Create the Product Chapter Eight. 8-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives Explain how value is derived through

Create the ProductCreate the Product

Chapter EightChapter Eight

8-2© 2012 Pearson Education, Inc. publishing as Prentice-Hall.

Chapter ObjectivesChapter Objectives

Explain how value is derived through Explain how value is derived through different product layersdifferent product layers

Describe how marketers classify Describe how marketers classify productsproducts

Understand the importance and types of Understand the importance and types of product innovationsproduct innovations

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

and the diffusion of innovationsand the diffusion of innovations


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

Which method should be used to addWhich method should be used to add aaççai juice into the current product line? ai juice into the current product line? • Option 1:Option 1: Add the a Add the aççai juice ingredient to ai juice ingredient to

one of the Bossa Nova’s existing one of the Bossa Nova’s existing productsproducts

• Option 2:Option 2: Create a new line of pure a Create a new line of pure aççai ai juices with new packagingjuices with new packaging

• Option 3:Option 3: Focus on a single line of a Focus on a single line of aççai ai products by promoting the high products by promoting the high antioxidant aspect of aantioxidant aspect of aççai products; ai products; divest other brands divest other brands


Build a Better Mousetrap - Build a Better Mousetrap - And Add ValueAnd Add Value

Value proposition: Value proposition: • Benefits the consumer will receive when Benefits the consumer will receive when

buying the productbuying the product Product: Product: • Tangible good, service, or idea that satisfies Tangible good, service, or idea that satisfies

needs; a bundle of attributesneeds; a bundle of attributes Good: Good: • A tangible product, something we can see, A tangible product, something we can see,

touch, smell, hear, taste, or possesstouch, smell, hear, taste, or possess Intangible products: Intangible products: • Services, ideas, people, placesServices, ideas, people, places


Figure 8.1Figure 8.1Layers of the ProductLayers of the Product


It’s DebatableIt’s DebatableClass Discussion QuestionClass Discussion Question

Identify the Identify the core, actual core, actual and and augmented augmented product for product for either flat either flat screen TVs screen TVs or your or your University.University.


How Marketers Classify How Marketers Classify Products Products

How Long Does the Product Last?How Long Does the Product Last? Durable goodsDurable goods provide benefits over a provide benefits over a

period of months, years, decadesperiod of months, years, decades• Examples:Examples: furniture, appliances, cars furniture, appliances, cars

Nondurable goodsNondurable goods are consumed in the are consumed in the short termshort term• Examples:Examples: newspapers, beverages, newspapers, beverages,

printer cartridges printer cartridges

What actions should marketers take to What actions should marketers take to satisfy the needs of each group?satisfy the needs of each group?


Figure 8.2Figure 8.2Classification of ProductsClassification of Products


Classifying Goods: Classifying Goods: How Do Consumers Buy the How Do Consumers Buy the

Product?Product? Convenience Convenience

productsproducts are are frequently frequently purchased itemspurchased items

Shopping productsShopping products are purchased with are purchased with considerable time considerable time and effortand effort

CNET.com


Classifying Goods: Classifying Goods: How Do Consumers Buy the How Do Consumers Buy the

Product?Product? Specialty productsSpecialty products

have unique have unique characteristics characteristics important to buyers important to buyers at almost any priceat almost any price

Unsought productsUnsought products are those in which are those in which consumers have consumers have little interest until a little interest until a need arisesneed arises


Business-to-Business ProductsBusiness-to-Business Products

EquipmentEquipment is used in daily is used in daily operationsoperations

Maintenance, repair, and Maintenance, repair, and operating (MRO) operating (MRO) goods are goods are consumed relatively quicklyconsumed relatively quickly

Raw materialsRaw materials are products are products of fishing, lumber, of fishing, lumber, agricultural, and mining agricultural, and mining industries that are used in industries that are used in the manufacture of finished the manufacture of finished goodsgoods


Business-to-Business ProductsBusiness-to-Business Products

Processed materialsProcessed materials are are produced by firms when produced by firms when they transform raw they transform raw materials from their materials from their original stateoriginal state

Component partsComponent parts are are manufactured goods or manufactured goods or subassemblies of subassemblies of finished items that finished items that organizations need to organizations need to complete their own goodscomplete their own goods


““New and Improved”New and Improved”The Process of InnovationThe Process of Innovation

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

Idea Connection


Figure 8.3Figure 8.3Types of InnovationTypes of Innovation


Continuous InnovationsContinuous Innovations

Continuous Continuous innovations:innovations:A modification to an A modification to an existing productexisting product• Sets a brand apart Sets a brand apart

from the competitionfrom the competition

• Consumers don’t need Consumers don’t need to learn anything new; to learn anything new; change is minimal change is minimal

• Knockoffs copy (with Knockoffs copy (with slight changes) the slight changes) the design of an original design of an original productproduct


Dynamically Continuous Dynamically Continuous InnovationInnovation

Dynamically continuous innovation:Dynamically continuous innovation:A pronounced modification to an A pronounced modification to an existing productexisting product • Requires a modest amount of learning Requires a modest amount of learning

or behavior change or behavior change


Dynamically Continuous Dynamically Continuous InnovationsInnovations

Convergence is a dynamically continuous innovation


Discontinuous InnovationsDiscontinuous Innovations

Discontinuous innovation:Discontinuous innovation:A totally new productA totally new product

• Creates major changes in the way we Creates major changes in the way we livelive

• Consumers must engage in a great deal Consumers must engage in a great deal of new learningof new learning


ActivityActivity

Truvia is a natural sweetener made from the leaves of the stevia plan, and has zero calories.

How would you classify this alternative to sugar or existing sweeteners?

Continuous innovation? Dynamically continuous? Discontinuous?


How Do We Measure How Do We Measure Innovation?Innovation?

Measuring innovation is complicated.Measuring innovation is complicated. Innovation should be measured with Innovation should be measured with

respect to:respect to:

• Firm strategyFirm strategy

• Firm cultureFirm culture

• Outcomes of innovationOutcomes of innovation


Developing New ProductsDeveloping New Products

New-product development (NPD)New-product development (NPD)The phases by which firms develop The phases by which firms develop new products including idea new products including idea generation, product concept generation, product concept development and screening, marketing development and screening, marketing strategy development, business strategy development, business analysis, technical development, test analysis, technical development, test marketing, and commercializationmarketing, and commercialization


Figure 8.4Figure 8.4Phases in New Product Phases in New Product

DevelopmentDevelopment


New-Product DevelopmentNew-Product Development

Idea generation involves brainstorming product ideasIdea generation involves brainstorming product ideas



Phase 2: Product-concept Phase 2: Product-concept development and screeningdevelopment and screening• Product ideas are tested Product ideas are tested

for technical and for technical and commercial success commercial success

Phase 3: Marketing strategy Phase 3: Marketing strategy developmentdevelopment• Developing a strategy to Developing a strategy to

introduce the product to introduce the product to the marketplacethe marketplace



Phase 4: Business analysisPhase 4: Business analysis• The product’s commercial The product’s commercial

viability is assessedviability is assessed Phase 5: Technical development Phase 5: Technical development • Firm engineers refine and Firm engineers refine and

perfect the new productperfect the new product• Prototypes or test versions of Prototypes or test versions of

the proposed product are the proposed product are developed (in R&D department)developed (in R&D department)• The firm may need to apply for a The firm may need to apply for a

patentpatent


Technical DevelopmentTechnical Development

Even continuous Even continuous innovations such as innovations such as new beverage flavors new beverage flavors may require multiple may require multiple prototypes and prototypes and consumer tests as consumer tests as part of the technical part of the technical development phase development phase



Phase 6: Test marketingPhase 6: Test marketing• The complete marketing plan The complete marketing plan

is tested in a small geographic is tested in a small geographic area similar to the larger area similar to the larger market market

Phase 7: Commercialization Phase 7: Commercialization • The new product is launched The new product is launched

into the marketinto the market

• Full-scale production, Full-scale production, distribution, advertising, and distribution, advertising, and sales promotion are begunsales promotion are begun



Interested in learning more Interested in learning more about new product about new product development?development?

Visit the website link below! Visit the website link below!

New Product Body of Knowledge


Adoption and Diffusion Adoption and Diffusion of New Productsof New Products

Product adoption: Product adoption:

• Process by which a consumer or Process by which a consumer or business customer begins to buy and business customer begins to buy and use a new good, service, or ideause a new good, service, or idea

Diffusion: Diffusion:

• Process by which the use of a product Process by which the use of a product spreads throughout a populationspreads throughout a population

Cloverfield Viral Marketing Case Study


Figure 8.5Figure 8.5Adoption PyramidAdoption Pyramid


Creating InterestCreating Interest

This ad bills Fruit2day This ad bills Fruit2day as a “new way to eat as a “new way to eat fruit” in an attempt to fruit” in an attempt to stimulate interest stimulate interest among prospective among prospective adopters by showing adopters by showing them how the product them how the product satisfies a needsatisfies a need


Figure 8.6Figure 8.6Categories of AdoptersCategories of Adopters


Product Factors That Affect Product Factors That Affect the Rate of Adoptionthe Rate of Adoption

Each characteristic affects the speed of Each characteristic affects the speed of innovation diffusion:innovation diffusion:

• Relative advantage Relative advantage

• CompatibilityCompatibility

• Complexity Complexity

• TrialabilityTrialability

• ObservabilityObservability


Real People, Real Choices: Real People, Real Choices: Decision Made at Bossa NovaDecision Made at Bossa Nova

Palo clung to options 1 and 2 for Palo clung to options 1 and 2 for several months but in the end chose several months but in the end chose option 3option 3•Why do you think Palo eventually Why do you think Palo eventually

decided to create Bossa Nova Adecided to create Bossa Nova Aççai juice ai juice in Mango, Passion Fruit, and Original in Mango, Passion Fruit, and Original flavors?flavors?


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

MillsMills

Meet David Clark, VP, Big G Adult Meet David Clark, VP, Big G Adult Cereals at General Mills Cereals at General Mills

Increased consumer interest in fiber Increased consumer interest in fiber food products created growth potential food products created growth potential for fiber cerealsfor fiber cereals

The decision to be made: The decision to be made: How should the core Fiber One brand How should the core Fiber One brand be positioned? be positioned?


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Create the Product Chapter Eight. 8-2 © 2012 Pearson Education, Inc. publishing as Prentice-Hall. Chapter Objectives Explain how value is derived through