A model-based framework for designing products and services: The role of multiple quality dimensions

In this dissertation, I examine the challenges of designing products in development-intensive settings and where tight integration with services is necessary.;The first problem studied is the design of development-intensive products, for which the fixed costs of development far outweigh the unit-variable costs.;Examples of such development-intensive offerings abound in a number of industries including the pharmaceutical, information, and entertainment sectors of the economy.;It is shown that the design problem presents some unique managerial challenges. Specifically, I find that managerial insights from the traditional approach to product line design developed for unit-variable cost intensive products do not carry over to development-intensive products.;I present new mechanisms and managerial guidelines for designing a family of such products for which development costs cannot be ignored, and illustrate the insights with an extended industry case-study. Specifically, I show that the design approach based on degrading (or subtracting value from) a high-end product to obtain a subsumed low-end edition, discussed in the literature to be an effective approach for designing unit cost intensive products leads to a sub-optimal line of development-intensive products.;As an alternative to a subsumed product design strategy, I propose the overlapped product design approach, in which the low-end product is not completely subsumed in the high-end product, but differentiated on additional vertical quality dimensions.;The second problem studied is the design of product lines with after-sale service offerings. I show that a multi-dimensional quality model can help a firm design a more profitable product line and after-sale services.;I specifically study the performance and conformance quality dimensions, as well as the interaction between the dimensions. I find that substitute after-sale services have opposite impacts on the optimal quality levels in performance and conformance quality dimensions.;With important after-sale services the firm has quite different strategies for its product line and service line that are sold through a distribution channel. The so-called quality distortion from uncoordinated supply chain can be alleviated because of the service offerings.;The contribution of this work is to unearth the crucial role of multiple quality dimensions in designing product lines in today's knowledge and service economy.