Applied Marketing LESSON-2 with assignments PDF

Lesson 2 Product and Services Strategies  PRODUCT/SERVICES Product and services are anything that can be offered to a market for attention, acquisition, use or consumption. Specifically, Services are essentially intangible activities which are separately identifiable and provide the satisf...

Lesson 2 Product and Services Strategies  PRODUCT/SERVICES Product and services are anything that can be offered to a market for attention, acquisition, use or consumption. Specifically, Services are essentially intangible activities which are separately identifiable and provide the satisfaction of wants. Includes: Physical Objects, Services, Events, Persons Places, Organizations, Ideas Combinations of the above A Service consist of activities Product Classification Product classification organizes products into four categories based mostly on consumer buying behavior, similarity to competing brands, and price range. Classifying products helps marketers develop strategies that target consumers' specific needs.  Product Classifications Consumer Products Convenience Products Shopping Products Buy frequently & immediately Buy less frequently Low priced Gather product information Many purchase locations Fewer purchase locations Includes: Compare for: Staple goods Suitability & Quality Impulse goods Price & Style Emergency goods Specialty Products Unsought Products Special purchase efforts New innovations Unique characteristics Products consumers don’t Brand identification want to think about Few purchase locations Require much advertising & personal selling  Product Classifications - Industrial Products Materials and Parts Capital Items Supplies and Services The 7 Stages of New Product Development  The process of coming up with 1. Idea concepts for new products or enhancements to existing ones is Generation known as "idea generation." In order to identify a problem and develop novel solutions, businesses do extensive research into the market and the desires and needs of their target audience (the "customers") during the "product discovery" phase. Once an issue has been recognized, for instance, it is time to start thinking about how to fix it. There should be New Product Development possibilities for every consumer issue. Here’s the workflow that starts with a problem and ends with strategizing around the solution.  2. Idea Screening In this second stage of developing a new product, all of the ideas that have been thought of are sorted through to find the best ones. There are various considerations for deciding which ideas to pursue and which to dismiss; some examples include consumer benefit, product enhancement priority, technical feasibility, and marketing potential. 3. Concept Development and Testing In this stage, All ideas passing the screening stage are developed into concepts. A product concept is a detailed description or blueprint of your idea. It should indicate the target market for your product, the features and benefits of your solution that may appeal to your customers, and the proposed price for the product. A concept should also contain the estimated cost of designing, developing, and launching the product. Once you’ve developed your concepts, test each of them with a select group of consumers. Concept testing is a great way to validate product ideas with users before investing time and resources into building them. Concepts are also often used for market validation. Before committing to developing a new product, share your concept with your prospective buyers to collect insights and gauge how viable the product idea would be in the target market. 4. Marketing Strategy and Business Analysis At this stage, you need to come up with a first marketing plan to get the product on the market and figure out how valuable your solution is from a business point of view. The marketing strategy serves to guide the positioning, pricing, and promotion of your new product. Once the marketing strategy is planned, product management can evaluate the business attractiveness of the product idea. The business analysis comprises a review of the sales forecasts, expected costs, and profit projections. If they satisfy the company’s objectives, the product can move to the product development stage. 5. Product Development The product development stage consists of developing the product concept into a finished, marketable product. Your product development process and the stages you’ll go through will depend on your company’s preference for development, whether it’s agile product development, waterfall, or another viable alternative.  6. Test Marketing Test marketing involves releasing the finished product to a sample market to evaluate its performance under the predetermined marketing strategy. There are two testing methods you can employ: Alpha testing is software testing used to identify bugs before releasing the product to the public Beta testing is an opportunity for actual users to use the product and give their feedback about it 7. Market Entry Commercialization is an umbrella term that entails varied strategies to ensure the success of the new product. Here is what commercialization includes: If all the mentioned strategies fall right in place, nothing can stop a product from getting attention and being a product- market fit. Product Life Cycle  The product life cycle is the progression of a product through 4 distinct stages—development, , growth, maturity, and decline. The concept was developed by German economist Theodore Levitt, who published his Product Life Cycle model in the Harvard Business Review in 1965. We still use this model today. Basically, the product life cycle is the time from the product concept through its eventual withdrawal from the market. The product life cycle is used for decision-making and strategy development throughout each stage. Stage 1. Development The first stage in the product life cycle is development. This is when a new product is first brought to market, before there is a proved demand for it, and often before it has been fully proved out technically in all respects. The pace of sales is slow and poor. Stage 2. Market Growth This is characterized by growing demand, an increase in production, and expansion in its availability. The product becomes more popular and recognizable. The growth period of the product life cycle results in increased sales and higher revenue. As competition begins to offer rival products, competition increases, potentially forcing the company to decrease prices and experience lower margins. Stage 3. Market Maturity The maturity stage of the product life cycle is the most profitable stage, the time when the costs of producing and marketing decline. Competition now higher than at other stages. Some analysts refer to the maturity stage as when sales volume is "maxed out". Sales levels stabilize, and a company strives to have its product exist in this maturity stage for as long as possible. Stage 4. Market Decline As the product takes on increased competition as other companies emulate its success, the product may lose market share and begin its decline. As customers become more discerning about their product loyalty, a company may decide not to invest more resources into marketing as product sales begin to decline owing to market saturation and competition from similar items. The product begins to lose consumer appeal and sales drift downward. Product Design  Product Design At its most basic, product design (also known as industrial design) is all the work that comes between the initial idea for a new product, through to the point where the design is ready to be handed off to a manufacturer. In the case of an entrepreneurial product designer, the work continues until the customer is holding the product in their hands. It is the practice of creating and executing design solutions for manufactured products using research, concept development, sketching, prototyping, and 3D modeling, that solve problems of form, function, usability, physical ergonomics, sustainability and consider marketing, brand development, and sales.  Process of Product Design 1. Define Product Vision And Strategy 2. Product Research 3. User Analysis 4. Ideation 5. Design 6. Testing And Validation Post-Launch Activities Pricing Strategies  Pricing strategies refer to the processes and methodologies businesses use to set prices for their products and services. If pricing is how much you charge for your products, then product pricing strategy is how you determine what that amount should be. There are different pricing strategies to choose from but some of the more common ones include: 1. Value-based pricing 2. Competitive pricing 3. Price skimming 4. Cost-plus pricing 5. Penetration pricing 6. Economy pricing 7. Dynamic pricing How to establish a winning pricing strategy? 1. Finding your value metric 2. Setting your ideal customer profiles and segments 3. Completing user research + experimentation  Monopoly Oglipoly Monopolistic Competition Perfect Competition  Cost-Based Pricing Cost-based pricing is the practice of setting prices based on the cost of the goods or services being sold. A profit percentage or fixed profit figure is added to the cost of an item, which results in the price at which it will be sold.  Demand and Price Elasticity Price elasticity of demand is the ratio of the percentage change in quantity demanded of a product to the percentage change in price. Economists employ it to understand how supply and demand change when a product’s price changes. If a price change for a product causes a substantial change in either its supply or its demand, it is considered elastic. Generally, it means that there are acceptable substitutes for the product. Examples would be cookies, luxury automobiles, and coffee.. If a price change for a product doesn’t lead to much, if any, change in its supply or demand, it is considered inelastic. Generally, it means that the product is considered to be a necessity or a luxury item for addictive constituents. Examples would be gasoline, milk, and iPhones. What is the importance of price elasticity of demand? Knowing the price elasticity of demand of a good allows someone selling that good to make informed decisions about pricing strategies. This metric provides sellers with information about consumer pricing sensitivity. It is also key for makers of goods to determine manufacturing plans, as well as for governments to assess how to impose taxes on goods. Pricing Practices 1. Laws - The legislative branch of the government enacted variouslaws that concerns on consumers’ welfare and pricing such ofwhich are: Republic Act No. 7581 - The Price Act Republic Act No. 7394 - The Consumer Act of the Philippines Republic Act No. 10667 - The Philippine CompetitionAct (PCA) 2. Regulations - These are more detailed guidelines established by government agencies such as theDepartment of Trade and Industry and the Food and Drug Administration, which aretasked with enforcing laws. Suggested retail prices (SRPs) for essential necessities and corecommodities such as canned and other food goods, bottled water, dairy, andcommon household or kitchen supplies are updated by the DTI. 3. Ethics - These are rules and principles that govern fairness and whether something is regarded right or wrong. People will be outraged and will avoid purchasing the item in issue, as well as other things, as a result of this. This is said to be included when pricing methods have negative consequences that are less important to society's functioning or that are difficult to regulate legally. Any firm must make a crucial decision when it comes to pricing a product responsibly. Businesses that employ ethical pricing tactics to sell their products and profit are significantly more appreciated than those that harm and deceive competitors or even customers. Companies must be able to recognize ethical difficulties that obstruct fair pricing in order to practice ethical pricing. Pricing Strategies New Product and Service Pricing Penetration and skimming are two strategies which play a crucial role in deciding the price of a new product. When a new product is launched in the market, first and foremost it needs to meet and exceed the expectations of customers and then compete with other brands available in the market.  Pricing Strategies 1. Penetration 2. Skimming Penetration refers to keeping the price Organizations which depend on of a new product relatively low such skimming strategy for pricing a new that it covers just the manufacturing product often keep it at high prices costs while earning minimum profits and target only those who are actually for the organization. interested in buying the new product. Keeping the price of a new product pricing as per skimming strategy relatively low in the initial stages ensures respective organizations earn helps it penetrate the market easily huge profits. and also get accepted among target audience. Organizations, in this case keeps a relatively high price for their products Keeping the price a little low not only as they believe there is no harm in reduces the competition from other charging more from the end-users in brands but also increases the sales exchange of a premium product. and makes the product popular in the market. Organizations dealing in premium products often depend on skimming No one would even bother to look at technique to price their product. your product if it is priced too high at the introductory stage, unless and until it has some exclusive features. 3. Premium Pricing - High price is used as a defining criterion. Such pricing strategies work in segments and industries where a strong competitive advantage exists for the company. Ex. Porche cars and louis vuitton bag. 4. Retail Price - Many retailers benchmark their pricing decisions using keystone pricing which essentially is doubling the cost of a product to set a healthy profit margin. 5. Psychological pricing - Studies have shown that when merchants spend money, they're experiencing pain or loss. Traditionally, merchants have accomplished this with prices ending in an odd number, like 5, 7, or 9. For example, a retailer would price a product at 99pesos instead of 100 pesos. From a customers’ perspective, it looks the retailer has slashed every cent possible off the price and makes the item seem like a better price. 6. Competitive Pricing - As the name of this pricing strategy suggests, competitive pricing strategy refers to using competitors’ pricing data as a benchmark and consciously pricing your products below theirs. This tactic is usually driven by the product value. For example, in industries with highly similar products where price is the only differentiator and you rely on price to win customers. 7. Anchor Pricing - Anchor pricing is another product pricing strategy retailers have used to create a favorable comparison. Essentially, a retailer lists both a discounted price and the original price to establish the savings a consumer could gain from making the purchase. 8. Cost-plus pricing: a simple markup - Cost-plus pricing, also known as mark-up pricing strategy, is the easiest way to price a product or service. You make the product, add a fixed percentage on top of the costs, and sell it for the final price. Assignment #2 1. If you will run a business, what will you offer to the market? a product or a service? Why is it? 2. In your own words, How will you establish a winning pricing strategy? 3. What are the different types of market structure? 4. What pricing plan is most suitable for a new business? 5. What is the most critical stage of the product life cycle?