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Chapter 16

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Department
Rotman Commerce
Course
RSM100Y1
Professor
John Oesch
Semester
Fall

Description
Developing and Promoting Goods & Services [Chapter 16] What is a product? Product features and benefits  Features: qualities- tangible and intangible- that a company builds in to its products  Value package: product marketed as a bundle of value-adding attributes, including reasonable cost Classifying goods and services  Buyers fall into 2 basic groups; consumer and industrial  Marketing products and services to consumers is very different from marketing them to companies  Classifying consumer products: 3 categories that reflect buyers’ behaviour; convenience, shopping, and specialty products o Convenience goods & services: relatively inexpensive consumer goods or services that are bought and sued rapidly and regularly, causing consumers to spend little time looking for them or comparing their prices (eg. milk) o Shopping goods & services: moderately expensive consumer goods or services that are purchased infrequently, causing consumers to spend some time comparing their prices (eg. apparel) o Specialty goods & 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 (eg. wedding gowns)  Classifying industrial products: based on how much they cost and how they will be used o Expense items: relatively inexpensive industrial goods that are consumed rapidly and regularly (eg. bulk loads of tea processed into tea bags) consume within a year o Capital items: expensive, long lasting industrial goods that are used in producing other goods or services and have a long life (eg. buildings, fixed equipment)  are permanent- expensive and long lasting- and also expected to live more than a year  Capital services: services for which long term commitments are made (eg. purchases for employee food services, equipment maintenance) The product mix  The group of produces a company has available for sale o Product lines: a group of similar produces intended for similar group of buyers who will use them in a similar fashion  Function in a similar manner or are sold to the same customer group who will sue them in similar ways  companies start with one product and when it starts to fail, to meet market demand they introduce similar products designed to reach more customers Developing new products The time frame of new product development  Product mortality rates: takes about 50 new product ideas to generate one product that finally reaches the market since it has become difficult with the number of new products increasing dramatically each year  Speed to market: strategy of introducing new products to respond quickly to customer and/or market changes o By more rapidly moving a product from lab to marketplace, the more likely it is to survive and establishes market leadership before others The 7 step development process 1. Product ideas: begins with search for new products a. Service package: identification of the tangible and intangible features that define the service 2. Screening: attempt to eliminate all product ideas that do not mesh with the firms abilities, expertise or objectives 3. Concept testing: use market research to solicit consumers input 4. Business analysis: involves developing a comparison of costs and benefits for the proposed product 5. Prototype development: using input from the concept testing phase, to produce a preliminary version of the product i. Service process design: selecting the process, identifying worker requirements, and determining facilities requirements so that the service can be effectively provided 6. Product testing and test marketing: company begins limited production of the item 7. Commercialization: if test marketing results are positive, company will begin full scale production and marketing of the product The product life cycle  PLC: the concept that the profit-producing life of any product goes through a cycle of intro, growth, maturity (leveling off), and decline Stages in the product life cycle (PLC): 1. Introduction: begins when the product reaches the marketplace 2. Growth: if the new product attracts and satisfies enough consumers, sales begin to climb rapidly 3. Maturity: sales growth begins to slow 4. Decline: this final stage, sales and profits continue to fall since new products that enter to intro stage take away sales Extending product life: an alternative to new products  Companies try to keep products in maturity stage for as long as they can  3 possibilities to lengthen product life cycles: o Product extension: the process of marketing an existing, unmodified product globally instead of just domestically o Product adaptation: the process of modifying a product to have greater appeal in foreign markets (eg. in Germany mcdees meals includes beer) o Reintroduction: the process of reviving for new markets products that are obsolete in older ones Identifying products  Marketers must also identify products so that consumers can recognize them; important tools for this are branding, packaging, labeling Banding products  The use of symbols to communicate the qualities of a particular product made by a particular producer o Adding value through brand equity: degree of consumers loyalty and awareness of a brand and its resultant market share o Ebusiness and international branding: if selling internationally must consider how name translates in other languages o Types of brand names:  National brands: products distributed by and carrying a name associated with the manufacturer  Licensed brands: products for which the right to use a brand name, a celebrities name, or some other well known identification mark was sold to another company to use on a product  Private brands: products promoted by and carrying a name associated with the retailer or wholesaler, not the manufacturer (eg. sears has 2 well known private brads- craftsman tools and Kenmore appliances) o Brand loyalty: customers’ recognition of, preference for, and insistence on buying a product with a certain brand name  Exists are 3 levels: brand awareness, brand preference, brand insistence (demand the product and are willing to go out of their way to get it) o Trademarks, patents, and copyrights  Trademark: the exclusive legal right to use a brand name  granted for 15 years  Patent: exclusive right to use and license a manufactured item or substance manufacturering process, or object design  for 20 years  Copyright: exclusive ownership rights belonging to the creators of books, articles, designs, illustrations, photos, films, and music Packaging products  Physical container in which a product is sold, advertised, or protected  Important to consider so that it can withstand shipping and not frustrate consumers when trying to open Labeling products  That part of a product’s packing that identifies the products name and contents and sometimes its benefits  label on its package o Consumer packaging and labeling act: a federal law that provides comprehensive rules for packaging and labeling of consumer products  2 main purposes: first is to provide a set of rules and second dis to ensure that manufactures provide full and factual information on label Promoting products and services  Promotion: any technique designed to sell a product Information and exchange values  Businesses use promotional methods to accomplish 4 objectives with potential customers: o Make them aware of products o Make them knowledgeable about products o Persuade them to like products o Persuade them to purchase products  Successful promotions provide communication about the product and create exchanges that satisfy the objectives of customers and sellers Promotional objectives: use to communication information, position products, add value, and control sales volume  Communicating information: can be verbal, visual, writing  gives more info to customers who need it in order to be informed when making decisions  Positioning products: the establishment of an easily identifiable image of a product in the minds of consumers  Adding value: communicate the benefits in its products  Controlling sales volume: by increasing promotional activities in slow periods, firms can achieve more stable sales volume throughout the year (eg. hallmark) Promotional strategies  Once a firms promotional objectives are clear, must develop a promotional strategy to achieve objectives o Push strategy: a promotional strategy whereby a company aggressively pushes it products through wholesalers and retailers, who persuade customers to buy it o In contrast, pull strategy: a promotional strategy in which a company appeals directly to customers, who demand the product from retailers, who demand the product from wholesalers Promotional mix  That portion of marketing concerned with choosing the best combination of advertising, personal selling sales promotions, and publicity to sell a product  most important is the target audience  Marketers match promotional tools with the 5 stages in buyer decision process o Buyers recognize the need to make a purchase o Buyers seek info about available products o Buyers compare competing products o Buyers purchase products o Buyers evaluate products after purchase Advertising promotions  A promotional tool consisting of paid, non personal communication sued by an identified sponsor to inform an audience about a product Advertising strategies depends on which stage of the product life cycle the product is in  During introduction stage: informative advertising: an advertising strategy, appropriate to the intro stage of the product life cycle, in which the goal is to make potential customers aware that a product exists  During growth stage: persuasive advertising: an advertising strategy, appropriate to growth stage, in which the goal is to influence the customer to buy the firms product rather than the similar product of a com
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