Copyright © 2006 Pearson Education Canada Inc. 13-1 Chapter 13 Developing and Promoting Goods and Services

13-1

Copyright © 2006 Pearson Education Canada Inc.

Chapter 13

Developing and PromotingGoods and Services

13-2Copyright © 2006 Pearson Education Canada Inc.

Learning ObjectivesIdentify a product, distinguish between consumer and industrial products, and explain the product mixDescribe the new product development process and trace the stages of the product life cycleDiscuss the importance of branding, packaging and labelling


Learning ObjectivesIdentify the important objectives of promotion and discuss the considerations involved in selecting a promotional mixDescribe the key advertising mediaOutline the tasks involved in personal selling and list the steps in the personal selling processDescribe the various types of sales promotions and distinguish between publicity and public relations


The Product

Consumers purchase a product for its function and benefit to them … for what it does as much as what it is Product features must provide desired

benefits Features include intangibles like

image and reputation


Consumer Goods Classification

Convenience Bought quickly & with little thought (milk)

Shopping Purchased infrequently; Typically of moderate

cost Consumers shop around for price, value and

brand(home furnishings)

Specialty Purchased rarely; Typically expensive Consumers take time to carefully plan their

purchase (wedding gowns, automobiles)


Industrial Goods Classification

Expense items Relatively inexpensive industrial goods

that are consumed rapidly and regularly Support materials, supplies

Capital items Expensive, long-lasting industrial goods

that are used in producing other goods or services and have a long life

Offices, factories, equipment, computers


Product StrategyProduct mix the group of products a company has

available for sale Procter & Gamble sells household cleansers,

disposable diapers etc

Product line a group of similar products intended

for a similar group of buyers who will use them in a similar fashion Procter and Gamble sells more than one brand of

laundry detergent


R & DActivities required to provide new products, services, and processes Usually requires a large investment in

laboratories, equipment, and scientific talent

Businesses must embrace technology so that their products will not become obsolete


The Product Development Process (1 of 4)

Step #1: product ideas Seek out ideas for new products Sources: employees, consumers, sales

people, engineers

Step #2: screening Elimination of product ideas that do

not fit with the firm’s resources Includes staff from marketing,

engineering, and production



Step #3: Concept Testing Market research to obtain customer feedback Results in a clearer understanding of product

benefits as well as a pricing strategy

Step #4: Business Analysis Comparison of costs and benefits of each new

product Preliminary sales projections and cost projections Comparison of profit potential with the firm’s

goals



Step #5: Prototype Development input from concept-testing, engineering

and/or R & D result in a preliminary version of the product

identifies potential problems with the product and its production; costly

Step #6: Product and Market Testing limited production of the product for sale in a

test market area with complete promotion and distribution

provides feedback on potential performance: costly



Step #7: Commercialization Full-scale production of the product

for sale in the target market The product may be rolled out to the

larger market area on a gradual basis to alleviate strain on the company both in production and finances


The Product Life Cycle Concept

Basic philosophy that each product/service goes through a profit-producing lifecycleConsists of four stages Introduction, growth, maturity, and

decline

Represents the life of a product/service offering (industry), not the activities of an individual firm in the industry


The Product Life Cycle$

Sales

Dollars

Profits

0Introduction Growth Maturity Decline

Time


IntroductionCompetition is limited to the firm that has introduced the application

Costs are high due to R & D and promotion

Profits are non-existent due to expensive costs

Prices are high to offset costs of market entry

Promotion focuses on informing consumers

And generating initial product demand


Growth

Sales grow rapidlyNew competition begins to enter the market to seek the growth opportunityFunds diverted to aggressive promotionPrices are lowered to meet the competitionProfits peak and level offPromotion emphasizes brand preference


MaturityIndustry sales level off

Market becomes more aggressive due to increased competition in the face of slow/no sales growth

Profits decline Costs increase due to the need to promote

aggressively while prices are simultaneously declining

In late maturity, some firms will leave the market


Decline

Sales and profits declineProduct is becoming obsolete Competition leaves marketSales drop: the industry has run its coursePromotion is limited and tied to brand loyaltyFirms with larger market shares may let product linger until industry ceases to exist


Brand NamesSpecific names associated with a manufacturer, wholesaler, and/or retailer Designed to distinguish products from those

of competitors and establish “brand loyalty”

Brand categories National brands Licensed brands Private brands Generic brands

NIKENIKESheratonSheraton

HeinzHeinz


Types of Brands

National Distributed by, and

carrying the name of, the manufacturer (Kellogg’s)

Licensed Selling the right to

use the firm’s name on another company’s product (Mickey mouse)

Private Brands carrying the

name of the retailer or wholesaler (president’s choice)

Generic Products carrying

no brand name, which are usually priced lower


Trademarks, Patents, andCopyrightsTrademark The exclusive legal right to use a brand name

Patent Protects an invention or idea for a period of

20 years

Copyright Exclusive ownership rights to creators of

books, articles, designs, illustrations, photos, films, and music


Packaging and Labelling

The physical container in which the product is soldLabel, which identifies the product’s name, contents, and possibly benefitsMay enhance product features (Aseptic packaging, bottles with spouts)

Must conform to the consumer packaging and labelling act (federal legislation)


Promotion

Key objectives Increase product awareness Increase knowledge of products and

their added-values Increase product preference Increase product purchase


Promotion PlanObjectivesObjectives

StrategiesStrategiesPromotional Promotional

MixMixInformationPositioningAdded valueSales volume

Push Push

vs.vs.

PullPull

AdvertisingPersonal sellingSales promotionPublicity


Promotional Strategies

Push strategy Firm promotes aggressively to intermediaries Commonly used by industrial product

manufacturers

Pull strategy Firm promotes directly to final consumers, who

demand the product from intermediaries Commonly used for consumer product

producers

Many firms use a combination of both strategies


Promotional Mix

Choosing the best combination of promotional methods Methods used depends on: The nature of the product The nature of the audience Promotional budget The cost of different promotional

methods


Advertising Media

NewspapersTelevisionDirect mailRadioMagazinesOutdoorWord-of-mouthInternet


Newspaper

Most widely used mediumExcellent market coverageFlexible with short lead times

Do not usually print in colour May be too widely spread, resulting in wastePoor reproduction of images


Television

Total sensory experience (Sight, sound & motion)

Can target specific marketsBroad market coverage

ExpensivePeople are beginning to ignore adsToo many ads are confusingShort ad time Hard to use as an

informative tool


Direct Mail

Printed ads (flyers or mail-outs, faxes) directed to final consumers’ homes or businessesHighly selective and personalized“Junk mail” imageExpensive but cost-effective


Radio

Large audienceInexpensiveAds are quick, impacting on the listener’s ability to comprehend the messageMay be used as background music with little actual attention going to the medium


MagazinesAdvantages High degree of consumer selectivity (less waste) Excellent reproduction of images (full-colour

possible) Magazines have a long life Space is available for detailed product

information

Disadvantages Long lead times Expensive fees for special positioning in the

issue Relatively expensive


Outdoor Advertising

Billboards, signs, bus, taxi, and bus stop ads Inexpensive, with little distraction for

readers Reaches broad audience, but is not

selective

Some areas ban roadside billboards


Word-of-Mouth and the Internet

Word of Mouth Opinions about products passed from

consumer to consumer through informal conversation

Very powerful promotional tool

Internet The newest advertising medium Internet advertisers obtain counts of Web page

visitors Requires considerable Web-surfing to find

information online Spyware: monitors the websites a person visits

and the generates pop-up advertisements


Other Advertising Channels

Yellow Pages

Catalogues

Sidewalk flyers

Door-to-door advertising

Special Events


Personal Selling Promotions

Personal selling Salesperson communicates one-on-

one with potential customers Requires a level of trust between the

buyer and the seller Most expensive form of promotion


Sales Promotions

CouponsPoint-of-purchase (POP) displaysPurchase incentives/premiums (free item or bargain price)

Trade showsContests and sweepstakes


Publicity and Public Relations

Publicity Information made available to

consumers via the news media Company has no control over it Free to the company

Public relations Public service announcements initiated

by the firm Designed to enhance the firm’s image


International PromotionCompanies involved in exporting are adopting a worldwide advertising strategyDecentralized approach Separate marketing management for each

company

Global perspective A coordinated marketing focus on a global scale

Issues impacting on international promotion Language differences, product variations,

cultural receptivity, image differences

Documents

Copyright © 2006 Pearson Education Canada Inc. 13-1 Chapter 13 Developing and Promoting Goods and Services