Product Line Design for Consumer Durables: An Integrated Marketing and Engineering Approach

Abstract

Product line design for consumer durables often relies on close coordination between marketing and engineering domains. Product lines that evolve as “optimal” from marketers’ perspective may not be “optimal” from an engineering viewpoint, and vice versa. Although extant research has proposed sophisticated techniques to handle problems that characterize each individual domain, the majority of these developments have not addressed the interdependent issues across marketing and engineering. We present a product line optimization method that enables managers to simultaneously consider factors deemed as important from both domains of marketing and engineering. One major advantage of this method is that it takes into account the strategic reactions from the incumbent manufacturers and the retailer in the design of the product line. We demonstrate in a simulation study that this method is applicable to problems with a reasonably large scale. Using data collected in a power tool development project undertaken by a major U.S. manufacturer, we illustrate that the proposed method leads to a more profitable product line than alternative approaches that consider requirements from these two domains separately.