Product and Pricing

Question 1

Factors affecting pricing decision/policy of a product

Answer 1

A. Internal Factors
1. Cost of production
2. Pre determined objectives
3. Image of the firm
4. Product life cycle
5. Credit period offered
6. Promotional activity
7. Marketing objectives
8. Distribution channels
9. Popularity of the brand
10. Marketing mix (Change in one affects the other 4P’s of marketing)

B. External factors
1. Competition
2. Consumers
3. Govt. Control
4. Economic conditions
5. Channel intermediaries (longer = costlier)
6. Demand
7. Availability of raw material
8. Trade barriers
9. Suppliers

Question 2

Classification of Goods

Answer 2

A. Consumer Products
1. Convenience product
a. Staple items/Goods
b. Impulse item
c. Emergency goods
2. Shopping goods
3. Speciality goods (less frequent, strong brand preference - luxury brands)
4. Unsought products (new innovations/ consumer knows but doesn’t want aggressive selling required)

B. Industrial goods
1. Raw materials -a. Natural b. Farm
2. Fabricating materials and parts
3. Installations
4. Accessory Equipment - Forklift, power tools
5. Operating Supplies (Used day to day like lights, stationery)

Question 3

Product Life Cycle

Answer 3

Philip Kotler - “The product life cycle is an attempt to recognise distinct stages in the sales history of the product.”

A. Introduction, Innovation, Pioneering or Development stage
1. Just introduced and made known
2. Advertising and sales promotion to be done
3. Promotional Expenditure is high
4. Product line is narrow
5. Distribution line is limited
6. Sales low
7. Price high
8. Low profit margin

B. Growth or Market acceptance stage
1. Product gains popularity
2. Sales increases
3. Profit goes up
4. Product line may be expanded
5. Price may be slightly reduced
6. Product improvements are made

C. Maturity Stage
1. Consumer market becomes very wide
2. Supply exceeds demand
3. Sales increases at lower rate
4. Improvement required
5. Prices are reduced
6. Profit is high

D. Saturation or Stagnation
1. Period of stability
2. No possibility to increase sales
3. Severe competition leads to reduction in price
4. Profit margins come down unless substantial improvements are made

E. Decline and Obsolescence Stage
1. Sales begins to decline
2. Firms may withdraw due to reduction sales and profit
3. Cost control key to generate profit
4. Profit is declining

Question 4

Need / Importance of Packaging

Answer 4

1. Provides physical protection
2. Product Promotion
3. Product Attraction
4. Easy Identification
5. Product Differentiation
6. Convenience
7. Enhance Brand Image
8. Enhance Profits
9. Convey the message