1. Chapter 10: Product Design and Development
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Chapter Objectives
Define product.
Describe the four major categories of product developments: new-to-the-market, new-to-the-company, improvement of existing product, and extension of product line.
Explain where product ideas come from.
Explain how an idea turns into a business opportunity.
Describe the four types of utility provided by a product: time, place, ownership, and form.
Explain how to research an industry.
Forecast demand for a product.
Learn how to use breakeven analysis to estimate the number of sales units at which net income is zero.
Describe the process of developing a product that meets customer needs.
Learn how to protect your product idea by applying for a patent.
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Product
“…something that can be marketed to customers…provides…a benefit and satisfies a need.”
Tangible v. Intangible
(Good) v. (Service)
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4. Types of Product Developments
New-to-the-market
New-to-the-company
Improvement in an existing product
Extend existing product line
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5. Chief Characteristics of Entreprenerial Start-Ups
Characterized by innovative products and/or practices.
Goals include profitability and growth.
Focuses on new opportunities.
Owners are willing to take risks.
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6. How to Take a Calculated Risk
Decision making regarding new products can be improved with input from:
Information gathered from research
Knowledge gained from personal experience
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7. Coming Up with a New Product Idea
Do not ask:
“What do I want to sell?”
Instead ask:
“What does the customer want to buy?”
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8. Sources of New Product Ideas
Entrepreneurs and small business owners
Solicit ideas from people within the organization
Marketing
Sales
Research
Manufacturing
“Entrepreneurial” Units
Speak with customers and others outside the organization
Customers
Competition
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9. Sales from New Products
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Customers
“…buy products to fill unmet needs and because they expect to derive some value or benefit from them.”
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Utility
Time
Ownership
Place
Form
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12. When Is an Idea a Business Opportunity
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13. Industry “…a group of related businesses.”
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Understand Industry
How to Study an Industry
Begin with overall industry (group of businesses that do similar things)
Look at market (everyone who buys your product)
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15. Assessing your Competition
Is industry growing or contracting?
Subdivide market into market segments (customers with common characteristics)
Subdivide into niche (an unmet need)
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16. Assessing Competition
Industry sales growing/contracting?
Major competitors?
Opportunities/threats?
Recent changes/direction?
Importance of technology?
Mature/new company success?
Reasonable profits?
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17. When to Develop and Market a New Product
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18. Areas that need to be researched when marketing a new product
People in Similar Businesses
Potential customers
Published Industry Data
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Breakeven Analysis
“…total sales revenue must exactly equal all your expenses (both variable and fixed).”
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20. Breakeven Calculation
Selling Price
Variable Cost per Unit
Contribution Margin
Fixed Cost
Contribution Margin =
Breakeven (Units)
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21. Risks to Product Development
Trade-Offs
Time Pressure
Economics
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Development Process
“…series of activities by which a product idea is transformed into a final product.”
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23. The Product Development Process
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24. Website: http://www.uspto.gov
Patent
“…‘right to exclude others from making, using, offering for sale, or selling’ the invention in the U.S. for 20 years.”
Requirement for getting a patent:
Be new
Not be obvious
Have utility
Website:
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