Product Design
Chapter 4
Product Item
• Is a specific model or size of product
Product Line
• Group of closely related products
Product Mix
• All the products a company makes
Product Classification
Consumer Good
• Purchased and used by the
ultimate consumer for
personal use
Business Goods
• Purchased by the
organization for use in their
operation
Point of Difference
• Is a unique characteristic or benefit that sets
the product apart from a competitor’s product
Steps in New Product Development
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SWOT Analysis
Idea Generation
Screening and Evaluation
Business Analysis
Development
Test Marketing
Commercializtion
SWOT Analysis
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Strength
Weakness
Opportunity
Threat
Focus Group
• A panel of six to ten consumers who discuss
their opinions about a topic under the
guidance of a moderator
Commercialization
• Is a process that involves producing and
marketing a new product
Product Life Cycle
• Introduction – main focus is promoting consumer
awareness and getting consumers to try the
product
• Growth – more competitors enter the
marketplace if they see a new product is
successful (Powerade/Gatorade) Distribution is
important
• Maturity – sales begin to slow down
• Decline – sales begin to drop. Technology
advances can cause entire categories to entire
decline stage
Repositioning
• Involves changing a product’s image in
relation to its competitor’s image.
Pricing and Strategies
• Price – the value placed on the goods or
services being exchanged
• Price is important because it helps determine
a company’s profit or loss
• What is the target market willing to pay?
• Company purchased 1,000 bats for $90 each
and sold them for $175 each. How much
money did the company make?
Pricing
Consideration
and Strategies
• Prestige Pricing – is based
on consumer perception.
• Items are priced well above
the average market price to
attract consumers who may
judge a product’s quality by
its price
Odd-even pricing
• Pricing goods with either an odd number or an
even number to match the product’s image.
• Odd-pricing suggests a bargain
• Even-pricing reflect a quality item
Target Pricing
• Pricing goods according to what consumers
are willing to pay.
• Manufactures estimate the target price then
work backwards to determine how much to
charge wholesalers and retailers for that item
Supply and Demand
• Elastic demand – change in price will affect
the demand
• Inelastic demand – product is a necessity,
there are no substitutions, a price increase is
not significant relative to income, or there are
time restraints
Markup
• Difference between the retail or wholesale
price and the cost of an item
• Must be high enough to cover expenses and
ensure a profit
Market Share
• Percentage of total sales of all companies that
sell the same type of product
Price Lining
• Selling all goods in a product line at a specific
price point
Bundle Pricing
• Selling several items as a package for a set
price
Loss-leader Pricing
• Pricing an item at cost or below to draw
customers into the store
$89.00 (regularly $100.00)
Yield-Management Pricing
• Pricing items at different prices to maximize
revenue when limited capacity is involved
Price Fixing
• Illegal practice whereby competitors conspire
to set the same prices
• Sherman Anti Trust Act prohibits price fixing