MT 219 Marketing Unit Five

New Products and Pricing

Note: This seminar will be recorded by the instructor.

Review of Unit 4

• How did Unit 4 go? Questions or concerns?

• Instructor suggestions for Unit- Research for your Unit 6 research Project

• Questions?

New Product Development 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 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

• See figure 8.2 in text

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

What is Price?

• Value exchanged for products- Money

- Barter

• Only primary source of revenue

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

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

• 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?

Price Adjustments

• Adjusts 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.

Any Questions?

Thank you for attending!

See you next week!

Instructor will post the link to the recording of tonight’s seminar in the course Announcements.