1 9-1 Many Ideas Are Eliminated Before Concept Testing PIC eliminates most new product ideas even before they are developed into concepts. Ideas of the following types are excluded: –Ideas requiring technologies the firm does not have. –Ideas to be sold to customers about whom the firm has no close knowledge. –Ideas that offer too much (or too little) innovativeness. –Ideas wrong on other dimensions: not low cost, too close to certain competitors, etc.

2 9-2 Suggested Questions for the Initial Reaction Market Worth: what is the attractiveness of the new product to the targeted customer population? Firm Worth: Is the new product project viewed positively by management? Does this new product project enhance the firm’s competencies? Competitive Insulation: Can the product’s advantage be maintained against competitive retaliation?

3 9-3 Concept Testing Cautions and Concerns If the prime benefit is a personal sense (aroma, taste). If the concept involves new art and entertainment. If the concept embodies a new technology that users cannot visualize. If concept testing is mishandled by management, then blamed for product failure. If customers simply do not know what problems they have.

4 9-4 What Is a Product Concept Statement? A statement about anticipated product features (form or technology) that will yield selected benefits relative to other products or problem solutions already available. Example: “A new electric razor whose screen is so thin it can cut closer than any other electric razor on the market.”

5 9-5 Purposes of Concept Testing To identify very poor concepts so that they can be eliminated. To estimate (at least crudely) the sales or trial rate the product would enjoy (buying intentions, early projection of market share). To help develop the idea (e.g. make tradeoffs among attributes).

6 9-6 Some Key Issues in Concept Testing Concept statement: narrative, drawing, model? Respondent group: Lead users? Large users? Response situation: Where? How? Interviewing sequence: Believable? Important? Interesting? Would it work? What problems do they see? Would they buy? Test procedure, change and implement, study findings.

7 9-7 Mail Concept Test -- Verbal Description Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with a delightful flavor blend of orange, mint, and lime. It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal snacks. And, best of all, it contains absolutely no calories. Comes in 12-ounce cans or bottles and costs 60 cents each. 1. How different, if at all, do you think this diet soft drink would be from other available products now on the market that might be compared with it? Very different ( ) ( ) ( ) ( ) Not at all different 2. Assuming you tried the product described above and liked it, about how often do you think you would buy it? More than once a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy it Figure 9.1

8 9-8 Mail Concept Test -- Sketch

9 9-9 The Full Screen A step often seen as a necessary evil, yet very powerful and with long-lasting effects. Forces pre-technical evaluation, and summarizes what must be done. Methods range from simple checklists to complex mathematical models.

Purposes of the Full Screen To decide whether technical resources should be devoted to the project. –Feasibility of technical accomplishment -- can we do it? –Feasibility of commercial accomplishment -- do we want to do it? To help manage the process. –Recycle and rework concepts –Rank order good concepts –Track appraisals of failed concepts To encourage cross-functional communication.

Screening Alternatives Judgment/Managerial Opinion Concept Test followed by Sales Forecast (if only issue is whether consumers will like it) Scoring Models

A Simple Scoring Model Answer: Go boating.

A Scoring Model for Full Screen Note: this model only shows a few sample screening factors. Factor Score (1-5) Weight Weighted Score Technical Accomplishment: Technical task difficulty Research skills required Rate of technological change Design superiority assurance Manufacturing equipment... Commercial Accomplishment: Market volatility Probable market share Sales force requirements Competition to be faced Degree of unmet need...

The Scorers Scoring Team: Major Functions (marketing, technical, operations, finance) New Products Managers Staff Specialists (IT, distribution, procurement, PR, HR) Problems with Scorers: May be always optimistic/pessimistic May be "moody" (alternately optimistic and pessimistic) May always score neutral May be less reliable or accurate May be easily swayed by the group May be erratic

Alternatives to the Full Screen Profile Sheet Empirical Model Expert Systems Analytic Hierarchy Process

A Profile Sheet

Empirical Screening Model (This example is based on Project NewProd database.) Eight Significant Factors Product superiority Overall firm/resource compatibility Market need, growth, and size Economic advantage of product to end user Technological resource compatibility Product scope (mass vs. narrow specialty) Market competitiveness (-) Newness to the firm (-)

Items Constituting the First Factor Factor One: Product Superiority 1. Product is superior. 2. Product has unique feature. 3. Product is higher quality. 4. Product does unique task. 5. Product cuts user's costs. 6. Product is first of kind. (There are about six items constituting each of the other factors as well.)

Sample Items on Other Factors Factor Two: Overall Company Project Fit Good fit in terms of managerial, marketing, engineering skills; financial, R&D, production resources Factor Three: Market Need, Growth and Size High need level by customers for this product class Large, fast-growing market Factor Four: Economic Advantage to User Product reduces customer’s costs Product is priced lower than competitors

Sample Items on Other Factors Factor Five: Newness to the Firm New product class, customer need served, technology, production process, sales force or distribution Factor Six: Technological Capability Good fit in terms of R&D and engineering resources Factor Seven: Market Competitiveness Intense price competition, many competitors, many new product introductions, changing user needs Factor Eight: Product Scope Market-derived new product idea, not a custom product (has mass appeal), mass market exists for product

Sample Application of NewProd Screening Model Factor Mean Evaluation Impact Project Superiority 1.19POSITIVE Economic Advantage-0.49negative Company-Project Fit-0.16marginal (-) Tech. Compatibility-0.19marginal (-) Newness to Firm-0.24marginal (+) Market Need/Growth/Size 0.88POSITIVE Market Competitiveness-1.82positive Product Scope 0.90marginal (+)

Pros and Cons of Project Pros –1. Product Superiority/Quality –6. Market Need/Growth/Size –7. Market Competitiveness Cons –2. Economic Advantage to User Marginals –8. Product Scope –5. Newness to Firm –4. Technology Compatibility –3. Overall Company-Project Fit

Analytic Hierarchy Process (AHP)

Why Financial Analysis for New Products is Difficult Target users don’t know. If they know they might not tell us. Poor execution of market research. Market dynamics. Uncertainties about marketing support. Biased internal attitudes. Poor accounting. Rushing products to market. Basing forecasts on history. Technology revolutions.

Handling Problems in Financial Analysis Improve your existing new products process. Use the life cycle concept of financial analysis. Reduce dependence on poor forecasts. –Forecast what you know. –Approve situations, not numbers (recall Campbell Soup example) –Commit to low-cost development and marketing. –Be prepared to handle the risks. –Don’t use one standard format for financial analysis. –Improve current financial forecasting methods.

A-T-A-R Model Results: Bar Chart Format

Bass Model Forecast of Product Diffusion

The Life Cycle of Assessment

Why Have A Protocol? Also known as product requirements, product definition, etc. Doesn’t it seem obvious and simple? Actually is one of the top success factors distinguishing winning from losing projects. Maybe because it involves more than technical aspects.

Purposes of Protocol To determine what marketing and R&D groups need to do their work. –Think concept life cycle: this is more than a simple concept statement, yet less than we will have when the first prototype is available. –Try to identify the key deliverables at this point. To communicate essential to all players and integrate their actions, directing outcomes consistent with the full screen and financials. To set boundaries on development process or cycle time. To permit the development process to be managed (i.e., what needs to be done, when, why, how, by whom, whether).

Contents of a Product Protocol Target market Product positioning Product attributes (benefits) Competitive comparison Augmentation dimensions Timing Marketing requirements Financial requirements Production requirements Regulatory requirements Corporate strategy requirements Potholes

Narrow Version of Protocol: End-User “I Want” List This is the “I Want” list for a new lawn leaf blower /vacuum. These are benefits -- how they are achieved is determined during development. Manufacturer stands behind product -- two year full warranty. Electrically and mechanically safe. Good value and lasts a long time -- top quality component parts, state-of-the-art manufacturing. Makes yard clean-up easier -- most powerful blower you can buy. Converts from blower to vacuum without tools. Electrical cord does not come loose. Can be used with existing extension cord. Easy to maneuver. Clog-free vacuuming. Tubes go together and stay together.

A Sample Protocol: Trash Disposal System Must automate trash disposal at factory cost not to exceed $800. Clean, ventilated, odor-free, no chance of combustion. Must be safe enough to be operated by children; outside storage safeguards against children and animals. Size must be small enough to work as kitchen appliance, to provide easy access and eliminate need for double handling of trash. Simple installation Decor adaptable to different user tastes. If design requires opening of exterior walls, structural integrity and insulation against elements must be maintained. User-friendly, automatic operation, easy to maintain by technical servicepeople.