TEST 3: Chapter 14, Developing and Pricing Goods and Service (TEXT)

69 terms by JMarinaro 

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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 cost

total product offer (value package)

everything that consumers evaluate when deciding whether to buy something

tangible total product offer

the product itself and its packaging

intangible total product offer

the producer's reputation and the image created by advertising

product line

a group of products that are physically similar or are intended for a similar market (i.e. Diet Coke, Diet Coke with Lime, Coke Zero, etc.)

product mix

the combination of product lines offered by a manufacturer (i.e. for Proctor and Gamble: Tide, Era, Downy, Bold, etc.)

product differentiation

the creation of real or perceived product differences

convenience goods and services

products that the consumer wants to purchase frequently and with minimum effort (i.e. candy, gum, milk, snacks, gas, banking services); location, brand awareness, and image are important for marketers of convenience goods and services

shopping goods and services

those products that the consumer buys only after comparing value, quality, price, and style from a variety of sellers (i.e. clothes, shoes, appliances, auto repair); marketers can emphasize price differences, quality differences, or some combination of the two

specialty goods and services

consumer products with unique characteristics and brand identity; because these products are perceived as having no reasonable substitute, the consumer puts forth a special effort to purchase them (i.e. fine watches, expensive wine, fur coats, jewelry, imported chocolates, services provided by medical specialists or business consultants); marketed through specialty magazines and the Internet

unsought goods and services

products that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem (i.e. emergency car-towing services, burial services, insurance)

Whether a good or service falls into a particular class depends on ...

the individual consumer (classifying goods by user category helps marketers determine the proper marketing-mix strategy)

industrial goods (business goods, B2B goods)

products used in the production of other products; sold in a B2B market

installations

major capital equipment, i.e. new factories, heavy machinery

capital items

expensive products that last a long time

accessory equipment

capital items that are not quite as long-lasting or expensive as installations, i.e. computers, copy machines, various tools

functions of packages

(1) attract the buyer's attention, (2) protect the goods, (3) be easy to use and open, (4) describe and give information about contents, (5) explain the benefits of the good inside, (6) provide info, (7) give some indication of price, value, and uses

UPC

universal product code; helps stores control inventory

RFID

radio frequency identification chip; sends out signals telling the company where the product is at all times

Fair Packaging and Labeling Act

passed to give consumers much more quantity and value information on product packaging

Bundling

grouping 2 or more products together and pricing them as a unit

Brand

a name, symbol, or design (or a 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

trademark

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

brand name

a word, letter, or group of words or letters that differentiates one seller's goods and services from those of competitors

For a buyer, a brand name:

ensures quality, reduces search time, and adds prestige to purchases

For a seller, a brand name:

facilitates new product introductions, helps promotional efforts, adds to repeat purchases, and differentiates products so that prices can be set higher

manufacturers' brand names

the brand names of manufacturers that distribute products nationally

dealer (private-label, house, distributor) brands

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

generic goods

nonbranded products that usually sell at a sizable discount compared to national or private-label brands; have basic packaging and little or no advertising

knockoff brands

illegal copies of national brand-name goods

generic name

name for a whole product category (i.e. aspirin, linoleum, zipper)

brand equity

the value of the brand name and associated symbols

brand loyalty

the degree to which customers are satisfied, like the brand, and are committed to further purchases; the core of brand equity

brand awareness

how quickly or easily a given brand name comes to mind when a product category is mentioned

factors influencing a customer's perception of quality

price, appearance, reputation

brand preference

when customers prefer one brand over another

brand insistence

when a customer only buys 1 brand; at this point, the product becomes a speciality good

brand association

the linking of a brand to other favorable images

brand (product) manager

a manager who has direct responsibility for one brand or one product line; manages all elements of the brand/product line's marketing mix (product, price, place, and promotion); think of him/her as the president of a 1-product firm

leading cause of new product failure:

not delivering what is promised (causes: poor positioning, too few differences from competitors, and poor packaging)

most ideas for new industrial products come from :

employee suggestions

new product development process

(1) idea generation - based on consumer wants and needs,
(2) product screening,
(3) product analysis,
(4) development - including building prototypes,
(5) testing,
(6) commercialization - bringing the product to the market

product screening

a process designed to reduce the number of new-product ideas being worked on at any one time; applies criteria to determine whether the product fits well with present products, has good profit potential, and is marketable

product analysis

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

concept testing

taking product idea to consumers to test their reactions

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

product life cycle

a theoretical model of what happens to sales and profits for a product class over time; 4 stages of are
(1) introduction,
(2) growth,
(3) maturity,
(4) decline

introduction

low sales; losses may occur; few competitors

growth

rapidly rising sales; very high profits; growing number of competitors

maturity

peak sales; declining profits; stable number of competitors, then declining

decline

falling sales; profits may fall to become losses; declining number of competitors

pricing objectives

(1) achieving a target return on investment or profit,
(2) building traffic,
(3) achieving greater market share,
(4) creating an image,
(5) furthering social objectives

loss leaders

products that are advertised at or below cost to attract people to the store and increase traffic

3 major approaches to pricing strategy

(1) cost-based,
(2) demand-based (target costing),
(3) competition-based

cost-based pricing

producers use cost as a primary basis for setting price; they develop elaborate cost accounting systems to measure production costs (including materials, labor, and overhead), add in a margin of profit, and come up with a price

target costing

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

competition-based pricing

a pricing strategy based on what all other competitors are doing; the price can be set at, above, or below competitors' prices; pricing depends on customer loyalty, perceived differences, and the competitive climate

price leadership

the strategy by which 1 or more dominant firms set the pricing practices that all competitors in an industry follow

break-even analysis

the process used to determine profitability at various levels of sales

break-even point

the point where revenues from sales = all costs;
BEP = [Total Fixed Costs] / [Price of 1 Unit - Variable Costs of 1 Unit]
= FC / [P - VC]

total fixed costs

all the expenses that remain the same no matter how many products are made or sold; i.e. amount paid to own or rent a factory or warehouse and the amount paid for business insurance

variable costs

costs that change according to the level of production; expenses for the materials used in making products and the direct costs of labor used in making those goods

skimming price strategy

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

penetration strategy

strategy in which a product is priced low to attract many customers and discourage competition

everyday low pricing (EDLP)

setting prices lower than competitors and then not having any special sales

high-low pricing strategy

setting prices that are higher than EDLP stores, but having many special sales where the prices are lower than competitors'; problem is that it encourages customers to wait for sales, thus cutting into profits

psychological pricing

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

demand-oriented pricing

price on the basis of consumer demand rather than cost or some other calculation

nonprice competition

marketers tend to stress product images and consumer benefits such as comfort, style, convenience, and durability since prices differences are small among different products (i.e. candy bars)

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