Product and Pricing

The long-term success of any marketing effort depends on a strong product.

A product is really a bundle of attributes that consumers want and need. The product mix consists of all the products a business sells. Product strategy calls for making coordinated decisions on the product mix, product lines, individual product items, brands, packages, and services.

A product is everything that is received in an exchange. It is not just a collection of components but includes its design, quality and reliability. Each product must possess a “unique selling proposition” (USP) which has features and benefits that make it unlike any other product in its market.

A product item is a specific version of a product, while a product line is a group of closely related product items. The total group of products that an organization makes available to customers is called a product mix.

A product consists of all tangibles and intangibles that consumers evaluate when deciding whether or not to buy something. The basic product may be a good, a service, or an idea.

A good is a real, physical thing that we can touch.

A service is a change we pay others to make for us.

An idea usually takes forms of philosophies, lessons, concepts, or advice and is connected with a good or service.

Most of products coming into the market are not really original. It means that they are not new; these products are existing items to which a modification or adaptation has been made. Only few products, very often formed on the basis of a new business, are innovations.

Every product has a life cycle, the stages of which are introduction, growth, maturity and decline. The life expectancy of a product is based on buyer’s wants, availability of competing products and other conditions.

All products can be classified as being consumer and industrial.

Consumer products are those purchased to satisfy personal and family needs.

Industrial or business-to-business products are purchased for the use in a company’s operations or to make other products.

Consumer products are subdivided into convenience, shopping, specialty and unsought products.

Industrial products can be classified into raw materials, major equipment, accessory equipment, component parts, process materials, consumer suppliers, MRO (maintenance, repair, and operating) items and industrial services.

Pricing is the process of setting a price for a product. Pricing takes account of the value of a product, its quality, the ability of the customer to pay, the volume of sales required, the level of market saturation and the prices charged by the competition.

Pricing involves setting the pricing objectives and selecting a pricing method to achieve these objectives. Once a firm has determined its pricing objectives, it must select a relevant pricing method and strategy. The pricing method offers a “basic” price for each product. Pricing strategies are often used to modify the basic price according to pricing objectives and the market situation.

There are several pricing strategies. In cost-based pricing, the seller first determines the total cost of producing one unit of the product and then adds an amount to cover additional cost and profit. This amount is called the markup. The total of the cost plus markup is the selling price of the product. In demand-cost pricing the goal of a firm is to determine how many units it can sell at each possible price. In competition-based pricing the firm essentially ignores costs and market demand. After setting the price for a product the seller adjusts different price strategies to modify it.

Psychological pricing sets prices to appeal to buyers’ subjective perceptions.

Price lining involves offering products at different levels of price, rather than all at one price. Another pricing strategy is discounting. Trade discounts are offered to middlemen, quantity discounts are given to customers who buy in large quantities and seasonal discounts promote the purchase of goods or services out of season.

Exercise 3. Answer the following questions:

1. What do the notions “product” and “product strategy” refer to?

2. What characteristics must a product possess?

3. How can we define a product item\a product line\ a product mix?

4. What is the difference between an innovation and an adaptation?

5. What categories are products classified into?

6. What types of consumer and industrial products do you know?

7. What do we call “pricing”?

8. What activities does pricing involve?

9. What do pricing strategies depend on?

10. Who are trade discounts offered to?

Exercise 4. Give Ukrainian equivalents of the following:

basic price, pricing method, total cost, quantity, markup, price lining, adaptation, selling price, relevant, to involve, market demand, bundle of attributes, reliability, raw materials, unsought product, decline, product mix, competing, growth, to make something available, subjective perception, total cost, to be connected with, according to.

Exercise 5. Give English equivalents of the following:

основне обладнання, фірмові товари, група однакових товарів, обробні матеріали, невидимі якості товару, ринкова ціна, очікувана тривалість життєвого циклу, споживчі предмети постачання, пропонувати, зниження ціни, упорядковувати, суб’єктивне сприйняття, частка ринку, ціноутворення на основі конкуренції, знижка торговцям в роздріб, несезонний товар, довготривалий, встановити ціну, вирівнювання ціни, комплекс маркетингу, загальна вартість, платоспроможність.

Exercise 6. Match and learn the synonyms:

A: product mix, decline, objective, costs, item, long-term, brand name, life cycle, markup, success;

B: recession, progress, product range, mark-on, goal, vital cycle, spending, trade mark, product, long-run.

Exercise 7. Match and learn the opposites:

A: major, growth, discount, possible, tangibles, long-term, costs, to involve, subjective, strong product, success;

B: weak product, minor, decline, intangibles, markup, short-term, earnings, to exclude, failure, impossible, objective.

Exercise 8. Fill in the gaps with appropriate word or word combination from the text:

1. A product is really a bundle of attributes that … 2. …mix consists of all the products a business sells. 3. Each product must possess a … 4. After setting the price for a product the seller … to modify it. 5. The total of the cost plus markup is … . 6. The pricing method offers a … 7. … is a group of closely related items.

Exercise 9. Put questions to the bold part of the sentence:

1. Marketers have to identify or anticipate a consumer need. 2. All products can be classified as being consumer and industrial. 3. Pricing is the process of setting a price for a product. 4. Companies build brand identification to distinguish their goods from those of their competitors. 5. Packaging is the container, wrapper or other means in which a product is presented. 6. Consumer products are subdivided into convenience, shopping, specialty and unsought products. 7. A good is a real, physical thing that we can touch.

Exercise 10.Fill in missing words or word combinations:

product strategy, business-to-business, takes account of, price lining, trade discounts, life cycle, service, quantity discounts

1. … are offered to middlemen, … are given to customers who buy in large quantities. 2. Pricing … the value of a product, its quality, the ability of the customer to pay etc. 3. … is a change we pay others to make for us. 4. Every product has a …, the stages of which are introduction, growth, maturity and decline. 5. … calls for making coordinated decisions on the product mix, product lines brands, services etc. 6. Industrial or … … products are purchased for the use in a company’s operations. 7. … … involves offering products at different levels of price, rather than all at one price.

Exercise 11. Translate into English:

1. Фірмові товари – це товари, які мають унікальні якості та вимагають від покупця значних зусиль для їх придбання. 2. Товари повсякденного попиту є відносно недорогими, і покупці не витрачають багато часу на їх покупку. 3. Ціноутворення – це процес встановлення ціни на продукт. 4. Щомісяця, постійним споживачам надається знижка на побутову техніку. 5. Існує декілька стратегій ціноутворення у маркетингу. 6. Продавці повинні часто змінювати асортимент товару, щоб задовольняти потреби споживача. 7. Наша компанія не планувала купувати нове обладнання, але потреба виявилась нагальною. 8. Ціноутворення є найбільш складною та важливою рисою комплексу маркетингу. 9. Чому маркетологи повинні розуміти життєвий цикл продукту? 10. Деякі продавці встановлюють високі ціни на товар, щоб привабити платоспроможного споживача.

Grammar: Appendix 20