DEVELOPING
NEW PRODUCTS AND SERVICES
Layers of the Product Concept
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.
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
The Augmented Product
• Consists of the actual product plus other
supporting features such as warranty, credit,
delivery, installation, and repair service
after the sale
Classification of consumer goods
Classifying Products
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
Specialty Products
• Goods or services bought with much
consumer effort in an extended problemsolving situation
• Consumers insist upon a particular item and
will not accept substitutes
• Example:
– Sony’s AIBO Robot Dog
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
Business Products
Equipment:
Installations &
Accessories
Specialized
Services
MRO
Supplies
Business
Product
Classes
Component
Parts and
Materials
Processed
Materials
Raw
Materials
Life-Changing Innovations
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CD
Photocopier
Fax
Cell phone
Post-it Notes
Air conditioner
Microwave
What is your favorite
life-changing innovation?
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
Innovation Continuum
Continuous
Little to no change
Dynamically
Continuous
Discontinuous
Extreme changes
“New” Products
• What is a New Product?
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Newness Compared with Existing Products
Newness in Legal Terms
Newness from the Company’s Perspective
Newness from the Consumer’s Perspective
Consumption effects define newness
Marketing Reasons for New Product
Failures
• Insignificant “point of difference”
• Incomplete market and product definition
• Too little market attractiveness
• Poor execution of the marketing mix
• Poor product quality or sensitivity
• Bad timing
• No economical access to buyers
Stages in the new-product process
Marketing Strategy Development
• Develop a marketing strategy that can
be used to introduce the product to the
marketplace
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Identify the target market
Estimate its size
Determine how the product can be positioned
Plan pricing, distribution, and promotion
expenditures necessary for roll-out
Idea Generation
• Sources of new ideas
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customers
salespeople
research and development breakthroughs
competitive products
anyone with direct customer contact
Product Concept
Development and Screening
• 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 – internal and external
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 organization’s
product mix
• Only after approval at this stage does
significant development $$ expenditure
begin
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
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
Six important U.S. test markets
Commercialization
• Launch the product!
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Full scale production
Distribution
Advertising
Sales promotion
and more
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
Six Stages of Adoption
Confirmation
Adoption
Trial
Evaluation
Interest
Awareness
Diffusion Process
• Concerned with the broader issue of how an
innovation is communicated and adopted
throughout the marketplace
• The process of spreading out - PLC
• Adopter categories
– Five different type of consumers
– Normal distribution
The Product Life Cycle
Adopter Categories
Mean Time of
Adoption
Innovators
(2.5%)
Early
Adopters
(13.5%)
Early
Majority
(34%)
Late
Majority
(34%)
Laggards
(16%)
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
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
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
Late Majority
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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
Laggards
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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
Marketing
information
and
methods
used in the
newproduct
process