kWhatkiskPrice? Inkgeneralktermskpricekiskakcomponentkofkankexchangekorktransactionkthatkta eskp lacekbetweenktwokpartieskandkrefersktokwhatkmustkbekgivenkupkbykonekpartyk(i.e., kbuyer)kinkorderktokobtainksomethingkofferedkbykanotherkpartyk(i.e.,kseller).kYe tkthiskviewkofkpricekprovideskaksomewhatklimitedkexplanationkofkwhatkpricekmeans ktokparticipantskinkthektransaction.kInkfact,kpricekmeanskdifferentkthingsktokdi fferentkparticipantskinkankexchange: kkkkBuyers kViewk kForkthosekma ingkakpurchase,ksuchkaskfinalkcustomers,kpricekrefer sktokwhatkmustkbekgivenkupktokobtainkbenefits.kInkmostkcaseskwhatkiskgivenkupkis kfinancialkconsiderationk(e.g.,kmoney)kinkexchangekforkacquiringkaccessktokakgoo dkorkservice.kButkfinancialkconsiderationkisknotkalwayskwhatkthekbuyerkgiveskup.

kSometimeskinkakbarterksituationkakbuyerkmaykacquirekakproductkbykgivingkupkthei rkownkproduct.kForkinstance,ktwokfarmerskmaykexchangekcattlekforkcrops.kAlso,kas kwekwillkdiscusskbelow,kbuyerskmaykalsokgivekupkotherkthingsktokacquirekthekbene fitskofkakproductkthatkareknotkdirectkfinancialkpaymentsk(e.g.,ktimektoklearnkto kusekthekproduct). kkkkSellers kViewk-kToksellerskinkaktransaction,kpricekreflectskthekrevenuekgenera tedkforkeachkproductksoldkand,kthus,kiskankimportantkfactorkinkdeterminingkprofi t.kForkmar etingkorganizationskpricekalsokserveskaskakmar etingktoolkandkiskak e ykelementkinkmar etingkpromotions.kForkexample,kmostkretailerskhighlightkproduct kpricingkinktheirkadvertisingkcampaigns. Pricekiskcommonlykconfusedkwithktheknotionkofkcostkaskink"Ikpaidkakhighkcostkfor kbuyingkmyknewkplasmaktelevision."kTechnically,kthough,kthesekarekdifferentkconc epts.kPricekiskwhatkakbuyerkpaysktokacquirekproductskfromkakseller.kCostkconcern skthekseller skinvestmentk(e.g.,kmanufacturingkexpense)kinkthekproductkbeingkexcha ngedkwithkakbuyer.kForkmar etingkorganizationsksee ingktokma ekakprofitkthekhope kiskthatkpricekwillkexceedkcostksokthekorganizationkcankseekfinancialkgainkfromk thektransaction. Finally,kwhilekproductkpricingkiskakmainktopickforkdiscussionkwhenkakcompanykisk examiningkitskoverallkprofitability,kpricingkdecisionskareknotklimitedktokfor-pr ofitkcompanies.kNot-for-profitkorganizations,ksuchkaskcharities,keducationalkins titutionskandkindustryktradekgroups,kalsoksetkprices,kthoughkitkiskoftenknotkask apparentk.kForkinstance,kcharitiesksee ingktokraisekmoneykmayksetkdifferentk targe t klevelskforkdonationskthatkrewardkdonorskwithkincreaseskinkstatusk(e.g.,knamekin knewsletter),kgiftskorkotherkbenefits.kWhilekakcharitablekorganizationkmayknotkc allkitkakpricekinktheirkpromotionalkmaterial,kinkrealitykthesekdonationskarekequ ivalentktokpriceksettingksincekdonorskarekrequiredktokgivekakcontributionkinkord erktokobtainksomethingkofkvalue. kImportancekofkPrice Whenkmar etersktal kaboutkwhatktheykdokaskpartkofktheirkresponsibilitieskforkmar etingkproducts,kthektas skassociatedkwithksettingkpricekarekoftenknotkatkthekto pkofktheklist.kMar eterskarekmuchkmorekli elyktokdiscussktheirkactivitieskrelate dktokpromotion,kproductkdevelopment,kmar etkresearchkandkotherktas skthatkarekvi ewedkaskthekmorekinterestingkandkexcitingkpartskofkthekjob. Yetkpricingkdecisionskcankhavekimportantkconsequenceskforkthekmar etingkorganiza tionkandkthekattentionkgivenkbykthekmar eterktokpricingkiskjustkaskimportantkask thekattentionkgivenktokmorekrecognizablekmar etingkactivities.kSomekreasonskpric ingkiskimportantkinclude: kkkkMostkFlexiblekMar etingkMixkVariablek kForkmar eterskpricekiskthekmostkadjusta blekofkallkmar etingkdecisions.kUnli ekproductkandkdistributionkdecisions,kwhich kcankta ekmonthskorkyearsktokchange,korksomekformskofkpromotionkwhichkcankbektim ekconsumingktokalterk(e.g.,ktelevisionkadvertisement),kpricekcankbekchangedkvery

krapidly.kThekflexibilitykofkpricingkdecisionskiskparticularlykimportantkinktime skwhenkthekmar eterksee sktokquic lykstimulatekdemandkorkrespondktokcompetitorkp ricekactions.kForkinstance,kakmar eterkcankagreektokakfieldksalesperson skrequestk toklowerkpricekforkakpotentialkprospectkduringkakphonekconversation.kLi ewisekak mar eterkinkchargekofkonlinekoperationskcankraisekpriceskonkhotksellingkproducts kwithkthekclic kofkakfewkwebsitekbuttons. kkkkSettingkthekRightkPricek kPricingkdecisionskmadekhastilykwithoutksufficientkre search,kanalysis,kandkstrategickevaluationkcankleadktokthekmar etingkorganizatio nklosingkrevenue.kPricesksetktooklowkmaykmeankthekcompanykiskmissingkoutkonkaddi tionalkprofitskthatkcouldkbekearnedkifkthektargetkmar etkiskwillingktokspendkmor ektokacquirekthekproduct.kAdditionally,kattemptsktokraisekankinitiallyklowkprice dkproductktokakhigherkpricekmaykbekmetkbykcustomerkresistancekasktheykmaykfeelkt hekmar eterkiskattemptingktokta ekadvantagekofktheirkcustomers.kPricesksetktookh ighkcankalsokimpactkrevenuekaskitkpreventskinterestedkcustomerskfromkpurchasingk thekproduct.kSettingkthekrightkpriceklevelkoftenkta eskconsiderablekmar etk nowl edgekand,kespeciallykwithknewkproducts,ktestingkofkdifferentkpricingkoptions. kkkkTriggerkofkFirstkImpressionsk-kOftenktimeskcustomers kperceptionkofkakproductk iskformedkasksoonkasktheyklearnkthekprice,ksuchkaskwhenkakproductkiskfirstkseenk whenkwal ingkdownkthekaislekofkakstore.kWhilekthekfinalkdecisionktokma ekakpurch asekmaykbekbasedkonkthekvaluekofferedkbykthekentirekmar etingkofferingk(i.e.,ken tirekproduct),kitkiskpossiblekthekcustomerkwillknotkevaluatekakmar eter skproductk atkallkbasedkonkpricekalone.kItkiskimportantkforkmar etersktok nowkifkcustomersk arekmorekli elyktokdismisskakproductkwhenkallktheyk nowkiskitskprice.kIfkso,kpri cingkmaykbecomekthekmostkimportantkofkallkmar etingkdecisionskifkitkcankbekshown kthatkcustomerskarekavoidingklearningkmorekaboutkthekproductkbecausekofkthekpric e. kkkkImportantkPartkofkSaleskPromotionk kManyktimeskpricekadjustmentskarekpartkofks aleskpromotionskthatklowerkpricekforkakshortktermktokstimulatekinterestkinkthekp roduct.kHowever,kaskweknotedkinkourkdiscussionkofkpromotionalkpricingkinkthekSal eskPromotionktutorial,kmar eterskmustkguardkagainstkthektemptationktokadjustkpri cesktookfrequentlyksincekcontinuallykincreasingkandkdecreasingkpricekcankleadkcu stomersktokbekconditionedktokanticipatekpricekreductionskand,kconsequently,kwith holdkpurchasekuntilkthekpricekreductionkoccurskagain. kStepskinkthekPricekSettingkProcess Wekviewkpriceksettingkaskakserieskofkdecisionskthekmar eterkma eskinkorderktokde terminekthekpricekdirectkandkindirectkcustomerskpayktokacquirekthekproduct.kDire ctkcustomerskarekthosekwhokpurchasekproductskdirectlykfromkthekmar eter.kForkexa mple,kconsiderkthekdirectkpricingkdecisionskthatkta ekplacekwhenkaknewknovelkisk sold: kkkkPublisherkofkthekboo kmustkdecidekatkwhatkpricektheykwillkchargektheirkimmed iatekcustomerskinkthekchannelkofkdistributionksuchkaskonlinekboo sellersk(e.g.,k Amazon.com). kkkkBoo sellerskmustkdecidekatkwhatkpricektheykwillksellkthekboo ktoktheirkimmed iatekcustomerskwhichkarektypicallykfinalkconsumersk(e.g.,kwebsitekshopper). Askwekseekwithkthekboo sellerkexample,kmanykcompanieskalsoksellkindirectlyktokth ekfinalkcustomerkthroughkaknetwor kofkresellersksuchkaskretailers.kForkmar eters ksellingkthroughkresellerskthekpricingkdecisionkiskcomplicatedkbykresellers kneedk tokearnkakprofitkandkthekmar eter skneedktokhaveksomekcontrolkoverkthekproduct skpri cektokthekfinalkcustomer.kInkthesekcasesksettingkpricekinvolveskmorekthankonlykw orryingkaboutkwhatkthekdirectkcustomerkiskwillingkpayksincekthekmar eterkmustkal sokevaluatekpricingktokindirectkcustomersk(e.g.,kresellers kcustomers).kClearlyksa leskcankbekdramaticallykdifferentkthankwhatkthekmar eterkforecastskifktheksellin gkpricektokthekfinalkcustomerkdiffersksignificantlykfromkwhatkthekmar eterkexpec ts.kForkinstance,kifkthekmar etingkorganizationkhaskforecastedktoksellk1,000,000 knovelskifkthekpricektokthekfinalkcustomerkiskonekpricekandkresellerskdecidektok raisekthekpricek25%khigherkthankthatkpricekthekmar eter sksaleskmaykbekmuchklowerk

thenkforecasted. Withkankunderstandingkthatkmar eterskmustkconsiderkmanykfactorsk(seekthekPricing kDecisionsktutorial)kwhenksettingkprice,kweknowkturnktokthekprocesskbykwhichkpri cekiskset.kWekpresentkthiskaskakfive-stepkapproach.kAskweknotedkearlier,kwhilekn otkallkmar eterskfollowktheseksteps,kwhatkiskpresentedkdoeskcoverkthekmethodskus edkbykmanykmar eters. Thekstepskwekcoverkinclude: 1.kExaminekCompanykandkMar etingkObjectives 2.kDeterminekankInitialkPrice 3.kSetkStandardkPricekAdjustments 4.kDeterminekPromotionalkPricing 5.kStatekPaymentkOptions kPromotionalkPricing:kDynamickPricing Thekconceptkofkdynamickpricingkhaskreceivedkakgreatkdealkofkattentionkinkrecentk yearskduektokitskprevalentkusekbykInternetkretailers.kButkthekbasickideakofkdyna mickpricingkhaskbeenkaroundksincekthekdawnkcommerce.kEssentiallykdynamickpricing kallowskforkthekpoint-of-salek(i.e.,katkthektimekandkplacekofkpurchase)kpricekad justmentsktokta ekplacekforkcustomerskmeetingkcertainkcriteriakestablishedkbykth ekseller.kThekmostkcommonkandkoldestkformkofkdynamickpricingkiskhaggling;kthekgi ve-and-ta ekthatkta eskplacekbetweenkbuyerkandksellerkasktheyksettlekonkakprice. kWhilekthekwordkhagglingkmaykconjurekupkvisionskofktransactionskta ingkplacekamo ngkvendorskandkcustomerskinkakstreetkmar et,kthekconceptkiskwidelykusedkinkbusin esskmar etskaskwellkwherekitkcarrieskthekmorekreservedklabelkofknegotiatedkprici ng. Advanceskinkcomputerkhardwarekandksoftwarekpresentkaknewkdimensionkforkthekuseko fkdynamickpricing.kUnli ekhaggling,kwherektheksellerkma eskpricekadjustmentskbas edkonkakperson-to-personkdiscussionkwithkakbuyer,kdynamickpricingkusesksophistic atedkcomputerktechnologyktokadjustkprice.kItkachieveskthiskbykcombiningkcustomer kdatak(e.g.,kwhoktheykare,khowktheykbuy)kwithkpre-programmedkpricekofferingsktha tkarekaimedkatkcustomerskmeetingkcertainkcriteria.kForkexample,kdynamickpricingk iskusedkinkretailkstoreskwherekcustomers kusekofkloyaltykcardsktriggerskthekstore sk computerktokaccesskcustomerkinformation.kIfkcustomers kcharacteristicskmatchkrequi rementskinktheksoftwarekprogramktheykmaykbekofferedkakspecialkdealksuchkask10%ko ffkifktheykalsokpurchasekanotherkproduct.kDynamickpricingkiskalsokwidelykusedkin kairlinektic etkpurchasingkwherektypekofkcustomerk(e.g.,kbusinesskvs.kleisurektr aveler)kandkdatekofkpurchasekcankaffectkpricing. OnkthekInternet,kmar eterskmaykusekdynamickpricingktokenticekfirstktimekvisitors ktokma ekakpurchasekbykofferingkakone-timekdiscount.kThiskiskaccomplishedkbykcom paringkinformationkstoredkinkthekmar eter skcomputerkdatabasekwithkidentifierkinfo rmationkgatheredkaskthekpersonkiskvisitingkakwebsite.kOnekwaykthiskiskdonekiskfo rkakwebsitektokleaveksmallkdatakfileskcalledk"coo ies"konkakvisitor skcomputerkwhe nktheykfirstkaccesskthekmar eter skwebsite.kAkcoo iekcankresidekonkthekvisitorskco mputerkforksomektimekandkallowskthekmar eterktokmonitorkthekuser skbehaviorkonkthe ksiteksuchkaskhowkoftenktheykvisit,khowklongktheykspendkonktheksite,kwhatkwebpag esktheykaccesskandkmuchkmore.kThekmar eterkcankthenkprogramkspecialksoftware,kof tenkcalledkcampaignkmanagementksoftware,ktoksendkvisitorskakspecialkofferksuchka skakdiscount.kForkinstance,kthekmar eterkmaykhavekakdiscountkofferedkifkthekvisi torkhaskcomektoktheksitekatkleastkfivektimeskinktheklastksixkmonthskbutkhaskneve rkpurchased. kPricingkDecisions Whatkdokthekfollowingkwordskhavekinkcommon?kFare,kdues,ktuition,kinterest,krent, kandkfee.kThekanswerkiskthatkeachkofkthesekiskaktermkusedktokdescribekwhatkonekm

ustkpayktokacquirekbenefitskfromkanotherkparty.kMorekcommonly,kmostkpeopleksimpl ykusekthekwordkpricektokindicatekwhatkitkcostsktokacquirekakproduct. Thekpricingkdecisionkiskakcriticalkonekforkmostkmar eters,kyetkthekamountkofkatt entionkgivenktokthisk eykareakiskoftenkmuchklesskthankiskgivenktokotherkmar etin gkdecisions.kOnekreasonkforktheklac kofkattentionkiskthatkmanykbelievekpricekset tingkiskakmechanicalkprocesskrequiringkthekmar eterktokutilizekfinancialktools,k suchkaskspreadsheets,ktokbuildktheirkcasekforksettingkpriceklevels.kWhilekfinanc ialktoolskarekwidelykusedktokassistkinksettingkprice,kmar eterskmustkconsiderkma nykotherkfactorskwhenkarrivingkatkthekpricekforkwhichktheirkproductkwillksell. PricingkDecisionsInkthiskpartkofkourkhighlykdetailedkPrincipleskofkMar etingkTut orialskwekbeginkaktwo-partkdiscussionkofkthekfourthkmar etingkmixkvariablek-kpri ce.kForksomekmar eterskmorektimekiskspentkagonizingkoverkpricekthankanykotherkma r etingkdecision.kInkthisktutorialkwekloo katkwhykpricekiskimportantkandkwhatkfa ctorskinfluencekthekpricingkdecision. kPricekvs.kValue Forkmostkcustomerskpricekbykitselfkisknotkthek eykfactorkwhenkakpurchasekiskbein gkconsidered.kThiskiskbecausekmostkcustomerskcomparekthekentirekmar etingkofferi ngkandkdoknotksimplykma ektheirkpurchasekdecisionkbasedksolelykonkakproduct skpric e.kInkessencekwhenkakpurchaseksituationkariseskpricekiskonekofkseveralkvariables kcustomerskevaluatekwhenktheykmentallykassesskakproduct skoverallkvalue. Askwekdiscussedkbac kinkthekWhatkiskMar eting?ktutorial,kvaluekrefersktokthekper ceptionkofkbenefitskreceivedkforkwhatksomeonekmustkgivekup.kSincekpricekoftenkre flectskankimportantkpartkofkwhatksomeonekgiveskup,kakcustomer skperceivedkvaluekof kakproductkwillkbekaffectedkbykakmar eter skpricingkdecision.kAnykeasykwayktokseek thiskisktokviewkvaluekaskakcalculation: Valuek=kperceivedkbenefitskreceived perceivedkpricekpaid Forkthekbuyerkvaluekofkakproductkwillkchangekaskperceivedkpricekpaidkand/orkperc eivedkbenefitskreceivedkchange.kButkthekpricekpaidkinkaktransactionkisknotkonlyk financialkitkcankalsokinvolvekotherkthingskthatkakbuyerkmaykbekgivingkup.kForkex ample,kinkadditionktokpayingkmoneykakcustomerkmaykhavektokspendktimeklearningkto kusekakproduct,kpayktokhavekankoldkproductkremoved,kclosekdownkcurrentkoperation skwhilekakproductkiskinstalledkorkincurkotherkexpenses.kHowever,kforkthekpurpose kofkthisktutorialkwekwillklimitkourkdiscussionktokhowkthekmar eterksetskthekfina ncialkpricekofkaktransaction. kFactorskAffectingkPricingkDecision Forkthekremainderkofkthisktutorialkwekloo katkfactorskthatkaffectkhowkmar etersk setkprice.kThekfinalkpricekforkakproductkmaykbekinfluencedkbykmanykfactorskwhich kcankbekcategorizedkintoktwokmainkgroups: kkkkInternalkFactorsk-kWhenksettingkprice,kmar eterskmustkta ekintokconsideratio nkseveralkfactorskwhichkarekthekresultkofkcompanykdecisionskandkactions.kTokakla rgekextentkthesekfactorskarekcontrollablekbykthekcompanykand,kifknecessary,kcank bekaltered.kHowever,kwhilekthekorganizationkmaykhavekcontrolkoverkthesekfactorsk ma ingkakquic kchangekisknotkalwayskrealistic.kForkinstance,kproductkpricingkmay kdependkheavilykonkthekproductivitykofkakmanufacturingkfacilityk(e.g.,khowkmuchk cankbekproducedkwithinkakcertainkperiodkofktime).kThekmar eterk nowskthatkincrea singkproductivitykcankreducekthekcostkofkproducingkeachkproductkandkthuskallowkt hekmar eterktokpotentiallyklowerkthekproduct skprice.kButkincreasingkproductivityk maykrequirekmajorkchangeskatkthekmanufacturingkfacilitykthatkwillkta ektimek(not ktokmentionkbekcostly)kandkwillknotktranslatekintoklowerkpricekproductskforkakco

kPricekAdjustments:kGeographickPricing Productskrequiringkmar etersktokpaykhigherkcostskthatkarekaffectedkbykgeographic kareakinkwhichkakproductkisksoldkmaykresultkinkadjustmentsktokcompensatekforkthe khigherkexpense.kThekmostkli elykcausekforkchargingkakdifferentkpricekrestskwith kthekcostkofktransportingkakproductkfromktheksupplier skdistributionklocationktokt hekbuyer skplacekofkbusiness.kIfktheksupplierkiskincurringkallkcostskforkshippingk thenktheykmaykchargekakhigherkpricekforkproductskinkorderktokcoverkthekextraktra nsportationkcosts.kForkinstance,kshippingkproductskbykairktokHawaiikmaykcostkakL oskAngeles,kCaliforniakmanufacturerkakmuchkhigherktransportationkcostkthankakshi pmentkmadektokSankDiego. Transportationkexpensekisknotkthekonlykcostkthatkmaykraisekakproduct skprice.kSpec ialktaxeskorktariffskmaykbekimposedkonkcertainkproductskbyklocal,kregionalkorkin ternationalkgovernmentskwhichkaksellerkpasseskalongkinkthekformkofkhigherkprices . PRODUCT kProductkComponents:kCorekBenefits Considerkwhatkwekhavektal edkaboutkmanyktimeskinkthisktutorial;kpeoplekma ekbuyi ngkdecisionskthatksatisfyktheirkneeds.kWhilekmanykneedskarekaddressedkbykthekcon sumptionkofkakproductkorkservice,ksomekneedskareknot.kForkinstance,kcustomerskma ykneedktokbekperceivedkhighlykbykotherkmemberskofktheirkgroupkorkneedkakproductk thatkiskeasyktokusekorkneedkakris -freekpurchase.kInkeachkofkthesekcases,kandkma nykmore,kthekcorekproductkitselfkiskthekbenefitkthekcustomerkreceiveskfromkusing kthekproduct. Inksomekcaseskthesekcorekbenefitskarekofferedkbykthekproductkitselfk(e.g.,kfloor kcleaner)kwhilekinkotherkcaseskthekbenefitkiskofferedkbykotherkaspectskofkthekpr oductk(e.g.,kthekcankcontainingkthekfloorkcleanerkthatkma eskitkeasierktokspread kthekproduct).kConsequently,katkthekverykheartkofkallkproductkdecisionskiskdeter miningkthek eykorkcorekbenefitskakproductkwillkprovide.kFromkthiskdecision,kthek restkofkthekproductkofferingkcankbekdeveloped. kAdoptionkofkNewkProducts ThekPLCkisktiedkcloselyktokthekconceptkofkDiffusionkofkInnovation,kwhichkexplain skhowkinformationkandkacceptancekofknewkproductskspreadkthroughkakmar et.kAskwek discussedkinkthekManagingkExternalkForcesktutorial,kinnovationkiskanythingknewkt hatksolveskneedskbykofferingkaksignificantkadvantagekoverkexistingkmethodsk(e.g. ,kotherkproducts)kcustomerskuse.kInnovationkcankencompasskbothkhighlykadvancedkt echnologykproducts,ksuchkasknewkcomputerkchips,kandknon-technologicalkproducts,k suchkaskaknewksoftkdrin .kInkfact,kthekseminalkwor kofkthekDiffusionkofkInnovati onkconceptkoccurredkinkthek1950skwhenkresearcherskinkthekagriculturalkindustryko bservedkhowknewkcornkseedskwerekadoptedkbykfarmerskinkMidwestkU.S.kstates. Forkmar eterskak eykconceptktokemergekfromkresearchkonknewkproductkdiffusionkisk thekidentificationkofkadopterkcategorieskintokwhichkmemberskofkakmar etkarekli e lyktokfall.kThesekcategorieskinclude: kkkkInnovatorsk kRepresentkaksmallkpercentagekofkthekmar etkthatkiskatkthekforefro

nsiderablekperiodkofktime. kkkkExternalkFactorsk-kTherekarekaknumberkofkinfluencingkfactorskwhichkareknotkc ontrolledkbykthekcompanykbutkwillkimpactkpricingkdecisions.kUnderstandingkthesek factorskrequireskthekmar eterkconductkresearchktokmonitorkwhatkiskhappeningkinke achkmar etkthekcompanykservesksincekthekeffectkofkthesekfactorskcankvarykbykmar et.

ntkofkadoptingknewkproducts.kThesekpeoplekarekoftenkviewedkaskenthusiastskandkar ekeagerktoktryknewkthings,koftenkwithoutkregardktokprice.kWhilekakgoodktestkgrou ndkforknewkproducts,kmar eterskfindkthatkInnovatorskoftenkdoknotkremainkloyalkas ktheykcontinuallyksee knewkproducts. kkkkEarlykAdoptersk kThiskgroupkcontainskmorekmemberskthankthekInnovatorkcategory. kTheyksharekInnovators kenthusiasmkforknewkproductskthoughktheyktendktokbekmorekpr acticalkaboutktheirkdecisions.kTheykalsokarekeagerktokcommunicatektheirkexperien ceskwithkthekEarlykMajorityk(nextkgroup)kandkbecausekofktheirkinfluencektheykare kimportantktokthekfutureksuccesskofkthekproductk(i.e.,kactkaskopinionkleaders). kkkkEarlykMajorityk kThiskrepresentskthekbeginningkofkentrykintokthekmasskmar et.k ThekEarlykMajoritykaccountkforkupktokone-thirdkofkthekoverallkmar et.kThekEarlyk Majoritykli eknewkthingskbutktendktokwaitkuntilktheykhavekreceivedkpositivekopin ionskforkothersk(i.e.,kearlykadopters)kbeforekpurchasing.kAdoptionkbykthekEarlyk Majoritykisk eykifkaknewkproductkisktokbekprofitable.kOnkthekotherkhand,kmanykne wkproductskdiekquic lykbecausektheykareknotkacceptedkbeyondkearlyktrialskbykInno vatorskandkEarlykAdopterskandkneverkreachkmasskmar etkstatus. kkkkLatekMajorityk kPossiblykasklargekaskthekEarlykMajority,kthiskgroupkta eskakwa it-and-seekapproachkbeforektryingksomethingknew.kMar eterskarekli elyktokseekthe irkhighestkprofitskoncekthiskgroupkstartsktokpurchase. kkkkLaggardsk kThiskisktheklastkgroupktokadoptksomethingknewkand,kinkfact,kmaykonl ykdoksokifktheykhaveknokotherkchoice.kDependingkonkthekmar etkthiskgroupkcankbek largekthoughkbecausekofktheirkreluctancektokacceptknewkproductskmar eterskarekno tkinclinedktokdirectkmuchkattentionktokthem. kProductkDecisions Mar etingkstartskwithkthekproductksincekitkiskwhatkankorganizationkhasktokofferk itsktargetkmar et.kAskwe vekstressedkmanyktimeskinkthisktutorial,korganizationskat temptktokprovideksolutionsktokaktargetkmar et skproblems.kTheseksolutionskincludek tangiblekorkintangiblek(orkboth)kproductkofferingskmar etedkbykankorganization. Inkadditionktoksatisfyingkthektargetkmar et skneeds,kthekproductkiskimportantkbeca usekitkiskhowkorganizationskgeneratekrevenue.kItkiskthek thing kthatkfor-profitkcomp aniesksellkinkorderktokrealizekprofitskandksatisfyksta eholderskandkwhatknon-pro fitkorganizationskusektokgeneratekfundskneededktoksustainkitself.kWithoutkakwell -developedkproductkstrategykthatkincludeskinputkfromkthektargetkmar et,kakmar et ingkorganizationkwillknotkhaveklong-termksuccess. ProductkDecisionsInkthiskpartkofkthekPrincipleskofkMar etingkTutorialskwekta eka kclosekloo katkthek eykconceptskallkmar eterskshouldkconsiderkwhenkfacedkwithkpr oductkdecisions.kInkthekManagingkProductsktutorialkwekwillkextendkthekdiscussion ktokloo katkthek eykissueskinkmanagingkproductkdecisions. kProductkFeatureskandkFunctionalkBenefits Customerskderivekfunctionalkbenefitskfromkfeatureskthatkarekpartkthekconsumablek product.kForkinstance,kakplasmaktelevisionkincludesksuchkfeatureskandkbenefitska s: Feature FunctionalkBenefit screenksize screenkresolution surroundksound remotekcontrol offerskgreaterkdetailkandkallowskforkmorekdistantkviewing viewingkprovideskclear,kmorekrealistickpicture immerseskallksenseskinkthekviewingkexperience

allowskforkgreaterkcomfortkwhilekviewing Thesekfeatureskarekcalledkfunctionalkbecausektheykresultkinkakbenefitkthekuserkd irectlykassociateskwithkthekconsumablekproduct.kForkmar eterskfunctionalkbenefit skarekoftenkthekresultkofkmaterials,kdesignkandkproductionkdecisions.kHowkthekpr oductkiskbuiltkcankleadktokbenefitsksuchkaskeffectiveness,kdurability,kspeed,kea se-of-use,kandkcostksavingsktoknamekjustkfew. kCategorieskofkConsumerkProducts Inkadditionktokcategorizingkbyktypekofkoffering,kmostkproductskintendedkforkcons umerkusekcankbekfurtherkcategorizedkbykhowkfrequentlykandkwherektheykarekpurchas ed. kkkkConveniencekProductsk kThesekarekproductskthatkappealktokakveryklargekmar etks egment.kTheykarekgenerallykconsumedkregularlykandkpurchasedkfrequently.kExamples kincludekmostkhouseholdkitemsksuchkaskfood,kcleaningkproducts,kandkpersonalkcare kproducts.kBecausekofkthekhighkpurchasekvolume,kpricingkperkitemktendsktokbekrel ativelyklowkandkconsumerskoftenkseeklittlekvaluekinkshoppingkaroundksincekadditi onalkeffortkyieldskminimalksavings.kFromkthekmar eter skperspectivektheklowkpricek ofkconveniencekproductskmeanskthatkprofitkperkunitksoldkiskveryklow.kInkorderkto kma ekhighkprofitskmar eterskmustksellkinklargekvolume.kConsequently,kmar etersk attemptktokdistributekthesekproductskinkmasskthroughkaskmanykretailkoutletskaskp ossible. kkkkShoppingkProductsk kThesekarekproductskconsumerskpurchasekandkconsumekonkakles skfrequentkschedulekcomparedktokconveniencekproducts.kConsumerskarekwillingktoks pendkmorektimeklocatingkthesekproductsksincektheykarekrelativelykmorekexpensivek thankconveniencekproductskandkbecausekthesekmaykpossesskadditionalkpsychological kbenefitskforkthekpurchaser,ksuchkaskraisingktheirkperceivedkstatusklevelkwithin ktheirksocialkgroup.kExampleskincludekmanykclothingkproducts,kpersonalkservices, kelectronickproducts,kandkhouseholdkfurnishings.kBecausekconsumerskarekpurchasin gklesskfrequentlykandkarekwillingktokshopktoklocatekthesekproducts,kthektargetkm ar etkiskmuchksmallerkthankthatkofkconveniencekgoods.kConsequently,kmar eterskof tenkarekmorekselectivekwhenkchoosingkdistributionkoutletsktoksellktheirkproducts . kkkkSpecialtykProductsk kThesekarekproductskthatktendktokcarrykakhighkpricektagkre lativektokconveniencekandkshoppingkproducts.kConsumptionkmaykoccurkatkaboutkthek samekratekaskshoppingkproductskbutkconsumerskarekmuchkmorekselective.kInkfact,ki nkmanykcaseskconsumersk nowkinkadvancekwhichkproductktheykpreferkandkwillknotksh opktokcomparekproducts.kButktheykmaykshopkatkretailerskthatkprovidekthekbestkval ue.kExampleskincludekhigh-endkluxurykautomobiles,kexpensivekchampagne,kandkceleb ritykhairkcarekexperts.kThektargetkmar etskarekgenerallykveryksmallkandkoutletsk sellingkthekproductskarekveryklimitedktokthekpointkofkbeingkexclusive. Inkadditionktokthekthreekmainkcategorieskabove,kproductskarekclassifiedkinkatkle astktwokadditionalkways: kkkkEmergencykProductsk kThesekarekproductskakcustomerksee skduektoksuddenkeventsk andkforkwhichkpre-purchasekplanningkisknotkconsidered.kOftenkthekdecisionkiskone kofkconveniencek(e.g.,kwhateverkwor sktokfixkakproblem)korkpersonalkfulfillmentk (e.g.,kperceivedktokimprovekpurchaser skimage). kkkkUnsoughtkProductsk kThesekarekproductskwhosekpurchasekiskunplannedkbykthekcons umerkbutkoccurkaskakresultkofkmar eter skactions.kSuchkpurchasekdecisionskarekmade kwhenkthekcustomerkiskexposedktokpromotionalkactivity,ksuchkaskaksalesperson skper suasionkorkpurchasekincentiveskli ekspecialkdiscountskofferedktokcertainkonlinek shoppers.kThesekpromotionalkactivitieskoftenkleadkcustomersktokengagekinkImpulse kPurchasing. kCategorieskofkNewkProducts

Newkproductskcankfallkintokonekofkseveralkcategories.kThesekcategorieskarekdefin edkbykthektypekofkmar etkthekproductkiskenteringk(i.e.,knewlykcreated,kexistingk butknotkpreviouslyktargeted,kexistingkandktargetedk)kandktheklevelkofkproductkin novationk(i.e.,kradicallyknew,knew,kupgrade). kkkkCreateskNewkMar etkwithkRadicallykNewkProductkorkProductkLinek kThiskcategoryk iskrepresentedkbyknewkbrea throughkproductskthatkareksokrevolutionaryktheykcreat ekankentirelyknewkmar et.kRecentkexampleskincludekdigitalkmusickplayers,ksuchkas kApple skiPod,kthatkhavekspawnedknewkdeliverykmethodsk(downloadablekmusic)kandknew kmediak(podcasting).kHighlykinnovativekproductskarekrareksokverykfewknewkproduct skfallkintokthiskcategory. kkkkEnterskExistingkButkNotkPreviouslykTargetedkMar etkwithkNew-ProductkorkProdu ctkLinek kInkthiskcategorykakmar eterkintroduceskaknewkproductkitemkorkproductklin ektokankexistingkmar etkwhichktheykdidknotkpreviouslyktarget.kOftenkthesekproduc tskareksimilarktokcompetitors kproductskalreadykavailablekinkthekmar etkbutkwithks omeklevelkofkdifferencek(e.g.,kdifferentkfeatures,klowerkprice,ketc.).kMicrosoft s kentrykintokthekvideokgamingksystemkmar etkwithktheirkXboxkiskankexample. kkkkStayskinkExistingkandkPreviouslykTargetedkMar etkbykEnhancingkExistingkProdu ctkorkProductkLinek kUnderkthiskdevelopmentkcategorykthekmar eterkattemptsktokimpr ovekitskcurrentkpositionkinkthekmar etkbykeitherkimprovingkorkupgradingkexisting kproductskorkbykextendingkakproductklinekbykaddingknewkproducts.kThisktypekofkne wkproductkiskseenkinkourkearlierkexamplekofkProcterkandkGamble skTidekproductkline kwhichkcontainskmanykproductkvariationskofkthekbasickTidekproduct.k kNewkProductkDevelopmentkProcess Becausekintroducingknewkproductskonkakconsistentkbasiskiskimportantktokthekfutur eksuccesskofkmanykorganizations,kmar eterskinkchargekofkproductkdecisionskoftenk followksetkprocedureskforkbringingkproductsktokmar et.kInkthekscientifickareakth atkmaykmeankthekestablishmentkofkongoingklaboratorykresearchkprogramskforkdiscov eringknewkproductsk(e.g.,kmedicines)kwhileklesskscientifickcompanieskmaykpullkto getherkresourceskforkproductkdevelopmentkonkaklesskstructuredktimetable. Inkthisksectionkwekpresentkak7-stepkprocesskcomprisingkthek eykelementskofknewkp roductkdevelopment.kWhileksomekcompanieskmayknotkfollowkakdeliberatekstep-by-ste pkapproach,kthekstepskarekusefulkinkshowingkthekinformationkinputkandkdecisionkm a ingkthatkmustkbekdonekinkorderktoksuccessfullykdevelopknewkproducts.kThekproce sskalsokshowskthekimportancekmar etkresearchkplayskinkdevelopingkproducts. Wekshouldknotekthatkwhilekthek7-stepkprocesskwor skforkmostkindustries,kitkiskle sskeffectivekinkdevelopingkradicallyknewkproducts.kThekmainkreasonklieskinktheki nabilitykofkthektargetkmar etktokprovideksufficientkfeedbac konkadvancedkproduct kconceptsksincektheykoftenkfindkitkdifficultktokunderstandkradicallykdifferentki deas.kSokwhilekmanykofkthesekstepskarekusedktokresearchkbrea throughkideas,kthek mar eterkshouldkexercisekcautionkwhenkinterpretingkthekresults. kCategorieskofkBusinesskProducts AskdiscussedkinkthekBusinesskBuyingkBehaviorktutorial,kthekamountkspentkonkbusin esskpurchasingkfarkexceedskconsumerkpurchasing.kProductsksoldkwithinkthekb-to-bk mar etkfallkintokonekofkthekfollowingkcategories: kkkkRawkMaterialsk kThesekarekproductskobtainedkthroughkmining,kharvesting,kfishin g,ketc.,kthatkarek eykingredientskinkthekproductionkofkhigher-orderkproducts. kkkkProcessedkMaterialsk kThesekarekproductskcreatedkthroughkthekprocessingkofkbas ickrawkmaterials.kInksomekcaseskthekprocessingkrefineskoriginalkrawkmaterialskwh ilekinkotherkcaseskthekprocesskcombineskdifferentkrawkmaterialsktokcreateksometh ingknew.kForkinstance,kseveralkcropskincludingkcornkandksugarkcanekcankbekproces sedktokcreatekethanolkwhichkhaskmanykuseskincludingkaskakfuelktokpowerkcarkandkt

ruc kengines. kkkkEquipmentk kThesekarekproductskusedktokhelpkwithkproductionkorkoperationskacti vities.kExampleskrangekfromkconveyorkbeltskusedkonkankassemblyklinektoklargekbui ldingskusedktokhousekthekheadquarterskstaffkofkakmulti-nationalkcompany. kkkkBasickComponentsk kThesekarekproductskusedkwithinkmorekadvancedkcomponents.kTh esekarekoftenkbuiltkwithkrawkmaterialkorkprocessedkmaterial.kElectricalkwirekisk ankexample. kkkkAdvancedkComponentsk kThesekarekproductskthatkusekbasickcomponentsktokproducek productskthatkofferkaksignificantkfunctionkneededkwithinkaklargerkproduct.kYetkb ykitselfkankadvancedkcomponentkdoesknotkstandkalonekaskakfinalkproduct.kInkcompu terskthekmotherboardkwouldkbekankexampleksincekitkcontainskmanykbasickcomponents kbutkwithoutkthekinclusionkofkotherkproductsk(e.g.,kmemorykchips,kmicroprocessor ,ketc.)kwouldkhaveklittlekvalue. kkkkProductkComponentk kThesekarekproductskusedkinkthekassemblykofkakfinalkproduct kthoughkthesekcouldkalsokfunctionkaskstandkalonekproducts.kDicekincludedkaskpart kofkakchildren skboardkgamekwouldkbekankexample. kkkkMROk(Maintenance,kRepairkandkOperating)kProductsk kThesekarekproductskusedktok assistkwithkthekoperationkofkthekorganizationkbutkareknotkdirectlykusedkinkprodu cingkgoodskorkservices.kOfficeksupplies,kpartskforkaktruc kfleetkandknaturalkgas ktokheatkakfactorykwouldkfallkintokthiskcategory.