Entrepreneurship Chapter 9 Ethan Chazin
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Entrepreneurship Chapter 9 Ethan Chazin
- 1. Chapter 9 Business Marketing: ProductProduct PRICINGPRICING StrategiesStrategies
- 2. This Week’sThis Week’s KEYKEY ResourcesResources
- 3. • New Jersey Entrepreneurial Network. • Venture Association of NJ. • NJ Economic Development Authority. • www.nyc.gov/html/sbs/nycbiz/html/library/library.shtml • www.sba.gov/smallbusinessplanner/start/financestartup/ • www.nyc.gov/html/sbs/nycbiz/html/business_planning/g • http://www.nypl.org/smallbiz/ Resources
- 4. Resources
- 5. Resources
- 6. Resources
- 8. • A product is anything that is offered to the market to satisfy customer wants, needs, and demands • A Good versus A Service: – Tangibility: physical items – Inseparability: Services are inseparable from consumption (a haircut) – Heterogeneity: The quality of the service depends entirely on the co. and person performing the service, and the circumstances at the time of the service – Perishability: a good can be stored for later use/consumption What’s a “Product”
- 9. • HYBRID products: a balance of tangible and intangible (meal at restaurant) – Chuck e cheese or Wolfgang Puck • Total ProductTotal Product = CORE + Augmented – CORE: Clean houses, help people find jobs, make wine – AUGMENTED: What distinguishes you from the competition but is still associated with the CORE – TOTALTOTAL: Comprises both but includes other aspects that change over time Making Intangible More TANGIBLE
- 10. • A small business’s resources are limited, so you MUST focus on your TARGET MARKET: – The group of people on which a marketer focuses their promotional efforts What’s a “Product”
- 12. What’s aWhat’s a BrandBrand
- 13. Resources
- 14. Resources
- 15. • Avoid using JUST your family name • Is your name appropriate (Ex. Pain Dental) • Watch your intellectual capital, website domains, etc. • Don’t use a name that’s so narrow that it prevents your future growth (Ex. Just Screws) Brand Guidelines
- 16. • Idea Generation / SCAMPER (Chpt. 4) • Idea screening for business potential, which do we evaluate further • Idea evaluation – specifying the details of each idea’s technological feasibility, cost, market potential • Product Development – start with prototypes, test marketing • Commercialization Product Development Process
- 17. • SS - Substitute • CC - Combine •A - Adapt • MM - Magnify/Modify • PP - Put to other uses • EE - Eliminate •R - Rearrange SCAMPER
- 25. • Post commercial launch sales grow slowly • Building brand awareness/recognition is CRITICAL • Advertising must focus on the advantage this product/service offers • Let them try your new product out (samples) • Let them see it in action (Shamwow) STAGE 1: Introduction
- 26. • Product acceptance happens rapidly • Sales and profits grow at a high rate • Not a huge need for advertising and promotions • Marketing goal is maximize market share • Critical time for small firms – larger firms can now see you coming at them from the rear view mirror STAGE 2: Growth
- 27. Growth is aGrowth is a Double-EdgedDouble-Edged SwordSword
- 29. • Rapid growth begins to slow • Competition is fierce • New client acquisition comes from taking customers from competitors • When competitors go out of business you snatch up their accounts • Less advertising more promotions • Expand your suite of products and services STAGE 3: Maturity
- 30. • Can be slow or fast, steady or sporadic • Sales and profits fall • Stop advertising and promoting • Scale back production, phase out certain products and/or services STAGE 4: Decline
- 33. What isWhat is Pricing?Pricing?
- 34. • So much more than the cost of making the product plus a mark up • Implies VALUEVALUE or WORTH • Need to understand the “psychologypsychology” behind consumer purchase decisions • A MAJOR factor in affecting customers’ beliefs about your quality and desirability • The easiest variable of the 5P marketing mix to change • A critical component of your competitive strategy What’s “Pricing”
- 36. • Seller tendency to overcharge • Highest versus optimum price • Optimum price is a function of 4 things: – Demand for the product – Value delivered to the customer – Competitor pricing – Your business strategy and product placement • Markup: what you sell it for -what it cost to make it – As a %: markup / cost What’s “Pricing”
- 37. • Price elasticity: inelastic product is one people can’t do without. Now matter how much you increase the price, they will still buy it. • Got any examples???Got any examples??? • Inelastic products have almost NO substitutes • Elastic products have LOTS of substitutes Price Elasticity
- 38. • We all have INTERNAL & EXTERNAL reference prices: – Internal: A consumer’s mental image what the price should be – External: An estimation what the price should be based on information external to the consumer • Price Range ACCEPTABILITY Pricing Psychology
- 39. • Align pricing to your company objectives • Reflect your marketing strategy • Channels of Distribution (pay off every hand in the pot) • Competition • Legal Regulatory Issues: – Price gouging Factors in Setting Prices
- 41. • Skimming: set it high, bring it down over time • Prestige/Premium – the higher the price, the higher the “perceived” value • Odd-Even: End with a $.05$.05, $.07$.07, or $.09$.09 • Partitioned: Charging for all the “EXTRAS” • Captive: The base unit pricing is inexpensive but the expendable is COSTLY (Ex. Printer + ink cartridge, single coffee cups, home water service) • Price Lining: Different product versions to appeal to different markets. Pricing Strategies
- 42. • Periodic/random discounting • Off-Peak Pricing • Bundling/Multi-pack Pricing • Coupons, Rebates, Loyalty Programs • Referral Discounts Price Lowering Techniques
- 52. Resources