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 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
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
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
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
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.
If test-making results are positive, the company will begin full-scale production and marketing of the
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
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:
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
Because of extensive promotional and development costs, profits are nonexistent.
If the new product attracts and satisfies enough customers, sales begin to climb rapidly.
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 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
Brand loyalty: customer’s recognition of, preference for, and insistence on buying a product with a certain
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
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.
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
Today’s value-conscious customers gain benefits when the promotional mix