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CHAPTER 12
Developing and Managing Products
TEACHING RESOURCES QUICK REFERENCE GUIDE
Resource
Location
Purpose and Perspective
IRM, p. 249
Lecture Outline
IRM, p. 250
Discussion Starters
IRM, p. 258
Class Exercises
IRM, p. 259
Chapter Quiz
IRM, p. 260
Semester Project
IRM, p. 261
Answers to Discussion and Review Questions
IRM, p. 262
PURPOSE AND PERSPECTIVE
This chapter examines several ways to improve an organization’s product mix, including managing
existing products through line extensions and product modifications. We also examine how companies
develop new products, from idea generation to commercialization. After development of new products,
Answers to Application Questions
IRM, p. 266
Answers to Internet Exercise
IRM, p. 267
Answers to Developing Your Marketing Plan
IRM, p. 268
Comments on the Cases
IRM, p. 269
Case 12.1
IRM, p. 269
Case 12.2
IRM, p. 270
Examination Questions: Essay
Testing CD
Examination Questions: Multiple-Choice
Testing CD
Examination Questions: True-False
Testing CD
PowerPoint Slides
250 Chapter 12: Developing and Managing Products
LECTURE OUTLINE
I. Managing Existing Products
A. By assessing the composition of the current product mix, a marketer can identify weaknesses and
gaps in its existing product mix. It can often overcome these shortcomings by capitalizing on its
existing products through line extension or though product modification.
B. Line Extensions
1. A line extension is the development of a product closely related to one or more products in
the existing product line but specifically designed to meet somewhat different needs.
2. Line extensions are more common than new products because they are a less expensive,
C. Product Modifications
1. Product modification means changing one or more characteristics of a firm’s product; it
differs from a line extension in that the original product is removed from the line.
2. Product modification is less risky than new-product development.
3. Three conditions must exist for product modification to improve the firm’s product mix.
4. There are three major ways to modify products: quality modifications, functional
modifications, and aesthetic modifications.
5. Quality Modifications
a. Quality modifications are changes relating to a product’s dependability and durability,
6. Functional Modifications
a. Functional modifications are changes affecting a product’s versatility, effectiveness,
convenience, or safety; they usually require the product to be redesigned.
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7. Aesthetic Modifications
a. Aesthetic modifications change the sensory appeal of a product by altering its taste,
texture, sound, smell, or appearance.
II. Developing New Products
A. A firm develops new products as a means of enhancing its product mix and adding depth to a
product line.
1. Developing and introducing new products is frequently expensive and risky.
2. Failure to introduce new products is also risky.
3. The term “new product” can have more than one meaning.
B. Before a product is introduced, it goes through a seven-phase, new-product development
process; a product may be dropped at any stage of this process.
1. Idea Generation
a. Idea generation, the first step in the development process, occurs when organizations
seek product ideas to achieve organizational objectives.
b. Firms trying to effectively maximize product mixes usually develop systematic
2. Screening
a. In phase two, screening, the most promising ideas are selected for further review.
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3. Concept Testing
a. Stage three is concept testing, in which a sample of potential buyers is presented with a
product idea to determine attitudes and initial buying intentions regarding the product.
4. Business Analysis
a. During stage four, business analysis, the product idea is evaluated to determine its
potential contribution to the organization’s sales, costs, and profits.
5. Product Development
a. In stage five, product development, the firm finds out if it is technically feasible to
produce the product and if it can be produced at costs low enough to make the final price
reasonable.
(1) The idea or concept is converted into a prototype, or working model, that should
reveal the tangible and intangible attributes associated with the product in consumers’
minds.
b. This phase can be lengthy and expensive; thus a relatively small number of product ideas
are put into development.
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6. Test Marketing
a. Stage six, test marketing, is a limited introduction of the product in geographic areas
chosen to represent the intended market to gauge the extent to which potential customers
buy.
d. Selecting a test market that accurately represents the target market is very important to
ensure valid results.
e. Test marketing can be risky and competitors may interfere.
7. Commercialization
a. Stage seven, commercialization, is planning for full-scale manufacturing and marketing
as well as preparing finalized budgets.
b. Marketing management analyzes the results of test marketing to find out which changes
in the marketing mix are needed before the product is introduced.
e. Products are usually launched through an introduction process called a “roll–out”—stages
start in a set of geographic areas and gradually expand into adjacent areas.
(1) Gradual introduction reduces the risk of introducing a new product and provides
additional benefits.
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III. Product Differentiation through Quality, Design, and Support Services
A. Product differentiation is the process of creating and designing products so customers perceive
them as different from competing products. Perceived differences might include quality, features,
B. Product Quality
1. Product quality refers to the overall characteristics of a product that allow it to perform as
expected in satisfying customer needs.
2. Expectations and perceptions of quality vary by customer and between consumer and
C. Higher product quality generally results in a higher price. Some companies compromise and
produce moderate quality products in order to charge lower prices.
D. Product Design and Features
1. Product design refers to how a product is conceived, planned, and produced; it involves the
total sum of a product’s physical characteristics.
2. One component of design is styling, the physical appearance of a product; most consumers
E. Product Support Services
1. Customer services include any human or mechanical efforts or activities a company
provides which add product value.
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IV. Product Positioning and Repositioning
A. Product positioning refers to the decisions and activities intended to create and maintain a certain
B. Perceptual Mapping
1. A product’s position is the result of customers’ perceptions of the product’s attributes relative
to those of competitive brands.
2. To avoid a continuous reevaluation of numerous products, buyers tend to group, or
“position,” products in their minds to simplify buying decisions.
C. Bases for Positioning
1. A firm can position a product to compete head-on with another brand.
a. Head-to-head competition may be a marketer’s positioning objective if the product’s
2. Positioning to avoid competition may be best when the product’s performance characteristics
do not differ significantly from competing brands.
a. Positioning a brand to avoid competition may also be appropriate when that brand has
3. A product’s position can be based on specific product attributes or features.
a. Style, shape, construction, and color help create the image and the appeal.
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4. Other bases for product positioning include price, quality level, and benefits provided by the
product.
5. Positioning based on the target market relies heavily on promoting the types of people who
use the product.
D. Repositioning
1. Evaluating the positions of existing products is important because a brand’s market share and
profitability may be strengthened by product repositioning.
V. Product Deletion
A. Product deletion is the process of eliminating a product from the product mix when it no longer
satisfies a sufficient number of customers.
1. A weak product is a drain on potential profitability and the marketer’s time and resources.
B. There are three ways to delete products.
1. A phase-out lets the product decline without changing the marketing strategy.
3. An immediate drop is the best strategy when losses are too great to prolong its life.
VI. Organizing to Develop and Manage Products
A. Managing products is a complex task and often the traditional functional form of an organization
does not fit a company’s needs. There are several alternatives to the traditional functional form of
business organization.
B. A product manager is the person within an organization responsible for a product, product line,
or several distinct products which make up a group.
1. A brand manager is responsible for a single brand.
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C. A market manager is responsible for managing the marketing activities which serve a particular
group of customers.
1. This approach is effective when a firm uses different types of activities to market products to
D. A venture team is a cross-functional team that creates entirely new products aimed at new
markets.
1. Venture teams, unlike product managers or market managers, are responsible for all aspects
of a product’s development.
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DISCUSSION STARTERS
Discussion Starter 1: Product Line Extensions
Dr. Pepper created a product line extension called Dr. Pepper Cherry. Below is a YouTube clip
incorporating Gene Simmons (from Kiss) to promote this new product. Ask students to identify other
Discussion Starter 2: New Product Ideas
ASK: What two groups of people know the most about your products and services?
ASK: If you are an online content provider, who knows the most about your service and what
consumers want from the site?
The answer is the providers of the content. YouTube realized the best information about other
Discussion Starter 3: Concept Testing
ASK: How do organizations know whether or not consumers will respond to a new concept?
As the textbook states, for new products there is a tool called concept testing. Concepts are put
before consumers to gauge their reactions. This same technique is used to test advertisements. When
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CLASS EXERCISES
Class Exercise 1: Product Positioning and Product Categories
The goal of this exercise is to help students understand product positioning—that is, customers’
perceptions of a product’s attributes—by considering the position of several products.
Prompt for students:
Describe the following brands’ relative positioning in their product categories:
Question
Answers
1.
Volvo automobiles
safe
2.
Keds athletic shoes
inexpensive, simple comfort
3.
Mont Blanc writing instruments
more expensive
4.
Diet Coke
superior taste
5.
Hampton Inn
for business travel
6.
Dom Perignon champagne
premium taste
7.
Sony television sets
better quality
8.
Avis Rent-A-Car
more responsive
9.
Just For Men hair color
for men only
10.
Subway sandwiches
alternative fast food
Class Exercise 2: Keeping Products Relevant
In this chapter, students learned about developing and managing products. In this exercise, they will
examine how products remain relevant to consumers.
Prompt for students:
For each of the following product categories, you are to: 1) list a brand, 2) list the products stage within
the product life cycle, 3) list any product or brand extensions familiar to you, and 4) brainstorm possible
next-generation products for this brand.
1. MP3 players
2. Bicycles
3. Frozen pizza
Answers:
Class Exercise 3: New Product Concept
In this exercise, students will examine the process of devising a new product concept for an established
product.
Step 1: Backpacks have been used without innovation for decades. List features common to all
backpacks.