BUS 620 Week 4 Discussion 1& 2 plus Week 4 Assignment

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Chapter 9

Product and Service Decisions

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Learning Outcomes

By the end of this chapter, you should:

Understand basic product concepts, and be able to iden�fy how each of four different product levels contributes to the quality and value that buyers receive from the brands they purchase. Define how services differ from goods and how the unique features of services pose special marke�ng challenges. Develop a prac�cal understanding of how the new product development process shapes the course of innova�on within both small organiza�ons and large corpora�ons. Recognize the Product Diffusion Curve and product adop�on process. Understand the Product Life Cycle and appreciate its value and limita�ons in guiding the development of brand strategy.

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Ch. 9 Introduction In previous chapters, we have been systema�cally developing our understanding of products and services in conjunc�on with the inves�ga�on of other topics in marke�ng management. The overall plan of a�ack for this chapter is to briefly consider a few addi�onal core concepts about products and services before examining the strategic significance of three cri�cal processes: new product development, product diffusion and adop�on, and the Product Life Cycle.

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Some�mes the new product development process doesn't go precisely the way it is described in the books. Consider the case of a toy company that was evalua�ng the financial poten�al of a project called My First RC. The RC in ques�on was an inexpensive remote control helicopter intended for children 12 years of age and younger. The remote control technology itself was just a simplified version of the scheme used in advanced models. However, the product design team had worked for nearly two years to develop a helicopter prototype that was sturdy enough to withstand the demands of younger children playing with it outdoors across a diverse range of wind and weather condi�ons. To make the small copter heavy enough to be stable in outdoor flight, the final model was a li�le clunkier and less maneuverable than the team would have liked.

The plan was to build future product sales in the company's highly profitable remote control products division by introducing the base technology to a rela�vely young market. The concept had passed the ini�al screening process and preliminary business analysis. The next step in concept tes�ng was to solicit the reac�ons of a focus group to a working prototype of My First RC. Less than a week before the focus group mee�ng, the market research team sent a request to the designers. "We'd like to demo this product indoors . . . at the conference facility. Could you possibly replace the copter blades with new ones made from a safer material?" The new blades were provided six hours before the mee�ng. They were less rigid and less bri�le than the hard plas�c ones on the original model. They were lighter, more flexible, and not as sharp-edged.

The response by parents invited to par�cipate in the focus group was enthusias�c. . . . they loved the idea of a safe, indoor RC helicopter. Even when the focus group moderator tried to push them toward evalua�ng the concept as an outdoor toy, they were adamant that this was a great, ac�ve toy for indoor use. A second, unintended consequence of the new blades was that the copter was now lighter and more maneuverable than the ini�al prototype. Sales in the first two years of this product introduc�on were 540 percent higher than ini�ally projected for the outdoor model.

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9.1 Basic Product Concepts A product can be defined in mul�ple ways. In Chapter 1, we ini�ally iden�fied the product as one of four variables in the marke�ng mix, related to both the tangible and intangible dimensions of ideas, goods, services, or some combina�on of the three. We explicitly recognized the role of products in the marke�ng concept as the means of sa�sfac�on of customers' wants and needs. That is, products are developed specifically "for the purpose of exchange in the sa�sfac�on of individual and organiza�onal objec�ves" (American Marke�ng Associa�on, 2011).

At several later points in the discussion of consumer behavior, brand management, market segmenta�on, and product posi�oning, we iden�fied products as bundles of a�ributes. Although the most important of these a�ributes are the benefits that consumers derive from using the product, other features, func�ons, and alterna�ve uses can also be included in this defini�on. It is what the organiza�on has to offer the intended target market as a means of sa�sfying customer needs. It is also the element of the marke�ng mix that ul�mately generates revenue for the company.

Two addi�onal terms o�en encountered within the domain of product management are product mix and product line. A product mix is simply the complete collec�on or set of products offered for sale by an organiza�on. It is inclusive of all product lines.

A product line is most o�en used in reference to a group of products that are related to each other by virtue of sharing a common target market. However, lines can also be defined as sets of products that share similar uses, technologies, distribu�on channels, or other relevant features.

To complete our understanding of products, we need to add a few addi�onal dimensions of this concept to the founda�ons established thus far.

Product Levels

Recognizing that products can be be�er understood as bundles of a�ributes or benefits is a cri�cal insight for marke�ng managers. However, the total product consists of more than what is consumed or u�lized by the buyer. Products are composed of four levels, each of which contributes uniquely to the value that customers receive. These levels are referred to as the core benefit, secondary benefits, basic product, and augmented product.

Core benefit represents the primary or essen�al value that the customer derives from the product being purchased. When ren�ng a car, for example, the core benefit to the driver is transporta�on.

Secondary benefits are provided by features of the product that enhance the primary value provided by the product. An automa�c transmission, cruise control, and a GPS naviga�on system are features that make the customer's driving experience more pleasant and efficient. Although the car would s�ll provide the renter with basic transporta�on if these features were absent, their presence enhances the value of the rental purchase.

Basic product refers to the tangible components and features that cons�tute the product being purchased. In simplest terms, it is the sum of the physical characteris�cs of the good being sold. Using the auto rental example, the physical characteris�cs of the car itself make up the basic product being acquired for a limited �me. In the case of items frequently purchased at a drugstore, for example, the actual products are the items in the shopping bag at the end of the trip.

Augmented product refers to addi�onal features and benefits that provide added value to products even though they may not be the primary drivers or core benefits in the purchase decision. Providing online check-in, perks for frequent customers, and special concierge services at popular des�na�ons would be elements of the augmented product for car rental companies. Although the specific features of the augmented product will necessarily differ from one type of product to the next, there are several elements common to many types of B2B and B2C purchases. These include excep�onal customer service and sales support, product guarantees and warran�es, and accessibility. Accessibility relates to how easy the product or service is to obtain. Maintaining adequate inventories, same-day delivery, and 24-hour availability are all elements of product accessibility.

Although marketers o�en focus on the quality of the actual product being sold, each of these four product levels makes important contribu�ons to the overall value enjoyed by purchasers. Consequently, marke�ng managers must recognize that the final product that reaches the customer is derived from many decisions not directly related to product design. The cri�cal importance of branding, for example, was inves�gated at length in Chapter 7. Two addi�onal areas of importance to successful product marke�ng are packaging and labeling.

Product Packaging

A package is defined as the container used to protect, promote, transport, and/or iden�fy a product. It may be primary (containing the product), secondary (containing one or more primary packages), or ter�ary (containing one or more secondary packages). Packaging generally refers to the process by which packages are created, although it can be synonymous with package (American Marke�ng Associa�on, 2011). Most tangible consumer products are sold within a package that serves several purposes. Although the primary func�on of packaging is to protect its contents, the manner in which a product is packaged can also enhance the convenience of using the product or deliver a promo�onal message. Packaging decisions generally fall into one of two categories: packaging for distribu�on and packaging for final customers.

Packaging for Distribu�on

Packaging for distribu�on includes the ac�vi�es involved in designing and crea�ng the containers for a product during its transporta�on from the manufacturer, through the channels of distribu�on, to the point of retail sale or purchase. It typically contains mul�ple packages for individual resale. Since it is usually subjected to significant physical stress as it passes through the distribu�on channel, it needs to be designed to withstand these forces. Depending on the distribu�on path, products may require specific protec�on from being crushed, wide temperature varia�ons, vibra�ons, water, and other threats. As a general principle, this type of transport packaging needs to provide more effec�ve protec�on against damage-related losses than packaging for final customers.

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Retailers seeking to reduce shopli�ing some�mes rely on RFID tags like this one that can be detected by devices at store exits.

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Labeling requirements for consumer products are established, regulated, and enforced by the FDA and the FTC with the authority granted to them by Congress.

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Packaging for Final Customers

Packaging for final customers is primarily the container that the final buyer receives at the �me of purchase. Packaging at this retail level of marke�ng o�en makes the product more appealing and also protects it from damage. In this sense, retail packaging can contribute to the value offered by a product in four dis�nct ways:

Image: The graphic elements of a package as well as its physical design may a�ract a�en�on to the brand and promote a specific brand image. It can also contribute to the brand's visibility within the store. As noted in Chapter 7, image-specific elements of marke�ng communica�ons can shape percep�ons of brands.

Convenience: Many containers have features that add convenience in product handling, storage, opening, resealing, dispensing, and disposal. In addi�on, some containers add value and convenience for consumers by enabling easier por�on control. Single-serving containers, for example, hold an amount of the product suitable for individual use.

Product Integrity and Security: The design of containers can significantly reduce the risks posed by both inten�onal product tampering and uninten�onal product damage from rou�ne handling.

Addi�onally, some product packages are designed to minimize the poten�al for pilferage through the use of an�-the� devices, such as radio-frequency iden�fica�on (RFID) tags that can be detected by devices at retail store exits.

Informa�on: Packages communicate informa�on on the proper use and disposal of the package or product. This is par�cularly cri�cal with packaged foods, pharmaceu�cals, and medical products.

The specific informa�on included on a product's package can make significant contribu�ons to the successful execu�on of a marke�ng plan for many types of products. The following sec�on briefly considers the role of labeling in package design.

Product Labeling

The term label refers to any informa�on a�ached to a product for the purpose of naming it and describing its use, its dangers, its ingredients, its manufacturer, and the like. Package labeling typically includes more informa�on than simply the brand name. Most distribu�on and final consumer containers include printed informa�on to assist the intermediary or end customer. For consumer products, label features serve several important purposes.

Most importantly, labels iden�fy the product and brand being purchased. As noted in the previous discussion of brand iden�ty, the brand name conveys the percep�on of a brand in the minds of current and prospec�ve buyers. Consequently, a package label can communicate a composite impression of what the brand means to buyers in terms of their a�tudes and expecta�ons.

The design elements and features of product labels also serve to capture the a�en�on of shoppers. The use of color, shape, and high-impact words and phrases can lead prospec�ve first-�me buyers to pause long enough to evaluate the product. This is par�cularly important since the label is o�en the first thing a shopper encounters. Both the appearance of the label and its informa�on content will shape first impressions.

Labels also include informa�on related to environmental issues and legal disclosure requirements. Increasingly, labels provide informa�on that assists poten�al buyers in assessing the environmental impact of the product and its eventual disposal. For many categories of products, sellers of food and pharmaceu�cal products are required by law to list ingredients, nutri�onal data, and usage warning informa�on. However, food marketers also use labels to provide consumers with recipes and product usage sugges�ons to promote sa�sfac�on with the product and addi�onal sales.

Since the late 1970s, labels for most products sold in retail outlets have been required to include a Universal Product Code (UPC) to help sellers speed up the checkout process and improve inventory management. And for companies selling into interna�onal markets or domes�c markets with diverse cultural roots, bilingual or mul�lingual labels may be needed.

Think About It

For one eight-hour period, make it a point to be aware of all the labels you encounter. Consider the label-maker's inten�on for each of them. Consciously categorize each of the labels according to the func�on or purpose it is intended to serve.

Which category did you encounter the most?

Is almost every label a part of that category in some way? Why?

What did you learn about the way in which you no�ce or fail to no�ce the informa�on provided by labels on a regular basis?

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Luxury cars, like Audi's A6, are classified as specialty goods since they are expensive and infrequently purchased. Buyers tend to devote substan�al �me and energy to making the best choice.

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Prefabricated circuit boards are classified as parts since they enter the manufacturing process for other products without any further

Classifications for Goods

There are substan�al differences in how marketers approach strategy development for consumer and industrial markets. Individual consumers who purchase goods for themselves spend far less each year than the average industrial customer, but each individual among the 7 billion people worldwide may act as an independent decision maker. Decision making in industrial se�ngs, as we saw in Chapter 5, o�en depends on input from mul�ple sources within the organiza�on.

Consumer Goods Classes

Consumer goods can be classified according to the way in which individuals shop for them. Specifically, most products intended for sale in B2C markets are categorized by where and how frequently they are purchased. There are four primary classes of consumer goods: convenience, shopping, specialty, and emergency goods.

Convenience goods are products that appeal to a very large por�on of the B2C market. They are typically consumed and purchased frequently. Examples include food, beverages, household cleaning products, and personal care items. These products are sold in very high volume, and the unit price per item tends to be rela�vely low. Consequently, buyers see li�le value in comparison shopping on price since such effort will yield insignificant savings. Unit margins are typically low due to compe��ve pricing pressures. Companies need to sell large product volume to realize substan�al levels of profitability. As a direct consequence of this dynamic, firms seek to distribute their products through as many retail outlets as possible.

Shopping goods are products purchased and consumed less frequently than convenience goods. These are more expensive purchases; buyers are willing to invest more �me comparison shopping across brands and between retailers to locate the best values. These products are usually higher involvement purchases than convenience goods, but less involving than specialty goods. Examples include consumer electronics, clothing, home decor, and household furnishings. Since the market for these goods is substan�ally smaller and sales volumes lower than for convenience goods, marketers are more selec�ve when recrui�ng distribu�on outlets to sell their products.

Specialty goods are products that are rela�vely expensive and infrequently purchased. Consumers are deliberate and selec�ve when making these high involvement decisions. In the absence of prior experience or brand loyalty, consumers may comparison shop extensively before reaching a decision on which brand provides the best value rela�ve to their wants and needs. Examples include high-end automobiles, fine wines, and designer clothing. The target market for each class of specialty products is typically small, and the number of outlets selling the products is limited.

Emergency goods are products that a consumer may seek due to sudden, unexpected events. Buyers o�en rush to select the first viable op�on encountered. For example, when confron�ng an unexpected snowstorm in October, a consumer who needs a snow shovel will not typically shop around to find the best price.

Industrial Goods Classes

Industrial goods can be classified according to the way in which they enter the produc�on process and their cost to acquire. These items are used directly or indirectly in the transforma�on of materials to create products for resale. The purchase pa�erns and behavior governing industrial buying were discussed in Chapter 5. There are four basic classes of industrial goods: materials, parts, capital goods, and opera�ng and business supplies.

Materials include both basic raw materials and processed or manufactured materials. Raw materials are products obtained through digging, mining, harves�ng, drilling, and fishing. These are the essen�al ingredients in the produc�on of higher-order manufactured goods. Processed materials include goods created through the processing or refinement of basic raw materials. Corn, for example, can be transformed by refining processes to create ethanol, which in turn can be used to power produc�on equipment and manufacturing facili�es. Price, reliable supply, and on-�me delivery are major

considera�ons when companies are evalua�ng poten�al suppliers. If the supply–demand balance in materials markets is subject to significant changes over �me, the purchase process will most closely resemble the modified rebuy situa�on.

Parts are finished goods that enter the manufacturing process for other products without any further change in their basic form. Basic components are products used within more advanced components such as electrical wire. Advanced components are finished goods that can be combined with basic components to produce intermediate pieces of a larger product. The circuit boards in consumer electronics, for example, only have func�onal value when used to combine component parts in accord with precise technical specifica�ons. Finding a reliable source for parts tends to be less difficult than securing reliable sources for raw materials in many instances. Consequently, many buying situa�ons for parts conform to the straight rebuy model of industrial purchasing once rela�onships with good suppliers have been established.

Capital goods are long-las�ng installa�ons and equipment that are used in the produc�on or management of finished products. Equipment includes portable items such as factory machinery, tools, computers, and forkli�s that facilitate produc�on and opera�ons ac�vi�es. Installa�ons include office buildings, factories, and fixed-loca�on equipment (e.g., power plants). Installa�ons are among

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change in their basic form or design.

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the most expensive capital purchases that any organiza�on can make. This purchasing process always corresponds to the new task buying situa�on and procedures described in previous chapters.

Opera�ng and business supplies are short-lived goods used to support the rou�ne opera�ons of the firm. Opera�ng supplies such as lubrica�ng oil for machine tools are products specifically used to support the produc�on func�on. Business supplies are those items used to support the maintenance and repair ac�vi�es of the firm, as well as the daily office ac�vi�es of the organiza�on. The purchase of these goods is typically done on a straight rebuy basis for the organiza�on.

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Quality and skill of the provider are crucial to the successful marke�ng of personal services, such as haircuts.

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9.2 Service Essentials Though the term product refers to both goods and services, there are some characteris�cs that are specific and exclusive to the provision of services. A service is an intangible product that does not result in the ownership of material goods that can be stored or inventoried. The benefits derived from consump�on of a service are uniquely dependent on the knowledge, talents, and abili�es of the service provider. Services possess four characteris�cs that have direct implica�ons for how they should be marketed: intangibility, perishability, inseparability, and variability.

Services are intangible insofar as they lack a physical or material nature. Unlike tangible goods, services cannot be touched or examined before they are purchased. Life insurance coverage, for example, is not something the buyer can hold in his or her hands. The wri�en policy may be evidence of the purchase, but the actual benefit from acquiring the insurance is intangible. Prospec�ve buyers of services o�en experience greater difficulty in evalua�ng the quality and value of services than tangible physical goods.

Services are perishable in the sense that they cannot be stored or inventoried. Airline seats that are not sold for a Monday flight cannot be set aside and sold on Tuesday. If an appointment with an a�orney is not kept by the client, the opportunity to provide legal services on that occasion is lost. One marke�ng response to the perishability of services is to manage customer demand. Reserva�on systems, for example, allow business managers to match service capacity to market demand. And airlines will o�en use off-peak price discounts to shi� nonbusiness travel demand to nights and weekends.

Services differ from physical goods since the delivery of any given service is inseparable from the service provider. Surgeries will not happen in the absence of the surgeon. Haircuts cannot be given without a barber. Personal services of this kind are par�cularly dependent on the presence of a specific provider. Most customers are not content to have their hair done by just anyone with a license and a pair of scissors. This linkage between service quality and the abili�es of the provider is referred to as variability.

The quality of service provided is variable as a func�on of who provides it. Not all professionals are equally skilled or capable of delivering a consistent quality of service on each occasion. Consequently,

consumers develop preferences for one provider over another based on differences rooted in both objec�vely and subjec�vely experienced a�ributes of the performance. A buyer may prefer one plumber over another based on the observed quality of his or her work or one concert violinist over another based on subjec�ve aesthe�cs.

It is important to remember that most products are a hybrid of goods and services. Consider a home inspec�on that is performed for a prospec�ve property buyer. The crea�on of a home inspec�on report (a good) is an integral part of the product being sold. However, it is wholly dependent on the provision of the inspec�on itself, the intangible dimension of this service. A can of soup sold in the grocery store may seem to be a wholly tangible product. However, the transac�on cannot take place without the accompanying retail services provided by the store.

A cri�cal considera�on when marke�ng services is to be mindful that each service encounter is unique. It can never be perfectly duplicated, and it can never be created under precisely the same circumstances and condi�ons again. However, consumers typically assign great importance to service consistency, and the difficul�es that buyers confront when trying to evaluate intangibles complicates the marke�ng challenge significantly. Consequently, managers must recognize the need to maintain consistently high standards of service quality and find ways to effec�vely relate the quality and value of their offering to buyers.

Think About It

Conven�onal business wisdom tradi�onally held that marke�ng intangible services was substan�ally more difficult than marke�ng tangible goods. However, some experts are now arguing that the task of selling services to the next genera�on of consumers is becoming much easier because they have grown up with social media and the Internet.

Do you agree? Why would this be the case?

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Frontera salsas proved to be best sellers in Whole Foods Markets around the U.S. Now, Frontera wants to go up against mass-marketed products made by the likes of Tos�tos and Pace by developing a new product. What steps do they take to create their product? How do they market this product?

Since many organiza�ons require a stream of new and innova�ve products to remain successful, marketers o�en rely on formal models to systema�cally guide the process of new product development.

9.3 New Product Development Process The development and introduc�on of new products is essen�al to survival and success in many product markets. The cri�cal importance of innova�ons in fields such as pharmaceu�cal research and the high-tech sectors is apparent. However, slow-growth markets such as household products and prepackaged food are commi�ed to the process of product development and commercializa�on as a primary means of sustaining sales growth in mature market categories. In all circumstances, new products provide businesses with the opportunity to be�er sa�sfy their customers' shi�ing preferences and gain profitable advantages over compe�tors.

Product Development

Since the introduc�on of new products on a regular basis is essen�al to the survival of many businesses, organiza�ons o�en follow established product development procedures to improve the odds of success. Independent of the organiza�onal structure suppor�ng the explora�on and commercializa�on of new ideas, the development of new products can o�en be described by a process model comprising six stages, as depicted in Figure 9.1. These stages include idea genera�on, screening, concept development and tes�ng, business analysis, market tes�ng, and commercializa�on. It is worth no�ng, however, that radically new and innova�ve discoveries, inven�ons, and product concepts o�en arise apart from the systema�c corporate business model presented here.

Figure 9.1: New product development process

Idea Generation

The first stage of the new product development process requires gathering a pool of ideas for subsequent considera�on and evalua�on as poten�al product introduc�ons. The ini�al idea behind new product concepts can originate from many sources. Small firms o�en rely on brand managers, produc�on personnel, salespeople, and customers to iden�fy new opportuni�es. Larger, mul�-department companies may create a new product commi�ee or task force composed of members from several departments to take formal responsibility for the tasks associated with crea�ng and evalua�ng new product concepts. Depending on the specific requirements for successful innova�on within a given industry, many large organiza�ons create permanent research and development, or R&D, units to steer the pursuit of innova�ve products in specific direc�ons.

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New products are essen�al to success in many product markets. Bridgestone is developing and tes�ng a range of innova�ve prototypes, including an airless �re that never goes flat.

Associated Press

Many of the market research techniques discussed in Chapter 3 can be used at the idea genera�on stage of the process. The Ansoff matrix for finding growth opportuni�es can be a par�cularly useful framework for iden�fying new product concepts. Some organiza�ons also use independent market research firms to conduct focus groups with consumers, channel intermediaries, and sales personnel. Direct customer feedback via comment cards, toll-free numbers, and website forms can also help uncover be�er ways to sa�sfy buyers' needs.

Screening

In Stage 2 of the process, the ideas generated in the previous step are cri�cally evaluated to iden�fy the most-a�rac�ve op�ons. Large groups of new concepts are typically judged against a set of fixed criteria or scored using a formula that es�mates the likelihood of successful commercializa�on. Under both schemes, three primary ques�ons dominate the screening process:

1. Does the idea fit within the organiza�on's overall strategy? 2. Does it build upon the resources and core competencies of the company? 3. Does it have sufficient market poten�al to warrant further inclusion in the process? (Urban et al.,

1998).

If the screening process is performed periodically, judges may need more than one round of delibera�ons to reduce the pool size to a manageable number of alterna�ves. In mul�ple- round scenarios, different filters are applied at each successive step in the process. Once a rela�vely small number of ideas remains, preliminary es�mates of sales and profit poten�al may be used as the final considera�on when deciding to move acceptable candidates on to the next stage of the process.

Concept Development and Testing

To have customers, channel intermediaries, and employees contribute to the evalua�on process, each of the remaining concepts must be transformed from simple ideas to testable forms of the product or concept. If the idea for a chocolate cheese soup survived the screening process, the next step would be to produce samples for taste tests. If the idea being considered is a combina�on snowboard and personal watercra�, the concept may be presented to audiences in the form of an actual prototype or simply as sketches and diagrams. Concept board presenta�ons or storyboards are used as the testable form of the product when the produc�on costs associated with producing a func�onal prototype or model are prohibi�ve.

Feedback from the different groups of par�cipants in the tes�ng process is most o�en gathered by conduc�ng focus group studies. Favorable and unfavorable reac�ons to the concept boards, prototypes, or actual sample product are used to evaluate and filter out rela�vely weak product concepts in much the same way as the screening process judged the merits of ini�al product ideas. Informa�on typically collected at this stage of the process includes measurements of interest, liking, likelihood of buying, and value or pricing-related percep�ons.

Advances in technology have impacted concept development and tes�ng for some types of products in recent years. Three-dimensional designs and graphics can be displayed on computer screens to solicit consumer response. Both non-working and working models or prototypes can be inexpensively created with current CAD/CAM (computer-aided design and computer-aided manufacturing) technologies. Virtual reality and other computer-simulated environments have also been used in some instances for concept tests that include both visual and nonvisual sensory s�muli.

The New Product Development Process at Campbell's Soup

Campbell Soup Company has a long history of successful product innova�ons. Within its soups division alone, the company has redefined the category over the years by introducing microwavable soups, Chunky soups, Select Harvest premium soups, Healthy Request brands, and low sodium soups. The drive to generate innova�ve, new ideas is an essen�al feature of the corporate culture at Campbell's. "Powered by a relentless focus on the consumer and a radically different approach to innova�on, we are extending our product pla�orms into new meal�me occasions and packaging formats, and responding directly to new consumer expecta�ons. We are focused on rebuilding rela�onships with our exis�ng consumers and establishing connec�ons to new ones. Simply put, our mission is to reinvent our products and our company for a new era" (Campbell Soup Company News Release, 2012).

Innova�ve concepts developed from in-house research, focus groups, customer comments, and other sources reflect changes in the tastes and interests of its target customer groups. Some ideas in development reflect an emerging global awareness on the part of target customers. These include varie�es of pouch soups in dis�nc�ve flavors such as Coconut Curry and Moroccan Chicken. An upscale line of asep�cally packaged soups called "Campbell's Gourmet Bisques" includes varie�es like Thai Tomato Coconut and Tomato Roasted Garlic Bacon.

The idea screening process used by the cross-func�onal innova�on teams that manage the new product development process at Campbell's Soup is guided by several growth-related objec�ves. These include profitable growth in North American markets, expansion of the brand's interna�onal sales, and sales growth in healthy foods categories.

Concept tes�ng for food producers such as Campbell's o�en begins with in-house product trials. Brand managers and members of the innova�on team are o�en the first to sample new products. Once the products are refined and approved, the test kitchen facili�es may prepare batches for sampling in the company cafeteria and employee households. Posi�ve feedback from these cri�cal audiences is essen�al if the product is going to move forward in the process.

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Those concepts that have survived the new product development process to this point will usually be subject to market tes�ng in regions selected to be demographically representa�ve of the intended target market. This experimental market introduc�on provides brand managers with the opportunity to forecast the sales and profit outcomes that can be an�cipated from a full-scale market launch. If these projec�ons demonstrate significant profitability, the brand will typically be rolled out na�onwide.

Business Analysis

The next step in the new product development process is to subject the surviving product concepts to rigorous business analysis to evaluate their financial poten�al. Typically, very few of the ini�al ideas considered at the beginning ever reach this point in the process. The viability of the remaining candidates is determined by their projected costs, sales, profits, return on investment, cash flow, and long-term growth poten�al. This level of detailed scru�ny in the business analysis phase is far more detailed and thorough than any financial considera�ons raised previously in the process.

The techniques and procedures of most direct relevance to this stage are those for evalua�ng market demand and forecas�ng sales, as discussed in Chapter 4. The primary objec�ve is to provide an accurate assessment of the best and worst case scenarios for the product's financial impact on the firm, as well as es�mates of the most likely outcome. This requires extensive research, analysis, and planning since mul�ple scenarios must be evaluated to reflect alterna�ve marke�ng plans. Consider the series of consequences associated with simply increasing the retail price point for a proposed product. Sales shi� in response to declining demand. The fixed and variable cost profile will be altered due to changing economies of scale in produc�on as total output is reduced. Profit forecasts and marke�ng budgets will have to reflect the impact of reduced unit sales and increased contribu�on margins per unit. Then consider that mul�ple scenarios based on a wide range of alterna�ve marke�ng plans need to be evaluated to determine the best possible plan for introducing the product.

Both in-house and external market research are required to complete the business analysis. The responses of both consumers and compe�tors must be reckoned with to derive the sales forecasts, produc�on-related costs, and financial projec�ons associated with a possible product launch. If the forecast outcomes warrant the required level of investment, the development of a specific launch strategy commences.

Where's the Marke�ng Plan?

Conven�onal descrip�ons of the new product development process o�en indicate that the next step for ideas that survive the business analysis stage is the development of a marke�ng plan. That is true to the extent that marke�ng plans are some�mes formalized at this stage. However, throughout the process to this point, the essen�al elements of a marke�ng plan for products that survive the gauntlet have already taken shape. Marke�ng mix decisions are made on an "as needed" basis to facilitate comple�ng each phase of evalua�on. The target market for the product must be tenta�vely determined at the outset. Pricing decisions are made to enable forecas�ng. Promo�onal and posi�oning decisions o�en must be made prior to concept tes�ng the product with an audience. Distribu�on plans need to be tenta�vely made to determine both product-related costs and sales poten�al. Product details are inevitably refined at each step of the process. All of the marke�ng mix elements are, of course, interrelated and interdependent. Consequently, changes to one will trigger corresponding and itera�ve changes to all. Addi�onally, refinements to the final marke�ng plan will con�nue throughout the process and well into the future for products that are introduced to the market.

Market Testing

Products that reach the market tes�ng stage have been carefully considered and thoroughly inves�gated. At this point, companies frequently create a unique marke�ng plan for the exclusive purpose of market tes�ng the product. A market test is essen�ally an experimental market introduc�on, conducted on a limited basis, within a carefully selected sample of the intended target market. The primary goal of the test is to enable marke�ng managers to project the sales and profit consequences of a full-scale market launch.

In contrast to concept tes�ng, real customers respond to the actual product and other dimensions of the marke�ng mix under actual marketplace condi�ons. Among the most frequently employed models of market tes�ng is making the product available to a small geographic sample of the target market (e.g., one city), which propor�onally receives the full marke�ng effort that has been planned for a full-market product introduc�on. Posi�ve customer reac�ons and strong sales performance are required to trigger a full-scale product launch on a market-wide basis. Nega�ve outcomes may doom the product or suggest the need to refine the marke�ng mix before retes�ng the product once more.

It is worth no�ng that not all products are test marketed prior to execu�ng a full-market launch. In some instances the costs of a test market exceed its value. This is par�cularly true if the financial risks associated with a full launch are rela�vely modest. In other situa�ons, the company may be sufficiently impressed with the results from concept tes�ng and the business analysis to skip a test market in favor of a full market launch. Occasionally marke�ng managers will opt to avoid market tests for fear that the public exposure of the product will enable compe�tors to preemp�vely introduce a directly compe��ve brand before its own full- scale launch can be executed.

Think About It

By now you have probably already thought about it and asked yourself, isn't there a simpler way to organize the process of new product development? Does it have to be so elaborate?

Consider this: What would be the posi�ve and nega�ve consequences of skipping one or two of the steps in the process thus far?

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Regional tastes must be considered when designing the final commercializa�on strategy. Where might a small chocola�er want to consider rolling out its new chili confec�ons? Why?

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Commercialization

If the market test results are sufficiently posi�ve, the product will probably be introduced to a wider market. Commercializa�on is the final stage in the development cycle for a new product. It marks the organiza�on's commitment to marke�ng the product to the broader target market and subsequent execu�on of the product-specific marke�ng plan.

This process of commercializa�on is some�mes rolled out progressively over various geographic segments of the market according to a predetermined schedule. This is par�cularly desirable if there's reason to believe that some geographic segments are likely to be more profitable than others. For example, spicier foods tend to sell be�er in the south and west por�ons of the United States than in the north and east. This rollout pa�ern of commercializa�on is also warranted if the company lacks the financial resources to introduce the product to all poten�al geographic segments of the intended target market. A gradual or phased market rollout also enables the company to fine-tune its marke�ng mix as the product enters new geographic markets.

Marketers also recognize that there are dis�nct advantages to targe�ng prospec�ve buyers who are most likely to be early purchasers of the product. Iden�fying and reaching consumers who are predisposed to try innova�ve products as soon as they become available represents a strategic priority for the commercializa�on of many brands. Research on this issue has determined that sta�s�cal models of the new product adop�on process conform to a bell-shaped diffusion curve usually referred to as the Product Diffusion Curve.

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The Product Diffusion Curve groups consumers into clusters or buying segments according to how quickly they adopt new products.

9.4 Product Diffusion Curve and Adoption Process The concept of the Product Diffusion Curve (PDC) is loosely based on medical models that describe how contagious diseases spread through a popula�on. That is, the PDC explains how informa�on and the acceptance of new products spread through a market. As popularized by Evere� Rogers (1962), the underlying principle is that once a target popula�on buyer is ini�ally exposed to informa�on about a new product, definable groups of consumers will acquire the product at different rates as a func�on of certain group characteris�cs. In most instances, the new product adop�on process can be modeled in the form of a bell-shaped diffusion curve. The managerial value of the PDC lies in iden�fying five specific adopter categories into which different types of consumers are most likely to belong: innovators, early adopters, early majority, late majority, and laggards. An illustra�on of the PDC is provided in Figure 9.2.

Figure 9.2: Product Diffusion Curve

Innovators are the first people to adopt a new product or innova�on and they represent the first 2.5 percent of adopters. They tend to be more willing to take risks and are o�en the youngest in age of the five typologies, especially in technology-related markets. As illustrated in Figure 9.2, they represent a small percentage of the market that is at the forefront of adop�ng new products. These people are o�en regarded as well-informed enthusiasts within the product category and eager to try the latest innova�on. They are typically less price sensi�ve than others, and their behavior within test markets is o�en closely tracked. Unfortunately, their a�rac�on to new products means that they are not usually brand loyal consumers.

Early adopters are the second fastest category of adopters, 13.5 percent of buyers, making up a larger share of the market than innovators. They are also a�racted to innova�ve new products in categories that interest them, but they are less impulsive and more prac�cal about decisions to buy new things. An important characteris�c of people in this category is their tendency to convey their experiences to the early majority. Consequently, their opinions are important to a product's long-term success since they serve as both a key buying cluster and as opinion leaders to others.

The early majority accounts for 34 percent of all buyers. They also enjoy new and innova�ve products, but they tend to wait for posi�ve opinions and reviews from others (early adopters) before purchasing. The adop�on of new products by the early majority is essen�al for sustained profitability. However, many products fail early in their life cycles because they are rejected by this category of consumers and those that follow.

The late majority category makes up 34 percent of buyers, corresponding in size to the early majority in many instances. These consumers will adopt an innova�on later than the average member of the target market. They are quite cau�ous and reliably take a wait-and-see approach before trying something new. However, once this category begins buying into the new concept, marketers begin to capture their highest rates of profitability.

Laggards make up the final 16 percent of buyers and are the last group to adopt new product innova�ons. These buyers are, quite simply, skep�cs. If the new product is replacing an older form of the product (e.g., audio CDs replacing casse�e tapes), they may not buy into the new form un�l they have no other op�ons. They tend to be older than the average consumer and among the most price sensi�ve since they do not recognize substan�al value in the new product. Since they are rela�vely disinterested in the product, marke�ng plans typically focus very li�le effort on them.

An understanding of the general shape and character of the Product Diffusion Curve reinforces the importance of developing a marke�ng plan that recognizes meaningful differences within the intended target market for a new product. The impact of opinion leadership is pivotal in the eventual success or failure of new concepts. It is important to recognize, however, that the true distribu�on of consumers across the five categories and corresponding steepness of the slope of the curve will differ between markets and always relates uniquely to the nature of the product being introduced. However, the PDC does provide a valuable strategic perspec�ve on the adop�on of new products that should be considered in the development of marke�ng plans for new product launches.

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The Product Life Cycle is a conceptual model of a product's lifespan that is closely aligned in principle to the Product Diffusion Curve.

9.5 Product Life Cycle The Product Life Cycle (PLC) is a conceptual model that describes the four stages that a product typically passes through from its origins un�l its demise. Ini�ally developed by Raymond Vernon (1966), its validity and value are greatest when applied to an analysis of general product classes (e.g., canned dog food) rather than specific brands (e.g., Alpo). Nonetheless, the PLC can be a useful strategic planning tool for understanding the dynamics of a product's lifespan in terms of its sales history. Further, understanding a given product's posi�on within the context of its life cycle can enable the manager to make be�er decisions in shaping the marke�ng plan for a specific brand. Figure 9.3 provides a graphical representa�on of the PLC.

Figure 9.3: Product Life Cycle

There are four primary asser�ons made by the Product Life Cycle:

1. Products have a limited life. 2. Product sales pass through dis�nct stages, each having different implica�ons for the seller. 3. Profits from the product vary at different stages in the life cycle. 4. Products require different marke�ng strategies at different stages of the life cycle (American Marke�ng Associa�on, 2011).

Although the characteris�cs of the PLC for any given product will be unique to that product and its market, most products exhibit pa�erns of aggregate category sales and profits that correspond to four dis�nct stages: introduc�on, growth, maturity, and decline.

Introduction

The introduc�on stage of the PLC corresponds to the commercializa�on and launch of a new type of product or product form. This first stage is some�mes further divided into two substages: early and late introduc�on stages. The introduc�on stage is characterized by the following market-related condi�ons:

Compe��on: Direct compe�tors may be absent for the first-to-market brand of this product. However, there is s�ll compe��on for sales in the form of exis�ng alterna�ves or subs�tute product types that address similar customer needs. If the product is successful in gaining acceptance from innovators and early adopters, compe�ng brands will typically enter the product market in the la�er half of the introductory stage.

Target Market: At this stage, innovators and early adopters compose the target market. As the product nears the close of the introductory stage, the emphasis shi�s exclusively to winning market share ba�les among the early adopters division of the market.

Product: Ini�ally low sales volume, unformed consumer preferences, and uncertainty regarding the financial viability of the product tend to limit the range of op�ons and features made available on early forms of the product. In the la�er phase of this stage, new compe�tors introduce greater product variability and choice to the market, though the total number of brands remains low.

Price: Marketers o�en engage in a strategy termed market skimming by which prices are ini�ally set at a rela�vely high level. This approach to maximizing per unit revenue corresponds to minimal price sensi�vity of buyers in the innovator category. Prices will be lowered gradually in response to compe��ve pressure as addi�onal brands enter the market.

Promo�on: Aggressive promo�onal campaigns focus on raising product awareness and educa�ng prospec�ve buyers on the benefits associated with the new product in the ini�al phase of this stage. The top priority for the sale force is o�en securing distribu�on for the product. As brand-versus-brand compe��on intensifies toward the close of the introductory stage, promo�onal themes typically shi� to emphasize benefits and features that are brand specific.

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Marke�ng managers use a range of sales promo�ons and pricing incen�ves to introduce new brands, encourage the movement of inventory through distribu�on channels, and phase out obsolete lines.

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Distribu�on: Substan�al sales promo�ons targe�ng marke�ng intermediaries are commonly used to expand the product's distribu�on network. The total number of product distributors con�nues to increase throughout this stage, and many offer consumers more than one brand to choose from.

Profits: The costs associated with establishing the sales network, building product awareness, and confron�ng new compe�tors usually exceed profits at this stage. The organiza�on incurs losses in an�cipa�on of future profitability.

The overall strategy for the first few market entrants is to create both product and brand-specific awareness while generally educa�ng customers about the new product. Promo�onal campaigns typically emphasize product features and benefits that will a�ract innovators and early adopters. For many types of products, sales promo�ons are used extensively to accelerate the process of building sales volume. Examples of products currently in this stage of the PLC include electric cars, 3-D television, tankless water heaters, holographic projec�on systems, and emerging mul�media conferencing technologies.

Growth

The beginning of the growth stage of the PLC is marked by the point at which profitability becomes posi�ve. The rapid rate of category sales toward the midpoint of the growth stage is an indica�on that sales of the product have moved beyond the early adopters and reached the early majority. This is also the stage at which many compe�tors begin to show profits despite a predictable growth in the number of compe�tors. It is primarily the profitability of the category, a�er all, that a�racts the new entrants at this point. In this highly compe��ve climate, establishing brand differen�a�on and preference becomes a top priority for marke�ng managers. The growth stage of the PLC is characterized by the following market- related condi�ons:

Compe��on: As the number of compe�ng brands grows, the ba�le for market share intensifies. Price-driven compe��on may have the unintended consequence of delaying purchases by some early and late majority buyers if they are an�cipa�ng future price reduc�ons. Toward the end of this stage, the ba�les for dominance within the largest segments of the market o�en intensify.

Target Market: The ini�al emphasis on early adopters gradually transi�ons to the early and then late majority groups. The intensity of compe��ve rivalry drives managers to posi�on their brands for progressively narrower target segments. Sales volume throughout the industry grows steadily, and new market segments and niche markets are o�en iden�fied. Toward the end of the growth stage, the heavy demand created by the majority groups begins to level off and sales may con�nue to grow, but at a decreasing rate of growth.

Product: The product evolves substan�ally throughout this stage of the PLC. The "basic product" that was introduced in the first stage adapts to the expressed preferences of the market as discrete benefit segments emerge. More features are incorporated as buyers grow increasingly sophis�cated and demanding. Product lines tend to lengthen as companies seek to reach a growing diversity of consumers while differen�a�ng themselves from compe�tors. Toward the close of this stage, marketers recognize the need to trim back product lines in the interest of efficiency and in response to slowing market growth.

Prices: The range of price points expands as product lines lengthen. Prices may ini�ally remain high, especially in segments where market demand is strong. The entrance of more compe�ng brands, however, will inevitably drive prices lower over the span of this stage of the PLC. Toward the close of the growth stage, it is common to see average retail prices fall rapidly in response to slowing category growth. Companies need to defend market share and maintain sales volume to retain economies of scale and corresponding cost advantages. Price wars are some�mes a symptom of the close of the growth stage.

Promo�on: Promo�ons are ini�ally focused on sharpening the brands' posi�oning rela�ve to specific target markets. As compe��on intensifies and growth slows, the financial consequences associated with losing market share increase. Promo�onal spending, par�cularly among market leaders, o�en increases substan�ally as they ba�le for share points. Heavy spending on sales promo�ons is a common tac�c aimed at s�mula�ng customers to buy.

Distribu�on: Marketers work to secure and reinforce those channels of distribu�on that are most essen�al to reaching their chosen target markets. Toward the end of this stage, distributors will begin cri�cally evalua�ng those rela�onships as product demand slows. Many distributors will reduce the number of brands they carry.

Profits: For early market entrants, product development costs have been recovered and unit profits increase in the preliminary phase of the growth stage. Economies of scale also contribute to higher profitability as sales volume grows. Toward the end of this stage, however, declines in prices and produc�on and growing marke�ng-related expenses begin to erode per-unit profit levels. Profits associated with the industry as a whole begin to level off toward the close of the growth stage.

At the outset of the growth stage, the priority for marketers is sales growth. In an environment where sales are accelera�ng, the strategic emphasis is on providing a brand that serves buyers' needs be�er than the compe��on. Significant numbers of new brands, a�racted by the profitability of the product category, intensify the posi�oning ba�le to win the hearts and minds of consumers. Products currently in this phase of the growth stage include home water purifica�on systems, e- books and e-readers, smartphones, tablet computers, Blu-ray discs, and digital video recording systems.

The closing phase of the growth stage is quite different. Firms fight to hold their share in the face of declining rates of sales growth. Price becomes the weapon of first resort for many poorly posi�oned brands that are struggling to survive, depressing profitability throughout the industry. Maintaining market leadership, however, will enable a brand to remain viable as the industry transi�ons to the maturity stage of the Product Life Cycle. Many types of laptops and portable media players may be nearing the end of the growth stage.

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Maturity

The maturity stage of the PLC can be iden�fied by the range where the rate of sales growth reaches an industry-wide sales peak. This occurs primarily because most poten�al customers have already purchased the product and the market has become saturated. Since aggregate sales have leveled off, the only opportunity to increase sales is to increase market share—that is, take sales away from another compe�tor. Consequently, this part of the PLC ini�ally tends to reflect a hotly contested compe��ve environment.

The maturity stage of the PLC is characterized by the following market-related condi�ons:

Compe��on: Very aggressive head-to-head compe��on for shares marks the maturity stage. Weaker brands tend to drop out of the market or merge with compe�tors. Eventually the market becomes stable, consis�ng of rela�vely few large compe�tors and some small niche brands.

Target Market: Virtually no growth is seen in the target market at this stage. Sales o�en consist almost exclusively of repeat purchasers seeking to replace their current product.

Product: Though brands differen�ate to improve their fit with their target market, compe��on for the largest market segments tends to promote the standardiza�on of brands to a great extent. The homogeniza�on of consumer tastes over �me reinforces this trend.

Price: Ini�ally average retail prices fall as weakened compe�tors try to remain viable. Price wars are common. Toward the end of this stage price levels stabilize.

Promo�on: This stage is ini�ally characterized by aggressive adver�sing and promo�ons intended to steal market share from compe�tors. As the market finds its own point of share equilibrium toward the end of this stage, the surviving compe�tors cut back on promo�on expenditures.

Distribu�on: Distributors o�en con�nue to reduce the number of brands they will carry.

Profits: Industry profits fall rapidly throughout the early phase of maturity. Profit levels eventually stabilize as both market shares and compe��ve marke�ng expenditures level off.

In the early parts of the maturity stage, the key objec�ve for brands is simply survival. This is challenging as the market "shakeout" process eliminates the majority of smaller brands. In many instances, size in the form of market share is the essen�al key to remaining viable. Many successful brands in established product categories are thriving in the maturity stage as cash cows for their companies. This is a common situa�on in consumer packaged goods where well-established names such as Coca-Cola, Kra� Macaroni and Cheese, and Reynolds Wrap enjoy high, stable market shares in low-growth categories. Products such as fax machines, personal DVD players, desktop telephones, and desktop personal computers are also likely occupants of this stage of the PLC.

Decline

A product form or category has arrived at the decline stage of the PLC when the market is no longer able to sustain itself. The only significant strategic choice remaining is the determina�on of a market exit strategy. There are two basic alterna�ves: A company can simply let the brand con�nue, without any substan�ve marke�ng support, un�l it fails to generate enough profit to jus�fy its existence within the company's por�olio of brands. Alterna�vely, management could seek a buyer for the product while the brand s�ll has market value. O�en large companies are interested in dives�ng themselves of product lines that simply are not profitable enough to be bothered with. A smaller firm, however, might find the rate of return on the purchase of such a brand more than sa�sfactory.

Product categories typical of the decline stage include VCRs and videocasse�es, paper bank checks, electric typewriters, electronic word processors, photographic film, and fax machines. These products are gradually passing through the final stage of the PLC, having been displaced by be�er technologies. Individual brands within the category will remain on the market only as long as jus�fied by their financial contribu�on to the firm.

Strengths and Weaknesses of the PLC

The Product Life Cycle, like other conceptual models, is not intended to be prescrip�ve. It is a decision-making aid, not a subs�tute for cri�cal analysis and though�ul planning. It has the poten�al to provide a general level of guidance on brand management strategies as they relate to general product-market condi�ons. It also has the poten�al to focus managers' a�en�on on how market dynamics drive industry sales.

It is necessary to note, however, that the model has some fundamental limita�ons. It does not apply to all kinds of products in all circumstances. The market behavior of some products departs radically from asser�ons made by the model. Sales pa�erns associated with fads and fashions are o�en cited as devia�ng from the basic shape of the PLC curve. Similarly, it can also be difficult to ascertain the length of each stage and where any given product currently resides along the PLC curve.

The fundamental principle asserted by the model, however, is an important one for marke�ng managers. Markets are dynamic, and marketers need to be responsive to those changing condi�ons. The Product Life Cycle should be regarded as one of the many marke�ng models that are intended to make managers think about important features and characteris�cs of the environment in which their brands compete.

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Ch. 9 Conclusion Although every element of the marke�ng mix is essen�al, it is hard to escape the primacy of the product. The product is the basis of the firm's viability to the extent that it sa�sfies target customers' needs or fails to meet their expecta�ons. Contribu�ons from a wide array of professionals are needed to make the tasks of product planning, produc�on, and marke�ng successful. The coordina�on and integra�on of these efforts across all the stages of the Product Life Cycle is one of the most vital roles played by marke�ng managers.

In the three chapters that follow, we will examine the contribu�on of the remaining marke�ng mix elements to the efficient and effec�ve posi�oning and sale of the product. Product posi�oning will remain a central considera�on in the development of the marke�ng mix, since it explicitly recognizes both the percep�ons of buyers and strategies of compe�tors. In Chapter 13, we will revisit the concept of product once more to inves�gate how boundaries between the tradi�onal concep�on of tangible products and the provision of intangible services are blurring as we transi�on from a manufacturing-based to a service-based economy. In the closing chapter of the text we will examine the unique challenges and opportuni�es posed by marke�ng products in a compe��ve global economy.

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Ch. 9 Learning Resources

Key Ideas

Cri�cal Thinking Ques�ons

1. Explain how understanding the four different levels of products (bundles of a�ributes) can lead to thinking crea�vely about promo�on, distribu�on, and pricing. Can it help organiza�ons iden�fy new product concepts?

2. Most of the �me, product packaging and labeling are not very interes�ng. However, there are always excep�ons. Iden�fy several unique product packaging or labeling features in products that you find interes�ng. Explain how these features contribute to the value you derive from the product.

3. Consider the four basic classes of industrial goods: materials, parts, capital goods, and opera�ng and business supplies. To which of the five classes of consumer goods do each of these types of industrial products most closely correspond? Some are easier to assign than others; think outside the box. Explain the ra�onale for the matches you made.

4. Explain how economies of scale work for services. Be specific. 5. Most products are hybrids of goods and services, making it truly difficult to dis�nguish one type of product from another in every case. It has been argued that the

Internet has blurred the dis�nc�on between goods and services even more. Explain why this might be true. 6. Service bundling (e.g., cable television, Internet, and telephone services together) is an op�on in the same way that bundling tangible goods is an op�on for brand

managers. Give three examples of services bundling that you are familiar with. Is it more difficult to bundle services? Why? 7. Por�olio analysis in the form of the BCG Matrix was introduced early in the text. What role does a new product introduc�on typically fill within the BCG Matrix

model? Why is it an important part of a healthy brand por�olio? 8. Some�mes new product introduc�ons cannibalize an exis�ng brand within an organiza�on's por�olio. Is that a good thing? Is it a necessary thing? 9. What elements of the new product development process relate directly to the marke�ng concept?

10. Should customers or companies be primarily responsible for the safe and environmentally sound disposal of old and worn-out products? Use television sets to illustrate the ra�onale suppor�ng your opinion.

11. Iden�fy a company that you are familiar with and evaluate how the environmental movement and emphasis on sustainability will necessitate the development of new products.

12. At which stages can social media and the Internet impact the process of new product development? How? Be specific. 13. How is the process of commercializing new industrial products or consumer products with infrequent purchasing rates (e.g., computers) different from launching

frequently purchased products? What kinds of measures or metrics are used to assess the success of the launch for infrequently purchased products versus frequently purchased ones?

14. What sorts of marke�ng-related factors within the organiza�on will be related to the successful introduc�on of new products? What kinds of sales incen�ves are likely to do more harm than good in building consumer demand for a new brand?

15. Consider a product category that you are very familiar with. Explain how the Product Life Cycle can provide cues to category brand managers about the execu�on of the marke�ng plan. Can it give different direc�on to different types of brands depending on their rela�ve size and market share? Explain.

Key Terms

Click on each key term to see the defini�on.

augmented product (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Features and benefits that provide added value to products even though they may not be the primary driv�ers or core benefits in the purchase decision.

basic product (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The tangible features that cons�tute the product being purchased.

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capital goods (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Long-las�ng industrial installa�ons and equipment used in the produc�on or management of finished products.

convenience goods (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Consumer products that are typically consumed and purchased frequently.

core benefit (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The primary or essen�al value that the customer derives from the product being purchased (e.g., transporta�on).

emergency goods (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Consumer products that are sought in response to sudden, unexpected events.

label (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Any informa�on a�ached to a product for the purpose of naming it and describing its use, its dangers, its ingredi�ents, its manufacturer, etc.

market test (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

An experimental market introduc�on, conducted on a limited basis, within a carefully selected sample of the intended target market. The primary goal of the test is to enable marke�ng managers to project the sales and profit consequences of a full-scale market launch.

materials (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Industrial goods including both basic raw materials and manufactured materials.

new product development process (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A con�ceptual model describing the cul�va�on of an idea from its ini�al beginnings to its introduc�on to the market as a new prod�uct. The development of new products in this model is described in six sequen�al stages: idea genera�on, screening, concept development and tes�ng, business analy�sis, market tes�ng, and commercializa�on.

opera�ng and business supplies (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Short-lived goods used to support the rou�ne opera�ons of the firm.

package (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The container used to protect, promote, transport, and/or iden�fy a product.

packaging (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The process by which packages are created.

packaging for distribu�on (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Ac�vi�es involved in designing and crea�on of containers for a product during its trans�porta�on from the manufacturer, through the channels of distribu�on, to the point of retail sale or purchase.

packaging for final customers (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Ac�vi�es involved in the design and crea�on of con�tainers that the final buyer receives at the �me of purchase. Packaging at this retail level can contribute to the value offered by a product in four dis�nct ways: maintain�ing product integrity, promo�ng of the brand image, enhancing the convenience associated with using the product, and pro�viding valuable informa�on to the buyer.

parts (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

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Finished industrial goods that enter the manufacturing process for other prod�ucts without any further change in their basic form.

product (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

One of four variables in the marke�ng mix, related to both the tangible and intangible dimensions of ideas, goods, services, or some combina�on of the three. Bundles of benefits created specifically to meet the needs of specific target markets for of sa�sfying organiza�onal objec�ves.

Product Diffusion Curve (PDC) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A model illustra�ng how the acceptance of new products spreads through five adopter segments or categories within a market: innovators, early adopters, early majority, late majority, and laggards.

Product Life Cycle (PLC) (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A conceptual model that describes the four stages that a product typically passes through from its origins un�l its exit from the market: intro�duc�on, growth, maturity, and decline.

product line (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A group of products that are related to each other by virtue of sharing a common target market. Lines can also be defined as sets of products that share similar uses, technologies, distribu�on channels, or other relevant features.

product mix (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

The complete collec�on or set of products offered for sale by an orga�niza�on, inclusive of all product lines.

secondary benefits (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Features that enhance the primary value provided by the product (e.g., cruise control, GPS naviga�on system).

service (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

An intangible product that does not result in the ownership of material goods that can be stored or inventoried. The benefits derived from consump�on of a service are uniquely dependent on the knowledge, talents, and abili�es of the service provider. Services possess four characteris�cs that have direct implica��ons for how they should be marketed: intangibility, perishability, inseparability, and variability.

shopping goods (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Consumer products purchased and consumed less frequently than convenience goods. These are more expensive purchases, and buyers are will�ing to invest more �me comparison shop�ping across brands and between retailers to locate the best values. These products are usually higher involvement purchases than convenience goods, but less involving than specialty goods.

specialty goods (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

Consumer products that are rela�vely expensive and infrequently purchased. Consumers are deliberate and selec�ve when making these very high involvement decisions.

total product (h�p://content.thuzelearning.com/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12.1/sec�ons/front_ma�er/books/AUBUS620.12

A conceptualiza�on of products as consis�ng of four levels, each of which contributes to the value that customers receive from their purchase. These levels are the core benefit, second�ary benefits, basic product, and augmented product.

Web Resources

This website includes an ar�cle by John Walsh en�tled "Reverse Logis�cs and the Total Product Life Cycle" from the November/December 2007 issue of Reverse Logis�cs Magazine. It examines the concept of the Product Life Cycle from the perspec�ve of reversing the conven�onal supply chain sequence to reuse products and materials that have been previously sold as finished goods. h�p://www.rlmagazine.com/edi�on08p42.php (h�p://www.rlmagazine.com/edi�on08p42.php)

This is a site that provides excellent resources specific to topics in the area of new product development. The Product Development Forum sec�on also provides an exhaus�ve new product development glossary of terms. h�p://www.npd-solu�ons.com (h�p://www.npd-solu�ons.com)

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This links to a page of the U.S. Federal Trade Commission's website that addresses legal requirements and prac�cal guidelines related to product labeling. h�p://www.�c.gov/os/statutes/fplajump.shtm (h�p://www.�c.gov/os/statutes/fplajump.shtm)

Many issues specific to labeling and packaging consumer commodi�es can also be found by searching the U.S. Food and Drug Admnistra�on site: h�p://www.fda.gov (h�p://www.fda.gov) .