chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Transcript of chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Page 1: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Page 2: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

chapter

77

ProductProduct

McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Page 3: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Product — Today’s Objectives

Objectives will be to:

Develop a clear definition of product

Discuss how the 2Is affect product

Examine the product development process

Explore how products enable customer relationships

Page 4: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

Chapter 7: Product

Page 5: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

Page 6: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Augmented Product

Basic Product Daily Newsletter

Advice

In-Depth Information

Engine

Tires

Radio

Extended Warranty

Trade In

Financing

MealPreparation

Fitness Books

Exercise Plan

Traditional: Sports Utility Vehicle

New Economy: e-diets.com

Transportation Dieting Information Core Benefit

ProductDifferentiation

Val

ue P

ropo

sitio

n

Exhibit 7.1: Product Value Hierarchy

Page 7: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Exhibit 7.2: Internet Product Types

Product Type Primary Purpose Internet Properties Examples

Digitized Good Provides core benefit in digitized form online

Is not used up in consumption; easily reproducible; transferable

Downloadable software, music, newspapers

Service Performs core service benefit online

Standardizes service; allows producer and consumer to be separated in space and time; adds vividness to intangibles

Schwab.com, eDiets.com, Yahoo Sports Fantasy Baseball Plus

Retail or Distribution Service

Sells, brokers, or distributes product delivered offline

Helps dispose of perishable inventory; aggregates demand

Amazon.com, priceline, FreeMarkets

Product Augmentation

Adds extra services or benefits to a service or product

Differentiates at low incremental cost

FedEx, Fidelity

Page 8: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

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Exhibit 7.6: The Effects of the 2Is on Product

Users can redevelop aspects of the product to meet individual needs and preferences

Firms can provide more targeted, personalized products

Increases “stickiness” as customers invest time and effort to personalize

Enables responsive service interaction to provide augmented value to the product

Allows companies to quickly gather valuable customer data such as preferences

Customers can be directly involved in the product development process

IndividualizationIndividualization InteractivityInteractivity

ProductProduct

Page 10: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Exhibit 7.7: Product Portfolio

Degree of InnovationDegree of InnovationDegree of InnovationDegree of Innovation

New to FirmNew to Market

New Technology

None Breakthrough or Discontinuous

Incremental

Existing ProductsExisting Products New ProductsNew ProductsLine

ExtensionsLine

Extensions

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Exhibit 7.8: Order of Market Entry Effect

Mar

ket

Ad

op

tio

n

First to Market

FastFollower

“Me Too”Entrant

Laggard

Typical “Hockey Stick”Adoption Curve

Time

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Exhibit 7.9: Product Life Cycle

Page 13: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

Page 14: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

The Product Development Process

1.

2.

3.

4.

5.

6.

7.

Idea generation

Idea screening

Concept development

Product design

Prototype development

Test marketing

Commercialization

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Exhibit 7.10: Stage-Gate New Product Development Process

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Exhibit 7.11: Divergent and Convergent Thinking in Development

ConvergentThinking

ConvergentThinking

DivergentThinking

DivergentThinking

Numberof

Ideas

StartStart FinishFinish

Time

1. Brainstorming

Ideas ExpandOver Time

2. Idea Screening

Critical EvaluationNarrows the Focus Over Time

TASK

SEPARATION

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Exhibit 7.12: New Product Development Metrics

Customer Is our objective to generate more

business among the existing customer base, attract new users or keepexisting customers?

Do customers have expectations of a particular imagery or positioning that the new productmust be consistent with?

Does the new product fulfill a customer’s needs or aspirations?

People How will the performance of

the development team be measured?

What does an individual employee have to commit him or herself to a particular new product development effort?

What resources and skills will be needed to maximize the team’s probability of success?

Business Extending an existing brand name or

developing a new brand? How does this concept fit into the overall

product / service portfolio of the enterprise? What is the competitive landscape in this

market: fierce, non-existent or somewhere in between?

How attractive is the economic potential of this proposition?

What is the role of each channel and how will they be integrated?

Process What is the desired timing

for market introduction, seasonality or industry event?

Do we have the necessary resources to bring this concept to market?

How long will it take and how much will it cost to develop thisnew product and bring it to market?

What is the required business model and how will it mesh with the existing business model?

Technology Does the enterprise have the

capabilities to develop and deliver this product or is an alliance partner or subcontractor required?

Is there sufficient existing capacity or do new sourcesneed to be identified?

Does the required technology exist today or will new technology need to be developed?

Should the technology be managed internally or outsourced?

Drivers

Enablers

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Exhibit 7.13: Internet-Enabled Product Development Process

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Beta Testing

Beta Testing Is Critical in New Product Categories

Beta Testing of Rough Products Is Not a Good Idea

Speed to market leads to learning Early entrants in a product category can

count on high customer interest, feedback and free advice

Because they are pioneering an important solution, users take the time to provide in-depth information

Releasing rough beta versions with bugs to be worked out to a set of early users leads to an extremely valuable source of feedback

There is no consistent or reliable feedback mechanism

The testers only report on what they find by happenstance

A poor experience with a beta product is likely to permanently turn off prospective users and create negative “buzz”

Any competitor can readily obtain a beta prototype and replicate, preempt or quickly follow the technology

Point-Counterpoint

Page 20: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

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AwarenessAwareness Exploration/Expansion

Exploration/Expansion CommitmentCommitment DissolutionDissolution

Four Key Stages of Customer Relationships

Core benefit Presentation and

packaging

Presentation and packaging

Attributes and features

Presales support Fulfillment Availability of

complementary products

Customer-specific attributes and features

Upgrades Customer-specific

attributes and features

Post-sales support Tiered service Personalization Customer care

Migration to different product in the portfolio

Customer care

Exhibit 7.14: Product Levers by Relationship Phase

Page 22: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

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Exhibit 7.15: EBay Expansion Through Features and Platforms

Page 24: chapter 7 Product McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 7: Product

Defining Product

How the 2Is Affect Product

The Product Development Process

How Products Enable Customer Relationships

EBay Case Study

Conclusion

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Product — Conclusion

Products come in two basic types: physical products and services. For all products there are three components to the overall value proposition: the core benefit, the basic product and the augmented product.

There are certain product development levers available to managers The levers may be applied to both physical and service products The product development levers can be organized by product type

Basic product development levers Augmented product development levers

The 2Is allow firms to learn about their customers, personalize a product to meet customer preferences and offer customer relationship management tools to provide more value for customers and cut costs for product sellers


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