Chapter 12Developing and

Managing Products

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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 OfProduct 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 OfProduct 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 OfFunctional 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 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.

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Concept Testing

Seeking a sample of potential buyers’ responses to a product idea.

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Concept TestFor 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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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

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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 DevelopAnd Manage Products

Product Manager

Brand Manager

Market Manager

Venture Team

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