Marketing: Real People, Real Choices

Ninth Edition

Chapter 8
Product I

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Learning Objectives

8.1 Explain how value is derived through different

product layers.
8.2 Describe how marketers classify products.
8.3 Understand the importance and types of product
innovations.
8.4 Show how firms develop new products.
8.5 Explain the process of product adoption and the
diffusion of new innovations.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Real People, Real Choices:
Under Armour
• Which option should Neal pursue?
▪ Option 1: Approach the decision as a product problem,
building new product offerings to get into retail ASAP.
▪ Option 2: Approach the decision as a marketing
problem. Stay the course with the current product line
and invest resources into ramping up its messaging to
target markets.
▪ Option 3: Start over with a new business plan and
rebuild the Baselayer product from the ground up.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Build a Better Mousetrap …
and Add Value
• “Build a better mousetrap and the world will beat a
path to your door.”
▪ Old adage, but not always true!
▪ Woodstream Company’s “Little Champ” failure …
• Next set of chapters relate to developing value
propositions for the customer.
▪ Emphasis on the word develop

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Layers of the Product Concept

• A product represents all that a

customer receives in an
exchange.
• Marketers distinguish among
three distinct “layers” of the
product:
▪ Core product
▪ Actual product
▪ Augmented product

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.1 Layers of the Product

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
How Marketers Classify Products

• Based on how consumers feel about, purchase, and

consume products
▪ How long products last
▪ How consumers buy products
▪ How businesses buy products

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
How Long Do Products Last?

• Durable goods are consumer products that provide

benefits over a period of months, years, or even
decades.
▪ Cars
▪ Furniture
▪ Appliances
• Nondurable goods are consumed over the short
term.
▪ Magazines
▪ Sushi

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.2 Classification of Products

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
How Do Consumers Buy Products?

• Marketers also classify

products based on where and
how consumers buy the
product.
▪ Similar to how consumer
decisions differ in terms of
effort they put into habitual
decision making vs. limited
problem solving vs. extended
problem solving (Chapter 6)

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Convenience Products

• Convenience products are typically nondurable

goods or services bought with minimal effort.
▪ Staples (e.g., milk, bread)
▪ Consumer packaged good (CPG) or fast-moving
consumer good (FMCG)
▪ Impulse products
▪ Emergency products
• Consumers expect convenience products to be low
priced and widely available.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Shopping Products

• Shopping products are goods and services for which

consumers will spend time and effort to gather
information on price, product attributes, and product
quality.
▪ Computers
▪ TVs
▪ Appliances
• Consumers are more likely to compare alternatives
before they buy.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Specialty Products

• Specialty products have unique characteristics that

are important to buyers at almost any price.
▪ Generally, an extended problem-solving purchase that
requires a lot of effort to choose
▪ Marketers have to go to a lot of effort to make their
products stand out.
▪ Customers tend to be very loyal.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Unsought Products

• Unsought products are goods and services for

which a consumer has little awareness or interest
until a need arises.
▪ Retirement plans
▪ Life insurance
• Often require a good deal of advertising or personal
selling to interest buyers

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Business to Business Products

• 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.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Categorizing B2B Products (1 of 2)

• Equipment, often called installations or capital

equipment, is used in daily operations.
• Maintenance, repair, and operating (MRO) goods
are consumed relatively quickly.
• Raw materials are products of fishing, lumber,
agricultural, and mining industries used to in the
final product.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Categorizing B2B Products (2 of 2)

• Processed materials: produced by firms when

they transform raw materials from their original
state
• Specialized services: services which are essential
to the organization but are not a part of the actual
production of a product
• Component parts: manufactured goods or
subassemblies of finished items an organizations
needs to complete their own goods

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
 Classification of Consumer
and B2B Products
• Categorizing consumer and B2B products helps
marketers to:
▪ develop better new products
▪ improved marketing mixes
• Product durability, purchase process, and product
use provide useful information.
Are consumer product classifications for a given
product permanent? Can you think of products that
have moved from one class to another?

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
“New and Improved!”:
The Process of Innovation
• Innovation is a hot topic in
the boardroom today!
• For marketers, an
innovation is anything
customers perceive as new
or different.
▪ May be a minor or game
changing alteration to an
existing good or service
▪ May be a brand new
product entirely

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.3 Types of Innovations

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Continuous Innovation
• A continuous innovation is a modification to an
existing product.
▪ Customer doesn’t have to learn anything new
• A knockoff is a new product that copies, with slight
modification, the design of an original product.
▪ Harder to legally protect designs than technological
innovations

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Dynamically Continuous Innovation
• A dynamically continuous innovation is a
pronounced modification to an existing product.
• Requires a modest amount of learning for consumers
to use

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Discontinuous Innovation
• To qualify as a discontinuous innovation, the
product must create major change in the way people
live.
▪ Consumers have to learn a great deal in order to be
able to effectively use the product.
What’s the next “killer app?”

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Convergence
• Convergence is the coming together of two or more
technologies to create a new system.
• One of the most talked about forms of dynamically
continuous innovation

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
New Product Development (NPD)
• The new product development model is based on
categories of R&D expenditures.
▪ In most organizations, this process is well- defined
and systematic.
• R&D investment is a central metric for measuring an
organization’s commitment to innovation relative to its
rivals.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.4 Phases in New
Product Development

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
New Product Development (1 of 4)
• Phase 1: Idea generation
(Ideation)
▪ Marketers use a variety of
sources to come up with ideas
for new products.
▪ Value co-creation via
collaboration with customers,
salespeople, service personnel,
and other stakeholders

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
New Product Development (2 of 4)
• Phase 2: Product-concept
development and screening
▪ Product ideas are tested for
technical and commercial
success.
• Phase 3: Marketing strategy
development
▪ Developing a plan including
identifying the target market and
developing strategies for the four
Ps.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
New Product Development (3 of 4)
• Phase 4: Business analysis
▪ The product’s commercial viability
is assessed.
• Phase 5: Technical development
▪ Engineers work to develop and
refine a working prototype.
▪ Firm may need to apply for a
patent.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Technical Development

• Even continuous
innovations such as
new beverage flavors
may require multiple
prototypes and
consumer tests as part
of the technical
development phase.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
New Product Development (4 of 4)
• Phase 6: Market Test
▪ The complete marketing plan is
tested in a small geographic area
similar to the larger market or via a
simulated market test.

• Phase 7: Commercialization
▪ The new product is launched into
the market.
▪ Full-scale production, distribution,
advertising, and sales promotion are
begun.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Adoption and Diffusion of
New Products
• Product adoption is the process by which a
consumer or business customer begins to buy and use
a new good, service, or idea.
• Diffusion is the process by which the use of a product
or innovation spreads throughout a population.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.5 Adoption Pyramid

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Adoption Pyramid (1 of 2)

• Awareness
▪ Customers see that innovation exists.
▪ Media blitz
• Interest
▪ Customers see how the product satisfies a need.
▪ Seek out information
• Evaluation
▪ Costs and benefits
▪ Impulse purchase

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Adoption Pyramid (2 of 2)

• Trial
▪ Actually experience or use the product
• Adoption
▪ Purchase is made
• Confirmation
▪ Expected versus actual benefits and costs

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Figure 8.6 Categories of Adopters

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Categories of Adopters (1 of 2 )
• Innovators
▪ Extremely adventurous
▪ Risk takers
▪ Well-educated
• Early Adopters
▪ Concerned about social acceptance
▪ Heavy media users

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Categories of Adopters (2 of 2)

• Early Majority
▪ Avoid being first or last
▪ Middle class
▪ Deliberate and cautious
• Late Majority
▪ Older
▪ Conservative
▪ Lower than average education and income
• Laggards
▪ Lower education and income
▪ Bound by tradition

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Product Factors That Affect
the Rate of Adoption
• The degree to which a new product has each of these
characteristics affects the speed of diffusion.
▪ Relative advantage
▪ Compatibility
▪ Complexity
▪ Trialability
▪ Observability

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Characteristics of Innovations (1 of 3 )

• Relative advantage is the degree to which a

consumer perceives a new product as offering superior
benefits.
▪ Greater relative advantage means faster adoption
• Compatibility is the extent to which an innovation is
consistent with existing cultural values, customs,
practices, and norms.
▪ Lack of perceived compatibility slows adoption

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Characteristics of Innovations (2 of 3)

• Complexity refers to the degree to which consumers

perceive a new product as difficult to understand and
use.
▪ Higher the degree of perceived complexity, the slower
the rate of adoption.
• Trialability refers to the ease of sampling a new
product and its benefits.
▪ Lower costs associated with trial usage can speed rate
of adoption.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Characteristics of Innovations (3 of 3)

• Observability refers to the degree to which others can

see the new product and the benefits it provides.
▪ An innovation that is more visible will drive more
word-of-mouth communication.

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.
Copyright

Copyright © 2018, 2016, 2012 Pearson Education, Inc. All Rights Reserved.