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Chapter 16

RSM100Y1 Chapter Notes - Chapter 16: Wedding Dress, Test Market, Business Analysis


Department
Rotman Commerce
Course Code
RSM100Y1
Professor
John Oesch
Chapter
16

Page:
of 8
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
oDefining the Service Package
Identification of the tangible/intangible features of the
service and stating service specifications
- Service Process Design
oSelecting 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
oProducts which carry the name of its manufacturer
- Licensed brands
oSelling the right to use a brand name, celebrity or other
identifiable mark
- Private Brands
oProducts promoted by and carrying the name of the retailer, not
the manufacturer