Creating the
Product
Chapter Objectives
• layers of a product
• classifications of products
• importance of new products
2
Chapter Objectives
• Developing new products
• product adoption
• diffusion of innovations
3
The Value Proposition
• Value proposition:
• benefits consumer will receive
• if she buys the product
4
The Value Proposition
• Product:
• Good:
• Intangible products:
5
The Value Proposition
• 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
6
Layers of the Product Concept
• Core product:
basic benefits product provides
• Actual product:
physical good or delivered service
• that supplies the benefits
• Augmented product:
actual product + supporting
features’
Examples:
• warranty, repair, installation, customer
support
7
Figure 8.2: Layers of the Product
8
Classifying Products
• Products are either
B2C products or B2B products.
• Categories differ in
how consumers & business customers
feel about products and
how they purchase them.
9
Classifying Goods: Product life
• Durable goods:
• provide benefits for months, years, decades
 Example: automobile
• Nondurable goods:
• consumed in the short term
 Example: newspapers
10
Classifying Goods:
How Do Consumers Buy the Product?
• Convenience product:
• frequently purchased
Staples (milk)
Impulse products (candy bar)
Emergency products (drain opener)
11
Classifying Goods:
How Do Consumers Buy the Product?
• Shopping product:
• purchased with considerable time & effort
Attribute based (shoes)
Price-based (water heater)
12
Classifying Goods:
•Specialty products:
• have unique characteristics
• important to buyers
 Rolex watch
GEICO INSURANCE
13
Classifying Goods:
•Unsought products:
• consumers have little interest
until a need arises
insurance
GEICO INSURANCE
14
Business-To-Business Products
• Classified by how organizational
customers use them
Equipment
Maintenance, repair, &
operating (MRO) products
Raw materials
Processed materials & special
services
Component parts
15
The Process of Innovation
• The FTC says :
--A product must be entirely new
or changed significantly
to be called new,
--A product may be called new
•for only 6 months.
16
The Process of Innovation
• Innovation:
• anything customers perceive as
• new & different
17
How Innovations Work
•
Technology
is advancing at a dizzying pace.
• New products
 expensive to develop
more costly if they fail.
• New products
can contribute to society.
BIONIC EAR SYSTEM
18
Types of Innovations
• Innovations differ in degree of
newness
--Continuous innovations
--Dynamically continuous innovations
--Discontinuous innovations
19
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.
20
Dynamically Continuous Innovation
• A pronounced modification
to an existing product
--Requires
a modest amount
of learning or behavior
change.
21
Dynamically Continuous Innovation
Convergence:
the coming together of two
or more technologies
to create a new system with
greater benefit than its
parts.
22
Discontinuous Innovations
• A totally new product
• --Creates major changes
in the way we live.
• --Consumer must engage in
a great deal of learning.
Examples?????
23
New product development
• For next Monday
• Friday:
Bonus video
24
Developing New Products
• New-product development
• create totally new products or
• make an existing product better.
TOTO NEOREST TOILETS
25
Phases in New-Product Development
• Phase 1:
• Idea generation
Brainstorm for products
that provide customer benefits.
LEGO MINDSTORMS
26
Phases in New-Product Development
• Phase 2:
• Product-concept development &
screening
Test product ideas
for technical and commercial success.
LEGO MINDSTORMS
27
Phases in New-Product Development
• Phase 3:
• Marketing strategy development
• how to introduce the product to the
marketplace.
28
Phases in New-Product Development
• Phase 4:
• Business analysis
Assess a product’s commercial viability.
29
Phases in New-Product Development
•Phase 5:
• Technical development
Refine and perfect new product.
Develop prototypes or
test versions of proposed
product
• (in R&D department).
30
Phases in New-Product Development
•Phase 6:
• Test marketing
Test complete marketing plan
in a small geographic area
similar to larger market.
31
Phases in New-Product Development
• Phase 7:
• Commercialization
Launch new product into the market.
Begin full-scale production,
distribution, advertising, sales
promotion.
FLUMIST
32
Adoption & diffusion
Adoption and Diffusion
• Product adoption:
• process by which a consumer or
business customer
• begins to buy and use
• a new good, service, or idea
34
Adoption and Diffusion
• Diffusion:
• process when use of a product
• spreads throughout a population
35
Stages in Consumer Adoption of a
New Product
Figure 8.4
36
Stages in Consumer Adoption of a
New Product
• Awareness:
• learning the
innovation exists
37
Stages in Consumer Adoption of a
New Product
• Interest:
• seeing how the new
product might satisfy
an existing or newly
realized need
38
Stages in Consumer Adoption of a
New Product
• Evaluation:
• weighing
costs/benefits
• of new product
39
Stages in Consumer Adoption of a
New Product
• Trial:
• experiencing or using
product for the first time
40
Stages in Consumer Adoption of a
New Product
• Adoption:
• buying the good or
• agreeing with the new
idea
41
Stages in Consumer Adoption of a
New Product
• Confirmation:
• weighing expected
versus actual benefits
and costs
42
The Diffusion of Innovations
• Adopter categories
Innovators
Early adopters
Early majority
Late majority
Laggards
43
Categories of Adopters
Figure 8.5
44
Product Factors Affecting
Rate of Adoption
•
•
•
•
•
Relative advantage
Compatibility
Complexity
Trialability
Observability
45
How Organizational Differences
Affect Adoption
• Innovators:
are new, smaller, or younger firms
• Early-adopter firms:
are market-share leaders
46
How Organizational Differences
Affect Adoption
• Late-majority firms:
prefer the status quo and have large
investments in existing production
technology
• Laggard firms:
are probably already losing money
47
• The end
48
Real People, Real Choices
• Black and Decker (Eleni Rossides)
• Considering the results of a survey, Black
and Decker needed to decide what to do
with its ScumBuster
 Option 1: if it ain’t broke, don’t fix it
 Option 2: emphasize value for your money
 Option 3: ramp up the ScumBuster’s features
BLACK and DECKER
49
Real People, Real Choices
• Black and Decker (Eleni Rossides)
• Eleni chose Option 3: ramp up the ScumBuster’s
features
The company continues to modify the basic concept with new
features and new applications to “clean up” against the
competition
50
Marketing Plan Exercise
• Visit Procter & Gamble’s Web site
(www.pg.com) and click on “Products” at
the top, then “Oral Care” and “Crest.”
 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?
51
Marketing in Action Case:
You Make the Call
• What is the decision facing Kodak?
• What factors are important in
understanding this decision situation?
• What are the alternatives?
• What decision(s) do you recommend?
• What are some ways to implement your
recommendation?
52
Keeping It Real: Fast Forward to Next
Class Decision Time at Grendha
• Meet Angelo Daros, VP of Grendha
Shoes, a major Brazilian shoe
manufacturer
• Plan: to launch the Rider brand in the U.S.
market
• The decision: How to position the Rider
brand for the United States
53
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
54
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?
55
Discussion
• Should knockoffs be illegal?
• Who is hurt by knockoffs?
• Is the marketing of knockoffs good or bad for
consumers in the short run? In the long run?
56
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?
57
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
58
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
59
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?
60
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?
61