Branding,
Product &
Pricing
Dr. Anupamaa Chavan
[Link]
[Link] - Monster
• •[Link]
The • A brand is a name, term, sign, symbol or design, or a
Role/Importance combination of them, intended to identify the goods or
services of one seller or group of sellers and to
differentiate them from those of competitors.
of Brands
• Role/Importance of Brands:
• •Brands role for Consumers
• •Brands role for firms
Importance of • Identification of the source of the product
• Assignment of responsibility to product
Brands to maker
Consumers • Risk reducer
• Promise, bond, or pact with product maker
• Symbolic device
• Signal of quality
Importance of Brands to Firms
• To firms, brands represent enormously valuable pieces of legal property, capable of influencing
consumer behavior, being bought and sold, and providing the security of sustained future
revenues
• Identification to simplify handling or tracing
• Legally protecting unique features
• Signal of quality level
• Endowing products with unique associations
• Source of competitive advantage
• Source of financial returns
Scope of Branding
• Branding is the process of endowing products and services with the power of
a brand. It’s all about creating differences between products.
• Marketers need to teach consumers “who” the product is—by giving it a
name and other brand elements to identify it—as well as what the product
does and why consumers should care.
• Branding creates mental structures that help consumers organize their
knowledge about products and services in a way that clarifies their decision
making and, in the process, provides value to the firm
• Stores
Places:
• Organisations: For the cause or the profit:
People:
•
• Idea: Some great ones here:
• A brand is a name, term, design, symbol, or other feature that distinguishes an
organization or product from its rivals in the eyes of the customer.
• Trademarks are registered brands
• You have :
• Individual brand: eg – Surf, Lux
• Family brand: Amul, Ponds
• Umbrella brand: Godrej
• Combination brand: Maruti Suzuki
• Private or Middlemen brand: Shopper’s Stop
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The monetary value of a brand is called brand equity and reflects the premium that
is placed on a company’s valuation because of its ownership of the brand.
Brand equity encompasses the Net Present Value (NPV) of the total financial
returns that the brand will generate over its lifetime.
Brand equity is included in the accounting term goodwill, and the monetary value
of all intangible assets of a company, such as trademarks, patents, copyrights,
know-how also licenses, distribution arrangements, company culture, and
management practices.
• Brand power is the measurable ability of a brand to be the preferred choice over
competitors. Unlike simple brand awareness (being known), brand power is about
being trusted
• Key Benefits of Brand Power:
• Commanding Premiums: The ability to charge higher prices than competitors.
• Customer Loyalty: Higher retention rates and less vulnerability to competitive actions.
• Greater Trade Support: Retailers and distributors are more likely to cooperate with and
promote powerful brands.
• Product is that which can be offered to a market for attention , acquisition , use or
consumption which can satisfy want or need
• It includes Physical goods, services, experiences, events, persons, places, properties,
organizations, information's and ideas.
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• Marketers classify products on the basis of durability, tangibility, and use (consumer or
industrial):
• Products fall into three groups according to durability and tangibility:
• 1. Nondurable goods are tangible goods normally consumed in one or a few uses, such as
beer and shampoo. Because these goods are purchased frequently, the appropriate strategy
is to make them available in many locations, charge only a small markup, and advertise
heavily to induce trial and build preference.
• 2. Durable goods are tangible goods that normally survive many uses: refrigerators,
machine tools, and clothing. They normally require more personal selling and service,
command a higher margin, and require more seller guarantees.
• 3. Services are intangible, inseparable, variable, and perishable products that normally
require more quality control, supplier credibility, and adaptability. Examples include
Salons/Beauty Parlors/Spa, Professional services
Dr. Anupamaa - legal advice, and appliance repairs
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Product Classifications: Consumer goods
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Product Differentiation
Tangible Product Attributes Intangible Product Attributes
❖ Product Ingredients(Dabur Vatika)
❖Prestige/Status
❖ Functional/ Additional Features(LG
Refrigerators with outside Water ❖Image
dispenser)
❖Sentiments/Beliefs
❖ Design/Styling( Nike shoes designed
for women)
❖ Customer experience associated with
the product(Roti Makers)
❖ Product Quality/Technology(L&T)
❖ Service Support(Dell 24*7)
❖ Packaging(Hit special nozzle for
cockroach killing)
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• Core Benefit: Fundamental service or benefit that the customer is really buying
• Basic/Generic Product : Containing only those attributes or characteristics absolutely
necessary for its functioning but with no distinguishing features
• Expected Product: A set of attributes & conditions buyers normally expect when they
purchase the product
• Augmented Product: Exceeds customer expectations
• Potential Product: Encompasses all possible augmentations & transformations the
product might undergo in future
• Product Levels
• Describe the product level for:
• 1. Shampoo
• 2. Mobile phone
• 3. Car
• •CORE BENEFIT-Hair Cleanser
• •BASIC PRODUCT-The shampoo has good smell, keeps hair clean and healthy
• •EXPECTED PRODUCT-It smoothens hair, prevents hair fall, black shiny hair, to
construct damaged hair
• •AUGMENTED PRODUCT-the packaging is nicely integrated, assurance of proper hair
treatment is guaranteed and an after-sales service which is observed to answer all the
customers’ needs
• •POTENTIAL PRODUCT-Shampoo which also straightens/curls the hair.
• Product level -Mobile
• •CORE BENEFIT-Communication
• •BASIC PRODUCT-4G, Camera, Good Battery
• •EXPECTED PRODUCT-Smart phone, Good Camera quality, Large storage
• •AUGMENTED PRODUCT-Good Design, Best Display,
• •POTENTIAL PRODUCT-phone with projector
• A product item is a specific version of a product that can be designated as a
distinct offering among an organization’s products.
• A product line is a group of closely related product items that are considered to be a unit because
of marketing, technical, or end-use considerations.
• A product mix is the composite, or total, group of products that an organization makes available
to customers. For example, all the health-care, beauty-care, laundry and cleaning, food and
beverage, paper, cosmetic, and fragrance products that Procter & Gamble manufactures constitute
its product mix.
• Product System is a group of diverse but related items that
function in a compatible manner.
• For example, the extensive iPod product system includes
headphones and headsets, cables and docks, armbands,
cases, power and car accessories, and speakers.
• A Product Mix (also called a product assortment/product
portfolio) is the set of all products and items a particular seller
offers for sale.
• A Product Mix consists of various product lines
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• Product portfolio encompasses all products offered by a company, including various
product categories and product lines.
• Product portfolio/Product Mix has :
• Width: The width of a product mix refers to how many different product lines the company
carries
• Length: The length of a product mix refers to the total number of items in the mix.
• Depth: The depth of a product mix refers to how many variants are offered of each product
in the line
• Consistency: The consistency of the product mix describes how closely related the various
product lines are in end use, production requirements, distribution channels, or some other
way.
Width (Line) – 3
Length – 4 for every Line
Product Line and Length -
12
Liquid Tide - Depth: 200ml,
500ml,1000ml
Consistency: how closely related the various product lines are in the end use
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• Lengthening by adding more products and brands to the line
• Line Stretching : Down-Market Stretch; Up-Market Stretch, Two-way Stretch
• Line Filling: Deepening the line by adding more variants/pack sizes to the line. Lifebuoy with
neem and tulsi. Pond’s white beauty gel face wash
• Line Modernization: Improving the existing product, Package design of lifebuoy changed.
• Line Featuring: a strategy in which certain items in a product line are given special promotional
attention
• Pruning the line by withdrawing items e.g. HUL pruned close up renew and colgate oxyfresh
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Up Selling Cross Selling
Packaging:
Packaging is important because it is the buyer’s
first encounter with the product
Packages might have up to three layers. Cool
Water by Davidoff For Men cologne comes in a
bottle (primary package) inside a cardboard
box (secondary package), shipped in a
corrugated box (shipping package) containing
six dozen bottles in cardboard boxes.
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• Several factors contribute to the growing use of packaging as a marketing tool:
Self-service: The effective package must perform many sales tasks: attract attention, describe the product’s features, create
consumer confidence, and make a favorable overall impression.
Consumer affluence: Rising affluence means consumers are willing to pay a little more for the convenience, appearance,
dependability, and prestige of better packages.
Company and brand image: Packages contribute to instant recognition of the company or brand. In the store, they can create a
billboard effect.
Innovation opportunity: Unique or innovative packaging can bring big benefits to consumers and profits to producers.
Companies are always looking for a way to make their products more convenient and easier to use—often charging a premium
when they do so.
Kiwi Express Shine shoe polish has a dispenser and applicator to shine shoes without the need to spread newspaper, wear a
glove, or use a brush.
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• Packaging must achieve a number of objectives:
• 1. Identify the brand.
• 2. Convey descriptive and persuasive information.
• 3. Facilitate product transportation and protection.
• 4. Assist at-home storage.
• 5. Aid product consumption.
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Labeling:
• The label can be a simple attached tag or an elaborately designed graphic that is part of
the package.
• It might carry a great deal of information, or only the brand name.
• Even if the seller prefers a simple label, the law may require more.
• A label performs several functions:
1. Identifies the product or brand
2. Grade the product
3. Describe the product: who made it, where and when, what it contains, how it is to be used,
and how to use it safely.
4. Promote the product through attractive graphics.
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• Warranties and Guarantees
• All sellers are legally responsible for fulfilling a buyer’s normal or reasonable
expectations.
• Warranties are formal statements of expected product performance by the
manufacturer. Products under warranty can be returned to the manufacturer or
designated repair center for repair, replacement, or refund. Whether expressed or
implied, warranties are legally enforceable.
• Guarantees reduce the buyer’s perceived risk. They suggest that the product is of high
quality and the company and its service performance are dependable. They can be
especially helpful when the company or product is not well known or when the
product’s quality is superior to that of competitors
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Pricing
Understanding Pricing
• Negotiations between buyers and sellers
• One price for all buyers
• Internet pricing
Consumer Psychology and Pricing
•
• Consumer Psychology and Pricing
• Reference Prices
• Price-Quality Inferences
• Price Endings
• Reference Prices
• Few consumers can accurately recall specific prices
• Consumers often employ reference prices, comparing an observed price to an
internal reference price they remember or an external frame of reference such
as a posted “regular retail price.”
• “Fair Price” (what consumers feel the product should cost)
• Typical Price
• Last Price Paid
• Upper-Bound Price (reservation price or the maximum most consumers would pay)
• Lower-Bound Price (lower threshold price or the minimum most consumers would pay)
• Expected Future Price
• Usual Discounted Price
• Price-Quality Inferences (Image Pricing)
• Many consumers use price as an indicator of quality.
• Image pricing is especially effective with ego-sensitive products such as perfumes,
expensive cars, and designer clothing.
• When information about true quality is available, price becomes a less significant
indicator of quality.
• Exclusivity and scarcity can also affect quality inferences
• Price Endings
• Consumers tend to process prices “left to right” rather than by rounding
• Another explanation for the popularity of “9” endings is that they suggest a discount or bargain.
• Prices that end with 0 and 5 are also popular and are thought to be easier for consumers to
process and retrieve from memory.
• Total category sales are highest when some, but not all, items in a category have sale signs; past a
certain point, sale signs may cause total category sales to fall.
• Pricing cues such as sale signs and prices that end in 9 are more influential when
consumers’ price knowledge is poor, when they purchase the item infrequently or
are new to the category, and when product designs vary over time, prices vary
seasonally, or quality or sizes vary across stores
Setting the Price
• Six main steps:
• Defining the pricing objective
• Determining demand
• Estimating costs
• Analyzing competitors’ costs, prices, and offers
• Selecting a pricing method
• Setting the final price
1. Defining the Pricing Objective
• Common pricing objectives:
• SURVIVAL
• Short-term profit/ MAXIMUM CURRENT PROFIT
• Market penetration/ MAXIMUM MARKET SHARE
• Market Market skimming
• Quality leadership
2. Determining Demand
• PRICE SENSITIVITY
• Generally speaking, customers are less price sensitive to low-cost items or items they buy
infrequently.
• They are also less price sensitive when (1) there are few or no substitutes or competitors; (2) they do
not readily notice the higher price; (3) they are slow to change their buying habits; (4) they think the
higher prices are justified; and (5) price is only a small part of the total cost of obtaining, operating,
and servicing the product over its lifetime.
• ESTIMATING DEMAND CURVES
• Surveys can explore how many units consumers would buy at different proposed prices.
• Price experiments can vary the prices of different products in a store or of the same product in similar
territories to see how the change affects sales.
• Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships.
2. Determining Demand
• Price elasticity of demand
• The degree to which a change in price leads to a change in quantity sold
Figure 11.1 Inelastic And Elastic Demand
3. Estimating Costs (1 of 2)
• Fixed costs
• Costs that do not vary with production level or sales revenue
• Variable costs
• Vary directly with the level of production
• Total costs
• The sum of the fixed and variable costs
3. Estimating Costs (2 of 2)
• Experience curve effects
• Experience curve
• Experience curve pricing
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4. Analysing Competitors price
• If the firm’s offer contains features not offered by the nearest competitor, it should evaluate
their worth to the customer and add that value to the competitor’s price.
• If the competitor’s offer contains some features not offered by the firm, the firm should subtract
their value from its own price.
• The firm can decide whether it can charge more, the same, or less than the competitor
• Value- Priced Competitors: Companies offering the powerful combination of low price and
high quality are capturing the hearts and wallets of consumers all over the world.
• Example: Walmart
• Firm must take competitors’ costs, prices, and reactions into account and then go ahead with
pricing.
5. Selecting a Pricing Method (1 of 6)
• Three major considerations in price
• Costs
• Set a price floor
• Competitors’ prices
• Provide an orienting point
• Customers’ assessment of unique features
• Establish a price ceiling
The Three C’s Model for Price Setting
Selecting a Pricing Method
• Markup pricing
• Add a standard markup to the product’s cost
unit cost
Markup price =
(1 − desired return on sales )
Selecting a Pricing Method
• Target-return pricing
• Price that yields its target rate of return on investment
desired return invested capital
Target-return price = unit cost +
unit sales
Figure 11.2 Break-Even Chart for Determining
Target-Return Price and Break-Even Volume
Selecting a Pricing Method
• Value Pricing/Economic value-to-customer pricing
• Based on buyer’s image of product, channel
deliverables, warranty quality, customer support, and
softer attributes
Selecting a Pricing Method
• Competitive pricing/Going rate pricing
• The firm bases its price largely on competitors’ prices
Selecting a Pricing Method
• Auction pricing
• English (ascending)
• Dutch (descending)
• Sealed-bid
6. Setting the Final Price
• Price discrimination
Occurs when a company sells a product or service at two or more prices that do
not reflect a proportional difference in costs
First degree- the seller charges each customer a separate price, depending on the intensity of his or her
demand.
Second degree - the seller charges less to buyers of larger volumes
Third degree - the seller charges different amounts to different consumer segments.
Third degree price discrimination:
Customer segment pricing: Senior citizen, children etc
Product form pricing- Refill/bottled
Channel pricing- Restaurant/Vending machine
Location pricing- Different states/ Theatre- stall, balcony
Time pricing- peak hours/vacation/weekends
Product Mix Pricing
• Loss-leader pricing – dropping prices of well-known brands to get store
traffic (Dmart)
• Product line pricing
• Optional feature pricing- Automobile
• Captive pricing – product requires the use of ancillary/captive product
• Two-part pricing – Fix fees plus variable usage fee – amusement parks
• By-product pricing – Amul butter milk
• Product bundling pricing
Pricing Policies and Strategies/Promotional Pricing
Companies can use several pricing techniques to stimulate early purchase:
Loss-leader pricing. Supermarkets and department stores often drop the price on well-known brands to stimulate additional store
traffic. This pays if the revenue on the additional sales compensates for the lower margins on the loss-leader items.
Special event pricing. Sellers will establish special prices in certain seasons to draw in more customers. Every March, there are back-
to-school sales, and festive pricing.
Special customer pricing. Sellers will offer special prices exclusively to certain customers.
Cash rebates. Auto companies and other consumer-goods companies offer cash rebates to encourage purchase of the manufacturers’
products within a specified time period. Rebates can help clear inventories without cutting the stated list price.
Low-interest financing. Instead of cutting its price, the company can offer customers low-interest financing.
Longer payment terms. Sellers, especially mortgage banks and auto companies, stretch loans over longer periods and thus lower the
monthly payments. Consumers often worry less about the cost (the interest rate) of a loan, and more about whether they can afford
the monthly payment.
Warranties and service contracts. Companies can promote sales by adding a free or low-cost warranty or service contract.
Psychological discounting. This strategy sets an artificially high price and then offers the product at substantial savings; for example,
“Was $359, now $299.” Discounts from normal prices are a legitimate form of promotional pricing