13.2 Where does innovation come from?  (Page 3/3)

It is also possible to create a new business model. Wal-Mart is a good example here, as the retailer applies the philosophy of low prices and cost cutting to every aspect of its operations, including logistics, employee compensation, managerial philosophy, packaging, merchandising, negotiations with suppliers, and so forth. This manner of innovation is discussed in more detail in the section which follows, “Product Categories.”

Product categories

There are a number of ways to classify products (see [link] and [link] ). For instance, a product can be classified by durability and tangibility. Packaged goods are tangible and are consumed in one or a few uses, such as in the case of beer, soap, or fuel. Durable goods are tangible and survive many uses. Consumer examples include furniture, TVs, computers, clothing and automobiles. According to one convention, a durable good lasts more than one year. Non-durable goods are tangible, but they provide benefits for a short time. Good examples include: gum, shaving cream, gas, batteries, and cosmetics. There are also controlled goods which are often restricted by government action, due to their potential danger or addictive nature. Good examples include: cigarettes, alcohol, tobacco, firearms, and even some over-the-counter drugs.

Business-to-business (B2B) products refer to goods bought by individuals or organizations for further processing or for use in doing business. Examples in B2B include: buildings, flour purchased by a commercial baker, crude oil, steel for automobile manufacture, insurance policies for company buildings, and business consulting services. Business-to-customer (B2C) products refer to goods that individual customers purchase for personal and family use, such as passenger cars, hairdryers, TVs, medical insurance policies, and carpet cleaning services for the home.

Convenience products are products that consumers want to purchase frequently, immediately, and with a minimum of effort. Examples here include: soft drinks, cigarettes, fast foods, newspapers, public transportation and candy bars. Shopping goods are purchased only after consumers make comparisons with competing goods based on such attributes as price, quality, style, or color. Examples in this category include: MP3 players, passenger cars, clothing, furniture, and houses. Specialty products are products with unique characters. Buyers often prize such goods and make a special effort to obtain them. Examples in this group include collectable items, engagement rings, vacation homes, yachts, art works, luxury cars, and special concert tickets.

Exhibit