The PROFILE at the beginning of this chapter focuses on KENDRICK MELROSE of TORO. Melrose, the chief executive, knows that Toro must broaden its product base to protect itself from seasonal changes.

1. PRODUCT DEVELOPMENT AND THE VALUE PACKAGE.
1. International competition today is strong.
1. To prevent losses, marketers must design and promote better products.
1. Products perceived to have VALUE are those offer good quality at a fair price.
2. When consumers calculate the value of a product, they look at the benefits and then subtract the cost to see if the benefits exceed the costs.
2. To satisfy consumers, marketers must learn to listen better and to adapt constantly to changing market demands.
3. This chapters explores two key parts of the marketing mix: PRODUCT and PRICE.
4. Customer wants and needs must be constantly monitored because these needs change over time.
5. Product development is key in any business.
6. Marketers must create excitement and demand for those products (PRODUCT STRATEGY.)
2. DEVELOPING A VALUE PACKAGE. Explain the concept of a value package.
1. A VALUE PACKAGE (total product offer) consists of everything that consumers evaluate when deciding whether or not to buy something.
1. The basic product may be a physical good or service.
2. The text lists such intangibles as: price, package, store surroundings, image created by advertising, guarantee, reputation of the producer, brand name, service, and buyers’ past experience, speed of delivery, and accessibility.
3. When people buy a product, they evaluate and compare value packages on all dimensions.
2. The value package as perceived by the consumer is much more than the product itself. CONCEPT CHECK
1. Often a high price indicates exceptional quality.
2. A guarantee of satisfaction can increase the product’s value in the mind of consumers.
3. An organization can also use low price to create an attractive value package.
3. One way to keep customers is to establish a dialogue with them and keep the information in a database CONCEPT CHECK
3. PRODUCT LINES AND THE PRODUCT MIX.
1. Companies usually sell several different, but complementary, products.
2. PRODUCT LINE is a group of products that are physically similar or are intended for a similar market.
3. PRODUCT MIX is the combination of product lines offered by a manufacturer.
4. SERVICE PROVIDERS also have product lines and product mixes.
5. Companies must decide what product and service mix is best.
6. The mix may include both goods and services to spread the risk. CONCEPT CHECK
2. PRODUCT DIFFERENTIATION.
1. PRODUCT DIFFERENTIATION is the creation of real product differences or perceptions that make one product seem superior to others.
1. Actual product differences are sometimes quite small, so marketers must create a unique, attractive image.
2. Different products call for different marketing strategies.
3. Small businesses can often win market share with creative product differentiation.
2. MARKETING DIFFERENT CLASSES OF CONSUMER GOODS AND SERVICES.

Describe the various kinds of consumer and industrial goods.

1. CONVENIENCE GOODS AND SERVICES are products that the consumer wants to purchase frequently and with a minimum of effort.
1. Location, brand awareness, and image are important for marketers.
2. Examples: candy, snacks, and banking.
3. Best marketing strategy: make them readily available and create the proper image.
2. SHOPPING GOODS AND SERVICES are those products that the consumer buys only after comparing value, quality, and price from a variety of sellers.
1. Shopping goods and services are sold largely through shopping centers where consumers can shop around.
2. Examples: clothes, shoes, appliances.
3. Best marketing strategy: good price, quality, and services.
3. SPECIALTY GOODS AND SERVICES are products that have a special attraction to consumers, who are willing to go out of their way to obtain them.
1. These products are often marketed through specialty magazines.
2. Examples: specialty skis marketed through ski magazines.
3. Best marketing strategy: advertising that reaches special market segments.
4. UNSOUGHT GOODS AND SERVICES are goods and services that consumers are unaware of, haven’t necessarily thought of buying, or find that they need to solve an unexpected problem CONCEPT CHECK .
1. Examples: emergency car-towing services.
2. Unsought goods are best sold through personal selling and creative and highly visible displays.
5. The marketing task varies depending on the kind of product.
6. The individual consumer determines whether or not a good or service falls into a particular class.
3. MARKETING INDUSTRIAL GOODS AND SERVICES.
1. INDUSTRIAL GOODS are products used in the production of other products.
2. The buyer’s intended use of the product determines whether it is a consumer or an industrial product.
3. Industrial goods are more likely to be sold by salespeople or on the Internet.
4. Categories:
1. INSTALLATIONS consist of major capital equipment such as new factories and heavy equipment.
2. CAPITAL ITEMS are produces that last a long time and cost a lot.
3. ACCESSORY EQUIPMENT consists of capital items that are not quite as expensive as installations, such as computers and photocopy machines
3. PACKAGING CHANGES THE PRODUCT.

List and describe the six functions of packaging.

1. PACKAGING can be very important in customers’ evaluation of the value package.
1. Packaging changes the product by changing its visibility, usefulness, or attractiveness.
2. It can change and improve its basic product (salt.)
3. Packaging can also help make a product more attractive to retailers (UPCs on packages make inventory easier.)
4. Packaging changes the product by changing its visibility, usefulness, or attractiveness.
2. THE GROWING IMPORTANCE OF PACKAGING:
1. Today the package carries more of the promotional burden than in the past.
2. PACKAGING MUST DO THE FOLLOWING:
1. Protect the goods inside, stand up under handling and storage, be tamperproof, and easy to open.
2. Attract the buyer’s attention.
3. Describe the contents and give information about the contents.
4. Explain the benefits of the goods inside.
5. Provide information on warranties, warnings, and other consumer matters.
6. Give some indication of price, value, and uses CONCEPT CHECK .
3. Packaging of SERVICES has been getting more attention recently.
4. BRANDING AND BRAND EQUITY:.

Give examples of a brand, a brand name, and a trademark, and explain the concepts of brand equity and loyalty.

1. A BRAND is a name, symbol, or design that identifies the goods or services of one seller and distinguishes them from those of competitors.
1. BRAND NAME is that part of the brand consisting of a word, letter, or group of words or letters comprising a name that differentiates the goods or services of a seller from those of competitors.
2. BRAND NAME is that part of the brand consisting of a word, letter, or group of words or letters comprising a name that differentiates the goods or services of a seller from those of competitors.
3. Most people choose a brand name product over a nonbranded one, even when they say there’s no difference.
2. BRAND CATEGORIES:
1. MANUFACTURERS’ BRAND NAMES are the brand names of manufacturers that distribute products nationally.
2. KNOCKOFF BRANDS are illegal copies of national brand name goods.
3. DEALER (PRIVATE) BRANDS are products that do not carry the manufacturer’s name, but carry the name of a distributor or retailer instead.
4. Many manufacturers fear having their brand names become generic names.
1. A GENERIC NAME is the name for a product category.
2. Names such as nylon, escalator, and zipper became so popular that they lost their brand status and became generic
3. Companies that are working hard to protect their brand names today include Xerox and Styrofoam.
5. GENERIC GOODS are nonbranded products that usually sell at a sizable discount compared to national brands.
1. They have very basic packaging and are backed with little or no advertising.
2. Consumers today are buying more generic products because their quality has improved.
3. GENERATING BRAND EQUITY AND LOYALTY.
1. BRAND EQUITY is a combination of factors including awareness, loyalty, perceived quality, the feeling and images, and any other emotion people associate with a brand name.
2. BRAND LOYALTY is the degree to which customers are satisfied, like the brand, and are committed to further purchases.
3. BRAND AWARENESS is how quickly or easily a given brand name comes to mind when a product category is mentioned.
4. PERCEIVED QUALITY is an important part of brand equity.
1. A product that’s perceived as better quality can be priced higher and thus improve profits.
2. Quality cues include a high price, appearance, and reputation.
3. BRAND PREFERENCE means that consumers prefer one brand over another.
5. Brand name manufacturers have to develop new products even faster and hold off the challenge of lower-priced competitors CONCEPT CHECK .
4. CREATING BRAND ASSOCIATIONS.
1. The name, symbol, and slogan a company uses can assist greatly in brand recognition for that company’s products.
2. BRAND ASSOCIATION is the linking of a brand to other favorable images.
3. The person responsible for building brands is known as a brand manager or product manager.
5. BRAND MANAGEMENT:.

Explain the role of product managers and the six steps of the new-product development process.

1. A BRAND MANAGER has direct responsibility for one brand or one product line
1. He or she is responsible for all the elements of the marketing mix.
2. Large consumer-product companies created the position of brand manager is to have greater control over new-product development and product promotion.
2. NEW PRODUCT SUCCESS.
1. Changes that a new product will fail are high, as high as 86%.
2. Not delivering what is promised is a leading cause of new-product failure.
3. Other reasons for failure include poor positioning, not enough differences from competitors, and poor packaging.
3. THE NEW-PRODUCT DEVELOPMENT PROCESS:
1. IDEA GENERATION, based on consumer wants and needs.
2. SCREENING.
3. PRODUCT ANALYSIS.
4. DEVELOPMENT, including building prototypes.
5. TESTING.
6. COMMERCIALIZATION (bringing the product to market).
4. GENERATING NEW PRODUCT IDEAS:
1. The largest percentage of new consumer product ideas (38%) come from studying the competition, but copying slows the flow of new ideas.
2. Employee suggestions can also lead to new products.
3. Since more than a third of all new ideas for industrial products come from users, managers should listen to their suppliers and customers.
5. PRODUCT SCREENING
1. PRODUCT SCREENING is a process designed to reduce the number of new-product ideas being worked on at any one time.
2. Criteria needed for screening include whether the product fits in with present products, profit potential, marketability, and personnel requirements.
6. PRODUCT ANALYSIS.
1. PRODUCT ANALYSIS, done after screening, is a matter of making cost estimates and sales forecasts to determine profitability.
2. Products that don’t meet the established criteria are withdrawn from further consideration.
7. PRODUCT DEVELOPMENT AND TESTING.
1. A PRODUCT IDEA can be developed into many different PRODUCT CONCEPTS.
2. CONCEPT TESTING involves taking a product idea to consumers to get their reactions.
8. COMMERCIALIZATION.
1. The text uses the example of the long struggle for the inventor of zippers to gain consumer acceptance of the product.
2. The marketing effort must include COMMERCIALIZATION including:
1. Promoting the product to distributors and retailers.
2. Developing strong advertising and sales campaigns.
3. Today new products are getting more rapid exposure to global markets by being promoted on the Internet.
9. THE INTERNATIONAL CHALLENGE.
1. The key to international success is to BRING OUT NEW PRODUCTS FASTER than your competitors.
2. Other countries, particularly Japan, are known for their rapid development processes.
3. To stay competitive in world markets, U.S. businesses must develop a NEW PRODUCT DEVELOPMENT PROCESS.
1. This requires continuous, incremental improvements in function, cost, and quality.
2. Cost-sensitive design and new process technologies are also crucial.
4. Successful new-product development is an INTERACTIVE PROCESS between customers and marketers.
5. The focus shifts from INTERNAL product development processes to EXTERNAL customer responsiveness.
6. THE PRODUCT LIFE CYCLE.

Identify and describe the stages of the product life cycle and describe marketing strategies at each stage.

1. The PRODUCT LIFE CYCLE is a theoretical model of what happens to a product class over time.
1. It explains what happens to sales and profits for a product over time.
2. Not all products follow the life cycle, and some brands may act differently.
3. Knowing what stage in the cycle a product is in helps marketing managers to decide when strategic changes are needed.
2. EXAMPLE OF THE PRODUCT LIFE CYCLE—The text uses the example of the introduction of instant coffee.
3. THE IMPORTANCE OF THE PRODUCT LIFE CYCLE.
1. Different stages in the product life cycle call for different strategies.
2. Each stage calls for multiple marketing mix changes.
7. COMPETITIVE PRICING.

Give examples of various pricing objectives and strategies.

1. PRICE is a critical ingredient in consumer evaluations of the product.
2. PRICING OBJECTIVES.
1. When setting a pricing strategy, the firm may have several objectives in mind.
2. A firm must formulate price objectives clearly before developing an overall pricing objective.
3. Popular PRICING STRATEGIES include:
1. Achieving a target return on investment or profit.
2. Building traffic.
3. Achieving greater market share.
4. Increasing sales.
5. Creating an image.
6. Furthering social objectives.
4. Another objective may be to avoid government investigation and control.
5. A company’s SHORT-TERM PRICING OBJECTIVES may differ from its LONG-TERM OBJECTIVES.
6. Pricing objectives are influenced by OTHER MARKETING DECISIONS regarding product design, packaging, branding, and promotion.
3. COST-BASED PRICING.
1. Producers often use COST as a primary basis for setting price.
2. In the long run, THE MARKET—not the producer—DETERMINES WHAT THE PRICE WILL BE.
3. TARGET COSTING is designing a product so that it satisfies customers and meets the profit margins desired by the firm.
1. Target costing makes cost an input to the development process, not an outcome of it.
2. The Japanese used PRICE-LED COSTING, determining what the market was willing to pay, then designing products to fit those prices.
4. The recent economic collapse in Asia is leading to huge price discounts from Asian firms.
4. VALUE PRICING.
1. VALUE PRICING means that marketers are providing consumers with brand name goods and services at fair prices.
2. The way to offer value prices and not go broke is to REDESIGN PRODUCTS from the bottom up and to cut costs wherever possible.
5. VALUE PRICING IN THE SERVICE SECTOR.
1. Service industries are adopting many of the same pricing tactics as goods-producing firms.
1. Service firms begin by cutting costs as much as possible.
2. Those services that aren’t important to customers are cut.
2. With both goods and services, the idea is to give the consumer value.
6. BREAK-EVEN ANALYSIS.
1. BREAK-EVEN ANALYSIS is the process used to determine profitability at various levels of sales.
2. \ The BREAK-EVEN POINT (BEP) is the point where revenues from sales equal all costs.
3. BEP is calculated: total fixed cost (FC) price of one unit (P) minus variable cost (VC) of one unit
4. TOTAL FIXED COSTS are all the expenses that remain the same no matter how many products are sold.
5. VARIABLE COSTS change according to the level of production.
7. PRICING STRATEGIES.
1. A SKIMMING PRICE STRATEGY is one in which a new product is priced high to make optimum profit while there is little competition; however, it invites competitors.
2. A PENETRATION STRATEGY is one in which a product is priced low to attract more customers and discourage competitors.
3. Pricing strategies used by retailers.
1. EVERYDAY LOW PRICING (EDLP) is setting prices lower than competitors and then not having any special sales.
2. The HIGH-LOW PRICING STRATEGY is setting prices that are higher than EDLP stores, but have many special sales where the prices are lower than competitors.
3. These price strategies are less effective as consumers are able to use the Internet to find prices.
4. Some retailers use price as a major determinant of the goods they carry.
8. HOW MARKET FORCES AFFECT PRICING.
1. Ultimately, price is determined by supply and demand in the marketplace.
2. The price that results from the interaction of buyers and sellers in the marketplace is called the MARKET PRICE.
3. Different consumers may be willing to pay different prices.
4. Marketers sometimes price on the basis of consumer demand, called DEMAND-ORIENTED PRICING, rather than cost or other calculations.
5. PRICE LEADERSHIP is the procedure by which one or more dominant firms set the pricing practices that all competitors in an industry follow.
6. COMPETITION-ORIENTED PRICING is a strategy based on what all the other competitors are doing.
7. Marketers now face a new pricing problem: customers can compare prices of many goods and services on the Internet.
8. Price competition is going to heat up as consumers have more access to price information from all around the world.
8. NONPRICE COMPETITION.

Explain why nonpricing strategies are growing in importance.

1. Marketers often compete on product attributes other than price.
1. Many smaller organizations promote the services that accompany basic products rather than price in order to compete with bigger firms.
2. Marketers emphasize nonprice differences because prices are so easy to match.
2. NONPRICE STRATEGIES: Other STRATEGIES FOR AVOIDING PRICE WARS include:
1. Add value.
2. Educate consumers.
3. Establish relationships.