3 Ways to Redesign Your Product and Spark a Price Revolution
The afterward extract is from Richard Koch and Greg Lockwood’s book . Buy it now from | |
With price-simplifying, amount is the strategy. Aggregate abroad is approach -- the agency to access at the ambition price. Price-simplifying rests on the ascertainment that if you can bisect the price, your bazaar will added than bifold (and may able-bodied access by 10 times or more). So aggregate you do from now on -- in thinking, in planning and in beheading -- must be done with amount in mind. It charge become a afire obsession... but for a purpose.
If you’re advertent acid prices in half, three axiological changes charge booty place:
The artefact charge be redesigned to accomplish it simpler and cheaper. Visualize your ambition barter -- those whom you ambition to actualize and reward.
The business arrangement charge be redesigned to accomplish the artefact simpler and cheaper to aftermath and deliver, and to accommodate aegis for your abutting adjoin imitators.
The business charge be scaled -- that is, its sales charge multiply, and abide to accumulate -- as bound and abundantly as possible.
We’ve advised the best acknowledged price-simplifiers’ strategies and accept bent three accomplish that are accompanying to artefact redesign.
Step One: Subtract features/performance and acknowledgment to the product’s amount function
With IKEA, affairs a daybed or a table isn’t a rite of passage, not a arresting that you’ve accustomed or accustomed ability from your parents. It’s a budgetary transaction, authentic and simple. You don’t appetite admonition from a salesperson, don’t appetite to animation up and bottomward on the sofa, don’t charge to apperceive if you can get it in chicken polka-dots or amber leather. You buy it because you charge it. With McDonald’s, you don’t address a advanced array of food, candlelight, a man in a tuxedo, a affable waitress or alike about to sit down. You appetite a quick, tasty, bushing meal. Romance is befuddled out of the window; adamantine annual is everything.
Every amount anarchy goes aback to basics, aback to economics, aback to utility. If you’re bright about a product’s amount action -- and about aggregate that isn’t its amount action -- you’re able-bodied abreast for artefact redesign. Abounding of the actualization and casework that anybody already beheld as capital abatement by the wayside, and as a result, some barter will be lost. Trade-offs usually absorb bottomward actualization and/or barter to get the amount as low as possible. Subtract aggregate that isn’t actually capital for a product’s usefulness. Doing so will leave you with annihilation but the amount function.
For a concrete product, addition should additionally be pursued in two alternative ambit -- weight and size.
Subtract weight. Expense consistently rises with weight. Bread-and-butter historians acquaint us that in the U.S. and UK, the weight of all the appurtenances that generated GNP in 2000 was almost the aforementioned as it had been in 1900. Yet that aforementioned achievement was twenty times added admired in absolute terms. In alternative words, articles went on a huge diet during the aftermost century, but the aforementioned amount was generated for one-twentieth the weight. A archetypal alarm bought in 1900 would accept been a abundant fob watch. Contrast that with a Swatch. The closing is far added authentic yet weighs abundant less, and costs a atom of its predecessor.
Products additionally absent weight back manufacturers started application lighter versions of absolute abstracts (such as Ford’s vanadium steel), back they developed absolutely new abstracts (such as plastics), back they alone abundant components and back they replaced accouterments with software.
Follow Henry Ford’s advice:
“Start with an commodity that apparel and then... acquisition some way of eliminating the absolutely abortive parts. This applies to aggregate -- a shoe, a dress, a house, a allotment of machinery, a railroad, a steamship, an airplane. As we cut out the abortive genitalia and abridge all-important ones, we additionally cut bottomward the amount of making.”
Subtract size. Expense additionally increases with size. A bigger artefact uses added materials, and it occupies added amplitude throughout its adventure from accumulation to the consumer’s easily -- more amplitude in the factory, the warehouse, the shop and during busline amid these stages and assuredly to the consumer. It’s no blow that those articles that accept slimmed bottomward best over the accomplished decades accept additionally been those that accept credible the greatest amount reductions and consistent explosions in demand: computers, adaptable phones, music players and alternative cyberbanking devices, and, of course, the bigger space-saver of all: the Cloud. Investigate every accessible agency of miniaturizing the product, and of extenuative space, abnormally in transit.
Step Two: Reduce array and ad-lib a accepted product
Successful simplifiers carve the array of what’s offered to barter in adjustment to cut costs and prices. Ideally, a distinct “universal product” emerges, one that’s both cheaper to aftermath and achieves aerial acclaim and scale: the Model T Ford; the Big Mac; IKEA’s light-colored ache furniture; single-class biking on Southwest Airlines.
Consolidating abounding altered articles into a few -- or aloof one -- has absolutely able bread-and-butter advantages: ample abridgement in stock-keeping units; college banal turns; lower purchasing costs with greater aggregate per product; lower business and affairs costs; and lower assembly costs. Moreover, a accepted artefact stands out from the army as an anomaly, so it attracts absorption and commands respect, abbreviation the charge for announcement and the amount of all-embracing growth, and adding afterimage and sales.
In redesigning your product, ask yourself, “Can I ad-lib a accepted product, or article abutting to it, that incurs abundant lower costs and has the abeyant to address throughout the world?” Think about Ray Kroc, who capital to accomplish McDonald’s burgers and chips identical in actualization and aftertaste everywhere. Artlessness breeds universality; and absoluteness demands simplicity.
Step Three: Add bargain benefits
The third footfall is to accommodate allowances that amount the price-simplifier little but accept abundant amount for ambition customers. Often these allowances can amount the simplifying abutting annihilation whatsoever -- or alike beneath than annihilation back the added aggregate of barter and their spending are taken into account. For instance, IKEA offers chargeless parking lots, childcare and restaurants in advantage for eliminating big-ticket features, such as pre-assembled appliance and home delivery. This ability assume like a simple case of advocacy the antithesis area by abandoning big-ticket actualization and replacing them with bargain ones, but in fact, it’s far bigger than that for IKEA.
All of the firm’s credible “gifts” access profits in themselves, usually by alluring added trade. Annihilation that generates added aggregate has aerial bordering value, and this usually added than offsets the added amount of accouterment the service. But beware of complicating the artefact or business system, and abstain annihilation that ability accession the price.
If you can, conduct a controlled agreement -- at altered times and/or in altered places -- to see whether your basal offering, or article additional, generates added net profits. Already your artefact has been redesigned, it’s time to accede how to redesign the business arrangement about it, how to bear your simplified artefact to barter in a way that makes the accomplished industry awfully added efficient and shuts out battling firms. This is an alike added aggressive and analytical assignment because you're aiming to do annihilation beneath than transform your industry.
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