Chapter 12
Developing and
Managing Products
Objectives
• Understand how companies manage existing
products through line extension and product
modifications
• Describe the development of product ideas into
commercial products
• Understand importance of product differentiation
and elements that differentiate products
• Examine use of product deletion to improve
product mix
• Describe organizational structures used for
managing products
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Managing Existing Products
•
•
•
•
•
Line Extensions
Product Modifications
Quality Modifications
Functional Modifications
Aesthetic Modifications
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Line Extension
Development of a product that is closely
related to existing products in the line but
is designed specifically to meet different
customer needs.
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Purpose of Line Extensions
 Focus on different segment
 More precisely satisfy needs of current
segment
 Capture market share from competitors
 Might result in negative view of core
product
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Product Modification
Changes in one or more characteristics
of a product.
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Conditions Of
Product Modification
 Must be modifiable
 Perceive modification has occurred
 Makes product more consistent with
customers’ desires
 Risk = previous purchaser may view
as riskier purchase
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Methods Of
Product Modification
 Quality
 Functional
 Aesthetic
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Quality Modifications
• Changes relating to a product’s
dependability and durability.
– Reducing quality = lower price
– Increasing quality = competitive edge
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Functional Modifications
Changes affecting a product’s versatility,
effectiveness, convenience, or safety.
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Benefits Of
Functional Modifications
 Stronger competitive position
 Achieve/maintain progressive image
 Reduce possibility of product liability
lawsuits
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Aesthetic Modifications
Changes relating to the sensory appeal
of a product. Such as taste, texture,
sound, smell, and appearance.
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Aesthetic Modifications
Benefit
 Differentiate product
Drawback
- Value is subjective
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Developing New Products
• New product development process
– A seven-phase process for introducing
products: idea generation, screening,
concept testing, business analysis,
product development, test marketing,
and commercialization
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Phases Of
New-Product
Development
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Idea Generation
Seeking product ideas to achieve
organizational objectives.
Magazine of Innovation
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Screening
Selecting the ideas with the greatest
potential for further review.
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Concept Testing
Seeking a sample of potential buyers’
responses to a product idea.
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Concept Test
For A New
Product
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Business Analysis
Evaluating the potential impact of a product
idea on the firm’s sales, costs, and profits
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Product Development
Determining if producing a product is feasible
and cost effective.
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Test Marketing
A limited introduction of a product in
geographic areas chosen to represent
the intended market.
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Benefits Of Test Marketing
• Expose product to marketing environment
and assess sales performance
• Identify weaknesses in product or
marketing mix
• Experiment with variations in marketing mix
• Reduce risk of failure
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Popular
Test Markets
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Commercialization
Refining and finalizing plans and budgets
for full-scale manufacturing and marketing
of a product
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National Market
Commercialization
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Product Differentiation through Quality,
Design, and Support Services
• Product Differentiation
– Creating and designing products so that
customers perceive them as different from
competing products.
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Product Differentiation
 Quality- characteristics to perform
as expected
- Level
- Consistency
 Design and features
- Styling
- Features
 Support services- add value
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Product Quality
• Quality – characteristics of a product allowing it
to perform as expected in satisfying customer needs
• Level of quality – the amount of quality a
product possesses
• Consistency of quality – the degree to which
a product has the same level of quality over time
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Product Design and Features
• Product design – conception, plan, and production
of a product
• Styling – physical appearance of a product
• Product features – specific design characteristics
that allow a product to perform certain tasks
• Customer services – human or mechanical efforts
or activities that add value to a product
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Product Deletion
Eliminating a product from the product mix
when it no longer satisfies a sufficient
number of customers.
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Product Deletion Process
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Organizing To Develop
And Manage Products
 Product Manager
 Brand Manager
 Market Manager
 Venture Team
 18 Steps
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