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Developing andPricing Products
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What Is a Product?
Features are the qualities, tangible andintangible, that a company builds into its
products
Benefits are what the consumer derivesfrom the product: the want-satisfying value
Value package is a product marketed as a
bundle of value-adding attributes
Features?
Benefits?
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Types of ConsumerProducts
Convenience Goods: Commonly available,
generally affordable, often prone to rapid
consumption and re-buy, in which casethese are referred to as ast !oving
Consumer Goods "!CG#s$
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Types of ConsumerProducts
%hopping Goods: & category of consumer
goods that are purchased after the buyer
has spent some time and effort comparingthe price, quality, style and other attributes
of the product in several stores 'ypes of
Consumer (roducts
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Types of ConsumerProducts
%pecialty Goods: & category of consumer
goods for which the consumers have a
strong brand preference and are willing tospend substantial time, effort and money for
acquiring the desired brand
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Types of ConsumerProducts
)nsought (roducts: & category of products
about which the consumers are generally
not aware, or if they are aware, they wouldrather not buy them unless otherwise
compelled
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Types of Business Products
*aw !aterial: +usiness goods that become
part of another tangible product before
being processed amples include natural resources,
minerals, agriculture, dairy and poultry
products etc.
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Types of Business Products
abricating !aterials / (arts: +usiness
goods that become part of another tangible
product after being processed amples include sugar, flour, semi-
conductor micro chips in computers, and
0ippers / buttons in clothing etc.
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Types of Business Products
nstallations: !anufactured products that
form an organi0ation#s maor, epensive
and long-lived assets amples include machinery "heavy
generators, blast furnaces, machinery used
in production$ and buildings
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Types of Business Products
&ccessory quipment: Goods that neither
become a part of finished goods nor are
directly involved in the manufacturingprocess, yet are essential in carrying out
various processes of a firm
amples include workstations, fork lifts,
office furniture etc.
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Types of Business Products
3perating %upplies: Goods characteri0ed
by low price and short life span, contributing
to an organi0ation#s operations amples include stationery, fuel, telephone
sets etc.
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The Product Mix
Product mix is a group of products that afirm makes available for sale "e.g. 4estle$
Product line is a group of similar products
intended for a similar group of buyers whowill use them in similar ways
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nderstanding Product MixProcter &Gamble
Body Wash& Soap
Antiperspirants
&Deodorants
Hair Care
Ivory Olay Old Spice
Safe!ard
Camay "o#$ema
%est
Secret Pantene
Head &Sho!lders
Herbal ssences
Inf!si!m
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The !e"en#!tep Product$e"elopment Process
1. Product Ideas
2. Screening
3. Concept Testing 4. Business Analysis
5. Prototype Developent
!. Product Testing and Test "ar#eting
$. Coerciali%ation
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The Product %ife Cycle
&ccording to the (6C a product passesthrough many stages in it#s life
t is important for managers to understandand formulate appropriate strategies foreach stage
'he concept of product life applies to a
generic category of products "not to brands$
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The P%C !tages
ntroduction
Growth
!aturity
7ecline
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Introduction
Customers: ew Competition: 6ittle or none
%ales: 6ow, but rising (rofits: 4one Cost per unit: 8igh (ricing: 8igh 7istribution : %cattered %trategy: (roduct &wareness
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&ro'th
Customers: !ass !arket Competition: ncreasing
%ales: *apid Growth (rofits: (eaking Cost per unit: 7eclining (ricing: 6ower 7istribution : ntensive %trategy: 7ifferentiation
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Maturity
Customers: !ass !arket Competition: ntense
%ales: %low Growth (rofits: 7eclining Cost per unit: %table (ricing: 6owest
7istribution : ntensive %trategy: *etention
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$ecline
Customers: 6oyalists Competition: 7ecreasing
%ales: 7eclining (rofits: 6ow or none Cost per unit: 6ow (ricing: ncreasing
7istribution : %elective %trategy: it
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1 n t r o d u
c t i o n
G r o ' t
h
(at!rity
7 e c l i n e S a l e s
V o l u m
e
)ime In *ears
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Branding Products
Branding is the process of using symbolsto communicate the qualities of a product
made by a particular producer
Adding &alue t'roug' Brand ()uity
Brand equity is the degree of consumers# loyalty
to and awareness of a brand and its resultant
market share
Brand awareness is the etent to which a brand
name comes to mind when the consumerconsiders a particular product category
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Types of Brand (ames
(ational )rand is a product producedby, widely distributed by, and carry thename of the manufacturer
%icensed )rand is a product forwhose name the seller has purchasedthe right from an organi0ation orindividual
Pri"ate )rand "or Pri"ate la)el$ is aproduct that a wholesaler or retailerhas commissioned from amanufacturer
Costco-irkland
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Packaging and %a)elingProducts
Packaging is the physical container inwhich a product is sold, advertised orprotected
%a)eling can help market the product Label is the part of a product#s packaging
that identifies its name, manufacturer andcontents
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What Is Pricing?
Process of determiningwhat a compan will
receive in e!change forits products
P i i t M t B i
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Pricing to Meet Business*)+ecti"es
Pricing o)+ecti"es are goals
that producers hope to attain in
pricing products for sale
Profit#Maximi,ing *)+ecti"es Pricing for maximizing profits on
each unit sold
Market !hare *)+ecti"es
Market share is a company#s
percentage of total market sales
for a specific product type
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Cost#*riented Pricing
Cost#oriented pricing considers the
firm#s desire to make a profit and its
need to cover production costs Markup is the amount added to an item#s
cost to sell it at a profit
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Breake"en -nalysis
Breake"en analysis assesses costs
versus revenues for various sales volumes
Varia)le cost is a cost that changes with thequantity of a product produced or sold
Fixed cost is a cost unaffected by the quantity
of a product produced or sold
Breake"en point is the sales volume at whichthe seller#s total revenue from sales equals total
costs with neither profit nor loss
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Break ."en -nalysis
+reak even point is that quantity of output
"sales$ at which total revenue equals total
cost, at a certain selling price +reak even point ? 'otal ied Cost
%elling (rice @ Aariable Cost "per unit$
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Breake"en -nalysis
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Pricing .xisting Products
(ricing above prevailingmarket prices for similarproducts
(ricing below market prices
(ricing at or near marketprices
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Pricing (e' Products
Price skimming is setting an
initial high price to cover new
product costs and generate a
profit
Penetration pricing is settingan initial low price to establish
a new product in the market
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Fixed "ersus Flexi)le Pricing
Flexi)le Pricing works where the sellerscan alter prices privately , on a one-to-one,
customer-to-customer basis.
Fixed pricing leaves no room for
bargaining
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Pricing Tactics
Price lining is setting a fied price forcertain categories of products
Psychological pricing or 3dd (ricing
takes advantage of the idea that consumerstend to see prices in round figures
niform Pricing is when a diverse range ofgoods are given the same price
$iscount is a price reduction offered as anincentive to purchase
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