What are the principle and elements of design? Learn these important 8 principles of economics

Economic principles may be the most cross-disciplinary knowledge of all disciplines. It may be a bit too much to say that all the problems in the world are essentially economic in nature, but the problems in the field of product design are essentially economic in nature. After all, the product is designed to be profitable, even if it benefits the user in the process, that’s just by the way.
Why is it that almost all the problems in product design are economic problems?

It’s clear from a few simple examples that companies design a product to find that one function doesn’t work very well, so they decide to give priority to other functions. This is actually a case of opportunity cost. Money and resources are fixed. To develop this requirement, another requirement needs to lag behind. There must be a choice.

Another example: product design a function to make users more convenient to use, which seems to be for users to consider, but in fact, it is also economic considerations. Better user experience can retain users, suppress their own competitors, from a long-term perspective to achieve profitable purposes.
There are many principles of economics, most of which can be applied to the field of products, the author selected some famous principles to show you the application of economic principles.

1. opportunity cost

1. principle understanding

One of the most famous principles is simply that opportunity itself is also a cost. For example, if you go mountain climbing today, you lose the chance to swim. If you choose one person to be your lifelong partner, you lose the chance to choose someone else to be your partner. If you choose to design your own major when filling in a university volunteer, you will lose the opportunity to take finance as your major.
The choice of opportunity cost can be seen everywhere in life, but it is often neglected. For example, many people do not value their time and are not careful about the choice itself, they seldom consider the cost of making a choice is how heavy, the concept of opportunity cost extended to product design is the following points. By What are the principle and elements of design?

2. applications in products

The first is the sort of demand, and many companies are prudent in their choice of demand. For a product, the need for improvement is almost limitless, because it is unlikely that every aspect of the product will not be able to be improved. At this time the enterprise must choose which demand is more important and which demand is more urgent.
Companies focus on those important and urgent needs, but pay less attention to those less important needs. This is actually the case of opportunity cost, in which one requirement is selected for development, and the other requirement is the opportunity cost of the choice – that is, the development of this function, and other functions are temporarily abandoned because of insufficient resources. The cost is very high, so the enterprise must be very careful when determining the development task.
Of course, this situation also lays a foundation for product managers to find resources to support their grief-driven lives. If you can’t impress your boss, your idea will not get everyone’s attention. By What are the principle and elements of design?

2. sunk costs

1. principle understanding

The principle is as well known as the former and has important guiding significance for the decision-making of many things in life. Simply put, the costs that have been paid are absolutely unreachable, so don’t take them into consideration in subsequent decisions. Of course, this principle is often simple and difficult to do, a simple example to illustrate.
A male classmate pursued his favorite female classmate a long time later, during which time he spent a lot of time and money. In order to pursue the female classmate, the male classmate made every effort to serve the three meals on time as a cow and horse, never absent from the rain and wind, and finally won the love of beauty after years of death.
But only after we were together, we found that there was a big gap between the three views of the two people, and the fairy was not so busy after falling into the world. In the analysis of a group of friends, the male classmate found it difficult to have a good result with the female classmate.
At this time it is difficult for the male students to choose, let go, after all, spent such a high price, his heart felt too bad. Do not let go, feel that the future is certainly not a good result, long pain is not as short as pain, sometimes as early as letting go. At this time, if we are rational enough, we should use the principle of sunk cost to analyze the current situation.
As far as sunk costs are concerned, the analysis should not take into account the costs incurred in pursuing them, as they are already overwhelming. Rational consideration is to start from the pursuit of the hands of thinking, together the advantages are greater than the disadvantages together, otherwise early release is better for each other. But there are too few people in the actual selection to do this, and most of them are hard to let go.

The image above is food that sank into the water. Once it has completely sunk into the water, it is lost. If you’re going to salvage it, it’s another matter, whether the cost of salvage is higher than the cost of the fruit when a certain area is known to have sunk some fruit. By What are the principle and elements of design?

2. applications in products

An example of applying this principle to product design is the decision to abandon a product that has no future, even if the entire team has been fighting for it for a long time, or has invested a lot of money in it. There are many such failures, such as: a program has been developed 40%, and then found that the direction of the market is worrying, even if the final release is likely to be a bleak end, whether to give up the product is a difficult choice.
The correct way of thinking is that these 40% investments have already been spent, and will definitely not be returned. So consider the question of whether the cost of this product has become 60% of the original cost, and will it be profitable to do so?
If you can make a profit, then go ahead and stop the loss in time if the cost is only 60% of the original loss.

By What are the principle and elements of design?

3. effective market theory

1. principle understanding

Efficient market theory simply means that the market is efficient, and the information individuals have is unlikely to allow individuals to exceed the average market return. This is especially true for new recruits. Let me give you an example to illustrate this problem.

Xiao Ming went to the supermarket to buy something. After shopping, he was ready to queue up for payment. He found that the length of the queue was different and there was a very short queue. So Xiao Ming was happy to queue up behind the queue. Then he found that the payment machine of the queue was broken, and he spent more waiting time.
The fundamental reason for this problem is that Xiao Ming, as a newcomer, is difficult to obtain more information than the original crowd, in the market is effective, will not leave such a great opportunity.
In the same way, most roadside fruits are not edible or tasty, and if there is a 100-piece piece piece on the ground, be careful if someone intends to do so.

The picture above shows a dazzling array of commodities in the market. When the market is effective, the products are basically worth the money. It is difficult to find out what is worth and what is not worth. By What are the principle and elements of design?

2. applications in products

The market is effective, in fact, is to remind people not to think that a great good thing will happen in front of their own. This can stop policy makers in a timely manner and make unrealistic fantasies. For example, the decision-maker finds that there is no company in a certain field to do the corresponding product, and then after thinking about the difficulty of making the product is very low, so he draws a conclusion, and seize all the resources into this field in order to become a black horse immediately, as if the market is just around the corner.
It’s time for policymakers to think a little bit about whether such a big gap might be left behind, why so many big companies don’t do it, and don’t everyone think I’m the only one who’s found out.

Next should sink down to think, first of all, whether he is a very advanced level of the industry, his information channel is what is unique. If it’s all possible to make follow-up plans, and if you’re just a newcomer in the business, it’s best not to think too much about it. The greatest possibility of making this new discovery a treasure is to know too little and think too much.
The author is a graduate student. When he entered the school, he also had many ideas. Later, I found out that my idea was probably not worth doing or not, or that other people had tried to solve other problems.
Product work is an imaginative job, but for newcomers, be restrained. Keep in mind that the market is effective. You won’t be much ahead of the times. You won’t be Steve Jobs.

By What are the principle and elements of design?

4. principle of marginal utility

1. principle explanation

To mention marginal benefits, we must mention two other concepts, marginal cost and marginal revenue. Simply put, the marginal cost is the cost of adding a product or multiple services to a user, and the marginal benefit is the benefit.
Let me give you a simple example:
After a car factory has designed a car, the cost of producing one more car is not very high, but the price is the same as the first one. Obviously, the larger the volume of a car, the more money it will make.
Of course, there are counter examples, such as:
Gifts to girlfriends, the more times, the less surprise and can move each other, will eventually let the other party will accept gifts as a matter of course, so love is mutual, unilateral pay will go very hard.

By What are the principle and elements of design?

2. applications in products

The most important indicator of product is user volume. Why?
The above theory explains this point very well, the increase of the number of product users will significantly increase the revenue of the product, but the increase of the cost of the product is not a lot. For the product, the impact of the change in the number of users on the cost is far less than the impact on profitability.
Unlike physical products, Internet products are digital information, which leads to the marginal cost of the Internet is particularly low, so each Internet enterprise will inevitably take the number of users as one of the important assessment indicators. By What are the principle and elements of design?

5. do not put eggs in a basket.

1. principle explanation

This principle is straightforward, that is, risk diversification. Readers must be familiar with it if they have financial experience. Few people will put all their money on the same platform or buy the same stock. Because it is too dangerous to do so, most investment proposals are basically diversified investment, such as: 80% of the money to buy Low-yield and low-risk products, 20% of the money to buy high-yield and high-risk products, so that their capital is more secure.
On the one hand, it can guarantee that the principal is almost no loss, on the other hand, it can give itself the opportunity to impact high returns. Of course, if something like this happened, I didn’t say it.

The picture above is purely a low probability event. Let’s continue with the previous topic. Dispersing risk is actually very useful, and many people have adopted the risk diversification measures imperceptibly. For example, when applying for a volunteer, many colleges and universities usually have one. When people meet with important decisions and listen to others’ opinions, others are right. By What are the principle and elements of design?

2. applications in products

This is also common in products, such as developing multiple products at the same time, not putting the lifeblood of the company in one product. In addition to QQ, Tencent has WeChat, and even if QQ does not fire one day, Tencent is still the leader. Byte jitter has jitter in addition to paragraphs, otherwise the removal of connotative paragraphs will lead to a full-blown crash of the company.
In fact, large Internet companies have a lot of products, and will involve all aspects, on the one hand, it is easy to build their own system, each product can help each other. Another consideration should be corporate security, whether the company can survive a sudden policy shock in one direction.
Big companies are so comprehensive that it’s hard to take a fatal hit. Take Tencent for example, even if the social circle really turns upside down, Tencent is still the biggest game company, and the profits from games can support Tencent to move back the downside again. But for small companies, it’s basically a hammer deal, like the recently precarious p2p, which has a limited range of areas, and can only go one way if there’s a capital problem.By What are the principle and elements of design?

6. free exchange is mutually beneficial.

1. principle explanation

In short, if the transaction is not forced, then it will be good for both sides. For example, many bullies in TV dramas are forced to buy and sell goods, which are non free exchanges. It’s understandable that since it’s a free trade, both parties have the right to decide whether or not to trade, then if it’s bad for them, it certainly won’t lead to the deal.
For example:
Xiao Ming went to the supermarket to buy a cola with ice after playing basketball. Xiao Ming spent 2.5 yuan to get a cola with ice. The deal was worthwhile for Xiao Ming and the shopkeeper. For Xiao Ming, it is obviously worthwhile to spend 2.5 yuan on a refreshing coke. For the owner, the cost of the cola is less than 2.5 yuan, and it’s worth selling at that price.
If one side feels the loss, the transaction is very difficult. By What are the principle and elements of design?

2. applications in products

There shouldn’t be any product that users have to use right now. Maybe Weixin, QQ makes it hard for users to leave, but it’s hard to leave here because users need its services, not because it’s compulsory. Using any product is actually a mutually beneficial behavior between the product and the user. Users can naturally meet their own needs in a certain area. For the product, users can contribute to the spread of the product. In addition, advertisers will decide the price of advertising according to the number of users.
In this process, the product and the user are profitable, in fact, if the product and the user have no profit, the product is difficult to long-term existence. For example, only advertising software, users will choose to uninstall.
Without any revenue from the software, companies can only burn money to operate, which may be for users to obtain, or to advertise other products. If the company has only this product and is always free, then the company is probably a welfare institution.
For example: although all the functions of Wechat are free, there is no membership system, but Wechat has brought a huge number of users for themselves, can layout for their other products. By What are the principle and elements of design?

7. results are more important than motivation.

1. principle explanation

The consequence is more important than the motivation, which can be understood as long as the end result is good, regardless of the motivation for the beginning of the event.
Let me give you an example:
When an entrepreneur becomes the boss of a big company after making money for himself, the community will give him high praise. The government also praised them for its high taxes and jobs.
But the entrepreneur did everything for the sake of making a lot of money, living in a villa and buying a yacht. But these are not important, as long as the final result is good.
The purpose of the rich is to enjoy, but this does not affect everyone’s evaluation of him. By What are the principle and elements of design?

2. applications in products

In fact, almost all products are created to make a better life for the boss or the investor. But this does not prevent people from thinking that the electricity providers have changed their lives. Jobs has defined a new way of life. It doesn’t stop people from believing in many game makers, such as Blizzard, which players love very much, but it’s really just a merchant.
This is actually an example of how results outweigh motivation, and we don’t care why they do it, as long as we know the outcome is good enough for everyone. Any product is developed for profit, but the product really facilitates our lives, so people are willing to respect those businessmen and put it on the altar. By What are the principle and elements of design?

8. psychological accounts

1. principle explanation

The so-called psychological account is the perception and classification of a certain person’s mind.
For example:
Xiao Ming wants to go to the Internet cafe to play games. He charged 3 yuan in his account in advance and bought 3 yuan of happy water when he went there. Walking down the road thinking about the game skills, not noticing that a car was heading in, and then in a hurry dropped the coke into the foul gutter.
Will Xiaoming go to the Internet this time?
Probably still will, so if Xiao Ming silently read his password at all times is 123 456, and then be frightened to forget the password, resulting in the recharged account recharge, although happy water is still, but Xiao Ming will go online?
Probably not at all.
Although they were all three yuan, the results were quite different, because Xiao Ming classified happy water and Internet charges into different psychological accounts. So it leads to the same loss and different result. By What are the principle and elements of design?

2. applications in products

Is there any similar case in the product? Of course there are. This can be started from the awareness of software copyright, because of the special domestic environment, leading to most people feel that online things are free, so many pirated software, legitimate software can hardly be sold.
But with the rise of knowledge payment in recent years, people’s ideas have undergone a subtle change, we are gradually willing to recharge members, willing to pay for knowledge, willing to buy genuine software.
In fact, this change is people from the psychological, digital products as the kind of payment should be, rather than the same as before that is not the use of software, and there is no physical object, why let me pay?
summary
The principle of economics is the most widely used principle, different from the laws of many professional fields, out of the scope of this exercise is very limited. Different economic principles, it is a guide to life and can be applied to various fields.
In fact, if you dig carefully, there are far more principles of economics that can be applied to products. Interested readers can find them by themselves, and they are welcome to communicate in the comments section. By What are the principle and elements of design?

 

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