Developing and Pricing Products

Describe what a product is and distinguish between consumer and industrial products.

     Products are a firm's reason for being; product features offer benefits to buyers, whose purchases are the source of business profits. In developing products, firms must decide whether to produce goods for consumers (consumer goods) or goods for other firms (industrial goods). Marketers must recognize that buyers will pay less for convenience goods than they will pay for shopping and specialty goods. In industrial markets, expense items are generally less expensive and more rapidly consumed than are capital items. 

Trace the steps in new product development and the stages of the product life cycle.

     The seven stages of product development are: development of ideas, screening, concept testing, business analysis prototype development, product testing (test marketing), and commercialization. Very few ideas for new products make it to the commercialization stage. New products have a life cycle that begins with their introduction and progresses through stages of growth, maturity, and decline. Revenues rise through the early growth period; sales rise through the late maturity period. In terms of the growth&-share matrix, this progression appears as the products moves from question mark to star to cash cow to dog. 

Explain the importance of brand names, packaging, and labeling.

     Each product is given an identity by its brand and the way it is packaged and labeled. National, licensed, and private brands are developed to create brand loyalty. Packaging provides an attractive container and advertises the product. The label informs the consumer of the packages contents.

Identify the various business objectives that govern pricing decisions and the tools used in making these decisions.

     The pricing of a product will determine its business success, depending on the business objectives that are established. Profit maximization, market share, and other business objectives may be relevant to the pricing  decision. Economic theory, cost&-oriented pricing, and break&-even analysis can then be used as tools in determining prices.

Discuss pricing strategies and tactics for existing and new products.

     Either a price&-skimming or a penetration&-pricing strategy can be used for new products. Existing products may be priced at, above, or below prevailing prices for similar products, depending on the other elements in the marketing mix. Guided by a firm's pricing strategies, managers set prices using tactics such as price lining, psychological pricing, and discounting.