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Lecture

Chapter 16 Notes


Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Michael Szlachta

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Chapter 16
Value package Product marketed as a bundle of value-adding attributes, including
reasonable costs
Classifying consumer products
Convenience goods/services 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
Shopping goods/services moderately expensive consumer goods or services that are
purchased infrequently, causing consumers to spend some time comparing prices and such
Specialty goods/services very expensive consumer goods or services that are purchased
rarely, causing consumers to spend a lot of time comparing prices
Classifying industrial products
Expense items materials and services that are consumed within a year by firms
producing other goods or services
Capital items expensive, long-lasting industrial goods that are used in producing other
goods or services and have a long life
Buildings, fixed equipment (water towers, baking oven), accessory equipment
(computers, airplanes)
Capital services services for which long-term commitments are made
Employee food services, building and equipment maintenance, legal services
Product mix the group of products a company has available for sale
Product line a group of products that are closely related because they function in a similar
manner or are sold to the same customer group, who will use them in similar ways
Developing New Products
Speed to market strategy of introducing new products to respond quickly to customer
and/or market changes
The seven-step development process
Product development begins with a search for ideas for new products
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oService package identification of the tangible and intangible features that
define a service
Screening this stage is an attempt to eliminate all product ideas that do not mesh
with the firms abilities, expertise, or objectives
Concept testing once ideas have been culled, companies use the market research to
solicit consumers’ input
Business analysis this involves developing a comparison of costs and benefits for
the proposed product
Prototype development using input from the concept-testing phase, engineering
and/or research and development produce a preliminary version of the product
oService process design involves selecting the process, identifying worker
requirements, and determining facilities requirements
Product testing and test marketing the company begins limited production of the
item
Commercialization if test-marketing results are positive, the company will begin
full-scale production and marketing of the product
The Product Life Cycle
Product life cycle (PLC) based on the idea that products have a limited profit-producing
life
Stages in the PLC:
Introduction: the introduction stage begins when the product reaches the
marketplace
oBecause of extensive promotional and development costs, profits are non-
existent
Growth if the new product attracts and satisfies enough consumers, sales begin to
climb rapidly
Maturity sales growth begins to slow. Although the product earns its highest profit
level early in this stage, increased competition eventually leads to price cutting and
lower profits
Decline sales and profits continue to fall
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