How can companies develop products and product lines to maximize profits? Out of all the possible configurations available to them, how they should decide what to offer? The authors have developed a framework for balancing the cost of development and offers a wide range of products and services to customer demand for additional choice. Their methodology helps managers make informed decisions about the features included in the product, which include variations in a product line … Read more »

How can companies develop products and product lines to maximize profits? Out of all the possible configurations available to them, how they should decide what to offer? The authors have developed a framework for balancing the cost of development and offers a wide range of products and services to customer demand for additional choice. Their methodology helps managers make informed decisions about the features included in the product, the variations in a product line are, and how the services should develop with technology and competition. Using examples from the music, media and software industry, and relying on companies like Apple, Dell, Microsoft, The New York Times, and ESPN, the authors describe five basic types of product offerings: the a la carte menu, the specialization offer, the all-in-one offer, the basic / premium offer, and have-it-your-way deal. By highlighting how the costs affect product design, they go from the standard product performance criteria, such as sales and market share, which are the focus of much of the work on the bundling of products. The authors point out that the decision to offer a product and how it is designed generally affects both the fixed costs and marginal costs. They argue that product designers need to expand their definition of fixed and marginal costs over the ones they usually pursue and cover account for the cost of the entire supply chain. Although some of these costs can be difficult to quantify, they are often too large to ignore.
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from
David S. Evans,
Karen L. Webster
Source: MIT Sloan Management Review
9 sides.
Release Date: 1 October 2007. Prod #: SMR263-PDF-ENG
Designing the right product offerings HBR case solution