Marketing 351 Chapter 11
Business Products
-products bought to use in a firm's operations, to resell, or to make other products -classified according to their characteristics and intended use
Shopping Products
-products which buyers are more willing to spend much time comparing stores and brands for differences in the price, product features, and services -have LOWER inventory and need FEWER distribution outlets than connivence goods (appliances, bikes, furniture)
Growth Stage
-the product life-cycle stage when sales rise rapidly, profits peak, and then they start to decline -business reaches the break-even point of the product -critical to the products survival because the competitors reactions to the product's success during this period will affect the product's life expectancy -marketers must fortify the production position -agressive pricing -achieving greater penetration of the market is typically a business goal during this time -Lowering prices after developmental costs have been recovered
Decline Stage
-the stage of a product's life cycle when sales fall rapidly -cut back advertising expenditures -revitalize its brand and attract different market segments -when marketers consider eliminating products that are not contributing to profitability or the overall effectiveness of a product mix -When are marketers least likely to change a product's design, style, or other attributes
Accessory Equipment
Equipment that does not become part of the final physical product but is used in production or office supplies (file cabinets, calculators, tools)
T/F The original marketing strategy should not be altered in any way as a product travels through the stages of the product life cycle because consumers can become confused.
FALSE
T/F Consumers are reluctant to purchase substitute brands if a desired brand of a convenience product is unattainable.
FALSE - Consumers are likely to purchase substitute brands if a desired brand of a convenience product is unavailable
T/F Per-unit gross margins on convenience products are relatively high
FALSE - Per-unit gross margins on convenience products are relatively low
T/F The gross margin percentage on convenience goods is usually fairly high because they are low-priced items.
FALSE - The gross margin percentage on convenience products is relatively low because they are low-priced items
T/F The core product element of the total product can include installation, delivery, training, and financing.
FALSE - a core product consist of a products fundamental utility or main benefit, this is an example of a product's supplemental features
T/F Obtaining a specialty product involves a considerable amount of comparison activity
FALSE - buyers plan the purchase of a specialty product and will not accept a substitute
T/F The two major product categories are business and institutional.
FALSE - the two major product categories are business and consumer
T/F Unfinished furniture is considered to be a convenience product because it is relatively inexpensive
FALSE - unfinished furniture would be a component part
T/F Trial is the first stage of the product adoption process.
FALSE -trial is the fourth stage of the product adoption process
T/F Buyers want to exert only minimal effort to obtain shopping products
FALSE- Buyers are willing to spend considerable effort in planning and making purchases
T/F A buyer becomes aware of the product during the evaluation phase of the product adoption process.
FALSE- a buyer becomes aware of the product during the awareness stage
T/F A product line is a particular version of a product that can be designated as a distinct offering on the organization's list of products.
FALSE- a product line is a group of closely related product items viewed as a unit because of marketing, technical, or end use consideration
Innovators
first adopters of new products
Symbolic and Experiential Benefits (Symbols or Cues)
-help symbolize products benefits and make intangible products more tangible -customers receive benefits based on their experiences with the product -can increase customer satisfaction and can also make the development of the product more cost effective
Maturity Stage
-the stage of a product's life cycle when the sales curve peaks and starts to decline, and profits continue to fall -When a business finds itself squeezed out of a market for a product or loses interest in that product -some competitors are forced out -intense competition -sales usually start to decline at the end of this -likely to see dealers offered promotional assistance from the producer -more price flexibility
Increase share of customers (maturity stage)
-whereas "market share" refers to the percentage of total customers a firm holds, "share of customers" relates to the percentage of each customer's needs that the firm is meeting -example: many banks have added new services (financial planning etc) to gain more of each customer's financial services business. (Walmart adding restaurants)
5 Major Adopter Categories
1. Early Adopters 2. Early Majority 3. Late Majority 4. Laggards 5. Innovators
Three general objectives that can be pursued during the maturity stage
1. Generate Cash flow 2. Maintain share of Market 3. Increase Share of customers
Four major stages of a product life cycle
1. Introduction 2. Growth 3. Maturity 4. Decline
7 Business Catagoies
1. MRO Supplies 2. Raw Materials 3. Installations 4. Accessory Equp. 5. Component Parts 6. Process Materials 7. Business Serives
Adoption model when launching new product
1. company must promote the product to create widespread awareness 2. samples or simulated trials should be arranged 3. marketers should emphasize quality control and provide solid guarantees to reinforce buyers opinion 4. production and physical distribution must be lined to patterns of adoption and repeat purchases
Reasons why new products fail
1. overestimated market plan 2. distributed insufficiently 3. poor timing 4. promoted poorly
Marketing manager's two options during the decline stage
1.Attempt to postpone the decline (harvesting) 2. Accept its inevitability (divesting)
Consumer Reports and Shopsmart
Consumers who spend considerable time researching product attributes and comparisons find these very appealing
T/F Product mix refers to a related group of products in the product line.
FALSE- a product mix refers to the TOTAL group of products that an organizations makes available to customers
T/F Distribution outlets become more difficult to secure during the growth stage of a product's life cycle because of aggressive competition
FALSE- as a product gains market acceptance, new distribution outlets usually become easier to obtain
T/F During the growth stage, promotion costs rise as a percentage of total sales.
FALSE- as sales increase, promotion cost should drop as a percentage of total sales
T/F Component parts usually need to be processed significantly before they are used in production.
FALSE- component parts are either finished items ready for assembly or items that need little processing before assembly
T/F Accessory equipment becomes a part of the finished product
FALSE- does not become part of the final physical product but is used in production or office activities
T/F A seller's profits peak in the maturity stage of a product's life cycle
FALSE- in the maturity stage, profits continue to fall
T/F "Business Services" is not a category or type of business product
FALSE- it is a category or type of business product
T/F The marketing mix should be left alone during the maturity stage of the product life cycle; tampering with it may bring an early death to the product.
FALSE- marketers must adjust the marketing mix
T/F During a product's maturity stage, all sales promotion efforts are focused on consumers.
FALSE- producers who remain in the market are likely to change their promotional and distribution efforts during the maturity stage
T/F Intensive competition causes price increases during the growth stage of the product life cycle
FALSE- profits decline as more competitors enter the market driving prices down and creating the need for heavy promotional expenses
T/F The width of a product mix refers to the number of generic products offered by a company.
FALSE- the width of a product mix refers to the number of product lines a company offers
Early Majority
Individuals who adopt a new product just prior to the average person
Business Services
Intangible products that many organizations use in their operations (financial, legal, market research, information technology, janitorial services)
Component Parts
Items that become part of the physical product and are either finished items ready for assembly or items that need little processing become assembly and are easily identified and distinguished (spark-plugs, tires, clocks, breaks)
MRO Supplies
Maintenance repair, and operating items that facilitate production and operations but do not become part of the finished product (paper, pencils, oils, cleaning agents, and paints)
Late Majority
Skeptics who adopt new products when they feel it is necessary
T/F A business can justify keeping a product as long as it contributes to profits or enhances the effectiveness of a product mix
TRUE
T/F A product line includes a group of closely related product items that are considered to be a unit because of marketing, technical, or end-use considerations.
TRUE
T/F A product mix is the composite or total group of products that an organization makes available to customers.
TRUE
T/F A product need not be a physical product
TRUE
T/F A product's classification can influence its price, distribution, and promotion
TRUE
T/F A service is intangible and is the result of the application of human or mechanical efforts to people or objects.
TRUE
T/F Advertising used in the decline stage may prolong the life of the product.
TRUE
T/F Bread is usually a convenience product
TRUE
T/F Changing the product's quality is a distinct alternative in the maturity stage of the product life cycle.
TRUE
T/F Communicating product benefits to consumers is very important in the introduction stage
TRUE
T/F Intense price wars are likely to occur during the growth stage of the product life cycle as competitors attempt to gain market share.
TRUE
T/F Many products are in the maturity stage of the product life cycle
TRUE
T/F New products seldom generate enough sales to bring immediate profits.
TRUE
T/F Price cuts are typical in a product's growth stage.
TRUE
T/F Process materials are used directly in the production of products
TRUE
T/F Procter & Gamble has a wider product mix than does Baskin Robbins.
TRUE
T/F Profits decline in the maturity stage, largely because of increased competition.
TRUE
T/F Promotion decreases in importance during a product's decline stage
TRUE
T/F Sales peak in a product's maturity stage.
TRUE
T/F Sellers can sometimes prolong a product's life cycle.
TRUE
T/F Service, repair work, and accessories may be important considerations in a consumer's decision to purchase a particular shopping product
TRUE
T/F Sometimes new marketing channels open up in the decline stage
TRUE
T/F Strategies relating to price become more mixed during a product's maturity stage.
TRUE
T/F Supporting services, such as installation and guarantees, are part of a product
TRUE
T/F The atmosphere and décor of a retail store, the variety and depth of product choices, the customer support, even the sounds and smells all contribute to the experiential element of its total product
TRUE
T/F The buyer's intent can determine whether an item is classified as a consumer or a business product.
TRUE
T/F The depth of a product mix is measured by the average number of product types in a product line.
TRUE
T/F Use of the product is the most important means of distinguishing consumer products from business products.
TRUE
T/F When an organization introduces a new product, people do not all begin the adoption process at the same time, nor do they move through the process at the same speed
TRUE
T/FF Many products never get beyond the introduction stage
TRUE
Product Line
a group of closely related product items viewed as a unit because of marketing, technical, or end use consideration (Purina's fancy feast includes five different varieties or wet, dry, or kitten food in the same product line)
Product Item
a specific version of a product that can be designated as a distinct offering among a firm's products (Abercrombie and fitch polo shirt)
Product
anything the customer receives in exchange Combination of 3 independent elements: 1. core product 2. supplemental features 3. symbolic and experiential benefits
Raw Materials
basic natural materials that become part of the final product (minerals, chemicals, timber)
Specialty Products
buyers do not compare alternatives when shopping, requires purchase planning, and the buyer will not accept substitutes (one of a kind necklace)
Products are classified as being business or consumer products according to:
buyers intended use of the product (always used in the classification of a good)
Maintain share of market (maturity stage):
companies with marginal marker share must decide whether they have a reasonable chance to improve their position or whether they should drop out - requires average to large advertising expenditures
Idea
concept, philosophy, or image (MADD's primary market)
Harvesting (decline stage)
deciding to gradually reduce marketing expenditures and realign its marketing mix to one that requires fewer resources
Divesting (decline stage)
deciding to immediately withdraw all of its marketing support from these declining products
Instalations
facilities and non-portable major equipment (buildings, factories, warehouses)
Absolute Product failure
failure results in a loss on the investment and is deleted from the product mix
Relative Product Failure
failure results in a small profit, and improvements or repositioning can create success later.
Process Materials
materials that are used directly in the products of other products but are not readily identifiable (vinegar in a salad dressing)
Early Adopters
people who adopt new products early, choose new products carefully, and are viewed as "the people to check with" by later adopters
Core Product
product's fundamental utility or main benefit -usually addresses a fundamental need -example: Chipotle's core product uses the finest sustainable ingredients. therefor its core product is high quality fast food
Consumer Products
products purchased to satisfy personal and family needs
Connivence Product
products that are relatively inexpensive and frequently purchased with minimal effort (bread, gum, soft drinks)
Product's Supplemental features
provide added value or attributes in addition to its core utility or benefit -installations, delivery, training, and financing - are not required to make the core product function effectively -help differentiate one product brand from another
Depth of product mix
the average number of different products offered in each product line
Awareness
the buyer becomes aware of the product (have litter information about the product and are not concerned about obtaining more) -An individual knows that a product exists, but has little information regarding the product and does not seek additional information
Evaluation
the buyer considers the product's benefits and decides whether to try it, considering its value versus the competition (consider whether the product will satisfy certain criteria that are crucial to meeting their particular needs)
Trial
the buyer examines, test, or tries the product to determine if it meets his or her needs (use or experience the product for the first time, possibly by purchasing a small quantity, taking advantage of free samples, or borrowing the product from someone) -during this stage potential adopters determine the usefulness of the product under the specific conditions for which they need it
Adoption
the buyer purchases the product and can be expected to use it again whenever the need for this product arises (individuals move into this stage by choosing a specific product when they need a product of that general type) - does NOT mean the person will eventually adopt the new product -rejection may occur -can be temporary or permanent -begins using that specific product
Interest
the buyer seeks information and its receptive to learning about the product (when they are motivated to get information about the product's features, uses, advantages, disadvantages, prices, and location)
Product Mix
the composite, or total, group of products that an organization makes available to customers (Procter & Gamble's product mix comprises all the health-care, beauty-care, laundry and cleaning, food and beverage, products that the firm manufactures)
Product Adoption Process
the five-stage process of buyer acceptance of a product: 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption
Introduction Stage
the initial stage of a product's life cycle; its first appearance in the marketplace when sales start at zero and profits are negative (profits are usually negative and increasing)
Generate cash flow (maturity stage):
the is essential for recouping the initial investment and generating excess cash to support new product
Laggards
the last adopters, who distrust new products
Width of product mix
the number of product lines a company offers
Unsought Products
when a sudden problem confronts a consumer, such as emergency automotive repair (emergency medical services, automotive repair)