Chapter 6-Developing and Promoting Goods and Services

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14 Aug 2010

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Chapter 6: Developing and Promoting Goods and Services
What is a Product
The Value Package
Features - The quality, both tangible and intangible, that a company builds into its products
Value Package - Product marketed as a bundle of value-adding attributes, including reasonable cost
Classifying Goods and Services
Classifying Consumer Products
- Convenience Goods/Service - Relatively inexpensive consumer goods or services that are bought and
used rapidly and regularly, causing consumers to spend little time looking for them or comparing their prices
- milk, newspaper, fast food
- Shopping Goods/Services - Moderately expensive consumer goods or services that are purchased infrequently,
causing consumers to spend more time comparing their prices
- Stereos, tires, insurance
- Specialty Goods/Services - Very expensive consumer goods or services that are purchased rarely, causing
consumers to spend a great deal of time locating the exact item desired
- Wedding gowns, catering
Classifying Industrial Products
- Expense Items - Relatively inexpensive industrial goods that are consumed rapidly and regularly
- within a year
- Capital Items - Expensive, long-lasting industrial goods that are used in producing other goods or services and
have a long life
- buildings, factories, fixed equipment
The Product Mix
Product Mix - The group of products a company has available for sale
Product Lines
Product Line - A group of similar products intended for a similar group of buyers who will use them in a similar
- Companies usually start with 1 product, then makes more similar products to reach out to a bigger
audience: Tea, Flavoured tea.
- Result - multiple (or diversified) product lines
Developing New Products
The Time Frame of New Product Development
Product Mortality Rates
- 1 in 50 product ideas reach the market
- average supermarket carries about 20,000 to 25,000 different items
- 9 out of 10 new products will fail
Speed to Market
Speed To Market - Strategy of introducing new products to respond quickly to customer and/or market changes
- The faster a product moves from lab to market, the more likely it is to survive
- Introducing products to market before competitors, allows to establish market leadership
The Seven-Step Development Process
1. Product Ideas
- can come from consumers, sales force, research and development people, or engineering
2. Screening
- attempt to eliminate all product ideas that do not mesh with the firm's ability, expertise, or objectives
- Representatives from marketing, engineering, and production must have input at this stage
3. Concept Testing
- companies use market research to solicit consumers' input
- finds benefits, and price level
4. Business Analysis
- early comparison of costs versus benefits
- preliminary sales projections compared with cost projections from finance and production
- to see if product can meet minimum profitability goals
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5. Prototype Development
- ideas take shape
- can be extremely expensive, requiring extensive hand crafting, tooling, development of components
- can help identify potential production problems
6. Product Testing and Test Marketing
- uses what it learned from prototype, company begins limited production on the item
- product is then tested internally to see if it meets performance requirements; if so, made for sale in limited areas
- costly
- gives idea of real market conditions
7. Commercialization
- company begins full scale production and marketing if results are positive
- extensive delays in commercialization may give competitors a chance to bring out their own version
Variations in the Process for Services
1. Service Ideas
- includes task called defining the Service Package
- Identification of the tangible and intangible features that define the service
5. Service Process Design
- Instead of a prototype, services require a 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 service, including sequence and timing
- Worker requirements specify employee behaviours, skills, capabilities, and interaction with customers
- Facilities requirements designate all of the equipment that supports delivery of the service
The Product Life Cycle
Product Life Cycle - (PLC) The concept that the profit-producing life of any product goes through a cycle of
introduction, growth, maturity (levelling off), and decline.
Stages in the Product Life Cycle
1. Introduction
- Begins when product reaches the marketplace
- marketers focus on making potential consumers aware of the product and benefits
- high promotion costs, profit is non-existent
2. Growth
- if product satisfy consumers enough, sales start to climb
- begins to show a profit
- other firms in the industry start to introduce their own versions
3. Maturity
- Sales growth begins to slow
- though product earns its highest profit level early in this stage, competition leads to price cutting
4. Decline
- Sales and profits continue to fall
- companies reduce, or remove promotions, but may let product linger to provide some profits
Extending Product Life: An Alternative to New Products
Product Extension - Exist, unmodified product that is marketed globally
Product Adaptation - Product modified to have greater appeal in foreign markets
Reintroduction - Process of reviving for new markets products that are obsolete in older ones
Identifying Products
Branding Products
Branding - Process of using symbols to communicate the qualities of a product made by a particular producer
Brand Equity - Degree of consumers' loyalty to and awareness of a brand and its resultant market share
Types of Brand Names
National Brands - Products distributed by and carrying a name associated with the manufacturer.
Licensed Brands - Selling the right to use a brand name, a celebrity's name, or some other well-known
identification mark to another company to use on a product.
Private Brands - Products promoted by and carrying a name associated with the retailer or wholesaler, not the
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