Question

Assignment Content Answer the following critical thinking questions: 

1. What are the ways to improve a product mix? Describe two approaches to use existing products to strengthen a product mix 

2. What factors must be considered when pricing products? 

3. Explain the various types of pricing objectives 

4. Why is it important to consider the buyer's sensitivity to price when pricing products?

Answer 1

1) Some of the ways to improve a product mix are:

a. Widen the product mix by including new product lines

b. Extend the present product lines

c. Deepen the product mix by adding more varieties in the product

d. Maintain consistency in the product lines

A product line can be strengthened by product modification - deepening the product mix by adding more varieties in the product. The products can be modified by improving its quality, function and appearance. Product modification can improve the efficiency, convenience and safety of the product.

Product line can also be strengthened by changing mix width - widening the product mix by including new product lines. A company manufacturing a product can diversify by manufacturing a different group of related products. In this case, usually both the products cater to the same market or may have a similar function.

2) The critical points that must be considered while pricing products are:

a. Costs: the manufacturer must be aware of all the different types of costs involved in manufacturing the product

b. Customers: It is important to understand their needs, expectations from the product etc.

c. Competitors: The manufacturer should know about his competitors activities

3) The types of pricing objectives are:

a. Competitor driven pricing – Price the product according to that charged by the competitors. The price may either be lower or more if the product offers superior value.

b. Profit driven pricing – Price the product to achieve maximum profits. However, while charging the maximum possible amount, the manufacturer should not alienate his core customers.

c. Market penetration – Offer a lower product price in a competitive market. This strategy is usually adopted while entering a new market.   

d. Skimming price – Price the product higher than competition. A manufacture can charge higher prices based on the reputation that he has built.

4) Buyer’s sensitivity to price is the extent to which price determines his preference to buy the product. It is extremely important for marketers to understand their buyer’s price sensitivity because in most cases, buyers are sensitive to prices and demand maximum benefit of their money. Each buyer will have a range of acceptable price. Hence it is important as the price affects his buying behaviour.