intro to business chapter 14
TRANSCRIPT
![Page 1: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/1.jpg)
Business in Business in Action 8e Action 8e Bovée/ThillBovée/Thill
Developing a Business Mindset
Chapter 14Chapter 14Product and Product and
Pricing StrategiesPricing Strategies
Production Systems
![Page 2: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/2.jpg)
Copyright © 2017 Pearson Education, Inc.
Learning Objectives
1. Identify the main types of consumer and organizational products, and describe the four stages in the life cycle of a product.
2. Describe six stages in the product development process.
3. Define brand, and explain the concepts of brand equity and brand loyalty.
14-2
![Page 3: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/3.jpg)
Copyright © 2017 Pearson Education, Inc.
Learning Objectives (cont.)
4. Identify four ways of expanding a product line, and discuss two risks that product-line extensions pose.
5. List the factors that influence pricing decisions, and explain break-even analysis.
6. Identify nine common pricing methods.
14-3
![Page 4: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/4.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.1 The Product Continuum
14-4
![Page 5: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/5.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.2 Augmenting the Basic Product
14-5
![Page 6: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/6.jpg)
Consumer Products
Copyright © 2017 Pearson Education, Inc.
• Convenience products Everyday goods
and services that people buy frequently, usually without much conscious planning
• Shopping products Fairly important
goods and services that people buy less frequently with more planning and comparison
14-6
![Page 7: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/7.jpg)
Consumer Products (cont.)
Copyright © 2017 Pearson Education, Inc.
• Specialty products Particular brands that the buyer especially
wants and will seek out, regardless of location or price
14-7
![Page 8: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/8.jpg)
Industrial and Commercial Products
Copyright © 2017 Pearson Education, Inc.
• Expense items Inexpensive goods generally used within a
year of purchase
• Capital items More expensive organizational products with
a longer useful life, ranging from office and plant equipment to entire factories
14-8
![Page 9: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/9.jpg)
Industrial and Commercial Products (cont.)
Copyright © 2017 Pearson Education, Inc. 14-9
![Page 10: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/10.jpg)
Copyright © 2017 Pearson Education, Inc.
The Product Life Cycle
• Product life cycle Four stages through which a product
progresses: introduction, growth, maturity, and decline
14-10
![Page 11: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/11.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.3 The Product Life Cycle
14-11
![Page 12: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/12.jpg)
Copyright © 2017 Pearson Education, Inc.
The New-Product Development Process
• Product development process A formal process of generating, selecting,
developing, and commercializing product ideas
14-12
![Page 13: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/13.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.4The Product Development Process
14-13
![Page 14: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/14.jpg)
Copyright © 2017 Pearson Education, Inc.
• Prototypes Pre-production samples of products used for
testing and evaluation
• Test marketing The stage of product development in which a
product is sold on a limited basis to gauge its market appeal
The New-Product Development Process (cont.)
14-14
![Page 15: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/15.jpg)
Copyright © 2017 Pearson Education, Inc.
• Commercialization Large-scale production and distribution of a
product
The New-Product Development Process (cont.)
14-15
![Page 16: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/16.jpg)
Product Identities
Copyright © 2017 Pearson Education, Inc.
• Brand A name, term, sign, symbol, design, or
combination of those used to identify the products of a firm and to differentiate them from competing products
14-16
![Page 17: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/17.jpg)
Product Identities (cont.)
Copyright © 2017 Pearson Education, Inc.
• Brand equity The value that a
company has built up in a brand
• Brand loyalty The degree to
which customers continue to purchase a specific brand
14-17
![Page 18: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/18.jpg)
Brand Name Selection
Copyright © 2017 Pearson Education, Inc.
• Brand names The portion of
brands that can be expressed orally, including letters, words, or numbers
• Brand marks The portion of
brands that cannot be expressed verbally
14-18
![Page 19: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/19.jpg)
Brand Name Selection (cont.)
Copyright © 2017 Pearson Education, Inc.
• Logo A graphical and/or
textual representation of a brand
• Trademarks Brands that have
been given legal protection so that their owners have exclusive rights to their use
14-19
![Page 20: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/20.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.5 Product Identities
14-20
![Page 21: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/21.jpg)
Brand Ownership
Copyright © 2017 Pearson Education, Inc.
• National brands Brands owned by
manufacturers and distributed nationally
• Private brands Brands that carry
the label of a retailer or a wholesaler rather than a manufacturer
14-21
![Page 22: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/22.jpg)
Brand Ownership (cont.)
Copyright © 2017 Pearson Education, Inc.
• Co-branding A partnership between two or more
companies to closely link their brand names together for a single product
• License An agreement to produce and market another
company’s product in exchange for a royalty or fee
14-22
![Page 23: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/23.jpg)
Product-Line andProduct-Mix Strategies
Copyright © 2017 Pearson Education, Inc.
• Brand managers Managers who develop and implement the
marketing strategies and programs for specific products or brands
14-23
![Page 24: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/24.jpg)
Copyright © 2017 Pearson Education, Inc.
Product-Line andProduct-Mix Strategies (cont.)
• Product line A series of related
products offered by a firm
• Product mix The complete
portfolio of products that a company offers for sale
14-24
![Page 25: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/25.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.7 Expanding a Product Line
14-25
![Page 26: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/26.jpg)
Strategic Considerations in Pricing
Copyright © 2017 Pearson Education, Inc. 14-26
![Page 27: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/27.jpg)
Cost Structure
Copyright © 2017 Pearson Education, Inc.
• Fixed costs Business costs
that remain constant regardless of the number of units produced
• Variable costs Business costs
that increase with the number of units produced
14-27
![Page 28: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/28.jpg)
Copyright © 2017 Pearson Education, Inc.
Break-Even Analysis
• Break-even analysis A method of calculating the minimum volume
of sales needed at a given price to cover all costs
14-28
![Page 29: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/29.jpg)
Break-Even Analysis (cont.)
Copyright © 2017 Pearson Education, Inc.
• Break-even point Sales volume at a given price that will cover
all of a company’s costs
14-29
![Page 30: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/30.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.8 Break-Even Analysis
14-30
![Page 31: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/31.jpg)
Copyright © 2017 Pearson Education, Inc.
Exhibit 14.8 Break-Even Analysis (cont.)
14-31
![Page 32: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/32.jpg)
Copyright © 2017 Pearson Education, Inc.
Pricing Methods
• Cost-based pricing A method of setting prices based on
production and marketing costs, rather than conditions in the marketplace
• Value-based pricing A method of setting prices based on customer
perceptions of value
14-32
![Page 33: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/33.jpg)
Copyright © 2017 Pearson Education, Inc.
Pricing Methods (cont.)
• Optimal pricing A computer-based pricing method that creates
a demand curve for every product to help managers select a price that meets specific marketing objectives
14-33
![Page 34: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/34.jpg)
Pricing Methods (cont.)
Copyright © 2017 Pearson Education, Inc.
• Skim pricing Charging a high price for a new product during
the introductory stage and lowering the price later
• Penetration pricing Introducing a new product at a low price in
hopes of building sales volume quickly
14-34
![Page 35: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/35.jpg)
Copyright © 2017 Pearson Education, Inc.
• Loss-leader pricing Selling one product at a loss as a way to entice
customers to consider other products
• Auction pricing The seller doesn’t set a firm price but allows
buyers to competitively bid on the products being sold
Pricing Methods (cont.)
14-35
![Page 36: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/36.jpg)
Copyright © 2017 Pearson Education, Inc.
• Participative pricing Allowing customers to pay the amount they
think a product is worth
• Freemium pricing A hybrid pricing strategy (free+premium) of
offering some products for free while charging for others, or offering a product for free to some customers while charging others for it
Pricing Methods (cont.)
14-36
![Page 37: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/37.jpg)
Price Adjustment Tactics
Copyright © 2017 Pearson Education, Inc.
• Discounts Temporary price reductions to stimulate sales
or lower prices to encourage certain behaviors such as paying with cash
• Bundling Offering several products for a single price that
is presumably lower than the total of the products’ individual prices
14-37
![Page 38: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/38.jpg)
Price Adjustment Tactics (cont.)
Copyright © 2017 Pearson Education, Inc.
• Dynamic pricing Continually adjusting prices to reflect changes
in supply and demand
14-38
![Page 39: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/39.jpg)
Applying What You’ve Learned
Copyright © 2017 Pearson Education, Inc.
1. Identify the main types of consumer and organizational products, and describe the four stages in the life cycle of a product.
2. Describe six stages in the product development process.
3. Define brand, and explain the concepts of brand equity and brand loyalty.
14-39
![Page 40: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/40.jpg)
Copyright © 2017 Pearson Education, Inc.
Applying What You’ve Learned (cont.)
4. Identify four ways of expanding a product line, and discuss two risks that product-line extensions pose.
5. List the factors that influence pricing decisions, and explain break-even analysis.
6. Identify nine common pricing methods.
14-40
![Page 41: Intro to Business Chapter 14](https://reader031.vdocuments.site/reader031/viewer/2022021921/58e8de4a1a28abe06c8b4e93/html5/thumbnails/41.jpg)
Copyright © 2017 Pearson Education, Inc. 14-41