Concept Testing Chapter 8 EIN 6392, Summer 2012 Product Design for Manufacturability and Automation

10/13/20152 Product Design and Development Karl T. Ulrich and Steven D. Eppinger 4th edition, Irwin McGraw-Hill, 2008 Chapter Table of Contents 1.Introduction 2.Development Processes and Organizations 3. Product Planning 4.Identifying Customer Needs 5.Product Specifications 6.Concept Generation 7.Concept Selection 8. Concept Testing 9.Product Architecture 10. Industrial Design 11.Design for Manufacturing 12.Prototyping 13.Product Development Economics 14.Managing Projects

10/13/20153 Planning Product Development Process Concept Development Concept Development System-Level Design System-Level Design Detail Design Detail Design Testing and Refinement Testing and Refinement Production Ramp-Up Production Ramp-Up Qualitative Concept Testing Quantitative Concept Testing

10/13/20154 Concept Development Process Perform Economic Analysis Benchmark Competitive Products Build and Test Models and Prototypes Identify Customer Needs Establish Target Specifications Generate Product Concepts Select Product Concept(s) Set Final Specifications Plan Downstream Development Mission Statement Test Product Concept(s) Development Plan

10/13/20155 Outline Essence of concept testing Process for product concepts testing

10/13/20156 Sources of Forecast Error Word-of-Mouth Effects Quality of Concept Description Pricing Level of Promotion Competition

10/13/20157 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

10/13/20158 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

10/13/20159 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?

10/13/ 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?

10/13/ Concept testing process 1. Define the purpose of the concept testing 2. Choose a survey population and sample size 3. Choose a survey format 4. Communicate the concept 5. Measure customer response 6. Interpret the results 7. Reflect on the results and the process

10/13/ 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

10/13/ Choose a survey population and sample size (step 2) 1. Sample size varies from a few to thousands 2. Factors affecting the sample size 1. The stage of product development 2. Cost to conduct survey 3. Nature and intent of the survey 4. Budget (amount) of the development project 5. How possible to collect the intended information. 3. Possible to structure multiple surveys with different objectives at different stages.

10/13/ Choose a survey format (step 3) Formats 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.

10/13/ 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

10/13/ 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.

10/13/ 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

10/13/ Market sizes Population and demographic data Sales volume of various products Airplanes Machine tools Cars Hand tools Printers Ball pens Razor blades

10/13/ Concept Testing Example: emPower Electric Scooter

10/13/ Scooter Example Purpose of concept test: What market to be in? Sample population: College students who live 1-3 miles from campus Factory transportation Survey format: Face-to-face interviews

10/13/ Communicating the Concept Verbal description Sketch Photograph or rendering Storyboard Video Simulation Interactive multimedia Physical appearance model Working prototype

10/13/ 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.

10/13/ Sketch

10/13/ Rendering

10/13/ Storyboard

10/13/ D Solid CAD Model

10/13/ Appearance Model

10/13/ Working Prototype

10/13/ Beta Prototype

10/13/ Video Animation, Interactive Multimedia Live Demonstration

10/13/ Survey Format PART 1, Qualification How far do you live from campus? How do you currently get to campus from home? How do you currently get around campus? PART 2, Product Description

10/13/ 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 might or might not purchase the scooter. I would definitely purchase the scooter. I would probably not purchase the scooter. I would probably purchase the scooter. “top box”“second box”

10/13/ Survey Format PART 4, Comments 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.

10/13/ 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) = C def x F def + C prob x F prob “second box”“top box”

10/13/ 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 x second-box Q = Price point $795

10/13/ 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 x second-box Q = 150,000 x 0.25 x [0.4 x x 0.2] = 6000 units/yr Price point $1500

10/13/ emPower’s Market Decision: Factory Transportation

10/13/ Production Product