Product Design

CHAPTER 3
Learning Outcomes:
At the end of the chapter, you should be able to:

Define product and service design

Differentiate between products and services
Determine the strategic importance of product and service
design
Identify and enumerate product life cycle and product stages
Product & Service Design

The process of deciding on the unique characteristics

of a company’s product & service offerings

Serves to define a company’s customer base, image,

competition and future growth
Products versus Services

Products:
◦ Tangible offerings
◦ Dimensions, materials, tolerances & performance
standards
Services:
◦ Intangible offerings
◦ Physical elements + sensory, aesthetic, & psychological
benefits
Strategic Importance
Products & service offerings must support the company’s
business strategy by satisfying the target customers’ needs
& preferences
If not, the company will lose its customer base and its
market position will erode
 
Product Life Cycle

Product life cycle stages

◦ Introduction
◦ Growth
◦ Maturity
◦ Decline
Facility & process investment depends on life cycle
 
Steps in Product Design

Idea Development:
◦ A need is identified & a product idea to satisfy it is put together
Product Screening:
◦ Initial ideas are evaluated for difficulty & likelihood of success
Preliminary Design & Testing
◦ Market testing & prototype development
Final Design
◦ Product & service characteristics are set
Idea Development

Existing & target customers

◦ Customer surveys & focus groups
Benchmarking
◦ Studying “best in class” companies from your industry or others and
comparing their practices & performance to your own
Reverse engineering
◦ Disassembling a competitor’s product & analyzing its design characteristics &
how it was made
Suppliers, employees and technical advances
 
Product Screening

Operations:
◦ Are production requirements consistent with existing capacity?
◦ Are the necessary labor skills & raw materials available?
Marketing:
◦ How large is the market niche?
◦ What is the long-term potential for the product?
Finance:
◦ What is the expected return on investment?
 
Break-Even Analysis
Preliminary Design and Testing

General performance characteristics are translated into

technical specifications
Prototypes are built & tested (maybe offered for sale on a
small scale)
Bugs are worked out & designs are refined
 
Final Design

Specifications are set & then used to:

◦ Develop processing and service delivery instructions
◦ Guide equipment selection
◦ Outline jobs to be performed
◦ Negotiate contracts with suppliers and distributors
 
 
Service Design

Approaches to Service Design:

Substitute Technology for People
Get the Customer Involved
Provide High Level of Customer Attention
 

 
 
 Product (service) offerings

Accommodation Sector (Supplier)

Managed Service (Restaurant & Foodservice)
Travelling Sector (Carriers: Mode of Transportation & Travel
Trade Intermediaries: Travel Agencies & Tour Operators)
Event Sector (Interactive and Attendee Participations)
Recreation & Gaming Sector (Theme Parks / Destinations)
Product Levels

Core Facilitating Supporting Augmented

Product Product Product Product
 Product levels
Core products Facilitating products
refers to what the market services / goods that must be
is buying availing. present for the market to use
also refers to generic the core product.
functions of the also refers to specific
product/service or basic attributes attached to the core
benefits customers look benefits generic functions of
the product / service.
for the product/service
 Product levels
Supporting products Notes

Extra attributes / Core products require facilitation

products but not supporting
products offered to add products
value to the core Firms should choose supporting
product and to help products that are not easily
differentiate it from the matched by competitors
competitors.
Augmented products
Product Considerations:
Refers to extra
Physical Environment
product/service Accessibility – location
offer to the market Atmosphere – facilities / ambiance
consists of product Customer Interaction with service
considerations organization during the different phases
Customer Participation
Customer Interaction with other
Customers
 Customer Interaction with the
Service Delivery System

Joining Stage is when the customer makes the initial inquiry

contact (Quality Service + Product Knowledge)
Utilization Phase takes place when the service is utilized
(Consistency Product / Service Delivery)
Detachment Phase is when the customer is through using a
product and departs (Consistency Product / Service Delivery)
this refers to involving the customers in service delivery that
will increase capacity of the product/service offerings,
improve customer satisfaction and reduce production costs

Customer Participation
refers to management’s effort giving attention to how
the customers deal with other users of the product.

Customer Interaction with other Customers

Product 1 Idea Generation
development
process 2 Idea Screening
5 3 Concept Development & Testing
4 6
4 Marketing Strategy
Development

3 7 5 Business Analysis
6 Product Development

2 8 7 Market Testing
1 8 Commercialization
Idea generation IDEA SCREENING
Process of soliciting
information from any the purpose of screening
source/s: Internal is to spot good ideas and
Sources Owners,
Officers & Staff / drop poor ones as quickly
External Sources: as possible
Customers.
Competitors,
Distributors & Suppliers
and other sources.
 Concept development &
testing

the process of developing product Product Idea envisions a possible

idea into specific and concrete
model taking into consideration:
product idea, product concept and
product image.
product maybe offer to the market
Product Concept is a detailed version
of the idea stated in meaningful customer
terms
Product Image is the way that
customers imagine an actual or the
potential product

Note: The task is choose the best concept and determine the attractiveness of
the product image to a group of customers.
 Marketing strategy development BUSINESS ANALYSIS

-The process of involves preparation and review

development
appropriate marketing of the sales, costs, and profit
plan using the 8Ps projections to determine
whether such satisfy the
company’s objectives
 Product development
After achieving favorable
feedback based on business
test, the product concept will
be developed into a product
prototype that may include
various physical versions
Note: The prototype may
include: key features, safety
nets and can be produced
within the budget
requirements.
 Market testing
If the product passes
functional and customer
tests, the next step is
market testing in which the
product and marketing
program are introduced into
realistic market settings.
This process allows the
firm to discover
marketability of the
product, identify
potential problems and
gain other information
before full introduction in
the market.
commercialization

Market testing allows the firm

the information it needs to make
a final decision about whether to
launch a new product. In
launching the new product, the
firm must decide when, where,
for whom and how market the
product.
 Product life cycle

To maximize profits, Product Development

marketing strategies are
normally reformulated or Introduction
changed. This is due to Growth
changes in the market
environment conditions Maturity
as the product passes Decline
various stages
 Product life cycle
Product development Introduction
Begins when the firm finds It is period of slow sales growth
and develops new product as the product is being known /
idea. During this stage introduced into the market. No
sales are zero and profits due to heavy expenses
investment costs increase for promotion.
 Product life cycle
growth Maturity
A period of slowdown in
It is a period of rapid sales due to product’s wide
market acceptance and acceptance. Profits decline,
increasing profits. sales are used enhance
marketing mix due to
competition.
 Product cycle
Decline Options During Decline
Phase-out – slow removal
It is the period when
sales fall off quickly Run-Out – remove from the list
if production cost is high
and profits drop.
Drop – immediate removal due
to complaints received
 Product mix

also called product assortment

set of all products and items that a particular marketer
offers for sale.
the product mix of an individual company can be
described in terms of product width / length / depth, and
consistency
 Product mix
Product width Product length

refers to how many refers to the total

different product lines number of items in the
the company carries. mix.
 Product mix

Product depth Consistency

refers to how many variants refers to how closely related
of each product are offered. the various product lines
PW – one company: airline, hotel, banks, etc, PL
– hotel – suites, standard, vacation, PD –
standard: 5 rooms suite – 3 rooms double twin
– 2 delux 2 etc
The four product-mix dimensions permit the
company to expand its business by:

 Adding new product lines, thus widening its product

mix;
 Lengthening each product line;
 Deepening the product mix by adding more variants; and
 Pursuing more product-line consistency.
Branding decision ADVANTAGES

Brand - refers to a name, Branding

term, sign, symbols, design,
Price Value
or a combination of these
elements that is intended to Quality Standards
identify the goods/services of Product Class
the company and differentiate
them from those of Economic Attributes
competitors.
 Advantages of product branding
Branding Price value

Product is easy to identify with the brand name derives its value
the brand as it suggests something from a perception of p/s quality
about the benefits and qualities. and is perceived as the best
Name should be easy to value for the price.
pronounce, recognize and
remember with distinctive
features and capable of
registration and legal protection
 Advantages of product
branding
Quality standards Product class

quality and standards are easy to demand for general class that is large
maintain. if the brand is successful in enough to support a regional, national,
developing an image of quality, or international chain
customers will expect quality carrying
the same brand name. consistency and
standardization are critical factors for
multi-unit branding.
 Advantages of product branding

Economic attributes

branding provides level of economies of scale to justify

expenditures for administration and advertising.