Objectives:

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Chapter 9

• Objectives
• Know the characteristics of goods and services
• Define the total product
• Learn the stages of new product development
• Learn the product life cycle
• Understand why pricing is an important but
  difficult task for small business
• Understand price elasticities, pricing
  psychology, and other price influencers and their
  impact on pricing
• Understand different pricing strategies

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• Focus on Small Business Scott the Seamstress
• Scott Jones was junior at U. of Oregon
• Wanted a fleece jacket, but couldnt afford one
• Went to campus craft center, bought material, and
  made his own

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• Friends wanted them, so he kept making them
• Pricing then needed to cover costs, plus a
  little extra
• Beyond Fleece went live in 1998
• Pricing now covering all overhead, including
  equipment (laser cutting tables, computerized
  sewing machines

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Chapter 9

• Product
• Goods versus services differentiated in several
  ways

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Chapter 9
Question

• Each time a service is provided, it will be
  slightly different is the definition for?
• a) Heterogeneity
• b) Perishability
• c) Inseparability
• d) Tangibility

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Chapter 9

• Differentiations
• Tangibility capability to be touched, seen,
  tasted, or felt
• Inseparability service cannot be disconnected
  from the provider
• Heterogeneity each time the service is provided,
  it will be slightly different
• Perishability cannot be saved for later use

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Chapter 9

• Total product approach
• Core product basic description of what a product
  is
• Augmented product core product, plus features
  that tend to differentiate it from the
  competition
• Includes brand names, quality levels, packaging,
  and specific features of your product

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Chapter 9
Total Product Approach
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Chapter 9

• Total product entire bundle of products and
  services that you offer
• There are often components that you are not aware
  of, or that change over time
• Delivery, installation, warranty, repair, spare
  parts, instruction, and training
• Legal, cultural, and economic environment may
  force changes

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Chapter 9

• Why is this important?
• Your product means more to the consumer than just
  the core product
• Dont waste time and money designing features for
  your product or service that your target market
  doesnt want
• Knowing what your product means to consumers
  will help you set an appropriate price

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Chapter 9

• Branding
• Guidelines for naming a business
• Entrepreneurs name
• Not very clear to customers what you do
• How to handle name if you sell the company
• Is your name appropriate i.e. Payne for a
  dentist

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• Branding (cont.)
• Guidelines for naming a business
• Be careful about infringing on trademarks
• Describes firm or product and is easy to
  remember Discount Furniture
• Creative spellings are eye-catching dont go
  overboard
• Beware of selecting a name too narrow to allow
  the firm to grow

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Chapter 9
Example

• Branding Trends Delivery Channels Take the Lead
• You cant ignore branding basics, but you can no
  longer rely on traditional outlets such as TV,
  radio and print to get the job done
• Branding success will depend on adapting to the
  rapidly evolving media environment and taking
  advantage of new opportunities to reach your
  target audience
• In 2007 the elements of successful branding will
  not be all that different, but the proper use of
  evolving media channels must be present

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Chapter 9
New Product Development Process
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Product Life Cycle
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• Product Life Cycle
• Stage 1 Introduction
• Sales slowly take off and then begin to grow
• Very important to build brand awareness
• Speak to the relative advantage your product has
• Also need to market to any middlemen
• Heavy introductory marketing expenses will
  suppress profits
• Competition is generally low

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• Stage 2 Growth
• Acceptance of the product increases rapidly
• Advertising and promotion are much less critical
• Goal in this time is to maximize market share
• Prices tend to drop as production becomes more
  efficient

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• Stage 3 Maturity
• Sales will level off and start to decline
• Profits follow suit
• Competition becomes fierce price competition
  begins to rise
• Advertising will suggest new uses for the product
• Product can stay in the maturity stage for a long
  period of time (i.e. Murphys Oil soap)

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Chapter 9

• Stage 4 Decline
• Decline can be slow or fast, steady or unsteady
• May come from introduction of new technology
• May also be caused by a shift in consumer
  preferences
• Sales and profits fall during this stage
• Advertising and promotion expenses are usually
  nearly eliminated at this point

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• Service Life Cycle
• Services go through same four stages
• Easier to extend life cycle, and virtually
  eliminate the decline stage of a service
• Services are often much easier to change on the
  run
• Services, in effect, begin new life cycles with
  each tweaking

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Chapter 9

• Service Life Cycle

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• Pricing
• Pricing Basics
• 4 main reasons why owners of small businesses pay
  so much attention to pricing
• Major factor in determining perceptions of
  quality and desirability
• Price is directly related to gross revenue and to
  volume you can attain
• Easiest of all marketing variables for a business
  owner to change
• Essential part of competitive strategy

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• Pricing from the Sellers Point of View
• Sellers wish to obtain highest price possible
  for whatever they are selling
• Rather than highest price, try to determine
  optimum price
• Optimum price is a function of 4 things
• Demand for the product or service
• Value delivered to the customer
• Prices set by competing firms
• Your business strategy and product placement

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Chapter 9
Question

• A product for which there are any number of
  substitutes and for which a change in price makes
  a difference in quantity purchased is called
• a) Inelastic Products
• b) Elastic Products
• c) Acceptability
• d) External reference price

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Chapter 9

• Price elasticity
• Inelastic product product for which there are
  few substitutes and for which a change in price
  makes very little difference in quantity
  purchased
• Elastic product product for which there are any
  number of substitutes and for which a change in
  price makes a difference in quantity purchased

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Chapter 9

• Pricing psychology
• Internal reference price a consumers mental
  image of what a products price should be
• External reference price an estimation of what a
  price should be based on advice, advertisements,
  or comparison shopping
• Consumers also have a price range of acceptability

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Chapter 9

• Price setting
• Decide what is the right price
• Examine existing market prices for similar
  products and services
• Consider your business costs

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Chapter 9

• Considerations for pricing
• Company objectives
• Marketing strategy
• Channels of distribution
• Competition
• Legal and regulatory issues

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Chapter 9

• Pricing strategies
• Skimming charging the highest price the market
  will bear
• First product or service of your type
• Something people really want
• Truly innovative
• This method will attract competition

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Chapter 9
Example

• What Should You Charge?
• Prices you charge for what you sell have an
  enormous ability to affect your company's growth
• Several ways to decide what your prices should
  be
• matching the competition
• charging whatever the market will bear
• marking up from your own costs
• Skimming can allow you to recoup development
  costs of new products and services

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Chapter 9
Question

• What is the strategy called when a price ends
  with 9, 7, or 5?
• a) Price Lining
• b) Partitioned Pricing
• c) Premium Pricing
• d) Odd-even Pricing

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Chapter 9

• Pricing strategies (cont.)
• Premium pricing high price can signal great
  quality
• Impression that more expensive has to be better
  than less expensive
• Item that could be considered a status symbol
• Odd-even pricing price that ends with 9, 7, or
  5, getting over the psychological hurdle of
  prices that are multiples of 10

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Chapter 9

• Pricing strategy (cont.)
• Partitioned pricing setting the price for a base
  item and then charging extra for each additional
  component
• Computer for 999, printer for another 100,
  cables for 29.95, extended warranty for 79.95,
  et al

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Chapter 9

• Pricing strategy (cont.)
• Captive pricing selling a base system at a
  relatively low price, but expendable items are
  relatively expensive
• Replacement ink cartridges for printers
• Price lining practice of setting three price
  points good quality, better quality, and best
  quality
• Appeals to customers with different budgets and
  needs

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Chapter 9

• Price-lowering techniques
• Periodic discounting sales that happen once a
  month, or year, etc.
• Back to school sales
• After Christmas sales
• Random discounting running a sale without a
  definite pattern
• Sales shouldnt be too often

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Chapter 9

• Price-lowering techniques (cont.)
• Off-peak pricing lower prices at certain times
  to encourage customers to come during slack times
• A business version of Happy Hour
• Bundling combining two or more products in one
  unit and pricing less than if the units were sold
  separately
• Three for price of two, or complementary products

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Chapter 9

• Price-lowering techniques (cont.)
• Coupons, rebates, and loyalty programs
• Coupons are usually delivered in newspapers
• Redemption is about 2 in the United States
• Great way to get people to try new products
• Serve an advertising purpose subconscious
  remembers the product favorably

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Chapter 9

• Price-lowering techniques (cont.)
• Coupons, rebates, and loyalty programs
• Rebates are great tools for small business
  because the redemption rate is extremely low
• Think favorably about the product
• Incentive to buy something

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Chapter 9

• Price-lowering techniques (cont.)
• Coupons, rebates, and loyalty programs
• Loyalty programs are good for getting customers
  to return to your business
• People may lose their cards
• 45 of customers spend more money in stores with
  loyalty programs

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• Pricing strategy wrap-up
• Temporary reduction in price wont tarnish your
  product image
• Consumers also feel smart about buying something
  at a better price
• They will feel they got a great deal

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Chapter 10

• Objectives
• Understand how to assess your value proposition
• Segment and further define your target audience
• Recognize the different approaches and methods
  you can use to craft and convey your promotional
  message
• Learn the key skills involved in personal
  selling, especially closing the sale
• Recognize the major approaches to customer
  relationship management
• Learn how to develop a press relations program
• Learn how to develop a public relations program

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Chapter 10

• Focus on Small Business Girls Who Are Between
  Toys and Boys
• Pivotal tween years something needed to help
  girls bridge the gap between Barbie and Britney
• Beacon Street Girls
• Market Tween girls and their parents / older
  gift-buying relatives
• Marketing push to the Web viral marketing
  programs
• Girls are media-savvy, looking for fun, admiring
  of teenagers, but are still looking to be kids

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Chapter 10

• Need for Promotion
• Does your target market know you exist?
• Advertise and actively promote your business
  before you can expect inquiries
• Basics
• Value proposition small business owners unique
  selling points that will be used to differentiate
  their products / services

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Chapter 10

• Value proposition cont.
• For (target customer)
• Who (statement of the need or opportunity)
• The (retail business name) is a (product or
  service category)
• That (statement of key benefit)
• Unlike (primary competitive alternative)
• Our business (statement of primary
  differentiation)
• Is available (where)

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Chapter 10
Question

• The segment or segments you select on which to
  concentrate your marketing efforts is
• a) Segmentation
• b) Target market
• c) Divisional market
• d) Geographic market

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Chapter 10

• Segmenting Your Market
• Segmentation is the process of dividing the
  market into smaller portions of people who have
  certain common characteristics
• Target market the segment or segments you
  select on which to concentrate your marketing
  efforts

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• Segmenting Your Market
• Dividing the market can be done several ways
• Geographically
• Demographically
• By the benefits sought

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Chapter 10

• Crafting Your Message
• How can you get the attention of your potential
  customer?
• If a potential customer sees or hears your
  message and walks away with only one thought
  about your firm, your product, or your service,
  what do you want it to be?

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• Crafting Your Message cont.
• Message should combine the elements of your
  product or services value proposition with the
  needs of your target customer
• Need to decide the voice or tone of you message
• i.e. humor, fear, patriotism, collegiality, etc.

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• Crafting Your Message cont.
• Effective messages are succinct messages
• Succinct Message Your key point in as few and
  as memorable words as possible
• Ex. Mary Kays slogan Enriching womens lives

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Chapter 10
Example

• Relating to Customers
• Message must be personal and informative to
  directly connect with your audience
• Your ability to deliver powerful and succinct
  messages is one of the most essential components
  of your business
• 4 Tips to improve your message
• Sharpen your message through ruthless editing
• Make all communication two-way
• Use stories or mental pictures to communicate
• Increase understanding through repetition

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Chapter 10

• Conveying Your Message
• Determine the audience that would care about your
  value proposition and message
• Work on how you may want to convey the message
• Promotional Mix how much of each message
  conveyance you will use to sell your product as
  well as your objective in using each one

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• How to convey the message
• Advertisements
• Brochures
• Web sites
• Business cards
• Business stationery
• Post flyers
• Word of Mouth
• Buzz Marketing

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• Publicity
• Press kits should include product or service
  brochures, press releases, biographies on you and
  key employees, photos or digital images
• Write articles
• Pitch the idea as a story to a newspaper or
  magazine

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Chapter 10
Question

• A form of communication that encourages the
  customer to act immediately is called
• a) Sales promotions
• b) Target advertising
• c) Word-of-mouth
• d) Referrals

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• Advertising method of conveying your messages to
  you target audience
• hard to discern feedback
• Can be done in print ads in newspapers,
  magazines, etc.
• Sales Promotions Form of communication that
  encourages the customer to act immediately
• Coupons, sales, or contests

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• Web sites customer search on the Internet
• Useful as a cost-effective way of gaining new
  clients and keeping current customers
• Needs unique keyword and description tags
• Referrals and word-of-mouth
• Offer incentives for referrals that turn into
  business
• Create a referral form and send it clients with
  invoice
• Ask prospects who have turned you down
• Tap your suppliers for leads

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• Buzz Marketing word-of-mouth marketing
• Commonly passed along electronically
• Viral marketing any electronic equivalent of
  word-of-mouth advertising, in which the
  advertisers message spreads quickly and widely
  via e-mail, Web Site, blogs, and other online
  tools

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Chapter 10
Example

• Harmful Hype?
• In buzz marketing, honesty is key
• President of The Geek Factory, a New York City PR
  firm that creates buzz marketing campaigns, warns
  marketers to be careful when trying to create
  buzz
• could lead people to trash your companys name
  all over the internet or even make your efforts
  sound disingenuous, prompting customers,
  prospects and even the media to lose interest
• Find people who are fans of what you do and
  encourage them to tell their stories to others
  who will probably like what you do

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Chapter 10

• Personal Selling
• Important technique for small business owner
• Benefits of personal selling
• Craft your product or service message to answer a
  customers specific questions or needs
• Gain information on how to make product better
• Gain personal information about potential
  customer
• Direct your focus on the most promising potential
  sales

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• Process of Personal Selling
• Prospect and evaluate
• Prepare
• Present
• Hold the prospects attention
• Stimulate interest
• Stir up desire
• The close ask prospects to buy your product
• The follow-up

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Chapter 10
Question

• The process of tracking the customers different
  contacts with the firm, and using this data to
  help improve sales as well as the customers
  experience is called
• a) Contact management
• b) Customer service management
• c) Data collection management
• d) Customer relationship management

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Chapter 10

• Succeeding after the Sale
• Research shows it costs five times as much to get
  a purchase from a new customer compared to an
  existing one
• Customer relationship management (CRM) The
  process of tracking the customers different
  contacts with the firm, and using this data to
  help improve sales as well as the customers
  experience

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• Strategies of CRM

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Chapter 10

• Steps in CRM
• Step 1 Gathering the data
• Step 2 Analyzing the data
• Step 3 Delivering CRM-driven marketing efforts
  to increase sales

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• Press Relations Program
• Activities used to establish and promote a
  favorable opinion by the media
• Public relations is effective in helping to build
  the foundation
• Advertising acts as a supportive maintenance
  program
• Press Release a written announcement intended to
  draw news media attention to a specific event

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• Basics of Press Release
• Attention catchy headline
• Interest pique their interest
• Desire details of opening information
• Action contact information

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• Resources for e-mailing press releases
• ABYZ News Links
• 17,200 newspapers
• http//www.abyznewslinks.com
• Gebbie Press
• http//www.gebbieinc.com
• American Journalism Review
• http//www.ajr.org

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• Press Release

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• Public interest
• Good story
• Human interest
• Visuals
• Cultural resonance

• What is Newsworthy?
• Public recognition
• Trendiness
• Famous faces
• Proximity
• Currency

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• Generating publicity
• Write or provide materials
• Exclusive articles, photos, or columns
• Produce public service announcements
• Produce your own program or short feature for the
  broadcast media
• Include your products as props

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• Generating publicity cont.
• Conduct interviews
• Local TV talk shows or radio call-in shows
• Professional spokesperson
• Stage events
• Educate the media holding a seminar
• Become involved in charitable events
• Offer your products as prizes at events
• Sponsor or financially support awards

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