New Product Research

Session 3

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Market Potential and Performance

Market Potential

Industry Sales

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Primary Demand Gap

Market Potential

Demand Gap
Industry Sales

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Company Potential and Performance

Company Potential

Company Sales

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Selective Demand Gap

Selective Demand Gap Company Potential

Company Sales

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High Mortality seen in the launch of New products

Source :Product Development Managers Association

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 Product Life Cycle

Maturity
Decline
Growth

Introduction

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New Product Development Process
New Product
Ideas

Develop Concept

Test Market
Launch

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 Concept Evaluation

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Concept Table

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 Direct Importance Rating - Input

On a 1 to 7 scale, with 7 being very important and 1 being not

important at all, how important are the following product
attribute in purchasing a laptop computer (circle one for
each product feature):

Not Important Very

At All Important

Processor speed 1 2 3 4 5 6 7
Price 1 2 3 4 5 6 7
Battery Life 1 2 3 4 5 6 7
Weight 1 2 3 4 5 6 7
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Laptop Concept Evaluation

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 Results of Direct Rating

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Overall
 Results of Direct Rating

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Gender
 Results of Direct Rating

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Laptop Ownership
 Results of Direct Rating

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Work Experience
 Conjoint Input

Rate the following laptop computer alternatives

Rating
a) 5 lbs, 5 hours, 2.0 Ghz, Rs 55000 ______
b) 3 lbs, 5 hours, 2.0 Ghz, Rs 55000 ______
c) 5 lbs, 7 hours, 2.0 Ghz, Rs 70000 ______
d) 3 lbs, 7 hours, 2.0 Ghz, Rs 70000 ______
e) 5 lbs, 5 hours, 2.3 Ghz, Rs 55000 ______
f) 3 lbs, 5 hours, 2.3 Ghz, Rs 70000 ______
g) 5 lbs, 7 hours, 2.3 Ghz, Rs 70000 ______
h) 3 lbs, 7 hours, 2.3 Ghz, Rs 70000 ______

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Laptop Concept Evaluation

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 Conjoint – Importance Weights
Weights add upto 100

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Overall
 Conjoint – Importance Weights
Weights add upto 100

Price

Speed

B_Life

Weight

18

Laptop Concept Evaluation

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Gender
 Conjoint – Importance Weights
Weights add upto 100

Price

Speed

B_Life

Weight

19

Laptop Concept Evaluation

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Work Experience
 Conjoint – Importance Weights
Weights add upto 100

Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Laptop Ownership
 Direct Importance Ratings vs. Conjoint “Revealed”
Direc Conjoint
t
Price

Speed

B_Life

Weight

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Laptop Concept Evaluation

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Overall
 Market Shares
Price Weight

Bat_Life Speed

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Overall
 Market Shares
Concept 1,2 & 3 contribute to 60% of the market

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Laptop Concept Evaluation

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Overall
 Conjoint Analysis
● Examines how consumers develop overall
preferences for goods and services
● Assumes consumers take individual utilities of
each attribute and sum them to give an overall
utility value
● Requires consumers to perform a simple task
✔ eg rating, ranking, choice, pairwise preference
● The basic output of conjoint analysis:
✔ A numerical assessment of the relative importance that
customers attach to different product attributes
✔ The utility for each potential option/level of each attribute
● Calculates a profile for each consumer
● Gives an overall profile or by segments
● Can be used to predict choice patterns
● Catch-phrase-- “Features CONsidered JOINTly”
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Three Main “Flavors” of Conjoint Analysis

● Traditional Full-Profile Conjoint R

✔ Unrealistic when there are large number of features A
✔ Attribute combinations are not believable T
I
● Adaptive Conjoint Analysis (ACA) N
✔ Sample of Full-Profile Conjoint G
✔ Fractional Factorial Design
✔ Eliminates unlikely combinations (best features, least price) C
H
● Choice-Based Conjoint (CBC), also known as O
I
Discrete Choice Modeling (DCM)
✔ Realistic C
✔ Individual level estimation not possible E

25

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 Traditional Full-Profile Conjoint
Rate each one
No. Pounds Battery Life P_Speed Price Rating
1 3 5 2.0 55000
55000
2 5 5 2.0
3 3 7 2.0 55000
4 5 7 2.0 55000
5 3 5 2.3 55000
6 5 5 2.3 55000
7 3 7 2.3 55000
8 5 7 2.3 55000
9 3 5 2.0 70000
10 5 5 2.0 70000
11 3 7 2.0 70000
12 5 7 2.0 70000
13 3 5 2.3 70000
14 5 5 2.3 70000
15 3 7 2.3 70000
16 5 7 2.3 70000 26

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Adaptive Conjoint Analysis (ACA)
Rate each one

No. Pounds Battery Life P_Speed Price Rating

1 3 5 2.0 55000
2 5 7 2.0 55000
3 5 5 2.3 55000
4 3 7 2.0 70000
5 3 5 2.3 70000
6 5 7 2.3 70000

27

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 DCM (Pair-wise) – Choose one
Card 1

No. Pounds Battery Life P_Speed Price

1 3 5 2.0 55000

2 5 7 2.0 55000
28

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 DCM (Pair-wise) – Choose one
Card 2

No. Pounds Battery Life P_Speed Price

1 3 5 2.0 55000

3 5 5 2.3 55000
29

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 DCM (Pair-wise) – Choose one
Card 3

No. Pounds Battery Life P_Speed Price

1 3 5 2.0 55000

4 3 7 2.0 70000
30

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 DCM (Pair-wise) – Choose one
Card 4

No. Pounds Battery Life P_Speed Price

1 3 5 2.0 55000

5 3 5 2.3 70000
31

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 DCM (Pair-wise) – Choose one
Card 5

No. Pounds Battery Life P_Speed Price

1 3 5 2.0 55000

6 5 7 2.3 70000
32

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 DCM (Pair-wise) – Choose one
Card 6

No. Pounds Battery Life P_Speed Price

2 5 7 2.0 55000

3 5 5 2.3 55000
33

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 DCM (Pair-wise) – Choose one
Card 7

No. Pounds Battery Life P_Speed Price

2 5 7 2.0 55000

4 3 7 2.0 70000
34

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 DCM (Pair-wise) – Choose one
Card 8

No. Pounds Battery Life P_Speed Price

2 5 7 2.0 55000

5 3 5 2.3 70000
35

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 DCM (Pair-wise) – Choose one
Card 9

No. Pounds Battery Life P_Speed Price

2 5 7 2.0 55000

6 5 7 2.3 70000
36

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 DCM (Pair-wise) – Choose one
Card 10

No. Pounds Battery Life P_Speed Price

3 5 5 2.3 55000

4 3 7 2.0 70000
37

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 DCM (Pair-wise) – Choose one
Card 11

No. Pounds Battery Life P_Speed Price

3 5 5 2.3 55000

5 3 5 2.3 70000
38

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 DCM (Pair-wise) – Choose one
Card 12

No. Pounds Battery Life P_Speed Price

3 5 5 2.3 55000

6 5 7 2.3 70000
39

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 DCM (Pair-wise) – Choose one
Card 13

No. Pounds Battery Life P_Speed Price

4 3 7 2.0 70000

5 3 5 2.3 70000
40

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 DCM (Pair-wise) – Choose one
Card 14

No. Pounds Battery Life P_Speed Price

4 3 7 2.0 70000

6 5 7 2.3 70000
41

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 DCM (Pair-wise) – Choose one
Card 15

No. Pounds Battery Life P_Speed Price

5 3 5 2.3 70000

6 5 7 2.3 70000
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Choice Based Conjoint (CBC) or
Discrete Choice Modelling (DCM)

Rs 85,000 Rs 50,000 Rs 140,000 Rs 65,000

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 CBC or DCM’s Popularity

● CBC (Choice-Based Conjoint) is the most

commonly used stated preference modeling
technique among market researchers.

● It has advantages over ratings-based conjoint

methods:
✔ Choices are more realistic
✔ Models can be more sophisticated
✔ Practitioners have felt that predictions are more accurate
✔ Rigorous error theory

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 Base Data
Excel Worksheet Demo

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 Product Testing

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STAGE III: Product/Market Testing I
● Product and market testing provides a more detailed
assessment of a new product's chances for success.
● Includes technical testing, preference and satisfaction
testing, simulated test markets and test markets to
evaluate potential success/failure and define
important marketing elements.
✔ Uncovers product shortcomings
✔ evaluate commercial products
✔ evaluate alternative formulations
✔ uncover the appeal of the product to various market
segments
✔ gain ideas for other elements of the marketing program

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 Product/Market Testing II

● Technical Testing on a prototype provides information on

product shelf life, product wear/tear rates, problems
regarding use/consumption, potential defects, maintenance
schedule
● Preference and satisfaction testing
✔ reserved for the final version of the product
● Simulated test marketing [laboratory test markets] provides
insights to potential market response/market share
✔ Popular models include ASSESSOR, BASES, DESIGNOR,
and LITMUS

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Approaches to measure performance
of the test product
● Three Approaches:
­ Testing against a standard product
✔Test Product --> brand leader
­ Horse Racing Alternative
✔Several test products are developed for testing
against one another to determine which one
attains the highest level of consumer acceptance.
­ Testing against a historical standard
✔Test product --> Performance of a successful
product which may not be involved in the test. A
seldom used technique.

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 Test Marketing

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 Product/Market Testing III:
Test Marketing
● Objective:
✔To obtain reasonable prediction for
performance of a new product;
✔To understand the contributing factors
underlying a particular performance;
✔To provide management with the opportunity to
pre-test alternative marketing strategies.
● Only those products, which have shown a
good chance of success in the earlier concept
and product development test, are subjected
to test marketing.
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 Typical information gathered
and major design issues in test
marketing
● Awareness level; Design Issues:
● Purchase and repurchase rate; ● The number of test markets to
● Users’ experience with the be chosen;
product; ­ at least three
● Users’ perception of the ­ involves cost-benefit
product; analysis
● Users’ profile and lifestyles; ● The criteria used for selecting
test markets;
● Reasons for not using products; ­ a normal and not over-
● Market share. tested market
● The length of the test.
­ six to 12 months

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 53

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 Conjoint Analysis

● Measures relative values of attributes jointly

rather than separately

● Mirrors trade-offs that individuals make in

the market place

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 Conjoint Process

● Select attributes
● Determine attribute levels
● Determine attribute combinations
● Select form of stimuli
● Select a method for judgment
● Decide how to aggregate judgments

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Product Design: Conjoint Analysis

Price
Memory 50,000 75,000 100,000
8 Mb 4 2 1
16 Mb 7 5 3
24 Mb 9 8 6
9 = Most preferred
•
•
•
1 = Least preferred

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 Simplified Part-Worth
(Utility) Calculation

Price Part-
Memory 50,000 75,000 100,000 Worth
8 Mb 4 2 1 7/3 2.3
16 Mb 7 5 3 15/35.0
24 Mb 9 8 6 23/37.7
20/315/310/3
Part-Worth: 6.7 5.0 3.3
9 = Most preferred
•
•
•
1 = Least preferred

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 How to Use in
Design/Tradeoff Evaluation
Example: 24 Mb vs 16 Mb = 7.7 – 5.0 = 2.7
units
50,000 vs 75,000 = 6.7 – 5.0 = 1.7
units

So: Δ 8 Mb is worth more than 25,000 to this

customer.

2.7
(≅ ––– × (75,000 – 50,000) ≅ 39,706)
1.7

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