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Chapter 14 - Developing and Pricing Goods and Services
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80. Healthy Pick designed a new type of packaging that significantly improves taste and
texture of food when defrosted. Unfortunately, firms seldom find that improvements in
packaging impact market share and profits.
Feedback: Packaging has become a critical part of product design by performing many
promotional functions. The text cites many examples of how improvements in packaging have
changed consumer perceptions and opened up large markets.
81. A brand includes practically all means of identifying a product.
82. The purpose of a brand name is to establish an image of generic goods or services.
83. Brand names can significantly impact consumer perceptions of a product.
84.
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A trademark is a brand that has been given exclusive legal protection for both the brand
name and the pictorial design.
85. The benefits provided by a brand name for a buyer include reduced search time, prestige,
and quality assurance.
86. The U.S. legal system does not offer trademark protection.
87. Brand names help sellers with new-product introductions and create an opportunity for
higher prices.
88.
Chapter 14 - Developing and Pricing Goods and Services
Dealer (private) brands are products that do not carry the manufacturer's name, but rather
carry the name of a distributor or retailer.
89. Chevrolet is an example of a generic name in the automobile market.
90. Manufacturers' brands carry the brand name of the producers that distribute the products
nationally.
91. Most manufacturers hope that their brand names will become a generic name.
92. Sales of generic products are decreasing because consumers prefer the higher quality of
the nationally known brands.
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93. The legal protection offered to an established brand name prevents that name from being
used as a generic name for a product.
94. The use of price discounts and coupons may erode the commitment of consumers to
brand names.
95. The best strategy for brand name manufacturers to respond to the challenge of generic
goods is to use price discounts and coupons to price their products more aggressively.
96. A knockoff brand is a brand name that has lost its exclusive legal protection.
97.
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Brand equity refers to those factors that people associate with a specific brand name, such
as awareness, perceived quality, and loyalty.
98. Brand loyalty refers to the degree to which customers are satisfied with a brand and are
committed to further purchases.
99. Although their names are similar, brand loyalty and brand equity are unrelated.
100. When consumer loyalty reaches the point of brand insistence, the product becomes a
specialty good.
101.
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Event sponsorship like the FedEx Orange Bowl football game helps improve brand
awareness.
102. Price, appearance, and reputation can influence a consumer's perceptions of quality.
103. Endorsements by sports or movie celebrities can help create a favorable brand
association.
104. Brand association is the linking of a brand to other favorable images such as a
celebrity or geographic location.
105.
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Brand managers have direct responsibility for all the elements of the marketing mix for a
particular brand or product line.
106. Firms use brand managers or brand teams to give them greater control over both new-
product development and product promotion.
107. Federal legislation requires that the brand name of a product clearly identify the
manufacturer of that product.
Feedback: Private or dealer brands do not carry the name of the manufacturer. They carry the
name of a distributor or retailer instead.
108.
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Papa's Market offers customers tissues, canned vegetables, napkins, and dishwashing
detergent in basic packaging with no identified brand. These goods are popular with
Papa's cost-conscious shoppers because they are significantly less expensive than
nationally known brand names. These types of goods are examples of generic goods.
Feedback: Generic goods are non-branded products that usually sell at a sizable discount from
national or private brands, have very basic packaging, and are backed with little or no
advertising.
109. Nailerman's Hardware is a large chain of hardware stores that sells a line of tools
under the Nailerman brand even though they were actually produced by another firm.
Since the products are actually produced by another firm, using the Nailerman brand is an
example of a knockoff brand.
Feedback: Knockoff brands are illegal copies of brand-name goods. However, there is
nothing illegal about a firm (such as Nailerman's) putting its brand on a good produced by
another firm. This is an example of a dealer (or private) brand. Many retailers (the text cites
the example of Sears) use this type of brand.
110.
Chapter 14 - Developing and Pricing Goods and Services
Travelwell manufactures and sells luggage and briefcases. Their marketing research
indicates that durability is the attribute that consumers most desire in their luggage and
briefcases. Travelwell now emphasizes durability in all of their promotional efforts. This
strategy is intended to build brand equity.
Feedback: Perceived quality is an important part of brand equity. The key to creating the
perception of quality is to identify what consumers look for in a high-quality product and then
make sure that the company uses this information when it sends messages about its product.
The intended goal of brand equity is to establish the firm's brand name as the generic name
for the product.
111. Beth works for Champion Industries overseeing the marketing mix for the firm's line
of calculators. Beth serves as a brand manager for Champion Industries.
Feedback: A brand manager has direct responsibility for a specific brand or product line at a
company. This responsibility includes all elements of the marketing mix.
112. Brand managers are responsible for the marketing of a product after it has been
developed and a clear promotional message has been identified.
Feedback: One reason why many companies have utilized product management is to gain
greater control over product development and product promotion.
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123. SnackAttack has found that an effective technique to generate ideas for new consumer
products is to carefully listen to employees and suppliers.
Feedback: Employees and suppliers are major sources of new ideas for new consumer goods.
124. "Create a better mousetrap and the world will beat a path to your door." This statement
is consistent with the idea behind the commercialization of products.
Feedback: The statement suggests that all that is needed to generate sales is a better product.
Commercialization recognizes that even good products that meet the needs of consumers may
not succeed without additional marketing effort. Specifically, commercialization involves (1)
promoting the product to distributors and retailers to get wide distribution and (2) developing
strong advertising and sales campaigns to generate and maintain interest in the product among
distributors and consumers.
125. At the concept testing stage, factors such as packaging, branding, ingredients, etc.
should be tested to ensure that a product is acceptable to potential consumers.
Feedback: Concept testing involves taking the product to consumers to test their reactions.
126.
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The product life cycle presents a theoretical model describing what happens to sales and
profits for a class of products over time.
127. While the time in each stage may vary, all products progress through each stage of the
product life cycle.
128. The four stages in the product life cycle are introduction, market, exchange, and
disposal.
129. While some products remain in the introductory stage of the product life cycle for
years, other products may go through the entire cycle in a few months.
130.
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Knowledge of the product life cycle model can help firms develop marketing strategies
and anticipate market changes.
131. Successful firms maintain consistency in their marketing mix strategies throughout the
product life cycle.
132. Profits peak during the maturity stage of the product life cycle.
133. While the product life cycle is a good theory, it's not important for marketers to
recognize what life cycle stage a product is in.
134.
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Successful businesses develop a mix of price, product, place, and promotion that is
consistently applied throughout a product's life cycle.
Feedback: Different stages in the product life cycle call for different strategies.
135. Some goods have a product life cycle that is completed in a shorter amount of time
than other goods.
Feedback: Some products, such as items based on fads, may go through the entire cycle in a
few months, while other products may have product life cycles that last for years.
136. After several years as a brand manager for an established product, Pete has taken a job
with a microbrewery. He is responsible for managing the marketing mix for a new product
introduction. In his new job, Pete will find that while the products may be at different
stages of the product life cycle, the marketing strategies will be essentially the same.
Feedback: Products in different stages of the product life cycle call for different strategies.
Figure 14.5 outlines the marketing mix decisions that are product life cycle dependent.
137.
Chapter 14 - Developing and Pricing Goods and Services
As consumers evaluate a product, price plays a small role.
138. A long-run pricing objective of almost all firms is to optimize profit.
139. Sometimes a firm will lower prices below their costs in order to build a customer
base.
140. In order to achieve a social objective, firms use low prices to enable people with low
incomes to buy their product.
141. Consumer perceptions of product quality are affected by promotions and packaging,
but not by the price of the product.
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147. Demand-based pricing is another name for cost-based pricing.
148. Target costing is a cost-based pricing strategy.
149. The target costing strategy establishes a selling price that consumers are willing to pay
for a product, and then subtracts a desired profit margin to determine a target cost of
production.
150. In the long run, the price of a product is determined by the cost of production and the
length of the firm's supply chain.
151.
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Competition-based pricing is a strategy based on what all the other competitors are doing.
152. Price leadership is a demand based pricing strategy.
153. Price leadership occurs when one or more dominant firms set pricing practices that
other firms in the market follow.
154. The purpose of break-even analysis is to determine the lowest price a firm can charge
and still be able to cover its costs of production.
155.
Chapter 14 - Developing and Pricing Goods and Services
Break-even analysis determines profitability of a firm at various levels of sales.
156. The break-even point is that level of sales where total revenues equals total costs.
157. Total fixed costs are those costs that change when the volume of production changes.
158. Variable costs are costs that change with the level of production.
159. A skimming price strategy involves a low pricing policy intended to attract price-
sensitive customers from competitors.
