Creating the Product

2

Chapter Objectives

• layers of a product

• classifications of products

• importance of new products

3

Chapter Objectives

• Developing new products

• product adoption

• diffusion of innovations

4

The Value Proposition

•Value proposition: • benefits consumer will receive

• if she buys the product

5

The Value Proposition

• Product:

• Good: • Intangible products:

6

The Value Proposition

• Product: tangible good, service, idea that satisfies customer needs

• Good: a tangible product, something we can

see, touch, smell, hear, taste, or possess

• Intangible products: services, ideas, people, places

7

Layers of the Product Concept

•Core product: basic benefits product provides

•Actual product: physical good or delivered service

• that supplies the benefits

•Augmented product: actual product + supporting features’ Examples:

• warranty, repair, installation, customer support

8

Figure 8.2: Layers of the Product

9

Classifying Products

• Products are either B2C products or B2B products.

• Categories differ in how consumers & business customers feel about products and how they purchase them.

10

Classifying Goods: Product life

• Durable goods: • provide benefits for months, years, decades

Example: automobile

• Nondurable goods:

• consumed in the short termExample: newspapers

11

Classifying Goods: How Do Consumers Buy the Product?

•Convenience product: • frequently purchased

Staples (milk)Impulse products (candy bar)Emergency products (drain opener)

12

Classifying Goods: How Do Consumers Buy the Product?

•Shopping product: • purchased with considerable time & effort

Attribute based (shoes)Price-based (water heater)

13

Classifying Goods:

•Specialty products: • have unique characteristics

• important to buyers Rolex watch

GEICO INSURANCE

14

Classifying Goods:

•Unsought products: • consumers have little interest

until a need arisesinsurance

GEICO INSURANCE

15

Business-To-Business Products

• Classified by how organizational customers use themEquipment Maintenance, repair, & operating

(MRO) productsRaw materialsProcessed materials & special

servicesComponent parts

16

The Process of Innovation

•The FTC says :--A product must be entirely new or changed significantly to be called new, --A product may be called new

•for only 6 months.

17

The Process of Innovation

• Innovation:

• anything customers perceive as

• new & different

18

How Innovations Work

• Technology is advancing at a dizzying pace.

• New products expensive to developmore costly if they fail.

• New products can contribute to society.

BIONIC EAR SYSTEM

19

Types of Innovations

• Innovations differ in degree of newness--Continuous innovations

--Dynamically continuous innovations

--Discontinuous innovations

20

Continuous Innovations

• A modification to an existing product

• --Consumer doesn’t have to learn anything new.Knockoffs copy, with slight modification, the design of an original product.

21

Dynamically Continuous Innovation

• A pronounced modification to an existing product

--Requires a modest amount of learning or behavior change.

22

Dynamically Continuous Innovation

Convergence:

the coming together of two or more technologies

to create a new system with greater benefit than its parts.

23

Discontinuous Innovations

• A totally new product• --Creates major changes

in the way we live.• --Consumer must engage in

a great deal of learning. Examples?????

24

New product development

• For next Monday

• Friday:

Bonus video

25

Developing New Products

• New-product development • create totally new products or

• make an existing product better.

TOTO NEOREST TOILETS

26

Phases in New-Product Development

•Phase 1: •Idea generation

Brainstorm for products that provide customer benefits.

LEGO MINDSTORMS

27

Phases in New-Product Development

•Phase 2: • Product-concept development &

screeningTest product ideas for technical and commercial success.

LEGO MINDSTORMS

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Phases in New-Product Development

• Phase 3: • Marketing strategy development

• how to introduce the product to the marketplace.

29

Phases in New-Product Development

•Phase 4: •Business analysis

Assess a product’s commercial viability.

30

Phases in New-Product Development

•Phase 5: • Technical development

Refine and perfect new product.Develop prototypes or test versions of proposed

product • (in R&D department).

31

Phases in New-Product Development

•Phase 6: •Test marketing

Test complete marketing plan in a small geographic area similar to larger market.

32

Phases in New-Product Development

• Phase 7:

• Commercialization Launch new product into the market.Begin full-scale production, distribution, advertising, sales

promotion.

FLUMIST

Adoption & diffusion

34

Adoption and Diffusion

• Product adoption: • process by which a consumer or

business customer

• begins to buy and use

• a new good, service, or idea

35

Adoption and Diffusion

•Diffusion: • process when use of a product

• spreads throughout a population

36

Stages in Consumer Adoption of a New Product

Figure 8.4

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Stages in Consumer Adoption of a New Product

•Awareness: • learning the

innovation exists

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Stages in Consumer Adoption of a New Product

•Interest: • seeing how the new

product might satisfy an existing or newly realized need

39

Stages in Consumer Adoption of a New Product

•Evaluation: • weighing

costs/benefits • of new product

40

Stages in Consumer Adoption of a New Product

•Trial: • experiencing or using

product for the first time

41

Stages in Consumer Adoption of a New Product

•Adoption: • buying the good or

• agreeing with the new idea

42

Stages in Consumer Adoption of a New Product

•Confirmation:

• weighing expected versus actual benefits and costs

43

The Diffusion of Innovations

• Adopter categories

Innovators

Early adopters

Early majority

Late majorityLaggards

44

Categories of Adopters

Figure 8.5

45

Product Factors AffectingRate of Adoption

• Relative advantage

• Compatibility

• Complexity

• Trialability• Observability

46

How Organizational Differences Affect Adoption

•Innovators: are new, smaller, or younger firms

•Early-adopter firms: are market-share leaders

47

How Organizational Differences Affect Adoption

•Late-majority firms: prefer the status quo and have large

investments in existing production technology

•Laggard firms: are probably already losing money

48

• The end

49

Real People, Real Choices

• Black and Decker (Eleni Rossides)

• Considering the results of a survey, Black and Decker needed to decide what to do with its ScumBusterOption 1: if it ain’t broke, don’t fix itOption 2: emphasize value for your moneyOption 3: ramp up the ScumBuster’s features

BLACK and DECKER

50

Real People, Real Choices

• Black and Decker (Eleni Rossides)• Eleni chose Option 3: ramp up the ScumBuster’s

featuresThe company continues to modify the basic concept with new

features and new applications to “clean up” against the competition

51

Marketing Plan Exercise

• Visit Procter & Gamble’s Web site (www.pg.com) and click on “Products” at the top, then “Oral Care” and “Crest.” Crest lists several product innovations including

Whitestrips and Night Effects. Classify each based on the chapter discussion. Explain your answers.

What type of innovation do you consider each of these products to be? Why?

52

Marketing in Action Case:You Make the Call

• What is the decision facing Kodak?

• What factors are important in understanding this decision situation?

• What are the alternatives?

• What decision(s) do you recommend?

• What are some ways to implement your recommendation?

53

Keeping It Real: Fast Forward to Next Class Decision Time at Grendha

• Meet Angelo Daros, VP of Grendha Shoes, a major Brazilian shoe manufacturer

• Plan: to launch the Rider brand in the U.S. market

• The decision: How to position the Rider brand for the United States

54

Group Activity

• Marketers often try to communicate benefits additional to the main benefit the product offers consumersPick a tangible product you might use and brainstorm

all the possible benefits consumers can obtain from it

55

Discussion

• When marketers understand the distinctions among the three layers of the product (the core, actual, and augmented product), what are the benefits to consumers?

• What are the hazards of this type of thinking?

56

Discussion

• Should knockoffs be illegal?• Who is hurt by knockoffs?• Is the marketing of knockoffs good or bad for

consumers in the short run? In the long run?

57

Discussion

• What are some discontinuous innovations introduced in the past 50 years?

• Why are there so few discontinuous innovations?

• What recently introduced products do you believe will be regarded as discontinuous innovations?

58

Discussion/Group Activity

• Technology improvements let new products enter and leave the market faster than ever.What products might technology

help develop in the future that you would like?

SEGWAY HUMAN TRANSPORTER

59

Group Activity

• Brainstorm new-product ideas for one of the following (or another product of your choice):An exercise machine with some desirable new

featuresA combination of shampoo and body washA new type of university

60

Group Activity

• Your group acts as director of marketing for a major cell phone manufacturer.Your company’s new product does

everything but tap dance. How will you convince the late majority to adopt this new technology?

61

Discussion/Group Activity

• It is not necessarily true that all new products benefit consumers/society.What are some new products that have made our

lives better?What are some new products that have been harmful

to consumers/society?