Joe Smith

Your University

Marketing Principles 101

Copyright 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Understanding Your Customer

Chapter 6: Developing Your Product

6-2
Learning Objectives
LO 6-1 Distinguish among the different types of new products and
describe the advantages and risks of each.
LO 6-2 Outline the various stages of new-product development.
LO 6-3 Summarize the major risks in new-product development and
discuss ways to reduce those risks.
LO 6-4 Summarize the ethical issues in new-product development.
LO 6-5 Describe the consumer adoption process and explain how
types of adopters and the characteristics of a new product
affect product diffusion.
LO 6-6 Illustrate the product life cycle and describe its stages and
aspects.

6-3
Executive Perspective
Tom Payne
Director of Access Planning at PEG Bandwidth

During his time as a product analyst, he realized that

problem solving was an essential part of product management.
His success has come from having a positive attitude. Companies do not
respond well to someone who is arrogant or ill-tempered.
Advice to graduates: be flexible and take advantage of every opportunity. In
addition, use your personal network a personal introduction or reference is
better than sending 500 resumes into a job bank.
In his role, marketing is the key driver to increase revenues and profits.
Marketing is relevant to every job in the organization.
His personal brand: positive attitude and good character.

6-4
What is a
LO6-1
New Product?
We see more new products introduced today
Faster and more economical transportation
Mass production
Advent of electronic communication

Product
Goods
Services
Ideas

6-5
What is a New Product?
Four categories
New-to-the-Market
Products

New Category Entries

Product Line Extensions

Revamped Products

6-6
The Chevy Volt illustrates the risk involved in
developing a new category entry. Though General
Motors has been producing cars for over a century, it
suffered setbacks when it tried to branch out into the
electric vehicle product category.

6-7
New Product at GM Video

Click on the play button to watch

the video.

6-8
6-9
 LO6-2
The Stages of New-Product
Development
New-Product Development (NPD)
Consists of seven stages
1. New-product strategy development
2. Idea generation
3. Idea screening
4. Business analysis
5. Product development
6. Test marketing
7. Product launch

6-10
The Stages of New-Product
Development
General guidelines
STAGE 1: How new products will
New-Product fit
Strategy Characteristics of
products to be
Development developed
Specifies target
markets

Internal
STAGE 2: External
Outsource
Idea
Generation

6-11
The Stages of New-Product
Development
Will product sell?
STAGE 3: Concept test
Can it be developed
Idea and marketed within
Screening time/ budget?
Can it be produced?

Estimating costs
STAGE 4: Offshore
organization
Business Identifying price
Analysis Estimate demand

6-12
Clorox has established
a social media site
called CloroxConnects
that allows consumers
to review and provide
feedback on new
products, submit ideas
of their own, and
compete in contests for
the best ideas to solve
company-posed
challenges.

6-13
6-14
The Stages of New-Product
Development
STAGE 5: Goods
Prototype
Product Services
Employee training
Developme protocol
nt Identify equipment
Determine staffing

STAGE 6: Product testing

Risks of test marketing
Test Economical options
Marketing Simulated test
markets

6-15
Honda designers develop prototypes, such as the one of a sedan
in the photo on the left, at the companys research and design
center in Tokyo. They use such prototypes to ensure that Honda
can efficiently build the production version of its cars, including
the Honda Insight shown in the photo on the right.

6-16
The Stages of New-Product
Development

Purchase
materials
Hire employees
STAGE 7: Manufacture
enough to fill
Product distribution
Launch pipelines
Place good in
warehouses
Prepare internal
systems
Train new
employees

6-17
Boeings 787 Dreamliner provides an extreme example
of the price of a delayed product launch. The
unexpected costs of a three-year delay due to design
and supply chain problems seriously impacted the
companys near-term sales opportunities.

6-18
6-19
The Stages of New-Product
Development
Sequential new-product development
Concurrent new-product development

6-20
TABLE 6.1 Sequential versus
Concurrent New-Product Development

6-21
Product Development at
McDonalds Video

Click on the play button to watch

the video.

6-22
6-23
 Risks in New-Product
LO6-3
Development
Categorizing Risks in New-Product
Development
Highest level occurs when products fail to generate
sales or prove to be dangerous or defective
Significant risk when introducing internationally

6-24
Nokia was forced to cut prices substantially after launching
the Lumia because it set the price too high for consumers in
the Middle East, Africa, and some parts of Asia.

6-25
New-Product Development Risks and Related Outcomes

6-26
Risks in New-Product
Development
Reducing Risks in New-Product Development
Listening to the customer carefully
Making a commitment to the NPD process
Understanding current market trends and
anticipating changes in the market
Asking the right questions
Being willing to fail on occasion

6-27
LO6-4
Ethical Issues in New-Product
Development

FTCs definition of the term

new
Waiting to develop new
product until existing product
is obsolete
Planned obsolescence

6-28
Product
LO6-5
Adoption
Consumer Adoption Process
1. Awareness
2. Interest
3. Evaluation
4. Trial
5. Adoption

6-29
Product Adoption
Types of Adopters Percentage of Each Type
of Adopter
Innovators
Early adopters
Early majority
Late majority
Laggards

6-30
Early adopters not only help marketers spread
the message about a product to the rest of
the population, they also provide valuable feedback
to marketers about their products.

6-31
Product Adoption
Product Characteristics
Competitive advantage
Compatibility
Observability
Complexity
Trialability

6-32
High-end digital single lens reflex cameras
with a multitude of functions like the Nikon D3100
might not be adopted quickly by the average
consumer, but if the firm targets camera enthusiasts
willing to spend the time to learn how to use the
cameras featurs, the product can still be successful.

6-33
The
LO6-6
Product Life Cycle
Product Life Cycle involves four stages
Introduction
Growth
Maturity
Decline

6-34
Stages of the Product Life Cycle

6-35
New material technology in fly rods made bamboo rods
much less attractive due to the superior performance of
graphite and boron, yet the market for bamboo rods still
exists. Though an R.L. Winston bamboo rod can cost
$3,000, aficionados of this type of rod continue to purchase
them even though more effective rods cost less.

6-36
Todays Professional
Misti McCollum
Membership Marketing Specialist, Girl Scouts of Arkansas,
Oklahoma and Texas

Job focuses on recruitment, volunteer management,

community and public relations.
Even though she had no specific plans to work for a nonprofit, she
kept her mind and options open.
Feels great people skills have made her successful.
Advice to graduates: An internship is beneficial. Take any
opportunities for hands-on experience in college.
Her personal brand: lending a helping hand for the betterment of
youth.

6-37
Aspects of the Product Life Cycle
Estimate the length of the Products Life
Use marketing research and analyze competition
An organization can combat shortening life cycles
Product mix

6-38
Aspects of the Product Life Cycle
Project the shape of the PLC Curve

High-learning products

Low-learning products

Fad product

Fashion product

6-39
Different Types of Product Life Cycle Curves

6-40
Electric cars like the Tesla Model S are high-learning
products because it takes longer for consumers to
evaluate the benefits of owning one.

6-41
Aspects of the Product Life Cycle
Implications for the Marketing Mix
Strategies change within each aspect of the
marketing mix over the life cycle of a product
Product
Place
Promotion
Price

6-42
Typical Marketing Mix Strategies
during a Products Life Cycle

6-43
Memorable Product Launches
Video

Click on the play button to watch

the video.

6-44
Continuous Development:
EA Sports Video

Click on the play button to watch

the video.

6-45
1. Assume that you are the vice president of marketing for a consumer
packaged goods company like Procter & Gamble, one that produces
everyday items at a low price. Your marketing team has expressed a
desire to revamp one of its brands to appeal to younger buyers.
Develop a list of questions to determine the risks and rewards this
revamping strategy poses for the company.
2. Select a product, either a good or service, that you consider to be in
the decline phase of the PLC. Discuss some of the options the
company has for dealing with this product. What do you think is the
best option, and why do you think so?
3. Discuss the advantages of a concurrent NPD process over a
sequential process. What impact will a concurrent NPD process
have on time to market, profits, and brand image? What are some of
the issues a company might face when using a concurrent process?

6-46
4. Which product characteristics influence the length and shape
of a products PLC? What changes might a company make in
its product design to lengthen its life cycle?
5. Assume you are in charge of the business analysis stage of a
companys NPD process. What data will you need to collect to
make an informed decision about whether product
development should continue? What elements of bias might
exist from the data you receive from the marketing
department?

6-47
 1. What makes a product new, and how do I adapt my
marketing strategy to the various new-product
categories?
2. What is the process for developing a new product?
3. What can go wrong when developing new products?
4. What ethical issues might I face as I develop new
FORECAST

products?
5. Why does the type of product I am marketing matter
to how fast consumers will choose to buy it?
6. How should my marketing strategy change as a
product goes through its life cycle?

6-48
Key Terms
Business analysis
The process of analyzing a new product to determine its
profitability. Retur
n to
Competitive advantage slide
The superior position a product enjoys over competing
products if consumers believe it has more value than
other products in its category. Retur
n to
Concept test slide
A procedure in which marketing professionals ask
consumers for their reactions to verbal descriptions and
Retur
rough visual models of a potential product. n to
slide

6-49
Key Terms
Concurrent new-product development
New-product development that uses cross-functional
teams made up of representatives from various
Retur
departments to develop goods and services. n to
slide
Consumer adoption process
The process by which customers formally accept and
purchase products. Retur
n to
Decline stage slide
The stage of the product life cycle characterized by
Retur
decreases in sales and profits. n to
slide

6-50
Key Terms
Early adopters
A category of consumer that purchases and uses a
product soon after it has been introduced, but not as
Retur
quickly as innovators. n to
Early majority slide

A category of consumer that gathers more information

and spends more time deciding to make a purchase than
innovators and early adopters. Retur
n to
Fad product slide
A product that is very popular for a relatively short amount
of time. Retur
n to
slide

6-51
Key Terms
Fashion product
A product that comes in and out of favor with consumers.
Retur
Growth stage n to
The stage of the product life cycle characterized by slide

increases in sales, profits, and competition.

Retur
High-learning products n to
slide
Products that take longer for consumers to see the
benefits of or that do not have a good infrastructure in
place to support them.
Retur
n to
slide

6-52
Key Terms
Idea generation
The stage of new-product development in which a set of
product concepts is generated from which to identify Retur
potentially viable new products. n to
slide
Idea screening
The stage of new-product development in which the firm
evaluates an idea to determine whether it fits into the
new-product strategy. Retur
n to
slide

6-53
Key Terms
Innovators
A category of consumer that adopts a product almost
immediately after it is launched. Retur
Introduction stage n to
slide
The stage of the product life cycle that occurs after the
firm launches the product into the marketplace and
Retur
innovators begin to buy it. n to
Laggards slide

A category of consumer that does not like change and

may remain loyal to a product until it is no longer Retur
available for sale. n to
slide

6-54
Key Terms
Late majority
A category of consumer that relies on others for
information, buying a good or service because others
have already done so. Retur
n to
Low-learning products slide
Products with benefits customers can easily see.
Retur
Maturity stage n to
slide
The stage of the product life cycle during which the firm
focuses on profitability and maintaining the firms market
share for as along as possible.
Retur
n to
slide

6-55
Key Terms
New category entries
Products that are new to a company but not new to the
marketplace. Retur
New product development (NPD) n to
slide
The process of conceiving, testing, and launching a new
product in the marketplace. Retur
New product strategy development n to
slide
The stage of new-product development in which the
company determines the direction it will take when it
develops a new product. Retur
n to
slide

6-56
Key Terms
New-to-the-market products
Inventions that have never been seen before and create a
new market. Retur
Offshore n to
slide
An organization that is located or based in a foreign
Retur
country. n to
Outsource slide

To procure goods, services, or ideas from a third-party

supplier rather than from an internal source. Retur
n to
slide

6-57
Key Terms
Planned obsolescence
A practice in which companies frequently come out with new
models of a product that make existing models obsolete.
Retur
Product n to
slide
The specific combination of goods, services, or ideas that a
firm offers to its target market.
Retur
Product development n to
The stage of new-product development at which a firm slide
determines that the good can be produced or the service
can be offered in a way that meets customer needs and
generates profits.
Retur
n to
slide

6-58
Key Terms
Product launch
Completing all the final preparations for making the fully
tested product available to the market. Retur
Product life cycle (PLC) n to
slide
The series of stages a product goes through from the
time it is launched into the market until the time it is Retur
removed from the market. n to
slide
Product line extensions
Products that extend and supplement a companys Retur
established product line. n to
slide

6-59
Key Terms
Product mix
The combination of all of the products a company sells. Retur
Prototype n to
slide
A mockup of a good, often created individually with the
materials the firm expects to use in the final product. Retur
Revamped products n to
slide
A product that has new packaging, different features, and
updated designs and functions.
Retur
n to
slide

6-60
Key Terms
Sequential new-product development
New-product development that utilizes a progressive
sequence in which functional areas consecutively completeRetur
their development tasks. n to
slide
Simulated test markets
A procedure in which the firm builds a mock shopping
experience for participants to observe their response to
Retur
marketing stimuli. n to
Test marketing slide
Introducing a new product in its final form to a
geographically limited market to see how well the product
Retur
sells and get reactions from potential users.
n to
slide

6-61