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CHAPTER 16: DEVELOPING AND PROMOTING GOODS AND SERVICES WHAT IS A PRODUCT?

Product Features and Benefits: Features: qualities tangible and intangible that a company builds to its products In buying product, consumers are also buying an image and a reputation (i.e. brand names) To attract buyers, product features must also provide benefits (lawn mower = attractive lawn) Value Package: product marketed as a bundle of value-adding attributes, including reasonable cost I.e. personal computer value package = choice of colour, attractive software packages, etc Classifying Goods and Services: Buyers fall into two basic groups, consumer and industrial Marketing products and services to consumers is vastly different from marketing them to companies 1. Classifying Consumer Products Consumer products are commonly divided into three categories that reflect buyers behaviour: convenience, shopping, and specialty products Convenience goods (milk and newspapers) and convenience services (fast-food restaurants) are consumed rapidly and regularly and relatively inexpensive Shopping goods (stereos and tires) and shopping services (insurance) are more expensive and purchased less frequently than convenience goods and services Specialty goods (wedding gowns) and specialty services (catering for wedding) are extremely important and expensive purchases

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Classifying Industrial Products Industrial products are usually divided into two categories, based on how much they cost and how they will be used Expensive items are materials and services that are consumed within a year by firms producing other goods or services (bulk loads of tea processed into tea bags) Capital items are permanent, expensive and long-lasting goods and services that have expected lives of more than a year (buildings, offices, factories, etc) Capital services are those for which long-term commitments are made (legal services) The Product Mix: Is the group of consumer or industrial products a company has available for sale 1. Product Lines Is a group of products that are closely related because they function in a similar manner or are sold to the same customer group, who will use them in similar ways To meet market demand, companies introduce similar products designed to reach more customers Companies may also introduce multiple product lines that go well beyond their existing product line DEVELOPING NEW PRODUCTS All products and services eventually fall out of favour with consumers Firms must therefore develop and introduce new products The Time Frame of New Product Development: Companies often face multi-year time horizons, high risks, and lots of uncertainty when developing new products 1. Product Mortality Rates It takes about 50 new product ideas to generate one product that finally reaches the market and then only 10 percent of these products become successful Success of new products has become increasingly difficult because the number of new products hitting the market each year has increased dramatically

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Speed to Market More rapidly a product moves from the laboratory to the marketplace, more likely it is to survive By introducing new products ahead of competitors, companies establish market leadership and become entrenched in the market before being challenged by newer competitors Speed to Market: strategy of introducing new products to respond quickly to customer and/or market changes The Seven-Step Development Process:

To increase their chances of developing successful new products or services, many firms use a basic seven-step process Steps 2, 3, 4, 6, and 7 are the same for both products and services, but there are some differences in steps 1 and 5 1. Product ideas product development begins with search for new products. Product ideas can come from consumers, the sale force, research and development, or engineering. Service package involves identification of the tangible and intangible features that define the service 2. Screening this stage is an attempt to eliminate all product ideas that do not mesh the firms abilities, expertise, or objectives 3. Concept testing once ideas have been culled, companies use market research to solicit consumers input. Firms can identify benefits and appropriate price levels for the product this way 4. Business analysis involves developing a comparison of costs and benefits for proposed product 5. Prototype development is using input from the concept-testing phase, engineering and/or research and development produce a preliminary version of the product. Service process design involves selecting the process, identifying worker requirements, and determining facilities requirements 6. Product testing and test marketing the company begins limited production of the item. If the product meets performance requirements, it is made available for sale in limited areas (test markets) which tells how consumers will respond to the product under real market conditions 7. Commercialization if test-marketing results are positive, company will begin full-scale production and marketing of the product THE PRODUCT LIFE CYCLE Product Life Cycle (PLC): the concept that the profit-producing life of any product goes through a cycle of introduction, growth, maturity (levelling off), and decline Life may be a matter of months, years, or decades, depending on the ability of product to attract customers over time Stages in the Product Life Cycle (PLC): Four phases of PLC are applied to several products with which you are familiar 1. Introduction begins when the product reaches the marketplace, profits are non-existent 2. Growth if new product attracts and satisfies enough consumers, sales begin to climb rapidly, product begins to show a profit, other firms move to introduce their own versions 3. Maturity sales growth begins to slow, the product earns its highest profit level early in this stage, but increased competition eventually leads to price cutting and lower profits, sales start to fall 4. Decline sales and profits continue to fall, new products in the introduction stage take away sales Although early stages of PLC often show negative cash flows, successful products usually recover those losses and continue to generate profits until the decline stage For most products, profitable life spans are short 1. Extending Product Life: An Alternative to New Products Companies try to keep products in the maturity stage as long as they can Companies can extend product life through a number of creative means a. In product extension, an existing product is marketed globally instead of just domestically b. With product adaptation, the product is modified for greater appeal in different countries c. Reintroduction means reviving, for new markets, products that are becoming obsolete in older ones IDENTIFYING PRODUCTS Developing a products features is only part of a marketers job They must also identify products so that consumers recognize them Three important tools for this task are branding, packaging, and labelling Branding Products: Branding: the use of symbols to communicate the qualities of a particular product made by a particular producer (i.e. Gucci, Toyota, PC, Apple, etc) 1. Adding Value Through Brand Equity Many companies that once measured assets in terms of cash, building, equipments, and inventories now realize that a strong brand is an equally important asset Widely known and admired brands are valuable because of their power to attract customers Those with high brand equity degree of consumers loyalty to and awareness of a brand and its resultant market share have larger market shares than competing brands Ebusiness and International Branding Firms that sell products internationally must consider how product names will translate in various languages

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Types of Brand Names Virtually every product has a brand name of some form Different brand names tell consumers something about the products origin National Brands Are products distributed by and carrying a name associated with the manufacturer Are widely recognized by consumers because of large national advertising costs (high costs) Licensed Brands Are products for which the right to use a brand name, a celebritys name, or some other well-known identification mark was sold to another company to use on a product Private Brands Are products promoted by and carrying a name associated with the retailer or wholesaler, not the manufacturer Brand Loyalty Is customers recognition of, preference for, and insistence on buying a product with a certain brand name Brand loyalty exists at three levels: brand awareness (customers recognize the brand name), brand preference (customers have a fortunate attitude toward the product), and brand insistence (consumers demand the product and are willing to go out of their way to get it) Brand insistence implies a lot of trust in a brand

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Trademarks, Patents, and Copyrights Trademark: the exclusive legal right to use a brand name Apply to the Canadian government to get it and lasts for 15 years and may be renewed for another 15 years but only if the company continues to protect its brand name Exactly what can be trademarked is not always clear If company allows the name to lapse into common usage, courts may take away protection Common usage occurs when company fails to use the symbol for its brand Also occurs if the company fails to correct those who do not acknowledge the brand as a trademark Patent: exclusive legal right to use and license a manufactured item or substance, manufacturing process, or object design Protects an invention or an idea for a period of 20 years Cost is $1000 $1500, takes 9 months to 3 years to secure a patent from the Canadian Patent Office Copyrights: exclusive ownership rights belonging to the creators of books, articles, designs, illustrations, photos, films, and music Computer programs and even semiconductor chips are also protected In Canada, use symbol with the date for copyright process Copyrights extend to creators for their entire lives and to their estates for 50 years after in Canada Copyrights apply to the tangible expression of an idea, not to the idea itself Packaging Products: Almost all products need some form of packaging (except for fresh fruits and vegetables) so they can be transported to the market Packing also serves several other function: is an in-store advertisement that makes the product attractive, clearly displays the brand, identifies product features and benefits, and reduces the risk of damage, breakage, or spoilage Labelling Products: Label: the part of a products packaging that identifies the products name and contents and sometimes its benefits Every product has a label on its package Federal government regulates the information on package labels Consumer Packaging and Labelling Act: a federal law that provides comprehensive rules for packaging and labelling of consumer products Many companies use different labels for their products in Quebec than they do for products sold elsewhere in Canada PROMOTING PRODUCTS AND SERVICES Promotion: any technique designed to sell a product Is part of the communication mix: the total message a company sends to consumers about its products Promotional techniques, especially advertising, must communicate the uses, features, and benefits of products Sales promotions also include various programs that add value beyond the benefits inherent in the product (i.e. rebate, bonus pack, 20% more free, etc)

Information and Exchange Values: In a free market system, businesses use promotional methods to accomplish four objectives with potential customers: Make them aware of products Make them knowledgeable about products Persuade them to like products Persuade them to purchase products Successful promotion provide communication about the product and create exchanges that satisfy the objectives of customers (get a desired product) and sellers (get sales and profits) Promotional Objectives: Ultimate objective of any promotion is to increase sales Marketers also use promotion to communicate information, position products, add value, and control sales volume 1. 2. 3. Communicating Information Information can advise customers about the availability of a product, educate them on the latest technological advances, or announce the candidacy of someone running for government office Information may be communicated in writing, verbally, or visually Positioning Products Establishes an easily identifiable image of a product in the minds of consumers With product positioning, the company is trying to appeal to a specific segment of the market rather than to the market as a whole

Adding Value Customers gain benefits when the promotional mix is shifted so that it communicates value-added benefits in its products (i.e. lowering prices) 4. Controlling Sales Volume Many companies experience seasonal sales patterns By increasing promotional activities in slow periods, firms can achieve more stable sales volume throughout the year Promotional Strategies: Once firms promotional objectives are clear, it must develop a promotional strategy to achieve these objectives A company using a push strategy will aggressively push its products through wholesalers and retailers, who in turn persuade customers to buy the product A company using a pull strategy appeals directly to the customers, who them demand the product from retailers, who in turn demand the product from wholesalers Makers of industrial products use a push strategy and makers of consumer products use a pull strategy, but many large companies use a combination of the two The Promotional Mix: There are four types of promotional tools: advertising, personal selling, sales promotions, and publicity/public relations The best combination of these tools the promotional mix depends on many factors, with the most important being the target audience In establishing a promotional mix, marketers match promotional tools with the five stages in the buyer decision process 1. Buyers recognize the need to make a purchase marketers must make sure that buyers are aware of their products; i.e. advertising and publicity 2. Buyers seek information about available products advertising and personal selling are important because both can be used to educate customers 3. Buyers compare competing products Sales representative can demonstrate product quality and performance in comparison with competitors products 4. Buyers purchase products sales promotion is effective because it can give consumers an incentive to buy 5. Buyers evaluate products after purchase advertising or personal selling is sometimes used to remind consumers that they made wise purchases ADVERTISING PROMOTIONS Advertising: a promotional tool consisting of paid, non-personal communication used by an identified sponsor to inform an audience about a product Advertising Strategies: Depend on which stage of the product life cycle the product is in Informative Advertising: an advertising strategy, appropriate to the introduction stage of the product life cycle, in which the goal is to make potential customers aware that a product exists

Persuasive Advertising: appropriate in the growth stage of the product life cycle, in which the goal is to influence the customer to buy the firms product rather than the similar competitors product Comparative Advertising: appropriate to the maturity stage, in which the goal is to influence the customer to switch from competitors product to firms similar product by directly comparing them Reminder Advertising: appropriate to latter part of maturity stage, in which the goal is to keep the products name in the minds of customers Advertising Media: Is the specific communication devices television, radio, newspapers, direct mail, magazines, billboards, the internet used to carry a firms advertising message to potential customers Media Mix: the combination of media through which a company chooses to advertise its products Different companies use different mixes, but most depend on multiple media to advertise their products and services An advertiser selects media with a number of factors in mind which medium will reach the people I want to reach? (i.e. bridal dresses for magazines for brides) 1. 2. 3. 4. 5. 6. Newspapers Television Direct Mail Involves flyers or other types of printed advertisements that are mailed directly to consumers homes or places of business Radio Magazines Outdoor Advertising Billboards, signs, and advertisements on buses, taxis and subways is relatively inexpensive, faces little competition for customer attention and is subject to high repeat exposure 7. Word-of-Mouth Advertising Occurs when consumers talk to each other about products theyre using There are several varieties of word-of-mouth advertising These include buzz marketing (using high-profile news to get consumers talking about a product), viral marketing (consumers passing product information around on the internet), product seeding (providing free product samples to influential consumers), and cause marketing (involving consumers who feel strongly about a cause such as reducing poverty) 8. The Internet Ecommerce: buying and selling processes that make use of electronic technology Internet Marketing: the promotional efforts of companies to sell their products and services to consumers over the internet Advertising advantages for buyers convenience, privacy, selection, useful information and control Advantages for sellers reach, direct distribution, reduced expenses, relationship building, flexibility, and feedback Disadvantages unprofitable, high failure rate, information overload, and limited markets 9. Virtual Advertising Uses digital implants of brands or products onto live or taped programming, giving the illusion that the product is part of the show 10. Other Advertising Media Includes catalogues, sidewalk handouts, Yellow Pages, skywriting, telephone calls, special events, and door-to-door communications Types of Advertising: Brand Advertising: advertising that promotes a specific brand-name product Product Advertising: a variation of brand advertising that promotes a general type of product or service Advocacy Advertising: advertising that promotes a particular viewpoint or candidacy Institutional Advertising: advertising that promotes a firms long-term image, not a specific product Retail Advertising: advertising by retailers designed to reach end-users of a consumer product Co-Operative Advertising: advertising in which a manufacturer together with a retailer or a wholesaler advertise to reach customers Trade Advertising: advertising by manufacturers designed to reach potential wholesalers and retailers Industrial Advertising: advertising by manufacturers designed to reach other manufacturers professional purchasing agents and managers of firms buying raw materials or components Preparing an Advertising Campaign: Advertising Campaign: the arrangement of ads in selected media to reach target audiences Includes several activities, that taken together, constitute a program for meeting a marketing objective A campaign typically includes six steps: 1. Identifying the target audience 2. Defining the objectives of the advertising messages

3. Establishing the advertising budget 4. Creating the advertising messages 5. Selecting the appropriate media 6. Evaluating advertising effectiveness Advertising Agencies: firms that specialize in creating and placing advertisements in the media for clients Agency works together with the client company to determine the campaigns central message, create detailed message content, identify advertising media, and negotiate media purchases Advantage expertise in developing advertising themes, message content, and artwork, as well as in coordinating advertising production and advising on relevant legal matters PERSONAL SELLING Is a promotional tool in which a salesperson communicates one-on-one with potential customers Adds to firms credibility because it provides buyers with someone to interact with Is the most expensive form of promotion per contact since presentations are made to one or two people at a time Expenses include salespeoples compensation and their overhead, usually travel, food, and lodging Sales Force Management: Means setting goals at top levels of the organization, setting specific objectives for individual salespeople, organizing the sales force to meet those objectives, and implementing and evaluating the success of the overall sales plan 1. 2. Personal Selling Situations Retail Selling: selling a consumer a product for the buyers personal household use Industrial Selling: selling products to other businesses, either for manufacturing products or resale In retail selling, buyer usually comes to the seller, but in industrial selling, the salesperson comes to the buyer Personal Selling Tasks Improving sales efficiency requires marketers to consider salespeoples tasks Three basic tasks are generally associated with selling: order processing, creative selling, and missionary selling Sales jobs usually require salespeople to perform all three tasks to some degree, depending on the product and the company Order Processing: in personal sales, it is the receiving and follow-through on handling and delivery of an order by a salesperson Creative Selling: in personal sales, the use of techniques designed to persuade a customer buy a product when the benefits of the product are not readily apparent or the item is very expensive Missionary Selling: in personal sales, the indirect promotion of a product by offering technical assistance and/or promoting the companys image (long-term > quick sale) The Personal Selling Process Creative selling is the most complicated of the three sales tasks The creative salesperson is responsible for most of the steps in the personal selling process: Prospecting and Qualifying Prospecting: in personal sales, the process of identifying potential customers Qualifying: determining whether prospects have the authority to buy and the ability to pay Approaching Refers to the first few minutes that a salesperson has contact with a qualified prospect Presenting and Demonstrating Presenting involves a full explanation of the product, its features, and its uses It links the products benefits to the prospects needs A presentation may or may not include a demonstration of the product, but better to do one Handling Objections Objections show the salesperson that the buyer is interested in the presentation and which parts of the presentation the buyer is unsure of and has a problem with Closing Is the most critical part of the selling process

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Is the process of asking the customer to buy the product

f) Following Up Sales process doesnt end with the close of the sale Sales follow-up activities include fast processing of the customers order and on-time delivery SALES PROMOTIONS Are short-term promotional activities designed to stimulate consumer buying or co-operation from distributors, sales agents, or other members of the trade (i.e. buy 3 and get 1 free) Are important because they enhance product recognition and increase the likelihood that buyers will try products To be successful, sales promotion must be convenient and accessible Types of Sales Promotions: Best known sales promotions are coupons, point-of-purchase displays, purchasing incentives (such as free samples, trading stamps, and premiums), trade shows, and contests and sweepstakes Coupon: a certificate that entitles the bearer to stated savings off a products regular price Point-of-Purchase (POP) Displays: a product display is so located in a retail store as to encourage customers to buy the product Premiums: some item is offered free or at a bargain price to customers in return for buying a specified product Trade Shows: members of a particular industry gather for displays and product demonstrations designed to sell products to customers PUBLICITY AND PUBLIC RELATIONS Publicity: information about a company that is made available to consumers by the news media; not controlled by the company but it doesnt cost the company any money Public Relations: a company-influenced activity that attempts to establish a sense of goodwill between the company and its customers through public-service announcements that enhance the companys image INTERNATIONAL PROMOTION AND STRATEGIES Emergence of the Global Perspective: Every company that markets products in several countries faces a basic choice use a decentralized approach (maintaining separate marketing for each country) or adopt a global perspective (directing a coordinated marketing program at one worldwide audience) Global Perspective: a companys approach to directing its marketing toward worldwide rather than local or regional markets The Movement Toward Global Advertising: A truly global perspective means designing products for multinational appeal Four factors make global advertising a challenging proposition: Product variations even if a product has universal appeal, some variations are usually preferred in different cultures Language differences exact translations of English words differ in other languages Cultural receptiveness there are differences across nations regarding the mass advertising of sensitive products (birth control, tampons, alcohol, cigarettes, nudity, etc) Image differences any companys image can vary from nation to nation

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