Ch. 14 Developing and Pricing Goods and Services
Since different stages of the product life cycle experience differing levels of sales and profits , what are marketers able to do?
- alter the marketing mix - anticipate future market developments - alter marketing strategies
Factors that influence quality perception
- appearance - reputation - price
specialty goods and services
- consumer products with unique characteristics and brand identity - no substitutes - rely on advertising to reach special market segments - best way to promote: advertise in specialized magazines or sponsor events
variable costs
- costs that change according to level of production - includes expenses of materials used and direct costs of labor
Products that don't carry manufacturer's name but do carry the distributor or retailer name
- dealer brands - private-label brands
target costing
- demand-based - designing product so it satisfies customers and meets profit margins desired by firms
service providers
- do not offer tangible products - can still have product lines and product mixes
product value
- good quality at a fair price - benefits - costs to determine whether benefits exceed costs
industrial goods
- goods sold from B2B - e.g. drill press, computer servers
Marketing Mix
- helps to understand product life cycle
How must marketers satisfy customers?
- listen better - adapt
radio frequency identification (RFID) chip
- method of tracking products - can be read at a distance
generic name/goods
- name for an entire product category - non-branded
dealer brand
- other names: private label, house brand, distributor brand - don't carry manufacturer name, but carry distributor or retailer name
What is a brand manager in a B2B company responsible for?
- product - price - promotion
unsought goods and services
- products consumers are unaware of or haven't thought of purchasing - best way to promote: personal selling
shopping goods and services
- products the consumer buys only after comparing value, quality, price, and style from a variety of sellers (e.g. dishwashers, automobiles) - best way to promote: combine price, quality, and service to create value - comparison to substitutes - best way to raise appeal: price and quality
convenience goods and services
- products the consumer wants to purchase frequently with minimum effort - best way to promote: make readily available - little thought goes into purchasing
New functions of packaging
- promotional messages - pricing information
Functions of Product Packaging
- protection - info about product - attract buyers
Product Life Cycle
- theoretical model - describes sales & profits of a product class over time - used to recognize how to invest in the product to meet company objectives and change a product's marketing mix as it moves through the stages
brand equity
- value of brand name and associated symbols - core: brand loyalty
New Product Development Process
1. Idea Generation 2. Product Screening 3 Product Analysis 4. Development 5. Testing 6. Commercialization
`4 Stages of the product life cycle
1. Introduction 2. Growth 3. Maturity 4. Decline
Achieve Greater Market Share
Offering lower prices and lower financing rates, low lease rates, or rebates
Create an Image
Price high to create perception of exclusivity
_______ have a direct impact on pricing strategy and should therefore be clearly formulated in the context of the strategic marketing plan and the rest of the marketing mix
Pricing objectives
Further Social Objective
Pricing products low, so people with little money can afford them
In the long run, what is price determined by?
The market
competition-based pricing
a pricing strategy of setting price at, above, or below competitors based on what they are doing
Building Traffic
advertising certain products at or below cost to attract people to the store
product mix
all product lines offered by a manufacturer
fixed cost
amount paid to own or rent a factory or warehouse and the amount paid for business insurance
packaging
can be used to make changes/improvements to a product
How do consumers calculate the value of a product?
considering whether all benefits > all costs
product differentiation
creation of real or perceived product differences
cost-based pricing strategy
determine price by costs of production plus a profit margin
product screening
determine whether product fits well with existing products, has good profit potential, and is marketable; narrows down to single, most promising product idea
nonprice competition
differentiating product by promoting nonprice related attributes
product value enhancer
e.g.: - price, store surroundings, guarantee - brand name, service, delivery speed - convenience, internet access, image created by advertising - package, buyer's past experience, producer reputation
demand-based pricing strategy
estimate price people are willing to pay and design product that will satisfy customers and meet profit margins
total product offer
everything consumers evaluate when deciding whether to buy something including look & feel, features, and company/brand reputation
total fixed costs
expenses that are consistent no matter how many products are made/sold
brand loyalty
extent to which consumers are satisfied, like the brand, and are committed to further purchases
concept testing
gauge customer reactions to product idea(s)
product line
group of products that are physically similar or intended for a similar market
bundling
grouping multiple products together and pricing as a unit
knock offs
illegal copies of national brand name goods
What are two recommended ways to generate brand equity?
increase brand loyalty and brand awareness
distributed product development
increase in outsourcing and alliance building that often includes coordinating with companies in other countries
penetration price strategy
low initial entry price to attract many customers and discourage competition
Target Return on Investment or Profit
making a profit by providing goods and services to others
product analysis
making cost estimates and sales forecasts to get a feeling for the profitability of a new product idea
commercialization
marketing process of promoting a product to distributors and retailers and developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers
manufacturers' brand (names)
name of brands that manufacturers distribute nationally
brand
name, symbol, or design that represent goods/services of one seller/group of sellers
What must marketer's continually adapt product to?
new competition, new markets
brand insistence
not accepting any substitutes for a specific product
new-product failure
not delivering what's promised
generating new product ideas
part of new product development process that requires listening to employees, customers, and suppliers
brand manager
person in charge of a product line
brand preference
prefer one brand over another
competition-based pricing strategy
price product at, above, or below that of competition
Due to competition and demand in the marketplace, ________ and ________ aren't always related
price; cost
skimming price strategy
pricing new product high to recover research and development costs and maximize products while there's minimal competition
demand-oriented pricing
pricing on the basis of consumer demand
break-even analysis
process of determining profitability at various levels of sales
tangible total product offering
product & package
intangible total product offering
product image & company reputation
loss leaders
product sold at a loss to attract customers
Fair Packaging and Labeling Act
provide more info on product quantity and content
marketing
set of processes for creating, communicating, and delivering value to customers, according to the American Marketing Association
high-low pricing
set prices higher than everyday low price stores then have sales that set prices lower than competitors
Everyday low pricing (EDLP)
setting price lower than competitors without special sales
psychological pricing
trying to make product appear less expensive than it really is by the price points they set
trademark
type of brand with exclusive legal protection of name and design
marketing tasks
vary with product category
brand association
when brand is linked to other favorable images
price leadership
when one or more dominant firms set pricing practices that all competitors in an industry follow
break-even point
when sale revenues equal all costs
brand awareness
when specific brand name comes to mind when hear about a product category