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Role of design in
new product
development
Conjoint Analysis
for product
(offering) design
Value of Good Design
100
Mkt Share 98
32.4%
50 Mkt Share 58
11.6%
18.4
0
Minimal Moderate Maximal
Product Superiority
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 management’s 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).
37.3%
100
Mkt Share
36.5 85.4
Mkt Share
50 22.9 64.2
26.2
0
Poor Moderate Strong
Product Definition
0
Low Moderate High
Market Attractiveness
100 57
0
Predevelopment Product development Commercialization
Activities & product testing
Decor 1 2 3 4 5 6 7 8 9
Location 1 2 3 4 5 6 7 8 9
Quality of food 1 2 3 4 5 6 7 8 9
Price 1 2 3 4 5 6 7 8 9
Décor 5.7
Location 6.5
Price 6.2
1 5 9
Attributes
Type of crust (3 types) Topping (4 varieties)
Type of cheese (3 types) Amount of cheese (2 levels)
Price (3 levels)
A total of 216 (3x4x3x2x3) different pizzas can be developed from these options!
ME Conjoint Analysis 2006 - 21
Designing a Frozen Pizza
Example Ratings Data
kj m
U(P) = aijxij
j=1 i=1
m: Number of attributes
xij: 1 if the jth level of the ith attribute is present
in product P, 0 otherwise ME Conjoint Analysis 2006 - 25
Utility Computation
(Designing a Frozen Pizza)
Customer’s Utility
Cust 1 Cust 2 Cust 3
Base* 0 45 30
Thin crust 10 -5 0
Thick crust 15 10 0
Veggie 10 0 50
Sausage 25 5 0
Pepperoni 30 20 0
Mixed Cheese 3 -10 0
Mozzarella 10 10 -5
6 oz 10 15 -20
$ 8.99 20 -10 10
$ 7.99 35 -5 20
*Base product is: Pan pizza with pineapple, 2 oz of Romano cheese, and
priced at $9.99.
Under this choice rule, each customer selects the product that
offers him/her the highest utility among the competing
alternatives. Market share for product Pi is then given by:
Maximum Utility Rule: If we assume customers will only buy the product with
the highest utility, the market share for Meat Lover’s treat is 2/3 and for Veggie
Delite is 1/3.
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: Aloha Special (27.4%), Meat Lover’s Treat (27.8%) and
Veggie Delite (44.8%).
Delivery terms
Installed, 2-year guarantee
Installed, 1-year guarantee
Installed, service contract
FOB seller, service contract
Deluxe Mid-level
model model
m: Number of attributes
xij: 1 if the jth level of the ith attribute is present
in product P, 0 otherwise
ME Conjoint Analysis 2006 - 42
Market Share Computation:
(Air Pollution Control Equipment)
Customer’s Utility
Sunoco Mattel ICI
Base 0 0 0
Meets target 5 10 10
Exceed 5% 35 0 40
Exceed 9% 40 0 50
12 months 20 5 3
9 months 30 20 8
6 months 40 10 10
$800k 5 20 2
$700K 8 35 5
$600K 10 50 10
Inst_ser 6 5 10
Inst_1Yr 8 10 20
Inst_2Yr 10 20 30
ME Conjoint Analysis 2006 - 43
Market Share and Revenue Share
Forecasts
Under this choice rule, each customer selects the product that
offers him/her the highest utility among the competing
alternatives. Market share for product Pi is then given by:
Product
Waste
watch Thermatrix Advanced Air