Product Offerings and
the Business Model
Dr. Dawne Martin
MKTG 241
February 28, 2012
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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
LEARNING OBJECTIVES
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-2
Creating new ventures, either from
scratch or within an existing company,
three sequential challenges
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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
PRODUCTS, CONCEPTS, AND
MODELS
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-3
The Business Concept
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Core value of firm may come from
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Concise statement that centers on what is
really being done for customer
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Product
Way product is sold
How it is distributed
Manner it is priced or sold
◦ 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.
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-4
Entrepreneurial Success
Common characteristics
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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
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-5
What is a Business Model?
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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
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-6
What it the Purpose of a
Business Model?
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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
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-7
Well formulated model must address six
key questions
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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?
Breaking It Down: Elements
that Define a Business Model
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-8
The product or service
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Products are tangible, services are not
Great challenge with any product or service
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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
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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
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
7-9
Figure 7.1: Seeing Products as Creative Variables
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
710
Seeing Products as Creative
Variable
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Core product
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Primary benefit
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Company and product presentation
Styling
Physical design
Options
Quality and reliability
Features
Packaging
Tangible product
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
711
Seeing Products as Creative
Variable
Augmented
product
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Delivery
Installation
System interaction
Sales terms and
warranty
Technical support
Maintenance and
repair
After-sale service
Customer training
Communicated
product
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Product
Product
name
Product
Product
Product
Prentice Hall © 2009
positioning
brand
logo
image
bundling
Rethinking Marketing, 1st
Edition
712
Characteristics of Successful New
Products and Services
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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
Process of acceptance and continuous use
 Adoption Process
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Awareness
Interest
Evaluation
Trial
Adoption or rejection
Diffusion: Manner in which customers
accept a new product/service
Adoption of Innovation
Adopter
s
Early
Adopters
13.5%
Profit
Early
Majority
34%
Late
Majority
34%
Innovators
Adopter
Categories
2.5%
Time
Laggards
16%
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)
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Enhancing or Speed Diffusion and
Adoption
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
Growing
Many
Reduced
Competition Little
Managing the Product Life Cycle
Product-Price Position, Marketing
Effort, and Market Share
Marketing to Cross the Chasm
Geoffery A. Moore, Crossing the Chasm, Harper Business,
1991.
Target specific niche markets through
technology enthusiasts and visionary
stages
 Broaden niche to cross chasm
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◦ 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 platforms
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Bowling Alley & Main Street Issues
Inside the Tornado
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
721
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
722
The Importance of Internal and
External Fit
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Internal fit
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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
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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
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
723
How Business Models Emerge
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Process of trial and error
Mental model becomes some aspect of
written model
Intuitive sense of how firm must operate
to make money
As competencies are developed keener
insight emerges
Entrepreneur may have fair picture of the
foundation level, limited notion of some
proprietary level
Develop rules to guide operation and
ongoing development
Prentice Hall © 2009
Rethinking Marketing, 1st
Edition
724
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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
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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
New Products/Services