Developing and Pricing ProductsPertemuan 10

Matakuliah : J0712 - Pengantar BisnisTahun : 2009

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Developing and Pricing Products•Outline:

What Is A Product?Developing New ProductsIdentifying ProductsDetermining PricesPricing Strategies & Tactics

What is a Product?• Features are the qualities, tangible and intangible,

that a company builds into its products.• Benefits are what the consumer derives from the

product: the want-satisfying value.• Value package is a product marketed as a bundle

of value-adding attributes.

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Features?Benefits?

Goods/Services-Classification

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•Consumer

•Industrial

Consumer Products

• Convenience- Rapidly Consumed• Shopping

– Moderately Priced– Infrequent Purchase

• Specialty– Expensive– Rarely Purchased

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Industrial Products• Expense Items

– Regularly Purchased– Consumed Rapidly

• Capital Items– Expensive– Long-lasting– Infrequently

Purchased

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The Product MixProduct mix is a group of products that a

firm makes available for sale (e.g. Nestle).

Product line is a group of similar products intended for a similar group of buyers who will use them in similar ways.

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Ex: Product Mix - Minute Maid

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New Product Development

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Product MortalityFailure rates for new products are high.

Speed to market is a strategy of introducing new products to respond quickly to customer or market changes.

New Product Development Process

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1. Product Ideas2. Screening3. Concept Testing4. Business Analysis5. Prototype Development6. Product Testing and

Test Marketing7. Commercialization

Variations in the Process for Services

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Steps 2, 3, 4, 6 & 7 are the same. Differences in steps 1 and 5:

Service IdeasService package is the tangible and intangible features that characterize a service product.

Service Process DesignService process design is three aspects (process selection, worker requirements, facilities requirements) of developing a service product.

Product Life Cycle

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Series of stages in a product’s profit-producing life

Stages of PLC• Introduction: This stage begins when the product

reaches the marketplace.• Growth: If the new product attracts enough

consumers, sales start to climb rapidly.– Consumers Attracted– Sales Climb

• Maturity: Sales growth starts to slow.• Decline: Sales and profits continue to fall as new

products in the introduction stage take away sales.– Other Competing New Products Introduced.– Sales & Profits Decline.

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Extending Product Life: An Alternative to New Products

• Product extension is an existing product that is marketed globally.

• Product adaptation is the product modified to have greater appeal in foreign markets.

• Reintroduction is the process of reviving for new markets products that are obsolete in older ones.

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Branding Products• Branding is the process of using

symbols to communicate the qualities of a product made by a particular producer.

– Adding Value through:• Brand equity is the degree of

consumers’ loyalty to and awareness of a brand and its resultant market share.

• Brand awareness is the extent to which a brand name comes to mind when the consumer considers a particular product category.

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World’s 10 Most Valuable Brands

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Types of Brand Names

– National brand is a product produced by, widely distributed by, and carry the name of the manufacturer.

– Licensed brand is a product for whose name the seller has purchased the right from an organization or individual.

– Private brand (or Private label) is a product that a wholesaler or retailer has commissioned from a manufacturer.

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Costco-Kirkland

Packaging and Labeling Products• Packaging is the physical container in which

a product is sold, advertised or protected.

• Labeling can help market the product– Label is the part of a product’s packaging that

identifies its name, manufacturer and contents.

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What is Pricing?• Process of determining what a company will

receive in exchange for its products

•Pricing objectives are goals that producers hope to attain in pricing products for sale.

•Profit-Maximizing Objectives:•Pricing for E-Business Objectives•Market Share Objectives:

•Market share is a company’s percentage of total market sales for a specific product type.

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Cost Oriented and Break Even Analysis• 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.– Components:

• Markup $• Markup %• Sales Price

• Break Even Analysis– Components:

• Variable Cost• Fixed Cost• Breakeven Point

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Pricing Existing Products

• Relative To Current Market Relative To Current Market Prices For Similar ProductsPrices For Similar Products

• Current MarketCurrent Market– AboveAbove– BelowBelow– At/NearAt/Near

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Pricing New Products• Price skimming is setting an

initial high price to cover new product costs and generate a profit.

• Penetration pricing is setting an initial low price to establish a new product in the market.

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E-Business Pricing• Dynamic pricing works because

information flow on the Web notifies millions of buyers of instantaneous change in product availability.– Sellers can alter prices

privately, on a one-to-one, customer-to-customer basis.

• Fixed pricing is still the most common option for cybershoppers.

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Pricing Tactics

• Price lining is setting a limited number of prices for certain categories of products.

• Psychological pricing takes advantage of the fact that consumers do not always respond rationally to stated prices.– Odd-even pricing is based on the premise

that customers prefer prices not stated in even dollar amounts.

• Discount is a price reduction offered as an incentive to purchase.

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International Pricing

• Determine what market will bear

• Post-purchase-encourage to trade up as personal economics allow

• Dumping

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