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Great tips, resources, best practices and strategies for entrepreneurs, start-ups, professionals and small business owners.to plan launch and grow successful businesses.
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Chapter 9
Business Marketing:ProductProduct PRICINGPRICING
StrategiesStrategies
This Week’s This Week’s KEY KEY ResourcesResources
• New Jersey Entrepreneurial Network.• Venture Association of NJ.• NJ Economic Development Authority.• www.nyc.gov/html/sbs/nycbiz/html/library/library.shtml • www.sba.gov/smallbusinessplanner/start/financestartup
/index/html
• www.nyc.gov/html/sbs/nycbiz/html/business_planning/get.shtml
• http://www.nypl.org/smallbiz/
Resources
ProductsProductsvs.vs.
ServicesServices
• A product is anything that is offered to the market to satisfy customer wants, needs, and demands
• A Good versus A Service:– Tangibility: physical items– Inseparability: Services are inseparable from
consumption (a haircut)– Heterogeneity: The quality of the service depends
entirely on the co. and person performing the service, and the circumstances at the time of the service
– Perishability: a good can be stored for later use/consumption
What’s a “Product”
• HYBRID products: a balance of tangible and intangible (meal at restaurant)– Chuck e cheese or Wolfgang Puck
• Total ProductTotal Product = CORE + Augmented – CORE: Clean houses, help people find jobs, make
wine– AUGMENTED: What distinguishes you from the
competition but is still associated with the CORE– TOTALTOTAL: Comprises both but includes other aspects
that change over time
Making Intangible More TANGIBLE
• A small business’s resources are limited, so you MUST focus on your TARGET MARKET:– The group of people on which a marketer focuses
their promotional efforts
What’s a “Product”
What’s a What’s a BrandBrand
• Avoid using JUST your family name• Is your name appropriate (Ex. Pain Dental)• Watch your intellectual capital, website
domains, etc. • Don’t use a name that’s so narrow that it
prevents your future growth (Ex. Just Screws)
Brand Guidelines
• Idea Generation / SCAMPER (Chpt. 4)• Idea screening for business potential, which do
we evaluate further• Idea evaluation – specifying the details of each
idea’s technological feasibility, cost, market potential
• Product Development – start with prototypes, test marketing
• Commercialization
Product Development Process
•SS - Substitute•CC - Combine•A - Adapt•MM - Magnify/Modify•PP - Put to other uses•EE - Eliminate•R - Rearrange
SCAMPER
Product Development
Product Development
http://www.slideshare.net/nusantara99/new-product-development-strategy
New Product Development
• Post commercial launch sales grow slowly• Building brand awareness/recognition is
CRITICAL• Advertising must focus on the advantage this
product/service offers• Let them try your new product out (samples)• Let them see it in action (Shamwow)
STAGE 1: Introduction
• Product acceptance happens rapidly• Sales and profits grow at a high rate• Not a huge need for advertising and promotions• Marketing goal is maximize market share• Critical time for small firms – larger firms can
now see you coming at them from the rear view mirror
STAGE 2: Growth
Growth is a Growth is a Double-Edged Double-Edged
SwordSword
• Rapid growth begins to slow• Competition is fierce• New client acquisition comes from taking
customers from competitors• When competitors go out of business you
snatch up their accounts• Less advertising more promotions• Expand your suite of products and services
STAGE 3: Maturity
• Can be slow or fast, steady or sporadic• Sales and profits fall• Stop advertising and promoting• Scale back production, phase out certain
products and/or services
STAGE 4: Decline
What is What is Pricing?Pricing?
• So much more than the cost of making the product plus a mark up
• Implies VALUEVALUE or WORTH• Need to understand the “psychologypsychology” behind
consumer purchase decisions• A MAJOR factor in affecting customers’ beliefs
about your quality and desirability • The easiest variable of the 5P marketing mix to
change• A critical component of your competitive
strategy
What’s “Pricing”
• Seller tendency to overcharge• Highest versus optimum price• Optimum price is a function of 4 things:
– Demand for the product– Value delivered to the customer– Competitor pricing– Your business strategy and product placement
• Markup: what you sell it for -what it cost to make it
– As a %: markup / cost
What’s “Pricing”
• Price elasticity: inelastic product is one people can’t do without. Now matter how much you increase the price, they will still buy it.
• Got any examples???Got any examples???• Inelastic products have almost NO substitutes• Elastic products have LOTS of substitutes
Price Elasticity
• We all have INTERNAL & EXTERNAL reference prices:– Internal: A consumer’s mental image what the price
should be– External: An estimation what the price should be
based on information external to the consumer
• Price Range ACCEPTABILITY
Pricing Psychology
• Align pricing to your company objectives• Reflect your marketing strategy• Channels of Distribution (pay off every hand in
the pot)• Competition• Legal Regulatory Issues:
– Price gouging
Factors in Setting Prices
• Skimming: set it high, bring it down over time• Prestige/Premium – the higher the price, the
higher the “perceived” value• Odd-Even: End with a $.05$.05, $.07$.07, or $.09$.09• Partitioned: Charging for all the “EXTRAS”• Captive: The base unit pricing is inexpensive
but the expendable is COSTLY (Ex. Printer + ink cartridge, single coffee cups, home water service)
• Price Lining: Different product versions to appeal to different markets.
Pricing Strategies
• Periodic/random discounting• Off-Peak Pricing• Bundling/Multi-pack Pricing• Coupons, Rebates, Loyalty Programs• Referral Discounts
Price Lowering Techniques
Pricing Strategies
Pricing Strategies
Industry ResearchIndustry Research
FREEFREE Industry Research
FREEFREE Industry Research
FREEFREE Industry Research
FREEFREE Industry Research
FREEFREE Industry Research
FREEFREE Industry Research
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