Week 6: Product Development Management

According to Kotler, product is composed of three different levels: core, actual, and augmented. The core product is the core benefit that consumer seek, the actual product is tangible product that the target market recognizes as an offer, and the augmented product is supported by additional  consumer benefits and services.

(Ashok Jain, “Principles of Marketing”, page 163)

For example, I have SONY cyber-shot digital camera. The core product is the ability to take pictures and record videos.  The actual product is the camera which has the following characteristics: SONY cyber-shot brand, stylish design, features (9 megapixel result, 20x optical zoom, high speed shooting, advanced image processor, panorama mode, etc), and high quality. The augmented product includes warranty, technical support, and online product support.

Another example is my TOYOTA Camry. The core product is the ability to go anywhere at any time. The actual product is the car which has the characteristics:  TOYOTA Camry brand, luxurious design, features (hands free system, multiple airbags, ABS, etc), and high quality and reliability. The augmented product includes fianance, warranty, and customer service support.

Products are tools that provide consumer benefits and they can be obsolete when there is a better tool that provides the same core benefit.   For instance, cassette tapes and Walkman had been widely used until in the 1980s and lived up to 1990s when the CDs and CD players took their place. The CDs and CD players were widely used in the early 2000s and then headed for decline as MP3s and MP3 players and iPOD came out. Another example is the VHS tapes and VCRs that now almost vanish from the market due to the entry of DVDs and DVD players. As technology advances into HD DVD and Blu-ray and 3D, the old DVD players are replaced by HD-DVD/Blu-ray 3D players.

There are several other products that have become obsolete. Type writers have been replaced by computers and printers. Film cameras were replaced by digital cameras. Pager had been replaced by cell phone, which is now getting replaced by smart phone.

While I am studying Chapter 6 on the product development and product life cycle, I come across the cartoon below in my friend’s facebook. It's about how thinkgs have changed, which somewhat relates to product becoming obsolete that we learn in this chapter :)

New product development process typically comprises 6 to 8 steps including ideation, screening, concept development and testing, marketing strategy development, business analysis, product development, test marketing, and commercialization. The first five steps (from ideation to business analysis) involve relatively low incremental cost. After moving into step 6, the process will involve large cost. So it is expected to see the products that get into step 6 achieve a high chance of success (e.g. at least 60%). 

Following the product development process is the product life cycle of introduction, growth, maturity, and decline. If products have shorter life cycle, company needs to develop new products more frequently to sustain its position in the market. This would incur higher cost of product development which likely to lead to lower profit. It is crucial for the company to make decision about new products and life-cycle movement to minimize cannibalization. The product life cycle also depends on industry. For high-tech industry, the products typically have relatively short life cycle.  For example, the life cycle of PDAs is only within a decade.