CHAP1120

Chapter 20
Public Policy Issues

Public Policy Concerns
• Product developers have to be aware of
emerging public policy concerns and consider
their impact on product development and
launch.
• How do the following affect product decision
making?
– Concern about the environment and the results of
climate policy, government mandates on fuel
emission, etc.
– Concern about poor diets leading to heart disease,
high cholesterol and diabetes, including among young
people.
Life Cycle of a Public Concern
Figure 20.1
• Stirring
• Trial Support
• Political Arena
• Regulatory Adjustment
Product Liability:
Typology of Injury Sources
• Inherent Risk in Product
• Design Defects
– Dangerous Condition
– No Safety Device
– Inadequate Materials
• Defects in Manufacture
• Inadequate Instructions or Warnings
• Dangers After Use
Four Legal Bases for Product
Liability
• Negligence
– Manufacturer let the product be injurious
• Warranty
– A promise
– Express warranty: a statement of fact about a product
– Implied warranty: arises when product is made available for a
given use
Four Legal Bases for Product
Liability (continued)
• Strict Liability
– Seller is responsible for not putting a defective product on the
market
– Defenses: assumption of risk; unforeseeable misuse; not
defective
• Misrepresentation
– Implied use of product, even if not defective
Other Legislation
Consumer Product Safety Act/Safety Commission
Which Are the Real Product Warning Labels?
Figure 20.3
1. On a disposable razor: “Do not use this product during an earthquake.”

2. On a rock garden: “Eating rocks may lead to broken teeth.”
3. On a roll of Life Savers: “Not for use as a flotation device.”
4. On a hair dryer: “Do not use while sleeping.”
5. On a piano: “Harmful or fatal if swallowed.”
6. On a cardboard windshield sun shade: “Warning: Do not drive with sun shield in place.”
7. On shin guards: “Shin guards cannot protect any part of the body they do not cover.”
8. On syrup of ipecac: “Caution: may induce vomiting.”
9. On an iron: “Do not iron clothes while being worn.”
10. On a plastic sled: “Not to be eaten or burned.”
11. On work gloves: “For best results, do not leave at crime scene.”
12. On a cell phone: “Don’t try to dry your phone in a microwave oven.”
13. On a carpenter’s router: “This product not intended for use as a dentist’s drill.”
14. On a blender: “Not for use as an aquarium.”
15. On a stroller: "Always remove child from stroller before folding.“
16. On a washing machine: “Do not put any person in this washer.”
17. On a fireplace log: “Caution – risk of fire.”
18. On a laser printer cartridge: “Do not eat toner.”
Which Are the Real Product Warning Labels?
Figure 20.3
1. NO
2. On a rock garden: “Eating rocks may lead to broken teeth.”
3. NO
4. On a hair dryer: “Do not use while sleeping.”
5. NO
6. On a cardboard windshield sun shade: “Warning: Do not drive with sun shield in place.”
7. On shin guards: “Shin guards cannot protect any part of the body they do not cover.”
8. NO
9. On an iron: “Do not iron clothes while being worn.”
10. On a plastic sled: “Not to be eaten or burned.”
11. NO
12. On a cell phone: “Don’t try to dry your phone in a microwave oven.”
13. On a carpenter’s router: “This product not intended for use as a dentist’s drill.”
14. NO
15. On a stroller: "Always remove child from stroller before folding.“
16. On a washing machine: “Do not put any person in this washer.”
17. On a fireplace log: “Caution – risk of fire.”
18. On a laser printer cartridge: “Do not eat toner.”
Preparing For the Product Recall
• Prior to the Recall
– Designate the recall program coordinator
(spokesperson)
– Develop channels for communicating with customers
directly
• During the Recall
– Assess safety risk and take corrective action
– Inform customers as well as intermediaries of the
risks
• After the Recall
– Strive to restore company reputation
– Monitor recall effectiveness
Public Policy Problems and the
Figure 20.5
New Products Process

Other Areas of Public Policy
Debate
• Environmental Needs
• Product Piracy
• Worthy Products
• Morality
• Monopoly
• Personal Ethics (what would you do?)
Environmental Needs
• A new product is said to hurt the environment if:
– Its raw materials are scarce or hard to get to.
– Its design or manufacture causes pollution or excess power
usage.
– Its use causes pollution.
– Its disposal cannot be handled by recycling.
• Some companies test market their products in Germany and
Scandinavia, because of the strict greenness tests there.
• Business objectives should be aligned with environmental initiatives,
otherwise product teams will not feel supported in pursuing projects
with real environmental benefits.
• Taking a leadership position in green product development could
turn out to be a sustainable competitive advantage.
Five Actionable Strategies for
Sustainable Design
• Innovate at the system level (Soladey toothbrush)
• Use new materials, rather than cutting down on current
materials (Coca-Cola “plant bottle”)
• Develop new technologies to solve environmental
challenges (Solio sunlight-powered charger)
• Develop new business models (Zipcar)
• Restore the environment (P&G Pur)
Source: J. Ottman (2012)

Product Piracy
• Threatens brand equity and intellectual property
of firms.
• Categories of product piracy:
– Counterfeiting: unauthorized production of goods
– Brand Piracy: unauthorized use of copyrights or
patented brands (the “$20 Rolex”)
– Near Brand Usage: slightly different brand names
(“Tonny Hilfiger” clothes, “Kuma” running shoes,
“Sunbucks” coffee)
– Intellectual Property Copying: Unauthorized copying
of CDs and DVDs, for example
Protection Against Product
Piracy Figure 20.6
• Communication
• Legal recourse
• Government
• Direct contact
• Labeling
• Strong proactive marketing
• Piracy as Promotion
Source: Laurence Jacobs, A. Coksun Samli, and Tom Jedlik, “The Nightmare of International Product Piracy,”
Industrial Marketing Management 30, 2001, pp. 499-509.
Worthy Products
• Coffee manufacturers agreed to produce some
brands containing no beans from El Salvador.
• Manufacturers have been asked to produce
special exercise equipment for the
handicapped or modified products for the
elderly.
• Orphan drugs supported by the federal
government; otherwise would not be
commercially feasible due to few users.
Products for Emerging Markets:
Basic Questions
• Should we develop new products or new technology in the
emerging market?
• Should we de-feature a current product, or build a totally new
product for the emerging market?
• Should the product be designed in the emerging market, and
by whom (in-house team or contract designers)?
• Is there a risk of having the emerging market product re-
imported to the home market where it can cannibalize sales?
• Is the technical talent from the emerging market
helpful/trustworthy?
• Are there any intellectual property risks of development or
engineering in the emerging market?
Considerations in Developing
Products For Emerging Markets
• Adapt the innovation strategy Figure 20.7
• Meet the new customers

• Offer a new price-performance ratio
• Apply “Ghandian” engineering
• Localize R&D activities
• Adapt marketing and sales
• Introduce new business models
• Find a local partner
Source: Dubiel and Ernst (2013).
Frugal Innovation Figure 20.8
• Nokia developed a cell phone charger for the Indian market that works on
bike power. A “dynamo” transmits current generated by the revolution of
the front wheel to a bracket located on the handlebars. This is a practical
cell phone charger for a market where millions of people use bicycles as
their primary means of transportation and where electrical power is
unreliable and often unavailable through the night.
• German manufacturer Siemens has a corporate technology center in
Goa, India, where a very low-cost medical scanner was developed (it
costs about $500 per unit to produce, about a quarter of the cost of a
typical scanner of this type). Rather than redesigning and dumbing-down
a Western model, the entire scanner was redesigned in such a way as to
meet the needs of doctors in developing countries while minimizing
costs. The key to the redesign was embedding the camera in the “heart”
of the scanner.
Source: Gunjan Bagla, “Product Development in Emerging Markets,” Visions, 35(3), 2011, pp.
44-45.
Personal Ethics – What Would
You Do?
1. You introduce a temporary product and are told not to let distributors or your sales
force know it is only temporary and will soon be replaced.
2. You are marketing a new seminar service to train bank personnel in investment
counseling, but you don’t know they will really learn how to counsel.
3. You are working on an item to be sold to virtually every K-12 school. You
calculate gross margin at about 80%. The price could be cut in half and your
company margin would still be 60%.
4. Your database service collects patient records from physicians and offers a new
service of information for pharmaceutical firms, including patients’ name, age, sex,
and so on, as well as illnesses and treatments.
5. Your company’s “educational” game cards are known to be bought by less
sophisticated parents: there are several far better games on the market.
6. Your brewing company markets a new beer containing legal (sterilized) hemp
seeds, mostly as a gimmick. Nevertheless, your advertising contains obvious drug
imagery.
What Can the New Product
Manager Do?
• Include in Strategy and Policy
– Consider public policy implications in PIC
• Control Systems
• Product Testing
• Marketing Prepares Warnings/Labels
• Adequate Market Testing (to identify
miscommunications)
• Education (to company personnel and customers)
• External Affairs

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Chapter 20

Public Policy Issues

1. On a disposable razor: “Do not use this product during an earthquake.”

New Products Process

Source: J. Ottman (2012)

• Meet the new customers

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