1. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Fifteen Creating and Pricing Products That Satisfy Customers 15 | 1 PRIDE HUGHES KAPOOR INTRODUCTION TO BUSINESS ELEVENTH EDITION

2. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives 1. Explain what a product is and how products are classified 2. Discuss the product life cycle and how it leads to new product development 3. Define product line and product mix and distinguish between the two 4. Identify the methods available for changing a product mix 5. Explain the uses and importance of branding, packaging, and labeling 15 | 2

3. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (cont’d) 6. Describe the economic basis of pricing and the means by which sellers can control prices and buyers’ perceptions of prices 7. Identify the major pricing objectives used by businesses 8. Examine the three major pricing methods that firms employ 9. Explain the different strategies available to companies for setting prices 10. Describe three major types of pricing associated with business products 15 | 3

4. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Classification of Products  Define Product -Know the difference between a Consumer Product and a Business (Industrial) Product Convenience Product Shopping Product Specialty Product Raw Material 15 | 4

5. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Business Product Classifications (cont’d)  Define Major Equipment Accessory Equipment Component Part Process Material Supply Business Service 15 | 5

6. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Product Life Cycle  Be able to explain the Product Life Cycle  Know the stages Introduction Growth Maturity Decline  Be able to explain what happens to sales and profits at each stage  Why is it important that marketers understand the product life cycle? 15 | 6

7. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Line and Product Mix  Define Product Line Product Mix -Be able to explain the width and depth of the mix 15 | 7

8. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Managing the Product Mix  Be able to discuss how firms manage existing products Product Modification Line Extensions Deleting Products  Be familiar with the seven phases of New Product Development 1.Idea development 2.Screening 3.Concept testing 4.Business analysis 5.Product development 6.Test marketing 7.Commercialization 15 | 8

9. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Why Do Products Fail?  Be prepared to discuss the reasons why products fail Improperly/Incompletely planned and tested Commercialization launched too quickly Pushing ahead even when flaws are known Inadequate financing  Be able to think of some prominent product failures 15 | 9

10. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Branding  Define Brand Brand Name Brand Mark Trademark Trade Name  Know the different Types of Brands Manufacturer (Producer) Brand Store (Private) Brand Generic 15 | 10

11. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Benefits of Branding  Be able to discuss the various Benefits of Branding  Define Brand Loyalty Brand Equity  What criteria should a firm consider when Choosing a Brand?  What steps must a firm take to Protect a Brand? 15 | 11

12. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Branding Strategies  Know the different Branding Strategies Individual Branding Family Branding Brand Extensions  What are the advantages and drawbacks of each of these strategies? 15 | 12

13. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Packaging  Define Packaging  Know the Functions of Packaging  What are the principle Design Considerations? 15 | 13

14. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Labeling  Define Labeling  What information must be included on a product’s label?  What elements might be included on a label?  What is an Express Warranty? 15 | 14

15. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Products  What is the meaning and use of price?  Define Supply Demand Equilibrium Price  How does Supply and Demand affect prices?  Be familiar with Supply and Demand Curves and how to determine the Equilibrium Price 15 | 15

16. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Objectives and Methods  Define Price Competition Non-Price Competition  Be prepared to discuss Buyers’ Perceptions of Price  Be able to define the following terms related to Pricing Objectives Survival Profit Maximization Target Return on Investment (ROI) Market-Share Goals Status Quo Pricing 15 | 16

17. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Breakeven Analysis  Understand Breakeven Analysis and the variables used to calculate it Breakeven Quantity Total Revenue Fixed Cost Variable Cost Total Cost  Be able to read a table displaying the breakeven point 15 | 17

18. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Methods  Define Cost-Based Pricing Demand-Based Pricing Price Differentiation Competition-Based Pricing  When are each of these pricing methods used?  What are the benefits and drawbacks of each of these pricing methods? 15 | 18

19. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Strategies  Be familiar with the different types of Pricing Strategies  New-Product Strategies Price Skimming Penetration Pricing  Differential Pricing Negotiated Pricing Secondary-Market Pricing Periodic Discounting Random Discounting 15 | 19

20. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Strategies (cont’d)  Psychological Pricing Odd-Number Pricing Multiple-Unit Pricing Reference Pricing Bundle Pricing Everyday Low Prices (EDLPs) Customary Pricing  Product-Line Pricing Captive Pricing Premium Pricing Price Lining 15 | 20

21. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pricing Strategies (cont’d)  Promotional Pricing Price Leaders Special-Event Pricing Comparison Discounting  Geographic Pricing Deals with Delivery Costs FOB (Free-on-Board) Origin Pricing FOB Destination Pricing  Transfer Pricing  Discounting 15 | 21

22. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Discounts Used for Business Markets 15 | 22  Be able to list and describe discounts used exclusively for business markets Trade (Functional) Quantity Seasonal Allowance