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
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
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
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
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