12 14 13 Chapter 14 Notes Developing and Pricing Goods and Services Product Development and the Total Product Offer Value good quality at a fair price When consumers calculate the value of a product they look at the benefits and then subtract the cost to see if the benefits exceed the costs o Marketers have to learn to adapt products to new completion and new markets Distributed product development handing off various parts of your innovation process Total product offer everything that consumers evaluate when deciding whether to buy Product line a group of products that are physically similar or are intended for a similar often to companies in other countries something also called a value package market Product mix the combination of product lines offered by a manufacturer Product Differentiation Product differentiation the creation of real or perceived product differences Convenience goods and services products that the consumer wants to purchase frequently and with a minimum of effort o 7 11 Shopping goods and services those products that the consumer buys only after comparing value quality price and style from a variety of sellers o Target Specialty goods and services consumer products with unique characteristics and brand identity Because these products are perceived as having no reasonable substitute the consumer puts forth a special effort to purchase them o Fine watches fine wine fur coats jewelry imported chocolates and services provided by medical specialists or business consultants Unsought goods products that consumers are unaware of haven t necessarily thought of buying or find that they need to solve an unexpected problem o Emergency car towing services burial services and insurance Fair Packaging and Labeling Act passed to give consumers much more quantity and value information on product packaging Bundling grouping two or more products together and pricing them as a unit Branding and Brand Equity Brand a name symbol or design that identifies the goods or services of one seller or group of sellers and distinguishes them from the goods and services of competitors o Brand name ensures quality reduces search time and adds prestige to purchases Trademark a brand that has exclusive legal protection for both its brand name and its Manufacturers brand the brand name of manufacturers that distribute products nationally Dealer private label brands products that don t carry the manufacturers name but carry design o Kodak Sony Dell distributor or retailers name o House brands or distributor brands ex Kenmore and Diehard are dealer brands sold by Sears Generic name name for a whole product category Generic goods nonbranded products that usually sell at a sizable discount compared to national or private label brands o Generic tissues generic drugs consumers buy them more now because quality has gotten better Knockoff brands illegal copies of national brand name goods Generating Brand Equity and Loyalty Brand equity the value of the brand name and associated symbols most valuable is Apple Brand loyalty the degree to which customers are satisfied like the brand and are committed to further purchases lowering carbon footprint to build loyalty Brand awareness how quickly or easily a given brand name comes to mind when a product category is mentioned Brand preferences preferring one brand over another Brand insistence insisting on a certain brand Brand association the linking of a brand to other favorable images Brand manager a manager who has a direct responsibility for one brand or one product line called a product manager in some firms New Product Development Odds a product will fail are high over 80 introduced in any year fail Takes about 7 ideas to generate one commercial product Product screening a process designed to reduce the number of new product ideas being worked on at any time of new product ideas Product analysis making cost estimates and sales forecasts to get a feeling for profitability Develop further testing many different product concepts or alternatives o This step involves making a prototype Concept testing taking a idea product to consumers to test their reactions Commercialization promoting a product to distributors and retailers to get wide distribution and developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers Product Life Cycle Product life cycle a theoretical model of what happens to sales and profits for a product class over time the four stages of the cycle are introduction growth maturity and decline o Within each stage there s product price place and promotion Competitive Pricing Pricing objectives o Achieving a target return on investment or profit o Building traffic offer certain products at low cost to attract people loss leaders Long run objective is to make profits by following the short run objective of building a customer base Achieving greater market share offer lower prices low finance rates low lease rates or rebates Creating an image pricing certain products high to create an image of exclusivity and status Further social objectives offering low prices so people can afford it Government offers subsidies on farm products to keep basic necessities like milk and bread affordable Cost based pricing add up production costs and margin of profit and come up with a price Demand based pricing o Target costing designing a product so that it satisfies customers and meets the profit margins desired by the firm Competition based pricing pricing strategy based on what all the other competitors are doing The price can be set at above or below competitors prices o Price leadership the strategy by which one or more dominant firms set the pricing practices that all competitors in an industry follow Break even analysis the process used to determine profitability at various levels of sales o Break even point total fixed costs FC price of one unit P variable costs of one unit VC are made or sold o Total fixed costs all the expenses that remain the same no matter how many products o Variable costs costs that change according to the level of production Skimming price strategy strategy in which a new product is priced high to make optimum profit while there s little competition Penetration strategy strategy in which a product is priced low to attract many customers Everyday low pricing setting prices lower than competitors and then not having any and discourages completion special sales
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