Product and Price Considerations in Marketing

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Product and Price Considerations in Marketing

• Tuesday, September 13, 2005

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First Finish Oracle

• Problems
• Product delays/late entrant in market
• Go it alone attitude
• Lack of STP strategy
• Company reputation (excellence in database
  software)
• strengths/weaknesses vis a vis new market thrust
• Understanding of competition/effective
  differentiation

Critically evaluate these problems in terms of
If solved, will company problems in the
market be solved? What is crux of problem?
Bandaids vs. antibiotics diminishing returns on
resources
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Solutions

• Market segments
• Size/vertical markets/applications
• Evaluate what segments make sense/why
• Criteria to select segments?
• Pros/cons (trade-offs)
• Customer concerns/barriers to adoption
• Credibility in positioning
• Competitive threats/differentiation
• Partnerships with other developers
• Pros/cons

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Other issues

• Specific segments
• SME switching costs CLV
• Large provide own integration ? partner
  solution
• Price high
• Consistent with value provided to customers
• (based on cost efficiencies/savingsre Right Now
  and Oracles experience)
• Price low
• Must be consistent with cost efficiencies/structur
  e of the business
• i.e., inconsistent with hire more programmers!

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Key Takeaways

• Explicit solution is offered
• Logic to support solutions grounded in class
  learnings
• Pros/cons (upside potential/downside
  risks/opportunity costs) addressed
• Barriers to implementation/critical success
  factors for solution to achieve results

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Gupta and Lehmann

• Ch. 1, Q5 Customer-oriented
• Marketing as
• A philosophy of doing business
• customer-centric organization
• market-oriented

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Becoming Market/Customer Oriented
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Gupta and Lehmann, Ch. 2

• See assigned discussion questions

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Product Considerations

• Innovation
• Managing over the PLC
• Partnerships for Development (Outsourcing
  Innovation)
• Branding Strategies
• Packaging
• Services Revenue

Career Product/brand manager
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What is a brand?

• A well-known/established product name that stands
  for something in the market
• Promise of quality
• Personality specific attributes
• Premised on the fact that customers want an
  emotional connection with a product or company
• Extention of self/personality/image
• Creates loyalty/familiarity
• Simplifies decision making (heuristic)

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Pros/Cons of Brands

• Company
• Goodwill
• Higher margin/profits
• Ease new market entries
• Products/markets
• Guides corporate strategy
• Consumer
• Simplifies decision making (esp. for complex
  products)
• Trust/safety
• Self-expression

• Company
• Hard to do accounting!
• Vulnerable to tarnishing
• Requires maintenance
• Requires consistency
• May limit new initiatives
• Consumer
• Pay higher prices (??)

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How to Create a Strong Brand?

• Create awareness/familiarity
• Media advertising
• New media (alternative outlets)
• Rely on on-going innovation
• Develop a Brand Personality
• Work with partners
• Deliver Moments of truth
• Fulfill promises/fix mistakes
• Influence the influencers
• Internal consistency

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The Three Cs of Pricing
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Costs

• Know fixed and variable costs
• Know costs to serve customers
• Low price competition viable only with low-cost
  infrastructure (cost efficiencies)
• Wal-Mart Southwest

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Competition

• Know competitive prices and customer perceptions
  of competitive offerings
• Value Quality (Benefits)/Price

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Customer Perceptions of Benefits/Costs

• Benefits
• Functional
• Operational
• Financial
• Personal
• Costs
• Monetary
• Non-monetary

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Customer-Oriented Pricing

• How will the customer use the product?
• What are the benefits the customer will receive
  from using the product?
• Calculate customer costs and understand
  customers trade-off between costs and benefits.

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Implications of Customer-Oriented Pricing

• Pricing decisions are part of product design
  decisions
• Different segments value the product differently
• Therefore, different customers yield differential
  profitability

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Pricing Strategies in Commodity Markets

• Focus on segments that are less price sensitive
• Pfizer example
• Focus on bundled solutions
• Separate bare-bones provisioning from
  fee-for-services
• Find new uses
• Intel example
• Long-term relationships with (profitable)
  customers LTV
• Innovate!
• Build brand equity

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Look ahead to Tweeter