Developing and Pricing Products Pertemuan 10 Matakuliah: J Pengantar Bisnis Tahun: 2009

Bina Nusantara University 3 Developing and Pricing Products Outline: What Is A Product? Developing New Products Identifying Products Determining Prices Pricing Strategies & Tactics

What is a Product? Features are the qualities, tangible and intangible, that a company builds into its products. Benefits are what the consumer derives from the product: the want-satisfying value. Value package is a product marketed as a bundle of value- adding attributes. Bina Nusantara University 4 Features? Benefits?

Goods/Services-Classification Bina Nusantara University 5 Consumer Industrial

Consumer Products Convenience- Rapidly Consumed Shopping –Moderately Priced –Infrequent Purchase Specialty –Expensive –Rarely Purchased Bina Nusantara University 6

Industrial Products Expense Items –Regularly Purchased –Consumed Rapidly Capital Items –Expensive –Long-lasting –Infrequently Purchased 7 Bina Nusantara University

8 The Product Mix Product mix is a group of products that a firm makes available for sale ( e.g. Nestle ). Nestle Product line is a group of similar products intended for a similar group of buyers who will use them in similar ways. 8 Bina Nusantara University

Ex: Product Mix - Minute Maid 9 Bina Nusantara University

New Product Development Bina Nusantara University 10 Product Mortality Failure rates for new products are high. Speed to market is a strategy of introducing new products to respond quickly to customer or market changes.

New Product Development Process Bina Nusantara University 11  Product Ideas  Screening  Concept Testing  Business Analysis  Prototype Development  Product Testing and Test Marketing  Commercialization

Variations in the Process for Services Bina Nusantara University 12 Steps 2, 3, 4, 6 & 7 are the same. Differences in steps 1 and 5: Service Ideas Service package is the tangible and intangible features that characterize a service product. Service Process Design Service process design is three aspects (process selection, worker requirements, facilities requirements) of developing a service product.

Product Life Cycle Bina Nusantara University 13 Series of stages in a product’s profit-producing life

Stages of PLC Introduction: This stage begins when the product reaches the marketplace. Growth: If the new product attracts enough consumers, sales start to climb rapidly. –Consumers Attracted –Sales Climb Maturity: Sales growth starts to slow. Decline: Sales and profits continue to fall as new products in the introduction stage take away sales. –Other Competing New Products Introduced. –Sales & Profits Decline. Bina Nusantara University 14

Extending Product Life: An Alternative to New Products Product extension is an existing product that is marketed globally. Product adaptation is the product modified to have greater appeal in foreign markets. Reintroduction is the process of reviving for new markets products that are obsolete in older ones. Bina Nusantara University 15

Branding Products Branding is the process of using symbols to communicate the qualities of a product made by a particular producer. –Adding Value through: Brand equity is the degree of consumers’ loyalty to and awareness of a brand and its resultant market share. Brand awareness is the extent to which a brand name comes to mind when the consumer considers a particular product category. 16 Bina Nusantara University

World’s 10 Most Valuable Brands 17 Bina Nusantara University

Types of Brand Names –National brand is a product produced by, widely distributed by, and carry the name of the manufacturer. –Licensed brand is a product for whose name the seller has purchased the right from an organization or individual. –Private brand (or Private label ) is a product that a wholesaler or retailer has commissioned from a manufacturer. 18 Bina Nusantara University Costco-Kirkland

Packaging and Labeling Products Packaging is the physical container in which a product is sold, advertised or protected. Labeling can help market the product –Label is the part of a product’s packaging that identifies its name, manufacturer and contents. 19 Bina Nusantara University

What is Pricing? Process of determining what a company will receive in exchange for its products Pricing objectives are goals that producers hope to attain in pricing products for sale. Profit-Maximizing Objectives: Pricing for E-Business Objectives Market Share Objectives: Market share is a company’s percentage of total market sales for a specific product type. Other Pricing Objectives 20 Bina Nusantara University

Cost Oriented and Break Even Analysis Cost-oriented pricing considers the firm’s desire to make a profit and its need to cover production costs. –Markup is the amount added to an item’s cost to sell it at a profit. –Components: Markup $ Markup % Sales Price Break Even Analysis –Components: Variable Cost Fixed Cost Breakeven Point 21 Bina Nusantara University

Pricing Existing Products Relative To Current Market Prices For Similar ProductsRelative To Current Market Prices For Similar Products Current MarketCurrent Market –Above –Below –At/Near 22 Bina Nusantara University

Pricing New Products Price skimming is setting an initial high price to cover new product costs and generate a profit. Penetration pricing is setting an initial low price to establish a new product in the market. 23 Bina Nusantara University

E-Business Pricing Dynamic pricing works because information flow on the Web notifies millions of buyers of instantaneous change in product availability. –Sellers can alter prices privately, on a one-to-one, customer-to- customer basis. Fixed pricing is still the most common option for cybershoppers. 24 Bina Nusantara University

Pricing Tactics Price lining is setting a limited number of prices for certain categories of products. Psychological pricing takes advantage of the fact that consumers do not always respond rationally to stated prices. –Odd-even pricing is based on the premise that customers prefer prices not stated in even dollar amounts. Discount is a price reduction offered as an incentive to purchase. 25 Bina Nusantara University

International Pricing Determine what market will bear Post-purchase-encourage to trade up as personal economics allow Dumping 26 Bina Nusantara University