MARKETING PROJECT

New Product Development & Pricing

“CHANGE IS THE ONLY CONSTANT IN TODAY'S MARKETPLACE”

New Product Development & Pricing “Launch of NEW PRODUCT”
Members:
Faseeh Ur Rehman Nousherwan Akbar Umer Farooq --Muhammad Waqas - - Javeria Zia Ayesha Siddiqui ----BAF-07-60 BAF-07-14

BAF-07-39 BAF-07-34 ----BAF-07-17 BAF-07-18

Instructor:
Mr. Khurram Javed Paracha

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Executive Summary
Report is the practical part of the theoretical subject marketing of our BS Accounting & Finance (Hons) Program. The sole objective is to familiarize the students with the practical manipulation of business organization. This report has been written to know about the causes that lead to the launching new Product. In the first phase of the report there is the general introduction about the New Product Development. In the next part; we took into account the objectives that are behind this. We illustrate the objective one by one according to their priority. To understand and specify the objectives is necessary to understand the variable, which affect this issue. We define only the key variable. After this we collect the data from different sources and analyze it, interpret it, and show the diagrammatical representation for easy understanding. More over this we make some conclusion and offer our suggestions for improvements with some limitations that we face. In the next phase the feasibility report of A.G Detergent with the SWOT analysis, target market, market segmentation and the detail of 7ps of marketing mix etc.

Authors

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Acknowledgment
We are very thankful to Almighty Allah who has all the powers in the world and who also give us power to perform the assigned task, which otherwise we can't perform.

We are great full to Hazrat Muhammad (S.A.W.W) who remains an example in every aspect of life

We are also very thankful to our parents. We are very thankful to our honorable instructor Mr. Khurram Javed Paracha for providing us with such an opportunity to explore the practical aspects of the Marketing that refined our theoretical concepts and would help us in the practical field.

We are also thankful to all of our respondents especially Mr. Allah Ditta who co-operated with us in conducting the research and sorting out the cause of the problem. We are especially thankful to our class fellows who help us from every aspect.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Table of Contents
Introduction……………………………………………………………… Major Stages in New-Product Development  Idea generation ……………………………………………….…..  Idea screening ………………………………………………..…...  Concept Development and Testing ………………………………  Product Idea ……………………………………..…..  Product Concept …………………..……………..….  Product Image………………………………….…….  Marketing strategy development …………………………………  Business analysis………………………………………………….  Test marketing…………………………………………………….  Commercialization………………………………………………... Key success factors in New Product Development     Operating Philosophy….……………………………………………. Organization Structure………………………………………………. The Experience Effect……………………………………………….. Management Style …………………………………………………...

The Product Life Cycle      Product development ……………………………………….………… Introduction ……………………………………………………….….. Growth ………………………………………………………………... Maturity…………………………………………………………….…. Decline …………………………………………….…………………..

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT
New-Product Failures 1. 2. 3. 4. 5.

New Product Development & Pricing

Faulty Product Idea ……………………………………………... Distribution Related problems ………………………………….. Poor Timing of Launch …………………… ………………….... Improper Positioning …………………………… ……………… Others …………… …………………….………………………..

PRICING
Pricing Objective Profit oriented goal ……………………………………………….. Sale oriented goal …………………………………………………. Maintain & increase market share ………………………………... Status Quo goals …………………………………………………… Pricing Decision Cost-orientated …………………………………………………….. Demand-orientated ………………………………………………… Competitor-orientated ……………………………………………… Influences on Pricing Decisions Company Objective ……………………………………………….. New Competitors ………………………………………………….. Suppliers / Distributers ……………………………………………. Cost ………………………………………………………………… Existing Competitor ……………………………………………….. Customer …………………………………………………………… Management Culture ……………………………………………….. Company Market Stance ……………………………………………

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT
Pricing Strategies

New Product Development & Pricing

Market Skimming …………………………………………………… Penetration Pricing ………………………………………………….. Value Pricing ………………………………………………………... Going Rate (Price Leadership) ……………………………………..... Captive Product Pricing ……………………………………………... Product-bundle pricing ……………………………………………… Promotional pricing …………………………………………………. Geographical Pricing ………………………………………………… Contribution Pricing …………………………………………………. Pricing Variations……………………………………………………... Premium Pricing ……………………………………………………… Ten ways to „increase‟ prices without increasing price

Case Study Self Made

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Introduction
What is a new product? • • • • • • A product that opens an entirely new market. A product that adopts or replaces an existing product. A product that significantly broadens the market for an existing product. An old product introduced in a new market. An old product packaged in a different way. An old product marketed in a different way.

Types of new product

• • • • • •

Innovative products New product lines – to allow the firm to enter an existing market Addition to product line – to supplement the firm‟s existing product line Improvements and revisions of existing product Repositioned products – existing products targets at new market Cost reduction new product that provide similar performance at lower cost

Examples of new products

• • •

New to the world – high definition TV, iPod, flat screen TV, Probiotic Ice Cream Product improvement & replacement :SPEED by BPCL Cost reduction new product: Moser Baer.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

New product can be used to……

• • • • • • •

Increase/defend market share by offering more choice or updating older products Appeal to new segments Diversify into new markets Improve relationship with distributors Maintain the firm‟s reputation a leading edge company Even out peaks and troughs in demand Make better use of the organization's resources

Why develop New Product?

• • • • • • • •

To create stars and cash cows for the future To replace declining product To take advantage of new technology To defeat rivals To maintain/increase market share To keep up with rivals To maintain competitive advantage To fill gap in the market

New product development

In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

There are two parallel paths involved in the NPD process: The idea generation, product design, and detail engineering; Involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.

OR
Development of original products Product improvements Product modifications New brands through the firm‟s own R & D efforts

OR
New product development is a process which is designed to develop, test and consider the viability of products which are new to the market in order to ensure the Growth or survival of the organization.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Major Stages in NPD
There are 7 Stages of New Product Development
“The "fuzzy front end" of the New Product Development process”

IDEA GENERATION

Idea Generation is the Systematic Search for New Product Ideas Obtained Internally From Employees and Also From:

Ideas for new products can be obtained from basic research using a SWOT analysis (OPPORTUNITY ANALYSIS), Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies.
“Process to spot good ideas and drop poor ones”

IDEA SCREENING

Many companies have systems for rating and screening ideas which estimate: Market Size Product Price Development Time & Costs Manufacturing Costs Rate of Return

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

OR
The screeners must ask these questions:

Will the customer in the target market benefit from the product? What is the size and growth forecasts of the market segment/target market? What is the current or expected competitive pressure for the product idea? What are the industry sales and market trends the product idea is based on? Is it technically feasible to manufacture the product? Will the product be profitable when manufactured and delivered to the customer at the target price? Then, the idea is evaluated against a set of general company criteria.

Concept Development and Testing
“Develop the marketing and engineering details”

Product Idea: idea for a possible product that the company can see itself offering. Product Concept: detailed version of the idea stated in meaningful consumer terms. Product Image: the way consumers perceive an actual or potential product.
Purposes of Concept Testing

To identify very poor concepts so that they can be eliminated. To estimate (at least crudely) the sales or trial rate the product would enjoy (buying intentions, early projection of market share). To help develop the idea (e.g. make tradeoffs among attributes).

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT
Procedure for a Concept Test

New Product Development & Pricing

Prepare concept statement Clarify specific purposes Decide format(s) Select commercialization Determine price(s) Select respondent type(s) Select response situation Define the interview Conduct trial interviews Interview, tabulate, analyze
“Essentially a pattern or plan that integrates your organization's major goals”

Marketing Strategy Development

Includes development of three part strategy plan

Describes Overall

Describe the market‟s size, structure, and behavior, the planned product positioning, and the sales, market share, and profit goals for first few years.
Describes Short-Term

Outlines the planned price, distribution strategy, and marketing budget for the first year
Describes Long-Term

Describes the long-run sales and profit goals and marketing-mix strategy over time

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

“Estimate likely selling price based upon competition and customer feedback”

Business Analysis

Business analysis is the discipline of identifying business needs and determining solutions to business problems. Solutions often include a systems development component, but may also consist of process improvement or organizational change or strategic planning and policy development. The person who carries out this task is called a business analyst or BA There are a number of techniques that a Business Analyst will use when facilitating business change & in NPD there are two important techniques used names MOST & SWOT
MOST

This is used to perform an internal environmental analysis by defining the attributes of MOST to ensure that the project you are working on is aligned to each of the 4 attributes. The four attributes of MOST Mission (where the business intends to go) Objectives (the key goals which will help achieve the mission) Strategies (options for moving forward) Tactics (how strategies are put into action)
SWOT

This is used to help focus activities into areas of strength and where the greatest opportunities lie. This is used to identify the dangers that take the form of weaknesses and both internal and external threats. The four attributes of SWOT Strengths - What are the advantages? What is currently done well? Weaknesses - What could be improved? What is done badly? Opportunities - What good opportunities face the organization? Threats - What obstacles does the organization face?

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

There come two Conditions after reviewing this analysis If No, Eliminate Product Concept If Yes, Move to Product Development

Test Marketing
“Involves placing a product for sale in one or more selected areas”

Test Marketing is the Stage Where the Product and Marketing Program are Introduced into More Realistic Market Settings

In this we also Produce a physical prototype or mock-up Test the product (and its packaging) in typical usage situations Conduct focus group customer interviews or introduce at trade show Make adjustments where necessary Produce an initial run of the product and sell it in a test market area to determine customer acceptance

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Commercialization
“Considered post-New Product Development”

Commercialization is the Introduction of the New Product into the Marketplace Must decide on timing (i.e., when to introduce the product). Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally). Must develop a market rollout plan. Each successive set of consumers behaves differently New Product Adoption Process is also known as the “Diffusion Process”. The Consumer-Adoption Process/ Innovation diffusion process

Adopters of new products move through five stages

Awareness Interest  Evaluation Trial Adoption Commercialization involves implementing a total marketing plan and full production Launch the product Produce and place advertisements and other promotions Fill the distribution pipeline with product Critical path analysis is most useful at this stage

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Key Success Factors in NPD
• • • • Operating Philosophy Organization Structure The Experience Effect Management Style

Operating Philosophy

Successful companies are more committed to growth through new products developed internally. They are more likely to have had a formal new product process in place for a longer period of time than unsuccessful companies. They are more likely to have a strategic plan that includes a certain portion of company growth from new products.
Organization Structure

Successful companies are more likely to house the new product organization in R&D or engineering and are more likely to allow the marketing and R&D functions to have greater influence on the new product process
The experience Effect

Experience in introducing new products enables companies to improve new product performance. New product development costs conform to the experience curve: The more you do something, the more efficient you become at doing it. This experience advantage stems from the acquisition of knowledge of the market and of the steps required to develop a new product.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT
Management Style

New Product Development & Pricing

Successful companies appear not only to select a management style appropriate to immediate new product development needs but also to revise and tailor that approach to changing new product opportunities

The Product Life Cycle
There are five main Strategies of PLC

Product development – Discussed in Detailed Previously Introduction Growth Maturity Decline Not all products follow this cycle Fads Styles Fashions

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Introduction

Growth Stage of PLC

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Maturity Stage of PLC

Declining Stage of PLC

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

NEW PRODUCT FAILURE
In this era of tight competition from domestic and global firms the firm who don't come out with new products are putting themselves at great risk because their existing products are prone to changing customer needs, shorter product life cycles, new technologies and increased competition. Despite years of research and huge capital being pumped in to understanding the consumer, making a launch successful is still a difficult task. The new product largely depends on the product quality and the marketing tactics of the firm, there are many occasions were the product failed miserably even after using the best technology and quality the reason is that the new product is not worth for the customers. The prime factor for the new product success is - customer value. Value is what the customer thinks is value. The major reasons for product failure are:
Faulty product idea

The product often fail because faulty of product idea. A good idea can revolutionize the market but a bad idea may prove bitter to the firm or it may backfire Eg: Polar industries in 1991 launched "COOL CATS" fan -decorated with cartoon characters meant primarily for children. The fan was priced at premium; the idea was that children's were increasingly becoming influencers in purchase decisions and to attract the kids with the cartoon creatures and to position the product exclusively for kids. The product failed miserably in spite of its huge advertising budget because when the fan was put on it didn't have any color effect and the customer did not justify its premium price.
Distribution related problems

The new product fails if the product is unable to meet the channel requirements. While developing the product the channel requirements must be given adequate consideration.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Eg: when NESTLE launched its new chocolates the product and promotion was ok but the product failed in the distribution side because the company stipulated the product to be stored in refrigerators. The product faced two problems in the distribution side because it meant excluding a number of retail outlets as they didn't have this facility and secondly the chocolate was not picked by the customers as it was not seen upfront in the retail shops. Finally Nestle had to reformulate the product according to channel requirements.
Poor timing of launch

Too early or late entry into the market is a common cause of failure. Kinetic Merlin was launched in pune in 1991.It was a 3 in 1 set consisting of a color television, a stereo with detachable speakers and a home computer. The product was targeted at the Indian consumers who are fond of sophisticated gadgets to immediately adopt such an innovative idea but in reality the idea was too advanced for the customers to digest at that time because they were not exposed to such type of products before.
Improper Positioning

Positioning means putting the product into the predetermined orbit Improper positioning may affect the product success. Eg: Titan Tanishq introduced their 18 carat jewellery and the product was positioned at elite segment but there was a contradiction as to why these elite segment should go in for a low carat gold because the norms for gold in India at that time was 22 carat. The product failed miserably in retrospect Titan had to introduce 22-carat jewellery Some “Other Reasons” for product failure are: Lack of differential advantage Poor planning Technical problems in the product Competitors fighting back harder than expected Poor market research The watchwords for new product success are
“RIGHT PRODUCT TO THE RIGHT CUSTOMER AT RIGHT TIME”

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Pricing
Pricing objectives should flow from and be consistent with corporate and marketing objectives and the overall company mission these objectives should be started explicitly because they directly affect pricing polices and the methods used to be set)

Objectives
Profit Oriented profit goals may be set for the short or long term .Accompany may select one of two profit –oriented goals for its pricing policy
To achieve a target returns

The pricing objective of marking as much as money as possible is probably followed more then any other goal. The trouble with this goal is that some people profit maximization has an ugly connotation suggesting profiteering, high prices and monopoly. E.g. Pizza hut
To maximize profit

A profit maximization objective seeks to achieve as much profit as possible. It might be stated as desire to earn a high return an investment or more sonly to change “what the method will bear” E.g. Pizza expert Pizza hut Pizza next McDonalds

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Sale Oriented
In some companies management‟s pricing is focused on sales volume. The pricing goal may be to increase sales volume or to maintain or increase the firm's market share
To Increase Sale Volume

This pricing goal of increasing sales volume .The pricing goal may be to increase volume or to maintain or increase the firm's market share.

To maintain or increase Most industries today are not growing much if t all and have excess production capacity. Many firms need added and to utilize their production capacity more fully and, in turn, gain economics of scale and better profits

Market share
Many organization seek to gain same specific share % of a market .The advantage of a market-share price object is that its force a managers to pay attention to the performance of the competitions. It is usually easier to measure an argumentation market share than to determine if profit are buying maximized since market share is a relation measure it is often the preferred measurement of an argument competitive E.g. McDonald, Coca-Cola Pepsi

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Status quo oriented
To stabilize oriented Price stabilized often is the goal in industries where The product is highly standardized (such as steel or bulk chemicals. One large firm. Such as Phelps Dogs in the copper industry. Historically has acted as a leader in setting their prices. To meet competent: Firm that adopt status quo pricing goals to avoid price competition are not necessarily passive in their marketing .Quite the contrary! Typically these companies compete aggressively using other marketing-mix elementsproduct. Distribution and especially protion.This approach called nonprime competition Pricing Decisions: Pricing policies can be established in three ways: • Cost-orientated (the costs involved in manufacturing the product and then adds on a percentage of the cost as a mark-up in order to set the price) • Demand-orientated (High demand means high prices – low demand means low prices) • Competitor-orientated (pricing is usually found where a group of organizations is selling the same product i.e. petrol, finance, etc. Customers are happy to pay and accepted the product as the “market price”. Individual firm cannot increase the price and decrease, consequently, loss of customer and loss of revenue. )

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Factors to Consider When Setting Prices

Internal Factors Affecting Pricing Decisions

Marketing Objectives Survival Low Prices to Cover Variable Costs and Some Fixed Costs to Stay in Business Current Profit Maximization Choose the Price that Produces the Maximum Current Profit, Cash Flow or ROI Market Share Leadership Low as Possible Prices to Become the Market Share Leader Product Quality Leadership High Prices to Cover Higher Performance Quality

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing
Marketing Mix Strategy

Product Design & Quality Non price Factor Promotion Distribution
Total Cost = Fixed Cost + Variable Cost

Cost

Total Costs

Sum of the Fixed and Variable Costs for a Given Level of Production
Fixed Costs (Overhead)

Costs that don‟t vary with sales or production levels. E.g. Executive Salaries, Rent
Variable Costs

Costs that do vary directly with the level of production E.g. Raw materials Costs Considerations

“Cost Per Unit at Different Levels of Production per Period”

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

External Factors Affecting Pricing Decision
Market & Demand Factor Competitor‟s Cost, Price & Offers Other External Factors Economic Conditions Reseller Needs Govt. Actions Social Actions

Market & Demand Factor

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Competition-Based Pricing

And the Rest of the Factors which are mentioned before Economic Conditions Reseller Needs Govt. Actions Social Actions

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Pricing Strategies

Setting the price steps between various products in a product line, based on cost differences between the products, customer evaluations of the different features and the competitors‟ pricing Importance of Setting Prices  Setting the proper price point is instrumental in attracting your target customer.  Some customers are willing to pay more for a product as long as they feel they are getting value for their Money.  Most customers however are price-sensitive and are always seeking the lowest possible price.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Price Determination Process

Skimming pricing strategy
“Involves the use of a high price relative to competitive offerings”

 High price, Low volumes  Skim the profit from the market  Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out) Examples include: Play station, jewellery, digital technology, new DVDs, etc. Advantages of Market Skimming • The practice of „price skimming‟ involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

• The objective with skimming is to “skim” off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the “early adopters” falls • The success of a price-skimming strategy is largely dependent on the inelasticity of demand for the product either by the market as a whole, or by certain market segments

Penetration Pricing
“Price set to „penetrate the market”

 Low‟ price to secure high volumes  Typical in mass market products – chocolate bars, food stuffs, household goods, etc.  Suitable for products with long anticipated life cycles  May be useful if launching into a new market Example: Telenor – To attract New Corporate Clients Advantages of Penetration Pricing • It can result in fast diffusion and adoption. This can achieve high market penetration rates quickly. This can take the competition by surprise, not giving them time to react. • It can create goodwill among the early adopters segment. This can create more trade through word of mouth. • It creates cost control and cost reduction pressures from the start, leading to greater efficiency. • It discourages the entry of competitors. Low prices act as a barrier to entry (see: porter 5 forces analysis). • It can be based on marginal cost pricing, which is economically efficient.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

“Price Based on Consumer Perception”

Value Pricing

• Value based pricing, or Value optimized pricing is a business strategy. It sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price • The goal of value-based pricing is to align price with value delivered. Price for any individual customer can be customized to reflect the specific value delivered. Examples could include metrics such as number of users, number of annual transactions, size of revenues, cost savings, or other measurements. Value based pricing typically enables companies to become more competitive and more profitable than using simpler pricing methods.  Price set in accordance with customer perceptions about the value of the product/service Examples include Value menus at Fast Food Restaurants

Going Rate (Price Leadership)
“Based on Limited Competition”

In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market May follow pricing leads of rivals especially where those rivals have a clear dominance of market share Where competition is limited, „going rate‟ pricing may be applicable – banks, petrol, supermarkets, electrical goods – find very similar prices in all outlets

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing
“Used to play on consumer perceptions”

Psychological Pricing

To get a customer to respond on an emotional, rather than rational basis Links with value pricing – high value goods priced according to what consumers THINK should be the price Example: Rs.99 not Rs.100 „price point perspective

Captive product pricing
“Products that complement others”

e.g Gillette razors (low price) and blades (high price)

“Sellers combine several products at the same price”

Product-bundle pricing

E.g. software, books, CDs.

Promotional pricing
• BOGOF e.g. toothpaste, soups, etc

Geographical pricing
“Different prices for customers in different parts of the world”

E.g. include shipping costs

Pricing variations
“off-peak‟ pricing, early booking discounts, etc”

E.g. cash back‟ incentive for expensive goods

Premium pricing
“Uses a high price, but gives a good product/service exchange”

E.g. 5 Star Hotels

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Ten ways to „increase‟ prices without increasing price “By Dr Winkler P” • • • • • • • • • • Revise the discount structure Change the minimum order size Charge for delivery and special services Invoice for repairs on serviced equipment Charge for engineering, installation Charge for overtime on rushed orders Collect interest on overdue accounts Produce less of the lower margin models in the line Write penalty clauses into contracts Change the physical characteristics of the product

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

A.G - Detergent
Idea Generation
New product that we are going to launch is an Anti Germ detergent. The idea behind this product is that people are very much health conscious and are aware of the importance of germ prevention. Recently we were conducting a research on brand preferences in soaps. Our survey based research showed that most people prefer antibacterial soap over other soaps for health reasons. Many people think that Germ Killing ability is one of the core benefits of soaps.

Market Research
This research triggered the idea that if most people prefer to keep skin germ free, than it is their latent demand to have a product that keeps there towels, clothes, bedsheets etc. germ free. Than we conducted another survey asking people that if we introduce an anti-germ detergent whether they would purchase it. 80% people said that they will surely purchase it. Most of them were enthusiastic about the idea of this new product. This argument convinced them that anti-bacterial soap cannot help to achieve the goal of germ-free, healthy living. To be truly germ-free you have to keep your immediate surroundings hygienically clean. Most of the germs that our body catches come from our contact with clothes, bed sheets, curtains, pillows and most importantly towels. Towels are made of materials that are especially receptive to germs. Towels provide suitable place for germs and their reproduction.Anti-bacterial soaps can kill germs from our body but when we use towels to dry our body, millions of germs living on it transfers to our body and hands making us again “Germy”.

Market segmentation and Targeting
“Dividing a market into smaller group of buyers distinct characteristics or behavior who might require separate products or marketing mix” We are dividing the market geographically, psychographic ally and demographically.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT
Geographically

New Product Development & Pricing

We are dividing the market into major and small cities. Initially, we are targeting only the big cities like Karachi Lahore Islamabad Multan Faisalabad

Demographic Segmentation
We are dividing consumers into 3 classes on the basis of their Income. Upper Class Middle Class Lower Class But we are targeting the only the upper and middle class

Psychographic Segmentation
We are dividing consumers into these groups: Innovators Thinkers Achievers These all will buy our product.

Marketing Mix
Now we discuss in terms of marketing mix ----- the set of controllable marketing tools i.e. product, price, place and promotion, which are blended to produce the desired response in the target market.

Product
Brand Name

“Anti Germ” Detergent.
Quality

It is of high quality in cleaning white and colored alike.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT

New Product Development & Pricing

Features

i. Superior quality detergent ii. It salient feature is killing Germs, Bacteria and various types viruses. iii. It does not the fibers of the clothes so they give a new look for a longer time.
Packaging

The product is available in 4 sizes of different weights. 80 gm 200 gm 500 gm 1 Kg

Price
We are the 1st ones to introduce an anti-bacterial detergent. So we are in a position to charge relatively high price than ordinary detergents. If we charge very high price as compared to other detergents than chances are that most people especially middle class detergent users, though convinced about the importance of its Germ Killing feature, will not purchase it. If we charge low price as compared to ordinary detergents than people may consider that it is an inferior product. So we are introducing it at prices which are slightly higher than Arial and Surf Excel. The prices are as follows: 80gm……………………Rs. 20 200gm…………………..Rs. 40 500gm…………………..Rs. 85 ! Kg …………………....Rs. 150

Place
Initially, we will make this product available at all departmental stores and superstores. Once the product gets off to a good start availability will be increased to other cities and small shops.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

MARKETING PROJECT Promotion

New Product Development & Pricing

There will be extensive promotion for the product. All our promotion efforts will be to persuade people to buy anti-bacterial detergent powder. We will not have to spend money on creating awareness of the importance of germ prevention, because the general awareness has been created by anti-bacterial soap industry. We will mainly use 3 media type. 1. Electronic Media 2. Print Media 3. Outdoor media

Electronic Media
We will make persuasive commercials and infomercials about our product in Doctors will be shown explaining importance of Germ-free towels and clothing and hence the importance of “Anti Germ ” as an anti-bacterial detergent. These Ads will be presented on TV, RADIO and INTERNET.

Print Media
Ads would be placed especially on women digests and weekly magazines in which details of the benefits of the product for consumers will be discussed persuasively.

Out-door Media
The portraits from the TV ad will be placed on bill boards on centralized locations.

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Students of BS A/F (HONS) Session (2007-2011) Department of Commerce, Bahauddin Zakariya University Multan

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