Page 362 - Introduction to Business

336 PART 3 Marketing

LEARNING OBJECTIVE 4 introduce the new product and the methods whereby
Discuss the concept of brand equity and why it is its performance is tracked.
important.
LEARNING OBJECTIVE 6
Brand equity refers to the value or worth of a brand. The Describe the product life cycle and how it can be
benefits from having a high level of brand equity used to manage existing products.
include improved balance sheets, better awareness of
The product life cycle consists of the introduction,
brands by customers, and better prices when a
growth, maturity, and decline stages of a product. Using
company is acquired by another.
the concepts of primary and secondary markets and the
competitive landscape, companies can formulate
LEARNING OBJECTIVE 5
marketing mix strategies over the PLC.
List the steps in the process for developing new
products and how each should be performed.
LEARNING OBJECTIVE 7
Firms use a number of sequential steps to develop new List the major objectives of a company’s pricing
products. In generating ideas for new products, they strategies.
consider both internal and external sources. During
Besides maximizing profits, firms expect their products’
screening, potential new products are evaluated on
prices to generate market share, prevent other firms
criteria the firm believes influence new product
from entering the market, maintain the current
success, such as whether they meet a specific market
competitive situation, or even permit them to survive in
need. Concept testing involves a sample of customers
a particular market, among others.
being introduced to the general notion of a new
product and how it can benefit them. As business
LEARNING OBJECTIVE 8
analysis is conducted, firms predict the likely
Summarize the basic concepts and tools needed to
profitability of the candidate. In developing a new
set prices.
product, firms should ensure that all required steps are
carefully performed and the marketing department In setting prices for their products, companies must
continues to be involved. Testing involves both know what objectives they want to achieve, the level of
technical testing to see how well a product’s physical demand and its elasticity, the product’s cost per unit,
properties will respond to various stimuli and market competitors’ prices, how distinctive the product is from
testing to measure the level of customer demand. existing ones, and how much marketing support the
Commercialization refers to the strategies used to product will receive.

Chapter Questions in formulating a strategy for managing existing
products?
1. What are some of the principles that should be 10. Should there be any restrictions on the ability of a
recognized as companies select brand names? company to pull products off the market? Why or
2. What are the two major purposes of packaging? why not?
Can you think of any others? 11. Why is elasticity or inelasticity an important
3. Distinguish between express and implicit warranties. pricing concept?
4. Which strategy for developing products for 12. What are the various ways markup can be
overseas markets do you believe will be the most measured?
effective, standardization or adaptation?
5. What should be top management’s role in the new Interpreting Business News
product development process? What should it not
Ford Motor Company recently announced its intention
do?
to develop a new range of small, mass-market cars for
6. Are you comfortable with how the text defines
emerging markets in Asia and South America. The cars
product failure? Is there a better way?
would also be sold in Europe. The development and
7. What are the advantages and disadvantages of
marketing of these cars is based on the following
companies developing prototypes for their new
strategies:
products?
8. How would you describe the product life cycle? Ford will develop a new global platform with suf-
Indicate how it can help a company manage its ficient flexibility to allow for regional differences
current products. in tastes.
9. Carefully distinguish between the primary market No new product development funds would be
and the secondary market. Why are they important required. The capital needed would be taken

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