Chapter 11 ♦ Developing and Managing Products 11-1
CHAPTER 11 Developing and Managing Products
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their interest in and
attentiveness to the market and new products.
✓ Application Exercise
Kodak invented the digital camera, and it has implemented a
sophisticated design process to keep new innovations on store
shelves.
Students collect a data set of 100 new products and create a grid that
categorizes each product according to new-product type. The
resulting curve demonstrates the text statement that most products
are simply modifications of existing products.
USING THIS MANUAL
Chapter eleven includes six learning outcomes that help students become more familiar with developing and managing
products. The chapter outline provides detailed analysis of these learning outcomes, listing PowerPoint slides and
✓ Global Perspectives
India is leading the way with low-price high-tech gadgets. This case
examines the drive behind developing a tablet computer that will sell
in India for the equivalent of $35, and what that means for global
manufacturers.
11-2 Chapter 11 ♦ Developing and Managing Products
LEARNING OUTCOMES
1 Explain the importance of developing new products and describe the six categories of
new products
New products are important to sustain growth and profits and to replace obsolete items. New products can be classified
2 Explain the steps in the new-product development process
First, a firm forms a new-product strategy by outlining the characteristics and roles of future products. Then new-product
ideas are generated by customers, employees, distributors, competitors, vendors, and internal R&D personnel. Once a
to consumers.
3 Explain why some products succeed and others fail
The most important factor in determining the success of a new product is the extent to which the product matches the
4 Discuss global issues in new-product development
A marketer with global vision seeks to develop products that can easily be adapted to suit local needs. The goal is not
5 Explain the diffusion process through which new products are adopted
The diffusion process is the spread of a new product idea from its producer to the ultimate adopters. Adopters in the
6 Explain the concept of product life cycles
All brands and product categories undergo a life cycle with four stages: introduction, growth, maturity, and decline. The
Chapter 11 ♦ Developing and Managing Products 11-3
CHAPTER OUTLINE
1 Explain the importance of developing new products and
describe the six categories of new products
PowerPoint 11-4:
New Product Advantages
PowerPoint 11-5:
Categories of New
Products
Review Questions 1.1, 1.2
I. The Importance of New Products
A new product can be new-to-the-world, to the market, to the producer or seller,
or to some combination of these.
Being the first on the market has numerous advantages:
• Increased sales through longer sales life
A. Categories of New Products
1. New-to-the-world products are also called discontinuous innovations.
The product category itself is new.
2. New product lines are products the firm has not offered in the past that
allow it to enter an established market.
2 Explain the steps in the new-product development process
PowerPoint 11-8, 11-9:
New-Product
Development Process
II. The New Product Development Process
Companies most likely to succeed in developing and introducing new products are
those that take the following actions:
A. A new-product strategy links the new product development process and the
objectives of the marketing department, business unit, and corporation. All of
those objectives must be consistent.
B. Idea Generation
PowerPoint 11-10:
Idea Generation
PowerPoint 11-11
New product ideas can come from many sources:
1. Customers: The marketing concept suggests that customers’ needs and
wants should be the springboard for developing new products.
4. A vendor may forge partnerships with companies to create proprietary
products.
6. Research and development (R&D) may be a source of new product
ideas and innovation. R&D is carried out in four ways:
a. Basic research is scientific research aimed at discovering new
technologies.
7. Consultants are available to examine a business and recommend
product ideas.
A variety of approaches and techniques have been used to stimulate creative
thinking and generate product ideas:
• Brainstorming is a process for getting a group to think of
PowerPoint 11-12:
C. Idea Screening
Screening is the first filter in the product development process. It eliminates
ideas that are inconsistent with the organization’s new product strategy or are
Chapter 11 ♦ Developing and Managing Products 11-5
Idea Screening
obviously inappropriate for some other reason.
1. Most new product ideas are rejected at this stage.
Review Question 2.2
PowerPoint 11-14:
Business Analysis
D. Business Analysis
1. The business analysis is the second stage of the screening process
where preliminary figures for demand, cost, sales, and profitability are
calculated.
Marketing Metrics
Brand Development Index
Companies looking to expand into new markets or to develop an existing market for
PowerPoint 11-15:
Development
Review Question 2.1
E. Development
In the development stage of the product development process, a prototype is
developed and a marketing strategy is outlined.
Costs increase dramatically as the new product idea moves into the
development stage.
1. In the early stages of development, the research and development or
engineering department may develop a prototype or working model.
4. Some firms use online brain trusts to solve technical problems.
11-6 Chapter 11 ♦ Developing and Managing Products
tests, in which they are placed in consumers’ homes or businesses for
trial.
Review Question 2.3
PowerPoint 11-17:
Test Marketing
F. Test Marketing
After products and marketing programs have been developed, they are
usually tested in the marketplace.
PowerPoint 11-18:
Alternatives to Test
Marketing
PowerPoint 11-19:
Commercialization
1. Costs of test marketing are very high. Some companies choose to
2. Many firms are looking for cheaper or faster alternatives to test
marketing.
a. Supermarket scanner testing (single-source data) keeps track of
3. Despite the problems associated with test marketing, most firms still
consider it essential for new products. Many firms are finding that the
Internet offers a fast, cost-effective way to conduct test marketing.
G. The final stage of the process is commercialization, or launching the
product in the market. The time between the initial commercialization and
the full scale launch varies.
The decision to commercialize a product sets several tasks in motion:
1. Ordering production materials and equipment
3 Explain why some products succeed and others fail
PowerPoint 11-22:
Why New Products Fail
Review Question 3.1
III. Product Success and Failure
Products fail for many reasons
Chapter 11 ♦ Developing and Managing Products 11-7
PowerPoint 11-23, 11-24:
1. They do not offer any discernible benefit
2. Poor match between product features and customer desires
Degrees of failure
1. Absolute failure occurs when a company actually loses money.
The most important factor in successful new-product introduction is a good
match between the product and market needs. Successful new products
deliver a meaningful and perceivable benefit to a sizable number of people or
organizations and are different in some meaningful way from their intended
substitutes.
Success factors:
1. History of listening to customers
2. Obsession with producing the best product possible
4 Discuss global issues in new-product development
PowerPoint 11-27:
Global Issues
IV. Global Issues in New Product Development
A firm that starts with a global strategy is better able to develop products
which are marketable worldwide.
Global Perspectives
A $35 iPad: No Way!
5 Explain the diffusion process through which new products are
adopted
PowerPoint 11-30:
Diffusion
PowerPoint 11-31:
Categories of Adopters
Review Question 5.2
PowerPoint 11-32:
Product Characteristics
and Rate of Adoption
Review Questions 5.1, 5.3
V. The Spread of New Products
A. Diffusion of Innovation
1. An innovation is a product perceived as new by a potential adopter.
2. Diffusion is the process by which the adoption of an innovation
spreads.
Five categories of adopters participate in the diffusion process:
1. Innovators are eager to try new ideas and products, have higher
incomes, and are better educated than non-innovators, and represent the
first 2.5 percent of all those who will adopt.
4. The late majority, the next 34 percent to adopt, do so because most of
their friends have already done so. For them, adoption is the result of
pressure to conform. This group is older than the others and tends to be
below average in income and education.
B. Product Characteristics and the Rate of Adoption
Five product characteristics predict and explain the rate of acceptance and
diffusion of new products:
1. Complexity refers to the degree of difficulty involved in understanding
and using a new product. The more complex the product, the slower its
diffusion.
Chapter 11 ♦ Developing and Managing Products 11-9
PowerPoint 11-34:
Marketing Implications of
the Adoption Process
5. Trialability is the degree to which a product can be tried on a limited
basis.
C. Marketing Implications of the Adoption Process
1. Two types of communication aid in the diffusion process:
6 Explain the concept of product life cycles
PowerPoint 11-37, 11-38
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Product Life Cycle
VI Product Life Cycles
The product life cycle is a biological metaphor that traces the stages of a
product’s acceptance from its introduction to its decline.
1. The product life cycle concept can be used to analyze a brand, a product
form, or a product category, which includes all brands that satisfy a
particular type of need.
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Introductory Stage
A. Introductory Stage
1. The introductory stage of the product life cycle represents the
full-scale launch of a new product into the marketplace.
2. The introductory stage is typified by a high failure rate, little
competition, frequent product modification, and limited distribution.
11–10 Chapter 11 ♦ Developing and Managing Products
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Growth Stage
PowerPoint 11-43:
Maturity Stage
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Decline Stage
Diet Coke moved rapidly from introduction to growth. Mountain Dew took over twenty
years to take off.
B. Growth Stage
1. The growth stage of the life cycle is characterized by sales growing at
an increasing rate, the entrance of competitors into the market, market
consolidation, and healthy profits.
During the growth stage, the product is offered in more sizes, flavors, and models.
C. Maturity Stage
1. The maturity stage of the life cycle is characterized by declining sales
growth rates, markets approaching saturation, annual product changes
that are more cosmetic that substantial, and a move toward the widening
or extension of the product line.
Many familiar consumer products are in the maturity stage and seem to be there
indefinitely. Procter & Gamble argues that there is no product life cycle and points to
Ivory and Camay soaps as examples.
D. Decline Stage
a. The decline stage is signaled by a long-run drop in sales.
b. The rate of decline is governed by how rapidly consumer tastes
Chapter 11 ♦ Developing and Managing Products 11–11
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Diffusion Process and
PLC Curve
E. Implications for Marketing Management
The product life cycle concept encourages marketing managers to plan so that
TERMS
adopter
diffusion
product category
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
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
REVIEW AND APPLICATIONS
1.1 How many new products can you identify? Visit the supermarket and make a list of at least 15 items with the
word “New” on the label. Include on your list anything that looks like a new product. Next to each item on
your list, write the category of new product that best describes the item. Share your results with the class.
1.2 New entertainment products aren’t necessarily media products. Form a team of three or four students and
brainstorm new nonmedia entertainment products. Try to identify one item for each of the categories of
new products discussed in the chapter.
2.1 List the advantages of simultaneous product development.
Advantages of simultaneous product development include shortening the development process, reduced costs, and
component parts.
2.2 You are a marketing manager for Nike. Your department has come up with the idea of manufacturing a
baseball bat for use in colleges around the nation. Assuming you are in the business analysis stage, write a
brief analysis based on the questions in the “Business Analysis” section of the chapter.