Chapter 9
DEVELOPING NEW PRODUCTS AND MANAGING THE
PRODUCT LIFE CYCLE
MARKETING STARTER: CHAPTER 9
SAMSUNG: Enriching Customers’ Lives through New-Product Innovation
Synopsis
Twenty years ago, Samsung was known as a Korean copycat brand; the brand you bought if you couldn’t afford a
Sony product, at that time the most coveted consumer electronics brand. Now, Samsung is number 13 on Fortune’s
Global 500, two spots ahead of Apple. Samsung passed Sony in less than 10 years. It accomplished this
transformation by committing to change its entire culture, from copycat to leading edge. The leadership realized that
if it wanted to surpass Sony, and outsell Sony, it had to out-innovate Sony. Every new product had to pass the
“Wow!” test: If it didn’t get a “Wow!” reaction during market testing, it went back to the design studio. Samsung’s
primary innovation goal was to improve the customer experience and bring genuine change to people’s lives in
everything it did. Currently, the company is investing heavily in the “Internet of Things” as it realizes that staying on
top means continuing to innovate. Samsung remains focused on “creating amazing experiences, [on doing] what is
right by customers.”
Discussion Objective
A well-focused discussion of innovation at Samsung will open students’ eyes to how prolific a company can be in
developing customer-centered new products, and it will show the foundations underlying such imaginative
new-product productivity. The goal is to help students appreciate the essence of Samsung’s relentless
customer-focused innovation process and how forward-looking it is.
Starting the Discussion
Start by visiting the Samsung website (http://www.samsung.com/us/). Review the product tabs at the top, showing
the categories in which Samsung competes: Mobile, TV & Audio, Computing, and Appliances. Check out the
variety of products the company offers. Look at the Samsung SmartThings, the newest innovative area, where some
of the “Internet of Things” products will be found. Once you’ve drawn out the almost overwhelming list of Samsung
innovations, discuss the Samsung innovation process. Keep in mind that the purpose of the discussion is not to
discuss every Samsung product; rather, it’s to show the scope of Samsung’s innovations and the process behind their
development.
Discussion Questions
1. Name some Samsung products. Which Samsung products do you use? (Develop a quick starting list. Initial
responses will probably include more common products such as Galaxy smartphones and tablets, Samsung
TVs, and laptops. But digging deeper shows the mind-boggling scope and innovativeness of Samsung’s
portfolio. Note that in addition to those common products, apps, printers, home theater, virtual reality,
headphones, and many household appliances are on the list. Refrigerators, dishwashers, ranges, washers
and dryers, even home security can be found here. Again, the goal is not to discuss specific products but to
convey the sheer magnitude of innovative products from Samsung and their variety.)
2. “We have to show consumers what’s in it for them and what the Internet of Things can achieve,” says
Samsung’s CEO. “To transform our economy, society, and how we live our lives.” Adds another Samsung
executive: “We will focus on creating amazing experiences, [on doing] what is right by customers.” In
terms of new product development, what do these quotes mean to you? (Beyond cutting-edge technology,
Samsung puts the customer at the core of its innovation movement.)
3. How does the chapter-opening Samsung story relate to the concepts in Chapter 9? (Use the Samsung story to
transition into chapter concepts such as the eight-step process for developing new products. But more
Copyright© 2018 Pearson Education
important than the steps in any process is the idea that new-product development must be systematic,
team-based, and—most important—customer centered. Does Samsung follow this approach?)
CHAPTER OVERVIEW
Use Power Point Slide 9-1 Here
In this chapter, we’ll look into two product topics:
1. Developing new products
2. Managing products through their life cycles.
New-product development is risky, and many new products fail. The first part of this chapter lays
out a process for finding and growing successful new products. In the second part of the chapter,
we see that every product passes through several life-cycle stages and that each stage poses new
challenges requiring different marketing strategies and tactics. Finally, we look at two additional
considerations, social responsibility in product decisions and international product and services
marketing.
CHAPTER OBJECTIVES
Use Power Point Slide 9-2 here
1. Explain how companies find and develop new product ideas.
2. List and define the steps in the new product development process and the major
considerations in managing this process.
3. Describe the stages of the product life cycle and how marketing strategies change during a
product’s life cycle.
4. Discuss two additional product issues: Socially responsible product decisions and
international product and services marketing.
CHAPTER OUTLINE
p. 254 INTRODUCTION
Samsung is one of the world’s largest consumer electronics
companies, and it ranks 13th on Fortune’s Global 500, two
spots above Apple. It is also a fixture on every list of
most-innovative companies.
Samsung has been dominant in recent years at the
International Design Excellence Awards (IDEA)
presentations— the Academy Awards of the design world—
that judges new products based on appearance, functionality,
and inspirational thinking. For the past three years, Samsung
has been the top corporate winner, claiming more than twice
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Photo: Samsung
Copyright© 2018 Pearson Education
as many awards as the next runner-up.
Samsung also realizes that today’s “gotta have it” products
can be tomorrow’s has-beens. The electronics powerhouse is
constantly on the prowl for the “next big thing,” regardless
of the product category. To that end, Samsung’s market
intelligence and product innovation teams around the globe
continually research product usage, purchase behavior, and
lifestyle trends, looking for consumer insights and innovative
new ways to meet consumer needs.
Twenty years ago, few people would have predicted that
Samsung could have transformed itself so quickly and
completely from a low-cost copycat manufacturer into a
world-leading innovator of stylish, high-performing,
premium products. But through a dedication to
customer-focused new-product innovation, that’s exactly
what Samsung has done. And even recently, few would have
predicted that Samsung would be a driving force behind
creating a digitally interconnected world. Yet Samsung
seems well on its way to accomplishing that as well.
Opening Vignette Questions
1. Describe Samsung’s secret to innovation. What
exactly does it do better than its competitors?
2. How does Samsung thrive in its competitive new
product development environment?
3. Recall this quote from Samsung’s CEO: “We
have to show consumers what’s in it for them and
what the Internet of Things can achieve, to
transform our economy, society, and how we live
our lives.” Do you agree with this business
approach? Explain.
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Explain how companies find and develop new product
ideas.
NEW PRODUCT DEVELOPMENT STRATEGY
A firm can obtain new products in two ways.
1. Acquisition—by buying a whole company, a patent,
or a license to produce someone else’s product
2. New product development efforts
There are a number of reasons new products may fail.
Innovation can be expensive and risky. New products face
tough odds. An idea may be good, but the market size may
Learning Objective
1
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Key Term: New
product
development
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be overestimated. The product may be poorly designed,
launched at the wrong time, priced incorrectly, or poorly
advertised.
Review Learning Objective 1: Explain how companies find
and develop new product ideas.
List and define the steps in the new product development
process and the major considerations in managing this
process.
THE NEW PRODUCT DEVELOPMENT PROCESS
Figure 9.1 shows the eight major steps in the new product
development process.
Idea Generation
Idea generation is the systematic search for new product
ideas.
Internal Idea Sources
Using internal sources, the company can find new ideas
through formal research and development. Or it can pick the
brains of employees—from executives to scientists,
engineers, and manufacturing staff to salespeople.
External Idea Sources
Companies can also obtain good new product ideas from a
number of external sources, such as distributors and
suppliers, or even competitors.
Perhaps the most important source of new product ideas is
customers themselves.
Crowdsourcing
Crowdsourcing throws the innovation doors wide open,
inviting broad communities of people into the new product
innovation process.
When it comes to helping to improve products and services,
many heads are better than one. Crowdsourcing can produce
a flood of innovative ideas.
Learning Objective
2
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Key Term: Idea
generation
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Figure 9.1: Major
Stages in New
Product
Development
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Photo: LEGO
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Key Term:
Crowdsourcing
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Ad: Under Armour
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Idea Screening
The first idea-reducing stage is idea screening, which helps
spot good ideas and drop poor ones as soon as possible.
Concept Development and Testing
A product idea is an idea for a possible product that the
company can see itself offering to the market.
A product concept is a detailed version of the idea stated in
meaningful consumer terms.
A product image is the way consumers perceive an actual or
potential product.
Concept Development
In concept development, several descriptions of the product
are generated to find out how attractive each concept is to
customers. From these concepts, the best one is chosen.
Concept Testing
Concept testing calls for testing new product concepts with
groups of target consumers.
Marketing Strategy Development
Marketing strategy development involves designing an
initial marketing strategy for introducing a product to the
market.
The marketing strategy statement consists of three parts.
1. A description of the target market; the planned value
proposition; and the sales, market share, and profit
goals for the first few years.
2. Outline of the product’s planned price, distribution,
and marketing budget for the first year.
3. Description of the planned long-run sales, profit
goals, and marketing mix strategy.
Business Analysis
Business analysis involves a review of the sales, costs, and
profit projections for a new product to find out whether they
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Key Term: Idea
screening
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Key Term: Product
concept
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Photo: Tesla
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Key Terms:
Concept testing,
Marketing strategy
development
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Table 9.1:
Questions for the
All-Electric Car
Concept Test
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Key Term: Business
analysis
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satisfy the company’s objectives.
Product Development
In product development, R&D or engineering develops the
product concept into a physical product.
The product development step calls for a large jump in
investment. The new product must have the required
functional features and must also convey the intended
psychological characteristics.
Test Marketing
Test marketing is the stage at which the product and
marketing program are introduced into realistic market
settings.
The amount of test marketing needed varies with each new
product. Test marketing costs can be high, and it takes time
that may allow competitors to gain advantages. When the
costs of developing and introducing the product are low, or
when management is already confident about the new
product, the company may do little or no test marketing. In
fact, test marketing by consumer-goods firms has been
declining in recent years. Companies often do not
test-market simple line extensions or copies of competitors’
successful products.
However, when introducing a new product requires a big
investment, when the risks are high, or when management is
not sure of the product or its marketing program, a company
may do a lot of test marketing.
In controlled test markets new products and tactics are tested
among controlled groups of customers and stores. Within test
stores, such factors as shelf placement, price, and in-store
promotions for the products being tested can be controlled.
In simulated test markets, researchers measure consumer
responses to new products and marketing tactics in
laboratory stores or simulated shopping environments. Many
marketers use online simulated marketing technologies to
reduce the costs of test marketing and speed up the process.
Commercialization
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Key Term: Product
development
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Photo: Carhartt
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Key Term: Test
marketing
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Photo: Starbucks
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Commercialization means introducing the new product into
the market.
Decisions must be made concerning:
Timing
Where to launch the new product
Market rollout
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Key Term:
Commercialization
Assignments, Resources
Use Real Marketing 9.1 here
Use Discussion Questions 9-1, 9-2, and 9-3 here
Use Critical Thinking Exercise 9-6 here
Use Additional Projects 1 and 2 here
Use Small Group Assignment 1 here
Use Outside Example 1 here
Troubleshooting Tip
Understanding the systematic nature of the new
product development process will cause problems for
some students. They will have some difficulty
understanding why a process is needed at all, and
they will also not realize how development costs rise
at every stage. Finally, the amount of analysis that
goes into the screening phases might be a surprise to
them. To overcome these barriers, come up with a
new product idea in class and review how you might
develop it into a viable product.
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MANAGING NEW PRODUCT DEVELOPMENT
Customer-Centered New Product Development
Above all else, new product development must be customer
centered.
Customer-centered new product development focuses on
finding new ways to solve customer problems and create
more customer-satisfying experiences.
Team-Based New Product Development
Under the sequential product development approach, one
company department works individually to complete its
stage of the process before passing the new product along to
the next department and stage.
This orderly, step-by-step process can help bring control to
complex and risky projects. But it also can be dangerously
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Key Term:
Customer-centered
new product
development
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Ad: Intuit
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Key Term:
Team-based new
product
development
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slow.
In order to get their new products to market more quickly,
many companies use a team-based new product
development approach.
Under this approach, company departments work closely
together in cross-functional teams, overlapping the steps in
the product development process to save time and increase
effectiveness.
Instead of passing the new product from department to
department, the company assembles a team of people from
various departments that stay with the new product from start
to finish.
Systematic New-Product Development
An innovation management system can be used to collect,
review, evaluate, and manage new-product ideas.
The innovation management system approach yields two
favorable outcomes:
1. It helps create an innovation-oriented company
culture.
2. It will yield a larger number of new product ideas,
among which will be found some especially good
ones.
Review Learning Objective 2: List and define the steps in
the new product development process and the major
considerations in managing this process.
Assignments, Resources
Use Discussion Question 9-4 here
Use Critical Thinking Exercises 9-7 and 9-8 here
Use Video Case here
Copyright© 2018 Pearson Education
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Describe the stages of the product life cycle and how
marketing strategies change during a product’s life cycle.
PRODUCT LIFE-CYCLE STRATEGIES
Figure 9.2 shows a typical product life cycle (PLC), the
course that a product’s sales and profits take over its lifetime.
The product life cycle has five distinct stages:
1. Product development begins when the company finds
and develops a new product idea. During product
development, sales are zero, and the company’s
investment costs mount.
2. Introduction is a period of slow sales growth as the
product is introduced in the market. Profits are
nonexistent in this stage because of the heavy expenses
of product introduction.
3. Growth is a period of rapid market acceptance and
increasing profits.
4. Maturity is a period of slowdown in sales growth because
the product has achieved acceptance by most potential
buyers. Profits level off or decline because of increased
marketing outlays to defend the product against
competition.
5. Decline is the period when sales fall off and profits drop.
The PLC concept can describe a product class
(gasoline-powered automobiles), a product form (SUVs), or
a brand (the Ford Escape).
Product classes have the longest life cycles. Product forms,
in contrast, have the standard PLC shape.
A product brand’s PLC can change quickly because of
changing competitive attacks and responses.
The PLC also can be applied to styles, fashions, and fads
(Figure 9.3).
A style is a basic and distinctive mode of expression.
A fashion is a currently accepted or popular style in a
given field.
Fads are temporary periods of unusually high sales
driven by consumer enthusiasm and immediate
product or brand popularity.
Learning Objective
3
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Key Term: Product
life cycle (PLC)
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Figure 9.2: Sales
and Profits over the
Product’s Life from
Inception to Decline
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Photo: Google and
Alphabet
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Ad: Life Savers
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Key Terms: Style,
Fashion, Fad
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Figure 9.3: Styles,
Fashions, and Fads
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Each of the life-cycle stages calls for a different marketing
strategy.
Introduction Stage
The introduction stage starts when the new product is first
launched. Profits are negative or low, promotion spending is
relatively high, and only basic versions of the product are
produced.
Growth Stage
The growth stage is where sales begin to climb quickly.
New competitors will enter the market. They will introduce
new product features, and the market will expand.
The increase in competitors leads to an increase in the
number of distribution outlets. Prices remain stable or
decrease slightly.
Profits also may increase during the growth stage.
Maturity Stage
The maturity stage is characterized by slowing product
growth.
The slowdown in sales growth results in many producers
with many products to sell.
Competitors begin marking down prices, increasing their
advertising and sales promotions, and upping their
product-development budgets to find better versions of the
product. These steps lead to a drop in profit.
Product managers should consider modifying the market,
product, and marketing mix.
In modifying the market, the company tries to increase the
consumption of the current product.
In modifying the product, the company tries changing
characteristics such as quality, features, style, or packaging
to attract new users and to inspire more usage.
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Photo: Mattel
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Key Terms:
Introduction stage,
Growth stage
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Key Term: Maturity
stage
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Ad: Quaker
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In modifying the marketing mix, the company tries changing
one or more marketing mix elements.
Decline Stage
The sales of most product forms and brands eventually dip.
This is the decline stage.
Management may decide to maintain its brand without
change in the hope that competitors will leave the industry.
Management may decide to harvest a product, which means
reducing various costs (plant and equipment, maintenance,
R&D, advertising, sales force) and hoping that sales hold up.
Management may decide to drop the product from the line.
Review Learning Objective 3: Describe the stages of the
product life cycle and how marketing strategies change
during a product’s life cycle.
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Key Term: Decline
stage
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Table 9.2: Summary
of Product
Life-Cycle
Characteristics,
Objectives, and
Strategies
Assignments, Resources
Use Real Marketing 9.2 here
Use Discussion Question 9-5 here
Use Critical Thinking Exercise 9-8 here
Use Online, Mobile, and Social Media Marketing
here
Use Marketing Ethics here
Use Marketing by the Numbers here
Use Company Case here
Use Additional Project 3, 4, and 5 here
Use Small Group Assignment 2 here
Use Individual Assignment 1 and 2 here
Use Outside Example 2 here
Troubleshooting Tips
1) The phases of the product life cycle, and the fact
that it can apply to product classes, forms, and
brands, can be difficult to understand at first.
Discussing brands that are in each stage helps
tremendously, as does discussing products that have
successfully moved back from decline into maturity
or growth (e.g., Arm & Hammer baking soda).
2) The differences among fads, fashions, and styles
can be explained by asking the students to discuss
clothing in those terms. Because these items are
Copyright© 2018 Pearson Education
routinely discussed regarding fashions and styles,
students can easily internalize the differences in
meaning of these terms.
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Discuss two additional product issues: Socially
responsible product decisions and international product
and services marketing.
ADDITIONAL PRODUCT AND SERVICE
CONSIDERATIONS
Product Decisions and Social Responsibility
Marketers should consider public policy issues and
regulations regarding acquiring or dropping products, patent
protection, product quality and safety, and product
warranties.
Regarding new products, the government may prevent
companies from adding products through acquisitions if the
effect threatens to lessen competition.
Manufacturers must comply with specific laws regarding
product quality and safety.
International Product and Services Marketing
International product and service marketers face special
challenges.
They must determine what products and services to
introduce and in which countries.
They must decide how much to standardize or adapt
their products and services for world markets.
Packaging presents new challenges for international
marketers.
The trend toward growth of global service companies will
continue, especially in banking, airlines, telecommuni–
cations, and professional services.
Review Learning Objective 4: Discuss two additional
product issues: Socially responsible product decisions and
international product and services marketing.
Learning Objective
4
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Photo: McDonald’s
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