Unit - 03
2018
Unit-5
Pricing decisions:
Significance of pricing,
factor influencing pricing
(Internal factor and External factor), objectives,
Pricing Strategies-
Value based, Cost based, Market based, Competitor based, Pricing Procedure.
Marketing Channels: Meaning, Purpose, Factors Affecting
Channel Choice, Channel Design, Channel Management Decision,
Channel Conflict,
Designing a physical Distribution System,
Network Marketing.
2017
Unit-5:
Pricing decisions:
Significance of pricing,
factor influencing pricing
(Internal factor and External factor),
objectives,
Pricing Strategies-Value based, Cost based, Market based, Competitor based,
Pricing Procedure.
Marketing Channels: Meaning,
Purpose, Factors Affecting Channel Choice, Channel Design,
Channel Management Decision,
Channel Conflict,
Designing a physical Distribution System,
Network Marketing,
Unit-5:
Pricing decisions:
Significance of pricing,
factor influencing pricing (Internal factor and External factor),
objectives,
Pricing Strategies-Value based, Cost based, Market based, Competitor based,
Pricing Procedure.
Marketing Channels:
Meaning, Purpose, Factors Affecting Channel Choice, Channel Design, Channel Management Decision, Channel Conflict, Designing a physical Distribution System, Network Marketing,
2020 Syllabus
Product management and Pricing:
Importance and primary objective of product management,
Product levels,
Product hierarchy,
Classification of products,
Product mix, product mix strategies,
Managing product life cycle.
New product development,
Packing as a marketing tool,
role of labeling in packing.
Concept of Branding,
Brand Equity, branding strategies, selecting logo, brand extension- effects
Introducing to pricing,
Significance of pricing,
factors influencing pricing (Internal factor and External factor),
objectives,
Pricing Strategies-Value based, Cost based, Market based, Competitor based, Pricing Procedure.
2022 Syllabus
Product
Management
Product
Management
Product
Products refer to tangible and intangible goods like physical objects, services, events, persons, places, organisations, ideas or combinations of these.
For ex: Cars, Washing machines, soaps, exhibitions etc.
Meaning of Product:
A product is the item offered for sale.
A product can be a service or an item.
It can be physical or in virtual or cyber form.
Every product is made at a cost and each is sold at a price.
The price that can be charged depends on the market, the quality, the marketing and the segment that is targeted.
Each product has a useful life after which it needs replacement, and a life cycle after which it has to be re-invented.
Definition:
“A product is anything that can be offered to a market for attention, acquisition, use, or consumption and might satisfy a want or need.” -Philip Kotler
“A product may be regarded from the marketing point of view as a bundle of benefits which are being offered to consumer”.
– Rustom S. Davar
“A product is a bundle of utilities consisting of various product features and accompanying services”. – W. Anderson
A product as “everythiing the purchaser gets in exchange for money. – C.P. Stephenson
Product management is an organisational function within a company dealing with new product development, business justification, planning, verification, forecasting, pricing, product launch, and marketing of a product or products at all stages of the product lifecycle
Or
Product management is the business management of products, product lines, or portfolios, holistically, for maximum value creation, across their life cycles
Product Manger:
They work across functions and serve to integrate or synchronize the work of others so that products can be planned, developed, released or launched, and managed as they move through chosen markets.
Product Management-
Characteristics of Product:
Pencil
Pen
Eraser
Uniform
Paper
Book
Calculator
Student
MEANING OF
PAPER – Past And Present Events Report
PEN – Poets Essayists And Novelists
BOOK – Big Ocean Of Knowledge
STUDENT – Smart Thoughtful Understanding Disciplined Energetic Notable Talented Person
UNIFORM – Unity Neat Identity Formal Order Responsibility Mandatory
PENCIL – Platform for Effective Enforcement for No Child Labour.
Features of Products
Importance of Product
A successful product management framework helps an organization realize three main objectives:
Primary Objectives of Product Management
Levels of Product:
History:
The Five Product Levels model was developed by Philip Kotler in the 1960s. Kotler’s book, Marketing Management (15th Edition), was voted one of the 50 best business books of all time in the mid-1990s by the Financial Times.
Before Kotler, marketing existed within a silo, the marketing department. Kotler was instrumental in making marketing an organization-wide activity.
The Five Product Levels model provides a way to show the different levels of need customers have for a product.
These needs range from core needs to psychological needs. At each product level, more customer value is added.
1. Core Product
This is the basic product and the focus is on the purpose for which the product is intended.
For example: a warm coat will protect you from the cold and the rain.
2. Generic Product
This represents all the qualities of the product.
For a warm coat this is about fit, material, rain repellent ability, high-quality fasteners, etc.
3. Expected Product
This is about all aspects the consumer expects to get when they purchase a product.
That coat should be really warm and protect from the weather and the wind and be comfortable when riding a bicycle.
4. Augmented Product
This refers to all additional factors which sets the product apart from that of the competition. And this particularly involves brand identity and image.
Is that warm coat in style, its colour trendy and made by a well-known fashion brand? But also factors like service, warranty and good value for money play a major role in this.
5. Potential Product
This is about augmentations and transformations that the product may undergo in the future.
For example, a warm coat that is made of a fabric that is as thin as paper and therefore light as a feather that allows rain to automatically slide down.
Product Hierarchy
Six Levels of Product Hierarchy:
Product Hierarchy stretches from basic needs to particular items that satisfy those needs .
Each product is related to obtain other products.
Ex: Thirsty.
2. Product Family - All product classes that can satisfy a core need with reasonable effectiveness.
Ex: Mineral water, beer, fresh juice, bottled juice, tea, coffee, soft drinks.
3. Product Class - A group of products within the product family recognized as having a certain functional coherence. Also known as Product Category.
Ex : Soft drinks
4. Product Line – A group of products within a product category that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same outlets or channels or fall within the given price ranges
Ex: Aerated soft drinks
5. Product Type – A group of items within a product line that share one of several possible forms of the product.
Ex: Cola drinks
6. Item (SKU or Product Variant) - A distinct unit within a brand or product line that can be distinguished by price, size, appearance or some other attribute.
Ex: Coca-Cola
Product Hierarchy Example.
1. Need family: What is the basic need being fulfilled?
Ex Entertainment.
2. Product family:
Ex: Leisure.
3. Product class: What all product classes can fulfil the basic need?
Ex: TV, book, movie, socializing, radio etc.
the various types of movies one can watch?
Ex: Full length feature, animated, short.
5. Product type: What are the sub categories under full length feature?
Ex: Sci-fi, horror, drama, Action, comedy etc.
6. Item: The specific product which fulfils the need. Ex: Dhoom.
Product Classification
Product Mix
Also known as Product Assortment.
Product mix is the number of products offered by a company for sale.
or
Product Mix Consists of all the product line and items that a particular items marketer offers for sale.
or
Is a set of all products/items that a particular seller offers for sale to buyers.
The product mix dimensions / decisions:
The Product Mix dimensions / decisions:
1. Product Mix Width-
the number of product lines that are being produced by the company.
2. Product Mix Length-
The total number of items in the product mix.
3. Product Mix Depth-
How many variants or varieties are offered in each product line.
4. Product Mix Consistency-
How closely the various product lines are related to one another in terms of use, production requirements, distribution channels, consumer behaviour and other characteristics.
Product Mix strategies
http://www.yourarticlelibrary.com/products/top-8-alternative-product-mix-strategies/48610
Product life cycle and its strategies
Definition:
Philip Kotler: The product life cycle is an attempt to recognize distinct stages in sales history of the product.
It involves five distinct stages:
Product life cycle (PLC) is the cycle through which every product goes through from introduction to withdrawal or eventual demise.
Time
Product
Develop-
ment
Introduction
Profits
Sales
Growth
Maturity
Decline
Losses/
Investments ($)
Sales and
Profits ($)
Stages in PLC and Marketing Strategies
1. Product development - covers the complete process of bringing a new product to market
2. Introduction: The product is introduced in the market.
Characteristics of introduction stage include:
Huge selling and promotional costs are required to increase awareness of customers.
Marketing Strategies:
3. Growth: The product is getting rapid acceptance and sales rise at the increasing rate.
Characteristics of growth stage include:
Marketing Strategies:
During this stage, the firm uses several strategies to sustain market growth as long as possible.
4. Maturity (including Saturation):
Sales rise, but at the decreasing rate. Saturation is marked with stable sales.
Characteristics of maturity stage include:
Marketing strategies:
5. Decline: It is the stage when sales start falling.
Characteristics of decline stage include:
Marketing strategies:
A company faces a number of tasks and decisions to handle its ageing products. Identifying the weak products is normally done by a product committee.
They must decide to maintaining the product without change, hoping that competitors will drop out of the market; Harvest the product, reducing costs and trying to maintain sales or drop the product
Example Apple I Pod:
New Product Development
What is new product?
A new product is a product which is genuine innovation and which serves nearly a new function in an entirely new way.
Steps / stages in New Product Development:
Idea Generation
Idea Screening
Concept Development and Testing
Marketing Strategy
Business Analysis
Product Development
Test Marketing
Commercialization
Packing as a Marketing tool
Meaning:
The physical container or a wrapper for a product that represents the size, shape, and final appearance of a product.
Definition:
“The activities of Designing and producing the container or wrapper for a product”. – Philip Kotler
Packaging is the technology of enclosing or protecting products for distribution, storage, sell, and use.
Packaging also refers to the process of designing, evaluating, and producing packages.
Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale, and end use.
Role of labelling in packing
Meaning:
Printed information appearing on or with the package.
Labelling is the art or act of attaching or tagging the labels to the products for giving information about the grades, uses and other valuable information about the products.
Definition:
“The label is any informative tag, wrapper or seal attached to a product or product’s package”. – Mason and Rath
“Label is the part of a product that carries verbal information about the producer or seller.” - W.J. Stanton,
The following are the functions / role of labeling:
http://www.yourarticlelibrary.com/products/product-life-cycle-definition-assumption-and-stages/48626/
PLC
new product?
http://www.yourarticlelibrary.com/products/developing-new-products-with-diagram/48622/
https://marketing-insider.eu/characteristics-of-services/
Services Marketing & its Characteristics.
https://opentextbc.ca/introtourism/chapter/chapter-8-services-marketing/
https://www.kmfnandini.coop/product/milk
https://www.tatachemicals.com/asia/products/consumer-products
https://www.garnier.in/
Branding
Brand- selecting brand name, selecting logo, brand extension- effects.
Introducing new product, innovations, new product development,
stages in new product development, pricing strategy for new product.
Brand
“A brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers” (American Marketing Association).
Brand
Brand is the unique identifying essence of your business.
A brand, in short, can be defined as a seller’s promise to provide consistently a unique set of characteristics, advantages, and services to the buyers/consumers.
It is a name, term, sign, symbol or a combination of all these planned to differentiate the goods/services of one seller or group of sellers from those of competitors.
Some examples of well known brands are Mc Donald’s’, Mercedes-Benz, Sony, Coca Cola, Kingfisher, etc.
SELECTING BRAND NAME
7 Steps for Choosing a Brand or Product Name
Branding
Branding - Concept of Branding, Types, Brand Equity, Branding strategies.
Branding is the process of giving a meaning to specific company, products or services by creating and shaping a brand in consumers’ minds.
It is a strategy designed by companies to help people to quickly identify their products and organization, and give them a reason to choose their products over the competition’s, by clarifying what this particular brand is and is not.
Branding
“Branding is endowing products and services with the power of a brand”
- (Kotler & Keller, 2015)
The process involved in creating a unique name and image for a product in the consumers' mind, mainly through advertising campaigns with a consistent theme. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.
As Jeff Bezos says, "Branding is what people say about you when you're not in the room."
Branding has been around since 350 A.D and is derived from the word “Brandr”, meaning “to burn” in Ancient Norse language.
By the 1500s, it had come to mean the mark that ranchers burned on cattle to signify ownership.
Yet branding today is more than just a look or a logo.
Your brand lives in hearts and minds
Why Is Branding Important?
2017: Cyclone Ockhi
2016: Cyclone Nada, Vardah, Kyant, Roanu
2014: Cyclone Hudhud
2013: Cyclone Phailin
2012: Cyclone Nilam
2010: Cyclone Laila, cyclone Jal
2009: Cyclone Aila
2008: Cyclone Nargis
Islero - In 1947, the matador Manolete was killed by a bull named Islero
Espada - reference to the bullfighter himself.
Miura SV - fierce and powerful Spanish fighting bulls
Murciélago LP640 - Murciélago was also a fighting bull that survived a matador's 28 sword strokes.
Reventón - "Reventón" was in reference to a fighting bull that killed a bullfighter named Felix Guzman in 1943.
Aventador LP700-4 - Aventador takes its name from an award-winning bull from the Spanish Corrida.
Veneno - one of the strongest and most aggressive fighting bulls ever."
Example
Functions of branding:
Types of branding:
Brand Equity
Brand Equity is a marketing term that describes a brand’s value.
That value is determined by consumer perception of and experiences with the brand.
The commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.
Components of Brand Equity
Apple is one of the best examples to explain brand equity. Even though the product offered by this brand have similar features to products of other brands, the demand, loyalty and the price premium to higher than any other mobile brand. The brand is counted among the top three most valuable brands since the past 7 years.
Even after months of the ban on its flagship noodles in India, the product saw a great demand when it was relaunched in the market. Maggi is one of the best examples to show how a strong brand equity can help a company cope up with anything in the market.
Other social networking websites may come and go but Facebook remains the only constant. Facebook has made its users so brand loyal that most of them don’t even look up to any other social media platforms.
Examples of Brand Equity
By definition, a branding strategy is a long-term plan for the development of a successful brand in order to achieve specific goals.
A well-defined and executed brand strategy affects all aspects of a business and is directly connected to consumer needs, emotions, and competitive environments.
One important element of a comprehensive branding strategy targeted to consumers is television advertising. Although it may not be right for every business, TV is the most powerful media available to advertisers and it has the potential to dramatically impact a communications campaign’s success.
Branding Strategies
Branding Strategies
1. Brand Positioning |
|
2. Brand name selection |
|
3. Brand sponsorship |
|
4. Brand development |
|
1. Brand Positioning
Marketers can position their brands clearly in target customers’ mind at three levels.
(e.g: face cream – cleansing)
(e.g: face cream – ponds – softer skin, glowing skin)
(e.g: face cream – makes you more attractive) Ex: Clearsil, Halo Shampoo
2. Brand name selection
Selection of a brand name starts with a careful analysis of the product and its benefits, the target market, and proposed marketing strategies.
The following are the desirable qualities for a brand name:
(Ex: Fair & Lovely, V-guard, Whirlpool)
(Ex: Ariel, Surf, Nokia, Pepsi)
(Ex: Kodak, Oracle, Canon)
(Ex: Amazon.com online bookseller expanded into other categories)
(Ex: Xerox, Vaseline)
3. Brand sponsorship
There are 4 major types of Brand sponsorship options:
a. Manufacturer’s brand example
b. Private brand example
Manufacturer’s brands Vs Private label brand example
c. Licensing brand example
d. Co-branding example
4. Brand Development
Development of brands can involve 4 different strategies:
a. Line extensions - occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes.
b. Brand extension - Brand Extension is the use of an established and successful brand to more products.
Ex: Amul – Amul milk, amul ice cream, amul butter, choclates
c. Multibrands – sometimes companies launch additional brands in same category.
d. New brands – creating a new brand
Line extension refers to the expansion of an existing product line.
OR
A new variant of an existing product that competes in the same category
OR
Line extensions occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes.
This is as opposed to brand extension which is a new product in a totally different product category.
OR
A product line extension is when a company creates a new product in the same product line of an existing brand. The strategy for an extension could be a different color or size, and it may have different ingredients or come in different flavors.
LINE EXTENSION MEANING
Line extensions example
Foods
Beverages
Brand extensions example
https://kmfnandini.coop/
Multibrands example
SELECTING LOGO
The word logo can refer to a variety of graphic and typeface elements; however, we use it here to refer to the graphic design that a company uses, with or without its name, to identify itself or its products (Bennett 1995; Giberson and Hulland 1994).
You may be asking yourself: How can I design my own logo? These are the steps you need to follow:
A logo is a graphic mark, emblem, symbol, or stylized name used to identify a company, organization, product, or brand. It may take the form of an abstract or figurative design, or it may present as a stylized version of the company's name if it has sufficient brand recognition.
BRAND EXTENSION
A brand extension is when a company uses one of its established brand names on a new product or new product category.
It's sometimes known as brand stretching.
The strategy behind a brand extension is to use the company's already established brand equity to help it launch its newest product.
Types of Brand extensions
Brand extensions can be divided into:
Instances where brand extension has been a success are-
BRAND EXTENSION- EFFECTS.
PRICING
Pricing :
Pricing:
Pricing is the process you need to go through to figure out what price to attach to each unit.
Or
The act or an instance of setting a price for a product or service.
Or
Pricing is the process of determining the value of a product or service in terms of money before it is offered to the market for sale.
Price:
The price is the amount of money you want for each product unit.
Objectives
Factors influencing pricing:
Internal Factors
External Factors
Pricing
Decisions
Pricing Strategies-
Pricing strategy is the tactic that company use to increase sales and maximize profits by selling their goods and services for appropriate prices
1. Value pricing
Price set in accordance with customer perceptions about the value of the product/service.
Based on Customer Perception
Example:
Tata Motors launched a compact sedan called Tata Indigo CS with a base price under Rs4.5 Lac sometime back.
2. Cost based pricing
A pricing method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.
For Example:
3. Market/Demand based pricing
Pricing determined by the demand of the product
Example:
4. Competitor based
Set prices based on what the competitors charge
Example:
- High Price, Low Volumes
Price Skimming is a pricing strategy in which a retailer sets a relatively high price for a product or service at first, then lowers the price over time.
5. Market Skimming
Example:
Model | Old iPhone Price in India | New iPhone Price in India |
iPhone 6s 32GB | Rs. 42,900 | Rs. 29,900 |
iPhone 6s 128GB | Rs. 52,100 | Rs. 39,900 |
iPhone 6s Plus 32GB | Rs. 52,240 | Rs. 34,900 |
iPhone 6s Plus 128GB | Rs. 61,450 | Rs. 44,900 |
iPhone 7 32GB | Rs. 52,370 | Rs. 39,900 |
iPhone 7 128GB | Rs. 61,560 | Rs. 49,900 |
iPhone 7 Plus 32GB | Rs. 62,840 | Rs. 49,900 |
iPhone 7 Plus 128GB | Rs. 72,060 | Rs. 59,900 |
iPhone 8 64GB | Rs. 67,940 | Rs. 59,900 |
iPhone 8 256GB | Rs. 81,500 | Rs. 74,900 |
iPhone 8 Plus 64GB | Rs. 77,560 | Rs. 69,900 |
iPhone 8 Plus 256GB | Rs. 91,110 | Rs. 84,900 |
iPhone X 64GB | Rs. 95,390 | Rs. 91,900 |
iPhone X 256GB | Rs. 1,08,930 | Rs. 1,06,900 |
Example:
6. Market Penetration
Market penetration pricing is a pricing strategy that sets a low initial price for a product, a price that is often lower than the eventual market rate.
The goal is to quickly attract new customers based on the low cost. The strategy is most effective for increasing market share and sales volume while discouraging competition
Low price to secure high volumes
Example:
Example:
Mobile phone rates in India; housing loans etc. Tata Docomo was the best example. I remember, some 4 years back Docomo coming with “pay per second” plan. The company launched TV and print advertisements with catchy taglines such as ‘Second is the new minute’. Within five months of the launch Tata DoCoMo attracted 10 million customers. Three-fourths of them came from other operators. (After capturing the market, they increased price, now the base tariff, in Kerala circle,is 2 paise per second, = 1 rupee 20 paise per minute!!!!!).. But , as we know, end of this film “DoCoMo” was a tragedy. In other words, this strategy was not successful in long run for Docomo.
7. Price Bundling
Price Bundling is a tactic of marketing two or more products and/or services for a price below the sum of individual prices
Examplea:
A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulate other profitable sales.
8. Loss leader
Sold Below cost to attract sales everywhere
Example:
Regular price: $45
Now Only: $25
REFERENCE PRICING
ODD/EVEN PRICING
$1.87$4.95$9.99
$175 $1000
PRESTIGE PRICING
9. Psychological Pricing
Psychological Pricing is a method of setting prices intended to have special appeal to consumers.
Used to play on consumer perceptions
Odd-even pricing is a pricing strategy involving the last digit of a product or service price. Prices ending in an odd number, such as $1.99 or $78.25, use an odd pricing strategy, whereas prices ending in an even number, such as $200.00 or 18.50, use an even strategy.
Decoy Pricing is a pricing strategy that offers consumers similar products at different prices to create a preference.
Decoy pricing is a pricing strategy to divert consumers to the higher-priced product and make consumers think they are getting a better deal.
Decoy Pricing:
10. Going Rate (Price Leadership)
Where competition is limited, ‘going rate’ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets
The Going-Rate Pricing is a method adopted by the firms wherein the product is priced as per the rates prevailing in the market especially on par with the competitors.
11. Predatory pricing
Example:
Everyday low price (also abbreviated as EDLP) is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shopping.
12. EDLP
Pricing Procedure