Product Design
Pricing and Strategies
2
Chapter Objectives
Differentiate between a product item and
product line.
Classify products as consumer goods or business
goods.
Explain the seven steps in developing a new product.
Identify the stages in a product’s life cycle.
Define price and the role it plays in determining profit.
Describe the factors that affect pricing decisions.
Identify pricing strategies.
3
Product Defined
A specific model of athletic
shoe would be called a
product item.
product item:
The entire group of a
manufacturer’s athletic
shoes would be called a
product line.
4
Product Defined
Products can be classified
as consumer goods or
business goods.
consumer goods:
business goods:
Products need to have a
point of difference.
point of difference:
5
Steps in New Product
Development
The seven steps in new
product development are:
focus group:
1. _ _ _ _ analysis (strengths,
weaknesses, opportunities,
and threats)
2. Idea generation
3. Screening and evaluation
– Focus group
continued
6
continued
Steps in New Product
Development
4. Business analysis
Commercialization:
5. Development
6. Test marketing
7. Commercialization
7
Product Life Cycle
The four stages in the product life cycle are:
______
Maturity
Product Life Cycle
Introduction
_______
Not all products fit the life-cycle pattern.
8
Management of the
Product Life Cycle
The three ways to manage
the product life cycle are:
Repositioning:
Modifying the product.
Marketing the product.
Repositioning the
product.
9
E-Trading Collectibles
A box of baseball cards may not be
Operating an e-tail business
an electronic
worth theon
price
of college channel—the
tuition
Web—can be costly,anymore,
due to design,
delivery,
returns,bull
and
because
the so-called
operating expenses.market for sports collectibles peaked
in the 1990s. Lower demand has
Though Many larger dot-com companies crashed in the
caused
lower
prices.
the
latest hot
itemsNewton,
are
1990’s,
small
storesHowever,
like Harris
Cyclery
of West
autographs
from Hall
of Famers—and
top using
players
who don’t
Massachusetts,
actually
increase sales
a basic
Web
often
baseballs,
photographs,
jerseys,
or bats.
Youincan
site.sign
Today,
a third of
Harris’s bicycle
business
rides
on
find
bidtoon
these
curios atparts
collectibles
Web sites,
theand
Web
get
hard-to-find
and personal
service.
including eBay—but be sure to get authentication when you
Describe
an e-business’s
home
page toMantle.
your class after
score
that vintage
ball signed
by Mickey
viewing
one throughon
marketingseries.glencoe.com.
For
more information
sports and entertainment marketing,
go to marketingseries.glencoe.com.
10
1.
Explain the seven steps involved in
developing a new product.
2.
Name the four stages in the product
life cycle.
3.
What three things can be done to manage a
product through its life cycle?
11
Pricing
Price is important in a
business because it helps
determine a company’s
profit or loss.
Price:
Price plays a significant role
in the marketing mix.
12
Determining Profit
Subtract the cost of goods sold and the company’s
expenses from the money it generated in sales revenue.
1,000
baseball
bats sold
$175 each
=
$175,000
revenue
-
$90,000 to
purchase
the bats
-
$60,000
in business
expenses
=
$______
Profit
$90 each
13
Pricing Considerations
and Strategies
Three types of pricing
strategies are:
Prestige pricing
prestige pricing:
odd-even pricing:
Odd-even pricing
Target pricing
target pricing:
14
Pricing Considerations
and Strategies
Other pricing considerations
include:
Demand
Markup:
cost-plus pricing:
Cost
– Markup
– Cost-plus pricing
Newness of the product
non-price competition;
Competition
– Non-price competition
15
Pricing Objectives and
Strategies
Pricing objectives and
strategies include:
Profit objective
Market share objective
Special pricing
–
–
–
–
Price lining
Bundle pricing
Loss-leader pricing
Yield-management pricing
– Tiered pricing
market share the _________of
the total sales of all companies
that sell the same type of product
price lining selling all goods in
a product line at specific
__________ points
bundle pricing selling
___________ items as a
package for a set price
loss-leader pricing pricing an
item at ______or ________cost
to draw customers into the store
yield-management pricing
pricing items at _________ prices
to maximize revenue when
limited ____________is involved
16
Price Adjustments and
Regulations
Manufacturers will offer discounts in the following
situations:
Buying in _________quantities
Buying _________ to the buying season
Allowances are reductions taken from the quoted
price. One type of allowance is a trade-in.
17
Price Adjustments and
Regulations
The Sherman Anti-Trust Act
prohibits price fixing and
predatory pricing.
price fixing;
Price discrimination was
originally prohibited by the
Clayton Act and later by the
Robinson-Patman Act.
18
1.
How is pricing related to profit and the
marketing mix?
2.
List five factors that affect price decisions.
3.
What are two common pricing objectives
and special pricing strategies?
19
Checking Concepts
1. Explain the difference
between product item
and product line.
2. Name the ways products
can be defined and
classified.
3. Explain the seven steps
used in developing a new
product.
continued
20
Checking Concepts
4. Identify the four stages
in a product’s life cycle.
5. Define price.
6. Explain how price
determines a company’s
profit.
7. Identify the factors that
may influence pricing
strategies.
continued
21
Checking Concepts
Critical Thinking
8. Define and compare
markup and cost-plus
pricing.
22