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Chapter 12Developing and
Managing Products
12 | 3Copyright © Houghton Mifflin Company. All rights reserved.
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
12 | 4Copyright © Houghton Mifflin Company. All rights reserved.
Managing Existing Products
• Line Extensions
• Product Modifications
• Quality Modifications
• Functional Modifications
• Aesthetic Modifications
12 | 5Copyright © Houghton Mifflin Company. All rights reserved.
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.
12 | 6Copyright © Houghton Mifflin Company. All rights reserved.
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
12 | 7Copyright © Houghton Mifflin Company. All rights reserved.
Product Modification
Changes in one or more characteristics of a product.
12 | 8Copyright © Houghton Mifflin Company. All rights reserved.
Conditions OfProduct Modification
Must be modifiable
Perceive modification has occurred
Makes product more consistent with customers’ desires
Risk = previous purchaser may view as riskier purchase
12 | 9Copyright © Houghton Mifflin Company. All rights reserved.
Methods OfProduct Modification
Quality
Functional
Aesthetic
12 | 10Copyright © Houghton Mifflin Company. All rights reserved.
Quality Modifications
• Changes relating to a product’s dependability and durability.– Reducing quality = lower price
– Increasing quality = competitive edge
12 | 11Copyright © Houghton Mifflin Company. All rights reserved.
Functional Modifications
Changes affecting a product’s versatility, effectiveness, convenience, or safety.
12 | 12Copyright © Houghton Mifflin Company. All rights reserved.
Benefits OfFunctional Modifications
Stronger competitive position Achieve/maintain progressive image Reduce possibility of product liability
lawsuits
12 | 13Copyright © Houghton Mifflin Company. All rights reserved.
Aesthetic Modifications
Changes relating to the sensory appeal of a product. Such as taste, texture, sound, smell, and appearance.
12 | 14Copyright © Houghton Mifflin Company. All rights reserved.
Aesthetic Modifications
Benefit Differentiate product
Drawback
- Value is subjective
12 | 15Copyright © Houghton Mifflin Company. All rights reserved.
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 OfNew-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.
12 | 19Copyright © Houghton Mifflin Company. All rights reserved.
Concept Testing
Seeking a sample of potential buyers’ responses to a product idea.
12 | 20Copyright © Houghton Mifflin Company. All rights reserved.
Concept TestFor A New Product
12 | 21Copyright © Houghton Mifflin Company. All rights reserved.
Business Analysis
Evaluating the potential impact of a product idea on the firm’s sales, costs, and profits
12 | 22Copyright © Houghton Mifflin Company. All rights reserved.
Product Development
Determining if producing a product is feasible and cost effective.
12 | 23Copyright © Houghton Mifflin Company. All rights reserved.
Test Marketing
A limited introduction of a product in geographic areas chosen to represent the intended market.
12 | 24Copyright © Houghton Mifflin Company. All rights reserved.
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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PopularTest 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 itto 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
12 | 31Copyright © Houghton Mifflin Company. All rights reserved.
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
12 | 32Copyright © Houghton Mifflin Company. All rights reserved.
Product Deletion
Eliminating a product from the product mix when it no longer satisfies a sufficient number of customers.
12 | 33Copyright © Houghton Mifflin Company. All rights reserved.
Product Deletion Process
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Organizing To DevelopAnd Manage Products
Product Manager
Brand Manager
Market Manager
Venture Team
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