1. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-1 ChapterFourteen Developing and Pricing Products and Services

2. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-2 Consumer Choices of Best Product Innovation of ALL Time Source: American Demographics

3. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-3 Product Development & Value Package  Value- Total Product Offer  Product Line  Product Mix  Product Differentiation

4. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-4 Classic Product Failures Failure CompanyLoss EdselCorfamVideoDiscPCjr New Coke Premier Ford Motor Co. DuPontRCAIBMCoca-Cola R. J. Reynolds $250 M $100 M $500 M $ 40 M No $ Number

5. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-5 First Products Produced by Five Major Companies Hershey Caramels Amway No-rinse car wash Heinz Horseradish Avon Little Dot perfume set 3M Sandpaper Source: World Features Syndicate

6. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-6 Mickey Mouse’s Product Mix  Theme parks & resorts  ABC Television Network  TV & radio stations  Film studios & production  Video programs & licensing  Consumer products  Publishing

7. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-7 Marketing Classes of Goods & Services  Consumer -Convenience -Shopping -Specialty -Unsought  Industrial

8. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-8 Packaging 1)Protect 2)Attract 3)Describe 4)Explain 5)Warranties 6)Price, Value, Uses

9. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-9 Branding Mary’s Fresh Fruit Jams Fresh Daily Straight from the Garden  Brand & Trademark   Categories -Manufacturers’ -Knockoff -Dealer/Private -Generic  Equity  Loyalty  Awareness  Association

10. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-10 Market Value of A Brand Name Source: Source: Interbrand Group Billions of Dollars

11. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-11 A Good Brand Name...  Speaks directly to product’s target customers  Attracts/motivates consumers to try it  Is memorable/sticks in customers’ minds  Is distinctive enough to protect it legally  Speaks directly to product’s target customers  Attracts/motivates consumers to try it  Is memorable/sticks in customers’ minds  Is distinctive enough to protect it legally

12. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-12 New-Product Development Idea Generation Screening Analysis Development Testing Commercialize

13. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-13 Figure 14.7 Sales and Profits During the PLC

14. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-14 What They Cost When First Introduced 1927 Transatlantic Call$ 75/3 min. 1947Microwave Oven$ 3,000 1964FAX unit rental$ 850/month 1970Pocket Calculator$ 150 1974VCR Tape$ 50 Source: World Features Syndicate

15. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-15 Pricing  Objectives $ROI $Traffic $Market Share $Sales $Image $Social  Cost-Based  Value- Service  Break-Even -Fixed Cost -Variable Cost  Strategies -Skim -Penetration -EDLP -High-Low  Leadership

16. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-16 Breakeven Chart (Figure 14.9) Total Revenue or Total Cost Number of Units

17. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-17 Pricing Using Breakeven Analysis Problem Should we charge $2 or $3 per box? Costs Total Fixed Costs$400,000 Costs Total Fixed Costs$400,000 Variable Cost$ 1 per box Market Research Forecast Company can sell: 290,000 boxes at $2 @ 210,000 boxes at $3 @ 210,000 boxes at $3 @ Breakeven point = total fixed cost price - variable cost price - variable cost (per unit) (per unit) (per unit) (per unit) $2 price = $400,000 400,000 units to breakeven $2 - $1 $2 - $1 $3 price = $400,000 200,000 units to breakeven $3 - $1 BreakevenAnalysis

18. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-18 Market Share-Cable Source: Source: Wall Street Journal 1/12/2000

19. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-19 Movies- Domestic Box Office Market Share Source: Source: Wall Street Journal, 1/12/2000

20. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. 14-20 Market Share of Video Sales Source: Source: Wall Street Journal, 1/12/2000