1. S ARFARAZ S ARWAR K HAN DIT, BSIT, MBA Certified Professional Marketer (Asia) Marketing Association of Pakistan Cell: 0300-2111257 | Email: sarfarazpk@cyber.net.pk Spring ’2014 New Product Development

2. Concepts Define the purpose of the concept test Choose a survey population Choose a survey format Communicate the concept Measure customer response Interpret the results Reflect on the results and the processes

3. Concept Testing : What is It? closely related to concept selection different from concept selection in that it is based on data gathered directly from potential customers and relies to a lesser degree on judgments made by the development team.

4. Concept Testing : What for? 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?

5. ‘7 Step Method’ Step 1: Define purpose Step 2: Choose a survey population Step 3: Choose a survey format Step 4: Communicate the concept Step 5: Measure customer response Step 6: Interpret results Step 7: Reflect on results and process

6. Step-1: Define purpose of Concept test… Write down the questions the team wishes to answer with the test: Which of several alternative concepts should be pursued? How can the concept be improved to better meet customer needs? Approximately how many units are likely to be sold? Should development be continued? … … …

7. Step-2: Choose a survey population The underlying assumption is that the survey population reflects the target market. This assumption is NOT TRUE actually! Choose a survey population which mirrors the target market in as many ways as possible. But how big the population is?

8. Step-2: Choose a survey population Factors favoring a SMALLER sample size: Test occurs early in concept development process. Test is primarily intended to gather qualitative data. Surveying potential customers is relatively costly in time and/or money. Factors favoring a LARGER sample size: Test occurs later in concept development process. Test is primarily intended to gather quantitative data. Surveying potential customers is relatively fast and inexpensive.

9. Step-2: Choose a survey population Factors favoring a SMALLER sample size: Required investment to develop and launch the product is relatively small. A relatively large fraction of the target market is expected to value the product. Factors favoring a LARGER sample size: Required investment to develop and launch the product is relatively high. A relatively small fraction of the target market is expected to value the product.

10. Step-2: Choose a survey population Test occurs later in concept development process. Test is primarily intended to gather quantitative data. Surveying potential customers is relatively fast and inexpensive. Required investment to develop and launch the product is relatively high. A relatively small fraction of the target market is expected to value the product.

11. Survey Population Size How Big? iPhone Chewing Gum Aircraft Carrier Car

12. Step-3: Choose a survey format Face-to-face interaction – Stopping people at the street Telephone – May be targeted to specific individuals Postal mail – Somewhat slower than other methods, often poor response E-mail: – Similar to postal mail except respondents seem slightly more likely to reply than via postal mail Internet – An internet survey would be a bad choice when surveying a product geared for non-technical customers.

13. Step-4: Communicate the concept Verbal Description Sketch Photos/Rendering Storyboard Video Simulation Interactive multimedia Physical appearance models Working prototypes Make sure you communicate the concept in a way that is appropriate for the survey. Example: You can’t show a video via a telephone survey!

14. Step-4: Communicate the concept Verbal Description Sketch Photos/Rendering Storyboard Video Simulation Interactive multimedia Physical appearance models Working prototypes Make sure you communicate the concept in a way that is appropriate for the survey. Example: You can’t show a video via a telephone survey!

15. Step-4: Communicate the concept - ISSUES Description of concept: the information the user will most likely consider when making a purchase. Do not include price unless very high or very low. WHY? Present several concepts if possible.

16. Mail Concept test - Sketch

17. 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 1X a week ( ) ( ) ( ) ( ) ( ) ( ) Would never buy

18. Step-5: Measure Customer Response Concept testing can measure Choice between alternative concepts (early in design) Ways to improve concept Purchase intent scale 1.Definitely would buy 2.Probably would buy 3.Might or might not buy 4.Probably would not buy 5.Definitely would not buy

19. Rendering Sketch Appearance Model

20. Working Prototype Beta Prototype Production Product

21. Step-6: Interpret Results Concept selection Relatively easy which did the respondents indicate they liked better? Demand estimation What is the estimated demand of the product after launch?

22. Step-6: Interpret Results : Demand Estimation Durables Products that are purchased one time. Negligible repeat purchase rate. Examples? Consumer goods Goods that have high repeat purchases. Examples? Q = N x A x P Q= sales (annual) N= number of (annual) purchases A= awareness x availability (fractions) P= probability of purchase (surveyed)

23. Step-7: Reflect on results 1.Was the concept communicated in a way that is likely to elicit customer response that reflects true intent? 2. Is the resulting forecast consistent with observed sales rates of similar products?

24. Sources of Forecast Error Word-of-Mouth Effects Fidelity of Concept Description Pricing Level of Promotion Competition

25. Summary Concept testing can verify that customer needs have been adequately met by the product concept, asses the sales potential of a product concept, and/or gather customer information for refining the product concept. Concept testing is appropriate at several points in the development process.

26. End of Lecture Q&A Please… S ARFARAZ S ARWAR K HAN DIT, BSIT, MBA Certified Professional Marketer (Asia) Marketing Association of Pakistan Cell: 0300-2111257 | Email: sarfarazpk@cyber.net.pk