AU-451 “Product Design and Development”

Lecture-5 Product Definition

By
Dr.-Ing. Syed Mushahid Hussain Hashmi

AU-451 Product Design and Development by Dr.-Ing. S. Mushahid H Hashmi (Lec 5-Product Definition) 1
 Lecture content

 Mind map of Product

 Definition of Product

 Three levels of Product

 B2C and B2B products

 Difference between Price and Value of Product

 Product Concepts

 Production Concepts

 Product Acquisition

AU-451 Product Design and Development by Dr.-Ing. S. Mushahid H Hashmi (Lec 5-Product Definition) 2
 Product- Mind Map ?

What comes to the head?

from

Product

AU-451 Product Design and Development by Dr.-Ing. S. Mushahid H Hashmi (Lec 5-Product Definition) 3
 Product

AU-451 Product Design and Development by Dr.-Ing. S. Mushahid H Hashmi (Lec 5-Product Definition) 4
 Product- Mind Map

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 Definition of a Product
Product: Anything that can be offered to a market for attention, acquisition, use,
or consumption that might satisfy a want or need.
Service: An activity, benefit, or satisfaction offered for sale that is essentially
intangible and does not result in the ownership of anything.

Product Service
Tangibility Tangible Intangible

Ownership Ownership to customer No Ownership to customer,

pay for experience
Manufacturability Involves manufacturing Cannot be manufactured, only
processes interactions and experiences
Inventory Countable and can be Uncountable and so cannot be
inventoried inventoried
Examples Electronics, clothing, Customer support, education,
automobiles healthcare

Product = Goods + Services + Works + Experiences+…

Product is a bundle of benefits.
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 Three levels of products

AU-451 Product Design and Development by Dr.-Ing. S. Mushahid H Hashmi (Lec 5-Product Definition) 7
 Consumer products (usually B2C, could be B2B)
Consumer Products: A product bought by final consumers for personal consumption.

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 Industrial products (B2B)
Industrial Products: A product bought by individuals and organizations for further
processing or for use in conducting a business.

Raw Materials: Basic materials used in the production of goods. They undergo
further processing to become finished products. Metals, minerals, chemicals, textiles,
and agricultural products, packaging products etc.

Components and Parts: Items that become a part of the final product during the
manufacturing process. Engines, computer chips, gears, fasteners, circuit boards etc.

Capital goods: Long-term assets used by businesses to produce goods or services.

They do not become part of the final product. Examples: Machinery, equipment,
buildings, vehicles, tools.

Supplies: Consumables and equipment used in day-to-day operations, maintenance,

and repair of machinery and facilities. Lubricants, cleaning supplies, safety equipment,
hand tools, office supplies
Industrial Services: Services related to IT, transport and logistics, cleaning,
consulting, warehousing, utilities etc.

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 Difference between “Price” and “Value” of a Product?
Price Value

Definition Amount paid by the customer. Worth, usefulness to the customer

Focus Seller's perspective, revenue Buyer's perspective, customer

generation gains.
Determinants Production costs, competition, Quality, features, brand, customer
profit margins service
Nature Absolute, tangible, short-term Relative, subjective, long-term
focus satisfaction, customer experience

Understanding the distinction between price and value enables businesses to set
appropriate pricing strategies, communicate effectively with customers, and create
products or services that meet customer needs and expectations.

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 Product Concept
Product Concept: The idea that consumers will favor products that offer the most
quality, performance, and features; therefore, the organization should devote its energy
to making continuous product improvements.

Product Concept:

Focus: Emphasizes the quality, features, and performance of a product.

Key Principle: Creating superior products that offer unique features or benefits.
Customer Approach: Belief that customers will buy products that offer the most
quality, performance, or innovative features.
Risk: Might focus too much on product features without considering pricing and
customer demand.

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 Production Concept

Production Concept: The idea that consumers will favor products that are available
and highly affordable; therefore, the organization should focus on improving
production and distribution efficiency.

Production Concept:

Focus: Primarily concerned with producing high volumes of products at low costs.
Key Principle: Efficiency in production and distribution is the primary goal.
Customer Approach: Assumes that customers will favor products that are widely
available and affordable.
Risk: May overlook changing customer needs and preferences, leading to outdated
products in the market.

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 Product Acquisition
Product acquisition refers to the process of obtaining goods or services for a
company or individual's use or any pre processing.

Sourcing
Purchasing Procurement
Suppliers

Identifying reliable Managing the entire

Negotiating deals
suppliers based on acquisition process,
for price, quantity,
quality, price, and ensuring cost
and delivery terms.
reliability. effectiveness and quality.

Importance of Effective Product Acquisition:

• Cost Savings
• Efficient supply chain management.
• Inventory optimization and therefore cost reduction.
• Ensuring product quality and customer satisfaction.

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 Product Acquisition Process

Negotiation Supply
Supplier Quality
and Chain Compliance
Identification Control
Purchase Management

Researching Negotiating Coordinating Ensuring Adhering to

potential terms and product flow products legal and
suppliers making from supplier meet quality regulatory
purchases to end user standards requirements

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