Professional Documents
Culture Documents
Product design using conjoint analysis Forecasting the pattern of new product
New Products1
Newness of Products
Repositioning
New to World
Line Extensions
Me Too Products
New to Company
New Products2
New
Market Development
Existing
Products
New New Product Development (Diversification)
New Products3
Reposition
Harvest
Life-Cycle Management
Go Design
Identifying customer needs forecasting Product positioning Marketing mix assessment
No
Market response analysis & fine tuning the marketing mix; Competitor monitoring & defense Innovation at maturity
Go
No
Introduction
Launch planning Tracking the launch
Go Testing
No
Advertising & product testing Pretest & prelaunch forecasting Test marketing
Go
No
New Products4
100
Mkt Share 32.4%
98
50 0
58
18.4
Minimal Moderate Product Superiority Maximal
Based on a study of 203 products in B2B -- Robert G. Cooper, Winning at New Products (1993) . Success measured using four factors: (1) whether it met or exceeded managements criteria for success, (2) the profitability level (1-10 scale), (3) market share at the end of three years, and (4) whether it met company sales and profit objectives (1-10 scale). New Products5
100 50 0
Poor
85.4
64.2
26.2
Moderate Product Definition Strong
100
Mkt Share 31.7 Mkt Share 33.7
50 42.5 0
Low
61.5
73.9
High
200 100 0
57
148.4
Predevelopment Activities
New Products8
New Products9
Attitude-Based
Direct Questions
Unconstrained Focus groups Direct survey questions Importance and attitude ratings rule-based system/AI/expert systems
New Products12
Should we offer our business travelers more room space or a fax machine in their room?
Given a target cost for a product, should we enhance product reliability or its performance?
Should we use a steel or aluminum casing to increase customer preference for the new equipment?
New Products13
1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9
Decor
1 2 3 4 5 6 7 8 9
New Products14
New Products15
New Products16
New Products17
New Products18
Crust
Pan Thin Thick
Type of Cheese
Romano Mixed cheese Mozzeralla
Price
$ 9.99 $ 8.99 $ 7.99
Topping
Pineapple Veggie Sausage Pepperoni
Amount of Cheese
2 oz. 4 oz. 6 oz.
Type of crust (3) Type of cheese (3) Amount of cheese (3) Type of meat (3)
Amount of meat (3) Type of sauce (3) Amount of sauce (3) Presence of mushrooms (2)
Types of peppers (3) Presence of olives (2) Presence of oil (2) Price (3)
Prototypes
81 prototype pizzas from 105,000 possible profiles.
Person Attributes
Study Approach
Each respondent rates 3 of the 81 prototypes along with a control. Likelihood of purchase, conditioned on price. Appropriateness for various meals/snacks. Appropriateness for various family members. New Products20
Aloha Special
Meat-lovers treat
Crust
Topping Type of cheese Amount of cheese Price Which do you prefer? Which one would you buy?
Pan
Pineapple Mozzarella 4 oz $8.99
Thick
Pepperoni Mixed cheese 6 oz $9.99
New Products21
Example Ratings
Product Bundle Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Type of Cheese Romano Mixed Mozzarella Mixed Mixed Romano Mixed Mozzarella Mozzarella Mixed Romano Mixed Mixed Mozzarella Mixed Romano Amount of Cheese 2 oz 6 oz 4 oz 4 oz 4 oz 4 oz 6 oz 2 oz 6 oz 2 oz 4 oz 4 oz 4 oz 4 oz 2 oz 6 oz Example Preference Score 0 43 53 56 41 63 38 53 68 46 80 58 61 57 83 70
New Products22
Crust Pan Thin Thick Thin Pan Thin Thick Thin Thick Thin Pan Thin Pan Thin Thick Thin
Topping Pineapple Pineapple Pineapple Pineapple Veggie Veggie Veggie Veggie Pepperoni Pepperoni Pepperoni Pepperoni Sausage Sausage Sausage Sausage
Price $9.99 $8.99 $8.99 $7.99 $8.99 $7.99 $9.99 $8.99 $7.99 $8.99 $8.99 $9.99 $8.99 $9.99 $7.99 $8.99
New Products23
New Products24
Conjoint Computations
m ki
where: P U(P) aij ki m xij = = = = = = a particular product/concept of interest, the utility associated with product P, Utility associated with the jth level (j = 1, 2, 3, . . . , ki) on the ith attribute (part-worth), number of levels of attribute i, number of attributes, and 1 if the jth level of the ith attribute is present in product P, 0 otherwise.
New Products25
which the target segment make choices. Some of theses may be existing products and, others concepts being evaluated. We denote this set of products as P1, P2,...PN.
Select Choice rule
compute the revenue index of any product compared to the revenue index of 100 for a base product you select.
New Products26
The relevant market consists of products P1, P2, . . . , PN. Some of theses may be existing products and, others concepts being evaluated. Each consumer will prefer to buy the product with the highest utility among those available. Then forecasted market share for products Pi is given by:
MS (Pi) =
K=1
C1
Pan Thin Thick Pineapple Veggie Sausage Pepperoni Romano Mixed cheese Mozzarella 2 oz 4 oz. 6 oz. $9.99 $8.99 $7.99 0 9 11 17 6 13 0 52 13 0 0 8 10 0 10 10
C2
10 37 0 3 0 3 0 0 9 3 0 39 21 0 4 12
C3
26 0 10 0 14 7 19 21 0 14 0 16 12 0 18 16
New Products30
Infrequently purchased products: Consumers only buy the brand with the highest utility. Then, the market share for Product 1 is 66.6% and Product 3 is 33.4%. Frequently purchased products (Share of utility rule) Assume each consumer buys the same amount. Then Market share of P1 = (0.24 +0.43+0.45)/3 = 37.3% Market share of P2 = (0.23+0.22+0.25)/3 = 23.3% Market share of P3 = (0.53+0.35+0.30)/3 = 39.4%
New Products31
wi pij i mj = wi pij
j i mj: market share of product j wi: weights assigned to individual i
New Products32
New Products33
New Products34
New Products35
Efficiency
Exceed by 9% Exceed by 5% Meets target Short by 5%
Delivery time
6 months 9 months 12 months 15 months
List Price
$600k $700k $800k $900k
Delivery terms
Installed, 2-year guarantee Installed, 1-year guarantee Installed, service contract FOB seller, service contract A total of 256 (4x4x4x4) different offerings can be designed from these options!
New Products36
New Products38
Thermatrix
78 30 78
Advanced Air
61 75 40
70 40 50
Maximum Utility Rule: If we assume customers will only buy the product with the highest utility, the market share for Thermatrix is 2/3 and 1/3 for Wahlco. Share of preference rule: If we assume that each customer will buy each product in proportion to its utility relative to the other products, then market shares for the three products are:
Thermatrix: 34.8
New Products39
Cummins Engineering, Illinois Tools, Mattel, NesteResin, Ralston Purina, New World Technologies, Baltimore Gas, Applied Coatings, Pharmasyn, and Thermal Electric. These are smaller companies that operate in industries without major pollution problems. They want an equipment that meets EPA efficiency target, medium delivery times, have high price sensitivity, and require installation and warranty.
New Products41
ICI, Mobil, Maytag, Texaco, Union Carbide, Dow Chemicals, Boise Cascade, and 3M. These are large chemical and paper companies that have pollution issues to deal with. They want an equipment that Exceeds EPA efficiency target, have long delivery times (perhaps for installation in new factories that they build), have moderate price sensitivity, and do not require installation help or warranty (FOB).
New Products42
Deere, Intel, Air Products, Sunoco, HP, Conagra, Kimberly-Clark, Hershey, and Westinghouse Electric. These are large companies that seem to operate in industries with less severe pollution problems. They want an equipment that Exceeds EPA efficiency target, prefer quick/medium delivery, have low price sensitivity, and moderately prefer installation and warranty.
New Products43
Market share Incremental margin over base product Segment 1 (Value segment): A product that meets EPA target, with delivery of 6 months, priced at 600K, and with installation and 2-year warranty has the potential to get 42% share of the market and good revenue potential against the three existing competitors. Segment 3 (Premium segment): A product that exceeds EPA target by 5%, with delivery of 9 months, priced at 700K, and with installation and 2-year warranty has the potential to get 31% share and high revenue potential.
New Products44
The new concept involves important tradeoffs affecting design, production, marketing, or other operational variables. Product/service is realistically decomposable into a set of basic attributes.
New Products45
Industrial/Business Goods
1. 2. 3. 4. 5. 6. Copying machines Printing equipment Fax machines Data transmission Lap top computer Job offers to MBAs
Other Products
1. 2. 3. 4. 5. Automotive styling Automobile tires Car batteries Ethical drugs Employee benefit package
Financial Services
1. 2. 3. 4. 5. Branch bank services Auto insurance policies Health insurance policies Credit card features Consumer discount card
Transportation
1. 2. 3. 4. 5. Air Canada IATA American Airlines Canadian National Railway Amtrak
Other Services
1. 2. 3. 4. 5. Car rental agencies Telephone service pricing Hotels Medical laboratories Employment agencies New Products46
Scenario Analysis
Diffusion modeling Later stages of development Pre-test market methods Test-market methods
New Products47
Model designed to answer the question: When will customers adopt a new product or technology?
New Products48
F(t)
Time (t)
(b)
f(t) = d(F(t)) dt
Time (t)
New Products50
5,000,000
1,000,000 1983 1 2 3 4 5 6 7 8 9
Imitation Effect
# Adopters
Remaining Potential
=
=
S0 + S1 + + St1
Total Potential # Adopters
New Products52
B&W TV Color TV Room Air conditioner Clothes dryers Ultrasound Imaging CD Player Cellular telephones Steam iron Oxygen Steel Furnace (US) Microwave Oven Hybrid corn Home PC
A study by Sultan, Farley, and Lehmann in 1990 suggests an average value of 0.03 for p and an average value of 0.38 for q.
New Products53
Formulation
Let:
L(t): Likelihood of purchase at t, given that consumer has not purchased until t f(t): Instantaneous likelihood of purchase at time t F(t): Cumulative probability that a consumer would buy the product by time t
Once f(t) is specified, then F(t) is simply the cumulative distribution of f(t), and from Bayes Theorem, it follows that:
L(t) = f(t)/[1F(t)]
(1)
New Products54
q L(t) = p + N(t) N
where p q N(t) N = = = = Coefficient of innovation (or coefficient of external influence) Coefficient of imitation (or coefficient of internal influence) Total number of adopters of the product up to time t Total number of potential buyers of the new product
(2)
Then the number of customers who will purchase the product at time t is equal to Nf(t) . From (1), it then follows that:
(3)
Nf(t) may be interpreted as the number of buyers of the product at time t [ = (t)]. Likewise, NF(t ) is equal to the cumulative number of buyers of the product up to time t [ = N(t)].
New Products55
Noting that [n(t) = Nf(t)] is equal to the number of buyers at time t, and [N(t) = NF(t)] is equal to the cumulative number of buyers until time t, we get from (2): q Nf(t) = [ p + N(t)][1 N(t)] N (3)
After simplification, this gives the basic diffusion equation for predicting new product sales: q n (t) = pN + (q p) [N(t)] [N(t)]2 N (4)
New Products56
q p + N(t1) N
[N N(t1)]
Given four or more values of N(t) we can estimate the three parameters of the above equation to minimize the sum of squared deviations.
New Products57
N(t1) 2/N
Sales in Quarter 1 = 0.01 16,000 + (0.410.01) 0 (0.41/16,000) (0)2 = 160 Sales in Quarter 2 = 0.01 16,000 + (0.40) 160 (0.41/16,000) (160)2 = 223.35 New Products59
High relative advantage over existing products High degree of compatibility with existing approaches Low complexity
Market-related
Type of innovation adoption decision (eg, does it involve switching from familiar way of doing things?) Communication channels used Nature of links among market participants Nature and effect of promotional efforts
New Products60
Conceptual model
Awareness Availability Trial Repeat
ASSESSOR Model
Objectives
Predict new products long-term market share, and sales volume over time
Estimate the sources of the new products share, which includes cannibalization of the firms existing products, and the draw from competitor brands Generate diagnostics to improve the product and its marketing program
Evaluate impact of alternative marketing mix elements such as price, package, etc.
New Products63
Diagnostics
New Products64
O1
O2 X1
[O3]
X2 O4
X3 O5
Respondent screening and recruitment (personal interview) Pre-measurement for established brands (self-administrated questionnaire) Exposure to advertising for established brands and new brands Measurement of reactions to the advertising materials (selfadministered questionnaire) Simulated shopping trip and exposure to display of new and established brands Purchase opportunity (choice recorded by research personnel) Home use/consumption of new brand Post-usage measurement (telephone
Criteria for target-group identification (eg, product-class usage) Composition of relevant set of established brands, attribute weights and ratings, and preferences
Brand(s) purchased
New-brand usage rate, satisfaction ratings, and repeat-purchase propensity; attribute ratings and preferences for relevant set of established brands plus the new brand
Trial/Repeat Model
New Products66
Trial Model
T = FKD + CU (FKD) (CU)
where:
F = K = D = C = long-run probability of trial given 100% awareness and 100% distribution (from O4) long-run probability of awareness (from managerial judgment) long-run probability of product availability where target segment shops (managerial judgment and experience) probability of consumer receiving sample (Managerial judgment)
U =
probability that consumer who receives a product will use it (from managerial judgment and past experience)
New Products67
Repeat Model
Obtained as long-run equilibrium of the switching matrix estimated from (O2 and O5): Time (t+1)
New New Other
p(nn) p(on)
p(no) p(oo)
Time t
Other
p(.) are probabilities of switching where p(nn) + p(no) = 1.0; p(on) + p(oo) = 1.0 Long-run repeat given by: r = p(on) 1 + p(on) p(nn)
New Products68
(Vij)b =
k=1
(Vik)b
Ri
Lij
Ri b
= Products that participant i will consider for purchase (Relevant set) = An index which determines how strongly preference for a product will translate to choice of that product (typical range: 1.53.0)
New Products69
Ri
k=1
(Vik)b
Choice probability of product j after participant i has had an opportunity to try the new product b = index obtained earlier Then, market share for new product:
Mn = En
n En = = index for new product
Lin N I
proportion of participants who include new product in their relevant sets number of respondents
New Products70
Lin Mj = N I Mj = En
Lin + (1 En) N I
Lin N I
Then the market share drawn by the new product from each of the existing products is given by:
Dj = Mj Mj
New Products71
8
9 10
0.6
4.8 0.7
0.2
2.4 0.0
0.0
0.0 4.9
0.0
0.0 0.0
0.6
5.0 0.7
0.2
2.2 0.0
0.0
0.0 3.4
0.0
0.0 0.0
5.0
0.3 0.9
New Products72
Choice Probabilities
Customer 1 2 3 4 5 6 7 8 9 10 B1 0.00 0.20 0.43 0.46 0.00 1.00 0.01 0.89 0.79 0.02 Lij (Pre-use) B2 B3 B4 0.00 0.05 0.57 0.54 1.00 0.00 0.35 0.11 0.21 0.00 0.63 0.75 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.98 0.37 0.00 0.00 0.00 0.00 0.00 0.64 0.00 0.00 0.00 10.1 B1 0.00 0.21 0.42 0.47 0.00 0.80 0.03 0.02 0.82 0.04 28.1 B2 0.00 0.03 0.16 0.50 1.00 0.00 0.61 0.00 0.18 0.00 24.8 Lij (Post-use) B3 B4 New Product 0.69 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.89 16.1 0.31 0.00 0.00 0.00 0.00 0.00 0.36 0.00 0.00 0.00 6.7 0.00 0.73 0.42 0.03 0.00 0.20 0.00 0.98 0.00 0.07 24.3
Unweighted market share (%) 38.0 28.3 23.6 New products draw from each brand (Unweighted %) New products draw from each brand (Weighted by En in %)
9.9
2.0
3.5
0.7
7.5
1.5
3.4
0.7
New Products73
% making first purchase due to advertising 0.137 Long-term market share from advertising 0.39 Retention rate GIVEN trial for ad purchasers 0.286
New Products74
New Products75
Post-use constant sum evaluations Cumulative trial from ad (T&R model) 0.137
New Products76
JWC factory sales 16.7 Average unit margin 0.541 Ad/sampling expense 4.5/3.5
New Products77
Deodorant Antacid Shampoo Shampoo Cleaner Pet Food Analgesic Cereal Shampoo Juice Drink Frozen Food Cereal Etc. Average Average Absolute Deviation Standard Deviation of Differences
13.3 9.6 3.0 1.8 12.0 17.0 3.0 8.0 15.6 4.9 2.0 9.0 ... 7.9
11.0 10.0 3.0 1.8 12.0 21.0 3.0 4.3 15.6 4.9 2.0 7.9 ... 7.5
10.4 10.5 3.2 1.9 12.5 22.0 2.0 4.2 15.6 5.0 2.2 7.2 ... 7.3
2.9 0.9 0.2 0.1 0.5 5.0 1.0 3.8 0.0 0.1 0.2 1.8 ... 0.6 1.5 2.0
0.6 0.5 0.2 0.1 0.5 1.0 1.0 0.1 0.0 0.1 0.2 0.7 ... 0.2 0.6 1.0
New Products78
BASES Model
Trial volume estimate Pt =
Calibrated intent score
Distribution intensityt
Awareness levelt
Rt = Ni1,t Yit Ui
i=1 where: Ni1,t = Cumulative number of consumers who repeat at least i1 times by week t (N0,t = initial trial volume) Yit = Conditional cumulative ith repeat purchase rate at week t given that i1 repeat purchases were made up to week t Ui = Average units purchased at repeat level i Ni1,t & Yit are estimated based on consumers stated after use intended purchase frequency and estimate of long-run decay in repeat rate. Ui is estimated based on consumers stated purchase quantities.
New Products80
New Products81
New Products83