Chapter 5
Product Development
Prepared by
Bùi Ngọc Tuấn Anh (PhD)
Content
• What is a product
• Individual product decisions
• Product line and product mix decisions
• Developing new products
• Managing the product life cycle (PLC)
1
What is a Product?
• A product is anything that can be offered to a market to
satisfy a want or need.
• This includes tangible goods, services, events,
experiences, persons, places, organizations, and ideas.
What is a Product?
• Needs are basic human requirements, like food, clothing,
and safety.
• Wants are the forms that needs take, shaped by culture
and individual personality.
• Demands are wants backed by the ability to pay.
2
Components of the Market Offering
Product Characteristics/Classifications
Persons • Experiences
• Events
• Properties
• Organizations
• Information
• Ideas
Goods
Services Places
3
Levels of product and services
Core customer value
• The fundamental problem-solving benefits
that consumers seek when they buy a
product.
Actual product
• The tangible attributes of a product including quality
level, features, design, brand name, and packaging.
Augmented product
• The actual product plus additional services and
benefits, such as warranty, free delivery, installation,
and maintenance.
Potential product
• Encompasses all the possible augmentations
and transformations the product might undergo
in the future.
Product classifications
• Consumer products: products purchased by final
consumers for personal consumption.
• Industrial products: products purchased for further
processing or use in conducting a business.
– These can be classified as materials and parts, capital items,
and supplies and services.
4
Consumer products
• Convenience products
– purchased frequently, immediately, and with minimal effort.
• Shopping products
– purchased less frequently, with more comparison shopping.
• Specialty products
– unique characteristics or brand identification that buyers are
willing to make a special effort to purchase.
• Unsought products
– products that consumers do not know about or do not normally
think of buying.
Product Classifications
Durability and Tangibility
Nondurable goods
Durable goods
Services
5
Product Classifications
• Staples
Consumer-Goods
• Impulse goods
• Emergency goods
Specialty goods
Convenience goods
Shopping goods Unsought goods
Product Classifications
Materials and Parts Industrial-Goods
Manufactured
materials
Capital Items
Raw materials
Installations
Supplies and Equipment
business Services
6
Product and Services Differentiation
Product Differentiation
Form Features
Customization Durability
Performance Conformance
Reliability Repairability
Style
7
Services Differentiation
Customer
Consulting
Delivery &
Ordering Ease
Returns
Training
Installation Maintenance & Repair
Design
Functional
Benefits
Aesthetic
Benefits
8
Product and Brand Relationships
Product Hierarchy
Product Systems/Mixes
Product Line Analysis
Product Line Length
Product Mix Pricing
Co-Branding
Individual product decisions
Product Labeling
Branding Packaging
attributes and Logos
Decisions
Developing related to
Designing
the benefits building and
Designing and labels and
that a product managing a
producing the logos to
will offer brand,
container or identify,
through including
wrapper for a describe, and
quality, brand name
product. promote a
features, style, selection and
product.
and design. brand
strategy.
Product Support Services are the additional services provided with a product.
These services enhance customer service and satisfaction.
9
Product Hierarchy
Need Family
Product Family
Product Class
Product Line
Product Type
Item
Product line and Product Mix decisions
• Product line decisions
• Product mix decisions
• Product portfolio:
– the total number of products offered by a company, including
various product categories and product lines.
10
Product line and Product Mix decisions
• Product line decisions
– Product line: a group of products that are closely related.
– Product line length: the number of items in a product line.
– Line stretching: lengthening a product line beyond its current
range (down-market, up-market, or both).
– Line filling: adding more items within the existing product line
range.
– Product line modernization, featuring and pruning: companies
need to modernize, feature, and prune their product lines to
remain competitive.
Product Systems and Mixes
Width
Product
Product System Consistency
Mix
Length
Depth
11
Product line and Product Mix decisions
• Product mix decisions
– Product mix: the set of all product lines and items that a
particular seller offers for sale.
– Product mix width: the number of different product lines the
company carries.
– Product mix length: the total number of items a company
carries within its product lines.
– Product mix depth: the number of versions offered of each
product in the line.
– Product mix consistency: how closely related the various
product lines are.
Proctor & Gamble Product Mix
Product Mix Width
Disposable Paper
Detergents Toothpaste Bar Soap
Diapers Products
Ivory Snow Gleem Ivory Pampers Charmin
Dreft Crest Camay Luvs Puffs
Tide Zest Bounty
Product Cheer Safeguard
Line
Length Dash Oil of Olay
Bold
Gain
Era
12
Product Map
Product Line Length
Up-market stretch Line modernization,
featuring, and pruning
Line stretching Two-way
stretch
Down-market stretch
Line filling
13
Product Mix Pricing
Product line pricing Captive-product pricing
Optional-feature pricing Two-part pricing
By-product pricing Product-bundling pricing
Co-Branding and Ingredient Branding
Co-
Branding
• Same-company
• Joint venture
• Multi-sponsor
• Retail co-
branding
Ingredient
Branding
14
Packaging and Labeling
Packaging
Objectives
1. Brand
identification
2. Persuade
3. Protection
4. At-home storage Labeling
5. Aid consumption
Objectives
1. Identify
2. Grade
3. Describe
4. Promote
Developing new products
• New product development strategy
– Acquisition
• Obtaining new products by buying a whole company, a patent, or a
license to produce someone else’s product.
– New product development efforts
• Developing original products, product improvements, product
modifications, and new brands.
15
Developing new products
• The new product development process: a systematic,
customer-driven process for finding and growing new
products. This involves 8 major steps:
– Idea generation: the systematic search for new product ideas,
often from both internal and external sources.
– Idea screening: filtering new product ideas to identify good ideas
and drop poor ones, often using a r-w-w (real, win, worth doing)
framework.
– Concept development and testing: developing a detailed version
of the new product idea stated in meaningful consumer terms, and
testing these concepts with target consumers.
Developing new products
– Marketing strategy development: developing an initial marketing
strategy for the new product based on the product concept,
including target market, positioning, sales goals, and marketing
mix.
– Business analysis: reviewing sales, costs, and profit projections
for a new product to determine whether it satisfies company
objectives.
– Product development: developing the product concept into a
physical product to ensure it can be a workable offering.
– Test marketing: testing a product and its marketing program in
realistic market settings.
– Commercialization: introducing the new product into the market.
16
Managing the product life cycle (PLC)
Product life cycle (PLC): the course of a product's sales and profits over its lifetime.
Managing the product life cycle (PLC)
• PLC marketing strategies: each stage of the plc requires
different marketing strategies and tactics.
– Introduction stage: focus on building product awareness and
trial.
– Growth stage: focus on maximizing market share and building
brand preference.
– Maturity stage: focus on defending market share, improving the
product, or modifying the marketing mix.
– Decline stage: decide whether to maintain, harvest, or drop the
product.
17
Key considerations
Competitive
Value creation Innovation
advantage
• Product • New products are • Product design and
development is the lifeblood of an differentiation are
critical for creating organization, and key to creating a
value for customers innovation is crucial competitive
and the company. for long-term advantage.
success.
Key considerations
Customer Marketing
Sustainability Pricing strategy
satisfaction communication
• Products must • Product • Product • Promote and
meet development development communicate
customer should needs to be the benefits of
needs and incorporate aligned with new and
expectations sustainable pricing existing
to achieve practices and strategies to products to
satisfaction consider maximize target
and loyalty. environmental profitability. customers.
impact.
18
