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Product management
Business process of planning, developing, launching, and managing a product or service
Product Features
A trait or attribute that differentiates a product in the market
Product Differentiation
Brand, Package, Label
Product Positioning
The establishment of an easily identifiable image of a product in the minds of consumers.
Product Creation
Context - What do you want to develop? Market needs and how to fill them?
Ideating - Open-minded ideas to fill the market needs. How will it be special and target market?
Prototyping - Creating a plan/product
Testing - How it works? Reworking and taking feedack
Making - Step by step to make. Appropriate tools
Sharing - Identify new goals, Reassess, and Evaluate your product in a larger environment
Promotion
Purpose - Brand awareness, create interest, generate sales and brand loyalty
Public Relations - Create a favourable image of your product and business.
Publicity - Placing positive and newsworthy information about a business, product and policies
Types of Advertising
Product advertising
Institutional advertising
Cause advertising
Product placement
Guerilla advertising
Billboard advertising
Online advertising
Product advertising
Promotion of a product
Institutional advertising
Messages that promote ideas and concepts
Cause advertising
Promotes specific viewpoints on public issues
Product Placement
Companies may pay a fee to place their products in media like movies, tv shows, or newspapers
Guerilla advertising
Low-cost, innovative efforts to promote a product in an unexpected or unusual way
Billboard advertising
Online advertising
Influencer marketing, top ad banners, ads in apps or games
Fix costs
Costs that are unaffected by the number of goods/services being sold. (Ex. Rent, Insurance, Salaries,
Variable costs
Costs that are affected by the number of goods/services being sold. (Ex. If you sold cupcakes, the amount of ingredients you buy will depend on how many cupcakes you sell)
Break-even point
The number of units that must be sold at a given price before the company covers all of its variable and fixed costs.
Formula (with units) = total fixed costs / (price - variable costs)
Markup
How much profit do you want to make on every product sold? Charge that amount over your input costs.
Ex. (Price-Cost)/Cost = Markup
Margin
The sales minus the cost of goods sold.
Ex. (Price-Cost)/Price = Margin
Price competition
Basing
Non-Price competition
Factors not related to price e.g. location, quality, reputation
Penetration
`When companies lure customers in by pricing their products extremely low then hope that the customers will be loyal and stay with the company even if the price increases.
Skimming
Skimming is when companies price their products at the highest possible price. This only works when the company is able to convince customers that the product is new and unique.
Bundle
Selling the product with other products and “bundling” the price
e.g. phone plan could come with netflix and ctv
Phycological
Charm pricing - $10 → $9.99
Prestige pricing - $9.99 → $10
Place distribution
How the products get transported to the customer
4 distribution channels for customers
Direct channel
Retail distrubution
Wholesale distribution
Distribution from agents or brokers
Direct channel
Direct channel -Â the product travels from the producer to the consumer without passing through any intermediary (Ex. Etsy)
Retail distribution
Involving the manufacturer, retailer, and seller, the manufacturer sells the product to retailer, then the retailer sells the product to consumers. Stores get products from the manufacturers, then sell the products. (Ex. Dollarama)
Wholesale distribution
A wholesaler buys goods from a manufacturer and then sells them to retailers and other businesses as more of a storage function (e.g. costco)
Distribution from agents or brokers
An independent business person who represents a business and receives a commission in return, but never takes legal possession of the product. The sales agent represents the producer, selling the products to wholesalers, retailers, or even both → the agent connects people to the goods/service that is being sold
Intermediary
Any individual or firm other than the producer who participates in a product’s distribution
Manufactures
Produces the good, using machines,
Wholesalers
Intermediary who sells products to other businesses, which in turn resell them to the end users
Retailers
Sell
Consumers
the user of product/service
Law of Demand
The higher the price, the lower the demand.
Customers will purchase more if the price drops.
Law of Supply
The higher the price of a good, the greater quantity supplied
The lower the price of a good, the smaller quantity supplied
Producers offer more of a product when the price increases
Demand curve
A graph that shows how many units of a product will be demanded at different prices
Supply curve
Graph that shows how many units of a product will be supplied at different prices
Market Equilibrium
When the price balances the plans of the buyer and seller
Quantity demanded = quantity supplied
The equilibrium quantity is the quantity bought and sold at the equilibrium price.
Surplus
Quantity supplied > quantity demanded
Price goes down
Shortages
Pros and cons of E-commerce
Pros for business:
More business (convenient)
Wider demographic (people from all over the world with shipping can shop)
Can hire less people
Don’t have to spend money on making the store look aesthetic, can just be a warehouse
Cons for business:
Many returns
Pros for customer:
Convenience (can shop from home)
Good for introverted people
Cons for customer:
Hard to know sizing (clothes, shoes, etc.)
Seller may not be reliable e.g. aliexpress
Items may get lost or damaged
What’s the connection between distribution and price?
Distribution pricing is the price point you as the business owner chooses to extend to vendors who will then distribute your products. The price is commonly a percentage discount off of your retail price. The discount gives the distributor room to make a profit from sales of the product.
In what situations can two items of the same quality be priced differently?
Two items of the same quality can be priced differently based on the colour. Companies may observe customers to see which colours are more popular and make those ones more expensive.
Companies pricing new products often choose between price skimming and penetration pricing. Explain the difference between these two pricing policy options, and what type of product is often associated with these two pricing policy options?
Price skimming is when companies price a product at its maximum value. This pricing strategy only works when a company can convince customers that they have a unique product. Some products that use price skimming are electronics, like cell phones and televisions.
Penetration is when companies price their products extremely low to entice the customers. They may do free trials to convince customers that after the trial ends, they still need the product. One example of this may be streaming services, like Spotify Premium. They have 1-3 month free trials before a customer has to pay for Spotify Premium.
If my product costs $10 to make, and my selling price is $15 per unit. What is my markup stated as a percentage, and what is my margin stated as a percentage?
The markup price would be $5, as it’s the difference between the cost and selling price, meaning there is a markup percentage of 33.3%.
Explain the difference between fixed and variable costs. Provide an example of each.
Fixed costs are unaffected by the amount of the goods/services being sold such as rent or insurance, whereas variable costs are costs that change depending on the number of goods/services sold. An example of variable costs would be if you sell loaves of bread, where the number of loaves you sell determine the quantity of ingredients you buy.