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Chapter 6

MGTA04 Notes Chapter 6.docx

9 Pages

Management (MGT)
Course Code
Chris Bovaird

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Chapter 6: Developing & Promoting Goods & Services - Important to continuously make new products; short profitable life spans - Oracle = product innovation & performance features - Microsoft = lower ratings but low prices - IBM = satisfaction w/ customers - Leader depends on who you value - Impossible to focus on one aspect of the marketing mix w/o others What is a Product? - Product strategy begins w/ understanding product features & benefits - Classification of products consumer & industrial - Most important part of offerings of business = product mix The Value Package - Product features: the qualities, both tangible & intangible, that a company builds into its products - Features must also provide benefits - Value package: product marketed as a bundle of value-adding attributes, including a reasonable cost buyers expect more value at reasonable cost - Most items in the value package are intangibles that add value by providing benefits - Products also include image & reputation (not just visible features/benefits) - Firms compete on basis of enhanced value packages addition of a new service usually pleases customers more than the cost it takes Classifying Goods & Services - 2 groups of buyers: buyers of consumer products & buyers of industrial products Classifying Consumer Products - Convenience goods/services: relatively inexpensive consumer goods/services that are bought & used quickly and regularly, causing consumers to spend little time for them or comparing prices, easy to buy o Ex. milk, newspapers, fastfood - Shopping goods/services: moderately expensive consumer goods/services that are bought infrequently, causing consumers to spend some time comparing prices o Stereos, tires, insurance - Specialty goods/services: very expensive consumer goods/services that are bought rarely, causing consumers to spend a lot of time locating the exact item desired o Wedding gowns, catering for receptions Classifying Industrial Products - Expense items: relatively inexpensive industrial goods consumed rapidly & regularly, within 1 year; goods used directly in production process (ex. bulk loads of tea to make tea bags) - Capital items: expensive, long-lasting industrial goods that are used in producing other goods/services & have a long life, lives of more than 1 year; ex. expensive buildings, accessory equipment (computers, etc.); long-term commitments made; involve decisions by high-level managers The Product Mix - Product mix: the group of products a company has available for sale Product Lines - Product Line: a group of similar products intended for a similar group of buyers who will use them in a similar fashion - Introduce new products based off of one to reach lots of consumers and meet market demand - Multiple/diversified product lines when companies extend their horizons & see opps outside existing product lines; helps a country grow quickly and offset any slow downs in sales of 1 product line (like back ups) Developing New Products - To survive businesses need new products/constant renewal The Time Frame of New Product Development - Companies face multi-year time horizons & high risks when developing new products - Taking long to develop products or starting then shelving projects - Ex. Bombardier Inc + passenger jets; HDTV was slow to develop broadcasters dont offer HD programming so manufacturers hold back, consumers are slow to buy because of high costs Product Mortality Rates - About 50 new product ideas to make 1 product that makes it to market - A few of products that make it are successful - Good ideas fail as products so many products always hitting the market to compete with; supermarket carries 20-25,000 items at a time - 9/10 new products will fail those with best chances are innovative & have unique benefits Speed to Market - Speed to market: strategy of introducing new products to respond quickly to customer and/or market changes - Establish market leadership by introducing new products 1 st - 3 months late loses 12% of life time profit potential, 6 months late = 33% The 7-Step Development Process 1. Product ideas search for ideas for new products; comes from consumers, sales force, research, devlpmt people, engineering personnel seek ideas & reward those with successful products 2. Screening take out all product ideas that dont fit w/ company abilities, expertise, objectives reps from marketing/engineering/production input 3. Concept Testing companies use market research to solicit customer input to get benefits product should have & price4. Business Analysis develop early comparison of cost VS benefits for proposed product, look at sales & costs projections, will product meet minimum profit goals? 5. Prototype Development produce preliminary version of product, expensive, helps identify potential product problems 6. Product Testing & Test Marketing using info from prototype, begins limited production of item; sell in few places to see if it meets performance requirements, need campaigns, test market to see how consumers respond costly 7. Commercialization w/ positive test-marketing results, company starts full-scale production & marketing of product; delays = competitors Variations in the Process for Services - Steps 2, 3, 4, 6, 7 for services BUT steps 1 & 5 are different - 1. Service ideas define service package o Service package: identification of the tangible & intangible features that define the service & stating service specifications - 5. Service process design instead of prototype development o Service process design: selecting the process, identifying worker requirements & determining facilities requirements so service can be effectively provided o Process selection identifies each step in service; sequence & timing o Worker requirements spe
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