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Creating Services and Products

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Creating Services and Products Creating Services and Products v. 1.0 This is the book Creating Services and Products (v. 1.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/ 3.0/) license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. This book was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz (http://lardbucket.org) in an effort to preserve the availability of this book. Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page (http://2012books.lardbucket.org/attribution.html?utm_source=header). For more information on the source of this book, or why it is available for free, please see the project's home page (http://2012books.lardbucket.org/). You can browse or download additional books there. ii Table of Contents Dedication............................................................................................................................... 1 Acknowledgments................................................................................................................. 2 Preface..................................................................................................................................... 4 Chapter 1: Concepts in the Context of Monopolistic Competition ........................... 12 Monopolistic Competition .......................................................................................................................... 14 The Importance of Being Entrepreneurial and Being a Short-Term Monopolist .................................16 The Entrepreneur Should Design Products and Services for Continuous Product Differentiation and Innovation..................................................................................................................................................... 17 Entrepreneurship Can Be Found in Large and Small Companies ...........................................................18 The Kingpins of Product Differentiation and Entrepreneurial Innovation Activity ............................19 Radical and Incremental Innovation ......................................................................................................... 20 Product and Technology Life Cycles .......................................................................................................... 21 Diffusion of a Technology Usually Lags Performance.............................................................................. 23 Discontinuities, Chasms, and Hype in the Diffusion Process ..................................................................25 The Bridge Model of Technology Life Cycle.............................................................................................. 27 Technologies Do Not Necessarily Fall Into the Abyss: They Become Embedded in New Technology 28 There is Power in Numbers: Network Effects and Metcalfe’s Law..........................................................29 The Role of R&D Process in Innovation ..................................................................................................... 31 Push, Pull, and Reload can go on Forever ................................................................................................. 33 R&D for Start-Ups and Small Businesses................................................................................................... 34 Search and the Role of Learning-About in Developing Ideas for New Products and Services ............35 Building Things and the Role of Learn-By-Doing in Developing Ideas for New Products and Services ......................................................................................................................................................... 38 The Role of the Supply Chain and the Brand in Product Differentiation ..............................................40 Conclusion .................................................................................................................................................... 41 Chapter 2: Fundamentals of Product and Price Differentiation............................... 42 The Demand Curve....................................................................................................................................... 43 First-Degree Price Discrimination: Personalized Pricing ........................................................................44 Second-Degree Price Discrimination: Versioning .................................................................................... 48 Third-degree Price Discrimination: Group Pricing .................................................................................. 52 Legal Issues Related to Price Discrimination and Product Differentiation ...........................................55 Conclusion .................................................................................................................................................... 57 iii Chapter 3: Differentiation in Action............................................................................... 58 Price and Product Differentiation and Enlightenment............................................................................62 Generating Additional Revenues: Willingness-to-Pay ............................................................................. 66 Demand and Differentiation Dashboards .................................................................................................. 68 Monopolistic Competition at Work............................................................................................................ 70 Independent, Complement, and Substitute Goods and Services ............................................................71 Price Discrimination and Price Differentiation ........................................................................................ 73 Irritating Consumers ................................................................................................................................... 74 Waves of Innovation Fueled by Substitutes and Complements ..............................................................76 Arbitrage: Producer’s Paradise and Consumer’s Dread ...........................................................................77 Conclusion .................................................................................................................................................... 79 Appendix: Determining the Optimal Selling Price Using Demand, Revenue, and Cost Equations......80 Chapter 4: Dynamic Tension in Versioning and PD Curves ....................................... 89 Product Differentiation Curves .................................................................................................................. 90 Versioning and Goldilocks Pricing............................................................................................................. 92 Using Dynamic Tension Differentiation to Develop Products and Services for the Entire Demand Curve ............................................................................................................................................................. 93 Dynamic Tension Between Midas and Hermes Spawns Atlas .................................................................96 Midas, Atlas, and Hermes Versions............................................................................................................ 97 Bottom of the Pyramid ................................................................................................................................ 99 Versioning Restaurants, Hotels, and Motels........................................................................................... 100 Versioning Commodity and Standardized Products.............................................................................. 102 Versioning Strategies ................................................................................................................................ 103 Version Rollout Strategies ........................................................................................................................ 105 Customer Segments and Midas, Atlas, and Hermes Versions ...............................................................106 Pricing and Product Differentiation Strategies ...................................................................................... 108 Dynamic Tension in Action at Singapore Airlines.................................................................................. 109 Conclusion .................................................................................................................................................. 110 Addendum on Pareto Economics, Welfare, and Efficiency....................................................................111 iv Chapter 5: Examples of Product Differentiation & Versioning Curves ................. 113 Versioning Automobiles...........................................................................................................................
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