Chapter 14 Developing and Pricing Goods and Services 1 Product Development and the Total Product Offer a Value Good quality at a fair price offering products with better value is the best way to compete i Benefits must exceed costs for the good to be considered valuable ii Markets must listen to consumers and adapt to changing market demands b Total Product Offer Everything consumers evaluate when deciding whether to buy something also called a value package i Core Product The basic product such as a washing machine ii Augmented Product Total product offer which includes all the value put into the product such as price package convenience brand name guarantee image past experiences etc c Product Line A group of products that are physically similar or intended for a similar market which usually face similar competition i Example Diet Coke Diet Coke w Splenda Coke Zero Diet Coke w Lemon Diet Coke w Lime and other diet coke products how do you know which to pick d Product Mix The combination of product lines offered by a manufacturer i Example Proctor Gamble s laundry detergent product line offers Tide Era Downey ad Bold 2 Product Differentiation a The creation of real or perceived product differences i Actual differences are quite small thus markets must use a creative mix of pricing advertising and packaging aka value enhancers in order to create a unique attractive image ii Example Bottled water water inside bottle is usually the same but the label and image that wraps the bottle creates differences b 4 Classes of Goods Services These are considered consumer goods i Convenience Products that a consumer wants to purchase frequently and with minimum effort ii Shopping Products that a consumer buys only after comparing value quality price and style 1 Candy gum snacks gas banking services 2 7 Eleven Wawa from a variety of sellers 1 Clothes shoes appliances auto repair services 2 Sold in shopping centers Targets etc iii Specialty Consumer products with unique characteristics and brand identity no reasonable substitutes so consumers put forth extra effort to purchase them 1 Fine watches expensive wines fur coats jewelry medical services etc 2 Good becomes a specialty good when it reaches brand insistence iv Unsought Products consumers are unaware of haven t necessarily thought of buying or suddenly find they need to solve an unexpected problem 1 Emergency car towing services funeral services insurance etc c Industrial Goods B2B Goods Products used in the production of other products i Production Goods ii Support Goods 1 Raw Materials Component Parts Production Materials 1 Installations Accessory Equipment Supplies Service d Consumer Goods Products used for personal use 3 Packaging Changes The Product a Packaging Should Change visibility usefulness and or attractiveness i Attract the Buyer s Attention ii Protect the goods inside stand up under handling and storage be tamperproof and deter theft iii Be easy to open and use iv Describe and give information about the contents v Explain the benefits of the good inside vi Provide information on warranties warnings and other consumer matters vii Give some indication of price value and uses b UPC s Universal Product Codes on many packages help stores control inventory i Combines bar code and a preset number that gives the retailer information about the product s price size color and other attributes c RFID Radio Frequency Identification Chips that are attached to products and let the company know where the product is at all times d Bundling Grouping two or more products together and pricing them as a unit a Brand A word letter or group of words or letters that differentiates one seller s goods and services 4 Branding and Brand Equity from those of competitors i 1 Brand Google b Trademark A brand that has exclusive legal protection for both it s brand name and its design c Manufacturer s Brand Names Manufacturers that distribute products nationally i Example McDonald s golden arches i Xerox Kodak Sony and Dell d Dealer Private Label Brands Don t carry a manufacturer s name but carry a distributor or retailer s name instead i Kenmore Diehard are dealer brands sold by Sears ii Aka House Brands or Distributor Brands e Generic Goods Non branded products that usually sell at a sizable discount compared to national or f Knockoff Brands Illegal copies of national brand name goods g Brand Equity The value of the brand name and associated symbols h Brand Loyalty The degree to which customers are satisfied like the brand and are committed to private label brands further purchases i Brand Awareness How quickly or easily a given brand name comes to mind when someone mentions a product category Advertising helps build strong brand awareness j Brand Association Linking of brands to favorable images like famous product users a popular celebrity or a particular geographic area k Brand Manager Product Manager Obtains direct responsibility for one brand or product line and manages all the elements of its marketing mix 5 New Product Development Process a Over 80 of products introduced in any year fail to reach their business objectives b Generating New Product Ideas Takes about 7 ideas to generate one commercial product most ideas come from employee suggestion c Product Screening Reduces the number of new product ideas a firm is working on at any one time so it can focus on the most promising applies criteria to determine whether the product fits well with present products has good profit potential and is marketable d Product Analysis Making cost estimates and sales forecasts to get a feeling for the profitability of new product ideas e Product Development Testing Tests many different product concepts or alternatives i Concept Testing Takes a product idea to consumers to test their reactions f Commercialization 1 Promoting the product to distributors and retailers to get wide distribution and 2 Developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers a Product Life Cycle A theoretical model of what happens to sales and profits for a product class over i Introduction Gaining general acceptance ii Growth Growing in popularity different brands of a product are introduced iii Maturity People become attached to one brand and sales level off iv Decline 6 Product Life Cycle time 7 Competitive Pricing a Objectives i Achieve a Target Return on Investment or Profit Optimize profit ii Building
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