COMM 223 — Marketing Management
Chapter 8: Developing New Products and Managing
the Product Life Cycle
Based on: Armstrong, Kotler et al., Marketing: An Introduction, 7th Canadian Edition
Chapter Overview: This chapter covers two interrelated product challenges: (1) how to
find and develop successful NEW products, and (2) how to manage products strategically
through their LIFE CYCLE stages. It closes with social responsibility in product decisions
and international product marketing.
1. New Product Development Strategy
How Companies Obtain New Products
A firm can obtain new products in two fundamental ways:
• Acquisition — buying a whole company, a patent, or a licence to produce someone else's
product.
• New Product Development (NPD) — developing original products, improvements, modifications,
and new brands through the firm's own internal efforts.
Why New Products Matter
New products are critical to both customers (new solutions, variety) and companies (growth engine). In
fast-changing environments, many companies rely on new products for the majority of their growth.
Real-World Example: 3M estimates 40% of its revenues come from products that didn't
exist 5 years ago. Apple's iPhone alone generates over 70% of the company's total global
revenues — a product introduced little more than a decade ago.
Why New Products Fail — and the Odds Against Success
Despite their importance, new products are extremely risky:
• ~60% of all new consumer packaged products introduced by established companies fail.
• Two-thirds of new product concepts are never even launched.
Common Reasons for Failure:
• Overestimating market size
• Poorly designed product
• Incorrect positioning or wrong launch timing
, • Priced too high or poorly advertised
• Executive bias — pushing a favourite idea despite poor research
• Higher-than-expected development costs
• Competitors fight back harder than expected
Key Insight: To succeed, a company must understand its consumers, markets, and
competitors — and develop products that deliver superior customer value. Success
requires customer-focused, holistic planning, not chance.
2. The New Product Development Process
Rather than leaving new products to chance, companies must follow a systematic, customer-driven
process. The book identifies 8 major steps:
# Step What Happens
Systematic search for new product ideas from internal sources (R&D,
1 Idea Generation employees, hackathons) and external sources (customers, competitors,
distributors, suppliers, crowdsourcing).
Reduces ideas using the R-W-W framework: Is it Real? Can we Win? Is
2 Idea Screening it Worth doing? Drops poor ideas early before costly development
begins.
Concept Translate idea into detailed product concept stated in consumer terms,
3 Development & then test multiple concepts with target consumers to assess appeal and
Testing purchase intent.
Design initial marketing strategy (3-part statement): target market &
Marketing Strategy
4 Development
value proposition; price, distribution & budget; long-run sales, profit
goals & marketing mix.
Review sales, cost, and profit projections to determine whether the
5 Business Analysis
product meets company objectives. Gate before heavy investment.
Product R&D creates one or more physical prototypes. Rigorous functional and
6 Development psychological testing; customers often involved (e.g., wear testers).
Product and full marketing program tested in realistic market settings.
7 Test Marketing Can use standard, controlled, or simulated test markets. May be
shortened or skipped for speed.
Full market launch. Key decisions: timing (cannibalization?
8 Commercialization
competition?) and geographic rollout (local, national, global).
Step 1 — Idea Generation
Idea generation is the systematic search for new product ideas. Companies typically generate
hundreds or thousands of ideas to find a few good ones. Sources fall into two categories:
, A) Internal Idea Sources
• Formal R&D departments (e.g., Ford's Silicon Valley innovation and mobility centre).
• Employees at all levels — executives, salespeople, scientists, engineers, manufacturing staff.
• Intrapreneurial programs: internal social networks where employees submit, discuss, and vote on
ideas.
◦ Example — AT&T's Innovation Pipeline (TIP): Since 2009, 40,000+ ideas submitted; 80+ projects
funded.
• Hackathons: events where employees spend a day or week on intensive idea generation.
◦ Example — Facebook hackathons produced the 'Like' button and friend tagging.
B) External Idea Sources
• Distributors & Suppliers — close to the market; can relay consumer problems and new
possibilities, new materials or techniques.
• Competitors — monitoring ads, buying and reverse-engineering competitor products, analyzing
sales.
• Trade publications, shows, seminars, government agencies, ad agencies, marketing research
firms, universities, inventors.
• Customers (most important) — analyzing questions and complaints; inviting suggestions.
◦ Example — Salesforce Idea Exchange: customers submit and vote on software features; 60,000+
ideas submitted; 1/3 of product management decisions influenced by it.
C) Crowdsourcing (Open Innovation)
Crowdsourcing invites broad communities — customers, employees, independent scientists, the public
— into the innovation process. It can produce unexpected and powerful ideas that internal R&D alone
would miss.
Example: Under Armour's Future Show Innovation Challenge: annual competition where
outside innovators pitch ideas in a Shark Tank-style format. Winner earns $50,000 + a
development contract. First winner: the UA MagZip, a one-handed zipper their own R&D
had failed to develop for 2 years.
Key Principle: Truly innovative companies develop extensive innovation networks
capturing ideas from every possible source — employees, customers, outside innovators,
and beyond. They don't rely on any single source.
Step 2 — Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of idea screening is
to reduce that number by dropping poor ideas as soon as possible. Product development costs rise
sharply in later stages, so early elimination of weak ideas is critical.
Chapter 8: Developing New Products and Managing
the Product Life Cycle
Based on: Armstrong, Kotler et al., Marketing: An Introduction, 7th Canadian Edition
Chapter Overview: This chapter covers two interrelated product challenges: (1) how to
find and develop successful NEW products, and (2) how to manage products strategically
through their LIFE CYCLE stages. It closes with social responsibility in product decisions
and international product marketing.
1. New Product Development Strategy
How Companies Obtain New Products
A firm can obtain new products in two fundamental ways:
• Acquisition — buying a whole company, a patent, or a licence to produce someone else's
product.
• New Product Development (NPD) — developing original products, improvements, modifications,
and new brands through the firm's own internal efforts.
Why New Products Matter
New products are critical to both customers (new solutions, variety) and companies (growth engine). In
fast-changing environments, many companies rely on new products for the majority of their growth.
Real-World Example: 3M estimates 40% of its revenues come from products that didn't
exist 5 years ago. Apple's iPhone alone generates over 70% of the company's total global
revenues — a product introduced little more than a decade ago.
Why New Products Fail — and the Odds Against Success
Despite their importance, new products are extremely risky:
• ~60% of all new consumer packaged products introduced by established companies fail.
• Two-thirds of new product concepts are never even launched.
Common Reasons for Failure:
• Overestimating market size
• Poorly designed product
• Incorrect positioning or wrong launch timing
, • Priced too high or poorly advertised
• Executive bias — pushing a favourite idea despite poor research
• Higher-than-expected development costs
• Competitors fight back harder than expected
Key Insight: To succeed, a company must understand its consumers, markets, and
competitors — and develop products that deliver superior customer value. Success
requires customer-focused, holistic planning, not chance.
2. The New Product Development Process
Rather than leaving new products to chance, companies must follow a systematic, customer-driven
process. The book identifies 8 major steps:
# Step What Happens
Systematic search for new product ideas from internal sources (R&D,
1 Idea Generation employees, hackathons) and external sources (customers, competitors,
distributors, suppliers, crowdsourcing).
Reduces ideas using the R-W-W framework: Is it Real? Can we Win? Is
2 Idea Screening it Worth doing? Drops poor ideas early before costly development
begins.
Concept Translate idea into detailed product concept stated in consumer terms,
3 Development & then test multiple concepts with target consumers to assess appeal and
Testing purchase intent.
Design initial marketing strategy (3-part statement): target market &
Marketing Strategy
4 Development
value proposition; price, distribution & budget; long-run sales, profit
goals & marketing mix.
Review sales, cost, and profit projections to determine whether the
5 Business Analysis
product meets company objectives. Gate before heavy investment.
Product R&D creates one or more physical prototypes. Rigorous functional and
6 Development psychological testing; customers often involved (e.g., wear testers).
Product and full marketing program tested in realistic market settings.
7 Test Marketing Can use standard, controlled, or simulated test markets. May be
shortened or skipped for speed.
Full market launch. Key decisions: timing (cannibalization?
8 Commercialization
competition?) and geographic rollout (local, national, global).
Step 1 — Idea Generation
Idea generation is the systematic search for new product ideas. Companies typically generate
hundreds or thousands of ideas to find a few good ones. Sources fall into two categories:
, A) Internal Idea Sources
• Formal R&D departments (e.g., Ford's Silicon Valley innovation and mobility centre).
• Employees at all levels — executives, salespeople, scientists, engineers, manufacturing staff.
• Intrapreneurial programs: internal social networks where employees submit, discuss, and vote on
ideas.
◦ Example — AT&T's Innovation Pipeline (TIP): Since 2009, 40,000+ ideas submitted; 80+ projects
funded.
• Hackathons: events where employees spend a day or week on intensive idea generation.
◦ Example — Facebook hackathons produced the 'Like' button and friend tagging.
B) External Idea Sources
• Distributors & Suppliers — close to the market; can relay consumer problems and new
possibilities, new materials or techniques.
• Competitors — monitoring ads, buying and reverse-engineering competitor products, analyzing
sales.
• Trade publications, shows, seminars, government agencies, ad agencies, marketing research
firms, universities, inventors.
• Customers (most important) — analyzing questions and complaints; inviting suggestions.
◦ Example — Salesforce Idea Exchange: customers submit and vote on software features; 60,000+
ideas submitted; 1/3 of product management decisions influenced by it.
C) Crowdsourcing (Open Innovation)
Crowdsourcing invites broad communities — customers, employees, independent scientists, the public
— into the innovation process. It can produce unexpected and powerful ideas that internal R&D alone
would miss.
Example: Under Armour's Future Show Innovation Challenge: annual competition where
outside innovators pitch ideas in a Shark Tank-style format. Winner earns $50,000 + a
development contract. First winner: the UA MagZip, a one-handed zipper their own R&D
had failed to develop for 2 years.
Key Principle: Truly innovative companies develop extensive innovation networks
capturing ideas from every possible source — employees, customers, outside innovators,
and beyond. They don't rely on any single source.
Step 2 — Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of idea screening is
to reduce that number by dropping poor ideas as soon as possible. Product development costs rise
sharply in later stages, so early elimination of weak ideas is critical.
