2. Chapter
Fourteen
LEARNING GOALS
1. Describe a total product offer.
2. Identify the various kinds of consumer and
industrial goods.
3. Summarize the functions of packaging.
4. Contrast brand, brand name, and trademark, and
show the value of brand equity.
14-2
3. Chapter
Fourteen
LEARNING GOALS
5. Explain the steps in the new-product development
process.
6. Describe the product life cycle.
7. Identify various pricing objectives and strategies.
14-3
4. Profile
MARY BARRA
General Motors
• Senior vice president of global product
development, Barra is GM’s highest-ranking
woman.
• With a team of over
36,000 members, she
manages global strategic
product alliances.
• GM is working to gain
market share in highly
competitive segments like
small fuel efficient cars.
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5. Chapter
Fourteen
NAME that COMPANY
It’s no secret that the airline industry is extremely
competitive and many airlines have cut basic
services like free baggage and food. In order
to set itself apart from its competitors, this
company takes a different path by offering
door-to-door limousine service and in-flight
massages.
Name that company!
14-5
6. Product
Development and
the Total Product
Offer
DEVELOPING VALUE
LG1
• According to the American Marketing
Association, value is a foundation of marketing.
• Value -- Good quality at a fair price.
• Adapting products to new markets is an ongoing
challenge.
• Product development is a key activity in any
modern business.
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7. Product
Development and
the Total Product PRODUCTS CONSUMERS
Offer
LG1 WON’T GIVE UP
• Internet service
• Cell phone service
• Cable television
• Discount apparel
• Haircuts and coloring
• Fast-food
Source: www.bigresearch.com.
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8. Product
Development and
the Total Product PRODUCTS “EXPENDABLE”
Offer
LG1 by SPENDING CUTS
• Luxury handbags
• Satellite radio
• Specialty apparel
• High-end cosmetics
• Facials
Source: www.bigresearch.com.
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9. Distributed
Product
Development
DISTRIBUTED PRODUCT
LG1 DEVELOPMENT
• Distributed Product Development -- The
handing off of various parts of your innovation
process - often overseas.
• The increase in outsourcing has
resulted in using multiple
organizations separated by
cultural, geographic and legal
boundaries.
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10. Developing a
Total Product
Offer
DEVELOPING a
LG1 TOTAL PRODUCT
• Total Product Offer -- Everything consumers
evaluate when deciding whether to buy something.
• Products are evaluated on
many different dimensions,
both tangible and intangible.
• Marketers must think like and
talk to consumers to find out
what’s important.
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14. QUALITY and SUSTAINABILITY
(Thinking Green)
• Trident Seafoods assures fish
sustainability by staying well
within catch limits.
• One part of its sustainability
practices is to use all of the fish.
That results in fish oil and
byproducts used in fertilizer and
fishmeal. Photo Courtesy of: Lisa Brunette
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15. Product Lines
& Product Mix UNDERSTANDING
LG1 PRODUCT LINES
• Product Line -- A group of products that are
physically similar or intended for a similar market.
• Product lines often include
competing brands like:
- Coca-Cola
- Diet Coke
- Coke Zero
- Cherry Coke
Photo Courtesy of: Coca-Cola Art Gallery
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16. Product Lines
& Product Mix The PRODUCT MIX
LG1
• Product Mix -- The combination of all product
lines offered by a manufacturer or service provider.
• Product mixes like Procter & Gamble’s can be
extensive:
- Toothpaste
- Cosmetics
- Diapers
- Batteries
- Bar soap
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17. Product
Differentiation DIFFERENTIATING PRODUCTS
LG2
• Product Differentiation -- The creation of real
or perceived product differences.
• Marketers use a mix of pricing, advertising and
packaging to create different images. Examples
include:
- Bottled water
- Aspirin
- Fast-food
- Laundry detergent
- Shampoo
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18. Marketing Different
Classes of
Consumer Goods
and Services
CLASSIFYING CONSUMER
LG2 GOODS and SERVICES
• Convenience Goods and
Services -- Products
consumers purchase frequently
with minimal effort. These
include:
- Candy and snacks
- Gas
- Milk and eggs
14-18
19. Marketing Different
Classes of
Consumer Goods
and Services
CLASSIFYING SHOPPING
LG2 GOODS and SERVICES
• Shopping Goods and Services -- Products
consumers buy only after comparing value, quality,
price, and styles. These include:
- Clothes and shoes
- Appliances and furniture
- Childcare
- Home remodeling
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20. Marketing Different
Classes of
Consumer Goods
and Services
CLASSIFYING SPECIALTY
LG2 GOODS and SERVICES
• Specialty Goods and Services -- Products
with unique characteristics and brand identity. These
include:
- Tiffany jewelry
- Rolex watches
- Lamborghini automobiles
- Ritz Carlton Hotels
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21. Marketing Different
Classes of
Consumer Goods
and Services
SPECIALTY GOODS AREN’T
LG2 JUST for HUMANS
• Would you buy these for your dog?
- Wine with custom labels featuring Fido
- Doggy day camp and in-home pet care
- A bound journal of your pets exploits
- Luxury shampoos and hair-care products
- A sound system to eliminate pet-unfriendly
frequencies
- A “dog beer” at the Pawbar
Source: Entrepreneur, June 2010.
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22. Marketing Different
Classes of
Consumer Goods
and Services
CLASSIFYING UNSOUGHT
LG2 GOODS and SERVICES
• Unsought Goods and Services -- Products
consumers aren’t aware of or haven’t thought of
buying until they need them. These include:
- Car-towing services
- Funeral services
- Renter’s insurance
Photo Courtesy of: Paul Chenoweth
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23. Marketing Different
Classes of
Consumer Goods
and Services
IDENTIFYING CONSUMER
LG2 GOODS CLASSIFICATIONS
• How would you classify these consumer
products?
- Beautyrest mattress
- Honda Accord
- McDonald’s Big Mac
- Rolls Royce automobiles
- Oreo Cookies
- Harvard University degree
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24. Marketing Different
Classes of
Consumer Goods
and Services
ODD PRODUCT IDEAS
LG2 that WERE SUCCESSFUL
• Pet Rock - For $3.95 you could buy a gift-wrapped
rock with eyes and a training manual.
• Garbage Pail Kids - Perhaps the grossest
trading cards ever produced.
• Mood Rings - Wildly popular as the changing
colors of the ring supposedly measured your mood.
• Chia Pets - Animal shaped (even President
shaped) clay figures that grew sprouts.
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25. Marketing
Industrial Goods
and Services
CLASSIFYING INDUSTRIAL
LG2 GOODS and SERVICES
• Industrial Goods -- Products used in the
production of other products and sold in the B2B
market.
• Industrial goods
include:
- Installations
- Capital items
- Accessory equipment
- Supplies
- Service
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26. Progress
Assessment PROGRESS ASSESSMENT
• What value enhancers may be included in a total
product offer?
• What’s the difference between a product line and
a product mix?
• Name the four classes of consumer goods and
services and give examples of each.
• Describe three different types of industrial goods.
14-26
27. Packaging
Changes the
Product
USES of PACKAGING
LG3
• Companies often use packaging to change and
improve their basic product. Examples include:
- Microwave popcorn
- Tuna pouches
- McDonald’s green packaging
• Good packaging can also make
a product more attractive to
retailers.
14-27
28. Packaging
Changes the
Product
SOME KEY FUNCTIONS of
LG3 PACKAGING
1) To attract buyers’ attention
2) Protect the goods inside and be tamperproof
3) Be easy to open
4) Describe and give information about the product
5) Explain the product’s benefits
6) Provide warranty information and warnings
7) Give an indication of price, value, and uses
14-28
29. The Growing
Importance of
Packaging
BUNDLING
LG3
• Bundling -- Grouping two or more products
together and pricing them as a unit.
• Virgin Airlines bundles
door-to-door limo
service and inflight
massage with some
tickets.
• Financial institutions
bundle advice with Photo Courtesy of: Joey Day
purchases.
14-29
30. Branding and
Brand Equity UNDERSTANDING BRANDING
LG4
• Brand -- Name, symbol, or design that identifies
the goods or services and distinguishes them from
competitors’ offerings.
• Trademark -- A brand
that has exclusive legal
protection for both its
brand name and design.
14-30
31. The NAME GAME
(Reaching Beyond Our Borders)
• With a couple hundred countries on the cyber-
platform, choosing the right name is a global
issue.
• Every once in a while, a successful name is
created by accident. Google was supposed to be
called Googol.
• What would you rename Very Vegetarian if given
the chance? Would you want to ask an expert?
14-31
32. WHAT’S in a NAME?
Source: Bloomberg Businessweek, October 21, 2010.
14-32
33. Branding and
Brand Equity KEY BRAND CATEGORIES
LG4
• Manufacturers’
Brands – Brand names
of manufacturers that
distribute products
nationally.
• Dealer (Private-
Label) Brands --
Products that carry a
retailer’s or distributor’s
brand name instead of a Photo Courtesy of: Joe Mudd
manufacturer’s.
14-33
34. Branding and
Brand Equity KEY BRAND CATEGORIES
LG4
• Generic Goods -- Nonbranded products that sell
at a discount compared to manufacturers’ or dealers’
brands.
• Knockoff Brands -- Illegal copies of national
brands.
14-34
35. Generating
Brand Equity
and Loyalty
ESTABLISHING BRAND EQUITY
LG4 and LOYALTY
• Brand Equity – The value of the brand name and
associated symbols.
• Brand Loyalty -- The degree to which consumers
are satisfied and are committed to further purchases.
14-35
37. Generating
Brand Equity
and Loyalty
ORIGINS of
LG4 AUTOMOBILE SYMBOLS
• Volvo - Symbol for iron
• Lamborghini - Company founder’s
zodiac sign was Taurus
• Volkswagen - Product of an office
contest
• Porsche - Coat of arms for city and state
headquarters
Source: World Features Syndicate.
14-37
38. Generating
Brand Equity
and Loyalty BUILDING BRAND AWARENESS
LG4
• Brand Awareness -- How quickly or easily a
given brand name comes to mind when someone
mentions a product category.
• Consumers reach a point of brand preference
when they prefer one brand over another.
• When consumers reach brand insistence, they
will not accept substitute brands.
14-38
39. Creating Brand
Associations
& Brand BUILDING BRAND
Management
LG4 ASSOCIATIONS
• Brand Association -- Linking a brand to other
favorable images, like celebrities or a geographic
area.
• Brand Manager -- Person responsible for a
particular brand and handles all the elements of the
brand’s marketing mix.
14-39
40. Progress
Assessment PROGRESS ASSESSMENT
• What functions does packaging now perform?
• What’s the difference between a brand name and
a trademark?
• Explain the difference between a manufacturers’
brand, a dealer brand, and a generic brand.
• What are the key elements of brand equity?
14-40
42. Product
Screening &
Analysis
BRINGING NEW PRODUCTS
LG5 to the MARKET
• Product Screening -- Reduces the number of
new products a firm is working on to focus on the
most promising.
• Product Analysis -- Focuses on the cost
estimates and sales forecasts to get an idea of
potential profitability.
14-42
43. Product
Development
and Testing
BRINGING NEW PRODUCTS
LG5 to the MARKET
• Concept Testing -- Takes a product idea to
consumers to test reactions.
• Commercialization
-- Promoting the product
to distributors and
retailers and developing
the promotional
campaign.
14-43
44. DON’T COME to ME,
I’LL COME to YOU
(Spotlight on Small Business)
• The popularity of food trucks has risen, but it’s no
longer just hot dogs and hamburgers:
- Clover Food Truck in Boston/Cambridge offers a
rotating menu of local organic foods.
- Sugar Philly Truck in Philadelphia offers crè me
brulee hot off the truck.
- Dim and Den Sum in Cleveland has some of the
best food truck art in America.
- Koi Fusion PDX in Portland is one of the few mobile
eateries in that town.
14-44
45. The Product
Life Cycle
The FOUR STAGES of a
LG6 PRODUCT LIFE CYCLE
• Product Life Cycle -- A theoretical model of
what happens to sales and profits for a product over
time.
• Product Life Cycle Stages:
1. Introduction
2. Growth
3. Maturity
4. Decline
14-45
47. The Product
Life Cycle
PROFITS BEYOND the GRAVE
LG6 Top Earning Deceased Celebrities in 2010
Source: Forbes, www.forbes.com, accessed July 2011.
14-47
48. Progress
Assessment PROGRESS ASSESSMENT
• What are the six steps in the new-product
development process?
• What’s the difference between product screening
and product analysis?
• What are the two steps in commercialization?
• What’s the theory of the product life cycle?
14-48
49. Competitive
Pricing PRICING OBJECTIVES
LG7
1) Achieving a target return on
investment or profit
2) Building traffic
3) Achieving greater market
share
4) Creating an image
5) Furthering social objectives
both short-run and long-run
14-49
50. Competitive
Pricing PRICING STRATEGIES
LG7
• Cost-based pricing measures cost of producing a
product including materials, labor, and overhead.
• Target Costing – Designing a product that
satisfies customers and meets the firm’s targeted
profit margins.
• Competition-Based Pricing -- A strategy
based on what the competition is charging for its
products.
14-50
51. Break-Even
Analysis USING BREAK-EVEN ANALYSIS
LG7
• Break-Even Analysis -- The process used to
determine profitability at various levels of sales. The
break-even point is where revenues equals cost.
• Total Fixed Costs -- All costs that remain the
same no matter how much is produced or sold.
• Variable Costs -- Costs that change according to
the level of production.
14-51
52. Other Pricing
Strategies PRICING ALTERNATIVES
LG7
• Skimming Price Strategy -- Pricing new
products high to recover costs and make high profits
while competition is limited.
• Penetration Price Strategy -- Pricing
products low with the hope of attracting more buyers
and discouraging other companies from competing in
the market.
• Everyday Low Pricing (EDLP) -- Setting
prices lower than competitors with no special sales.
14-52
53. Other Pricing
Strategies PRICING STRATEGIES
LG7 of RETAILERS
• High-Low Pricing -- Using regular prices that
are higher than EDLP stores except during special
sales when they are lower.
• Psychological Pricing -- Pricing products at
price points that make a product seem less expensive
than it is.
14-53
54. Progress
Assessment PROGRESS ASSESSMENT
• List two short-term and two long-term pricing
objectives. Can the two be compatible?
• What are the limitations of a cost-based pricing
strategy?
• What’s psychological pricing?
14-54
Notas del editor
Company: Virgin Airlines
See Learning Goal 1: Describe a total product offer.
See Learning Goal 1: Describe a total product offer. Products Consumers Won’t Give Up This slide profiles some of the goods and services people do not eliminate during a recession. Ask students: Why are the items listed on the slide considered “untouchables”? To further the discussion, ask students: What items do you consider to be “untouchable” and why?
See Learning Goal 1: Describe a total product offer. “ Expendable” Spending Cuts This slide shows the flipside of the previous slide and lists items that people are most likely to eliminate. Ask students to get into groups and discuss: Why are these items “expendable,” but the items on the previous slide are “untouchable”?
See Learning Goal 1: Describe a total product offer.
See Learning Goal 1: Describe a total product offer. The total product offering includes tangible as well as intangible benefits.
See Learning Goal 1: Describe a total product offer. Product Innovation During the Great Depression The late twenties and thirties are associated with the Great Depression, but the period was also one of great product innovation. The items on the slide were invented during the Great Depression. Have students look at the items and ask: Why do you think these items were developed during a time when most Americans had very little discretionary income? Have students work with a partner or small group to come up with specific reasons they think these products developed.
See Learning Goal 1: Describe a total product offer. Anything You Can Do… This slides shows that companies that innovated and create new products don’t always remain the market leaders. Point out that while Apple didn’t introduce cell phones, video recorders or game players, it has become the market leader by listening to consumers and improving these products to meet consumers’ wants and needs.
See Learning Goal 1: Describe a total product offer. A product can be divided into the physical and the total product. Marketing managers must take the physical and add value to create the total product offer.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
See Learning Goal 1: Describe a total product offer.
See Learning Goal 1: Describe a total product offer. To give students a visual of the products offered by Proctor and Gamble, use their website at www.pg.com and click on the products tab.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Location, brand awareness, and image are important in marketing these goods and services.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Brand name, price, and quality differences are important in marketing these goods and services.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Purchasers of the items listed on this slide are brand insistent and refuse to accept substitutes.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Specialty Goods Aren ’t Just for Humans : People are doting on their pets more than ever. These links show just a few things you could buy for your best friend. Ask students: Would you ever purchase any of these for your pet? Do you have a pet product idea?
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Unsought goods and services often rely on personal selling or specialty advertising - like the yellow pages.
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Identifying Consumer Goods Classifications: Beautyrest mattress - shopping good Honda Accord - shopping good McDonald ’s Big Mac - convenience good Rolls Royce automobiles - specialty good Oreo Cookies - convenience good Harvard University degree - specialty good
See Learning Goal 2: Identify the various kinds of consumer and industrial goods. Odd Product Ideas Not all successful products necessarily make sense. Take for example the products mentioned on this slide. To start a discussion on odd product offerings, ask students: What are some other examples of odd products that were successful or unsuccessful? For more examples of odd products that were not successful go to http://www.businessadministration.org/blog/15-ridiculous-products-that-actually-sell
See Learning Goal 2: Identify the various kinds of consumer and industrial goods.
Some value enhancers that may be included in the total product offering include: brand name, warranty, service, store surroundings, and speed of delivery. Product line refers to the group of products that are physically similar or intended for a similar market. These products may face similar competition. For example, you can purchase a Diet Coke, Diet Coke with Splenda etc. The product mix is the total of the product lines offered by a particular company. The text uses the example of Procter & Gamble. The four classes of consumer goods and services include: Convenience goods and services - candy, gum and milk Shopping goods and services - clothes, shoes and appliances Specialty goods and services - fur coats, imported chocolates and business consultants Unsought goods and services - burial service, insurance and emergency drain cleaning Capital items are expensive products that last a long time. Accessory equipment consists of capital items that are not quite as long-lasting or expensive as installations and include computers, copy machines, and various tools.
See Learning Goal 3: Summarize the functions of packaging.
See Learning Goal 3: Summarize the functions of packaging.
See Learning Goal 3: Summarize the functions of packaging.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Recognized trademarks include the Nike Swoosh, the Pillsbury Doughboy, and Apple ’s Apple.
See Learning Goal 7: Identify various pricing objectives and strategies.
See Learning Goal 7: Identify various pricing objectives and strategies. What ’s in a Name? Product names are not decided on lightly. Many companies seek professional advice regarding corporate identity.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Manufacturers ’ brand examples - Ford, Microsoft, Xerox Dealer brand example - Kenmore from Sears
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Brand equity is t he combination of factors (awareness, loyalty, perceived quality, images, and emotions) that people associate with a brand name. Examples: Coca-Cola and Ziploc have strong brand equity.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Most Valuable Brands This slide lists the 10 most valuable brands according to Forbes. As you can see, six of the most valuable brands are tech companies.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity. Origins of Automobile Symbols This slide presents the origins of car symbols. Ask the students: How important is the name and symbol of a product? What aspects should be considered in the naming process? ( Most students should suggest that the name of your product is very important, because it represents your company, tells the customers what the product is, and it should mean something.) Given that there are so many models of cars in so many different countries, naming cars becomes a very complex process. Should only one name be used in all countries or different names for the same model in different countries?
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
See Learning Goal 4: Contrast brand, a brand name, and trademark and show the value of brand equity.
The functions packaging performs include: (1) attract the buyer ’s attention, (2) protect the goods inside, (3) be easy to open, (4) describe and give information, (5) explain the benefits of the good inside, (6) provide information on warranties, warnings and other consumer matters, and (7) give some indication of price, value, and uses. Brand names consist of a word, letter or group of words or letters that set it apart from other goods and services. A trademark is a brand that has exclusive legal protection for both its brand name and design. A manufacturers ’ brand represents manufacturers that distribute their products nationally such as Xerox or Dell. A dealer brand is often referred to as a private label and will not carry the manufacturers name, but rather carries the name of the distributor instead. For example, Kenmore is a dealer brand sold via Sears. A generic brand is the name of an entire product category. Brand equity is the value of the brand name and associated symbols. The elements of brand equity include: brand loyalty, brand awareness, and brand association.
See Learning Goal 5: Explain the steps in the new product development cycle. Green Ketchup and New Coke are two of the many thousands of products that failed. New product failure is common due to the fact that companies fail to properly manage the new product development process.
See Learning Goal 5: Explain the role of brand managers and the steps of the new-product development process.
See Learning Goal 5: Explain the role of brand managers and the steps of the new-product development process.
See Learning Goal 1: Describe a total product offer.
See Learning Goal 6: Describe the product life cycle.
See Learning Goal 6: Describe the product life cycle.
See Learning Goal 6: Describe the product life cycle. Profits Beyond the Grave This slide explores the top earnings of deceased celebrities. Ask students: Albert Einstein is associated with all things “brainy.” His earnings weren’t generated by sales of any products he invented, so how did his estate bring in $10 million in 2010? (Einstein’s name appears on such things as Baby Einstein products, Chrysler’s Ram brand truck ads, and a collection of A.J. Morgan “geek chic glasses. A new brain videogame for Nintendo DS retails for about $50. Go to http://www.forbes.com/2010/10/22/top-earning-dead-celebrities-business-entertainment-dead-celebs-10_land.html to read more about each of the deceased celebrities on the slide.) Ask students: What do you think the future earnings of Michael Jackson will be?
The six steps in the new-product development process include: Idea generation, development, product screenings, testing, product analysis, and commercialization. During the product screening process the number of new-product ideas a firm is working on is reduced, so that it may focus on the most promising ideas. Product analysis occurs after screening and involves making cost estimates and sales forecasts to get a feeling for the profitability of new-product ideas. The two steps in commercialization involve promoting the product to distributors and retailers, and the development of strong advertising and sales campaigns. The product life cycle is a theoretical model which explains what happens to sales and profit for a product over a particular period of time. This model has four stages: introduction, growth, maturity, and decline.
See Learning Goal 7: Identify various pricing objectives and strategies. One strategy many students have experienced but might not fully understand is the loss leader strategy. This strategy is often used around the Thanksgiving holiday when grocery stores offer to sell customers turkeys for much less than their actual cost in an effort to attract consumers into the store. This leads to more traffic and sales of more products.
See Learning Goal 7: Identify various pricing objectives and strategies.
See Learning Goal 7: Identify various pricing objectives and strategies.
See Learning Goal 7: Identify various pricing objectives and strategies. When Apple introduced the iPhone, they used a skimming price strategy. Walmart has effectively used everyday low pricing or EDLP to dominate the retail sector.
See Learning Goal 7: Identify various pricing objectives and strategies.
Short-term pricing objectives include loss leaders and is designed to build traffic as well as achieving greater market share. Long-term pricing objectives include achieving a target return on investment and creating a certain image. It is important that marketing managers set pricing objectives in context of other marketing decisions, since the pricing objectives may differ greatly. The limit of a cost-based pricing system is that in the long run it is not the producer that establishes price but rather the market place. To effectively establish price, the producer must take into account competitor prices, marketing objectives, actual cost, and the expected cost of product updates. Psychological pricing involves setting the price of goods or services at price points that make the product appear less expensive. For example, a TV may be priced at $999, since it sounds less expensive than $1,000.