4.11 Key Terms

Break-even Point: The level of sales at which total revenues equal total costs, resulting in neither profit nor loss.

Business and Financial Analysis: The evaluation of development, marketing, and operational costs against potential revenues to assess a product’s financial viability.

Commercialization: The full-scale launch of a new product to the target market, including widespread production, distribution, and promotional efforts.

Concept Testing: A method of presenting a product idea to potential customers to assess reactions, purchase intent, perceived value, and suggestions for improvement.

Cost-Benefit Analysis: A financial tool that compares the benefits of a proposed product or decision against its associated costs.

Customer Requirements (WHATs): Statements that reflect the voice of the customer, expressing their needs and preferences in product features.

Decline Stage: The phase in the product life cycle where sales and profits fall due to obsolescence or changing consumer preferences.

Dimensional Analysis: An idea generation technique that examines a product’s physical attributes to identify opportunities for improvement or innovation.

Distribution (LCC Component): All logistical costs associated with delivering the product to the customer, including packaging, shipping, and inventory.

End-of-Life (LCC Component): Costs incurred during product disposal, recycling, or decommissioning, often influenced by sustainability practices.

Growth Stage: The product life cycle phase where sales increase rapidly, consumer awareness grows, and competitors begin to enter the market.

House of Quality (HOQ): A structured matrix used in Quality Function Deployment (QFD) to link customer requirements with technical specifications in product development.

Idea Generation: The initial step in NPD involving the creative search for innovative product ideas using structured methods such as problem and scenario analysis.

Idea Screening: The process of filtering out weak, impractical, or unsustainable product ideas to focus resources on those with high potential.

Implementation of LCC Analysis: A step-by-step process involving scope definition, data collection, cost modeling, and trade-off decisions to evaluate a product’s total cost of ownership.

Introduction Stage: The first phase of the product life cycle when a new product is introduced, awareness is low, and marketing investment is high.

Life Cycle Cost (LCC): The total cost of a product throughout its life, from research and development to disposal, used to assess long-term cost efficiency.

Maturity Stage: The product life cycle stage marked by slowed sales growth, intense competition, and strategic efforts to retain customers and maintain profitability.

Market Strategy Development: The formulation of a marketing plan that includes targeting, positioning, pricing, promotion, and distribution strategies for a new product.

Operating Costs (TOC): Day-to-day expenses associated with the use of a product, such as energy consumption or routine maintenance.

Problem Analysis: An idea generation method that identifies deficiencies in existing products to create better alternatives based on customer pain points.

Product Life Cycle (PLC): A model that describes the stages a product goes through: Introduction, Growth, Maturity, and Decline.

Production (LCC Component): All costs related to manufacturing a product, including materials, labour, equipment, and overhead.

Profit Margin: The percentage of revenue that exceeds the total cost, representing the profitability of a product or service.

Relationship Matrix: A central component of the House of Quality that shows the strength of relationships between customer needs and technical features.

Research and Development (R&D) (LCC Component): Initial expenditures for designing, prototyping, and testing a product before market launch.

Return on Investment (ROI): A profitability metric that measures the gain or loss generated on an investment relative to its cost.

Scenario Analysis: An idea generation method that explores future market conditions, competitive dynamics, and trends to identify new product opportunities.

Sensitivity Analysis: A financial tool used to evaluate how changes in variables (e.g., costs) affect overall profitability or pricing.

Technical Assessment: An evaluation of how well a product’s technical features perform relative to competitors and internal benchmarks.

Technical Characteristics (HOWs): Measurable engineering features designed to meet customer requirements as part of the HOQ framework.

Test Marketing: The limited launch of a product to gauge market reactions and test marketing strategies before a full-scale rollout.

Total Acquisition Cost (TAC): The complete set of costs associated with procuring and preparing a product for use, beyond the sticker price.

Total Life Cycle Cost (TLCC): The full summation of all life cycle cost components, used to inform strategic pricing and investment decisions.

Total Ownership Cost (TOC): The complete cost of owning a product, including acquisition, operation, maintenance, upgrades, training, and disposal.

Training Costs (TOC): Expenses incurred to educate users or employees on proper operation and maintenance of the product.

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OpenAI. (2025, May 23). ChatGPT. [Large language model]. https://www.chatgpt.com Prompt: Provide a list of key terms, with definitions, for the following content.