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1. Why bother to segment markets?

The main reason companies divide markets into identifiable groups (based on similar needs and
wants) is so that the marketing team can create a custom marketing mix for the specific group.
Instead of exhausting financial budget by advertising to the masses, markets identify their target
market and create specific marketing plan to communicate with its prime customers. The
importance of market segmentation is that it allows a business to precisely reach a consumer
with specific needs and wants. In the long run, this benefits the company because they are able to
use their corporate resources more effectively and make better strategic marketing decisions. A
company that segments its target market can significantly reduce its risk of marketing failure.
Instead, they can make more accurate decisions about the where, when, who, and how of
marketing. Since companies often have limited resources to spend on marketing, the choices
made for each group can result in better responses and increased revenues. All in all it is good to
segment markets because you can do differentiation strategy and spot opportunities and threats.
2. The process of market segmentation and target marketing.
Identifying the Total Market
The first step in market segmentation is to define the total market for the product. Purchasing
patterns and needs are important factors to consider. For example, the total market for a book on
finance can be estimated by compiling the total number of students enrolled in business
administration, accounting and related fields.
Choosing Segmentation Criteria
Understanding why people behave as they do helps identify the needs the company should
satisfy in the market. Different types of buyer characteristics are used in market segmentation.
Demographics such as age, income and education are the easiest starting points. Demographic
information is easy to compile, and general demographic data is publicly available. In
geographic segmentation, place of residence is the segmentation basis. Lifestyle or
psychographic differences are another segmentation basis. Here, attitudes, interests and opinions
count. These factors are better grounds for segmentation than demographics and geography. For
instance, some consumers are innovators with a taste for niche, upscale products and services,
while others are conservative thinkers looking for functionality, value and durability.
Profiling and Selecting Segments
After selecting segmentation criteria, the company develops segment profiles. A segment profile
comprises the generalized characteristics of the typical consumer in the specific segment. For
example, a segment profile may contain the age, behavior pattern such as being a sports fan and
the gender of the typical consumer. Next, the company assesses the potential profitability of each
sector and selects segments for targeting. Purchasing power and size of the segment, profitability
potential and ability to serve the market are important in the selection decision.
Determining Positioning Strategies
Positioning creates a specific image of the product in the customer's mind and is done through a
variety of strategies. Emphasizing the value of the product in terms of price, quality or both is
one way to position the product. Creating unique product attributes is another positioning
strategy. For example, toothpaste can offer both cavity protection and whitening. Comparing the
product with the competition is another strategy that helps the customer make an informed
purchase.
3. Segmenting consumers markets
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Behavioral- Benefits sought are manifestations of both consumer requirements (needs and/or
wants) and the value that consumers are willing to pay in return for the sacrifices that they are
willing to make.
Purchase occasion is the process of dividing the market into groups according to specific
occasions related to the customer. Occasion segmentation focuses on slicing the market based on
certain specific events during a particular time, when a customer is in a need of a product or a
service. This type of segmentation is usually time bound and helps targets those customers who
want a certain product for a certain event or occasion.
Purchase behavior Problem recognition, information search, evaluation of alternatives, purchase,
post purchase behavior.
Usage Markets can be distinguished on the basis of usage rate, that is, on the basis of light,
medium and heavy users. Heavy users are often a small percentage of the market, but account for
a high percentage of the total consumption. Marketers usually prefer to attract a heavy user rather
than several light users, and vary their promotional efforts accordingly.
Perceptions and beliefs-What are the perception and beliefs towards certain products.
Psychographic – Lifestyle is the manner in which people live and spend their time and money.
Lifestyle analysis provides marketers with a broad view of consumers because it segments the
markets into groups on the basis of activities, interests, beliefs and opinions. Companies making
cosmetics, alcoholic beverages and furniture’s segment market according to the lifestyle
Personality it refers to a person’s individual character traits, attitudes and habits.
Profile - Demographic segmentation divides the market into segments based on the
characteristics of targeted population. The variables may include age, gender, family size, family
life cycle, income, occupation, education, religion, race, generation, and nationality.
Geographic Segmentation- Division of market based on location structure. These geographical
locations may include nations, states, regions, counties, cities, or even neighborhoods. The
strategy behind this division is to localizing the products, advertising, promotion, and sales
efforts to fit the needs of individual regions, cities, and even neighborhoods
Socio-economic relating to or concerned with the interaction of social and economic factors.
4. Segmenting organizational markets
Macrosegmentation
Organizational size the size of buying organizations may be used to segment markets. Large
organization differ from medium sized and small organizations in having greater order potential,
more formalized buying and management processes and special needs. The result is that they
may form important target segments and require tailored marketing mix strategies.
Industry Another common macrosegmentation variable is industry sector. Different industries
may have unique requirements from products to various sectors such as banking, manufacturing,
healthcare and education. Each of them has unique needs in terms of software programs,
servicing, price and purchasing practice. By understanding each industry’s needs in depth, a
more effective marketing mix can be designed.
Geographic location Regional variations in purchasing practice and needs may imply the use of
geographic location as a basis for differentiating marketing strategies. The purchasing practices
and expectations of companies in central and eastern Europe are likely to differ markedly from
those in western Europe. Their more bureaucratic structures may imply a fundamentally different
approach to doing business that needs to be recognized by companies.
Microsegmentation
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Choice criteria This factor segments the organizational market on the basis of the key choice
criteria used by buyers when evaluating supplier offering. One group of customers may rate price
as the key choice criteria, another segment may favour productivity, while a
third segment may be service orientated. Example:telemarketing companies.
Decision making unit structure Another way of segmenting organizational markets is based on
decision making unit (DMU) composition. DU and its size may vary between buying
organizations. One segment might be characterized by influence of top management on the
decision, another by the role played by engineers and third where purchasing manager plays the
key role.
Decision making process Decision making process can take a long time or be relatively short in
duration. The length of time is often correlated with DMU composition.
Buy class Organizational purchase can be categorized into straight rebuy, modified rebuy and
new task. The buy class effects the length of the decision making process.
Purchasing organization Decentralized versus centralized purchasing is another micro
segmentation variable because of its influence on the purchase decision. Centralized purchasing
is associated with purchasing specialists who become experts in buying a range of products.
Organizational innovativeness A key segmentation variable when launching new products is the
degree of innovativeness of potential buyers.
5. Target marketing
Market targeting: Evaluating Market Segments
Financial issues
Segment Size What is the size of the segment (mainly in terms of unit and revenue sales)? And is
this substantial enough for the firm to consider entering? Each firm is likely to have minimum
size requirements for a market segment to be considered financially viable. Obviously larger
firms have higher requirements.
Segment growth rate At what rate is the segment growing (or perhaps declining)? What is its
future outlook? Segments with strong growth rates are more attractive as firms can gain market
share from primary demand (as opposed to needing to win business from established
competitors)
Profit margins Is this a high profit margin segment or one that is price competitive? Pursuing
new target markets typically requires significant marketing investment, so target markets with
higher profit margins are always more attractive.
Structural Attractiveness
Competitors How dominant are the established competitors? What degree of competitive
rivalry exists? Are there significant indirect competitors (or close substitute products)? Generally
firms do not want to compete in markets where there are dominant market leaders, as they tend
to be quite aggressive to new competitors. Therefore, target markets with a fragmented
competition position are often preferred. Obviously the lower the level of competitive rivalry the
better with limited in direct competition. Note: Porter’s five forces model could be used to assist
this style of analysis.
Distribution channels How easy would it be to gain access to the appropriate distribution
channels? What level of new investment would be required in this regard? Strong relationships
between the current firms in the distribution channel would be of concern. The ability to
establish suitable channel relationships needs to be evident.
Marketing Expertise
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Resources Does the firm have the financial position and staff resources to successfully enter in
this segment? Firms seek target markets where they can enter with a comfortable level of
investment, in terms of: financial investment, staff time, and the potential disruption to the
balance of their business.
Capability Does the firm have the capability to develop appropriate products in a supportive
marketing mix Firms will naturally seek target markets where they can leverage their existing
skills, capabilities, and technologies. Target markets that require the firm to develop new
expertise are generally best avoided.
Role of brand Would the firm be required to create a new brand, or could an existing brand be
leveraged into the new target market, or is brand relatively unimportant? Establishing a new
brand requires time and money, so that requirement reduces the attractiveness of a segment. As
does the risk to a brand of leveraging in into a lower status segment, such as when targeting
budget conscious consumers.
6. Positioning and repositioning
Positioning defines where your product (item or service) stands in relation to others offering
similar products and services in the marketplace as well as the mind of the consumer. Key tasks
in positioning are Market Segmentation, Target market and Differentiated advantage.
There are two broad categories of market position: cost leadership and differentiation.
 Cost Leader Strategy
A company using a cost leader strategy attempts to position itself in the minds of the consumers
as a company that provides products the consumers want at a price that is lower than competing
products available in the marketplace. Consumers expect basic products with no bells and
whistles from a company using a cost leader strategy. Instead, consumers just expect the
products to meet their needs and nothing more or less
 Differentiation Business Strategy
A company using a differentiation business strategy attempts to position itself in the minds of the
consumers as a company that provides unique products that consumers will pay more for because
they cannot find comparable products or product features anywhere else in the marketplace.

Market repositioning is when a company changes its existing brand or product status in the
marketplace. Repositioning a brand or product means altering its place in the minds of the
consumer, or essentially changing the brand’s or product’s image or identity. Repositioning is
usually done due to declining performance or major shifts in the environment. Repositioning
strategies:
 Same product and target market, change in the image of the product
The product may be acceptable in functional terms but fails because it lacks the required image.
The communication emanating from the company is overhauled. The advertising message is
changed. The contexts and the structure of the contexts in which the customers come into contact
with the company are changed to reflect the new image.
 Product repositioning:
The product is modified to make it more acceptable to its present target market. Customer
requirements may have changed and the product has to be modified to be able to serve the new
needs effectively. The company may have acquired new resources and competencies enabling it
to modify the product so that it serves the target market better.
 Intangible repositioning:
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The company targets different market segments with the same product. The company is able to
locate a segment which has requirements, similar to the requirements of the segments it is
serving. The company retains its value proposition and offers it to new segments.
 Tangible repositioning:
Both product and target market are changed. A company may decide to move up or down a
market by introducing a new range of products to meet the needs of the new target customers.

7. The product line and product mix

Product mix is a combination of total product lines within a company. A company like HUL has
numerous product lines like Shampoos, detergents, Soaps etc. The combination of all these
product lines is the product mix.
Product line is a subset of the product mix. The product line generally refers to a type of product
within an organization
 Product line length
 Product line width
 Product line depth
 Product line consistency
Example of Product line and Product mix
Detergents – Arial, Arial oxyblue, Ariel bar, Tide, Tide naturals, Tide bleach, Tide plus.
Shampoos – Head and shoulders, Head and shoulders anti dandruff, Pantene, Pantene damage
repair, Pantene pro-v

In the above example the following can be learned about the product mix of P&G
Product mix Length – 12
Product mix Width – 2
Product mix Depth – 7 in detergents and 5 in shampoos
Product mix consistency – High as both are bathroom products.
8. Brand types
There are 3 types of brands that we considered on our classes:
 Manufacturer brands – created by producers, bear their own chosen brand name
 Own-label brands – owned by distributors
 Fighter brands- In marketing, a fighter brand (sometimes called a fighting brand) is a
lower-priced offering launched by a company to take on, and ideally take out, specific
competitors that are attempting to under-price them.
9. Brand equity
Measure for the strength of a brand in the marketplace.
Customer-based brand equity – differential effect that brand knowledge has on consumer
response to the marketing of that brand.
Proprietary-based brand equity – derived from company attributes that deliver value to the brand
Sources of brand equity come from customer based: brand awareness and brand association and
proprietary based: patents and channel relationship.
10. Brand building
Being first Company may be first on market if it develops some innovative products.
Well-blended communications could be achieved by combining new and traditional media
(blogs, press releases, newspapers, social networks and broadcast networks.
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Quality Brand quality is the perception of quality that a brand achieves with its customers.
Quality is often defined as the meeting the expectations of customers.
Positioning: brand domain, values, reflection, personality, assets, heritage
Repositioning=>Set rebranding objectives=>Generation of new
names=>Screening=>Information search=>Consumer research=>Choice of new brand
name=>Implementation.
Long-term perspective
Internal marketing With an internal marketing strategy, employees are treated as “internal
customers” who must be convinced of a company's vision and worth just as aggressively as
“external customers.” The goal of internal marketing is to align every aspect of a company’s
internal operations to ensure they are as capable as possible of providing value to customers. If a
company can operate in a coordinated and standardized way, that company can provide a more
consistent experience to their customers. Internal marketing is based on the idea that customers’
attitudes toward a company are based on their entire experience with that company, and not just
their experience with the company’s products. Any time a customer interacts with an employee,
it affects their overall satisfaction.
11. Key brand decisions
Branding consists of a set of complex branding decisions. Major brand strategy decisions involve
brand positioning, brand name selection, brand sponsorship and brand development. Before
going into the four branding decisions, also called brand strategy decisions, we should clarify
what a brand actually is. A brand is a company’s promise to deliver a specific set of features,
benefits, services and experiences consistently to buyers. However, a brand should rather be
understood as a set of perceptions a consumer has about the products of a particular firm.
Therefore, all branding decisions focus on the consumer.
 Brand positioning-attributes, beliefs and values, benefits.
 Brand name selection-selection, protection,
 Brand sponsorship-private brand, licensing, co-branding, manufacturer’s brand.
 Brand development-line extension, brand extension, multibrands, new brands.
12. Rebranding and brand extension
Rebranding is a marketing strategy in which a new name, term, symbol, design, concept or
combination thereof is created for an established brand with the intention of developing a new,
differentiated identity in the minds of consumers, investors, competitors, and other stakeholders.
Start With the Business Reason-Any rebranding strategy should start with a thorough
understanding of the business reason behind the rebranding. Is it driven by a need to accelerate
growth? Does your firm need to compete with larger, more established competitors?
Research Your Firm and Your Target Clients-When you are clear on the business case for a
rebranding, the next step is to conduct independent research on your firm and your clients. If you
are attempting to move into a new market, that research should include your new target clients as
well. The goal is to have an objective understanding of your current brand perception and
competencies.
Use Positioning and Messaging to Capture Your Brand Strategy- As you develop your firm’s
market positioning and messaging architecture, you will uncover the essence of your brand
strategy. Your market positioning is a brief description of where you fit into the market space.
Are you an innovative leader or a low cost provider? Your messaging architecture articulates
your messages to each of your main audiences. These messages must be consistent with your
overall brand and supportable.
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Build Your Brand Identity- This is the part of the rebranding strategy where you develop the
visual elements that will communicate your brand. Think firm name, logo, tagline, colors,
business card design, stationary, and the like. These elements are often described in a brand style
guidelines document, which provides a set of parameters to ensure your brand is implemented
consistently across all of your marketing materials. Many folks confuse these elements with your
brand. Your brand is your reputation and your visibility, not your firm’s name or its logo. Your
brand identity is a sort of visual shorthand for your brand.
Build Your Website and Online Presence-Your website is your single most important
communication and business development tool. It is the place where you can tell a compelling
story to each of your audiences. It is the first place a prospective client or employee will turn to
learn more about your firm.
Brand Building Plan-The final element of your rebranding strategy is to develop a plan to
promote and strengthen your new brand. How will you launch it internally? In professional
services, it is essential that your employees embrace the new brand. After all, they are your
product.
It’s also important that you build the brand in a way that communicates your firm’s reputation
and expertise, as well as its name. It must communicate your market positioning. Brand building
is different for professional services. Some rebranding strategies fail because they try to shortcut
the process. Others fail because they picked the wrong partners to work with. But it doesn’t have
to be that way. Start with a sound rebranding strategy. Find an experienced partner. Give
rebranding the attention it deserves and the rewards will follow. A well-positioned firm that
clearly communicates its brand is a formidable competitor indeed.
Brand extension is the use of an established brand name for a new product or new product
category. It's sometimes known as brand stretching.
A brand extension leverages the reputation and popularity of a well-known product to launch a
new product. To be successful, there must be a logical association between the original product
and the new item. A weak or nonexistent association can result in the opposite effect, brand
dilution. This can even harm the parent brand. Brand extension fails when the new product is
unrelated to the original, or even creates a negative association, such as Colgate Lasagna.
Successful brand extensions allow companies to diversify their offerings, increase market share,
and boost profits. The existing brand serves as an effective and inexpensive marketing tool for
the new product.
13. Co-branding
Co-branding is a marketing strategy that utilizes multiple brand names on a good or service as
part of a strategic alliance. Also known as a brand partnership, co-branding (or "cobranding")
encompasses several different types of branding collaborations typically involving the brands of
at least two companies. Each brand in such a strategic alliance contributes its own identity to
create a melded brand with the help of unique logos, brand identifiers and color schemes.
The point of co-branding is to combine the market strength, brand awareness, positive
associations and cachet of two or more brands to compel consumers to pay a greater premium for
them. It can also make a product less susceptible to copying by private label competition.
Product-based co-branding is a marketing strategy that involves linking of multiple brands from
different companies in order to create a product indicative of their individual identities. Product-
based co-branding maybe categorized into Parallel and Ingredient co-branding
1. Parallel co-branding is the marketing strategy where multiple brands come together and
create a combined brand.
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2. Ingredient co-branding is a marketing strategy carried out by a supplier where an

ingredient of a product chooses to position its brand.
Communications-based co-branding is a marketing strategy that involves linking of multiple
brands from different companies in order to jointly communicate and promote their brands.
14. The product life cycle and uses of PLC
The product life cycle (PLC) is the term used to describe the stages a product goes through from
initial development (start of life) to its removal from the market when sales have declined (end of
life). PLC has 4 stages:
Introduction- Introducing a new product where it's unknown and products are small. The price is
often higher as distribution is limited and promotion is personalized.
Growth-Popularity for the product grown, meaning it is being bought in greater numbers and,
with volume, the price declines. Distribution increases and promotion focuses on product
benefits
Maturity- The product competes with alternatives and its pricing drops. Distribution becomes
intense (it’s available everywhere) and promotion focuses on the differences to competitors’
products.
Decline-Reaching the end of its life, the product faces fewer competitors. The price may rise and
distribution has become selective as some distributors have dropped the product. Promotion aims
to remind customers of its existence.
Understanding the life cycle of a product is important to a business for a number of reasons. One
important reason is that understanding the PLC will help a business to manage its cash flow.
In the development stage money will be spent on developing the product with no sales to cover
the cost of that development. When the product is introduced into the market the business will
probably incur significant costs in marketing campaigns. Sales revenue in the introductory stage
is unlikely to cover costs. As the product moves into its growth phase, the cost of promoting the
product should decrease as cash flow from product sales increase and the business can see a
profit. Profits should continue through maturity until sales fall as the product begins to decline.
15. The BCG Matrix
The matrix helps companies to analyse their strategic business units (SBUs) or product lines and
enable them to allocate resources; The BCG Matrix thus offers a very useful 'map' of the
organization's product (or service) strengths and weaknesses, in terms of current profitability, as
well as the likely cash flows;
Cash Cows These are business units or product lines with high market share in a slow-growing
industry; they typically generate cash in excess of the amount of cash needed to maintain the
business. As leaders in a mature market, cash cows exhibit a return on assets that is greater than
the market growth rate, and thus generate more cash than they consume; They are to be
"milked", extracting the profits and continuously investing as little cash as possible, since such
investment would be wasted in an industry with low growth; Since cash cows require little
investment and generate cash, the cash can be used to invest in other business units.
Dogs are the units/products with low market share in a mature, slow-growing industry; Such
products or SBUs typically "break even” and generate barely enough cash to maintain the
business's market share; A dog may not require substantial cash, but it ties up capital that could
better be deployed elsewhere; They depress a profitable company's return on assets ratio, which
is used by many investors to judge how well a firm is being managed; Unless a dog has some
other strategic purpose, it should be liquidated if there is little prospect for it to gain market
share.
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Question marks (Problem Child) Are SBUs or products which are growing rapidly and they
consume large amounts of cash, but because they have low market shares they do not generate
much cash; Have worst cash characteristics of all, because of high demands and low returns due
to low market share, hence they result in large net cash consumption; Such units or products
have the potential to gain market share and become a stars; They can eventually become cash
cows when the market growth slows; If nothing is done to change the market share situation,
then question marks will simply continue to absorb great amounts of cash and later degenerate
into a dog when the market growth declines; Question marks must be analyzed carefully in order
to determine whether they are worth the investment required to grow market share; The best
course of action is to try and increase market share or get it to deliver cash.
Stars Are units/products with a high market share in a fast-growing industry; They generate large
amounts of cash due to their strong relative market share, but also consume large amounts of
cash because of their high growth rate; If market share is maintained, the hope is that stars
become the next cash cows when the market growth rate declines; Stars are required in any
portfolio of a diversified company since they have a potential to become the next cash cows and
ensure future cash generation; Since stars are in the scenario where there is the optimum
situation of high growth and high share, they require an increased investment due to the
continuous growth. As a particular industry matures and its growth slows, all business units
become either cash cows or dogs; The natural cycle for most business units is that they start as
question marks, and then turn into stars; Eventually the market stops growing thus the business
unit becomes a cash cow; At the end of the cycle the cash cow urns into a dog.
16. The General Electric market attractiveness – competitive position model
GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for the multi
business corporation to prioritize its investments among its business units.
Market attractiveness criteria
 Market size
 Market growth rate
 Beatable rivals
 Market entry barriers
 Social, political and legal factors
Competitive strength criteria
 Market share
 Reputation
 Distribution capability
 Market knowledge
 Service quality
 Innovative capability
 Cost advantages
Management is allowed to decide which criteria are applicable for their product. This gives MA-
CP model flexibility. Having decided the criteria, management’s next task is to agree upon
weighting system for each set criteria, with those factors that are more important having a higher
weighting. Next management assesses the particular market for the product under examination
on each of factor from market attractiveness criteria. By multiplying each weighting by its
corresponding rating, and then summing, a total score indicating overall attractiveness of the
particular market for the product under examination is obtained.
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Competitive strength assessment begins by selecting strength that are needed to compete in
market.
Competitive position model Zone 1: Build, Zone 2:Hold, Zone 3:build/hold/harvest, Zone
4:Harvest, Zone 5:Divest.

17. Product strategies for growth

A useful way of looking at growth opportunities is the Ansoff Matrix. By combining present and
new products, and present and new markets into a 2x2 matrix, four product strategies for growth
are revealed: market penetration, market expansion, product development and market
development.

The most basic method of gaining market penetration in existing

markets with current products is by winning competitors’ customers. This
may be achieved by more effective use of promotion or distribution, or by
cutting prices. You can also increase promotional expenditure or buy
competitors. By buying competitors markets increase market share and
sales volume. To protect the penetration already gained in market, a
business may consider methods of discouraging competitive entry.
A company may attempt market expansion in a market that it already
serves by converting non-users of its product. This can be an attractive
option in new markets when non-users from a sizeable segment and may be willing to try the
product given suitable inducements. Market expansion can also be achieved by increasing usage
rate.
The product development option involves the development of new products for existing
markets. One variant is to extend existing product lines to give current customers greater choice.
Also create innovation, product replacement and product line extension.
Market development entails the promotion of new uses of existing products to new customers,
or the marketing of existing products to new market segments. You may achieve market
development by entering new segments or promote new uses.
The entry into new markets (diversification) option concerns the development of new products
for new markets. Your strategy here is to bring new products.

18. What is new product and four functions/benefits of packaging?

The company's goal with creating new products involves two parts. The first part consists of
finding a product that customers want to pay for; only products that customers purchase produce
revenue for the business. The second part consists of beating competitors to market. The first
company to offer a product generates the greatest number of repeat customers.
Important functions of packaging are given below:
(i) Product Identification:
Packaging serves as an identification of the product. A product is packed in special sized,
coloured and shaped container for keeping its difference from the products of competitors. For
example, the yellow and black coloured pack of KODAK ROLL tells itself of its producer.
(ii) Product Protection:
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The main function of packaging is to provide protection to the product from dirt, insects,
dampness and breakage. For example, the products like biscuit, jam, chips, etc., need to be
protected from environmental contact. That is why they are tightly packed.
(iii) Convenience:
Packaging provides convenience in the carriage of the product from one place to another, in
stocking and in consuming. For example, the new pet bottles of COKE makes the carriage and
stocking easier. Similarly, the pack of FROOTI provides convenience in its consumption.
(iv) Product Promotion:
Packaging simplifies the work of sales promotion. Packing material in the house reminds the
consumers constantly about the product. In this way, the packaging performs the role of a
passive salesman. Consequently, it increases the sales.

19. Organizing effectively for new product development

Some frameworks, like the fuzzy front end (FFE) approach, define what steps should be
followed, but leave it up to the team to decide which order makes most sense for the specific
product that is being developed. The five elements of FFE product development are:
 Identification of design criteria -- involves brainstorming possible new products. Once an
idea has been identified as a prospective product, a more formal product development
strategy can be applied.
 Idea analysis -- involves a closer evaluation of the product concept. Market research and
concept studies are undertaken to determine if the idea is feasible or within a relevant
business context to the company or to the consumer.
 Concept genesis -- involves turning an identified product opportunity into a tangible
concept.
 Prototyping -- involves creating a rapid prototype for a product concept that has been
determined to have business relevance and value. Prototyping in this front-end context
means a "quick-and-dirty" model is created, rather than the refined product model that
will be tested and marketed later on.
 Product development -- involves ensuring the concept has passed muster and has been
determined to make business sense and have business value.

20. Managing the new product development process

NPD Process:
 New Product Strategy – Innovators have clearly defined their goals and objectives for the
new product.
 Idea Generation – Collective brainstorming through internal and external sources.
 Screening – Condense the number of brainstormed ideas.
 Concept Testing – Structure an idea into a detailed concept.
 Business Analysis – Understand the cost and profits of the new product and determining
if they meet company objectives.
 Product Development – Developing the product.
 Market Testing – Marketing mix is tested through a trial run of the product.
 Commercialization – Introducing the product to the public.
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21. Cost orientated pricing

A method of setting prices that takes into account the company's profit objectives and that covers
its costs of production. For example, a common form of cost-oriented pricing used by retailers
involves simply adding a constant percentage markup to the amount that the retailer paid for
each product.

22. Competitor orientated pricing

Competition-based pricing is a pricing method that makes use of competitors' prices for the same
or similar product as basis in setting a price.This pricing method focuses on information from the
market rather than production costs (cost-plus pricing) and product's perceived value (value-
based pricing).

The price of competing products is used a benchmark. The business may sell its product at a
price above or below such benchmark. Setting a price above the benchmark will result in higher
profit per unit but might result in less units sold as customers would prefer products with lower
prices.
On the other hand, setting a price below the benchmark might result in more units sold but will
cause less profit per unit. In a perfectly competitive market, sellers almost have no control over
prices. It is solely determined by the supply and demand, and products are sold at the market
price or going rate.
23. Marketing orientated pricing
Market-oriented pricing is a method of pricing in which price is based off of current market
conditions. Market-oriented pricing compares similar products being offered on the market.
Then, the seller sets the price higher or lower than their competitors depending on how well their
own product matches up. Many companies that launch a product into a specific market will price
their products around prices of other products currently released. Although this kind of pricing
may work for some companies, it isn't optimized and could be improved.
Depending on if the product has more or less features than the competition, the company sets the
price higher or lower than the competitor pricing.
For example, if this product has an extra feature over the competitor’s product, the company
could either decide to price it the same, therefore making it the better value or could price it
slightly higher to account for the additional feature.
24. Pricing existing products
1. Pricing at a Premium
With premium pricing, businesses set costs higher than their competitors. Premium pricing is
often most effective in the early days of a product’s life cycle, and ideal for small businesses that
sell unique goods.
2. Pricing for Market Penetration
Penetration strategies aim to attract buyers by offering lower prices on goods and services. While
many new companies use this technique to draw attention away from their competition,
penetration pricing does tend to result in an initial loss of income for the business.
3. Economy Pricing
Used by a wide range of businesses including generic food suppliers and discount retailers,
economy pricing aims to attract the most price-conscious of consumers. With this strategy,
businesses minimize the costs associated with marketing and production in order to keep product
prices down. As a result, customers can purchase the products they need without frills
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4. Price Skimming
Designed to help businesses maximize sales on new products and services, price skimming
involves setting rates high during the introductory phase. The company then lowers prices
gradually as competitor goods appear on the market.
5. Psychology Pricing
Psychology pricing refers to techniques that marketers use to encourage customers to respond on
emotional levels rather than logical ones.
6. Bundle Pricing
With bundle pricing, small businesses sell multiple products for a lower rate than consumers
would face if they purchased each item individually. Not only is bundling goods an effective way
of moving unsold items that are taking up space in your facility, but it can also increase the value
perception in the eyes of your customers, since you’re essentially giving them something for
free.