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Product Development
Products Fall into 2 Categories:
► Business
Goods: goods purchased by
organizations for use in their operation.
 Ex: Foot Locker purchases shoes from Nike.
 Promotion Method: Discounts for large volume
► Consumer
Goods: goods purchased and used
by the consumer for personal use.
We buy Nike shoes at Foot Locker.
►Promotion Method: TV, Magazines, Sporting
► Point
of Difference: Unique product
characteristic or benefit that sets the
product apart from a competitor’s product.
Steps in New Product
#2. Idea Generation –
Generating new product ideas.
New ideas come from:
► Consumers
► Employees
► Research
► Development Departments
► Competitors
Protocol: statement that identifies a target market,
specifies customers needs and wants, explains the
new product and its point of difference.
► Focus
Groups: a panel of six to ten
consumers who discuss opinions about a
topic under the guidance of a moderator.
Business Analysis: Financial
aspect of producing and marketing
the product are analyzed.
Creating the product
► Prototype:
the first model of the product.
Company tests its production capabilities
to see if the product can be produced at a
reasonable cost.
#6: Test Marketing
► Test
marketing involves offering the product
for sale in a small geographic area. This
helps project sales.
#7: Commercialization –
► Produce
the product for mass market.
Product Life Cycle
► Product
Life Cycle: stages that a product
goes through during its life in the
Introduction Stage:
► The
product is first introduce into the
market place.
 Ex: Gatorade
 Biggest challenge: Attaining shelf space in retail
 Two pricing strategies:
Skimming – pricing products high to cover
research and development costs
►Penetration pricing – price products low in
comparison to a competitors product to increase
demand for the product.
Growth Stage
► Competitors
enter the marketplace if they
see that a new product is successful.
► New product features are added – new
flavors, colors, sizes
► Distribution outlets increase (vending
machines, fountain service, snack bars)
Maturity Stage
► Sales
slow down for the product
► Must be innovative with your product to
move out of this stage.
► Hardees ($6.00 burger)
Decline Stage
► Sales,
profits and profiles begin to drop.
► Technological changes can cause an entire
product category to go to the decline (8Track, cassettes, cd players)
► When they reach this stage, a company
does one of two things:
 Drop the product
 Keep the product in the market in smaller
quantities for brand loyal customers.