UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES

UNIT IV - PRODUCT AND PRICING STRATEGIES
 PRODUCT CLASSIFICATION
 PRODUCT MIX DECISION
 RURAL PRODUCT CATEGORY
 NEW PRODUCT DEVELOPMENT
 CONSUMER ADOPTION PROCESS
 PRODUCT LIFE CYCLE
 PRICING IN RURAL MARKETS – CONCEPTS,
POLICIES AND STRATEGIES

PRODUCT CLASSIFICATION
 Product classification organizes products into
four categories based mostly on consumer buying
behavior, similarity to competing brands, and
price range. Classifying products helps
marketing and sales teams develop strategies to
target consumer needs.

TYPES OF PRODUCT
CLASSIFICATION

1. CONVENIENCE GOODS
Convenience goods are products that consumers buy
repeatedly without much thought.
 Once consumers choose their brand of choice, they
typically stick to it unless they see a reason to switch.
For example, an interesting advertisement or
convenient placement at the checkout aisle may
inspire them to try a new brand.
 Examples of convenience goods include:
 Gum
 Toilet paper
 Soap
 Toothpaste
 Shampoo
 Milk

2. SHOPPING GOODS
 Shopping goods are products shoppers typically spend more time researching
and comparing before they buy. Unlike convenience goods, these are rarely
impulse purchases.
 Shopping goods can be affordable items, like clothes and home decor. For
example, if you have an event coming up and you want to get a nice pair of
shoes, this doesn’t fall under impulse purchases. Instead, you'll want to try it
on, consider whether the price is worth it, and even get input from your loved
ones.
 Shopping goods can also be a one-off purchase with a higher economic impact.
These are higher-end goods like cars and houses.
 Since it's an expensive and important purchase, you'll spend a good amount
of time deliberating on it. For example, when buying a house you'll attend
different open houses, and compare the pros and cons of your final selection.
Marketing Shopping Goods
 To promote a shopping good, invest in content that persuades your buyer of
your product’s value. It's important your marketing materials show how your
product differs from the competition and the unique value it offers. This
commercial for Honda is a great example of shopping goods marketing:
 Price also plays a role in this product type. This means that the promotion of
discounts and sales can attract consumers to your brand.

3. SPECIALTY GOODS
 A specialty good is the only product of its kind on
the market. This means consumers don't usually
feel the need to compare and deliberate as much
as they would with shopping products.
 For example, iPhones are a specialty good
because of Apple’s strong brand identity, unique
features, and operating system. This combination
creates a perception of product quality.
 Other examples of specialty goods include luxury
cars, gourmet food brands, and designer clothing.

4. UNSOUGHT GOODS
 Unsought products are goods that people aren't
usually excited to buy. These products have
utility, but they're usually not fun purchases.
Good examples of unsought goods include fire
extinguishers, insurance, and refrigerators.
 People often buy unsought goods out of a sense of
fear, danger, or utility. For instance, you
wouldn't go online to search for the "new and
best" fire extinguisher. You'd only buy one due to
the fear of a potential fire. People also buy
unsought goods like refrigerators or toasters
because the old ones stopped working.

UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES

PRODUCT MIX
Product mix, also known as product assortment
or product portfolio, refers to the complete set of
products and/or services offered by a firm.
A product mix consists of product lines, which
are associated items that consumers tend to use
together or think of as similar products or
services.

DIMENSIONS OF A PRODUCT MIX
An organization's product mix has the following
four dimensions:-
 width - (number of different product lines)
 length - (total number of items within product
lines)
 depth - (number of variants of each product)
 consistency - (closeness of products in terms of
usage, production, distribution)

Width
 The width of an organization's product mix pertains to
the number of product lines that the organization is
offering.
Length
 The length of an organization's product mix pertains to
the total number of products or items in the product
mix.
Depth
 The depth of an organization's product mix pertains to
the total number of variants of each product offered in
the line. Variants include size, color, flavors, and other
distinguishing characteristics.
Consistency
 The consistency of an organization's product mix refers
to how closely related the various product lines are in
use, production, distribution, or in any other manner.

PRODUCT MIX DECISION
 Product mix decision refers to the decisions regarding
adding a new or eliminating any existing product from
the product mix, adding a new product line,
lengthening an existing line, or bringing new variants
of a brand to expand the business and increase
profitability.
 Product Line Decision - Product line managers
take product line decisions considering the sales and
profit of each item in the line and comparing their
product line with the competitors' product lines in the
same markets. Marketing managers have to decide
the optimal length of the product line by adding new
items or dropping existing items from the line.

 Line Stretching Decision - Line stretching means
lengthening a product line beyond its current range.
An organization can stretch its product line
downward, upward, or both ways.
Downward Stretching means adding low-end items
to the product line, for example in the Indian car
market, watching the success of Maruti-Suzuki in the
small car segment, Toyota and Honda also entered
the segment.
Upward Stretching means adding high-end items to
the product line, for example, Maruti-Suzuki initially
entered the small car segment but later entered the
higher-end segment.
Two-way Stretching means stretching the line in both
directions if an organization is in the middle range of
the market.

 Line Filling Decision - It means adding more
items within the present range of the product
line. Line filling can be done to reach incremental
profits or to utilize excess capacity.

RURAL PRODUCT CATEGORY
 Product Strategies, Rural product categories:
FMCG, Consumer Durables, Agriculture goods
and Services

RURAL PRODUCT
CATEGORIES
Fast Moving Consumer Goods
Major players are HUL, Dabur, Marico, Colgate, Palmolive, Nirma, CavinKare and Godrej.

RURAL PRODUCT
CATEGORIES
Consumer Durables
Usha, Bajaj, Philips, Titan, Godrej, Videocon, Onida, Salora, Hero Cycles,Mahindra &
Mahindra and Tata.
New entrants – LG, Samsung and Maruti.

RURAL PRODUCT
CATEGORIES
Agricultural Products
Agricultural inputs seeds, fertilizers, pesticides, insecticides and
implements (tractors, tillers and threshers) Livestock, poultry and
fishery.
Major players are Rallis India, Monsanto, Chambal Fertilisers,
IFFCO, Mahindra & Mahindra, Eicher and Escorts.

RURAL PRODUCT
CATEGORIES
Services
Telecommunications (BSNL), banking (SBI), insurance (LIC).

RURAL MARKETING
STRATEGIES
Degrees of Segmentation
Mass Marketing
 All consumers are being treated the same.
 Allows a company to target the maximum number of consumers.
Example –
₪ HUL offered only one detergent powder, Surf, to all consumers.
₪ But when Nirma entered the market and grabbed a sizeable market share of low-
income households.
₪ HUL woke up and introduced Wheel.

NEW PRODUCT DEVELOPMENT
 New product development is a process of idea
generation, creation, designing, validation, and
launching of a product that is completely new to
the market.
 Examples of new product
development include creating a new brand of
canned soup, launching an app for tracking
mileage, and introducing a smartwatch that can
track workouts. This process requires careful
planning and consideration of potential customer
needs, market trends, and competitive landscape.

CONTD….
 Product development includes the product’s
entire journey — everything from ideation to
strategy and planning, building and launching,
and more. In short: Product development is the
process by which you plan, build, and launch
your product into the world.

CONSUMER ADOPTION
 Customer adoption refers to introducing a new
product to the marketplace and acquiring new
and/or repeat customers. It’s the start-to-end
process of product awareness and integration into
a customer’s life. Customer adoption also refers to
the rate at which current customers adopt or
purchase new products, features, or services, and
how quickly they adapt to using them as
intended.
 In short, customer adoption pertains to
maximizing potential and the effective use and
implementation of your product or service for
your customers.

1. PRODUCT AWARENESS
 The consumer becomes aware of the new product
but lacks information about it. Initially, the
consumer must become aware of the new product.
 Awareness leads to interest, and the customer
seeks information about the new product
HOW?
 Ungating your content
 Running paid ads
 Hosting and attending online and in-person events
 Newsletter
 Customer success
 Hosting and attending online and in-person events

2. PRODUCT INTEREST
 This stage sits with marketing. Potential buyers are now aware of your
product, and they’re interested. This interest allows marketers to implement
additional marketing adoption strategies.
What are the strategies?
 At this stage of the adoption process, you want to provide more information
to the potential buyer. And, if possible, get them to sign up for further
communications from you, increasing your chances of selling.
 Email marketing
 Product content
 Here’s the rule:
 Social media
 Newsletters and podcasts
 Customer success

3. PRODUCT EVALUATION
 In this stage of the customer adoption process, interested prospects
are considering your product. They’re trying to understand exactly
how to use it, and the impact it could have on their company or
offering. They’ll also be judging if it’s a cost-effective investment.
 This customer adoption phase sits with marketing and sales.
 This is the time to communicate with the prospect. You need to
provide them with information to help them make an informed
decision.
 Sales
 Create BOFU content
 Bottom of the funnel (BOFU) content is your best friend in the
product evaluation stage. This is content specifically written for
people who are aware of your product and are exploring their
options.
 Website journey

4. PRODUCT TESTING
 In the fourth stage of customer adoption, the
prospect is excited by your product (in theory).
Now, they need to see it in action.
 That’s why this phase sits with sales.
 It depends on the product you’re selling. Offering a
trial isn’t always viable, but there are other ways
to test whether a product can work for the
prospect.
 Trial
 Demo
 Personalised resources

5. PRODUCT ADOPTION
 Definition: The customer bought your product, but you still have work to
do. This phase of customer adoption sits with customer success and
customer service.
 The product adoption stage is about providing the customer with an
excellent onboarding process. If you ensure they’re as happy as possible
with their purchase, the long-term effects of this can be huge.
 Onboarding
 Cross-selling and upselling
 Reviews
 Key customer adoption metrics
 Active users (Daily/Monthly)
 The number of unique users who engage with your product within a
specified period.

STAGES OF PRODUCT LIFE CYCLE
#1 – Introduction
 Once companies introduce a product into the market, it will not
generate revenue until the consumers know about it. Hence, businesses
publicize their products through advertising, press releases, social media posts,
etc.
 Since they have to spread awareness among consumers quickly, the advertising
costs are typically high. Moreover, there are additional expenses at the time of a
product launch, for example, distribution and packaging. Thus, in the first
stage, the cost of introducing the product is usually more than the income
earned.
#2 – Growth
 In the second stage, the product garners more popularity. As product awareness
spreads rapidly among consumers, sales increases exponentially. Thus, a
business can maximize production capability, reaping the benefits of economies
of scale. Moreover, companies can open multiple distribution channels and add
different features to its offering.
 During the growth stage, a company may face tough competition if other
businesses introduce a similar product in the market. This might lead to price
competition. Moreover, companies might incur higher marketing expenses to
maintain the product’s demand among consumers.

CONTD….
#3 – Maturity
 The sales increase rate is lower than that of the growth stage. As a result,
companies may cut their prices and increase their marketing activities to compete
with other players in the market.
 Entrepreneurs learn from the mistakes they made in the first two stages in this
phase and take measures to improve efficiency. The advertisements aim at product
differentiation from competitors’ offerings rather than spread awareness. A
product’s profitability is the highest in the maturity stage as the cost of
manufacturing the product decreases while sales continue to rise.
 The main objective of a company in the last product life cycle stage is to keep the
market share consistent when cheaper alternatives enter the market.
#4 – Decline
 In the final stage, the product’s sales start to decrease along with its profitability.
This is mainly because of the introduction of various new products that fulfill the
consumers’ requirements better than it.
 If a product is on the verge of becoming obsolete, the company can take the
following measures:
 They can remove it from the market.
 The management team can lower the marketing expenses or reduce the production
cost to maximize the product life for as long as possible.

PRICING
 Price refers to exchange value of the product and
includes-
 (a) Maximum retail price,
 (b) Discounts,
 (c) Credit,
 (d) Terms of delivery and
 (e) Maintenance charges.
Rural retailers generally require credit and,
therefore, product pricing has to be adjusted to
meet their requirements.

PRICING STRATEGY
 (a) Low Price:
 (b) No-Frills Product:
 (c) Refill/Reusable Packaging
 (d) Credit Facilities
 (e) Discounts
 (f) Promotional Schemes
 (g) Value Engineering

 Price is a major element of the marketing mix.it
is an important strategic issue because it is
related to product positioning.
 Pricing is a determinant of the market demand
for the product. But before any pricing decisions
are undertaken ,it is important that the factors
influencing price are understood. These factors
can be categorized as internal and external
PRICING

These factors can be categorized as internal and
external factors
Internal factors : The internal factors affecting
price include cost and the company’s pricing
objectives.
 cost factors
 Promotion as a cost factor
 Credit based transactions increase costs
 Pricing Objectives
 Profit maximization in the long run
 Minimum returns on sales turn over
INFLUENCING FACTORS

 Keeping up with the competition
 Increasing sales volume and market share
External factor: This factor includes –
 Customers
 Suppliers
 Competitors
 Legal environment

 Optional product pricing
 Captive product pricing
 Product bundle pricing
 Penetration pricing
 Economy pricing
 Value pricing
 Coinage pricing
 Psychological pricing
PRICING STRATEGIES

Optional product pricing is the pricing of
optional or accessory products along with the main
product like a company selling tractors for a low
sticker price but charging high prices for serving
and spare parts.
Ex:
OPTIONAL PRODUCT PRICING

Captive product pricing is setting a price for
products that must be used along with the main
product , such as blade for a razor and film for a
camera.
Ex:
CAPTIVE PRODUCT PRICING

Product bundle pricing is combining several
products and offering the bundle at a reduced price
.
Companies very commonly use this pricing
strategy during periods of inflation it helps to
generate sales and attract customers in a highly
competitive market , it is mostly used in festival.
PRODUCT BUNDLE PRICING

A penetration pricing policy involves setting
prices of products relatively low compared to those
of similar products. This pricing policy is
appropriate when demand is elastic.
Ex: Anchor white and Ajanta tooth pastes used
this pricing to enter the crowded dental cream
market
PENETRATION
PRICING

Economy pricing is no-frills low price, the cost of
marketing and manufacturing are kept to a
minimum.
Regional and local manufacturers usually follow
this economy pricing strategy as they have limited
investments to make on building brands and
developing channels.
Ex: Nirma & Ghari
ECONOMY PRICING

When economic recession or increased competition
forces a company to provide value products and
services to retain sales.
Ex: Godrej No.1 soap placed their offering
containing rose, sandalwood neem and other
ingredients at a very economical price .
VALUE PRICING

Prices are set of a coin value. Coinage price is
directly proportionate to the package size. These
packs are small in size and are normally meant for
one time consumption(shampoo sachet)or days
consumption(tea bag)or a week’s
consumption(bathing or washing soap).
COINAGE PRICING

The price quality relationship refers to the idea
that consumers tend to equate product quality with
the price charged.
In the color TV segment LG at a higher price is
considered a better buy than Texla and Jolly
brands particularly in R1 households.
PSYCHOLOGICAL
PRICING

 Cash discounts or bargaining benefits
 Free gift
 Schemes for retailers
 Discriminatory pricing
DISCOUNTS AND ALLOWANCES

Price discrimination exists when sales of
identical goods or services are transacted at
different prices from the same supplier, different
prices are charged on the basis of different
consumer groups, location, product form etc.
discriminatory pricing may take the following
norms-
 Consumer segment pricing
 Product form pricing
 Location pricing
DISCRIMINATORY
PRICING

Discriminatory pricing based on consumer
segments.
Ex: Museum often charge low admission fee for
students and senior citizens.
CONSUMER SEGMENT PRICING

Different versions of the same product are priced
differently but not proportionately to the increase
in costs.
Ex: Microsoft sold different versions of its
operating software windowsXP at different price
level . Windows vista home basic version is sold at
$200 and with some variations the same operating
software windows vista ultimate version is sold at
$320.
PRODUCT FORM
PRICING

Discriminatory pricing based on different locations,
even though the cost of offerings at each location is
identical.
Ex: Theatre charges different prices for different
audience preferences for different locations.
LOCATION PRICING

UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES

More Related Content

Similar to UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES (20)

Recently uploaded (20)

UNIT 4 RM.pptx PROUCUCT AND PRICIING STRATEGIES

Editor's Notes