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Strategies
Developing Product Strategies
Product: Good or service used as a bases
of commerce
Types of products
Tangible & intangible products
Consumer products
Organizational products
Tangible & Intangible Products
Product Continuum: relative amounts of tangible
& intangible components in a product
How to market Service product?
By compensate intangibility:
by using tangible symbols or
by adding tangible components
Services cannot be created in advance or kept in
storage, services are time sensitive
To shift consumer demand on service during
slow periods, marketers offer discounts or
promotions
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Tangible Intangible
Dominant Dominant
DVD Cassette
Internet VCR tapes
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Sales
Profits
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Time
Dimensions:
Width: several product lines
Length: product line carries several items
Depth: products has number of versions
To decide dimensions weigh the risks & reward
with various approaches
Focus on few selected items strategy:
economical (low production costs, limited selling
expenses, single sales force)
Full line strategy: protection against shifts in
technology, taste, & economic conditions
Product Line Expansion
Introduce additional items in same product
category under same brand (new flavors, forms,
colors, ingredients, package size, products)
Overextended brand name causes:
lose specific meaning
Sales of extension is expense of other items in the line
Expansion works best when take sales from
competing brands & not when cannibilizes
company’s other items
Product Positioning
Product positioning: Place it occupies in
consumer mind relative to competing products
Consumers simplify the buying process by
organizing products into categories based on
perceived position of high-performance vehicles
Products position is placed by customers or by
marketers
Product position is defined & chosen before
developing marketing strategy
Choose Position in selected markets that will
give the product greatest advantage
Product Positioning Strategies
On specific Product features or attributes
(size or ease of use or styles)
On service accompany product
(convenient delivery or lifetime customer
support)
On products image (reliability or
sophistication)
On price (low cost or premium)
On category leadership (leading business)
Major Positioning Errors
Under positioning: fail to position the
product
Over positioning: promoting too many
benefits so no one stand out
Confused positioning: mixing benefits that
confuse buyer “such as sophisticated
image & low cost”
Product Strategies For International
Markets
Consider following factors:
Which product to introduce in which country
Type of government
Market entry requirements
Tariffs & other trade barriers
Cultural & language differences
Consumer preferences
Foreign exchange rates
Differing business customs
Decide whether to standardize or customize
product
Standardized Product
Selling the same product everywhere
Customize product
To accommodate lifestyles & habits of target
markets
Degree of customization vary:
Change product name
Change packaging
Offer completely different product in different markets
You can switch from standardized to customized
strategy by adjusting marketing mix, when
customers not all alike
Developing Brand & Packaging
Strategies
Developing Brand & Packaging
Strategies
Brand: a name, term, sign, symbol, design, or
combination of those used to identify the
products of a firm & to differentiate them from
competing products
Brand Names: portion of a brand that can be
expressed orally, including letters, words, or
numbers
Brand Mark: portion of a brand that cannot be
expressed verbally
Developing Brand & Packaging
Strategies (cont.)
Well known brand name, generates more
sales than unknown name
Trademark: brand that has been given
legal protection so that its owner has
exclusive rights to its use
Too widely using brand name, it no longer
qualified for production under trademark
laws
License
Sell rights to specific well-known names &
symbols & then manufactures use
licensed labels to help sell products
Winning At The Name Game
Elements of good name:
Speak directly to target customers
Motivate consumers to buy
Stick in consumer’s mind
Be distinctive to prevent unauthorized use
Be distinguishable from competition
Winning At The Name Game
(cont.)
Tips for choosing names:
Name selection (frustrating, time consuming, &
fraught with legal difficulties)
Be sure to
Find a flexible name for your company (describes what you
do now, in future, & allows to roll-out range of products)
Check for potential cultural conflicts
Keep it legible (easy to spell, pronounce, & read)
Keep it meaningful, friendly, & personalized (creates
emotional bond between consumer & company
Know the law (might to consult an attorney))
Get professional help
Brand categories
National brands: brands owned by the
manufacturers & distributed nationally
Private brands: brands that carry the label of a
retailer or a wholesaler rather than a
manufacturer
Generic products: Products characterized by a
plain label, with no advertising and no brand
name
Generic products cost up to 40% less than
brand-name products (because uneven quality,
plain packaging, lack of promotion)
Brand Equity & Loyalty
Brand equity: notion of value of a brand
Brand loyalty: commitment to a particular
brand
Strong brands command premium price in
marketplace
Building on recognition of existing brand,
cuts costs & risks of introducing new
products
Degrees Of Brand Loyalty
Brand awareness: level of brand loyalty at
which people are familiar with a product;
they recognize it
Brand preference: level of brand loyalty at
which people habitually buy a product if it
is available
Brand insistence: level of brand loyalty at
which people will accept no substitute for
a particular product
Approached To Build Brands
Create brands for products targeting
different customer segments
Operate under one brand everywhere in
world
Put separate brand identities to each
business chain
Family Branding
Using a brand name on a variety of
related products
Brand Name Stretching
Limits of stretch to accommodate new
products & still fit perception depends on
what brand stands for
Overextended brand:
Alienate loyal customers
Put it in danger of losing identity
Co-branding
Partnership between two or more
companies to closely link their brand
names together for a single product
Help companies reach new audiences &
tap equity of particularly strong brands
Help in changing product image
Packaging & Labeling Your
Products
Packaging:
Protect product from damage or tampering
Make product convenient for customers to purchase
Makes products easier to display
Facilitates sale of smaller products
Provide convenience (e.g. foods: ready to eat out of wrapper)
Essential part of some products (e.g. toothpaste)
Important role in Marketing strategy
Package shape, composition & design:
Attract consumers attention
Promote product’s benefits
Innovative packaging give product powerful marketing boost
while poorly designed packaging may drive customers away
Labeling
Labeling is integral part of packaging & serves to identify
a brand
Label types:
Separate element attached to package
Printed part of container
Label uses:
Gives grading information about product, or about ingredients,
operating procedures, shelf life, or risks
Labeling of foods, drugs, cosmetics & health products regulated
under federal laws which requires disclosure about benefits,
dangers & other issues consumers need
Communicate with consumers
Tool for monitoring performance & inventory of manufacturers &
retailers
Universal Product Codes (Upcs)
A bar code on a product’s package that
provides information read by optical
scanners
Developing Pricing Strategies
Developing Pricing Strategies
Price:
is only element in marketing mix produces
revenues, all other elements represent cost
determines the amount of income
generated from sales of product
differentiate product from competitors
If too much generate fewer sales
If too little sacrifice profits
Break-even Analysis
Break-even analysis: method of calculating the
minimum volume of sales needed at a given
price to cover all costs
Variable costs: business costs that increase with
the number of units produced
Fixed Costs: business costs that remain
constant regardless of the number of units
Break-even point: sales volume at a given price
that will cover all of a company costs
Break Even Analysis (cont.)
Doesn’t dictate price to charge
Provides some insight into number of units
to sell at a given price to make profit
Useful when calculating the effect of
special pricing promotion
Allows to try different prices & see results
by using spreadsheet software
Break-even Point
Break-even point=
fixed costs
selling price per unit – variable costs per unit
Factors Affecting Pricing Decisions
Pricing determined by:
Manufacturing
Selling costs
Competition
Needs of distributers (wholesalers &
retailers)
Pricing Influenced By:
Marketing objectives
Government regulations
Consumer perceptions
Consumer demand
Price & Marketing objectives
Match price to objectives in strategic marketing plan
Common objectives
increase market share
increase sales
improve profits
project a particular image
combat competition
Slashed prices boost sales & fend-off lower-priced rival
brands
Premium pricing with other marketing mix give luxury
position
Price & Government regulations
To protect consumers & encourage fair
competition
Classes of pricing regulated:
Price fixing (agreement among companies
supplying the same products as to prices they
will charge)
Price discrimination (unfairly offering attractive
discounts to some customers not to others)
Deceptive pricing (pricing schemes consider
misleading)
Pricing & Consumer perceptions
Customers will elicit perception of quality
from price
Rough price range usually in customers
mind
Unexpectedly low price triggers fear the
item is low quality
Unexpectedly high price make buyers
question is product worth
Pricing & Consumer demand
Costs establish floor for price
Demand establish ceiling for price
Theoretically:
if price too high demand fall & Producers reduce
prices to stimulate demand
if price too low demand increases & producers
motivated to raise prices
When prices climb & profits improve producers boost
output until supply & demand balance
Price elasticity
Some products insensitive to changes in
price & Some products highly responsive
Price elasticity: a measure of the
sensitivity of demand to changes in price
Pricing Methods
Cost-based & Priced-based pricing
Price skimming
Penetration pricing
Cost-based Pricing
Cost-based pricing (cost plus pricing):
Starting with cost of production
Then add markup to the cost of product
Simple but little sense
Ignores demand & competitors prices, & not
lead to best price
Ensure certain profit but sacrifice profit
opportunity
Priced-based Pricing
Maximize profit by establishing optimal price for
product
How to optimize the price?
Based on analysis of product’s competitive advantage
User’s perception of item
Market targeted
When price established, focus on keeping costs
at level allows healthy profit
Few businesses fail from over pricing
Many businesses fail from underpricing
Price Skimming
Skimming: charging a high price for a new product
during the introductory stage & lowering the price later
Price vary depending on stage in product life cycle
During introductory phase objective to recover
development costs ASAP, so price is high & the drop
later when product no longer novelty & competition heats
up
Makes sense under 2 conditions:
Product quality & image support higher price
Competitors cannot enter market with competing products &
undercut price
Penetration Pricing
Penetration Pricing: introducing a new product at a low price
in hopes of building sales volume quickly
Advantages:
discouraging competition because the low price
Limits profit for everyone
Helps expanding entire product category by attracting
customers who don’t buy at higher, skim-pricing levels
If you compete pioneers in category, this strategy helps in
taking customers away from pioneer
Makes sense when market highly price sensitive, so low price
generates additional sales & company maintain low-price
position long to keep out competition
Price Adjustment Strategies
Price discounts
Bundling
Dynamic Pricing
Price Discounts
Discount Pricing: offering a reduction in price
Depend on type of customer targeted & type of
item offered
Discount boost sales but can touch off price
wars between competitors
Price war encourage customers to focus only on
pricing not on value or benefits
Price war can hurt entire industry for years
To offset loss of revenue stock shelves with
more profitable items otherwise if you couldn't
compete you close up business
Examples
Wholesaler or retailer Discount: to encourage
orders
Customer cash discount: to reward customers
who pay cash or pay promptly
Quantity discount: to Large volumes buyer
Seasonal discount: to who buy out of season
Value pricing: charging affordable price for high
quality offering (for certain times or certain
customer segment)
Bundling
Definition: Combining several products &
offering the bundle at a reduced price
Promote sales of products consumers
might not otherwise buy
Make products harder for consumers to
make price comparison
Dynamic Pricing
Definition: Charging different prices depending on
individual customers & situations
By using internet technology
Enables to move slow-selling merchandise instantly
Allows to experiment with different pricing levels
Tactics:
Auction pricing (buyers bid against each other & the highest bid
buy)
Group buying (buyers obtain volume discount by joining buying
groups)
Name-your-price (buyers specify how much to pay & sellers
choose whether to sell)