Does your enterprise have a hard time meeting customer expectations on new product introductions? Do you often find that your engineering department includes far too many "bells and whistles" and that these added features do nothing more than raise your prices so high, that your product offering is no longer competitive? If you’ve answered yes to each of these aforementioned questions, then it’s time to define how best to balance real customer needs versus expected customer needs. Your engineering department may think they now what your customers need, but are they basing these opinions on factual assertions, or on assumptions? More importantly, are they taking an approach predicated on dictating what customers need, rather than listening to what these customers want?
You need your engineering department to spearhead innovative product designs, to establish a market presence of being an innovator & leader and most importantly, to balance the needs of customers with your product’s budget and price tag. It’s not an easy thing to do by any means. However, that task is much harder to complete when your engineering department is given free reign over designs. When left on their own, it’s not uncommon for engineering to veer off and go above and beyond what customers expect, or can afford. They’re trying to exceed the customer’s expectations without understanding that part of those expectations includes the product’s price tag. It’s one thing to meet customer expectations, but it’s something else entirely when exceeding those expectations means you've priced your product out of the market. So, what are some possible solutions?
1. Charging Customers NRE, Non-Recurring Engineering Charge
Is your enterprise tasked with the responsibility of coming up with one-off, custom-made designs? If so, then make it a point to charge your customers an NRE, which is an acronym for non-recurring engineering charge. Put the decision on product features in the hands of your customer base. Give them the power to decide on what features are essential and what are simply too costly to pursue. Understand your NRE multiplier and what role it must play in aligning your custom-made design to your customer’s specific needs.
2. Identifying Value-Add & Non-Value-Add Process Steps in Product Management
For those standard, “me-too” product lines, identify which process steps are value-added versus non-value-added. Streamline your processes so as to minimize waste and reduce your product’s COGS. Identifying value-add vs. non-value-add process steps will help weed out those product features and steps that aren’t needed versus those that are. More importantly, it will limit the influence of an engineering department that sees exceeding customer expectations as the only viable option.
3. Using VOC Data and Simplified Kano Analysis Steps for Product Managers & Marketers
Finally, use VOC (voice-of-customer) data, coupled with a Kano analysis, in order to reduce your product’s design costs over its life cycle. This includes reducing design costs from the product's initial scope stage all the way through to its market launch. Use these same principles for any and all future product upgrades. The link I’ve provided above includes a post that shows how to use a simple Kano analysis to isolate those product features that are essential for market entry & market dominance, versus those product features that are unnecessary product cost drivers. Managed properly, and your VOC data can be used to reduce your design costs and limit the impact of costly mistakes.
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