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New Product DevelopmentPresented by Precast Consulting Services
Agenda
What’s Precast Consulting ? New Product Development
– New product development 7-Step Process
– Example product lines
– Checklist for success
Summary
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New Product Development Margin Improvement
The starting point – What’s your sales margin?
Analysis: compute sales margin by product line - Sales and cost of production by product line - Allocate fixed costs to product lines - Get involved to keep the effort focused and efficient
Results - Product lines losing money need immediate attention - High margin product lines need emphasis - Product lines with margins 0-5% need to be replaced
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New Product Development Margin Improvement
Commodity Pricing – Low Margin
Products undifferentiated - interchangeable Standard specifications Technology is mature Buyers market – excess capacity Low cost producer sets the price Product sales margin less than 5%
Many products fit this description Quality and ethical challenges They remain the financial backbone of many producers
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New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology– Margin improvements are typically short lived
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New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology 2. Differentiate your products & services – improve margin
– Focus on markets - Be market driven rather than product driven
– Create value - Provide solutions, not products
– Segment customers - Better focus on market needs
– New services - Focus on selected markets & customers
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New Product Development Margin Improvement
Commodity Pricing What’s the answer
1. New production technology 2. Differentiate your products & services
3. Develop new products - improve margin– Focused product - Displace another building system
– Focused service - Solve a specific problem or reduce costs
– Market strength - Successful new products build on what you are already doing
Replace your least profitable commodity business
New Product Development is today’s topic
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New Product Development Margin Improvement
Commodity pricing – What's the answer
1. New production technology – stay current
2. Differentiate your products & services – from commodities
3. Develop new products - improve margin
Every commodity was once a new product with high margin
competing with and displacing another building system
Precast manholes once were a
new product competing with brick
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New Product Lines Action Plan
Precast Competitive Advantages Owners
- Strength (5000+ PSI)– Plant Quality– Durability– Fire resistance– Project specific (appearance, maintenance, etc)
Architects & Specifiers - Design & engineering services
– Engineering envelope – design objectives– Job cost savings– Speed of construction
Contractors - Turn key contract – risk reduction
– All weather construction– Shortage of masons– Reduction of trades on the job
Precast relative advantages differ from market to market
The greatest advantages are against other building systems
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New Product Lines Action Plan
Bill Ray’s Principles 1. High margin new products compete with other building systems,
not other precast.
2. Successful new products build upon what you are doing now.
3. Find your new products with your partner architects & specifiers
4. It takes time. New products take two years to develop.
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New Product Lines Today’s AgendaA 7-Step Action Plan
1. Find the product
2. Evaluate the product
3. Design the product
4. Pricing guidelines
5. Patent protection
6. It takes time
7. It takes commitment
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product . Survey your jobs . Survey your architects . Survey your customers . Ask questions: big and small
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product . Survey your jobs . Survey your architects Structural Producers . Survey your customers
Look for new products . . .
And you will find you have been walking right by them without noticing.
Precast Producers
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product
. Survey your jobs
. Survey your architects
. Survey your customers
2. Evaluate potential products Perform a structured features & benefits evaluation Benefits to the owner
Benefits to the architect Benefits to the contractor
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product
. Survey your jobs
. Survey your architects
. Survey your customers 2. Evaluate potential products . Structured Features & benefits evaluation . Identify specifiers required to reach target markets
• Architects
• Engineering firms
• Code authorities
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product
. Survey your jobs
. Survey your architects
. Survey your customers 2. Evaluate potential products . Structured Features & benefits evaluation . Specifiers required to reach target markets . Identify market size by product
• Ask specifiers
• Dodge Reports
• Market Research Firms
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product
2. Evaluate potential products
3. Design the product . Come to the specifier with a specific product . Drawings . Specific price point
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
1. Find the product
2. Evaluate the product
3. Design the product . Come to the specifier with a specific product . Drawings or illustrations . Specific price point
Be competitive with full cost of competitive product Price the features Show the included benefits Charge what the market will bear
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New Product Lines Action PlanSuccessful new products compete with other building systems, not other precast
4. Pricing guidelines Don’t use formula pricing . Product enhancements - premium pricing . Product innovations - partner without introductory pricing . New products - initial pricing should never be at breakeven
5. Patent Protection Protect unique designs & materials . Examples: Special designs & connx details . Pat. Pending Protection during the application - about 2 years . Protection Draw the patents broadly to cover variations
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New Product Lines Stairtower
ExampleSuccessful new products build upon what you are doing now
WTC was much worse because of failed stairtower wallsRefuge Egress
Changes in code typically originate in disasters
BOCA is evaluating proposals for more robust stairtowers
Considerable local interest
Structural Producers: Think about stair towers
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New Product Lines Lightpole Base
Example Precast Producers, think about this light pole base:
Product Advantages to the customer . Rapid construction – reduced project scheduling risks . Product quality – bolt hole & elec connx . Appearance – Steel form finish vs. Sonotube . Cost - Reduced GC overhead & supervision costs
Market Advantages to the producer . Competes with other building systems – good margin . Product line extension from current – known req. . Builds relationships with existing specifiers – customers
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New Product Lines Action PlanProduct development must be a way of life
6. It takes time There are many excuses for inaction . Persistence is the most important trait . Go for a small early success . It takes two years
7. It’s ongoing New products turn into commodities . Specifiers write specifications, margins are reduce . New product development must be a way of life . You need to have one or two new products in each stage of development
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New Product Lines
Checklist for failure
1. Did not commit to a sustained effort
2. What I wanted to produce was not what the customer wanted
3. Did not learn to do business with the new customer type
4. The new product competes with other precast at low margin
5. Unsolved production problems
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New Product Lines
Checklist for success
1. Find the product
2. Evaluate the product
3. Design the product
4. Price it correctly
5. Patent protection may help
6. It takes time
7. It’s ongoing
8. It’s up to you
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New Product Lines Action Plan Find the product
Evaluate the product
Design the product
Pricing guidelines
Patent protection
It takes time, its ongoing
What can Precast Consulting do?– Facilitate the process– What’s worked elsewhere– Market studies– Product requirements - cost studies
– Contact info: 770-979-3711. [email protected]
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New Product DevelopmentPresented by Precast Consulting Services
Who’s Precast Consulting
We are a general management consulting firm Focused only on the precast industry
Finance – Acquisitions / dispositions– Financial benchmark analysis
Sales & marketing– New product development– Margin improvement– Profitable sales growth
Operations– Work group productivity improvement– Project management– Quality programs – rework reduction– Manufacturing improvements
Contact information [email protected] web site www.precastconsulting.com 770-979-3711
