BUSINESS

Developing and
Pricing Products

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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

Features?
Benefits?
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Types of Consumer
Products
Convenience Goods: Commonly available,
generally affordable, often prone to rapid
consumption and re-buy, in which case
these are referred to as Fast Moving
Consumer Goods (FMCGs)

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Types of Consumer
Products
Shopping Goods: A category of consumer
goods that are purchased after the buyer
has spent some time and effort comparing
the price, quality, style and other attributes
of the product in several stores Types of
Consumer Products

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Types of Consumer
Products
Specialty Goods: A category of consumer
goods for which the consumers have a
strong brand preference and are willing to
spend substantial time, effort and money for
acquiring the desired brand

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Types of Consumer
Products
Unsought Products: A category of products
about which the consumers are generally
not aware, or if they are aware, they would
rather not buy them unless otherwise
compelled

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Types of Business Products

Raw Material: Business goods that become
part of another tangible product before
being processed
Examples include natural resources,
minerals, agriculture, dairy and poultry
products etc.

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Types of Business Products

Fabricating Materials & Parts: Business
goods that become part of another tangible
product after being processed
Examples include sugar, flour, semiconductor micro chips in computers, and
zippers & buttons in clothing etc.

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Types of Business Products

Installations: Manufactured products that
form an organizations major, expensive
and long-lived assets
Examples include machinery (heavy
generators, blast furnaces, machinery used
in production) and buildings

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Types of Business Products

Accessory Equipment: Goods that neither
become a part of finished goods nor are
directly involved in the manufacturing
process, yet are essential in carrying out
various processes of a firm
Examples include workstations, fork lifts,
office furniture etc.

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Types of Business Products

Operating Supplies: Goods characterized
by low price and short life span, contributing
to an organizations operations
Examples include stationery, fuel, telephone
sets etc.

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The Product Mix

Product 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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Understanding Product Mix

Procter &
Gamble

Antiperspirants
&
Deodorants

Body Wash
& Soap

Ivory

Olay

Camay

Noxzema

Zest

Safeguard

Old Spice

Secret

Hair Care

Pantene

Herbal Essences

Infusium

Head &
Shoulders

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The Seven-Step Product

Development Process
1.
2.
3.
4.
5.
6.
7.

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Product Ideas
Screening
Concept Testing
Business Analysis
Prototype Development
Product Testing and Test Marketing
Commercialization

BUSINESS

The Product Life Cycle

According to the PLC a product passes
through many stages in its life
It is important for managers to understand
and formulate appropriate strategies for
each stage
The concept of product life applies to a
generic category of products (not to brands)

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The PLC Stages

Introduction
Growth
Maturity
Decline

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Introduction

Customers: Few
Competition: Little or none
Sales: Low, but rising
Profits: None
Cost per unit: High
Pricing: High
Distribution : Scattered
Strategy: Product Awareness

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Growth

Customers: Mass Market

Competition: Increasing
Sales: Rapid Growth
Profits: Peaking
Cost per unit: Declining
Pricing: Lower
Distribution : Intensive
Strategy: Differentiation

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Maturity

Customers: Mass Market

Competition: Intense
Sales: Slow Growth
Profits: Declining
Cost per unit: Stable
Pricing: Lowest
Distribution : Intensive
Strategy: Retention

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Decline

Customers: Loyalists
Competition: Decreasing
Sales: Declining
Profits: Low or none
Cost per unit: Low
Pricing: Increasing
Distribution : Selective
Strategy: Exit

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In

n
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i
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c
u
d
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w
o
r
G
h

Maturit
y
s
e
l
Sa lum
Vo
e

Time In Years

De
clin
e

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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
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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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
Costco-Kirkland
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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 products 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

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Pricing to Meet Business

Objectives
Pricing objectives are goals
that producers hope to attain in
pricing products for sale
Profit-Maximizing Objectives
Pricing for maximizing profits on
each unit sold

Market Share Objectives

Market share is a companys
percentage of total market sales
for a specific product type
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Cost-Oriented Pricing
Cost-oriented pricing considers the
firms desire to make a profit and its
need to cover production costs
Markup is the amount added to an items
cost to sell it at a profit

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Breakeven Analysis
Breakeven analysis assesses costs
versus revenues for various sales volumes
Variable cost is a cost that changes with the
quantity of a product produced or sold
Fixed cost is a cost unaffected by the quantity
of a product produced or sold
Breakeven point is the sales volume at which
the sellers total revenue from sales equals total
costs with neither profit nor loss

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Break Even Analysis

Break even point is that quantity of output
(sales) at which total revenue equals total
cost, at a certain selling price
Break even point =
Total Fixed Cost
Selling Price Variable Cost (per unit)

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Breakeven Analysis

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Pricing Existing Products

Pricing above prevailing
market prices for similar
products
Pricing below market prices
Pricing at or near market
prices
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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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Fixed versus Flexible Pricing

Flexible Pricing works where the sellers
can alter prices privately, on a one-to-one,
customer-to-customer basis.
Fixed pricing leaves no room for
bargaining

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Pricing Tactics
Price lining is setting a fixed price for
certain categories of products
Psychological pricing or Odd Pricing
takes advantage of the idea that consumers
tend to see prices in round figures
Uniform Pricing is when a diverse range of
goods are given the same price
Discount is a price reduction offered as an
incentive to purchase

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