Chapter Thirteen
Creating and
Pricing Products
That Satisfy
Customers
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Learning Objectives
1. Explain what a product is and how products are
classified
2. Discuss the product life cycle and how it leads to
new product development
3. Define product line and product mix and distinguish
between the two
4. Identify the methods available for changing a
product mix
5. Explain the uses and importance of branding,
packaging, and labeling
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Learning Objectives (cont’d)
6.
Describe the economic basis of pricing and the means
by which sellers can control prices and buyers’
perceptions of prices
7.
Identify the major pricing objectives used by businesses
8.
Examine the three major pricing methods that firms
employ
9.
Explain the different strategies available to companies
for setting prices
10. Describe three major types of pricing associated with
business products
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Classification of Products

Define
• Product
- Know the difference between a Consumer
Product and a Business (Industrial)
Product
•
•
•
•
Convenience Product
Shopping Product
Specialty Product
Raw Material
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Business Product Classifications (cont’d)

Define
•
•
•
•
•
•
Major Equipment
Accessory Equipment
Component Part
Process Material
Supply
Business Service
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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The Product Life Cycle

Be able to explain the Product Life Cycle

Know the stages
• Introduction
• Growth
• Maturity
• Decline

Be able to explain what happens to sales and
profits at each stage

Why is it important that marketers understand the
product life cycle?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Product Line and Product Mix

Define
• Product Line
• Product Mix
- Be able to explain the width and depth of
the mix
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Managing the Product Mix

Be able to discuss how firms manage existing products
• Product Modification
• Line Extensions
• Deleting Products

Be familiar with the seven phases of New Product
Development
1. Idea development
2. Screening
3. Concept testing
4. Business analysis
5. Product development
6. Test marketing
7. Commercialization
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Why Do Products Fail?

Be prepared to discuss the reasons why
products fail
• Improperly/Incompletely planned and tested
• Commercialization launched too quickly
• Pushing ahead even when flaws are known
• Inadequate financing

Be able to think of some prominent product
failures
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Branding

Define
• Brand
• Brand Name
• Brand Mark
• Trademark
• Trade Name

Know the different Types of Brands
• Manufacturer (Producer) Brand
• Store (Private) Brand
• Generic
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Benefits of Branding

Be able to discuss the various Benefits of
Branding

Define
• Brand Loyalty
• Brand Equity

What criteria should a firm consider when
Choosing a Brand?

What steps must a firm take to Protect a
Brand?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Branding Strategies

Know the different Branding Strategies
• Individual Branding
• Family Branding
• Brand Extensions

What are the advantages and drawbacks of
each of these strategies?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Packaging

Define Packaging

Know the Functions of Packaging

What are the principle Design Considerations?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Labeling

Define Labeling

What information must be included on a
product’s label?

What elements might be included on a
label?

What is an Express Warranty?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Products

What is the meaning and use of price?

Define
• Supply
• Demand
• Equilibrium Price

How does Supply and Demand affect prices?

Be familiar with Supply and Demand Curves and how
to determine the Equilibrium Price
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Objectives and Methods

Define
• Price Competition
• Non-Price Competition

Be prepared to discuss Buyers’ Perceptions of Price

Be able to define the following terms related to Pricing
Objectives
• Survival
• Profit Maximization
• Target Return on Investment (ROI)
• Market-Share Goals
• Status Quo Pricing
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Breakeven Analysis

Understand Breakeven Analysis and the
variables used to calculate it
•
•
•
•
•

Breakeven Quantity
Total Revenue
Fixed Cost
Variable Cost
Total Cost
Be able to read a table displaying the breakeven
point
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Methods

Define
•
•
•
•
Cost-Based Pricing
Demand-Based Pricing
Price Differentiation
Competition-Based Pricing

When are each of these pricing methods used?

What are the benefits and drawbacks of each of
these pricing methods?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Strategies

Be familiar with the different types of Pricing
Strategies

New-Product Strategies
• Price Skimming
• Penetration Pricing

Differential Pricing
•
•
•
•
Negotiated Pricing
Secondary-Market Pricing
Periodic Discounting
Random Discounting
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Strategies (cont’d)

Psychological Pricing
•
•
•
•
•
•

Odd-Number Pricing
Multiple-Unit Pricing
Reference Pricing
Bundle Pricing
Everyday Low Prices (EDLPs)
Customary Pricing
Product-Line Pricing
• Captive Pricing
• Premium Pricing
• Price Lining
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Pricing Strategies (cont’d)

Promotional Pricing
• Price Leaders
• Special-Event Pricing
• Comparison Discounting

Geographic Pricing
• Deals with Delivery Costs
• FOB (Free-on-Board) Origin Pricing
• FOB Destination Pricing

Transfer Pricing

Discounting
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Discounts Used for Business Markets

Be able to list and describe discounts used
exclusively for business markets
• Trade (Functional)
• Quantity
• Seasonal
• Allowance
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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