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 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. 278 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 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
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Photo: Samsung
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 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.
Learning Objective 1
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Key Term: New
product development
Learning Objective 2
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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.
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.
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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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Key Term: Idea
screening
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Key Term: Product
concept
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Photo: Tesla
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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 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
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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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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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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
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 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.
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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
Assignments, Resources
Use Discussion Question 9-4 here
Use Critical Thinking Exercises 9-7 and 9-8 here
Use Video Case here
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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.
Each of the life-cycle stages calls for a different marketing
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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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.
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.
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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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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 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, telecommunications, 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