Chapter 8 - Product I: Innovation and new product development

early adopters

those who adopt an innovation early in the diffusion process but after the innovators

first-mover advantage

Being the first firm to enter a market with a new product, perhaps as a disruptive innovator.

ideation

Idea generation through a process characterized by the alternation of divergent and convergent thinking, typical of the design-thinking process.

how do consumers buy products

Marketers also classify products based on where and how consumers buy the product. Figure 8.2 portrays product classifications in the consumer and business marketplaces. We'll consider the consumer market first in which we think of both goods and services as convenience products, shopping products, specialty products, or unsought products. Recall that in Chapter 6 we talked about how consumer decisions differ in terms of effort consumers put into habitual decision making versus limited problem solving versus extended problem solving—a useful idea on which to base our understanding of why it's important to classify products. A convenience product typically is a nondurable good or service that consumers purchase frequently with a minimum of comparison and effort. As the name implies, consumers expect these products to be handy, and they will buy whatever brands are easy to obtain. In general, convenience products are low priced and widely available. You can buy a gallon of milk or a loaf of bread at most any grocery store, 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 alternative brands if their preferred brand is not available in a convenient location. What's the most important thing for marketers of convenience products? You guessed it—make sure the product is easily obtainable in all the places where consumers are likely to look for it. It's a good guess that shoppers don't put a lot of thought into buying convenience products, so a company that sells products like white bread might focus its strategy on promoting awareness of a brand name (ever try Bunny 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 are several types of convenience products: Staple products, such as milk, bread, and gasoline, are basic or necessary items that are available almost everywhere. Most consumers don't perceive 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 are less basic, with more variations than general staples. Importantly, they are also more brand-centric, and consumers tend to perceive more differences in product quality, features, and benefits, so the brands are heavily advertised. And in terms of distribution, giant retailers use CPGs and FMCGs to bring shoppers into the store, thus building foot traffic and increasing the chances that other types of products will also end up in shopping baskets (see the discussion on impulse and shopping products that follows). A few years back, the venerable treat Twinkies disappeared from distribution for a while because of a closing and sale of the manufacturer. Then, to celebrate the victorious re-debut of the fluffy delights, Walmart heavily promoted the arrival of Twinkies at its stores the weekend before the shipments arrived, resulting in a rush to their stores on arrival (and no doubt a sugar rush among consumers immediately thereafter). And if your Twinkie crave was on, who can go into Walmart and purchase just one item? Their sales for that week were up across the board.6 While a staple is something we usually decide to buy in advance (or at least before the fuel needle sits on "E" for too long), we buy impulse products on the spur of the moment. When you throw a copy of People magazine into your shopping cart because it has a cool photo of Prince Harry and Meghan Markle with a screaming headline "Prince Charmed: How Love Changed Harry" on the cover, you're acting on impulse. When they want to promote impulse products, marketers have two challenges: (1) to create a product or package design that "reaches out and grabs the customer" and (2) to make sure their product is highly visible, for example, by securing prime end-aisle or checkout-lane space. That's why you'll often find brightly colored packages of 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 through the lines with "mobile blinders" on—that is, customers with mobile phones in hand are more likely to send texts or check Instagram while they stand in line, so they don't even notice the impulse products beckoning for their attention. It's getting harder and harder for a package of Juicy Fruit gum to compete with a juicy Instagram post, and by the way, gum sales have decreased by 15 percent in the last decade.7 And advances in technology (such as physical devices called beacons that can transmit information based on location—more on this in Chapter 12) have made it possible for marketers to provide highly targeted promotions to consumers' smartphones as they navigate through the store, driving impulse purchases that in the past would have been missed for retailers. Rite Aid for one has deployed this technology in more than 4,600 stores nationwide, and it is able to offer coupons and announce sales items just before the moment of purchase!8 As the name suggests, we purchase emergency products when we're in dire need; examples include bandages, umbrellas, and something to unclog the nasty bathroom sink. Because we need the product badly and immediately, price and sometimes product quality may be irrelevant to our decision to purchase. In contrast to convenience products, shopping products are goods or services for which consumers will spend time and effort to gather information on price, product attributes, and product quality. For these products, consumers are likely to compare alternatives before they buy. Tablet computers are a good example of a shopping product. They offer an ever-expanding array of features and functions, and new versions constantly enter the market. The shopper 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 their advertising—and, as you might expect, they usually find a way to make their version seem superior. Specialty products have unique characteristics that are important to buyers at almost any price. When gas prices are down, hybrid vehicles are less cost-effective versus standard cars, yet many consumers still opt to shell out the premium prices to purchase them because of the importance they place on being environmentally friendly. Specialty products often have luxury connotations for which consumers are willing to pay a higher price to achieve a desired image—Rolex versus Timex for example. Both keep time quite accurately, 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.9 Consumers usually know a good deal about specialty products, and they tend to be loyal to specific brands. Generally, a specialty product is an extended problem-solving purchase that requires a lot of effort to choose, meaning that firms that sell these kinds of products need to create marketing strategies that make their products stand apart from the rest. Unsought products are goods or services (other than convenience products) for which a consumer has little awareness or interest until a need arises. When a college graduate lands his or her first "real" job, typically retirement plans and disability insurance are unsought products. It requires a good deal of advertising or personal selling to interest young people in these kinds of products—just ask any life insurance salesperson. One solution may be to make pricing more attractive; for example, reluctant consumers may be more willing to buy an unsought product for "only pennies a day" than if they have to think about their yearly or lifetime cash outlay.

product factors that affect the rate of adoption

Not all products are successful, to say the least. Let's see if you've ever heard of these classic boo-boos in new product introduction: Clairol Look of Buttermilk shampoo: Consumers pondered what exactly was the "look of buttermilk" and why would they want it? Betamax video player: Sony refused to allow anyone else to make the players, and the rest of the industry went to VHS format. Cheetos Lip Balm: Eating Cheetos may be a guilty pleasure, but why would anyone want that flavor stuck on their lips all day?35 Heinz multicolored ketchup: What's better than red ketchup? Blue, green, or purple, of course! Consumers, however, didn't equate the look with the flavor. Wow! Chips: Frito-Lay thought fat-free chips would be a smash hit among the health conscious. Too bad the main ingredient, Olestra, caused stomach cramping and other abdominal issues.36 Coors Rocky Mountain Sparkling Water: Despite Coors' efforts to equate their beer'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 water line. Perhaps this was because consumers were confused as to why a company known for brew was selling sparkling water with a label similar to the one on its more familiar beer cans and bottles.37 The reason for most product failures is really pretty simple: consumers simply did not perceive that the product satisfied a need better than competitive products already on the market. If you could predict which new products will succeed and which will fail, you'd quickly be in high demand as a marketing guru by companies worldwide. That's because companies make large investments in new products, but failures are all too frequent. Experts suggest that between one-third and one-half of all new products fail. As you might expect, a lot of people try to develop research techniques that enable them to predict whether a new product will be hot or not. Researchers identify five characteristics of innovations that affect the rate of adoption: relative advantage, compatibility, complexity, trialability, and observability.38 The degree to which a new product has each of these characteristics affects the speed of diffusion. It may take years for a market to widely adopt a new product. As an example to better understand why each of these characteristics is important, 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-priced staple of every kitchen (and every college apartment and dorm): Relative advantage describes the degree to which a consumer perceives that a new product provides superior benefits. In the case of the microwave oven, consumers in the 1960s did not believe that the product provided important benefits that would improve their lives. But by the late 1970s, that perception had changed because more women had entered the workforce. So in the 1960s, quite a few more women had all day to prepare the evening meal, so they didn't really need the microwave (yes, at that time there were very few males in the "househusband" role—that's really changed today!). In the 1970s, however, when many women left home for work at 8 a.m. and returned home at 6 p.m., an appliance that would "magically" defrost a frozen chicken and cook it in 30 minutes provided a genuine advantage. Compatibility is the extent to which a new product is consistent with existing cultural values, customs, and practices. Did consumers see the microwave oven as being compatible with existing ways of doing things? Hardly. Cooking on paper plates? If you put a paper plate in a conventional oven, you'll likely get a visit from the fire department. By anticipating compatibility issues early in the new-product-development stage, marketing strategies can address such problems in planning communications and consumer education programs, or there may be opportunities to alter product designs to overcome some consumer objections. Complexity is the degree 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 oven cooks food. When appliance manufacturers introduced the first microwaves, they explained that this new technology causes molecules to move and rub together, which creates friction that produces heat. Voilà! Cooked pot roast. But that explanation was too complex and confusing for the homemaker of the Beaver Cleaver days back in the 1960s. (Too young to know who Beaver Cleaver is? If so, then you'll enjoy Googling it and finding out!). Trialability is the ease of 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 an entire meal a microwave cooked. Finally, consumers began to understand what the product even was and what it could do! Observability refers to how visible a new product and its benefits are to others 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 Pokémon cards and wanted to join in (were you part of this craze when you were younger?). In the case of the microwave, it wasn't quite so readily observable for its potential adopters—only close friends and acquaintances who visited someone's home would likely see an early adopter using it. But the fruits of the microwave's labors—tasty food dishes—created lots of buzz at office watercoolers 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 microwaves would have been a whole lot faster.

innovators

The first segment (roughly 2.5 percent) of a population to adopt a new product.

equipment

expensive goods that an organization uses in its daily operations that last for a long time

8.2 how marketers classify products

So far, we've learned that a product may be a tangible good or an intangible service or idea and that there are different layers to the product through which a consumer can derive value. Now we'll build on these ideas as we look at how products differ from one another. Marketers classify products into categories because they represent differences in how consumers and business customers feel about products and how they purchase different products. Such an understanding helps marketers develop new products and a marketing mix that satisfies customer needs. Let's first consider differences in consumer products based on how long the product will last and on how the consumer shops for the product. Then, we will discuss the general types of B2B products. How Long Do Products Last? Marketers classify consumer goods as durable or nondurable depending on how long the product lasts. You expect a refrigerator to last many years, but a gallon of milk will last only a week or so until it turns into a science project. Durable goods are consumer products that provide benefits over a period of months, years, or even decades, such as cars, furniture, and appliances. In contrast, we consume nondurable goods, such as People magazine and fresh sushi, in the short term. We are more likely to purchase durable goods under conditions of high involvement (as we saw in Chapter 6), whereas nondurable goods are more likely to be low-involvement decisions. When consumers buy a new car or a house, most will spend a lot of time and energy on the decision process. When marketers offer high-involvement products, they 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 information they need. One way is to provide a frequently asked questions (FAQ) section on a company website. Another is to host a Facebook page, Twitter feed, message board, or blog to build a community around the product. When a company itself sponsors such forums, the firm can keep 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 company related to specific products. For high-tech products, this is especially valuable to support the consumer's experience and ensure they are able to gain maximum value from what they buy. Our friends at Apple maintain a popular online forum for iPad users to ask new questions, look up answers to prior questions, and answer active questions from others.5 In contrast to the higher-involvement mode for durable goods, consumers usually don't "sweat the details" so much when they choose among nondurable goods. There is little if any search for information or deliberation. Sometimes this means that consumers buy whatever brand is available and is reasonably priced. In other instances, they base their decisions largely on past experience. Because a certain brand has performed satisfactorily before, customers often see no reason to consider other brands, and they choose the same one out of habit.

dynamically continuous innovation

a change in an existing product that requires a moderate amount of learning or behavior change

convenience product

a consumer good or service that is usually low priced, widely available, and purchased frequently with a minimum of comparison and effort

consumer packaged good (CPG) or fast-moving consumer good (FMCG)

a low-cost good that is consumer quickly and replaced frequently

commercial success

indicates that a product concept is feasible from the standpoint of whether the firm developing the product believes there is or will be sufficient consumer demand to warrant its development and entry into the market

technical success

indicates that a product concept is feasible purely from the standpoint of whether or not it is possible to physically develop it, regardless of whether it is perceived to be commercially viable

beta test

limited release of a product, especially an innovative technology, to allow usage and feedback from a small number of customers who are willing to test the product under normal, everyday conditions of use

component parts

manufactured goods or subassemblies of finished items that organizations need to complete their own products

observability

how visible a new product and its benefits are to others who might adopt it

Adopter Categories

As we saw previously, diffusion describes how the use of a product spreads throughout a population. Of course, marketers prefer their entire target market to immediately adopt a new product, but this is not the case. Both consumers and business customers differ in their willingness to try something new, lengthening the diffusion process by months or even years. Based on adopters' roles in the diffusion process, experts classify them into five categories, as shown in Figure 8.6: innovators, early adopters, early majority, late majority, and laggards.32 Some people like to try new products. Others are so reluctant that you'd think they're afraid of anything new (know anyone like that?). Many innovative technology products are released as a beta test to allow usage and feedback from a small number of users who are willing to test the product under normal, everyday conditions of use. The types of innovative technologies commonly beta tested are often called a bleeding-edge technology—one that is not yet ready for release to the market as a whole, potentially because of issues related to reliability and stability, but is in a suitable state for beta testing and user feedback.33 To understand how the adopter categories differ, we'll focus below on a threaded example of the adoption of one specific technology—a blast from the past that has had a big impact on all of us today—Wi-Fi (did you know that Wi-Fi is short for wireless fidelity?). What would we do without it? You'll enjoy getting a little history of how it started. Innovators Innovators make up roughly the first 2.5 percent of adopters. This segment is extremely adventurous and willing to take risks with new products. Innovators are typically well educated, 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 way back in ancient history (1999) when Apple first introduced them in its Mac laptops. 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 adopters are concerned about social acceptance, so they tend to gravitate toward products they believe will make others think they are cutting-edge or fashionable. Typically, they are heavy media users and often are heavy users of the product category. Others in the population often look to early adopters for their opinions on various topics, making early adopters critical to a new product's success. For this reason, marketers often heavily target them in their advertising and other communications efforts. Remember that the innovators pretty much already have the new product in hand before most early adopters purchase. Columnists who write about personal technology for most popular magazines and tech websites were testing Wi-Fi in the mid-2000s. 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, hotels, city parks, and other public spaces. Intel, maker of the Centrino mobile platform, launched a major campaign with field-leading Condé Nast's Traveler magazine and offered a location guide to T-Mobile hot spots nationwide. Early Majority The early majority, roughly 34 percent of adopters, avoid being either first or last to try an innovation. They are typically middle-class consumers and are deliberate and cautious. Early majority consumers have slightly above-average education and income levels. When the early majority adopts a product, we no longer consider it new or different—that is, when it gets into their hands, it is, in essence, "established." By 2002, Wi-Fi access was available in more than 500 Starbucks cafés, and monthly subscription prices were dropping rapidly (from $30 to $9.95 per month). Late Majority Late majority adopters, about 34 percent of the population, are older, are even more conservative, and typically have lower-than-average levels of education and income. The late majority adopters avoid trying a new product until it is no longer risky. By that time, the product has become an economic necessity for them, or there is pressure from peer groups to adopt. By 2004, Wi-Fi capability was being bundled into almost all laptops, and you could connect in mainstream venues, like McDonald's restaurants and sports stadiums. Cities across the country began considering blanket Wi-Fi coverage throughout the entire town through WiMAX (Worldwide Interoperability for Microwave Access) technology, a wireless communication standard. Laggards Laggards, about 16 percent of adopters, are the last in a population to adopt a new product. Laggards are typically lower in income level and education than other adopter categories and are bound by tradition. By the time laggards adopt a product, it may already be superseded by other innovations. By 2006, it would have seemed strange if Wi-Fi or a similar capability was not part of the standard package in even the lowest-priced laptop computer, and people began to become annoyed if Wi-Fi access wasn't available just about everywhere they might go.34 So now you know a bit about the diffusion of innovation of Wi-Fi. And understanding these adopter categories allows marketers to develop strategies that will speed 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 special-interest magazines and websites to attract innovators and early adopters. Later, they may lower the product's price or come out with lower-priced models with fewer "bells and whistles" to attract the late majority. We will talk more about strategies for new and existing products in the next chapter.

phase 5: technical development

If a new product concept survives the scrutiny of a business analysis, it then undergoes technical development, in which a firm's engineers work with marketers to refine the design and production process. A classic example of the technical development phase involves goTenna, which launched a product to enable people to be able to communicate with each other using their smartphones while in an area without cell phone coverage. The product ingeniously uses radio signals to create a network between multiple goTenna devices that, along with the company's smartphone app, provides a means of communication between multiple users of the product within a given area. One valuable application of goTenna is during wilderness excursions, where potentially intense weather conditions make it even more difficult to receive cell phone signals. The goTenna'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 water-resistant. Although many of these characteristics were most likely identified to some degree during an earlier stage of the product development process, the company's marketers needed to work with the engineering 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 company.20 The better a firm understands how customers will react to a new product, the better its chances of commercial success. For this reason, typically a company allocates resources to develop one or more physical versions or prototypes of the product. Prospective customers may evaluate these mock-ups in focus groups or in field trials at home. A relatively new aspect of the technical development phase of new product development is enabled by the increasing popularization of 3D printing. Marketers in firms as diverse as Coca-Cola, Volkswagen, Nokia, and BelVita are engaging customers directly in product development processes through this technology. For example, as part of Nokia's 3D Printing Community Project, the mobile phone manufacturer made available a 3D printing kit for its customers enabling them to print out customized covers for one of its smartphones. And Volkswagen encouraged patrons to become their own car designers though The Polo Principle campaign in which people were allowed to take control of the 3D printer used to create the original VW Polo car model via a website. Then, the consumers could create their very own versions, from which 40 ideas were finally 3D-printed and displayed in Copenhagen. Afterward, the consumers/designers had the chance to take the mini-car version of their design home—one of the ideas was even turned into a full-sized VW Polo!21 And marketers at Trek bicycles are using 3D printing to both speed up and increase accuracy in developing product prototypes, thus accelerating overall product design cycles. Trek now produces four times as many prototypes as before, while also improving overall speed to market.22 Prototypes also are useful for people within the firm. Those involved in the technical development process must determine which parts of a finished good the company will make and which ones it will buy from other suppliers. In the case of manufacturing goods, the company may have to buy new production equipment or modify existing machinery. Someone has to develop work instructions for employees and train them to make the product. When it's a matter of a new service process, technical development includes decisions such as which activities will occur within sight of customers versus in the "backroom" and whether the company can automate parts of the service to make delivery more efficient. Technical development sometimes requires the company to apply for a patent. As you learned in Chapter 2, because patents legally prevent competitors from producing or selling the invention, this legal mechanism may reduce or eliminate competition in a market for many years so that a firm gains some time to recoup its investments in technical development.

attributes

Include features, functions, benefits, and uses of a product. Marketers view products as a bundle of attributes that includes the packaging, brand name, benefits, and supporting features in addition to a physical good.

speciality products

goods or services that have unique characteristics and are important to the buyer and for which he or she will devote significant effort to acquire

tipping point

in the context of product diffusion, the point when a product's sales spike from a slow climb to an unprecedented new level

crowdfunding

online platforms that allow thousands of individuals to each contribute small amounts of money in order to fund a new product from a startup company

processed materials

products created when firms transform raw materials from their original state

laggards

the last consumers to adopt an innovation

New Product Development (NPD)

the phases by which firms develop new products including idea generation, product concept development and screening, marketing strategy development, business analysis, technical development, test marketing, and commercialization

phase 7: commercialization

The last phase in new product development is commercialization. This means the launching of a new product, and it requires full-scale production, distribution, advertising, sales promotion—the works. For this reason, commercialization of a new product cannot happen overnight. A launch requires planning and careful preparation. Commercialization is expensive, but the Internet makes it much easier for start-ups to obtain the funding they need to get their new products into the market. Today, we witness the explosive growth of crowdfunding, where innovative websites such as Kickstarter.com, Indiegogo.com, and Crowdfunder.com are expected to exceed $34 billion in funds raised for entrepreneurs and small companies this year (not to mention the popular TV show Shark Tank, which also provides funding for contestants who convince one or more Sharks to join them). On these sites, individuals can choose to either donate money (often in exchange for a product sample) or invest in the company.24 Under this model, even small contributions add up when hundreds or thousands of people like an idea and pitch in. As launch time nears, preparations gain a sense of urgency. First, the social media campaigns are likely to crank up, and hopefully insiders will then start to buzz about the new product on Twitter and in the blogosphere. Then, sales managers will have to explain special incentive programs to salespeople, who in turn will educate all of their customers in the channel of distribution. Soon the media announce to prospective customers why they should buy and where they can find the new product. And all of this has to be orchestrated with the precision of a symphony, with every player on top of his or her part, else the introduction into the market can easily disappoint customers when they first try to buy. The late Apple innovation genius Steve Jobs was never one to squelch precommercialization hype about his new product introductions. It has been estimated that Apple achieved prelaunch publicity worth more than $500 million on the original iPhone before it spent a single penny on any actual paid advertising. And the introduction of the original iPad back in 2010 was no exception to the Apple hype-creation machine. Jobs claimed that the iPad would offer an experience superior to that of netbooks (a popular term at the time for notebook computers). He argued that the 751 million people who at that time owned iPhones and iPod Touches already knew how to use the iPad because it uses the same operating system and touch-screen interface. Well, as they say, the rest is history. Since 2010, the iPad and its bevy of competitors have had a major impact on how we work and entertain ourselves.25 The iPad introduction is a perfect segue to the next section on adoption and diffusion of innovation.

staple product

basic or necessary items that are available almost everywhere

creativity

a phenomenon whereby something new and valuable is created

8.1 build a better mousetrap-and add value

8.1 Explain how value is derived through different product layers. "Build 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, there is no guarantee it will succeed. For decades, the Woodstream Corp. built Victor-brand wooden mousetraps. Then, the company decided to 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 prototypes of different mousetraps to come up with the best possible design and tested them in homes. Then, the company unveiled the sleek-looking "Little Champ," a black plastic miniature inverted bathtub with a hole. When the mouse went in and ate the bait, a spring snapped upward—and the mouse was history. Sounds like a great new product (unless you're a mouse), but the Little Champ failed. Woodstream studied mouse habits, not consumer preferences. The company later discovered that husbands set the trap at 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 Little 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.2 Woodstream's failure in the "rat race" underscores the importance of creating products that provide the benefits people want rather than just new gizmos that sound like a good idea. It also tells us that any number of products, from low-tech cheese to high-tech traps, potentially deliver these benefits. Despite Victor's claim to be the "World's Leader in Rodent Control Solutions," in this case, cheese and a shoebox could snuff out a mouse as well as a high-tech trap. We need to take a close look at how products successfully trap consumers' dollars when they provide value. In Chapter 1, we saw that the value proposition is the consumer's perception 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 better 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 combination of these that satisfies consumer or business customer needs through the exchange process; it is a value-adding bundle of attributes, including features, functions, benefits, and uses as well as its brand and packaging. Because of the broad range of possibilities for bundles of attributes, instead of saying product, it has become common for marketers to substitute the more generic term offering to denote the broadest possible range of sources of value for the product. But to keep things simpler, in this chapter, we will use the more basic term product. 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 Model 3 you might like to buy, or a chic but pricey Christian Louboutin bag for women or men (get ready to spend four figures!). In contrast, intangible products—services, ideas, people, and places—are products that we can't always see, touch, taste, smell, or possess. We'll talk more about intangible products in Chapter 12. Welcome to Part 3 of this book, Develop the Value Proposition for the Customer. The key word here is develop, and a large part of the marketer's role in developing the value proposition is to create and market products innovatively. In this chapter, we'll first examine what a product is and see how marketers classify consumer and business-to-business (B2B) products. Then, we'll go on to look at new products, how marketers develop new products, and how markets accept them (or not). More broadly speaking, Parts 3 and 4 of the book take you systematically through all of the elements 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 great 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, "If the product ain't right, the rest don't matter." Layers of the Product Concept No doubt you've heard someone say, "It's the thought, not the gift that counts." Sometimes that's just an excuse for a lame present, but more broadly it means that the gift is a sign or symbol that the gift giver has remembered you. When we evaluate a gift, we may consider the following: Was it presented with a flourish? Was it wrapped in special paper? Was it obviously a "regift"—something the gift giver had received as a gift but wanted to pass on to you (like last year's fruitcake or that funky vase that clashes with everything else in the house)? These dimensions are a part of the total gift you receive in addition to the actual goodie in the box. Like a gift, 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—the core product, the actual product, and the augmented product. When they develop product strategies, 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 consider each layer in turn. The Core Product The core product consists of all the benefits the product will provide for consumers or business customers. As we noted in Chapter 1, a benefit is an outcome that the customer receives from owning or using a product. Wise 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-inch hole." This tried-and-true saying reminds us that people buy the core product—in this case, the ability to make a hole. If a new product, such as a laser, comes along that provides that outcome in a better way or more cheaply, the drill-bit maker has a problem. The moral of this story? Marketing is mostly about supplying benefits, not just creating features and functionality. And benefits are the foundation of any value proposition, which we defined in Chapter 1 as a marketplace offering that fairly and accurately sums up the value the buyer will receive if the good or service is purchased. Many products actually provide multiple benefits. For example, the primary benefit 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 because manufacturers add "bells and whistles" to win them over. Some drivers simply want economical transportation, others appreciate an environmentally friendly hybrid car, and still others want a top-of-the-line, all-terrain vehicle or 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 The second layer—the actual product—is the physical good or the delivered service that supplies the desired benefit. For example, when you buy a washing machine, the core product is the ability to get clothes clean, but the actual product is a large, square metal apparatus. When you get a medical exam, the core service is maintaining your health, but the actual one is a lot of annoying poking and prodding. The actual product also includes the unique features of the product, such as its appearance or styling, the package, and the brand name. Samsung makes a wide range of flat-screen TVs in dozens of sizes from low-end low-price to other models that might cause you to mortgage your house. But in the end, all offer the same core benefit of enabling you to maximize your viewing experience the next time you sit down for some binge streaming from Netflix. The Augmented Product Finally, marketers offer customers an augmented product—the actual product plus other supporting features, such as a warranty, credit, delivery, installation, and repair service after the sale. Marketers know that adding these supporting features to a product is an effective way for a company to stand out from the crowd. For example, Apple truly revolutionized the music industry when it created its iTunes Store, which enabled consumers to download titles directly to their digital music and video libraries. It also conveniently 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 (convenience, extensive selection, and ease of use) pays off 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 for music like Spotify rose in popularity, Apple adapted to the change in consumer preferences by creating Apple Music. Apple Music offers users the ability to access an extensive collection of songs (to the tune of 45 million!) for a monthly fee as opposed to purchasing songs or albums individually.3 One high-profile benefit to attract users is the release of exclusive content from artists, including a new music video section with exclusives from the likes of eclectic rocker Beck.4

8.3 "new and improved!" the process of innovation

8.3 Understand the importance and types of product innovations. "New and improved!" What exactly do we mean when we use the term new product? The Federal Trade Commission says that (1) a product must be entirely new or changed significantly to be called new and that (2) a product may be called new for only six months. That definition is fine from a legal perspective. From a marketing standpoint, though, a new product, or an innovation, is anything that customers perceive as new and different. Innovation has its roots in an even more elemental concept that is a hot topic in boardrooms of most organizations today: creativity. Creativity describes a phenomenon in which something new and somehow valuable is created. That is, the outcome is original and worthwhile and can be most anything tangible or intangible—an idea, a joke, an artistic or literary work, a painting or musical composition, a novel solution to a problem, an invention, and of course, a new product. Scientific research into creativity provides strong evidence of the importance of creative processes in the production of novel, useful products.10 Recently, organizations desiring to accelerate the pace of innovation have been incorporating design thinking into their processes to gain an edge over competitors. Design thinking draws upon logic, imagination, intuition, and systemic reasoning to explore possibilities of what could be—and to create desired outcomes that benefit the end user (the customer).11 Design thinking requires an organizational culture that values ideation, which means idea generation through a process characterized by the alternation of divergent and convergent thinking, typical of the design-thinking process. Divergent thinking means coming up with as many new ideas as possible and exploring new "out-of-the-box" alternatives. To achieve divergent thinking, it is important to have a diverse group of people involved in the process. In contrast, convergent thinking moves toward a more analytical focus on the different ideas in order to come to a decision on the best choice, a process that ensures the design-thinking process will achieve the desired outcome and not just be an exercise in throwing ideas on the wall. Sometimes an innovation may be relatively minor, such as the thousands of new versions of current products such as Lay's Wavy Fried Green Tomato potato chips and Multi-Grain Cheerios Dark Chocolate Crunch cereal that come onto the market. But other times innovation can bring game-changing products,, such as the iPhone Face ID that unlocks your personal gadgets or the Samsung Family Hub that can help you shop for food, organize your family's schedules, and even entertain by connecting online. Innovation might result in a new way to game on the go, which is enabled by the Nintendo Switch comes with its touchscreen sandwiched between a pair of removable controllers and also has its own battery and storage, or in a simple way to amuse children and adults, such as the fidget spinner. Historically, the highest-impact innovations have been completely new products that provide benefits never available before. A great example if the original HP scientific calculator that nearly overnight made the slide rule obsolete (if the term slide rule is foreign to you, we suggest Googling it—a slide rule is how engineers used to make complex calculations before HP's innovation). In this section and the next, we focus heavily on the concept and process of product innovation. When done well, innovation contributes mightily to organizational success! Types of Innovations Innovations differ in their degree of newness, and this helps determine how quickly the target market will adopt them. Because innovations that are more novel require us to exert greater effort to figure out how to use them, they are slower to spread throughout a population than new products that are similar to what is already available. As Figure 8.3 shows, marketers classify innovations into three categories based on their degree of newness: continuous innovations, dynamically continuous innovations, and discontinuous innovations. However, it is better to think of these three types as ranges along a continuum that goes from a very small change in an existing product to a totally new product. We can then describe the three types of innovations in terms of the amount of change they bring to people's lives. For example, the first automobiles caused tremendous changes in the lives of people who were used to getting places by "horse power." Then airplanes came along and opened 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 translator—just speak into your phone, and it speaks back to you, at whatever speed you choose. Extras include a culture guide (for quirky dress code and etiquette help), a currency converter, and a slang section for times when you want to be a little less formal.12 On the idea side, Airbnb changed how travelers book a place to stay at their destinations (by allowing virtually anyone to rent out space in their own homes), and of course Uber's app provides an easy way to get to a destination (and also cuts down on confusion between you and your driver when there is a language barrier). While you're visiting those new places, you can also use the SitOrSquat App to find the nearest restroom and to even see a rating in advance on its cleanliness. Plus, you'll naturally also want to know if it is free to use or if the restroom's establishment expects you to buy a cup of coffee from them to be able to "use the facilities"!13 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 modification can set one brand apart from its competitors. For example, people associate Volvo cars with safety—in fact, their taglines include "Safety first, always" and "You're not just driving a car, you're driving a promise." Those are strong words, and Volvo backs them up with a steady stream of safety-related innovations. The consumer doesn't have to learn anything new to use a continuous innovation. From a marketing perspective, this means that it's usually relatively easy to convince consumers to adopt this kind of new product. For example, the current generation of smart TVs didn't require television buyers to change their behaviors very much. We all know what a television is and how it works, and we all still want a large screen. The technology's continuous innovation simply gives users the added benefits of accessing online features like Netflix, Hulu, Amazon Prime, and more without needing another product to facilitate the connection. A knockoff is a new product that copies, with slight modification, the design of an original product. Firms deliberately create knockoffs of clothing and jewelry, often with the intent to sell to a larger or different market. For example, companies may copy the haute couture clothing styles of top designers and sell them at lower prices to the mass market. It's likely that a cheaper version of the gown Emily Blunt wears to the Academy Awards ceremony will be available at numerous websites within a few days after the event. It is difficult to legally protect a design (as opposed to a technological invention) because an imitator can argue that even a slight change—different buttons or a slightly wider collar on a dress or shirt—means the knockoff is not an exact copy. Dynamically Continuous Innovations A dynamically continuous innovation is a pronounced modification to an existing product that requires a modest amount of learning or change in behavior to use it. The history of audio equipment is a series of dynamically continuous innovations. For many years, consumers enjoyed listening to their favorite Frank Sinatra songs on record players (actually, when first introduced, they were called gramophones). In the 1960s, teeny boppers screamed and swooned as they listened to the Beatles on a continuous-play eight-track tape (requiring the purchase of an eight-track tape player, of course). Then came cassette tapes to listen to the Eagles (oops, now a cassette player is needed). In the 1980s, consumers could hear Metallica songs digitally mastered on compact discs (that, of course, required the purchase of a new CD player). But of course, in the 1990s, recording technology moved one big step forward with MP3 technology; it allowed Madonna fans to download music from the Internet or to exchange electronic copies of the music with others, and when mobile MP3 players hit the scene in 1998, fans could download the tunes directly into a portable player. Then, in November 2001, Apple Computer introduced its first iPod (can you believe it's been that long!). With the original iPod, music fans could take 1,000 songs with them wherever they went. By 2010, iPods could hold 40,000 songs, 25,000 photos, and 200 hours of video.14 Music fans go to the Apple iTunes Store or elsewhere to download songs and to get suggestions for new music they might enjoy. Of course, today you can do all this on your smartphone. With improving data plans and coverage as well as Wi-Fi being available almost everywhere outside the home, it's easier than ever to stream music on your smartphone or tablet as opposed to downloading it on a device. Although Apple still sells iPods, sales plummeted from a peak of nearly 55 million in 2008 to less than 15 million in 2014 because many moved on to using iPhones instead.15 In 2017, Apple discontinued the iPod Shuffle and iPod Nano models, leaving only the iPod Touch, which it now offers with more memory and slashed prices. With 77 percent of Americans owning a smartphone that can hold hundreds of songs or that can stream music via Apple Music or iHeart Radio, it's no surprise that consumers are waiting for the "next big thing."16 Discontinuous Innovations To qualify as a discontinuous innovation, the product must create major changes 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 TV, are the sort of innovations that radically changed modern lifestyles. Another discontinuous innovation, the personal computer—developed in fairly close parallel to the rise of the Internet—changed the way we shop and allowed more people to work from home or anywhere else. Since the advent of PCs, the move toward processing the same information on tablets and on handheld devices became a follow-up journey in dynamically continuous innovation. One particular type of discontinuous innovation is convergence, which means the coming together of two or more technologies to create new systems that provide greater benefit than the original technologies alone. What's the next discontinuous innovation? Is there a product out there already that will 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"). At the organizational strategy level, the concept of discontinuous innovation gets translated to disruptive innovation, which refers to an innovation that creates a new market and value chain and eventually disrupts an existing market and value chain, displacing established market-leading firms, products, and alliances. As you learned in Chapter 2 and Chapter 3, prior to engaging in market planning, an important part of the process is scanning the external environment—including the competitive environment—to seek out trends that may impact the business. Part of the art and science of marketing strategy is working to predict and ultimately get ahead of anticipated future disruptive innovations and hopefully gain a first-mover advantage in the market by being the firm that leads the disruption! A great example is the success of LinkedIn as the new default mechanism for professional job searches in many industries. As a social media platform at its roots, LinkedIn has grown to usurp online employment websites like Monster and CareerBuilders as a go-to place for much job-hunting as well as for recruiting.

8.4 new product development

8.4 Show how firms develop new products. Building on our knowledge of the concept of creativity and the different types of innovations, we'll now turn our attention to how firms actually develop new products. This process is based on expenditures in research and development (R&D), which in most organizations is a well-defined and systematic approach to how it innovates. Investors and financial markets closely scrutinize R&D investments because these expenditures tend to predict how robust the firm's oncoming 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 are inherently more competitively important in some industries versus others (high tech and pharmaceuticals are 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 Figure 8.4 shows: idea generation, product concept development and screening, marketing strategy development, business analysis, technical development, market test, and commercialization. Let's take a quick look at what goes on during each of these phases. Phase 1: Ideation (or Idea Generation) As we discussed earlier, in the ideation (or idea generation) phase of product development, marketers use a variety of sources to come up with great new product ideas that provide customer benefits and that are compatible with the company mission. Sometimes ideas come from customers. Ideas also come from salespeople, service providers, and others who have direct customer contact. Value co-creation refers to the process by which an organization creates worth through collaborative participation by customers and other stakeholders in the new product development process. Lego developed an online platform called Lego Ideas where users can suggest new Lego sets and seek to have them turned into physical products by the company. Lego Ideas enables users to provide a description, create a visual representation (either physically or digitally using Legos), and specify the characteristics 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, at which point Lego determines whether or not it's feasible to turn 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, etc.). This approach to value co-creation has yielded creative new ideas, including sets targeted to older Lego aficionados, such as Luke's Diner from The Gilmore Girls and The Big Bang Theory set.18 It's important to note that such 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 new offering. Metrics Moment How do marketers measure innovation? Short answer: It's pretty complex. This is because it involves not only marketing but also the firm's overall culture, leadership, 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 scorecard." Firm Strategy How aware are organization members of a firm's goals for innovation? How committed is the firm and its leadership to those goals? How actively does the firm support innovation among its organization members? Are there rewards 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 available for innovation (money and otherwise)? Firm Culture Does the organization have an appetite for learning and trying new things? Do organization members have the freedom and security to try things, fail, and then go forward to try different things? Outcomes of Innovation How many innovations have been launched in the past three years? What is the percentage of revenue attributable to launches of innovations during the past three years?17 Apply the Metrics 1. Select a firm that you are particularly interested in and that you believe is pretty innovative. 2. Do a little research on its website and elsewhere to get a sense for the evidence about how it performs on the scorecard's criteria for innovativeness. 3. Summarize your findings; how does the firm score on the innovation scorecard. Consider each item that requires a rating (e.g., the "firm strategy" section of the scorecard) on a scale of 1 to 5, where 5 is the highest or most favorable rating and 1 is the lowest or least favorable rating. 4. In general, do you find that the firm is more or less innovative than you expected? Often firms use marketing research activities, 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 new channels or change the focus of its existing channels might hold focus group discussions across different groups of sports-minded viewers to get ideas for new types of programs.

8.5 adoption and diffusion of new products

8.5 Explain the process of product adoption and the diffusion of innovations. In the 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 market—how an innovation spreads throughout a population. A painting is not a work of art until someone views it. A song is not music until someone sings it. In the same way, new products do not satisfy customer wants and needs until the customer actually uses (consumes) them—hence the word consumer. Product adoption is the process by which a consumer or business customer begins to buy and use a new good, service, or idea. The term diffusion describes how the use of a product spreads throughout a population. One way to understand how this process works is to think about a new product as if it were a computer virus that spreads from a few computers to infect many machines. A brand might just slog around—sometimes for years and years. At first, only a small number 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 the tipping point.26 After they spend months or even years to develop a new product, the real challenge for firms is to get consumers to buy and 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'll discuss the stages in this process. We'll also see how consumers and businesses differ in their eagerness to adopt new products and how the characteristics of a product affect its adoption (or "infection") rate. Stages in Consumers' Adoption of a New Product Whether the innovation is the next breakthrough in smartphones or a better mousetrap, individuals 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, interest, evaluation, trial, adoption, and confirmation. At every stage in building the pyramid, people drop out of the process, so the proportion of consumers who wind up actually using the innovation on a consistent basis is a mere fraction of those who are exposed to it. Awareness Awareness that the innovation exists at all is the first step in the adoption process. To educate consumers about a new product, marketers may conduct a massive advertising campaign: a media blitz. For the launch of American Girl's 2018 Girl of the Year doll, the upscale shop for specialty dolls and accessories arranged for a live unveiling on ABC's Good Morning America. Prior to the reveal, they engaged their target audience on social media with daily hints about the new doll's personality and hobbies. For the live show, they gathered girls of varying ages and races to be a part of the show, where on arrival each received her very own Luciana Vega doll—the new Hispanic character who dreams of being an astronaut and is into science and math. Beyond the introduction of Luciana, American Girl partnered with NASA to fund Blast Off to Discovery, a program that provides science, technology, engineering, and mathematics (STEM) training aimed at third-through fifth-grade girls. They also promoted a Mission to Mars sweepstakes where the prize was a week at space camp! Each of these promotional efforts bolstered awareness of their 2018 Girl of the Year doll Luciana, along with the company's efforts to impact STEM education for girls—a huge win-win!27 Interest For some of the people who become aware of a new product, a second stage in the adoption process is interest. In this stage, a prospective adopter begins to see how a new product might satisfy an existing or newly realized need. Interest also means that consumers look for and are open to additional information about the innovation. The Apple iPad was originally launched way back in 2010, but recently the company released a new 9.7-inch iPad with the Apple Pencil. Consumers' interest quickly peaked as they learned about its innovative new features, such as the Retina Display that has a higher pixel density than traditional Apple displays, all-day battery life, the ability to sketch on-screen, and a faster processor. Ads featuring the sleek new products filled the airwaves on TV, and pop-ups seemed to burst on to every website. Apple's efforts to produce a lower-priced product with superior features quickly paid off by generating substantial interest as the company tried to regain some of the users it lost to Samsung in recent years.28 However, this approach doesn't work with all products, so marketers often design teaser advertisements that give prospective customers just enough information about the new product to make them curious and to stimulate their interest. Despite marketers' best efforts, however, some more consumers drop out of the process at this point. Evaluation In the evaluation stage, we weigh the costs and benefits of the new product. On the one hand, for complex, risky, or expensive products, people think about the innovation a great deal before they will try it. For example, a firm will carefully evaluate spending hundreds of thousands of dollars on manufacturing robotics prior to purchase. Marketers for such products help prospective customers see how such products can benefit them. In a very unique and innovative approach, Callaway (the golf club manufacturer) partnered with Boeing to deploy some of the aerodynamic know-how and design elements that Boeing has developed for use in airplanes into the development of a new set of drivers. Although some consumers might be initially skeptical of the end product of this partnership, Callaway has worked hard to educate consumers on why this odd coupling of two companies has resulted in better performing golf clubs. To drive home the point (pun intended), Callaway convinced several of its sponsored pro golf players to use the new clubs in the Masters tournament. If this product is good enough for arguably the most prestigious tournament in golf, it stands to reason they it would make a great addition to most casual golfers' arsenals.29 As you read earlier in the chapter, in the case of impulse products a person may do very little planning or search effort before deciding to purchase. This phenomenon is called an impulse purchase, like the small robotic toy Fingerlings the WowWee toy company released in 2017. The $15 five-inch monkey grips your finger with its legs and arms as it babbles, moves its head from side to side, and blows kisses your way. Fingerlings grabbed the attention of the marketplace quickly and became the one of the most sought-after toys with listings on eBay for—believe it or not—as much as $5,000!30 Some potential adopters will evaluate an innovation positively enough to move on to the next stage. Those who do not think the new product will provide adequate benefits drop out at this point. Trial Trial is the stage in the adoption process when potential buyers will actually experience or use the product for the first time. Often marketers stimulate trial when they provide opportunities for consumers to sample the product. Diet Coke, as part of a full brand relaunch in North America, recently rolled out a new campaign to showcase the brand's four bold new flavors, new packaging, and new design. The "Because I Can" campaign centered on doing things that make you happy in life, no matter what others may think. In addition to a creative new TV and outdoor campaign, Diet Coke executed a major nationwide sampling push at events and festivals to encourage people to try (or retry) the brand. Product trial can result in high rates of adoption by the target market, provided its members enjoy the product.31 Those who do not are unlikely to adopt the new product and fall out at this point. Adoption In the adoption stage, a prospect actually buys the product (hooray, a sale!). Does this mean that all individuals or organizations that first choose an innovation are permanent customers? No, and that's a mistake many firms make. Marketers need to provide follow-up contacts and communications with adopters to ensure they are satisfied and remain loyal to the new product over time. Confirmation After he or she adopts an innovation, a customer weighs expected versus actual benefits and costs. Favorable experiences make it more likely that the customer will become a loyal adopter as initially positive opinions result in confirmation. Of course, nothing lasts forever; even a loyal customer may decide that a new product no longer meets his or her expectations and reject it. Hence, marketers understand that reselling the customer in the confirmation stage is often quite important. They provide advertisements, sales presentations, and other communications to reinforce a customer's choice.

offering

A generic term often used by marketers to denote the broad range of possibilities of product attributes and sources of product value.

design thinking

A process that draws upon logic, imagination, intuition, and systemic reasoning to explore possibilities of what could be—and to create desired outcomes that benefit the end user (the consumer).

nondurable goods

consumer products that provide benefits for a short time because they are consumed (such as food) or are no longer useful (such as newspapers)

durable goods

consumer products that provide benefits over a long period of time, such as cars, furniture, and appliances

Phase 4: Business Analysis

Once a product concept passes the screening stage, the next phase is a business analysis. Even though marketers have evidence that there is a market for the product, they still must find out if the product can make a profitable contribution to the organization's product mix. How much potential demand is there for the product? Does the firm have the resources it will need to successfully develop and introduce the product? The business analysis for a new product begins with assessing how the new product will fit into the firm's total product mix. Will the new product increase sales, or will it simply take away sales of existing products (a concept called cannibalization that we'll discuss further in Chapter 9)? Are there possible synergies between the new product and the company's existing offerings that may improve visibility and the image of both? And what are the marketing costs likely to be?

Phase 6: market test

The next phase of new product development is running a market test, or test market. This usually means the firm tries out the complete marketing plan—the distribution, advertising, and sales promotion—in a small slice of the market that is similar to the 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 are 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 competition a free look at the new product, its introductory price, and the intended promotional strategy—and an opportunity to get to the market first with a competing product. On the positive side, when they offer a new product in a limited area, marketers can evaluate and improve the marketing program. Sometimes, market tests uncover a need to improve the product itself. At other times, market tests indicate product failure, providing an advanced warning that allows the firm to save millions of dollars by "pulling the plug." For years, the manufacturer of venerable Listerine wanted to introduce a mint-flavored version of its classic gold formulation to compete more directly with P&G's pleasant-tasting Scope (it originally introduced this alternative under the brand Listermint). Unfortunately, every time they tried to run a market test, P&G found out, and the rival poured substantial extra advertising and coupons for its Scope brand into the test market cities. This counterattack reduced the usefulness of the test market results for Listerine when its market planners tried to decide whether to introduce Listermint nationwide. Because P&G's aggressive response to Listermint's market tests actually increased Scope's market share in the test cities, there was no way to determine how well Listermint would actually do under normal competitive conditions. The company went ahead and introduced Listermint nationally anyway, but the new brand achieved only marginal success, and the company ultimately pulled it from the market. Today, thanks to better product development, the Listerine brand itself is available in mint flavor as well as several other choices and is the top-selling mouthwash.23 Because of the potential problems and expense of market tests, marketers instead may use special computer software to conduct a simulated market test that imitates the introduction of a product into the marketplace. These simulations allow the company to see the likely impact of price cuts and new packaging—or even to determine where in the store it should try to place the product. The process entails gathering basic research data on consumers' perceptions of the product concept, the physical product, the advertising, and other promotional activity. The test market simulation model uses that information to predict the product's success much less expensively (and more discreetly) than a traditional test market. As this technology improves, traditional test markets may become a thing of the past.

core product

all the benefits the product will provide for consumers or business customers

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 come from a variety of sources and, it is hoped, through co-creation with customers and others, ultimately the responsibility usually falls to marketers to manage the process and expand these ideas into more complete product concepts. Product concepts describe what features the product should have and the benefits those features will provide for consumers. Of course, just because an idea is unique doesn't mean it will sell. How about the Japanese company that invented an app to allow your smartphone 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 progress. Now this idea is flush with possibilities!19 In new product development, failures often come as frequently (or more so) than successes, and it is critical to screen ideas for both their technical and commercial value. When screening, marketers examine the chances that a new product concept might be successful while they weed out concepts that have little chance to make it in the market. They estimate technical success when they decide whether the new product is technologically feasible—is it possible to actually build this product? Then, they estimate commercial success when they decide whether anyone is 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. If the product concept reaches this benchmark, the company will then conduct an analysis of whether it can actually produce it.

phase 3: marketing strategy development

The third phase in new product development is to develop a marketing strategy to introduce the product to the marketplace, a process we began to talk about back in Chapter 3. This means that marketers must identify the target market, estimate its size, and determine how they can effectively position the product to address the target market's needs. And, of course, marketing strategy development includes planning for pricing, distribution, and promotion expenditures both for the introduction of the new product and for the long run.

disruptive innovation

an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances.; Being the first firm to enter a market with a new product, perhaps as a disruptive innovator.; A well-defined and systematic approach to how innovation is done within the firm

bleeding edge technology

an innovative technology that is not yet ready for release to the market as a whole, potentially because of issues related to reliability and stability, but is in a suitable state to be offered for beta testing to evaluate consumer perceptions of its performance and identify any potential issues in its usage

simulated market test

application of special computer software to imitate the introduction of a product into the marketplace allowing the company to see the likely impact of price cuts and new packaging- or even to determine where in the store it should try to place the product

how do businesses buy products

While consumers purchase products for their own use, as we saw in Chapter 6, organizational customers purchase items to enable them to produce still other goods or services. Marketers classify B2B products based on how organizational customers use them. As with consumer products, when marketers know how their business customers use a product, they are better able to design products and craft an appropriate marketing mix. Let's briefly review the five different types of B2B products that Figure 8.2 depicts. Equipment refers to the products an organization uses in its daily operations. Heavy equipment, sometimes called installations or capital equipment, includes items such as the sophisticated robotics Ford uses to assemble automobiles. Installations are big-ticket items and last for a number of years. Desktop computers, desks, and chairs are examples of light or accessory equipment; they are portable, cost less, and have a shorter life span than capital equipment. Maintenance, repair, and operating (MRO) products are goods that a business customer consumes in a relatively short time. Maintenance products include light bulbs, mops, cleaning supplies, and the like. Repair products are items such as nuts, bolts, washers, and small tools. Operating supplies include computer paper and oil to keep machinery running smoothly. Although some firms use a sales force to promote MRO products, most rely on online sales or telemarketing approaches in order to keep prices as low as possible. Raw materials are products of the fishing, lumber, agricultural, and mining industries that organizational customers purchase to use in their finished products. For example, a food company transforms soybeans into tofu, and a steel manufacturer changes iron ore into large sheets of steel that other firms use to build automobiles, washing machines, and lawn mowers. Firms produce processed materials when they transform raw materials from their original state. A builder uses treated lumber to add a deck onto a house. A company that creates aluminum cans for Monster, Red Bull, and Rockstar buys aluminum ingots to make them. 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 non-equipment-based, such as market research and legal services. These services are essential to the operation of an organization but are not part of the production of a product. Component parts are manufactured goods or subassemblies of finished items that organizations need to complete their own products. For example, a computer manufacturer needs silicon chips to make a computer, and an automobile manufacturer needs batteries, tires, and fuel injectors.

media blitz

a massive advertising campaign that occurs over a relatively short time frame

continuous innovation

a modification of an existing product that sets one brand apart from its competitors

knockoff

a new product that copies, with slight modification, the design of an original product

impulse products

a product people often buy on the spur of the moment

innovation

a product that consumers perceive to be new and different from existing products

impulse purchase

a purchase made without any planning or search effort

good

a tangible product that we can see, touch, smell, hear, or taste

Discountinous Innovation

a totally new product that creates major changes in the way we live

research and development (R&D)

a well-defined and systematic approach to how innovation is done within the firm

convergent thinking

after successful divergent thinking, convergent thinking moves toward analyzing the different ideas in order to come to a decision on the best choice

divergent thinking

coming up with as many new ideas as possible exploring new "out-of-the-box" alternatives

unsought products

goods or services for which a consumer has little awareness or interest until the product or a need for the product is brought to his or her attention

shopping products

goods or services for which consumers spend considerable time and effort gathering information and comparing alternatives before making a purchase

maintenance, repair, and operating (MRO) products

goods that a business customer consumes in a relatively short time

raw materials

products of the fishing, lumber, agricultural, and mining industries that organizational customers purchase to use in their finished products

emergency products

products we purchase when we're in dire need

adoption pyramid

reflects how a person goes from being unaware of an innovation through stages from the bottom up of awareness, interest, evaluation, trial, adoption, and confirmation

specialized services

services that are essential to the operation of an organization but are not part of the production of a product

prototypes

test versions of a proposed product

market test, or test market

testing the complete marketing plan in a small geographic area that is similar to the larger market the firm hopes to enter

augmented product

the actual product plus other supporting features such as a warranty, credit, delivery, installation, and repair service after the sale

late majority

the adopters who are willing to try new products when there is little or no risk associated with the purchase, when the purchase becomes an economic necessity, or when there is social pressure to purchase

convergence

the coming together of two or more technologies to create a new system with greater benefits than its separate parts

relative advantage

the degree to which a consumer perceives that a new product provides superior benefits

complexity

the degree to which consumers find a new product or its use difficult to understand

trialability

the ease of sampling a new product and its benefits

compability

the extent to which a new product is consistent with existing cultural values, customs, and practices

commercialization

the final step in the product development process in which a new product is launched into the market

actual product

the physical good or the delivered service that supplies the desired benefit

product adaption

the process by which a consumer or business customer begins to buy and use a new good, service, or idea

value co-creation

the process by which benefits-based value is created through collaborative participation by customers and other stakeholders in the new product development process

diffusion

the process by which the use of a product spreads throughout the population

product concept development and screening

the second step of product development in which marketers test product ideas for technical and commercial success

technical development

the step in the product development process in which company engineers refine and perfect a new product

business analysis

the step in the product development process in which marketers assess a product's commercial viability

early majority

those whose adoption of a new product signals a general acceptance of the innovation