IB Design Technology 10.5 Economic Viability Notes

Why Do Costs and Pricing Matter?

1. The balancing act between costs and pricing is essential to ensuring your product is both affordable for customers and profitable for your business.
2. In this section, we’ll dive into how costs and pricing strategies influence the economic success of products.

Balancing Cost-Effectiveness with Quality

1. Cost-effectiveness is about finding the balance between affordability and quality.
2. While it might be tempting to cut costs to make a product cheaper, sacrificing quality can damage your brand’s reputation and reduce customer satisfaction.
3. A truly cost-effective design uses resources efficiently without compromising the product’s value.

Delivering Value for Money

1. Consumers are more likely to buy a product if they perceive it as offering good value for money.
2. But what does "value for money" mean?
3. It’s the balance between the product’s utility and its price.

How to Design for Value

1. Focus on Functionality: Ensure the product performs its intended purpose effectively.
2. Enhance Features: Add features that resonate with customer priorities, such as sustainability or convenience.
3. Communicate Benefits: Use marketing and branding to highlight how the product justifies its price.

Types of Costs in Pricing

1. Understanding the different types of costs involved in production is crucial for setting an appropriate price.
2. These costs can be categorized into fixed costs and variable costs.

Fixed Costs

1. Fixed costs remain constant regardless of production volume. Examples include: