Chapter 12

Developing and
Managing Products
 Objectives

• Understand how companies manage existing

products through line extension and product
modifications
• Describe the development of product ideas into
commercial products
• Understand importance of product differentiation
and elements that differentiate products
• Examine use of product deletion to improve
product mix
• Describe organizational structures used for
managing products
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 Managing Existing Products

• Line Extensions
• Product Modifications
• Quality Modifications
• Functional Modifications
• Aesthetic Modifications

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 Line Extension

Development of a product that is closely

related to existing products in the line but
is designed specifically to meet different
customer needs.

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 Purpose of Line Extensions

 Focus on different segment

 More precisely satisfy needs of current
segment
 Capture market share from competitors
 Might result in negative view of core
product

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 Product Modification

Changes in one or more characteristics

of a product.

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 Conditions Of
Product Modification
 Must be modifiable
 Perceive modification has occurred
 Makes product more consistent with
customers’ desires
 Risk = previous purchaser may view
as riskier purchase

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 Methods Of
Product Modification
 Quality
 Functional
 Aesthetic

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 Quality Modifications

• Changes relating to a product’s

dependability and durability.
– Reducing quality = lower price
– Increasing quality = competitive edge

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 Functional Modifications

Changes affecting a product’s versatility,

effectiveness, convenience, or safety.

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 Benefits Of
Functional Modifications
 Stronger competitive position
 Achieve/maintain progressive image
 Reduce possibility of product liability
lawsuits

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 Aesthetic Modifications

Changes relating to the sensory appeal

of a product. Such as taste, texture,
sound, smell, and appearance.

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 Aesthetic Modifications

Benefit
 Differentiate product

Drawback
- Value is subjective

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 Developing New Products

• New product development process

– A seven-phase process for introducing
products: idea generation, screening,
concept testing, business analysis,
product development, test marketing,
and commercialization

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 Phases Of
New-Product
Development

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 Idea Generation

Seeking product ideas to achieve

organizational objectives.
Magazine of Innovation

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 Screening

Selecting the ideas with the greatest

potential for further review.

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 Concept Testing

Seeking a sample of potential buyers’

responses to a product idea.

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 Concept Test
For A New
Product

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 Business Analysis

Evaluating the potential impact of a product

idea on the firm’s sales, costs, and profits

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 Product Development

Determining if producing a product is feasible

and cost effective.

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 Test Marketing

A limited introduction of a product in

geographic areas chosen to represent
the intended market.

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 Benefits Of Test Marketing

• Expose product to marketing environment

and assess sales performance
• Identify weaknesses in product or marketing
mix
• Experiment with variations in marketing mix
• Reduce risk of failure

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 Popular
Test Markets

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 Commercialization

Refining and finalizing plans and budgets

for full-scale manufacturing and marketing
of a product

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 National Market
Commercialization

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 Product Differentiation through Quality,
Design, and Support Services

• Product Differentiation
– Creating and designing products so that
customers perceive them as different from
competing products.

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 Product Differentiation

 Quality- characteristics to perform

as expected
- Level
- Consistency
 Design and features
- Styling
- Features
 Support services- add value

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 Product Quality

• Quality – characteristics of a product allowing it

to perform as expected in satisfying customer needs
• Level of quality – the amount of quality a
product possesses
• Consistency of quality – the degree to which
a product has the same level of quality over time

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 Product Design and Features

• Product design – conception, plan, and production

of a product
• Styling – physical appearance of a product
• Product features – specific design characteristics
that allow a product to perform certain tasks
• Customer services – human or mechanical efforts
or activities that add value to a product

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 Product Deletion

Eliminating a product from the product mix

when it no longer satisfies a sufficient
number of customers.

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 Product Deletion Process

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 Organizing To Develop
And Manage Products
 Product Manager
 Brand Manager
 Market Manager
 Venture Team
 18 Steps © Royalty-Free, The Studio Dog/Getty Images

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