Teaching materials to accompany: Concept Testing Teaching materials to accompany: Product Design and Development Chapter 9 Karl T. Ulrich and Steven D. Eppinger 5th Edition, Irwin McGraw-Hill, 2012.

Product Design and Development Karl T. Ulrich and Steven D Product Design and Development Karl T. Ulrich and Steven D. Eppinger 5th edition, Irwin McGraw-Hill, 2012. Chapter Table of Contents: Introduction Development Processes and Organizations Opportunity Identification Product Planning Identifying Customer Needs Product Specifications Concept Generation Concept Selection Concept Testing Product Architecture Industrial Design Design for Environment Design for Manufacturing Prototyping Robust Design Patents and Intellectual Property Product Development Economics Managing Projects

Product Development Process Planning Concept Development System-Level Design Detail Design Testing and Refinement Production Ramp-Up Qualitative Concept Testing Quantitative Concept Testing

Concept Development Process Mission Statement Development Plan Identify Customer Needs Establish Target Specifications Generate Product Concepts Select Product Concept(s) Test Product Concept(s) Set Final Specifications Plan Downstream Development Perform Economic Analysis Benchmark Competitive Products Build and Test Models and Prototypes

Outline Essence of concept testing Process for product concepts testing 4/23/2017

Nature of concept testing Further narrow the set of concepts under consideration, based data gathered from potential customers in the target markets, rather than the judgments made by the development team Specific Objectives Select one from multiple concepts, Gather information on how to improve a concept, and Estimate the sales potential of the product 4/23/2017

Input and output Input to the potential customer Prototype Output from the potential customer Likelihood for the potential customer to buy the product Estimate of how many units of the product the company is likely to sell 4/23/2017

Purposes for Concept Testing Go/no-go decisions What market to be in? Selecting among alternative concepts Confirming concept selection decision Benchmarking Soliciting improvement ideas Forecasting demand Ready to launch? 4/23/2017

Concept testing process Define the purpose of the concept testing Choose a survey population and sample size Choose a survey format Communicate the concept Measure customer response Interpret the results Reflect on the results and the process 4/23/2017

Define the purpose (step 1) Which of the alternative concepts should be pursued How can the concept be improved to better meet customer needs Approximately how much units are likely to be sold Should the development be continued 4/23/2017

Choose a survey population and sample size (step 2) Sample size varies from a few to thousands Factors affecting the sample size The stage of product development Cost to conduct survey Nature and intent of the survey Budget (amount) of the development project How possible to collect the intended information. Possible to structure multiple surveys with different objectives at different stages. 4/23/2017

Choose a survey format (step 3) Face to face interaction Telephone Postal mail Electronic mail Internet (a test site on the internet) Each has its pros and cons Each has its bias. 4/23/2017

Communicate the concept (step 4) Communication means Verbal description Sketch Photos and renderings Storyboard (a series of images shown a temporal sequence of actions involving the products) Video (allowing more dynamic than the story board) Simulation Interactive multimedia (video and simulation) Physical appearance model (looks-like) Working prototypes (works-like) Survey formats vs. means, page 154 4/23/2017

Measure customer response (step 5) Measurement Mere their preferences among alternative concepts Understand why and how they respond to the product concepts Attempt to measure purchase intent (the likelihood of buying) But avoid aggressively promoting the product concepts The solution space? Alternative function diagrams? Alternative ways to decompose the problem? Additional external resources? All ideas generated and integrated? Survey form, page 156. 4/23/2017

Interpret the results (Step 6) Q = N x A x P Where P = Cd x Fd + Cp x Fp Q = the quantity of the expected sales N = the number of potential customers expected to buy A = the fraction of these potential customers aware of the product and the product is available P = the the probability that the product is purchased if the customer is aware of it and it is available. Fd = the the fraction of survey respondents indicating that they would definitely purchase Cd = the percentage that those in Fd will actually buy (.1-.5) Cp = the percentage that those in Fp will actually buy (0-.25) Be aware that sales also depends on Words of month Fidelity of the concept description Pricing Level of promotion 4/23/2017

Market sizes Population and demographic data Sales volume of various products Airplanes Machine tools Cars Hand tools Printers Ball pens Razor blades 4/23/2017

Concept Testing Example: emPower Electric Scooter

Scooter Example Purpose of concept test: Sample population: What market to be in? Sample population: College students who live 1-3 miles from campus Factory transportation Survey format: Face-to-face interviews

Communicating the Concept Verbal description Sketch Photograph or rendering Storyboard Video Simulation Interactive multimedia Physical appearance model Working prototype

Verbal Description The product is a lightweight electric scooter that can be easily folded and taken with you inside a building or on public transportation. The scooter weighs about 25 pounds. It travels at speeds of up to 15 miles per hour and can go about 12 miles on a single charge. The scooter can be recharged in about two hours from a standard electric outlet. The scooter is easy to ride and has simple controls — just an accelerator button and a brake.

Sketch

Rendering

Storyboard

3D Solid CAD Model

Appearance Model

Working Prototype

Beta Prototype

Video Animation Interactive Multimedia Live Demonstration

Survey Format PART 1, Qualification PART 2, Product Description How far do you live from campus? <If not 1-3 miles, thank the customer and end interview.> How do you currently get to campus from home? How do you currently get around campus? PART 2, Product Description <Present the concept description.>

Survey Format PART 3, Purchase Intent If the product were priced according to your expectations, how likely would you be to purchase the scooter within the next year? I would definitely not purchase the scooter. I would probably not purchase the scooter. I might or might not purchase the scooter. I would probably purchase the scooter. I would definitely purchase the scooter. “second box” “top box”

Survey Format PART 4, Comments Thank you. What would you expect the price of the scooter to be? What concerns do you have about the product concept? Can you make any suggestions for improving the product concept? Thank you.

Interpreting the Results: Forecasting Sales Q = N x A x P Q = sales (annual) N = number of (annual) purchases A = awareness x availability (fractions) P = probability of purchase (surveyed) = Cdef x Fdef + Cprob x Fprob “top box” “second box”

Forecasting Example: College Student Market N = off-campus grad students (200,000) A = 0.2 (realistic) to 0.8 (every bike shop) P = 0.4 x top-box + 0.2 x second-box Q = Price point $795

Forecasting Example: Factory Transport Market N = current bicycle and scooter sales to factories (150,000) A = 0.25 (single distributor’s share) P = 0.4 x top-box + 0.2 x second-box Q = 150,000 x 0.25 x [0.4 x 0.3 + 0.2 x 0.2] = 6000 units/yr Price point $1500

emPower’s Market Decision: Factory Transportation

Production Product

Sources of Forecast Error Word-of-Mouth Effects Quality of Concept Description Pricing Level of Promotion Competition

Discussion Why do respondents typically overestimate purchase intent? Might they ever underestimate intent? How to use price in surveys? How much does the way the concept is communicated matter? When shouldn’t a prototype model be shown? How do you increase sales, Q? How does early (qualitative) concept testing differ from later (quantitative) testing?

Other Images

Issues to discuss Why do respondents typically overestimate purchase intent? Might they ever underestimate intent? How to use price in surveys? Or how much would the customer be willing to pay? How much does the way (the concept is communicated) matter? When shouldn’t a prototype model be shown? How do you increase sales? How does early (qualitative) concept testing differ from later (quantitative) testing? 4/23/2017

Sources of Forecast Error Word-of-Mouth Effects Quality of Concept Description Pricing Level of Promotion Competition 4/23/2017