BUS7450 Strategic Marketing Management Week 3 Dr. Jenne Meyer

BUS7500  Article reviews

12 Setting Product Strategy

Class Exercise – Chapter 12  Put a product in the room  How does the product differentiate?  Where do you think this product fits in the company’s product roadmap? Draw it.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall What is a Product? A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

Product Value Attractiveness of the market offering Superior product Value pricing Quality

Product Classification Durable v tangible  Non durable  Durable  Services Consumer good classification  Convenience  Shopping  Compare based on suitability, quality, price, and style  Specialty  Unique characteristics or brand identification  Unsought  Something not normally thought of (smoke detectors)

Product Differentiation  Product form  Features  Customization  Performance  Conformance  Durability  Reliability  Repairability  Style

Service Differentiation  Ordering ease  Delivery  Installation  Customer training  Customer consulting  Maintenance and repair  Returns

Product Map for a Paper-Product Line Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

What is the Fifth P? Packaging, sometimes called the 5 th P, is all the activities of designing and producing the container for a product. Objectives  Identify the brand  Convey descriptive & persuasive information  Facilitate product transportation and protection  Assist at-home storage  Aid product consumption

13 Designing and Managing Services

Class Exercise – Chapter 13  Brainstorm a service offering  How do you define or classify your service  How is this service differentiated?  How can we improve service quality compared to competitors?

What is a Service? A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Services are Everywhere

Service Distinctions  Equipment-based or people-based  Service processes  Client’s presence required or not  Personal needs or business needs  Objectives and ownership

Figure 13.1 Continuum of Evaluation for Different Types of Products Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Tangible Elements that Impact Service  Place  People  Equipment  Communication material  Symbols  Price

Inseparability

Variability

Perishability

Matching Demand and Supply Demand side  Differential pricing  Nonpeak demand  Complementary services  Reservation systems Supply side  Part-time employees  Peak-time efficiency  Increased consumer participation  Shared services  Facilities for future expansion

Factors Leading to Customer Switching Behavior  Pricing  Inconvenience  Core Service Failure  Service Encounter Failures  Response to Service Failure  Competition  Ethical Problems  Involuntary Switching

Determinants of Service Quality  Reliability  Responsiveness  Assurance  Empathy  Tangibles

Improving Service Quality  Listening  Reliability  Basic service  Service design  Recovery  Surprising customers  Fair play  Teamwork  Employee research  Servant leadership

14 Developing Pricing Strategies and Programs

Class Exercise – Chapter 14  What is the pricing strategy or your product?  What is the pricing strategy or your service?  How do consumers evaluate prices for your product or service?  Do your competitors price differently?

Synonyms for Price  Rent  Tuition  Fee  Fare  Rate  Toll  Premium  Honorarium  Special assessment  Bribe  Dues  Salary  Commission  Wage  Tax

The Internet Changes the Pricing Environment – By Providing Information

Common Pricing Mistakes  Determine costs and take traditional industry margins  Failure to revise price to capitalize on market changes  Setting price independently of the rest of the marketing mix  Failure to vary price by product item, market segment, distribution channels, and purchase occasion

Consumer Psychology and Pricing  Reference prices  Price-quality inferences  Price endings  Price cues

Table 14.1 Possible Consumer Reference Prices  “Fair price”  Typical price  Last price paid  Upper-bound price  Lower-bound price  Competitor prices  Expected future price  Usual discounted price

Tiers in Pricing

Steps in Setting Price  Select the price objective  Determine demand  Estimate costs  Analyze competitor price mix  Select pricing method  Select final price

Step 1: Selecting the Pricing Objective  Survival  Maximum current profit  Maximum market share  Maximum market skimming  Product-quality leadership

Step 2: Determining Demand  Price sensitivity  Estimate demand curves  Price elasticity of demand

Inelastic and Elastic Demand

Factors Leading to Less Price Sensitivity  The product is more distinctive  Buyers are less aware of substitutes  Buyers cannot easily compare the quality of substitutes  Expenditure is a smaller part of buyer’s total income  Expenditure is small compared to the total cost  Part of the cost is paid by another party  Product is used with previously purchased assets  Product is assumed to have high quality and prestige  Buyers cannot store the product

Step 3: Estimating Costs  Types of costs  Fixed costs  Variable costs  Total costs  Average cost  Accumulated production  Activity-based cost accounting  Target costing

Step 4: Analyze Competitor Pricing  How do you compare to your competitors?  Evaluate points of differentiation

Step 5: Selecting a Pricing Method  Markup pricing  Target-return pricing  Perceived-value pricing  Value pricing  Going-rate pricing  Auction-type pricing

Figure 14.5 Break-Even Chart for Determining Target-Return Price and Break-Even Volume

Dollar Store Pricing

Step 6: Selecting the Final Price  Impact of other marketing activities  Company pricing policies  Gain-and-risk sharing pricing  Impact of price on other parties

Price Discounts and Allowances  Discount  Quantity discount  Functional discount  Seasonal discount  Allowance

Promotional Pricing Tactics  Loss-leader pricing  Special-event pricing  Cash rebates  Low-interest financing  Longer payment terms  Warranties and service contracts  Psychological discounting

Differentiated Pricing  Customer-segment pricing  Product-form pricing  Image pricing  Channel pricing  Location pricing  Time pricing  Yield pricing

Geographical Pricing  Pricing varies by location

Brand Leader Responses to Competitive Price Cuts  Maintain price  Maintain price and add value  Reduce price  Increase price and improve quality  Launch a low-price fighter line

Class wrap up  What is due for next week