Product & Pricing

Khaled Mahmud
Associate Professor
Institute of Business Administration (IBA)
University of Dhaka
Classical Ps of Marketing

•Product
•Price
•Place
•Promotion

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 What Is a Product?

Product is anything that can be offered in a

market for attention, acquisition, use, or
consumption that might satisfy a need or
want
Service is a product that consists of
activities, benefits or satisfaction that is
essentially intangible and does not result
in the ownership of anything
What Is a Product?
Levels of Product and Services
What Is a Product?
Product and Service Classifications
 What Is a Product?
Product and Service Classifications
• Consumer products are products and
services for personal consumption
• Classified by how consumers buy them
• Convenience products
• Shopping products
• Specialty products
• Unsought products
 What Is a Product?
Product and Service Classifications
Convenience products
consumer products and services that the
customer usually buys frequently,
immediately, and with a minimum
comparison and buying effort
• Newspapers
• Candy
• Fast food
 What Is a Product?
Product and Service Classifications
Convenience products
 What Is a Product?
Product and Service Classifications

Shopping products
consumer products and services that
the customer compares carefully on
suitability, quality, price, and style
• Furniture
• Appliances
 What Is a Product?
Product and Service Classifications
Specialty products
consumer products and services with unique
characteristics or brand identification for which a
significant group of buyers is willing to make a
special purchase effort
• Medical services
• Designer clothes
• High-end electronics
 What Is a Product?
Product and Service Classifications

Unsought products
consumer products that the consumer does not
know about or knows about but does not
normally think of buying
• Lifeinsurance
• Funeral services
• Blood donations
 What Is a Product?
Product and Service Classifications
Industrial products
products purchased for further processing or for
use in conducting a business
• Classified by the purpose for which the product is
purchased
• Materials and parts
• Capital
• Raw materials
 What Is a Product?
Organizations, Persons, Places, and Ideas
Person marketing
consists of
activities
undertaken to
create, maintain,
or change
attitudes and
behavior of target
consumers toward
particular people
bichanakandi
Ratargul
New-Product Development Process
Idea Generation

Idea generation is the systematic

search for new-product ideas
Sources of new-product ideas
● Internal
● External
New-Product Development Process
Idea Generation
Internal sources refer to the
company’s own formal research
and development, management
and staff, and intrapreneurial
programs
External sources refer to sources
outside the company such as
customers, competitors,
distributors, suppliers, and
outside design firms
New-Product Development Process

Crowdsourcing
New-Product Development Process

Concept Development and Testing

Concept testing refers to testing

new-product concepts with groups
of target consumers
New-Product Development Process
Marketing Strategy Development
Test marketing is the stage
at which the product
and marketing
program are
introduced into more
realistic marketing
settings

Provides the marketer

with experience in
testing the product
and entire marketing
program before full
introduction
Product Life Cycle
Product Life-Cycle Strategies
Product Life Cycle
 Product Life-Cycle
Strategies
• Product development
• Sales are zero and investment costs mount
• Introduction
• Slow sales growth and profits are nonexistent
• Growth
• Rapid market acceptance and increasing profits.
• Maturity
• Slowdown in sales growth and profits level off
or decline
• Decline
• Sales fall off and profits drop
Product Life-Cycle Strategies

Fads are temporary

periods of unusually
high sales driven by
consumer
enthusiasm and
immediate product
or brand popularity
Product Life-Cycle Strategies
Decline Stage
 What Is a Price?

Price is the amount of money

charged for a product or service.
It is the sum of all the values
that consumers give up in order
to gain the benefits of having or
using a product or service.
 What Is a Price?

Price is the only

element in the
marketing mix
that produces
revenue; all
other elements
represent costs
Major Pricing Strategies
Customer Value-Based Pricing
Understanding how
much value
consumers place on
the benefits they
receive from the
product and setting a
price that captures
that value
 Major Pricing Strategies
Cost-Based Pricing

Cost-based pricing setting prices

based on the costs for producing,
distributing, and selling the
product plus a fair rate of return
for effort and risk
 Major Pricing Strategies
Cost-Plus Pricing
• Cost-plus pricing adds a standard
markup to the cost of the product
• Benefits
• Sellers are certain about costs
• Prices are similar in industry and price competition is
minimized
• Buyers feel it is fair

• Disadvantages
• Ignores demand and competitor prices
 Major Pricing Strategies
Break-Even Analysis and Target Profit Pricing

Break-even pricing is the price at which

total costs are equal to total revenue
and there is no profit

Target profit pricing is the price at

which the firm will break even or
make the profit it’s seeking
 Major Pricing Strategies
Customer Value-Based Pricing

Everyday low pricing (EDLP)

charging a constant everyday low
price with few or no temporary
price discounts
 Major Pricing Strategies
Customer Value-Based Pricing

High-low pricing charging higher

prices on an everyday basis but
running frequent promotions to
lower prices temporarily on
selected items
 Major Pricing Strategies
Competition-based pricing

• Setting prices based on

competitors’ strategies, costs,
prices, and market offerings.
• Consumers will base their
judgments of a product’s value
on the prices that competitors
charge for similar products.
 Other Internal and External
Considerations Affecting Price
Decisions
 Other Internal and External Considerations
Affecting Price Decisions

Price elasticity of demand illustrates the response of

demand to a change in price
Inelastic demand occurs when demand hardly changes
when there is a small change in price
Elastic demand occurs when demand changes greatly for
a small change in price
 Other Internal and External
Consideration Affecting Price
Decisions
Competition
New-Product Pricing Strategies
Market-skimming pricing is a strategy with high
initial prices to “skim” revenue layers from the
market
● Product quality and image must support the price
● Buyers must want the product at the price
● Costs of producing the product in small volume
should not cancel the advantage of higher prices
● Competitors should not be able to enter the market
easily
New-Product Pricing Strategies
Market-penetration pricing sets a low initial
price in order to penetrate the market quickly
and deeply to attract a large number of buyers
quickly to gain market share
● Price sensitive market
● Inverse relationship of production and
distribution cost to sales growth
● Low prices must keep competition out of the
market
Product Mix Pricing Strategies
Captive-product pricing
involves products that
must be used along with
the main product
 Price Mix Pricing Strategies

Product bundle pricing combines

several products at a reduced
price
Price-Adjustment Strategies

Segmented pricing is
used when a
company sells a
product at two or
more prices even
though the
difference is not
based on cost
Price-Adjustment Strategies
Customer segment pricing is when
different customers pay
different prices for the same
product or service.
museums and theatres may charge a
lower admission for students and senior
citizens.

Product form segment pricing is

when different versions of the
product are priced differently
but not according to
differences in cost.
Location pricing is when the
product sold in different
geographic areas is priced
differently even though the
cost is the same.
 Public Policy and Pricing
Pricing Within Channel Levels

Price fixing: Sellers must set prices

without talking to competitors
Predatory pricing: Selling below cost
with the intention of punishing a
competitor or gaining higher
long-term profits by putting
competitors out of business
Price-Adjustment Strategies
Promotional pricing is when prices are
temporarily priced below list price or cost to
increase demand
● Loss leaders
● Special event pricing
● Low-interest financing
● Longer warrantees
● Free maintenance
Price-Adjustment Strategies
Geographical pricing is used for
customers in different parts of the
country or the world
● FOB-origin pricing
● Uniformed-delivered pricing
● Zone pricing
● Basing-point pricing
● Freight-absorption pricing
 Price-Adjustment Strategies

• FOB-origin (free on board) pricing

means that the goods are delivered
to the carrier and the title and
responsibility passes to the customer
• Uniformed-delivered pricing means
the company charges the same price
plus freight to all customers,
regardless of location
 Price-Adjustment Strategies
• Zone pricing means that the company sets up
two or more zones where customers within a
given zone pay a single total price
• Basing-point pricing means that a seller
selects a given city as a “basing point” and
charges all customers the freight cost
associated from that city to the customer
location, regardless of the city from which
the goods are actually shipped
 Price-Adjustment Strategies

● Freight-absorption pricing means

the seller absorbs all or part of
the actual freight charge as an
incentive to attract business in
competitive markets
Price-Adjustment Strategies
Dynamic pricing is
when prices are
adjusted continually
to meet the
characteristics and
needs of the
individual customer
and situations
Pain of Paying
Thank you

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