UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES

BBA UNIT 4 PRODUCT AND PRICING STRATEGIES

1. UNIT IV - PRODUCT AND PRICING STRATEGIES PRODUCT CLASSIFICATION PRODUCT MIX DECISION RURAL PRODUCT CATEGORY NEW PRODUCT DEVELOPMENT CONSUMER ADOPTION PROCESS PRODUCT LIFE CYCLE PRICING IN RURAL MARKETS – CONCEPTS, POLICIES AND STRATEGIES

2. PRODUCT CLASSIFICATION Product classification organizes products into four categories based mostly on consumer buying behavior, similarity to competing brands, and price range. Classifying products helps marketing and sales teams develop strategies to target consumer needs.

3. TYPES OF PRODUCT CLASSIFICATION

4. 1. Convenience Goods Convenience goods are products that consumers buy repeatedly without much thought. Once consumers choose their brand of choice, they typically stick to it unless they see a reason to switch. For example, an interesting advertisement or convenient placement at the checkout aisle may inspire them to try a new brand. Examples of convenience goods include: Gum Toilet paper Soap Toothpaste Shampoo Milk

5. 2. Shopping Goods Shopping goods are products shoppers typically spend more time researching and comparing before they buy. Unlike convenience goods, these are rarely impulse purchases. Shopping goods can be affordable items, like clothes and home decor. For example, if you have an event coming up and you want to get a nice pair of shoes, this doesn’t fall under impulse purchases. Instead, you'll want to try it on, consider whether the price is worth it, and even get input from your loved ones. Shopping goods can also be a one-off purchase with a higher economic impact. These are higher-end goods like cars and houses. Since it's an expensive and important purchase, you'll spend a good amount of time deliberating on it. For example, when buying a house you'll attend different open houses, and compare the pros and cons of your final selection. Marketing Shopping Goods To promote a shopping good, invest in content that persuades your buyer of your product’s value. It's important your marketing materials show how your product differs from the competition and the unique value it offers. This commercial for Honda is a great example of shopping goods marketing: Price also plays a role in this product type. This means that the promotion of discounts and sales can attract consumers to your brand.

6. 3. Specialty Goods A specialty good is the  only  product of its kind on the market. This means consumers don't usually feel the need to compare and deliberate as much as they would with shopping products. For example, iPhones are a specialty good because of Apple’s strong brand identity, unique features, and operating system. This combination creates a perception of product quality. Other examples of specialty goods include luxury cars, gourmet food brands, and designer clothing.

7. 4. Unsought Goods Unsought products are goods that people aren't usually excited to buy. These products have utility, but they're usually not fun purchases. Good examples of unsought goods include fire extinguishers, insurance, and refrigerators. People often buy unsought goods out of a sense of fear, danger, or utility. For instance, you wouldn't go online to search for the "new and best" fire extinguisher. You'd only buy one due to the fear of a potential fire. People also buy unsought goods like refrigerators or toasters because the old ones stopped working.

8. PRODUCT MIX Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services.

9. Dimensions of a Product Mix An organization's product mix has the following four dimensions:- width - (number of different product lines) length - (total number of items within product lines) depth - (number of variants of each product) consistency - (closeness of products in terms of usage, production, distribution)

10. Width The width of an organization's product mix pertains to the number of product lines that the organization is offering. Length The length of an organization's product mix pertains to the total number of products or items in the product mix.  Depth The depth of an organization's product mix pertains to the total number of variants of each product offered in the line. Variants include size, color, flavors, and other distinguishing characteristics. Consistency The consistency of an organization's product mix refers to how closely related the various product lines are in use, production, distribution, or in any other manner.

11. Product Mix Decision Product mix decision refers to the decisions regarding adding a new or eliminating any existing product from the product mix, adding a new product line, lengthening an existing line, or bringing new variants of a brand to expand the business and increase profitability. Product Line Decision  - Product line managers take product line decisions considering the sales and profit of each item in the line and comparing their product line with the competitors' product lines in the same markets. Marketing managers have to decide the optimal length of the product line by adding new items or dropping existing items from the line.

12. Line Stretching Decision  - Line stretching means lengthening a product line beyond its current range. An organization can stretch its product line downward, upward, or both ways. Downward Stretching  means adding low-end items to the product line, for  example   in the Indian car market, watching the success of Maruti -Suzuki in the small car segment, Toyota and Honda also entered the segment. Upward Stretching  means adding high-end items to the product line, for  example,   Maruti -Suzuki initially entered the small car segment but later entered the higher-end segment. Two-way Stretching  means stretching the line in both directions if an organization is in the middle range of the market.

13. Line Filling Decision  - It means adding more items within the present range of the product line. Line filling can be done to reach incremental profits or to utilize excess capacity.

14. RURAL PRODUCT CATEGORY Product Strategies, Rural product categories: FMCG, Consumer Durables, Agriculture goods and Services

15. Rural Product Categories Fast Moving Consumer Goods Major players are HUL, Dabur, Marico, Colgate, Palmolive , Nirma , CavinKare and Godrej.

16. Rural Product Categories Consumer Durables Usha , Bajaj, Philips, Titan, Godrej, Videocon, Onida , Salora , Hero Cycles,Mahindra & Mahindra and Tata. New entrants – LG, Samsung and Maruti .

17. Rural Product Categories Agricultural Products Agricultural inputs seeds , fertilizers, pesticides, insecticides and implements ( tractors, tillers and threshers ) Livestock, poultry and fishery. Major players are Rallis India, Monsanto, Chambal Fertilisers , IFFCO, Mahindra & Mahindra, Eicher and Escorts .

18. Rural Product Categories Services Telecommunications (BSNL), banking (SBI), insurance (LIC ).

19. Rural M arketing Strategies Degrees of Segmentation Mass M arketing All consumers are being treated the same. Allows a company to target the maximum number of consumers. Example – HUL offered only one detergent powder, Surf, to all consumers. But when Nirma entered the market and grabbed a sizeable market share of low-income households. HUL woke up and introduced Wheel .

20. NEW PRODUCT DEVELOPMENT New product development is a process of idea generation, creation, designing, validation, and launching of a product that is completely new to the market.  Examples of new product development  include creating a new brand of canned soup, launching an app for tracking mileage, and introducing a smartwatch that can track workouts. This process requires careful planning and consideration of potential customer needs, market trends, and competitive landscape.

21. CONTD…. Product development includes the product’s entire journey — everything from ideation to strategy and planning, building and launching, and more. In short: Product development is the process by which you plan, build, and launch your product into the world.

22. CONSUMER ADOPTION Customer adoption refers to introducing a new product to the marketplace and acquiring new and/or repeat customers. It’s the start-to-end process of product awareness and integration into a customer’s life. Customer adoption also refers to the rate at which current customers adopt or purchase new products, features, or services, and how quickly they adapt to using them as intended. In short, customer adoption pertains to maximizing potential and the effective use and implementation of your product or service for your customers.

23. CONSUMER ADOPTION PROCESS

24. 1. Product awareness The consumer becomes aware of the new product but lacks information about it. Initially, the consumer must become aware of the new product. Awareness leads to interest, and the customer seeks information about the new product HOW? Ungating your content Running paid ads Hosting and attending online and in-person events Newsletter Customer success Hosting and attending online and in-person events

25. 2. Product interest This stage sits with marketing. Potential buyers are now aware of your product, and they’re interested. This interest allows marketers to implement additional marketing adoption strategies.  What are the strategies? At this stage of the adoption process, you want to provide more information to the potential buyer. And, if possible, get them to sign up for further communications from you, increasing your chances of selling. Email marketing Product content Here’s the rule:  Social media Newsletters and podcasts Customer success

26. 3. Product evaluation In this stage of the customer adoption process, interested prospects are considering your product. They’re trying to understand exactly how to use it, and the impact it could have on their company or offering. They’ll also be judging if it’s a cost-effective investment. This customer adoption phase sits with marketing and sales. What are the strategies? This is the time to communicate with the prospect. You need to provide them with information to help them make an informed decision. Sales Create BOFU content Bottom of the funnel (BOFU) content is your best friend in the product evaluation stage. This is content specifically written for people who are aware of your product and are exploring their options. Website journey

27. 4. Product testing In the fourth stage of customer adoption, the prospect is excited by your product (in theory). Now, they need to see it in action.  That’s why this phase sits with sales. What are the strategies? It depends on the product you’re selling. Offering a trial isn’t always viable, but there are other ways to test whether a product can work for the prospect. Trial Demo Personalised resources

28. 5. Product adoption Definition:  The customer bought your product, but you still have work to do. This phase of customer adoption sits with customer success and customer service. What are the strategies? The product adoption stage is about providing the customer with an excellent onboarding process. If you ensure they’re as happy as possible with their purchase, the long-term effects of this can be huge. Onboarding Cross-selling and upselling Reviews Key customer adoption metrics Active users (Daily/Monthly) The number of unique users who engage with your product within a specified period.

29. PRODUCT LIFE CYCLE

30. STAGES OF PRODUCT LIFE CYCLE #1 – Introduction Once companies introduce a product into the market, it will not generate revenue until the consumers know about it. Hence, businesses publicize their products through advertising, press releases, social media posts, etc. Since they have to spread awareness among consumers quickly, the advertising costs are typically high. Moreover, there are additional expenses at the time of a product launch, for example, distribution and packaging. Thus, in the first stage, the cost of introducing the product is usually more than the income earned. #2 – Growth In the second stage, the product garners more popularity. As product awareness spreads rapidly among consumers, sales increases exponentially. Thus, a business can maximize production capability, reaping the benefits of economies of scale. Moreover, companies can open multiple distribution channels and add different features to its offering. During the growth stage, a company may face tough competition if other businesses introduce a similar product in the market. This might lead to price competition. Moreover, companies might incur higher marketing expenses to maintain the product’s demand among consumers.

31. CONTD…. #3 – Maturity The sales increase rate is lower than that of the growth stage. As a result, companies may cut their prices and increase their marketing activities to compete with other players in the market. Entrepreneurs learn from the mistakes they made in the first two stages in this phase and take measures to improve efficiency. The advertisements aim at product differentiation from competitors’ offerings rather than spread awareness. A product’s profitability is the highest in the maturity stage as the cost of manufacturing the product decreases while sales continue to rise. The main objective of a company in the last product life cycle stage is to keep the market share consistent when cheaper alternatives enter the market. #4 – Decline In the final stage, the product’s sales start to decrease along with its profitability. This is mainly because of the introduction of various new products that fulfill the consumers’ requirements better than it. If a product is on the verge of becoming obsolete, the company can take the following measures: They can remove it from the market. The management team can lower the marketing expenses or reduce the production cost to maximize the product life for as long as possible.

32. PRICING Price refers to exchange value of the product and includes- (a) Maximum retail price, (b) Discounts, (c) Credit, (d) Terms of delivery and (e) Maintenance charges. Rural retailers generally require credit and, therefore, product pricing has to be adjusted to meet their requirements.

33. TYPES OF PRICING

34. Pricing Strategy (a) Low Price: (b) No-Frills Product: (c) Refill/Reusable Packaging   (d) Credit Facilities   (e) Discounts (f) Promotional Schemes (g) Value Engineering

35. Price is a major element of the marketing mix.it is an important strategic issue because it is related to product positioning. Pricing is a determinant of the market demand for the product. But before any pricing decisions are undertaken ,it is important that the factors influencing price are understood. These factors can be categorized as internal and external Pricing

36. These factors can be categorized as internal and external factors Internal factors : The internal factors affecting price include cost and the company’s pricing objectives . cost factors Promotion as a cost factor Credit based transactions increase costs Pricing Objectives Profit maximization in the long run Minimum returns on sales turn over Deeper penetration of the market Influencing factors

37. Keeping up with the competition Increasing sales volume and market share External factor: This factor includes – Customers Suppliers Competitors Legal environment

38. Optional product pricing Captive product pricing Product bundle pricing Penetration pricing Economy pricing Value pricing Coinage pricing Psychological pricing Pricing strategies

39. Optional product pricing is the pricing of optional or accessory products along with the main product like a company selling tractors for a low sticker price but charging high prices for serving and spare parts. Ex: Optional product pricing

40. Captive product pricing is setting a price for products that must be used along with the main product , such as blade for a razor and film for a camera. Ex: Captive product pricing

41. Product bundle pricing is combining several products and offering the bundle at a reduced price . Companies very commonly use this pricing strategy during periods of inflation it helps to generate sales and attract customers in a highly competitive market , it is mostly used in festival. Product bundle pricing

42. A penetration pricing policy involves setting prices of products relatively low compared to those of similar products. This pricing policy is appropriate when demand is elastic. Ex : Anchor white and Ajanta tooth pastes used this pricing to enter the crowded dental cream market Penetration pricing

43. Economy pricing is no-frills low price, the cost of marketing and manufacturing are kept to a minimum. Regional and local manufacturers usually follow this economy pricing strategy as they have limited investments to make on building brands and developing channels. Ex: N irma & G hari Economy pricing

44. When economic recession or increased competition forces a company to provide value products and services to retain sales. Ex: Godrej No.1 soap placed their offering containing rose, sandalwood neem and other ingredients at a very economical price . Value pricing

45. Prices are set of a coin value . Coinage price is directly proportionate to the package size. These packs are small in size and are normally meant for one time consumption(shampoo sachet)or days consumption(tea bag)or a week’s consumption(bathing or washing soap). Coinage pricing

46. The price quality relationship refers to the idea that consumers tend to equate product quality with the price charged. In the color TV segment LG at a higher price is considered a better buy than T exla and Jolly brands particularly in R1 households. Psychological pricing

47. Cash discounts or bargaining benefits Free gift Schemes for retailers Discriminatory pricing Discounts and allowances

48. Price discrimination exists when sales of identical goods or services are transacted at different prices from the same supplier, different prices are charged on the basis of different consumer groups, location, product form etc. discriminatory pricing may take the following norms- Consumer segment pricing Product form pricing Location pricing Discriminatory pricing

49. Discriminatory pricing based on consumer segments. Ex: Museum often charge low admission fee for students and senior citizens. Consumer segment pricing

50. Different versions of the same product are priced differently but not proportionately to the increase in costs. Ex: Microsoft sold different versions of its operating software windowsXP at different price level . Windows vista home basic version is sold at $200 and with some variations the same operating software windows vista ultimate version is sold at $320. Product form pricing

51. Discriminatory pricing based on different locations, even though the cost of offerings at each location is identical. Ex: Theatre charges different prices for different audience preferences for different locations. Location pricing

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