Layers of Product Concept

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Layers of Product Concept
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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!
• Marketing is about supplying benefits, not
  products.

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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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NetFlix Example

• Core Product access to movies
• Actual Product rental of DVDs
• Augmented Product rentals unlimited, 3 movies
  out at a time, monthly subscription fee, no late
  fees, no shipping fees, movie recommendation
  service

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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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Shopping Product
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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

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Band-Aid
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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

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Specialty Products

• Goods or services bought with much consumer
  effort or in an extended problem- solving
  situation
• Consumers insist upon a particular item and will
  not accept substitutes

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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

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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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Life-Changing Innovations

• CD
• Photocopier
• Fax
• Cell phone
• Post-it Notes
• Air conditioner
• Microwave

What is your favorite life-changing innovation?
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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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Innovation Continuum
Continuous Dynamically
Discontinuous Continuous
Little to no change Extreme changes
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New Product Development
Idea Generation
Product Concept Development
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

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Step 2 Product Concept Development

• Expand ideas into more complete product concepts
• Describe features the product should have and
  benefits those features will provide
• Evaluate chance for success

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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

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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

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Product Testing
Firms using online research techniques can test
consumer reactions to product ideas faster than
ever before
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Commercialization

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

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Commercialization Is No Guarantee

• Forecasts estimated sales of FluMist to exceed 6
  million doses when it was introduced in 2003
• Despite a 25 million ad campaign, only 100,000
  doses were sold

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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
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Michelle Beauty Centre
This ad builds interest by showing how the
service will benefit customers
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Silk Soymilk
Silk stimulated adoption by distributing free
samples
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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

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Figure 8.6 Adopter Categories
Mean Time of Adoption
Innovators (2.5)
Early Adopters (13.5)
Early Majority (34)
Late Majority (34)
Laggards (16)
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Innovators

• 2.5, the first to accept a new idea or product
• Venturesome and willing to take risks
• Cosmopolites willing to seek social
  relationships outside of their local peer group
• Rely heavily on impersonal information sources

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Early Adopters

• 13.5, the second to adopt an innovation
• Heavy media users
• Tend to be concerned with social acceptance
• 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
• Spend more time in the innovation decision
  process
• Slightly above average in education and social
  status

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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
Observability
Complexity
Trialability
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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

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Skin Watch
Does an ultra-thin watch provide a relative
advantage over other watches?
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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

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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

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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

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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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Marketing Throughout the PLC

• The Product Life Cycle (PLC) explains how
  features change over the life of a product
• Marketing strategies must change and evolve as a
  product moves through the PLC
• The PLC relates to a product category

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Figure 9.5 The Product Life Cycle
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Introduction

• Full-scale launch of new product into marketplace
• Sales are low, high failure rate
• Little competition
• Frequent product modification
• Limited distribution
• High marketing and product costs
• Promotion focused on product awareness and to
  stimulate primary demand
• Intensive personal selling to retailers and
  wholesalers

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Growth

• Sales grow at an increasing rate
• Many competitors enter market
• Large companies may acquire small pioneering
  firms
• Profits are healthy
• Promotion emphasizes brand advertising and
  comparative ads
• Wider distribution
• Toward end of growth stage, prices fall
• Sales volume creates economies of scale

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Maturity

• Sales continue to increase but at a decreasing
  rate
• Marketplace is approaching saturation
• Typified by annual models of products with an
  emphasis on style rather than function
• Product lines are widened or extended
• Marginal competitors drop out
• Heavy promotions - sales promotions
• Prices and profits fall

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Decline

• Signaled by a long-run drop in sales
• Rate of decline is governed by how rapidly
  consumer tastes change or how rapidly substitute
  products are adopted
• Falling demand forces many out of market
• Few specialty firms left