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. 

Comments

Post a Comment

Popular posts from this blog

NEW PRODUCT DEVELOPMENT PROCESS

Image
NEW PRODUCT DEVELOPMENT PROCESS As markets and customer preferences change companies adapt to insure success. Adaptations usually are made to capitalize on markets and expertise a firm has developed over its life . Some adaptations are limited to updating packaging or marketing approaches or finding new uses for established products. There are occasions where new products are needed in order to meet new customer needs or address a disruptive market innovation. When addressing changing market needs and market disruptions it is necessary to find good ideas and then have a process to evaluate and narrow the field to the ideas most likely to succeed. Generating new product ideas The first step in generating good ideas that will further develop the markets and expertise that defines the firm is to clearly articulate the job customers are hiring the firm to perform. Here it is important not to be too restrictive in the focus of the definition. It is probab...
Read more

10 Considerations for Pricing a Product or Service

When introducing a new product or service to the market a key, and often critical, consideration is the price for this offering. I have seen folks simply take the cost of production and use a percent mark up as a pricing model. This is the simplest model and it provides a good example for the need to consider other pricing model options. Here are 10 things to consider before setting a price for your product or service: ·       Mark up Based on Cost Vs Retail . In the opening paragraph I gave the example of a model being used that marked up a product by a percent over the cost. The cost used here is generally direct cost or labor and materials. If someone wants a 30% of the asking price to be the mark up, then using 30% of cost won’t provide the desired outcome. Simply put, it is the wrong math. If something costs $1 to make and it is marked up by 30% for a selling price of $1.30 then the profit of based on the asking price...
Read more

Grow Your Business Through Community Involvement and Leadership

Business is built on relationships that start with individuals and grow to include groups and institutions. Community involvement is an excellent means of creating opportunities to meet individuals and develop meaningful relationships. Whether you are a large company or a small, family-run operation relationships built through community involvement pays big dividends.   For companies considering how to get involved in the community, here are some pointers for choosing the best activities for your company. 1) Don’t choose too many activities. Stay within the bounds of your financial and human resources. The goal here is to have a successful business that grows and participates in the community. 2) Choose activities that help employees grow in the community and develop new networks. Most Chambers of Commerce have Leadership programs for developing community leaders. These programs are excellent and bring long-term benefits for the organization and the employee...
Read more