Product Development
A product is not just a physical object — it is a value package: a bundle of tangible and intangible attributes that, taken together, satisfy a customer’s want or need. Understanding what a product is (LO7), and how to develop, brand, and package it (LO8), are the final two pillars of Ch12’s marketing framework.
graph TD VP[Product as Value Package\nBundle of features → benefits] VP --> CG[Consumer Goods\nPersonal use · B2C\nConvenience · Shopping · Specialty] VP --> IG[Industrial Goods\nProduction · B2B] VP --> SV[Services\nIntangible] VP --> ID[Ideas\nConcepts, causes] PLC[Product Life Cycle\n4 Stages] PLC --> I[Introduction] I --> G[Growth] G --> M[Maturity] M --> D[Decline] D -->|drives| NPD[New Product Development] NPD --> RD[R&D Departments] RD --> HM[High Mortality Rate\nFew ideas survive] HM --> STM[Speed to Market\nKey success factor] BR[Branding] BR --> BE[Brand Equity\nAdded value beyond function] BE --> PP[Premium Pricing Power] BE --> RE[Reputation Risk\nBad ethics destroy equity]
How It Appears Per Course
ADMN 201
LO7 defines the product as a value package and classifies goods and services. LO8 connects the Product Life Cycle to the imperative for continuous innovation, and introduces branding and packaging as tools for differentiating and protecting products in the market.
LO7 — The Product as a Value Package
Features vs. Benefits
A product’s value is not in its features alone — it is in what those features do for the customer.
| Element | What it is | Example |
|---|---|---|
| Feature | A specific quality of the product | Night-mode camera on a smartphone |
| Benefit | The result the customer achieves from that feature | Captures clear photos at a dark party without a photographer |
| Satisfaction | The feature provides a benefit that meets the customer’s need | Customer buys the phone to capture memories |
Key insight: Customers buy benefits, not features. A faster processor is a feature. Finishing work early and having more free time is the benefit.
Product Classification
Products are classified by who buys them and for what purpose — not by what they are.
| Type | Definition | Examples |
|---|---|---|
| Consumer Goods | Tangible goods purchased for personal use (B2C) | Cologne, economy car, groceries |
| — Convenience | Inexpensive, purchased frequently with little effort | Coffee, newspapers, toothpaste |
| — Shopping | Moderately expensive, purchased infrequently; comparison shopping involved | Appliances, clothing, electronics |
| — Specialty | Expensive, rarely purchased; strong brand preference | Luxury watches, high-end cars |
| Industrial Goods | Physical items purchased to produce other goods or run business operations (B2B) | Bulldozers, microchips, steel, surgical instruments |
| Services | Intangible products — non-physical features | Consulting, insurance, medical checkups, travel arrangements |
| Ideas | Concepts or causes marketed to satisfy societal needs | ”Don’t text and drive” campaigns, political candidates |
The dual identity rule: The same item can be a consumer good or an industrial good based on buyer intent.
- Coffee beans at home = consumer good
- Coffee beans at a café = industrial good (input to production)
Product Mix vs. Product Line
- Product Mix: The total collection of all products a firm offers. Example: Black+Decker’s entire catalogue — drills, toasters, toys.
- Product Line: A related subset within the mix — products that function similarly or target the same group. Example: Starbucks’ range of espresso drinks.
LO8 — New Product Development, Branding & Packaging
Why New Products Are Necessary: The Product Life Cycle (PLC)
Every product passes through four stages:
| Stage | Characteristics | Marketing Implication |
|---|---|---|
| Introduction | Low sales, high costs, losses or break-even | Build awareness; invest in promotion |
| Growth | Rising sales, new competitors enter, profits peak | Defend market share; expand distribution |
| Maturity | Sales plateau, heavy competition, price pressure | Differentiate; squeeze efficiency |
| Decline | Falling sales, shrinking profits | Exit, reintroduce elsewhere, or replace with new product |
Because products inevitably decline, firms need a continuous product development process or they go obsolete.
The NPD Process
- R&D Departments: Continuously explore new possibilities.
- High Mortality Rate: Of the many ideas that enter development, only a few survive to become successful market products. This is expected — the risk is managed, not eliminated.
- Speed to Market: How quickly a firm responds to market changes or introduces new items. Speed is a primary factor in profitability — early movers capture market share before competitors.
Extending Products Instead of Replacing Them
Firms can delay the need for entirely new products through three strategies:
| Strategy | What it is | Example |
|---|---|---|
| Product Extension | Market the same product globally without change | Coca-Cola — same formula everywhere |
| Product Adaptation | Modify for local tastes or conditions | McDonald’s serving beer in Germany; Ford right-hand steering in Japan |
| Reintroduction | Take a product obsolete in one market to a new market | Selling manually-operated cash registers in Latin America |
Branding
Branding is the use of names, symbols, and logos to communicate the qualities of a product made by a specific producer — distinguishing it from competitors.
Brand Equity is the added value a brand name provides beyond the product’s basic functional benefits. It is both a pricing tool and a financial asset:
- Firms with high brand equity (Apple, Coca-Cola, Mercedes) can charge more than competitors for functionally equivalent products.
- Coca-Cola’s brand name alone has been valued at over $76 billion.
- Top Canadian brands: RBC, TD, Bell, Lululemon ($12.1B).
Brand equity is fragile: Corporate misconduct (child labour, pollution, scandals) directly erodes equity, forcing price cuts and losing customers. Nearly everything a firm does should be evaluated for its effect on brand image.
Brand types:
- National brands: Distributed by and carrying the manufacturer’s name (e.g., Coca-Cola, Ford)
- Private brands: Carrying the retailer’s name (e.g., President’s Choice, Kirkland)
- Generic brands: No-frills products under the category name, not a specific brand
Packaging
Packaging serves three distinct functions:
| Function Type | What it does |
|---|---|
| Marketing | Makes the product attractive on the shelf; displays brand name; identifies features and benefits |
| Logistical | Physical protection from breakage/spoilage; prevents theft (bulky packaging for small valuable items) |
| Legal | Complies with the Consumer Packaging and Labelling Act: comprehensive, factual information; bilingual (French and English) required on all prepackaged products in Canada |
Packaging is “the silent salesman” — it must sell the product from the shelf without a human pitch.
Cross-Course Connections
MarketingMix — Product is the first P; branding and PLC decisions shape the full mix
MarketSegmentation — positioning is built through branding; brand equity reinforces the target segment’s perception
ConsumerBuyingProcess — brand equity shortcuts the evaluation stage; packaging influences shelf selection
OrganizationalMarkets — same product can be consumer or industrial depending on buyer intent
CorporateSocialResponsibility — brand equity is directly tied to corporate citizenship; unethical behaviour destroys equity
Key Points for Exam/Study
- LO7: Product = value package (bundle of tangible + intangible attributes); customers buy benefits, not features
- Product classification: Consumer goods (personal use) / Industrial goods (production/operations) / Services (intangible) / Ideas — same item can be either consumer or industrial
- Consumer goods sub-types: Convenience (frequent, cheap), Shopping (comparison, moderate), Specialty (rare, expensive)
- LO8: PLC = Introduction → Growth → Maturity → Decline — the decline stage drives the need for continuous NPD
- Speed to market = primary NPD success factor; High mortality rate = most ideas don’t make it — both are exam-testable
- Brand equity = added value beyond functional benefits → allows premium pricing; destroyed by bad corporate behaviour
- Packaging: Marketing (sell) + Logistics (protect) + Legal (Canadian bilingual requirement)
- Product Extension (same globally) vs. Product Adaptation (modified for local) vs. Reintroduction (old product, new market) — know the distinction
Open Questions
- At what point in the PLC should a firm invest in a new product vs. extend/adapt the existing one?
- How does private brand growth (e.g., President’s Choice) threaten national brand equity?