1. New Product Development
Presented by Bill Ray of Precast Consulting Services

2. New Product Development
Agenda
Credits
Ideas with a payoff
New product development & margin improvement
Example product line – Lightpole Bases
Checklist for success
Summary

3. New Product Development
Credits
Arrow Concrete Products – Granby, CT
Arco Concrete – Fort Lupton, CO
Aurora Precast – Aurora, IL
Colorado Precast – Loveland, CO
Southern Precast – Alachua, FL
Utility Structures – Nepean, Ontario
Wilbert Precast – Spokane, WA
Adam Neuwald – NPCA staff

4. New Product Development
Who is Bill Ray
Principal at Precast Consulting
Background
Business owner PCI certified producer
General manager Sales exceeding $15 million
Project manager Projects exceeding $ 10 million
Chief fin. Officer Sales exceeding $150 million
Education
MBA University of Chicago
BS Florida state
Contact info:
website: www. precastconsulting.com

5. New Product Development
New Product development – Margin Improvement

6. New Product Development Margin Improvement
The starting point – What’s your sales margin?
Analysis: compute sales margin by product line
Sales and cost of production by product line
Allocate fixed costs to product lines
Get involved to keep the effort focused and efficient
Results
Product lines losing money need immediate attention
High margin product lines need emphasis
Product lines with margins 0-5% need to be replaced

7. New Product Development Margin Improvement
Progression toward commodities
Profit by Product line $000
Sales 15, %
Total Cost of Goods Sold 12,500
Gross Margin 2,500
% %
Sales, General & Admin 1,000
Interest costs
Profit before Tax $ 1,000
% %

8. New Product Development Margin Improvement
Progression toward commodities
Profit by Product line $ Losers Bleeders Cash Cows Stars
Sales 15, , ,
100% 2% 28% % %
Total Cost of Goods Sold 12, , ,
Gross Margin 2, ,
% % 5% 15% % %
Sales, General & Admin 1,
Interest costs
Profit before Tax $ 1,000 (20)
% % -10% % % %

9. New Product Development Margin Improvement
Progression toward commodities
Profit by Product line $ Losers Bleeders Cash Cows Stars
Sales 15, , ,
100% 2% 28% % %
Total Cost of Goods Sold 12, , ,
Gross Margin 2, ,
% % 5% 15% % %
Sales, General & Admin 1,
Interest costs
Profit before Tax $ 1,000 (20)
% % -10% % % %
Take action benchmark guidelines:
If Losers exceed Stars
If Bleeders exceed Cash Cows
If Cash Cows are less than 50% of all sales

10. New Product Development Margin Improvement
Commodity Pricing – Low Margin
Products undifferentiated - interchangeable
Standard specifications
Technology is mature
Buyers market – excess capacity
Low cost producer sets the price
Product sales margin less than 5%
Many products fit this description
Quality and ethical challenges
They remain the primary market for many producers

11. New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology
Margin improvements are typically short lived

12. New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology
2. Differentiate your products & services – improve margin
Focus on markets Be market driven rather than product driven
Create value Provide solutions, not products
Segment customers - Better focus on market needs
New services Focus on selected markets & customers

13. New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology
2. Differentiate your products & services – improve margin
3. Develop new products – improve margin
Focused product - Displace another building system
Focused service - Solve a specific problem or reduce costs
Market strength - Successful new products build on what you are already doing
Replace your least profitable commodity business
New Product Development is today’s topic

14. Precast manholes once were a new product competing with brick
New Product Development Margin Improvement
Commodity Pricing – What’s the answer?
1. New production technology
2. Differentiate your products & services – improve margin
3. Develop new products – improve margin
Every commodity was once a new product with high margin competing with and displacing another building system
Precast manholes once were a
new product competing with brick

15. New Product Lines Action Plan
Precast Competitive Advantages
Owners
Strength (5000+ PSI)
Plant Quality
Durability
Fire resistance
Project specific (appearance, maintenance, etc)
Architects & Specifiers
Design & engineering services
Engineering envelope – design objectives
Job cost savings
Speed of construction
Contractors
Turn key contract – risk reduction
All weather construction
Shortage of masons
Reduction of trades on the job
Precast relative advantages differ from market to market
The greatest advantages are against other building systems

16. New Product Lines Action Plan
Bill Ray’s Principles:
1. High margin new products compete with other building systems, not other precast.
2. Successful new products build upon what you are doing now.
3. Find your new products with your partner architects & specifiers
4. It takes time. New products take two years to develop.

17. New Product Lines Today’s Agenda A 7-Step Action Plan
1. Find the product
2. Evaluate the product
3. Design the product
4. Pricing guidelines
5. Patent protection
Example – Lightpole Base
6. It takes time
7. It takes commitment

18. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
Survey your jobs
Survey your architects
Survey your customers
Ask questions: big and small

19. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
Survey your jobs
Survey your architects
Survey your customers
Look for new products . . .
And you will find you have been walking right by them without noticing.

20. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
Survey your jobs
Survey your architects
Survey your customers
2. Evaluate potential products
Perform a structured features & benefits evaluation
Benefits to the owner
Benefits to the architect
Benefits to the contractor

21. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
Survey your jobs
Survey your architects
Survey your customers
2. Evaluate potential products
Structured Features & benefits evaluation
Identify specifiers required to reach target markets
Architects
Commercial developers
Electrical contractors

22. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
Survey your jobs
Survey your architects
Survey your customers
2. Evaluate potential products
Structured Features & benefits evaluation
Specifiers required to reach target markets
Identify market size by product Survey your jobs
Ask specifiers
Dodge Reports
Freedonia – Market Research Firms

23. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
2. Evaluate potential products
3. Design the product
Come to the specifier with a specific product
Drawings
Specific price point

24. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
1. Find the product
2. Evaluate potential products
3. Design the product
Come to the specifier with a specific product
Drawings
Specific price point
Be competitive with customers’ full cost
Price the features
Show the included benefits
Charge what the market will bear

25. New Product Lines Action Plan Successful new products compete with other building systems, not other precast
4. Pricing guidelines Don’t use formula pricing
Product enhancements - Premium pricing
Product innovations Partner without introductory pricing
New products Initial pricing should never be at breakeven
5. Patent Protection Protect unique designs & materials
Examples: Special designs & connx details
Pat. Pending Protection during the application - about 2 years
Protection Draw the patents broadly to cover variations

26. New Product Lines Lightpole base example Successful new products build on what you are doing now
Lightpole base - An example
Developer:
I could cast this with readi-mix for $80/yard, why should I spend 5 or 6 times that amount for precast?

27. New Product Lines Lightpole base example Successful new products build on what you are doing now
2. Features and benefits evaluation
Product Quality
Precast – steel forms CIP Sonotube 2

28. New Product Lines Lightpole base example Successful new products build on what you are doing now
Features and benefits evaluation
All weather construction

29. New Product Lines Lightpole base example Successful new products build on what you are doing now
Features and benefits evaluation
Rapid project completion
Reduction of trades on the job
Reduced contractor overhead

30. Come to specifiers with a specific product line
New Product Lines Lightpole base example Successful new products build on what you are doing now
3. Design the Product
Come to specifiers with a specific product line
Round and/or square

31. Come to specifiers with a specific product line
New Product Lines Lightpole base example Successful new products build on what you are doing now
3. Design the product
Come to specifiers with a specific product line
Architectural shapes
& finishes

32. Come to specifiers with a specific product line
New Product Lines Lightpole base example Successful new products build on what you are doing now
3. Design the product
Come to specifiers with a specific product line
. Bolt patterns
. Electrical conduit &
JB design
. Engineering design

33. New Product Lines Lightpole base example – Market Summary
Commercial development
Tract subdivisions
Shelf item
Customers
Developers
Electrical Contractors
Competitors
CIP in Sonotube
Currently precast market share is low
Specifiers
Architects
Lightpole manufacturers

34. New Product Lines Lightpole base example Successful new products build on what you are doing now
Developer:
I could cast this with readi-mix for $80/yard, why should I spend 5 or 6 times that amount for precast?
What’s the answer?

35. New Product Lines Lightpole base example Successful new products build on what you are doing now
Cast in place costs more that you think
Materials
Labor
Supervision
Overhead such as procurement & admin.
Rework
Delay of job due to weather
Precast is higher quality
Anchor bolt alignment
Conduit & JB problems
Appearance factors
Risk with precast is lower
Job delay due to weather or rework
Single source contracting

36. New Product Lines Lightpole base example
This product line could be a winner!
Product Advantages to the customer
Rapid construction – reduced project scheduling risks
Product quality – bolt hole & elec connx
Appearance – Steel form finish vs. Sonotube
Cost - Reduced GC overhead & supervision costs
Market Advantages to the producer
Competes with other building systems – good margin
Product line extension from current – known req.
Builds relationships with existing specifiers – customers
Action Plan
1. Survey specifiers for product requirements
2. Design & price typical prototype
3. Present a specific product to specifiers with price point

37. New Product Lines Action Plan Product Development must be a way of life
6. It takes time There are many excuses for inaction
Persistence is the most important trait
Go for a small early success
It takes two years
7. It’s ongoing New products turn into commodities
Specifiers write specifications, margins are reduce
New product development must be a way of life
You need to have one or two new products in each stage of development

38. Precast Consulting Services, Inc
Precast Consulting Services, Inc. New Product Development – Margin Improvement
Success or Failure?

39. New Product Lines Checklist for failure
1. Did not commit to a sustained effort
2. What I wanted to produce was not what the customer wanted
3. Did not learn to do business with the new customer type
4. The new product competes with other precast at low margin
5. Unsolved production problems

40. New Product Lines Checklist for Success
1. Find the product
2. Evaluate the product
3. Design the product
4. Price it correctly
5. Patent protection may help
6. It takes time
7. It’s ongoing
8. It’s up to you

41. New Product Development