Chapter 6: Developing and Promoting Goods and Services
What is a Product?
Features: the qualities, both tangible and intangible, that a company builds into its
Value package: product marketed as a bundle of value-adding attributes, including
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
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
Expense items: relatively inexpensive industrial goods that are consumed rapidly
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.
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
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
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
If it does, it is made available for sale in limited areas.
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
But extended delays in commercialization may give competitors a chance to
bring out their own version.
Service package: identification of the tangible and intangible features that define
Service process design: selecting the process, identifying worker requirements,
and determining facilities requirements so that the service can be effectively
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:
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
2. Growth: If the new product attracts and satisfies enough customers, sales begin to
During this stage, the product begins to show a profit.
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.
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.
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
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
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:
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
Positioning products: the establishment of an easily identifiable image of a
product in the minds of consumers.
Today’s value-conscious customers gain benefits when the promotional mix