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CHAPTER 16
Developing and Promoting
Goods and Services
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-2
Learning Objectives
Explain the definition of a product as a value
package
Describe the new product development process
and trace the stages of the product life cycle.
Explain the importance of branding, packaging
and labelling.
Identify the objectives of promotion and discuss
the considerations involved in selecting a
promotional mix.
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-3
More Learning Objectives
Discuss the most important advertising
strategies and describe the key advertising media
Outline the tasks involved in personal selling and
list the steps in the personal selling process
Describe the various types of sales promotions,
and distinguish between publicity and public
relations
Describe the development of international
promotion strategies
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-4
The Product as a Value Package
Consumers purchase a product for its
function and benefit to them … for what it
does as much as what it is
Product features include both tangibles and
intangibles like image and reputation
must provide desired benefits
Value Package = a bundle of value-adding
attributes, including reasonable cost
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-5
Consumer Products Classification
Convenience
 bought frequently & with little thought
 milk
Shopping
 purchased infrequently; typically of moderate cost
 consumers shop around for price, value and brand
 home furnishings
Specialty
 purchased rarely; typically expensive
 consumers take time
to locate the exact item desired
 wedding gowns, automobiles
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-6
Industrial Products Classification
Expense Items: are used quickly
in the course of business/
production
Capital Items:
expensive, long-lasting
goods and equipment
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-7
Product Mix
Product mix
the group of products a company has for sale
 Procter & Gamble sells household cleansers, disposable
diapers etc.
Product line
a group of similar products intended for a
similar group of buyers
 Procter and Gamble sells more than one brand of laundry
detergent
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-8
New Product Development
 Needed to expand, and survive
 Expensive, risky and long time horizons
Product mortality
 only 1 in 50 new product ideas reaches the market
 only a few become successful
Speed to market
 introduce products quickly to respond to changes
 introduce ahead of competitors to establish market leadership
 more rapid = more likely to survive
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-9
The 7-Step Development Process
Step #1: Product Ideas
 Seek out ideas for new products
 Sources: employees, consumers, sales people, engineers
etc.
Step #2: Screening
 Elimination of product ideas that do not fit with the
firm’s resources
 Includes staff from marketing, engineering, and
production
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-10
The 7-Step Development Process
Step #3: Concept Testing
market research
identify benefits and a pricing strategy
Step #4: Business Analysis
comparison of costs and benefits
preliminary sales and cost projections
can it meet minimum profitability goals?
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-11
The 7-Step Development Process
Step #5: Prototype Development
 preliminary version of the product ; costly
 identifies potential production problems
Step #6: Product and Market Testing
 limited production of the product for sale in a test
market area with complete promotion and
distribution
 provides feedback on potential performance: costly
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-12
The 7-Step Development Process
Step #7: Commercialization
Full-scale production and marketing
may be rolled out on a gradual basis to
alleviate strain on the company’s production
and finances
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-13
Developing Services
Step #1: Service Ideas
defining the “service package”
identification of the tangible and
intangible features that define the
service
Step #5: Prototype Development
requires “service process design”:
selecting the process, identifying
worker and facilities requirements
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-14
The Product Life Cycle Concept
Products have a limited profit-producing
life cycle
Consists of four stages
introduction, growth, maturity, and decline
May be months, years, or decades
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-15
The Product Life Cycle
$
Dollars
Sales
Profits
0
Introduction
Growth
Maturity
Decline
Time
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-16
Introduction
Competition is limited to the firm that has
introduced the application
Costs are high due to R & D and promotion
Profits are non-existent due to expensive costs
Prices are high to offset costs of market entry
Promotion focuses on informing consumers
and generating initial product demand
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-17
Growth
Sales grow rapidly
New competition enters
Aggressive promotion emphasizes brand
preference
Prices lowered to meet competition
Profits peak and level off
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-18
Maturity
Industry sales level off
Market becomes more aggressive due to
increased competition in the face of slow/no
sales growth
Profits decline
 Costs increase due to the need to promote aggressively
while prices are simultaneously declining
In late maturity, some firms will leave the market
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-19
Decline
Sales and profits decline
Product is becoming obsolete
Competition leaves market
Sales drop: the industry has run its course
Promotion is limited and tied to brand loyalty
Firms with larger market shares may let product
linger until industry ceases to exist
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-20
Extending Product Life: Foreign Markets
Product Extension
 Marketing an existing product globally (Coca-Cola, Levi’s)
Product Adaptation
 Marketing a product internationally with some
modification (McDonald’s in Germany serves beer)
Reintroduction
 Aiming declining or obsolete products to less developed
markets (Manual cash registers in Latin America)
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-21
Identifying Products
Branding
Packaging
Labelling
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-22
Branding
Branding
 use of symbols to communicate the qualities of a
product made by a particular producer
Brand Equity
 degree of loyalty to and awareness of a brand and its
relevant market share
 manage brands to increase value and “brand loyalty”
 International Branding
 takes a long time to establish national or global brand
recognition
 must consider how brand names translate
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-23
Types of Brands
National
Private
 distributed by, and
carrying the name of
the manufacturer
(Kellogg’s)
 brands carrying the
name of the retailer or
wholesaler (President’s
Choice)
Licensed
 selling the right to use
the firm’s name on
another company’s
product (Mickey Mouse)
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-24
Brand Loyalty
Measured in 3 stages (from least to most loyal):
Brand Recognition:
consumers recognize the brand name
Brand Preference:
consumers prefer one brand over another
Brand Insistence:
consumers insist on buying only one brand over all
others without substitution.
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-25
Trademarks, Patents and Copyrights
Trademark 
 the exclusive legal right to use a brand name
Patent
 protects an invention or idea for a period of 20 years
Copyright 
 exclusive ownership rights to creators of books,
articles, designs, illustrations, photos, films, and music
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-26
Packaging and Labelling
Packaging
 The physical container in which the
product is sold
 makes the product attractive
 reduces risk of damage, breakage or spoilage
Label
 identifies the product’s name, contents,
and possibly benefits
 identifies, promotes and describes
Must conform to the Consumer
Packaging and Labelling Act
(federal legislation)
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-27
Promotion
Seeks to
Communicate Information
increase product awareness
increase knowledge of products
and their added-values
increase product preference
increase product purchase
Create Satisfying Exchanges
a more attractive product
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-28
Promotion Plan
Objectives
Information
Positioning
Added value
Sales volume
Strategies
Push
vs.
Pull
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Promotional
Mix
Advertising
Personal selling
Sales promotion
Publicity
Copyright © 2008 Pearson Education Canada
16-29
Promotional Objectives
Communicate Information
 awareness and education
 written, verbal or visual
Position Products
 establishing an easily identifiable image of a product in the
minds of consumers
 try to appeal to a specific market segment
Add Value
 added benefits, e.g. consumer discounts
Control Sales Volume
 achieve more stable sales despite seasonal sales patterns
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-30
Promotion Strategies
Push Strategy
 Firm promotes aggressively to intermediaries
 Commonly used by industrial product manufacturers
Pull Strategy
 Firm promotes directly to final consumers, who demand
the product from intermediaries
 Commonly used for consumer product producers
Many firms use a combination of both strategies
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-31
Promotional Mix
the combination chosen to sell a product of
 advertising
 personal selling
 sales promotions
 publicity and
 public relations
affected by
 the nature of the product
 the nature of the audience
 promotional budget
 the cost of different promotional methods
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-32
Promotional Techniques (1 of 2)
Advertising
any paid form of non-personal communication
by a sponsor
persuading or informing customers about the
product via various media
Personal Selling
Selling using sales representatives
Commonly used for industrial marketing
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-33
Promotional Techniques (2 of 2)
Sales Promotion
 using specialty items & methods to promote
the product
 Gifts, coupons, package inserts, samples
Public Relations
 Used to build good relations with buyers,
suppliers and other stakeholders
 charitable donations and sponsorship
Publicity
 Any non-paid communication about a firm
and/or its products
 outside the control of the firm
 press articles
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-34
The Consumer Purchase Process
and the Promotional Mix
Purchase Process
Advertising
Publicity
Problem
Recognition
Information
Seeking
Advertising
Personal
selling
Personal
selling
Sales promotion
Personal selling
Evaluation of
Alternatives
Purchase
Decision
Advertising
Personal selling
PostEvaluation
Purchase
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-35
Advertising Strategies
Informative Advertising
Increase awareness among potential buyers
generate primary (initial) demand
typical life cycle stage: introduction
Persuasive Advertising
influence the customer to buy the firm’s
product over that of the competition
typical life cycle stage: growth to maturity
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-36
Advertising Strategies
Comparative Advertising
influence customers to switch brands
involves direct or indirect comparison
typical life cycle stage: maturity
Reminder Advertising
keep the product’s name in front of consumers
typical life cycle stage: late maturity
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-37
Advertising Media
Media Mix
combination of media
company chooses
to use
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Newspapers
Television
Direct mail
Radio
Magazines
Outdoor
Word-of-mouth
Internet
Virtual
Other
Copyright © 2008 Pearson Education Canada
16-38
Newspaper
Widely used medium
Excellent market
coverage
Flexible with short
lead times
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Not kept
Not targeted
Not colour
Poor reproduction of
images
Copyright © 2008 Pearson Education Canada
16-39
Television
Total sensory
experience
(sight, sound & motion)
Can target specific
markets
Broad market
coverage
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Expensive
People are beginning
to ignore ads
Too many ads are
confusing
Short ad time
 hard to use as an
informative tool
Copyright © 2008 Pearson Education Canada
16-40
Direct Mail
Printed ads (flyers or mail-outs, faxes)
directed to final consumers’ homes or
businesses
Highly selective and personalized
“junk mail” image
Expensive but cost-effective
“Fax attacks” are effective
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-41
Radio
Large audience
Inexpensive
Can be selective
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Short ad time
Audio only
May pay little attention
Copyright © 2008 Pearson Education Canada
16-42
Magazines
Advantages
 High degree of consumer selectivity (less waste)
 Excellent reproduction of images (full-colour possible)
 Magazines have a long life
 Space is available for detailed product information
Disadvantages
 Long lead times
 Expensive fees for
special positioning in the issue
 Relatively expensive
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-43
Outdoor
Billboards, signs, bus, taxi, and
bus stop ads
inexpensive, with little distraction for
readers
reaches broad audience, but is not
selective
limited information
Some areas ban roadside
billboards
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-44
Word-of-Mouth
Opinions about products passed from
consumer to consumer through informal
conversation
Very powerful promotional tool
Also called buzz marketing
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-45
The Internet
Advantages for Buyers
Advantages for Sellers
 convenience
 reach
 privacy
 direct distribution
 selection
 reduced expenses
 useful information
 flexibility
 control
 feedback
Weaknesses
 high failure rate
 information overload
 limited markets
 security issues: credit cards and spyware
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-46
Virtual Advertising
Uses “digital implants” of brands or
products in live or taped programming
Appears that product was part of the show
Viewers are paying attention
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-47
Other Advertising Channels
Yellow Pages
Catalogues
Sidewalk flyers
Telephone calls
Door-to-door advertising
Skywriting
Special Events
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-48
Types of Advertising
Co-operative
Brand
Institutional
Trade
Product
Advocacy
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Retail
Industrial
Copyright © 2008 Pearson Education Canada
16-49
Advertising Campaigns
Identify the
target audience
Establish an
advertising budget
Define the objectives
of the messages
Create
advertising messages
Advertising Agency
A firm that
creates and places ads
for clients
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Select
appropriate media
Evaluate
advertising
effectiveness
Copyright © 2008 Pearson Education Canada
16-50
Personal Selling Situations
Most expensive form of promotion
 telemarketing more popular due to lower cost
 Retail: selling to consumers
 buyer usually comes to seller
 Industrial: selling to business users
 seller usually goes to buyer
Sales force management
 setting goals for sales people, organizing a sales force,
implementing and evaluating the sales program
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-51
Personal Selling Tasks
Order processing
 receiving and handling orders
 route salespeople
Creative selling
 using techniques to persuade people
to buy products with benefits that are
hard to describe or relate to
 essential for high-priced items
Missionary selling
 offering of technical assistance to aid
the selling process, or to promote the
image of the firm
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-52
Personal Selling Process
Prospecting &
Qualifying Leads
Creative selling
involves skilful use
of a sales presentation.
Approaching
Presenting &
Demonstrating
Handling
Objections
Closing
Following up
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-53
Sales Promotions
Short-term promotional activities designed to
stimulate buying or cooperation from distributors
Coupons
Point-of-purchase (POP) displays
Purchase incentives/premiums
 free item or bargain price
Trade shows
Contests and sweepstakes
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-54
Publicity and Public Relations
Publicity
 information made available to consumers
via the news media
 company has no control over it
 free to the company
Public relations
 public service announcements initiated by
the firm
 designed to enhance the firm’s image
 sponsorship, charity work or donations
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-55
International Promotion
Companies involved in exporting are adopting a
worldwide advertising strategy
 Decentralized approach
 separate marketing management for each company
 Global perspective
 a coordinated marketing focus on a global scale
Issues impacting on international promotion
 language differences
 product variations
 cultural receptivity
 image differences
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada
16-56
Small Business Promotion
Firms use the same sales promotion methods as
larger firms and rely heavily on publicity
 non prime-time local or cable TV
 newspapers, radio and the Yellow Pages
 personal selling locally
 telemarketing and direct mail nationally
 direct mail, targeted magazine, and sales agencies internationally
Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke
Copyright © 2008 Pearson Education Canada