New Products Management

Chapter 7 Analytical Attribute Approaches: Trade-Off Analysis and Qualitative Techniques

Trade-Off (Conjoint) Analysis

Put the determinant attributes together in combinations or sets. Respondents rank these sets in order of preference. Conjoint analysis finds the optimal levels of each attribute.

What is Conjoint Analysis?

A way to incorporate the structure of customer preferences into the new product design process. It helps evaluate how customers make tradeoffs between various product attributes (a decompositional approach). The basic outputs of conjoint analysis are:
G A numerical assessment of the relative importance each

customers attaches to attributes of a product set.

G The value (utility) provided to each customer by each

attribute option.

Use of Conjoint Analysis

G Designing new products that enhance consumer utility.

G Forecasting sales/market share of alternative product

concepts.
G Identifying market segments for which a given concept

has high value.

G Identifying the best concept for a target segment. G Pricing products/product bundles. G Product line management. G Positioning new products to different segments.

Product Design: Conjoint Analysis

The approach derives customers utility values for attributes and attribute options based on customers stated overall preferences for different bundles of attributes. The following example shows Memory and Price bundles.

Memory 8 Mb 16 Mb 24 Mb
9 =

$1,000 4 7 9
Most preferred

Price $1,500
2 5 8

$2,000 1 3 6

1 =

Least preferred

Simplified Part-Worth (Utility) Calculation

Memory
8 Mb 16 Mb 24 Mb

$1,000
4 7 9

Price $1,500 2 5 8

$2,000
1 3 6 7/3 15/3 23/3

PartWorth 2.3 5.0 7.7

20/3
Part-Worth:
9 =

15/3
5.0

10/3
3.3

6.7

Most preferred

1 =

Least preferred

How to Use in Design/Tradeoff Evaluation

Example: 24 Mb $1,000 vs 16 Mb vs $1,500 = 7.7 5.0 = 6.7 5.0 = 2.7 units = 1.7 units 8 Mb is worth more than $500 to this customer.

So:

2.7 (1,500 1,000) $795) 1.7

Can use to assess value to customer of non-product (service) attributes.

Conjoint Analysis Input: Salsa Example

Thickness Spiciness Color Actual Ranking* 4 3 10 6 15 16 2 1 8 5 13 11 7 9 14 12 17 18 Regular Regular Regular Regular Regular Regular Thick Thick Thick Thick Thick Thick Extra-Thick Extra-Thick Extra-Thick Extra-Thick Extra-Thick Extra-Thick Mild Mild Medium-Hot Medium-Hot Extra-Hot Extra-Hot Mild Mild Medium-Hot Medium-Hot Extra-Hot Extra-Hot Mild Mild Medium-Hot Medium-Hot Extra-Hot Extra-Hot Red Green Red Green Red Green Red Green Red Green Red Green Red Green Red Green Red Green

Figure 7-2

Ranking as Estimated by Model 4 3 10 8 16 15 2 1 6 5 13 11 7 9 14 12 18 17

* 1 = most preferred, 18 = least preferred.

Figure 7-3

Conjoint Analysis: Graphical Output

Thickness
2 1 0 -1 -2
Regular Thick Ex-Thick Mild Medium-Hot Ex-Hot Red Green

Spiciness

Color

0.161

0.913

-1.074 1.667

0.105

-1.774 -0.161

0.161

Figure 7-3 (contd.)

Conjoint Analysis: Relative Importance of Attributes

0 20 40 60 80 100 %

Spiciness Thickness Color

5.6% 34.6%

59.8%

Some Qualitative Attribute Analysis Techniques

Dimensional Analysis Checklists Relationships Analysis
There are many others.

Figure 7-4

A Dimensional Attribute List

Weight Rust resistance Length Color Water resistance Materials Style Durability Shock resistance Heat tolerance Explosiveness Flammability Aroma Translucence Buoyancy Hangability Rechargeability Flexibility Malleability Compressibility

Figure 7-5

An Idea Stimulator Checklist

Can the dimensions be changed? (larger, smaller, longer,
shorter, thicker...)

Can the quantity be changed? (more, less, combine,

fractionate...)

Can the order be changed? Can the time element be changed? Can the cause or effect be changed? Can there be a change in character? Can the form be changed? (animated, speeded, slowed,
attracted...)

Can the state or condition be changed? Can the use be adapted to a new market?

Relationships Analysis
Force combinations of dimensions (features, functions, and benefits) together. Techniques: Two-dimensional matrix Multidimensional (morphological) matrix Household cleaning products example used six dimensions: Instrument used, ingredients used, objects cleaned, type of container, substances removed, texture or form of cleaner

Other Methods: Lateral Search Techniques

Free association Stereotype activity Lateral thinking -- avoidance Creative stimuli words Studying big winners Use of the ridiculous Forced relationships

Some Creative Stimuli Words

Guest stars Alphabet Truth Outer space Charity His and hers Style Nation Family Videotape Photography Testimonials Decorate Fantasy Hobbies Holidays Weather Calendar Push button Snob appeal

Designing Courtyard by Marriott

Problem for Marriott
G Early 1980s:
Running out of good sites for typical full service Marriott Hotels (missing low-end business traveller segment).

G Idea:
New chain for low-end business and/or pleasure travellers. u Business travellers? (6+ trips/mid-week). u Pleasure travellers? (2+ trips/stay in hotels/motels).

G Hotel Chain should:

u u u

Offer good value for the money. Have minimal cannibalization of Marriotts other facilities. Have market position with competitive advantage.

Overall Study Design

G 50 attributes, 28 levels/attributes. G Hybrid conjoint task. G Price elasticity, using ELASTICON model. G Positioning analysis: scaling, clustering to deal with

demographics, attitudes and hotel usage.

G 263 mid-week business travellers,

83 high-end business travellers, 255 non-business travellers in Atlanta, Dallas, San Francisco, Chicago.

Optimal Hotel Design Features

1. External factors: G G building shape landscape design

G
G 2. Rooms: G G G

pool type and location

hotel size room size & decor type of heating & cooling location/type of bathroom

3. Food-related services:

G
G G G

type/location of restaurant
room service vending services/stores in-room kitchen location atmosphere type of people (clientele)

4. Lounge facilities:

G G G

Optimal Hotel Design Features

contd
5. Services:
G G G G G G G G

reservations registration/checkout limo to airport bellman message center secretarial service car rental maintenance sauna exercise room racquetball courts tennis courts game room childrens playroom & yard security guards smoke detectors 24 hour video

6. Leisure facilities:

G G G G G G

7. Security factors:

G G G

Overall Study Design and Analysis

Management Question Is the concept viable What is the best competitive position? Hybrid conjoint analysis and simulation Self-explicated evaluation Multifact evaluation of complete offering Supplementary tasks and background data What combination of features and services? What pricing strategy to follow? ELASTICON What type of location to select? Attitude and preference scaling Preference for location types Model Respondents Tasks

Price/demand response

Additional Modeling and Validation

Simulation Crossvalidation Additional guidelines for segmentation, positioning and product design Crossvalidation

Output

Guidelines for product design, positioning and advertising

Pricing recommendation

Recommendation for type of location

50 Factors and 167 Levels that Describe Hotel Features

External Factors Building shape L-shaped w/landscape Outdoor courtyard Landscaping Minimal Pool type No pool Rectangular shape Free form shape Indoor/Outdoor Pool location Corridor view Outside access/restricted view Enclosed access/unrestricted view/ balcony or window Hotel size Small (125 rooms, 2 stories)

Moderate
Elaborate Rooms Size Entertainment Color TV Color TV w/movies at $5 Color TV w/30 channel cable Color TV w/HBO, movies, etc. Color TV w/free movies Entertainment/Rental in room None Rental Cassettes/Atari Rental Cassettes/Stereo Rental Movies/Betamax

In courtyard
Not in courtyard Sink location Small (standard) Slightly larger (1 foot) Much larger (2.5 feet) Small suite (2 rooms) Large suite (2 rooms) Quality of Decor Budget motel decor Old Holiday Inn decor New Holiday Inn decor New Hilton decor New Hyatt decor

Large (600 rooms, 12 stories)

Bathroom features In bath only In separate area In bath and separate Size of bath Standard bath Slightly larger/sink separate Much larger bath w/ larger tub Very large/tub for 2 Heating and Cooling Wall unit/full control Wall unit/soundproof/full control Central H or C (seasonal) Central H or C/full control None Shower Massage Whirlpool (Jacuzzi) Steam bath Amenities Small bar soap Large soap/shampoo/ shoeshine Large soap/bath gel/ shower cap/sewing kit Above items + toothpaste,

50 Factors and 167 Levels that Describe Hotel Features

Food Restaurant nearby Restaurant in hotel None (coffee shop next door) Restaurant/lounge combo, limited menu Coffee shop, full menu Full-service restaurant, full menu Coffee shop, full menu and good restaurant Free continental None Continental included in in room rate Store None Coffee shop Fast food Fast food or coffee shop and moderate restaurant Fast food or coffee shop and good restaurant Room Service None Phone-in order/guest to pick up Room service, limited menu Room service, full menu Vending No food in store Snack items Snacks, refrigerated items, wine, beer, liquor Above items and gourmet food items In-room kitchen facilities None Coffee maker only Coffee maker and refrigerator Cooking facilities in room None Soft drink machine only Soft drink and snack machines Soft drink, snack, and sandwich machines Above and microwave available

Lounge
Atmosphere Quiet bar/lounge Lively, popular bar/ lounge

Type of people
Hotel guests and friends only Open to public general appeal Open to public many singles

Lounge nearby
None Lounge/bar nearby Lounge/bar w/ entertainment nearby

50 Factors and 167 Levels that Describe Hotel Features

Leisure Sauna None Yes Whirlpool/Jacuzzi None Outdoor Indoor Exercise room None Basic facility w/weights Facility w/Nautilus equipment Racquet ball courts None Yes Tennis courts None Yes Game room/Entertainment None Electric games/pinball Electric games/pinball/ Ping-Pong Above + movie theater, bowling Childrens playroom/ playground None Playground only Playroom only Playground and playroom Pool extras None Pool w/slide Pool w/slides and equipment Pool w/slides, waterfall, equipment

Security
Security guard None 11 a.m. to 7 p.m. 7 p.m. to 7 a.m. 24 hours

Smoke detector
None In rooms and throughout hotel Alarm button None Button in room

Sprinkler system
None Lobby and hallways only Lobby/hallways/rooms 24-hours video cameras None Parking/hallway/rooms

50 Factors and 167 Levels that Describe Hotel Features

Services Reservations Limo to airport None Cleanliness/upkeep Management skill Special Services None

Call hotel directly

800 reservation number Check-in Standard Pre-credit clearance Machine in lobby Check out

Yes
Bellman None Yes Message service Note at front desk Light on phone

Budget motel level

Holiday Inn level Non-convention Hyatt level Convention Hyatt level Fine hotel level Laundry/Valet

Information on
restaurants, theaters, etc. Arrangements and reservations Travel problem resolution Car maintenance

At front desk
Bill under door/leave key Key to front desk/bill by mail Machine in lobby

Light on phone and

message under door Recorded message Secretarial services None Xerox machine Xerox machine and typist

None
Client drop off and pick up Valet pick up and drop off Self service

None
Take car to service Gas on premises/bill to room Car rental/Airline reservations None Car rental facility

Airline reservations
Car rental and airline reservations

Room Price per Night is $44.85

This full profile description of a hotel offering is one of the 50 cards developed by a fractional factorial design of the seven facets each at the five levels (developed by the Marriotts development team). Each rpondent received five cards following a block design.

Building Size, Bar/Lounge

Large (600 rooms) 12-storey hotel with: u quiet bar/lounge, u enclosed central corridors & elevators, and u all rooms have very large windows

Room Size & Function

Room 1 foot longer than typical hote;motel room: u space for comfortable sofa-bed & 2 chairs, u large desk & coffee table, and u coffee maker & small refrigerator.

Landscaping/Court
Building forms a spacious outdoor courtyard: u many trees & shrubs, u the swimming pool plus a fountain, and u terraced areas for sunning, sitting & eating.

Service Standards
Full service including: u rapid check-in/check-out systems, u reliable message service, u valet (laundry pick-up/delivery), u bellman, u someone (concierge) arranges reservations, tickets, generally at no cost, and u cleanliness, up-keep, management similar to Hyatts & Marriotts .

Food
Small, moderately priced lounge and restaurant for hotel guests/friends: u limited breakfast with juices, fruit, Danish, cereal, bacon & eggs, u lunch: soup & sandwiches only, and u evening meal: salad, soup, sandwiches, six hot entrees including steak.

Leisure
u u u

Hotel/Motel Room Quality

Quality of room furnishings, carpet, etc., is similar to: u Hyatt Regencies, and u Westin Plaza Hotels.

Combination indoor-outdoor pool, enclosed whirlpool (Jacuzzi), and well-equipped playroom/playground for kids. Night guard on duty 7 pm to 7 am, fire/water sprinklers throughout hotel, and all rooms have very large windows.

Security
u u u

Would stay there almost all the time

Would stay there on a regular basis

o Would stay there now and then

o Would rarely stay there

o Would not stay there

Result
Courtyard by Marriott not

small Marriott

Marriott13