Chapter 14: Developing and Pricing Goods and Services

Ultimately, producers determine the price of a product.

False

A computer kept at home for personal use is considered a(n) good, whereas the same computer purchased for use in a business office is considered a(n) good.

personal or consumer business or industrial

The reasons why many new products fail include:

poor packaging too few differences from competitors poor positioning

Reducing the number of new product ideas based on specific criteria is a function of product , whereas determining the profitability of those ideas is a function of product .

screening analysis

The pricing strategy that calls for a new product being priced high to make optimum profit while there is little competition is called a(n) price strategy.

skimming

When there is low competition, firms can use a price strategy to recover research and development costs and make as much profit as possible.

skimming

Knowing what of the product life cycle a product is in helps marketers make intelligent and efficient marketing decisions.

stage

Match the type of consumer products with the products and services below:

Convenience - milk Shopping - washing machines Specialty - orthopedic surgeons Unsought - burial services

Packaging serves several critical functions in the overall success of a product. Some of these functions are

Explaining the benefits of what's inside Attracting the buyer's attention Giving a potential buyer a sense of price, value, and uses.

Distributed product development is producing a firm's product without the help of other organizations.

False

Price and cost are not always related.

True

What is an example of a current manufacturer's brand name that has not become generic?

Xerox

A major reason why many new products fail is that they:

are too similar to competitors

A name, symbol, or design that identifies the goods or services of one seller or group of sellers is called a:

brand

Setting price at, above, or below competitors based on what they are doing is a pricing strategy called:

competition-based pricing

A product that could be both a consumer product or industrial product depending on its use is a:

computer

Consumers calculate the value of a product by:

considering whether all of the benefits exceed all of the costs

Candy, gum, milk, snacks, and gas are all examples of goods.

convenience

Items purchased often and without much effort on the part of the consumer are referred to as goods.

convenience

An increase in outsourcing and alliance building has resulted in product development that often includes coordinating with companies in other countries.

distributed or distributing

Brand is the value of the brand name and associated symbols.

equity

Not delivering what is promised is a leading cause of new-product

failure

Sellers are now able to commercialize new products more quickly online and through social media that enable them to reach

global markets

List the six steps in the new product development process, starting with the first step at the top and ending with the last.

idea generation product screening product analysis development testing commercialization

When developing new products, it takes about seven new to generate one new commercial product.

ideas

During the growth stage of the product life cycle, sales and profits mostly

increase

Select the stages of the Product Life Cycle in order from earliest to latest with the earliest on top.

introduction growth maturity decline

The stages of the product life cycle are:

introduction, growth, maturity, decline

Xerox, Kodak, Sony, and Dell are all examples of brand names.

manufacturers', national, manufacturer, manufacturers, or manufacturer's

In the long run, price is determined by the:

market

A brand manager manages all elements of a product line or the brand's

marketing mix

In which stage of a product's life cycle would marketers find the need to communicate what makes its product different from others products?

maturity

A , symbol, or design that identifies the goods or services of one seller or group of sellers is called a brand.

name

Marketers competing on product attributes and image are said to be participating in:

nonprice competition

Marketers who seek to differentiate their products by promoting attributes such as safety or the brand name are using:

nonprice competition

It is unusual for a company to sell:

one product

Can you list two short-term and two long-term pricing objectives? Can the two be compatible?

1. Short-term pricing objectives include loss leaders and is designed to build traffic as well as achieving greater market share. Long-term pricing objectives include achieving a target return on investment and creating a certain image. It is important that marketing managers set pricing objectives in context of other marketing decisions, since the pricing objectives may differ greatly.

What value enhancers may be included in a total product offer?

1. Some value enhancers that may be included in the total product offering include brand name, warranty, service, store surroundings, and speed of delivery.

What seven functions does packaging now perform?

1. The functions packaging performs include: (1) attract the buyer's attention, (2) protect the goods inside, (3) be easy to open, (4) describe and give information, (5) explain the benefits of the good inside, (6) provide information on warranties, warnings, and other consumer matters, and (7) give some indication of price, value, and uses.

What are the six steps in the new-product development process?

1. The six steps in the new-product development process are Idea generation, development, product screenings, testing, product analysis, and commercialization.

What's the difference between a brand name and a trademark?

2. Brand names consist of a word, letter or group of words or letters that set it apart from other goods and services. A trademark is a brand that has exclusive legal protection for both its brand name and design.

What is the difference between product screening and product analysis?

2. During the product screening process the number of new-product ideas a firm is working on is reduced, so that it may focus on the most promising ideas. Product analysis occurs after screening and involves making cost estimates and sales forecasts to get a feeling for the profitability of new-product ideas.

What's the difference between a product line and a product mix?

2. Product line refers to the group of products that are physically similar or intended for a similar market. These products may face similar competition. For example, you can purchase a Diet Coke, Diet Coke with Splenda etc. The product mix is the total of the product lines offered by a particular company. The text uses the example of Procter & Gamble.

What are the limitations of a cost-based pricing strategy?

2. The limit of a cost-based pricing system is that in the long run it is not the producer that establishes price but rather the marketplace. To effectively establish price, the producer must consider competitor prices, marketing objectives, actual cost, and the expected cost of product updates.

Can you explain the difference between a manufacturers' brand, a dealer brand, and a generic brand?

3. A manufacturers' brand represents manufacturers that distribute their products nationally, such as Xerox or Dell. A dealer brand is often referred to as a private label and will not carry the manufacturers name, but rather carries the name of the distributor instead. For example, Kenmore is a dealer brand sold via Sears. A generic brand is the name of an entire product category.

What is psychological pricing?

3. Psychological pricing involves setting the price of goods or services at price points that make the product appear less expensive. For example, a TV may be priced at $999, since it sounds less expensive than $1,000.

Name the four classes of consumer goods and services, and give examples of each.

3. The four classes of consumer goods and services include: •Convenience goods and services: candy, gum, and milk •Shopping goods and services: clothes, shoes, and appliances •Specialty goods and services: fur coats, imported chocolates, and business consultants •Unsought goods and services: burial service, insurance, and emergency drain cleaning

What are the two steps in commercialization?

3. The two steps in commercialization involve promoting the product to distributors and retailers and the development of strong advertising and sales campaigns.

What are the key elements of brand equity?

4. Brand equity is the value of the brand name and associated symbols. The elements of brand equity include brand loyalty, brand awareness, and brand association.

Describe three different types of industrial goods.

4. Installations consist of major capital equipment such as new factories and heavy machinery. Capital items are expensive products that last a long time. Accessory equipment consists of capital items that are not quite as long-lasting or expensive as installations and include computers, copy machines, and various tools.

What is the theory of the product life cycle?

4. The product life cycle is a theoretical model that explains what happens to sales and profit for a product over a particular period. This model has four stages: introduction, growth, maturity, and decline.

LO 14-4 Contrast brand, brand name, and trademark, and show the value of brand equity.

Brands •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. •Brand name gives products a distinction that tends to make them attractive to consumers. •Trademark — A brand that has exclusive legal protection for both its brand name and its design. Creating Brand Associations •Brand association —Linking a brand to other favorable images. Brand Management •Brand manager — A manager who has direct responsibility for one brand or one product line. •The brand manager handles all the elements of the brand's marketing mix.

Match the goods classifications with the buyer behaviors shown below.

Convenience - Purchased often with little thought Shopping - Time spent on comparison to substitutes Specialty - No substitute will do Unsought - Unaware of product or not looking for it

When airlines charge higher prices for seats in the Economy section Exit rows that have more leg room, they are using which pricing strategy?

Demand-oriented

Grouping two or more products together and pricing them as a unit is called stacking.

False

It takes dozens of ideas to generate one commercial product.

False

LO 14-3 Summarize the functions of packaging.

Key Functions of Packaging 1.Attract the buyer's attention. 2.Protect the goods inside, be tamperproof and deter theft. 3.Be easy to open and use. 4.Describe and give information about the contents. 5.Explain the product's benefits. 6.Provide warranty information and warnings. Give an indication of price, value, and uses.

LO 14-2 Identify the various kinds of consumer and industrial goods.

Marketing Different Classes of Consumer Goods and Services •Convenience goods and services — Products that the consumer wants to purchase frequently and with a minimum of effort. •Candy and snacks, gas, milk. •Shopping goods and services — Those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers. •Target, wireless carriers. •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. •Fine watches, expensive wine, designer clothes, jewelry. •Unsought goods and services — Products that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem. Car-towing services, burial services, insurance.

LO 14-5 Explain the steps in the new-product development process.

New Product Development •The odds a new product will fail are high. •New product potential: 3D printing, streaming TV, virtual reality (VR). Generating New-Product Ideas •It takes about seven ideas to generate one commercial product. •Employees, research and development, suppliers offer new ideas. Product Development and Testing •Concept testing takes a product idea to consumers to test reactions. •Crowdsourcing platforms allow the public to give their opinions of potential products. 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.

competition does not use price as a major promotional appeal, but instead stresses consumer benefits and product style.

Nonprice

Which of the four Ps below is the most difficult for a manager to control due to the impact it has on consumer evaluation of an offering?

Price

is one of the most difficult of the four Ps for a manager to control, since it directly relates to the consumer perceptions of the value of a product.

Price

LO 14-7 Identify various pricing objectives and strategies.

Pricing Objectives 1.Achieving a target return on investment or profit. 2.Building traffic. 3.Achieving greater market share. 4.Creating an image. 5.Furthering social objectives. Competition on Attributes Other than Price •Product images. •Comfort. •Style. •Convenience. •Durability. Accompanying services.

LO 14-6 Describe the product life cycle.

Product Life Cycle •A theoretical model of what happens to sales and profits for a product class over time. •Product Life Cycle Stages: •Introduction. •Growth. •Maturity. Decline.

Which step in the new product development process involves estimating costs and sales to get a feel for the new product's potential profitability.

Product analysis

Differentiate between the elements of the new-product development process:

Product screening - Reduces the number of products a company is working on down to the most promising Product analysis - Develops cost estimates and sales forecasts to determine profitability

is a pricing strategy that aims to design a product so that it satisfies customers and meets the profit margins for a company.

Target costing

When opening a bag of potato chips the bag is much larger than what is inside. The reason for this most likely has to do with which function of packaging.

To protect the goods inside

LO 14-1 Describe a total product offer.

Value •Good quality at a fair price. •According to the American Marketing Association, value is a foundation of marketing. •Adapting products to new markets is an ongoing challenge. •Product development is a key activity in any modern business. Distributed Product Development •Handing off various parts of your innovation process—often to companies overseas. •The increase in outsourcing has resulted in using multiple organizations separated by cultural, geographic, and legal boundaries. •Developing a total product offer: •Everything that consumers evaluate when deciding whether to buy something. •Products are evaluated on many different dimensions, both tangible and intangible. •Marketers must think like and talk to consumers to find out what's important.

The value of the brand name and associated symbols is referred to as

brand equity

The value of the brand name and associated symbols refers to:

brand equity

Direct responsibility for all aspects of a product line or a brand including the marketing mix is the role of the

brand or product manager

A firm is at the - point when revenue is equal to all costs.

break even

The point where revenues from sales equal all costs is called the:

break-even point

Grouping two or more products together and pricing them as a unit is called:

bundling

Product differentiation is used to

call attention to product differences that appeal to the preferences of the target market

Examples of convenience goods are:

candy, gum, milk, and gas

Pricing based on the pricing activities of other companies in relation to a product is called - pricing.

competition based

A product the consumer wants to purchase frequently and with minimum effort is a good or service called a(n):

convenience product

The pricing strategy in use when a firm prices products based on consumer demand is called:

demand-oriented

Due to competition and demand in the marketplace, are not always related.

price cost

Companies rarely sell one product, but offer a

product mix or line

The creation of real or perceived product differences is called:

product differentiation

During _____, a marketing manager should use such criteria as fit with the firm's other products, profit potential, and marketability.

product screening

Justifying a new product's fit, profit potential, and marketability is known as:

product screening

Designing a product so that it satisfies customers and meets the profit margins desired by firms is called

target costing

New products are getting rapid exposure to global markets through:

the Internet

Recognizing what stage of its life cycle a product is in has a direct impact on marketers' decisions about:

the marketing mix

When consumers calculate they look at the benefits of a product or service and subtract the costs to determine whether the benefits exceed the costs.

value