Textbook Notes (362,882)
Canada (158,081)
BUS 346 (9)

chpter 7,8.docx

13 Pages
Unlock Document

Simon Fraser University
Business Administration
BUS 346
Zaheer Jiwani

CHAPTER 7 CREATE THE PRODUCT  EG. When you buy a washing machine, the core product is the ability to get clothes clean, BUILD A BETTER MOUSETRAP—AND ADD VALUE but the actual product is a large, square, metal apparatus.  The marketer’s task is twofold: 1 , to create a better value than what’s out  The actual product also includes the unique features of the product, such as its there already appearance or styling, the package, and the 2 , to convince customers that this is true brand name.  A product is a tangible good, service, idea, or some combination of these that satisfies THE AUGMENTED PRODUCT consumer or business customer needs through the exchange process  Augmented product—the actual product plus  Products can be physical goods, services, ideas, other supporting features such as a warranty, people, or place. credit, delivery, installation, and repair service  A good is a tangible product, something that after the sale. we can see, touch, smell, hear, taste, or  Marketers know that adding these supporting possess. features to a product is an effective way for a  Intangible products—services, ideas, people, company to stand out from the crowd. place—are products that we can’t always see, EG. Apple revolutionized the music business touch, taste, smell, or possess. when it created its iTunes Music Store that  Marketers think of the product as more than enables consumers to download titles directly to their digital music and video libraries. just a thing that comes in a package. They view it as a bundle of attributes that includes the packaging, brand name, benefits, and HOW MARKETERS CLASSIFY PRODUCTS supporting features in addition to a physical  Generally, products are either consumer good.  A large part of the marketer’s role in creating products or business-to-business products. the value proposition is to develop and HOW LONG DO PRODUCTS LAST market products appropriately.  Marketers classify consumer goods as durable LAYERS OF THE PRODUCT or nondurable depending on how long the  A product is everything that a customer product lasts.  Durable goods are consumer products that receives in an exchange. provide benefits over a period of months,  We distinguish among 3 distinct layers of the product—the core product, the actual product, years, or even decades, such as cars, furniture and appliances. and the augmented product.  FIGURE7.1  Nondurable goods, such as gasoline, newspapers and food, in the short term.  We are more likely to purchase durable goods THE CORE PRODUCT under conditions of high involvement, while  The core product consists of all the benefits nondurable goods are more likely to be low- involvement decisions. the product will provide for consumer or business customers.  When they offer these products, (computer or  A benefit is an outcome that the customer house) they will spend a lot of time, marketers receives from owning or using a product. need to understand consumers’ desires for  Marketing is about supplying benefit, not different product benefits and the importance attributes. of warranties, service, and customer support.  Many products actually provide multiple  Consumers usually don’t “sweat the details” benefits. so much when they choose among nondurable goods. There is little search for THE ACTUAL PRODUCT information or deliberation. Sometimes, this means that consumers buy whatever brand is  The actual product—is the physical good or available and reasonably priced. the delivered service that supplies the desired  Marketers can probably be less concerned benefit. with developing new product features to attract customers; they should focus more on creating new uses for the existing product, as They may visit several stores and devote well as pricing and distribution strategies. considerable effort to comparing products.  Intelligent agents or shopbots—computer HOW DO CONSUMERS BUY PRODUCTS programs that find sites selling a particular product. Some of these programs also provide  Marketers also classify products based on information on competitors’ prices, and they where and how consumers buy the product. may even ask customers to rate the various e-  A convenience product typically is a nondurable goods or service that consumers businesses that they have listed on their site so consumers can learn from other shoppers purchase frequently with a minimum of which sellers are good and which are less than comparison and effort. desirable.  Convenience products are low priced and  Specialty products have unique characteristics widely available. that are important to buyers at almost any  Consumers generally already know all they price. need or want to know about a convenience EG. Rolex watches and Alienware laptops. product, devote little effort to purchases, and  Consumers usually know a good deal about willingly accept alternative brands if their specialty products, and they tend to be loyal preferred brand is not available in a to specific brands. convenient location. Most convenience product purchases are the results of habitual  A specialty product is an extended problem- solving purchase that requires a lot of effort to consumer decision making. choose. That means firms that sell these kinds  Make sure the product is easily obtainable in all the places where consumers are likely to of products need to create marketing strategies that make their product stand apart look for it. from the rest.  There are several types of convenience  Unsought products are goods or services products: FIGURE 7.2 consumer has little awareness or interest until  Staples such as milk, bread, and gasoline are a need arises, retirement plans and disability basic or necessary items that are available insurance are unsought products. It requires a almost everywhere. When selling staples, good deal of advertising or personal selling marketers must offer customers a product and is a real challenge to fine convincing ways that consistently meets their expectations for to interest people in these kinds of products— quality and make sure it is available at a price just ask any life insurance salesperson. comparable to the competition’s prices.  We buy impulse products on the spur of the  One solution may be to make pricing more attractive. moment  When they want to promote impulse products, HOW DO BUSINESSES BUY PRODUCTS? marketers have two challenges: to create a product or package design that is enticing, and  Marketers classify business-to-business to make sure their product is highly visible. products based on how organizational  We purchase emergency products when we’re customers use them. in dire need; because we need the product  Equipment refers to the products an badly and immediately, price and sometimes organization uses in its daily operations. product quality may be irrelevant to our Heavy equipment, sometimes called decision to purchase. installations or capital equipment.  Shopping products are goods or services for  Light or accessory equipment; they are which consumers will spend time and effort to portable, cost less, and have a shorter life gather information on price, product span than capita equipment.  Marketing strategies for equipment usually attributes, and product quality.  They are likely to compare a alternatives emphasize personal selling and may mean before they buy. The purchase of shopping custom-designing products to meet an products is typically a limited problem-solving industrial customer’s specific needs. decision.  Maintenance, repair, and operating (MRO)  Consumers are only moderately brand products are goods that a business customers loyal;they will typically switch whenever a in a relatively short time. different brand offers new or better benefits.  Mainternace products include light bulbs, mops, cleaning supplies, and the like.  Repair products are items such as nuts, bolts, continuous innovations, dynamically washers, and small tools. continuous innovations, and discontinuous  Operating supplies include computer paper innovations. and oil to keep machinery running smoothly. CONTINUOUS INNOCATIONS  Use a sales force ro promote MRO products, others rely on catalogue sales, the Internet, and telemarketing in order to keep prices as  A continuous innovation is a modification to an existing product. low as possible.  This type of modification can set one brand  Raw materials are products of the fishing, lumber, agricultural, and mining industries apart from its competitors.  The consumer doesn't have to learn anything that organizational customers purchase to use in their finished products. new to use a continuous innovation.  Firms produce processed materials when they  From a marketing perspective, this means that it’s usually pretty easy to convince consumers transform raw materials form their original state. to adopt this kind of new product.  A knockoff is a new product that copies, with  Organizations purchase processed materials slight modification, the design of an original that become a part of the products they make.  Some business customers purchase product.  Firms deliberately create knockoffs of clothing specialized services from outside suppliers. and jewellery, often with the intent to sell to a Specialized services may be equipment-based, such as repairing a copy machine or fixing an larger or different market. assembly line malfunction, or non-equipment DYNAMICALLY CONTINUOUS INNOVATIONS based, essential to the operation of an organization but are not part of the  A dynamically continuous innovation is a production of a product. pronounced modification to an existing  Component parts are manufactured goods or product that requires a modest amount of subassemblies of finished items that learning or change in behaviour to use it. organizations need to complete their own products. DISCONTINUOUS INNOVATIONS  Marketing strategies for component parts usually involve nurturing relationships with  To quality as a discontinuous innovation, the customer firms and on-time delivery of a product must create major changes in the way product that meets the buyer’s specifications. we live.  Consumers must learn a great deal to use a “NEW AND IMPROVED!” THE PROCESS OF discontinuous innovation because no similar INNOVATION product has ever been on the market.  An innovation is anything that customers HWO DO WE MEASURE INNOVATION perceive as new and different.  Innovation – a product that consumers  Innovation is a complicated item to try to perceive to be new and different from existing measure. This is because it involves not only products. marketing, but the firm’s overall culture,  An innovation may be a completely new leadership, and processes in place that foster product that provides benefits never available innovation.  Firm strategy before, such as personal computers when they were first introduced, or it may simply be o How aware are organization an existing product with a new style, in a members of a firm’s goals for innovation? different colour, or with some new feature, like blue Smarties. o How committed is the firm and its leadership to those goals? TYPES OF INNOVATIONS o How actively does the firm support innovation among its organization  Innovations differ in their degree of newness, members? Are there rewards and and this helps to determine how quickly the other incentives in place to innovate? target market will adopt them. Is innovation part of the performance  Marketers classify innovations into 3 evaluation process? categories based on their degree of newness: o To what degree do organization  They estimate technical success when they members perceive that resources are decide whether the new product is available for innovation? technologically feasible  Commercial success when they decide  Firm culture whether anyone is likely to buy the product. o Does the organization have an appetite for learning and trying new PHASE 3: MARKETING STRATEGY DEVELOPMENT things?  Develop a marketing strategy to introduce the o Do organization members have the freedom and security to try things, product of the marketplace.  Is means that marketer must identify the fail, and then go forward to try different things? target market, estimate its size, and  Outcomes of innovation determine how they can effectively position the product to address the target market’s o What is the number of innovations launched in the past 3 years? needs. o What % of revenue is attributable to  Marketing strategy development includes planning for pricing, distribution, and launches of innovations during the past 3 year? promotion expenditures both for the introduction of the new product and for the long run. NEW PRODUCT DEVELOPMENT  How firms actually develop new products. PHASE 4: BUSINESS ANALYSIS There are 7 phases in the process of new  Marketers still must find out if the product can product development: idea generation, product concept development and screening, make a profitable contribution to the marketing strategy development, business organization’s product mix. analysis, technical development, test  The business analysis for a new product begins marketing, and commercialization. with assessing how the new product will fit into the firm’s total product mix. PHASE 1: IDEA GENERATION PHASE 5: TECHNICAL DEVELOPMENT  In the initial idea generation phase of product development, marketers use a variety of  Is it survives the scrutiny of a business analysis, sources to come up with great new product a new product concept then undergoes ideas that provide customer benefits and that technical development in which a firm’s are compatible with the company mission. engineers work with marketers to refine the  Often firms use marketing research activities design and production process. such as the focus groups—search for new  The better a firm understand how customer will react to a new product, the better its product ideas. chances of commercial success. For this PHASE 2: PRODUCT COMCEPT DEVELOPMET AND reason, a company's research and SCREENING development department usually develops one or more physical version or prototypes of  Although ideas for products initially come the product. from a variety of sources, it is up to marketer  Prospective customers may evaluate these to expand these ideas into more complete mock-ups in focus groups or in field trials at product concepts. home.  Product concepts describe what features that  If it will be manufacturing goods, the company product should have and the benefits those may have to buy new production equipment feature will provide for consumers. or modify existing machinery.  FIGURE 7.8  Technical development sometimes requires  In new product development, failures often the company to apple for a patent. come as frequently than successes  Because patents legally prevent competitor  When screening, marketer and researcher from producing or selling the invention, this examine the chances that a new product legal mechanism may reduce or eliminate concepts that have little chance to make it in competition in a market for many years so the market. that a firm gains some “breathing room: to recoup its investments in technical  Product adoption is the process by which a development. consumer or business customer begins to by and use a new good, service, or idea. PHASE 6: TEST MARKETING  Diffusion—describes how the use of a product  It means the firm tries out the complete spreads throughout a population  At first only a small number of perple buy it, marketing plan—the distribution, advertising, but change happens in a hurry when the and sales promotion—in a small geographic area that is similar to the larger market it process reaches the moment of critical mass, this moment of truth is called the tipping hopes to enter. point—a product’s sales spike from a slow  On the negative side, test marketing is extremely expensive. climb to an unprecedented new level.  After they spend months or even years to  A test market also gives the competition a free develop a new product, the real challenge to look at the new product, its introduction price firms is to get consumers to buy and use the and the intended promotional strategy—and product, and to do so quickly so they can an opportunity to get to the market first with recover the costs of product development and a competing product. launch.  On the positive side, when they offer a new  Marketer must understand the product product in a limited area, marketers can evaluate and improve the marketing program. adoption process.  Test marketing uncovers a need to improve STAGES IN CONSUMERS’ ADOPTION OF A NEW the product itself. PRODUCT  At other times, test marketing indicates product failure; this advanced warning allows  Whether the innovation is better film the firm to save millions of dollars by “pulling technology or a better mousetrap, individuals the plug”. and organizations pass through 6 stages in the  Because of the potential problems and adoption process. expense of test marketing, marketers instead  After every stage, people drop out of the may use special computer software to process, so the proportion of consumers who conduct simulated tests that imitate the wind up using the innovation on a consistent introduction of a product into the marketplace. basis is a fraction of those who are exposed to  These simulations allow the company to see it. the likely impact of price cuts and new packaging—or even to determine where in the AWARENESS store it should try to place the product.  To educate consumers about a new product, PHASE 7: COMMERCIALIZATION marketers may conduct a massive advertising campaign: a media blitz.  This means the launching of a new product,  But this strategy works for new products and it requires full-scale product, distribution, when at least some consumers see a new advertising, sales promotion—the works. product as something they want and need and  A launch requires planning and careful just can’t live without. preparation. Marketers must implement trade INTEREST promotion plans that offer special incentives to encourage dealers, retailers, or other members of the channel to stock the new  A prospective adopter begins to see how a new product might satisfy an existing or newly product so that customer will find it on store shelves the very first time they look. realized need.  They must also develop consumer sales  Interest also means that consumers look for and are open to information about the promotions such as coupons. innovation. ADOPTION AND DIFFUSION OF NEW PRODUCTS  Marketers often design teaser advertisements that give prospective customers jest enough  What happens after that new product hits the information about the new product to make market—how and innovation spreads them curious and to stimulate their interest throughout a population  FIGURE 7.9 EVALUATION  Favourable experiences make it more likely that she will become a loyal adopter as her  We weigh the costs and benefits of the new initially positive opinions result in product. confirmation.  For complex, risky, or expensive products,  Some marketers feel that reselling the people thing about the innovation a great deal customer in the confirmation stage in before they will try it. important. They provide advertisements, sales  Marketers for such products help prospective presentation, and other communication to customers see how such products can benefit reinforce a customer’s choice. them.  Impulse products—something little evaluation INNOVATOR CATEGORIES may occur before someone decides to by a good or service.  Diffusion describes how the use of a product spreads throughout a population.  A person may do very little thinking before she makes an impulse purchase, for these  Consumers and business customers differ in goods, marketers design the product to be how eager or willing they are to try something new, lengthening the diffusion proves by eye-catching and appealing to get consumers to notice the product quickly. months or even years.  Some potential adopters will evaluate an  There are five categories of adopters innovation positively enough to move on to the next stage. Those who do not thing the INNOVATORS new product will provide adequate benefits  Make up roughly the first 2.5% of adopters. drop out at this point.  Extremely adventurous and willing to take TRIAL risks with new products.  Typically well educated, younger, better off  The stage in the adoption process when financially than others in the population, and potential buyers will actually experience or worldly. use the product or the first time. EARLY ADOPTERS  Often marketers stimulate trial when they provide opportunities for consumers to  Approximately 13.5% of adopters, buy sample the product. product innovations early in the diffusion  Even if the trial is satisfactory, some prospective buyers still won’t actually adopt process but not as early as innovators.  Early adopters are very concerned about the new product because it costs too much. social acceptance, so they tend to gravitate  Online direct marketing—consumers jest can’t stand to by without first touching, holding and toward products they believe will make others thing they are cutting-edge or fashionable. using a produc
More Less

Related notes for BUS 346

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.