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Chapter 16

Management II Chapter 16

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Department
Management (MGT)
Course
MGTA02H3
Professor
Chris Bovaird
Semester
Winter

Description
Developing and Promoting Goods and Services What is a Product The Value Package either good, service or both, customers get value from the benefits, features and intangible rewards associated with a product - features: the qualities, both tangible and intangible, that a company builds into its products (features are different from benefits; features must provide benefits ex. The mower must produce an attractive lawn) - benefits are very important; they can be the focal point of a marketing campaign, rather than features - value package: product marketed as a bundle of value-adding attributes, including reasonable cost Classifying Goods and Services - one way to classify goods and services is according to who is expected to buy them; there are buyers of consumer products and buyers of industrial products - classifying consumer products: - convenience goods and 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 (ex. Milk, fast food) - shopping goods and services: moderately expensive consumer goods or services that are purchased infrequently, causing consumers to spend some time comparing their prices (ex. Stereos, insurance) - specialty goods and 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 (ex. Catering, wedding gown) - classifying industrial goods - expense items: relatively inexpensive industrial goods that are consumed rapidly and regularly (ex. Bulk loads of tea processed into tea bags) - capital items: expensive, long-lasting industrial goods that are used in producing other goods or services and have a long life (ex. computers, airplanes) The Product Mix - product mix: the group of products that a company has available for sale (ex. Black and Decker makes toasters, vacuum cleaners, etc) - most companies begin with a single product and progress to meet the needs of more consumers - product line: a group of similar products intended for a similar group of buyers who will used them in a similar fashion - a lot of companies identify opportunities outside of their existing product line (Procter and Gamble used to make soap, now they make papers, food, coffee as well Developing New Products - to survive, companies must expand or diversify their product lines, no firm can depend on only one product; basic products require constant renewal - Research and Development (R&D) refers to those activities that are necessary to provide new products, services and processes - technology: the application of science that enables people to do entirely new things or to perform established tasks in a new and better way - after studying the movement of the human foot in minute detail, Canstar Sports Inc developed the Micron Mega skate, which is now worn by 70% of NHL players The New Product Development Process - product mortality rates: it is estimated that it takes 50 new product ideas to generate one product that finally reaches the marketplace; many great ideas have failed in the market - speed to market: the strategy if introducing new products to respond quickly to customer and/or market changes - the faster a product moves from the laboratory to the marketplace, the more likely it is to survive; companies establish market leadership by introducing new products ahead of competitors - The seven-step development Process: - product ideas: product development begins with a search for ideas (can come from consumers, sales force, R&D, engineering personnel) - screening: an attempt to eliminate all product ideas that do not mesh with the firms abilities, expertise or objectives - concept testing: once ideas have been chosen, companies use market research to solicit consumers imput - business analysis: involves developing an early comparison of costs versus benefits for the proposed product - prototype development: ideas begin to take shape, engineering and/or R&D produce a preliminary product (prototype) - product testing and test marketing: limited production of item, internal testing and then sale in limited areas- commercialization: if test-marketing results are positive, the company will begin full-scale production and marketing of the product - variation in the process for services: 1. service ideas: search for ideas includes defining the service package - service package: identification of the tangible and intangible features that define the service 5. service process design: selevting the process, identifying worker requirements, and determining facilities requirements so that the service can be effectively provided (instead of prototype development) - process selection: identifies each step in service - worker requirements: specify employee behaviours, skills, capabilities, and interactions - facilities requirements: designate all of the equipment that supports delivery of service The Product Life Cycle - product life cycle: the concept that the profit-producing life of any product goes through a cycle of introduction, growth , maturity, (leveling off), and decline - stages in the product life cycle 1. introduction: begins when product reaches marketplace; marketers focus on making potential customers aware of product and its benefits 2. growth: if product attracts and satisfies customers, sales begin to climb (profit); other firms introduce their versions 3. maturity: sales growth begin to slow, competition leads to lower price and lower profit 4. decline: profits fall, new products take over - companies try to extend product life by: 1. product extension: existing, unmodified product that is marketed globally (Coca Cola) 2. product adaptation: product modified to have greater appeal in foreign markets (McDonalds sells beer in Germany) 3. reintroduction: reviving, for new markets, products that re becoming obsolete in older ones (manual cash registers in Latin America) Identifying Products -branding products: process of using symbols to communicate the qualities of a product made by a particular producer - people who like certain products can identify them by name - brand equity: degree of consumers loyalty to and awareness of a brand and its resultant market sh
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