MKTG 361

Chapter 12
DEVELOPING AND MANAGING
PRODUCTS
 Learning Objectives
Explain how companies manage existing products through line
extensions and product modifications.
Understand the New Product Development (“NPD”) process.
Discuss the importance of product differentiation and the
elements that differentiate one product from another.
Explain how businesses position their products.
Discuss how product deletion is used to improve product mix.
Describe organizational structures used for managing products.
The Product Life Cycle
 New Product Development (NPD)
New products: enhance product mix and add depth to line.
➢Risk of new product development (expensive, failure rates) yet
risk in failing to innovate (be competitive and meet consumer
demand).
New products:
• Innovative, never seen or sold
• Modified product that previously existed
• New entrant to competitive set
• One or more markets from another market
Disruptive Innovation in NPD

Identifies old tech that

can be exploited in new
ways or develops new
business models to give
customers updates,
revisions, or expansion
from the current
products available in that
market.
Platform
Strategies in
NPD
To take advantage of ROI for
New Product Development
and speed to market, more
companies are recognizing
the strategy of building new
products using the
components, processes, and
technology interfaces or
infrastructures of existing
products.
Platform Strategies
(contd)
4,147,200 Build
Permutations
• 2WD or 4WD
• 3 Cab types
• 3 Box lengths
• 4 Engines
• 8 Axle types/ratios
• 3 Mirror types
• 2 Interior packages (standard plus
1 optional)
• 3 Exterior packages (standard plus
2 optional)
• 2 Seat fabric (cloth or vinyl)
• 2 Wheel types (steel or alloy)
 New Product Development Process

Concept Marketing Product

Idea Idea Strategy & Product
Development Test Marketing Launch /
Generation Screening Business Development
& Testing Commercialization
Analysis
 Idea Generation
Task
Brainstorming for new
product ideas or ways to
improve an existing product.
• Market trends
• Product research
• Users’ needs and wants
• Innovative solutions
Mechanisms
• SWOT Analysis
 Idea Generation
Mechanisms
Internal Feedback
• Marketing
• Customer Support
• Sales Team
• Technical Department
External Feedback
• Competitor studies
• Target audience
 Idea Generation
Mechanisms
• Market analysis
• Product value properly
positioned
• Collecting user feedback
• Run user tests on product
use and gaps for
improvement
Outcome
➢List of potential product
ideas of value to customers
 Idea Screening
Task Mechanisms
Taking the list of ideas and • Logic or Opportunity Trees
filtering out the ones with the
highest chance of success. • Checklist of new product
requirements
Considerations
Outcomes
• Expected consumer benefits
• Viable concepts
• Necessary product
improvements
• Technical and production
feasibility
• Market potential
• Alignment with organizational
mission
Idea Screening
 Concept Development and Testing
Ideas → Concepts
Product concept: detailed description or blueprint of your
idea.
• Target market
• Appealing features and benefits
• Proposed price
• Cost estimates of design, development and launch
Developing alternative concepts – how attractive is each to
customers, and which provides the highest value?
 Concept Development and Testing
Concept testing is a market research method that helps
businesses evaluate new product ideas before releasing them
to the public. It involves asking customers about the
company's ideas and whether they would like them. This
process can help businesses determine how their target
audience will react to new features.

Proper market validation process helps organizations ensure

that they're developing the right solutions for the right audience
in the right markets. This reduces the risk of wasting resources
on developing products or features that the market doesn't
need. Ultimately, it increases the chances of building a
successful product.
 Concept Development and Testing
Market validation: interviews, surveys, focus groups
1. Set a goal for the test.
2. Create a script and questions.
3. Recruit the right participants.
4. Determine the flow of the test.
5. Integrate quantitative measurements.
6. Review and interpret the results.
Concept Development and Testing
 Marketing Strategy & Business Analysis
The marketing
strategy serves to guide the
positioning, pricing, and
promotion of your new
product. Once planned,
product management can
evaluate the business
attractiveness of the
product idea. Develop
launch strategies.
The business
analysis comprises a review
of the sales forecasts,
expected costs, and profit
projections. If they satisfy
the company’s objectives,
the product can move to the
product development stage.
 Product Development
Agile product development:
process that allows
businesses to quickly and
efficiently create and test new
products with an emphasis on
collaboration and customer
satisfaction. The idea focuses
on improvement, where
products are constantly being
refined and updated based on
user feedback.
Prototype testing: process of
testing an early version of a
product or feature with real
users to validate the design
before development starts
and identify problems early
on. The goal is to build a
product that meets user
needs and expectations.
 Test Marketing
https://www.youtube.com/watch?v=e28I2BwPTUs&t=191s
 Test Marketing
Test marketing: method that aims to explore consumer response
to a product or marketing campaign by making it available on a
limited basis to test markets before a wider release.
Alpha testing: first end-to-end testing of a product to ensure it
meets the business requirements and functions correctly. It is
typically conducted in a staged environment.
Beta testing: small select group of end users try to use and
thoroughly test out the product, putting it to practical use,
assessing its feature and functionality, and identifying bugs and
potential improvement areas.
 Test Marketing
Can occur in select geographic market. Benefits:
• Natural environment to measure actual sales performance.
• Identify product weaknesses or other parts of marketing mix.
• Experiment in variations of promotion, price, and packaging.
• Measure brand awareness, brand switching, and repeat purchases
from marketing mix alterations.
Selection is key for validity of results; sites provide accurate
representations of intended target markets. Criteria depends on
product attributes, target market characteristics, and firm’s
objectives and available resources.
 Test Marketing
Expensive. Competitors potential interference:
• Increasing their own advertising or promotions
• Lowering prices
• Offering special incentives
• Copying the product in the testing stage and rushing to
introduce a similar product.
Simulated test marketing: staged or artificial marketplace where
researchers expose subjects to advertising and other marketing
mix variables to gauge the subjects' purchase intent. Yields
qualitative results. Faster, less expensive, and more controlled,
but not a completely “real” environment.
 Commercialization & Product Launch
Commercialization – Refining and finalizing plans and budgets for full-
scale manufacturing and marketing of a product.
Here are some essential elements to consider.
• Customers: Understand who will be making the final purchasing
decisions and why they will be purchasing your product. Create buyer
personas and identify their roles, objectives, and pain points.
• Value proposition: Identify what makes you different from the
competition and why people should choose to buy your product
• Messaging: Determine how you will communicate your product’s value
to potential customers.
• Channels: Pick the right marketing channels to promote your products,
such as email marketing, social media, SEO, etc.
 Commercialization & Product Launch
Entry to market → rollout
Introduced starting in one geographic area or set of areas and
gradually expands into adjacent ones. Benefits:
• Reduced risk, potentially experience smaller losses.
• Inherent challenges in getting channel to wholesalers and
retailers established quickly.
• If successful, number of units to satisfy demand may outpace
production capabilities.
• Allows more adjustment to marketing mix to satisfy customers.
 Commercialization & Product Launch
Rollout drawbacks:
• Competitors can observe what the firm is doing and monitor
results just as the firm’s own marketers are doing.
• If successful, competitors may quickly enter with same
market with similar products (late-mover advantage.)
 Concept Marketing Product
Idea Idea Strategy & Product
Development Test Marketing Launch /
Generation Screening Business Development
& Testing Commercialization
Analysis

1. Samsung determines whether developing a smartwatch would contribute

significantly to sales and profits.
2. Tide released a smaller, more basic version of its detergent in the Southeast to see
how it would sell.
3. A team at 3M gets together to brainstorm on new-product introductions.
4. Starbucks provides a small group of customers with a written description of a new
drink to gauge their reaction.
5. A car company is in the process of building a car that uses hydrogen for fuel.
6. Caterpillar just released a new model of bulldozers across the United States.
7. New-product ideas at McDonald’s are analyzed to determine whether they are
feasible and match the company’s objectives.
 Developing and Managing Products
Product mix adjustments. Why?
• Attitudes and preferences • Competitive landscape.
change, desire may wane. • Delete a product as result of
• Expand to take advantage of competitor dominance.
excess marketing and production • Introduce a new product or modify
an existing one to compete more
capacity. efficiently.
 Managing Existing Products
Line extension: company creates a new product in the same
product line of an existing brand.
 Managing Existing Products
Line extension advantages
• Less expensive and less risky than introducing a new product.
• May focus on a different market segment or attempt to increase
sales within the same market segment by more precisely
satisfying the needs of people in that segment.
• The success is enhanced if the parent brand has a high-quality
brand image and if there is a good fit.
• Can take market share from competitors.
 Managing Existing Products
Line extension versus brand extension
Both are strategies for expanding the product portfolio and
reaching new customers.
➢Line extension: company introduces new products within the
same category under the existing brand. Less risk (positive
brand association).
➢Brand extension: company uses an existing brand name to
launch a new product or service in a different category or
market.
 Managing Existing Products
Product modifications: Changes in one or more characteristics of
a product. Original product does not remain in the product line.

To successfully modify,
• Product needs to be modifiable.
• Customers must be able to notice the product modification.
• The modified product needs to satisfy consumers' needs and
wants more than before.
 Managing Existing Products
Types of product modifications
• Quality modifications – Changes relating to a product’s quality,
dependability and durability.
• Functional modifications – Changes affecting a product’s
versatility, effectiveness, convenience, or safety.
• Aesthetic modifications – Changes relating to the sensory
appeal of a product.
 Managing Existing Products
Name it! (Quality, Functional, Aesthetic)
1. Apple released a new model of the iPhone equipped with the
intelligent personal assistant Siri.
2. Gap introduces a popular summer T-shirt in a new color.
3. Kraft begins changing the packaging of its snack foods to make
them easier for elderly customers to open.
4. Prada decided to change the design of one of its more expensive
handbags.
5. Diet Coke Lime is now made with all-natural lime flavor.
6. A coffee shop decides to offer its coffees made with organic milk.
 Product Differentiation
Product differentiation – Creating and designing products so
that customers perceive them as different from competing
products.

Consumer perception is critical in differentiating products. Three

aspects of product differentiation companies must consider
when creating and offering products for sale:
• Product quality
• Product design and features
• Product support services
 Product Quality
Quality – The overall characteristics of a product that allow it to
perform as expected in satisfying customer needs.
Two dimensions of quality:
• Level of quality – The amount of quality a product processes.
• Consistency of quality – The degree to which a product has the
same level of quality over time.
 Product Design & Features
Product design – How a product is conceived, planned, and
produced.
Styling Functionality Usefulness

Product feature – specific function or characteristic of a product

that provides value to customers. It can include capabilities,
design elements, or performance upgrades.
 Product Design & Features
Product features can be:
Physical: What a product has. Its material and composition (Made
from 18 Carat Gold) ...
Functional: What a product does. Its capabilities (This product works
with multiple devices)
Added value: What a product comes with.
Product benefits: the positive outcomes or values that customers
receive from using a product or service. They are the reasons why
customers buy products and are typically communicated through
marketing messages and product descriptions.
Product Design & Features
 Product Service
Service increasingly important for competitive advantage:
1. Differentiation in saturated markets.
2. Enhanced customer experience.
3. Building customer loyalty.
4. Reducing customer churn.
5. Positive brand reputation.
 Product Service
Service hall of fame
• Apple’s Genius Bar
• Amazon Prime’s One-Day Delivery
• Zappos 24/7 Customer Support
 Product Positioning
Product positioning is where
your product or service fits
into its market, what features
make it unique and why it's
better than competitors'
offerings. It considers your
target market's needs and
wants and aims to fulfil them.
 Perceptual Mapping
Perceptual mapping: visual technique that shows how customers perceive
different products, brands, or items. It's a useful tool for businesses because
it helps them understand customer opinions, identify market opportunities,
and make strategic choices. Helps marketers:
• Understand how your customers perceive your products or services in
relation to your competitors.
• Identify gaps, opportunities, and threats in your market.
• Guide you to develop more effective marketing strategies.
• Enhance brand identity.
• Bolster feature adoption.
• Improve customer satisfaction.
 Product Positioning
Product positioning: marketing concept that involves creative
and distinct perceptions of a product brand in the minds of
consumers relative to competing products or brand in the
market.
It is about shaping how consumers perceive and understand the
unique value proposition of a product and differentiating it from
others in the marketplace.
➢Goal is to occupy a specific and favorable position in the target
market, establishing a competitive advantage and influencing
consumer preferences and purchasing decisions.
 Product Positioning
Common bases for product positioning
• Price: more affordable option on the market.
• Quality: Convey your product as high quality or luxury. This can be an
effective positioning strategy against product rivals that are competing on
price.
• User: Target a specific user group, demographic, or application that is
relevant to your product.
• Product type: Shift customer perceptions and reach new market
segmentations by selecting an alternate category for your product.
• Competitor: Demonstrate directly or indirectly that your product is better
than a competitor's product.
• Differentiation: completely unique offering in the market that cannot be
easily duplicated.
 Product Repositioning
Repositioning refers to the process of changing a target market's
understanding or perception of a product or service.

Changing where the product is sold and promoted

A change to the product itself might be required.
can bring in new customers and revenue. If a
This is especially true for products that aren't
brand is only sold and marketed in a certain
keeping up with current technology trends.
region, it could expand into new regions.

A company might need to change the way they

Changing the price can change the view of the
promote their products. This is a very common
product. Most cases involve a downward change
strategy and is seen when the tone and content
in pricing, but an upward change can happen in
of advertising change dramatically. Further, a
certain cases.
different target market may be selected.
 Product Repositioning
The concept of repositioning can be confused with the idea of rebranding.
➢When you reposition a product, you are changing the way your customers
perceive a familiar brand. This can involve establishing a new mission
statement or message, introducing new products, or altering the way your
brand communicates with customers. The goal of these changes is to regain
the trust of your most loyal customers while also appealing to the target
market.
➢Conversely, rebranding involves entirely changing the identity of your brand.
This may include designing a new logo or choosing a new name for the
brand or certain products. Rebranding allows a company to build a new
identity from the ground up. The goal of rebranding is often to distance the
brand from its previous reputation and to facilitate a fresh start for the
company.
 Product Deletion
Product deletion – Eliminating a product from the product mix
when it no longer satisfies enough customers. Considerations:
• A declining product reduces an organization’s profitability and
drains resources that could be used to modify other products or
develop new ones.
• A marginal product may require shorter production runs, which
can increase per-unit production costs.
• When a dying product loses favor with customers, the negative
feelings may transfer to some of the company’s other products.
 Organizational structure overview
Future careers!
Product manager – The person within an organization who is responsible for a
product, a product line, or several distinct products that make up a group.

Brand manager – The person responsible for a single brand.

Market manager – The person responsible for managing the marketing

activities that serve a particular group of customers.

Venture team – A cross-functional group that creates entirely new products

that may be aimed at new markets.
Organizational structure overview
Product manager is responsible for defining in detail the
product to be built and validating that product with real
customers.

Product marketing manager is responsible for branding the

product (positioning, messaging, pricing, managing, launching
products, and leading marketing programs.

Project manager leads the execution; manages the task

breakdown, sets deadlines, manages resources,
communicates day to day operations to shareholders.
 What’s next
• Wednesday – Exam 3

• Week of March 25 is PRICE WEEK for MKTG 361

• Monday, March 25: Chapter 19, “Pricing Concepts”
• Wednesday, March 27: Chapter 20, “Setting Prices”

• Team Leaders: schedule meeting with your preceptors