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RSM100Y1 (432)
Chapter 16

CHAPTER 16-Developing and Promoting Goods and Services

9 Pages
125 Views
Winter 2009

Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Michael Szlachta
Chapter
16

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CHAPTER
16:
DEVELOPING
AND
PROMOTING GOODS
AND SERVICES
- cannot focus on one
element
of the
marketing
mix without
having
to deal with the other
marketing
variables
What is a product?
Ideas,
goods, services.
-
marketers
must
consider
what
consumers really
buy when they
purchase
products
-
Strategy begins
with an
understanding
of product
features
and benefits
-
Then
you need to
classify
products as
consumer
goods or
industrial
goods
-
The
most important component in the
offerings
of any
business
is its product mix
The
value
package - customers get
value
from the
benefits, features
and
intangible
rewards
associated
with
a product
-
features
are the
qualities,
both
tangible
and
intangible,
that a company builds into its products
- To attract
buyers, features
also must provide benefits
- A product as a bundle of
attributes
is
called
the
value
package.
The value
package is
marketed
as a bundle
of
value
adding
attributes, including
a
reasonable
cost
-
Buyers
expect to receive products with
greater value
- more
benefits
at
reasonable
costs
- Most items in the
value
package are
services
or
intangibles
that
collectively
add
value
by
providing
benefits
that
increase
the customers satisfaction
- Products are more than
visible features
and benefits
-
When buying
a product,
consumers
also buy an
image
and a
reputation
- the brands commitment that its
product with be satisfactory
-
Advertising
tends to focus on the customer
oriented
benefits
-
The
addition of a new
service
often
pleases
customers far beyond the cost of
providing
it
Classifying goods and
services
- one way to
classify
a product is according to expected buyers
- there are
buyers
of
consumer
products and
buyers
of
industrial
products
-
Since
the
consumer
and
industrial buying processes
differ, so do the
marketing
strategies
Classifying
consumer
products - 3
categories
that
reflect
EX\HUV behaviour:
1)
Convenience
Goods and
Services: goods/services
that are consumed
rapidly
and
regularly. They
are
relatively inexpensive
and are
purchased frequently
without
investing
much time and effort into the process
(so
they dont compare their
relative
prices)
2) Shopping goods and
services:
more
expensive
and
purchased less frequently (so consumers
will spend
time comparing prices amongst
competitors). Consumers
will compare brands,
evaluate
alternatives in
terms of
style, performance,
colour, price and more
3)
Speciality
Goods and
services: extremely
important and
expensive purchases. Consumers
will spend a lot
of time and
money finding
the product they want and wont accept substitutes
Classifying
Industrial
products - 2
categories depending
on how much they cost and how they will be used
1)
Expense
items:
materials
and
services
that are consumed
rapidly
and
regularly (usually
within a year)
2)
Capital
items:
permanent, expensive
and long
lasting
goods and
services
that are used in producing other
goods. For
example,
a
building. Capital services
are those for which long term commitments are made.
They
are
expensive
and
purchased infrequently
so they often
involve decisions
by high
level
managers
The product mix - the group of products that a company has
available
for sale
PRODUCT LINES:
this is a group of
similar
products that are
closely related because
they function in a
similar
manner
or are sold to the same customer group who will use the products in a
similar
way.
-
companies
often start out by
introducing
one product and then the company tends to
realize
that the one
product does not cater to
everyone
s
needs so then they begin to branch out.
This
is known as extending
their
horizons
and
identifying opportunities
outside
existing
product lines
www.notesolution.com
-
The result
is
multiple (diversified)
product
lines. 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 - firms must
develop
and
successfully
introduce
streams
of new product
- since firms face competition and
changing consumer preferences,
no firm can count on a
single
product to
carry
it out forever
-
Companies always
need renewal
The time
frame
of new product development
- need to be able to
assess
enough time to
actually develop
the product that you want to
release including
all
of the
technology
that goes along with it in order to gain
consumer confidence
in the product
PRODUCT MORTALITY RATES:
many great
ideas have failed
as products
- it has become
increasingly difficult
to
launch
a
successful
new product
because
the number of new
products hitting the market each
year
has
increased
dramatically
-
Because
of lack of space and customer demand, 9/10 new products will fail
-
Only
products that are
innovative
and
deliver unique benefits have
a chance at making it into the market
SPEED
TO
MARKET:
the quicker a product is able to move from
manufacturing/design
into the marketplace,
the more
likely
it is to be successful
- by
introducing
new products
ahead
of competitors,
companies establish
market leadership
- Speed to market is the
strategy
of
introducing
new products to respond
quickly
to customer and market
changes. Speed to market is a firms success in
responding
to customer demand or market changes
The 7 step
development
process: this is a process that firms use to
increase
their
chances
of
developing
a
successful
new product:
1) product
ideas
- the idea can come from
consumers,
the
sales
force, research and
development
people or
engineering personnel. The
goal is to
actively
seek out
ideas
and to reward those whose
ideas
become
successful
products
2)
Screening
-
eliminate
product
ideas
that do not correspond with the firms
abilities, expertise
or objectiveis.
3) Concept testing - once
ideas have
been chosen,
companies
use market research to obtain FRQVXPHUV
input.
Firms
can
identify
the
benefits
that the product must provide as well as the
appropriate
price level
for the product
4)
Business analysis
-
develop
an
early
comparison of costs
versus benefits
for the proposed product. The
goal at this stage is to see if the product can meet
minimum profitability
goals
5) Prototype
development
- product
ideas
begin to take
shape. Engineering
and
R&D
departments produce
a
preliminary version
of the product.
This
phase can be costly, but can help
identify potential
production
problems
6) Product testing and test
marketing
- using what has been
learned
from the prototype, the company
produces the product in
limited quantities. The
product is tested
internally
to see if it meets performance
requirements.
If it does, its made for
sale
in
limited areas. Promotional campaigns
must be
developed
for
test markets - costly but
gives
the company its first
indication
on how
consumers
will respond to a
product under
real
market conditions
7)
Commercialization
-
full scale
production and
marketing
of the product.
The
firm
provides
the product to
more and more
areas
over time.
Delays
in
commercialization give
competitors a chance to bring out their
own
version
of the product
Variations
in the process for
Services
- only
difference
in the process for
services
is in steps 1 and 5:
1)
Service Ideas: searching
for
service ideas involves defining
the
service
package - the
identification
of the
tangible
and
intangible features
that
define
the
service (see
chapter 11)
5)
service
process design: this step
involves selecting
the process,
identifying
worker
requirements
and
determining facilities requirements
so that the
service
can be provided as promised in the service
specifications
www.notesolution.com
- process
selection identifies
the steps in the service
- Worker
requirements
=
employee behaviours, skills, capabilities
and
interactions
with customers
-
Facilities requirements
= the
equipment
that supports the
delivery
of the service
The product
life
cycle
(PLC)
- products
have
a
limited
product producing
life
for a company.
The life
of a
product depends on the
ability
of the product to attract customers over time
Stages in the PLC - products are born, grow, mature,
decline
and die.
- 4
phases
of PLC:
1) Introduction: product
reaches
the
marketplace. Marketers
focus on making
potential consumers aware
of
the product and its
benefits. Promotional
and
development
costs are high so making a profit is difficult
2) Growth - if the product attracts and
satisfies
enough
consumers, sales
will climb and the product will earn
a profit
3)
Maturity
-
sales
growth slows down and
increased
competition
leads
to price cuts and lower profits
4)
Decline
-
sales
and profits
fall
and new products take away
sals. Companies
will start to let people go and
cut down on
promotional
costs but
leave
the product
- for most products,
profitable life
spans are short which is why it is so importnat for
companies
to renew
their product lines
EXTENDING PRODUCT LIFE:
AN
ALTERNATIVE
TO
NEW PRODUCTS: companies
try to keep products in
the
maturity
stage for as long as
possible
by
changing little
features
- 3
possibilites
for
lengthening
product
life
cycles:
1) product
extension
- an
existing
product is
marketing globally instead
of just
domestically
- no change is
made to the product itself
2) Product adaptation - product is
modified
to
have greater appeal
in
foreign markets. Involves pr
oduct
changes,
so this tends to be more costly than product extension
3)
Reintroduction
-
reviving
for new markets
Identifying products -
marketers
need to
develop
a products
features
and
identify
products so that
consumers
reorganize them. 3 important tools for the reorganization:
1) Branding: using symbols to
communicate
the
qualities
of a product that is made by a
particular
producer
-
designed
to
signal uniform
quality
-
Customers
who buy and
like
the product will return to it by
remembering
its name
-
Countries
can also be branded
(ie Canada
is branded as a
positive country)
which can help
increase
sales
within that country
ADDING VALUE THROUGH BRAND EQUITY:
a brand is an asset
like
cash.
- brands are
valuable because
of their power to attract customers
- Brand equity is the
degree
of FRQVXPHUV
loyalty
to and
awareness
of a brand and its
correspondingly
large
market share
- Brands add
value
to a product so
marketers
try to
manage
brand
names
to
increase
that value
E-BUSINESS
AND
INTERNATIONAL BRANDING:
it takes a long time to
establish national
or global brand
recognition
TYPES OF BRAND NAMES: different
types of brand
names
tell the
alert consumer
about the products origin
-
National
Brands: products that are distributed by the
manufacturer
and
carry
that same name
-
Widely recognized
by
consumers because
of
large national advertising
campaigns
-
Licensed
Brands:
selling
the right to use a brand
name,
a
celebrity
s
name or
another
well known
identification
mark to
another
company to use on a product
-
License
a brand name on
different
merchandise items
(like blankets
and
plates, eyewear,
clothes)
www.notesolution.com

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Description
CHAPTER16: DEVELOPING AND PROMOTING GOODS AND SERVICES - cannot focus on one element of the marketing mix without having to deal with the other marketing variables What is a product? Ideas, goods, services. - marketers must consider what consumers reallybuy when they purchase products - Strategy begins with an understanding of product features and benefits - Thenyou need to classify products as consumer goods or industrial goods - The most important component in the offerings of anybusiness is its product mix The value package - customers get value from the benefits, features and intangible rewards associated with a product - features are the qualities, both tangible and intangible, that a company builds into its products - To attract buyers, features alsomust provide benefits - A product as a bundle of attributes is called the value package. The value package is marketed as a bundle of value adding attributes, including a reasonable cost - Buyers expect to receive products with greater value - more benefits at reasonable costs - Most items in thevalue package are services or intangibles that collectively add value by providing benefits that increase the customers satisfaction - Products are more than visible features and benefits - When buying a product, consumers alsobuy an image and a reputation - the brands commitment that its product with be satisfactory - Advertising tends to focus on the customer oriented benefits - The additionof a new service often pleases customers far beyond the cost of providing it Classifying goods and services - one way to classify a product is according to expected buyers - there are buyers of consumer products and buyers of industrial products - Since the consumer and industrial buying processes differ,so do the marketing strategies Classifying consumer products - 3 categories that reflect -:078 behaviour: 1) Convenience Goods and Services: goodsservices that are consumedrapidly and regularly. They are relatively inexpensive and are purchased frequently without investing much time and effort into the process (so they dont compare their relative prices) 2) Shopping goods and services: more expensive and purchased less frequently (so consumers willspend time comparing prices amongst competitors). Consumers willcompare brands, evaluate alternatives in terms of style, performance, colour, price and more 3) Speciality Goods and services: extremely important and expensive purchases. Consumers willspend a lot of time and money finding the product they want and wont accept substitutes Classifying Industrial products - 2 categories depending on how much they cost and how they will be used 1) Expense items: materials and services that are consumed rapidly and regularly (usuallywithin a year) 2) Capital items: permanent, expensive and long lasting goods and services that are used in producing other goods. Forexample, a building. Capital services are those for which long term commitments are made. They are expensive and purchased infrequently so they often involve decisions by high level managers The product mix - the group of products that a company has available for sale PRODUCT LINES: this is a group of similar products that are closely related because they functionin a similar manner or are sold to the samecustomer group who willuse the products in a similar way. - companies often start out by introducing one product and then the company tends to realize that the one product does not cater to everyones needs so then they begin to branch out. This is known as extending their horizons and identifying opportunities outsideexisting product lines www.notesolution.com
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