Pricing for Convenience Goods

Topics: Marketing, Pricing, Product management Pages: 43 (12599 words) Published: April 13, 2011
CH 12]

Business 101 — The Basics


Chapter 12

Product and Pricing Strategies
Learning Goals
1. Identify the components of the total product concept. 2. List the types of consumer goods, industrial goods, and services. 3. Explain the product mix and product lines. 4. List and describe the stages of the product life cycle. 5. Identify the stages in the new-product development process. 6. Describe how products are identified. 7. Outline the different types of pricing objectives. 8. Discuss how prices are set in the marketplace. 9. Explain how breakeven analysis can be used in pricing strategy. 10. Differentiate between skimming and penetration pricing strategies.


Product and Pricing Strategies
Chapter Overview

[CH 12

product Bundle of physical, service, and symbolic attributes designed to satisfy consumer wants.

This chapter deals with the first two components of a marketing mix: product strategy and pricing strategy. Marketers broadly define a product as a bundle of physical, service, and symbolic attributes designed to satisfy consumer wants. Therefore, product strategy involves considerably more than producing a physical good or service. It is a total product concept that includes decisions about package design, brand name, trademarks, warranties, guarantees, product image, and new-product development. The Sears advertisement in Figure 12.1 illustrates the total product concept. In the ad, Sears points out that consumers buy its Kenmore appliances for reasons other than the products' functional characteristics. Rather, the main reason consumers choose Kenmore is because of the retailer's satisfactionguaranteed-or-money-back policy. The second element of the marketing mix is pricing strategy. Price is the exchange value of a good or service. An item is worth only what someone else is willing to pay for it. In a primitive society, the exchange value may be determined by trading a good for some other commodity. A horse may be worth ten coins; twelve apples may be worth two loaves of bread. More advanced societies use money for exchange. But in either case, the price of a good or service is its exchange value. Pricing strategy deals with the multitude of factors that influence the setting of a price. This chapter begins by discussing the classification of goods and services, the product mix, and the product life cycle. We then explain how products are developed, identified, and packaged and the service attributes of products. The second part of the chapter focuses on the pricing of goods and services, including pricing objectives, The picture above is one of Chevrolet's longest running how prices are set, and different types of pricing print ads. It ran in both TV and in print. strategies.

price Exchange value of a good or service.

Classifying Goods and Services
Marketers have found it useful to classify goods and services because each type requires a different competitive strategy. Goods and services are classified as either consumer or industrial, depending on the purchaser and use of the particular item. Consumer and industrial product classifications can also be subdivided.

Classifying Consumer Goods
A variety of classifications have been suggested for consumer goods, but the system most typically used has three subcategories: convenience goods, shopping goods, and specialty goods. This system, based on consumer buying habits, has been used for about 70 years. Convenience goods are products the consumer seeks to purchase frequently, immediately, and with a minimum of effort. Items stocked in 24-hour convenience stores, vending machines, and local newsstands are usually convenience goods. Newspapers, chewing gum, magazines, milk, beer, bread, and cigarettes are all convenience goods.

convenience goods Products that consumers seek to purchase frequently, immediately, and with a minimum of effort.

CH 12]

Business 101 — The Basics


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