Product and Price

     A product is everything that one receives in an exchange, including all attributes and expected benefits. The basic product may be a manufactured item, a service, an idea, or some combination of these.

     Products are classified according to their ultimate use. Classification affects a product's distribution, promotion, and pricing. Consumer products, which include convenience, shopping, and specialty products, are purchased to satisfy personal and family needs. Industrial products are purchased for use in a firm's operations or to make other products.

     Every product moves through a series of four stages&-introduction, growth, maturity, and decline&-which together form the product life cycle. As the product progresses through these stages, its sales and profitability increase, peak, and then decline. A firm that does not introduce new products to replace declining products will eventually fail.

     A product line is a group of similar products marketed by a firm. The firm's product mix includes all the products it offers for sale. Customer satisfaction and organizational objectives require marketers to develop, adjust, and maintain an effective product mix. Marketers may improve a product mix by changing existing products, deleting products, and developing new products.

    New products should be developed in a series of seven steps. The first two steps, idea generation and screening, remove from consideration those product ideas that do not mesh with organizational goals or are not feasible. Concept testing, the third step, is a phase in which a small sample of potential buyers is exposed to a product idea through a written or oral

description in order to determine their initial feelings and buying intentions associated with the product. The fourth step, business analysis, generates information on the marketability and profitability of the proposed product. The last three steps&-product development test marketing, and commercialization provide an actual product and launch it into the marketplace. Most product failures result from inadequate product planning and development.

     Branding strategies are used to associate (or not associate) particular products with existing products, producers or intermediaries. Packaging protects good and enhances marketing efforts. Labeling provides customers with product information, some of which is required by law.

     Under the ideal conditions of pure competition, an individual seller has no control over the price of its products. Prices are determined by the workings of supply and demand. In our real economy, however, sellers do exert some control, primarily through product differentiation.

     Before the price of a product can be set, a firm must decide whether its basis for competition will be its low price or some nonprice consideration. Also, managers must consider the relative importance of price to buyers in the target market before setting prices. Prices may be established based on costs, demands, the competitions' prices or some combination of these. Cost and competition&-based pricing are simpler than demand&-based pricing, which considers additional marketing factors in the pricing process. Once basic prices are set, the seller may apply various pricing strategies to reach its target markets more effectively.