Ebook Marketing - Real people, real choices (9/E): Part 2
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PART THREE: Develop
the Value Proposition
for the Customer
Chapter 8
Product I: Innovation and
New Product Development
8.1 Explaln how value ls derived
(])
C
+=
:::,
0
8.3 Undersland the Importance
8.5 Explaln tne process or product
tnrough different product
layers. pp. 234- 237
and types of product
innovations. pp. 241 - 243
adoption and lhe dlffuslon
of Innovations. pp. 249- 255
BUILDA BITTER MOUSETRAP-AND
ADD VALUE p. 234
"NEW AND IMPROVE DI" THE PROCESS
OF INNOVATION p. 241
ADOPTION AND DIFFUSION Of NEW
PRODUCTS p. 249
G)
-.....
·-0>
8.2 Desctlbe how market ers
classify products. pp. 237- 241
G)
.0
HOW MARKETERS CLASSIFY
PRODUCTS p. 237
8.4 Shaw how forms develop new
products. pp. 244-249
Check out the Chapter B Studr Map
on page 2S6.
NEW PRODUCT DEVELOPMENT p. 244
0
Neal Goldman
T
A Decision M aker at Under Armour
Neal Goldman is director of men's trajning and team sporu apparel at Under Armour. 8.ased in Baltimore. Maryiand, Neal
has been on the Under Armour men's apparel busine;ss f0< four years. He has held various product category business
responsibilities, including those f0< Baselayer. NFl Combine, and Football. 8ef0
Laaosse brand. At Warrior, Ne.ti
oversaw everything from product direction to execution to mafketing asset activation, doubling Bfine'S business
in three years. Neal gtaduated with a degfee in English litetature tll 2004 from Georgetown. Unive
scoring and was named the 2004 Ge0<9etown Male Athlete of the Year.
0
'+-
c
en
0
ft
G)
z
Whal I do when I'm not warl
My motto to Dve by?
My management style?
Playing with my wild two-year-old soo and
still pretending I'm as good of a lacrosse
player as I was IO years ago.
I have two: (1) If it was easy, anybody
could do it. (2) Be the !Mfmosta~ not the
thermometer.
lead by actions, not words. I want my
team to see what empower~nt to make
decisions looks like.
Rrst Job out of school?
What drives me?
My pet peeve?
Wrigley Gum sales rep.
~rsonally, making my family proud.
Professionally, cun05il)I of the unknown.
Meetings where lots of words are said but
no decisions are made.
Career high?
I feel like it's an evolving ranking, but
currenrly it's the admowledgment of being
made director.
232
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In I996, l(evin Plank, a football player at the Univer·
sity of Ma,yland, had the thought that there must be a
better solution to the I00 percent cotton T-shirt he and
his feOow teammates were wearing under their pads. Their shirts were qukkfy
soaked with sweat within minutes of practice. and once they v.'efe saturated,
it seemed like it took an eternity f0< them to dry. Not only did the wet, t.r1com·
fortable feeling of a heavy shirt bother hin, but they also fit poorly; the shirts
were constantly poking out of the jersey and becoming a distraction. He knew
there had to be a better solution, so he scoured the garment district, found a
synthetic blend that met his tiking, and took that material along with a small
underwear shin to a ra.ilot With that, the first run of Under Armour compression
shirts was created.
What started as Kevin's idea in 1996 has exploded into a S2 billion-plus
empire 18 years later that n
grows and expands into new markets and categories around the world, the
heritage product category. compression HeatGear, remains a vital part of the
COfJ\1any. This Baselayer apparel line links directty to Under Armour's core mes-
sage: •protect This House:"'
In the spring of 201I, Under Armow started to see a gradual dedine
in HeatGear Baselayer sales during a time when historically business would
begin ramping up. The brand's biggest Sj)O
were seeing severe competition from other brands. One major threat was Nike,
which had just launched a new product campaign called Pro Combat. If Under
Armour had created the story of compression appaiel Nike's Pro Combat was
aiming to wrfte the next chapte<. The company dearly planned to target the
next W
The challenge we faced was twofold: product and marketing. At least
horn the consumer's perspective, the HeatGear Baselayec product line had not
evolved in moce than a decade. The core franchise business had been treated
like • milk and eggs" in the sense that as long as these basic items we1e in
stock, customers wouJdn't forget to pick up key essentials. That mind-set
contributed to a lack of new produa initiatffl within this range because we
had been focusing on creating new category opportunitie~ such as women's
apparel and athletic shoe~ Marketing also played a critical role in this cha~
lenge, as Nike launched a full-on assault in all touch points with a heavy focus
on retail in-store creative and social media. Our biggerrival was forging a new
emotional connection with customers and leveraging its rosterof professionaJ
athletes and creative resol.lfces to explode into the Baselayer category--and
threaten our house.
To make matters worse, the product development calendar is an
18-month process from line archftecture briefing to market delivery. When
business began to dip, the reality of the sftuation was that any p,oduct fine
overhaul might be too little too late. The HeatGear compression line sells
minions of units each year. At1'j product adjusUTient can send ripple effects
through the supply chain, which in rurn can affect delimy times, sales, and
profit. On the other hand, the longer Under Armour waited to enact a new
plan, the more we '1.'0Ukl see a dip in sales. Adelay in responding to the threat
had the potential to threaten long-term revenue and de-crease Under Armour's
overall market share in the athletic apparel category.
As the leader of the business unit. my role was to assess our options and
deliver a strategy that took into account all cros.s-functional groups with the
end goal of ,ecouping shon-term ,evenue as well as setting the brand up for
long-term success.
Neal considered his Options 1·2·3
l
Approach the decision as a product problem. Build
new product offerings to get into retail ASAP. Try to = e the sales
trend with new, exciting styles. This emphasis on inmediate new
p,oduct development to produce a new collection of Baselayer ap·
Option
parel could capture open-to-buy dollars from retailers (ie., the bud·
get they have to purchase retail merchandise), who clearly were going to begin
allocating more of th~ funds to tlike. It could also help Under Armour to lool<
more enticing and c~tftive compared to other products in the markel, which
would draw shoppers bad to our core brand. But because Under Armou(s prod·
uct development team would have to make this happen on an accelerated time
fine with no opportunity for delay,, production expenses would go up. We would
need to position materials. trims. and manufacturing with our current supplier so
that once designs and fits were completed. production could stan immediately.
Combine speed to market with the substantial aesthetic and material direction
this product line would demand, and the costs of producing these s,yles could
dimb anyv,l,ere from 25 to 50 percenl Under Armour wouldn'1 be able to pass
these costs on to consumers in such a competitive market, so short-term gains at
retail could come at the expense of bonom~line reYenue.. In addition, we had to
assume that we wouldn't acquire more Hoorspace in stores. so some of ourcur·
rent product offerings would h..., to come off the displays 10 make room for the
new. The c0
Approach the decision as a marketing problem. Stay
the course with the current product line and invest time, money,
and resources immediately into ramping up the messaging that Un·
der Armour sent to its target market of active athletes.. This wouJd
Option allow us to continue investing in other new business categories and
aflow one of the brand's strengths-storytellin!l-tO be on display. An overhaul
of this pcesentatian of our Baselayer products in stores would create new energy
for the brand and encourage shoppers to take a doser look. Styles that had been
treated like milk and eggs would now take center stage. and launching a social
and digital campaign !0< Baselayer could reach millions of consumers instantly.
However, although a marketing blitz could put Baselayer into the product spot·
tight, this might p
O·ii13,!lli?1J
Whidl Option would you choose, and w hy?
D Option 1 D Option 2 D Option 3
See what option Neal chose
1n
MyMarketinglab 1.,.
MyMarketinglab""
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Over IOmillion swdents improved their results using the Pearson Mylabs.
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233
234
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
gain from a marketing blitz couk:I even provide us with a false sense of security about our Baselayer business. The
same issues with prcduct inertia and attractive options from co~etitoo could pop up again six to njne months
later.. and if so, we woukl find ourselves in an even deeper hole in terms of our ability to bring new products to
market In additioo, other initiatives the marketing teams are working on would need to be put on hold. Finally,
cost could be a real issue: Nike's marketing budget dwarts Under Armour's, so going toe-to-toe with the larger
company in a marketing showdown would be tough for us.
Start over with a new business plan. Rebuild !he Baselaye, pfOduc:t from the ground up.
Analyze every detaa in teans of new fabric selections, design aesthetics. features and benefits, pricing.
and consumer positioning. Instead of rushing throogh the process like option I prQPO
money, and resources to build out the consume<-facing message of what this relaunch means 10 athletes aO over
the wocld. Because this more drawn-out approach "WOUid not interrupt their project flow from the previous season,
Under Armot.r's marketing team would have the bandwidth to fully focus oo the new deliverables. H°""""", it's
nice to have the luxury to step back and reset the game.We didn't necessarily have that this approach would cause
us to lose out in sales and market share in the shon term. We don't know how low the Hooe is yet Will Under Ar·
mour still haYe the confidence of its retail partneis when we come back to the table with oe\V ideas aher a tough
year of stagnant or dedining sales?Another major concern was that to overhaul the product line, we would have
to move the category into a arfferent a•ec:tion from when the company was founded. Think about that for a second:
Aside from questioning why we need a new course of action after 17 years of doing something the same Wif/,
imagine telfing the CEO and COO that to be successful we would need to go forward with a different p,oduc:t plan
than v,nat these "'" had built from the ground up! And from the marketing end, conventional branding wasn't
going to make enough waves ro let consumers know about the new line. so there is much more cost and risk as·
sociated wilh taking a bigger swing. If the p,oduc:t and marketing reset isn't soccessM how deep is the hole Under
Armour would ha,e to dig itself out of?
Now, put yuurseff in Neal's shoes. Which option would you choose, and v,i,y?
a
Chapter 8
8.1
OBJECTIVE
Explain how value
is derived through
different p,oduct
laye,s.
Build a Better Mousetrapand Add Value
''lluild a better mousetrap and the world will beat a path to your door."
Although we've all heard that adage, the truth is that just because a
product is better th~ is no guarantre it will succeed. Fot decades,
the Woodstream Corp. built Victor brand wooden mousetraps. Then
the company decided lo build a better one. Woodstream's product•
development people researched the eating, crawling, and nesting habits of mice (hey, it's a living). They built prototyfl('S of different mousetraps to come up
with the best possible design and tested thslecl<-looking " Little Champ," a black p lastic miniature inverted bathhlb w ith a hole. When
the mouse went in and ate the bait, a spring snapped upward-and the mouse v,ras his tory.
Sounds like a great new product (unless you're a mouse), but the Little Champ failed.
Woodstrcam s tudied mouse habits, not consumer prcforenccs. The company later discov•
crcd that husbands set the trap a t night, but in the morning it was the wives who disposed
of the "present'' they found waiting for them. Unfortunately, many of them thought the
Lit~e Champ looked too expensive to throw away, so they felt they should empty the trap
for reuse. This was a task most women weren't willing to do; they wanted a trap they could
happily toss into the garbage. t
Woodstrcam's failure in the "rat race'' underscores the importance of creating prod·
(PP 234-237)
ucts that provide the benefits people want rather than just new gizmos that sound like a
good idea. lt also tells us that any number of products, from low-tech chccsc to high-tech
traps, potentially deliver these bc>nefits. Despite Victor's claim to be the "World's Leader in
Rodent Control Solutions," in this case cheese and a shoe box could s nuff out a mouse as
well as a high-tech trap.
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
We need to take a close look at how products successfully trap consumers' dollars
when they provide value. ln Chapter 1., we saw that the value proposition is the consume.r's
pcrceptfon of the benefits he or she will receive if he or she buys a good or service. So the
marketer's task is twofold: first, to create a bct1.er value than what's out there already and,
second, to convince customers that this is true.
As we defined it in Chapter 1, a product is a tangible good, service, idea, or some com·
bi.nation of these that satisfies consumer or business customer nct:.."'
as its brand and packaging.
Products can be physical goods, services, ideas, people, or places. A good is a tangible
product, something that we can see, touch, smell, hear, taste, or possess. It may take the form
of a pack of yummy cookies, a shiny new iPad, a house, a part used in production of that
Tesla electric sports car you'd like to buj\ or a chic but pricey Coach handbag. In contrast,
intaugible products-st!l'Viccs, ideas, people., and places-are products that we can't always
sec, touch,. taste, sme.ll, or pos..r;ess. We'll talk more about intangible ptoducts in Chapter 12.
Welcome to Part 3 of this book, "Devclop the ValuC: Proposition for the Customer." The
key word here is develop, and a large part of the marketer's role in developing the value
235
attributes
Include features, flllctions. benefits, and uses of
a product. Marketers view produas as a bund1e
of attributes that includes the packaging, brand
name, benefits, and supponing features in
addition to a physkal good.
good
A tangible product that we can see. touch. smel
heat or taste.
proposition is to create and market products innovatively. ln this chapter., we'll first exam·
inc what a product is and sec how ma.rkcters classify consumer and busincss-to-,busincss
(B2B) products. Then wc'U go on to look at new products, how marketers develop new
products, and how markets acc..>pt them (or not).
More broadly speaking. Parts 3 and 4 of the book take you systematically through aU
of the clements of the marketing mix's four Ps: product and price in Part 3 and distribution
("place") and promotion in Part 4. As you learned in Chapter 7, developing and executing
a gn.,at marketing mix is the heart and soul of positioning strategy. And the place to start is
with your product-as an old saying in marketing goes, "(( the product ain't righ~ the rest
doi,' t matter. ..
Layers of the Product Concept
No doubt you've heard someone say, "It's the thought,. not the gift, that counts." Some-times
that's just an excuse for a lame prlSCnt, but more broadJy it means that the gift is a sign or
symbol that the gift giver has remembered you. When we evaluate a gift., we may con.sider
the following: Was it presented with a flourish? Was it wrapped in special paper? Was it
obviously a "regift"-.omcthing the gift giver had received as a gift for himself or herself
but wanted to pass on to you (like last year's fruitcake)? These dimcnsiOJ,s are a pa.rt of the
total gift you receive in addition to the actual goodic in the box.
Like a gi(t, a product is everything that a customer receives in an exchange. As
~ Figure 8.1 shows, we distinguish among three distinct layers of the product- ~,. core
product, the actual product, and the augmented product. When they develop product
s trategies., marketers need to consider how to satisfy customers' wants and needs at each
of these three layers-that is, how they can create value. Let's conside.r each layer in tum.
The Core Product
The core product consists of all the bet,cfits the product wilJ provide for consumers or
business customers. As we noted in Chapter l, a benefit is an outcome that the customer
receives from owning or using a product. Wisc old marketers (and some young ones, too)
will tell you, ~-A marketer may make and sell a half•inch drill bit, but a customer buys a
half-incl, hole." This tried-and-true saying reminds us that people buy the core product,
in this ca.~,. the abiUty to make a hole. U a new product, such as a laser, comes a long that
provides th.at outcome in a better way or more cheaply., the driU ..bit maker has a problem.
The moral o( thl,; s tory? Mnrkt'tiug is abo-ut supplying bent-jits, not allributes. And bcnclits a.re
the foundation o( any va)ue proposition.
core product
All the benefos the p,odoo wii p,oYide for
consumers or busiless customers.
236
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PART THREE ] DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
Ffgure 8.1
~ SMpshot J Layers of the Product
A pfOduct is eve,ything a customer ceceives-the basic benefits. the physical p«xtuct and its packaging, and the "exuas"
that come .....;th the producL
Automobile
The Product
Basic Benefits
Transportation
Carrying cargo
Excitement
Image enhancement
Engine size
Color
Interior design
Body size
Body style
Options available
Model name (Camry, Corolla, etc.)
Workmanship
Features
Package
Brand
Quality
Appearance
Warranty
Repair/maintenance service after the sale
Installation
Customer support services
Delivery
Credit
Product-use instruction
4-year. 50,000-mile, bumper-to-bumper warranty
Dealer parts and repair department
Dealer preparation prior to delivery
Owner instruction manual
2.9% interest auto loan
Toll-free customer complaint number
Customer problem policies
Free lubrication and oil changes
Many products actually provide multiple benefits. For example, the primary bt,ne/it
of a car is transportation-all cars (in good repair) offer the ability to travel from point A
to point B. But products also provide customized benefits-benefits customers receive be.
cause manufacturers add "'bells and whistles" to win them over. Some drive.ts simply want
economical transportation, others appreciate an cnvin:mment.a.Uy friendly hybrid car, and
still others want a top.of•the-Line, all•l'crrain vehicle o r perhaps a hot sports car that will be
the envy of their friends. And some just like the expandable cup holder's ability to accommodate everything from your Red Bull to a Big Gulp!
The Actual Product
actuat product
The physical good or the dsiveted service that
suppOes !he d
The s«ond layer-the actual product-is the physical good or the delivered service that
supplies the desired b...·•ncfil For example, when you buy a washing macMne, the core
product is the ability to gct clothes clean, but the actual product is a large, square metal
apparatus. When you gc-t a mOOicill exam, the core service is maintaining your health, but
the actual one is a lot ol annoying poking and prodding. The actual product also includes
the unique foatur..-s of the p roduct, such as ilS appearance or styling, the package, and the
brand name. Samsung makes a wide range of flat'"5Cl'L>en TVs in dozens of sizes fTom low•
end low•price to other models that 1night cause you to mortgage your house. But in the
end, all offer the same core benefit of enabling you to catch Sht!Jdon Cooper's antics on th!!
latest episode of Tl,e Big Ba11g T/1<'0ry.
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
237
The Augmented Product
F'u\3Uy, mar-kctets offer customers an augmented product-the: actual product plus other
s upporting features, such as a warranty, credit, delivery,. installation, and repair sctVice
after the sale. Marketers know that adding these supporting features to a product Ls an t>f.
fectivc way for a company to s tand out from the crowd.
For example, Apple truly revolutionized the music industry when it
created its iTuncs Store, which enabled consumcts to download titles di·
roctJy to their digjtal music and video libraries. It also 001wenientJy saves
you the trouble of correctly inserting, labeling, and sorting the new music.
This innovation no doubt dealt a blow to firms that manufactured stands
designed to hold hundreds of CDs. Apple 's augmented product (CQ1wcniencc, extensive scloction, and case of use) pays of( handsomely for the
company in sales and profits, and customers adore. the fact that you can
do it all on your device of choice. As streaming services fo r music such as
Spotify and lidal have gained in popularity, Apple adapted to the change
in consumer pn,forences by creating Apple Music. Apple Music offers users the ability to acress an extensive collection of songs for a monthly fee
as opposed to purchasing songs or albums individually.2 One high profile
benefit to a ttract users is the re.Jcasc of exclusive conteuJ from artists s uch as
first•to•markct singles by popular rapper Drake.3
8.2
How Marketers Classify
Products
OBJECTIVE
So for, we've learned that a product may be a tangible
Describe how
mall:eters cla'5ity
products.
augmented product
The actual product plus olhe< supponing
featlJ'Ies su
s
!
good or an intangible service or idea and that there a.re
This diet dessert offe,s the value proposi:ion ol good laste wilhout the
different layers to the product through which a con•
extra calories.
sumer can derive value. Now wc'U build on these ideas
(pp. 237-241)
as we look a t how products differ from one another.
Marketers classify products into categories because they represent cl.if•
fc.re.nccs in how consumers and business customers feel about products and how they pur•
chase different products. Such an understanding helps marketers develop new products
and a marketing mix that satisfies customer net."
will last and on how the consumer shops for the product. Then we will discuss the general
types of 828 products.
How Long Do Products Last?
Marketers classify consumer goods as durable or nondurable depending on how long the
product lasts. You expect a rcf:rigerator to last many ycal'S, but a galJon of milk will last
only a week or so until it tu.ms into a science project. Durable goods are consumer products
that provide benefits over a period of months, years, or even decades, such as cars, fumi•
tu.re, and appliances. ln contrast, we consume nondurable goods, such as Peoplt magazine
and fresh sushi, in the short term.
We are more likely to purchase durable goods under conditions of lligh involvemenl
(as we saw in Chapter 6), whc-mas nondurable goods are more likely to be Imo-involvement
decisions. Wh en CQ1\Sumcrs buy a new car or a house., most will spend a lot of time and
energy on the decision process. When they offer Mgh•involvement p roducts, marketers
durable goods
Consumer produas that provide benefits over a
long period of time, such as cars. furniture., and
afl>liances.
nondurable goods
Consumer prcducts that provide benefits
for a shat time because they are consumed
(such as food) or a1e no IOOJer useful (such as
newspaper,).
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238
PART THREE ] DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
need to understand consumers' desires for different product benefits and the importance
of warranties, service, and customer support. So they must be sure that consumers can find
the infornl.ltion they need. One way is to provide a "Frequently Asked Questions" (FAQ)
St."'Ction on a company website:. Another is to host a Facebook page, l\vitter fct."
such forums, the firm can kc;,p track of what people say about its products and provide a
place for users to share information with each other as well as ask questions of the com..
pany related to specific products. For high-tech products, this is especially valuable to
s upport the consumcr"s cxpcrien~ and ensure they a.re able to gain maximum value from
what they buy. Our friends at Apple maintain a popular online fonun for iPad users to
ask I\C\V question.,;., look up answc-rs to prior questions. and answer activ£' questions from
others. Th~ forum is divided into two commw\ities bMLxl on how the iPad is used: one for
gener'al use and one £or business and education use, providing maximum utility for each
user group.•
ln contrast to the higher involvement mode for durable goods,. consumers usually
dol't't "sweat the details# so much when they choose among nondurable goods. There is
little if any search for infonnation or deliberation. Sometimes this means that conswners
buy whatever brand is available and is reasonably priced. ln other instartccs, they base
their decisions largely on past experience. Because a certain brand has _performed satisfac•
torily before., cwnomcrs often sec no reason to consider other brands, and they choose the
same one out of habit
How Do Consumers Buy Products?
convenience product
Aconsumer good or service that is usually
low priced, widely available, and ptrchased
frequently v.;1h a minimum of comparison and
effan.
Marketers also classify products based on where and how consunll?rs buy the: product.
~ Figure 8.2 portrays product classifications in tl,e consumer and business marketplaces.
We'll COf'ISidcr the consumer market first in which we think of both goods and scrvict:S as
convenience products, shopping products, specialty products, or unsought products. Recall
th.at in Chapter 6 we talked about how consumer decisions
differ
in terms of effort they put into habitual decision
Figure 8.2 ~ Snapshot Classification of Products
I
Products are classified differently depoodjog oo 'Mlethet' they a,e in the consumer
Business
Consumer
·.
.....
-
Convenience Products
-
Shopping Products
Maintenance, Repair,
..... and
Operating (MRO)
-
Specialty Products
.....
Raw~
-
Unsought Products
-
Processed Material.s
and Special Services
-
Component Parts
Equipment
making versus limHcd problem sol,ring versus ~tended
problem solving-a useful idea on whid1 to base our un•
dcrstanding of why i~s important to classify products.
A conve nience product typicaUy is a nondurable
good or service that consumers purchase frequently with
a minimum of comparison and effort. As the name im..
plies, consumers expc,ct these products to be handy, and
they will buy whatever brands are easy to obtain. ln
g:cnc.ral, convenience products arc low priced and widely
available. You can buy a gallon of milk or a loaf of bread
at most any gToce:ry s tore, drugstore, or convenience
store. Consumers generally already know all they need
or want to know about a convenience product, devote
little effort to purchases, and willingly accept altemativc
brands if their preferred brand is not available in a convc•
nie.nt location.
What's the most important thing: for markete-.rs of coo•
vcruencc prod.ucts? You guCSSL.,..j it-make sure the prod·
uct is easily obtain.able: in all the places where consumers
arc likely to look for it. It's a good guess that shoppers
don't put a Jot of thought into buying convcn..ienc~ prod..
ucts, so a company that sells products like white bread
might focus its strategy on promoting awareness: of a
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
239
brand name (evct try Bunn}' Bread? It's white bread at its finest!) as opposed to providing
a detailed "spec sheet" we might expect to find for a smartphone or other durable product.
There arc several types of convcnjcnce products:
• Staple products, such as milk, bread, and gasoline, 3J'C basic or necessary items that a.re
available almost everywhere. Most consumers don't percc:Jvc big differences among
brands. A particular category of staple products is called consumer packaged goods.
A consumer packaged good (CPG) or fast-moving consumer good ( FMCG) is a low•
cost good that we consume quickly and replace frequently.
Like staple products in general, CPGs (or FMCGs) are also frequently purchased
but arc less basic, with more varlatio,,s than gen~al s taples. Importantly, they arc also
more brand
tribution, giant retailers use O'Gs and FMCGs to bring shoppers into the s tore, thus
building foot traffic and incnc'1l.
a while bc..~usc of a closing and sale of the manufacturer. Then, to celebrate the victori•
ous re-debut of the Ouffydclights, Walmart heavily promoted the arrival ofTwinkiesat
its s tores the weekend before the shipments arrived, resulting in a rush to their stores
on arrival (and no doubt a sugar rush among consume.rs immediately thereafter). And
if your Twinkie crave was on. who can go into Walmart and purchase just one item?
'lncir s ales for that week w~ up across the board.
staple products
Basico, necessa,y items that are a\'ailable
almosi r,erywt,e
fast-moving consumer good (FMCG)
A low-cosi good that is consumed quialy and
replaced frequently.
• While a s taple is something we usually decide to buy in advance (or at least before the
fuel needle sits on ·~E'' for too Jong), we buy impulse products on the spur of the moment.
When you throw a copy or l'eople magazine into your shopping cart b..--causc it has a
cool photo of Christina Aguilera and her baby with a screaming headliJ,e "NEW BABY,
NEW LIFE" on the cover, you're acting on impulse. When they want to promote impulse
impulse products
A p-oduct people olten buy on the spur of the
moment.
products, marketers have two challenges: (I) to create a product or package design that
• reaches out and grabs tJ,e customer" and (2) to make sure their product is highly visible,
(or example, by s«uring prime end-aisle or checkout-lane space. That's why you'll often
find brightly colored packages or yellow creme Oreos on end caps in the spring or cheery
packages of gum and candy in the checkout lines. Package design and placement is becoming ever more important as customers come th.tough the lines with '"mobile blinders"
on-that is, customers ,•,.rith mobiJc phones in hand are more likely to send texts or check
Facd,ook while they st.:lnd in line, so they don't even notice the impulse products beck•
oning for thcir attention.' Ws getting harder and harder for a package of Juicy Fruit gum
to oompetc with a juicy Facebook post. And advances in technology (such as physical
devices that can transmit information based on locatioo caUOO beacons-more on this in
Chapter U) have made it possible for marketers to provide highly targeted promotions to
consumers' smartphoncs as ~,ey navigate ti,rough the s tore, driving impulse purchases
that in the past would have been mi,c;.sed for retaiJc.rs.6
• As the name suggests, we purchase emergency products when we're in di.re need;
examples include bandages, umbrellas, and something to unclog the nasty bathroom
sink. Bc.."Causc we need the product badly and immediately, prire and sometimes prod•
emergency products
Products we purchase VfflM we're in dire need.
uct quality may be irrelevant to our docision to purchase.
ln contrast to convenience products, shopping products a.re goods or services for
which consumers wilJ Spt."nd time and effort to gather information on price, product at..
tributes, and product quality. For these products, consumers art:" likely to compare altema•
tivcs be.fore they buy.
Tablet computers arc a good example of a shopping product. They offer an ever•
expanding array of features and functions, and new versions oonstantJy enter the markcl
shopping p roducts
Goods or s«vices fOf vdl:ich consumers
spend considerable time and effon gathering
ilformation and c0tnparing altemati\oes before
making a purchase.
240
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
spe
and are inparant to the buyer and lorwhidl he
« she will devote significant effort to acquf e.
unsought products
Goods or s«vices fOf vdl:ich a consumer has
ittlt> awareness°' Wlterest until the product or
a need for the produa is brought to his Of her
aneotioo.
The s hopper has many trade-offs and decisions to make about a variety of features that can
be, bundled, including speed, screen size, functionality, weight, and battery life. And tablet
manufacturers understand your decision dilemma: They take great pains to communicate
comparisons to you in thcir advertising-and, as you might expect, they usually find a
way to make their version seem superior.
Specialty products have unique charncteristics that are important to buyers a t almost
any price. When gas prices arc down, hybrid vchidcs are less cost--c:ffective versus sta.n•
dard cars yet many CQ1\Sumcrs still opt to shell out the premium prices to purchase them
lx.'Causc of the importance they place on being environmentally friendly. Specialty prod·
ucts often have luxury connotations for which consume.rs are willing to pay a higher
price to achieve a desired image-Rolcx versus Timex for example. Both keep time quite
accuratcl}~ but the Rolex mystique commands considerable attention. Rolex justifies its
high price when the company points out that because of its high standards for quality and
design it takes about a year to make one of its watches.7
Consumers usually know a good deal about specialty products, and they tend to be, loyal
to specific brands. Cmerally, a specialty product is an extended problem-solving purchase
that requires a lot of effort to choose, meaning that firms that sell ~,csc kinds of products
need to create marketing strategies that make their pnxlucts stand apart from the resl
Unsought products are goods or services (other than oonvcniconswncr has little a\.\ta.reness or inte:l\."Sl until a need arises. \.\'hen a college graduate lands his
or h<,r first "real" job, typically retirement plans and disability insurance are unsought products.
It ""luires a good deal of advertising or p,:,rsonal selling to interest young people in these kinds
of products-just ask any life insurance sa!espetson. One solution may be, to make pricing more
attractive; for example, reluctant consumetS may be more willing to buy an w,souglll product
for "only pennies a day" than ii they have to think about their yearly or lifetime cash ouday.
How Do Businesse s Buy Products?
Although consume-rs purchase products for thcir own use., as we saw in Chapter 6 organi·
zational customers purchase items to enable U,em to produce still other goods or sctviccs.
Marketers classify 828 products based on how organizational customers use them. As with
consumer products, when marketers know how their business customers lL-,C a product,
they are better able to design products and craft an appropriate marketing mix. Let's
briefly review the five different types of 828 products that Figure 8.2 depicts.
equipment
Expensi\
• Equipment refers to the products an organization uses in its daily operations. Heavy
equipment, sometimes called installatio,rs o r capital equipment, includes items s uch as the
maintenance, repair, and operating
(MRO) products
• Maintenance, repair. and operating (MRO) products a.re goods that a business customer
consumes in a relatively short time. Mainlerumce produds include light bulbs, mops, dean•
ing supplies, and the like. Repair products are items such as nuts, bolts, washers, and
smaU tools. OJJ<>mling supp/ks include computer paper and oil to keep machinery running
smoothly. Although some Finns use a sales force to promote MRO products, others rely
on catalog sales, the Internet, and telemarketing to keep prices as low as possible.
Goods that a business customer consumes in a
relatiwfy shott time.
raw materials
P\'oducts of the fishing, lumber, ag!icuhural and
mining industries that organizational customers
purchase to use in their finished products.
sophisticated robotics Ford uses to assemble automobiles. Installations arc big-ticket
items and last for a number of years. Computers, photocopy machines, and water
fountains arc examples of ligM ot accessory equipment; they arc portable, cost less, and
have a shorter life span than capital equipment.
• Raw materials are products of the fishing, lumber, agricultural, and mining industries
that organizational cust omers purchase to use in their finished products. For example,
a food company transforms SO)'beans into tofu, and a s teel manufacturer changes iron
ore into large sheets of steel that other firms use to build automobiles, washing machines, and lawn mowers.
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
241
processed materials
• Firms produce processed materials when they transform raw matcriaJs from their
original state. A builder uses treated lumber to add a dcc.k onto a house. A com•
pany that creates aluminum cans for Red BulJ buys aluminum ingots to make
them.
Products created when fr-ms transform raw
materials from their original st.ate.
• In addition to tangible processed materials, some business customers purchase
specialized services from outside suppliers. These may be equipment based#such
as repairing a copy machine or fixing an assembly line malfunction, or noncquipme:nt•bas'-"d, such as market research and legal services. These services arc
essential to the operation of an organization but arc not part of the production of
a product.
Services that are essential to the operation of an
organization but are not pan of the ptoduction
• Component parts are manufactured goods or subassemblies of finished items that or•
ganizations need to complete their own products. For example, a computer manufac..
turer needs silicon chips to make a computer, and an automobile manufacturer needs
batteries, tires, and fueJ injectors.
Manufactured goods or subassemblies of
finished items that otganizations need lo
8.3
specialized services
of a product.
component parts
co~lete their Olffl produas.
"New and Improved!"
The Process of Innovation
OBJECTIVE
"New and improved!"' What exactly do we mean when we use the
term m'W product? The Fedt>l'al Trade Commission says that (I) a prod·
uct must be entirely new or changed signjficantly to be called new and
that (Z) a product may be caUed now for only six months.
That definition is fine From a legal _perspective. From a market•
(pp. 241-243)
ing st3ndpoint, though, a new product or an innovat ion is auytlring
that customers perceive as n~w and different. Innovation has its roots in an even more
elemental concept that is a hot topic in boardrooms of most organizations today: ere•
ativity. Creativity describes a process that results in something new. Creative outcomes
can take on many forms, but most often we experience them as something we can
see, hear, smell, touch, or taste.3 The outcome can be most anything- an idea, a joke,
an artistic or li terary work, a painting or mLL,;ical composition, a novel solution to a
problem, an inve.ntion, and of COllrse, a new product. Scientific research into crl'.!ativity
provides strong cvidc.nce of the importance of creative processes in the production of
novel, useful products.9
An innovation may be relatively minor, such as the thousands of new vctsions of cur•
rent products, such as Chocolate Chcetios, we see: on the market each year. Or it can be
something game changing like wearable technology to monitor personal health and fitness
worn on the wrist (e.g., the Fitbit Flex and tho Jawbone Up) or hoadsclS used to explore
virtual reality (e.g., the Oculus Rift). It may come in the form of a now way to transmit in•
Fotmation, s uch as when Skype VoIP telephony became available as a (n..~ service over th~
lntcmct, or as a ne-w way to power a vehicle, such as the hydrogen fuel cells in the Honda
FCX Clarity. In some cases, an innovation may be a completely new product fl,a t provides benefits never available before, like the original HP scientific caku]ator that nearly
overnight made the slide rule obsolete (if the term slide r11le is foreign to you, we suggest
Coogling it-a sJidc rule i,; how engineers used to make complex calcufations bclore H]'>•s
innovation). ln this section and the next, we focus heavily on the concept and process o(
product innovatjon, whkh, if done wcU, contributes mightily to organizational success.
Unde
types of product
innovations..
innovation
A product that consumers perceive co be new
and different from existing products.
creativity
A phenomenon whereby something new and
valuable is ae.ated.
242
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PART THREE ] DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
Figure 8.3
~ Snap.shot ITypes of Innovations
Types of Innovations
Three types of innovations ate continuous. dynamically continuous.
and Olscontinuous. based on their degree of newness..
Discontinuous
Dynamically
Continuous
Types of
Innovations
continuous innovation
A mocific.ation of an existing pcodua that sets
cne b'and apan from its competitOfS..
Innovations differ in their degrw of newness, and this helps dcte-rminc
how quickly the target matkct will adopt them. 8t.."Causc innovations
that are more novcl rt.'q_uire us to exert greater effort to figure out how
to US<> them, they are slower to spread throughout a population than
new products that arc similar to what is already available.
As~ Figure S.3 shows1 marketers classify innovations into thn..""categories based on thcir degree: 0£ newness: continuous innovations,
dynamically continuous innovatiOI\S, and discontinuous innovations.
Continuous
However, it is bctttU to lhink of these three types as ranges along a
continuum that gOL'S from a very small change in an e.xisting product
to a totally new product. We can then describe the three types of innovations in terms of the amount of dlang:e they bring to p.."'Oplc's lives.
For e.-x.amp1e, the ft.rst automobiles caused tremendous changes in the
Jives of poop lo who were us.xi to getting places by "horse power.•
Then airplanes came along and ope:ned the entire world to us. And
now, with innovations like the Triplingo app., you can communicate
easily while traveling abroad. TripLingo comes with a real-time trans•
lator-just speak into your phone, and it speaks back to you, at what..
ever speed you choose. It even has a Slangslider so that you can set the
level of formali ty. 10
On the idea side, Airbnb changed how travelers book a place to stay at their desti.na.•
tions (by allowing virtually anyone to rent out space in their own homes), and Ubcr's app
provides a new way to get to this dcsHnation (by allowing virtually anyone to become a
taxi driver and pick up fares when people summon a ride on their phones). With a whole
new world of travel opened up through th= apps and all of the data those travel plans
generate, an app such as Trip It is a nice innovation h) have handy. The app aHows a usc-r to
fonvard any confirmation c,.·i nails received associated with a trip so that the important de•
rails can be automaticalJy organized into an easy to use djg;ital itinerary. Very convcnient! 11
Continuous Innovations
A continuous innovation is a modification to an existing product, such as when Samsung
and others reinvigorated the TV market by offering thinner sets that featured high•
definition viewing. This type of mod.ification can set one brand apart from its competitors.
knockoff
For example, people associate Volvo cars with safety-in fact, their taglines include "Safety
A new product that copies. with sligh1
first, always" and #You're not just driving a car, you're driving a promise." Those are
modification. the design of an original product.
strong words, and Volvo backs them up with a
steady stream of safcty•rclated innovations.
The consumer doesn't have to learn any•
thing new to US1? a continuous innovation. From
a marketing perspective, this means that it's
usually rclativcly easy to convince consumers
to adopt this kind of new product. For example,
the current ge:ncration of high-
e.rs to change thcir behaviors. We all know what
a computer monitor is and how it works. The
system's
continuous innovation simply gives us-KESHI:
crs the added benelilS of taking up less space and
being easier on lhc eyes than old.style monitors.
A knockoff is a new product that copies,
Relatively new products like ltis Alrkan mascara l>'ard need to \\Olk hard to aeate a distinctiYe inage ;rod with slight modification, the design of an original
st?n:I out in a cranded marketplace.
product. Fums deliberately create knockoffs of
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
243
clothing and jewelry, often with the intf!n t to sell to n larger or different markct. For example,
oompanies may copy the ha11te co11/11rt clothing styles of top designers and sell tMm at lower
pri<>.'S to the mass markel It's likely that a cheaper version of the gown Jennifer Lawrcnc.>
wears to th!.? Academy Awards ceremony will be available at numerous websites within a
few days afi er the event It is difficult to legally protect a design (as opposed to a technologi·
c.a.1 invention) bcc.lusc an imitator can argut" that ever, a slight change-different buttons or a
slightly wider collar on a dress or shirt-means tJ,e knockoff is not an exact oopy.
Dynamically Continuous Innovations
A dynamically continuous innovation is a pronounced mod.ification to an existing product
that requires a modest amount of learning or change in behavior to use it. The history
of a udfo equipment is a series of dynamically continuous innovations. For many years,
consumers enjoyed listening to their favorite Frank Sinatra songs on record playi.m; (actu•
ally, when first introduced, they were called Gramophones). In the 1960s, teeny boppers
screamed and swooned as they listened to the Beatles on a continuou:;.play cight•track
tape (requiring the p urchase of an eight-track tape player, of course). Then came cassette
tap,,s to listen to the Eagles (oops, now a cassette player is needed). In the 1980s, conswners
could hear Mctallica songs digitally ma.,;tered on compact discs (that, of course, n.-quired
the purchase of a new CD player).
But of course, in U,e 1990s, recording technology moved one big s te-p fon...-ard with
MP3 technology; it allowed Madonna funs to download music En>m the lntcmel or to
exchange electronic copies of the music with others, and when mobile MP3 play€..rs hit
the scene in 1998, fans could download the tunes diroctJ), into a portable p layer. Then, i:n
November 2001, Apple Compute r introduced its first iPod (can you believe it's been that
long!). With the original il'od, music fans could tike 1,000 songs with them wherever they
went. By 2010, iPods could hold 40,000 songs, 25,000 photos, and 200 hours of vidco_ll
Music fans go lo the Apple iTunes Store or elsewhere to download songs and to get suggest:ioi,s for new music they might enjoy. Of course, today you can do all this on your smart•
phone. With imptoving data p lans and coverage as wc.U as w. ..ft bcing available almost
cvru-ywhere outside the home, it's easier than ever to s tream mus ic on your s mattphonc
or tablet as opposed to downloading it on a device. Although Apple s till sells iPods, sales
p lummeted fro.m a peak of nearly 55 million in 2008 to less than 15 million in 2014 because
many of us have moved on to using our il'.>honcs instead. But in marketing, the s tory never
ends: Now even mighty Apple sees sales dropping dramatically as the market for il'hones
gets saturated and consumers wait to buy "the next big th.ing." 0 Maybe a vittual reality
Gramopho,,e?
dynamically continuous innovation
Achange in an existing ~odua that requ.ies
a moderate amount of learning a, behavior
mange.
Discontinuous Innovations
To qualify as a discontinuous innovation., the product must create major cJ1a11gL'S in the way
we live. Consumers have to learn a great deal to be able to effectively use a discontinuous
innovation because no similar product has ever been on the market. Major inventions,. such
as the airplane, the car, and the TVl are the sort of innovations that radically changed mod ..
cm lifcStylcs. Another discontinuous innovation, the personal computcr-dcvc.lopcd i:n
fairly close parallel to the rise of the lntcrnet-chan&cd the way we shop and allowed more
people to work from home or anywhere: clse. Since the: advent of PCs, the move toward
processing the same information on tablets and on handheld devices bt."'Came a follow•up
journey in dynamically continuous innovation. One particular type of discontinuous u, ..
novation is convergence,. which mean.,; the coming together of tvlo or more technologies to
create- new systems that provide greater benefit than the originaJ technologies alone.
What's the next discontinuous innovation? ls the.re a product out there aln.v.idy that
wW gain that distinction? Usually, marketers know for sure only through 20/20 hindsight;
in other words, it's tough to plan for the next really big one (what the computer industry
calls the ·killer app•).
discontinuous innovation
A totally new produa !hat creai,s major
changes in the way we five.
convergence
The coming 1ogether of two°' mOl'e
technologies to create a new systemwith
,-eater benefits than its separate part:s.
244
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
8.4
research and development (R&D)
Awell-defined and sy,tematic approach to how
innovation is done within the firm.
new product development (NPD)
The phases by which firms develop new
products. including idea generation. product
concept deveiopment and screening. marketing
strategy development, business analysis.
technical development, test madeting, and
commercialization.
idea generation (ideation)
New Product Development
Building on o ur knowledge of the concept of c reativity and the
different
t}'pcs of innovations, we'll now turn our a ttl.:':ntion to how
OBJECTIVE
firms
ac-tuaJly
develop new products. TMs process is based on
Show how fvms
cxpenditu.tes
in
research and development (R&O), which in most
develop new
organizations is a v,.rcll-deJined and systematic approach to how it
products.
innovates. Investors and fi nancial markets closely scrutinize R&D
(pp. 244- 249)
investments bL'Causc these expenditures tend to p redict how robust
the firm's o ncoming new product stream will be. In fact, R&D investment in and of itself
is often a central metric for organizational commitment to innovation. Higher levels of
R&D activity a.re inherently more competitlve:I}' important in some industl'ics ve:rsus
others (high tech and pharmaceuticals arc examples on the: high side), but as we saw
in the case of Under Armour at the beginning of the chapter, in any firm new product
development is fueled by investment in R&D.
There are seven phases in the process of new product development (NPD), as[&Figure8.4
shows: idea generation, product concept development and screening, marketing strategy development, business analysis, technical devclopmcn~ market test, and commercialization. Let's
take a quick look at what goes on during each of ti= phases.
A piase of product dl!Yelopment in which
markete,s use a variety of sources to come
14> with great new produa ideas that provide
customer benefits and that are ccmpatible with
the co""any mission.
value co-creation
The process by v.flich benefits-based value ~
aeated throogh coOaborative participation by
rustomers and other stakeholders in the new
JXoduct development ixocess
Phase 1: Idea Generation (Ideation)
ln the initial idea generation (or ideation) phase of product development, marketers use a
variet y of sources to come up with great new product ideas that provide customer benefits
and that are compatible with the company mission. Sometimes ideas con,c from custometS. fdeas also come from sa1espcop1e:, service providers, a nd others who have direct
ClL<;tomcr contact. Value co•creation refers to the process by which an organization creates
worth through coUaborativc participation by customers and other stakeholders in the: new
product development process.
Metrics Moment
How do marketers meas.ure innovation? Short answer: It's pretty complex.
This is because it involves not only marketing but als.o the firm's overall
culture, k?adership. and processes in place that foster innovation. Here's
a short list of measures that when taken as a whole can provide a firm's
"Innovation Score Card:
Outcomes of Innovation
Firm Strategy
Apply the Metrics
• How ;mare are organ.izaDOn members of a firm's goak for innovation?
• How committed is the firm and its Jeadership to those goaJs?
• How actively does the firm support innovation among its organiza·
tion members? Ale there rev,ards and other incentives in place to
innovate? Is innovation part of the performance evaluation process?
• To what degree do organization members perceive that resources
are avaRable for innovation (money and otherwise)?
Firm Culture
• Does the organization have an appetite for learning and uying
new things?
• Do otganization members have the freedom and security to try
thing~ fail and then go forward to uy different things?
• How many innovations have been launched in the past three years?
• What is the percentage of sevenue attributable to launches of
innovations during the past three years?14
1. Select a firm that you are particularly interested in and mat you
believe ts pretty imovative.
2. Do a little research on its website and elsewhere to get a sense for
the evidence about how it performs on the Score Card's criteria for
innovativeness.
3. Summarize your findings; how does the firm score on the lnnova·
tion Score Card. Consider each item that requires a rating (e.g., the
"Firm Strategy"" section of the scocecard} on a scale of 1 to S where
S is the highest or most favorable rating and 1 is the lowest or least
favorable rating?
4. In general do you fmd that the firm is more or less innD'lative than
you expected?
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
Lego devclopcd an o.nline platform called Lego Ideas where users can suggest new
Lego sets and s,,ek to have them turned into physical products by the company. Lego Ideas
enables users to provide a description, a visual represcntatia,, (build a representation of the
product physically or digitally using !..egos), and to specify the characterLstics of their proposed Lego set. Then, any new ideas that attract more than 10,000 supporters in a two-year
period on the platform move into a review phase, a t ,,1hich point Lego determines whether
245
I
[/4]
Figure SA
PrOCl!ss Phase s in New
Product Development
New produc1 development generaDy occurs
in seven phases.
or not it's feasible to tum the idea into a mass..produced Lego set. As part of the vetting
process, folks who throw their support behind a particular proposed product answer a
series of questions to determine market potential (questions related to perceived price,
segments of the market the set would appeal to, complexity of building the set, c tc.).This
approach to value co-aeation has yielded some massive s uccesses for Lego including the
first Mineo-aft set that paved the way for future sets to be made that leverage the Minccraft
intcllcctual propcrty.15 It's important to note that s uch a value co--creation approach is
in stark contrast to ''traditional" approaches in which firms develop products behind a
curtain and send them to market_, hoping that customers connect with the intended value
proposition of the nc".., offering.
Often firms use marketing resea.n'..'h activitir:s~ such as the focus groups we discussed in
Chapter 4, in their search for new product ideas. For example, a company like ESPN that
wants to develop nC\\1 channels or change the focus of its existing chan.ncls might hold
focus group discussions across different groups of spo.rts--minded vicwc.rs to get ideas fo.r
new types of programs.
Phase 2: Product Concept Development and Screening
The second phase in developing new products is product concept development and
screening. Although ideas for products initially oomc from a variety of sources and, it is
hoped, through co...:reation with customers and others, ultimatcly the responsibility us.u•
ally falls to marketers to manage the proo..--ss and expand these ideas into more complete
product concepts. Product 001,ccpts describe what features the product should have and
the bcne-fits those featun..'.'S will provide for consumers. Of course, just bt..~use an idea is
unique doesn't mean it will sell. How about the Japanese company that invented an app
to allow your s martphone to control your toilet? It lets you flush and lift the seat without
touching the commode. But wait, there's more:: You can play music through the toilet's
speakers, and store your .. usage history" in a "toilet diary" to track your progres.s. Now
this idea is flush v.,ith possiliilitics! 16
Phase 1: Idea Generation
t
Phase 2: Product Concept
Development and Screening
t
Phase 3: Marketing Strategy
Development
t
Phase 4 : Business Analysis
t
Phase 5: Technical
Development
'
l
Phase 6: Test Marketing
t
PhMe 7: Comme rcialization
product concept deve lopment and
screening
The second step of produa de'lelopmen1 in
which marteters test pcodua ideas for technical
ln new product development, faiJurcs often come as frequently (or more so) than successes, and it is critical to screen ideas for both their technical and commercial valul?. When
screening, matketcrs examir,e the cha.ores that a new product concept might be successful
while they weed out concepts that have little chance to make it in the market. They esti•
mate technical success when they decide whether the new product is technolog·k ally (ca..
s iblc-is it possible to actually build this product? TI,cn they estimate commercial success
when they decide whether anyone i$ likely to buy the product. Lego uses its Lego Ideas
process to estimate the potential commercial success: of a new product in terms of the
number of supporters the: idea attracts. Its potential technical success comes into play only
if the product gains enough support to make it to Lego's internal review. 1J the: product
concept reaches this benchmark, the company will then conduct an analysis of whether it
can actually produce it.
technical success
Indicates that a product concept is feasible
pureiy from the standpoint of whether not it
is possible to physicaly develop it. regardless of
\\llether nis perceil/ed to be cornme
Phase 3: Marketing Strategy Development
deveklpmem and entry into the market.
The third phase in new product dcvelopmc.nt is to develop a marketing strategy to
introduce the product to the marketplace, a process we bega1, to talk about back i:n
Chapter 3. This means that marketers must identify the target ma.rkct, estimate its
s ize, and determine how they can effectively posit.ion the product to address the target
and commercial success.
°'
commercia l success
lndica1es tha1 a product concept is feasible
from the standpoil>t of whether the fwm
developing the produa believes there is or will
be sufficient consume, demand to warrant its
246
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
market's needs. And, of course, marketing sh'ategy development includes planning for pricing.. disl'r ibution, and
promotion expenditures both for the introduction of the
new product and for the long run.
Phase 4: Business Analysis
Once a p roduct concept passes the screening s tage, the next
phase is a business analysis. Even though marketers have
evidence that there is a inarkct for the product, they still
must find out if the product can make a profitable contribu•
tion to the organization's product mix. How much potential
demand is there for the- prod uct? Docs the firm have the
resources it will need to s ucccss£ully develop and introduce
the product?
The business analysis for a nc-w product l,c.gins with
The direclll< ol culinary imvalion at Mc!mald's recent~ came LI> with a
idea: He
look the breaded clicl
product mix. Will the new product increase sates., or will it
It in a flour tortilla. Mc!mald's dubbed ft !he •snack Wrap' and put ft m the menu at a
simply take away sales of existing products (a concept called
s!a1er pn;e ol Sl .29. Ahi! was born-the Snack Wrap is one ol the mos! successful new
caunlbalization that wc'U discuss futthcr in Chapter 9)? Ate
prab:l lai.m,es in cm,pany history with sales e>eeeding prcjedions by 20 percent.
the-re possible synergies between the new product and the
business analysis
company's existing offerings that may improve- vi,;ibility and the image- of both? And w hat
The step in the pro
which marteters assess a product's commercial
'*"'*'
viabi:ity.
technical deve.lopment
The step in the prcdm devefopment process in
which COl11)any engineers refine and perfoo a
new product.
Phase 5: Technical Development
1£ a new p roduct concept sutVives the scrutiny of a business analysis, it then undergoes
technical development, in which a firm's engineers work with matketc.r s to refine the de•
sign and production proet.'SS. A great example of the technical development phase involves
Ripped fr:Jn, tr'• - Headlines
Ethical/Sustainable Decisions
in the Real World
Over the years, automobile companies have come undef increasing
pressure to produce cars that are more fuel efficient and better for the
environment. Fuel efficiency is commonly measured in miles pe1' gallon
of gasoline. Measl.l'es of environmental benefit can include greenhouse
gas and other aWixiUuting emissions.. 17 Driven in part by consumer senti·
ment~spedalty among millennjals-and governmental regulations. car
c~anies have worl
Volkswagen (VW) found itself in a lot of trouble with government
agencies and the public when it came to light that 11 million VW cars
were manufactured with so-called •cheating software" that enabled
each of those vehicles to es.sentjallysense when an emissions test was
being conducted and then direct the engine to operate in a manner that
wouJd significantly reduce 00th power and performance and in tum
lower the level or pollutants the tests measured. When the vehicle's
software sensed that a test was no longer being performed it reverted
the vehicle back into normal operations. which meant a significant
increase in the amount of environmentaJ pollutants being emitted
ind udlflg niuogen oxide at 40 times greater than what is permitted
in the U.S. 18 The discovery of this cheating software in many of VW's
vehicles led to profound consumer backlash and shunning of the brand
that will likely continue ro impact VW for some time.
Diesel cars offer strong fuel economy on a par with hybrids. Unfonunately,
the VW scandal has shaken consumer confidence. VW played a significant
role in bringing diesel cars into the mainstream
in the U.S., and it is quite possible that WIs
ETHICS CHECK:"admission that it cheated on tests will make
Should managbuyers mptical about the environmental pereB wbo ate bolh
formance of diesel cars in general 19 When al is
knowlngty
and
said and done. fines from governmental agenactt,ely Involved In
cies against WI win be in the billions of dollars
1he development of
and the costs of physically correcting the issues
automobiles that 811!
on a ca.Ho-car basis will be at a comparable
designed to cheat
level. The ~ct of this ..,,..,,t on brand equity
govemment nmand consumer confidence c,,.,er the bng term
also v.ifl be measurable and signilicant and the
future of the VW brand is unc«tain e,pecially
with enlJironmentaO, conscious milennials.
dated enwonmental
tes1S be held arnlnally acaiurtable?
0
YES
O NO
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247
fl,e company goTcnna, which nc-cently laund,ed a product to enable people
to be able to communicate with each other using their smartphooes while
in an area without cell phone coverage. The product (also named goTenna)
uses radfo signals to create a network bch\'CCJ"I multiple g·oTenna devices
that, along with the company's smartphonc app, provides a means of com..
munication between multiple users of the product within a given area. One
valuable application of goTenna is during wiJde:mess ~xcursions, whe:rc
potentially intense weather conditions make it even more dffficult to receive
cell phone signals. The goTe=a's design is lightweight, it's easy to attach
to the outside of a backpack or one of the belt loops on a pair of pants, and
... ~
it's watcM·csistant. Although many of these characteristics were most likely '"
identified to some degree during an earlier stage of the product develop-,
ment process, the company's marketers needed to work with the engineer..
. WHAT'S YOUR NUMBtR?"
ing team during the technical development phase to more fully flesh them
out into a tangible form that fits with both consumer needs and the internal
capabilities of the:compan)'.20
The better a firm understands how customers wilJ react to a nc-w prod ..
uct; the better its chances of commercial s uccess. For this reason, typically
a company allocates resources to develop one or more physical versions or
prototypes of th!? product. Prospective. customers may cvaJuatc these mock•
ups in focus groups or in field trials at home.
Prototypes also are useful for petlplc within the firm. Those involved
in the t«hnic.al development process must determine which parts of a fin• New flavors need ID undergo fi!polis rectrtical development so
ish~ good the company will make and which ones it will buy from other conpanies can be sure they will satisfy COf'6llmers• expectations.
suppliers. In the case or manufacturing goods, the company may have to
buy new production equipment or mocti/y existing machinery. Someone has
prototypes
to develop work U\SlTuctions for employei..~ and train them to make the product. When it's
Test ve/Sions of a prOjlOSed proooct.
a matter of a new se.tvicc process, technical development includes decisions s uch as which
activities will occur within sight of customers versus in the ''backroom',. and whether the
EGETABLE
HATERS
REJOICE!
-"'·--···-·.,.
company can automate parts of the service to make delivery more cFEicicnt~
Technical development sometimes n.'quircs the company to apply for a patent.
Because patents legally prevent competitors from producing or selling the invention, this
legal mechanism may reduce or climinah? competition in a market for many years so th.at a
firm gains some time to recoup its investments in techt1ical development.
patent
A legal me
pcoducing or selling an inventiol\ aimed at
reducing or eliminating competition in a market
b a period of time.
Phase 6: Market Test
The nex.t phase of new product devc-lopment is running: a market test (also known as a t est
mari
larger market it ultimately hopes to enter with full force.
There are both pluses and minuses to market tests. On the negative side, market tests
arc extremely expensive. It can cost more than a million dollars to conduct a market test
even in a single city. A market test also gives the competitio.n a fn.--e look at the nc-w prod•
uct, its introductory price, and the intt.--ndcd promotional strategy-and an opportunity
to get to the market first with a competing product. On the positjvc side, when they of..
fer a new product in a limited an.v.i, marketers can evaluate and improve the marketing
program. Sometimes, market tests Wlcovc.r a need to improve the product itse:lf. At other
times, market tests indicate product failure, provirung an advanced warning that aJJows
the firm to save millions or dollars by "pulling the plug.•
fior yea.rs., the manufacturer o( venerable Listerine wanted to introduce a mint•flavorcd
version of its dass:ic gold formulation to compete more directly with P&C's pleasanH asting
Scope (it originally introduced this altemati,•~ under the brand Llstennint). Unfortunately.
martc.et test or test market
Testing the complete mart.ting plan in a small
geographic area that is similar to the larger
market the film hopes to enter.
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
every time they tried to run a market test, P&C found out,
and the rival poured substantial extra advertising and cou•
pons for it$ Scope brand into the test market cities. This
counterattack tL'
whether hl introduce List.mnint nationwide.
Bcca~ P&..,C's
aggressive response to Llstc-rm.int's market tests actually in ..
cn.>ased Scope's market .s.hare in the test cities, the~ was no
way to determine how well Llstcrmint would actually do
under nonnal competitive conditions. The company went
ahead and introduced Listctmint nationally anyway, but the
new brand achieved only marginal success, and the company
ultimately pulled it £mm the market. Today, thanks to better
product development, the Listerine brand itself is available
Pepsi is ITIOWlQ it'i0 the restaurant business as ii q>ens Kda House in a h1) area mkffl'er
Manhattan. The restaurant-bar-event sp;Y;e wl bull bJzz for Pepsi, rul also serve as a
in mint flavor as weU as sc-ve:ral other choices and is the t ~
testing ground for new products.
selling mouthwash.21
llc'Clusc of the potential problems and expense of market
simulated market te,s t
tests, marketers instead may use special computer software tQ conduct a simulated market
Application of special co~uter software to
test that imitates the introduction of a product into the ma.rketplace. ~ simulations aJ.
initate the introduction of a proooct into the
low the company to sec the likcly impact of price cul'> and new packaging-or even to de,.,
marketplace allowing the company to see the
termine where in the store it should try to place the producl The prOCikely i~aa of price ruts and new pactaginr
basic research data on consumers' perceptions of the product concept, the physical product,
ex even to determine where in the store it
the adv\!l'tising., and other promotional activity. The test market simulation model uses that
should uy to place the produa.
information to pl'l.>dict ~,e product's success much less expensively (and more di
bc--comc a thing of the past.
Phase 7: Commercialization
commercialization
The final
the marl:et.
crowdfunding
On6ne platforms that allow thousands of
individuals to each contribute small amounts
of money to food a new product from a startup
co~any.
The last phase in new product development is commercialization. Th.is means the launch·
ing of a n~w product, and it requires full.scale production, distribution, advertising, sales
promotion- the works. For this reason, commercialization of a new product cannot hap•
pen ovemight. A law,ch requires planning and careful preparation.
Commercialization is expensive, but the lntcmct makes it much easier for start•ups to
obtain the funding they need to get their new products into the market. Today, we v.ritncss
the explosive growth of crowdfunding, where innovative websites such as Kickstarter.coml
lndiegogo.com., and Crowdfundc.r.oom have raised more: than $5 billion for cntreprenc~u.rs
and small companies (not to mention the popular TV show Slrnrk Tank, which also provides
funding: for contestant'> who coo~rUlcc one or more Sharks to join them). On these sites,
individuals can choose to c.ithe:r donate money (often in exchange for a product sample)
or invest in the co,npany.22 Under this model, cve:n small contributions add up when hun..
drcds or thousands of people like an idea and pitch in.
As launch tin,e nears, preparations gain a sense of urgency. First, the social media
campaigns arc UkcJy to crank up and hopefully insiders will then start to buzz about
the new product on T\vitter and in the blogosphcrc. Then sales managers will have to
explai:n special i:nccntive programs to salespeople, who in turn will educate alJ of their
customers in the channc:I of distribution. Soon the media announce to prospective cus•
tomcrs why thoy should buy and where they can find the new product. And aU of this
has to~ orchestrated with th~ precision of a symphony, with every player on top of his
or het part:., else the introduction into the matkct can easily disappoint customers when
they first try to buy.
The late Apple innovation gc.n.ius Steve Jobs was never one to squelch ptcoommer•
cialization hype about his new product introductions. It has b<,en cstim.itcd that Apple
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249
achieved prelaunch publicity worth more than $500 million on the originaJ iPhone before
it spent a single penny on any actual paid advertising. And the introduction of the original
il'ad back in 2010 was no exception to the Apple hypc-acation machine. Jobs claimed that
the iPad would offer an experience s upc:rior to that of nctbooks (a popular term a t the time
for notebook computers). He argued that the 751 million people who at that time owned
i.Phoncs and i.Pod Touches already knew how to US{! the iPad bt..'Causc it uses the same op•
crating system and touch'"5cn..""C.r\ interface. Well, as they sa)~ the rest is history. Since 2010,
the iPad and its bevy of competitors have had a major impact on how we work and en•
tertain oursclves.2.1 The re.Ocction on the LPad introduction provides a perfect segue to the
next sectior, on adoption and diffusion of innovaHon.
8.5
Adoption and Diffusion
of New Products
OBJECTIVE
In lhc previous section, we talked about the steps marketers take to
develop new products from generating ideas to launch. Now we'll
look at what happens after that new product hits the markct- hmti.r an
innovation spn."3.ds throughout a population.
innovations..
A painting is not a work of art until someone views it. A song is
(pp. 249-255)
i\Ot mus ic until someone sings it.. ln the same way, Jlew products do
not satisfy customer wants and needs until the customer actually uses (consumes) themhence the word cous11mer. Product adoption is the process by which a cons~r or business
customer begins to buy and use a new good, service, or idea.
The term diffusion describes how fl,e use of a product spreads throughout a population. One way to understand how th.is process works is to think about a new product as if
it were a computer virus th.at spreads from a few computers to infect many machines. A
brand might Just slog around-sometimes for yC!ars and years. At first, only a small num•
bcr of people buy it, but change happens in a hurry when the process reaches the moment
of critical mass. This moment of truth is called fl,e tipping point. 24 Alter ~,ey spend months
or even years to develop a new product., the real challenge for firms is to get consumers
to buy a.nd use the product and to do so quickly and in sufficient quantities so they can
recover the costs of product development and launch. To accomplish this, marketers must
understand the product adoption process.
Next we'U discuss the stages in this process. 'A'e'U also sec how consume.t s and busi•
nesscs differ in their eagerness to adopt new products and how the cha.ractcristics of a
product affect its adoption (or "infection") rate.
E:xplain the process
of produa adoption
and the diffusion of
product adoption
The process by which a consumer Of business
customer begins to buy and use a new good.
service. or idea.
diffusion
The process by v.tlich the use of a produa
spreads throughout a population.
tipping point
In the context of product diffusion, the point
when a product's sales spike from a slcm dimb
to an unprecedented ~v level
Stages in Consumers' Adoption of a New Product
Whether the iru,ovation is the next breakthrough in smartphonas or a better mousetrap, in•
dividuals and organizations pass through six stages in the adoption process.
Figure 8.5
shows the adoption pyramid, which reflects how a person goes from being unaware of
an innovation through stages from the bottom up of awareness, intercs.t, eva!uaHo,,, trial,
adoption, and confirmation. At every stage in building: the pyramid, people drop out of the
process, so the proportion o( consumers who wind up actuaUy using the innovation on a
consist.ml basis is a mere fraction of those who are exposed to it.
IJJ
Awareness
Atoalt!ttess that the innovation exists at all is the ftrst step in the adoption process. To
cducab? consumt?rs about a new product, marketers may conduct a massive advertising
adoption pyramid
Reflens how a person goes from being unaware
of an innovation drough stages from the
boncwn up of awareness, interest, evaluatKll'l.
lrial adop(ion, and confrmation.
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PART THREE ] DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
Figure 8.5
~ Process IAdoption
Pyramid
Consumets pass thtough six stages in the
adoption of a new product- from being
unaware of an innovation to becoming
loyal adopt•"· The right marl:eting
sttat~ies at each stage help ensu,e a
successful adoption.
Reinforce the customers choice through advertising,
sales promotion. and other communications
Make the product available
Provide product use informa t ion
Oemonstratjons, samples, trial-size packages
Provide information to customers
about how the product can benefit them
May use teaser advertising
media blitz
over a re4atively short time frame..
Trial
Evaluation
~-------------".
Interest
Massive advertising
A massive advertising campaign that occurs
Adoption
Awareness
campaign: a media blitz. For tho launch of its Samsung Galaxy S7 smartphone, Samsung
chose to place a significant emphasis on developing content that could be shan.>d through
social media. Before the product launched Samsung devoted significant resources to the
development of a campaign called the "Seven Days of Unboxing,'' which included a
special website and a series o( short videos disseminated online. Each video reaturcd a
difforent character going into a sealed room for 30 seconds to unbox the product and then
coming out and illustrating what they saw. The videos included (among others) a child, a
llama that likes to paint, and a pastry chef. Tho campaign generated incredible buzz for the
product loading up to its official unboxing.""6
At this stage, though, some con..;umers will say, .,.So there's a new smartphone out
there. So what?" Many of these consumers-a good portion of whom are probably not
current Samsung smartphonc O\'
some consumers sec a new product as something they want and need and just can't
Uve without.
Interest
I
i
Slyde Handboards faces a particularly daunlilg challenge: how lo create a marl
prau:t most people have never helrd ol, and for a sport lhey know nothing allouL Hand·
boards r..-, bodyboarders moYe faster and have more cmtrol in lhe water, but a very smaJ
nullt>er of surfers kmw abrul than-so far.
For some of the people who b~ome aware of a new
product, a second stage in the adoption process is in/t•r·
est. In this stage, a prospective adopter begins to see how
a new product might satisfy an existing or newly real..
izcd need. Interest also means that consumers look for
and arc. ope:n to information about the innovation. ln the
months after the launch of the Samsung Galaxy S7, the
company continued to build interest in the product with
a series of videos featuring the C rammy.. winning rapper
Lil' Wayne. One of tho videos showcased the product's
wat"er..rcsistant capabilities through a comical scene in
which Lil' Way·n e is shown in a s tore dousing the device
in expensive champagne and then using it to make a
mobile payment for another bottle of champagne. Tho
commercials fea turing the rapper were v iewed well over
10 million times on YouTubc and videos and gifs created
from them we.re viewed more than 30 million times on
Face-book and Twittcr.27 Other ads featu red the Galaxy
S7's wire.less charging capabilities and its role in enabling
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251
the use 0£ the Samsung Ct?ar VR headset fot virtual reality experiences. Samsung's ef•
forts to c.n courage consumers to consider an iPho,,c alternative paid off big time. The
Galaxy 57 had a tremendous product introduction despite Apple's percn niolly tough
competition.
However, this approach doesn't work with a ll products, so marketers often design
teaser advertisements that give prospective customers just enough inlonnati01, about the
MW product to make them curious and to stimulate their interest. Despite marketers' best
efforts, however, some more consumers drop out of the p rocess at this point.
Evaluation
In the eoo.luatiou stage, we weigh the costs and benefits of the new product. On the one
hand, for complex, risky, or 1.?.Xpc-nsivc products, people think about the innovation a great
deal before they will try it. For example, a firm will carclully evaluate spending hundreds
of thousa.nds of dollars on manufacturing robotics prior to purchase. Marketers for such
products help prospt.'.>Ctive customers SL~ hO\tit such products can benefit them.
In recent years, Callaway (the golf d ub manufacturer) has portnercd with Boeing
to deploy some of the aerodynamic know•how and design clements that Boeing has
devcloped for use in airplanes in to the dcveJopme:nt of a nc,,1 set of drivers. Although
some consumers aught be initially skeptic,! of the end product of this partnership,
Ca1Jaw.1y has worked hard to educate consume.rs on w hy this odd coupling or two
companjes has resulted in better performing golf d ubs. To hammer home the poin t,
Callaway convinet.>d several of its sponsored pm golf players to use the new clubs in the
Masters tournament. £f this product is good enough fo r arguably the most prestigious
tournament in golf, it stands to reason they would make a g reat addition to most casual
golfers' arscnals.28
A,:;, we've seen in the case of impulse products., sometimes little evaluation may oc..
cur before someone decides to buy a good or service. A pc-rson may do very little think•
ing before he or she makes an impu'lse purchase, like the virtual Tamagotchi (Japanese for
•cute little egg•) pets. For these goods, marketers design the product to be eye-catching
and appeiling to get consumers to notice the pmduct quickly. Tamagotchis certa.i nly did
grab the a ttention of consumers,. who bought more than 79 million of them since the fll'St
generation came out.29
Some potential adopters will evaluate an innovation posjtivcly enough
to movl' on to the next stage:. Those
who do not think the new product will
provide adequate benefits drop out a t
this point
impulse purchase
A purchase made without a"( planning or
seardl effon.
Trial
Trial is the s tage in U,e adoption p rocess when potential buyers will actu•
ally experience or use the product for
the first time. Often marketers s timu•
late triol when they provide opportunities for consumers to samplc the
product. Mountain Ckw·' s Kickstart
product is positioned primarily as a
carbonated energy drink for consump·
tioi, at the start and end or the day. lt is
deorly targeted to a younger audience
and has been s uccessful since its initial
Mountai:1 Dew's Kict(slart tn.d< offers samples to consumers to encourage trial of a new product.
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PART THREE ] DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
launch in 2013. ln 2015, Mountain Dew added two new flavors to the lineup. To stimulate
trial of these new products, the company sent out five specially cquippcd Mountain Dew
JGckstart trucks on an eight•month tour to college campuses and sports stadiwns to offer
samples to consumers. This sort ol trial ol a product like Kickstart can result in high rates
ol adoption by the target market, provided its members enjoy the product.30 Those who do
not al\'! unlikely to adopt the new product and fall out at this poinL
Adoption
In the adop//0,1 stage, a prospect actually buys the product (hooray, a sale!). Docs this mean
that all individuals or organizations that firs t d,oosc an innovation arc perma1,ent cus•
tomcrs? No, and that's a mistake many firms make. Marketers net..--.d to provide follow•up
contacts and communications with adopters to ensure they are satisfied and remain loyal
to the nc-w product over time.
Confirmation
After he or she adopts an innovation., a customer weighs expected versus actual
bencJits and costs. Favorable experiences make it more likely that the customer will
become a loyal adopter as initially positive opinions result in co,ifirmaliou. Of course,
nothing lasts forever; even a loyal customer may decide that a nt'.'w product no longer
meets his or her expectations and reject it. Hence, marketers w,derstand that resellin.g
the customer in the confirmaHon stage is often quite important. T hey provide advcr..
tiseme:nts, sales presentations, and o ther communications to reinforce a customer's
choice.
Adopter Categories
As we saw previousl}~ diffusion describt.->s how the use of a product spreads throughout a
beta test
Limited release of a product. especially an
ilnovative tedvlology, to alJow usage and
feedbadt from a small number of cuswme,s
who are witting to test the p-oduct under
normal eoteryday conditions of use.
bleeding edge technology
An innovati\le technology that is not yet
ready for reJease to the market as a whole.
potentially because of issues related to reliability
and stability, but is in a suitable state to be
offered fOf beta testing to evaluate consumer
perceptions of its perfonnance and identify any
potential issues in its usage.
Figure 8.6
population. Of course, marketers prefer thcir entirt:' target markct to immediately adopt a
new product, but this is not the case. Both consumers and business customers differ in their
willingness to try soincthing new. lengthening the diffusion process by months or even
years. Based on adopters' mies in the diffusion process, experts classify them into five cat..
cgorics, as shown m@figure 8.6: iMovators, early adopters, early majority, late majority,
and laggards.31
Some people like to try new products. Others arc so reluctant that you'd thirlk
they're afraid of anything new (know anyone Like that?). Many innovative technology
products are re.leased as a beta test to allow usage and feedback (ro1n a small nwnber of
users who arc willing to test the product under normal, everyday conditions of use:. The
types of innovative technologies commonly beta tested are often caUed a bleeding edge
technology-one that is not yet ready for release to the market as a whole., potentially
because of issues related to reliabUity and stability, but is in a s uitable state for beta test..
ing and user fredback. 32 To understand how the adopter categories diffor, we'll focus
~ Snapshot ICategories
of Adopters
Because consumers differ in hcMi willing
they are to buy and tty a new ptoduct. it
often takes months or yeclfS for most of the
population to adopt an innOYation.
Early
Majority
34%
Late
Majority
34%
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below on a threaded example of the adoption of one specific technology from the past
that has had a big impact on all of us today- Wi-Fi (wireless fidelity). What would we
do without it?
Innovators
Innovators make up roughly the first 2.5 percent of adopters. This segment is extremely ad•
venturous and willing to take risb with new products. Innovators are typically wcll cdu•
cal'cd, younger, better off financially than others in the population, and worldly. innovators
who were into new technology knew all about Wi-Fi well before other people had even
heard of it. Because: innovators pride themselves on trying new products, they purchased
laptops with Wi-Fi cards wai• back in ancient history (1999) when Apple firs t introduced
them in its Mac laptops.
innovators
The first segme,11 (roughly 2.S perceot) of a
population to adopt a new product.
Early Adopters
Early adopters, approximately 13.5 percent of adopters, buy product innovations early
in the diffusion process but not as early as innovators. Unlike innovators, early adopt..
crs arc concerned about social acceptance, so they tend to gravitate toward products
they believe will make others think they are cutting'"(_"dge or fashionable. Typically, they
arc heavy media use:rs and often arc heavy users of the product category. Others in the
popuJation often look to early adopters for their opinions on various topics., making
early adopters criticaJ to a new product's success. for this reason, marketers ofte:n hcav•
ily target them in their advertising and o ther communkations efforts. Remember that the
innovators prct-ty much already have the 1,cw product in hand before most early adopt•
ers purchase.
Columnists who write about personal technology for most popular magazines and
tech websites were testing Wi•fi in mid•2000. They experienced. some problems (like PCs
crashing when they set up a wireless network at home), but still they touted the benefits
of wireless connectivity. Road warriors adopted the technology as Wi-Fi access spread into
airports, hote-ls, city parks, and o ther public spaces. ln.tcl. maker of the Ce:ntrino mobile
platform, launched a major campaign with field-leading Conde Nast's Ti"av,/er magazine
and offered a location guide to T-Mobilo hot spots nationwide.
early adopters
Those who adopt an imovation early in the
diffusion process but aher the imovators.
Early Majority
The early majority, roughly 34 pcn:ent of adopters, avoid being e ither first or last to try
an innovation. They are typically middJc,.cJass consumers and arc deliberate and cau•
tious. Early majority consumers have- slightly above-average t.")(fucation and income levels.
When the early majority adopts a product, we no longer considc-t it new or different- that
is, when it gets into the.fr hands, it is, in essence, "established.ff By 2002, Wi•Fi access was
available in more than 500 Starbucks cafes, and monthly subscription prices were dropping
rapidly (from $30 to $9.95 per month).
early majority
Those whose adoption of a new product signals
a generat acceptance of the innovation.
late Majority
Late majority adopters, about 34 percent of the population, are oldc-r, arc even more con..
scrvative, and typicaUy have lowc_r..than..avcrage lc-vcls of education and income. The late
majority adoptt!rS avoid trying a new product until it is no longer risky. By that time, the
product has become an econom.ic necessity for them, or there is pressure fro1n peer groups
to adopt. By 2004, Wi•Fi capability was being bundled into almost all laptops, and you
could connect in mainstream venues like Mc.Donald's restaurants and sports stadiums.
Cities across the country bt.."'gan considering blanket Wi.. Fi coverage throughout the entire
town through WiMax (Worldwide Interoperability for Microwave Access) technology, a
wire-less communication s tandard.
late majority
The adopters YmO are willing to try new
products when there is linle or no risk
as.soc:iated with the purchase, when the
purchase becomes an economic necessity, or
when there is social pressure to purchase.
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PART THREE J DEVELOP THE VALUE PROPOSITION FOR THE CUSTOMER
Laggards
laggards
The last consumers to adopt an innovation.
Laggards, about 16 p,,ro,nt of adopters, arc the last in a population to adopt a new producl
Laggards arc typically lowcr in income level and education than other adoph?r categories
and arc bound l>y tradition. By the time laggards adopt a product, it may already be su•
pcrseded by other innovations. By 2006, it would have seemed strange if Wi•Fi or a similar
capability was 1\ot part of the standard packag~ in even the Jowest•prin"and people began to become annoyed if Wi-Fi access wasn't available just about every•
where they might go.33
Understanding these adopter categories a1Jows marketers to develop strate,gics
that will sp,eed the diffusion or widespread use of their products. for example, early
in the diffusion process marketers may put greater emphasis on gaining buzz through
targeted social media and advertising in spccial•interest magazines and websites to
attract innovatots and early adoptc.rs~ Later, they may lower the ptoduct-'s ptice or
come out with lower•priccd models with fower "bells and whistles" to attract the late
majotity. We will talk more about mote strategics for new and cx.isti.ng products in the
next chapter.
Product Factors That Affect the Rate of Adoption
Not all products are successful, to say the least. Let's
sic boo-,boos in new product introduction;
SL--C
if you've ever heard of these clas-
• Clairol Look of 811/tem,i/k s/rampoo: Consumers pondered what exactly was tho "Look of
Buttermilk" and why they would want it.
• &>l.amax video player: Sony refused to allow anyone else: to make the players, and the
rust of the industry went to VHS format.
• S11ifT.. Panties: Yes, women's undtm,\•ear that smelled litre bananas, popcorn, whiskey,
or pizza. What were they thinking!"
• Heinz multicolored kelcltup: What's better than red ketchup? Blue, green, or purple, of
course! Consumers., however, didn't equate the look with the fla vor.
• Wowl Chips: Frito-Lay thought fo t-frcc chips would be a smash hit among the health
conscious. Too bad the main ingred.Jent, Olcstra, caused stomach cramping and other
abdominal issues.3.5
• Coors Rocky Mountniu Sparkling Water: Despite Coors' c:fforts to equate thcit OOCJ''s
quality with the pureness of the Rocky Mountain water used to produce it, the Coors
brand and its famous water source did not translate into successful sales of a sparkling
watct line. Pe:rhaps this v,.ras because consumers Wet!.? confused as to why a company
known for brew was se:lling sparkling watl.!r with a label similar to the one on its more
familiar beer cans and boulcs.36
'Int:' reason for most product faiJutcS is really pretty simple; consumers djd not per•
ccive that the products satisfied a need better than competitive products already on the
market. [f you ro11/d predict which new products will succeed and which will fail, you'd
quicklj• be in high demand as a marketing guru by companies worldwide. Tha~s bccauoo
companies make large investments in new products, but failures are all too frequent.
Experts suggest that betvirecn onc•third and onc,.hall of all new products fail. As you
might expect, a Jot of people try to develop research techniques that enable !hem to pr.'
Researchers identify five characteristics of innovations that affect the. rate of
adoptio,,: relative advantage, compatibility, complexity, trialability, and observability.37
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j PRODUCT I : INNOVATION AND
CH APTER 8
NEW PRODUCT DEVELOPMENT
255
Th~ degree to which a new product has each of these characteristics a/fccts the speed
of dif(usio.n. It may t3ke years for a market to widely adopt a new product. Let's take a
closer look at the humble microwave oven- a product that was highly innovative in its
early days but now is generally a low-priet.>d staple of every kitchen (and every coUegc
apartment and dorm)-as an example to better understand why each o( these five factors
is important.
• Relative advantage describes the degree to which a consumer pcrccivcs that a new
product provides superior benefits. In the ca,;e of the microwave ovcn1 consumers
in the 1960s did not believe that the product provided important benefits that would
improve their lives. But by the late 1970s, that pcrcc>ption had changed because more
women had entctOO the workforce. In the 1960s, a woman had aU day to prepare the
evening meal, so she didn't need the microwave (yes, at Lhat time thel\'! we.re very
few males in the "househusband" rolo-that's really changed today!). ln the 1970s,
however, when many women JeJt home for work at 8:00 A.M. and returned home at6:00 P.M., an appliance th.at would ,..magically" de.frost a frozen chicken and cook it i:n
30 minutes provided a genuine advantage.
• Compatibility is the extent to which a new produd is consistent with existing cultur..
a.1 va]ues, customs, and practices. Did consumers see the microwave oven as being
compatible with existing ways of doing things? Hardly. Cooking on paper plates? U
you put a paper plate in a conventional oven, you'll likely get a visit from the fire department. B)' anticipating CQmpatibility issues early in the nc-w..product-dcvelopment
stage, marketing strategies can address such ptoblems in pJanning communications
and consumer education programs, or there may be opportunities to aJtcr product de,.
signs to overcome some consumer objections.
relative advantage
The degree to which a consumer perceives that
a new produa provides superior benefits.
compatibility
The extent to vmich a new produa is consistent
with existing cultural values. custcwns, and
JYactiCes.
• Complexity is the degtcc to which consumers find a new product or its use difficult
to understand. Many microwave users today haven't a clue about how a microwave
ovc-.n cooks food. When appliai,ce manufacturers introduced the first microwaves,
they explained that this new technology causes molecules to move and rub together,
which creates friction that produces heat. Voilil! Cooked pot roast. But ~,at explanation
was too complex and confusing for the homemaker of the Beaver Ocaver days back
in the !%Os.
complexity
The degree to which consumers find a new
product or its use diff1CUlt to understand.
• Trialability is the case o( sampling a new product and its benefits. Marketers took an
important step in the 1970s to speed up adoption of the microwave oven product trial
Just about every store that sold microwaves invited shoppers to visit the store and
sample a.n entire meal a microwave CQokcd. Finally, consumers began to understand
what the product even was and what it could do!
trialability
The ease of sa~ling a new prodoa and its
• Observability refers to how visiblt- a new product and il,; benefits are to o thers who
might adopt it. The ideal innovation is easy to see. For example, for a generation of
kids, scooters like the Razor became the hippest way to get around as soon as one
preteen saw his or her friends flying by. That same generation observed its friends
trading Pok~on cards and wanted to join in (were you part of this craze when you
were younger?). ln the c.asc of the microwave, it wasn't quite so readily observab]e for
its potential adopters-only close friends and acquaintances who visited somoone's
home would likely sec an early adopter using it. But the fruits of the microwave's
labors-tasty food dishcs-creat'ed lots of buzz at of6cc wate.rcoolers and social
events, and its use spread quickly. Too bad they didn't have social media back then-if
they had, it's a sure bet that the rate of adoption of micro\,ravcs would have been a
whole lot faster.
observability
How visible a new product and its benefits are
to others who might adopt it.
benefits.
256
PART THREE
j DEVELOP
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THE VALUE PROPOSITION FOR THE CUS TOMER
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0
CHAPTER 8
Study Map
8.1 Objective Summary
(PP 234-237)
Explain how value is derived through different
product layers.
Products can be physical goods, services, ideas. people, or
places. A good is a rangible product, something that we can
see, touch, smell, hear, taste, or possess. In contrast, intangible products-services, ideas. people, and places-are products that we can't always see, touch, taste, smell, or possess.
Marketers think of the product as more than just a thing that
comes in a package. They view it as a bundle of attributes that
includes the packaging, brand name, benefits, and supporting
features in addition to a physical good. The key issue is the
marketer's role in aeating the value proposition to develop
and market products appropriately.
The core product is the basic product category benefits
and customized benefit(s) the product provides. The actual
product is the physical good or delivered service, including the
packaging and brand name. The augmented product indudes
both the actual product and any supplementary services, such
as warranty, credit, delivery, installation, and so on.
are purchased. Durable goods provide benefits for months
or years, whereas nondurable goods are used up quickly or
are useful for only a short time. Consumers purchase convenience products frequently wi th lillle effort. Customers
carefully gather information and compare different brands
on their attributes and prices before buying shopping products. Specialty products have unique characteristics that
are important to the buyer. Customers have lin le interest
in unsought products until a need arises. Business products
are for commercial uses by organizations. Marketers classify business products according to how they are used, for
example, equipment: maintenance, repair, and operating
(MRO) products; raw materials; processed materials; specialized services; and component parts.
Key Terms
durable goods, p. 237
nondurable goods, p. 237
convenience product, p. 238
staple products, p. 239
Key Terms
consumer packaged good (CPG) or
fast-moving consumer good (FMCG), p. 239
attributes, p. 235
impulse products. p. 239
good, p. 235
core product. p . 235
actual product. p. 236
augmented product. p. 237
8.2 Objective Summary
emergency products, p . 239
shopping products, p. 239
specialty products, p. 240
unsought products, p. 240
equipment. p. 240
(pp. 237-241)
Describe how marketers c.lassify products.
Marketers generally classify goods and services as either
consumer or 828 products. They further classify consumer
products according to how long they last and by how they
maintenance, repair. and operating (MRO) products. p. 240
raw materials, p. 240
processed materials, p. 241
specialized seNices, p. 241
component parts, p. 241
