Entrepreneurial Small Business 4th Edition Katz Solutions Manual

Entrepreneurial Small Business 4th
Edition Katz Solutions Manual

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Chapter 09 - Small Business Marketing: Product and Pricing Strategies
CHAPTER 9: SMALL BUSINESS MARKETING: PRODUCT

AND PRICING STRATEGIES
Chapter Summary
This chapter takes the student through two pieces of the marketing plan: product and
pricing. The student will learn the different characteristics of a product and service and how
the total product is a combination of these and more. New product development is
discussed. How to set price, the components of a price, pricing psychology, price
influencers and pricing strategies are presented.
Learning Objectives
After studying this chapter, the student should be able to:
1. Recognize the characteristics of goods and services.

2. Define the total product.
3. Differentiate the stages of new product development.
4. Understand how elasticity, margin and value impact price setting.
5. Apply different pricing strategies.
Focus on Small Business:

Scott the Seamstress
Scott Jones made his own fleece jacket because he couldn’t afford buying one. Friends saw
it and clamored for Scott to make ones for them as well. It took a little trial and error, but
Scott was able to establish pricing and product standards and Beyond Fleece is now an
extremely successful company.
Discussion Questions
1. How would you describe the pricing approaches used by Beyond Fleece when it
started and as it grew?
At first he simply covered the cost of his materials and some profits, a strategy known as
cost plus, return pricing, or return on investment pricing. He also priced below the
competition – the main reason he got into the business in the first place. As his business
grew he had additional investments to cover. The popularity of his jackets has increased
to the point where he doesn’t have to be the low price seller and can be at, or above,
competition.
2. As Beyond Fleece continues to grow Jones will face several challenges. First and
foremost how can he continue to offer a unique, customizable product as he
produces hundreds of types of garments?
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While each garment is strictly no longer 100% customized, each model is offered in a
number of colors and with 16 different options – providing a huge number of options.
Certainly programmable sewing machines are a big help and a process of “mass
customization” has worked for firms larger than Scott’s. At this point, it appears, there
are enough options to still be considered custom.
3. As more companies offer custom sizing, will consumer continue to pay higher
prices for Beyond’s clothing?
If the customer perceives this as a mass production item or as being the same as he can
purchase many places, he may be more reluctant to pay high prices. On the other hand,
if Scott establishes his product exceptionably high quality or prestigious – the
Lamborghini of fleece wear – customers will be willing to pay more, maybe more than
the price he’s currently using.
4. What directions do you see Beyond Fleece moving as a provider of custom clothing
and how will the business’s prices be affected?
Answers will vary.
Extended Chapter Outline
Note: Key terms are in boldface.
Teaching tool Internet application
International application Group activity
Objective 1: Recognize the characteristics of goods and services
1.1 Marketing it the process of planning and executing the factors of product, price,
promotion and placement, commonly know as the 4 P’s of marketing.
1.2 A product is anything that is offered to the market to satisfy a consumer’s wants,
needs or demands.
1.3 Products include goods, services, people and ideas.
1.4 While products are often divided into goods or services, most everything is a
combination of both goods and services.
1.4.1 A product has more tangibility (i.e., things that can be touched, seen, held,
tasted and/or moved) than a service. A purchased car is a good example.
1.4.2 A product that is nearly equal in intangible and tangible aspects – such as a
leased car – is considered a hybrid product.
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1.4.3 A product that is dominated by intangible aspects is a service.

1.4.4 A pure service would have very few tangible aspects – a cab ride, for
example.
1.5 In addition to tangibility, goods can be differentiated from services in several other
ways:
1.5.1 Services have perishability; they cannot be stored for future usage.
1.5.2 Services have inseparability; they are produced and consumed at the same
time.
1.5.3 Services have heterogeneity; each time it is offered it will be slightly
different.
Skill Module 9.1: Facing Intangibility and Perishability
This exercise allows students to explore some of the same options marketers do when
addressing the characteristics of services.
It’s important for students to realize that these characteristics of services do make a
difference to consumers who often feel somewhat “helpless” when evaluating different
providers. Often choices are made on what may be very unimportant factors –
unimportant to the actual production of the service. For example, a rundown restaurant
may serve the best food in town, but customers are reluctant to try it and will opt for a
place that looks nicer – and may serve less tasty food.
Objective 2: Define the total product
2.1 The total product is the complete bundle of goods and services that you offer, along
with what the product means to the customer.
Skills Module 9.2: Learning About the Total Product of You
This module allows the student to think about what characteristics they have that mean
something to someone else – their augmented product. By asking this person – their
customers – for a second list of characteristics, they will find new items – the things that
make up the total product.
2.2 The augmented product shows the distinctive competence – what sets you apart
from other competition.
2.3 The core product is the lowest common denominator – the basic good or service.
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Teaching tool: divide the students into groups and give each group a
core product. Have them develop the augmented and total product
concept for them. Have them tell briefly how their total product will
impact their pricing, their promotion and their distribution.
NOTE: this can be combined with the following teaching tool and done
as one exercise.
2.4 Why is the total product important to understand?

2.4.1 What you are/mean to the customer is much more than your core product.
2.4.2 Knowing what products mean to your customer, your target market, helps
you design the products they’ll want and design the rest of the marketing
plan – price, distribution and promotion.
2.5 Branding is part of your total product. Sometimes your brand is the same as the
company name. In any case, there are several considerations in picking your brand.
2.5.1 If you use your own name:
2.5.1.1 Add descriptors so that we know what your company does or your
product is.
2.5.1.2 If you use your name, consider the implications if you sell your firm.
2.5.1.3 Consider whether your name is appropriate, overused, and/or easy to
spell/pronounce.
2.5.2 For brand names in general:
2.5.2.1 Consider whether you are too close to a trademark.
2.5.2.2 Consider something that describes your firm or product and is easy to
remember and catchy.
2.5.2.3 Creative spellings are okay, as long as they are not too extreme.
2.5.2.4 Consider words that are evocative of the benefits your products offer.
2.5.2.5 Beware of a name that is too narrow to allow your firm to grow.
2.5.3 Many firms have different company names and product names. This has the
advantage of a poor product not necessarily being linked with the firm who
produced it.
2.5.4 For many small businesses, the owner and the brand are virtually
indistinguishable.
Teaching tool: Using the total products developed in the exercise above,
have students come up with several suggestions for brand names.
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Objective 3: Differentiate the stages of new product development.
3.1. Before a product is introduced, it needs to go through a series of steps known as the
new product development process.
3.1.1. These steps may take years or a few hours or days.
3.1.2. More innovative product will take longer, while me-too products may even
skip steps of the process.
3.2. The first step is idea generation (and was covered in chapter 4). There are several
processes to consider:
3.2.1. Often ideas for new products come from something the entrepreneur wants
and can’t find.
3.2.2. Using the SCAMPER approach found in Chapter 4 is another approach.
3.2.3. Keep a product notebook and jot down every idea. Review them from time
to time. Use SCAMPER to “play” with them.
3.2.4. Look at your job, your hobbies, your family and friends, and your customers
for new ideas.
Skill Module 9.3: Creating Your Own Idea Notebook
Many goods and services are invented because someone was unhappy with what already
existed. Jotting down these dissatisfiers and exploring possibilities using tools such as
SCAMPER, are ways to potential create a new product or service.
3.3. Step two is idea screening, also covered in Chapter 4.

3.3.1. Particularly consider I2P which looks at.
3.3.1.1.Product – innovativeness and uniqueness;
3.3.1.2.Market – size, need;
3.3.1.3.Intellectual Property;
3.3.1.4.Whether you have the right people to make the idea succeed;
3.3.1.5.What resources will be required to bring the idea to successful
completion; and
3.3.1.6.Profitability of the idea
3.3.2. Typically, multiple ideas are generated and compared head-to-head.
3.4. In idea evaluation, step three, you consider more specific details to see if the idea is
feasible.
3.4.1. Additional information is gathered on its cost, how it should be marketed and
its market potential.
3.4.2. Consider how it fits with your mission.
3.4.3. The tool to use is Feasibility Analysis (chapter 4).
3.4.4. The results will normally be:
3.4.4.1.The idea cannot be economically made.
3.4.4.2.The product can be made but the market is insufficient.
3.4.4.3.The product can be made and the market is large enough, but you
need resources to make it happen.
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3.4.4.4.You have everything you need and are “good-to-go.”
3.5. The fourth step is product development; in this step the “serious” evaluation gets
done.
3.5.1. Build (or have built) prototypes for consumer testing for advanced consumer
concept testing.
3.5.1.1.Prototypes can be expensive, but perhaps a “desktop” version will do
for now.
3.5.1.2.You may be able to rough it out using products you have at home and
can get from a craft store.
3.5.1.3.Universities may have rapid prototyping equipment capacity.
3.5.1.4.A manufacturer may prototype your product in exchange for part of
your business.
3.5.1.5.For services a mock-up Website or example projects can serve the
same purpose.
3.5.2. Conduct test marketing.
3.5.2.1.This is a good method to test not only your product, but promotion,
distribution and pricing strategies as well.
3.5.2.2.Largest drawback is that competitors can see what you are doing and
possibly get a head start.
3.5.3. Simulated test markets can be developed. Although these are harder for
competitors to infiltrate, they are artificial settings and the results aren’t quite
as true.
3.5.4. Family and friends are low cost test markets that are unlikely to tell the
competition, but they may try to spare your feelings if they don’t like your
product.
3.5.5. Groups such as a church’s Ladies Aid or the local Friends of the Library may
be willing to try your product and report back, perhaps for a donation to their
cause.
3.5.6. Leverage social media by having participants share their opinions on a
private Facebook group or LinkedIn.
3.5.7. If you are not in business, in a very different business or where prototyping
and test marketing are difficult, consider focus groups discussed further in
chapter 12.
3.6. The final step is commercialization or making the product available to consumers.
3.6.1. There may be government or university assistance
3.6.2. Small businesses with limited budgets may want to introduce their products
city by city or region by region.
3.6.3. You may want to hire a contract manufacturer to make and sell your product
for you
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Small Business Insight: The Story of Kryptonite
Mike Zane of Kryptonite has a constant stream of new products coming. He tests his
prototypes in unique ways – such as sitting in a surveillance van for 48 hours seeing if
any one could steal his bike.
Take-away point: Product/service testing does not need to be traditional. In fact, an

idea such as Zane’s also created some nice publicity – a small business’ cheapest
advertising as further discussed in Chapter 10.
Objective 4: Understand why pricing is an important but difficult task for small
businesses.
4.1 While marking or changing a price is an easy task, determining what number to use
can be challenging.
4.1.1 It has an impact on your personal earnings
4.1.2 It determines how many sales you can make.
4.1.3 It sets expectations about the quality of your product or service.
4.2 Many factors impact your pricing decisions.

4.2.1 What your competition does.
4.2.2 Computations to determine profit levels.
4.2.3 Your magic number and strategy (chapter 7).
4.2.4 Your target audience and value proposition (chapter 10).
4.2.5 The costs of your business (chapter 13.)
4.3 Your fundamental goal should be your optimum price. Four factors help you
determine this.
4.3.1 The demand for your product or service
4.3.2 The value delivered to the customer.
4.3.3 Prices set by competing firms.
4.3.4 Your business strategy and product placement.
4.4 Businesses often use some arbitrary rule-of-thumb in setting prices with disastrous
results.
Objective 5: Understand how elasticity, margin and value impact price-setting.
5.1 While your magic number can give you sales, here is where you break that down
into price.
5.1.1 Annual sales can break down into daily sales which can be used to find out
how many units you might need to sell based on a certain price.
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5.1.2 Mark-up pricing looks at the costs you have plus the mark-up (what you
need or would like to make) to tell you the price you need to have.
5.1.2.1 This computation will also tell you your margin.
5.1.2.2 One way to increase sales is to lower prices – but this means you’ll
need to sell a lot more in order to make your magic number.
5.2 Price elasticity has to do with how essential a product is to customers.

5.2.1 Inelastic products are products that are essential and raising prices will only
drop sales slightly.
5.2.2 Elastic products are less essential and lowering or raising prices will have a
larger impact on the quantity sold.
5.2.3 The law of supply and demand is illustrated by elasticity.
5.2.4 If there is a quick and larger increase in demand, a reasonable increase in
price is expected, however, be wary of price gouging.
5.2.5 Price elasticity also means that if your competitor starts charging a lower
price, your sales could drop considerably.
5.3 Price also signals different things to customers.

5.3.1 Quality is often determined by price – a more expensive item with no
discernible differences from a cheaper version must be better quality.
5.3.2 Conversely, people will pay a higher price when they discern that a product
is a better value.
5.4 Screaming Eagle provides a good example of why prices are not just cost plus a
profit margin.
5.4.1 Demand for a product drives prices up.
5.4.2 Price is tied to the value the customer perceives he/she is getting.
5.4.3 Competition must be considered.
5.4.3.1 Lower prices than competition.
5.4.3.1.1 While tempting to have a lower price, the competition will
catch on and can react by lowering their prices.
5.4.3.1.2 Your revenue as a percentage of sales will decline as well.
5.4.3.2 Higher than competition: Sounds good, but will only work if the
customers see the value in the higher prices.
5.4.4 Examining your product/service against the values discussed in chapter 7 are
ways to determine if your product could bear higher prices.
5.5 The factors that influence setting the right price vary from industry to industry, but
there are some underlying similarities:
5.5.1 If you are operating profitably at or near capacity, the price needs to be high
enough not to leave any money on the table.
5.5.2 If the product is extremely popular or rare (e.g., patented), charging high
prices is warranted.
5.5.3 If you are operating below capacity, setting prices low should bring in
enough business to meet payroll and keep operating.
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5.5.4 Growing a business or planning your exit strategy are other goals that can
influence the prices you set.
5.6 Examine the market

5.6.1 See what prices your competition is getting.
5.6.2 See what they are offering for the price.
5.6.3 Look at your costs.
5.6.3.1 You will want to cover costs and make some profit.
5.6.3.2 You also want to meet your goals.
5.6.3.3 Once you have a price that does both, you can experiment a bit to see
what works best.
5.7 Company objectives:

5.7.1 The objective in the start-up phase is survival and products may be sold at
nearly any price merely to meet cash flow needs.
5.7.2 Increasing market share as an objective means setting a fairly low price to
encourage switching behavior.
5.7.2.1 Lower prices make it harder to cover costs.
5.7.2.2 Lower prices are hard to raise later.
5.7.2.3 Lower prices send out lower quality signals.
5.7.3 The objective of profit maximization means setting prices relatively high.
5.7.3.1 This isn’t setting the highest price, but rather setting a higher price
AND keeping sales strong.
5.7.3.2 Companies that compete on innovation and high quality achieve
higher growth than those who compete of price.
Small Business Insight: Blue Water Boatworks
J.P. Keating set a low price for his service, but his customer showed him that he was
under pricing.
5.8 Marketing strategy:

5.8.1 Price is only one part of the marketing strategy.
5.8.2 Price must match the advertising, distribution and product components as
well. For example, plain packaging, “it’s a great value” advertising and
selling at Wal-Mart indicate low prices, while a gilt package, “because you
deserve it” advertising, and selling at upscale stores indicate higher prices.
5.9 Channels of distribution

5.9.1 Price escalation happens because each person who handles the product gets a
profit.
5.9.2 Price escalation can raise the price to your customers four times or more.
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5.9.3 If price escalation puts your price too high compared to competition, consider
direct distribution (see chapter 11).
5.10 Competition:
5.10.1 Small businesses generally do NOT want to be the low price in the market
for reasons mentioned above.
5.10.2 Deciding how to price in comparison with the competition means comparing
your “bundle or satisfactions” against your competition’s product.
5.11 Legal and regulatory:

5.11.1 There some product specific rules, especially in the form of taxes.
5.11.2 There are laws against price fixing and collusion.
5.11.3 Sometimes there are government mandated price maximums or minimums.
5.11.4 Some forms of price discriminations are allowed and others are illegal.
Objective 6: Apply different pricing strategies
6.1 After knowing your objectives, costs, competition and all the other categories
consider, you still need to think about your customers.
6.2 Pricing psychology has to do with the customer’s perception about the price and
varies customer to customer and from time to time. Some of the more frequently
observed pricing psychology phenomena are:
6.2.1 Internal reference price: Customer’s have a mental image of what a product
should cost based on past experiences, what he/she remembers reading or
hearing and the value the product has to the customer.
6.2.2 External reference price: The customer’s perception of what a product
should cost is now based on outside influences – what friends have said,
comparison shopping, ads, salesmen’s spiels, etc.
6.2.3 Perception of value: Customer will pay more if they perceive the value the
get is higher. If it’s important for me to have, I’ll pay more; if you don’t
really care, you’ll pay less.
6.2.4 Expectations of future prices: If you think prices are going to go up, you’ll
pay more; if you think they are going down, you’ll pay less.
6.2.5 Price range of acceptability: Consumers set a range of prices, below which
they believe the quality is questionable and above which they think they are
being taken advantage of.
Skill Module 9.4: Pricing Psychology
By manipulating some of the product characteristics consumer use to determine value,

quality, students have the opportunity to examine pricing psychology.
6.3 There are a number of pricing strategies that small businesses can use:
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6.3.1 Price skimming is charging the highest price the market will bear. This is
used if you are the first one in the market and is often used to recoup start-up
expenses before competition sets in.
6.3.2 Prestige or premium pricing is setting prices high and supporting it with
the rest of your marketing strategy in order to create the impression that your
product has high quality (premium) or is a status symbol to own (prestige)
Teaching example: Swiss Watchmaker TAG Heuer thought they were

following a good strategy when they set the average price of their watches
around $250 dollars. Sales were mediocre as the watch wasn’t perceived as
being neither in the inexpensive category nor truly in the upscale category.
They moved their average price to $1500 and sales increase seven times.
6.3.3 Odd-even pricing means ending your price with a 9, 7 or 5. $99.99 sounds
much cheaper than $100 to customers.
6.3.4 Partitioned pricing is setting a price for the main component and pricing all
the peripheral components, installation, delivery, etc., separately. Consumers
select the main component based on the preset price they had in mind and
may spend much more to get all the accessories.
6.3.5 Captive pricing occurs when the customer spend usually a low price for a
base system but then is locked into certain expendables he/she must purchase
to use the system. These expendables are where the business makes most of
their profits.
6.3.6 Price lining is an attempt to please a wider target market by setting multiple
price points for closely related products – often “good” quality, “better”
quality, and “best” quality. This can work on products from shampoo to
clothing to appliances.
6.4 While having low prices is not recommended for small businesses, there are times
and occasions when it makes sense to temporarily reduce price, or to give the
impression of lower prices. These reasons include:
6.4.1 These reasons include:
6.4.1.1 Attracting more business.
6.4.1.2 Smoothing service cycles
6.4.1.3 Building loyalty
6.4.1.4 Moving excess inventories
6.4.1.5 Alleviating temporary cash flow problems
6.4.2 Some price lowering techniques include:
6.4.2.1 Periodic or random discounting is having a sale on a regular cycle
(periodic) or not (random).
6.4.2.2 Off-peak pricing works especially well for seasonal products or for
services trying to reduce perishability. During slack times, lower
prices are charged in order to get people to change their buying
patterns
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6.4.2.3 Bundling, multiple-packs or bonus-packs are methods to give the

customer more at a lower cost.
6.4.2.3.1 Generally services use bundling – combining more than
one service at a price slightly less than each separately
would be. For products, it’s combining two (or more)
different products and selling them at a lower total price
than the two (or more) separately. This is a good way, too,
to get customers to try slower moving products or services,
or new products or services.
6.4.2.3.2 Multiple-packs involve more than one of the same products
(e.g., two hamburgers for the price of one).
6.4.2.3.3 Bonus packs are larger amounts of the product/service for
free (e.g., shampoo with 25% more in the bottle than
normal).
6.4.2.3.4 There is a psychological bonus as well; the more people use
of your products, the more likely they are to internalize this
brand as “their brand” and become more loyal customers.
6.4.2.4 Coupons, rebates and loyalty programs reduce prices and promote
sales.
6.4.2.4.1 Coupons encourage people to switch brands or to try new
products. Even if they are not redeemed, they have the
advertising value of creating a lower price/higher value
“feeling” in the customer’s mind.
6.4.2.4.2 Rebates are great incentive to buy, but rebate redemption
rates are extremely low. Even if the customer fails to
redeem the rebate, he still has the perception that he’s made
a good deal.
6.4.2.4.3 Loyalty programs get the customers to return multiple
times and are good at creating customer allegiance.
Generally, when a customer has purchased a certain
number of products, he/she gets something for free.
Customers often forget their loyalty cards or never quite get
enough purchases, but still feel they have made a good
deal.
6.4.2.5 Referral discounts are a great way to get businesses established and
an inexpensive method of advertising. A customer recommends your
business to a friend and when that friend buys something, the original
customer gets a discount, something for free or some other incentive.
6.5 Setting prices too low is a big problem for small businesses.
6.5.1 Most small businesses in financial difficulties have set their prices too low,
especially as only 15 – 35% of consumers decide on a product using price as
the number one factor.
6.5.2 There are other pricing techniques in table 9.1, but these only scratch the
surface.
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Key Terms
Augmented product: core product plus features that tend to differentiate it from
competition.
Bundling: combining two or more products in one unit and pricing it less than if the units
were sold separately.
Captive pricing: setting the price for an item relatively low and then charging much higher
prices for the expendables it uses.
Core product: the very basic description of what the product is – a bar of soap, a house-
cleaning service.
Elastic product: product for which there are any number of substitutes and for which a
change in price means a difference in quantity purchased.
Elasticity: the degree to which a product’s demand changes when its price changes.
External reference price: an estimation of what a price should be based on information

external to a consumer such as advice, advertisements or coupons..
4 P’s of marketing: the four elements of a marketing plan – product, price, promotion
(advertising) and placement (distribution).
Goods: a physical product
Heterogeneity: a quality of a service in that each time it is provided it will be slightly

different from the last time.
Inseparability: a quality of a service in which the service being done cannot be

disconnected from the provider of the service.
Inelastic product: product for which there are few substitutes and for which a change in
price means very little difference in quantity purchased.
Internal reference price: a consumer’s mental image of what a product’s price should be.
Law of Supply and Demand: the economic theory that describes how the demand for
products (or services) and the supply of them affect each other.
Margin: the amount of profit usually stated as a percentage of the total price.
Markup: the amount an entrepreneur adds to costs to provide a profit.
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Markup pricing: a price setting method where an amount is added to the cost of a product
to set the retail price and provide a profit.
Me-too products: products essentially similar to something already on the market.
Multiple or bonus pack: combining more than one unit of the same product and pricing it
less than if they were each sold separately.
Odd-even pricing: setting a price ending in the number 5, 7, or 9.
Off-peak pricing: charging lower prices at certain times to encourage customers to come
during slack periods.
Optimum Price: the price that would generate the most income possible for the year for
the product or service you are selling.
Partitioned pricing: setting the price for a base item and then charging additional for each
additional component.
Peak pricing: charging more for a product or service during high demand periods.
Periodic or random discounting: sales conducted either at predictable or non-predictable

intervals.
Perishability: services exhibit perishability in that if it is not used when offered, it cannot
be saved for later use.
Prestige or premium pricing: setting a price above competition so as to indicate a higher

quality or that it is a status symbol.
Price gouging: charging an outrageously high price for something.
Price lining: the practice of setting (usually) three price points: good quality, better
quality, best quality.
Referral discount: a discount given to a customer who refers a friend to your business.
Service: a nonphysical product.
Skimming: setting a price at the highest level the market will bear, usually as there is no
competition at the time.
Tangibility: an item’s capability of being seen, touched, tasted or felt.
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Target market: the group of people on which a marketer focuses promotion and sales
efforts.
Total product: the entire bundle of products, services and meanings of your offering.
Includes extras like service, warranty, or delivery as well as what the product means to the
customer.
Discussion Questions
NOTE: many questions allow for a number of different answers. Below are some
suggestions
1. A college education comes pretty close to a true service. Discuss the four
main characteristics of service – intangibility, inseparability, perishability
and heterogeneity – as they pertain to a college education
Intangibility: you can’t touch, feel, smell, or taste an education.
Inseparability: a student must consume (listen, participate, learn) at the time the
service is produced (lecture, discussion, etc.). A professor must be engaged in
teaching (lecturing, etc.) when teaching is done.
Perishability: if no one shows up to a lecture, discussion, etc., it cannot be stored

(except via videotape, etc., and then with limitations) for a later time.
Heterogeneity: A course varies based on the professor teaching it, the

professor’s mood on a certain day, the time of day and students in the classroom,
and other factors
2. What is the core component, the augmented product and the total product
sold at your college or university? How does it differ from your institution
to others in the area?
Core product: education
Augmented product: a liberal arts education or a degree in entrepreneurship, etc.
Total product: will vary considerably but might include the school’s mission,
social and sports experiences of the student, the prestige of the school, etc.
The difference here will be dependent on the schools selected to compare.
If students are experiencing difficulty, ask them why they selected this particular
school (and why they did NOT pick other ones).
9-15
3. List all the products/services you have seen lately that are promoted as new,
different, improved or otherwise changed from what has been available
before. What percentage of these are actually me-too products? Identify
the differential advantages these companies believe they have over the
competition.
Answers will vary considerably. Percentage of me-too products are likely to be

extremely high – even 100%.
Students will/should discover that differential advantages are often subtle and
dependent on the belief of the consumer. Does one product REALLY taste
better than another? Is one company TRULY faster than another? And, beyond
this, do consumers really CARE about the differences? A classic example is the
airline industry that advertised based on safety records and on-time arrivals;
while customers do want safe, timely flights, things such as pricing, comfort and
destinations were far more critical deciders. (Thus the birth of many discount
airlines, etc.)
4. Why do owners and manager of small businesses spend so much time on

issues of pricing?
If prices are too high, you may lose customers. If they are too low, you may be
cutting into your profits. How high or low your price is sends signals to the
customer about your quality. Competitors will also watch and react to your
prices.
5. Suppose you are operating a copy service. You learn that FedEx Kinkos is
going to open an outlet just a few blocks away. You are concerned that you
cannot compete with the marketing power of FedEx. What is likely to
happen to your business if you lower your prices and place colorful
advertising banners in the windows announcing the lowered prices?
FedEx Kinkos, being a large company with “deep pockets” is likely to meet or
beat your prices.
6. How do the four primary factors of optimum price work together to

determine what price should be? Draw a diagram of the relationships.
Basically, they work hand in hand. Your business strategy (factor 4) may
indicate that you have a prestigious product (factor 2) sold in exclusive channels
(factor 4) at a price higher than the competition (factor 3) even though this price
will limit the customers who can afford it (factor 1) – and similarly in reverse.
The model will vary but might look something like (showing the opposite side of
9-16
the coin):
Business strategy: to capture the largest possible market
Increase demand “Okay” quality Less than

(value) competition
Lower prices
7. Describe a situation where you have been influenced by consumer buying

psychology towards considering a price too high or a real bargain.
Answer will vary, but should reflect one of the pricing psychology situations.
8. Think of two products in the same product category – one high priced and
one low priced. How do the other parts of the marketing mix – the product
itself, the advertising message and the distribution – support or detract from
the message the price tag gives?
Answers will vary but certain things will come out: Wal-Mart distribution for
low priced items; “rich” colors on expensive product ads, “because you deserve
it” messages for more expensive items, etc.
Experiential Exercises
1. At this point in time, you are fairly experienced with a college education.
What could you suggest could be done in order to reduce intangibility,
inseparability, perishability and heterogeneity of this service?
Answer will vary, but here are some suggestions:
Intangibility: Show statistics about earning power with a degree versus without.
Inseparability: Provide different sort of “on-your-own” learning experiences

besides just the textbook – workbook, posted lecture notes, etc.
9-17
Perishability: Videotape professors’ lecture for later viewing.
Heterogeneity: Have all professors teaching the same class adhere to covering
certain materials. Provide teaching classes or other help to sub-standard teachers
to improve the level. Have professors rotate classes to ensure that all students
hear the same material.
2. BMW automobiles call themselves “the ultimate driving machine.” Their

advertising tagline attempts to capture the total product package – what
driving a BMW means to its owners. Review other advertising and come up
with a list of five other products that do the same thing. What do their
products mean to their consumers?
Answers will vary considerably depending on what ads are chosen.
If students are having some difficulty figuring out what this means, ask them
what brands they “insist” on buying, or will go out of their way to get. At what
stores “must” they shop? The follow-up question is “why?”
3. With a group of friends, brainstorm a list of ideas for a service you could
provide for your college professors. Design an idea checklist to evaluate this
list.
Answers will vary, but should resemble the checklist in the text.
4. Select a service you know. Brainstorm a list of potential incremental

changes – whether technologically feasible or not – that might extend the
product life cycle for them over the next several years.
Answers will vary, but should show incremental changes rather than radical
changes. Have them look back at the SCAMPER model to help generate ideas.
5. Set up several selling scenarios for the same product displaying different
cues about the value of a product (e.g., where it’s sold, whether it’s on sale),
the motivation of the seller, prices of competitive products (external
reference price) and other possibilities appropriate for your product. Ask
several people what they would pay under the circumstance you’ve set up.
This exercise should result in testing consumer behavior/perceptions based on

external clues – price, where it’s sold, country of origin, motivation of seller,
competitive pricing and other techniques at the student’s discretion. If the results
are not what were expected, speculate the reasons why. Generally, they will
have set their variables either too extreme or not different enough.
9-18
6. For one week collect all the coupons you find in newspapers, magazine,
mail, etc., etc. What percentage are for products or services or brands that
you would really buy? Typically, how many coupons do you actually use in
a week? Pull all the coupons for one product category and visit a store. Are
there other brands of that same product that do not have coupons? Are
they engaging in any other method to attract customers – rebates, sales,
contests, multipacks, etc.?
Answers will vary. Generally students find that they are exposed to way more
promotional materials than they’ll ever use. While they usually believe that
before this exercise, they often do not realize exactly how many they see.
Follow-up questions include asking which promotional activities were likely to

catch their attention. Would they switch from their normal brand due to
promotions on a competing brand? When? Why or why not? What products?
Usually, a promotion will get someone to switch if it’s not an “important”
product or brand for him or her. The larger the advantage – the bigger the
discount, the more attractive the contest – the more likely they are to switch.
7. You’ve heard about Paul Scheiter and his firm,

HedgehogLeatherworks.com. One of his customers, Ian Atkinson, is a big
fan, and also a leatherworker, and provided his analysis of the pricing
behind one of Hedgehog’s most popular sheaths. See the video at
http://www.youtube.com/watsh?v=NYqmSzx_LRs. Based on this example,
explain in your own words how elements like design and quality of
construction make a product worth more than just the cost of raw materials
and an hourly wage for leatherworking. The first 14 minutes gives you the
pricing discussion. The last 7 minutes shows you what you would have to do
to make a similar sheath of your own.
Answers will vary.
Student Manual Critical Thinking Exercises

Learning objective 1
1. Donna Harsch is opening a bed and breakfast in a historic old house with a
distinctive red roof. This famous home is located in a seaport in Maine. What
parts of her operations are goods and what parts are services?
Answer:
Goods would include the actual room, bed and other furnishing and the food she
provides.
Services would include the cleaning and maintaining of the rooms, including the
9-19
ambiance created by the décor. The preparation of the breakfast and its
presentation are also services. Donna probably accepts credit cards, offers
advice about tourist attractions, makes reservations at local restaurants and may
provide airport pick-up.
Other possible goods and services may also be offered.
2. Address the four characteristics that differentiate services from goods for
Donna's bed and breakfast. How might she address each one?
Answer:
Answers may vary, but here are some possibilities:
Tangibility: The ambiance that Donna is trying to achieve is intangible. Does

she want romance, comfort, or practicality? These will be reflected in the
decorating scheme and amenities she offers. For example, elaborate Victorian
décor, a claw-foot tub (or Jacuzzi) and a bottle of champagne would be
appropriates for honeymooners. A desk or work space with Internet hook-up in
the room and a business center with fax and copier would be appropriate for the
businessman. Her advertising in the first case may be in a decorative script
complete with flower, bows and Cupids. In the latter, plain type and different
copy would be required.
Inseparability: Donna is likely to take a couple days off a week or be

unavailable at certain times. In-sitters are people who will fill in for bed and
breakfast owners when they are unavailable. Donna should make sure that she
fully briefs them on the standards she expects them to maintain in her absence.
Heterogeneity: If Donna has help with cooking, she may wish to establish some
“tried and true” recipes so that her guests experience the same great food each
time they visit.
Perishability: While Donna may have no trouble filling her inn during the
summer and the fall foliage months, she is likely to experience hiring vacancies
the rest of the year. Donna could arrange special packages with special prices to
encourage tourism year round.
9-20
3. Describe the core, augmented and total product Donna offers. How could she
use this information?
Answer:
Note: augmented and particularly total product definitions may vary depending
on what you think Donna’s mission is.
Core product: a bed and breakfast.
Augmented product: a luxury room in a famous historic home in a seaport town

in Maine complete with a full breakfast menu.
Total product: A romantic getaway in a luxurious room in a quaint village; an

escape from the daily pressures of life.
These will help her decide how to decorate and what services to offer. It will
help her advertise and promote her Bed and Breakfast by giving her clues about
the message and the media to use. It will help her price her product/service so as
to meet the needs of her target market.
4. Donna has a list of possible names for her business. Critique each of the
following:
a. Donna’s Place
b. Harsch Bed and Breakfast
c. Come On Inn
d. Inntimate
e. Red Roof Bed and Breakfast
Answer:
a. Donna’s Place could be a bar, a hairdresser, a candle shop . . .
b. “Harsch” sounds like “harsh.” Would you want to stay somewhere harsh?
c. “Come On Inn” is cute in that it sounds like an invitation. On the other hand,
a “come-on” is a synonym for some types of fraudulent (or near fraudulent)
behavior.
d. “Inntimate” is creative spelling, but some may not catch that it’s a B&B.
“Inntimate Bed and Breakfast” would work better and would attract the
honeymooners and romantic getaway crowd, but if Donna wants to attract
businessmen or families, it may not work as well.
e. While “Red Roof” does describe her building, this is trademark infringement
against “Red Roof Inns.” She’d be better off with “Red Shingle” or
something less close.
9-21
5. Below are a few entrepreneurs at various stages of the product development

process (idea generation, screening and evaluating, product development,
commercialization). Can you tell which stage they are in?
a. Adam is designing a prototype of his microwaveable Popsicle.
b. Joe Ann jotted a possible new way to deliver packages in her idea notebook.
c. The return on investment for Robbie’s computer repair service idea looked
good.
d. Chas used the SCAMPER model to come up with some possible line
additions to his restaurant’s menu.
e. Lois’s Website is up and running and she’s ready to start processing orders.
f. While her new cookie recipe was a real hit, Becca, a partner in a legal firm,
didn’t think she should sell them at her legal office.
g. Reba introduced her new diet peanut butter soda in only one restaurant on
her distribution route.
h. Roy licensed his new idea to a contract manufacturer.
Answer:
a. Product development
b. Idea generation
c. Idea screening and evaluation
d. Idea generation
e. Commercialization
f. Idea screening and evaluation
g. Product development
h. Commercialization
6. Alice is a single mom raising two young children. Recently, her uncle said that
he’d provide a $10,000 gift and co-sign loans to help her start a new business if
she could come up with a good idea. She had kept an idea notebook since taking
an entrepreneurship class in college and considered four of those ideas.
Idea 1: Would it be neat if there were bacteria that could eat plastic and we
wouldn’t have to just throw it away?
Idea 2: There needs to be a daycare center that’s open for evenings and nights
for parents who work those shifts.
Idea 3: Everybody raves about my spaghetti sauce.
Idea 4: I’d love a service that would run all sorts of errands for me so that I
wouldn’t have to go out everywhere with two little kids. Besides, I just really
hate driving and all that traffic.
Alice mused, “Well, there’s some things here that I don’t know much about, but
others that I do. I love kids and my home is large enough for the daycare. I like
cooking as well, but I’d need a bigger stove and a freezer. Hmmm, it’s hard to
9-22
decide what to do.”
Help Alice decide which idea might be work further consideration by putting
together an idea screening comparison. (You can make some assumptions about
Alice if you need to complete the checklist.)
Answer:
Teaching Tool: The example below is constructed so as to illustrate a potential

problem with this analysis: by making an impossible idea the one to pursue. Often
other checklists will use some sort of “go/no go” criteria. For example, the first factor
could have been something like “technologically feasible” and a “no” answer would
indicate going no further.
Additionally, the last three feasible ideas have identical scores. This can be changed
by varying the weights of the factors. Warn students that this could be a perfect
example of “figures don’t lie, but liars figure.”
Factor Score Plastic Evening Spaghetti Delivery

bacteria daycare sauce service
Product – 1=low 5 3 1 3
Innovative/Unique 5-high
Product Uniqueness 1=low 5 1 1 1
5-high
Market – Customer 1=low 5 3 3 2
Need 5-high
Market Size 1=small 5 2 3 2
5=big
Protectable IP 1=no 5 1 1 1
5=yes
Product Team Quality 1=poor 1 4 5 5
5=great
Additional Resources 1=none -10 -5 -1 -2
Needed (subtract) 10 = many
Profitability 1=low 5 5 1 2
5=high
TOTAL 21 14 14 14
With this scoring system, it looks like Alice should consider the plastic bacteria.
(Here’s a case where the weighting is deceptive. It is probable that Alice has NO
ability to produce this product regardless the potential, and would be better off
with one of the three others. In a case of a tie, such as with the final three, Alice
could go back and rescale certain factors. For instance, if she made the
profitability score range from 1 – 10, the evening day care becomes the winner.).
9-23
7. Higher or lower? Read the following scenarios and decide if each entrepreneur
should raise or lower prices. What basic element of setting optimum prices
should they react to?
a. Portia had projected selling 1000 bottles of her organic bubble bath in the
first quarter. She had only sold 800 bottles though by the end of the quarter.
b. Most customers found Jacquelyn’s customer service just okay and her hours
of operating inconvenient.
c. Verna’s marketing research showed the local coffee shops sold their coffee
25% above her price.
d. Margaret intended that her one of a kind quilts be considered collector’s
items.
e. Mary Louise’s customers like the prestige of owning clothing once owned by
movie stars and other famous people.
f. Neil is worried; Toys “R” Us has announced that they will be building a
store less than a mile from his toy shop.
g. Pam was interested in selling as many World Series Champion T-Shirts as
she could before the next baseball season.
h. Terry had trouble keeping up with orders for his new lawn care service.
Answer:
a. Lower Demand
b. Lower Perceived Value
c. Higher Competition
d. Higher Business Strategy (possibly Perceived Value as well)
e. Higher Perceived Value
f. Lower Competition
g. Lower Business Strategy
h. Higher Demand
8. The Lawson family was discussing purchasing a new television. Larry

mentioned that he’d seen an ad from Ates Appliances pricing the model he liked
at $899 and that his neighbor had paid about that same price for his. Lila
replied, “$899! The last one we bought was less than $400 and since they’re all
made in China, I can’t imagine that prices are so high! I’d think that something
between $500 and 600 would be more like it.”
Lonnie piped up, “At that price you’d be getting excellent quality and all the
latest technology.”
Leta had a television set in her room. “I can’t see why we’d spend that kind of
9-24
money for a television when we should be saving towards my college!”
Linda added her opinion, “You know Ates is going out of business; they should
be really dropping prices as their time runs out.”
The Lawsons all had opinions on what the price should be for their new
television set. All their opinions reflected different pricing psychology effects –
internal reference prices, external reference prices, perception of value,
expectation of future prices, range of price acceptability, motivation of the seller,
and price as a proxy for quality. Can you identify who used what?
Answer:
Larry: external reference price
Lila: internal reference price; range of price acceptability
Lonnie: perception of value
Leta: perception of value
Linda: motivation of the seller; perception of future prices.
9. All of the following entrepreneurs have carefully studied pricing strategies and
have put these principles to work. From the information below, can you tell
which strategy from table 9.1 they have decided to use?
a. Ervin’s barber shop offers $15 haircuts and $10 shaves, but you can get them
both for $22.
b. Albert’s photography has won a number of awards for its outstanding
quality. Due to this, he now charges 30% more than his competitors.
c. The Anna Brown Museum offers a discounted admission price on weekdays
when attendance is low.
d. Angela’s Tanning sells tanning packages for $99.
e. Floyd sells good shirts $15, better shirts at $25 and best shirts at $35.
f. Assured Lawn Care Service charges $25 to mow the lawn, $5 more if you
want the grassed bagged, $10 to do edging, $30 to fertilize, $15 to aerate
and $25 for weed killing.
g. Gail offers a back-to-school sale each year.
h. The Auto Shack’s ad mentioned an incredibly low priced car, but when you
got there, it was way in the back of the lot and about the ugliest color you
had ever seen – nothing at all like that red sports car you passed near the
entrance.
i. Tian told her best friend, Ahn, to use Associated Brokers and the next time
Tian made a trade, the company waived their fee because Ahn had set up an
account with them.
j. Delmar was happy; he just bought his 9th carwash and now got one free.
k. Melissa was the newest babysitter in the neighborhood. In order to attract a
lot of clientele quickly, she set her prices considerably below the competition.
9-25
Answer:
a. Bundling
b. Prestige or premium pricing
c. Off-peak pricing
d. Odd-even pricing
e. Product line pricing
f. Partitioned pricing
g. Periodic discounting
h. Bait pricing
i. Referral discount
j. Loyalty program
k. Penetration pricing
Mini-Case:
Yak Milk
Dongzhou Gongbu saw yak milk as a way of supporting his native people and helping
China’s food crisis. Along the way he had to consider his product and pricing strategies.
Mini-Case Questions
1. How did Dongzhou Gongbu “discover” his new product?
This was a case of solving two problems with the same solution – finding a help for
China’s food problem and helping out his native people. Under SCAMPER, it is an
illustration of Combine
2. What was his “total product”?
Milk, combined with a high health perception, a high environmentalism perception

and the mythology of the yak. (The core product is certainly “milk.” What the total
product is may vary somewhat from student to student.)
3. How did this help him with his pricing strategy?
These unique characteristics meant that he could charge a premium price for this
product.
4. How might he use this in advertising?
The rareness of yak milk and remoteness of the Tibetan plateau combined with the
“magic” of the yak should be included in his message. Taglines might be something
like “magic milk makes healthy kids.” (Again, there’s a lot of room for variation
here.)
9-26
5. Can you think of another product that is basically the same as the competition
and has been positioned much differently in order to command a higher price?
Answers will vary, but most premium or prestige priced products are not too much
different than their less expensive competition. Compare designer clothing to mass
marketed clothing.
Epilog: Dongzhou did market his milk as a health product rather than a pure substitute for
cow’s milk. In addition, he pursued the more lucrative international market with specialty
cheeses.
Additional Activities
1. The Internet is now a good tool for investigating consumers’ thoughts about
products – everything from test marketing ideas (like the Proof-of-Concept
Website discussed in the last chapter) to solicit customers’ feedback on products.
Chat rooms, in particular are often used to discuss new products and disseminate
information about the pros and cons of new products.
A. Have any students participated in Internet chats where products were
discussed? What sorts of products? What sorts of information?
B. How does this or could this affect the product life cycle?
Students may be unaware the businesses often surf the net looking for feedback on
their products – feedback that they feel may be more honest (less filtered) than
focus groups or surveys.
2. Have students select a service provider to visit this week and make a purchase (or
consider making a purchase). The student should take notes about the typical
customer, the facilities of the store/location, the salespeople, types of advertising
or signage used, the salespeople and their knowledge and the transaction as a
whole. The student should be prepared to ask several questions – location of a
product, return policy, technical information, special services, etc – of the
salespeople. What attempts at reducing intangibility and other service
characteristics did they note? How does the whole package (the total product)
work, that is, do all the pieces seem to support the idea/concept?
End of Book Case

The House of Wine – Grand Opening
Instructor’s Executive Summary: The House of Wine
This multi-task case requires students to incorporate and apply a number of distinct but
interrelated business management disciplines-- marketing, finance, retail merchandising and
operations. It may be helpful to guide and direct your students through some logical
progression of research, analysis and documentation.
9-27
Target market groups are usually the first and primary focus. Decisions regarding product
mix and promotion must be directly related to the demographics and buying behaviors of the
customer base. Students should clearly define their markets and should then proceed to
select the package of products, services and promotional activities that will maximize profits
and achieve the goals established by the principles.
There are many acceptable floor plans for this business. This element of the case challenges
student’s creativity and imagination and requires them to research and observe the ways in
which any physical plant can be laid out and operated. Customer satisfaction, employee
efficiency, safety and profit maximization should be incorporated into each sketch and
supporting narrative.
Summary of Actual Results
For their grand opening, Fred and Larry “borrowed” an idea that they heard about from a
guest speaker back in their business school days. That gentleman had recently opened a new
restaurant in Massachusetts and was faced with many of the same challenges as Fred and
Larry.
That idea which was slightly modified to fit Fred and Larry’s business was to formally
invite people from each prospective market group to sample free wines and foods and to
tour the new establishment. Fred and Larry invited the local fire and police departments,
schoolteachers, business owners, club members, senior citizens, sports organization
members and assorted other community leaders and groups. The store was full of people
seven days a week for the first six weeks of operation. By that time, hundreds of locals
knew about the House of Wine and had enjoyed a pleasant first-hand experience. Fred and
Larry’s “show” was on the road and off to a great start. Their “grand opening act” cost them
$25,000-- they considered this to be a wise investment.
For the next six months, Fred and Larry worked hard to capture the local year-round
markets in order to sustain their cash flow. A variety of promotional, seasonal and holiday
events took place. They started a “Wine Cellar for the Ages” program that focused on
building personal home wine cellars through an annual case-purchasing program. Cases are
offered at a reduced price. The goal for a personal wine cellar owner is to have at least five
times their annual consumption on hand, including gift bottles. For example, a family that
“consumes” an average of four bottles per week, including gifts, will work to build a cellar
with at least one thousand bottles.
Fred and Larry spent a lot of time on their showroom floor establishing personal
relationships with customers and listening carefully to their opinions and requests for wine
and complementary products. They tracked inventory turnover and sales very closely and
constantly “tweaked” their product mix.
First year sales were just under $1,250,000. Fred and Larry were very pleased.
9-28
Fred and Larry then worked to develop their seasonal and tourist markets through selected
ads in papers, magazines and local cable. Town records (public information) allowed them
to gather useful demographic and geographic data about the many cottage owners in the
area.
During their second year of operation, Fred and Larry also established partnerships with
area hotels and restaurants and became a supplier for several of those businesses. This also
included a catering service that featured wine tasting and special event parties. Fred and
Larry’s lower level warehouse thus became a profit center of its own, as hundreds of cases
of wine and party platters made their way to customers via local delivery.
Fred and Larry were also wise to have created a computer database right from their grand
opening start. This enabled them to stay in touch with both area and seasonal customers all
year round and to obtain many referrals from those satisfied customers.
At last check, Fred and Larry were getting fat on both profits and wine!
Additional Materials
Available on Create
Alma Products, Inc
Whale Printing Company
Giberson's Glass Studio
Video Case
Craft Beer Boom
STVP Videos
The Product Vision
Role of Market Research
ItsYourBiz.com Videos
Howard Wright, Inventor of the Storm Safety Whistle, part-time business, marketing
Market Research
9-29

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Entrepreneurial Small Business 4th

Edition Katz Solutions Manual

CHAPTER 9: SMALL BUSINESS MARKETING: PRODUCT

1. Recognize the characteristics of goods and services.

Focus on Small Business:

Answers will vary.

Extended Chapter Outline

Note: Key terms are in boldface.

Teaching tool Internet application

International application Group activity

Objective 1: Recognize the characteristics of goods and services

1.3 Products include goods, services, people and ideas.

1.4.3 A product that is dominated by intangible aspects is a service.

Objective 2: Define the total product

Skills Module 9.2: Learning About the Total Product of You

2.4 Why is the total product important to understand?

Objective 3: Differentiate the stages of new product development.

3.3. Step two is idea screening, also covered in Chapter 4.

3.4.4.4.You have everything you need and are “good-to-go.”

Small Business Insight: The Story of Kryptonite

Take-away point: Product/service testing does not need to be traditional. In fact, an

4.2 Many factors impact your pricing decisions.

Objective 5: Understand how elasticity, margin and value impact price-setting.

5.2 Price elasticity has to do with how essential a product is to customers.

5.3 Price also signals different things to customers.

5.6 Examine the market

5.7 Company objectives:

Small Business Insight: Blue Water Boatworks

5.8 Marketing strategy:

5.9 Channels of distribution

5.11 Legal and regulatory:

Objective 6: Apply different pricing strategies

Skill Module 9.4: Pricing Psychology

By manipulating some of the product characteristics consumer use to determine value,

Teaching example: Swiss Watchmaker TAG Heuer thought they were

6.4.2.3 Bundling, multiple-packs or bonus-packs are methods to give the

External reference price: an estimation of what a price should be based on information

Goods: a physical product

Heterogeneity: a quality of a service in that each time it is provided it will be slightly

Inseparability: a quality of a service in which the service being done cannot be

Markup: the amount an entrepreneur adds to costs to provide a profit.

Me-too products: products essentially similar to something already on the market.

Odd-even pricing: setting a price ending in the number 5, 7, or 9.

Periodic or random discounting: sales conducted either at predictable or non-predictable

Prestige or premium pricing: setting a price above competition so as to indicate a higher

Price gouging: charging an outrageously high price for something.

Service: a nonphysical product.

Tangibility: an item’s capability of being seen, touched, tasted or felt.

Intangibility: you can’t touch, feel, smell, or taste an education.

Perishability: if no one shows up to a lecture, discussion, etc., it cannot be stored

Heterogeneity: A course varies based on the professor teaching it, the

Core product: education

Augmented product: a liberal arts education or a degree in entrepreneurship, etc.

The difference here will be dependent on the schools selected to compare.

Answers will vary considerably. Percentage of me-too products are likely to be

4. Why do owners and manager of small businesses spend so much time on

6. How do the four primary factors of optimum price work together to

Business strategy: to capture the largest possible market

Increase demand “Okay” quality Less than

7. Describe a situation where you have been influenced by consumer buying

Answer will vary, but here are some suggestions:

Inseparability: Provide different sort of “on-your-own” learning experiences

Perishability: Videotape professors’ lecture for later viewing.

2. BMW automobiles call themselves “the ultimate driving machine.” Their