Chapter

12
Developing
and Managing
Products

zayats-and-

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duplicated, in whole or in part, except for use as permitted in a license
distributed with a certain product or service or otherwise on a passwordprotected website for classroom use.

Learning Objectives
zayats-andzayats

LO 12-1Explain how companies manage

existing products through line extensions
and
product modifications
LO 12-2Describe how businesses
develop a
product idea into a
commercial product
LO 12-3Discuss the importance of
product differentiation and the elements
that
differentiate one product from
another

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with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objectives
zayats-andzayats

LO 12-4Explain how businesses position

their
products
LO 12-5Discuss how product deletion is
used to improve product mixes
LO 12-6Describe organizational
structures used for managing products

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with a certain product or service or otherwise on a password-protected website for classroom use.

Managing Existing Products

zayats-andzayats

OOrganizations must be able to

adjust their products features

in response to changes in
customers needs
O A marketer must develop, alter and

maintain an effective product mix

O By assessing the current product mix, a
marketer can identify weaknesses and
gaps which can lead to improving the
product mix through
O Line Extensions

LO
12-1

O Product Modifications
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with a certain product or service or otherwise on a password-protected website for classroom use.

Line Extensions
zayats-andzayats

OA line extension is the

development of a product
closely related to existing
products in the line but
designed specifically to meet
different customer needs
O Less risky and less costly than

introducing a new product

OLine extensions may

O Increase sales
LO
12-1

O Take market share from competitors

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Modifications
zayats-andzayats

OA product modification means

changing one or more

characteristics of a product
O Differs from a line extension because

the original product drops from the

product line
O Certain conditions must exist for the
modification to work
O The product must be modifiable
O Customers must recognize the modification
O The modification should make the product

LO
12-1

more consistent with customers desires

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Modifications
zayats-andzayats

OThree major types of product

modifications:
O Quality modifications are changes to

a products dependability and durability

O Functional modifications are
changes that affect a products
versatility, effectiveness, convenience
or safety
O Aesthetic modifications are changes
to the sensory appeal of a product
LO
12-1

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with a certain product or service or otherwise on a password-protected website for classroom use.

Discussion
Point Product
Modifications

A few years ago, Apple released a

Look at the

following examples
of product
changes. Identify
the type of product
modification:

LO
12-1

new model of the iPhone equipped

with the intelligent personal
assistant Siri.
Gap introduces a popular summer
T-shirt in a new color.
Kraft begins changing the
packaging of its snack foods to
make them easier for elderly
customers to open.
Prada decided to change the
design of one of its more
expensive handbags.
Smartphones are being made
waterproof in case of accidents.
A coffee shop decides to offer its
coffees made with organic milk.

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-

Developing New Products

zayats-andzayats

ODeveloping new products

enhances a product mix and

adds depth to a product line
O Introducing new products can be

expensive and risky

O New product failures often occur and can

create major financial problems for an

organization

O Failing to introduce new products is also

risky
O Companies can lose market share with failure

LO
12-2

to innovate and keep up with competitive

products
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with a certain product or service or otherwise on a password-protected website for classroom use.

Developing New Products

zayats-andzayats

OThe term new product may

have more than one meaning

O A new product can be an innovative

LO
12-2

product that has never been sold by

any organization
O A new product can be a modified
product that existed previously
O A new product may be a product a
specific company has not marketed
previously but similar products have
been available from other companies
O A product can be viewed as new when it
is brought to one or more markets from

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with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 12.1 Phases of NewProduct Development

zayats-andzayats

ONew-

product
developme
nt process
is a sevenphase
process for
introducing
products
LO
12-2

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with a certain product or service or otherwise on a password-protected website for classroom use.

Idea Generation
zayats-andzayats

OIdea generation is the activity

of seeking product ideas to

achieve organizational
objectives
O There is a relationship between the

amount of market research gathered

and the number of ideas generated by
work groups
O One trend is engaging customers online

OIdeas can come from several

LO
12-2

sources
O Internally through departments or

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with a certain product or service or otherwise on a password-protected website for classroom use.

Screening
zayats-andzayats

OScreening means selecting the

ideas with the greatest potential

for further review
O Ideas are analyzed to determine whether

LO
12-2

they match the organizations objectives

and resources
O Keeping the product idea in focus and on
track by understanding consumer needs
and wants is the key to success
O A checklist is often used encouraging
evaluators to be systematic
O Most new products are rejected during
this phase

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with a certain product or service or otherwise on a password-protected website for classroom use.

Concept Testing
zayats-andzayats

OConcept testing is seeking a

sample of potential buyers

responses to a product idea
O Often necessary in order to evaluate

LO
12-2

ideas properly
O A low-cost procedure allowing the
company to determine customers initial
reactions before investing resources in
research and development
O The result of concept testing can help
marketers understand which attributes
and benefits are most important to
potential customers

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with a certain product or service or otherwise on a password-protected website for classroom use.

Business Analysis
zayats-andzayats

OBusiness analysis involves

evaluating the potential impact

of a product idea on the firms
sales, costs and profits
O Marketers ask a series of questions and

LO
12-2

attempt to answer them through market

information
O Results of customer surveys and
secondary data supply the specifics
needed to estimate potential sales,
costs and profits
O Analysis based on estimates is useful
but not precise

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Development
zayats-andzayats

OProduct development is

determining if producing a
product is technically feasible
and cost effective
O To test acceptability, the idea is

LO
12-2

converted into a prototype or working

model
O The prototype is tested for overall
functioning both in the lab and in the
field
O Crucial questions during this phase
include how much quality to build into
the product

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with a certain product or service or otherwise on a password-protected website for classroom use.

Discussion
Point
ProductDevelopment
For the following
Process
examples, identify the
stage of the productdevelopment process
that applies:

Samsung determines whether developing

a smartwatch would contribute

significantly to sales and profits.
Tide released a smaller, more basic

version of its detergent in the Southeast

to see how it would sell.
A team at 3M gets together to brainstorm

on new product introductions.

Starbucks provides a small group of

customers with a written description of a

new drink to gauge their reaction.
A car company is in the process of

building a car that uses hydrogen for fuel.

Caterpillar just released a new model of

bulldozer across the United States.

New product ideas at McDonalds are

analyzed to determine whether they are

feasible and match the companys
objectives.
LO
12-2

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-

Test Marketing
zayats-andzayats

OTest marketing is a limited

introduction of a product in
geographic areas chosen to
represent the intended market
O The aim is to determine if potential

LO
12-2

customers will buy the product and used

to lessen the risk of product failure
O Selection of test areas is important to
provide accurate representation of the
intended market
O Test marketing is expensive and
competitors may try to interfere
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with a certain product or service or otherwise on a password-protected website for classroom use.

Commercialization
zayats-andzayats

OCommercialization is refining

and finalizing plans and

budgets for full-scale
manufacturing and marketing
of a product
O Marketers analyze results of test

LO
12-2

marketing and make needed changes to

the marketing mix
O During this stage, decisions are made
on services such as warranties, repairs
and replacement parts
O Product enters the market with

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with a certain product or service or otherwise on a password-protected website for classroom use.

 zayats-andzayats

LO
12-2

Figure 12.3 Stages of Expansion

into a National Market during
Commercialization
O
A roll-out is introducing a product in
stages starting in one geographic area
and expanding

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Differentiation
zayats-andzayats

OProduct differentiation is

creating and designing

products so customers perceive
them as different from
competing products
O Customer perception is critical

OThree aspects of product

differentiation companies must

consider:
O Product Quality
LO
12-3

O Product Design and Features

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Quality
zayats-andzayats

OProduct Quality
O The overall characteristics of a product

that allow it to perform as expected in

satisfying customer needs

OLevel of Quality
O The amount of quality a product

possesses

OConsistency of Quality
O The degree to which a product has the

same level of quality over time

LO
12-3

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Design and Features

zayats-andzayats

OProduct Design how a

product is conceived, planned

and produced
O Styling the physical appearance of a

product

OProduct Features specific

design characteristics that

allow a product to perform
certain tasks
O Marketers must determine the product
LO
12-3

designs and features customers desire

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Support Services

zayats-andzayats

OCustomer Services human

or mechanical efforts or
activities that add value to a
product
OExamples include:
Delivery/Installation
Financing

LO
12-3

Customer training

Warranties/Guarante
es

Repairs

Layaway plans

Convenient hours

Adequate parking

Toll-free numbers

Websites

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Positioning
zayats-andzayats

OProduct positioning refers to the

decisions and activities

intended to create and
maintain a certain concept of
the product in customers
minds
O This projected image is crucial because

LO
12-4

consumers tend to group, or position,

products in their minds to simplify
buying decisions
O Perceptual maps are created by
questioning a sample of consumers

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with a certain product or service or otherwise on a password-protected website for classroom use.

Bases for Positioning

zayats-andzayats

OMarketers can use several

bases for product positioning

O Head-to head best when products are

equal and if price is lower

O Avoid competition critical when
introducing a brand into a market in
which the company already has one or
more brands
O Position can be based on specific
product attributes or features
O Other bases include price, quality level and

benefits
LO
12-4

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with a certain product or service or otherwise on a password-protected website for classroom use.

Repositioning
zayats-andzayats

OA brands market share and

profitability may be
strengthened by product
repositioning of existing
products
O Requires changes in perception and

LO
12-4

usually changes in product features

O Repositioning can be accomplished by
changing any aspect of the marketing
mix
O A marketer may reposition a product by
aiming it at a completely different

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with a certain product or service or otherwise on a password-protected website for classroom use.

Discussion
Point
Perceptual
Mapping

Look at the following types of vehicle.

Based on the perceptual map, where

does each vehicle fit in terms of
performance, environmental
consciousness, and size.
Ford F-150
Prius
Mercedes S-Class
Ford Escape Hybrid
Ford Focus
Chevy Volt

Performance
Cadillac SUV
Compact

Full-Size

Environmental Consciousness

LO
12-4

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Product Deletion
zayats-andzayats

OProduct deletion means

eliminating a product from the

product mix when it no longer
satisfies a sufficient number of
customers
O Declining products reduce profitability

LO
12-5

and drain resources

O A dying product may lose favor with
customers and negative feelings may
transfer to a companys other products
O Product deletions may be met with
opposition by management, sales

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with a certain product or service or otherwise on a password-protected website for classroom use.

Product Deletion
zayats-andzayats

OA systematic review allows an

organization to improve a
product or delete a product
OThree ways to delete a product
O Phase-out allows a product to decline

without a change in marketing strategy

O Run-out exploits any strengths left in
the product
O Immediate drop used when losses are
too great
LO
12-5

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with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 12.5 Product Deletion

Process
zayats-andzayats

LO
12-5

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with a certain product or service or otherwise on a password-protected website for classroom use.

Organizing to Develop and

Manage Products
zayats-andzayats

OProduct Manager the

person within an organization

who is responsible for a
product, a product line or
several distinct products that
make up a group
OBrand Manager the person

responsible for a single brand

LO
12-6

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with a certain product or service or otherwise on a password-protected website for classroom use.

Organizing to Develop and

Manage Products
zayats-andzayats

OMarket Manager the person

responsible for managing the

marketing activities that serve
a particular group of customers
OVenture team a cross-

functional group that creates

entirely new products that may
be aimed at new markets
LO
12-6

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with a certain product or service or otherwise on a password-protected website for classroom use.

Discussion
Point Zipcar

Zipcar is a car-sharing service that

promotes itself as an alternative

to the hassle of owning an
expensive car. Company members
can reserve and rent cars by the
hour or by the day, with gas and
insurance included for up to 180
miles. Zipcar claims it saves
people hundreds of dollars each
month. Zipcar has developed a
partnership with Ford, making
Ford Zipcars largest provider for
its University program.
How does Zipcar differentiate its

product from competitors?

Which stage of product
development is Zipcar in?
LO
12-6

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-