Chapter 6.docx

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22 Apr 2012
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Chapter 6 (What’s a product?) 4/7/2012 5:37:00 PM
The Value Package
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
By buying a product consumers are also buying image and
reputation
More and more firms compete on the basis of enhanced value of
package
Classifying Goods and Services
Classifying consumer products: 3 categories
o Convenience goods: relatively inexpensive consumer goods or
services that are brought and used rapidly and regularly,
causing consumers to spend little time looking for them or
comparing their prices
o Shopping service: More expensive and purchased less
frequently than conveniences goods and services, consumers
often compare brands
o Specialty goods: Extremely important and expensive
purchase, consumers usually decide on precisely what they
want and will accept no substitution
Classifying Industrial Products (Two categories)
o Expensive Item: Any material and services that are consumed
within a year by firms producing other goods or supplying
services
o Capital Item: Permanent that is expensive and long lasting
goods and services, live more than a year, typically for
several years
The product Mix: The group of product a company has available for sale
Product line: A group of similar products intended for a similar
group of buyers who will use them in similar fashion
o Every company starts off with a simple product but as the
market demand increases they introduce new products
o Companies may extend their horizons and identify
opportunities outside existing product line
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o Multiple product lines allow a company to grow rapidly and
can help to offset the consequences of slow sales in anyone
product line
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Development New Products 4/7/2012 5:37:00 PM
No firm can count on single successful product to carry forever
Recognizing the new trend is very important too
The time Frame of New Product Development
Companies face multi year time horizons and high risks when
developing a new product
New product brings lots of uncertainties
Product Mortality rates: It takes about 50 new products ideas to
generate one product that finally reaches the market
o There are 1000s of new products coming out each year and
that makes it harder for the new products to survive in the
market competition
Speed Market: Strategy of introducing new product to consumers
and or market changes
o More rapidly a product moves from a lab to marketplace more
likely it is to survive
o Company establishes market leadership by introducing new
products ahead of competitors
The seven Steps Development Process
Product Idea: Begins with search for ideas for new products, can
come from, consumers, sales forces, research.
Screening: Attempt to eliminate all product ideas that do not mesh
with the firm’s abilities, expertise, or objectives
Concept Testing: Companies use market research to solicit
consumers’ input and identify benefits that product must provide
and the price level
Business Analysis: Involves developing and early comparison of
cost VS benefits of the proposed products. Aim is to see whether
the product can meet in profitability goals
Prototype development: Preliminary version of the product, helps
identify potential product problems
Product testing and product Marketing: using the prototype they
test the new product and test marketing gives company its first
information on how consumers respond and will respond to a
product under real market conditions
Commercialization: Company begins full scale production and
marketing of the product
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