Creating, Pricing,

Promoting, and
Dsitributing Products
Ch. 12 – 14
 Products Classifications

Product:
everything one receives in an exchange, including
all tangible and intangible attributes and expected
benefits; it may be a good, service, or idea.
Consumer Product:
a product purchased to satisfy personal and family
needs.
Business Product:
a product bought for resale, for making other
products, or for use in a firm’s operations.
 Consumer Product Classifications

• Convenience
Inexpensive, frequently purchased item; buyers exert
minimal effort
• Shopping
Buyers willing to expend considerable effort
planning/making purchase, not purchased frequently
• Specialty
Possesses one or more unique characteristics; significant
group of buyers willing to expend considerable
purchasing effort
 Product Life Cycle

…a series of stages in which a product’s sales

revenue and profit increase, reach a peak, and
then decline.
 Stages of Product Life Cycle

• Introduction
• Sales: gradual rise
• Profit: low or loss
• Growth
• Sales: rapid increase
• Profit: per-unit drop
• Maturity
• Sales: peak and decline of curve
• Profit: decline
• Decline
• Sales: sharp drop
• Profit: continued fall
 Brand

Brand: a name, term, symbol, design,

or any combination of these that identifies a seller’s
products as distinct from those of other sellers.

Brand name: the part of a brand that can be spoken.

Trade name: the complete and legal name of an

organization.
 Types of Brands

 Manufacturer/Producer
Owned by a manufacturer

 Store/Private
Owned by individual wholesaler or retailer

 Generic Product/Brand
Product with no brand
 Choosing and Protecting a Brand

• Easy to say, spell, recall

• Suggests product’s uses, special characteristics, and
major benefits
• Distinctive enough to set it apart
 Protect it through registration®.
 Generic terms cannot be legally protected.
 Branding Strategies

• Individual Branding
Different brand for each of firm’s products
• Family Branding
Same brand for all or most of firm’s products
• Brand Extension
Using an existing brand to brand new product in different
product category
 Packaging
Packaging: all the activities involved in developing and
providing a container with graphics for a product.
Packaging functions:
• Protects Product
• Adds Consumer Convenience
• Promotes Product
Design Considerations
• Cost
• Single/multiple units
• Family packaging: consistency
• Environmental responsibility
 Labeling & Pricing

Labeling: the presentation of information on a product

or its package.

Pricing: the amount of money a seller is willing to

accept in exchange for a product at a given time and
under given circumstances.
Breakeven Analysis
 New Product Pricing Strategies

• Price Skimming
Charge highest possible price during introduction stage

• Penetration Pricing
Setting low price for new product to build market share
 Differential Pricing
Charging different prices to different buyers for
same quality and quantity

• Negotiated Final price comes from bargaining

• Secondary Market
One price for primary target market and different price for
another market
• Periodic Discounting
Temporary price reduction on patterned/systematic basis
• Random Discounting
Temporary price reduction on unsystematic basis
 Promotional Pricing

• Price Leaders
Below usual markup, near or below cost
• Special-Event
Price cutting linked to holiday, season, or event
• Comparison Discounting
Set at specific level and compare with higher price
 Channels of Distribution
• Determine how the firm’s products will be
accessible to customers
– Convenience of place
• Direct channel
– Allows full control over price
– Provides first-hand customer feedback
– Requires more employees
– Incurs more expenses to promote product
– May require selling on credit
 Channels of Distribution
• One-Level Channel
– One marketing intermediary is between the
producer and the customer
• Merchants
• Agents
• Two-Level Channel
– Two marketing intermediaries are between the
producer and the customer
• Small businesses may use agents to generate sales to
retailers

13–17
One Level Distribution
Two Levels Distribution
Comparison of Common
Distribution Systems

13–20
 Optimal Distribution Channels

Depends on product’s characteristics:

• Ease of transporting
If product is easy to transport, use of intermediary is
more likely
If product is difficult to transport, use of direct
channel is more likely
• Degree of standardization
Standardized products more likely to use
intermediary
• Ability to fulfill Internet orders
Internet ordering allows use of direct channel
AlternativesDegrees of Market
Coverages
Steps involve in Production and
Distribution of Product
 Retailers

Valuable intermediaries that distribute products

directly to customers
• Number of outlets
Independent retail store versus chain store
Chain stores get lower prices by buying in bulk
Chain stores gain national reputation
• Quality of service
Full-service store versus self-service store
• Variety of products offered
Specialty retailer versus variety retail store
 Non Store Retailers

• Mail-order retailers
Receive orders over the phone or through the mail
Works well for products that are light, somewhat
standardized, and do not need to be serviced
• Websites
Firm does not have to send out catalogs
Cuts costs and allows changes to be made easily and often
• Vending machines
 Wholesalers

Intermediaries who purchase products from

manufacturers and sell them to retailers

Serve manufacturers:
Warehousing; Providing sales expertise; Delivery to retailers;
Assumption of credit risk; Information

Serve retailers:
Warehousing (allows retailer to order in smaller quantities);
Promotion (increase sales by retailers); Displays (attract
customer attention); Credit; Information (inform retailers about
competitors’ policies)
 Vertical Channel Integration

Two or more levels of distribution are managed by a

single firm

• Manufacturer decides to open its own retail stores

• Retailer decides to produce its own products, rather
than buying products from a manufacturer
• Must consider costs and benefits before deciding to
vertically integrate
Trade-off from Using Vertical
Integration