{"id":253,"date":"2018-12-27T19:23:57","date_gmt":"2018-12-28T00:23:57","guid":{"rendered":"http:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/chapter-10-product-design-and-development-exploring-business\/"},"modified":"2020-01-06T09:58:28","modified_gmt":"2020-01-06T14:58:28","slug":"chapter-10-product-design-and-development-exploring-business","status":"publish","type":"chapter","link":"https:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/chapter-10-product-design-and-development-exploring-business\/","title":{"raw":"Chapter 9: Product Design and Development","rendered":"Chapter 9: Product Design and Development"},"content":{"raw":"
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Riding the Crest of Innovation<\/span><\/h1>\r\n<\/div>\r\n
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To see the PowerSki Jetboard in action, visit the company\u2019s Web site at http:\/\/www.powerski.com<\/a>. Watch the streaming videos that demonstrate what the Jetboard can do.<\/p>\r\n

Have you ever wanted to go surfing but couldn\u2019t find a body of water with decent waves? You no longer have a problem: the PowerSki Jetboard makes its own waves. This innovative product combines the ease of waterskiing with the excitement of surfing. A high-tech surfboard with a forty-five-horsepower, forty-five-pound watercraft engine, the PowerSki Jetboard has the power of a small motorcycle. Experienced surfers use it to get to the top of rising ocean waves, but if you\u2019re just a weekend water-sports enthusiast, you can get your adrenaline going by skimming across the surface of a local lake at forty miles an hour. All you have to do is submerge the tail of the board, slide across on your belly, and stand up (with the help of a flexible pole). To innocent bystanders, you\u2019ll look like a very fast water-skier without a boat.<\/p>\r\n

Where do product ideas like the PowerSki Jetboard come from? How do people create products that meet customer needs? How are ideas<\/em> developed and turned into actual products<\/em>? How do you forecast demand for a product? How do you protect your product ideas? These are some of the questions that we\u2019ll address in this chapter.<\/p>\r\n\r\n

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What Is a Product?<\/h1>\r\n<\/div>\r\n
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Learning Objectives<\/h3>\r\n
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  1. Define product<\/em>.<\/li>\r\n \t
  2. 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.<\/li>\r\n<\/ol>\r\n<\/div>\r\n

    Basically, a product is something that can be marketed to customers because it provides them with a benefit and satisfies a need. It can be a physical good<\/em>, such as the PowerSki Jetboard, or a service<\/em>, such as a haircut or a taxi ride. The distinction between goods and services isn\u2019t always clear-cut. Say, for example, that a company hires a professional to provide an in-house executive training program on \u201cnetiquette\u201d (e-mail etiquette). Off the top of our heads, most of us would say that the company is buying a service. What if the program is offered online? We\u2019d probably still argue that the product is a service. But what if the company buys training materials that the trainer furnishes on DVD? Is the customer still buying a service? Probably not: we\u2019d have to say that when it buys the DVD, the company is buying a tangible good.<\/p>\r\n

    In this case, the product that satisfies the customer\u2019s need has both a tangible component (the training materials on DVD) and an intangible component (the educational activities performed by the seller). Not surprisingly, many products have both tangible and intangible components. If, for example, you buy a Hewlett-Packard computer, you get not only the computer (a tangible good) but certain promises to answer any technical questions that you might have and certain guarantees to fix your computer if it breaks within a specified time period (intangible services).<\/p>\r\n\r\n

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    Types of Product Developments<\/h2>\r\n

    New product developments can be grouped into four major categories: new-to-the-company, improvement of existing product, extension of product line, and new-to-the-market.<\/p>\r\n\r\n

    Figure 9.1 Peeps Milk Chocolate<\/span><\/h3>\r\n
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    \"Peeps<\/a><\/p>\r\n\r\n<\/div>\r\nHoliday decorating kits have extended Just Born\u2019s product line beyond Peeps[footnote]Mike Mozart \u2013 Peeps<\/a> \u2013 CC BY 2.0.[\/footnote]\r\n

    For examples of the first three types of new product developments, we\u2019ll take a look at Just Born. The company is known for its famous \u201cMarshmallow Peeps,\u201d and consequently its management is very interested in marshmallows. It conducted research that revealed that families use marshmallows in lots of ways, including crafts and decorating. This led Just Born to develop an Easter decorating kit that used Peeps marshmallows. It was such a hit that the company followed by creating decorating kits for Halloween and the Christmas season. Because similar products are made by other companies, the decorating kits are not \u201cnew to the market\u201d but are \u201cnew to the company.\u201d Now, let\u2019s look at another product development involving Just Born\u2019s also famous Mike & Ike\u2019s. The marketing people at Just Born discovered that teenagers prefer to buy candies that come in pouches (which fit into their pants pockets) rather than in small boxes. In response, the company reduced the piece size, added some new ingredients, and put the Mike & Ike\u2019s in pouches. This \u201cimprovement in an existing product\u201d resulted in a 20 percent annual sales jump for Mike & Ike\u2019s. Our last look at Just Born demonstrates an approach used by the company to \u201cextend its existing product line.\u201d Most of us like chocolate and most of us also like marshmallow, so how about putting them together? This is just what Just Born did\u2014the company extended its Peeps product line to include \u201cPeeps in a chocolate egg.\u201d Consumers loved the combination, and its success prompted the company to extend its product line again and launch a chocolate crispy version for Easter.<\/p>\r\n\r\n

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    New-to-the-Market Products<\/h2>\r\n

    The PowerSki Jetboard is a \u201cnew-to-the-market product.\u201d Before it was invented, no comparable product existed. Launching a new-to-the-market product is very risky, and only about 10 percent of products created fall into this category. On a positive note, introducing a new product to the market can be very profitable, because the product often enjoys a temporary monopolistic position.<\/p>\r\n\r\n<\/div>\r\n

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    Entreprenerial Start-Ups<\/h2>\r\n

    Inventors of new-to-the-market products often form entrepreneurial start-ups to refine their product idea and bring it to market. This was the path taken by Bob Montgomery, inventor of the PowerSki Jetboard. As is typical of entrepreneurial start-ups, the company that Montgomery founded has these characteristics:[footnote]Coulter, M., Entrepreneurship in Action (Upper Saddle River, NJ: Prentice Hall, 2001), 9\u201311.[\/footnote]<\/p>\r\n\r\n