Chapter 11
Developing and Managing Products
This chapter begins with the learning outcome summaries followed by a set of lesson plans for
instructors to use to deliver the content.
Lecture (for large sections) on page 3
Company Clips (video) on page 5
Group Work (for smaller sections) on page 7
Review and Assignments begin on page 8
Review questions
Application questions
Application exercise
Ethics exercise
Video assignment
Case assignment
Great Ideas for Teaching Marketing from faculty around the country begin on page 18
Learning Outcomes
11-1 Explain the importance of developing new products and describe the six categories
of new products
New products are important to sustain growth, increase revenues and profits, and replace
obsolete items. Some companies spend a considerable amount of money each year for
developing new products. The term “new product” is somewhat confusing because its meaning
varies widely. Actually, the term has several “correct” definitions. A product can be new to the
world, to the market, to the producer or seller, or to some combination of these. There are six
categories of new products: new-to-the-world products (discontinuous innovations), new product
lines, additions to existing product lines, improvements or revisions of existing products,
repositioned products, or lower-priced products.
11-2 Explain the steps in the new-product development process
The management consulting firm Booz Allen Hamilton has studied the new-product
development process for more than 30 years. Analyzing five major studies undertaken during this
period, the firm has concluded that the companies most likely to succeed in developing and
introducing new products are those that take the following actions: make the long-term
commitment needed to support innovation and new-product development. Use a
company-specific approach, driven by corporate objectives and strategies, with a well-defined
new-product strategy at its core. Capitalize on experience to achieve and maintain competitive
advantage. Establish an environment—a management style, organizational structure, and degree
of top management support—conducive to achieving company-specific new-product and
corporate objectives. First, a new-product strategy links the new-product development process
with the objectives of the marketing department, the business unit, and the corporation. . Then
new-product ideas are generated by customers, employees, distributors, competitors, R&D,
consultants, and other experts. After new ideas have been generated, they pass through the first
filter in the product development process. This stage, called screening, eliminates ideas that are
inconsistent with the organization’s new-product strategy or are obviously inappropriate for some
other reason. New-product ideas that survive the initial screening process move to the business
analysis stage, where preliminary figures for demand, cost, sales, and profitability are calculated.
Laboratory tests are often conducted on prototype models during the development stage. Test
marketing is the limited introduction of a product and a marketing program to determine the
reactions of potential customers in a market situation. Another alternative to traditional test
marketing is simulated (laboratory) market testing. Advertising and other promotional materials
for several products, including the test product, are shown to members of the product’s target
market. The final stage in the new-product development process is commercialization, the
decision to market a product. The decision to commercialize the product sets several tasks in
motion: ordering production materials and equipment, starting production, building inventories,
shipping the product to field distribution points, training the sales force, announcing the new
product to the trade, and advertising to potential customers.
11-3 Understand why some products succeed and others fail
Despite the amount of time and money spent on developing and testing new products, a large
proportion of new-product introductions fail. Products fail for a number of reasons. One common
reason is that they simply do not offer any discernible benefit compared to existing products.
Another commonly cited factor in new-product failures is a poor match between product features
and customer desires. Failure can be a matter of degree—absolute failure occurs when a
company cannot recoup its development, marketing, and production costs, while relative product
failure occurs when the product returns a profit but fails to achieve sales, profit, or market share
goals.
11–4Discuss global issues in new-product development
Increasing globalization of markets and competition provides a reason for multinational firms to
consider new-product development from a worldwide perspective. A firm that starts with a global
strategy is better able to develop products that are marketable worldwide. In many multinational
corporations, every product is developed for potential worldwide distribution, and unique market
requirements are satisfied during development whenever possible. Some global marketers design
their products to meet regulations in their major markets and then, if necessary, meet smaller
markets’ requirements country by country.
11-5 Explain the diffusion process through which new products are adopted
Managers have a better chance of successfully marketing products if they understand how
consumers learn about and adopt products. An innovation is a product perceived as new by a
potential adopter. Diffusion is the process by which the adoption of an innovation spreads. Five
categories of adopters participate in the diffusion process: innovators, early adopters, the early
majority, the late majority, and laggards. Product characteristics that can be used to predict and
explain the rate of acceptance and diffusion of a new product including product complexity,
compatibility with existing values, relative advantage over existing substitutes, observability, and
“trialability” can be helpful. Two types of communication aid the diffusion process:
word-of-mouth communication among consumers and communication from marketers to
consumers.
11-6 Explain the concept of product life cycles
The product life cycle (PLC) is one of the most familiar concepts in marketing. Product
categories have the longest life cycles. A product category includes all brands that satisfy a
particular type of need, such as shaving products, passenger automobiles, or soft drinks. The time
a product spends in any one stage of the life cycle may vary dramatically. All brands and product
categories undergo a life cycle with four stages: introduction, growth, maturity, and decline
stage. The various categories of adopters buy products in different stages of the life cycle.
Almost all sales in the maturity and decline stages represent repeat purchases.
Key Terms
Brainstorming Growth stage Product development
Business analysis Innovation Product life cycle (PLC)
Commercialization Introductory stage Screening
Concept test Maturity stage Simulated (laboratory) market
testing
Decline stage New product Simultaneous product
development
Development New-product strategy Test marketing
Diffusion Product category
Lesson Plan for Lecture
Suggested Homework
The end of this chapter contains assignments on the GaGa’s Inc. video or the America Online
case.
This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and
other resources that can be assigned or used as the basis for longer investigations into
marketing.
Lesson Plan for Video
Company Clips
Segment Summary: GaGa’s Inc.
Jim King and his wife discuss how they decided to create the company GaGa’s Inc. using the
product Sherbetter. The line expanded from only one flavor, lemon, to several other flavors as
well as Sherbetter bars, the struggles of branding, line extension, and other aspects of the frozen
dessert market.
These teaching notes combine activities that you can assign students to prepare before class,
in-class activities to be done before watching and during the video, and activities that can be
assigned for students to complete after watching the video.
During the viewing portion of the teaching notes, stop the video at appropriate points to ask
students the questions or perform the activities listed on the grid. You may even want to give the
students the questions before starting the video and have them think about the answer while
viewing the segment. That way, students will be engaged in active viewing rather than passive
viewing.
Pre-class Prep for You Pre-class Prep for Your Students
Preview the Company Clips video segment
for Chapter 11. This exercise reviews
concepts for LO1, LO2, LO5, and LO6.
Review your lesson plan.
Stream the video HERE.
Have students review and familiarize
themselves with the following terms and
concepts: types of new products,
new-product development process, spread
of new product, and product life cycles.
Ask students to review the section on test
marketing and think about which U.S.
cities might fit the qualifications of a good
test market.
Video Review Exercise
Activity
Warm-up
Begin by asking students the following question: “What is a product, and why are
products important?”
While students respond, write the following statement on the board: New
products are important to sustain growth, increase revenues and profits, and
replace obsolete items.
In-class
Preview
Review the six categories of new products: new-to-the-world, new product
lines, additions to existing product lines, improvements to existing products,
repositioned products, and lower-priced products.
Discuss Exhibit 11.1, New-Product Development Process with the class.
Review Exhibit 11.2, Four Stages of the Product Life Cycle. Discuss the
product life cycle with students, soliciting from them examples of products
for each life cycle stage.
Review the Company Clips questions below with students, and encourage
them to keep the questions in mind while viewing the video.
Viewing
(Solutions
below)
1. What type of new product is GaGa’s Sherbetter? Why?
2. What stage in the Product Life Cycle does it seem that GaGa’s is in? Explain.
Follow-up
Divide students into groups of three to five, and have them propose a new
product or service for Kodak. Have them discuss and write a brief report on
(1) the product category in which the new product/service belongs; (2) how,
specifically, they would develop the product; and (3) how they would
encourage adoption of that product.
Discuss with the class why Kodak has recently struggled.
Ask students for suggestions on what Kodak can do to regain its success. Ask
students to defend their answers with terms relating to the material of the
chapter. This can also be done in small groups.
If you had students write answers to the viewing questions, give them a few
minutes after viewing to finish their work. You can collect their responses as
an in-class quiz.
Solutions for Viewing Activities
1. What type of new product is GaGa’s Sherbetter? Why?
GaGa’s Sherbetter is most arguably a new-to-the-world product because it was created by
Jim King’s grandmother, but not sold before.
2. What stage in the product life cycle does it seem that GaGa’s is in? Explain.
Students should argue for the introductory stage (which is most likely what they will
choose) because Jim King is trying to educate customers about his product and break into
the frozen dessert market.
Lesson Plan for Group Work
In most cases, group activities should be completed after some chapter content has been covered,
probably in the second or third session of the chapter coverage. (See “Lesson Plan for Lecture”
above.)
For “Class Activity: Generating and Screening New Product Ideas,” provide the information
and the questions asked by the activity.
Application questions 1, 2, 3, and 5 lend themselves well to group work. For those activities,
divide the class into small groups of four or five people. Each group should read the
question and then use their textbooks, or any work completed previously, to perform the
exercise. Each group should discuss or present their work to the class.
Class Activity: Generating and Screening New Product Ideas
In the class activity in Chapter 1, students were asked to consider the range of marketing
activities that a small manufacturer of tennis racquets would undertake. Now the class should
assume that the tennis racquet manufacturer has been very successful in manufacturing and
marketing a single line of inexpensive tennis racquets, aimed at beginners and casual players.
The manufacturer’s current distribution channel is through large discount retailers, such as Kmart
and Walmart. Recently, three major sporting goods chains also began to carry the racquets. The
company puts most of its promotion budget into sales promotion to the retailers and into in-store
displays. The competitive advantage for this company is its low price for good, sturdy tennis
racquets.
The company wishes to expand its operations, either with new products or in new customer
markets.
1. What are some possible new products for this company?
2. Do these products fit the company’s image? Does the firm have the technological or
production expertise needed for these products?
3. If a product is introduced and fails, what effect will the failure have on the company and its
other products?