Developing Quality Products at the Right Price

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Chapter 14
Developing Quality Products at the Right Price
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What is a Product?

• Product bundle of physical, service, and
  symbolic attributes designed to enhance buyers
  want satisfaction

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Tangible Intangible Attributes Create Product
Value
Imageof store
Serviceafter sale
Warranty
Product type of material, size, shape, smell
Color
Attach-ments
Imageof brand
Pack-aging
Instruc-tions
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Exhibit 14.3
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Types of Consumer Products

• Convenience product good or service that
  consumers want to purchase frequently,
  immediately, and with minimal effort
• Usually inexpensive to purchase
• Brand Name plays important role in purchase coke
  or pepsi

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Types of Consumer Products

• Shopping product good or service purchased only
  after the customer compares competing offerings
  from competing vendors on such characteristics as
  price, quality, style, and color brand to brand,
  store to store
• Typically cost more than convenience purchases.
• Include tangible and service items clothing,
  furniture, appliances, child care, home
  remodeling, auto repairs.

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Types of Consumer Products

• Important features that distinguish shopping
  products
• Physical attributes
• Service attributes
• Warranties and after-sales service terms
• Price
• Styling
• Places of purchase
• Stores name and reputation
• Personal selling efforts

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Types of Consumer Products

• Specialty product good or service with unique
  characteristics that cause the buyer to value it
  and make a special effort to obtain it
• Unsought product good or service marketed to
  consumers who may not yet recognized in the need
  for it

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What is a Service?

• Service intangible task that satisfies consumer
  or business user needs
• Goods-services continuum device that helps
  marketers to visualize the differences and
  similarities between goods and services

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What is a Service?

• Characteristics that distinguish services from
  goods
• Intangibility
• Inseparability
• Difficulty of standardization
• Frequent requirement ofinteraction between buyer
  and Seller
• Variability

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Classifying Goods and Services for Consumer and
Business Markets

• Consumer products products destined for use by
  ultimate consumers
• Business (or B2B) products those that contribute
  directly or indirectly to the output of other
  products for resale
• Capital Products large, expensive items, long
  life span
• Expense Items smaller, less expensive
  items,typical life span less than one year

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Types of Business Products

• Installation major capital investment by a
  business buyer that typically involves expensive
  and relatively long-lived products, such as a new
  factory or piece of heavy machinery

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Types of Business Products

• Accessory equipment capital product, usually
  less expensive and shorter-lived that insulation,
  such as a laptop computer
• Price plays bigger role in decision because of
  shorter product life
• Fewer decision makers involved maybe single
  purchasing agent
• Advertising a keycomponent in theAccessory
  marketing mix.

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Types of Business Products

• Component parts and materials finished business
  products from one producer that becomes parts of
  buying firms final products, such as spark plugs
  for new cars. Intel chips for Gateway or Dell
• Raw materials business product, such as a farm
  product (wheat, cotton, soybeans) or natural
  product (coal, lumber, iron ore) that become part
  of a final product
• Raw materials usually graded

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• General MillsBakers Flour
• A Component Product

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Types of Business Products

• Supplies products that represent regular
  expenses necessary to carry out a firms daily
  operations but are not part of the final product.
  Supplies are sometimes called MRO items
• MRO item part of business supplies categorized
  as maintenance items, repair items, or operating
  supplies such as light bulbs, nuts and boltsused
  in repairing equipment, or pencils
• Wholesalers usually facilitate sales of these
  supplies

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Types of Business Products

• Business service intangible product purchased to
  facilitate a firms production and operating
  processes.
• Financial services
• Leasing of vehicles
• Legal advice and consulting
• Web page design

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Branding Creating and Protecting a Strong
Identity for Products

• Branding is the process of creating an identity.
• Three Main Purposes
• Product Identification
• Repeat Sales
• New Product Sales

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Brand Equity

• Brand equity refers to the added value that a
  certain brand gives to a product
• Brand equity increases the likelihood that
  consumers will recognize the firms product when
  they make purchase decisions
• A strong brand equity to can contribute to
  buyers perceptions of product quality
• Branding can also reinforce customer loyalty and
  repeat purchases

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Dominant Brands Master Brands

• Adhesive Bandages
• Antacids
• Baking soda
• Cellophane tape
• Fast Food
• Gelatin
• Rum
• Salt
• Soft drinks
• Soup

• Band-Aid
• Alka-Seltzer
• Arm Hammer
• Scotch Tape
• McDonalds
• Jell-O
• Bacardi
• Morton
• Coca-Cola
• Campbells

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Characteristics of Effective Brand Names

• Easy to pronounce
• Easy to recognize
• Easy to remember
• Short
• Distinctive, unique
• Describes the product
• Describes the products use
• Descries the products benefits
• Has a positive connotation
• Reinforces the desired product image
• Is legally protectable in home and foreign
  markets of interest

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Importance of Packaging

• Protects the product
• prevent damage, prevent spoilage
• Distinguish product from competition
• Ben Jerrys has an ecologically friendly
  unbleached paperboard package for its ice cream
  pints, consistent with its socially conscious
  mission (Source Ben Jerrys,
  www.benandjerrys.com)
• Promote product
• brand identification, information

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Creating New Products
1. Set new product goals
2. Develop new product ideas
3. Screen ideas/concepts
4. Develop the concept
5. Test-market the new product
6. Introduce the product to the marketplace
Familiarize yourself with pp. 422-423
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The Product Life Cycle

• Product life cycle progression of products
  through introduction, growth, maturity, and
  decline stages

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The Product Life Cycle

• Introduction Stage
• Competition is light
• Distribution limited
• Promotional campaigns stress features
• High Failure Rate
• Low Profits production and marketing costs are
  high, sales volume is low

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The Product Life Cycle

• Growth Stage
• Sales volume rises rapidly
• Firm usually begins to realize substantial
  profits
• Success attracts competitors
• Large companies tend to acquire small companies
  at this stage
• Distribution is key to success

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The Product Life Cycle

• Maturity Stage
• Industry sales continue to grow, but eventually
  reach a plateau
• Many competitors have entered the market, and
  profits began to decline
• Marketing strategy may be to offer variations of
  successful product
• Available supplies exceed industry demand for the
  first time

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The Product Life Cycle

• Decline (and death) Stage
• Rate of decline governed by two factors
• Rate of change in consumer tastes
• Rate at which new products enter the market

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Pricing Issues

• Perceived satisfaction vs. actual satisfaction
• Pricing objectives
• Maximizing profits
• Exhibit 14-10, p. 427
• Achieve target return on investments
• Used to benchmark what stage of product lifecycle
• Dictated by management as well as shareholders
• Value pricing
• offer good value at fair price
• offer products that perform

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Determining Price

• 1. Markup pricing
• a percentage is added to product cost to
  determine price
• 2. Breakeven analysis
• determine the number of units needed to be sold
  at a given price to cover costs, so additional
  sales result in profit
• sales forecasts then determine total profit

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Product Pricing
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Product Pricing
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Leader Pricing
Pricing products below the normal markup or
below cost to attract customers to a store where
they would not otherwise shop
Bundling
Grouping two or more related products together
and pricing them as a single product
Odd-Even Pricing
Setting a price at an odd number toconnote a
bargain and at an even number to suggest quality
Prestige Pricing
Increasing the price of a product so that
consumers will perceive it as being of higher
quality, status, or value