Transcript No Slide Title

Chapter
Fourteen
Developing and Pricing
Products and Services
Consumer Choices of Best
Product Innovation of ALL Time
Aspirin
Television
Telephone
Light Bulb
Automobile
0%
10%
Source: American Demographics
20%
30%
40%
50%
60%
70%
Product Development
& Value Package
Value- Total Product Offer
Everything consumers consider when making a purchase
Price
Reputation of
producer
Package
Brand name
Store surroundings
Image created by
advertising
Guarantee
Buyer’s past
experience
Service
Speed of delivery
Convenience
Internet access
Product Development
& Value Package
Product Line
Product Mix
Product
Differentiation
A company’s similar
goods or services
Perceived differences
in goods or services
Classic
Product Failures
Failure
Company
Loss
Edsel
Ford Motor Co.
$250 M
Corfam
DuPont
$100 M
VideoDisc
RCA
$500 M
PCjr
IBM
$ 40 M
New Coke
Coca-Cola
No $ Number
Premier
R. J. Reynolds
No $ Number
First Products Produced by
Five Major Companies
Hershey
Amway
Heinz
Avon
3M
Caramels
No-rinse car
wash
Horseradish
Little Dot
perfume set
Sandpaper
Source: World Features Syndicate
Mickey Mouse’s
Product Mix
Theme parks &
resorts
ABC Television
Network
TV & radio
stations
Film studios &
production
Video programs
& licensing
Consumer
products
Publishing
Marketing Classes
of Goods & Services
Consumer Goods
for final use
- Convenience for frequent purchases (7-11)
for comparing value (mall)
- Shopping
for small market segment
- Specialty
- Unsought unexpected purchases
Industrial
for production of
other goods
1)
2)
3)
4)
5)
6)
Importance of
Packaging
Protect
Attract
Describe
Explain
Warranties
Price, Value, Uses
Branding
 Brand &
Trademark
 name, symbol or
design
Mary’s FreshFruit
Jams use
exclusive
 Categories
 for national
distribution
Fresh Daily
- Manufacturers’
 illegal copies
- Knockoff
carry
Straight fromthe
Garden
distributors
- Dealer/Private
name like Sears
 non-branded
- Generic
aspirin, zipper, linoleum, nylon, kerosene, escalator
Xerox, rollerblade, kleenex, Coke,??
Branding
 awareness, images
quality, loyalty
Equity
Mary’s Fresh Fruit Jams
Loyalty
Fresh
Straight
Awareness
Association
 commitment to
purchases
Daily
 name represents
from the
Garden
category
 linking to
favorable images
Market Value
of A Brand Name
McDonald's
Disney
Billions of
Dollars
Ford
General Electric
Nokia
Intel
IBM
MS/Windows
Coca-Cola
0
10
Source: Interbrand Group
20
30
40
50
60
70
80
A Good Brand Name...
Speaks directly to
product’s target
customers
Attracts/motivates
consumers to try it
Is memorable/sticks in
customers’ minds
Is distinctive enough to
protect it legally
Most Powerful
Internet Brands
Category
Brand
Books & Music
Amazon.com
Buy.com
Charles Schwab,
Ameritrade, E*Trade
Brokerage
Search Engine
Google, Yahoo,
MSN, AOL
Travel
Expedia, Travelocity,
Fodors, Priceline
Source: Business 2.0, July 2002, p. 86.
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
New-Product
Development
Idea
Generation
Screening
Analysis
Development
Testing
Commercialize
Soft Drink Brands
That Didn’t Make It
Juicy Fruit with
Lemon Lime
Lemon Merengue
Cream Wizard
Wintergreen
Crow Clove
Source: St. Louis Post-Dispatch
Kentucky No
Nip Cherry
Julep
Satan’s Punch
Green Tangerine
Sourer
Key Lime
Cream
Renaming Brands
OLD NAME
BELL ATLANTIC
BELL SOUTH
AMERICAN BRANDS
CIBA
VALUJET
Source: Forbes Magazine, December 21, 2002
NEW NAME
VERIZON
CINGULAR
FORTUNE BRANDS
NOVARTIS
AIR TRON
Sales and Profits During the PLC
Life Cycle
Stage
Introduction
Sales
Profits
Competitors
low sales
losses may
occur
few
Maturity
rapidly rising
slaes
peak sales
very high
profits
declining
profits
growing
number
stable, then
declining
Decline
falling sales
profits may
become losses
declining
number
Growth
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
Pricing
 Objectives
$
$
$
$
$
$
 Value- Service
 Break-Even
ROI (profit)
Building Traffic

Greater Market Share
Increasing Sales
Creating an Image
Social Objectives
 Cost-Based
- Fixed Cost
- Variable Cost
Other Strategies
-
Skim – high price
Penetration - low
EDLP – no sales
High-Low
Psychological - $9.99
Bundling – washer/dryer
 Leadership
Breakeven Chart
$1,200,000
$1,000,000
$800,000
Fixed Cost
Total Cost
Total Revenue
$600,000
$400,000
$200,000
50,000
40,000
30,000
20,000
10,000
$0
0
Total Revenue or Total Cost
(Figure 14.9)
Number of Units
Pricing Using
Breakeven Analysis
Problem
Costs
Market
Research
Forecast
Should we charge $2 or $3 per box?
Total Fixed Costs $400,000
Variable Cost
$1 per box
Company can sell: 290,000 boxes at $2 @
210,000 boxes at $3 @
Breakeven point =
price - variable cost
Breakeven
Analysis
total fixed 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
Market Share-Cable
AT&T/Media
One
29%
Others
38%
Comcast
12%
Source: Wall Street Journal 1/12/2000
AOL Time
Warner
21%
Movies- Domestic
Box Office Market Share
Others
16%
Disney
17%
MGM
4%
Dreamworks
4%
Warner Bros.
14%
Universal
13%
Sony
9%
Fox
11%
Source: Wall Street Journal, 1/12/2000
Paramount
12%
Market Share of
Video Sales
Paramount
10%
Universal
7%
Disney
35%
Sony
13%
Fox
15%
Source: Wall Street Journal, 1/12/2000
Warner
Bros.
20%