chapter 8 create the product. copyright 2009 pearson education, inc. publishing as prentice hall8-2...

Chapter 8

Create the Product

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall8-2

Chapter Objectives Articulate the value proposition Explain the layers of a product Describe how marketers classify

products Understand the importance and types of

product innovations Show how firms develop new products Explain the process of product adoption

and the diffusion of innovations


Real People, Real Choices: Decision Time at Bossa Nova Beverages

Which method should be used to add açai juice into the current product line? – Option 1: Add the açai juice ingredient to one

of the Bossa Nova’s existing products– Option 2: Create a new line of pure açai

juices with new packaging– Option 3: Focus on a single line of açai

products by promoting the high antioxidant aspect of açai products; divest other brands


Build a Better Mousetrap: The Value Proposition

Value proposition: – Benefits the consumer will receive when buying the

product Product:

– Tangible good, service, or 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


Layers of the Product Concept

Core product: – All the benefits the product will provide

Actual product: – Physical good or delivered service that

supplies the desired benefits Augmented product:

– Actual product plus supporting features such as warranty, credit, delivery, installation, and repair service after the sale


How Marketers Classify Products

Consumer products– Durable– Nondurable– Convenience

products– Shopping products– Specialty products– Unsought products

Business-to-business products– Equipment– Maintenance, repair

& operating products– Raw materials– Processed materials– Specialized services– Component parts


Classifying Goods: How Long Does the Product Last?

Durable goods provide benefits over a period of months, years, decades– Examples: automobile, washing machine

Nondurable goods are consumed in the short term– Examples: newspapers, beverages, printer

cartridges


Classifying Goods: How Do Consumers Buy the Product?

Convenience products are frequently purchased– Staples (milk)– Impulse products (candy bar)– Emergency products (drain opener)

Shopping products are purchased with considerable time and effort– Attribute based (shoes)– Price based (water heater)


Classifying Goods: How Do Consumers Buy the Product?

Specialty products have unique characteristics important to buyers– Rolex watch

Unsought products are those in which consumers have little interest until a need arises– Burial plots


Business-to-Business Products

B2B products are classified by how organizational customers use them– Equipment is used in daily operations– Maintenance, repair, and operating (MRO)

goods are consumed relatively quickly– Raw materials are products of fishing,

lumber, agricultural, and mining industries that are used in the manufacture of finished goods


Business-to-Business Products

B2B products are classified by how organizational customers use them – Processed materials are created when raw

materials are transformed from their original state – Specialized services are purchased from outside

suppliers and may be equipment based or non-equipment based

– Component parts are manufactured goods or subassemblies of finished goods that organizations need to complete their own products


“New and Improved”The Process of Innovation

Innovation: A product that customers perceive to be new and different from existing products

The Federal Trade Commission 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


It’s Important to Understand How Innovations Work

Successful innovations spread throughout the population

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


Types of Innovations

Innovations differ in their degree of newness and can be classified along a continuum in terms of the amount of disruption/change they bring to people’s lives– Continuous innovations– Dynamically continuous innovations– Discontinuous innovations


Continuous Innovations

Continuous innovations:A modification to an existing product– Most common form of innovation– Consumers don’t need to learn anything new;

change is minimal – Examples: brand extensions, line extensions – Knockoffs copy (with slight modification) the

design of an original product


Dynamically Continuous Innovation

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


Discontinuous Innovations

Discontinuous innovation:A totally new product– Creates major changes in the way we live– Consumers must engage in a great deal of

new learning– Examples: microwave ovens when first

introduced as an alternative to traditional ovens


Developing New Products

New-product development is a continuous process of looking for entirely new products or for ways to make an existing product better

Successfully introducing new products is becoming more difficult– R&D costs are enormous– Products become obsolete faster– Slotting fees are high


Phases in New-Product Development

Phase 1: Idea generation – Brainstorming products that provide customer

benefits and which are compatible with the firm’s mission

Phase 2: Product-concept development and screening– Product ideas are tested for technical and

commercial success Phase 3: Marketing strategy development

– Developing a strategy to introduce the product to the marketplace

– May involve green marketing



Phase 4: Business analysis– The product’s commercial viability is

assessed in this phase

Phase 5: Technical development – Firm engineers refine and perfect the new

product– Prototypes or test versions of the proposed

product are developed (in R&D department)



Phase 6: Test marketing– The complete marketing plan is tested in a

small geographic area similar to the larger market

Phase 7: Commercialization – The new product is launched into the market– Full-scale production, distribution, advertising,

and sales promotion are begun


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– The point where a product’s sales spike from

a slow climb to a new level is called the tipping point


Stages in Consumer Adoption of a New Product

Awareness: – Massive advertising is used to generate

awareness that the innovation exists Interest:

– Prospective adopters see how the new product might satisfy a need

– Consumers are open to information– Teaser advertising may be used to stimulate

interest



Evaluation: – Consumers weigh the costs/benefits – Impulse purchases are typically made with

little evaluation Trial:

– Potential adopters experience or use the product for the first time

– Sales promotions and product demos are critical for generating trial



Adoption: – The prospect buys the product or agrees with

the new idea

Confirmation: – After adoption, the consumer weighs the

expected vs. actual benefits and costs– Marketers can reinforce the consumer’s

choice via marketing communications


Innovation and Adoption

Diffusion of innovation adopter categories– Innovators– Early adopters– Early majority– Late majority– Laggards

Factors affecting the rate of adoption– Relative advantage – Compatibility– Complexity – Trialability– Observability


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


Real People, Real Choices: Decision Made at Bossa Nova

Bossa Nova clung to options 1 and 2 for several months but in the end chose option 3– Implementation: Bossa Nova Açai juice was

introduced in Mango, Passion Fruit, and Original flavors. Venture capital funding allowed the firm to grow by 300% annually and products are in all major retailers today

– Measuring success: Sales were compared to carbonated beverage run-rates


Keeping It Real: Fast-Forward to Next Class Decision Time at Petters

Meet Tom Petters, chairman and CEO of Petters Group Worldwide

Petters Group began as a licensee of the Polaroid brand; Polaroid currently faces many challenges

The decision to be made: What role should Polaroid play in the future of Petters Group?


Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

chapter 8 create the product. copyright 2009 pearson education, inc. publishing as prentice hall8-2...

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