Modul Matrikulasi

Program Doktor Ilmu Manajemen

Universitas Brawijaya

CREATING AND PRICING

PRODUCTS
Chapter IX
 ➔ BACKGROUND ON P ➔ IDENTIFYING A TARGET
RODUCTS
MARKET

➔ CREATING NEW PRO ➔ PRODUCT

DUCT DIFFERENTIATION
Table
of
Content
➔ PRICING STRATEGY ➔ ADDITIONAL
PRICING DECISIONS
Concept of Pricing and Product Strategies

Highlights
● Pricing Strategies are pivotal element
to make sure that firm’s can gain profits
and create value
● Pricing strategies should be plan
carefully so it can be assurance for
launch firm’s product and gain profit
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Background On Products By Criteria

Convenient Product Shopping Product Speciality Product

Convenience products are
widely available to consumers,
are purchased frequently, and
are easily accessible.
Shopping products differ from
convenience products in that
they are not purchased
frequently.
Specialty products are products
that specific consumers
consider to be special and
therefore make a special effort
to purchase.

Milk, Newspaper, Soda, Etc Furniture, Appliances, etc Rolex watch, Expensive Car,
Etc
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Background On Products Product Line

A product line is a set of related products or services offered by a single firm. A product line tends to expand
over time as a firm identifies other consumer needs.
Example

Regular Cola Non-Caffeine Product

Highlights
● Coca-cola company
has expanded its
product line of soft
drinks to satisfy
Diet Cola Caffeine Product various needs.
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Background On Products Product Mix

The assortment of products offered by a firm is referred to as the product mix. Most firms tend to expand
their product mix over time as they identify other consumer needs or preferences.

Example

Highlights
GoTo Group expand
their product to different
functions, such as on-
demand apps, e-
commerce, fintech,
business, etc
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Improving the
Background On Products Convenience

A firm may also extend its product by making the product more accessible and more convenient to use or
acquire. To many consumers, convenience may be just as important as the product itself.

Example

Highlights
Airport Many firm’s like airport
or book store created
their own online order
apps to help their
Online Order customers to ordered
online their product
Book Store
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Background On Products Product Life Cycle

Most products experience a product life cycle, or a typical set of phases over their
lifetime. The marketing decisions made about a particular product may be influenced
by the prevailing phase of the cycle.

Product Life Cycle

Highlights
Firm’s should understand
where their product life cycle
positions, so they can make
decisions for what they need
to do to their product, mostly
it’s affected on marketing
decisions
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Identifying A Target Market

Target markets can be broadly classified as consumer markets or industrial markets.

Industrial Markets Consumer Markets Mix Markets

industrial markets exist for Consumer markets exist for Mix markets exist for both of
industrial products that are various consumer products and Industrial and Consumer
purchased by firms services markets

plastic and steel cameras, clothes, and Tires and internet provider
household items
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Factors That Affect the Size of a

Identifying A Target Market Target Market

As consumer preferences change, the size of a particular target market can change. There are 4
factors that can affect to the size of a target market :

Demographics Geography Economics Social

the social values of

Characteristics of the During a recessionary
different climates, consumers change, so
human population or period, the demand for
cultures, and contours do their preference
specific segments of most types of goods
of the region Such as cigarettes and
the population. declines.
aperitif
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Creating New Products

Many additional products are created in response to customer feedback. For example, when
customers frequently order a type of product that a firm does not sell, these requests prompt the
firm to add that type of product to its product line.

Methods to Creating New Products

Market Research Research and Development

Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Creating New Products Market Research Methods

marketing research are the set of methods to do accumulation and analysis of

data in order to make a particular marketing decision :

● Find consumers needs for a specific product that is not available.

● Identify deficiencies in the firm’s existing products
● The design and quality of a product may be revised to accommodate
Market Research
consumer preferences.
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Creating New Products Research n Development Methods

Firms invest funds in research and development (R&D) to design new

products or to improve the products they already produce. To expand
their product line, many firms have recently increased their investment
in R&D.

Research and Development For Example : Manufacturing firms tend to invest more money in R&D than service
firms because technology can improve manufactured products more easily than services.
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Creating New Product Following Step to Create New Product

Develop Product Idea Assess the feasibility Design and Test

Post-audit Distribute and promote

Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Product Differentiation
Product differentiation is the effort of a firm to distinguish its product from competitors’ products in a
manner that makes the product more desirable.

Methods to Differentiate Product

Unique Design Unique Packaging Unique Branding

Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Pricing Strategies
firm needs to determine a price for its product. Managers typically attempt to set a price that will
maximize the firm’s value. The price charged for a product affects the firm’s revenue and therefore its
earnings.
things to consider when planning
pricing strategy

Pricing According to
Competitors’ Prices.
Penetration Pricing
Pricing According to the Cost Pricing According to the Defensive Pricing
of Productions Supply of Inventory
Prestige Pricing
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Pricing Strategies Example of Setting a Product’s Price

Study Cases
Assume that you plan to run this Hot Dog
business for one year, with detailed cost are
:
● Fixed Cost = $4.000/year
● Variable Cost = $0.60/piece Assume that you price the hot dogs at $1.80 so that your price is
slightly lower than those of competitors.
Competitor Prices = $2.00/hot dog

You forecast that you can sell 20,000 hot

dogs in one year as long as
your price is competitive.

calculate Total Cost, Total Revenue,

and Profits So, Your Total Profits are $20.000
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Pricing Strategies Example of Setting Break-Even Point

Study Cases
difference between price and variable cost per unit

Assume that you plan to run this Hot Dog

business for one year, with detailed cost are
:
● Fixed Cost = $4.000/year
● Variable Cost = $0.60/piece

Competitor Prices = $2.00/hot dog

how many hot dogs must be sold to

reach the Break-Even Point? If you charge a higher price for hot dogs, your contribution
margin is higher, and you will break even at a lower quantity.
However, a higher price may result in lower demand and
therefore may be less profitable
Background Product Identify Target Market Create New Product Product Differentiations Pricing Strategy Add-on

Pricing Strategies Pricing Technology-Based Products

As information technology (IT) is increasingly incorporated into products, manufacturers are having to
rethink their traditional pricing strategies.

The IT components of products have a different cost structure

however. Although it may cost millions of dollars to design and test a single chip, once
chips are in production, the variable cost of producing additionazl chips is very small
(such as a few dollars or even pennies).

Firms with technology-based products need to spread the cost of the technology
across
across their
their product
product and
and ensure
ensure that
that they
they properly
properly price
price the
the product
product toto cover
cover the
the cost
cost ofof the
the technology
technology
 Background Product Identify Target Market
Additional Pricing Decisions
Discounting
Some consumers are willing to
pay more for a product than
others, a firm may attempt to
charge different prices to
different customers. For
example, restaurants and hotels
often offer discounts for senior
citizens.
Create New Product Product Differentiations
Sales Prices
sales prices as a means of
discounting for those consumers
who will make purchases only if
the price is reduced. For
example, retail stores tend to put
some of their products on sale in
any given week.
Pricing Strategy Add-on
Credit Terms
Supplier firms commonly allow
manufacturing firms to purchase
supplies on credit. they may
still offer credit to attract some
manufacturing firms that do not
have cash available.