Marketing 10 CHIN

Product management

**B**usiness 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

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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 -  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

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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. 

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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.