Chapter 15: Products that satisfy Flashcards
Two main groupings of products
- Consumer products
- Business products
Three consumer product classifications
- Convenience product
- Shopping product
- Specialty product
7 types of business products
- Raw material
- Major equipment
- Accessory equipment
- Component part
- Process material
- Supply
- Business service
Four stages of a product lifecycle
- introduction
- growth
- maturity
- decline
Introduction stage of the product lifestyle
In this stage, customer awareness and acceptance of the product are low.
Sales rise gradually as a result of promotion and distribution activities.
Initially high development and marketing costs result in low profit or even in a loss.
There are few competitors.
The price is sometimes high and purchasers are primarily people who want to be “the first” to own the new product.
The growth stage
Sales increase rapidly as the product becomes well-known.
Other firms have probably begun to market competing products.
The competition and lower unit costs (owing to mass production) result in a lower price, which reduces the profit per unit.
The maturity stage
Sales are still increasing at the beginning of the maturity stage, but the rate of increase has slowed.
Later in this stage, the sales curve peaks and begins to decline. Industry profits decline throughout this stage. Product lines are simplified, markets are segmented more carefully and price competition increases.
The decline stage
Sales volume decreases sharply.
Profits continue to fall.
The number of competing firms declines, and the only survivors in the marketplace are firms that specialize in marketing of the product. Production and marketing costs become the most important determinant of profit.
Eight steps of new product development
- Idea generation
- Screening
- Concept testing
- Business analysis
- Product development
- Test marketing
- commercialization
Three major pricing methods that firms employ
- Cost-based pricing
- Demand-based pricing
- Competition-based pricing
Cost-based pricing
The seller first determines the total cost of producing one unit of the product.
The seller then adds an amount to cover additional costs and profit.
Demand-based pricing
Rather than basing the price of a product on its cost, companies sometimes use a pricing method based on the level of demand for the product.
This method results in a high price when product demand is strong and a low price when demand is weak.
Competition-based pricing.
Here, an organization considers costs and revenue secondary to competitors’ prices.
The importance of this method increases if competing products are quite similare and the organization is serving markets in which price is the crucial variable of the marketing strategy.
