expensive, often requiring extensive hand crafting, tooling, and development of components, but this phase can help
identify potential production problems.
6) Product testing and test marketing. Using what it learned from the prototype, the company begins limited production of the
item. The product is then tested internally to see if it meets performance requirements. If it does, it is made available for sale
in limited areas. This stage is very costly, since promotional campaigns and distribution channels must be established for
test markets. But test marketing gives a company its first information on how consumers will respond to a product under
real market conditions.
7) Commercialization. If test-marketing results are positive, the company will begin full-scale production and marketing of the
product. Gradual commercialization, with the firm providing the product to more and more areas over time, prevents undue
strain on the firm’s initial production capabilities. But extensive delays in commercialization may give competitors a chance
to bring out their own version.
Variations in the Process for Services
x the development of services (both for consumers and industrial buyers) involves many of the same steps as goods development
x basically, steps 2, 3, 4, 6, and 7 are the same; however, there are some important differences in steps 1 and 5:
1) Service ideas. The service for service ideas includes task called defining the service package, which involves identification
of the tangible and intangible features that define the service and stating service specifications.
5) Service process design. Instead of prototype development, services require a service process design. This step involves
selecting process, identifying worker requirements, and determining facilities requirements so that service can be provided
as promised in the service specifications. Process selection identifies each step in the service, including the sequence and
the timing. Worker requirements specify employee behaviours, skills, capabilities, and interactions with customers during
the service encounter. Facilities requirements designate all of the equipment that supports delivery of the service.
x service package Æ identification of the tangible and intangible features that define the service
x service process design Æ selecting the process, identifying worker requirements, and determining facilities requirements so that
the service can be effectively provided
The Product Life Cycle
x product live cycle (PLC) Æ the concept that the profit-producing life of any product goes through a cycle of introduction,
growth, maturity (levelling off), and decline
Stages in the Product Line Cycle
x life cycle for both goods and services is a natural process in which products are born, grow in stature, and finally decline and die
1) Introduction. The introduction stage begins when the product reaches the marketplace. During this stage, marketers focus
on making potential consumers aware of the product and its benefits. Because of extensive promotional and development
costs, profits are nonexistent.
2) Growth. If the new product attracts and satisfies enough consumers, sales begin to climb rapidly. During this stage, the
product begins to show a profit. Other firms in the industry move rapidly to introduce their own versions.
3) Maturity. Sales growth begins to slow. Although the product earns its highest profit level early in this stage, increased
competition eventually leads to price cutting and lower profits. Toward the end of the stage, sales start to fall.
4) Decline. During the final stage, sales and profits continue to fall. New products in the introduction stage take away sales.
Companies remove or reduce promotional support (ads and salespeople) but may let product linger to provide some profits.
Extending Product Life: An Alternative to New Products
x firms try to keep products in maturity stage as long as they can, in fact, they extend product life via number of creative means
x foreign markets offer 3 possibilities for lengthening product life cycles:
1) product extension Æ existing, unmodified product that is marketed globally
2) product adaptation Æ product modified to have greater appeal in foreign markets
3) reintroduction Æ process of reviving for new markets products that are obsolete in older ones
x branding Æ process of using symbols to communicate the qualities of a product made by a particular producer
x brands are designed to signal uniform quality: customers who try and like a product can return to it by remembering its name
x sometimes companies change the name of a popular brand because it is “tired”, or because of legal requirements
x just as products can be branded, so can entire countries
Adding Value Through Brand Equity
x widely known and admired brands are valuable because of their power to attract customers
x those with higher brand equity generate greater brand awareness and loyalty on the part of consumers and larger market shares
than competing brands (and are perceived to have greater quality)
x brand equity Æ degree of consumers’ loyalty to and awareness of a brand and its resultant market share
x because a brand adds value to a product, marketers manage brand names to increase that value
Types of Brand Names
x every product has brand name of some form, however, different types of brand names tell consumer something about its origins
x national brands Æ products distributed by and carrying a name associated with the manufacturer
x these brands are often widely recognized by consumers because of large national advertising campaigns
x costs of developing positive image for national brand are high, so some companies use national brand on several related products
x licensed brands Æ selling the right to use a brand name, a celebrity’s name, or some other well-known identification mark to
another company to use on a product