Chapter 8 Create the Product
Dec 21, 2015
Chapter 8
Create the Product
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-2
Chapter Objectives Articulate the value proposition Explain the layers of a product Describe how marketers classify
products Understand the importance and types of
product innovations Show how firms develop new products Explain the process of product adoption
and the diffusion of innovations
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-3
Real People, Real Choices: Decision Time at Bossa Nova Beverages
Which method should be used to add açai juice into the current product line? – Option 1: Add the açai juice ingredient to one
of the Bossa Nova’s existing products– Option 2: Create a new line of pure açai
juices with new packaging– Option 3: Focus on a single line of açai
products by promoting the high antioxidant aspect of açai products; divest other brands
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-4
Build a Better Mousetrap: The Value Proposition
Value proposition: – Benefits the consumer will receive when buying the
product Product:
– Tangible good, service, or 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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-5
Layers of the Product Concept
Core product: – All the benefits the product will provide
Actual product: – Physical good or delivered service that
supplies the desired benefits Augmented product:
– Actual product plus supporting features such as warranty, credit, delivery, installation, and repair service after the sale
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-6
How Marketers Classify Products
Consumer products– Durable– Nondurable– Convenience
products– Shopping products– Specialty products– Unsought products
Business-to-business products– Equipment– Maintenance, repair
& operating products– Raw materials– Processed materials– Specialized services– Component parts
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-7
Classifying Goods: How Long Does the Product Last?
Durable goods provide benefits over a period of months, years, decades– Examples: automobile, washing machine
Nondurable goods are consumed in the short term– Examples: newspapers, beverages, printer
cartridges
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-8
Classifying Goods: How Do Consumers Buy the Product?
Convenience products are frequently purchased– Staples (milk)– Impulse products (candy bar)– Emergency products (drain opener)
Shopping products are purchased with considerable time and effort– Attribute based (shoes)– Price based (water heater)
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-9
Classifying Goods: How Do Consumers Buy the Product?
Specialty products have unique characteristics important to buyers– Rolex watch
Unsought products are those in which consumers have little interest until a need arises– Burial plots
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-10
Business-to-Business Products
B2B products are classified by how organizational customers use them– Equipment is used in daily operations– Maintenance, repair, and operating (MRO)
goods are consumed relatively quickly– Raw materials are products of fishing,
lumber, agricultural, and mining industries that are used in the manufacture of finished goods
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-11
Business-to-Business Products
B2B products are classified by how organizational customers use them – Processed materials are created when raw
materials are transformed from their original state – Specialized services are purchased from outside
suppliers and may be equipment based or non-equipment based
– Component parts are manufactured goods or subassemblies of finished goods that organizations need to complete their own products
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-12
“New and Improved”The Process of Innovation
Innovation: A product that customers perceive to be new and different from existing products
The Federal Trade Commission 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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-13
It’s Important to Understand How Innovations Work
Successful innovations spread throughout the population
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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-14
Types of Innovations
Innovations differ in their degree of newness and can be classified along a continuum in terms of the amount of disruption/change they bring to people’s lives– Continuous innovations– Dynamically continuous innovations– Discontinuous innovations
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-15
Continuous Innovations
Continuous innovations:A modification to an existing product– Most common form of innovation– Consumers don’t need to learn anything new;
change is minimal – Examples: brand extensions, line extensions – Knockoffs copy (with slight modification) the
design of an original product
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-16
Dynamically Continuous Innovation
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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-17
Discontinuous Innovations
Discontinuous innovation:A totally new product– Creates major changes in the way we live– Consumers must engage in a great deal of
new learning– Examples: microwave ovens when first
introduced as an alternative to traditional ovens
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Developing New Products
New-product development is a continuous process of looking for entirely new products or for ways to make an existing product better
Successfully introducing new products is becoming more difficult– R&D costs are enormous– Products become obsolete faster– Slotting fees are high
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Phases in New-Product Development
Phase 1: Idea generation – Brainstorming products that provide customer
benefits and which are compatible with the firm’s mission
Phase 2: Product-concept development and screening– Product ideas are tested for technical and
commercial success Phase 3: Marketing strategy development
– Developing a strategy to introduce the product to the marketplace
– May involve green marketing
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-20
Phases in New-Product Development
Phase 4: Business analysis– The product’s commercial viability is
assessed in this phase
Phase 5: Technical development – Firm engineers refine and perfect the new
product– Prototypes or test versions of the proposed
product are developed (in R&D department)
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-21
Phases in New-Product Development
Phase 6: Test marketing– The complete marketing plan is tested in a
small geographic area similar to the larger market
Phase 7: Commercialization – The new product is launched into the market– Full-scale production, distribution, advertising,
and sales promotion are begun
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-22
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– The point where a product’s sales spike from
a slow climb to a new level is called the tipping point
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-23
Stages in Consumer Adoption of a New Product
Awareness: – Massive advertising is used to generate
awareness that the innovation exists Interest:
– Prospective adopters see how the new product might satisfy a need
– Consumers are open to information– Teaser advertising may be used to stimulate
interest
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-24
Stages in Consumer Adoption of a New Product
Evaluation: – Consumers weigh the costs/benefits – Impulse purchases are typically made with
little evaluation Trial:
– Potential adopters experience or use the product for the first time
– Sales promotions and product demos are critical for generating trial
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-25
Stages in Consumer Adoption of a New Product
Adoption: – The prospect buys the product or agrees with
the new idea
Confirmation: – After adoption, the consumer weighs the
expected vs. actual benefits and costs– Marketers can reinforce the consumer’s
choice via marketing communications
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Innovation and Adoption
Diffusion of innovation adopter categories– Innovators– Early adopters– Early majority– Late majority– Laggards
Factors affecting the rate of adoption– Relative advantage – Compatibility– Complexity – Trialability– Observability
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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
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-28
Real People, Real Choices: Decision Made at Bossa Nova
Bossa Nova clung to options 1 and 2 for several months but in the end chose option 3– Implementation: Bossa Nova Açai juice was
introduced in Mango, Passion Fruit, and Original flavors. Venture capital funding allowed the firm to grow by 300% annually and products are in all major retailers today
– Measuring success: Sales were compared to carbonated beverage run-rates
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Keeping It Real: Fast-Forward to Next Class Decision Time at Petters
Meet Tom Petters, chairman and CEO of Petters Group Worldwide
Petters Group began as a licensee of the Polaroid brand; Polaroid currently faces many challenges
The decision to be made: What role should Polaroid play in the future of Petters Group?
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-30
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