Consumers Rule

1
Creating the Product
2
Chapter Objectives

• layers of a product
• classifications of products
• importance of new products

3
Chapter Objectives

• Developing new products
• product adoption
• diffusion of innovations

4
The Value Proposition

• Value proposition
• benefits consumer will receive
• if she buys the product

5
The Value Proposition

• Product
• Good
• Intangible products

6
The Value Proposition

• 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

7
Layers of the Product Concept

• Core product
• basic benefits product provides
• Actual product
• physical good or delivered service
• that supplies the benefits
• Augmented product
• actual product supporting features
• Examples
• warranty, repair, installation, customer support

8
Figure 8.2 Layers of the Product
9
Classifying Products

• Products are either
• B2C products or B2B products.
• Categories differ in
• how consumers business customers
• feel about products and
• how they purchase them.

10
Classifying Goods Product life

• Durable goods
• provide benefits for months, years, decades
• Example automobile
• Nondurable goods
• consumed in the short term
• Example newspapers

11
Classifying Goods How Do Consumers Buy the
Product?

• Convenience product
• frequently purchased
• Staples (milk)
• Impulse products (candy bar)
• Emergency products (drain opener)

12
Classifying Goods How Do Consumers Buy the
Product?

• Shopping product
• purchased with considerable time effort
• Attribute based (shoes)
• Price-based (water heater)

13
Classifying Goods

• Specialty products
• have unique characteristics
• important to buyers
• Rolex watch

14
Classifying Goods

• Unsought products
• consumers have little interest until a need
  arises
• insurance

15
Business-To-Business Products

• Classified by how organizational customers use
  them
• Equipment
• Maintenance, repair, operating (MRO) products
• Raw materials
• Processed materials special services
• Component parts

16
The Process of Innovation

• The FTC says
• --A product must be entirely new
• or changed significantly
• to be called new,
• --A product may be called new
• for only 6 months.

17
The Process of Innovation

• Innovation
• anything customers perceive as
• new different

18
How Innovations Work

• Technology
• is advancing at a dizzying pace.
• New products
• expensive to develop
• more costly if they fail.
• New products
• can contribute to society.

19
Types of Innovations

• Innovations differ in degree of newness
• --Continuous innovations
• --Dynamically continuous innovations
• --Discontinuous innovations

20
Continuous Innovations

• A modification to an existing product
• --Consumer doesnt have to learn anything new.
• Knockoffs copy,
• with slight modification,
• the design of an original product.

21
Dynamically Continuous Innovation

• A pronounced modification to an existing product
• --Requires a modest amount of learning or
  behavior change.

22
Dynamically Continuous Innovation

• Convergence
• the coming together of two or more technologies
• to create a new system with greater benefit than
  its parts.

23
Discontinuous Innovations

• A totally new product
• --Creates major changes
• in the way we live.
• --Consumer must engage in
• a great deal of learning.
• Examples?????

24
New product development

• For next Monday
• Friday
• Bonus video

25
Developing New Products

• New-product development
• create totally new products or
• make an existing product better.

26
Phases in New-Product Development

• Phase 1
• Idea generation
• Brainstorm for products
• that provide customer benefits.

27
Phases in New-Product Development

• Phase 2
• Product-concept development screening
• Test product ideas
• for technical and commercial success.

28
Phases in New-Product Development

• Phase 3
• Marketing strategy development
• how to introduce the product to the marketplace.

29
Phases in New-Product Development

• Phase 4
• Business analysis
• Assess a products commercial viability.

30
Phases in New-Product Development

• Phase 5
• Technical development
• Refine and perfect new product.
• Develop prototypes or
• test versions of proposed product
• (in RD department).

31
Phases in New-Product Development

• Phase 6
• Test marketing
• Test complete marketing plan
• in a small geographic area
• similar to larger market.

32
Phases in New-Product Development

• Phase 7
• Commercialization
• Launch new product into the market.
• Begin full-scale production,
• distribution, advertising, sales promotion.

33
Adoption diffusion
34
Adoption and Diffusion

• Product adoption
• process by which a consumer or business customer
• begins to buy and use
• a new good, service, or idea

35
Adoption and Diffusion

• Diffusion
• process when use of a product
• spreads throughout a population

36
Stages in Consumer Adoption of a New Product
Figure 8.4
37
Stages in Consumer Adoption of a New Product

• Awareness
• learning the innovation exists

38
Stages in Consumer Adoption of a New Product

• Interest
• seeing how the new product might satisfy an
  existing or newly realized need

39
Stages in Consumer Adoption of a New Product

• Evaluation
• weighing costs/benefits
• of new product

40
Stages in Consumer Adoption of a New Product

• Trial
• experiencing or using product for the first time

41
Stages in Consumer Adoption of a New Product

• Adoption
• buying the good or
• agreeing with the new idea

42
Stages in Consumer Adoption of a New Product

• Confirmation
• weighing expected versus actual benefits and
  costs

43
The Diffusion of Innovations

• Adopter categories
• Innovators
• Early adopters
• Early majority
• Late majority
• Laggards

44
Categories of Adopters
Figure 8.5
45
Product Factors AffectingRate of Adoption

• Relative advantage
• Compatibility
• Complexity
• Trialability
• Observability

46
How Organizational Differences Affect Adoption

• Innovators
• are new, smaller, or younger firms
• Early-adopter firms
• are market-share leaders

47
How Organizational Differences Affect Adoption

• Late-majority firms
• prefer the status quo and have large investments
  in existing production technology
• Laggard firms
• are probably already losing money

48

• The end

49
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 aint broke, dont fix it
• Option 2 emphasize value for your money
• Option 3 ramp up the ScumBusters features

50
Real People, Real Choices

• Black and Decker (Eleni Rossides)
• Eleni chose Option 3 ramp up the ScumBusters
  features
• The company continues to modify the basic concept
  with new features and new applications to clean
  up against the competition

51
Marketing Plan Exercise

• Visit Procter Gambles 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?

52
Marketing in Action CaseYou 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?

53
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

54
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

55
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?

56
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?

57
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?

58
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?

59
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

60
Group Activity

• Your group acts as director of marketing for a
  major cell phone manufacturer.
• Your companys new product does everything but
  tap dance. How will you convince the late
  majority to adopt this new technology?

61
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?