2. Copyright 2000 Prentice Hall9-1 Chapter 9 Creating the Product

3. Copyright 2000 Prentice Hall9-2 What is a Product? n n Anything tangible or intangible that, through the exchange process, satisfies consumer or business customer needs. n n Products can be: – – physical goods, – – services, – – ideas, – – people, or – – places

4. Copyright 2000 Prentice Hall9-3 Product Layers (Fig. 9.1)

5. Copyright 2000 Prentice Hall9-4 Classification of Products How Long the Products Will Last Durable Goods Provide Long-Term Benefits (cars, furniture, appliances) Durable Goods Provide Long-Term Benefits (cars, furniture, appliances) Nondurable Goods Provide Short-Term Benefits (newspapers, food) Nondurable Goods Provide Short-Term Benefits (newspapers, food) Low Involvement Decisions High Involvement Decisions

6. Copyright 2000 Prentice Hall9-5 Classification of Products How Consumers Shop for the Product Shopping Products > Considerable time & effort in selection > Moderately brand loyal > Comparison shop Clothing, appliances, services Convenience Products > Frequently purchased with little effort > Low priced > Must be convenient Staples, impulse, emergency Specialty Products > Significant purchase efforts > Brand loyalty > Unique characteristics important to buyer Big Bertha golf club, Rolex Unsought Products > Little awareness or interest until need arises >Require much advertising & personal selling Retirement plans, insurance

7. Copyright 2000 Prentice Hall9-6 Classification of Convenience Products n n Staples – – basic or necessary items that are available almost everywhere, e.g. milk, bread, gas n n Impulse Products – – products that people often buy on the spur of the moment, e.g. magazines, gum, candy n n Emergency Products – – products that people purchase when we’re in dire need, e.g. bandages, umbrellas

8. Copyright 2000 Prentice Hall9-7 Business-to-Business Products MRO Products MRO Products Equipment Component Parts Business Services Raw Materials Processed Materials Processed Materials Products Used in the Production of Other Goods & Services

9. Copyright 2000 Prentice Hall9-8 Understanding Innovations nnPnnProducts that consumers perceive to be new and different from existing products. nnCnnCritical to the success of a company because of the: ––t––technological products that are introduced and become obsolete quickly, and ––h––high cost of new product development and the higher cost of new product failure, and ––c––contributions to society.

10. Copyright 2000 Prentice Hall9-9 Dynamically Continuous Innovations Significant Change to an Existing Product; Requires Some Learning Tapes - CD - DVD Dynamically Continuous Innovations Significant Change to an Existing Product; Requires Some Learning Tapes - CD - DVD Continuous Innovations Modification to an Existing Product Knockoffs Honey Nut Cheerios Continuous Innovations Modification to an Existing Product Knockoffs Honey Nut Cheerios Discontinuous Innovations Totally New Product Requires Much Learning Airplane, Car, TV Discontinuous Innovations Totally New Product Requires Much Learning Airplane, Car, TV Types of Innovations Degree of Newness

11. Copyright 2000 Prentice Hall9-10 Developing New Products n n Successful new product introduction is becoming more difficult because: – – costs of research and development are huge so development is limited, and – – products are outdated quickly giving less time to recover R&D costs, and – – retailers charge large fees to stock a new product.

12. Copyright 2000 Prentice Hall9-11 Visionary Phase Visionary Phase Planning & Development Planning & Development Testing & Improving the Product Testing & Improving the Product Stages in New Product Development

13. Copyright 2000 Prentice Hall9-12 Generate Ideas Screen Product Concepts Screen Product Concepts Business Analysis Identify product ideas which will provide customer benefits compatible with company mission. Estimate potential technical and commercial success. Estimate potential for profit: – potential demand, –expenditures required, –marketing costs. Visionary Phase

14. Copyright 2000 Prentice Hall9-13 Commercial Development Develop aMarketing Plan Commercial Development Develop aMarketing Plan Technical Development Design Product & Manufacturing Process Technical Development Design Product & Manufacturing Process Planning and Development

15. Copyright 2000 Prentice Hall9-14 Test Marketing Develop Evidence of Potential Success in the Real Market Test Marketing Develop Evidence of Potential Success in the Real Market Improve Make Improvements in Marketing Mix as NeededImprove Make Improvements in Marketing Mix as Needed Commercial Launch Full-Scale Implementation of Entire Marketing Plan Commercial Launch Full-Scale Implementation of Entire Marketing Plan Testing and Improving the Product

16. Copyright 2000 Prentice Hall9-15 Adoption and Diffusion Processes n n Product Adoption – – process by which a consumer or business customer begins to buy and use a good, service, or idea. n n Diffusion of Innovations – – process by which the use of a product spreads throughout a population.

17. Copyright 2000 Prentice Hall9-16 Adoption Pyramid (Fig. 9.4)

18. Copyright 2000 Prentice Hall9-17 Categories of Adopters (Fig. 9.5)

19. Copyright 2000 Prentice Hall9-18 Observability How visible is the new product and its benefits? Compatibility Does the new product fit the existing values, customs & practices? Trialability Is the new product easy to sample? Relative Advantage Does the new product provide superior benefits? Product Characteristics Product Characteristics Product Factors Affecting the Rate of Adoption Complexity Is the new product easy to understand?

20. Copyright 2000 Prentice Hall9-19 Chapter Summary n Explain the layers of a product. n Describe the classification of products. n Explain the importance of new products. n Describe how firms develop new products. n Explain the process of product adoption and the diffusion of innovations.