For unlimited access to Textbook Notes, a Class+ subscription is required.
Chapter 6 – The 4 Ps - Product
WHAT IS A PRODUCT?
The most important component in the offerings of any business is its product mix.
The Value Package
Product features are the qualities, both tangible and intangible, that a company
builds into its products.
Value package is the product marketed as a bundle of value-added attributes,
including reasonable cost.
Classifying Goods and Services
One was to classify a product is according to expected buyers.
Buyers fall into two groups: buyers of consumer products and buyers of industrial
Classifying Consumer Products
Consumer products are commonly divided into three categories that reflect buyers’
oConvenience goods and convenience services are consumed rapidly and
Convenience goods/services are relatively inexpensive services that are
bought and used rapidly and regularly, causing consumers to spend
little time looking for them or comparing their prices.
oShopping goods and shopping services are most expensive and are purchased
less frequently than convenience goods and services.
Shopping goods/services are moderately expensive consumer goods or
services that are purchased infrequently, causing consumers to spend
some time comparing their prices.
oSpecialty goods and specialty services are extremely important and expensive
Specialty goods/services are 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
Depending on how much they cost and how they will be used, industrial products can
be divided into two categories:
oExpense items are any materials and services that are consumed within a
year by firms producing other goods or supplying services.
oCapital items are permanent (expensive and long lasting) goods and services.
All these items have expected lives of more than a year.
The Product Mix
Product mix is the group of a product a company has available for sale.
Product line is a group of similar products intended for a similar group of buyers
who will use them in a similar fashion.
Multiple product lines allow a company to grow rapidly and can help to offset the
consequences of slow sales in any one product line.
DEVELOPING NEW PRODUCTS
The Time Frame of New Product Development
Companies often face multi-year time horizons and high risks when developing new
There is a lot of uncertainty in new product development.
Product Mortality Rates
Creating a successful new product has become increasingly difficult because the
number of new products hitting the market each year has increased dramatically,
and thousands of new household, grocery, and drugstore items are introduced
Because of lack of space and customer demand, about 9 out of 10 new products will
Speed to Market
The more rapidly a product moves from the laboratory to the marketplace, the more
likely it is to survive.
By introducing new products ahead of competitors, companies establish market
leadership, they become entrenched in the market before being challenged by newer
Speed to market is the strategy to introducing new products to respond quickly to
customer and/or market changes.
The Seven-Step Development Process
To increase their chances of developing a successful new product, many firms adopt
some variation on a basic seven-step process.
oProduct ideas. Product development begins with a search for ideas for new
products. The key is to actively seek out ideas and to reward those whose
ideas become successful products.
oScreening. This second stage is an attempt to eliminate all product ideas that
do not mesh with the firm’s abilities, expertise, or objectives.
oConcept 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.
oBusiness 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