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study guide


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird

Page:
of 14
Chapter 6: Developing and Promoting Goods and Services
WHAT IS A PRODUCT?
-markets must consider what consumers really buy when they purchase products
-this way, they can plan their strategies effectively
The Value Package
-customers get value from benefits, features, and even intangible rewards associated with the
products
-features: the qualities, both tangible and intangible, that a company builds into its products
-to attract buyers, features must provide benefits
-value package: product markets as a bundle of value-adding attributes, including reasonable
costs
-buyers expect to receive products with a greater value—with more benefits at reasonable costs
-most items in the value package are services or intangibles
-services and intangibles add value by providing benefits that increase the customers satisfaction
-products are just more than just visible features and benefits
-consumers are also buying an image and a reputation
-brand name, packaging, labelling, and after-the-purchase service are also essential parts of the
marketer’s products
-ads do not usually emphasize the technical features of its products, not even the criteria that
companies
-ads usually focus on the customer-oriented benefits
-benefits are being marketed as part of a complete value package
-a new service often pleases customers more than the cost of providing it
-making the purchase transaction more convenient, adds value by reducing long waits for
customers
Classifying Goods and Services
-one way to classify a product is according to expected buyers
-buyers fall into two groups: buyers of consumer products, and buyers of industrial products
Classifying Consumer Products
-consumer products are divided into three categories that reflect buyers behaviour: convenience,
shopping, and specialty products
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Convenience goods and convenience services are consumed rapidly and regularly. They
are inexpensive, purchased frequently, with little expenditure of time and effort. Example,
milk, eggs, fast-food restaurants
Shopping goods and shopping services are more expensive and purchased less
frequently. Consumers compare brands, and evaluate alternatives in terms of style, colour,
price, and other criteria. Example, stereos, tires, insurance, pension
Speciality goods and speciality services are extremely important and expensive.
Consumers usually decide on what they want without substitutes. Consumers will spend a
lot of money and time to get a specific product. Example, wedding gown, catering
services for wedding receptions
Classifying Industrial Products
-depends on how much they cost and how they will be used
-divided into two categories: expense items and capital items
Expense items are relatively inexpensive industrial goods that are consumed rapidly and
regularly. Example, bulk loads of tea processed into tea bags
Capital items are expensive, long-lasting industrial goods that are used in producing
other goods or services and have a long life. Example, buildings and water towers. Capital
services are those for which long-term commitments are made. Example, purchases for
employee food services and legal services. Capital items involve decisions by high level
managers
The Product Mix
-product mix: the group of products a company has available for sale
Product Lines
-product lines: a group of similar products intended for a similar group of buyers who will use
them in similar fashion
-begin with a single product, and as time progresses the initial product fails to suit every
consumer shopping for the product type
-to meet market demand, marketers introduce similar products
-companies may extend their horizons and identify opportunities outside existing product lines
-this results in multiple (or diversified) product lines
-for example, a business or industry services are added
-multiple product lines allow a company to grow rapidly
-they also help to offset the consequences of slow sales in any one product line
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DEVELOPING NEW PRODUCTS
-no firm can count on a single successful product to carry it forever
-there is competition and shifting consumer preferences to worry about
-even basic products are constantly renewed
-companies who fall to keep pace with changing tastes, fall behind new products from
competitors
The Time Frame of New Product Development
-companies face multi-year time horizons and high risks when developing new products
-a company which spends millions of dollars can have a lot of uncertainty in new product
-a new product may be developed slower than expected
-a new product may suffer from a classicchicken-and-egg problem
-consumers were wait longer to purchase the product, it is expensive
-the new product may be confusing
-example, when consumers purchased HDTV over half of the consumers did not have the set-top
box which was required
Product Morality Rates
-takes about 50 new product ideas to generate one product that finally reaches the market
-only a few of these survivors become successful products
-the number of new products hitting the market each year was increased
-this causes creating a successful new product difficult
-because of the lack of space and customer demand, about 9 out of 10 products will fail
Speed to Market
-the more faster a product moves from the lab to the marketplace, the more likely it is so survive
-if new products are introduced ahead of competitors, companies establish market leadership
-speed to market: strategy of introducing new products to respond quickly to customer and/or
market changes
-a product that is three months late to the market (3 months behind the leader) loses 12 of its
lifetime profit potential
The Seven-Step Development Process
1.Product ideas.
-begins with a search for ideas for new products
-ideas can from consumers, the sale force, research and development people, or engineering
personnel
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