Considerations and Assessment of Product and Service Design

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Considerations for product/service design

There are certain considerations, which entrepreneur/s need to examine prior to developing the product/service design. Some of these include (that were discussed in class are):

1) Identification of Stakeholders, 2) Costs, 3) Price, 4) Appearance, 5) End-use, 6) Maintenance/Customer Care, 6) Prestige Value, 7) Research and Development, 8) Environmental considerations and 9) Legal and Ethical considerations. While all of the above mentioned considerations are related to internal operations of a business, the identification of stakeholders is one of the most critical considerations for product/service design.

Stakeholders are any individuals or group of individuals who can affect or are affected by the actions, decisions, policies, practices or goals of a business. In a business, there are primary stakeholder that directly influence the operations of a business and include owners, creditors, employees, suppliers, and customers. These stakeholders are broadly explored in the following figure:

Secondary stakeholders such as media, governments, competitors, lobbyists, courts, public and society can also influence a business though the involvement and interests of these stakeholders depends upon the nature of the industry the business represents. For example, media plays a (secondary though) critical role for businesses in FMCG sector, businesses in banking sector are influenced by policies formulated by the Reserve Bank of India (RBI), oil lobbyists influence the prices of petrol, diesel, etc. I have considered two secondary stakeholders below who indirectly influence business operations across most industries.

  1. Government – Most businesses in India are largely influenced by regulations and policies initiated by the government. The regulations and policies play a critical role in shaping up the representative industries/sectors of businesses. Examples for regulation include the Factories Act, 1948, Competition Act, 2002, Foreign Trade Act, 1992, etc, which prescribe adherence norms for businesses. Examples for policies can include changes in interest rates, customs, duties, etc that influence the cost of production and distribution and encourages growth of the business’ representative industry
  2. Competitors – Competitors encourage healthy competition within an industry and influence the price and quality of products and services in an industry. A business’ decision on targeting different markets and products is based on the market strategies considered by its competitors. Competitors accordingly, play a significant role in positioning products/services and in turn positioning a business in the market. What happens in a monopoly?

Interaction among stakeholders

Owners invest or hire employees/managers for conducting business activities leading to production and/or distribution or selling products and/or services to customers (end-consumers or other businesses). To conduct business activities including allocation of resources (natural, human, capital) from suppliers, owners/managers borrow money from creditors as loans that translate into revenues or profit earned from customers. The day-to-day business activities leading to profits are also influenced by government policies and regulations that aim at safeguarding interests of businesses and other stakeholders. Government also provides the use of utilities (electricity, water), infrastructural facilities (roads, railways, airports, ports, etc) that assists businesses for supply, production and distributional requirements. Also, competitors of businesses encourage competitive pricing, availability and accessibility to good quality goods/services. The profits earned are returned into the system as bonuses to human resources, dividends to shareholders, interest payments to creditors and payment for supplies. Businesses pay taxes to government that is utilized for managing government expenditures on administration and facilities. Theoretically, in a perfectly competitive scenario, businesses in particular equally share industry profits between their competitors. However, imperfect competition exists in the real world and depending upon the nature of competition (monopoly, oligopoly, monopolistic competition, etc) profits varies among competitors and can be depicted through changes in market share. One of the most significant factors that broadly influence changes in market share is prices and quality of goods /services. Other factors include interrelationships in the supply chain, costs of production, technology, etc.

Additional considerations in service design

Service design requires different considerations due to their intangible characteristics. One of the favourable characteristics of service design is that it is relatively easier to provide them in comparison to product design that involves high capital investments. Nonetheless, service design would seem relatively harder to develop than product design, which consists of mostly standardized processes and procedures. Alternatively, services directly involve interations with customers with diverse backgrounds (ethnicity, religion, language, regions, etc), tastes and preferences. Service design mainly requires skilled human resources who are willing to provide services for something in return, which could be in cash or kind (profit or non-profit). Skilled human resources does not necessarily imply being literate or educated but the sector mostly runs on soft skills (presentation, written, oral, personality, attitude, etc.) to communicate the nature of the service and their relevant use for customers. The design accordingly requires a continuous feedback and changes in accordance to customer requirements making it one of the most dynamic sectors. Service sector, which has the most contribution in India’s economy, is yet not favorably developed though growth in this sector is highly favourable.

Assessment: Product and Service Life Cycle

The product and service life cycle attempts to describe the stages through which product or service goes through from the time of its introduction until it is finally removed from the market. The cycle is assessed on two variables – sales generated by the product/service and time taken for sales generation. Accordingly shows how sales of a product/service change over time. The main stages of life cycle are:

  1. Introduction: The product/service is introduced in the market and prerequisites for the same include research and forecasting as well as adequate supply to meet expected demand. In this stage however, a business may experience none or low revenue while costs would be high.
  2. Growth: The demand for the product/service is expected to grow at this stage. Time taken from the time of introduction to its growth is subject to the nature of the product or service changes in a particular industry, sector or the overall market. During the growth stage additional enhancements and improvements are made to cater to the growing demand.
  3.  Maturity: Demand for this stage reaches a steady state. The demand in this case is viewed to be either consistent or stagnant. Few or no improvements or product changes may be needed during this stage. Forecasting techniques may be required to understand the length of maturity for a product/service. Most businesses however, consider introduction of newer products or expansion in other markets during this stage. Note: This stage is broadly based on an economics term “Law of Diminishing Marginal Utility”. According to the law, a when anyone increases consumption of a product (consumption of other products remaining constant), there is a decline in the marginal utility that a person derives from consuming another unit of that product. For example, one can drink 1 glass of water to quench thirst, followed by the 2nd glass and by the time one reaches out for another glass the consumption of water starts to decline
  4. Decline: This stage follows up from the maturity when the demand for a product/service begins to saturate. At this stage a business can choose to discontinue the product/service replacing the product with a new product or finding new uses for the product.

While the life assessment of product and service would seem like a marketing concept, the study’s use can be examined for operations management to reduce possible wastage, labour costs, costs of manufacturing and logistics. However, there are some limitations of the assessment, as in the shape and duration of the cycle varies; it is sometimes difficult to recognise at which stage the product/service exists; it assumes no reversion to earlier consumer preferences and it assumes that the decline is not inevitable.