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

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

4. Review of Unit 4 How did Unit 4 go? Questions or concerns? Instructor suggestions for Unit -Research for your Unit 6 research Project Questions?

5. 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

7. 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

8. New Product Development

9. Idea Generation The first step of the new product development process is called idea generation. Idea generation is simply seeking product ideas to achieve objectives. Pride and Ferrell. Some refer to idea generation as the systematic search for new-product ideas. Kotler A company typically has to generate many ideas in order to find a few good ones.

10. Screening Screening is choosing the most promising ideas for further review. (Pride/Ferrell) Screening not only includes spotting good ideas but dropping bad ones as soon as possible so time is not wasted on them. It’s similar to a human resources manager screening applicants for a job.

11. Concept Planning Seeking potential buyer’s response to a product idea. (Pride and Ferrell)

12. Business Analysis The business analysis phase is the fourth phase of the new product development process. This phase consist of assessing the potential of a product idea for the firm’s sales, costs, and profits. (Pride and Ferrell)

13. Product Development The fifth phase of the new product development process is known as product development. Product development is determining if producing a product is feasible and cost effective. (Pride and Ferrell) In this phase, marketers are attempting to ensure that the product idea can be turned into a workable product. This is where the Research and Development department steps in. Developing successful prototypes could take days, months or years. It depends on the product.

14. Test Marketing The sixth phase of the new product development process is called test marketing. The test-marketing phase measures the extent to which potential customers will actually buy it. Test marketing gives the marketer experience with marketing the product before going to the great expense of full introduction. All aspects get tested such as advertising, pricing, branding, and packaging to name a few.

15. Commercialization The final stage of the new product development process is called commercialization. Commercialization is deciding on full scale manufacturing and marketing plans and preparing budgets. Pride and Ferrell

16. Line extensions When a company introduced an additional item in a given product category under the same brand name, such as a new flavor, new color, new form, new ingredient or package size, it is know as a line extension which is a popular strategy for introducing a new product to the market.

17. Product design Product design refers to how a product is conceived, planned, and produced. Design is a very complex topic because it involves the total sum of all the product’s physical characteristics. Pride and Ferrell

18. Style Good product style and design can attract attention to the product as well as improve the products performance.

19. Product features By product features, we are referring to the specific design characteristics that allow a product to perform certain tasks. Products can be sold stripped down to the very basics or be sold at higher prices because the products have more features. The question is, are those features important and do they add value.

20. 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

21. What is Price? Value exchanged for products -Money -Barter Only primary source of revenue

22. Price Our textbook refers to price as the value exchanged for products in a marketing transaction. Price is also the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Kotler

23. Ebay.com

24. The term price goes by many names Education we pay tuition, real estate agents charge a commission, clubs charge dues, credit cards charge interest.

25. “ So how do you think marketers determine the price for the product? ”

26. Cost based pricing Cost based pricing is adding a dollar amount or percentage to the cost of the product. Pride and Ferrell

27. 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

28. Demand Pricing Demand based pricing is based on the level of demand for a product. P ride and Ferrell

29. Competition Based Pricing Competition based pricing by definition is pricing influenced primarily by competitors prices. Pride and Ferrell

30. 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.

31. Value pricing Value pricing is a pricing strategy that emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings Pride and Ferrell

32. 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

33. Target Market and Profit A set of buyers that share common needs or characteristics that the company decides to serve. A group of people toward whom the firm decides to direct its marketing efforts, and ultimately its goods and services. Boone and Kurtz Profit= Total revenue - Total expenses Other pricing strategies

34. Maximizing Volume Setting a minimum acceptable profit level and then seek to maximize sales in the belief that the increased sales are more important then immediate high profits to the long-run competitive picture. Boone and Kurtz

35. Psychological Pricing Prestige Reference Bundle Multiple unit EDLP Odd-Even Customary

36. Other pricing strategies Skimming pricing strategy, penetration pricing strategy and competitive pricing strategy.

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

38. Breakeven Pricing (chart from Kotler)

39. 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

40. 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?

41. 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?

42. 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

43. 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

44. 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

45. 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

46. 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.

47. 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.