8/7/2023

Strategic Marketing
S. T. P.
Price
Product

30%
OFF
Promotion
Place
People
Target market Process
Physical evidence

In digital context: 4Ps -> 4Cs:

Co-creation; Communal activation; Currency; Conversation

Chapter Nine

New-Product Development and

Product Life-Cycle Strategies

Copyright © 2009 Pearson Education, Inc.

Prof. Nguyen Thi Tuyet Chapter 8 - slide 2
Publishing as Prentice Hall Mai (ISD)

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New-Product Development and

Product Life-Cycle Strategies
Topic Outline

• New-Product Development Strategy

• The New-Product Development Process
• Managing New-Product Development
• Product Life-Cycle Strategies
• Additional Product and Service
Considerations

New-Product Development Strategy

Two ways to obtain new products

Acquisition refers to the buying of a whole company, a

patent, or a license to produce someone else’s
product

New product development refers to original products,

product improvements, product modifications, and
new brands developed from the firm’s own research
and development

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Product levels

Installment Core product

Brand
Payment Packaging Specific product
Core After-
benefit sale
Design service
Features

Quality

Augmented product
Warranty

iPhone 13 Pro Max 128Gb

Copyright © 2009 Pearson Education, Inc.

Chapter 8 - slide 6
Publishing as Prentice Hall

3
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Café bóng đá

Café lốp xe

Café sân vườn

New-Product Development
Reasons for new product failure

Overestimation of market size

Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition

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The New-Product Development Process

1. Idea Generation

Idea generation is the systematic search

for new-product ideas

Sources of new-product ideas

• Internal
• External
?

New-Product Development Process

Idea Generation

Internal sources refer to the company’s own

formal research and development,
management and staff, and intrapreneurial
programs
External sources refer to sources outside the
company such as customers, competitors,
distributors, suppliers, and outside design
firms

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New-Product Development Process

2. Idea Screening

• Identify good ideas and drop poor ideas

• R-W-W Screening Framework:
– Is it real?
– Can we win?
– Is it worth doing?

New-Product Development Process

3. Concept Development and Testing
• Product idea is an idea for a possible
product that the company can see itself
offering to the market
• Product concept is a detailed version of
the idea stated in meaningful consumer
terms
• Product image is the way consumers
perceive an actual or potential product

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New-Product Development Process

3. Concept Development and Testing

Concept testing refers to testing new-

product concepts with groups of target
consumers

New-Product Development Process

4. Marketing Strategy Development

• Marketing strategy development refers

to the initial marketing strategy for
introducing the product to the market
• Marketing strategy statement includes:
– Description of the target market
– Value proposition
– Sales and profit goals

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New-Product Development
Process
5. Business Analysis

• Business analysis involves a review of

the sales, costs, and profit projections to
find out whether they satisfy the
company’s objectives

New-Product Development
Process
6. Product Development

• Product development involves the

creation and testing of one or more
physical versions by the R&D or
engineering departments
• Requires an increase in investment

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New-Product Development
Process
7. Test Marketing

Test marketing is the stage at which the

product and marketing program are
introduced into more realistic marketing
settings
• Provides the marketer with experience in
testing the product and entire marketing
program before full introduction

New-Product Development Process

8. Commercialization

Commercialization is the introduction

of the new product
• When to launch
• Where to launch
• Planned market rollout

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The Product Life Cycle (PLC)

Sales

Value

Profit

Introduction Growth Maturity Decline Withdrawal

Product Life-Cycle Strategies

Introduction Stage

• Slow sales growth

• Little or no profit
• High distribution and promotion
expense

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Product Life-Cycle Strategies

Growth Stage
• Sales increase
• New competitors enter the market
• Price stability or decline to increase volume
• Consumer education
• Profits increase
• Promotion and manufacturing costs gain
economies of scale

Product Life-Cycle Strategies

Maturity Stage

• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to
support sales and profits

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Product Life-Cycle Strategies

Maturity Stage Modifying Strategies

• Market modifying
• Product modifying
• Marketing mix modifying

Product Life-Cycle Strategies

Decline Stage

• Maintain the product

• Harvest the product
• Drop the product

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Strategic Marketing
S. T. P.
Price
Product

30%
OFF
Promotion
Place
People
Target market Process
Physical evidence

In digital context: 4Ps -> 4Cs:

Co-creation; Communal activation; Currency; Conversation

Chapter 10: Pricing

Understanding and Capturing
Customer Value

Copyright © 2009 Pearson Education, Inc.

Chapter 8 - slide 26
Publishing as Prentice Hall

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What Is a Price?

Price is the amount of money charged for a

product or service. It is the sum of all the
values that consumers give up in order to
gain the benefits of having or using a
product or service.

Price is the only element in the marketing mix

that produces revenue; all other elements
represent costs

Group discussion

• Factors to Consider When Setting

Prices

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Factors to Consider When Setting Prices

Customer Perceptions of Value

• Understanding how much value

consumers place on the benefits they
receive from the product and setting a
price that captures that value

Factors to Consider When Setting Prices

Customer Perceptions of Value

Value-based pricing

Good-value pricing

Value-added pricing

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Factors to Consider When Setting Prices

Customer Perceptions of Value

Value-based pricing uses the buyers’

perceptions of value, not the sellers
cost, as the key to pricing. Price is
considered before the marketing
program is set.
• Value-based pricing is customer driven
• Cost-based pricing is product driven

Factors to Consider When

Setting Prices
Customer Perceptions of Value

Good-value pricing offers the right combination

of quality and good service to fair price
(an important type: everyday low pricing – Wal-
Mart)

Existing brands are being redesigned to offer

more quality for a given price or the same
quality for less price

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Cửa hàng bán lẻ Aldi’s

Big Lots Store

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Factors to Consider When

Setting Prices
Customer Perceptions of Value

Everyday low pricing (EDLP) involves

charging a constant everyday low price with
few or no temporary price discounts

High-low pricing involves charging higher

prices on an everyday basis but running
frequent promotions to lower prices
temporarily on selected items

Factors to Consider
When Setting Prices
Customer Perceptions of Value

Value-added pricing attaches value-added

features and services to differentiate offers,
support higher prices, and build pricing
power

Pricing power is the ability to escape price

competition and to justify higher prices and
margins without losing market share

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Factors to Consider
When Setting Prices
Company and Product Costs

Cost-based pricing involves setting prices

based on the costs for producing,
distributing, and selling the product plus a
fair rate of return for its effort and risk

Factors to Consider When

Setting Prices
Company and Product Costs

Cost-based pricing adds a standard markup to

the cost of the product

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Factors to Consider When

Setting Prices
Company and Product Costs
Types of costs

Fixed Variable Total

costs costs costs

Factors to Consider
When Setting Prices
Company and Product Costs

Fixed costs are the costs that do not vary with

production or sales level
• Rent
• Heat
• Interest
• Executive salaries

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Factors to Consider When

Setting Prices
Company and Product Costs

Variable costs are the costs that vary with the

level of production
• Packaging
• Raw materials

Factors to Consider
When Setting Prices
Company and Product Costs

Total costs are the sum of the fixed and

variable costs for any given level of
production

Average cost is the cost associated with a

given level of output

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Factors to Consider When

Setting Prices
Costs as a Function of Production Experience

• Experience or learning curve is when

average cost falls as production
increases because fixed costs are
spread over more units

Factors to Consider When

Setting Prices
Cost-Plus Pricing
• Cost-plus pricing adds a standard markup
to the cost of the product
• Benefits
– Sellers are certain about costs
– Prices are similar in industry and price competition is
minimized
– Consumers feel it is fair
• Disadvantages
– Ignores demand and competitor prices

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Factors to Consider
When Setting Prices
Break-Even Analysis and Target Profit Pricing

Break-even pricing is the price at which total

costs are equal to total revenue and there is
no profit

Target profit pricing is the price at which the

firm will break even or make the profit it’s
seeking

Factors to Consider When

Setting Prices
Other Internal and External Considerations

• Customer perceptions of value set the

upper limit for prices, and costs set the
lower limit
• Companies must consider internal and
external factors when setting prices

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3 C model for pricing

Factors to Consider
When Setting Prices
Other Internal and External Considerations

Target costing starts with an ideal selling price

based on consumer value considerations
and then targets costs that will ensure that
the price is met

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Factors to Consider When

Setting Prices
Other Internal and External Considerations
Overall marketing strategy, objectives, and mix

Factors to Consider When

Setting Prices
Other Internal and External Considerations

Organizational considerations include:

• Who should set the price
• Who can influence the prices

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Factors to Consider When

Setting Prices
Other Internal and External Considerations
The Market and Demand

• Before setting prices, the marketer must

understand the relationship between
price and demand for its products

Factors to Consider When

Setting Prices
Other Internal and External Consideration
The Market and Demand

Pure competition
Monopolistic competition
Oligopolistic competition
Pure monopoly

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Factors to Consider When

Setting Prices
Other Internal and External Considerations

The demand curve shows the number of units

the market will buy in a given period at
different prices
• Normally, demand and price are inversely
related
• Higher price = lower demand
• For prestige (luxury) goods, higher price can
equal higher demand when consumers
perceive higher prices as higher quality

Factors to Consider When

Setting Prices
Other Internal and External Considerations

Price elasticity of demand illustrates the response of

demand to a change in price

Inelastic demand occurs when demand hardly changes when there

is a small change in price

Elastic demand occurs when demand changes greatly for a small

change in price

Price elasticity of demand = % change in quantity demand

% change in price

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Factors to Consider When Setting Prices

Other Internal and External Considerations
Competitor's Strategies

• Comparison of offering in terms of

customer value
• Strength of competitors
• Competition pricing strategies

Factors to Consider
When Setting Prices
Other Internal and External Consideration

Economic conditions

Reseller’s response to price

Government

Social concerns

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Pricing Strategies

Copyright © 2009 Pearson Education, Inc.

Chapter 8 - slide 57
Publishing as Prentice Hall

Pricing Strategies

• New-Product Pricing Strategies

• Product Mix Pricing Strategies
• Price Adjustment Strategies
• Price Changes

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New-Product Pricing
Strategies

• Market-skimming pricing
• Market-penetration pricing

Pricing for Iphone?

New-Product Pricing
Strategies
Market-skimming pricing is a strategy with high
initial prices to “skim” revenue layers from the
market, then the price is reduced gradually.
• Product quality and image must support the price
• Buyers must want the product at the price
• Costs of producing the product in small volume
should not cancel the advantage of higher prices
• Competitors should not be able to enter the
market easily

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New-Product Pricing
Strategies
Market-penetration pricing sets a low initial
price in order to penetrate the market quickly
and deeply to attract a large number of
buyers quickly to gain market share
• Price sensitive market
• Inverse relationship of production and
distribution cost to sales growth
• Low prices must keep competition out of the
market

Pricing Strategies

• New-Product Pricing Strategies

• Product Mix Pricing Strategies
• Price Adjustment Strategies
• Price Changes

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Product Mix Pricing Strategies

Optional- Captive-
Product
product product
line pricing
pricing pricing

Product
By-product bundle
pricing pricing

Product Mix Pricing Strategies

Product line pricing takes into account the
cost differences between products in the
line, customer evaluation of their features,
and competitors’ prices
Optional product pricing takes into account
optional or accessory products along with
the main product

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Product Mix Pricing Strategies

• Captive-product pricing involves products
that must be used along with the main
product
• Two-part pricing involves breaking the Blade
price into:
– Fixed fee
– Variable usage fee

Razor

Price Mix Pricing Strategies

By-product pricing refers to products with little or no
value produced as a result of the main product.
Producers will seek little or no profit other than the
cost to cover storage and delivery.

Coffee pods

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Price Mix Pricing Strategies

Product bundle pricing combines several

products at a reduced price

Pricing Strategies

• New-Product Pricing Strategies

• Product Mix Pricing Strategies
• Price Adjustment Strategies
• Price Changes

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Price-Adjustment Strategies
Discount and
Segmented
allowance
pricing
pricing

Psychological Promotional
pricing pricing

Geographic Dynamic International

pricing pricing pricing

Price-Adjustment Strategies
Pricing Strategies

Discount and allowance pricing reduces

prices to reward customer responses such
as paying early or promoting the product
• Discounts
• Allowances

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Price-Adjustment Strategies
Pricing Strategies

Segmented pricing is used when a company

sells a product at two or more prices even
though the difference is not based on cost

Price-Adjustment Strategies
Pricing Strategies

Psychological pricing occurs when sellers

consider the psychology of prices and not simply
the economics
• Reference prices are prices that buyers carry in
their minds and refer to when looking at a given
product
– Noting current prices
– Remembering past prices
– Assessing the buying situations

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Price-Adjustment Strategies
Pricing Strategies

Promotional pricing is when prices are

temporarily priced below list price or cost to
increase demand
• Special event pricing
• Cash rebates
• Low-interest financing
• Longer warrantees
• Free maintenance

Price-Adjustment Strategies
Pricing Strategies

Geographical pricing is used for customers in

different parts of the country or the world
• FOB pricing
• Uniformed-delivery pricing
• Zone pricing
• Basing-point pricing
• Freight-absorption pricing

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Price-Adjustment Strategies
Pricing Strategies

• FOB (free on board) pricing means that

the goods are delivered to the carrier and
the title and responsibility passes to the
customer

• Uniformed delivery pricing means the

company charges the same price plus
freight to all customers, regardless of
location

Price-Adjustment Strategies
Pricing Strategies

• Zone pricing means that the company sets

up two or more zones where customers
within a given zone pay a single total price

• Basing point pricing means that a seller

selects a given city as a “basing point” and
charges all customers the freight cost
associated from that city to the customer
location, regardless of the city from which
the goods are actually shipped

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Price-Adjustment Strategies
Pricing Strategies

• Freight absorption pricing means the

seller absorbs all or part of the actual freight
charge as an incentive to attract business in
competitive markets

Price-Adjustment Strategies
Pricing Strategies

Dynamic pricing is when prices are

adjusted continually to meet the
characteristics and needs of the
individual customer and situations

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Price-Adjustment Strategies
Pricing Strategies

International pricing is when prices are set in

a specific country based on country-specific
factors
• Economic conditions
• Competitive conditions
• Laws and regulations
• Infrastructure
• Company marketing objective

Pricing Strategies

• New-Product Pricing Strategies

• Product Mix Pricing Strategies
• Price Adjustment Strategies
• Price Changes

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Price Changes
Initiating Pricing Changes

• Price cuts
• Price increases

Why would a company consider

cutting/increasing its price?

Thinking: Price Changes

Buyer Reactions to Pricing Changes

Price
Price cuts
increases

? ?

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Price Changes
Buyer Reactions to Pricing Changes

Price
Price cuts
increases
• Product is “hot” • New models
• Company greed will be available
• Models are not
selling well
• Quality issues

Marketing Mix
Price

Product

30%
OFF
Promotion
Place

People
Target market Process
Physical evidence

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Marketing Channels
Delivering Customer Value

Copyright © 2009 Pearson Education, Inc.

Chapter 8 - slide 86
Publishing as Prentice Hall

Marketing channel/distribution channel

• A set of interdependent organizations

that help make a product or service
available for use or consumption by the
consumer or business user

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Discussion

• How channel members add value for

– Manufacturers
– Consumers

The Nature and Importance of

Marketing Channels
How Channel Members Add Value

Intermediaries offer producers greater

efficiency in making goods available to
target markets. Through their contacts,
experience, specialization, and scale of
operations, intermediaries usually offer the
firm more than it can achieve on its own.

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The Nature and Importance of

Marketing Channels
How Channel Members Add Value

• From an economic view, intermediaries

transform the assortment of products into
assortments wanted by consumers
• Channel members add value by bridging the
major time, place, and possession gaps that
separate goods and services from those who
would use them

The Nature and Importance of

Marketing Channels
How Channel Members Add Value

Information Promotion Contact

Physical
Matching Negotiation
distribution

Financing Risk Taking

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Consumer and Industrial Marketing Channels

International channel
Example of distribution channel of fresh fruits
(exporting to UAE)

Agent

Importer/wholesaler

Central wholesalers

Regional Hypermarkets/ Hotels &

Organizations
wholesalers supermarkets Food suppliers

Small
Source: Higginson, 2006
retailers

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Channel Behavior and Organization

Multichannel Distribution Systems
Hybrid Marketing Channels

Multichannel Distribution systems

(Hybrid marketing channels) are when a
single firm sets up two or more marketing
channels to reach one or more customer
segments

Channel Behavior and Organization

Multichannel Distribution systems (Hybrid
marketing channels) are when a single firm
sets up two or more marketing channels to reach
one or more customer segments

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Channel Design Decisions

Analyzing Setting
consumer channel
needs objectives

Identifying
major
Evaluation
channel
alternatives

Channel Design Decisions

Setting Channel Objectives

• Targeted levels of customer service

• What segments to serve
• Best channels to use
• Minimizing the cost of meeting customer
service requirements

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Channel Design Decisions

Identifying Major Alternatives

• Types of intermediaries
• Number of intermediaries
• Responsibilities of each channel
member

Channel Design Decisions

Identifying Major Alternatives

Intensive distribution
• Candy and toothpaste

Exclusive distribution
• Luxury automobiles and prestige
clothing
Selective distribution
• Television and home appliance

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Channel Management Decisions

Selecting Managing & Evaluating

channel motivating channel
members channel members members

Discussion

• How to select good channel members?

• How to motivate channel members?
• How to evaluate channel members?

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 8/7/2023

Example: Selecting distributors for

company

Do nhu cầu mở rộng kinh doanh, Công ty

Cổ phần Archcafé chúng tôi cần tìm các đối
tác, nhà phân phối cấp 2 về ngành hàng cà
phê, trà trên toàn quốc

Yêu cầu:

- Có hứng thú với việc kinh doanh hoặc

đang kinh doanh các mặt hàng thực phẩm.

- Có chỗ để hàng hóa khoảng 4 mét vuông.

- Năng lực tài chính: 5 - 20 triệu đồng

Motivating distributors
Quyền lợi:
- Hưởng chính sách chiết khấu bán hàng (tổng chiết khấu
trên >20%).
- Hỗ trợ hoạt động thị trường, quảng bá và tìm kiếm khách hàng
- Hỗ trợ đào tạo kiến thức về sản phẩm và các công cụ khai thác thị
trường
- Được đầu tư 1 nhân viên, lương cơ bản do công ty Cổ phần
Archcafé trả.
- Quản lý nhân viên, hàng hóa trên hệ thống bán hàng DMS của
công ty
- Không cần cam kết doanh số
- Các chính sách hỗ trợ khác

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Team project: Marketing Plan

Market Planning—Parts of a Marketing Plan

Executive Marketing Threats and

summary situation opportunities

Objective and Action Budgets

issues programs

Controls

52