chapter_9_instructors_manual - 1 CHAPTER 9: SMALL BUSINESS...

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1 CHAPTER 9: SMALL BUSINESS MARKETING: PRODUCT AND PRICING STRATEGIES Chapter Summary This chapter take the student through two pieces of the marketing plan: product and pricing. The student will learn the different characteristics of a product and service and how the total product is a combination of these and more. New product development and the product life cycle are discussed. How to set price, the components of a price, pricing psychology, price influencers and pricing strategies are presented. Learning Objectives After studying this chapter, the student should be able to: 1. Know the characteristics of goods and services. 2. Define the total product. 3. Learn the stages of new product development. 4. Learn the product life cycle. 5. Understand why pricing is an important but difficult task for small business. 6. Understand price elasticities, pricing psychology, and other price influencers and their impact on pricing. 7. Understand different pricing strategies. Focus on Small Business: Scott the Seamstress Scott Jones made his own fleece jacket because he couldn’t afford buying one. Friends saw it and clamored for Scott to make ones for them as well. It took a little trial and error, but Scott was able to establish pricing and product standards and Beyond Fleece is now an extremely successful company. Discussion Questions 1. How would you describe the pricing approaches used by Beyond Fleece when it started and as it grew? At first he simply covered the cost of his materials and some profits, a strategy known as cost plus, return pricing, or return on investment pricing. He also priced below the competition – the main reason he got into the business in the first place. As his business grew he had additional investments to cover. The popularity of his jackets has increased to the point where he doesn’t have to be the low price seller and can be at, or above, competition.
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2 2. As Beyond Fleece continues to grow Jones will face several challenges. First and foremost how can he continue to offer a unique, customizable product as produces hundreds of types of garments? While each garment is strictly no longer 100% customized, each model is offered in a number of colors and with 16 different options – providing a huge number of options. Certainly programmable sewing machines are a big help and a process of “mass customization” has worked for firms larger than Scott’s. At this point, it appears, there are enough options to still be considered custom. 3. As more companies offer custom sizing, will consumer continue to pay higher prices for Beyond’s clothing? If the customer perceives this as a mass production item or as being the same as he can purchase many places, he may be more reluctant to pay high prices. On the other hand, if Scott establishes his product exceptionably high quality or prestigious – the Lamborghini of fleece wear – customers will be willing to pay more, maybe more than the price he’s currently using. 4.
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chapter_9_instructors_manual - 1 CHAPTER 9: SMALL BUSINESS...

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