1. Product Defined A product can be a tangible (physical) good or intangible (non-physical) service. A specific model would be called a product item. A product line would be the entire group of closely related products (Nike has three… athletic clothing, athletic footwear, athletic equipment). -The three together makeup Nike’s product mix. product item specific model or size of a product Ex. Specific shoe by Nike Louisville Slugger model C271 baseball bat 1

2. Product Defined consumer goods business goods Products can be classified as consumer goods or business goods. Some can be both (Depends on use). consumer goods goods purchased and used by the ultimate consumer for personal use 2 business goods goods purchased by organizations for use in their operations point of difference Products need to have a point of difference. Ex. World Series winner Shoe design point of difference a unique product characteristic or benefit that sets it apart from a competitor

3. Steps in New Product Development The seven steps in new product development are: focus group a panel of six to ten consumers who discuss opinions about a topic under the guidance of a moderator Protocol-statement identifies target market, needs/wants, point of difference 3 1.SWOT analysis (strengths, weaknesses, opportunities, and threats) of company. 2.Idea generation-Can come from anywhere. 3.Screening and evaluation –Focus group continued

4. Steps in New Product Development commercialization process that involves producing and marketing a new product -Offers product to final consumer -Full scale production 4 4. Business analysis-financial aspects of making and marketing product 5. Development Prototype -first model of the product. Company tests production capabilities to see if the product can be made at a reasonable cost. continued 6. Test marketing-Offered in small area Commercialization 7. Commercialization

5. Product Life Cycle The four stages in the product life cycle are: 5 Introduction Growth Maturity Decline Product Life Cycle **Not all products fit the life-cycle pattern. Introduction-promote awareness, educate through promotion, get consumer to try. Skimming Pricing -Price high at beginning to recover costs of research and development. Penetration Pricing -Price low compared to a competitor to generate demand. Growth-more competition due to product success. New features or products in the line and new distribution outlets should be added. Maturity-sales begin to slow down. Make changes to the product to distinguish it from competitors. Decline-sales begin to drop. Technological advances can cause entire product categories to enter decline stage. Company may drop the product from its product line.

6. Management of the Product Life Cycle The three ways to manage the product life cycle are: repositioning changing a product’s image in relation to a competitor’s image Ex. New Balance targets older people to avoid competing with Nike 6 Product Modification -Features, appearance, package design, quality Marketing Modification –target a new group, change promotion, etc.Repositioning **Fads-products that become popular quickly and lose popularity just as fast.

7. Pricing Price Price is important in a business because it helps determine a company’s profit or loss. 7 price the value placed on goods or services being exchanged -How much will someone pay for a product? -Must fit with target market. Price plays a significant role in the marketing mix.

8. Determining Profit 8 1,000 baseball bats sold $175 each $175,000 revenue = - $90,000 to purchase the bats $90 each - $60,000 in business expenses = $25,000 Profit Subtract the cost of goods sold and the company’s expenses from the money it generated in sales revenue.

9. Pricing Considerations and Strategies Three types of pricing strategies are: 9 prestige pricing pricing based on consumer perception. -Higher is better. Prestige pricing Odd-even pricing Target pricing odd-even pricing pricing goods with either an odd number or even number to match a product’s image -$29.99 suggests bargain -$30.00 suggests quality target pricing pricing goods according to what the customer is willing to pay

10. Pricing Considerations and Strategies Other pricing considerations include: 10 markup difference between the retail or wholesale price and the cost of an item Demand-how popular Cost-higher than amount to produce it –Markup –Cost-plus pricing Newness of the product-price high or low cost-plus pricing pricing products by calculating all costs and expenses and adding desired profit non-price competition competition between businesses based on quality, service, and relationships -May charge higher price Competition-match competitor –Non-price competition

11. Pricing Objectives and Strategies Pricing objectives and strategies include: 11 market share the percentage of the total sales of all companies that sell the same type of product Profit objective-maintain certain profit Market share Market share objective Special pricing –Price lining –Bundle pricing –Loss-leader pricing –Yield-management pricing Tiered pricing-Ex. Charge more when playing good team Tiered pricing-Ex. Charge more when playing good team price lining selling all goods in a product line at specific price points Ex. $20, $40, $60 bundle pricing selling several items as a package for a set price Ex. TV and Internet loss-leader pricing pricing an item at cost or below cost to draw customers into the store (Buy other things) yield-management pricing pricing items at different prices to maximize revenue when limited capacity is involved Ex. Stadium

12. Price Adjustments and Regulations Manufacturers will offer discounts in the following situations: 12 Buying in large quantities- Ex. Group tickets Buying prior to the buying season- Ex. Theme park season pass before park opens Allowances are reductions taken from the quoted price. One type of allowance is a trade-in. Ex. Cars

13. Price Adjustments and Regulations price fixing The Sherman Anti-Trust Act prohibits price fixing and predatory pricing (Price low to put competitor out of business). 13 price fixing an illegal practice whereby competitors conspire to set the same price -Usually ends up being a very high price Price discrimination was originally prohibited by the Clayton Act and later by the Robinson-Patman Act. -Different prices to similar buyers (Race, gender)