MARKETING Real People Real Choices Fourth Edition CHAPTER

MARKETING Real People, Real Choices Fourth Edition CHAPTER 8 Creating the Product

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 2

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 3

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

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 5

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

Classifying Business Products • By how products are used – Equipment – Maintenance and supplies – Raw materials – Processed materials – Specialized services – Component parts 7

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? 8

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? 9

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? 10

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? 11

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 12

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 13

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 14

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’? 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

New Product Development • Idea Generation • Product Concept Development and Screening • Marketing Strategy Development • Business Analysis • Technical Development • Market Testing • Commercialization 17

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 18

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 19

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 20

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 21

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. Mc. Donalds and a sweeter breakfast offering 22

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 23

Commercialization • Launch the product! – Full scale production – Distribution – Advertising – Sales promotion – and more 24

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 25

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 26

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 27

Adopter Categories • • • Innovators Early adopters Early majority Late majority Laggards 28

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 29

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 30

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 31

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 32

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 33

Factors Affecting the Rate of Adoption • • • Relative Advantage Compatibility Complexity Trialability Observability 34

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 1960 s and 1970’s 35

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 36

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 37

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 38

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. 39

B 2 B Adoption Factors • Increase in gross margin and profits • Consistency with firm’s way of doing business • Benefit relative to required investment 40

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