Week 3:

Branding, Pricing

&

Life Product-Cycle

Strategies

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 Learning Objectives

After completing this week you should be able to:

 Develop a deeper understanding of what a product is, including services and of

what a price is.

 Define the complexity of managing product lines and product mixes

 Discuss what goes into building and maintaining a brand.

 The particulars of finding new ideas for products and developing, marketing and
managing price related to new products should be grasped as well as the stages of
the product life-cycle.

 Assess the importance of value perception to the pricing process and understand
how pricing can be used to achieve company objectives as well as the effects of
pricing strategies on the other operations of the company.

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 1. Product Brands

This section takes a step back as we look at the concept of what a product is again. We
will look at products both as goods and as services and follow the development of
products from idea inception to the final product.

So moving forward please keep in mind that a product is basically anything for which
you have exchanges something for. It could be a durable or non-durable good, a service
paid for specifically or included in an over-all price or even verbal advice from someone
either paid for (e.g. lawyer) or offered as part of a sold experience (hotel personnel
advising to use sun block at the pool). Services and experiences are also products in this
sense and occupy a very large part of the products being traded globally today.

A product thus has different attributes starting with its core purpose and benefits i.e.
what is it designed to do/offer. At this level the company conceives a concept of a
product that simultaneously promises to further the mission of the company, keeping in
line with the objectives the company seeks to achieve while at the same time meeting an
identified consumer need/want/demand (Kotler et al., 2008).

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 Next the product must be realised and turned into a complete package including the
actual product, its unique features and usages and its packaging/presentation. Last comes
the stage where additional features are added to maximise the value offered by the
product e.g. after-sales services, inclusion in follower/fan communities etc. In the end,
creating a product means creating a satisfying customer experience.

2. Branding
According to Kotler et al. (2008), Branding is something of a holy grail in
marketing as once achieved, the brand will lend attributes to the product without
having to market these as intensively for each product of the brand’s product line
having already established certain values associated with the brand in the
consciousness of consumers.

Branding a product means that a company has undertaken to pursue long-term

customer relationships, it’s a commitment that is appreciated by consumers of a
brand as they are offered values they desire across a range of products and can also
have a single point of contact for matters related to their customer experiences.

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 3 Packaging Decisions

According to Kotler et al. (2008), packaging can be seen as part of the design in that
it alludes by its appearance, to the attributes of the product contained within it.
Packaging also needs to have elements of design such as being user-friendly (easy
to open) and more and more also environmentally friendly.

It needs to be of an appropriate quality/durability depending on the type of product

it contains and it needs to offer information in a clear concise manner. It also needs
to appeal to the senses (specifically sight) as most in-storedecisions are made on
impulse in many sectors. Lastly, packaging needs to be safe for children (Kotler et
al., 2008).

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 4. Labeling

According to Kotler et al. (2002), labels can be part of the packaging (in some cases
it is the packaging) and can be a simple logo sticker or contain a lot of information
about the product and the company behind it as well as user instructions,
suggestions and directions to where more information can be found.

Labelling is a potential pitfall for some however as including a lot of information

can be displeasing to the eye and put people off reading the information but perhaps
more importantly, including a label with a lot of information means you then have
to include all necessary information.

Leaving anything out that in the context of the included information is necessary
can be a criminal offense (ingredients for example). Labels where misleading
information could cause a health or safety hazard now need to include information
on the contents but also on proper handling, storing, expire dates, country of origin
and contact details of the manufacturer (Kotler et al., 2002).

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 2. New Product Development and Product Life-Cycle Strategies

Deciding your product line few companies have a single product offering. Product
lines are groups of products that are connected by functionality, purpose, price
range, choice of outlets etc. As every product has a life-cycle, product lines need to
be managed efficiently to ensure that it is neither too long containing non-profitable
or image damaging products and neither too short decreasing the company’s market
presence (Kotler et al., 2008).

Some companies even add luxury models at a loss hoping that consumers will want
to be associated to the brand and purchase lower-cost models belonging to the same
brand. Luxury models provide an opportunity for manufacturers to show their
engineering/manufacturing/designing abilities, values that are transcended down to
more affordable models.

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 Deciding your product mix in addition to having several products in a product line,
a company can also have a product mix, i.e. several product lines. Consider for
example a large distribution company. It will handle several brands and categorize
them into product lines e.g. foodstuffs, technology, industrial/consumer products
etc. A Company does the same categorizing products into lines and further breaking
product lines into sub-categories.

Your mix can be defined by its width, length, and depth and consistency level. By
adding new product lines i.e. a new group of related products and entering a new
sector a company can increase its business. It can also choose to increase the
number of different products contained within an existing product line stretching the
product line and adding length and/or depth (adding sub-category items to a
production line) to the product mix (Kotler et al., 2008).

The company has to decide how it can best capture market shares, by broadening
the market mix and be active in seemingly unrelated sectors (low consistency level
although knowledge from one sector can often be transferable to other seemingly
unrelated sectors) or by adding products and product lines to the mix that have a
strong connection to each-other in matters of usage etc.(Kotler et al., 2008).

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 2.1 Innovation and New Product Development

According to Kotler et al. (2002), product innovation involves a selection of products

improvements development activities of totally into new ones. We can define innovation
as an idea, product, service or part of technology that has been slightly developed to
customers and marketed as well who received it as entirely new.

A company can gain in different ways new products. One way is through
acquisition to by entirely the company, license or a patent in order to produce
somebody else’s product. Numerous of large firms have decided to acquire already
existing brands instead to create or develop new ones due to increasingly costs of
introducing and developing mainly new products. The other option to gaining new
products is through new-product development in the firm’s own research as well as
development division (Kotler et al., 2008).

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 2.2 New – Product Development Process

The process of new development product contains of nine (see below) main steps.

New – product Strategy

New product innovation is directed effectively through a well- defined new –product
strategy. The new product strategy defines four main objectives: firstly provides
directions to the new upcoming product and focuses to the team effort, secondly, it
assists to integrate departmental or functional efforts. Thirdly, it allows through the new
product members tasks to be delegated to team members, who may be operating
autonomously. Fourthly, it is essential for managers to agree on innovation strategy for
new product opportunities (Kotler et al., 2008).

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 Stage 1: Idea generation
The idea generation should be systematic and proactive. This ensures that the firm
will find many ideas for its business purpose. A firm usually has to create a lot of
ideas in order to find the most suitable for its purpose (Kotler et al., 2008).

Stage 2: Idea screening

The aim of idea generation is to generate a lot of ideas. Therefore, the succssful purpose
is to eliminate that number of ideas. The reducing stage of ideas is called idea screening.

Stage 3: Concept Development and testing

The most suitable ideas for our business purposes must be settled into product concepts.
It is essential to distinguish among a product image, a product concept and a product
idea. A product idea is an idea for a most likely product that the firm can see offering to
the marketpalce. A detailed form of the idea regarding consumer terms is called a
product concept. The way that consumers perceive a potential or actual product is
caleed a product image.

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 Stage 4: Marketing Strategy development
The Marketing strategy statement includes of three steps. The first step defines the target
market, the product positioning, market share and profit objectives for the first few
years. Therefore: we can say for example the target market is well- educated younger
individuals, moderate to – high income, small families or couples looking for a practical,
environmentally transporation.

Thus, as more economical the car will be positioned to operate, more fun and at the same
time less polluting compares today’s engines cars or to those battery- powered electric
cars which very often the battery must be recharged.
The firm will intend to sell 50,000 cars in the first year, for not than €10 million loss.
Furthermore, in the following year the firm will intend to sell 70,000 cars at a profit of
€20,000 million.

The second step regarding the Marketing strategy defines the product’s distribution,
price as well as the budget for the starting year.
For example, an electric power car will be offered in different colours and the air-
conditioning as well as the drive-power will be offered as optional features. Also, at a
retail price it will be offered at the price of €20,000 within 15% (percent) off the amount
to sellers. Additionally, every seller will be offered an additional discount each month if
they manage to sell more than 10 cars. The additional discount or the bonus for the
sellers will be 5 percent for every car sold per month.

However, the amount of €20 million as an advertising budget will be divided in an equal
amount among local and national advertising. The advertising will concentrate the low
emissions and car’s fun. Furthermore, €150,000 will be spent during the first year for
marketing research to identify their level of satisfaction and who is buying certain types
of cars.The third steps regarding the marketing strategy defines the profit goals, long-
term sales as well as marketing mix strategy:

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 For example, the firm aims to capture a long term run market share of 3% per cent and
subtract an after –tax return on investment of 15% (percent). In order to accomplish this
quality of the product will begin high and be progressed through the time. However, if
competition permits price will be increased from the second and third years. The total
budget for advertising will be increased by 15% (percent) per year. After the first year
the marketing research will be decreased to €60,000 (Kotler et al., 2008).

Stage 5: Business Analysis

Business analysis comprises an analyisis of the projetions of the sales and costs for a
new product to identify thether they meet the company’s aims. However, if they do then
they proceed to the next step which is the development step. Furthermore, the company
in order to estimate sales search previous years slaes history for similar products and
conducts surveys of market view.

Stage 6: Product development

Product development involves the developing of the product into an actual physical final
product. Thus in order to ensure their products rediness for release in the marketplace.

Stage 7: Test Marketing& Pricing

Test Marketing is the procedure of the new product development where the marketing
program and the product are evaluated or tested in more actual market settings.

Stage 8: Commercialization
Though the test marketing managers can have all the information needed in order to
proceed to the final decision therether to launch and promote the new produt in the
market place or not to proceed. Therefore, if the firm proceed with commercialization,
meaning introdusing into the pamrket place the newly product.

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 2.4 Product Life – Cycle
After releasing the product into the market the managers ensure the product last a
long life and healthy. However, it is not expected to sell forever the new product but
the company wants to earn as much profit or to gain the most of the new product
life (Kotler et al., 2008).

Figure 2.1: Product life Cycle, https://somartinblog.wordpress.com

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 3. Pricing

According to Kotler et al. (2002), price can be defined as the amount of money that
people can pay for a product or service. More generally, price is the total amount of all
the values that buyers exchange for the acquisition of using or having a product or
service. Price isconsidering one of the majorfactors affecting buyer’s decision choice.
Furthermore, price is one of the most important components determining a company’s
profitability and market share.

Figure 3.1: Factors to consider when setting prices

https://www.slideshare.net/bravoram/10-47458622

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 3.1 The Market and Demand

Thus, costs determine the lower perimeter of prices, the market and demand on the other
hand set the upper perimeter. As mentioned earlier pricing starts with a good
understanding of how individuals perceive the value of products and services and are
willing to pay (Kotler et al., 2008).

Figure 3.2: www.simplynotes.in/market-structure-pricing-decision-competition/

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 3.2 Pricing in different types of market

According to Kotler et al. (2008), the pricing freedom of the sellers varies within
different market categories. Economists identify four different forms of market where
each demonstrating a different challenge pricing such as: Monopolistic competition, pure
competition, pure monopolistic competition and oligopolistic competition.

Figure 3.3: types of competitive market.

http://www.oocities.org/shaw4545/mk/kerinmarketing13.htm

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 3.3 Factors Affecting Pricing Decisions
According to Kotler et al., (2008).A firm’s pricing choices are affected equally by
internal factors as well as by external factors.

 Internal factors
Internal factors include the firm’s marketing objectives, marketing mix strategy,
costs and organization.

 Marketing Objectives: the firm must decide before setting the price and the strategy
of the product. Thus if the firm has already decided carefully its target market and
positioning therefore its marketing mix strategy, containing price will be
straightforward.

Figure 3.4: factors affecting pricing decisions, www.google.com

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 3.4 Pricing Strategies – New Products
Through the product life cycle pricing strategies generally change as the time passes.
Particularly the preliminary stage is challenging. The companies in order to deal with
this challenge bring out or create a new product, an innovative product of setting prices
for the beginning. Companies can choose among two strategies:

1. Market skimming pricing

2. Market –penetration pricing

Figure 3.5: Market skimming pricing https://www.hausmanmarketingletter.com/growth-

hacking/

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 1. Market – Skimming Pricing
Many firms initially from the introductory level set high prices when they invent new
products to ‘skim’ revenues from the market. This method is named market –skimming
pricing.

Figure 3.5: Pricing strategies, http://present5.com/prezentaciya-ep-pricing/

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 2. Market – Skimming Pricing
Some companies instead of setting initially a high price to their products to skim off
small but profitable market segments, therefore some firms market –penetration pricing.
Companies set an initially a low price in order to penetrate the marketplace deeply and
quickly (Kotler et al., 2008).

Figure 3.6:pricing strategies, http://slideplayer.com/slide/2546649/

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 Price – Adjustment Strategies
Firms generally adjust their normal prices to accounts for various consumers’ changes as
well as changing conditions.

The figure below summarizes all the seven price-adjustment strategies:

1. Discount and allowances pricing

Figure 3.7: Discount and allowance pricing

https://www.slideshare.net/denashdeni/pricing-adjustment-strategies

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 2. Segmented pricing

Figure 3.8: Pricing strategies, www.slideshare.net/parth79/pricing-strategy-47367489

3. Psychological pricing

Figure3.9: Pricing strategies,www.slideshare.net/ninidevela22/pricing-strategy-

30288094

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 4. Promotional pricing

Figure 3.10: Promotional pricing http://slideplayer.com/slide/1635466/

5. Dynamic pricing

Figure 3.11: Dynamic pricing www.slideshare.net/suraj4321/ecommerce-winning-

pricing-strategy

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 6. Geographical pricing
A firm needs to take into consideration the people who are living in different parts of the
world or the country when setting the product’s price.

 FOB – origin pricing

 Uniform Delivered pricing
 Zone pricing
 Basing-point pricing
 Freight-absorption pricing

7. International pricing

Figure 3.12: International pricing,http://slideplayer.com/slide/5803387/

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 References List

Kotler,P., Armstrong,G., Wong, V., & Saunders, J. (2008). Principles of Marketing (5th
ed.).England: Prentice Hall.

Kotler,P., Armstrong,G., Wong, V., & Saunders, J. (2002). Principles of Marketing (3rd
ed.). England: Prentice Hall.

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