Session 3: Modules 7-9 Lecture Notes

Flashcards from a lecture on product strategies, the product life cycle, new product development, consumer product adoption, service characteristics, the service profit chain, service quality, how service quality is measured, pricing objectives, pricing strategies, pricing tactics, discount strategies, allowance strategies, price change strategies, and legal considerations in pricing.

Product

What is offered to the consumer and satisfies a need or want.

Essential Benefit

Why we need the product or what we're going to get out of the product.

Core Product

The "what" of the product; things we can see make up the benefits.

Enhanced Product

The extras that we get with the product.

Tangibility

How easy it is for the consumer to physically touch, examine, or see the product prior to purchase.

Durability

Represents the length of the product's use.

Convenience Goods

Grab and go items at the checkout lane; low cost, regularly purchased items.

Shopping Goods

Goods that cost more than convenience goods and are purchased less frequently; range in price.

Specialty Products

Once in a lifetime purchases only available from the manufacturer; usually extremely pricey.

Unsought Goods

Products that we don't know we need until we need them, such as disaster recovery or funeral services.

Materials

Resources needed to produce a product.

Parts

Consist of equipment either fully assembled or in smaller pieces that will be assembled into larger components; used in the production process.

MRO

Maintenance, repair, and operating supplies; everyday items a company needs to keep running; low per unit cost but high total cost over a year.

Capital Goods

Major purchases in support of a significant business function, such as building a new plant or installing a new IT network; often require significant customization and are negotiated over months or years.

Form

Reflects changes to the product's size, shape, color, and other physical characteristics.

Features

Involves product and performance attributes.

Performance Quality

Involves building the product to performance expectations; higher cost usually leads to higher expectations.

Conformance Quality

Delivering on the promise of marketing communications.

Durability

Simply how long the product will last.

Reliability

The percentage of time that the product will work without failure.

Repairability

How easy it is to fix the product.

Style

The look and feel of the product.

Product Life Cycle

The category that goes through four stages: introduction, growth, maturity, and decline.

Introduction Stage

When the product category becomes available to the consumer; consumers don't know much about the product and companies must invest heavily in promotion.

Growth Stage

Sales start to increase dramatically and profits also increase; new competitors enter the market.

Maturity Stage

Sales stabilize and can stay steady for a long time; companies try to make the product better.

Decline Stage

Sales and profits drop.

New Product

A product that has not been available before or is new to the world; can create fundamental changes in the marketplace and are known as disruptive innovation.

Go to Market Mistake

Fail to stop a bad product idea from moving into product development.

Stop Market Mistake

Good idea is prematurely eliminated during the screening process.

How long it takes the product to move, from first purchase to last purchase.

Innovative diffusion process

awareness

user knows of the product but has insufficient information to move forward through the adoption process

interest

user is looking on a website for more information about the product because they have a need for the product.

evaluation

user is comparing the product with the competition's products, looking at things like price, quality, warranties.

trial

user purchases the product but is still deciding if the product is right for them .

adoption process

user has grown loyal to the product because it does provide them the value that the consumer was looking for.

innovators

product enthusiasts who enjoy being the first to try and master a new product

early adapters

opinion leaders who seek out new products consistent with their personal self image

early majority

product watchers who want to be convinced of the product's claims and value proposition before making a commitment

late majority

product followers that are price sensitive and risk adverse.

laggards

product avoiders that want to evade adoption if possible. They are resistant to change.

Intangibility

The service cannot be seen, heard, tasted, felt, or smelled.

Inseparability

The service is produced and consumed at the same time; cannot separate the service from the provider or the recipient.

Variability

The service is only as good as the service provider.

Perishability

The service cannot be stored for future use; once the time has passed, the opportunity to profit has also passed.

Service Profit Chain

Tool used to see the connections between employees and the quality of service that they are delivering.

Perishability has pushed

Businesses to implement cancellation policies with penalties attached if you don't abide by the policy

Loyal customers

Customers into brand advocates

Gap analysis

Tool used to discover gaps between expectations and performance

service quality

how we measure performance versus expectations

service encounter

the customer is interacting with the service provider.

Moment of truth

face to face time between the customer and the service provider

Sometimes it is by what we see. Sometimes it is by what we experience. And sometimes it's just based on trust alone.

the evaluation continuum

Tangibles

physical observable elements

reliability

the company does delivering the service correctly and consistently

Responsiveness

quickly we respond to customer requests

assurance

knowledge and courtesy of employees, which in turn, builds customer confidence.

empathy

Carring the service provider is and whether they can see things from the customer's point of view

Price and value Connected

impacts whether we see the value in the product

Penetration Pricing

We go into the market with competitors.

SKimming strategy

go into the market

Target ROI

price the product

price elasticity of demand

how sensitive the customer is to price changes.

Competitor based pricing

products in line with our competitors

Value pricing

strategy primarily based on a consumer's perceived value of the product or service

Product line pricing

multiple versions of the same product or service at different price points at the same time

Captive pricing

gaining a commitment from the customer for a basic product or system that requires continual purchase of additional items to operate the product.

Price bundling

we offer multiple products together at a slightly lower price than if we were buying each product individually.

Then pricing

customers believe or expect an item should cost based on experience with or knowledge about the product.

Prestige pricing

price the product high due to the quality of the product and the status owning the product

Odd pricing

the price is not expressed in whole dollars

Everyday low price

simplifies decision making and search costs.

High low pricing price

retailers introduce products or in some cases services at a higher price point and then gradually discount or mark down the price as demand decreases.

Cost plus pricing

building a price by adding a standardized markup on top of costs for an offering

Markup on sales price

used the sales price as a basis for calculating the market percentage.

2 % discount of paying within then days

cash discounts encourage distributors

Seasonal discounts

when a company extends its payment terms

Promotional allowances price

special promotion of a product

geographical driving prices

price adjusted the sale

uniform delivered pricing

the same delivery fee regardless of location.

Companies

collude to set prices at a mutually beneficially high level are engaged in price fixing.

price discrimination

when a seller offers different prices to different customers without a substantial basis

Deceptive pricing

designed the customer is misled

predatory pricing

sells below cost to push a competitor out of the market, then raises the prices to new highs.