Tag: Product Development

Product Diversification is a strategic approach adopted by businesses to expand their product portfolio by introducing new products, modifying existing ones, or entering new markets. This strategy helps companies spread risks, tap into new customer segments, and enhance growth opportunities. Product diversification can be a crucial component of a business’s long-term strategy to remain competitive in a dynamic marketplace.

Concept of Product Diversification:

At its core, product diversification involves introducing a variety of products to cater to different customer needs or entering new market segments. It helps businesses adapt to market changes, mitigate risks associated with dependence on a single product or market, and create new revenue streams. Diversification strategies can range from minor modifications to completely new product categories.

Example: A smartphone manufacturer introducing a line of wearable fitness devices to complement its existing product portfolio.

Types of Product Diversification:

1. Horizontal Diversification

In horizontal diversification, a company introduces new products that are unrelated to its existing product line but appeal to its current customer base.

• Example: A soft drink company launching a line of snacks or packaged foods.
• Benefit: It leverages the existing brand name and customer base for cross-selling opportunities.

2. Vertical Diversification

Vertical diversification occurs when a company integrates its supply chain by adding products or services at different stages of production or distribution.

• Example: A coffee company starting its own coffee bean plantation or opening branded coffee shops.
• Benefit: It allows the business to gain greater control over the production process and improve profitability.

3. Conglomerate Diversification

In conglomerate diversification, a company introduces entirely new products that are unrelated to its existing business. This type of diversification targets a completely different market.

• Example: A car manufacturer venturing into the healthcare equipment business.
• Benefit: It reduces dependence on a single industry and spreads business risk.

Advantages of Product Diversification:

• Risk Mitigation:

Diversification reduces the reliance on a single product or market, minimizing the impact of market fluctuations or product failures.

• Revenue Growth:

Expanding the product portfolio enables companies to tap into new revenue streams and boost overall sales.

• Enhanced Brand Value:

A diversified product range can strengthen brand perception and attract a wider customer base.

• Market Adaptation:

Diversification allows companies to respond to changing customer preferences and stay relevant in competitive markets.

• Economies of Scale:

By leveraging existing resources, businesses can achieve cost efficiencies when introducing new products.

• Cross-Selling Opportunities:

New products can complement existing ones, encouraging customers to purchase multiple items from the same brand.

• Competitive Edge:

Diversification helps businesses differentiate themselves from competitors and create unique selling propositions.

Challenges of Product Diversification:

• High Initial Investment:

Developing and launching new products require significant financial resources, including R&D, marketing, and distribution costs.

• Risk of Overextension:

Diversification may dilute the company’s focus and lead to inefficiencies in managing multiple product lines.

• Market Uncertainty:

Entering new markets or introducing unfamiliar products carries the risk of low customer acceptance or failure to meet market expectations.

• Operational Complexity:

Diversification increases operational challenges, such as managing diverse supply chains, inventory, and customer support.

• Cannibalization:

New products may compete with or cannibalize the sales of existing products within the same company.

Strategies for Successful Product Diversification:

• Market Research:

Conduct in-depth market research to identify gaps, customer needs, and potential opportunities.

• Leverage Core Competencies:

Build on the company’s strengths, such as expertise, technology, or brand reputation, to create products that align with the business’s core values.

• Gradual Expansion:

Start with small-scale diversification to test market response before committing to large-scale investments.

• Collaboration and Partnerships:

Partner with other businesses or acquire established companies to gain expertise and reduce the risks associated with diversification.

• Effective Marketing:

Develop targeted marketing campaigns to create awareness and generate interest in the new products.

• Quality Assurance:

Maintain high standards of quality across all products to preserve brand credibility.

Examples of Product Diversification

• Apple Inc.:

Apple began as a computer manufacturer but diversified its portfolio to include smartphones (iPhone), tablets (iPad), wearables (Apple Watch), and services (Apple Music, iCloud).

• Amazon:

Amazon started as an online bookstore but expanded into e-commerce, cloud computing (AWS), streaming services (Amazon Prime Video), and smart devices (Alexa).

• Coca-Cola:

Coca-Cola diversified from carbonated beverages to include juices, sports drinks, bottled water, and energy drinks to cater to health-conscious consumers.

• Unilever:

Unilever offers a wide range of products across food, beverages, personal care, and home care, catering to various customer segments.

Product Improvement refers to the process of enhancing a product’s features, quality, functionality, or design to meet changing customer needs, improve performance, and stay competitive in the market. It involves modifications based on customer feedback, technological advancements, and market trends. Improvements can be incremental, such as refining existing features, or transformative, introducing new functionalities or designs. The goal is to increase customer satisfaction, boost sales, and strengthen brand loyalty. Examples include adding advanced safety features in cars, upgrading smartphone software, or improving packaging for sustainability. Effective product improvement ensures that a product remains relevant and valuable over its lifecycle.

Characteristics of Product Improvement:

1. Customer-Centric Focus

Product improvement is often driven by customer feedback and preferences. Businesses analyze customer reviews, surveys, and complaints to identify areas of dissatisfaction or unmet needs. This ensures that the improved product addresses specific customer concerns, resulting in higher satisfaction and loyalty.

• Example: Smartphone manufacturers upgrading battery life or camera quality based on user feedback.

2. Incremental and Continuous

Product improvement is typically an ongoing process involving incremental changes rather than complete overhauls. Regular updates and enhancements ensure that the product evolves with changing trends and technologies while maintaining customer interest.

• Example: Software companies releasing periodic updates to fix bugs and add new features.

3. Focus on Quality Enhancement

Improving the quality of a product is a core characteristic of product improvement. This includes enhancing durability, performance, and reliability to meet or exceed industry standards. High-quality products build trust and foster long-term customer relationships.

• Example: Automakers incorporating better materials to improve vehicle safety and longevity.

4. Technological Adaptation

Product improvement often leverages advancements in technology to introduce innovative features or improve existing functionalities. Incorporating cutting-edge technology helps businesses stay competitive and cater to tech-savvy customers.

• Example: Integration of artificial intelligence in home appliances to make them smarter and more efficient.

5. Enhanced User Experience

Improved products aim to provide a better overall user experience, including ease of use, ergonomic design, and added convenience. A product that is easier and more enjoyable to use is more likely to succeed in the market.

• Example: Redesigning kitchen appliances to make them more intuitive and user-friendly.

6. Market-Driven Changes

Product improvement often aligns with changing market trends, such as shifts in consumer preferences, regulatory requirements, or competitive dynamics. Adapting to market needs helps businesses maintain relevance.

• Example: Launching eco-friendly packaging to meet rising environmental awareness among consumers.

7. Cost-Effectiveness

Improving a product does not always mean increasing its price. Efficient product improvement often involves optimizing the production process to reduce costs while maintaining or enhancing value, making the product more attractive to customers.

• Example: Using sustainable and cost-effective materials in product manufacturing.

8. Competitive Advantage

A well-executed product improvement can differentiate a product from competitors by offering unique features or superior value. This advantage helps businesses capture market share and solidify their position in the industry.

• Example: Smartphones with exclusive camera technologies setting themselves apart from rivals.

Challenges of of Product Improvement:

• Identifying Customer Needs

Understanding what customers truly want can be challenging due to diverse preferences and dynamic expectations. Misinterpreting customer feedback or focusing on a limited subset of users can result in improvements that fail to resonate with the broader market. Effective market research and data analysis are essential but can be resource-intensive.

• High Development Costs

Product improvement often requires significant investment in research, design, technology, and production. Companies may face financial constraints, especially smaller businesses, when trying to allocate funds for improvement while maintaining profitability.

• Risk of Failure

Improved products are not guaranteed to succeed. Changes might not meet customer expectations, or new features could complicate usability. Failure can lead to wasted resources, damaged reputation, and a loss of customer trust.

• Balancing Innovation with Affordability

Innovative improvements often increase production costs, leading to higher prices for customers. Balancing innovation with affordability is critical to maintaining market competitiveness and ensuring the product appeals to a wide audience.

• Competitive Pressure

In highly competitive markets, companies must improve their products quickly to stay ahead. However, rushing product improvements can lead to subpar results or oversights, ultimately harming the brand’s reputation.

• Technological Challenges

Adopting new technologies for product improvement can be complex and costly. Companies may face issues like compatibility, scalability, or the need for specialized expertise. Additionally, rapidly changing technology trends may render improvements obsolete.

• Cannibalization of Existing Products

Improved products may compete with or reduce the demand for existing products in the company’s portfolio. This cannibalization can lead to revenue losses and make it harder to maintain a balanced product line.

• Regulatory and Legal Constraints

Product improvements must comply with industry regulations and standards. Meeting these requirements can involve additional costs and time, and failure to comply can result in legal penalties or market restrictions.

Sales Force refers to a group of employees or individuals responsible for selling a company’s products or services. This team plays a crucial role in generating revenue, maintaining customer relationships, and ensuring that sales targets are met. The sales force can consist of various roles, including sales representatives, sales managers, and account executives, depending on the organization. Their primary responsibilities include prospecting, presenting products, negotiating deals, and closing sales. An effective sales force is well-trained, motivated, and aligned with the company’s overall sales strategy to drive growth and achieve business objectives.

Sales force Decision:

• Sales Force Size Decision

Determining the right size of the sales force is crucial for effective market coverage and cost control. Companies must balance between having enough salespeople to maximize opportunities and avoiding excessive payroll expenses. Methods like the workload approach, incremental approach, and sales potential approach help decide size. Too few salespeople can lead to lost sales, while too many increase costs without proportional returns. The decision depends on product complexity, market size, competition, and selling methods. Regular evaluation ensures the sales team is neither overstretched nor underutilized, enabling the company to achieve sales targets efficiently and maintain customer satisfaction.

• Sales Force Structure Decision

Sales force structure defines how salespeople are organized to serve customers effectively. Common structures include territorial (based on geography), product-based (specialized by product line), market-based (organized by customer segments), and complex/matrix structures. The choice depends on product diversity, customer needs, and company size. A clear structure ensures proper coverage, avoids duplication, and increases accountability. For example, a product-based structure works well for technical goods requiring expertise, while a territorial structure reduces travel costs. The right structure enhances productivity, improves customer relationships, and ensures sales goals are met by matching salesperson skills with the needs of the assigned market.

• Sales Force Compensation Decision

Compensation is a key motivator for salespeople and influences recruitment, retention, and performance. It typically includes a fixed salary, commissions, bonuses, and benefits. Companies choose between salary-based (security), commission-based (performance-driven), or combination plans (balanced approach). The decision depends on the nature of the product, sales cycle, and company objectives. For example, high-commission plans work well for aggressive sales targets, while salary-heavy plans suit relationship-based selling. Compensation must be competitive to attract talent, fair to retain staff, and aligned with company profitability. A well-designed plan motivates salespeople to achieve targets while controlling costs and maintaining organizational goals.

• Sales Force Recruitment and Selection Decision

Recruitment and selection involve attracting, assessing, and hiring salespeople with the right skills and attitudes. The process starts with defining the role, qualifications, and performance expectations. Sources include job portals, campus placements, referrals, and recruitment agencies. Selection methods include interviews, aptitude tests, role plays, and background checks. A careful selection ensures the right cultural fit, reduces turnover, and improves productivity. Hiring the wrong person can be costly, leading to poor sales and damaged customer relationships. Therefore, companies must focus on candidates with product knowledge, communication skills, and strong interpersonal abilities to ensure long-term success in the sales role.

• Sales Force Training and Supervision Decision

Training equips salespeople with product knowledge, selling techniques, customer handling skills, and industry insights. It may be conducted in-house or through external experts, using classroom, online, or on-the-job methods. Supervision ensures that salespeople follow company policies, meet targets, and maintain service quality. It includes regular meetings, performance reviews, and field visits. Training improves competence and confidence, while supervision maintains discipline and motivation. Continuous development programs keep the sales team updated with market changes. Effective training and supervision reduce mistakes, enhance customer satisfaction, and increase sales efficiency, making them vital for maintaining a high-performing sales force.

Management of Sales Force:

The management of a sales force is a critical component of any organization’s sales strategy. A well-managed sales force helps increase sales, improves customer relationships, and boosts overall business performance. Effective management involves recruiting, training, motivating, and evaluating the sales team to ensure they align with the company’s goals.

1. Recruitment and Selection

The first step in managing a sales force is to recruit and select the right individuals. Successful salespeople possess qualities such as excellent communication skills, empathy, persistence, and the ability to work under pressure. To build a strong team, companies should have a systematic recruitment process that includes evaluating candidates based on their experience, skills, and cultural fit with the organization. Additionally, clear job descriptions and expectations should be outlined to avoid misunderstandings and ensure the best candidates are chosen.

2. Training and Development

Once the sales force is hired, ongoing training and development are essential to keep the team updated on product knowledge, sales techniques, and industry trends. Sales training programs should cover:

• Product Training: In-depth understanding of the company’s products or services to ensure that the sales team can confidently present and sell them.
• Sales Skills Development: Techniques such as building rapport, handling objections, negotiating, and closing sales.
• Customer Relationship Management: Training on maintaining long-term relationships with customers, focusing on customer needs and satisfaction.

Training should be continuous, with regular workshops, seminars, and online courses to keep the sales team’s skills sharp and relevant.

3. Sales Organization and Structure

Effective sales force management involves determining the structure and organization of the sales team. Companies can choose from different sales force structures:

• Geographical Structure: Salespeople are assigned specific territories to manage and serve.
• Product-Based Structure: Each salesperson specializes in a specific product or product line.
• Customer-Based Structure: Sales representatives focus on specific customer segments (e.g., large accounts, small businesses).
• Hybrid Structure: A combination of the above, depending on the company’s needs.

Choosing the right structure depends on the company’s size, market complexity, and sales objectives. The structure should facilitate efficient resource allocation and maximize the productivity of the sales force.

4. Motivation and Incentives

Motivating the sales force is essential for maintaining high levels of productivity. Salespeople need a clear understanding of what is expected of them and how their performance will be rewarded. Motivation can be driven through:

• Monetary Incentives: Commission-based pay structures, bonuses, and performance-related incentives.
• Non-Monetary Incentives: Recognition programs, career development opportunities, and a positive work environment.
• Goal Setting: Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals to provide clear direction and a sense of purpose.

Motivating the sales force ensures they remain engaged, focused, and committed to achieving their targets.

5. Sales Performance Evaluation

Regular evaluation of sales performance is vital for identifying areas of improvement and recognizing achievements. Performance can be assessed through various metrics, such as:

• Sales Volume: The number of units sold within a specific time frame.
• Revenue Growth: Increase in revenue generated by each salesperson.
• Customer Satisfaction: Measuring customer feedback and the quality of customer relationships.
• Conversion Rate: The percentage of leads turned into actual sales.

Evaluating performance provides insights into the effectiveness of sales strategies, highlights high performers, and identifies those in need of additional training or support.

6. Communication and Coordination

Clear and open communication between sales managers and the sales force is crucial for effective management. Regular meetings, briefings, and one-on-one discussions ensure that sales representatives are well-informed about new products, changes in strategy, or market conditions. Coordination with other departments, such as marketing, finance, and customer service, ensures that the sales team has the necessary support and resources to meet their targets.

7. Leadership and Support

Strong leadership is essential in managing the sales force effectively. Sales managers should provide guidance, support, and mentorship to their teams. A good sales manager leads by example, sets clear expectations, and creates an environment where sales representatives feel motivated and empowered to perform at their best. Additionally, managers should be approachable, offer regular feedback, and encourage collaboration within the team.

Physical Distribution refers to the process of moving finished products from the manufacturer to the end consumer. It involves the management of logistics, including warehousing, inventory control, transportation, order fulfillment, and delivery. The goal is to ensure that products are available at the right place, at the right time, in the right quantities, and at minimal cost. Physical distribution is a critical component of the supply chain management system, and its efficiency directly impacts customer satisfaction, operational costs, and overall business performance. Effective physical distribution strategies help businesses maintain competitive advantage in the marketplace.

Importance of Physical Distribution:

• Customer Satisfaction

A well-managed physical distribution system ensures that products reach consumers in a timely manner and in good condition. On-time delivery and product availability are essential for maintaining customer satisfaction. When products are consistently delivered when and where they are needed, customers are more likely to remain loyal and make repeat purchases.

• Cost Efficiency

Effective physical distribution helps businesses reduce operational costs. By optimizing transportation routes, minimizing inventory holding costs, and improving warehousing practices, companies can lower their overall distribution expenses. Efficient logistics systems allow for economies of scale, reducing transportation and storage costs, which ultimately contributes to cost savings for the company and the customer.

• Competitive Advantage

A company with a robust physical distribution network can gain a competitive edge over its rivals. Fast and reliable delivery services, for instance, can differentiate a brand from its competitors. Additionally, being able to deliver products in a timely and cost-effective manner can help a company build a strong reputation, attracting more customers.

• Market Expansion

Physical distribution enables businesses to expand into new geographic markets. By establishing a distribution network in various regions, companies can reach a broader customer base, increasing sales and market share. This is especially important for businesses looking to scale their operations and tap into emerging or international markets.

• Inventory Management

Physical distribution plays a crucial role in effective inventory management. By strategically positioning warehouses and managing stock levels across distribution channels, businesses can maintain optimal inventory levels. This helps prevent overstocking or stockouts, ensuring that products are available when needed while reducing excess inventory costs.

• Flexibility and Responsiveness

A well-organized distribution system allows businesses to respond quickly to changes in consumer demand, seasonal variations, or market fluctuations. Companies can adjust their distribution strategies, reroute deliveries, or switch suppliers to meet customer needs effectively. The flexibility in physical distribution operations helps businesses maintain smooth operations and adapt to shifting market conditions.

• Enhanced Communication and Coordination

Effective physical distribution ensures smooth communication between different functions within a business, including sales, inventory, and customer service teams. By having a streamlined process for managing orders, inventory, and delivery schedules, companies can avoid delays, confusion, and errors. Good communication between distributors, suppliers, and retailers ensures that the entire supply chain operates smoothly.

• Supports Sales and Revenue Generation

Ultimately, physical distribution is a key driver of sales. When products are delivered promptly and in good condition, it directly affects the company’s ability to generate revenue. Additionally, distribution networks can be used to create promotional opportunities or introduce new products to the market, helping to boost sales and increase overall profitability.

Factors affecting Channel Selection:

• Product Characteristics

The nature of the product plays a crucial role in determining the distribution channel. For example, products that are perishable, like food items or flowers, require channels that ensure quick delivery, such as direct distribution or specialized logistics. Similarly, expensive and technical products, such as machinery or electronics, often require personal selling and specialized intermediaries who can provide detailed information and after-sales support. On the other hand, mass-produced, non-perishable goods may be suitable for broader distribution through retail stores or online platforms.

• Target Market

Understanding the target market is essential when selecting distribution channels. The preferences, location, and purchasing behavior of the target audience will influence the choice of channel. For instance, if the target market consists of younger, tech-savvy consumers, e-commerce channels may be more effective. On the other hand, if the market is geographically dispersed and requires physical interaction, traditional retail or wholesaler channels may be more suitable. Additionally, the purchasing power and buying habits of consumers should be taken into account, as they may determine whether a direct or indirect channel is more appropriate.

• Cost Considerations

The cost involved in using different distribution channels is a major factor in channel selection. Direct channels, such as company-owned stores or e-commerce platforms, tend to have higher initial setup and operational costs but provide more control over the distribution process. Indirect channels, such as wholesalers or retailers, may have lower operational costs, but businesses must factor in the commissions and margins paid to intermediaries. Companies need to evaluate which distribution model provides the best balance between cost-effectiveness and customer service.

• Channel Control

The level of control a company wants over the distribution process is another important factor. Direct channels, where the company controls the entire distribution process, allow for greater control over how products are presented, priced, and delivered to customers. Indirect channels, on the other hand, involve intermediaries like wholesalers and retailers, which can reduce the company’s control over the marketing, sales, and customer service aspects. Companies may choose their channel strategy based on how much control they wish to exert over the customer experience.

• Market Coverage

The extent of market coverage required for the product also affects channel selection. Some products may require intensive distribution to reach a wide audience quickly, making it necessary to use a network of retailers, wholesalers, or online platforms. For example, convenience products like snacks and beverages require broad market coverage, necessitating a wide distribution network. In contrast, products targeted at niche markets may require selective distribution through specialized retailers or exclusive outlets.

• Competitive Pressure

The distribution channels used by competitors can influence a company’s channel strategy. If competitors are using specific channels successfully, a company may feel compelled to adopt similar strategies to maintain competitiveness. Alternatively, a company may opt for unique or innovative channels to differentiate itself from competitors and capture market share. Competitive analysis can help businesses identify gaps in the distribution network and explore new opportunities.

• Legal and Regulatory Factors

Different markets have varying legal and regulatory requirements that can influence channel selection. For example, some countries may have specific laws governing distribution, such as import restrictions, taxation policies, or standards for product labeling and packaging. These factors may limit the options available for selecting distribution channels. In such cases, companies must comply with local regulations, ensuring that their chosen channels adhere to the legal framework.

• Company Resources and Capabilities

The company’s internal resources, including financial resources, expertise, and capacity, also play a role in selecting distribution channels. A company with substantial resources and logistics capabilities may choose to establish a direct distribution network, such as opening its own stores or building an online platform. Smaller businesses or those with limited resources may prefer to partner with intermediaries, such as wholesalers or retailers, to avoid the costs and complexities of managing their own distribution network.

• Technological Advancements

With the increasing reliance on digital platforms, technological advancements can significantly impact channel selection. The rise of e-commerce and digital tools for supply chain management allows companies to reach customers more efficiently and cost-effectively. Businesses may choose online channels, mobile apps, or other digital platforms to streamline their distribution process, particularly for products that lend themselves to online shopping. Technological advancements also enable better tracking and monitoring of inventory, improving the efficiency of the distribution process.

• Customer Service and Support

The level of customer service and support required by the product can also influence the choice of distribution channel. High-touch products that require post-purchase support, such as electronics or appliances, may be best sold through retailers or distributors who can offer after-sales services and technical support. For products that do not require significant customer interaction, such as basic consumer goods, direct online sales may be sufficient.

A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and thus in turn of the global environmental analysis. Through all of these analyses, the strengths, weaknesses, opportunities and threats (SWOT) of a company can be identified. Finally, with the help of a SWOT analysis, adequate business strategies of a company will be defined. The market analysis is also known as a documented investigation of a market that is used to inform a firm’s planning activities, particularly around decisions of inventory, purchase, work force expansion/contraction, facility expansion, purchases of capital equipment, promotional activities, and many other aspects of a company.

Product Mix Analysis

Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services.

The principle of product mix analysis, as described in all these texts is, in fact, correct and essential. The appeal of product mix analysis results from its simple yet powerful application, providing a platform to base the search for higher profitability and production throughputs. After years of practicing OR and quantitative methods in industry, however, I have come to the realization that an effective application of product mix analysis is not nearly as simple as illustrated in these texts. I will therefore outline the necessary steps, challenges and possible pitfalls of a practical application of product mix analysis to improve the profitability of an operation or business.

Product mix analysis is not as simple as it looks. In a typical textbook illustration of a product mix problem, a company produces several products, each requiring a certain amount of labor and materials. Constraints, such as total amount of resources and the maximum number of units that each product can sell, as well as the unit profit for each product, are given. The analysis focuses on how many products to produce in order to maximize the overall profit, correctly illustrating the essence of the product mix problem. However, the case does not even begin to reveal the complexities of a real and practical product mix study commonly used in industry.

First, the data needed for product mix study does not come in a handy form that is ready to import by an OR/MS practitioner into a spreadsheet for quick analysis. Obtaining and formatting the necessary information for analysis requires at least a few days and up to several months, depending upon the scope, complexity and purpose of the analysis.

After the first hurdle in data requirements is crossed and initial analysis of the product mix is conducted, a practitioner will usually be faced with the next issue: Is the current “optimized” product mix truly the best? In practical applications, the product mix study is rarely a one-shot deal, taking time and effort. Analysis is iterative, each iteration representing one of numerous different businesses and/or production scenarios.

The third difficulty of product mix analysis is its implementation. Even after an “optimal” product mix is found, the realization of the product mix within the operation is a challenge. An optimized product mix usually represents an idealized and somewhat macro view of the production profile, delivering a profit obtained in the analysis. In many cases, however, operational constraints in production and in the supply chain that were not or cannot be specifically formulated into the product mix optimization such as availability of raw materials, seasonality of customer demand and bottlenecks of equipment and resources may deem your product mix results infeasible.

Your product mix shapes your brand image and the customers you attract

Your product mix helps create customers’ perception of your brand. For example, if Neiman Marcus had many bargain brands in their product mix, they would likely lose their reputation as a luxury retailer. Clients looking for luxury goods would go elsewhere, and the company would, instead, be competing with retailers like Kohls.

Your product mix makes it easy for customers to buy

 Knowing your customers and nailing the right product mix is more important than ever in the age of online shopping. Customers come with precise demands and expectations, and they can easily pull up a new tab and load your competition’s website. Tailoring your product mix to your customers’ needs and desires will help you retain them.

Your product mix must help mitigate the paradox of choice

Plenty of studies have demonstrated the paradox of choice: Customers insist on a range of choice and variety, but too many options will cause them to move on without making a decision. In one study, a display of 24 jams and jellies was put out on a store floor. While it attracted shoppers, only 3% converted. The next week, a display of only six jams and jellies was created. That display drew fewer shoppers, but 30% converted.

Customer Requirement Analysis

In systems engineering and software engineering, requirements analysis focuses on the tasks that determine the needs or conditions to meet the new or altered product or project, taking account of the possibly conflicting requirements of the various stakeholders, analyzing, documenting, validating and managing software or system requirements.

Requirements analysis is critical to the success or failure of a systems or software project. The requirements should be documented, actionable, measurable, testable, traceable, related to identified business needs or opportunities, and defined to a level of detail sufficient for system design.

Conceptually, requirements analysis includes three types of activities:

• Eliciting requirements: (e.g. the project charter or definition), business process documentation, and stakeholder interviews. This is sometimes also called requirements gathering or requirements discovery.
• Recording requirements: Requirements may be documented in various forms, usually including a summary list and may include natural-language documents, use cases, user stories, process specifications and a variety of models including data models.
• Analyzing requirements: Determining whether the stated requirements are clear, complete, unduplicated, concise, valid, consistent and unambiguous, and resolving any apparent conflicts. Analyzing can also include sizing requirements.

Stakeholder identification

See Stakeholder analysis for a discussion of people or organizations (legal entities such as companies, standards bodies) that have a valid interest in the system. They may be affected by it either directly or indirectly. A major new emphasis in the 1990s was a focus on the identification of stakeholders. It is increasingly recognized that stakeholders are not limited to the organization employing the analyst. Other stakeholders will include:

• Anyone who operates the system (normal and maintenance operators)
• Anyone who benefits from the system (functional, political, financial and social beneficiaries)
• Anyone involved in purchasing or procuring the system. In a mass-market product organization, product management, marketing and sometimes sales act as surrogate consumers (mass-market customers) to guide development of the product.
• Organizations which regulate aspects of the system (financial, safety, and other regulators)
• People or organizations opposed to the system (negative stakeholders; see also misuse case)
• Organizations responsible for systems which interface with the system under design.
• Those organizations who integrate horizontally with the organization for whom the analyst is designing the system.

Joint Requirements Development (JRD) Sessions

Requirements often have cross-functional implications that are unknown to individual stakeholders and often missed or incompletely defined during stakeholder interviews. These cross-functional implications can be elicited by conducting JRD sessions in a controlled environment, facilitated by a trained facilitator (Business Analyst), wherein stakeholders participate in discussions to elicit requirements, analyze their details and uncover cross-functional implications. A dedicated scribe should be present to document the discussion, freeing up the Business Analyst to lead the discussion in a direction that generates appropriate requirements which meet the session objective.

JRD Sessions are analogous to Joint Application Design Sessions. In the former, the sessions elicit requirements that guide design, whereas the latter elicit the specific design features to be implemented in satisfaction of elicited requirements.

Contract-style requirement lists

One traditional way of documenting requirements has been contract style requirement lists. In a complex system such requirements lists can run to hundreds of pages long.

An appropriate metaphor would be an extremely long shopping list. Such lists are very much out of favour in modern analysis; as they have proved spectacularly unsuccessful at achieving their aims; but they are still seen to this day.

Strengths

• Provides a checklist of requirements.
• Provide a contract between the project sponsors and developers.
• For a large system can provide a high level description from which lower-level requirements can be derived.

Weaknesses

• Such lists can run to hundreds of pages. They are not intended to serve as a reader-friendly description of the desired application.
• Such requirements lists abstract all the requirements and so there is little context. The Business Analyst may include context for requirements in accompanying design documentation.

Types of Requirements

Business requirements

Statements of business level goals, without reference to detailed functionality. These are usually high level (software and/or hardware) capabilities that are needed to achieve a business outcome.

Customer requirements

Statements of fact and assumptions that define the expectations of the system in terms of mission objectives, environment, constraints, and measures of effectiveness and suitability (MOE/MOS). The customers are those that perform the eight primary functions of systems engineering, with special emphasis on the operator as the key customer. Operational requirements will define the basic need and, at a minimum, answer the questions posed in the following listing:

• Operational distribution or deployment: Where will the system be used?
• Mission profile or scenario: How will the system accomplish its mission objective?
• Performance and related parameters: What are the critical system parameters to accomplish the mission?
• Utilization environments: How are the various system components to be used?
• Effectiveness requirements: How effective or efficient must the system be in performing its mission?
• Operational life cycle: How long will the system be in use by the user?
• Environment: What environments will the system be expected to operate in an effective manner?

Architectural requirements

Architectural requirements explain what has to be done by identifying the necessary systems architecture of a system.

Structural requirements

Structural requirements explain what has to be done by identifying the necessary structure of a system.

Behavioral requirements

Behavioral requirements explain what has to be done by identifying the necessary behavior of a system.

Functional requirements

Functional requirements explain what has to be done by identifying the necessary task, action or activity that must be accomplished. Functional requirements analysis will be used as the toplevel functions for functional analysis.

Non-functional requirements

Non-functional requirements are requirements that specify criteria that can be used to judge the operation of a system, rather than specific behaviors.

Performance requirements

The extent to which a mission or function must be executed; generally measured in terms of quantity, quality, coverage, timeliness or readiness. During requirements analysis, performance (how well does it have to be done) requirements will be interactively developed across all identified functions based on system life cycle factors; and characterized in terms of the degree of certainty in their estimate, the degree of criticality to system success, and their relationship to other requirements.

Design requirements

The “build to”, “code to”, and “buy to” requirements for products and “how to execute” requirements for processes expressed in technical data packages and technical manuals.

Derived requirements

Requirements that are implied or transformed from higher-level requirement. For example, a requirement for long range or high speed may result in a design requirement for low weight.

Allocated requirements

A requirement that is established by dividing or otherwise allocating a high-level requirement into multiple lower-level requirements. Example: A 100-pound item that consists of two subsystems might result in weight requirements of 70 pounds and 30 pounds for the two lower-level items.