Understanding business 11th by mchugh nickels chap014

CHAPTER 14

Developing
and Pricing
Goods and
Services

McGraw-Hill/Irwin

Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.


LEARNING OBJECTIVES

1. Describe a total product offer.
2. Identify the various kinds of consumer and industrial
goods.
3. Summarize the functions of packaging.
4. Contrast brand, brand name, and trademark, and
show the value of brand equity.
14-2


LEARNING OBJECTIVES

5. Explain the steps in the new-product development
process.
6. Describe the product life cycle.
7. Identify various pricing objectives and strategies.

14-3

KATHY IRELAND
Kathy Ireland Worldwide

• Began selling crafts door-todoor as a small child.
• Toward the end of her modeling
career, she started licensing her
name to apparel products.
• Now she is in the house wares
business and bringing in more
money than Martha Stewart!
14-4


NAME that COMPANY

You’ve been using my product for years, yet it took
over 15 years for it to be accepted in the market.
It finally became popular during World War I, and
today you’ll find it on your pants, your travel
bags, and your hoodie.
Who am I and what do I make?

14-5


DEVELOPING VALUE

LO 14-1

• According to the American Marketing Association,
value is a foundation of marketing.
• Value -- Good quality at a fair price.
• Adapting products to new markets is an ongoing
challenge.
• Product development is a key activity in any
modern business.
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PRODUCTS CONSUMERS
WON’T GIVE UP

LO 14-1

• Internet service
• Cell phone service
• Cable television
• Discount apparel
• Haircuts and coloring
• Fast-food

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PRODUCTS “EXPENDABLE”
by SPENDING CUTS

LO 14-1

• Luxury handbags
• Satellite radio
• Specialty apparel
• High-end cosmetics
• Facials

14-8


BELLYING UP
to SOCIAL MEDIA
• Bocktown Beer and Grill is at the
front of mobile media marketing.
• It holds polls on Facebook and
Twitter that let customers pick the
beers on tap.
• It also uses Tabbedout, a mobile
app that allows customers to pay
their bill without returning to the bar
or giving their card to a server.
14-9


DISTRIBUTED PRODUCT
DEVELOPMENT

LO 14-1

• Distributed Product Development -- The

handing off of various parts of your innovation
process - often overseas.

• The increase in outsourcing has
resulted in using multiple
organizations separated by
cultural, geographic and legal
boundaries.

14-10


DEVELOPING a
TOTAL PRODUCT

LO 14-1

• Total Product Offer -- Everything consumers
evaluate when deciding whether to buy something.

• Products are evaluated on
many different dimensions,
both tangible and intangible.
• Marketers must think like and
talk to consumers to find out
what’s important.
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PRODUCT INNOVATION DURING

the GREAT DEPRESSION

Source: BusinessWeek Small Biz.

LO 14-1

14-12


ANYTHING YOU CAN DO…

LO 14-1

Products Replacing Products

14-13


POTENTIAL COMPONENTS
of a TOTAL PRODUCT OFFER

LO 14-1

14-14


UNDERSTANDING
PRODUCT LINES

LO 14-1

• Product Line -- A group of products that are
physically similar or intended for a similar market.

• Product lines often include
competing brands like:
- Coca-Cola
- Diet Coke
- Coke Zero
- Cherry Coke
Photo Courtesy of: Coca-Cola Art Gallery

14-15


The PRODUCT MIX

LO 14-1

• Product Mix -- The combination of all product lines
offered by a manufacturer or service provider.

• Product mixes like Procter & Gamble’s can be
extensive:
- Toothpaste
- Cosmetics
- Diapers
- Batteries
- Bar soap

14-16


SEALING the DEAL
• As a Navy Seal, Randy
Hetrick found keeping
his fitness levels up
while in the field was
difficult.
• He created the TRX
out of parachute
harnesses.
• While earning his MBA, he raised capital to
launch Fitness Anywhere. Now, a $50 million
company!

14-17


DIFFERENTIATING PRODUCTS

LO 14-2

• Product Differentiation -- The creation of real or
perceived product differences.

• Marketers use a mix of pricing, advertising and
packaging to create different images. Examples
include:
- Bottled water

- Aspirin
- Fast-food
- Laundry detergent
- Shampoo

14-18


CLASSIFYING CONSUMER
GOODS and SERVICES

LO 14-2

• Convenience Goods and
Services -- Products
consumers purchase frequently
with minimal effort. These
include:
- Candy and snacks
- Gas
- Milk and eggs

14-19


CLASSIFYING SHOPPING
GOODS and SERVICES

LO 14-2

• Shopping Goods and Services -- Products
consumers buy only after comparing value, quality,
price, and styles. These include:
- Clothes and shoes
- Appliances and furniture
- Childcare
- Home remodeling

14-20


CLASSIFYING SPECIALTY
GOODS and SERVICES

LO 14-2

• Specialty Goods and Services -- Products with
unique characteristics and brand identity. These
include:
- Tiffany jewelry
- Rolex watches
- Lamborghini automobiles
- Ritz Carlton Hotels

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SPECIALTY GOODS AREN’T
JUST for HUMANS

LO 14-2

• Would you buy these for your dog?
- Wine with custom labels featuring Fido
- Doggy day camp and in-home pet care
- A bound journal of your pets exploits
- Luxury shampoos and hair-care products
- A sound system to eliminate pet-unfriendly frequencies
- A “dog beer” at the Pawbar
- Monthly gifts from BarkBox
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.

14-22


CLASSIFYING UNSOUGHT
GOODS and SERVICES

LO 14-2

• Unsought Goods and Services -- Products
consumers aren’t aware of or haven’t thought of
buying until they need them. These include:
- Car-towing services
- Funeral services
- Renter’s insurance
Photo Credit: Paul Chenoweth

14-23

IDENTIFYING CONSUMER
GOODS CLASSIFICATIONS

LO 14-2

• How would you classify these consumer
products?
- Beautyrest mattress
- Honda Accord
- McDonald’s Big Mac
- Rolls Royce automobiles
- Oreo Cookies
- Harvard University degree
14-24


ODD PRODUCT IDEAS
that WERE SUCCESSFUL

LO 14-2

• Pet Rock - For $3.95 you could buy a gift-wrapped
rock with eyes and a training manual.

• Garbage Pail Kids - Perhaps the grossest trading
cards ever produced.

• Mood Rings - Wildly popular as the changing colors
of the ring supposedly measured your mood.

• Chia Pets - Animal shaped (even President shaped)
clay figures that grew sprouts.
14-25