Principles of Marketing
Seventeenth Edition
Chapter 8
Products, Services, and
Brands: Building Customer
Value
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HOW TO GET A “YES” FROM CUSTOMER AND
MAKE THE BEST MONEY??
WHAT IS WRONG WITH THE BUNNY?
SOLUTION!
WHAT IS MARKETING?
Marketing is the process by which companies
provide value (?) for customers and build
strong customer relationships ( for what?) to
capture value (?) from customers in return
(Phillips Kotler)
5
Marketing mix = VALUE PROVISION PROCESS
What to sell • CREAT Value (Product)
Sell how much • EXCHANGE value (Price)
Where to sell • DISTRIBUTE value (Place)
How to sell • COMMUNICATE value (Promotion)
What is a Product?
Product is anything that can be offered in a market for attention,
acquisition, use, or consumption that might satisfy a need or
want.
Products include more than just tangible objects…broadly
defined, products also include services, events, persons, places,
organisations, ideas or a mixture of these.” (Kotler et al,
2021:234).
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What Is a Product?
Products, Services, and Experiences
Service is a product that consists of activities, benefits, or
satisfactions and that is essentially intangible and does not
result in the ownership of anything.
Products and services are becoming more commoditized.
Companies are now creating and managing customer
experiences with their brands or company, instead of pure
products or pure services.
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Customer experience with Starbucks
Customer experience with Starbucks - Drive Thru
Product
A Product has two dimensions:
Tangible attributes - design, availability,
performance, packaging
Intangible attributes - image, value,
perceived value
“Remember that the customer seeks value
from the benefits a product offers.”
(Richardson,2020:102)
Whatever the product, it can always be
broken down into bundles of
benefits/values (???) that mean different
things to different buyers
Anatomy of a product – Richardson (2020:103)
Future Augmented
product product Tangible/
- there is a - the added value Actual
need to Core product
built into product
alter - the actual benefit
products eg - where the
existing customers derive
warranty, credit focus is on
products to from consuming the
terms, after sales the physical
‘move product-eg a car is
advice. Highly features &
with the moving from A to B
competitive & unique
times’ requires much selling point
thought of the actual
product
What Is a Product?
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• Apple Experience/Service
Apple Connectivity
• Apple Brand
• Design, Features, Apps
Augmented Product
Actual Product
Core • Connectivity,
Product/Core Entertainment, Self-
expression
customer value
Discussion
So how about future
product?
Future product: Future enhancements or improvements
that can be made to the product. It represents the product's
potential for growth and innovation.
For a car/smartphone, the potential product could be:...?
What Is a Product?
Product and Service Classifications
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What Is a Product?
Product and Service Classifications
Consumer products
Industrial products
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Industrial products
Consumer products
What is a Product?
What is a Product?
Product and Service Classifications
Consumer products are products and services bought by final
consumers for personal consumption.
• Convenience products
• Shopping products
• Specialty products
• Unsought products
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What Is a Product?
Product and Service Classifications
Convenience products are consumer products and services
that the customer usually buys frequently, immediately, and
with a minimum comparison and buying effort.
• Newspapers
• Candy
• Fast food
• Any thing else?
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What Is a Product?
Product and Service Classifications
Shopping products are less frequently purchased consumer
products and services that the customer compares carefully on
suitability, quality, price, and style.
• Furniture
• Cars
• Appliances
• Anything else?
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What Is a Product?
Product and Service Classifications
Specialty products are consumer products and services with
unique characteristics or brand identification for which a
significant group of buyers is willing to make a special purchase
effort.
• Medical services
• Designer clothes
• High-end electronics
• Anything else?
What Is a Product?
Product and Service Classifications
Unsought products are consumer products that the consumer
does not know about or knows about but does not normally
think of buying.
• Life insurance
Anything else?
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Industrial products
Product and Service Classifications
Industrial products are those products purchased for further
processing or for use in conducting a business.
Installations/Capital Goods - critical and expensive items e.g. plant &
machinery
Accessories - usually less expensive than installations, not as critical. e.g. PCs,
office equipment
Raw Materials - Quality, consistency, cost are important considerations
Component parts & materials – eg Lucas headlights on Ford Cars, Intel chip in
most PCs
Supplies & services- office stationary, cleaning materials, cleaning services...
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Industrial products
Materials and parts include raw materials and manufactured materials
and parts.
Capital items are industrial products that aid in the buyer’s
production or operations.
Supplies and services include operating supplies, repair and
maintenance items, and business services.
Product and Service Decisions
Figure 8.2 Individual Product
Decisions
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Product and Service Decisions
Individual Product and Service Decisions
Communicate and deliver benefits by product and service
attributes.
• Quality: How do you define “good quality”?
• Features: A product may have a variety of features. How do
you define “good product features”?
• Style and design
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Product and Service Decisions
Individual Product and Service Decisions
Product quality refers to the characteristics of a product or
service that bear on its ability to satisfy stated or implied
customer needs
Keywords: “free from defects”, creating customer value and
satisfaction, “Quality is when customers come back and our
products don’t”
• Total quality management: constantly improving the
quality of products/services and business processes
• Return-on-quality: Quality as an investment
• Quality level: will support the product’s positioning
• Performance quality: the product’s ability to perform its
functions (Eg. Honda quality check)
• Conformance quality: freedom from defects and
Product and Service Decisions
Individual Product and Service Decisions
Product Features
• Competitive tool for differentiating a product from
competitors’ products
• How can a company identify new features and decide
which ones to add to its product?
• Assessed based on the value to the customer versus its
cost to the company
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Product and Service Decisions
Individual Product and Service Decisions
Style describes the appearance of the product.
Design contributes to a product’s usefulness as well as to
its looks.
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Product and Service Decisions
Individual Product and Service Decisions
Brand is the name, term, sign, or design or a combination
of these, that identifies the maker or seller of a product or
service.
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Product and Service Decisions
Individual Product and Service Decisions
Packaging involves designing and
producing the container or wrapper for
a product.
Labels identify the product or brand,
describe attributes, and provide
promotion.
ROLES of Packaging and Labelling?
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Packaging consideration
Size and range of sizes
Protection and Preservation
Convenience for the customer
Instructions (Legislation)
Communication/Promotion / design innovation
Ease of handling for the intermediary
Innovation opportunities / sustainability
Which one?
Newer is better???
Packaging changes
Product and Service Decisions
Individual Product and Service Decisions
Product support services augment
actual products.
“Take care of customers, no
matter what it takes”
“Keeping customers happy after
the sale”
Product and Service Decisions
Product Mix Decisions
Product mix consists of all the product lines and items that a
particular seller offers for sale.
• Width: the number of different product lines (chủng loại) the company
carries
• Length: the total number of items the company carries within its product
lines.
• Depth: the number of versions offered of each product in the line
• Consistency: how closely related the various product lines are in end
use, production requirements, distribution channels, or some other way.
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Product Line decisions
Product Mix – is the total sum of all products and variants offered
by an organisation.
Product Line – is a group of products that are closely related to
each other. E.g. laptops, printers
Product Items – A product line consists of a number of product
items – individual products.
Product Line Length – the total number of items within the
product line
Product Line Depth – the number of variants of each item within a
product line
Product Mix Width – the number of product lines offered
Product and Service Decisions
Product Line Decisions
Product line length is the number
of items in the product line.
• Line stretching
• Line filling
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Length/Width
Depth
PRODUCT LINE DECISIONS
• The company can increase its business in four ways.
1. It can add new product lines, widening its product mix.
2. It can lengthen its existing product lines.
3. It can add more versions of each product, deepening its
product mix.
4. It can pursue more product line consistency.
Q1: Add or cut down depends on???
Q2: Why we need to rely on current product mix to make
decisions about adding new products?
Product Life-Cycle Strategies
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Product Life-Cycle Strategies
Product development
• Zero sales and increasing investment
costs
Introduction
• Slow sales and nonexistent profits
Growth
• Rapid market acceptance and increasing
profits
Maturity
• Slow sales growth and profits level off or
decline
Decline
• Sales fall off and profits drop
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Product Lifecycle (PLC) Defined
The Product Lifecycle is a concept
suggesting that a product goes through
various stages in the course of it’s life:
product development, introduction,
growth, maturity and decline
In fact, NOTHING lasts forever !
8-49
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Figure 8.1 The Product Lifecycle
1. Why profit is negative during the introduction phase?
2. Why is the product going into decline?
8-50
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51
Discussion
What are factors affecting the shape of a product
life cycle?
8-52
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PLC Variations
What is the difference?
8-53
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PLC Variations
8-54
Brassington & Pettitt, Principles of Marketing 4e, © Pearson Education 2006
Product Life-Cycle Strategies
Introduction Stage
• Slow sales growth
• Little or no profit
• High distribution and promotion
expenses
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Product Life-Cycle Strategies
Growth Stage
• Sales increase
• New competitors enter the
market
• Profits increase
• Economies of scale
• Consumer education
• Lowering prices to attract more
buyers
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Product Life-Cycle Strategies
Maturity Stage
• Slowdown in sales
• Many suppliers
• Substitute products
• Overcapacity leads to competition
• Increased promotion and R&D to support sales and
profits
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Product Life-Cycle Strategies
Maturity Stage
Modification Strategies
• Modify the market
• Modify the product
• Modify the marketing
mix
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Product Life-Cycle Strategies
Decline Stage
• Maintain the
product
• Harvest the
product
• Drop the product
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Product Life-Cycle Strategies
Table 9.2 Part
I
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Product Life-Cycle Strategies
Table 9.2 Part
II
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What do you see from the charts? whether this
follows a normal product lifecycle and WHY?
Brand Defined
Visual approach: “A brand is the name, symbol,
packaging and service reputation.”
(Assael 1990, as cited in Fill (2009), p355)
Differentiation approach: “A brand is a name,
term, sign, symbol or design or a combination
of these intended to identify the goods or
services of one seller or group of sellers, and
to differentiate them from those of
competitors.”
63
(Kotler 2000, as cited in Fill, (2009), p355.
The following characteristics belong to BRAND
or PRODUCT?
- Tangible/Intangible
- Satisfy need/want
- Core benefit/Actual performance and
apprearance/Augmented services/ Attached
emotions & feelings
- Can be/NOT be copied easily
Brands vs Products
“A brand is more than a product, because it can have
dimensions that differentiate it from other products to satisfy
the same need. These differences may be rational and tangible
– related to the performance of the brand – or more symbolic,
emotional and intangible – related to what the brand
represents.”
Keller (2013)
Brand Defined
A brand consists of any name, design, style, words, or symbols, singly
or in combination, that distinguish one product from another in the
eyes and in the.....of the customer.
De Chernatony et al (2011) describe brands as clusters of functional
and emotional values that promise stakeholders a particular
experience..”
7-67
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Roles that brands play
For the Manufacturer
Consumer
Helps consumer
Means of identification
identify source/product
to simplify tracing
maker
Helps consumers
Means of legally protecting
take mental
unique
shortcuts
features
Reduces
Signal of risk
quality
in purchasing
Signal of
Means of quality
endowing products with unique associations
Helps consumers
Source of competitive
express
advantage
themselves
Source of financial returns
Brand architecture is the
structure a business uses to
organize their offerings into
brands that become
meaningful to customers. A
company’s brand
Brand Architecture architecture specifies which
names, logos, messaging to
apply to new and existing
products.
(Brand Marketing Blog.com
Accessed Dec 2021)
What is brand architecture? 70
• Brand architecture defines the role of each brand and acts as a guideline for the
interrelationship between the brands in your organization (GENEALOGY)
• When an organization thinks about adding a new brand or product, it’s crucial to
understand where it will sit within the organization.
• To simplify the concept, imagine that your organization is a house:
- Where will your brands be located within the architecture of that house?
- Which role will each brand play?
- What will be its relationship with other brands, if any?
71
Levels of a brand architecture 73
Corporate brand
Product brand
Target all
Target specific customers segment
stakeholders (investors/stockholders,
employees, suppliers, intermediaries,
publics)
74
1.2. Levels of a brand architecture
An example
of Mondelez
International
as the
corporate or
company
brand level
75
1.2. Levels of a brand architecture
• Individual brands are restricted to essentially one "relatively broad" product
category, although multiple product types may differ on the basis of model, package
size, flavor and so forth. These can be "product line" level.
- Each brand has had a dominant position in its respective product category within
the broader salty snack product class.
- FMCG giants like P&G or Unilever have a portfolio of many individual brands in their
brand architecture. For example, for beauty and grooming P&G has Head &
Shoulders, Gilette, Always, Pantene, Max Factor .
76
Levels of a brand architecture
• Modifier level or Variant level
- Regardless of whether marketers choose corporate, family, or
individual brands, they must often further distinguish brands
according to the different types of items or models.
- A modifier is a means to designate a specific item or model type or
a particular version or configuration of the product
77
1.2. Levels of a brand architecture
An example of Cadbury as the family or umbrella brand with
individual brands & variants
78
1.4. Brand architecture strategies
1.4.1. The branded house
1.4.2. The house of brands
1.4.3. Branded house vs. House of brands
1.4.4. The hybrid model
Advantages and Disadvantages of Branded house and
House of Brand?
81
The hybrid model
Examples of hybrid brand
architecture
Another quick
question: What’s
Google brand
architecture?
Brand Strategy: Building Strong Brands
Brand Equity and Brand Value
• Brand equity is the differential effect that knowing the brand
name has on customer response to the product or its marketing.
• Brand value is the total financial value of a brand.
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Aaker’s brand equity model c
Brand equity is a set of brand assets and liabilities
linked to a brand, its name and symbol, that add to or
subtract from the value provided by a product or
service to a firm and/or to that firm’s customers. David
A.Aaker identifies five brand equity components:
1. Brand awareness
2. Brand associations
3. Brand Perceived quality
4. Brand loyalty
5. Other proprietary brand assets—patents,
trademarks, channel relationships, etc.
84
Brand awareness
How familiar your target audience is with your brand and how
well they recognize it
85
Brand Awareness
Brand Recognition Brand Recall
Consumers ability to Consumers ability to recall
recognise a brand that they the product brand when
have already been exposed given the product category,
to needs fulfilled or usage
situation
Source: Keller (2013)
Brand Awareness – Breadth and
Depth
Breadth of Awareness Depth of Awareness
The range of purchasing situations How easily can we recall a brand e.g. do
when the brand comes to mind we need visual cues?
Brand association c
A mental connection a customer makes between a brand and a concept,
image, emotion, experience, person, interest, or activity. This association can
be immediately positive or negative and it heavily influences purchase
decisions
These associations form over time through consistent brand experiences
Help customers recall your brand right away.
LIKE & REMEMBER!
88
Brand perceived quality c
A part of BRAND IMAGE (all perceptions people have of a brand - When a
person call a “name” then many things may come to mind such as the
attribute of the offerings, values, personality, willingness to take on social
programs, applications linked to a lifestyle)
89
Brand perceived quality c
Brand association = What they feel about a brand through associations
(Much more emotionally)
Brand image (perceived quality is one of them) = What they think about a
brand (rationally)
90
Brand loyalty c
When you buy, you buy a brand! --> Brand loyalty is the business base generating a
potential profit flow
Signs of brand loyalty:
LOYAL TO YOUR
- Buy a product just because it bears that brand BRAND
- There is no reason to change
- Like it, passionate about it
- Really involved in any products under that brand
- Part of one’s identity/ Part of one’s lifestyle ...(can’t live without, included in daily routine)
- Other alternative products cannot access you/ win you only at a high cost
--> Create barriers to competitors, help capture customer’s lifetime value
91
LOYALTY is a sign of TRUE LOVE
Other proprietary brand assets
Symbols or stories - A part of brand perception that you want to create
A story about an appliance company in China.
One day, a customer came and said “I have a defective product”
CEO: “No problem, we’ll go to the warehouse” - He found 70% of products
are defected --> Destroyed all defective products
“From now on, we only sell quality products. That’s us”
Today that company is the largest applicance manufacturer in the world -
HAIER
93
Other proprietary brand assets
“A story is a symbol that becomes an important part of a brand”
https://www.youtube.com/watch?v=cDsVOXTQAIs
94
Designing The Business Portfolio
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Product Portfolio Planning
• A portfolio is a collection of products/segments/SBUs
• The product portfolio can be extended by:
– Introducing variations
– Changing quality of products
– Developing associated items
– Developing new products
• Understanding suitability, profitability and potential of
products is key to ensuring objectives are met
• Model of portfolio analysis: The Boston Consulting Group
Growth-Share (BCG) Matrix
The BCG Matrix
• The BCG Matrix can be applied to individual
products, segments or Strategic BusinessPlotted
Units points
Circles with
diameters that
20% represent
contribution to
turnover
Market Growth Rate
STAR QUESTION MARK
(modest +ve/-ve cash flow) (large -ve cash flow)
10%
CASH COW DOG
(large +ve cash flow) (modest +ve/-ve cash flow)
0%
x10 x1 x0.1
Relative Market Share
(= sales/largest competitor sales)
Henderson, B. (1970) "The Product Portfolio", BCG Perspectives, 66.
The BCG Matrix
Market growth rate: Where the product is in the PLC?
(introduction, growth, maturity or decline phase?)
Relative market share: the product capacity to
generate revenue
Plotted point: How important the product is to the
company’s survival? (Bigger point 🡪 more important)
The case of an
unbalanced portfolio
Hig
h
Market growth
rate
Lo
w
Hig Lo
h Market share w 99
FBL 1996
HOW TO MAKE IT
BALANCED???
Stars Question Marks
Hot
Cups
Market Growth Rate
Silk & Lin
10%
Cash Cows Dogs
Dispenser
Napkins Cold
Cups
Doyley MultiPly
s Napkins Paper
Plates
10x 1x 0.1x
Relative Market Share
Creating a
Balanced Product Portfolio
• Retain and maintain existing products
• Modify and adapt existing products
• Delete old products
• Introduce flow of new products
8-101
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Boston Consulting Grid
Stars Question mark
⮚ Build (Invest) sales and/or
⮚ Build (Invest) selectively
market share
⮚ Focus on defendable niche
⮚ Invest to maintain/increase
where dominance can be
leadership position
achieved
⮚ Repel competitive
⮚ Harvest or divest the rest
challenges
Cash cows
⮚ Hold (No invest just keep) Dogs
sales and/or market share
⮚ Harvest or
⮚ Defend position
⮚ Divest or
⮚ Use excess cash to support
stars, selected problem ⮚ Focus on defendable niche
children and new product
development
Designing The Business Portfolio
Problems with Matrix Approaches
• Difficulty in defining SBUs and measuring market
share and growth
• Time consuming
• Expensive
• Focus on current businesses, not future planning
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Designing The Business Portfolio
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Product growth based on
the Ansoff Matrix
Market
Product
Existin penetration
developmen
g or
t
expansion
Markets
New Market
Diversificatio
developmen
n
t
Existin New
g Product
s
New Product Development Process
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Methodological Approach to Product
Development
• Customers
1.Ide • R&D
a • Competitors
Acqui
sition
• Strategic Fit
2.Init
ial • Initial due diligence
Scree
ning
• Formal Financial
3.Bus analysis
iness • ROI Estimate
Analy
sis
Should you engage consumers in NPD?
• Consumers seek to develop products
if they don’t meet their needs.
• Consumers develop a product
knowledge that is fundamentally
different from researchers in firms
(Chatterji & Fabrizio, 2014).
• Hamel & Prahalad (1991) say lack of
user knowledge inhibits innovations.
• Open innovation (Chesbrough,
2006).
• The management of external and
internal flows of information.
R&D Video
https://www.youtube.com/watch?v=anVMS
aqzRRU
2mins -
Methodological Approach to Product
Development
4. • Continual R&D
Prod • Prototyping
uct • Testing
Devel
opm
ent
5. • Implement a test
Mark
et
market
Testi
ng
6. • Roll-out
Prod
uct • Monitor Performance
Intro
ducti
on
Test Marketing
https://www.youtube.com/watch?v=7wx5B2
p8qyg
- 4.50 Wendy’s test marketing
IKEA Product Development Process
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New Product Development Process
Idea Generation
Idea generation is the systematic search
for new product ideas.
Sources of new product ideas
• Internal
• External
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New Product Development Process
Idea Generation
Internal sources refer to the company’s own formal
research and development, management and staff,
and intrapreneurial programs.
External sources refer to sources outside the company
such as customers, competitors, distributors, suppliers,
and outside design firms.
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New Product Development Process
Idea Generation
Crowdsourcing involves
inviting broad communities of
people— customers,
employees, independent
scientists and researchers,
and even the public at large—
into the new product
innovation process.
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New Product Development Process
Idea Screening
Identify good ideas and drop poor
ideas R-W-W screening
framework:
• Is it real?
• Can we win?
• Is it worth doing?
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New Product Development Process
Concept Development and Testing
Product idea is an idea for a possible product that the
company can see itself offering to the market.
Product concept is a detailed version of the idea
stated in meaningful consumer terms.
Product image is the way consumers perceive an
actual or potential product.
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New Product Development Process
Concept Development and Testing
Concept testing refers to
testing new product concepts
with groups of target
consumers.
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New Product Development Process
Marketing Strategy Development
Marketing strategy development is designing an
initial marketing strategy for a new product based
on the product concept.
Marketing strategy statement consists of:
• Target market description
• Value proposition planned
• Sales, market-share, and marketing mix
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New Product Development Process
Business Analysis
Business analysis is a review of the sales, costs, and profit
projections for a new product to find out whether these
factors satisfy the company’s objectives.
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New Product Development Process
Product Development
Product development is developing
the product concept into a
physical product to ensure that
the product idea can be turned
into a workable market offering.
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New Product Development Process
Test Marketing
Test marketing is the stage of new
product development in which the
product and its proposed marketing
program are tested in realistic
market settings.
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New Product Development Process
Test Marketing
Marketing Strategy
DevelopmentWhen test
When test
marketing is marketing
likely is unlikely
• New product • Simple
with large line
investment extension
• Uncertainty • Copy of
about product competit
or marketing or
program product
• Low
costs
• Manageme
nt
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confidence
New Product Development
Process
Commercialization
Commercialization involves
introducing a new product into
the market.
• When to launch?
• Where to launch?
• Planned market rollout?
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Managing New Product Development
Successful new product development
should be:
• Customer centered
• Team based
• Systematic
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Managing New Product Development
Customer-Centered New Product
Development
Customer-centered new product
development focuses on finding
new ways to solve customer
problems and creating more
customer-satisfying
experiences.
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Managing New Product Development
Team-Based New Product Development
Team-based new product development involves various
company departments working closely together,
overlapping the steps in the product development
process to save time and increase effectiveness.
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Managing New Product Development
Systematic New Product Development
• Innovation management system
Creates an innovation-oriented company
culture
Yields a large number of new product
ideas
New Product Development in Turbulent Times
• Tempted to reduce spending
• May become less competitive
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
