Product Management

Term Project - Analysis of Harvard Cases

By Alexander Joel Heriford




MKTG 459
Professor Narayan Janakiraman



















Heriford "
Case 1 Forecasting the Adoption of E-books (505063-PDF-ENG):

A vital component of product management involves making predictions of the specific
products penetration into the market. The 1990s projected that e-books would replace
physical books, magazines, and other forms of literatures. The first task of the
forecasting of e-books involves using the Bass model, which will forecast the initial sales
(year 2000) and predict the long-run total adoption of e-books (parameter m). After
implementing key statistics (shown below), the total number of potential consumers for
e-books in the year 2000 is estimated as 24,700,042.

Total number of potential consumers calculation table:








*http://www.census.gov/prod/2001pubs/c2kbr01-2.pdf

In order to predict the total number of potential consumers for year 2000, the total U.S.
population in 2000 needed to first be found. The 2000 U.S. Census resulted in a
population of 281,421,906 (census.gov). The key statistics provided in the document
appeared to be the U.S. reading literature population and Internet penetration. This data
is the most concrete, which must be included in the calculation. The Internet user likely
to buy music online targets the consumers whom are innovators and trusting of the
current technology, as well as online purchasing. Finally, the last important key statistic
of user penetration of cell phones provides a percentage that will simulate the penetration
of a new form of technology amongst the U.S. population. All of these percentages were
multiplied into the total U.S. population, again producing the total number of potential
consumer for e-books at 24,700,042

The next step involves selecting the ps (effect of advertising) and qs (effect of word of
mouth). In order to predict these values, all of the products estimated ps and qs were
averaged. Each product provides a different aspect in the prediction of these values. For
example, the CD player provides the traveling convenience side; cable television service
relates to Amazon.com or any other e-books providers service; home personal computer
relates to the innovative side; cellular telephone to convenience and travel; handheld
organizer relates to another area of innovations; and final the mp3 player to the
portability. All of these different products were involved in producing a p-value of 0.056
and a q-value of 0.415.

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Effect of advertising and effect of word of mouth calculation table:



Once the m (total number of potential consumers), the ps (effect of advertising)
and qs (effect of word of mouth) are calculated, these values will be inputted into the
final part of the Bass model to forecast the volumes for the e-books over the first five
years (2001 to 2006). The formula Sales = (Probability)(Remaining Consumers) will be
used, but more specifically:
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All of the values: m = 24,700,042, p = 0.056, and q =0.415 will be inputted into this
equation, keeping in mind that N is number of years. A trend in the Bass model is that as
sales increase, total number of remaining consumers decreases. Another aspect is since
there is no word of mouth during the first year; this value is disregarded in year 1.

Using Excel the forecast volumes for the first fives years was calculated. The Excel
equation for year one was =($G$18+($G$19*((0)/D20)))*(D20-(0)) and for year
two and on =($G$18+($G$19*((B21)/$D$20)))*($D$20-(B21)), in which
each specifically referenced a cell. After running the equation, the total cumulative sales
for the first five years resulted in 8,461,795 with a remaining market of 16,238,247. Each
specific year and graph depicting the sales is displayed below.










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After running the Bass diffusion model using the key statistics and estimation of the
effect of advertising and effect of word of mouth, a difference can be draw between the
estimation and the actual volumes calculated. The estimated sales per year using the
Bass diffusion model predicted much higher volumes. During 2004 specifically, the e-
book titles sold were 421,000 1Q2004, using my predictions (assuming all quarters sold
equally) it would be about 716,188 sales. The reasoning behind the higher volume
estimates using the Bass diffusion model may include a wrong calculated total number of
consumers and wrong alignment with previously calculated ps and qs. The Bass
diffusion model is the most accurate was to forecast product sales, but the values inputted
need to be thoroughly research and thought through.

Case 2 - Johnson Wax A (583046 PDF ENG):

The Johnson Wax A case covers the future launch of Enhance, the new instant hair
condition, produced by S. C. Johnson & Company. The case covers the importance of
executing an in-depth pre-test-market testing procedure, which is commonly performed
through the ASSESSOR measurement. Firstly, it is important to briefly understand the
roles of: product, advertising copy, advertising budget, and price in determining sales in
the market; the roles will then be compared to the case of S. C. Johnson & Company.
Each of these components roles will first be individually defined before determining
how well ASSESSOR measured the impact of these marketing program elements for
Enhance.

The role of the product is to meet someones needs, which is defined as the desired end
state that propels a consumer to action. Maslows hierarchy of needs specifically defines
the needs of a being, from most important to least, as: physiological, safety,
love/belonging, esteem, and self-actualization. The needs are then brought into a product
through the process of brainstorming, depth interviews, focus groups, and the modern
form of information pump. In the Johnson Wax A case, the need for an instant hair
conditioner that solves dry and damaged hair became noticeable through lab research,
marketing research, and consumer contact (displayed in Incidence of Problems). Once a
product idea forms, concept generation is the next step.

Determining the concept of the product is another step in the role of the product. The
concept testing can be used to get a products diagnostics and product concept. A
perceptual map is a method in order to find the correct position a design group wants to
place their product. The method lists two different attributes on a y-axis and x-axis and
the current brands are placed throughout the map. Main attributes of Enhance intend to
fight against oily/greasy looking hair and appeal towards women ages 25-45 years old, as
well as conditioning vs. clean and conditioning vs. effects). S. C. Johnson &
Company decided that Enhance fits into this area on the perceptual map, which is later
tested in ASSESSOR. Though not discussed in the case, the methods of House of
Qualities and functional decomposition look further into a concept creation and
possibilities.
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Once the concepts are determined, two different steps aid in defining the importance of
each of the products attributes. Regression analysis allows a researcher to analyze the
relationships between a dependent and independent variables (attributes). The most
important independent attribute is displayed, given a dependent variable. The other step
is a conjoint analysis, which shows multiple concepts to a participant and asks for their
overall preference towards the group of products. The products differ by offering
different attribute levels. Once completed, the most important attribute and attributes
level can be analyzed. This is one of the final steps in determining the attributes and their
levels that will aid in determining sales volume in the market.

Once the product role is understood, S. C. Johnson & Companys ASSESSOR test can
now be analyzed. The needs and concepts were effectively determined using this testing
method in the first step of Market Structure. Different concepts such as conditioning,
clean, manageability/effects, and fragrance were ranked on relative importance. This step
also suggested that Enhance should to enter the market using more than once concept in
order to gain market share against the competitors. The ASSESSOR test produced
product maps that placed Enhance slightly more conditioning on each map. This draws
a better picture of the consumers concept view of Enhance. Although the concepts were
not tested further, such as regression and conjoint analysis, the ASSESSOR should only
initially indicate these attributes.

Advertising copy is the next step that aids in determining sales volume in the market.
The channel must complement the products consumer segment, strategy, and market
mix. The copy aims to follow the process of AIDA (attention, interest, desire, and
action) in the consumers purchasing step. The ELM model also aids by deciding whether
the communication should follow the central route (i.e. Dell) or peripheral route (i.e.
Heinz). The learning effect is another important aspect considered in during which
channel to distribute and market the product. Once determined, the company needs to
decide whether to create a line extension, brand extension, or co-brand. Enhance decided
to sell the proposition, that the addition of this oil, especially for people with oily hair,
caused the hair to look oily, greasy, and limp soon after shampooing, to fit into their
brand extension of instant-conditioners.

Conducting the ASSESSOR leads S. C. Johnson & Company in a better direction for
their advertising copy. As previously stated, the advertisements must display more than
one concept in order to create an interest in the consumer. The ASSESSOR stated
Agree and Breck Crme Rinse have achieved the clean position, while Clairol
Condition has succeeded in differentiating itself as the conditioning brand. The
preference on specific attributes also helps to lead the marketing department in
selecting the top attributes to offer to their consumer base. ASSESSOR effectively gives
a better insight in catching the attention of the consumer by stating the consumer views of
each brand.

The advertising budget plans take into account the costs for the consumer to first become
and interested as well as create a desire to purchase. The budget must be correctly
established in taking an acceptable market share percentage to meet the companys target.
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Unaided and aided recall of the product also affects the advertisement budget. As for
Johnson Waxs Enhance, it received an awareness from advertising at .70, which is
similar to Agrees 0.70. In order to effectively advertise, they must pass their own
product, possibly cannibalizing sales. Sherman must take this into consideration.

In regards to the advertising budgets, ASSESSOR provides a helpful analysis in the
market share prediction trail/repeat model chart. All of the given data will aid S. C.
Johnson & Company in deciding the ideal budget to set aside for advertising. Although,
these values just resemble a prediction of the market versus Agree. The ASSESSOR
provides helpful insight in this area, but the advertising budget will constantly change due
to competitors, environment, time, season, and etc.

The last part involves pricing, which can be done by cost-based, competition-based, or
value-base pricing. Cost-based takes into account the direct costs and overhead heads.
Competition-based pricing considers the going rate or a sealed bid strategy. Finally, the
value-based pricing takes in the perceived value and the perceived price. As for Johnson
& Company, they seemed to take the competition-based approach by determining if they
purchased Enhance using a $2.25 certificate.

The trail estimation through ASSESSOR allowed a better look into how the consumers
feel towards the price of Enhance. During this step, 307 respondents made a purchase in
the store that contained Enhance and Agree, in which Enhance achieved a 23% trail rate
and Agree resulted in a 33% trail rate. This test suggested that consumer seem to be
more likely to purchase Agree, when presented at the same price. A minor flaw in this
test may include that consumers are more likely to purchase a shampoo before a
conditioner. In review, this test needs to be taken into consider when setting an official
price. Enhance also lacked in repeat purchases both in the lab and after trail.

Looking back on the roles of determining sales volume in the market and the ASSESSOR
results, it seems as if Enhance does not create a large enough need for the consumers.
This is expressed in the results that the base share for Enhance is 3.8% and the base share
for Agree is 8.4%. The reasoning for this is explained in multiple areas during the
ASSESSOR test. If John Sherman wonders, Why did I only get about half the share
points I need, it can be attributed to several factors. The first factor involves the similar
consumers view of Enhance vs. Agree.

The perceptual map displays these similar factors in the perceptual mapping of
conditioning vs. clean and conditioning vs. effects. Enhance ranked similarly on both
maps, only appearing to be more conditioning than either clean or effects. Agree ranked
higher on clean and about .6 points less than Enhance on conditioning. Although
condition is more important attribute (33%), clean (27%) is not ranked far behind. The
higher ranking of clean attribute seems to be taken into larger consideration during the
consumers purchase.

Another aspect of the lack in share points involves the pricing and awareness. During the
trail estimation, as previously mentioned, consumers purchased Agree at a ten percent
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higher trail rate that Enhance. The awareness from advertising for both Enhance and
Agree equaled 0.70, but some aspects must be taken into consideration after review of the
consumers trail purchase of the product. Consumers seem to more likely purchase a
shampoo, Agree, than a conditioner. It may be possible that consumers are not as aware
of Enhance than Agree.

The last important factor in the lack of share points involves the advertising recall of
Enhance. The main reason for the product is to condition the hair (33% of relative
importance), with the other aspect of curing dry as a lesser-stressed attribute. During the
ASSESSOR recall, 50% recalled Enhance was for dry hair and the conditioning received
a lower recall rate. Consumers did not recall that conditioning is the main important
attribute/need that Enhance contains. The advertising recall contributed to the lack of
share points.

In review of this case, the ASSESSOR methodology seemed to result as an appropriate
tool for John Shermans situation. Although it did not produce the results desired, it can
ultimately bring in a better understanding of the launch of Enhance. Consumers do
contain the need of conditioning their hair based on the relative importance of each
attribute. Also, the ASSESSOR proved that only a couple other brands offered the
attribute of conditioning. Looking back from today on the ASSESSOR test, since it took
place in 1978, provides a plan of action S. C. Johnson & Company should have taken on
the launch of Enhance.

The ASSESSOR test basically ran against S. C. Johnson & Companys shampoo product
Agree, which now is place in a whole different product category. Since consumers first
need in hair care is a wash, the conditioning comes second. Creating trail estimation
against Agree skewed the results did show that a shampoo is more desirable when given a
budget. One suggestion on the launch of the product should include joint-sales (package
sale) so no cannibalization occurs.

Case 3 Braun Syncro Shaver (DMI017 PDF ENG)


The Braun Syncro Shaver case provides an interesting look into the product development
processes. The case looks into the issue of Braun losing market share to Nationals
washable shavers and Philips Reflex Action top shaver. Braun led the market as the
leading innovator for years, but now trails in the wake of the competitors. The product
development team must produce a shaver that will compete against the competitors,
appear the most innovative, satisfy consumers, and regain the market leader. In doing so,
they develop the Flex Integral: 6017 and the cleaning center concept.

The company culture at Braun seems to wish for these opportunities such as the 6017 and
cleaning center, due to their willingness to experiment and take risks. Some companies
seem to fear such events, but Braun embraces them. This can be accounted by Brauns
cross-functional product development teams, which accounts for their readiness in such
times. These teams include both a formal process and an information process during the
product development stages. The formal process tends to keep ideas on track.
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During the formal process, product generation and innovation (PG&I) follows fives
phases. The first phase includes blue sky, which is the idea generation stage. Phase
two discusses product ideas, consumer needs, benefits, business potential, and
design/technical/financial considerations through a team that consists of roughly six
people. Phase 3 consists of engineering experiments, models, and marketing research
that make facts. Phase 4 involves proto-typing, tool, revamping the models. Phase 5 is
launch, shipment, and project review. The top management at Braun comprised these
phases and cross-functional teams to allow fast-paced, effective, product design. The
informal process complements the formal processes described.

The informal process explains another reasoning for Brauns willingness to experience
and take risks. The informal process takes place outside of regular meetings.
Brainstorming technically happens everyday, not specifically during designated time
slots. Also, it is estimate in the case that 80% of the design decisions were made
collectively and intuitively. The teams also should consist of designers whom have been
on various projects, so that innovative ideas and synergy exist throughout the team.
Braun prepares and enjoys these events of risk taking through formal and informal
processes.

The final important factor that relates to Brauns readiness and willingness to take risks
includes Schneiders description of their preparation product development. Braun
constantly prepares themselves for product, such that Braun get(s) an idea even if its
only part of a project and develop it; thats advanced design. The team constantly
keeps ideas within the company, whether they relate to the current project or not. Project
teams are constantly prepared with numerous ideas, and Schneider states if someone
really believes in it, hell continue working on it. Throughout the Braun Syncro Shaver
case, Brauns willingness to experiment and take risks rings throughout the paper.

This product developments aggressiveness plays a big part in the development of Braun
products. They are always brainstorming new concepts, whether they relate to the
current project or not. The willingness keeps the cross-functional product development
team on their toes. Schneider describes product development as aiming ahead in order to
reach the final product. The willingness and risk taking places Braun above their
competitors in idea generation.

In order to compete with their competitors, Braun developed the Flex Integral 6017.
Throughout the development process, the team brainstormed different concepts and
attributes that need to be placed on the new dry shaver. To gain a better understanding of
the consumer preferences, a concept test must be initiated. This will determine the
reaction to a product concept by a sample of the target segment on specific quantitative
measure. In this survey, four different types of feedback need to be asked.

The first step is to determine the purchase measures of the Braun dry shaver. This
question helps in screening consumers for their likelihood of purchasing the product, if
priced within their expectations. The annual sales can then be calculated by (number of
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annual purchases)(awareness x availability)(probability of purchase). Another possible
screening question determines the frequency of purchase. For Brauns shaver, these
questions can be easily worded into a survey.

The second step involves the product diagnostics. Theses look into the physical product
and the perception of the consumer. The testing methods may be initiated through face-
to-face, telephone, mail, e-mail, and the Internet. The physical product of Brauns shaver
includes: separation of head from body, grip, movability of head, washable, etc.

The third step involves the attribute diagnostics. This section of the concept test surveys
the performance on specific attributes and benefits and the perception of the delivery of
the attributes. The attributes to be tested in the Braun case may be the ease of use,
closeness of shave, cleanliness, comfort, etc. Brauns 6017 must beat out the other
competitors in the tough market through customer satisfaction. This part of the concept
test must be initiated thoroughly.

The final step in the concept test is segmenting variables. The part digs into the possible
demographics, psychographics, purchase details, and satisfaction with current brands.
After completing this portion of the concept test, the consumers may be segmented into
different groups. Braun understands they are losing market share to Nationals washable
shavers and Philips Reflex Action, so it is important to dig into the consumers
reasoning to purchase the competitors products. This portion of the test provides insight
of their competitors customers.

After conducting the concept test, conjoint analysis is the next step Braun should take
towards the product development of the Flex Integral 6017. The conjoint analysis
contains multiple concepts that differ on attributes and levels, which are then placed in
groups of two for the respondent to select their preferred. In the case of the Braun
shaver, the attributes and levels may include:
Price Level:
o $60 - $89
o $90 - $119
o $120 - $149
Thumb Switch:
o Yes
o No



Cleaning method:
o Cartridge (Puck)
o Brush
Movement:
o None
o Oscillating
Grip type:
o Soft Rubber
o Teflon
o Rubber Bumps

Testing the consumer based on these levels will provide a better insight into which
attributes are more important to the consumer. Also, for each attribute, the highest-
ranking level will provide an insight into the consumer preferences.

Further into the product development stage includes the communication strategy. The
objectives of initiating a successful communication plan is such that it will create an
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awareness, inform consumers, persuasion, and to reinstate the innovation of Braun. The
goal is to implement the AIDA model into the market. In the case of Brauns Flex
Integral 6017, the ELM model of central processing creates a basis for the
communication strategy.

Since Braun remained on top for years, consumers already contain an awareness of the
brand. Recently, Braun slacked in competing with the dry shavers and washable shaver
market. In order to maintain the top position in the market, Braun has developed the
innovative Flex Integral 6017. The communication to the consumers must show the
uniqueness and modern technology used in a dry shaver. As stated in the case, Braun is
renown in the market for their German Engineering. They must simply reinstate their
technological solutions for everyday shaver usage.

Once the marketing/communication strategy is developed then next step involves the
distribution strategy. Since Braun already maintains vast distribution connections, due to
the combination of Oral-B and Gillette, this step may not be as difficult compared to
other companies. One important factor to consider is how the product will go from the
manufacturer to the retail stores. Implementing a wholesaler or a retailer in between
these steps will reduce the transactions costs to the to reduction in the touch points.
Intermediaries will also economize the shipping since Braun, Oral-B, and Gillette all
exist together.

A negative aspect of an intermediary involves channel conflict, which is when each
member of the channel may not behave accordingly to the desires of the manufacturer.
One specific occurrence out of channel conflict is double marginalization, which is when
each channel marks up the price higher lowering the end demand. In order to combat this
issue a two-part tariff may be implementing for the manufacturer and retailer. This
allows the manufacture to place an upfront fee to the retailer in order to complement their
low selling costs. The manufacturer, in this case Braun, covers their profit loss due to the
two-part tariff and the retailer will sell at lower costs, creating a higher demand.

Braun must decide on what two-part tariff to place on their new dry shaver. In the final
section of the case Michael Hansen, director of business management, mentions the
pricing of the shaver to hover around $150. It is difficult to fully decide the price and
costs associated since no references are supplied in the case. To explain this calculation
of price, the Braun shaver will be priced at $123.75 and manufacturing costs will hover
around $70.00 per product (including direct and indirect costs).

Table Projecting Potential Pricing Scenario:


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The warehouse/distributer cost will be $103.50 (15% profit margin) and the retailers cost
will be $129.38 (25% profit margin). The two-part tariff comes into play in order to
persuade the retailer to not sell the product at a discouraging low price and not at an
extreme price, lowering the demand. If the end demand is 200 per order, a franchise fee
of 20% will be imposed on the retailer. The total profits for channel are as follows:
Manufacturer - $5,035, Warehouse/Distributer - $3,105.00, and the Retailer - $4,140.00.
All channels of the Braun Flex Integral will be satisfied based on the profit margin.

The Braun Syncro Shaver case leaves a lasting impact on multiple points. One idea
consists of how innovated and cross-functional development teams need to be. These
teams consist of employees who have different backgrounds, which collectively develop
excellent product ideas. Another aspect involves the importance of constantly updating a
current product. Braun lost market share to Philips and National since they delayed on
launching a new product. The competitors beat them in producing a washable shaver.
Lastly includes the different considerations that need to be addressed in order to meet the
consumers ideal concepts, communication, and the distribution strategy.