The Two Models Behind Low Cost Products

Low cost products and services are nowadays present in most sectors. However a clear definition of what makes a low cost product seems to be missing. This article proposes a state of the art on low cost products (through the study of a sample of 42 products recognized as "low cost") and aims to develop a framework to classify them through their design principles, to identify their main characteristics, how they emerge, how they are managed, as well as the impact they have on markets. One of the main conclusions of this work is that two main low cost models should be distinguished. They are labeled i) 'low cost adaptation', where the classical products are striped naked of their non-essential functions to reduce costs, following a functionalist design approach; and ii) 'smart low cost design', that develops a less costly new product from scratch answering to consumer needs, and that can be linked to innovative design theories. These two models should not be mixed up with cost efficiencies models, which are also aimed at reducing costs, but are not a company's main strategy. The studied products show that 'smart low cost design' products are more innovative than 'low cost adaptation' products. The second model is richer and uses elements of the first one. Furthermore, similar effects on the market are observed for both low cost product models, like the creation of demand and the overall price reduction, but the second model seems to have a stronger impact. This work illustrates that a low cost approach can be used as a design tool.