Chapter 8 Create the Product The Value Proposition o Build a better mousetrap and the world will beat a path to your door o Consumer s perception of the benefits they will receive if they buy a good or o Product Tangible good service idea or some combination of these that satisfies consumer or business customer needs through the exchange process o Good Tangible product something we can see touch smell hear taste or service possess o Intangible products Service ideas people places Layers of the Product Concept o Core Product All the benefits the product will provide for consumers or business customers product Benefit Outcome that the customer receives from owning or using a Marketing is about supplying benefits not products Multiple benefits Example Ability to clean clothes o Actual Product Physical good or delivered service that supplies the desired benefit Example Large square metal apparatus washing machine o Augmented Product Actual product plus other supporting features such as warranty credit delivery installation and repair service after the sale How Marketers Classify Products o Consumer Products How long they last How they are bought Durable goods Consumer products that provide benefits over a long period of time such as cars furniture and appliances o High involvement decisions Nondurable goods Consumer products that provide benefits for a short time because they are consumed ex food or are no longer useful ex newspapers o Low involvement decisions Convenience products Consumer good or service that is usually low priced widely available and purchased frequently with a minimum or comparison and effort o Staples Basic or necessary items that are available o Impulse product Product people often buy on the spur o Emergency products Products people purchase when almost everywhere of the moment in dire need o Fast moving consumer goods FMCG Products that exhibit consistently high velocity of sales in the consumer marketplace Shopping products Good or service for which consumers spend considerable time and effort gathering information and comparing alternatives before making a purchase o Attribute based products vs price based products o Intelligent agents shop bots Computer programs that find sites selling a particular product Specialty products Good or service that has unique characteristics and is important to the buyer and for which they will devote significant effort to acquire Unsought products Goods or services for which a consumer has little awareness or interest until the product or a need for the product is brought to their attention o Business to Business Products how organizational customers use them Equipment Expensive goods that an organization uses in its daily operations that last for a long time Heavy installations or capital equipment Big ticket items that last for a long period of time Light accessory Portable cost less shorter life span Maintenance Repair and Operating MRO products Goods that a business customer consumers in a relatively short time Raw materials Products of the fishing lumber agricultural and mining industries that organizational customers purchase to use in their finished products Processed materials Products created when firms transform raw materials from their original state Specialized services Services essential to the operation of an organization but are not part of the production of the product Ex Repairing a copy machine Component parts Manufactured goods or subassemblies of finished items that organizations need to complete their own products Process of Innovation o Federal Trade Commission For a product to be new 1 Must be entirely new or changed significantly 2 Can be called new for only six months o Innovation Product that consumers perceive to be new and different from existing products o Why Innovations Succeed Technology advances at a quickening pace Marketers must know how to satisfy consumers changing needs Contributions to society Communication and medical products o Types of Innovations New Product Development changes in the way we live Continuous innovations Modification of an existing product that sets one brand apart from its competitors Relatively easy to convince customers to adopt this kind of new Knock off New product that copies with slight modification the design of an original product Dynamically continuous innovations Change in an existing product that requires a moderate amount of learning or behavior change Example Records to eight tracks to cassette players to CDs to product mp3s Convergence Coming together of two or more technologies to create a new system with greater benefits than its separate parts Discontinuous innovations Totally new product that creates major o Phase 1 Idea Generation Marketers brainstorm for products that provide customer benefits and are compatible with the company mission Use of focus groups or consumer interaction o Phase 2 Product concept development and screening Marketers test product ideas for technical and commercial success Estimation of technical and commercial success Product s appearance o Phase 3 Marketing Strategy Development Identify target market estimate its size and determine how they can effectively position the product to address the target market s needs Green marketing Development of marketing strategies that support environmental stewardship by creating an environmentally founded differential benefit in the minds of consumers o Phase 4 Business Analysis Marketers assess a products commercial viability new product o Phase 5 Technical Development Company engineers refine and perfect a Prototypes Test versions of a proposed product o Phase 6 Test Marketing Testing the complete marketing plan in a small geographic area that is similar to the larger market the firm hopes to enter Disadvantages Extremely expensive Gives competition a free lock at the new product introductory price and intended promotional strategy Evaluation and improvement of marketing program or product Advantages itself o Phase 7 Commercialization New product is launched into the market Requires full scale production distribution advertising and sales promotion Adoption and Diffusion of New Products o Product adoption Process by which a consumer or business customer begins to buy and use a new good service or idea o Diffusion Process by which the use of a product spreads throughout a population o Tipping point Point when a product s sales spike from a slow climb to an unprecedented new level