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Layers of Product Concept

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Layers of Product Concept 8-* 8-* Early Adopters 13.5%, the second to adopt an innovation Heavy media users Tend to be concerned with social acceptance Opinion ... – PowerPoint PPT presentation

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Title: Layers of Product Concept


1
Layers of Product Concept
2
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.

3
The Actual Product
  • Consists of the physical good or delivered
    service that supplies the desired benefit
  • Example
  • A washing machines 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

4
The Augmented Product
  • Consists of the actual product plus other
    supporting features such as warranty, credit,
    delivery, installation, and repair service after
    the sale

5
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

6
Classifying Consumer Products
  • By how long they last
  • Durable
  • Nondurable
  • By how consumers buy them
  • Convenience
  • Shopping
  • Specialty
  • Unsought

7
Shopping Product
8
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

9
Band-Aid
10
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

11
Specialty Products
  • Goods or services bought with much consumer
    effort or in an extended problem- solving
    situation
  • Consumers insist upon a particular item and will
    not accept substitutes

12
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

13
Its 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

14
Life-Changing Innovations
  • CD
  • Photocopier
  • Fax
  • Cell phone
  • Post-it Notes
  • Air conditioner
  • Microwave

What is your favorite life-changing innovation?
15
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

16
Innovation Continuum
Continuous Dynamically
Discontinuous Continuous
Little to no change Extreme changes
17
New Product Development
Idea Generation
Product Concept Development
Marketing Strategy Development
Business Analysis
Technical Development
Market Testing
Commercialization
18
Step 1 Idea Generation
  • Sources of new ideas
  • customers
  • salespeople
  • service providers
  • anyone with direct customer contact

19
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

20
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

21
Step 4 Business Analysis
  • Assess how the new product will fit into the
    firms total product mix
  • Evaluate whether the product can be a profitable
    contribution for the organizations product mix

22
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

23
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

24
Product Testing
Firms using online research techniques can test
consumer reactions to product ideas faster than
ever before
25
Commercialization
  • Launch the product!
  • Full-scale production
  • Distribution
  • Advertising
  • Sales promotion
  • and more

26
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

27
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

28
Six Stages of Adoption
29
Michelle Beauty Centre
This ad builds interest by showing how the
service will benefit customers
30
Silk Soymilk
Silk stimulated adoption by distributing free
samples
31
Diffusion Process
  • Concerned with the broader issue of how an
    innovation is communicated and adopted throughout
    the marketplace
  • The process of spreading out

32
Figure 8.6 Adopter Categories
Mean Time of Adoption
Innovators (2.5)
Early Adopters (13.5)
Early Majority (34)
Late Majority (34)
Laggards (16)
33
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

34
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

35
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

36
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

37
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

38
Factors Affecting the Rate of Adoption
Relative Advantage
Compatibility
Observability
Complexity
Trialability
39
Relative Advantage
  • A product innovation is perceived as better than
    existing alternatives
  • Positively correlated with an innovations
    adoption rate
  • Exist when a new product offers
  • Better performance, increased comfort, saving in
    time and effort, or immediacy of reward

40
Skin Watch
Does an ultra-thin watch provide a relative
advantage over other watches?
41
Compatibility
  • An innovation is perceived to fit into a persons
    way of doing things
  • The greater compatibility, the more rapid a
    products rate of adoption
  • Overcome perception of incompatibility through
    heavy advertising to persuade consumers

42
Complexity
  • The more complex the product, the more slowly a
    products rate of adoption
  • Overcome perception of complexity with
    demonstrations, personal selling, and emphasis on
    ease of use

43
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 consumers being dissatisfied with a product
    after having permanently committed to it through
    outright purchase

44
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

45
B2B Adoption Factors
  • Increase in gross margin and profits
  • Consistency with firms way of doing business
  • Benefit relative to required investment

46
Marketing Throughout the PLC
  • The Product Life Cycle (PLC) explains how
    features change over the life of a product
  • Marketing strategies must change and evolve as a
    product moves through the PLC
  • The PLC relates to a product category

47
Figure 9.5 The Product Life Cycle
48
Introduction
  • Full-scale launch of new product into marketplace
  • Sales are low, high failure rate
  • Little competition
  • Frequent product modification
  • Limited distribution
  • High marketing and product costs
  • Promotion focused on product awareness and to
    stimulate primary demand
  • Intensive personal selling to retailers and
    wholesalers

49
Growth
  • Sales grow at an increasing rate
  • Many competitors enter market
  • Large companies may acquire small pioneering
    firms
  • Profits are healthy
  • Promotion emphasizes brand advertising and
    comparative ads
  • Wider distribution
  • Toward end of growth stage, prices fall
  • Sales volume creates economies of scale

50
Maturity
  • Sales continue to increase but at a decreasing
    rate
  • Marketplace is approaching saturation
  • Typified by annual models of products with an
    emphasis on style rather than function
  • Product lines are widened or extended
  • Marginal competitors drop out
  • Heavy promotions - sales promotions
  • Prices and profits fall

51
Decline
  • Signaled by a long-run drop in sales
  • Rate of decline is governed by how rapidly
    consumer tastes change or how rapidly substitute
    products are adopted
  • Falling demand forces many out of market
  • Few specialty firms left
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