1. Layers of Product Concept

2. 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 s/he want?
A 1/2” hole!
Marketing is about supplying benefits, not products.

3. 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, and the brand

4. The Augmented Product
Consists of the actual product plus other supporting features such as warranty, credit, delivery, installation, and repair service after the sale

5. NetFlix Example Core Product: access to movies
Actual Product: rental of DVDs
Augmented Product: rentals unlimited, 3 movies out at a time, monthly subscription fee, no late fees, no shipping fees, movie recommendation service

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

7. Shopping Product

8. 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

9. Band-Aid

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

11. Specialty Products
Goods or services bought with much consumer effort or in an extended problem- solving situation
Consumers insist upon a particular item and will not accept substitutes

12. 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

13. 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 and different

14. Life-Changing InnovationsCD
Photocopier
Fax
Cell phone
Post-it Notes
Air conditioner
Microwave
What is your favorite
life-changing innovation?

15. Types of Innovations
Innovations differ in their degree of newness and this helps to determine how quickly products will be adopted by a target market
The more novel the innovation, the slower the diffusion process
Innovation continuum is based on the amount of disruption or change

16. Innovation Continuum Continuous Dynamically Discontinuous Continuous
Little to no change Extreme changes

17. New Product Development
Idea Generation
Product Concept Development
Marketing Strategy Development
Business Analysis
Technical Development
Market Testing
Commercialization

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

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

20. 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

21. 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

22. 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

23. 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

24. Product Testing Firms using online research techniques
can test consumer
reactions to product
ideas faster than ever
before

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

26. Commercialization Is No Guarantee
Forecasts estimated sales of FluMist to exceed 6 million doses when it was introduced in 2003
Despite a $25 million ad campaign, only 100,000 doses were sold

27. Adoption and Diffusion Processes
Adoption is the process by which a consumer or business customer begins to buy and use a new good, service, or idea
Diffusion describes how the use of a product spreads throughout a population

28. Six Stages of Adoption

29. Michelle Beauty Centre
This ad builds interest by showing how the service will benefit customers

30. Silk Soymilk
Silk stimulated adoption by distributing free samples

31. Diffusion Process
Concerned with the broader issue of how an innovation is communicated and adopted throughout the marketplace
The process of spreading out

32. Figure 8.6: Adopter Categories
Mean Time of
Adoption
Innovators
(2.5%)
Early
Adopters
(13.5%)
Early
Majority
(34%)
Late
Majority
(34%)
Laggards
(16%)

33. Innovators 2.5%, the first to accept a new idea or product
Venturesome and willing to take risks
Cosmopolites: willing to seek social relationships outside of their local peer group
Rely heavily on impersonal information sources

34. Early Adopters 13.5%, the second to adopt an innovation
Heavy media users
Tend to be concerned with social acceptance
Opinion leaders primarily come from the early adopter group

35. Early Majority
34% adopt the product prior to the mean time of adoption
Deliberate and cautious
Spend more time in the innovation decision process
Slightly above average in education and social status

36. Late Majority 34% follow the average adoption time
Older, more conservative
Peers are the primary source of new ideas
Below average in education, income, and social status
Wait to purchase until product has become a necessity and/or peers pressure to adopt

37. Laggards 16% - last to adopt an innovation
Lower in social class than other categories
Bound by tradition
Product may have already been replaced by another innovation

38. Factors Affecting the Rate of Adoption
Relative
Advantage
Observability
Compatibility
Trialability
Complexity

39. Relative Advantage
A product innovation is perceived as better than existing alternatives
Positively correlated with an innovation’s adoption rate
Exist when a new product offers:
Better performance, increased comfort, saving in time and effort, or immediacy of reward

40. Skin Watch
Does an ultra-thin watch provide a relative advantage over other watches?

41. Compatibility
An innovation is perceived to fit into a person’s way of doing things
The greater compatibility, the more rapid a product’s rate of adoption
Overcome perception of incompatibility through heavy advertising to persuade consumers

42. Complexity
The more complex the product, the more slowly a product’s rate of adoption
Overcome perception of complexity with demonstrations, personal selling, and emphasis on ease of use

43. Trialability
An innovation can be used on a limited basis prior to making a full-blown commitment
The trial experience serves to reduce the risk of a consumer’s being dissatisfied with a product after having permanently committed to it through outright purchase

44. Observability
The product user or other people can observe the positive effects of new product usage
The higher the visibility, the more rapid the adoption rate

45. B2B Adoption Factors Increase in gross margin and profits
Consistency with firm’s way of doing business
Benefit relative to required investment

46. Marketing Throughout the PLC
The Product Life Cycle (PLC) explains how features change over the life of a product
Marketing strategies must change and evolve as a product moves through the PLC
The PLC relates to a product category

47. Figure 9.5: The Product Life Cycle

48. Introduction Full-scale launch of new product into marketplace
Sales are low, high failure rate
Little competition
Frequent product modification
Limited distribution
High marketing and product costs
Promotion focused on product awareness and to stimulate primary demand
Intensive personal selling to retailers and wholesalers

49. Growth Sales grow at an increasing rate Many competitors enter market
Large companies may acquire small pioneering firms
Profits are healthy
Promotion emphasizes brand advertising and comparative ads
Wider distribution
Toward end of growth stage, prices fall
Sales volume creates economies of scale

50. Maturity Sales continue to increase but at a decreasing rate
Marketplace is approaching saturation
Typified by annual models of products with an emphasis on style rather than function
Product lines are widened or extended
Marginal competitors drop out
Heavy promotions - sales promotions
Prices and profits fall

51. Decline Signaled by a long-run drop in sales
Rate of decline is governed by how rapidly consumer tastes change or how rapidly substitute products are adopted
Falling demand forces many out of market
Few specialty firms left