2. chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

3. Product — Today’s Objectives Objectives will be to: Develop a clear definition of product Discuss how the 2Is affect product Examine the product development process Explore how products enable customer relationships

4. Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion Chapter 7: Product

5. Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

6. Augmented Product Basic Product Daily Newsletter Advice In-Depth Information Engine Tires Radio Extended Warranty Trade In Financing Meal Preparation Fitness Books Exercise Plan Traditional: Sports Utility Vehicle New Economy: e-diets.com Transportation Dieting Information Core Benefit Product Differentiation Value Proposition Exhibit 7.1: Product Value Hierarchy

7. Exhibit 7.2: Internet Product Types

8. Chapter 7: Product Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

9. Exhibit 7.6: The Effects of the 2Is on Product Users can redevelop aspects of the product to meet individual needs and preferences Firms can provide more targeted, personalized products Increases “stickiness” as customers invest time and effort to personalize Enables responsive service interaction to provide augmented value to the product Allows companies to quickly gather valuable customer data such as preferences Customers can be directly involved in the product development process Individualization Interactivity Product

10. Exhibit 7.7: Product Portfolio Degree of Innovation New to Firm New to Market New Technology None Breakthrough or Discontinuous Incremental Existing Products New Products Line Extensions

11. Exhibit 7.8: Order of Market Entry Effect Market Adoption First to Market Fast Follower “Me Too” Entrant Laggard Typical “Hockey Stick” Adoption Curve Time

12. Exhibit 7.9: Product Life Cycle

13. Chapter 7: Product Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

14. The Product Development Process 1. 2. 3. 4. 5. 6. 7. Idea generation Idea screening Concept development Product design Prototype development Test marketing Commercialization

15. Exhibit 7.10: Stage-Gate New Product Development Process

16. Exhibit 7.11: Divergent and Convergent Thinking in Development Convergent Thinking Divergent Thinking Number of Ideas Start Finish Time 1. Brainstorming Ideas Expand Over Time 2. Idea Screening Critical Evaluation Narrows the Focus Over Time TASKTASK SEPARATIONSEPARATION

17. Exhibit 7.12: New Product Development Metrics Customer Is our objective to generate more business among the existing customer base, attract new users or keep existing customers? Do customers have expectations of a particular imagery or positioning that the new product must be consistent with? Does the new product fulfill a customer’s needs or aspirations? People How will the performance of the development team be measured? What does an individual employee have to commit him or herself to a particular new product development effort? What resources and skills will be needed to maximize the team’s probability of success? Business Extending an existing brand name or developing a new brand? How does this concept fit into the overall product / service portfolio of the enterprise? What is the competitive landscape in this market: fierce, non-existent or somewhere in between? How attractive is the economic potential of this proposition? What is the role of each channel and how will they be integrated? Process What is the desired timing for market introduction, seasonality or industry event? Do we have the necessary resources to bring this concept to market? How long will it take and how much will it cost to develop this new product and bring it to market? What is the required business model and how will it mesh with the existing business model? Technology Does the enterprise have the capabilities to develop and deliver this product or is an alliance partner or subcontractor required? Is there sufficient existing capacity or do new sources need to be identified? Does the required technology exist today or will new technology need to be developed? Should the technology be managed internally or outsourced? Drivers Enablers

18. Exhibit 7.13: Internet-Enabled Product Development Process

19. Beta Testing Point-Counterpoint

20. Chapter 7: Product Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

21. Awareness Exploration/ Expansion Exploration/ Expansion Commitment Dissolution Four Key Stages of Customer Relationships Core benefit Presentation and packaging Attributes and features Presales support Fulfillment Availability of complementary products Customer-specific attributes and features Upgrades Customer-specific attributes and features Post-sales support Tiered service Personalization Customer care Migration to different product in the portfolio Customer care Exhibit 7.14: Product Levers by Relationship Phase

22. Chapter 7: Product Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

23. Exhibit 7.15: EBay Expansion Through Features and Platforms

24. Chapter 7: Product Defining Product How the 2Is Affect Product The Product Development Process How Products Enable Customer Relationships EBay Case Study Conclusion

25. Product — Conclusion Products come in two basic types: physical products and services. For all products there are three components to the overall value proposition: the core benefit, the basic product and the augmented product. There are certain product development levers available to managers The levers may be applied to both physical and service products The product development levers can be organized by product type Basic product development levers Augmented product development levers The 2Is allow firms to learn about their customers, personalize a product to meet customer preferences and offer customer relationship management tools to provide more value for customers and cut costs for product sellers