The Price is Right!...Right?

How do you decide how to price a product? Do you guess how much your market would be willing to pay for it? Or do you price it according to how much it cost to make?
While Pricing is the easiest of the four P's (Product, Promotion, Placement, Price) to change, it is also the easiest to get wrong!
The very bottom line with pricing is YOU HAVE TO COVER COSTS. This often means covering the cost of any promotion or prime placement as well as the cost of making the product. Each product has a base line price that you can not go under without suffering a loss-UNLESS you have a stragic pricing stragedy.
If you are having an introductory sale, you may want to begin by selling you product UNDER COST to get people hooked on it. While this method is effective in getting people to try your product, it may backfire once you raise the price. You could potentailly loose all the customers, and not make up the cost of selling below cost of producing the product.
A confusing and baffling part of pricing are the luxery items that are sold so far over cost that how they determine what, exactly, the price should be, is often a mystery to me. I am speaking of the $650 handbags by design houses such as Coach or Fendi,
and of the $700 pairs of shoes.
One reason a customer would be effected to pay so much is for the status the item brings. If they can buy a $650 purse, and everyone else KNOWS that purse cost that much, then surely they are wealthy, successful, and happy.
Perhaps the price managers for high end items keep their finger on the pulse of the consumer, and decide how much such a consumer is willingly to pay for the status symbol. But Sometime it seems that they are setting impossible prices so that once a person is able to pay them, the person feels that they have arrived.
Whatever a particular pricing strategy, I personally still love shopping at the Dollar Store, and yet I do love the feeling of owning a good $50 bag, and think of it as an investment. Investment into to what exactly? My wardrobe? I'd like to think so, but realistly it's an investment into the product producer's pocket.

Managing Product Lines

of four major companies? One example is Kraft Food Corporation, which has so many different product lines such as Wishbone salad dressing, WheatThins, Oreos, and even Tang!

Each of these products is it's own product line, with many side products and complementary products. Oreo's alone has over 15 different cookie products in the Oreo line!


Did you know that most food products are produced by one
It would be far too much to expect one manager to look after ALL the products and be able to handel them and foresee problems. Instead each product line has it's own manager to overlook the line and ensure quality and customer satisfaction. The manager makes decisions regarding whether to add a new product to the product line mix, (this is called stretching) or to get rid of a few product in the product mix (this is called contraction).
There are also upward and downward line stretches, where a line creates a less expensive addition to their existing line to capture a lower income market, and not allow their competetors to gain control over that market. An upward expansion is when a company creates a luxery line or more expensive version of their product. This is made to appeal to a higher end demographic, and can help elevate an entire product line.
In the case of Volvo, the foreign car, their product line is narrow, as they only offer a few options or products. But in the case of Oreo's, the product line is full, meaning they offere as much as possible! If I had a choice, I would chose to be the marketing head of a wide product line, because there are so many more options to choose from, and different angles one could try to promote products. You could use cross marketing and have Oreo cookies include a coupon for Oreo candy bars, or you could build an entire campaign around the bevy of Oreo products. All in all, the more a product line has to offer, the more challenging and interesting it would be to manage.

Innovation

Innovation basically means coming up with new products, or making people believe the product is new. Some innovations are easily to spot, like when the wheel was created thousands or years ago, or the advent of the automobile, computer, or cell phone. All of these innovations can be classified as disruptive innovations, because they radically change or disrupt the way things are done. Before the wheel, items had to be carried around, and after, people learned how to use the wheel to make carts to carry things, and to transport more goods at a time. Before automobiles, a cart drawn by horses was the best way to travel in a city or in the country, and have control over your route. After the automobile, roads had to change, jobs had to change, pretty much EVERYTHING changed.


They are other types of innovation, like continuous innovation, where a little bit of learning is required, but it's more of an add-on to existing technology. Examples of this include the remote control for the televison, because while some learning was required, the first remotes were simple, and they have slowly gotten more and more complex.
The tricky thing about marketing innovations is figuring out how your market will respond to a new product, and whether to play up the newness of it, or to make it seem like an easy to use product. For example how would you present a service that allows people to video call friends all across the world using the internet? Would you present it as a completely new product that breaks down boundaries, is the next wave of telecommunications, or would you present it as an easy to use product, something that is like instant messaging, but with voice and video? This product exists, and is called Skype.
Even though it is a disruptive innovation because it is changing the way people communicate and whether or not the purcahse phones, it was presented as easy to use and took off. It is now even used as a noun, and is popular with almost all demographics! Deciding how to market something to it's best advantage is one of the most basic and difficult aspects of marketing. With innovative products, the success of the product, and whether or not people get to see and use it, depends on the marketing plan.

Target Market MISTAKES!

So we know that target marketing is important, and that knowing who you are selling to is vital. So what about this ad?



Who are they selling to?
I'm guessing NOT women, maybe to men. But is this ad truly offensive, or is it this side of a fart joke funny?

Personally I think its funny, but not in a good way, in a "Wow, that's SUCH a bad idea that it's hilarious!"

Target Marketing Mojo

Does this body wash make you more manly, or is it to, well, girly?
What about this one, the ultra macho Axe body scrub.

Interesting that the Axe is a higher price than the Dove, maybe it means that men are buying the Axe more than the Dove.
But what about brands that don't have strong marketing campaigns? They still have their products on the shelves, but they generally cost less. However, Irish Spring cost the same as the Dove product.
So which company knows their target market better? Dove, marketing manliness as soft ans strong skin? Axe marketing cleaniness as rough and edgey, or Irish Spring, which doesn't market aggressively, but relies on a strong constumer base and reliablity.
In this case, I'd put my money on Irish Spring.
Just for fun, let's compare a Gatorade commercial against a Mountain Dew commercial.
VS.
The tarket market of Gatorade is athletes and people who want to be athletes or feel like athletes. The Target market for Mountain Dew? College Kids, 20 and 30 somethings who like to think they are edgy.
So you are what you drink! At least Marketers hope that we believe that...

Has Target Marketing got a Bullseye on you?

Most of us know that companies talior marketing to fit the people they want to buy their product. But are we aware of how present it is in our lives?
There is marketing in ads, but what about marketing in the grocery store?
Marketing is so much more than a well place advertisment or a catchy commercial.
Target Marketing is knowing who your customer is, what their needs are, and what will persude them to purchase your product.
Is your market teens who have extra cash and think they will live for ever? Maybe you can sell them coffee by playing up the thrilling effects and the adult qualities of your coffee product.
What about the market of retired couples whose children have left home? if you want to sell them they same coffee product, you might try marketing it as a luxury, a peaceful moment of rich and fine coffee, and a product that gives them the energy to do the activies they enjoy.
Instead of selling cookies and snacks in big boxes and bags, Nabisco has reformated its cookies and snacks in tiny "100 Calorie Packs" to appeal to calorie and weight concerned customers.
This shows that Nabisco knew it's target market, and knew what would persuade them to buys cookies instead of apples!
Another example of Target marketing done at the product level is what I like to call
Ceral Box Marketing."
This is when the product is intended to appeal to children, and be used by children, but has to be something their parents will approve of. Most ceral boxes have cartoons on them, but they also have nutritional information on the front of the box.
While the kids are attracted to the bright colors and cartoon characters they know and love, the parents feel that they are providing good nutrition to their family. This marketing stragedy has been effective for over 50 years.
Ceral companies charge a hefty fee for this marketing stratedgy.
The same ceral in different boxes by different companies cost a completely different price.
Coca Pebbles cost over three times as much as the Malt-O-Meal brand!
So if you pass over the cheaper bulk ceral for the expensive Coco Pebbles, you've been Target Marketed, and the hit a Bullseye!

Marketing Business 2 Business

As individual consumers, we don't give too much thought to how companies that produce what we buy market to other companies.
But how do my favorite brands end up in the grocery store?
Who builds the parts for cars before they are cars? I'm pretty sure it's not elves.

They only make shoes and cookies...
And mostly importantly, where do mannequins come from?
First, Grocery Stores.
Why is it that WinCo has organic food, and Safeway has national brands like Nabisco and Kraft?
The answer isn't hard; it's because each brand uses their market research to try and figure out WHERE consumers are going to buy their product, and they market their product to that place. Safeway buys all of the stock we see, and sells it to consumers for a higher price.
This is one example of a Business selling to a business. Another is a factory selling cars parts to a major manufactuar like Ford. Ford doesn't make all of it's parts in the factories that assemble the cars, but buys many of them from other companies. It's the job of marketers to know what Ford needs (do they need headlights or brake pads?) and market these products to the company that will buy them.
Finally, manniequins. When you walk into any retail clothing store, you see them. Sometimes they look like very large dolls, sometimes they don't have heads, and sometimes they just look like gray aliens. But have you ever wondered where the retail stores get them?


I have!
There are many factories that make nothing but manniquins, sell them to clothing stores. But what they are really selling are the tools for the retailer to market their clothing items. So they need to sell the idea that their particular style of manniquin is what the retailer needs.

Businesses sell to businessess all the time, but consumers often don't think about it. However, it is important that we do, because knowing what is being bought can give us insight into what EXACTLY we are being sold, whether it is a food, car, or an image.