Chapter 5: Product and Price Decisions
Chapter Overview
Focuses on Product and Price Decisions in Sports Marketing, emphasizing the critical interplay between product characteristics and pricing strategies in influencing consumer behavior and market dynamics.
Organized into Sections 5.1 and 5.2 covering Product Design and Pricing Strategies, providing an in-depth analysis of how these elements impact marketing effectiveness in the sports industry.
Chapter Objectives
Differentiate between a product item and a product line to understand the breadth of offerings in sports marketing.
Classify products as consumer goods or business goods, highlighting their distinct market roles and implications for marketing strategies.
Explain the seven steps in new product development, emphasizing the systematic process required for successful product launch in the competitive sports market.
Identify the stages in a product's life cycle to understand how products evolve in market acceptance and sales over time.
Define price and its role in profit determination, illustrating how pricing strategies can maximize profitability in a dynamic marketplace.
Describe factors affecting pricing decisions, including market trends, consumer behavior, and competitive landscape.
Identify pricing strategies and their application in real-world scenarios within sports marketing.
Product Definitions
Product Item: A specific model or size of a product (e.g., a particular athletic shoe), which can be marketed uniquely based on its specifications and branding.
Product Line: The entire group of related products offered by a manufacturer (e.g., all athletic shoes) that often share similar features or appeal to a specific market segment.
Classification of Products
Consumer Goods: Goods purchased for personal use (e.g., sneakers), which can be further categorized into convenience, shopping, and specialty goods based on consumer purchasing behavior.
Business Goods: Goods purchased by organizations for operational use (e.g., sports equipment for a gym), which serve as essential tools in delivering services or enhancing athletic performance.
Point of Difference: Unique characteristic or benefit that differentiates a product from competitors, such as innovative technology or exclusive design features.
Steps in New Product Development
SWOT Analysis: Identify strengths, weaknesses, opportunities, and threats related to new product ideas, assessing both internal and external factors.
Idea Generation: Brainstorming sessions involving diverse stakeholders to cultivate innovative concepts for new sports products.
Screening and Evaluation: Assessing ideas through focus groups and market research, ensuring alignment with consumer needs and preferences.
Business Analysis: Analyzing market potential, competitive threats, and profitability projections to validate the viability of the product concept.
Development: Creating prototypes and working models, which undergo rigorous testing to refine functionality and design.
Test Marketing: Introducing the product on a small scale in select markets to gauge consumer reactions and make necessary adjustments before full-scale launch.
Commercialization: Launching the product to the overall market, accompanied by comprehensive marketing strategies to ensure consumer awareness and engagement.
Product Life Cycle Stages
Introduction: The launch phase of the product characterized by low sales and high marketing costs.
Growth: An increase in sales and market acceptance, necessitating strategies to scale production and distribution.
Maturity: Peak sales where the product enjoys widespread acceptance, but faces increased competition and market saturation.
Decline: A decrease in sales leading to decisions about product discontinuation or revitalization through repositioning.
Note: Not all products follow a predictable life-cycle pattern; some may experience rapid declines or extensions based on market dynamics.
Managing the Product Life Cycle
Repositioning: Changing a product's image relative to competitors to refresh its appeal in the market.
Modifying the Product: Improving features, packaging, or quality to attract new customers and retain existing ones.
Marketing the Product: Adjusting promotional strategies to highlight differentiators effectively and respond to changing consumer preferences.
Importance of Price in Business
Price: The monetary value placed on goods/services, which needs to reflect both the perceived value and costs.
Profit Determination: Pricing impacts revenue versus costs, illustrated by the formula (Revenue = Price × Quantity Sold), which informs strategic pricing decisions.
Example: Selling 1,000 baseball bats at $175 each results in total revenue of $175,000. After subtracting $90,000 (cost of goods), a profit of $25,000 is realized, demonstrating the direct impact of pricing on profitability.
Pricing Strategies
Prestige Pricing: Setting prices based on perceived value to consumers, often used for high-end sports products to convey quality and exclusivity.
Odd-even Pricing: Prices set at odd/even numbers (e.g., $9.99) to influence consumer perception and purchasing behaviors.
Target Pricing: Setting prices based on consumer willingness to pay, ensuring that products remain competitive and accessible.
Cost-Plus Pricing: Adding a markup to the cost of goods to ensure profitability while covering production expenses.
Non-Price Competition: Competing on quality and customer service rather than price; for instance, offering exceptional after-sales support in sports stores.
Example: Discounts for bulk purchases and allowances for trade-ins reinforce the strategic use of pricing to stimulate sales and enhance customer loyalty.
Pricing Objectives and Regulations
Pricing Objectives: Establish goals such as market share, profit targets, and the implementation of special pricing strategies such as bundle pricing that can enhance consumer appeal.
Price Adjustments: Changes may include discounts for large purchases, seasonality, and trade-ins, which can significantly influence purchase decisions.
Regulations: The Sherman Anti-Trust Act prohibits price fixing, ensuring fair competition; while price discrimination is controlled by Clayton and Robinson-Patman Acts, maintaining equity in the marketplace.
Summary of Key Questions
Difference between product item and product line: Product item refers to a specific model, while product line encompasses a group of related products, impacting marketing decisions and consumer choices.
Factors influencing pricing strategies include demand fluctuations, cost structure, competitive actions, and product life cycle stages, necessitating adaptive pricing models to maximize success in sports marketing.