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Chapter 8 – Product Design and Development

8.1 Riding the Crest of Innovation

o   PowerSki Jetboard makes its own waves, so you don’t need natural waves to surf.

o   45 horsepower, 45-pound watercraft engine.

8.2 What is a Product?

o   Product – something that can be marketed to customers because it provides benefits and satisfies a need.

o   Tangible and Intangible good (ex: apple computer is tangible and the promises to answer technical questions about the computer is intangible).

o   New-to-the-company – product in the market but new to the company.

o   Improvement of existing product – getting an existing product in the company and making it better.

o   Extension of product line – adding more products in a category that already exists in the company.

o   New-to-the-market – no comparable product in the market.

o   Four characteristics of the entrepreneurial start-up

o   Innovative

o   Goals include profitability and growth

o   New opportunities

o   Willing to take risks

8.3 Where Do Product Ideas Come From?

o   Have multiple ideas so one might have a chance

o   Seth Godin refers to remarkable ideas as “Purple Cows”

o   55% of all new product ideas come from small businesses

8.4 Identifying Business Opportunities

o   Commercial potential – make money by selling the product

o   Products provide customers with four types of utility or benefit

o   Time utility – available at a convenient time

o   Place utility – convenient location

o   Ownership utility – value created by transferring a product’s ownership

o   Form utility – the value to consumers from changing the composition of a product

8.5 Understand Your Industry

o   Industry – group of businesses that compete with one another to market products that are the same or similar

o   Market – group of buyers or potential buyers who share a common need that can be met by a certain product

o   Niche – narrowly defined group of potential customers with a fairly specific set of needs

8.6 Forecasting Demand

o   Market share – the company’s portion of the market that it has targeted

8.7 Breakeven Analysis

o   Breakeven analysis – method of determining the level of sales at which the company will break even (have no profit or loss)

o   Fixed costs – costs that don’t change

o   Variable costs – costs that vary, in total, as the quantity of goods sold changes but stay constant on a per-unit basis.

o   Contribution margin per unit – excess of revenue per unit/variable cost per unit

o   Breakeven point in unit – number of sales units at which net income is zero (calculates: fixed costs/contribution margin per unit)

8.8 Product Development

o   Project team – individuals from different functional areas assigned to work together throughout the product development process

o   Risks in product development

o   Trade-offs

o   Time pressure

o   Economics

o   Product development process – a series of activities by which a product idea is transformed into a final product

o   Product concept – description of what a new product will look like and how it will work

o   Prototype – physical model of a new product

o   Ramp-up stage – stage in the product development process during which employees are trained in necessary production processes and new products are tested.

8.9 Protecting Your Idea

o   Patent – grant of the executive right to produce or sell a product, process, or invention.

o   To be patentable the idea needs to be new, not obvious, and have utility

Chapter 9 – Marketing: Providing Value to Customers

9.1 A Robot with Attitude

o   Mark Tilden used to build robots for NASA that were trashed on Mars.

o   Decided to specialize in robots for earthlings

o   Teamed up with Wow Wee Toys Ltd. To create “Robosapien,” an intelligent robot with attitude

o   Without marketing, Robosapien wouldn’t have gotten anywhere

9.2 What Is Marketing

o   Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large

o   Marketing includes: coming up with a product and defining its features and benefits, setting price, identifying target market, making potential cusomers aware, getting people to buy it, delivering it to people who buy it, managing relationships with customers after delivery.

o   Find out what customers need, develop product to meet needs, engage the entire organization in efforts to satisfy customers

o   Marketing concept: Basic philosophy of satisfying customer needs while meeting organizational goals.

o   Marketing strategy - Plan accfor selecting a target market and creating, pricing, promoting, and distributing products that satisfy customers.

o   Demographic segmentation - Process of dividing the market into groups based on such variables as age and income.

o   Geographic segmentation - Process of dividing a market according to such variables as climate, region, and population density.

o   Behavioral segmentation - Process of dividing consumers by behavioral variables, such as attitude toward the product, user status, or usage rate.

o   Psychographic segmentation - Process of classifying consumers on the basis of individual lifestyles as reflected in people’s interests, activities, attitudes, and values.

9.3 The Marketing Mix

o   Four P’s: product, price, place, promote

o   Secondary data - Information used in marketing decisions that has already been collected for other purposes.

o   Primary data - Newly collected marketing information that addresses specific questions about the target market.

o   Private branding - Product made by a manufacturer and sold to a retailer who in turn resells it under its own name.

o   Generic branding - Product with no branding information attached to it except a description of its contents.

o   Manufacturer branding - Branding strategy in which a manufacturer sells one or more products under its own brand names.

o   Brand equity – Value of a brand generated by a favorable consumer experience with a product.

o   Brand loyalty – Consumer preference for a particular brand that develops over time based on satisfaction with a company’s products.

o   Packaging – Container that holds a product and can influence a consumer’s decision to buy or pass it up.

o   Labeling – Information on the package of a product that identifies the product and provides details of the package contents.

   The Federal Reserve System (Fed):

       Central Banking System: Regulates the US banking industry and monetary policy.

       Goals: Price stability, sustainable economic growth, and full employment.

       Tools:

           Reserve Requirements: The percentage of deposits that banks must hold in reserve.

           Discount Rate: The interest rate charged by the Fed to banks borrowing reserves.

           Open Market Operations: Buying and selling government securities to influence the money supply (information not from sources).

   Securities Markets:

       Functions:

           Raising Capital:  Helping companies raise funds by issuing stocks and bonds.

           Trading Securities:  Providing a platform for buying and selling existing securities.

       Types of Markets:

           Primary Market: Where new securities are issued to the public (e.g., through an IPO).

           Secondary Market: Where previously issued securities are traded among investors.

   Major Stock Exchanges:

       New York Stock Exchange (NYSE): The largest stock exchange in the world by market capitalisation.

       American Stock Exchange (AMEX): A smaller exchange focusing on small and mid-sized companies.

       NASDAQ: An electronic exchange known for listing technology companies.

   Insider Trading: Illegal trading of securities based on non-public information, giving the trader an unfair advantage.

   Market Indexes: Measures of stock market performance, tracking the movement of a specific group of stocks (e.g., Dow Jones Industrial Average, S\&P 500, NASDAQ Composite).

Valid Contract: A legally enforceable agreement that meets these four essential elements:

       Agreement:  A mutual understanding and agreement to the terms of the contract, evidenced by an offer and acceptance.

       Consideration: Something of value exchanged between the parties, such as money, goods, services, or a promise to do or not do something.

       Contractual Capacity: The legal ability to enter into a contract. This excludes minors, individuals under the influence of drugs or alcohol, and those mentally incompetent.

       Legality: The contract's purpose must be legal and not violate any laws or public policy.

## 13.7 Overview of Contract Remedies

   Breach of Contract: Occurs when a party fails to fulfil its contractual obligations.

   Contract Remedies: Legal remedies available to the non-breaching party to address the breach:

       Monetary Remedies:  Financial compensation to cover losses caused by the breach, including compensatory damages (covering direct losses) and consequential damages (covering indirect losses).

       Equitable Remedies: Non-monetary remedies to enforce the contract, such as:

           Specific Performance: Ordering the breaching party to fulfil the contract's terms.

           Injunction: Ordering a party to stop a specific action.