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Chapter 16

RSM 100 - Chapter 16 - Summary Notes

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University of Toronto St. George
Rotman Commerce
John Oesch

RSM 100Y – Chapter 16: Developing & Promoting Goods/Services What is a Product? Its FEATURES are the intangible/tangible qualities that is apart of a product.  A Product must provide CLEAR BENEFITS A product is considered a bundle of attributes known as a VALUE PACKAGE  A bundle of value-adding attributes including reasonable cost Not all benefits/features are visible, also sociality, and prestige benefits Types of Consumer Products Convenience Goods/Services Goods consumed rapidly, which are inexpensive, leading to little comparison between them or their prices (Milk, Fast food) Shopping Goods/Services More expensive goods purchased/consumed less frequently; consumers will compare price, brand, style, performance (Tires, Insurance) Specialty Goods/Services One-time, or slowly consumed purchases, thy are really expensive. They will have a specific need with no substitutes allowed (Wedding gown) Types of Industrial Products Expense Items Items which are consumed within a year for the purposes of production, most commonly would be raw materials used in production Capital Items Items which are used over a long period of time (Consumed in greater than a year) which are essentially permanent (Machinery, Computers) The Product Mix The variety of products a firm has to offer Product Lines A group of similar products intended for a similar group of buyers Product Mortality Rates Usually takes about 50 new product ideas for one to reach the market. Only a few of these actually survive the market. 9 out of 10 will fail. Speed to Market The faster a product makes it to market, the better chance it will survive  Quicker to market establishes market leadership  Will have to face very little if any competition Seven-Step Development Process 1. Product Ideas a. Ideas are brainstormed to make new products 2. Screening a. Eliminate product ideas that are stupid and will fail i. Must bring together reps from all departments 3. Concept Testing a. Use market research to see which ideas are most attractive to consumers, as well as determine the price level 4. Business Analysis a. Preliminary sales projections are compared with cost projections i. See here if the product meets profit goals (not gross) 5. Prototype Development a. First version of the product, usually very expensive 6. Product Testing and Test marketing a. Using what is learned from prototype, a small batch of products are produced and tested internally b. Test Markets may be used if it passes internal tests. This is also costly due to promotional costs in test markets, but it provides very valuable information in terms of customer satisfaction 7. Commercialization a. If the product passes all those tests, then it is brought to full scale production and marketing (lowers cost in bulk) Variations of Process in Services - Service Ideas o Defining the Service Package  Identification of the tangible/intangible features of the service and stating service specifications - Service Process Design o Selecting a process, identifying worker requirements and determining facility requirements so that the service can be provided as promised Stages in Product Life Cycle (PLC) This is the profit-producing life of a product 1. Introduction a. When product reaches market i. HIGH COST, LOW PROFITS = NEGATIVE CASH FLOW 2. Growth a. Products begin to show profit, competition arises i. Movement from Negative to Positive Cash Flow 3. Maturity a. Sales begin to slow, increased competition leads to price cutting i. HIGHEST PROFITS = Positive Cash Flow (Slowly declining) 4. Decline a. Sales and profits continue to fall, new products take away sales, all promotions of the product cease, and probably production i. Low Profits, movement to negative Cash Flows Extending a Product’s Life Product Extension: Old products marketed globally to new, unsaturated markets Product Adaptation: Modified to have greater appeal in foreign markets  Modifications like British Steering Wheels cost a lot more money Reintroduction: Introduce products into new markets that are considered obsolete in older markets  Old Laptops in Africa Identifying Products Branding The process of using symbols to communicate the quality of a product made by a specific produce, and delivering that message to the consumer Types of Brand Names - National brands o Products which carry the name of its manufacturer - Licensed brands o Selling the right to use a brand name, celebrity or other identifiable mark - Private Brands o Products promoted by and carrying the name of the retailer, not the manufacturer Brand Equity Degree of consumers loyalty to and awareness of a brand and its market share  A way to add value to a product; important asset Brand Loyalty A customers preference or insistence on buying a product with a certain name  EACH MARKET SHARE POINT IS WORTH $25 Million Exists at Three Levels: 1. Brand Awareness – Customers RECOGNIZE the brand name 2. Brand Preference – Customers like the brand over others 3. Brand Insistence – Customers want THAT product and no other Trademarks: Exclusive Legal right to use a Brand name  Granted for 15 Years and renewed for every 15 years if name is protected Patent: Protects an invention or idea for 20 Years  Costs $1K - $1.5K and takes 9 months – 3 years to be filled Copyright: Exclusive ownership right to creators of tangible expressions of ideas  Books, Articles, Illustrations, Music, Film, Math Packages & Exams… Consumer Packaging and Labeling Act 1. Provide a comprehensive set of rules for packaging and labeling 2. TO ensure that the manufacture provides full, factual information regarding the product inside on the labels (in French and English) Labels in general Identify, describes and promo
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