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Product Design
and Development
Chapter Objectives
1)
2)
3)
4)
5)
6)
7)
8)
Product
•“…something that can be
marketed to
customers…provides…a benefit
and satisfies a need.
need ”
Tangible v. Intangible
(Good) v. (Service)
Sources of
New Product Ideas
Define product and describe categories of product development
Explain where product ideas come from
Explain how an idea becomes an opportunity and describe four
types of utility
Explain how to research an industry
Forecast demand for a product
L
Learn
breakeven
b k
analysis
l i to
t estimate
ti t number
b off sales
l units
it att
which net income is zero
Describe process of developing a product that meets customer
needs
Learn how to protect product with patent
Types of Product Developments
1. New-to-the-market
2. New to the company
3 Improvement in an existing
3.
product
4. Extend existing product line
Sales from New Products
* Entrepreneur = Creative
* Solicit people within the organization
•
•
•
•
•
Marketing
Sales
Research
Manufacturing
“Entrepreneurial” Units
* Outside
• Customers
• Competition
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Utility
Customers
•“…buy products to fill unmet
needs and because they expect
to derive some value or benefit
from them.”
/Time
/Place
/Ownership
/Form
When Is an Idea an Opportunity?
Industry
•“…a group of related
businesses.”
Understand Industry
9Evaluate
• Segment Market
• Find Niche- Unmet need
9Assess Competition
9Understand Customer Needs
9Forecast Demand
• Similar Businesses
• Potential Customers
• Published Industry Data
Assessing Competition
/Industry sales growing/contracting?
/Major competitors?
/Product differ?
/Opportunities/threats?
/Recent
R
t changes/direction?
h
/di ti ?
/Technology?
/Mature/new company success?
/Reasonable profits?
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When to Develop and Market a New
Product
Breakeven Analysis
•“…total sales revenue must
exactly equal all your
expenses (both variable
and fixed).”
Breakeven Calculation
Risks to Product Development
[Trade-Offs
Selling Price
-Variable Cost per Unit
Contribution Margin
Fixed Cost
Contribution Margin
=
Breakeven (Units)
Development Process
[Time
Ti
P
Pressure
[Economics
The Product Development Process
•“…series of activities by
which a product idea is
t
transformed
f
d iinto
t a fi
finall
product.”
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Patent
© “…‘right to exclude others from making,
using, offering for sale, or selling’ the
invention in the U.S. for 20 years.”
™
™
™
•
Must:
Be new
Not be obvious
Have utility
Website: http://www.uspto.gov
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