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Management (MGT)
Chris Bovaird

Chapter 6: Developing and Promoting Goods and Services What is a Product? Terms:  Features: the qualities, 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.  Convenience goods: relatively inexpensive consumer goods or services that is bought and used rapidly and regularly, causing consumers to spend little time looking for them or comparing their prices.  Shipping goods/services: moderately expensive consumer goods or services that are purchased infrequently, causing consumers to spend some time comparing their prices.  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 time desired.  Expense items: relatively inexpensive industrial goods 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.  Product mix: the group of products a company has available for sale.  Product line: a group or similar products intended for a similar group of buyers who will use them in a similar fashion. 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. Terms:  Service package: identification of the tangible and intangible features that define the service.  Service process design: selecting the process, identifying worker requirements, and determining facilities requirements so that the service can be effectively provided.  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:  The introduction stage begins when the product reaches the marketplace.  During the stage, marketers focus on making potential consumers aware of the product and its benefits.  Because of extensive promotional and development costs, profits are nonexistent. 2. Growth:  If the new product attracts and satisfies enough customers, sales begin to climb rapidly.  During this stage, the product begins to show a profit. 3. 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.  Towards the end of the stage, prices begin to fall. 4. Decline:  During the final stage, sales and profits continue to fall.  New products in the introduction stage take away sales.  Companies remove or reduce promotional support (ads and salespeople) and may let the product linger to provide some profits. Terms:  Product extension: existing, 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.  Branding: process of using symbols to communicate the qualities of a product made by a particular producer.  Brand equity: degree of consumer’s loyalty to and awareness of a brand and its resultant market share.  National brands: products distributed by and carrying a name associated with the manufacturer.  Licensed brand: 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 manufacturer.  Brand loyalty: customer’s recognition of, preference for, and insistence on buying a product with a certain brand name.  Trademark: the exclusive legal right to use a brand name.  Patent: protects an invention or idea for a period of 20 years.  Copyright: exclusive ownership rights granted to creators for the tangible expression of an idea.  Packaging: the physical container in which a product is sold, including the label.  Label: the part of a product’s packaging that identifies the product’s name and contents and sometimes its benefits.  Promotion: any technique designed to sell a product in order to:  Make them aware of products.  Make them knowledgeable about products.  Persuade them to like products.  Persuade them to purchase products. Promotional Objectives:  Communicating information:  Consumers cannot buy a product unless they have been informed about it.  Information can advise customers about the availability of a product, educate the on the latest technological advances, or announce the candidacy of someone running for a government office.  May be communicated in writing (newspapers and magazines), verbally (in person or over the telephone), or visually (television, a matchbook cover or a billboard).  Positioning products: the establishment of an easily identifiable image of a product in the minds of consumers.  Adding value:  Today’s value-conscious customers gain benefits when the promotional mix
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