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Lecture

MGTA02H3 Lecture Notes - Business Analysis, Brand Equity, Brand Loyalty


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird

Page:
of 5
CHAPTER 6: THE 4 P s - PRODUCT
WHAT IS A PRODUCT?
The Value Package
Features: the qualities, both tangible and intangible, that a company
builds into its products. To attract buyers, features also must provide
benefits: The mower must produce an attractive lawn or the owner’s
pleasure in knowing that the mower is nearby when need.
Value package: product marketed as a bundle of value-adding
attributes, including reasonable cost.
Products are much more than just visual features and benefits. In
buying a product, consumers are also buying an image and a
reputation.
Classifying Goods and Services
Classifying Consumer Products
Convenience goods/services: relatively inexpensive consumer
goods (milk and newspapers) or services (those offered by fast
food restaurants) that is bought and used rapidly and regularly,
causing consumers to spend little time looking for them or
comparing their prices.
Shopping goods/services: moderately expensive consumer
goods (stereos and tires) or services (insurance) that are
purchased infrequently, causing consumers to spend some time
comparing their prices.
Specialty goods/services: very expensive consumer goods
(wedding gowns) or services (catering for wedding reception)
that are purchased rarely, causing consumers to spend a great
deal of time locating the exact time desired.
Classifying Industrial Products
Expense items: relatively inexpensive industrial goods (bulk
loads of tea processed into tea bags) that are consumed rapidly
and regularly.
Capital items: expensive, long-lasting industrial goods that are
used in producing other goods or services and have a long life.
Expensive buildings (offices, factories), fixed equipment (water
towers, baking ovens), and accessory equipment (computers,
airplanes) are capital goods Capital services are those which
long-term commitments are made which include purchases for
employee food services, building and equipment maintenance, or
legal services.
The Product Mix
Product mix: the group of products a company has available for sale.
Product Lines
Product line: a group or similar products intended for a similar group
of buyers who will use them in a similar fashion.
DEVELOOPING NEW PRODUCTS
To expand or diversify product lines, firms must develop and
successfully introduce streams of new products. Faced with
competition and shifting consumer preferences, no fir can count on a
single successful product to carry it forever. Even basic products
(jeans) that have been widely purchased for decades require neatly
constant renewal.
The Time Frame of New Product Development
Product Mortality Rates
Many seemingly great ideas have failed as products. Creating a
successful new product has been increasingly difficult, even for the
most experiences marketers. Why? The number of new products
hitting the market each year has increased dramatically, and
thousands of new household, grocery, and drugstore items are
introduced annually. There’s a lack of space in supermarkets, as well
as customer demand, causing 9 out of 10 products to fail. Those with
the best changes are innovative and deliver unique benefits.
Speed to Market
Speed to Market is the strategy of introducing new products to
respond quickly to customer and/or market changes.
Seven-Step Development Process:
1. Product ideas:
Begins with a search for ideas for new products.
Can come from consumers, the sales force, research and
development people, or engineering personnel.
The key is to actively seek out ideas and to reward those
whose ideas become successful products.
2. Screening:
An attempt to eliminate all product ideas that do not mesh
with the firm’s abilities, expertise or objectives.
Representatives from marketing, engineering, and
production must have input at this stage.
3. Concept testing:
Once ideas have been culled, companies use market
research to solicit consumer’s input.
Firms can identify benefits that the products must provide
as well as an appropriate price level for the product.
4. Business analysis:
Involves an early comparison of costs versus benefits for
the proposed products.
Preliminary sales projections are compared with cost
projections from finance and production.
The aim is not to determine precisely how much money the
product will make but to see whether the product can meet
minimum profitability goals.
5. Prototype development:
Product ideas begin to take shape at this stage.
Using input from the concept-testing phase, engineering
and/or development produce a preliminary version of the
product.
Prototypes can be extremely expensive, often requiring
extensive hand crafting, tooling and development of
components.
This can help identify potential production problems.
6. Product testing and test marketing:
Using what it learned from the prototype, the company
begins limited production of the item.
The product can be tested internally to see if it meets
performance requirements.
If it does, it is made available for sale in limited areas.
7. Commercialization:
If test-making results are positive, the company will begin
full-scale production and marketing of the products.
Gradual commercialization, with the firm providing the
product to more and more areas over times, prevents
undue strain on the firm’s initial production capabilities.
But extended delays in commercialization may give
competitors a chance to bring out their own version.
Variations in the Process for Services
1Service package: identification of the tangible and intangible
features that define the service.
5. Service process design: selecting the process, identifying worker
requirements, and determining facilities requirements so that the
service can be effectively provided. Process selection identifies
each step in the service, including the sequence and the timing.
Worker requirements specify employee behaviours, skills,
capabilities, and interactions with customers during the service
encounter. Facilities requirements designate all of the equipment
that supports delivery of the service.
THE PRODUCT LIFE CYCLE