Creating the Product

1. Creating the Product

2. Chapter Objectives • Explain the layers of a product • Describe the classifications of products • Understand the importance of new products • Show how firms develop new products • Explain the process of product adoption and the diffusion of innovations

3. Build a Better Mousetrap: The Value Proposition • Value proposition: benefits the consumer will receive if she buys the product • 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

4. Layers of the Product Concept • Core product: basic benefits the product will provide • Actual product: physical good or delivered service that supplies the benefits • Augmented product: actual product plus supporting features’ such as warranty, repair, installation, customer support

5. Figure 8.2: Layers of the Product

6. Group Activity • Marketers often try to communicate benefits additional to the main benefit the product offers consumers • Pick a tangible product you might use and brainstorm all the possible benefits consumers can obtain from it

7. 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?

8. Classifying Products • Products are either consumer products or B2B products. • Categories differ in how consumers and business customers feel about products and how they purchase them.

9. Classifying Goods: How LongDoes the Product Last? • Durable goods: provide benefits over a period of months, years, decades • Example: automobile • Nondurable goods: consumed in the short term • Example: newspapers

10. Classifying Goods: How Do Consumers Buy the Product? • Convenience product: frequently purchased • Staples (milk) • Impulse products (candy bar) • Emergency products (drain opener) • Shopping product: purchased with considerable time and effort • Attribute based (shoes) • Price-based (water heater)

11. GEICO INSURANCE Classifying Goods: How Do Consumers Buy the Product? (cont’d) • Specialty products: have unique characteristics important to buyers • Rolex watch • Unsought products: those in which consumers have little interest until a need arises • insurance

12. Business-To-Business Products • Classified by how organizational customers use them • Equipment • Maintenance, repair, and operating (MRO) products • Raw materials • Processed materials and special services • Component parts

13. The Process of Innovation • The FTC says : • --A product must be entirely new or changed significantly to be called new, and • --A product may be called new for only six months. • Innovation: anything that customers perceive as new and different

14. It’s Important to Understand How Innovations Work • Technology is advancing at a dizzying pace. • New products are expensive to develop and even more costly if they fail. • New products can contribute to society.

15. Types of Innovations • Innovations differ in degree of newness --Continuous innovations --Dynamically continuous innovations --Discontinuous innovations

16. 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.

17. Dynamically Continuous Innovation • A pronounced modification to an existing product --Requires a modest amount of learning or behavior change. Convergence: the coming together of two or more technologies to create a new system with greater benefit than its parts.

18. Discontinuous Innovations • A totally new product • --Creates major changes in the way we live. • --Consumer must engage in a great deal of learning.

19. 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?

20. Developing New Products • New-product development can be creating totally new products or making an existing product better.

21. SEGWAY HUMAN TRANSPORTER 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?

22. LEGO MINDSTORMS Phases in New-Product Development • Phase 1: Idea generation • Brainstorm for products that provide customer benefits. • Phase 2: Product-concept development and screening • Test product ideas for technical and commercial success.

23. Phases in New-Product Development (cont’d) • Phase 3: Marketing strategy development Decide how to introduce the product to the marketplace. • Phase 4: Business analysis Assess a product’s commercial viability.

24. Phases in New-Product Development (cont’d) • Phase 5: Technical development • Refine and perfect new product. • Develop prototypes or test versions of proposed product (in R&D department). • Phase 6: Test marketing • Test complete marketing plan in a small geographic area similar to larger market.

25. FLUMIST Phases in New-Product Development (cont’d) • Phase 7: Commercialization Launch new product into the market. Begin full-scale production, distribution, advertising, sales promotion.

26. 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?

27. Adoption and Diffusion • Product adoption: process by which a consumer or business customer begins to buy and use a new good, service, or idea • Diffusion: process by which the use of a product spreads throughout a population

28. Stages in Consumer Adoption of a New Product Figure 8.4

29. Stages in Consumer Adoption of a New Product • Awareness: learning the innovation exists • Interest: seeing how the new product might satisfy an existing or newly realized need • Evaluation: weighing costs/benefits of new product

30. Stages in Consumer Adoption of a New Product (cont’d) • Trial: experiencing or using product for the first time • Adoption: buying the good or agreeing with the new idea • Confirmation: weighing expected versus actual benefits and costs

31. The Diffusion of Innovations • Adopter categories Innovators Early adopters Early majority Late majority Laggards

32. Categories of Adopters Figure 8.5

33. Product Factors AffectingRate of Adoption • Relative advantage • Compatibility • Complexity • Trialability • Observability

34. How Organizational Differences Affect Adoption • Innovators: are new, smaller, or younger firms • Early-adopter firms: are market-share leaders • Late-majority firms: prefer the status quo and have large investments in existing production technology • Laggard firms: are probably already losing money

35. Individual activity • 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?

36. Group Activity • Brainstorm new-product ideas for one of the following (or another product of your choice): • An exercise machine with some desirable new features • A combination of shampoo and body wash • A new type of university

37. 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?