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									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.




                                                         27
 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




                                  34
                     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

•   Relative advantage
•   Compatibility
•   Complexity
•   Trialability
•   Observability




                                      36
        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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