rsm100chapter16.docx

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Department
Rotman Commerce
Course
RSM100Y1
Professor
John Oesch
Semester
Fall

Description
Chapter 16 Features: qualitiestangible and intangiblethat a companybuild in to its products (i.e. 12 HP motor on a lawn mower) Products are much more than just visible features; in buying a product, consumers are buying an image and reputation To attract buyers, product features must provide benefits (i.e. by buying a lawn mower, it produces an intangible benefit, an attractive lawn) Value package: product marketed as a bundle of value adding attributes, including reasonable cost o i.e. possible attributes in a PC value package are things like choices of colour, attractive software packages, fast ordering via the internet, speedy delivery, etc Marketing products and services to consumers is vastly different from marketing them to companies Consumer products are divided into 3 categories that reflect buyers behaviour o 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 o Shopping goods/ services: moderately expensive consumer goods or services that are purchased infrequently, causing consumers to spend some time comparing brands and prices o 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 Consumers usually have strong preferences and will not accept substitutes Industrial products are divided into 2 categories o Expense items: materials and services that are consumed within a year by firms producing other goods or services and they are relatively inexpensive They are consumed rapidly and regularly o Capital items: expensive, long lasting goods that are used in producing other goods or services (expected lives are greater than 1 year) I.e. buildings, fixed equipments, etc o Capital services: services for which long term commitments are made (i.e. purchases for employee food services, building and equipment maintenance, legal services Product mix: group of consumer or industrial products a company has available for sale Product line: 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 o Many companies that begin with a single product find that the product fails to suit every consumer and so they introduce similar products to reach more customers o Companies may also introduce multiple product lines that go well beyond their existing product line Because all products and services eventually fall out of favour with consumers, firms must develop and introduce new products (i.e. DVD players vs. Blu-ray) Companies often face multi-year time horizons, high risks, and lots of uncertainty when developing new products It takes about 50 new product ideas to generate one product that finally reaches the market, and then only 10 percent of these products become successful Creating a successful new product has become increasingly difficult because the number of new products hitting the market each year has increased dramatically The more rapidly a product moves from the lab to the marketplace, the more likely it is to survive o By introducing new products ahead of competitors, they establish market leadership Speed to market: strategy of introducing new products to respond quickly to customer and/or market changes o A product that is only 3 months late to market loses 12 percent of its lifetime profit potential o A product that is 6 months late will lose 33 percent To increase the chances of developing successful new products or services, many firms use a seven-step processo Product ideas: product development begins with a search for ideas for new products and they can come from consumers, the sales force, R&D, or engineering Developing services ideas includes a task called service packageidentification of the tangible and intangible features that define the service and service specification o Screening: eliminate all product ideas that do not mesh with firms abilities, expertise, or objectives Representatives from marketing, engineering, and production must have input at this stage o Concept testing: companies use market research to solicit consumers input Firms can identify benefits that the product provides and can also identify the price level for the product o Business analysis: compares costs and benefits for the proposed product Preliminary sales projections are compared with cost projections from finance and production to determine whether the product can meet minimum profitability goals o Prototype development: produces a preliminary version of the product (although it can be very expensive, it can help identify potential production problems) Service process design: involves selecting the process (i.e. identifying each step in the service, such as sequence and timing), identifying worker requirements (i.e. specifying employee skills, capabilities, etc) and determining facilities requirements o Product testing and test marketing: company begins limited production of the item and if the product meets performance requirements, it is made available for sale in test markets o Commercialization: if test marketing results are positive, the company will begin full scale production and marketing of the product Product life
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