It can be very helpful to have a working prototype. You can use a prototype to check that a new design works mechanically. You can also use a prototype to assess customer reaction to the look and feel of a product.
It may be worth going through more than one prototyping stage. For example, you could use a sketch at an early stage to gauge initial reactions to an outline design before investing heavily in developing it. If you are improving a product, you might produce models that demonstrate the improvements rather than a full prototype.
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