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Chapter 8- Product 1

Saturday, September 29, 2018 12:23 PM

Starting Part 3
"Build a better mouse trap"
Product- a good, service, or idea

LO1 Product layers


Refresher
Recall: A Product is a good, service or idea.

Product Layers
• A product represents everything a customer
receives and is described in three "layers":
○ Core
○ Actual
○ Augmented
Quiz Questions and
answers:
Marketing JMU - Ch 8

What To Study:
Product Layers Defined
• Core Product: layer of basic benefits. For
example, a car provides transportation, and
possibly fun and image enhancement.
• Actual product: the good, service, or idea that
is delivered to the consumer. Includes direct
attributes. For a car: mileage, color, style,
accessories, etc.
• Augmented Product: the additional features and
benefits that are associated with the product.
In the car example, warranty, customer service,
financing, etc.

LO2 Product Classification


Product Classification
• Marketers classify products into categories that
represent differences in consumers' feelings
about, purchase of, and consumption of product.
• Categories relate to:
○ How long a product lasts? (durability)
○ How consumers buy products? (B2C)
○ How businesses buy products? (B2B)

Terms
• Durable Goods- Consumed over relatively long
periods of time (months or decades)
• Nondurable "goods"- Consumed relatively quickly
and can include experiences (which is a service)

Classification by distribution or use.


• Durable Goods- Consumed over relatively long
periods of time (months or decades)
• Nondurable "goods"- Consumed relatively quickly
and can include experiences (which is a service)

Classification by distribution or use.


• Marketers also classify products based on
intended usage (i.e. consumer vs. business)
• Also, where the product is bought often
describes categories of consumer product.
• The type of item often categorizes business
products.
• In some cases, the same item (such as a laptop)
may be sold to both consumers (as a shopping
good) or to a business (as equipment).

B2C Purchasing Categories


• These categories directly relate to and differ
in how costumers' make decisions.
• Different levels of effort are applied (recall
chapter 6) based on the purchasing habit of the
customer:
○ Habitual decision making
○ Limited problem solving
• Different levels of effort are applied (recall
chapter 6) based on the purchasing habit of the
customer:
○ Habitual decision making
○ Limited problem solving
○ Extended problem solving

Decisions

From Chapter 6

Extended Problem Solving Ha


Product New Car Box of Ce
Level of involvement High Low
(Important decision) (Unimport
Perceived risk High Low
(expensive, complex (Simple,
product)
Information Careful processing Respond t
Processing information (Store si
abitual Decision Making
ereal

tant decision)

low-cost product)

to environmental cues
ignage, or displays)
Perceived risk High Low
(expensive, complex (Simple,
product)
Information Careful processing Respond t
Processing information (Store si
(Search advertising,
magazines, car dealers, web
sites)
Learning Model Cognitive learning Behaviora
(Use insight and creativity (ad shows
to use information found in setting,
environment)
Needed Marketing Provide information via Provide e
Actions advertising, salespeople, of-purcha
brochures, Web Sites.
Educate consumers to
product benefits, risk of
wrong decisions, etc.

Consumer Purchasing Categories


Category Examples
Convenience Staples, FMCG, Impulse, Expect conviv
Emergency (Fast moving priced and wi
consumer goods)
Shopping Computers, TVs, Appliances, More likely t
Autos before they b
Specialty Expensive watch, Hobby- Extended prob
related, Fashion tend to be lo
Unsought Burial Plots, Life/Death Require a goo
insurance personal sell

B2B Purchasing
• Marketers classify B2B products based on how
organizations use them.
• Knowledge of customer product use enables
marketers to:
○ Improve product designs.
○ Craft an appropriate marketing mix (usually
utilitarian value)
low-cost product)

to environmental cues
ignage, or displays)

al learning
s product in beautiful
creating positive attitude)

environmental cues at point-


ase, such as product-display

Consumer Notes
vence products to be low
idely available.

to compare alternatives
buy.
blem-solving and consumers
oyal.
od deal of advertising or
ling to interest buyers.
organizations use them.
• Knowledge of customer product use enables
marketers to:
○ Improve product designs.
○ Craft an appropriate marketing mix (usually
utilitarian value)

Business Purchasing Categories


Category Examples Bu
Equipment Conveyor system, Heavy and light eq
tractor, computer operations. Person
personal selling)
Maint., repair, & Light Bulbs, cleaning Consumed relativel
operating (MRO) supplies, toner,
paper
Raw Materials Milk, Steel, fish, Used to make a pro
wood e-commerce
Processed Treated lumber, Transformed raw ma
materials cheese, bolts
Specialized Consulting, legal, Services essential
services painting product, Personal
usiness Notes
quipment used in daily
nal selling. (Note all the

ly quickly. E-commerce

oduct, Personal selling or

aterials, sold B2C or, B2B.

l firm but not part of the


selling.
wood e-commerce
Processed Treated lumber, Transformed raw ma
materials cheese, bolts
Specialized Consulting, legal, Services essential
services painting product, Personal
Component Parts Processed material Processed material
sold B2B, tires, good. B2C or B2B
cheese.

LO3 Types of innovations


Definitions
• For marketers, an innovation is anything
costumers perceive as new or different.
• May be minor or game changing alteration to an
existing good or service
• Or may be a brand new product category (very
rare).
Innovation

Example
• After clicking the Dash button, Amazon
automatically sends this notice and 30 minutes
later fulfills this order and emails you a
receipt.
• You can't accidentally order 100 (or 2) items as
Amazon won't allow new order until the first
order is delivered (you can change this.

Inventory Categories

Category Definition Example


Continuous Modification to an Squeeze Ketchup Most c
innovation existing product bottle "knock
are ha
Dynamically Pronounced iPhone Requir
continuous modification to an learni
aterials, sold B2C or, B2B.

l firm but not part of the


selling.
ls needed to complete a

Notes H
A
common form. Can suffer from R
koffs" where design changes D
arder to legally protect. E
R
res a modest amount of
ing for consumers to use. T
Continuous Modification to an Squeeze Ketchup Most c
innovation existing product bottle "knock
are ha
Dynamically Pronounced iPhone Requir
continuous modification to an learni
innovation existing product Includ
produc
Discontinuous Product creates Telephone, car, Rare.
innovation major change in the airplane, great
way people live personal effect
computer

Convergence
Convergence is the blending of two+ "technologies"
to create a new system. One of the most active areas
today.

Innovation dimensions

Costumer Asks

Relative Is the Product Better?


Advantage

Compatibility Does this fit how I use things? [Cul

Is this product easy to use?


Complexity

Trial- Is this easy/cheap to buy?


abliliy
A
common form. Can suffer from R
koffs" where design changes D
arder to legally protect. E
R
res a modest amount of
ing for consumers to use. T
des "convergence" where two O
cts come together.
L
Consumers have to learn a E
deal in order to be able to A
R
tively use the product. N

lture, social]
Trial- Is this easy/cheap to buy?
abliliy

Observability Have I seen this around?

LO4 Product Development


Product Development: R&D
• A new product development model is funded with
R&D expenditures and a well-developed process to
discover and create innovations.
• R&D is a central metric system for measuring an
organizations commitment to innovation relative
to its rivals
7: Commercialization
Phase 1
1: Idea Generation

• Also called "Ideation" marketers use a variety


of sources and methods to come up with ideas for
new products.
• Value co-creation via collaboration with
costumers, salespeople, service personnel, and
other stakeholders.

Phase 2 & 3
2: Concept Screening
3: Strategy

• Phase 2: Product Ideas are preliminary tested


for technical and commercial success.
• Phase 3: Developing a plan including identifying
the target market and developing strategies for
• Phase 2: Product Ideas are preliminary tested
for technical and commercial success.
• Phase 3: Developing a plan including identifying
the target market and developing strategies for
the 4 Ps. (Price, Product, place, Promotion)

Phase 4 & 5
4: Analysis
5: Development

• Phase 4: The product's Commercial viability is


assessed.
• Phase 5: Engineers work to develop and refine a
working prototype(s). Firm may apply a patent.

Technical Development (Phase 5)


Even seemingly simple continuous innovations- like a
new beverage flavor- may require multiple prototypes
and consumer tests as part of the technical
development phase.

Phase 6 & 7
6: Test Marketing
7: Commercialization

• Phase 6: The complete marketing plan is (often)


"field tested" in a small geographic area
similar to the larger market or via a simulated
market test.
• Phase 7: Full scale launch of production,
distribution, and sales promotion are begun.

Product development: R & D

• Having the R&D process does not guarantee


success.
• Apple's Message Pad and Woodstream's "Little
Champ" show this.
Product development: R & D

• Having the R&D process does not guarantee


success.
• Apple's Message Pad and Woodstream's "Little
Champ" show this.
• Typical failures:
○ Product has no discernible benefit over
existing alternatives
○ Overestimating market size
○ Poor positioning strategy
○ Poor implementation of marketing mix
○ And for startups: insufficient capital

Product development:QDF
• An alternative process to what is shown in the
book is "Quality function Development" (QFD)
• QFD is an approach to identifying costumer needs
and translating those to an implemented product.

LO5 Product Adoption and


diffusion
Adoption and Diffusion
LO5 Product Adoption and
diffusion
Adoption and Diffusion
• Product adoption is the process by which
individual consumers or businesses begin to buy
and use a new good, service, or idea.

Business Action

• Diffusion is the process by which a population


adopts a product or innovation.

Market Level
Market Level

Adoption Process
• Consumers go through stages to adoption
• Awareness must be present first
• Then the consumer will try the product
• Finally, if satisfied, the consumer will
purchase again.
• The boxes in this diagram show how you can
affect each stage
Adoption- actions
• Confirmation:
○ Reinforce the customer's choice through
advertising, sales promotion, and other
communications
• Adoption:
○ Make the product available.
○ Provide product use information
• Trail:
○ Demonstrations, samples, trail-size packages
• Evaluation:
○ Provide information to customers about how
the product can benefit them
• Interest:
○ May use teaser advertising
• Awareness:
○ Massive advertising
Diffusion Cycle
• Each stage of diffusion requires different
actions from the marketers. Here, we're mostly
concerned with innovators and early adopters.
Without these, the product will fail.

Diffusion Categories Characteristics


Category Characteristics
Innovators Extremely adventurous, risk Often so
takers, well-educated for "tho
Early Adopters Concerned with social acceptance, Usually
heavy media users for the
Early Majority Avoid being first or last, middle Competit
class, deliberate and cautious the scen
Late Majority Older, Conservative, lower than Market h
the average education and income
Laggards Lower education and income, bound May not
by tradition acquisit

Facilitating adoption:. diffusion


• Using the goals here, we can improve the
product, therefore improve adoption, and,
Comments
ought by marketers
ought leadership"
paying higher prices
latest products.
tors are usually on
ne by now.
has Stabilized

be worth the cost of


tion
Facilitating adoption:. diffusion
• Using the goals here, we can improve the
product, therefore improve adoption, and,
therefore improve diffusion.
• Marketers look for barriers in these categories
and try and remove them so consumers will see
the value, try, then buy.