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MGTA02H3 (361)
Chapter 6

chapter 6 notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 6 Developing and Promoting Goods and Services Notes What is a Product? The Value Package N whether it is a physical good, a service, or some combination of the two, customers get value from the various benefits, features, and even intangible rewards associated with a product N features the qualities, both tangible and intangible, that a company builds into its products N todays consumer regards a product as a bundle of attributes which, taken together, marketers call the value package N value package product marketed as a bundle of value-added attributes, including reasonable cost N today, more and more firms compete on the basis of enhanced value packagethey find that the addition of a simple new service often pleases customers far beyond the cost of providing it Classifying Goods and Services N buyers fall into two groups: buyers of consumer products and buyers of industrial products Classifying Consumer Products N consumer products are divided into 3 categories that reflect buyers behaviour: convenience, shopping, and speciality products N convenience goodsservices 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 N shopping hoodsservices moderately expensive consumer goods or services that are purchased infrequently, causing consumers to spend some time comparing their prices N speciality goodsservices very expensive consumer goods or services that are purchased rarely, causing consumers to spend a great deal of time locating the exact item desired Classifying Industrial Products N depending on how much they cost and how will they will be used, industrial products can be divided into two categories: o expense items relatively inexpensive industrial goods that are consumed rapidly and regularly o capital items expensive, long-lasting industrial goods that are used in producing goods or services and have a long life The Product Mix N product mix the group of products a company has available for sale Product Lines N product line a group of similar products intended for a similar group of buyers who will use them in a similar fashion N companies may extend their horizons and identify opportunities outside existing product lines N multiple product lines allow a company to grow rapidly and can help to offset consequences of slow sales in any one product line Developing New Products N to expand or diversify product linesjust to survivefirms must develop and successfully introduce streams of new products N faced with competition and shifting consumer preferences, no firm can count on a single successful product to carry it forever N even basic products that have been widely purchased for decades require nearly constant renewal9 The Time Frame of New Product Development Product Mortality Rates N it takes about 50 new products ideas to generate one product that finally reaches the market N even then, only a few of theses survivors become successful products; many seemingly great ideas have failed as products N indeed, creating a successful new product has become increasingly difficulteven for most experienced marketersbecause the number of new products hitting market each year has increased dramatically, and thousands of new household, grocery, and drugstore items are introduced annually, but at any given time, average supermarket carries only 20 000 to 25 000 different items Speed to Market N the more rapidly a product moves from the laboratory to the marketplace, the more likely it is to survive N by introducing new products ahead of competitors, companies establish market leadership and they become entrenched in the market before being challenged by newer competitors N speed to market strategy of introducing new products to respond quickly to customer andor market changes The Seven-Step Development Process N to increase their chances of developing a successful new product, many firms adopt some variation on a basic 7-step process: 1) Product ideas. Product development begins with a search for ideas for new products. Product ideas 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. This second stage is an attempt to eliminate all product ideas that do not mesh with the firms 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 consumers input. In this way, firms can identify benefits that the product must provide as well as an appropriate price level for the product. 4) Business analysis. This stage involves developing an early comparison of costs versus benefits for the proposed product. 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. At this stage, product ideas begin to take shape. Using input from the concept-testing phase, engineering andor research and development produce a preliminary version of the product. Prototypes can be extremely www.notesolution.com
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