MGTA01 Week 2 - Products: The Things People Need and Want

Why must a business satisfy customers?

Satisfied customers generate revenue and profit, allowing the business to continue operating.

What is the customer-to-profit cycle?

Customer need → product value → revenue → profit potential → continued operation.

What is customer need?

Understanding the problem or need the customer has.

What is product value?

The solution or benefit a product offers to the customer.

What is a product?

Anything a customer expects or believes they are getting when purchasing something.

What do customers actually buy?

The value and benefits a product provides, not just the physical item.

What is the difference between the public and private sectors?

• Public sector: Organizations owned or funded by government.

• Private sector: Organizations run by private individuals or companies.

What is the main difference between the public and private sectors?

Ownership, funding, and profit motive.

What are goods?

Tangible products that can be seen and touched, such as clothing, soap, and phones.

What are services?

Intangible products that are experienced but usually cannot be touched, such as tutoring, banking, and physiotherapy.

Why is a restaurant meal a bundle of goods and services?

• Food = good.

• Cooking, serving, and atmosphere = services.

Why are services often more complex than goods?

• Timing: Services happen when delivered.

• Customer involvement: Customers often participate.

• Customization: Services can vary based on customer needs.

• Storage: Services usually cannot be stored.

What is a low-contact service?

A service involving little customer interaction, such as internet banking, dry cleaning, or car repair.

What is a high-contact service?

A service involving direct customer interaction, such as retail banking, airline travel, or consulting.

How does customer contact affect required skills?

Higher customer contact requires stronger interpersonal and people skills.

What is knowledge-based work?

Work that provides ideas, advice, analysis, experiences, or information.

What are the three parts of the value package?

1. Function

2. Features

3. Benefits

What is product function?

What the product is designed to do.

What are product features?

Extra attributes that improve a product's usefulness or experience.

What are product benefits?

The advantages or feelings customers receive from a product.

What determines the value of a product?

The total package of function, features, and benefits that customers are willing to pay for.

What are the two broad product categories based on who buys them?

• Consumer products

• Industrial products

What are consumer products?

Products purchased by individuals for personal use.

What are industrial products?

Products purchased by businesses to make other products or support operations.

What are the three types of consumer products?

1. Convenience

2. Shopping

3. Specialty products

What are convenience products?

Low-cost, frequently purchased products requiring little effort.
Examples: Coffee, chocolate bars, and deodorant.

What are shopping products?

Products customers compare based on features, benefits, and price before buying.
Examples: Laptops, cars, and insurance.

What are specialty products?

Products customers spend significant time and effort finding because they want something specific.
Examples: Wedding gowns and event catering.

How do convenience and shopping products differ?

Convenience products require little effort, while shopping products involve comparing alternatives.

How do shopping and specialty products differ?

Shopping products involve comparing options, while specialty products involve finding exactly what the customer wants.

Why do product categories matter to businesses?

They help businesses determine their marketing strategies, including pricing, promotion, distribution, features, and services.

What is price sensitivity?

How much price influences a customer's purchasing decision.

What is research and development (R&D)?

Researching innovations and ideas that may lead to future products.

Why do businesses need R&D?

• Customer tastes change.

• Technology evolves.

• Competitors imitate or improve products.

• Older products can become obsolete.

What is the product life cycle?

The stages a product goes through in the market.

What are the four stages of the product life cycle?

Introduction, growth, maturity, and decline.

What are the characteristics of the introduction stage?

• Low customer awareness and sales.

• High prices and development costs.

• Limited distribution.

• Low or negative profits.

What is the managerial focus during the introduction stage?

• Educate customers about the product.

• Build distribution channels.

• Improve product design.

• Learn from early users.

Why is failure risk highest during the introduction stage?

Products are expensive to develop, and customers may not understand their value yet.

What are examples of products that struggled during introduction?

New Coke and Samsung Galaxy Note 7.

What happens during the growth stage?

• Product becomes better known and easier to purchase.

• Demand increases.

• Production costs may decrease.

• Prices may fall.

• Distribution expands.

• Profits usually begin to appear.

What are economies of scale?

Production costs can fall as businesses increase production.

• Economies of scale = producing more → lower average cost per unit.

What happens during the maturity stage?

• Sales reach their peak.

• The market becomes saturated.

• Customers understand and accept the product.

• Purchases increasingly involve replacing existing products.

• Competition focuses on differentiation and customer loyalty.

What is market saturation?

When the market can absorb no more products.

What happens during the decline stage?

Demand, prices, profits, and the number of competitors decrease.

What can cause a product to enter the decline stage?

• New technology performs the same function better.

• Social attitudes change.

• Demographics change.

• Customers shift spending toward substitutes.

What is product life cycle extension?

Strategies used to refresh existing products, delay decline, and maintain profitability.

What are strategies businesses use to extend a product's life cycle?

• Repackage or relaunch the product.

• Introduce new varieties or flavours.

• Update features or design.

• Target a new customer segment or usage occasion.

What is the goal of life cycle extension?

Keep products in the maturity stage and profitable for as long as possible.

How can technology replacement affect businesses?

New technology can replace older products. Businesses that fail to adapt may struggle or fail.

What is an example of technology replacing older products?

Music technology changed from records → tapes → CDs → downloads/streaming.

How can product growth be measured?

• Number of customers

• Revenue

• Profit

• Number of outlets

• Number of employees

• Units sold

What is the difference between R&D and life cycle extension?

R&D develops new ideas and innovations, while life cycle extension refreshes existing products.

How can you distinguish goods from services on a credit card bill?

• Goods: Tangible items you purchased, such as clothing or groceries.

• Services: Intangible purchases, such as subscriptions, transportation, or haircuts.

How can purchasing a service make a customer better off?

A service provides a benefit or solves a problem, even if the customer has nothing physical to show for the money spent.

Why might someone purchase a convenience product without comparison shopping?

It is usually inexpensive, frequently purchased, convenient, or needed immediately.

What factors influence a customer's decision when comparison shopping?

Price, features, quality, benefits, reviews, and advice.

Why might someone spend significant time negotiating and specifying product features?

They want a product that meets their specific needs, provides particular benefits, or offers the best value for their money.

What is an example of a product that became obsolete or common over time?

Flip phones, DVDs, or early smartphones that were once exciting but are now outdated or common.

What is immediacy?

The need or desire to obtain a product or service right away.

What is the introduction stage?

The first stage of the product life cycle, when a new product enters the market and customer awareness and sales are usually low.