Product Design

2. Product Design Pricing and Strategies 2

3. Chapter 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 product’s life cycle. • Define price and the role it plays in determining profit. • Describe the factors that affect pricing decisions. • Identify pricing strategies. 3

4. Product Defined A specific model of athletic shoe would be called a product item. product item: The entire group of a manufacturer’s athletic shoes would be called a product line. 4

5. Product Defined Products can be classified as consumer goods or business goods. consumer goods: business goods: Products need to have a point of difference. point of difference: 5

6. Steps in New Product Development The seven steps in new product development are: focus group: • _ _ _ _ analysis (strengths, weaknesses, opportunities, and threats) • Idea generation • Screening and evaluation • Focus group continued 6

7. Steps in New Product Development continued • Business analysis Commercialization: • Development • Test marketing • Commercialization 7

8. ______ Maturity _______ Product Life Cycle The four stages in the product life cycle are: Product Life Cycle Introduction Not all products fit the life-cycle pattern. 8

9. Management of the Product Life Cycle The three ways to manage the product life cycle are: Repositioning: • Modifying the product. • Marketing the product. • Repositioning the product. 9

10. E-Trading Collectibles A box of baseball cards may not be worth the price of college tuition anymore, because the so-called bull market for sports collectibles peaked in the 1990s. Lower demand has Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses. Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service. Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com. caused lower prices. However, the latest hot items are autographs from Hall of Famers—and top players who don’t often sign baseballs, photographs, jerseys, or bats. You can find and bid on these curios at collectibles Web sites, including eBay—but be sure to get authentication when you score that vintage ball signed by Mickey Mantle. For more information on sports and entertainment marketing, go to marketingseries.glencoe.com. 10

11. Explain the seven steps involved in developing a new product. Name the four stages in the product life cycle. What three things can be done to manage a product through its life cycle? 1. 2. 3. 11

12. Pricing Price is important in a business because it helps determine a company’s profit or loss. Price: Price plays a significant role in the marketing mix. 12

13. $______ Profit $175,000 revenue $90,000 topurchasethe bats $60,000in businessexpenses - - = = $90 each Determining Profit Subtract the cost of goods sold and the company’s expenses from the money it generated in sales revenue. 1,000 baseball bats sold $175 each 13

14. Pricing Considerations and Strategies Three types of pricing strategies are: prestige pricing: odd-even pricing: • Prestige pricing • Odd-even pricing • Target pricing target pricing: 14

15. Pricing Considerations and Strategies Markup: Other pricing considerations include: • Demand cost-plus pricing: • Cost • Markup • Cost-plus pricing non-price competition; • Newness of the product • Competition • Non-price competition 15

16. Pricing Objectives and Strategies market sharethe _________of the total sales of all companies that sell the same type of product Pricing objectives and strategies include: price liningselling all goods in a product line at specific __________ points • Profit objective • Market share objective bundle pricingselling ___________ items as a package for a set price • Special pricing • Price lining • Bundle pricing • Loss-leader pricing • Yield-management pricing loss-leader pricingpricing an item at ______or ________cost to draw customers into the store yield-management pricingpricing items at _________ prices to maximize revenue when limited ____________is involved • Tiered pricing 16

17. Price Adjustments and Regulations Manufacturers will offer discounts in the following situations: • Buying in _________quantities • Buying _________ to the buying season Allowances are reductions taken from the quoted price. One type of allowance is a trade-in. 17

18. Price Adjustments and Regulations The Sherman Anti-Trust Act prohibits price fixing and predatory pricing. price fixing; Price discrimination was originally prohibited by the Clayton Act and later by the Robinson-Patman Act. 18

19. How is pricing related to profit and the marketing mix? List five factors that affect price decisions. What are two common pricing objectives and special pricing strategies? 1. 2. 3. 19

20. Checking Concepts 1. Explain the difference between product item and product line. 2. Name the ways products can be defined and classified. Explain the seven steps used in developing a new product. 3. continued 20

21. Checking Concepts 4. Identify the four stages in a product’s life cycle. Define price. 5. Explain how price determines a company’s profit. 6. Identify the factors that may influence pricing strategies. 7. continued 21

22. Checking Concepts Critical Thinking • Define and compare markup and cost-plus pricing. 8. 22