In the previous chapter, you learned how marketers manage and develop products and brands. In this chapter, we examine two additional product topics: developing new products and managing products through their life cycles. New products are the lifeblood of an organization. However, new product development is risky, and many new products fail. So, the first part of this chapterlays out a process for finding and growing successful new products. Once introduced, marketers then want their products to enjoy long and happy lives. In the second part of this chapter, you’ll see that every product passes through several life-cycle stages, and each stage poses new challenges requiring different marketing strategies and tactics. Finally, we wrap up our product discussion by looking at two additional considerations: social responsibility in product decisions and international product and services marketing.
For openers, consider Samsung, the world’s leading consumer electronics maker and one of the world’s most innovative companies. Over the past two decades, Samsung has transformed itself by creating a culture of customer-focused innovation and a seemingly endless flow of inspired new products that feature stunning design, innovative technology, life-enriching features, and a big dose of “Wow!”
SAMSUNG: Enriching Customers’ Lives through New-Product Innovation
You’re probably familiar with the Samsung brand. Maybe you own one of Samsung’s hot new Galaxy smartphones that tracks your eye movements to help you navigate the screen, or maybe you’ve seen one of Samsung’s dazzling new Superior 4k Ultra-High-Definition Smart TVs with a fully immersive curved screen and nano-crystal technology. Samsung, the world’s largest consumer electronics manufacturer, produces “gotta-have” electronics in just about every category, from TVs and Blu-ray players, tablets and mobile phones, and smartwatches to smart-home devices and even a full range of home appliances.
But little more than 20 years ago, Samsung was barely known, and it was anything but cutting-edge. Back then, Samsung was a Korean copycat brand that you bought off a shipping pallet at Costco if you couldn’t afford a Sony, then the world’s most coveted consumer electronics brand. However, in 1993 Samsung made an inspired decision. It turned its back on cheap knockoffs and set out to overtake rival Sony. To dethrone the consumer electronics giant, however, Samsung first had to change its entire culture, from copycat to leading-edge. To outsell Sony, Samsung decided, it first had to out-innovate Sony.
Samsung’s dramatic shift began with a top-down mandate for reform. Samsung set out to become a premier brand and a trailblazing product leader. It hired a crop of fresh, young designers and managers who unleashed a torrent of new products—not humdrum, me-too products, but sleek, bold, and beautiful products targeted to high-end users. Samsung called them “lifestyle works of art.” Every new product had to pass the “Wow!” test: If it didn’t get a “Wow!” reaction during market testing, it went straight back to the design studio. Beyond cutting-edge technology and stylish designs, Samsung put the customer at the core of its innovation movement. Its primary innovation goal was to improve the customer experience and bring genuine change to people’s lives in everything it did.
With its fresh customer-centered new-product focus, Samsung overtook Sony in less than 10 years. Today, Samsung’s annual revenues of $196 billion are more than two and a half times Sony’s revenues, placing it at number 13 on Fortune ’s Global 500—two spots ahead of Apple. But more than just being the biggest, Samsung has also achieved that new-product Wow! factor it sought. For example, Samsung has been dominant in recent years at the International Design Excellence Awards (IDEA) presentations—the Academy Awards of the design world—which judges new products based on appearance, functionality, and inspirational thinking. For the past three years, Samsung has been the top corporate winner, claiming more than twice as many awards as the next runner-up.
In this digital, connected, and mobile era, Samsung now competes less with the Sonys of the world and more with innovation pacesetters like Apple. And against Apple, Samsung is more than holding its own. In mobile devices, for example, Samsung has surged to the top of the market. Just a few years ago, Samsung’s goal was to double its market share of smartphones from 5 percent to 10 percent. But the success of its Galaxy line catapulted Samsung’s global share to 22 percent, ahead of Apple’s 18.5 percent worldwide.
In its favor, Samsung holds a piece of the technology puzzle that Apple doesn’t—big screens. In fact, Samsung has been the global leader in television sales for eight straight years. Its Smart TVs not only offer gesture control, voice control, and face recognition but also provide seamless web connectivity that has TV users Facebooking, Skyping, streaming online content, and using their favorite apps with a wave of the hand. Control of so many different kinds of screens gives Samsung a leg up against more-focused competitors in this interconnected age.
But Samsung also realizes that today’s “gotta have it” products can be tomorrow’s has-beens. Future growth will come not just from bigger TVs and better smartphones. Rather, the electronics powerhouse is constantly on the prowl for the “next big thing,” regardless of the product category. To that end, Samsung’s market intelligence and product innovation teams around the globe continually research product usage, purchase behavior, and lifestyle trends, looking for consumer insights and innovative new ways to meet consumer needs.
For instance, Samsung is now investing heavily in the “Internet of Things” (IoT), a global environment where everything—from home electronics and appliances to automobiles, buildings, and even clothing—will be digitally connected to everything else. Given that Samsung already makes products in almost every electronics category, IoT provides fertile territory for future innovation and growth. In recent years, Samsung has begun developing a “web of connectivity” that links its products to the rest of the world. The goal is to develop Samsung IoT products and technologies that are “In Sync with Life.” The company has already introduced numerous “smart” products—including its entire Smart TV lineup, 16 kitchen appliances, and mobile apps—that connect devices to each other and to those who use them.
Beyond cutting-edge technology and stylish design, Samsung puts the customer at the core of its innovation movement. Its new products “bring genuine change to people’s lives.”
© Yaacov Dagan / Alamy Stock Photo
Samsung’s soon-to-be-released SleepSense device provides just one glimpse into the company’s IoT future:
Samsung’s SleepSense helps you to better understand and manage your sleep. It’s a flat disk that slips under the mattress and provides contactless monitoring of your heart and respiratory rates as well as your movements during sleep. Then, through a smartphone app, SleepSense provides you with daily sleep scores and reports along with expert advice and recommendations based on your own metabolism and other personal characteristics. But here’s the best part. SleepSense also connects to Samsung appliances and third-party IoT devices. For example, when it detects that you’ve fallen asleep during a late-night Netflix binge, it can automatically turn off the television and adjust the air-conditioning for a comfortable sleep environment. In the future, if your Samsung Family Hub Refrigerator detects that you tend to eat dairy before a bad night’s sleep, SleepSense might even advise you on better late-night snack alternatives. Wow!
Samsung’s current IoT lineup is just the tip of the iceberg. According to one estimate, the number of networked devices will surge from about 1 billion today to 25 billion by 2020, representing a $3 trillion market. By that time, Samsung claims that 100 percent of the products it makes will be internet-connected.
Twenty years ago, few people would have predicted that Samsung could have transformed itself so quickly and completely from a low-cost copycat manufacturer into a world-leading innovator of stylish, high-performing, premium products. But through a dedication to customer-focused new-product innovation, that’s exactly what Samsung has done. And even recently, few would have predicted that Samsung would be a driving force behind creating a digitally interconnected world. Yet Samsung seems well on its way to accomplishing that as well. “We have to show consumers what’s in it for them and what the Internet of Things can achieve,” says Samsung’s CEO. “To transform our economy, society, and how we live our lives.” Adds another Samsung executive: “We will focus on creating amazing experiences, [on doing] what is right by customers.” In short, whatever gets that “Wow!”
AS THE SAMSUNG STORY SUGGESTS, companies that excel at developing and managing new products reap big rewards. Every product seems to go through a life cycle: It is born, goes through several phases, and eventually dies as newer products come along that create new or greater value for customers.
This product life cycle presents two major challenges: First, because all products eventually decline, a firm must be good at developing new products to replace aging ones (the challenge of new product development ). Second, a firm must be good at adapting its marketing strategies in the face of changing tastes, technologies, and competition as products pass through stages (the challenge of product life-cycle strategies ). We first look at the problem of finding and developing new products and then at the problem of managing them successfully over their life cycles.