BUSN101 Ch. 14 Developing and Pricing Goods and Services

What are six pricing strategies other than competition based, cost based, and demand based?

1. Skimming price strategy 2. Penetration strategy 3. Everyday low pricing (EDLO) 4. High-low pricing strategy 5. Psychological pricing 6. Bundling

What are three ways in which packaging can change a product?

1. Visibility 2. Usefulness 3. Attractiveness

How does a marketer create a perception of product differentiation?

Actual product differences are sometimes quite small, so marketers must use a creative mix of pricing, advertising, and packaging (value enhancers) to create a unique, attractive image. Various bottled water companies, for example, have successfully attempted product differentiation.

How would the marketing be different?

Advertising is less of a factor when selling industrial goods. Vice-versa for consumer goods.

What are brand preference and brand insistence?

Brand preference- that is, they prefer one brand over another- because of such cues. Brand insistence- the product becomes a specialty good. For example, a consumer may insist on Goodyear tires for his or her car.

Organizations must constantly monitor

Changing consumer wants and needs, and adapt products, policies, and services accordingly.

Specialty goods and services

Consumer products with unique characteristics and brand identity. Because these products are perceived as having no reasonable substitute, the consumer puts forth a special effort to purchase them.

Variable costs

Costs that change according to the level of production.

Target costing

Designing a product so that it satisfies customers and meets the profit margins desired by the firm.

What are the responsibilities of a brand manager?

Direct responsibility for one brand or product line, and manages all the elements of its marketing mis: product, price, place, and promotion.

Total product offer

Everything that consumers evaluate when deciding whether to buy something also called value package.

Value

Good quality at a fair price. When consumers calculate the value of a product, they look at the benefits and then subtract the cost to see if the benefits exceed the costs.

Bundling

Grouping two or more products together and pricing them as a unit.

Distributed product development

Handing off various parts of your innovation process often to companies in other countries.

Brand awareness

How quickly or easily a given brand name comes to mind when a product category is mentioned.

Knockoff brands

Illegal copies of national brand-name goods.

What distinguishes a consumer good from an industrial (or B2B) good?

Industrial goods are products used in the production of other products. They are sold in the B2B market.

In discussing industrial goods, describe: - Installations: - Capital items: - Accessory equipment:

Installations: consist of major capital equipment such as new factories and heavy machinery. Capital items: Are expensive products that last a ling time. Accessory equipment: Consists of capital items that are not quite as long-lasting or expensive as installations- like computers, copy machines and various tools.

How can a company create brand associations?

Linking a brand to another favorable image, like famous product users, a popular celebrity, or particular geographic area.

Product analysis

Making cost estimates and sales forecasts to get a feeling for profitability of new-product ideas.

Why is packaging carrying more of the promotional burden today than in the past?

Many products once sold by salespersons are now sold in self-service outlets, and the package has acquired more sales and responsibility.

In using non-price competition, what aspects of their products will firms tend to stress?

Marketers tend to stress product images and consumer benefits such as comfort, style, convenience, and durability.

Discuss the important considerations in cost-based pricing.

Measure production costs (including materials, labor, and overhead), add in margin of profit, and you come up with a price. Pricing should take into account costs, but it should also include the expected costs of product updates, the marketing objectives for each product, and competitor prices.

Do all products follow the traditional stages of the product life cycle in the same pattern?

No this cycle is a theoretical model of what happens yo sales and profits for a product class over time. Not all individual products follow the life cycle.

Generic goods

Non-branded products that usually sell at a sizable discount compared to national or private-label brands.

Unsought goods and services

Products that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem.

Dealer (private-label) brands

Products that don't carry the manufacturer's name but carry a distributor or retailer's name instead.

Describe demand oriented pricing.

Recognizing that different consumers may be willing to pay different prices, marketers sometimes price on the basis of consumer demand rather than cost or some other calculation.

Everyday low pricing (EDLP)

Setting prices lower than competitors and then not having any special sales.

Concept testing

Taking product idea to consumers to test their reactions.

What are the important elements of target costing?

Target costing is demand-based. a product is designed so it not only satisfies customers but also meets the profit margins set. Target costing makes the final price an input to the product development process, not an outcome of it.

What are the odds that a product will be successful?

The odds a new product will fail are high. Over 80% of products introduced in any year fail to reach their business objectives.

What is the problem with a high-low pricing strategy?

The problem with such pricing is that it encourages consumers to wait for sales, thus cutting into profits.

Break-even analysis

The process used to determine profitability at various levels of sales.

Price leadership

The strategy by which one or more dominant firms set the pricing practices that all competitors in an industry follow.

Brand equity

The value of the brand name and associated symbols.

What is the main idea behind EDLP?

They set prices lower than competitors and don't usually have special sales. The idea is to bring consumers to the store whenever they want a bargain rather than having them wait until there is a sale.

Shopping goods and services

Those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers.

In bundling, or combining goods and services into one package, what is the consideration marketers must be aware of, with regard to price?

When combining goods or services into one package, marketers must not include so much that the price gets too high. It is best to work with customers to develop value enhancers that meet their individual needs.

What determines into which class a product falls? Can one consumer good be classified in several ways?

Whether a good or service falls into a particular class depends on the individual consumer. Coffee can be a shopping good for one consumer, while flavored gourmet roast is a specialty good for another.

What are five pricing objectives?

1. Achieving a target on investment or profit 2. Building traffic 3. Achieving greater market share 4. Creating an image 5. Furthering social objectives

What questions are answered by concept testing?

1. Do they see the benefits of this new product? 2. How frequently would they buy it? 3. At what price? 4. What feature do they like and dislike? 5. What changes in it would they make?

What are the four stages of the product life cycle?

1. Introduction 2. Growth 3. Maturity 4. Decline

Why does a company develop a variety of total product offers?

A company develops a variety of product offers because different consumers want different total product offers.

Product Line

A group of products that are physically similar or are intended for a similar market.

Product life cycle

A theoretical model of what happens to sales and profits for a product class over time; the four stages of the cycle are introduction, growth, maturity, and decline.

Total fixed costs

All the expenses that remain the same no matter how many products are made or sold.

What are the best ways to promote: Convenience goods: Shopping goods: Specialty goods: Unsought goods:

Convenience goods: The best way to promote convenience goods is to make them readily available and create the proper image. Shopping goods: Come combination of price, quality, and service is the best appeal. Specialty goods: Rely on reaching special market segments through advertising. Unsought goods: Rely on personal selling

How is the Internet affecting pricing?

Customers can no compare prices of many goods and services on the Internet. They have been introduced to a "demand collection system'" in which buyers post the prices they are willing to pay and invite sellers to accept or decline the price.

What are some of the expenses included in: fixed costs: variable costs:

Fixed costs: all the expenses that remain the same no matter how many products are made or sold. Among the expenses that make up fixed costs are the amount paid to own or rent a factory or warehouse and the amount paid for business insurance Variable costs: change according to the level or production. Included are the expenses for the materials used in making products and the direct costs of labor used in making those goods.

How does a brand name benefit buyers and sellers?

For the buyer a brand name: 1. Ensures quality 2. Reduces search time 3. Adds prestige to purchase For the seller brand names: 1. Facilitate new-product introductions 2. Help promotional efforts 3. Add to repeat purchases 4. Differentiate products so that prices can be set higher

What is the major price consideration when evaluating competition based pricing?

Price leadership by which one or more dominate firms set pricing practices all competitors in an industry follow.

Psychological pricing

Pricing goods and services at price points that make the product appear less expensive than it is.

In the product analysis step of the new product development process, what happens to products that don't meet established criteria?

Products that don't meet the established criteria are withdrawn from consideration.

Industrial goods

Products used in the production of other products. Sometimes called business goods or B2B goods.

Commercialization

Promoting a product to distributors and retailers to get wide distribution, and developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers.

Describe RFID in packaging.

Radio frequency identification chip, packing technology for tracking products, especially ones made with nanoparticle powder. When attached to a product, the chip send out signals telling a company where the product is at all times. RFID chips carry more information than bar codes and don't have to be read one at a time and can be read at a distance.

Describe the characteristics of shopping goods.

Shopping goods and services are sold largely through shopping centers where consumers can make comparisons of products like clothes, shoes, appliances, and auto repair services.

Can a good be classified as both?

Some products can be both consumer and industrial goods.

Skimming price strategy

Strategy in which a new product is priced hight to make optimum profit while there's little competition.

Penetration strategy

Strategy in which a product is priced low to attract many customers and discourage competition.

Describe a "loss leader" in pricing.

Supermarkets often advertise certain products at or below cost to attract people to the store. The long-run objective is to make profits by following the short-run objective of building a customer base.

Manufacturers' brands

The brand names of manufacturers that distribute products nationally.

Product mix

The combination of product lines offered by a manufacturer.

Product differentiation

The creation of real or perceived product differences.

Brand loyalty

The degree to which customers are satisfied, like the brand, and are committed to further purchases.

What is the key to creating perceived quality?

The key to creating a perception of quality is to identify what consumers look for in a high-quality product and then to use that information in every message the company sends out. Factors influencing the perception of quality include price, appearance and reputation.

Brand association

The linking of a brand to other favorable images.

What pricing strategy is being used when the company: a. ____________ Sets prices high to make optimum profit when there is little competition? b. ____________ Sets prices higher than those at stores, using EDLP, but has special sales? c. ____________ Prices products at points that make them appear less expensive? d.____________ Prices products low to attract customers and discourage competition? e. ____________ Groups products together and prices them as a unit? f. ____________ Sets prices lower than competitors and usually doesn't have sales.

a. Skimming price strategy b. High-low pricing strategy c. Psychological pricing d.Penetration e. Bundles f. EDLP

Different stages in the product life cycle call for

different marketing strategies.

To satisfy consumers today marketers and managers must

learn to listen better and constantly adapt to changing market demands. For example, traditional phone companies must now compete with Voice over Internet Protocol (VoIP)- s system that allows people to make very inexpensive phone calls through the internet.

Pricing objectives should be influenced by:

other marketing mix variable decisions, such as product design, packaging, branding, distribution and promotion.

List the four different classes of consumer goods and services. Give an example of each kind.

1. Convenience goods and services - products the consumer wants to purchase frequently & with minimum effort like candy, gum, milk 2. Shopping goods and services - products the consumer buys only after comparing value, quality, price, & style like clothes, shoes, appliances, & auto repair services 3. Specialty goods and services -Consumer products with unique characteristics and brand identity a special effort is put forth to purchase. includes fine watches, expensive wine, jewelry etc. 4. Unsought goods and services - products consumers are unaware of, haven't necessarily thought of buying. Ex: emergency car towing, burial services, and insurance

Trademark

A brand that has exclusive legal protection for both its brand name and its design.

Brand manager

A manager who has direct responsibility for one brand or one product line; called a product manager in some firms.

Brand

A name, symbol, or design (or combination thereof) that identifies the goods or services of one seller or group of sellers and distinguishes them from goods and services of competitors.

Product screening

A process designed to reduce the number or new product ideas being worked on at any time.

Why will consumers put forth a special effort to purchase a specific brand name when purchasing specialty products? How are these goods marketed?

Because consumers perceive that specialty goods have no reasonable substitute. Specialty goods are often marketed through specialty magazines. Some specialty goods can be sold exclusively on the internet.

Convenience goods and services

Products that the consumer wants to purchase frequently and with a minimum effort.

High-low pricing strategy

Setting prices that are higher than EDLP stores, but having may special sales where the prices are lower than competitors'.

Identify the steps in the new product development process.

1. Idea generation (based on consumer wants and needs) 2. Product screening 3. Product analysis 4. Development (including building prototypes) 5. Testing 6. Commercialization (brining the product to the market)

What are three things important to marketers of convenience goods?

1. Location 2. Brand awareness 3. Image

What are four reasons for product failure?

1. Not delivering what is promised is a leading cause of new-product failure. 2. Getting ready for marketing too late 3. Poor positioning 4. Too few differences from competitors, and poor packaging

Describe three important components of brand equity.

a. The core of brand equity is brand loyalty. A loyal group of customers represents substantial value to the firm. b. Another part of brand equity is brand awareness, which is built by advertising and event sponsorships c. A third element is perceived quality which is an important part of brand equity. A product that is perceived as having better quality than its competitors can be priced accordingly.

Identify the functions of packaging.

1. Attract the buyer'r attention 2. Protect the goods inside, stand up under handling and storage, be tamperproof, and deter theft. 3. Be easy to open and use 4. Describe and give information about contents. 5. Explain the benefits of the good inside 6. Provide information on warranties, warnings, and other consumer matters 7. Give some indication of price, values, and uses.

What are the factors that make up the total product offer?

1. Price 2. Store surroundings 3. Guarantee 4. Brand name 5. Service 6. Speed of delivery 7. Convenience 8. Internet access 9. Image created by advertising 10. Package 11. Buyer's past experience 12. Reputation of producer

What are two important elements of the marketing effort during commercialization?

1. Promoting the product to distributors and retailers to get wide distribution 2. Developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers

What are important sources of new product ideas?

1. Research and development 2. Employee 3. Firms listening to their suppliers for new product ideas, because suppliers are often exposed to new ideas.

List the criteria used for product screening.

1. determine whether the product fits well with present products 2. Has a good profit potential 3. Marketable

What is the difference between a brand, brand name and a trademark?

A brand is a new, symbol, or design (or combination thereof) that identifies the goods or services of one seller or group of sellers and distinguishes them form the goods and services of competitors. A brand name consists of a word, letter; or group of words or letters that differentiates one seller's goods and services from those of competitors. A trademark is a brand that has exclusive legal protection for both its brand name and its design.

How does a manufacturer's brand name become a generic brand?

A brand name can become generic when a name becomes so popular, so identified with the product that it loses its brand status and become the name of the product category. Examples include aspirin, nylon, escalator, and zipper.

Competition-based pricing

A pricing strategy based on wheat all the other competitors are doing. The price can be set at, above, or below competitors prices.

What is the difference between a product line and a product mix?

A product line is a group of products that are physically similar or intended for a similar market. A product mix is the combination of product lines offered by a manufacturer.