Saturday, May 16, 2015

Creating Value for New Products

Value creation is a phenomenon that is much discussed and is the basis for all economic activity. That is, for a product or service to be sold it must be viewed as providing some value for the purchaser.

In some instances, value is based on long-standing measurements and is tied to supply and demand. The more some thing is demanded when there is a limited supply results in an increase in its value.

For individuals with new products or services, determining value is critical to the success of a new venture. In these situations there is no history to gauge value that might be based on supply and demand. There is only anecdotal and (at times) research based evidence on the potential value of the new offering.

In the early 1970s Gerald Zaltman (Processes and Phenomena of Social Change, Wiley Interscience, 1973) conducted research based on social change. In these studies he determined that there were several factors that caused societal change.

In the late 1970s I used these factors to establish Consumer Adoption Drivers that could be used to determine the factors that would cause consumers to by a product. These factors would be instrumental in determining the value of new products to audiences.

Some of these factors measured the influence of peer groups and social status as creating value for customer segments while other factors measured the impact of competing products and the need for technical training on the creation of values. Value was determined by the willingness of a market to adopt a product. This, in effect, was a means of using phenomena of social change to determine the willingness of a targeted market to adopt a product.

The Consumer Adoption Drivers used are as follows:

1)   Group Influence Intensity – relates to peer pressure exerted on customers
2)   Perish ability – the length of time the product is deemed useful,
3)   Psychological appeal – status associated with the product
4)   Price sensitivity – the need for the customer to budget for the purchase,
5)   Relative Price Influence – the attractiveness of other products as a substitute when price is a consideration,
6)   Frequency of Purchase – The frequency with which the customer purchases the product,
7)   Search Time Intensity – the amount of time invested in the search for the “right” product,
8)   Tangible Differentiability – physical differences between products,
9)   Intangible differentiability – non-physical differences between products (guarantees, relationships with company, branding etc.),
10)         Technical Complexity – the need for training before a customer can use the product. This may be a factor in determining the type of sales force that will be required.

These adoption drivers are used by my firm, GWR Research, as the basis for developing questionnaires to determine the basis for value of a new product offering to a potential target market.

In some cases availability (supply chain) will be the creator of value. This happens most often when the product is frequently purchased and the search time willingly invested in finding the “right” product is low.

In other cases, promotion will be important in creating value. This happens in cases where peer-pressure plays an important factor (showing peers benefitting from the product) or similar products are available (differentiating the products based on benefits derived).

Pricing can be critical in value creation when other products are similarly priced or the target market has a limited budget.

The product design can be critical in creating value through tangible differences in product design and reduction in technical complexity for the consumer.

Using the Consumer Adoption Drivers as a basis for research can assist marketers in determining the best marketing mix of price, place, product and promotion for the creation of value.


If marketers do not consider all of the factors that may cause an audience to adopt a product, they could miss a critical component of value creation, which could lead to failure when launching a new product.

This process along with programs for developing the marketing strategies and tactics are discussed more thoroughly in the book, Developing Successful Marketing Strategies, Business Expert Press, 2014. The book is available on Amazon.com, BarnesandNoble.com and Businessexpertpress.com.