Transcript Consumers Rule - Faculty Sites

Creating the Product
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
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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
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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
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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
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Figure 8.2: Layers of the Product
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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
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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?
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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.
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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
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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)
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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
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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
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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
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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.
BIONIC EAR SYSTEM
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Types of Innovations
• Innovations differ in degree of newness
--Continuous innovations
--Dynamically continuous innovations
--Discontinuous innovations
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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.
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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?
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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.
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Discontinuous Innovations
• A totally new product
• --Creates major changes in the way we live.
• --Consumer must engage in a great deal of
learning.
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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?
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Developing New Products
• New-product development
can be creating totally new
products or making an
existing product better.
TOTO NEOREST TOILETS
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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
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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
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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
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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.
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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.
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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
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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
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Stages in Consumer Adoption of a
New Product
Figure 8.4
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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
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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
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The Diffusion of Innovations
• Adopter categories
Innovators
Early adopters
Early majority
Late majority
Laggards
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Categories of Adopters
Figure 8.5
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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?
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Product Factors Affecting
Rate of Adoption
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Relative advantage
Compatibility
Complexity
Trialability
Observability
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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?
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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
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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
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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?
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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?
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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
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