Fourteen

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Chapter Fourteen
Developing and Pricing Products and Services
2
Consumer Choices of Best Product Innovation of
ALL Time
Source American Demographics
3
Product Development Value Package

• Value- Total Product Offer
• Product Line
• Product Mix
• Product Differentiation

4
Classic Product Failures
Company
Loss
Failure
Edsel Corfam VideoDisc PCjr New Coke Premier
Ford Motor Co. DuPont RCA IBM Coca-Cola R. J.
Reynolds
250 M 100 M 500 M 40 M No Number No
Number
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First Products Produced byFive Major Companies

• Hershey Caramels
• Amway No-rinse car wash
• Heinz Horseradish
• Avon Little Dot perfume set
• 3M Sandpaper

Horseradish
Source World Features Syndicate
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Mickey Mouses Product Mix

• Theme parks resorts
• ABC Television Network
• TV radio stations
• Film studios production

• Video programs licensing
• Consumer products
• Publishing

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Marketing Classes of Goods Services

• Consumer
• Convenience
• Shopping
• Specialty
• Unsought
• Industrial

8
Packaging

• Protect
• Attract
• Describe
• Explain
• Warranties
• Price, Value, Uses

9
Branding

• Brand Trademark?
• Categories
• Manufacturers
• Knockoff
• Dealer/Private
• Generic

• Equity
• Loyalty
• Awareness
• Association

Marys Fresh Fruit Jams Fresh Daily Straight from
the Garden
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Market Value of A Brand Name
Billions of Dollars
Source Interbrand Group
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A Good Brand Name...

• Speaks directly to products target customers
• Attracts/motivates consumers to try it
• Is memorable/sticks in customers minds
• Is distinctive enough to protect it legally

Brand Name
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New-Product Development
Idea Generation
Screening
Analysis
Development
Testing
Commercialize
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Figure 14.7 Sales and Profits During the PLC
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What They Cost When First Introduced
1927 Transatlantic Call 75/3
min. 1947 Microwave Oven 3,000 1964 FAX
unit rental 850/month 1970 Pocket
Calculator 150 1974 VCR Tape 50
Source World Features Syndicate
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Pricing

• Value- Service
• Break-Even
• Fixed Cost
• Variable Cost
• Strategies
• Skim
• Penetration
• EDLP
• High-Low
• Leadership

• Objectives
• ROI
• Traffic
• Market Share
• Sales
• Image
• Social
• Cost-Based

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Breakeven Chart (Figure 14.9)
Total Revenue or Total Cost
Number of Units
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Pricing Using Breakeven Analysis
Problem Should we charge 2 or 3 per
box? Costs Total Fixed Costs 400,000 Variabl
e Cost 1 per box
Market Research Forecast
Company can sell 290,000 boxes at 2 _at_
210,000 boxes at 3 _at_
Breakeven point total fixed cost
price - variable cost
(per unit) (per
unit) 2 price 400,000 400,000 units to
breakeven 2 - 1 3 price
400,000 200,000 units to breakeven 3 - 1
Breakeven Analysis
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Market Share-Cable
Source Wall Street Journal 1/12/2000
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Movies- Domestic Box Office Market Share
Source Wall Street Journal, 1/12/2000
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Market Share of Video Sales
Source Wall Street Journal, 1/12/2000