Business 100: Chapter 14 Developing and Pricing Goods and Services

Products "Untouchable" by Spending Cuts

"Untouchable" Spending Cuts: Goods and services people do not eliminate during a recession. Internet service Cell phone service Cable television Discount apparel Haircuts and coloring Fast-food Why are the items listed on the slide "untouchables"?

Developing Value

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.

Using 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.

Key Brand Categories

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

Manufacturers' Brands- brand names of manufacturers that distribute products nationally. Manufacturers' brand examples - Ford, Microsoft, Xerox Dealer (Private-Label) Brands- products that carry a retailer's or distributor's brand name instead of a manufacturer's. Dealer brand examples - Kenmore from Sears

The 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

Bringing New Products to the Market

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.

Classifying Specialty 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 ***Purchasers of the items listed on this slide are brand insistent and refuse to accept substitutes.

Product Innovating During the Great Depression

The late twenties and thirties are associated with the Great Depression, but the period was also one of great product innovation. The items on the slide were invented during the Great Depression. Have students look at the items and ask: Why do you think these items were developed during a time when most Americans had very little discretionary income? Have students work with a partner or small group to come up with specific reasons they think these products developed.

Developing a Total Product

Total Product Offer- Everything consumers evaluate when deciding whether to buy something. -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. ***The total product offering includes tangible as well as intangible benefits.

Classifying Unsought 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 ***Unsought goods and services often rely on personal selling or specialty advertising - like the yellow pages.

Pricing Objectives

-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 One strategy many students have experienced but might not fully understand is the loss leader strategy. This strategy is often used around the Thanksgiving holiday when grocery stores offer to sell customers turkeys for much less than their actual cost in an effort to attract consumers into the store. This leads to more traffic and sales of more products.

Product Development Process

Benefits -Enhances product mix Risks -Expensive to develop -Creates risk of market failure -Loss of market share without new products

Building Brand Associations

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.

Establishing Brand Equity and Loyalty

Brand Equity- The combination of factors such as awareness, loyalty, perceived quality, images, and emotions that people associate with a brand name. Example: Coca-Cola and Ziploc have strong brand equity. Brand Loyalty- The degree to which consumers are satisfied and are committed to further purchases

Understanding Branding

Brand- Name, symbol, or design that identifies the goods or services and distinguishes them from competitors' offerings. Trademark- A brand that has exclusive legal protection for both its brand name and design. ***Recognized trademarks include the Nike Swoosh, the Pillsbury Doughboy, and Apple's Apple.

Identifying Products

Branding Products Branding- A process of using symbols to communicate the qualities of a particular product made by a particular producer. Key Factor: Signals uniform quality and stimulates consumer recall Brand loyalty- Consumer preference for a particular product Brand awareness- The brand name that comes first to mind when consumers consider a particular product category Identifying, or branding, our products is a very important part of the marketing mix. Branding is a process of using symbols to communicate the qualities of a particular product made by a particular producer. A brand signals uniform quality and stimulates consumer recall. Brand loyalty represents a consumer's preference for a particular product. Brand awareness is the brand name that comes first to mind when consumers consider a particular product category.

Company Uses of Packaging

Companies often use packaging to change and improve their basic product. Examples include: -Microwave popcorn -Tuna pouches -McDonald's green packaging Good packaging can also make a product more attractive to retailers.

Bringing New Products to the Market

Concept Testing- Takes a product idea to consumers to test reactions. Commercialization- Promoting the product to distributors and retailers and developing the promotional campaign.

Classifying Consumer Goods and Services

Convenience Goods and Services- products consumers purchase frequently with minimal effort. These include: Examples: -Candy and snacks -Gas -Milk and eggs ***Location, brand awareness, and image are important in marketing these goods and services.

Pricing Strategies

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 of Retailers

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.

Classifying 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

Product Width/ Depth of Proctor & Gamble

Laundry Detergent Toothpastes Bar Soaps Deodorants Shampoos Tissue/ Towel

Odd Product Ideas that Were Successful

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. ****Not all products necessarily make sense.

Differentiating Products

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

The Four Stages of a 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

Understanding Product Lines

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

Classifying Shopping Goods and Services

Shopping Goods and Services-products consumers buy only after comparing value, quality, price, and styles. These include: Examples: -Clothes and shoes -Appliances and furniture -Childcare -Home remodeling ***Brand name, price, and quality differences are important in marketing these goods and services.

Pricing Alternatives

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. When Apple introduced the iPhone, they used a skimming price strategy. The everyday low pricing or EDLP has been effectively used by Wal-Mart to dominate the retail sector.

Some Key Functions of Packaging

To attract buyers' attention Protect the goods inside and be tamper proof 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