FM BUS 141 - MARKETING CHAPTER 10 NOTES

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MARKETING CHAPTER 10 NOTESMarketing: Chapter 10 – Developing New Products and ServicesProduct: a good, service or idea consisting of a bundle of tangible and intangible attributes that satisfies customers’ needs and is received in exchange for money or something else of value. Good: has tangible attributes that a consumer’s 5 senses can perceive.Nondurable Good: is an item consumed in once or a few uses. (food, fuel)Durable Good: is an item that usually lasts over many uses. (car, appliances)Services: intangible activities or benefits that an organization provides to satisfy consumers’ needs in exchange for money or something else of value.Idea: a thought that leads to a product or action.Classifying Products2 broad categories:1. Consumer Products are products purchased by the ultimate consumer.2. Business Products (AKA B2B or industrial products) are products organizations buy that assist in providing other products for resale. The four consumer products differ in terms of 1. The effort the consumer spends on the decision 2. The attributes used in making the purchase decision and 3. The frequency of purchase.Convenience Products: are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort.Shopping Products: are items for which the consumer compares several alternatives on criteria such as price, quality, or style.Specialty Products: are items that the consumer makes a special effort to search out and buy.Unsought Products: are items that the consumer foes not know about or knows about but does not initially want.MARKETING CHAPTER 10 NOTESType of Consumer ProductBasis of ComparisonConvenience ProductShopping Product Specialty Product Unsought ProductProductToothpaste, cake mix, hand soap, ATM cash withdrawalCameras, TV’s, briefcases, airline ticketsRolls-Royce cars, Rolex watches, heart surgeryBurial insurance, thesaurusPriceRelatively InexpensiveFairly expensive Usually very expensiveVariesPlace (distribution)Widespread, manyoutletsLarge number of selective outletsVery limited Often limitedPromotionPrice, availability, and awareness stressedDifferentiation from competitors stressedUniqueness of brand and status stressedAwareness is essentialBrand Loyalty ofConsumersAware of brand but will accept substitutesPrefer specific brands but will accept substitutesVery brand loyal, will not accept substitutesWill accept substitutesPurchase Behaviorof ConsumersFrequent purchases, little time and effort spent shoppingInfrequent purchases; needs much comparison shopping timeInfrequent purchases; needs extensive search and decision timeVery infrequent purchases; some comparison shoppingBusiness Products A major characteristic of business products is that their sales are often the result of derived demand: that is, sales of business products frequently result (or are derived) from the sale of consumer products. Business Products may be classified as components or support productso Components are items that become part of the final products (raw materials)o Support Products are items used to assist in producing other goods and services. Include: Installations – such as buildings and fixed equipment Accessory equipment – such as tools and office equipment Supplies – such as stationery, paper clips, and brooms Industrial services – such as maintenance, repair, and legal servicesProduct Items, Product Lines, and Product MixesMARKETING CHAPTER 10 NOTESProduct Item: is a specific product that has a unique brand, size or price. (Ultra Downy softener for clothes comes in several different sizes. Each size is a separate stock keeping unit)SKU: a unique identification number that defines an item for ordering or inventory purposes.Product Line: is a group of product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range. (Nike product lines include shoes and clothing [Mayo Clinic consists of inpatient hospital care and outpatient physician services])Product Mix: consists of all of the product lines offered by an organization. (Cray Inc. has a small productmix of five super-computer lines that are sold mostly to governments and large businesses. Procter & Gamble has a large product mix that includes product lines such as beauty and grooming, and householdcare)How Marketing Dashboards Can Improve New Product PerformanceThe Using Marketing Dashboards box shows how marketers measure actual market performance versus the goals set in new-product planning New products are the lifeblood of a company and keep it growing, but the financial risks can be large. What is a New Product?The term new is difficult to defineNewness Compared with Existing ProductsIf a product is functionally different from existing products, it can be defined as new.Sometimes this newness is revolutionary and creates and whole new industry, as in the case of the Apple II computer.At other times, more features are added to an existing product to try to appeal to more customersNewness from the Consumer’s PerspectiveA second way to define new products is in terms of their effects on consumptionThis approach classifies new products according to the degree of learning required by the consumerContinuous Innovation: consumers don’t need to learn new behaviors.Dynamically Continuous Innovation: only minor changes in behavior are requiredDiscontinuous Innovation: involves making the consumer learn entirely new consumption patterns to use the productLow Degree of New Consumer Learning NeededMARKETING CHAPTER 10 NOTESBasis of Comparison Continuous InnovationDynamically Continuous InnovationDiscontinuous InnovationDefinition Requires no new learning by consumersDisrupts consumer’s normal routine but does not require totally new learningRequires new learning and consumption patterns by consumersExamples New improved shaver, detergent, and toothpasteElectric toothbrush, compact disk player, and automatic flash unit for camerasWireless router, digitalvideo recorder, and electric carMarketing Strategy Gain consumer awareness and wide distributionAdvertise points of difference and benefitsto consumersEducate consumers through product trial and personal sellingNewness in Legal TermsThe U.S Federal Trade Commission (FTC) advises that the term new be limited to use with a product up to six months after


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FM BUS 141 - MARKETING CHAPTER 10 NOTES

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