MGM 406 Exam 3

Concurrent System

all of the players begin working, doing as much as they can at any time as the project rolls along

Scenario/ "what if" analysis

best forecasting method for new-to-the-world/ new-to-the-firm products

Required Rate of Return

in theory, the riskier the new project is expected to be, the higher this should be

Feasibility of Commercial Accomplishment

means will get out of the project profits, market share/ whatever it is we are doing w/ the PIC, "want to"

Prescreening Process

preparing a management team to do the full screening of the idea by providing input into the full screen just before beginning serious technical work

ACV

the percentage of the market that has access to the product in local distribution channels

Concept Life Cycle

this is more than a simple concept statement, yet less than we will have when the first prototype is available

Drawing Concept Statement

usually supplemented w/ a narrative statement of the concept

Buying Unit

- A-T-A-R Model - purchase point- person/ department/ buying center

Bass Model

- estimates the sales of the product class at some future time - based on the diffusion curve of new products through a population

House of Quality (HOQ)

- gathers desired attributes from customers and translates them to engineering characteristics (ECs) - first step of the QFD - key takeaway is that it's the translator - value is that it summarizes multiple product aspects simultaneously & in relationship to one another ***IMPORTANT***

Real-Options Analysis

- may be used to estimate the net present value of a new product when it's in the concept stage - it accounts for the fact that there are still unknowns at this early stage & that the firm may need to abandon the project at some time in the future as more info. is obtained & uncertainty is reduced

Feasibility of Technical Accomplishment

- means feasibility, can we do it?

Prototypes Concept Statement

- most expensive form - many decisions have to be made about the new product to get it into a ... - useful only in special situation

Competitive Insulation

- suggested question for the initial reaction - can the product's advantage be maintained against competitive retaliation?

Purpose of Concept Testing

- to identify very poor concepts so that they can be eliminated - to estimate at least crudely the sales/ trial rate the product would enjoy buying intentions, early projet of market share - knowing the benefit segments that exist in the marketplace, the firm can identify concepts that would be particularly desirable to specific segments/ niches - to help develop the idea- make tradeoffs among attributes

Commercialized Concept Statement

- type of concept statement - "embellished description" - sounds like the way the product would be promoted/ advertised - reads more like an ad - might produce more realistic customer evaluations, but quality of advertising copywriting can bias results - both commonly used

Non-Commercialized Concept Statement

- type of concept statement - "stripped description" - just facts, can be in bullet points - some prefer b/c concept being tested not the advertising - both commonly used

Bottom-Up Strategic Approach

build streatic criteria into the project selection tools

BASES II

combines the concept test w/ a customer taste test & post-taste customer responses & achieves an accuracy range of 20%

Product Line/ Life Cycle Analysis

common for selling a new technology into a current market

Contents of a Product Protocol

*** Target market *** - Product positioning - Product attributes (benefits) - Competitive comparison - Augmentation dimensions - Timing - Marketing Requirments - Financial Requirements - Production Requirements - Regulatory Requirements - Corporate strategy requirements - Potholes

Product Positioning

- "Product X is better for your use than other products b/c..." - It announces the item as new & gives the end user a real reason for trying it - in the process, it shows the end user what problem it attacks & what about it makes it better than whatever they're using now

Must Meet Criteria

- "yes-no" questions even one "no" screens the project out - Strategic alignment- should be things in the PIC - Existence of market need - Likelihood of technical feasibility - Product advantage - Environmental health and safety policies - Return versus risk - Show stoppers ("killer" variables)

Gathering the VOC

- 20 or 30 45-minute interviews produce 90-100% of customer needs. - Audio recording and transcription. - Statements grouped into 15-25 affinity groupings, prioritized by importance to customer. - Don't ask "what are your needs or requirements" as this will give you "better sameness," not revolutionary new products. - Ask about experiences or desired outcomes: "What are the most difficult tasks? What do you like and dislike? What was your worst experience?"

The Full Screen

- A step often seen as a necessary evil, yet very powerful and with long-lasting effects. - Forces pre-technical evaluation, and summarizes what must be done. - Methods range from simple checklists to complex mathematical models - often involves a scoring model- an arrangement of checklist factors w/ weights/ importance on them - helps the firm decide whether it should go forward w/ the concept/ quit

Quality Function Deployment (QFD)

- A technique designed to insure that customer needs are focused on throughout the new product project. *** First step is the House of Quality (HOQ) *** - Requires inputs from marketing and technical personnel - encourages communication and cooperation across the functional areas - making sure customers interest/ benefit is the most important/ concentrated on *** Consists of two parts, the House of Quality and later stages which converts benefits into actual assignments *** - driven by customer needs Realities - Substantial cost and time commitment - Only mixed results in some applications - Requires top management support and commitment - Must be viewed internally as an investment - Requires good functional integration - May work better if the team members have a successful track record of working together before

Diffusion of Innovation

- A-T-A-R Model - for a person/ firm to become a regular buyer of an innovation, there must first be awareness that it exists - then there must be a decision to try that innovatio - then the person must find the item available to them - finally there must be the type of happiness w/ it that leads to adoption/ repeat usage - the process by which an innovation is spread w/in a market, over time, & over categories of adopters

Awareness

- A-T-A-R Model - has heard about the new product w/ some characteristic that differentiates it - advertising thing - is the buying unit sufficiently informed to stimulate trial - ex: are they knowledgeable enough?

Availability

- A-T-A-R Model - if the buyer wants to try the product, the effort to find it will be successful - expressed as a percentage - is the product convenient to get? - can be percent of outlets carrying product/ ACV

Repeat

- A-T-A-R Model - the product is bought at least once more/ recommended to others - did they get more of it? - a measure of how successful the trial was & how pleased the buying unt is - can be the actual ... rate/ a proxy could be a statement of satisfaction level/ how likely the buying unit would recommend it to others

Trial

- A-T-A-R Model - usually means a purchase/ consumption of the product - did they get it & try it? - can be actual in-home, on-site/ vicarious depending on the product type - usually requires some expense to get the trial supply & enough time to decide whether the product was any good

Analytic Hierarchy Process (AHP)

- An analytical technique that gathers expert judgment and uses it to make optimal decisions. - the respondent identifies the key criteria in the screening decision, assessing which are the most important - Each choice (project) is rated on each criterion. - the software calculates scores for each project and ranks them in terms of preferability - calculates overall global weights for each new product project - these weights can be interpreted as the relative contribution of each alternative to the overall goal - Ex: Expert Choice are commercially available ***IMPORTANT***

Toyota's Oobeya Room

- Big room to accommodate all team members for a new product project. - Prototype (model, mock-up, or drawing) is in center of room. - All around the room are boards to guide discussion (objectives, metrics, action, decomposition into sub-projects, critical problems and issues). - Team leader sets targets and controls meeting. - Team members all make short presentations (under three minutes). - No time for loafing! Total meeting time is under one hour.

Improving QFD Efficiency

- Concentrate on only some of the Engineering Characteristics: the most critical, or the ones where improvements are easy to accomplish. - Organize the Engineering Characteristics into groups, and designate responsibility to functional areas. - Do cost-benefit analysis on each Engineering Characteristic to determine which provide the greatest benefit relative to cost of improvement

VOC Misuses

- It is not qualitative research only. - The value comes from organizing, clustering, and prioritizing the needs by importance - Do not talk to major customers only - Non-customers, average customers, and customers loyal to the competitor can provide valuable information.

Difficulties in Concept Selection

- One of the biggest challenges of product management. - What if every project under consideration has passed all the hurdles so far? - Lacking enough financial and human resources, the firm needs a good concept selection procedure, otherwise management must: - Guess (and select the wrong project) - Approve too many projects (and underfund everything)

Function

- Product Attributes - Marketers tend to use them a lot - performance specs, performance parameters,/ design parameters - protocols for service are especially likely to be in performance terms since the production of a service is a performance

Features

- Product Attributes - technical people often come up w/ these first, based on technologies they have - the bigger problem w/ is that they deprive the firm's most creative & inventive people of the freedom to use their skills Situations where will appear in protocols 1. Where regulations stipulate a particular feature 2. Where end users own major items of equipment that impose limitations 3. Where established practice in a customer industry is too strong for one supplier to change 4. Where upper managements have personal preferences

Benefits

- Product Attributes - the most desirable form for the protocol to use - an advantage of specifying the protocol in terms of ... is that it places no constraints on the R&D staff

Financial Analysis Difficulties with New Products

- Target users don't know - If they know they might not tell us - Poor execution of market research - Market dynamics - Uncertainties about marketing support - Biased internal attitudes - Poor accounting - Rushing products to market. - Basing forecasts on history - Technology revolutions

Project NewProd Screening

- The idea is that by examining dozens of variables on real product successes and failures, one would be able to predict the likelihood of success of a new product at this early stage, and to identify weak spots that can be addressed before new product project approval - Current practices splits the screening model into two groups: must-meet and should-meet criteria

Protocol Purposes

- To determine what marketing and R&D groups need to do their work - Concept Life Cycle - Try to identify the key deliverables at this point. *** To communicate essential to all players and integrate their actions, directing outcomes consistent with the full screen and financials *** - To set boundaries on development process or cycle time. *** To permit the development process to be managed (i.e., what needs to be done, when, why, how, by whom, whether) ***

Simple Scoring Model

- a ... process is what we actually use in making decisions - if we could, we would use only one factor - net present value - use surrogates/ substitutes in some cases - want to level set the field - get everyone on the same page

Product Concept Statement

- a statement about anticipated product features that will yield selected benefits relative to other products/ problem solutions already available - the importance of getting responses to ... and not simply ideas - states a difference & how that difference benefits the customer/ end user - ex: a new electric razor whose screen is so thin it can cut closer than any other electric razor on the market A claim of proposed satisfaction through... 1. The producer's perception of the features of the new product 2. The consumer's perception of the features of the new product 3. The producer's estimate of the benefits delivered by that set of features 4. The consumer's estimate of the benefits of that set of features

Drop Error

- a winner is discarded - throwing away a winner is very costly b/c the ultimate profits from a winning product are bound to be must greater than all the development costs combined

Joint Space Map

- allows us to assess the preferences of each benefit segment for different product concepts - can be developed using ideal brand ratings/ preference regression

Narrative Concept Statement

- brief presentation w/ minimum attributes & letting the respondent offer new ones/ full description - approaching what a diagram/ prototype would provide

Preference Regression

- can be used to identify the optimum combination of attributes desired by the market - we do a regression analysis to relate the factors scores of each brand to the ranking of brands - the relative sizes of the regression coefficients we obtain give us an indication of the relative importance of each factor - can also be done on attribute ratings instead of factor scores

Real Time Response Survey

- combines best features of focus groups & surveys - 100 participants gather info. about the concept via a simulated ad - moderator guides respondents through computer exercise - early results from this dataset ar sued by the moderator to develop original open-ended questions on new concepts/ combinations of attributes - dozens of concepts can be evaluated in a three-hour session

Voice of the Customer (VOC)

- complete set of customer wants and needs, expressed in customer's own language, prioritized in terms of importance and performance. - No scientific jargon - Use people words - Remember that customers are very good at stating their needs, even though they are not professional engineers and usually cannot tell what technology should be used (reason to use QFD) - Key lesson: don't ask customers about what they want. Ask about what outcomes they want to see in the future - customers must organize & prioritize their needs in their own way which is likely to be different than the firm - affinity grouping - avoid "better sameness" - good to focus on experiences/ desired outcomes

Concept Testing Key Issues

- concept statement: narrative, drawing, model? - respondent group: lead users? large users? - response situation: where? how? - interviewing sequence: is the concept understandable? believable? important? interesting? realistic? would it work? what problems do they see? would they buy? - test procedure, change & implement, study findings

Decay Curve

- depicts the % of any firm's new product concepts that survive through the development pd. - the discarded 98% drop off at various times during the process - when they drop off is primarily determined by the analysis of the risk matrix

Cumulative Expenditure Curve

- different industries have different curves - checkpoints throughout the process of continue/ don't continue points - early expenditure/ high tech products more challenging to approve initially - late expenditure/ consumer products less development costs & easier to approve initially ***IMPORTANT***

Profile Sheet

- graphically arranges the 5-point scoring on different factors - the approach draws attention to patterns

Initial Diffusion Rate

- growth in total number of purchases - based on adoption by innovators

BASES

- helps firms evaluate & optimize new product concepts & also predict sales, operate worldwide, & studies over 10,000 new product ideas per year - Pre, I, & II

Sales Forecast

- how begin the financial analysis - typically the responsibility of the marketing person on the new product team - models challenging b/c require massive amounts of data to work well, are heavily built on assumptions & are so complex that many managers are wary of them - sales job is responsible for how much is sold, not at what price - consider time, cost, product, & market newness when selecting the appropriate model Considerations when developing ... 1. A product's potential may be extremely high, but sales may not materialize due to insufficient marketing efforts 2. Sales will grow through time if we successfully get customers to try the product & covert many of these into repeat purchases, favorable word of mouth, etc. 3. We should recognize that our product's sales will depend on our competitor's strategies & programs along w/ our own

Concept Testing Concerns

- if the prime benefit is a personal sense - if the concept involves new art & entertainment - if the concept embodies a new technology that users cannot visualize - if mishandled by management, then blamed for product failure - if customers simply do not know what problems they have

Product Diffusion

- in theory, early adopters should influence purchase behaviors of later ones through word of mouth & other influence processes - the rate of diffusion of a product can be difficult to assess b/c it's unknown how influential the early adopters will ultimately be - sales cycle for the product could be years/ months - every product has this type of curve - want to keep the waves going, if don't wil be out of business - can use an analogous existing product as a guideline for the growth potential of an innovation product - managerial judgment regarding new products might suggest that actual market potential be higher/ lower than the initial estimate - quantitative innovation diffusion can also be used in predicting future product category sales based on historical product sales levels

Market Analysis

- in-depth study of market area that the PIC has selected for focus - conducted immediately after PIC approval ***IMPORTANT***

Product Augmentation

- includes any enhancement to the product which is not a part of the physical product form/ service - includes warranties, guarantees, technical support & other product related info. - ex: complementary foods with a wine - at the core of a product is the end-user benefit, the real purpose for which the product was created ***IMPORTANT***

Ideal Brand

- most direct way to get customers to rate each attribute, convert to factor scores, & plot the ... positions directly on the perceptual map - each cluster represents a segment w/ its own ... positioned at the center of the cluster - we expect the brand is located closest to a segment's ... will be preferred by that segment - useful to managers in developing ideal new products for targeted segments & making positioning decisions

Customer Attributes (CAs)

- needs, whats, or requirements - identified through market research - frequently weighted in terms of importance - identifies the strong points & areas for improvement of new product

Conjoint Analysis

- overall is extremely useful in concept testing b/c of its ability to uncover relationships between attributes & customer preferences - the top ranking concept(s) are the ones that hold the highest potential & should be considered for further development *** never test for anything/ variable that your not willing to do ***

Commercial Success Factors

- part of industrial research institute scoring model - Customer/Market Need - Market/Brand Recognition - Channels to Market - Customer Strength - Raw Materials/Components Supply - Safety, Health and Environmental Risks

Technical Success Factors

- part of industrial research institute scoring model - Proprietary Position - Competencies/Skills - Technical Complexity - Access to and Effective Use of External Technology - Manufacturing Capability

People

- part of planning the evaluation system *** proposal may be hard to stop once there is buy-in on the concept *** - need tough demanding hurdles, especially late in new products process - personal risk associated w/ new product development very common - need system that protects developers & offers reassurance if warranted

Rolling Evaluation

- part of planning the evaluation system - "everything is tentative" - project is assessed continuously - financial analysis needs to also be continuous - not enough data early on for complex financial analyses - run risk of killing off too many good ideas early - marketing planning begins early in the process - new product participants avoid "good/bad" mindsets, avoid premature closure - open-minded people - used often today - continuously upgrade the quality of info. available to us throughout the process to minimize the chances of failure & to expect contingencies & deal w/ them as they come up

Potholes

- part of planning the evaluation system - know what the really damaging problems are for your firm & focus on them when evaluating concepts - only costly when we fail to see them coming in time to steer around them - ex: FDA approval, manufacturing costs & taste, consumer unwillingness to learn

Surrogates

- part of planning the evaluation system - questions that give clues to the real answers - replacement for the real question - gives us pieces of info. that can substitute for what we want to learn but can't ***IMPORTANT***

Initial Reaction

- preliminary, inexpensive assessment of concepts, which may be flowing very quickly at this point - avoid "bazooka effect" quickly blasting out concepts w/out forethought * do not include idea source in ... * respect the "fragility of ideas - have more than a single person involved - two/more personal are involved in any rejection decision- the rejection % is much higher here than at any other stage * use more than pure intuition- keep records & stay objective ***IMPORTANT***

Protocol

- product requirements, product definition, deliverables, etc. - Doesn't it seem obvious and simple? - Actually is one of the top success factors distinguishing winning from losing projects. - Maybe because it involves more than technical aspects - Include things people especially those w/in the company should/ need to know - what is the final package of output form the development system, what benefits/ performance will the product deliver to the customer, & what changes will the marketing program bring in the marketplace - the negotiating parties are the functions - states requirements that force us to do what we should be doing anyways - an aid to management, not a substitute for thinking - all have to change at some point - the burden of proof is on those who want to change a requirement

BA Risk/ Payoff Matrix

- product would fail if marketed - continue to next evaluation - more financially costly to the company - "go error" - don't forget about opportunity costs - like art, has a less concrete decision ***IMPORTANT***

AA Risk/ Payoff Matrix

- product would fail if marketed - stop the project now - "correct" decisions - drop a concept that would ultimately fail - like science, more straight forward correct answer ***IMPORTANT***

BB Risk/ Payoff Matrix

- product would succeed if marketed - continue to next evaluation - "correct" decision - like science, more straight forward correct answer ***IMPORTANT***

AB Risk/ Payoff Matrix

- product would succeed if marketed - stop the project now - worse of the two errors - "drop error" - greater risk to the organization as a whole b/c cut an opportunity/ potential revenue short - like art, has a less concrete decision ***IMPORTANT***

Importance Rating

- rate how important each attribute was in determining their preferences among brands - can be used to model existing brand preferences & predict likely preferences to new concepts - can use cluster analysis w/ it/ in support of this

Acceptance

- risk/ payoff matrix new product team should consider four generic risk strategies - develop a contingency plan - how to (active acceptance) deal w/ the risks as they come up (passive acceptance)

Avoidance

- risk/ payoff matrix new product team should consider four generic risk strategies - eliminate the risky project altogether - opportunity costs incurred

Transfer

- risk/ payoff matrix new product team should consider four generic risk strategies - move the responsibility to another organization in the form of a joint venture/ subcontractor - the other party would be better equipped to handle the risk

Mitigation

- risk/ payoff matrix new product team should consider four generic risk strategies - reduce the risk to an acceptable threshold level - perhaps through redesigning the product to include more backup systems/ increasing product reliability

Should Meet

- scales, and high scores offset (compensate for) any low scores - no one project should rate high on all of these - Strategic alignment and importance- more towards individual project, don't conflict w/ products the company already has - Product advantage (unique benefits, meets customer needs, provides value for money) - Market attractiveness (size, growth rate) - Synergies (marketing, distribution, technical, manufacturing expertise) - Technical feasibility (complexity, uncertainty) - Risk vs. return (NPV, IRR, ROI, pay

Interview Sequence

- state new product concept - ask about the believability, buying intentions, & any other info. wanted - first explore the respondent's current practice in the area concerned, asking people how they currently solve their problems, what competing products exist, & what they think about those products - the immediate & critical question is "does the respondent understand the concept?" - especially interested in what changes they would make in the concept, exactly what it would be used for & why, what products/ processes would be replaced, & who else would be involved in using the item - exploring what people are doing & thinking

Firm Worth

- suggested question for the initial reaction - is the new product project viewed positively by management? - does this new product project enhance the firm's competencies?

Market Worth

- suggested question for the initial reaction - what is the attractiveness of the new product to the targeted customer population?

Top-Down Strategic Approach

- the firm/ SBU lays out its strategy first, then allocates funds across different kinds of projects - can be used in project selection

Sales Analysis

- the most straightforward kind of forecast to conduct - used for current technologies being used in current markets - time series & regression forecasts useful here

Group Support Systems

- used in a focus group setting - participants respond to different versions of products - group's responses are averaged & immediately displayed on the screen in the room - good concepts are selected & improved on & more responses are gathered - captures the advantages of the prototype w/out most of the disadvantages

Ideal Vector

- visually represents the optimum proportion of attributes desired by this market - a product concept laying near the regression line point x on the mpa is the most desirable position for this market

Net Present Value

- what the value of future expenditures are worth today - in low inflation environment, is worth less/ has less value -... of the discounted stream of earnings from the product concept - covers both technical & commercial accomplishment - "the bottom line on an income statement for the product, where we have included all costs, & then discounted back the profits into what their value is today"

Scoring Factor Model

- work on factors that are important - as a group negotiate the weight want to put on things - typically high scores win - over time the list should be reduced as much as possible & always kept fluid - model contains a set of technical success factors & a set of commercial success factors - projects w/ the highest total scores are most likely to succeed - another problem occurs when the factor being scored has all/ nothing, yes/ no answers - culling factors: bad score constituting a veto - most serious criticism is their use of weights b/c the weightings are necessarily judgemental - sensitivity testing: used b/c of the importance of weightings

Top-two boxes

1. Definitely would buy 2. Probably would buy 3. Might/ might not buy 4. Definitely would not buy A total number/ % of people who would definitely buy/ probably would buy being used as an indicator of group reaction- usually should discount what people say7

A-T-A-R Model

Awareness Trial Availability Repeat 1. Each factor is subject to estimation which improves w/ each step in the development phase 2. Inadequate profit forecast can be improved by changing factors & doing a "what-if" analysis - if inadequate, look at each factor & see which can be improved & at what cost - consider qualitative issues as well

Handling problems in Financial Analysis

Improve your existing new products process Use the life cycle concept of financial analysis Reduce dependence on poor forecasts - Forecast what you know - Approve situations, not numbers - Commit to low-cost development and marketing - Be prepared to handle the risks - Don't use one standard format for financial analysis - Improve current financial forecasting methods

The Scorers

The Team: - Major Functions (marketing, technical, operations, finance) - New Products Managers Staff Specialists (IT, distribution, procurement, PR, HR) Problems with ...: - May be always optimistic/pessimistic - May be "moody" (alternately optimistic and pessimistic) - May always score neutral - May be less reliable or accurate - May be easily swayed by the group - May be erratic

Full Screen Purposes

To decide whether technical resources should be devoted to the project. - Feasibility of technical accomplishment -- can we do it? - Feasibility of commercial accomplishment -- do we want to do it? - real people doing real work To help manage the process. - Recycle and rework concepts - Rank order good concepts - Track appraisals of failed concepts *** To encourage cross-functional communication *** - disagreements put the spotlight on "potholes"/ hurdles that the concept will face during development & show where new people may need to be

Pre-BASES

a concept test that provides rough sales predictions

Benefit Segmentation

a firm may identify unsatisfied market segments & concentrate its efforts on developing concepts ideally suited to the needs of these segments

Go Error

a loser is continued to the next evaluation point

BASES I

a more advanced concept test that incorporates media selection decisions, levels of consumer, & trade promotions, & extent of distribution to estimate awareness & ability, & can attain a forecasting accuracy range of 25%