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

2. 8-2 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! What is the core product? –A toothpaste –The I-Pod

3. 8-3 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. 8-4 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. 8-5 Distinguishing between 3 levels of product Why do we do it? –Zero in on the most important benefit(s) which consumers are looking for –Make sure the actual product delivers the benefits –Then focus on additional features which serve to make the product more attractive

6. 8-6 Classifying Consumer Products By how long they last –Durable –Nondurable By how consumers buy them –Convenience –Shopping –Specialty –Unsought

7. 8-7 Classifying Business Products By how products are used –Equipment –Maintenance and supplies –Raw materials –Processed materials –Specialized services –Component parts

8. 8-8 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 Parallels with involvement levels, consumer decision making strategies and the buying process Implications for marketers?

9. 8-9 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 Parallels with involvement levels, consumer decision making strategies and the buying process Implications for marketers?

10. 8-10 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 Parallels with involvement levels, consumer decision making strategies and the buying process Implications for marketers?

11. 8-11 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 Parallels with involvement levels, consumer decision making strategies and the buying process Implications for marketers?

12. 8-12 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

13. 8-13 Types of innovations Continuous innovations: “newness” in small continuous increments –E.g. adding new features to existing products, new brand names, etc. –Minimal learning, hence faster diffusion, easier acceptance Knock-off: copies with slight differences from the original –Aimed at different target audiences

14. 8-14 Types of innovations Dynamically continuous innovations – Much greater ‘newness’ –Requires greater learning hence slower acceptability and slower diffusion –E.g. vinyl records to tapes to CDs –Convergence of technologies

15. 8-15 Types of innovations Discontinuous Innovations –Maximum ‘newness’ –Requires major learning, slowest acceptance and diffusion –E.g. writing letters as opposed to email Marketing implications of degrees of ‘newness’?

16. 8-16 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

17. 8-17 New Product Development Idea Generation Product Concept Development and Screening Marketing Strategy Development Business Analysis Technical Development Market Testing Commercialization

18. 8-18 Step 1: Idea Generation Sources of new ideas –customers –salespeople –service providers –anyone with direct customer contact –Employees (e.g. Nike’s Deep Dives) –Consultants

19. 8-19 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 e.g. Burger King’s new starch coated fries

20. 8-20 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. 8-21 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. 8-22 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 E.g. McDonalds and a sweeter breakfast offering

23. 8-23 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 E.g. Listermint vs. Scope mouthwash

24. 8-24 Commercialization Launch the product! –Full scale production –Distribution –Advertising –Sales promotion –and more

25. 8-25 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

26. 8-26 Six Stages of Adoption Awareness – advertising aims at enhancing recognition and recall Interest – advertising that evokes curiosity Evaluation – advertising that focuses on product benefits Trial – demonstrations, sampling, trial size pouches, etc. Adoption – recommendations, endorsements, distribution Confirmation – communications which reassure customers

27. 8-27 Diffusion Process Concerned with the broader issue of how an innovation is communicated and adopted throughout the marketplace The process of spreading out Adopter categories –Five different type of consumers –Normal distribution

28. 8-28 Adopter Categories Innovators Early adopters Early majority Late majority Laggards

29. 8-29 Innovators 2.5%, the first to accept a new idea or product Venturesome and willing to take risks Generally better educated, younger and financially better off Rely heavily on impersonal information sources

30. 8-30 Early Adopters 13.5%, the second to adopt an innovation Heavy media users Use products extensively to make statements about themselves –Believe social acceptance is rooted in product adoption Opinion leaders primarily come from the early adopter group

31. 8-31 Early Majority 34% adopt the product prior to the mean time of adoption Deliberate and cautious middle class consumers Slightly above average education and income levels Spend more time in the innovation decision process

32. 8-32 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

33. 8-33 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

34. 8-34 Factors Affecting the Rate of Adoption Relative Advantage Compatibility Complexity Trialability Observability

35. 8-35 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 E.g. Microwaves in the 1960s and 1970’s

36. 8-36 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 E.g. New software versions are backward compatible

37. 8-37 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

38. 8-38 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 E.g. stores cooked whole dinners in microwaves to demonstrate their use

39. 8-39 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 E.g. The I-pod; the Razor scooters, etc.

40. 8-40 B2B Adoption Factors Increase in gross margin and profits Consistency with firm’s way of doing business Benefit relative to required investment

41. 8-41 www.vosswater.com