Chapter 14 - Developing and Pricing Goods and Services

Three different types of industrial goods:

- Installations - Capital - Accessory equipment

Functions of Packaging

1. Attract the buyers attention 2. Protect the goods 3. Be easy to open 4. Describe and give information 5. Explain the benefits of the good 6. Provide information on warranties, warnings, and other consumer matters 7. Give some indication of price, value, and uses

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.

Pricing Objectives

Achieving a target return on investment or profit Building traffic Achieving greater market share Creating an image Furthering social objectives both short-run and long-run

Which of the following statements about packaging is the most accurate?

Changes in packaging can actually change the product itself and open up large new markets.

___________ is the stage of new product development that involves promoting the product to distributors and developing advertising and sales campaigns to generate and maintain consumer interest in the product.

Commercialization

Which of the following is the best example of a product line?

Kellogg offers Special K, Raisin Bran, Corn Flakes, and a variety of other cold ready-to-eat cereals.

Which of the following statements about nonprice competition is most accurate?

Marketers often rely on nonprice differences in their competitive strategy to enhance a relatively homogeneous product.

industrial goods

Products used in the production of other products. Sometimes called business goods or B2B goods.

Product screening

Reduces the number of new products a firm is working on to focus on the most promising.

__________ are products that the consumer buys only after comparing quality and price from a variety of sellers.

Shopping goods

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

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

product line

a group of products that are physically similar or are intended for a similar market

brand manager

a manager who has direct responsibility for one brand or one product line; called a product manager in some firms

The number of units that must be sold for the total revenue to equal the total cost is called the:

break-even point

Bundling

combining goods and/or services for a single price

Four classes of consumer goods

convenience, shopping, specialty, unsought

variable costs

costs that vary with the quantity of output produced

target costing

designing a product so that it satisfies customers and meets the profit margins desired by the firm

total product

everything consumers evaluate when deciding whether to buy something.

Value

good quality at a fair price

distributed product development

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

The stages of the product life cycle include:

introduction, growth, maturity, and decline

product life cycle

introduction, growth, maturity, decline

Product Analysis

making cost estimates and sales forecasts to get a feeling for profitability of new-product ideas

The brand names that are used by producers that distribute products nationally are called:

manufacturers' brand names

A skimming pricing strategy is designed to:

price the product high in order to earn the highest possible profit while there is little competition

demand-based pricing

pricing based on the level of demand for the product

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

cost-based pricing

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

concept testing

testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal

brand equity

the added value a brand name gives to a product beyond the functional benefits provided

product mix

the combination of product lines offered by a manufacturer

product differentiation

the creation of real or perceived product differences

brand loyalty

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

brand association

the linking of a brand to other favorable images

break-even analysis

the process used to determine profitability at various levels of sales

price leadership

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

June Daye lives in the southern part of Alabama where winters are normally fairly mild. Last January, during an unusually cold spell, the water pipes in her house froze and burst. She had to look in the Yellow Pages to find a plumber who was able to come out and repair the pipes the same day. Prior to the frozen pipes, the plumber's services represent an example of a(n):

unsought service