product design product design pricing and strategies pricing and strategies 2

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  • Product Design Product Design Pricing and Strategies Pricing and Strategies 2
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  • Section 5.1 Product Design - 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 products life cycle 3
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  • Section 5.1 Product Design Product Defined Products are one the essential components in the marketing mix Products can be tangible (sporting equipment) Goods Products can be intangible (sporting events) Services 4
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  • Section 5.1 Product Design Product Item and Line Product Item a specific model or size of a product Nikes Zoom Kobe is a product item Product Line - Group of closely related products that are sold by a company Entire group of Nike athletic shoes would be their product line Nike has 3 product lines: athletic clothing, athletic footwear, sports equipment Makes up Nikes product mix 5
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  • Section 5.1 Product Design Product Classifications Products can be classified as consumer goods or business goods Different marketing approaches should be used to reach the different consumers Consumer Goods are purchased and used by the ultimate consumer for personal use Sneakers bought by end consumer at Foot Locker Promotion might be television commercial Business Goods are purchased by organizations for use in their operation Sneakers bought by Foot Locker to be sold to end consumer Promotion might be discounts for volume purchases. 6
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  • Section 5.1 Product Design Point of Difference Products are designed to stand out in the marketplace Point of Difference is a unique product characteristic or benefit that sets the product apart from a competitors product Winning championships provide teams with point of difference Companies with certain product brands work to communicate their products unique features and benefits to establish point of difference Product planning is crucial to success of a product 7
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  • Section 5.1 Product Design 1.SWOT Analysis Analysis of Companys: Strengths Weaknesses External Opportunities Threats in Marketplace Helps to develop a product that matches the companys objectives 2.Idea Generation Generating new product ideas Consumers, Employees, R&D Developments, Competitors After getting a new idea from studying a competitors new product a company should write protocol A statement that identifies target market, customers needs and wants, and explains the new product & what makes it unique 8 The seven steps in new product development Not all steps are followed each time
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  • Section 5.1 Product Design Nike Pump Sneakers Reebok Pump Sneakers
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  • Section 5.1 Product Design 3.Screening and Evaluation Product idea is evaluated to see if if company has technology needed to make product & meets companys objectives Researchers work with focus groups to evaluate product idea Focus Group is a panel of six to 10 consumers who discuss their opinions about a topic under guidance of moderator 4.Business Analysis Financial aspects of making and marketing the product are reviewed Must determine what is needed to take product idea to market Legal factors are analyzed to see if the product can be patented or copyrighted for protection against competitors
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  • Section 5.1 Product Design 5.Development Development of actual product Prototype is the first model of the product Company tests if product can be produced for reasonable cost Technical problems and standards for quality and safety are evaluated 6.Test Marketing Product tested in marketplace Product is offered for sale in small geographic area Marketers test all aspects of marketing mix (product, place, price, and promotion) Results can help project sales and market share Some competitors may ruin test marketing by flooding test area with special promotions or reducing its price
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  • Section 5.1 Product Design 7.Commercialization Commercialization is a process that involves producing and marketing a new product Product is offered in the marketplace for sale to final consumer Full scale production during launch of new product Regional roll-outs allow companies to launch product in certain geographic areas over a set time period Companies can build up production gradually and evaluate marketing Gatorade CommercialGatorade Commercial
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  • Section 5.1 Product Design Product Life Cycle The four stages in the product life cycle are: 13 Introduction GrowthMaturity Decline Product Life Cycle Not all products fit the life-cycle pattern.
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  • Section 5.1 Product Design Product Life Cycle Introduction Product is first introduced to the marketplace Marketing focus is on promoting consumer awareness and getting customers to try new product Consumers are educated through advertising and promotion Product Pricing: Skimming is pricing set high to cover costs of research & development Penetration is low pricing in order to quickly generated demand for product Distribution of product into marketplace is major task at this stage Goal is to convince distributors to carry product
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  • Section 5.1 Product Design Product Life Cycle Product Life Cycle cont. Growth More competition in marketplace if your product has success Stay competitive at this stage by improving product or adding new features or products to line Must increase distribution outlets at this stage Ex. From convenience stores to supermarkets
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  • Section 5.1 Product Design Product Life Cycle Product Life Cycle cont. Maturity Sales begin to slow down for the product category or just the product Repeat customers may stop buying the product New buyers may be difficult to attract in this stage To keep product alive: Company may make changes to the product to distinguish it from competitors products Marketers my focus on identifying new buyers
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  • Section 5.1 Product Design Product Life Cycle Product Life Cycle cont. Decline Sales and profits begin to drop Products move into decline when newer and more improved models replace the older ones Ex. Technological advances Results of decline: Product dropped from product line Products in decline that are kept in product line get little or no marketing support Only keep product is to satisfy requests from loyal customers
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  • Section 5.1 Product Design Product Life Cycle Product Life Cycle cont. Considerations Not all products fit the life-cycle pattern Consumer demand and continued sales will allow products to stay in growth stage Fads have a short life cycle Products that become popular quickly and lose popularity quickly Products requiring a lot of information to educate consumers will stay in introduction stage for longer periods of time
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  • Section 5.1 Product Design Management of the Product Life Cycle Product managers manage a produce through its lifecycle by: Modifying the product Changing the products features, appearance, package, design or quality in hopes to increase sales Marketing the product Strategy to find new customers or to encourage current customers to use more of the product Repositioning Repositioning the product Repositioning is changing a products image in relation to its competitors image A change in any of the four Ps of the marketing mix can be enough to reposition a product
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  • Section 5.2 Pricing and Strategies - Objectives Define price and the role it plays in determining profit. Describe the factors that affect pricing decisions. Identify pricing strategies. 20
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  • Section 5.2 Pricing and Strategies Pricing Price is defined as the value placed on the goods or services being exchanged Price can be referred to as: Tuition, Fee, Toll, Fare, Rent, Barter Important in a business because it helps determine a companys profit or loss To calculate Profit or Loss: Subtract the cost of goods sold and the companys expenses from the money it generated Price plays a significant role in the marketing mix 21
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  • Determining Profit 22 1,000 baseball bats sold ($175x1,000) $175,000 revenue = - $90,000 to purchase the bats ($90x1,000) - $60,000 in business expenses = $25,000 Profit Subtract the cost of goods sold and the companys expenses from the money it generated in sales revenue.
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  • Section 5.2 Pricing and Strategies 23 Consumer Perception, demand, cost, product, life-cycle stage, and competition influence the pricing strategies that businesses use Consumer Perception Consumers believe that higher prices suggest higher quality Marketers use this perception to price goods and services Image of a product is closely related to its price High quality products priced low may not sell as much as it would at a higher price Prestige pricing is pricing based on consumer perception
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  • Section 5.2 Pricing and Strategies 24 Consumer Perception Consumer Perception cont. Odd-even pricing is another pricing strategy related to consumer perception Odd-even pricing is pricing goods with either an odd number or an even number to match a products image Ex. An item priced with odd number, such as $25.99, suggests a bargain Ex. An item priced with even number, such as $26, suggests a qua


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