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 term  Example: 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 arises  insurance GEICO INSURANCE

15 Business-To-Business Products Classified by how organizational customers use them  Equipment  Maintenance, repair, & operating (MRO) products  Raw materials  Processed materials & special services  Component 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 develop  more 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 & screening  Test product ideas  for technical and commercial success. LEGO MINDSTORMS

28 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

37 Stages in Consumer Adoption of a New Product Awareness: learning the innovation exists

38 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 majority Laggards

44 Categories of Adopters Figure 8.5

45 Product Factors Affecting Rate 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 ScumBuster  Option 1: if it ain’t broke, don’t fix it  Option 2: emphasize value for your money  Option 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 features The 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 ( 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 consumers  Pick 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 features  A combination of shampoo and body wash  A 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?