unit ii - product development
TRANSCRIPT
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SEMESTER - II
MARKETING MANAGEMENT
UNIT - II
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What is product?
Anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need.
Product: A bundle of attributes
The Total Product
Tangible attributes: materials, size, weight, design, packaging,
performance, comfort
Intangibles: brand image, styling, other benefits (installation, delivery,credit, warranty, after-sale service, return policy)
ServiceAny activity or benefit that one party can offer to another that is
essentially intangible and does not result in the ownership of anything.
Service and Experience
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Product Related Global Drivers
Demand Drivers
Higher expectations More information
Higher switching costs
Full-service expectations
Supply Drivers
Fast-paced innovations
Frequent product modifications
Manufacturing rationalization
Outsourcing coordination
Strategic Alliances
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Global Product Decisions Existing Products
Product phase - out
Product modification Product introduction into new markets
Product performance management
New Product
Product development
Product introduction
Product performance management
Global Product Development
1. Standardization- developing same product for multiple countries
2. Product Adaptation- modifying product to reflect characteristics of a market
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Components of the Market Offering
Value-based prices
Services mix
and quality
Product features
and quality
Attractivenessof the
market offering
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International Product Policy
1. What to Sell ?2. International Product Strategies
3. Standardization versus Customization
4. Managing an International Brand Portfolio5. Product Packaging and Labeling
6. Managing International Product Lines
7. Timing of Foreign Entry
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1. What to Sell ? The international marketer needs to determine what the market offering
should be in a foreign market :
Defining the product offering
Products versus Services/Rights
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Consumer Goods Classes
Consumer products can be classified by the buying behaviour of the consumers:
Convenience goods are bought with little time and effort, such as milk, bread, achocolate bar.
Shopping goods are those where extensive comparison is the norm-- cars, furniture,clothes.
Specialty goods are those for which consumers have a strong brand preference.BMW, BENZ
Unsought goods are those now unknown to the consumer or, if known, undesired.
Classifying Business Products Raw materials: unprocessed, become part of other manufactured products
Manufactured parts and materials: processed products that become part of otherproducts
Installations: major buildings and equipment
Accessory equipment: used in operations, include computers, desks, tools
Operating supplies: low value, used by most firms, convenience products for businesses
Product Planning and Development
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Specialty Products Unsought Products
Shopping Products
Buy less frequently> Gather product information> Fewer purchase locations> Compare for:
Suitability & Quality Price & Style
Convenience Products
Special purchase efforts> Unique characteristics> Brand identification> Few purchase locations
New innovations> Products consumers dont
want to think about.>Require much advertising &
personal selling
Buy frequently & immediately> Low priced> Many purchase locations> Includes:
Staple goods Impulse goods Emergency goods
Consumer-Goods Classification
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Consumer-Goods Market Testing
Sales-Wave
ResearchTest offering trail to
a sample ofconsumers insuccessive
periods.
SimulatedTest Market
Test in a simulatedshopping environment
to a sample ofconsumers.
Standard
Test MarketFull marketing campaign
in a small number ofrepresentative cities.
ControlledTest Market
A few stores that haveagreed to carry newproducts for a fee.
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Diversification
Market Penetration Market Development
Product Development
Existing Markets New Markets
NewP
roducts
Ansoffs Matrix (Product/Market Matrix)
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New Product DevelopmentDevelopment of original products, product improvements, product modifications,
and new brands through the firms own R & D efforts.
Original products
Product improvements
Product modifications
New brands that the firm develops through its own research and development efforts
What is new product?
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategies
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization
Major stages in new product development
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The New Product Development Process
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Concept Development & Testing
1. Develop Product Ideas intoAlternative Product Concepts
2. Concept Testing - Test the ProductConcepts with Groups of Target Customers
3. Choose the Best One
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Sales and Profits
Over A Products Life
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Product Life-Cycle Strategies
1. Product development
Introduction
Growth
Maturity
Decline
Begins when the company
develops a new-product idea
Sales are zero
Investment costs are high
Profits are negative
PLC Stages
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Product development
2. Introduction
Growth
Maturity
Decline
Low sales
High cost per customeracquired
Negative profits
Innovators are targeted
Little competition
PLC Stages
Product Offer a basic product
Price Use cost-plus basis to set
Distribution Build selective distribution
Advertising Build awareness among early adopters and dealers/resellers
Sales Promotion Heavy expenditures to create trial
Marketing Strategies: Introduction Stage
Product Life-Cycle Strategies
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Four Introductory Marketing Strategies
Rapid-skimmingstrategy
Rapid-penetration
strategy
Slow-penetration
strategy
Slow-skimmingstrategy
Price
Low
High
Promotion
High Low
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Product Life-Cycle Strategies
Product development
Introduction
3. Growth
Maturity
Decline
Rapidly rising sales Average cost per customer
Rising profits
Early adopters are targeted
Growing competition
PLC Stages
Marketing Strategies: Growth Stage
Product Offer product extensions, service, warranty
Price Penetration pricing
Distribution Build intensive distribution Advertising Build awareness and interest in the mass market
Sales Promotion Reduce expenditures to take advantage ofconsumer demand
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Product Life-Cycle Strategies
Product development
Introduction
Growth
4. Maturity
Decline
Sales peak
Low cost per customer
High profits
Middle majority are targeted
Competition begins to decline
PLC Stages
Marketing Strategies: Maturity Stage
Product Diversify brand and models Price Set to match or beat competition
Distribution Build more intensive distribution
Advertising Stress brand differences and benefits
Sales Promotion Increase to encourage brand switching
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Product Life-Cycle Strategies
Product development
Introduction
Growth
Maturity
5. Decline
Declining sales
Low cost per customer
Declining profits
Laggards are targeted
Declining competition
PLC Stages
Marketing Strategies: Decline Stage
Product Phase out weak items Price Cut price
Distribution Use selective distribution: phase out unprofitable outlets
Advertising Reduce to level needed to retain hard-core loyalists
Sales Promotion Reduce to minimal level
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2. International Product Strategies
StraightExtension
Product ProductAdaptation Innovation
The firm adoptsthe same policy
used in its home
market.
The company catersto the needs and wants
of its foreign customers.
The firm designs aproduct from scratch
for foreign customers.
3. Standardization versus Customization
Although the products sold abroad generally are not identical to their domestic
counterparts, there is always a core of expertise that the firm can carry abroad.
Principle " All Business is local.
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Developing New Products
for Global Markets Identifying New Product Ideas
4 Cs:
Company
Customers
Competition
Collaborators
New Product Development (NPD) Process
Screening
Concept Testing
Conjoint Analysis
To Standardize or not to Standardize
Test Marketing
Timing of Entry: Waterfall versus Sprinkler Strategies
Waterfall Strategy: Global phased rollout where new products trickledown in a cascade-like manner
Sprinkler Strategy: Simultaneous worldwide entry
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Global Product Strategies
Three global strategies to penetrate foreign markets:
Extension strategy
Adaptation strategy
Invention strategy
Five strategic options for the global marketplace: Strategic Option 1: Product and Communication Extension -- Dual Extension
Strategic Option 2: Product Extension -- Communications Adaptation
Strategic Option 3: Product Adaptation -- Communications Extension
Strategic Option 4: Product and Communications Adaptation -- Dual
Adaptation Strategic Option 5: Product Invention
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New Product Adoption and Diffusion
Adoption process: The decision-making activity ofan individualthroughwhich the new product is accepted.
Diffusion: The process by which an innovation is spread through a socialsystem over time.
Stages in the Adoption Process1. Awareness: customer is exposed to the product2. Interest: interest and information seeking3. Evaluation: assessment of the advantages and disadvantages of the new
product
4. Trial: customer tries the product in low-risk situation; may be a sample ortest drive5. Adoption: customer decides to buy the product6. Confirmation: customer decides to stay with the product; attempts
dissonance reduction
Adopter Categorization of the Basis of Relative Time of
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2 1/2%Innovators
13 1/2%Early
adopters
34%Early
majority
34%Late
majority
16%Laggards
Time of adoption innovations
Adopter Categorization of the Basis of Relative Time of
Adoption of InnovationsResearchers have identified five categories of individual adopters for new products:
Innovators3% of the market.
Early adopters
13% of the market.Early majority34% of the market.
Late majority34% of the market.
Laggards16% of the market.
In addition, some individuals non adoptersnever accept the innovation.
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Probability of Success
Probability
of technical
completion
Overall
probability
ofsuccess=Probability of
commercializationgiven technical
completionX
Probability of
economicsuccess given
commercializationX
Multinational Diffusion
The Adoption of new products is drivenby three types of factors:
Individual Differences Personal Influences
Product Characteristics1. Relative advantage
2. Compatibility
3. Complexity
4. Trial ability
5. Observability
Other country characteristics used topredict new product penetration patterns
include:
Homogeneous population
Lead countries
Lag countries
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4. Managing An International Brand Portfolio
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5. Product Packaging and Labeling
Protection
Legal ConstraintsPromotion
Climate
Transport & HandlingBuyer's slow usage rate
Lack of storage facilites
Merchandising ( income level, shopping habits)
Minimum breakage / theft
Ease of handling
Multilingual Labels to Convey an International
Image
Recycling of Packaging
(Duales System, Eco-Emballage)
Regulations on consumer info.
(Origin, weight, ingredients)
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International Product Line Planning
The foreign product line is frequently smaller than the domestic linebecause of financial and market limitations.
By introducing a limited product line into foreign markets the firm can
test the market before taking a bigger plunge.
6.Managing International Product
Lines
Deciding on the right individual product for world markets is only one aspectof product policy.
The next step is to decide what family of products should be offered
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Product-line decision
Product mix
Product-line analysis
Productline length
Product mix(assortment)
The set of all products and items that a particular seller offers for sale.A companys product mix has a certain width, length, depth, and consistency.
Width: how many different product lines.
Length: the total number of items.
Depth: how many variants are offered of each product in the line. Consistency: how closely related the various product lines are in end use,
production requirement, distribution channels, or some other way.
Product-line analysis
Sales and profit
Market profile
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Product Mix
Width - number ofdifferent product lines
Length - total number ofitems
within the lines
Depth - number ofversions of each
product
Product Mix -all the product
lines offered
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Sellers
services
Product
quality Physicalcharacteristics
of goods
Price
Brand
Design
PackagingProductwarranty
Sellers
reputation
Colour
The Total Product
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Product-Line Length
Line Stretching
Line Filling
Line Modernization
Line Featuring & Line Pruning
Line stretching
1. Downmarket stretch
2. Upmarket stretch
3. Two-way stretch
Line filling
Qualityprice analysis
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Two-Way Product-Line Stretch: Marriott Hotels
QualityEconomy SuperiorStandard Good
Price
High
Aboveaverage
Average
Low Fairfield Inn
(Vacationers)
Courtyard(Salespeople)
Marriott(Middle
managers)
MarriottMarquis
(Topexecutives)
B d
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Brand
Attributes Benefits Values
Culture
User
Personality
Brand is a name, term, sign, symbol, or design, or a combination of them, intended
to identify the goods or services of one seller or group of sellers and differentiate
them from those of competitors.
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Brand Positioning
Perceived fit between a particular product
offering and the needs of target market
Positioning is defined relative to:
competitive offerings
consumer needs
1. Global brand
2. Tiered branding3. Co-branding
4. Brand extensions
Types of Brands
Positioning Strategy
Attribute or Benefit
Quality and Price
Use or User
Types of Brand Positioning1. Physical Positioning
How a firms product compares to the
competitions on some set of objective
physical characteristics
2. Perceptual Positioning
How a firms product compares to the
competitions on some set of subjective
characteristics
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An Overview of
Branding Decisions
BrandingDecision
Brand
No brand
Brand-SponsorDecision
Manu-facturerbrand
Distribu-tor
(private)brand
Licensedbrand
Brand-Name
Decision
IndividualbrandnamesBlanketfamilynameSeparatefamilynamesCompany-individualnames
Brand-Repositioning
Decision
Reposi-tioning
Noreposi-tioning
Brand-StrategyDecision
Lineextension
Brandextension
Multi-
brandsNewbrands
Cobrands
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Good Brand Names:
SuggestProductBenefits
Distinctive
Lack PoorForeign
LanguageMeanings
SuggestProductQualities
Easy to:
PronounceRecognizeRemember
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Brand Strategies
BrandExtension
New
Bra
ndName
Product Category
LineExtension
Existing
Existing
MultibrandsNew NewBrands
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Why Package Crucial as a Marketing Tool
Self-service
Consumer affluence
Company & brand image Opportunity for innovation
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Labels
Identify
Describe
Promote
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Product/Brand Strategic Alternatives
Local Transnational
Multinational Global
Same
Different
Brand
Same
Different
Product
h I f L h
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The Importance of Launches
A company.must choose a launch strategy that is consistent with its intendedpositioning. The launch strategy should be the first step in a grand plan for life-
cycle marketing.
Philip Kotler
Marketing Management
Does your product launch plan reflect all of the money
and time put into developing the product?
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Launch Objectives
Unite company around shared objective: making the launch successful
Provide strategy evidence of the companys intent, and right, to be a marketsegment leader in product/service category
Build independent third-party validation, and strategy evidence, of
positioning strategy
Start the buzz, market pull with a consistent message architecture
Support long lead time sales cycles
Facilitate fundraising
Establish core technology/system as an extensible platform for future
products and partnerships
Establish broad-based awareness and credibility with xxx customer segment
Generate market momentum/Accelerate the sales cycle for Product XXX;
delay customer purchase commitments to competitors
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New Venture Launch Phases
Company funding announcements: PWC Money Tree, Venture Wire, etc.
Company: Stealth mode Identify system lite: business cards, industry event attendance
Content-free micro website: contact info, investors, team, etc. (note: mayhave password-protected real site)
Phone listing
Company launch: Seeding the market
Company: team, market vision Technology platform Product category, general problem addressed
Product launch: Going public
Positioning strategy: problem solved, market and market entry customersegment, competitive differentiation
Product details: architecture, technology and product roadmap Key customers and partners (especially channels) Pricing and product availability information A grown-up website
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Pre-Announcing Tips
Do Describe key elements of technology
Explain benefits of technology/potential applicationsenabled
Articulate initial total product assumptions (services,
standards, partnerships, etc.)
Dont Name product, provide specifications
Announce pricing Provide precise launch date
Launch Dependencies: Strategy Evidence
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Launch Dependencies: Strategy Evidence
ProductConcept
PreliminaryPositioning
Strategy
BusinessModel
Product &
ReferenceCustomers
PositioningStrategy
ValidationLaunch
Planning
Go/No Go
Go/No Go
Go/No Go
Go/No Go
LaunchDate
Ongoing MarketReinforcement
18 months
Be prepared to postpone for key
pieces of strategy evidence!
Strategic
Partnerships(channel)
Post SalesSupport
Plan
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Launch Plan Outline
Positioning Strategy Statement and Message Architecture
Objectives and Strategies
Competitors/Competitive Response
Market leverage/Influencer plan
Sales training and lead generation (closed loop)
Marketing programs materials
Schedule/Timeline
Momentum milestones
Appendix
- positioning toolkit- customer segment profile
- buying decision process
Launch Checklist: Some Strategy Evidence Options
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Positioning Tool kit
Sales, channel strategy
Product Release schedule
Programs Ads, site sponsorships CD, Flash demo Customer seminars Data sheets, application notes
Direct mail, e-mail, list promotions Newsletters Sales, channel launch; training Trial, swap-up program Trade shows, conferences, events; suite
briefings Advance press and analyst tour
Speaker program Regional field sales champions User groups, customer councils Webcasts/Webinars with guestexperts: customers, analysts, partners
Lead management systemsalesforce.com,
eloqua, etc.
Materials Brochures Data sheets, application notes Presentations Price lists Product catalogs
Product demonstrations Product roadmap Press releases Technical articles Technology, company backgrounders Testimonials
White papers Web site update
Launch Checklist: Some Strategy Evidence Options
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LaunchProgram
Manager
Launch Manager is Command and Control
Creative,
Website,
Interactive
Marketing
Product
Development/Technical
Marketing: Data
Sheets & Demos
Press/Analyst
Relations,
MaterialsProduction
Strategic
Partners, Investor
Relations
Shows,
Conferences,
Events
CTO/Guru:
White Papers,
Simulation
Strategies
Sales:
Customer
Advocates
Content
Weekly Status and
Project Management
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Summary and Wrap-Up
The Launch Plan is the chance to get the company and productoff to a good start in the market!
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Low High
Low
High
Economy Strategy
e.g. Air Arabia Airline
Penetratione.g. Co-operative
Products
Skimminge.g. New film or
album
Premiume.g. MBA first
class
Price
Quality
Pricing Decisions
Cost Determinants of Price
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Cost Determinants of Price
01 2 3 4 5 6 7 8 9 10
50
100
150
200
Dollars
Quantity
MC
ATCAVC
AFC
Break-Even Analysis
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Break Even Analysis
Quantity (units)
Price($)
Fixed Costs
Total Revenue
Total Costs
Profits
Losses
Break Even
Steps in Setting the Right Price
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Steps in Setting the Right Price
$ $ $ $ $ $ $ $
Fine-Tune Base Price
Choose Strategy
Estimate Demand, Costs,and Profits
Establish Pricing Goals
Right Price
Legal and Ethical Issues in Pricing
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Legal and Ethical Issues in Pricing
Unfair Trade Practices
Key Legal
and EthicalIssuesRelated to
Price
Price Fixing
Price Discrimination
Predatory Pricing
Discounts Allowances and Rebates
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Cash
Discount
QuantityDiscount
FunctionalDiscount
Trade Loading
EDLP(Every Day Low Pricing)
SeasonalDiscounts
PromotionalAllowances
Rebates
Discounts, Allowances, and Rebates
PriceReductions
Geographic Pricing
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Geographic Pricing
Basing-Point
Freight-Absorption
Zone Pricing
Uniform Delivered
FOB (Free On Board)Origin
PricingTactics
Based onGeography
Special Pricing Tactics
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Special Pricing Tactics
Odd-EvenPricing
Two-PartPricing
BundlePricing
Bait (andSwitch)Pricing
PriceLining
FlexiblePricing
ProfessionalServices
LeaderPricing
SinglePrice
Common
Special Pricing
Tactics
Pricing strategies
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Premium pricing
Uses a high price, but gives a good product/service exchange e.g. Concorde,
The Ritz Hotel
Penetration pricing
offers low price to gain market share - then increases price
e.g. France Telecom - to attract new corporate clients (or Telewest cable)
Economy pricing
placed at no frills, low price
e.g. Soups, spaghetti, beans - economy brands
Price skimming
where prices are high - usually during introduction
e.g new albums or films on release
ultimately prices will reduce to the parity
Psychological pricing to get a customer to respond on an emotional, rather than rational basis
.e.g 99p not 1.01 price point perspective
Product line pricing
rationale of a product range
e.g. MARS 32p, Four-pack 99p, Bite-size 1.29
Pricing variations
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Pricing variations
off-peak pricing, early booking discounts,etc
e.g Grundig offers a cash back incentive for expensive goods
Optional product-pricing
e.g. optional extras - BMW famously under-equipped
Captive product pricing
products that complement others
e.g Gillette razors (low price) and blades (high price)
Product-bundle pricing
sellers combine several products at the same price
e.g software, books, CDs.
Promotional pricing
BOGOF e.g. toothpaste, soups, etc
Geographical pricing
different prices for customers in different parts of the world
e.g.Include shipping costs, or place onPLC
Value pricing
usually during difficult economic conditions
e.g. Value menus at McDonalds
Ten ways to increase prices without
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Ten ways to increase prices without
increasing price - Winkler
Revise the discount structure
Change the minimum order size
Charge for delivery and special services
Invoice for repairs on serviced equipment
Charge for engineering, installation
Charge for overtime on rushed orders
Collect interest on overdue accounts
Produce less of the lower margin models in the line Write penalty clauses into contracts
Change the physical characteristics of the product