Unit 2 · Topic 2.4 · about 30 minutes
Product
Describe how a product is developed and branded, and explain how its marketing changes from introduction to decline.
Predict first
Two friends want to sell a backpack with a padded laptop sleeve that unzips flat at airport security. A factory will make 5,000 of them for $110,000. What should they do first?
Six stages from idea to launch
Product development is the process of creating or improving a product through research and iteration. It typically includes six stages: ideation, validation, design, messaging, production and launch. Iteration matters here. Bad feedback on a prototype can send a team back a step or two before anything is built for sale.
Hall Pass, a protein bar a small team is developing for kids whose schools ban nuts, shows what each stage looks like in practice.
| Stage | What it focuses on | For Hall Pass |
|---|---|---|
| Ideation | Generating ideas for new or improved products through market research, technical research and development (R&D), and brainstorming | Parents say their kids' schools ban nuts, and the protein bars they find all contain nuts |
| Validation | Testing product ideas with potential customers, often with an MVP, to assess whether the product can achieve product-market fit (customer demand sufficient to generate profit) | A one-page description and a handmade sample go to 60 parents, and 41 say they would buy a box a month |
| Design | Sourcing materials, creating prototypes and estimating production and delivery costs; setting key features such as functionality, the user experience, and size, color and quality; gathering feedback on prototypes | Kids taste three recipes and pick chocolate, and each bar will cost $1.10 to make and deliver |
| Messaging | Creating the overall marketing strategy, including a value proposition (who the product serves, the problem or need it addresses and how it beats alternatives) and a product-positioning strategy (how customers should see it next to rivals) | The team writes its value proposition and positions Hall Pass as the protein bar schools allow |
| Production | Building the product using design-stage feedback, setting the production process and supply chain, and matching production levels to customer demand | A nut-free bakery makes the bars, and the first month's run of 8,000 is matched to expected customer demand |
| Launch | Taking orders, distributing the final product to customers and marketing it to the target segment | Orders open online, boxes ship, and ads run in parent groups at nut-free schools |
Validation: the MVP and product-market fit
Validation is the cheapest place for an idea to fail. The team tests the idea with potential customers, often using an MVP, to assess whether the product can achieve product-market fit, which occurs if customer demand is sufficient to generate profit.
That is a higher bar than problem-solution fit. A nut-free bar that solves a real problem for parents has problem-solution fit. Product-market fit means enough of them will buy it, at a price above what it costs to make, for the bar to earn a profit.
Worked exampleWriting a value proposition
In the messaging stage, a business develops a value proposition: a statement, based on market research insights, of who the product intends to serve, what problem or need it addresses, and how it is superior to alternatives. The Hall Pass team's research found that local schools ban nuts, that parents want at least 10 grams of protein in a snack, and that the leading protein bars contain nuts or are made alongside them. Each Hall Pass bar has 12 grams of protein and is made in a nut-free bakery. Write the value proposition, then choose a position.
Who it serves. Parents of kids at nut-free schools who want a filling lunch-box snack.
The problem or need. The protein bars parents trust cannot go to a nut-free school.
How it is superior. Each bar has 12 grams of protein and is made with no nuts, in a nut-free bakery, so it meets school rules where the leading bars do not.
Position it. A product-positioning strategy influences how potential customers perceive a product relative to rivals. Hall Pass should be the protein bar for school, not one more gym bar competing on flavor.
For parents of kids at nut-free schools, Hall Pass is a 12-gram protein bar that school rules allow, because unlike the leading bars it is made with no nuts, in a nut-free bakery.
Branding
Branding is the process of developing an identity, or brand, for a business or product. A brand distinguishes the product from competitors, raises customer awareness and generates loyalty.
Businesses typically build a brand identity from their vision, the product's value proposition or both, so that the brand appeals to the target customer. A courier that promises same-day delivery might choose a forward-leaning logo and a name that sounds fast. Hall Pass works the same way: the name says "allowed at school" before anyone reads the label.
A brand identity can be conveyed through a name, idea, term, symbol, design or a combination of these, and businesses often protect it by trademarking. Not every product needs a famous name, though. Businesses may also sell generic products, because some customers prioritize the cost savings that come with generic goods over branding. That is why a pharmacy shelves a generic pain reliever right beside the brand-name one.
The product life cycle
Once a product launches, it enters the product life cycle, a series of stages from introduction (the culmination of the product development stages) to decline. Changes in customer demand over time move it from one stage to the next. At each stage, the business adapts the focus of its marketing strategy to address competitive challenges and to grow or retain its market share.
| Stage | Sales volume and revenue | Marketing strategy focuses on |
|---|---|---|
| Introduction | Typically low, because the product has just launched | Raising brand awareness to generate initial customer demand |
| Growth | Grow at an increasing rate; production typically increases, and competitors often enter the market | Differentiating the product from rivals, improving quality, promoting the brand and advertising to promote growth |
| Maturity | Flatten, in a saturated market (most customers who want the product already have it) | Retaining market share through brand loyalty, continued differentiation, lower prices and innovation |
| Decline | Fall as customers turn to rival products or innovative substitutes | Cutting costs or redesigning the product to remain viable; the product may be discontinued |
Units sold each year: a fictional company's dashboard GPS unit
Years 1 and 2, introduction: sales are low. Years 3 to 5, growth: sales rise by more each year. Years 6 to 8, maturity: sales flatten. Years 9 and 10, decline: sales fall as drivers switch to map apps on their phones, an innovative substitute.
Sort it
Tap each situation, then tap the life cycle stage it describes.
Introduction
Growth
Maturity
Decline
Check your understanding
A team builds three prototypes of a new water bottle, asks testers how each one feels to carry and drink from, and estimates what each would cost to make and ship. Which stage of product development is the team in?
A startup shows a sketch of a new dog harness to 200 dog owners. Which result would best suggest the harness can achieve product-market fit?
A new company called Shiftwear makes scrubs, the uniforms many nurses wear. Which statement is a value proposition?
A meal-delivery startup's value proposition promises hot dinners at your door within 20 minutes. Which brand identity fits it best?
A sports drink's sales grew quickly for five years. For the last three years, its sales volume and revenue have stayed flat, and four rival drinks sell for about the same price. Which marketing focus fits this stage best?
Course alignment, for teachers
AP Business with Personal Finance topic 2.4, Unit 2: Marketing.