product & pricing strategies

• Marketing mix


  Elements of a firm's marketing that are designed to meet the needs of customers (also called the 4Ps)
• Marketing mix elements


  • Product
  • Price
  • Promotion
  • Place
• Product development


  A continuing process for many businesses to replace outdated products and gain a competitive edge
• Product development process


  1. Generating ideas

  2. Analysis

  3. Development

  4. Test marketing

  5. Commercialisation and launch
• Many product ideas are rejected at each stage of the development process
• Types of products


  • Consumer goods
  • Services
  • Producer goods
• Packaging


  • Protects fragile or perishable goods
  • Provides convenience
  • Is cost-effective
  • Has appealing design
  • Provides information
• Product life cycle


  The level of sales at the different stages through which a product passes over time
• Stages of product life cycle


  • Development
  • Introduction
  • Growth
  • Maturity and saturation
  • Decline
• Skimming pricing


  Setting a high price initially and then lowering it later
• Penetration pricing


  Setting a low price to start with in order to get established in the market, then raising price once established
• Extension strategies


  • Finding new markets
  • Finding new uses
  • Modifying the product
  • Developing the product range
  • Changing appearance or packaging
  • Encouraging more frequent use
• Extension strategies help lengthen the life of a product before it starts to decline
• Product portfolio


  The range of products a business is currently marketing
• Boston matrix


  A 2x2 matrix that describes products according to the market share they enjoy and whether the market has any potential for growth
• Boston matrix


  2x2 matrix that describes products according to the market share they enjoy and whether the market has any potential for growth
• Categories in the Boston matrix


  • Star
  • Cash cow
  • Question mark
  • Dog
• Businesses must try to have the 'right balance' of products in their portfolio, avoiding too many dogs and increasing stars and cash cows
• Large businesses


  • More likely to invest heavily in product development
  • Have more resources
  • Can reap huge rewards for discovering new products or materials
• Cost-plus or cost-based pricing


  Adding a percentage mark-up to the costs of producing a product to get the price
• Penetration pricing


  Setting a low price to start with in order to get established in the market, price may be raised once established
• Penetration pricing aims to get consumers into the habit of buying the product when the price is low, and to attract large retailers and bulk buyers
• Competition-based pricing


  Pricing based on the prices charged by rivals
• Price leadership


  The market leader sets the price and all others follow
• Predatory or destroyer pricing

  Setting a low price temporarily to drive out competition
• Skimming or creaming


  Setting a high price initially and then lowering it later
• Skimming is often used by companies like Apple when launching new products, to target early adopters who are willing to pay higher prices
• Promotional pricing


  Lowering the price of a product for a period of time to draw in customers
• Reasons for promotional pricing


  • To get rid of old stock
  • To generate cash quickly
  • To generate renewed interest in an existing product
  • To attempt to win a larger market share
• Psychological pricing


  Setting the price slightly below a round figure, e.g. £99.99 instead of £100, to make it seem significantly cheaper
• Loss leader


  A product sold at a price lower than cost, to draw customers into a store where they will buy other products