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Chapter 12

RSM100Y1 Chapter 12: Chapter 12


Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Michael Szlachta
Chapter
12

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Chapter 12: Product and Distribution Strategies
Product Strategy
Product:
a bundle of physical, service, and symbolic characteristics designed to satisfy consumer wants
Classifying Goods and Services
B2B or B2C goods and services
Classifying Consumer Goods and Services
Convenience products are items that consumers purchase frequently, immediately, and with little effort,
for example, newspapers, snacks, candy, coffee, etc
Shopping Products are those products that are usually purchased only after the buyer has compared
competing products in competing stores
Specialty Products: products that a purchaser is willing to make a special effort to obtain
Classifying Business Goods
Business products are goods or services such as paycheque services and huge multifunction
copying machines used in operating an organization
products that are long lived and relatively expensive are called capital items
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B2B Products have 5 basic categories:
installations
major capital items, such as new factories, heavy equipment, machinery
expensive and often involve buyer and seller negotiations that may last for more
than a year before a purchase is made
accessory equipment
includes capital items, usually less expensive and shorter lived than installations,
and involve fewer decision makers
for example, hand tools, fax machines
component parts and materials
finished business goods that become part of a final product, such as disk drives
that are sold to computer manufacturers or batteries purchased by automakers
raw materials
farm and natural products used to produce other final products
supplies
expense items used in a firm's daily operation that do not become part of the final
product
example, paper clips, light bulbs, copy paper
Classifying Services
either B2B or B2C
example, child care and eldercare centres and auto detail shops
services are intangible, immaterial, in contrast, goods are tangible, or material
services are perishable, short lived, because firms cannot store them in inventory, also difficult to
standardize because they must meet individual customers' needs
Marketing Strategy Implications
each group of business products needs a different marketing strategy
most installations and many component parts are marketed directly from manufacturer to business
buyer
that means that promotional emphasis is on personal selling, not advertising
marketers of supplies and accessory equipment rely more on advertising because their products are
often sold through an intermediary, such as a wholesaler
producers of installations and component parts may involve their customers in new product
development, especially when the business product is custom made
firms selling supplies and accessory equipment place greater emphasis on competitive pricing strategies
than do other B2B marketers, who tend to focus more on product quality and customer service
Product Lines and Product Mix
Product Line: a group of related products that share physical similarities or are targeted toward a
similar market
Product Mix: the assortment of product lines and individual goods and services that a firm offers to
consumers and business users
marketers must continually assess their product mix for a few reasons:
to ensure company growth
to satisfy changing consumer needs and wants
to adjust to competitors' offerings
Product Life Cycle
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maturity, and decline
Stages of the Product Cycle
Introduction
promoting demand for its new offering
informing the market about the product
offering free samples to interest consumers in making their first purchase
explaining the product's features, uses and benefits
Growth
sales climb quickly as new customers join the early users who now are repurchasing the item
word of mouth referrals and continued advertising and other special promotions encourage
consumers to make their first purchases
company begins to earn profits
Maturity
industry sales first increase, but then reach a saturation level when further expansion is difficult
competition also gets much stronger, increasing the availability of the product
firms focus on capturing competitors' customers, often dropping prices to increase the
attractiveness of their product
cellphones are in the maturity stages
late in this stage, sales volume fades, and some of the weaker competitors leave the market
Decline
sales continue to fall
usually caused by product innovation or change in consumer preferences
Marketing Strategy Implications of the Product Life Cycle
Marketer's goal is to extend the product life cycle as long as the item is profitable
commonly used strategy for extending the life cycle is to increase customers' frequency of use
another is to add more users
find new uses for its products
changing package size, labels, and product designs
Stages in New-Product Development
Generating new product ideas
come from many sources, including customer suggestions, suppliers, employees, research
scientists, marketing research, inventors outside the firm, and competitive products
Screening
removes ideas that do not work with the overall company goals or that cannot be developed
given the company's resources
Concept Development and business analysis
further screening
involves assessing the new product's potential sales, profits, growth rate, competitive strengths
concept testing - marketing research designed to attract consumers' first reactions to new
product ideas
Focus groups are formal sessions where consumers meet with marketers to discuss what they
like or dislike about the current products
Product development
product is developed, subjected to a series of tests, and revised
functioning prototypes, test models, detailed descriptions of the product
Test Marketing
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