Chapter 8 - New Proposition Development & Innovation

Question 1

What are the three levels that make up a proposition?

Answer 1

1. The core proposition. Core benefit or service. Can be a functional benefit in terms of what the offering enables, but also an emotional benefit of how the product/service makes you feel.
2. The embodied proposition. The physical good or delivered service that provides the expected benefit. There are many factors, such as features, capabilities, durability, design, packaging and brand name.
3. The augmented proposition. The embodied offering plus all other factors that are necessary to support the purchase and any post-purchase activities. (credit, finance, training, delivery, installation, guarantees, and the overall perception of customer service)

Question 2

In what ways can digital value help to augment the proposition?

Answer 2

• coordinating activities to engage customers through an increasingly digital purchase journey
• harnessing content to empower the consumer to build their own identity
• recognizing the need to think like a multimedia publisher
• plotting how to gather and use the increasing amount of data available.

Question 3

What are most costs of the proposition development associated with?

Answer 3

The design, so it is important to get it right. Joint work between marketing and R&D.

Question 4

What are the two classes of consumer goods based on durability?

Answer 4

1. Durable goods. Can be used repeatedly and provide benefits each time they are used. Often require the purchaser to have high levels of involvement in the purchase decision. Since there is a perceived risk, consumers often spend time, care and energy to search and make the right decision.
2. Non-durable goods. Limited duration, often used only once. Low levels of involvement and buyers are seldom concerned what product they buy. Risk is low and purchases are made based on availability, price, habit, or brand experience.

Question 5

What are the four main categories of consumer goods classified based on demonstrated behaviour?

Answer 5

1. Convenience products
2. Shopping products
3. Speciality products
4. Unsought products

Question 6

What are convenience products?

Answer 6

Non-durable, bought without much effort. Bought frequently and are inexpensive, mainly based on habits. Three sub-categories:
1. Staple products
2. Impulse products
3. Emergency products
Availability is important and customers have perception of expected price

Question 7

What is a Shopping product?

Answer 7

Not bought as frequently. Give time/effort to planning purchases since risk is more substantial. Low brand loyalty, switch to get functionality and overall value. Requires selective distribution strategy, since customers want specialist advice.

Question 8

What is a speciality product?

Answer 8

High risk, expensive, bought infrequently. Planned carefully, intensive search for information. Limited edition and rare, few substitutes worth considering. Only offer in limited distribution outlets, that give high levels of buyer experiences.

Question 9

What is an unsought product?

Answer 9

Do not normally anticipate buying nor indeed want to buy. Little knowledge or awareness of the brands in the marketplace and are only motivated to find out about them when a specific need arises.

Question 10

What are the six main categories of business propositions?

Answer 10

1. Capital equipment goods (PPE) and Accessory equipment goods (support key operational processes)
2. Raw materials
3. Semi-finished goods
4. Maintenance, Repair and Operating goods
5. Component parts
6. Business services (intangible)

Question 11

What is the concept of product life cycles and what are the five stages?

Answer 11

Offerings move through a sequential pattern of development. Each product has a limited lifespan.

1. Development
2. Introduction
3. Growth
4. Maturity
5. Decline

Question 12

What is the service dominant logic?

Answer 12

Products alone can’t meet all customer’s needs, particularly in B2B markets. There is an increase in the view that services are needed to enable customers to create value.

Question 13

What are the three main options to ensure a stream of new propositions?

Answer 13

1. Buy finished goods from other suppliers, perhaps from other parts of the world, or license the use of other products for specific periods of time.
2. Develop products through collaboration with suppliers or even competitors.
3. Develop new products internally, often through R&D departments or by adapting current products with minor design/engineering changes.

Question 14

What are main reasons for failure of marketing new products?

Answer 14

• No market exists for the product.
• There is a market need, but the product fails to meet customer requirements.
• The product’s ability to meet market needs, although satisfactory, is not adequately communicated to the target market.

Question 15

What are the six stages of the general new product development process?

Answer 15

1. Idea generation. Foster corporate culture that encourages creativity.
2. Screening. Asses ideas based on predetermined criteria (fit overall objectives).
3. Business planning and market analysis. Indicating the potential and relative profitability of the product.
4. Product development and selection. Select products that have commercial potential and are in best interest of strategy, and use of resources.
5. Test marketing. Piloting the product under real-market conditions, to raise and resolve issues.
6. Commercialization. Launch plan that considers needs of stakeholders.

Question 16

How can we develop new service propositions?

Answer 16

• Established services within competitive markets. Operational efficiency is aimed to improve under intense competition.
• Incremental service innovation targeting value-added propositions. Services are developed to provide extra value. The service provider and client can work together to produce more effective solutions.
• Radical service innovation, which aims to produce completely novel or unusual offerings. Requires new technologies, offerings or business concepts, and involves radical system-wide changes in existing value systems.

Question 17

What are the four stages of maturity for enhancing physical propositions through service development?

Answer 17

• Stage 1. Services are used as aftersales support for goods. Service innovation is framed around maintaining the product, and ensuring that customers are satisfied with their purchase. Customers typically view the service and goods business as distinct entities.
• Stage 2. Aftersales services complement the core element of the proposition. Services should improve customer satisfaction with existing goods, increase loyalty and may generate additional purchases.
• Stage 3. The portfolio includes a full line of services and goods designed to provide a clearly differentiated offering aimed at solving clients’ life cycle problems. Goods are still core to the company, but end users see no major perceived boundaries between goods and services.
• Stage 4 = The highest end of innovation maturity. Integrate the services dimension as part of their total offer (servitization) They are developed in collaboration with clients and thus require a deep understanding of the customer’s overall business. It is often market leaders that develop these solutions of mutual value.

Question 18

What is the process of adoptation?

Answer 18

When individuals accept and use new propositions. Awareness –> purchase. 5 stages:

1. Knowledge. consumers become aware of the new proposition, but have little information (and no interest in finding out more) and have not yet developed any particular attitude.
2. Persuasion. consumers become aware that the innovation may be useful in solving a potential problem. They become motivated to find out more about characteristics such as features, price and availability.
3. Decision. Individuals develop an attitude towards the proposition and decide whether it will meet their needs. If positive, they will experiment with the innovation.
4. Implementation. Users try the innovation for the first time. Sales promotions often offer samples to allow people to test the product without any risk. Then they reject or accept the innovation based on their experience.
5. Confirmation. Signaled when an individual successfully purchases the proposition on a regular basis without the help of sales promotion or other incentives.

Question 19

What are the five categories of adopters in the diffusion theory?

Answer 19

• Innovators. Like new ideas, often well educated, young, confident and financially strong. More likely to take risks associated with new propositions.
• Early adopters. High percentage of opinion leaders, and are important for speeding up the adoption process. Marketing communications should be targeted at these, who in turn stimulate word-of-mouth and spread information. These people enjoy being on the edge of innovation, tend to be young and are above average in education.
• Early majority. More risk-averse than the previous two groups. Require reassurance that the offering works and has been proved in the market. They are above average in age, education, social status and income, and tend to wait for prices to fall.
• Late majority. Skeptical of new ideas and adopt new offerings only because of social or economic factors. Read few publications and are below average in education, social status and income.
• Laggards. Are suspicious of new ideas and their opinions are hard to change. They have the lowest income, social status and education, and take a long time to adopt an innovation, if ever at all.