CHAPTER 8 Creating the Product

Document Sample
CHAPTER 8 Creating the Product Powered By Docstoc
					    MARKETING
                           Real People, Real Choices
                                         Fourth Edition




                                CHAPTER 8
                        Creating the Product



Michael R. Solomon   Greg W. Marshall    Elnora W. Stuart
                  Chapter Objectives


• Explain the layers of a product
• Describe the classifications of products
• Explain the importance of new products
• Describe how firms develop new
  products
• Explain the process of product adoption
  and the diffusion of innovations


                                         8-2
Figure 8.1: Making and Delivering Value




                                     8-3
Figure 8.2: Layers of Product Concept




                                   8-4
                        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.

                                             8-5
                        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

                                              8-6
           The Augmented Product

• Consists of the actual product plus other
  supporting features such as warranty,
  credit, delivery, installation, and repair
  service after the sale




                                          8-7
                           NetFlix Example

• Core Product: access
  to movies
• Actual Product: rental
  of DVDs
• Augmented Product:
  rentals unlimited, 3
  movies out at a time,
  monthly subscription
  fee, no late fees, no
  shipping fees, movie
  recommendation
  service


                                        8-8
Figure 8.3: Classifying Consumer Products

• By how long they   • By how consumers
  last                 buy them
   – Durable            – Convenience
   – Nondurable         – Shopping
                        – Specialty
                        – Unsought




                                          8-9
Shopping Product




              8-10
Figure 8.3: Classifying Business Products

• By how products are used
  – Equipment
  – MRO
  – Raw materials
  – Processed materials
  – Specialized services
  – Component parts


                                       8-11
              Convenience Products

• Good or service that consumers
  purchase frequently with a minimum of
  comparison and effort
• Types of convenience products
   – staples
   – impulse products
   – emergency products



                                      8-12
Band-Aid




       8-13
                     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

                                            8-14
                       Specialty Products

• Goods or services
  bought with much
  consumer effort in an
  extended problem-
  solving situation
• Consumers insist upon a
  particular item and will
  not accept substitutes




                                       8-15
                  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




                                        8-16
     Business Products

                Equipment:
              Installations &
               Accessories

Specialized
                                Processed
 Services
                Business         Materials
                Product
 MRO            Classes           Raw
Supplies                        Materials

               Component
                Parts and
                Materials



                                             8-17
               It’s New and Improved
• What is a new product?
  – According to the FTC, a new product
    is one that is entirely new or changed
    significantly and that product may be
    called new for only six months
  – From a marketing perspective, new is
    anything a customer perceives as
    new and different


                                         8-18
         Life-Changing Innovations

•   CD
•   Photocopier
•   Fax
                      What is your favorite
•   Cell phone        life-changing innovation?
•   Post-it Notes
•   Air conditioner
•   Microwave


                                           8-19
               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


                                       8-20
                      Innovation Continuum




   Continuous         Dynamically   Discontinuous
                      Continuous




Little to no change                   Extreme changes


                                                    8-21
Legal Knock-Offs




              8-22
   New Product Development

    Idea Generation
Product Concept Development
 Marketing Strategy Development
           Business Analysis
            Technical Development
                      Market Testing
                      Commercialization

                                          8-23
                Step 1: Idea Generation

• Sources of new
  ideas
   – customers
   – salespeople
   – service
     providers
   – anyone with
     direct customer
     contact


                                     8-24
 Step 2: Product Concept Development

• Expand ideas into
  more complete
  product concepts
• Describe features
  the product should
  have and benefits
  those features will
  provide
• Evaluate chance for
  success


                                  8-25
Step 3: Marketing Strategy Development

  • Develop a marketing strategy that can
    be used to introduce the product to the
    marketplace
    – Identify the target market
    – Estimate its size
    – Determine how the product can be
      positioned
    – Plan pricing, distribution, and promotion
      expenditures necessary for roll-out

                                                  8-26
       Step 4: 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 the organization’s
  product mix




                                   8-27
 Step 5: 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




                                        8-28
             Texwood


These
jeans have
been
tested on
humans




                  8-29
                           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

                                         8-30
Product Testing


Firms using online
research techniques
can test consumer
reactions to product
ideas faster than ever
before




                  8-31
                    Commercialization

• Launch the product!
   – Full-scale production
   – Distribution
   – Advertising
   – Sales promotion
   – and more




                                   8-32
     Commercialization Is No Guarantee

• Forecasts estimated
  sales of FluMist to
  exceed 6 million
  doses when it was
  introduced in 2003
• Despite a $25
  million ad campaign,
  only 100,000 doses
  were sold



                                   8-33
  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



                                       8-34
Figure 8.5: Six Stages of Adoption




                                8-35
        Michelle Beauty Centre

This ad
builds
interest by
showing how
the service
will benefit
customers




                                 8-36
Silk Soymilk


Silk
stimulated
adoption by
distributing
free samples




               8-37
                   Diffusion Process

• Concerned with the broader issue of
  how an innovation is communicated and
  adopted throughout the marketplace
• The process of spreading out




                                    8-38
        Figure 8.6: Adopter Categories

                                        Mean Time of
                                         Adoption




Innovators
  (2.5%)
         Early     Early       Late
       Adopters   Majority   Majority    Laggards
        (13.5%)    (34%)      (34%)        (16%)




                                                    8-39
                                 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

                                          8-40
                        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


                                       8-41
                           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


                                       8-42
                           Late Majority

• 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
                                         8-43
                                Laggards

• 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




                                      8-44
 Factors Affecting the Rate of Adoption

                  Relative
                 Advantage

Observability                Compatibility




  Trialability               Complexity



                                          8-45
       What factors hindered the adoption of
smokeless cigarettes, Betamax Video Players,
    the Ford Edsel, and Laser Disk Players?




                                      8-46
                    Relative Advantage

• A product innovation is perceived as
  better than existing alternatives
• Positively correlated with an
  innovation’s adoption rate
• Exist when a new product offers:
   – Better performance, increased
     comfort, saving in time and effort, or
     immediacy of reward


                                              8-47
             Skin Watch

Does an
ultra-thin
watch
provide a
relative
advantage
over other
watches?




                     8-48
                           Compatibility

• An innovation is perceived to fit into a
  person’s way of doing things
• The greater compatibility, the more
  rapid a product’s rate of adoption
• Overcome perception of incompatibility
  through heavy advertising to persuade
  consumers



                                         8-49
                            Complexity

• The more complex the product, the
  more slowly a product’s rate of adoption
• Overcome perception of complexity with
  demonstrations, personal selling, and
  emphasis on ease of use




                                        8-50
                              Trialability

• An innovation can be used on a limited
  basis prior to making a full-blown
  commitment
• The trial experience serves to reduce
  the risk of a consumer’s being
  dissatisfied with a product after having
  permanently committed to it through
  outright purchase


                                         8-51
                           Observability


• The product user or other people can
  observe the positive effects of new
  product usage
• The higher the visibility, the more rapid
  the adoption rate




                                          8-52
                B2B Adoption Factors

• Increase in gross margin and profits
• Consistency with firm’s way of doing
  business
• Benefit relative to required investment




                                            8-53
             Issues for Discussion_1

• What are some products technology
  might develop in the future?
• What are the benefits to consumers
  when marketers understand the three
  layers of the product and develop
  products with the concept in mind?
• What are some examples of
  discontinuous innovations introduced
  during this century? What might the
  future hold for new products?

                                         8-54
             Issues for Discussion_2

• 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?
• What are some new products that have
  made our lives better? That have been
  harmful to consumers or to society?
  Should there be a way to monitor new
  products that are introduced?

                                        8-55

				
DOCUMENT INFO