CHAPTER 8 Creating the Product M A R K E T I N G Real People, Real Choices Fourth Edition

CHAPTER 8Creating the Product

M A R K E T I N GReal 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 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

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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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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

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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. Nike’s 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 King’s 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 firm’s total product mix

• Evaluate whether the product can be a profitable contribution for the organization’s 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 innovation’s 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 1970’s

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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

• E.g. New software versions are backward compatible

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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

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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 consumer’s 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 firm’s way of doing business

• Benefit relative to required investment

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