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Product Pricing PDF
Product Pricing PDF
Members:
Faseeh Ur Rehman --- BAF-07-60
Nousherwan Akbar --- BAF-07-14
Umer Farooq --- BAF-07-39
Muhammad Waqas - - - BAF-07-34
Javeria Zia --- BAF-07-17
Ayesha Siddiqui --- BAF-07-18
Instructor:
Mr. Khurram Javed Paracha
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
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 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.
Table of Contents
Introduction………………………………………………………………
Operating Philosophy….…………………………………………….
Organization Structure……………………………………………….
The Experience Effect………………………………………………..
Management Style …………………………………………………...
New-Product Failures
1. Faulty Product Idea ……………………………………………...
2. Distribution Related problems …………………………………..
3. Poor Timing of Launch …………………… …………………....
4. Improper Positioning …………………………… ………………
5. 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 ………………………………………………
Pricing Strategies
Introduction
What is a new product?
• Innovative products
• New product lines – to allow the firm to enter an existing market
• 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.
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.
IDEA GENERATION
“The "fuzzy front end" of the New Product Development process”
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.
IDEA SCREENING
“Process to spot good ideas and drop poor ones”
Many companies have systems for rating and screening ideas which estimate:
Market Size
Product Price
Development Time & Costs
Manufacturing Costs
Rate of Return
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?
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.
Describes Overall
Business Analysis
“Estimate likely selling price based upon competition and customer feedback”
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?
Test Marketing
“Involves placing a product for sale in one or more selected areas”
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
Commercialization
“Considered post-New Product Development”
Operating Philosophy
Organization Structure
Management Style
Fads
Styles
Fashions
Introduction
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.
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.
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.
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
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 maximize profit
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
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
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 elements-
product. Distribution and especially protion.This approach called nonprime
competition
Pricing Decisions:
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. )
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
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
Competition-Based Pricing
Economic Conditions
Reseller Needs
Govt. Actions
Social Actions
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
Examples include: Play station, jewellery, digital technology, new DVDs, etc.
• 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”
• 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.
Value Pricing
“Price Based on Consumer Perception”
Price set in accordance with customer perceptions about the value of the
product/service
Examples include Value menus at Fast Food Restaurants
Psychological Pricing
“Used to play on consumer perceptions”
Product-bundle pricing
“Sellers combine several products at the same price”
Promotional pricing
• BOGOF e.g. toothpaste, soups, etc
Geographical pricing
“Different prices for customers in different parts of the world”
Pricing variations
“off-peak‟ pricing, early booking discounts, etc”
Premium pricing
“Uses a high price, but gives a good product/service exchange”
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 anti-
bacterial 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, bed-
sheets 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”.
Geographically
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.
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.
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.
Promotion
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.