Lecture 8 Flashcards
What are the two types of innovation?
- Continuous Innovations – Products for which new characteristics do not necessarily call for redefining the product category (ex.: new flavor, new ingredient)
- Discontinuous Innovations – Radically new products, ideas or services, which disrupt established habits or create an entirely new product category
Describe the different type of consumers regarding innovation.
Innovators (2.5%)
- Innovative personality and opinion leader
- Fans of the product category and will try anything new
- Adopt innovations just because they are innovative and new, not because of any benefits they offer
Early adopters (13.5%)
- Want to be seen as an opinion leader
- Want major improvements and are ok with risk (price insensitive)
Early majority (34%)
- Will adopt a product if the product clearly benefits them
- Make sure you market clear benefits of the product to this segment because this is where many innovative products fail
Late majority (34%)
- Will use a product if it is affordable, and has shown its value in other consumer segments
Laggards (16%)
- Don’t like to try new things
- Purchase the product only when all other options are worse
A person can be an innovator with fashion but a laggard with technology.
Which product feature help or hinder adoption of new innovations?
- Relative Advantage
- Are you better than the competitors in some meaningful way?
- The better your innovation is, the faster it will be adopted - Compatibility
- Does it accord with the “usual way” of doing things?
- Does it work with other products, environments, behavioral ecosystems? - Trialability
- How easily can the innovation be tried?
- Does it cost a lot of money or time to try it? - Observability
- Can you see or feel the benefits of the innovation easily?
- Do you advertise in such a way that the benefits are clear?
- Do consumers see others using this product (word-of-mouth)?
- Perceived Complexity
- Does it seem hard to learn or complicated to use?
- Sometimes, you may want to make your innovation similar to what already exists in order to make it seem easier
Describe the difference between a product and a service
Product: tangible thing, something you can touch
Service: an action or effort offered by one party to another
- Intangible cannot be touched/no physical presence
- Inseparability: production is tied to consumption (ex.: concert)
- Variability: quality depends on who offers the service, when, where, and how it is offered
- Perishability: cannot be stored until demand increase
What is the core dimension of a product?
Definition: What is concretely offered to consumers to provide the benefits they seek
- Ex.: “People don’t want a quarter inch drill; they want a quarter inch hole.”
- Benefit: Quarter-inch hole
- Core product: Quarter-inch drill
What is the core product made-up of?
- Design
- form (the way the products look or feel)
- function (the attributes a product must be seen as useful, utilitarian)
- choose a form that emphasizes your products’ function
- you can choose a form that changes the symbolism or feeling of your product (emotions, ex.: nostalgia; visual codes, ex.: nods to history of a brand/culture) - Brand
- All material signs that allow a product, business, or organization to differentiate itself from competition
- Often consists of a name, term, design element, symbol, logo, color, or even a sound - Packaging
- The form and function of the container that holds the product
- First interaction of the consumer with your brand -> can affect their decision to buy and/or to use the product
- Experience of unboxing (word-of-mouth: YouTube videos or customer’s experience: does it feel luxurious?)
4.1 Quality for goods
- Includes both technical and perceptual dimensions
- Performance (accomplish the task it was designed to do)
- Reliability (how likely is it to break/fail)
- Conformity (always the same quality?)
- Durability (how long can you use the product before it deteriorates)
- Perceptual dimensions: how the consumer perceives your product. Does it meet expectations?
4.2 Quality for services
- Reliability: Are you able to perform the service dependably and accurately?
- Responsiveness: Can you respond to customer’s needs and provide prompt service?
- Assurance: Are your employees knowledgeable? Polite? Do customers trust them?
- Empathy: Can you provide caring, individualized attention to customers
- Tangibles: Appearance of physical facilities, equipment, personnel, and communication materials
What is a product line? A product range? A product portfolio?
Product line: A group of products intended for a specific market or that solve a specific problem for the consumer (different variations of one specific product)
Product Range: A set of products in the same category that meet the same need. Usually made up of multiple product lines (broader, can include complementary products)
- Width: number of lines that make-up the range (ex.: tops, blazers, jeans = 3)
- Depth: number of models per line (ex.: 3 tops, 2 blazers, 3 jeans)
- Length: total number of products in the range (8 products in the range)
Product Portfolio: All the products offered by a company
What should you do when managing product lines?
- Companies need to decide which existing product lines they should continue to offer and which new product lines are likely to do well.
- When developing a new product line, always be concerned about cannibalization (definition: the drop in sales of a current product caused by the launch of a new product)
- Companies can also use the BCG Matrix (learned in Lecture 2) to decide which products to keep based on market share and market growth
- Cash Cows, Stars, Dogs, Problem Children
What is brand equity? How do you determine it
The value of the brand itself, based on the benefits people associate with the brand name, the perceived quality of the brand, the image of the brand and other assets.
When a brand has a higher equity, you can sell the brand more $.
How to determine brand equity?
- Customer-based Approach
- Are customers aware of your brand?
- What do they think? (quality, brand associations, loyalty) - Price differential approach
- A mathematical approach examining the differences between what customers will pay for the same attributes from different brands
- For example, you pay more for jeans from Levi’s than Old Navy. - Income-based Approach
- Proportion of the company’s future income attributable to the brand
What are the different ways of organizing brands within a portfolio?
- Umbrella Brand
- A brand whose name and sign appears on all products marketed by a particular company.
- Main Advantage: The brand is visible, unified, and clear.
- Main Disadvantage: It becomes more difficult to adapt the brand, range, or product line to fit the specific needs of a market segment.
- If one brand has a scandal, all brands have a scandal. - House of Brands
- Each brand in the portfolio is treated independently
- Main advantage: Each brand can have a distinct, unique positioning
- Main disadvantage: Unable to rely on the brand-equity built by the parent brand.
What are the different brands extensions and product launches?
Line extension: Using the same brand for a product in the same category.
Brand extension: Using the same brand for a product in a different category.
Multibrand Approach: Using a new brand to sell a product in the same category.
New Brand Creation: Using a new brand to sell a new product in a new category.
