CHAPTER 8 Creating the Product

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CHAPTER 8Creating the Product
M A R K E T I N G
Real People, Real Choices Fourth Edition
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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!
• What is the core product?
• A toothpaste
• The I-Pod

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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

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The Augmented Product

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

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Distinguishing between 3 levels of product

• Why do we do it?
• Zero in on the most important benefit(s) which
  consumers are looking for
• Make sure the actual product delivers the
  benefits
• Then focus on additional features which serve to
  make the product more attractive

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Classifying Consumer Products

• By how long they last
• Durable
• Nondurable

• By how consumers buy them
• Convenience
• Shopping
• Specialty
• Unsought

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Classifying Business Products

• By how products are used
• Equipment
• Maintenance and supplies
• Raw materials
• Processed materials
• Specialized services
• Component parts

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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
• Parallels with involvement levels, consumer
  decision making strategies and the buying process
• Implications for marketers?

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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
• Parallels with involvement levels, consumer
  decision making strategies and the buying process
• Implications for marketers?

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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
• Parallels with involvement levels, consumer
  decision making strategies and the buying process
• Implications for marketers?

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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
• Parallels with involvement levels, consumer
  decision making strategies and the buying process
• Implications for marketers?

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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

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Types of innovations

• Continuous innovations newness in small
  continuous increments
• E.g. adding new features to existing products,
  new brand names, etc.
• Minimal learning, hence faster diffusion, easier
  acceptance
• Knock-off copies with slight differences from
  the original
• Aimed at different target audiences

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Types of innovations

• Dynamically continuous innovations
• Much greater newness
• Requires greater learning hence slower
  acceptability and slower diffusion
• E.g. vinyl records to tapes to CDs
• Convergence of technologies

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Types of innovations

• Discontinuous Innovations
• Maximum newness
• Requires major learning, slowest acceptance and
  diffusion
• E.g. writing letters as opposed to email
• Marketing implications of degrees of newness?

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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

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New Product Development

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

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Step 1 Idea Generation

• Sources of new ideas
• customers
• salespeople
• service providers
• anyone with direct customer contact
• Employees (e.g. Nikes Deep Dives)
• Consultants

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Step 2 Product Concept Development

• Expand ideas into more complete product concepts
• Describe what features the product should have
  and benefits those features will provide for
  consumers
• Evaluate the chance for technical and commercial
  success e.g. Burger Kings new starch coated fries

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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

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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

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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
• E.g. McDonalds and a sweeter breakfast offering

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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
• E.g. Listermint vs. Scope mouthwash

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Commercialization

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

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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

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Six Stages of Adoption

• Awareness advertising aims at enhancing
  recognition and recall
• Interest advertising that evokes curiosity
• Evaluation advertising that focuses on product
  benefits
• Trial demonstrations, sampling, trial size
  pouches, etc.
• Adoption recommendations, endorsements,
  distribution
• Confirmation communications which reassure
  customers

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Diffusion Process

• Concerned with the broader issue of how an
  innovation is communicated and adopted throughout
  the marketplace
• The process of spreading out
• Adopter categories
• Five different type of consumers
• Normal distribution

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Adopter Categories

• Innovators
• Early adopters
• Early majority
• Late majority
• Laggards

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Innovators

• 2.5, the first to accept a new idea or product
• Venturesome and willing to take risks
• Generally better educated, younger and
  financially better off
• Rely heavily on impersonal information sources

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Early Adopters

• 13.5, the second to adopt an innovation
• Heavy media users
• Use products extensively to make statements about
  themselves
• Believe social acceptance is rooted in product
  adoption
• Opinion leaders primarily come from the early
  adopter group

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Early Majority

• 34 adopt the product prior to the mean time of
  adoption
• Deliberate and cautious middle class consumers
• Slightly above average education and income
  levels
• Spend more time in the innovation decision process

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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

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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

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Factors Affecting the Rate of Adoption

• Relative Advantage
• Compatibility
• Complexity
• Trialability
• Observability

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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
• E.g. Microwaves in the 1960s and 1970s

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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
• E.g. New software versions are backward compatible

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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

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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
• E.g. stores cooked whole dinners in microwaves to
  demonstrate their use

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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
• E.g. The I-pod the Razor scooters, etc.

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B2B Adoption Factors

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

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