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Lecture 6

BUSI 1800 Week 6.docx

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Department
Business
Course
BUSI 1800
Professor
Richard Clayman
Semester
Fall

Description
BUSI 1800 Week 6 Chapter 13 – Developing and Promoting Goods and Services What is a product? - Product is something consumers purchase for a function and benefit - Product features includes both tangibles and intangibles such as image and reputation - Value package = a bundle of value-adding attributes including reasonable cost - Value proposition = promise of value to be given on the seller’s side and the buyers belief that it will in fact be delivered Consumer Products Classification - Convenience o Goods bought frequently and with little thought o Services consumer rapidly and regularly - Shopping o Purchased infrequently; typically of moderate cost o Consumers shop around for price, value and brand - Specialty o Purchased rarely; typically expensive and/or worth important implications o Consumers take time to locate the exact item desired Industrial Products Classification - OPEX items: consumed quickly and/or regularly in the course of business production - CAPEX items: expensive, long-lasting (durable) goods, equipment and services Products and Services - Product mix: the group of products a company sells - Product line: a group of similar (synergistic) products intended for a similar group of buyers New Product Development - Needed to expand and survive - Expensive, risky and long time horizons - Product mortality o Only 1 in 50 new products reaches the market, only a few among them become successful - Speed to market o Introduce products quickly to respond to changes  Ahead of competitors to establish market leadership  More rapid to market = more likely Seven Step Development Process - Step 1: Product ideas o Seek out ideas for new products from: employees, consumers, sales people, engineers... - Step 2: Screening o Eliminate product ideas that do not fit with the firm’s resources: performed by staff from marketing, engineering and production - Step 3: Concept testing o Market research o Identify benefits and a pricing strategy - Step 4: Business analysis o Comparison of costs and benefits o Preliminary sales and cost projections o Can it meet minimum profitability goals? - Step 5: Prototype development o Preliminary version of the product; costly o Identifies potential production problems - Step 6: Product and market testing o Limited production run for sale in a test market area with complete promotion and distribution o Provides feedback on potential performance; costly - Step 7: Commercialization o Full-scale production and marketing o May be rolled out on a gradual basis to alleviate strain on the company’s production and finances Product Life Cycle - Introduction o Competition is limited o Costs are high o Profits are non-existent o Prices are high o Promotion focuses on informing - Growth o Sales grow rapidly o New competitors enters o Aggressive promotion  Badge value o Prices lowered o Profits peak and level off - Maturity o Industry sales level off o Market is more aggressive due to increased competition in the face of slow/no sales growth o Profits decline o Some firms will leave - Decline o Sales and profits decline o Product becomes obsolete o Competition leaves market o Sales drop o Promotion is limited o Firms with larger market shares may let product linger until industry ceases to exist Identifying Products - Branding: use of symbols to communicate the qualities of a product made by a particular producer - Brand equity: degree of loyalty and awareness of
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