INSTRUCTIONAL MATERIAL

COLLEGE OF BUSINESS ADMINISTRATION

DEPARTMENT OF MARKETING MANAGEMENT

COMPILED
BY
MARIA TERESA R. YUMANG
Faculty
First Semester AY2020-2021
 OVERVIEW

New product have always been of interest to both academics and practitioners, and
organized, college-level instruction of the subject of product management traces from its
historical discipline. Product Management subject had evolved and still evolving to
present. To date, the Product Development & Management Association, (PDMA) a
known global community of more than 3,500 professional members around the world
whose skills, expertise and experience power the most recognized and respected
innovative companies in the world. This service provider of the latest tools and
technology is an independent, not-for-profit, third-party certification body which skills are
essential, highly valued, and sought by businesses and universities. They are the
leaders in driving product management, development, innovation productivity in terms of
efficiency, speed and impact.

Over 300 colleges have courses on the subject of Product Management which will equip
students what the industry demands in academic excellence and comprehensive
knowledge provision in becoming a winning professional in the future.

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 COURSE OUTCOMES

This Instructional Material is divided into four topics. They are (1) Product Concept, (2)
Product Decision (3) Developing Products and (4) Managing Products. At the beginning
of each topic is a detailed Learning Objectives to give students a nutshell of what to
expect to learn in the discussion of course materials. Also, some figures taken from
other resources are provided to have a figurative view of the concept being presented.
The figure provides the detailed information about what goes on in the discussion of the
topic.

Topic 1 and 2 introduces basic concepts and relationships that must be understood to
make effective product decisions. This includes definition and discussion of how
customers view products, examination of concepts of product line and product mix, and
exploration of the stages of the product life cycle and the effect of each on marketing
strategies. Topic 3 and 4 analyzes a variety of dimensions regarding product
management, including line extensions and product modification, new product
development and product deletion. It involves examination of ways to improve an
organization’s product mix by discussing management of product through the effective
line extension and product modification. Also, comprehensive discussion of phases and
stages of new product development process which include generating and screening
ideas, developing new products and commercializing new products. Next is
identification at how companies differentiate their products in the marketplace through
quality, design, and support services, and the importance of product deletion. Lastly, the
analysis of organizational structures used to manage products.

Acknowledgment on all the resources used is listed on the Reference part to give proper
identification of the author/s and contributors for the compilation of this instructional
material.

Finally is the Grading System in which students will based the computation of their mid-
term and final grades in accordance to the formula used.

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 TABLE OF CONTENTS

Overview
Course Outcomes

TOPIC 1 – Product Concept Learning Objectives

Introduction: What is product?
Product Anatomy
Classification of products
Product Line vs. Product Mix
Assessment/Activities

TOPIC 2 – Product Decision Learning Objectives

Product Life Cycle
Stages of Adoption Process
Success and Failure of Products
Assessment Activities

TOPIC 3 – Developing Products Learning Objectives

Product Line Extension
Product Modification
Developing New Products
New Product Development
The New-Product Development Process
Assessment/Activities

TOPIC 4 – Managing Product Learning Objectives

Product Differentiation though Quality, Design and Support Services
Product Positioning and Repositioning
Perceptual Mapping
Product Deletion
Product Manager Job Description
Assessment/Activities

References
Grading System

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 TOPIC 1 – PRODUCT CONCEPT

LEARNING OBJECTIVES

After reading this module, student should be able to:

1. Understand the concept of a product

2. Discuss the anatomy of product

3. Explain how to classify products

4. Examine the concepts of product item, product line, and product mix, and
understand how they are connected

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 COURSE MATERIALS

We are now prepared to introduce basic concepts and relationship that must be
understood to make effective product decisions through focusing on the major
components of the marketing mix exploring on the product component.

Figure 1.1
Product Description

The product is a key variable in the marketing mix. Products are typically a firm’s most
important asset.

WHAT IS A PRODUCT?

A product is a good, a service, or an idea received in an exchange. It is anything that

can be offered to a market to satisfy the desire or need of a customer. It can be
classified as tangible or intangible. A tangible product is a physical object that can be
perceived by touch such as a building, vehicle, gadget, or clothing. An intangible product
is a product that can only be perceived indirectly such as an insurance policy. A
service can be broadly classified under intangible products which can be durable or non-
durable. It can be a result of the application of human and mechanical efforts to people
or objects. Examples of services include online travel agency booking, a medical
examination, child day care, real estate services and martial arts lessons. An idea is a
concept, philosophy, or image, issues or inventions. Ideas provide the psychological
stimulation that aids in solving problems or adjusting to the environment. Example of an
idea is the invention of light bulb by General Electric or an internet load.

Product anatomy is the analysis of a product according to the different level of benefits
it offers.

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 Figure 1.2

Three Levels of a Product

CORE product is the benefit of the product that makes it valuable. Example: in a car,
the benefit is convenience or the ease at which you can go where you like, when you
want to. Another is speed since you can travel around relatively quickly.

ACTUAL product is the tangible, physical product. You can get some use out of it.
Again with the car example, it is the vehicle that you test drive, buy and the collect. You
can touch, see and feel it.

AUGMENTED product is the supplemental features provide added value or attributes in

addition to its core utility or benefit. So when you buy a car, it is the warranty, the
customer service support offered by the car’s manufacturer and any after-sales service.
It can also provide installation, delivery, training and financing. These supplemental
attributes are not required to make the core product function effectively, but they help
differentiate one product brand from another.

CLASSIFICATION OF PRODUCTS

Product classifications are important, because classes of products are aimed at

particular target markets which affect distribution, promotion and pricing decisions, and
the entire marketing mix.

Consumer products – products purchased to satisfy personal and family needs. There
are four categories in classifying consumer products based on characteristics of
consumer buying behaviour.

 Convenience goods are relatively inexpensive, frequently purchased items for

which buyers exert only minimal purchasing effort. The buyer spends little time in
planning the purchase or comparing available brands or sellers, and many
consumers buy products at the closest location to preserve time and effort
normally through retail outlets. Examples are breads, newspaper, soft drinks

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  Shopping goods are goods in which the consumer is willing to invest a great deal
of time and effort. Buyers spend a lot of time comparing stores and brands with
respect to prices, product features, qualities, services and warranty. For
example, consumers will spend a great deal of time looking for a new car or a
medical procedure.

 Specialty goods are those that are of interest only to a narrow segment of the
population. Items with unique characteristics that buyers are willing to spend
considerable effort to obtain. Buyers actually plan the purchase of a specialty
product they know exactly what they want and will not accept a substitute.—e.g.,
the Swatch watch, Michael Jordan basketball shoes.

 Unsought products are products purchased when a sudden problem must be

solved, products of which consumers are unaware, and products that people do
not necessarily think of purchasing. Emergency medical services and
automotive repairs are examples of products needed quickly to solve a problem.

Business products – products bought to use in a firm’s operations, to resell, or to make

other product, usually purchased on the basis of an organization’s goals and objectives.
Generally, the functional aspects of the product are more important than the
psychological rewards. Business products can be classified into seven categories
according to their characteristics and intended uses.

 Installations include facilities such as office buildings, factories and warehouses

as well as major pieces of equipment that are non-portable, such as production
lines and very large machines.
 Accessory equipment does not become a part of the final physical product but is
used in production or office activities. Usually cheaper, purchased routinely with
less negotiation, and treated as expense items because they are not expected to
last long. Examples include file cabinets, calculators and tools.
 Raw materials are the basic natural materials that are used in marketing a
physical product. They include minerals, chemicals, agricultural products, and
materials from forests and oceans. They are usually bought and sold according
to grades and specifications and in relatively large quantities. Corn, for example,
is a raw material that is found in many different products, including food.
Beverages (corn syrup) and even fuel (ethanol).
 Components parts become part of the physical product and are either finished
items ready for assembly or products that need little processing before assembly.
Although they become part of a larger product, component parts often can be
easily identified and distinguished. Spark plugs, tires, clocks, brakes, and
headlights are all component parts of an automobile.
 Process materials are used directly in the production of other products not readily
identifiable. A salad dressing manufacturer may include vinegar in its salad
dressing; the vinegar is a process material, because it is included in the salad
dressing but is not identifiable.
 MRO supplies are maintenance, repair and operating items that facilitate
production and operations but do not become part of the finished product.
Paper, pencils, oils, cleaning agents, and paints are in this category.

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  Business services are the intangible products that many organizations use in
their operations. They include financial, legal, market research, information
technology and janitorial services. Firms must decide whether to provide their
own services internally or obtain them from outside the organization.

PRODUCT LINE vs. PRODUCT MIX

Marketers must understand the relationships among all the products of their organization
to coordinate the marketing of the total group of products. The following concepts help
describe the relationships among an organization’s products.

A product item is a specific version of a product that can be designated as a distinct

offering among an organization’s products. An Abercrombie and Fitch polo shirt
represents a product item.

A firm’s product line is a group of closely related product items that are considered to
be a unit because of marketing, technical or end-use considerations. It refers to the
assortment of similar things that the firm holds. Brother, for example, has both a line of
laser printers and one of typewriters.

In contrast, the firm’s product mix describes the combination of different product lines
that the firm holds. It is the composite, or total, group of products that an organization
makes available to customers. Procter & Gamble’s product mix comprises all the health-
care, beauty-care, laundry and cleaning, food and beverage, paper, cosmetic, and
fragrance products that the firm manufactures.

The width of product mix is measured by the number of product lines a company
offers. Some firms have one very focused or narrow product line (e.g., KFC
does only chicken right) while others maintain numerous lines that hopefully all have
some common theme. 3M, for example, makes a large assortment of goods that are
thought to be related in the sense that they use the firm’s ability to bond surfaces
together. The depth of product mix refers to the average number of different products
offered in each product line. It is the variety that is offered within each product line.
Maybelline offers a great deal of depth in lipsticks with subtle differences in shades while
Morton Salt offers few varieties of its product.

Products may be differentiated in several ways. Some may be represented as being of

superior quality (e.g., Maytag), or they may differ in more arbitrary ways in terms of
styles—some people like one style better than another, while there is no real consensus
on which one is the superior one. Finally, products can be differentiated in terms of
offering different levels of service—for example, Volvo offers a guarantee of free, reliable
towing away here should the vehicle break down. American Express offers services not
offered by many other charge cards.

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 ACTIVITIES/ASSESSMENTS

Discussion and Review Questions: Quiz No. 1

Instruction: 2 points each. Please limit your answers to three sentences each.

1. List the tangible and intangible attributes of a pair of Nike athletic shoes.
Compare its benefits with those of an intangible product, such as hairstyling in a
salon.

2. A product has been referred to as a ―psychological bundle of satisfaction.‖ Is this

a good definition of a product? Why or why not?

3. Is a personal computer sold at a retail store a consumer product or a business

product? Defend your answer.

4. How do convenience products and shopping products differ? What are the
distinguishing characteristics of each type of product?

5. In the category of business products, how do component parts differ from

process materials?

6. How does an organization’s product mix relate to its development of a product

line? When should an enterprise add depth to its product lines rather than width
to its product mix?

Application Questions: MID-TERM EXAMINATION (Part 1)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

1. Choose a familiar clothing store. Describe its product mix, including its depth
and width. Evaluate the mix and make suggestions to the owner.

2. It is helpful to think of a total product offering as having a combination of three

interdependent elements: the core product itself, its actual features and its
augmented product. Use the following matrix for the three different companies to
identify their product categories:

CORE ACTUAL AUGMENTED

BMW
Starbucks
McDonalds

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 TOPIC 2 – PRODUCT DECISION

LEARNING OBJECTIVES

After reading this module, you should be able to:

1. Understand the product life cycle and its impact on marketing strategies

2. Describe the product adoption process

3. Understand why some products fail and some succeed.

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 COURSE MATERIALS

Module 2 is provided for the student to understand the product life cycle and its impact
on marketing strategies. It is used to ensure that the introduction, alteration and
termination of a product are timed and executed properly. Also, this topic describes the
product adoption process and how customers do so through the stages as they accept a
new product. Of the thousands of new products introduced every year, many fail.
Reasons for product failure varies, as well as effective marketing planning and product
management are important factors in a new product’s chances of success, and this
material will teach you to understand why some products fail and some succeed.

PRODUCT LIFE CYCLE

The product life-cycle (PLC) refers to the different stages a product goes through from
introduction to withdrawal. It refers to a likely pathway a product may take. As a product
moves its life cycle, the strategies that relate to competition, promotion, distribution,
pricing, and market information must be periodically evaluated and possibly changed. It
has implications for the marketing strategy of a firm as it seeks to introduce, grow and
maintain market share. By understanding the typical life-cycle pattern, marketers are
better able to maintain profitable products.

Figure 2.1
In this case, the product has four stages:

1. Introduction – begins at a product’s first appearance in the market, when sales

start at zero and profits are negative. Profits are below zero because initial
revenues are low, and the company generally must cover when the product is
introduced and struggles to gain brand recognition. Notice in Figure 2.1 how
sales should move upward as time passes.

Because of high risks and costs, few product introductions represent

revolutionary inventions. More typically, product introductions involve a new
variety of packaged convenience rood, a new model of automobile, or a new
fashion in clothing rather than a major product innovation. For instance, Kraft
released its Philadelphia Cooking Creme in 10-oz container after discovering that
consumers liked to use its cream cheese varieties in cooking. Its new product
line comes in four different flavors of cream cheese. The more market-oriented

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 the firm, the more likely it will be to launch innovative, new-to-the-market
products.

Potential buyers must be aware of the new product’s features, uses, and
advantages. Efforts to highlight a new product’s value can create a foundation
for building brand loyalty and customer relationships. Two difficulties may arise
at this point. First, sellers may lack the resources, technological knowledge, and
marketing know-how to launch the product successfully. Firms without large
budgets can still attract attention by giving away free samples or gain visibility
through media appearances. Second, the initial product price may have to be
high to recoup expensive marketing research or development costs. Given these
difficulties, it is not surprising that many products never get beyond the
introduction stage.

Most new products start off slowly and seldom generate enough sales to bring
immediate profits. Less than 10% of new products succeed in the marketplace,
and 90% of successes come from a handful of companies. As buyers learn
about the new product, marketers should be alert for product weaknesses and
make corrections quickly to prevent the product’s early demise. Marketing
strategy should be designed to attract the segment that is most interested in the
product and has the fewest objections. As the sales curve moves upward and
the break-even point is reached, the growth stage begins.

2. Growth – sales rise rapidly, profits reach a peak, and then they start to decline.
This stage is critical to a product’s survival, because competitive reactions to a
product’s success during this period will affect the product’s life expectancy.

Profit begin to decline late in the growth stage as more competitors enter the
market, driving prices down and creating the need for heavy promotional
expenses. At this point, a typical marketing strategy encourages strong brand
loyalty and competes with aggressive emulators of the product. During growth
stage, the organization tries to strengthen its market share and develop a
competitive niche by emphasizing the product’s benefits. Marketers should also
analyse competing brands’ product positions relative to their own brands and
take corrective actions. Aggressive pricing, including price cuts, is also typical
during this stage.

As sales increase, management must support the momentum by adjusting the

marketing strategy. The goal is to establish and fortify the product’s market
position by encouraging brand loyalty. To achieve greater market penetration,
segmentation may have to be used more intensely. This would require
developing product variations - a deeper product mix – to satisfy the needs of
people in several different market segments. Apple, for example, introduced
more variations on its wildly popular iPod MP3 player, including affordable iPod
shuffle, the smaller iPod nano, and the iPod touch, all of which helped expand
Apple’s market penetration in the competitive MP3 player industry.

Gaps in geographic market coverage should be filled during the growth period.
As a product gains market acceptance, new distribution outlets usually become
easier to obtain. Marketers sometimes move from an exclusive or a selective

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 exposure to a more intensive network of dealers to achieve greater market
penetration. Marketers must also make sure the physical, distribution system is
running efficiently so that customers’ orders are processed accurately and
delivered on time.

Advertising and word of mouth helps the product to increase sales. As sales
growth, more firms are willing to stock the product which helps the product to
grow even further.

3. Maturity – When the product reaches peak market penetration. This stage is
characterized by intense competition because many brands are now in the
market. Competitors emphasize improvements and differences in their versions
of the product. As a result, during the maturity stage, stronger companies tend to
squeeze out their weaker competitors or consumers begin to lose interest in the
product.

During maturity phase, the producers who remain in the market are likely to
change their promotional and distribution efforts. Advertising and dealer-oriented
promotions are typical during this stage, as the product matures, buyers
knowledge of it reaches a high level. Consumers of the product are no longer
inexperienced generalist; instead they are experienced specialists. Marketers of
mature products sometimes expand distribution into global markets.

As customers become more experienced and knowledgeable about products, the

benefits they seek may change as well, necessitating product modifications.

Three general objectives can be pursued during the maturity stage:

1. Generate cash flow. This is essential for recouping the initial investment and
generating excess cash to support new products.
2. Maintain share of market. Companies with marginal market share must
decide whether they have a reasonable chance to improve their position or
whether they should drop out.
3. Increase share of customer. Whereas market share refers to the percentage
of total customers a firm holds, share of customers relates to the percentage
of each customer’s needs that the firm is meeting

During maturity stage, marketers actively encourage dealers to support the

product. Resellers may be offered promotional assistance in lowering their
inventory costs. In general, marketers go to great lengths to serve resellers and
provide incentives for selling their brands..

Maintaining market share requires moderate, and sometimes large promotion

expenditures. Advertising messages focus on differentiating a brand from the
field of competitors and sales promotion efforts are aimed at both consumers and
resellers.

A greater mixture of pricing strategies is used during the maturity stage. Strong
price competition is likely and may ignite price wars. Firms also compete in ways
other than price, such as through product quality or service. In addition,

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 marketers develop price flexibility to differentiate offerings in product lines.
Markdowns and price incentives are common. Prices may have to be increased,
however, if distribution and production costs rise.

4. Decline – sales fall rapidly. When this happens, the marketers consider pruning
items from the product line to eliminate those that are no longer earning a profit.
The marketer may also cut promotion efforts, eliminate marginal distributors, and
finally plan to phase out the product.

An organization can justify maintaining a product only as long as the product or

try to reposition it to extend its life. Usually, a declining product has lost its
distinctiveness because similar competing or superior products have been
introduced. Competition engenders increased substitution and brand switching
as buyers become insensitive to minor product differences. For these reasons,
marketers do little to change a product’s style, design, or other attributes during
its decline. New technology or social trends, product substitutes, or
environmental considerations may also indicate that the time has come to delete
the product.

During a product’s decline, outlets with strong sales volumes are maintained and
unprofitable outlets are eliminated. An entire marketing channel may be
eliminated if it does not contribute adequately to profits. An outlet that was not
previously used, such as a factory outlet or internet retailer, is sometimes use to
liquidate remaining inventory of an obsolete product. As sales decline, the
product becomes more inaccessible, but loyal buyers seek out resellers who still
carry it.

Spending on promotion efforts is usually reduced considerable. Advertising of

special offers may slow the rate of decline. Sales promotions, such as coupons
and premiums, may temporarily recapture buyers’ attention. As the product
continues to decline, the marketing manager has tow options during the decline
stage: attempt to postpone the decline or accept its inevitability. Many firms lack
the resources to renew a product’s demand and are forced to consider
harvesting or divesting the product or the strategic business unit (SBU). The
harvesting approach employs a gradual reduction in marketing expenditures and
a less resource-intensive marketing mix. A company adopting the divesting
approach withdraws all marketing support from the declining product or SBU. It
may continue to sell the product until losses are sustained, or it may arrange for
another firm to acquire the product.

Because most businesses have a product mix that consists of multiple products,
a firm’s destiny is rarely tied to one product. A composite of life-cycle patterns
forms when various products in the mix are at different cycle stages: as one
product is declining, other products are in the introduction, growth, or maturity
stages. Marketers must deal with the dual problem of prolonging the lives of
existing products and introducing new products to meet organizational sales
goals.

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 Figure 2.2

The adoption process is the mental process through which an individual passes from
first learning about an innovation to final adoption.

1. Product Awareness - consumer becomes aware of the product. Awareness leads

to interest and the customer seeks information about the new product.

2. Product Interest - consumer seeks information and is receptive to learning about

the product.

3. Product Evaluation - consumer considers the product’s benefits and decides

whether to try it, considering its value versus the competition.

4. Product Trial – consumer examines, tests, or tries the product to determine if it

meets his or her needs.

5. Product Adoption - consumer purchases the products and decides to make full
and regular use of it.

Depending on the length of time it takes them to adopt a new product, consumers fall
into one of five major adopter categories:

 Innovators are the first to adopt a new product; they enjoy trying new products
and tend to be venturesome.
 Early adopters choose new products carefully and are viewed as ―the people to
check with‖.
 Early majority adopt a new product just prior to the average person; they are
deliberate and cautious in trying new products.
 Late majority are quite sceptical of new products but eventually adopt them
because of economic necessity or social pressure.
 Laggards are the last to adopt a new product, are oriented toward the past. They
are suspicious of new products, and when they finally adopt the innovation, it
may already have been replaced by a new product.

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A new product may fail for many reasons:

Most often, companies fail to offer a unique benefit or underestimate the competition.
Sometimes the idea is good but the company has design problems – or the product cost
much more to produce than was expected. Some companies rush to get a product on
the market without developing a complete marketing plan.
Some companies move too slow. With the fast pace of change for many products,
speedy entry into the market can be a key to competitive advantage. To move quickly
and avoid expensive new product failures, companies should follow an organized new-
product development process.

An important element in the new-product development process is continued evaluation

of a new idea’s likely profitability and return on investment. The hypothesis tested is that
the new idea will not be profitable. Applying this process requires much analysis of the
idea before the company spend money to develop and market a product/service. This is
the mayor departure from the product-oriented approach in which a company develops a
product first and then asks sales to ―get rid of it‖.

Whatever your business or industry, managing a new-product development project

should always be efficient!

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Readings:

Marketing, Home of the 12th Man, Custom Edition for Texas A&M University by
W. M. Pride/O. C. Ferell

ACTIVITIES/ASSESSMENTS

Discussion and Review Questions: Quiz No. 2

Instruction: 2 points each. Please limit your answers to three sentences each.

1. How do industry profits change as a product moves through the four stages of its
life cycle?

2. What is the relationship between the concepts of product mix and product life
cycle?

3. What are the stages in the product adoption process, and how do they affect the
commercialization phase?

4. What are the five major adopter categories describing the length of time required
for a consumer to adopt a new product, and what are the characteristics of each?

Application Questions: MID-TERM EXAMINATION (Part 2)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

1. Tabasco pepper sauce is a product that has entered the maturity stage of the
product life cycle. Name products that would fit into each of the four stages:
introduction, growth, maturity, and decline. Describe each product and explain
why it fits into that stage.

2. Generally, buyers go through a product adoption process before becoming loyal

customers. Describe your experience in adopting a product you now use
consistently. Did you go through all the stages of the process?

3. Identify and describe a friend or family member who fits into each of the following
adopter categories. How would you use this information if you were product
manager for a fashion-oriented, medium-priced clothing retailer such as J.Crew
or JCPenny?

a. Innovator
b. Early adopter
c. Early majority
d. Late majority
e. Laggard

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 Developing Your Marketing Plan: FINAL EXAMINATION (Part 1)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

Identifying the needs of consumer groups and developing products that satisfy those
needs are essential when creating a marketing strategy. Successful product
development begins with a clear understanding of fundamental product concept. The
product concept is the basis on which many of the marketing plan decisions are made.
When relating the information in this module to the development of your marketing plan,
consider the following:

1. Create a matrix of the current product mix for your company (assumption only).

2. Discuss how the profitability of your product will change as it moves through each
of the phases of the product life cycle.

3. Create a brief profile of the type of consumer who is likely to represent each of
the product adopter categories for your product.

4. Discuss the factors that could contribute to the failure of your product. How will
you define product failure?

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 TOPIC 3 – DEVELOPING PRODUCTS

LEARNING OBJECTIVES

After reading this module, you should be able to:

1. Understand how companies manage existing products through line extensions

and product modifications.

2. Identity the types of new products.

3. Describe how businesses develop a product idea into a commercial product

4. Explain the stages of the new-product development process

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 COURSE MATERIALS

Module 3 focuses on identifying and developing new-product ideas – and effective

strategies to go with them – is often the key to a company’s success and survival.
Before product reaches the market, it goes through several phases of new product
development process. This module discusses each phase briefly but comprehensive so
that students would be able to create their own understanding of the process.

A company can benefit by capitalizing on its existing products. By assessing the

composition of the current product mix, a marketer can identify weaknesses and gaps.
This analysis can then lead to improvement of the product mix through line extension
and product modification.

PRODUCT LINE EXTENSION

The concept of Product Line Extension can be defined as a business strategy where
the firm plans to expand its established product brand name with the new range of items
in the product category. The Product Line Extension can be in the form of new colors,
forms, shapes, sizes, flavors, packaging, and ingredients. The main idea and agenda
behind the same are to increase the sales and reach of the already established product
at the market place.

Example: Coca Cola:

Figure 3.1

Over its successful and vibrant years in the market, the beverage giant has launched
various versions such as regular coke, vanilla coke, and cherry coke amongst others.
The main motive behind the same was to offer something or the other innovative to the
loyal consumers of the brand with the edge of taste and flavor. Diet Coke is one of the
most famous. Product Line Extension of the brand. The brand has also launched regular
coke in an array of packaging materials and sizes as well.

PRODUCT MODIFICATION

Product modification is an important product strategy which refers to the value adding
modifications to already existing products, mostly in mature markets. Referring to
the product life cycle, the accurate moment to make modifications in already existing
product is in the stage called "maturity"[1]. This strategy may be only an element in more
complex strategies called Production management or Lean product development.

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The key marketing information to implement this strategy into an organisation is about
customers such as:
 preferences
 buying habits
 lifestyle habits

Without those 3 important elements, product modification may be difficult to arrange

because customer's needs are not known. There is also one specific way of product
modification which is made to encourage people do something, for example to stop
smoking. It shows that not only advantages for companies are important.

Types of value adding modifications related to marketing information

In this case 2 types of modifications can be considered from the perspective of

marketing information:

1. retention type- is focused on loyal customers of the firm and the main goal is to
increase the product's attractiveness for them;

2. conquesting type- is focused on loyal customers of the competitors firms and this
modification allows to increase the product's attractiveness for them.

Product’s characteristics allow to changed

In most situations, marketing managers or product managers are responsible for the
changes in existing products. There are 3 main characteristics of a product which may
be changed:

 quality modification- it refers mostly to the change in product's durability. There

are two ways of quality modifications. Firstly, reducing quality of a product to
decrease price and to reach new group of people who are not able to buy an
original product. The second way is to increase quality to compete with other,
rival firms. It is also a good way to build brand loyalty and it gives an opportunity
to raise prices if needed

 functional modification- in this case more focus in paid to the product's versatility,
effectiveness safety and convenience as well;

 style modification- the last product's modification is combined with aesthetic

product change. This way is more connected to the visual side of the product
rather than quality or functionality.

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 DEVELOPING NEW PRODUCTS

The term new product can have more than one meaning. A genuinely new product
offers innovative benefits.

Types of New Products

New-to-the-world products or really-new products: These are essentially the new

products that didn’t exist in the world before, an invention that create a whole new
market. This category accounts for about 10% of new products. For example, the
launch of Uber app was a new-to-the-world product.

New-to-the-firm Products (new product lines): These are new products that didn’t
exist in the firm’s portfolio before. These are not new to the world but are just new to the
firm and add a new product line to the existing portfolio. About 20% of new products.
For example, P&G’s first shampoo was a new-to-the-firm product.

Additions to existing product lines: These products are supplements to the

company’s established product lines. About 26% of new products. For example, a new
flavour for Colgate would be a product line extension.

Improvements and revisions of existing products: These are the upgrades that
replace current products and provide improved performance and/or higher perceived
value. About 26% of new products.

Repositionings: Repositioning is changing the existing image of the product in front of

the existing target market (and relaunching it) or taking this product to a new market with
a new image. About 7% of new products. For example, McDonald’s was launched in
Japan as Makudonarudo.

Cost reductions: These are the new products that provide performance similar to the
existing products but at a lower cost to the company. About 11% of new products

New Product Development

Before diving deeper, let us first learn how Product Development and new Product
Development differ from each other.

Product Development is the broader term that incorporates the complete process of
ideating, designing, developing, and launching new products or already existing products
to gain a competitive advantage in the market, whereas, New Product
Development (NPD) is about introducing a unique and out-of-box idea and launching it in
the market. We can say that the new product is about taking advantage of the white
space in the market and launching a solution that is entirely new. In other words,
Product Development is about iterating & improving new and existing products while

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New Product Development focuses on innovation. It is about your crazy idea that might
look impossible at first and transforming the 7P marketing mix to 7N.

Figure 3.2

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 The New-Product Development Process

Figure 3.3

There are probably as many varieties of new-product development systems as there are
types of companies, but most of them share the same basic steps or stages—they are
just executed in different ways. Below, we have divided the process into eight stages,
grouped into three phases. Many of the activities are performed repeatedly throughout
the process, but they become more concrete as the product idea is refined and
additional data are gathered. For example, at each stage of the process, the product
team is asking, ―Is this a viable product concept?‖ but the answers change as the
product is refined and more market perspectives can be added to the evaluation.

New Product Development Process: Phases and Stages

Phase 1 Phase 2 Phase 3
Generating and Screening Ideas Developing New Products Commercializing New Products
Stage1: Idea Generation Stage4: Business Analysis Stage6: Test Marketing
Stage2: Screening Stage5: Technical and Marketing Stage7: Launch
Stage3: Concept Testing Development Stage8: Evaluation

Stage 1: Idea Generation

Figure 3.4

Generating new product ideas is a creative task that requires a particular way of
thinking. Coming up with ideas is easy, but generating good ideas is another story.
Companies use a range of internal and external sources to identify new product ideas. A
SWOT analysis might suggest strengths in existing products that could be the basis for
new products or market opportunities. Research might identify market and customer
trends. A competitive analysis might expose a hole in the company’s product portfolio.
Customer focus groups or the sales team might identify unmet customer needs.
Many amazing products are also the result of lucky mistakes—product experiments that
don’t meet the intended goal but have an unintended and interesting application. New

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product ideas can come from several sources. They may stem from internal sources:
marketing managers, researchers, sales personnel, engineers or other organizational
personnel. Brainstorming and incentives or rewards for good ideas are typical intra-firm-
devices for stimulating development of ideas. For example, the idea for 3M Post-It
adhesive-backed notes came from an employee. As a church choir member, he used
slips of paper to mark songs in his hymnal. Because the pieces of paper kept falling out,
he suggested developing an adhesive backed note. Employees are becoming more
empowered to express their own product ideas to their supervisors. This collaborative
process can be particularly useful to help marketers iron out the details of a new product
concept.

Sources of ideas

New product ideas come from many places, some of which are peculiar to particular firm
or industries. Here are the more broadly user sources.

 Employees who uses the products

 Customers or user of the firms products or services
 Resellers such as brokers, manufacturer’s reps, industrial distributors, large
jobbers, and large retail firms
 Suppliers/vendors – manufacturers and producers
 Competitors
 Invention industry includes venture capital firms, inventor’s schools, attorneys,
trademark and patent offices, consultants on new business, patent brokers and
others, inventor assistance firms, individual investor, banks, inventors’ councils,
small business administration, technology expositions, patent shows, inventor
newsletters, state entrepreneurial aid programs, and university innovation center.
 Miscellaneous such as consultants, advertising agencies, marketing research
firms, retired product specialists, industrial designers, other manufacturers,
universities, research laboratories, government, printed sources, international
and internet

New product ideas may also arise from sources outside the firm, such as customers,
competitors, advertising agencies, management consultants, and private research
organizations. The interactivity of the Internet allows stockholders to not only suggest
and analyze new product ideas but also interact with one another on evaluating and
filtering these ideas.

The key to the idea generation stage is to explore possibilities, knowing that most will not
result in products that go to market.

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 Figure 3.5 Breakthrough Innovations That Changed Our Lives

Personal computer Automatic teller MS-DOS

Microwave oven Answering machine Magnetic resonance imaging
Photocopier Velcro fastener Gene-splicing technique
Pocket calculator Touch-tone telephone Microsurgery
Fax machine Laser surgery Camcorder
Birth control pill Apollo lunar spacecraft Space shuttle
Home VCR Computer disk drive Home smoke alarm
Communication satellite Organ transplanting CAT Scan
Bar coding Fiber-optic system Liquid crystal display
Integrated circuit Disposable diaper CAD/CAM

Sources: A survey of technology people by R & D Magazine, reported by Carl Vogel, ―Thirty Products That Changed Our
Lives‖ R & D Magazine, September 28,, 1992, pp.42-46.

Stage 2: Screening

The second stage of the product development process is idea screening. This is the first
of many screening points. At this early stage much is not known about the product and
its market opportunity. Still, product ideas that do not meet the organization’s overall
objectives should be rejected at this stage. If a poor product idea is allowed to pass the
screening stage, it wastes effort and money in later stages until it is abandoned. Even
more serious is the possibility of screening out a worthwhile idea and missing a
significant market opportunity. For this reason, this early screening stage allows many
ideas to move forward that may not eventually go to market.

At this early stage, product ideas may simply be screened through some sort of internal
rating process. Employees might rate the product ideas according to a set of criteria, for
example; those with low scores are dropped and only the highest ranked products move
forward.

Stage 3: Concept Testing

Figure 3.6

Today, it is increasingly common for companies to run some small concept test in a real
marketing setting. The product concept is a synthesis or a description of a product idea

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that reflects the core element of the proposed product. Marketing tries to have the most
accurate and detailed product concept possible in order to get accurate reactions from
target buyers. Those reactions can then be used to inform the final product, the
marketing mix, and the business analysis.

New tools leveraging technology for product development are available that support the
rapid development of prototypes which can be tested with potential buyers. When
concept testing can include an actual product prototype, the early test results are much
more reliable. Concept testing helps companies avoid investing in bad ideas, and at the
same time, helps them catch and keep outstanding product ideas.

In concept testing, a small sample of potential buyers is presented with a product idea
through a written or oral description (and perhaps a few drawings) to determine their
attitudes and initial buying intentions regarding the product. For a single product idea,
an organization can test one or several concepts of the same product. Concept testing
is a low-cost procedure that allows a company to determine customers’ initial reactions
to a product idea before it invests considerable resources in research and development
process. The result of concept testing can help product development personnel better
understand which product attributes and benefits are most important to potential
customers.

The Purposes of Concept Testing

1. Identify the very poor concept so it can be eliminated
2. Eliminate the sales or trial rate that the product would enjoy – a sense of market
share or general range of revenue.

3. Help develop the idea, not just test it.

Stage 4: Business Analysis

During the business analysis stage, the product idea is evaluated to determine its
potential contribution to the firms’ sales, costs and profit. The company seeks to answer
such questions as the following:

What is the market opportunity for this product?

What are the costs to bring the product to market?
What are the costs through the stages of the product life cycle?
Where does the product fit in the product portfolio and how will it impact existing product
sales?
How does this product impact the brand?
How does this product impact other corporate objectives such as social responsibility?

The marketing budget and costs are one element of the business analysis, but the full
scope of the analysis includes all revenues, costs, and other business impacts of the
product.

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Stage 5: Technical and Marketing Development

Figure 3.7

A product that has passed the screening and business analysis stages is ready for
technical and marketing development. Technical development processes vary greatly
according to the type of product. For a product with a complex manufacturing process,
there is a lab phase to create specifications and an equally complex phase to develop
the manufacturing process. For a service offering, there may be new processes requiring
new employee skills or the delivery of new equipment. These are only two of many
possible examples, but in every case the company must define both what the product is
and how it will be delivered to many buyers.

While the technical development is under way, the marketing department is testing the
early product with target customers to find the best possible marketing mix. Ideally,
marketing uses product prototypes or early production models to understand and
capture customer responses and to identify how best to present the product to the
market. Through this process, product marketing must prepare a complete marketing
plan—one that starts with a statement of objectives and ends with a coherent picture
of product distribution, promotion, and pricing integrated into a plan of marketing action.

Stage 6: Test Marketing and Validation

Test marketing is the final stage before commercialization; the objective is to test all the
variables in the marketing plan including elements of the product. Test marketing
represents an actual launching of the total marketing program, done on a limited basis.
Initial product testing and test marketing are not the same. Product testing is totally
initiated by the producer: he or she selects the sample of people, provides the consumer
with the test product, and offers the consumer some sort of incentive to participate. Test
marketing, on the other hand, is distinguished by the fact that the test
group represents the full market, the consumer must make a purchase decision and pay
for the product, and the test product must compete with the existing products in the
actual marketing environment. For these and other reasons, a market test is an accurate
simulation of the broader market and serves as a method for reducing risk. It should
enhance the new product’s probability of success and allow for final adjustment in the
marketing mix before the product is introduced on a large scale.

Who should be the test group?

 Laboratory personnel at the plants where the products are first produced

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  Experts will give more careful consideration and express more accurate reactions
 Employees – company loyalties and pressures and employee’s lifestyles and
customs
 Stakeholders includes customers and non-customers, users and non-users
resellers, end-user advisers (such as architects), users of competitive products,
repair organizations and technical support specialists whose reaction to new
products have been sought

How should the test be conducted?

 Monadic test – where the respondent tests a single product for a period of time.
Services usually must be monadic, though there are exceptions.
 Sequential monadic test – where there are back-to-back monadic tests with the
same respondent. It is sometimes called a staggered paired comparison.
 Paired comparison test – where use of the test product is interspersed with that
of a competitive product
 Triangular comparison test – similar to paired comparison but with two
competitive products vs. one test product (or two test products vs one
competitor)

Stage 7: Launch

Finally, the product arrives at the commercial launch stage. The marketing mix comes
together to introduce the product to the market. This stage marks the beginning of the
product life cycle. Traditionally, the term launch, or commercialization, has described
that time or that decision where the firm decides to market a product. At this point we
need to prepare for an activity planning for launch management. Apparently, most
managements today are at least receptive to the concept of a guided launch; a few use
such system, some are experimenting with parts of systems, and the rest are watching
what the others are doing.

The Launch Management System

1. Spot potential problems – the first step is to identify all potential weak spots or
potential troubles. Four techniques are used to develop the list of potential
problems.
 Situation analysis made for the marketing planning step. For example,
government lawyers may recently have criticized an ingredient used in
the product. Or, buyers may have indicated a high level of satisfaction
with present products on the market, suggesting trouble in getting them to
try our new one. This problems section in the marketing plan will have
summarized most of the potential troubles from the situation analysis.
 Role-play what competitors will do – after they have heard of the new
product. Vigorous devil’s advocate sessions can turn up scary options
that competitors may exercise – they usually have more options than we
think of at first glance.
 Look back over all of the data – accumulated in the new products file.
Start with the original concept test reports, then the screening forms, the
early lab testing, the rest of the use tests (especially the longer-term ones

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 with potential customers) and records of all internal discussions. These
sources contain lots of potential troubles, some of which we had to ignore
in our efforts to move the item along.
 Fourth, it is helpful to start with a satisfied customer or industrial user and
work back from that satisfaction to determine the hierarchy of effects
necessary to produce it. On consumer packaged goods, this hierarchy is
applied to the marketing of three ethical pharmaceutical and nutritional
specialty items. Note each product had a different problem and required
different remedial action (contingency plan). All three items were
marketed by one firm in one year. But the hierarchy of effects will vary in
situation.
2. Select those to control – Each potential problem is analysed to determine its
expected impact. Expected impact means we multiply the damage the event
would cause by likelihood of the event happening. The impact is used to rank
the problems and to select those that will be ―controlled‖ and those that won’t.
3. Develop contingency plans for the control problems – Contingency plans are
what, if anything, will be done if the difficulties actually occur. The degree of
completeness in this planning varies, but the best contingency plans are ready
for immediate action.
4. Design the tracking system – the tracking system must send back usable data
fast. We must have some experience so we can evaluate the data. There
should be trigger points. These points trigger the contingency plan. The answer
lies in the concept of tracking.

SAMPLE LAUNCH MANAGEMENT PLAN

Setting: This launch control plan is for a small or medium-sized industrial firm that is marketing a
unique electrical measuring instrument. The device must be sold to the general-purpose (i.e.,
factory) market, whereas past company products have been sold primarily to the scientific R&D
market. The firm has about 60 salespeople, but its resources ar not large. No syndicated (e.g.,
audit firm) services are available in this market.

Only a few parts of the marketing plan are presented here, but the control plan does contain the
total set of control problems, a plan to measure those that could be measured, and what the firm
planned to do if each problem actually occurred.

Potential Problem Tracking Contingency Plan

1 Salespeople fail to contact Track weekly call reports. The plan If activity falls below this level for
general-purpose market at Calls for at least 10 general three weeks running, a remedial
prescribed rate. Purpose calls per week per rep. program of one-day district sales
meetings will be held.
2 Salespeople may fail to Tracking will be done by having Clarification will be given to
understand how the new sales manager call one rep each individual reps on the spot, but if
feature of the product day. Entire sales force will be first10 calls suggest a wide
relates to product usage in covered in two months. spread problem, special
the general-purpose teleconference calls will be
market. arranged to repeat the story to
the whole sales force.
3 Potential customers are Tracking by instituting a series of 10 Remedial plan provides for
not making trial purchases follow-up telephone calls a week to special follow-up telephone calls
of the product prospects who have received sales to all prospects by reps, offering
presentations. There must be 25 a 50 percent discount on all first-

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 percent agreement on the product’s time purchases
main feature and trial orders from 30
percent of those prospects who
agree on the feature.
4 Buyers make trial Track another series of telephone No remedial plan for now. If
purchase but do not place survey calls, this time to those who customer does not rebuy, there
quantity reorders. placed an initial order. Sales is some problem in product use.
forecast based on 50 percent of trial Since product is clearly better,
buyers reordering at least 10 more we must know the nature of the
units within six months. misuse. Field calls on key
account will be used to
determine that problem, and
appropriate action will follow.
5 Chief competitor may This situation is essentially Remedial plan is to pull out all
have the same new untrackable. Inquiry among our stops on promotion for 60 days.
feature (for which we have suppliers and media will help us All make-or-break program. Full
no patent) ready to go and learn quicker. field selling on new item only,
markets it. plus a 50 percent first-order
discount and two special
mailings. The other trackings
listed above will be monitored
even more closely.
Much of this section is taken from Ken Bruss, ―Gaining Competitive Advantage by Leveraging Lessons Learned, ― in A.
Griffin and S. M. Somermeyer, The PDMA Toolbook 3 for New Product Development, Willey, 2007, Chapter 15.

Stage 8: Evaluation

The launch does not in any way signal the end of the marketing role for the product. To
the contrary, after launch the marketer finally has real market data about how the
product performs in the wild, outside the test environment. These market data initiate a
new cycle of idea generation about improvements and adjustments that can be made to
all elements of the marketing mix.

The small business environment today is very dynamic and competitive, and new
product development is a crucial process if you want to survive. For small enterprises
to withstand competition from multinationals, they have to continuously update their
products to conform to current trends. The new product development process is the
cycle that a new product has to undergo from conceptualization to the final introduction
into the market.

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 ASSESSMENTS/ACTIVITI ES

Discussion and Review Questions: Quiz No. 3

Instruction: 2 points each. Please limit your answers to three sentences each.

1. What is a line extension, and how does it differ from a product modification?

2. Compare and contrast the major approaches to modifying a product?

3. Identify and briefly explain the phases of the new-product-development process.

4. Do small companies that manufacture just a few products need to be concerned

about developing and managing products? Why and why not?

5. Why is product development a cross-functional activity – involving finance,

engineering, manufacturing, and other functional areas – within an organization?

6. What is the major purpose of concept testing, and how is it accomplished?

7. What are the benefits and disadvantages of test marketing?

8. Why can the process of lunching take a considerable amount of time?

Application Questions: MID-TERM EXAMINATION (Part 3)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

1. When developing a new product, a company often test-markets the proposed

product in a specific area or location. Suppose you wish to test-market your new,
revolutionary Super Wax, car wax, which requires only one application for a
lifetime finish. Where and how would you test-market your new product?

2. A product manager may make quality, functional, or style modification when

modifying a product. Identify a familiar product that recently was modified,
categorize the modification and describe how you would have modified it
differently.

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 TOPIC 4 – MANAGING PRODUCTS

LEARNING OBJECTIVES

After reading this module, you should be able to:

1. Understand the importance of product differentiation and the elements that

differentiate one product from another

2. Understand how businesses position their products

3. Examine how product deletion is used to improve product mixes

4. Describe organizational structures used for managing products

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 COURSE MATERIALS

Module 4 reviews the concepts of product differentiation through quality, design and
support services. Since managing products is a complex task, management must find
an organizational approach that accomplished the tasks necessary to manage products.
This module also discusses the important role of product manager who is responsible for
a product, a product line or several distinct products that make up an interrelated group
within a multiproduct organization.

PRODUCT DIFFERENCIATION THROUGH QUALITY, DESIGN AND

SUPPORT SERVICES

Some of the most important characteristics of products are the elements that distinguish
them from one another. Product differentiation is the process of creating and
designing products so customers perceive them as different from competing products.
Customer perception is critical in differentiating products. Perceived differences might
include quality, features, styling, price or image. A crucial element used to differentiate
one product from another is the brand. In this section, we examine three aspects of
product differentiation that companies must consider when creating and offering
products for sale: product quality, product design and features and product support
services. These aspects involve the company’s attempt to create real differences
among products.

Product Quality

Quality refers to the overall characteristics of a product that allow it to perform as

expected in satisfying customer needs. The concept of quality also varies between
consumer and business markets. Consumers consider high-quality products to be
reliable, durable and easy to maintain. For business markets, technical suitability, ease
of repair, and company reputation are important characteristics.

Quality dimension
 Level of quality which is the amount of quality a product possess when it is
compared with other products.

 Consistency of quality refers to the degree to which a product has the same level
of quality over time. Consistency means giving to consumers the quality they
expect every time they purchase the product.

Figure 4.1

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Product Design refers to how a product is conceived, planned and produced. Design
involves the total sum of all the product’s physical characteristics. Good design is one of
the best competitive advantages any brand can possess. One component of design is
styling, or the physical appearance of the product. The style of a product is one design
feature that can allow certain products to sell very rapidly. Good design, however,
means more than just appearance; it involves a product’s functioning and usefulness.

Product features are specific design characteristics that allow a product to perform
certain tasks. By adding or subtracting features, a company can differentiate its
products from those of the competition and within the same company. In general, the
more features a product has, the higher its price and the higher its perceived quality.

Types of Product Design

1. Demand – Pull Innovation happens when a product design can directly take
advantage of an opportunity in the market. A new design works towards solving
an existing design issue. This happens either through a new product or a
variation of an existing product.

2. Invention – Push Innovation occurs with an advancement in technology or

intelligence. This is driven through research or a creative new product design.

Factors Affecting Product Design

 Cost of production including material costs and labor costs. These in turn affect
the pricing strategy, which needs to be in line with what the customer is prepared
to pay for it.
 Ergonomics - the product needs to be user friendly and afford convenience in its
function. Using ergonomic measurements, minor or major changes may need to
be made to product design to meet essential requirements.
 Materials - whether the requisite materials are available easily is an important
consideration in product design. In addition, an eye needs to be kept on new
developments in materials and technology.
 Customer Requirements - it is vital to capture customer feedback on any
prototype as well as during the planning and conceptual stages. Even a
technologically advanced and exciting feature may need to be removed if it
causes dislike or negative feelings in an end user.
 Company Identity - is a point of pride and as a matter of course, a product’s
very design or color schemes and features may be determined by this identity.
The logo may need to be featured in a specific manner or subtle or overt features
of the company identity may need to be built into the design.
 Aesthetics - the product may need to appear stylish or of a certain shape. This
form may end up determining the technology that it built into the product. This
may in turn also affect the manufacturing process that needs to be followed.
 Fashion - the current fashion and trends may also affect a certain product’s
design. Customers will want the most updated options and need to be
considered during product design.

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  Culture - if a product is for a certain market with its own individual culture, this
needs to be kept in mind during product design. A product acceptable in one
culture may end up being offensive or not desirable in another one.
 Functions - the number of uses and functions a product has will impact its
design.
 Environment - or its impact on the environment. The average customer these
days may be more discerning and concerned about the environment than before.
Things to consider here may include whether the materials used are recyclable,
how the product will be disposed of at the end of its life or how the packaging can
be disposed of.

PRODUCT SUPPORT SERVICES

Usually referred to as customer services, these services include any human or

mechanical efforts or activities a company provides that add value to a product such as
delivery and installation , financing arrangements, customer training, warranties and
guarantees, repairs, layaway plans, convenient hours of operation, adequate parking
and information through toll-free numbers and websites.

PRODUCT POSITIONING AND REPOSITIONING

Positioning refers to the decisions and activities intended to create and maintain in the
minds of the customers and how it is distinguished from the products of the competitors.

There are three standard types of product positioning strategies brands should
consider: comparative, differentiation, and segmentation. Through these strategies,
brands can help their product stand out by targeting the right audiences with the best
message.

As gaining shelf space becomes more competitive for brands, marketers should be
looking into leveraging one of the various types of product positioning strategies. A long-
time staple of in-store marketing, product positioning strategies are tied to how items are
displayed in the shopping aisle to maximize sales. Unfortunately, CPG brands may find
they have little control over their placement in the store without a hefty investment.
Mobile marketing offers a path to cost-effectively enhancing in-store placement.

There are three standard types of product positioning strategies brands should consider:
comparative, differentiation, and segmentation. Through these strategies, brands can
help their product stand out by targeting the right audiences with the best message.
Mobile marketing enhances all of these strategies and helps guide consumers to
products in the shopping aisle.

3 Traditional Types of Product Positioning Strategies

Conventional models of product positioning strategies focus on catching the eye of

consumers. While there is a wide range of options for brands to consider in product
positioning, most can be broken down into one of three categories.

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 1. Comparative: Comparative positioning strategies work by placing products right
next to other brands to highlight their competitive edge. A typical example of this
occurs when stores place a white label value brand next to a more expensive
name brand product. Often, the label includes a ―compare to X brand‖ statement
to show the consumers that the products are similar, but the value brand offers a
better price.

2. Differentiation: Sometimes, the uniqueness of a product can’t be duplicated,

making it ideal for a differentiation strategy. An excellent example of a product
easily differentiated is Barilla’s Pronto pasta. While the pasta aisle is competitive,
Pronto offers a unique selling point in that it requires no draining. As such, this is
the primary focal point that the brand highlights on its packaging to gain
consumer attention.

3. Segmentation: Sometimes, helping a product stand out requires focusing on

multiple audiences with different needs, but with the same product. Consider a
simple product like Bayer aspirin. The brand offers bottles of its tablets in the
pharmacy aisle at the grocery store, but they also provide smaller, on-the-go
packs for purchase at the convenience store. Through this, they target
consumers buying bottles of medication for households for use in the future, as
well as traveller or individuals dealing with an immediate ache or pain they want
to take care of right away.

Repositioning refers to the major change in positioning for the brand/product. To

successfully reposition a product, the firm has to change the target market's
understanding of the product. This is sometimes a challenge, particularly for well-
established or strongly branded products.

Repositioning involves changing target markets or the differential advantage or both.

There are four generic repositioning strategies.

Figure 4.2

Same product and target market change in the image of the product: The product may
be acceptable in functional terms but fails because it lacks the required image. The
communication emanating from the company is overhauled. The advertising message is
changed. The contexts and the structure of the contexts in which the customers come

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into contact with the company are changed to reflect the new image. It is not easy to
effect such a repositioning. Because the company and its products do not change in any
substantive way, it is very difficult for the company to believe that it is different from what
it was earlier. And unless the company does not truly believe in its new image, it cannot
communicate the new image effectively to its customers.

PERCEPTUAL MAPPING

Firms use perceptual or positioning maps to help them develop a market positioning
strategy for their product or service. As the maps are based on the perception of the
buyer they are sometimes called perceptual maps. Positioning maps show where
existing products and services are positioned in the market so that the firm can decide
where they would like to place (position) their product. Firms have two options they can
either position their product so that it fills a gap in the market or if they would like to
compete against their competitors they can position it where existing products have
placed their product.

The diagram below is a Perceptual Map of UK chocolate confectionery Brands

Figure 4.3

Perceptual map usually have 2 lines, the x and y axis. The x axis goes left to right and
the y axis goes bottom to top. Any criteria can be used for example price, quality, status,
features, safety and reliability.

In the example, two dimensions price (x axis) and quality (y axis) have been used. If we
plot the UK chocolate market, we can identify where existing chocolate brands have
been positioned by manufacturers. For example our fictional brand of Belgian
chocolates called Belgium Chocolates are high quality and high price so they are placed
in the top right hand box, whilst Twix is an affordable ―everyday‖ treat chocolate so it has
been placed in the bottom left hand square, in the low quality low price brand box.

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The Purpose of Perceptual Maps

Perceptual maps can help identify where (in the market) an organization could position a
new brand. In our example this could be at the medium price and medium quality
position, as there is a gab there. There is also a gap in high price low quality but
consumers will not want to pay a lot of money for a low quality product. Similarly, the
low price high quality box is empty because manufacturers would find it difficult to make
a high quality chocolate for a cheap price or make a profit from selling a high quality
product at a low price.

We must remember that perceptual maps are based on the buyer’s perception. This is
challenging: what may be viewed as a quality product by one buyer may not be
perceived as quality product by another buyer. Perceptual maps help firms understand
how customers view their products. However as perception is very subjective, firms
need to ensure that the date they use to plot the map is accurate. If customer
perception data is wrong, the map will be wrong and this will affect the success of any
marketing strategy based on the perceptual (positioning) map. Perceptual maps may
help organizations identify gaps in the market. Before deciding to fill any gaps in the
market firms need to ensure that there is likely to be a demand for a product positioned
in the gap.
PRODUCT DELETION

Product deletion is the process through which a product or an entire product line is
removed from the product portfolio either through product elimination or product
replacement. Usually, product deletion is done when a product reaches the decline or
death stage of the product life cycle or there is a dramatic decline in its sales and profits.
A failing product reduces the profitability of the firm and results in draining of resources.
This process of product deletion requires the company to evaluate its entire product mix
and to analyzed where can resources be used to generate more reliable revenue
streams.

Along with declining sales, there are several factors which contribute to product deletion
including the firm's business model, failure of alignment with marketing strategies, local
preference and culture, political and government rules and regulations, legal constraints
and product malfunction. Product deletion or product elimination is a complex process. It
involves communication with customers, proper production planning, evaluation of
contracts etc.

Product Deletion Stages

Product deletion has four distinct stages:

1. Identification of products to be deleted.

2. Analysis of products to be deleted.
3. The decision to remove the product
4. Implementation of the deletion process

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 Figure 4.4

Importance of Product Deletion

If a product is not at a proper position in the market and not generating enough revenue,
then all the resources invested in it are washed out which could have been used for the
production of some other product or enhance some existing product. This calls for
product deletion. Sometimes, there is a presence of a lot of products in the product line
which leads to increased use of capital and resources being distributed too thinly. In
these cases, the deletion of some products is essential. A weak product demands more
managerial efforts with respect to different marketing decisions and may also lead to
debilitation of the company’s image and dissatisfaction of its shareholders. As the taste
and preference of consumer change, there arises a need of deleting some products
which no longer appeal to the new preferences. The old products can be totally
eliminated by product deletion or replaced with some other new products. Sometimes,
products which do not align with the current objectives of the company face deletion.
Sometimes, when there are a lot of products in a product line, it leads to product
cannibalism in which some products take away the business of some other products. It
calls for product deletion of some products and thinning the product line depth.

Who Is Involved in the Process?

Because they are ultimately responsible for the success or failure of the company’s
products, product managers typically drive the product development process from a
strategic standpoint. But this process is not strictly a product management
function. Product development requires the work and input of many teams across a
business, including:

 Development
 Design
 Marketing
 Sales
 Finance
 Testing

Product managers act as the strategic directors of the development process. They pull
together the cross-functional team, communicate the big-picture goals and plans for the
product and oversee the team’s progress.

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 Figure 4.5

For the success of any product strategy, the role of a product manager assumes utmost
significance. The product manager job description clarifies the key duties, tasks and
responsibilities of the product management role in an organization.

The spectrum of the job will vary according to:

 the particular industry

 the product or group of products
 the product life cycle

However the day-to-day primary functions, responsibilities and skills required for the
position are detailed in this job description. A product manager may be responsible for
all or only certain of these tasks.

Main Job Tasks, Duties and Responsibilities

Research and Analysis

 Research and analyze market conditions

 Identify key competitor and consumer trends
 Articulate market requirements and opportunities
 Identify opportunities for product innovation and product enhancements
 Work with research regarding product development

Product Planning and Management

 Determine product specifications

 Define the long term strategy of the product and create product road map
 Prepare product documents including Market Requirement Documents and
product use cases to drive product activity
 Develop pricing strategies and product policies
 Determine product packaging solutions
 Negotiate with suppliers
 Oversee product development
 Manage and communicate with cross functional teams

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Product Marketing

 Develop product marketing plan and event campaigns to generate product

awareness and demand
 Plan product launch
 Liaise with advertising and public relations to promote product
 Support sales and marketing with the necessary product knowledge and
technical expertise
 Conduct product presentations
 Develop sales tools and sales training material
 Provide input for marketing collateral development
 Supply sales with latest research and marketing information
 Implement marketing plan in conjunction with all departments
 Drive on-going improvement in sales and profitability

Customer and End-User Support

 Manage product-related support, feedback and inquiries from users

 Co-ordinate market research to track customer and end-user feedback
 Monitor product inventory
 Use market feedback to inform product refinements and ongoing development

Education and Experience

 Bachelor's degree or equivalent

 Advanced degree an advantage
 Previous product management or related experience
 Quantitative and business analysis skills
 Knowledge of marketing principles and practices
 Knowledge of business and management principles and practices
 Project management skills
 Proficient in relevant software applications

Key Skills and Competencies

 communication skills
 problem analysis and solving
 strategic thinking/planning
 organizational and planning skills
 judgment and decision making skills
 attention to detail
 negotiating skills
 team player
 creativity
 stress tolerance
 customer orientation
 presentation skills

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Job postings for product manager positions demand these primary product manager
skills from job candidates:

 able to work productively and seamlessly within cross-functional teams to enable

an efficient product creation process
 effective verbal and written communication skills with the ability to interact
effectively with diverse stakeholders
 proven ability to manage and analyze data to derive meaningful insights and
quickly diagnose and correct any problems
 outstanding planning and organizational skills with a proven ability to adjust
quickly to shifting priorities, multiple demands and rapid change

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 AS S E S S M E N TS / AC T I V I TI E S

Discussion and Review Questions: Quiz No. 4

Instruction: 2 points each. Please limit your answers to three sentences each.

1. What is product differentiation, how can it be achieved?

2. Explain how the term quality has been used to differentiate products in the
automobile industry in recent years. What are some makes and models of
automobiles that come to mind when you hear the terms high quality and poor
quality?

3. What is product positioning? Under what conditions would head-to-head product

positioning be appropriate? When should head-to-head positioning be avoided?

4. What types of problems does a weak product cause in a product mix? Describe
the most effective approach for avoiding such problems.

5. What type of organization might use a venture team to develop new products?
What are the advantages and disadvantages of such a team?

Application Questions: MID-TERM EXAMINATION (Part 4)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

1. Phasing out a product from the product mix often is difficult for an organization.
Visit a retail store in your area and ask the manager what does he or she has
had to discontinue in the recent past. Find out what factors influenced the
decision to delete the product and who was involved in the decision. Ask the
manager to identify any products that should be but have not been deleted, and
try to ascertain the reason.

2. Marketers use different approaches in new-product development in order to

identify the relative importance of different product attributes. These approaches
help marketers optimize product design, predict purchasing likelihood and
estimate market share in a competitive situation. As an example, different
restaurants have varying attributes, including ambience, breadth of menu,
service level, location and price. Consumer place different value on each of
these attributes and are consequently willing to make ―trade-offs.‖ Higher service
levels often mean a higher price, for example. A broader menu often
accompanies a restaurant with a nicer ambiance, but it comes at a higher price.
Marketers can assign weights to the different values that consumers place on the
product attributes, and thereby understand the trade-offs that are made.

You are designing a new tablet computer. Begin by identifying the set of all
product attributes. Rate these attributes on a scale of 1 to 10, with 1 being the
most important and 10 being the least important. For instance, would you rate

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 ease of use higher than the style design of the product? How important is it for
the tablet to have the newest technological features? Remember, the more
sophisticated and tech-savvy the product, the more expensive it is likely to be.
Finally, make a recommendation for the new tablet computer design.

Developing Your Marketing Plan: FINAL EXAMINATION (Part 2)

Instruction: 10 points each. Please limit your answer to ten sentences

each.

A company marketing strategy may be revised to include new products as it considers

its SWOT analysis and the impact of environmental factors on its product mix. When
developing a marketing plan, the company must decide whether new products are to be
added to the product mix or if existing ones should be modified. The information in this
chapter will assist you in the creation of your marketing plan as you consider the
following:

1. Identify whether your product will be a modification of an existing one in your

product mix or a completely new product.

2. If the product is an extension of one in your current product mix, determine the
type (s) of modifications that will be performed.

3. Discuss how the product idea would move through the stages of new-product
development. Examine the idea, using the tests and analyses included in the
new-product development process.

4. Discuss how the management of this product will fit into your current
organizational structure.

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 REFERENCES

Crawford, M., and Di Benedetto, A., (2008) New Products Management, Ninth Edition,
McGraw-Hill International Edition.
Pride, W.M., and Ferrell, O. C., (2013) Marketing, Custom Edition for Texas A & M
University, Cengage Learning.
Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed. Pearson
Education Australia/Prentice Hall.
Sears online Archived 2007-02-17 at the Wayback Machine, sears.com.
When an online Sears customer goes to the "Parts and accessories" section of the
website to find parts for a particular Sears item, the "model number" field actually
requires a Sears item number, not a manufacturer's model number. This is a typical
problem with product codes or item codes that are internally assigned by a company but
do not conform to an external standard.
Kotler, Philip; Gary Armstrong (1989). Principles of Marketing, fourth edition (Annotated
Instructor's Edition). Prentice-Hall, Inc. pp. 639 (glossary definition). ISBN 0-13-706129-
3.
"2002 Economic Census, Finance and Insurance" US Census Bureau, 2002, p.14.
Insurance carrier product lines at Curlie
North American Product Classification System, U.S. Census Bureau
Eurostat classifications Archived 2007-10-12 at the Wayback Machine, ec.europa.eu.
United Nations product classifications Archived 2007-07-03 at the Wayback Machine,
unstats.un.org.
Leo Aspinwall, 1958 Archived 2013-08-29 at the Wayback Machine, Social Marketing
AED Resource p. 45
A history of schools of marketing thought, Eric H. Shaw, D.G. Brian
Jones Archived2010-12-05 at the Wayback Machine, Marketing theory Volume 5(3):
239–281, 2005 SAGE, p. 249

Internet:

https://www.youtube.com/watch?v=UN6rpHQGVgc
www.cengagebrain.com
http://en.wikipedia.org/wiki/File:Wikiquote-logo.svg
https://www.youtube.com/watch?v=_26E6QR_hmU
https://www.youtube.com/watch?v=xm3iEWVi4Kw
https://www.youtube.com/watch?v=2sQ-xzowedk
https://www.youtube.com/watch?v=M0SQBuU5duQ
https://www.youtube.com/watch?v=QNN-Ful-KU0
https://www.youtube.com/watch?v=KWy4UgbzCBU
https://www.youtube.com/watch?v=jS-rD6HuxIk
http://www.businessdictionary.com/definition/product-modification.html
https://www.youtube.com/watch?v=NIkg3Ui7ITY
https://www.youtube.com/watch?v=tqKnsfyPXAI
https://www.youtube.com/watch?v=ntzB9pGsD3E&t=276s
https://www.youtube.com/watch?v=iS_pjfCOZdM

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 GRADING SYSTEM

Class Standing 70%

 Quizzes
 Portfolio/e-Portfolio
 Case Analysis
 Projects
 Summative Test (Long or Unit Test)

Midterm / Final Examinations 30%

100%

Midterm Grade + Final Term Grade = FINAL GRADE

2

Ms. Y.2020

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