Design of Products and Services: Discussion Questions

Chapter 03 – Design of Products and Services
CHAPTER 3
DESIGN OF PRODUCTS AND SERVICES
Discussion Questions
1. Describe the generic product development process described in this chapter. How does this process change for technology push products?
Products that are developed using the “technology push” would be more narrowly focused in phase 0 and phase 1 of Marketing. The focus
would be narrower because you would only look at market segments that could benefit from the application of your technology. The rest of
the generic process may be somewhat less complex as well since the technology of the product currently exists in your manufacturing
facilities
2. How does the QFD approach help? What are some limitations of this approach?
QFD helps to get the voice of the customer into the design process using interfunctional teams. The limitations of QFD relate to the culture of
the organization. In the United States, we tend to be vertically oriented and try to promote breakthrough. This can work against
interfunctional teamwork, which is needed for QFD success. If a breakthrough culture can be maintained with a continuous improvement
mentality through interfunctional teams, this would lead to tremendous improvements in productivity.
3. Discuss the product design philosophy behind industrial design and design for manufacture and assembly. Which one do you think is more
important in a customer-focused product development?
Industrial design is concerned with designing a product from the end-user’s point of view, such as aesthetics and user-friendliness of the
product. Design for manufacturability, on the other hand, makes the product design less complicated and easier to manufacture. Very often
it results in fewer parts, smaller size, increased reliability, and lower cost.
Both philosophies are equally important for a customer-focused product development. In order to attract customers, the product must be
aesthetically pleasing and user-friendly (industrial design). However, to sustain customer interests, it should also have a lower cost and
higher reliability (design for manufacturability).
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4. Discuss design-based incrementalism, which is frequent product redesign throughout the product’s life. What are the pros and cons of this
idea?
Pro: enhanced function, higher quality, and lower cost through continuously advancing technology.
Con: time and money spent on frequent product and process redesigns, low priority given in servicing the existing and older products.
Consumer reaction to frequent changes may be negative.
5. Do the concepts of complexity and divergence apply to an online sales company such as Dell Computer?
Due to the size of Dell and the number of market segments they serve, these concepts certainly apply. Consider as one example the technical
support process for an existing customer. Service can vary from very simple like an individual customer needing a particular driver for her
new computer to very complex in troubleshooting a network load problem in a server farm for an Internet service provider. In the first
example there is a straightforward solution to the problem in emailing the customer a copy of the driver. In the latter, the service process
may be quite divergent, with the process being adapted based on the symptoms of the problem and the skill of the customer’s technical
workforce.
For a pure sales company like Amazon, the complexity and divergence would be much less.
6. What factors must be traded off in the product development process before introducing a new product?
The factors that need careful attention for new products are product performance, development speed, product cost, and development
program expense. Smith and Reinertsen identify six pairs of trade-offs in their book. These include all possible pairs among the four factors
noted above.
7. Coca-Cola is a well-established consumer products company with a strong position in the global market. The sales of their core soda
products have remained relatively stable for decades, yet the company has continued to grow and has remained extremely profitable.
Discuss Coca-Cola’s history in light of the statement that “generating a steady stream of new products to market is extremely important to
competitiveness.” Does Coca-Cola’s success disprove that statement? Is the company an exception to the rule or an example of its
application?
By growing into a global company, one could argue they have been introducing new products into markets they never served before, even
though the products are not new to the company. They have also grown by acquisition of other drink companies and introduction of new
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drink products outside of their core soda business. As the products are not subject to great innovation or technological advances, Coca-Cola
has needed to expand their product lines and global reach to continue to grow.
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Objective Questions
1. Which phase of the generic development process involves construction and evaluation of multiple preproduction versions of the product?
Testing and refinement
2. A process that emphasizes cross-functional integration and concurrent development of a product and its associated processes is known as
_________________________.
Concurrent engineering
3. Match the following product types to the appropriate product development description.
Entail unusually large uncertainties about the technology or market. The

B Technology-push products A:
development process takes steps to address those uncertainties.
A firm with a new proprietary technology seeks out a market where that
E Platform products B:
technology can be applied.
Uses a repeated prototyping cycle. Results from one cycle are used to modify
D Process-intensive products C:
priorities in the ensuing cycle.
The production process has an impact on the product properties. Therefore,

A High-risk products D:
product design and process design cannot be separated.
C Quick-build products E: Products are designed and built around a preexisting technological
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subsystem.
4. Designing products for aesthetics and with the user in mind is generally called what?
Industrial design
5. The first step in developing a house of quality is to develop a list of ______________________.
customer requirements for the product
6. The purpose of value analysis/value engineering is to _________________________________.
simplify products and processes
7. What is it about service processes that makes their design and operation so different from manufacturing processes?
Direct customer involvement in the process
8. What are the three general factors that determine the fit of a new or revised service process?
Service experience fit, operational fit, and financial impact.
9. Measures of product development success can be organized in what three categories?
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Time to market, productivity, quality.
10. Tuff Wheels Kiddy Dozer
a. Base case
Project Schedule Year 1 Year 2 Year 3 Year 4

Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development 533 533 533
Pilot Testing 100 100
Ramp-up 200 200
Marketing and Support 38 38 38 38 38 38 38 38 38 38 38 38 38
Production Volume 15 15 15 15 15 15 15 15 15 15 15 15
Unit Production Cost 100 100 100 100 100 100 100 100 100 100 100 100
Production Costs 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
Sales Volume 15 15 15 15 15 15 15 15 15 15 15 15
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600
Period Cash Flow -533 -533 -833 -338 2063 2063 2063 2063 2063 2063 2063 2063 2063 2063 2063 2063
PV Year 1 r = 8 -533 -523 -801 -318 1905 1868 1831 1796 1760 1726 1692 1659 1626 1594 1563 1532
Project NPV 18378
b. The results are shown below for both scenarios. If sales are only 50,000 then the project is still worthwhile since the NPV decrease to
$14,890,497. If Tuff Wheels has under estimated the sales and it ends up being 70,000 per year then NPV will increase from $18,378,380 base
case to $21,866,263 with the higher sales rate.
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Sales Revised to 50,000 per Year

Ramp-up 200 200
Marketing and
38 38 38 38 38 38 38 38 38 38 38 38 38
Support
Production Volume 13 13 13 13 13 13 13 13 13 13 13 13
Unit Production Cost 100 100 100 100 100 100 100 100 100 100 100 100
Sales Volume 13 13 13 13 13 13 13 13 13 13 13 13
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
Period Cash Flow -533 -533 -833 -338 1713 1713 1713 1713 1713 1713 1713 1713 1713 1713 1713 1713
PV Year 1 r = 8 -533 -523 -801 -318 1582 1551 1521 1491 1462 1433 1405 1377 1350 1324 1298 1272
Project NPV 14890
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Sales Revised to 70,000 per Year

Ramp-up 200 200
Marketing and
38 38 38 38 38 38 38 38 38 38 38 38 38
Support
Production
18 18 18 18 18 18 18 18 18 18 18 18
Volume
Unit Production
100 100 100 100 100 100 100 100 100 100 100 100
Cost
Sales Volume 18 18 18 18 18 18 18 18 18 18 18 18
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 4200 4200 4200 4200 4200 4200 4200 4200 4200 4200 4200 4200
Period Cash Flow -533 -533 -833 -338 2413 2413 2413 2413 2413 2413 2413 2413 2413 2413 2413 2413
PV Year 1 r = 8 -533 -523 -801 -318 2229 2185 2142 2100 2059 2019 1979 1940 1902 1865 1828 1793
Project NPV 21866
c. The impact of changing the interest rate is shown below. There is still a positive NPV but it shrinks the interest rate increases. This would be
expected since a higher the interest rate reduces the present value of future cash flows.
Base Case 8% $18,378,380
9% $17,925,730
10% $17,485,803
11% $17,058,189
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11. Perot Corporation Patay2 Chip.
a. In the base case the Patay2 Chip Project has a very good NPV of $8,369,000, see below.

Patay2 Chip 1st half 2nd half 1st half 2nd half 1st half 2nd half 1st half 2nd half
Development Cost 5,000 5,000 5,000 5,000
Pilot Testing Cost 2,500 2,500
Debug Cost 1,900 1,900
Ramp-up Cost 3,000
Advance Marketing Cost 6,600
Ongoing Marketing and Support 500 500 500 500
Production Volume 125 125 75 75
Unit Production Cost 655 655 545 545
Production Costs 81,875 81,875 40,875 40,875
Sales Volume 125 125 75 75
Unit Price 820 820 650 650
Sales Revenue 102,500 102,500 48,750 48,750
Period Cash Flow -5,000 -5,000 -9,400 -19,000 20,125 20,125 7,375 7,375
PV Year 1 r = 10 -5,000 -4,762 -8,526 -16,413 16,557 15,768 5,503 5,241
Project NPV 8,369
b. Additional 10 million for higher price is clearly worthwhile as it raises the NPV from $8.37 million to $14.563 million. See results below.
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Ramp-up Cost 3,000
Ongoing Marketing and Support 500 500 500 500
Unit Price 870 870 700 700
Sales Revenue 108,750 108,750 52,500 52,500
Period Cash Flow -7,500 -7,500 -11,900 -21,500 26,375 26,375 11,125 11,125
PV Year 1 r = 10 -7,500 -7,143 -10,794 -18,573 21,699 20,666 8,302 7,906
Project NPV 14,563
c. Reduced sales estimates have a significant impact on the NPV. It reduces the NPV all the way down to $-2,081,000. The success of the Patay2
Chip is very dependent on the sales estimates. It would be wise for Perot to make sure that there is sufficient demand for Patay2 Chips.
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Ramp-up Cost 3,000
Ongoing Marketing and
500 500 500 500
Support

Unit Price 820 820 650 650
Sales Revenue 82,000 82,000 32,500 32,500
Period Cash Flow -5,000 -5,000 -9,400 -19,000 16,000 16,000 4,750 4,750
PV Year 1 r = 10 -5,000 -4,762 -8,526 -16,413 13,163 12,536 3,545 3,376
Project NPV -2,081
12. Answers will vary based upon the product selected and the student. Issues that should be considered in the design and manufacture of a
product include design process (traditional vs. concurrent engineering), customer needs and expectations, legal considerations (EPA, OSHA,
etc.), service life, reliability, appearance, standardization, any industry standards that should be considered (e.g., television set and the type
of signal received from stations), method of shipment, material cost and availability, stage of the product life cycle, design for
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manufacturability, design for assembly, packaging, environmental, unit cost, pricing, availability of purchased material, availability of
capacity, availability of subcontractors, setup cost, manufacturing time, volume, and expected product life.
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13. Answers may vary. Following is just one possible result.
Grounds Tournament
maintenance Activities (per
text)
Helpful service
attendants
Fair handicapping
system
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CASE: IKEA: Design and Pricing
Questions:
1. What are IKEA”s competitive priorities?
Probably the key priority is maximizing value to the customer in each product offered through their stores. Low cost is certainly a major priority
as well.
2. Describe IKEA’s process for developing a new product.
This is described in the case: (1) Pick a price, (2) Choose a manufacturer, (3) Design the product, (5) Ship it. The key here is to recognize that
they pick a price point early in the product development process and then work with a manufacturer to ensure they can meet this price point.
This is a very innovative approach to product design.
3. What are additional features of the IKEA concept (beyond their design process) that contribute to creating exceptional value for the
customer?
Customer can easily view the product in a setting similar to theirs (i.e. apartments) in the IKEA store. Also, the product can be easily brought
home by the customer eliminating delivery and setup charges. This creates more value in the product by eliminating these costs.
4. What would be important criteria for selecting a site for an IKEA store?
Need to be located in a high density area where many people live in smaller apartments where space is a premium. The IKEA products really
appeal to young, affluent customers.
CASE: Dental Spa
Questions:
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1. Which one of the three new service requirements would a dental spa least likely pass: service experience fit, operational fit, or financial
impact? Why?
The dental spa is least likely to have operational fit because new personnel must be hired and the layout of current operations must be changed
in order to offer this new service. Although service experience fit might seem logical, distracting the patient from possible pain would improve
the service experience of the core service, dentistry. Often the services are given away. Dental Associates must “buy in” to the new services and
see the obvious patient comfort benefits to the dental business and experience.
2. What are some of the main areas of complexity and divergence in this kind of operation relative to the standard dental clinic?
Complexity: By providing two services at once, the complexity is automatically increased. For example, if cleaning teeth requires two steps and
a hand massage requires one, then together the new service at the dental spa would take three steps. Besides just being a combination of two
services normally provided separately, timing or coordination issues could add extra steps to this new process. However some steps, such as
billing, would be combined in comparison to two services and it might be simple addition (often these services are free and do not affect billing).
Divergence: Any customer service that can possibly inflict pain, such as a visit to a dentist, requires a large degree of judgment on the part of the
service provider of how best to deal with a painful situation. For example, some patients need empathy. Almost completely opposite, a visit to
a spa can be like going to a psychiatrist as a customer tells their problems as they are getting their manicure. This allows for divergence as a
customer service provider must decide how to react to hearing all of the issues in someone’s life. However, being at the dentist would limit this
verbal interaction much like a dentist who only asks questions when he has instruments in the patients mouth preventing a real answer.
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Chapter 03 – Design of Products and Services

Testing and refinement

Entail unusually large uncertainties about the technology or market. The

The production process has an impact on the product properties. Therefore,

5. The first step in developing a house of quality is to develop a list of ______________________.

customer requirements for the product

6. The purpose of value analysis/value engineering is to _________________________________.

simplify products and processes

Direct customer involvement in the process

Service experience fit, operational fit, and financial impact.

9. Measures of product development success can be organized in what three categories?

Time to market, productivity, quality.

10. Tuff Wheels Kiddy Dozer

Project Schedule Year 1 Year 2 Year 3 Year 4

Project NPV 18378

Sales Revised to 50,000 per Year

Project NPV 14890

Sales Revised to 70,000 per Year

Project NPV 21866

11. Perot Corporation Patay2 Chip.

Project Schedule Year 1 Year 2 Year 3 Year 4

Project NPV 8,369

Project Schedule Year 1 Year 2 Year 3 Year 4

Project NPV 14,563

Project Schedule Year 1 Year 2 Year 3 Year 4

Unit Production Cost 655 655 545 545

Project NPV -2,081

13. Answers may vary. Following is just one possible result.

CASE: IKEA: Design and Pricing

1. What are IKEA”s competitive priorities?

2. Describe IKEA’s process for developing a new product.

CASE: Dental Spa

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