Chapter 14 – Products & Pricing

Product

Anything offered to a market to satisfy a want or need.

Includes:

Goods

Services

Ideas

People

Places

Total Product Offer

Everything customers evaluate when deciding whether to buy a product.

Includes:

Quality

Price

Brand

Packaging

Warranty

Reputation

Customer service

Availability

Product Line

A group of closely related products offered by a company.

Example:

Apple iPhone lineup

Product Mix

All the product lines and items offered by a single company.

Example:

Apple

iPhones

MacBooks

iPads

Apple Watch

AirPods

Product Differentiation

Creating unique features to make a product stand out from competitors.

Examples:

Design

Quality

Features

Customer service

Brand image

Consumer Product Classifications

Convenience Products

Inexpensive items purchased frequently with minimal effort.

Examples:

Toothpaste

Milk

Candy

Gasoline

Shopping Products

Items consumers compare across brands for price and quality before buying.

Examples:

Furniture

TVs

Laptops

Shoes

Specialty Products

Unique items that consumers actively seek out with high brand loyalty.

Examples:

Rolex

Ferrari

Louis Vuitton

Tesla

Unsought Products

Products consumers do not think about buying until a specific need arises.

Examples:

Life insurance

Funeral services

Smoke detectors

Industrial (Business) Product Classifications

Goods purchased by businesses to help produce other products or services.

Examples:

Raw materials

Component parts

Major equipment

Accessory equipment

Supplies

Business services

Packaging

Designing and producing the product container.

Functions:

Protects, promotes, provides info, adds convenience, and ensures product safety.

Brand

A name, symbol, or design identifying a seller's products from competitors.

Brand Equity

The added value a brand name gives based on customer recognition and loyalty.

Higher brand equity allows companies to charge higher prices.

Product Life Cycle: Introduction

Stage characterized by low sales, high costs, and heavy promotion.

Product Life Cycle: Growth

Stage marked by rapidly increasing sales, rising profits, and growing competition.

Product Life Cycle: Maturity

Stage where sales peak, competition is highest, and advertising is heavy.

Product Life Cycle: Decline

Stage characterized by falling sales, leading to product updates or discontinuation.

Pricing Objectives

Maximize profits

Increase market share

Survive competition

Maintain market position

Cost-Based Pricing

Setting prices by adding a target profit markup to production costs.

Price = Cost + Profit

Demand-Based Pricing

Setting prices based on perceived customer demand and willingness to pay.

Competition-Based Pricing

Setting prices based on the prices charged by competitors.

Penetration Pricing

Setting a low initial price to gain market share quickly.

Price Skimming

Setting a high initial price that is gradually lowered over time.

Used with innovative products

Everyday Low Pricing (EDLP)

Maintaining continuously low prices without relying on temporary discounts.

Example:

Walmart

Psychological Pricing

Pricing items at specific numbers (e.g., $9.99) to influence consumer perception.

Break-Even Point

The sales level where total revenue = total costs, yielding zero profit or loss.