Fourteen

1
Chapter Fourteen
Developing and Pricing Products and Services
2
Consumer Choices of Best Product Innovation of
ALL Time
Aspirin
Television
Telephone
Light Bulb
Automobile
0
10
20
30
40
50
60
70
Source American Demographics
3
Product Development Value Package

• Value- Total Product Offer

Everything consumers consider when making a
purchase
Price
Reputation of producer
Package
Brand name
Store surroundings
Service
Image created by advertising
Speed of delivery
Guarantee
Convenience
Buyers past experience
Internet access
4
Product Development Value Package

• Product Line
• Product Mix
• Product Differentiation

A companys similar goods or services
Perceived differences in goods or services
5
Classic Product Failures
Company
Loss
Failure
Edsel Corfam VideoDisc PCjr New Coke Premier
Ford Motor Co. DuPont RCA IBM Coca-Cola R. J.
Reynolds
250 M 100 M 500 M 40 M No Number No
Number
6
First Products Produced byFive Major Companies

• Hershey Caramels
• Amway No-rinse car wash
• Heinz Horseradish
• Avon Little Dot perfume set
• 3M Sandpaper

Horseradish
Source World Features Syndicate
7
Mickey Mouses Product Mix

• Theme parks resorts
• ABC Television Network
• TV radio stations
• Film studios production

• Video programs licensing
• Consumer products
• Publishing

8
Marketing Classes of Goods Services

• Consumer Goods
• Convenience
• Shopping
• Specialty
• Unsought
• Industrial

for final use
for frequent purchases (7-11)
for comparing value (mall)
for small market segment
unexpected purchases
for production of other goods
9
Importance of Packaging

• Protect
• Attract
• Describe
• Explain
• Warranties
• Price, Value, Uses

10
Branding

• Brand Trademark?
• Categories
• Manufacturers
• Knockoff
• Dealer/Private
• Generic

• name, symbol or design
• exclusive use
• for national distribution
• illegal copies
• carry distributors name like Sears
• non-branded

Marys Fresh Fruit Jams Fresh Daily Straight from
the Garden
aspirin, zipper, linoleum, nylon, kerosene,
escalator
Xerox, rollerblade, kleenex, Coke,??
11
Branding

• Equity
• Loyalty
• Awareness
• Association

• awareness, images quality, loyalty
• commitment to purchases
• name represents category
• linking to favorable images

Marys Fresh Fruit Jams Fresh Daily Straight from
the Garden
12
Market Value of A Brand Name
Billions of Dollars
Source Interbrand Group
13
A Good Brand Name...

• Speaks directly to products target customers
• Attracts/motivates consumers to try it
• Is memorable/sticks in customers minds
• Is distinctive enough to protect it legally

Brand Name
14
Most Powerful Internet Brands
Source Business 2.0, July 2002, p. 86.
15
Brands Consumers Consider Most Reliable

• CRAFTSMAN TOOLS
• WATERFORD CRYSTAL
• ROLL-ROYCE MOTOR CARS
• DISCOVERY CHANNEL
• WD-40 LUBRICANT
• BOSE STEREO/SPEAKER SYSTEMS
• CRAYOLA CRAYONS/MARKERS
• HERSHEY KISSES

16
New-Product Development
Idea Generation
Screening
Analysis
Development
Testing
Commercialize
17
Soft Drink Brands That Didnt Make It

• Juicy Fruit with Lemon Lime
• Lemon Merengue
• Cream Wizard Wintergreen
• Crow Clove

• Kentucky No Nip Cherry Julep
• Satans Punch
• Green Tangerine Sourer
• Key Lime Cream

Source St. Louis Post-Dispatch
18
Renaming Brands

• OLD NAME NEW NAME
• BELL ATLANTIC VERIZON
• BELL SOUTH CINGULAR
• AMERICAN BRANDS FORTUNE BRANDS
• CIBA NOVARTIS
• VALUJET AIR TRON
• Source Forbes Magazine, December 21, 2002

19
Sales and Profits During the PLC
20
What They Cost When First Introduced
1927 Transatlantic Call 75/3
min. 1947 Microwave Oven 3,000 1964 FAX
unit rental 850/month 1970 Pocket
Calculator 150 1974 VCR Tape 50
Source World Features Syndicate
21
Pricing

• Value- Service
• Break-Even
• Fixed Cost
• Variable Cost
• Other Strategies
• Skim high price
• Penetration - low
• EDLP no sales
• High-Low
• Psychological - 9.99
• Bundling washer/dryer
• Leadership

• Objectives
• ROI (profit)
• Building Traffic
• Greater Market Share
• Increasing Sales
• Creating an Image
• Social Objectives
• Cost-Based

22
Breakeven Chart (Figure 14.9)
Total Revenue or Total Cost
Number of Units
23
Pricing Using Breakeven Analysis
Problem Should we charge 2 or 3 per
box? Costs Total Fixed Costs 400,000 Variabl
e Cost 1 per box
Market Research Forecast
Company can sell 290,000 boxes at 2 _at_
210,000 boxes at 3 _at_
Breakeven point total fixed cost
price - variable cost
(per unit) (per unit) 2 price
400,000 400,000 units to breakeven
2 - 1 3 price 400,000 200,000 units to
breakeven 3 - 1
Breakeven Analysis
24
Market Share-Cable
Source Wall Street Journal 1/12/2000
25
Movies- Domestic Box Office Market Share
Source Wall Street Journal, 1/12/2000
26
Market Share of Video Sales
Source Wall Street Journal, 1/12/2000