Product, Brand, and Pricing Strategies in Marketing

Posted on Sep 7, 2024 in Economy

PRODUCT

A product is a set of benefits and services offered by a trader in a market. A favorable product encompasses everything a person receives in an exchange, including tangible and intangible attributes such as packaging, color, price, and the manufacturer’s reputation. Consumers accept a product as something that satisfies their desires or needs.

CLASSIFICATION OF PRODUCTS

CONSUMER PRODUCTS

Consumer products are intended for purchase and use by consumers, according to their wishes and needs. These products can be used without additional manufacturing processes and are ultimately purchased for consumption or use at home. Consumer products can be further divided into subgroups:

• Durable and Non-Durable: Durable goods are tangible items used daily, such as TVs, refrigerators, and blenders. Non-durable goods have a short lifespan, like food.
• Convenience and Routine: Consumers purchase these products regularly without much planning, for example, cigarettes, toothpaste, and candy.
• Choice or Purchase: Consumers compare attributes when selecting and purchasing these products, such as clothing, perfumes, and watches.
• Special or Specialty: Consumers are willing to sacrifice their economy or effort to acquire these items, and they do not consider purchasing alternatives. Examples include cars, computers, and life insurance.
• Unsought: Consumers do not actively seek out these items; they arise from a need, such as coffins, funeral services, and health insurance.

INDUSTRIAL PRODUCTS

Industrial products are goods or services used in producing other articles and are not sold to final consumers. These products include supplies, accessories, services, and even factories or equipment. Industrial goods are classified as:

• Facilities (industrial plants, land)
• Equipment (tools)
• Operating materials (oil, stationery, light bulbs)
• Services (tax and accounting firms, advertising agencies, banks)

POSITIONING OF A PRODUCT

Positioning refers to the overall marketing program that influences consumers’ mental perception (feelings, opinions, impressions, and associations) of a brand, product, product group, or company in connection with the competition.

Companies must carefully develop marketing programs to create and reinforce desired positions. Otherwise, consumers will define their position. Marketers employ various strategies to achieve and strengthen the desired positioning for their company, brand, product, or product group. Some available strategies include:

• Positioning Based on Attributes: The Volkswagen sedan car exemplifies this strategy, having held the position of small cars in consumers’ minds for over 35 years. While it may not be the best-selling small car brand now, it still holds the leading position for small cars in the minds of many.
• Positioning Based on Benefits: Consumers purchase these products for their specific benefits. An established example is toothpaste, such as Crest, which”fights tooth decay” or Sensodyne, designed for”sensitive teeth”
• Positioning Based on Occasions of Use: These products are purchased only for certain periods or dates. For example, turkeys are consumed more regularly at Christmas, and some brands, like Old Orchard brandy, suggest their product is consumed only at night.
• Positioning Based on Users: These products depend on the promoters featured in marketing campaigns. For instance, Sugar Crisp cereal made the promise of”Breakfast of Champions” promoting the product with elite athletes to reach their target market.

PRODUCT LINE AND MIX

A product line is a group of closely related products that satisfy a need or are used together. It is a large group of products with similar characteristics or uses, such as:

• White goods (refrigerators, stoves, cabinets)
• Online electronics (TVs, irons, radios, consoles, stereos, toasters)
• Cosmetics line (pencils, lipsticks, blushes, enamels, stains)

A product mix is a list of all the products a company offers to consumers. The structure of the product mix has two dimensions: amplitude and depth.

• Amplitude is measured by the number of product lines offered by the company, also known as variety.
• Depth is the range of sizes, colors, models, prices, and qualities offered within a product line.

FACTORS AFFECTING CHANGES IN PRODUCT MIX

• Population of Consumers and Industrial Users: A specific population sector can induce a company to change its product mix as tastes and needs change.
• Purchasing Power: When purchasing power changes, it becomes necessary to adjust the product mix and target market segments that are expanding or shrinking.
• Consumer Behavior: This factor considers consumers’ motivation, attitude, preferences, and buying habits.

PRODUCT PORTFOLIO

A product portfolio is the set of all products grouped into lines that an organization offers to its market. For example, Hickok sells products grouped into four major product lines: perfumes, jewelry, belts, and leather goods.

A merchandising product portfolio has four fundamental characteristics: amplitude, extension, depth, and consistency:

• Amplitude: The number of product lines offered by a company (belts, jewelry, perfumes, leather goods).
• Depth: Relates to the number of variants or versions of products a company offers in each product line (perfume 500ml, 250ml, etc.).
• Extension: The total number of products that make up a portfolio.
• Consistency: How the lines are related in terms of end-use, product demand, distribution systems, procurement, and so on.

MODEL PORTFOLIO ANALYSIS

The Boston Consulting Group (BCG) developed and popularized the market share-market growth matrix, also known as the BCG matrix. The matrix is divided into four cells, each illustrating a different product type: question marks, stars, cash cows, and dogs.

• Question Marks or Problem Children: Products with low market share require significant resources to finance growth (machinery, manufacturing processes, personnel). These products are considered a”question mar” in the market.
• Stars: Question mark products that have become successful are considered stars. They have a high market share and high growth. These products are generally profitable and later become”cash cows”
• Cash Cows: These products generate large cash flows for their businesses and do not require financing expansions in their plants to meet demand and maintain a leading market share. When cash cow products decline, they become”dogs”
• Dogs: Products with a stagnant market and no growth consume more resources than they generate. These products should be removed from the product portfolio as they become”fle” products.

STAGES OF THE LIFE CYCLE

Stage of Market Introduction

The introduction phase (also called presentation) occurs immediately after introducing a new product to the market. Sales are low because of the lack of wide market acceptance. Product availability (for the buyer) is limited, and competition is limited or nonexistent.

Growth Stage

If the market accepts the product, sales increase rapidly. Physical distribution planning is challenging at this growth stage (also called acceptance). However, product availability expands rapidly throughout the geography to capitalize on the buyer’s interest in the product. Profits increase as customers become familiar with the product.

Maturity Stage

The previous growth stage can be quite short, followed by a longer period called maturity. Sales growth slows down or stabilizes at a maximum level. At this point, profitability is at its highest, and different marketing techniques can extend the product’s lifespan.

Decline Stage

Eventually, sales decline (decline or decadence) for most products due to changes in technology, competition, or loss of customer interest. Prices often fall, and profits shrink.

BRAND

A brand is a name, term, symbol, or design used to identify a seller’s or group of sellers’ products or services and to differentiate them from competitors’ products.

PURPOSE OF THE BRAND

• Differentiation from competition
• A sign of warranty and product quality
• Convey prestige and seriousness to the manufacturer
• Facilitate product sales through promotion
• Position the product in the consumer’s mind

FEATURES OF THE BRAND

• Short name
• Easy to remember
• Pleasing to the eye
• Adaptable to any advertising medium
• Meet the necessary requirements for registration and be protected by law

CLASSIFICATION OF THE BRAND

• Family Brand: Used for all items of a company, such as Nestle, which uses its brand name on all its products.
• Individual Brand: Refers to the name the manufacturer gives to each product, regardless of the firm that produces and manufactures other articles.
  Example: Nestle Milk

ADVANTAGES OF THE BRAND

• A well-designed brand is easily identifiable, which favors purchases.
• Protects consumers by ensuring consistent quality.
• An established brand ensures that consumers can compare the quality of the products they buy.
• There is a tendency to improve products over time.

IMPORTANCE OF THE BRAND

• To the Consumer: The brand helps buyers identify the product or service and its quality.
• For the Seller: The brand allows the seller to advertise the product, expand the product line, control market share, and participate in the market.

CONTAINER AND/OR PACKAGING

Kotler defines a package as follows:

• The primary package is the product’s immediate container. For example, a lotion bottle is the primary package.
• The secondary packaging refers to the material that protects the primary package and is discarded when the item is used. For example, the cardboard box containing the lotion bottle is secondary packaging, providing extra protection and promotion opportunities.
• The shipping packaging refers to packaging needed for storage, identification, and transportation. For example, a corrugated box containing six dozen lotions is shipping packaging.

Packaging is defined as any material that contains an item, with or without packaging, to preserve and facilitate its delivery to the consumer.

Objective of the Package

The objective of the package is to protect the product, contain it, or both, and to promote the article within the distribution channel.

Classification of the Package

In the Mexican market, packages are classified as”untouchable” and”ephemeral”

• Untouchables: These packages remain virtually unchanged for years, and their life cycle is very long due to their physical presentation and the psychological connotations they evoke in consumers. An example is the packaging of beer or non-returnable cardboard toothpaste packaging.
• Ephemeral: Most recently launched products have packaging that changes frequently, sometimes every two or three years, supplementing or replacing the function of advertising. An example is a plastic detergent bag or a cardboard box for a drink.

Rules

The container or package must adhere to the following rules:

• Display the company name
• Indicate the place of origin
• Include the company address
• Specify the population
• State the content
• Comply with the relevant Health Code requirements for packaging presentation
• Display the manufacturing and expiry dates, or both, depending on the product

The following table describes some of them:

PACKAGING

Packaging involves grouping a set of objects or packages, whether identical or different, to facilitate handling. This grouping can be done using boxes, bags, or containers, which protect small and fragile objects and heavy machinery or specialized equipment.

In short, packaging is the housing that protects goods during transportation and storage.

Features

• It serves as a means to transport goods more efficiently from their origin to the point of use.
• It is used in art, science, and technology to prepare and transport goods for final sale.
• It aims to find the most appropriate way to ensure a product’s safe and cost-effective delivery to the final consumer.

Objective of Packaging

The objective of packaging is to take a product and protect its contents during transportation from the factory to consumer centers.

Functions of Packaging

Packaging protects products against shrinkage, moisture, dust, insects, rodents, or theft. It is labeled to indicate the product, manufacturer, and destination.

Classification of Packaging

• Packing for Export

  The following product, market, and transportation characteristics must be considered for export:

  • Engineering Aspects: Material, size, protection from weather conditions, height of stowage, security during transport, and ease of opening or closing.
  • Design: Labels, instructions, colors, and product differentiation from the competition.
  • Laws and Regulations in the Country of Origin and Destination: Requirements for labels, hazard statements, information on size, weight, price, and language.
  • Shipping and Transport: Type of transport, handling, and inventory control.

• Packaging Product Line

  This type of packaging requires all packaging to be identical for all products or to use a consistent feature on all packaging, such as consumer products like food.

• Packing for Later Use

  This type of packaging is designed and promoted to have a secondary use after the product is consumed. This type of packaging is unusual.

• Multiple Packaging

  This type of packaging involves placing multiple units in one box. It helps increase overall and unit sales and is often used to introduce special offers. It also benefits retailers by reducing unit handling costs and relevant market prices. Examples include motor oil, beer, soap, candy, towels, and sheets.

SERVICE

A service is a set of activities, benefits, or satisfactions offered for sale or supplied in connection with sales.

Features

• Effectiveness
• Functionality
• Speed
• Opportunity
• Customer service
• Honesty
• Reliability

Four characteristics distinguish a service from a good:

• Intangibility: A service is not perceived by the senses.
• Perishable Nature: A service is momentary, meets the needs of consumers, and does not need to be stored for some time.
• Standardization: A service depends on action to create the benefit without being standardized and does not occur online.
• Involvement: The service takes place within a timeframe where the purchaser is involved in the process.

PRICE STRATEGY

PRICE

In ancient times, people acquired necessary items through barter, exchanging goods. Money subsequently emerged as a means to facilitate trade transactions.

Money is only the social measure of value. There are two types of values:

• Use Value: The value of a thing depends on the value assigned to it by the individual. This value is subjective and individual.
• Exchange Value: The value of a thing depends on the importance others will award it and indirectly meets the needs of its owner.

The price is the amount of money required to acquire a product and its accompanying services in exchange. The key to determining a product’s price is understanding the value consumers receive from it.

The most common conflicts regarding product pricing arise within the distribution channels between the buyer and the seller and the maintenance of resale prices.

IMPORTANCE OF PRICE TO THE ECONOMY

Balanced pricing is essential to maintaining a healthy economy.

ROLE OF PRICES

• Regular Production: Price is an indicator that helps decide what to produce and in what quantity, as the production decision also depends on consumer reaction to product price.
• Regular Consumption: Price acts as a rationing agent, adjusting production to society’s consumption needs, following the law of demand.
• Distribute Production: Among different members of society, this distribution depends on wages, profits, interest, and income derived during the production process.
• Sponsor Research and Development of the Country: Profits allow companies to allocate funds for research and development.

IMPORTANCE OF PRICE FOR COMPANIES

Profits are determined by the difference between income and costs. Revenues depend on the prices set by the company and the number of products sold. The price assigned to a product impacts company revenue, profits, or utilities.

The price of an item or service significantly determines market demand, affecting the company’s competitive position and market share. When setting prices, marketers should consider the long-term effects and their profit desires.

OBJECTIVES OF PRICES

The objectives represent the purpose of planning and the end goal toward which the organization is headed. The company’s objectives are the foundation of the basic plan.

• Preserve or Enhance Market Share: Maintain or increase the company’s market share, depending on its determination.
• Stabilize Prices: In industries where demand fluctuates frequently, even violently, companies try to maintain price stability.
• Achieve a Rate of Return on Investment: Establish a percentage increase in sales large enough to cover projected operating costs plus a desired profit for the year.
• Maximize Profits: Most companies aim to achieve the largest possible profit through pricing. Profit maximization is more likely to benefit a company and the consumer when practiced long-term.
• Fight or Avoid Competition: Many companies, regardless of size, knowingly price their products to confront or avoid competition.
• Market Penetration: Set relatively low prices to stimulate market growth and capture a large portion of it.
• Promotion of the Product Line: Set a price increase for all online sales with less emphasis on the product’s profits.
• Survival: Sometimes, competing in the market is difficult.

FACTORS INVOLVED IN FIXING PRICES

COST

Cost is an essential element in pricing, as it is crucial to measure the profit contribution and for comparisons between products and hierarchies. Its function is to guide the employer in determining the most profitable product mix. Costs can be incurred without affecting benefits. Cost encompasses all the money paid to perform an operation.

CLASSIFICATION OF COSTS FOR THE DETERMINATION OF PRICE

1. Related primarily with:
   • Direct Material Costs: Costs of materials used in producing an article.
   • Costs of Direct Labor: Labor costs, skilled or unskilled, of employees.
   • Overhead Costs: Expenses that cannot be readily associated with the product.
2. Related to the duration of benefit cost:
   • Investment Costs: Equipment, buildings, systems, etc.
   • Operating Costs: Costs incurred in the administration of the company.
   • Distribution Costs: Costs of physically distributing the product.
3. The amount related to operations:
   • Fixed Costs: Costs necessary to begin operations.
   • Variable Costs: Costs that depend on the volume of production.
4. From the economic viewpoint:
   • Total Average Costs: Costs resulting from manufacturing one product unit.
   • Marginal Costs: Additional costs.
   • Opportunity Costs: Costs of doing one thing over another.
5. From an accounting viewpoint:
   • Costs Incurred or Historical: Costs already incurred at the time of registration.
   • Estimated Costs: Advance estimates of the costs expected to prevail in the future.
   • Standard Costs: The sum of prices obtained from the specifications of a product.

POINT OF BALANCE

The break-even analysis system is a key tool for profit planning, decision-making, and problem-solving. This method provides employers with an overview of the essential relationships between income on sales, costs, profits, and different production and sales volumes.

The break-even point is where total costs equal total income.

DEMAND AND SUPPLY

Product prices are determined by the market, where the laws of supply and demand come into play.

DEMAND: The quantities of a product that consumers are willing to buy at any market price. Reducing demand means a substantial reduction in prices. If this reduction is permanent and large-scale, it requires conducting assessments over time. A simple and common way to set prices based on demand is price discrimination.

LAW OF DEMAND: If prices rise, demand falls, and if prices fall, demand increases. The goods that consumers are willing to buy will be determined by the following factors:

• Consumer groups and preferences, which will be conditioned by custom, habit, and culture.
• The number of consumers.
• The price of substitute products, which will be more remarkable because most products have perfect substitutes.
• The income of consumers.
• The general level of prices.

FLUCTUATIONS IN DEMAND

The shift of the demand curve in either direction, caused by changes in the determinants of demand.

ELASTICITY OF DEMAND

A basic tool to measure the sensitivity of turnover to a change in any of several operating factors.

TYPES

• When a drop in the price of goods does not alter the quantity bought, the demand elasticity is zero.
• When a small reduction in the price of a product produces a very broad increase in purchasing the property, the demand is infinitely elastic.

CROSS-ELASTICITY OF DEMAND

The elasticity of demand for a good depends on the existence of substitute and complementary products.

SUPPLY: The quantities of each product that producers are willing to produce at potential market prices.

LAW OF SUPPLY: The amount of goods producers are willing to put on the market tends to vary in direct relation to price movement. If the price drops, the supply decreases, and if the price increases, the supply increases. Such goods shall be determined by the following factors:

• The number of firms in the industrial sector
• The productive capacity of existing firms
• The cost of production factors
• Production techniques

FLUCTUATIONS OF LONG-TERM SUPPLY

Alterations occur that are sufficiently intense to cause visible changes, sometimes requiring extended periods.

INCREASE AND REDUCTION OF THE OFFER

An increase in supply will cause a shift in the supply curve to the right of the original curve.

ELASTICITY OF SUPPLY

Refers to changes in the quantities of products that sellers are willing to put on the market in response to price changes.

• Elastic Supply: When a change in price leads to a proportionally greater change in the quantities offered.
• Inelastic Supply: When the induced change in the quantities offered is proportionally less than the change in price.
• Supply Unit: When a change in price leads to a proportionally equal change in the quantities offered.

COMPETITION

Price fixing concerning competitors allows employers to understand the competitive price level. As price is an important competitive weapon, four basic considerations must be made:

• A company must have its own pricing policies.
• Attention should be paid to other factors related to prices in the marketing mix.
• Prices should be related to the product life cycle.
• According to the strategic classification of products or product portfolios, the price should be related to their classification strategy for generating cash and profit accounting and their position.

The importance of price differentiation lies in inducing consumers to prefer a particular company’s product solely because of price differences, in addition to the guarantee of high quality, fast service, good treatment, etc.

The main feature that distinguishes the powers of a monopoly is that it does not face the constraints of an industrial product in constant struggle with competition.

An oligopoly has competitors, and any price changes made by one company will almost automatically trigger other firms to change their product prices.

Competition is less keen and aggressive in an oligopoly market with unrestricted access, where a considerable number of companies make competition a totally impersonal phenomenon.

PRICE WAR

Reasons for Starting a Price War

• One competitor believes market prices are too high and decides to lower them.
• One competitor is willing to sacrifice established margins to gain market share.
• When competitors do not know or trust each other, any price movement, no matter how minimal, triggers a cascading decline.
• When one of the competitors has excess capacity or inventories that are financially declining.

The first step in facing a price war is to understand the terrain by preparing a diagnostic of the following areas:

• Consumer sensitivity to price changes
• The cost structure of their organization, their ability to achieve economies of scale, and strategic positioning
• Position on a possible price scenario

The second step is to stop the price war:

• Publicly report on their strategic intentions regarding prices.
• Reveal the cost structure advantages.
• Seek a diplomatic settlement.
• Become the price leader or follow the price leader if one already exists.

The third step in facing a price war is to implement competitive actions that are not related to prices:

• Focus on quality, not price.
• Alert consumers to the risk of market quality.
• Emphasize other negative consequences.
• Ask for help from the authorities.

The fourth step in a price war is to engage in the price war for the following reasons:

• Competition threatens the backbone of the business.
• There is an important price-sensitive market segment.
• The company has an advantage in cost structure.
• The company has more capital than the competition, which will allow it to withstand the war longer.
• The company has economies of scale.
• The company can quickly neutralize or eliminate the competition.
• The price war can be implemented quickly.

OTHER PRICE DETERMINING FACTORS

LIFE CYCLE OF A PRODUCT:

• Introduction: Depending on the desired strategy, the company may opt for a higher or lower price.
• Growth: Prices begin to stabilize as new competitors appear.
• Maturity: Strategies are developed to keep the product on the market.
• Decline: The firm must make a significant price reduction before deciding to modify the product.

fy the product.