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AB219 Marketing Unit Five
Tonight’s Focus:
New Products and Pricing
What do I have to do this week?• Reading: Chapters 8 & 9.
• Discussion: Product Satisfaction!
• Quiz (Review): On U4 & U5 material.
• Simulation: 2nd one for the term.
• Assignment: Begin Your Project on Brand chosen in U2.
Professor’s Tip: Time to start working on your U6 Research Project submission and related research! Not intended to be
completed in a few days, but over at least 2 weeks!
Remember: Tuesday @ 11:59 pm is the weekly deadline.
Assignment: BEGIN RESEARCH PROJECT!• Begin Research and complete work on Price & Product portion of Final
Project. (Submitted in U6 for grading)
• Template provided under U5 Assignment & provides clear instructions on how to approach & complete it.
• The R.P. is on brand you chose in the U2 discussion.
• You will submit it with a Title Page & Reference page. (i.e. full APA structure requirements will apply to research project)
Let’s look @ the major areas to address in the following couple of slides!
Research Project
• Major Components:
-Focuses on the Marketing Mix for your brand (4 P’s: Product, Price, Promotion & Distribution/Place).
-APA formatted paper with approximately 3 – 4 page written response section when complete
YOU WILL NOT BE ADDRESSING THE ENTIRE PROJECT THIS WEEK …………. Just PRODUCT & PRICE!
Major Components of the R.P. Work this Unit
Product (U4 & U5)
• Product(s) Classification• Product Life Cycle• Product Positioning• Why different product lines or line extensions? (if appl.)• Features and Benefits of the product. • Type of product(s): Shopping, Convenience, etc……….. • Width and Depth of your brand & respective products• Importance of Product Packaging
Major Components of the R.P. Work this Unit
Price (Unit 5)
• Pricing Strategies: competition-based pricing, demand-based pricing, new product pricing, and/or product-line pricing.
• Pricing Objectives • Is the brand’s pricing is in line with the competition? • Discuss the issues and reasons behind the brand and respective
products being higher priced or lower priced.• Is price is consistent with the quality level?
Discussion “Best Practices”Major Discussion Requirements include:
• 1st detailed original response (answers discussion questions) no later than Saturday of unit.
• EXCEED minimum 100 word initial post (usually will have to exceed this minimum to adequately respond to the question(s) asked .)
• Post on at least 3 different days.
• Respond to @ least 2 of your classmates (These posts must also include the substance from our weekly focus and demonstrate your application of the material we are learning.)
• Minimum 3 total posts for each unit (1st detailed original response, 2 peer responses).
Remember:• Relate Discussion to Reading & Weekly Focus. • Interactive discussions, so please answer any questions that I or classmates may ask.
Let’s Test our Knowledge!
U5.1: The following are included in the major segmentation variables except _________________ ?
a) Demographic
b) Geographic
c) Behavioristic
d) Sociocultural
e) Psychographic
The major Segmentation Variables The major segmentation variables can be divided into demographic,
geographic, psychographic, and behavioristic groups. These are
summarized below:
Adoption – individual process
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption
Adopter Categories - diffusion
• Innovators• Early Adopters• Early Majority• Late Majority• Laggards
Note: You can fall into different categories depending on the
product we are talking about.
Review of Unit 4
• How did it go?
• Questions or concerns?
• Lets start discussing Unit 5!
New Product Development Process(8 step process)
• Idea Generation – ideas come from many sources• Idea Screening – need to avoid “go” or “no go” error• Concept Development and Testing – iterative process of
consumer feedback• Marketing Strategy Development - initial marketing strategy for
the new product• Business Analysis – what is the potential for sales, costs, and
profits?• Product Development – lengthy and expensive• Test Marketing – realistic settings• Commercialization – when, where, and how
Product Life Cycle Characteristics
Product Life Cycle Stages are as follows: (see figure
8.2 of our ebook)
• Product development – sales are zero and expense outlays are significant
• Introduction - sales begin at zero, profits negative• Growth – sales rise rapidly, profits peak• Maturity – sales peak and start to decline as profits fall• Decline – sales fall rapidly
Marketing Objectives at each stage
• Introduction – create awareness and trial
• Growth – establish unique selling proposition; differentiate, build mass market awareness
• Maturity – hold share, consumer loyalty, diversify product, increase distribution points
• Decline – decrease expenditures, milk the brand and discontinue if necessary
Let’s Test our Knowledge!
U5.2: When PepsiCo introduced flavored water to its Aquafina line, this was an example of a(n):
a) line extension.
b) product deletion.
c) quality modification.
d) concept test.
e) functional modification.
U5.3: Test marketing:
a) helps guarantee a product’s success.
b) is the unlimited introduction of a
product into a geographic area.
c) is a sample launching of the entire
marketing mix for a product.
d) should be conducted for all products.
e) is usually inexpensive.
U5.4: Kraft Foods changed the image of Cheez Whiz into a microwavable cheese sauce. This was an example of:
a) repositioning.
b) product deletion.
c) line extension.
d) business analysis.
e) customer contact.
PRICE
What is Price?
• Value exchanged for products-Money
-Barter
• Pricing is Important …….. only primary source of revenue of all the 4P’s!
• Marketing Mix/4P’s- Product,
- Price
- Distribution/Place
- Promotion
Now, we will focus on Price on the upcoming slides!
Major Pricing Strategies
• Customer value-based pricing
• Cost-based pricing
• Competition-based pricing
Customer Value-Based Pricing
• Assesses prices based on customer perceptions of value
• Good-value pricing - The correct amount of quality and service at a fair price
• Value-added pricing - Differentiates the product by attaching value-added features and services and charges higher prices for them
Cost-Based Pricing
• Assesses price based on costs
• Cost-plus pricing - adds a markup to the cost of the product
• Breakeven pricing - sets prices to ensure that costs are covered and there is a certain rate of return
Breakeven Pricing (chart from Kotler)
Competition-Based Pricing
• Sets prices based upon what the competition’s strategies, market offerings, costs and prices are.
• Consumers will look at value in the product compare it to the competition and make a purchase decision based on what they see.
Other Considerations Impacting Pricing
• Can be internal or external to the firm• Marketing strategies and objectives• Organizational considerations such as internal
costs• The economy• Government requirements• Social considerations• Demand and the marketplace
Price Elasticity & Demand Typically, if the price of a product increases beyond a
person’s comfort level, they will either switch to a different
brand (a substitute) or stop buying the product all together.
• Elastic Example:
Water is usually Demand Elastic in that consumers will
try to find a different brand if their favorite becomes too expensive (price increase).
• Inelastic Example:
Gasoline is Demand Inelastic and you will usually need to buy it no matter what the price is until it is completely unaffordable.
Price Elasticity• A Product or Industry is PRICE ELASTIC if:
Demand for product if the Price goes & Vice Versa.
So, consumers will look to either find SUBSTITUTES or stop
buying the product altogether if prices increase.
• A Product or Industry is PRICE INELASTIC if, on the other hand, no substitutes and price increase will not cut demand.
Demand for a product or remain the same if price .
So, profits for an industry or product will increase for a company when prices increase and decrease when prices decrease.
Price Elasticity
• Measures the sensitivity of demand to price changes
• If acceptable substitutes are available, markets tend to be elastic.
• If not, they tend to be inelastic.
• Examples of inelastic products?
New Product Pricing
• Skimming – set initial price high. Useful for unique products when competition cannot follow quickly.
- Where does the term come from?
- Examples?
• Penetration – set initial price low to capture as much of the market as possible before competition enters.
- Examples?
Product Mix Pricing
Attempts to maximize profits across the total product mix
of the product line.
• Product Line Pricing - Sets prices across an entire product line
• Optional-Product Pricing - provides optional accessories available with the primary product
Product Mix Pricing (continued)
• Captive - Product Pricing - Prices products that must be bought with the main product
• By-Product Pricing - Pricing low-value by products to clear inventory
• Product-Bundle Pricing - Pricing products that are sold in bundles.
Price Adjustments
In general, price adjustments adjust prices based on
situational, product and customer differences.
• Discount and allowance pricing - price reductions are provided based on customer behavior such as frequent purchases and paying early.
• Psychological pricing - prices that impact the customer psychologically such as pricing products at $1.99 or reference pricing.
Price Adjustments (continued)
• Promotional Pricing - temporary reductions in prices to increase sales.
Examples: white sales and rebates
• Geographical Pricing - Pricing based on where customers are located.
Examples: delivery based on zones or a uniform delivered price
Price Adjustments (continued)
• Dynamic Pricing- prices are continually changed and adjusted depending on individual characteristics and needs of customers.
Examples: negotiated prices and pop machines that charge based on temperature outside.
• International Pricing - Price adjustments made in marketing products internationally.
Examples: Pharmaceuticals and McDonalds are priced differently in different countries.
What do I have to do this week?• Reading: Chapters 8 & 9.
• Discussion: Product Satisfaction!
• Quiz (Review): On U4 & U5 material.
• Simulation: 2nd one for the term.
• Assignment: Begin Your Project on Brand chosen in U2.
Professor’s Tip: Time to start working on your U6 Research Project submission and related research! Not intended to be
completed in a few days, but over at least 2 weeks!
Remember: Tuesday @ 11:59 pm is the weekly deadline.
Any Questions?
Thank you for attending!
See you next week .... Same Place, Same Time!
