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Collaborative prototyping and the pricing of customized products

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A major challenge in the creation of custom-designed products lies in the elicitation of customer needs. As customers are frequently unable to express accurately their needs, designers typically create one or several prototypes, which they then present to the customer. This process, to which the authors refer as collaborative prototyping, allows both parties to anticipate the outcome of the design process. Prototypes have two advantages: they help the customer to evaluate the unknown customized product, and they guide both parties in the search for the ideal product specification. A novel aspect of collaborative prototyping is that costs are incurred by the customizing producer, while the benefits are expereinced by the customer. This raises several interesting questions, namely, how many prototypes should be built, who should pay for them, and how they and the customized product should be priced. Terwiesch and Loch show that , depending on the design problem and the market characteristics, the customizing producer should offer prototypes with aprofit, at cost, or even for free.

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