product offerings and the business model dr. dawne martin mktg 241 february 28, 2012

Product Offerings and the Business Model

Dr. Dawne MartinMKTG 241

February 28, 2012

Rethinking Marketing, 1st Edition

LEARNING OBJECTIVES

Rethink Tool #7: Think holistically by approaching marketing as a system with various ecosystems.

Identifying the uses for a Business concept, a business model and the product

Identify the components of the product and how it defines the business

Analysis the internal and external fit in your business model

Prentice Hall © 2009 7-2


PRODUCTS, CONCEPTS, AND MODELS

Creating new ventures, either from scratch or within an existing company, three sequential challenges

◦ Come up with a new product or service◦ Translate these products or services into a

unique business concept◦ Develop an original business model around

the innovative concept



The Business ConceptCore value of firm may come from

◦Product◦Way product is sold◦How it is distributed◦Manner it is priced or sold

Concise statement that centers on what is really being done for customer◦CNN—“instant information, anytime, from anywhere”◦Starbucks: core value proposition is defined more

by the environment and experience they create ◦Proactiv, which sells acne and related skin treatment

products, additional value comes from selling directly to customers.



Common characteristics◦ Challenge existing assumptions and ways of doing

things◦ Beyond responding to customers in existing markets◦ Create entirely new market spaces◦ Lead customers instead of follow

Companies that created new market spaces Starbucks Dell Computer Swatch Amazon.com


Entrepreneurial Success


A simplified abstraction of a real situation

Captures key aspects of a sustainable new venture

More than business concept less than business plan

Concise representation of interrelated variable interacts to create sustainable competitive advantage


What is a Business Model?


Helps ensure fairly logical and internally consistent approach to design and operation

It represents the architecture for identifying key variables that can be combined in unique ways

Vehicle for demonstrating the economic attractiveness of the venture

A guide to ongoing company operations Mapping it can help facilitate necessary

modifications as conditions change over time


What it the Purpose of a Business Model?


Breaking It Down: Elements that Define a Business Model

Well formulated model must address six key questions

◦ How will firm create value?◦ For whom will the firm create value?◦ What is the firm’s internal source of

advantage?◦ How will the firm differentiate itself?◦ How will the firm make money?◦ What are the entrepreneur’s time, scope,

and size ambitions?



The product or service◦ Products are tangible, services are not ◦ Great challenge with any product or service

Build in enough uniqueness such that the item can be differentiated from the offerings of competitors

◦ Creative marketers tend to view their product or service differently than others do Apple is more than a computer, it is an artistic

tool Snap-on Tools not a tool made of metal but an

extension of the hand of an auto mechanic



Figure 7.1: Seeing Products as Creative Variables

Prentice Hall © 2009 7-

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Seeing Products as Creative Variable Core product

Primary benefit Tangible product

Company and product presentation Styling Physical design Options Quality and reliability Features Packaging


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Augmented product

◦ Delivery◦ Installation◦ System interaction◦ Sales terms and

warranty◦ Technical support◦ Maintenance and

repair◦ After-sale service◦ Customer training

Communicated product

◦ Product positioning◦ Product brand

name◦ Product logo◦ Product image◦ Product bundling


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Seeing Products as Creative Variable

Characteristics of Successful New Products and Services

Superior Advantage: Customers perceive product to be superior to existing alternatives

Compatibility: Aligned with values, attitudes, norms or behaviors

Simplicity: Easy to understand and use Observability: Innovative characteristics that customer

can “see” or can be easily communicated Trailability: Customer can try or “trial” product Low Perceived Risk: Customer perceives risk to be low

through return policy, guarantees or warranties Intellectual Property Protection: patent, trademark or

copyright to protect sustainable competitive advantage

Adoption of Innovation

Process of acceptance and continuous useAdoption Process

◦Awareness◦Interest◦Evaluation◦Trial◦Adoption or rejection

Diffusion: Manner in which customers accept a new product/service

Adopter CategoriesTime

Innovators 2.5%

Early Adopters 13.5%

Early Majority 34%

Ad

op

ters

Profit

Late Majority 34%

Laggards 16%

Enhancing or Speed Diffusion and Adoption

Superior Advantage Simplicity (ease of use) Compatibility Price Distribution Promotion (create awareness) Trial Niche (Crossing the Chasm) Leveraging Opinion Leadership (buss or viral marketing Publicity Educational programs Free (trial)

Managing the Product Life Cycle

Introduction Growth Maturity Decline

Industry Sales

Low Increasing High/Stable Decreasing

Industry Profit

Low Increasing Decreasing Decreasing

Marketing Objective

Awareness Differentiation Brand Loyalty Harvest/Delete

Target Market

Innovators Early Adopters Early Majority

Early/Late Majority

Late Majority Laggards

Product One More versions Full line Best sellers

Price High (or Low) Decreasing Lower Low

Promotion High High Decreasing Low

Distribution Limited Expanded Maximum Fewer

Competition Little Growing Many Reduced

Product-Price Position, Marketing Effort, and Market Share

Marketing to Cross the ChasmGeoffery A. Moore, Crossing the Chasm, Harper Business, 1991.Target specific niche markets through

technology enthusiasts and visionary stages

Broaden niche to cross chasm◦Develop a must have value-statement

Capability to ensure competitive advantage Improves productivity Reduces operating costs

◦Choose a niche Application niche Thematic niche: portability across incompatible

hardware platformsBowling Alley & Main Street IssuesInside the Tornado



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The Importance of Internal and External Fit

Internal fit◦ Includes both consistency and reinforcement

within and between the six components of the models

◦ Each component affects and is affected by every other component

External fit◦ Consistency between choices in each of the

six areas of the model and conditions in the external environment

◦ As conditions change, model may require adaptation or wholesale change


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How Business Models Emerge

Process of trial and errorMental model becomes some aspect of

written modelIntuitive sense of how firm must operate

to make moneyAs competencies are developed keener

insight emergesEntrepreneur may have fair picture of the

foundation level, limited notion of some proprietary level

Develop rules to guide operation and ongoing development


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New Products/Services

Continuous Innovations: minor improvements of existing products: little disruptive influence on consumptions

Dynamically Continuous Innovations : New approach but not new technologies – mildly disruptive

Discontinuous Innovation: Major technological innovations & cause disruptions in the way customers buy – new markets and education required

Major Service Innovations: New Concept

Major Process Innovations: New ways to deliver services that create new value

Service Line Extensions: Adding new services

Supplementary Service Innovations: Adding new elements or improving existing supplemental service

product offerings and the business model dr. dawne martin mktg 241 february 28, 2012

Documents

rethinking marketing

business modelprentice

business modeldr

new product

original business model

unique business conceptdevelop

comprentice hall

timeprentice hall