Chapter 14 – Developing and Pricing Goods and Services
14-16
bonus case 14-3
THE TOY STORY ISN’T OVER JUST
YET
Specialty toys, like Disney-Pixar’s Woody and Buzz, are a hot
commodity among kids. Though the movie trilogy has fin-
ished, the company is finding new ways to keep these charac-
ters’ toys in the hands of kids. (See the complete case on page
14.87 of this manual.)
PPT 14-21
Classifying Specialty Goods and
Services
CLASSIFYING SPECIALTY
GOODS and SERVICES
14-21
LO 14-2
• Specialty Goods and Services — Products with
unique characteristics and brand identity. These
include:
– Tiffany jewelry
– Rolex watches
– Lamborghini automobiles
– Ritz Carlton Hotels
PPT 14-22
Specialty Goods Aren’t Just for
Humans
SPECIALTY GOODS AREN’T
JUST for HUMANS
14-22
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.
LO 14-2
• Would you buy these for your dog?
– Wine with custom labels featuring Fido
– Doggy day camp and in-home pet care
– A bound journal of your pets exploits
– Luxury shampoos and hair-care products
– A sound system to eliminate pet-unfriendly frequencies
– A “dog beer” at the Pawbar
– Monthly gifts from BarkBox
PPT 14-23
Classifying Unsought Goods and
Services
CLASSIFYING UNSOUGHT
GOODS and SERVICES
14-23
PhotoCredit:PaulChenoweth
LO 14-2
• Unsought Goods and Services — Products
consumers aren
’
t aware of or haven
’
t thought of
buying until they need them. These include:
– Car-towing services
– Funeral services
– Renter’s insurance
Chapter 14 – Developing and Pricing Goods and Services
14-17
a. Examples: emergency car-towing services.
b. Unsought goods are best sold through per-
sonal selling and the Yellow Pages.
5. The marketing task varies depending on the
category of product.
6. The INDIVIDUAL CONSUMER determines
whether or not a good or service falls into a par-
ticular class.
C. MARKETING INDUSTRIAL GOODS AND SER-
VICES
1. Many goods could be classified as consumer
goods or industrial goods, based on their uses.
2. INDUSTRIAL GOODS are products used in the
production of other products: sometimes called
business goods or B2B goods.
3. The buyer’s intended use of the product deter-
mines whether it is a consumer or an industrial
product.
4. Industrial goods are more likely to be sold by
salespeople or on the Internet.
5. CATEGORIES:
a. INSTALLATIONS consist of major capital
equipment such as new factories and heavy
equipment.
b. CAPITAL ITEMS are products that last a
long time and cost a lot of money.
c. ACCESSORY EQUIPMENT consists of cap-
ital items that are not quite as long lasting or
expensive as installations, such as comput-
ers and photocopy machines.
Chapter 14 – Developing and Pricing Goods and Services
14-18
PPT 14-24
Identifying Consumer Goods
Classifications
IDENTIFYING CONSUMER
GOODS CLASSIFICATIONS
14-24
LO 14-2
• How would you classify these consumer
products?
– Beautyrest mattress
– Honda Accord
– McDonald’s Big Mac
– Rolls Royce automobiles
– Oreo Cookies
– Harvard University degree
PPT 14-25
Odd Product Ideas That Were
Successful
ODD PRODUCT IDEAS
that WERE SUCCESSFUL
14-25
LO 14-2
• Pet Rock – For $3.95 you could buy a gift-wrapped
rock with eyes and a training manual.
• Garbage Pail Kids – Perhaps the grossest trading
cards ever produced.
• Mood Rings – Wildly popular as the changing colors
of the ring supposedly measured your mood.
• Chia Pets – Animal shaped (even President shaped)
clay figures that grew sprouts.
PPT 14-26
Classifying Industrial Goods and
Services
• Industrial Goods — Products used in the
production of other products and sold in the B2B
market.
CLASSIFYING INDUSTRIAL
GOODS and SERVICES
14-26
LO 14-2
• Industrial goods
include:
– Installations
– Capital items
– Accessory equipment
– Supplies
– Service
PPT 14-27
Categories of Industrial Goods and
Services
TEXT FIGURE 14.2
Various Categories of Consumer
and Industrial Goods and Services
CATEGORIES of INDUSTRIAL
GOODS and SERVICES
14-27
LO 14-2
test
prep
PPT 14-28
Test Prep
TEST PREP
14-28
• What value enhancers may be included in a total
product offer?
• What’s the difference between a product line and
a product mix?
• Name the four classes of consumer goods and
services and give examples of each.
• Describe three different types of industrial goods.
Chapter 14 – Developing and Pricing Goods and Services
14-19
learning objective 3
Summarize the functions of packaging.
III. PACKAGING CHANGES THE PRODUCT
A. PACKAGING plays an important role in customers’
evaluation of the value package.
1. It can CHANGE AND IMPROVE its basic prod-
uct (for example, the packaging of salt).
2. Other packaging improvements: squeezable
ketchup, square paint cans, and aromatic bottle
caps.
3. PACKAGING MUST DO THE FOLLOWING:
a. ATTRACT THE BUYER’S ATTENTION
b. PROTECT THE GOODS INSIDE, stand up
under handling and storage, be tamperproof,
deter theft, and be easy to open
c. BE EASY TO OPEN AND USE
d. DESCRIBE THE CONTENTS and give in-
formation about the contents
e. EXPLAIN THE BENEFITS of the goods in-
side
f. PROVIDE INFORMATION on warranties,
warnings, and other consumer matters
g. Give some INDICATION OF PRICE, VAL-
UE, AND USES
4. Packaging can also help make a PRODUCT
MORE ATTRACTIVE TO RETAILERS (UPCs
on packages help stores control inventory).
Chapter 14 – Developing and Pricing Goods and Services
14-20
PPT 14-29
Uses of Packaging
USES of PACKAGING
• Good packaging can also make
a product more attractive to
retailers.
14-29
LO 14-3
• Companies often use packaging to change and
improve their basic product. Examples include:
– Microwave popcorn
– Tuna pouches
– McDonald’s green packaging
lecture enhancer 14-4
SMALLER PACKAGING LEADS TO
BIGGER PROFITS
Though smaller packages mean consumers eat less at the time,
they also buy more in the future. (See the complete lecture
enhancer on page 14.69 of this manual.)
PPT 14-30
Some Key Functions of Packaging
SOME KEY FUNCTIONS of
PACKAGING
14-30
LO 14-3
1) To attract buyers’ attention
2) Protect the goods inside and be
tamperproof
3) Be easy to open
4) Describe and give information about the
product
5) Explain the product’s benefits
6) Provide warranty information and warnings
7) Give an indication of price, value, and uses
lecture enhancer 14-5
THE NEW BARCODES
After years of using a 12-digit UPC barcode, U.S. companies
are now using the same 13-digit standard that has long been
the worldwide standard. (See the complete lecture enhancer on
page 14.70 of this manual.)
Chapter 14 – Developing and Pricing Goods and Services
14-21
5. Packaging changes the product by changing its
VISIBILITY, USEFULNESS, or ATTRACTIVE-
NESS.
B. THE GROWING IMPORTANCE OF PACKAGING
1. The package is more important for promotion
now than in the past.
2. The FAIR PACKAGING AND LABELING ACT
requires that packages contain quantity and val-
ue comparison.
3. Packaging can use a strategy called BUNDLING
that combines goods and/or services for a single
price.
4. BUNDLING is grouping two or more products
together and pricing them as a unit.
a. Marketers must not include so much that the
price gets too high.
b. The best strategy is to work with customers
to develop value that meets their needs.
learning objective 4
Contrast brand, brand name, and trademark, and show the value of brand equity.
IV. BRANDING AND BRAND EQUITY
A. A BRAND is a name, symbol, or design (or combi-
nation thereof) that identifies the goods or services
of one seller or group of sellers and distinguishes
them from the goods and services of competitors.
1. BRAND NAME is that part of the brand consist-
ing of a word, letter, or group of words or letters
comprising a name that differentiates a seller’s
goods or services from those of competitors.
Chapter 14 – Developing and Pricing Goods and Services
14-22
lecture enhancer 14-6
DATES ON FOOD LABELS CAUSE
CONFUSION
Labels on packaging are needed to inform consumers. Howev-
er, some are finding it a little tricky to figure out whether a
food is still safe or not. (See the complete lecture enhancer on
page 14.71 of this manual.)
PPT 14-31
Bundling
• Bundling — Grouping two or more products together
and pricing them as a unit.
BUNDLING
14-31
PhotoCredit:JoeyDay
LO 14-3
• Virgin Airlines bundles
door-to-door limo
service and inflight
massage with some
tickets.
• Financial institutions
bundle advice with
purchases.
critical thinking
exercise 14-1
CHOOSING A BRAND NAME
This exercise gives students a chance to create unique brand
names for several consumer products. (See the complete exer-
cise on page 14.74 of this manual.)
PPT 14-31
Understanding Branding
• Brand — Name, symbol, or design that identifies the
goods or services and distinguishes them from
competitors
’
offerings.
UNDERSTANDING BRANDING
14-32
LO 14-4
• Trademark — A brand
that has exclusive legal
protection for both its
brand name and design.
Chapter 14 – Developing and Pricing Goods and Services
14-23
Examples: Red Bull, Sony, Del Monte, Levis,
Google.
2. A TRADEMARK is a brand that has been given
exclusive legal protection for both the brand
name and its design (example: McDonald’s
golden arches).
3. Most people CHOOSE A BRAND-NAME
PRODUCT over a nonbranded one, even when
they say there’s no difference.
4. A brand name has benefits for both buyers and
sellers.
a. For the BUYER, a brand name ensures
quality, reduces search time, and adds pres-
tige.
b. For the SELLER, brand names facilitate
new-product introductions, help promotional
efforts, add to repeat purchases, and differ-
entiate products.
B. BRAND CATEGORIES
1. MANUFACTURERS’ BRANDS are the brand
names of manufacturers that distribute products
nationally.
2. DEALER (PRIVATE-LABEL) BRANDS are
products that do not carry the manufacturer’s
name, but carry a distributor or retailer’s name
instead (examples: Kenmore and Diehard
brands sold through Sears).
3. Many manufacturers fear having their brand
name become a GENERIC NAME, a name for a
Chapter 14 – Developing and Pricing Goods and Services
14-24
REACHING
BEYOND
our borders
PPT 14-33
Playing the Name
Game
PLAYING the NAME GAME
14-33
• With a couple hundred countries
on the cyber-platform, choosing
the right name is a global issue.
• Every once in a while, a successful
name is created by accident.
Häagen-Dazs means nothing!
• What would you rename Very
Vegetarian if given the chance?
Would you want to ask an expert?
PPT 14-34
The Name Game
The NAME GAME
Source: Bloomberg Businessweek, www.businessweek.com, accessed November 2014. 14-34
Product Name Why?
Blackberry The “B” sounds relaxing and the “Y”
sounds friendly.
OreoThe bookending “O”s mirror the shape of
the cookie.
Viagra V is for vigor, vitality, virile and victory.
Wii The double ii symbolizes two players as
does the pronunciation.
lecture enhancer 14–7
BABY PRODUCTS STAY STRONG
AS PRICES RISE
Though new parents are often strapped for cash, they still buy
brand-name baby products. (See the complete lecture enhancer
on page 14.71 of this manual.)
PPT 14-35
Key Brand Categories
KEY BRAND CATEGORIES
14-35
PhotoCredit:JoeMudd
LO 14-4
• Manufacturers’ Brands –
Brand names of
manufacturers that distribute
products nationally.
• Dealer (Private-Label)
Brands — Products that
carry a retailer
’
s or
distributor
’
s brand name
instead of a manufacturer
’
s.
Chapter 14 – Developing and Pricing Goods and Services
14-25
product category.
a. Names such as nylon, escalator, kerosene,
and zipper became so popular that they lost
their brand status and became generic.
b. Companies today are protecting brand
names such as Xerox and Rollerblade.
4. GENERIC GOODS are nonbranded products
that usually sell at a sizable discount compared
to national or private-label brands.
a. They have very basic packaging and are
backed with little or no advertising.
b. Because quality has improved, consumers
today are buying more generic products.
5. KNOCKOFF BRANDS are illegal copies of na-
tional brand-name goods.
C. GENERATING BRAND EQUITY AND LOYALTY
1. BRAND EQUITY is the value of the brand name
and associated symbols.
2. BRAND LOYALTY is the degree to which cus-
tomers are satisfied, like the brand, and are
committed to further purchases.
3. BRAND AWARENESS refers to 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.
a. A product that is perceived as better quality
can be priced accordingly.
Chapter 14 – Developing and Pricing Goods and Services
14-26
PPT 14-36
Key Brand Categories
KEY BRAND CATEGORIES
14-36
LO 14-4
• Generic Goods — Nonbranded products that sell at
a discount compared to manufacturers
’
or dealers
’
brands.
• Knockoff Brands — Illegal copies of national
brands.
lecture enhancer 14-8
THE MYSTIQUE OF COCA-COLA
The critical element in Coca-Cola’s success is the aura of
mystery around the product’s formula. (See the complete lec-
ture enhancer on page 14.72 of this manual.)
PPT 14-37
Establishing Brand Equity and
Loyalty
ESTABLISHING BRAND EQUITY
and LOYALTY
14-37
LO 14-4
• Brand Equity – The value of the brand name and
associated symbols.
• Brand Loyalty — The degree to which consumers
are satisfied and are committed to further purchases.
PPT 14-38
Most Valuable Brands
MOST VALUABLE BRANDS
Source: Forbes, www.forbes.com, accessed November 2014. 14-38
Brand Value (in $millions)
Apple $124.2
Microsoft $63.0
Google $56.6
Coca-Cola $56.1
IBM $47.9
McDonald’s $39.9
GE $37.1
Samsung $35.0
Toyota $31.3
Louis Vuitton $29.9
LO 14-4
PPT 14-39
Origins of Automobile Symbols
ORIGINS of
AUTOMOBILE SYMBOLS
Source: World Features Syndicate. 14-39
LO 14-4
• Volvo – Symbol for iron
• Lamborghini – Company founder’s
zodiac sign was Taurus
• Volkswagen – Product of an office
contest
• Porsche – Coat of arms for city and
state headquarters
Chapter 14 – Developing and Pricing Goods and Services
14-27
b. Factors influencing the perception of quality
include price, appearance, and reputation.
c. Consumers often develop BRAND PREF-
ERENCE—they prefer one brand over an-
other.
d. The product becomes a specialty good when
customers reach BRAND INSISTENCE.
5. To hold off the challenge from competitors,
brand-name manufacturers have to develop new
products faster and promote their names better.
D. CREATING BRAND ASSOCIATIONS
1. The name, symbol, and slogan a company uses
helps gain brand recognition for that company’s
products.
2. BRAND ASSOCIATION is the linking of a brand
to other favorable images.
3. Many brands use celebrities or athletes to pro-
vide a positive association.
4. The person responsible for building brands is a
BRAND MANAGER or PRODUCT MANAGER.
E. BRAND MANAGEMENT
1. A BRAND MANAGER is a manager who has di-
rect responsibility for one brand or one product
line; called a PRODUCT MANAGER in some
firms.
2. The brand manager is responsible for all the el-
ements of the marketing mix.
3. Brand managers in large consumer-product
companies have greater control over new–
product development and product promotion.
Chapter 14 – Developing and Pricing Goods and Services
14-28
critical thinking
exercise 14-2
MOST VALUABLE GLOBAL
BRANDS
Interbrand, a research company, annually ranks the most valu-
able brands in the world. This exercise asks students to re-
search the current year’s ranking. (See the complete exercise
on page 14.76 of this manual.)
PPT 14-40
Building Brand Awareness
BUILDING BRAND AWARENESS
14-40
LO 14-4
• Brand Awareness — How quickly or easily a given
brand name comes to mind when someone mentions
a product category.
• Consumers reach a point of brand preference
when they prefer one brand over another.
• When consumers reach brand insistence, they will
not accept substitute brands.
PPT 14-41
Building Brand Associations
BUILDING BRAND
ASSOCIATIONS
14-41
LO 14-4
• Brand Association — Linking a brand to other
favorable images, like celebrities or a geographic
area.
• Brand Manager — Person responsible for a
particular brand and handles all the elements of the
brand
’
s marketing mix.
PPT 14-42
Made in America?
MADE in AMERICA?
Home Countries of America’s Favorite Brands
14-42
Brand Country
Budweiser Belgium and Brazil
Alka-Seltzer Germany
Good Humor Ice Cream UK and Holland
7-11 Japan
Gerber Switzerland
Firestone Japan
John Hancock Life Canada
Frigidaire Sweden
Holiday Inn UK
LO 14-4
test
prep
PPT 14-43
Test Prep
TEST PREP
14-43
• What functions does packaging now perform?
• What’s the difference between a brand name and
a trademark?
• Explain the difference between a manufacturers’
brand, a dealer brand, and a generic brand.
• What are the key elements of brand equity?
Chapter 14 – Developing and Pricing Goods and Services
14-29
learning objective 5
Explain the steps in the new-product development process.
V. THE NEW-PRODUCT DEVELOPMENT PRO-
CESS
A. Chances that a NEW PRODUCT WILL FAIL are
high, as high as 80%.
1. A leading cause of new-product failure is not de-
livering what is promised.
2. Other REASONS FOR FAILURE include getting
ready for market too late, poor positioning, not
enough differences from competitors, and poor
packaging.
B. THE NEW-PRODUCT DEVELOPMENT PROCESS:
1. IDEA GENERATION, based on consumer wants
and needs
2. PRODUCT SCREENING
3. PRODUCT ANALYSIS
4. DEVELOPMENT, including building prototypes
5. TESTING
6. COMMERCIALIZATION (bringing the product to
market)
C. GENERATING NEW-PRODUCT IDEAS
1. It now takes about seven ideas to generate one
commercial product.
2. The number one SOURCE OF IDEAS for indus-
trial products has been employees.
3. Research and development is a major source of
new products.
Chapter 14 – Developing and Pricing Goods and Services
14-30
TEXT FIGURE 14.3
The New-Product Development
Process
lecture enhancer 14–9
TOP 10 NEW PRODUCTS IN
HISTORY
Research and development executives identify the top 10 new
products of all time. (See the complete lecture enhancer on
page 14.72 of this manual.)