Transcript Marketing343 - University of Alaska system

Product & Pricing
Concepts & Strategies
Product Price
Target
&
Position
Place
Promo
What is a Product?
Basically
Essentially
Academically
Commercially
Good
Products
are
the
set
of
Consumer Products: Convenience,
Service
features,
functions,
and
Products
are
Specialty,
Shopping,
Unsought
benefits that
customers
Business
Products:
Raw materials,
Idea
nothing
until
they
purchase:
Maintenance,
repair & operating
Organization
equipment,
Component
Parts…
“Bundle
of
Attributes”
are a brand!
Person
THE ART OF MARKETING
is BRANDING
*
If you are not a BRAND,
You’re a COMMODITY.
*
Then PRICE is everything
& the LOW-COST producer
is the only winner!
Branding:
Function & Components of
Brands
History & Types of
Branding
Brand Equity
Brand Management:
Line & Mix Strategies
New Product Development
Pricing Strategies &
Tactics
Product Life-Cycle
By Definition…
 A BRAND
is a name,
term, symbol, design or
combination thereofthat identifies a
seller’s product
& differentiates it
from competitors’
products.
The Power of a Brand
Identical cereals tasted by consumers:
Vs.
59% Chose
Kellogg’s
41% Chose
No Brand
Identical TV sets examined by consumers:
Vs.
Consumers willing to pay $75 more for Hitachi than GE
Branding
 Brand name:
--part of brand consisting of
words or letters that
“identify & distinguish”
firm’s offering
 Brand mark:
--symbol or pictorial design
that identifies product….
Logo: a brand or company
name written/ symbolized in
a distinctive way
BRAND TRADEMARKS


registered ®; pending TM
Trademark: confers the
exclusive right to brand name,
trade mark, &/or any slogan or
abbreviation
A registered trademark (10
year renewable periods;
$~325 filing fee) gives a
marketer proprietary rights to
a symbol or name.
Legal
Trademarks
date back to 1226 A.D.
English Law:
Bakers had to mark
every loaf- so any
Baker w/ “light” loaves
could be ID’d
Multi-Million $ Logos: Words
Multi-Million $ Logos: Symbols
Multi-Million $ Words w/ Symbols
Some of 1st Major Brand Names
 1850s
Smith Brothers
 1877 Quaker Oats used
image of William Penn who founded co.
in 1681 to convey company image of
honest, decency, hard work
 1869
Campbell’s Soup
 1873 Levi Strauss
 1879
Ivory Soap
 1888 Eastman Kodak
Kleenex,
Windex,
Timex,
An Effective
Brand Name
… Off,
Close-up, Drano, Underalls,
Wham-o,
True-Value,
 Easy to Gleem,
pronounce
 Easy to recognize
& remember
Sleepeze,
Beauty-Rest,
Duz,
 Is short,Total,
distinctiveunique
Allerest,
ColdSpot…
 Describes product- use- benefits
Tide,
Crest,
Bic,
Crest,
Crisco,
 Has positive connotation
Wendy’s,
Apple,
Sony,
Nike…
 Reinforces
product
image
Types of Brands
Dupont Brand Mgt. &
Corporate Umbrella
Manufacturers’ Brand:
brand name owned by product’s producer
–
Family Brand
Marketing entire mix under one
name (Kraft, Heinz, Kellogg, Post)
–
Ingredient Brand
Brand is component-part w/in
product purchased by consumer
(Intel-chip, DupontStainmaster; Teflon; Kevlar)
Master Brands:
A brand so dominant that it comes to mind immediately when
product category, use, attribute, or benefit is mentioned
Tissue
Kleenex
Adhesive Bandages
Band-Aid
Rum
Gelatin
Bacardi
Jell-O
Soup
Campbell’s
Cream Cheese
Philadelphia
Crayons
Petroleum Jelly
Crayola
Vaseline
Retailers are creating their own brands
Store Brands
(a.k.a. house brand/ private
label):
A brand used exclusively by one
chain of stores for a line of
products made to a store’s
specification
•SELECT
•SIGNATURE
•Sam’s
Choice
•Ol’ Roy
•Equate
Private/ Store Brands
~1 in 5 items sold in
U.S. stores is
store branded…
and more and more
retailers are getting in on
the action.
 They're selling better
products and designing
spiffier packaging”

On-going move to House Brands :
 Target ~ 50% of products are private
brands
 Kroger sells 4,300 items it cranks out of
41 factories it owns
 7-Eleven has own beer, Santiago, brewed
in El Salvador - designed to steal market share
from - Corona.

-Rite Aid adding ~ 250 private-label items
.. some under its new brands Pure Spring
and 411.
Advantages of House Brands


Earn higher profits
– Less overhead: Production
outsourced & Less Promo$
Total control of distribution
– Manufacturer may drop a
brand or become a direct
competitor to dealers via the
W3
Store Brand Impact Grows
w/ Retail Consolidation
10 biggest
MegaRetailers:
account for ~
80% of mfgrs
biz vs. ~ 30%
decade ago
Wal-Mart's
share of the $3
trillion U.S.
retail market has
edged up to
11.3%,
compared with
10.5% in 2008
Strong Brands Provide Value -
For Consumers

Simplify choice
& reduce risk-

provide support
& social cues for
one’s lifestyle &
identity
For Business:
Build Loyalty &
enable higher
margins
 Facilitate entry
into new markets
 Basis of
differentiation in
mind of consumer

A Brand > its Components
Consumer
perceptions &
associations

Name

Slogan

Colors

Music

Theme-lines

Logo and typeface Objects
• Dress code
• Offices
• Trucks
Sources of Brand-personality
•
Founders
Spokespersons
Characters
Stories
and mythologies
Brand = Story
Market Power =
Story Power
“We are in the twilight of a society based on
data. As information and intelligence become
the domain of computers, society will place
more value on the one human ability that cannot
be automated: emotion. Imagination, myth,
ritual - the language of emotion - will affect
everything from our purchasing decisions to
Companies
will thrive on the basis of their
stories and myths. Companies will
how we work with others.
need to understand that their products are less
important than
their stories.”
Rolf Jensen, Copenhagen Institute for Future Studies
BRAND
The better your
brand-story &
the longer you’ve
told it… the more
valuable your
brand
http://www.interbrand.com/best_global_brands.aspx
BRAND EQUITY
The marketplace value
of a brand based on:
 Sum
total of all the
persons aware of the
brand…
 Plus-all their knowledge,
feelings & perceptions
toward the brand…
Communications + Experience =
Brand Equity
Marketer-controlled communications
All Brand Promotion
(Sales, Advertising, PR)
Brand
Awareness
Uncontrolled brand communications
Firm’s
Brand Equity
What Media, -Word-of-Mouth Say re: Brand
Customer’s Experience
with Brand
Brand
Meaning/ Assoc.
Brand
Associations
ATTRIBUTES
User Imagery
Product Attributes
Blue denim, shrink to fit,
cotton fabric, button-fly,
two horse patch,-small red
pocket tag
High Quality, Longlasting - durable
Functional
Benefits
Western, American,
blue collar, hardworking, traditional,
strong, rugged, masculine
Levi’s
501
Usage Imagery
Appropriate
for outdoor
work- casual
social
situations
Brand Personality
Honest, classic,
contemporary,
approachable,
independent,- universal
self-confidence - selfassurance
Comfortable fitting
- relaxing to wear
Experiential Benefits
BENEFITS
Symbolic Benefits
The Branding Process
Brand Building
1-Brand
Identity
WHO
Are You?
2- Brand
Meaning
WHAT Are
You?
Salience
Performance
& Imagery
3- Brand
Response
WHAT
About
You?
4- Brand
Relationship
WHAT About
You & ME?)
Consumer
Judgments &
Feelings
Consumer
Acceptance
POSITIONING
1
Establish Presence & Purpose
 Create
Awareness
 Id &
demonstrate
– Needs
Satisfied
– Benefits
delivered














Advertising
Sponsorships
Web casts Info-tainment
Distribution outlets
Public Transit
Sponsor Sports; Social causes
Stealth Marketing- create. buzz
User community building (e.g.,
Harley-Davidson)
Founder’s personality (e.g.,
Colonel Saunders)
Celebrity spokespersons
Clubs
Company visits
Trade shows
Traveling exhibits
2 Create Points of Difference
Performance

Brand Characteristics &
Secondary Features
– Product Reliability,
– Durability &
Serviceability
– Service Effectiveness,
Efficiency & Empathy
– Style and Design;
– Price
Imagery
• User Profiles
• Purchase & Usage
Situations
• Personality & Values
• History, Heritage, &
Experiences
3 Define Associations
Judgments
 Quality
 Credibility
Feelings
 Consideration
• Warmth, Fun
• Excitement
• Security
• Social Approval
• Self-Respect
 Superiority
4 Build Relationship
 Loyalty
 Attachment
 Community
 Engagement
Brand Management Basics

What do brand Managers do…… Handle the P’s
 products

promotions place of distribution pricing
positioning people
processes
They Interact with…………………..
Everybody
 advertising market research operations finance sales
HR R&D design promotions

They need to Know…………………. Everything!
product development new positioning advertising campaign
targeting to new consumers internet initiatives
ethnic marketing promotions increasing margins
exploring alternative channels international synergies etc
Why Products fail….
Failure to Meet Customer Needs
Poor Timing
Ineffective or Inconsistent
Branding
Technical or Design Problems
Overestimation of Market Size
Poor Promotion
Insufficient Distribution




Brand Name?
Marketing Mix?
Packaging?
Pricing?
Should the product be modified?
Should the product line be
extended?
Should the Brand be extended?
Product Mix Decisions

Product Mix Width - # Product Lines compete in

Product Mix Depth - # Brands w/in each line
Product Mix: Procter & Gamble
Depth of Line
Width of Product Mix
Detergent
Toothpaste
Bar Soap
Disposable
Paper Tissue
Diapers
Ivory Snow
Gleem
Ivory
Pampers
Charmin
Dreft
Crest
Kirk’s
Luvs
White Cloud
Tide
Denquel
Lava
Puffs
Cheer
Camay
Banner
Oxydol
Zest
Dash
Safeguard
Bold
Coast
Gain
Era
Solo
Product Mix: Gillette
Depth = BRANDS
Width =Categories
Blades and
razors
Toiletries
Mach 3
Sensor
Trac II
Atra
Swivel
Double-Edge
Lady Gillette
Super Speed
Twin Injector
Techmatic
Series
Adorn
Toni
Right Guard
Silkience
Soft and Dri
Foamy
Dry Look
Dry Idea
Brush Plus
Writing
instruments
Lighters
Paper Mate
Flair
Cricket
S.T. Dupont
Brand Mgt - Lingo
Existing Product
Category
Existing
Brand Line Extension
New
Brand
Flanker Product
New Product
Category
Brand Extension
New Product
Line
Benefits
Leverage Co.
–Brand Equity
Production Efficiencies
Why Extend
Product Lines
or add
to mix?
Marketing Efficiencies
Even out seasonal
sales patterns
Inc. sales w/ further
market segmentation
Do Need to be careful w/ Brand Extensions
(using existing brand name in new product category)
 Kodak
Crayons
 Exxon Office Furniture
Established
 Gerber Life Insurance
perceptions not
 Life Savers Gumcompatible across
 Xerox Computersproduct classes
 Kleenex Towels
Another BRAND Mgt. Concern:
New-Product Development
Idea
Generation
Ideas from:
Customers
and users
Marketing
research
Competitors
Other
markets
Company
people
Middlemen
Screening
Idea
Commercial
Development
Evaluation
-ization
Strengths
and
Weaknesses
Fit with
objectives
Market
trends
Rough ROI
estimate
Concept
testing
Customer
reactions
Rough
estimates
of cost,
sales,
profits
R&D
Develop
model or
service
prototype
Test
marketing
mix
Revise plans
as needed
ROI estimate
Finalize
product and
marketing
plan
Start
production
and
marketing
“Roll out” in
select
markets
Final ROI
estimate
Finding 1 Successful New Product
(Starting w/ 64 New Ideas)
Stage
Number of
Ideas
Pass Ratio
Cost per
Product Idea
Total Cost
1.
Idea screening
64
1:4
$ 1,000
$
64,000
2.
Concept testing
16
1:2
20,000
320,000
3.
Development
8
1:2
200,000
1,600,000
4.
Test marketing
4
1:2
500,000
2,000,000
5.
National launch
2
1:2
5,000,000
10,000,000
$5,721,000
$13,984,000
New Product Development
Clear & Direct
Application of Sit.
Analysis &
Marketing Concept
Consumer
Centric…
Customer-Driven
& Directed R&D
Moving from top-down to bottom-up innovation
Source - inspiration
Key drivers
Customer involvement
Process
Corporate posture
Tools
Traditional
innovation
Customer-driven
innovation
Executives
Customers
Existing assets,
Products & Position
Structured
Deep observation
of customer tastes
needs & desires
Spontaneous
Linear, step by step
Interactive
Go out to customer
Invite customer in
storyboards
Surveys, focus groups
Search, email, blogs
Web-text mining,
addition all
Products- old or
new- need to be
 In
priced
appropriately
 ..this
too lies w/in
the Brand
Manager’s Domain
of Responsibility
Art or
Science?
Pricing Considerations
1. Your Costs
2. Your Objectives
3. Your Consumers
4.
5.
MindSet
Stage in Product
Life-Cycle
Legalities
1. Your Costs
Types of Costs
Variable
Costs
Fixed Costs
Deviate with changes
in level of output
Do not deviate
as level of output changes
Dollars
Breakeven Analysis
Total Fixed Costs
Units of Production
Dollars
Breakeven Analysis
Total
Costs
Total
Variable Costs
Total Fixed Costs
Units of Production
Breakeven Analysis
Dollars
Total Revenue
Breakeven
Point
Total
Costs
Fixed Costs
#Sales= FC/ price-VC
Breakeven Analysis
Dollars
Total Revenue
Breakeven
Point
Losses
Total
Costs
Fixed Costs
Units of Production
Breakeven Analysis
Dollars
Total Revenue
Breakeven
Point
Profits
Fixed Costs
Units of Production
Total
Costs
Pricing Considerations
1. Your Costs
2. Your Objectives
3. Your Consumers
4.
5.
MindSet
Stage in Product
Life-Cycle
Legalities
2nd Consideration-Your Objective
Profit
Oriented
Pricing
Objectives
Sales
Oriented
Status Quo
Oriented
Target
Return
Cost-Plus
Pricing
Sales/ Share
Growth
Beat the
Competition
Meet the
Competition
Customary
Pricing
Pricing Considerations
1. Your Costs
2. Your Objectives
3. Your Consumers
4.
5.
MindSet
Stage in Product
Life-Cycle
Legalities
3rd Consideration=Consumer Mind-Set
Internal Reference Price
What expect/willing to
pay
External Reference
What compare to
Buyer Behavior
Price, Brand, StyleConsciousness
Lower $
Higher $
Slide
1-3
Figure
1.3
Style-Conscious
Price-Conscious
Time
Brand-Conscious
(All Benefits Received) – (All Costs Incurred)
= Product’s Value to the Customer
Prestige Pricing
Pricing at
relatively high
levels - to convey
image of high
quality
Value Pricing
 Low- enticing
opening price
points
 Bundling
 Up-selling
Lo-Opening
Price point
Product Line Pricing
Producing
& marketing
multiple
products at
different
price points
Loss-Leader Pricing
Retail Tactic
Pricing policy
which offers
products at
prices below or
near cost to “get
consumers in
the door”
Odd-Even Pricing


Odd pricing = ending
w/ odd number
Even pricing =
convey high quality
Elasticity of Demand
How badly need product
 Elastic
– Discretionary
goods
– Lots of competition/
Substitutes
 Inelastic
– Necessities
– Few-if any-
Substitutes
Lower $
Higher $
DEMAND PRICING
 Higher
pricesfavored w/ inelastic
–
Price increases offset
volume losses
 Lower
prices favored w/ elastic
–
Volume increases
offset price reductions
Formula to Determine Elasticity
Price
Elasticity =
of Demand
% Change in Demand
% Change in Price
If PEoD > 1 Demand is Price Elastic (sensitive)
If PEoD < 1 Demand is Price Inelastic (insensitive)
Demand Curves
Price
Elastic Demand
Recreational
Vehicles
Hi$
Lo$
GREAT- change in Demand
Q_HI
Q-LOW
Quantity
Demand Curves
Inelastic Demand
Price
Electricity
P-Hi
P-LO
Q Lo QHI
little- change in Demand
Pricing Considerations
1. Your Costs
2. Your Objectives
3. Your Consumers
4.
5.
MindSet
Stage in Product
Life-Cycle
Legalities
Product Life Cycle
Market Strategy
Pricing
Promotion
Target
Copy
Profits
Introduction
Establish Distribution & Share
Skimming or Penetration
Create Awareness, induce Trial
Innovators
Switching Idea, Excitement, Immediacy
Expected loses; Promo/sales ratio Hi
Growth
Maturity
Decline
New Product Pricing
Skimming
Pricing
Strategy
Penetration
Pricing Strategy
Maturity
Growth
Introduction

High initial price for quick ROI
Price insensitivity by the market- Innovative
Consumer places hi premium on social &
experiential benefits of owning product

Strategic
Pricing
Concerns
Decline
New Product Pricing
Penetration
Pricing
Strategy
Skimming
Pricing Strategy
Maturity
Growth
Introduction

Low initial price

Volume for lower production costs

Imminent competition
Strategic
Pricing
Concerns
Decline
Product Life Cycle- Growth Stage
Marketing
Inc. Market share & Penetration
Price policy Maintain stable pricing policy
Place
Promotion
Copy
Profits
Target
Introduction
solidify distribution channels generate
Selective demand; establish Brand Pref.
Stress Originality
start of profits
Early Adopters
Growth
Maturity
Decline
Product Life Cycle: Maturity
Marketing
Price policy
Place
Promotion
Copy
Profits
Target
Introduction
Maintain share
Use Consumer & Trade Promotions
increase distribution efforts
New users- new segments-new uses
New & Improved; New campaigns
highest profits (peak)
Early-Late Majority
Growth
Maturity
Decline
PROMOTOOLS:
Sales Promotions
Seasonal
Quantity
Premiums, Contests
Rebates
Trade-in Allowances
50
Product Life Cycle- Decline
Marketing
Price policy
Place
Promotion
Profits
Target
Introduction
Prune Channels, reduce losses
clear inventory w/ $- discounts
& Promos
limit distribution efforts
cut-back on advertising
reduced profits
Laggards
Growth
Maturity
Decline
Pricing Considerations
1. Your Costs
2. Your Objectives
3. Your Consumers
4.
5.
MindSet
Stage in Product
Life-Cycle
Legalities
Major Legal Concerns
Exaggerated Compartives
Price Fixing
Issues
That Impact
Pricing
Decisions
Price Discrimination
Predatory Pricing
Unfair Trade Practice Acts
Laws that prohibit
wholesalers & retailers
from manipulating prices –to
manipulate markets
#1=Exaggerated Comparative Price
Advertising
 Using comparison prices of dubious
validity -Product introduced at
artificially high prices for short time
then dropped to a new low long-term
price
#2=Price Fixing.. agreement betw. two
or more firms on price
they will charge
for product.
#3=Price Discrimination
The Robinson-Patman Act
of 1936:
Prohibits any firm from
selling to two or more
different buyers
at different prices
… if the result would lessen
competition
#4=Predatory Pricing
The practice of charging a
very low price for a
product with the intent of
driving competitors out of
business or out of a
market…
Finally-A couple of things…
Don’t Strain your Brain…
just install the
latest
software…
Oracle Retail Price Optimization

-provides targeted capabilities - allow you to sharpen your
pricing policies & drive higher profits.

Consider key demand drivers such as price elasticity,
seasonality, cross-elasticity, and targeted price elasticity
models at the item and store level

Recommend the exact minimum relative price gap need to
compete effectively for each store or key-item

Predict the whole-store revenue and margin impact of a key
item price change

Provide what-if decision support to simulation options prior to
executing the strategy
Key- not get Right Price
But- Get Price Right
 Which
price is right?
Software-using algorithms to
calibrate
– how much need to buy
– how to promote &
merchandize
– and how to price it
OR- don’t charge anything at all !
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