
*
• Internet service
• Cell phone service
• Cable television
• Discount apparel
• Haircuts and coloring
• Fast-food
PRODUCTS “UNTOUCHABLE”
by SPENDING CUTS LG1
Product
Development and
the Total Product
Offer
Source: www.bigresearch.com.
14-4
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*
*
• Luxury handbags
• Satellite radio
• Specialty apparel
• High-end cosmetics
• Facials
PRODUCTS “EXPENDABLE”
by SPENDING CUTS LG1
Product
Development and
the Total Product
Offer
Source: www.bigresearch.com.
14-5
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*
*
• Let’s Dish and Dream Dinners provides a service
where customers prepare meals then bring them
home.
HOME COOKING in
HALF the TIME Spotlight on Small Business
• The companies
provide a place to
meet, has supplies
and relieves the
stress and mess
for its customers.
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*
* Developing a
Total Product
Offer
• Total Product Offer -- Everything consumers
evaluate when deciding whether to buy something.
DEVELOPING a
TOTAL PRODUCT LG1
• Products are evaluated on
many different dimensions,
both tangible and intangible.
• Marketers must think like and
talk to consumers to find out
what’s important.
14-7
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*
* PRODUCT INNOVATION DURING
the GREAT DEPRESSION LG1
Developing a
Total Product
Offer
Source: BusinessWeek Small Biz.
Year Product
1929 Electric Razors
1930 Car Radios
1930 Supermarkets
1933 Chocolate Chip Cookies
1933 Laundromats
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*
* POTENTIAL COMPONENTS
of a TOTAL PRODUCT OFFER LG1
Developing a
Total Product
Offer
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*
* Product Lines
& Product Mix
• Product Line -- A group of products that are
physically similar or intended for a similar market.
• Product lines often include competing brands like:
- M&Ms
- Peanut M&Ms
- Mint M&Ms
- Dark Chocolate M&Ms
UNDERSTANDING
PRODUCT LINES LG1
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*
* Product Lines
& Product Mix
• Product Mix -- The combination of all product lines
offered by a manufacturer or service provider.
• Product mixes like Proctor & Gamble’s can be
extensive:
- Laundry detergent
- Cosmetics
- Diapers
- Potato chips
- Bar soap
The PRODUCT MIX
LG1
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*
* Product
Differentiation
• Product Differentiation -- The creation of real or
perceived product differences.
• Marketers use a mix of pricing, advertising and
packaging to create different images. Examples
include:
- Bottled water
- Aspirin
- Fast-food
- Laundry detergent
- Shampoo
DIFFERENTIATING PRODUCTS
LG2
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*
* Marketing Different
Classes of
Consumer Goods
and Services
• Convenience Goods and Services -- Products
consumers purchase frequently with minimal effort.
These include:
- Candy and snacks
- Gas
- Milk and eggs
CLASSIFYING CONSUMER
GOODS and SERVICES LG2
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*
* Marketing Different
Classes of
Consumer Goods
and Services
• Shopping Goods and Services -- Products
consumers buy only after comparing value, quality,
price, and styles. These include:
- Clothes and shoes
- Appliances and furniture
- Childcare
- Home remodeling
CLASSIFYING SHOPPING
GOODS and SERVICES LG2
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*
* Marketing Different
Classes of
Consumer Goods
and Services
• Specialty Goods and Services -- Products with
unique characteristics and brand identity. These
include:
- Tiffany jewelry
- Rolex watches
- Lamborghini automobiles
- Ritz Carlton Hotels
CLASSIFYING SPECIALTY
GOODS and SERVICES LG2
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*
* Marketing Different
Classes of
Consumer Goods
and Services
• Unsought Goods and Services -- Products
consumers aren’t aware of or haven’t thought of
buying until they need them. These include:
- Car-towing services
- Funeral services
- Renter’s insurance
CLASSIFYING UNSOUGHT
GOODS and SERVICES LG2
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*
*
• How would you classify these consumer
products?
- Beautyrest mattress
- Honda Accord
- McDonald’s Big Mac
- Rolls Royce automobiles
- Oreo Cookies
- Harvard University degree
IDENTIFYING CONSUMER
GOODS CLASSIFICATIONS LG2
Marketing Different
Classes of
Consumer Goods
and Services
14-17
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*
*
• Pet Rock - For $3.95 you could buy a gift-wrapped
rock with eyes and a training manual.
• Garbage Pail Kids - Perhaps the grossest trading
cards ever produced.
• Mood Rings - Wildly popular as the changing colors
of the ring supposedly measured your mood.
• Chia Pets - Animal shaped clay figures that grew
sprouts.
ODD PRODUCT IDEAS
that WERE SUCCESSFUL LG2
Marketing Different
Classes of
Consumer Goods
and Services
14-18
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*
* Marketing
Industrial Goods
and Services
• Industrial Goods -- Products used in the
production of other products and sold in the B2B
market.
• Industrial goods include:
- Installations
- Capital items
- Accessory equipment
- Supplies
- Service
CLASSIFYING INDUSTRIAL
GOODS and SERVICES LG2
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*
* Progress
Assessment
• What value enhancers may be included in a total
product offer?
• What’s the difference between a product line and
a product mix?
• Name the four classes of consumer goods and
services and give examples of each.
• Describe three different types of industrial goods.
PROGRESS ASSESSMENT
14-20
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*
* Packaging
Changes the
Product
• Companies often use packaging to change and
improve their basic product. Examples include:
- Microwave popcorn
- Tuna pouches
- McDonald’s green packaging
COMPANY USES of PACKAGING
LG3
• Good packaging can also make
a product more attractive to
retailers.
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*
* Packaging
Changes the
Product
• To attract buyers’ attention
• Protect the goods inside and be tamperproof
• Describe and provide information about the
product
• Explain the product’s benefits
• Provide warranty information and warnings
• Give an indication of price, value, and uses
SOME KEY FUNCTIONS of
PACKAGING LG3
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*
* Branding and
Brand Equity
• Brand -- Name, symbol, or design that identifies the
goods or services and distinguishes them from
competitors’ offerings.
UNDERSTANDING BRANDING
LG4
• Trademark -- A brand that
has exclusive legal protection
for both its brand name and
design.
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*
* Branding and
Brand Equity
• Manufacturers’ Brands – Brand names of
manufacturers that distribute products nationally.
• Dealer (Private-Label) Brands -- Products that
carry a retailer’s or distributor’s brand name instead
of a manufacturer’s.
KEY BRAND CATEGORIES
LG4
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*
* Branding and
Brand Equity
• Generic Goods -- Non-branded products that sell
at a discount compared to manufacturers’ or dealers’
brands.
• Knockoff Brands -- Illegal copies of national
brands.
KEY BRAND CATEGORIES
LG4
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*
* Generating
Brand Equity
and Loyalty
• Brand Equity – The combination of factors
(awareness, loyalty, perceived quality, images, and
emotions) that people associate with a brand name.
• Brand Loyalty -- The degree to which consumers
are satisfied and are committed to further purchases.
ESTABLISHING BRAND EQUITY
and LOYALTY LG4
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*
*
• Volvo - Symbol for iron
• Lamborghini - Company founder’s was a
Taurus
• Volkswagen - Product of an office
contest
• Porsche - Coat of arms for city and state
headquarters
ORIGINS of
AUTOMOBILE SYMBOLS LG4
Generating
Brand Equity
and Loyalty
Source: World Features Syndicate. 14-27
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*
*
• Timberland (U.S.A.) is putting a carbon label on
its products.
• Tesco (U.K.) puts carbon labels on all products -
including grocery bags.
• China and India, though, are building coal-
powered plants and expanding car-use.
• The focus on climate change varies from country
to country.
COULDN’T YOU MAKE a
SMALLER FOOTPRINT? (Thinking Green)
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*
* Generating
Brand Equity
and Loyalty
• Brand Awareness -- How quickly or easily a given
brand name comes to mind when someone mentions
a product category.
• Consumers reach a point of brand preference
when they prefer one brand over another.
• When consumers reach brand insistence, they
will not accept substitute brands.
BUILDING BRAND AWARENESS
LG4
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*
* Generating
Brand Equity
and Loyalty
• Brand Association -- Linking a brand to other
favorable images, like celebrities or a geographic
area.
• Brand Manager -- Person responsible for a
particular brand and handles all the elements of the
brand’s marketing mix.
BUILDING BRAND
ASSOCIATIONS LG4
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*
* Progress
Assessment
• What six functions does packaging now perform?
• What’s the difference between a brand name and
a trademark?
• Explain the difference between a manufacturers’
brand, a dealer brand, and a generic brand.
• What are the key elements of brand equity?
PROGRESS ASSESSMENT
14-31
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*
* The New
Product
Development
Process
The NEW PRODUCT
DEVELOPMENT PROCESS LG5
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*
*
• Product Screening -- Reduces the number of new
products a firm is working on to focus on the most
promising.
• Product Analysis -- Focuses on the cost estimates
and sales forecasts to get an idea of potential
profitability.
BRINGING NEW PRODUCTS
to the MARKET LG5
The New
Product
Development
Process
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*
*
• Concept Testing -- Takes a product idea to
consumers to test reactions.
BRINGING NEW PRODUCTS
to the MARKET LG5
The New
Product
Development
Process
• Commercialization -- Promoting the product to
distributors and retailers and
developing the promotional
campaign.
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*
* The Product
Life Cycle
• Product Life Cycle -- A theoretical look at what
happens to sales and profits for a product over time.
• Product Life Cycle Stages:
1. Introduction
2. Growth
3. Maturity
4. Decline
The FOUR STAGES of a
PRODUCT LIFE CYCLE LG6
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*
* The Product
Life Cycle SALES and PROFITS DURING
the PRODUCT LIFE CYCLE LG6
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*
* PROFITS BEYOND the GRAVE
Top Earning Deceased Celebrities LG6
Celebrity Earnings Year of Death
Elvis Presley $52 Million 1977
Charles Schultz $33 Million 2000
Heath Ledger $20 Million 2008
Albert Einstein $18 Million 1955
Aaron Spelling $15 Million 2006
Dr. Seuss $12 Million 1991
John Lennon $9 Million 1980
The Product
Life Cycle
Source: Forbes, www.forbes.com/deadcelebs.
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*
* Progress
Assessment
• What are the six steps in the new-product
development process?
• What’s the difference between product screening
and product analysis?
• What are the two steps in commercialization?
• What’s the theory of the product life cycle?
PROGRESS ASSESSMENT
14-38
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*
* Competitive
Pricing
• Achieving a target return on investment or profit
• Building traffic
• Achieving greater market share
• Creating an image
• Furthering social objectives both short-run and
long-run
PRICING OBJECTIVES
LG7
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*
* Competitive
Pricing
• Cost-based pricing measures cost of producing a
product including materials, labor, and overhead.
• Target Costing -- Making the final price of a
product an input in the product development process
by estimating the selling price consumers will pay.
• Competition-Based Pricing -- A strategy based
on what the competition is charging for its products.
PRICING STRATEGIES
LG7
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*
*
• Choco-Logo saw its costs increase dramatically
in one year.
• The company cut back by using less expensive
packaging and reducing the size of a box of
chocolates.
WHEN SELLING SWEETS
GOES SOUR (Reaching Beyond Our Borders)
• Pricing is a process that’s
never simple. You need to
maintain high quality while
cutting costs.
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*
* Break-Even
Analysis
• Break-Even Analysis -- The process used to
determine profitability at various levels of sales. The
break-even point is where revenues equals cost.
• Total Fixed Costs -- All costs that remain the same
no matter how much is produced or sold.
• Variable Costs -- Costs that change according to
the level of production.
USING BREAK-EVEN ANALYSIS
LG7
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*
* Other Pricing
Strategies
• Skimming Price Strategy -- Pricing new products
high to recover costs and make high profits while
competition is limited.
• Penetration Price Strategy -- Pricing products low
with the hope of attracting more buyers and
discouraging other companies from competing in the
market.
• Everyday Low Pricing (EDLP) -- Setting prices
lower than competitors with no special sales.
PRICING ALTERNATIVES
LG7
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*
* Other Pricing
Strategies
• High-Low Pricing -- Using regular prices that are
higher than EDLP except during special sales when
they are lower.
• Psychological Pricing -- Pricing products at price
points that make a product seem less expensive than
it is.
PRICING STRATEGIES
of RETAILERS LG7
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*
* Progress
Assessment
• List two short-term and two long-term pricing
objectives. Can the two be compatible?
• What are the limitations of a cost-based pricing
system?
• What’s psychological pricing?
PROGRESS ASSESSMENT
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