CHAPTER 14 – DEVELOPING AND PRICING GOODS AND SERVICES
LEARNING GOALS
After you have read and studied this chapter, you should be able to:
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 the value of brand equity.
5. Explain the steps in the new-product development process.
6. Describe the product life cycle.
7. Explain various pricing objectives and strategies.
LEARNING THE LANGUAGE
Listed below are important terms found in the chapter. Choose the correct term for the definition and write it in the space provided.
Brand / Everyday low pricing (EDLP) / Product screeningBrand association / Generic goods / Psychological pricing
Brand awareness / High-low pricing strategy / Shopping goods and services
Brand equity / Industrial goods / Skimming price strategy
Brand loyalty / Knockoff brands / Specialty goods and services
Brand manager / Manufacturers’ brand names / Target costing
Break-even analysis / Penetration strategy / Total fixed costs
Bundling / Price leadership / Total product offer
Commercialization / Product analysis / Trademark
Competition-based pricing / Product differentiation / Unsought goods and services
Concept testing / Product life cycle / Value
Convenience goods and services / Product line / Variable costs
Dealer (private) brands / Product mix
1. The process used to determine profitability at various levels of sales is called ______.
2. The method of pricing known as a ______is when a product is priced low to attract many customers and discourage competitors.
3. The strategy of ______involves setting prices that are higher than EDLP stores, but having many special sales where the prices are lower than competitors.
4. A ______consists of everything that consumers evaluate when deciding whether to buy something; also called a value package.
5. The degree to which customers are satisfied, like the brand, and are committed to further purchases is called ______.
6. A theoretical model called the ______shows what happens to sales and profits for a product class over time; stages are introduction, growth, maturity and decline.
7. A strategy known as ______is one in which a new product is priced high to make optimum profit while there is little competition.
8. A brand that has been given exclusive legal protection for both the brand name and the pictorial design is called a ______.
9. The linking of a brand to other favorable images is called ______.
10. Products identified as ______are used in the production of other products and are sometimes called business goods or B2B goods.
11. Conducting a ______involves making cost estimates and sales forecasts to get a feeling for the profitability of new product ideas.
12. A ______is a name, symbol, or design (or combination thereof) that identifies the goods or services of one seller or group of sellers and distinguishes them from those of competitors.
13. The process of ______calls for taking a product idea to consumers to test their reactions.
14. Products called ______are products that the consumer wants to purchase frequently with a minimum of effort.
15. Grouping two or more products together and pricing them as a unit is known as ______.
16. Products called ______don’t carry the manufacturer's name, but carry a distributor or retailer’s name instead.
17. Products with unique characteristics and brand equity are perceived as having no reasonable substitute. The consumer puts forth a special effort to purchase these products, called ______.
18. How quickly or easily a given brand name comes to mind when a product category is mentioned is ______.
19. A group of products known as the ______are physically similar or are intended for a similar market.
20. Nonbranded products called ______usually sell at a sizable discount compared to national or private-label brands.
21. Designing a product so that it satisfies customers and meets the profit margins desired by the firm is called ______.
22. Products known as ______are products that consumers are unaware of, haven’t necessarily thought of buying, or find that they need to solve an unexpected problem.
23. Consumers buy ______only after comparing value, quality, price, and style and from a variety of sellers.
24. A combination of factors called ______includes awareness, loyalty, perceived quality, images and emotions people associate with a brand name.
25. The brand names of manufacturers that distribute a product nationally are called ______.
26. Costs known as ______change according to the level of production.
27. Consumers want a good quality product at a fair price, so they calculate the ______of a product by looking at the benefits, and subtracting the costs to see if benefits exceed the costs.
28. Illegal copies of national brand-names goods are known as ______.
29. A ______has direct responsibility for one brand or one product line; called a product manager in some firms.
30. The process of ______is designed to reduce the number of new-product ideas being worked on at any one time.
31. Known as ______these are all the expenses that remain the same no matter how many products are sold.
32. 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 is called ______.
33. The creation of real or perceived product differences is called ______.
34. The practice of ______is setting prices lower than competitors and then not having any special sales.
35. The term ______is used to describe the combination of product lines offered by a manufacturer.
36. The procedure of ______is one by which one or more dominant firms set the pricing practices that all competitors in an industry follow.
37. A pricing strategy called ______is based on what all the other competitors are doing. Price can be set at, above, or below competitor’s prices.
38. Pricing goods and services at price points that make the product appear less expensive is known as ______.
ASSESSMENT CHECK
Learning Goal 1
Product Development and the Total Product Offer
1. To satisfy consumers today marketers and managers must ______
______.
Organizations must constantly monitor ______
______.
2. What are the factors that make up the total product offer?
a. ______g.______
b. ______h.______
c. ______i.______
d. ______j.______
e. ______k. ______
f. ______l. ______
3. Why does a company develop a variety of total product offers?
4. What is the difference between a product line and a product mix?
Learning Goal 2
Product Differentiation
5. How does a marketer create a perception of product differentiation?
6. List the four different classes of consumer goods and services. Give an example of each kind.
a. ______
b. ______
c. ______
d. ______
7. What are three things important to marketers of convenience goods?
a. ______c. ______
b. ______
8. Describe the characteristics of shopping goods.
9. Why will consumers put forth a special effort to purchase a specific brand name when purchasing specialty products? How are these goods marketed?
10. What are the best ways to promote:
Convenience goods:
Shopping goods:
Specialty goods:
Unsought goods:
11. What determines into which class a product falls? Can one consumer good be classified in several ways?
12. What distinguishes a consumer good from an industrial (or B2B) good?
Can a good be classified as both?
How would the marketing be different?
13. In discussing industrial goods, describe:
Installations: ______
Capital items: ______
Accessory equipment: ______
Learning Goal 3
Packaging Changes the Product
14. Identify the functions of packaging.
a. ______
b. ______
c. ______
d. ______
e. ______
f. ______
g. ______
15. What are three ways in which packaging can change a product?
a. ______
b. ______
c. ______
16. Describe RFID in packaging.
17. Why is packaging carrying more of the promotional burden today than in the past?
18. In bundling, or combining goods and services into one package, what is the consideration marketers must be aware of, with regard to price?
Learning Goal 4
Branding and Brand Equity
19. What is the difference between a brand, brand name and a trademark?
20. How does a brand name benefit buyers and sellers?
For the buyer a brand name:
a. ______
b. ______
c. ______
For the seller brand names:
a. ______
b. ______
c. ______
d. ______
21. How does a manufacturer’s brand name become a generic brand?
22. Describe three important components of brand equity.
a. ______
b. ______
c. ______
23. What is the key to creating perceived quality?
24. What are brand preference and brand insistence?
25. How can a company create brand associations?
26. What are the responsibilities of a brand manager?
Learning Goal 5
The New Product Development Process
27. What are the odds that a product will be successful?
28. What are four reasons for product failure?
a. ______c. ______
b. ______d. ______
29. Identify the steps in the new product development process.
a. ______d. ______
b. ______e. ______
c. ______f. ______
30. What are important sources of new product ideas?
a. ______c. ______
b. ______
31. List the criteria used for product screening.
a. ______
b. ______
c. ______
32. In the product analysis step of the new product development process, what happens to products that don’t meet established criteria?
33. What questions are answered by concept testing?
a. ______
b. ______
c. ______
d. ______
e. ______
34. What are two important elements of the marketing effort during commercialization?
a. ______
b. ______
Learning Goal 6
The Product Life Cycle
35. What are the four stages of the product life cycle?
a. ______c. ______
b. ______d. ______
36. Do all products follow the traditional stages of the product life cycle in the same pattern?
37. Different stages in the product life cycle call for ______
38. Identify the marketing strategies for the Marketing Mix variables in each stage of the Product Life Cycle by completing the following chart:
Product / Price / Place / PromotionIntroduction
Growth
Maturity
Decline
39. What happens to sales, profits, and competitors during each of the stages in the Product Life Cycle?
Sales / Profits / CompetitorsIntroduction
Growth
Maturity
Decline
Learning Goal 7
Competitive Pricing
40. What are five pricing objectives?
a.______d.______
b.______e.______
c.______
41. Describe a “loss leader” in pricing.
42. Pricing objectives should be influenced by:
43. Discuss the important considerations in cost-based pricing.
44. What are the important elements of target costing?
45. What is the major price consideration when evaluating competition based pricing?
46. Define the break-even point. What is the formula for determining a break-even point?
47. What are some of the expenses included in:
fixed costs:
variable costs:
48. What are six pricing strategies other than competition based, cost based, and demand based?
a. ______d.______
b. ______e. ______
c. ______f. ______
49. What pricing strategy is being used when the company:
a. ______Sets prices high to make optimum profit when there is little competition?
b. ______Sets prices higher than those at stores, using EDLP, but has special sales?
c. ______Prices products at points that make them appear less expensive?
d.______Prices products low to attract customers and discourage competition?
e. ______Groups products together and prices them as a unit?
f. ______Sets prices lower than competitors and usually doesn’t have sales.
50. What is the main idea behind EDLP?
51. What is the problem with a high-low pricing strategy?
52. Describe demand oriented pricing.
53. How is the Internet affecting pricing?
54. In using non-price competition, what aspects of their products will firms tend to stress?
CRITICAL THINKING EXERCISES
Learning Goal 1
1. When people buy a product, they evaluate and compare on several dimensions:
For each product below, identify some of the dimensions that may influence the buyer.
a. Bicycle ______
______
b. Toothpaste ______
______
c. A new suit ______
______
Learning Goal 2
2. The two major product classifications are consumer goods and services and industrial goods and services.
a. Classify the following products:
1. Milk ______
2. Steel ______
3. Tickets to the Olympics ______
4. Dry cleaners ______
5. Diesel engines ______
6. Flashlight batteries ______
7. Auto repair ______
8. Heart surgeon ______
9. Management consultant ______
10. Winter coat ______
b. Consumer goods and services are further classified as either: convenience, shopping, specialty or unsought. Indicate the correct class for each of the consumer items you identified above.
1.______5.______
2.______6.______
3.______7.______
4.______
3. Marketing strategies will change depending upon the category of the product. Identify the most appropriate way to market:
a. a new car model -
b. a marketing consulting firm -
c. banking services -
d. a funeral home -
Learning Goal 3
4. Packaging is carrying the promotional burden for products more than ever, and performs a number of functions: attract attention, describe contents, explain benefits, provide information, indicate price, value, and uses, and protect goods. Evaluate the importance of packaging, which function(s) may be the most important and how well the packaging performs those functions for the following:
a. Lunch meat (like bologna) ______
______
b. Children's cereal (like Froot Loops) ______
______
c. Potato chips (like Pringles) ______
______
Learning Goals 1, 2, 3
5. You are in conference with the marketing manager of Sun-2-Shade, and are still in the process of developing a marketing plan. Sun-2-Shade is a company that manufactures automobile windshields that self-darken in the same manner as some eyewear, automatically darkening in the sun, and going back to light in the shade, on a cloudy day or in the evening.
In evaluating the windshield to be produced by Sun-2-Shade, you want to know what features customers might consider when purchasing Sun-2-Shade from an auto parts store or an after-market windshield installation and repair company. Are the same things going to be important if the main customers are the auto manufacturers? What additional or different features might manufacturers consider?
Just before your meeting, you jotted down these questions you feel need to be answered in order to create an effective marketing plan: