BUS 348 Lecture Notes - Luxury Vehicle, Value Proposition, Toner
14 Jun 2018
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BUS 348
Lecture 8: Create the Product
• Build a Better Mousetrap and Add Value
o Value proposition - benefits the consumer will receive when buying the product
o Product - tangible good, service, or idea that satisfies needs; a bundle of attributes
o Good - a tangible product, something we can see, touch, smell, hear, taste, or possess
o Intangible products - services, ideas, people, places
o In creating value proposition, the marketer must focus on:
• Creating a product or service that provides better value than existing alternatives, and
• Crafting marketing communication messages in a manner that convinces customers
that the product is better than the competition.
• Layers of the Product
o A product is everything that a customer receives from a purchase. Marketers need to
uderstad osuers’ eeds ad ats at EACH leel ad arket their produts
appropriatel. Let’s disuss the three produt laers i ore detail.
• Basic benefits relate to the primary reason why consumers purchase a given product
within a product category. Obviously, anyone who purchases a vehicle is looking for
transportation – this would be considered a basic benefit. But basic benefits might
also be less functional or practical in nature. For example, an individual seeking to
enhance their personal status would consider this a basic benefit when purchasing a
luxury vehicle. Fun, or driving excitement might also be a primary benefit sought by
individuals who purchase sports cars.
• The core product is defined as the physical good or delivered service that supplies the
desired benefits. Thus the core product includes specific features associated with the
physical product, its appearance, the brand, or its package.
• The augmented product includes the actual product PLUS other supporting features
such as the warranty, service contract, credit and delivery services, installation and
training or product use instructions. Many aspects of the augmented product can be
adapted or changed much more easily than can the actual product itself. For
example, loan rates offered aufaturer’s flutuate – low rates may be used to
entice consumers to buy at certain times of the year. Similarly, warranties can
change, though a change of this nature is more likely to coincide with the start of a
new model year.
• How Marketers Classify Products
o How long does the product last?
o Durable goods provide benefits over a period of months, years, decades
• Examples: furniture, appliances, cars
o Nondurable goods (or consumables) are consumed in the short term
• Examples: newspapers, beverages, printer cartridges
• Classification of Products
o Marketers also classify products based on their intended usage (by consumers for personal
use vs. for business use) and according to either where it is bought (consumer) or the type
of item it is (business).
o In some cases, the same item (such as a laptop) may be sold to both consumers (as a
shopping good) or to a business (as equipment).
• Classifying Goods: How Do Consumers Buy the Product?
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o Convenience products are frequently purchased items
• There are three common subtypes of convenience products:.
• Staple products are asi or eessar ites that e sipl a’t do ithout.
Gasoline and milk are a couple of examples.
• Impulse products are bought on the spur of the moment. Package designs of
items like candy bars need to be bright and colorful so they catch the consumers
attention, enhancing the likelihood of an impulse by. In-store placement is also
important; many manufacturers of impulse items try to obtain special point-of-
purchase displays to make the product standout, or seek to have them stocked
near the cash registers where they may be noticed by bored shoppers waiting
their turn in line.
• Emergency products are items that have to be purchased immediately because
of dire need. Because immediate access to the product takes priority,
consumers may not consider price or product quality when making their choice.
Some examples of emergency products include drain cleaner (when the sink is
stopped or overflowing), diapers (when the baby is wet and none are in the
house, or a urella he ou’re outside soehere ad hae to sta there,
despite the fact that it is raining.
o Shopping products are purchased with considerable time and effort
• Shopping products are purchased after considerable time and effort is spent gathering
information related to prices, stores, different features offered by different
manufacturers, and product quality. Since consumers are likely to compare
alternatives before making a decision, advertising that facilitates these comparisons
can be helpful.
• There are a variety of intelligent agents or shopbots that can help both businesses and
consumers make comparisons among shopping products. Intelligent agents are
computer programs that find sites selling a particular product.
• For example, CNET.com hosts a shopping bot that finds not only different web sites
that sell a particular product, but also different brands within a product category or
class.
o Specialty products have unique characteristics important to buyers at almost any price
o Unsought products are those in which consumers have little interest until a need arises
• Business-to-Business Products
o B2B products are classified by how organizational customers use them.
o Equipment is used in daily operations.
o One form is heavy equipment, which is sometimes called capital equipment or
installations. Examples might include a conveyor system used in a warehouse or
as part of a production line, or the robotics used by Ford in the manufacturing of
their vehicles.
o Computers, copy machines, and water fountains are examples of light or
accessory equipment. Normally these types of items are more portable, cost
less, and do not last as long as heavy equipment.
o Regardless of the type of equipment, marketers commonly rely heavily upon
personal selling of equipment in B2B situations.
o Maintenance, repair, and operating (MRO) goods are consumed relatively quickly.
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o Maintenance items include light bulbs, mops, etc., in comparison to repair
products, which include small tools, nuts, bolts, and the like. Operating
supplies include paper, toner, and the oil that keeps machines running
smoothly.
o The low cost and straightforward, non-technical nature of these items means
most marketers use e-commerce or catalog marketing as the primary method of
selling these items, as opposed to personal selling. However, sometimes inside
sales representatives will be used to telephone business buyers for supply
orders.
o Raw materials are products of fishing, lumber, agricultural, and mining industries that are
used in the manufacture of finished goods. Milk, soybeans, trees, and ore would be
considered examples of raw materials.
o Processed materials are produced by firms when they transform raw materials from their
original state
o Component parts are manufactured goods or subassemblies of finished items that
organizations need
• "New and Improved" - The Process of Innovation
o Innovation - a product that customers perceive to be new and different from existing
products
o According to the Federal Trade Commission...
• A product may be entirely new or changed significantly to be called "new," and
• A product may be called "new" for only 6 months
• Types of Innovation
o Innovations, as perceived by consumers, differ in terms of their DEGREE of newness.
Innovations that are radically different from what we are used to require more time to
learn, and tend to be more slowly adopted throughout the population as a result.
o Marketers often classify innovations as continuous innovations, dynamically continuous
innovation, or discontinuous innovations. The deciding factor that drives the classification is
the degree to hih the eess of the produt hages people’s lies ad osuptio
patterns.
o For eaple, eletriit ad the light ul fudaetall haged people’s lies. No loger
oud to the risig ad settig of the su, people’s ork ad life haits haged. Eletriit
spawned entire new product categories of a wide variety of devices that changed the way
people prepared food, cleaned their house, and completed a variety of tasks.
• Types of Innovation
o Dynamically continuous innovation - a pronounced modification to an existing product
• Requires a modest amount of learning or behavior change
• Convergence is a dynamically continuous innovation
o Convergence is the coming together of 2 or more technologies to create a new
system
o Discontinuous innovation - a totally new product
• Creates major changes in the way we live
• Consumers must engage in a great deal of new learning
o Continuous innovations - a modification to an existing product
• Sets a brand apart from the competition
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Document Summary
Layers of the product: a product is everything that a customer receives from a purchase. Marketers need to u(cid:374)dersta(cid:374)d (cid:272)o(cid:374)su(cid:373)ers" (cid:374)eeds a(cid:374)d (cid:449)a(cid:374)ts at each le(cid:448)el a(cid:374)d (cid:373)arket their produ(cid:272)ts appropriatel(cid:455). Let"s dis(cid:272)uss the three produ(cid:272)t la(cid:455)ers i(cid:374) (cid:373)ore detail: basic benefits relate to the primary reason why consumers purchase a given product within a product category. Obviously, anyone who purchases a vehicle is looking for transportation this would be considered a basic benefit. But basic benefits might also be less functional or practical in nature. For example, an individual seeking to enhance their personal status would consider this a basic benefit when purchasing a luxury vehicle. Fun, or driving excitement might also be a primary benefit sought by individuals who purchase sports cars: the core product is defined as the physical good or delivered service that supplies the desired benefits.
