How to Design R&D Projects

Information Related to R&D Projects TABLE OF CONTENT Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Report” shows the base R&D project of your marketed brands

The “Report” lists all Sonites or Vodites R&D projects Listing of available R&D projects as well as on-going ones. New brands can be launched or existing ones can be upgraded with available projects. The brand will have the physical characteristics specified in the project. The current base cost is the transfer cost of the units produced, for the first production batch of 100,000 units. If the cumulative production level is lower, the unit transfer cost will be higher. If the cumulative production level is higher, the unit transfer cost will be lower. The minimum base cost is the minimum cost that can be specified in a cost-reduction R&D project with the same physical characteristics. Unit transfer cost = $158 Why ??

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Newsletter” gives the physical characteristics, the base costs and prices of all marketed Sonites or Vodites brands

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Benchmarking” study gives estimates of competitive R&D budgets Useful to determine when first Vodite brands will be launched.

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Semantic Scales” study provides a graphical representation of segment needs and brand perceptions Segment ideal points Six dimensions : 5 physical characteristics plus price Brand perceptions

The “Semantic Scales” study tracks the evolution of segment needs The lifetime of an R&D project is several years long. Design R&D projects that will be attractive in a few years time. ?

Additional charts give exact coordinates of ideal points and brand perceptions on a 1-7 scale Compare brand perceptions with segment expectations. R&D will let you fill in the gap Need to improve Design Good fit in Max Freq and Power

The “Semantic Scales” study plots the brand perceptions against the brand physical characteristics Do graphical interpolations on these charts to calculate the characteristic in Kg, Dm3, KHz, W, … that corresponds to a given value on the 1-7 scale Singles’ Ideal Max Freq in 2 years : 4.50 Singles’ Ideal Max Freq in 2 years : 30 KHz

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “MDS” study provides a graphical representation of segment needs and brand perceptions in three “composite” dimensions Three dimensions : Economy, Performance and Convenience Segment ideal points Brand perceptions

MDS dimensions are discovered by the MDS methodology and thus are a good representation of segment needs Brand physical characteristics and prices have an influence on MDS dimensions. For instance, Performance is strongly linked with Power and Max Freq.

The “MDS” study also tracks the evolution of segment needs The lifetime of an R&D project is several years long. Design R&D projects that will be attractive in a few years time. ?

Additional charts give exact coordinates of ideal points and brand perceptions on a -20 to +20 scale Compare brand perceptions with segment expectations. R&D will let you fill in the gap Need to improve Convenience

The “MDS” study plots the brand perceptions against the brand physical characteristics Do graphical interpolations on these charts to calculate the characteristic in Kg, Dm3, KHz, W, … that corresponds to a given value on the -20 to +20 scale Pros Ideal Performance in 2 years : 10 Irrelevant if the MDS dimension and the characteristic are not strongly linked Pros Ideal Power in 2 years : 75 W

Sources of information related to R&D projects Company Report Newsletter Benchmarking Semantic Scales MDS Conjoint Analysis

The “Conjoint Analysis” study plots the utilities of various levels in each of the four most important characteristics Higher utilities mean higher customer satisfaction levels Beware, the four levels are arbitrarily set. Maximum utility may be achieved for a fifth level.

The “Conjoint Analysis” study indicates what characteristics are the most important ones In the Sonite market, Price is the most important dimension, followed by Power. For instance, almost 80% of the decision is driven by Price for Singles.

Specifying a Sonite R&D Project TABLE OF CONTENT Source of Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

Repositioning an existing Sonite brand through R&D in 7 steps 1. Decide on which segment to target using the MDS maps . 2. Determine what characteristics are important to that segment using the Semantic Scales or Conjoint Analysis. 3. Identify the dimensions where the gap between “Ideal” levels and your brand “Perceived” levels are the largest ones, using the Semantic Scales or MDS. 4. Decide on which brand characteristics you should modify. Small gaps and/or non-important characteristics can be ignored. 5. Calculate the “ideal” level in each characteristic you want to upgrade, using graphical interpolations. Remember to take the evolution of needs into account. 6. Estimate the future price of the brand when it is repositioned and decide on a “Base Cost” that will give you an acceptable profitability ratio. Or develop the project at the minimum possible base cost (R&D budget will be higher) 7. Launch an R&D project with the new characteristics and the new base cost, using the current base project as a starting point.

A Complete Example : Repositioning SIBI SIBI : Based on PSIBI Weight = 19 Kg - Design = 8 - Volume = 60 dm3 Max Freq = 15 KHz - Power = 20 W Base cost = $99 (current cost = $79) Target Segment : Singles Most important characteristics : Power, Max Freq, Design Ideal Power in two years = 4.80 = 65 W Ideal Max Freq in two years = 4.70 = 30 KHz Ideal Design in two years = 5.20 = 7 R&D project PSIN1 Weight = 19 Kg - Design = 7 - Volume = 60 dm3 Max Freq = 30 KHz - Power = 65 W Develop project at minimum cost

Open the R&D decision form and create a new project PSIN1 using PSIBI as a basis.

Enter the new characteristics and then use an on-line query to estimate the budget.

Your R&D project is now ready to be launched Your R&D project is now ready to be launched. It will be available next period to modify an existing brand or introduce a new one.

Specifying a Vodite R&D Project TABLE OF CONTENT Source of Information Related to R&D Projects Specifying a Sonite R&D Project Specifying a Vodite R&D Project

Specifying a Vodite R&D project The only available data are the “Semantic Scales - Ideal Values” and the importance of characteristics. Eg: Most important characteristic : “Max Freq” Ideal level for Innovators : 4.90 on the 1 to 7 scale Ideal “Max Freq” in KHz for this segment ???

Specifying a Vodite R&D project (cont’d) When no brands are marketed, estimating ideal characteristics through graphical interpolation is not possible. One has to assume that 1 on the semantic scales corresponds to the minimum feasible characteristic, e.g.: 5 KHz 7 on the semantic scales corresponds to the maximum feasible characteristic, e.g.: 20 KHz Variations are linear in between 5 1.0 7.0 20 4.9 15

On your marks. Get set. Go! Respect the deadline Good luck!