1. Creating the Product

2. 2 Chapter Objectives Explain the layers of a product Describe the classifications of products Understand the importance of new products Show how firms develop new products Explain the process of product adoption and the diffusion of innovations

3. 3 Build a Better Mousetrap: The Value Proposition Value proposition: benefits the consumer will receive if she buys the product 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

4. 4 Layers of the Product Concept Core product: basic benefits the product will provide Actual product: physical good or delivered service that supplies the benefits Augmented product: actual product plus supporting features’ such as warranty, repair, installation, customer support

5. 5 Figure 8.2: Layers of the Product

6. 6 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

7. 7 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?

8. 8 Classifying Products Products are either consumer products or B2B products. Categories differ in how consumers and business customers feel about products and how they purchase them.

9. 9 Classifying Goods: How Long Does the Product Last? Durable goods: provide benefits over a period of months, years, decades  Example: automobile Nondurable goods: consumed in the short term  Example: newspapers

10. 10 Classifying Goods: How Do Consumers Buy the Product? Convenience product: frequently purchased  Staples (milk)  Impulse products (candy bar)  Emergency products (drain opener) Shopping product: purchased with considerable time and effort  Attribute based (shoes)  Price-based (water heater)

11. 11 Classifying Goods: How Do Consumers Buy the Product? (cont’d) Specialty products: have unique characteristics important to buyers  Rolex watch Unsought products: those in which consumers have little interest until a need arises  insurance GEICO INSURANCE

12. 12 Business-To-Business Products Classified by how organizational customers use them  Equipment  Maintenance, repair, and operating (MRO) products  Raw materials  Processed materials and special services  Component parts

13. 13 The Process of Innovation The FTC says :  --A product must be entirely new or changed significantly to be called new, and  --A product may be called new for only six months. Innovation: anything that customers perceive as new and different

14. 14 It’s Important to Understand How Innovations Work Technology is advancing at a dizzying pace. New products are expensive to develop and even more costly if they fail. New products can contribute to society.

15. 15 Types of Innovations Innovations differ in degree of newness --Continuous innovations --Dynamically continuous innovations --Discontinuous innovations

16. 16 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.

17. 17 Dynamically Continuous Innovation A pronounced modification to an existing product --Requires a modest amount of learning or behavior change. Convergence: the coming together of two or more technologies to create a new system with greater benefit than its parts.

18. 18 Discontinuous Innovations A totally new product --Creates major changes in the way we live. --Consumer must engage in a great deal of learning.

19. 19 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?

20. 20 Developing New Products New-product development can be creating totally new products or making an existing product better.

21. 21 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

22. 22 Phases in New-Product Development Phase 1: Idea generation  Brainstorm for products that provide customer benefits. Phase 2: Product-concept development and screening  Test product ideas for technical and commercial success. LEGO MINDSTORMS

23. 23 Phases in New-Product Development (cont’d) Phase 3: Marketing strategy development Decide how to introduce the product to the marketplace. Phase 4: Business analysis Assess a product’s commercial viability.

24. 24 Phases in New-Product Development (cont’d) Phase 5: Technical development  Refine and perfect new product.  Develop prototypes or test versions of proposed product (in R&D department). Phase 6: Test marketing  Test complete marketing plan in a small geographic area similar to larger market.

25. 25 Phases in New-Product Development (cont’d) Phase 7: Commercialization Launch new product into the market. Begin full-scale production, distribution, advertising, sales promotion. FLUMIST

26. 26 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?

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

28. 28 Stages in Consumer Adoption of a New Product Figure 8.4

29. 29 Stages in Consumer Adoption of a New Product Awareness: learning the innovation exists Interest: seeing how the new product might satisfy an existing or newly realized need Evaluation: weighing costs/benefits of new product

30. 30 Stages in Consumer Adoption of a New Product (cont’d) Trial: experiencing or using product for the first time Adoption: buying the good or agreeing with the new idea Confirmation: weighing expected versus actual benefits and costs

31. 31 The Diffusion of Innovations Adopter categories Innovators Early adopters Early majority Late majority Laggards

32. 32 Categories of Adopters Figure 8.5

33. 33 Product Factors Affecting Rate of Adoption Relative advantage Compatibility Complexity Trialability Observability

34. 34 How Organizational Differences Affect Adoption Innovators: are new, smaller, or younger firms Early-adopter firms: are market-share leaders Late-majority firms: prefer the status quo and have large investments in existing production technology Laggard firms: are probably already losing money

35. 35 Individual activity Visit Procter & Gamble’s Web site (www.pg.com) and click on “Products” at the top, then “Oral Care” and “Crest.”www.pg.com  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?

36. 36 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

37. 37 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?