Chapter 2: MGTA01 (Textbook Notes)

Satisfying Customers And Making A Profit

• A business must both gain profits and satisfy customers. They are both dependent on each other
• Businesses must listen to their customer to get profit (personally this is probably why the phrase “the customer is always right” exists)

The Things That People Need And Want

Product: Whatever a purchaser hopes to get, or believes they are getting whenever they purchase from another individual or organization

Public sector organization: An organization that is owned or funded by the government

• 20% of working population are in public sector

Private Sector: Part of the economy that is run by private individuals, usually to make a profit

Goods: Products which can be seen and touched (tangible)

Services: Products which are experienced, not seen or touched (intangible)

Immediacy: Quality that makes something important/relevant because it’s happening there/then

• Eg. taxi

High-contact services: Services that require personal interaction with the customer

• Eg. Nursing home, haircut

Low-contact services: Service operations that don’t necessarily involve interaction with the customer

• Internet banking, fast food

Customization: The characteristics of a service that means that no two customers want the same thing delivered in the same way

• Eg. fast food delivery

Diversification: Owning a wide variety of investments to reduce risk

• Eg. don’t put all your eggs in one basket in case in breaks
• The intention should be there
  • Eg. kids selling lemonade. Intention is either selflessness or money (business)

Value Proposition: Why you should buy from the business

• Eg. Jerusalem dancing
• Eg. Build a bear experience

Examples of different services/experiences: escape room (stressful), wonderland (scary)

Differences Between Goods And Services

• Roughly 70% of Canadian products are services

Products: Filling Needs and Satisfying Wants

People want a product to have 3 elements:

1. Function
2. Features
3. Benefits
4. Function

Function: What a product is intended to do

• Eg. car’s function is transport, hotel is night accommodations

Features: Additional attributes/offerings that contribute to usefulness/better experience of product

• Eg. air condition in a car doesn’t affect the function, but it makes the car nicer to ride in

Benefit: An advantage that is derived from purchasing a product

• Difficult to measure
• Eg. sense of achievement/social status from buying a car

Value: worth or importance of product, usually in terms of usefulness, desirability, or financial (mostly financial)

Value package: function + features + benefit

Eg. 3 star hotel, 5 star hotel

Understanding Different Products And Their Consumers

Consumer products: Products purchased by the end user, for personal use

• Eg. cereal

Industrial Products: Parts, ingredients, materials, supplies are brought by one business in order to make a consumer products

• Eg. one cereal business buying industrial products like cardboard and ingredients to make cereal, a consumer product

3 types of consumer products:

• Convenience products: inexpensive products, purchased frequently, little time and effort used for product
  • Eg. razors, coffee, chocolate
• Shopping products: Moderately expensive, purchased infrequently
  • Consumers spend time comparing features, benefits, and price
  • Eg. cars & laptops (goods), life insurance & house contractor (services)
• Specialty products: very important products that may be purchased only once
  • Eg. ring, wedding gown, wedding catering

Research and Development (R&D): Looking for innovations and ideas which will lead to the next generation of products

Product Life Cycle

Product life cycle: introduction, growth, maturity, decline, and demise of products & industries as consumer preferences change

Stages:

1. Introduction
2. Growth
3. Maturity
4. Decline
5. Introduction

• Product is new, not well-known
• # of units small, selling price high

1. Growth

• Demand for product expands rapidly
• Economies of scale: A decrease in the cost to produce a product as the volume of product increases
  • Note to self: This probably relates to why it’s cheaper buying in bulk
• Easier to purchase = more it will be purchased
• This stage is when product begins to make profit

1. Maturity

• Sales peak
• Product most profitable
• Most purchase that consumers make are replacements of the product (aka everyone’s already got a product)
  • This is called saturation

1. Decline

• # of purchase falls after saturation/being outdated
• Sometimes forced to cut product price = profits falling

Life Cycle Extension

• One tactic to delay product decline is to launch new variation/update

Life cycle extension: Any effort by a business to re-package, re-launch, or update mature but well-known product

• Eg. new flavours of coke