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69 terms

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

STUDY
PLAY
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)