1. MT 219 Marketing Unit Five New Products and Pricing Note: This seminar will be recorded by the instructor.

2. Agenda Unit 4 Review Unit 5

3. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept 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

4. New Product Development Process Idea Generation – ideas come from many sources Gatorade:

5. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error

6. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback

7. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept testing – iterative process of consumer feedback Marketing Strategy Development- initial marketing strategy for the new product

8. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept 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?

9. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept 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

10. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept 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

11. New Product Development Process Idea Generation – ideas come from many sources Idea Screening – need to avoid “go” or “no go” error Concept 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

12. Product Life Cycle PLC Overview Introduction Stage Growth Stage Maturity Stage Decline Stage

13. What is Price? Value exchanged for products Only source of revenue

14. Price vs. Non-Price Competition In price competition, competitors seek to match or beat the price of competitors The major advantage is flexibility in a parity product market In non-price competition, factors other than price are emphasized This is especially useful when a marketer has a unique product, and helps avoid price wars

15. Major Pricing Strategies Customer value-based pricing Cost-based pricing Competition-based pricing

16. 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

17. 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

18. Breakeven Pricing (chart from Kotler)

19. 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.

20. 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

21. 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

22. 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?

23. 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

24. 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

25. 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

26. 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.