UNIT XIV – CONCEPT DEVELOPMENT AND TESTING

Difference between Concept Testing and Idea Generation

During the idea generation stage a company may have several ideas, however they will go through
all the ideas and arrive at only a few that will be taken up in the next stage. In this stage the
development team tries and get responses of the various product ideas/ concepts from some
potential customers in the target market. This testing allows the product development team to
understand if the concept meets the customers’ expectations, whether it can be improved and to
get an idea of the potential sales of the product. In this phase product concept can be discussed
with the customer at several points in the development for example in the initial stage the product
may only be described to a customer verbally to get a feedback on whether the product actually
meets the customer ‘s expectations as is being thought by the company because this is the basis
on which the company is developing the product. The product can also be shown to the customer
once it has been partially developed in order to get a clearer response from the customer and also
an indication of the potential sales that the company can get from the product.

In concept development and testing we have not only to discuss the concept with the customer it
may also involve showing him the prototype of the product or other methods of making him
understand the product, its utility and thus getting the relevant feedback from him. Based on the
feedback we receive from the customer the company should be able to evaluate the customers’
acceptance of the product, its potential sale and hence the fit into the business objectives of the
company. This concept testing may or may not be carried out. The decision to carry it out or not
depends on:

 The type of product and

 Time available for development
 Cost of development versus the cost of launch
 Cost of failure vs cost of development

For example, if we launch a website and there is an error it can be corrected at a later point of
time also but if we launch medical equipment on which life depends and it malfunctions the
consequences can be very serious.

Concept Development and Testing Process

Concept testing can be carried out by following the following steps:
i. Define the purpose of the concept test
ii. Choose the target customer to survey
iii. Decide the method of gathering information
iv. Communicate the concept to the customer
v. Capture the customer’s response
vi. Interpret the results
Define the purpose of the concept test
The first step in concept testing is to define what and why we want to test about the concept. The
product development team must know what the areas they want to test are and for what areas
they need answers. It is only then that the test can be structured in a proper manner. The concept
test is an experimental process and like for any experiment its objective must be defined before
we undertake the test. It is the definition of the test that will tell us how to measure the responses
of the customer. For example, if the company is developing a new washing machine it may need
to know how much piped water is available in houses in that country or region. If we do not define
this parameter in the test we may just discuss the concept without determining the amount of
water available. In other words, we will not measure the water availability in the test.

Generally, a product concept test will need an answer to the following primary questions:
i. Does the product meet the customers need?
ii. How can the product be improved?
iii. Can the product be enhanced to meet additional needs?
iv. How frequently will the customer need the product?
v. How much sales will the product generate?
vi. Should the development be continued or not?

All questions in the survey ‘s design will have a bearing on the product and along with it the
business strategy of the company. For example, if the product meets the customer ‘s needs but is
not likely to generate sales then the purpose of development is lost.

Choose the target customer to survey

Once we have decided what we want to ask the customers we have to choose the customers from
whom we will ask the information. Choosing the target customer sample who will be surveyed for
testing the concept is an extremely important step. This is because we are going to base the entire
product development concept on the feedback received from this customer sample. If we have
chosen, the customer sample wrongly this customer sample gives the wrong feedback and it will
be disastrous for the product development and the company. For example, if the customer sample
with whom we have discussed the concept likes the product and approves it but these customers
do not represent the target market segment because of a wrong selection then the product will
most likely fail. In order to overcome such a problem companies undertaking such a survey like to
include as many potential target segments in a survey as possible. However, such a survey is very
expensive and it is not possible for all companies to undertake it. So many times companies try
and include two or three major segments in the survey. This allows the company to get a mix of
opinions and so arrive at a more balanced decision. Another important factor while undertaking
the survey is to decide the number of customers to be surveyed. Naturally the more the customers
who are surveyed the greater is the possibility of a more unbiased or balanced decision. Here again
more customers to survey means more cost and so a trade-off needs to be arrived at between
number of customers to be surveyed and cost to be spent.

The factors which determine the size of the test consumers are:
 Factors for selecting a small sample size
  If the test is done during the early part of the developmental process
 If the test is only to gather some qualitative data about the product
 If it is expensive or time consuming to survey customers
 If the investment needed for developing the product is small

 Factors for selecting a large sample size

 If the test is being carried out at a later stage of development. In later stages of the
development we have moved ahead on the development and now have certain definite
questions to be answered to proceed to the next stage of development. This needs a larger
number to answer them so as to get the information without bias.
 If we are trying to get an estimate of the demand of the product.
 If it is possible to survey customers quickly and without much cost.
 If the investment needed to develop and launch the product is high e.g.an airplane,
medical equipment, car, etc.

So the actual numbers of customers surveyed will vary drastically from a small number to a very
large number depending on the above mentioned factors. Let us see what would happen if we
develop a website and host it quickly after conducting a brief survey of only a few customers. It is
possible that because all information on the needs of the customer was not captured due to a
small sample and also due to the speed of the development some aspects of the website do not
function properly. In such a situation the company developing the website can continue to correct
it in stages since the information is not critical. However, if we were to do this for say a medical
equipment on which life depended and this machine did not give all the needed functions because
we did not ask enough customers or were in a hurry to launch it the consequences would be
disastrous.

Decide the method of gathering information

Once the customer sample has been decided we now have the task of actually going out and
collecting the information. The product development team has the responsibility of determining
the best way to collect the information since they are the ones who are setting up this ‗experiment
‘. In the initial stages of the product development information is taken in a more unstructured
manner this means that the questions are such that can have qualitative answers and are not so
easily quantifiable. In the later stages of development questions can be more structured. This
means that in the initial stages the interaction with the customer must be done by the
development team themselves while a more structured survey done at later stages can be given
to a research agency for collecting and collating the information. There are many ways in which
information can be collected

 Face to face interaction – this type of surveys is the most common and by far the most effective
method. In this method the surveyor meets the customer face to face and ask him the questions
which have been decided in the questionnaire. Just before beginning the detailed questionnaire
the customer is asked a few questions to confirm that he is actually from the target segment for
which the questionnaire is planned. So the customer may be asked general questions about his
age, income, education, whether he is the user of a certain product category, etc. to validate him.
If this is the customer from our target segment, then the survey continues or else it stops. The
face to face interaction with the customer can be done by meeting him in:

 Retail outlets, malls, or other public areas where the customer may be.
 Trade show booth – these are good places to talk to the customer since here we have a
relevant customer. In the trade show companies show their prototypes or concept
products. Here customers are focused on the product and are likely to give more relevant
answers.
 Focus groups – These are a set of customers (between 5 to 10 at a time) from the target
segment who are invited by the company to come to a fixed location where all of them are
explained or shown the product concept. During their session the concept is discussed with
them and their responses are recorded. Since this is a face to face discussion the product
development team is able to get a lot of qualitative inputs from the customers. Inputs may
be on does the customer find the product useful, what needs it fulfils, what more should
be in the product, what kind of colors are suited for the product, does the customer find it
easy to use, etc.

 Telephone – today technology is also being used for trying to reduce the time needed in getting
a feedback on a product concept. Telephones can be sued where the product concept can easily
be explained to consumers without actually having to see a prototype, or drawing, etc.

In using telephones, the calls can be made to a:

 Predetermined set of customers like young men, or young women, or college going
students, etc.
 Or we can make cold calls – meaning that we call without pre-categorization and once we
get responses we set them off depending on the response category.

 Postal mail – this was an option that used to be followed in earlier days when the prevalence of
electronic media was not so pervasive. Earlier a telephone was only land line based and so who
would answer a phone was not certain and so asking questions on phones was not simple. It was
therefore better to send a questionnaire to a customer and along with that send him a prepaid
return envelope and hope that the customer will fill the questionnaire and send it back. In most
cases it was seen that the response was not more than 1-2% and it was slow. In order to increase
the responses companies sometimes gave incentives to customers to send in their responses.

 Email – this is option is an improved version of the postal mail. It has virtually the same issues as
the postal mail system. Here people have the option to put filters in their mail to block unwanted
mail. However, this remains a quick and cost effective option to collect feedback from customers.
It also has the advantage that data collected can be integrated into the database without needing
to actually feed the data into it.
 Internet – the internet can be used very effectively in getting a feedback from the customer.
Here the product development team can put not only a questionnaire but can also show images
of the product ‘s concept or simulated videos showing how the product will work and what
benefits the customer can get from it. Here the customers can be asked to comment on the
product or fill the feedback form that is on the website. Filling this form automatically updates the
information database.

Each method of gathering information has a bias towards the type of customer it is suited for –
internet/ email is more suited towards technology savvy customers; the focus group discussions
are good for products where the product development team needs feedback on qualitative
characteristics of the product. However even though each process has some limitations, for some
products it is a good idea to use a test method with a limitation because for using the product this
functionality is needed e.g. a software based product needs ability in the customer to use
technology. However, it is not such a good idea if TV based internet (IPTV) is to be tested. Open
ended interactive formats are better in the concept development stage since it allows the
customer to choose his reply himself. As tests get more focused a more structured format can be
used. For these type of surveys, a market research company can be hired.

Communicate the concept

So we have decided what to ask, to whom to ask and how to ask. The next step is how to show
him the concept. Please note that the concept must be communicated to the customer in such
manner that the ideas of the product development team do not dominate his thoughts. The
customer should have the freedom to use his own thoughts to give the feedback. Some of the
ways in which the concept can be shown to the customer are:
 Verbal description – here the customer is given a verbal description of the product. This is
usually done in the initial stages of the products development and when the product is still
in the conceptual stage of development and no firm description is available.
 Sketch – The product concept can also be shown as a single or a series of sketches. These
can show the concept and how it can be used. This type is again used in the initial stages
of the product development.
 Photo and rendering – Sometimes product concepts can be shown as images that have
been developed on computer simulation. This allows the customer to get a more realistic
impression of the product. This type of visualization allows the product development team
to show the customer different colors and also the detail of some functional or ergonomic
features.
 Storyboard – a storyboard is a concept that was first developed for making cartoons by
Walt Disney and later for films. According to Christopher Finch in The Art of Walt Disney
(Abrams, 1974), Disney credited animator Webb Smith with creating the idea of drawing
scenes on separate sheets of paper and pinning them up on a bulletin board to tell a story
in sequence, thus creating the first storyboard. So the product development team uses the
storyboarding method to show the concept to the customers who can by seeing this
understand what the product can do.
  Video – the advantage of a video is to show how the product works and how it can be used.
This method is used where it is difficult to take the actual product to the customers. For
example if we want to show how a machine works it is easier to take a video of the machine
and its functionality and show it to customers at different locations.
 Simulation - It is the imitation of some real thing or process. The act of simulating
something generally means showing certain key characteristics or behaviors of a selected
physical or abstract system.

 In simulation a user may actually control the use of a product and get a real feel of how
the product will respond. This can give him a near real feeling of the product. Simulation is
used in safety engineering and tests, for training, development, etc. For example, we have
a flight simulator in which pilots train how to fly aircrafts before that actually go on a plane.
During product development this method is used where the system can be used to show
the effect of using different use parameters e.g. in a chemical process where the change
in parameters can lead to different consequences. Simulation is also used when the real
system cannot be engaged, because it may not be accessible, or it may be dangerous or
unacceptable to engage. Interactive media The product development team can also use a
combination of Video plus simulation to explain the concept better. Developing simulation
is expensive. This type of method is used in highly technical products where the cost of
developing the simulation is significantly lower than the cost of developing the product.

 Physical appearance models – In this method the concept is shown as a model of the
product. At times this model also has some functions also incorporated in them so that
customers can get an idea of how the product will work. Generally, this type of method is
used either when the product development team has a clear idea of what they have to
develop or it is in the later stages of the development of the product by which time a large
extent of the work has been done.
 Working prototypes – This type of method is used when the product development is almost
complete, and the product development needs the final inputs for the customer. However,
care must be taken because customers tend to equate this product with the final product
– so the positives and negatives of the prototype rub off onto their judgement and
feedback. Secondly since the prototype is generally one of the few products developed by
the product development team and all care has been taken and better material has been
used to manufacture it this prototype may perform better than the final product that
comes off the actual production.

The choice of the survey format must match the communication method used because how we
show the product concept to the customer depends on how we are asking him to respond. So for
example, we cannot demonstrate a working model while using a phone survey. In addition to this
we must take care that while showing or communicating the product concept to the customer:
 Must not oversell the concept to the customer.
  Must give only that much information as much as the customer will get during selling. This
ensures that the responses from the customer will be similar to the way he will respond
when he gets the advertising stimulus.
 Price must not be given but customer must be asked for it. Giving a price to the customer
tends to undervalue or overvalue the product depending on how the customer perceives
the price. SO in order to overcome this problem it is better to ask the customer what he is
willing to pay for the product.

Capturing customer response

The product development team must faithfully capture the customer response in order to ensure
that the development progresses in the right direction. Here in order to capture the information
is the right manner the tests are made with formats that provide for:
 Questions with multiple choice answers.
 In order to ensure that the answers given by the customer are validated as correct and
consistent the questionnaire also has questions that ask asks why he gave the answer.
 The questionnaire also has similar questions in different parts of the questionnaire that ask
similar information in a slightly different manner. This again helps the development team
to validate and understand the correctness and consistency of the customers thinking.
 The questionnaire also captures the intention of the customer to buy the product, the
frequency of purchase, the certainty of purchase, etc. Here we may capture answers like
o Definitely buy
o Probably buy
o Might or might not
o Probably would not buy
o Definitely not buy

Depending on the method used in interacting with the customer the product development team
in addition to structured responses from the customer interaction can also capture of a large
amount of unstructured data. This data is also important and needs to be recorded and analyzed.

Interpret results
Once the information has been captured it must be collated and structured. This information must
then be structured in a hierarchy of importance. This hierarchy must be segregated by primary
and secondary needs. From the responses the redundant responses must be removed and further
all information should be categorized by customer need so that we can see what important needs
have to be worked upon first and what can be worked on later. Since customers are shown
multiple options, results must be interpreted based on the difference in responses and the
concept preferred by the customers. They must also factor in cost of manufacturing and other
considerations (Like possible sales, customer acceptance, profit, etc.).

If manufacturing costs are very different and price of the product has not been communicated to
the customer during the survey, then the company must use its own judgement in proceeding
ahead with one of the products selected by the customer. Some factors like sales of the product
have to be calculated by using various forecasting methods. However even this data needs to be
compared with the sales data that the company may have had for similar products or industry data
that exists in the market to check if this bears out the forecast.

In case the company has no history of the product and neither does the market then care must be
taken. In concept testing models we are not able to factor in:

 Effect of word of mouth – especially when product benefits are not obvious word of mouth
plays an important role in promoting the products
 Fidelity of concept description – if the final product differs substantially from the one
described in the test – forecast may differ
 Pricing – if price deviates significantly from that indicated in survey or from customer
expectations
 Level of premium – spending on advertising and promotion can add to the cost of the
product. This is weakly accounted in forecasting models by factoring in awareness/
availability term and via materials used to present the concept(s)

A Team must reflect on results and qualitative and quantitative results obtained. In order to be
sure that the answers received are true they must ask two key questions:
o Was the concept communicated in the way that the customer response is likely to be true?
o Is the resulting forecast consistent with the observed sales rate of similar products?

All results whether used or not must be documented so that they are available for similar products
in the future. Another learning that the product development can get is that their results for the
tests can be compared with future results. This benefits the team because testing in future can
benefit from the experience in analyzing the difference between forecast and actual.

The benefits from this survey is:

 Overall size of market – can be increased by considering alternative markets
 Availability/ awareness of the product – can be enhanced through distribution and
promotion
 Fraction of consumers likely to purchase – can be enhanced by changes in product design
(and advertising) that improve the attractiveness of the product