CHAPTER 8 Creating the Product M A R K E T I N G Real People, Real Choices CHAPTER 8 Creating the Product

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

The Core Product Consists of all the benefits the product will provide for consumers or business customers A customer purchases a 1/2” drill bit. What does he want? A 1/2” hole! Marketing is about supplying benefits, not products

The Actual Product Consists of the physical good or delivered service that supplies the desired benefit Example: A washing machine’s core product is the ability to get clothes clean, but the actual product is a large, square, metal apparatus Actual product also includes appearance, styling, packaging, & the brand

The Augmented Product Consists of the actual product plus other supporting features such as warranty, credit, delivery, installation, & service Have you heard: “sell the sizzle not the steak?”

Classifying Consumer Products By how long they last Durable Nondurable By how consumers buy them Convenience Shopping Specialty Unsought

Classifying Business Products By how products are used Equipment Maintenance, repair, operating Raw materials Processed materials Specialized services Component parts

Convenience Products Good or service that consumers purchase frequently with a minimum of comparison and effort Types of convenience products staples impulse products emergency products

Shopping Products Good or service for which consumers will spend time & effort gathering information on price, product attributes, & product quality Consumers compare alternatives before purchase Types of shopping products attribute-based shopping products price-based shopping products

Specialty Products Goods or services bought with much consumer effort in an extended problem-solving situation Consumers insist upon a particular item and will not accept substitutes Rolex Watch: real or fake?

Unsought Products Goods or services for which a consumer has little awareness or interest until a need arises Require a good deal of advertising or personal selling to interest people 1-800-Metlife

It’s New and Improved What is a new product? According to the FTC, a new product is one that is entirely new or changed significantly and that product may be called new for only six months From a marketing perspective, new is anything a customer perceives as new & different

New Product Development Idea Generation Product Concept Development & Screening Marketing Strategy Development Business Analysis Technical Development Market Testing Commercialization

Step 1: Idea Generation Sources of new ideas customers salespeople service providers anyone with direct customer contact

Step 2: Product Concept Development Expand ideas into more complete product concepts Describe what features the product should have and benefits those features will provide for consumers Evaluate the chance for technical and commercial success

Step 3: Marketing Strategy Development Develop a marketing strategy that can be used to introduce the product to the marketplace Identify the target market Estimate its size Determine how the product can be positioned Plan pricing, distribution, and promotion expenditures necessary for roll-out

Step 4: Business Analysis Assess how the new product will fit into the firm’s total product mix Evaluate whether the product can be a profitable contribution for the organization’s product mix

Step 5: Technical Development Work with engineers to refine the design and production process Develop one or more prototypes Evaluate prototypes with prospective customers If applicable, apply for a patent

Market Testing Try out the complete marketing plan (product, price, place, and promotion) in a small geographic area that is similar to larger target market Traditional test marketing is expensive and gives competition a chance to evaluate the new product Simulated test markets eliminate competitive viewing and cost less

Commercialization Launch the product! Full scale production Distribution Advertising Sales promotion and more

Issues for Discussion Should knockoffs be illegal? Who is hurt by knockoffs? Is the marketing of knockoffs good or bad for consumers? What are some new products that have made our lives better? That have been harmful to consumers or to society? Should there be a way to monitor new products that are introduced?