Intro to Business: Chapter 14 - Developing and Pricing Goods and Services

marketers must do the following to satisfy customers

- adapt - listen better

marketing mix strategy

- classified by user category

the new product development process

1) idea generation 2) product screening 3) product analysis 4) development (including building prototypes) 5) testing 6) commercialization (bringing the product to the market)

trademark

a brand that has exclusive legal protection for both its brand name and its design

capital items

are expensive products that last a long time

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

product screening

unsought goods and services

products consumers are unaware of, haven't necessarily thought of buying, or suddenly find they need to solve an unexpected problem ex: emergency car towing services, burial services, and insurance consumers are not typically searching in the market for an unsought good

companies, especially those marketing food, must __ to local tastes

adapt

knockoff brands

illegal copies of national brand name goods

generic name

the name for a whole product category

price leadership

the strategy by which one or more dominant firms set the pricing practices that all competitors in an industry follow

product screening

a process designed to reduce the number of new product ideas from being worked on at any one time

the best way to __ is to design and promote products that consumers perceive as having greater value than the competition

compete

installations

consist of major capital equipment such as new factories and heavy machinery

products in the same product line usually:

face similar competition

the pricing strategy often used in the introductory stage of the product life cycle is a high or __ strategy, whereas the maturity stage calls for a price __.

skimming, decrease

demand based pricing

based on what customers are willing to pay for a product due to its perceived value, not the cost of producing it design a product that will satisfy customers and meet profit margins

packaging influences __ association by presenting products using the same name, symbol, and slogal

brand association

determining a good ___ strategy depends greatly on identifying the customer base and understanding how the product is perceived by this target market

differentiation

the fair packing and labeling act gives consumers

more information on product content, quantity, and value

when a brand name becomes a generic name, manufacturers:

must come up with new names for their differentiated offering

generic goods

nonbranded products that usually sell at a sizable discount compared to national or private label

marketers should be careful not to include so much in a bundle of goods that the __ becomes too high for customers

price

demand collection systems that allow consumers to name the price they are willing to pay to bid on goods are likely to increase:

pricing competition

psychological pricing

pricing goods and services at price points that make the product appear less expensive than it is

brand association

the linking of a brand to other favorite images company hiring famous figures to showcase themselves in their ads

marketers use the theoretical model of the product life cycle to:

- change a product's marketing mix as it moves through its stages - recognize how to invest in the product to meet company objectives

a major goal of marketers in the future will be to strengthen consumer commitment to brand names because it:

- increases brand equity - develops brand preference

marketers must continually adapt products to new ___.

- markets - competition

packing carries more of the promotional burden today than in the past, when most products were sold through direct sales. the change from using salespersons to using self-service outlets has put more responsibility on packaging for:

- pricing information - promotional messages

a brand manager in a b2b company is responsible for:

- product - promotion - price

which of the four Ps is most difficult for a manager to control due to the impatct it has on consumer evaluation of a product?

- promotion - product - place ----->> price <<-----

non price competition

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

brand loyalty

the degree to which customers are satisfied, like the brand, and are committed to further purchases

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:

to protect the goods inside

considering an ipod's look and feel, its features as well as apple's reputation demonstrate a consumer evaluating the:

total product offer

understanding the product life cycle can provide marketing managers some basis for planning __ strategies

marketing mix

boxes of juice and liquid milk that do not need refrigeration are examples of:

packaging that changes a product

a computer kept at home for personal use is considered a *consumer* good

whereas the same computer purchased for use in a business office is considered an *industrial* good

service providers

who do not offer tangible products also have product lines and product mixes

what is an example of a manufacturer's brand name?

xerox

brand insistence

when no substitute for a specific product will do

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

- the marketing mix

packaging has put more responsibility for:

- promotional messages - pricing information

concept testing

taking a product idea to consumers to test their reactions revelations about whether or not a new product will be liked and purchased are revealed

marketers must recognize that different customers perceive the same product, such as coffee, as belonging to different:

classes of consumer goods

product analysis

making cost estimates and sales forecasts to get a feeling for profitability of new product ideas developing cost estimates and sales forecasts to learn whether a new product idea meets financial objectives

high low pricing strategy

setting prices that are higher than EDLP stores, but having many special sales where the prices are lower than competitors

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

stage

skimming price strategy

strategy in which a new product is priced high to make optimum profit while there's little competition

product category

to determine a product category, marketers must carefully monitor their customer base and how products are perceived

marketers should make a habit of talking with consumers to determine which ___ enhancers want in the final product offerings

value

demand oriented pricing

when airlines charge higher prices for seats in the economy section exit rows that have more leg room, they are using which pricing strategy

product line

a group of products that are physically similar or are intended for a similar market usually face similar competition ex: coke, diet coke, vanilla coke, coke w/ lemon

brand manager

a manager who has direct responsibility for one brand or one product line; called a product manager in some firms manages all elements in the marketing mix: product, price, place, and promotion some companies have brand-management teams to bolster the overall effort

brand

a name, symbol, or design (or combination thereof) that identifies the goods or services of one seller or group of sellers and distinguishes them from the goods and services of competitors

competition based pricing

a pricing strategy based on what all the other competitors are doing. the price can be set at, above, or below competitors' prices. price set based on what other competitors are doing with price

total fixed costs

all the expenses that remain the same no matter how many products are made or sold example of fixed cost: - factory rent expense

marketers have learned that adapting products to new competition and new markets is:

an ongoing need

variable costs

costs that change according to the level of production when levels of production change, so do variable costs materials used in making goods and the direct costs of labor used in making them are examples of variable costs

determining a good differentiation strategy

depends greatly on identifying the customer base and understanding how the product is perceived by this target market

target costing aka demand based pricing

designing a product so that it satisfies customers and meets the profit margins desired by the firm target costing makes the final price an input to the product development process, not an outcome of it

total product offer

everything that consumers evaluate when deciding whether to buy something. also called a value package.

value enhancers

for bottled water company price: worth the cost due to image and unique style packaging: uniquely styled water bottle advertisement: successful image through billboard illustrations

product life cycle

four stages: introduction, growth, maturity, and decline a theoretical model of what happens to sales and profits for a products class over time; the four stages of the cycle are introduction, growth, maturity, and decline during growth, sales and profits mostly increase over 80% of products introduced in a year fail to reach their business objectives

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

when a company uses the marketing mix to attract customers to the products real or perceived differences, they are engaging in:

product differentiation

the part of new product development process that requires listening to employees, customers, and suppliers is generating new __ __.

product ideas

it takes about ___ ideas to generate one commercial product

seven

penetration strategy

strategy in which a product is priced low to attract many customers and discourage competitive in order to capture a large share of the market quickly, firms use penetration pricing as a strategy

manufacturer's brands

the brand names of manufacturers that distribute products nationally

break even analysis

the process used to determine profitability at various levels of sales

tangible intangible

the product and the package product image and company reputation

brand equity

the value of the brand name and associated symbols two ways to generate brand equity are to increase brand loyalty and brand awareness the core of brand equity is brand loyalty

UPCs

universal product codes combine bar code and preset number that gives retailer info about product's price, size, color, and other attributes

since different stages of the product life cycle experience differing levels of sales and profits, marketers are able to:

- alter marketing strategies - anticipate future market developments - alter the marketing mix

pricing strategy

1) achieving a target return on investment or profit: making a profit by providing goods and services to others 2) building traffic: advertising certain products at or below cost to attract people to the store 3) achieving greater market share: offering lower prices and lower financing rates, low lease rates, or rebates 4) creating an image: price high to create perception of exclusivity 5) furthering social objectives: pricing products low, so people with little money can afford them price and cost not always related

the ___ will ultimately determine the price of goods

market

brand name

benefit for sellers who sell products with brand names: - adds to repeat customers - facilitates new product introduction

manufacturer's brands

brands that manufacturers distribute nationally, such as Xerox or Sony

accessory equipment

consists of capital items that are not quite as long lasting or expensive as installations ex: computers, copy machines, and various tools

small businesses can often gain market share through creative product ___, such as attractive packing when marketing their products

differentiation

new idea screening

during a __ a marketing manager should look at the organization's resources and objectives

specialty goods

goods that are marketed through advertising in special interest or industry magazines or the internet to reach specific market segments

bundling

grouping two or more products together and pricing them as a unit

distributed product development

handing off various parts of your innovation process--often to companies in other countries

pricing objectives

have a direct impact on pricing strategy and should therefore be clearly formulated in the context of the strategic marketing plan and the rest of the marketing mix

product mix

the combination of product lines offered by a manufacturer ex: atm machine, online banking, safe deposit box, savings accounts companies rarely sell one product, but offer a product mix

new product failure

not delivering what is promised is a leading cause of new product failure

various categories of consumer and industrial goods and services

p 385

why do companies use nonprice strategies?

pricing is one of the easiest marketing strategies to copy. it's often not a good long run competitive tool.

RFID chip

radio frequency identification new packaging technology for tracking products, the chip sends out signals telling a company where the product is at all times a benefit of RFID system is that the packaging inventory method does not have to be read one at a time and can be read at a distance walmart has been a leader using the RFID chips

everyday low pricing (EDLP)

setting prices lower than competitors and then not having any special sales bring customers to the store whenever they want a bargain

brand awareness

the linking of a brand to other favorable images advertising helps build strong brand awareness. established brands such as coke and pepsi are among the highest in brand awareness. sponsorship of events helps improve brand awareness how quickly or easily a given brand name comes to mind when a product category is mentioned

american marketing association's definition of marketing

a set of processes for creating, communicating, and delivering value to customers

marketing

a set of processes for creating, communicating, and delivering value to customers, according to the American Marketing Associations

specialty goods and services

consumer products with unique characteristics and brand identity no reasonable substitute, must put forth a special effort to purchase them ex: fine watches, expensive wine, fur coats, jewelry, imported chocolates, and services provided by medical specialists or business consultants (usually marketed through specialty magazines)

trademark brand

mark and bruce have launched a successful brand of gardening tools. their brand is becoming well known for its high level of quality. they have decided they would like to seek exclusive legal protection for both the brand name and its design, so they have decided to ___ the brand.

sales and profits during the product life cycle (p 393)

note that profit levels start to fall before sales reach their peak. this is due to increasing price competition. when profits and sales start to decline, it's time to come out with a new product or to remodel the old one to maintain interest and profits. "product class" however, not all individual products follow the life cycle, and particular brands may act differently.

cost based, demand based, and competition based are considered three major approaches to

pricing strategy

cost based pricing

production costs added to a margin of profit to determine price companies that develop elaborate cost accounting systems to measure production costs, add in a margin of profit and come up with a price are using cost based pricing adding up various costs relative to producing a car such as engine parts, body, tires, and radio and adding a profit margin to come up with the vehicle price is a method called cost based pricing

dealer (private-label) brands aka private label, distributor, house brand

products that don't carry the manufacturer's name but carry a distributor or retailer's name instead

convenience goods and services

products that the consumer wants to purchase frequently and with a minimum of effort ex: gum, candy, milk, snacks, gas, and banking services, stuff they sell at 7 eleven the best way to promote a convenience good is to make it readily available and create a proper image

shopping goods and services

products the consumer buys only after comparing value, quality, price, and style from a variety of sellers sold largely through shopping centers ex: clothes, shoes, appliances, and auto repair services, stuff they sell at target (dept stores) the best appeal for shopping goods is: combining price, service, and quality appeal price and quality are the two best ways to raise appeal for a shopping good or service

industrial goods

products used in the production of other products. sometimes called business goods or B2B goods can be both consumer and industrial goods installations, capital items, and accessory equipment are example of industrial goods

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 1) promoting product to distributors 2) developing strong advertising and sales campaigns

product differentiation

the creation of real or perceived product differences use a creative mix of pricing, advertising, and packaging firms can gain market share by creatively establishing product differentiation that is either real or perceived by consumers