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The end result of the manufacturing process, to be offered to the marketplace to satisfy a need or want


In marketing, a product is anything that can be offered to a market that might satisfy a want or need In retailing, products are called merchandise. In manufacturing, products are purchased as raw materials and sold as finished goods. Commodities are usually raw materials such as metals and agricultural products, but a commodity can also be anything widely available in the open market. In project management, products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project.

Classification of Product

Based on Tangibility
Tangible goods referred to as a products Intangible goods referred to as services

Based on the purpose of use

Consumption Production

Classification (contd.)

Functional life of the products

Consumables Durables

Based on habits
Convenience goods Shopping goods Specialty goods

Classification (contd.)

Based on price & quality

Mass product Premium product

Based on product development

Innovations Imitations

Classification (contd.)

Based on brand hierarchy level

Global brand National brand Regional brand Local brand Unbranded product Commodities

Types of Consumer Products

Frequent purchases bought

with minimal buying effort and little comparison shopping

Convenience Shopping Specialty Unsought

Low price Widespread distribution Mass promotion by producer

Types of Consumer Products

Less frequent purchases requiring

more shopping effort and price, quality, and style comparisons. Higher than convenience good

Convenience Shopping Specialty Unsought


Selective distribution in fewer outlets Advertising and personal selling by producer and reseller

Types of Consumer Products

Strong brand preference and

loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity

Convenience Shopping Specialty Unsought

High price
Exclusive distribution Carefully targeted promotion by producers and resellers

Types of Consumer Products

Little product awareness and

knowledge (or if aware, sometimes negative interest)

Convenience Shopping Specialty Unsought

Pricing varies Distribution varies Aggressive advertising and personal selling by

producers and resellers

Product & Service Decisions

Product Mix

Product and Service Decisions

Individual Product
Product Line

Product and Service Decisions

Key Decisions

Product attributes

Quality, features, style and design

Individual Product Product Line Product Mix

Branding Packaging Labeling Product support services

Individual Product

Product quality Product features Product style & design


A name ,term, sign, symbol or design, or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.

Branding Strategy

Brands are powerful assets that must be

carefully developed / managed. Brands with strong equity have many

competitive advantages:

High consumer awareness Strong brand loyalty Helps when introducing new products Less susceptible to price competition

Brand Strategy

Three levels of positioning:

Brand Positioning Brand Name Selection Brand Sponsorship Brand Development

Product attributes

Least effective

Benefits Beliefs and values

Taps into emotions

Brand Strategy

Good Brand Names:

Brand Positioning Brand Name Selection Brand Sponsorship Brand Development

Suggest something about the product or its benefits Are easy to say, recognize and


Are distinctive Are extendable Translate well into other languages Can be registered and legally protected

Brand Strategy

Manufacturer brands
Private (store) brands

Brand Positioning Brand Name Selection Brand Sponsorship Brand Development

Costly to establish and promote

Higher profit margins


Brand Strategy

Line extensions

Brand Positioning Brand Name Selection Brand Sponsorship Brand Development

Minor changes to existing products

Brand extensions

Successful brand names help

introduce new products


Multiple product entries in a

product category

New brands

New product category


The activities of designing and producing the container or wrapper for a product.


Label might also describes many things about the product

Who made it? Where it was made? When it was made? Its contents

Product line

A group of product s that are closely related because they function in a similar manner, are sold to the same customer groups are marketed through the same types of outlets, or fall within given price ranges.

Product Mix

Product portfolio The set of all product lines and items that a particular seller offers for sale.

Product Mix Decisions

Product mix width refers to the

number of different product lines the company caries. GE manufactures 250,000 items Wal-Mart stocks 100,000 to 120,000 items

Product width Product length Product depth Consistency

Product Mix Decisions

Product width Product length Product depth Consistency

Product mix length refers to the total number of items the company caries within its product lines.

Product Mix Decisions

Product width Product length Product depth Consistency

Product mix depth refers to the number of versions offered of each product in the line.

Product Mix Decisions

Product width Product length Product depth Consistency

Consistency of the product mix refers to how closely related the various product lines are in the end use.



What is Price?

Narrowest sense price is the amount of money charged for a product or service. Broader sensePrice is the sum of all values that customer give up in order to gain the benefits of having or using a product or services.

Pricing Objectives

Profit maximization in the long run Minimum return on sales turnover Deeper penetration of the market Keeping up with the Competition Increasing sales volumes and market share


Factors to Consider When Setting Price

Internal Factors

Marketing objectives Marketing mix strategies

Organizational considerations


Marketing objectives

Market positioning influences pricing strategy Other pricing objectives:

Survival Current profit maximization Market share leadership Product quality leadership

Not-for-profit objectives:

Partial or full cost recovery

Social pricing

Marketing mix strategies

Pricing must be carefully coordinated with the other marketing mix elements

Target costing is often used to support product

positioning strategies based on price

Nonprice positioning can also be used



Types of costs:

Variable Fixed Total costs

How costs vary at different production levels will influence price


Experience (learning) curve effects on price


Organizational Considerations

Who sets the price?

Small companies: CEO or top management Large companies: Divisional or product line managers

Price negotiation is common in industrial settings Some industries have pricing departments


Factors to Consider When Setting Price

External Factors

Types of markets

Pure competition Monopolistic competition Oligopolistic competition Pure monopoly

Nature of market and demand Competitors costs, prices, and offers Other environmental elements

Consumer perceptions of price and value Price-demand relationship

Demand curve Price elasticity of demand

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Factors to Consider When Setting Price

External Factors

Nature of market and demand Competitors costs, prices, and offers Other environmental elements

Consider competitors costs, prices, and possible reactions when developing a pricing strategy Pricing strategy influences the nature of competition Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition Benchmarking costs against the competition is recommended

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Factors to Consider When Setting Price

External Factors

Economic conditions

Nature of market and demand Competitors costs, prices, and offers

Affect production costs Affect buyer perceptions of price and value

Reseller reactions to prices must be considered Government may restrict or limit pricing options

Other environmental elements

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General Pricing Approaches

Cost-Based Pricing: Cost-Plus Pricing

Adding a standard markup to cost Ignores demand and competition Popular pricing technique because:

It simplifies the pricing process Price competition may be minimized It is perceived as more fair to both buyers and sellers

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General Pricing Approaches

Cost-Based Pricing Example
Variable costs: $20 Fixed costs: $ 500,000 Expected sales: 100,000 units Desired Sales Markup: 20% Variable Cost + Fixed Costs/Unit Sales = Unit Cost $20 + $500,000/100,000 = $25 per unit Unit Cost/(1 Desired Return on Sales) = Markup Price $25 / (1 - .20) = $31.25

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General Pricing Approaches

Cost-Based Pricing: Break-Even Analysis and

Target Profit Pricing

Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.

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General Pricing Approaches

Value-Based Pricing:

Uses buyers perceptions of value rather than sellers costs to set price.

Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade.

Introduction of less expensive versions of established brands

has become common.

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General Pricing Approaches

Value-Based Pricing:

Business-to-business firms seek to retain pricing power

Value-added strategies can help

Value pricing at the retail level

Everyday low pricing (EDLP) vs. high-low pricing

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General Pricing Approaches

Competition-Based Pricing:

Also called going-rate pricing May price at the same level, above, or below the competition Bidding for jobs is another variation of competition-based pricing

Sealed bid pricing

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Methods of Pricing

Competition-based pricing Cost-plus pricing Limit pricing Loss leader Penetration pricing Creaming or skimming Economy pricing Premium pricing Psychological pricing


Pricing Strategy


Setting the Price

Selecting the pricing objective Determining demand Estimating costs Analyzing competitors costs, price and offers Selecting a pricing method Selecting the final price

Selecting a pricing method

Markup Price Target return Pricing Perceived value pricing Value pricing Going rate pricing

Adapting the price

Geographical pricing

Cash Countertrade Barter

Price discount and allowances Promotional pricing Differentiated pricing

Initiating & Responding to Price Changes

Initiating Price cuts Initiating price increase