Lesson video

Hello, thank you for joining me for your design and technology lesson.

My name is Mrs. Conway and I will be guiding you through your learning today.

So today's lesson, we're gonna be looking at economic viability.

Our lesson outcome is I understand the factors which affect economic viability of a product and can design considering this.

So we're gonna be learning about what economic viability actually is and then how designers can consider that when they actually go through the process.

And these are our keywords.

We have socioeconomic, enterprise, crowdfunding, marketing and advertising.

I'll go through each of those as we go through the slides today.

So the first thing we're gonna look at then is ensuring economic viability.

So when we're actually designing a product, designers need to ensure that their product will be economically viable.

Now, for a product to be economically viable, basically that means it needs to sell enough to cover costs associated with the designing and the manufacturing of it, but it still needs to achieve a profit.

You must also be able to guarantee that your target market will actually want to and be able to buy the product.

If they don't want to or they can't actually afford to buy that product, then you're not gonna sell any.

And obviously that's gonna affect your ability to make a profit.

Just to remind you, the target market is the group of people you design your product for and you hope will actually buy it.

So let's just do a quick check for understanding on that.

What is an economically viable product? Is it A, a product that is innovative and unique? B, a product that sells enough to make a profit? Or C, a product that focuses only on high quality materials regardless of the cost? Pause the video here.

Just take a moment to think about that.

Okay, the answer was B, an economically viable product is a product that sells enough to make a profit.

Well done if you got that right.

So let's now have a look at the word socioeconomic.

Now, socioeconomic is a measure of a person's standing based on their income, education, and occupation.

Let's break this word down then.

The first half of the word is socio and socio is standing for the word social.

The second half of the word is economic, and you may have seen that word before.

And economic is referring to financial.

We put that together, is basically referring to the social and the financial side of things.

Now, social in this context actually refers to a person's position in society, rather than being sociable.

Now, understanding your target market socioeconomic status will help in ensuring that there will actually be able to and want to buy your product.

Now remember the socioeconomic status is a measure of a person's social and economic position, and that is based on a combination of these three things, income, education and job type.

Quite often there's a mistake that is only based on income.

This isn't correct, it is a combination of all these three areas.

Let's just have a little example of how that actually works.

So if someone has a good education, they're more likely to get a good job.

That's obviously not completely always true, but it's more likely.

A good job usually means a higher income.

With a higher income, they can afford a better lifestyle, which often improves their place in society.

But if someone doesn't have access to a good education, it might limit their job choices and income and that will then make it harder to improve their socioeconomic status.

Let's just do a quick check for understanding on that.

What is socioeconomic a measure of? Is it A, the political systems within a country? B, a combination of a person's income, education and occupation? Or C, the biological traits of a population? Pause the video here just to take a moment to think about that.

How did you get on? The answer was B, socioeconomic is a measure of a combination of a person's income, education and occupation.

Now, target markets can be broadly divided into what's considered as a low socioeconomic status or we can abbreviate that to low SES and a high socioeconomic status or high SES.

Let's just have a look at what I mean by that.

So if we have a little look at this table and consider pricing of a product, if we're price pricing a product, aiming it at a low SES consumer, we would look at using potentially cost effective materials to try and reduce the price point of the product, making it more affordable.

If however, we were aiming at at a high SES consumer, we might instead look at more premium materials or higher price materials and cutting edge technology.

Obviously we are looking at making a profit always, but we can afford to spend a bit more on using cutting edge technology or premium materials because we can actually afford to charge more for this product.

As we're gonna presume that our high SES consumers have a larger income.

If we take function in the same way then, for low SES consumer, we may be focused on practicality or durability, making sure that product lasts a long time and is really needed and useful.

For our high SES consumer, we might actually instead look at the luxury product, one that isn't necessarily needed but it's just wanted, it's seen as a extra luxury and also maybe something that is innovative and different or new to the market.

Our high SES consumers generally have something which is called a a higher disposable income.

A disposable income is the money you've got left over after you've paid all your bills and that money can be spent on more frivolous things or fun things or different things, things that you just kind of want rather than need.

Aesthetics is our last one just to consider.

So again, and for a low SES consumer, we might consider making the design more vibrant and bold designs to appeal to them.

Whereas for a high SES consumer, we might be considering more minimalist or sophisticated designs.

Now designers will use the knowledge of their target market's socioeconomic status to help them to make design decisions.

However, do you agree with some of these design decisions? Take a moment just to think about these and pause the video here while you do so.

So let's look at the first task then.

I'd like you to consider the product below and explain whether this product would or would not be economically viable considering what we've just gone through.

I'd like you to explain why in your answer as well.

The product is a high-end electric vehicle marketed in a developing country with limited charging infrastructure and a low to average income.

The other part of this task then is I'd like you to suggest an alternative transportation product for this market.

Pause the video here to have a go at this and good luck.

How did you get on? So your first task was to consider the product below and explain whether this product would or would not be economically viable.

And I also asked you to explain why in your answer.

Now this is my answer.

So this product would not be economically viable.

Now hopefully most of you realise that it would not necessarily be the best choice and would not necessarily be economically viable.

My reasoning is the product may be too expensive for most of the target market and impractical due to the lack of necessary support systems, showing a disregard for the socioeconomic conditions of the target market.

Now you will have a slightly different answer there or slightly different reasoning as to why you considered it not to be economically viable.

Don't worry, just compare your answer to mine and see if you've got some of the similar points.

So the second part of this task was to suggest an alternative transportation product for this market.

Here's what I suggested.

A good product for a developing country with fewer charging stations and lower incomes could be a low cost hybrid scooter or motorcycle.

It would use both a small petrol engine and an electric motor, so it saves fuel and cuts pollution without needing lots of charges.

These scooters are affordable, easy to ride in busy cities or rough roads and great for people who need something reliable and cheap for work or school.

Now we're aiming at our target market and our target market in this case is a low SES consumer.

So we need to make sure it's affordable, that they're going to actually need it and want it and be able to use it.

And hopefully with this suggestion we've met all of those needs.

Again, you'll have a slightly different answer, so just compare yours to mine, see what else you've come up with and you might wanna discuss with the people in your class also what they came up with.

Next we're gonna look at enterprise.

So an enterprise is a business or organisation that works to make money or achieve goals.

In the design world, enterprise is when a designer identifies new design opportunities that will be economically viable.

And to do this, a designer needs to be really innovative and really think creatively to bring new ideas to the market.

You can't really be enterprising if you're not actually thinking of new ideas.

Now innovation often happens due to new and emerging technologies and because of those new and emerging technologies that can actually help create better or completely new products or processes.

So actually technology can often help design and take things forward and make things more innovative.

Let's just do a quick check for understanding on that.

Which word describes when a designer identifies new design opportunities that will be economically viable? Is it A enterprise, B, sustainability or C, innovation? Pause the video here just to take a moment to think about that.

And the answer, it was A, enterprise.

Well done if you got that right.

So enterprise can be made possible if the designer has the money to do so, they need to be able to launch their new idea and usually that comes in the form of an investment.

Now, one increasingly popular way to do this is through something called crowdfunding.

And crowdfunding is a way of raising money by collecting small contributions from a large number of people and that's usually done via online platforms. So rather than asking for one big contribution from one single investor, crowdfunding relies on lots of people making smaller contributions to raise the same amount of money.

Let's just break that down and explain that a little bit further.

So in this example, Jen is our single investor and he has invested four pounds, a lot of money, single investor, four pounds to go towards this kind of this idea.

Now if we compare that to a crowdfunding example, here, we've got four investors this time.

So we've got Jacob, Izzy, Alex, and Sofia, and they have invested one pound each.

The total is still the same, but it's just come from four people instead of one single investor.

So which one is an example of crowdfunding in this? A, a musician raises money from fans on an online platform to produce a new album.

B, a company gets a bank loan to launch a new product.

Or C, a charity receives a large donation from a single wealthy donor.

Pause the video here, just take a moment to think about your answer.

And the answer was A.

So the example of crowdfunding here is A, a musician that raises money from fans on an online platform to produce a new album.

Here's an example of a crowdfunded product.

So these are are the Kibu headphones.

Now, just to explain a little bit about these, these headphones are sustainable, child-friendly headphones.

They're assembled by the user themselves.

So the concept is is that the child with the parent or their carers build these headphones together to learn how they're actually made and they're actually built to then be easily repaired as well.

And by the user actually making them, they learn how they can be easily repaired as they go and that reduces waste from broken headphones.

Children can break headphones and electrical equipment really easily, so actually being able to repair them will reduce waste and obviously makes them more sustainable.

Also, on top of that, the headphones are actually made from recyclable materials using 3D printed consumer waste.

Now the company coming up with these asked two people to crowdfund their product by buying the product prior to the release of the product or prior to manufacture.

And that way it actually enabled them to be made.

So it was almost as if they were making like a pledge of their money and Kibu was promising them headphones if they brought them in advance.

Now people really wanted to support this project due to the sustainable and nature of it, so they did really well out of it.

Now there are different types of crowdfunding.

The first one is donation.

Now donation is when people give money because they believe in the idea or product, they don't expect to get anything back in return from that.

The next one is equity.

Now with equity, their contribution actually buys a share in the business.

Now a share in a business is like owning a small little piece of that company, which means you then get a say in how it's run and you also have the potential to earn money if the company does well.

It's a little bit of a gamble, but loads of people go in for that.

And the last one is debt.

The contribution is actually given as a loan and is then returned with interest once they start to make a profit.

Now interest is the money you pay when borrowing, it acts as like a fee for letting them use your money.

So in this this example, the company will actually pay you, the contributor, some interest for letting you kind of letting them borrow your money.

So let's just do a quick check for understanding on that.

What type of crowdfunding buys a share in the business? Is it A, a donation, B, debt, or C, equity? Pause the video here just to take a moment to think about that.

The answer was equity.

So equity buys a share in the business.

Well done if you got that right.

Now there's lots of benefits to crowdfunding.

The first one is it actually helps people raise money for ideas without needing loans or big investors.

It's also a a great way to see if people like an idea and also to spread the word about it, helping to ensure it's economically viable.

You basically get fans of the product before it's even been released who hopefully will help promote it and kind of get the idea around to everyone.

You can also get really helpful feedback from those supporters and build a group of fans like I mentioned before.

And it's also less risky because you get money before you actually start making the product.

So you can see why it's become a really popular way of raising money for enterprise projects.

Right.

Now it's over to you.

I'd like you to answer the following questions to help you devise a crowdfunding campaign to encourage people to give money for a new product.

And the new product you're gonna be doing this for is a solar powered portable charger.

These are the questions.

Who are your target market and why? You get to decide, but please explain why you've chosen them.

Where will you advertise? So what kind of locations? Is it more online? Is it billboards, is it on TV, is it radio? Lots of different ways you can do that.

Will you ask for funding to be a donation, equity or debt? And once again, please explain why.

What is your message or pitch to encourage people to give their money? You need to be really persuasive to do that.

And the second part of the task is to explain the advantages of crowdfunding this product.

Okay, so it's gonna be over to you now.

Pause the video here to have a go at this.

Okay, how did you get on? Right, I asked you to answer the following questions to help devise a crowdfunding campaign for a solar powered portable charger.

Now here are my suggestions from my answers.

They're gonna be slightly different to yours as we've mentioned before.

That's absolutely fine.

Just compare your answer to mine and see if you've got kind of similar ideas.

So the first one was, who are your target market and why? And I suggested young adults with a high socioeconomic status, but of course young adults are quite often not necessarily making their own money at that particular stage.

So I'm going to actually say they've got a high socioeconomic status due to their parents' high socioeconomic status as well as their upbringing, but also university education and possibly their current occupations as well.

The next one was, where will you advertise? I suggested video sharing social media platforms and also professional social media platforms. I've gone for young adults and so I feel advertising online will be a better fit for them.

The next one was, will you ask for the funding to be a donation, equity or debt and why? I've gone for donation, I want to try and gain as much profit as possible and I think I can persuade people of the benefits to the environment and the savings for individuals to use solar power.

So I'm really gonna lean into the whole sustainable kind of angle on this one and hope that people will really support me by me thinking trying to be more sustainable with my product.

And what is your message or pitch to encourage people to give their money? So here's my suggestion.

Join us empowering the future with our solar powered portable charger.

Perfect far outdoor adventures or emergency situations, this eco-friendly charger keeps your devices running while reduces your carbon footprint.

Support our campaign and help bring sustainable energy to everyone everywhere.

Sounds a little cheesy when I read it out.

Yours will probably sound a little bit cheesy too, but I've tried to use as much persuasive language as possible by giving the target market all the important information they need about the product.

The second part of this task was to explain the advantages of crowdfunding.

So I've written crowdfunding is a solar powered portable charger is a great way to raise money and to see if people like the idea before making it.

It helps spread the word about the charger and gets people excited about helping the environment.

You can also hear what backers think and improve your product based on their feedback.

Plus, you don't have to pay for everything up front since the funds come from supporters who want to make your idea real.

Well done, if you've got kind of similar ideas to that.

As I said, it won't be exactly the same, but hopefully you've got most of the key points.

Right.

Lastly, we're gonna look at marketing and advertising.

Now the first thing to consider is the difference between marketing and advertising, 'cause quite often it gets a little bit confused between the two.

So marketing is how businesses promote and sell their products or services, whereas advertising is the act of promoting products or services to attract customers.

Marketing is the big plan of how to sell something, whereas advertising is just one small part of that marketing plan.

And advertising focuses on showing people messages about the business or the product.

Let's just explain that a little bit further.

So marketing could include some of these elements.

Market research for example, where you actually go out and find about, find all about the target market.

Packaging design would also fall under a marketing plan.

The website also falls under marketing.

And also the TV advert.

Now the TV advert is an advertisement, but it's just one small part of the bigger marketing plan that would include things such as market research, packaging design, and a website.

In contrast to that, advertising would be a social media advert, for example, or a billboard advert or a TV advert.

They may choose to do all of those, but those are all the advertisement elements.

The marketing includes those ideas and lots of other areas as well.

Let's just do a quick check for understanding on that.

So what is marketing? Is it A, the process of manufacturing and assembling products for sale? B, the act of managing a company's internal operations and employee relations, or C, how businesses promote and sell their products or services? Just pause the video here to take a moment to think about that.

The answer was C.

So marketing is how businesses promote and sell their products or services.

Well done if you got that right.

So to market their products effectively, businesses really need to consider a few things.

Firstly, the target market or user of the product.

They have to have a good understanding of that, as well as a really good understanding of what the product itself is actually going to be.

They have to have considered the price point of the product.

And they've done a lot of research to get to that point.

The way in which that it is promoted or advertised as well, and also how and where the target market will be able to purchase the product.

Now all of these things need to be considered really carefully to ensure the product will sell and a profit will be made.

Here's the example of some people caving.

Now if you're not familiar with caving, caving is when people put on hard hats, get some lights and go down into caves to explore them.

That might be from a geographical kind of consideration or geological consideration, or it might just be for fun and exercise.

Now Lucas has decided he's going to market a solar powered torch to sell to people who like to go caving.

Now he's deciding on his marketing plan, I'm going to sell it for 90 pounds to make the biggest profit possible and will advertise it on a local radio station.

He's also said people will be able to buy the torch in high-end department stores in the sports and leisure sections.

Now, what do you think of the idea for his marketing plan? Do you think Lucas has devised an effective marketing strategy? Aisha has given him some feedback.

So firstly, she's pointed out as a torch is often needed in the dark in emergencies, solar power may not be the best solution to charging it.

Obviously we're not gonna be able to charge it while they're in the cave.

Caves will be underground in the dark and so again, will not have the chance to charge it.

She's also suggested that 90 pounds seems like a lot of money compared to other torches and this may put people off buying it.

She suggested that perhaps this would be better advertised on the internet or TV.

If you remember, Lucas suggested doing this on the radio, but Aisha's pointed out though people might actually want to see it working and you won't be able to do that on the radio, but you can do that on the internet or TV.

She's also suggested that she thinks outdoor shops and websites would actually be a better place to sell this to cavers, as people do not often think of department stores as being the place to buy outdoor products.

People who are outdoor people will more likely go to an outdoor kind of shop rather than necessarily a department store that sells home and leisure goods.

So, now let's look at virtual marketing.

Virtual marketing is becoming more popular and that's to increase brand awareness and promote products.

But what is virtual marketing? Virtual marketing uses websites and social media platforms to promote products and services.

Now, as online shopping becomes more and more popular, marketing products online makes sense, so that consumers can purchase quickly and easily after they've seen the advertisement.

And I'm definitely susceptible to that.

I've definitely seen adverts online and then before I've known it, I've clicked through, I've brought it before I've even really thought about if I really need that product.

So it can be very effective.

Let's just do a quick check for understanding on that.

Which answer would be an example of virtual marketing? Is it A, a company uses social media influencers to promote its products through sponsored posts? B, a business places a billboard advertisement along a busy highway or C, a store hands out flyers to promote a weekend sale in the local area.

Pause the video here just to take a moment to think about that.

The answer was A.

A company uses social media influencers to promote its products through sponsored posts is an example of virtual marketing.

Well then if you got that right.

Now, advertisements for products are often tailored to the online user and this is called targeted advertising.

And targeted advertising is based on the user's interests, behaviour, or location.

And this is all determined by data that is actually collected from their online activity.

So whenever you are online, if you notice that adverts popping up for things that you are actually interested in, that is because they are targeted advertising.

They've been tracking your behaviour and your interests online to make sure that any advertisements shown to you are ones that they know you will be interested in.

It's not perfect.

Sometimes it makes mistakes, but quite often it also works very well.

Right.

Time for a task.

You're going to complete the table below to consider how to market the two example products I'm going to show you.

Now, you may need to do some research into similar existing products just to help you with this task.

Here's the table that you are going to complete.

You're going to consider two different products, an espresso coffee machine and a games controller storage device.

And you're gonna consider these different areas.

Who your target market's going to be, the price point for that product, where you are going to advertise it, and also how do the consumers purchase it.

So here are the two examples of the products.

You have the espresso machine on the left and also an example of a games controller storage.

Now the espresso machine, there's lots of different examples and you can find examples online, which you'll need to have a look at anyway to get an idea of the price point of one.

Games controller storage, there's lots of different versions of this and this may not be the most suitable, but it's just to give you an idea of what I mean, ways that we can actually store games controllers so they're not kind of everywhere and they're kind of kept in a neat and tidy way.

The second part of this task is to explain and justify the decisions you have made in your previous answer, but you need to do that for one of the products.

So in the table you are answering for both the espresso machine and the games controller storage.

But actually for this bit, you only need to focus on one of those and you can decide which one.

Okay, time to have a go.

Pause the video here to have a go at this and see how you get on.

How did you get on? Okay, here are my suggestions.

Now yours might be slightly different.

That's absolutely fine.

Just compare your answers to mine.

So the first thing that I've looked at then is the espresso coffee machine.

The target market for this I suggested are middle aged professionals such as lawyers or doctors.

I've put the price of this at 175 approximately, based on similar products at that price point.

I've suggested in terms of advertising that they, we actually use broad sheet newspapers.

These are more kind of the financial newspapers and also home magazines, like home style magazines.

Also then how to purchase, I've suggested high-end department stores.

For the games control to storage, I've suggested college and university students trying to save space are our main target market.

I've put the price of this at approximately 20 pounds.

In terms of where to advertise I've suggested gaming websites and gaming chat pages.

And then in regards to how to purchase, I've suggested an online advert or online website to buy these from.

The second part of this task was to explain and justify the decisions you've made for one of the products in part one.

I'm gonna run through the espresso machine example and why I made the decisions I did.

So the espresso machine is a luxury product due to the price they usually sell at and them not being essential kitchen items. You don't have to have an espresso machine in your life.

That kettle works just fine.

And this means that people with a high socioeconomic status may be the only people able to afford that luxury.

So I've decided my target market should be people in highly paid occupations.

People also sometimes earn more as they get older and they gain promotions in their jobs.

That isn't always the case, but we can presume a lot of the time it is.

So I've also suggested middle-aged people.

A lot of research has been put into place to say that the middle aged and older have that higher disposable income.

So from my kind of knowledge, I know that that means that they can, are more likely to be able to afford a luxury product.

Now as they have a higher income, I've also suggested a high-end department stores is the place in which my target market can purchase the product.

And due to doctors and lawyers needing to be educated to a degree level, I've also decided that more newspapers where the content and language is aimed at a well-educated audience would be a better fit.

Now, as I've said, your answer can be slightly different to mine as long as you have been able to justify and explain the decisions that you put into the table.

Well done for giving it a go.

That was quite a hard task.

Let's summarise today's lesson.

We've been looking at economic viability.

And for a product to be economically viable, it must sell enough to cover the costs associated with designing and manufacturing and still achieve a profit.

Socioeconomic status is a measure of a person's social and economic position and knowledge of this is needed when designing a product to be economically viable.

We also looked at enterprise and enterprise is when a designer identifies new design opportunities that will be economically viable.

And we looked at crowdfunding as a way of funding these.

And lastly, we looked at marketing and marketing as the big plan for how to sell something.

Whilst advertising is just a small part of that marketing plan and the advertising focuses on showing people messages about the business or the product.

We've covered a lot in today's lesson.

So well done for learning with me today.

Thank you very much and I will see you soon.