1. Chapter 5: Product & Price Decisions—Sports
Marketing Principles
Mrs. Ingram

2. Section 1: Product Design

3. Product Product Defined
Products are one of the MOST essential components in the marketing mix.
Tangible Products- goods
Intangible Products- services

4. Product Item and Line Product Item Product Line
A specific model or size of a product.
Nike Air Basketball Shoe
Product Line
A group of closely related products that are sold by a company.
3 product lines- athletic clothing, athletic footwear, sports equipment.

5. Product Classification
Consumer Goods
purchased and used by the ultimate consumer for personal use.
Business Goods
purchased by organizations for the use in their operation.

6. Point of Difference
Unique product characteristics or benefits that set the product apart from a competitor's product.

7. Steps in New Product Development
Step 1- SWOT Analysis
In the marketplace:
Strengths
Weaknesses
Opportunities
Threats

8. Steps in New Product Development
Step 2—Idea Generation
New product ideas
Sources:
Consumers
Employees
Research & Development Department
Competitiors

9. Steps in New Product Development
Step 3—Screening and Evaluation
Screen and evaluate new product idea.
Technology needed to meet objectives.
Focus Group (group feedback): panel of six to ten consumers who discuss their opinions about a topic. (moderator)

10. Steps in New Product Development
Step 4—Business Analysis
Financial aspects of making and marketing the product reviewed.

11. Steps in New Product Development
Step 5—Development
Prototype- the first model of the product.
Test production capabilities (produced at a reasonable cost)
Complex technical problems
Standards for quality and safety

12. Steps in New Product Development
Step 6—Test Marketing
Tested in the marketplace
Offer product for sale in small geographical area
Test all aspects of the marketing mix
Product
Price
Place
Promotion
(helps project sales and market share)
Competitors- run test market by flooding geographical area with promotions.

13. Steps in New Product Development
Step 7—Commercialization
Process that involves producing and marketing a new product.
Product offered in the marketplace.

14. Product Life Cycle
Introduction
Growth
Maturity
Decline
Product

15. Product Life Cycle Introduction
Product first introduced into the marketplace.
Promote customer awareness.
Advertising & promotion.
Skimming pricing
product price is high to cover research and development.
Penetration pricing
price is low in comparison to a competitor product to quickly generate demand.

16. Product Life Cycle Growth
More competitors enter the marketplace if they see new products succeed.
Add new features or products to a line.
Add distribution outlets.

17. Product Life Cycle Maturity
Sales begin to slow down for the product category or just the product.
Keep the product alive.
Make change to the product.
Identify new layers.

18. Product Life Cycle Decline When sales and profits drop. What happens
Drop product from the line.
Keep and get little or no support (only kept to satisfy loyal customers)

19. Product Life Cycle Considerations
Fads
Products that become popular quickly and lose popularity just as quickly.
Examples????

20. Management of the Product Life Cycle
Modify the product.
Market the product.
Reposition the product.

21. Product Modification Changing the products characteristics. Features
Appearance
Package
Design
Quality
Examples of products that have been modified?

22. Market Modification
Find new customers or encourage current customers to use more of the product.
Gatorade introduced a new version of its product (Gatorade Frost) to target a new market.
Gatorade Frost Target- people in a hot environment.
Regular Gatorade Target- athletes specifically

23. Repositioning
Changing a product’s image in relation to it’s competitor's image.
Changing any of the 4 P’s.
New Balance redesigning its athletic shoes for older people who have wider feet and often have foot problems.

24. Section 2: Pricing & Strategies

25. Pricing
Price- the value placed on the goods or services being exchanged.

26. Pricing & Profit Price determines a company’s profit or loss.
Number of items x sales price = profit or loss
1,000 bates $175 each = $175,000.
The company purchased each baseball $90 each. Cost of goods sold would be $90,000. Expenses for running the business is $60,000. Business earned a profit of $25,000. ($175,000-$150,000= $25,000)

27. Pricing & The Marketing Mix
All of the 4 P’s must be directed towards the target market.
What is the customer in the target market willing to pay?
Market must price the product correctly to fit the target market’s pocketbook.
Ex: Roller Skates- Lower Price (Target & Wal-Mart) High Price (specialty shops)

28. Pricing Considerations & Strategies
Consumer Perception
Higher the price, the better quality of item.
Marketers price high to attract customer with this perception.
Prestige pricing- pricing based on consumer perception.
Odd-even pricing- pricing goods with either an odd or even number to match a product’s image.
Odd- $25.99
Even- $100 (more expensive)
Target Pricing- pricing goods according to what the customer is willing to pay.

29. Demand Product with high demand and limited supply the price is high.
Ex: Concert Tickets
High supply of a product and low demand the price is low.
Elastic demand- change in price will affect demand.

30. Demand 4 situations when price has no effect on demand:
Product is a necessity
There are no substitutions
Price increase is not significant to the customer's income
Time restraints

31. Cost Price must be higher than the cost a business paid for it.
2 pricing strategies related to cost:
Markup- difference between the retail or wholesale price and the cost of an item. *must be high enough to cover expenses and ensure profit. (see pg. 110)
Cost-plus pricing- pricing products by calculating all costs and expenses and adding desired profit. (see pg. 110)

32. Newness of the Product 2 Options from Marketers:
Price item high to recover the costs of development.
Price lower to create immediate demand for the product. (penetration pricing)
What are the risks of each???

33. Competition
Non-price competition- competition between businesses based on quality, service, and relationships.
Better quality than competitors’ products- higher price
Offer special services- higher price.
Customer Loyalty- higher price

34. Pricing Objectives and Strategies
Profit Objective:
Earn Higher Profit
Market Share Objective:
Market Share- the % of the total sales of all companies that sell the same type of product.

35. Pricing Objectives and Strategies
Special Pricing Strategies:
Price Lining- selling a good in a product line at a specific price point.
Bundle Pricing- selling several items as a package for a set price.
Loss-Leader Pricing- pricing an item at cost or below cost to draw customers into the store.
Yield-Management Pricing- pricing items at different prices to maximize revenue when limited capacity is involved.

36. Price Adjustments & Regulations
Discounts & Allowances
Used to change a published price.
Discount for large quantities or prior to buying season.
Allowances- reductions taken from the quoted price. (trade-in car)

37. Regulatory Factors The Sherman Anti-Trust Act: Price-Fixing:
Prohibits price fixing and predatory pricing.
Price-Fixing:
Illegal practice whereby competitors conspire to set the same prices.
Predatory Pricing:
Setting a very low price to drive competitors out of business.
**Both restrict competition and are illegal**

38. Regulatory Factors Clayton Act/Robinson-Patman Act
Prohibits price discrimination.
Price Discrimination
The practice of charging different prices to similar buyers.