* * * Developing and Pricing Products and Services * CHAPTER ** 14 Nickels * McHugh McGraw-Hill/Irwin Understanding Business, 8e * McHugh 1-1 14-1 © 2008 The McGraw-Hill Companies, Inc., All Rights * * * Product Development & Value Package • Value/Total Product Offer • Product Line • Product Mix • Product Differentiation 14-2 * * * Marketing Different Classes of Goods & Services • Consumer • Convenience • Shopping • Specialty • Unsought • Industrial 14-3 * * * Importance Of Packaging • Protection • Attraction • Description • Explain Benefits • Information on warranties, warnings, etc • Indication of price, value, and uses 14-4 * * * Branding • • Brand & Trademark Categories • Manufacturers’ • Dealer/Private • Generic • Knockoff • Equity • Loyalty • Awareness • Association 14-5 * * * Characteristics of a Good Brand Name • Short, sweet, and easily pronounced, but flexible and expandable, and does not lend itself to abbreviation • Unique within its industry and retain its age • Legally available and defensible • Good alliteration and linguistically clean • Embraces company personality / brand portfolio Source: The Brand Name Awards 2005 14-6 * * * Best/Worst/Weirdest Car Brand Names Best Worst Lamborghini Diablo Volkswagon Thing Ford Mustang Honda That’s Weirdest FSR Tarpan Honker Mazda Bongo Friendee/ Brawny Mitsubishi Colt Nissan Cedric Isuzu Tractor Pontiac Firebird Toyota Toyopet Mitsubishi Delica Space Gear Rolls-Royce Silver Corbin Sparrow Suzuki Joy Pop Shadow Dodge Coronet Super Bee Source: FT Weekend, November, 2005 14-7 * * * Brand Characters: Are They Real or Fake? • Betty Crocker • Chef Boyardee • Uncle Ben • Colonel Sanders • Little Debbie Source: Fast Company, August 2004 Fake Real Both Real guy, fake rank Real 14-8 * * * 10 Most Valuable Brands Rank Product Brand Value (Billions) Coca-Cola $67.00 Microsoft 56.93 IBM 56.20 GE 48.91 Intel 32.32 Nokia 30.13 Toyota 27.94 Disney 27.85 McDonald’s 27.50 10 Mercedes-Benz 21.80 Source: Business Week, August 7, 2006 14-9 * * * • • • • • • • • • • Top 10 Favorite Mascots of America M&Ms figures / Mars Doughboy / General Mills, Smucker’s Duck / Aflac Tony the Tiger / Kellogg Gecko / Berkshire Hathaway’s Geico Chester the Cheetah / Pepsi’s Frito-Lay Energizer Bunny / Energizer Holdings Kool-Aid Man / Kraft Foods Trix Rabbit / General Mills Snap, Crackle and Pop / Kellogg Source: Forbes, January 9, 2006 14-10 * * * New-Product Development Process 1.Idea Generation 2.Screening 3.Analysis 4.Development 5.Testing 6.Commercialize 14-11 * * * First Products Produced by Five Major Companies • Hershey - Caramels • Amway - No-rinse car wash • Heinz - Horseradish • Avon - Little Dot perfume set • 3M - Sandpaper Source: World Features Syndicate 14-12 * * * People Behind Product Innovation • Liquid Paper – an American Secretary • Paper Clip – a Norwegian Patent Clerk • • • Fax Machine – a Scottish Clock Maker • Ballpoint pen – a Hungarian Journalist • Eraser Head – English Chemist Lewis Waterman Fountain Pen – an American Insurance Salesman Pencil Sharpener – French Mathematician Source: World Features Syndicate 14-13 * * * Best Product Innovation of ALL Time % of Consumers’ Choice Source: American Demographics 14-14 * * * Consumers Attitudes about New Products Source: USA Today 14-15 * * * Why People Purchase New Products Source: USA Today 14-16 * * * Sales & Profits During the PLC 14-17 * * * Pricing • • • • Objectives • • • • • ROI Traffic Market Share Image Social Cost-Based Demand-Based CompetitionBased • Break-Even • Strategies • Market Forces • Fixed Cost • Variable Cost • Skimming • Penetration • EDLP • High-Low • Bundling • Psychological 14-18 * * * What They Cost When First Introduced 1927 Transatlantic Call $ 75/3 1947 3,000 Microwave Oven $ 1964 850/month FAX unit rental 1970 Pocket Calculator $ 150 1974 VCR Tape Source: World Features Syndicate $ $ 14-19 * * * Total Revenue or Total Cost Breakeven Chart Number of Units 14-20 * * * Pricing Using Breakeven Analysis Problem Costs Market Research Forecast Should we charge $2 or $3 per unit? Total Fixed Costs $400,000 Variable Cost per unit $ Company can sell: 290,000 boxes at $2 / unit 210,000 boxes at $3 / unit Breakevenpoint point== Breakeven Breakeven Analysis totalfixed fixedcost cost total price variable variablecost cost price (perunit) unit) (per (perunit) unit) (per $2price price==$400,000 $400,000==400,000 400,000units unitsto to $2 breakeven breakeven $2 $1 $1 $2 $3price price==$400,000 $400,000==200,000 200,000units unitsto to $3 breakeven breakeven $3 - $1 14-21 * * * Advanced Breakeven Analysis 14-22 * * * Example of a UPC Barcode 12 34567 89012 Example only: not a valid UPC barcode 14-23 ... Syndicate 14- 13 * * * Best Product Innovation of ALL Time % of Consumers’ Choice Source: American Demographics 14- 14 * * * Consumers Attitudes about New Products Source: USA Today 14- 15 * * *... January 9, 2006 14- 10 * * * New-Product Development Process 1.Idea Generation 2.Screening 3.Analysis 4.Development 5.Testing 6.Commercialize 14- 11 * * * First Products Produced by Five Major Companies... $3 breakeven breakeven $3 - $1 14- 21 * * * Advanced Breakeven Analysis 14- 22 * * * Example of a UPC Barcode 12 34567 89012 Example only: not a valid UPC barcode 14- 23