Chapter 12 (Produce and price)

Question 1

Classification of products

Answer 1

1. Product
   Everything one receives in an exchange, including all tangible and intangible attributes and expected benefits
   A good, service, or idea
2. Consumer product
   A product purchased to satisfy personal and family needs
3. Business (industrial) product
   A product bought for resale, for making other products, or for use in a firm’s operations

Question 2

Consumer product classification

Answer 2

1. Convenience product
   A relatively inexpensive, frequently purchased item for which buyers want to exert only minimum effort
2. Shopping product
   An item for which buyers are willing to expend considerable effort on planning and making the purchase
3. Speciality product
   An item that possesses one or more unique characteristics for which a significant group of buyers is willing to expend considerable purchasing effort

Question 3

Business product classification

Answer 3

1. Raw material
   A basic material that becomes part of a physical product; usually comes from mines, forests, oceans, or recycled solid wastes
2. Major equipment
   Large tools and machines used for production purposes
3. Accessory equipment
   Standardised equipment used in a firm’s production or office activities
4. Component part
   An item that becomes a part of a physical product and is either a finished item ready for assembly or a product that needs little processing before assembly
5. Process material
   A material that is used directly in the production of another product but is not readily identifiable in the finished product
6. Supply
   An item that facilitates production and operations but does not become part of the finished product
7. Business service
   An intangible product that an organization uses in its operations

Question 4

Product life cycle

Answer 4

Introduction
Customer awareness and acceptance are low
Growth
Sales increase rapidly as the product becomes well known
Maturity
Sales are still increasing but at a slower rate; later in this stage, sales and profits begin to slowly decline
Decline stage
Sales volume decreases sharply and profits continue to fall

Question 5

Product line and mix

Answer 5

1. Product line
   A group of similar products that differ only in relatively minor characteristics
2. Product mix
   All of the products that a firm offers for sale
   Width of the mix
   The number of product lines the mix contains
   Depth of the mix
   The average number of individual products within each line

Question 6

Branding

Answer 6

1. A name, term, symbol, design, or any combination of these that identifies a seller’s products as distinct from those of other sellers
2. Brand name
   The part of a brand that can be spoken
3. Brand mark
   The part of a brand that is a symbol or distinctive design
4. Trademark
   A brand name or brand mark that is registered with the U.S. Patent and Trademark Office and is legally protected from use by anyone else
5. Trade name
   The complete and legal name of an organization

Question 7

Price and non-price competition

Answer 7

1. Price competition
   An emphasis on setting a price equal to or lower than competitors’ prices to gain sales or market share
2. Non-price competition
   Competition based on factors other than price (such as quality, customer service, packaging)

Question 8

Price objectives

Answer 8

1. Survival
   Pricing the firm’s products (perhaps at a loss) in order to attract customers to establish the firm in a market
2. Profit maximisation
   Pricing with the intent to reap profits as large as possible from a market—usually an unattainable goal
3. Target return on investment (ROI)
   Pricing that allows the firm to attain its profit goal, which is a percentage of the investment the firm has made
4. Market-share goals
   Pricing that will increase a firm’s proportion of total industry sales
5. Status quo pricing
   Pricing the firm’s products so as not to disturb the stability of prices in the industry